KBRA Upgrades and Subsequently Withdraws the Ratings of Malvern Bancorp, Inc.

KBRA upgrades the senior unsecured debt rating to BBB from BBB-, upgrades the subordinated debt rating to BBB- from BB+, and affirms the short-term debt rating of K3 for Paoli, Pennsylvania based Malvern Bancorp, Inc. (“Malvern” or “the company”). In addition, KBRA upgrades the deposit and senior unsecured debt ratings to BBB+ from BBB, the subordinated debt rating to BBB from BBB-, and the short-term deposit and debt ratings to K2 from K3 for its subsidiary, Malvern Bank, N.A. Subsequently, KBRA withdraws all ratings for Malvern Bancorp, Inc. and Malvern Bank, N.A. following the completion of the acquisition by First Bank (NASDAQ: FRBA; KBRA Senior Bank rating: BBB+ / Stable Outlook).

Key Credit Considerations

On July 17, 2023, First Bank announced the completion of the acquisition of Malvern Bancorp, Inc. and its subsidiary. In connection with the close of the transaction, the ratings of Malvern were aligned with the ratings of FRBA at the appropriate levels prior to being subsequently withdrawn. Overall, we view the transaction positively with respect to Malvern’s creditor profile, and the transaction aligns with FRBA’s well defined strategy which includes acquisitive expansion in main line Philadelphia. Malvern adds approximately $1 billion in assets, $800 million in loans, and $680 million in deposits, as of 1Q23, to FRBA's balance sheet (pro forma total assets of ~$3.8 billion). Meanwhile, pro forma capitalization is expected to remain strong at the close of the transaction, although was not formally disclosed. Also key to KBRA’s rating assessment is FRBA’s veteran management team, including a strong track record of successfully closing and integrating acquisitions, and thorough due diligence performed on the acquired loan book as the transaction included a credit mark of 3% of gross loans as well as an interest and securities rate mark nearly matching the credit mark. We expect integration to progress relatively smoothly supported by these factors, as well as the retention of the core business from Malvern, while FRBA should benefit from significant cost savings phased in 2H23.

Rating Sensitivities

As the ratings have been withdrawn following the merger completion, there are no rating sensitivities.

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