Exhibit 99.2
Investor Contact:
Joseph D. Gangemi
Senior Vice President & Chief Financial Officer
(610) 695-3676
Media Contact:
David Culver, VP Public Relations
Boyd Tamney Cross
(610) 254-7426
Malvern Bancorp, Inc. Reports Net Income of $1.3 million or $0.21 per Share for the First Quarter of Fiscal 2016, Representing a 318.7% Increase over the First Quarter of Fiscal 2015
PAOLI, PA., January 27, 2016 — Malvern Bancorp, Inc. (NASDAQ: MLVF)(the "Company"), parent company of Malvern Federal Savings Bank (“Malvern” or the “Bank”), today reported operating results for the first fiscal quarter ended December 31, 2015. Net income amounted to $1.3 million, or $0.21 per share, for the quarter ended December 31, 2015, an increase of $1.0 million or 318.7 percent as compared with the net income of $321,000, or $0.05 per share, for the quarter ended December 31, 2014.
“The Company continued to maintain pace with our business strategies and creating core strength. We are pleased with the first quarter results as they reflect positive trends in income, asset quality, and efficiency," said Anthony C. Weagley, Chief Executive Officer & President of Malvern Bancorp, Inc.
Highlights for the quarter include:
| · | Return on average assets (“ROAA”) was 0.79 percent for the three months ended December 31, 2015, compared to 0.22 percent a year earlier, and return on average equity (“ROAE”) rose to 6.55 percent for the three months ended December 31, 2015, compared with 1.65 percent for the three months ended December 31, 2014. |
| · | The Company originated $115.5 million in new loans in the first quarter which was offset in part with $45.0 million in payoffs, prepayments and maturities from its portfolio; new loan originations consisted of $3.1 million in residential mortgage loans, $100.9 million in commercial loans, $8.3 million in construction and development loans and $3.2 million in consumer loans. |
| · | Non-performing assets (“NPAs”) were at 0.27 percent of total assets at December 31, 2015, compared to 0.63 percent at December 31, 2014 and 0.39 percent at September 30, 2015. The allowance for loan losses as a percentage of total non-performing loans was 575.6 percent at December 31, 2015 compared to 197.1 percent at December 31, 2014 and 333.6 percent at September 30, 2015. |
| · | The Company’s ratio of shareholders’ equity to total assets was 11.37 percent at December 31, 2015, compared to 12.91 percent at December 31, 2014, and 12.41 percent at September 30, 2015. |
| · | Book value per common share amounted to $12.60 at December 31, 2015, compared to $11.88 at December 31, 2014 and $12.41 at September 30, 2015. |
| · | The efficiency ratio, a non-GAAP measure, was 71.3 percent for the first quarter of fiscal 2016 on an annualized basis, compared to 87.5 percent in the first quarter of fiscal 2015 and 73.9 percent in the fourth quarter of fiscal 2015. |
| · | The Company’s balance sheet reflected growth of $71.4 million at December 31, 2015 compared to September 30, 2015, coupled with 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: | | 12/31/15 | | | 9/30/15 | | | 6/30/15 | | | 3/31/15 | | | 12/31/14 | |
| Return on average assets | | | 0.79 | % | | | 0.72 | % | | | 0.77 | % | | | 0.64 | % | | | 0.22 | % |
| Return on average equity | | | 6.55 | % | | | 5.77 | % | | | 6.01 | % | | | 5.05 | % | | | 1.65 | % |
| Net interest margin (tax equivalent basis) (1) | | | 2.72 | % | | | 2.71 | % | | | 2.61 | % | | | 2.58 | % | | | 2.61 | % |
| Loans / deposits ratio | | | 86.90 | % | | | 84.68 | % | | | 84.54 | % | | | 85.57 | % | | | 87.61 | % |
| Shareholders’ equity / total assets | | | 11.37 | % | | | 12.41 | % | | | 12.79 | % | | | 12.68 | % | | | 12.91 | % |
| Efficiency ratio(1) | | | 71.3 | % | | | 73.9 | % | | | 69.0 | % | | | 76.6 | % | | | 87.5 | % |
| Book value per common share | | $ | 12.60 | | | $ | 12.41 | | | $ | 12.17 | | | $ | 12.20 | | | $ | 11.88 | |
| (1) | Information reconciling non-GAAP measures to GAAP measures is presented elsewhere in this press release. |
Net Interest Income
For the three months ended December 31, 2015, total interest income on a fully tax equivalent basis increased $934,000 or 19.4 percent, to $5.8 million, compared to the three months ended December 31, 2014. Interest income rose in the quarter ended December 31, 2015, compared to the comparable period in fiscal 2015 primarily due to a $31.1 million increase in the average balance of our loans and a $65.9 million increase in the average balance of our investment securities. Total interest expense increased by $224,000, or 17.9 percent, to $1.5 million, for the three months ended December 31, 2015, compared to the comparable period in fiscal 2015.
Net interest income on a fully tax equivalent basis was $4.3 million for the three months ended December 31, 2015, increasing $710,000, or 19.9 percent, from $3.6 million for the comparable three month period in fiscal 2015. The change for the three months ended December 31, 2015 primarily was the result of an increase in average balance of interest earning assets, which increased $80.9 million. The net interest spread on an annualized tax-equivalent basis was at 2.61 percent and 2.45 percent for the three months ended December 31, 2015 and December 31, 2014, respectively. For the quarter ended December 31, 2015, the Company’s net interest margin on a tax equivalent basis increased to 2.72 percent as compared to 2.61 percent for the same three month period in fiscal 2015. “We continued to carry healthy levels of cash, which is a positive trend as we generate funding for the Company designed to position the Company to fuel increased loan originations. During the first quarter we were able to add $115.5 million in gross loan originations to the balance sheet keeping pace with funding, “commented Mr. Weagley.
The 17.9 percent increase in interest expense for the first quarter of fiscal 2016 compared to the first fiscal quarter in 2015, primarily reflects higher volumes of borrowings. The increased borrowings for the period are tied primarily to an interest rate swap that was executed to improve interest rate risk. The average cost of funds was 1.05 percent for the quarter ended December 31, 2015 compared to 1.07 percent for the same three month period in fiscal 2015 and, on a linked sequential quarter basis, increased two basis points compared to the fourth quarter of fiscal 2015.
Earnings Summary for the Period Ended December 31, 2015
The following table presents condensed consolidated statements of income data for the periods indicated.
Condensed Consolidated Statements of Income (unaudited)
| (dollars in thousands, except per share data) | | | | | | | | | | | | | | | |
| For the quarter ended: | | 12/31/15 | | | 9/30/15 | | | 6/30/15 | | | 3/31/15 | | | 12/31/14 | |
| Net interest income | | $ | 4,211 | | | $ | 3,979 | | | $ | 3,838 | | | $ | 3,836 | | | $ | 3,561 | |
| Provision for loan losses | | | — | | | | — | | | | — | | | | — | | | | 90 | |
| Net interest income after provision for loan losses | | | 4,211 | | | | 3,979 | | | | 3,838 | | | | 3,836 | | | | 3,471 | |
| Other income | | | 558 | | | | 639 | | | | 640 | | | | 745 | | | | 511 | |
| Other expense | | | 3,425 | | | | 3,454 | | | | 3,273 | | | | 3,573 | | | | 3,661 | |
| Income before income tax expense | | | 1,344 | | | | 1,164 | | | | 1,205 | | | | 1,008 | | | | 321 | |
| Income tax expense | | | - | | | | - | | | | - | | | | - | | | | - | |
| Net income | | $ | 1,344 | | | $ | 1,164 | | | $ | 1,205 | | | $ | 1,008 | | | $ | 321 | |
| Earnings per common share: | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.21 | | | $ | 0.18 | | | $ | 0.19 | | | $ | 0.16 | | | $ | 0.05 | |
| Weighted average common shares outstanding: | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 6,402,332 | | | | 6,398,720 | | | | 6,395,126 | | | | 6,391,521 | | | | 6,387,932 | |
Other Income
Other income increased $47,000 for the first quarter of fiscal 2016 compared with the same period in fiscal 2015. During the first quarter of fiscal 2016, the Company recorded $131,000 in net gains on sales of investment securities compared to $26,000 in net gains on sales of investment securities for the same period in fiscal 2015. Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $427,000 for the three months ended December 31, 2015 compared to $485,000 for the three months ended December 31, 2014 and $561,000 for the three months ended September 30, 2015. Increase in other income in the first quarter of fiscal 2016 when compared to the first quarter of fiscal 2015 (excluding securities gains) was primarily from an increase of $15,000 in net gain on sale of loans, which was partially offset by a decrease in service charges of $59,000 and a decrease in rental income of $14,000.
The following table presents the components of other income for the periods indicated.
| (in thousands, unaudited) | | | | | | | | | | | | | | | |
| For the quarter ended: | | 12/31/15 | | | 9/30/15 | | | 6/30/15 | | | 3/31/15 | | | 12/31/14 | |
| Service charges on deposit accounts | | $ | 211 | | | $ | 169 | | | $ | 286 | | | $ | 264 | | | $ | 270 | |
| Rental income – other | | | 50 | | | | 60 | | | | 61 | | | | 64 | | | | 64 | |
| Net gains on sales of investments, net | | | 131 | | | | 78 | | | | 145 | | | | 266 | | | | 26 | |
| Gain on sale of loans, net | | | 34 | | | | 47 | | | | 16 | | | | 20 | | | | 19 | |
| Bank-owned life insurance | | | 132 | | | | 285 | | | | 132 | | | | 131 | | | | 132 | |
| Total other income | | $ | 558 | | | $ | 639 | | | $ | 640 | | | $ | 745 | | | $ | 511 | |
Other Expense
Total other expense for the first quarter of fiscal 2015 amounted to $3.4 million, which was approximately $29,000 or 0.8 percent lower than other expense for the three months ended September 30, 2015. The decrease in other expense in the first quarter of fiscal 2016 was primarily related to a decrease in federal deposit insurance premium of $30,000 from the quarter ended September 30, 2015, as well as a $10,000 decrease in advertising, a $24,000 decrease in data processing expense, a $30,000 decrease in professional fees and a $33,000 decrease in other operating expense and a $18,000 change in other real estate owned expense. These decreases were partially offset by increases in employee salaries and benefits of $112,000 and occupancy expense of $4,000.
The decrease in other expense for the three months ended December 31, 2015, when compared to the quarter ended December 31, 2014, was $236,000, or 6.5 percent. Decreases primarily reflected reductions in salaries and employee benefits of $229,000, a $1,000 decrease in occupancy expense, a $55,000 decrease in advertising expense, a $5,000 decrease in data processing expense and a $71,000 decrease in other operating expense. These decreases were partially offset by increases of $33,000 in federal deposit insurance premium, $57,000 in professional fees and a $35,000 change in other real estate owned income/expense, net.
The following table presents the components of other expense for the periods indicated.
| (in thousands, unaudited) | | | | | | | | | | | | | | | |
| For the quarter ended: | | 12/31/15 | | | 9/30/15 | | | 6/30/15 | | | 3/31/15 | | | 12/31/14 | |
| Salaries and employee benefits | | $ | 1,499 | | | $ | 1,387 | | | $ | 1,333 | | | $ | 1,550 | | | $ | 1,728 | |
| Occupancy expense | | | 423 | | | | 419 | | | | 407 | | | | 465 | | | | 424 | |
| Federal deposit insurance premium | | | 200 | | | | 230 | | | | 203 | | | | 184 | | | | 167 | |
| Advertising | | | 30 | | | | 40 | | | | 54 | | | | 60 | | | | 85 | |
| Data processing | | | 297 | | | | 321 | | | | 312 | | | | 301 | | | | 302 | |
| Professional fees | | | 400 | | | | 430 | | | | 364 | | | | 434 | | | | 343 | |
| Other real estate owned (recovery) expense, net | | | (1 | ) | | | 17 | | | | 32 | | | | (59 | ) | | | (36 | ) |
| Other operating expenses | | | 577 | | | | 610 | | | | 568 | | | | 638 | | | | 648 | |
| Total other expense | | $ | 3,425 | | | $ | 3,454 | | | $ | 3,273 | | | $ | 3,573 | | | $ | 3,661 | |
Statement of Condition Highlights at December 31, 2015
Commenting on the balance sheet, Mr. Weagley indicated: "Our efforts to change the balance sheet continued during the first quarter of fiscal 2016 with marked results in the gross amount of commercial loan generation. We continue to execute on our business plans and are positioning the Company to take advantage of the growth activity we are achieving in our markets, which includes our two new private banking / loan production offices in Villanova, PA and Morristown, New Jersey. Our business plans call for us to transition our balance sheet to be commercial bank – like in nature. The new Malvern brand has been successfully launched.”
Highlights as of December 31, 2015 included:
| · | Balance sheet strength, with total assets amounting to $727.1 million at December 31, 2015, increasing $71.5 million, or 10.9 percent compared to September 30, 2015. |
| · | On a linked sequential basis, the Company’s gross loans in the first quarter of fiscal 2016 increased $70.5 million, to $464.7 million at December 31, 2015, from $394.2 million at September 30, 2015. |
| · | Deposits totaled $534.7 million at December 31, 2015, an increase of $69.2 million or 14.9 percent compared to September 30, 2015 and an increase of $94.1 million, or 21.4 percent, since December 31, 2014. Total demand, savings, money market, and certificates of deposit less than $100,000 increased $28.5 million, or 8.1 percent, from September 30, 2015 and increased $62.1 million, or 19.5 percent, from December 31, 2014. |
| · | Borrowings totaled $103.0 million at December 31, 2015 and September 30, 2015. |
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: | | 12/31/15 | | | 9/30/15 | | | 6/30/15 | | | 3/31/15 | | | 12/31/14 | |
| Cash and due from depository institutions | | $ | 16,334 | | | $ | 16,026 | | | $ | 3,460 | | | $ | 1,056 | | | $ | 1,404 | |
Interest bearing deposits in depository
institutions | | | 40,036 | | | | 24,237 | | | | 20,833 | | | | 50,587 | | | | 46,648 | |
Investment securities, available for sale, at fair
value | | | 116,767 | | | | 128,354 | | | | 130,509 | | | | 113,557 | | | | 135,786 | |
| Investment securities held to maturity | | | 54,914 | | | | 57,221 | | | | 59,243 | | | | 50,697 | | | | — | |
| Restricted stock, at cost | | | 4,762 | | | | 4,765 | | | | 4,369 | | | | 4,602 | | | | 3,805 | |
| Loans held for sale | | | — | | | | — | | | | 657 | | | | — | | | | — | |
Loans receivable, net of allowance for loan
losses | | | 461,491 | | | | 391,307 | | | | 371,897 | | | | 377,340 | | | | 383,389 | |
| Other real estate owned | | | 1,168 | | | | 1,168 | | | | 1,366 | | | | 1,430 | | | | 1,494 | |
| Accrued interest receivable | | | 2,722 | | | | 2,484 | | | | 2,404 | | | | 2,168 | | | | 1,623 | |
| Property and equipment, net | | | 6,486 | | | | 6,535 | | | | 6,502 | | | | 6,592 | | | | 6,718 | |
| Deferred income taxes | | | 2,874 | | | | 2,874 | | | | 2,816 | | | | 2,940 | | | | 2,419 | |
| Bank-owned life insurance | | | 18,033 | | | | 17,905 | | | | 18,659 | | | | 18,527 | | | | 18,397 | |
| Other assets | | | 1,561 | | | | 2,814 | | | | 1,529 | | | | 1,610 | | | | 1,487 | |
| Total assets | | $ | 727,148 | | | $ | 655,690 | | | $ | 624,244 | | | $ | 631,106 | | | $ | 603,170 | |
| Deposits | | $ | 534,701 | | | $ | 465,522 | | | $ | 443,218 | | | $ | 444,146 | | | $ | 440,625 | |
| Borrowings | | | 103,000 | | | | 103,000 | | | | 93,000 | | | | 98,000 | | | | 78,000 | |
| Other liabilities | | | 6,789 | | | | 5,777 | | | | 8,214 | | | | 8,934 | | | | 6,660 | |
| Shareholders' equity | | | 82,658 | | | | 81,391 | | | | 79,812 | | | | 80,026 | | | | 77,885 | |
| Total liabilities and shareholders’ equity | | $ | 727,148 | | | $ | 655,690 | | | $ | 624,244 | | | $ | 631,106 | | | $ | 603,170 | |
The following table reflects the composition of the Company’s deposits as of the dates indicated.
| Deposits (unaudited) | | | | | | | | | | | | | | | |
| (in thousands) | | | | | | | | | | | | | | | |
| At quarter ended: | | 12/31/15 | | | 9/30/15 | | | 6/30/15 | | | 3/31/15 | | | 12/31/14 | |
| Demand: | | | | | | | | | | | | | | | | | | | | |
| Non-interest bearing | | $ | 28,260 | | | $ | 27,010 | | | $ | 26,877 | | | $ | 25,111 | | | $ | 22,242 | |
| Interest-bearing | | | 86,008 | | | | 82,897 | | | | 85,085 | | | | 87,921 | | | | 86,948 | |
| Savings | | | 45,312 | | | | 45,189 | | | | 44,949 | | | | 44,848 | | | | 44,747 | |
| Money market | | | 133,608 | | | | 108,706 | | | | 78,963 | | | | 70,066 | | | | 69,553 | |
| Time | | | 241,513 | | | | 201,720 | | | | 207,344 | | | | 216,200 | | | | 217,135 | |
| Total deposits | | $ | 534,701 | | | $ | 465,522 | | | $ | 443,218 | | | $ | 444,146 | | | $ | 440,625 | |
Loans
Total net loans were $461.5 million at December 31, 2015 compared to $391.3 million at September 30, 2015 for a net increase of $70.2 million. The allowance for loan losses amounted to $4.6 million and $4.7 million at December 31, 2015 and September 30, 2015, respectively. Average loans during the first quarter of fiscal 2016 totaled $420.6 million as compared to $389.5 million during the first quarter of fiscal 2015, representing an 8.0 percent increase.
At the end of first quarter of fiscal 2016, the loan portfolio remained weighted toward the core residential portfolio, with single-family residential real estate loans accounting for 45.5 percent of the loan portfolio, construction and development loans for 2.8 percent, commercial loans accounting for 38.6 percent, and consumer loans represented 13.1 percent of the loan portfolio at such date. Total gross loans increased $70.5 million, to $464.7 million at December 31, 2015 compared to $394.2 million at September 30, 2015. The $70.5 million increase in the loan portfolio at December 31, 2015 compared to September 30, 2015, primarily reflected an increase of $71.0 million in commercial loans and a $5.0 million increase in construction and development loans. These increases were partially offset by a $3.6 million decrease in residential mortgage loans and a $1.9 million reduction in consumer loans at December 31, 2015 as compared to September 30, 2015.
For the quarter ended December 31, 2015, the Company originated total new loan volume of $115.5 million, which was offset in part with payoffs, prepayments and maturities totaling $45.1 million. The payoffs were primarily contained to the consumer and residential portfolios. “Our current pipeline of loans has remained strong buttressed with our continued business development activity and overall growth in the portfolio has gained traction supported by slowing payoff activity. We anticipate continued growth as we move forward in the 2016 fiscal year,” commented Anthony C. Weagley.
The following reflects the composition of the Company’s loan portfolio as of the dates indicated.
| Loans (unaudited) | | | | | | | | | | | | | | | |
| (in thousands) | | | | | | | | | | | | | | | |
| At quarter ended: | | 12/31/15 | | | 9/30/15 | | | 6/30/15 | | | 3/31/15 | | | 12/31/14 | |
| Residential mortgage | | $ | 211,302 | | | $ | 214,958 | | | $ | 219,197 | | | $ | 225,232 | | | $ | 229,507 | |
| Construction and Development: | | | | | | | | | | | | | | | | | | | | |
| Residential and commercial | | | 6,007 | | | | 5,677 | | | | 6,751 | | | | 5,922 | | | | 6,039 | |
| Land | | | 6,804 | | | | 2,142 | | | | 25 | | | | 344 | | | | - | |
| Total construction and development | | | 12,811 | | | | 7,819 | | | | 6,776 | | | | 6,266 | | | | 6,039 | |
| Commercial: | | | | | | | | | | | | | | | | | | | | |
| Commercial real estate | | | 142,981 | | | | 87,686 | | | | 67,617 | | | | 68,858 | | | | 67,274 | |
| Multi-family | | | 10,549 | | | | 7,444 | | | | 5,451 | | | | 5,508 | | | | 5,450 | |
| Other | | | 25,975 | | | | 13,380 | | | | 9,839 | | | | 5,506 | | | | 5,603 | |
| Total commercial | | | 179,505 | | | | 108,510 | | | | 82,907 | | | | 79,872 | | | | 78,327 | |
| Consumer: | | | | | | | | | | | | | | | | | | | | |
| Home equity lines of credit | | | 23,207 | | | | 22,919 | | | | 23,173 | | | | 23,073 | | | | 24,430 | |
| Second mortgages | | | 35,533 | | | | 37,633 | | | | 40,121 | | | | 43,013 | | | | 45,051 | |
| Other | | | 2,299 | | | | 2,359 | | | | 2,523 | | | | 2,610 | | | | 2,675 | |
| Total consumer | | | 61,039 | | | | 62,911 | | | | 65,817 | | | | 68,696 | | | | 72,156 | |
| Total loans | | | 464,657 | | | | 394,198 | | | | 374,697 | | | | 380,066 | | | | 386,029 | |
| Deferred loan costs, net | | | 1,410 | | | | 1,776 | | | | 1,774 | | | | 1,886 | | | | 1,960 | |
| Allowance for loan losses | | | (4,576 | ) | | | (4,667 | ) | | | (4,574 | ) | | | (4,612 | ) | | | (4,600 | ) |
| Loans Receivable, net | | $ | 461,491 | | | $ | 391,307 | | | $ | 371,897 | | | $ | 377,340 | | | $ | 383,389 | |
At December 31, 2015, the Company had $85.2 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 $14.0 million in construction and $31.8 million in commercial real estate loans, $7.3 million in commercial term loans and lines of credit and $1.4 million in residential mortgage loans expected to fund over the next 90 days.
Asset Quality
Non-accrual loans were $795,000 at December 31, 2015, as compared to $1.4 million at September 30, 2015 and $2.3 million at December 31, 2014. Other real estate owned, (“OREO”) was $1.2 million at December 31, 2015 and September 30, 2015 and $1.5 million at December 31, 2014, respectively. Total performing troubled debt restructured loans were $1.6 million at December 31, 2015, $1.1 million at September 30, 2015 and $1.0 million at December 31, 2014, respectively. The $493,000 increase in performing troubled debt restructured loans at December 31, 2015 compared to September 30, 2015 was due to two commercial loans to one borrower, with an outstanding balance of approximately $493,000, being returned to accruing status during the first quarter of fiscal 2016.
At December 31, 2015, non-performing assets totaled $2.0 million, or 0.27 percent of total assets, as compared with $2.6 million, or 0.39 percent, at September 30, 2015 and $3.8 million, or 0.63 percent, at December 31, 2014. The decrease from December 31, 2014 reflects the Company’s continued diligence to satisfactorily work out certain problem assets. The portfolio of remaining non-accrual loans at December 31, 2015 was comprised of seven residential real estate loans with an aggregate outstanding balance of approximately $609,000, four consumer loans with an aggregate outstanding balance of approximately $174,000 and one construction and development loan with an outstanding balance of $12,000 that were on non-accrual status at December 31, 2015.
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: | | 12/31/15 | | | 9/30/15 | | | 6/30/15 | | | 3/31/15 | | | 12/31/14 | |
| Non-accrual loans(1) | | $ | 795 | | | $ | 1,399 | | | $ | 1,357 | | | $ | 1,826 | | | $ | 2,334 | |
| Loans 90 days or more past due and still accruing | | | — | | | | — | | | | — | | | | — | | | | — | |
| Total non-performing loans | | | 795 | | | | 1,399 | | | | 1,357 | | | | 1,826 | | | | 2,334 | |
| Other real estate owned | | | 1,168 | | | | 1,168 | | | | 1,366 | | | | 1,430 | | | | 1,494 | |
| Total non-performing assets | | $ | 1,963 | | | $ | 2,567 | | | $ | 2,723 | | | $ | 3,256 | | | $ | 3,828 | |
| Performing troubled debt restructured loans | | $ | 1,584 | | | $ | 1,091 | | | $ | 109 | | | $ | 109 | | | $ | 1,007 | |
| | | | | | | | | | | | | | | | | | | | | |
| Non-performing assets / total assets | | | 0.27 | % | | | 0.39 | % | | | 0.44 | % | | | 0.52 | % | | | 0.63 | % |
| Non-performing loans / total loans | | | 0.17 | % | | | 0.35 | % | | | 0.36 | % | | | 0.48 | % | | | 0.60 | % |
| Net charge-offs (recoveries) | | $ | 91 | | | $ | (93 | ) | | $ | 38 | | | $ | (12 | ) | | $ | 79 | |
| Net charge-offs (recoveries) / average loans(2) | | | 0.08 | % | | | (0.10 | )% | | | 0.04 | % | | | 0.01 | % | | | 0.08 | % |
| Allowance for loan losses / total loans | | | 0.98 | % | | | 1.18 | % | | | 1.22 | % | | | 1.21 | % | | | 1.19 | % |
| Allowance for loan losses / non-performing loans | | | 575.60 | % | | | 333.60 | % | | | 337.07 | % | | | 252.57 | % | | | 197.09 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 727,148 | | | $ | 655,690 | | | $ | 624,244 | | | $ | 631,106 | | | $ | 603,170 | |
| Total loans | | | 464,657 | | | | 394,198 | | | | 374,697 | | | | 380,066 | | | | 386,029 | |
| Average loans | | | 420,601 | | | | 383,092 | | | | 378,953 | | | | 384,915 | | | | 389,544 | |
| Allowance for loan losses | | | 4,576 | | | | 4,667 | | | | 4,574 | | | | 4,612 | | | | 4,600 | |
| (1) | Five loans totaling approximately $422,000 or (53.1%) of the total non-accrual loan balance were making payments at December 31, 2015. |
The allowance for loan losses at December 31, 2015 amounted to approximately $4.6 million, or 0.98 percent of total loans, compared to $4.7 million, or 1.18 percent of total loans at September 30, 2015. The Company had no provision for loan losses during the quarter ended December 31, 2015 and September 30, 2015 and $90,000 for the quarter ended December 31, 2014. Provision expense was lower during the quarter ended December 31, 2015 due to a decline in charge-offs history during the quarter ended December 31, 2015 and the unallocated portion of the reserve. However, given the recent loan growth and anticipated loan growth in subsequent quarters, the Company expects to incur charges to provision expense in future periods to raise the allowance for loan losses commensurate with loan growth and other risk factors.
Capital
At December 31, 2015, our total shareholders' equity amounted to $82.7 million, or 11.37 percent of total assets compared to $81.4 million at September 30, 2015. The Company’s book value per common share was $12.60 at December 31, 2015, compared to $12.41 at September 30, 2015.
At December 31, 2015, the Bank’s common equity tier 1 ratio was 13.94 percent, tier 1 leverage ratio was 10.43 percent, tier 1 risk-based capital ratio was 13.94 percent and the total risk-based capital ratio was 14.85 percent. At September 30, 2015, the Bank’s common equity tier 1 ratio was 15.90 percent, tier 1 leverage ratio was 10.80 percent, tier 1 risk-based capital ratio was 15.90 percent and the total risk-based capital ratio was 16.99 percent. At December 31, 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: | | 12/31/15 | | | 9/30/15 | | | 6/30/15 | | | 3/31/15 | | | 12/31/14 | |
| Other income | | $ | 558 | | | $ | 639 | | | $ | 640 | | | $ | 745 | | | $ | 511 | |
| Less: Net investment securities gains | | | 131 | | | | 78 | | | | 145 | | | | 266 | | | | 26 | |
Other income, excluding net investment
securities gains | | $ | 427 | | | $ | 561 | | | $ | 495 | | | $ | 479 | | | $ | 485 | |
“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: | | 12/31/15 | | | 930/15 | | | 6/30/15 | | | 3/31/15 | | | 12/31/14 | |
| Other expense | | $ | 3,425 | | | $ | 3,454 | | | $ | 3,273 | | | $ | 3,573 | | | $ | 3,661 | |
| Less: non-core items(1) | | | 67 | | | | 42 | | | | 244 | | | | 242 | | | | 110 | |
| Other expense, excluding non-core items | | $ | 3,358 | | | $ | 3,412 | | | $ | 3,029 | | | $ | 3,331 | | | $ | 3,551 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest income (tax equivalent basis) | | $ | 4,285 | | | $ | 4,056 | | | $ | 3,898 | | | $ | 3,871 | | | $ | 3,575 | |
Other income, excluding net investment
securities gains | | | 427 | | | | 561 | | | | 495 | | | | 479 | | | | 485 | |
| Total | | $ | 4,712 | | | $ | 4,617 | | | $ | 4,393 | | | $ | 4,350 | | | $ | 4,060 | |
| | | | | | | | | | | | | | | | | | | | | |
| Efficiency ratio | | | 71.3 | % | | | 73.9 | % | | | 69.0 | % | | | 76.6 | % | | | 87.5 | % |
| (1) | Included in non-core items are costs which include expenses related to the Company’s corporate restructuring initiatives, such as professional fees, litigation and settlement costs, severance costs, external payroll development costs related to such restructuring initiatives. The Company believes these adjustments are necessary to provide the most accurate measure of core operating results as a means to evaluate comparative results. |
The Company’s efficiency ratio, calculated on a GAAP basis without excluding net investment securities gains and without deducting non-core items, from other expense follows:
| For the quarter ended: | | 12/31/15 | | | 9/30/15 | | | 6/30/15 | | | 3/31/15 | | | 12/31/14 | |
| Efficiency ratio on a GAAP basis | | | 70.4 | % | | | 73.9 | % | | | 67.6 | % | | | 72.7 | % | | | 87.2 | % |
Net interest margin, which is non-interest income as a percentage of average interest-earning assets, is presented on a fully tax equivalent (“TE”) basis as we believe this non-GAAP measure is the preferred industry measurement for this item. The TE basis adjusts GAAP interest income and yields for the tax benefit of income on certain tax-exempt investments using the federal statutory rate of 34% for each period presented. Below is a reconciliation of GAAP net interest income to the TE basis and the related GAAP basis and TE net interest margins for the periods presented:
| (dollars in thousands) | | | | | | | | | | | | | | | |
| For the quarter ended: | | 12/31/15 | | | 9/30/15 | | | 6/30/15 | | | 3/31/15 | | | 12/31/14 | |
| Net interest income (GAAP) | | $ | 4,211 | | | $ | 3,979 | | | $ | 3,838 | | | $ | 3,836 | | | $ | 3,561 | |
| Tax-equivalent adjustment(1) | | | 74 | | | | 77 | | | | 60 | | | | 35 | | | | 14 | |
| TE net interest income | | $ | 4,285 | | | $ | 4,056 | | | $ | 3,898 | | | $ | 3,871 | | | $ | 3,575 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest income margin (GAAP) | | | 2.67 | % | | | 2.66 | % | | | 2.57 | % | | | 2.56 | % | | | 2.60 | % |
| Tax-equivalent effect | | | 0.05 | | | | 0.05 | | | | 0.04 | | | | 0.02 | | | | — | |
| Net interest margin (TE) | | | 2.72 | % | | | 2.71 | % | | | 2.61 | % | | | 2.58 | % | | | 2.61 | % |
| (1)Reflects tax-equivalent adjustment for tax exempt loans and investments. |
The following table sets forth the Company’s consolidated average statements of condition for the periods presented.
Condensed Consolidated Average Statements of Condition (unaudited)
| (in thousands) | | | | | | | | | | | | | | | |
| For the quarter ended: | | 12/31/15 | | | 9/30/15 | | | 6/30/15 | | | 3/31/15 | | | 12/31/14 | |
| Investment securities | | $ | 179,979 | | | $ | 188,424 | | | $ | 178,713 | | | $ | 151,746 | | | $ | 114,129 | |
| Loans | | | 420,601 | | | | 383,092 | | | | 378,953 | | | | 384,915 | | | | 389,544 | |
| Allowance for loan losses | | | (4,662 | ) | | | (4,596 | ) | | | (4,649 | ) | | | (4,614 | ) | | | (4,600 | ) |
| All other assets | | | 85,450 | | | | 82,892 | | | | 76,915 | | | | 95,921 | | | | 77,776 | |
| Total assets | | $ | 681,368 | | | $ | 649,812 | | | $ | 629,932 | | | $ | 627,968 | | | $ | 576,849 | |
| Non-interest bearing deposits | | $ | 28,604 | | | $ | 32,477 | | | $ | 28,943 | | | $ | 27,002 | | | $ | 26,770 | |
| Interest-bearing deposits | | | 460,999 | | | | 428,205 | | | | 415,646 | | | | 419,367 | | | | 393,225 | |
| Borrowings | | | 102,998 | | | | 101,802 | | | | 96,462 | | | | 94,556 | | | | 72,945 | |
| Other liabilities | | | 6,688 | | | | 6,576 | | | | 8,674 | | | | 7,272 | | | | 6,151 | |
| Shareholders’ equity | | | 82,079 | | | | 80,752 | | | | 80,207 | | | | 79,771 | | | | 77,758 | |
| Total liabilities and shareholders’ equity | | $ | 681,368 | | | $ | 649,812 | | | $ | 629,932 | | | $ | 627,968 | | | $ | 576,849 | |
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 Mainline. 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, through its Private Banking division and strategic partnership with Bell Rock Capital, Rehoboth, Delaware, provides personalized wealth management and advisory services to high net worth individuals and families. Our services include banking, liquidity management, investment services, 401 accounts and planning, custody, tailored lending, wealth planning, trust and fiduciary services, insurance, family wealth advisory services and philanthropic advisory services
For further information regarding Malvern Bancorp, Inc., please visit our web site athttp://ir.malvernfederal.com. For information regarding Malvern Federal Savings Bank, please visit our web site athttps://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) | | December 31,
2015 | | | September 30,
2015 | |
| (unaudited) | | | | | | |
| ASSETS | | | | | | | | |
| Cash and due from depository institutions | | $ | 16,334 | | | $ | 16,026 | |
| Interest bearing deposits in depository institutions | | | 40,036 | | | | 24,237 | |
| Total cash and cash equivalents | | | 56,370 | | | | 40,263 | |
| Investment securities available for sale, at fair value | | | 116,767 | | | | 128,354 | |
| Investment securities held to maturity (fair value of $53,931 and $56,825) | | | 54,914 | | | | 57,221 | |
| Restricted stock, at cost | | | 4,762 | | | | 4,765 | |
| Loans receivable, net of allowance for loan losses | | | 461,491 | | | | 391,307 | |
| Other real estate owned | | | 1,168 | | | | 1,168 | |
| Accrued interest receivable | | | 2,722 | | | | 2,484 | |
| Property and equipment, net | | | 6,486 | | | | 6,535 | |
| Deferred income taxes, net | | | 2,874 | | | | 2,874 | |
| Bank-owned life insurance | | | 18,033 | | | | 17,905 | |
| Other assets | | | 1,561 | | | | 2,814 | |
| Total assets | | $ | 727,148 | | | $ | 655,690 | |
| LIABILITIES | | | | | | | | |
| Deposits: | | | | | | | | |
| Non-interest bearing | | $ | 28,260 | | | $ | 27,010 | |
| Interest-bearing | | | 506,441 | | | | 438,512 | |
| Total deposits | | | 534,701 | | | | 465,522 | |
| FHLB Advances | | | 103,000 | | | | 103,000 | |
| Advances from borrowers for taxes and insurance | | | 2,790 | | | | 1,806 | |
| Accrued interest payable | | | 398 | | | | 396 | |
| Other liabilities | | | 3,601 | | | | 3,575 | |
| Total liabilities | | | 644,490 | | | | 574,299 | |
| SHAREHOLDERS’ EQUITY | | | | | | | | |
| Preferred stock, $0.01 par value, 10,000,000 shares, authorized, none issued | | | — | | | | — | |
| Common stock, $0.01 par value, authorized 40,000,000 shares authorized, issued and outstanding: 6,558,473 shares at December 31, 2015 and September 30, 2015 | | | 66 | | | | 66 | |
| Additional paid in capital | | | 60,387 | | | | 60,365 | |
| Retained earnings | | | 25,158 | | | | 23,814 | |
| Unearned Employee Stock Ownership Plan (ESOP) shares | | | (1,739 | ) | | | (1,775 | ) |
| Accumulated other comprehensive loss | | | (1,214 | ) | | | (1,079 | ) |
| Total shareholders’ equity | | | 82,658 | | | | 81,391 | |
| Total liabilities and shareholders’ equity | | $ | 727,148 | | | $ | 655,690 | |
MALVERN BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| | | Three Months Ended December 31, | |
| (in thousands, except for share data) | | 2015 | | | 2014 | |
| (unaudited) | | | | | | |
| Interest and Dividend Income | | | | | | | | |
| Loans, including fees | | $ | 4,545 | | | $ | 4,202 | |
| Investment securities, taxable | | | 875 | | | | 514 | |
| Investment securities, tax-exempt | | | 195 | | | | 37 | |
| Dividends, restricted stock | | | 54 | | | | 37 | |
| Interest-bearing cash accounts | | | 18 | | | | 23 | |
| Total Interest and Dividend Income | | | 5,687 | | | | 4,813 | |
| Interest Expense | | | | | | | | |
| Deposits | | | 964 | | | | 859 | |
| Borrowings | | | 512 | | | | 393 | |
| Total Interest Expense | | | 1,476 | | | | 1,252 | |
| Net interest income | | | 4,211 | | | | 3,561 | |
| Provision for Loan Losses | | | — | | | | 90 | |
Net Interest Income after Provision forLoan Losses | | | 4,211 | | | | 3,471 | |
| Other Income | | | | | | | | |
| Service charges and other fees | | | 211 | | | | 270 | |
| Rental income-other | | | 50 | | | | 64 | |
| Net gains on sales of investments | | | 131 | | | | 26 | |
| Net gains on sale of loans | | | 34 | | | | 19 | |
| Earnings on bank-owned life insurance | | | 132 | | | | 132 | |
| Total Other Income | | | 558 | | | | 511 | |
| Other Expense | | | | | | | | |
| Salaries and employee benefits | | | 1,499 | | | | 1,728 | |
| Occupancy expense | | | 423 | | | | 424 | |
| Federal deposit insurance premium | | | 200 | | | | 167 | |
| Advertising | | | 30 | | | | 85 | |
| Data processing | | | 297 | | | | 302 | |
| Professional fees | | | 400 | | | | 343 | |
| Other real estate owned recovery, net | | | (1 | ) | | | (36 | ) |
| Other operating expenses | | | 577 | | | | 648 | |
| Total Other Expense | | | 3,425 | | | | 3,661 | |
| Income before income tax expense | | | 1,344 | | | | 321 | |
| Income tax expense | | | — | | | | — | |
| Net Income | | $ | 1,344 | | | $ | 321 | |
| | | | | | | | | |
| Earnings per common share | | | | | | | | |
| Basic | | $ | 0.21 | | | $ | 0.05 | |
Weighted Average Common SharesOutstanding | | | | | | | | |
| Basic | | | 6,402,332 | | | | 6,387,932 | |
MALVERN BANCORP, INC AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA
| | | Three Months Ended | |
| (in thousands, except for share and per share data) (annualized where applicable) | | 12/31/2015 | | | 9/30/2015 | | | 12/31/2014 | |
| (unaudited) | | | | | | | | | |
| Statements of Operations Data | | | | | | | | | |
| Interest income | | $ | 5,687 | | | $ | 5,344 | | | $ | 4,813 | |
| Interest expense | | | 1,476 | | | | 1,365 | | | | 1,252 | |
| Net interest income | | | 4,211 | | | | 3,979 | | | | 3,561 | |
| Provision for loan losses | | | — | | | | — | | | | 90 | |
| Net interest income after provision for loan losses | | | 4,211 | | | | 3,979 | | | | 3,471 | |
| Other income | | | 558 | | | | 639 | | | | 511 | |
| Other expense | | | 3,425 | | | | 3,454 | | | | 3,661 | |
| Income before income tax expense | | | 1,344 | | | | 1,164 | | | | 321 | |
| Income tax expense | | | — | | | | — | | | | — | |
| Net income | | $ | 1,344 | | | $ | 1,164 | | | $ | 321 | |
| Earnings (per Common Share) | | | | | | | | | | | | |
| Basic | | $ | 0.21 | | | $ | 0.18 | | | $ | 0.05 | |
| Statements of Condition Data (Period-End) | | | | | | | | | | | | |
| Investment securities available for sale, at fair value | | $ | 116,767 | | | $ | 128,354 | | | $ | 135,786 | |
| Investment securities held to maturity (fair value of $53,931, $56,825 and $0) | | | 54,914 | | | | 57,221 | | | | — | |
| Loans, net of allowance for loan losses | | | 461,491 | | | | 391,307 | | | | 383,389 | |
| Total assets | | | 727,148 | | | | 655,690 | | | | 603,170 | |
| Deposits | | | 534,701 | | | | 465,522 | | | | 440,625 | |
| Borrowings | | | 103,000 | | | | 103,000 | | | | 78,000 | |
| Shareholders' equity | | | 82,658 | | | | 81,391 | | | | 77,885 | |
| Common Shares Dividend Data | | | | | | | | | | | | |
| Cash dividends | | $ | — | | | $ | — | | | $ | — | |
| Weighted Average Common Shares Outstanding | | | | | | | | | | | | |
| Basic | | | 6,402,332 | | | | 6,398,720 | | | | 6,387,932 | |
| Operating Ratios | | | | | | | | | | | | |
| Return on average assets | | | 0.79 | % | | | 0.72 | % | | | 0.22 | % |
| Return on average equity | | | 6.55 | % | | | 5.77 | % | | | 1.65 | % |
| Average equity / average assets | | | 12.05 | % | | | 12.43 | % | | | 13.48 | % |
| Book value per common share (period-end) | | $ | 12.60 | | | $ | 12.41 | | | $ | 11.88 | |
| Non-Financial Information (Period-End) | | | | | | | | | | | | |
| Common shareholders of record | | | 482 | | | | 483 | | | | 487 | |
| Full-time equivalent staff | | | 76 | | | | 71 | | | | 84 | |
