PAOLI, Pa., Aug. 09, 2021 (GLOBE NEWSWIRE) -- Malvern Bancorp, Inc. (NASDAQ: MLVF) (the “Company”), the parent company of Malvern Bank, National Association (the “Bank”), today reported operating results for the third fiscal quarter ended June 30, 2021. Net income amounted to $1.6 million, or $0.21 per fully diluted common share, compared with net income of $1.5 million, or $0.19 per fully diluted common share, for the quarter ended June 30, 2020. The increases in net income and diluted earnings per share from the third quarter of 2020 were primarily due to an increase in net interest income and other income. Annualized return on average assets (“ROAA”) was 0.53 percent for the quarter ended June 30, 2021, compared to 0.47 percent for the quarter ended June 30, 2020, and annualized return on average equity (“ROAE”) was 4.35 percent for the quarter ended June 30, 2021, compared with 4.06 percent for the quarter ended June 30, 2020.
For the nine months ended June 30, 2021, net income amounted to $6.1 million, or $0.81 per fully diluted common share, compared with net income of $4.1 million, or $0.54 per fully diluted common share, for the nine months ended June 30, 2020. Annualized ROAA was 0.67 percent for the nine months ended June 30, 2021, compared to 0.45 percent for the nine months ended June 30, 2020, and annualized ROAE was 5.61 percent for the nine months ended June 30, 2021, compared with 3.85 percent for the nine months ended June 30, 2020.
“Our third quarter results reflect solid core earnings and our continuing efforts to improve our margin. We anticipate that these efforts, along with economic conditions that we hope will continue to improve going forward, should contribute to stronger operating results. Our top priority for the coming quarters remains improving our overall asset quality metrics and a focus on expense reduction,” commented Anthony C. Weagley, President and Chief Executive Officer.
Statement of Income Highlights at June 30, 2021
- Net interest margin (“NIM”) increased to 2.70 percent for the quarter ended June 30, 2021, compared to 2.28 percent for the prior year’s quarter ended June 30, 2020. The increase was driven by the reduction in interest expense, partially offset by a decrease in interest-earning assets. On a linked quarter basis, NIM increased 0.16 percent to 2.70 percent; the linked quarter increase was driven by reductions in rates paid on deposits.
- Net interest income increased $923,000, or 4.5 percent, for the nine months ended June 30, 2021 compared to the nine months ended June 30, 2020. The increase in net interest income was due primarily to a reduction in cost of interest-bearing deposits. Net interest income increased $327,000 compared to the sequential quarter ended March 31, 2021.
- Net other real estate owned (“OREO”) expensed increased $806,000 for the quarter ended June 30, 2021, compared to the quarter ended June 30, 2020. The increase in OREO expense was due to the company’s $835,000 adjustment of value of the one commercial real estate property based on the ongoing monitoring and evaluation of current economic conditions.
- The Company did not record a provision for loan losses during the three-month period ended June 30, 2021 or the sequential quarter ended March 31, 2021. For the nine months ended June 30, 2021, provision for loan losses was $550,000, or $2.7 million less than the $3.2 million provision recorded for the nine months ended June 30, 2020.
| Linked Quarter Financial Ratios (unaudited) | |||||||||||||||
| As of or for the quarter ended: | 6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | 6/30/20 | ||||||||||
| Return on average assets (1) | 0.53% | 0.73% | 0.74% | (1.15%) | 0.47% | ||||||||||
| Return on average equity (1) | 4.35% | 6.14% | 6.38% | (9.54%) | 4.06% | ||||||||||
| Net interest margin (1) | 2.70% | 2.54% | 2.62% | 2.38% | 2.28% | ||||||||||
| Loans / deposits ratio | 104.84% | 108.14% | 111.33% | 116.62% | 117.93% | ||||||||||
| Shareholders’ equity / total assets | 12.50% | 12.09% | 11.73% | 11.64% | 11.88% | ||||||||||
| Efficiency ratio (2) | 73.6% | 63.5% | 58.3% | 61.5% | 66.7% | ||||||||||
| Book value per common share | $19.44 | $19.17 | $18.83 | $18.47 | $18.86 | ||||||||||
| __________ | |
| (1) | Annualized. |
| (2) | Included impact of $835,000 OREO valuation adjustment in the quarter ended June 30, 2021. Without valuation adjustment, efficiency ratio is 63.1% for the quarter ended June 30, 2021. |
| Linked Quarter Income Statement Data (unaudited) (in thousands, except share and per share data) | |||||||||||||||
| For the quarter ended: | 6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | 6/30/20 | ||||||||||
| Net interest income | $ | 7,129 | $ | 6,802 | $ | 7,304 | $ | 6,720 | $ | 6,631 | |||||
| Provision for loan losses | - | - | 550 | 7,400 | 435 | ||||||||||
| Net interest income after provision for loan losses | 7,129 | 6,802 | 6,754 | (680 | ) | 6,196 | |||||||||
| Other income | 793 | 1,167 | 1,224 | 692 | 389 | ||||||||||
| Other expense | 5,832 | 5,063 | 4,972 | 4,558 | 4,684 | ||||||||||
| Income (loss) before income tax expense | 2,090 | 2,906 | 3,006 | (4,546 | ) | 1,901 | |||||||||
| Income tax expense (benefit) | 489 | 682 | 733 | (1,043 | ) | 447 | |||||||||
| Net income (loss) | $ | 1,601 | $ | 2,224 | $ | 2,273 | $ | (3,503 | ) | $ | 1,454 | ||||
| Earnings (loss) per common share | |||||||||||||||
| Basic | $ | 0.21 | $ | 0.30 | $ | 0.30 | $ | (0.46 | ) | $ | 0.19 | ||||
| Diluted | $ | 0.21 | $ | 0.30 | $ | 0.30 | $ | (0.46 | ) | $ | 0.19 | ||||
| Weighted average common shares outstanding | |||||||||||||||
| Basic | 7,545,371 | 7,529,408 | 7,525,808 | 7,522,199 | 7,538,375 | ||||||||||
| Diluted | 7,546,200 | 7,530,151 | 7,526,376 | 7,522,360 | 7,538,375 | ||||||||||
Net Interest Income
Net interest income was $7.1 million for the quarter ended June 30, 2021, an increase of $498,000, or 7.51 percent, from $6.6 million for the quarter ended June 30, 2020. For the quarter ended June 30, 2021, NIM increased by 42 basis points to 2.70 percent, as compared to 2.28 percent for the quarter ended June 30, 2020. This increase was primarily driven by a reduction in interest expense as the cost of interest-bearing deposits decreased by 68 basis points compared to the quarter ended June 30, 2020. The cost of interest-bearing liabilities decreased by 60 basis points compared to the quarter ended June 30, 2020.
Net interest income was $21.2 million for the nine months ended June 30, 2021, an increase of $923,000, or 4.5 percent, from $20.3 million for the nine months ended June 30, 2020. For the nine months ended June 30, 2021, NIM increased by 34 basis points to 2.62 percent, as compared to 2.28 percent for the nine months ended June 30, 2020. Consistent with the current quarter, this increase was primarily driven by the 72 basis point decrease in cost of interest-bearing deposits compared to the nine months ended June 30, 2020. The cost of borrowings decreased by 18 basis points compared to the nine months ended June 30, 2020. The cost of interest-bearing liabilities decreased by 66 basis points compared to the nine months ended June 30, 2020.
Interest Income
For the quarters ended June 30, 2021 and June 30, 2020, total interest income was $9.4 million and $10.5 million, respectively. The average yield on interest-earning assets declined 4 basis points when compared to the same period in 2020. Total interest income fell for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, due to the decrease in loan balances and the overall average yield on loans.
For the nine months ended June 30, 2021, total interest income was $29.6 million, a decrease of $4.4 million or 13.0 percent, from $34.0 million for the nine months ended June 30, 2020. The average yield on interest-earning assets declined 16 basis points when compared to the same period in 2020. Total interest income fell for the nine months ended June 30, 2021, compared to the nine months ended June 30, 2020, primarily due to an overall decrease in rates.
Interest Expense
For the quarter ended June 30, 2021, interest expense decreased by $1.6 million, or 40.8 percent, to $2.3 million, compared to $3.9 million for the quarter ended June 30, 2020. The decrease in interest expense is primarily attributable to rate related factors, as the average rate on interest-bearing liabilities fell 60 basis points compared to the quarter ended June 30, 2020. This decline is reflected in a 68 basis point decrease in the rate on interest-bearing deposits.
Total interest expense decreased by $5.3 million, or 39.1 percent, to $8.3 million for the nine months ended June 30, 2021, compared to $13.7 million for the nine months ended June 30, 2020. The decrease in interest expense on deposits is primarily attributable to rate related factors. The annualized average rate on total interest-bearing liabilities decreased to 1.10 percent for the nine months ended June 30, 2021, from 1.76 percent for the nine months ended June 30, 2020. This decrease primarily reflects a decrease in the average rate of interest-bearing deposits of 0.72 percent and a decrease in the average rate of borrowings of 0.18 percent. The decrease in the average rate of interest-bearing deposits consisted of a 0.72 percent decrease in the average rate of certificates of deposit, a 0.68 percent decrease in the average rate of money market accounts and a 0.66 percent decrease in average rate of other interest-bearing deposit accounts.
Other Income
Other income increased $404,000 during the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020. The increase in other income was primarily due to increases of $164,000 in net gains on sale of investments, $149,000 in service charges and other fees and $54,000 in net gains on sale of loans. The net gain on sale of investments resulted from managing and optimizing portfolio activity in the ordinary course of business. The increase in service charges and other fees was due to approximately $75,000 in prepayment penalties and $54,000 of increased service charges. The gain on sale of loans was a result of a strategic effort to originate and sell residential loans in this low interest rate environment.
For the nine months ended June 30, 2021, total other income increased $1.4 million compared to the same period in 2020. This increase was primarily a result of a $729,000 increase in net gains on sale of loans and a $598,000 increase in net gains on sale of investments.
Other Expense
Other expense for the quarter ended June 30, 2021 increased $1.1 million when compared to the quarter ended June 30, 2020. The increase was primarily due to an increase of $806,000 in net OREO expense. This increase was the result of the ongoing monitoring and evaluation of our one OREO property value and is reflective of current economic and market conditions. In addition, professional fees increased $317,000 mainly due to costs associated with legal, accounting, and audit expenses related to the Company’s periodic and annual filings.
Other expense for the nine months ended June 30, 2021 increased $2.1 million, or 15.4 percent, when compared to the nine months ended June 30, 2020. The increase was primarily due to increases of $921,000 in professional fees associated with legal, accounting, and audit expenses related to the Company’s periodic and annual filings and a $767,000 increase in net OREO expense.
Income Taxes
The Company recorded $489,000 in income tax expense during the quarter ended June 30, 2021 compared to $447,000 in income tax expense during the quarter ended June 30, 2020. The effective tax rate for the Company for the quarters ended June 30, 2021 and 2020 were 23.4 percent and 23.5 percent, respectively.
For the nine months ended June 30, 2021, income tax expense increased by $897,000 or 89.1 percent, to $1.9 million from $1.0 million for the nine months ended June 30, 2020. The effective tax rate for the Company for the nine months ended June 30, 2021 and 2020 were 23.8 percent and 19.5 percent, respectively. Tax expense for the nine months ended June 30, 2020 was impacted due to discrete tax items in the first fiscal quarter of 2020.
Statement of Condition Highlights at June 30, 2021
- Total assets totaled $1.186 billion at June 30, 2021, a decrease of $22.5 million, or 1.9 percent, compared to September 30, 2020.
- Deposits totaled $907.7 million at June 30, 2021, an increase of $16.8 million, or 1.9 percent, compared to September 30, 2020.
- Non-performing assets (“NPAs”) were 2.42 percent and 1.87 percent of total assets at June 30, 2021 and September 30, 2020, respectively. Excluding one OREO property ($5.0 million at June 30, 2021 and $5.8 million at September 30, 2020), NPAs were 2.00 percent and 1.39 percent of total assets at June 30, 2021 and September 30, 2020, respectively. The allowance for loan losses as a percentage of total non-performing loans was 48.8 percent at June 30, 2021, compared to 74.1 percent at September 30, 2020.
- Non-accrual loans increased $1.3 million from $22.3 million at March 31, 2021 to $23.5 million at June 30, 2021. The increase was primarily due to additions to non-accrual status of one commercial and industrial loan totaling $2.6 million (net of a partial charge of $379,000) and one consumer second mortgage loan totaling $56,000. These additions were partially offset by a payoff of a non-accrual real estate loan totaling $531,000, combined with partial charge-offs totaling $645,000 of two commercial real estate non-accrual loans.
- The Company’s ratio of shareholders’ equity to total assets was 12.50 percent at June 30, 2021, compared to 11.64 percent at September 30, 2020.
- Book value per common share amounted to $19.44 at June 30, 2021, compared to $18.47 at September 30, 2020.
| Linked Quarter Statement of Condition Data (in thousands, unaudited) | ||||||||||||||
| At quarter ended: | 6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | 6/30/20 | |||||||||
| Cash and due from depository institutions | $ | 90,441 | $ | 99,358 | $ | 83,764 | $ | 16,386 | $ | 30,653 | ||||
| Interest-bearing deposits in depository institutions | 14,513 | 9,556 | 25,458 | 45,053 | 28,291 | |||||||||
| Investment securities, available for sale, at fair value | 34,502 | 28,899 | 35,224 | 31,541 | 33,245 | |||||||||
| Investment securities held to maturity | 31,795 | 25,834 | 14,161 | 14,970 | 15,921 | |||||||||
| Restricted stock, at cost | 7,896 | 8,891 | 9,327 | 9,622 | 9,766 | |||||||||
| Loans receivable, net of allowance for loan losses | 940,735 | 974,596 | 990,346 | 1,026,894 | 1,032,318 | |||||||||
| Other real estate owned | 4,961 | 5,796 | 5,796 | 5,796 | 5,796 | |||||||||
| Accrued interest receivable | 3,370 | 3,598 | 4,051 | 3,677 | 5,680 | |||||||||
| Operating lease right-of-use-assets | 2,168 | 2,322 | 2,479 | 2,638 | 2,799 | |||||||||
| Property and equipment, net | 5,902 | 6,040 | 6,154 | 6,274 | 6,355 | |||||||||
| Deferred income taxes, net | 3,389 | 3,535 | 3,601 | 3,680 | 3,103 | |||||||||
| Bank-owned life insurance | 25,889 | 25,725 | 25,564 | 25,400 | 20,270 | |||||||||
| Other assets | 20,183 | 12,269 | 14,999 | 16,344 | 13,873 | |||||||||
| Total assets | $ | 1,185,744 | $ | 1,206,419 | $ | 1,220,924 | $ | 1,208,275 | $ | 1,208,070 | ||||
| Deposits | $ | 907,704 | $ | 912,213 | $ | 900,465 | $ | 890,906 | $ | 884,444 | ||||
| FHLB advances | 90,000 | 110,000 | 130,000 | 130,000 | 130,000 | |||||||||
| Secured borrowings | — | — | — | 4,225 | 4,225 | |||||||||
| Other borrowings | — | — | 5,000 | — | — | |||||||||
| Subordinated debt | 24,895 | 24,855 | 24,816 | 24,776 | 24,737 | |||||||||
| Operating lease liabilities | 2,204 | 2,357 | 2,512 | 2,671 | 2,824 | |||||||||
| Other liabilities | 12,749 | 11,143 | 14,865 | 15,104 | 18,309 | |||||||||
| Shareholders’ equity | 148,192 | 145,851 | 143,266 | 140,593 | 143,531 | |||||||||
| Total liabilities and shareholders’ equity | $ | 1,185,744 | $ | 1,206,419 | $ | 1,220,924 | $ | 1,208,275 | $ | 1,208,070 | ||||
The following table sets forth the Company’s consolidated average statement of condition for the quarters presented.
| Condensed Consolidated Average Statement of Condition | |||||||||||||||||||
| (in thousands, unaudited) | |||||||||||||||||||
| For the quarter ended: | 6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | 6/30/20 | ||||||||||||||
| Investment securities | $ | 71,811 | $ | 58,559 | $ | 59,135 | $ | 57,906 | $ | 53,477 | |||||||||
| Interest-bearing cash accounts | 16,914 | 21,506 | 21,690 | 27,996 | 76,828 | ||||||||||||||
| Loans | 967,615 | 990,913 | 1,032,483 | 1,045,595 | 1,033,246 | ||||||||||||||
| Allowance for loan losses | (12,603 | ) | (13,037 | ) | (12,462 | ) | (11,071 | ) | (10,618 | ) | |||||||||
| All other assets | 164,288 | 165,942 | 123,919 | 98,155 | 75,041 | ||||||||||||||
| Total assets | $ | 1,208,025 | $ | 1,223,883 | $ | 1,224,765 | $ | 1,218,581 | $ | 1,227,974 | |||||||||
| Non-interest-bearing deposits | $ | 52,799 | $ | 50,327 | $ | 48,152 | $ | 49,139 | $ | 46,450 | |||||||||
| Interest-bearing deposits | 868,099 | 866,153 | 854,649 | 842,727 | 852,330 | ||||||||||||||
| FHLB advances | 99,505 | 116,889 | 130,000 | 130,000 | 136,121 | ||||||||||||||
| Other short-term borrowings | — | 3,111 | 5,918 | 4,250 | 4,526 | ||||||||||||||
| Subordinated debt | 24,877 | 24,835 | 24,794 | 24,760 | 24,719 | ||||||||||||||
| Other liabilities | 15,399 | 17,751 | 18,689 | 20,853 | 20,509 | ||||||||||||||
| Shareholders’ equity | 147,346 | 144,817 | 142,563 | 146,852 | 143,319 | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | 1,208,025 | $ | 1,223,883 | $ | 1,224,765 | $ | 1,218,581 | $ | 1,227,974 | |||||||||
Deposits
The following table reflects the composition of the Company’s deposits as of the dates indicated.
| (in thousands, unaudited) | ||||||||||||||
| At quarter ended: | 6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | 6/30/20 | |||||||||
| Demand: | ||||||||||||||
| Non-interest-bearing | $ | 53,365 | $ | 54,210 | $ | 49,264 | $ | 50,422 | $ | 47,443 | ||||
| Interest-bearing | 329,372 | 313,865 | 303,535 | 303,682 | 277,238 | |||||||||
| Savings | 51,011 | 49,601 | 46,531 | 45,072 | 43,702 | |||||||||
| Money market | 359,040 | 338,100 | 303,796 | 277,711 | 281,419 | |||||||||
| Time | 114,916 | 156,437 | 197,339 | 214,019 | 234,642 | |||||||||
| Total deposits | $ | 907,704 | $ | 912,213 | $ | 900,465 | $ | 890,906 | $ | 884,444 | ||||
Loans
Total net loans amounted to $940.7 million at June 30, 2021 compared to $1.027 billion at September 30, 2020, for a net decrease of $86.2 million or 8.39 percent for the period. The allowance for loan losses amounted to $11.6 million, or 1.22 percent of total loans, at June 30, 2021 and $12.4 million, or 1.22 percent of total loans excluding PPP loans, at September 30, 2020. Average loan balances for the quarter ended June 30, 2021 totaled $967.6 million as compared to $1.046 billion for the quarter ended September 30, 2020, representing a 7.46 percent decrease.
At the end of the quarter ended June 30, 2021, the gross loan portfolio remained weighted toward two primary components: commercial and the core residential portfolio, with commercial loans accounting for 69.8 percent and single-family residential real estate loans accounting for 21.2 percent. Construction and development loans amounted to 6.7 percent and consumer loans represented 2.3 percent of the gross loan portfolio at such date. The decrease in the gross loan portfolio at June 30, 2021 compared to September 30, 2020 primarily reflected decreases of $13.8 million in commercial loans net of the sale of $19.7 million of PPP loans, $40.4 million in residential mortgage loans, $8.5 million in consumer loans, and $5.1 million in construction and development loans.
At June 30, 2021, the Company had eight COVID-19-related modified loans totaling approximately $61.3 million or 6.44 percent of loans, compared to 12 COVID-19-related modified loans totaling approximately $62.4 million or 6.33 percent of total loans at March 31, 2021.
The following table reflects the Company’s loan portfolio composition as of the dates indicated.
| (in thousands, unaudited) | |||||||||||||||||||
| At quarter ended: | 6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | 6/30/20 | ||||||||||||||
| Residential Mortgage | $ | 201,737 | $ | 218,165 | $ | 232,481 | $ | 242,090 | $ | 246,215 | |||||||||
| Construction and Development: | |||||||||||||||||||
| Residential and commercial | 61,484 | 76,257 | 73,000 | 65,703 | 56,999 | ||||||||||||||
| Land | 2,253 | 3,596 | 3,648 | 3,110 | 3,535 | ||||||||||||||
| Total construction and development | 63,737 | 79,853 | 76,648 | 68,813 | 60,534 | ||||||||||||||
| Commercial: | |||||||||||||||||||
| Commercial real estate | 478,032 | 482,611 | 478,808 | 495,398 | 506,180 | ||||||||||||||
| Farmland | 10,335 | 7,344 | 7,378 | 7,517 | 7,531 | ||||||||||||||
| Multi-family | 66,725 | 67,122 | 67,457 | 67,767 | 66,416 | ||||||||||||||
| Commercial and industrial | 97,955 | 94,706 | 101,852 | 116,584 | 115,899 | ||||||||||||||
| Other | 10,896 | 9,927 | 10,010 | 10,142 | 8,397 | ||||||||||||||
| Total commercial | 663,943 | 661,710 | 665,505 | 697,408 | 704,423 | ||||||||||||||
| Consumer: | |||||||||||||||||||
| Home equity lines of credit | 12,822 | 15,936 | 16,389 | 17,128 | 18,097 | ||||||||||||||
| Second mortgages | 7,039 | 8,114 | 9,097 | 10,711 | 11,704 | ||||||||||||||
| Other | 2,372 | 2,650 | 2,388 | 2,851 | 2,074 | ||||||||||||||
| Total consumer | 22,233 | 26,700 | 27,874 | 30,690 | 31,875 | ||||||||||||||
| Total loans | 951,650 | 986,428 | 1,002,508 | 1,039,001 | 1,043,047 | ||||||||||||||
| Deferred loan costs, net | 685 | 769 | 873 | 326 | 338 | ||||||||||||||
| Allowance for loan losses | (11,600 | ) | (12,601 | ) | (13,035 | ) | (12,433 | ) | (11,067 | ) | |||||||||
| Loans Receivable, net | $ | 940,735 | $ | 974,596 | $ | 990,346 | $ | 1,026,894 | $ | 1,032,318 | |||||||||
At June 30, 2021, the Company had $128.5 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.
Asset Quality
Non-accrual loans totaled $23.5 million at June 30, 2021 and $16.7 million at September 30, 2020. The increase in non-accrual loans was primarily due to one $12.3 million commercial real estate loan classified as substandard and non-accruing as of June 30, 2021. This increase in non-accrual loans was partially offset by a $6.5 million commercial real estate, troubled debt restructure (“TDR”) loan that was returned to accrual status.
The total portfolio of non-accrual loans at June 30, 2021 was comprised of two commercial real estate loans with an aggregate outstanding balance of approximately $19.6 million, one commercial and industrial loan with an aggregate outstanding balance of approximately $2.6 million, eleven residential mortgage loans with an aggregate outstanding balance of approximately $1.1 million, and ten consumer loans with an aggregate outstanding balance of approximately $337,000.
At June 30, 2021, NPAs totaled $28.7 million, or 2.42 percent of total assets, as compared with $22.6 million, or 1.87 percent of total assets, at September 30, 2020. The increase in NPAs is due to the increase in non-accrual loans as described above.
OREO, which is comprised of one commercial real estate property, totaled $5.0 million at June 30, 2021 and $5.8 million at September 30, 2020. Excluding the OREO, NPAs totaled $23.8 million, or 2.00 percent of total assets at June 30, 2021, and $16.8 million, or 1.39 percent of total assets at September 30, 2020.
Performing TDR loans were $23.4 million at June 30, 2021 and $13.4 million at September 30, 2020. As noted above, one commercial real estate loan in the amount of $6.5 million was returned to accruing status and as such is now classified as a performing TDR as of the second fiscal quarter of 2021.
Non-Performing Asset and Other Asset Quality Data:
| (dollars in thousands, unaudited) | |||||||||||||||||||
| As of or for the quarter ended: | 6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | 6/30/20 | ||||||||||||||
| Non-accrual loans(1) | $ | 23,547 | $ | 22,281 | $ | 16,240 | $ | 16,730 | $ | 8,871 | |||||||||
| Loans 90 days or more past due and still accruing | 212 | 765 | 775 | 58 | 265 | ||||||||||||||
| Total non-performing loans | 23,759 | 23,046 | 17,015 | 16,788 | 9,136 | ||||||||||||||
| OREO | 4,961 | 5,796 | 5,796 | 5,796 | 5,796 | ||||||||||||||
| Total NPAs | $ | 28,720 | $ | 28,842 | $ | 22,811 | $ | 22,584 | $ | 14,932 | |||||||||
| Performing TDR loans | $ | 23,352 | $ | 22,697 | $ | 16,229 | $ | 13,418 | $ | 13,640 | |||||||||
| NPAs / total assets | 2.42% | 2.39% | 1.87% | 1.87% | 1.24% | ||||||||||||||
| Non-performing loans / total loans | 2.50% | 2.34% | 1.70% | 1.62% | 0.88% | ||||||||||||||
| Net charge-offs (recoveries) | $ | 1,001 | $ | 434 | $ | (52 | ) | $ | 6,034 | $ | (76 | ) | |||||||
| Net charge-offs (recoveries) / average loans(2) | 0.41% | 0.18% | (0.02% | ) | 2.31% | (0.03% | ) | ||||||||||||
| Allowance for loan losses / total loans | 1.22% | 1.28% | 1.30% | 1.22% | 1.08% | ||||||||||||||
| Allowance for loan losses / non-performing loans | 48.8% | 54.7% | 76.6% | 74.1% | 121.1% | ||||||||||||||
| Total assets | $ | 1,185,744 | $ | 1,206,419 | $ | 1,220,924 | $ | 1,208,275 | $ | 1,208,070 | |||||||||
| Total gross loans | 951,650 | 986,428 | 1,002,508 | 1,039,001 | 1,043,047 | ||||||||||||||
| Average loans | 967,615 | 990,913 | 1,032,483 | 1,045,595 | 1,033,246 | ||||||||||||||
| Allowance for loan losses | 11,600 | 12,601 | 13,035 | 12,433 | 11,067 | ||||||||||||||
| __________ | |
| (1) | Fourteen loans totaling approximately $13.2 million, or 56.0 percent of the total non-accrual loan balance, were making payments as of June 30, 2021. |
| (2) | Annualized. |
The allowance for loan losses at June 30, 2021 amounted to approximately $11.6 million, or 1.22 percent of total loans compared to $12.4 million, or 1.22 percent of total loans excluding PPP loans, at September 30, 2020. The Company did not record a provision for loan losses during the fiscal quarter ended June 30, 2021.
During the three months ended June 30, 2021, the Company recorded net charge-offs of $1.0 million, consisting of the partial charge-off of two individual commercial real estate loans totaling $645,000 and a partial charge-off of one commercial and industrial loan totaling $379,000. This activity was partially offset by recoveries of $23,000. The partial charge-offs were the result of the ongoing monitoring and evaluation of classified loan values and is reflective of the change in current market and economic conditions.
Capital
At June 30, 2021, total shareholders’ equity amounted to $148.2 million, or 12.50 percent of total assets, compared to $140.6 million, or 11.64 percent of total assets at September 30, 2020. The Company’s capital position continues to significantly exceed all regulatory capital guidelines. At June 30, 2021, the Bank’s common equity Tier 1 capital ratio was 16.61 percent, Tier 1 leverage ratio was 13.53 percent, Tier 1 risk-based capital ratio was 16.61 percent and the total risk-based capital ratio was 17.80 percent. At September 30, 2020, the Bank’s common equity Tier 1 capital ratio was 15.40 percent, Tier 1 leverage ratio was 12.78 percent, Tier 1 risk-based capital ratio was 15.40 percent and the total risk-based capital ratio was 16.64 percent.
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 nine other banking locations in Chester and Delaware counties, Pennsylvania, Morristown, New Jersey, its New Jersey regional headquarters and Palm Beach Florida. 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 investment advisory services to individuals, families, businesses and non-profits. These services include banking, liquidity management, investment services, 401(k) accounts and planning, custody, tailored lending, wealth planning, trust and fiduciary services, family wealth advisory services and philanthropic advisory services.
The Bank offers insurance services though Malvern Insurance Associates, LLC, which provides clients a rich array of financial services, including commercial and personal insurance and commercial and personal lending.
For further information regarding Malvern Bancorp, Inc., please visit our web site at http://ir.malvernbancorp.com. For information regarding Malvern Bank, National Association, please visit our web site at http://www.mymalvernbank.com.
Forward-Looking Statements
The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company, including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, and shareholder value creation.
Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the effects of, and changes in, trade, monetary and fiscal policies and laws, including recent changes in interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the impact of competition and the acceptance of the Company’s products and services by new and existing customers; the impact of changes in financial services policies, laws and regulations; technological changes; any oversupply of inventory and deterioration in values of real estate in the markets in which the Company operates, both residential and commercial; the effect of changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, the Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters; possible other-than-temporary impairment of securities held by us; the effects of the Company’s lack of a widely-diversified loan portfolio, including the risks of geographic and industry concentrations; ability to attract deposits and other sources of liquidity; changes in the competitive environment among financial and bank holding companies and other financial service providers; unanticipated regulatory or judicial proceedings; and the Company’s ability to manage the risk involved in the foregoing. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company’s 2020 Annual Report on Form 10-K/A and Quarterly Reports on Form 10-Q filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).
Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus and its variants can be controlled and abated and when and how the economy may be fully reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we are subject to any of the following risks, any of which could continue to have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to continue to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may continue to decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0 percent, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our NIM and spread and reducing net income; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and FDIC premiums may increase if the agency experiences additional resolution costs.
The Company undertakes no obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, unless required by law.
MALVERN BANCORP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
| June 30, 2021 | September 30, 2020 | ||||||||
| (in thousands, except for share and per share data) | (unaudited) | ||||||||
| ASSETS | |||||||||
| Cash and due from depository institutions | $ | 90,441 | $ | 16,386 | |||||
| Interest-bearing deposits in depository institutions | 14,513 | 45,053 | |||||||
| Total cash and cash equivalents | 104,954 | 61,439 | |||||||
| Investment securities available for sale, at fair value (amortized cost of $34,261 and $31,658 at June 30, 2021 and September 30, 2020, respectively) | 34,502 | 31,541 | |||||||
| Investment securities held to maturity (fair value of $32,355 and $15,608 at June 30, 2021 and September 30, 2020, respectively) | 31,795 | 14,970 | |||||||
| Restricted stock, at cost | 7,896 | 9,622 | |||||||
| Loans receivable, net of allowance for loan losses | 940,735 | 1,026,894 | |||||||
| Other real estate owned | 4,961 | 5,796 | |||||||
| Accrued interest receivable | 3,370 | 3,677 | |||||||
| Operating lease right-of-use-assets | 2,168 | 2,638 | |||||||
| Property and equipment, net | 5,902 | 6,274 | |||||||
| Deferred income taxes, net | 3,389 | 3,680 | |||||||
| Bank-owned life insurance | 25,889 | 25,400 | |||||||
| Other assets | 20,183 | 16,344 | |||||||
| Total assets | $ | 1,185,744 | $ | 1,208,275 | |||||
| LIABILITIES | |||||||||
| Deposits: | |||||||||
| Non-interest bearing | $ | 53,365 | $ | 50,422 | |||||
| Interest-bearing | 854,339 | 840,484 | |||||||
| Total deposits | 907,704 | 890,906 | |||||||
| FHLB advances | 90,000 | 130,000 | |||||||
| Secured borrowings | — | 4,225 | |||||||
| Subordinated debt | 24,895 | 24,776 | |||||||
| Advances from borrowers for taxes and insurance | 2,502 | 1,741 | |||||||
| Accrued interest payable | 946 | 728 | |||||||
| Operating lease liabilities | 2,204 | 2,671 | |||||||
| Other liabilities | 9,301 | 12,635 | |||||||
| Total liabilities | 1,037,552 | 1,067,682 | |||||||
| 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; 7,816,832 and 7,622,316 issued and outstanding, respectively, at June 30, 2021, and 7,804,469 and 7,609,953 shares issued and outstanding, respectively, at September 30, 2020 | 76 | 76 | |||||||
| Additional paid in capital | 85,424 | 85,127 | |||||||
| Retained earnings | 66,486 | 60,388 | |||||||
| Unearned Employee Stock Ownership Plan (ESOP) shares | (937 | ) | (1,047 | ) | |||||
| Accumulated other comprehensive income (loss) | 6 | (1,088 | ) | ||||||
| Treasury stock, at cost: 194,516 shares at June 30, 2021 and September 30, 2020 | (2,863 | ) | (2,863 | ) | |||||
| Total shareholders’ equity | 148,192 | 140,593 | |||||||
| Total liabilities and shareholders’ equity | $ | 1,185,744 | $ | 1,208,275 | |||||
MALVERN BANCORP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||
| (in thousands, except for share data) | 2021 | 2020 | 2021 | 2020 | ||||||||
| (unaudited) | ||||||||||||
| Interest and Dividend Income | ||||||||||||
| Loans, including fees | $ | 8,895 | $ | 10,068 | $ | 28,040 | $ | 31,626 | ||||
| Investment securities, taxable | 378 | 253 | 1,046 | 699 | ||||||||
| Investment securities, tax-exempt | 30 | 27 | 77 | 100 | ||||||||
| Dividends, restricted stock | 110 | 124 | 370 | 494 | ||||||||
| Interest-bearing cash accounts | 6 | 26 | 21 | 1,048 | ||||||||
| Total Interest and Dividend Income | 9,419 | 10,498 | 29,554 | 33,967 | ||||||||
| Interest Expense | ||||||||||||
| Deposits | 1,446 | 2,876 | 5,508 | 10,236 | ||||||||
| Short-term borrowings | — | — | 48 | — | ||||||||
| Long-term borrowings | 461 | 608 | 1,614 | 2,270 | ||||||||
| Subordinated debt | 383 | 383 | 1,149 | 1,149 | ||||||||
| Total Interest Expense | 2,290 | 3,867 | 8,319 | 13,655 | ||||||||
| Net interest income | 7,129 | 6,631 | 21,235 | 20,312 | ||||||||
| Provision for Loan Losses | — | 435 | 550 | 3,210 | ||||||||
| Net Interest Income after Provision for Loan Losses | 7,129 | 6,196 | 20,685 | 17,102 | ||||||||
| Other Income | ||||||||||||
| Service charges and other fees | 344 | 195 | 1,010 | 1,058 | ||||||||
| Rental income-other | 55 | 54 | 163 | 163 | ||||||||
| Net gains on sale of investments | 165 | 1 | 779 | 181 | ||||||||
| Net gains on sale of loans | 65 | 11 | 743 | 14 | ||||||||
| Earnings on bank-owned life insurance | 164 | 128 | 489 | 380 | ||||||||
| Total Other Income | 793 | 389 | 3,184 | 1,796 | ||||||||
| Other Expense | ||||||||||||
| Salaries and employee benefits | 2,259 | 2,279 | 6,806 | 6,675 | ||||||||
| Occupancy expense | 546 | 576 | 1,656 | 1,749 | ||||||||
| Federal deposit insurance premium | 77 | 79 | 236 | 79 | ||||||||
| Advertising | 12 | 33 | 76 | 87 | ||||||||
| Data processing | 301 | 275 | 935 | 825 | ||||||||
| Professional fees | 841 | 524 | 2,388 | 1,467 | ||||||||
| Net other real estate owned expense | 835 | 29 | 866 | 99 | ||||||||
| Pennsylvania shares tax | 170 | 169 | 509 | 509 | ||||||||
| Other operating expenses | 791 | 720 | 2,395 | 2,254 | ||||||||
| Total Other Expense | 5,832 | 4,684 | 15,867 | 13,744 | ||||||||
| Income before income tax expense | 2,090 | 1,901 | 8,002 | 5,154 | ||||||||
| Income tax expense | 489 | 447 | 1,904 | 1,007 | ||||||||
| Net Income | $ | 1,601 | $ | 1,454 | $ | 6,098 | $ | 4,147 | ||||
| Earnings per common share | ||||||||||||
| Basic | $ | 0.21 | $ | 0.19 | $ | 0.81 | $ | 0.54 | ||||
| Diluted | $ | 0.21 | $ | 0.19 | $ | 0.81 | $ | 0.54 | ||||
| Weighted Average Common Shares Outstanding | ||||||||||||
| Basic | 7,545,371 | 7,538,375 | 7,533,516 | 7,622,820 | ||||||||
| Diluted | 7,546,200 | 7,538,375 | 7,534,068 | 7,622,820 | ||||||||
MALVERN BANCORP, INC., AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA
| Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||||
| (in thousands, except for share and per share data) (annualized where applicable) | 6/30/2021 | 3/31/2021 | 6/30/2020 | |||||||||||
| (unaudited) | ||||||||||||||
| Statements of Operations Data | ||||||||||||||
| Interest income | $ | 9,419 | $ | 9,539 | $ | 10,498 | ||||||||
| Interest expense | 2,290 | 2,737 | 3,867 | |||||||||||
| Net interest income | 7,129 | 6,802 | 6,631 | |||||||||||
| Provision for loan losses | - | - | 435 | |||||||||||
| Net interest income after provision for loan losses | 7,129 | 6,802 | 6,196 | |||||||||||
| Other income | 793 | 1,167 | 389 | |||||||||||
| Other expense | 5,832 | 5,063 | 4,684 | |||||||||||
| Income before income tax expense | 2,090 | 2,906 | 1,901 | |||||||||||
| Income tax expense | 489 | 682 | 447 | |||||||||||
| Net income | $ | 1,601 | $ | 2,224 | $ | 1,454 | ||||||||
| Earnings (per Common Share) | ||||||||||||||
| Basic | $ | 0.21 | $ | 0.30 | $ | 0.19 | ||||||||
| Diluted | $ | 0.21 | $ | 0.30 | $ | 0.19 | ||||||||
| Statements of Condition Data (Period-End) | ||||||||||||||
| Investment securities available for sale, at fair value | $ | 34,502 | $ | 28,899 | $ | 33,245 | ||||||||
| Investment securities held to maturity (fair value of $32,355, $26,367, and $16,507, respectively) | 31,795 | 25,834 | 15,921 | |||||||||||
| Loans, net of allowance for loan losses | 940,735 | 974,596 | 1,032,618 | |||||||||||
| Total assets | 1,185,744 | 1,206,419 | 1,208,070 | |||||||||||
| Deposits | 907,704 | 912,213 | 884,444 | |||||||||||
| FHLB advances | 90,000 | 110,000 | 130,000 | |||||||||||
| Subordinated debt | 24,895 | 24,855 | 24,737 | |||||||||||
| Shareholders' equity | 148,192 | 145,851 | 143,531 | |||||||||||
| Common Shares Dividend Data | ||||||||||||||
| Cash dividends | $ | - | $ | - | $ | - | ||||||||
| Weighted Average Common Shares Outstanding | ||||||||||||||
| Basic | 7,545,371 | 7,529,408 | 7,538,375 | |||||||||||
| Diluted | 7,546,200 | 7,530,151 | 7,538,375 | |||||||||||
| Operating Ratios | ||||||||||||||
| Return on average assets | 0.53% | 0.73% | 0.47% | |||||||||||
| Return on average equity | 4.35% | 6.14% | 4.06% | |||||||||||
| Average equity / average assets | 12.20% | 11.83% | 11.67% | |||||||||||
| Book value per common share (period-end) | $ | 19.44 | $ | 19.17 | $ | 18.86 | ||||||||
| Non-Financial Information (Period-End) | ||||||||||||||
| Common shareholders of record | 380 | 381 | 387 | |||||||||||
| Full-time equivalent staff | 80 | 81 | 88 | |||||||||||
Investor Contacts:
Joseph D. Gangemi
Corporate Investor Relations
610-695-3676
Investor Relations Contact:
Ronald Morales
610-695-3646
