It was a good news/bad news discovery that Malvern Bancorp in Paoli, Pa., would have preferred to avoid.
The good-news part: The $1 billion-asset company made nearly $1.6 million more in profits in fiscal years 2014-2016 than it had thought. Malvern’s fiscal years end on Sept. 30.
The bad news was the reason: Malvern’s independent public accounting firm, BDO USA, found a material weakness in the bank’s internal controls over financial reporting.
The problem, which the company announced Wednesday, also led Malvern to revise downward by roughly $795,000 its net income for the first nine months of fiscal 2017. However, its tax liability fell by the same amount, offsetting the downward revision.
The changes ultimately reduce Malvern’s tax liability by roughly $800,000 and increase equity by the same amount, Frank Schiraldi, an analyst at Sandler O’Neill, wrote in a note to clients. Schiraldi also described the change as “much ado about nothing” in the “scheme of things.”
“This seems to be fairly standard procedure for a restatement, and we wouldn't think it amounts to anything significant,” Schiraldi wrote.
Malvern has not released its earnings for the fourth quarter of fiscal 2017. The company expects to meet a December deadline for its 10K filing, Schiraldi said.