Huntingdon Valley, Pa.-based Polonia Bancorp Inc. in its Form 10-K filed April 6 discloseda material weakness that caused a misstatement of the company's consolidated financialstatements.
The company stated that the material deficiencies were in theoperating effectiveness of certain controls relating to identifying and accountingfor post-retirement benefits. The misstatements were corrected through a restatementof the company's consolidated balance sheet as of Dec. 31, 2014.
The company determined there was an unrecorded liability relatedto the post retirement deferred compensation and split dollar arrangement with theprevious president of Polonia Bankwhich was entered into in 1997. The obligation is funded by an insurance policy.As a result the company recorded a combined liability of $2.5 million, a relateddeferred tax asset of $592,760, and a reduction to retained earnings of $1.9 million.
As a result of the material weakness, management concluded that,as of Dec. 31, 2015, the company's internal control over financial reporting wasnot effective.
In a separate news release issued the same day, Polonia statedthat it terminated the registration and reporting obligations of its common stockunder the Securities Exchange Act of 1934 by filing Form 15 with the SEC. Both thecompany and the bank will continue to provide financial reports to the Federal ReserveBoard and the OCC. The company cited the costs of continued registration and reportingobligations, including the costs associated with regulatory compliance as the reasonfor the deregistration.
The company also said that its common stock is quoted on theover-the-counter market, however, there can be no assurance that a trading marketin its common stock will be maintained on the over-the-counter market, or as tothe prices that may be obtained in any such market.