Malvern in Pennsylvania Expects 3Q Loss After Loan Sale, FHLB Prepayment

Register now

Malvern Bancorp (MLVF) in Paoli, Pa., expects to report another quarterly loss after selling a block of problem loans and repaying Federal Home Loan Bank advances.

The $666 million-asset company said Tuesday that it expects those moves will also require it to record a charge of $6 million to $7 million against its deferred tax valuation allowance.

Malvern said it sold a block of problem loans to an unnamed buyer in early October at a $10 million loss. The company had classified the loans as held for sale during the third quarter. The sale included $11.2 million of nonaccrual loans, $3.4 million of troubled-debt restructurings and $5.8 million of other loans.

The company also said it had prepaid $20 million in FHLB advances last month, incurring a $1.5 million prepayment penalty. The company used cash and equivalents with a 0.25% yield to repay advances with an average cost of 3.84%.

"Improving asset quality and strengthening our balance sheet has been a top priority," Ronald Anderson, Malvern’s president and chief executive, said in a press release. “We believe the loan sale coupled with the prepayment of FHLB advances positions the company to return to profitability and to grow earnings in future periods."

The company, which earned $141,000 in the second quarter, has been drawing pressure from activist investors Stilwell Group and PL Capital. Stilwell Group, which controls nearly 10% of Malvern’s common stock, wants to put a director on the thrift company’s board.

Malvern said on Tuesday that the loan sale will lower total nonaccrual loans to 0.47% of gross loans, compared to 3.4% at June 30. Nonperforming assets will decrease to 0.97% of total assets, compared to 2.96% at June 30.

For reprint and licensing requests for this article, click here.