EX-99.1 2 e1450_99-1.htm EXHIBIT 99.1

Exhibit 99.1

 

 

 

Investor Relations:

Joseph D. Gangemi

SVP & CFO

(610) 695-3676

 

Investor Contact:

Ronald Morales

(610) 695-3646

 

Malvern Bancorp, Inc. Reports Third Fiscal Quarter 2019 Results

PAOLI, PA., July 31, 2019 -- 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, 2019. Net income amounted to $2.7 million, or $0.35 per fully diluted common share, for the quarter ended June 30, 2019, compared with net income of $2.2 million, or $0.35 per fully diluted common share, for the quarter ended June 30, 2018. Annualized return on average assets (“ROAA”) was 0.88 percent for the three months ended June 30, 2019, compared to 0.85 percent for the three months ended June 30, 2018, and annualized return on average equity (“ROAE”) was 7.66 percent for the three months ended June 30, 2019, compared with 8.40 percent for the three months ended June 30, 2018. Excluding provision expense, net of tax, of $44,000, third fiscal quarter 2019 adjusted ROAA was 0.89 percent and adjusted ROAE was 7.79 percent.

 

For the nine months ended June 30, 2019, net income amounted to $6.6 million, or $0.87 per fully diluted common share, compared with net income of $4.7 million, or $0.72 per fully diluted common share, for the nine months ended June 30, 2018. ROAA was 0.78 percent for the nine months ended June 30, 2019, compared to 0.59 percent for the nine months ended June 30, 2018, and ROAE was 6.48 percent for the nine months ended June 30, 2019, compared with 5.92 percent for the nine months ended June 30, 2018. Excluding provision expense, net of tax, of $1.9 million, adjusted ROAA was 1.00 percent and adjusted annualized ROAE was 8.34 percent for the nine months ended June 30, 2019.

“Our top line revenue increased despite the lower net growth in loans during the period.  Other aspects of operations were also positive, and we believe we are well positioned to execute our strategic plan through the remainder of fiscal 2019 and into 2020.  Our continued focus on client service remains constant and is a key driver in gathering customer relationships, fueling the business model advancement and our resulting performance,” commented Anthony C. Weagley, President and Chief Executive Officer. 

Joseph D. Gangemi, Chief Financial Officer of the Company, added: “Liquidity remained elevated to fuel loan growth during the quarter and anticipated loan growth in the fourth fiscal quarter. While the large cash balances do have a dampening effect on margins, we expect liquidity to continue to remain elevated to fund current pipelines, we also anticipate a positive impact on margins with the investment of our cash into loans.”

 

 

 1 

 

 Linked Quarter Financial Ratios
(unaudited)		                         
                          
As of or for the quarter ended :   6/30/19    3/31/19    12/31/18    9/30/18    6/30/18 
Return on average assets (1)   0.88%   0.70%   0.74%   1.02%   0.85%
Return on average equity (1)   7.66%   5.74%   6.00%   9.63%   8.40%
Net interest margin (tax equivalent basis) (2)   2.54%   2.67%   2.65%   2.85%   2.75%
Loans / deposits ratio   106.52%   106.82%   110.70%   117.62%   114.46%
Shareholders’ equity / total assets   11.03%   11.37%   12.02%   10.72%   10.25%
Efficiency ratio, non-GAAP (1)  (2)  (3)   56.9%   57.6%   48.1%   58.3%   52.9%
Book value per common share  $17.98   $17.68   $17.45   $16.84   $16.42 

_____________

(1)Annualized.
(2)Information reconciling non-GAAP measures to GAAP measures is presented beginning on page 12 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 Highlights

Linked Quarter

Income Statement and Other Data

(unaudited)

(in thousands, except share and per share data)

         
                
For the quarter ended:   6/30/19    3/31/19    12/31/18    9/30/18    6/30/18 
Net interest income  $7,461   $7,249   $6,947   $7,109   $6,976 
Provision for loan losses   56    870    1,453    125    589 
 Net interest income after provision for loan losses   7,405    6,379    5,494    6,984    6,387 
Other income   454    441    1,146    429    715 
Other expense   4,497    4,443    4,094    4,437    4,790 
Income before income tax expense   3,362    2,377    2,546    2,976    2,312 
Income tax expense   706    411    535    334    69 
Net income  $2,656   $1,966   $2,011   $2,642   $2,243 
Earnings per common share                         
Basic  $0.35   $0.26   $0.27   $0.41   $0.35 
Diluted  $0.35   $0.26   $0.27   $0.41   $0.35 
Weighted average common shares outstanding                         
Basic   7,671,623    7,667,518    7,555,810    6,464,326    6,453,031 
Diluted   7,672,284    7,667,518    7,555,969    6,467,628    6,456,048 
                          

 

Net Interest Income

Net interest income both as reported and on a fully tax equivalent basis, a non-GAAP measure, was $7.5 million for the three months ended June 30, 2019. Net interest income on a fully tax-equivalent basis, a non-GAAP measure, increased $450,000, or 6.4 percent, from $7.0 million for the comparable three-month period in fiscal 2018. The change for the three months ended June 30, 2019 primarily was the result of an increase of $145.7 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 2.29 percent and 2.56 percent for the three months ended June 30, 2019 and 2018, respectively. For the quarter ended June 30, 2019, the Company’s net interest margin on a tax-equivalent basis decreased to 2.54 percent as compared to 2.75 percent for the same three-month period in fiscal 2018.

 2 

 

 Net interest income both as reported and on a fully tax equivalent basis, a non-GAAP measure, was $21.7 million for the nine months ended June 30, 2019. Net interest income on a fully tax equivalent basis, a non-GAAP measure, increased $1.7 million, or 8.4 percent, from $20.0 million for the nine months ended June 30, 2018. The change for the nine months ended June 30, 2019 primarily was the result of an increase of $121.3 million in the average balance of, primarily commercial loans. The net interest spread on an annualized tax-equivalent basis was 2.36 percent and 2.43 percent for the nine months ended June 30, 2019 and 2018, respectively. For the nine months ended June 30, 2019, the Company’s net interest margin on a tax-equivalent basis increased slightly to 2.62 percent as compared to 2.60 percent for the same nine-month period in fiscal 2018.

Total Interest Income

For the three months ended June 30, 2019, total interest income both as reported and on a fully tax-equivalent basis, a non-GAAP measure, was $12.5 million. Total interest income on a fully tax equivalent basis, a non-GAAP measure, increased $2.2 million, or 21.7 percent, from $10.2 million for three months ended June 30, 2018, primarily due to a $145.7 million increase in the average balance of our loans.

For the nine months ended June 30, 2019, total interest income both as reported and on a fully tax equivalent basis, a non-GAAP measure, was $35.0 million. Total interest income on a fully tax equivalent basis, a non-GAAP measure, increased $5.5 million, or 18.7 percent, from $29.5 million for the nine months ended June 30, 2018. Interest income rose for the nine months ended June 30, 2019, compared to the comparable period in fiscal 2018, primarily due to a $121.3 million increase in average loan balances. Compared to the nine months ended June 30, 2018, average interest earning assets increased $77.7 million, the net interest spread decreased on an annualized tax-equivalent basis by seven basis points and the net interest margin increased slightly on an annualized tax-equivalent basis by two basis points at nine months ended June 30, 2019. Total interest expense increased by $3.8 million, or 40.3 percent, to $13.3 million, for the nine months ended June 30, 2019, compared to the comparable period in fiscal 2018.

Interest Expense

For the three months ended June 30, 2019, interest expense increased by $1.8 million, or 55.0 percent, to $5.0 million, for the three months ended June 30, 2019, compared to the same period in fiscal 2018, primarily due to an increase of $169.3 in deposits and an increase in average rates. The increase in deposits reflects an increase in interest-bearing demand and time deposits. The annualized average rate of total interest-bearing liabilities increased 50 basis points to 1.95 percent for the three months ended June 30, 2019, from 1.45 percent for the three months ended June 30, 2018 and, on a linked sequential quarter basis, increased from 1.85 percent or ten basis points compared to the second quarter of fiscal 2019. At the same time, the average balance of total interest-bearing liabilities increased by $131.3 million. This increase primarily reflects an increase in the average balance of total interest-bearing deposit accounts of $136.5 million and a decrease in the average balance of borrowings of $5.2 million. 

For the nine months ended June 30, 2019, interest expense increased by $3.8 million, or 40.3 percent, to $13.3 million, for the nine months ended June 30, 2019, compared to the comparable period in fiscal 2018. The average rate of total interest-bearing liabilities increased 46 basis points to 1.86 percent for the nine months ended June 30, 2019, from 1.40 percent for the nine months ended June 30, 2018. At the same time, the average balance of total interest-bearing liabilities increased by $52.1 million. This increase primarily reflects an increase in the average balance of deposits of $62.7 million and a decrease in the average balance of borrowings of $10.6 million.  The increase in the average balance of deposits consisted primarily of a $66.7 million increase in the average balance of other interest-bearing deposit accounts, a $194,000 increase in the average balance of certificates of deposit accounts, an $80,000 increase in the average balance of savings deposits, and a $4.3 million decrease in the average balance of money market accounts.

 3 

 

 

Other Income

Other income decreased $261,000, or 36.5 percent, during the third fiscal quarter of 2019 compared with the same period in 2018. The decrease in total other income was due to a $278,000 decrease in service charges and other fees, a $10,000 decrease in rental income, and a $3,000 decrease in net gains on sale of loans, partially offset by a $27,000 gain on sale of investments and a $3,000 increase in earnings on bank-owned life insurance. The decrease in service charges and other fees during the three months ended June 30, 2019 is primarily due to lower net swap fees through the Bank’s commercial loan hedging program.

For the nine months ended June 30, 2019, other income decreased $834,000 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 $59,000 decrease in net gains on sale of loans and a $12,000 decrease in rental income, partially offset by an increase of $392,000 in service charges, a $27,000 gain on sale of investments and a $4,000 increase in earnings on bank-owned life insurance. The non-proportional increase in service charges and other fees during the nine months ended June 30, 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 manage the interest rate risk on long term fixed rate loans while allowing Malvern to compete in the market and offer competitive financing to our clients.

Other Expense

Total other expense for the three months ended June 30, 2019 decreased $293,000, or 6.1 percent, when compared to the three months ended June 30, 2018. The decrease was primarily due to a $683,000 decrease in professional fees due to lower legal expense, a $17,000 decrease in occupancy expense, a $15,000 decrease in data processing expense, partially offset by a $199,000 increase in salaries and employee benefits, a $191,000 increase in other operating expense, a $30,000 increase in net other real estate owned expense, and a $2,000 increase in federal deposit insurance premium. The increase in salaries and employee benefits during the three-month period ended June 30, 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 June 30, 2019 was primarily due to the Pennsylvania shares tax related to the Bank’s new standing as a National Association. The Bank converted its charter in February 2018.

For the nine months ended June 30, 2019, total other expense decreased $332,000, or 2.5 percent, compared to the same period in 2018. The decrease primarily reflected a $967,000 decrease in professional fees, a $55,000 decrease in data processing expense, $49,000 decrease in occupancy expense, a $32,000 decrease in advertising expense, and a $7,000 decrease in the federal deposit insurance premium. These decreases were offset by a $429,000 increase in salaries and employee benefits, a $270,000 increase in other operating expenses and a $79,000 increase in net other real estate owned expense. The decrease in professional fees during the nine-month period ended June 30, 2019 was primarily due to lower legal expense. The increase in salaries and employee benefits during the three-month period ended June 30, 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 nine-month period ended June 30, 2019 was primarily due to the Pennsylvania shares tax related to the Bank’s new standing as a National Association.

 4 

 

 

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

(in thousands, unaudited)               
For the quarter ended:  6/30/19  3/31/19  12/31/18  9/30/18  6/30/18
Salaries and employee benefits  $2,223   $2,213   $2,008   $2,178   $2,024 
Occupancy expense   560    577    539    570    577 
Federal deposit insurance premium   78    73    69    71    76 
Advertising   30    30    30    30    30 
Data processing   259    251    254    279    274 
Professional fees   405    455    499    565    1,088 
Net other real estate owned expense   30    28    21    —      —   
Other operating expenses   912    816    674    744    721 
   Total other expense  $4,497   $4,443   $4,094   $4,437   $4,790 
                          

Income Taxes

 

The Company recorded $706,000 in income tax expense during the three months ended June 30, 2019 compared to $69,000 in income tax expense during the three months ended June 30, 2018. The effective tax rates for the Company for the three months ended June 30, 2019 and 2018 were 21.0 percent and 3.0 percent, respectively. For the nine months ended June 30, 2019, income tax expense decreased $2.3 million, or 58.1 percent, to $1.7 million from $3.9 million for the three months ended June 30, 2018. The effective tax rates for the Company for the nine months ended June 30, 2019 and 2018 were 19.9 percent and 45.8 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.

 

 5 

 

 

Statement of Condition Highlights at June 30, 2019

 

 •Gross loans were $1.0 billion at June 30, 2019, increasing $109.0 million, or 12.0 percent, from September 30, 2018.
   
 •Total assets stood at $1.3 billion at June 30, 2019, increasing $231.9 million, or 22.4 percent, compared to September 30, 2018.
   
 • Deposits totaled $957.2 million at June 30, 2019, an increase of $183.0 million, or 23.6 percent, compared to September 30, 2018.
   
 • Federal Home Loan Bank (FHLB) advances totaled $133.0 million at June 30, 2019, an increase from $118.0 million at September 30, 2018.
   
 • The Bank had gross originations of $60.2 million during the quarter ended June 30, 2019, with net portfolio growth of $12.9 million. Gross loan originations during the quarter consisted of $28.4 million in commercial loans, $20.3 million in residential mortgage loans, $7.3 million in construction and development loans, and $4.2 million in consumer loans.
   
 • Non-performing assets (“NPAs”) were 0.65 percent of total assets at June 30, 2019, compared to 0.30 percent at September 30, 2018. Allowance for loan losses as a percentage of total non-performing loans was 418.1 percent at June 30, 2019, compared to 294.7 percent at September 30, 2018.
   
 • Excluding one other real estate owned property of $5.8 million; NPAs were 0.19 percent of total assets at June 30, 2019.
   
 • The Company’s ratio of shareholders’ equity to total assets was 11.03 percent at June 30, 2019, compared to 10.72 percent at September 30, 2018.
   
 • Book value per common share amounted to $17.98 at June 30, 2019, compared to $16.84 at September 30, 2018.
   
 • The efficiency ratio, a non-GAAP measure, was 56.9 percent at June 30, 2019, compared to 58.3 percent at September 30, 2018.

 

 6 

 

 

Linked Quarter Statements of Condition Data

 

(in thousands, unaudited)
             
At quarter ended:   6/30/19    3/31/19    12/31/18    9/30/18    6/30/18 
Cash and due from depository institutions  $1,535   $1,370   $1,377   $1,563   $1,447 
Interest bearing deposits in depository
institutions		   148,501    109,450    98,499    29,271    45,934 
Investment securities, available for sale, at fair
value		   23,552    19,371    19,231    24,298    34,348 
Investment securities held to maturity   23,323    26,789    29,323    30,092    31,004 
Restricted stock, at cost   10,404    8,952    9,493    8,537    8,781 
Loans receivable, net of allowance for loan
losses		   1,009,959    997,114    924,639    902,136    893,355 
Other real estate owned   5,796    5,796    5,796    —      —   
Accrued interest receivable   4,237    4,344    3,724    3,800    3,571 
Property and equipment, net   6,795    6,948    7,067    7,181    7,240 
Deferred income taxes, net   3,542    3,434    3,367    3,195    3,920 
Bank-owned life insurance   19,766    19,643    19,524    19,403    19,282 
Other assets   8,468    7,029    6,452    4,475    4,693 
   Total assets  $1,265,878   $1,210,240   $1,128,492   $1,033,951   $1,053,575 
Deposits  $957,199   $942,374   $843,200   $774,163   $787,932 
FHLB advances   133,000    98,000    118,000    118,000    123,000 
Other short-term borrowings   —      —      —      2,500    2,500 
Subordinated debt   24,579    24,540    24,500    24,461    24,421 
Other liabilities   11,432    7,758    7,113    4,004    7,749 
Shareholders' equity   139,668    137,568    135,679    110,823    107,973 
   Total liabilities and shareholders’ equity  $1,265,878   $1,210,240   $1,128,492   $1,033,951   $1,053,575 
                          

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

Deposits

 

               
(in thousands, unaudited)                         
At quarter ended:   6/30/19    3/31/19    12/31/18    9/30/18    6/30/18 
Demand:                         
    Non-interest bearing  $48,580   $42,937   $39,734   $41,677   $48,296 
    Interest-bearing   288,555    295,475    261,025    184,073    198,410 
Savings   43,334    43,943    44,438    44,642    44,629 
Money market   288,561    283,571    253,436    270,834    276,807 
Time   288,169    276,448    244,567    232,937    219,790 
   Total deposits  $957,199   $942,374   $843,200   $774,163   $787,932 

 

 7 

 

 

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

 

Condensed Consolidated Average Statements of Condition
                
(in thousands, unaudited)                         
                          
   For the quarter ended:   6/30/19    3/31/19    12/31/18    9/30/18    6/30/18 
Investment securities  $49,408   $47,761   $53,882   $64,848   $75,932 
Loans   1,010,033    956,840    912,259    908,962    864,348 
Allowance for loan losses   (10,061)   (9,408)   (8,638)   (9,077)   (8,589)
All other assets   164,424    130,712    123,643    72,535    120,730 
   Total assets   1,213,804    1,125,905    1,081,146    1,037,268    1,052,421 
Non-interest bearing deposits  $42,151   $41,035   $40,420   $43,330   $45,124 
Interest-bearing deposits   882,825    814,412    758,813    732,489    746,341 
FHLB advances   115,363    101,000    116,859    118,326    118,121 
Other short-term borrowings   —      277    761    2,522    2,555 
Subordinated debt   24,563    24,523    24,483    24,440    24,399 
Other liabilities   10,192    7,728    5,750    6,457    9,072 
Shareholders’ equity   138,710    136,930    134,060    109,704    106,809 
   Total liabilities and shareholders’ equity  $1,213,804   $1,125,905   $1,081,146   $1,037,268   $1,052,421 

 

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Loans

Total net loans amounted to $1.0 billion at June 30, 2019 compared to $902.1 million at September 30, 2018, for a net increase of $107.8 million or 12.0 percent. The allowance for loan losses amounted to $10.1 million and $9.0 million at June 30, 2019 and September 30, 2018, respectively. Average loans during the third fiscal quarter of 2019 totaled $1.0 billion as compared to $864.3 million during the third fiscal quarter of 2018, representing a 16.9 percent increase.

At the end of the third quarter of fiscal 2019, the loan portfolio remained weighted toward two primary components: commercial and the core residential portfolio, with commercial loans accounting for 70.2 percent and single-family residential real estate loans accounting for 21.2 percent of the loan portfolio. Construction and development loans amounted to 5.0 percent and consumer loans represented 3.6 percent of the loan portfolio at such date. The increase in the loan portfolio at June 30, 2019 compared to September 30, 2018, primarily reflected an increase of $84.6 million in commercial loans, an increase of $18.9 million in residential mortgage loans, a $4.6 million increase in construction and development loans, and an $886,000 increase in consumer loans.

For the quarter ended June 30, 2019, the Company originated total new loan volume of $60.2 million, which was offset by loan payoffs of $24.0 million, prepayments totaling $13.7 million, amortization of $7.1 million, and participations of $2.5 million.

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

 

Loans               
(in thousands, unaudited)                         
At quarter ended:   6/30/19    3/31/19    12/31/18    9/30/18    6/30/18 
Residential mortgage  $216,114   $202,655   $202,306   $197,219   $192,901 
Construction and Development:                         
   Residential and commercial   47,485    44,014    41,140    37,433    39,845 
   Land   3,809    5,696    7,180    9,221    15,565 
Total construction and
development		   51,294    49,710    48,320    46,654    55,410 
Commercial:                         
   Commercial real estate   543,045    550,933    508,448    493,929    477,584 
   Farmland   5,388    12,041    12,054    12,066    12,058 
   Multi-family   64,050    64,328    44,989    45,102    45,204 
   Commercial and industrial   97,877    82,731    76,892    73,895    76,957 
   Other   5,356    8,111    7,344    6,164    5,899 
Total commercial   715,716    718,144    649,727    631,156    617,702 
Consumer:                         
   Home equity lines of credit   19,348    18,466    14,484    14,884    14,446 
   Second mortgages   15,018    15,773    16,674    18,363    19,063 
   Other   2,081    1,904    1,915    2,315    2,311 
Total consumer   36,447    36,143    33,073    35,562    35,820 
Total loans   1,019,571    1,006,652    933,426    910,591    901,833 
Deferred loan costs, net   494    478    460    566    546 
Allowance for loan losses   (10,106)   (10,016)   (9,247)   (9,021)   (9,024)
   Loans Receivable, net  $1,009,959   $997,114   $924,639   $902,136   $893,355 

 

Subsequent to quarter-end, in July 2019 the Company completed the sale of one commercial real estate loan classified as held for sale. The loan had an aggregate book balance of $367,000 and was sold at a gain of approximately $17,000. As a result, our consolidated statement of financial condition at June 30, 2019 includes $367,000 of one commercial real estate loan as held for sale. As such it is not considered to be included in our loan portfolio at June 30, 2019.  Net proceeds from the sale amounted to $384,000 after deducting amounts due for outstanding liens, related expenses and applicable transfer fees. This transaction resulted in a decrease of approximately $17,000 through the provision for loan loss during the third quarter of fiscal 2019.

 

 9 

 

 

At June 30, 2019, the Company had $140.3 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 June 30, 2019 included approximately $81.7 million in commercial and construction loans and $21.4 million in residential mortgage loans expected to fund over the following quarter.


Asset Quality

Non-accrual loans, all of which were making payments at June 30, 2019, were $2.2 million at June 30, 2019, a decrease of $498,000, or 18.5 percent, as compared to $2.7 million at September 30, 2018. The decrease in non-accrual loans was primarily due to the transfer of one commercial real estate loan with an aggregate book balance of $367,000 to loans held for sale (as noted above, such loan sale was subsequently completed in July 2019). The portfolio of non-accrual loans at June 30, 2019 was comprised of fourteen residential real estate loans with an aggregate outstanding balance of approximately $1.8 million, and thirteen consumer loans with an aggregate outstanding balance of approximately $339,000.

At June 30, 2019, non-performing assets totaled $8.2 million, or 0.65 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 June 30, 2019 compared to September 30, 2018 was primarily due to the transfer to Other Real Estate Owned (“OREO”), of one commercial real estate loan in the amount of $5.8 million. 

OREO was $5.8 million at June 30, 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. Excluding the OREO property of $5.8 million, NPAs totaled $2.4 million, or 0.19 percent of total assets at June 30, 2019.

Performing Troubled Debt Restructuring (“TDR”) loans were $11.8 million at June 30, 2019 and $18.6 million at September 30, 2018.

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Non-Performing Asset and Other Asset Quality Data:

(dollars in thousands, unaudited)               
As of or for the quarter ended:  6/30/19  3/31/19  12/31/18  9/30/18  6/30/18
Non-accrual loans(1)  $2,189   $2,432   $2,562   $2,687   $2,023 
Loans 90 days or more past due and still accruing   228    —      759    374    1,338 
   Total non-performing loans   2,417    2,432    3,321    3,061    3,361 
OREO   5,796    5,796    5,796    —      —   
   Total non-performing assets  $8,213   $8,228   $9,117   $3,061   $3,361 
Performing TDR loans  $11,824   $12,099   $12,164   $18,640   $18,693 
                          
Non-performing assets / total assets   0.65%   0.68%   0.81%   0.30%   0.32%
Non-performing loans / total loans   0.24%   0.24%   0.36%   0.34%   0.37%
Net (recoveries)charge-offs  $(34)  $101   $1,227   $128   $30 
Net (recoveries)charge-offs/average loans(2)   (0.01)%   0.04%   0.54%   0.06%   0.01%
Allowance for loan losses / total loans   0.99%   0.99%   0.99%   0.99%   1.00%
Allowance for loan losses / non-performing loans   418.1%   411.8%   278.4%   294.7%   268.5%
                          
Total assets  $1,265,878   $1,210,240   $1,128,492   $1,033,951   $1,053,575 
Total gross loans   1,019,571    1,006,652    933,426    910,591    901,833 
Average loans   1,010,033    956,840    912,259    908,962    864,348 
Allowance for loan losses   10,106    10,016    9,247    9,021    9,024 

______________

(1)Twenty-seven loans totaling approximately $2.2 million, or 100.0 percent of the total non-accrual loan balance, were making payments at June 30, 2019.
(2)Annualized.

 

The allowance for loan losses at June 30, 2019 amounted to approximately $10.1 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 $56,000 provision for loan losses during the quarter ended June 30, 2019 compared to $125,000 for the quarter ended September 30, 2018.

 

Capital

At June 30, 2019, our total shareholders' equity amounted to $139.7 million, or 11.03 percent of total assets, compared to $110.8 million, or 10.72 percent of total assets at September 30, 2018. At June 30, 2019, the Bank’s common equity tier 1 ratio was 14.98 percent, tier 1 leverage ratio was 12.36 percent, tier 1 risk-based capital ratio was 14.98 percent and the total risk-based capital ratio was 16.00 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 June 30, 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 and nine months ended June 30, 2019, the Company purchased 16,699 shares and 16,863 shares of its common stock in the open market under the repurchase plan at an average cost of $19.94 per share and $19.95 per share, respectively. At June 30, 2019, the Company had 177,653 shares remaining in the repurchase plan.

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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:  6/30/19  3/31/19  12/31/18  9/30/18  6/30/18
Net income as reported under GAAP  $2,656   $1,966   $2,011   $2,642   $2,243 
Non-core items, net of tax:                         
    Prior period restatement costs(1)   —      —      —      —      667 
    Audit expenses(2)   —      —      110    —      —   
    Other(3)   —      10    100    15    24 
Core net income, non-GAAP  $2,656   $1,976   $2,221   $2,657   $2,934 
Earnings per common share:                         
    Diluted  $0.35   $0.26   $0.29   $0.41   $0.45 
Weighted average common shares outstanding:                         
    Diluted   7,672,284    7,667,518    7,555,969    6,467,628    6,456,048 

 

(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.

 

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:  6/30/19  3/31/19  12/31/18  9/30/18  6/30/18
Other income  $454   $441   $1,146   $429   $715 
Less: Net investment securities
gains		   27    —      —      —      —   
Other income, excluding net
investment securities gains		  $427   $441   $1,146   $429   $715 

 

“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:

 

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(dollars in thousands)               
For the quarter ended:  6/30/19  3/31/19  12/31/18  9/30/18  6/30/18
Other expense as reported under GAAP  $4,497   $4,443   $4,094   $4,437   $4,790 
Less: non-core items(1)    —      —      139    —      688 
Other expense, excluding non-core items, non-GAAP  $4,497   $4,443   $3,955   $4,437   $4,102 
Net interest income (tax
equivalent basis), non-GAAP		  $7,471   $7,263   $6,958   $7,172   $7,021 
Non-core items(2)   —      12    127    16    25 
Net interest income (tax
equivalent basis), excluding non-core items, non-GAAP		   7,471    7,275    7,085    7,188    7,046 
Other income, excluding gain on sale of investments   427    441    1,146    429    715 
   Total  $7,898   $7,716   $8,231   $7,617   $7,761 
                          
Efficiency ratio, non-GAAP(3)   56.9%   57.6%   48.1%   58.3%   52.9%

______________________          

(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:  6/30/19  3/31/19  12/31/18  9/30/18  6/30/18
Efficiency ratio on a GAAP basis   56.8%   57.8%   50.6%   58.9%   62.3%

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 and 24.5 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:  6/30/19  3/31/19  12/31/18  9/30/18  6/30/18
Net interest income (GAAP)  $7,461   $7,249   $6,947   $7,109   $6,976 
Tax-equivalent adjustment(1)     10    14    11    63    45 
TE net interest income, non-GAAP  $7,471   $7,263   $6,958   $7,172   $7,021 
                          
Net interest income margin (GAAP)   2.54%   2.66%   2.65%   2.82%   2.73%
Tax-equivalent effect   —      0.01    —      0.03    0.02 
Net interest margin (TE), non-GAAP   2.54%   2.67%   2.65%   2.85%   2.75%

 

____________________          
(1) Reflects tax-equivalent adjustment for tax exempt investments.

 

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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.

 

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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.

 

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MALVERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CONDITION

 

(in thousands, except for share and per share data)  June 30, 2019  September 30, 2018
(unaudited)          
ASSETS          
Cash and due from depository institutions  $1,535   $1,563 
Interest bearing deposits in depository institutions   148,501    29,271 
    Total cash and cash equivalents   150,036    30,834 
Investment securities available for sale, at fair value (amortized cost of $23,783 and $24,804 at June 30, 2019 and September 30, 2018, respectively)   23,552    24,298 
Investment securities held to maturity (fair value of $23,309 and $28,968 at June 30, 2019 and September 30, 2018, respectively)   23,323    30,092 
Restricted stock, at cost   10,404    8,537 
Loans receivable, net of allowance for loan losses   1,009,959    902,136 
Other real estate owned   5,796    —   
Accrued interest receivable   4,237    3,800 
Property and equipment, net   6,795    7,181 
Deferred income taxes, net   3,542    3,195 
Bank-owned life insurance   19,766    19,403 
Other assets   8,468    4,475 
   Total assets  $1,265,878   $1,033,951 
LIABILITIES          
Deposits:          
   Non-interest bearing  $48,580   $41,677 
   Interest-bearing   908,619    732,486 
Total deposits   957,199    774,163 
FHLB advances   133,000    118,000 
Other short-term borrowings   —      2,500 
Subordinated debt   24,579    24,461 
Advances from borrowers for taxes and insurance   3,345    1,305 
Accrued interest payable   1,443    784 
Other liabilities   6,644    1,915 
   Total liabilities   1,126,210    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; 7,784,030 and 7,767,167 issued and outstanding, respectively, at June 30, 2019, and 6,580,879 shares issued and outstanding at September 30, 2018   78    66 
Additional paid in capital   84,705    61,099 
Retained earnings   57,045    50,412 
Unearned Employee Stock Ownership Plan (ESOP) shares   (1,229)   (1,338)
Accumulated other comprehensive (loss) income   (595)   584 
Treasury stock, at cost: 16,863 shares at June 30, 2019   (336)   —   
   Total shareholders’ equity   139,668    110,823 
   Total liabilities and shareholders’ equity  $1,265,878   $1,033,951 

 

 16 

 

 

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)  2019  2018  2019  2018
(unaudited)            
Interest and Dividend Income                    
Loans, including fees  $11,415   $9,380   $32,171   $26,821 
Investment securities, taxable   259    300    760    832 
Investment securities, tax-exempt   49    61    167    191 
Dividends, restricted stock   159    130    450    333 
Interest-bearing cash accounts   574    327    1,421    1,236 
       Total Interest and Dividend Income   12,456    10,198    34,969    29,413 
Interest Expense                    
Deposits   3,926    2,304    10,265    6,641 
Short-term borrowings   —      13    7    54 
Long-term borrowings   686    539    1,891    1,648 
Subordinated debt   383    366    1,149    1,144 
Total Interest Expense   4,995    3,222    13,312    9,487 
Net interest income   7,461    6,976    21,657    19,926 
Provision for Loan Losses   56    589    2,379    829 

Net Interest Income after Provision for

Loan Losses

   7,405    6,387    19,278    19,097 
Other Income                    
Service charges and other fees   252    530    1,430    1,038 
Rental income-other   53    63    184    196 
Net gains on sale of investments   27    —      27    —   
Net gains on sale of real estate   —      —      —      1,186 
Net gains on sale of loans   —      3    37    96 
Earnings on bank-owned life insurance   122    119    363    359 
Total Other Income   454    715    2,041    2,875 
Other Expense                    
Salaries and employee benefits   2,223    2,024    6,444    6,015 
Occupancy expense   560    577    1,676    1,725 
Federal deposit insurance premium   78    76    220    227 
Advertising   30    30    90    122 
Data processing   259    274    764    819 
Professional fees   405    1,088    1,359    2,326 
Net other real estate owned expense   30    —      79    —   
Other operating expenses   912    721    2,402    2,132 
Total Other Expense   4,497    4,790    13,034    13,366 
Income before income tax expense   3,362    2,312    8,285    8,606 
Income tax expense   706    69    1,652    3,942 
Net Income  $2,656   $2,243   $6,633   $4,664 
                     
Earnings per common share                    
Basic  $0.35   $0.35   $0.87   $0.72 
Diluted  $0.35   $0.35   $0.87   $0.72 

Weighted Average Common Shares

Outstanding

                    
Basic   7,671,623    6,453,031    7,631,241    6,449,089 
Diluted   7,672,284    6,456,048    7,631,902    6,452,068 

 

 

 17 

 

 

 

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)

  6/30/2019  3/31/2019  6/30/2018
(unaudited)         
Statements of Operations Data         
          
   Interest income  $12,456   $11,601   $10,198 
   Interest expense   4,995    4,352    3,222 
      Net interest income   7,461    7,249    6,976 
   Provision for loan losses   56    870    589 
      Net interest income after provision for loan losses   7,405    6,379    6,387 
   Other income   454    441    715 
   Other expense   4,497    4,443    4,790 
   Income before income tax expense   3,362    2,377    2,312 
      Income tax expense   706    411    69 
   Net income  $2,656   $1,966   $2,243 
Earnings (per Common Share)               
   Basic  $0.35   $0.26   $0.35 
   Diluted  $0.35   $0.26   $0.35 
Statements of Condition Data (Period-End)               
   Investment securities available for sale, at fair value  $23,552   $19,371   $34,348 
   Investment securities held to maturity (fair value of $23,309,   $26,338 and $29,990, respectively)   23,323    26,789    31,004 
   Loans, net of allowance for loan losses   1,009,959    997,114    893,355 
   Total assets   1,265,878    1,210,240    1,053,575 
   Deposits   957,199    942,374    787,932 
   FHLB advances   133,000    98,000    123,000 
   Short-term borrowings   —      —      2,500 
   Subordinated debt   24,579    24,540    24,421 
   Shareholders' equity   139,668    137,568    107,973 
Common Shares Dividend Data               
   Cash dividends  $—     $—     $—   
Weighted Average Common Shares Outstanding               
   Basic   7,671,623    7,667,518    6,453,031 
   Diluted   7,672,284    7,667,518    6,456,048 
Operating Ratios               
   Return on average assets   0.88%   0.70%   0.85%
   Return on average equity   7.66%   5.74%   8.40%
   Average equity / average assets   11.43%   12.16%   10.15%
   Book value per common share (period-end)  $17.98   $17.68   $16.42 
Non-Financial Information (Period-End)               
   Common shareholders of record   396    399    406 
   Full-time equivalent staff   84    89    87 

 

 18