PAOLI, Pa., July 31, 2019 (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 third fiscal quarter ended June 30, 2019.   Net income amounted to $2.7 million, or $0.35 per fully diluted common share, for the quarter ended June 30, 2019, compared with net income of $2.2 million, or $0.35 per fully diluted common share, for the quarter ended June 30, 2018. Annualized return on average assets (“ROAA”) was 0.88 percent for the three months ended June 30, 2019, compared to 0.85 percent for the three months ended June 30, 2018, and annualized return on average equity (“ROAE”) was 7.66 percent for the three months ended June 30, 2019, compared with 8.40 percent for the three months ended June 30, 2018.  Excluding provision expense, net of tax, of $44,000, third fiscal quarter 2019 adjusted ROAA was 0.89 percent and adjusted ROAE was 7.79 percent.

For the nine months ended June 30, 2019, net income amounted to $6.6 million, or $0.87 per fully diluted common share, compared with net income of $4.7 million, or $0.72 per fully diluted common share, for the nine months ended June 30, 2018.  ROAA was 0.78 percent for the nine months ended June 30, 2019, compared to 0.59 percent for the nine months ended June 30, 2018, and ROAE was 6.48 percent for the nine months ended June 30, 2019, compared with 5.92 percent for the nine months ended June 30, 2018.  Excluding provision expense, net of tax, of $1.9 million, adjusted ROAA was 1.00 percent and adjusted annualized ROAE was 8.34 percent for the nine months ended June 30, 2019.

“Our top line revenue increased despite the lower net growth in loans during the period.  Other aspects of operations were also positive, and we believe we are well positioned to execute our strategic plan through the remainder of fiscal 2019 and into 2020.  Our continued focus on client service remains constant and is a key driver in gathering customer relationships, fueling the business model advancement and our resulting performance,” commented Anthony C. Weagley, President and Chief Executive Officer. 

Joseph D. Gangemi, Chief Financial Officer of the Company, added: “Liquidity remained elevated to fuel loan growth during the quarter and anticipated loan growth in the fourth fiscal quarter. While the large cash balances do have a dampening effect on margins, we expect liquidity to continue to remain elevated to fund current pipelines, we also anticipate a positive impact on margins with the investment of our cash into loans.”

Linked Quarter Financial Ratios   (unaudited)
As of or for the quarter ended :	6/30/19			3/31/19			12/31/18			9/30/18			6/30/18
Return on average assets (1)		0.88	%		0.70	%		0.74	%		1.02	%		0.85	%
Return on average equity (1)		7.66	%		5.74	%		6.00	%		9.63	%		8.40	%
Net interest margin (tax equivalent basis) (2)		2.54	%		2.67	%		2.65	%		2.85	%		2.75	%
Loans / deposits ratio		106.52	%		106.82	%		110.70	%		117.62	%		114.46	%
Shareholders’ equity / total assets		11.03	%		11.37	%		12.02	%		10.72	%		10.25	%
Efficiency ratio, non-GAAP (1)  (2)  (3)		56.9	%		57.6	%		48.1	%		58.3	%		52.9	%
Book value per common share	$17.98			$17.68			$17.45			$16.84			$16.42

(1) Annualized.

(2) Information reconciling non-GAAP measures to GAAP measures is presented beginning on page 12 in this press release.

(3) 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.

Linked Quarter Income Statement Highlights

Linked Quarter Income Statement and Other Data   (unaudited) (in thousands, except share and per share data)
For the quarter ended:			6/30/19			3/31/19		12/31/18			9/30/18		6/30/18
Net interest income			$	7,461		$	7,249	$	6,947		$	7,109	$	6,976
Provision for loan losses				56			870		1,453			125		589
Net interest income after provision for loan losses				7,405			6,379		5,494			6,984		6,387
Other income				454			441		1,146			429		715
Other expense				4,497			4,443		4,094			4,437		4,790
Income before income tax expense				3,362			2,377		2,546			2,976		2,312
Income tax expense				706			411		535			334		69
Net income			$	2,656		$	1,966	$	2,011		$	2,642	$	2,243
Earnings per common share
Basic			$	0.35		$	0.26	$	0.27		$	0.41	$	0.35
Diluted			$	0.35		$	0.26	$	0.27		$	0.41	$	0.35
Weighted average common shares outstanding
Basic				7,671,623			7,667,518		7,555,810			6,464,326		6,453,031
Diluted				7,672,284			7,667,518		7,555,969			6,467,628		6,456,048

Net Interest Income

Net interest income both as reported and on a fully tax equivalent basis, a non-GAAP measure, was $7.5 million for the three months ended June 30, 2019. Net interest income on a fully tax-equivalent basis, a non-GAAP measure, increased $450,000, or 6.4 percent, from $7.0 million for the comparable three-month period in fiscal 2018. The change for the three months ended June 30, 2019 primarily was the result of an increase of $145.7 million in the average balance of loans. The increase in average loans primarily reflects a net increase in commercial loans and, to a lesser extent, a net increase in residential loans.  The net interest spread on an annualized tax-equivalent basis was 2.29 percent and 2.56 percent for the three months ended June 30, 2019 and 2018, respectively.  For the quarter ended June 30, 2019, the Company’s net interest margin on a tax-equivalent basis decreased to 2.54 percent as compared to 2.75 percent for the same three-month period in fiscal 2018.

Net interest income both as reported and on a fully tax equivalent basis, a non-GAAP measure, was $21.7 million for the nine months ended June 30, 2019. Net interest income on a fully tax equivalent basis, a non-GAAP measure, increased $1.7 million, or 8.4 percent, from $20.0 million for the nine months ended June 30, 2018.  The change for the nine months ended June 30, 2019 primarily was the result of an increase of $121.3 million in the average balance of, primarily commercial loans.  The net interest spread on an annualized tax-equivalent basis was 2.36 percent and 2.43 percent for the nine months ended June 30, 2019 and 2018, respectively.  For the nine months ended June 30, 2019, the Company’s net interest margin on a tax-equivalent basis increased slightly to 2.62 percent as compared to 2.60 percent for the same nine-month period in fiscal 2018.

Total Interest Income

For the three months ended June 30, 2019, total interest income both as reported and on a fully tax-equivalent basis, a non-GAAP measure, was $12.5 million. Total interest income on a fully tax equivalent basis, a non-GAAP measure, increased $2.2 million, or 21.7 percent, from $10.2 million for three months ended June 30, 2018, primarily due to a $145.7 million increase in the average balance of our loans.   

For the nine months ended June 30, 2019, total interest income both as reported and on a fully tax equivalent basis, a non-GAAP measure, was $35.0 million. Total interest income on a fully tax equivalent basis, a non-GAAP measure, increased $5.5 million, or 18.7 percent, from $29.5 million for the nine months ended June 30, 2018.  Interest income rose for the nine months ended June 30, 2019, compared to the comparable period in fiscal 2018, primarily due to a $121.3 million increase in average loan balances. Compared to the nine months ended June 30, 2018, average interest earning assets increased $77.7 million, the net interest spread decreased on an annualized tax-equivalent basis by seven basis points and the net interest margin increased slightly on an annualized tax-equivalent basis by two basis points at nine months ended June 30, 2019.  Total interest expense increased by $3.8 million, or 40.3 percent, to $13.3 million, for the nine months ended June 30, 2019, compared to the comparable period in fiscal 2018.

Interest Expense

For the three months ended June 30, 2019, interest expense increased by $1.8 million, or 55.0 percent, to $5.0 million, for the three months ended June 30, 2019, compared to the same period in fiscal 2018, primarily due to an increase of $169.3 in deposits and an increase in average rates.  The increase in deposits reflects an increase in interest-bearing demand and time deposits. The annualized average rate of total interest-bearing liabilities increased 50 basis points to 1.95 percent for the three months ended June 30, 2019, from 1.45 percent for the three months ended June 30, 2018 and, on a linked sequential quarter basis, increased from 1.85 percent or ten basis points compared to the second quarter of fiscal 2019. At the same time, the average balance of total interest-bearing liabilities increased by $131.3 million. This increase primarily reflects an increase in the average balance of total interest-bearing deposit accounts of $136.5 million and a decrease in the average balance of borrowings of $5.2 million. 

For the nine months ended June 30, 2019, interest expense increased by $3.8 million, or 40.3 percent, to $13.3 million, for the nine months ended June 30, 2019, compared to the comparable period in fiscal 2018. The average rate of total interest-bearing liabilities increased 46 basis points to 1.86 percent for the nine months ended June 30, 2019, from 1.40 percent for the nine months ended June 30, 2018. At the same time, the average balance of total interest-bearing liabilities increased by $52.1 million. This increase primarily reflects an increase in the average balance of deposits of $62.7 million and a decrease in the average balance of borrowings of $10.6 million.  The increase in the average balance of deposits consisted primarily of a $66.7 million increase in the average balance of other interest-bearing deposit accounts, a $194,000 increase in the average balance of certificates of deposit accounts, an $80,000 increase in the average balance of savings deposits, and a $4.3 million decrease in the average balance of money market accounts.                                                                         

Other Income

Other income decreased $261,000, or 36.5 percent, during the third fiscal quarter of 2019 compared with the same period in 2018.  The decrease in total other income was due to a $278,000 decrease in service charges and other fees, a $10,000 decrease in rental income, and a $3,000 decrease in net gains on sale of loans, partially offset by a $27,000 gain on sale of investments and a $3,000 increase in earnings on bank-owned life insurance. The decrease in service charges and other fees during the three months ended June 30, 2019 is primarily due to lower net swap fees through the Bank’s commercial loan hedging program.

For the nine months ended June 30, 2019, other income decreased $834,000 compared to the same period in 2018. This decrease was primarily a result of a $1.2 million gain recorded in 2018 on the sale of the Exton, Pennsylvania branch location. Additionally, there was a $59,000 decrease in net gains on sale of loans and a $12,000 decrease in rental income, partially offset by an increase of $392,000 in service charges, a $27,000 gain on sale of investments and a $4,000 increase in earnings on bank-owned life insurance. The non-proportional increase in service charges and other fees during the nine months ended June 30, 2019 is primarily due to the recognition of approximately $708,000 of net swap fees through the Bank’s commercial loan hedging program during the first fiscal quarter of 2019.  The primary benefit of the loan hedging program is to manage the interest rate risk on long term fixed rate loans while allowing Malvern to compete in the market and offer competitive financing to our clients.

Other Expense

Total other expense for the three months ended June 30, 2019 decreased $293,000, or 6.1 percent, when compared to the three months ended June 30, 2018. The decrease was primarily due to a $683,000 decrease in professional fees due to lower legal expense, a $17,000 decrease in occupancy expense, a $15,000 decrease in data processing expense, partially offset by a $199,000 increase in salaries and employee benefits, a $191,000 increase in other operating expense, a $30,000 increase in net other real estate owned expense, and a $2,000 increase in federal deposit insurance premium.  The increase in salaries and employee benefits during the three-month period ended June 30, 2019 reflects normal increases to salary and benefits and three strategic hires to support overall franchise growth consistent with the business plan.  The increase in other operating expenses during the three-month period ended June 30, 2019 was primarily due to the Pennsylvania shares tax related to the Bank’s new standing as a National Association. The Bank converted its charter in February 2018.

For the nine months ended June 30, 2019, total other expense decreased $332,000, or 2.5 percent, compared to the same period in 2018. The decrease primarily reflected a $967,000 decrease in professional fees, a $55,000 decrease in data processing expense, $49,000 decrease in occupancy expense, a $32,000 decrease in advertising expense, and a $7,000 decrease in the federal deposit insurance premium.  These decreases were offset by a $429,000 increase in salaries and employee benefits, a $270,000 increase in other operating expenses and a $79,000 increase in net other real estate owned expense.  The decrease in professional fees during the nine-month period ended June 30, 2019 was primarily due to lower legal expense. The increase in salaries and employee benefits during the three-month period ended June 30, 2019 reflects normal increases to salary and benefits and three strategic hires to support overall franchise growth consistent with the business plan.  The increase in other operating expenses during the nine-month period ended June 30, 2019 was primarily due to the Pennsylvania shares tax related to the Bank’s new standing as a National Association.

The following table presents the components of Other Expense for the periods indicated.

(in thousands, unaudited)
For the quarter ended:	6/30/19		3/31/19			12/31/18		9/30/18		6/30/18
Salaries and employee benefits	$	2,223	$	2,213		$	2,008	$	2,178	$	2,024
Occupancy expense		560		577			539		570		577
Federal deposit insurance premium		78		73			69		71		76
Advertising		30		30			30		30		30
Data processing		259		251			254		279		274
Professional fees		405		455			499		565		1,088
Net other real estate owned expense		30		28			21		—		—
Other operating expenses		912		816			674		744		721
Total other expense	$	4,497	$	4,443		$	4,094	$	4,437	$	4,790

Income Taxes

The Company recorded $706,000 in income tax expense during the three months ended June 30, 2019 compared to $69,000 in income tax expense during the three months ended June 30, 2018. The effective tax rates for the Company for the three months ended June 30, 2019 and 2018 were 21.0 percent and 3.0 percent, respectively. For the nine months ended June 30, 2019, income tax expense decreased $2.3 million, or 58.1 percent, to $1.7 million from $3.9 million for the three months ended June 30, 2018. The effective tax rates for the Company for the nine months ended June 30, 2019 and 2018 were 19.9 percent and 45.8 percent, respectively.

In the first fiscal quarter of 2018, the Company revised its annual effective rate to reflect a change in the federal statutory rate from 34 percent to 21 percent, resulting from the Tax Cuts and Jobs Act that was enacted on December 22, 2017.

Statement of Condition Highlights at June 30, 2019

• Gross loans were $1.0 billion at June 30, 2019, increasing $109.0 million, or 12.0 percent, from September 30, 2018.     

• Total assets stood at $1.3 billion at June 30, 2019, increasing $231.9 million, or 22.4 percent, compared to September 30, 2018.

• Deposits totaled $957.2 million at June 30, 2019, an increase of $183.0 million, or 23.6 percent, compared to September 30, 2018. 

• Federal Home Loan Bank (FHLB) advances totaled $133.0 million at June 30, 2019, an increase from $118.0 million at September 30, 2018.

• The Bank had gross originations of $60.2 million during the quarter ended June 30, 2019, with net portfolio growth of $12.9 million. Gross loan originations during the quarter consisted of $28.4 million in commercial loans, $20.3 million in residential mortgage loans, $7.3 million in construction and development loans, and $4.2 million in consumer loans.   

• Non-performing assets (“NPAs”) were 0.65 percent of total assets at June 30, 2019, compared to 0.30 percent at September 30, 2018. Allowance for loan losses as a percentage of total non-performing loans was 418.1 percent at June 30, 2019, compared to 294.7 percent at September 30, 2018.
  
  
• Excluding one other real estate owned property of $5.8 million; NPAs were 0.19 percent of total assets at June 30, 2019.
  
  
• The Company’s ratio of shareholders’ equity to total assets was 11.03 percent at June 30, 2019, compared to 10.72 percent at September 30, 2018. 
  
  
• Book value per common share amounted to $17.98 at June 30, 2019, compared to $16.84 at September 30, 2018. 
  
  
• The efficiency ratio, a non-GAAP measure, was 56.9 percent at June 30, 2019, compared to 58.3 percent at September 30, 2018. 

Linked Quarter Statements of Condition Data

(in thousands, unaudited)
At quarter ended:	6/30/19		3/31/19		12/31/18			9/30/18		6/30/18
Cash and due from depository institutions	$	1,535	$	1,370	$	1,377		$	1,563	$	1,447
Interest bearing deposits in depository institutions		148,501		109,450		98,499			29,271		45,934
Investment securities, available for sale, at fair value		23,552		19,371		19,231			24,298		34,348
Investment securities held to maturity		23,323		26,789		29,323			30,092		31,004
Restricted stock, at cost		10,404		8,952		9,493			8,537		8,781
Loans receivable, net of allowance for loan losses		1,009,959		997,114		924,639			902,136		893,355
Other real estate owned		5,796		5,796		5,796			—		—
Accrued interest receivable		4,237		4,344		3,724			3,800		3,571
Property and equipment, net		6,795		6,948		7,067			7,181		7,240
Deferred income taxes, net		3,542		3,434		3,367			3,195		3,920
Bank-owned life insurance		19,766		19,643		19,524			19,403		19,282
Other assets		8,468		7,029		6,452			4,475		4,693
Total assets	$	1,265,878	$	1,210,240	$	1,128,492		$	1,033,951	$	1,053,575
Deposits	$	957,199	$	942,374	$	843,200		$	774,163	$	787,932
FHLB advances		133,000		98,000		118,000			118,000		123,000
Other short-term borrowings		—		—		—			2,500		2,500
Subordinated debt		24,579		24,540		24,500			24,461		24,421
Other liabilities		11,432		7,758		7,113			4,004		7,749
Shareholders' equity		139,668		137,568		135,679			110,823		107,973
Total liabilities and shareholders’ equity	$	1,265,878	$	1,210,240	$	1,128,492		$	1,033,951	$	1,053,575

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

Deposits
(in thousands, unaudited)
At quarter ended:	6/30/19		3/31/19		12/31/18		9/30/18		6/30/18
Demand:
Non-interest bearing	$	48,580	$	42,937	$	39,734	$	41,677	$	48,296
Interest-bearing		288,555		295,475		261,025		184,073		198,410
Savings		43,334		43,943		44,438		44,642		44,629
Money market		288,561		283,571		253,436		270,834		276,807
Time		288,169		276,448		244,567		232,937		219,790
Total deposits	$	957,199	$	942,374	$	843,200	$	774,163	$	787,932

The following table sets forth the Company’s consolidated average statements of condition for the periods presented.

Condensed Consolidated Average Statements of Condition
(in thousands, unaudited)
For the quarter ended:	6/30/19			3/31/19			12/31/18			9/30/18			6/30/18
Investment securities	$	49,408		$	47,761		$	53,882		$	64,848		$	75,932
Loans		1,010,033			956,840			912,259			908,962			864,348
Allowance for loan losses		(10,061	)		(9,408	)		(8,638	)		(9,077	)		(8,589	)
All other assets		164,424			130,712			123,643			72,535			120,730
Total assets		1,213,804			1,125,905			1,081,146			1,037,268			1,052,421
Non-interest bearing deposits	$	42,151		$	41,035		$	40,420		$	43,330		$	45,124
Interest-bearing deposits		882,825			814,412			758,813			732,489			746,341
FHLB advances		115,363			101,000			116,859			118,326			118,121
Other short-term borrowings		—			277			761			2,522			2,555
Subordinated debt		24,563			24,523			24,483			24,440			24,399
Other liabilities		10,192			7,728			5,750			6,457			9,072
Shareholders’ equity		138,710			136,930			134,060			109,704			106,809
Total liabilities and shareholders’ equity	$	1,213,804		$	1,125,905		$	1,081,146		$	1,037,268		$	1,052,421

Loans

Total net loans amounted to $1.0 billion at June 30, 2019 compared to $902.1 million at September 30, 2018, for a net increase of $107.8 million or 12.0 percent.  The allowance for loan losses amounted to $10.1 million and $9.0 million at June 30, 2019 and September 30, 2018, respectively.  Average loans during the third fiscal quarter of 2019 totaled $1.0 billion as compared to $864.3 million during the third fiscal quarter of 2018, representing a 16.9 percent increase. 

At the end of the third quarter of fiscal 2019, the loan portfolio remained weighted toward two primary components: commercial and the core residential portfolio, with commercial loans accounting for 70.2 percent and single-family residential real estate loans accounting for 21.2 percent of the loan portfolio.  Construction and development loans amounted to 5.0 percent and consumer loans represented 3.6 percent of the loan portfolio at such date.  The increase in the loan portfolio at June 30, 2019 compared to September 30, 2018, primarily reflected an increase of $84.6 million in commercial loans, an increase of $18.9 million in residential mortgage loans, a $4.6 million increase in construction and development loans, and an $886,000 increase in consumer loans.

For the quarter ended June 30, 2019, the Company originated total new loan volume of $60.2 million, which was offset by loan payoffs of $24.0 million, prepayments totaling $13.7 million, amortization of $7.1 million, and participations of $2.5 million.

Loan Portfolio Composition (which does not include loans held for sale):

Loans
(in thousands, unaudited)
At quarter ended:	6/30/19			3/31/19			12/31/18			9/30/18			6/30/18
Residential mortgage	$	216,114		$	202,655		$	202,306		$	197,219		$	192,901
Construction and Development:
Residential and commercial		47,485			44,014			41,140			37,433			39,845
Land		3,809			5,696			7,180			9,221			15,565
Total construction and development		51,294			49,710			48,320			46,654			55,410
Commercial:
Commercial real estate		543,045			550,933			508,448			493,929			477,584
Farmland		5,388			12,041			12,054			12,066			12,058
Multi-family		64,050			64,328			44,989			45,102			45,204
Commercial and industrial		97,877			82,731			76,892			73,895			76,957
Other		5,356			8,111			7,344			6,164			5,899
Total commercial		715,716			718,144			649,727			631,156			617,702
Consumer:
Home equity lines of credit		19,348			18,466			14,484			14,884			14,446
Second mortgages		15,018			15,773			16,674			18,363			19,063
Other		2,081			1,904			1,915			2,315			2,311
Total consumer		36,447			36,143			33,073			35,562			35,820
Total loans		1,019,571			1,006,652			933,426			910,591			901,833
Deferred loan costs, net		494			478			460			566			546
Allowance for loan losses		(10,106	)		(10,016	)		(9,247	)		(9,021	)		(9,024	)
Loans Receivable, net	$	1,009,959		$	997,114		$	924,639		$	902,136		$	893,355

Subsequent to quarter-end, in July 2019 the Company completed the sale of one commercial real estate loan classified as held for sale. The loan had an aggregate book balance of $367,000 and was sold at a gain of approximately $17,000.  As a result, our consolidated statement of financial condition at June 30, 2019 includes $367,000 of one commercial real estate loan as held for sale. As such it is not considered to be included in our loan portfolio at June 30, 2019.  Net proceeds from the sale amounted to $384,000 after deducting amounts due for outstanding liens, related expenses and applicable transfer fees. This transaction resulted in a decrease of approximately $17,000 through the provision for loan loss during the third quarter of fiscal 2019.

At June 30, 2019, the Company had $140.3 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 at June 30, 2019 included approximately $81.7 million in commercial and construction loans and $21.4 million in residential mortgage loans expected to fund over the following quarter.

Asset Quality

Non-accrual loans, all of which were making payments at June 30, 2019, were $2.2 million at June 30, 2019, a decrease of $498,000, or 18.5 percent, as compared to $2.7 million at September 30, 2018. The decrease in non-accrual loans was primarily due to the transfer of one commercial real estate loan with an aggregate book balance of $367,000 to loans held for sale (as noted above, such loan sale was subsequently completed in July 2019). The portfolio of non-accrual loans at June 30, 2019 was comprised of fourteen residential real estate loans with an aggregate outstanding balance of approximately $1.8 million, and thirteen consumer loans with an aggregate outstanding balance of approximately $339,000.  

At June 30, 2019, non-performing assets totaled $8.2 million, or 0.65 percent of total assets, as compared with $3.1 million, or 0.30 percent of total assets, at September 30, 2018. The increase in non-performing assets at June 30, 2019 compared to September 30, 2018 was primarily due to the transfer to Other Real Estate Owned (“OREO”), of one commercial real estate loan in the amount of $5.8 million.  

OREO was $5.8 million at June 30, 2019 and zero at September 30, 2018, as previously disclosed in the Company’s Annual Report on Form 10-K filed on December 14, 2018. Excluding the OREO property of $5.8 million, NPAs totaled $2.4 million, or 0.19 percent of total assets at June 30, 2019.

Performing Troubled Debt Restructuring (“TDR”) loans were $11.8 million at June 30, 2019 and $18.6 million at September 30, 2018.

Non-Performing Asset and Other Asset Quality Data:

(dollars in thousands, unaudited)
As of or for the quarter ended:	6/30/19			3/31/19			12/31/18			9/30/18			6/30/18
Non-accrual loans(1)	$	2,189		$	2,432		$	2,562		$	2,687		$	2,023
Loans 90 days or more past due and still accruing		228			—			759			374			1,338
Total non-performing loans		2,417			2,432			3,321			3,061			3,361
OREO		5,796			5,796			5,796			—			—
Total non-performing assets	$	8,213		$	8,228		$	9,117		$	3,061		$	3,361
Performing TDR loans	$	11,824		$	12,099		$	12,164		$	18,640		$	18,693
Non-performing assets / total assets		0.65	%		0.68	%		0.81	%		0.30	%		0.32	%
Non-performing loans / total loans		0.24	%		0.24	%		0.36	%		0.34	%		0.37	%
Net (recoveries)charge-offs	$	(34	)	$	101		$	1,227		$	128		$	30
Net (recoveries)charge-offs/average loans(2)		(0.01	)%		0.04	%		0.54	%		0.06	%		0.01	%
Allowance for loan losses / total loans		0.99	%		0.99	%		0.99	%		0.99	%		1.00	%
Allowance for loan losses / non-performing loans		418.1	%		411.8	%		278.4	%		294.7	%		268.5	%
Total assets	$	1,265,878		$	1,210,240		$	1,128,492		$	1,033,951		$	1,053,575
Total gross loans		1,019,571			1,006,652			933,426			910,591			901,833
Average loans		1,010,033			956,840			912,259			908,962			864,348
Allowance for loan losses		10,106			10,016			9,247			9,021			9,024

(1) Twenty-seven loans totaling approximately $2.2 million, or 100.0 percent of the total non-accrual loan balance, were making payments at June 30, 2019.

(2) Annualized.

The allowance for loan losses at June 30, 2019 amounted to approximately $10.1 million, or 0.99 percent of total loans, compared to $9.0 million, or 0.99 percent of total loans, at September 30, 2018.  The Company had a $56,000 provision for loan losses during the quarter ended June 30, 2019 compared to $125,000 for the quarter ended September 30, 2018.

Capital

At June 30, 2019, our total shareholders' equity amounted to $139.7 million, or 11.03 percent of total assets, compared to $110.8 million, or 10.72 percent of total assets at September 30, 2018.  At June 30, 2019, the Bank’s common equity tier 1 ratio was 14.98 percent, tier 1 leverage ratio was 12.36 percent, tier 1 risk-based capital ratio was 14.98 percent and the total risk-based capital ratio was 16.00 percent.  At September 30, 2018, the Bank’s common equity tier 1 ratio was 15.09 percent, tier 1 leverage ratio was 12.71 percent, tier 1 risk-based capital ratio was 15.09 percent and the total risk-based capital ratio was 16.13 percent.  At June 30, 2019, the Bank was in compliance with all applicable regulatory capital requirements.

On March 14, 2019, the Company’s Board of Directors approved a stock repurchase plan, under which the Company is authorized to repurchase up to 194,516 shares, or approximately 2.5 percent of the Company’s current outstanding common stock.  This authority extends through March 31, 2020 and may be exercised from time to time and in such amounts as market conditions warrant. The repurchases may be made on the open market, in block trades or otherwise. The program may be suspended or discontinued at any time.  During the three and nine months ended June 30, 2019, the Company purchased 16,699 shares and 16,863 shares of its common stock in the open market under the repurchase plan at an average cost of $19.94 per share and $19.95 per share, respectively. At June 30, 2019, the Company had 177,653 shares remaining in the repurchase plan.  

Non-GAAP Financial Measures

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 net income is presented in the table below including non-core income and expense items.

(in thousands)
For the quarter ended:	6/30/19		3/31/19		12/31/18		9/30/18		6/30/18
Net income as reported under GAAP	$	2,656	$	1,966	$	2,011	$	2,642	$	2,243
Non-core items, net of tax:
Prior period restatement costs(1)		—		—		—		—		667
Audit expenses(2)		—		—		110		—		—
Other(3)		—		10		100		15		24
Core net income, non-GAAP	$	2,656	$	1,976	$	2,221	$	2,657	$	2,934
Earnings per common share:
Diluted	$	0.35	$	0.26	$	0.29	$	0.41	$	0.45
Weighted average common shares outstanding:
Diluted		7,672,284		7,667,518		7,555,969		6,467,628		6,456,048

(1) Non-core items for the quarter ended June 30, 2018 consisted of additional legal and accounting fees arising out of matters pertaining to prior period restatements. (2) Non-core items for the quarter ended December 31, 2018 consisted of expenses arising out of the dismissal of the Company’s Certifying Accountant, as previously announced in the Company’s Form 8-K filed on July 9, 2018, which required issuance of consent on previously audited consolidated financial statements. (3) Included in non-core items such as accelerated payoff and non-accrual interest amounts.

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:	6/30/19		3/31/19		12/31/18		9/30/18		6/30/18
Other income	$	454	$	441	$	1,146	$	429	$	715
Less: Net investment securities gains		27		—		—		—		—
Other income, excluding net investment securities gains	$	427	$	441	$	1,146	$	429	$	715

“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, calculated as follows:

(dollars in thousands)
For the quarter ended:	6/30/19			3/31/19			12/31/18			9/30/18			6/30/18
Other expense as reported under GAAP	$	4,497		$	4,443		$	4,094		$	4,437		$	4,790
Less: non-core items(1)		—			—			139			—			688
Other expense, excluding non-core items, non-GAAP	$	4,497		$	4,443		$	3,955		$	4,437		$	4,102
Net interest income (tax equivalent basis), non-GAAP	$	7,471		$	7,263		$	6,958		$	7,172		$	7,021
Non-core items(2)		—			12			127			16			25
Net interest income (tax equivalent basis), excluding non-core items, non-GAAP		7,471			7,275			7,085			7,188			7,046
Other income, excluding gain on sale of investments		427			441			1,146			429			715
Total	$	7,898		$	7,716		$	8,231		$	7,617		$	7,761
Efficiency ratio, non-GAAP(3)		56.9	%		57.6	%		48.1	%		58.3	%		52.9	%
(1) Non-core items for the quarter ended December 31, 2018 consisted of expenses arising out of the dismissal of the Company’s Certifying Accountant, as previously announced in the Company’s Form 8-K filed on July 9, 2018, which required issuance of consent on previously audited consolidated financial statements. Non-core items for the quarter ended June 30, 2018 consisted of additional legal and accounting fees arising out of matters pertaining to prior period restatements. The Company believes these adjustments are helpful to provide insight into core operating results as a means to evaluate comparative results. (2) Included in non-core items such as accelerated payoff and non-accrual interest amounts.

The Company’s efficiency ratio, calculated on a GAAP basis, without excluding net investment securities gains and without deducting non-core items from other expense, follows:

For the quarter ended:	6/30/19		3/31/19		12/31/18		9/30/18		6/30/18
Efficiency ratio on a GAAP basis	56.8	%	57.8	%	50.6	%	58.9	%	62.3	%

Net interest margin, which is net 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 tax rate to reflect a change in the federal statutory rate from 35 percent to 21 percent, 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 21 percent for the current period and 24.5 percent 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:	6/30/19			3/31/19			12/31/18			9/30/18			6/30/18
Net interest income (GAAP)	$	7,461		$	7,249		$	6,947		$	7,109		$	6,976
Tax-equivalent adjustment(1)		10			14			11			63			45
TE net interest income, non-GAAP	$	7,471		$	7,263		$	6,958		$	7,172		$	7,021
Net interest income margin (GAAP)		2.54	%		2.66	%		2.65	%		2.82	%		2.73	%
Tax-equivalent effect		—			0.01			—			0.03			0.02
Net interest margin (TE), non-GAAP		2.54	%		2.67	%		2.65	%		2.85	%		2.75	%
____________________
(1) Reflects tax-equivalent adjustment for tax exempt investments.

About Malvern Bancorp, Inc.

Malvern Bancorp, Inc. is the holding company for Malvern Bank, National Association, an institution 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, Palm Beach, Florida, and Morristown, New Jersey, its New Jersey regional headquarters.  The Bank also operates a representative office in Montchanin, Delaware and a Private Banking Office in West Chester, Pennsylvania.  Its primary market niche is providing personalized service to its client base.  

Malvern Bank, through its Private Banking division and a strategic partnership with Bell Rock Capital in Rehoboth Beach, Delaware, provides personalized wealth management and advisory services to high net worth individuals and families. These 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

The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company, including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, and shareholder value creation.

Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company.  There can be no assurance that future developments affecting the Company will be the same as those anticipated by management.  The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements.  These risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the impact of competition and the acceptance of the Company’s products and services by new and existing customers; the impact of changes in financial services policies, laws and regulations (including the Dodd-Frank Wall Street Reform and Consumer Protection Act) and of governmental efforts to restructure the U.S. financial regulatory system; technological changes; changes in the level of the Company’s nonperforming assets and charge offs; any oversupply of inventory and deterioration in values of real estate in the markets in which the Company operates, both residential and commercial; the effect of changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, the Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters; possible other-than-temporary impairment of securities held by us; changes in consumer spending, borrowing and savings habits; the effects of the Company’s lack of a widely-diversified loan portfolio, including the risks of geographic and industry concentrations; ability to attract deposits and other sources of liquidity; changes in the financial performance and/or condition of our borrowers; changes in the competitive environment among financial and bank holding companies and other financial service providers; unanticipated regulatory or judicial proceedings; and the Company’s ability to manage the risk involved in the foregoing.  Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the 2018 Annual Report on Form 10-K of Malvern Bancorp, Inc. filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).

The Company undertakes no obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

MALVERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
                                                                                                                                                                                                   

(in thousands, except for share and per share data)		June 30, 2019				September 30, 2018
(unaudited)
ASSETS
Cash and due from depository institutions		$	1,535			$	1,563
Interest bearing deposits in depository institutions			148,501				29,271
Total cash and cash equivalents			150,036				30,834
Investment securities available for sale, at fair value (amortized cost of $23,783 and $24,804 at June 30, 2019 and September 30, 2018, respectively)			23,552				24,298
Investment securities held to maturity (fair value of $23,309 and $28,968 at June 30, 2019 and September 30, 2018, respectively)			23,323				30,092
Restricted stock, at cost			10,404				8,537
Loans receivable, net of allowance for loan losses			1,009,959				902,136
Other real estate owned			5,796				—
Accrued interest receivable			4,237				3,800
Property and equipment, net			6,795				7,181
Deferred income taxes, net			3,542				3,195
Bank-owned life insurance			19,766				19,403
Other assets			8,468				4,475
Total assets		$	1,265,878			$	1,033,951
LIABILITIES
Deposits:
Non-interest bearing		$	48,580			$	41,677
Interest-bearing			908,619				732,486
Total deposits			957,199				774,163
FHLB advances			133,000				118,000
Other short-term borrowings			—				2,500
Subordinated debt			24,579				24,461
Advances from borrowers for taxes and insurance			3,345				1,305
Accrued interest payable			1,443				784
Other liabilities			6,644				1,915
Total liabilities			1,126,210				923,128
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; 7,784,030 and 7,767,167 issued and outstanding, respectively, at June 30, 2019, and 6,580,879 shares issued and outstanding at September 30, 2018			78				66
Additional paid in capital			84,705				61,099
Retained earnings			57,045				50,412
Unearned Employee Stock Ownership Plan (ESOP) shares			(1,229	)			(1,338	)
Accumulated other comprehensive (loss) income			(595	)			584
Treasury stock, at cost: 16,863 shares at June 30, 2019			(336	)			—
Total shareholders’ equity			139,668				110,823
Total liabilities and shareholders’ equity		$	1,265,878			$	1,033,951

MALVERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

		Three Months Ended June 30,						Nine Months Ended June 30,
(in thousands, except for share data)			2019			2018			2019			2018
(unaudited)
Interest and Dividend Income
Loans, including fees		$	11,415		$	9,380		$	32,171		$	26,821
Investment securities, taxable			259			300			760			832
Investment securities, tax-exempt			49			61			167			191
Dividends, restricted stock			159			130			450			333
Interest-bearing cash accounts			574			327			1,421			1,236
Total Interest and Dividend Income			12,456			10,198			34,969			29,413
Interest Expense
Deposits			3,926			2,304			10,265			6,641
Short-term borrowings			-			13			7			54
Long-term borrowings			686			539			1,891			1,648
Subordinated debt			383			366			1,149			1,144
Total Interest Expense			4,995			3,222			13,312			9,487
Net interest income			7,461			6,976			21,657			19,926
Provision for Loan Losses			56			589			2,379			829
Net Interest Income after Provision for   Loan Losses			7,405			6,387			19,278			19,097
Other Income
Service charges and other fees			252			530			1,430			1,038
Rental income-other			53			63			184			196
Net gains on sale of investments			27			—			27			—
Net gains on sale of real estate			—			—			—			1,186
Net gains on sale of loans			—			3			37			96
Earnings on bank-owned life insurance			122			119			363			359
Total Other Income			454			715			2,041			2,875
Other Expense
Salaries and employee benefits			2,223			2,024			6,444			6,015
Occupancy expense			560			577			1,676			1,725
Federal deposit insurance premium			78			76			220			227
Advertising			30			30			90			122
Data processing			259			274			764			819
Professional fees			405			1,088			1,359			2,326
Net other real estate owned expense			30			—			79			—
Other operating expenses			912			721			2,402			2,132
Total Other Expense			4,497			4,790			13,034			13,366
Income before income tax expense			3,362			2,312			8,285			8,606
Income tax expense			706			69			1,652			3,942
Net Income		$	2,656		$	2,243		$	6,633		$	4,664
Earnings per common share
Basic		$	0.35		$	0.35		$	0.87		$	0.72
Diluted		$	0.35		$	0.35		$	0.87		$	0.72
Weighted Average Common Shares   Outstanding
Basic			7,671,623			6,453,031			7,631,241			6,449,089
Diluted			7,672,284			6,456,048			7,631,902			6,452,068

MALVERN BANCORP, INC AND SUBSIDIARIES SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA
	Three Months Ended
(in thousands, except for share and per share data) (annualized where   applicable)	6/30/2019			3/31/2019			6/30/2018
(unaudited)
Statements of Operations Data
Interest income	$	12,456		$	11,601		$	10,198
Interest expense		4,995			4,352			3,222
Net interest income		7,461			7,249			6,976
Provision for loan losses		56			870			589
Net interest income after provision for loan losses		7,405			6,379			6,387
Other income		454			441			715
Other expense		4,497			4,443			4,790
Income before income tax expense		3,362			2,377			2,312
Income tax expense		706			411			69
Net income	$	2,656		$	1,966		$	2,243
Earnings (per Common Share)
Basic	$	0.35		$	0.26		$	0.35
Diluted	$	0.35		$	0.26		$	0.35
Statements of Condition Data (Period-End)
Investment securities available for sale, at fair value	$	23,552		$	19,371		$	34,348
Investment securities held to maturity (fair value of $23,309,  $26,338 and $29,990, respectively)		23,323			26,789			31,004
Loans, net of allowance for loan losses		1,009,959			997,114			893,355
Total assets		1,265,878			1,210,240			1,053,575
Deposits		957,199			942,374			787,932
FHLB advances		133,000			98,000			123,000
Short-term borrowings		—			—			2,500
Subordinated debt		24,579			24,540			24,421
Shareholders' equity		139,668			137,568			107,973
Common Shares Dividend Data
Cash dividends	$	—		$	—		$	—
Weighted Average Common Shares Outstanding
Basic		7,671,623			7,667,518			6,453,031
Diluted		7,672,284			7,667,518			6,456,048
Operating Ratios
Return on average assets		0.88	%		0.70	%		0.85	%
Return on average equity		7.66	%		5.74	%		8.40	%
Average equity / average assets		11.43	%		12.16	%		10.15	%
Book value per common share (period-end)	$	17.98		$	17.68		$	16.42
Non-Financial Information (Period-End)
Common shareholders of record		396			399			406
Full-time equivalent staff		84			89			87

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

Investor Contact:
Ronald Morales
(610) 695-3646

 

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