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Malvern Bancorp, Inc. Reports Second Fiscal Quarter 2019 Results

Malvern Bancorp, Inc. Reports Second Fiscal Quarter 2019 Results

PAOLI, Pa., May 01, 2019 (GLOBE NEWSWIRE) -- Malvern Bancorp, Inc. (MLVF) (the "Company"), parent company of Malvern Bank, National Association (“Malvern” or the “Bank”), today reported operating results for the second fiscal quarter ended March 31, 2019.   Net income amounted to $2.0 million, or $0.26 per fully diluted common share, for the quarter ended March 31, 2019, compared with net income of $2.0 million, or $0.31 per fully diluted common share, for the quarter ended March 31, 2018. The annualized return on average assets (“ROAA”) was 0.70 percent for the three months ended March 31, 2019, compared to 0.77 percent for the three months ended March 31, 2018, and annualized return on average equity (“ROAE”) was 5.74 percent for the three months ended March 31, 2019, compared with 7.71 percent for the three months ended March 31, 2018.  Excluding provision expense, net of tax, of $720,000, second fiscal quarter 2019 adjusted annualized ROAA was 0.95 percent and adjusted annualized ROAE was 7.85 percent.

For the six months ended March 31, 2019, net income amounted to $4.0 million, or $0.52 per fully diluted common share, compared with net income of $2.4 million, or $0.38 per fully diluted common share, for the six months ended March 31, 2018. The annualized ROAA was 0.72 percent for the six months ended March 31, 2019, compared to 0.46 percent for the six months ended March 31, 2018, and annualized ROAE was 5.87 percent for the six months ended March 31, 2019, compared with 4.65 percent for the six months ended March 31, 2018.  Excluding provision expense, net of tax, of $1.9 million, adjusted annualized ROAA was 1.06 percent and adjusted annualized ROAE was 8.64 percent for the six months ended March 31, 2019.

Anthony C. Weagley, President and Chief Executive Officer, commented on the financial results: “We continue to execute well on our strategic priorities and are pleased to report solid financial results. Our net interest margin expanded quarter over quarter despite the challenges of an uncertain yield curve. We are especially pleased with our deposit growth and new customer acquisition during our second fiscal quarter, and we remain encouraged by the level of new business activity across our markets.” 

Joseph Gangemi, Senior Vice President and Chief Financial Officer of Malvern Bancorp, Inc., added, "The quarter reflects our continued effort to shift our funding away from relatively volatile sources and become less reliant on borrowings. In addition, we continue to reposition the loan portfolio and deposit composition.” 

Linked Quarter Financial Ratios  
(unaudited)
           
             
As of or for the quarter ended : 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18  
Return on average assets (1)   0.70 %   0.74 %   1.02 %   0.85 %   0.77 %  
Return on average equity (1)   5.74 %   6.00 %   9.63 %   8.40 %   7.71 %  
Net interest margin (tax equivalent basis) (2)   2.67 %   2.65 %   2.85 %   2.75 %   2.58 %  
Loans / deposits ratio   106.82 %   110.70 %   117.62 %   114.46 %   102.38 %  
Shareholders’ equity / total assets   11.37 %   12.02 %   10.72 %   10.25 %   9.73 %  
Efficiency ratio (1)   57.6 %   48.1 %   58.3 %   52.9 %   57.9 %  
Book value per common share $   17.68   $   17.45   $   16.84   $   16.42   $   16.03    

_____________

  1. Annualized.
  2. Information reconciling non-GAAP measures to GAAP measures is presented beginning on page 10 in this press release.

Income Statement Highlights

   
Linked Quarter
Income Statement and Other Data  
(unaudited)
  (in thousands, except share and per share data)  
           
For the quarter ended: 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18
Net interest income $   7,249 $   6,947 $   7,109 $   6,976 $   6,568
Provision for loan losses   870   1,453   125   589   240
 Net interest income after provision for loan losses   6,379   5,494   6,984   6,387   6,328
Other income   441   1,146   429   715   449
Other expense   4,443   4,094   4,437   4,790   4,105
Income before income tax expense   2,377   2,546   2,976   2,312   2,672
Income tax expense   411   535   334   69   654
Net income $   1,966 $   2,011 $   2,642 $   2,243 $   2,018
Earnings per common share          
Basic $   0.26 $   0.27 $   0.41 $   0.35 $   0.31
Diluted $   0.26 $   0.27 $   0.41 $   0.35 $   0.31
Weighted average common shares outstanding    
Basic   7,667,518   7,555,810   6,464,326   6,453,031   6,448,691
Diluted   7,667,518   7,555,969   6,467,628   6,456,048   6,452,246

Net Interest Income

Net interest income was $7.2 million for the three months ended March 31, 2019, increasing $681,000, or 10.4 percent, from $6.6 million for the three months ended March 31, 2018. Net interest income on a fully tax-equivalent basis, a non-GAAP measure, was $7.3 million for the three months ended March 31, 2019, increasing $666,000, or 10.1 percent, from $6.6 million for the comparable three-month period in fiscal 2018. The change for the three months ended March 31, 2019 primarily was the result of an increase of $129.3 million in the average balance of loans. The increase in average loans primarily reflects a net increase in commercial loans and to a lesser extent, a net increase in residential loans.  The net interest spread on an annualized tax-equivalent basis was 2.42 percent and 2.41 percent for the three months ended March 31, 2019 and 2018, respectively.  For the quarter ended March 31, 2019, the Company’s net interest margin on a tax-equivalent basis increased to 2.67 percent as compared to 2.58 percent for the same three-month period in fiscal 2018.

Net interest income both as reported and on a fully tax equivalent basis, a non-GAAP measure, was $14.2 million for the six months ended March 31, 2019. Net interest income on a fully tax equivalent basis, a non-GAAP measure increased $1.2 million, or 9.5 percent, from $13.0 million for the six months ended March 31, 2018.  The change for the six months ended March 31, 2019 primarily was the result of an increase of $109.1 million in the average balance of loans.  The net interest spread on an annualized tax-equivalent basis was 2.40 percent and 2.36 percent for the six months ended March 31, 2019 and 2018, respectively.  For the six months ended March 31, 2019, the Company’s net interest margin on a tax-equivalent basis increased to 2.66 percent as compared to 2.52 percent for the same six-month period in fiscal 2018.

For the three months ended March 31, 2019, total interest income both as reported and on a fully tax-equivalent basis, a non-GAAP measure, was $11.6 million. Total interest income on a fully tax equivalent basis, a non-GAAP measure, increased $1.9 million, or 19.3 percent, from $9.7 million for three months ended March 31, 2018, primarily due to a $129.3 million increase in the average balance of our loans.   Total interest expense increased by $1.2 million, or 38.8 percent, to $4.4 million, for the three months ended March 31, 2019, compared to the same period in fiscal 2018, primarily due to an increase of $116.8 million in deposits and the increase in average rates.  The increase in deposits reflects an increase in interest-bearing demand and time deposits.

The average cost of funds was 1.85 percent for the fiscal quarter ended March 31, 2019 compared to 1.39 percent for the same three-month period in fiscal 2018 and, on a linked sequential quarter basis, increased from 1.76 percent or nine basis points compared to the first quarter of fiscal 2019. 

For the six months ended March 31, 2019, total interest income both as reported and on a fully tax equivalent basis, a non-GAAP measure, was $22.5 million. Total interest income on a fully tax equivalent basis, a non-GAAP measure, increased $3.3 million, or 17.1 percent, from $19.3 million for the six months ended March 31, 2018.  Interest income rose for the six months ended March 31, 2019, compared to the comparable period in fiscal 2018 primarily due to a $109.1 million increase in average loan balances. Compared to the six months ended March 31, 2018, average interest earning assets increased $39.3 million, the net interest spread increased on an annualized tax-equivalent basis by four basis points and the net interest margin increased on an annualized tax-equivalent basis by fourteen basis points at six months ended March 31, 2019.  Total interest expense increased by $2.1 million, or 32.8 percent, to $8.3 million, for the six months ended March 31, 2019, compared to the comparable period in fiscal 2018.                                            

Other Income

Other income decreased $8,000, or 1.8 percent, during the second fiscal quarter of 2019 compared with the same period in 2018.  The decrease in total other income was due to a $7,000 decrease in net gains on sale of loans, and a $3,000 decrease in rental income, partially offset by a $1,000 increase in service charges and other fees and a $1,000 increase in earnings on bank-owned life insurance.      

For the six months ended March 31, 2019, total other income decreased $573,000 compared to the same period in 2018. This decrease was primarily a result of a $1.2 million gain recorded in 2018 on the sale of the Exton, Pennsylvania branch location. Additionally, there was a $56,000 decrease in net gains on sale of loans and a $2,000 decrease in rental income, partially offset by an increase of $670,000 in service charges and a $1,000 increase in earnings on bank-owned life insurance. The non-proportional increase in service charges and other fees during the six months ended March 31, 2019 is primarily due to the recognition of approximately $708,000 of net swap fees through the Bank’s commercial loan hedging program during the first fiscal quarter of 2019.  The primary benefit of the loan hedging program is to eliminate the interest rate risk on long term fixed rate loans while allowing the Bank to compete more effectively in our markets.    

Other Expense

Total other expense for the three months ended March 31, 2019 increased $338,000, or 8.2 percent, when compared to the three months ended March 31, 2018. The increase was primarily due to a $212,000 increase in salaries and employee benefits, a $128,000 increase in other operating expense, a $28,000 increase in net other real estate owned expense, and a $5,000 increase in professional fees, partially offset by a $16,000 decrease in data processing expense, a $9,000 decrease in occupancy expense, an $8,000 decrease in advertising expense and a $2,000 decrease in federal deposit insurance premium. The increase in salaries and employee benefits during the three-month period ended March 31, 2019 reflects normal increases to salary and benefits and three strategic hires to support overall franchise growth consistent with the business plan. The increase in other operating expenses during the three-month period ended March 31, 2019 was primarily due to $92,000 of Pennsylvania shares tax related to the Bank’s new standing as a National Association.

For the six months ended March 31, 2019, total other expense decreased $39,000, or 0.5 percent, compared to the same period in 2018. The decrease primarily reflected a $284,000 decrease in professional fees, a $40,000 decrease in data processing expense, a $32,000 decrease in advertising expense, a $32,000 decrease in occupancy expense, and a $9,000 decrease in the federal deposit insurance premium.  These decreases were largely offset by a $230,000 increase in salaries and employee benefits, a $79,000 increase in other operating expenses and a $49,000 increase in net other real estate owned expense.  The decrease in professional fees during the six-month period ended March 31, 2019 was primarily due to lower legal expense. The increase in salaries and employee benefits during the six-month period ended March 31, 2019 reflects normal increases to salary and benefits and three strategic hires to support overall franchise growth consistent with the business plan.  The increase in other operating expenses during the six-month period ended March 31, 2019 was primarily due to $92,000 of Pennsylvania shares tax related to the Bank’s new standing as a National Association.

The following table presents the components of Other Expense for the periods indicated.

(in thousands, unaudited)          
  For the quarter ended: 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18
  Salaries and employee benefits $   2,213 $   2,008 $   2,178 $   2,024 $   2,001
  Occupancy expense   577   539   570   577   586
  Federal deposit insurance premium   73   69   71   76   75
  Advertising   30   30   30   30   38
  Data processing   251   254   279   274   267
  Professional fees   455   499   565   1,088   450
  Net other real estate owned expense   28   21      
  Other operating expenses   816   674   744   721   688
    Total other expense $   4,443 $   4,094 $   4,437 $   4,790 $   4,105

Income Taxes

The Company recorded $411,000 in income tax expense during the three months ended March 31, 2019 compared to $654,000 in income tax expense during the three months ended March 31, 2018. The effective tax rates for the Company for the three months ended March 31, 2019 and 2018 were 17.3 percent and 24.5 percent, respectively. For the six months ended March 31, 2019, income tax expense decreased $2.9 million, or 75.6 percent, to $946,000 from $3.9 million for the six months ended March 31, 2018. The effective tax rates for the Company for the six months ended March 31, 2019 and 2018 were 19.2 percent and 61.5 percent, respectively.

In the first fiscal quarter of 2018, the Company revised its annual effective rate to reflect a change in the federal statutory rate from 34 percent to 21 percent, resulting from the Tax Cuts and Jobs Act that was enacted on December 22, 2017.

Statement of Condition Highlights at March 31, 2019

  • The Company achieved a milestone with gross loans rising to $1.0 billion at March 31, 2019, increasing $96.1 million, or 10.5 percent, from September 30, 2018.     
  • Total assets stood at $1.2 billion at March 31, 2019, increasing $176.3 million, or 17.1 percent, compared to September 30, 2018.
  • Total investments were $46.2 million at March 31, 2019, a decrease of $8.2 million, or 15.1 percent, compared to September 30, 2018.
  • Deposits totaled $942.4 million at March 31, 2019, an increase of $168.2 million, or 21.7 percent, compared to September 30, 2018. 
  • Federal Home Loan Bank (FHLB) advances totaled $98.0 million at March 31, 2019, down from $118.0 million at September 30, 2018.
  • The Bank originated $103.7 million in loans in the second fiscal quarter of 2019, with net portfolio growth of $73.2 million. New loan originations in the second quarter of fiscal 2019 consisted of $83.6 million in commercial loans, $6.9 million in residential mortgage loans, $6.6 million in consumer loans, and $6.6 million in construction and development loans.  
  • Non-performing assets (“NPAs”) were 0.68 percent of total assets at March 31, 2019, compared to 0.30 percent at September 30, 2018 and 0.24 percent at March 31, 2018. Excluding the other real estate owned property of $5.8 million, NPAs were 0.20 percent at March 31, 2019. Allowance for loan losses as a percentage of total non-performing loans was 411.8 percent at March 31, 2019, compared to 294.7 percent at September 30, 2018 and 325.1 percent at March 31, 2018.
  • The Company’s ratio of shareholders’ equity to total assets was 11.37 percent at March 31, 2019, compared to 10.72 percent at September 30, 2018, and 9.73 percent at March 31, 2018.  
  • Book value per common share amounted to $17.68 at March 31, 2019, compared to $16.84 at September 30, 2018 and $16.03 at March 31, 2018.  The efficiency ratio, a non-GAAP measure, was 57.6 percent for the second quarter of fiscal 2019, compared to 57.9 percent in the second quarter of fiscal 2018, and 58.3 percent in the fourth quarter of fiscal 2018.  
  • On March 14, 2019, the Company’s Board of Directors approved a stock repurchase plan, under which the Company is authorized to repurchase up to 194,516 shares, or approximately 2.5 percent of the Company’s current outstanding common stock. 

Linked Quarter Statements of Condition Data

(unaudited)
           
(in thousands)          
At quarter ended: 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18
Cash and due from depository institutions $   1,370 $   1,377 $   1,563 $   1,447 $   1,566
Interest bearing deposits in depository
  institutions
  109,450   98,499   29,271   45,934   120,144
Investment securities, available for sale, at fair
  value
  19,371   19,231   24,298   34,348   44,341
Investment securities held to maturity   26,789   29,323   30,092   31,004   33,052
Restricted stock, at cost   8,952   9,493   8,537   8,781   8,583
Loans receivable, net of allowance for loan
  losses
  997,114   924,639   902,136   893,355   837,314
Other real estate owned   5,796   5,796      
Accrued interest receivable   4,344   3,724   3,800   3,571   3,583
Property and equipment, net   6,948   7,067   7,181   7,240   7,357
Deferred income taxes, net   3,434   3,367   3,195   3,920   3,713
Bank-owned life insurance   19,643   19,524   19,403   19,282   19,163
Other assets   7,029   6,452   4,475   4,693   4,500
  Total assets $ 1,210,240 $ 1,128,492 $ 1,033,951 $ 1,053,575 $ 1,083,316
Deposits $   942,374 $   843,200 $   774,163 $   787,932 $   825,569
FHLB advances   98,000   118,000   118,000   123,000   118,000
Other short-term borrowings       2,500   2,500   2,500
Subordinated debt   24,540   24,500   24,461   24,421   24,382
Other liabilities   7,758   7,113   4,004   7,749   7,503
Shareholders' equity   137,568   135,679   110,823   107,973   105,362
  Total liabilities and shareholders’ equity $ 1,210,240 $ 1,128,492 $ 1,033,951 $ 1,053,575 $ 1,083,316

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

Deposits (unaudited)            
(in thousands)          
At quarter ended: 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18
Demand:          
  Non-interest bearing $   42,937 $   39,734 $   41,677 $   48,296 $   38,444
  Interest-bearing   295,475   261,025   184,073   198,410   190,602
Savings   43,943   44,438   44,642   44,629   44,716
Money market   283,571   253,436   270,834   276,807   293,813
Time   276,448   244,567   232,937   219,790   257,994
  Total deposits $   942,374 $   843,200 $   774,163 $ 787,932 $ 825,569

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: 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18  
Investment securities $   47,761   $   53,882   $   64,848   $   75,932   $   77,961    
Loans   956,840      912,259      908,962      864,348      827,483     
Allowance for loan losses   (9,408  )   (8,638  )   (9,077  )   (8,589  )   (8,426  )  
All other assets   130,712      123,643      72,535      120,730      157,126     
  Total assets   1,125,905     1,081,146     1,037,268     1,052,421     1,054,144    
Non-interest bearing deposits $   41,035   $   40,420   $   43,330   $   45,124   $   40,034    
Interest-bearing deposits   814,412      758,813      732,489      746,341      754,820     
FHLB advances   101,000      116,859      118,326      118,121      118,000     
Other short-term borrowings   277     761     2,522     2,555     4,945    
Subordinated debt   24,523     24,483     24,440     24,399     24,360    
Other liabilities   7,728      5,750      6,457      9,072      7,283     
Shareholders’ equity   136,930      134,060      109,704      106,809      104,702     
  Total liabilities and shareholders’ equity $   1,125,905   $   1,081,146   $   1,037,268   $   1,052,421   $   1,054,144    
             
           

Loans

Total net loans amounted to $997.1 million at March 31, 2019 compared to $902.1 million at September 30, 2018, for a net increase of $95.0 million or 10.5 percent.  The allowance for loan losses amounted to $10.0 million and $9.0 million at March 31, 2019 and September 30, 2018, respectively.  Average loans during the second fiscal quarter of 2019 totaled $956.8 million as compared to $827.5 million during the second fiscal quarter of 2018, representing a 15.6 percent increase. 

At the end of the second quarter of fiscal 2019, the loan portfolio remained weighted toward two primary components: commercial and the core residential portfolio, with commercial loans accounting for 71.3 percent and single-family residential real estate loans accounting for 20.1 percent of the loan portfolio.  Construction and development loans amounted to 4.9 percent and consumer loans represented 3.6 percent of the loan portfolio at such date.  The increase in the loan portfolio at March 31, 2019 compared to September 30, 2018, primarily reflected an increase of $87.0 million in commercial loans, an increase of $5.4 million in residential mortgage loans, a $3.1 million increase in construction and development loans and a $581,000 increase in consumer loans. 

For the quarter ended March 31, 2019, the Company originated total new loan volume of $103.7 million, which was offset by prepayments totaling $9.4 million, participations of $8.5 million, loan payoffs of $6.6 million, and amortization of $6.0 million.

Loan Portfolio Composition:

Loans (unaudited)          
(in thousands)          
At quarter ended: 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18
Residential mortgage $ 202,655   $ 202,306   $ 197,219   $ 192,901   $ 184,318  
Construction and Development:          
  Residential and commercial   44,014     41,140     37,433     39,845     35,213  
  Land   5,696     7,180     9,221     15,565     21,727  
Total construction and
  development
  49,710     48,320     46,654     55,410     56,940  
Commercial:          
  Commercial real estate   550,933     508,448     493,929     477,584     445,995  
  Farmland   12,041     12,054     12,066     12,058     12,069  
  Multi-family   64,328     44,989     45,102     45,204     32,608  
  Commercial and industrial   82,731     76,892     73,895     76,957     70,049  
  Other   8,111     7,344     6,164     5,899     5,319  
Total commercial   718,144     649,727     631,156     617,702     566,040  
Consumer:          
  Home equity lines of credit   18,466     14,484     14,884     14,446     15,538  
  Second mortgages   15,773     16,674     18,363     19,063     19,960  
  Other   1,904     1,915     2,315     2,311     2,404  
Total consumer   36,143     33,073     35,562     35,820     37,902  
Total loans   1,006,652     933,426     910,591     901,833     845,200  
Deferred loan costs, net   478     460     566     546     579  
Allowance for loan losses   (10,016 )   (9,247 )   (9,021 )   (9,024 )   (8,465 )
  Loans Receivable, net $ 997,114   $ 924,639   $ 902,136   $ 893,355   $ 837,314  

At March 31, 2019, the Company had $142.0 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. The Company's current "Approved, Accepted but Unfunded" pipeline at March 31, 2019 included approximately $101.6 million in commercial and construction loans and $5.1 million in residential mortgage loans expected to fund over the following quarter.

Asset Quality

Non-accrual loans were $2.4 million at March 31, 2019, a decrease of $255,000 or 9.5 percent, as compared to $2.7 million at September 30, 2018. Other Real Estate Owned (“OREO”) was $5.8 million at March 31, 2019 and zero at September 30, 2018, as previously disclosed in the Company’s Annual Report on Form 10-K filed on December 14, 2018. Performing Troubled Debt Restructuring (“TDR”) loans were $12.1 million at March 31, 2019 and $18.6 million at September 30, 2018.

At March 31, 2019, non-performing assets totaled $8.2 million, or 0.68 percent of total assets, as compared with $3.1 million, or 0.30 percent of total assets, at September 30, 2018. The increase in non-performing assets at March 31, 2019 compared to September 30, 2018 was primarily due to the transfer to OREO of one commercial real estate loan in the amount of $5.8 million.  The portfolio of non-accrual loans at March 31, 2019 was comprised of fourteen residential real estate loans with an aggregate outstanding balance of approximately $1.8 million, one commercial real estate loan with an outstanding balance of $366,000, and twelve consumer loans with an aggregate outstanding balance of approximately $305,000.     

Non-Performing Asset and Other Asset Quality Data:

 (dollars in thousands, unaudited)          
As of or for the quarter ended: 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18
Non-accrual loans(1) $   2,432   $   2,562   $   2,687   $ 2,023   $ 2,129  
Loans 90 days or more past due and still accruing       759     374     1,338     475  
  Total non-performing loans   2,432     3,321     3,061     3,361     2,604  
OREO   5,796     5,796              
  Total non-performing assets $   8,228   $   9,117   $   3,061   $ 3,361   $ 2,604  
Performing TDR loans $   12,099   $   12,164   $   18,640   $ 18,693   $ 18,666  
           
Non-performing assets / total assets   0.68 %   0.81 %   0.30 %   0.32 %   0.24 %
Non-performing loans / total loans   0.24 %   0.36 %   0.34 %   0.37 %   0.31 %
Net charge-offs $   101   $   1,227   $   128   $   30   $   212  
Net charge-offs/average loans(2)   0.04 %   0.54 %   0.06 %   0.01 %   0.10 %
Allowance for loan losses / total loans   0.99 %   0.99 %   0.99 %   1.00 %   1.00 %
Allowance for loan losses / non-performing loans   411.8 %   278.4 %   294.7 %   268.5 %   325.1 %
           
Total assets $ 1,210,240   $ 1,128,492   $ 1,033,951   $ 1,053,575   $ 1,083,316  
Total gross loans   1,006,652     933,426     910,591     901,833     845,200  
Average loans    956,840      912,259      908,962     864,348     827,483  
Allowance for loan losses   10,016     9,247     9,021     9,024     8,465  

______________

  1. Twenty-four loans totaling approximately $2.0 million, or 82.6 percent of the total non-accrual loan balance, were making payments at March 31, 2019. 
  2. Annualized.

The allowance for loan losses at March 31, 2019 amounted to approximately $10.0 million, or 0.99 percent of total loans, compared to $9.0 million, or 0.99 percent of total loans, at September 30, 2018.  The Company had a $870,000 provision for loan losses during the quarter ended March 31, 2019 compared to $125,000 for the quarter ended September 30, 2018. The increase in the provision during the quarter ended March 31, 2019 was driven by new loan growth.

Capital
At March 31, 2019, our total shareholders' equity amounted to $137.6 million, or 11.37 percent of total assets, compared to $110.8 million, or 10.72 percent of total assets at September 30, 2018.  At March 31, 2019, the Bank’s common equity tier 1 ratio was 14.86 percent, tier 1 leverage ratio was 13.04 percent, tier 1 risk-based capital ratio was 14.86 percent and the total risk-based capital ratio was 15.88 percent.  At September 30, 2018, the Bank’s common equity tier 1 ratio was 15.09 percent, tier 1 leverage ratio was 12.71 percent, tier 1 risk-based capital ratio was 15.09 percent and the total risk-based capital ratio was 16.13 percent.  At March 31, 2019, the Bank was in compliance with all applicable regulatory capital requirements.

On March 14, 2019, the Company’s Board of Directors approved a stock repurchase plan, under which the Company is authorized to repurchase up to 194,516 shares, or approximately 2.5 percent of the Company’s current outstanding common stock.  This authority extends through March 31, 2020 and may be exercised from time to time and in such amounts as market conditions warrant. The repurchases may be made on the open market, in block trades or otherwise. The program may be suspended or discontinued at any time.  During the three-month period ended March 31, 2019, the Company purchased 164 shares at an average cost of $20.00 per share.  

Non-GAAP Financial Measures

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 net income is presented in the table below including non-core income and expense items.

(in thousands)          
For the quarter ended: 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18
Net income as reported under GAAP $   1,966 $   2,011 $   2,642 $   2,243 $   2,018
Non-core items, net of tax:          
  Prior period restatement costs(1)         667  
  Audit expenses(2)     110      
  Other(3)   10   100   15   24   32
Core net income, non-GAAP $   1,976 $   2,221 $   2,657 $   2,934 $   2,050
Earnings per common share:          
  Diluted $ 0.26 $ 0.29 $ 0.41 $ 0.45 $ 0.31
Weighted average common shares outstanding:          
  Diluted   7,667,518   7,555,969   6,467,628   6,456,048   6,452,246


  1. Non-core items for the quarter ended June 30, 2018 consisted of additional legal and accounting fees arising out of matters pertaining to prior period restatements.
  2. Non-core items for the quarter ended December 31, 2018 consisted of expenses arising out of the dismissal of the Company’s Certifying Accountant, as previously announced in the Company’s Form 8-K filed on July 9, 2018, which required issuance of consent on previously audited consolidated financial statements.
  3. Included in non-core items such as accelerated payoff and non-accrual interest amounts.

“Efficiency ratio” is a non-GAAP financial measure and is defined as the other expense, excluding certain non-core items, as a percentage of net interest income on a tax equivalent basis plus other income, calculated as follows:

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(dollars in thousands)          
For the quarter ended: 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18
Other expense as reported under GAAP $   4,443   $   4,094   $   4,437   $   4,790   $   4,105  
Less: non-core items(1)       139         688      
Other expense, excluding non-core items, non-GAAP