Malvern Bancorp, Inc. Reports Net Income of $1.2 Million or $0.18 Per Share for the Fourth Quarter of Fiscal 2015, Representing a 296.0% Increase Over the Fourth Quarter of Fiscal 2014

PAOLI, Pa., Oct. 30, 2015 (GLOBE NEWSWIRE) — Malvern Bancorp, Inc. (NASDAQ:MLVF) (the “Company”), parent company of Malvern Federal Savings Bank (“MFSB” or the “Bank”), today reported operating results for the fourth quarter ended September 30, 2015.  Net income amounted to $1.2 million, or $0.18 per share, for the quarter ended September 30, 2015, an increase of $870,000 or 296.0 percent as compared with the net income of $294,000, or $0.05 per share, for the quarter ended September 30, 2014.

For the twelve months ended September 30, 2015, net income amounted to $3.7 million, or $0.58 per share, compared with the net income of $323,000, or $0.05 per share, for fiscal 2014.

“We feel that we have created the proper momentum for Malvern, our fourth quarter and year-to-date earnings reflect our fundamental core strength.  We have a solid framework with which to scale the organization and increase profitability. The results for the fourth quarter performance reflect continued growth in income, stable asset quality, and an improved infrastructure cost.  As previously stated we are pleased with the significant improvements accomplished here since the transition began last September and with the financial returns achieved,” said Anthony C. Weagley, Chief Executive Officer & President of Malvern Bancorp, Inc.

Highlights for the quarter include:

  • Return on average assets (“ROAA”) was 0.72% for the three months ended September 30, 2015, compared to 0.21% a year earlier, and return on average equity (“ROAE”) rose to 5.77% for the three months ended September 30, 2015, compared with 1.53% for the three months ended September 30, 2014.
  • The Company originated $39.3 million in new loans in the fourth quarter which was offset in part with $19.8 million in payoffs, prepayments and maturities from its portfolio; $2.5 million in residential mortgage loans, $28.0 million in commercial loans, $6.5 million in construction and development loans and $2.3 million in consumer loans.  
  • Non-performing assets (“NPAs”) were at 0.39 percent of total assets at September 30, 2015, compared to 0.44 percent at June 30, 2015 and 0.80 percent at September 30, 2014. The allowance for loan losses as a percentage of total non-performing loans was 333.6 percent at September 30, 2015 compared to 337.1 percent at June 30, 2015 and 191.9 percent at September 30, 2014.
  • The Company’s ratio of shareholders’ equity to total assets was 12.41 percent at September 30, 2015, compared to 12.79 percent at June 30, 2015, and 14.16 percent at September 30, 2014.
  • Book value per common share amounted to $12.41 at September 30, 2015, compared to $12.17 at June 30, 2015 and $11.71 at September 30, 2014.
  • The efficiency ratio, a non-GAAP measure, was 73.9 percent for the fourth quarter of fiscal 2015 on an annualized basis, compared to 69.0 percent in the third quarter of fiscal 2015 and 87.8 percent in the fourth quarter of fiscal 2014.
  • The Company’s balance sheet reflected growth of $113.4 million coupled with stable asset quality, and capital levels that exceeded accepted standards for a well-capitalized institution. 
           
Selected Financial Ratios  (unaudited; annualized where applicable)          
           
As of or for the quarter ended: 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14
Return on average assets   0.72 %   0.77 %   0.64 %   0.22 %   0.21 %
Return on average equity   5.77 %   6.01 %   5.05 %   1.65 %   1.53 %
Net interest margin (tax equivalent basis)   2.71 %   2.61 %   2.58 %   2.61 %   2.70 %
Loans / deposits ratio   84.68 %   84.54 %   85.57 %   87.61 %   94.10 %
Shareholders’ equity / total assets   12.41 %   12.79 %   12.68 %   12.91 %   14.16 %
Efficiency ratio (1)   73.9 %   69.0 %   76.6 %   87.5 %   87.8 %
Book value per common share $   12.41   $   12.17   $   12.20   $   11.88   $   11.71  

_____________

(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, 2015, total interest income on a fully tax equivalent basis increased $585,000 or 12.1 percent, to $5.4 million, compared to the three months ended September 30, 2014. Interest income rose in the quarter ended September 30, 2015, compared to the comparable period in fiscal 2014 primarily due to an $85.0 million increase in the average balance of our investment securities. Total interest expense increased by $150,000, or 12.4 percent, to $1.4 million, for the three months ended September 30, 2015, compared to the comparable period in fiscal 2014.  

Net interest income on a fully tax equivalent basis was $4.1 million for the three months ended September 30, 2015, increasing $435,000, or 12.0 percent, from $3.6 million for the comparable three month period in fiscal 2014. The change for the three months ended September 30, 2015 primarily was the result of an increase in average interest earning assets, which increased $62.7 million.  The net interest spread on an annualized tax-equivalent basis was at 2.59 percent and 2.55 percent for the three months ended September 30, 2015 and September 30, 2014, respectively. For the quarter ended September 30, 2015, the Company’s net interest margin on a tax equivalent basis increased slightly to 2.71 percent as compared to 2.70 percent for the same three month period in fiscal 2014. “We continue to carry excess liquidity in our cash pool. As we previously have discussed, this is a positive trend as we generate funding for the Company and in turn positions the Company to fuel increased loan originations.  During the fourth quarter we were able to add $39.3 million in gross loan originations to the balance sheet keeping pace with funding,“ commented Mr. Weagley. 

The 12.4 percent increase in interest expense for the quarter primarily reflects higher volumes of borrowings. The increased borrowings for the period are tied primarily to an interest rate swap that was executed to improve interest rate risk. The average cost of funds was 1.03 percent for the quarter ended September 30, 2015 as compared to 1.06 percent for the same three month period in fiscal 2014 and on a linked sequential quarter basis increased one basis point compared to the third quarter of fiscal 2015. 

For the twelve months ended September 30, 2015, total interest income on a fully tax equivalent basis increased $425,000 or 2.1 percent, to $20.6 million, compared to $20.2 million for fiscal 2014. Total interest expense increased by $177,000, or 3.5 percent, to $5.2 million, for the twelve months ended September 30, 2015, compared to fiscal 2014.  Interest income increased for the twelve months ended September 30, 2015, compared to fiscal 2014 primarily due to a $40.9 million increase in the average balance of our investment securities. Compared to fiscal 2014, for the twelve months ended September 30, 2015, average interest earning assets increased $33.2 million while net interest spread and margin decreased on a tax-equivalent basis by 11 basis points and 12 basis points, respectively.

Earnings Summary for the Period Ended September 30, 2015

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

Condensed Consolidated Statements of Income (unaudited)
           
(dollars in thousands, except per share data)          
For the quarter ended: 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14
Net interest income $   3,979   $   3,838   $   3,836   $   3,561   $   3,617  
Provision for loan losses                 90     183  
Net interest income after  provision for loan losses   3,979     3,838     3,836     3,471     3,434  
Other income   639     640     745     511     446  
Other expense   3,454     3,273     3,573     3,661     3,569  
Income before income tax expense   1,164     1,205     1,008     321     311  
Income tax expense                   17  
Net income $   1,164   $   1,205   $   1,008   $   321   $   294  
Earnings per common share:          
Basic $   0.18   $    0.19   $   0.16   $   0.05   $   0.05  
Weighted average common shares outstanding:    
Basic   6,398,720     6,395,126     6,391,521     6,387,932     6,384,319  
                               

Other Income

Other income increased $193,000 for the fourth quarter of fiscal 2015 compared with the same period in fiscal 2014.  During the fourth quarter of fiscal 2015, the Company recorded $78,000 in net gains on sales of investment securities compared to no net gains on sales of investment securities for the same period in fiscal 2014. Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $561,000 for the three months ended September 30, 2015 compared to other income of $446,000 for the three months ended September 30, 2014 and $495,000 for the three months ended June 30, 2015.  Increases in other income in the fourth quarter of fiscal 2015 when compared to the fourth quarter of fiscal 2014 (excluding securities gains) were primarily from an increase of bank owned life insurance income of $151,000 and $34,000 in net gain on sale of loans, which were partially offset by a decrease in service charges of $66,000 and a decrease in rental income of $4,000. 

For the twelve months ended September 30, 2015, total other income increased $380,000 compared to fiscal 2014, primarily as a result of $432,000 related to an increase in net gains on sales of investment securities, an increase in service charges on deposit accounts of $42,000, an increase in bank owned life insurance income of $121,000 and a decrease of $41,000 in loss of disposal of fixed assets, partially offset by decreased income on rental income and net gain on sale of loans.

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

(in thousands, unaudited)          
For the quarter ended: 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14
Service charges on deposit accounts $   169   $   286   $   264   $   270   $   235  
Rental income – other   60     61     64     64     64  
Net gains on sales of investments, net   78     145     266     26      
Loss on disposal of fixed assets                    
Gain on sale of loans, net   47     16     20     19     13  
Bank-owned life insurance   285     132     131     132     134  
Total other income $   639   $   640   $   745   $   511   $   446  
 

Other Expense

Total other expense for the fourth quarter of fiscal 2015 amounted to $3.5 million, which was approximately $181,000 or 5.5 percent higher than other expense for the three months ended June 30, 2015.  The increase in other expense in the fourth quarter of fiscal 2015 was primarily related to an increase in employee salaries and benefits, which increased $54,000 from the quarter ended June 30, 2015, as well as, a $12,000 increase in occupancy expense, a $27,000 increase in federal deposit insurance premium, a $9,000 increase in data processing expense, a $66,000 increase in professional fees and a $42,000 increase in other operating expense. These increases were partially offset by decreases in advertising of $14,000 and other real estate owned expense of $15,000.   

The decrease in other expense for the three months ended September 30, 2015, when compared to the quarter ended September 30, 2014, was $115,000, or 3.2 percent. Decreases primarily reflected reductions in salaries and employee benefits of $249,000, professional fees of $137,000, primarily reflecting lower expenses related to loan workouts, advertising expense of $46,000 and a $230,000 decrease in other operating expense.  These decreases were partially offset by increases of $47,000 in federal deposit insurance premium, 9,000 in data processing expense, $4,000 in occupancy expense and a $487,000 change in other real estate owned income/expense, net. The change in other real estate owned expense was primarily due to a $500,000 insurance reimbursement of a fire claim for a property located in Melrose Park, Pennsylvania received during the fourth quarter of fiscal 2014. 

For the twelve months ended September 30, 2015, total other expense was reduced by $2.7 million, or 16.2 percent, compared to fiscal 2014. Decreases primarily included $1.8 million in salaries and employee benefits primarily due to workforce reductions, $376,000 in occupancy expense, $322,000 in advertising costs, $634,000 in professional fees and $9,000 in data processing expense. These decreases were partially offset by a $253,000 reduction in other real estate owned income and by an increase in other operating expenses of $128,000 and a $49,000 increase in federal deposit insurance premium.

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

(in thousands, unaudited)          
  For the quarter ended: 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14
  Salaries and employee benefits $   1,387   $   1,333   $   1,550   $   1,728   $   1,636  
  Occupancy expense   419     407     465     424     415  
  Federal deposit insurance premium   230     203     184     167     183  
  Advertising   40     54     60     85     86  
  Data processing   321     312     301     302     312  
  Professional fees   430     364     434     343     567  
  Other real estate owned expense (income), net   17     32     (59 )   (36 )   (470 )
  Other operating expenses   610     568     638     648     840  
  Total other expense $   3,454   $   3,273   $   3,573   $   3,661   $   3,569  
   

Statement of Condition Highlights at September 30, 2015

Commenting on the balance sheet, Mr. Weagley indicated: “Our efforts to change the balance sheet continued during the fourth quarter with marked results in the gross amount of commercial loan generation.  We continue to execute on our business plans and are positioning the Company to take advantage of the growth activity we are achieving in our markets, which includes our new loan production location in New Jersey.  Our business plans call for us to achieve the transition to a commercial bank balance sheet. The new Malvern brand has been successfully launched.” Highlights as of September 30, 2015 included:

  • Balance sheet strength, with total assets amounting to $656.0 million at September 30, 2015, increasing $113.4 million, or 20.9 percent compared to September 30, 2014.
  • On a linked sequential basis, the Company’s gross loans in the fourth quarter of 2015 increased $19.5 million, to $394.2 million at September 30, 2015, from $374.7 million at June 30, 2015.  The $19.5 million increase in the loan portfolio at September 30, 2015 compared to June 30, 2015, primarily reflected an increase of $25.6 million in commercial loans and a $1.0 million increase in construction and development loans. These increases were partially offset by a $4.2 million decrease in residential mortgage loans and a $2.9 million reduction in consumer loans at September 30, 2015 as compared to June 30, 2015.
            
  • Deposits totaled $465.5 million at September 30, 2015, an increase of $52.6 million or 12.7 percent compared to September 30, 2014.  Total demand, savings, money market, and certificates of deposit less than $100,000 increased $43.0 million or 14.0 percent from September 30, 2014. During fiscal 2015, we have focused on allowing our relatively higher costing non-household certificates of deposit to run off while attempting to increase our relatively lower costing core and commercial deposits as a source of funds.
  • Borrowings totaled $103.0 million and $48.0 million at September 30, 2015 and September 30, 2014, respectively.

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: 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14
Cash and due from depository institutions $   16,026   $   3,460   $   1,056   $   1,404   $   1,203  
Interest bearing deposits in depository institutions   24,237     20,833     50,587     46,648     17,984  
Investment securities, available for sale, at fair value   128,354     130,509     113,557     135,786     100,943  
Investment securities held to maturity   57,221     59,243     50,697          
Restricted stock, at cost   4,765     4,369     4,602     3,805     3,503  
Loans held for sale       657              
Loans receivable, net of allowance for loan losses   391,307     371,897     377,340     383,389     386,074  
Other real estate owned   1,168     1,366     1,430     1,494     1,964  
Accrued interest receivable   2,484     2,404     2,168     1,623     1,322  
Property and equipment, net   6,535     6,502     6,592     6,718     6,823  
Deferred income taxes   2,874     2,816     2,940     2,419     2,376  
Bank-owned life insurance   17,905     18,659     18,527     18,397     18,264  
Other assets   2,814     1,529     1,610     1,487     1,808  
Total assets $   655,690   $    624,244   $   631,106   $   603,170   $   542,264  
Deposits $   465,522   $   443,218   $   444,146   $   440,625   $   412,953  
Borrowings   103,000     93,000     98,000     78,000     48,000  
Other liabilities   5,777     8,214     8,934     6,660     4,539  
Shareholders’ equity   81,391     79,812     80,026     77,885     76,772  
Total liabilities and shareholders’ equity $   655,690   $   624,244   $   631,106   $   603,170   $   542,264  
 

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

Deposits (unaudited)            
(in thousands)          
At quarter ended: 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14
Demand:          
  Non-interest bearing $   27,010   $   26,877   $   25,111   $   22,242   $   23,059  
  Interest-bearing   82,897     85,085     87,921     86,948     81,921  
Savings   45,189     44,949     44,848     44,747     44,917  
Money market   108,706     78,963     70,066     69,553     59,529  
Time   201,720     207,344     216,200     217,135     203,527  
  Total deposits $   465,522   $   443,218   $   444,146   $   440,625   $   412,953  
 

Loans

Total net loans were $391.3 million at September 30, 2015 compared to $386.1 million at September 30, 2014.  The allowance for loan losses amounted to $4.7 million and $4.6 million at September 30, 2015 and September 30, 2014, respectively. Average loans during the fourth quarter of fiscal 2015 totaled $383.1 million as compared to $395.1 million during the fourth quarter of fiscal 2014, representing a 3.0 percent decrease.

At the end of fiscal 2015, the loan portfolio remained weighted toward the core residential portfolio, with single-family residential real estate loans accounting for 54.5 percent of the loan portfolio, construction and development loans for 2.0 percent, commercial loans accounting for 27.5 percent, and consumer loans representing 16.0 percent of the loan portfolio at such date. Total loans increased $5.6 million, to $394.2 million at September 30, 2015 compared to $388.6 million at September 30, 2014.  The $5.6 million increase in the loan portfolio at September 30, 2015 compared to September 30, 2014, primarily reflected an increase of $30.4 million in commercial loans and a $822,000 increase in construction and development loans. These increases were partially offset by a $16.4 million decrease in residential mortgage loans and a $9.2 million reduction in consumer loans at September 30, 2015 as compared to September 30, 2014.  

For the year ended September 30, 2015, the company originated total new volume of $92.7 million which was offset in part with payoffs, prepayments and maturities totaling $87.1 million.  The payoffs were primarily contained to the consumer and residential portfolios.   “With the strength of the pipelines and a tapering of payoff activity, we see solid growth in the loan portfolio moving into the next quarter and in 2016,” commented Mr. Weagley.

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

Loans (unaudited)          
(in thousands)          
At quarter ended: 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14
Residential mortgage $ 214,958   $ 219,197   $ 225,232   $ 229,507   $ 231,324  
Construction and Development:          
Residential and commercial   5,677     6,751     5,922     6,039     5,964  
Land   2,142     25     344         1,033  
Total construction and development   7,819     6,776     6,266     6,039     6,997  
Commercial:          
Commercial real estate   87,686     67,617     68,858     67,274     71,579  
Multi-family   7,444     5,451     5,508     5,450     1,032  
Other   13,380     9,839     5,506     5,603     5,480  
Total commercial   108,510     82,907     79,872     78,327     78,091  
Consumer:          
Home equity lines of credit   22,919     23,173     23,073     24,430     22,292  
Second mortgages   37,633     40,121     43,013     45,051     47,034  
Other   2,359     2,523     2,610     2,675     2,839  
Total consumer   62,911     65,817     68,696     72,156     72,165  
Total loans   394,198     374,697     380,066     386,029     388,577  
Deferred loan costs, net   1,776     1,774     1,886     1,960     2,086  
Allowance for loan losses   (4,667 )   (4,574 )   (4,612 )   (4,600 )   (4,589 )
Loans Receivable, net $ 391,307   $ 371,897   $ 377,340   $ 383,389   $ 386,074  
 

At September 30, 2015, the Company had $67.7 million in overall undisbursed loan commitments, which consisted primarily of unused commercial lines of credit, home equity lines of credit and available usage from active construction facilities.   Included in the overall undisbursed commitments are the Company’s “Approved, Accepted but Unfunded” pipeline, which includes approximately $9.0 million in construction and $15.0 million in commercial real estate loans and $2.8 million in residential mortgage loans expected to fund over the next 90 days. “We continue to see a surge in activity and growth in our commercial portfolio with our additional work in progress in current pipelines of $88.1 million,” said Mr. Weagley.       

Asset Quality

Non-accrual loans were $1.4 million at September 30, 2015, as compared to $1.4 million at June 30, 2015 and $2.4 million at September 30, 2014.  Other real estate owned, (“OREO”) was $1.2 million at September 30, 2015, as compared with $1.4 million at June 30, 2015 and $2.0 million at September 30, 2014, respectively.  Total performing troubled debt restructured loans were $1.1 million at September 30, 2015, $109,000 at June 30, 2015 and $1.0 million at September 30, 2014, respectively.  The $82,000 increase in troubled debt restructured loans at September 30, 2015 compared to September 30, 2014 was due to a commercial loan with an outstanding balance of approximately $900,000 being paid-off during the second quarter of fiscal 2015 and two commercial loans with an outstanding balance of approximately $982,000 being classified as TDRs during the fourth quarter of fiscal 2015.

At September 30, 2015, non-performing assets totaled $2.6 million, or 0.39 percent of total assets, as compared with $2.7 million, or 0.44 percent, at June 30, 2015 and $4.4 million, or 0.80 percent, at September 30, 2014.  The decrease from September 30, 2014 reflects the Company’s continued diligence to satisfactorily work out certain problem assets.  The portfolio of remaining non-accrual loans at September 30, 2015 was comprised of six residential real estate loans with an aggregate outstanding balance of approximately $599,000, five consumer loans with an aggregate outstanding balance of approximately $199,000, one construction and development loan with an outstanding balance of $12,000 and four commercial loans with an aggregate outstanding balance of $589,000 that were on non-accrual status at September 30, 2015. Of the non-accrual loans, two commercial loans to one borrower, with an aggregate balance of $492,000, were restructured during the quarter ended June 30, 2015.  These loans are classified as troubled debt restructured loans at September 30, 2015. The borrower is currently making principal and interest payments as agreed under the terms of the restructuring. Though these loans are classified as TDRs, the Company believes that over sufficient time with consistent payments from the borrowers, these loans can return to accruing status.

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: 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14
Non-accrual loans(1) $   1,399   $    1,357   $   1,826   $   2,334   $   2,391  
Loans 90 days or more past due and still accruing                    
Total non-performing loans   1,399     1,357     1,826     2,334     2,391  
Other real estate owned   1,168     1,366     1,430     1,494     1,964  
Total non-performing assets $   2,567   $   2,723   $   3,256   $   3,828   $   4,355  
Performing troubled debt restructured loans $   1,091   $   109   $   109   $   1,007   $   1,009  
           
Non-performing assets / total assets   0.39 %   0.44 %   0.52 %   0.63 %   0.80 %
Non-performing loans / total loans   0.35 %   0.36 %   0.48 %   0.60 %   0.62 %
Net charge-offs (recoveries) $   (93 ) $   38   $   (12 ) $   79   $   452  
Net charge-offs (recoveries) / average loans(2)   0.00 %   0.04 %   0.01 %   0.08 %   0.19 %
Allowance for loan losses / total loans   1.18 %   1.22 %   1.21 %   1.19 %   1.18 %
Allowance for loan losses / non-performing loans   333.60 %   337.07 %   252.57 %   197.09 %   191.93 %
           
Total assets $ 655,690   $ 624,244   $ 631,106   $ 603,170   $ 542,264  
Total loans   394,198     374,697     380,066     386,029     388,577  
Average loans    383,092     378,953     384,915     389,544     395,067  
Allowance for loan losses   4,667     4,574     4,612     4,600     4,589  

_________________

(1) Seven loans totaling approximately $931,000 or (66.6%) of the total non-accrual loan balance were making payments at September 30, 2015. 

(2) Annualized.

The allowance for loan losses at September 30, 2015 amounted to approximately $4.7 million, or 1.18 percent of total loans, compared to 1.18 percent of total loans at September 30, 2014. The Company had no provision for loan losses during the quarter ended September 30, 2015 compared to $183,000 during the quarter ended September 30, 2014.  Provision expense was lower during the quarter ended September 30, 2015 due to a decline in charge-offs history, generally, and a net recovery position during the quarter ended September 30, 2015.

Capital

At September 30, 2015, our total shareholders’ equity amounted to $81.4 million, or 12.41 percent of total assets compared to $76.8 million at September 30, 2014.  The Company’s book value per common share was $12.41 at September 30, 2015, compared to $11.71 at September 30, 2014.

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, 2014, the Bank’s tier 1 leverage ratio was 12.09 percent, tier 1 risk-based capital ratio was 19.50 percent and the total risk-based capital ratio was 20.75 percent.  At September 30, 2015, the Bank was in compliance with all applicable regulatory capital requirements.

Non-GAAP Financial Measures

Reported amounts are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company’s management believes that the supplemental non-GAAP information provided in this press release is utilized by market analysts and others to evaluate a company’s financial condition and, therefore, that such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures presented by other companies.

The Company’s other income is presented in the table below including and excluding net investment securities gains. The Company’s management believes that many investors desire to evaluate other income without regard for such gains.

(in thousands)          
For the quarter ended: 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14
Other income $   639   $   640   $   745   $   511   $   446  
Less: Net investment securities gains   78     145     266     26      
Other income, excluding net investment securities gains $   561   $   495   $   479   $   485   $   446  
 

“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: 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14
Other expense $   3,454   $   3,273   $   3,573   $   3,661   $   3,569  
Less: non-core items(1)   42     244     242     110      
Other expense, excluding non-core items $ 3,412   $ 3,029   $ 3,331   $ 3,551   $ 3,569  
           
Net interest income (tax equivalent basis) $   4,056   $   3,898   $   3,871   $   3,575   $   3,621  
Other income, excluding net investment securities gains   561     495     479     485     446  
Total $  4,617   $   4,393   $   4,350   $   4,060   $   4,067  
           
Efficiency ratio   73.9 %   69.0 %   76.6 %   87.5 %   87.8 %
______________________          
(1) Included in non-core items are costs which include expenses related to the Company’s corporate restructuring initiatives,
  such as professional fees, litigation and settlement costs, severance costs, external payroll development costs  related to
  such restructuring initiatives. The Company believes these adjustments are necessary to provide the most accurate
  measure of core operating results as a means to evaluate comparative results.
 

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

For the quarter ended: 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14
Efficiency ratio on a GAAP basis   73.9 %   67.6 %   72.7 %   87.2 %   87.8 %
           

Net interest margin, which is non-interest income as a percentage of average interest-earning assets, is presented on a fully tax equivalent (“TE”) basis as we believe this non-GAAP measure is the preferred industry measurement for this item.  The 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: 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14
Net interest income (GAAP) $   3,979   $   3,838   $   3,836   $   3,561   $   3,617  
Tax-equivalent adjustment(1)    77     60     35     14     4  
TE net interest income $   4,056   $   3,898   $   3,871   $   3,575   $   3,621  
           
Net interest income margin (GAAP)   2.66 %   2.57 %   2.56 %   2.60 %   2.70 %
Tax-equivalent effect     0.05       0.04       0.02       0.01      
Net interest margin (TE)   2.71 %   2.61 %   2.58 %   2.61 %   2.70 %
____________________          
(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: 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14
Investment securities $   188,424   $   178,713   $   151,746   $   114,129   $   103,458  
Loans   383,092     378,953     384,915     389,544     395,067  
Allowance for loan losses   (4,596 )   (4,649 )   (4,614 )   (4,600 )   (4,851 )
All other assets   82,892     76,915     95,921     77,776     71,930  
Total assets $   649,812   $   629,932   $   627,968   $   576,849   $   565,604  
Non-interest bearing deposits $   32,477   $   28,943   $   27,002   $   26,770   $   26,057  
Interest-bearing deposits   428,205     415,646     419,367     393,225     408,937  
Borrowings   101,802     96,462     94,556     72,945     47,998  
Other liabilities   6,549     8,674     7,272     6,151     5,549  
Shareholders’ equity   80,779     80,207     79,771     77,758     77,063  
Total liabilities and shareholders’ equity $   649,812   $   629,932   $   627,968   $   576,849   $   565,604  
           

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 Main Line. For more than a century, Malvern Federal has been committed to helping people build prosperous communities as a trusted financial partner, forging lasting relationships through teamwork, respect and integrity. The Bank conducts business from its headquarters in Paoli, Pennsylvania, a suburb of Philadelphia, as well as seven other financial centers located throughout Chester and Delaware Counties, Pennsylvania. Its primary market niche is providing personalized service to its client base. The Bank focuses its lending activities on retail clients, commercial lending to small and medium-sized businesses, real estate developers and high net worth individuals.

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 http://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,
2015
   September 30,
2014
(unaudited)            
ASSETS              
Cash and due from depository institutions   $   16,026     $   1,203    
Interest bearing deposits in depository institutions       24,237         17,984    
Total cash and cash equivalents       40,263         19,187    
Investment securities available for sale, at fair value       128,354         100,943    
Investment securities held to maturity (fair value of $56,825 and $0)       57,221            
Restricted stock, at cost       4,765         3,503    
Loans receivable, net of allowance for loan losses       391,307         386,074    
Other Real estate owned       1,168         1,964    
Accrued interest receivable       2,484         1,322    
Property and equipment, net       6,535         6,823    
Deferred income taxes, net       2,874         2,376    
Bank-owned life insurance       17,905         18,264    
Other assets       2,814         1,808    
  Total assets   $   655,690     $   542,264    
LIABILITIES              
Deposits:              
Non-interest bearing   $   27,010     $   23,059    
Interest-bearing:       438,512         389,894    
Total deposits       465,522         412,953    
FHLB Advances       103,000         48,000    
Advances from borrowers for taxes and insurance       1,806         1,786    
Accrued interest payable       396         149    
Other liabilities       3,575         2,604    
  Total liabilities       574,299         465,492    
SHAREHOLDERS’ EQUITY              
Preferred stock, $0.01 par value, 10,000,000 shares, authorized, not issued                  
Common stock, $0.01 par value, authorized 40,000,000 shares authorized, issued and outstanding: 6,558,473 shares at September 30, 2015 and  September 30, 2014         66           66    
Additional paid in capital       60,365         60,317    
Retained earnings       23,814         20,116    
Unearned Employee Stock Ownership Plan (ESOP) shares       (1,775 )       (1,922 )  
Accumulated other comprehensive loss       (1,079 )       (1,805 )  
  Total shareholders’ equity       81,391         76,772    
  Total liabilities and shareholders’ equity   $   655,690     $   542,264    

MALVERN BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 
    Three Months Ended September 30,   Twelve Months Ended September 30,
(in thousands, except for share data)     2015       2014         2015         2014  
(unaudited)                        
Interest and Dividend Income                        
Loans, including fees   $ 4,128   $   4,288     $   16,484     $   17,736  
Investment securities, taxable     922       486         3,073         2,109  
Investment securities, tax-exempt     217       8         522         145  
Dividends, restricted stock     67       36         311         123  
Interest-bearing cash accounts     10       14         72         54  
Total Interest and Dividend Income     5,344       4,832         20,462         20,167  
Interest Expense                        
Deposits     870       923         3,431         3,969  
Borrowings     495       292         1,817         1,102  
Total Interest Expense     1,365       1,215         5,248         5,071  
Net interest income     3,979       3,617         15,214         15,096  
Provision for Loan Losses           183         90         263  
Net Interest Income after Provision for Loan Losses     3,979       3,434         15,124         14,833  
Other Income                        
Service charges and other fees     169       235         989         947  
Rental income-other     60       64         249         255  
Net gains on sales of investments     78               515         83  
Loss on disposal of fixed assets                           (41 )
Net gains on sale of loans     47       13         102         352  
Earnings on bank-owned life insurance     285       134         680         559  
Total Other Income     639       446         2,535         2,155  
Other Expense                        
Salaries and employee benefits     1,387       1,636         5,998         7,770  
Occupancy expense     419       415         1,715         2,091  
Federal deposit insurance premium     230       183         784         735  
Advertising     40       86         239         561  
Data processing     321       312         1,236         1,245  
Professional fees     430       567         1,571         2,205  
Other real estate owned (income) expense, net     17       (470 )       (46 )       (299 )
Other operating expenses     610       840         2,464         2,336  
Total Other Expense     3,454       3,569         13,961         16,644  
Income before income tax expense     1,164       311         3,698         344  
Income tax expense           17                 21  
Net Income   $ 1,164   $   294     $   3,698     $   323  
                         
Earnings per common share                        
Basic   $ 0.18   $   0.05     $   0.58     $   0.05  
Weighted Average Common Shares Outstanding                        
Basic     6,398,720       6,384,319         6,393,330         6,378,930  

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) 9/30/2015 6/30/2015 9/30/2014
(unaudited)       
Statements of Operations Data      
       
Interest income $   5,344   $   5,139   $   4,832  
Interest expense   1,365     1,301     1,215  
Net interest income   3,979     3,838     3,617  
Provision for loan losses           183  
Net interest income after provision for loan losses   3,979     3,838     3,434  
Other income   639     640     446  
Other expense   3,454     3,273     3,569  
Income before income tax expense   1,164     1,205     311  
Income tax expense           17  
Net income $   1,164   $   1,205   $     294  
Earnings (per Common Share)      
Basic $   0.18   $   0.19   $   0.05  
Statements of Condition Data (Period-End)      
Investment securities available for sale, at fair value $   128,354   $   130,509   $   100,943  
Investment securities held to maturity (fair value of $56,825, $58,181 and $0)   57,221     59,243      
Loans, net of allowance for loan losses   391,307     371,897     386,074  
Total assets   655,690     624,244     542,264  
Deposits   465,522     443,218     412,953  
Borrowings   103,000     93,000     48,000  
Shareholders’ equity   81,391     79,812     76,772  
Common Shares Dividend Data      
Cash dividends $   $   $  
Weighted Average Common Shares Outstanding      
Basic   6,398,720     6,395,126     6,384,319  
Operating Ratios      
Return on average assets   0.72 %   0.77 %   0.21 %
Return on average equity   5.77 %   6.01 %   1.53 %
Average equity / average assets   12.43 %   12.73 %   13.62 %
Book value per common share (period-end) $   12.41   $   12.17   $   11.71  
Non-Financial Information (Period-End)      
Common shareholders of record   483     488       485  
Full-time equivalent staff   71     71       93  

 

CONTACT: Investor Contact:
Joseph D. Gangemi
Senior Vice President & Chief Financial Officer
(610) 695-3676

Media Contact:
David Culver, VP Public Relations
Boyd Tamney Cross 
(610) 254-7426