PAOLI, Pa., July 29, 2015 (GLOBE NEWSWIRE) -- Malvern Bancorp, Inc. (NASDAQ:MLVF) (the "Company"), parent company of Malvern Federal Savings Bank (“MFSB” or the “Bank”), today reported operating results for the third quarter ended June 30, 2015. Net income amounted to $1.2 million, or $0.19 per share, for the quarter ended June 30, 2015, an increase of $814,000 or approximately 208.2 percent as compared with the net income of $391,000, or $0.06 per share, for the quarter ended June 30, 2014.
“Our third quarter and year-to-date earnings are strong and reflect increasing momentum as we continue to expand our banking relationships, improve fundamentals and move forward with our business model for the new Malvern. Third quarter performance reflects stable asset quality, a rise in net income and continued success in positioning the Company for growth. We are pleased with the significant improvements accomplished here since the transition began last September and with the financial returns delivered thus far,” said Anthony C. Weagley, Chief Executive Officer & President of Malvern Bancorp, Inc.
For the nine months ended June 30, 2015, net income amounted to $2.5 million, or $0.40 per share, compared with the net income of $29,000, or $0.00 per share, for the nine months ended June 30, 2014.
Highlights for the quarter include:
- Return on average assets (ROAA) was 0.77% for the three months ended June 30, 2015, compared to 0.27% a year earlier, and return on average equity (ROAE) rose to 6.01% for the three months ended June 30, 2015, compared with 2.05% for the three months ended June 30, 2014.
- Non-performing assets (“NPAs”) were at 0.44 percent of total assets at June 30, 2015, compared to 0.82 percent at June 30, 2014 and 0.80 percent at September 30, 2014. The allowance for loan losses as a percentage of total non-performing loans was 337.1 percent at June 30, 2015 compared to 157.1 percent at June 30, 2014 and 191.9 percent at September 30, 2014.
- The Company’s ratio of shareholders’ equity to total assets was 12.79 percent at June 30, 2015, compared to 13.26 percent at June 30, 2014, and 14.16 percent at September 30, 2014.
- Book value per common share amounted to $12.17 at June 30, 2015, compared to $11.69 at June 30, 2014 and $11.71 at September 30, 2014.
- The efficiency ratio, a non-GAAP measure, was 69.0 percent for the third quarter of fiscal 2015 on an annualized basis, compared to 92.6 percent in the third quarter of fiscal 2014 and 87.8 percent in the fourth quarter of fiscal 2014.
- The Company’s balance sheet reflected stable asset quality, and capital levels that exceeded accepted standards for a well-capitalized institution.
| Selected Financial Ratios | |||||||||||||||
| (unaudited; annualized where applicable) | |||||||||||||||
| As of or for the quarter ended: | 6/30/15 | 3/31/15 | 12/31/14 | 9/30/14 | 6/30/14 | ||||||||||
| Return on average assets | 0.77 | % | 0.64 | % | 0.22 | % | 0.21 | % | 0.27 | % | |||||
| Return on average equity | 6.01 | % | 5.05 | % | 1.65 | % | 1.53 | % | 2.05 | % | |||||
| Net interest margin (tax equivalent basis) | 2.61 | % | 2.58 | % | 2.61 | % | 2.70 | % | 2.76 | % | |||||
| Loans / deposits ratio | 84.54 | % | 85.57 | % | 87.61 | % | 94.10 | % | 88.61 | % | |||||
| Shareholders’ equity / total assets | 12.79 | % | 12.68 | % | 12.91 | % | 14.16 | % | 13.26 | % | |||||
| Efficiency ratio (1) | 69.0 | % | 76.6 | % | 87.5 | % | 87.8 | % | 92.6 | % | |||||
| Book value per common share | $ | 12.17 | $ | 12.20 | $ | 11.88 | $ | 11.71 | $ | 11.69 | |||||
_____________
(1) Information reconciling non-GAAP measures to GAAP measures is presented elsewhere in this press release.
Net Interest Income
For the three months ended June 30, 2015, total interest income on a fully tax equivalent basis increased $97,000 or 1.9 percent, to $5.2 million, compared to the three months ended June 30, 2014. Interest income rose in the quarter ended June 30, 2015, compared to the comparable period in fiscal 2014 primarily due to a $64.1 million increase in the average balance of our investment securities. Total interest expense increased by $36,000, or 2.9 percent, to $1.3 million, for the three months ended June 30, 2015, compared to the comparable period in fiscal 2014.
Net interest income on a fully tax equivalent basis was $3.9 million for the three months ended June 30, 2015, increasing $61,000, or 1.6 percent, from $3.8 million for the comparable three month period in fiscal 2014. The change for the three months ended June 30, 2015, primarily was the result of an increase in average interest earning assets, which increased $41.3 million. The net interest spread on an annualized tax-equivalent basis was at 2.46 percent and 2.62 percent for the three months ended June 30, 2015 and June 30, 2014, respectively. For the quarter ended June 30, 2015, the Company’s net interest margin on a tax equivalent basis decreased to 2.61 percent as compared to 2.76 percent for the same three month period in 2014. “We continue to carry excess liquidity in our cash pool. As we have discussed, this is a positive trend for the Company and positions the Company to fuel increased loan originations. We anticipate an improvement in margin as the cash is deployed to earning-assets,” commented Mr. Weagley.
The 2.9 percent increase in interest expense for the quarter primarily reflects higher volumes of borrowings. The average cost of funds was 1.02 percent for the quarter ended June 30, 2015 as compared to 1.05 percent for the same three month period in fiscal 2014 and on a linked sequential quarter decreased two basis points compared to the second quarter of fiscal 2015.
For the nine months ended June 30, 2015, total interest income on a fully tax equivalent basis decreased $160,000 or 1.0 percent, to $15.2 million, compared to $15.4 million for the nine months ended June 30, 2014. Total interest expense increased by $27,000, or 0.7 percent, to $3.9 million, for the nine months ended June 30, 2015, compared to the comparable period in fiscal 2014. Interest income declined for the nine months ended June 30, 2015, compared to the comparable period in fiscal 2014 primarily due to a $26.8 million decline in average loan balances. The decline in loan balances was primarily due to a 5.2 percent decrease in residential mortgage loans, a 3.2 percent decrease in construction and development loans, as well as a 8.8 percent decline in consumer loans. Even with the overall decline in the loan portfolio balance, there was a 6.2 percent growth in commercial loans. Compared to the same period in fiscal 2014, for the nine months ended June 30, 2015, average interest earning assets increased $22.2 million while net interest spread and margin decreased on an annualized tax-equivalent basis by 17 basis points and 15 basis points, respectively.
Earnings Summary for the Period Ended June 30, 2015
The following table presents condensed consolidated statements of operations data for the periods indicated.
| Condensed Consolidated Statements of Operations (unaudited) | ||||||||||||||||||||||
| (dollars in thousands, except per share data) | ||||||||||||||||||||||
| For the quarter ended: | 6/30/15 | 3/31/15 | 12/31/14 | 9/30/14 | 6/30/14 | |||||||||||||||||
| Net interest income | $ | 3,838 | $ | 3,836 | $ | 3,561 | $ | 3,617 | $ | 3,826 | ||||||||||||
| Provision for loan losses | — | — | 90 | 183 | — | |||||||||||||||||
| Net interest income after provision for loan losses | 3,838 | 3,836 | 3,471 | 3,434 | 3,826 | |||||||||||||||||
| Other income | 640 | 745 | 511 | 446 | 744 | |||||||||||||||||
| Other expense | 3,273 | 3,573 | 3,661 | 3,569 | 4,179 | |||||||||||||||||
| Income before income tax expense | 1,205 | 1,008 | 321 | 311 | 391 | |||||||||||||||||
| Income tax expense | - | - | - | 17 | - | |||||||||||||||||
| Net income | $ | 1,205 | $ | 1,008 | $ | 321 | $ | 294 | $ | 391 | ||||||||||||
| Earnings per common share: | ||||||||||||||||||||||
| Basic | $ | 0.19 | $ | 0.16 | $ | 0.05 | $ | 0.05 | $ | 0.06 | ||||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||||||
| Basic | 6,395,126 | 6,391,521 | 6,387,932 | 6,384,319 | 6,380,726 | |||||||||||||||||
Other Income
Other income decreased $104,000 for the third quarter of fiscal 2015 compared with the same period in fiscal 2014. During the third quarter of fiscal 2015, the Company recorded $145,000 in net gains on sales of investment securities compared to $69,000 net gains on sales of investment securities for the same period in fiscal 2014. Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $495,000 for the three months ended June 30, 2015 compared to other income of $675,000 for the three months ended June 30, 2014 and $446,000 for the three months ended September 30, 2014. Decreases in other income in the third quarter of fiscal 2015 when compared to the third quarter of fiscal 2014 (excluding securities gains) were primarily from a decrease of $267,000 in net gain on sale of loans, a decrease in bank owned life insurance income of $8,000 and a decrease in rental income of $2,000, partially offset by an increase of $56,000 in service charges on deposit accounts and a decrease of $41,000 in loss on disposal of fixed assets.
For the nine months ended June 30, 2015, total other income increased $187,000 compared to the same period in fiscal 2014, primarily as a result of $354,000 related to an increase in net gains on sales of investment securities, partially offset by decreased income on bank owned life insurance and net gain on sale of loans.
The following table presents the components of other income for the periods indicated.
| (in thousands, unaudited) | |||||||||||||||
| For the quarter ended: | 6/30/15 | 3/31/15 | 12/31/14 | 9/30/14 | 6/30/14 | ||||||||||
| Service charges on deposit accounts | $ | 286 | $ | 264 | $ | 270 | $ | 235 | $ | 230 | |||||
| Rental income – other | 61 | 64 | 64 | 64 | 63 | ||||||||||
| Net gains on sales of investments, net | 145 | 266 | 26 | - | 69 | ||||||||||
| Loss on disposal of fixed assets | - | - | - | - | (41 | ) | |||||||||
| Gain on sale of loans, net | 16 | 20 | 19 | 13 | 283 | ||||||||||
| Bank-owned life insurance | 132 | 131 | 132 | 134 | 140 | ||||||||||
| Total other income | $ | 640 | $ | 745 | $ | 511 | $ | 446 | $ | 744 | |||||
Other Expense
Total other expense for the third quarter of fiscal 2015 amounted to $3.3 million, which was approximately $300,000 or 8.4 percent lower than other expense for the three months ended March 31, 2015. The reduction in other expense in the third quarter of fiscal 2015 was primarily related to a decrease in employee salaries and benefits, which decreased $217,000 from the quarter ended March 31, 2015, as well as, a $70,000 decrease in professional fees, a $58,000 decrease in occupancy expense, a $70,000 decrease in other operating expenses and a $6,000 decrease in advertising. These reductions were partially offset by increases in federal deposit insurance premium of $19,000, data processing expense of $11,000 and other real estate owned expense of $91,000.
The decrease in other expense for the three months ended June 30, 2015, when compared to the quarter ended June 30, 2014, was approximately $906,000, or 21.7 percent. Decreases primarily reflected reductions in salaries and employee benefits of $662,000, primarily due to workforce reductions, professional fees of $99,000, primarily reflecting lower expenses related to loan workouts, occupancy expense of $164,000, primarily attributable to a decrease in rent expense of $69,000 and building and equipment expenses of $80,000 primarily due to elimination of expenses related to a branch closure in fiscal 2014 as well as a reduction in expenses associated with janitorial, snow removal and related activities, advertising expense of $47,000 and a $42,000 improvement in other real estate owned expense, net. These decreases were partially offset by increases of $72,000 in other operating expense, $19,000 in federal deposit insurance premium and $17,000 in data processing expense. The increase in other operating expense was primarily due to an increase of $70,000 in director compensation, a $45,000 increase in insurance and bond expense, a $57,000 increase in other operating expense and a $56,000 increase in amortization of mortgage servicing rights.
For the nine months ended June 30, 2015, total other expense was reduced by $2.6 million, or 19.6 percent, compared to the same fiscal period in 2014. Decreases primarily included $1.5 million in salaries and employee benefits primarily due to workforce reductions, $380,000 in occupancy expense, $276,000 in advertising costs, $497,000 in professional fees, $234,000 in other real estate owned expense and $18,000 in data processing. These decreases were partially offset by an increase in other operating expenses of $358,000 and a slight increase in federal deposit insurance premium of $2,000.
The following table presents the components of other expense for the periods indicated.
| (in thousands, unaudited) | ||||||||||||||||
| For the quarter ended: | 6/30/15 | 3/31/15 | 12/31/14 | 9/30/14 | 6/30/14 | |||||||||||
| Salaries and employee benefits | $ | 1,333 | $ | 1,550 | $ | 1,728 | $ | 1,636 | $ | 1,995 | ||||||
| Occupancy expense | 407 | 465 | 424 | 415 | 571 | |||||||||||
| Federal deposit insurance premium | 203 | 184 | 167 | 183 | 184 | |||||||||||
| Advertising | 54 | 60 | 85 | 86 | 101 | |||||||||||
| Data processing | 312 | 301 | 302 | 312 | 295 | |||||||||||
| Professional fees | 364 | 434 | 343 | 567 | 463 | |||||||||||
| Other real estate owned expense (income), net | 32 | (59 | ) | (36 | ) | (470 | ) | 74 | ||||||||
| Other operating expenses | 568 | 638 | 648 | 840 | 496 | |||||||||||
| Total other expense | $ | 3,273 | $ | 3,573 | $ | 3,661 | $ | 3,569 | $ | 4,179 | ||||||
Statement of Condition Highlights at June 30, 2015
Commenting on the balance sheet, Mr. Weagley indicated: "Our efforts to change the balance sheet continued during the third quarter. We continue to execute on our business plans and are positioning the Company to take advantage of the signs for growth we see in our markets and transition to a commercial bank balance sheet. The new Malvern brand has been successfully launched." Highlights as of June 30, 2015 included:
- Balance sheet strength, with total assets amounting to $624.2 million at June 30, 2015, increasing $82.0 million, or 15.1 percent compared to September 30, 2014 and increasing $46.2 million, or 8.0 percent compared to June 30, 2014.
- Net loans were $371.9 million at June 30, 2015, decreasing $14.2 million, or 3.7 percent and $20.7 million, or 5.3 percent, from September 30, 2014 and June 30, 2014, respectively.
- Deposits totaled $443.2 million at June 30, 2015, an increase of $30.3 million or 7.3 percent compared to September 30, 2014 and a decrease of $2.8 million, or 0.6 percent, since June 30, 2014. Total demand, savings, money market, and certificates of deposit less than $100,000, increased $16.7 million or 5.4 percent from September 30, 2014 and decreased $3.7 million or 1.1 percent from June 30, 2014. During fiscal 2015, we have focused on allowing our relatively higher costing non-household certificates of deposit to run off while attempting to increase our relatively lower costing core and commercial deposits as a source of funds.
- Borrowings totaled $93.0 million, $48.0 million and $48.0 million at June 30, 2015, September 30, 2014 and June 30, 2014, respectively.
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: | 6/30/15 | 3/31/15 | 12/31/14 | 9/30/14 | 6/30/14 | ||||||||||
| Cash and due from depository institutions | $ | 3,460 | $ | 1,056 | $ | 1,404 | $ | 1,203 | $ | 1,155 | |||||
| Interest bearing deposits in depository institutions | 20,833 | 50,587 | 46,648 | 17,984 | 41,300 | ||||||||||
| Investment securities, available for sale, at fair value | 130,509 | 113,557 | 135,786 | 100,943 | 104,985 | ||||||||||
| Investment securities held to maturity | 59,243 | 50,697 | — | — | — | ||||||||||
| Restricted stock, at cost | 4,369 | 4,602 | 3,805 | 3,503 | 3,495 | ||||||||||
| Loans held for sale | 657 | — | — | — | — | ||||||||||
| Loans receivable, net of allowance for loan losses | 371,897 | 377,340 | 383,389 | 386,074 | 392,582 | ||||||||||
| Other real estate owned | 1,366 | 1,430 | 1,494 | 1,964 | 1,645 | ||||||||||
| Accrued interest receivable | 2,404 | 2,168 | 1,623 | 1,322 | 1,300 | ||||||||||
| Property and equipment, net | 6,502 | 6,592 | 6,718 | 6,823 | 6,897 | ||||||||||
| Deferred income taxes | 2,816 | 2,940 | 2,419 | 2,376 | 2,575 | ||||||||||
| Bank-owned life insurance | 18,659 | 18,527 | 18,397 | 18,264 | 21,003 | ||||||||||
| Other assets | 1,529 | 1,610 | 1,487 | 1,808 | 1,151 | ||||||||||
| Total assets | $ | 624,244 | $ | 631,106 | $ | 603,170 | $ | 542,264 | $ | 578,088 | |||||
| Deposits | $ | 443,218 | $ | 444,146 | $ | 440,625 | $ | 412,953 | $ | 446,036 | |||||
| Borrowings | 93,000 | 98,000 | 78,000 | 48,000 | 48,000 | ||||||||||
| Other liabilities | 8,214 | 8,934 | 6,660 | 4,539 | 7,385 | ||||||||||
| Shareholders' equity | 79,812 | 80,026 | 77,885 | 76,772 | 76,667 | ||||||||||
| Total liabilities and shareholders’ equity | $ | 624,244 | $ | 631,106 | $ | 603,170 | $ | 542,264 | $ | 578,088 | |||||
The following table reflects the composition of the Company’s deposits as of the dates indicated.
| Deposits (unaudited) | |||||||||||||||
| (in thousands) | |||||||||||||||
| At quarter ended: | 6/30/15 | 3/31/15 | 12/31/14 | 9/30/14 | 6/30/14 | ||||||||||
| Demand: | |||||||||||||||
| Non-interest bearing | $ | 26,877 | $ | 25,111 | $ | 22,242 | $ | 23,059 | $ | 22,782 | |||||
| Interest-bearing | 85,085 | 87,921 | 86,948 | 81,921 | 88,072 | ||||||||||
| Savings | 44,949 | 44,848 | 44,747 | 44,917 | 46,645 | ||||||||||
| Money market | 78,963 | 70,066 | 69,553 | 59,529 | 61,291 | ||||||||||
| Time | 207,344 | 216,200 | 217,135 | 203,527 | 227,246 | ||||||||||
| Total deposits | $ | 443,218 | $ | 444,146 | $ | 440,625 | $ | 412,953 | $ | 446,036 | |||||
Loans
Total loans were $374.7 million at June 30, 2015. Mr. Weagley commented: “Outstanding loan balances remained relatively stable with a continued decrease in the residential components of our portfolios. Our focus will continue to be the commercial sectors of the loan portfolios for asset growth and new loan generation continues to grow underscoring the ability of the Company to gain traction and scale the Malvern balance sheet.” The Company had approximately $19.8 million in new loan originations and advances during the third quarter of fiscal 2015. This new loan activity and advances were offset by prepayments, scheduled payments, maturities and payoffs of $25.2 million. Average loans during the third quarter of fiscal 2015 totaled $379.0 million as compared to $412.5 million during the third quarter of fiscal 2014, representing an 8.1 percent decrease.
The Company’s total loans in the third quarter of 2015 decreased $5.4 million, to $374.7 million at June 30, 2015, from $380.1 million at March 31, 2015. The allowance for loan losses amounted to $4.6 million at both June 30, 2015 and March 31, 2015.
At the end of the third quarter of fiscal 2015, the loan portfolio remained weighted toward the core residential portfolio, with single-family residential real estate accounting for 58.5 percent of the loan portfolio, commercial loans accounting for 22.1 percent, and consumer loans representing 17.6 percent of the loan portfolio at such date. Total loans decreased $13.9 million, to $374.7 million at June 30, 2015 compared to $388.6 million at September 30, 2014. The $13.9 million reduction in the loan portfolio at June 30, 2015 compared to September 30, 2014, primarily reflected reductions of $12.1 million in residential mortgage loans and $6.3 million in consumer loans. These decreases were partially offset by a $4.8 million increase in commercial loans at June 30, 2015 as compared to September 30, 2014. At June 30, 2014, total loans were $395.2 million. The decreased loan balance in the loan portfolio at June 30, 2015 compared to June 30, 2014, primarily reflected reductions of $15.9 million in residential mortgage loans, $2.2 million in construction and development loans and $8.0 million in consumer loans, which were partially offset by a $5.5 million increase in commercial loans.
The following reflects the composition of the Company’s loan portfolio as of the dates indicated.
| Loans (unaudited) | |||||||||||||||
| (in thousands) | |||||||||||||||
| At quarter ended: | 6/30/15 | 3/31/15 | 12/31/14 | 9/30/14 | 6/30/14 | ||||||||||
| Residential mortgage | $ | 219,197 | $ | 225,232 | $ | 229,507 | $ | 231,324 | $ | 235,050 | |||||
| Construction and Development: | |||||||||||||||
| Residential and commercial | 6,751 | 5,922 | 6,039 | 5,964 | 7,484 | ||||||||||
| Land | 25 | 344 | - | 1,033 | 1,537 | ||||||||||
| Total construction and development | 6,776 | 6,266 | 6,039 | 6,997 | 9,021 | ||||||||||
| Commercial: | |||||||||||||||
| Commercial real estate | 67,617 | 68,858 | 67,274 | 71,579 | 69,788 | ||||||||||
| Multi-family | 5,451 | 5,508 | 5,450 | 1,032 | 2,086 | ||||||||||
| Other | 9,839 | 5,506 | 5,603 | 5,480 | 5,492 | ||||||||||
| Total commercial | 82,907 | 79,872 | 78,327 | 78,091 | 77,366 | ||||||||||
| Consumer: | |||||||||||||||
| Home equity lines of credit | 23,173 | 23,073 | 24,430 | 22,292 | 21,914 | ||||||||||
| Second mortgages | 40,121 | 43,013 | 45,051 | 47,034 | 48,866 | ||||||||||
| Other | 2,523 | 2,610 | 2,675 | 2,839 | 3,011 | ||||||||||
| Total consumer | 65,817 | 68,696 | 72,156 | 72,165 | 73,791 | ||||||||||
| Total loans | 374,697 | 380,066 | 386,029 | 388,577 | 395,228 | ||||||||||
| Deferred loan costs, net | 1,774 | 1,886 | 1,960 | 2,086 | 2,212 | ||||||||||
| Allowance for loan losses | (4,574 | ) | (4,612 | ) | (4,600 | ) | (4,589 | ) | (4,858 | ) | |||||
| Loans Receivable, net | $ | 371,897 | $ | 377,340 | $ | 383,389 | $ | 386,074 | $ | 392,582 | |||||
At June 30, 2015, the Company had $41.8 million in overall undisbursed loan commitments, which consisted primarily of unused commercial lines of credit, home equity lines of credit and available usage from active construction facilities. Included in the overall undisbursed commitments are the Company's "Approved, Accepted but Unfunded" pipeline, which includes approximately $7.4 million in construction and $20.6 million in commercial real estate loans and $2.0 million in residential mortgage loans expected to fund over the next 90 days. “We continue to see a surge in activity and growth in our commercial portfolio with our additional work in progress in current pipelines of $48.6 million,” said Mr. Weagley.
Asset Quality
Non-accrual loans were $1.4 million at June 30, 2015, as compared to $2.4 million at September 30, 2014 and $3.1 million at June 30, 2014. Other real estate owned, (“OREO”) was $1.4 million at June 30, 2015, as compared with $2.0 million at September 30, 2014 and $1.6 million at June 30, 2014, respectively. At July 1, 2015 the Company disposed of a residential property for $200,000, further reducing OREO to $1.2 million. Total performing troubled debt restructured loans were $109,000 at June 30, 2015, $1.0 million at September 30, 2014 and $1.2 million at June 30, 2014, respectively. The $900,000 decrease in troubled debt restructured loans at June 30, 2015 compared to September 30, 2014 was due to a commercial loan with an outstanding balance of approximately $900,000 being paid-off during the second quarter of fiscal 2015.
At June 30, 2015, non-performing assets totaled $2.7 million, or 0.44 percent of total assets, as compared with $4.4 million, or 0.80 percent, at September 30, 2014 and $4.7 million, or 0.82 percent, at June 30, 2014. The decrease from June 30, 2014 reflects the Company’s continued diligence to satisfactorily work out certain problem assets. The portfolio of remaining non-accrual loans at June 30, 2015 comprised five residential real estate loans with an aggregate outstanding balance of approximately $566,000, four consumer loans with an aggregate outstanding balance of approximately $182,000, one construction and development loan with an outstanding balance of $12,000 and four commercial loans with an aggregate outstanding balance of $597,000 that were on non-accrual status at June 30, 2015. Of the non-accrual loans, two commercial loans to one borrower, with an aggregate balance of $499,000 were restructured during the quarter ended June 30, 2015. These loans are classified as troubled debt restructured loans at June 30, 2015. The borrower is currently making payments as agreed under the terms of the restructuring of principal and interest payments.
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: | 6/30/15 | 3/31/15 | 12/31/14 | 9/30/14 | 6/30/14 | ||||||||||
| Non-accrual loans(1) | $ | 1,357 | $ | 1,826 | $ | 2,334 | $ | 2,391 | $ | 3,092 | |||||
| Loans 90 days or more past due and still accruing | — | — | — | — | — | ||||||||||
| Total non-performing loans | 1,357 | 1,826 | 2,334 | 2,391 | 3,092 | ||||||||||
| Other real estate owned | 1,366 | 1,430 | 1,494 | 1,964 | 1,645 | ||||||||||
| Total non-performing assets | $ | 2,723 | $ | 3,256 | $ | 3,828 | $ | 4,355 | $ | 4,737 | |||||
| Performing troubled debt restructured loans | $ | 109 | $ | 109 | $ | 1,007 | $ | 1,009 | $ | 1,246 | |||||
| Non-performing assets / total assets | 0.44 | % | 0.52 | % | 0.63 | % | 0.80 | % | 0.82 | % | |||||
| Non-performing loans / total loans | 0.36 | % | 0.48 | % | 0.60 | % | 0.62 | % | 0.78 | % | |||||
| Net charge-offs (recoveries) | $ | 38 | $ | (12 | ) | $ | 79 | $ | 452 | $ | (11 | ) | |||
| Net charge-offs (recoveries) / average loans(2) | 0.04 | % | 0.01 | % | 0.08 | % | 0.19 | % | 0.11 | % | |||||
| Allowance for loan losses / total loans | 1.22 | % | 1.21 | % | 1.19 | % | 1.18 | % | 1.23 | % | |||||
| Allowance for loan losses / non-performing loans | 337.07 | % | 252.57 | % | 197.09 | % | 191.93 | % | 157.1 | % | |||||
| Total assets | $ | 624,244 | $ | 631,106 | $ | 603,170 | $ | 542,264 | $ | 578,088 | |||||
| Total loans | 374,697 | 380,066 | 386,029 | 388,577 | 395,228 | ||||||||||
| Average loans | 378,953 | 384,915 | 389,544 | 395,067 | 412,457 | ||||||||||
| Allowance for loan losses | 4,574 | 4,612 | 4,600 | 4,589 | 4,858 | ||||||||||
_________________
(1) Eleven loans totaling approximately $1.2 million or (86.3%) of the total non-accrual loan balance were making payments at June 30, 2015.
(2) Annualized.
The allowance for loan losses at June 30, 2015 amounted to approximately $4.6 million, or 1.22 percent of total loans, compared to 1.18 percent and 1.23 percent of total loans at September 30, 2014 and June 30, 2014, respectively. The Company had no provision for loan losses during the quarter ended June 30, 2015 compared to $183,000 and zero, respectively, during the quarters ended September 30, 2014 and June 30, 2014. Provision expense was lower during the quarter ended June 30, 2015 due to a decline in charge-offs history, generally, and lower charge-offs during the quarter ended June 30, 2015.
Capital
At June 30, 2015, our total shareholders' equity amounted to $79.8 million, or 12.79 percent of total assets compared to $76.8 million at September 30, 2014 and $76.7 million at June 30, 2014. The Company’s book value per common share was $12.17 at June 30, 2015, compared to $11.71 at September 30, 2014 and $11.69 at June 30, 2014.
At June 30, 2015, the Bank’s ratio of tier 1 risk-based capital to risk-weighted assets was 17.32 percent and its ratio of tier 1 capital to adjusted total assets was 16.22 percent, compared to 20.75 percent and 19.50 percent, respectively, at September 30, 2014 and 19.96 percent and 18.71 percent, respectively, at June 30, 2014. At June 30, 2015, 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 for such gains.
| (in thousands) | |||||||||||||||
| For the quarter ended: | 6/30/15 | 3/31/15 | 12/31/14 | 9/30/14 | 6/30/14 | ||||||||||
| Other income | $ | 640 | $ | 745 | $ | 511 | $ | 446 | $ | 744 | |||||
| Less: Net investment securities gains | 145 | 266 | 26 | - | 69 | ||||||||||
| Other income, excluding net investment securities gains | $ | 495 | $ | 479 | $ | 485 | $ | 446 | $ | 675 | |||||
“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: | 6/30/15 | 3/31/15 | 12/31/14 | 9/30/14 | 6/30/14 | ||||||||||
| Other expense | $ | 3,273 | $ | 3,573 | $ | 3,661 | $ | 3,569 | $ | 4,179 | |||||
| Less: non-core items(1) | 244 | 242 | 110 | — | — | ||||||||||
| Other expense, excluding non-core items | $ | 3,029 | $ | 3,331 | $ | 3,551 | $ | 3,569 | $ | 4,179 | |||||
| Net interest income (tax equivalent basis) | $ | 3,898 | $ | 3,871 | $ | 3,575 | $ | 3,621 | $ | 3,837 | |||||
| Other income, excluding net investment securities gains | 495 | 479 | 485 | 446 | 675 | ||||||||||
| Total | $ | 4,393 | $ | 4,350 | $ | 4,060 | $ | 4,067 | $ | 4,512 | |||||
| Efficiency ratio | 69.0 | % | 76.6 | % | 87.5 | % | 87.8 | % | 92.6 | % | |||||
| (1) Included in non-core items are professional fees of approximately $52,000, advertising expense of $12,000 and other operating expense of $180,000 for the quarter ended June 30, 2015. For the quarter ended March 31, 2015, included in non-core items were professional fees of approximately $97,000, advertising expense of $11,000 and other operating expense of $134,000. | |||||||||||||||
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: | 6/30/15 | 3/31/15 | 12/31/14 | 9/30/14 | 6/30/14 | ||||||||||
| Efficiency ratio on a GAAP basis | 67.6 | % | 72.7 | % | 87.2 | % | 87.8 | % | 91.4 | % | |||||
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: | 6/30/15 | 3/31/15 | 12/31/14 | 9/30/14 | 6/30/14 | ||||||||||
| Net interest income (GAAP) | $ | 3,838 | $ | 3,836 | $ | 3,561 | $ | 3,617 | $ | 3,826 | |||||
| Tax-equivalent adjustment(1) | 60 | 35 | 14 | 4 | 11 | ||||||||||
| TE net interest income | $ | 3,898 | $ | 3,871 | $ | 3,575 | $ | 3,621 | $ | 3,837 | |||||
| Net interest income margin (GAAP) | 2.57 | % | 2.56 | % | 2.60 | % | 2.70 | % | 2.75 | % | |||||
| Tax-equivalent effect | 0.04 | 0.02 | 0.01 | — | 0.01 | ||||||||||
| Net interest margin (TE) | 2.61 | % | 2.58 | % | 2.61 | % | 2.70 | % | 2.76 | % | |||||
| ____________________ | |||||||||||||||
| (1) Reflects adjustment to GAAP interest income. | |||||||||||||||
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: | 6/30/15 | 3/31/15 | 12/31/14 | 9/30/14 | 6/30/14 | ||||||||||
| Investment securities | $ | 178,713 | $ | 151,746 | $ | 114,129 | $ | 103,458 | $ | 114,631 | |||||
| Loans | 378,953 | 384,915 | 389,544 | 395,067 | 412,457 | ||||||||||
| Allowance for loan losses | (4,649 | ) | (4,614 | ) | (4,600 | ) | (4,851 | ) | (4,829 | ) | |||||
| All other assets | 76,915 | 95,921 | 77,776 | 71,930 | 65,131 | ||||||||||
| Total assets | $ | 629,932 | $ | 627,968 | $ | 576,849 | $ | 565,604 | $ | 587,390 | |||||
| Non-interest bearing deposits | $ | 28,943 | $ | 27,002 | $ | 26,770 | $ | 26,057 | $ | 24,834 | |||||
| Interest-bearing deposits | 415,646 | 419,367 | 393,225 | 408,937 | 430,780 | ||||||||||
| Borrowings | 96,462 | 94,556 | 72,945 | 47,998 | 49,014 | ||||||||||
| Other liabilities | 8,674 | 7,272 | 6,151 | 5,549 | 6,551 | ||||||||||
| Shareholders’ equity | 80,207 | 79,771 | 77,758 | 77,063 | 76,211 | ||||||||||
| Total liabilities and shareholders’ equity | $ | 629,932 | $ | 627,968 | $ | 576,849 | $ | 565,604 | $ | 587,390 | |||||
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 Federal has been committed to helping people build prosperous communities as a trusted financial partner, forging lasting relationships through teamwork, respect and integrity. The Bank conducts business from its headquarters in Paoli, Pennsylvania, a suburb of Philadelphia, as well as seven other financial centers located throughout Chester and Delaware Counties, Pennsylvania. Its primary market niche is providing personalized service to its client base. The Bank focuses its lending activities on retail clients, commercial lending to small and medium-sized businesses, real estate developers and high net worth individuals.
For further information regarding Malvern Bancorp, Inc., 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) | June 30, 2015 | September 30, 2014 | |||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Cash and due from depository institutions | $ | 3,460 | $ | 1,203 | |||||||
| Interest bearing deposits in depository institutions | 20,833 | 17,984 | |||||||||
| Total cash and cash equivalents | 24,293 | 19,187 | |||||||||
| Investment securities available for sale, at fair value | 130,509 | 100,943 | |||||||||
| Investment securities held to maturity (fair value of $58,181 and $0) | 59,243 | — | |||||||||
| Restricted stock, at cost | 4,369 | 3,503 | |||||||||
| Loans held for sale | 657 | — | |||||||||
| Loans receivable, net of allowance for loan losses | 371,897 | 386,074 | |||||||||
| Other Real estate owned | 1,366 | 1,964 | |||||||||
| Accrued interest receivable | 2,404 | 1,322 | |||||||||
| Property and equipment, net | 6,502 | 6,823 | |||||||||
| Deferred income taxes, net | 2,816 | 2,376 | |||||||||
| Bank-owned life insurance | 18,659 | 18,264 | |||||||||
| Other assets | 1,529 | 1,808 | |||||||||
| Total assets | $ | 624,244 | $ | 542,264 | |||||||
| LIABILITIES | |||||||||||
| Deposits: | |||||||||||
| Non-interest bearing | $ | 26,877 | $ | 23,059 | |||||||
| Interest-bearing: | 416,341 | 389,894 | |||||||||
| Total deposits | 443,218 | 412,953 | |||||||||
| FHLB Advances | 93,000 | 48,000 | |||||||||
| Advances from borrowers for taxes and insurance | 4,245 | 1,786 | |||||||||
| Accrued interest payable | 346 | 149 | |||||||||
| Other liabilities | 3,623 | 2,604 | |||||||||
| Total liabilities | 544,432 | 465,492 | |||||||||
| SHAREHOLDERS’ EQUITY | |||||||||||
| Preferred stock, $0.01 par value, 10,000,000 shares, authorized, no issued | — | — | |||||||||
| Common stock, $0.01 par value, authorized 40,000,000 shares authorized, issued and outstanding: 6,558,473 shares at June 30, 2015 and September 30, 2014 | 66 | 66 | |||||||||
| Additional paid in capital | 60,346 | 60,317 | |||||||||
| Retained earnings | 22,650 | 20,116 | |||||||||
| Unearned Employee Stock Ownership Plan (ESOP) shares | (1,811 | ) | (1,922 | ) | |||||||
| Accumulated other comprehensive loss | (1,439 | ) | (1,805 | ) | |||||||
| Total shareholders’ equity | 79,812 | 76,772 | |||||||||
| Total liabilities and shareholders’ equity | $ | 624,244 | $ | 542,264 | |||||||
| MALVERN BANCORP, INC AND SUBSIDIARIES | ||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||
| (in thousands, except for share data) | 2015 | 2014 | 2015 | 2014 | ||||||||||||||
| (unaudited) | ||||||||||||||||||
| Interest and Dividend Income | ||||||||||||||||||
| Loans, including fees | $ | 4,028 | $ | 4,476 | $ | 12,356 | $ | 13,448 | ||||||||||
| Investment securities, taxable | 859 | 519 | 2,151 | 1,623 | ||||||||||||||
| Investment securities, tax-exempt | 172 | 29 | 305 | 137 | ||||||||||||||
| Dividends, restricted stock | 65 | 54 | 244 | 87 | ||||||||||||||
| Interest-bearing cash accounts | 15 | 13 | 62 | 40 | ||||||||||||||
| Total Interest and Dividend Income | 5,139 | 5,091 | 15,118 | 15,335 | ||||||||||||||
| Interest Expense | ||||||||||||||||||
| Deposits | 843 | 980 | 2,561 | 3,046 | ||||||||||||||
| Borrowings | 458 | 285 | 1,322 | 810 | ||||||||||||||
| Total Interest Expense | 1,301 | 1,265 | 3,883 | 3,856 | ||||||||||||||
| Net interest income | 3,838 | 3,826 | 11,235 | 11,479 | ||||||||||||||
| Provision for Loan Losses | — | — | 90 | 80 | ||||||||||||||
| Net Interest Income after Provision for Loan Losses | 3,838 | 3,826 | 11,145 | 11,399 | ||||||||||||||
| Other Income | ||||||||||||||||||
| Service charges and other fees | 286 | 230 | 820 | 712 | ||||||||||||||
| Rental income-other | 61 | 63 | 189 | 191 | ||||||||||||||
| Net gains on sales of investments, net | 145 | 69 | 437 | 83 | ||||||||||||||
| Loss on disposal of fixed assets | — | (41 | ) | — | (41 | ) | ||||||||||||
| Net gains on sale of loans, net | 16 | 283 | 55 | 339 | ||||||||||||||
| Earnings on bank-owned life insurance | 132 | 140 | 395 | 425 | ||||||||||||||
| Total Other Income | 640 | 744 | 1,896 | 1,709 | ||||||||||||||
| Other Expense | ||||||||||||||||||
| Salaries and employee benefits | 1,333 | 1,995 | 4,611 | 6,134 | ||||||||||||||
| Occupancy expense | 407 | 571 | 1,296 | 1,676 | ||||||||||||||
| Federal deposit insurance premium | 203 | 184 | 554 | 552 | ||||||||||||||
| Advertising | 54 | 101 | 199 | 475 | ||||||||||||||
| Data processing | 312 | 295 | 915 | 933 | ||||||||||||||
| Professional fees | 364 | 463 | 1,141 | 1,638 | ||||||||||||||
| Other real estate owned (income) expense, net | 32 | 74 | (63 | ) | 171 | |||||||||||||
| Other operating expenses | 568 | 496 | 1,854 | 1,496 | ||||||||||||||
| Total Other Expense | 3,273 | 4,179 | 10,507 | 13,075 | ||||||||||||||
| Income before income tax expense | 1,205 | 391 | 2,534 | 33 | ||||||||||||||
| Income tax expense | — | — | — | 4 | ||||||||||||||
| Net Income | $ | 1,205 | $ | 391 | $ | 2,534 | $ | 29 | ||||||||||
| Earnings per common share | ||||||||||||||||||
| Basic | $ | 0.19 | $ | 0.06 | $ | 0.40 | $ | 0.00 | ||||||||||
| Weighted Average Common Shares Outstanding | ||||||||||||||||||
| Basic | 6,395,126 | 6,380,726 | 6,391,514 | 6,377,114 | ||||||||||||||
| MALVERN BANCORP, INC AND SUBSIDIARIES | |||||||||
| SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA | |||||||||
| Three Months Ended | |||||||||
| (in thousands, except for share and per share data) (annualized where applicable) | 6/30/2015 | 3/31/2015 | 6/30/2014 | ||||||
| (unaudited) | |||||||||
| Statements of Operations Data | |||||||||
| Interest income | $ | 5,139 | $ | 5,166 | $ | 5,091 | |||
| Interest expense | 1,301 | 1,330 | 1,265 | ||||||
| Net interest income | 3,838 | 3,836 | 3,826 | ||||||
| Provision for loan losses | — | — | — | ||||||
| Net interest income after provision for loan losses | 3,838 | 3,836 | 3,826 | ||||||
| Other income | 640 | 745 | 744 | ||||||
| Other expense | 3,273 | 3,573 | 4,179 | ||||||
| Income before income tax expense | 1,205 | 1,008 | 391 | ||||||
| Income tax expense | — | — | — | ||||||
| Net income | $ | 1,205 | $ | 1,008 | $ | 391 | |||
| Earnings (per Common Share) | |||||||||
| Basic | $ | 0.19 | $ | 0.16 | $ | 0.06 | |||
| Statements of Condition Data (Period-End) | |||||||||
| Investment securities available for sale, at fair value | $ | 130,509 | $ | 113,557 | $ | 104,985 | |||
| Investment securities held to maturity (fair value of $58,181, $50,312 and $0) | 59,243 | 50,697 | — | ||||||
| Loans, net of allowance for loan losses | 371,897 | 377,340 | 392,582 | ||||||
| Total assets | 624,244 | 631,106 | 578,088 | ||||||
| Deposits | 443,218 | 444,146 | 446,036 | ||||||
| Borrowings | 93,000 | 98,000 | 48,000 | ||||||
| Shareholders' equity | 79,812 | 80,026 | 76,667 | ||||||
| Common Shares Dividend Data | |||||||||
| Cash dividends | $ | — | $ | — | $ | — | |||
| Weighted Average Common Shares Outstanding | |||||||||
| Basic | 6,395,126 | 6,391,521 | 6,380,726 | ||||||
| Operating Ratios | |||||||||
| Return on average assets | 0.77 | % | 0.64 | % | 0.27 | % | |||
| Return on average equity | 6.01 | % | 5.05 | % | 2.05 | % | |||
| Average equity / average assets | 12.73 | % | 12.70 | % | 12.97 | % | |||
| Book value per common share (period-end) | $ | 12.17 | $ | 12.20 | $ | 11.69 | |||
| Non-Financial Information (Period-End) | |||||||||
| Common shareholders of record | 488 | 494 | 461 | ||||||
| Full-time equivalent staff | 71 | 76 | 95 | ||||||