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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)           August 2, 2018

 

Malvern Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 

Pennsylvania 000-54835 45-5307782
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation)   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 August 2, 2018, Malvern Bancorp, Inc. (the “Company”), the holding company for Malvern Bank, National Association (the “Bank”), reported its results of operations for the third fiscal quarter ended June 30, 2018.

 

For additional information, reference is made to the Company’s press release dated August 2, 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 August 2, 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:  August 6, 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

 

(graphic)

 

Investor Relations:

Joseph D. Gangemi

SVP & CFO

(610) 695-3676

 

Investor Contact:

Ronald Morales

(610) 695-3646

 

Malvern Bancorp, Inc. Reports Third Fiscal Quarter Results

 

PAOLI, PA., August 2, 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 third fiscal quarter ended June 30, 2018. Net income amounted to $2.2 million or $0.35 per fully diluted common share, for the quarter ended June 30, 2018, an increase of $0.5 million, or 30.5 percent, as compared with net income of $1.7 million, or $0.27 per fully diluted common share, for the quarter ended June 30, 2017.

 

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

 

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

 

 

 

 

Highlights for the quarter include:

 

Return on average assets (“ROAA”) was 0.85 percent for the three months ended June 30, 2018, compared to 0.70 percent for the three months ended June 30, 2017, and return on average equity (“ROAE”) was 8.40 percent for the three months ended June 30, 2018, compared with 6.90 percent for the three months ended June 30, 2017.

 

The Company originated $105.3 million in new loans in the third quarter of fiscal 2018, which was offset by $48.5 million in payoffs, prepayments, amortization, and participation from its portfolio, resulting in a net portfolio increase of $56.8 million over the second quarter of fiscal 2018. New loan originations in the third quarter of fiscal 2018 consisted of $14.2 million in residential mortgage loans, $79.6 million in commercial loans, $9.5 million in construction and development loans and $2.0 million in consumer loans.

 

Non-performing assets (“NPAs”) were 0.32 percent of total assets at June 30, 2018, compared to 0.19 percent at June 30, 2017 and 0.12 percent at September 30, 2017. The allowance for loan losses as a percentage of total non-performing loans was 268.5 percent at June 30, 2018, compared to 421.8 percent at June 30, 2017 and 694.1 percent at September 30, 2017.

 

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

 

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

 

The efficiency ratio, a non-GAAP measure, was 52.7 percent for the third quarter of fiscal 2018 on an annualized basis, compared to 57.0 percent in the third quarter of fiscal 2017 and 55.4 percent in the fourth quarter of fiscal 2017.

 

The Company’s balance sheet reflected total asset growth of $7.6 million at June 30, 2018, compared to September 30, 2017, coupled with stable asset quality, and capital levels that exceeded regulatory standards for a well-capitalized institution.

 

Selected Financial Ratios 
(unaudited; annualized where applicable)
                    
As of or for the quarter ended:  6/30/18   3/31/18   12/31/17   9/30/17   6/30/17 
Return on average assets   0.85%   0.77%   0.15%   0.77%   0.70%
Return on average equity   8.40%   7.71%   1.55%   7.70%   6.90%
Net interest margin (tax equivalent basis) (1)   2.75%   2.58%   2.47%   2.75%   2.72%
Loans / deposits ratio   114.46%   102.38%   102.19%   106.55%   106.30%
Shareholders’ equity / total assets   10.25%   9.73%   9.76%   9.80%   9.93%
Efficiency ratio (1)   52.7%   57.7%   63.6%   55.4%   57.0%
Book value per common share  $16.42   $16.03   $15.70   $15.60   $15.28 

 

 

 

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

 

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Net Interest Income

 

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

 

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

 

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

 

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

 

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

 

Earnings Summary for the Period Ended June 30, 2018

 

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

 

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

 

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Other Income

 

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

 

For the nine months ended June 30, 2018, total other income increased $1.1 million compared to the same period in fiscal 2017, primarily as a result of a $1.2 million net gain on the sale of real estate, an increase of $308,000 in other fees and service charges and a $35,000 increase in rental income offset by a $432,000 decrease in net gains on sales of investment securities, a $10,000 decrease in net gains on sale of loans, and a $21,000 decrease in earnings on bank-owned insurance.

 

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

 

(in thousands, unaudited)                    
For the quarter ended:  6/30/18   3/31/18   12/31/17   9/30/17   6/30/17 
Service charges on deposit accounts  $530   $237   $271   $262   $233 
Rental income – other   63    67    66    66    51 
Net gains on sales of investments, net               31    374 
Gain on sale of real estate, net           1,186         
Gain on sale of loans, net   3    26    67    48    31 
Bank-owned life insurance   119    119    121    125    125 
Total other income  $715   $449   $1,711   $532   $814 

 

Other Expense

 

Total other expense for the three months ended June 30, 2018, increased $804,000, or 20.2 percent, when compared to the quarter ended June 30, 2017. The increase primarily reflected increases in salaries and employee benefits of $151,000, a $44,000 increase in occupancy expense, a $467,000 increase in professional fees, and a $215,000 increase in other operating expense. The increase was offset by a $2,000 decrease in the federal deposit insurance premium, a $37,000 decrease in advertising expense, and a $34,000 decrease in data processing expense. The increase in salaries and employee benefits primarily reflects higher compensation and related costs due to added staff to support overall franchise growth. The increase in occupancy expense was mainly due to expanded locations. Professional fees reflect increased legal and accounting fees for the period related to prior period restatements, which the Company does not expect to continue into future periods.

 

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

 

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

 

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

 

Income Taxes

 

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

 

Statement of Condition Highlights at June 30, 2018

 

Highlights as of June 30, 2018, included:

 

Balance sheet strength, with total assets amounting to $1.1 billion at June 30, 2018, an increase of $7.6 million, or 0.7 percent, compared to September 30, 2017.

 

The Company’s gross loans were $901.8 million at June 30, 2018, an increase of $59.7 million, or 7.1 percent, from September 30, 2017.

 

Total investments were $65.4 million at June 30, 2018, an increase of $15.9 million, or 32.0 percent, compared to September 30, 2017.

 

Deposits totaled $787.9 million at June 30, 2018, a decrease of $2.5 million, or 0.3 percent, compared to September 30, 2017.

 

Federal Home Loan Bank (FHLB) advances totaled $123.0 million and $118.0 million at June 30, 2018 and at September 30, 2017, respectively.

 

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

 

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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:  6/30/18   3/31/18   12/31/17   9/30/17   6/30/17 

Cash and due from depository institutions

  $1,447   $1,566   $1,636   $1,615   $1,622 

Interest bearing deposits in depository institutions

   45,934    120,144    127,006    115,521    111,805 

Investment securities, available for sale, at fair value

   34,348    44,341    44,503    14,587    16,811 
Investment securities held to maturity   31,004    33,052    33,893    34,915    36,027 
Restricted stock, at cost   8,781    8,583    5,930    5,559    5,458 

Loans receivable, net of allowance for loan losses

   893,355    837,314    806,764    834,331    800,337 
Accrued interest receivable   3,571    3,583    3,344    3,139    2,837 
Property and equipment, net   7,240    7,357    7,374    7,507    7,182 
Deferred income taxes   3,920    3,713    4,469    6,671    7,912 
Bank-owned life insurance   19,282    19,163    19,045    18,923    18,798 
Other assets   4,693    4,500    3,872    3,244    2,119 
                          
Total assets  $1,053,575   $1,083,316   $1,057,836   $1,046,012   $1,010,908 
Deposits  $787,932   $825,569   $797,099   $790,396   $759,679 
FHLB advances   123,000    118,000    118,000    118,000    118,000 
Other short-term borrowings   2,500    2,500    5,000    5,000     
Subordinated debt   24,421    24,382    24,342    24,303    24,263 
Total other liabilities   7,749    7,503    10,199    5,793    8,533 
Shareholders’ equity   107,973    105,362    103,196    102,520    100,433 

Total liabilities and shareholders’ equity

  $1,053,575   $1,083,316   $1,057,836   $1,046,012   $1,010,908 

 

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

 

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

 

Loans

 

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

 

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

 

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

 

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

 

Loans (unaudited)                    
(in thousands)                    
At quarter ended:  6/30/18   3/31/18   12/31/17   9/30/17   6/30/17 
Residential mortgage  $192,901   $184,318   $186,831   $192,500   $190,788 
Construction and Development:                         
Residential and commercial   39,845    35,213    34,627    35,622    36,530 
Land   15,565    21,727    18,599    18,377    18,325 

Total construction and development

   55,410    56,940    53,226    53,999    54,855 
Commercial:                         
Commercial real estate   477,584    445,995    427,610    437,760    424,732 
Farmland   12,058    12,069    1,711    1,723    1,734 
Multi-family   45,204    32,608    32,716    39,768    21,547 
Other   82,856    75,368    71,933    74,837    71,248 
Total commercial   617,702    566,040    533,970    554,088    519,261 
Consumer:                         
Home equity lines of credit   14,446    15,538    16,811    16,509    17,602 
Second mortgages   19,063    19,960    21,304    22,480    23,658 
Other   2,311    2,404    2,435    2,570    1,403 
Total consumer   35,820    37,902    40,550    41,559    42,663 
Total loans   901,833    845,200    814,577    842,146    807,567 
Deferred loan costs, net   546    580    624    590    687 
Allowance for loan losses   (9,024)   (8,466)   (8,437)   (8,405)   (7,917)
Loans Receivable, net  $893,355   $837,314   $806,764   $834,331   $800,337 

 

At June 30, 2018, the Company had $123.8 million in overall undisbursed loan commitments, which consisted primarily of unused commercial lines of credit, home equity lines of credit and available usage from active construction facilities. The Company’s current “Approved, Accepted but Unfunded” pipeline, includes approximately $58.1 million in commercial and construction loans and $1.4 million in residential mortgage loans expected to fund over the next 90 days.

 

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Asset Quality

 

Non-accrual loans were $2.0 million at June 30, 2018 an increase of $1.0 million or 95.0 percent, as compared to September 30, 2017, and an increase of $0.4 million as compared to June 30, 2017. Other real estate owned (“OREO”) remained at zero at June 30, 2018, September 30, 2017 and June 30, 2017. The increase in non-accrual loans at June 30, 2018 compared to September 30, 2017 was primarily due to one legacy commercial loan, with an aggregate outstanding balance of approximately $0.6 million moving to non-accrual status in the first quarter of 2018. Total performing troubled debt restructured (TDR) loans were $18.7 million at June 30, 2018, $2.2 million at September 30, 2017 and $1.6 million at June 30, 2017. The increase in TDR loans at June 30, 2018 compared to September 30, 2017 was primarily due to two commercial loans with an aggregate outstanding balance of approximately $16.4 million moving to performing TDR status in the second fiscal quarter of 2018.

 

At June 30, 2018, non-performing assets totaled $3.4 million, or 0.32 percent of total assets, as compared with $1.2 million, or 0.12 percent, at September 30, 2017 and $1.9 million, or 0.19 percent, at June 30, 2017. The increase in non-performing assets at June 30, 2018 compared to September 30, 2017 was primarily due to the addition of five single residential loans with an aggregate outstanding balance of $0.5 million, one commercial loan with an outstanding balance of $0.6 million and seven consumer loans with an aggregate outstanding balance of $0.2 million moving into non-accrual status and a $1.0 million increase in residential mortgage loans receivable greater than 90 days and accruing. The portfolio of non-accrual loans at June 30, 2018 was comprised of twelve residential real estate loans with an aggregate outstanding balance of approximately $1.1 million, one commercial real estate loan with an outstanding balance of $0.6 million, and ten consumer loans with an aggregate outstanding balance of approximately $0.3 million.

 

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

 

(dollars in thousands, unaudited)                    
As of or for the quarter ended:  6/30/18   3/31/18   12/31/17   9/30/17   6/30/17 
Non-accrual loans(1)  $2,023   $2,129   $2,242   $1,038   $1,556 
Loans 90 days or more past due and still accruing   1,338    474    345    173    321 
Total non-performing loans   3,361    2,603    2,587    1,211    1,877 
Other real estate owned                    
Total non-performing assets  $3,361   $2,603   $2,587   $1,211   $1,877 

Performing troubled debt restructured loans

  $18,693   $18,666   $2,222   $2,238   $1,603 
                          
Non-performing assets / total assets   0.32%   0.24%   0.24%   0.12%   0.19%
Non-performing loans / total loans   0.37%   0.31%   0.32%   0.14%   0.23%
Net charge-offs (recoveries)  $30   $212   $(32)  $1   $(91)

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

   0.03%   0.10%   (0.02)%   0.00%   (0.05)%
Allowance for loan losses / total loans   1.00%   1.00%   1.04%   1.00%   0.98%

Allowance for loan losses / non-performing loans

   268.5%   325.2%   326.1%   694.1%   421.8%
                          
Total assets  $1,053,575   $1,083,316   $1,057,836   $1,046,012   $1,010,908 
Total gross loans   901,833    845,200    814,577    842,146    807,567 
Average loans   864,348    827,483    822,941    831,578    792,139 
Allowance for loan losses   9,024    8,466    8,437    8,405    7,917 

 

 

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

(2)Annualized.

 

-8

 

 

The allowance for loan losses at June 30, 2018 amounted to approximately $9.0 million, or 1.00 percent of total loans, compared to $8.4 million, or 1.00 percent of total loans, at September 30, 2017 and $7.9 million, or 0.98 percent of total loans, at June 30, 2017. The Company had a slight decrease in provision expense of approximately $56,000 for the quarter ended June 30, 2018 compared to June 30, 2017.

 

Capital

 

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

 

At June 30, 2018, the Bank’s common equity tier 1 ratio was 14.77 percent, tier 1 leverage ratio was 12.23 percent, tier 1 risk-based capital ratio was 14.77 percent and the total risk-based capital ratio was 15.82 percent. At September 30, 2017, the Bank’s common equity tier 1 ratio was 14.75 percent, tier 1 leverage ratio was 12.02 percent, tier 1 risk-based capital ratio was 14.75 percent and the total risk-based capital ratio was 15.78 percent. At June 30, 2018, the Bank was in compliance with all applicable regulatory capital requirements.

 

Non-GAAP Financial Measures

 

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

 

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

 

(in thousands)                    
For the quarter ended:  6/30/18   3/31/18   12/31/17   9/30/17   6/30/17 
Other income  $715   $449   $1,711   $532   $814 

Less: Net investment securities gains and gains on sale of real estate

           1,186    31    374 

Other income, excluding net investment securities gains and gains on sale of real estate

  $715   $449   $525   $501   $440 

 

-9

 

 

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

 

(dollars in thousands)                    
For the quarter ended:  6/30/18   3/31/18   12/31/17   9/30/17   6/30/17 
Other expense  $4,790   $4,105   $4,471   $3,813   $3,986 
Less: non-core items(1)   713    43    72    29    72 
Other expense, excluding non-core items  $4,077   $4,062   $4,399   $3,784   $3,914 
Net interest income (tax equivalent basis)  $7,021   $6,597   $6,393   $6,729   $6,433 
Other income, excluding net investment securities gains and gains on sale of real estate   715    449    525    501    440 
Total  $7,736   $7,046   $6,918   $7,230   $6,873 
                          
Efficiency ratio   52.7%   57.7%   63.6%   55.4%   57.0%

 

 

         
(1)  Non-core items for the quarter ended June 30, 2018 consisted of additional legal and accounting fees arising out of matters pertaining to prior period restatements.  Non-core items for prior periods consisted of expenses related to the Company’s corporate restructuring initiatives, such as professional fees, litigation and settlement costs, severance costs and external payroll development costs.  The Company believes these adjustments are necessary to provide the most accurate measure of core operating results as a means to evaluate comparative results.

 

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

 

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

 

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

 

(dollars in thousands)                    
For the quarter ended:  6/30/18   3/31/18   12/31/17   9/30/17   6/30/17 
Net interest income (GAAP)  $6,976   $6,568   $6,382   $6,707   $6,399 
Tax-equivalent adjustment(1)     45    29    11    22    34 
TE net interest income  $7,021   $6,597   $6,393   $6,729   $6,433 
                          
Net interest income margin (GAAP)   2.73%   2.57%   2.46%   2.75%   2.71%
Tax-equivalent effect   0.02    0.01    0.01    0.00    0.01 
Net interest margin (TE)   2.75%   2.58%   2.47%   2.75%   2.72%

 

 

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

 

 -10-

 

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

 

(in thousands)                    
For the quarter ended:  6/30/18   3/31/18   12/31/17   9/30/17   6/30/17 
Investment securities  $75,932   $77,961   $59,453   $50,899   $82,832 
Loans   864,348    827,483    822,941    832,205    792,139 
Allowance for loan losses   (8,589)   (8,426)   (8,419)   (8,120)   (7,456)
All other assets   120,730    157,126    194,017    134,502    110,456 
   Total assets   1,052,421    1,054,144    1,067,992    1,009,486    977,971 
Non-interest bearing deposits  $45,124   $40,034   $42,760   $45,969   $45,173 
Interest-bearing deposits   746,341    754,820    766,105    705,841    682,606 
FHLB advances   118,121    118,000    118,000    118,000    118,000 
Other short-term borrowings   2,555    4,945    5,000    6,033    220 
Subordinated debt   24,399    24,360    24,322    24,282    24,992 
Other liabilities   9,072    7,283    8,086    7,749    7,324 
Shareholders’ equity   106,809    104,702    103,719    101,612    99,656 
Total liabilities and shareholders’ equity
  $1,052,421   $1,054,144   $1,067,992   $1,009,486   $977,971 

 

About Malvern Bancorp, Inc.

 

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

 

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

 

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

 

 -11-

 

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

 

Forward-Looking Statements

 

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

 

 -12-

 

MALVERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CONDITION

 

(in thousands, except for share and per share data)  June 30,
2018
   September 30,
2017
 
(unaudited)          
ASSETS          
Cash and due from depository institutions  $1,447   $1,615 
Interest bearing deposits in depository institutions   45,934    115,521 
    Total cash and cash equivalents   47,381    117,136 
Investment securities available for sale, at fair value (amortized cost of $34.8 million and $14.9 million at June 30, 2018 and September 30, 2017, respectively)    34,348    14,587 
Investment securities held to maturity (fair value of $30.0 million and $34.6 million at June 30, 2018 and September 30, 2017, respectively)   31,004    34,915 
Restricted stock, at cost   8,781    5,559 
Loans receivable, net of allowance for loan losses of $9,024 and $8,405, respectively   893,355    834,331 
Accrued interest receivable   3,571    3,139 
Property and equipment, net   7,240    7,507 
Deferred income taxes, net   3,920    6,671 
Bank-owned life insurance   19,282    18,923 
Other assets   4,693    3,244 
   Total assets  $1,053,575   $1,046,012 
           
LIABILITIES          
Deposits:          
   Non-interest bearing  $48,296   $42,121 
   Interest-bearing   739,636    748,275 
Total deposits   787,932    790,396 
FHLB advances   123,000    118,000 
Other short-term borrowings   2,500    5,000 
Subordinated debt   24,421    24,303 
Advances from borrowers for taxes and insurance   3,148    1,553 
Accrued interest payable   1,095    694 
Other liabilities   3,506    3,546 
   Total liabilities   945,602    943,492 
           
SHAREHOLDERS’ EQUITY          
Preferred stock, $0.01 par value, 10,000,000 shares, authorized, none issued        
Common stock, $0.01 par value, 50,000,000 shares authorized, issued and outstanding: 6,575,179 shares at June 30, 2018 and 6,572,684 shares at September 30, 2017   66    66 
Additional paid in capital   60,985    60,736 
Retained earnings   47,770    43,139 
Unearned Employee Stock Ownership Plan (ESOP) shares   (1,374)   (1,483)
Accumulated other comprehensive income   526    62 
   Total shareholders’ equity   107,973    102,520 
   Total liabilities and shareholders’ equity  $1,053,575   $1,046,012 

 

 -13-

 

MALVERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

 

   Three Months Ended June 30,   Nine Months Ended June 30, 
(in thousands, except for share data)  2018   2017   2018   2017 
(unaudited)                
Interest and Dividend Income                    
Loans, including fees  $9,380   $8,246   $26,821   $21,926 
Investment securities, taxable   300    422    832    1,364 
Investment securities, tax-exempt   61    100    191    422 
Dividends, restricted stock   130    64    333    192 
Interest-bearing cash accounts   327    141    1,236    349 
Total Interest and Dividend Income   10,198    8,973    29,413    24,253 
Interest Expense                    
Deposits   2,304    1,645    6,641    4,393 
Short-term borrowings   13    1    54    12 
Long-term borrowings   539    545    1,648    1,615 
Subordinated debt   366    383    1,144    604 
Total Interest Expense   3,222    2,574    9,487    6,624 
Net interest income   6,976    6,399    19,926    17,629 
Provision for Loan Losses   589    645    829    2,302 

Net Interest Income after Provision for Loan Losses

   6,387    5,754    19,097    15,327 
Other Income                    
Service charges on deposit accounts   530    233    1,038    730 
Rental income-other   63    51    196    161 
Net gains on sales of investments, net       374        432 
Net gains on sale of real estate           1,186     
Net gains on sale of loans, net   3    31    96    106 
Earnings on bank-owned life insurance   119    125    359    380 
Total Other Income   715    814    2,875    1,809 
Other Expense                    
Salaries and employee benefits   2,024    1,873    6,015    5,389 
Occupancy expense   577    533    1,725    1,541 
Federal deposit insurance premium   76    78    227    173 
Advertising   30    67    122    191 
Data processing   274    308    819    911 
Professional fees   1,088    621    2,326    1,421 
Other operating expenses   721    506    2,132    1,708 
Total Other Expense   4,790    3,986    13,366    11,334 
Income before income tax expense   2,312    2,582    8,606    5,802 
Income tax expense   69    863    3,942    1,940 
Net Income  $2,243   $1,719   $4,664   $3,862 
                     
Earnings per common share                    
Basic  $0.35   $0.27   $0.72   $0.60 
Diluted  $0.35   $0.27   $0.72   $0.60 

Weighted Average Common Shares Outstanding

                    
Basic   6,453,031    6,443,515    6,449,089    6,427,978 
Diluted   6,456,048    6,445,288    6,452,068    6,428,426 

 

 -14-

  

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

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

 

-15-

 

 

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