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Malvern Bancorp, Inc. Reports Second Fiscal Quarter Earnings; Momentum Carries Malvern to net profit of $1.4 million, or $0.22 per Share

PAOLI, Pa., April 26, 2017 (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, 2017. Net income amounted to $1.4 million, or $0.22 per fully diluted common share, for the quarter ended March 31, 2017, an increase of $143,000, or 11.3 percent, as compared with net income of $1.3 million, or $0.20 per fully diluted common share, for the quarter ended March 31, 2016. The March 2016 quarter, earnings per share were favorably impacted by the tax position of the Company prior to the full recognition of the Bank’s deferred tax asset. On a fully taxable basis, net income for the quarter ended March 31, 2016 would have been $1.0 million, and earnings per share for the quarter ended March 31, 2016 would have been $0.16.

For the six months ended March 31, 2017, net income amounted to $2.6 million, or $0.40 per fully diluted common share, compared with net income of $2.6 million, or $0.41 per fully diluted common share, for the six months ended March 31, 2016. For the six months ended March 31, 2016, earnings per share were favorably impacted by the tax position of the Company prior to the full recognition of the Bank’s deferred tax asset. On a fully taxable basis, net income for the six months ended March 31, 2016 would have been $2.1 million, and earnings per share for the six months ended March 31, 2016 would have been $0.33.

"Completing our half way mark in to 2017, Malvern is again demonstrating consistent earnings following a year in which Malvern delivered record earnings – in fact, our 10th consecutive quarter since my joining Malvern Federal – and also another period where we reported strong performance across all key metrics. The expansion of Malvern continues, driven by growth in deposits of $102.2 million and in gross loans of $180.8 million. This was all achieved despite the challenges of digesting increased provisions for loan losses commensurate with loan growth and growing net revenue simultaneously. Moreover, we bolstered our capital position with a successful subordinated debt offering of $25 million which closed on February 7, 2017. This capital raise, along with solid earnings retention, well positions Malvern for future expansion," commented Anthony C. Weagley, President and Chief Executive Officer.

"The team continues to execute our highly successful client focused business model, which allows Malvern to differentiate itself in an extremely competitive marketplace. The private banking model delivering service 'beyond your expectations' is supported by our committed colleagues – this furthers our business development activities and allows us to better attract and retain clients. Our persistence, commitment and overall strong performance culminated in the Bank achieving its success this quarter," Mr. Weagley said.

Joe Gangemi, Chief Financial Officer of Malvern Bancorp, Inc. added, "Malvern has produced yet another quarter of increased earnings and solid financial performance. We maintained a rapid growth pace while remaining steadfast to our focus for our clients."

Highlights for the quarter include:

  • Return on average assets (“ROAA”) was 0.62 percent for the three months ended March 31, 2017, compared to 0.68 percent for the three months ended March 31, 2016, and return on average equity (“ROAE”) was 5.81 percent for the three months ended March 31, 2017, compared with 6.03 percent for the three months ended March 31, 2016.
  • The Company originated $118.7 million in new loans in the second quarter of fiscal 2017, which was offset in part by $33.2 million in participations, payoffs, prepayments and maturities from its portfolio, resulting in net portfolio growth of $85.5 million over first quarter of fiscal 2017; new loan originations consisted of $5.2 million in residential mortgage loans, $86.7 million in commercial loans, $25.2 million in construction and development loans and $1.6 million in consumer loans.
  • Non-performing assets (“NPAs”) were at 0.18 percent of total assets at March 31, 2017, compared to 0.20 percent at March 31, 2016 and 0.28 percent at September 30, 2016. The allowance for loan losses as a percentage of total non-performing loans was 425.4 percent at March 31, 2017, compared to 578.8 percent at March 31, 2016 and 234.9 percent at September 30, 2016.
  • The Company’s ratio of shareholders’ equity to total assets was 10.13 percent at March 31, 2017, compared to 11.09 percent at March 31, 2016, and 11.52 percent at September 30, 2016.
  • Book value per common share amounted to $14.83 at March 31, 2017, compared to $12.91 at March 31, 2016 and $14.42 at September 30, 2016.
  • The efficiency ratio, a non-GAAP measure, was 57.4 percent for the second quarter of fiscal 2017 on an annualized basis, compared to 66.2 percent in the second quarter of fiscal 2016 and 67.7 percent in the fourth quarter of fiscal 2016.
  • The Company’s balance sheet reflected total asset growth of $140.5 million at March 31, 2017, compared to September 30, 2016, 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: 3/31/17
12/31/16
9/30/16
6/30/16
3/31/16
Return on average assets 0.62% 0.56% 3.90% 0.81% 0.68%
Return on average equity 5.81% 4.92% 35.10% 7.41% 6.03%
Net interest margin (tax equivalent basis) (1) 2.75% 2.64% 2.65% 2.56% 2.65%
Loans / deposits ratio 107.80% 102.29% 96.07% 96.39% 94.53%
Shareholders’ equity / total assets 10.13% 10.89% 11.52% 10.88% 11.09%
Efficiency ratio (1) 57.4% 61.6% 67.7% 64.0% 66.2%
Book value per common share $14.83 $14.59 $14.42 $13.21 $12.91


_____________
(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, 2017, total interest income on a fully tax-equivalent basis increased $2.0 million, or 31.1 percent, to $8.2 million, compared to the three months ended March 31, 2016. Interest income rose in the quarter ended March 31, 2017, compared to the comparable period in fiscal 2016, primarily due to a $223.4 million increase in the average balance of our loans. Total interest expense increased by $474,000, or 27.7 percent, to $2.2 million, for the three months ended March 31, 2017, compared to the same period in fiscal 2016.

Net interest income on a fully tax-equivalent basis was $6.0 million for the three months ended March 31, 2017, increasing $1.5 million, or 32.4 percent, from $4.6 million for the comparable three month period in fiscal 2016. The change for the three months ended March 31, 2017 primarily was the result of an increase in the average balance of interest earning assets, which increased $190.2 million. The net interest spread on an annualized tax-equivalent basis was at 2.61 percent and 2.55 percent for the three months ended March 31, 2017 and 2016, respectively. For the quarter ended March 31, 2017, the Company’s net interest margin on a tax-equivalent basis increased to 2.75 percent as compared to 2.65 percent for the same three month period in fiscal 2016.

The 27.7 percent increase in interest expense for the second quarter of fiscal 2017 as compared to the second quarter of fiscal 2016 primarily due to increase in deposits as well as subordinated debt and short-term borrowing. The average cost of funds was 1.13 percent for the quarter ended March 31, 2017 compared to 1.09 percent for the same three month period in fiscal 2016 and, on a linked sequential quarter basis, increased six basis points compared to the first quarter of fiscal 2017.

For the six months ended March 31, 2017, total interest income on a fully tax equivalent basis increased $3.4 million, or 27.9 percent, to $15.4 million, compared to $12.0 million for the six months ended March 31, 2016. Total interest expense increased by $864,000, or 27.1 percent, to $4.1 million, for the six months ended March 31, 2017, compared to the comparable period in fiscal 2016. Interest income rose for the six months ended March 31, 2017, compared to the comparable period in fiscal 2016 primarily due to a $207.2 million increase in average loan balances. Compared to the same period in fiscal 2016, for the six months ended March 31, 2017, average interest earning assets increased $180.8 million, and the net interest spread decreased on an annualized tax-equivalent basis by two basis points and net interest margin increased on an annualized tax-equivalent two basis points.

Earnings Summary for the Period Ended March 31, 2017

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: 3/31/17
12/31/16
9/30/16
6/30/16
3/31/16
Net interest income $5,991 $5,239 $5,021 $4,780 $4,500
Provision for loan losses 997 660 100 472 375
Net interest income after provision for loan losses 4,994 4,579 4,921 4,308 4,125
Other income 542 453 615 659 501
Other expense 3,778 3,570 3,759 3,378 3,360
Income before income tax expense (benefit) 1,758 1,462 1,777 1,589 1,266
Income tax expense (benefit) 349 292 (5,966) - -
Net income $1,409 $1,170 $7,743 $1,589 $1,266
Earnings per common share:
Basic $0.22 $0.18 $1.21 $0.25 $0.20
Diluted $0.22 $0.18 $1.21 $0.25 $0.20
Weighted average common shares outstanding:
Basic 6,427,309 6,418,583 6,415,049 6,411,766 6,408,167
Diluted 6,427,932 6,419,012 6,415,207 6,411,804 6,408,167

Other Income

Other income increased $41,000, or 8.2 percent, for the second quarter of fiscal 2017 compared with the same period in fiscal 2016. The increase was primarily as a result of a $47,000 increase in service charges and other fees and an increase in rental income of $5,000. The increase was partially offset by a decrease in net gains on sales of investment securities of $3,000, a decrease of $6,000 in net gain on sale of loans and a decrease of $2,000 in earnings on bank-owned insurance. Excluding net securities gains and losses, a non-GAAP measure, the Company would have recorded other income of $484,000 for the three months ended March 31, 2017 compared to $440,000 for the three months ended March 31, 2016, an increase of $44,000, or 10.0 percent.

For the six months ended March 31, 2017, total other income decreased $64,000 compared to the same period in fiscal 2016, primarily as a result of a $134,000 decrease in net gains on sales of investment securities and a $4,000 decrease in earnings on bank-owned insurance. The decrease was partially offset by an increase of $59,000 in service charges, a $10,000 increase in rental income and a $5,000 increase in net gain on sale of loans. Excluding net securities gains and losses, a non-GAAP measure, the Company recorded other income of $937,000 for the six months ended March 31, 2017 compared to $867,000 for the comparable period in fiscal 2016, an increase of $70,000, or 8.1 percent.

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

(in thousands, unaudited)
For the quarter ended: 3/31/17
12/31/16 9/30/16
6/30/16
3/31/16
Service charges on deposit accounts $274 $223 $258 $227 $227
Rental income – other 55 55 56 55 50
Net gains on sales of investments, net 58 144 229 61
Gain on disposal of fixed assets, net 1
Gain on sale of loans, net 30 45 26 20 36
Bank-owned life insurance 125 130 130 128 127
Total other income $542 $453 $615 $659 $501

Other Expense

Total other expense for the three months ended March 31, 2017, increased $418,000, or 12.4 percent, when compared to the quarter ended March 31, 2016. The increase primarily reflected increases in salaries and employee benefits of $282,000, a $58,000 increase in occupancy expense, a $48,000 increase in advertising expense, a $31,000 increase in data processing expense, a $38,000 increase in professional fees and an $110,000 increase in other operating expense. The increases in other expense were attributed to increases in our workforce as well as increased expenses due to the opening of new locations. These increases for the quarter were partially offset by decreases of $141,000 in the federal deposit insurance premium due to the new regulatory calculation and an $8,000 decrease in other real estate expense, net.

For the six months ended March 31, 2017, total other expense increased $563,000, or 8.3 percent, compared to the same period in fiscal 2016. The increase primarily reflected increases in salaries and employee benefits of $495,000, a $129,000 increase in occupancy expense, a $69,000 increase in advertising expense, a $36,000 increase in data processing expense, a $39,000 increase in professional fees and a $139,000 increase in other operating expense. These increases were partially offset by decreases of $337,000 in the federal deposit insurance premium and a $7,000 decrease in other real estate expense, net.

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

(in thousands, unaudited)
For the quarter ended: 3/31/17
12/31/16
9/30/16
6/30/16
3/31/16
Salaries and employee benefits $1,804 $1,712 $1,669 $1,600 $1,522
Occupancy expense 514 494 472 469 456
Federal deposit insurance premium 91 4 107 40 232
Advertising 73 51 50 26 25
Data processing 301 302 283 278 270
Professional fees 399 401 507 415 361
Other real estate owned expense, net 28 (8) 8
Other operating expenses 596 606 643 558 486
Total other expense $3,778 $3,570 $3,759 $3,378 $3,360

Statement of Condition Highlights at March 31, 2017

Highlights as of March 31, 2017 included:

  • Balance sheet strength, with total assets amounting to $961.8 million at March 31, 2017, increasing $140.5 million, or 17.1 percent, compared to September 30, 2016.
  • The Company’s gross loans were $759.2 million at March 31, 2017, increasing $180.8 million, or 31.3 percent, from September 30, 2016.
  • Total investments were $98.7 million at March 31, 2017, a decrease of $8.2 million, or 7.7 percent, compared to September 30, 2016.
  • Deposits totaled $704.3 million at March 31, 2017, an increase of $102.2 million, or 17.0 percent, compared to September 30, 2016.
  • Federal Home Loan Bank (FHLB) advances totaled $118.0 million at March 31, 2017 and at September 30, 2016.
  • Other short-term borrowing totaled $10.0 million at March 31, 2017 and zero at September 30, 2016.
  • Subordinated debt totaled $25.0 million at March 31, 2017 and zero at September 30, 2016. On February 7, 2017 the Company completed a private placement of $25.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the "Notes") to certain institutional investors. The Notes are non-callable for five years, have a stated maturity of February 15, 2027, and bear interest at a fixed rate of 6.125% per year, from and including February 7, 2017 to, but excluding February 15, 2022.

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: 3/31/17
12/31/16
9/30/16
6/30/16
3/31/16
Cash and due from depository institutions $1,716 $1,598 $1,297 $1,331 $1,304
Interest bearing deposits in depository
institutions
64,036 61,683 95,465 77,052 56,739
Investment securities, available for sale, at fair
value
61,672 65,108 66,387 80,555 100,895
Investment securities held to maturity 37,060 38,160 40,551 45,834 52,272
Restricted stock, at cost 5,397 5,416 5,424 5,548 5,553
Loans held for sale 304
Loans receivable, net of allowance for loan
losses
752,708 668,427 574,160 553,971 515,094
Other real estate owned 700 700
Accrued interest receivable 3,177 2,899 2,558 2,714 2,622
Property and equipment, net 6,896 6,769 6,637 6,654 6,490
Deferred income taxes 7,881 8,449 8,827 1,598 2,202
Bank-owned life insurance 18,673 18,548 18,418 18,289 18,161
Other assets 2,599 1,945 1,548 1,755 1,954
Total assets $961,815 $879,002 $821,272 $796,305 $763,986
Deposits $704,272 $658,623 $602,046 $579,043 $548,790
FHLB advances 118,000 118,000 118,000 123,000 123,000
Other short-term borrowing 10,000
Subordinated debt 25,000
Other liabilities 7,079 6,644 6,635 7,612 7,506
Shareholders' equity 97,464 95,735 94,591 86,650 84,690
Total liabilities and shareholders’ equity $961,815 $879,002 $821,272 $796,305 $763,986

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

Deposits (unaudited)
(in thousands)
At quarter ended: 3/31/17
12/31/16
9/30/16
6/30/16
3/31/16
Demand:
Non-interest bearing $ 45,303 $ 35,184 $ 34,547 $ 29,416 $ 30,720
Interest-bearing 102,525 101,759 95,041 100,609 99,154
Savings 43,913 42,699 44,714 46,056 44,207
Money market 251,671 217,260 177,486 147,103 129,652
Time 260,860 261,721 250,258 255,859 245,057
Total deposits $ 704,272 $ 658,623 $ 602,046 $ 579,043 $ 548,790

Loans

Total net loans were $752.7 million at March 31, 2017 compared to $574.2 million at September 30, 2016, for a net increase of $178.5 million. The allowance for loan losses amounted to $7.2 million and $5.4 million at March 31, 2017 and September 30, 2016, respectively. Average loans during the second quarter of fiscal 2017 totaled $717.4 million as compared to $494.0 million during the second quarter of fiscal 2016, representing a 45.2 percent increase.

At the end of the second quarter of fiscal 2017, the loan portfolio remained weighted toward commercial and the core residential portfolio, with commercial real estate accounting for 60.5 percent and single-family residential real estate loans accounting for 25.4 percent of the loan portfolio. Construction and development loans amounted to 8.0 percent and consumer loans representing 6.0 percent of the loan portfolio at such date. Total gross loans increased $180.8 million, to $759.2 million at March 31, 2017 compared to $578.4 million at September 30, 2016. The increase in the loan portfolio at March 31, 2017 compared to September 30, 2016, primarily reflected an increase of $169.8 million in commercial loans and a $32.4 million increase in construction and development loans. These increases were partially offset by a $16.4 million decrease in residential mortgage loans and a $5.0 million reduction in consumer loans at March 31, 2017 as compared to September 30, 2016.

For the quarter ended March 31, 2017, the Company originated total new loan volume of $118.7 million, which was offset in part by participations, payoffs, prepayments and maturities totaling $33.2 million. The payoffs were primarily confined to the consumer and residential portfolios.

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

Loans (unaudited)
(in thousands)
At quarter ended: 3/31/17
12/31/16
9/30/16
6/30/16
3/31/16
Residential mortgage $192,775 $205,668 $209,186 $210,621 $214,207
Construction and Development:
Residential and commercial 46,721 28,296 18,579 14,050 10,796
Land 14,322 10,117 10,013 9,904 7,755
Total construction and development 61,043 38,413 28,592 23,954 18,551
Commercial:
Commercial real estate 383,170 307,821 231,439 211,516 173,160
Multi-family 12,838 19,805 19,515 20,102 20,548
Other 63,551 53,587 38,779 37,091 34,585
Total commercial 459,559 381,213 289,733 268,709 228,293
Consumer:
Home equity lines of credit 19,214 19,729 19,757 21,035 21,712
Second mortgages 25,103 26,971 29,204 31,752 33,987
Other 1,512 1,697 1,914 2,088 2,041
Total consumer 45,829 48,397 50,875 54,875 57,740
Total loans 759,206 673,691 578,386 558,159 518,791
Deferred loan costs, net 683 913 1,208 1,155 1,240
Allowance for loan losses (7,181) (6,177) (5,434) (5,343) (4,937)
Loans Receivable, net $752,708 $668,427 $574,160 $553,971 $515,094

At March 31, 2017 , the Company had $102.7 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 $15.3 million in construction and $36.6 million in commercial real estate loans, $2.4 million in commercial term loans and lines of credit and $5.4 million in residential mortgage loans expected to fund over the next 90 days.

Asset Quality

Non-accrual loans were $1.6 million at March 31, 2017 and at September 30, 2016 and $853,000 at March 31, 2016. Other real estate owned (“OREO”) was zero at March 31, 2017 and September 30, 2016, and $700,000 at March 31, 2016, respectively. Total performing troubled debt restructured loans were $1.6 million at March 31, 2017, $2.0 million at September 30, 2016 and $1.6 million at March 31, 2016, respectively. The decrease in performing troubled debt restructured loans at March 31, 2017 compared to September 30, 2016 was primarily due to two commercial loans, with an aggregate outstanding balance of approximately $1.3 million, being paid off during the first six months of fiscal 2017. These decreases were offset by three residential mortgage loans with an aggregate outstanding balance of $811,000 and one second mortgage loan with an outstanding balance of approximately $54,000 being classified as a performing TDR during first six months of fiscal 2017.

At March 31, 2017, non-performing assets totaled $1.7 million, or 0.18 percent of total assets, as compared with $2.3 million, or 0.28 percent, at September 30, 2016 and $1.6 million, or 0.20 percent, at March 31, 2016. The portfolio of non-accrual loans at March 31, 2017 was comprised of 10 residential real estate loans with an aggregate outstanding balance of approximately $1.2 million, one commercial real estate loan with an outstanding balance of $188,000 and six consumer loans with an aggregate outstanding balance of approximately $153,000.

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: 3/31/17
12/31/16
9/30/16
6/30/16
3/31/16
Non-accrual loans(1) $1,566 $1,833 $1,617 $1,037 $853
Loans 90 days or more past due and still accruing 122 121 696
Total non-performing loans 1,688 1,954 2,313 1,037 853
Other real estate owned 700 700
Total non-performing assets $1,688 $1,954 $2,313 $1,737 $1,553
Performing troubled debt restructured loans $1,623 $1,418 $2,039 $1,959 $1,577
Non-performing assets / total assets 0.18% 0.22% 0.28% 0.22% 0.20%
Non-performing loans / total loans 0.22% 0.29% 0.28% 0.19% 0.16%
Net charge-offs (recoveries) $(7) $(83) $9 $66 $14
Net charge-offs (recoveries) / average loans(2) 0.00% (0.04)% 0.01% 0.05% 0.01%
Allowance for loan losses / total loans 0.95% 0.92% 0.94% 0.96% 0.95%
Allowance for loan losses / non-performing loans 425.4% 316.1% 234.9% 515.2% 578.8%
Total assets $961,815 $879,002 $821,272 $796,305 $763,986
Total gross loans 759,206 673,691 578,386 558,159 518,791
Average loans 717,376 612,388 575,784 542,985 494,005
Allowance for loan losses 7,181 6,177 5,434 5,343 4,937


______________
(1)12 loans totaling approximately $779,000 or 49.7% of the total non-accrual loan balance were making payments at March 31, 2017.
(2)Annualized.

The allowance for loan losses at March 31, 2017 amounted to approximately $7.2 million, or 0.95 percent of total loans, compared to $5.4 million, or 0.94 percent of total loans, at September 30, 2016 and $4.9 million, or 0.95 percent of total loans, at March 31, 2016. The Company had a $997,000 provision for loan losses during the quarter ended March 31, 2017 compared to $375,000 for the quarter ended March 31, 2016, respectively. For the six months ended March 31, 2017 and 2016, we had a $1.7 million and $375,000, respectively, of provision for loan losses. Provision expense was higher during fiscal 2017 due to an increase in loan growth.

Capital

At March 31, 2017, our total shareholders' equity amounted to $97.5 million, or 10.13 percent of total assets, compared to $94.6 million at September 30, 2016. The Company’s book value per common share was $14.83 at March 31, 2017, compared to $14.42 at September 30, 2016.

At March 31, 2017, the Bank’s common equity tier 1 ratio was 14.53 percent, tier 1 leverage ratio was 12.35 percent, tier 1 risk-based capital ratio was 14.53 percent and the total risk-based capital ratio was 15.46 percent. At September 30, 2016, the Bank’s common equity tier 1 ratio was 14.24 percent, tier 1 leverage ratio was 10.79 percent, tier 1 risk-based capital ratio was 14.24 percent and the total risk-based capital ratio was 15.16 percent. At March 31, 2017, 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: 3/31/17
12/31/16
9/30/16
6/30/16
3/31/16
Other income $542 $453 $615 $659 $501
Less: Net investment securities gains 58 144 229 61
Other income, excluding net investment
securities gains
$484 $453 $471 $430 $440

“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: 3/31/17
12/31/16
9/30/16
6/30/16
3/31/16
Other expense $3,778 $3,570 $3,759 $3,378 $3,360
Less: non-core items(1) 29 29 44
Other expense, excluding non-core items

$


3,749


$


3,541


$


3,759


$


3,378


$


3,316
Net interest income (tax equivalent basis) $6,043 $5,292 $5,083 $4,847 $4,566
Other income, excluding net investment
securities gains
484 453 471 430 440
Total $6,527 $5,745 $5,554 $5,277 $5,006
Efficiency ratio 57.4% 61.6% 67.7% 64.0% 66.2%


______________
(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: 3/31/17
12/31/16
9/30/16
6/30/16
3/31/16
Efficiency ratio on a GAAP basis 57.8% 62.7% 66.7% 62.1% 67.2%

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: 3/31/17
12/31/16
9/30/16
6/30/16
3/31/16
Net interest income (GAAP) $5,991 $5,239 $5,021 $4,780 $4,500
Tax-equivalent adjustment(1) 52 53 62 67 66
TE net interest income $6,043 $5,292 $5,083 $4,847 $4,566
Net interest income margin (GAAP) 2.72% 2.61% 2.62% 2.52% 2.61%
Tax-equivalent effect 0.03 0.03 0.03 0.04 0.04
Net interest margin (TE) 2.75% 2.64% 2.65% 2.56% 2.65%


______________
(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: 3/31/17
12/31/16
9/30/16
6/30/16
3/31/16
Investment securities $102,090 $104,645 $115,366 $141,292 $164,789
Loans 717,376 612,388 575,784 542,985 494,005
Allowance for loan losses (6,489) (5,650) (5,424) (5,132) (4,602)
All other assets 101,804 124,062 107,655 107,044 94,581
Total assets 914,781 $835,445 $793,381 $786,189 $748,773
Non-interest bearing deposits $38,565 $33,330 $33,242 $34,360 $29,592
Interest-bearing deposits 634,214 581,838 543,985 535,457 514,402
FHLB advances 118,000 118,245 122,319 123,434 113,000
Other short-term borrowings 5,389
Subordinated debt 14,722
Other liabilities 6,908 6,872 5,601 7,172 7,847
Shareholders’ equity 96,983 95,160 88,234 85,766 83,932
Total liabilities and shareholders’ equity $914,781 $835,445 $793,381 $786,189 $748,773

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 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 and through its nine other banking locations in Chester, Delaware and Bucks counties, Pennsylvania and Morristown, N.J., its New Jersey regional headquarters. 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 in Rehoboth Beach, Del., provides personalized wealth management and advisory services to high net worth individuals and families. Our services include banking, liquidity management, investment services, 401(K) accounts and planning, custody, tailored lending, wealth planning, trust and fiduciary services, family wealth advisory services and philanthropic advisory services. The bank offers insurance services though Malvern Insurance Associates, LLC, which provides clients a rich array of financial services, including commercial and personal insurance and commercial and personal lending.

For further information regarding Malvern Bancorp, Inc., please visit our web site at http://ir.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) March 31, 2017 September 30, 2016
(unaudited)
ASSETS
Cash and due from depository institutions $1,716 $1,297
Interest bearing deposits in depository institutions 64,036 95,465
Total cash and cash equivalents 65,752 96,762
Investment securities available for sale, at fair value 61,672 66,387
Investment securities held to maturity (fair value of $36,441 and $40,817) 37,060 40,551
Restricted stock, at cost 5,397 5,424
Loans receivable, net of allowance for loan losses 752,708 574,160
Accrued interest receivable 3,177 2,558
Property and equipment, net 6,896 6,637
Deferred income taxes, net 7,881 8,827
Bank-owned life insurance 18,673 18,418
Other assets 2,599 1,548
Total assets $961,815 $821,272
LIABILITIES
Deposits:
Non-interest bearing $45,303 $34,547
Interest-bearing 658,969 567,499
Total deposits 704,272 602,046
FHLB advances 118,000 118,000
Other short-term borrowings 10,000
Subordinated debt 25,000
Advances from borrowers for taxes and insurance 3,224 1,659
Accrued interest payable 649 427
Other liabilities 3,206 4,549
Total liabilities 864,351 726,681
SHAREHOLDERS’ EQUITY
Preferred stock, $0.01 par value, 10,000,000 shares, authorized, none issued
Common stock, $0.01 par value, authorized 50,000,000 shares authorized, issued and outstanding: 6,572,684 shares at March 31, 2017 and 6,560,403 shares at September 30, 2016 66 66
Additional paid in capital 60,536 60,461
Retained earnings 38,335 35,756
Unearned Employee Stock Ownership Plan (ESOP) shares (1,556) (1,629)
Accumulated other comprehensive income (loss) 83 (63)
Total shareholders’ equity 97,464 94,591
Total liabilities and shareholders’ equity $961,815 $821,272


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) 2017 2016 2017 2016
(unaudited)
Interest and Dividend Income
Loans, including fees $7,367 $5,121 $13,680 $9,666
Investment securities, taxable 470 795 942 1,670
Investment securities, tax-exempt 159 190 322 385
Dividends, restricted stock 64 63 128 117
Interest-bearing cash accounts 115 41 208 59
Total Interest and Dividend Income 8,175 6,210 15,280 11,897
Interest Expense
Deposits 1,424 1,161 2,748 2,125
Short-term borrowings 11 11
Long-term borrowings 528 549 1,070 1,061
Subordinated debt 221 221
Total Interest Expense 2,184 1,710 4,050 3,186
Net interest income 5,991 4,500 11,230 8,711
Provision for Loan Losses 997 375 1,657 375
Net Interest Income after Provision for
Loan Losses
4,994 4,125 9,573 8,336
Other Income
Service charges and other fees 274 227 497 438
Rental income-other 55 50 110 100
Net gains on sales of investments, net 58 61 58 192
Net gains on sale of loans, net 30 36 75 70
Earnings on bank-owned life insurance 125 127 255 259
Total Other Income 542 501 995 1,059
Other Expense
Salaries and employee benefits 1,804 1,522 3,516 3,021
Occupancy expense 514 456 1,008 879
Federal deposit insurance premium 91 232 95 432
Advertising 73 25 124 55
Data processing 301 270 603 567
Professional fees 399 361 800 761
Other real estate owned expense, net 8 7
Other operating expenses 596 486 1,202 1,063
Total Other Expense 3,778 3,360 7,348 6,785
Income before income tax expense 1,758 1,266 3,220 2,610
Income tax expense 349 641
Net Income $1,409 $1,266 $2,579 $2,610
Earnings per common share
Basic $0.22 $0.20 $0.40 $0.41
Diluted $0.22 $0.20 $0.40 $0.41
Weighted Average Common Shares
Outstanding
Basic 6,427,309 6,408,167 6,422,899 6,405,234
Diluted 6,427,932 6,408,167 6,423,269 6,405,234


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)
3/31/201712/31/20163/31/2016
(unaudited)
Statements of Operations Data
Interest income$8,175 $7,105 $6,210
Interest expense 2,184 1,866 1,710
Net interest income 5,991 5,239 4,500
Provision for loan losses 997 660 375
Net interest income after provision for loan losses 4,994 4,579 4,125
Other income 542 453 501
Other expense 3,778 3,570 3,360
Income before income tax expense 1,758 1,462 1,266
Income tax expense 349 292
Net income$1,409 $1,170 $1,266
Earnings (per Common Share)
Basic$0.22 $0.18 $0.20
Diluted$0.22 $0.18 $0.20
Statements of Condition Data (Period-End)
Investment securities available for sale, at fair value$61,672 $65,108 $100,895
Investment securities held to maturity (fair value of $36,441, $37,426
and $52,176)
37,060 38,160 52,272
Loans, net of allowance for loan losses 752,708 668,427 515,094
Total assets 961,815 879,002 763,986
Deposits 704,272 658,623 548,790
FHLB advances 118,000 118,000 123,000
Short-term borrowings 10,000
Subordinated debt 25,000
Shareholders' equity 97,464 95,735 84,690
Common Shares Dividend Data
Cash dividends$ $ $
Weighted Average Common Shares Outstanding
Basic 6,427,309 6,418,583 6,408,167
Diluted 6,427,932 6,419,012 6,408,167
Operating Ratios
Return on average assets 0.62% 0.56% 0.68%
Return on average equity 5.81% 4.92% 6.03%
Average equity / average assets 10.60% 11.39% 11.21%
Book value per common share (period-end)$14.83 $14.59 $12.91
Non-Financial Information (Period-End)
Common shareholders of record 437 457 472
Full-time equivalent staff 81 81 76

Investor Relations: Joseph D. Gangemi SVP & CFO (610) 695-3676 Investor Contact: Ronald Morales (610) 695-3646 Media Contact: Bronwyn Pait, Marketing (610) 695-3630

Source:Malvern Bancorp, Inc.