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Malvern Bancorp, Inc. Reports Net Income of $1.2 Million or $0.19 Per Share for the Third Quarter of Fiscal 2015, Representing a 208.18% Increase Over the Third Quarter of Fiscal 2014

PAOLI, Pa., July 29, 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 third quarter ended June 30, 2015. Net income amounted to $1.2 million, or $0.19 per share, for the quarter ended June 30, 2015, an increase of $814,000 or approximately 208.2 percent as compared with the net income of $391,000, or $0.06 per share, for the quarter ended June 30, 2014.

“Our third quarter and year-to-date earnings are strong and reflect increasing momentum as we continue to expand our banking relationships, improve fundamentals and move forward with our business model for the new Malvern. Third quarter performance reflects stable asset quality, a rise in net income and continued success in positioning the Company for growth. We are pleased with the significant improvements accomplished here since the transition began last September and with the financial returns delivered thus far,” said Anthony C. Weagley, Chief Executive Officer & President of Malvern Bancorp, Inc.

For the nine months ended June 30, 2015, net income amounted to $2.5 million, or $0.40 per share, compared with the net income of $29,000, or $0.00 per share, for the nine months ended June 30, 2014.

Highlights for the quarter include:

  • Return on average assets (ROAA) was 0.77% for the three months ended June 30, 2015, compared to 0.27% a year earlier, and return on average equity (ROAE) rose to 6.01% for the three months ended June 30, 2015, compared with 2.05% for the three months ended June 30, 2014.

  • Non-performing assets (“NPAs”) were at 0.44 percent of total assets at June 30, 2015, compared to 0.82 percent at June 30, 2014 and 0.80 percent at September 30, 2014. The allowance for loan losses as a percentage of total non-performing loans was 337.1 percent at June 30, 2015 compared to 157.1 percent at June 30, 2014 and 191.9 percent at September 30, 2014.

  • The Company’s ratio of shareholders’ equity to total assets was 12.79 percent at June 30, 2015, compared to 13.26 percent at June 30, 2014, and 14.16 percent at September 30, 2014.

  • Book value per common share amounted to $12.17 at June 30, 2015, compared to $11.69 at June 30, 2014 and $11.71 at September 30, 2014.

  • The efficiency ratio, a non-GAAP measure, was 69.0 percent for the third quarter of fiscal 2015 on an annualized basis, compared to 92.6 percent in the third quarter of fiscal 2014 and 87.8 percent in the fourth quarter of fiscal 2014.

  • The Company’s balance sheet reflected 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:6/30/153/31/1512/31/149/30/146/30/14
Return on average assets 0.77% 0.64% 0.22% 0.21% 0.27%
Return on average equity 6.01% 5.05% 1.65% 1.53% 2.05%
Net interest margin (tax equivalent basis) 2.61% 2.58% 2.61% 2.70% 2.76%
Loans / deposits ratio 84.54% 85.57% 87.61% 94.10% 88.61%
Shareholders’ equity / total assets 12.79% 12.68% 12.91% 14.16% 13.26%
Efficiency ratio (1) 69.0% 76.6% 87.5% 87.8% 92.6%
Book value per common share$ 12.17 $ 12.20 $ 11.88 $ 11.71 $ 11.69

_____________

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

Net Interest Income

For the three months ended June 30, 2015, total interest income on a fully tax equivalent basis increased $97,000 or 1.9 percent, to $5.2 million, compared to the three months ended June 30, 2014. Interest income rose in the quarter ended June 30, 2015, compared to the comparable period in fiscal 2014 primarily due to a $64.1 million increase in the average balance of our investment securities. Total interest expense increased by $36,000, or 2.9 percent, to $1.3 million, for the three months ended June 30, 2015, compared to the comparable period in fiscal 2014.

Net interest income on a fully tax equivalent basis was $3.9 million for the three months ended June 30, 2015, increasing $61,000, or 1.6 percent, from $3.8 million for the comparable three month period in fiscal 2014. The change for the three months ended June 30, 2015, primarily was the result of an increase in average interest earning assets, which increased $41.3 million. The net interest spread on an annualized tax-equivalent basis was at 2.46 percent and 2.62 percent for the three months ended June 30, 2015 and June 30, 2014, respectively. For the quarter ended June 30, 2015, the Company’s net interest margin on a tax equivalent basis decreased to 2.61 percent as compared to 2.76 percent for the same three month period in 2014. “We continue to carry excess liquidity in our cash pool. As we have discussed, this is a positive trend for the Company and positions the Company to fuel increased loan originations. We anticipate an improvement in margin as the cash is deployed to earning-assets,” commented Mr. Weagley.

The 2.9 percent increase in interest expense for the quarter primarily reflects higher volumes of borrowings. The average cost of funds was 1.02 percent for the quarter ended June 30, 2015 as compared to 1.05 percent for the same three month period in fiscal 2014 and on a linked sequential quarter decreased two basis points compared to the second quarter of fiscal 2015.

For the nine months ended June 30, 2015, total interest income on a fully tax equivalent basis decreased $160,000 or 1.0 percent, to $15.2 million, compared to $15.4 million for the nine months ended June 30, 2014. Total interest expense increased by $27,000, or 0.7 percent, to $3.9 million, for the nine months ended June 30, 2015, compared to the comparable period in fiscal 2014. Interest income declined for the nine months ended June 30, 2015, compared to the comparable period in fiscal 2014 primarily due to a $26.8 million decline in average loan balances. The decline in loan balances was primarily due to a 5.2 percent decrease in residential mortgage loans, a 3.2 percent decrease in construction and development loans, as well as a 8.8 percent decline in consumer loans. Even with the overall decline in the loan portfolio balance, there was a 6.2 percent growth in commercial loans. Compared to the same period in fiscal 2014, for the nine months ended June 30, 2015, average interest earning assets increased $22.2 million while net interest spread and margin decreased on an annualized tax-equivalent basis by 17 basis points and 15 basis points, respectively.

Earnings Summary for the Period Ended June 30, 2015

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

Condensed Consolidated Statements of Operations (unaudited)
(dollars in thousands, except per share data)
For the quarter ended:6/30/153/31/1512/31/149/30/146/30/14
Net interest income$ 3,838 $ 3,836 $ 3,561 $ 3,617 $ 3,826
Provision for loan losses 90 183
Net interest income after provision for loan losses 3,838 3,836 3,471 3,434 3,826
Other income 640 745 511 446 744
Other expense 3,273 3,573 3,661 3,569 4,179
Income before income tax expense 1,205 1,008 321 311 391
Income tax expense - - - 17 -
Net income$ 1,205 $ 1,008 $ 321 $ 294 $ 391
Earnings per common share:
Basic$ 0.19 $ 0.16 $ 0.05 $ 0.05 $ 0.06
Weighted average common shares outstanding:
Basic 6,395,126 6,391,521 6,387,932 6,384,319 6,380,726

Other Income

Other income decreased $104,000 for the third quarter of fiscal 2015 compared with the same period in fiscal 2014. During the third quarter of fiscal 2015, the Company recorded $145,000 in net gains on sales of investment securities compared to $69,000 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 $495,000 for the three months ended June 30, 2015 compared to other income of $675,000 for the three months ended June 30, 2014 and $446,000 for the three months ended September 30, 2014. Decreases in other income in the third quarter of fiscal 2015 when compared to the third quarter of fiscal 2014 (excluding securities gains) were primarily from a decrease of $267,000 in net gain on sale of loans, a decrease in bank owned life insurance income of $8,000 and a decrease in rental income of $2,000, partially offset by an increase of $56,000 in service charges on deposit accounts and a decrease of $41,000 in loss on disposal of fixed assets.

For the nine months ended June 30, 2015, total other income increased $187,000 compared to the same period in fiscal 2014, primarily as a result of $354,000 related to an increase in net gains on sales of investment securities, partially offset by decreased income on bank owned life insurance 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:6/30/153/31/1512/31/149/30/146/30/14
Service charges on deposit accounts$ 286 $ 264 $ 270 $ 235 $ 230
Rental income – other 61 64 64 64 63
Net gains on sales of investments, net 145 266 26 - 69
Loss on disposal of fixed assets - - - - (41)
Gain on sale of loans, net 16 20 19 13 283
Bank-owned life insurance 132 131 132 134 140
Total other income$ 640 $ 745 $ 511 $ 446 $ 744

Other Expense

Total other expense for the third quarter of fiscal 2015 amounted to $3.3 million, which was approximately $300,000 or 8.4 percent lower than other expense for the three months ended March 31, 2015. The reduction in other expense in the third quarter of fiscal 2015 was primarily related to a decrease in employee salaries and benefits, which decreased $217,000 from the quarter ended March 31, 2015, as well as, a $70,000 decrease in professional fees, a $58,000 decrease in occupancy expense, a $70,000 decrease in other operating expenses and a $6,000 decrease in advertising. These reductions were partially offset by increases in federal deposit insurance premium of $19,000, data processing expense of $11,000 and other real estate owned expense of $91,000.

The decrease in other expense for the three months ended June 30, 2015, when compared to the quarter ended June 30, 2014, was approximately $906,000, or 21.7 percent. Decreases primarily reflected reductions in salaries and employee benefits of $662,000, primarily due to workforce reductions, professional fees of $99,000, primarily reflecting lower expenses related to loan workouts, occupancy expense of $164,000, primarily attributable to a decrease in rent expense of $69,000 and building and equipment expenses of $80,000 primarily due to elimination of expenses related to a branch closure in fiscal 2014 as well as a reduction in expenses associated with janitorial, snow removal and related activities, advertising expense of $47,000 and a $42,000 improvement in other real estate owned expense, net. These decreases were partially offset by increases of $72,000 in other operating expense, $19,000 in federal deposit insurance premium and $17,000 in data processing expense. The increase in other operating expense was primarily due to an increase of $70,000 in director compensation, a $45,000 increase in insurance and bond expense, a $57,000 increase in other operating expense and a $56,000 increase in amortization of mortgage servicing rights.

For the nine months ended June 30, 2015, total other expense was reduced by $2.6 million, or 19.6 percent, compared to the same fiscal period in 2014. Decreases primarily included $1.5 million in salaries and employee benefits primarily due to workforce reductions, $380,000 in occupancy expense, $276,000 in advertising costs, $497,000 in professional fees, $234,000 in other real estate owned expense and $18,000 in data processing. These decreases were partially offset by an increase in other operating expenses of $358,000 and a slight increase in federal deposit insurance premium of $2,000.

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

(in thousands, unaudited)
For the quarter ended:6/30/153/31/1512/31/149/30/146/30/14
Salaries and employee benefits$ 1,333 $ 1,550 $ 1,728 $ 1,636 $ 1,995
Occupancy expense 407 465 424 415 571
Federal deposit insurance premium 203 184 167 183 184
Advertising 54 60 85 86 101
Data processing 312 301 302 312 295
Professional fees 364 434 343 567 463
Other real estate owned expense (income), net 32 (59) (36) (470) 74
Other operating expenses 568 638 648 840 496
Total other expense$ 3,273 $ 3,573 $ 3,661 $ 3,569 $ 4,179

Statement of Condition Highlights at June 30, 2015

Commenting on the balance sheet, Mr. Weagley indicated: "Our efforts to change the balance sheet continued during the third quarter. We continue to execute on our business plans and are positioning the Company to take advantage of the signs for growth we see in our markets and transition to a commercial bank balance sheet. The new Malvern brand has been successfully launched." Highlights as of June 30, 2015 included:

  • Balance sheet strength, with total assets amounting to $624.2 million at June 30, 2015, increasing $82.0 million, or 15.1 percent compared to September 30, 2014 and increasing $46.2 million, or 8.0 percent compared to June 30, 2014.
  • Net loans were $371.9 million at June 30, 2015, decreasing $14.2 million, or 3.7 percent and $20.7 million, or 5.3 percent, from September 30, 2014 and June 30, 2014, respectively.
  • Deposits totaled $443.2 million at June 30, 2015, an increase of $30.3 million or 7.3 percent compared to September 30, 2014 and a decrease of $2.8 million, or 0.6 percent, since June 30, 2014. Total demand, savings, money market, and certificates of deposit less than $100,000, increased $16.7 million or 5.4 percent from September 30, 2014 and decreased $3.7 million or 1.1 percent from June 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 $93.0 million, $48.0 million and $48.0 million at June 30, 2015, September 30, 2014 and June 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:6/30/153/31/1512/31/149/30/146/30/14
Cash and due from depository institutions$ 3,460 $ 1,056 $ 1,404 $ 1,203 $ 1,155
Interest bearing deposits in depository institutions 20,833 50,587 46,648 17,984 41,300
Investment securities, available for sale, at fair value 130,509 113,557 135,786 100,943 104,985
Investment securities held to maturity 59,243 50,697
Restricted stock, at cost 4,369 4,602 3,805 3,503 3,495
Loans held for sale 657
Loans receivable, net of allowance for loan losses 371,897 377,340 383,389 386,074 392,582
Other real estate owned 1,366 1,430 1,494 1,964 1,645
Accrued interest receivable 2,404 2,168 1,623 1,322 1,300
Property and equipment, net 6,502 6,592 6,718 6,823 6,897
Deferred income taxes 2,816 2,940 2,419 2,376 2,575
Bank-owned life insurance 18,659 18,527 18,397 18,264 21,003
Other assets 1,529 1,610 1,487 1,808 1,151
Total assets$ 624,244 $ 631,106 $ 603,170 $ 542,264 $ 578,088
Deposits$ 443,218 $ 444,146 $ 440,625 $ 412,953 $ 446,036
Borrowings 93,000 98,000 78,000 48,000 48,000
Other liabilities 8,214 8,934 6,660 4,539 7,385
Shareholders' equity 79,812 80,026 77,885 76,772 76,667
Total liabilities and shareholders’ equity$ 624,244 $ 631,106 $ 603,170 $ 542,264 $ 578,088

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

Deposits (unaudited)
(in thousands)
At quarter ended:6/30/153/31/1512/31/149/30/146/30/14
Demand:
Non-interest bearing$ 26,877 $ 25,111 $ 22,242 $ 23,059 $ 22,782
Interest-bearing 85,085 87,921 86,948 81,921 88,072
Savings 44,949 44,848 44,747 44,917 46,645
Money market 78,963 70,066 69,553 59,529 61,291
Time 207,344 216,200 217,135 203,527 227,246
Total deposits$ 443,218 $ 444,146 $ 440,625 $ 412,953 $ 446,036

Loans

Total loans were $374.7 million at June 30, 2015. Mr. Weagley commented: “Outstanding loan balances remained relatively stable with a continued decrease in the residential components of our portfolios. Our focus will continue to be the commercial sectors of the loan portfolios for asset growth and new loan generation continues to grow underscoring the ability of the Company to gain traction and scale the Malvern balance sheet.” The Company had approximately $19.8 million in new loan originations and advances during the third quarter of fiscal 2015. This new loan activity and advances were offset by prepayments, scheduled payments, maturities and payoffs of $25.2 million. Average loans during the third quarter of fiscal 2015 totaled $379.0 million as compared to $412.5 million during the third quarter of fiscal 2014, representing an 8.1 percent decrease.

The Company’s total loans in the third quarter of 2015 decreased $5.4 million, to $374.7 million at June 30, 2015, from $380.1 million at March 31, 2015. The allowance for loan losses amounted to $4.6 million at both June 30, 2015 and March 31, 2015.

At the end of the third quarter of fiscal 2015, the loan portfolio remained weighted toward the core residential portfolio, with single-family residential real estate accounting for 58.5 percent of the loan portfolio, commercial loans accounting for 22.1 percent, and consumer loans representing 17.6 percent of the loan portfolio at such date. Total loans decreased $13.9 million, to $374.7 million at June 30, 2015 compared to $388.6 million at September 30, 2014. The $13.9 million reduction in the loan portfolio at June 30, 2015 compared to September 30, 2014, primarily reflected reductions of $12.1 million in residential mortgage loans and $6.3 million in consumer loans. These decreases were partially offset by a $4.8 million increase in commercial loans at June 30, 2015 as compared to September 30, 2014. At June 30, 2014, total loans were $395.2 million. The decreased loan balance in the loan portfolio at June 30, 2015 compared to June 30, 2014, primarily reflected reductions of $15.9 million in residential mortgage loans, $2.2 million in construction and development loans and $8.0 million in consumer loans, which were partially offset by a $5.5 million increase in commercial loans.

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

Loans (unaudited)
(in thousands)
At quarter ended:6/30/153/31/1512/31/149/30/146/30/14
Residential mortgage$219,197 $225,232 $229,507 $231,324 $235,050
Construction and Development:
Residential and commercial 6,751 5,922 6,039 5,964 7,484
Land 25 344 - 1,033 1,537
Total construction and development 6,776 6,266 6,039 6,997 9,021
Commercial:
Commercial real estate 67,617 68,858 67,274 71,579 69,788
Multi-family 5,451 5,508 5,450 1,032 2,086
Other 9,839 5,506 5,603 5,480 5,492
Total commercial 82,907 79,872 78,327 78,091 77,366
Consumer:
Home equity lines of credit 23,173 23,073 24,430 22,292 21,914
Second mortgages 40,121 43,013 45,051 47,034 48,866
Other 2,523 2,610 2,675 2,839 3,011
Total consumer 65,817 68,696 72,156 72,165 73,791
Total loans 374,697 380,066 386,029 388,577 395,228
Deferred loan costs, net 1,774 1,886 1,960 2,086 2,212
Allowance for loan losses (4,574) (4,612) (4,600) (4,589) (4,858)
Loans Receivable, net$371,897 $377,340 $383,389 $386,074 $392,582

At June 30, 2015, the Company had $41.8 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 $7.4 million in construction and $20.6 million in commercial real estate loans and $2.0 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 $48.6 million,” said Mr. Weagley.

Asset Quality

Non-accrual loans were $1.4 million at June 30, 2015, as compared to $2.4 million at September 30, 2014 and $3.1 million at June 30, 2014. Other real estate owned, (“OREO”) was $1.4 million at June 30, 2015, as compared with $2.0 million at September 30, 2014 and $1.6 million at June 30, 2014, respectively. At July 1, 2015 the Company disposed of a residential property for $200,000, further reducing OREO to $1.2 million. Total performing troubled debt restructured loans were $109,000 at June 30, 2015, $1.0 million at September 30, 2014 and $1.2 million at June 30, 2014, respectively. The $900,000 decrease in troubled debt restructured loans at June 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.

At June 30, 2015, non-performing assets totaled $2.7 million, or 0.44 percent of total assets, as compared with $4.4 million, or 0.80 percent, at September 30, 2014 and $4.7 million, or 0.82 percent, at June 30, 2014. The decrease from June 30, 2014 reflects the Company’s continued diligence to satisfactorily work out certain problem assets. The portfolio of remaining non-accrual loans at June 30, 2015 comprised five residential real estate loans with an aggregate outstanding balance of approximately $566,000, four consumer loans with an aggregate outstanding balance of approximately $182,000, one construction and development loan with an outstanding balance of $12,000 and four commercial loans with an aggregate outstanding balance of $597,000 that were on non-accrual status at June 30, 2015. Of the non-accrual loans, two commercial loans to one borrower, with an aggregate balance of $499,000 were restructured during the quarter ended June 30, 2015. These loans are classified as troubled debt restructured loans at June 30, 2015. The borrower is currently making payments as agreed under the terms of the restructuring of principal and interest payments.

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:6/30/153/31/1512/31/149/30/146/30/14
Non-accrual loans(1)$ 1,357 $ 1,826 $ 2,334 $ 2,391 $ 3,092
Loans 90 days or more past due and still accruing
Total non-performing loans 1,357 1,826 2,334 2,391 3,092
Other real estate owned 1,366 1,430 1,494 1,964 1,645
Total non-performing assets$ 2,723 $ 3,256 $ 3,828 $ 4,355 $ 4,737
Performing troubled debt restructured loans$ 109 $ 109 $ 1,007 $ 1,009 $ 1,246
Non-performing assets / total assets 0.44% 0.52% 0.63% 0.80% 0.82%
Non-performing loans / total loans 0.36% 0.48% 0.60% 0.62% 0.78%
Net charge-offs (recoveries)$ 38 $ (12)$ 79 $ 452 $ (11)
Net charge-offs (recoveries) / average loans(2) 0.04% 0.01% 0.08% 0.19% 0.11%
Allowance for loan losses / total loans 1.22% 1.21% 1.19% 1.18% 1.23%
Allowance for loan losses / non-performing loans 337.07% 252.57% 197.09% 191.93% 157.1%
Total assets$624,244 $631,106 $603,170 $542,264 $578,088
Total loans 374,697 380,066 386,029 388,577 395,228
Average loans 378,953 384,915 389,544 395,067 412,457
Allowance for loan losses 4,574 4,612 4,600 4,589 4,858

_________________

(1) Eleven loans totaling approximately $1.2 million or (86.3%) of the total non-accrual loan balance were making payments at June 30, 2015.

(2) Annualized.

The allowance for loan losses at June 30, 2015 amounted to approximately $4.6 million, or 1.22 percent of total loans, compared to 1.18 percent and 1.23 percent of total loans at September 30, 2014 and June 30, 2014, respectively. The Company had no provision for loan losses during the quarter ended June 30, 2015 compared to $183,000 and zero, respectively, during the quarters ended September 30, 2014 and June 30, 2014. Provision expense was lower during the quarter ended June 30, 2015 due to a decline in charge-offs history, generally, and lower charge-offs during the quarter ended June 30, 2015.

Capital

At June 30, 2015, our total shareholders' equity amounted to $79.8 million, or 12.79 percent of total assets compared to $76.8 million at September 30, 2014 and $76.7 million at June 30, 2014. The Company’s book value per common share was $12.17 at June 30, 2015, compared to $11.71 at September 30, 2014 and $11.69 at June 30, 2014.

At June 30, 2015, the Bank’s ratio of tier 1 risk-based capital to risk-weighted assets was 17.32 percent and its ratio of tier 1 capital to adjusted total assets was 16.22 percent, compared to 20.75 percent and 19.50 percent, respectively, at September 30, 2014 and 19.96 percent and 18.71 percent, respectively, at June 30, 2014. At June 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:6/30/153/31/1512/31/149/30/146/30/14
Other income$ 640 $ 745 $ 511 $ 446 $ 744
Less: Net investment securities gains 145 266 26 - 69
Other income, excluding net investment securities gains$ 495 $ 479 $ 485 $ 446 $ 675

“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:6/30/153/31/1512/31/149/30/146/30/14
Other expense$ 3,273 $ 3,573 $ 3,661 $ 3,569 $ 4,179
Less: non-core items(1) 244 242 110
Other expense, excluding non-core items

$


3,029


$


3,331


$


3,551


$


3,569
$ 4,179
Net interest income (tax equivalent basis)$ 3,898 $ 3,871 $ 3,575 $ 3,621 $ 3,837
Other income, excluding net investment securities gains 495 479 485 446 675
Total$ 4,393 $ 4,350 $ 4,060 $ 4,067 $ 4,512
Efficiency ratio 69.0% 76.6% 87.5% 87.8% 92.6%
(1) Included in non-core items are professional fees of approximately $52,000, advertising expense of $12,000 and other operating expense of $180,000 for the quarter ended June 30, 2015. For the quarter ended March 31, 2015, included in non-core items were professional fees of approximately $97,000, advertising expense of $11,000 and other operating expense of $134,000.

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:6/30/153/31/1512/31/149/30/146/30/14
Efficiency ratio on a GAAP basis 67.6% 72.7% 87.2% 87.8% 91.4%

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:6/30/153/31/1512/31/149/30/146/30/14
Net interest income (GAAP)$ 3,838 $ 3,836 $ 3,561 $ 3,617 $ 3,826
Tax-equivalent adjustment(1) 60 35 14 4 11
TE net interest income$ 3,898 $ 3,871 $ 3,575 $ 3,621 $ 3,837
Net interest income margin (GAAP) 2.57% 2.56% 2.60% 2.70% 2.75%
Tax-equivalent effect 0.04 0.02 0.01 0.01
Net interest margin (TE) 2.61% 2.58% 2.61% 2.70% 2.76%
____________________
(1) Reflects adjustment to GAAP interest income.

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:6/30/153/31/1512/31/149/30/146/30/14
Investment securities$ 178,713 $ 151,746 $ 114,129 $ 103,458 $ 114,631
Loans 378,953 384,915 389,544 395,067 412,457
Allowance for loan losses (4,649) (4,614) (4,600) (4,851) (4,829)
All other assets 76,915 95,921 77,776 71,930 65,131
Total assets$ 629,932 $ 627,968 $ 576,849 $ 565,604 $ 587,390
Non-interest bearing deposits$ 28,943 $ 27,002 $ 26,770 $ 26,057 $ 24,834
Interest-bearing deposits 415,646 419,367 393,225 408,937 430,780
Borrowings 96,462 94,556 72,945 47,998 49,014
Other liabilities 8,674 7,272 6,151 5,549 6,551
Shareholders’ equity 80,207 79,771 77,758 77,063 76,211
Total liabilities and shareholders’ equity$ 629,932 $ 627,968 $ 576,849 $ 565,604 $ 587,390

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://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) June
30,
2015
September
30,
2014
(Unaudited)
ASSETS
Cash and due from depository institutions $ 3,460 $ 1,203
Interest bearing deposits in depository institutions 20,833 17,984
Total cash and cash equivalents 24,293 19,187
Investment securities available for sale, at fair value 130,509 100,943
Investment securities held to maturity (fair value of $58,181 and $0) 59,243
Restricted stock, at cost 4,369 3,503
Loans held for sale 657
Loans receivable, net of allowance for loan losses 371,897 386,074
Other Real estate owned 1,366 1,964
Accrued interest receivable 2,404 1,322
Property and equipment, net 6,502 6,823
Deferred income taxes, net 2,816 2,376
Bank-owned life insurance 18,659 18,264
Other assets 1,529 1,808
Total assets $ 624,244 $ 542,264
LIABILITIES
Deposits:
Non-interest bearing $ 26,877 $ 23,059
Interest-bearing: 416,341 389,894
Total deposits 443,218 412,953
FHLB Advances 93,000 48,000
Advances from borrowers for taxes and insurance 4,245 1,786
Accrued interest payable 346 149
Other liabilities 3,623 2,604
Total liabilities 544,432 465,492
SHAREHOLDERS’ EQUITY
Preferred stock, $0.01 par value, 10,000,000 shares, authorized, no issued
Common stock, $0.01 par value, authorized 40,000,000 shares authorized, issued and outstanding: 6,558,473 shares at June 30, 2015 and September 30, 2014 66 66
Additional paid in capital 60,346 60,317
Retained earnings 22,650 20,116
Unearned Employee Stock Ownership Plan (ESOP) shares (1,811) (1,922)
Accumulated other comprehensive loss (1,439) (1,805)
Total shareholders’ equity 79,812 76,772
Total liabilities and shareholders’ equity $ 624,244 $ 542,264




MALVERN BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, Nine Months Ended June 30,
(in thousands, except for share data) 2015 2014 2015 2014
(unaudited)
Interest and Dividend Income
Loans, including fees $4,028 $ 4,476 $ 12,356 $ 13,448
Investment securities, taxable 859 519 2,151 1,623
Investment securities, tax-exempt 172 29 305 137
Dividends, restricted stock 65 54 244 87
Interest-bearing cash accounts 15 13 62 40
Total Interest and Dividend Income 5,139 5,091 15,118 15,335
Interest Expense
Deposits 843 980 2,561 3,046
Borrowings 458 285 1,322 810
Total Interest Expense 1,301 1,265 3,883 3,856
Net interest income 3,838 3,826 11,235 11,479
Provision for Loan Losses 90 80
Net Interest Income after Provision for Loan Losses 3,838 3,826 11,145 11,399
Other Income
Service charges and other fees 286 230 820 712
Rental income-other 61 63 189 191
Net gains on sales of investments, net 145 69 437 83
Loss on disposal of fixed assets (41) (41)
Net gains on sale of loans, net 16 283 55 339
Earnings on bank-owned life insurance 132 140 395 425
Total Other Income 640 744 1,896 1,709
Other Expense
Salaries and employee benefits 1,333 1,995 4,611 6,134
Occupancy expense 407 571 1,296 1,676
Federal deposit insurance premium 203 184 554 552
Advertising 54 101 199 475
Data processing 312 295 915 933
Professional fees 364 463 1,141 1,638
Other real estate owned (income) expense, net 32 74 (63) 171
Other operating expenses 568 496 1,854 1,496
Total Other Expense 3,273 4,179 10,507 13,075
Income before income tax expense 1,205 391 2,534 33
Income tax expense 4
Net Income $1,205 $ 391 $ 2,534 $ 29
Earnings per common share
Basic $0.19 $ 0.06 $ 0.40 $ 0.00
Weighted Average Common Shares Outstanding
Basic 6,395,126 6,380,726 6,391,514 6,377,114



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) 6/30/20153/31/20156/30/2014
(unaudited)
Statements of Operations Data
Interest income$ 5,139 $ 5,166 $ 5,091
Interest expense 1,301 1,330 1,265
Net interest income 3,838 3,836 3,826
Provision for loan losses
Net interest income after provision for loan losses 3,838 3,836 3,826
Other income 640 745 744
Other expense 3,273 3,573 4,179
Income before income tax expense 1,205 1,008 391
Income tax expense
Net income$ 1,205 $ 1,008 $ 391
Earnings (per Common Share)
Basic$ 0.19 $ 0.16 $ 0.06
Statements of Condition Data (Period-End)
Investment securities available for sale, at fair value$ 130,509 $ 113,557 $ 104,985
Investment securities held to maturity (fair value of $58,181, $50,312 and $0) 59,243 50,697
Loans, net of allowance for loan losses 371,897 377,340 392,582
Total assets 624,244 631,106 578,088
Deposits 443,218 444,146 446,036
Borrowings 93,000 98,000 48,000
Shareholders' equity 79,812 80,026 76,667
Common Shares Dividend Data
Cash dividends$$$
Weighted Average Common Shares Outstanding
Basic 6,395,126 6,391,521 6,380,726
Operating Ratios
Return on average assets 0.77% 0.64% 0.27%
Return on average equity 6.01% 5.05% 2.05%
Average equity / average assets 12.73% 12.70% 12.97%
Book value per common share (period-end)$ 12.17 $ 12.20 $ 11.69
Non-Financial Information (Period-End)
Common shareholders of record 488 494 461
Full-time equivalent staff 71 76 95


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

Source:Malvern Bancorp, Inc.