Market Overview

Malvern Bancorp, Inc. Reports Net Income of $1.6 million, or $0.25 per Share, for the Third quarter of Fiscal 2016, Representing a 31.9% Increase over the Third quarter of Fiscal 2015

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PAOLI, Pa., July 28, 2016 (GLOBE NEWSWIRE) -- Malvern Bancorp, Inc. (NASDAQ: MLVF) (the "Company"), parent company of Malvern Federal Savings Bank ("Malvern" or the "Bank"), today reported operating results for the third fiscal quarter ended June 30, 2016.  Net income amounted to $1.6 million, or $0.25 per share, for the quarter ended June 30, 2016, an increase of $384,000, or 31.9 percent, as compared with the net income of $1.2 million, or $0.19 per share, for the quarter ended June 30, 2015.

"We continued to perform well this quarter with solid growth in key areas of our business. We continue to see strong credit metrics with non-performing assets remaining low as our loan growth remained strong.  Our core loan growth increased 41.6 percent at June 30, 2016 compared to September 30, 2015.   The company also had strong deposit growth at June 30, 2016 with total deposits increasing 24.4 percent compared to September 30, 2015.  We are maintaining our course with our business strategy and our performance reflected that and the strength of our balance sheet," commented Anthony C. Weagley, Chief Executive Officer & President of Malvern Bancorp, Inc.

For the nine months ended June 30, 2016, net income amounted to $4.2 million, or $0.66 per share, compared with net income of $2.5 million, or $0.40 per share, for the nine months ended June 30, 2015.

Highlights for the quarter include:

  • Return on average assets ("ROAA") was 0.81 percent for the three months ended June 30, 2016, compared to 0.77 percent for the three months ended June 30, 2015, and return on average equity ("ROAE") rose to 7.41 percent for the three months ended June 30, 2016, compared with 6.01 percent for the three months ended June 30, 2015.
  • The Company originated $82.2 million in new loans in the third quarter of fiscal 2016, achieving net portfolio growth of $39.4 million compared to the second quarter of fiscal 2016, which was offset in part by $42.8 million in participations, payoffs, prepayments and maturities from its portfolio; new loan originations consisted of $4.7 million in residential mortgage loans, $68.0 million in commercial loans, $6.8 million in construction and development loans and $2.7 million in consumer loans.



  • Non-performing assets ("NPAs") were at 0.22 percent of total assets at June 30, 2016, compared to 0.44 percent at June 30, 2015 and 0.39 percent at September 30, 2015. The allowance for loan losses as a percentage of total non-performing loans was 515.2 percent at June 30, 2016, compared to 337.1 percent at June 30, 2015 and 333.6 percent at September 30, 2015.



  • The Company's ratio of shareholders' equity to total assets was 10.88 percent at June 30, 2016, compared to 12.79 percent at June 30, 2015, and 12.41 percent at September 30, 2015.



  • Book value per common share amounted to $13.21 at June 30, 2016, compared to $12.17 at June 30, 2015 and $12.41 at September 30, 2015.



  • The efficiency ratio, a non-GAAP measure, was 64.0 percent for the third quarter of fiscal 2016 on an annualized basis, compared to 69.0 percent in the third quarter of fiscal 2015 and 73.9 percent in the fourth quarter of fiscal 2015.



  • The Company's balance sheet reflected total asset growth of $140.6 million at June 30, 2016, compared to September 30, 2015, coupled with stable asset quality, and capital levels that exceeded regulatory standards for a well-capitalized institution. 
Selected Financial Ratios  (unaudited; annualized where applicable)     
      
As of or for the quarter ended:6/30/163/31/1612/31/159/30/156/30/15
Return on average assets 0.81% 0.68% 0.79% 0.72% 0.77%
Return on average equity 7.41% 6.03% 6.55% 5.77% 6.01%
Net interest margin (tax equivalent basis) (1) 2.56% 2.65% 2.72% 2.71% 2.61%
Loans / deposits ratio 96.39% 94.53% 86.90% 84.68% 84.54%
Shareholders' equity / total assets 10.88% 11.09% 11.37% 12.41% 12.79%
Efficiency ratio (1) 64.0% 66.2% 71.3% 73.9% 69.0%
Book value per common share$  13.21 $  12.91 $  12.60 $  12.41 $  12.17 
                

(1) Information reconciling non-GAAP measures to GAAP measures is presented elsewhere in this press release.

Net Interest Income

For the three months ended June 30, 2016, total interest income on a fully tax equivalent basis increased $1.4 million, or 26.9 percent, to $6.6 million, compared to the three months ended June 30, 2015. Interest income rose in the quarter ended June 30, 2016, compared to the comparable period in fiscal 2015 primarily due to a $164.0 million increase in the average balance of our loans.   Total interest expense increased by $449,000, or 34.5 percent, to $1.8 million, for the three months ended June 30, 2016, compared to the same period in fiscal 2015.  

Net interest income on a fully tax equivalent basis was $4.8 million for the three months ended June 30, 2016, increasing $949,000, or 24.4 percent, from $3.9 million for the comparable three month period in fiscal 2015. The change for the three months ended June 30, 2016 primarily was the result of an increase in the average balance of interest earning assets, which increased $160.5 million.  The net interest spread on an annualized tax-equivalent basis was at 2.42 percent and 2.46 percent for the three months ended June 30, 2016 and June 30, 2015, respectively. For the quarter ended June 30, 2016, the Company's net interest margin on a tax equivalent basis decreased to 2.56 percent as compared to 2.61 percent for the same three month period in fiscal 2015.

"We continued to carry a large cash balance as we grew deposits despite the funding of $82.2 million in new loans for the period.  While we anticipate reducing the funding pool, we see growth in funding at the same time so that the dampening effect to margin may continue in the coming quarters. "commented Mr. Weagley. 

The 34.5 percent increase in interest expense for the third quarter of fiscal 2016 as compared to the third fiscal quarter in 2015 primarily reflected higher volumes of borrowings which are part of the hedging activity strategies executed to mitigate interest rate risk. The average cost of funds was 1.06 percent for the quarter ended June 30, 2016 compared to 1.02 percent for the same three month period in fiscal 2015 and, on a linked sequential quarter basis, decreased three basis points compared to the second quarter of fiscal 2016. 

For the nine months ended June 30, 2016, total interest income on a fully tax equivalent basis increased $3.4 million, or 22.4 percent, to $18.6 million, compared to $15.2 million for the nine months ended June 30, 2015. Total interest expense increased by $1.1 million, or 27.1 percent, to $4.9 million, for the nine months ended June 30, 2016, compared to the same period in fiscal 2015.  Interest income rose for the nine months ended June 30, 2016, compared to the same period in fiscal 2015 primarily due to a $100.7 million increase in average loan balances. Compared to the same period in fiscal 2015, for the nine months ended June 30, 2016, average interest earning assets increased $108.6 million, and the net interest spread and net interest margin increased on an annualized tax-equivalent basis by eight basis points and four basis points, respectively.

Earnings Summary for the Period Ended June 30, 2016

The following table presents condensed consolidated statements of income data for the periods indicated.

Condensed Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)     
For the quarter ended:6/30/163/31/1612/31/159/30/156/30/15
Net interest income$  4,780 $  4,500 $  4,211 $  3,979 $  3,838 
Provision for loan losses 472  375    
 Net interest income after  provision for loan losses 4,308  4,125  4,211  3,979  3,838 
Other income 659  501  558  639  640 
Other expense 3,378  3,360  3,425  3,454  3,273 
Income before income tax expense 1,589  1,266  1,344  1,164  1,205 
Income tax expense -  -  -  -  - 
Net income$  1,589 $  1,266 $  1,344 $  1,164 $  1,205 
Earnings per common share:     
Basic$  0.25 $  0.20 $  0.21 $  0.18 $  0.19 
Diluted$  0.25 $  0.20 n/a n/a n/a 
Weighted average common shares outstanding:  
Basic 6,411,766  6,408,167  6,402,332  6,398,720  6,395,126 
Diluted 6,411,804  6,408,167 n/a n/a n/a 

Other Income

Other income increased $19,000 for the third quarter of fiscal 2016 compared with the same period in fiscal 2015.  The increase during the third quarter of fiscal 2016 was primarily due to an increase of $84,000 in net gains on sales of investment securities compared to the same period in fiscal 2015. Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $430,000 for the three months ended June 30, 2016 compared to $495,000 for the three months ended June 30, 2015, a decrease of $65,000, or 13.1 percent.  The decrease in other income in the third quarter of fiscal 2016 when compared to the third quarter of fiscal 2015 (excluding securities gains) resulted primarily from an increase of $4,000 in net gain on sale of loans, offset by a decrease in service charges of $59,000, a decrease in rental income of $6,000 and a decrease in earnings on bank-owned insurance of $4,000. 

For the nine months ended June 30, 2016, total other income decreased $178,000 compared to the same period in fiscal 2015, primarily as a result of a $16,000 decrease in net gains on sales of investment securities, a $155,000 decrease in service charges, a $34,000 decrease in rental income, and a $8,000 decrease in earnings on bank-owned insurance, partially offset by an increase of $35,000 in net gain on sale of loans. Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $1.3 million for the nine months ended June 30, 2016 compared to $1.5 million for the comparable period in fiscal 2015, a decrease of $162,000, or 11.1 percent.

The following table presents the components of other income for the periods indicated.

(in thousands, unaudited)     
For the quarter ended:6/30/163/31/1612/31/159/30/156/30/15
Service charges on deposit accounts$  227 $  227 $  211 $  169 $  286 
Rental income – other 55  50  50  60  61 
Net gains on sales of investments, net 229  61  131  78  145 
Gain on sale of loans, net 20  36  34  47  16 
Bank-owned life insurance 128  127  132  285  132 
  Total other income$  659 $  501 $  558 $  639 $  640 

Other Expense

Total other expense for the three months ended June 30, 2016, increased $105,000, or 3.2 percent, when compared to the quarter ended June 30, 2015. The increase primarily reflected increases in salaries and employee benefits of $267,000, a $62,000 increase in occupancy expense and a $51,000 increase in professional fees.  These increases were partially offset by decreases of $163,000 in federal deposit insurance premium, a $28,000 decrease in advertising expense, a $34,000 decrease in data processing expense, a $10,000 decrease in other operating expense and a $40,000 change in other real estate (income) expense, net. 

For the nine months ended June 30, 2016, total other expense decreased $344,000, or 3.3 percent, compared to the same period in fiscal 2015. The decrease primarily reflected an $82,000 decrease in federal deposit insurance, an $118,000 decrease in advertising, a $70,000 decrease in data processing expense and a $233,000 decrease in other operating expenses.  These decreases were partially offset by an increase in salaries and employee benefits of $10,000, a $52,000 increase in occupancy expense, a $35,000 increase in professional fees and a $62,000 change in other real estate owned (income) expense, net.

The following table presents the components of other expense for the periods indicated.

(in thousands, unaudited)     
 For the quarter ended:6/30/163/31/1612/31/159/30/156/30/15
 Salaries and employee benefits$  1,600 $  1,522 $  1,499 $  1,387 $  1,333 
 Occupancy expense 469  456  423  419  407 
 Federal deposit insurance premium 40  232  200  230  203 
 Advertising 26  25  30  40  54 
 Data processing 278  270  297  321  312 
 Professional fees 415  361  400  430  364 
 Other real estate owned (income) expense, net (8) 8  (1) 17  32 
 Other operating expenses 558  486  577  610  568 
   Total other expense$  3,378 $  3,360 $  3,425 $  3,454 $  3,273 


Statement of Condition Highlights at June 30, 2016

Highlights as of June 30, 2016 included:

  • Balance sheet strength, with total assets amounting to $796.3 million at June 30, 2016, increasing $140.6 million, or 21.5 percent, compared to September 30, 2015, and increasing $172.1 million, or 27.6 percent, compared to June 30, 2015.
  • The Company's gross loans were $558.2 million at June 30, 2016, increasing $164.0 million, or 41.6 percent, and $183.5 million, or 49.0 percent, from September 30, 2015 and June 30, 2015, respectively.



  • Total investments were $126.4 million at June 30, 2016, a decrease of $59.2 million, or 31.9 percent compared to September 30, 2015, and a decrease of $63.4 million, or 33.4 percent, compared to June 30, 2015.



  • Deposits totaled $579.0 million at June 30, 2016, an increase of $113.5 million, or 24.4 percent, compared to September 30, 2015, and an increase of $135.8 million, or 30.7 percent, since June 30, 2015.  Total demand, savings, money market, and certificates of deposit less than $100,000 increased $54.8 million, or 15.6 percent, from September 30, 2015, and increased $81.1 million, or 24.9 percent, from June 30, 2015.
  • Borrowings totaled $123.0 million at June 30, 2016, $103.0 million at September 30, 2015 and $93.0 million at June 30, 2015, respectively.

Condensed Consolidated Statements of Condition

The following table presents condensed consolidated statements of condition data as of the dates indicated.

Condensed Consolidated Statements of Condition (unaudited)
      
(in thousands)     
At quarter ended:6/30/163/31/1612/31/159/30/156/30/15
Cash and due from depository institutions$  1,331 $  1,304 $  16,334 $  16,026 $  3,460 
Interest bearing deposits in depository
  institutions
 77,052  56,739  40,036  24,237  20,833 
Investment securities, available for sale, at fair
  value
 80,555  100,895  116,767  128,354  130,509 
Investment securities held to maturity 45,834  52,272  54,914  57,221  59,243 
Restricted stock, at cost 5,548  5,553  4,762  4,765  4,369 
Loans held for sale 304     657 
Loans receivable, net of allowance for loan
  losses
 553,971  515,094  461,491  391,307  371,897 
Other real estate owned 700  700  1,168  1,168  1,366 
Accrued interest receivable 2,714  2,622  2,722  2,484  2,404 
Property and equipment, net 6,654  6,490  6,486  6,535  6,502 
Deferred income taxes 1,598  2,202  2,874  2,874  2,816 
Bank-owned life insurance 18,289  18,161  18,033  17,905  18,659 
Other assets 1,755  1,954  1,561  2,814  1,529 
  Total assets$  796,305 $  763,986 $  727,148 $  655,690 $  624,244 
Deposits$  579,043 $  548,790 $  534,701 $  465,522 $  443,218 
Borrowings 123,000  123,000  103,000  103,000  93,000 
Other liabilities 7,612  7,506  6,789  5,777  8,214 
Shareholders' equity 86,650  84,690  82,658  81,391  79,812 
  Total liabilities and shareholders' equity$  796,305 $  763,986 $  727,148 $  655,690 $  624,244 

The following table reflects the composition of the Company's deposits as of the dates indicated.

Deposits (unaudited)       
(in thousands)     
At quarter ended:6/30/163/31/1612/31/159/30/156/30/15
Demand:     
  Non-interest bearing$  29,416 $  30,720 $  28,260 $  27,010 $  26,877 
  Interest-bearing 100,609  99,154  86,008  82,897  85,085 
Savings 46,056  44,207  45,312  45,189  44,949 
Money market 147,103  129,652  133,608  108,706  78,963 
Time 255,859  245,057  241,513  201,720  207,344 
  Total deposits$  579,043 $  548,790 $  534,701 $  465,522 $  443,218 

Loans

Total net loans were $554.0 million at June 30, 2016 compared to $391.3 million at September 30, 2015, for a net increase of $162.7 million.  The allowance for loan losses amounted to $5.3 million and $4.7 million at June 30, 2016 and September 30, 2015, respectively.  Average loans during the third quarter of fiscal 2016 totaled $543.0 million as compared to $379.0 million during the third quarter of fiscal 2015, representing a 43.3 percent increase.

At the end of the third quarter of fiscal 2016, the loan portfolio remained weighted toward commercial real estate and the core residential portfolio, with single-family residential real estate loans accounting for 37.7 percent of the loan portfolio, construction and development loans for 4.3 percent, commercial loans accounting for 48.2 percent, and consumer loans representing 9.8 percent of the loan portfolio at such date. Total gross loans increased $164.0 million, to $558.2 million at June 30, 2016 compared to $394.2 million at September 30, 2015.  The $164.0 million increase in the loan portfolio at June 30, 2016 compared to September 30, 2015, primarily reflected an increase of $160.2 million in commercial loans and a $16.1 million increase in construction and development loans. These increases were partially offset by a $4.3 million decrease in residential mortgage loans and an $8.0 million reduction in consumer loans at June 30, 2016 as compared to September 30, 2015.  

For the quarter ended June 30, 2016, the Company originated total new loan volume of $82.2 million, which was offset in part by participations, payoffs, prepayments and maturities totaling $42.8 million.  The payoffs were primarily confined to the consumer and residential portfolios.   " The gathering of new clients, and our market presence continued throughout the quarter with overall growth in the portfolio despite payoff activity.  We anticipate the growth continuing this year and into our 2017 fiscal year," commented Anthony C. Weagley.

The following reflects the composition of the Company's loan portfolio as of the dates indicated.

Loans (unaudited)      
(in thousands)     
At quarter ended:6/30/163/31/1612/31/159/30/156/30/15
Residential mortgage$210,621 $214,207 $211,302 $214,958 $219,197 
Construction and Development:     
  Residential and commercial 14,050  10,796  6,007  5,677  6,751 
  Land 9,904  7,755  6,804  2,142  25 
Total construction and development 23,954  18,551  12,811  7,819  6,776 
Commercial:     
  Commercial real estate 211,516  173,160  142,981  87,686  67,617 
  Multi-family 20,102  20,548  10,549  7,444  5,451 
  Other 37,091  34,585  25,975  13,380  9,839 
Total commercial 268,709  228,293  179,505  108,510  82,907 
Consumer:     
  Home equity lines of credit 21,035  21,712  23,207  22,919  23,173 
  Second mortgages 31,752  33,987  35,533  37,633  40,121 
  Other 2,088  2,041  2,299  2,359  2,523 
Total consumer 54,875  57,740  61,039  62,911  65,817 
Total loans 558,159  518,791  464,657  394,198  374,697 
Deferred loan costs, net 1,155  1,240  1,410  1,776  1,774 
Allowance for loan losses (5,343) (4,937) (4,576) (4,667) (4,574)
  Loans Receivable, net$553,971 $515,094 $461,491 $391,307 $371,897 

At June 30, 2016 , the Company had $116.3 million in overall undisbursed loan commitments, which consisted primarily of unused commercial lines of credit, home equity lines of credit and available usage from active construction facilities.   Included in the overall undisbursed commitments are the Company's "Approved, Accepted but Unfunded" pipeline, which includes approximately $11.5 million in construction and $42.9 million in commercial real estate loans, $11.5 million in commercial term loans and lines of credit and $2.4 million in residential mortgage loans expected to fund over the next 90 days.

Asset Quality

Non-accrual loans were $1.0 at June 30, 2016, as compared to $1.4 million at September 30, 2015 and $1.4 million at June 30, 2015.  Other real estate owned, ("OREO") was $700,000 at June 30, 2016, as compared with $1.2 million at September 30, 2015 and $1.4 million at June 30, 2015, respectively.  OREO at June 30, 2016 consisted of one commercial property, which is under contract of sale and scheduled to close within 45 days, reducing OREO to zero.  Total performing troubled debt restructured loans were $2.0 million at June 30, 2016, $1.1 million at September 30, 2015 and $109,000 at June 30, 2015, respectively.  The increase in performing troubled debt restructured loans at June 30, 2016 compared to September 30, 2015 was primarily due to two commercial loans to one borrower, with an outstanding balance of approximately $493,000, being returned to accruing status during the first quarter of fiscal 2016, as well as a commercial loan with an outstanding balance of $386,000 being classified as a performing TDR during the third quarter of fiscal 2016.  The decrease in OREO at June 30, 2016 compared to September 30, 2015, was attributable to three single residential loans sold during the nine months of fiscal 2016.  The $468,000 decrease in OREO at June 30, 2016 compared to September 30, 2015, was due to $493,000 of sale proceeds, at a net gain of $45,000, as well as a $20,000 reduction in the fair value of the remaining property, which is reflected in other REO expense during the nine months of fiscal 2016.

At June 30, 2016, non-performing assets totaled $1.7 million, or 0.22 percent of total assets, as compared with $2.6 million, or 0.39 percent, at September 30, 2015 and $2.7 million, or 0.44 percent, at June 30, 2015.  The decrease from June 30, 2015 reflects the Company's continued diligence to satisfactorily work out certain problem assets.  The portfolio of remaining non-accrual loans at June 30, 2016 was comprised of ten residential real estate loans with an aggregate outstanding balance of approximately $785,000 and seven consumer loans with an aggregate outstanding balance of approximately $252,000.

The following table presents the components of non-performing assets and other asset quality data for the periods indicated.

 (dollars in thousands, unaudited)     
As of or for the quarter ended:6/30/163/31/1612/31/159/30/156/30/15
Non-accrual loans(1)$  1,037 $  853 $  795 $  1,399 $  1,357 
Loans 90 days or more past due and still accruing     
  Total non-performing loans 1,037  853  795  1,399  1,357 
Other real estate owned 700  700  1,168  1,168  1,366 
  Total non-performing assets$  1,737 $  1,553 $  1,963 $  2,567 $  2,723 
Performing troubled debt restructured loans$  1,959 $ 1,577 $  1,584 $  1,091 $  109 
      
Non-performing assets / total assets 0.22% 0.20% 0.27% 0.39% 0.44%
Non-performing loans / total loans 0.19% 0.16% 0.17% 0.35% 0.36%
Net charge-offs (recoveries)$  66 $  14 $  91 $  (93)$  38 
Net charge-offs (recoveries) / average loans(2) 0.05% 0.01% 0.08% (0.10)% 0.04%
Allowance for loan losses / total loans 0.96% 0.95% 0.98% 1.18% 1.22%
Allowance for loan losses / non-performing loans 515.2% 578.8% 575.60% 333.60% 337.07%
      
Total assets$796,305 $763,986 $727,148 $655,690 $624,244 
Total loans 558,159  518,791  464,657  394,198  374,697 
Average loans  542,985   494,005   420,601   383,092  378,953 
Allowance for loan losses 5,343  4,937  4,576  4,667  4,574 
                

(1) 12 loans totaling approximately $827,000 or 79.8% of the total non-accrual loan balance were making payments at June 30, 2016. 
(2) Annualized.


The allowance for loan losses at June 30, 2016 amounted to approximately $5.3 million, or 0.96 percent of total loans, compared to $4.7 million, or 1.18 percent of total loans, at September 30, 2015 and $4.6 million, or 1.22 percent of total loans, at June 30, 2015. The Company had a $472,000 provision for loan losses during the quarter ended June 30, 2016 compared to $375,000 and zero for the quarters ended March 31, 2016 and June 30, 2015, respectively.  Provision expense was higher during the quarter ended June 30, 2016 due to an increase in loan growth, despite the level of the unallocated component of the provision.

Capital



At June 30, 2016, our total shareholders' equity amounted to $86.7 million, or 10.88 percent of total assets, compared to $81.4 million at September 30, 2015 and $79.8 million at June 30, 2015.  The Company's book value per common share was $13.21 at June 30, 2016, compared to $12.41 at September 30, 2015 and $12.17 at June 30, 2015.

At June 30, 2016, the Bank's common equity tier 1 ratio was 13.95 percent, tier 1 leverage ratio was 10.37 percent, tier 1 risk-based capital ratio was 13.95 percent and the total risk-based capital ratio was 14.87 percent.  At September 30, 2015, the Bank's common equity tier 1 ratio was 15.90 percent, tier 1 leverage ratio was 10.80 percent, tier 1 risk-based capital ratio was 15.90 percent and the total risk-based capital ratio was 16.99 percent.  At June 30, 2016, the Bank was in compliance with all applicable regulatory capital requirements.

Non-GAAP Financial Measures

Reported amounts are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The Company's management believes that the supplemental non-GAAP information provided in this press release is utilized by market analysts and others to evaluate a company's financial condition and, therefore, that such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures presented by other companies.

The Company's other income is presented in the table below including and excluding net investment securities gains. The Company's management believes that many investors desire to evaluate other income without regard to such gains.

(in thousands)     
For the quarter ended:6/30/163/31/1612/31/159/30/156/30/15
Other income$  659 $  501 $  558 $  639 $  640 
Less: Net investment securities gains 229  61  131  78  145 
Other income, excluding net investment
securities gains
$  430 $  440 $  427 $  561 $  495 

"Efficiency ratio" is a non-GAAP financial measure and is defined as other expense, excluding certain non-core items, as a percentage of net interest income on a tax equivalent basis plus other income, excluding net securities gains, calculated as follows:

(dollars in thousands)     
For the quarter ended:6/30/163/31/1612/31/15930/156/30/15
Other expense$  3,378 $  3,360 $  3,425 $  3,454 $  3,273 
Less: non-core items(1)  44  67  42  244 
Other expense, excluding non-core items$3,378 $3,316 $ 3,358 $3,412 $3,029 
      
Net interest income (tax equivalent basis)$  4,847 $  4,566 $  4,281 $  4,056 $  3,898 
Other income, excluding net investment
  securities gains
 430  440  427  561  495 
  Total$  5,277 $  5,006 $  4,708 $  4,617 $  4,393 
      
Efficiency ratio 64.0% 66.2% 71.3% 73.9% 69.0%
      

(1) Included in non-core items are costs which include expenses related to the Company's corporate restructuring initiatives, such as professional fees, litigation and settlement costs, severance costs, and external payroll development costs related to such restructuring initiatives. The Company believes these adjustments are necessary to provide the most accurate measure of core operating results as a means to evaluate comparative results.

The Company's efficiency ratio, calculated on a GAAP basis without excluding net investment securities gains and without deducting non-core items from other expense, follows:

For the quarter ended:6/30/163/31/1612/31/159/30/156/30/15
Efficiency ratio on a GAAP basis 62.1% 67.2% 70.4% 73.9% 67.6%
      

Net interest margin, which is non-interest income as a percentage of average interest-earning assets, is presented on a fully tax equivalent ("TE") basis as we believe this non-GAAP measure is the preferred industry measurement for this item.  The TE basis adjusts GAAP interest income and yields for the tax benefit of income on certain tax-exempt investments using the federal statutory rate of 34% for each period presented.  Below is a reconciliation of GAAP net interest income to the TE basis and the related GAAP basis and TE net interest margins for the periods presented

(dollars in thousands)     
For the quarter ended:6/30/163/31/1612/31/159/30/156/30/15
Net interest income (GAAP)$  4,780 $  4,500 $  4,211 $  3,979 $  3,838 
Tax-equivalent adjustment(1)  67  66  70  77  60 
TE net interest income$  4,847 $  4,566 $  4,281 $  4,056 $  3,898 
      
Net interest income margin (GAAP) 2.52% 2.61% 2.67% 2.66% 2.57%
Tax-equivalent effect   0.04    0.04    0.05    0.05    0.04 
Net interest margin (TE) 2.56% 2.65% 2.72% 2.71% 2.61%
      

(1) Reflects tax-equivalent adjustment for tax exempt loans and investments.

The following table sets forth the Company's consolidated average statements of condition for the periods presented.

Condensed Consolidated Average Statements of Condition (unaudited)
      
(in thousands)     
For the quarter ended:6/30/163/31/1612/31/159/30/156/30/15
Investment securities$  141,292 $  164,789 $  179,979 $  188,424 $  178,713 
Loans 542,985  494,005  420,601  383,092  378,953 
Allowance for loan losses (5,132) (4,602) (4,662) (4,596) (4,649)
All other assets 107,044  94,581  85,450  82,892  76,915 
  Total assets$  786,189 $   748,773 $  681,368 $  649,812 $  629,932 
Non-interest bearing deposits$  34,360 $  29,592 $  28,604 $  32,477 $  28,943 
Interest-bearing deposits 535,457  514,402  460,999  428,205  415,646 
Borrowings 123,434  113,000  102,998  101,802  96,462 
Other liabilities 7,172  7,847  6,688  6,576  8,674 
Shareholders' equity 85,766  83,932  82,079  80,752  80,207 
  Total liabilities and shareholders' equity$  786,189 $  748,773 $  681,368 $  649,812 $  629,932 
      

About Malvern Bancorp

Malvern Bancorp, Inc. is the holding company for Malvern Federal Savings Bank. Malvern Federal Savings Bank is a federally-chartered, FDIC-insured savings bank that was originally organized in 1887 and now serves as one of the oldest banks headquartered on the Philadelphia Mainline. For more than a century, Malvern Federal has been committed to helping people build prosperous communities as a trusted financial partner, forging lasting relationships through teamwork, respect and integrity. The Bank conducts business from its headquarters in Paoli, Pennsylvania, a suburb of Philadelphia, as well as eight other financial centers located throughout Chester and Delaware Counties, Pennsylvania and a Private Banking Loan production headquarters office in Morristown, New Jersey. Its primary market niche is providing personalized service to its client base. 

The Bank, through its Private Banking division and strategic partnership with Bell Rock Capital, Rehoboth, Delaware, provides personalized wealth management and advisory services to high net worth individuals and families. Our services include banking, liquidity management, investment services, 401 accounts and planning, custody, tailored lending, wealth planning, trust and fiduciary services, insurance, family wealth advisory services and philanthropic advisory services

For further information regarding Malvern Bancorp, Inc., please visit our web site at http://ir.malvernfederal.com. For information regarding Malvern Federal Savings Bank, please visit our web site at https://www.malvernfederal.com/.

Forward-Looking Statements


This press release contains certain forward looking statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like "believe," "expect," "anticipate," "estimate" and "intend" or future or conditional verbs such as "will," "would," "should," "could" or "may." Certain factors that could cause actual results to differ materially from expected results include changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the business of Malvern Bancorp, Inc., and changes in the securities markets. Except as required by law, the Company does not undertake any obligation to update any forward-looking statements to reflect changes in beliefs, expectations or events.                                                                                                                                                                                                   

MALVERN BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
 
(in thousands, except for share and per share data) June 30,
2016
  September 30,
2015


 
(unaudited)      
ASSETS       
Cash and due from depository institutions $ 1,331  $ 16,026  
Interest bearing deposits in depository institutions   77,052    24,237  
  Total cash and cash equivalents   78,383    40,263  
Investment securities available for sale, at fair value   80,555    128,354  
Investment securities held to maturity (fair value of $46,146 and $56,825)   45,834    57,221  
Restricted stock, at cost   5,548    4,765  
Loans held for sale   304     
Loans receivable, net of allowance for loan losses   553,971    391,307  
Other real estate owned   700    1,168  
Accrued interest receivable   2,714    2,484  
Property and equipment, net   6,654    6,535  
Deferred income taxes, net   1,598    2,874  
Bank-owned life insurance   18,289    17,905  
Other assets   1,755    2,814  
  Total assets $ 796,305  $ 655,690  
LIABILITIES       
Deposits:       
  Non-interest bearing $ 29,416  $ 27,010  
  Interest-bearing   549,627    438,512  
Total deposits   579,043    465,522  
FHLB Advances   123,000    103,000  
Advances from borrowers for taxes and insurance   3,935    1,806  
Accrued interest payable   436    396  
Other liabilities   3,241    3,575  
  Total liabilities   709,655    574,299  
SHAREHOLDERS' EQUITY       
Preferred stock, $0.01 par value, 10,000,000 shares, authorized, none issued       
Common stock, $0.01 par value, authorized 40,000,000 shares authorized, issued and outstanding: 6,560,713 shares at June 30, 2016  and  6,558,473 shares at September 30, 2015     66      66  
Additional paid in capital   60,437    60,365  
Retained earnings   28,013    23,814  
Unearned Employee Stock Ownership Plan (ESOP) shares   (1,665)   (1,775) 
Accumulated other comprehensive loss   (201)   (1,079) 
  Total shareholders' equity   86,650    81,391  
  Total liabilities and shareholders' equity $ 796,305  $ 655,690  



MALVERN BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 
  Three Months Ended June 30, Nine Months Ended June 30,
(in thousands, except for share and per
  share data)
   2016   2015   2016    2015 
(unaudited)            
Interest and Dividend Income            
Loans, including fees $ 5,560  $4,028 $ 15,226  $ 12,356 
Investment securities, taxable   643   859   2,313    2,151 
Investment securities, tax-exempt   192   172   577    305 
Dividends, restricted stock   65   65   182    244 
Interest-bearing cash accounts   70   15   129    62 
  Total Interest and Dividend Income   6,530   5,139   18,427    15,118 
Interest Expense            
Deposits   1,180   843   3,305    2,561 
Borrowings   570   458   1,631    1,322 
Total Interest Expense   1,750   1,301   4,936    3,883 
Net interest income   4,780   3,838   13,491    11,235 
Provision for Loan Losses   472      847    90 
Net Interest Income after Provision for
  Loan Losses
   4,308   3,838   12,644    11,145 
Other Income            
Service charges and other fees   227   286   665    820 
Rental income-other   55   61   155    189 
Net gains on sales of investments, net   229   145   421    437 
Net gains on sale of loans, net   20   16   90    55 
Earnings on bank-owned life insurance   128   132   387    395 
Total Other Income   659   640   1,718    1,896 
Other Expense            
Salaries and employee benefits   1,600   1,333   4,621    4,611 
Occupancy expense   469   407   1,348    1,296 
Federal deposit insurance premium   40   203   472    554 
Advertising   26   54   81    199 
Data processing   278   312   845    915 
Professional fees   415   364   1,176    1,141 
Other real estate owned (income)
  expense, net
   (8)  32   (1)   (63)
Other operating expenses   558   568   1,621    1,854 
Total Other Expense   3,378   3,273   10,163    10,507 
Income before income tax expense   1,589   1,205   4,199    2,534 
Income tax expense           
Net Income  $ 1,589  $1,205 $ 4,199  $ 2,534 
             
Earnings per common share            
Basic $ 0.25  $0.19 $ 0.66  $ 0.40 
Diluted $ 0.25   n/a $ 0.66   n/a 
Weighted Average Common Shares
  Outstanding
            
Basic   6,411,766   6,395,126   6,407,403    6,391,514 
Diluted   6,411,804   n/a   6,407,433   n/a 



MALVERN BANCORP, INC AND SUBSIDIARIES

SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA   
 
 Three Months Ended
(in thousands, except for share and per share data) (annualized where
  applicable)
6/30/20163/31/20166/30/2015
(unaudited)     
Statements of Operations Data   
    
  Interest income$  6,530 $  6,210 $  5,139 
  Interest expense 1,750  1,710  1,301 
  Net interest income 4,780  4,500  3,838 
  Provision for loan losses 472  375  
  Net interest income after provision for loan losses 4,308  4,125  3,838 
  Other income 659  501  640 
  Other expense 3,378  3,360  3,273 
  Income before income tax expense 1,589  1,266  1,205 
  Income tax expense   
  Net income$  1,589 $  1,266 $    1,205 
Earnings (per Common Share)   
  Basic$  0.25 $  0.20 $  0.19 
  Diluted$   0.25 $  0.20 n/a 
Statements of Condition Data (Period-End)   
  Investment securities available for sale, at fair value$  80,555 $  100,895 $  130,509 
  Investment securities held to maturity (fair value of $46,146, $52,176
  and $58,181)
 45,834  52,272  59,243 
  Loans held for sale 304   
  Loans, net of allowance for loan losses 553,971  515,094  371,897 
  Total assets 796,305  763,986  624,244 
  Deposits 579,043  548,790  443,218 
  Borrowings 123,000  123,000  93,000 
  Shareholders' equity 86,650  84,690  79,812 
Common Shares Dividend Data    
  Cash dividends$ $ $ 
Weighted Average Common Shares Outstanding   
  Basic 6,411,766  6,408,167  6,395,126 
  Diluted 6,411,804  6,408,167 n/a 
Operating Ratios   
  Return on average assets 0.81% 0.68% 0.77%
  Return on average equity 7.41% 6.03% 6.01%
  Average equity / average assets 10.91% 11.21% 12.73%
  Book value per common share (period-end)$  13.21 $  12.91 $  12.17 
Non-Financial Information (Period-End)   
  Common shareholders of record 464  472    488 
  Full-time equivalent staff 76  76    71 

 

Investor Relations: Joseph D. Gangemi SVP & CFO (610) 695-3676 Investor Contact: Ronald Morales (610) 695-3646 Media Contact: Bronwyn Pait, Marketing (610) 695-3630

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