Market Overview

Malvern Bancorp, Inc. Reports Fourth Fiscal Quarter and Fiscal 2017 Results

Share:

PAOLI, Pa., Dec. 01, 2017 (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, 2017.   Net income amounted to $2.0 million, or $0.30 per fully diluted common share, for the quarter ended September 30, 2017, compared with net income of $8.0 million, or $1.24 per fully diluted common share, for the quarter ended September 30, 2016.  For the twelve months ended September 30, 2017, net income amounted to $5.8 million, or $0.90 per fully diluted common share, compared with net income of $12.2 million, or $1.90 per fully diluted common share, for the twelve months ended September 30, 2016. 

As previously disclosed in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on November 28, 2017 (the "8-K"), the Company was advised by BDO USA, LLP ("BDO"), its independent registered public accounting firm, that BDO's audit report on the Company's consolidated financial statements as of September 30, 2016 and 2015, and for each of the years in the two year period ended September 30, 2016 and 2015, and BDO's completed interim reviews of the Company's consolidated interim financial statements as of and for the periods ended December 31, 2016, March 31, 2017 and June 30, 2017 (collectively, the "Specified Financial Statements"), should no longer be relied upon.  The Company plans to restate the Specified Financial Statements, which will be included in amendments to the Company's fiscal 2016 10-K and 10-Qs for the first three quarters of fiscal 2017.  All numbers in this press release reflect such restatements.

The matters described in the 8-K relate to the Company's tax account balances.  The effect of these matters is to increase net income for fiscal 2016 by approximately $208,000, fiscal 2015 by approximately $970,000 and fiscal 2014 by approximately $388,000.  The effect of these matters as of and for the fiscal year ended September 30, 2017, is a decrease to net income of approximately $795,000 and a decrease in tax liability account of $795,000.  These matters have no effect on the Company's cash position, net interest margin, pre-tax income or the Company's operating expenses. 

The following table below shows the analysis of the impact on the consolidated balance sheets and income statements for the periods affected. 

(in thousands, except per share data)

      Sep. 30, 2014  Amount of Misstatement Restated Amount   Sep. 30, 2015  Amount of Misstatement Restated Amount   Sep. 30, 2016  Amount of Misstatement Restated Amount   Dec. 31, 2016  Amount of Misstatement Restated Amount   Mar. 31, 2017  Amount of Misstatement Restated Amount   Jun. 30, 2017  Amount of Misstatement Restated Amount  
                                                     
                                                     
Total Assets   $ 542,264   542,264   655,690   655,690   821,272   821,272   879,002   879,002   961,815   961,815   1,010,908   1,010,908  
                                                     
Liabilities and Shareholders' Equity                                                    
                                                     
Other liabilities   $ 2,604 (388 ) 2,216   3,575 (1,358 ) 2,217   4,549 (1,566 ) 2,983   3,662 (1,369 ) 2,293   3,206 (1,130 ) 2,076   4,697 (770 ) 3,927  
Total Liabilities   $ 465,492 (388 ) 465,104   574,299 (1,358 ) 572,941   726,681 (1,566 ) 725,115   783,267 (1,369 ) 781,898   864,351 (1,130 ) 863,221   911,245 (770 ) 910,475  
                                                     
Shareholders' Equity                                                    
Total Shareholders' Equity   $ 76,772 388   77,160   81,391 1,358   82,749   94,591 1,566   96,157   95,735 1,369   97,104   97,464 1,130   98,594   99,663 770   100,433  
Total Liabilities and Shareholders' Equity   $ 542,264 -   542,264   655,690 -   655,690   821,272 -   821,272   879,002 -   879,002   961,815 -   961,815   1,010,908 -   1,010,908  
                                   
                               

 

      Sep. 30, 2014  Amount of Misstatement Restated Amount   Sep. 30, 2015  Amount of Misstatement Restated Amount   Sep. 30, 2016  Amount of Misstatement Restated Amount   Dec. 31, 2016  Amount of Misstatement Restated Amount   Mar. 31, 2017  Amount of Misstatement Restated Amount   Jun. 30, 2017  Amount of Misstatement Restated Amount  
Income (Loss) before income tax expense   $   344       344     3,698     3,698     5,976     5,976     1,462       1,462       1,758       1,758       2,582       2,582    
Income tax benefit (expense)   $   (21 )   388   367     -   970   970     5,966   208   6,174     (292 )   (197 )   (489 )     (349 )   (239 )   (588 )     (503 )   (360 )   (863 )  
Net Income (Loss)   $   323     388   711     3,698   970   4,668     11,942   208   12,150     1,170     (197 )   973       1,409     (239 )   1,170       2,079     (360 )   1,719    
                                                     
Basic Earnings (Loss) Per Share      $ 0.05   $ 0.06 $ 0.11   $ 0.58 $ 0.15 $ 0.73   $ 1.86 $ 0.04 $ 1.90   $ 0.18   $ (0.03 ) $ 0.15     $ 0.22   $ (0.04 ) $ 0.18     $ 0.32   $ (0.05 ) $ 0.27    
Diluted Earnings (Loss) Per Share        n/a     n/a   n/a     n/a   n/a   n/a   $ 1.86 $ 0.04 $ 1.90   $ 0.18   $ (0.03 ) $ 0.15     $ 0.22   $ (0.04 ) $ 0.18     $ 0.32   $ (0.05 ) $ 0.27    
                                                     

"Our results for the fourth quarter of fiscal 2017 were strong; top line revenue expanded and overall we continued to reflect the forward momentum of the Company.  Our continued focus on client service continues to aid in gathering customer relationships, fueling the business model focus and resulting performance.  We are excited by the sequential growth and the prospects for continued growth in fiscal 2018," commented Anthony C. Weagley, President and Chief Executive Officer. 

"Total loans increased $263.8 million, mostly in commercial and industrial and commercial real estate.  We remain successful gathering deposits across the franchise as evidenced by the growth in deposits of $188.4 million to $790.4 million at September 30, 2017."

Joe Gangemi, Chief Financial Officer of Malvern Bancorp, Inc., added, "Malvern continues to grow its capital position with growth in core earnings, and has produced yet another quarter of solid financial performance".

Highlights for the quarter include:

  • Return on average assets ("ROAA") was 0.77 percent for the three months ended September 30, 2017, compared to 4.01 percent for the three months ended September 30, 2016, and return on average equity ("ROAE") was 7.70 percent for the three months ended September 30, 2017, compared with 35.50 percent for the three months ended September 30, 2016.

  • The Company originated $84.8 million in new loans in the fourth quarter of fiscal 2017, which was offset in part by $50.2 million in participations, payoffs, prepayments and maturities from its portfolio, resulting in net portfolio growth of $34.6 million over the third quarter of fiscal 2017; new loan originations in the fourth quarter of fiscal 2017 consisted of $13.9 million in residential mortgage loans, $57.4 million in commercial loans, $10.5 million in construction and development loans and $3.0 million in consumer loans.

  • Non-performing assets ("NPAs") were 0.12 percent of total assets at September 30, 2017, compared to 0.19 percent at June 30, 2017 and 0.28 percent at September 30, 2016. The allowance for loan losses as a percentage of total non-performing loans was 694.1 percent at September 30, 2017, compared to 421.8 percent at June 30, 2017 and 234.9 percent at September 30, 2016.

  • The Company's ratio of shareholders' equity to total assets was 9.80 percent at September 30, 2017, compared to 9.93 percent at June 30, 2017, and 11.71 percent at September 30, 2016.

  • Book value per common share amounted to $15.60 at September 30, 2017, compared to $15.28 at June 30, 2017 and $14.66 at September 30, 2016.  The efficiency ratio, a non-GAAP measure, was 55.4 percent for the fourth quarter of fiscal 2017 on an annualized basis, compared to 57.0 percent in the third quarter of fiscal 2017 and 67.7 percent in the fourth quarter of fiscal 2016.

  • The Company's balance sheet reflected total asset growth of $224.7 million at September 30, 2017, compared to September 30, 2016, coupled with stable asset quality, and capital levels that exceeded regulatory standards for a well-capitalized institution.
Selected Financial Ratios
  (unaudited; annualized where applicable)
           
      Restated     Restated     Restated     Restated    
As of or for the quarter ended  :   9/30/17     6/30/17     3/31/17     12/31/16     9/30/16    
Return on average assets   0.77 %   0.70 %   0.51 %   0.47 %   4.01 %  
Return on average equity   7.70 %   6.90 %   4.77 %   4.03 %   35.50 %  
Net interest margin (tax equivalent basis) (1)   2.76 %   2.72 %   2.75 %   2.64 %   2.65 %  
Loans / deposits ratio   106.55 %   106.30 %   107.80 %   102.29 %   96.07 %  
Shareholders' equity / total assets   9.80 %   9.93 %   10.25 %   11.05 %   11.71 %  
Efficiency ratio (1)   55.4 %   57.0 %   57.4 %   61.6 %   67.7 %  
Book value per common share $   15.60   $   15.28   $   15.00   $   14.80   $   14.66    

_____________
         (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, 2017, total interest income on a fully tax-equivalent basis increased $2.7 million, or 38.8 percent, to $9.6 million, compared to the three months ended September 30, 2016.  Interest income rose in the quarter ended September 30, 2017, compared to the comparable period in fiscal 2016, primarily due to a $255.8 million increase in the average balance of our loans.   Total interest expense increased by $1.0 million, or 57.1 percent, to $2.8 million, for the three months ended September 30, 2017, compared to the same period in fiscal 2016 due to the increase of $187.6 million in average funding sources. 

Net interest income on a fully tax-equivalent basis was $6.7 million for the three months ended September 30, 2017, increasing $1.6 million, or 32.4 percent, from $5.1 million for the comparable three-month period in fiscal 2016. The change for the three months ended September 30, 2017 primarily was the result of an increase in the average balance of interest earning assets, which increased $210.8 million.  The net interest spread on an annualized tax-equivalent basis was at 2.59 percent and 2.51 percent for the three months ended September 30, 2017 and 2016, respectively.  For the quarter ended September 30, 2017, the Company's net interest margin on a tax-equivalent basis increased to 2.75 percent as compared to 2.65 percent for the same three-month period in fiscal 2016.

The 57.1 percent increase in interest expense for the fourth quarter of fiscal 2017 as compared to the fourth quarter of fiscal 2016 was primarily due to an increase in deposits, as well as the interest expense associated with the Company's subordinated debt.  The average cost of funds was 1.32 percent for the quarter ended September 30, 2017 compared to 1.08 percent for the same three-month period in fiscal 2016 and, on a linked sequential quarter basis, increased 7 basis points compared to the third quarter of fiscal 2017.  The increase in cost was primarily related to the increase in average volume, coupled with the increased expense related to the issuance of subordinated debt.

For the twelve months ended September 30, 2017, total interest income on a fully tax equivalent basis increased $8.4 million, or 33.1 percent, to $33.9 million, compared to $25.5 million for the twelve months ended September 30, 2016. Total interest expense increased by $2.7 million, or 40.3 percent, to $9.4 million, for the twelve months ended September 30, 2017, compared from the comparable period in fiscal 2016.  Interest income rose for the twelve months ended September 30, 2017, compared to the comparable period in fiscal 2016 primarily due to a $230.5 million increase in average loan balances. Compared to the same period in fiscal 2016, for the twelve months ended September 30, 2017, average interest earning assets increased $191.3 million, the net interest spread increased on an annualized tax-equivalent basis by four basis points and the net interest margin increased on an annualized tax-equivalent basis by seven basis points. 

Earnings Summary for the Period Ended September 30, 2017

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

   
(dollars in thousands, except per share data)            
    Restated Restated Restated   Restated    
For the quarter ended: 9/30/17 6/30/17 3/31/17 12/31/16   9/30/16    
Net interest income $   6,707 $   6,399 $   5,991 $   5,239 $   5,021    
Provision for loan losses   489   645   997   660   100    
 Net interest income after provision for loan losses   6,218   5,754   4,994   4,579   4,921    
Other income   532   814   542   453   615    
Other expense   3,813   3,986   3,778   3,570   3,759    
Income before income tax expense (benefit)   2,937   2,582   1,758   1,462   1,777    
Income tax expense (benefit)   982   863   588   489   (6,174 )  
Net income $   1,955 $   1,719 $   1,170 $   973 $   7,951    
Earnings per common share            
Basic $   0.30 $   0.27 $   0.18 $   0.15 $   1.24    
Diluted $   0.30 $   0.27 $   0.18 $   0.15 $   1.24    
Weighted average common shares outstanding:          
Basic   6,441,731   6,443,515   6,427,309   6,418,583   6,415,049    
Diluted   6,445,151   6,445,288   6,427,932   6,419,012   6,415,207    

Other Income

Other income decreased $83,000, or 13.5 percent, for the fourth quarter of fiscal 2017 compared with the same period in fiscal 2016.  The decrease in other income was primarily a result of a $113,000 decrease in net gains on sales of investment securities.  The decrease was offset in part by an increase in net gains on sale of loans of $22,000 and rental income of $10,000.  Excluding net securities gains and losses, a non-GAAP measure, the Company would have recorded other income of $501,000 for the three months ended September 30, 2017 compared to $471,000 for the three months ended September 30, 2016, an increase of $30,000, or 6.4 percent. 

For the twelve months ended September 30, 2017, total other income increased $8,000 compared to the same period in fiscal 2016, primarily a result of a $68,000 increase in service charges and other fees, a $16,000 increase in rental income and a $38,000 increase in net gains on sale of loans.  The increase was partially offset by a $102,000 decrease in net gains on sales of investment securities and a $12,000 decrease in earnings on bank-owned insurance.  Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $1.9 million for the twelve months ended September 30, 2017 compared to $1.8 million for the comparable period in fiscal 2016, an increase of $110,000, or 6.2 percent.

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

(in thousands, unaudited)          
For the quarter ended: 9/30/17 6/30/17 3/31/17 12/31/16 9/30/16
Service charges on deposit accounts $   262 $   233 $   274 $   223 $   259
Rental income – other   66   51   55   55   56
Net gains on sales of investments, net   31   374   58     144
Gain on sale of loans, net   48   31   30   45   26
Bank-owned life insurance   125   125   125   130   130
  Total other income $   532 $   814 $   542 $   453 $   615

Other Expense

Total other expense for the three months ended September 30, 2017, increased $54,000, or 1.4 percent, when compared to the quarter ended September 30, 2016. The increase primarily reflected increases in salaries and employee benefits of $56,000, a $71,000 increase in occupancy expense, and a $20,000 increase in other operating expense.  The increase in occupancy expense was mainly due to expanded locations.  Additionally, the increase in salaries and employee benefits primarily reflects higher compensation and related costs due to added staff to support overall franchise growth.

For the twelve months ended September 30, 2017, total other expense increased $1.2 million, or 8.8 percent, compared to the same period in fiscal 2016. The increase primarily reflected increases in salaries and employee benefits of $824,000, a $264,000 increase in occupancy expense, an $85,000 increase in advertising expense, a $67,000 increase in data processing expense, a $211,000 increase in professional fees and a $109,000 increase in other operating expense.  These increases were partially offset by a decrease of $335,000 in the federal deposit insurance premium.

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

(in thousands, unaudited)          
  For the quarter ended: 9/30/17 6/30/17 3/31/17 12/31/16 9/30/16
  Salaries and employee benefits $   1,725 $   1,873 $   1,804 $   1,712 $   1,669
  Occupancy expense   543   533   514   494   472
  Federal deposit insurance premium   71   78   91   4   107
  Advertising   25   67   73   51   50
  Data processing   285   308   301   302   283
  Professional fees   473   621   399   401   507
  Other operating expenses   691   506   596   606   671
    Total other expense $   3,813 $   3,986 $   3,778 $   3,570 $   3,759
                       
                       

Statement of Condition Highlights at September 30, 2017

Highlights as of September 30, 2017 included:

  • Balance sheet strength, with total assets amounting to $1.0 billion at September 30, 2017, increasing $224.7 million, or 27.4 percent, compared to September 30, 2016.

  • The Company's gross loans were $842.1 million at September 30, 2017, increasing $263.8 million, or 45.6 percent, from September 30, 2016.

  • Total investments were $49.5 million at September 30, 2017, a decrease of $57.4 million, or 53.7 percent, compared to September 30, 2016.

  • Deposits totaled $790.4 million at September 30, 2017, an increase of $188.4 million, or 31.3 percent, compared to September 30, 2016.

  • Federal Home Loan Bank (FHLB) advances totaled $118.0 million at September 30, 2017 and at September 30, 2016.

  • Subordinated debt totaled $24.3 million at September 30, 2017 and zero at September 30, 2016.  On February 7, 2017, the Company completed a private placement of $25.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the "Notes") to certain institutional investors. The Notes are non-callable for five years, have a stated maturity of February 15, 2027, and bear interest at a fixed rate of 6.125% per year, from and including February 7, 2017 to, but excluding February 15, 2022.

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)   Restated Restated Restated Restated
At quarter ended: 9/30/17 6/30/17 3/31/17 12/31/16 9/30/16
Cash and due from depository institutions $   1,615 $   1,622 $   1,716 $   1,598 $   1,297
Interest bearing deposits in depository
  institutions
  115,521   111,805   64,036   61,683   95,465
Investment securities, available for sale, at fair
  value
  14,587   16,811   61,672   65,108   66,387
Investment securities held to maturity   34,915   36,027   37,060   38,160   40,551
Restricted stock, at cost   5,559   5,458   5,397   5,416   5,424
Loans receivable, net of allowance for loan
  losses
  834,331   800,337   752,708   668,427   574,160
Accrued interest receivable   3,139   2,837   3,177   2,899   2,558
Property and equipment, net   7,507   7,182   6,896   6,769   6,637
Deferred income taxes   6,671   7,912   7,881   8,449   8,827
Bank-owned life insurance   18,923   18,798   18,673   18,548   18,418
Other assets   3,244   2,119   2,599   1,945   1,548
  Total assets $ 1,046,012 $   1,010,908 $   961,815 $   879,002 $   821,272
Deposits $   790,396 $   759,679 $   704,272 $   658,623 $   602,046
FHLB advances   118,000   118,000   118,000   118,000   118,000
Other short-term borrowings   5,000     10,000    
Subordinated debt   24,303   24,263   25,000    
Other liabilities   5,793   8,533   5,949   5,275   5,069
Shareholders' equity   102,520   100,433   98,594   97,104   96,157
  Total liabilities and shareholders' equity $ 1,046,012 $   1,010,908 $   961,815 $   879,002 $   821,272
 

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

Deposits (unaudited)            
(in thousands)          
At quarter ended: 9/30/17 6/30/17 3/31/17 12/31/16 9/30/16
Demand:          
  Non-interest bearing $   42,121 $   50,097 $   45,303 $   35,184 $   34,547
  Interest-bearing   155,579   105,439   102,525   101,759   95,041
Savings   44,526   43,709   43,913   42,699   44,714
Money market   276,404   274,018   251,671   217,260   177,486
Time   271,766   286,416   260,860   261,721   250,258
  Total deposits $   790,396 $   759,679 $   704,272 $   658,623 $   602,046
 

Loans

Total net loans amounted to $834.3 million at September 30, 2017 compared to $574.2 million at September 30, 2016, for a net increase of $260.1 million or 45.3 percent for the period.  The allowance for loan losses amounted to $8.4 million and $5.4 million at September 30, 2017 and September 30, 2016, respectively.  Average loans during the fourth quarter of fiscal 2017 totaled $831.6 million as compared to $575.8 million during the fourth quarter of fiscal 2016, representing a 44.4 percent increase.

At the end of the fourth quarter of fiscal 2017, the loan portfolio remained weighted toward two primary components: commercial and the core residential portfolio, with commercial real estate accounting for 52.0 percent and single-family residential real estate loans accounting for 22.9 percent of the loan portfolio.  Construction and development loans amounted to 6.4 percent and consumer loans represented 4.9 percent of the loan portfolio at such date.   Total gross loans increased $263.8 million, to $842.1 million at September 30, 2017 compared to $578.4 million at September 30, 2016.  The increase in the loan portfolio at September 30, 2017 compared to September 30, 2016, primarily reflected an increase of $264.4 million in commercial loans and a $25.4 million increase in construction and development loans. These increases were partially offset by a $16.7 million decrease in residential mortgage loans and a $9.3 million reduction in consumer loans at September 30, 2017 as compared to September 30, 2016.

For the quarter ended September 30, 2017, the Company originated total new loan volume of $84.8 million, which was offset in part by participations out, payoffs, prepayments and maturities totaling $50.2 million. 

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

Loans (unaudited)          
(in thousands)          
At quarter ended:   9/30/17     6/30/17     3/31/17     12/31/16     9/30/16  
Residential mortgage $ 192,500   $ 190,788   $ 192,775   $ 205,668   $ 209,186  
Construction and Development:          
  Residential and commercial   35,622     36,530     46,721     28,296     18,579  
  Land   18,377     18,325     14,322     10,117     10,013  
Total construction and development   53,999     54,855     61,043     38,413     28,592  
Commercial:          
  Commercial real estate   437,760     424,732     383,170     307,821     231,439  
  Farmland   1,723     1,734              
  Multi-family   39,768     21,547     12,838     19,805     19,515  
  Other   74,837     71,248     63,551     53,587     38,779  
Total commercial   554,088     519,261     459,559     381,213     289,733  
Consumer:          
  Home equity lines of credit   16,509     17,602     19,214     19,729     19,757  
  Second mortgages   22,480     23,658     25,103     26,971     29,204  
  Other   2,570     1,403     1,512     1,697     1,914  
Total consumer   41,559     42,663     45,829     48,397     50,875  
Total loans   842,146     807,567     759,206     673,691     578,386  
Deferred loan costs, net   590     687     683     913     1,208  
Allowance for loan losses   (8,405 )   (7,917 )   (7,181 )   (6,177 )   (5,434 )
  Loans Receivable, net $ 834,331   $ 800,337   $ 752,708   $ 668,427   $ 574,160  
 

At September 30, 2017, the Company had $120.2 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 $9.2 million in construction and $56.7 million in commercial real estate loans, $7.3 million in commercial term loans and lines of credit and $7.0 million in residential mortgage loans expected to fund over the next 90 days.

Asset Quality

Non-accrual loans were $1.0 million at September 30, 2017 a decrease of $579,000 or 35.8 percent, as compared to $1.6 million at September 30, 2016.  Other real estate owned ("OREO") remained at zero at both September 30, 2017 and September 30, 2016.   Total performing troubled debt restructured loans were $2.2 million at September 30, 2017 and $2.0 million at September 30, 2016.

At September 30, 2017, non-performing assets totaled $1.2 million, or 0.12 percent of total assets, as compared with $2.3 million, or 0.28 percent, at September 30, 2016.  The portfolio of non-accrual loans at September 30, 2017 was comprised of nine residential real estate loans with an aggregate outstanding balance of approximately $826,000 and five consumer loans with an aggregate outstanding balance of approximately $212,000.

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:   9/30/17     6/30/17     3/31/17     12/31/16     9/30/16  
Non-accrual loans(1) $   1,038   $   1,556   $   1,566   $   1,833   $   1,617  
Loans 90 days or more past due and still accruing   173     321     122     121     696  
  Total non-performing loans   1,211     1,877     1,688     1,954     2,313  
Other real estate owned                    
  Total non-performing assets $   1,211   $   1,877   $   1,688   $   1,954   $   2,313  
Performing troubled debt restructured loans $   2,238   $   1,603   $   1,623   $   1,418   $   2,039  
           
Non-performing assets / total assets   0.12 %   0.19 %   0.18 %   0.22 %   0.28 %
Non-performing loans / total loans   0.14 %   0.23 %   0.22 %   0.29 %   0.40 %
Net charge-offs (recoveries) $   1   $   (91 ) $   (7 ) $   (83 ) $   9  
Net charge-offs (recoveries) / average loans(2)   0.00 %   (0.05 )%   0.00 %   (0.04 )%   0.01 %
Allowance for loan losses / total loans   1.00 %   0.98 %   0.95 %   0.92 %   0.94 %
Allowance for loan losses / non-performing loans   694.1 %   421.8 %   425.4 %   316.1 %   234.9 %
           
Total assets $ 1,046,012   $ 1,010,908   $ 961,815   $ 879,002   $ 821,272  
Total gross loans   842,146     807,567     759,206     673,691     578,386  
Average loans    831,578      792,139      717,376      612,388      575,784  
Allowance for loan losses   8,405     7,917     7,181     6,177     5,434  

______________
  (1) 10 loans totaling approximately $554 thousand, or 53.4% of the total non-accrual loan balance, were making payments at September 30, 2017.
  (2) Annualized.

The allowance for loan losses at September 30, 2017 amounted to approximately $8.4 million, or 1.00 percent of total loans, compared to $5.4 million, or 0.94 percent of total loans, at September 30, 2016.  The Company had a $489,000 provision for loan losses during the quarter ended September 30, 2017 compared to $100,000 for the quarter ended September 30, 2016.  For the twelve months ended September 30, 2017 and 2016, the Company had a $2.8 million and $947,000, respectively, provision for loan losses.  Provision expense was higher during fiscal 2017 due to an increase in loan growth and level of reserves commensurate with the size of the loan portfolio overall.

Capital
At September 30, 2017, our total shareholders' equity amounted to $102.5 million, or 9.80 percent of total assets, compared to $96.2 million at September 30, 2016.  The Company's book value per common share was $15.60 at September 30, 2017, compared to $14.66 at September 30, 2016.  At September 30, 2017, the Bank's common equity tier 1 ratio was 14.75 percent, tier 1 leverage ratio was 12.03 percent, tier 1 risk-based capital ratio was 14.75 percent and the total risk-based capital ratio was 15.79 percent.  At September 30, 2016, the Bank's common equity tier 1 ratio was 14.50 percent, tier 1 leverage ratio was 10.98 percent, tier 1 risk-based capital ratio was 14.50 percent and the total risk-based capital ratio was 15.42 percent.  At September 30, 2017, 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: 6/30/17 6/30/17 3/31/17 12/31/16 9/30/16
Other income $   532 $   814 $   542 $   453 $   615
Less: Net investment securities gains   31   374   58     144
Other income, excluding net investment
securities gains
$   501 $   440 $   484 $   453 $   471
 

"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:   9/30/17     6/30/17     3/31/17     12/31/16     9/30/16  
Other expense $   3,813   $   3,986   $   3,778   $   3,570   $   3,759  
Less: non-core items(1)   29     72     29     29      
Other expense, excluding non-core items

$
 

  3,784
 

$
 

  3,914
 

$
 

  3,749
 

$
 

  3,541
 

$
 

  3,759
 
           
Net interest income (tax equivalent basis) $   6,729   $   6,433   $   6,043   $   5,292   $   5,083  
Other income, excluding net investment
    securities gains
  501     440     484     453     471  
  Total $   7,230   $   6,873   $   6,527   $   5,745   $   5,554  
           
Efficiency ratio   52.3 %   57.0 %   57.4 %   61.6 %   67.7 %
______________________          
(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: 9/30/17   6/30/17   3/31/17   12/31/16   9/30/16  
Efficiency ratio on a GAAP basis 52.7 % 55.3 % 57.8 % 62.7 % 66.7 %
                     

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:   9/30/17     6/30/17     3/31/17     12/31/16     9/30/16  
Net interest income (GAAP) $   6,707   $   6,399   $   5,991   $   5,239   $   5,021  
Tax-equivalent adjustment(1)    22     34     52     53     62  
TE net interest income $   6,729   $   6,433   $   6,043   $   5,292   $   5,083  
           
Net interest income margin (GAAP)   2.75 %   2.71 %   2.72 %   2.61 %   2.62 %
Tax-equivalent effect     0.00       0.01       0.03       0.03       0.03  
Net interest margin (TE)   2.75 %   2.72 %   2.75 %   2.64 %   2.65 %
____________________          
(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)          
          Restated     Restated     Restated     Restated  
For the quarter ended:   9/30/17     6/30/17     3/31/17     12/31/16     9/30/16  
Investment securities $   50,899   $   82,832   $   102,090   $   104,645   $   115,366  
Loans   832,205      792,139      717,376      612,388      575,784   
Allowance for loan losses   (8,120  )   (7,456  )   (6,489  )   (5,650  )   (5,424  )
All other assets   134,500      110,456      101,804      124,062      107,655   
  Total assets   1,009,485     977,971   $   914,781   $   835,445   $   793,381  
Non-interest bearing deposits $   45,969   $   45,173   $   38,565   $   33,330   $   33,242  
Interest-bearing deposits   705,841      682,606      634,214      581,838      543,985   
FHLB advances   118,000      118,000      118,000      118,245      123,319   
Other short-term borrowings   6,033     220     5,389          
Subordinated debt   24,282     24,992     14,722          
Other liabilities   7,749      7,324      5,778      5,503      4,243   
Shareholders' equity   101,612      99,656      98,113      96,529      89,592   
  Total liabilities and shareholders' equity $   1,009,485   $   977,971   $   914,781   $   835,445   $   793,381  
           

About Malvern Bancorp, Inc.

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 Main Line. For more than a century, Malvern 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 and through its nine other banking locations in Chester, Delaware and Bucks counties, Pennsylvania and Morristown, N.J., its New Jersey regional headquarters.  The Bank also recently announced new representative offices in Palm Beach, Florida and Montchanin, Delaware.  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 in Rehoboth Beach, DE, provides personalized wealth management and advisory services to high net worth individuals and families. Bel Rock Capital's services include banking, liquidity management, investment services, 401(K) accounts and planning, custody, tailored lending, wealth planning, trust and fiduciary services, family wealth advisory services and philanthropic advisory services. The Bank offers insurance services though Malvern Insurance Associates, LLC, which provides clients a rich array of financial services, including commercial and personal insurance and commercial and personal lending.

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 http://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
 
        Restated
(in thousands, except for share and per share data)   September 30, 2017    September 30, 2016
(unaudited)            
ASSETS              
               
Cash and due from depository institutions   $ 1,615     $ 1,297    
Interest bearing deposits in depository institutions     115,521       95,465    
  Total cash and cash equivalents     117,136       96,762    
Investment securities available for sale, at fair value     14,587       66,387    
Investment securities held to maturity (fair value of $34,566 and $40,817)     34,915       40,551    
Restricted stock, at cost     5,559       5,424    
Loans receivable, net of allowance for loan losses     834,331       574,160    
Accrued interest receivable     3,139       2,558    
Property and equipment, net     7,507       6,637    
Deferred income taxes, net     6,671       8,827    
Bank-owned life insurance     18,923       18,418    
Other assets     3,244       1,548    
  Total assets   $ 1,046,012     $ 821,272    
               
LIABILITIES              
Deposits:              
  Non-interest bearing   $ 42,121     $ 34,547    
  Interest-bearing     748,275       567,499    
Total deposits     790,396       602,046    
FHLB advances     118,000       118,000    
Other short-term borrowings     5,000          
Subordinated debt     24,303          
Advances from borrowers for taxes and insurance     1,553       1,659    
Accrued interest payable     694       427    
Other liabilities     3,546       2,983    
  Total liabilities     943,492       725,115    
SHAREHOLDERS' EQUITY              
Preferred stock, $0.01 par value, 10,000,000 shares, authorized, none issued              
Common stock, $0.01 par value, 50,000,000 shares authorized, issued and
   outstanding: 6,572,684 shares at September 30, 2017 and 6,560,403 shares at
   September 30, 2016
      66         66    
Additional paid in capital     60,736       60,461    
Retained earnings     43,139       37,322    
Unearned Employee Stock Ownership Plan (ESOP) shares     (1,483 )     (1,629 )  
Accumulated other comprehensive income (loss)     62       (63 )  
  Total shareholders' equity     102,520       96,157    
  Total liabilities and shareholders' equity   $ 1,046,012     $ 821,272    



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)

 
    2017     Restated
2016
    2017     Restated
2016
 
(unaudited)                          
Interest and Dividend Income                          
Loans, including fees   $ 8,915   $ 5,980     $ 30,841   $ 21,206    
Investment securities, taxable     197     511       1,561     2,824    
Investment securities, tax-exempt     70     174       492     751    
Dividends, restricted stock     65     68       257     250    
Interest-bearing cash accounts     282     84       631     213    
  Total Interest and Dividend Income     9,529     6,817       33,782     25,244    
Interest Expense                          
Deposits     1,843     1,232       6,236     4,537    
Short-term borrowings     22           34        
Long-term borrowings     561     564       2,176     2,195    
Subordinated debt     396           1,000        
Total Interest Expense     2,822     1,796       9,446     6,732    
Net interest income     6,707     5,021       24,336     18,512    
Provision for Loan Losses     489     100       2,791     947    
Net Interest Income after Provision for
  Loan Losses
    6,218     4,921       21,545     17,565    
Other Income                          
Service charges and other fees     262     259       992     924    
Rental income-other     66     56       227     211    
Net gains on sales of investments, net     31     144       463     565    
Net gains on sale of loans, net     48     26       154     116    
Earnings on bank-owned life insurance     125     130       505     517    
Total Other Income     532     615       2,341     2,333    
Other Expense                          
Salaries and employee benefits     1,725     1,669       7,114     6,290    
Occupancy expense     543     472       2,084     1,820    
Federal deposit insurance premium     71     107       244     579    
Advertising     25     50       216     131    
Data processing     285     283       1,195     1,128    
Professional fees     473     507       1,894     1,683    
Other operating expenses     691     671       2,400     2,291    
Total Other Expense     3,813     3,759       15,147     13,922    
Income before income tax expense     2,937     1,777       8,739     5,976    
Income tax expense (benefit)     982     (6,174 )     2,922     (6,174 )  
Net Income   $ 1,955   $ 7,951     $ 5,817   $ 12,150    
                           
Earnings per common share                          
Basic   $ 0.30   $ 1.24     $ 0.90   $ 1.90    
Diluted   $ 0.30   $ 1.24     $ 0.90   $ 1.90    
Weighted Average Common Shares
  Outstanding
                         
Basic     6,441,731     6,415,049       6,431,445     6,409,265    
Diluted     6,445,151     6,415,207       6,432,137     6,409,325    
 
 
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)
9/30/2017 Restated
6/30/2017
Restated
03/31/2017
(unaudited)       
Statements of Operations Data      
       
  Interest income $   9,529   $   8,973   $   8,175  
  Interest expense   2,822     2,574     2,184  
  Net interest income   6,707     6,399     5,991  
  Provision for loan losses   489     645     997  
  Net interest income after provision for loan losses   6,218     5,754     4,994  
  Other income   532     814     542  
  Other expense   3,813     3,986     3,778  
  Income before income tax expense   2,937     2,582     1,758  
  Income tax expense   982     863     588  
  Net income $   1,955   $   1,719   $   1,170  
Earnings (per Common Share)      
  Basic $   0.30   $   0.27   $   0.18  
  Diluted $   0.30   $   0.27   $   0.18  
Statements of Condition Data (Period-End)      
  Investment securities available for sale, at fair value $   14,587   $   16,811   $   61,672  
  Investment securities held to maturity (fair value of $34,566, $35,625
  and $36,441)
  34,915     36,027     37,060  
  Loans, net of allowance for loan losses   834,331     800,337     752,708  
  Total assets   1,046,012     1,010,908     961,815  
  Deposits   790,396     759,679     704,272  
  FHLB advances   118,000     118,000     118,000  
  Short-term borrowings   5,000         10,000  
  Subordinated debt   24,303     24,263     25,000  
  Shareholders' equity   102,520     100,433     98,594  
Common Shares Dividend Data      
  Cash dividends $   —   $   —   $   —  
Weighted Average Common Shares Outstanding      
  Basic   6,441,731     6,443,515     6,427,309  
  Diluted   6,445,151     6,445,288     6,427,932  
Operating Ratios      
  Return on average assets   0.77 %   0.70 %   0.51 %
  Return on average equity   7.70 %   6.90 %   4.77 %
  Average equity / average assets   10.07 %   10.19 %   10.75 %
  Book value per common share (period-end) $ 15.60   $ 15.28   $ 15.00  
Non-Financial Information (Period-End)      
  Common shareholders of record   427     428     437  
  Full-time equivalent staff   81     81     81  
                   

Investor Relations:
Joseph D. Gangemi
SVP & CFO
(610) 695-3676

Investor Contact:
Ronald Morales
(610) 695-3646

Primary Logo

View Comments and Join the Discussion!