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RESTATEMENT OF THE CONSOLIDATED FINANCIAL STATEMENTS | 6 Months Ended
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Dec. 31, 2020
RESTATEMENT OF THE CONSOLIDATED FINANCIAL STATEMENTS |
RESTATEMENT OF THE CONSOLIDATED FINANCIAL STATEMENTS | 2.RESTATEMENT OF THE CONSOLIDATED FINANCIAL STATEMENTS The Restatement results from a technical accounting correction to reflect the Mann Entities-related $15.8 million Loan Balances Impairment as a recognized (Type I) subsequent event in the quarter and fiscal year ended June 30, 2019, rather than as a disclosure only nonrecognized (Type II) subsequent event recognized in the quarter ended September 30, 2019, notwithstanding that the Company and the Bank did not start to become aware of the events causing the Impairment until the quarter ended September 30, 2019 (capitalized terms defined below). On February 12, 2021, the Audit Committee of the Board of Directors of the Company, after consultation with management, determined that certain financial statements previously issued by the Company should be restated and no longer relied upon (the “Restatement”). The following financial statements of the Company are impacted by the Restatement: (a) the audited consolidated financial statements for the fiscal years ended June 30, 2019 and June 30, 2020, as reported in the Company’s Annual Reports on Form 10-K for those years, and (b) the unaudited consolidated financial statements for the periods ended September 30, 2019, December 31, 2019, March 31, 2020, and September 30, 2020, as reported in the Company’s Quarterly Reports on Form 10-Q. As previously disclosed, after the Company’s fiscal year ended June 30, 2019, but prior to December 10, 2019, the date the financial statements for that year were issued, the Company became aware of fraudulent activity associated with transactions by an established business customer of the Bank. The customer, Michael Mann, and various affiliated entities (collectively, the “Mann Entities”) had numerous general deposit corporate operating accounts and loans with the Bank. As reflected in its Current Report on Form 8-K filed on September 11, 2019, the Company’s potential exposure with respect to the Mann Entities’ lending activity was approximately $15.8 million (the “Loan Balances”). Subsequently, the Company learned that Mr. Mann had perpetrated a concealed fraud on the Bank and many other parties. In the second quarter of fiscal 2020, the Company concluded that due to the impact of the potential fraudulent activity, the Loan Balances were impaired and, as a result, recorded a provision for loan losses in the amount of $15.8 million in the first quarter of fiscal 2020 related to the charge-off of the entire Loan Balances (the “Impairment”). In July 2020, the Company received a comment letter from the staff of the Securities and Exchange Commission (the “SEC”) Division of Corporation Finance (the “Staff”) related to, among other matters, the classification of the Loan Balances Impairment as a disclosure only nonrecognized (Type II) subsequent event in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019 (the “2019 Form 10-K”). The Company and the Staff engaged in several discussions regarding the Staff’s position, based on technical accounting precepts, that the Loan Balances should be deemed impaired as of June 30, 2019, and the Loan Balances Impairment should have been recognized by the Company in the quarter and fiscal year ended June 30, 2019 as a Type I subsequent event and not as a disclosure only nonrecognized (Type II) subsequent event. In its communications with the Staff, the Company described that its original determination that the Loan Balances Impairment was a Type II subsequent event in the Company’s 2019 Form 10-K recognized in the quarter ended September 30, 2019, was based on the unique circumstances of the event. As a result of the Staff’s position, the Restatement reflects the Loan Balances Impairment in the quarter and fiscal year ended June 30, 2019 (as a recognized (Type I) subsequent event), rather than as a disclosure only nonrecognized (Type II) subsequent event recognized in the quarter ended September 30, 2019. This technical accounting correction is not a result of any new facts coming to light after the filing of the 2019 Form 10-K. The table below shows the effects of the Restatement on the Company’s consolidated statement of operations, consolidated statement of comprehensive loss and consolidated statement of cash flows for the six months ended December 31, 2019 (in thousands, except for per share data).
|  | For the Six Months Ended December 31, 2019
|  | As Previously |  | Restatement |  |
|  | Reported |  | Adjustments |  | As Restated
Consolidated Statement of Operations |  |  |  |  |  |  |  |  |
Net interest income |  | $ | 25,811 |  | $ | — |  | $ | 25,811
Provision for loan losses |  |  | 17,890 |  |  | (15,800) |  |  | 2,090
Net interest income after provision for loan losses |  |  | 7,921 |  |  | 15,800 |  |  | 23,721
Total noninterest income |  |  | 9,375 |  |  | — |  |  | 9,375
Total noninterest expense |  |  | 29,836 |  |  | — |  |  | 29,836
Income (loss) before income taxes |  |  | (12,540) |  |  | 15,800 |  |  | 3,260
Income tax expense (benefit) |  |  | (3,706) |  |  | 4,093 |  |  | 387
Net income (loss) |  |  | (8,834) |  |  | 11,707 |  |  | 2,873
Earnings (loss) per common share: |  |  |  |  |  |  |  |  |
Basic |  | $ | (0.35) |  | $ | 0.47 |  | $ | 0.12
Diluted |  | $ | (0.35) |  | $ | 0.47 |  | $ | 0.12
Consolidated Statement of Comprehensive Income (Loss): |  |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (8,834) |  | $ | 11,707 |  | $ | 2,873
Comprehensive income (loss) |  |  | (8,584) |  |  | 11,707 |  |  | 3,123
Consolidated Statement of Cash Flows: |  |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (8,834) |  | $ | 11,707 |  | $ | 2,873
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |  |  |  |  |  |  |
Provision for loan losses |  |  | 17,890 |  |  | (15,800) |  |  | 2,090
Increase in other assets |  |  | (4,979) |  |  | 4,093 |  |  | (886)

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- Definition The entire disclosure for reporting accounting changes and error corrections. It includes the conveyance of information necessary for a user of the Company's financial information to understand all aspects and required disclosure information concerning all changes and error corrections reported in the Company's financial statements for the period. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 + Details
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