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Section 1: 8-K (8-K)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported) April 25, 2018
 
Malvern Bancorp, Inc.
(Exact name of registrant as specified in its charter)
 
Pennsylvania 000-54835 45-5307782

(State or other jurisdiction

of incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

 
42 E. Lancaster Avenue, Paoli, Pennsylvania 19301
(Address of principal executive offices) (Zip Code)
 
Registrant’s telephone number, including area code (610) 644-9400
 
Not Applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
   
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
           

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

Item 2.02Results of Operations and Financial Condition

 

On April 25, 2018, Malvern Bancorp, Inc. (the “Company”), the holding company for Malvern Bank, National Association (the “Bank”), reported its results of operations for the second fiscal quarter ended March 31, 2018.

 

For additional information, reference is made to the Company’s press release dated April 25, 2018, which is included as Exhibit 99.1 hereto and is incorporated herein by reference thereto. The press release attached hereto as Exhibit 99.1 is being furnished to the Securities and Exchange Commission (the “SEC”) and shall not be deemed to be “filed” for any purpose except as otherwise provided herein.

 

Item 9.01Financial Statements and Exhibits

 

  (a) Not applicable.
  (b) Not applicable.
  (c) Not applicable.
  (d) Exhibits

 

The following exhibit is included herewith.

 

Exhibit Number Description
99.1 (furnished, not filed) Press release dated April 25,2018

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  MALVERN BANCORP, INC.
     
Date:  April 26, 2018   By: /s/ Joseph Gangemi  
    Joseph D. Gangemi
   

Senior Vice President and Chief Financial Officer 

 

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Section 2: EX-99.1 (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 Second Fiscal Quarter Results

 

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

 

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

 

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

 

 

 

 

Highlights for the quarter include:

 

Return on average assets (“ROAA”) was 0.77 percent for the three months ended March 31, 2018, compared to 0.51 percent for the three months ended March 31, 2017, and return on average equity (“ROAE”) was 7.71 percent for the three months ended March 31, 2018, compared with 4.77 percent for the three months ended March 31, 2017.

 

The Company originated $74.6 million in new loans in the second quarter of fiscal 2018, which was offset by $44.0 million in payoffs, prepayments and amortization from its portfolio, resulting in a net portfolio increase of $30.6 million over the first quarter of fiscal 2018. New loan originations in the second quarter of fiscal 2018 consisted of $6.6 million in residential mortgage loans, $62.4 million in commercial loans, $4.8 million in construction and development loans and $0.8 million in consumer loans.

 

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

 

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

 

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

 

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

 

The Company’s balance sheet reflected total asset growth of $37.3 million at March 31, 2018, compared to September 30, 2017, coupled with stable asset quality, and capital levels that exceeded regulatory standards for a well-capitalized institution.

 

Selected Financial Ratios
(unaudited; annualized where applicable)

                    
As of or for the quarter ended :  3/31/18   12/31/17   9/30/17   6/30/17   3/31/17 
Return on average assets   0.77%   0.15%   0.77%   0.70%   0.51%
Return on average equity   7.71%   1.55%   7.70%   6.90%   4.77%
Net interest margin (tax equivalent basis) (1)   2.58%   2.47%   2.76%   2.72%   2.75%
Loans / deposits ratio   102.38%   102.19%   106.55%   106.30%   107.80%
Shareholders’ equity / total assets   9.73%   9.76%   9.80%   9.93%   10.25%
Efficiency ratio (1)   57.65%   63.6%   55.4%   57.0%   57.4%
Book value per common share  $16.03   $15.70   $15.60   $15.28   $15.00 

 

 

(1)Information reconciling non-GAAP measures to GAAP measures is presented elsewhere in this press release.

 

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Net Interest Income

 

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

 

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

 

The 43.6 percent increase in interest expense for the second quarter of fiscal 2018 as compared to the second quarter of fiscal 2017 was primarily due to an increase in deposits, as well as the interest expense associated with the Company’s subordinated debt. The average cost of funds was 1.39 percent for the quarter ended March 31, 2018 compared to 1.13 percent for the same three-month period in fiscal 2017 and, on a linked sequential quarter basis, increased two basis points compared to the first quarter of fiscal 2018. The increase in cost was primarily related to the increase in average volume, coupled with the increased expense related to the issuance of subordinated debt.

 

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

 

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

 

Earnings Summary for the Period Ended March 31, 2018

 

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

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

  

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Other Income

 

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

 

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

 

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

 

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

 

Other Expense

 

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

 

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

 

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

 

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

 

Statement of Condition Highlights at March 31, 2018

 

Highlights as of March 31, 2018, included:

 

Balance sheet strength, with total assets amounting to $1.1 billion at March 31, 2018, an increase of $37.3 million, or 3.6 percent, compared to September 30, 2017.

 

The Company’s gross loans were $845.2 million at March 31, 2018, an increase of $3.1 million, or 0.36 percent, from September 30, 2017.

 

Total investments were $77.4 million at March 31, 2018, an increase of $27.9 million, or 56.3 percent, compared to September 30, 2017.

 

Deposits totaled $825.6 million at March 31, 2018, an increase of $35.2 million, or 4.5 percent, compared to September 30, 2017.

 

Federal Home Loan Bank (FHLB) advances totaled $118.0 million at March 31, 2018 and at September 30, 2017.

 

Subordinated debt totaled $24.4 million and $24.3 million at March 31, 2018 and at September 30, 2017, respectively.

 

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Condensed Consolidated Statements of Condition

 

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

 

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

 

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

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

 

Loans

 

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

 

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

 

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

 

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

 

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

 

At March 31, 2018, the Company had $122.7 million in overall undisbursed loan commitments, which consisted primarily of unused commercial lines of credit, home equity lines of credit and available usage from active construction facilities. The Company’s current “Approved, Accepted but Unfunded” pipeline, includes approximately $54.0 million in commercial and construction loans and $15.7 million in residential mortgage loans expected to fund over the next 90 days.

 

Asset Quality

 

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

 

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

 

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

 

The following table presents the components of non-performing assets and other asset quality data for the periods indicated.

 

(dollars in thousands, unaudited)                    
As of or for the quarter ended:  3/31/18   12/31/17   9/30/17   6/30/17   3/31/17 
Non-accrual loans(1)  $2,129   $2,242   $1,038   $1,556   $1,566 
Loans 90 days or more past due and still accruing   474    345    173    321    122 
Total non-performing loans   2,603    2,587    1,211    1,877    1,688 
Other real estate owned                    
Total non-performing assets  $2,603   $2,587   $1,211   $1,877   $1,688 
Performing troubled debt restructured loans
  $18,666   $2,222   $2,238   $1,603   $1,623 
                          
Non-performing assets / total assets   0.24%   0.24%   0.12%   0.19%   0.18%
Non-performing loans / total loans   0.31%   0.32%   0.14%   0.23%   0.22%
Net charge-offs (recoveries)  $212   $(32)  $1   $(91)  $(7)

Net charge-offs (recoveries) / average loans(2)

   0.10%   (0.02)%   0.00%   (0.05)%   0.00%
Allowance for loan losses / total loans   1.00%   1.04%   1.00%   0.98%   0.95%
Allowance for loan losses / non-performing loans
   325.2%   326.1%   694.1%   421.8%   425.4%
                          
Total assets  $1,083,316   $1,057,836   $1,046,012   $1,010,908   $961,815 
Total gross loans   845,200    814,577    842,146    807,567    759,206 
Average loans   827,483    822,941    831,578    792,139    717,376 
Allowance for loan losses   8,466    8,437    8,405    7,917    7,181 

 

 

(1)18 loans, totaling approximately $0.8 million or 38.8% of the total non-accrual loan balance, were making payments at March 31, 2018.

(2)Annualized.

 

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

 

-8-

 

 

Capital

 

At March 31, 2018, our total shareholders’ equity amounted to $105.4 million, or 9.73 percent of total assets, compared to $102.5 million at September 30, 2017. The Company’s book value per common share was $16.03 at March 31, 2018, compared to $15.60 at September 30, 2017.

 

At March 31, 2018, the Bank’s common equity tier 1 ratio was 15.20 percent, tier 1 leverage ratio was 11.96 percent, tier 1 risk-based capital ratio was 15.20 percent and the total risk-based capital ratio was 16.23 percent. At September 30, 2017, the Bank’s common equity tier 1 ratio was 14.75 percent, tier 1 leverage ratio was 12.02 percent, tier 1 risk-based capital ratio was 14.75 percent and the total risk-based capital ratio was 15.78 percent. At March 31, 2018, the Bank was in compliance with all applicable regulatory capital requirements.

 

Non-GAAP Financial Measures

 

Reported amounts are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company’s management believes that the supplemental non-GAAP information provided in this press release is utilized by market analysts and others to evaluate a company’s financial condition and, therefore, that such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures presented by other companies.

 

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

 

(in thousands)                    
For the quarter ended:  3/31/18   12/31/17   9/30/17   6/30/17   3/31/17 
Other income  $449   $1,711   $532   $814   $542 
Less: Net investment securities gains and gains on sale of real estate        1,186    31    374    58 
Other income, excluding net investment securities gains and gains on sale of real estate
  $449   $525   $501   $440   $484 

 

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

 

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

 

 

(1) Included in non-core items are costs which include expenses related to the Company’s corporate restructuring initiatives, such as professional fees, litigation and settlement costs, severance costs, and external payroll development costs related to such restructuring initiatives. The Company believes these adjustments are necessary to provide the most accurate measure of core operating results as a means to evaluate comparative results.

 

-9-

 

 

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

 

For the quarter ended:  3/31/18   12/31/17   9/30/17   6/30/17   3/31/17 
Efficiency ratio on a GAAP basis   58.5%   55.2%   52.7%   55.3%   57.8%

 

Net interest margin, which is non-interest income as a percentage of average interest-earning assets, is presented on a fully tax equivalent (“TE”) basis as we believe this non-GAAP measure is the preferred industry measurement for this item. The Company revised its estimated annual effective rate to reflect a change in the federal statutory rate from 35% to 21%, resulting from the enactment of the Tax Cuts and Jobs Act of 2017. The TE basis adjusts GAAP interest income and yields for the tax benefit of income on certain tax-exempt investments using the blended statutory rate of 24.5% for the current period and 34% for each of the prior periods presented. Below is a reconciliation of GAAP net interest income to the TE basis and the related GAAP basis and TE net interest margins for the periods presented.

 

(dollars in thousands)                    
For the quarter ended:  3/31/18   12/31/17   9/30/17   6/30/17   3/31/17 
Net interest income (GAAP)  $6,568   $6,382   $6,707   $6,399   $5,991 
Tax-equivalent adjustment(1)     29    11    22    34    52 
TE net interest income  $6,597   $6,393   $6,729   $6,433   $6,043 
                          
Net interest income margin (GAAP)   2.57%   2.46%   2.75%   2.71%   2.72%
Tax-equivalent effect   0.01    0.01    0.00    0.01    0.03 
Net interest margin (TE)   2.58%   2.47%   2.75%   2.72%   2.75%

        

 

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

 

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

 

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

-10-

 

 

About Malvern Bancorp, Inc.

 

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

 

Malvern Bank conducts business from its headquarters in Paoli, Pennsylvania, a suburb of Philadelphia and through its nine other banking locations in Chester, Delaware and Bucks counties, Pennsylvania and Morristown, New Jersey, its New Jersey regional headquarters. The Bank also recently announced new representative offices in Palm Beach, Florida and Montchanin, Delaware. Its primary market niche is providing personalized service to its client base.  

 

Malvern Bank, through its Private Banking division and strategic partnership with Bell Rock Capital in Rehoboth Beach, Delaware, provides personalized wealth management and advisory services to high net worth individuals and families. Bel Rock Capital’s services include banking, liquidity management, investment services, 401(K) accounts and planning, custody, tailored lending, wealth planning, trust and fiduciary services, family wealth advisory services and philanthropic advisory services. The Bank offers insurance services though Malvern Insurance Associates, LLC, which provides clients a rich array of financial services, including commercial and personal insurance and commercial and personal lending.

 

For further information regarding Malvern Bancorp, Inc., please visit our web site at http://ir.malvernbancorp.com. For information regarding Malvern Bank, National Association, please visit our web site at http://www.mymalvernbank.com.

 

Forward-Looking Statements

 

This press release contains certain forward looking statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.” Certain factors that could cause actual results to differ materially from expected results include changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the business of Malvern Bancorp, Inc., and changes in the securities markets. Except as required by law, the Company does not undertake any obligation to update any forward-looking statements to reflect changes in beliefs, expectations or events.

 

-11-

 

 

MALVERN BANCORP, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CONDITION

 

(in thousands, except for share and per share data)  March 31, 2018   September 30, 2017 
(unaudited)          
           
ASSETS          
Cash and due from depository institutions  $1,566   $1,615 
Interest bearing deposits in depository institutions   120,144    115,521 
Total cash and cash equivalents   121,710    117,136 
Investment securities available for sale, at fair value (amortized cost of $44.8 million and $14.9 million at March 31, 2018 and September 30, 2017, respectively)   44,341    14,587 
Investment securities held to maturity (fair value of $32.1 million and $34.6 million at March 31, 2018 and September 30, 2017, respectively)   33,052    34,915 
Restricted stock, at cost   8,583    5,559 
Loans receivable, net of allowance for loan losses of $8,466 and $8,405, respectively   837,314    834,331 
Accrued interest receivable   3,583    3,139 
Property and equipment, net   7,357    7,507 
Deferred income taxes, net   3,713    6,671 
Bank-owned life insurance   19,163    18,923 
Other assets   4,500    3,244 
Total assets  $1,083,316   $1,046,012 
           
LIABILITIES          
Deposits:          
Non-interest bearing  $38,444   $42,121 
Interest-bearing   787,125    748,275 
Total deposits   825,569    790,396 
FHLB advances   118,000    118,000 
Other short-term borrowings   2,500    5,000 
Subordinated debt   24,382    24,303 
Advances from borrowers for taxes and insurance   2,463    1,553 
Accrued interest payable   713    694 
Other liabilities   4,327    3,546 
Total liabilities   977,954    943,492 
           
SHAREHOLDERS’ EQUITY          
Preferred stock, $0.01 par value, 10,000,000 shares, authorized, none issued        
Common stock, $0.01 par value, 50,000,000 shares authorized, issued and outstanding: 6,572,684 shares at March 31, 2018 and 6,572,684 shares at September 30, 2017   66    66 
Additional paid in capital   60,886    60,736 
Retained earnings   43,536    43,139 
Unearned Employee Stock Ownership Plan (ESOP) shares   (1,411)   (1,483)
Accumulated other comprehensive income   285    62 
Total shareholders’ equity   105,362    102,520 
Total liabilities and shareholders’ equity  $1,083,316   $1,046,012 

 

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MALVERN BANCORP, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

 

   Three Months Ended March 31,   Six Months Ended March 31, 
(in thousands, except for share data)  2018   2017   2018   2017 
(unaudited)                
Interest and Dividend Income                    
Loans, including fees  $8,740   $7,367   $17,441   $13,680 
Investment securities, taxable   302    470    532    942 
Investment securities, tax-exempt   65    159    130    322 
Dividends, restricted stock   134    64    203    128 
Interest-bearing cash accounts   463    115    909    208 
Total Interest and Dividend Income   9,704    8,175    19,215    15,280 
Interest Expense                    
Deposits   2,182    1,424    4,337    2,748 
Short-term borrowings   22    11    41    11 
Long-term borrowings   546    528    1,109    1,070 
Subordinated debt   386    221    778    221 
Total Interest Expense   3,136    2,184    6,265    4,050 
Net interest income   6,568    5,991    12,950    11,230 
Provision for Loan Losses   240    997    240    1,657 

Net Interest Income after Provision for Loan Losses

   6,328    4,994    12,710    9,573 
Other Income                    
Service charges and other fees   237    274    508    497 
Rental income-other   67    55    133    110 
Net gains on sales of investments, net       58        58 
Net gains on sale of real estate           1,186     
Net gains on sale of loans, net   26    30    93    75 
Earnings on bank-owned life insurance   119    125    240    255 
Total Other Income   449    542    2,160    995 
Other Expense                    
Salaries and employee benefits   2,001    1,804    3,991    3,516 
Occupancy expense   586    514    1,148    1,008 
Federal deposit insurance premium   75    91    151    95 
Advertising   38    73    92    124 
Data processing   267    301    545    603 
Professional fees   450    399    1,238    800 
Other operating expenses   688    596    1,411    1,202 
Total Other Expense   4,105    3,778    8,576    7,348 
Income before income tax expense   2,672    1,758    6,294    3,220 
Income tax expense   654    588    3,873    1,077 
Net Income  $2,018   $1,170   $2,421   $2,143 
                     
Earnings per common share                    
Basic  $0.31   $0.18   $0.38   $0.33 
Diluted  $0.31   $0.18   $0.38   $0.33 

Weighted Average Common Shares Outstanding

                    
Basic   6,448,691    6,427,309    6,446,959    6,422,899 
Diluted   6,452,246    6,427,932    6,427,932    6,423,269 

 

-13-

 

 

MALVERN BANCORP, INC AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA

   

   Three Months Ended 

(in thousands, except for share and per share data) (annualized where applicable)

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

 

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