STROUDSBURG, PA--(Marketwired - Oct 29, 2014) - ESSA Bancorp, Inc. (NASDAQ: ESSA), the holding company for ESSA Bank & Trust, a $1.6 billion asset financial institution providing full service retail and commercial banking, financial and investment services, today announced results for the fiscal three months and year ended September 30, 2014. The fiscal three months and year ended September 30, 2014 reflect the effects of ESSA's acquisition of Franklin Security Bancorp, Inc. on April 4, 2014.
The Company reported net income of $2.4 million, or $0.22 per diluted share, for the three months ended September 30, 2014, compared with net income of $2.0 million, or $0.19 per diluted share, for the three months ended September 30, 2013.
For the year ended September 30, 2014, the Company reported net income of $8.5 million, or $0.79 per diluted share, compared with net income of $8.8 million, or $0.76 per diluted share, for the corresponding 2013 period.
The Company's year-end 2014 results included $522,000 in merger-related costs. Following the close of the fiscal second quarter, the Company completed its acquisition of Franklin Security Bancorp on April 4, 2014, establishing a presence in the Wilkes-Barre and Scranton, Pennsylvania markets, and adding approximately $217.5 million in total assets, $152.2 million in loans and $162.2 million in deposits.
Gary S. Olson, President and CEO, commented: "Our fiscal 2014 results reflect continued growth in the value of our Company. Tangible book value rose to $13.34 per share at year-end, up from $12.99 a year ago. Our quarterly earnings run rate has increased significantly, reflecting growth in core operating income, primarily attributable to two prudent whole bank acquisitions over the past several years, which were quickly accretive to earnings per share. Significant improvement in asset quality, reduced cost of funds year-over-year and growing core deposits reflecting our expanded market reach through the Franklin acquisition are enhancing the value of ESSA's franchise for shareholders. Operations and performance in Monroe County continue to be stable, despite a difficult economic environment, and we continue to diversify our revenue and asset mix in the Lehigh Valley, Wilkes-Barre and Scranton markets.
"The addition of Franklin's commercial accounts were an important factor in building lower-cost core deposits, which contributed to maintaining relative stability in net interest spread, despite the ongoing low interest rate environment. With Franklin's operations now fully integrated, we intend to expand service offerings in Wilkes-Barre and Scranton, much as we did in the Lehigh Valley following our acquisition of First Star Bancorp, Inc.
"During the year, we acted to build shareholder value through stock repurchases at an average per-share cost below the Company's tangible book value, and increased our quarterly cash dividend on our common shares. Our ongoing focus continues to be to leverage the Company's increased scale to win new business and to build value for our shareholders through prudent capital management."
The Company's pre-tax core earnings, excluding the accretion of the fair market adjustments that resulted from the Company's acquisitions, gains on the sale of securities and loans, and the Franklin merger-related expenses, were $10.4 million in the fiscal year ended September 30, 2014 compared with $7.5 million in the fiscal year ended September 30, 2013.
Total stockholders' equity increased to $167.3 million at September 30, 2014 compared to $166.4 million at the beginning of fiscal 2014. The Company's Board of Directors authorized an increased cash dividend on common shares in the fiscal second quarter of 2014, and the Company utilized a portion of its capital to repurchase shares. During the three months ended September 30, 2014, the Company repurchased 248,100 shares at an average cost of $11.40 per share, and has repurchased 369,225 shares during the fiscal year ended September 30, 2014 at an average cost of $11.24 per share.
Income Statement Review
Net interest income increased $1.2 million, or 13.09%, to $10.6 million for the three months ended September 30, 2014, from $9.4 million for the comparable period in 2013, reflecting increased interest from commercial and indirect auto loans receivable and an increase in interest income from investment securities. These increases were partially offset by a decrease of $401,000 in the net accretion of fair market value adjustments from the Company's acquisitions in the 2014 quarter compared to the 2013 quarter.The Company's net interest rate spread was 2.85% for the three months ended September 30, 2014 compared to 2.83% for the comparable 2013 period.
For the fiscal year ended September 30, 2014, net interest income increased $304,000 to $40.1 million from $39.8 million for the comparable period in 2013. The increase was primarily attributable to increases in interest income from commercial and indirect auto loans and investment securities offset, in part, by a decrease in interest income from residential loans, combined with a decrease in interest expense from borrowed funds. In addition, the net accretion of fair market value adjustments from the Company's acquisition was $1.8 million less in 2014 compared to 2013. The Company's net interest rate spread was 2.89% in 2014 compared to 2.97% in 2013.
The net interest margin was 2.90% for the three months ended September 30, 2014 compared to a net interest margin of 2.92% for the comparable period in 2013. The net interest margin was 2.97% for the year ended September 30, 2014 compared to a net interest margin of 3.08% for the comparable period in 2013.
The Company's provision for loan losses declined to $350,000 for the three months ended September 30, 2014, compared to $800,000 for the three months ended September 30, 2013. Net loan charge-offs in fiscal fourth quarter 2014 were $552,000 compared with $920,000 in fiscal fourth quarter 2013. The provision for loan losses decreased to $2.4 million for the year ended September 30, 2014, compared with $3.8 million for the year ended September 30, 2013. Net loan chargeoffs for the year ended 2014 were $1.8 million compared to chargeoffs of $3.0 million for the comparable 2013 period, a 40.46% decrease.
Noninterest income increased 10.86% to $1.9 million for the three months ended September 30, 2014, compared with the three months ended September 30, 2013, reflecting increased gains on sales of investments. For the year ended September 30, 2014, noninterest income declined to $7.4 million compared with $8.0 million for the year ended September 30, 2013. The year-over-year change reflected moderate growth in deposit account service fees and income from the Company's trust and investment segment, a $416,000 decline in gain on sale of investments, lower service fees on loan accounts, and no gain on loan sales during the year ended September 30, 2014, compared with a $426,000 gain on loan sales in the year ended September 30, 2013.
Noninterest expense increased 13.38% to $9.1 million for the three months ended September 30, 2014 compared to $8.0 million for the comparable period in 2013, primarily reflecting increases in compensation and employee benefits, professional fees and other non-interest expenses, offset, in part, by an increase in the net gain on foreclosed real estate.
Noninterest expense increased 4.16% to $33.8 million for the year ended September 30, 2014 compared to $32.5 million for the comparable period in 2013.The merger with Franklin resulted in increases in merger related expenses of $522,000 and contributed to the increases in data processing expense of $363,000, occupancy and equipment expense of $155,000 and other non-interest expense of $292,000.
Balance Sheet, Asset Quality and Capital Adequacy
Total assets increased $202.5 million, or 14.76%, to $1.6 billion at September 30, 2014, compared to $1.4 billion at September 30, 2013 due primarily to the April 4, 2014 merger with Franklin.
Loans receivable, net of an $8.6 million allowance for loan losses, were $1.1 billion at September 30, 2014 compared to loans receivable, net of an $8.1 million allowance for loan losses, of $928.2 million at September 30, 2013. Residential mortgage lending declined year-over-year, reflecting continuing sluggishness in the housing market in northeastern Pennsylvania. The Company added $100.5 million of indirect auto loans and $62.5 million of commercial loans to its portfolio at September 30, 2014 compared with September 30, 2013, primarily reflecting loans added in the Franklin acquisition.
Total deposits increased $92.8 million, or 8.92%, to $1.1 billion at September 30, 2014, from $1.0 billion at September 30, 2013. Deposit growth included a 19.1% increase in non-interest bearing checking accounts, primarily reflecting new accounts added as a result of the Franklin acquisition. During the same period, FHLB borrowings increased $117.1 million. In fiscal 2014, FHLB borrowings were attractively priced compared to brokered certificates.
Nonperforming assets totaled $25.0 million, or 1.59%, of total assets at September 30, 2014, compared with $26.0 million, or 1.89%, of total assets at September 30, 2013. The allowance for loan losses was $8.6 million, or 0.81%, of loans outstanding at September 30, 2014, compared to $8.1 million, or 0.86%, of loans outstanding at September 30, 2013. The loans acquired from Franklin Security Bancorp were acquired at their fair market value, with no corresponding allowance.
The Bank continued to demonstrate financial strength, with a Tier 1 leverage ratio of 9.89%, exceeding accepted regulatory standards for a well-capitalized institution. The Company maintained a tangible equity to total assets ratio of 9.82%.
The Company's return on average assets and return on average equity, respectively, were 0.61% and 5.54% for the three months ended September 30, 2014 compared with 0.59% and 4.95% for the corresponding period of fiscal 2013. The Company's return on average assets and return on average equity, respectively, were 0.59% and 5.01% for the year ended September 30, 2014 compared to 0.64% and 5.12% for the comparable period in fiscal 2013.
Olson concluded: "As we enter our new fiscal year, we believe ESSA is well positioned as a major community banking presence in Northeastern Pennsylvania. We have been able to achieve balanced growth by taking advantage of the opportunity to execute two attractively priced acquisitions during the past several years. The Company is also utilizing its capital in a prudent manner to enhance shareholder value through continued stock repurchase and dividend payout programs. We are focused on delivering a balanced mix of growth from operations and through complementary actions that deliver ongoing enhancement in the value of the Company for shareholders."
About The Company
ESSA Bancorp (
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 and in Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended September 30, 2013, 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.
NON-GAAP Disclosures
This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding the Company's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
| FINANCIAL TABLES FOLLOW |
| ESSA BANCORP, INC. AND SUBSIDIARY |
| CONSOLIDATED BALANCE SHEET |
| (UNAUDITED) |
| September 30, 2014 |
September 30, 2013 |
|||||||||
| (dollars in thousands) | ||||||||||
| ASSETS | ||||||||||
| Cash and due from banks | $ | 20,884 | $ | 22,393 | ||||||
| Interest-bearing deposits with other institutions | 1,417 | 4,255 | ||||||||
| Total cash and cash equivalents | 22,301 | 26,648 | ||||||||
| Certificates of deposit | 1,767 | 1,767 | ||||||||
| Investment securities available for sale | 383,078 | 315,622 | ||||||||
| Loans receivable (net of allowance for loan losses of $8,634 and $8,064) | 1,058,267 | 928,230 | ||||||||
| Regulatory stock, at cost | 14,284 | 9,415 | ||||||||
| Premises and equipment, net | 16,957 | 15,747 | ||||||||
| Bank-owned life insurance | 29,720 | 28,797 | ||||||||
| Foreclosed real estate | 2,759 | 2,111 | ||||||||
| Intangible assets, net | 2,396 | 2,466 | ||||||||
| Goodwill | 10,259 | 8,817 | ||||||||
| Deferred income taxes | 12,027 | 11,183 | ||||||||
| Other assets | 21,000 | 21,512 | ||||||||
| TOTAL ASSETS | $ | 1,574,815 | $ | 1,372,315 | ||||||
| LIABILITIES | ||||||||||
| Deposits | $ | 1,133,889 | $ | 1,041,059 | ||||||
| Short-term borrowings | 108,020 | 23,000 | ||||||||
| Other borrowings | 151,300 | 129,260 | ||||||||
| Advances by borrowers for taxes and insurance | 4,093 | 4,962 | ||||||||
| Other liabilities | 10,204 | 7,588 | ||||||||
| TOTAL LIABILITIES | 1,407,506 | 1,205,869 | ||||||||
| STOCKHOLDERS' EQUITY | ||||||||||
| Common stock | 181 | 181 | ||||||||
| Additional paid in capital | 182,486 | 182,440 | ||||||||
| Unallocated common stock held by the Employee Stock Ownership Plan | (10,079 | ) | (10,532 | ) | ||||||
| Retained earnings | 77,413 | 71,709 | ||||||||
| Treasury stock, at cost | (80,113 | ) | (76,117 | ) | ||||||
| Accumulated other comprehensive loss | (2,579 | ) | (1,235 | ) | ||||||
| TOTAL STOCKHOLDERS' EQUITY | 167,309 | 166,446 | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,574,815 | $ | 1,372,315 | ||||||
| ESSA BANCORP, INC. AND SUBSIDIARY |
| CONSOLIDATED STATEMENT OF INCOME |
| (UNAUDITED) |
| For the Three Months Ended September 30 |
For the Year Ended September 30 |
||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||||
| (dollars in thousands) | |||||||||||||||||
| INTEREST INCOME | |||||||||||||||||
| Loans receivable | $ | 11,209 | $ | 10,434 | $ | 43,382 | $ | 44,744 | |||||||||
| Investment securities: | |||||||||||||||||
| Taxable | 1,703 | 1,400 | 6,385 | 5,958 | |||||||||||||
| Exempt from federal income tax | 232 | 72 | 550 | 272 | |||||||||||||
| Other investment income | 142 | 65 | 459 | 128 | |||||||||||||
| Total interest income | 13,286 | 11,971 | 50,776 | 51,102 | |||||||||||||
| INTEREST EXPENSE | |||||||||||||||||
| Deposits | 1,998 | 1,832 | 7,907 | 7,408 | |||||||||||||
| Short-term borrowings | 76 | 20 | 180 | 129 | |||||||||||||
| Other borrowings | 589 | 726 | 2,540 | 3,720 | |||||||||||||
| Total interest expense | 2,663 | 2,578 | 10,627 | 11,257 | |||||||||||||
| NET INTEREST INCOME | 10,623 | 9,393 | 40,149 | 39,845 | |||||||||||||
| Provision for loan losses | 350 | 800 | 2,350 | 3,750 | |||||||||||||
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 10,273 | 8,593 | 37,799 | 36,095 | |||||||||||||
| NONINTEREST INCOME | |||||||||||||||||
| Service fees on deposit accounts | 843 | 818 | 3,185 | 3,133 | |||||||||||||
| Services charges and fees on loans | 293 | 253 | 865 | 1,027 | |||||||||||||
| Trust and investment fees | 205 | 212 | 906 | 853 | |||||||||||||
| Gain on sale of investments, net | 107 | - | 333 | 749 | |||||||||||||
| Gain on sale of loans, net | - | - | - | 426 | |||||||||||||
| Earnings on Bank-owned life insurance | 237 | 240 | 924 | 949 | |||||||||||||
| Gain on acquisition | - | - | 241 | - | |||||||||||||
| Insurance commissions | 216 | 200 | 841 | 838 | |||||||||||||
| Other | 28 | 17 | 113 | 49 | |||||||||||||
| Total noninterest income | 1,929 | 1,740 | 7,408 | 8,024 | |||||||||||||
| NONINTEREST EXPENSE | |||||||||||||||||
| Compensation and employee benefits | 5,343 | 4,688 | 18,920 | 19,002 | |||||||||||||
| Occupancy and equipment | 1,016 | 960 | 4,050 | 3,895 | |||||||||||||
| Professional fees | 535 | 415 | 1,883 | 1,868 | |||||||||||||
| Data processing | 844 | 752 | 3,270 | 2,907 | |||||||||||||
| Advertising | 170 | 149 | 633 | 574 | |||||||||||||
| Federal Deposit Insurance Corporation Premiums | 272 | 208 | 1,002 | 947 | |||||||||||||
| Loss (Gain) on foreclosed real estate | (350 | ) | 30 | (466 | ) | (468 | ) | ||||||||||
| Merger related costs | - | - | 522 | - | |||||||||||||
| Amortization of intangible assets | 204 | 242 | 960 | 991 | |||||||||||||
| Other | 1,051 | 569 | 3,038 | 2,746 | |||||||||||||
| Total noninterest expense | 9,085 | 8,013 | 33,812 | 32,462 | |||||||||||||
| Income before income taxes | 3,117 | 2,320 | 11,395 | 11,657 | |||||||||||||
| Income taxes | 745 | 292 | 2,891 | 2,834 | |||||||||||||
| Net Income | $ | 2,372 | $ | 2,028 | $ | 8,504 | $ | 8,823 | |||||||||
| Earnings per share: | |||||||||||||||||
| Basic | $ | 0.22 | $ | 0.19 | $ | 0.79 | $ | 0.76 | |||||||||
| Diluted | $ | 0.22 | $ | 0.19 | $ | 0.79 | $ | 0.76 | |||||||||
| Dividends per share: | $ | 0.07 | $ | 0.05 | $ | 0.26 | $ | 0.20 | |||||||||
| For the Three Months Ended September 30, |
For the Year Ended September 30, |
|||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||
| (dollars in thousands) | (dollars in thousands) | |||||||||||||||||
| CONSOLIDATED AVERAGE BALANCES: | ||||||||||||||||||
| Total assets | $ | 1,555,617 | $ | 1,370,568 | $ | 1,454,280 | $ | 1,386,810 | ||||||||||
| Total interest-earning assets | 1,451,002 | 1,274,450 | 1,353,074 | 1,292,462 | ||||||||||||||
| Total interest-bearing liabilities | 1,296,114 | 1,125,696 | 1,204,262 | 1,138,780 | ||||||||||||||
| Total stockholders' equity | 171,378 | 164,009 | 169,668 | 172,286 | ||||||||||||||
| PER COMMON SHARE DATA: | ||||||||||||||||||
| Average shares outstanding - basic | 10,672,848 | 10,954,982 | 10,817,428 | 11,559,553 | ||||||||||||||
| Average shares outstanding - diluted | 10,705,175 | 10,954,982 | 10,822,673 | 11,559,553 | ||||||||||||||
| Book value shares | 11,590,378 | 11,945,564 | 11,590,378 | 11,945,564 | ||||||||||||||
| Net interest rate spread | 2.85 | % | 2.83 | % | 2.89 | % | 2.97 | % | ||||||||||
| Net interest margin | 2.90 | % | 2.92 | % | 2.97 | % | 3.08 | % | ||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES: | For the Year Ended September 30, |
|||||||
| 2014 | 2013 | |||||||
| (dollars in thousands) | ||||||||
| Income before income taxes | $ | 11,395 | $ | 11,657 | ||||
| Deduct: accretion of fair market value adjustments from acquisitions | 1,178 | 2,970 | ||||||
| Deduct gains/add losses from sales of loans and investments | 333 | 1,175 | ||||||
| Add: Merger related costs | 522 | - | ||||||
| Pre-tax core earnings: | $ | 10,406 | $ | 7,512 | ||||