The chief financial officer of a Connecticut bank has resigned several weeks after the company discovered accounting errors that will cause reductions in earnings for two prior reporting periods.
Hometown Bancorp, holding company for Bank of Darien, also said it will not be able to release revised earnings reports for yearend 1994 and the first quarter of 1995 because the complexity of the issues has delayed its internal investigation.
The bank had estimated that it would be able to release revised results within two weeks, but president and chief executive Kevin E. Gage said officials now aren't sure when the corrected earnings will be released.
"We're obviously looking to get the information out as soon as we can," Mr. Gage said.
Bank officials announced a month ago that the errors would cause a "material reduction in income" for yearend 1994 and the first quarter of 1995. Officials are looking at prior periods to determine if any other reports are affected, but Mr. Gage declined to say what has been found or how much of an effect the errors have had already.
Bank of Darien originally reported earnings for 1994 of $2 million and first quarter 1995 income of $542,000. The bank's Tier 1 leverage capital ratio at March 31 was 7.6%.
The bank also is delaying the release of its second-quarter earnings until the problems are resolved.
"We're going to get it done right, and if we have to delay to get it right, we're going to," he said. "If you're going to do a restatement, you only want to do it once. If it takes a little extra time, so be it."
Mr. Gage declined to comment on the resignation of Robert A. Foote Jr. and whether it was connected to the accounting errors.
The Hometown president also refused to reveal the nature of the errors or how they were discovered, but stressed that they don't affect safety- and-soundness issues. He said the bank is still in excess of regulatory capital requirements and added that customer accounts and asset quality are not involved.
"It's not an asset quality issue; it's more of an accounting issue," he said, comparing the situation to an amended tax return. "We have to correct our financial statements, and that's what we're working on."
John Carusone, president of Hartford's Bank Analysis Center, speculated that the problems might be in the bank's investment portfolio.
"This is an institution that has a disproportionately large investment portfolio for a bank this size," he said, noting that 62% of the bank's earning assets are in investments. "This bank looks more like an investment house than a bank."
