Malvern Bancorp, Inc. Reports Second Fiscal Quarter Results

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| Source: Malvern Bancorp, Inc.

PAOLI, Pa., April 25, 2018 (GLOBE NEWSWIRE) -- Malvern Bancorp, Inc. (NASDAQ:MLVF) (the "Company"), parent company of Malvern Bank, National Association (“Malvern” or the “Bank”), today reported operating results for the second fiscal quarter ended March 31, 2018.   Net income amounted to $2.0 million or $0.31 per fully diluted common share, for the quarter ended March 31, 2018, an increase of $0.8 million, or 72.5 percent, as compared with net income of $1.2 million, or $0.18 per fully diluted common share, for the quarter ended March 31, 2017. 

For the six months ended March 31, 2018, net income amounted to $2.4 million, or $0.38 per fully diluted common share, compared with net income of $2.1 million, or $0.33 per fully diluted common share, for the six months ended March 31, 2017.

“We see this as a strong quarter with fundamental strength. Our results for the period reflected a set of positive factors, including strong loan growth, rebounding from the prior quarter, and strong forward momentum for continued loan growth, a widening of the net interest margin, despite a high liquidity pool, favorable credit results, and continued management of operating overhead” indicated Anthony C. Weagley, President and Chief Executive Officer. 

Highlights for the quarter include:

  • Return on average assets (“ROAA”) was 0.77 percent for the three months ended March 31, 2018, compared to 0.51 percent for the three months ended March 31, 2017, and return on average equity (“ROAE”) was 7.71 percent for the three months ended March 31, 2018, compared with 4.77 percent for the three months ended March 31, 2017. 
  • The Company originated $74.6 million in new loans in the second quarter of fiscal 2018, which was offset by $44.0 million in payoffs, prepayments and amortization from its portfolio, resulting in a net portfolio increase of $30.6 million over the first quarter of fiscal 2018.  New loan originations in the second quarter of fiscal 2018 consisted of $6.6 million in residential mortgage loans, $62.4 million in commercial loans, $4.8 million in construction and development loans and $0.8 million in consumer loans.  

  • Non-performing assets (“NPAs”) were 0.24 percent of total assets at March 31, 2018, compared to 0.18 percent at March 31, 2017 and 0.12 percent at September 30, 2017. The allowance for loan losses as a percentage of total non-performing loans was 325.2 percent at March 31, 2018, compared to 425.4 percent at March 31, 2017 and 694.1 percent at September 30, 2017.

  • The Company’s ratio of shareholders’ equity to total assets was 9.73 percent at March 31, 2018, compared to 10.25 percent at March 31, 2017, and 9.80 percent at September 30, 2017.

  • Book value per common share amounted to $16.03 at March 31, 2018, compared to $15.00 at March 31, 2017 and $15.60 at September 30, 2017. 

  • The efficiency ratio, a non-GAAP measure, was 57.7 percent for the second quarter of fiscal 2018 on an annualized basis, compared to 57.4 percent in the second quarter of fiscal 2017 and 55.4 percent in the fourth quarter of fiscal 2017.

  • The Company’s balance sheet reflected total asset growth of $37.3 million at March 31, 2018, compared to September 30, 2017, coupled with stable asset quality, and capital levels that exceeded regulatory standards for a well-capitalized institution.
       
Selected Financial Ratios  (unaudited; annualized where applicable)      
As of or for the quarter ended : 3/31/18  12/31/17  9/30/17  6/30/17  3/31/17  
Return on average assets 0.77% 0.15% 0.77% 0.70% 0.51% 
Return on average equity 7.71% 1.55% 7.70% 6.90% 4.77% 
Net interest margin (tax equivalent basis) (1) 2.58% 2.47% 2.76% 2.72% 2.75% 
Loans / deposits ratio 102.38% 102.19% 106.55% 106.30% 107.80% 
Shareholders’ equity / total assets 9.73% 9.76% 9.80% 9.93% 10.25% 
Efficiency ratio (1) 57.65% 63.6% 55.4% 57.0% 57.4% 
Book value per common share$  16.03 $  15.70 $  15.60 $  15.28 $  15.00  
  1. Information reconciling non-GAAP measures to GAAP measures is presented elsewhere in this press release.

Net Interest Income

Net interest income on a fully tax-equivalent basis, a non-GAAP measure, was $6.6 million for the three months ended March 31, 2018, increasing $0.6 million, or 9.2 percent, from $6.0 million for the comparable three-month period in fiscal 2017. The change for the three months ended March 31, 2018 primarily was the result of an increase in the average balance of interest earning assets, which increased $143.8 million.  For the quarter ended March 31, 2018, the Company’s net interest margin on a tax-equivalent basis, a non-GAAP measure, decreased to 2.58 percent as compared to 2.75 percent for the same three-month period in fiscal 2017.

For the three months ended March 31, 2018, total interest income on a fully tax-equivalent basis, a non-GAAP measure, increased $1.5 million, or 18.3 percent, to $9.7 million, compared to the three months ended March 31, 2017.  Interest income rose in the quarter ended March 31, 2018, compared to the comparable period in fiscal 2017, primarily due to a $110.1 million increase in the average balance of our loans.   Total interest expense increased by $0.9 million, or 43.6 percent, to $3.1 million, for the three months ended March 31, 2018, compared to the same period in fiscal 2017 due to the increase of $130.0 million in average funding sources. 

The 43.6 percent increase in interest expense for the second quarter of fiscal 2018 as compared to the second quarter of fiscal 2017 was primarily due to an increase in deposits, as well as the interest expense associated with the Company’s subordinated debt.  The average cost of funds was 1.39 percent for the quarter ended March 31, 2018 compared to 1.13 percent for the same three-month period in fiscal 2017 and, on a linked sequential quarter basis, increased two basis points compared to the first quarter of fiscal 2018.  The increase in cost was primarily related to the increase in average volume, coupled with the increased expense related to the issuance of subordinated debt.

For the six months ended March 31, 2018, total interest income on a fully tax equivalent basis increased $3.9 million, or 25.2 percent, to $19.3 million, compared to $15.4 million for the six months ended March 31, 2017. Total interest expense increased by $2.2 million, or 54.7 percent, to $6.3 million, for the six months ended March 31, 2018, compared to the comparable period in fiscal 2017.  Interest income rose for the six months ended March 31, 2018, compared to the comparable period in fiscal 2017 primarily due to a $160.9 million increase in average loan balances. Compared to the same period in fiscal 2017, for the six months ended March 31, 2018, average interest earning assets increased $189.5 million, the net interest spread decreased on an annualized tax-equivalent basis by twenty basis points and the net interest margin decreased on an annualized tax-equivalent basis by eighteen basis points.

Joseph Gangemi, Chief Financial Officer of Malvern Bancorp, Inc., added, "Despite our asset growth this period, we continue to maintain a high liquidity position, which has a dampening effect on our margin. While we anticipate robust growth in loans this year, we continue to replenish the liquidity pool at a commensurate rate, therefore the traction to increase margin has been more gradual."

Earnings Summary for the Period Ended March 31, 2018

The following table presents condensed consolidated statements of income data for the periods indicated.

  
(dollars in thousands, except per share data)      
For the quarter ended:3/31/1812/31/179/30/176/30/173/31/17 
Net interest income$  6,568$  6,382$  6,707$  6,399$  5,991 
Provision for loan losses 240  489 645 997 
 Net interest income after provision for loan losses 6,328 6,382 6,218 5,754 4,994 
Other income 449 1,711 532 814 542 
Other expense 4,105 4,471 3,813 3,986 3,778 
Income before income tax expense 2,672 3,622 2,937 2,582 1,758 
Income tax expense 654 3,219 982 863 588 
Net income$  2,018$  403$  1,955$  1,719$  1,170 
Earnings per common share      
Basic$  0.31$  0.06$  0.30$  0.27$  0.18 
Diluted$  0.31$  0.06$   0.30$  0.27$  0.18 
Weighted average common shares outstanding:     
Basic 6,448,691 6,445,264 6,441,731 6,443,515 6,427,309 
Diluted 6,452,246 6,450,513 6,445,151 6,445,288 6,427,932 

Other Income

Other income decreased $0.1 million, or 17.2 percent, for the second quarter of fiscal 2018 compared with the same period in fiscal 2017.  The decrease in other income was primarily due to a decrease of $37,000 in service charges and other fees, a $58,000 decrease in net gains on sales of investment securities, a $4,000 decrease in net gains on sale of loans, and a $6,000 decrease in earnings on bank-owned insurance offset by an $12,000 increase in rental income.

For the six months ended March 31, 2018, total other income increased $1.2 million compared to the same period in fiscal 2017, primarily as a result of a $1.2 million net gain on the sale of real estate, an increase of $11,000 in service charges, a $23,000 increase in rental income, and an $18,000 increase in net gains on sale of loans offset by a $58,000 decrease in net gains on sales of investment securities and a $15,000 decrease in earnings on bank-owned insurance.

The following table presents the components of other income for the periods indicated.

(in thousands, unaudited)     
For the quarter ended:3/31/1812/31/179/30/176/30/173/31/17
Service charges on deposit accounts$  237$  271$  262$  233$  274
Rental income – other 67 66 66 51 55
Net gains on sales of investments, net   31 374 58
Gain on sale of real estate, net  1,186   
Gain on sale of loans, net 26 67 48 31 30
Bank-owned life insurance 119 121 125 125 125
  Total other income$  449$  1,711$  532$  814$  542

Other Expense

Total other expense for the three months ended March 31, 2018, increased $0.3 million, or 8.7 percent, when compared to the quarter ended March 31, 2017. The increase primarily reflected increases in salaries and employee benefits of $0.2 million, a $0.1 million increase in occupancy expense, a $0.1 million increase in professional fees, and a $0.1 million increase in other operating expense. The increase was offset by a $16,000 decrease in the federal deposit insurance premium, a $35,000 decrease in advertising expense, and a $34,000 decrease in data processing expense. The increase in salaries and employee benefits primarily reflects higher compensation and related costs due to added staff to support overall franchise growth. The increase in occupancy expense was mainly due to expanded locations.  Professional fees increased for the period as a result of expense related to increased legal and accounting fees.

For the six months ended March 31, 2018, total other expense increased $1.2 million, or 16.7 percent, compared to the same period in fiscal 2017. The increase primarily reflected increases in salaries and employee benefits of $0.5 million, a $0.1 million increase in occupancy expense, a $0.1 million increase in the federal deposit insurance premium, a $0.4 million increase in professional fees, and a $0.2 million increase in other operating expense. The increase was offset by a $0.1 million decrease in data processing expense and a $32,000 decrease in advertising expense. 

The following table presents the components of other expense for the periods indicated.

(in thousands, unaudited)     
 For the quarter ended:3/31/1812/31/179/30/176/30/173/31/17
 Salaries and employee benefits$  2,001$  1,990$  1,725$  1,873$  1,804
 Occupancy expense 586 562 543 533 514
 Federal deposit insurance premium 75 76 71 78 91
 Advertising 38 54 25 67 73
 Data processing 267 278 285 308 301
 Professional fees 450 788 473 621 399
 Other operating expenses 688 723 691 506 596
   Total other expense$  4,105$  4,471$  3,813$  3,986$  3,778

Statement of Condition Highlights at March 31, 2018

Highlights as of March 31, 2018, included:

  • Balance sheet strength, with total assets amounting to $1.1 billion at March 31, 2018, an increase of $37.3 million, or 3.6 percent, compared to September 30, 2017.
  • The Company’s gross loans were $845.2 million at March 31, 2018, an increase of $3.1 million, or 0.36 percent, from September 30, 2017.    
  • Total investments were $77.4 million at March 31, 2018, an increase of $27.9 million, or 56.3 percent, compared to September 30, 2017.
  • Deposits totaled $825.6 million at March 31, 2018, an increase of $35.2 million, or 4.5 percent, compared to September 30, 2017. 
  • Federal Home Loan Bank (FHLB) advances totaled $118.0 million at March 31, 2018 and at September 30, 2017.
  • Subordinated debt totaled $24.4 million and $24.3 million at March 31, 2018 and at September 30, 2017, respectively.

Condensed Consolidated Statements of Condition

The following table presents condensed consolidated statements of condition data as of the dates indicated.

(in thousands)     
At quarter ended:3/31/1812/31/179/30/176/30/173/31/17
Cash and due from depository
  institutions
$  1,566$  1,636$  1,615$  1,622$  1,716
Interest bearing deposits in depository
  institutions
 120,144 127,006 115,521 111,805 64,036
Investment securities, available for
  sale, at fair value
 44,341 44,503 14,587 16,811 61,672
Investment securities held to maturity 33,052 33,893 34,915 36,027 37,060
Restricted stock, at cost 8,583 5,930 5,559 5,458 5,397
Loans receivable, net of allowance for  
  loan losses
 837,314 806,764 834,331 800,337 752,708
Accrued interest receivable 3,583 3,344 3,139 2,837 3,177
Property and equipment, net 7,357 7,374 7,507 7,182 6,896
Deferred income taxes 3,713 4,469 6,671 7,912 7,881
Bank-owned life insurance 19,163 19,045 18,923 18,798 18,673
Other assets 4,500 3,872 3,244 2,119 2,599
  Total assets$1,083,316$1,057,836$1,046,012$  1,010,908$  961,815
Deposits$  825,569$  797,099$  790,396$  759,679$  704,272
FHLB advances 118,000 118,000 118,000 118,000 118,000
Other short-term borrowings 2,500 5,000 5,000  10,000
Subordinated debt 24,382 24,342 24,303 24,263 25,000
Other liabilities 7,503 10,199 5,793 8,533 5,949
Shareholders' equity 105,362 103,196 102,520 100,433 98,594
  Total liabilities and shareholders’
  equity
$1,083,316$1,057,836$1,046,012$  1,010,908$  961,815

The following table reflects the composition of the Company’s deposits as of the dates indicated.

(in thousands)     
At quarter ended:3/31/1812/31/179/30/176/30/173/31/17
Demand:     
  Non-interest bearing$  38,444$  45,756$   42,121$  50,097$  45,303
  Interest-bearing 190,602 161,278 155,579 105,439 102,525
Savings 44,716 41,631 44,526 43,709 43,913
Money market 293,813 293,674 276,404 274,018 251,671
Time 257,994 254,760 271,766 286,416 260,860
  Total deposits$825,569$797,099$790,396$759,679$704,272

Loans

Total net loans amounted to $837.3 million at March 31, 2018 compared to $834.3 million at September 30, 2017, for a net increase of $3.0 million or 0.36 percent for the period.  The allowance for loan losses amounted to $8.5 million and $8.4 million at March 31, 2018 and September 30, 2017, respectively. Average loans during the second quarter of fiscal 2018 totaled $827.5 million as compared to $717.4 million during the second quarter of fiscal 2017, representing a 15.3 percent increase. 

At the end of the second quarter of fiscal 2018 the loan portfolio remained weighted toward two primary components: commercial and the core residential portfolio, with commercial real estate accounting for 52.8 percent and single-family residential real estate loans accounting for 21.8 percent of the loan portfolio.  Construction and development loans amounted to 6.7 percent and consumer loans represented 4.5 percent of the loan portfolio at such date.   Total gross loans increased $3.1 million, to $845.2 million at March 31, 2018 compared to $842.1 million at September 30, 2017.  The increase in the loan portfolio at March 31, 2018 compared to September 30, 2017, primarily reflected an increase of $12.0 million in commercial loans, a $3.0 million increase in construction and development loans, a $8.2 million decrease in residential mortgage loans and a $3.7 million reduction in consumer loans at March 31, 2018 as compared to September 30, 2017. 

For the quarter ended March 31, 2018, the Company originated new loan volume of $74.6 million, which was offset by loan payoffs of $14.5 million, prepayments totaling $16.0 million, and amortization of $13.5 million.

The following reflects the composition of the Company’s loan portfolio as of the dates indicated.

Loans (unaudited)      
(in thousands)     
At quarter ended: 3/31/18  12/31/17  9/30/17  6/30/17  3/31/17 
Residential mortgage$184,318 $186,831 $192,500 $190,788 $192,775 
Construction and Development:     
  Residential and commercial 35,213  34,627  35,622  36,530  46,721 
  Land 21,727  18,599  18,377  18,325  14,322 
Total construction and
  development
 56,940  53,226  53,999  54,855  61,043 
Commercial:     
  Commercial real estate 445,995  427,610  437,760  424,732  383,170 
  Farmland 12,069  1,711  1,723  1,734   
  Multi-family 32,608  32,716  39,768  21,547  12,838 
  Other 75,368  71,933  74,837  71,248  63,551 
Total commercial 566,040  533,970  554,088  519,261  459,559 
Consumer:     
  Home equity lines of credit 15,538  16,811  16,509  17,602  19,214 
  Second mortgages 19,960  21,304  22,480  23,658  25,103 
  Other 2,404  2,435  2,570  1,403  1,512 
Total consumer 37,902  40,550  41,559  42,663  45,829 
Total loans 845,200  814,577  842,146  807,567  759,206 
Deferred loan costs, net 580  624  590  687  683 
Allowance for loan losses (8,466) (8,437) (8,405) (7,917) (7,181)
  Loans Receivable, net$837,314 $806,764 $834,331 $800,337 $752,708 

At March 31, 2018, the Company had $122.7 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.   The Company's current "Approved, Accepted but Unfunded" pipeline, includes approximately $54.0 million in commercial and construction loans and $15.7 million in residential mortgage loans expected to fund over the next 90 days.

Asset Quality

Mr. Weagley noted that “asset quality remained stable, and we are well positioned from an asset quality perspective, with continued improving trends and a low ratio of non-performing assets to total assets of 0.24 percent.”

Non-accrual loans were $2.1 million at March 31, 2018 an increase of $1.1 million or 105.1 percent, as compared to $1.0 million at September 30, 2017. Non-accrual loans were $1.6 million at March 31, 2017.  Other real estate owned (“OREO”) remained at zero at March 31, 2018, September 30, 2017 and March 31, 2017. The increase in non-performing loans at March 31, 2018 compared to September 30, 2017 was primarily due to one legacy commercial loan, with an aggregate outstanding balance of approximately $0.6 million moving to non-accrual status.  Total performing troubled debt restructured loans were $18.7 million at March 31, 2018, $2.2 million at September 30, 2017 and $1.6 million at March 31, 2017. The increase in troubled debt restructured loans at March 31, 2018 compared to September 30, 2017 was primarily due to two commercial loans with an aggregate outstanding balance of approximately $16.4 million.

At March 31, 2018, non-performing assets totaled $2.6 million, or 0.24 percent of total assets, as compared with $1.2 million, or 0.12 percent, at September 30, 2017 and $1.7 million, or 0.18 percent, at March 31, 2017.  The portfolio of non-accrual loans at March 31, 2018 was comprised of thirteen residential real estate loans with an aggregate outstanding balance of approximately $1.1 million, one commercial real estate loan with an outstanding balance of $0.6 million, and fourteen consumer loans with an aggregate outstanding balance of approximately $0.4 million.   

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: 3/31/18  12/31/17  9/30/17  6/30/17  3/31/17 
Non-accrual loans(1)$2,129 $2,242 $1,038 $1,556 $1,566 
Loans 90 days or more past due and still accruing 474  345  173  321  122 
  Total non-performing loans 2,603  2,587  1,211  1,877  1,688 
Other real estate owned          
  Total non-performing assets$2,603 $2,587 $1,211 $1,877 $1,688 
Performing troubled debt restructured
  loans
$18,666 $2,222 $2,238 $1,603 $1,623 
      
Non-performing assets / total assets 0.24% 0.24% 0.12% 0.19% 0.18%
Non-performing loans / total loans 0.31% 0.32% 0.14% 0.23% 0.22%
Net charge-offs (recoveries)$  212 $  (32)$  1 $  (91)$  (7)
Net charge-offs (recoveries) / average
  loans(2)
 0.10% (0.02)% 0.00% (0.05)% 0.00%
Allowance for loan losses / total loans 1.00% 1.04% 1.00% 0.98% 0.95%
Allowance for loan losses / non-
  performing loans
 325.2% 326.1% 694.1% 421.8% 425.4%
      
Total assets$1,083,316 $1,057,836 $1,046,012 $1,010,908 $961,815 
Total gross loans 845,200  814,577  842,146  807,567  759,206 
Average loans 827,483  822,941   831,578   792,139   717,376 
Allowance for loan losses 8,466  8,437  8,405  7,917  7,181 
  1. 18 loans, totaling approximately $0.8 million or 38.8% of the total non-accrual loan balance, were making payments at March 31, 2018. 
  2. Annualized.

The allowance for loan losses at March 31, 2018 amounted to approximately $8.5 million, or 1.00 percent of total loans, compared to $8.4 million, or 1.00 percent of total loans, at September 30, 2017 and $7.2 million, or 0.95 percent of total loans, at March 31, 2017.  The Company had a $0.2 million provision for loan losses during the quarter ended March 31, 2018 compared to $1.0 million for the quarter ended March 31, 2017.   

Capital

At March 31, 2018, our total shareholders' equity amounted to $105.4 million, or 9.73 percent of total assets, compared to $102.5 million at September 30, 2017.  The Company’s book value per common share was $16.03 at March 31, 2018, compared to $15.60 at September 30, 2017. 
At March 31, 2018, the Bank’s common equity tier 1 ratio was 15.20 percent, tier 1 leverage ratio was 11.96 percent, tier 1 risk-based capital ratio was 15.20 percent and the total risk-based capital ratio was 16.23 percent.  At September 30, 2017, the Bank’s common equity tier 1 ratio was 14.75 percent, tier 1 leverage ratio was 12.02 percent, tier 1 risk-based capital ratio was 14.75 percent and the total risk-based capital ratio was 15.78 percent.  At March 31, 2018, 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 to such gains.

(in thousands)     
For the quarter ended:3/31/1812/31/179/30/176/30/173/31/17
Other income$  449$  1,711$  532$  814$  542
Less: Net investment securities
  gains and gains on sale of real
  estate
  1,186 31 374 58
Other income, excluding net
  investment securities gains and
  gains on sale of real estate
$  449$  525$  501$  440$  484

“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: 3/31/18  12/31/17  9/30/17  6/30/17  3/31/17 
Other expense$  4,105 $  4,471 $  3,813 $  3,986 $  3,778 
Less: non-core items(1) 43  72  29  72  29 
Other expense, excluding non-core items$4,062  $4,399  $  3,784 $  3,914 $  3,749 
Net interest income (tax
  equivalent basis)
$6,597  $6,393  $  6,729 $  6,433 $  6,043 
Other income, excluding net
  investment securities gains and
  gains on sale of real estate
 449  525  501  440  484 
  Total$7,046  $6,918  $  7,230 $  6,873 $  6,527 
      
Efficiency ratio 57.7% 63.6% 52.3% 57.0% 57.4%
______________________     
(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, and 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:3/31/18 12/31/17 9/30/17 6/30/17 3/31/17 
Efficiency ratio on a GAAP basis58.5%55.2%52.7%55.3%57.8%

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 Company revised its estimated annual effective rate to reflect a change in the federal statutory rate from 35% to 21%, resulting from the enactment of the Tax Cuts and Jobs Act of 2017.  The TE basis adjusts GAAP interest income and yields for the tax benefit of income on certain tax-exempt investments using the blended statutory rate of 24.5% for the current period and 34% for each of the prior periods 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: 3/31/18  12/31/17  9/30/17  6/30/17  3/31/17 
Net interest income (GAAP)$  6,568 $  6,382 $  6,707 $  6,399 $  5,991 
Tax-equivalent adjustment(1)  29  11  22  34  52 
TE net interest income$  6,597 $  6,393 $  6,729 $  6,433 $  6,043 
      
Net interest income margin (GAAP) 2.57% 2.46% 2.75% 2.71% 2.72%
Tax-equivalent effect   0.01    0.01    0.00    0.01    0.03 
Net interest margin (TE) 2.58% 2.47% 2.75% 2.72% 2.75%
____________________     
(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.

(in thousands)     
  For the quarter ended: 3/31/18  12/31/17  9/30/17  6/30/17  3/31/17 
Investment securities$  77,961 $  59,453 $  50,899 $  82,832 $  102,090 
Loans 827,483   822,941   832,205   792,139   717,376  
Allowance for loan losses (8,426 ) (8,419 ) (8,120 ) (7,456 ) (6,489 )
All other assets 157,126   194,017   134,502   110,456   101,804  
  Total assets 1,054,144  1,067,992  1,009,486  977,971 $  914,781 
Non-interest bearing deposits$  40,034 $  42,760 $  45,969 $  45,173 $  38,565 
Interest-bearing deposits 754,820   766,105   705,841   682,606   634,214  
FHLB advances 118,000   118,000   118,000   118,000   118,000  
Other short-term borrowings 4,945  5,000  6,033  220  5,389 
Subordinated debt 24,360  24,322  24,282  24,992  14,722 
Other liabilities 7,283   8,086   7,749   7,324   5,778  
Shareholders’ equity 104,702   103,719   101,612   99,656   98,113  
  Total liabilities and
  shareholders’ equity
$  1,054,144 $  1,067,992 $  1,009,486 $  977,971 $  914,781 
      

About Malvern Bancorp, Inc.

Malvern Bancorp, Inc. is the holding company for Malvern Bank, National Association, a national bank that was originally organized in 1887 as a federally-chartered savings bank. Malvern Bank, National Association now serves as one of the oldest banks headquartered on the Philadelphia Main Line. For more than a century, Malvern Bank has been committed to helping people build prosperous communities as a trusted financial partner, forging lasting relationships through teamwork, respect and integrity.

Malvern Bank conducts business from its headquarters in Paoli, Pennsylvania, a suburb of Philadelphia and through its nine other banking locations in Chester, Delaware and Bucks counties, Pennsylvania and Morristown, New Jersey, its New Jersey regional headquarters.  The Bank also recently announced new representative offices in Palm Beach, Florida and Montchanin, Delaware.  Its primary market niche is providing personalized service to its client base.  

Malvern Bank, through its Private Banking division and strategic partnership with Bell Rock Capital in Rehoboth Beach, Delaware, provides personalized wealth management and advisory services to high net worth individuals and families. Bel Rock Capital’s services include banking, liquidity management, investment services, 401(K) accounts and planning, custody, tailored lending, wealth planning, trust and fiduciary services, family wealth advisory services and philanthropic advisory services. The Bank offers insurance services though Malvern Insurance Associates, LLC, which provides clients a rich array of financial services, including commercial and personal insurance and commercial and personal lending.

For further information regarding Malvern Bancorp, Inc., please visit our web site at http://ir.malvernbancorp.com. For information regarding Malvern Bank, National Association, please visit our web site at http://www.mymalvernbank.com.

Forward-Looking Statements

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) March 31, 2018  September 30, 2017
(unaudited)      
ASSETS       
Cash and due from depository institutions $1,566  $1,615  
Interest bearing deposits in depository institutions  120,144   115,521  
  Total cash and cash equivalents  121,710   117,136  
Investment securities available for sale, at fair value (amortized cost of  $44.8 million and $14.9 million at March 31, 2018 and September 30, 2017,
 respectively)
  44,341   14,587  
Investment securities held to maturity (fair value of $32.1 million and
 $34.6 million at March 31, 2018 and September 30, 2017, respectively)
  33,052   34,915  
Restricted stock, at cost  8,583   5,559  
Loans receivable, net of allowance for loan losses of $8,466 and $8,405, respectively  837,314   834,331  
Accrued interest receivable  3,583   3,139  
Property and equipment, net  7,357   7,507  
Deferred income taxes, net  3,713   6,671  
Bank-owned life insurance  19,163   18,923  
Other assets  4,500   3,244  
  Total assets $1,083,316  $1,046,012  
LIABILITIES       
Deposits:       
  Non-interest bearing $38,444  $42,121  
  Interest-bearing  787,125   748,275  
Total deposits  825,569   790,396  
FHLB advances  118,000   118,000  
Other short-term borrowings  2,500   5,000  
Subordinated debt  24,382   24,303  
Advances from borrowers for taxes and insurance  2,463   1,553  
Accrued interest payable  713   694  
Other liabilities  4,327   3,546  
  Total liabilities  977,954   943,492  
SHAREHOLDERS’ EQUITY       
Preferred stock, $0.01 par value, 10,000,000 shares, authorized, none issued       
Common stock, $0.01 par value, 50,000,000 shares authorized, issued and outstanding: 6,572,684 shares at March 31, 2018 and 6,572,684 shares at September 30, 2017    66     66  
Additional paid in capital  60,886   60,736  
Retained earnings  43,536   43,139  
Unearned Employee Stock Ownership Plan (ESOP) shares  (1,411)  (1,483) 
Accumulated other comprehensive income  285   62  
  Total shareholders’ equity  105,362   102,520  
  Total liabilities and shareholders’ equity $1,083,316  $1,046,012  


 
MALVERN BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 
  Three Months Ended March 31, Six Months Ended March 31,
(in thousands, except for share data)  2018  2017  2018  2017
(unaudited)            
Interest and Dividend Income            
Loans, including fees $8,740 $7,367 $17,441 $13,680
Investment securities, taxable  302  470  532  942
Investment securities, tax-exempt  65  159  130  322
Dividends, restricted stock  134  64  203  128
Interest-bearing cash accounts  463  115  909  208
  Total Interest and Dividend Income  9,704  8,175  19,215  15,280
Interest Expense            
Deposits  2,182  1,424  4,337  2,748
Short-term borrowings  22  11  41  11
Long-term borrowings  546  528  1,109  1,070
Subordinated debt  386  221  778  221
Total Interest Expense  3,136  2,184  6,265  4,050
Net interest income  6,568  5,991  12,950  11,230
Provision for Loan Losses  240  997  240  1,657
Net Interest Income after Provision for
  Loan Losses
  6,328  4,994  12,710  9,573
Other Income            
Service charges and other fees  237  274  508  497
Rental income-other  67  55  133  110
Net gains on sales of investments, net    58    58
Net gains on sale of real estate      1,186  
Net gains on sale of loans, net  26  30  93  75
Earnings on bank-owned life insurance  119  125  240  255
Total Other Income  449  542  2,160  995
Other Expense            
Salaries and employee benefits  2,001  1,804  3,991  3,516
Occupancy expense  586  514  1,148  1,008
Federal deposit insurance premium  75  91  151  95
Advertising  38  73  92  124
Data processing  267  301  545  603
Professional fees  450  399  1,238  800
Other operating expenses  688  596  1,411  1,202
Total Other Expense  4,105  3,778  8,576  7,348
Income before income tax expense  2,672  1,758  6,294  3,220
Income tax expense  654  588  3,873  1,077
Net Income  $2,018 $1,170 $2,421 $2,143
             
Earnings per common share            
Basic $0.31 $0.18 $0.38 $0.33
Diluted $0.31 $0.18 $0.38 $0.33
Weighted Average Common Shares
  Outstanding
            
Basic  6,448,691  6,427,309  6,446,959  6,422,899
Diluted  6,452,246  6,427,932  6,427,932  6,423,269


 
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)
3/31/201812/31/20173/31/2017
(unaudited)     
Statements of Operations Data   
    
  Interest income$  9,704 $  9,511 $  8,175 
  Interest expense 3,136  3,129  2,184 
  Net interest income 6,568  6,382  5,991 
  Provision for loan losses 240    997 
  Net interest income after provision for loan losses 6,328  6,382  4,994 
  Other income 449  1,711  542 
  Other expense 4,105  4,471  3,778 
  Income before income tax expense 2,672  3,622  1,758 
  Income tax expense 654  3,219  588 
  Net income$  2,018 $  403 $  1,170 
Earnings (per Common Share)   
  Basic$  0.31 $  0.06 $  0.18 
  Diluted$  0.31 $  0.06 $  0.18 
Statements of Condition Data (Period-End)   
  Investment securities available for sale, at fair value$  44,341 $44,503 $  61,672 
  Investment securities held to maturity (fair value of $32.1 million,  $33.3 million, and $36.4 million) 33,052  33,893  37,060 
  Loans, net of allowance for loan losses 837,314  806,764  752,708 
  Total assets 1,083,316  1,057,836  961,815 
  Deposits 825,569  797,099  704,272 
  FHLB advances 118,000  118,000  118,000 
  Short-term borrowings 2,500  5,000  10,000 
  Subordinated debt 24,382  24,342  25,000 
  Shareholders' equity 105,362  103,196  98,954 
Common Shares Dividend Data    
  Cash dividends$  — $  — $  — 
Weighted Average Common Shares Outstanding   
  Basic 6,448,691  6,445,264  6,427,309 
  Diluted 6,452,246  6,450,513  6,427,932 
Operating Ratios   
  Return on average assets 0.77% 0.15% 0.51%
  Return on average equity 7.71% 1.55% 4.77%
  Average equity / average assets 9.93% 9.71% 10.73%
  Book value per common share (period-end)$16.03 $15.70 $15.00 
Non-Financial Information (Period-End)   
  Common shareholders of record 409  422  437 
  Full-time equivalent staff 86  85  81 
          


Investor Relations:

Joseph D. Gangemi
SVP & CFO
(610) 695-3676

Investor Contact:
Ronald Morales
(610) 695-3646