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Malvern Bancorp, Inc. Reports Third Fiscal Quarter Results

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PAOLI, Pa., Aug. 02, 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 third fiscal quarter ended June 30, 2018.   Net income amounted to $2.2 million or $0.35 per fully diluted common share, for the quarter ended June 30, 2018, an increase of $0.5 million, or 30.5 percent, as compared with net income of $1.7 million, or $0.27 per fully diluted common share, for the quarter ended June 30, 2017. 

For the nine months ended June 30, 2018, net income amounted to $4.7 million, or $0.72 per fully diluted common share, compared with net income of $3.9 million, or $0.60 per fully diluted common share, for the nine months ended June 30, 2017.

"We see our third quarter results as strong and highlighted by increased revenue, net income and fully diluted earnings per common share.  We continue to deliver improved profitability metrics, including a return on tangible common equity and return on average assets.   In addition to these solid results, we are focused on continuing with our plans to build client relationships.   We continued loan growth that will aid in building these client relationships.  Our goal to have each of our employees "go beyond our client's expectations" is what ultimately drives our financial performance" indicated Anthony C. Weagley, President and Chief Executive Officer.    

Highlights for the quarter include:

  • Return on average assets ("ROAA") was 0.85 percent for the three months ended June 30, 2018, compared to 0.70 percent for the three months ended June 30, 2017, and return on average equity ("ROAE") was 8.40 percent for the three months ended June 30, 2018, compared with 6.90 percent for the three months ended June 30, 2017. 
  • The Company originated $105.3 million in new loans in the third quarter of fiscal 2018, which was offset by $48.5 million in payoffs, prepayments, amortization, and participation from its portfolio, resulting in a net portfolio increase of $56.8 million over the second quarter of fiscal 2018.  New loan originations in the third quarter of fiscal 2018 consisted of $14.2 million in residential mortgage loans, $79.6 million in commercial loans, $9.5 million in construction and development loans and $2.0 million in consumer loans. 
     
  • Non-performing assets ("NPAs") were 0.32 percent of total assets at June 30, 2018, compared to 0.19 percent at June 30, 2017 and 0.12 percent at September 30, 2017. The allowance for loan losses as a percentage of total non-performing loans was 268.5 percent at June 30, 2018, compared to 421.8 percent at June 30, 2017 and 694.1 percent at September 30, 2017.

  • The Company's ratio of shareholders' equity to total assets was 10.25 percent at June 30, 2018, compared to 9.93 percent at June 30, 2017, and 9.80 percent at September 30, 2017.

  • Book value per common share amounted to $16.42 at June 30, 2018, compared to $15.28 at June 30, 2017 and $15.60 at September 30, 2017. 

  • The efficiency ratio, a non-GAAP measure, was 52.7 percent for the third quarter of fiscal 2018 on an annualized basis, compared to 57.0 percent in the third 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 $7.6 million at June 30, 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: 6/30/18
  3/31/18
  12/31/17
  9/30/17
  6/30/17
   
Return on average assets   0.85 %   0.77 %   0.15 %   0.77 %   0.70 %  
Return on average equity   8.40 %   7.71 %   1.55 %   7.70 %   6.90 %  
Net interest margin (tax equivalent basis) (1)   2.75 %   2.58 %   2.47 %   2.75 %   2.72 %  
Loans / deposits ratio   114.46 %   102.38 %   102.19 %   106.55 %   106.30 %  
Shareholders' equity / total assets   10.25 %   9.73 %   9.76 %   9.80 %   9.93 %  
Efficiency ratio (1)   52.7 %   57.7 %   63.6 %   55.4 %   57.0 %  
Book value per common share $   16.42   $   16.03   $   15.70   $   15.60   $   15.28    

_____________

(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 $7.0 million for the three months ended June 30, 2018, increasing $0.6 million, or 9.1 percent, from $6.4 million for the comparable three-month period in fiscal 2017. The change for the three months ended June 30, 2018 primarily was the result of an increase in the average balance of interest earning assets, which increased $76.9 million.  For the quarter ended June 30, 2018, the Company's net interest margin on a tax-equivalent basis, a non-GAAP measure, increased to 2.75 percent as compared to 2.72 percent for the same three-month period in fiscal 2017.

For the three months ended June 30, 2018, total interest and dividend income on a fully tax-equivalent basis, a non-GAAP measure, increased $1.2 million, or 13.7 percent, to $10.2 million, compared to the three months ended June 30, 2017.  Interest income rose in the quarter ended June 30, 2018, compared to the comparable period in fiscal 2017, primarily due to a $72.2 million increase in the average balance of our loans.   Total interest expense increased by $0.6 million, or 25.2 percent, to $3.2 million, for the three months ended June 30, 2018, compared to the same period in fiscal 2017 due to the increase of $65.6 million in average funding sources, as described below. 

The 25.2 percent increase in interest expense for the third quarter of fiscal 2018 as compared to the third quarter of fiscal 2017 was primarily due to an increase in average rates. The average cost of funds was 1.45 percent for the quarter ended June 30, 2018 compared to 1.25 percent for the same three-month period in fiscal 2017 and, on a linked sequential quarter basis, increased six basis points compared to the second quarter of fiscal 2018. 

For the nine months ended June 30, 2018, total interest and dividend income on a fully tax equivalent basis increased $5.1 million, or 20.9 percent, to $29.5 million, compared to $24.4 million for the nine months ended June 30, 2017. Total interest expense increased by $2.9 million, or 43.2 percent, to $9.5 million, for the nine months ended June 30, 2018, compared to the comparable period in fiscal 2017.  Interest income rose for the nine months ended June 30, 2018, compared to the comparable period in fiscal 2017 primarily due to a $132.0 million increase in average loan balances. Compared to the same period in fiscal 2017, for the nine months ended June 30, 2018, average interest earning assets increased $151.1 million, the net interest spread decreased on an annualized tax-equivalent basis by thirteen basis points and the net interest margin decreased on an annualized tax-equivalent basis by ten basis points.

Joseph Gangemi, Chief Financial Officer of Malvern Bancorp, Inc., added, "The decrease in cash quarter over quarter reflects an investment of our excess cash holdings into loans, which had an overall positive impact for the period including expansion of the margin. We anticipate replenishing the liquidity pool at commensurate rates to the market, therefore the traction to increase margin has been more gradual."

Earnings Summary for the Period Ended June 30, 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: 6/30/18 3/31/18 12/31/17 9/30/17 6/30/17
Net interest income $   6,976    $   6,568    $   6,382   $   6,707 $   6,399
Provision for loan losses   589     240         489   645
 Net interest income after provision for loan losses   6,387     6,328     6,382     6,218   5,754
Other income   715     449     1,711     532   814
Other expense   4,790     4,105     4,471     3,813   3,986
Income before income tax expense   2,312     2,672     3,622     2,937   2,582
Income tax expense   69     654     3,219     982   863
Net income $   2,243   $   2,018   $   403   $   1,955 $   1,719
Earnings per common share          
Basic $   0.35   $   0.31   $   0.06   $   0.30 $   0.27
Diluted $   0.35   $   0.31   $   0.06   $   0.30 $   0.27
Weighted average common shares outstanding:    
Basic   6,453,031     6,448,691     6,445,264     6,441,731   6,443,515
Diluted   6,456,048     6,452,246     6,450,513     6,445,151   6,445,288

Other Income

Total other income decreased $99,000, or 12.2 percent, for the third quarter of fiscal 2018 compared with the same period in fiscal 2017.  The decrease in total other income was primarily due to a $374,000 decrease in net gains on sales of investment securities, a $28,000 decrease in net gains on sale of loans, and a $6,000 decrease in earnings on bank-owned insurance offset by an increase of $297,000 in other fees and service charges and a $12,000 increase in rental income.

For the nine months ended June 30, 2018, total other income increased $1.1 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 $308,000 in other fees and service charges and a $35,000 increase in rental income offset by a $432,000 decrease in net gains on sales of investment securities, a $10,000 decrease in net gains on sale of loans, and a $21,000 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: 6/30/18 3/31/18 12/31/17 9/30/17 6/30/17
Service charges on deposit accounts $   530 $   237 $   271 $   262 $   233
Rental income – other   63   67   66   66   51
Net gains on sales of investments, net         31   374
Gain on sale of real estate, net       1,186    
Gain on sale of loans, net   3   26   67   48   31
Bank-owned life insurance   119   119   121   125   125
  Total other income $   715 $   449 $   1,711 $   532 $   814

Other Expense

Total other expense for the three months ended June 30, 2018, increased $804,000, or 20.2 percent, when compared to the quarter ended June 30, 2017. The increase primarily reflected increases in salaries and employee benefits of $151,000, a $44,000 increase in occupancy expense, a $467,000 increase in professional fees, and a $215,000 increase in other operating expense. The increase was offset by a $2,000 decrease in the federal deposit insurance premium, a $37,000 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 reflect increased legal and accounting fees for the period related to prior period restatements, which the Company does not expect to continue into future periods.

For the nine months ended June 30, 2018, total other expense increased $2.0 million, or 17.9 percent, compared to the same period in fiscal 2017. The increase primarily reflected increases in salaries and employee benefits of $626,000, a $184,000 increase in occupancy expense, a $54,000 increase in the federal deposit insurance premium, a $905,000 increase in professional fees, and a $424,000 increase in other operating expense. The increase was offset by a $92,000 decrease in data processing expense and a $69,000 decrease advertising expense. 

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

(in thousands, unaudited)          
For the quarter ended: 6/30/18 3/31/18 12/31/17 9/30/17 6/30/17
Salaries and employee benefits $   2,024 $   2,001 $   1,990 $   1,725 $   1,873
Occupancy expense   577   586   562   543   533
Federal deposit insurance premium   76   75   76   71   78
Advertising   30   38   54   25   67
Data processing   274   267   278   285   308
Professional fees   1,088   450   788   473   621
Other operating expenses   721   688   723   691   506
  Total other expense $   4,790 $   4,105 $   4,471 $   3,813 $   3,986

Income Taxes

Total income tax expense for the three months ended June 30, 2018 was $69,000 compared to $863,000 for the quarter ended June 30, 2017. This decrease in income tax expense is primarily related to income tax strategies that were implemented during the past year. The results of this tax strategy were recognized in the third fiscal quarter of 2018 upon filing of the Company's federal and state income tax returns for the fiscal year ended September 30, 2017. For the nine months ended June 30, 2018, income tax expense increased $2.0 million, or 103.2 percent, compared to the same period in fiscal 2017.

Statement of Condition Highlights at June 30, 2018

Highlights as of June 30, 2018, included:

  • Balance sheet strength, with total assets amounting to $1.1 billion at June 30, 2018, an increase of $7.6 million, or 0.7 percent, compared to September 30, 2017.
  • The Company's gross loans were $901.8 million at June 30, 2018, an increase of $59.7 million, or 7.1 percent, from September 30, 2017. 
       
  • Total investments were $65.4 million at June 30, 2018, an increase of $15.9 million, or 32.0 percent, compared to September 30, 2017.

  • Deposits totaled $787.9 million at June 30, 2018, a decrease of $2.5 million, or 0.3 percent, compared to September 30, 2017. 
  • Federal Home Loan Bank (FHLB) advances totaled $123.0 million and $118.0 million at June 30, 2018 and at September 30, 2017, respectively.

  • Subordinated debt totaled $24.4 million and $24.3 million at June 30, 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: 6/30/18 3/31/18 12/31/17 9/30/17 6/30/17
Cash and due from depository
  institutions
$   1,447 $   1,566 $   1,636 $   1,615 $   1,622
Interest bearing deposits in depository
  institutions
  45,934   120,144   127,006   115,521   111,805
Investment securities, available for
  sale, at fair value
  34,348   44,341   44,503   14,587   16,811
Investment securities held to maturity   31,004   33,052   33,893   34,915   36,027
Restricted stock, at cost   8,781   8,583   5,930   5,559   5,458
Loans receivable, net of allowance for  
  loan losses
  893,355   837,314   806,764   834,331   800,337
Accrued interest receivable   3,571   3,583   3,344   3,139   2,837
Property and equipment, net   7,240   7,357   7,374   7,507   7,182
Deferred income taxes   3,920   3,713   4,469   6,671   7,912
Bank-owned life insurance   19,282   19,163   19,045   18,923   18,798
Other assets   4,693   4,500   3,872   3,244   2,119
  Total assets $ 1,053,575 $ 1,083,316 $ 1,057,836 $ 1,046,012 $   1,010,908
Deposits $   787,932 $   825,569 $   797,099 $   790,396 $   759,679
FHLB advances   123,000   118,000   118,000   118,000   118,000
Other short-term borrowings   2,500   2,500   5,000   5,000  
Subordinated debt   24,421   24,382   24,342   24,303   24,263
Total other liabilities   7,749   7,503   10,199   5,793   8,533
Shareholders' equity   107,973   105,362   103,196   102,520   100,433
  Total liabilities and shareholders'
  equity
$ 1,053,575 $ 1,083,316 $ 1,057,836 $ 1,046,012 $   1,010,908

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

(in thousands)          
At quarter ended: 6/30/18 3/31/18 12/31/17 9/30/17 6/30/17
Demand:          
  Non-interest bearing $   48,296 $   38,444 $   45,756 $   42,121 $   50,097
  Interest-bearing   198,410   190,602   161,278   155,579   105,439
Savings   44,629   44,716   41,631   44,526   43,709
Money market   276,807   293,813   293,674   276,404   274,018
Time   219,790   257,994   254,760   271,766   286,416
  Total deposits $ 787,932 $ 825,569 $ 797,099 $ 790,396 $ 759,679

Loans

Total net loans amounted to $893.3 million at June 30, 2018 compared to $834.3 million at September 30, 2017, for a net increase of $59.0 million or 7.1 percent for the period.  The allowance for loan losses amounted to $9.0 million and $8.4 million at June 30, 2018 and September 30, 2017, respectively. Average loans during the third quarter of fiscal 2018 totaled $864.3 million as compared to $792.1 million during the third quarter of fiscal 2017, representing a 9.1 percent increase. 

At the end of the third quarter of fiscal 2018 the loan portfolio remained weighted towards two primary components: commercial and the core residential portfolio, with commercial real estate accounting for 53.0 percent and single-family residential real estate loans accounting for 21.4 percent of the loan portfolio.  Construction and development loans amounted to 6.1 percent and consumer loans represented 4.0 percent of the loan portfolio at such date.   Total gross loans increased $59.7 million, to $901.8 million at June 30, 2018 compared to $842.1 million at September 30, 2017.  The increase in the loan portfolio at June 30, 2018 compared to September 30, 2017, primarily reflected an increase of $63.6 million in commercial loans, a $1.4 million increase in construction and development loans, a less than $0.1 million increase in residential mortgage loans and a $5.7 million reduction in consumer loans. 

For the quarter ended June 30, 2018, the Company originated new loan volume of $105.3 million, which was offset by loan payoffs of $25.3 million, prepayments totaling $12.9 million, amortization of $8.8 million, and participation of $1.5 million.

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

Loans (unaudited)          
(in thousands)          
At quarter ended: 6/30/18
  3/31/18
  12/31/17
  9/30/17
  6/30/17
 
Residential mortgage $ 192,901   $ 184,318   $ 186,831   $ 192,500   $ 190,788  
Construction and Development:          
  Residential and commercial   39,845     35,213     34,627     35,622     36,530  
  Land   15,565     21,727     18,599     18,377     18,325  
Total construction and
  development
  55,410     56,940     53,226     53,999     54,855  
Commercial:          
  Commercial real estate   477,584     445,995     427,610     437,760     424,732  
  Farmland   12,058     12,069     1,711     1,723     1,734  
  Multi-family   45,204     32,608     32,716     39,768     21,547  
  Other   82,856     75,368     71,933     74,837     71,248  
Total commercial   617,702     566,040     533,970     554,088     519,261  
Consumer:          
  Home equity lines of credit   14,446     15,538     16,811     16,509     17,602  
  Second mortgages   19,063     19,960     21,304     22,480     23,658  
  Other   2,311     2,404     2,435     2,570     1,403  
Total consumer   35,820     37,902     40,550     41,559     42,663  
Total loans   901,833     845,200     814,577     842,146     807,567  
Deferred loan costs, net   546     580     624     590     687  
Allowance for loan losses   (9,024 )   (8,466 )   (8,437 )   (8,405 )   (7,917 )
  Loans Receivable, net $ 893,355   $ 837,314   $ 806,764   $ 834,331   $ 800,337  

At June 30, 2018, the Company had $123.8 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 $58.1 million in commercial and construction loans and $1.4 million in residential mortgage loans expected to fund over the next 90 days.

Asset Quality

Non-accrual loans were $2.0 million at June 30, 2018 an increase of $1.0 million or 95.0 percent, as compared to September 30, 2017, and an increase of $0.4 million as compared to June 30, 2017.  Other real estate owned ("OREO") remained at zero at June 30, 2018, September 30, 2017 and June 30, 2017. The increase in non-accrual loans at June 30, 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 in the first quarter of 2018.  Total performing troubled debt restructured (TDR) loans were $18.7 million at June 30, 2018, $2.2 million at September 30, 2017 and $1.6 million at June 30, 2017. The increase in TDR loans at June 30, 2018 compared to September 30, 2017 was primarily due to two commercial loans with an aggregate outstanding balance of approximately $16.4 million moving to performing TDR status in the second fiscal quarter of 2018.

At June 30, 2018, non-performing assets totaled $3.4 million, or 0.32 percent of total assets, as compared with $1.2 million, or 0.12 percent, at September 30, 2017 and $1.9 million, or 0.19 percent, at June 30, 2017. The increase in non-performing assets at June 30, 2018 compared to September 30, 2017 was primarily due to the addition of five single residential loans with an aggregate outstanding balance of $0.5 million, one commercial loan with an outstanding balance of $0.6 million and seven consumer loans with an aggregate outstanding balance of $0.2 million moving into non-accrual status and a $1.0 million increase in residential mortgage loans receivable greater than 90 days and accruing. The portfolio of non-accrual loans at June 30, 2018 was comprised of twelve 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 ten consumer loans with an aggregate outstanding balance of approximately $0.3 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: 6/30/18
3/31/18
12/31/17
9/30/17
6/30/17
 
Non-accrual loans(1)  $ 2,023    $ 2,129    $ 2,242    $ 1,038    $ 1,556  
Loans 90 days or more past due and still accruing   1,338     474     345     173     321  
  Total non-performing loans   3,361     2,603     2,587     1,211     1,877  
Other real estate owned                    
  Total non-performing assets $ 3,361   $ 2,603   $ 2,587   $ 1,211   $ 1,877  
Performing troubled debt restructured
  loans
$ 18,693   $ 18,666   $ 2,222   $ 2,238   $ 1,603  
           
Non-performing assets / total assets   0.32%     0.24%     0.24%     0.12%     0.19%  
Non-performing loans / total loans   0.37%     0.31%     0.32%     0.14%     0.23%  
Net charge-offs (recoveries) $   30   $   212   $   (32)   $   1   $   (91)  
Net charge-offs (recoveries) / average
  loans(2)
  0.03%     0.10%     (0.02)%     0.00%     (0.05)%  
Allowance for loan losses / total loans   1.00%     1.00%     1.04%     1.00%     0.98%  
Allowance for loan losses / non-
  performing loans
  268.5%     325.2%     326.1%     694.1%     421.8%  
           
Total assets $ 1,053,575   $ 1,083,316   $ 1,057,836   $ 1,046,012   $ 1,010,908  
Total gross loans   901,833     845,200     814,577     842,146     807,567  
Average loans   864,348     827,483     822,941      831,578      792,139  
Allowance for loan losses   9,024     8,466     8,437     8,405     7,917  

______________

 (1) 19 loans, totaling approximately $1.1 million or 54.0% of the total non-accrual loan balance, were making payments at June 30, 2018.
 (2) Annualized.

The allowance for loan losses at June 30, 2018 amounted to approximately $9.0 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 $7.9 million, or 0.98 percent of total loans, at June 30, 2017.  The Company had a slight decrease in provision expense of approximately $56,000 for the quarter ended June 30, 2018 compared to June 30, 2017.

Capital

At June 30, 2018, our total shareholders' equity amounted to $108.0 million, or 10.25 percent of total assets, compared to $102.5 million at September 30, 2017.  The Company's book value per common share was $16.42 at June 30, 2018, compared to $15.60 at September 30, 2017. 

At June 30, 2018, the Bank's common equity tier 1 ratio was 14.77 percent, tier 1 leverage ratio was 12.23 percent, tier 1 risk-based capital ratio was 14.77 percent and the total risk-based capital ratio was 15.82 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 June 30, 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: 6/30/18 3/31/18 12/31/17 9/30/17 6/30/17
Other income $   715 $   449 $   1,711 $   532 $   814
Less: Net investment securities
  gains and gains on sale of real
  estate
      1,186   31   374
Other income, excluding net
  investment securities gains and
  gains on sale of real estate
$   715 $   449 $   525 $   501 $   440

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

(dollars in thousands)          
For the quarter ended: 6/30/18
  3/31/18
  12/31/17
  9/30/17
  6/30/17
 
Other expense $ 4,790   $ 4,105   $ 4,471   $ 3,813   $ 3,986  
Less: non-core items(1)   713     43     72     29     72  
Other expense, excluding non-core items $ 4,077   $ 4,062   $ 4,399   $ 3,784   $ 3,914  
Net interest income (tax
  equivalent basis)
$ 7,021   $ 6,597   $ 6,393   $ 6,729   $ 6,433  
Other income, excluding net
  investment securities gains and
  gains on sale of real estate
  715     449     525     501     440  
Total $ 7,736   $ 7,046   $ 6,918   $ 7,230   $ 6,873  
           
Efficiency ratio   52.7 %   57.7 %   63.6 %   55.4 %   57.0 %
______________________          
(1)  Non-core items for the quarter ended June 30, 2018 consisted of additional legal and accounting fees arising out of matters pertaining to prior period restatements.  Non-core items for prior periods consisted of expenses related to the Company's corporate restructuring initiatives, such as professional fees, litigation and settlement costs, severance costs and external payroll development costs.  The Company believes these adjustments are necessary to provide the most accurate measure of core operating results as a means to evaluate comparative results.

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

For the quarter ended: 6/30/18   3/31/18   12/31/17   9/30/17   6/30/17  
Efficiency ratio on a GAAP basis 62.3 % 58.5 % 55.2 % 52.7 % 55.3 %

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: 6/30/18
  3/31/18
  12/31/17
  9/30/17
  6/30/17
 
Net interest income (GAAP) $   6,976   $   6,568   $   6,382   $   6,707   $   6,399  
Tax-equivalent adjustment(1)    45     29     11     22     34  
TE net interest income $   7,021   $   6,597   $   6,393   $   6,729   $   6,433  
           
Net interest income margin (GAAP)   2.73 %   2.57 %   2.46 %   2.75 %   2.71 %
Tax-equivalent effect     0.02       0.01       0.01       0.00       0.01  
Net interest margin (TE)   2.75 %   2.58 %   2.47 %   2.75 %   2.72 %
____________________          
(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: 6/30/18
3/31/18
12/31/17
9/30/17
6/30/17
 
Investment securities $ 75,932      $ 77,961      $ 59,453      $ 50,899      $ 82,832  
Loans   864,348       827,483       822,941       832,205       792,139  
Allowance for loan losses   (8,589 )     (8,426 )     (8,419 )     (8,120 )     (7,456 )
All other assets   120,730       157,126       194,017       134,502       110,456  
  Total assets   1,052,421       1,054,144       1,067,992       1,009,486       977,971  
Non-interest bearing deposits $ 45,124     $ 40,034     $ 42,760     $ 45,969     $ 45,173  
Interest-bearing deposits   746,341       754,820       766,105       705,841       682,606  
FHLB advances   118,121       118,000       118,000       118,000       118,000  
Other short-term borrowings   2,555       4,945       5,000       6,033       220  
Subordinated debt   24,399       24,360       24,322       24,282       24,992  
Other liabilities   9,072       7,283       8,086       7,749       7,324  
Shareholders' equity   106,809       104,702       103,719       101,612       99,656  
Total liabilities and
   shareholders' equity
$ 1,052,421     $ 1,054,144     $ 1,067,992     $ 1,009,486     $ 977,971  
           

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 eight other banking locations in Chester, Delaware and Bucks counties, Pennsylvania and Morristown, New Jersey, its New Jersey regional headquarters.  The Bank also operates 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. Bell 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., changes in federal and state tax laws, and changes in the securities markets. Except as required by law, the Company does not undertake any obligation to update any forward-looking statements to reflect changes in beliefs, expectations or events.

MALVERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
                                                                                                                                                                                                   

(in thousands, except for share and per share data)   June 30, 2018    September 30, 2017
(unaudited)            
ASSETS              
Cash and due from depository institutions   $ 1,447   $ 1,615  
Interest bearing deposits in depository institutions     45,934     115,521  
  Total cash and cash equivalents     47,381     117,136  
Investment securities available for sale, at fair value (amortized cost of  $34.8 million and $14.9 million at June 30, 2018 and September 30, 2017,
 respectively)
    34,348     14,587  
Investment securities held to maturity (fair value of $30.0 million and
 $34.6 million at June 30, 2018 and September 30, 2017, respectively)
    31,004     34,915  
Restricted stock, at cost     8,781     5,559  
Loans receivable, net of allowance for loan losses of $9,024 and $8,405, respectively     893,355     834,331  
Accrued interest receivable     3,571     3,139  
Property and equipment, net     7,240     7,507  
Deferred income taxes, net     3,920     6,671  
Bank-owned life insurance     19,282     18,923  
Other assets     4,693     3,244  
  Total assets   $ 1,053,575   $ 1,046,012  
LIABILITIES              
Deposits:              
  Non-interest bearing   $ 48,296   $ 42,121  
  Interest-bearing     739,636     748,275  
Total deposits     787,932     790,396  
FHLB advances     123,000     118,000  
Other short-term borrowings     2,500     5,000  
Subordinated debt     24,421     24,303  
Advances from borrowers for taxes and insurance     3,148     1,553  
Accrued interest payable     1,095     694  
Other liabilities     3,506     3,546  
  Total liabilities     945,602     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: 6,575,179 shares at June 30, 2018 and 6,572,684 shares at September 30, 2017       66       66  
Additional paid in capital     60,985     60,736  
Retained earnings     47,770     43,139  
Unearned Employee Stock Ownership Plan (ESOP) shares     (1,374   (1,483 )
Accumulated other comprehensive income     526     62  
  Total shareholders' equity     107,973     102,520  
  Total liabilities and shareholders' equity   $ 1,053,575   $ 1,046,012  

MALVERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

    Three Months Ended June 30,   Nine Months Ended June 30,
(in thousands, except for share data)     2018     2017     2018     2017
(unaudited)                        
Interest and Dividend Income                        
Loans, including fees   $ 9,380   $ 8,246   $ 26,821   $ 21,926
Investment securities, taxable     300     422     832     1,364
Investment securities, tax-exempt     61     100     191     422
Dividends, restricted stock     130     64     333     192
Interest-bearing cash accounts     327     141     1,236     349
  Total Interest and Dividend Income     10,198     8,973     29,413     24,253
Interest Expense                        
Deposits     2,304     1,645     6,641     4,393
Short-term borrowings     13     1     54     12
Long-term borrowings     539     545     1,648     1,615
Subordinated debt     366     383     1,144     604
Total Interest Expense     3,222     2,574     9,487     6,624
Net interest income     6,976     6,399     19,926     17,629
Provision for Loan Losses     589     645     829     2,302
Net Interest Income after Provision for
  Loan Losses
    6,387     5,754     19,097     15,327
Other Income                        
Service charges on deposit accounts     530     233     1,038     730
Rental income-other     63     51     196     161
Net gains on sales of investments, net         374         432
Net gains on sale of real estate             1,186    
Net gains on sale of loans, net     3     31     96     106
Earnings on bank-owned life insurance     119     125     359     380
Total Other Income     715     814     2,875     1,809
Other Expense                        
Salaries and employee benefits     2,024     1,873     6,015     5,389
Occupancy expense     577     533     1,725     1,541
Federal deposit insurance premium     76     78     227     173
Advertising     30     67     122     191
Data processing     274     308     819     911
Professional fees     1,088     621     2,326     1,421
Other operating expenses     721     506     2,132     1,708
Total Other Expense     4,790     3,986     13,366     11,334
Income before income tax expense     2,312     2,582     8,606     5,802
Income tax expense     69     863     3,942     1,940
Net Income   $ 2,243   $ 1,719   $ 4,664   $ 3,862
                         
Earnings per common share                        
Basic   $ 0.35   $ 0.27   $ 0.72   $ 0.60
Diluted   $ 0.35   $ 0.27   $ 0.72   $ 0.60
Weighted Average Common Shares
  Outstanding
                       
Basic     6,453,031     6,443,515     6,449,089     6,427,978
Diluted     6,456,048     6,445,288     6,452,068     6,428,426


MALVERN BANCORP, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA  
   
  Three Months Ended
(in thousands, except for share and per share data) (annualized where
  applicable)
6/30/2018 3/31/2018 6/30/2017
(unaudited)         
Statements of Operations Data      
       
  Interest income $   10,198   $   9,704   $   8,973  
  Interest expense   3,222     3,136     2,574  
  Net interest income   6,976     6,568     6,339  
  Provision for loan losses   589     240     645  
  Net interest income after provision for loan losses   6,387     6,328     5,754  
  Other income   715     449     814  
  Other expense   4,790     4,105     3,986  
  Income before income tax expense   2,312     2,672     2,582  
  Income tax expense   69     654     863  
  Net income $   2,243   $   2,018   $   1,719  
Earnings (per Common Share)      
  Basic $   0.35   $   0.31   $   0.27  
  Diluted $   0.35   $   0.31   $   0.27  
Statements of Condition Data (Period-End)      
  Investment securities available for sale, at fair value $   34,348   $ 44,341   $   16,811  
  Investment securities held to maturity (fair value of $30.0 million,  $32.1 million, and $35.6 million)   31,004     33,052     36,027  
  Loans, net of allowance for loan losses   893,355     837,314     800,337  
  Total assets   1,053,575     1,083,316     1,010,908  
  Deposits   787,932     825,569     759,679  
  FHLB advances   123,000     118,000     118,000  
  Short-term borrowings   2,500     2,500      
  Subordinated debt   24,421     24,382     24,263  
  Shareholders' equity   107,973     105,362     99,663  
Common Shares Dividend Data      
  Cash dividends $   —   $   —   $   —  
Weighted Average Common Shares Outstanding      
  Basic   6,453,031     6,448,691     6,443,515  
  Diluted   6,456,048     6,452,246     6,445,288  
Operating Ratios      
  Return on average assets   0.85 %   0.77 %   0.70 %
  Return on average equity   8.40 %   7.71 %   6.90 %
  Average equity / average assets   10.15 %   9.93 %   10.19 %
  Book value per common share (period-end) $ 16.42   $ 16.03   $ 15.28  
Non-Financial Information (Period-End)      
  Common shareholders of record   406     409     428  
  Full-time equivalent staff   87     86     81  
                   

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

Investor Contact:
Ronald Morales
(610) 695-3646

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