Press Release

Malvern Bancorp, Inc. Reports Second Fiscal Quarter 2019 Results

Company Release - 5/1/2019 7:30 AM ET

PAOLI, Pa., May 01, 2019 (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, 2019.   Net income amounted to $2.0 million, or $0.26 per fully diluted common share, for the quarter ended March 31, 2019, compared with net income of $2.0 million, or $0.31 per fully diluted common share, for the quarter ended March 31, 2018. The annualized return on average assets (“ROAA”) was 0.70 percent for the three months ended March 31, 2019, compared to 0.77 percent for the three months ended March 31, 2018, and annualized return on average equity (“ROAE”) was 5.74 percent for the three months ended March 31, 2019, compared with 7.71 percent for the three months ended March 31, 2018.  Excluding provision expense, net of tax, of $720,000, second fiscal quarter 2019 adjusted annualized ROAA was 0.95 percent and adjusted annualized ROAE was 7.85 percent.

For the six months ended March 31, 2019, net income amounted to $4.0 million, or $0.52 per fully diluted common share, compared with net income of $2.4 million, or $0.38 per fully diluted common share, for the six months ended March 31, 2018. The annualized ROAA was 0.72 percent for the six months ended March 31, 2019, compared to 0.46 percent for the six months ended March 31, 2018, and annualized ROAE was 5.87 percent for the six months ended March 31, 2019, compared with 4.65 percent for the six months ended March 31, 2018.  Excluding provision expense, net of tax, of $1.9 million, adjusted annualized ROAA was 1.06 percent and adjusted annualized ROAE was 8.64 percent for the six months ended March 31, 2019.

Anthony C. Weagley, President and Chief Executive Officer, commented on the financial results: “We continue to execute well on our strategic priorities and are pleased to report solid financial results. Our net interest margin expanded quarter over quarter despite the challenges of an uncertain yield curve. We are especially pleased with our deposit growth and new customer acquisition during our second fiscal quarter, and we remain encouraged by the level of new business activity across our markets.” 

Joseph Gangemi, Senior Vice President and Chief Financial Officer of Malvern Bancorp, Inc., added, "The quarter reflects our continued effort to shift our funding away from relatively volatile sources and become less reliant on borrowings. In addition, we continue to reposition the loan portfolio and deposit composition.” 

Linked Quarter Financial Ratios  
(unaudited)
      
       
As of or for the quarter ended :3/31/1912/31/189/30/186/30/183/31/18 
Return on average assets (1) 0.70% 0.74% 1.02% 0.85% 0.77% 
Return on average equity (1) 5.74% 6.00% 9.63% 8.40% 7.71% 
Net interest margin (tax equivalent basis) (2) 2.67% 2.65% 2.85% 2.75% 2.58% 
Loans / deposits ratio 106.82% 110.70% 117.62% 114.46% 102.38% 
Shareholders’ equity / total assets 11.37% 12.02% 10.72% 10.25% 9.73% 
Efficiency ratio (1) 57.6% 48.1% 58.3% 52.9% 57.9% 
Book value per common share$  17.68 $  17.45 $  16.84 $  16.42 $  16.03  

_____________

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

Income Statement Highlights

  
Linked Quarter
Income Statement and Other Data  
(unaudited)
 (in thousands, except share and per share data) 
      
For the quarter ended:3/31/1912/31/189/30/186/30/183/31/18
Net interest income$  7,249$  6,947$  7,109$  6,976$  6,568
Provision for loan losses 870 1,453 125 589 240
 Net interest income after provision for loan losses 6,379 5,494 6,984 6,387 6,328
Other income 441 1,146 429 715 449
Other expense 4,443 4,094 4,437 4,790 4,105
Income before income tax expense 2,377 2,546 2,976 2,312 2,672
Income tax expense 411 535 334 69 654
Net income$  1,966$  2,011$  2,642$  2,243$  2,018
Earnings per common share     
Basic$  0.26$  0.27$  0.41$  0.35$  0.31
Diluted$  0.26$  0.27$  0.41$  0.35$  0.31
Weighted average common shares outstanding  
Basic 7,667,518 7,555,810 6,464,326 6,453,031 6,448,691
Diluted 7,667,518 7,555,969 6,467,628 6,456,048 6,452,246

Net Interest Income

Net interest income was $7.2 million for the three months ended March 31, 2019, increasing $681,000, or 10.4 percent, from $6.6 million for the three months ended March 31, 2018. Net interest income on a fully tax-equivalent basis, a non-GAAP measure, was $7.3 million for the three months ended March 31, 2019, increasing $666,000, or 10.1 percent, from $6.6 million for the comparable three-month period in fiscal 2018. The change for the three months ended March 31, 2019 primarily was the result of an increase of $129.3 million in the average balance of loans. The increase in average loans primarily reflects a net increase in commercial loans and to a lesser extent, a net increase in residential loans.  The net interest spread on an annualized tax-equivalent basis was 2.42 percent and 2.41 percent for the three months ended March 31, 2019 and 2018, respectively.  For the quarter ended March 31, 2019, the Company’s net interest margin on a tax-equivalent basis increased to 2.67 percent as compared to 2.58 percent for the same three-month period in fiscal 2018.

Net interest income both as reported and on a fully tax equivalent basis, a non-GAAP measure, was $14.2 million for the six months ended March 31, 2019. Net interest income on a fully tax equivalent basis, a non-GAAP measure increased $1.2 million, or 9.5 percent, from $13.0 million for the six months ended March 31, 2018.  The change for the six months ended March 31, 2019 primarily was the result of an increase of $109.1 million in the average balance of loans.  The net interest spread on an annualized tax-equivalent basis was 2.40 percent and 2.36 percent for the six months ended March 31, 2019 and 2018, respectively.  For the six months ended March 31, 2019, the Company’s net interest margin on a tax-equivalent basis increased to 2.66 percent as compared to 2.52 percent for the same six-month period in fiscal 2018.

For the three months ended March 31, 2019, total interest income both as reported and on a fully tax-equivalent basis, a non-GAAP measure, was $11.6 million. Total interest income on a fully tax equivalent basis, a non-GAAP measure, increased $1.9 million, or 19.3 percent, from $9.7 million for three months ended March 31, 2018, primarily due to a $129.3 million increase in the average balance of our loans.   Total interest expense increased by $1.2 million, or 38.8 percent, to $4.4 million, for the three months ended March 31, 2019, compared to the same period in fiscal 2018, primarily due to an increase of $116.8 million in deposits and the increase in average rates.  The increase in deposits reflects an increase in interest-bearing demand and time deposits.

The average cost of funds was 1.85 percent for the fiscal quarter ended March 31, 2019 compared to 1.39 percent for the same three-month period in fiscal 2018 and, on a linked sequential quarter basis, increased from 1.76 percent or nine basis points compared to the first quarter of fiscal 2019. 

For the six months ended March 31, 2019, total interest income both as reported and on a fully tax equivalent basis, a non-GAAP measure, was $22.5 million. Total interest income on a fully tax equivalent basis, a non-GAAP measure, increased $3.3 million, or 17.1 percent, from $19.3 million for the six months ended March 31, 2018.  Interest income rose for the six months ended March 31, 2019, compared to the comparable period in fiscal 2018 primarily due to a $109.1 million increase in average loan balances. Compared to the six months ended March 31, 2018, average interest earning assets increased $39.3 million, the net interest spread increased on an annualized tax-equivalent basis by four basis points and the net interest margin increased on an annualized tax-equivalent basis by fourteen basis points at six months ended March 31, 2019.  Total interest expense increased by $2.1 million, or 32.8 percent, to $8.3 million, for the six months ended March 31, 2019, compared to the comparable period in fiscal 2018.                                            

Other Income

Other income decreased $8,000, or 1.8 percent, during the second fiscal quarter of 2019 compared with the same period in 2018.  The decrease in total other income was due to a $7,000 decrease in net gains on sale of loans, and a $3,000 decrease in rental income, partially offset by a $1,000 increase in service charges and other fees and a $1,000 increase in earnings on bank-owned life insurance.      

For the six months ended March 31, 2019, total other income decreased $573,000 compared to the same period in 2018. This decrease was primarily a result of a $1.2 million gain recorded in 2018 on the sale of the Exton, Pennsylvania branch location. Additionally, there was a $56,000 decrease in net gains on sale of loans and a $2,000 decrease in rental income, partially offset by an increase of $670,000 in service charges and a $1,000 increase in earnings on bank-owned life insurance. The non-proportional increase in service charges and other fees during the six months ended March 31, 2019 is primarily due to the recognition of approximately $708,000 of net swap fees through the Bank’s commercial loan hedging program during the first fiscal quarter of 2019.  The primary benefit of the loan hedging program is to eliminate the interest rate risk on long term fixed rate loans while allowing the Bank to compete more effectively in our markets.    

Other Expense

Total other expense for the three months ended March 31, 2019 increased $338,000, or 8.2 percent, when compared to the three months ended March 31, 2018. The increase was primarily due to a $212,000 increase in salaries and employee benefits, a $128,000 increase in other operating expense, a $28,000 increase in net other real estate owned expense, and a $5,000 increase in professional fees, partially offset by a $16,000 decrease in data processing expense, a $9,000 decrease in occupancy expense, an $8,000 decrease in advertising expense and a $2,000 decrease in federal deposit insurance premium. The increase in salaries and employee benefits during the three-month period ended March 31, 2019 reflects normal increases to salary and benefits and three strategic hires to support overall franchise growth consistent with the business plan. The increase in other operating expenses during the three-month period ended March 31, 2019 was primarily due to $92,000 of Pennsylvania shares tax related to the Bank’s new standing as a National Association.

For the six months ended March 31, 2019, total other expense decreased $39,000, or 0.5 percent, compared to the same period in 2018. The decrease primarily reflected a $284,000 decrease in professional fees, a $40,000 decrease in data processing expense, a $32,000 decrease in advertising expense, a $32,000 decrease in occupancy expense, and a $9,000 decrease in the federal deposit insurance premium.  These decreases were largely offset by a $230,000 increase in salaries and employee benefits, a $79,000 increase in other operating expenses and a $49,000 increase in net other real estate owned expense.  The decrease in professional fees during the six-month period ended March 31, 2019 was primarily due to lower legal expense. The increase in salaries and employee benefits during the six-month period ended March 31, 2019 reflects normal increases to salary and benefits and three strategic hires to support overall franchise growth consistent with the business plan.  The increase in other operating expenses during the six-month period ended March 31, 2019 was primarily due to $92,000 of Pennsylvania shares tax related to the Bank’s new standing as a National Association.

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

(in thousands, unaudited)     
 For the quarter ended:3/31/1912/31/189/30/186/30/183/31/18
 Salaries and employee benefits$  2,213$  2,008$  2,178$  2,024$  2,001
 Occupancy expense 577 539 570 577 586
 Federal deposit insurance premium 73 69 71 76 75
 Advertising 30 30 30 30 38
 Data processing 251 254 279 274 267
 Professional fees 455 499 565 1,088 450
 Net other real estate owned expense 28 21   
 Other operating expenses 816 674 744 721 688
   Total other expense$  4,443$  4,094$  4,437$  4,790$  4,105

Income Taxes

The Company recorded $411,000 in income tax expense during the three months ended March 31, 2019 compared to $654,000 in income tax expense during the three months ended March 31, 2018. The effective tax rates for the Company for the three months ended March 31, 2019 and 2018 were 17.3 percent and 24.5 percent, respectively. For the six months ended March 31, 2019, income tax expense decreased $2.9 million, or 75.6 percent, to $946,000 from $3.9 million for the six months ended March 31, 2018. The effective tax rates for the Company for the six months ended March 31, 2019 and 2018 were 19.2 percent and 61.5 percent, respectively.

In the first fiscal quarter of 2018, the Company revised its annual effective rate to reflect a change in the federal statutory rate from 34 percent to 21 percent, resulting from the Tax Cuts and Jobs Act that was enacted on December 22, 2017.

Statement of Condition Highlights at March 31, 2019

  • The Company achieved a milestone with gross loans rising to $1.0 billion at March 31, 2019, increasing $96.1 million, or 10.5 percent, from September 30, 2018.     
  • Total assets stood at $1.2 billion at March 31, 2019, increasing $176.3 million, or 17.1 percent, compared to September 30, 2018.
  • Total investments were $46.2 million at March 31, 2019, a decrease of $8.2 million, or 15.1 percent, compared to September 30, 2018.
  • Deposits totaled $942.4 million at March 31, 2019, an increase of $168.2 million, or 21.7 percent, compared to September 30, 2018. 
  • Federal Home Loan Bank (FHLB) advances totaled $98.0 million at March 31, 2019, down from $118.0 million at September 30, 2018.
  • The Bank originated $103.7 million in loans in the second fiscal quarter of 2019, with net portfolio growth of $73.2 million. New loan originations in the second quarter of fiscal 2019 consisted of $83.6 million in commercial loans, $6.9 million in residential mortgage loans, $6.6 million in consumer loans, and $6.6 million in construction and development loans.  
  • Non-performing assets (“NPAs”) were 0.68 percent of total assets at March 31, 2019, compared to 0.30 percent at September 30, 2018 and 0.24 percent at March 31, 2018. Excluding the other real estate owned property of $5.8 million, NPAs were 0.20 percent at March 31, 2019. Allowance for loan losses as a percentage of total non-performing loans was 411.8 percent at March 31, 2019, compared to 294.7 percent at September 30, 2018 and 325.1 percent at March 31, 2018.
  • The Company’s ratio of shareholders’ equity to total assets was 11.37 percent at March 31, 2019, compared to 10.72 percent at September 30, 2018, and 9.73 percent at March 31, 2018.  
  • Book value per common share amounted to $17.68 at March 31, 2019, compared to $16.84 at September 30, 2018 and $16.03 at March 31, 2018.  The efficiency ratio, a non-GAAP measure, was 57.6 percent for the second quarter of fiscal 2019, compared to 57.9 percent in the second quarter of fiscal 2018, and 58.3 percent in the fourth quarter of fiscal 2018.  
  • On March 14, 2019, the Company’s Board of Directors approved a stock repurchase plan, under which the Company is authorized to repurchase up to 194,516 shares, or approximately 2.5 percent of the Company’s current outstanding common stock. 

Linked Quarter Statements of Condition Data

(unaudited)
      
(in thousands)     
At quarter ended:3/31/1912/31/189/30/186/30/183/31/18
Cash and due from depository institutions$  1,370$  1,377$  1,563$  1,447$  1,566
Interest bearing deposits in depository
  institutions
 109,450 98,499 29,271 45,934 120,144
Investment securities, available for sale, at fair
  value
 19,371 19,231 24,298 34,348 44,341
Investment securities held to maturity 26,789 29,323 30,092 31,004 33,052
Restricted stock, at cost 8,952 9,493 8,537 8,781 8,583
Loans receivable, net of allowance for loan
  losses
 997,114 924,639 902,136 893,355 837,314
Other real estate owned 5,796 5,796   
Accrued interest receivable 4,344 3,724 3,800 3,571 3,583
Property and equipment, net 6,948 7,067 7,181 7,240 7,357
Deferred income taxes, net 3,434 3,367 3,195 3,920 3,713
Bank-owned life insurance 19,643 19,524 19,403 19,282 19,163
Other assets 7,029 6,452 4,475 4,693 4,500
  Total assets$1,210,240$1,128,492$1,033,951$1,053,575$1,083,316
Deposits$  942,374$  843,200$  774,163$  787,932$  825,569
FHLB advances 98,000 118,000 118,000 123,000 118,000
Other short-term borrowings   2,500 2,500 2,500
Subordinated debt 24,540 24,500 24,461 24,421 24,382
Other liabilities 7,758 7,113 4,004 7,749 7,503
Shareholders' equity 137,568 135,679 110,823 107,973 105,362
  Total liabilities and shareholders’ equity$1,210,240$1,128,492$1,033,951$1,053,575$1,083,316

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

Deposits (unaudited)       
(in thousands)     
At quarter ended:3/31/1912/31/189/30/186/30/183/31/18
Demand:     
  Non-interest bearing$  42,937$  39,734$  41,677$  48,296$  38,444
  Interest-bearing 295,475 261,025 184,073 198,410 190,602
Savings 43,943 44,438 44,642 44,629 44,716
Money market 283,571 253,436 270,834 276,807 293,813
Time 276,448 244,567 232,937 219,790 257,994
  Total deposits$  942,374$  843,200$  774,163$787,932$825,569

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

Condensed Consolidated Average Statements of Condition (unaudited) 
       
(in thousands)      
       
  For the quarter ended:3/31/1912/31/189/30/186/30/183/31/18 
Investment securities$  47,761 $  53,882 $  64,848 $  75,932 $  77,961  
Loans 956,840   912,259   908,962   864,348   827,483   
Allowance for loan losses (9,408 ) (8,638 ) (9,077 ) (8,589 ) (8,426 ) 
All other assets 130,712   123,643   72,535   120,730   157,126   
  Total assets 1,125,905  1,081,146  1,037,268  1,052,421  1,054,144  
Non-interest bearing deposits$  41,035 $  40,420 $  43,330 $  45,124 $  40,034  
Interest-bearing deposits 814,412   758,813   732,489   746,341   754,820   
FHLB advances 101,000   116,859   118,326   118,121   118,000   
Other short-term borrowings 277  761  2,522  2,555  4,945  
Subordinated debt 24,523  24,483  24,440  24,399  24,360  
Other liabilities 7,728   5,750   6,457   9,072   7,283   
Shareholders’ equity 136,930   134,060   109,704   106,809   104,702   
  Total liabilities and shareholders’ equity$  1,125,905 $  1,081,146 $  1,037,268 $  1,052,421 $  1,054,144  
       
      

Loans

Total net loans amounted to $997.1 million at March 31, 2019 compared to $902.1 million at September 30, 2018, for a net increase of $95.0 million or 10.5 percent.  The allowance for loan losses amounted to $10.0 million and $9.0 million at March 31, 2019 and September 30, 2018, respectively.  Average loans during the second fiscal quarter of 2019 totaled $956.8 million as compared to $827.5 million during the second fiscal quarter of 2018, representing a 15.6 percent increase. 

At the end of the second quarter of fiscal 2019, the loan portfolio remained weighted toward two primary components: commercial and the core residential portfolio, with commercial loans accounting for 71.3 percent and single-family residential real estate loans accounting for 20.1 percent of the loan portfolio.  Construction and development loans amounted to 4.9 percent and consumer loans represented 3.6 percent of the loan portfolio at such date.  The increase in the loan portfolio at March 31, 2019 compared to September 30, 2018, primarily reflected an increase of $87.0 million in commercial loans, an increase of $5.4 million in residential mortgage loans, a $3.1 million increase in construction and development loans and a $581,000 increase in consumer loans. 

For the quarter ended March 31, 2019, the Company originated total new loan volume of $103.7 million, which was offset by prepayments totaling $9.4 million, participations of $8.5 million, loan payoffs of $6.6 million, and amortization of $6.0 million.

Loan Portfolio Composition:

Loans (unaudited)      
(in thousands)     
At quarter ended:3/31/1912/31/189/30/186/30/183/31/18
Residential mortgage$202,655 $202,306 $197,219 $192,901 $184,318 
Construction and Development:     
  Residential and commercial 44,014  41,140  37,433  39,845  35,213 
  Land 5,696  7,180  9,221  15,565  21,727 
Total construction and
  development
 49,710  48,320  46,654  55,410  56,940 
Commercial:     
  Commercial real estate 550,933  508,448  493,929  477,584  445,995 
  Farmland 12,041  12,054  12,066  12,058  12,069 
  Multi-family 64,328  44,989  45,102  45,204  32,608 
  Commercial and industrial 82,731  76,892  73,895  76,957  70,049 
  Other 8,111  7,344  6,164  5,899  5,319 
Total commercial 718,144  649,727  631,156  617,702  566,040 
Consumer:     
  Home equity lines of credit 18,466  14,484  14,884  14,446  15,538 
  Second mortgages 15,773  16,674  18,363  19,063  19,960 
  Other 1,904  1,915  2,315  2,311  2,404 
Total consumer 36,143  33,073  35,562  35,820  37,902 
Total loans 1,006,652  933,426  910,591  901,833  845,200 
Deferred loan costs, net 478  460  566  546  579 
Allowance for loan losses (10,016) (9,247) (9,021) (9,024) (8,465)
  Loans Receivable, net$997,114 $924,639 $902,136 $893,355 $837,314 

At March 31, 2019, the Company had $142.0 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 at March 31, 2019 included approximately $101.6 million in commercial and construction loans and $5.1 million in residential mortgage loans expected to fund over the following quarter.

Asset Quality

Non-accrual loans were $2.4 million at March 31, 2019, a decrease of $255,000 or 9.5 percent, as compared to $2.7 million at September 30, 2018. Other Real Estate Owned (“OREO”) was $5.8 million at March 31, 2019 and zero at September 30, 2018, as previously disclosed in the Company’s Annual Report on Form 10-K filed on December 14, 2018. Performing Troubled Debt Restructuring (“TDR”) loans were $12.1 million at March 31, 2019 and $18.6 million at September 30, 2018.

At March 31, 2019, non-performing assets totaled $8.2 million, or 0.68 percent of total assets, as compared with $3.1 million, or 0.30 percent of total assets, at September 30, 2018. The increase in non-performing assets at March 31, 2019 compared to September 30, 2018 was primarily due to the transfer to OREO of one commercial real estate loan in the amount of $5.8 million.  The portfolio of non-accrual loans at March 31, 2019 was comprised of fourteen residential real estate loans with an aggregate outstanding balance of approximately $1.8 million, one commercial real estate loan with an outstanding balance of $366,000, and twelve consumer loans with an aggregate outstanding balance of approximately $305,000.     

Non-Performing Asset and Other Asset Quality Data:

 (dollars in thousands, unaudited)     
As of or for the quarter ended:3/31/1912/31/189/30/186/30/183/31/18
Non-accrual loans(1)$  2,432 $  2,562 $  2,687 $2,023 $2,129 
Loans 90 days or more past due and still accruing   759  374  1,338  475 
  Total non-performing loans 2,432  3,321  3,061  3,361  2,604 
OREO 5,796  5,796       
  Total non-performing assets$  8,228 $  9,117 $  3,061 $3,361 $2,604 
Performing TDR loans$  12,099 $  12,164 $  18,640 $18,693 $18,666 
      
Non-performing assets / total assets 0.68% 0.81% 0.30% 0.32% 0.24%
Non-performing loans / total loans 0.24% 0.36% 0.34% 0.37% 0.31%
Net charge-offs$  101 $  1,227 $  128 $  30 $  212 
Net charge-offs/average loans(2) 0.04% 0.54% 0.06% 0.01% 0.10%
Allowance for loan losses / total loans 0.99% 0.99% 0.99% 1.00% 1.00%
Allowance for loan losses / non-performing loans 411.8% 278.4% 294.7% 268.5% 325.1%
      
Total assets$1,210,240 $1,128,492 $1,033,951 $1,053,575 $1,083,316 
Total gross loans 1,006,652  933,426  910,591  901,833  845,200 
Average loans  956,840   912,259   908,962  864,348  827,483 
Allowance for loan losses 10,016  9,247  9,021  9,024  8,465 

______________

  1. Twenty-four loans totaling approximately $2.0 million, or 82.6 percent of the total non-accrual loan balance, were making payments at March 31, 2019. 
  2. Annualized.

The allowance for loan losses at March 31, 2019 amounted to approximately $10.0 million, or 0.99 percent of total loans, compared to $9.0 million, or 0.99 percent of total loans, at September 30, 2018.  The Company had a $870,000 provision for loan losses during the quarter ended March 31, 2019 compared to $125,000 for the quarter ended September 30, 2018. The increase in the provision during the quarter ended March 31, 2019 was driven by new loan growth.

Capital
At March 31, 2019, our total shareholders' equity amounted to $137.6 million, or 11.37 percent of total assets, compared to $110.8 million, or 10.72 percent of total assets at September 30, 2018.  At March 31, 2019, the Bank’s common equity tier 1 ratio was 14.86 percent, tier 1 leverage ratio was 13.04 percent, tier 1 risk-based capital ratio was 14.86 percent and the total risk-based capital ratio was 15.88 percent.  At September 30, 2018, the Bank’s common equity tier 1 ratio was 15.09 percent, tier 1 leverage ratio was 12.71 percent, tier 1 risk-based capital ratio was 15.09 percent and the total risk-based capital ratio was 16.13 percent.  At March 31, 2019, the Bank was in compliance with all applicable regulatory capital requirements.

On March 14, 2019, the Company’s Board of Directors approved a stock repurchase plan, under which the Company is authorized to repurchase up to 194,516 shares, or approximately 2.5 percent of the Company’s current outstanding common stock.  This authority extends through March 31, 2020 and may be exercised from time to time and in such amounts as market conditions warrant. The repurchases may be made on the open market, in block trades or otherwise. The program may be suspended or discontinued at any time.  During the three-month period ended March 31, 2019, the Company purchased 164 shares at an average cost of $20.00 per share.  

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:3/31/1912/31/189/30/186/30/183/31/18
Net income as reported under GAAP$  1,966$  2,011$  2,642$  2,243$  2,018
Non-core items, net of tax:     
  Prior period restatement costs(1)    667 
  Audit expenses(2)  110   
  Other(3) 10 100 15 24 32
Core net income, non-GAAP$  1,976$  2,221$  2,657$  2,934$  2,050
Earnings per common share:     
  Diluted$0.26$0.29$0.41$0.45$0.31
Weighted average common shares outstanding:     
  Diluted 7,667,518 7,555,969 6,467,628 6,456,048 6,452,246


  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.
  2. Non-core items for the quarter ended December 31, 2018 consisted of expenses arising out of the dismissal of the Company’s Certifying Accountant, 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. Included in non-core items such as accelerated payoff and non-accrual interest amounts.

“Efficiency ratio” is a non-GAAP financial measure and is defined as the 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:3/31/1912/31/189/30/186/30/183/31/18
Other expense as reported under GAAP$  4,443 $  4,094 $  4,437 $  4,790 $  4,105 
Less: non-core items(1)    139    688   
Other expense, excluding non-core items, non-GAAP$  4,443 $  3,955 $  4,437 $4,102 $4,105  
Net interest income (tax
equivalent basis), non-GAAP
$  7,263 $  6,958 $  7,172 $7,021  $6,597  
Non-core items(2) 12  127  16  25  43 
Net interest income (tax
equivalent basis), excluding non-core items, non-GAAP
 7,275  7,085  7,188  7,046  6,640 
Other income 441  1,146  429  715  449 
  Total$  7,716 $  8,231 $  7,617 $7,761  $7,089  
      
Efficiency ratio, non-GAAP(3) 57.6% 48.1% 58.3% 52.9% 57.9%
______________________     
  1. Non-core items for the quarter ended December 31, 2018 consisted of expenses arising out of the dismissal of the Company’s Certifying Accountant, 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. 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. The Company believes these adjustments are helpful to provide insight into core operating results as a means to evaluate comparative results.
  2. Included in non-core items such as accelerated payoff and non-accrual interest amounts.
 

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:3/31/1912/31/189/30/186/30/183/31/18
Efficiency ratio on a GAAP basis57.8%50.6%58.9%62.3%58.5%

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 24.5 percent for the current period and 34 percent 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:3/31/1912/31/189/30/186/30/183/31/18
Net interest income (GAAP)$  7,249 $  6,947 $  7,109 $  6,976 $  6,568 
Tax-equivalent adjustment(1)  14  11  63  45  29 
TE net interest income, non-GAAP$  7,263 $  6,958 $  7,172 $  7,021 $  6,597 
      
Net interest income margin (GAAP) 2.66% 2.65% 2.82% 2.73% 2.57%
Tax-equivalent effect 0.01      0.03    0.02    0.01 
Net interest margin (TE), non-GAAP 2.67% 2.65% 2.85% 2.75% 2.58%
____________________     
(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 nine other banking locations in Chester, Delaware and Bucks counties, Pennsylvania, Palm Beach, Florida, and Morristown, New Jersey, its New Jersey regional headquarters.  The Bank also operates a representative office in Montchanin, Delaware and a Private Banking Office in West Chester, Pennsylvania.  Its 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 2018 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.


MALVERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION

     
(in thousands, except for share and per share data) March 31, 2019  September 30, 2018
(unaudited)      
ASSETS       
Cash and due from depository institutions $1,370  $1,563  
Interest bearing deposits in depository institutions  109,450   29,271  
  Total cash and cash equivalents  110,820   30,834  
Investment securities available for sale, at fair value (amortized cost of $19,754 and $24,804 at March 31, 2019 and September 30, 2018, respectively)  19,371   24,298  
Investment securities held to maturity (fair value of $26,338 and $28,968 at March 31, 2019 and September 30, 2018, respectively)  26,789   30,092  
Restricted stock, at cost  8,952   8,537  
Loans receivable, net of allowance for loan losses  997,114   902,136  
Other real estate owned  5,796     
Accrued interest receivable  4.344   3,800  
Property and equipment, net  6,948   7,181  
Deferred income taxes, net  3,434   3,195  
Bank-owned life insurance  19,643   19,403  
Other assets  7,029   4,475  
  Total assets $1,210,240  $1,033,951  
LIABILITIES       
Deposits:       
  Non-interest bearing $42,937  $41,677  
  Interest-bearing  899,437   732,486  
Total deposits  942,374   774,163  
FHLB advances  98,000   118,000  
Other short-term borrowings     2,500  
Subordinated debt  24,540   24,461  
Advances from borrowers for taxes and insurance  2,244   1,305  
Accrued interest payable  859   784  
Other liabilities  4,655   1,915  
  Total liabilities  1,072,672   923,128  
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; 7,780,639 and 7,780,475 issued and outstanding, respectively, at March 31, 2019, and 6,580,879 shares issued and outstanding at September 30, 2018    78     66  
Additional paid in capital  84,559   61,099  
Retained earnings  54.389   50,412  
Unearned Employee Stock Ownership Plan (ESOP) shares  (1,265)  (1,338) 
Accumulated other comprehensive (loss) income  (190)  584  
Treasury stock, at cost: 164 shares at March 31, 2019  (3)    
  Total shareholders’ equity  137,568   110,823  
  Total liabilities and shareholders’ equity $1,210,240  $1,033,951  


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)  2019  2018  2019  2018
(unaudited)            
Interest and Dividend Income            
Loans, including fees $10,661 $8,740 $20,756 $17,441
Investment securities, taxable  250  302  501  532
Investment securities, tax-exempt  57  65  118  130
Dividends, restricted stock  158  134  291  203
Interest-bearing cash accounts  475  463  847  909
  Total Interest and Dividend Income  11,601  9,704  22,513  19,215
Interest Expense            
Deposits  3,395  2,182  6,339  4,337
Short-term borrowings  2  22  7  41
Long-term borrowings  572  546  1,205  1,109
Subordinated debt  383  386  766  778
Total Interest Expense  4,352  3,136  8,317  6,265
Net interest income  7,249  6,568  14,196  12,950
Provision for Loan Losses  870  240  2,323  240
Net Interest Income after Provision for
  Loan Losses
  6,379  6,328  11,873  12,710
Other Income            
Service charges and other fees  238  237  1,178  508
Rental income-other  64  67  131  133
Net gains on sale of real estate        1,186
Net gains on sale of loans  19  26  37  93
Earnings on bank-owned life insurance  120  119  241  240
Total Other Income  441  449  1,587  2,160
Other Expense            
Salaries and employee benefits  2,213  2,001  4,221  3,991
Occupancy expense  577  586  1,116  1,148
Federal deposit insurance premium  73  75  142  151
Advertising  30  38  60  92
Data processing  251  267  505  545
Professional fees  455  450  954  1,238
Net other real estate owned expense  28    49  
Other operating expenses  816  688  1,490  1,411
Total Other Expense  4,443  4,105  8,537  8,576
Income before income tax expense  2,377  2,672  4,923  6,294
Income tax expense  411  654  946  3,873
Net Income  $1,966 $2,018 $3,977 $2,421
             
Earnings per common share            
Basic $0.26 $0.31 $0.52 $0.38
Diluted $0.26 $0.31 $0.52 $0.38
Weighted Average Common Shares
  Outstanding
            
Basic  7,667,518  6,448,691  7,611,051  6,446,959
Diluted  7,667,518  6,452,246  7,611,051  6,451,205


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)
3/31/201912/31/20183/31/2018
(unaudited)     
Statements of Operations Data   
    
  Interest income$  11,601 $  10,912 $  9,704 
  Interest expense 4,352  3,965  3,136 
   Net interest income 7,249  6,947  6,568 
  Provision for loan losses 870  1,453  240 
  Net interest income after provision for loan losses 6,379  5,494  6,328 
  Other income 441  1,146  449 
  Other expense 4,443  4,094  4,105 
  Income before income tax expense 2,377  2,546  2,672 
  Income tax expense 411  535  654 
  Net income$  1,966 $  2,011 $  2,018 
Earnings (per Common Share)   
  Basic$  0.26 $  0.27 $  0.31 
  Diluted$  0.26 $  0.27 $  0.31 
Statements of Condition Data (Period-End)   
  Investment securities available for sale, at fair value$  19,371 $19,231 $  44,341 
  Investment securities held to maturity (fair value of $26,338, $28,557, and $32,094, respectively) 26,789  29,323  33,052 
  Loans, net of allowance for loan losses 997,114  924,639  837,314 
  Total assets 1,210,240  1,128,492  1,083,316 
  Deposits 942,374  843,200  825,569 
  FHLB advances 98,000  118,000  118,000 
  Short-term borrowings ---    2,500 
  Subordinated debt 24,540  24,500  24,382 
  Shareholders' equity 137,568  135,679  105,362 
Common Shares Dividend Data    
  Cash dividends$   — $  — $  — 
Weighted Average Common Shares Outstanding   
  Basic 7,667,518  7,555,810  6,448,691 
  Diluted 7,667,518  7,555,969  6,452,246 
Operating Ratios   
  Return on average assets 0.70% 0.74% 0.77%
  Return on average equity 5.74% 6.00% 7.71%
  Average equity / average assets 12.16% 12.40% 9.93%
  Book value per common share (period-end)$17.68 $17.45 $16.03 
Non-Financial Information (Period-End)   
  Common shareholders of record 399  402  409 
  Full-time equivalent staff 89  87  86 

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

Investor Contact:
Ronald Morales
(610) 695-3646


malvern logo.JPG

Source: Malvern Bancorp, Inc.