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Malvern Bancorp, Inc. Reports Second Fiscal Quarter Results

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PAOLI, Pa., April 25, 2018 (GLOBE NEWSWIRE) -- Malvern Bancorp, Inc. (NASDAQ:MLVF) (the "Company"), parent company of Malvern Bank, National Association ("Malvern" or the "Bank"), today reported operating results for the second fiscal quarter ended March 31, 2018.   Net income amounted to $2.0 million or $0.31 per fully diluted common share, for the quarter ended March 31, 2018, an increase of $0.8 million, or 72.5 percent, as compared with net income of $1.2 million, or $0.18 per fully diluted common share, for the quarter ended March 31, 2017. 

For the six months ended March 31, 2018, net income amounted to $2.4 million, or $0.38 per fully diluted common share, compared with net income of $2.1 million, or $0.33 per fully diluted common share, for the six months ended March 31, 2017.

"We see this as a strong quarter with fundamental strength. Our results for the period reflected a set of positive factors, including strong loan growth, rebounding from the prior quarter, and strong forward momentum for continued loan growth, a widening of the net interest margin, despite a high liquidity pool, favorable credit results, and continued management of operating overhead" indicated Anthony C. Weagley, President and Chief Executive Officer. 

Highlights for the quarter include:

  • Return on average assets ("ROAA") was 0.77 percent for the three months ended March 31, 2018, compared to 0.51 percent for the three months ended March 31, 2017, and return on average equity ("ROAE") was 7.71 percent for the three months ended March 31, 2018, compared with 4.77 percent for the three months ended March 31, 2017. 
  • The Company originated $74.6 million in new loans in the second quarter of fiscal 2018, which was offset by $44.0 million in payoffs, prepayments and amortization from its portfolio, resulting in a net portfolio increase of $30.6 million over the first quarter of fiscal 2018.  New loan originations in the second quarter of fiscal 2018 consisted of $6.6 million in residential mortgage loans, $62.4 million in commercial loans, $4.8 million in construction and development loans and $0.8 million in consumer loans.  

  • Non-performing assets ("NPAs") were 0.24 percent of total assets at March 31, 2018, compared to 0.18 percent at March 31, 2017 and 0.12 percent at September 30, 2017. The allowance for loan losses as a percentage of total non-performing loans was 325.2 percent at March 31, 2018, compared to 425.4 percent at March 31, 2017 and 694.1 percent at September 30, 2017.

  • The Company's ratio of shareholders' equity to total assets was 9.73 percent at March 31, 2018, compared to 10.25 percent at March 31, 2017, and 9.80 percent at September 30, 2017.

  • Book value per common share amounted to $16.03 at March 31, 2018, compared to $15.00 at March 31, 2017 and $15.60 at September 30, 2017. 

  • The efficiency ratio, a non-GAAP measure, was 57.7 percent for the second quarter of fiscal 2018 on an annualized basis, compared to 57.4 percent in the second quarter of fiscal 2017 and 55.4 percent in the fourth quarter of fiscal 2017.

  • The Company's balance sheet reflected total asset growth of $37.3 million at March 31, 2018, compared to September 30, 2017, 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 :   3/31/18     12/31/17     9/30/17     6/30/17     3/31/17    
Return on average assets   0.77 %   0.15 %   0.77 %   0.70 %   0.51 %  
Return on average equity   7.71 %   1.55 %   7.70 %   6.90 %   4.77 %  
Net interest margin (tax equivalent basis) (1)   2.58 %   2.47 %   2.76 %   2.72 %   2.75 %  
Loans / deposits ratio   102.38 %   102.19 %   106.55 %   106.30 %   107.80 %  
Shareholders' equity / total assets   9.73 %   9.76 %   9.80 %   9.93 %   10.25 %  
Efficiency ratio (1)   57.65 %   63.6 %   55.4 %   57.0 %   57.4 %  
Book value per common share $   16.03   $   15.70   $   15.60   $   15.28   $   15.00    
  1. Information reconciling non-GAAP measures to GAAP measures is presented elsewhere in this press release.

Net Interest Income

Net interest income on a fully tax-equivalent basis, a non-GAAP measure, was $6.6 million for the three months ended March 31, 2018, increasing $0.6 million, or 9.2 percent, from $6.0 million for the comparable three-month period in fiscal 2017. The change for the three months ended March 31, 2018 primarily was the result of an increase in the average balance of interest earning assets, which increased $143.8 million.  For the quarter ended March 31, 2018, the Company's net interest margin on a tax-equivalent basis, a non-GAAP measure, decreased to 2.58 percent as compared to 2.75 percent for the same three-month period in fiscal 2017.

For the three months ended March 31, 2018, total interest income on a fully tax-equivalent basis, a non-GAAP measure, increased $1.5 million, or 18.3 percent, to $9.7 million, compared to the three months ended March 31, 2017.  Interest income rose in the quarter ended March 31, 2018, compared to the comparable period in fiscal 2017, primarily due to a $110.1 million increase in the average balance of our loans.   Total interest expense increased by $0.9 million, or 43.6 percent, to $3.1 million, for the three months ended March 31, 2018, compared to the same period in fiscal 2017 due to the increase of $130.0 million in average funding sources. 

The 43.6 percent increase in interest expense for the second quarter of fiscal 2018 as compared to the second quarter of fiscal 2017 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 1.39 percent for the quarter ended March 31, 2018 compared to 1.13 percent for the same three-month period in fiscal 2017 and, on a linked sequential quarter basis, increased two basis points compared to the first quarter of fiscal 2018.  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 six months ended March 31, 2018, total interest income on a fully tax equivalent basis increased $3.9 million, or 25.2 percent, to $19.3 million, compared to $15.4 million for the six months ended March 31, 2017. Total interest expense increased by $2.2 million, or 54.7 percent, to $6.3 million, for the six months ended March 31, 2018, compared to the comparable period in fiscal 2017.  Interest income rose for the six months ended March 31, 2018, compared to the comparable period in fiscal 2017 primarily due to a $160.9 million increase in average loan balances. Compared to the same period in fiscal 2017, for the six months ended March 31, 2018, average interest earning assets increased $189.5 million, the net interest spread decreased on an annualized tax-equivalent basis by twenty basis points and the net interest margin decreased on an annualized tax-equivalent basis by eighteen basis points.

Joseph Gangemi, Chief Financial Officer of Malvern Bancorp, Inc., added, "Despite our asset growth this period, we continue to maintain a high liquidity position, which has a dampening effect on our margin. While we anticipate robust growth in loans this year, we continue to replenish the liquidity pool at a commensurate rate, therefore the traction to increase margin has been more gradual."

Earnings Summary for the Period Ended March 31, 2018

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

   
(dollars in thousands, except per share data)            
For the quarter ended: 3/31/18 12/31/17 9/30/17 6/30/17 3/31/17  
Net interest income $   6,568 $   6,382 $   6,707 $   6,399 $   5,991  
Provision for loan losses   240     489   645   997  
 Net interest income after provision for loan losses   6,328   6,382   6,218   5,754   4,994  
Other income   449   1,711   532   814   542  
Other expense   4,105   4,471   3,813   3,986   3,778  
Income before income tax expense   2,672   3,622   2,937   2,582   1,758  
Income tax expense   654   3,219   982   863   588  
Net income $   2,018 $   403 $   1,955 $   1,719 $   1,170  
Earnings per common share            
Basic $   0.31 $   0.06 $   0.30 $   0.27 $   0.18  
Diluted $   0.31 $   0.06 $    0.30 $   0.27 $   0.18  
Weighted average common shares outstanding:          
Basic   6,448,691   6,445,264   6,441,731   6,443,515   6,427,309  
Diluted   6,452,246   6,450,513   6,445,151   6,445,288   6,427,932  

Other Income

Other income decreased $0.1 million, or 17.2 percent, for the second quarter of fiscal 2018 compared with the same period in fiscal 2017.  The decrease in other income was primarily due to a decrease of $37,000 in service charges and other fees, a $58,000 decrease in net gains on sales of investment securities, a $4,000 decrease in net gains on sale of loans, and a $6,000 decrease in earnings on bank-owned insurance offset by an $12,000 increase in rental income.

For the six months ended March 31, 2018, total other income increased $1.2 million compared to the same period in fiscal 2017, primarily as a result of a $1.2 million net gain on the sale of real estate, an increase of $11,000 in service charges, a $23,000 increase in rental income, and an $18,000 increase in net gains on sale of loans offset by a $58,000 decrease in net gains on sales of investment securities and a $15,000 decrease in earnings on bank-owned insurance.

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

(in thousands, unaudited)          
For the quarter ended: 3/31/18 12/31/17 9/30/17 6/30/17 3/31/17
Service charges on deposit accounts $   237 $   271 $   262 $   233 $   274
Rental income – other   67   66   66   51   55
Net gains on sales of investments, net       31   374   58
Gain on sale of real estate, net     1,186      
Gain on sale of loans, net   26   67   48   31   30
Bank-owned life insurance   119   121   125   125   125
  Total other income $   449 $   1,711 $   532 $   814 $   542

Other Expense

Total other expense for the three months ended March 31, 2018, increased $0.3 million, or 8.7 percent, when compared to the quarter ended March 31, 2017. The increase primarily reflected increases in salaries and employee benefits of $0.2 million, a $0.1 million increase in occupancy expense, a $0.1 million increase in professional fees, and a $0.1 million increase in other operating expense. The increase was offset by a $16,000 decrease in the federal deposit insurance premium, a $35,000 decrease in advertising expense, and a $34,000 decrease in data processing expense. The increase in salaries and employee benefits primarily reflects higher compensation and related costs due to added staff to support overall franchise growth. The increase in occupancy expense was mainly due to expanded locations.  Professional fees increased for the period as a result of expense related to increased legal and accounting fees.

For the six months ended March 31, 2018, total other expense increased $1.2 million, or 16.7 percent, compared to the same period in fiscal 2017. The increase primarily reflected increases in salaries and employee benefits of $0.5 million, a $0.1 million increase in occupancy expense, a $0.1 million increase in the federal deposit insurance premium, a $0.4 million increase in professional fees, and a $0.2 million increase in other operating expense. The increase was offset by a $0.1 million decrease in data processing expense and a $32,000 decrease in advertising expense. 

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

(in thousands, unaudited)          
  For the quarter ended: 3/31/18 12/31/17 9/30/17 6/30/17 3/31/17
  Salaries and employee benefits $   2,001 $   1,990 $   1,725 $   1,873 $   1,804
  Occupancy expense   586   562   543   533   514
  Federal deposit insurance premium   75   76   71   78   91
  Advertising   38   54   25   67   73
  Data processing   267   278   285   308   301
  Professional fees   450   788   473   621   399
  Other operating expenses   688   723   691   506   596
    Total other expense $   4,105 $   4,471 $   3,813 $   3,986 $   3,778

Statement of Condition Highlights at March 31, 2018

Highlights as of March 31, 2018, included:

  • Balance sheet strength, with total assets amounting to $1.1 billion at March 31, 2018, an increase of $37.3 million, or 3.6 percent, compared to September 30, 2017.
  • The Company's gross loans were $845.2 million at March 31, 2018, an increase of $3.1 million, or 0.36 percent, from September 30, 2017.    
  • Total investments were $77.4 million at March 31, 2018, an increase of $27.9 million, or 56.3 percent, compared to September 30, 2017.
  • Deposits totaled $825.6 million at March 31, 2018, an increase of $35.2 million, or 4.5 percent, compared to September 30, 2017. 
  • Federal Home Loan Bank (FHLB) advances totaled $118.0 million at March 31, 2018 and at September 30, 2017.
  • Subordinated debt totaled $24.4 million and $24.3 million at March 31, 2018 and at September 30, 2017, respectively.

Condensed Consolidated Statements of Condition

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

(in thousands)          
At quarter ended: 3/31/18 12/31/17 9/30/17 6/30/17 3/31/17
Cash and due from depository
  institutions
$   1,566 $   1,636 $   1,615 $   1,622 $   1,716
Interest bearing deposits in depository
  institutions
  120,144   127,006   115,521   111,805   64,036
Investment securities, available for
  sale, at fair value
  44,341   44,503   14,587   16,811   61,672
Investment securities held to maturity   33,052   33,893   34,915   36,027   37,060
Restricted stock, at cost   8,583   5,930   5,559   5,458   5,397
Loans receivable, net of allowance for  
  loan losses
  837,314   806,764   834,331   800,337   752,708
Accrued interest receivable   3,583   3,344   3,139   2,837   3,177
Property and equipment, net   7,357   7,374   7,507   7,182   6,896
Deferred income taxes   3,713   4,469   6,671   7,912   7,881
Bank-owned life insurance   19,163   19,045   18,923   18,798   18,673
Other assets   4,500   3,872   3,244   2,119   2,599
  Total assets $ 1,083,316 $ 1,057,836 $ 1,046,012 $   1,010,908 $   961,815
Deposits $   825,569 $   797,099 $   790,396 $   759,679 $   704,272
FHLB advances   118,000   118,000   118,000   118,000   118,000
Other short-term borrowings   2,500   5,000   5,000     10,000
Subordinated debt   24,382   24,342   24,303   24,263   25,000
Other liabilities   7,503   10,199   5,793   8,533   5,949
Shareholders' equity   105,362   103,196   102,520   100,433   98,594
  Total liabilities and shareholders'
  equity
$ 1,083,316 $ 1,057,836 $ 1,046,012 $   1,010,908 $   961,815

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

(in thousands)          
At quarter ended: 3/31/18 12/31/17 9/30/17 6/30/17 3/31/17
Demand:          
  Non-interest bearing $   38,444 $   45,756 $    42,121 $   50,097 $   45,303
  Interest-bearing   190,602   161,278   155,579   105,439   102,525
Savings   44,716   41,631   44,526   43,709   43,913
Money market   293,813   293,674   276,404   274,018   251,671
Time   257,994   254,760   271,766   286,416   260,860
  Total deposits $ 825,569 $ 797,099 $ 790,396 $ 759,679 $ 704,272

Loans

Total net loans amounted to $837.3 million at March 31, 2018 compared to $834.3 million at September 30, 2017, for a net increase of $3.0 million or 0.36 percent for the period.  The allowance for loan losses amounted to $8.5 million and $8.4 million at March 31, 2018 and September 30, 2017, respectively. Average loans during the second quarter of fiscal 2018 totaled $827.5 million as compared to $717.4 million during the second quarter of fiscal 2017, representing a 15.3 percent increase. 

At the end of the second quarter of fiscal 2018 the loan portfolio remained weighted toward two primary components: commercial and the core residential portfolio, with commercial real estate accounting for 52.8 percent and single-family residential real estate loans accounting for 21.8 percent of the loan portfolio.  Construction and development loans amounted to 6.7 percent and consumer loans represented 4.5 percent of the loan portfolio at such date.   Total gross loans increased $3.1 million, to $845.2 million at March 31, 2018 compared to $842.1 million at September 30, 2017.  The increase in the loan portfolio at March 31, 2018 compared to September 30, 2017, primarily reflected an increase of $12.0 million in commercial loans, a $3.0 million increase in construction and development loans, a $8.2 million decrease in residential mortgage loans and a $3.7 million reduction in consumer loans at March 31, 2018 as compared to September 30, 2017. 

For the quarter ended March 31, 2018, the Company originated new loan volume of $74.6 million, which was offset by loan payoffs of $14.5 million, prepayments totaling $16.0 million, and amortization of $13.5 million.

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

Loans (unaudited)          
(in thousands)          
At quarter ended:   3/31/18     12/31/17     9/30/17     6/30/17     3/31/17  
Residential mortgage $ 184,318   $ 186,831   $ 192,500   $ 190,788   $ 192,775  
Construction and Development:          
  Residential and commercial   35,213     34,627     35,622     36,530     46,721  
  Land   21,727     18,599     18,377     18,325     14,322  
Total construction and
  development
  56,940     53,226     53,999     54,855     61,043  
Commercial:          
  Commercial real estate   445,995     427,610     437,760     424,732     383,170  
  Farmland   12,069     1,711     1,723     1,734      
  Multi-family   32,608     32,716     39,768     21,547     12,838  
  Other   75,368     71,933     74,837     71,248     63,551  
Total commercial   566,040     533,970     554,088     519,261     459,559  
Consumer:          
  Home equity lines of credit   15,538     16,811     16,509     17,602     19,214  
  Second mortgages   19,960     21,304     22,480     23,658     25,103  
  Other   2,404     2,435     2,570     1,403     1,512  
Total consumer   37,902     40,550     41,559     42,663     45,829  
Total loans   845,200     814,577     842,146     807,567     759,206  
Deferred loan costs, net   580     624     590     687     683  
Allowance for loan losses   (8,466 )   (8,437 )   (8,405 )   (7,917 )   (7,181 )
  Loans Receivable, net $ 837,314   $ 806,764   $ 834,331   $ 800,337   $ 752,708  

At March 31, 2018, the Company had $122.7 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.   The Company's current "Approved, Accepted but Unfunded" pipeline, includes approximately $54.0 million in commercial and construction loans and $15.7 million in residential mortgage loans expected to fund over the next 90 days.

Asset Quality

Mr. Weagley noted that "asset quality remained stable, and we are well positioned from an asset quality perspective, with continued improving trends and a low ratio of non-performing assets to total assets of 0.24 percent."

Non-accrual loans were $2.1 million at March 31, 2018 an increase of $1.1 million or 105.1 percent, as compared to $1.0 million at September 30, 2017. Non-accrual loans were $1.6 million at March 31, 2017.  Other real estate owned ("OREO") remained at zero at March 31, 2018, September 30, 2017 and March 31, 2017. The increase in non-performing loans at March 31, 2018 compared to September 30, 2017 was primarily due to one legacy commercial loan, with an aggregate outstanding balance of approximately $0.6 million moving to non-accrual status.  Total performing troubled debt restructured loans were $18.7 million at March 31, 2018, $2.2 million at September 30, 2017 and $1.6 million at March 31, 2017. The increase in troubled debt restructured loans at March 31, 2018 compared to September 30, 2017 was primarily due to two commercial loans with an aggregate outstanding balance of approximately $16.4 million.

At March 31, 2018, non-performing assets totaled $2.6 million, or 0.24 percent of total assets, as compared with $1.2 million, or 0.12 percent, at September 30, 2017 and $1.7 million, or 0.18 percent, at March 31, 2017.  The portfolio of non-accrual loans at March 31, 2018 was comprised of thirteen residential real estate loans with an aggregate outstanding balance of approximately $1.1 million, one commercial real estate loan with an outstanding balance of $0.6 million, and fourteen consumer loans with an aggregate outstanding balance of approximately $0.4 million.   

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:   3/31/18     12/31/17     9/30/17     6/30/17     3/31/17  
Non-accrual loans(1) $ 2,129   $ 2,242   $ 1,038   $ 1,556   $ 1,566  
Loans 90 days or more past due and still accruing   474     345     173     321     122  
  Total non-performing loans   2,603     2,587     1,211     1,877     1,688  
Other real estate owned                    
  Total non-performing assets $ 2,603   $ 2,587   $ 1,211   $ 1,877   $ 1,688  
Performing troubled debt restructured
  loans
$ 18,666   $ 2,222   $ 2,238   $ 1,603   $ 1,623  
           
Non-performing assets / total assets   0.24 %   0.24 %   0.12 %   0.19 %   0.18 %
Non-performing loans / total loans   0.31 %   0.32 %   0.14 %   0.23 %   0.22 %
Net charge-offs (recoveries) $   212   $   (32 ) $   1   $   (91 ) $   (7 )
Net charge-offs (recoveries) / average
  loans(2)
  0.10 %   (0.02 )%   0.00 %   (0.05 )%   0.00 %
Allowance for loan losses / total loans   1.00 %   1.04 %   1.00 %   0.98 %   0.95 %
Allowance for loan losses / non-
  performing loans
  325.2 %   326.1 %   694.1 %   421.8 %   425.4 %
           
Total assets $ 1,083,316   $ 1,057,836   $ 1,046,012   $ 1,010,908   $ 961,815  
Total gross loans   845,200     814,577     842,146     807,567     759,206  
Average loans   827,483     822,941      831,578      792,139      717,376  
Allowance for loan losses   8,466     8,437     8,405     7,917     7,181  
  1. 18 loans, totaling approximately $0.8 million or 38.8% of the total non-accrual loan balance, were making payments at March 31, 2018. 
  2. Annualized.

The allowance for loan losses at March 31, 2018 amounted to approximately $8.5 million, or 1.00 percent of total loans, compared to $8.4 million, or 1.00 percent of total loans, at September 30, 2017 and $7.2 million, or 0.95 percent of total loans, at March 31, 2017.  The Company had a $0.2 million provision for loan losses during the quarter ended March 31, 2018 compared to $1.0 million for the quarter ended March 31, 2017.   

Capital

At March 31, 2018, our total shareholders' equity amounted to $105.4 million, or 9.73 percent of total assets, compared to $102.5 million at September 30, 2017.  The Company's book value per common share was $16.03 at March 31, 2018, compared to $15.60 at September 30, 2017. 
At March 31, 2018, the Bank's common equity tier 1 ratio was 15.20 percent, tier 1 leverage ratio was 11.96 percent, tier 1 risk-based capital ratio was 15.20 percent and the total risk-based capital ratio was 16.23 percent.  At September 30, 2017, the Bank's common equity tier 1 ratio was 14.75 percent, tier 1 leverage ratio was 12.02 percent, tier 1 risk-based capital ratio was 14.75 percent and the total risk-based capital ratio was 15.78 percent.  At March 31, 2018, 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: 3/31/18 12/31/17 9/30/17 6/30/17 3/31/17
Other income $   449 $   1,711 $   532 $   814 $   542
Less: Net investment securities
  gains and gains on sale of real
  estate
    1,186   31   374   58
Other income, excluding net
  investment securities gains and
  gains on sale of real estate
$   449 $   525 $   501 $   440 $   484

"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:   3/31/18     12/31/17     9/30/17     6/30/17     3/31/17  
Other expense $   4,105   $   4,471   $   3,813   $   3,986   $   3,778  
Less: non-core items(1)   43     72     29     72     29  
Other expense, excluding non-core items $ 4,062    $ 4,399    $   3,784   $   3,914   $   3,749  
Net interest income (tax
  equivalent basis)
$ 6,597    $ 6,393    $   6,729   $   6,433   $   6,043  
Other income, excluding net
  investment securities gains and
  gains on sale of real estate
  449     525     501     440     484  
  Total $ 7,046    $ 6,918    $   7,230   $   6,873   $   6,527  
           
Efficiency ratio   57.7 %   63.6 %   52.3 %   57.0 %   57.4 %
______________________          
(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: 3/31/18   12/31/17   9/30/17   6/30/17   3/31/17  
Efficiency ratio on a GAAP basis 58.5 % 55.2 % 52.7 % 55.3 % 57.8 %

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 Company revised its estimated annual effective rate to reflect a change in the federal statutory rate from 35% to 21%, resulting from the enactment of the Tax Cuts and Jobs Act of 2017.  The TE basis adjusts GAAP interest income and yields for the tax benefit of income on certain tax-exempt investments using the blended statutory rate of 24.5% for the current period and 34% for each of the prior periods 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:   3/31/18     12/31/17     9/30/17     6/30/17     3/31/17  
Net interest income (GAAP) $   6,568   $   6,382   $   6,707   $   6,399   $   5,991  
Tax-equivalent adjustment(1)    29     11     22     34     52  
TE net interest income $   6,597   $   6,393   $   6,729   $   6,433   $   6,043  
           
Net interest income margin (GAAP)   2.57 %   2.46 %   2.75 %   2.71 %   2.72 %
Tax-equivalent effect     0.01       0.01       0.00       0.01       0.03  
Net interest margin (TE)   2.58 %   2.47 %   2.75 %   2.72 %   2.75 %
____________________          
(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.

(in thousands)          
  For the quarter ended:   3/31/18     12/31/17     9/30/17     6/30/17     3/31/17  
Investment securities $   77,961   $   59,453   $   50,899   $   82,832   $   102,090  
Loans   827,483      822,941      832,205      792,139      717,376   
Allowance for loan losses   (8,426  )   (8,419  )   (8,120  )   (7,456  )   (6,489  )
All other assets   157,126      194,017      134,502      110,456      101,804   
  Total assets   1,054,144     1,067,992     1,009,486     977,971   $   914,781  
Non-interest bearing deposits $   40,034   $   42,760   $   45,969   $   45,173   $   38,565  
Interest-bearing deposits   754,820      766,105      705,841      682,606      634,214   
FHLB advances   118,000      118,000      118,000      118,000      118,000   
Other short-term borrowings   4,945     5,000     6,033     220     5,389  
Subordinated debt   24,360     24,322     24,282     24,992     14,722  
Other liabilities   7,283      8,086      7,749      7,324      5,778   
Shareholders' equity   104,702      103,719      101,612      99,656      98,113   
  Total liabilities and
  shareholders' equity
$   1,054,144   $   1,067,992   $   1,009,486   $   977,971   $   914,781  
           

About Malvern Bancorp, Inc.

Malvern Bancorp, Inc. is the holding company for Malvern Bank, National Association, a national bank that was originally organized in 1887 as a federally-chartered savings bank. Malvern Bank, National Association now serves as one of the oldest banks headquartered on the Philadelphia Main Line. For more than a century, Malvern Bank has been committed to helping people build prosperous communities as a trusted financial partner, forging lasting relationships through teamwork, respect and integrity.

Malvern 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, New Jersey, 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.  

Malvern Bank, through its Private Banking division and strategic partnership with Bell Rock Capital in Rehoboth Beach, Delaware, 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.malvernbancorp.com. For information regarding Malvern Bank, National Association, please visit our web site at http://www.mymalvernbank.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, 2018    September 30, 2017
(unaudited)            
ASSETS              
Cash and due from depository institutions   $ 1,566     $ 1,615    
Interest bearing deposits in depository institutions     120,144       115,521    
  Total cash and cash equivalents     121,710       117,136    
Investment securities available for sale, at fair value (amortized cost of  $44.8 million and $14.9 million at March 31, 2018 and September 30, 2017,
 respectively)
    44,341       14,587    
Investment securities held to maturity (fair value of $32.1 million and
 $34.6 million at March 31, 2018 and September 30, 2017, respectively)
    33,052       34,915    
Restricted stock, at cost     8,583       5,559    
Loans receivable, net of allowance for loan losses of $8,466 and $8,405, respectively     837,314       834,331    
Accrued interest receivable     3,583       3,139    
Property and equipment, net     7,357       7,507    
Deferred income taxes, net     3,713       6,671    
Bank-owned life insurance     19,163       18,923    
Other assets     4,500       3,244    
  Total assets   $ 1,083,316     $ 1,046,012    
LIABILITIES              
Deposits:              
  Non-interest bearing   $ 38,444     $ 42,121    
  Interest-bearing     787,125       748,275    
Total deposits     825,569       790,396    
FHLB advances     118,000       118,000    
Other short-term borrowings     2,500       5,000    
Subordinated debt     24,382       24,303    
Advances from borrowers for taxes and insurance     2,463       1,553    
Accrued interest payable     713       694    
Other liabilities     4,327       3,546    
  Total liabilities     977,954       943,492    
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 March 31, 2018 and 6,572,684 shares at September 30, 2017       66         66    
Additional paid in capital     60,886       60,736    
Retained earnings     43,536       43,139    
Unearned Employee Stock Ownership Plan (ESOP) shares     (1,411 )     (1,483 )  
Accumulated other comprehensive income     285       62    
  Total shareholders' equity     105,362       102,520    
  Total liabilities and shareholders' equity   $ 1,083,316     $ 1,046,012    


 
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)     2018     2017     2018     2017
(unaudited)                        
Interest and Dividend Income                        
Loans, including fees   $ 8,740   $ 7,367   $ 17,441   $ 13,680
Investment securities, taxable     302     470     532     942
Investment securities, tax-exempt     65     159     130     322
Dividends, restricted stock     134     64     203     128
Interest-bearing cash accounts     463     115     909     208
  Total Interest and Dividend Income     9,704     8,175     19,215     15,280
Interest Expense                        
Deposits     2,182     1,424     4,337     2,748
Short-term borrowings     22     11     41     11
Long-term borrowings     546     528     1,109     1,070
Subordinated debt     386     221     778     221
Total Interest Expense     3,136     2,184     6,265     4,050
Net interest income     6,568     5,991     12,950     11,230
Provision for Loan Losses     240     997     240     1,657
Net Interest Income after Provision for
  Loan Losses
    6,328     4,994     12,710     9,573
Other Income                        
Service charges and other fees     237     274     508     497
Rental income-other     67     55     133     110
Net gains on sales of investments, net         58         58
Net gains on sale of real estate             1,186    
Net gains on sale of loans, net     26     30     93     75
Earnings on bank-owned life insurance     119     125     240     255
Total Other Income     449     542     2,160     995
Other Expense                        
Salaries and employee benefits     2,001     1,804     3,991     3,516
Occupancy expense     586     514     1,148     1,008
Federal deposit insurance premium     75     91     151     95
Advertising     38     73     92     124
Data processing     267     301     545     603
Professional fees     450     399     1,238     800
Other operating expenses     688     596     1,411     1,202
Total Other Expense     4,105     3,778     8,576     7,348
Income before income tax expense     2,672     1,758     6,294     3,220
Income tax expense     654     588     3,873     1,077
Net Income   $ 2,018   $ 1,170   $ 2,421   $ 2,143
                         
Earnings per common share                        
Basic   $ 0.31   $ 0.18   $ 0.38   $ 0.33
Diluted   $ 0.31   $ 0.18   $ 0.38   $ 0.33
Weighted Average Common Shares
  Outstanding
                       
Basic     6,448,691     6,427,309     6,446,959     6,422,899
Diluted     6,452,246     6,427,932     6,427,932     6,423,269


 
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)
3/31/2018 12/31/2017 3/31/2017
(unaudited)       
Statements of Operations Data      
       
  Interest income $   9,704   $   9,511   $   8,175  
  Interest expense   3,136     3,129     2,184  
  Net interest income   6,568     6,382     5,991  
  Provision for loan losses   240         997  
  Net interest income after provision for loan losses   6,328     6,382     4,994  
  Other income   449     1,711     542  
  Other expense   4,105     4,471     3,778  
  Income before income tax expense   2,672     3,622     1,758  
  Income tax expense   654     3,219     588  
  Net income $   2,018   $   403   $   1,170  
Earnings (per Common Share)      
  Basic $   0.31   $   0.06   $   0.18  
  Diluted $   0.31   $   0.06   $   0.18  
Statements of Condition Data (Period-End)      
  Investment securities available for sale, at fair value $   44,341   $ 44,503   $   61,672  
  Investment securities held to maturity (fair value of $32.1 million,  $33.3 million, and $36.4 million)   33,052     33,893     37,060  
  Loans, net of allowance for loan losses   837,314     806,764     752,708  
  Total assets   1,083,316     1,057,836     961,815  
  Deposits   825,569     797,099     704,272  
  FHLB advances   118,000     118,000     118,000  
  Short-term borrowings   2,500     5,000     10,000  
  Subordinated debt   24,382     24,342     25,000  
  Shareholders' equity   105,362     103,196     98,954  
Common Shares Dividend Data      
  Cash dividends $   —   $   —   $   —  
Weighted Average Common Shares Outstanding      
  Basic   6,448,691     6,445,264     6,427,309  
  Diluted   6,452,246     6,450,513     6,427,932  
Operating Ratios      
  Return on average assets   0.77 %   0.15 %   0.51 %
  Return on average equity   7.71 %   1.55 %   4.77 %
  Average equity / average assets   9.93 %   9.71 %   10.73 %
  Book value per common share (period-end) $ 16.03   $ 15.70   $ 15.00  
Non-Financial Information (Period-End)      
  Common shareholders of record   409     422     437  
  Full-time equivalent staff   86     85     81  
                   


Investor Relations:

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

Investor Contact:
Ronald Morales
(610) 695-3646

 

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