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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:9/30/156/30/153/31/1512/31/149/30/14
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:9/30/156/30/153/31/1512/31/149/30/14
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:9/30/156/30/153/31/1512/31/149/30/14
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:9/30/156/30/153/31/1512/31/149/30/14
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:9/30/156/30/153/31/1512/31/149/30/14
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:9/30/156/30/153/31/1512/31/149/30/14
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:9/30/156/30/153/31/1512/31/149/30/14
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:9/30/156/30/153/31/1512/31/149/30/14
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:9/30/156/30/153/31/1512/31/149/30/14
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:9/30/156/30/153/31/1512/31/149/30/14
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:9/30/156/30/153/31/1512/31/149/30/14
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:9/30/156/30/153/31/1512/31/149/30/14
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:9/30/156/30/153/31/1512/31/149/30/14
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) 9/30/20156/30/20159/30/2014
(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


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.