Market Overview

Malvern Bancorp, Inc. Reports Net Income of $7.7 million, or $1.21 per Share, for the Fourth quarter of Fiscal 2016, Representing a 565.2% Increase over the Fourth quarter of Fiscal 2015

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PAOLI, Pa., Oct. 26, 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 fourth fiscal quarter ended September 30, 2016.  Net income amounted to $7.7 million, or $1.21 per fully diluted common share, for the quarter ended September 30, 2016, an increase of $6.6 million, or 565.2 percent, as compared with the net income of $1.2 million, or $0.18 per fully diluted common share, for the quarter ended September 30, 2015.  For the year ended September 30, 2016, net income amounted to $11.9 million, or $1.86 per fully diluted common share, compared with net income of $3.7 million, or $0.58 per fully diluted common share, for the year ended September 30, 2015.

During the fourth quarter of 2016, the Company reversed approximately $7.8 million representing the valuation allowance related to net deferred tax assets, which contributed to a net tax benefit for the quarter of $6.0 million. The impact of the reversal and subsequent income tax benefit positively affected net income for the fourth quarter and full fiscal year 2016 results. Excluding the net tax benefit of $6.0 million, net income attributable to the Company would have been approximately $1.8 million, or $0.28 per fully diluted common share, for the three months ended September 30, 2016 and $6.0 million, or $0.93 per fully diluted common share, for the full fiscal year 2016.

The reversal of the valuation allowance on net deferred tax assets was based on management's judgment that the net deferred tax asset will be realized by the Company.   The Company has reported positive cumulative pre-tax earnings over the prior two year period ended September 30, 2016, representing 10 quarters. These historical results in conjunction with management's expectations of future projected taxable income supported the Company's decision to reverse the valuation allowance on net deferred tax assets.

Anthony C. Weagley, President and Chief Executive Officer, said, "In closing out 2016, we continued to perform with 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 financial performance continues to allow Malvern to expand its brand through our private banking model and expansion of geographic footprint. We successfully opened our Villanova location, in Pennsylvania, and our Private Banking Loan Production headquarters in Morristown, New Jersey. Our ability to continue to gather client relationships underscores the success of our business plans.  We are maintaining our course with our business strategy and our performance reflected that and the strength of our balance sheet.  Our core loan growth increased 46.7 percent at September 30, 2016 compared to September 30, 2015.   The company also had strong deposit growth at September 30, 2016 with total deposits increasing 29.3 percent compared to September 30, 2015."

Highlights for the quarter include:

  • Return on average assets ("ROAA") was 3.90 percent for the three months ended September 30, 2016, compared to 0.72 percent for the three months ended September 30, 2015, and return on average equity ("ROAE") rose to 35.10 percent for the three months ended September 30, 2016, compared with 5.77 percent for the three months ended September 30, 2015. Excluding the impact of the income tax benefit from the reversal of the valuation allowance, the return on average assets was 0.90 percent for the three months ended September 30, 2016 and the return on average equity was 7.55 percent for the three months ended September 30, 2016. 
  • The Company originated $58.2 million in new loans in the fourth quarter of fiscal 2016, which was offset in part by $38.0 million in participations, payoffs, prepayments and maturities from its portfolio, resulting in net portfolio growth of $20.2 million compared to the third quarter of fiscal 2016; new loan originations consisted of $3.8 million in residential mortgage loans, $47.2 million in commercial loans, $5.4 million in construction and development loans and $1.8 million in consumer loans.  
  • Non-performing assets ("NPAs") were at 0.20 percent of total assets at September 30, 2016, compared to 0.22 percent at June 30, 2016 and 0.39 percent at September 30, 2015. The allowance for loan losses as a percentage of total non-performing loans was 336.1 percent at September 30, 2016, compared to 515.2 percent at June 30, 2016 and 333.6 percent at September 30, 2015.
  • The Company's ratio of shareholders' equity to total assets was 11.52 percent at September 30, 2016, compared to 10.88 percent at June 30, 2016, and 12.41 percent at September 30, 2015.
  • Book value per common share amounted to $14.42 at September 30, 2016, compared to $13.21 at June 30, 2016 and $12.41 at September 30, 2015.
  • The efficiency ratio, a non-GAAP measure, was 67.7 percent for the fourth quarter of fiscal 2016 on an annualized basis, compared to 64.0 percent in the third quarter of fiscal 2016 and 73.9 percent in the fourth quarter of fiscal 2015.
  • The Company's balance sheet reflected total asset growth of $165.6 million at September 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:9/30/16
 6/30/16
 3/31/16
 12/31/15
 9/30/15
 
Return on average assets 3.90%  0.81%  0.68%  0.79%  0.72% 
Return on average equity 35.10%  7.41%  6.03%  6.55%  5.77% 
Net interest margin (tax equivalent basis) (1) 2.65%  2.56%  2.65%  2.72%  2.71% 
Loans / deposits ratio 96.07%  96.39%  94.53%  86.90%  84.68% 
Shareholders' equity / total assets 11.52%  10.88%  11.09%  11.37%  12.41% 
Efficiency ratio (1) 67.7%  64.0%  66.2%  71.3%  73.9% 
Book value per common share$14.42  $13.21  $12.91  $12.60  $12.41  
_____________                    


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

Net Interest Income

For the three months ended September 30, 2016, total interest income on a fully tax-equivalent basis increased $1.5 million, or 26.9 percent, to $6.9 million, compared to the three months ended September 30, 2015. Interest income rose in the quarter ended September 30, 2016, compared to the comparable period in fiscal 2015, primarily due to a $192.7 million increase in the average balance of our loans.   Total interest expense increased by $431,000, or 31.6 percent, to $1.8 million, for the three months ended September 30, 2016, compared to the same period in fiscal 2015.  

Net interest income on a fully tax-equivalent basis was $5.1 million for the three months ended September 30, 2016, increasing $1.0 million, or 25.3 percent, from $4.1 million for the comparable three month period in fiscal 2015. The change for the three months ended September 30, 2016 primarily was the result of an increase in the average balance of interest earning assets, which increased $167.6 million.  The net interest spread on an annualized tax-equivalent basis was at 2.51 percent and 2.59 percent for the three months ended September 30, 2016 and 2015, respectively.  For the quarter ended September 30, 2016, the Company's net interest margin on a tax-equivalent basis decreased to 2.65 percent as compared to 2.71 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 $58.2 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 31.6 percent increase in interest expense for the fourth quarter of fiscal 2016 as compared to the fourth quarter of fiscal 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 1.08 percent for the quarter ended September 30, 2016 compared to 1.03 percent for the same three month period in fiscal 2015 and, on a linked sequential quarter basis, increased two basis points compared to the third quarter of fiscal 2016. 

For the twelve months ended September 30, 2016, total interest income on a fully tax-equivalent basis increased $4.9 million, or 23.5 percent, to $25.5 million, compared to $20.6 million for the twelve months ended September 30, 2015. Total interest expense increased by $1.5 million, or 28.3 percent, to $6.7 million, for the twelve months ended September 30, 2016, compared to the same period in fiscal 2015.  Interest income rose for the twelve months ended September 30, 2016, compared to the same period in fiscal 2015 primarily due to a $123.8 million increase in average loan balances. Compared to the same period in fiscal 2015, for the twelve months ended September 30, 2016, average interest earning assets increased $122.7 million, and the net interest spread and net interest margin increased on an annualized tax-equivalent basis by five basis points and three basis points, respectively.

Earnings Summary for the Period Ended September 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:9/30/16
  6/30/16
  3/31/16
 12/31/15
 9/30/15
Net interest income$5,021  $4,780  $4,500 $4,211 $3,979 
Provision for loan losses 100   472   375    
Net interest income after  provision for loan losses 4,921   4,308   4,125  4,211  3,979 
Other income 615   659   501  558  639 
Other expense 3,759   3,378   3,360  3,425  3,454 
Income before income tax benefit 1,777   1,589   1,266  1,344  1,164 
Income tax benefit (5,966)          
Net income$7,743  $1,589  $1,266 $1,344 $1,164 
Earnings per common share:     
Basic$1.21  $0.25  $0.20 $0.21 $0.18 
Diluted$1.21  $0.25  $0.20 n/a n/a 
Weighted average common shares outstanding:  
Basic 6,415,049   6,411,766   6,408,167  6,402,332  6,398,720 
Diluted 6,415,207   6,411,804   6,408,167 n/a n/a 
              

Other Income

Other income decreased $24,000 for the fourth quarter of fiscal 2016 compared with the same period in fiscal 2015.  The decrease during the fourth quarter of fiscal 2016 was primarily due to a decrease of $155,000 in earnings on bank-owned insurance compared to the same period in fiscal 2015.    The decline was a result of a one time death benefit paid in fiscal 2015.   Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $471,000 for the three months ended September 30, 2016 compared to $561,000 for the three months ended September 30, 2015, a decrease of $90,000, or 16.0 percent.  The decrease in other income in the fourth quarter of fiscal 2016 when compared to the fourth quarter of fiscal 2015 (excluding securities gains and losses) resulted primarily from a decrease of $21,000 in net gain on sale of loans and a decrease in rental income of $4,000, offset by an increase in service charges of $89,000 and an increase in gain on disposal of fixed assets of $1,000. 

For the twelve months ended September 30, 2016, total other income decreased $202,000 compared to the same period in fiscal 2015, primarily as a result of a $66,000 decrease in service charges, a $38,000 decrease in rental income, and a $163,000 decrease in earnings on bank-owned insurance, partially offset by an increase of $50,000 in net gains on sales of investment securities, an increase of $14,000 in net gain on sale of loans and an increase in gain on disposal of fixed assets of $1,000. Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $1.8 million for the twelve months ended September 30, 2016 compared to $2.0 million for the comparable period in fiscal 2015, a decrease of $252,000, or 12.5 percent.

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

(in thousands, unaudited)     
For the quarter ended:9/30/16
  6/30/16
  3/31/16
  12/31/15
  9/30/15
 
Service charges on deposit accounts$258  $227  $227  $211  $169 
Rental income – other 56   55   50   50   60 
Net gains on sales of investments, net 144   229   61   131   78 
Gain on disposal of fixed assets, net 1             
Gain on sale of loans, net 26   20   36   34   47 
Bank-owned life insurance 130   128   127   132   285 
Total other income$615  $659  $501  $558  $639 
                    

Other Expense

Total other expense for the three months ended September 30, 2016, increased $305,000, or 8.8 percent, when compared to the quarter ended September 30, 2015. The increase primarily reflected increases in salaries and employee benefits of $282,000, a $53,000 increase in occupancy expense, a $77,000 increase in professional fees, and a $33,000 increase in other operating expense.  These increases were partially offset by decreases of $123,000 in federal deposit insurance premium and a $38,000 decrease in data processing expense. 

For the twelve months ended September 30, 2016, total other expense decreased $39,000, or 0.3 percent, compared to the same period in fiscal 2015. The decrease primarily reflected a $205,000 decrease in federal deposit insurance, a $108,000 decrease in advertising, a $108,000 decrease in data processing expense and a $200,000 decrease in other operating expenses.  These decreases were partially offset by an increase in salaries and employee benefits of $292,000, a $105,000 increase in occupancy expense, a $112,000 increase in professional fees and a $73,000 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:9/30/16
  6/30/16
  3/31/16
  12/31/15
  9/30/15
 
 Salaries and employee benefits$1,669  $1,600  $1,522  $1,499  $1,387 
 Occupancy expense 472   469   456   423   419 
 Federal deposit insurance premium 107   40   232   200   230 
 Advertising 50   26   25   30   40 
 Data processing 283   278   270   297   321 
 Professional fees 507   415   361   400   430 
 Other real estate owned expense (income), net 28   (8)  8   (1)  17 
 Other operating expenses 643   558   486   577   610 
 Total other expense$3,759  $3,378  $3,360  $3,425  $3,454 
                     

Statement of Condition Highlights at September 30, 2016

Highlights as of September 30, 2016 included:

  • Balance sheet strength, with total assets amounting to $821.3 million at September 30, 2016, an increase $165.6 million, or 25.3 percent, compared to September 30, 2015.
  • The Company's gross loans were $578.4 million at September 30, 2016, an increase of $184.2 million, or 46.7 percent, from September 30, 2015.
  • Total investments were $106.9 million at September 30, 2016, a decrease of $78.6 million, or 42.4 percent, compared to September 30, 2015.
  • Deposits totaled $602.0 million at September 30, 2016, an increase of $136.5 million, or 29.3 percent, compared to September 30, 2015.  Total demand, savings, money market, and certificates of deposit less than $100,000 increased $83.2 million, or 23.7 percent, from September 30, 2015.
  • Borrowings totaled $118.0 million at September 30, 2016, an increase of $15.0 million, or 14.6 percent, compared to $103.0 million at September 30, 2015.

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:9/30/16
 6/30/16
 3/31/16
 12/31/15
 9/30/15
 
Cash and due from depository institutions$1,297 $1,331 $1,304 $16,334 $16,026 
Interest bearing deposits in depository institutions 95,465  77,052  56,739  40,036  24,237 
Investment securities, available for sale, at fair value 66,387  80,555  100,895  116,767  128,354 
Investment securities held to maturity 40,551  45,834  52,272  54,914  57,221 
Restricted stock, at cost 5,424  5,548  5,553  4,762  4,765 
Loans held for sale   304       
Loans receivable, net of allowance for loan losses 574,160  553,971  515,094  461,491  391,307 
Other real estate owned   700  700  1,168  1,168 
Accrued interest receivable 2,558  2,714  2,622  2,722  2,484 
Property and equipment, net 6,637  6,654  6,490  6,486  6,535 
Deferred income taxes 8,827  1,598  2,202  2,874  2,874 
Bank-owned life insurance 18,418  18,289  18,161  18,033  17,905 
Other assets 1,548  1,755  1,954  1,561  2,814 
Total assets$821,272 $796,305 $763,986 $727,148 $655,690 
Deposits$602,046 $579,043 $548,790 $534,701 $465,522 
Borrowings 118,000  123,000  123,000  103,000  103,000 
Other liabilities 6,635  7,612  7,506  6,789  5,777 
Shareholders' equity 94,591  86,650  84,690  82,658  81,391 
Total liabilities and shareholders' equity$821,272 $796,305 $763,986 $727,148 $655,690 
                

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

      
Deposits (unaudited)     
(in thousands)     
At quarter ended:9/30/16
 6/30/16
 3/31/16
 12/31/15
 9/30/15
 
Demand:               
Non-interest bearing$34,547 $29,416 $30,720 $28,260 $27,010 
Interest-bearing 95,041  100,609  99,154  86,008  82,897 
Savings 44,714  46,056  44,207  45,312  45,189 
Money market 177,486  147,103  129,652  133,608  108,706 
Time 250,258  255,859  245,057  241,513  201,720 
Total deposits$602,046 $579,043 $548,790 $534,701 $465,522 
                

Loans

Total net loans were $574.2 million at September 30, 2016 compared to $391.3 million at September 30, 2015, for a net increase of $182.9 million.  The allowance for loan losses amounted to $5.4 million and $4.7 million at September 30, 2016 and September 30, 2015, respectively.  Average loans during the fourth quarter of fiscal 2016 totaled $575.8 million as compared to $383.1 million during the fourth quarter of fiscal 2015, representing a 50.3 percent increase.

At the end 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 36.2 percent of the loan portfolio.  Construction and development loans amounted to 4.9 percent with commercial loans accounting for 50.1 percent, and consumer loans representing 8.8 percent of the loan portfolio at such date.   Total gross loans increased $184.2 million, to $578.4 million at September 30, 2016 compared to $394.2 million at September 30, 2015.  The $184.2 million increase in the loan portfolio at September 30, 2016 compared to September 30, 2015, primarily reflected an increase of $181.2 million in commercial loans and a $20.8 million increase in construction and development loans. These increases were partially offset by a $5.8 million decrease in residential mortgage loans and a $12.0 million reduction in consumer loans at September 30, 2016 as compared to September 30, 2015.  

For the year ended September 30, 2016, the Company originated total new loan volume of $330.6 million, which was offset in part by participations, payoffs, prepayments and maturities totaling $146.4 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 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:9/30/16
 6/30/16
 3/31/16
 12/31/15
 9/30/15
 
Residential mortgage$209,186 $210,621 $214,207 $211,302 $214,958 
Construction and Development:     
  Residential and commercial 18,579  14,050  10,796  6,007  5,677 
  Land 10,013  9,904  7,755  6,804  2,142 
Total construction and development 28,592  23,954  18,551  12,811  7,819 
Commercial:     
  Commercial real estate 231,439  211,516  173,160  142,981  87,686 
  Multi-family 19,515  20,102  20,548  10,549  7,444 
  Other 38,779  37,091  34,585  25,975  13,380 
Total commercial 289,733  268,709  228,293  179,505  108,510 
Consumer:     
  Home equity lines of credit 19,757  21,035  21,712  23,207  22,919 
  Second mortgages 29,204  31,752  33,987  35,533  37,633 
  Other 1,914  2,088  2,041  2,299  2,359 
Total consumer 50,875  54,875  57,740  61,039  62,911 
Total loans 578,386  558,159  518,791  464,657  394,198 
Deferred loan costs, net 1,208  1,155  1,240  1,410  1,776 
Allowance for loan losses (5,434) (5,343) (4,937) (4,576) (4,667)
  Loans Receivable, net$574,160 $553,971 $515,094 $461,491 $391,307 
                

At September 30, 2016 , the Company had $107.9 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 $7.0 million in construction and $72.7 million in commercial real estate loans, $13.8 million in commercial term loans and lines of credit and $4.0 million in residential mortgage loans expected to fund over the next 90 days.

Asset Quality

Non-accrual loans were $1.6 million at September 30, 2016, as compared to $1.0 million at June 30, 2016 and $1.4 million at September 30, 2015.  Other real estate owned, ("OREO") was zero at September 30, 2016, as compared with $700,000 at June 30, 2016 and $1.2 million at September 30, 2015, respectively.  Total performing troubled debt restructured loans were $2.0 million at September 30, 2016, $2.0 million at June 30, 2016 and $1.1 million at September 30, 2015, respectively.  The increase in performing troubled debt restructured loans at September 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 and one residential mortgage loan with an outstanding balance of $85,000 being classified as a performing TDR during fiscal 2016.  The decrease in OREO at September 30, 2016 compared to September 30, 2015, was attributable to three single residential loans and one commercial real estate loan sold during the twelve months of fiscal 2016.  The $1.2 million decrease in OREO at September 30, 2016 compared to September 30, 2015, was due to $1.2 million of sale proceeds, at a net gain of $19,000, as well as a $20,000 reduction in the fair value of the remaining property, which is reflected in other REO expense during the twelve months of fiscal 2016.

At September 30, 2016, non-performing assets totaled $1.6 million, or 0.20 percent of total assets, as compared with $1.7 million, or 0.22 percent, at June 30, 2016 and $2.6 million, or 0.39 percent, at September 30, 2015.  The decrease from September 30, 2015 reflects the sale of OREO properties during fiscal 2016, as mentioned above.  The portfolio of remaining non-accrual loans at September 30, 2016 was comprised of eleven residential real estate loans with an aggregate outstanding balance of approximately $1.1 million, one commercial real estate loan with an outstanding balance of $193,000 and ten consumer loans with an aggregate outstanding balance of approximately $352,000.

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:9/30/16
 6/30/16
 3/31/16
 12/31/15
 9/30/15
Non-accrual loans(1)$  1,617  $  1,037  $  853  $  795  $  1,399 
Loans 90 days or more past due and still accruing              
  Total non-performing loans 1,617   1,037   853   795   1,399 
Other real estate owned    700   700   1,168   1,168 
  Total non-performing assets$  1,617  $  1,737  $  1,553  $  1,963  $  2,567 
Performing troubled debt restructured loans$  2,039  $  1,959  $  1,577  $  1,584  $  1,091 
      
Non-performing assets / total assets 0.20%  0.22%  0.20%  0.27%  0.39%
Non-performing loans / total loans 0.28%  0.19%  0.16%  0.17%  0.35%
Net charge-offs (recoveries)$  9  $  66  $  14  $  91  $  (93)
Net charge-offs (recoveries) / average loans(2) 0.01%  0.05%  0.01%  0.08%  (0.10)%
Allowance for loan losses / total loans 0.94%  0.96%  0.95%  0.98%  1.18%
Allowance for loan losses / non-performing loans 336.1%  515.2%  578.8%  575.60%  333.60%
      
Total assets$821,272  $796,305  $763,986  $727,148  $655,690 
Total loans 578,386   558,159   518,791   464,657   394,198 
Average loans  575,784    542,985    494,005    420,601    383,092 
Allowance for loan losses 5,434   5,343   4,937   4,576   4,667 
______________                   


 (1)17 loans totaling approximately $1.3 million or 78.0% of the total non-accrual loan balance were making payments at September 30, 2016. 
 (2)Annualized.
  

The allowance for loan losses at September 30, 2016 amounted to approximately $5.4 million, or 0.94 percent of total loans, compared to $5.3 million, or 0.96 percent of total loans, at June 30, 2016 and $4.7 million, or 1.18 percent of total loans, at September 30, 2015. The Company had a $100,000 provision for loan losses during the quarter ended September 30, 2016 compared to zero for the quarter ended September 30, 2015, respectively.  Provision expense was higher during the quarter ended September 30, 2016 due to an increase in loan growth, despite the level of the unallocated component of the provision. 

Capital

At September 30, 2016, our total shareholders' equity amounted to $94.6 million, or 11.52 percent of total assets, compared to $81.4 million at September 30, 2015.  The Company's book value per common share was $14.42 at September 30, 2016, compared to $12.41 at September 30, 2015.

At September 30, 2016, the Bank's common equity tier 1 ratio was 14.24 percent, tier 1 leverage ratio was 10.79 percent, tier 1 risk-based capital ratio was 14.24 percent and the total risk-based capital ratio was 15.16 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 September 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:9/30/16
 6/30/16
 3/31/16
 12/31/15
 9/30/15
Other income$  615 $  659 $  501 $  558 $  639
Less: Net investment securities gains 144  229  61  131  78
Other income, excluding net investment
securities gains
$  471 $  430 $  440 $  427 $  561
               

"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:9/30/16
 6/30/16
 3/31/16
 12/31/15  930/15
Other expense$3,759  $3,378  $3,360  $3,425  $3,454 
Less: non-core items(1)       44   67   42 
Other expense, excluding non-core items$3,759  $3,378  $3,316  $3,358  $3,412 
Net interest income (tax equivalent basis)$5,083  $4,847  $4,566  $4,281  $4,056 
Other income, excluding net investment securities gains 471   430   440   427   561 
Total$5,554  $5,277  $5,006  $4,708  $4,617 
Efficiency ratio 67.7%  64.0%  66.2%  71.3%  73.9%
______________________     
(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:9/30/16  6/30/16
 3/31/16
 12/31/15
 9/30/15 
Efficiency ratio on a GAAP basis 66.7%  62.1%  67.2%  70.4%  73.9%
      

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:9/30/16
 6/30/16  3/31/16  12/31/15  9/30/15
Net interest income (GAAP)$  5,021  $  4,780  $  4,500  $  4,211  $  3,979 
Tax-equivalent adjustment(1)  62   67   66   70   77 
TE net interest income$  5,083  $  4,847  $  4,566  $  4,281  $  4,056 
      
Net interest income margin (GAAP) 2.62%  2.52%  2.61%  2.67%  2.66%
Tax-equivalent effect   0.03     0.04     0.04     0.05     0.05 
Net interest margin (TE) 2.65%  2.56%  2.65%  2.72%  2.71%
____________________     
(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:9/30/16
 6/30/16
 3/31/16
 12/31/15
 9/30/15
Investment securities$115,366  $141,292  $164,789  $179,979  $188,424 
Loans 575,784   542,985   494,005   420,601   383,092 
Allowance for loan losses (5,424)  (5,132)  (4,602)  (4,662)  (4,596)
All other assets 107,655   107,044   94,581   85,450   82,892 
Total assets$793,381  $786,189  $748,773  $681,368  $649,812 
Non-interest bearing deposits$33,242  $34,360  $29,592  $28,604  $32,477 
Interest-bearing deposits 543,985   535,457   514,402   460,999   428,205 
Borrowings 122,319   123,434   113,000   102,998   101,802 
Other liabilities 5,601   7,172   7,847   6,688   6,576 
Shareholders' equity 88,234   85,766   83,932   82,079   80,752 
Total liabilities and shareholders' equity$793,381  $786,189  $748,773  $681,368  $649,812 
      

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) September 30,
2016
  September 30,
2015
(unaudited)      
ASSETS       
Cash and due from depository institutions $ 1,297  $ 16,026  
Interest bearing deposits in depository institutions   95,465    24,237  
  Total cash and cash equivalents   96,762    40,263  
Investment securities available for sale, at fair value   66,387    128,354  
Investment securities held to maturity (fair value of $40,817 and $56,825)   40,551    57,221  
Restricted stock, at cost   5,424    4,765  
Loans receivable, net of allowance for loan losses   574,160    391,307  
Other real estate owned       1,168  
Accrued interest receivable   2,558    2,484  
Property and equipment, net   6,637    6,535  
Deferred income taxes, net   8,827    2,874  
Bank-owned life insurance   18,418    17,905  
Other assets   1,548    2,814  
  Total assets $ 821,272  $ 655,690  
LIABILITIES       
Deposits:       
  Non-interest bearing $ 34,547  $ 27,010  
  Interest-bearing   567,499    438,512  
    Total deposits   602,046    465,522  
FHLB Advances   118,000    103,000  
Advances from borrowers for taxes and insurance   1,659    1,806  
Accrued interest payable   427    396  
Other liabilities   4,549    3,575  
  Total liabilities   726,681    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: 6,560,403 shares at September 30, 2016  and  6,558,473 shares at September 30, 2015   66    66  
Additional paid in capital   60,461    60,365  
Retained earnings   35,756    23,814  
Unearned Employee Stock Ownership Plan (ESOP) shares   (1,629)   (1,775) 
Accumulated other comprehensive loss   (63)   (1,079) 
  Total shareholders' equity   94,591    81,391  
  Total liabilities and shareholders' equity $ 821,272  $ 655,690  
            


 
MALVERN BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 
  Three Months Ended September 30, Twelve Months Ended September 30,
(in thousands, except for share and per
  share data)
   2016   2015   2016    2015 
(unaudited)            
Interest and Dividend Income            
Loans, including fees $ 5,980  $4,128 $ 21,206  $ 16,484 
Investment securities, taxable   511   922   2,824    3,073 
Investment securities, tax-exempt   174   217   751    522 
Dividends, restricted stock   68   67   250    311 
Interest-bearing cash accounts   84   10   213    72 
  Total Interest and Dividend Income   6,817   5,344   25,244    20,462 
Interest Expense            
Deposits   1,232   870   4,537    3,431 
Borrowings   564   495   2,195    1,817 
  Total Interest Expense   1,796   1,365   6,732    5,248 
Net interest income   5,021   3,979   18,512    15,214 
Provision for Loan Losses   100      947    90 
Net Interest Income after Provision for Loan Losses   4,921   3,979   17,565    15,124 
Other Income            
Service charges and other fees   258   169   923    989 
Rental income-other   56   60   211    249 
Net gains on sales of investments, net   144   78   565    515 
Gain on disposal of fixed assets, net   1      1     
Net gains on sale of loans, net   26   47   116    102 
Earnings on bank-owned life insurance   130   285   517    680 
  Total Other Income   615   639   2,333    2,535 
Other Expense            
Salaries and employee benefits   1,669   1,387   6,290    5,998 
Occupancy expense   472   419   1,820    1,715 
Federal deposit insurance premium   107   230   579    784 
Advertising   50   40   131    239 
Data processing   283   321   1,128    1,236 
Professional fees   507   430   1,683    1,571 
Other real estate owned expense
  (income), net
   28   17   27    (46)
Other operating expenses   643   610   2,264    2,464 
  Total Other Expense   3,759   3,454   13,922    13,961 
Income before income tax benefit   1,777   1,164   5,976    3,698 
Income tax benefit   (5,966)     (5,966)    
Net Income  $ 7,743  $1,164 $ 11,942  $ 3,698 
             
Earnings per common share            
  Basic $ 1.21  $0.18 $ 1.86  $ 0.58 
  Diluted $ 1.21   n/a $ 1.86   n/a 
Weighted Average Common Shares Outstanding            
  Basic   6,415,049   6,398,720   6,409,265    6,393,330 
  Diluted   6,415,207   n/a   6,409,325   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)
9/30/20166/30/20169/30/2015
(unaudited)     
Statements of Operations Data   
    
  Interest income$6,817 $6,530 $5,344 
  Interest expense 1,796  1,750  1,365 
   Net interest income 5,021  4,780  3,979 
  Provision for loan losses 100  472   
   Net interest income after provision for loan losses 4,921  4,308  3,979 
  Other income 615  659  639 
  Other expense 3,759  3,378  3,454 
  Income before income tax benefit 1,777  1,589  1,164 
   Income tax benefit (5,966)    
  Net income$7,743 $1,589 $1,164 
Earnings (per Common Share)   
  Basic$1.21 $0.25 $0.18 
  Diluted$1.21 $0.25 n/a 
Statements of Condition Data (Period-End)   
  Investment securities available for sale, at fair value$66,387 $80,555 $128,354 
  Investment securities held to maturity (fair value of $40,817, $46,146
    and $56,825)
 40,551  45,834  57,221 
  Loans held for sale   304   
  Loans, net of allowance for loan losses 574,160  553,971  391,307 
  Total assets 821,272  796,305  655,690 
  Deposits 602,046  579,043  465,522 
  Borrowings 118,000  123,000  103,000 
  Shareholders' equity 94,591  86,650  81,391 
Common Shares Dividend Data    
  Cash dividends$ $ $ 
Weighted Average Common Shares Outstanding   
  Basic 6,415,049  6,411,766  6,398,720 
  Diluted 6,415,207  6,411,804 n/a 
Operating Ratios   
  Return on average assets 3.90% 0.81% 0.72%
  Return on average equity 35.10% 7.41% 5.77%
  Average equity / average assets 11.12% 10.91% 12.43%
  Book value per common share (period-end)$14.42 $13.21 $12.41 
Non-Financial Information (Period-End)   
  Common shareholders of record 459  464  483 
  Full-time equivalent staff 83  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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