PAOLI, Pa., Dec. 14, 2023 (GLOBE NEWSWIRE) — Malvern Bancorp, Inc. (NASDAQ: MLVF) (the “Company”), the parent company of Malvern Bank, National Association (the “Bank”), today reported operating results for the fourth fiscal quarter ended September 30, 2023. The Company recorded a net loss of ($6.2) million, or ($0.82) per fully diluted common share, compared with a net loss of ($3.5) million, or ($0.46) per fully diluted common share, for the quarter ended September 30, 2020. The increase in net loss and decrease in diluted earnings per share from the fourth quarter of 2020 were primarily attributable to the recording of provision for loan losses of $10.6 million during the quarter ended September 30, 2023, which resulted from the write-down to fair value of four commercial real estate loans that were transferred to held-for-sale, compared to $7.4 million for the quarter ended September 30, 2020. Annualized return on average assets (“ROAA”) was (2.06) percent for the quarter ended September 30, 2023, compared to (1.15) percent for the quarter ended September 30, 2020, and annualized return on average equity (“ROAE”) was (16.59) percent for the quarter ended September 30, 2023, compared with (9.54) percent for the quarter ended September 30, 2020.
For the fiscal year ended September 30, 2023, the Company reported a net loss of ($92,000), or ($0.01) per fully diluted common share, compared with net income of $644,000, or $0.08 per fully diluted common share, for the fiscal year ended September 30, 2020. Annualized ROAA was (0.01) percent for the fiscal year ended September 30, 2023, compared to 0.05 percent for the fiscal year ended September 30, 2020. Annualized ROAE was (0.06) percent for the fiscal year ended September 30, 2023, compared with 0.45 percent for the fiscal year ended September 30, 2020.
Subsequent to September 30, 2023, the Company disposed of three of the commercial real estate loans previously transferred to held-for-sale, with an aggregate book balance of $29.3 million to improve its credit and asset quality. Included in these loans was one non-accrual commercial real estate loan totaling approximately $12.2 million and two trouble debt restructured (“TDR”) commercial real estate loans totaling $17.1 million. These loans were transferred to held-for-sale at the sale price fair value of $18.9 million on September 30, 2023, totaling a net charge down of approximately $10.8 million, and then subsequently sold. There was one additional non-accrual commercial real estate loan transferred to held-for-sale at September 30, 2023, with an aggregate book balance of $13.6 million. The Company is pursuing a sale strategy for this loan that is secured by property in the New York metropolitan area. There can be no assurance that a sale can be consummated, or that a sale can be consummated at the carrying value of the loan, as market and sales prices are subject to various factors; any sale at an amount less than the carrying value could result in a loss and affect the Company’s net income.
When excluding the loans sold as outlined above, non-accrual loans total $17.3 million, including one commercial real estate loan held-for-sale with an aggregate book balance of $13.6 million and one commercial and industrial loan with an aggregate outstanding balance of approximately $2.5 million, 10 residential mortgage loans with an aggregate outstanding balance of approximately $879,000, and nine consumer loans with an aggregate outstanding balance of approximately $301,000. Also, TDR loans total $6.2 million, including 12 residential mortgage loans totaling $2.5 million, five commercial loans totaling $3.6 million, and three consumer loans totaling $78,000.
“Disposing of these loans was a necessary step towards formulating a stronger company by allowing management to shift its core focus from credit resolution to the continued implementation of the Company’s business plan. It also positions the Company to return to profitability and provides the potential to grow earnings in future periods,” commented Anthony C. Weagley, President and Chief Executive Officer. “As we stated last quarter, improving asset quality is a top priority,” continued Mr. Weagley.
Statement of Operations Highlights at September 30, 2023
- The Company recorded provision for loan losses of $10.6 million during the quarter ended September 30, 2023, which resulted from the write-down of four loans that were transferred to held-for-sale, compared to $7.4 million for the quarter ended September 30, 2020. For the fiscal year ended September 30, 2023, the Company recorded provision for loan losses of $11.2 million compared to $10.6 million recorded for the fiscal year ended September 30, 2020.
- Net interest margin (“NIM”) increased 23 basis points to 2.61 percent for the quarter ended September 30, 2023, compared to 2.38 percent for the prior year’s quarter ended September 30, 2020. The increase was driven by a reduction in interest expense, partially offset by a decrease in interest-earning assets.
- Total interest expense decreased $6.9 million, or (40.1) percent, to $10.4 million for the fiscal year ended September 30, 2023, compared to $17.3 million for the fiscal year ended September 30, 2020, which resulted primarily from the reduction of costs on interest-bearing deposits.
- Net interest income increased $1.0 million, or 3.8 percent, for the fiscal year ended September 30, 2023, compared to the fiscal year ended September 30, 2020, which primarily resulted from a decrease in interest expense on interest-bearing deposits.
- Diluted and basic earnings (loss) per share decreased nine basis points to $(0.01) for the fiscal year ended September 30, 2023, compared to $0.08 for the fiscal year ended September 30, 2020. The decreases are primarily attributable to the provision of loan losses expense of $10.6 million recorded for the quarter ended September 30, 2023.
Linked Quarter Financial Ratios
(unaudited)
| As of or for the quarter ended: | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 |
| Return on average assets (1) | (2.06%) | 0.53% | 0.73% | 0.74% | (1.15%) |
| Return on average equity (1) | (16.59%) | 4.35% | 6.14% | 6.38% | (9.54%) |
| Net interest margin (1) | 2.61% | 2.70% | 2.54% | 2.62% | 2.38% |
| Loans / deposits ratio | 97.41% | 104.84% | 108.14% | 111.33% | 116.62% |
| Shareholders’ equity / total assets | 11.76% | 12.50% | 12.09% | 11.73% | 11.64% |
| Efficiency ratio | 68.7% | 73.6% | 63.5% | 58.3% | 61.5% |
| Book value per common share | $18.65 | $19.44 | $19.17 | $18.83 | $18.47 |
| ____________________ | |||||
| (1) Annualized. | |||||
Linked Quarter Income Statement Data
(unaudited)
(in thousands, except share and per share data)
| For the quarter ended: | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | ||||||||||
| Net interest income | $ | 6,825 | $ | 7,129 | $ | 6,802 | $ | 7,304 | $ | 6,720 | |||||
| Provision for loan losses | 10,626 | – | – | 550 | 7,400 | ||||||||||
| Net interest income (loss) after provision for loan losses | (3,801 | ) | 7,129 | 6,802 | 6,754 | (680 | ) | ||||||||
| Other income | 579 | 793 | 1,167 | 1,224 | 692 | ||||||||||
| Other expense | 5,084 | 5,832 | 5,063 | 4,972 | 4,558 | ||||||||||
| Income (loss) before income tax expense | (8,306 | ) | 2,090 | 2,906 | 3,006 | (4,546 | ) | ||||||||
| Income tax expense (benefit) | (2,116 | ) | 489 | 682 | 733 | (1,043 | ) | ||||||||
| Net income (loss) | $ | (6,190 | ) | $ | 1,601 | $ | 2,224 | $ | 2,273 | $ | (3,503 | ) | |||
| (Loss) Earnings per common share | |||||||||||||||
| Basic | (0.82 | ) | 0.21 | 0.30 | 0.30 | (0.46 | ) | ||||||||
| Diluted | (0.82 | ) | 0.21 | 0.30 | 0.30 | (0.46 | ) | ||||||||
| Weighted average common shares outstanding | |||||||||||||||
| Basic | 7,548,958 | 7,545,371 | 7,529,408 | 7,525,808 | 7,522,199 | ||||||||||
| Diluted | 7,550,766 | 7,546,200 | 7,530,151 | 7,526,376 | 7,522,360 | ||||||||||
Net Interest Income
Net interest income was $6.8 million for the quarter ended September 30, 2023, an increase of $105,000, or 1.6 percent, from $6.7 million for the quarter ended September 30, 2020. For the quarter ended September 30, 2023, NIM increased by 23 basis points to 2.61 percent, as compared to 2.38 percent for the quarter ended September 30, 2020. This increase was primarily driven by a reduction in interest expense as the cost of interest-bearing deposits decreased by 67 basis points compared to the quarter ended September 30, 2020. The cost of interest-bearing liabilities decreased by 62 basis points compared to the quarter ended September 30, 2020.
Net interest income was $28.1 million for the fiscal year ended September 30, 2023, an increase of $1.0 million, or 3.8 percent, from $27.0 million for the fiscal year ended September 30, 2020. For the fiscal year ended September 30, 2023, NIM increased by 32 basis points to 2.62 percent, as compared to 2.30 percent for the fiscal year ended September 30, 2020. Consistent with the quarter ended September 30, 2023, this increase was primarily driven by the 71 basis point decrease in cost of interest-bearing deposits compared to the fiscal year ended September 30, 2020. The cost of interest-bearing liabilities decreased by 66 basis points compared to the fiscal year ended September 30, 2020.
Interest Income
For the quarters ended September 30, 2023 and September 30, 2020, total interest income was $8.9 million and $10.3 million, respectively. The average yield on interest-earning assets declined 27 basis points for the quarter ended September 30, 2023, to 3.39 percent when compared to the same period in 2020. Total interest income fell for the quarter ended September 30, 2023, compared to the quarter ended September 30, 2020, due primarily to the decrease in average loan balances and average yield on loans and an adjustment to non-accrual interest on charged off loans of $347,000.
For the fiscal year ended September 30, 2023, total interest income was $38.4 million, a decrease of $5.9 million, or (13.3) percent, from $44.3 million for the fiscal year ended September 30, 2020. The average yield on interest-earning assets declined 20 basis points to 3.58 percent when compared to the same period in 2020 as average balances and average yields on loans decreased.
Interest Expense
For the quarter ended September 30, 2023, interest expense decreased by $1.6 million, or (43.7) percent, to $2.0 million, compared to $3.6 million for the quarter ended September 30, 2020. The decrease in interest expense is primarily attributable to rate related factors, as the average rate on interest-bearing liabilities fell 62 basis points to 0.83 percent compared to the quarter ended September 30, 2020. This decline reflects a 67 basis point decrease in the rate on interest-bearing deposits.
Total interest expense decreased by $6.9 million, or (40.1) percent, to $10.4 million for the fiscal year ended September 30, 2023, compared to $17.3 million for the fiscal year ended September 30, 2020. The decrease in interest expense is primarily attributable to rate related factors. The annualized average rate on total interest-bearing liabilities decreased to 1.03 percent for the fiscal year ended September 30, 2023, from 1.69 percent for the fiscal year ended September 30, 2020. This reduction primarily reflects a 71 basis point decrease in the average rate paid on interest-bearing deposits and a eight basis point decrease in the average rate of borrowings. The decrease in the average rate of interest-bearing deposits consisted of a 93 basis point decrease in the average rate of money market accounts, a 72 basis point decrease in the average rate of certificates of deposit, and a 34 basis point decrease in average rate of other interest-bearing deposit accounts.
Other Income
Other income decreased $113,000 during the quarter ended September 30, 2023, compared to the quarter ended September 2020. The decrease was primarily due to decreases of $149,000 in net gains on sale of investments and $57,000 on sales of loans, partially offset by a slight increase in service charges and other fees of $55,000 and earnings on bank-owned life insurance of $38,000.
For the fiscal year ended September 30, 2023, total other income increased $1.3 million, or 51.3 percent, compared to the same period in 2020. This increase was primarily due to a $672,000 increase in net gains on sale of loans, a $449,000 increase in net gains on sale of investments which resulted from managing and optimizing portfolio activity in the ordinary course of business, and $147,000 in earnings on bank-owned life insurance.
Other Expense
Other expense for the quarter ended September 30, 2023 increased $526,000, or 11.5 percent, to $5.1 million when compared to the quarter ended September 30, 2020. The increase was primarily due to increases of $262,000 in professional fees, $123,000 in salaries and employee benefits, and $94,000 in other operating expense.
Other expense for the fiscal year ended September 30, 2023 increased $2.6 million, or 14.5 percent, to $21.0 million when compared to the fiscal year ended September 30, 2020. The increase was primarily due to increases of $1.2 million in professional fees associated with legal, accounting, and audit expenses related to the Company’s periodic and annual filings including matters arising out of the Company’s prior restatements, $778,000 in net other real estate owned (“OREO”) expense due to the Company’s valuation adjustment for one commercial real estate property, $254,000 in salaries and employee benefits, $235,000 in other operating expenses, and $158,000 in federal deposit insurance premiums.
Income Taxes
The Company recorded an income tax benefit of $2.1 million during the quarter ended September 30, 2023, compared to an income tax benefit of $1.0 million for the quarter ended September 30, 2020. The increase in income tax benefit was due to the recorded provision for loan losses of $10.6 million. The effective tax rate for the Company for the quarters ended September 30, 2023 and September 30, 2020 were 25.5 percent and 22.9 percent, respectively.
For the fiscal year ended September 30, 2023, the Company recorded an income tax benefit of $212,000, compared to an income tax benefit of $36,000 for the fiscal year ended September 30, 2020, which also resulted from the provision for loan losses of $11.2 million recorded during the fiscal year ended September 30, 2023.
Statement of Condition Highlights at September 30, 2023
- The Company transferred four loans to held-for-sale, at fair value, totaling $32.5 million which resulted in a write-down of $10.8 million for the quarter ended September 30, 2023. Three of these loans were subsequently sold for a total of $18.9 million. Of the loans sold, one was on non-accrual totaling $7.5 million and the remaining two were TDRs totaling $11.4 million.
- Non-performing assets (“NPAs”) were 2.46 percent and 1.87 percent of total assets at September 30, 2023, and September 30, 2020, respectively.
- Non-performing loans (“NPLs”) were 2.62 percent and 1.62 percent of total loans at September 30, 2023, and September 30, 2020, respectively.
- Total deposits increased $47.3 million, or 5.3 percent, to $938.2 million at September 30, 2023, compared to $890.9 million at September 30, 2020, primarily driven by increases in money market and interest-bearing demand accounts.
- Book value per common share amounted to $18.65 at September 30, 2023, compared to $18.47 at September 30, 2020.
Linked Quarter Statement of Condition Data
(in thousands, unaudited)
| At the quarter ended: | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | ||||||||||
| Cash and due from depository institutions | $ | 99,670 | $ | 90,441 | $ | 99,358 | $ | 83,764 | $ | 16,386 | |||||
| Interest bearing deposits in depository institutions | 36,920 | 14,513 | 9,556 | 25,458 | 45,053 | ||||||||||
| Investment securities, available for sale, at fair value | 42,313 | 34,502 | 28,899 | 35,224 | 31,541 | ||||||||||
| Investment securities held to maturity | 28,507 | 31,795 | 25,834 | 14,161 | 14,970 | ||||||||||
| Restricted stock, at cost | 7,776 | 7,896 | 8,891 | 9,327 | 9,622 | ||||||||||
| Loans Held-for-sale | 33,199 | — | — | — | — | ||||||||||
| Loans receivable, net of allowance for loan losses | 902,981 | 940,735 | 974,596 | 990,346 | 1,026,894 | ||||||||||
| Other real estate owned | 4,961 | 4,961 | 5,796 | 5,796 | 5,796 | ||||||||||
| Accrued interest receivable | 3,512 | 3,370 | 3,598 | 4,051 | 3,677 | ||||||||||
| Operating lease right-of-use-assets | 1,796 | 2,168 | 2,322 | 2,479 | 2,638 | ||||||||||
| Property and equipment, net | 5,777 | 5,902 | 6,040 | 6,154 | 6,274 | ||||||||||
| Deferred income taxes, net | 3,530 | 3,389 | 3,535 | 3,601 | 3,680 | ||||||||||
| Bank-owned life insurance | 26,056 | 25,889 | 25,725 | 25,564 | 25,400 | ||||||||||
| Other assets | 12,145 | 20,183 | 12,269 | 14,999 | 16,344 | ||||||||||
| Total assets | $ | 1,209,143 | $ | 1,185,744 | $ | 1,206,419 | $ | 1,220,924 | $ | 1,208,275 | |||||
| Deposits | $ | 938,159 | $ | 907,704 | $ | 912,213 | $ | 900,465 | $ | 890,906 | |||||
| FHLB advances | 90,000 | 90,000 | 110,000 | 130,000 | 130,000 | ||||||||||
| Secured borrowings | — | — | — | — | 4,225 | ||||||||||
| Other borrowings | — | — | — | 5,000 | — | ||||||||||
| Subordinated debt | 24,934 | 24,895 | 24,855 | 24,816 | 24,776 | ||||||||||
| Operating lease liabilities | 1,830 | 2,204 | 2,357 | 2,512 | 2,671 | ||||||||||
| Other liabilities | 12,052 | 12,749 | 11,143 | 14,865 | 15,104 | ||||||||||
| Shareholders’ equity | 142,168 | 148,192 | 145,851 | 143,266 | 140,593 | ||||||||||
| Total liabilities and shareholders’ equity | $ | 1,209,143 | $ | 1,185,744 | $ | 1,206,419 | $ | 1,220,924 | $ | 1,208,275 |
The following table sets forth the Company’s consolidated average statement of condition for the quarters presented.
Condensed Consolidated Average Statement of Condition
(in thousands, unaudited)
| For the quarter ended: | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | ||||||||||
| Investment securities | $ | 75,004 | $ | 71,811 | $ | 58,559 | $ | 59,135 | $ | 57,906 | |||||
| Interest-bearing cash accounts | 26,339 | 16,914 | 21,506 | 21,690 | 27,996 | ||||||||||
| Loans | 945,457 | 967,615 | 990,913 | 1,032,483 | 1,045,595 | ||||||||||
| Allowance for loan losses | (11,730 | ) | (12,603 | ) | (13,037 | ) | (12,462 | ) | (11,071 | ) | |||||
| All other assets | 165,439 | 164,288 | 165,942 | 123,919 | 98,155 | ||||||||||
| Total assets | $ | 1,200,509 | $ | 1,208,025 | $ | 1,223,883 | $ | 1,224,765 | $ | 1,218,581 | |||||
| Non-interest-bearing deposits | 51,534 | 52,799 | 50,327 | 48,152 | 49,139 | ||||||||||
| Interest-bearing deposits | 869,914 | 868,099 | 866,153 | 854,649 | 842,727 | ||||||||||
| FHLB advances | 90,000 | 99,505 | 116,889 | 130,000 | 130,000 | ||||||||||
| Other short-term borrowings | — | — | 3,111 | 5,918 | 4,250 | ||||||||||
| Subordinated debt | 24,917 | 24,877 | 24,835 | 24,794 | 24,760 | ||||||||||
| Other liabilities | 14,907 | 15,399 | 17,751 | 18,689 | 20,853 | ||||||||||
| Shareholders’ equity | 149,237 | 147,346 | 144,817 | 142,563 | 146,852 | ||||||||||
| Total liabilities and shareholders’ equity | $ | 1,200,509 | $ | 1,208,025 | $ | 1,223,883 | $ | 1,224,765 | $ | 1,218,581 |
Deposits
The following table reflects the composition of the Company’s deposits as of the dates indicated.
(in thousands, unaudited)
| At quarter ended: | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | ||||||||||
| Demand: | |||||||||||||||
| Non-interest-bearing | $ | 53,849 | $ | 53,365 | $ | 54,210 | $ | 49,264 | $ | 50,422 | |||||
| Interest-bearing | 336,645 | 329,372 | 313,865 | 303,535 | 303,682 | ||||||||||
| Savings | 50,582 | 51,011 | 49,601 | 46,531 | 45,072 | ||||||||||
| Money market | 385,480 | 359,040 | 338,100 | 303,796 | 277,711 | ||||||||||
| Time | 111,603 | 114,916 | 156,437 | 197,339 | 214,019 | ||||||||||
| Total deposits | $ | 938,159 | $ | 907,704 | $ | 912,213 | $ | 900,465 | $ | 890,906 |
Loans
Total net loans amounted to $936.2 million at September 30, 2023, compared to $1.027 billion at September 30, 2020, resulting in a net decrease of $90.7 million, or (8.80) percent, for the fiscal year. The allowance for loan losses amounted to $11.5 million, or 1.21 percent of total loans, at September 30, 2023, compared to $12.4 million, or 1.22 percent of total loans, at September 30, 2020. Average loan balances for the quarter ended September 30, 2023, totaled $945.5 million as compared to $1.046 billion for the quarter ended September 30, 2020, representing a 9.58 percent decrease.
At the end of the quarter ended September 30, 2023, the gross loan portfolio, excluding loans held-for-sale, remained weighted toward two primary components: the commercial and core residential portfolio, with commercial loans accounting for 68.9 percent and single-family residential real estate loans accounting for 21.7 percent of the gross loan portfolio at such date. Construction and development loans amounted to 7.0 percent and consumer loans represented 2.4 percent of the gross loan portfolio at such date. The decrease in the gross loan portfolio at September 30, 2023, compared to September 30, 2020, primarily reflected decreases of $67.7 million in commercial loans, $43.4 million in residential mortgage loans, $9.0 million in consumer loans, and $5.1 million in construction and development loans.
The following table reflects the Company’s loan portfolio composition, excluding loans-held-for-sale.
(in thousands, unaudited)
| At quarter ended: | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | ||||||||||
| Residential mortgage | $ | 198,710 | $ | 201,737 | $ | 218,165 | $ | 232,481 | $ | 242,090 | |||||
| Construction and Development: | |||||||||||||||
| Residential and commercial | 61,492 | 61,484 | 76,257 | 73,000 | 65,703 | ||||||||||
| Land | 2,204 | 2,253 | 3,596 | 3,648 | 3,110 | ||||||||||
| Total construction and development | 63,696 | 63,737 | 79,853 | 76,648 | 68,813 | ||||||||||
| Commercial: | |||||||||||||||
| Commercial real estate | 426,915 | 478,032 | 482,611 | 478,808 | 495,398 | ||||||||||
| Farmland | 10,297 | 10,335 | 7,344 | 7,378 | 7,517 | ||||||||||
| Multi-family | 66,332 | 66,725 | 67,122 | 67,457 | 67,767 | ||||||||||
| Commercial and industrial | 115,246 | 97,955 | 94,706 | 101,852 | 116,584 | ||||||||||
| Other | 10,954 | 10,896 | 9,927 | 10,010 | 10,142 | ||||||||||
| Total commercial | 629,744 | 663,943 | 661,710 | 665,505 | 697,408 | ||||||||||
| Consumer: | |||||||||||||||
| Home equity lines of credit | 13,491 | 12,822 | 15,936 | 16,389 | 17,128 | ||||||||||
| Second mortgages | 5,884 | 7,039 | 8,114 | 9,097 | 10,711 | ||||||||||
| Other | 2,299 | 2,372 | 2,650 | 2,388 | 2,851 | ||||||||||
| Total consumer | 21,674 | 22,233 | 26,700 | 27,874 | 30,690 | ||||||||||
| Total loans | 913,824 | 951,650 | 986,428 | 1,002,508 | 1,039,001 | ||||||||||
| Deferred loan costs, net | 629 | 685 | 769 | 873 | 326 | ||||||||||
| Allowance for loan losses | (11,472 | ) | (11,600 | ) | (12,601 | ) | (13,035 | ) | (12,433 | ) | |||||
| Loans Receivable, net | $ | 902,981 | $ | 940,735 | $ | 974,596 | $ | 990,346 | $ | 1,026,894 | |||||
At September 30, 2023, the Company had $126.8 million in overall undisbursed loan commitments, which consisted primarily of available usage from active construction facilities, unused commercial lines of credit, and home equity lines of credit.
Asset Quality
Non-accrual loans totaled $24.8 million at September 30, 2023, and $16.7 million at September 30, 2020. The increase in non-accrual loans was primarily due to the addition of one $13.6 million commercial real estate loan classified as substandard, partially offset by one $4.2 million commercial real estate loan classified as substandard that returned to accrual status as of September 30, 2023.
The total portfolio of non-accrual loans at September 30, 2023 was comprised of two commercial real estate loans with an aggregate outstanding balance of approximately $21.1 million, one commercial and industrial loan with an aggregate outstanding balance of approximately $2.5 million, 10 residential mortgage loans with an aggregate outstanding balance of approximately $879,000, and nine consumer loans with an aggregate outstanding balance of approximately $301,000.
At September 30, 2023, NPAs totaled $29.8 million, or 2.46 percent of total assets, as compared with $22.6 million, or 1.87 percent of total assets, at September 30, 2020. The increase in NPAs is due to the increase in non-accrual loans as described above. OREO, which is comprised of one commercial real estate property, totaled $5.0 million at September 30, 2023, compared to $5.8 million at September 30, 2020.
Performing TDR loans were $17.6 million at September 30, 2023, and $13.4 million at September 30, 2020. As stated above, the increase is primarily related to one $4.2 million commercial real estate loan that returned to accruing status and as such is now classified as a performing TDR as of September 30, 2023.
Non-Performing Asset and Other Asset Quality Data:
(dollars in thousands, unaudited)
| As of or for the quarter ended: | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | ||||||||||
| Non-accrual loans(1) | $ | 24,813 | $ | 23,547 | $ | 22,281 | $ | 16,240 | $ | 16,730 | |||||
| Loans 90 days or more past due and still accruing | — | 212 | 765 | 775 | 58 | ||||||||||
| Total non-performing loans | 24,813 | 23,759 | 23,046 | 17,015 | 16,788 | ||||||||||
| OREO | 4,961 | 4,961 | 5,796 | 5,796 | 5,796 | ||||||||||
| Total NPAs | $ | 29,774 | $ | 28,720 | $ | 28,842 | $ | 22,811 | $ | 22,584 | |||||
| Performing TDR loans | $ | 17,601 | $ | 23,352 | $ | 22,697 | $ | 16,229 | $ | 13,418 | |||||
| NPAs / total assets | 2.46 | % | 2.42 | % | 2.39 | % | 1.87 | % | 1.87 | % | |||||
| Non-performing loans / total loans | 2.62 | % | 2.50 | % | 2.34 | % | 1.70 | % | 1.62 | % | |||||
| Net charge-off (recoveries) | 10,754 | 1,001 | 434 | (52 | ) | 6,034 | |||||||||
| Net charge-offs (recoveries) /average loans(2) | 4.55 | % | 0.41 | % | 0.18 | % | -0.02 | % | 2.31 | % | |||||
| Allowance for loan losses / total loans | 1.21 | % | 1.22 | % | 1.28 | % | 1.30 | % | 1.22 | % | |||||
| Allowance for loan losses / non-performing loans | 46.2 | % | 48.8 | % | 54.7 | % | 76.6 | % | 74.1 | % | |||||
| Total assets | 1,209,143 | 1,185,744 | 1,206,419 | 1,220,924 | 1,208,275 | ||||||||||
| Total gross loans | 947,023 | 951,650 | 986,428 | 1,002,508 | 1,039,001 | ||||||||||
| Average loans | 945,457 | 967,615 | 990,913 | 1,032,483 | 1,045,595 | ||||||||||
| Allowance for loan losses | 11,472 | 11,600 | 12,601 | 13,035 | 12,433 | ||||||||||
| ____________________ | |||||||||||||||
| (1) Includes one commercial real estate loan totaling approximately $7.5 million which was sold subsequent to the fiscal year ended September 30, 2023. | |||||||||||||||
| (2) Annualized. | |||||||||||||||
The allowance for loan losses at September 30, 2023 amounted to approximately $11.5 million, or 1.21 percent of total loans, compared to $12.4 million, or 1.22 percent of total loans, at September 30, 2020. The Company recorded provision for loan losses of $10.6 million for the quarter ended September 30, 2023, compared to $7.4 million for the quarter ended September 30, 2020.
During the quarter ended September 30, 2023 the Company recorded charge-offs of $10.8 million primarily related to the write-down on loans transferred to held-for-sale.
Capital
At September 30, 2023, total shareholders’ equity amounted to $142.2 million, or 11.8 percent of total assets, compared to $140.6 million, or 11.6 percent of total assets at September 30, 2020. The Company’s capital position continues to exceed all regulatory capital guidelines. At September 30, 2023, the Bank’s common equity Tier 1 capital ratio was 16.13 percent, Tier 1 leverage ratio was 13.14 percent, Tier 1 risk-based capital ratio was 16.13 percent and the total risk-based capital ratio was 17.32 percent. At September 30, 2020, the Bank’s common equity Tier 1 capital ratio was 15.40 percent, Tier 1 leverage ratio was 12.78 percent, Tier 1 risk-based capital ratio was 15.40 percent and the total risk-based capital ratio was 16.64 percent.
About Malvern Bancorp, Inc.
Malvern Bancorp, Inc. is the holding company for Malvern Bank, National Association (“Malvern Bank”), an institution that was originally organized in 1887 as a federally-chartered savings bank. Malvern Bank now serves as one of the oldest banks headquartered on the Philadelphia Main Line. For more than a century, Malvern Bank has been committed to helping people build prosperous communities as a trusted financial partner, forging lasting relationships through teamwork, respect, and integrity.
Malvern Bank conducts business from its headquarters in Paoli, Pennsylvania, a suburb of Philadelphia, and through its nine other banking locations in Chester and Delaware counties, Pennsylvania, Morristown, New Jersey, its New Jersey regional headquarters and Palm Beach Florida. The Bank also maintains representative offices in Wellington, Florida, and Allentown, Pennsylvania. The Bank’s primary market niche is providing personalized service to its client base.
Malvern Bank, through its Private Banking division, provides personalized investment advisory services to individuals, families, businesses and non-profits. These 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.malvernbancorp.com. For information regarding Malvern Bank, please visit our web site at http://www.mymalvernbank.com.
Forward-Looking Statements
The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company, including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, and shareholder value creation.
Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the effects of, and changes in, trade, monetary and fiscal policies and laws, including recent changes in interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the impact of competition and the acceptance of the Company’s products and services by new and existing customers; the impact of changes in financial services policies, laws and regulations; technological changes; any oversupply of inventory and deterioration in values of real estate in the markets in which the Company operates, both residential and commercial; the effect of changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, the Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters; possible other-than-temporary impairment of securities held by us; the effects of the Company’s lack of a widely-diversified loan portfolio, including the risks of geographic and industry concentrations; ability to attract deposits and other sources of liquidity; changes in the competitive environment among financial and bank holding companies and other financial service providers; unanticipated regulatory or judicial proceedings; and the Company’s ability to manage the risk involved in the foregoing. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company’s Annual Reports Filed on Form 10-K and Quarterly Reports on Form 10-Q filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).
Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus and its variants can be controlled and the effects on general economic conditions. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we are subject to any of the following risks, any of which could continue to have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; the economy , and particularly commercial real estate markets may be affected; there may be high levels of unemployment , loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially commercial real estate, may continue to decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0 percent, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our NIM and spread and reducing net income; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and FDIC premiums may increase if the agency experiences additional resolution costs.
The Company undertakes no obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, unless required by law.
MALVERN BANCORP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
| September 30, 2023 | September 30, 2020 | |||||||
| (in thousands, except for share and per share data) | (unaudited) | |||||||
| ASSETS | ||||||||
| Cash and due from depository institutions | $ | 99,670 | $ | 16,386 | ||||
| Interest-bearing deposits in depository institutions | 36,920 | 45,053 | ||||||
| Total cash and cash equivalents | 136,590 | 61,439 | ||||||
| Investment securities available for sale, at fair value (amortized cost of $42,256 and $31,658 at September 30, 2023 and September 30, 2020, respectively) | 42,313 | 31,541 | ||||||
| Investment securities held to maturity (fair value of $28,913 and $15,608 at September 30, 2023 and September 30, 2020, respectively) | 28,507 | 14,970 | ||||||
| Restricted stock, at cost | 7,776 | 9,622 | ||||||
| Loans Held-for-sale | 33,199 | — | ||||||
| Loans receivable, net of allowance for loan losses | 902,981 | 1,026,894 | ||||||
| Other real estate owned | 4,961 | 5,796 | ||||||
| Accrued interest receivable | 3,512 | 3,677 | ||||||
| Operating lease right-of-use-assets | 1,796 | 2,638 | ||||||
| Property and equipment, net | 5,777 | 6,274 | ||||||
| Deferred income taxes, net | 3,530 | 3,680 | ||||||
| Bank-owned life insurance | 26,056 | 25,400 | ||||||
| Other assets | 12,145 | 16,344 | ||||||
| Total assets | $ | 1,209,143 | $ | 1,208,275 | ||||
| LIABILITIES | ||||||||
| Deposits: | ||||||||
| Non-interest bearing | $ | 53,849 | $ | 50,422 | ||||
| Interest-bearing | 884,310 | 840,484 | ||||||
| Total deposits | 938,159 | 890,906 | ||||||
| FHLB advances | 90,000 | 130,000 | ||||||
| Secured borrowings | — | 4,225 | ||||||
| Subordinated debt | 24,934 | 24,776 | ||||||
| Advances from borrowers for taxes and insurance | 1,022 | 1,741 | ||||||
| Accrued interest payable | 572 | 728 | ||||||
| Operating lease liabilities | 1,830 | 2,671 | ||||||
| Other liabilities | 10,458 | 12,635 | ||||||
| Total liabilities | 1,066,975 | 1,067,682 | ||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Preferred stock, $0.01 par value, 10,000,000 shares, authorized, none issued | — | — | ||||||
| Common stock, $0.01 par value, 50,000,000 shares authorized; 7,816,832 and 7,622,316 issued and outstanding, respectively, at September 30, 2023, and 7,804,469 and 7,609,953 shares issued and outstanding, respectively, at September 30, 2020 | 76 | 76 | ||||||
| Additional paid in capital | 85,524 | 85,127 | ||||||
| Retained earnings | 60,296 | 60,388 | ||||||
| Unearned Employee Stock Ownership Plan (ESOP) shares | (901 | ) | (1,047 | ) | ||||
| Accumulated other comprehensive income (loss) | 36 | (1,088 | ) | |||||
| Treasury stock, at cost: 194,516 shares at September 30, 2023 and September 30, 2020 | (2,863 | ) | (2,863 | ) | ||||
| Total shareholders’ equity | 142,168 | 140,593 | ||||||
| Total liabilities and shareholders’ equity | $ | 1,209,143 | $ | 1,208,275 | ||||
MALVERN BANCORP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| Three Months Ended September 30, | Year Ended September 30, | ||||||||||||||
| (in thousands, except for share data) | 2021 | 2020 | 2021 | 2020 | |||||||||||
| (unaudited) | |||||||||||||||
| Interest and Dividend Income | |||||||||||||||
| Loans, including fees | $ | 8,330 | $ | 9,815 | $ | 36,370 | $ | 41,441 | |||||||
| Investment securities, taxable | 403 | 349 | 1,449 | 1,048 | |||||||||||
| Investment securities, tax-exempt | 30 | 24 | 107 | 124 | |||||||||||
| Dividends, restricted stock | 89 | 137 | 459 | 631 | |||||||||||
| Interest-bearing cash accounts | 10 | 15 | 31 | 1,063 | |||||||||||
| Total Interest and Dividend Income | 8,862 | 10,340 | 38,416 | 44,307 | |||||||||||
| Interest Expense | |||||||||||||||
| Deposits | 1,240 | 2,610 | 6,748 | 12,846 | |||||||||||
| Short-term borrowings | — | — | 48 | — | |||||||||||
| Long-term borrowings | 415 | 628 | 2,029 | 2,898 | |||||||||||
| Subordinated debt | 382 | 382 | 1,531 | 1,531 | |||||||||||
| Total Interest Expense | 2,037 | 3,620 | 10,356 | 17,275 | |||||||||||
| Net interest income | 6,825 | 6,720 | 28,060 | 27,032 | |||||||||||
| Provision for Loan Losses | 10,626 | 7,400 | 11,176 | 10,610 | |||||||||||
| Net Interest Income (loss) after Provision for Loan Losses | (3,801 | ) | (680 | ) | 16,884 | 16,422 | |||||||||
| Other Income | |||||||||||||||
| Service charges and other fees | 313 | 258 | 1,323 | 1,316 | |||||||||||
| Rental income-other | 54 | 54 | 217 | 217 | |||||||||||
| Net gains on sale of investments | — | 149 | 779 | 330 | |||||||||||
| Net gains on sale of loans | 45 | 102 | 788 | 116 | |||||||||||
| Earnings on bank-owned life insurance | 167 | 129 | 656 | 509 | |||||||||||
| Total Other Income | 579 | 692 | 3,763 | 2,488 | |||||||||||
| Other Expense | |||||||||||||||
| Salaries and employee benefits | 2,337 | 2,214 | 9,143 | 8,889 | |||||||||||
| Occupancy expense | 542 | 560 | 2,198 | 2,309 | |||||||||||
| Federal deposit insurance premium | 77 | 76 | 313 | 155 | |||||||||||
| Advertising | 33 | 32 | 109 | 119 | |||||||||||
| Data processing | 332 | 280 | 1,267 | 1,105 | |||||||||||
| Professional fees | 790 | 528 | 3,178 | 1,995 | |||||||||||
| Net other real estate owned expense | — | (11 | ) | 866 | 88 | ||||||||||
| Pennsylvania shares tax | 169 | 169 | 678 | 678 | |||||||||||
| Other operating expenses | 804 | 710 | 3,199 | 2,964 | |||||||||||
| Total Other Expense | 5,084 | 4,558 | 20,951 | 18,302 | |||||||||||
| Income (loss) before income tax expense | (8,306 | ) | (4,546 | ) | (304 | ) | 608 | ||||||||
| Income tax benefit | (2,116 | ) | (1,043 | ) | (212 | ) | (36 | ) | |||||||
| Net Income (loss) | $ | (6,190 | ) | $ | (3,503 | ) | $ | (92 | ) | $ | 644 | ||||
| Earnings (loss) per common share | |||||||||||||||
| Basic | $ | (0.82 | ) | $ | (0.46 | ) | $ | (0.01 | ) | $ | 0.08 | ||||
| Diluted | $ | (0.82 | ) | $ | (0.46 | ) | $ | (0.01 | ) | $ | 0.08 | ||||
| Weighted Average Common Shares Outstanding | |||||||||||||||
| Basic | 7,548,958 | 7,522,199 | 7,537,408 | 7,597,528 | |||||||||||
| Diluted | 7,550,766 | 7,522,360 | 7,538,116 | 7,597,726 | |||||||||||
MALVERN BANCORP, INC., AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA
| Three Months Ended |
Three Months Ended |
Three Months Ended |
|||||||||
| (in thousands, except for share and per share data) (annualized where applicable) | 9/30/2021 |
6/30/2021 |
9/30/2020 |
||||||||
| (unaudited) | |||||||||||
| Statements of Operations Data | |||||||||||
| Interest income | $ | 8,862 | $ | 9,419 | $ | 10,340 | |||||
| Interest expense | 2,037 | 2,290 | 3,620 | ||||||||
| Net interest income | 6,825 | 7,129 | 6,720 | ||||||||
| Provision for loan losses | 10,626 | – | 7,400 | ||||||||
| Net interest income (loss) after provision for loan losses | (3,801 | ) | 7,129 | (680 | ) | ||||||
| Other income | 579 | 793 | 692 | ||||||||
| Other expense | 5,084 | 5,832 | 4,558 | ||||||||
| Income (loss) before income tax expense | (8,306 | ) | 2,090 | (4,546 | ) | ||||||
| Income tax expense (benefit) | (2,116 | ) | 489 | (1,043 | ) | ||||||
| Net income (loss) | $ | (6,190 | ) | $ | 1,601 | $ | (3,503 | ) | |||
| Earnings (loss) (per Common Share) | |||||||||||
| Basic | $ | (0.82 | ) | $ | 0.21 | $ | (0.46 | ) | |||
| Diluted | $ | (0.82 | ) | $ | 0.21 | $ | (0.46 | ) | |||
| Statements of Condition Data (Period-End) | |||||||||||
| Investment securities available for sale, at fair value | $ | 42,313 | $ | 34,502 | $ | 31,541 | |||||
| Investment securities held to maturity (fair value of $28,913, $32,355, and $15,608, respectively) | 28,507 | 31,795 | 14,970 | ||||||||
| Loans Held-for-sale | 33,199 | — | — | ||||||||
| Loans, net of allowance for loan losses | 902,981 | 940,735 | 1,026,894 | ||||||||
| Total assets | 1,209,143 | 1,185,744 | 1,208,275 | ||||||||
| Deposits | 938,159 | 907,704 | 890,906 | ||||||||
| FHLB advances | 90,000 | 90,000 | 130,000 | ||||||||
| Secured Borrowings | — | — | 4,225 | ||||||||
| Subordinated debt | 24,934 | 24,895 | 24,776 | ||||||||
| Shareholders’ equity | 142,168 | 148,192 | 140,593 | ||||||||
| Common Shares Dividend Data | |||||||||||
| Cash dividends | $ | – | $ | – | $ | – | |||||
| Weighted Average Common Shares Outstanding | |||||||||||
| Basic | 7,548,958 | 7,545,371 | 7,522,199 | ||||||||
| Diluted | 7,550,766 | 7,546,200 | 7,522,360 | ||||||||
| Operating Ratios | |||||||||||
| Return on average assets | (2.06 | %) | 0.53 | % | (1.15 | %) | |||||
| Return on average equity | (16.59 | %) | 4.35 | % | (9.54 | %) | |||||
| Average equity / average assets | 12.43 | % | 12.20 | % | 12.05 | % | |||||
| Book value per common share (period-end) | $ | 18.65 | $ | 19.44 | $ | 18.47 | |||||
| Non-Financial Information (Period-End) | |||||||||||
| Common shareholders of record | 379 | 380 | 385 | ||||||||
| Full-time equivalent staff | 81 | 80 | 82 | ||||||||
Investor Contacts:
Joseph D. Gangemi
Corporate Investor Relations
610-695-3676
Investor Relations Contact:
Nathanial Jordan
610-695-3646
