PAOLI, Pa., Jan. 30, 2020 (GLOBE NEWSWIRE) -- Malvern Bancorp, Inc. (NASDAQ: MLVF) (the "Company"), parent company of Malvern Bank, National Association (“Malvern” or the “Bank”), today reported operating results for the first quarter ended December 31, 2019. Net income amounted to $2.5 million, or $0.33 per fully diluted common share, for the quarter ended December 31, 2019, compared with net income of $2.0 million, or $0.27 per fully diluted common share, for the quarter ended December 31, 2018. Annualized return on average assets (“ROAA”) was 0.82 percent for the quarter ended December 31, 2019, compared to 0.74 percent for the quarter ended December 31, 2018, and annualized return on average equity (“ROAE”) was 6.97 percent for the quarter ended December 31, 2019, compared with 6.00 percent for the quarter ended December 31, 2018.
“We are pleased that we managed our balance sheet in a declining interest rate environment to produce solid results. Despite an unusually high level of payoffs during our first quarter, resulting in a net portfolio decline for the quarter, we still produced loan growth of $70 million, or 7.6 percent, year over year, while remaining vigilant and disciplined with respect to credit metrics and underwriting. We believe we are positioned well for steady and measured growth throughout fiscal 2020,” commented Anthony C. Weagley, President and Chief Executive Officer.
Joseph D. Gangemi, Chief Financial Officer of the Company, added: “The Bank has taken strategic actions to reduce its excess cash balances to better match fund loans. We have also started reducing deposit rates consistent with the declining interest rate environment, while improving the funding mix. Average cash was reduced approximately $22 million during the first fiscal quarter. These efforts, combined with top line revenue growth, should help to improve our net interest margin.”
| Linked Quarter Financial Ratios (unaudited) | ||||||||||
| As of or for the quarter ended: | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | |||||
| Return on average assets (1) | 0.82% | 0.86% | 0.88% | 0.70% | 0.74% | |||||
| Return on average equity (1) | 6.97% | 7.65% | 7.66% | 5.74% | 6.00% | |||||
| Net interest margin (tax equivalent basis) (2) | 2.35% | 2.45% | 2.54% | 2.67% | 2.65% | |||||
| Loans / deposits ratio | 106.38% | 106.64% | 106.52% | 106.82% | 110.70% | |||||
| Shareholders’ equity / total assets | 11.52% | 11.26% | 11.03% | 11.37% | 12.02% | |||||
| Efficiency ratio, non-GAAP (1) (2) (3) | 58.7% | 54.9% | 56.6% | 57.2% | 52.3% | |||||
| Book value per common share | $18.70 | $18.35 | $17.99 | $17.68 | $17.45 | |||||
_____________
(1) Annualized.
(2) Information reconciling non-GAAP measures to GAAP measures is presented beginning on page 10 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: | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | |||||||||
| Net interest income | $ | 6,912 | $ | 7,418 | $ | 7,461 | $ | 7,249 | $ | 6,947 | ||||
| Provision for loan losses | - | - | 56 | 870 | 1,453 | |||||||||
| Net interest income after provision for loan losses | 6,912 | 7,418 | 7,405 | 6,379 | 5,494 | |||||||||
| Other income | 443 | 551 | 454 | 441 | 1,146 | |||||||||
| Other expense | 4,422 | 4,453 | 4,497 | 4,443 | 4,094 | |||||||||
| Income before income tax expense | 2,933 | 3,516 | 3,362 | 2,377 | 2,546 | |||||||||
| Income tax expense | 431 | 817 | 706 | 411 | 535 | |||||||||
| Net income | $ | 2,502 | $ | 2,699 | $ | 2,656 | $ | 1,966 | $ | 2,011 | ||||
| Earnings per common share | ||||||||||||||
| Basic | $ | 0.33 | $ | 0.35 | $ | 0.35 | $ | 0.26 | $ | 0.27 | ||||
| Diluted | $ | 0.33 | $ | 0.35 | $ | 0.35 | $ | 0.26 | $ | 0.27 | ||||
| Weighted average common shares outstanding | ||||||||||||||
| Basic | 7,665,842 | 7,663,242 | 7,669,851 | 7,667,518 | 7,555,810 | |||||||||
| Diluted | 7,665,842 | 7,663,593 | 7,670,106 | 7,667,518 | 7,555,969 | |||||||||
Net Interest Income
Net interest income was $6.9 million for the quarter ended December 31, 2019, a decrease of $35,000, or 0.5 percent, from $6.9 million for the quarter ended December 31, 2018. The change for the quarter ended December 31, 2019 primarily was the result of an increase in total interest-bearing liabilities of $121.0 million partially offset by an increase of $94.5 million in the average balance of loans. The increase in average loans primarily reflects a net increase in commercial loans and residential loans. The net interest spread on an annualized basis was 2.09 percent and 2.40 percent for the quarters ended December 31, 2019 and 2018, respectively. For the quarter ended December 31, 2019, the Company’s net interest margin on a tax-equivalent basis, a non-GAAP measure, decreased to 2.35 percent as compared to 2.65 percent for the quarter ended December 31, 2018.
For the quarter ended December 31, 2019, the Company’s net interest margin on a tax-equivalent basis, a non-GAAP measure, decreased by approximately fourteen basis points when adjusted for the decline in the interest rate environment as compared to the quarter ended December 31, 2018.
Total Interest Income
For the quarter ended December 31, 2019, total interest income was $11.8 million, an increase of $907,000, or 8.3 percent, from $10.9 million for quarter ended December 31, 2018, primarily due to a $94.5 million increase in the average balance of loans. Compared to the first quarter ended December 31, 2018, average interest earning assets increased $130.3 million.
Interest Expense
For the quarter ended December 31, 2019, interest expense increased by $942,000, or 23.8 percent, to $4.9 million, compared to the quarter ended December 31, 2018, primarily due to increases in average rates paid on and average volume of deposits. The increase in interest expense on deposits reflects an increase of $86.0 million, $11.9 million, and $10.5 million in interest-bearing demand, money market, and certificate deposits, respectively. The annualized average rate of total interest-bearing liabilities increased sixteen basis points to 1.92 percent for the quarter ended December 31, 2019, from 1.76 percent for the quarter ended December 31, 2018 and, on a linked sequential quarter basis, decreased from 2.00 percent or eight basis points compared to the fourth quarter of fiscal 2019. At the same time, the average balance of total interest-bearing liabilities increased by $121.0 million with the increase reflecting an increase in the average balance of total interest-bearing deposit accounts of $105.5 million and an increase in the average balance of borrowings of $15.5 million.
Other Income
Other income decreased $703,000, or 61.3 percent, during the first fiscal quarter of 2020 compared with the same period in 2019. The decrease in other income was primarily due to a $681,000 decrease in service charges and other fees. The decrease in service charges and other fees during the quarter ended December 31, 2019 is primarily due to higher net swap fees of $710,000 through the Bank’s commercial loan hedging program realized during the quarter ending December 31, 2018.
Other Expense
Other expense for the quarter ended December 31, 2019 increased $328,000, or 8.0 percent, when compared to the quarter ended December 31, 2018. The increase was primarily due to a $170,000 increase in the Pennsylvania shares tax, an increase of $117,000 in salaries and employee benefits and an increase of $62,000 in other operating expense. These were partially offset by a decrease of $72,000 in the federal deposit insurance premium. The increase in the Pennsylvania shares tax was primarily due to the imposition of the Pennsylvania shares tax related to the Bank’s new standing as a National Association during the second fiscal quarter of 2019. The increase in salaries and employee benefits reflect normal increases to salary and benefits. 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 Company has a current credit balance of approximately $78,678 that can be used to offset premiums during the next several quarters, should FDIC reserves remain above the required reserve ratio level.
The following table presents the components of Other Expense for the periods indicated.
| (in thousands, unaudited) | ||||||||||||||
| For the quarter ended: | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | |||||||||
| Salaries and employee benefits | $ | 2,125 | $ | 2,097 | $ | 2,223 | $ | 2,213 | $ | 2,008 | ||||
| Occupancy expense | 582 | 580 | 560 | 577 | 539 | |||||||||
| Federal deposit insurance premium | (3 | ) | 1 | 78 | 73 | 69 | ||||||||
| Advertising | 22 | 17 | 30 | 30 | 30 | |||||||||
| Data processing | 278 | 260 | 259 | 251 | 254 | |||||||||
| Professional fees | 441 | 440 | 405 | 455 | 499 | |||||||||
| Net other real estate owned expense | 71 | 113 | 30 | 28 | 21 | |||||||||
| Pennsylvania shares tax | 170 | 170 | 170 | 92 | - | |||||||||
| Other operating expenses | 736 | 775 | 742 | 724 | 674 | |||||||||
| Total Other Expense | $ | 4,422 | $ | 4,453 | $ | 4,497 | $ | 4,443 | $ | 4,094 | ||||
Income Taxes
The Company recorded $431,000 in income tax expense during the quarter ended December 31, 2019 compared to $535,000 in income tax expense during the quarter ended December 31, 2018. The effective tax rates for the Company for the quarter ended December 31, 2019 and 2018 were 14.7 percent and 21.0 percent, respectively. During the quarter ended December 31, 2019 the Company recorded discrete items that reduced the effective tax rate from 21.0 percent to 14.7 percent.
Statement of Condition Highlights at December 31, 2019
- Gross loans totaled $1.0 billion at December 31, 2019, increasing $70.6 million or 7.6 percent, compared to December 31, 2018. The Company originated $69.9 million in new loans during the quarter ended December 31, 2019, which was offset by $82.8 million in unusually high payoffs, prepayments and maturities resulting in a net portfolio decline of $12.9 million for the period. Gross loan originations during the quarter consisted of $31.6 million in commercial loans, $29.8 million in residential and consumer mortgage loans and $8.5 million in construction and development loans. The payoffs were primarily from payoffs/paydowns in lines of credit and commercial loan payoffs. Gross loans were $1.0 billion at December 31, 2019 and September 30, 2019, decreasing $13.1 million, or 1.3 percent
- Total assets stood at $1.3 billion at December 31, 2019, increasing $132.3 million, or 11.7 percent, compared to December 31, 2018. Total assets stood at $1.3 billion at December 31, 2019, decreasing $4.5 million, or 0.4 percent, compared to September 30, 2019.
- Deposits totaled $943.8 million at December 31, 2019, an increase of $100.6 million, or 11.9 percent, compared to December 31, 2018. Linked quarter total deposits decreased $10.0 million, or 1.0 percent, when compared to September 30, 2019 which was part of the overall strategic plan to better match funding expectations. Deposits totaled $943.8 million at December 31, 2019, a decrease of $10.0 million, or 1.0 percent, compared to September 30, 2019.
- Non-performing assets (“NPAs”) were 0.60 percent of total assets at December 31, 2019, compared to 0.64 percent at September 30, 2019 and 0.81 percent at December 31, 2018. The allowance for loan losses as a percentage of total non-performing loans was 553.7 percent at December 31, 2019, compared to 434.6 percent at September 30, 2019 and 278.4 percent at December 31, 2018.
- Excluding one OREO property of $5.8 million, NPAs were 0.14 percent of total assets and 0.18 percent of total assets at December 31, 2019 and September 30, 2019, respectively.
- The Company’s ratio of shareholders’ equity to total assets was 11.52 percent at December 31, 2019, compared to 11.26 percent at September 30, 2019 and 12.02 percent at December 31, 2018.
- Book value per common share amounted to $18.70 at December 31, 2019, compared to $18.35 at September 30, 2019 and $17.45 at December 31, 2018.
Linked Quarter Statement of Condition Data
| (in thousands, unaudited) | ||||||||||||||
| At quarter ended: | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | |||||||||
| Cash and due from depository institutions | $ | 1,337 | $ | 1,400 | $ | 1,535 | $ | 1,370 | $ | 1,377 | ||||
| Interest bearing deposits in depository institutions | 158,465 | 152,143 | 148,501 | 109,450 | 98,499 | |||||||||
| Investment securities, available for sale, at fair value | 23,723 | 18,411 | 23,552 | 19,371 | 19,231 | |||||||||
| Investment securities held to maturity | 20,578 | 22,485 | 23,323 | 26,789 | 29,323 | |||||||||
| Restricted stock, at cost | 11,115 | 11,129 | 10,404 | 8,952 | 9,493 | |||||||||
| Loans receivable, net of allowance for loan losses | 994,803 | 1,007,714 | 1,009,959 | 997,114 | 924,639 | |||||||||
| Other real estate owned | 5,796 | 5,796 | 5,796 | 5,796 | 5,796 | |||||||||
| Accrued interest receivable | 4,061 | 4,253 | 4,237 | 4,344 | 3,724 | |||||||||
| Operating lease right-of-use-assets | 3,119 | — | — | — | — | |||||||||
| Property and equipment, net | 6,594 | 6,678 | 6,795 | 6,948 | 7,067 | |||||||||
| Deferred income taxes, net | 2,806 | 2,840 | 3,542 | 3,434 | 3,367 | |||||||||
| Bank-owned life insurance | 20,018 | 19,891 | 19,766 | 19,643 | 19,524 | |||||||||
| Other assets | 8,341 | 12,482 | 8,468 | 7,029 | 6,452 | |||||||||
| Total assets | $ | 1,260,756 | $ | 1,265,222 | $ | 1,265,878 | $ | 1,210,240 | $ | 1,128,492 | ||||
| Deposits | $ | 943,819 | $ | 953,811 | $ | 957,199 | $ | 942,374 | $ | 843,200 | ||||
| FHLB advances | 133,000 | 133,000 | 133,000 | 98,000 | 118,000 | |||||||||
| Subordinated debt | 24,658 | 24,619 | 24,579 | 24,540 | 24,500 | |||||||||
| Operating lease liabilities | 3,128 | — | — | — | — | |||||||||
| Other liabilities | 10,899 | 11,284 | 11,432 | 7,758 | 7,113 | |||||||||
| Shareholders' equity | 145,252 | 142,508 | 139,668 | 137,568 | 135,679 | |||||||||
| Total liabilities and shareholders’ equity | $ | 1,260,756 | $ | 1,265,222 | $ | 1,265,878 | $ | 1,210,240 | $ | 1,128,492 | ||||
The following table sets forth the Company’s consolidated average statements of condition for the periods presented.
| Condensed Consolidated Average Statement of Condition | ||||||||||||||
| (in thousands, unaudited) | ||||||||||||||
| For the quarter ended: | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | |||||||||
| Investment securities | $ | 40,855 | $ | 42,256 | $ | 49,408 | $ | 47,761 | $ | 53,882 | ||||
| Loans | 1,006,755 | 1,015,251 | 1,010,033 | 956,840 | 912,259 | |||||||||
| Allowance for loan losses | (10,097) | (10,143) | (10,061) | (9,408) | (8,638) | |||||||||
| All other assets | 184,575 | 204,912 | 164,424 | 130,712 | 123,643 | |||||||||
| Total assets | 1,222,088 | 1,252,276 | 1,213,804 | 1,125,905 | 1,081,146 | |||||||||
| Non-interest bearing deposits | $ | 41,716 | $ | 44,104 | $ | 42,151 | $ | 41,035 | $ | 40,420 | ||||
| Interest-bearing deposits | 864,317 | 896,928 | 882,825 | 814,412 | 758,813 | |||||||||
| FHLB advances | 133,000 | 133,000 | 115,363 | 101,000 | 116,859 | |||||||||
| Other short-term borrowings | — | 54 | — | 277 | 761 | |||||||||
| Subordinated debt | 24,641 | 24,602 | 24,563 | 24,523 | 24,483 | |||||||||
| Other liabilities | 14,810 | 12,413 | 10,192 | 7,728 | 5,750 | |||||||||
| Shareholders’ equity | 143,604 | 141,175 | 138,710 | 136,930 | 134,060 | |||||||||
| Total liabilities and shareholders’ equity | $ | 1,222,088 | $ | 1,252,276 | $ | 1,213,804 | $ | 1,125,905 | $ | 1,081,146 | ||||
The following table reflects the composition of the Company’s deposits as of the dates indicated.
| Deposits | ||||||||||||||
| (in thousands, unaudited) | ||||||||||||||
| At quarter ended: | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | |||||||||
| Demand: | ||||||||||||||
| Non-interest bearing | $ | 41,273 | $ | 55,684 | $ | 48,580 | $ | 42,937 | $ | 39,734 | ||||
| Interest-bearing | 327,956 | 302,039 | 288,555 | 295,475 | 261,025 | |||||||||
| Savings | 40,908 | 41,875 | 43,334 | 43,943 | 44,438 | |||||||||
| Money market | 279,883 | 276,644 | 288,561 | 283,571 | 253,436 | |||||||||
| Time | 253,799 | 277,569 | 288,169 | 276,448 | 244,567 | |||||||||
| Total deposits | $ | 943,819 | $ | 953,811 | $ | 957,199 | $ | 942,374 | $ | 843,200 | ||||
Loans
Total net loans amounted to $994.8 million at December 31, 2019 compared to $1.0 billion at September 30, 2019, for a net decrease of $12.9 million or 1.3 percent for the period. The allowance for loan losses amounted to $10.1 million at December 31, 2019 and September 30, 2019. Average loans during the quarter ended December 31, 2019 totaled $1.0 billion as compared to $912.3 million during the quarter ended December 31, 2018, also representing a 10.4 percent increase. Average loans during the quarters ended December 31, 2019 and September 30, 2019 totaled $1.0 billion representing a 0.8 percent decrease.
At the end of the first quarter of fiscal 2020, the loan portfolio remained weighted toward two primary components: commercial and the core residential portfolio, with commercial loans accounting for 68.0 percent and single-family residential real estate loans accounting for 23.4 percent of the loan portfolio. Construction and development loans amounted to 5.2 percent and consumer loans represented 3.4 percent of the loan portfolio at such date. The decrease in the loan portfolio at December 31, 2019 compared to September 30, 2019, primarily reflected a decrease of $35.2 million in commercial loans, a $1.6 million decrease in consumer loans and were offset by an increase of $14.7 million in residential mortgage loans and a $9.0 million increase in construction and development loans.
For the quarter ended December 31, 2019, the Company originated total new loan volume of $69.9 million, which was offset by prepayments totaling $9.7 million, amortization of $10.8 million, loan payoffs of $56.0 million, and participations of $6.3 million.
Loan Portfolio Composition (which does not include loans held for sale):
| (in thousands, unaudited) | ||||||||||||||
| At quarter ended: | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | |||||||||
| Residential mortgage | $ | 234,738 | $ | 220,011 | $ | 216,114 | $ | 202,655 | $ | 202,306 | ||||
| Construction and Development: | ||||||||||||||
| Residential and commercial | 49,095 | 40,346 | 47,485 | 44,014 | 41,140 | |||||||||
| Land | 3,625 | 3,420 | 3,809 | 5,696 | 7,180 | |||||||||
| Total construction and development | 52,720 | 43,766 | 51,294 | 49,710 | 48,320 | |||||||||
| Commercial: | ||||||||||||||
| Commercial real estate | 523,807 | 543,452 | 543,045 | 550,933 | 508,448 | |||||||||
| Farmland | 7,563 | 7,563 | 5,388 | 12,041 | 12,054 | |||||||||
| Multi-family | 43,473 | 62,884 | 64,050 | 64,328 | 44,989 | |||||||||
| Commercial and industrial | 99,494 | 99,747 | 97,877 | 82,731 | 76,892 | |||||||||
| Other | 8,569 | 4,450 | 5,356 | 8,111 | 7,344 | |||||||||
| Total commercial | 682,906 | 718,096 | 715,716 | 718,144 | 649,727 | |||||||||
| Consumer: | ||||||||||||||
| Home equity lines of credit | 18,372 | 19,506 | 19,348 | 18,466 | 14,484 | |||||||||
| Second mortgages | 13,179 | 13,737 | 15,018 | 15,773 | 16,674 | |||||||||
| Other | 2,160 | 2,030 | 2,081 | 1,904 | 1,915 | |||||||||
| Total consumer | 33,711 | 35,273 | 36,447 | 36,143 | 33,073 | |||||||||
| Total loans | 1,004,075 | 1,017,146 | 1,019,571 | 1,006,652 | 933,426 | |||||||||
| Deferred loan costs, net | 828 | 663 | 494 | 478 | 460 | |||||||||
| Allowance for loan losses | (10,100 | ) | (10,095 | ) | (10,106 | ) | (10,016 | ) | (9,247) | |||||
| Loans Receivable, net | $ | 994,803 | $ | 1,007,714 | $ | 1,009,959 | $ | 997,114 | $ | 924,639 | ||||
At December 31, 2019, the Company had $155.2 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 December 31, 2019 included approximately $46.2 million in commercial and construction loans and $6.9 million in residential mortgage loans expected to fund over the following quarters.
Asset Quality
Non-accrual loans were $1.8 million at December 31, 2019 and September 30, 2019. The portfolio of non-accrual loans at December 31, 2019 was comprised of thirteen residential real estate loans with an aggregate outstanding balance of approximately $1.5 million and twelve consumer loans with an aggregate outstanding balance of approximately $282,000.
At December 31, 2019, non-performing assets totaled $7.6 million, or 0.60 percent of total assets, as compared with $8.1 million, or 0.64 percent of total assets, at September 30, 2019.
OREO was $5.8 million at December 31, 2019 and September 30, 2019. Excluding the OREO property of $5.8 million, NPAs totaled $1.8 million, or 0.14 percent of total assets at December 31, 2019. Excluding the OREO property of $5.8 million, NPAs totaled $2.3 million, or 0.18 percent of total assets at September 30, 2019. During the 2019 first fiscal quarter a national tenant signed a lease agreement that is expected to result in this OREO property producing income.
Performing Troubled Debt Restructuring (“TDR”) loans were $12.6 million at December 31, 2019 and $12.2 million at September 30, 2019.
Non-Performing Asset and Other Asset Quality Data:
| (dollars in thousands, unaudited) | |||||||||||||||
| As of or for the quarter ended: | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | ||||||||||
| Non-accrual loans(1) | $ | 1,823 | $ | 1,821 | $ | 2,189 | $ | 2,432 | $ | 2,562 | |||||
| Loans 90 days or more past due and still accruing | 1 | 502 | 228 | — | 759 | ||||||||||
| Total non-performing loans | 1,824 | 2,323 | 2,417 | 2,432 | 3,321 | ||||||||||
| OREO | 5,796 | 5,796 | 5,796 | 5,796 | 5,796 | ||||||||||
| Total non-performing assets | $ | 7,620 | $ | 8,119 | $ | 8,213 | $ | 8,228 | $ | 9,117 | |||||
| Performing TDR loans | $ | 12,598 | $ | 12,170 | $ | 11,824 | $ | 12,099 | $ | 12,164 | |||||
| Non-performing assets / total assets | 0.60 | % | 0.64 | % | 0.65 | % | 0.68 | % | 0.81 | % | |||||
| Non-performing loans / total loans | 0.18 | % | 0.23 | % | 0.24 | % | 0.24 | % | 0.36 | % | |||||
| Net (recoveries) charge-offs | $ | (5 | ) | $ | 11 | $ | (34 | ) | $ | 101 | $ | 1,227 | |||
| Net (recoveries) charge-offs/average loans(2) | — | % | — | % | (0.01 | )% | 0.04 | % | 0.54 | % | |||||
| Allowance for loan losses / total loans | 1.01 | % | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | % | |||||
| Allowance for loan losses / non-performing loans | 553.7 | % | 434.6 | % | 418.1 | % | 411.8 | % | 278.4 | % | |||||
| Total assets | $ | 1,260,756 | $ | 1,265,222 | $ | 1,265,878 | $ | 1,210,240 | $ | 1,128,492 | |||||
| Total gross loans | 1,004,075 | 1,017,146 | 1,019,571 | 1,006,652 | 933,426 | ||||||||||
| Average loans | 1,006,755 | 1,015,251 | 1,010,033 | 956,840 | 912,259 | ||||||||||
| Allowance for loan losses | 10,100 | 10,095 | 10,106 | 10,016 | 9,247 | ||||||||||
______________
(1) Twenty-one loans totaling approximately $1.6 million, or 89.6 percent of the total non-accrual loan balance, were making payments as of December 31, 2019.
(2) Annualized.
The allowance for loan losses at December 31, 2019 amounted to approximately $10.1 million, or 1.01 percent of total loans, compared to $10.1 million, or 0.99 percent of total loans, at September 30, 2019. The Company did not record a provision for loan losses during the fiscal quarter ended December 31, 2019 or the fiscal quarter ended September 30, 2019.
Capital
At December 31, 2019, our total shareholders' equity amounted to $145.3 million, or 11.52 percent of total assets, compared to $142.5 million, or 11.26 percent of total assets at September 30, 2019. At December 31, 2019, the Bank’s common equity tier 1 ratio was 15.49 percent, tier 1 leverage ratio was 12.78 percent, tier 1 risk-based capital ratio was 15.49 percent and the total risk-based capital ratio was 16.50 percent. At September 30, 2019, the Bank’s common equity tier 1 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. At December 31, 2019, the Bank was in compliance with all applicable regulatory capital requirements.
The Company did not purchase any shares of its common stock in the open market under the repurchase plan during the fiscal quarter ended December 31, 2019. At December 31, 2019, the Company had 177,653 shares remaining in the repurchase plan.
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: | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | ||||||||||
| Net income as reported under GAAP | $ | 2,502 | $ | 2,699 | $ | 2,656 | $ | 1,966 | $ | 2,011 | |||||
| Non-core items, net of tax: | |||||||||||||||
| OREO expense(1) | 60 | 87 | 24 | 23 | 17 | ||||||||||
| Audit expenses(2) | — | — | — | — | 110 | ||||||||||
| Net investment security gains | — | (1 | ) | (21 | ) | — | — | ||||||||
| Swap fees(3) | — | (71 | ) | — | — | (561 | ) | ||||||||
| Other(4) | 45 | 16 | — | 10 | 100 | ||||||||||
| Core net income, non-GAAP | $ | 2,607 | $ | 2,730 | $ | 2,659 | $ | 1,999 | $ | 1,677 | |||||
| Earnings per common share: | |||||||||||||||
| Diluted | $ | 0.34 | $ | 0.36 | $ | 0.35 | $ | 0.26 | $ | 0.22 | |||||
| Weighted average common shares outstanding: | |||||||||||||||
| Diluted | 7,665,842 | 7,663,593 | 7,670,106 | 7,667,518 | 7,555,969 | ||||||||||
(1) Non-core items for the quarters ended December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019, and December 31, 2018 include OREO expense relating to one commercial real estate loan.
(2) Non-core items for the quarter ended December 31, 2018 consisted of expenses arising from the dismissal of the Company’s accounting firm, as previously announced in the Company’s Form 8-K filed on July 9, 2018, which required issuance of consent on previously audited consolidated financial statements.
(3) Upfront recognition of net swap fees through the Bank’s commercial loan hedging program.
(4) 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: | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | |||||||||
| Other income | $ | 443 | $ | 551 | $ | 454 | $ | 441 | $ | 1,146 | ||||
| Less: Net investment securities gains | — | 1 | 27 | — | — | |||||||||
| Less: Net swap fees | — | 92 | — | — | 710 | |||||||||
| Other income, excluding net investment securities gains | $ | 443 | $ | 458 | $ | 427 | $ | 441 | $ | 436 | ||||
“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: | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | |||||||||
| Other expense as reported under GAAP | $ | 4,422 | $ | 4,453 | $ | 4,497 | $ | 4,443 | $ | 4,094 | ||||
| Less: non-core items(1) | 71 | 113 | 30 | 28 | 160 | |||||||||
| Other expense, excluding non-core items, non-GAAP | $ | 4,351 | $ | 4,340 | $ | 4,467 | $ | 4,415 | $ | 3,934 | ||||
| Net interest income (tax equivalent basis), non-GAAP | $ | 6,920 | $ | 7,426 | $ | 7,471 | $ | 7,263 | $ | 6,958 | ||||
| Non-core items(2) | 52 | 21 | — | 12 | 127 | |||||||||
| Net interest income (tax equivalent basis), including non-core items, non-GAAP | 6,972 | 7,447 | 7,471 | 7,275 | 7,085 | |||||||||
| Other income, excluding gain on sale of investments and swap fees | 443 | 458 | 427 | 441 | 436 | |||||||||
| Total | $ | 7,415 | $ | 7,905 | $ | 7,898 | $ | 7,716 | $ | 7,521 | ||||
| Efficiency ratio, non-GAAP | 58.7 | % | 54.9 | % | 56.6 | % | 57.2 | % | 52.3% | |||||
| ______________________ (1) Non-core items for the quarters ended December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019, and December 31, 2018 include OREO expense relating to one commercial real estate loan. In addition, non-core items for the quarter ended December 31, 2018 consisted of expenses arising from the dismissal of the Company’s accounting firm, as previously announced in the Company’s Form 8-K filed on July 9, 2018, which required issuance of consent on previously audited consolidated financial statements. (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: | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | |||||
| Efficiency ratio on a GAAP basis | 60.1 | % | 55.9 | % | 56.8 | % | 57.8 | % | 50.6% |
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: | 12/31/19 | 9/30/19 | 6/30/19 | 3/31/19 | 12/31/18 | |||||||||
| Net interest income (GAAP) | $ | 6,912 | $ | 7,418 | $ | 7,461 | $ | 7,249 | $ | 6,947 | ||||
| Tax-equivalent adjustment(1) | 8 | 8 | 10 | 14 | 11 | |||||||||
| TE net interest income, non-GAAP | $ | 6,920 | $ | 7,426 | $ | 7,471 | $ | 7,263 | $ | 6,958 | ||||
| Net interest margin (GAAP) | 2.34 | % | 2.45 | % | 2.54 | % | 2.66 | % | 2.65% | |||||
| Tax-equivalent effect | 0.01 | — | — | 0.01 | — | |||||||||
| Net interest margin (TE), non-GAAP | 2.35 | % | 2.45 | % | 2.54 | % | 2.67 | % | 2.65% | |||||
| ____________________ | ||||||||||||||
| (1) Reflects tax-equivalent adjustment for tax exempt investments. | ||||||||||||||
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 strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including 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 (including the Dodd-Frank Wall Street Reform and Consumer Protection Act) and of governmental efforts to restructure the U.S. financial regulatory system; technological changes; changes in the level of the Company’s nonperforming assets and charge offs; 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; changes in consumer spending, borrowing and savings habits; 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 financial performance and/or condition of our borrowers; 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 2019 Annual Report on Form 10-K of Malvern Bancorp, Inc. filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).
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.
| MALVERN BANCORP, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | ||||||||
| (in thousands, except for share and per share data) | December 31, 2019 | September 30, 2019 | ||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Cash and due from depository institutions | $ | 1,337 | $ | 1,400 | ||||
| Interest bearing deposits in depository institutions | 158,465 | 152,143 | ||||||
| Total cash and cash equivalents | 159,802 | 153,543 | ||||||
| Investment securities available for sale, at fair value (amortized cost of $23,761 and $18,522 at December 31, 2019 and September 30, 2019, respectively) | 23,723 | 18,411 | ||||||
| Investment securities held to maturity (fair value of $20,670 and $22,609 at December 31, 2019 and September 30, 2019, respectively) | 20,578 | 22,485 | ||||||
| Restricted stock, at cost | 11,115 | 11,129 | ||||||
| Loans receivable, net of allowance for loan losses | 994,803 | 1,007,714 | ||||||
| Other real estate owned | 5,796 | 5,796 | ||||||
| Accrued interest receivable | 4,061 | 4,253 | ||||||
| Operating lease right-of-use-assets | 3,119 | — | ||||||
| Property and equipment, net | 6,594 | 6,678 | ||||||
| Deferred income taxes, net | 2,806 | 2,840 | ||||||
| Bank-owned life insurance | 20,018 | 19,891 | ||||||
| Other assets | 8,341 | 12,482 | ||||||
| Total assets | $ | 1,260,756 | $ | 1,265,222 | ||||
| LIABILITIES | ||||||||
| Deposits: | ||||||||
| Non-interest bearing | $ | 41,273 | $ | 55,684 | ||||
| Interest-bearing | 902,546 | 898,127 | ||||||
| Total deposits | 943,819 | 953,811 | ||||||
| FHLB advances | 133,000 | 133,000 | ||||||
| Subordinated debt | 24,658 | 24,619 | ||||||
| Advances from borrowers for taxes and insurance | 2,344 | 1,761 | ||||||
| Accrued interest payable | 1,271 | 978 | ||||||
| Operating lease liabilities | 3,128 | — | ||||||
| Other liabilities | 7,284 | 8,545 | ||||||
| Total liabilities | 1,115,504 | 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; 7,782,412 and | ||||||||
| 7,765,549 issued and outstanding, respectively, at December 31, 2019, and 7,782,258 and 7,765,395shares issued and outstanding, at September 30, 2019 | 78 | 78 | ||||||
| Additional paid in capital | 84,860 | 84,783 | ||||||
| Retained earnings | 62,246 | 59,744 | ||||||
| Unearned Employee Stock Ownership Plan (ESOP) shares | (1,156 | ) | (1,192 | ) | ||||
| Accumulated other comprehensive (loss) income | (440 | ) | (569 | ) | ||||
| Treasury stock, at cost: 16,863 shares at December 31, 2019 and September 30, 2019 | (336 | ) | (336 | ) | ||||
| Total shareholders’ equity | 145,252 | 142,508 | ||||||
| Total liabilities and shareholders’ equity | $ | 1,260,756 | $ | 1,265,222 | ||||
| MALVERN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
| Three months ended December 31, | ||||||||||||
| (in thousands, except for share data) | 2019 | 2018 | ||||||||||
| (unaudited) | ||||||||||||
| Interest and Dividend Income | ||||||||||||
| Loans, including fees | $ | 10,905 | $ | 10,095 | ||||||||
| Investment securities, taxable | 215 | 251 | ||||||||||
| Investment securities, tax-exempt | 39 | 61 | ||||||||||
| Dividends, restricted stock | 188 | 133 | ||||||||||
| Interest-bearing cash accounts | 472 | 372 | ||||||||||
| Total Interest and Dividend Income | 11,819 | 10,912 | ||||||||||
| Interest Expense | ||||||||||||
| Deposits | 3,737 | 2,944 | ||||||||||
| Short-term borrowings | — | 5 | ||||||||||
| Long-term borrowings | 787 | 633 | ||||||||||
| Subordinated debt | 383 | 383 | ||||||||||
| Total Interest Expense | 4,907 | 3,965 | ||||||||||
| Net interest income | 6,912 | 6,947 | ||||||||||
| Provision for Loan Losses | — | 1,453 | ||||||||||
| Net Interest Income after Provision for Loan Losses | 6,912 | 5,494 | ||||||||||
| Other Income | ||||||||||||
| Service charges and other fees | 259 | 940 | ||||||||||
| Rental income-other | 54 | 67 | ||||||||||
| Net gains on sale of loans | 3 | 18 | ||||||||||
| Earnings on bank-owned life insurance | 127 | 121 | ||||||||||
| Total Other Income | 443 | 1,146 | ||||||||||
| Other Expense | ||||||||||||
| Salaries and employee benefits | 2,125 | 2,008 | ||||||||||
| Occupancy expense | 582 | 539 | ||||||||||
| Federal deposit insurance premium | (3 | ) | 69 | |||||||||
| Advertising | 22 | 30 | ||||||||||
| Data processing | 278 | 254 | ||||||||||
| Professional fees | 441 | 499 | ||||||||||
| Net other real estate owned expense | 71 | 21 | ||||||||||
| Pennsylvania shares tax | 170 | — | ||||||||||
| Other operating expenses | 736 | 674 | ||||||||||
| Total Other Expense | 4,422 | 4,094 | ||||||||||
| Income before income tax expense | 2,933 | 2,546 | ||||||||||
| Income tax expense | 431 | 535 | ||||||||||
| Net Income | $ | 2,502 | $ | 2,011 | ||||||||
| Earnings per common share | ||||||||||||
| Basic | $ | 0.33 | $ | 0.27 | ||||||||
| Diluted | $ | 0.33 | $ | 0.27 | ||||||||
| Weighted Average Common Shares Outstanding | ||||||||||||
| Basic | 7,665,842 | 7,555,810 | ||||||||||
| Diluted | 7,665,842 | 7,555,969 | ||||||||||
| 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) | 12/31/2019 | 9/30/2019 | 12/31/2018 | ||||||
| (unaudited) | |||||||||
| Statements of Operations Data | |||||||||
| Interest income | $ | 11,819 | $ | 12,686 | $ | 10,912 | |||
| Interest expense | 4,907 | 5,268 | 3,965 | ||||||
| Net interest income | 6,912 | 7,418 | 6,947 | ||||||
| Provision for loan losses | — | — | 1,453 | ||||||
| Net interest income after provision for loan losses | 6,912 | 7,418 | 5,494 | ||||||
| Other income | 443 | 551 | 1,146 | ||||||
| Other expense | 4,422 | 4,453 | 4,094 | ||||||
| Income before income tax expense | 2,933 | 3,516 | 2,546 | ||||||
| Income tax expense | 431 | 817 | 535 | ||||||
| Net income | $ | 2,502 | $ | 2,699 | $ | 2,011 | |||
| Earnings (per Common Share) | |||||||||
| Basic | $ | 0.33 | $ | 0.35 | $ | 0.27 | |||
| Diluted | $ | 0.33 | $ | 0.35 | $ | 0.27 | |||
| Statements of Condition Data (Period-End) | |||||||||
| Investment securities available for sale, at fair value | $ | 23,723 | $ | 18,411 | $ | 19,231 | |||
| Investment securities held to maturity (fair value of $20,670, $22,609 and $28,557, respectively) | 20,578 | 22,485 | 29,323 | ||||||
| Loans, net of allowance for loan losses | 994,803 | 1,007,714 | 924,639 | ||||||
| Total assets | 1,260,756 | 1,265,222 | 1,128,492 | ||||||
| Deposits | 943,819 | 953,811 | 843,200 | ||||||
| FHLB advances | 133,000 | 133,000 | 118,000 | ||||||
| Subordinated debt | 24,658 | 24,619 | 24,500 | ||||||
| Shareholders' equity | 145,252 | 142,508 | 135,679 | ||||||
| Common Shares Dividend Data | |||||||||
| Cash dividends | $ | — | $ | — | $ | — | |||
| Weighted Average Common Shares Outstanding | |||||||||
| Basic | 7,665,842 | 7,663,242 | 7,555,810 | ||||||
| Diluted | 7,665,842 | 7,663,593 | 7,555,969 | ||||||
| Operating Ratios | |||||||||
| Return on average assets | 0.82 | % | 0.86 | % | 0.74 | % | |||
| Return on average equity | 6.97 | % | 7.65 | % | 6.00 | % | |||
| Average equity / average assets | 11.75 | % | 11.27 | % | 12.40 | % | |||
| Book value per common share (period-end) | $ | 18.70 | $ | 18.35 | $ | 17.45 | |||
| Non-Financial Information (Period-End) | |||||||||
| Common shareholders of record | 384 | 391 | 402 | ||||||
| Full-time equivalent staff | 89 | 82 | 87 | ||||||
Investor Contacts:
Joseph D. Gangemi
Corporate Investor Relations
610-695-3676
Investor Relations Contact:
Ronald Morales
610-695-3646