ESSA Bancorp (NASDAQ:ESSA)
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ESSA Bancorp, Inc. (the “Company”)
(NASDAQ Global MarketSM: “ESSA”)
the holding company for ESSA Bank & Trust (the “Bank”)
today announced its operating results for the three and nine months
ended June 30, 2008. The Company reported net income of $2.0 million, or
$0.12 per diluted share, for the three months ended June 30, 2008, as
compared to a net loss of $9.0 million for the corresponding 2007
period. The net loss of $9.0 million for the three months ending June
30, 2007, was primarily due to a one time allocation of $12.7 million
made by the Company to the ESSA Bank & Trust Foundation (the “Foundation”),
in conjunction with the Company’s stock
offering which was consummated on April 3, 2007.
For the nine months ended June 30, 2008, the Company reported net income
of $5.3 million, or $0.33 per diluted share, as compared to a net loss
of $6.8 million for the comparable period in 2007. The primary reason
for the increase in net income for the nine month period was the Company’s
contribution to the Foundation during the prior period. In addition,
increases in average net earning assets added to net income during the
current period. Average net earning assets increased $95.7 million,
average loans outstanding increased $76.3 million and average
investments and mortgage-backed securities increased $80.3 million for
the nine months ended June 30, 2008, as compared to the comparable
period in 2007.
“It has been a successful and eventful
quarter for the Company and our stockholders,”
noted Gary S. Olson, President and Chief Executive Officer of the
Company. “In addition to holding our first
annual meeting of stockholders in May, our Board of Directors, at its
regularly scheduled May meeting, authorized the repurchase of up to 15%
of the Company’s outstanding stock and
declared a $.04 per share dividend which was paid on June 30, 2008.”
Mr. Olson continued, “Our operating results
were strong as our net interest spread improved from the previous
quarter and we continued to grow our Company through prudent loan
originations. Our asset quality remains strong, as evidenced by our low
ratio of non-performing assets to total assets.”
Net Interest Income:
Net interest income increased $548,000, or 8.7%, to $6.9 million for the
three months ended June 30, 2008, from $6.3 million for the comparable
period in 2007. The increase was primarily attributable to an increase
in average net earning assets of $15.4 million, offset in part by a one
basis point decrease in the Company’s
interest rate spread to 2.18% for the three months ended June 30, 2008,
from 2.19% for the comparable period in 2007.
Net interest income increased $4.0 million, or 25.4%, to $19.5 million
for the nine months ended June 30, 2008, from $15.5 million for the
comparable period in 2007. The increase was primarily attributable to an
increase in average net earning assets of $95.7 million to $204.8
million for the nine months ended June 30, 2008, from $109.1 million for
the comparable period in 2007 and was offset in part by a 20 basis point
decrease in the Company’s interest rate
spread to 2.04% for the nine months ended June 30, 2008, from 2.24% for
the comparable period in 2007.
NonInterest Income:
Noninterest income was unchanged in the 2008 period compared to the 2007
period, remaining at $1.4 million for the three months ended June 30,
2008 and 2007, respectively.
Noninterest income increased $62,000, or 1.5%, to $4.2 million for the
nine months ended June 30, 2008, from $4.1 million for the comparable
period in 2007. Increases in service charges and fees on loans, trust
and investment fees and earnings on bank-owned life insurance were
offset, in part, by decreases in service fees on deposit accounts, net
gain on sale of loans and other income.
NonInterest Expense:
Noninterest expense decreased $12.3 million, or 69.7%, to $5.3 million
for the three months ended June 30, 2008, from $17.6 million for the
comparable period in 2007. The primary reason for the decrease was the
Company’s contribution of $12.7 million to
the Foundation in April 2007. Excluding the contribution, noninterest
expense increased $444,000 or 9.1%. The primary reasons for the increase
excluding the contribution were increases in compensation and employee
benefits of $341,000 and professional fees of $101,000. Compensation and
employee benefits increased primarily as a result of normal compensation
increases of $168,000 in addition to an expense of $191,000 related to
the Company’s equity incentive plan. As
previously announced, the Company’s
stockholders approved the ESSA Bancorp, Inc. 2007 Equity Incentive Plan
at the 2008 Annual Meeting of Stockholders on May 8, 2008. Awards
granted under the Equity Incentive Plan were made on May 23, 2008.
Professional fees increased primarily as a result of increased legal,
accounting and regulatory fees associated with being a public reporting
company and included approximately $72,000 related to the Company’s
compliance with section 404 of the Sarbanes-Oxley Act.
Noninterest expense decreased $10.8 million, or 40.9%, to $15.5 million
for the nine months ended June 30, 2008, from $26.3 million for the
comparable period in 2007. The primary reason for the nine-month
decrease was the $12.7 million contribution to the Foundation. Excluding
the contribution, noninterest expense increased $1.9 million or 14.2%.
The primary reasons for the increase excluding the contribution were
increases in compensation and employee benefits of $1.2 million,
occupancy and equipment of $157,000, professional fees of $481,000 and
other expenses of $142,000. Compensation and employee benefits increased
primarily as a result of normal compensation increases of $574,000,
along with an increase in the expense related to the Employee Stock
Ownership Plan of $264,000 and the additional expense of $191,000
related to the Equity Incentive Plan. Occupancy and equipment costs
increased primarily as a result of increases in rental costs of $49,000,
along with increases in depreciation expense of $58,000. Professional
fees increased primarily as a result of increased legal, accounting and
regulatory fees associated with being a public reporting company,
including approximately $216,000 related to the Company’s
compliance with Section 404 of the Sarbanes-Oxley Act. Other expense
increased primarily due to increased loan processing costs related to
increased volume.
Balance Sheet
Total assets increased $74.5 million, or 8.2%, to $984.9 million at June
30, 2008, compared to $910.4 million at September 30, 2007. The primary
reasons for the increase in assets were increases in certificates of
deposit of $3.8 million, net loans receivable of $66.8 million and an
increase in cash and cash equivalents of $3.1 million. The increase in
net loans receivable included net increases in residential loans of
$53.8 million, commercial loans of $14.3 million and a decrease in
consumer loans of $1.3 million.
Retail deposits decreased $5.0 million and brokered certificates of
deposit decreased $9.0 million at June 30, 2008, compared to September
30, 2007. Borrowed funds increased during the same time period by $79.4
million.
Stockholders’ equity increased $3.2 million
to $207.9 million at June 30, 2008, compared to $204.7 million at
September 30, 2007.
Asset Quality:
Nonperforming assets totaled $1.1 million or 0.11% of total assets at
June 30, 2008, compared to $555,000, or 0.06%, of total assets at
September 30, 2007. The Company, in response to continued loan growth,
made a provision for loan losses of $150,000 for the three months ended
June 30, 2008, as compared to a provision of $90,000 for the comparable
three-month period in 2007. The Company made a provision for loan losses
of $450,000 for the nine months ended June 30, 2008, as compared to a
provision of $270,000 for the comparable nine month period in 2007. The
allowance for loan losses was $4.5 million, or 0.65%, of loans
outstanding at June 30, 2008, compared to $4.2 million, or 0.67%, of
loans outstanding at September 30, 2007.
ESSA Bank & Trust, a wholly-owned subsidiary of ESSA Bancorp, Inc., has
total assets of over $919 million and is the leading service-oriented
financial institution headquartered in the greater Pocono, Pennsylvania
region. The Bank maintains its corporate headquarters in downtown
Stroudsburg, Pennsylvania and has 13 community offices throughout the
Pocono, Pennsylvania area. In addition to being one of the region’s
largest mortgage lenders, ESSA Bank & Trust offers a full range of
retail and commercial financial services. ESSA Bancorp, Inc. stock
trades on The NASDAQ Global MarketSM under the
symbol “ESSA.”
Forward-Looking Statements
Certain statements contained herein are “forward-looking
statements” within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Such forward-looking statements may be identified by
reference to a future period or periods, or by the use of
forward-looking terminology, such as “may,”
“will,” “believe,”
“expect,” “estimate,”
“anticipate,” “continue,”
or similar terms or variations on those terms, or the negative of those
terms. Forward-looking statements are subject to numerous risks and
uncertainties, including, but not limited to, those related to the
economic environment, particularly in the market areas in which the
Company operates, competitive products and pricing, fiscal and monetary
policies of the U.S. Government, changes in government regulations
affecting financial institutions, including regulatory fees and capital
requirements, changes in prevailing interest rates, acquisitions and the
integration of acquired businesses, credit risk management,
asset-liability management, the financial and securities markets and the
availability of and costs associated with sources of liquidity.
The Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made.
The Company wishes to advise readers that the factors listed above could
affect the Company's financial performance and could cause the Company's
actual results for future periods to differ materially from any opinions
or statements expressed with respect to future periods in any current
statements. The Company does not undertake and specifically declines any
obligation to publicly release the result of any revisions, which may be
made to any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30,2008
September 30,2007
(dollars in thousands)
ASSETS
Cash and due from banks
$
9,126
$
10,604
Interest-bearing deposits with other institutions
10,782
6,175
Total cash and cash equivalents
19,908
16,779
Certificates of deposit
3,836
—
Investment securities available for sale
209,345
205,267
Investment securities held to maturity (fair value of $12,358 and
$16,876)
12,358
17,130
Loans receivable (net of allowance for loan losses of $4,464 and
$4,206)
686,609
619,845
Federal Home Loan Bank stock
18,430
16,453
Premises and equipment
10,885
11,277
Bank-owned life insurance
14,370
13,941
Other assets
9,116
9,723
TOTAL ASSETS
$
984,857
$
910,415
LIABILITIES
Deposits
$
370,677
$
384,716
Short-term borrowings
44,526
34,230
Other borrowings
348,847
279,697
Advances by borrowers for taxes and insurance
6,278
1,423
Other liabilities
6,626
5,657
TOTAL LIABILITIES
776,954
705,723
Commitment and contingencies
—
—
STOCKHOLDERS’ EQUITY
Preferred Stock
—
—
Common stock
170
170
Additional paid in capital
164,577
166,782
Unallocated common stock held by the Employee Stock Ownership Plan
(12,906
)
(13,283
)
Retained earnings
58,092
53,400
Accumulated other comprehensive loss
(2,030
)
(2,377
)
TOTAL STOCKHOLDERS’ EQUITY
207,903
204,692
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
984,857
$
910,415
ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the Three MonthsEnded June 30,
For the Nine MonthsEnded June 30,
2008
2007
2008
2007
(dollars in thousands)
INTEREST INCOME
Loans receivable
$
10,130
$
9,041
$
29,797
$
26,426
Investment securities:
Taxable
2,674
2,634
8,013
5,127
Exempt from federal income tax
83
74
249
221
Other investment income
217
424
825
1,209
Total interest income
13,104
12,173
38,884
32,983
INTEREST EXPENSE
Deposits
2,018
2,550
7,154
7,916
Short-term borrowings
1,052
480
1,815
1,319
Other borrowings
3,164
2,821
10,470
8,238
Total interest expense
6,234
5,851
19,439
17,473
NET INTEREST INCOME
6,870
6,322
19,445
15,510
Provision for loan losses
150
90
450
270
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
6,720
6,232
18,995
15,240
NONINTEREST INCOME
Service fees on deposit accounts
873
873
2,619
2,629
Services charges and fees on loans
174
178
472
434
Trust and investment fees
208
195
645
595
Gain on sale of loans, net
—
—
—
12
Earnings on Bank-owned life insurance
146
143
429
410
Other
9
22
33
56
Total noninterest income
1,410
1,411
4,198
4,136
NONINTEREST EXPENSE
Compensation and employee benefits
3,169
2,828
9,174
7,995
Occupancy and equipment
705
690
2,108
1,951
Professional fees
379
278
1,067
586
Data processing
443
475
1,400
1,358
Advertising
155
178
447
514
Contribution to Charitable Foundation
—
12,693
—
12,693
Other
464
422
1,344
1,202
Total noninterest expense
5,315
17,564
15,540
26,299
Income (loss ) before income taxes (benefit)
2,815
(9,921
)
7,653
(6,923
)
Income taxes (benefit)
849
(915
)
2,336
(79
)
NET INCOME (LOSS)
$
1,966
$
(9,006
)
$
5,317
$
(6,844
)
EARNINGS PER SHARE
Basic
$
0.13
(0.58
)
0.34
(0.58
)
Diluted
0.12
(0.58
)
0.33
(0.58
)
Prior period earnings per share are calculated for the period
beginning with the date of conversion or April 3, 2007.