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Malvern Bancorp, Inc. Reports Net Income of $7.7 million, or $1.21 per Share, for the Fourth quarter of Fiscal 2016, Representing a 565.2% Increase over the Fourth quarter of Fiscal 2015

PAOLI, Pa., Oct. 26, 2016 (GLOBE NEWSWIRE) -- Malvern Bancorp, Inc. (NASDAQ:MLVF) (the "Company"), parent company of Malvern Federal Savings Bank (“Malvern” or the “Bank”), today reported operating results for the fourth fiscal quarter ended September 30, 2016.  Net income amounted to $7.7 million, or $1.21 per fully diluted common share, for the quarter ended September 30, 2016, an increase of $6.6 million, or 565.2 percent, as compared with the net income of $1.2 million, or $0.18 per fully diluted common share, for the quarter ended September 30, 2015.  For the year ended September 30, 2016, net income amounted to $11.9 million, or $1.86 per fully diluted common share, compared with net income of $3.7 million, or $0.58 per fully diluted common share, for the year ended September 30, 2015.

During the fourth quarter of 2016, the Company reversed approximately $7.8 million representing the valuation allowance related to net deferred tax assets, which contributed to a net tax benefit for the quarter of $6.0 million. The impact of the reversal and subsequent income tax benefit positively affected net income for the fourth quarter and full fiscal year 2016 results. Excluding the net tax benefit of $6.0 million, net income attributable to the Company would have been approximately $1.8 million, or $0.28 per fully diluted common share, for the three months ended September 30, 2016 and $6.0 million, or $0.93 per fully diluted common share, for the full fiscal year 2016.

The reversal of the valuation allowance on net deferred tax assets was based on management's judgment that the net deferred tax asset will be realized by the Company.   The Company has reported positive cumulative pre-tax earnings over the prior two year period ended September 30, 2016, representing 10 quarters. These historical results in conjunction with management's expectations of future projected taxable income supported the Company’s decision to reverse the valuation allowance on net deferred tax assets.

Anthony C. Weagley, President and Chief Executive Officer, said, “In closing out 2016, we continued to perform with growth in key areas of our business. We continue to see strong credit metrics with non-performing assets remaining low as our loan growth remained strong.   Our financial performance continues to allow Malvern to expand its brand through our private banking model and expansion of geographic footprint. We successfully opened our Villanova location, in Pennsylvania, and our Private Banking Loan Production headquarters in Morristown, New Jersey. Our ability to continue to gather client relationships underscores the success of our business plans.  We are maintaining our course with our business strategy and our performance reflected that and the strength of our balance sheet.  Our core loan growth increased 46.7 percent at September 30, 2016 compared to September 30, 2015.   The company also had strong deposit growth at September 30, 2016 with total deposits increasing 29.3 percent compared to September 30, 2015.”

Highlights for the quarter include:

  • Return on average assets (“ROAA”) was 3.90 percent for the three months ended September 30, 2016, compared to 0.72 percent for the three months ended September 30, 2015, and return on average equity (“ROAE”) rose to 35.10 percent for the three months ended September 30, 2016, compared with 5.77 percent for the three months ended September 30, 2015. Excluding the impact of the income tax benefit from the reversal of the valuation allowance, the return on average assets was 0.90 percent for the three months ended September 30, 2016 and the return on average equity was 7.55 percent for the three months ended September 30, 2016. 
  • The Company originated $58.2 million in new loans in the fourth quarter of fiscal 2016, which was offset in part by $38.0 million in participations, payoffs, prepayments and maturities from its portfolio, resulting in net portfolio growth of $20.2 million compared to the third quarter of fiscal 2016; new loan originations consisted of $3.8 million in residential mortgage loans, $47.2 million in commercial loans, $5.4 million in construction and development loans and $1.8 million in consumer loans.  
  • Non-performing assets (“NPAs”) were at 0.20 percent of total assets at September 30, 2016, compared to 0.22 percent at June 30, 2016 and 0.39 percent at September 30, 2015. The allowance for loan losses as a percentage of total non-performing loans was 336.1 percent at September 30, 2016, compared to 515.2 percent at June 30, 2016 and 333.6 percent at September 30, 2015.
  • The Company’s ratio of shareholders’ equity to total assets was 11.52 percent at September 30, 2016, compared to 10.88 percent at June 30, 2016, and 12.41 percent at September 30, 2015.
  • Book value per common share amounted to $14.42 at September 30, 2016, compared to $13.21 at June 30, 2016 and $12.41 at September 30, 2015.
  • The efficiency ratio, a non-GAAP measure, was 67.7 percent for the fourth quarter of fiscal 2016 on an annualized basis, compared to 64.0 percent in the third quarter of fiscal 2016 and 73.9 percent in the fourth quarter of fiscal 2015.
  • The Company’s balance sheet reflected total asset growth of $165.6 million at September 30, 2016, compared to September 30, 2015, 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: 9/30/16
  6/30/16
  3/31/16
  12/31/15
  9/30/15
 
Return on average assets   3.90 %     0.81 %     0.68 %     0.79 %     0.72 %  
Return on average equity   35.10 %     7.41 %     6.03 %     6.55 %     5.77 %  
Net interest margin (tax equivalent basis) (1)   2.65 %     2.56 %     2.65 %     2.72 %     2.71 %  
Loans / deposits ratio   96.07 %     96.39 %     94.53 %     86.90 %     84.68 %  
Shareholders’ equity / total assets   11.52 %     10.88 %     11.09 %     11.37 %     12.41 %  
Efficiency ratio (1)   67.7 %     64.0 %     66.2 %     71.3 %     73.9 %  
Book value per common share $ 14.42     $ 13.21     $ 12.91     $ 12.60     $ 12.41    
_____________                                        


  (1 ) Information reconciling non-GAAP measures to GAAP measures is presented elsewhere in this press release.
   

Net Interest Income

For the three months ended September 30, 2016, total interest income on a fully tax-equivalent basis increased $1.5 million, or 26.9 percent, to $6.9 million, compared to the three months ended September 30, 2015. Interest income rose in the quarter ended September 30, 2016, compared to the comparable period in fiscal 2015, primarily due to a $192.7 million increase in the average balance of our loans.   Total interest expense increased by $431,000, or 31.6 percent, to $1.8 million, for the three months ended September 30, 2016, compared to the same period in fiscal 2015.  

Net interest income on a fully tax-equivalent basis was $5.1 million for the three months ended September 30, 2016, increasing $1.0 million, or 25.3 percent, from $4.1 million for the comparable three month period in fiscal 2015. The change for the three months ended September 30, 2016 primarily was the result of an increase in the average balance of interest earning assets, which increased $167.6 million.  The net interest spread on an annualized tax-equivalent basis was at 2.51 percent and 2.59 percent for the three months ended September 30, 2016 and 2015, respectively.  For the quarter ended September 30, 2016, the Company’s net interest margin on a tax-equivalent basis decreased to 2.65 percent as compared to 2.71 percent for the same three month period in fiscal 2015.

“We continued to carry a large cash balance as we grew deposits despite the funding of $58.2 million in new loans for the period.  While we anticipate reducing the funding pool, we see growth in funding at the same time so that the dampening effect to margin may continue in the coming quarters," commented Mr. Weagley. 

The 31.6 percent increase in interest expense for the fourth quarter of fiscal 2016 as compared to the fourth quarter of fiscal 2015 primarily reflected higher volumes of borrowings which are part of the hedging activity strategies executed to mitigate interest rate risk. The average cost of funds was 1.08 percent for the quarter ended September 30, 2016 compared to 1.03 percent for the same three month period in fiscal 2015 and, on a linked sequential quarter basis, increased two basis points compared to the third quarter of fiscal 2016. 

For the twelve months ended September 30, 2016, total interest income on a fully tax-equivalent basis increased $4.9 million, or 23.5 percent, to $25.5 million, compared to $20.6 million for the twelve months ended September 30, 2015. Total interest expense increased by $1.5 million, or 28.3 percent, to $6.7 million, for the twelve months ended September 30, 2016, compared to the same period in fiscal 2015.  Interest income rose for the twelve months ended September 30, 2016, compared to the same period in fiscal 2015 primarily due to a $123.8 million increase in average loan balances. Compared to the same period in fiscal 2015, for the twelve months ended September 30, 2016, average interest earning assets increased $122.7 million, and the net interest spread and net interest margin increased on an annualized tax-equivalent basis by five basis points and three basis points, respectively.

Earnings Summary for the Period Ended September 30, 2016

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: 9/30/16
    6/30/16
    3/31/16
  12/31/15
  9/30/15
Net interest income $ 5,021     $ 4,780     $ 4,500   $ 4,211   $ 3,979  
Provision for loan losses   100       472       375        
Net interest income after  provision for loan losses   4,921       4,308       4,125     4,211     3,979  
Other income   615       659       501     558     639  
Other expense   3,759       3,378       3,360     3,425     3,454  
Income before income tax benefit   1,777       1,589       1,266     1,344     1,164  
Income tax benefit   (5,966 )                    
Net income $ 7,743     $ 1,589     $ 1,266   $ 1,344   $ 1,164  
Earnings per common share:          
Basic $ 1.21     $ 0.25     $ 0.20   $ 0.21   $ 0.18  
Diluted $ 1.21     $ 0.25     $ 0.20   n/a   n/a  
Weighted average common shares outstanding:    
Basic   6,415,049       6,411,766       6,408,167     6,402,332     6,398,720  
Diluted   6,415,207       6,411,804       6,408,167   n/a   n/a  
                           

Other Income

Other income decreased $24,000 for the fourth quarter of fiscal 2016 compared with the same period in fiscal 2015.  The decrease during the fourth quarter of fiscal 2016 was primarily due to a decrease of $155,000 in earnings on bank-owned insurance compared to the same period in fiscal 2015.    The decline was a result of a one time death benefit paid in fiscal 2015.   Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $471,000 for the three months ended September 30, 2016 compared to $561,000 for the three months ended September 30, 2015, a decrease of $90,000, or 16.0 percent.  The decrease in other income in the fourth quarter of fiscal 2016 when compared to the fourth quarter of fiscal 2015 (excluding securities gains and losses) resulted primarily from a decrease of $21,000 in net gain on sale of loans and a decrease in rental income of $4,000, offset by an increase in service charges of $89,000 and an increase in gain on disposal of fixed assets of $1,000. 

For the twelve months ended September 30, 2016, total other income decreased $202,000 compared to the same period in fiscal 2015, primarily as a result of a $66,000 decrease in service charges, a $38,000 decrease in rental income, and a $163,000 decrease in earnings on bank-owned insurance, partially offset by an increase of $50,000 in net gains on sales of investment securities, an increase of $14,000 in net gain on sale of loans and an increase in gain on disposal of fixed assets of $1,000. Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $1.8 million for the twelve months ended September 30, 2016 compared to $2.0 million for the comparable period in fiscal 2015, a decrease of $252,000, or 12.5 percent.

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

(in thousands, unaudited)          
For the quarter ended: 9/30/16
    6/30/16
    3/31/16
    12/31/15
    9/30/15
 
Service charges on deposit accounts $ 258     $ 227     $ 227     $ 211     $ 169  
Rental income – other   56       55       50       50       60  
Net gains on sales of investments, net   144       229       61       131       78  
Gain on disposal of fixed assets, net   1                          
Gain on sale of loans, net   26       20       36       34       47  
Bank-owned life insurance   130       128       127       132       285  
Total other income $ 615     $ 659     $ 501     $ 558     $ 639  
                                       

Other Expense

Total other expense for the three months ended September 30, 2016, increased $305,000, or 8.8 percent, when compared to the quarter ended September 30, 2015. The increase primarily reflected increases in salaries and employee benefits of $282,000, a $53,000 increase in occupancy expense, a $77,000 increase in professional fees, and a $33,000 increase in other operating expense.  These increases were partially offset by decreases of $123,000 in federal deposit insurance premium and a $38,000 decrease in data processing expense. 

For the twelve months ended September 30, 2016, total other expense decreased $39,000, or 0.3 percent, compared to the same period in fiscal 2015. The decrease primarily reflected a $205,000 decrease in federal deposit insurance, a $108,000 decrease in advertising, a $108,000 decrease in data processing expense and a $200,000 decrease in other operating expenses.  These decreases were partially offset by an increase in salaries and employee benefits of $292,000, a $105,000 increase in occupancy expense, a $112,000 increase in professional fees and a $73,000 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: 9/30/16
    6/30/16
    3/31/16
    12/31/15
    9/30/15
 
  Salaries and employee benefits $ 1,669     $ 1,600     $ 1,522     $ 1,499     $ 1,387  
  Occupancy expense   472       469       456       423       419  
  Federal deposit insurance premium   107       40       232       200       230  
  Advertising   50       26       25       30       40  
  Data processing   283       278       270       297       321  
  Professional fees   507       415       361       400       430  
  Other real estate owned expense (income), net   28       (8 )     8       (1 )     17  
  Other operating expenses   643       558       486       577       610  
  Total other expense $ 3,759     $ 3,378     $ 3,360     $ 3,425     $ 3,454  
                                         

Statement of Condition Highlights at September 30, 2016

Highlights as of September 30, 2016 included:

  • Balance sheet strength, with total assets amounting to $821.3 million at September 30, 2016, an increase $165.6 million, or 25.3 percent, compared to September 30, 2015.
  • The Company’s gross loans were $578.4 million at September 30, 2016, an increase of $184.2 million, or 46.7 percent, from September 30, 2015.
  • Total investments were $106.9 million at September 30, 2016, a decrease of $78.6 million, or 42.4 percent, compared to September 30, 2015.
  • Deposits totaled $602.0 million at September 30, 2016, an increase of $136.5 million, or 29.3 percent, compared to September 30, 2015.  Total demand, savings, money market, and certificates of deposit less than $100,000 increased $83.2 million, or 23.7 percent, from September 30, 2015.
  • Borrowings totaled $118.0 million at September 30, 2016, an increase of $15.0 million, or 14.6 percent, compared to $103.0 million at 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: 9/30/16
  6/30/16
  3/31/16
  12/31/15
  9/30/15
 
Cash and due from depository institutions $ 1,297   $ 1,331   $ 1,304   $ 16,334   $ 16,026  
Interest bearing deposits in depository institutions   95,465     77,052     56,739     40,036     24,237  
Investment securities, available for sale, at fair value   66,387     80,555     100,895     116,767     128,354  
Investment securities held to maturity   40,551     45,834     52,272     54,914     57,221  
Restricted stock, at cost   5,424     5,548     5,553     4,762     4,765  
Loans held for sale       304              
Loans receivable, net of allowance for loan losses   574,160     553,971     515,094     461,491     391,307  
Other real estate owned       700     700     1,168     1,168  
Accrued interest receivable   2,558     2,714     2,622     2,722     2,484  
Property and equipment, net   6,637     6,654     6,490     6,486     6,535  
Deferred income taxes   8,827     1,598     2,202     2,874     2,874  
Bank-owned life insurance   18,418     18,289     18,161     18,033     17,905  
Other assets   1,548     1,755     1,954     1,561     2,814  
Total assets $ 821,272   $ 796,305   $ 763,986   $ 727,148   $ 655,690  
Deposits $ 602,046   $ 579,043   $ 548,790   $ 534,701   $ 465,522  
Borrowings   118,000     123,000     123,000     103,000     103,000  
Other liabilities   6,635     7,612     7,506     6,789     5,777  
Shareholders' equity   94,591     86,650     84,690     82,658     81,391  
Total liabilities and shareholders’ equity $ 821,272   $ 796,305   $ 763,986   $ 727,148   $ 655,690  
                               

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

           
Deposits (unaudited)          
(in thousands)          
At quarter ended: 9/30/16
  6/30/16
  3/31/16
  12/31/15
  9/30/15
 
Demand:                              
Non-interest bearing $ 34,547   $ 29,416   $ 30,720   $ 28,260   $ 27,010  
Interest-bearing   95,041     100,609     99,154     86,008     82,897  
Savings   44,714     46,056     44,207     45,312     45,189  
Money market   177,486     147,103     129,652     133,608     108,706  
Time   250,258     255,859     245,057     241,513     201,720  
Total deposits $ 602,046   $ 579,043   $ 548,790   $ 534,701   $ 465,522  
                               

Loans

Total net loans were $574.2 million at September 30, 2016 compared to $391.3 million at September 30, 2015, for a net increase of $182.9 million.  The allowance for loan losses amounted to $5.4 million and $4.7 million at September 30, 2016 and September 30, 2015, respectively.  Average loans during the fourth quarter of fiscal 2016 totaled $575.8 million as compared to $383.1 million during the fourth quarter of fiscal 2015, representing a 50.3 percent increase.

At the end of fiscal 2016, the loan portfolio remained weighted toward commercial real estate and the core residential portfolio, with single-family residential real estate loans accounting for 36.2 percent of the loan portfolio.  Construction and development loans amounted to 4.9 percent with commercial loans accounting for 50.1 percent, and consumer loans representing 8.8 percent of the loan portfolio at such date.   Total gross loans increased $184.2 million, to $578.4 million at September 30, 2016 compared to $394.2 million at September 30, 2015.  The $184.2 million increase in the loan portfolio at September 30, 2016 compared to September 30, 2015, primarily reflected an increase of $181.2 million in commercial loans and a $20.8 million increase in construction and development loans. These increases were partially offset by a $5.8 million decrease in residential mortgage loans and a $12.0 million reduction in consumer loans at September 30, 2016 as compared to September 30, 2015.  

For the year ended September 30, 2016, the Company originated total new loan volume of $330.6 million, which was offset in part by participations, payoffs, prepayments and maturities totaling $146.4 million.  The payoffs were primarily confined to the consumer and residential portfolios.   “The gathering of new clients, and our market presence continued throughout the quarter with overall growth in the portfolio despite payoff activity.  We anticipate the growth continuing into our 2017 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: 9/30/16
  6/30/16
  3/31/16
  12/31/15
  9/30/15
 
Residential mortgage $ 209,186   $ 210,621   $ 214,207   $ 211,302   $ 214,958  
Construction and Development:          
  Residential and commercial   18,579     14,050     10,796     6,007     5,677  
  Land   10,013     9,904     7,755     6,804     2,142  
Total construction and development   28,592     23,954     18,551     12,811     7,819  
Commercial:          
  Commercial real estate   231,439     211,516     173,160     142,981     87,686  
  Multi-family   19,515     20,102     20,548     10,549     7,444  
  Other   38,779     37,091     34,585     25,975     13,380  
Total commercial   289,733     268,709     228,293     179,505     108,510  
Consumer:          
  Home equity lines of credit   19,757     21,035     21,712     23,207     22,919  
  Second mortgages   29,204     31,752     33,987     35,533     37,633  
  Other   1,914     2,088     2,041     2,299     2,359  
Total consumer   50,875     54,875     57,740     61,039     62,911  
Total loans   578,386     558,159     518,791     464,657     394,198  
Deferred loan costs, net   1,208     1,155     1,240     1,410     1,776  
Allowance for loan losses   (5,434 )   (5,343 )   (4,937 )   (4,576 )   (4,667 )
  Loans Receivable, net $ 574,160   $ 553,971   $ 515,094   $ 461,491   $ 391,307  
                               

At September 30, 2016 , the Company had $107.9 million in overall undisbursed loan commitments, which consisted primarily of unused commercial lines of credit, home equity lines of credit and available usage from active construction facilities.   Included in the overall undisbursed commitments are the Company's "Approved, Accepted but Unfunded" pipeline, which includes approximately $7.0 million in construction and $72.7 million in commercial real estate loans, $13.8 million in commercial term loans and lines of credit and $4.0 million in residential mortgage loans expected to fund over the next 90 days.

Asset Quality

Non-accrual loans were $1.6 million at September 30, 2016, as compared to $1.0 million at June 30, 2016 and $1.4 million at September 30, 2015.  Other real estate owned, (“OREO”) was zero at September 30, 2016, as compared with $700,000 at June 30, 2016 and $1.2 million at September 30, 2015, respectively.  Total performing troubled debt restructured loans were $2.0 million at September 30, 2016, $2.0 million at June 30, 2016 and $1.1 million at September 30, 2015, respectively.  The increase in performing troubled debt restructured loans at September 30, 2016 compared to September 30, 2015 was primarily 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, as well as a commercial loan with an outstanding balance of $386,000 and one residential mortgage loan with an outstanding balance of $85,000 being classified as a performing TDR during fiscal 2016.  The decrease in OREO at September 30, 2016 compared to September 30, 2015, was attributable to three single residential loans and one commercial real estate loan sold during the twelve months of fiscal 2016.  The $1.2 million decrease in OREO at September 30, 2016 compared to September 30, 2015, was due to $1.2 million of sale proceeds, at a net gain of $19,000, as well as a $20,000 reduction in the fair value of the remaining property, which is reflected in other REO expense during the twelve months of fiscal 2016.

At September 30, 2016, non-performing assets totaled $1.6 million, or 0.20 percent of total assets, as compared with $1.7 million, or 0.22 percent, at June 30, 2016 and $2.6 million, or 0.39 percent, at September 30, 2015.  The decrease from September 30, 2015 reflects the sale of OREO properties during fiscal 2016, as mentioned above.  The portfolio of remaining non-accrual loans at September 30, 2016 was comprised of eleven residential real estate loans with an aggregate outstanding balance of approximately $1.1 million, one commercial real estate loan with an outstanding balance of $193,000 and ten consumer loans with an aggregate outstanding balance of approximately $352,000.

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: 9/30/16
  6/30/16
  3/31/16
  12/31/15
  9/30/15
Non-accrual loans(1) $   1,617     $   1,037     $   853     $   795     $   1,399  
Loans 90 days or more past due and still accruing                            
  Total non-performing loans   1,617       1,037       853       795       1,399  
Other real estate owned         700       700       1,168       1,168  
  Total non-performing assets $   1,617     $   1,737     $   1,553     $   1,963     $   2,567  
Performing troubled debt restructured loans $   2,039     $   1,959     $   1,577     $   1,584     $   1,091  
           
Non-performing assets / total assets   0.20 %     0.22 %     0.20 %     0.27 %     0.39 %
Non-performing loans / total loans   0.28 %     0.19 %     0.16 %     0.17 %     0.35 %
Net charge-offs (recoveries) $   9     $   66     $   14     $   91     $   (93 )
Net charge-offs (recoveries) / average loans(2)   0.01 %     0.05 %     0.01 %     0.08 %     (0.10 )%
Allowance for loan losses / total loans   0.94 %     0.96 %     0.95 %     0.98 %     1.18 %
Allowance for loan losses / non-performing loans   336.1 %     515.2 %     578.8 %     575.60 %     333.60 %
           
Total assets $ 821,272     $ 796,305     $ 763,986     $ 727,148     $ 655,690  
Total loans   578,386       558,159       518,791       464,657       394,198  
Average loans    575,784        542,985        494,005        420,601        383,092  
Allowance for loan losses   5,434       5,343       4,937       4,576       4,667  
______________                                      


  (1 ) 17 loans totaling approximately $1.3 million or 78.0% of the total non-accrual loan balance were making payments at September 30, 2016. 
  (2 ) Annualized.
   

The allowance for loan losses at September 30, 2016 amounted to approximately $5.4 million, or 0.94 percent of total loans, compared to $5.3 million, or 0.96 percent of total loans, at June 30, 2016 and $4.7 million, or 1.18 percent of total loans, at September 30, 2015. The Company had a $100,000 provision for loan losses during the quarter ended September 30, 2016 compared to zero for the quarter ended September 30, 2015, respectively.  Provision expense was higher during the quarter ended September 30, 2016 due to an increase in loan growth, despite the level of the unallocated component of the provision. 

Capital

At September 30, 2016, our total shareholders' equity amounted to $94.6 million, or 11.52 percent of total assets, compared to $81.4 million at September 30, 2015.  The Company’s book value per common share was $14.42 at September 30, 2016, compared to $12.41 at September 30, 2015.

At September 30, 2016, the Bank’s common equity tier 1 ratio was 14.24 percent, tier 1 leverage ratio was 10.79 percent, tier 1 risk-based capital ratio was 14.24 percent and the total risk-based capital ratio was 15.16 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 September 30, 2016, 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: 9/30/16
  6/30/16
  3/31/16
  12/31/15
  9/30/15
Other income $   615   $   659   $   501   $   558   $   639
Less: Net investment securities gains   144     229     61     131     78
Other income, excluding net investment
securities gains
$   471   $   430   $   440   $   427   $   561
                             

“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: 9/30/16
  6/30/16
  3/31/16
  12/31/15    930/15
Other expense $ 3,759     $ 3,378     $ 3,360     $ 3,425     $ 3,454  
Less: non-core items(1)               44       67       42  
Other expense, excluding non-core items $ 3,759     $ 3,378     $ 3,316     $ 3,358     $ 3,412  
Net interest income (tax equivalent basis) $ 5,083     $ 4,847     $ 4,566     $ 4,281     $ 4,056  
Other income, excluding net investment securities gains   471       430       440       427       561  
Total $ 5,554     $ 5,277     $ 5,006     $ 4,708     $ 4,617  
Efficiency ratio   67.7 %     64.0 %     66.2 %     71.3 %     73.9 %
______________________          
(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: 9/30/16    6/30/16
  3/31/16
  12/31/15
  9/30/15 
Efficiency ratio on a GAAP basis   66.7 %     62.1 %     67.2 %     70.4 %     73.9 %
           

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: 9/30/16
  6/30/16    3/31/16    12/31/15    9/30/15
Net interest income (GAAP) $   5,021     $   4,780     $   4,500     $   4,211     $   3,979  
Tax-equivalent adjustment(1)    62       67       66       70       77  
TE net interest income $   5,083     $   4,847     $   4,566     $   4,281     $   4,056  
           
Net interest income margin (GAAP)   2.62 %     2.52 %     2.61 %     2.67 %     2.66 %
Tax-equivalent effect     0.03         0.04         0.04         0.05         0.05  
Net interest margin (TE)   2.65 %     2.56 %     2.65 %     2.72 %     2.71 %
____________________          
(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: 9/30/16
  6/30/16
  3/31/16
  12/31/15
  9/30/15
Investment securities $ 115,366     $ 141,292     $ 164,789     $ 179,979     $ 188,424  
Loans   575,784       542,985       494,005       420,601       383,092  
Allowance for loan losses   (5,424 )     (5,132 )     (4,602 )     (4,662 )     (4,596 )
All other assets   107,655       107,044       94,581       85,450       82,892  
Total assets $ 793,381     $ 786,189     $ 748,773     $ 681,368     $ 649,812  
Non-interest bearing deposits $ 33,242     $ 34,360     $ 29,592     $ 28,604     $ 32,477  
Interest-bearing deposits   543,985       535,457       514,402       460,999       428,205  
Borrowings   122,319       123,434       113,000       102,998       101,802  
Other liabilities   5,601       7,172       7,847       6,688       6,576  
Shareholders’ equity   88,234       85,766       83,932       82,079       80,752  
Total liabilities and shareholders’ equity $ 793,381     $ 786,189     $ 748,773     $ 681,368     $ 649,812  
           

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 eight other financial centers located throughout Chester and Delaware Counties, Pennsylvania and a Private Banking Loan Production headquarters office in Morristown, New Jersey. 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 at http://ir.malvernfederal.com. For information regarding Malvern Federal Savings Bank, please visit our web site at https://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)   September 30,
2016
   September 30,
2015
(unaudited)            
ASSETS              
Cash and due from depository institutions   $   1,297     $   16,026    
Interest bearing deposits in depository institutions       95,465         24,237    
  Total cash and cash equivalents       96,762         40,263    
Investment securities available for sale, at fair value       66,387         128,354    
Investment securities held to maturity (fair value of $40,817 and $56,825)       40,551         57,221    
Restricted stock, at cost       5,424         4,765    
Loans receivable, net of allowance for loan losses       574,160         391,307    
Other real estate owned               1,168    
Accrued interest receivable       2,558         2,484    
Property and equipment, net       6,637         6,535    
Deferred income taxes, net       8,827         2,874    
Bank-owned life insurance       18,418         17,905    
Other assets       1,548         2,814    
  Total assets   $   821,272     $   655,690    
LIABILITIES              
Deposits:              
  Non-interest bearing   $   34,547     $   27,010    
  Interest-bearing       567,499         438,512    
    Total deposits       602,046         465,522    
FHLB Advances       118,000         103,000    
Advances from borrowers for taxes and insurance       1,659         1,806    
Accrued interest payable       427         396    
Other liabilities       4,549         3,575    
  Total liabilities       726,681         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: 6,560,403 shares at September 30, 2016  and  6,558,473 shares at September 30, 2015       66         66    
Additional paid in capital       60,461         60,365    
Retained earnings       35,756         23,814    
Unearned Employee Stock Ownership Plan (ESOP) shares       (1,629 )       (1,775 )  
Accumulated other comprehensive loss       (63 )       (1,079 )  
  Total shareholders’ equity       94,591         81,391    
  Total liabilities and shareholders’ equity   $   821,272     $   655,690    
                       


 
MALVERN BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 
    Three Months Ended September 30,   Twelve Months Ended September 30,
(in thousands, except for share and per
  share data)
      2016       2015       2016         2015  
(unaudited)                        
Interest and Dividend Income                        
Loans, including fees   $   5,980     $ 4,128   $   21,206     $   16,484  
Investment securities, taxable       511       922       2,824         3,073  
Investment securities, tax-exempt       174       217       751         522  
Dividends, restricted stock       68       67       250         311  
Interest-bearing cash accounts       84       10       213         72  
  Total Interest and Dividend Income       6,817       5,344       25,244         20,462  
Interest Expense                        
Deposits       1,232       870       4,537         3,431  
Borrowings       564       495       2,195         1,817  
  Total Interest Expense       1,796       1,365       6,732         5,248  
Net interest income       5,021       3,979       18,512         15,214  
Provision for Loan Losses       100             947         90  
Net Interest Income after Provision for Loan Losses       4,921       3,979       17,565         15,124  
Other Income                        
Service charges and other fees       258       169       923         989  
Rental income-other       56       60       211         249  
Net gains on sales of investments, net       144       78       565         515  
Gain on disposal of fixed assets, net       1             1          
Net gains on sale of loans, net       26       47       116         102  
Earnings on bank-owned life insurance       130       285       517         680  
  Total Other Income       615       639       2,333         2,535  
Other Expense                        
Salaries and employee benefits       1,669       1,387       6,290         5,998  
Occupancy expense       472       419       1,820         1,715  
Federal deposit insurance premium       107       230       579         784  
Advertising       50       40       131         239  
Data processing       283       321       1,128         1,236  
Professional fees       507       430       1,683         1,571  
Other real estate owned expense
  (income), net
      28       17       27         (46 )
Other operating expenses       643       610       2,264         2,464  
  Total Other Expense       3,759       3,454       13,922         13,961  
Income before income tax benefit       1,777       1,164       5,976         3,698  
Income tax benefit       (5,966 )           (5,966 )        
Net Income   $   7,743     $ 1,164   $   11,942     $   3,698  
                         
Earnings per common share                        
  Basic   $   1.21     $ 0.18   $   1.86     $   0.58  
  Diluted   $   1.21       n/a   $   1.86       n/a  
Weighted Average Common Shares Outstanding                        
  Basic       6,415,049       6,398,720       6,409,265         6,393,330  
  Diluted       6,415,207       n/a       6,409,325       n/a  
                                 


 
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)
9/30/2016 6/30/2016 9/30/2015
(unaudited)       
Statements of Operations Data      
       
  Interest income $ 6,817   $ 6,530   $ 5,344  
  Interest expense   1,796     1,750     1,365  
   Net interest income   5,021     4,780     3,979  
  Provision for loan losses   100     472      
   Net interest income after provision for loan losses   4,921     4,308     3,979  
  Other income   615     659     639  
  Other expense   3,759     3,378     3,454  
  Income before income tax benefit   1,777     1,589     1,164  
   Income tax benefit   (5,966 )        
  Net income $ 7,743   $ 1,589   $ 1,164  
Earnings (per Common Share)      
  Basic $ 1.21   $ 0.25   $ 0.18  
  Diluted $ 1.21   $ 0.25   n/a  
Statements of Condition Data (Period-End)      
  Investment securities available for sale, at fair value $ 66,387   $ 80,555   $ 128,354  
  Investment securities held to maturity (fair value of $40,817, $46,146
    and $56,825)
  40,551     45,834     57,221  
  Loans held for sale       304      
  Loans, net of allowance for loan losses   574,160     553,971     391,307  
  Total assets   821,272     796,305     655,690  
  Deposits   602,046     579,043     465,522  
  Borrowings   118,000     123,000     103,000  
  Shareholders' equity   94,591     86,650     81,391  
Common Shares Dividend Data      
  Cash dividends $   $   $  
Weighted Average Common Shares Outstanding      
  Basic   6,415,049     6,411,766     6,398,720  
  Diluted   6,415,207     6,411,804   n/a  
Operating Ratios      
  Return on average assets   3.90 %   0.81 %   0.72 %
  Return on average equity   35.10 %   7.41 %   5.77 %
  Average equity / average assets   11.12 %   10.91 %   12.43 %
  Book value per common share (period-end) $ 14.42   $ 13.21   $ 12.41  
Non-Financial Information (Period-End)      
  Common shareholders of record   459     464     483  
  Full-time equivalent staff   83     76     71  
                   
Investor Relations:
Joseph D. Gangemi
SVP & CFO
(610) 695-3676

Investor Contact:
Ronald Morales
(610) 695-3646

Media Contact:
Bronwyn Pait, Marketing
(610) 695-3630

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