ESSA Bancorp

January 28, 2015 16:30 ET

ESSA Bancorp, Inc. Announces Fiscal First Quarter 2015 Financial Results

STROUDSBURG, PA--(Marketwired - Jan 28, 2015) - ESSA Bancorp, Inc. (NASDAQ: ESSA), the holding Company for ESSA Bank & Trust, a $1.6 billion asset institution providing full service retail and commercial banking, financial and investment services, today announced results for fiscal first quarter 2015. 

The Company reported net income of $2.6 million, or $0.25 per diluted share, for the three months ended December 31, 2014, up 30% compared with net income of $2.0 million, or $0.18 per diluted share, for the three months ended December 31, 2013. Year-over-year quarterly comparisons reflect contributions from the acquisition of Franklin Security Bancorp, which closed in the Company's fiscal 2014 third quarter.

Gary S. Olson, President and CEO, commented: "Our fiscal 2015 first quarter results present a clear year-over-year picture of the positive contributions from the Company's acquisitive and organic growth during the past several years. An increasingly diversified loan portfolio, including new indirect auto lending our municipal banking business, and expanded commercial banking, all supported earnings growth by adding nearly $1 million to interest income, as well as generating fee income.

"A key component of our growth plan has been to expand the Company's geographic footprint and business mix, leading to an increasingly diversified revenue and core deposit funding base. We believe this strategy is adding to the value of our franchise. We successfully acquired and integrated Franklin, and expanded our presence in Monroe County by acquiring a branch, deposits and loans from another bank. This branch acquisition also enabled us to consolidate two of our branches into the acquired branch to enhance efficiency and improve service. Return on average assets (ROAA) expanded to 0.66% from 0.59% a year ago, and also rose compared with fiscal fourth quarter ROAA of 0.61%. The Company's results reflect continued asset quality, and a lower year-over-year provision for loan losses.

"Greater size, scale and market coverage position ESSA to generate revenue growth throughout the organization. We remain focused on executing our strategic plan, and continue to look for prudent ways to drive value for shareholders."

Income Statement Review

Net interest income increased $1.6 million, or 16.4%, to $11.1 million for the three months ended December 31, 2014, from $9.5 million for the comparable period in 2013. While interest expense remained relatively flat for the three months ended December 31, 2014 compared to the comparable period in 2013. Interest income increased $1.5 million. Increases in interest income from indirect auto loans, commercial loans and investment securities were offset, in part, by a decrease in interest income from mortgage loans. The Company's net interest rate spread was 2.94% for the three months ended December 31, 2014 compared to 2.88% for the comparable 2013 period. The net interest margin increased to 2.99% for the 2014 period compared to 2.98% for the 2013 period.

The Company's provision for loan losses decreased to $450,000 for the three months ended December 31, 2014, compared with $750,000 for the three months ended December 31, 2013. Net loan charge-offs in fiscal first quarter 2015 were $568,000 compared to $445,000 in fiscal first quarter 2014.

Noninterest income increased 11.5% to $1.8 million for the three months ended December 31, 2014, compared with the three months ended December 31, 2013, primarily reflecting an increase in service charges and fees on loans of $130,000 due to increased volume.

Noninterest expense was $9.0 million for the three months ended December 31, 2014 compared with $7.7 million for the comparable period in 2013 primarily reflecting increased costs after the acquisition of Franklin Security Bank in April, 2014.

Balance Sheet, Asset Quality and Capital Adequacy

Total assets were $1.57 billion at December 31, 2014 compared with $1.58 billion at September 30, 2014. Total loans receivable, net of allowance for loan losses, were $1.06 billion at each of December 31, 2014 and September 30, 2014.

Total deposits decreased $27.4 million, or 2.42%, to $1.11 billion at December 31, 2014, from $1.13 billion at September 30, 2014. Decreases in non-interest bearing, NOW and certificate of deposit accounts were partially offset by an increase in money market accounts. During the same period, borrowings increased $16.8 million.

Nonperforming assets totaled $25.2 million, or 1.61%, of total assets at December 31, 2014, compared with $25.0 million, or 1.59%, of total assets at September 30, 2014. The increase in nonperforming assets of $228,000 at December 31, 2014 compared to September 30, 2014 was due primarily to increases in non-performing residential mortgages. Nonperforming assets were $26.8 million, or 1.98% of total assets at December 31, 2013.

The Company recorded a provision for loan losses of $450,000 for the three-month period ended December 31, 2014, compared with a provision of $750,000 for the comparable period in 2013. The allowance for loan losses was $8.5 million, or 0.80%, of loans outstanding at December 31, 2014, 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 9.83%, exceeding accepted regulatory standards for a well-capitalized institution. The Company maintained a tangible equity to total assets ratio of 9.79%.

Stockholders' equity increased $2.2 million to $169.5 million at December 31, 2014, from $167.3 million at September 30, 2014. During the three months ended December 31, 2014, the Company repurchased 146,000 shares at an average cost of $11.54 per share. Tangible book value per share at December 31, 2014 increased to $13.72 compared with $13.34 at September 30, 2014.

In fiscal first quarter 2015, the Company's return on average assets and return on average equity, respectively, were 0.66% and 6.06%, compared with 0.59% and 4.77%, in the corresponding period of fiscal 2014. Return on average assets and return on average equity also demonstrated linked quarter growth, increasing from an ROAA of 0.61% and an ROAE of 5.54% in fiscal fourth quarter 2014.

Olson concluded, "We are pleased with the traction our Company has demonstrated in increasing earnings and enhancing shareholder value, which was reflected in higher tangible book value per share and accelerating return on average equity. We anticipate leveraging the benefits of our increased size and scale to continue on the course we have established."

ESSA Bank & Trust, a wholly-owned subsidiary of ESSA Bancorp, Inc., has total assets of over $1.6 billion and is the leading service-oriented financial institution headquartered in Stroudsburg, Pennsylvania. The Bank maintains its corporate headquarters in downtown Stroudsburg, Pennsylvania and has 27 community offices throughout the Greater Pocono,  Lehigh Valley, Scranton and Wilkes Barre areas in Pennsylvania. In addition to being one of the region's largest mortgage lenders, ESSA Bank & Trust offers a full range of retail, commercial financial services, and 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.

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.


    December 31,
    September 30,
    (dollars in thousands)  
  Cash and due from banks   $ 15,827     $ 20,884  
  Interest-bearing deposits with other institutions     4,639       1,417  
    Total cash and cash equivalents     20,466       22,301  
  Certificates of deposit     1,752       1,767  
  Investment securities available for sale     380,943       383,078  
  Loans receivable (net of allowance for loan losses of $8,516 and $8,634)     1,059,158       1,058,267  
  Regulatory stock, at cost     12,640       14,284  
  Premises and equipment, net     16,949       16,957  
  Bank-owned life insurance     29,959       29,720  
  Foreclosed real estate     2,895       2,759  
  Intangible assets, net     2,230       2,396  
  Goodwill     10,259       10,259  
  Deferred income taxes     10,599       12,027  
  Other assets     19,904       21,000  
  TOTAL ASSETS   $ 1,567,754     $ 1,574,815  
  Deposits   $ 1,106,454     $ 1,133,889  
  Short-term borrowings     110,879       108,020  
  Other borrowings     165,229       151,300  
  Advances by borrowers for taxes and insurance     7,075       4,093  
  Other liabilities     8,631       10,204  
    TOTAL LIABILITIES     1,398,268       1,407,506  
STOCKHOLDERS' EQUITY                
  Common stock     181       181  
  Additional paid in capital     182,520       182,486  
  Unallocated common stock held by the Employee Stock Ownership Plan     (9,966 )     (10,079 )
  Retained earnings     79,280       77,413  
  Treasury stock, at cost     (81,798 )     (80,113 )
  Accumulated other comprehensive loss     (731 )     (2,579 )
    TOTAL STOCKHOLDERS' EQUITY     169,486       167,309  
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 1,567,754     $ 1,574,815  
    For the Three Months
Ended December 31
    2014     2013
    (dollars in thousands)
INTEREST INCOME              
  Loans receivable   $ 11,449     $ 10,523
  Investment securities:              
    Taxable     1,889       1,527
    Exempt from federal income tax     234       73
  Other investment income     136       59
    Total interest income     13,708       12,182
INTEREST EXPENSE              
  Deposits     1,965       1,988
  Short-term borrowings     103       23
  Other borrowings     590       680
    Total interest expense     2,658       2,691
NET INTEREST INCOME     11,050       9,491
  Provision for loan losses     450       750
  Service fees on deposit accounts     827       792
  Services charges and fees on loans     315       185
  Trust and investment fees     238       211
  Earnings on Bank-owned life insurance     239       228
  Insurance commissions     182       193
  Other     13       18
    Total noninterest income     1,814       1,627
  Compensation and employee benefits     5,114       4,308
  Occupancy and equipment     981       918
  Professional fees     514       409
  Data processing     813       680
  Advertising     128       106
  Federal Deposit Insurance Corporation Premiums     292       229
  Loss (Gain) on foreclosed real estate     (38 )     42
  Merger related costs     -       258
  Amortization of intangible assets     166       237
  Other     996       561
    Total noninterest expense     8,966       7,748
Income before income taxes     3,448       2,620
  Income taxes     852       616
Net Income   $ 2,596     $ 2,004
    For the Three Months
Ended December 31
    2014     2013
Earnings per share:              
  Basic   $ 0.25     $ 0.18
  Diluted   $ 0.25     $ 0.18
    For the Three Months
Ended December 31,
    2014     2013  
    (dollars in thousands)  
  Total assets   $ 1,570,393     $ 1,361,034  
  Total interest-earning assets     1,466,915       1,264,918  
  Total interest-bearing liabilities     1,317,154       1,120,576  
  Total stockholders' equity     169,926       168,058  
PER COMMON SHARE DATA:                
  Average shares outstanding - basic     10,516,097       10,890,156  
  Average shares outstanding - diluted     10,516,097       10,906,229  
  Book value shares     11,444,378       11,927,964  
Net interest rate spread     2.94 %     2.88 %
Net interest margin     2.99 %     2.98 %