Posted on Tue, May. 6, 2008
Willow Financial Bancorp Inc. gave up its hunt for $6.2 million after spending five months and $2 million trying to balance its books.
It was a rare move in an industry where every cent normally has to be accounted for every day.
Since November, the Wayne bank had been trying to correct accounting discrepancies discovered last year during a review of annual financial statements.
In the end, the bank decided it would be better to record the so-called "unreconciled difference" as a charge to earnings rather than continue to spend time and money trying to figure out what happened.
While it is not unusual for banks to have items that need to be reconciled at the end of the day - perhaps because someone put the wrong code on a deposit - experts said it was highly unusual for a bank to be unable to figure out what happened.
"I'm sure that's an issue the regulators are going to want to look at," said Richard J. Devine, a senior managing director at Smart Business Advisory & Consulting L.L.C., of Devon, and a former bank chief financial officer. Smart does a small amount of valuation work for Willow.
Donna M. Coughey, Willow's president and chief executive officer, was not available for comment yesterday, said Joe Crivelli, an outside spokesman.
The bank said in an amended annual report on form 10-K that it had reduced two years of earnings $8.3 million before taxes, that it had reduced fiscal 2004 retained earnings $365,000, and that it had recognized errors in accounting for its 2005 purchase of Chester Valley Bancorp Inc. for $145.3 million.
Willow Financial said the problems with its general ledger started in the second half of 2005. The purchase of Chester Valley was completed Aug. 31 of that year.
The restatement reduced fiscal 2007 earnings for a second time, to $7.27 million from the original statement in August of $9.31 million. The bank had said in October that it earned $8.4 million.
Fiscal 2006 earnings were slashed even further, to $6.67 million in yesterday's filing from $11.08 million in October.
The balance-sheet restatement for both fiscal years substantially decreased the bank's level of deposits it was not paying interest on and increased the level it was paying interest on.
Shares in Willow Financial, which has 29 branches in the Philadelphia region and $1.55 billion in assets, closed at $7.59, down a penny, on Nasdaq. The shares' 52-week high was $13.12.
Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.
