Malvern Bancorp, Inc. Reports Third Fiscal Quarter 2020 Results

PAOLI, Pa., Aug. 05, 2020 (GLOBE NEWSWIRE) — Malvern Bancorp, Inc. (NASDAQ: MLVF) (the “Company”), the parent company of Malvern Bank, National Association (“Malvern” or the “Bank”), today reported operating results for the third fiscal quarter ended June 30, 2020.   Net income for the quarter ended June 30, 2020 amounted to $1.5 million, or $0.19 per fully diluted common share, compared with net income of $2.7 million, or $0.35 per fully diluted common share, for the quarter ended June 30, 2019. The decreases in net income and diluted earnings per share from the third quarter of 2019 were primarily due to an increase in the provision for loan losses and a decrease in net interest income. The Company recorded a provision for loan losses of $435,000 for the quarter ended June 30, 2020, an increase of $379,000 compared to the quarter ended June 30, 2019, substantially due to economic uncertainties caused by the coronavirus pandemic (“COVID-19”). Net interest income for the quarter ended June 30, 2020 was $830,000 lower than in the quarter ended June 30, 2019. This decrease was mainly driven by the lower interest rate environment. Annualized return on average assets (“ROAA”) was 0.48 percent for the quarter ended June 30, 2020, compared to 0.88 percent for the quarter ended June 30, 2019, and annualized return on average equity (“ROAE”) was 4.06 percent for the quarter ended June 30, 2020, compared with 7.66 percent for the quarter ended June 30, 2019.For the nine months ended June 30, 2020, net income amounted to $4.1 million, or $0.54 per fully diluted common share, compared with net income of $6.6 million, or $0.87 per fully diluted common share, for the nine months ended June 30, 2019. The decreases in net income and diluted earnings per share were primarily due to higher provision expense and lower net interest income, as well as the partial charge-off of $2.3 million in the first fiscal quarter of 2020 related to one commercial loan relationship. Annualized ROAA was 0.45 percent for the nine months ended June 30, 2020, compared to 0.78 percent for the nine months ended June 30, 2019, and annualized ROAE was 3.85 percent for the nine months ended June 30, 2020, compared with 6.48 percent for the nine months ended June 30, 2019.  “Over the last several months, we have operated under what can only be described as unprecedented circumstances.  While we’ve always tested and planned for emergencies, realizing one as significant as the COVID-19 pandemic, and activating our plan in March to work remotely and through drive-thru service only for almost three months, could not have been forecasted by anyone.  As the COVID-19 pandemic continues to provide a drag on both our business and the broader economy amidst the backdrop of virus spikes in certain states and the uncertainty of a vaccine, the question of when the economy will return to a more normal environment creates heightened uncertainty and new challenges to adapt our business,” commented Anthony C. Weagley, President and Chief Executive Officer. “Our priority remains keeping our staff and clients safe and helping our clients while we implement strategies to navigate this crisis and continue to move forward,” continued Mr. Weagley.Ongoing Impact of COVID-19The Company continues to take the following significant steps to protect the health and well-being of its employees and clients and to assist clients who have been impacted by the COVID-19 pandemic.Continuing limited lobby hours; prioritizing drive-thru and appointment banking. High-risk designated hours offered to assist our high-risk clients.Continuing to assist existing and new customers in the Small Business Association’s Paycheck Protection Program (“PPP”). As of June 30, 2020, the Company has obtained approval from the Small Business Administration (“SBA”) for 208 loans totaling $17.7 million for existing and new customers with an average loan size of approximately $85,000. As of August 1, 2020, the Company has originated 249 PPP loans totaling $20.7 million for both existing and new customers, with an average loan size of approximately $83,000. These loans are expected to generate fee income of approximately $763,000 in future quarters.Continuing to provide payment deferrals and forbearances to business customers and mortgage customers that are experiencing hardship because of the crisis. At June 30, 2020, the Company had $313.5 million in COVID-19 modified loan deferrals. As of August 1, 2020, $269.1 million, or 85.8 percent, of COVID-19 modified loans reached their initial 90-day forbearance expiration. Of this amount, $140.6 million, or 52.2 percent have returned to original contractual monthly payments and $128.5 million, or 47.8 percent have requested or been approved for a second forbearance period for a maximum of 90 additional days. Of the $128.5 million, $22.7 million, or 17.6 percent, started making interest-only payments during the second forbearance period.Statement of Income Highlights at June 30, 2020The Company recorded a provision for loan losses of $435,000 and $3.2 million during the three months ended June 30, 2020 and the nine months ended June 30, 2020, respectively. The increase in the provision for loan losses in the recent quarter as compared with the prior quarter ended June 30, 2019 reflects an increase in qualitative factors as a result of COVID-19. The larger component of the year-to-date increase was attributable to a partial charge-off of $2.3 million in the first fiscal quarter of 2020 related to one commercial loan relationship. Due to the uncertainty created by COVID-19, the Company anticipates elevated provisioning until businesses have fully reopened and deferral periods have expired.
 Net interest income decreased $830,000, or 11.1 percent, for the three months ended June 30, 2020 when compared to the three months ended June 30, 2019. Lower rates were attributable to the Federal Open Market Committee (“FOMC”) lowering its target rate from 2.25-2.50 percent to 0-0.25 percent between July 2019 and March 2020.
 On a linked-quarter basis, the reported net interest margin and net interest margin on a tax-equivalent basis, a non-GAAP measure, increased 4 basis points to 2.29 percent. This increase was driven by the reduction in interest expense, partially offset by a decrease in interest earning assets. Information reconciling non-GAAP measures to GAAP measures is presented beginning on page 13 in this press release. Average loan yields declined 29 basis points and the total cost of funds decreased 31 basis points, as the cost of interest-bearing deposits decreased 27 basis points compared to the second fiscal quarter of 2020.