SOURCE: ESSA Bancorp

ESSA Bancorp

October 28, 2015 16:30 ET

ESSA Bancorp, Inc. Announces Fiscal 2015 Fourth Quarter and Full-Year Financial Results

STROUDSBURG, PA--(Marketwired - Oct 28, 2015) - ESSA Bancorp, Inc. (the "Company") (NASDAQ: ESSA) today reported net income of $2.3 million, or $0.22 per diluted share, for the quarter ended September 30, 2015, compared with net income of $2.4 million, or $0.22 per diluted share, for the same quarter last year. Net income for the fiscal year ended September 30, 2015, increased to $9.8 million, or $0.93 per diluted share, compared with net income of $8.5 million, or $0.79 per diluted share, for the year ended September 30, 2014. Year-over-year comparisons reflect the acquisition of Franklin Security Bancorp in April 2014.

The Company is the holding company for ESSA Bank & Trust, a $1.6 billion asset institution, which provides full service retail and commercial banking, financial, and investment services from 26 locations in eastern Pennsylvania.

FOURTH QUARTER HIGHLIGHTS

  • Disciplined loan growth. Total loans at September 30, 2015 increased 0.9% (not annualized) on a sequential quarter basis, and 4.1% for the fiscal year ended September 30, 2015. Loan growth was driven primarily by commercial and indirect auto loan increases.
  • Net interest income and net interest margin. Net interest income was $10.7 million for the quarter ended September 30, 2015 compared to $11.0 million for the quarter ended June 30, 2015 and $10.6 million for the quarter ended September 30, 2014. The net interest margin was 2.85% for the quarter ended September 30, 2015 compared to 2.96% for the quarter ended June 30, 2015 and 2.90% for the quarter ended September 30, 2014.
  • Asset quality remained strong. Non-performing assets decreased to $22.7 million, or 1.41% of total assets, as of September 30, 2015 from $23.4 million, or 1.46% of total assets as of June 30, 2015.
  • Capital management. The Company remains well-capitalized. ESSA paid a quarterly cash dividend of $0.09 per share on September 30, 2015 and repurchased 68,700 shares at an average price of $12.97 during its fourth quarter. Tangible book value per share increased to $14.03 at September 30, 2015, from $13.34 at September 30, 2014.
  • Announced acquisition. On July 29, 2015, the Company announced a definitive agreement to purchase Eagle National Bancorp ("ENB") in an all-cash transaction. ENB had total assets of $175.7 million, total loans of $125.1 million, and total deposits of $148.7 million as of June 30, 2015.

Gary S. Olson, President and CEO, commented: "Solid fourth quarter results reflect our disciplined lending approach, conservative underwriting standards, and tight expense controls. We remain excited about the bright future at ESSA."

Income Statement Review

Net income for the three months ended September 30, 2015 was $2.3 million, or $0.22 per diluted share, compared with net income of $2.4 million, or $0.22 per share, for the prior year period. Net income for the three months ending September 30, 2015 includes non-recurring merger-related costs of $285,000, or $0.02 per share (after-tax), associated with the pending merger with ENB. Net income for the fiscal year ended September 30, 2015 was $9.8 million, or $0.93 per diluted share, compared to $8.5 million, or $0.79 per diluted share, for the prior year period. Net income for fiscal 2014 includes merger-related costs of $522,000, or $0.03 per share (after-tax), associated with the acquisition of Franklin Security Bancorp, Inc. on April 4, 2014.

For the fiscal fourth quarter of 2015, the Company's return on average assets and return on average equity were 0.57% and 5.27%, compared with 0.61% and 5.54%,respectively, in the corresponding period of fiscal 2014. For the year ended September 30, 2015, the Company's return on average assets and return on average equity were 0.62% and 5.68%, compared with 0.59% and 5.01%, respectively, in the year ended September 30, 2014.

Net interest income increased $103,000, or 1.0%, to $10.7 million for the three months ended September 30, 2015, from $10.6 million for the comparable period in 2014. Net interest income increased $3.6 million, or 9.0%, to $43.8 million for the fiscal year ended September 30, 2015, from $40.1 million for the comparable period in 2014, primarily reflecting the previously noted increase in the Company's loan portfolio.

Interest expense decreased $66,000 for the quarter ended September 30, 2015 compared to the comparable period in 2014, while interest income increased $37,000. Interest expense decreased $237,000 for the year ended September 30, 2015 compared to the comparable period in 2014, while interest income increased $3.4 million on growing loan volume. Increases in interest income from indirect auto loans, commercial loans and investment securities helped offset a decrease in interest income from mortgage loans.

The net interest margin for the fourth quarter of 2015 was 2.85%, down from 2.96% for the previous quarter, and down from 2.90% for the fourth quarter of fiscal 2014. The net interest margin was stable at 2.96% for the fiscal year ended September 30, 2015 compared to 2.97% for the 2014 fiscal year, despite continued pressure due to the low-interest rate environment and pricing competition for quality lending business.

The Company's provision for loan losses increased to $575,000 for the three months ended September 30, 2015, compared with $350,000 for the three months ended September 30, 2014. The Company's provision for loan losses decreased to $2.1 million for the year ended September 30, 2015, compared with $2.4 million for the year ended September 30, 2014. Net loan charge-offs in fiscal fourth quarter 2015 were $423,000 compared to $552,000 in fiscal fourth quarter 2014. Net loan charge-offs for the years ended September 30, 2015 and 2014 were $1.8 million.

Noninterest income increased $305,000 or 15.8%, to $2.2 million for the three months ended September 30, 2015, compared with $1.9 million for the three months ended September 30, 2014 due principally to increased trust and investment fees, and gain on sale of investments. Noninterest income increased $489,000 or 6.6%, to $7.9 million for the year ended September 30, 2015, compared with $7.4 million for the year ended September 30, 2014. The increase was due primarily to increases in service fees and charges related to loans and gain on sale of investments offset in part by declines in gain on acquisition and insurance commissions.

Noninterest expense increased $358,000 or 3.9%, to $9.4 million for the three months ended September 30, 2015 compared with $9.1 million for the comparable period in 2014. As previously mentioned, noninterest expense for the fourth quarter of 2015 included merger-related expenses of $285,000. Noninterest expense increased $3.1 million or 9.0% to $36.9 million for the year ended September 30, 2015 compared with $33.8 million for the comparable period in 2014. Increases in year-over-year noninterest expenses primarily reflect additional facilities and costs related to the Franklin Security Bank acquisition and the anticipated merger with Eagle National Bank.

Balance Sheet, Asset Quality and Capital Adequacy Review

Total assets grew $31.7 million to $1.60 billion at September 30, 2015, from $1.57 billion at September 30, 2014. This increase was primarily due to total loan growth (principally indirect auto and commercial) of $44.1 million, or 4.1%. Total net loans were $1.10 billion at September 30, 2015 vs. $1.06 billion at September 30, 2014. Loan growth, however, was partially offset by declines of investment securities and cash and cash equivalents.

Total deposits decreased $37.1 million, or 3.3%, to $1.10 billion at September 30, 2015, from $1.13 billion at September 30, 2014. Decreases in interest bearing demand deposits, money market and certificate of deposit accounts were partially offset by increases in non-interest bearing demand and savings and club accounts. During the same period, borrowings increased $61.1 million, reflecting the Company's ability to obtain borrowed funds at what management believes represent attractive rates.

Nonperforming assets declined to $22.7 million, or 1.41%, of total assets at September 30, 2015, compared with $25.0 million, or 1.59%, of total assets at September 30, 2014. The decrease in nonperforming assets of $2.3 million at September 30, 2015 compared to September 30, 2014 was due primarily to decreases in non-performing commercial mortgages and foreclosed real estate.

Net charge-offs as a percent of total average loans were only 0.04% for the three months ending September 30, 2015 and 0.05% for the three months ended September 30, 2014, which reflects the Company's disciplined credit and underwriting standards. The allowance for loan losses was $8.9 million, or 0.80%, of loans outstanding at September 30, 2015, compared to $8.6 million, or 0.81%, of loans outstanding at September 30, 2014.

The Bank continued to demonstrate financial strength, with a Tier 1 leverage ratio of 9.93%, exceeding accepted regulatory standards for a well-capitalized institution. The Company maintained a tangible equity to total assets ratio of 9.74%.

Stockholders' equity increased $4.0 million to $171.3 million at September 30, 2015, from $167.3 million at September 30, 2014. During the three months ended September 30, 2015, the Company repurchased 68,700 shares at an average cost of $12.97 per share. Tangible book value per share at September 30, 2015 increased to $14.03, compared with $13.34 at September 30, 2014.

Gary Olson added, "We look forward to completing our recently announced merger with ENB in the fourth calendar quarter of 2015, and to work with their retail and lending teams to establish a commercial presence in an attractive suburban Philadelphia market."

About the Company: ESSA Bancorp, Inc. is the holding company for its wholly-owned subsidiary, ESSA Bank & Trust, which was formed in 1916. Headquartered in Stroudsburg, Pennsylvania, the Company has total assets of $1.6 billion and has 26 community offices throughout the Greater Pocono, Lehigh Valley, and Scranton/Wilkes-Barre markets in Pennsylvania. ESSA Bank & Trust offers a full range of commercial and retail financial services, financial advisory and asset management capabilities. ESSA Bancorp Inc. stock trades on the NASDAQ Global Market (SM) 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 compliance costs 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, and the Risk Factors disclosed in our annual and quarterly reports.

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, that 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)  
   
    September 30,
2015
    September 30,
2014
 
    (dollars in thousands)  
ASSETS                
  Cash and due from banks   $ 15,905     $ 20,884  
  Interest-bearing deposits with other institutions     2,853       1,417  
                 
    Total cash and cash equivalents     18,758       22,301  
  Certificates of deposit     1,750       1,767  
  Investment securities available for sale     379,407       383,078  
  Loans receivable (net of allowance for loan losses of $8,919 and $8,634)     1,102,118       1,058,267  
  Regulatory stock, at cost     13,831       14,284  
  Premises and equipment, net     16,553       16,957  
  Bank-owned life insurance     30,655       29,720  
  Foreclosed real estate     2,480       2,759  
  Intangible assets, net     1,759       2,396  
  Goodwill     10,259       10,259  
  Deferred income taxes     11,149       12,027  
  Other assets     17,825       21,000  
                 
    TOTAL ASSETS   $ 1,606,544     $ 1,574,815  
                 
                 
LIABILITIES                
  Deposits   $ 1,096,754     $ 1,133,889  
  Short-term borrowings     91,339       108,020  
  Other borrowings     229,101       151,300  
  Advances by borrowers for taxes and insurance     4,273       4,093  
  Other liabilities     13,797       10,204  
                 
    TOTAL LIABILITIES     1,435,264       1,407,506  
                 
                 
STOCKHOLDERS' EQUITY                
  Common stock     181       181  
  Additional paid in capital     182,295       182,486  
  Unallocated common stock held by the Employee Stock Ownership Plan     (9,627 )     (10,079 )
  Retained earnings     83,658       77,413  
  Treasury stock, at cost     (82,832 )     (80,113 )
  Accumulated other comprehensive loss     (2,395 )     (2,579 )
                 
    TOTAL STOCKHOLDERS' EQUITY     171,280       167,309  
                 
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 1,606,544     $ 1,574,815  
                 
   
ESSA BANCORP, INC. AND SUBSIDIARY  
CONSOLIDATED STATEMENT OF INCOME  
(UNAUDITED)  
             
    For the Three Months
Ended September 30,
    For the Year
Ended September 30,
 
    2015   2014     2015     2014  
    (dollars in thousands)  
INTEREST INCOME                              
  Loans receivable   $ 11,120   $ 11,209     $ 45,067     $ 43,382  
  Investment securities:                              
    Taxable     1,770     1,703       7,199       6,385  
    Exempt from federal income tax     244     232       965       550  
  Other investment income     189     142       948       459  
    Total interest income     13,323     13,286       54,179       50,776  
                               
                               
INTEREST EXPENSE                              
  Deposits     1,782     1,998       7,425       7,907  
  Short-term borrowings     107     76       431       180  
  Other borrowings     708     589       2,534       2,540  
    Total interest expense     2,597     2,663       10,390       10,627  
                               
                               
NET INTEREST INCOME     10,726     10,623       43,789       40,149  
  Provision for loan losses     575     350       2,075       2,350  
                               
                               
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES     10,151     10,273       41,714       37,799  
                               
NONINTEREST INCOME                              
  Service fees on deposit accounts     845     843       3,271       3,185  
  Services charges and fees on loans     289     293       1,152       865  
  Trust and investment fees     241     205       901       906  
  Gain (loss) on sale of investments, net     388     107       786       333  
  Earnings on Bank-owned life insurance     234     236       935       923  
  Insurance commissions     208     216       790       841  
  Gain on acquisition     -     -       -       241  
  Other     28     28       61       113  
    Total noninterest income     2,233     1,928       7,896       7,407  
                               
NONINTEREST EXPENSE                              
  Compensation and employee benefits     5,047     5,343       20,606       18,920  
  Occupancy and equipment     1,039     1,016       4,150       4,050  
  Professional fees     545     535       1,983       1,883  
  Data processing     883     844       3,449       3,270  
  Advertising     249     170       974       633  
  Federal Deposit Insurance Corporation Premiums     275     272       1,125       1,002  
  Loss (Gain) on foreclosed real estate     19     (350 )     (148 )     (466 )
  Merger related costs     285     -       285       522  
  Amortization of intangible assets     151     203       637       959  
  Other     949     1,051       3,804       3,038  
    Total noninterest expense     9,442     9,084       36,865       33,811  
                               
Income before income taxes     2,942     3,117       12,745       11,395  
  Income taxes     636     745       2,954       2,891  
                               
                               
Net Income   $ 2,306   $ 2,372     $ 9,791     $ 8,504  
                               
Earnings per share:                              
  Basic   $ 0.22   $ 0.22     $ 0.94     $ 0.79  
  Diluted   $ 0.22   $ 0.22     $ 0.93     $ 0.79  
                               
                         
    For the Three Months
Ended September 30,
    For the Year
Ended September 30,
 
    2015     2014     2015     2014  
    (dollars in thousands)     (dollars in thousands)  
CONSOLIDATED AVERAGE BALANCES:                        
  Total assets   $ 1,593,301     $ 1,555,617     $ 1,580,889     $ 1,454,280  
  Total interest-earning assets     1,495,455       1,451,002       1,481,428       1,353,074  
  Total interest-bearing liabilities     1,299,855       1,296,114       1,301,650       1,204,262  
  Total stockholders' equity     173,443       171,378       172,290       169,668  
                                 
PER COMMON SHARE DATA:                                
  Average shares outstanding - basic     10,426,195       10,672,848       10,454,455       10,817,429  
  Average shares outstanding - diluted     10,550,898       10,687,163       10,543,245       10,820,914  
  Book value shares     11,353,244       11,590,378       11,353,244       11,590,378  
                                 
Net interest rate spread     2.78 %     2.85 %     2.89 %     2.89 %
Net interest margin     2.85 %     2.90 %     2.96 %     2.97 %