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Malvern Bancorp, Inc. Reports Net Income of $1.3 million, or $0.20 per Share, for the Second Quarter of Fiscal 2016, Representing a 25.6% Increase over the Second Quarter of Fiscal 2015

PAOLI, Pa., April 29, 2016 (GLOBE NEWSWIRE) -- Malvern Bancorp, Inc. (NASDAQ:MLVF) (the "Company"), parent company of Malvern Federal Savings Bank (“Malvern” or the “Bank”), today reported operating results for the second fiscal quarter ended March 31, 2016. Net income amounted to $1.3 million, or $0.20 per share, for the quarter ended March 31, 2016, an increase of $258,000, or 25.6 percent, as compared with the net income of $1.0 million, or $0.16 per share, for the quarter ended March 31, 2015.

“The results for the period were reflective of the continued growth in lending and in the Company overall. The Malvern brand continues to gain traction in the marketplace and is supported by our core strengths and fundamental focus on asset quality, efficiency and top line revenue growth," commented Anthony C. Weagley, Chief Executive Officer & President of Malvern Bancorp, Inc.

For the six months ended March 31, 2016, net income amounted to $2.6 million, or $0.41 per share, compared with net income of $1.3 million, or $0.21 per share, for the six months ended March 31, 2015.

Highlights for the quarter include:

  • Return on average assets (“ROAA”) was 0.68 percent for the three months ended March 31, 2016, compared to 0.64 percent for the three months ended March 31, 2015, and return on average equity (“ROAE”) rose to 6.03 percent for the three months ended March 31, 2016, compared with 5.05 percent for the three months ended March 31, 2015.

  • The Company originated $74.7 million in new loans in the second quarter of fiscal 2016 which was offset in part by $20.5 million in payoffs, prepayments and maturities from its portfolio; new loan originations consisted of $10.5 million in residential mortgage loans, $53.6 million in commercial loans, $8.6 million in construction and development loans and $1.9 million in consumer loans.

  • Non-performing assets (“NPAs”) were at 0.20 percent of total assets at March 31, 2016, compared to 0.52 percent at March 31, 2015 and 0.39 percent at September 30, 2015. The allowance for loan losses as a percentage of total non-performing loans was 578.8 percent at March 31, 2016, compared to 252.6 percent at March 31, 2015 and 333.6 percent at September 30, 2015.

  • The Company’s ratio of shareholders’ equity to total assets was 11.09 percent at March 31, 2016, compared to 12.68 percent at March 31, 2015, and 12.41 percent at September 30, 2015.

  • Book value per common share amounted to $12.91 at March 31, 2016, compared to $12.20 at March 31, 2015 and $12.41 at September 30, 2015.

  • The efficiency ratio, a non-GAAP measure, was 66.2 percent for the second quarter of fiscal 2016 on an annualized basis, compared to 76.6 percent in the second quarter of fiscal 2015 and 73.9 percent in the fourth quarter of fiscal 2015.

  • The Company’s balance sheet reflected total asset growth of $108.3 million at March 31, 2016, compared to September 30, 2015, coupled with stable asset quality, and capital levels that exceeded regulatory standards for a well-capitalized institution.

Selected Financial Ratios (unaudited; annualized where applicable)
As of or for the quarter ended:3/31/1612/31/159/30/156/30/153/31/15
Return on average assets 0.68% 0.79% 0.72% 0.77% 0.64%
Return on average equity 6.03% 6.55% 5.77% 6.01% 5.05%
Net interest margin (tax equivalent basis) (1) 2.65% 2.72% 2.71% 2.61% 2.58%
Loans / deposits ratio 94.53% 86.90% 84.68% 84.54% 85.57%
Shareholders’ equity / total assets 11.09% 11.37% 12.41% 12.79% 12.68%
Efficiency ratio (1) 66.2% 71.3% 73.9% 69.0% 76.6%
Book value per common share$12.91 $12.60 $12.41 $12.17 $12.20

_____________

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

Net Interest Income

For the three months ended March 31, 2016, total interest income on a fully tax equivalent basis increased $1.1 million, or 20.7 percent, to $6.3 million, compared to the three months ended March 31, 2015. Interest income rose in the quarter ended March 31, 2016, compared to the comparable period in fiscal 2015 primarily due to a $109.1 million increase in the average balance of our loans and a $13.0 million increase in the average balance of our investment securities. Total interest expense increased by $380,000, or 28.6 percent, to $1.7 million, for the three months ended March 31, 2016, compared to the comparable period in fiscal 2015.

Net interest income on a fully tax equivalent basis was $4.6 million for the three months ended March 31, 2016, increasing $695,000, or 18.0 percent, from $3.9 million for the comparable three month period in fiscal 2015. The change for the three months ended March 31, 2016 primarily was the result of an increase in the average balance of interest earning assets, which increased $90.8 million. The net interest spread on an annualized tax-equivalent basis was at 2.55 percent and 2.43 percent for the three months ended March 31, 2016 and March 31, 2015, respectively. For the quarter ended March 31, 2016, the Company’s net interest margin on a tax equivalent basis increased to 2.65 percent as compared to 2.58 percent for the same three month period in fiscal 2015.

“Our net interest margins remained stable despite the large liquidity pool carried during the period. We expect to continue to see growth in funding offset with the deployment of that cash into our loan portfolio in the coming quarters. During the second quarter of fiscal 2016 we added $74.7 million in gross loans to the balance sheet, maintaining pace with funding, “commented Mr. Weagley.

The 28.6 percent increase in interest expense for the second quarter of fiscal 2016 compared to the second fiscal quarter in 2015, 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 1.09 percent for the quarter ended March 31, 2016 compared to 1.04 percent for the same three month period in fiscal 2015 and, on a linked sequential quarter basis, increased four basis points compared to the first quarter of fiscal 2016.

For the six months ended March 31, 2016, total interest income on a fully tax equivalent basis increased $2.0 million, or 20.0 percent, to $12.0 million, compared to $10.0 million for the six months ended March 31, 2015. Total interest expense increased by $604,000, or 23.4 percent, to $3.2 million, for the six months ended March 31, 2016, compared to the comparable period in fiscal 2015. Interest income rose for the six months ended March 31, 2015, compared to the comparable period in fiscal 2015 primarily due to a $69.8 million increase in average loan balances. Compared to the same period in fiscal 2015, for the six months ended March 31, 2016, average interest earning assets increased $86.0 million, and the net interest spread and net interest margin increased on an annualized tax-equivalent basis by 14 basis points and nine basis points, respectively.

Earnings Summary for the Period Ended March 31, 2016

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

Condensed Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
For the quarter ended:3/31/1612/31/159/30/156/30/153/31/15
Net interest income$4,500 $4,211 $3,979 $3,838 $3,836
Provision for loan losses 375
Net interest income after provision for loan losses 4,125 4,211 3,979 3,838 3,836
Other income 501 558 639 640 745
Other expense 3,360 3,425 3,454 3,273 3,573
Income before income tax expense 1,266 1,344 1,164 1,205 1,008
Income tax expense - - - - -
Net income$1,266 $1,344 $1,164 $1,205 $1,008
Earnings per common share:
Basic$0.20 $0.21 $0.18 $0.19 $0.16
Diluted$0.20 n/a n/a n/a n/a
Weighted average common shares outstanding:
Basic 6,408,167 6,402,332 6,398,720 6,395,126 6,391,521
Diluted 6,413,167 n/a n/a n/a n/a

Other Income

Other income decreased $244,000 for the second quarter of fiscal 2016 compared with the same period in fiscal 2015. The decrease during the second quarter of fiscal 2016 was primarily due to a decrease of $205,000 in net gains on sales of investment securities compared to the same period in fiscal 2015. Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $440,000 for the three months ended March 31, 2016 compared to $479,000 for the three months ended March 31, 2015, a decrease of $39,000, or 8.1 percent. The decrease in other income in the second quarter of fiscal 2016 when compared to the second quarter of fiscal 2015 (excluding securities gains) resulted primarily from a decrease in service charges of $37,000, a decrease in rental income of $14,000 and a decrease in earnings on bank-owned insurance of $4,000, partially offset by an increase of $16,000 in net gain on sale of loans.

For the six months ended March 31, 2016, total other income decreased $197,000 compared to the same period in fiscal 2015, primarily as a result of a $100,000 decrease in net gains on sales of investment securities, a $96,000 decrease in service charges and a $28,000 decrease in rental income, partially offset by an increase of $31,000 in net gain on sale of loans. Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $867,000 for the six months ended March 31, 2016 compared to $964,000 for the comparable period in fiscal 2015, a decrease of $97,000, or 10.1 percent.

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

(in thousands, unaudited)
For the quarter ended:3/31/1612/31/159/30/156/30/153/31/15
Service charges on deposit accounts$227 $211 $169 $286 $264
Rental income – other 50 50 60 61 64
Net gains on sales of investments, net 61 131 78 145 266
Gain on sale of loans, net 36 34 47 16 20
Bank-owned life insurance 127 132 285 132 131
Total other income$501 $558 $639 $640 $745

Other Expense

Total other expense for the three months ended March 31, 2016, decreased $213,000, or 6.0 percent, when compared to the quarter ended March 31, 2015. The decrease primarily reflected reductions in salaries and employee benefits of $28,000, a $9,000 decrease in occupancy expense, a $35,000 decrease in advertising expense, a $31,000 decrease in data processing expense, a $73,000 decrease in professional fees and a $152,000 decrease in other operating expense. These decreases were partially offset by increases of $48,000 in federal deposit insurance premium and a $67,000 change in other real estate expense (income), net.

For the six months ended March 31, 2016, total other expense decreased $449,000, or 6.2 percent, compared to the same period in fiscal 2015. The decrease primarily reflected a $257,000 reduction in salaries and employee benefits primarily due to workforce reductions, a $10,000 decrease in occupancy expense, a $90,000 decrease in advertising costs, a 36,000 decrease in data processing expense, a $16,000 decrease in professional fees and a $223,000 decrease in other operating expenses. These decreases were partially offset by an increase in federal deposit insurance premium of $81,000, and a $102,000 change in other real estate owned expense (income), net.

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

(in thousands, unaudited)
For the quarter ended:3/31/1612/31/159/30/156/30/153/31/15
Salaries and employee benefits$1,522 $1,499 $1,387 $1,333 $1,550
Occupancy expense 456 423 419 407 465
Federal deposit insurance premium 232 200 230 203 184
Advertising 25 30 40 54 60
Data processing 270 297 321 312 301
Professional fees 361 400 430 364 434
Other real estate owned expense (income), net 8 (1) 17 32 (59)
Other operating expenses 486 577 610 568 638
Total other expense$3,360 $3,425 $3,454 $3,273 $3,573


Statement of Condition Highlights at March 31, 2016

Commenting on the balance sheet, Mr. Weagley indicated “as we have discussed in the prior quarter, we continue to change the balance sheet with lending as the primary asset. Our business plans have remained focused on this transformation for Malvern and we are pleased with the favorable results thus far this year. We expect our new locations in Villanova and Morristown to further support this change and growth in the lending segments of the balance sheet.”

Highlights as of March 31, 2016 included:

  • Balance sheet strength, with total assets amounting to $764.0 million at March 31, 2016, increasing $108.3 million, or 16.5 percent, compared to September 30, 2015, and increasing $132.9 million, or 21.1 percent, compared to March 31, 2015.

  • The Company’s gross loans were $518.8 million at March 31, 2016, increasing $124.6 million, or 31.6 percent, and $138.7 million, or 36.5 percent, from September 30, 2015 and March 31, 2015, respectively.

  • Deposits totaled $548.8 million at March 31, 2016, an increase of $83.3 million, or 17.9 percent, compared to September 30, 2015, and an increase of $104.6 million, or 23.6 percent, since March 31, 2015. Total demand, savings, money market, and certificates of deposit less than $100,000 increased $37.9 million, or 10.8 percent, from September 30, 2015, and increased $69.9 million, or 21.9 percent, from March 31, 2015.

  • Borrowings totaled $123.0 million at March 31, 2016, $103.0 million at September 30, 2015 and $98.0 million at March 31, 2015, 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:3/31/1612/31/159/30/156/30/153/31/15
Cash and due from depository institutions$1,304 $16,334 $16,026 $3,460 $1,056
Interest bearing deposits in depository institutions 56,739 40,036 24,237 20,833 50,587
Investment securities, available for sale, at fair value 100,895 116,767 128,354 130,509 113,557
Investment securities held to maturity 52,272 54,914 57,221 59,243 50,697
Restricted stock, at cost 5,553 4,762 4,765 4,369 4,602
Loans held for sale 657
Loans receivable, net of allowance for loan losses 515,094 461,491 391,307 371,897 377,340
Other real estate owned 700 1,168 1,168 1,366 1,430
Accrued interest receivable 2,622 2,722 2,484 2,404 2,168
Property and equipment, net 6,490 6,486 6,535 6,502 6,592
Deferred income taxes 2,202 2,874 2,874 2,816 2,940
Bank-owned life insurance 18,161 18,033 17,905 18,659 18,527
Other assets 1,954 1,561 2,814 1,529 1,610
Total assets$763,986 $727,148 $655,690 $624,244 $631,106
Deposits$548,790 $534,701 $465,522 $443,218 $444,146
Borrowings 123,000 103,000 103,000 93,000 98,000
Other liabilities 7,506 6,789 5,777 8,214 8,934
Shareholders' equity 84,690 82,658 81,391 79,812 80,026
Total liabilities and shareholders’ equity$763,986 $727,148 $655,690 $624,244 $631,106

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

Deposits (unaudited)
(in thousands)
At quarter ended:3/31/1612/31/159/30/156/30/153/31/15
Demand:
Non-interest bearing$30,720 $28,260 $27,010 $26,877 $25,111
Interest-bearing 99,154 86,008 82,897 85,085 87,921
Savings 44,207 45,312 45,189 44,949 44,848
Money market 129,652 133,608 108,706 78,963 70,066
Time 245,057 241,513 201,720 207,344 216,200
Total deposits$548,790 $534,701 $465,522 $443,218 $444,146

Loans

Total net loans were $515.1 million at March 31, 2016 compared to $391.3 million at September 30, 2015, for a net increase of $123.8 million. The allowance for loan losses amounted to $4.9 million and $4.7 million at March 31, 2016 and September 30, 2015, respectively. Average loans during the second quarter of fiscal 2016 totaled $494.0 million as compared to $384.9 million during the second quarter of fiscal 2015, representing a 28.3 percent increase.

At the end of second quarter of fiscal 2016, the loan portfolio remained weighted toward the core residential portfolio, with single-family residential real estate loans accounting for 41.3 percent of the loan portfolio, construction and development loans for 3.6 percent, commercial loans accounting for 44.0 percent, and consumer loans representing 11.1 percent of the loan portfolio at such date. Total gross loans increased $124.6 million, to $518.8 million at March 31, 2016 compared to $394.2 million at September 30, 2015. The $124.6 million increase in the loan portfolio at March 31, 2016 compared to September 30, 2015, primarily reflected an increase of $119.8 million in commercial loans and a $10.7 million increase in construction and development loans. These increases were partially offset by a $751,000 decrease in residential mortgage loans and a $5.2 million reduction in consumer loans at March 31, 2016 as compared to September 30, 2015.

For the quarter ended March 31, 2016, the Company originated total new loan volume of $74.7 million, which was offset in part by payoffs, prepayments and maturities totaling $20.5 million. The payoffs were primarily contained to the consumer and residential portfolios. “Our current pipeline of loans has remained strong, buttressed by our continued business development activity, and overall growth in the portfolio has gained traction, supported by slowing payoff activity. We anticipate continued growth as we move forward in the 2016 fiscal year,” commented Anthony C. Weagley.

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

Loans (unaudited)
(in thousands)
At quarter ended:3/31/1612/31/159/30/156/30/153/31/15
Residential mortgage$214,207 $211,302 $214,958 $219,197 $225,232
Construction and Development:
Residential and commercial 10,796 6,007 5,677 6,751 5,922
Land 7,755 6,804 2,142 25 344
Total construction and development 18,551 12,811 7,819 6,776 6,266
Commercial:
Commercial real estate 173,160 142,981 87,686 67,617 68,858
Multi-family 20,548 10,549 7,444 5,451 5,508
Other 34,585 25,975 13,380 9,839 5,506
Total commercial 228,293 179,505 108,510 82,907 79,872
Consumer:
Home equity lines of credit 21,712 23,207 22,919 23,173 23,073
Second mortgages 33,987 35,533 37,633 40,121 43,013
Other 2,041 2,299 2,359 2,523 2,610
Total consumer 57,740 61,039 62,911 65,817 68,696
Total loans 518,791 464,657 394,198 374,697 380,066
Deferred loan costs, net 1,240 1,410 1,776 1,774 1,886
Allowance for loan losses (4,937) (4,576) (4,667) (4,574) (4,612)
Loans Receivable, net$515,094 $461,491 $391,307 $371,897 $377,340

At March 31, 2016 , the Company had $97.2 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 $7.5 million in construction and $41.1 million in commercial real estate loans, $9.3 million in commercial term loans and lines of credit and $3.6 million in residential mortgage loans expected to fund over the next 90 days.

Asset Quality

Non-accrual loans were $853,000 at March 31, 2016, as compared to $1.4 million at September 30, 2015 and $1.8 million at March 31, 2015. Other real estate owned, (“OREO”) was $700,000 at March 31, 2016, as compared with $1.2 million at September 30, 2015 and $1.4 million at March 31, 2015, respectively. Total performing troubled debt restructured loans were $1.6 million at March 31, 2016, $1.1 million at September 30, 2015 and $109,000 at March 31, 2015, respectively. The increase in performing troubled debt restructured loans at March 31, 2016 compared to September 30, 2015 was due to two commercial loans to one borrower, with an outstanding balance of approximately $493,000, being returned to accruing status during the first quarter of fiscal 2016. The decrease in OREO at March 31, 2016 compared to September 30, 2015, was attributable to three single residential loans sold during the first six months of fiscal 2016. The $468,000 decrease in OREO at March 31, 2016 compared to September 30, 2015, was due to $493,000 of sale proceeds, at a net gain of $45,000, as well as a $20,000 reduction in the fair value of the remaining property, which are reflected in other REO expense during the first six months of fiscal 2016.

At March 31, 2016, non-performing assets totaled $1.6 million, or 0.20 percent of total assets, as compared with $2.6 million, or 0.39 percent, at September 30, 2015 and $3.3 million, or 0.52 percent, at March 31, 2015. The decrease from March 31, 2015 reflects the Company’s continued diligence to satisfactorily work out certain problem assets. The portfolio of remaining non-accrual loans at March 31, 2016 was comprised of seven residential real estate loans with an aggregate outstanding balance of approximately $624,000, six consumer loans with an aggregate outstanding balance of approximately $217,000 and one construction and development loan with an outstanding balance of $12,000.

The following table presents the components of non-performing assets and other asset quality data for the periods indicated.

(dollars in thousands, unaudited)
As of or for the quarter ended:3/31/1612/31/159/30/156/30/153/31/15
Non-accrual loans(1)$853 $795 $1,399 $1,357 $1,826
Loans 90 days or more past due and still accruing
Total non-performing loans 853 795 1,399 1,357 1,826
Other real estate owned 700 1,168 1,168 1,366 1,430
Total non-performing assets$1,553 $1,963 $2,567 $2,723 $3,256
Performing troubled debt restructured loans$1,577 $1,584 $1,091 $109 $109
Non-performing assets / total assets 0.20% 0.27% 0.39% 0.44% 0.52%
Non-performing loans / total loans 0.16% 0.17% 0.35% 0.36% 0.48%
Net charge-offs (recoveries)$14 $91 $(93)$38 $(12)
Net charge-offs (recoveries) / average loans(2) 0.01% 0.08% (0.10)% 0.04% 0.01%
Allowance for loan losses / total loans 0.95% 0.98% 1.18% 1.22% 1.21%
Allowance for loan losses / non-performing loans 578.8% 575.60% 333.60% 337.07% 252.57%
Total assets$763,986 $727,148 $655,690 $624,244 $631,106
Total loans 518,791 464,657 394,198 374,697 380,066
Average loans 494,005 420,601 383,092 378,953 384,915
Allowance for loan losses 4,937 4,576 4,667 4,574 4,612

______________

(1) Seven loans totaling approximately $491,000 or 57.6% of the total non-accrual loan balance were making payments at March 31, 2016.
(2) Annualized.

The allowance for loan losses at March 31, 2016 amounted to approximately $4.9 million, or 0.95 percent of total loans, compared to $4.7 million, or 1.18 percent of total loans, at September 30, 2015 and $4.6 million, or 1.21 percent of total loans, at March 31, 2015. The Company had a $375,000 provision for loan losses during the quarter ended March 31, 2016 compared to zero for the quarters ended December 31, 2015 and March 31, 2015. Provision expense was higher during the quarter ended March 31, 2016 due to an increase in loan growth.

Capital

At March 31, 2016, our total shareholders' equity amounted to $84.7 million, or 11.09 percent of total assets, compared to $81.4 million at September 30, 2015 and $80.0 million at March 31, 2015. The Company’s book value per common share was $12.91 at March 31, 2016, compared to $12.41 at September 30, 2015 and $12.20 at March 31, 2015.

At March 31, 2016, the Bank’s common equity tier 1 ratio was 14.23 percent, tier 1 leverage ratio was 10.34 percent, tier 1 risk-based capital ratio was 14.23 percent and the total risk-based capital ratio was 15.15 percent. At September 30, 2015, the Bank’s common equity tier 1 ratio was 15.90 percent, tier 1 leverage ratio was 10.80 percent, tier 1 risk-based capital ratio was 15.90 percent and the total risk-based capital ratio was 16.99 percent. At March 31, 2016, the Bank was in compliance with all applicable regulatory capital requirements.

Non-GAAP Financial Measures

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

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

(in thousands)
For the quarter ended:3/31/1612/31/159/30/156/30/153/31/15
Other income$501 $558 $639 $640 $745
Less: Net investment securities gains 61 131 78 145 266
Other income, excluding net investment
securities gains
$440 $427 $561 $495 $479

“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:3/31/1612/31/15930/156/30/153/31/15
Other expense$3,360 $3,425 $3,454 $3,273 $3,573
Less: non-core items(1) 44 67 42 244 242
Other expense, excluding non-core items

$


3,316


$


3,358


$


3,412


$


3,029


$


3,331
Net interest income (tax equivalent basis)$4,566 $4,281 $4,056 $3,898 $3,871
Other income, excluding net investment securities gains 440 427 561 495 479
Total$5,006 $4,708 $4,617 $4,393 $4,350
Efficiency ratio 66.2% 71.3% 73.9% 69.0% 76.6%
______________________
(1) Included in non-core items are costs which include expenses related to the Company’s corporate restructuring initiatives,
such as professional fees, litigation and settlement costs, severance costs, and external payroll development costs related
to such restructuring initiatives. The Company believes these adjustments are necessary to provide the most accurate
measure of core operating results as a means to evaluate comparative results.

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

For the quarter ended:3/31/1612/31/159/30/156/30/153/31/15
Efficiency ratio on a GAAP basis 67.2% 70.4% 73.9% 67.6% 72.7%

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:3/31/1612/31/159/30/156/30/153/31/15
Net interest income (GAAP)$4,500 $4,211 $3,979 $3,838 $3,836
Tax-equivalent adjustment(1) 66 70 77 60 35
TE net interest income$4,566 $4,281 $4,056 $3,898 $3,871
Net interest income margin (GAAP) 2.61% 2.67% 2.66% 2.57% 2.56%
Tax-equivalent effect 0.04 0.05 0.05 0.04 0.02
Net interest margin (TE) 2.65% 2.72% 2.71% 2.61% 2.58%
____________________
(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:3/31/1612/31/159/30/156/30/153/31/15
Investment securities$164,789 $179,979 $188,424 $178,713 $151,746
Loans 494,005 420,601 383,092 378,953 384,915
Allowance for loan losses (4,602) (4,662) (4,596) (4,649) (4,614)
All other assets 94,581 85,450 82,892 76,915 95,921
Total assets$748,773 $681,368 $649,812 $629,932 $627,968
Non-interest bearing deposits$29,592 $28,604 $32,477 $28,943 $27,002
Interest-bearing deposits 514,402 460,999 428,205 415,646 419,367
Borrowings 113,000 102,998 101,802 96,462 94,556
Other liabilities 7,847 6,688 6,576 8,674 7,272
Shareholders’ equity 83,932 82,079 80,752 80,207 79,771
Total liabilities and shareholders’ equity$748,773 $681,368 $649,812 $629,932 $627,968

About Malvern Bancorp

Malvern Bancorp, Inc. is the holding company for Malvern Federal Savings Bank. Malvern Federal Savings Bank is a federally-chartered, FDIC-insured savings bank that was originally organized in 1887 and now serves as one of the oldest banks headquartered on the Philadelphia Mainline. For more than a century, Malvern Federal has been committed to helping people build prosperous communities as a trusted financial partner, forging lasting relationships through teamwork, respect and integrity. The Bank conducts business from its headquarters in Paoli, Pennsylvania, a suburb of Philadelphia, as well as 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, through its Private Banking division and strategic partnership with Bell Rock Capital, Rehoboth, Delaware, provides personalized wealth management and advisory services to high net worth individuals and families. Our services include banking, liquidity management, investment services, 401 accounts and planning, custody, tailored lending, wealth planning, trust and fiduciary services, insurance, family wealth advisory services and philanthropic advisory services.

For further information regarding Malvern Bancorp, Inc., please visit our web site at http://ir.malvernfederal.com. For information regarding Malvern Federal Savings Bank, please visit our web site at https://www.malvernfederal.com/.

Forward-Looking Statements

This press release contains certain forward looking statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like "believe," "expect," "anticipate," "estimate" and "intend" or future or conditional verbs such as "will," "would," "should," "could" or "may." Certain factors that could cause actual results to differ materially from expected results include changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the business of Malvern Bancorp, Inc., and changes in the securities markets. Except as required by law, the Company does not undertake any obligation to update any forward-looking statements to reflect changes in beliefs, expectations or events.

MALVERN BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(in thousands, except for share and per share data) March 31,
2016
September 30,
2015
(unaudited)
ASSETS
Cash and due from depository institutions $ 1,304 $ 16,026
Interest bearing deposits in depository institutions 56,739 24,237
Total cash and cash equivalents 58,043 40,263
Investment securities available for sale, at fair value 100,895 128,354
Investment securities held to maturity (fair value of $52,176 and $56,825) 52,272 57,221
Restricted stock, at cost 5,553 4,765
Loans receivable, net of allowance for loan losses 515,094 391,307
Other real estate owned 700 1,168
Accrued interest receivable 2,622 2,484
Property and equipment, net 6,490 6,535
Deferred income taxes, net 2,202 2,874
Bank-owned life insurance 18,161 17,905
Other assets 1,954 2,814
Total assets $ 763,986 $ 655,690
LIABILITIES
Deposits:
Non-interest bearing $ 30,720 $ 27,010
Interest-bearing 518,070 438,512
Total deposits 548,790 465,522
FHLB Advances 123,000 103,000
Advances from borrowers for taxes and insurance 3,213 1,806
Accrued interest payable 436 396
Other liabilities 3,857 3,575
Total liabilities 679,296 574,299
SHAREHOLDERS’ EQUITY
Preferred stock, $0.01 par value, 10,000,000 shares, authorized, none issued
Common stock, $0.01 par value, authorized 40,000,000 shares authorized, issued and outstanding: 6,560,713 shares at March 31, 2016 and 6,558,473 shares at September 30, 2015 66 66
Additional paid in capital 60,412 60,365
Retained earnings 26,424 23,814
Unearned Employee Stock Ownership Plan (ESOP) shares (1,702) (1,775)
Accumulated other comprehensive loss (510) (1,079)
Total shareholders’ equity 84,690 81,391
Total liabilities and shareholders’ equity $ 763,986 $ 655,690


MALVERN BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, Six Months Ended March 31,
(in thousands, except for share data) 2016 2015 2016 2015
(unaudited)
Interest and Dividend Income
Loans, including fees $5,121 $ 4,126 $9,666 $ 8,328
Investment securities, taxable 795 778 1,670 1,292
Investment securities, tax-exempt 190 96 385 133
Dividends, restricted stock 63 142 117 179
Interest-bearing cash accounts 41 24 59 47
Total Interest and Dividend Income 6,210 5,166 11,897 9,979
Interest Expense
Deposits 1,161 859 2,125 1,718
Borrowings 549 471 1,061 864
Total Interest Expense 1,710 1,330 3,186 2,582
Net interest income 4,500 3,836 8,711 7,397
Provision for Loan Losses 375 375 90
Net Interest Income after Provision for Loan Losses 4,125 3,836 8,336 7,307
Other Income
Service charges and other fees 227 264 438 534
Rental income-other 50 64 100 128
Net gains on sales of investments, net 61 266 192 292
Net gains on sale of loans, net 36 20 70 39
Earnings on bank-owned life insurance 127 131 259 263
Total Other Income 501 745 1,059 1,256
Other Expense
Salaries and employee benefits 1,522 1,550 3,021 3,278
Occupancy expense 456 465 879 889
Federal deposit insurance premium 232 184 432 351
Advertising 25 60 55 145
Data processing 270 301 567 603
Professional fees 361 434 761 777
Other real estate owned expense (income), net 8 (59) 7 (95)
Other operating expenses 486 638 1,063 1,286
Total Other Expense 3,360 3,573 6,785 7,234
Income before income tax expense 1,266 1,008 2,610 1,329
Income tax expense
Net Income $1,266 $ 1,008 $2,610 $ 1,329
Earnings per common share
Basic $0.20 $ 0.16 $0.41 $ 0.21
Diluted $0.20 n/a $0.41 n/a
Weighted Average Common Shares Outstanding
Basic 6,408,167 6,391,521 6,405,234 6,389,687
Diluted 6,413,167 n/a 6,410,234 n/a


MALVERN BANCORP, INC AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA
Three Months Ended
(in thousands, except for share and per share data) (annualized where applicable) 3/31/201612/31/20153/31/2015
(unaudited)
Statements of Operations Data
Interest income$6,210 $5,687 $5,166
Interest expense 1,710 1,476 1,330
Net interest income 4,500 4,211 3,836
Provision for loan losses 375
Net interest income after provision for loan losses 4,125 4,211 3,836
Other income 501 558 745
Other expense 3,360 3,425 3,573
Income before income tax expense 1,266 1,344 1,008
Income tax expense
Net income$1,266 $1,344 $1,008
Earnings (per Common Share)
Basic$0.20 $0.21 $0.16
Diluted$0.20 n/a n/a
Statements of Condition Data (Period-End)
Investment securities available for sale, at fair value$100,895 $116,767 $113,557
Investment securities held to maturity (fair value of $52,176, $53,931 and $50,310) 52,272 54,914 50,697
Loans, net of allowance for loan losses 515,094 461,491 377,340
Total assets 763,986 727,148 631,106
Deposits 548,790 534,701 444,146
Borrowings 123,000 103,000 98,000
Shareholders' equity 84,690 82,658 80,026
Common Shares Dividend Data
Cash dividends$ $ $
Weighted Average Common Shares Outstanding
Basic 6,408,167 6,402,332 6,391,521
Diluted 6,413,167 n/a n/a
Operating Ratios
Return on average assets 0.68% 0.79% 0.64%
Return on average equity 6.03% 6.55% 5.05%
Average equity / average assets 11.21% 12.05% 12.70%
Book value per common share (period-end)$12.91 $12.60 $12.20
Non-Financial Information (Period-End)
Common shareholders of record 472 482 494
Full-time equivalent staff 76 76 76


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.