SEC Charges Malvern and Former CFO for Materially Misstating Financial Statements in Connection with Certain Commercial Real Estate Loans

ADMINISTRATIVE PROCEEDING
File No. 3-21562

August 15, 2023 –  The Securities and Exchange Commission (“Commission” or “SEC”) today announced settled cease and desist proceedings against Malvern Bancorp, Inc. (“Malvern”) and Malvern’s former Chief Financial Officer, Joseph D. Gangemi (“Gangemi”).  The SEC order finds that Malvern violated antifraud, reporting, books and records, and internal accounting controls provisions of the securities laws for repeatedly failing to timely recognize and account for impairment issues with respect to several large commercial real estate loans.  The SEC order finds that Gangemi caused Malvern’s violations.  Pursuant to the settlements, Malvern agreed to pay a penalty of $350,000, and Gangemi agreed to pay a penalty of $40,000.

An order issued by the SEC finds that between December 2017 through February 2021, Malvern failed to properly account for certain troubled debt restructurings, loan impairments and charge-offs, and impairment of other real estate owned.  According to the SEC’s order, due to the size of the loans, the effects of these misstatements were significant and materially impacted the Bank’s reported income for the periods ended December 31, 2017, March 31, 2018, June 30, 2018, September 30, 2018, December 31, 2019, September 30, 2020, and December 31, 2020.  The order further finds that for the quarter-ended December 31, 2019 and for the fiscal year-ended September 30, 2020, Malvern restated its financial statements in its amended Form 10-Q and in its amended Form 10-K, respectively.  According to the order, throughout the Relevant Period, Malvern’s books and records with respect to these loans were inaccurate, and it failed to devise and maintain a system of internal accounting controls to provide reasonable assurances that transactions were recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”).

On July 17, 2023, after the conducted alleged in the Order, Malvern merged with and into First Bank, Hamilton, New Jersey.  First Bank is the successor to Malvern.

The SEC’s order finds that Malvern violated Section 17(a)(2) and (3) of the Securities Act, Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder, and Section 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act.  The SEC’s order finds that Gangemi caused Malvern’s violations.  Without admitting or denying the SEC’s findings, Malvern and Gangemi consented to a cease-and-desist order and a civil penalty of $350,000 and $40,000, respectively.

The investigation was conducted by Grant Swanson, Michael Hoess, and Kathleen McDermott and supervised by Carolyn Welshhans and Laura Josephs of the Home Office.