Market Overview

Malvern Bancorp, Inc. Reports Net Income of $1.3 million, or $0.20 per Share, for the Second Quarter of Fiscal 2016, Representing a 25.6% Increase over the Second Quarter of Fiscal 2015

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PAOLI, Pa., April 29, 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 second fiscal quarter ended March 31, 2016.  Net income amounted to $1.3 million, or $0.20 per share, for the quarter ended March 31, 2016, an increase of $258,000, or 25.6 percent, as compared with the net income of $1.0 million, or $0.16 per share, for the quarter ended March 31, 2015.

"The results for the period were reflective of the continued growth in lending and in the Company overall.  The Malvern brand continues to gain traction in the marketplace and is supported by our core strengths and fundamental focus on asset quality, efficiency and top line revenue growth," commented Anthony C. Weagley, Chief Executive Officer & President of Malvern Bancorp, Inc.

For the six months ended March 31, 2016, net income amounted to $2.6 million, or $0.41 per share, compared with net income of $1.3 million, or $0.21 per share, for the six months ended March 31, 2015.

Highlights for the quarter include:

  • Return on average assets ("ROAA") was 0.68 percent for the three months ended March 31, 2016, compared to 0.64 percent for the three months ended March 31, 2015, and return on average equity ("ROAE") rose to 6.03 percent for the three months ended March 31, 2016, compared with 5.05 percent for the three months ended March 31, 2015.

  • The Company originated $74.7 million in new loans in the second quarter of fiscal 2016 which was offset in part by $20.5 million in payoffs, prepayments and maturities from its portfolio; new loan originations consisted of $10.5 million in residential mortgage loans, $53.6 million in commercial loans, $8.6 million in construction and development loans and $1.9 million in consumer loans.

  • Non-performing assets ("NPAs") were at 0.20 percent of total assets at March 31, 2016, compared to 0.52 percent at March 31, 2015 and 0.39 percent at September 30, 2015. The allowance for loan losses as a percentage of total non-performing loans was 578.8 percent at March 31, 2016, compared to 252.6 percent at March 31, 2015 and 333.6 percent at September 30, 2015.

  • The Company's ratio of shareholders' equity to total assets was 11.09 percent at March 31, 2016, compared to 12.68 percent at March 31, 2015, and 12.41 percent at September 30, 2015.

  • Book value per common share amounted to $12.91 at March 31, 2016, compared to $12.20 at March 31, 2015 and $12.41 at September 30, 2015.

  • The efficiency ratio, a non-GAAP measure, was 66.2 percent for the second quarter of fiscal 2016 on an annualized basis, compared to 76.6 percent in the second 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 $108.3 million at March 31, 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:3/31/1612/31/159/30/156/30/153/31/15
Return on average assets 0.68% 0.79% 0.72% 0.77% 0.64%
Return on average equity 6.03% 6.55% 5.77% 6.01% 5.05%
Net interest margin (tax equivalent basis) (1) 2.65% 2.72% 2.71% 2.61% 2.58%
Loans / deposits ratio 94.53% 86.90% 84.68% 84.54% 85.57%
Shareholders' equity / total assets 11.09% 11.37% 12.41% 12.79% 12.68%
Efficiency ratio (1) 66.2% 71.3% 73.9% 69.0% 76.6%
Book value per common share$12.91 $12.60 $12.41 $12.17 $12.20 
                

_____________

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

Net Interest Income

For the three months ended March 31, 2016, total interest income on a fully tax equivalent basis increased $1.1 million, or 20.7 percent, to $6.3 million, compared to the three months ended March 31, 2015. Interest income rose in the quarter ended March 31, 2016, compared to the comparable period in fiscal 2015 primarily due to a $109.1 million increase in the average balance of our loans and a $13.0 million increase in the average balance of our investment securities. Total interest expense increased by $380,000, or 28.6 percent, to $1.7 million, for the three months ended March 31, 2016, compared to the comparable period in fiscal 2015.  

Net interest income on a fully tax equivalent basis was $4.6 million for the three months ended March 31, 2016, increasing $695,000, or 18.0 percent, from $3.9 million for the comparable three month period in fiscal 2015. The change for the three months ended March 31, 2016 primarily was the result of an increase in the average balance of interest earning assets, which increased $90.8 million.  The net interest spread on an annualized tax-equivalent basis was at 2.55 percent and 2.43 percent for the three months ended March 31, 2016 and March 31, 2015, respectively. For the quarter ended March 31, 2016, the Company's net interest margin on a tax equivalent basis increased to 2.65 percent as compared to 2.58 percent for the same three month period in fiscal 2015.

"Our net interest margins remained stable despite the large liquidity pool carried during the period.  We expect to continue to see growth in funding offset with the deployment of that cash into our loan portfolio in the coming quarters.  During the second quarter of fiscal 2016 we added $74.7 million in gross loans to the balance sheet, maintaining pace with funding, "commented Mr. Weagley. 

The 28.6 percent increase in interest expense for the second quarter of fiscal 2016 compared to the second fiscal quarter in 2015, primarily reflects higher volumes of borrowings. The increased borrowings for the period are tied primarily to an interest rate swap that was executed to improve interest rate risk. The average cost of funds was 1.09 percent for the quarter ended March 31, 2016 compared to 1.04 percent for the same three month period in fiscal 2015 and, on a linked sequential quarter basis, increased four basis points compared to the first quarter of fiscal 2016. 

For the six months ended March 31, 2016, total interest income on a fully tax equivalent basis increased $2.0 million, or 20.0 percent, to $12.0 million, compared to $10.0 million for the six months ended March 31, 2015. Total interest expense increased by $604,000, or 23.4 percent, to $3.2 million, for the six months ended March 31, 2016, compared to the comparable period in fiscal 2015.  Interest income rose for the six months ended March 31, 2015, compared to the comparable period in fiscal 2015 primarily due to a $69.8 million increase in average loan balances. Compared to the same period in fiscal 2015, for the six months ended March 31, 2016, average interest earning assets increased $86.0 million, and the net interest spread and net interest margin increased on an annualized tax-equivalent basis by 14 basis points and nine basis points, respectively.

Earnings Summary for the Period Ended March 31, 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:3/31/1612/31/159/30/156/30/153/31/15
Net interest income$4,500 $4,211 $3,979 $3,838 $3,836 
Provision for loan losses 375              
Net interest income after  provision for loan losses 4,125  4,211  3,979  3,838  3,836 
Other income 501  558  639  640  745 
Other expense 3,360  3,425  3,454  3,273  3,573 
Income before income tax expense 1,266  1,344  1,164  1,205  1,008 
Income tax expense -  -  -  -  - 
Net income$1,266 $1,344 $1,164 $1,205 $1,008 
Earnings per common share:     
Basic$0.20 $0.21 $0.18 $0.19 $0.16 
Diluted$0.20   n/a    n/a    n/a  n/a 
Weighted average common shares outstanding:  
Basic 6,408,167  6,402,332  6,398,720  6,395,126  6,391,521 
Diluted 6,413,167   n/a    n/a    n/a  n/a 
        

Other Income

Other income decreased $244,000 for the second quarter of fiscal 2016 compared with the same period in fiscal 2015.  The decrease during the second quarter of fiscal 2016 was primarily due to a decrease of $205,000 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 $440,000 for the three months ended March 31, 2016 compared to $479,000 for the three months ended March 31, 2015, a decrease of $39,000, or 8.1 percent.  The decrease in other income in the second quarter of fiscal 2016 when compared to the second quarter of fiscal 2015 (excluding securities gains) resulted primarily from a decrease in service charges of $37,000, a decrease in rental income of $14,000 and a decrease in earnings on bank-owned insurance of $4,000, partially offset by an increase of $16,000 in net gain on sale of loans. 

For the six months ended March 31, 2016, total other income decreased $197,000 compared to the same period in fiscal 2015, primarily as a result of a $100,000 decrease in net gains on sales of investment securities, a $96,000 decrease in service charges and a $28,000 decrease in rental income, partially offset by an increase of $31,000 in net gain on sale of loans. Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $867,000 for the six months ended March 31, 2016 compared to $964,000 for the comparable period in fiscal 2015, a decrease of $97,000, or 10.1 percent.

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

      
(in thousands, unaudited)     
For the quarter ended:3/31/1612/31/159/30/156/30/153/31/15
Service charges on deposit accounts$227 $211 $169 $286 $264 
Rental income – other 50  50  60  61  64 
Net gains on sales of investments, net 61  131  78  145  266 
Gain on sale of loans, net 36  34  47  16  20 
Bank-owned life insurance 127  132  285  132  131 
Total other income$501 $558 $639 $640 $745 
                

Other Expense

Total other expense for the three months ended March 31, 2016, decreased $213,000, or 6.0 percent, when compared to the quarter ended March 31, 2015. The decrease primarily reflected reductions in salaries and employee benefits of $28,000, a $9,000 decrease in occupancy expense, a $35,000 decrease in advertising expense, a $31,000 decrease in data processing expense, a $73,000 decrease in professional fees and a $152,000 decrease in other operating expense.  These decreases were partially offset by increases of $48,000 in federal deposit insurance premium and a $67,000 change in other real estate expense (income), net. 

For the six months ended March 31, 2016, total other expense decreased $449,000, or 6.2 percent, compared to the same period in fiscal 2015. The decrease primarily reflected a $257,000 reduction in salaries and employee benefits primarily due to workforce reductions, a $10,000 decrease in occupancy expense, a $90,000 decrease in advertising costs, a 36,000 decrease in data processing expense, a $16,000 decrease in professional fees and a $223,000 decrease in other operating expenses.  These decreases were partially offset by an increase in federal deposit insurance premium of $81,000, and a $102,000 change in other real estate owned expense (income), net.

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

      
(in thousands, unaudited)     
 For the quarter ended:3/31/1612/31/159/30/156/30/153/31/15
 Salaries and employee benefits$1,522 $1,499 $1,387 $1,333 $1,550 
 Occupancy expense 456  423  419  407  465 
 Federal deposit insurance premium 232  200  230  203  184 
 Advertising 25  30  40  54  60 
 Data processing 270  297  321  312  301 
 Professional fees 361  400  430  364  434 
 Other real estate owned expense (income), net 8  (1) 17  32  (59)
 Other operating expenses 486  577  610  568  638 
 Total other expense$3,360 $3,425 $3,454 $3,273 $3,573 
                 


Statement of Condition Highlights at March 31, 2016

Commenting on the balance sheet, Mr. Weagley indicated "as we have discussed in the prior quarter, we continue to change the balance sheet with lending as the primary asset.  Our business plans have remained focused on this transformation for Malvern and we are pleased with the favorable results thus far this year. We expect our new locations in Villanova and Morristown to further support this change and growth in the lending segments of the balance sheet."

Highlights as of March 31, 2016 included:

  • Balance sheet strength, with total assets amounting to $764.0 million at March 31, 2016, increasing $108.3 million, or 16.5 percent, compared to September 30, 2015, and increasing $132.9 million, or 21.1 percent, compared to March 31, 2015.

  • The Company's gross loans were $518.8 million at March 31, 2016, increasing $124.6 million, or 31.6 percent, and $138.7 million, or 36.5 percent, from September 30, 2015 and March 31, 2015, respectively.

  • Deposits totaled $548.8 million at March 31, 2016, an increase of $83.3 million, or 17.9 percent, compared to September 30, 2015, and an increase of $104.6 million, or 23.6 percent, since March 31, 2015.  Total demand, savings, money market, and certificates of deposit less than $100,000 increased $37.9 million, or 10.8 percent, from September 30, 2015, and increased $69.9 million, or 21.9 percent, from March 31, 2015.

  • Borrowings totaled $123.0 million at March 31, 2016, $103.0 million at September 30, 2015 and $98.0 million at March 31, 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:3/31/1612/31/159/30/156/30/153/31/15
Cash and due from depository institutions$1,304 $16,334 $16,026 $3,460 $1,056 
Interest bearing deposits in depository institutions 56,739  40,036  24,237  20,833  50,587 
Investment securities, available for sale, at fair value 100,895  116,767  128,354  130,509  113,557 
Investment securities held to maturity 52,272  54,914  57,221  59,243  50,697 
Restricted stock, at cost 5,553  4,762  4,765  4,369  4,602 
Loans held for sale       657   
Loans receivable, net of allowance for loan losses 515,094  461,491  391,307  371,897  377,340 
Other real estate owned 700  1,168  1,168  1,366  1,430 
Accrued interest receivable 2,622  2,722  2,484  2,404  2,168 
Property and equipment, net 6,490  6,486  6,535  6,502  6,592 
Deferred income taxes 2,202  2,874  2,874  2,816  2,940 
Bank-owned life insurance 18,161  18,033  17,905  18,659  18,527 
Other assets 1,954  1,561  2,814  1,529  1,610 
Total assets$763,986 $727,148 $655,690 $624,244 $631,106 
Deposits$548,790 $534,701 $465,522 $443,218 $444,146 
Borrowings 123,000  103,000  103,000  93,000  98,000 
Other liabilities 7,506  6,789  5,777  8,214  8,934 
Shareholders' equity 84,690  82,658  81,391  79,812  80,026 
Total liabilities and shareholders' equity$763,986 $727,148 $655,690 $624,244 $631,106 
                

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

      
Deposits (unaudited)     
(in thousands)     
At quarter ended:3/31/1612/31/159/30/156/30/153/31/15
Demand:     
Non-interest bearing$30,720 $28,260 $27,010 $26,877 $25,111 
Interest-bearing 99,154  86,008  82,897  85,085  87,921 
Savings 44,207  45,312  45,189  44,949  44,848 
Money market 129,652  133,608  108,706  78,963  70,066 
Time 245,057  241,513  201,720  207,344  216,200 
Total deposits$548,790 $534,701 $465,522 $443,218 $444,146 
                

Loans

Total net loans were $515.1 million at March 31, 2016 compared to $391.3 million at September 30, 2015, for a net increase of $123.8 million.  The allowance for loan losses amounted to $4.9 million and $4.7 million at March 31, 2016 and September 30, 2015, respectively. Average loans during the second quarter of fiscal 2016 totaled $494.0 million as compared to $384.9 million during the second quarter of fiscal 2015, representing a 28.3 percent increase.

At the end of second quarter of fiscal 2016, the loan portfolio remained weighted toward the core residential portfolio, with single-family residential real estate loans accounting for 41.3 percent of the loan portfolio, construction and development loans for 3.6 percent, commercial loans accounting for 44.0 percent, and consumer loans representing 11.1 percent of the loan portfolio at such date. Total gross loans increased $124.6 million, to $518.8 million at March 31, 2016 compared to $394.2 million at September 30, 2015.  The $124.6 million increase in the loan portfolio at March 31, 2016 compared to September 30, 2015, primarily reflected an increase of $119.8 million in commercial loans and a $10.7 million increase in construction and development loans. These increases were partially offset by a $751,000 decrease in residential mortgage loans and a $5.2 million reduction in consumer loans at March 31, 2016 as compared to September 30, 2015.  

For the quarter ended March 31, 2016, the Company originated total new loan volume of $74.7 million, which was offset in part by payoffs, prepayments and maturities totaling $20.5 million.  The payoffs were primarily contained to the consumer and residential portfolios.   "Our current pipeline of loans has remained strong, buttressed by our continued business development activity, and overall growth in the portfolio has gained traction, supported by slowing payoff activity.  We anticipate continued growth as we move forward in the 2016 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:3/31/1612/31/159/30/156/30/153/31/15
Residential mortgage$214,207 $211,302 $214,958 $219,197 $225,232 
Construction and Development:     
Residential and commercial 10,796  6,007  5,677  6,751  5,922 
Land 7,755  6,804  2,142  25  344 
Total construction and development 18,551  12,811  7,819  6,776  6,266 
Commercial:     
Commercial real estate 173,160  142,981  87,686  67,617  68,858 
Multi-family 20,548  10,549  7,444  5,451  5,508 
Other 34,585  25,975  13,380  9,839  5,506 
Total commercial 228,293  179,505  108,510  82,907  79,872 
Consumer:     
Home equity lines of credit 21,712  23,207  22,919  23,173  23,073 
Second mortgages 33,987  35,533  37,633  40,121  43,013 
Other 2,041  2,299  2,359  2,523  2,610 
Total consumer 57,740  61,039  62,911  65,817  68,696 
Total loans 518,791  464,657  394,198  374,697  380,066 
Deferred loan costs, net 1,240  1,410  1,776  1,774  1,886 
Allowance for loan losses (4,937) (4,576) (4,667) (4,574) (4,612)
Loans Receivable, net$515,094 $461,491 $391,307 $371,897 $377,340 
                

At March 31, 2016 , the Company had $97.2 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 $7.5 million in construction and $41.1 million in commercial real estate loans, $9.3 million in commercial term loans and lines of credit and $3.6 million in residential mortgage loans expected to fund over the next 90 days.

Asset Quality

Non-accrual loans were $853,000 at March 31, 2016, as compared to $1.4 million at September 30, 2015 and $1.8 million at March 31, 2015.  Other real estate owned, ("OREO") was $700,000 at March 31, 2016, as compared with $1.2 million at September 30, 2015 and $1.4 million at March 31, 2015, respectively.  Total performing troubled debt restructured loans were $1.6 million at March 31, 2016, $1.1 million at September 30, 2015 and $109,000 at March 31, 2015, respectively.  The increase in performing troubled debt restructured loans at March 31, 2016 compared to September 30, 2015 was 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.  The decrease in OREO at March 31, 2016 compared to September 30, 2015, was attributable to three single residential loans sold during the first six months of fiscal 2016.  The $468,000 decrease in OREO at March 31, 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 are reflected in other REO expense during the first six months of fiscal 2016.

At March 31, 2016, non-performing assets totaled $1.6 million, or 0.20 percent of total assets, as compared with $2.6 million, or 0.39 percent, at September 30, 2015 and $3.3 million, or 0.52 percent, at March 31, 2015.  The decrease from March 31, 2015 reflects the Company's continued diligence to satisfactorily work out certain problem assets.  The portfolio of remaining non-accrual loans at March 31, 2016 was comprised of seven residential real estate loans with an aggregate outstanding balance of approximately $624,000, six consumer loans with an aggregate outstanding balance of approximately $217,000 and one construction and development loan with an outstanding balance of $12,000.

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:3/31/1612/31/159/30/156/30/153/31/15
Non-accrual loans(1)$853 $795 $1,399 $1,357 $1,826 
Loans 90 days or more past due and still accruing          
Total non-performing loans 853  795  1,399  1,357  1,826 
Other real estate owned 700  1,168  1,168  1,366  1,430 
Total non-performing assets$1,553 $1,963 $2,567 $2,723 $3,256 
Performing troubled debt restructured loans$1,577 $1,584 $1,091 $109 $109 
      
Non-performing assets / total assets 0.20% 0.27% 0.39% 0.44% 0.52%
Non-performing loans / total loans 0.16% 0.17% 0.35% 0.36% 0.48%
Net charge-offs (recoveries)$14 $91 $(93)$38 $(12)
Net charge-offs (recoveries) / average loans(2) 0.01% 0.08% (0.10)% 0.04% 0.01%
Allowance for loan losses / total loans 0.95% 0.98% 1.18% 1.22% 1.21%
Allowance for loan losses / non-performing loans 578.8% 575.60% 333.60% 337.07% 252.57%
      
Total assets$763,986 $727,148 $655,690 $624,244 $631,106 
Total loans 518,791  464,657  394,198  374,697  380,066 
Average loans 494,005  420,601  383,092  378,953  384,915 
Allowance for loan losses 4,937  4,576  4,667  4,574  4,612 
                

______________

(1) Seven loans totaling approximately $491,000 or 57.6% of the total non-accrual loan balance were making payments at March 31, 2016. 
(2) Annualized.

The allowance for loan losses at March 31, 2016 amounted to approximately $4.9 million, or 0.95 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 1.21 percent of total loans, at March 31, 2015. The Company had a $375,000 provision for loan losses during the quarter ended March 31, 2016 compared to zero for the quarters ended December 31, 2015 and March 31, 2015.  Provision expense was higher during the quarter ended March 31, 2016 due to an increase in loan growth.

Capital

At March 31, 2016, our total shareholders' equity amounted to $84.7 million, or 11.09 percent of total assets, compared to $81.4 million at September 30, 2015 and $80.0 million at March 31, 2015.  The Company's book value per common share was $12.91 at March 31, 2016, compared to $12.41 at September 30, 2015 and $12.20 at March 31, 2015.

At March 31, 2016, the Bank's common equity tier 1 ratio was 14.23 percent, tier 1 leverage ratio was 10.34 percent, tier 1 risk-based capital ratio was 14.23 percent and the total risk-based capital ratio was 15.15 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 March 31, 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:3/31/1612/31/159/30/156/30/153/31/15
Other income$501 $558 $639 $640 $745 
Less: Net investment securities gains 61  131  78  145  266 
Other income, excluding net investment
securities gains
$440 $427 $561 $495 $479 
                

"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:3/31/1612/31/15930/156/30/153/31/15
Other expense$3,360 $3,425 $3,454 $3,273 $3,573 
Less: non-core items(1) 44  67  42  244  242 
Other expense, excluding non-core items

$


  3,316
 

$


  3,358
 

$


  3,412
 

$


  3,029
 

$


  3,331
 
      
Net interest income (tax equivalent basis)$4,566 $4,281 $4,056 $3,898 $3,871 
Other income, excluding net investment securities gains 440  427  561  495  479 
Total$5,006 $4,708 $4,617 $4,393 $4,350 
      
Efficiency ratio 66.2% 71.3% 73.9% 69.0% 76.6%
______________________     
(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:3/31/1612/31/159/30/156/30/153/31/15
Efficiency ratio on a GAAP basis 67.2% 70.4% 73.9% 67.6% 72.7%
      

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:3/31/1612/31/159/30/156/30/153/31/15
Net interest income (GAAP)$4,500 $4,211 $3,979 $3,838 $3,836 
Tax-equivalent adjustment(1) 66  70  77  60  35 
TE net interest income$4,566 $4,281 $4,056 $3,898 $3,871 
      
Net interest income margin (GAAP) 2.61% 2.67% 2.66% 2.57% 2.56%
Tax-equivalent effect 0.04  0.05  0.05  0.04  0.02 
Net interest margin (TE) 2.65% 2.72% 2.71% 2.61% 2.58%
____________________     
(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:3/31/1612/31/159/30/156/30/153/31/15
Investment securities$164,789 $179,979 $188,424 $178,713 $151,746 
Loans 494,005  420,601  383,092  378,953  384,915 
Allowance for loan losses (4,602) (4,662) (4,596) (4,649) (4,614)
All other assets 94,581  85,450  82,892  76,915  95,921 
Total assets$748,773 $681,368 $649,812 $629,932 $627,968 
Non-interest bearing deposits$29,592 $28,604 $32,477 $28,943 $27,002 
Interest-bearing deposits 514,402  460,999  428,205  415,646  419,367 
Borrowings 113,000  102,998  101,802  96,462  94,556 
Other liabilities 7,847  6,688  6,576  8,674  7,272 
Shareholders' equity 83,932  82,079  80,752  80,207  79,771 
Total liabilities and shareholders' equity$748,773 $681,368 $649,812 $629,932 $627,968 
      

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 seven other financial centers located throughout Chester and Delaware Counties, Pennsylvania. 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) March 31,
2016
  September 30,
2015
(unaudited)      
ASSETS       
Cash and due from depository institutions $ 1,304  $ 16,026  
Interest bearing deposits in depository institutions   56,739    24,237  
Total cash and cash equivalents   58,043    40,263  
Investment securities available for sale, at fair value   100,895    128,354  
Investment securities held to maturity (fair value of $52,176 and $56,825)   52,272    57,221  
Restricted stock, at cost   5,553    4,765  
Loans receivable, net of allowance for loan losses   515,094    391,307  
Other real estate owned   700    1,168  
Accrued interest receivable   2,622    2,484  
Property and equipment, net   6,490    6,535  
Deferred income taxes, net   2,202    2,874  
Bank-owned life insurance   18,161    17,905  
Other assets   1,954    2,814  
  Total assets $ 763,986  $ 655,690  
LIABILITIES       
Deposits:       
Non-interest bearing $ 30,720  $ 27,010  
Interest-bearing   518,070    438,512  
Total deposits   548,790    465,522  
FHLB Advances   123,000    103,000  
Advances from borrowers for taxes and insurance   3,213    1,806  
Accrued interest payable   436    396  
Other liabilities   3,857    3,575  
  Total liabilities   679,296    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 March 31, 2016  and  6,558,473 shares at September 30, 2015   66    66  
Additional paid in capital   60,412    60,365  
Retained earnings   26,424    23,814  
Unearned Employee Stock Ownership Plan (ESOP) shares   (1,702)   (1,775) 
Accumulated other comprehensive loss   (510)   (1,079) 
Total shareholders' equity   84,690    81,391  
Total liabilities and shareholders' equity $ 763,986  $ 655,690  
            


 
MALVERN BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
     
  Three Months Ended March 31, Six Months Ended March 31,
(in thousands, except for share data)  2016   2015   2016   2015 
(unaudited)            
Interest and Dividend Income            
Loans, including fees $5,121 $ 4,126  $9,666 $ 8,328 
Investment securities, taxable  795   778   1,670   1,292 
Investment securities, tax-exempt  190   96   385   133 
Dividends, restricted stock  63   142   117   179 
Interest-bearing cash accounts  41   24   59   47 
Total Interest and Dividend Income  6,210   5,166   11,897   9,979 
Interest Expense            
Deposits  1,161   859   2,125   1,718 
Borrowings  549   471   1,061   864 
Total Interest Expense  1,710   1,330   3,186   2,582 
Net interest income  4,500   3,836   8,711   7,397 
Provision for Loan Losses  375      375   90 
Net Interest Income after Provision for Loan Losses  4,125   3,836   8,336   7,307 
Other Income            
Service charges and other fees  227   264   438   534 
Rental income-other  50   64   100   128 
Net gains on sales of investments, net  61   266   192   292 
Net gains on sale of loans, net  36   20   70   39 
Earnings on bank-owned life insurance  127   131   259   263 
Total Other Income  501   745   1,059   1,256 
Other Expense            
Salaries and employee benefits  1,522   1,550   3,021   3,278 
Occupancy expense  456   465   879   889 
Federal deposit insurance premium  232   184   432   351 
Advertising  25   60   55   145 
Data processing  270   301   567   603 
Professional fees  361   434   761   777 
Other real estate owned expense (income), net  8   (59)  7   (95)
Other operating expenses  486   638   1,063   1,286 
Total Other Expense  3,360   3,573   6,785   7,234 
Income before income tax expense  1,266   1,008   2,610   1,329 
Income tax expense            
Net Income  $1,266 $ 1,008  $2,610 $ 1,329 
             
Earnings per common share            
Basic $0.20 $ 0.16  $0.41 $ 0.21 
Diluted $0.20   n/a  $0.41   n/a 
Weighted Average Common Shares Outstanding            
Basic  6,408,167   6,391,521   6,405,234   6,389,687 
Diluted  6,413,167   n/a   6,410,234   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) 3/31/201612/31/20153/31/2015
(unaudited)     
Statements of Operations Data   
    
Interest income$6,210 $5,687 $5,166 
Interest expense 1,710  1,476  1,330 
Net interest income 4,500  4,211  3,836 
Provision for loan losses 375     
Net interest income after provision for loan losses 4,125  4,211  3,836 
Other income 501  558  745 
Other expense 3,360  3,425  3,573 
Income before income tax expense 1,266  1,344  1,008 
Income tax expense      
Net income$1,266 $1,344 $1,008 
Earnings (per Common Share)   
Basic$0.20 $0.21 $0.16 
Diluted$0.20  n/a  n/a 
Statements of Condition Data (Period-End)   
Investment securities available for sale, at fair value$100,895 $116,767 $113,557 
Investment securities held to maturity (fair value of $52,176, $53,931 and $50,310) 52,272  54,914  50,697 
Loans, net of allowance for loan losses 515,094  461,491  377,340 
Total assets 763,986  727,148  631,106 
Deposits 548,790  534,701  444,146 
Borrowings 123,000  103,000  98,000 
Shareholders' equity 84,690  82,658  80,026 
Common Shares Dividend Data    
Cash dividends$ $ $ 
Weighted Average Common Shares Outstanding   
Basic 6,408,167  6,402,332  6,391,521 
Diluted 6,413,167  n/a  n/a 
Operating Ratios   
Return on average assets 0.68% 0.79% 0.64%
Return on average equity 6.03% 6.55% 5.05%
Average equity / average assets 11.21% 12.05% 12.70%
Book value per common share (period-end)$12.91 $12.60 $12.20 
Non-Financial Information (Period-End)   
Common shareholders of record 472  482  494 
Full-time equivalent staff 76  76  76 

 

Investor Contact: Joseph D. Gangemi Senior Vice President & Chief Financial Officer (610) 695-3676 Media Contact: David Culver, VP Public Relations Boyd Tamney Cross (610) 254-7426

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