PAOLI, Pa., Oct. 26, 2016 (GLOBE NEWSWIRE) -- Malvern Bancorp, Inc. (NASDAQ:MLVF) (the "Company"), parent company of Malvern Federal Savings Bank (“Malvern” or the “Bank”), today reported operating results for the fourth fiscal quarter ended September 30, 2016. Net income amounted to $7.7 million, or $1.21 per fully diluted common share, for the quarter ended September 30, 2016, an increase of $6.6 million, or 565.2 percent, as compared with the net income of $1.2 million, or $0.18 per fully diluted common share, for the quarter ended September 30, 2015. For the year ended September 30, 2016, net income amounted to $11.9 million, or $1.86 per fully diluted common share, compared with net income of $3.7 million, or $0.58 per fully diluted common share, for the year ended September 30, 2015.
During the fourth quarter of 2016, the Company reversed approximately $7.8 million representing the valuation allowance related to net deferred tax assets, which contributed to a net tax benefit for the quarter of $6.0 million. The impact of the reversal and subsequent income tax benefit positively affected net income for the fourth quarter and full fiscal year 2016 results. Excluding the net tax benefit of $6.0 million, net income attributable to the Company would have been approximately $1.8 million, or $0.28 per fully diluted common share, for the three months ended September 30, 2016 and $6.0 million, or $0.93 per fully diluted common share, for the full fiscal year 2016.
The reversal of the valuation allowance on net deferred tax assets was based on management's judgment that the net deferred tax asset will be realized by the Company. The Company has reported positive cumulative pre-tax earnings over the prior two year period ended September 30, 2016, representing 10 quarters. These historical results in conjunction with management's expectations of future projected taxable income supported the Company’s decision to reverse the valuation allowance on net deferred tax assets.
Anthony C. Weagley, President and Chief Executive Officer, said, “In closing out 2016, we continued to perform with growth in key areas of our business. We continue to see strong credit metrics with non-performing assets remaining low as our loan growth remained strong. Our financial performance continues to allow Malvern to expand its brand through our private banking model and expansion of geographic footprint. We successfully opened our Villanova location, in Pennsylvania, and our Private Banking Loan Production headquarters in Morristown, New Jersey. Our ability to continue to gather client relationships underscores the success of our business plans. We are maintaining our course with our business strategy and our performance reflected that and the strength of our balance sheet. Our core loan growth increased 46.7 percent at September 30, 2016 compared to September 30, 2015. The company also had strong deposit growth at September 30, 2016 with total deposits increasing 29.3 percent compared to September 30, 2015.”
Highlights for the quarter include:
- Return on average assets (“ROAA”) was 3.90 percent for the three months ended September 30, 2016, compared to 0.72 percent for the three months ended September 30, 2015, and return on average equity (“ROAE”) rose to 35.10 percent for the three months ended September 30, 2016, compared with 5.77 percent for the three months ended September 30, 2015. Excluding the impact of the income tax benefit from the reversal of the valuation allowance, the return on average assets was 0.90 percent for the three months ended September 30, 2016 and the return on average equity was 7.55 percent for the three months ended September 30, 2016.
- The Company originated $58.2 million in new loans in the fourth quarter of fiscal 2016, which was offset in part by $38.0 million in participations, payoffs, prepayments and maturities from its portfolio, resulting in net portfolio growth of $20.2 million compared to the third quarter of fiscal 2016; new loan originations consisted of $3.8 million in residential mortgage loans, $47.2 million in commercial loans, $5.4 million in construction and development loans and $1.8 million in consumer loans.
- Non-performing assets (“NPAs”) were at 0.20 percent of total assets at September 30, 2016, compared to 0.22 percent at June 30, 2016 and 0.39 percent at September 30, 2015. The allowance for loan losses as a percentage of total non-performing loans was 336.1 percent at September 30, 2016, compared to 515.2 percent at June 30, 2016 and 333.6 percent at September 30, 2015.
- The Company’s ratio of shareholders’ equity to total assets was 11.52 percent at September 30, 2016, compared to 10.88 percent at June 30, 2016, and 12.41 percent at September 30, 2015.
- Book value per common share amounted to $14.42 at September 30, 2016, compared to $13.21 at June 30, 2016 and $12.41 at September 30, 2015.
- The efficiency ratio, a non-GAAP measure, was 67.7 percent for the fourth quarter of fiscal 2016 on an annualized basis, compared to 64.0 percent in the third quarter of fiscal 2016 and 73.9 percent in the fourth quarter of fiscal 2015.
- The Company’s balance sheet reflected total asset growth of $165.6 million at September 30, 2016, compared to September 30, 2015, 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: | 9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 9/30/15 | |||||||||||||||
| Return on average assets | 3.90 | % | 0.81 | % | 0.68 | % | 0.79 | % | 0.72 | % | ||||||||||
| Return on average equity | 35.10 | % | 7.41 | % | 6.03 | % | 6.55 | % | 5.77 | % | ||||||||||
| Net interest margin (tax equivalent basis) (1) | 2.65 | % | 2.56 | % | 2.65 | % | 2.72 | % | 2.71 | % | ||||||||||
| Loans / deposits ratio | 96.07 | % | 96.39 | % | 94.53 | % | 86.90 | % | 84.68 | % | ||||||||||
| Shareholders’ equity / total assets | 11.52 | % | 10.88 | % | 11.09 | % | 11.37 | % | 12.41 | % | ||||||||||
| Efficiency ratio (1) | 67.7 | % | 64.0 | % | 66.2 | % | 71.3 | % | 73.9 | % | ||||||||||
| Book value per common share | $ | 14.42 | $ | 13.21 | $ | 12.91 | $ | 12.60 | $ | 12.41 | ||||||||||
| _____________ | ||||||||||||||||||||
| (1 | ) | Information reconciling non-GAAP measures to GAAP measures is presented elsewhere in this press release. | |
Net Interest Income
For the three months ended September 30, 2016, total interest income on a fully tax-equivalent basis increased $1.5 million, or 26.9 percent, to $6.9 million, compared to the three months ended September 30, 2015. Interest income rose in the quarter ended September 30, 2016, compared to the comparable period in fiscal 2015, primarily due to a $192.7 million increase in the average balance of our loans. Total interest expense increased by $431,000, or 31.6 percent, to $1.8 million, for the three months ended September 30, 2016, compared to the same period in fiscal 2015.
Net interest income on a fully tax-equivalent basis was $5.1 million for the three months ended September 30, 2016, increasing $1.0 million, or 25.3 percent, from $4.1 million for the comparable three month period in fiscal 2015. The change for the three months ended September 30, 2016 primarily was the result of an increase in the average balance of interest earning assets, which increased $167.6 million. The net interest spread on an annualized tax-equivalent basis was at 2.51 percent and 2.59 percent for the three months ended September 30, 2016 and 2015, respectively. For the quarter ended September 30, 2016, the Company’s net interest margin on a tax-equivalent basis decreased to 2.65 percent as compared to 2.71 percent for the same three month period in fiscal 2015.
“We continued to carry a large cash balance as we grew deposits despite the funding of $58.2 million in new loans for the period. While we anticipate reducing the funding pool, we see growth in funding at the same time so that the dampening effect to margin may continue in the coming quarters," commented Mr. Weagley.
The 31.6 percent increase in interest expense for the fourth quarter of fiscal 2016 as compared to the fourth quarter of fiscal 2015 primarily reflected higher volumes of borrowings which are part of the hedging activity strategies executed to mitigate interest rate risk. The average cost of funds was 1.08 percent for the quarter ended September 30, 2016 compared to 1.03 percent for the same three month period in fiscal 2015 and, on a linked sequential quarter basis, increased two basis points compared to the third quarter of fiscal 2016.
For the twelve months ended September 30, 2016, total interest income on a fully tax-equivalent basis increased $4.9 million, or 23.5 percent, to $25.5 million, compared to $20.6 million for the twelve months ended September 30, 2015. Total interest expense increased by $1.5 million, or 28.3 percent, to $6.7 million, for the twelve months ended September 30, 2016, compared to the same period in fiscal 2015. Interest income rose for the twelve months ended September 30, 2016, compared to the same period in fiscal 2015 primarily due to a $123.8 million increase in average loan balances. Compared to the same period in fiscal 2015, for the twelve months ended September 30, 2016, average interest earning assets increased $122.7 million, and the net interest spread and net interest margin increased on an annualized tax-equivalent basis by five basis points and three basis points, respectively.
Earnings Summary for the Period Ended September 30, 2016
The following table presents condensed consolidated statements of income data for the periods indicated.
| Condensed Consolidated Statements of Income (unaudited) | ||||||||||||||||||||||||||
| (dollars in thousands, except per share data) | ||||||||||||||||||||||||||
| For the quarter ended: | 9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 9/30/15 | |||||||||||||||||||||
| Net interest income | $ | 5,021 | $ | 4,780 | $ | 4,500 | $ | 4,211 | $ | 3,979 | ||||||||||||||||
| Provision for loan losses | 100 | 472 | 375 | — | — | |||||||||||||||||||||
| Net interest income after provision for loan losses | 4,921 | 4,308 | 4,125 | 4,211 | 3,979 | |||||||||||||||||||||
| Other income | 615 | 659 | 501 | 558 | 639 | |||||||||||||||||||||
| Other expense | 3,759 | 3,378 | 3,360 | 3,425 | 3,454 | |||||||||||||||||||||
| Income before income tax benefit | 1,777 | 1,589 | 1,266 | 1,344 | 1,164 | |||||||||||||||||||||
| Income tax benefit | (5,966 | ) | — | — | — | — | ||||||||||||||||||||
| Net income | $ | 7,743 | $ | 1,589 | $ | 1,266 | $ | 1,344 | $ | 1,164 | ||||||||||||||||
| Earnings per common share: | ||||||||||||||||||||||||||
| Basic | $ | 1.21 | $ | 0.25 | $ | 0.20 | $ | 0.21 | $ | 0.18 | ||||||||||||||||
| Diluted | $ | 1.21 | $ | 0.25 | $ | 0.20 | n/a | n/a | ||||||||||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||||||||||
| Basic | 6,415,049 | 6,411,766 | 6,408,167 | 6,402,332 | 6,398,720 | |||||||||||||||||||||
| Diluted | 6,415,207 | 6,411,804 | 6,408,167 | n/a | n/a | |||||||||||||||||||||
Other Income
Other income decreased $24,000 for the fourth quarter of fiscal 2016 compared with the same period in fiscal 2015. The decrease during the fourth quarter of fiscal 2016 was primarily due to a decrease of $155,000 in earnings on bank-owned insurance compared to the same period in fiscal 2015. The decline was a result of a one time death benefit paid in fiscal 2015. Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $471,000 for the three months ended September 30, 2016 compared to $561,000 for the three months ended September 30, 2015, a decrease of $90,000, or 16.0 percent. The decrease in other income in the fourth quarter of fiscal 2016 when compared to the fourth quarter of fiscal 2015 (excluding securities gains and losses) resulted primarily from a decrease of $21,000 in net gain on sale of loans and a decrease in rental income of $4,000, offset by an increase in service charges of $89,000 and an increase in gain on disposal of fixed assets of $1,000.
For the twelve months ended September 30, 2016, total other income decreased $202,000 compared to the same period in fiscal 2015, primarily as a result of a $66,000 decrease in service charges, a $38,000 decrease in rental income, and a $163,000 decrease in earnings on bank-owned insurance, partially offset by an increase of $50,000 in net gains on sales of investment securities, an increase of $14,000 in net gain on sale of loans and an increase in gain on disposal of fixed assets of $1,000. Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $1.8 million for the twelve months ended September 30, 2016 compared to $2.0 million for the comparable period in fiscal 2015, a decrease of $252,000, or 12.5 percent.
The following table presents the components of other income for the periods indicated.
| (in thousands, unaudited) | |||||||||||||||||||
| For the quarter ended: | 9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 9/30/15 | ||||||||||||||
| Service charges on deposit accounts | $ | 258 | $ | 227 | $ | 227 | $ | 211 | $ | 169 | |||||||||
| Rental income – other | 56 | 55 | 50 | 50 | 60 | ||||||||||||||
| Net gains on sales of investments, net | 144 | 229 | 61 | 131 | 78 | ||||||||||||||
| Gain on disposal of fixed assets, net | 1 | — | — | — | — | ||||||||||||||
| Gain on sale of loans, net | 26 | 20 | 36 | 34 | 47 | ||||||||||||||
| Bank-owned life insurance | 130 | 128 | 127 | 132 | 285 | ||||||||||||||
| Total other income | $ | 615 | $ | 659 | $ | 501 | $ | 558 | $ | 639 | |||||||||
Other Expense
Total other expense for the three months ended September 30, 2016, increased $305,000, or 8.8 percent, when compared to the quarter ended September 30, 2015. The increase primarily reflected increases in salaries and employee benefits of $282,000, a $53,000 increase in occupancy expense, a $77,000 increase in professional fees, and a $33,000 increase in other operating expense. These increases were partially offset by decreases of $123,000 in federal deposit insurance premium and a $38,000 decrease in data processing expense.
For the twelve months ended September 30, 2016, total other expense decreased $39,000, or 0.3 percent, compared to the same period in fiscal 2015. The decrease primarily reflected a $205,000 decrease in federal deposit insurance, a $108,000 decrease in advertising, a $108,000 decrease in data processing expense and a $200,000 decrease in other operating expenses. These decreases were partially offset by an increase in salaries and employee benefits of $292,000, a $105,000 increase in occupancy expense, a $112,000 increase in professional fees and a $73,000 change in other real estate owned (income) expense, net.
The following table presents the components of other expense for the periods indicated.
| (in thousands, unaudited) | ||||||||||||||||||||
| For the quarter ended: | 9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 9/30/15 | |||||||||||||||
| Salaries and employee benefits | $ | 1,669 | $ | 1,600 | $ | 1,522 | $ | 1,499 | $ | 1,387 | ||||||||||
| Occupancy expense | 472 | 469 | 456 | 423 | 419 | |||||||||||||||
| Federal deposit insurance premium | 107 | 40 | 232 | 200 | 230 | |||||||||||||||
| Advertising | 50 | 26 | 25 | 30 | 40 | |||||||||||||||
| Data processing | 283 | 278 | 270 | 297 | 321 | |||||||||||||||
| Professional fees | 507 | 415 | 361 | 400 | 430 | |||||||||||||||
| Other real estate owned expense (income), net | 28 | (8 | ) | 8 | (1 | ) | 17 | |||||||||||||
| Other operating expenses | 643 | 558 | 486 | 577 | 610 | |||||||||||||||
| Total other expense | $ | 3,759 | $ | 3,378 | $ | 3,360 | $ | 3,425 | $ | 3,454 | ||||||||||
Statement of Condition Highlights at September 30, 2016
Highlights as of September 30, 2016 included:
- Balance sheet strength, with total assets amounting to $821.3 million at September 30, 2016, an increase $165.6 million, or 25.3 percent, compared to September 30, 2015.
- The Company’s gross loans were $578.4 million at September 30, 2016, an increase of $184.2 million, or 46.7 percent, from September 30, 2015.
- Total investments were $106.9 million at September 30, 2016, a decrease of $78.6 million, or 42.4 percent, compared to September 30, 2015.
- Deposits totaled $602.0 million at September 30, 2016, an increase of $136.5 million, or 29.3 percent, compared to September 30, 2015. Total demand, savings, money market, and certificates of deposit less than $100,000 increased $83.2 million, or 23.7 percent, from September 30, 2015.
- Borrowings totaled $118.0 million at September 30, 2016, an increase of $15.0 million, or 14.6 percent, compared to $103.0 million at September 30, 2015.
Condensed Consolidated Statements of Condition
The following table presents condensed consolidated statements of condition data as of the dates indicated.
| Condensed Consolidated Statements of Condition (unaudited) | |||||||||||||||
| (in thousands) | |||||||||||||||
| At quarter ended: | 9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 9/30/15 | ||||||||||
| Cash and due from depository institutions | $ | 1,297 | $ | 1,331 | $ | 1,304 | $ | 16,334 | $ | 16,026 | |||||
| Interest bearing deposits in depository institutions | 95,465 | 77,052 | 56,739 | 40,036 | 24,237 | ||||||||||
| Investment securities, available for sale, at fair value | 66,387 | 80,555 | 100,895 | 116,767 | 128,354 | ||||||||||
| Investment securities held to maturity | 40,551 | 45,834 | 52,272 | 54,914 | 57,221 | ||||||||||
| Restricted stock, at cost | 5,424 | 5,548 | 5,553 | 4,762 | 4,765 | ||||||||||
| Loans held for sale | — | 304 | — | — | — | ||||||||||
| Loans receivable, net of allowance for loan losses | 574,160 | 553,971 | 515,094 | 461,491 | 391,307 | ||||||||||
| Other real estate owned | — | 700 | 700 | 1,168 | 1,168 | ||||||||||
| Accrued interest receivable | 2,558 | 2,714 | 2,622 | 2,722 | 2,484 | ||||||||||
| Property and equipment, net | 6,637 | 6,654 | 6,490 | 6,486 | 6,535 | ||||||||||
| Deferred income taxes | 8,827 | 1,598 | 2,202 | 2,874 | 2,874 | ||||||||||
| Bank-owned life insurance | 18,418 | 18,289 | 18,161 | 18,033 | 17,905 | ||||||||||
| Other assets | 1,548 | 1,755 | 1,954 | 1,561 | 2,814 | ||||||||||
| Total assets | $ | 821,272 | $ | 796,305 | $ | 763,986 | $ | 727,148 | $ | 655,690 | |||||
| Deposits | $ | 602,046 | $ | 579,043 | $ | 548,790 | $ | 534,701 | $ | 465,522 | |||||
| Borrowings | 118,000 | 123,000 | 123,000 | 103,000 | 103,000 | ||||||||||
| Other liabilities | 6,635 | 7,612 | 7,506 | 6,789 | 5,777 | ||||||||||
| Shareholders' equity | 94,591 | 86,650 | 84,690 | 82,658 | 81,391 | ||||||||||
| Total liabilities and shareholders’ equity | $ | 821,272 | $ | 796,305 | $ | 763,986 | $ | 727,148 | $ | 655,690 | |||||
The following table reflects the composition of the Company’s deposits as of the dates indicated.
| Deposits (unaudited) | |||||||||||||||
| (in thousands) | |||||||||||||||
| At quarter ended: | 9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 9/30/15 | ||||||||||
| Demand: | |||||||||||||||
| Non-interest bearing | $ | 34,547 | $ | 29,416 | $ | 30,720 | $ | 28,260 | $ | 27,010 | |||||
| Interest-bearing | 95,041 | 100,609 | 99,154 | 86,008 | 82,897 | ||||||||||
| Savings | 44,714 | 46,056 | 44,207 | 45,312 | 45,189 | ||||||||||
| Money market | 177,486 | 147,103 | 129,652 | 133,608 | 108,706 | ||||||||||
| Time | 250,258 | 255,859 | 245,057 | 241,513 | 201,720 | ||||||||||
| Total deposits | $ | 602,046 | $ | 579,043 | $ | 548,790 | $ | 534,701 | $ | 465,522 | |||||
Loans
Total net loans were $574.2 million at September 30, 2016 compared to $391.3 million at September 30, 2015, for a net increase of $182.9 million. The allowance for loan losses amounted to $5.4 million and $4.7 million at September 30, 2016 and September 30, 2015, respectively. Average loans during the fourth quarter of fiscal 2016 totaled $575.8 million as compared to $383.1 million during the fourth quarter of fiscal 2015, representing a 50.3 percent increase.
At the end of fiscal 2016, the loan portfolio remained weighted toward commercial real estate and the core residential portfolio, with single-family residential real estate loans accounting for 36.2 percent of the loan portfolio. Construction and development loans amounted to 4.9 percent with commercial loans accounting for 50.1 percent, and consumer loans representing 8.8 percent of the loan portfolio at such date. Total gross loans increased $184.2 million, to $578.4 million at September 30, 2016 compared to $394.2 million at September 30, 2015. The $184.2 million increase in the loan portfolio at September 30, 2016 compared to September 30, 2015, primarily reflected an increase of $181.2 million in commercial loans and a $20.8 million increase in construction and development loans. These increases were partially offset by a $5.8 million decrease in residential mortgage loans and a $12.0 million reduction in consumer loans at September 30, 2016 as compared to September 30, 2015.
For the year ended September 30, 2016, the Company originated total new loan volume of $330.6 million, which was offset in part by participations, payoffs, prepayments and maturities totaling $146.4 million. The payoffs were primarily confined to the consumer and residential portfolios. “The gathering of new clients, and our market presence continued throughout the quarter with overall growth in the portfolio despite payoff activity. We anticipate the growth continuing into our 2017 fiscal year,” commented Anthony C. Weagley.
The following reflects the composition of the Company’s loan portfolio as of the dates indicated.
| Loans (unaudited) | |||||||||||||||
| (in thousands) | |||||||||||||||
| At quarter ended: | 9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 9/30/15 | ||||||||||
| Residential mortgage | $ | 209,186 | $ | 210,621 | $ | 214,207 | $ | 211,302 | $ | 214,958 | |||||
| Construction and Development: | |||||||||||||||
| Residential and commercial | 18,579 | 14,050 | 10,796 | 6,007 | 5,677 | ||||||||||
| Land | 10,013 | 9,904 | 7,755 | 6,804 | 2,142 | ||||||||||
| Total construction and development | 28,592 | 23,954 | 18,551 | 12,811 | 7,819 | ||||||||||
| Commercial: | |||||||||||||||
| Commercial real estate | 231,439 | 211,516 | 173,160 | 142,981 | 87,686 | ||||||||||
| Multi-family | 19,515 | 20,102 | 20,548 | 10,549 | 7,444 | ||||||||||
| Other | 38,779 | 37,091 | 34,585 | 25,975 | 13,380 | ||||||||||
| Total commercial | 289,733 | 268,709 | 228,293 | 179,505 | 108,510 | ||||||||||
| Consumer: | |||||||||||||||
| Home equity lines of credit | 19,757 | 21,035 | 21,712 | 23,207 | 22,919 | ||||||||||
| Second mortgages | 29,204 | 31,752 | 33,987 | 35,533 | 37,633 | ||||||||||
| Other | 1,914 | 2,088 | 2,041 | 2,299 | 2,359 | ||||||||||
| Total consumer | 50,875 | 54,875 | 57,740 | 61,039 | 62,911 | ||||||||||
| Total loans | 578,386 | 558,159 | 518,791 | 464,657 | 394,198 | ||||||||||
| Deferred loan costs, net | 1,208 | 1,155 | 1,240 | 1,410 | 1,776 | ||||||||||
| Allowance for loan losses | (5,434 | ) | (5,343 | ) | (4,937 | ) | (4,576 | ) | (4,667 | ) | |||||
| Loans Receivable, net | $ | 574,160 | $ | 553,971 | $ | 515,094 | $ | 461,491 | $ | 391,307 | |||||
At September 30, 2016 , the Company had $107.9 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. Included in the overall undisbursed commitments are the Company's "Approved, Accepted but Unfunded" pipeline, which includes approximately $7.0 million in construction and $72.7 million in commercial real estate loans, $13.8 million in commercial term loans and lines of credit and $4.0 million in residential mortgage loans expected to fund over the next 90 days.
Asset Quality
Non-accrual loans were $1.6 million at September 30, 2016, as compared to $1.0 million at June 30, 2016 and $1.4 million at September 30, 2015. Other real estate owned, (“OREO”) was zero at September 30, 2016, as compared with $700,000 at June 30, 2016 and $1.2 million at September 30, 2015, respectively. Total performing troubled debt restructured loans were $2.0 million at September 30, 2016, $2.0 million at June 30, 2016 and $1.1 million at September 30, 2015, respectively. The increase in performing troubled debt restructured loans at September 30, 2016 compared to September 30, 2015 was primarily due to two commercial loans to one borrower, with an outstanding balance of approximately $493,000, being returned to accruing status during the first quarter of fiscal 2016, as well as a commercial loan with an outstanding balance of $386,000 and one residential mortgage loan with an outstanding balance of $85,000 being classified as a performing TDR during fiscal 2016. The decrease in OREO at September 30, 2016 compared to September 30, 2015, was attributable to three single residential loans and one commercial real estate loan sold during the twelve months of fiscal 2016. The $1.2 million decrease in OREO at September 30, 2016 compared to September 30, 2015, was due to $1.2 million of sale proceeds, at a net gain of $19,000, as well as a $20,000 reduction in the fair value of the remaining property, which is reflected in other REO expense during the twelve months of fiscal 2016.
At September 30, 2016, non-performing assets totaled $1.6 million, or 0.20 percent of total assets, as compared with $1.7 million, or 0.22 percent, at June 30, 2016 and $2.6 million, or 0.39 percent, at September 30, 2015. The decrease from September 30, 2015 reflects the sale of OREO properties during fiscal 2016, as mentioned above. The portfolio of remaining non-accrual loans at September 30, 2016 was comprised of eleven residential real estate loans with an aggregate outstanding balance of approximately $1.1 million, one commercial real estate loan with an outstanding balance of $193,000 and ten consumer loans with an aggregate outstanding balance of approximately $352,000.
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: | 9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 9/30/15 | ||||||||||||||
| Non-accrual loans(1) | $ | 1,617 | $ | 1,037 | $ | 853 | $ | 795 | $ | 1,399 | |||||||||
| Loans 90 days or more past due and still accruing | — | — | — | — | — | ||||||||||||||
| Total non-performing loans | 1,617 | 1,037 | 853 | 795 | 1,399 | ||||||||||||||
| Other real estate owned | — | 700 | 700 | 1,168 | 1,168 | ||||||||||||||
| Total non-performing assets | $ | 1,617 | $ | 1,737 | $ | 1,553 | $ | 1,963 | $ | 2,567 | |||||||||
| Performing troubled debt restructured loans | $ | 2,039 | $ | 1,959 | $ | 1,577 | $ | 1,584 | $ | 1,091 | |||||||||
| Non-performing assets / total assets | 0.20 | % | 0.22 | % | 0.20 | % | 0.27 | % | 0.39 | % | |||||||||
| Non-performing loans / total loans | 0.28 | % | 0.19 | % | 0.16 | % | 0.17 | % | 0.35 | % | |||||||||
| Net charge-offs (recoveries) | $ | 9 | $ | 66 | $ | 14 | $ | 91 | $ | (93 | ) | ||||||||
| Net charge-offs (recoveries) / average loans(2) | 0.01 | % | 0.05 | % | 0.01 | % | 0.08 | % | (0.10 | )% | |||||||||
| Allowance for loan losses / total loans | 0.94 | % | 0.96 | % | 0.95 | % | 0.98 | % | 1.18 | % | |||||||||
| Allowance for loan losses / non-performing loans | 336.1 | % | 515.2 | % | 578.8 | % | 575.60 | % | 333.60 | % | |||||||||
| Total assets | $ | 821,272 | $ | 796,305 | $ | 763,986 | $ | 727,148 | $ | 655,690 | |||||||||
| Total loans | 578,386 | 558,159 | 518,791 | 464,657 | 394,198 | ||||||||||||||
| Average loans | 575,784 | 542,985 | 494,005 | 420,601 | 383,092 | ||||||||||||||
| Allowance for loan losses | 5,434 | 5,343 | 4,937 | 4,576 | 4,667 | ||||||||||||||
| ______________ | |||||||||||||||||||
| (1 | ) | 17 loans totaling approximately $1.3 million or 78.0% of the total non-accrual loan balance were making payments at September 30, 2016. | |
| (2 | ) | Annualized. | |
The allowance for loan losses at September 30, 2016 amounted to approximately $5.4 million, or 0.94 percent of total loans, compared to $5.3 million, or 0.96 percent of total loans, at June 30, 2016 and $4.7 million, or 1.18 percent of total loans, at September 30, 2015. The Company had a $100,000 provision for loan losses during the quarter ended September 30, 2016 compared to zero for the quarter ended September 30, 2015, respectively. Provision expense was higher during the quarter ended September 30, 2016 due to an increase in loan growth, despite the level of the unallocated component of the provision.
Capital
At September 30, 2016, our total shareholders' equity amounted to $94.6 million, or 11.52 percent of total assets, compared to $81.4 million at September 30, 2015. The Company’s book value per common share was $14.42 at September 30, 2016, compared to $12.41 at September 30, 2015.
At September 30, 2016, the Bank’s common equity tier 1 ratio was 14.24 percent, tier 1 leverage ratio was 10.79 percent, tier 1 risk-based capital ratio was 14.24 percent and the total risk-based capital ratio was 15.16 percent. At September 30, 2015, the Bank’s common equity tier 1 ratio was 15.90 percent, tier 1 leverage ratio was 10.80 percent, tier 1 risk-based capital ratio was 15.90 percent and the total risk-based capital ratio was 16.99 percent. At September 30, 2016, 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: | 9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 9/30/15 | |||||||||
| Other income | $ | 615 | $ | 659 | $ | 501 | $ | 558 | $ | 639 | ||||
| Less: Net investment securities gains | 144 | 229 | 61 | 131 | 78 | |||||||||
| Other income, excluding net investment securities gains | $ | 471 | $ | 430 | $ | 440 | $ | 427 | $ | 561 | ||||
“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: | 9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 930/15 | ||||||||||||||
| Other expense | $ | 3,759 | $ | 3,378 | $ | 3,360 | $ | 3,425 | $ | 3,454 | |||||||||
| Less: non-core items(1) | — | — | 44 | 67 | 42 | ||||||||||||||
| Other expense, excluding non-core items | $ | 3,759 | $ | 3,378 | $ | 3,316 | $ | 3,358 | $ | 3,412 | |||||||||
| Net interest income (tax equivalent basis) | $ | 5,083 | $ | 4,847 | $ | 4,566 | $ | 4,281 | $ | 4,056 | |||||||||
| Other income, excluding net investment securities gains | 471 | 430 | 440 | 427 | 561 | ||||||||||||||
| Total | $ | 5,554 | $ | 5,277 | $ | 5,006 | $ | 4,708 | $ | 4,617 | |||||||||
| Efficiency ratio | 67.7 | % | 64.0 | % | 66.2 | % | 71.3 | % | 73.9 | % | |||||||||
| ______________________ | |||||||||||||||||||
| (1) Included in non-core items are costs which include expenses related to the Company’s corporate restructuring initiatives, such as professional fees, litigation and settlement costs, severance costs, and external payroll development costs related to such restructuring initiatives. The Company believes these adjustments are necessary to provide the most accurate measure of core operating results as a means to evaluate comparative results. | |||||||||||||||||||
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: | 9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 9/30/15 | ||||||||||||||
| Efficiency ratio on a GAAP basis | 66.7 | % | 62.1 | % | 67.2 | % | 70.4 | % | 73.9 | % | |||||||||
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 TE basis adjusts GAAP interest income and yields for the tax benefit of income on certain tax-exempt investments using the federal statutory rate of 34% for each period 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: | 9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 9/30/15 | ||||||||||||||
| Net interest income (GAAP) | $ | 5,021 | $ | 4,780 | $ | 4,500 | $ | 4,211 | $ | 3,979 | |||||||||
| Tax-equivalent adjustment(1) | 62 | 67 | 66 | 70 | 77 | ||||||||||||||
| TE net interest income | $ | 5,083 | $ | 4,847 | $ | 4,566 | $ | 4,281 | $ | 4,056 | |||||||||
| Net interest income margin (GAAP) | 2.62 | % | 2.52 | % | 2.61 | % | 2.67 | % | 2.66 | % | |||||||||
| Tax-equivalent effect | 0.03 | 0.04 | 0.04 | 0.05 | 0.05 | ||||||||||||||
| Net interest margin (TE) | 2.65 | % | 2.56 | % | 2.65 | % | 2.72 | % | 2.71 | % | |||||||||
| ____________________ | |||||||||||||||||||
| (1) Reflects tax-equivalent adjustment for tax exempt loans and investments. | |||||||||||||||||||
The following table sets forth the Company’s consolidated average statements of condition for the periods presented.
| Condensed Consolidated Average Statements of Condition (unaudited) | |||||||||||||||||||
| (in thousands) | |||||||||||||||||||
| For the quarter ended: | 9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 9/30/15 | ||||||||||||||
| Investment securities | $ | 115,366 | $ | 141,292 | $ | 164,789 | $ | 179,979 | $ | 188,424 | |||||||||
| Loans | 575,784 | 542,985 | 494,005 | 420,601 | 383,092 | ||||||||||||||
| Allowance for loan losses | (5,424 | ) | (5,132 | ) | (4,602 | ) | (4,662 | ) | (4,596 | ) | |||||||||
| All other assets | 107,655 | 107,044 | 94,581 | 85,450 | 82,892 | ||||||||||||||
| Total assets | $ | 793,381 | $ | 786,189 | $ | 748,773 | $ | 681,368 | $ | 649,812 | |||||||||
| Non-interest bearing deposits | $ | 33,242 | $ | 34,360 | $ | 29,592 | $ | 28,604 | $ | 32,477 | |||||||||
| Interest-bearing deposits | 543,985 | 535,457 | 514,402 | 460,999 | 428,205 | ||||||||||||||
| Borrowings | 122,319 | 123,434 | 113,000 | 102,998 | 101,802 | ||||||||||||||
| Other liabilities | 5,601 | 7,172 | 7,847 | 6,688 | 6,576 | ||||||||||||||
| Shareholders’ equity | 88,234 | 85,766 | 83,932 | 82,079 | 80,752 | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | 793,381 | $ | 786,189 | $ | 748,773 | $ | 681,368 | $ | 649,812 | |||||||||
About Malvern Bancorp
Malvern Bancorp, Inc. is the holding company for Malvern Federal Savings Bank. Malvern Federal Savings Bank is a federally-chartered, FDIC-insured savings bank that was originally organized in 1887 and now serves as one of the oldest banks headquartered on the Philadelphia Mainline. For more than a century, Malvern Federal has been committed to helping people build prosperous communities as a trusted financial partner, forging lasting relationships through teamwork, respect and integrity. The Bank conducts business from its headquarters in Paoli, Pennsylvania, a suburb of Philadelphia, as well as eight other financial centers located throughout Chester and Delaware Counties, Pennsylvania and a Private Banking Loan Production headquarters office in Morristown, New Jersey. Its primary market niche is providing personalized service to its client base.
The Bank, through its Private Banking division and strategic partnership with Bell Rock Capital, Rehoboth, Delaware, provides personalized wealth management and advisory services to high net worth individuals and families. Our services include banking, liquidity management, investment services, 401 accounts and planning, custody, tailored lending, wealth planning, trust and fiduciary services, insurance, family wealth advisory services and philanthropic advisory services.
For further information regarding Malvern Bancorp, Inc., please visit our web site at http://ir.malvernfederal.com. For information regarding Malvern Federal Savings Bank, please visit our web site at https://www.malvernfederal.com/.
Forward-Looking Statements
This press release contains certain forward looking statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like "believe," "expect," "anticipate," "estimate" and "intend" or future or conditional verbs such as "will," "would," "should," "could" or "may." Certain factors that could cause actual results to differ materially from expected results include changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the business of Malvern Bancorp, Inc., and changes in the securities markets. Except as required by law, the Company does not undertake any obligation to update any forward-looking statements to reflect changes in beliefs, expectations or events.
| MALVERN BANCORP, INC AND SUBSIDIARIES | |||||||||||
| CONSOLIDATED STATEMENTS OF CONDITION | |||||||||||
| (in thousands, except for share and per share data) | September 30, 2016 | September 30, 2015 | |||||||||
| (unaudited) | |||||||||||
| ASSETS | |||||||||||
| Cash and due from depository institutions | $ | 1,297 | $ | 16,026 | |||||||
| Interest bearing deposits in depository institutions | 95,465 | 24,237 | |||||||||
| Total cash and cash equivalents | 96,762 | 40,263 | |||||||||
| Investment securities available for sale, at fair value | 66,387 | 128,354 | |||||||||
| Investment securities held to maturity (fair value of $40,817 and $56,825) | 40,551 | 57,221 | |||||||||
| Restricted stock, at cost | 5,424 | 4,765 | |||||||||
| Loans receivable, net of allowance for loan losses | 574,160 | 391,307 | |||||||||
| Other real estate owned | — | 1,168 | |||||||||
| Accrued interest receivable | 2,558 | 2,484 | |||||||||
| Property and equipment, net | 6,637 | 6,535 | |||||||||
| Deferred income taxes, net | 8,827 | 2,874 | |||||||||
| Bank-owned life insurance | 18,418 | 17,905 | |||||||||
| Other assets | 1,548 | 2,814 | |||||||||
| Total assets | $ | 821,272 | $ | 655,690 | |||||||
| LIABILITIES | |||||||||||
| Deposits: | |||||||||||
| Non-interest bearing | $ | 34,547 | $ | 27,010 | |||||||
| Interest-bearing | 567,499 | 438,512 | |||||||||
| Total deposits | 602,046 | 465,522 | |||||||||
| FHLB Advances | 118,000 | 103,000 | |||||||||
| Advances from borrowers for taxes and insurance | 1,659 | 1,806 | |||||||||
| Accrued interest payable | 427 | 396 | |||||||||
| Other liabilities | 4,549 | 3,575 | |||||||||
| Total liabilities | 726,681 | 574,299 | |||||||||
| SHAREHOLDERS’ EQUITY | |||||||||||
| Preferred stock, $0.01 par value, 10,000,000 shares, authorized, none issued | — | — | |||||||||
| Common stock, $0.01 par value, authorized 40,000,000 shares authorized, issued and outstanding: 6,560,403 shares at September 30, 2016 and 6,558,473 shares at September 30, 2015 | 66 | 66 | |||||||||
| Additional paid in capital | 60,461 | 60,365 | |||||||||
| Retained earnings | 35,756 | 23,814 | |||||||||
| Unearned Employee Stock Ownership Plan (ESOP) shares | (1,629 | ) | (1,775 | ) | |||||||
| Accumulated other comprehensive loss | (63 | ) | (1,079 | ) | |||||||
| Total shareholders’ equity | 94,591 | 81,391 | |||||||||
| Total liabilities and shareholders’ equity | $ | 821,272 | $ | 655,690 | |||||||
| MALVERN BANCORP, INC AND SUBSIDIARIES | ||||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
| Three Months Ended September 30, | Twelve Months Ended September 30, | |||||||||||||||||
| (in thousands, except for share and per share data) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| (unaudited) | ||||||||||||||||||
| Interest and Dividend Income | ||||||||||||||||||
| Loans, including fees | $ | 5,980 | $ | 4,128 | $ | 21,206 | $ | 16,484 | ||||||||||
| Investment securities, taxable | 511 | 922 | 2,824 | 3,073 | ||||||||||||||
| Investment securities, tax-exempt | 174 | 217 | 751 | 522 | ||||||||||||||
| Dividends, restricted stock | 68 | 67 | 250 | 311 | ||||||||||||||
| Interest-bearing cash accounts | 84 | 10 | 213 | 72 | ||||||||||||||
| Total Interest and Dividend Income | 6,817 | 5,344 | 25,244 | 20,462 | ||||||||||||||
| Interest Expense | ||||||||||||||||||
| Deposits | 1,232 | 870 | 4,537 | 3,431 | ||||||||||||||
| Borrowings | 564 | 495 | 2,195 | 1,817 | ||||||||||||||
| Total Interest Expense | 1,796 | 1,365 | 6,732 | 5,248 | ||||||||||||||
| Net interest income | 5,021 | 3,979 | 18,512 | 15,214 | ||||||||||||||
| Provision for Loan Losses | 100 | — | 947 | 90 | ||||||||||||||
| Net Interest Income after Provision for Loan Losses | 4,921 | 3,979 | 17,565 | 15,124 | ||||||||||||||
| Other Income | ||||||||||||||||||
| Service charges and other fees | 258 | 169 | 923 | 989 | ||||||||||||||
| Rental income-other | 56 | 60 | 211 | 249 | ||||||||||||||
| Net gains on sales of investments, net | 144 | 78 | 565 | 515 | ||||||||||||||
| Gain on disposal of fixed assets, net | 1 | — | 1 | — | ||||||||||||||
| Net gains on sale of loans, net | 26 | 47 | 116 | 102 | ||||||||||||||
| Earnings on bank-owned life insurance | 130 | 285 | 517 | 680 | ||||||||||||||
| Total Other Income | 615 | 639 | 2,333 | 2,535 | ||||||||||||||
| Other Expense | ||||||||||||||||||
| Salaries and employee benefits | 1,669 | 1,387 | 6,290 | 5,998 | ||||||||||||||
| Occupancy expense | 472 | 419 | 1,820 | 1,715 | ||||||||||||||
| Federal deposit insurance premium | 107 | 230 | 579 | 784 | ||||||||||||||
| Advertising | 50 | 40 | 131 | 239 | ||||||||||||||
| Data processing | 283 | 321 | 1,128 | 1,236 | ||||||||||||||
| Professional fees | 507 | 430 | 1,683 | 1,571 | ||||||||||||||
| Other real estate owned expense (income), net | 28 | 17 | 27 | (46 | ) | |||||||||||||
| Other operating expenses | 643 | 610 | 2,264 | 2,464 | ||||||||||||||
| Total Other Expense | 3,759 | 3,454 | 13,922 | 13,961 | ||||||||||||||
| Income before income tax benefit | 1,777 | 1,164 | 5,976 | 3,698 | ||||||||||||||
| Income tax benefit | (5,966 | ) | — | (5,966 | ) | — | ||||||||||||
| Net Income | $ | 7,743 | $ | 1,164 | $ | 11,942 | $ | 3,698 | ||||||||||
| Earnings per common share | ||||||||||||||||||
| Basic | $ | 1.21 | $ | 0.18 | $ | 1.86 | $ | 0.58 | ||||||||||
| Diluted | $ | 1.21 | n/a | $ | 1.86 | n/a | ||||||||||||
| Weighted Average Common Shares Outstanding | ||||||||||||||||||
| Basic | 6,415,049 | 6,398,720 | 6,409,265 | 6,393,330 | ||||||||||||||
| Diluted | 6,415,207 | n/a | 6,409,325 | n/a | ||||||||||||||
| 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) | 9/30/2016 | 6/30/2016 | 9/30/2015 | ||||||
| (unaudited) | |||||||||
| Statements of Operations Data | |||||||||
| Interest income | $ | 6,817 | $ | 6,530 | $ | 5,344 | |||
| Interest expense | 1,796 | 1,750 | 1,365 | ||||||
| Net interest income | 5,021 | 4,780 | 3,979 | ||||||
| Provision for loan losses | 100 | 472 | — | ||||||
| Net interest income after provision for loan losses | 4,921 | 4,308 | 3,979 | ||||||
| Other income | 615 | 659 | 639 | ||||||
| Other expense | 3,759 | 3,378 | 3,454 | ||||||
| Income before income tax benefit | 1,777 | 1,589 | 1,164 | ||||||
| Income tax benefit | (5,966 | ) | — | — | |||||
| Net income | $ | 7,743 | $ | 1,589 | $ | 1,164 | |||
| Earnings (per Common Share) | |||||||||
| Basic | $ | 1.21 | $ | 0.25 | $ | 0.18 | |||
| Diluted | $ | 1.21 | $ | 0.25 | n/a | ||||
| Statements of Condition Data (Period-End) | |||||||||
| Investment securities available for sale, at fair value | $ | 66,387 | $ | 80,555 | $ | 128,354 | |||
| Investment securities held to maturity (fair value of $40,817, $46,146 and $56,825) | 40,551 | 45,834 | 57,221 | ||||||
| Loans held for sale | — | 304 | — | ||||||
| Loans, net of allowance for loan losses | 574,160 | 553,971 | 391,307 | ||||||
| Total assets | 821,272 | 796,305 | 655,690 | ||||||
| Deposits | 602,046 | 579,043 | 465,522 | ||||||
| Borrowings | 118,000 | 123,000 | 103,000 | ||||||
| Shareholders' equity | 94,591 | 86,650 | 81,391 | ||||||
| Common Shares Dividend Data | |||||||||
| Cash dividends | $ | — | $ | — | $ | — | |||
| Weighted Average Common Shares Outstanding | |||||||||
| Basic | 6,415,049 | 6,411,766 | 6,398,720 | ||||||
| Diluted | 6,415,207 | 6,411,804 | n/a | ||||||
| Operating Ratios | |||||||||
| Return on average assets | 3.90 | % | 0.81 | % | 0.72 | % | |||
| Return on average equity | 35.10 | % | 7.41 | % | 5.77 | % | |||
| Average equity / average assets | 11.12 | % | 10.91 | % | 12.43 | % | |||
| Book value per common share (period-end) | $ | 14.42 | $ | 13.21 | $ | 12.41 | |||
| Non-Financial Information (Period-End) | |||||||||
| Common shareholders of record | 459 | 464 | 483 | ||||||
| Full-time equivalent staff | 83 | 76 | 71 | ||||||