Market Overview

Malvern Bancorp, Inc. Reports First Fiscal Quarter 2020 Results

Share:

PAOLI, Pa., Jan. 30, 2020 (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 first quarter ended December 31, 2019.   Net income amounted to $2.5 million, or $0.33 per fully diluted common share, for the quarter ended December 31, 2019, compared with net income of $2.0 million, or $0.27 per fully diluted common share, for the quarter ended December 31, 2018. Annualized return on average assets ("ROAA") was 0.82 percent for the quarter ended December 31, 2019, compared to 0.74 percent for the quarter ended December 31, 2018, and annualized return on average equity ("ROAE") was 6.97 percent for the quarter ended December 31, 2019, compared with 6.00 percent for the quarter ended December 31, 2018.  

"We are pleased that we managed our balance sheet in a declining interest rate environment to produce solid results.  Despite an unusually high level of payoffs during our first quarter, resulting in a net portfolio decline for the quarter, we still produced loan growth of $70 million, or 7.6 percent, year over year, while remaining vigilant and disciplined with respect to credit metrics and underwriting.  We believe we are positioned well for steady and measured growth throughout fiscal 2020," commented Anthony C. Weagley, President and Chief Executive Officer.

Joseph D. Gangemi, Chief Financial Officer of the Company, added: "The Bank has taken strategic actions to reduce its excess cash balances to better match fund loans.  We have also started reducing deposit rates consistent with the declining interest rate environment, while improving the funding mix.  Average cash was reduced approximately $22 million during the first fiscal quarter.  These efforts, combined with top line revenue growth, should help to improve our net interest margin."     

Linked Quarter Financial Ratios  (unaudited)
 
As of or for the quarter ended:   12/31/19
  9/30/19
  6/30/19
  3/31/19
  12/31/18
Return on average assets (1)   0.82%   0.86%   0.88%   0.70%   0.74%
Return on average equity (1)   6.97%   7.65%   7.66%   5.74%   6.00%
Net interest margin (tax equivalent basis) (2)   2.35%   2.45%   2.54%   2.67%   2.65%
Loans / deposits ratio   106.38%   106.64%   106.52%   106.82%   110.70%
Shareholders' equity / total assets   11.52%   11.26%   11.03%   11.37%   12.02%
Efficiency ratio, non-GAAP (1)  (2)  (3)   58.7%   54.9%   56.6%   57.2%   52.3%
Book value per common share   $18.70   $18.35   $17.99   $17.68   $17.45

_____________

(1) Annualized.

(2) Information reconciling non-GAAP measures to GAAP measures is presented beginning on page 10 in this press release.

(3) 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.

Linked Quarter Income Statement Data

(unaudited)
(in thousands, except share and per
share data)
                           
                             
For the quarter ended: 12/31/19
  9/30/19
  6/30/19
  3/31/19
  12/31/18
Net interest income $ 6,912   $ 7,418   $ 7,461   $ 7,249   $ 6,947
Provision for loan losses   -     -     56     870     1,453
Net interest income after provision for loan losses   6,912     7,418     7,405     6,379     5,494
Other income   443     551     454     441     1,146
Other expense   4,422     4,453     4,497     4,443     4,094
Income before income tax expense   2,933     3,516     3,362     2,377     2,546
Income tax expense   431     817     706     411     535
Net income $ 2,502   $ 2,699   $ 2,656   $ 1,966   $ 2,011
Earnings per common share                            
Basic $ 0.33   $ 0.35   $ 0.35   $ 0.26   $ 0.27
Diluted $ 0.33   $ 0.35   $ 0.35   $ 0.26   $ 0.27
Weighted average common shares outstanding                            
Basic   7,665,842     7,663,242     7,669,851     7,667,518     7,555,810
Diluted   7,665,842     7,663,593     7,670,106     7,667,518     7,555,969

Net Interest Income

Net interest income was $6.9 million for the quarter ended December 31, 2019, a decrease of $35,000, or 0.5 percent, from $6.9 million for the quarter ended December 31, 2018. The change for the quarter ended December 31, 2019 primarily was the result of an increase in total interest-bearing liabilities of $121.0 million partially offset by an increase of $94.5 million in the average balance of loans. The increase in average loans primarily reflects a net increase in commercial loans and residential loans.  The net interest spread on an annualized basis was 2.09 percent and 2.40 percent for the quarters ended December 31, 2019 and 2018, respectively.  For the quarter ended December 31, 2019, the Company's net interest margin on a tax-equivalent basis, a non-GAAP measure, decreased to 2.35 percent as compared to 2.65 percent for the quarter ended December 31, 2018.

For the quarter ended December 31, 2019, the Company's net interest margin on a tax-equivalent basis, a non-GAAP measure, decreased by approximately fourteen basis points when adjusted for the decline in the interest rate environment as compared to the quarter ended December 31, 2018.

Total Interest Income

For the quarter ended December 31, 2019, total interest income was $11.8 million, an increase of $907,000, or 8.3 percent, from $10.9 million for quarter ended December 31, 2018, primarily due to a $94.5 million increase in the average balance of loans.  Compared to the first quarter ended December 31, 2018, average interest earning assets increased $130.3 million. 

Interest Expense

For the quarter ended December 31, 2019, interest expense increased by $942,000, or 23.8 percent, to $4.9 million, compared to the quarter ended December 31, 2018, primarily due to increases in average rates paid on and average volume of deposits.  The increase in interest expense on deposits reflects an increase of $86.0 million, $11.9 million, and $10.5 million in interest-bearing demand, money market, and certificate deposits, respectively. The annualized average rate of total interest-bearing liabilities increased sixteen basis points to 1.92 percent for the quarter ended December 31, 2019, from 1.76 percent for the quarter ended December 31, 2018 and, on a linked sequential quarter basis, decreased from 2.00 percent or eight basis points compared to the fourth quarter of fiscal 2019. At the same time, the average balance of total interest-bearing liabilities increased by $121.0 million with the increase reflecting an increase in the average balance of total interest-bearing deposit accounts of $105.5 million and an increase in the average balance of borrowings of $15.5 million.     

Other Income

Other income decreased $703,000, or 61.3 percent, during the first fiscal quarter of 2020 compared with the same period in 2019.  The decrease in other income was primarily due to a $681,000 decrease in service charges and other fees.  The decrease in service charges and other fees during the quarter ended December 31, 2019 is primarily due to higher net swap fees of $710,000 through the Bank's commercial loan hedging program realized during the quarter ending December 31, 2018. 

Other Expense

Other expense for the quarter ended December 31, 2019 increased $328,000, or 8.0 percent, when compared to the quarter ended December 31, 2018. The increase was primarily due to a $170,000 increase in the Pennsylvania shares tax, an increase of $117,000 in salaries and employee benefits and an increase of $62,000 in other operating expense.  These were partially offset by a decrease of $72,000 in the federal deposit insurance premium.  The increase in the Pennsylvania shares tax was primarily due to the imposition of the Pennsylvania shares tax related to the Bank's new standing as a National Association during the second fiscal quarter of 2019.  The increase in salaries and employee benefits reflect normal increases to salary and benefits.  The reduction in the federal deposit insurance premium resulted from the Deposit Insurance Fund reserve ratio exceeding the official required reserve ratio, which in turn generates credits to qualified participating banks.  The Company has a current credit balance of approximately $78,678 that can be used to offset premiums during the next several quarters, should FDIC reserves remain above the required reserve ratio level.

The following table presents the components of Other Expense for the periods indicated.

(in thousands, unaudited)
                           
For the quarter ended: 12/31/19
  9/30/19
  6/30/19
  3/31/19
  12/31/18
Salaries and employee benefits $ 2,125   $ 2,097   $ 2,223   $ 2,213   $ 2,008
Occupancy expense   582     580     560     577     539
Federal deposit insurance premium   (3 )   1     78     73     69
Advertising   22     17     30     30     30
Data processing   278     260     259     251     254
Professional fees   441     440     405     455     499
Net other real estate owned expense   71     113     30     28     21
Pennsylvania shares tax   170     170     170     92     -
Other operating expenses   736     775     742     724     674
Total Other Expense $ 4,422   $ 4,453   $ 4,497   $ 4,443   $ 4,094

Income Taxes

The Company recorded $431,000 in income tax expense during the quarter ended December 31, 2019 compared to $535,000 in income tax expense during the quarter ended December 31, 2018. The effective tax rates for the Company for the quarter ended December 31, 2019 and 2018 were 14.7 percent and 21.0 percent, respectively. During the quarter ended December 31, 2019 the Company recorded discrete items that reduced the effective tax rate from 21.0 percent to 14.7 percent. 

Statement of Condition Highlights at December 31, 2019

  • Gross loans totaled $1.0 billion at December 31, 2019, increasing $70.6 million or 7.6 percent, compared to December 31, 2018.  The Company originated $69.9 million in new loans during the quarter ended December 31, 2019, which was offset by $82.8 million in unusually high payoffs, prepayments and maturities resulting in a net portfolio decline of $12.9 million for the period.  Gross loan originations during the quarter consisted of $31.6 million in commercial loans, $29.8 million in residential and consumer mortgage loans and $8.5 million in construction and development loans.  The payoffs were primarily from payoffs/paydowns in lines of credit and commercial loan payoffs.   Gross loans were $1.0 billion at December 31, 2019 and September 30, 2019, decreasing $13.1 million, or 1.3 percent  

  • Total assets stood at $1.3 billion at December 31, 2019, increasing $132.3 million, or 11.7 percent, compared to December 31, 2018.  Total assets stood at $1.3 billion at December 31, 2019, decreasing $4.5 million, or 0.4 percent, compared to September 30, 2019.

  • Deposits totaled $943.8 million at December 31, 2019, an increase of $100.6 million, or 11.9 percent, compared to December 31, 2018.  Linked quarter total deposits decreased $10.0 million, or 1.0 percent, when compared to September 30, 2019 which was part of the overall strategic plan to better match funding expectations.  Deposits totaled $943.8 million at December 31, 2019, a decrease of $10.0 million, or 1.0 percent, compared to September 30, 2019. 
  • Non-performing assets ("NPAs") were 0.60 percent of total assets at December 31, 2019, compared to 0.64 percent at September 30, 2019 and 0.81 percent at December 31, 2018.  The allowance for loan losses as a percentage of total non-performing loans was 553.7 percent at December 31, 2019, compared to 434.6 percent at September 30, 2019 and 278.4 percent at December 31, 2018.

  • Excluding one OREO property of $5.8 million, NPAs were 0.14 percent of total assets and 0.18 percent of total assets at December 31, 2019 and September 30, 2019, respectively.

  • The Company's ratio of shareholders' equity to total assets was 11.52 percent at December 31, 2019, compared to 11.26 percent at September 30, 2019 and 12.02 percent at December 31, 2018. 

  • Book value per common share amounted to $18.70 at December 31, 2019, compared to $18.35 at September 30, 2019 and $17.45 at December 31, 2018. 

Linked Quarter Statement of Condition Data

(in thousands, unaudited)
                           
                             
At quarter ended: 12/31/19
  9/30/19
  6/30/19
  3/31/19
  12/31/18
Cash and due from depository institutions $ 1,337   $ 1,400   $ 1,535   $ 1,370   $ 1,377
Interest bearing deposits in depository institutions   158,465     152,143     148,501     109,450     98,499
Investment securities, available for sale, at fair value   23,723     18,411     23,552     19,371     19,231
Investment securities held to maturity   20,578     22,485     23,323     26,789     29,323
Restricted stock, at cost   11,115     11,129     10,404     8,952     9,493
Loans receivable, net of allowance for loan losses   994,803     1,007,714     1,009,959     997,114     924,639
Other real estate owned   5,796     5,796     5,796     5,796     5,796
Accrued interest receivable   4,061     4,253     4,237     4,344     3,724
Operating lease right-of-use-assets   3,119                
Property and equipment, net   6,594     6,678     6,795     6,948     7,067
Deferred income taxes, net   2,806     2,840     3,542     3,434     3,367
Bank-owned life insurance   20,018     19,891     19,766     19,643     19,524
Other assets   8,341     12,482     8,468     7,029     6,452
Total assets $ 1,260,756   $ 1,265,222   $ 1,265,878   $ 1,210,240   $ 1,128,492
Deposits $ 943,819   $ 953,811   $ 957,199   $ 942,374   $ 843,200
FHLB advances   133,000     133,000     133,000     98,000     118,000
Subordinated debt   24,658     24,619     24,579     24,540     24,500
Operating lease liabilities   3,128                
Other liabilities   10,899     11,284     11,432     7,758     7,113
Shareholders' equity   145,252     142,508     139,668     137,568     135,679
Total liabilities and shareholders' equity $ 1,260,756   $ 1,265,222   $ 1,265,878   $ 1,210,240   $ 1,128,492
                           

The following table sets forth the Company's consolidated average statements of condition for the periods presented.

Condensed Consolidated Average Statement of Condition
                             
(in thousands, unaudited)                            
                             
For the quarter ended: 12/31/19
  9/30/19
  6/30/19
  3/31/19
  12/31/18
Investment securities $ 40,855   $ 42,256   $ 49,408   $ 47,761   $ 53,882
Loans   1,006,755     1,015,251     1,010,033     956,840     912,259
Allowance for loan losses   (10,097)     (10,143)     (10,061)     (9,408)     (8,638)
All other assets   184,575     204,912     164,424     130,712     123,643
Total assets   1,222,088     1,252,276     1,213,804     1,125,905     1,081,146
Non-interest bearing deposits $ 41,716   $ 44,104   $ 42,151   $ 41,035   $ 40,420
Interest-bearing deposits   864,317     896,928     882,825     814,412     758,813
FHLB advances   133,000     133,000     115,363     101,000     116,859
Other short-term borrowings       54         277     761
Subordinated debt   24,641     24,602     24,563     24,523     24,483
Other liabilities   14,810     12,413     10,192     7,728     5,750
Shareholders' equity   143,604     141,175     138,710     136,930     134,060
Total liabilities and shareholders' equity $ 1,222,088   $ 1,252,276   $ 1,213,804   $ 1,125,905   $ 1,081,146
           

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

Deposits                            
(in thousands, unaudited)                            
At quarter ended: 12/31/19
  9/30/19
  6/30/19
  3/31/19
  12/31/18
Demand:                            
Non-interest bearing $ 41,273   $ 55,684   $ 48,580   $ 42,937   $ 39,734
Interest-bearing   327,956     302,039     288,555     295,475     261,025
Savings   40,908     41,875     43,334     43,943     44,438
Money market   279,883     276,644     288,561     283,571     253,436
Time   253,799     277,569     288,169     276,448     244,567
Total deposits $ 943,819   $ 953,811   $ 957,199   $ 942,374   $ 843,200
                             

Loans

Total net loans amounted to $994.8 million at December 31, 2019 compared to $1.0 billion at September 30, 2019, for a net decrease of $12.9 million or 1.3 percent for the period.  The allowance for loan losses amounted to $10.1 million at December 31, 2019 and September 30, 2019.  Average loans during the quarter ended December 31, 2019 totaled $1.0 billion as compared to $912.3 million during the quarter ended December 31, 2018, also representing a 10.4 percent increase.  Average loans during the quarters ended December 31, 2019 and September 30, 2019 totaled $1.0 billion representing a 0.8 percent decrease.

At the end of the first quarter of fiscal 2020, the loan portfolio remained weighted toward two primary components: commercial and the core residential portfolio, with commercial loans accounting for 68.0 percent and single-family residential real estate loans accounting for 23.4 percent of the loan portfolio.  Construction and development loans amounted to 5.2 percent and consumer loans represented 3.4 percent of the loan portfolio at such date.  The decrease in the loan portfolio at December 31, 2019 compared to September 30, 2019, primarily reflected a decrease of $35.2 million in commercial loans, a $1.6 million decrease in consumer loans and were offset by an increase of $14.7 million in residential mortgage loans and a $9.0 million increase in construction and development loans.

For the quarter ended December 31, 2019, the Company originated total new loan volume of $69.9 million, which was offset by prepayments totaling $9.7 million, amortization of $10.8 million, loan payoffs of $56.0 million, and participations of $6.3 million.

Loan Portfolio Composition (which does not include loans held for sale):

           
(in thousands, unaudited)          
At quarter ended: 12/31/19
  9/30/19
  6/30/19
  3/31/19
  12/31/18
Residential mortgage $ 234,738   $ 220,011   $ 216,114   $ 202,655   $ 202,306
Construction and Development:                            
Residential and commercial   49,095     40,346     47,485     44,014     41,140
Land   3,625     3,420     3,809     5,696     7,180
Total construction and development   52,720     43,766     51,294     49,710     48,320
Commercial:                            
Commercial real estate   523,807     543,452     543,045     550,933     508,448
Farmland   7,563     7,563     5,388     12,041     12,054
Multi-family   43,473     62,884     64,050     64,328     44,989
Commercial and industrial   99,494     99,747     97,877     82,731     76,892
Other   8,569     4,450     5,356     8,111     7,344
Total commercial   682,906     718,096     715,716     718,144     649,727
Consumer:                            
Home equity lines of credit   18,372     19,506     19,348     18,466     14,484
Second mortgages   13,179     13,737     15,018     15,773     16,674
Other   2,160     2,030     2,081     1,904     1,915
Total consumer   33,711     35,273     36,447     36,143     33,073
Total loans   1,004,075     1,017,146     1,019,571     1,006,652     933,426
Deferred loan costs, net   828     663     494     478     460
Allowance for loan losses   (10,100 )   (10,095 )   (10,106 )   (10,016 )   (9,247)
Loans Receivable, net $ 994,803   $ 1,007,714   $ 1,009,959   $ 997,114   $ 924,639
                             

At December 31, 2019, the Company had $155.2 million in overall undisbursed loan commitments, which consisted primarily of available usage from active construction facilities, unused commercial lines of credit and home equity lines of credit. The Company's current "Approved, Accepted but Unfunded" pipeline at December 31, 2019 included approximately $46.2 million in commercial and construction loans and $6.9 million in residential mortgage loans expected to fund over the following quarters.

Asset Quality

Non-accrual loans were $1.8 million at December 31, 2019 and September 30, 2019. The portfolio of non-accrual loans at December 31, 2019 was comprised of thirteen residential real estate loans with an aggregate outstanding balance of approximately $1.5 million and twelve consumer loans with an aggregate outstanding balance of approximately $282,000.     

At December 31, 2019, non-performing assets totaled $7.6 million, or 0.60 percent of total assets, as compared with $8.1 million, or 0.64 percent of total assets, at September 30, 2019.

OREO was $5.8 million at December 31, 2019 and September 30, 2019.  Excluding the OREO property of $5.8 million, NPAs totaled $1.8 million, or 0.14 percent of total assets at December 31, 2019. Excluding the OREO property of $5.8 million, NPAs totaled $2.3 million, or 0.18 percent of total assets at September 30, 2019. During the 2019 first fiscal quarter a national tenant signed a lease agreement that is expected to result in this OREO property producing income.

Performing Troubled Debt Restructuring ("TDR") loans were $12.6 million at December 31, 2019 and $12.2 million at September 30, 2019.

Non-Performing Asset and Other Asset Quality Data:

 (dollars in thousands, unaudited)                              
As of or for the quarter ended: 12/31/19
  9/30/19
  6/30/19
  3/31/19
  12/31/18
 
Non-accrual loans(1) $ 1,823   $ 1,821   $ 2,189   $ 2,432   $ 2,562  
Loans 90 days or more past due and still accruing   1     502     228         759  
Total non-performing loans   1,824     2,323     2,417     2,432     3,321  
OREO   5,796     5,796     5,796     5,796     5,796  
Total non-performing assets $ 7,620   $ 8,119   $ 8,213   $ 8,228   $ 9,117  
Performing TDR loans $ 12,598   $ 12,170   $ 11,824   $ 12,099   $ 12,164  
                               
Non-performing assets / total assets   0.60 %   0.64 %   0.65 %   0.68 %   0.81 %
Non-performing loans / total loans   0.18 %   0.23 %   0.24 %   0.24 %   0.36 %
Net (recoveries) charge-offs $ (5 ) $ 11   $ (34 ) $ 101   $ 1,227  
Net (recoveries) charge-offs/average loans(2)   %   %   (0.01 )%   0.04 %   0.54 %
Allowance for loan losses / total loans   1.01 %   0.99 %   0.99 %   0.99 %   0.99 %
Allowance for loan losses / non-performing loans   553.7 %   434.6 %   418.1 %   411.8 %   278.4 %
                               
Total assets $ 1,260,756   $ 1,265,222   $ 1,265,878   $ 1,210,240   $ 1,128,492  
Total gross loans   1,004,075     1,017,146     1,019,571     1,006,652     933,426  
Average loans   1,006,755     1,015,251     1,010,033     956,840     912,259  
Allowance for loan losses   10,100     10,095     10,106     10,016     9,247  

______________
(1)  Twenty-one loans totaling approximately $1.6 million, or 89.6 percent of the total non-accrual loan balance, were making payments as of December 31, 2019.
(2)  Annualized.

The allowance for loan losses at December 31, 2019 amounted to approximately $10.1 million, or 1.01 percent of total loans, compared to $10.1 million, or 0.99 percent of total loans, at September 30, 2019.  The Company did not record a provision for loan losses during the fiscal quarter ended December 31, 2019 or the fiscal quarter ended September 30, 2019.

Capital

At December 31, 2019, our total shareholders' equity amounted to $145.3 million, or 11.52 percent of total assets, compared to $142.5 million, or 11.26 percent of total assets at September 30, 2019.  At December 31, 2019, the Bank's common equity tier 1 ratio was 15.49 percent, tier 1 leverage ratio was 12.78 percent, tier 1 risk-based capital ratio was 15.49 percent and the total risk-based capital ratio was 16.50 percentAt September 30, 2019, the Bank's common equity tier 1 ratio was 15.38 percent, tier 1 leverage ratio was 12.23 percent, tier 1 risk-based capital ratio was 15.38 percent and the total risk-based capital ratio was 16.40 percent.  At December 31, 2019, the Bank was in compliance with all applicable regulatory capital requirements.

The Company did not purchase any shares of its common stock in the open market under the repurchase plan during the fiscal quarter ended December 31, 2019.  At December 31, 2019, the Company had 177,653 shares remaining in the repurchase plan.  

Non-GAAP Financial Measures

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 net income is presented in the table below including non-core income and expense items.

(in thousands)                              
For the quarter ended: 12/31/19
  9/30/19
  6/30/19
  3/31/19
  12/31/18
 
Net income as reported under GAAP $ 2,502   $ 2,699   $ 2,656   $ 1,966   $ 2,011  
Non-core items, net of tax:                              
OREO expense(1)   60     87     24     23     17  
Audit expenses(2)                   110  
Net investment security gains       (1 )   (21 )        
Swap fees(3)       (71 )           (561 )
Other(4)   45     16         10     100  
Core net income, non-GAAP $ 2,607   $ 2,730   $ 2,659   $ 1,999   $ 1,677  
Earnings per common share:                              
Diluted $ 0.34   $ 0.36   $ 0.35   $ 0.26   $ 0.22  
Weighted average common shares outstanding:                              
Diluted   7,665,842     7,663,593     7,670,106     7,667,518     7,555,969  

(1)  Non-core items for the quarters ended December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019, and December 31, 2018 include OREO expense relating to one commercial real estate loan.  
(2)  Non-core items for the quarter ended December 31, 2018 consisted of expenses arising from the dismissal of the Company's accounting firm, as previously announced in the Company's Form 8-K filed on July 9, 2018, which required issuance of consent on previously audited consolidated financial statements.
(3)  Upfront recognition of net swap fees through the Bank's commercial loan hedging program.
(4)  Items such as accelerated payoff and non-accrual interest amounts are included in non-core items.

The Company's other income is presented in the table below including and excluding net investment securities gains and net swap fees. The Company's management believes that many investors evaluate other income without regard to such gains.

(in thousands)                            
For the quarter ended: 12/31/19
  9/30/19
  6/30/19
  3/31/19
  12/31/18
Other income $ 443   $ 551   $ 454   $ 441   $ 1,146
Less: Net investment securities gains       1     27        
Less: Net swap fees       92             710
Other income, excluding net investment securities gains $ 443   $ 458   $ 427   $ 441   $ 436

"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, calculated as follows:

(dollars in thousands)          
For the quarter ended: 12/31/19
  9/30/19
  6/30/19
  3/31/19
  12/31/18
Other expense as reported under GAAP $ 4,422   $ 4,453   $ 4,497   $ 4,443   $ 4,094
Less: non-core items(1)   71     113     30     28     160
Other expense, excluding non-core items, non-GAAP $ 4,351   $ 4,340   $ 4,467   $ 4,415   $ 3,934
Net interest income (tax
equivalent basis), non-GAAP
$ 6,920   $ 7,426   $ 7,471   $ 7,263   $ 6,958
Non-core items(2)   52     21         12     127
Net interest income (tax equivalent basis), including non-core items, non-GAAP   6,972     7,447     7,471     7,275     7,085
Other income, excluding gain on sale of investments and swap fees   443     458     427     441     436
Total $ 7,415   $ 7,905   $ 7,898   $ 7,716   $ 7,521
                             
Efficiency ratio, non-GAAP   58.7 %   54.9 %   56.6 %   57.2 %   52.3%
______________________
(1)  Non-core items for the quarters ended December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019, and December 31, 2018 include OREO expense relating to one commercial real estate loan.  In addition, non-core items for the quarter ended December 31, 2018 consisted of expenses arising from the dismissal of the Company's accounting firm, as previously announced in the Company's Form 8-K filed on July 9, 2018, which required issuance of consent on previously audited consolidated financial statements.

(2)  Items such as accelerated payoff and non-accrual interest amounts are included in non-core items.

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

For the quarter ended:   12/31/19   9/30/19   6/30/19   3/31/19   12/31/18
Efficiency ratio on a GAAP basis   60.1 % 55.9 % 56.8 % 57.8 % 50.6%

Net interest margin, which is net 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 tax rate to reflect a change in the federal statutory rate from 35 percent to 21 percent, 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 21 percent for the current period.  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: 12/31/19
  9/30/19
  6/30/19
  3/31/19
  12/31/18
Net interest income (GAAP) $ 6,912   $ 7,418   $ 7,461   $ 7,249   $ 6,947
Tax-equivalent adjustment(1)   8     8     10     14     11
TE net interest income, non-GAAP $ 6,920   $ 7,426   $ 7,471   $ 7,263   $ 6,958
                             
Net interest margin (GAAP)   2.34 %   2.45 %   2.54 %   2.66 %   2.65%
Tax-equivalent effect   0.01             0.01    
Net interest margin (TE), non-GAAP   2.35 %   2.45 %   2.54 %   2.67 %   2.65%
____________________                            
(1) Reflects tax-equivalent adjustment for tax exempt investments.
 

About Malvern Bancorp, Inc.

Malvern Bancorp, Inc. is the holding company for Malvern Bank, National Association, an institution 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 twelve other banking locations in Chester, Delaware and Bucks counties, Pennsylvania, Morristown, New Jersey, its New Jersey regional headquarters, Palm Beach, Florida, and Montchanin, Delaware. The Bank also maintains representative offices in Wellington, Florida and Allentown, Pennsylvania.  The Bank's primary market niche is providing personalized service to its client base. 

Malvern Bank, through its Private Banking division and a strategic partnership with Bell Rock Capital in Rehoboth Beach, Delaware, provides personalized wealth management and advisory services to high net worth individuals and families. These 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

The statements contained herein that are not historical facts are forward-looking statements based on management's current expectations and beliefs concerning future developments and their potential effects on the Company, including, without limitation, plans, strategies and goals, and statements about the Company's expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, and shareholder value creation.

Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company.  There can be no assurance that future developments affecting the Company will be the same as those anticipated by management.  The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements.  These risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the impact of competition and the acceptance of the Company's products and services by new and existing customers; the impact of changes in financial services policies, laws and regulations (including the Dodd-Frank Wall Street Reform and Consumer Protection Act) and of governmental efforts to restructure the U.S. financial regulatory system; technological changes; changes in the level of the Company's nonperforming assets and charge offs; any oversupply of inventory and deterioration in values of real estate in the markets in which the Company operates, both residential and commercial; the effect of changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, the Securities and Exchange Commission ("SEC"), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters; possible other-than-temporary impairment of securities held by us; changes in consumer spending, borrowing and savings habits; the effects of the Company's lack of a widely-diversified loan portfolio, including the risks of geographic and industry concentrations; ability to attract deposits and other sources of liquidity; changes in the financial performance and/or condition of our borrowers; changes in the competitive environment among financial and bank holding companies and other financial service providers; unanticipated regulatory or judicial proceedings; and the Company's ability to manage the risk involved in the foregoing.  Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the 2019 Annual Report on Form 10-K of Malvern Bancorp, Inc. filed with the SEC and available at the SEC's Internet site (http://www.sec.gov).

The Company undertakes no obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, unless required by law.      

 
 
MALVERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
         
(in thousands, except for share and per share data)   December 31, 2019    September 30, 2019
(unaudited)          
             
ASSETS            
                 
                 
Cash and due from depository institutions   $ 1,337     $ 1,400  
Interest bearing deposits in depository institutions     158,465       152,143  
Total cash and cash equivalents     159,802       153,543  
Investment securities available for sale, at fair value (amortized cost of $23,761 and $18,522
at December 31, 2019 and September 30, 2019, respectively)
    23,723       18,411  
Investment securities held to maturity (fair value of $20,670 and $22,609 at December 31,
2019 and September 30, 2019, respectively)
    20,578       22,485  
Restricted stock, at cost     11,115       11,129  
Loans receivable, net of allowance for loan losses     994,803       1,007,714  
Other real estate owned     5,796       5,796  
Accrued interest receivable     4,061       4,253  
Operating lease right-of-use-assets     3,119        
Property and equipment, net     6,594       6,678  
Deferred income taxes, net     2,806       2,840  
Bank-owned life insurance     20,018       19,891  
Other assets     8,341       12,482  
Total assets   $ 1,260,756     $ 1,265,222  
LIABILITIES            
Deposits:            
Non-interest bearing   $ 41,273     $ 55,684  
Interest-bearing     902,546       898,127  
Total deposits     943,819       953,811  
FHLB advances     133,000       133,000  
Subordinated debt     24,658       24,619  
Advances from borrowers for taxes and insurance     2,344       1,761  
Accrued interest payable     1,271       978  
Operating lease liabilities     3,128        
Other liabilities     7,284       8,545  
Total liabilities     1,115,504       1,122,714  
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; 7,782,412 and                 
7,765,549 issued and outstanding, respectively, at December 31, 2019,
and 7,782,258 and 7,765,395shares issued and outstanding, at September 30, 2019
    78       78  
Additional paid in capital     84,860       84,783  
Retained earnings     62,246       59,744  
Unearned Employee Stock Ownership Plan (ESOP) shares     (1,156 )     (1,192 )
Accumulated other comprehensive (loss) income     (440 )     (569 )
Treasury stock, at cost: 16,863 shares at December 31, 2019 and September 30, 2019     (336 )     (336 )
Total shareholders' equity     145,252       142,508  
Total liabilities and shareholders' equity   $ 1,260,756     $ 1,265,222  
                 
                 


MALVERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 
    Three months ended December 31,
(in thousands, except for share data)    2019
   2018
(unaudited)              
Interest and Dividend Income              
Loans, including fees   $ 10,905     $ 10,095
Investment securities, taxable     215       251
Investment securities, tax-exempt     39       61
Dividends, restricted stock     188       133
Interest-bearing cash accounts     472       372
Total Interest and Dividend Income     11,819       10,912
Interest Expense            
Deposits     3,737       2,944
Short-term borrowings           5
Long-term borrowings     787       633
Subordinated debt     383       383
Total Interest Expense     4,907       3,965
Net interest income     6,912       6,947
Provision for Loan Losses           1,453
Net Interest Income after Provision for Loan Losses     6,912       5,494
Other Income            
Service charges and other fees     259       940
Rental income-other     54       67
Net gains on sale of loans     3       18
Earnings on bank-owned life insurance     127       121
Total Other Income     443       1,146
Other Expense            
Salaries and employee benefits     2,125       2,008
Occupancy expense     582       539
Federal deposit insurance premium     (3 )     69
Advertising     22       30
Data processing     278       254
Professional fees     441       499
Net other real estate owned expense     71       21
Pennsylvania shares tax     170      
Other operating expenses     736       674
Total Other Expense     4,422       4,094
Income before income tax expense     2,933       2,546
Income tax expense     431       535
Net Income   $ 2,502     $ 2,011
             
Earnings per common share            
Basic   $ 0.33     $ 0.27
Diluted   $ 0.33     $ 0.27
Weighted Average Common Shares Outstanding          
Basic     7,665,842       7,555,810
Diluted     7,665,842       7,555,969
               
               

 

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)
12/31/2019 9/30/2019 12/31/2018
(unaudited)                     
Statements of Operations Data                  
                   
Interest income $ 11,819   $ 12,686   $ 10,912  
Interest expense   4,907     5,268     3,965  
Net interest income   6,912     7,418     6,947  
Provision for loan losses           1,453  
Net interest income after provision for loan losses   6,912     7,418     5,494  
Other income   443     551     1,146  
Other expense   4,422     4,453     4,094  
Income before income tax expense   2,933     3,516     2,546  
Income tax expense   431     817     535  
Net income $ 2,502   $ 2,699   $ 2,011  
Earnings (per Common Share)                  
Basic $ 0.33   $ 0.35   $ 0.27  
Diluted $ 0.33   $ 0.35   $ 0.27  
Statements of Condition Data (Period-End)                  
Investment securities available for sale, at fair value $ 23,723   $ 18,411   $ 19,231  
Investment securities held to maturity (fair value of $20,670, 
$22,609 and $28,557, respectively)
  20,578     22,485     29,323  
Loans, net of allowance for loan losses   994,803     1,007,714     924,639  
Total assets   1,260,756     1,265,222     1,128,492  
Deposits   943,819     953,811     843,200  
FHLB advances   133,000     133,000     118,000  
Subordinated debt   24,658     24,619     24,500  
Shareholders' equity   145,252     142,508     135,679  
Common Shares Dividend Data                  
Cash dividends $   $   $  
Weighted Average Common Shares Outstanding                  
Basic   7,665,842     7,663,242     7,555,810  
Diluted   7,665,842     7,663,593     7,555,969  
Operating Ratios                  
Return on average assets   0.82 %   0.86 %   0.74 %
Return on average equity   6.97 %   7.65 %   6.00 %
Average equity / average assets   11.75 %   11.27 %   12.40 %
Book value per common share (period-end) $ 18.70   $ 18.35   $ 17.45  
Non-Financial Information (Period-End)                  
Common shareholders of record   384     391     402  
Full-time equivalent staff   89     82     87  
                   

 

 

Investor Contacts:
Joseph D. Gangemi
Corporate Investor Relations
610-695-3676

Investor Relations Contact:
Ronald Morales
610-695-3646

 

Primary Logo

View Comments and Join the Discussion!
 
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com