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Section 1: 8-K (8-K)

mlvf-8k_20200805.htm

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 6, 2020 (August 5, 2020)

 

MALVERN BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

Pennsylvania

000-54385

45-5307782

(State or other jurisdiction of

(Commission file number)

(IRS Employer

incorporation or organization)

 

Identification No.)

42 East Lancaster Avenue, Paoli, Pennsylvania 19301

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (610) 644-9400

 

N/A

(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 obligations of the registrant under any of the following provisions:

 

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))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock

MLVF

NASDAQ

 

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 2.02

Results of Operations and Financial Condition

On August 5, 2020, Malvern Bancorp, Inc. (the “Company”), the holding company for Malvern Bank, National Association (the “Bank”), issued a press release setting forth its results of operations for its third fiscal quarter ended June 30, 2020.  A copy of the Company’s press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.

 

The information furnished under Item 2.02 and Item 9.01 of this Current Report on Form 8-K, including Exhibit 99.1 to this Current Report on Form 8-K, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of the Company under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.

Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits

 

The exhibits that are filed or furnished with this report are listed in the Exhibit Index that immediately follows the signatures hereto, which list is incorporated herein by reference.

 

 

 

 

 

 

 


2


 

EXHIBIT INDEX

 

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press release dated August 5, 2020.

 


3


 

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 hereunto duly authorized.

 

 

 

MALVERN BANCORP, INC.

 

 

Dated: August 6, 2020

By: 

/s/ Joseph D. Gangemi

 

 

Joseph D. Gangemi
Executive Vice President and Chief Financial Officer

 

4

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Section 2: EX-99.1 (EX-99.1)

mlvf-ex991_6.htm

 

Exhibit 99.1

 

 

NEWS RELEASE

 

 

42 E. Lancaster Avenue Paoli, Pennsylvania 19301 | 610-644-9400 | http://ir.malvernbancorp.com

 

Investor Contacts:

Joseph D. Gangemi

Corporate Investor Relations

610-695-3676

 

Investor Relations Contact:

Ronald Morales

610-695-3646

 

 

 

 

Malvern Bancorp, Inc. Reports Third Fiscal Quarter 2020 Results

 

PAOLI, PA., August 5, 2020 -- Malvern Bancorp, Inc. (NASDAQ: MLVF) (the “Company”), the parent company of Malvern Bank, National Association (“Malvern” or the “Bank”), today reported operating results for the third fiscal quarter ended June 30, 2020.   Net income for the quarter ended June 30, 2020 amounted to $1.5 million, or $0.19 per fully diluted common share, compared with net income of $2.7 million, or $0.35 per fully diluted common share, for the quarter ended June 30, 2019. The decreases in net income and diluted earnings per share from the third quarter of 2019 were primarily due to an increase in the provision for loan losses and a decrease in net interest income. The Company recorded a provision for loan losses of $435,000 for the quarter ended June 30, 2020, an increase of $379,000 compared to the quarter ended June 30, 2019, substantially due to economic uncertainties caused by the coronavirus pandemic (“COVID-19”). Net interest income for the quarter ended June 30, 2020 was $830,000 lower than in the quarter ended June 30, 2019. This decrease was mainly driven by the lower interest rate environment. Annualized return on average assets (“ROAA”) was 0.48 percent for the quarter ended June 30, 2020, compared to 0.88 percent for the quarter ended June 30, 2019, and annualized return on average equity (“ROAE”) was 4.06 percent for the quarter ended June 30, 2020, compared with 7.66 percent for the quarter ended June 30, 2019.

For the nine months ended June 30, 2020, net income amounted to $4.1 million, or $0.54 per fully diluted common share, compared with net income of $6.6 million, or $0.87 per fully diluted common share, for the nine months ended June 30, 2019. The decreases in net income and diluted earnings per share were primarily due to higher provision expense and lower net interest income, as well as the partial charge-off of $2.3 million in the first fiscal quarter of 2020 related to one commercial loan relationship.  Annualized ROAA was 0.45 percent for the nine months ended June 30, 2020, compared to 0.78 percent for the nine months ended June 30, 2019, and annualized ROAE was 3.85 percent for the nine months ended June 30, 2020, compared with 6.48 percent for the nine months ended June 30, 2019.

 

Over the last several months, we have operated under what can only be described as unprecedented circumstances.  While we’ve always tested and planned for emergencies, realizing one as significant as the COVID-19 pandemic, and activating our plan in March to work remotely and through drive-thru service only for almost three months, could not have been forecasted by anyone.  As the COVID-19 pandemic continues to provide a drag on both our business and the broader economy amidst the backdrop of virus spikes in certain states and the uncertainty of a vaccine, the question of when the economy will return to a more normal environment creates heightened uncertainty and new challenges to adapt our business,” commented Anthony C. Weagley, President and Chief Executive Officer.  “Our priority remains keeping our staff and clients safe and helping our clients while we implement strategies to navigate this crisis and continue to move forward,” continued Mr. Weagley.

-1-


 

Ongoing Impact of COVID-19

 

The Company continues to take the following significant steps to protect the health and well-being of its employees and clients and to assist clients who have been impacted by the COVID-19 pandemic.

 

 

Continuing limited lobby hours; prioritizing drive-thru and appointment banking.  

 

High-risk designated hours offered to assist our high-risk clients.

 

Continuing to assist existing and new customers in the Small Business Association’s Paycheck Protection Program (“PPP”). As of June 30, 2020, the Company has obtained approval from the Small Business Administration (“SBA”) for 208 loans totaling $17.7 million for existing and new customers with an average loan size of approximately $85,000.  As of August 1, 2020, the Company has originated 249 PPP loans totaling $20.7 million for both existing and new customers, with an average loan size of approximately $83,000. These loans are expected to generate fee income of approximately $763,000 in future quarters.

 

Continuing to provide payment deferrals and forbearances to business customers and mortgage customers that are experiencing hardship because of the crisis. At June 30, 2020, the Company had $313.5 million in COVID-19 modified loans deferrals.  As of August 1, 2020, $269.1 million, or 85.8 percent, of COVID-19 modified loans reached their initial 90 day forbearance expiration. Of this amount, $140.6 million, or 52.2 percent, have returned to original contractual monthly payments and $128.5 million, or 47.8 percent, have requested or been approved for a second forbearance period for a maximum of 90 additional days.  Of the $128.5 million, $22.7 million or 17.6 percent, started making interest only payments during the second forbearance period.  

Statement of Income Highlights at June 30, 2020

 

 

The Company recorded a provision for loan losses of $435,000 and $3.2 million during the three months ended June 30, 2020 and the nine months ended June 30, 2020, respectively. The increase in the provision for loan losses in the recent quarter as compared with the prior quarter ended June 30, 2019 reflects an increase in qualitative factors as a result of COVID-19. The larger component of the year-to-date increase was attributable to a partial charge-off of $2.3 million in the first fiscal quarter of 2020 related to one commercial loan relationship. Due to the uncertainty created by COVID-19, the Company anticipates elevated provisioning until businesses have fully reopened and deferral periods have expired.

 

 

Net interest income decreased $830,000, or 11.1 percent, for the three months ended June 30, 2020 when compared to the three months ended June 30, 2019. Lower rates were attributable to the Federal Open Market Committee (“FOMC”) lowering its target rate from 2.25-2.50 percent to 0-0.25 percent between July 2019 and March 2020.

 

 

On a linked-quarter basis, the reported net interest margin and net interest margin on a tax-equivalent basis, a non-GAAP measure, increased 4 basis points to 2.29 percent.  This increase was driven by the reduction in interest expense, partially offset by a decrease in interest earning assets. Information reconciling non-GAAP measures to GAAP measures is presented beginning on page 13 in this press release. Average loan yields declined 29 basis points and the total cost of funds decreased 31 basis points, as the cost of interest-bearing deposits decreased 27 basis points compared to the second fiscal quarter of 2020.

 

Linked Quarter Financial Ratios

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

As of or for the quarter ended:

6/30/20

3/31/20

12/31/19

9/30/19

6/30/19

Return on average assets (1)

0.48%

0.61%

0.26%

0.86%

0.88%

Return on average equity (1)

4.06%

5.29%

2.19%

7.65%

7.66%

Net interest margin (tax equivalent basis) (2)

2.29%

2.25%

2.34%

2.45%

2.54%

Loans / deposits ratio

117.45%

110.56%

106.14%

106.64%

106.52%

Shareholders’ equity / total assets

11.92%

11.58%

11.40%

11.26%

11.03%

Efficiency ratio, non-GAAP (1) (2)  (3)

66.0%

60.8%

58.9%

54.9%

56.6%

Book value per common share

$18.86

$18.67

$18.48

$18.35

$17.99

 

-2-


 

 

(1)

Annualized.

 

(2)

Information reconciling non-GAAP measures to GAAP measures is presented beginning on page 13 in this press release.

 

 

(3)

Efficiency ratio is a non-GAAP financial measure and is defined as other expense, excluding certain non-core items, as a percentage of net interest income on a tax equivalent basis plus other income.

Linked Quarter Income Statement Data

 

(unaudited)

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended:

 

6/30/20

 

 

3/31/20

 

 

12/31/19

 

 

9/30/19

 

 

6/30/19

Net interest income

$

6,631

 

$

6,793

 

$

6,888

 

$

7,418

 

$

7,461

Provision for loan losses

 

435

 

 

625

 

 

2,150

 

 

-

 

 

56

Net interest income after provision for loan losses

 

6,196

 

 

6,168

 

 

4,738

 

 

7,418

 

 

7,405

Other income

 

389

 

 

964

 

 

443

 

 

551

 

 

454

Other expense

 

4,684

 

 

4,638

 

 

4,422

 

 

4,453

 

 

4,497

Income before income tax expense

 

1,901

 

 

2,494

 

 

759

 

 

3,516

 

 

3,362

Income tax expense (benefit)

 

447

 

 

586

 

 

(26)

 

 

817

 

 

706

Net income

$

1,454

 

$

1,908

 

$

785

 

$

2,699

 

$

2,656

Earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.19

 

$

0.25

 

$

0.10

 

$

0.35

 

$

0.35

Diluted

$

0.19

 

$

0.25

 

$

0.10

 

$

0.35

 

$

0.35

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

Basic

 

7,538,375

 

 

7,663,771

 

 

7,665,842

 

 

7,663,242

 

 

7,669,851

Diluted

 

7,538,375

 

 

7,663,771

 

 

7,665,842

 

 

7,663,593

 

 

7,670,106

 

Net Interest Income

Net interest income was $6.6 million for the quarter ended June 30, 2020, a decrease of $830,000, or 11.1 percent, from $7.5 million for the quarter ended June 30, 2019. The decline was driven by the Federal Reserve Board’s zero rate policy. The net interest spread on an annualized basis was 2.10 percent and 2.29 percent for the quarters ended June 30, 2020 and 2019, respectively.  

For the quarter ended June 30, 2020, the Company’s reported net interest margin and net interest margin on a tax-equivalent basis, a non-GAAP measure, decreased by 25 basis points to 2.29 percent, as compared to the quarter ended June 30, 2019. This decrease was primarily driven by the low rate environment.  Average loan yields declined 62 basis points and the total cost of funds decreased 44 basis points, as the cost of interest-bearing deposits decreased 43 basis points compared to third fiscal quarter of 2019.  

 

As of June 30, 2020, we had a total of $76.8 million of average interest-bearing cash balances.  This excess liquidity diluted the net interest margin by approximately 25 basis points. In addition, we had $17.7 million of PPP loans that had a slight dilutive effect on our net interest margin. The PPP loans are at 1.00 percent plus the accretion of the origination fee.

Net interest income was $20.3 million for the nine months ended June 30, 2020, a decrease of $1.3 million, or 6.2 percent, from $21.6 million for the nine months ended June 30, 2019.  The change for the nine months ended June 30, 2020 was primarily the result of the low rate environment and an increase in total interest-bearing liabilities of $74.1 million, partially offset by an increase of $55.9 million in the average balance of loans. The net interest spread on an annualized basis was 2.06 percent and 2.36 percent for the nine months ended June 30, 2020 and 2019, respectively.  

For the nine months ended June 30, 2020, the Company’s net interest margin decreased by 32 basis points to 2.29 percent as compared to 2.61 percent for the same nine-month period in fiscal 2019.

For the nine months ended June 30, 2020, the Company’s net interest margin on a tax-equivalent basis, a non-GAAP measure, decreased by 33 basis points to 2.29 percent as compared to 2.62 percent for the same nine-month period in fiscal 2019.

 

Total Interest Income

For the quarters ended June 30, 2020 and June 30, 2019, total interest income was $10.5 million and $12.5 million, respectively. Average interest earning assets decreased $17.0 million for the quarter ended June 30, 2020 when compared to the quarter ended June 30, 2019, while the average yield on interest earning assets declined 63 basis points when compared to the same period in 2019.  The average yield was affected by the Federal Reserve Board’s zero rate policy.

-3-


 

For the nine months ended June 30, 2020, total interest income was $33.8 million, a decrease of $1.2 million, or 3.2 percent, from $35.0 million for the nine months ended June 30, 2019.  The decline in total interest income was driven by a lower earning asset yield of 41 basis points.

Interest Expense

For the quarter ended June 30, 2020, interest expense decreased by $1.2 million, or 23.5 percent, to $3.8 million, compared to the quarter ended June 30, 2019, primarily due to decreased rates on deposits and other interest-bearing liabilities.  The decrease in interest expense on deposits is primarily attributable to a decrease of $34.8 million and $18.4 million for certificate and money market deposits, respectively, partially offset by an increase of $22.5 million in other interest-bearing liabilities. The decrease in deposits was strategic, a method to reduce excess cash on the balance sheet, match funding expectations and improve the margin.  The reduction in certificates were all listing services and the reduction in money market were public funds deposits.  This shift in deposits also improves our strategy to develop relationship-based customers.

The annualized average rate of total interest-bearing liabilities decreased 44 basis points to 1.51 percent for the quarter ended June 30, 2020, from 1.95 percent for the quarter ended June 30, 2019 and, on a linked sequential quarter basis, decreased 31 basis points from 1.82 percent compared to the second fiscal quarter of 2020. For the quarter ended June 30, 2020, the average balance of total interest-bearing liabilities decreased by $9.3 million, reflecting a decrease in the average balance of total interest-bearing deposit accounts of $30.5 million and an increase in the average balance of borrowings of $21.2 million, compared to the quarter ended June 30, 2019.  

Total interest expense increased by $209,000, or 1.6 percent, to $13.5 million for the nine months ended June 30, 2020, compared to the nine months ended June 30, 2019. The average rate of total interest-bearing liabilities decreased to 1.75 percent for the nine months ended June 30, 2020, from 1.86 percent for the nine months ended June 30, 2019. At the same time, the average balance of total interest-bearing liabilities increased by $74.1 million. This increase primarily reflects an increase in the average balance of interest-bearing deposits of $51.2 million and an increase in the average balance of borrowings of $22.9 million. 

 

Other Income

 

Other income decreased $65,000, or 14.3 percent, during the third fiscal quarter of 2020 compared with the third fiscal quarter of 2019.  The decrease in other income was primarily due to a decrease in service charges, as there were noticeably lower customer transaction volumes in the COVID-19 environment.

 

For the nine months ended June 30, 2020, total other income decreased $245,000 compared to the nine months ended June 30, 2019. This decrease was primarily a result of a $372,000 decrease in service charges and other fees, partially offset by a $154,000 increase in gain on sale of investments. The decrease in service charges and other fees during the nine months ended June 30, 2020 is primarily due to the recognition of approximately $337,000 less of net swap fees through the Bank’s commercial loan hedging program.  

 

Other Expense

 

Other expense for the quarter ended June 30, 2020 increased $187,000, or 4.2 percent, when compared to the quarter ended June 30, 2019. The increase was primarily due to an increase of $119,000 in professional fees, which included COVID-19 related expenses, and an increase of $56,000 in salaries and employee benefits.  These were partially offset by a decrease of $23,000 in other operating expenses.  The increase in professional fees was due to higher legal and professional expense.  The increase in salaries and employee benefits were mainly due to four strategic hires to support franchise growth.

For the nine months ended June 30, 2020, total other expense increased $710,000, or 5.5 percent, compared to the nine months ended June 30, 2019. This increase primarily reflects a $248,000 increase in the Pennsylvania shares tax, a $231,000 increase in salaries and employee benefits, a $113,000 increase in other operating expenses, and a $108,000 increase in professional fees. These increases were partially offset by a $141,000 decrease in the federal deposit insurance premium. The increase in the Pennsylvania shares tax was due to the Bank not being subject to this tax until the second quarter of 2019. The increase in salaries and employee benefits during the nine-month period ended June 30, 2020 reflects normal increases to salary and benefits to support overall franchise growth. The increase in professional fees was due to higher professional services and legal expenses of $178,000 and $71,000, respectively, partially offset by lower audit and accounting expenses of approximately $140,000. The reduction in the federal deposit insurance premium resulted from the Deposit Insurance Fund reserve ratio exceeding the official required reserve ratio, which in turn generates credits to qualified participating banks.  The Bank currently does not have any further credit balance that can be used to offset premiums in future quarters.

-4-


 

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

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended:

 

6/30/20

 

 

3/31/20

 

 

12/31/19

 

 

9/30/19

 

 

6/30/19

Salaries and employee benefits

$

2,279

 

$

2,271

 

$

2,125

 

$

2,097

 

$

2,223

Occupancy expense

 

576

 

 

591

 

 

582

 

 

580

 

 

560

Federal deposit insurance premium

 

79

 

 

3

 

 

(3)

 

 

1

 

 

78

Advertising

 

33

 

 

32

 

 

22

 

 

17

 

 

30

Data processing

 

275

 

 

272

 

 

278

 

 

260

 

 

259

Professional fees

 

524

 

 

502

 

 

441

 

 

440

 

 

405

Net other real estate owned expense

 

29

 

 

(1)

 

 

71

 

 

113

 

 

30

Pennsylvania shares tax

 

169

 

 

170

 

 

170

 

 

170

 

 

170

Other operating expenses

 

720

 

 

798

 

 

736

 

 

775

 

 

742

Total Other Expense

$

4,684

 

$

4,638

 

$

4,422

 

$

4,453

 

$

4,497

 

Income Taxes

 

The Company recorded $447,000 in income tax expense during the quarter ended June 30, 2020 compared to $706,000 in income tax expense during the quarter ended June 30, 2019. The effective tax rates for the Company for the quarters ended June 30, 2020 and 2019 were 23.5 percent and 21.0 percent, respectively.  

 

For the nine months ended June 30, 2020, income tax expense decreased $645,000, or 39.0 percent, to $1.0 million from $1.7 million for the nine months ended June 30, 2019. The effective tax rates for the Company for the nine months ended June 30, 2020 and 2019 were 19.5 percent and 19.9 percent, respectively. Tax expense for the nine months ended June 30, 2020 was impacted by discreet items recorded in the first fiscal quarter ended December 31, 2019.

Statement of Condition Highlights at June 30, 2020

 

Gross loans totaled $1.039 billion at June 30, 2020, increasing $19.3 million or 1.9 percent, compared to June 30, 2019.  Gross loans at June 30, 2020 increased $21.7 million, or 2.1 percent, compared to September 30, 2019.   Total loan growth for the three months ended June 30, 2020 included $17.7 million of PPP commercial and industrial loans.    

 

Total assets stood at $1.204 billion at June 30, 2020, decreasing $62.0 million, or 4.9 percent, compared to June 30, 2019.  Total assets at June 30, 2020 decreased $61.4 million, or 4.9 percent, compared to September 30, 2019. The decline in assets was driven by the strategic reduction in interest-bearing deposits in other institutions to better match funding expectations and improve the margin.   

 

The deposit mix improved with the reduction of wholesale certificates of $18.7 million and reduction of money market public fund deposits of $44.1 million. Deposits totaled $884.4 million at June 30, 2020, a decrease of $72.8 million, or 7.6 percent, compared to June 30, 2019, and decreased $69.4 million or 7.3 percent, when compared to September 30, 2019.   The reductions in deposits are in line with the Bank’s overall funding strategy to reduce excess balance sheet cash and better match funding needs.

 

Non-performing assets (“NPAs”) were 1.24 percent of total assets at June 30, 2020, compared to 0.64 percent at September 30, 2019 and 0.65 percent at June 30, 2019. Excluding one OREO property of $5.8 million, NPAs were 0.76 percent of total assets and 0.18 percent of total assets at June 30, 2020 and September 30, 2019, respectively. The allowance for loan losses as a percentage of total non-performing loans was 121.1 percent at June 30, 2020, compared to 434.6 percent at September 30, 2019 and 418.1 percent at June 30, 2019.

 

The Company’s ratio of shareholders’ equity to total assets was 11.92 percent at June 30, 2020, compared to 11.26 percent at September 30, 2019 and 11.03 percent at June 30, 2019.  

 

Book value per common share amounted to $18.86 at June 30, 2020, compared to $18.35 at September 30, 2019 and $17.99 at June 30, 2019.  


-5-


 

Linked Quarter Statement of Condition Data

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At quarter ended:

 

6/30/20

 

 

3/31/20

 

 

12/31/19

 

 

9/30/19

 

 

6/30/19

Cash and due from depository institutions

$

30,653

 

$

1,829

 

$

1,337

 

$

1,400

 

$

1,535

Interest bearing deposits in depository

   institutions

 

28,291

 

 

124,239

 

 

158,465

 

 

152,143

 

 

148,501

Investment securities, available for sale, at fair

   value

 

33,245

 

 

21,839

 

 

23,723

 

 

18,411

 

 

23,552

Investment securities held to maturity

 

15,921

 

 

18,046

 

 

20,578

 

 

22,485

 

 

23,323

Restricted stock, at cost

 

9,766

 

 

10,913

 

 

11,115

 

 

11,129

 

 

10,404

Loans receivable, net of allowance for loan

   losses

 

1,028,093

 

 

1,002,907

 

 

992,629

 

 

1,007,714

 

 

1,009,959

Other real estate owned

 

5,796

 

 

5,796

 

 

5,796

 

 

5,796

 

 

5,796

Accrued interest receivable

 

5,680

 

 

4,121

 

 

4,061

 

 

4,253

 

 

4,237

Operating lease right-of-use-assets

 

2,799

 

 

2,959

 

 

3,119

 

 

 

 

Property and equipment, net

 

6,355

 

 

6,476

 

 

6,594

 

 

6,678

 

 

6,795

Deferred income taxes, net

 

3,103

 

 

2,974

 

 

2,806

 

 

2,840

 

 

3,542

Bank-owned life insurance

 

20,270

 

 

20,144

 

 

20,018

 

 

19,891

 

 

19,766

Other assets

 

13,873

 

 

13,869

 

 

8,341

 

 

12,482

 

 

8,468

Total assets

$

1,203,845

 

$

1,236,112

 

$

1,258,582

 

$

1,265,222

 

$

1,265,878

Deposits

$

884,444

 

$

915,900

 

$

943,819

 

$

953,811

 

$

957,199

FHLB advances

 

130,000

 

 

133,000

 

 

133,000

 

 

133,000

 

 

133,000

Subordinated debt

 

24,737

 

 

24,697

 

 

24,658

 

 

24,619

 

 

24,579

Operating lease liabilities

 

2,824

 

 

2,976

 

 

3,128

 

 

 

 

Other liabilities

 

18,309

 

 

16,389

 

 

10,442

 

 

11,284

 

 

11,432

Shareholders’ equity

 

143,531

 

 

143,150

 

 

143,535

 

 

142,508

 

 

139,668

Total liabilities and shareholders’ equity

$

1,203,845

 

$

1,236,112

 

$

1,258,582

 

$

1,265,222

 

$

1,265,878

 

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

 

Condensed Consolidated Average Statement of Condition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   For the quarter ended:

 

6/30/20

 

 

3/31/20

 

 

12/31/19

 

 

9/30/19

 

 

6/30/19

Investment securities

$

43,349      

 

$

40,165      

 

$

40,855      

 

$

42,256

 

$

49,408

Interest-bearing cash accounts

 

76,828

 

 

148,580

 

 

122,234

 

 

143,297

 

 

107,761

Loans

 

1,028,996          

 

 

1,010,767          

 

 

1,006,729          

 

 

1,015,251          

 

 

1,010,033          

Allowance for loan losses

 

(10,618)          

 

 

(9,756)          

 

 

(10,095)          

 

 

(10,143)          

 

 

(10,061)          

All other assets

 

85,169          

 

 

63,434          

 

 

62,341          

 

 

61,615          

 

 

56,663          

Total assets

$

1,223,724

 

$

1,253,190

 

$

1,222,064

 

$

1,252,276

 

$

1,213,804

Non-interest-bearing deposits

$

46,450

 

$

41,916

 

$

41,716

 

$

44,104

 

$

42,151

Interest-bearing deposits

 

852,330          

 

 

892,583          

 

 

864,317          

 

 

896,928          

 

 

882,825          

FHLB advances

 

136,121          

 

 

133,000          

 

 

133,000          

 

 

133,000          

 

 

115,363          

Other short-term borrowings

 

276

 

 

275

 

 

 

 

54

 

 

Subordinated debt

 

24,719

 

 

24,680

 

 

24,641

 

 

24,602

 

 

24,563

Other liabilities

 

20,509          

 

 

16,440          

 

 

14,805          

 

 

12,413          

 

 

10,192          

Shareholders’ equity

 

143,319        

 

 

144,296        

 

 

143,585        

 

 

141,175          

 

 

138,710          

Total liabilities and shareholders’ equity

$

1,223,724

 

$

1,253,190

 

$

1,222,064

 

$

1,252,276

 

$

1,213,804

 

-6-


 

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

 

Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At quarter ended:

 

6/30/20

 

 

3/31/20

 

 

12/31/19

 

 

9/30/19

 

 

6/30/19

Demand:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest-bearing

$

47,443

 

$

42,874

 

$

41,273

 

$

55,684

 

$

48,580

Interest-bearing

 

277,238

 

 

291,191

 

 

327,956

 

 

302,039

 

 

288,555

Savings

 

43,702

 

 

43,550

 

 

40,908

 

 

41,875

 

 

43,334

Money market

 

281,419

 

 

280,173

 

 

279,883

 

 

276,644

 

 

288,561

Time

 

234,642

 

 

258,112

 

 

253,799

 

 

277,569

 

 

288,169

Total deposits

$

884,444

 

$

915,900

 

$

943,819

 

$

953,811

 

$

957,199


-7-


 

Loans

For the quarter ended June 30, 2020, the Company originated a total new loan volume of $49.5 million, which was partially offset by prepayments of $6.0 million, amortization of $4.9 million, loan payoffs of $9.7 million, and participations of $3.7 million.  Total loan growth for the three months ended June 30, 2020 included an increase of $17.7 million of PPP commercial and industrial loans.

Total net loans amounted to $1.028 billion at June 30, 2020 compared to $1.008 billion at September 30, 2019, for a net increase of $20.4 million or 2.0 percent for the period.  The allowance for loan losses amounted to $11.1 million, or 1.08 percent of total loans, at June 30, 2020 and $10.1 million at September 30, 2019.  Average loan balances during the quarter ended June 30, 2020 totaled $1.029 billion as compared to $1.010 billion during the quarter ended June 30, 2019, representing a 1.9 percent increase.  Average loan balances during the quarters ended June 30, 2020 and September 30, 2019 totaled $1.029 billion and $1.015 billion, respectively, representing a 1.4 percent increase.

At the end of the third fiscal quarter of 2020, the gross loan portfolio remained weighted toward two primary components: commercial and the core residential portfolio, with commercial loans accounting for 67.4 percent and single-family residential real estate loans accounting for 23.7 percent of the loan portfolio.  Construction and development loans amounted to 5.8 percent and consumer loans represented 3.1 percent of the gross loan portfolio at such date. The increase in the gross loan portfolio at June 30, 2020 compared to September 30, 2019 primarily reflected an increase of $26.2 million in residential mortgage loans and $16.8 million in construction and development loans, which were partially offset by a decrease of $17.9 million in commercial loans, net of $17.7 million of PPP commercial and industrial loan originations, and a decrease of $3.4 million in consumer loans.

Loan Portfolio Composition (not including loans held for sale):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At quarter ended:

 

6/30/20

 

 

3/31/20

 

 

12/31/19

 

 

9/30/19

 

 

6/30/19

Residential mortgage

$

246,215

 

$

240,633

 

$

234,738

 

$

220,011

 

$

216,114

Construction and Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential and commercial

 

56,999

 

 

52,313

 

 

49,095

 

 

40,346

 

 

47,485

Land

 

3,535

 

 

3,579

 

 

3,625

 

 

3,420

 

 

3,809

Total construction and development

 

60,534

 

 

55,892

 

 

52,720

 

 

43,766

 

 

51,294

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

501,955

 

 

511,467

 

 

521,495

 

 

543,452

 

 

543,045

Farmland

 

7,531

 

 

7,537

 

 

7,563

 

 

7,563

 

 

5,388

Multi-family

 

66,416

 

 

59,978

 

 

43,473

 

 

62,884

 

 

64,050

Commercial and industrial

 

115,899

 

 

96,574

 

 

99,494

 

 

99,747

 

 

97,877

Other

 

8,397

 

 

7,604

 

 

8,569

 

 

4,450

 

 

5,356

Total commercial

 

700,198

 

 

683,160

 

 

680,594

 

 

718,096

 

 

715,716

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines of credit

 

18,097

 

 

18,441

 

 

18,372

 

 

19,506

 

 

19,348

Second mortgages

 

11,704

 

 

12,393

 

 

13,179

 

 

13,737

 

 

15,018

Other

 

2,074

 

 

2,112

 

 

2,160

 

 

2,030

 

 

2,081

Total consumer

 

31,875

 

 

32,946

 

 

33,711

 

 

35,273

 

 

36,447

Total loans

 

1,038,822

 

 

1,012,631

 

 

1,001,763

 

 

1,017,146

 

 

1,019,571

Deferred loan costs, net

 

338

 

 

832

 

 

828

 

 

663

 

 

494

Allowance for loan losses

 

(11,067)

 

 

(10,556)

 

 

(9,962)

 

 

(10,095)

 

 

(10,106)

Loans Receivable, net

$

1,028,093

 

$

1,002,907

 

$

992,629

 

$

1,007,714

 

$

1,009,959

 

At June 30, 2020, the Company had $140.6 million in overall undisbursed loan commitments, which consisted primarily of available usage from active construction facilities, unused commercial lines of credit, and home equity lines of credit. The Company’s current “Approved, Accepted but Unfunded” pipeline at June 30, 2020 included approximately $6.2 million in commercial and construction loans and $3.1 million in residential mortgage loans expected to fund over the following quarters. Active loan pipelines were reduced pending stability with respect to economic conditions.

-8-


 

Asset Quality

Non-accrual loans totaled $8.9 million at June 30, 2020 and $1.8 million at September 30, 2019. The portfolio of non-accrual loans at June 30, 2020 was comprised of one commercial real estate loan with an outstanding balance of approximately $6.7 million, fourteen residential real estate loans with an aggregate outstanding balance of approximately $1.9 million, and ten consumer loans with an aggregate outstanding balance of approximately $251,000.    

At June 30, 2020, NPAs totaled $14.9 million, or 1.24 percent of total assets, as compared with $8.1 million, or 0.64 percent of total assets, at September 30, 2019.

OREO totaled $5.8 million at both June 30, 2020 and September 30, 2019. Excluding the $5.8 million of OREO, NPAs totaled $9.1 million, or 0.76 percent of total assets at June 30, 2020, and $2.3 million, or 0.18 percent of total assets at September 30, 2019.

Performing TDR loans were $13.6 million at June 30, 2020 and $12.2 million at September 30, 2019. One commercial real estate loan in the amount of $10.6 million previously classified as non-impaired, moved to substandard impaired and was accruing during the second fiscal quarter of 2020.  Management has restructured this loan and reclassified it as a performing TDR during the third fiscal quarter ended June 30, 2020.

Non-Performing Asset and Other Asset Quality Data:

 

(dollars in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of or for the quarter ended:

 

6/30/20

 

 

3/31/20

 

 

12/31/19

 

 

9/30/19

 

 

6/30/19

Non-accrual loans(1)

$

8,871

 

$

8,655

 

$

8,649

 

$

1,821

 

$

2,189

Loans 90 days or more past due and still accruing

 

265

 

 

168

 

 

1

 

 

502

 

 

228

   Total non-performing loans

 

9,136

 

 

8,823

 

 

8,650

 

 

2,323

 

 

2,417

OREO

 

5,796

 

 

5,796

 

 

5,796

 

 

5,796

 

 

5,796

   Total NPAs

$

14,932

 

$

14,619

 

$

14,446

 

$

8,119

 

$

8,213

Performing TDR loans

$

13,640

 

$

3,243

 

$

3,460

 

$

12,170

 

$

11,824

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NPAs / total assets

 

1.24%

 

 

1.18%

 

 

1.15%

 

 

0.64%

 

 

0.65%

Non-performing loans / total loans

 

0.88%

 

 

0.87%

 

 

0.86%

 

 

0.23%

 

 

0.24%

Net (recoveries) charge-offs

$

(76)

 

$

31

 

$

2,283

 

$

11

 

$

(34)

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

 

(0.03)%

 

 

0.01%

 

 

0.91%

 

 

—%

 

 

(0.01)%

Allowance for loan losses / total loans

 

1.08%

 

 

1.04%

 

 

0.99%

 

 

0.99%

 

 

0.99%

Allowance for loan losses / non-performing loans

 

121.1%

 

 

119.6%

 

 

115.2%

 

 

434.6%

 

 

418.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

1,203,845

 

$

1,236,112

 

$

1,258,582

 

$

1,265,222

 

$

1,265,878

Total gross loans

 

1,038,822

 

 

1,012,631

 

 

1,001,763

 

 

1,017,146

 

 

1,019,571

Average loans

 

1,028,996

 

 

1,010,767

 

 

1,006,729

 

 

1,015,251

 

 

1,010,033

Allowance for loan losses

 

11,067

 

 

10,556

 

 

9,962

 

 

10,095

 

 

10,106

______________

 

(1)

Nineteen loans totaling approximately $1.6 million, or 17.7 percent of the total non-accrual loan balance, were making payments as of June 30, 2020.  

 

(2)

Annualized.

The allowance for loan losses excluding PPP loans, a non-GAAP measure, at June 30, 2020 amounted to approximately $11.1 million, or 1.08 percent of total loans, compared to $10.1 million, or 0.99 percent of total loans, at September 30, 2019. The allowance for loan losses increased quarter over quarter due to provision expense of $435,000 and recoveries of $76,000. The Company did not record a provision for loan losses during the fiscal quarter ended September 30, 2019.

-9-


 

Capital

At June 30, 2020, total shareholdersequity amounted to $143.5 million, or 11.92 percent of total assets, compared to $142.5 million, or 11.26 percent of total assets at September 30, 2019.  The Company’s capital position provides a source of strength and continues to significantly exceed all regulatory capital guidelines.  The Bank’s common equity Tier 1 capital ratio was 15.63 percent, Tier 1 leverage ratio was 12.98 percent, Tier 1 risk-based capital ratio was 15.63 percent and the total risk-based capital ratio was 16.73 percent.  At September 30, 2019, the Bank’s common equity Tier 1 capital ratio was 15.38 percent, Tier 1 leverage ratio was 12.23 percent, Tier 1 risk-based capital ratio was 15.38 percent and the total risk-based capital ratio was 16.40 percent.  

The Company purchased 64,318 shares of its common stock at an average cost $11.69 per share in the open market under its repurchase plan during the fiscal quarter ended June 30, 2020. As of June 30, 2020, there were no shares remaining in the repurchase plan.

Non-GAAP Financial Measures

In addition to the results presented in accordance with generally accepted accounting principles (“GAAP”), this press release includes certain 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:

 

6/30/20

 

 

3/31/20

 

 

12/31/19

 

 

9/30/19

 

 

6/30/19

Net income as reported under GAAP

$

1,454

 

$

1,908

 

$

785

 

$

2,699

 

$

2,656

Non-core items, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    OREO expense(1)

 

22

 

 

 

 

73

 

 

87

 

 

24

    Net investment security gains

 

(1)

 

 

(138)

 

 

 

 

(1)

 

 

(21)

    Swap fees(2)

 

 

 

 

 

 

 

(71)

 

 

    Other(3)

 

24

 

 

31

 

 

54

 

 

16

 

 

Core net income, non-GAAP

$

1,499

 

$

1,801

 

$

912

 

$

2,730

 

$

2,659

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Diluted

$

0.20

 

$

0.24

 

$

0.12

 

$

0.36

 

$

0.35

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Diluted

 

7,538,375

 

 

7,663,771

 

 

7,665,842

 

 

7,663,593

 

 

7,670,106

 

(1)Non-core items for the quarters ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019, and June 30, 2019, include OREO expense relating to one commercial real estate loan.

(2)Upfront recognition of net swap fees through the Bank’s commercial loan hedging program.

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

 

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

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended:

 

6/30/20

 

 

3/31/20

 

 

12/31/19

 

 

9/30/19

 

 

6/30/19

Other income as reported under GAAP

$

389

 

$

964

 

$

443

 

$

   551

 

$

454

Less: Net investment securities gains

 

1

 

 

180

 

 

 

 

1

 

 

27

Less: Net swap fees

 

 

 

 

 

 

 

92

 

 

Other income, excluding net

investment securities gains

$

388

 

$

784

 

$

443

 

$

   458

 

$

427

 

-10-


 

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

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended:

 

6/30/20

 

 

3/31/20

 

 

12/31/19

 

 

9/30/19

 

 

6/30/19

Other expense as reported under GAAP

$

4,684

 

$

4,638

 

$

4,422

 

$

4,453

 

$

4,497

Less: non-core items(1)

 

29

 

 

(1)

 

 

71

 

 

113

 

 

30

Other expense, excluding non-core items, non-GAAP

$

4,655

 

$

4,639

 

$

4,351

 

$

4,340

 

$

4,467

Net interest income (tax

equivalent basis), non-GAAP

$

6,637

 

$

6,800

 

$

6,896

 

$

7,426

 

$

7,471

Non-core items(2)

 

32

 

 

41

 

 

52

 

 

21

 

 

Net interest income (tax equivalent basis), including non-core items, non-GAAP

 

6,669

 

 

6,841

 

 

6,948

 

 

7,447

 

 

7,471

Other income, excluding gain on sale of investments and swap fees

 

388

 

 

784

 

 

443

 

 

458

 

 

427

   Total

$

7,057

 

$

7,625

 

$

7,391

 

$

7,905

 

$

7,898

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Efficiency ratio, non-GAAP

 

66.0%

 

 

60.8%

 

 

58.9%

 

 

54.9%

 

 

56.6%

 

 

(1)Non-core items for the quarters ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019, and June 30, 2019 include OREO expense relating to one commercial real estate loan.  

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

 

 

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

 

For the quarter ended:

6/30/20

3/31/20

12/31/19

9/30/19

6/30/19

Efficiency ratio on a GAAP basis

66.7%

59.8%

60.3%

55.9%

56.8%

 

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

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended:

 

 

6/30/20

 

 

3/31/20

 

 

12/31/19

 

 

9/30/19

 

 

6/30/19

Net interest income as reported under GAAP

 

$

6,631

 

$

6,793

 

$

6,888

 

$

7,418

 

$

7,461

Tax-equivalent adjustment(1)  

 

 

6

 

 

7

 

 

8

 

 

8

 

 

10

TE net interest income, non-GAAP

 

$

6,637

 

$

6,800

 

$

6,896

 

$

7,426

 

$

7,471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin as reported under GAAP

 

 

2.29%

 

 

2.25%

 

 

2.33%

 

 

2.45%

 

 

2.54%

Tax-equivalent effect

 

 

 

 

 

 

0.01

 

 

 

 

Net interest margin (TE), non-GAAP

 

 

2.29%

 

 

2.25%

 

 

2.34%

 

 

2.45%

 

 

2.54%

 

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

 

-11-


 

About Malvern Bancorp, Inc.

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

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

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

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

Forward-Looking Statements

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

Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company.  There can be no assurance that future developments affecting the Company will be the same as those anticipated by management.  The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements.  These risks and uncertainties include, but are not limited to, the following: the effects of, and changes in, trade, monetary and fiscal policies and laws, including recent changes in 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; technological changes; 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; 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 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 Company’s 2019 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be fully reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we are subject to any of the following risks, any of which could continue to have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to continue to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0 percent, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and FDIC premiums may increase if the agency experience additional resolution costs.

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

-12-


 

MALVERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 

 

 

June 30, 2020

 

September 30, 2019

(in thousands, except for share and per share data)

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Cash and due from depository institutions

   

$

30,653

 

$

1,400

 

Interest bearing deposits in depository institutions

 

 

28,291

 

 

152,143

 

    Total cash and cash equivalents

 

 

58,944

 

 

153,543

 

Investment securities available for sale, at fair value (amortized cost of $33,704 and $18,522 at June 30, 2020 and September 30, 2019, respectively)

 

 

33,245

 

 

18,411

 

Investment securities held to maturity (fair value of $16,507 and $22,609 at June 30, 2020 and September 30, 2019, respectively)

 

 

15,921

 

 

22,485

 

Restricted stock, at cost

 

 

9,766

 

 

11,129

 

Loans receivable, net of allowance for loan losses

 

 

1,028,093

 

 

1,007,714

 

Other real estate owned

 

 

5,796

 

 

5,796

 

Accrued interest receivable

 

 

5,680

 

 

4,253

 

Operating lease right-of-use-assets

 

 

2,799

 

 

 

Property and equipment, net

 

 

6,355

 

 

6,678

 

Deferred income taxes, net

 

 

3,103

 

 

2,840

 

Bank-owned life insurance

 

 

20,270

 

 

19,891

 

Other assets

 

 

13,873

 

 

12,482

 

   Total assets

 

$

1,203,845

 

$

1,265,222

 

LIABILITIES

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

   Non-interest bearing

 

$

47,443

 

$

55,684

 

   Interest-bearing

 

 

837,001

 

 

898,127

 

Total deposits

 

 

884,444

 

 

953,811

 

FHLB advances

 

 

130,000

 

 

133,000

 

Subordinated debt

 

 

24,737

 

 

24,619

 

Advances from borrowers for taxes and insurance

 

 

3,630

 

 

1,761

 

Accrued interest payable

 

 

1,096

 

 

978

 

Operating lease liabilities

 

 

2,824

 

 

 

Other liabilities

 

 

13,583

 

 

8,545

 

   Total liabilities

 

 

1,060,314

 

 

1,122,714

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Preferred stock, $0.01 par value, 10,000,000 shares, authorized, none issued

 

 

 

 

 

Common stock, $0.01 par value, 50,000,000 shares authorized; 7,804,469 and 7,609,953 issued and outstanding, respectively, at June 30, 2020, and 7,782,258 and 7,765,395shares issued and outstanding, at September 30, 2019

 

 

                               76

 

 

                               78

 

Additional paid in capital

 

 

85,068

 

 

84,783

 

Retained earnings

 

 

63,891

 

 

59,744

 

Unearned Employee Stock Ownership Plan (ESOP) shares

 

 

(1,083)

 

 

(1,192)

 

Accumulated other comprehensive loss

 

 

(1,558)

 

 

(569)

 

Treasury stock, at cost: 194,516 shares and 16,863 shares at June 30, 2020 and September 30, 2019, respectively

 

 

(2,863)

 

 

(336)

 

   Total shareholders’ equity

 

 

143,531

 

 

142,508

 

   Total liabilities and shareholders’ equity

 

$

1,203,845

 

$

1,265,222

 

 

-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)

 

 

2020

 

 

2019

 

 

2020

 

 

2019

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Interest and Dividend Income

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

10,024

 

$

11,415

 

$

31,492

 

$

32,171

Investment securities, taxable

 

 

253

 

 

259

 

 

699

 

 

760

Investment securities, tax-exempt

 

 

27

 

 

49

 

 

100

 

 

167

Dividends, restricted stock

 

 

124

 

 

159

 

 

494

 

 

450

Interest-bearing cash accounts

 

 

26

 

 

574

 

 

1,048

 

 

1,421

       Total Interest and Dividend Income

 

 

10,454

 

 

12,456

 

 

33,833

 

 

34,969

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

2,876

 

 

3,926

 

 

10,236

 

 

10,265

Short-term borrowings

 

 

 

 

 

 

 

 

7

Long-term borrowings

 

 

564

 

 

686

 

 

2,136

 

 

1,891

Subordinated debt

 

 

383

 

 

383

 

 

1,149

 

 

1,149

Total Interest Expense

 

 

3,823

 

 

4,995

 

 

13,521

 

 

13,312

Net interest income

 

 

6,631

 

 

7,461

 

 

20,312

 

 

21,657

Provision for Loan Losses

 

 

435

 

 

56

 

 

3,210

 

 

2,379

Net Interest Income after Provision for

  Loan Losses

 

 

6,196

 

 

7,405

 

 

17,102

 

 

19,278

Other Income

 

 

 

 

 

 

 

 

 

 

 

 

Service charges and other fees

 

 

195

 

 

252

 

 

1,058

 

 

1,430

Rental income-other

 

 

54

 

 

53

 

 

163

 

 

184

Net gains on sale of investments

 

 

1

 

 

27

 

 

181

 

 

27

Net gains on sale of loans

 

 

11

 

 

 

 

14

 

 

37

Earnings on bank-owned life insurance

 

 

128

 

 

122

 

 

380

 

 

363

Total Other Income

 

 

389

 

 

454

 

 

1,796

 

 

2,041

Other Expense

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

2,279

 

 

2,223

 

 

6,675

 

 

6,444

Occupancy expense

 

 

576

 

 

560

 

 

1,749

 

 

1,676

Federal deposit insurance premium

 

 

79

 

 

78

 

 

79

 

 

220

Advertising

 

 

33

 

 

30

 

 

87

 

 

90

Data processing

 

 

275

 

 

259

 

 

825

 

 

764

Professional fees

 

 

524

 

 

405

 

 

1,467

 

 

1,359

Net other real estate owned expense

 

 

29

 

 

30

 

 

99

 

 

79

Pennsylvania shares tax

 

 

169

 

 

169

 

 

509

 

 

261

Other operating expenses

 

 

720

 

 

743

 

 

2,254

 

 

2,141

Total Other Expense

 

 

4,684

 

 

4,497

 

 

13,744

 

 

13,034

Income before income tax expense

 

 

1,901

 

 

3,362

 

 

5,154

 

 

8,285

Income tax expense

 

 

447

 

 

706

 

 

1,007

 

 

1,652

Net Income

 

$

1,454

 

$

2,656

 

$

4,147

 

$

6,633

Earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.19

 

$

0.35

 

$

0.54

 

$

0.87

Diluted

 

$

0.19

 

$

0.35

 

$

0.54

 

$

0.87

Weighted Average Common Shares Outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

7,538,375

 

 

7,669,851

 

 

7,622,820

 

 

7,630,650

Diluted

 

 

7,538,375

 

 

7,670,106

 

 

7,622,820

 

 

7,630,944

 

-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)

 

6/30/2020

 

 

3/31/2020

 

 

6/30/2019

(unaudited)

 

 

 

 

 

 

 

 

Statements of Operations Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Interest income

$

10,454

 

$

11,584

 

$

12,456

   Interest expense

 

3,823

 

 

4,791

 

 

4,995

     Net interest income

 

6,631

 

 

6,793

 

 

7,461

   Provision for loan losses

 

435

 

 

625

 

 

56

      Net interest income after provision for loan losses

 

6,196

 

 

6,168

 

 

7,405

   Other income

 

389

 

 

964

 

 

454

   Other expense

 

4,684

 

 

4,638

 

 

4,497

   Income before income tax expense

 

1,901

 

 

2,494

 

 

3,362

      Income tax expense

 

447

 

 

586

 

 

706

   Net income

$

1,454

 

$

1,908

 

$

2,656

Earnings (per Common Share)

 

 

 

 

 

 

 

 

   Basic

$

0.19

 

$

0.25

 

$

0.35

   Diluted

$

0.19

 

$

0.25

 

$

0.35

Statements of Condition Data (Period-End)

 

 

 

 

 

 

 

 

   Investment securities available for sale, at fair value

$

33,245

 

$

21,839

 

$

23,552

   Investment securities held to maturity (fair value of $16,507, $18,434, and $23,309, respectively)

 

15,921

 

 

18,046

 

 

23,323

   Loans, net of allowance for loan losses

 

1,028,093

 

 

1,002,907

 

 

1,009,959

   Total assets

 

1,203,845

 

 

1,236,112

 

 

1,265,878

   Deposits

 

884,444

 

 

915,900

 

 

957,199

   FHLB advances

 

130,000

 

 

133,000

 

 

133,000