| | For further information contact: Ronald Anderson, President and CEO (610) 644-9400 |
Release Date: December 12, 2013
For Immediate Release
MALVERN BANCORP, INC. ANNOUNCES RESULTS FOR THE FOURTH QUARTER OF FISCAL 2013 AND FISCAL YEAR
Paoli, Pennsylvania – Malvern Bancorp, Inc. (the “Company”) (NASDAQ: MLVF), the holding company for Malvern Federal Savings Bank (the “Bank”), today announced a net loss for the three months ended September 30, 2013 of $18.8 million compared to net income of $217,000 for the three months ended September 30, 2012. On a per share basis, the Company is reporting a net loss of $2.95 per share for the quarter ended September 30, 2013, compared to net income of $0.03 per share (as adjusted for our “second-step” conversion) for the quarter ended September 30, 2012. Additionally, the Company is reporting a net loss of $18.8 million, or $2.96 per share, for the fiscal year ended September 30, 2013 compared to net income of $2.0 million, or $0.31 per share, for the fiscal year ended September 30, 2012 (as adjusted for our “second-step” conversion).
The Company’s loss for the fourth quarter of fiscal 2013 and the fiscal year ended September 30, 2013 was due primarily to our previously announced bulk sale of a substantial portion of our problem loans. The loans had an aggregate book balance of $20.4 million, before charge-offs, and were sold on October 4, 2013 at a loss of approximately $10.1 million. The subject loans were classified as held for sale at September 30, 2013, after taking charge-offs of $10.2 million in the aggregate to reflect the anticipated sale price of such loans. As a result, our consolidated statement of financial condition at September 30, 2013 includes $10.4 million in loans as held for sale. Such loans are not considered to be included in our loan portfolio at September 30, 2013. The aggregate book balance of the loans held for sale at September 30, 2013 included approximately $11.2 million of non-accruing loans, $3.4 million of performing troubled debt restructurings (“TDRs”) and $5.8 million of classified and other loans. As a result of the loan sale, the Company has significantly improved its credit quality metrics.
The provision for loan losses was $10.0 million for the quarter ended September 30, 2013, compared to $450,000 for the quarter ended September 30, 2012. For the fiscal year ended September 30, 2013, the provision for loan losses was $11.2 million, compared to $810,000 for the year ended September 30, 2012. The $11.2 million provision recorded in fiscal 2013 was primarily driven by $10.2 million of charge-offs taken in relation to our bulk sale of problem loans. Our total gross charge-offs for the year ended September 30, 2013 were $14.3 million, a $9.7 million, or 209.8%, increase compared to $4.6 million of charge-offs during the year ended September 30, 2012. As of September 30, 2013, the balance of the allowance for loan losses was $5.1 million, or 1.26% of gross loans in portfolio and 267.75% of non-accruing loans in portfolio, compared to an allowance for loan losses of $7.6 million or 1.64% of gross loans and 77.76% of non-accruing loans at September 30, 2012.
The Company’s net interest income for the three months ended September 30, 2013 was $3.8 million, a decrease of $289,000 compared to the three month period ended September 30, 2012. The Company's net interest rate spread of 2.40% and net interest margin of 2.54% for the three months ended September 30, 2013 decreased when compared to a net interest rate spread of 2.52% and a net interest margin of 2.66% for the fourth quarter of fiscal 2012. Similarly, the Company’s net interest income for the year ended September 30, 2013 was $15.4 million, a decrease of $2.0 million compared to the year ended September 30, 2012. The Company's net interest rate spread of 2.27% and net interest margin of 2.44% for the year ended September 30, 2013 decreased when compared to a net interest rate spread of 2.67% and a net interest margin of 2.79% for the year ended September 30, 2012.
The Company’s interest and dividend income decreased for the three month period ended September 30, 2013 by $748,000, or 12.3%, over the comparable fiscal 2012 period to $5.4 million. Interest income on loans decreased in the three months ended September 30, 2013 over the prior comparable period in fiscal 2012 by $987,000, or 17.3%. The decrease in interest earned on loans in the fourth quarter of fiscal 2013 was due primarily to a $45.6 million, or 9.8%, decrease in the average balance of our outstanding loans as well as a 40 basis point decrease in the average yield earned on our loan portfolio in the fourth quarter of fiscal 2013 compared to the fourth quarter of fiscal 2012. Interest income on investment securities increased by $213,000, or 53.9%, in the fourth quarter of fiscal 2013 compared to the comparable prior fiscal year period. The average yield on investment securities of 1.94% for the three months ended September 30, 2013 increased compared to 1.81% for the fourth quarter of fiscal 2012.
The Company’s interest and dividend income decreased for the fiscal year ended September 30, 2013 by $3.5 million, or 13.5%, over fiscal 2012 to $22.3 million. Interest income on loans decreased in the fiscal year ended September 30, 2013 over fiscal 2012 by $3.9 million, or 16.1%. The decrease in interest earned on loans in fiscal 2013 was due primarily to a $38.5 million, or 8.0%, decrease in the average balance of our outstanding loans as well as a 44 basis point decrease in the average yield earned on our loan portfolio in fiscal 2013 compared to fiscal 2012. Interest income on investment securities increased by $299,000, or 17.9%, in fiscal 2013 over fiscal 2012. The average yield on investment securities decreased eight basis points to 1.85% for the year ended September 30, 2013 from 1.93% for fiscal 2012. The average balance of our investment securities increased by $20.2 million during the fiscal year ended September 30, 2013 compared to the fiscal 2012.
The Company’s interest expense for the three month period ended September 30, 2013 was $1.5 million, a decrease of $459,000 from the three month period ended September 30, 2012. The reason for the decrease in interest expense in the fourth quarter of fiscal 2013 compared to the fourth quarter of fiscal 2012 was a 27 basis point decrease in average rate paid on total deposits together with a decrease in the average balance of our total deposits of $28.6 million, or 5.6%, in the fourth quarter of fiscal 2013 compared to fourth quarter of fiscal 2012 due primarily to a $20.3 million decrease in the average balance of certificates of deposit. The average rate paid on total deposits decreased to 0.95% for the fourth quarter of fiscal 2013 from 1.22% for the fourth quarter of fiscal 2012. Our expense on borrowings amounted to $388,000 in the fourth quarter of fiscal 2013 compared to $431,000 in the fourth quarter of fiscal 2012. The average balance of our borrowings decreased by $1.8 million in the fourth quarter of fiscal 2013 compared to the fourth quarter of fiscal 2012. The average rate paid on borrowed funds decreased to 3.35% in the fourth quarter of fiscal 2013 compared to 3.58% in the fourth quarter of fiscal 2012. During the fourth quarter of fiscal 2013 we prepaid $20.0 million in advances from the Federal Home Loan Bank which had a weighted average cost of 3.84%. We replaced a portion of the prepaid advances with the addition of $10.0 million of new FHLB advances in the fourth quarter of fiscal 2013 which have a weighted average cost of 1.06%.
The Company’s interest expense for the year ended September 30, 2013 was $6.9 million, a decrease of $1.5 million from the year ended September 30, 2012. The reason for the decrease in interest expense in fiscal 2013 compared to fiscal 2012 was a 24 basis point decrease in average rate paid on total deposits together with a decrease in the average balance of our total deposits of $17.7 million, or 3.4%, in fiscal 2013 compared to fiscal 2012 due primarily to a $11.2 million decrease in the average balance of money market accounts. The average rate paid on total deposits decreased to 1.05% for fiscal 2013 from 1.29% for fiscal 2012. Our expense on borrowings amounted to $1.7 million in fiscal 2013, which was relatively constant with the amount in fiscal 2012. The average balance of our borrowings decreased by $1.0 million in fiscal 2013 compared to fiscal 2012, and the average rate paid on borrowed funds decreased slightly to 3.50% in fiscal 2013 compared to 3.54% in fiscal 2012.
The Company’s other, or non-interest, income decreased by $1,000, to $485,000 for the three months ended September 30, 2013 compared to the three months ended September 30, 2012. The decrease in other income during the fourth quarter of fiscal 2013 was due to a $24,000 net loss on sale of investments, partially offset by a $55,000 increase in service charges and other fees, a $20,000 increase in earnings on bank-owned life insurance (“BOLI”) and a $34,000 increase in net gain on sale of loans.
The Company’s other, or non-interest, income increased by $433,000, or 17.9%, to $2.9 million for the year ended September 30, 2013 compared to $2.4 million for the year ended September 30, 2012. The increase in other income during fiscal 2013 was primarily due to a non-recurring, tax free death benefit of approximately $596,000 received pursuant to BOLI. In addition, we sold approximately $17.3 million in fixed-rate residential mortgage loans and $10.1 million in mortgage backed securities in a bulk sale in the secondary market which resulted in a net gain of approximately $366,000 during fiscal 2013. Also, our gain on sale of investments in fiscal 2013 decreased by $272,000 compared to fiscal 2012, and we recognized a $416,000 loss on the sale of a $2.1 million commercial real estate loan which had been classified as substandard during the year ended September 30, 2013.
The Company’s other, or non-interest, expense increased by $2.5 million, or 64.4%, to $6.5 million in the quarter ended September 30, 2013 compared to $3.9 million for the quarter ended September 30, 2012. The increase in other expenses in the fourth quarter of fiscal 2013 compared to the fourth quarter of fiscal 2012 was due primarily to the $1.5 million in FHLB pre-payment penalties recognized, a $423,000 increase in other real estate owned (“REO”) expense, a $371,000 increase in salaries and employee benefits and a $205,000 increase in professional fees. For the fourth quarter of fiscal 2013, the Company had income tax expense of $6.6 million compared to $8,000 in the fourth quarter of fiscal 2012. The increased income tax expense for the three months ended September 30, 2013 was primarily due to $6.7 million in charges taken for our deferred tax asset (“DTA”) valuation allowance.
The Company’s other, or non-interest, expenses increased by $3.4 million, or 20.6%, to $19.8 million for the year ended September 30, 2013 compared to $16.4 million for the year ended September 30, 2012. The increase in other expenses in fiscal 2013 compared to fiscal 2012 was due primarily to the $1.5 million in FHLB pre-payment penalties recognized as well as a $1.1 million increase in salaries and employee benefits. The increase in salaries and employee benefits expense during the year ended September 30, 2013 primarily reflects an increase in the number of employees in our secondary market program as well as the increase in support staff in the credit review department and mortgage loan department. There was an increase of $283,000 in professional fees and a $302,000 increase in REO expense in fiscal 2013 compared to fiscal 2012. For fiscal 2013, the Company had an income tax expense of $6.0 million compared to income tax expense of $628,000 for fiscal 2012.
The Company’s total assets decreased $110.3 million or 15.5% to $601.6 million at September 30, 2013 compared to $711.8 million at September 30, 2012. The decrease was primarily due to a $108.2 million or 82.0% decrease in cash and cash equivalents and a $55.1 million or 12.1% reduction in net loans receivable. These decreases were partially offset by a $44.2 million or 54.9% increase in investment securities and a $6.1 million increase in bank owned life insurance. The decrease in cash and cash equivalents at September 30, 2013 compared to September 30, 2012 was due to a $20.8 million refund of excess stock subscriptions received in our second-step conversion and stock offering, the utilization of cash to purchase additional investment securities and to prepay $20.0 million in advances from the FHLB during fiscal 2013. We also replaced a portion of the prepaid advances with the addition of $10.0 million of new FHLB advances in fiscal 2013. The $55.1 million decrease in net portfolio loans receivable was due primarily to the transfer of a net of $10.4 million of loans (after an aggregate of $10.2 million in charge-offs) to held for sale status at September 30, 2013 as well as normal amortization and prepayments of our loans in portfolio. During fiscal 2013, we recorded a $41.6 million decline in our portfolio of commercial real estate loans, a $13.8 million decrease in our portfolio of residential and commercial construction and development loans as well as an $11.2 million decrease in consumer second mortgage loans.
Our total liabilities at September 30, 2013, were $526.1 million compared to $649.2 million at September 30, 2012. The $123.0 million, or 19.0% decrease in total liabilities was due primarily to the elimination of the $56.7 million stock subscription escrow, reflecting the closing of our second-step conversion on October 11, 2012, and a $56.4 million decrease in total deposits. Our total deposits were $484.6 million at September 30, 2013 compared to $541.0 million at September 30, 2012. There was a $10.1 million decrease in our FHLB advances for fiscal 2013. The decrease in FHLB advances was due to prepaying $20.0 million in advances during the month of September 2013, which was partially offset by a $10.0 million purchase in lower costing advances during fiscal 2013.
Shareholders’ equity increased by $12.8 million to $75.4 million at September 30, 2013 compared to $62.6 million at September 30, 2012. The increase was due to the $34.7 million in net proceeds received from the stock offering undertaken as part of the “second-step” conversion of the Bank from the mutual holding company structure to the stock holding company structure, which was completed on October 11, 2012, partially offset by the $18.8 million in net loss for fiscal 2013. Our ratio of equity to assets was 12.54% at September 30, 2013.
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. The Bank conducts business from its headquarters in Paoli, Pennsylvania, a suburb of Philadelphia, as well as eight other financial centers located throughout Chester and Delaware County, Pennsylvania.
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. | | | | | | |
| SELECTED FINANCIAL AND OTHER DATA (unaudited) | | | | | | |
| | | | | | | |
| | | At September 30, 2013 | | | At September 30, 2012 | |
| | | (Dollars in thousands) | |
| Selected Financial Condition Data: | | | | | | |
| Total assets | | $ | 601,554 | | | $ | 711,812 | |
| Loans receivable, net | | | 401,857 | | | | 457,001 | |
| Loans held for sale | | | 10,367 | | | | - | |
| Securities available for sale | | | 124,667 | | | | 80,508 | |
| FHLB borrowings | | | 38,000 | | | | 48,085 | |
| Deposits | | | 484,596 | | | | 540,988 | |
| Shareholders’ equity | | | 75,406 | | | | 62,636 | |
| Total liabilities | | | 526,148 | | | | 649,176 | |
| Allowance for loan losses | | | 5,090 | | | | 7,581 | |
| Non-accrual loans | | | 1,901 | | | | 9,749 | |
| Non-performing assets | | | 5,863 | | | | 14,343 | |
| Performing troubled debt restructurings | | | 1,346 | | | | 8,187 | |
| Non-performing assets and performing troubled debt restructurings | | | 7,209 | | | | 22,530 | |
| | | Three Months Ended September 30, | |
| | | | 2013 | | | | 2012 | |
| | | (Dollars in thousands, except per share data) | |
| Selected Operating Data: | | | | | | | | |
| Total interest and dividend income | | $ | 5,360 | | | $ | 6,108 | |
| Total interest expense | | | 1,533 | | | | 1,992 | |
| Net interest income | | | 3,827 | | | | 4,116 | |
| Provision for loan losses | | | 9,980 | | | | 450 | |
| Net interest (loss) income after provision for loan losses | | | (6,153 | ) | | | 3,666 | |
| Total other income | | | 485 | | | | 486 | |
| Total other expense | | | 6,454 | | | | 3,927 | |
| Income tax expense | | | 6,648 | | | | 8 | |
| Net (loss) income | | $ | (18,770 | ) | | $ | 217 | |
| Net (loss) earnings per share* | | $ | (2.95 | ) | | $ | 0.03 | |
| Dividends declared per share | | $ | - | | | $ | - | |
| ______________________ | | | | | | | | |
*Net earnings per share for the prior period has been adjusted to reflect the impact of the second-step conversion and reorganization of the Company, which was completed on October 11, 2012. | |
| | | Year Ended September 30, | |
| | | | 2013 | | | | 2012 | |
| | | (Dollars in thousands, except per share data) | |
| Selected Operating Data: | | | | | | | | |
| Total interest and dividend income | | $ | 22,301 | | | $ | 25,775 | |
| Total interest expense | | | 6,944 | | | | 8,412 | |
| Net interest income | | | 15,357 | | | | 17,363 | |
| Provision for loan losses | | | 11,235 | | | | 810 | |
| Net interest income after provision for loan losses | | | 4,122 | | | | 16,553 | |
| Total other income | | | 2,860 | | | | 2,427 | |
| Total other expense | | | 19,775 | | | | 16,393 | |
| Income tax expense | | | 6,010 | | | | 628 | |
| Net (loss) income | | $ | (18,803 | ) | | $ | 1,959 | |
| Net (loss) earnings per share* | | $ | (2.96 | ) | | $ | 0.31 | |
| Dividends declared per share | | $ | - | | | $ | - | |
| ______________________ | | | | | | | | |
*Net earnings per share for the prior period has been adjusted to reflect the impact of the second-step conversion and reorganization of the Company, which was completed on October 11, 2012. | |
| | | Three Months Ended September 30, | | | Year Ended September 30, | |
| | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
Selected Financial Ratios and Other Data(1) | | | | | | | | | | | | |
| Selected Operating Ratios: | | | | | | | | | | | | |
| Average yield on interest-earning assets | | | 3.56 | % | | | 3.95 | % | | | 3.54 | % | | | 4.15 | % |
| Average rate on interest-bearing liabilities | | | 1.16 | | | | 1.43 | | | | 1.27 | | | | 1.48 | |
Net interest rate spread(2) | | | 2.40 | | | | 2.52 | | | | 2.27 | | | | 2.67 | |
Net interest margin(3) | | | 2.54 | | | | 2.66 | | | | 2.44 | | | | 2.79 | |
| Total non-interest expense to average assets | | | 3.98 | | | | 2.40 | | | | 2.93 | | | | 2.50 | |
Efficiency ratio(4) | | | 149.68 | | | | 85.33 | | | | 108.55 | | | | 82.83 | |
| Return on average assets | | | (11.57 | ) | | | 0.13 | | | | (2.79 | ) | | | 0.30 | |
| Return on average equity | | | (82.74 | ) | | | 1.38 | | | | (20.24 | ) | | | 3.15 | |
| | | | | | | | | | | | | | | | | |
Asset Quality Ratios(5): | | | | | | | | | | | | | | | | |
| Non-accrual loans as a percent of total loans receivable | | | 0.47 | % | | | 2.11 | % | | | 0.47 | % | | | 2.11 | % |
| Non-performing assets as a percent of total assets | | | 0.97 | | | | 2.01 | | | | 0.97 | | | | 2.01 | |
Non-performing assets and performing troubled debt restructurings as a percent of total assets | | | 1.20 | | | | 3.17 | | | | 1.20 | | | | 3.17 | |
Allowance for loan losses as a percent of non-accrual loans | | | 267.75 | | | | 77.76 | | | | 267.75 | | | | 77.76 | |
| | | | | | | | | | | | | | | | | |
Capital Ratios(5): | | | | | | | | | | | | | | | | |
| Total risk-based capital to risk weighted assets | | | 18.97 | % | | | 14.22 | % | | | 18.97 | % | | | 14.22 | % |
| Tier 1 risk based capital to risk weighted assets | | | 17.72 | | | | 12.96 | | | | 17.72 | | | | 12.96 | |
| Tangible capital to tangible assets | | | 10.91 | | | | 7.70 | | | | 10.91 | | | | 7.70 | |
| Tier 1 leverage (core) capital to adjusted tangible assets | | | 10.91 | | | | 7.70 | | | | 10.91 | | | | 7.70 | |
| Shareholders’ equity to total assets | | | 12.54 | | | | 8.80 | | | | 12.54 | | | | 8.80 | |
| | | | | | | | | | | | | | | | | |
| ___________________________ | | | | | | | | | | | | | | | | |
| (1) Ratios have been annualized where appropriate. | |
(2) Net interest rate spread represents the difference between the weighted average yield on interest earning assets and the weighted average cost of interest bearing liabilities. | |
| (3) Net interest margin represents net interest income divided by average interest-earning assets. | |
| (4) The efficiency ratio represents the ratio of non-interest expense divided by net interest income and total other income. | |
(5) Asset quality ratios are end of period ratios. Capital ratios are end of period ratios and are at Bank level except for shareholders’ equity to total assets. | |
