Malvern Bancorp, Inc. :MLVF-US: Earnings Analysis: 2016 By the Numbers : December 20, 2016

Malvern Bancorp, Inc. reports financial results for the year ended September 30, 2016.

We analyze the earnings along side the following peers of Malvern Bancorp, Inc. – Northwest Bancshares, Inc. (NWBI-US) that have also reported for this period.

Highlights

  • Net interest income margins narrowed from 89.35% to 88.73% compared to the same period last year.
  • Net loan assets changed 46.73% compared to same period last year and 46.73% from previous period, total deposits changed 29.33% compared to same period last year and 29.33% from previous period.
  • Year-on-year change in operating cash flow of 193.19% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 20.86 17.75 17.29 18.22 20.43
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 11.94 3.7 0.32 -18.8 1.96
Earnings Growth (YOY) 222.93 1044.89 101.72 -1059.83 132.05
Net Margin 57.24 20.83 1.87 -103.21 9.59
EPS 1.86 0.58 0.05 -2.96 0.31
Return on Equity 13.57 4.68 0.42 -27.24 3.19
Return on Assets 1.62 0.62 0.06 -2.86 0.28

Access our Ratings and Scores for Malvern Bancorp, Inc.

Earnings Growth Analysis

MLVF-US‘s earnings rose year-on-year. But this growth has not come as a result of improvement in net interest income margins or any loan loss improvement activities in its operations. Net interest income margins were 88.73% compared to 89.35% in the immediate last period. Net interest income after provisions margins were 84.19% this period compared to 88.84% in the previous period. In addition, loan loss provisions as a percentage of net interest income were 5.12% this period and 0.57% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (HY YOY)
Total Deposits Growth Rate History (HY YOY)

The firm’s decline in net interest income margins came despite the relative increase in the levels of net loan assets. In addition, total deposits as a percentage of equity went from 5.72% to 6.36%. On an absolute basis, net loan assets changed 46.73% compared to the same period last year and 46.73% from the previous period. Total deposits changed 29.33% compared to the same period last year and 29.33% from the previous period.

Cash Versus Earnings – Sustainable Performance?

MLVF-US‘s change in operating cash flow of 193.19% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins from 20.83% to 28.64% and (2) one-time items. The company’s pretax margins are now 28.64%, compared to 20.83% for the same period last year.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for Malvern Bancorp, Inc.

Company Profile

Malvern Bancorp, Inc. operates as a bank holding company for Malvern Federal Savings Bank, which engages in business of attracting deposits from the general public and originating residential and commercial mortgage loans, consumer loans and other loans. Its principal sources of funds are deposits, repayments of loans and investment securities, maturities of investments and interest bearing deposits. The company was founded on October 11, 2012 and is headquartered in Paoli, PA.

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