PAOLI, Pa., April 26, 2017 (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 second fiscal quarter ended March 31, 2017. Net income amounted to $1.4 million, or $0.22 per fully diluted common share, for the quarter ended March 31, 2017, an increase of $143,000, or 11.3 percent, as compared with net income of $1.3 million, or $0.20 per fully diluted common share, for the quarter ended March 31, 2016. The March 2016 quarter, earnings per share were favorably impacted by the tax position of the Company prior to the full recognition of the Bank’s deferred tax asset. On a fully taxable basis, net income for the quarter ended March 31, 2016 would have been $1.0 million, and earnings per share for the quarter ended March 31, 2016 would have been $0.16.
For the six months ended March 31, 2017, net income amounted to $2.6 million, or $0.40 per fully diluted common share, compared with net income of $2.6 million, or $0.41 per fully diluted common share, for the six months ended March 31, 2016. For the six months ended March 31, 2016, earnings per share were favorably impacted by the tax position of the Company prior to the full recognition of the Bank’s deferred tax asset. On a fully taxable basis, net income for the six months ended March 31, 2016 would have been $2.1 million, and earnings per share for the six months ended March 31, 2016 would have been $0.33.
"Completing our half way mark in to 2017, Malvern is again demonstrating consistent earnings following a year in which Malvern delivered record earnings – in fact, our 10th consecutive quarter since my joining Malvern Federal – and also another period where we reported strong performance across all key metrics. The expansion of Malvern continues, driven by growth in deposits of $102.2 million and in gross loans of $180.8 million. This was all achieved despite the challenges of digesting increased provisions for loan losses commensurate with loan growth and growing net revenue simultaneously. Moreover, we bolstered our capital position with a successful subordinated debt offering of $25 million which closed on February 7, 2017. This capital raise, along with solid earnings retention, well positions Malvern for future expansion," commented Anthony C. Weagley, President and Chief Executive Officer.
"The team continues to execute our highly successful client focused business model, which allows Malvern to differentiate itself in an extremely competitive marketplace. The private banking model delivering service 'beyond your expectations' is supported by our committed colleagues – this furthers our business development activities and allows us to better attract and retain clients. Our persistence, commitment and overall strong performance culminated in the Bank achieving its success this quarter," Mr. Weagley said.
Joe Gangemi, Chief Financial Officer of Malvern Bancorp, Inc. added, "Malvern has produced yet another quarter of increased earnings and solid financial performance. We maintained a rapid growth pace while remaining steadfast to our focus for our clients."
Highlights for the quarter include:
- Return on average assets (“ROAA”) was 0.62 percent for the three months ended March 31, 2017, compared to 0.68 percent for the three months ended March 31, 2016, and return on average equity (“ROAE”) was 5.81 percent for the three months ended March 31, 2017, compared with 6.03 percent for the three months ended March 31, 2016.
- The Company originated $118.7 million in new loans in the second quarter of fiscal 2017, which was offset in part by $33.2 million in participations, payoffs, prepayments and maturities from its portfolio, resulting in net portfolio growth of $85.5 million over first quarter of fiscal 2017; new loan originations consisted of $5.2 million in residential mortgage loans, $86.7 million in commercial loans, $25.2 million in construction and development loans and $1.6 million in consumer loans.
- Non-performing assets (“NPAs”) were at 0.18 percent of total assets at March 31, 2017, compared to 0.20 percent at March 31, 2016 and 0.28 percent at September 30, 2016. The allowance for loan losses as a percentage of total non-performing loans was 425.4 percent at March 31, 2017, compared to 578.8 percent at March 31, 2016 and 234.9 percent at September 30, 2016.
- The Company’s ratio of shareholders’ equity to total assets was 10.13 percent at March 31, 2017, compared to 11.09 percent at March 31, 2016, and 11.52 percent at September 30, 2016.
- Book value per common share amounted to $14.83 at March 31, 2017, compared to $12.91 at March 31, 2016 and $14.42 at September 30, 2016.
- The efficiency ratio, a non-GAAP measure, was 57.4 percent for the second quarter of fiscal 2017 on an annualized basis, compared to 66.2 percent in the second quarter of fiscal 2016 and 67.7 percent in the fourth quarter of fiscal 2016.
- The Company’s balance sheet reflected total asset growth of $140.5 million at March 31, 2017, compared to September 30, 2016, coupled with stable asset quality, and capital levels that exceeded regulatory standards for a well-capitalized institution.
| Selected Financial Ratios (unaudited; annualized where applicable) | ||||||||||||||||||||
| As of or for the quarter ended: | 3/31/17 | 12/31/16 | 9/30/16 | 6/30/16 | 3/31/16 | |||||||||||||||
| Return on average assets | 0.62 | % | 0.56 | % | 3.90 | % | 0.81 | % | 0.68 | % | ||||||||||
| Return on average equity | 5.81 | % | 4.92 | % | 35.10 | % | 7.41 | % | 6.03 | % | ||||||||||
| Net interest margin (tax equivalent basis) (1) | 2.75 | % | 2.64 | % | 2.65 | % | 2.56 | % | 2.65 | % | ||||||||||
| Loans / deposits ratio | 107.80 | % | 102.29 | % | 96.07 | % | 96.39 | % | 94.53 | % | ||||||||||
| Shareholders’ equity / total assets | 10.13 | % | 10.89 | % | 11.52 | % | 10.88 | % | 11.09 | % | ||||||||||
| Efficiency ratio (1) | 57.4 | % | 61.6 | % | 67.7 | % | 64.0 | % | 66.2 | % | ||||||||||
| Book value per common share | $ | 14.83 | $ | 14.59 | $ | 14.42 | $ | 13.21 | $ | 12.91 | ||||||||||
| _____________ | |
| (1) | Information reconciling non-GAAP measures to GAAP measures is presented elsewhere in this press release. |
Net Interest Income
For the three months ended March 31, 2017, total interest income on a fully tax-equivalent basis increased $2.0 million, or 31.1 percent, to $8.2 million, compared to the three months ended March 31, 2016. Interest income rose in the quarter ended March 31, 2017, compared to the comparable period in fiscal 2016, primarily due to a $223.4 million increase in the average balance of our loans. Total interest expense increased by $474,000, or 27.7 percent, to $2.2 million, for the three months ended March 31, 2017, compared to the same period in fiscal 2016.
Net interest income on a fully tax-equivalent basis was $6.0 million for the three months ended March 31, 2017, increasing $1.5 million, or 32.4 percent, from $4.6 million for the comparable three month period in fiscal 2016. The change for the three months ended March 31, 2017 primarily was the result of an increase in the average balance of interest earning assets, which increased $190.2 million. The net interest spread on an annualized tax-equivalent basis was at 2.61 percent and 2.55 percent for the three months ended March 31, 2017 and 2016, respectively. For the quarter ended March 31, 2017, the Company’s net interest margin on a tax-equivalent basis increased to 2.75 percent as compared to 2.65 percent for the same three month period in fiscal 2016.
The 27.7 percent increase in interest expense for the second quarter of fiscal 2017 as compared to the second quarter of fiscal 2016 primarily due to increase in deposits as well as subordinated debt and short-term borrowing. The average cost of funds was 1.13 percent for the quarter ended March 31, 2017 compared to 1.09 percent for the same three month period in fiscal 2016 and, on a linked sequential quarter basis, increased six basis points compared to the first quarter of fiscal 2017.
For the six months ended March 31, 2017, total interest income on a fully tax equivalent basis increased $3.4 million, or 27.9 percent, to $15.4 million, compared to $12.0 million for the six months ended March 31, 2016. Total interest expense increased by $864,000, or 27.1 percent, to $4.1 million, for the six months ended March 31, 2017, compared to the comparable period in fiscal 2016. Interest income rose for the six months ended March 31, 2017, compared to the comparable period in fiscal 2016 primarily due to a $207.2 million increase in average loan balances. Compared to the same period in fiscal 2016, for the six months ended March 31, 2017, average interest earning assets increased $180.8 million, and the net interest spread decreased on an annualized tax-equivalent basis by two basis points and net interest margin increased on an annualized tax-equivalent two basis points.
Earnings Summary for the Period Ended March 31, 2017
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: | 3/31/17 | 12/31/16 | 9/30/16 | 6/30/16 | 3/31/16 | ||||||||||||||||||
| Net interest income | $ | 5,991 | $ | 5,239 | $ | 5,021 | $ | 4,780 | $ | 4,500 | |||||||||||||
| Provision for loan losses | 997 | 660 | 100 | 472 | 375 | ||||||||||||||||||
| Net interest income after provision for loan losses | 4,994 | 4,579 | 4,921 | 4,308 | 4,125 | ||||||||||||||||||
| Other income | 542 | 453 | 615 | 659 | 501 | ||||||||||||||||||
| Other expense | 3,778 | 3,570 | 3,759 | 3,378 | 3,360 | ||||||||||||||||||
| Income before income tax expense (benefit) | 1,758 | 1,462 | 1,777 | 1,589 | 1,266 | ||||||||||||||||||
| Income tax expense (benefit) | 349 | 292 | (5,966 | ) | - | - | |||||||||||||||||
| Net income | $ | 1,409 | $ | 1,170 | $ | 7,743 | $ | 1,589 | $ | 1,266 | |||||||||||||
| Earnings per common share: | |||||||||||||||||||||||
| Basic | $ | 0.22 | $ | 0.18 | $ | 1.21 | $ | 0.25 | $ | 0.20 | |||||||||||||
| Diluted | $ | 0.22 | $ | 0.18 | $ | 1.21 | $ | 0.25 | $ | 0.20 | |||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | 6,427,309 | 6,418,583 | 6,415,049 | 6,411,766 | 6,408,167 | ||||||||||||||||||
| Diluted | 6,427,932 | 6,419,012 | 6,415,207 | 6,411,804 | 6,408,167 | ||||||||||||||||||
Other Income
Other income increased $41,000, or 8.2 percent, for the second quarter of fiscal 2017 compared with the same period in fiscal 2016. The increase was primarily as a result of a $47,000 increase in service charges and other fees and an increase in rental income of $5,000. The increase was partially offset by a decrease in net gains on sales of investment securities of $3,000, a decrease of $6,000 in net gain on sale of loans and a decrease of $2,000 in earnings on bank-owned insurance. Excluding net securities gains and losses, a non-GAAP measure, the Company would have recorded other income of $484,000 for the three months ended March 31, 2017 compared to $440,000 for the three months ended March 31, 2016, an increase of $44,000, or 10.0 percent.
For the six months ended March 31, 2017, total other income decreased $64,000 compared to the same period in fiscal 2016, primarily as a result of a $134,000 decrease in net gains on sales of investment securities and a $4,000 decrease in earnings on bank-owned insurance. The decrease was partially offset by an increase of $59,000 in service charges, a $10,000 increase in rental income and a $5,000 increase in net gain on sale of loans. Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $937,000 for the six months ended March 31, 2017 compared to $867,000 for the comparable period in fiscal 2016, an increase of $70,000, or 8.1 percent.
The following table presents the components of other income for the periods indicated.
| (in thousands, unaudited) | |||||||||||||||
| For the quarter ended: | 3/31/17 | 12/31/16 | 9/30/16 | 6/30/16 | 3/31/16 | ||||||||||
| Service charges on deposit accounts | $ | 274 | $ | 223 | $ | 258 | $ | 227 | $ | 227 | |||||
| Rental income – other | 55 | 55 | 56 | 55 | 50 | ||||||||||
| Net gains on sales of investments, net | 58 | — | 144 | 229 | 61 | ||||||||||
| Gain on disposal of fixed assets, net | — | — | 1 | — | — | ||||||||||
| Gain on sale of loans, net | 30 | 45 | 26 | 20 | 36 | ||||||||||
| Bank-owned life insurance | 125 | 130 | 130 | 128 | 127 | ||||||||||
| Total other income | $ | 542 | $ | 453 | $ | 615 | $ | 659 | $ | 501 | |||||
Other Expense
Total other expense for the three months ended March 31, 2017, increased $418,000, or 12.4 percent, when compared to the quarter ended March 31, 2016. The increase primarily reflected increases in salaries and employee benefits of $282,000, a $58,000 increase in occupancy expense, a $48,000 increase in advertising expense, a $31,000 increase in data processing expense, a $38,000 increase in professional fees and an $110,000 increase in other operating expense. The increases in other expense were attributed to increases in our workforce as well as increased expenses due to the opening of new locations. These increases for the quarter were partially offset by decreases of $141,000 in the federal deposit insurance premium due to the new regulatory calculation and an $8,000 decrease in other real estate expense, net.
For the six months ended March 31, 2017, total other expense increased $563,000, or 8.3 percent, compared to the same period in fiscal 2016. The increase primarily reflected increases in salaries and employee benefits of $495,000, a $129,000 increase in occupancy expense, a $69,000 increase in advertising expense, a $36,000 increase in data processing expense, a $39,000 increase in professional fees and a $139,000 increase in other operating expense. These increases were partially offset by decreases of $337,000 in the federal deposit insurance premium and a $7,000 decrease in other real estate expense, net.
The following table presents the components of other expense for the periods indicated.
| (in thousands, unaudited) | |||||||||||||||||
| For the quarter ended: | 3/31/17 | 12/31/16 | 9/30/16 | 6/30/16 | 3/31/16 | ||||||||||||
| Salaries and employee benefits | $ | 1,804 | $ | 1,712 | $ | 1,669 | $ | 1,600 | $ | 1,522 | |||||||
| Occupancy expense | 514 | 494 | 472 | 469 | 456 | ||||||||||||
| Federal deposit insurance premium | 91 | 4 | 107 | 40 | 232 | ||||||||||||
| Advertising | 73 | 51 | 50 | 26 | 25 | ||||||||||||
| Data processing | 301 | 302 | 283 | 278 | 270 | ||||||||||||
| Professional fees | 399 | 401 | 507 | 415 | 361 | ||||||||||||
| Other real estate owned expense, net | — | — | 28 | (8 | ) | 8 | |||||||||||
| Other operating expenses | 596 | 606 | 643 | 558 | 486 | ||||||||||||
| Total other expense | $ | 3,778 | $ | 3,570 | $ | 3,759 | $ | 3,378 | $ | 3,360 | |||||||
Statement of Condition Highlights at March 31, 2017
Highlights as of March 31, 2017 included:
- Balance sheet strength, with total assets amounting to $961.8 million at March 31, 2017, increasing $140.5 million, or 17.1 percent, compared to September 30, 2016.
- The Company’s gross loans were $759.2 million at March 31, 2017, increasing $180.8 million, or 31.3 percent, from September 30, 2016.
- Total investments were $98.7 million at March 31, 2017, a decrease of $8.2 million, or 7.7 percent, compared to September 30, 2016.
- Deposits totaled $704.3 million at March 31, 2017, an increase of $102.2 million, or 17.0 percent, compared to September 30, 2016.
- Federal Home Loan Bank (FHLB) advances totaled $118.0 million at March 31, 2017 and at September 30, 2016.
- Other short-term borrowing totaled $10.0 million at March 31, 2017 and zero at September 30, 2016.
- Subordinated debt totaled $25.0 million at March 31, 2017 and zero at September 30, 2016. On February 7, 2017 the Company completed a private placement of $25.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the "Notes") to certain institutional investors. The Notes are non-callable for five years, have a stated maturity of February 15, 2027, and bear interest at a fixed rate of 6.125% per year, from and including February 7, 2017 to, but excluding February 15, 2022.
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: | 3/31/17 | 12/31/16 | 9/30/16 | 6/30/16 | 3/31/16 | ||||||||||
| Cash and due from depository institutions | $ | 1,716 | $ | 1,598 | $ | 1,297 | $ | 1,331 | $ | 1,304 | |||||
| Interest bearing deposits in depository institutions | 64,036 | 61,683 | 95,465 | 77,052 | 56,739 | ||||||||||
| Investment securities, available for sale, at fair value | 61,672 | 65,108 | 66,387 | 80,555 | 100,895 | ||||||||||
| Investment securities held to maturity | 37,060 | 38,160 | 40,551 | 45,834 | 52,272 | ||||||||||
| Restricted stock, at cost | 5,397 | 5,416 | 5,424 | 5,548 | 5,553 | ||||||||||
| Loans held for sale | — | — | — | 304 | — | ||||||||||
| Loans receivable, net of allowance for loan losses | 752,708 | 668,427 | 574,160 | 553,971 | 515,094 | ||||||||||
| Other real estate owned | — | — | — | 700 | 700 | ||||||||||
| Accrued interest receivable | 3,177 | 2,899 | 2,558 | 2,714 | 2,622 | ||||||||||
| Property and equipment, net | 6,896 | 6,769 | 6,637 | 6,654 | 6,490 | ||||||||||
| Deferred income taxes | 7,881 | 8,449 | 8,827 | 1,598 | 2,202 | ||||||||||
| Bank-owned life insurance | 18,673 | 18,548 | 18,418 | 18,289 | 18,161 | ||||||||||
| Other assets | 2,599 | 1,945 | 1,548 | 1,755 | 1,954 | ||||||||||
| Total assets | $ | 961,815 | $ | 879,002 | $ | 821,272 | $ | 796,305 | $ | 763,986 | |||||
| Deposits | $ | 704,272 | $ | 658,623 | $ | 602,046 | $ | 579,043 | $ | 548,790 | |||||
| FHLB advances | 118,000 | 118,000 | 118,000 | 123,000 | 123,000 | ||||||||||
| Other short-term borrowing | 10,000 | — | — | — | — | ||||||||||
| Subordinated debt | 25,000 | — | — | — | — | ||||||||||
| Other liabilities | 7,079 | 6,644 | 6,635 | 7,612 | 7,506 | ||||||||||
| Shareholders' equity | 97,464 | 95,735 | 94,591 | 86,650 | 84,690 | ||||||||||
| Total liabilities and shareholders’ equity | $ | 961,815 | $ | 879,002 | $ | 821,272 | $ | 796,305 | $ | 763,986 | |||||
The following table reflects the composition of the Company’s deposits as of the dates indicated.
| Deposits (unaudited) | |||||||||||||||
| (in thousands) | |||||||||||||||
| At quarter ended: | 3/31/17 | 12/31/16 | 9/30/16 | 6/30/16 | 3/31/16 | ||||||||||
| Demand: | |||||||||||||||
| Non-interest bearing | $ | 45,303 | $ | 35,184 | $ | 34,547 | $ | 29,416 | $ | 30,720 | |||||
| Interest-bearing | 102,525 | 101,759 | 95,041 | 100,609 | 99,154 | ||||||||||
| Savings | 43,913 | 42,699 | 44,714 | 46,056 | 44,207 | ||||||||||
| Money market | 251,671 | 217,260 | 177,486 | 147,103 | 129,652 | ||||||||||
| Time | 260,860 | 261,721 | 250,258 | 255,859 | 245,057 | ||||||||||
| Total deposits | $ | 704,272 | $ | 658,623 | $ | 602,046 | $ | 579,043 | $ | 548,790 | |||||
Loans
Total net loans were $752.7 million at March 31, 2017 compared to $574.2 million at September 30, 2016, for a net increase of $178.5 million. The allowance for loan losses amounted to $7.2 million and $5.4 million at March 31, 2017 and September 30, 2016, respectively. Average loans during the second quarter of fiscal 2017 totaled $717.4 million as compared to $494.0 million during the second quarter of fiscal 2016, representing a 45.2 percent increase.
At the end of the second quarter of fiscal 2017, the loan portfolio remained weighted toward commercial and the core residential portfolio, with commercial real estate accounting for 60.5 percent and single-family residential real estate loans accounting for 25.4 percent of the loan portfolio. Construction and development loans amounted to 8.0 percent and consumer loans representing 6.0 percent of the loan portfolio at such date. Total gross loans increased $180.8 million, to $759.2 million at March 31, 2017 compared to $578.4 million at September 30, 2016. The increase in the loan portfolio at March 31, 2017 compared to September 30, 2016, primarily reflected an increase of $169.8 million in commercial loans and a $32.4 million increase in construction and development loans. These increases were partially offset by a $16.4 million decrease in residential mortgage loans and a $5.0 million reduction in consumer loans at March 31, 2017 as compared to September 30, 2016.
For the quarter ended March 31, 2017, the Company originated total new loan volume of $118.7 million, which was offset in part by participations, payoffs, prepayments and maturities totaling $33.2 million. The payoffs were primarily confined to the consumer and residential portfolios.
The following reflects the composition of the Company’s loan portfolio as of the dates indicated.
| Loans (unaudited) | ||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| At quarter ended: | 3/31/17 | 12/31/16 | 9/30/16 | 6/30/16 | 3/31/16 | |||||||||||||||
| Residential mortgage | $ | 192,775 | $ | 205,668 | $ | 209,186 | $ | 210,621 | $ | 214,207 | ||||||||||
| Construction and Development: | ||||||||||||||||||||
| Residential and commercial | 46,721 | 28,296 | 18,579 | 14,050 | 10,796 | |||||||||||||||
| Land | 14,322 | 10,117 | 10,013 | 9,904 | 7,755 | |||||||||||||||
| Total construction and development | 61,043 | 38,413 | 28,592 | 23,954 | 18,551 | |||||||||||||||
| Commercial: | ||||||||||||||||||||
| Commercial real estate | 383,170 | 307,821 | 231,439 | 211,516 | 173,160 | |||||||||||||||
| Multi-family | 12,838 | 19,805 | 19,515 | 20,102 | 20,548 | |||||||||||||||
| Other | 63,551 | 53,587 | 38,779 | 37,091 | 34,585 | |||||||||||||||
| Total commercial | 459,559 | 381,213 | 289,733 | 268,709 | 228,293 | |||||||||||||||
| Consumer: | ||||||||||||||||||||
| Home equity lines of credit | 19,214 | 19,729 | 19,757 | 21,035 | 21,712 | |||||||||||||||
| Second mortgages | 25,103 | 26,971 | 29,204 | 31,752 | 33,987 | |||||||||||||||
| Other | 1,512 | 1,697 | 1,914 | 2,088 | 2,041 | |||||||||||||||
| Total consumer | 45,829 | 48,397 | 50,875 | 54,875 | 57,740 | |||||||||||||||
| Total loans | 759,206 | 673,691 | 578,386 | 558,159 | 518,791 | |||||||||||||||
| Deferred loan costs, net | 683 | 913 | 1,208 | 1,155 | 1,240 | |||||||||||||||
| Allowance for loan losses | (7,181 | ) | (6,177 | ) | (5,434 | ) | (5,343 | ) | (4,937 | ) | ||||||||||
| Loans Receivable, net | $ | 752,708 | $ | 668,427 | $ | 574,160 | $ | 553,971 | $ | 515,094 | ||||||||||
At March 31, 2017 , the Company had $102.7 million in overall undisbursed loan commitments, which consisted primarily of unused commercial lines of credit, home equity lines of credit and available usage from active construction facilities. Included in the overall undisbursed commitments are the Company's "Approved, Accepted but Unfunded" pipeline, which includes approximately $15.3 million in construction and $36.6 million in commercial real estate loans, $2.4 million in commercial term loans and lines of credit and $5.4 million in residential mortgage loans expected to fund over the next 90 days.
Asset Quality
Non-accrual loans were $1.6 million at March 31, 2017 and at September 30, 2016 and $853,000 at March 31, 2016. Other real estate owned (“OREO”) was zero at March 31, 2017 and September 30, 2016, and $700,000 at March 31, 2016, respectively. Total performing troubled debt restructured loans were $1.6 million at March 31, 2017, $2.0 million at September 30, 2016 and $1.6 million at March 31, 2016, respectively. The decrease in performing troubled debt restructured loans at March 31, 2017 compared to September 30, 2016 was primarily due to two commercial loans, with an aggregate outstanding balance of approximately $1.3 million, being paid off during the first six months of fiscal 2017. These decreases were offset by three residential mortgage loans with an aggregate outstanding balance of $811,000 and one second mortgage loan with an outstanding balance of approximately $54,000 being classified as a performing TDR during first six months of fiscal 2017.
At March 31, 2017, non-performing assets totaled $1.7 million, or 0.18 percent of total assets, as compared with $2.3 million, or 0.28 percent, at September 30, 2016 and $1.6 million, or 0.20 percent, at March 31, 2016. The portfolio of non-accrual loans at March 31, 2017 was comprised of 10 residential real estate loans with an aggregate outstanding balance of approximately $1.2 million, one commercial real estate loan with an outstanding balance of $188,000 and six consumer loans with an aggregate outstanding balance of approximately $153,000.
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: | 3/31/17 | 12/31/16 | 9/30/16 | 6/30/16 | 3/31/16 | |||||||||||||||
| Non-accrual loans(1) | $ | 1,566 | $ | 1,833 | $ | 1,617 | $ | 1,037 | $ | 853 | ||||||||||
| Loans 90 days or more past due and still accruing | 122 | 121 | 696 | — | — | |||||||||||||||
| Total non-performing loans | 1,688 | 1,954 | 2,313 | 1,037 | 853 | |||||||||||||||
| Other real estate owned | — | — | — | 700 | 700 | |||||||||||||||
| Total non-performing assets | $ | 1,688 | $ | 1,954 | $ | 2,313 | $ | 1,737 | $ | 1,553 | ||||||||||
| Performing troubled debt restructured loans | $ | 1,623 | $ | 1,418 | $ | 2,039 | $ | 1,959 | $ | 1,577 | ||||||||||
| Non-performing assets / total assets | 0.18 | % | 0.22 | % | 0.28 | % | 0.22 | % | 0.20 | % | ||||||||||
| Non-performing loans / total loans | 0.22 | % | 0.29 | % | 0.28 | % | 0.19 | % | 0.16 | % | ||||||||||
| Net charge-offs (recoveries) | $ | (7 | ) | $ | (83 | ) | $ | 9 | $ | 66 | $ | 14 | ||||||||
| Net charge-offs (recoveries) / average loans(2) | 0.00 | % | (0.04 | )% | 0.01 | % | 0.05 | % | 0.01 | % | ||||||||||
| Allowance for loan losses / total loans | 0.95 | % | 0.92 | % | 0.94 | % | 0.96 | % | 0.95 | % | ||||||||||
| Allowance for loan losses / non-performing loans | 425.4 | % | 316.1 | % | 234.9 | % | 515.2 | % | 578.8 | % | ||||||||||
| Total assets | $ | 961,815 | $ | 879,002 | $ | 821,272 | $ | 796,305 | $ | 763,986 | ||||||||||
| Total gross loans | 759,206 | 673,691 | 578,386 | 558,159 | 518,791 | |||||||||||||||
| Average loans | 717,376 | 612,388 | 575,784 | 542,985 | 494,005 | |||||||||||||||
| Allowance for loan losses | 7,181 | 6,177 | 5,434 | 5,343 | 4,937 | |||||||||||||||
| ______________ | |
| (1) | 12 loans totaling approximately $779,000 or 49.7% of the total non-accrual loan balance were making payments at March 31, 2017. |
| (2) | Annualized. |
The allowance for loan losses at March 31, 2017 amounted to approximately $7.2 million, or 0.95 percent of total loans, compared to $5.4 million, or 0.94 percent of total loans, at September 30, 2016 and $4.9 million, or 0.95 percent of total loans, at March 31, 2016. The Company had a $997,000 provision for loan losses during the quarter ended March 31, 2017 compared to $375,000 for the quarter ended March 31, 2016, respectively. For the six months ended March 31, 2017 and 2016, we had a $1.7 million and $375,000, respectively, of provision for loan losses. Provision expense was higher during fiscal 2017 due to an increase in loan growth.
Capital
At March 31, 2017, our total shareholders' equity amounted to $97.5 million, or 10.13 percent of total assets, compared to $94.6 million at September 30, 2016. The Company’s book value per common share was $14.83 at March 31, 2017, compared to $14.42 at September 30, 2016.
At March 31, 2017, the Bank’s common equity tier 1 ratio was 14.53 percent, tier 1 leverage ratio was 12.35 percent, tier 1 risk-based capital ratio was 14.53 percent and the total risk-based capital ratio was 15.46 percent. 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 March 31, 2017, the Bank was in compliance with all applicable regulatory capital requirements.
Non-GAAP Financial Measures
Reported amounts are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The Company's management believes that the supplemental non-GAAP information provided in this press release is utilized by market analysts and others to evaluate a company's financial condition and, therefore, that such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures presented by other companies.
The Company’s other income is presented in the table below including and excluding net investment securities gains. The Company’s management believes that many investors desire to evaluate other income without regard to such gains.
| (in thousands) | |||||||||||||||
| For the quarter ended: | 3/31/17 | 12/31/16 | 9/30/16 | 6/30/16 | 3/31/16 | ||||||||||
| Other income | $ | 542 | $ | 453 | $ | 615 | $ | 659 | $ | 501 | |||||
| Less: Net investment securities gains | 58 | — | 144 | 229 | 61 | ||||||||||
| Other income, excluding net investment securities gains | $ | 484 | $ | 453 | $ | 471 | $ | 430 | $ | 440 | |||||
“Efficiency ratio” is a non-GAAP financial measure and is defined as other expense, excluding certain non-core items, as a percentage of net interest income on a tax equivalent basis plus other income, excluding net securities gains, calculated as follows:
| (dollars in thousands) | ||||||||||||||||||||
| For the quarter ended: | 3/31/17 | 12/31/16 | 9/30/16 | 6/30/16 | 3/31/16 | |||||||||||||||
| Other expense | $ | 3,778 | $ | 3,570 | $ | 3,759 | $ | 3,378 | $ | 3,360 | ||||||||||
| Less: non-core items(1) | 29 | 29 | — | — | 44 | |||||||||||||||
| Other expense, excluding non-core items | $ | 3,749 | $ | 3,541 | $ | 3,759 | $ | 3,378 | $ | 3,316 | ||||||||||
| Net interest income (tax equivalent basis) | $ | 6,043 | $ | 5,292 | $ | 5,083 | $ | 4,847 | $ | 4,566 | ||||||||||
| Other income, excluding net investment securities gains | 484 | 453 | 471 | 430 | 440 | |||||||||||||||
| Total | $ | 6,527 | $ | 5,745 | $ | 5,554 | $ | 5,277 | $ | 5,006 | ||||||||||
| Efficiency ratio | 57.4 | % | 61.6 | % | 67.7 | % | 64.0 | % | 66.2 | % | ||||||||||
| ______________ | |
| (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: | 3/31/17 | 12/31/16 | 9/30/16 | 6/30/16 | 3/31/16 | ||||||||||
| Efficiency ratio on a GAAP basis | 57.8 | % | 62.7 | % | 66.7 | % | 62.1 | % | 67.2 | % | |||||
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: | 3/31/17 | 12/31/16 | 9/30/16 | 6/30/16 | 3/31/16 | |||||||||||||||
| Net interest income (GAAP) | $ | 5,991 | $ | 5,239 | $ | 5,021 | $ | 4,780 | $ | 4,500 | ||||||||||
| Tax-equivalent adjustment(1) | 52 | 53 | 62 | 67 | 66 | |||||||||||||||
| TE net interest income | $ | 6,043 | $ | 5,292 | $ | 5,083 | $ | 4,847 | $ | 4,566 | ||||||||||
| Net interest income margin (GAAP) | 2.72 | % | 2.61 | % | 2.62 | % | 2.52 | % | 2.61 | % | ||||||||||
| Tax-equivalent effect | 0.03 | 0.03 | 0.03 | 0.04 | 0.04 | |||||||||||||||
| Net interest margin (TE) | 2.75 | % | 2.64 | % | 2.65 | % | 2.56 | % | 2.65 | % | ||||||||||
| ______________ | |
| (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: | 3/31/17 | 12/31/16 | 9/30/16 | 6/30/16 | 3/31/16 | |||||||||||||||
| Investment securities | $ | 102,090 | $ | 104,645 | $ | 115,366 | $ | 141,292 | $ | 164,789 | ||||||||||
| Loans | 717,376 | 612,388 | 575,784 | 542,985 | 494,005 | |||||||||||||||
| Allowance for loan losses | (6,489 | ) | (5,650 | ) | (5,424 | ) | (5,132 | ) | (4,602 | ) | ||||||||||
| All other assets | 101,804 | 124,062 | 107,655 | 107,044 | 94,581 | |||||||||||||||
| Total assets | 914,781 | $ | 835,445 | $ | 793,381 | $ | 786,189 | $ | 748,773 | |||||||||||
| Non-interest bearing deposits | $ | 38,565 | $ | 33,330 | $ | 33,242 | $ | 34,360 | $ | 29,592 | ||||||||||
| Interest-bearing deposits | 634,214 | 581,838 | 543,985 | 535,457 | 514,402 | |||||||||||||||
| FHLB advances | 118,000 | 118,245 | 122,319 | 123,434 | 113,000 | |||||||||||||||
| Other short-term borrowings | 5,389 | — | — | — | — | |||||||||||||||
| Subordinated debt | 14,722 | — | — | — | — | |||||||||||||||
| Other liabilities | 6,908 | 6,872 | 5,601 | 7,172 | 7,847 | |||||||||||||||
| Shareholders’ equity | 96,983 | 95,160 | 88,234 | 85,766 | 83,932 | |||||||||||||||
| Total liabilities and shareholders’ equity | $ | 914,781 | $ | 835,445 | $ | 793,381 | $ | 786,189 | $ | 748,773 | ||||||||||
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 Main Line. For more than a century, Malvern 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 and through its nine other banking locations in Chester, Delaware and Bucks counties, Pennsylvania and Morristown, N.J., its New Jersey regional headquarters. 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 in Rehoboth Beach, Del., provides personalized wealth management and advisory services to high net worth individuals and families. Our 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.malvernfederal.com. For information regarding Malvern Federal Savings Bank, please visit our web site at http://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) | March 31, 2017 | September 30, 2016 | |||||||
| (unaudited) | |||||||||
| ASSETS | |||||||||
| Cash and due from depository institutions | $ | 1,716 | $ | 1,297 | |||||
| Interest bearing deposits in depository institutions | 64,036 | 95,465 | |||||||
| Total cash and cash equivalents | 65,752 | 96,762 | |||||||
| Investment securities available for sale, at fair value | 61,672 | 66,387 | |||||||
| Investment securities held to maturity (fair value of $36,441 and $40,817) | 37,060 | 40,551 | |||||||
| Restricted stock, at cost | 5,397 | 5,424 | |||||||
| Loans receivable, net of allowance for loan losses | 752,708 | 574,160 | |||||||
| Accrued interest receivable | 3,177 | 2,558 | |||||||
| Property and equipment, net | 6,896 | 6,637 | |||||||
| Deferred income taxes, net | 7,881 | 8,827 | |||||||
| Bank-owned life insurance | 18,673 | 18,418 | |||||||
| Other assets | 2,599 | 1,548 | |||||||
| Total assets | $ | 961,815 | $ | 821,272 | |||||
| LIABILITIES | |||||||||
| Deposits: | |||||||||
| Non-interest bearing | $ | 45,303 | $ | 34,547 | |||||
| Interest-bearing | 658,969 | 567,499 | |||||||
| Total deposits | 704,272 | 602,046 | |||||||
| FHLB advances | 118,000 | 118,000 | |||||||
| Other short-term borrowings | 10,000 | — | |||||||
| Subordinated debt | 25,000 | — | |||||||
| Advances from borrowers for taxes and insurance | 3,224 | 1,659 | |||||||
| Accrued interest payable | 649 | 427 | |||||||
| Other liabilities | 3,206 | 4,549 | |||||||
| Total liabilities | 864,351 | 726,681 | |||||||
| SHAREHOLDERS’ EQUITY | |||||||||
| Preferred stock, $0.01 par value, 10,000,000 shares, authorized, none issued | — | — | |||||||
| Common stock, $0.01 par value, authorized 50,000,000 shares authorized, issued and outstanding: 6,572,684 shares at March 31, 2017 and 6,560,403 shares at September 30, 2016 | 66 | 66 | |||||||
| Additional paid in capital | 60,536 | 60,461 | |||||||
| Retained earnings | 38,335 | 35,756 | |||||||
| Unearned Employee Stock Ownership Plan (ESOP) shares | (1,556 | ) | (1,629 | ) | |||||
| Accumulated other comprehensive income (loss) | 83 | (63 | ) | ||||||
| Total shareholders’ equity | 97,464 | 94,591 | |||||||
| Total liabilities and shareholders’ equity | $ | 961,815 | $ | 821,272 | |||||
| MALVERN BANCORP, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
| (in thousands, except for share data) | 2017 | 2016 | 2017 | 2016 | |||||||||||
| (unaudited) | |||||||||||||||
| Interest and Dividend Income | |||||||||||||||
| Loans, including fees | $ | 7,367 | $ | 5,121 | $ | 13,680 | $ | 9,666 | |||||||
| Investment securities, taxable | 470 | 795 | 942 | 1,670 | |||||||||||
| Investment securities, tax-exempt | 159 | 190 | 322 | 385 | |||||||||||
| Dividends, restricted stock | 64 | 63 | 128 | 117 | |||||||||||
| Interest-bearing cash accounts | 115 | 41 | 208 | 59 | |||||||||||
| Total Interest and Dividend Income | 8,175 | 6,210 | 15,280 | 11,897 | |||||||||||
| Interest Expense | |||||||||||||||
| Deposits | 1,424 | 1,161 | 2,748 | 2,125 | |||||||||||
| Short-term borrowings | 11 | — | 11 | — | |||||||||||
| Long-term borrowings | 528 | 549 | 1,070 | 1,061 | |||||||||||
| Subordinated debt | 221 | — | 221 | — | |||||||||||
| Total Interest Expense | 2,184 | 1,710 | 4,050 | 3,186 | |||||||||||
| Net interest income | 5,991 | 4,500 | 11,230 | 8,711 | |||||||||||
| Provision for Loan Losses | 997 | 375 | 1,657 | 375 | |||||||||||
| Net Interest Income after Provision for Loan Losses | 4,994 | 4,125 | 9,573 | 8,336 | |||||||||||
| Other Income | |||||||||||||||
| Service charges and other fees | 274 | 227 | 497 | 438 | |||||||||||
| Rental income-other | 55 | 50 | 110 | 100 | |||||||||||
| Net gains on sales of investments, net | 58 | 61 | 58 | 192 | |||||||||||
| Net gains on sale of loans, net | 30 | 36 | 75 | 70 | |||||||||||
| Earnings on bank-owned life insurance | 125 | 127 | 255 | 259 | |||||||||||
| Total Other Income | 542 | 501 | 995 | 1,059 | |||||||||||
| Other Expense | |||||||||||||||
| Salaries and employee benefits | 1,804 | 1,522 | 3,516 | 3,021 | |||||||||||
| Occupancy expense | 514 | 456 | 1,008 | 879 | |||||||||||
| Federal deposit insurance premium | 91 | 232 | 95 | 432 | |||||||||||
| Advertising | 73 | 25 | 124 | 55 | |||||||||||
| Data processing | 301 | 270 | 603 | 567 | |||||||||||
| Professional fees | 399 | 361 | 800 | 761 | |||||||||||
| Other real estate owned expense, net | — | 8 | — | 7 | |||||||||||
| Other operating expenses | 596 | 486 | 1,202 | 1,063 | |||||||||||
| Total Other Expense | 3,778 | 3,360 | 7,348 | 6,785 | |||||||||||
| Income before income tax expense | 1,758 | 1,266 | 3,220 | 2,610 | |||||||||||
| Income tax expense | 349 | — | 641 | — | |||||||||||
| Net Income | $ | 1,409 | $ | 1,266 | $ | 2,579 | $ | 2,610 | |||||||
| Earnings per common share | |||||||||||||||
| Basic | $ | 0.22 | $ | 0.20 | $ | 0.40 | $ | 0.41 | |||||||
| Diluted | $ | 0.22 | $ | 0.20 | $ | 0.40 | $ | 0.41 | |||||||
| Weighted Average Common Shares Outstanding | |||||||||||||||
| Basic | 6,427,309 | 6,408,167 | 6,422,899 | 6,405,234 | |||||||||||
| Diluted | 6,427,932 | 6,408,167 | 6,423,269 | 6,405,234 | |||||||||||
| MALVERN BANCORP, INC AND SUBSIDIARIES SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA | |||||||||||
| Three Months Ended | |||||||||||
| (in thousands, except for share and per share data) (annualized where applicable) | 3/31/2017 | 12/31/2016 | 3/31/2016 | ||||||||
| (unaudited) | |||||||||||
| Statements of Operations Data | |||||||||||
| Interest income | $ | 8,175 | $ | 7,105 | $ | 6,210 | |||||
| Interest expense | 2,184 | 1,866 | 1,710 | ||||||||
| Net interest income | 5,991 | 5,239 | 4,500 | ||||||||
| Provision for loan losses | 997 | 660 | 375 | ||||||||
| Net interest income after provision for loan losses | 4,994 | 4,579 | 4,125 | ||||||||
| Other income | 542 | 453 | 501 | ||||||||
| Other expense | 3,778 | 3,570 | 3,360 | ||||||||
| Income before income tax expense | 1,758 | 1,462 | 1,266 | ||||||||
| Income tax expense | 349 | 292 | — | ||||||||
| Net income | $ | 1,409 | $ | 1,170 | $ | 1,266 | |||||
| Earnings (per Common Share) | |||||||||||
| Basic | $ | 0.22 | $ | 0.18 | $ | 0.20 | |||||
| Diluted | $ | 0.22 | $ | 0.18 | $ | 0.20 | |||||
| Statements of Condition Data (Period-End) | |||||||||||
| Investment securities available for sale, at fair value | $ | 61,672 | $ | 65,108 | $ | 100,895 | |||||
| Investment securities held to maturity (fair value of $36,441, $37,426 and $52,176) | 37,060 | 38,160 | 52,272 | ||||||||
| Loans, net of allowance for loan losses | 752,708 | 668,427 | 515,094 | ||||||||
| Total assets | 961,815 | 879,002 | 763,986 | ||||||||
| Deposits | 704,272 | 658,623 | 548,790 | ||||||||
| FHLB advances | 118,000 | 118,000 | 123,000 | ||||||||
| Short-term borrowings | 10,000 | — | — | ||||||||
| Subordinated debt | 25,000 | — | — | ||||||||
| Shareholders' equity | 97,464 | 95,735 | 84,690 | ||||||||
| Common Shares Dividend Data | |||||||||||
| Cash dividends | $ | — | $ | — | $ | — | |||||
| Weighted Average Common Shares Outstanding | |||||||||||
| Basic | 6,427,309 | 6,418,583 | 6,408,167 | ||||||||
| Diluted | 6,427,932 | 6,419,012 | 6,408,167 | ||||||||
| Operating Ratios | |||||||||||
| Return on average assets | 0.62 | % | 0.56 | % | 0.68 | % | |||||
| Return on average equity | 5.81 | % | 4.92 | % | 6.03 | % | |||||
| Average equity / average assets | 10.60 | % | 11.39 | % | 11.21 | % | |||||
| Book value per common share (period-end) | $ | 14.83 | $ | 14.59 | $ | 12.91 | |||||
| Non-Financial Information (Period-End) | |||||||||||
| Common shareholders of record | 437 | 457 | 472 | ||||||||
| Full-time equivalent staff | 81 | 81 | 76 | ||||||||