STROUDSBURG, PA--(Marketwired - Apr 24, 2013) - ESSA Bancorp, Inc. (
For the six months ended March 31, 2013, ESSA reported net income of $4.9 million, or $0.41 per diluted share, compared to net income of $1.5 million, or $0.14 per diluted share, for the corresponding 2012 period. The Company's ROAA, and ROAE, respectively, were 0.71% and 5.59% for the 2013 period, compared with 0.28% and 1.90%, in the corresponding period of 2012.
ESSA Bancorp completed its acquisition of First Star Bancorp on July 31, 2012. The results for the periods ended March 31, 2013, reflect the effects of the acquisition in fiscal 2013. Total assets were $1.4 billion and total deposits were $1.0 billion at March 31, 2013.
Gary S. Olson, President and CEO, commented: "ESSA's mid-2012 acquisition of First Star is clearly proving accretive to our earnings, and our expanded presence in the Lehigh Valley is providing ESSA with access to a vibrant market and a larger base of new customers and prospective customers. Additionally, we are realizing an approximate 30% cost savings from First Star's operating expenses, right in line with our previously stated goals pertaining to the acquisition.
"We are encouraged by the increasing loan demand in our Lehigh Valley market. Fiscal year-to-date, ESSA closed $72.2 million of residential mortgages and $22.6 million of commercial loans. A slightly reduced net loan balance at March 31, 2013 compared with September 30, 2012 primarily reflected loan pay-offs, which are expected during this protracted low interest rate environment and the sale of $19.2 million of mortgage loans.
"We are cautiously optimistic that continued economic expansion, combined with our new, larger market will provide significant lending growth opportunities for the Company. ESSA has the capital strength to support both organic and other growth as prudent opportunities arise.
"ESSA's board of directors continues to believe repurchasing the Company's stock is a good use of our capital, and our repurchase program remains ongoing. For the six months ended March 31, 2013, the Company repurchased 640,209 shares at an average cost of $11.07 per share."
Income Statement
Net interest income increased $3.1 million, or 45.98%, to $9.9 million for the three months ended March 31, 2013, from $6.8 million for the comparable period in 2012. The increase was primarily attributable to an increase in the Company's interest rate spread to 2.97% for the three months ended March 31, 2013, from 2.36% for the comparable period in 2012 combined with an increase in the Company's average net earning assets of $3.2 million. A decrease in the yield on the Company's total average interest earning assets to 3.97% for the 2013 period from 4.22% for the 2012 period was more than offset by a decrease in the cost of the Company's total average interest bearing liabilities to 1.00% from 1.86% for the same comparative periods. Net interest margin was 3.08% for the three months ended March 31, 2013 compared to net interest margin of 2.63% for the comparable period in 2012.
Olson stated: "While low interest rates continue to put pressure on our net interest margin, ESSA has demonstrated success in reducing its cost of funds while retaining core deposit customers."
Interest income for the three months ended March 31, 2013 includes approximately $443,000 of net accretion of fair market value adjustments for credit and yield applied to First Star loans at the acquisition closing date of July 31, 2012. In addition, net income for the quarter includes approximately $210,000 of the recapture of fair value adjustments to loans acquired as part of the First Star acquisition that were either fully or partially repaid during the quarter.
Interest income for the six months ended March 31, 2013 includes approximately $866,000 of net accretion of fair market value adjustments for credit and yield applied to First Star loans at the acquisition closing date of July 31, 2012. In addition, net income for the six months included approximately $1.2 million of the recapture of fair value adjustments to loans acquired as part of the First Star acquisition that were either fully or partially repaid during the six months ended March 31, 2013.
Interest expense decreased primarily as a result of a decrease in interest rates and a decrease in higher rate borrowings for the three and six months ended March 31, 2013 compared with the comparable periods in 2012.
The provision for loan losses increased $200,000 to $850,000 for the three months ended March 31, 2013, from $650,000 for the comparable period in 2012. The provision for loan losses increased $700,000 to $1.9 million for the six months ended March 31, 2013, from $1.2 million for the comparable period in 2012. Net loan charge-offs for the three months ended March 31, 2013 were $747,000 compared to $277,000 for the comparable period in 2012. Net loan charge-offs for the six months ended March 31, 2013 were $1.5 million compared to $1.2 million for the comparable period in 2012.
Noninterest income increased $835,000, or 51.45%, to $2.5 million for the three months ended March 31, 2013, compared with the three months ended March 31, 2012, primarily reflecting an increase in the gain on sale of investments of $561,000. The quarter ended March 31, 2013, included gains on the sale of investments of $708,000 before tax compared with $147,000 for the quarter ended March 31, 2012.
Noninterest income increased $1.3 million, or 42.48% to $4.5 million for the six months ended March 31, 2012 from $3.1 million for the comparable period in 2012. The primary reasons for the increase were increases in service fees on deposit accounts of $130,000, services charges and fees on loans of $113,000, gain on sale of investments of $591,000 and gain on sale of loans of $407,000.
Allan Muto, EVP and CFO, commented: "While our fiscal second quarter and six month results reflect the continued positive impact of the recapture of fair value adjustments and net accretion as a result of the acquired performing and non-performing loans from First Star, we expect these accounting related adjustments to become less significant by the end of fiscal 2013. We sold certain mortgage backed securities at a gain and provided some necessary liquidity to our holding company, in order to fund our continued stock repurchase program. We remain diligently focused on improving our financial performance in all areas of our business."
Noninterest expense increased $1.9 million to $8.8 million or 27.87%, for the three months ended March 31, 2013, from $6.9 million for the comparable period in 2012, reflecting increases in compensation and employee benefits of $1.1 million, occupancy and equipment of $254,000, data processing of $298,000 and professional fees of $189,000. These increases were partially offset by decreases in merger related costs of $227,000 and a decrease in the cost to liquidate foreclosed real estate of $212,000.
Noninterest expense increased $2.8 million to $16.3 million or 20.38%, for the six months ended March 31, 2013, from $13.5 million for the comparable period in 2012, reflecting increases in compensation and employee benefits of $1.7 million, occupancy and equipment of $447,000, data processing of $479,000 and amortization of intangible assets of $337,000. These increases were partially offset by decreases in merger related costs of $376,000 and a decrease in the cost to liquidate foreclosed real estate of $505,000.
The increases in noninterest expenses were due primarily to the larger organization in the 2013 periods compared with the 2012 periods.
Balance Sheet, Asset Quality and Capital Adequacy
Total assets decreased $32.9 million, or 2.32%, to $1.39 billion at March 31, 2013, compared to $1.42 billion at September 30, 2012, although up significantly compared with pre-merger total assets. Increases in cash and cash equivalents of $8.4 million, compared with September 30, 2012, were offset by decreases in total investment securities of $14.6 million, loans receivable of $11.2 million, regulatory stock of $5.6 million and other assets of $8.6 million.
Total deposits increased $8.4 million, or 0.84%, to $1.0 billion at March 31, 2013, from $995.6 million at September 30, 2012. Borrowings decreased $43.6 million to $191.1 million from $234.7 million during the same period.
Nonperforming assets totaled $28.6 million, or 2.06%, of total assets at March 31, 2013, compared with $27.2 million, or 1.92%, of total assets at September 30, 2012. The increase in nonperforming assets of $1.4 million at March 31, 2013 compared to September 30, 2012 was due primarily to an increase in non-performing residential mortgage loans of $2.4 million which was offset in part by a decline in foreclosed real estate of $1.3 million. The Company made a provision for loan losses of $850,000 and $1.9 million for the three and six month periods ended March 31, 2013, respectively, compared with provisions of $650,000 and $1.2 million for the comparable three and six month periods in 2012. The allowance for loan losses was $7.7 million, or 0.81%, of loans outstanding at March 31, 2013, compared to $7.3 million, or 0.76%, of loans outstanding at September 30, 2012.
Stockholders' equity decreased $3.7 million, or 2.08%, to $171.8 million at March 31, 2013, from $175.4 million at September 30, 2012. The decrease was due primarily to the stock repurchase program announced during the first fiscal quarter. For the six months ended March 31, 2013, the Company repurchased 640,209 shares at an average cost of $11.07 per share. The Company's tier 1 leverage ratio was 12.10%, and tangible equity to total assets was 11.56%.
Olson concluded: "Our primary focus is on growing shareholder value in a prudent manner, despite a difficult prolonged interest rate and economic environment for all financial institutions. Our strong capital position and newly established positioning as a go-to commercial and residential lender in the Lehigh Valley provides management and the board with great confidence in ESSA's future. We remain nimble as an organization and will continue to look for ways to increase value for shareholders in the coming periods."
ESSA Bank & Trust, a wholly-owned subsidiary of ESSA Bancorp, Inc., has total assets of over $1.3 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 26 community offices throughout the Greater Pocono and Lehigh Valley 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.
FINANCIAL TABLES FOLLOW
| ESSA BANCORP, INC. AND SUBSIDIARY | ||||||||||
| CONSOLIDATED BALANCE SHEET | ||||||||||
| (UNAUDITED) | ||||||||||
| March 31, 2013 |
September 30, 2012 |
|||||||||
| (dollars in thousands) | ||||||||||
| ASSETS | ||||||||||
| Cash and due from banks | $ | 11,006 | $ | 11,034 | ||||||
| Interest-bearing deposits with other institutions | 12,954 | 4,516 | ||||||||
| Total cash and cash equivalents | 23,960 | 15,550 | ||||||||
| Certificates of deposit | 1,766 | 1,266 | ||||||||
| Investment securities available for sale | 314,961 | 329,585 | ||||||||
| Loans receivable held for sale | - | 346 | ||||||||
| Loans receivable (net of allowance for loan losses of $7,671 and $7,302) | 938,782 | 950,009 | ||||||||
| Regulatory stock, at cost | 16,262 | 21,914 | ||||||||
| Premises and equipment, net | 16,017 | 16,170 | ||||||||
| Bank-owned life insurance | 28,323 | 27,848 | ||||||||
| Foreclosed real estate | 1,699 | 2,998 | ||||||||
| Intangible assets, net | 2,957 | 3,457 | ||||||||
| Goodwill | 8,541 | 8,541 | ||||||||
| Deferred income taxes | 11,413 | 11,336 | ||||||||
| Other assets | 21,195 | 29,766 | ||||||||
| TOTAL ASSETS | $ | 1,385,876 | $ | 1,418,786 | ||||||
| LIABILITIES | ||||||||||
| Deposits | $ | 1,004,032 | $ | 995,634 | ||||||
| Short-term borrowings | 33,038 | 43,281 | ||||||||
| Other borrowings | 158,060 | 191,460 | ||||||||
| Advances by borrowers for taxes and insurance | 9,425 | 3,432 | ||||||||
| Other liabilities | 9,564 | 9,568 | ||||||||
| TOTAL LIABILITIES | 1,214,119 | 1,243,375 | ||||||||
| STOCKHOLDERS' EQUITY | ||||||||||
| Common stock | 181 | 181 | ||||||||
| Additional paid in capital | 182,288 | 181,220 | ||||||||
| Unallocated common stock held by the Employee Stock Ownership Plan | (10,759 | ) | (10,985 | ) | ||||||
| Retained earnings | 68,918 | 65,181 | ||||||||
| Treasury stock, at cost | (69,034 | ) | (61,944 | ) | ||||||
| Accumulated other comprehensive income | 163 | 1,758 | ||||||||
| TOTAL STOCKHOLDERS' EQUITY | 171,757 | 175,411 | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,385,876 | $ | 1,418,786 | ||||||
| ESSA BANCORP, INC. AND SUBSIDIARY | ||||||||||||||||||
| CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||
| For the Three Months Ended March 31 |
For the Six Months Ended March 31 |
|||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||
| (dollars in thousands) | ||||||||||||||||||
| INTEREST INCOME | ||||||||||||||||||
| Loans receivable | $ | 11,041 | $ | 9,145 | $ | 23,278 | $ | 18,486 | ||||||||||
| Investment securities: | ||||||||||||||||||
| Taxable | 1,558 | 1,628 | 3,188 | 3,266 | ||||||||||||||
| Exempt from federal income tax | 73 | 55 | 127 | 103 | ||||||||||||||
| Other investment income | 18 | 6 | 47 | 8 | ||||||||||||||
| Total interest income | 12,690 | 10,834 | 26,640 | 21,863 | ||||||||||||||
| INTEREST EXPENSE | ||||||||||||||||||
| Deposits | 1,848 | 1,836 | 3,819 | 3,747 | ||||||||||||||
| Short-term borrowings | 46 | 6 | 82 | 11 | ||||||||||||||
| Other borrowings | 912 | 2,221 | 2,136 | 4,626 | ||||||||||||||
| Total interest expense | 2,806 | 4,063 | 6,037 | 8,384 | ||||||||||||||
| NET INTEREST INCOME | 9,884 | 6,771 | 20,603 | 13,479 | ||||||||||||||
| Provision for loan losses | 850 | 650 | 1,850 | 1,150 | ||||||||||||||
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 9,034 | 6,121 | 18,753 | 12,329 | ||||||||||||||
| NONINTEREST INCOME | ||||||||||||||||||
| Service fees on deposit accounts | 711 | 661 | 1,518 | 1,388 | ||||||||||||||
| Services charges and fees on loans | 268 | 200 | 497 | 384 | ||||||||||||||
| Trust and investment fees | 196 | 207 | 411 | 422 | ||||||||||||||
| Gain on sale of investments, net | 708 | 147 | 738 | 147 | ||||||||||||||
| Gain on sale of loans, net | 81 | 8 | 415 | 8 | ||||||||||||||
| Earnings on Bank-owned life insurance | 248 | 196 | 474 | 394 | ||||||||||||||
| Insurance commissions | 232 | 195 | 407 | 386 | ||||||||||||||
| Other | 14 | 9 | 24 | 18 | ||||||||||||||
| Total noninterest income | 2,458 | 1,623 | 4,484 | 3,147 | ||||||||||||||
| NONINTEREST EXPENSE | ||||||||||||||||||
| Compensation and employee benefits | 5,068 | 3,980 | 9,624 | 7,916 | ||||||||||||||
| Occupancy and equipment | 1,030 | 776 | 1,979 | 1,532 | ||||||||||||||
| Professional fees | 592 | 403 | 904 | 744 | ||||||||||||||
| Data processing | 805 | 507 | 1,468 | 989 | ||||||||||||||
| Advertising | 145 | 67 | 255 | 153 | ||||||||||||||
| Federal Deposit Insurance Corporation (FDIC) Premiums | 293 | 167 | 478 | 329 | ||||||||||||||
| Loss (Gain) on foreclosed real estate | (172 | ) | 40 | (398 | ) | 107 | ||||||||||||
| Merger related costs | - | 227 | - | 376 | ||||||||||||||
| Amortization of intangible assets | 249 | 81 | 499 | 162 | ||||||||||||||
| Other | 780 | 626 | 1,486 | 1,228 | ||||||||||||||
| Total noninterest expense | 8,790 | 6,874 | 16,295 | 13,536 | ||||||||||||||
| Income before income taxes | 2,702 | 870 | 6,942 | 1,940 | ||||||||||||||
| Income taxes | 662 | 211 | 2,023 | 395 | ||||||||||||||
| Net Income | $ | 2,040 | $ | 659 | $ | 4,919 | $ | 1,545 | ||||||||||
| Earnings per share: | ||||||||||||||||||
| Basic | $ | 0.17 | $ | 0.06 | $ | 0.41 | $ | 0.14 | ||||||||||
| Diluted | $ | 0.17 | $ | 0.06 | $ | 0.41 | $ | 0.14 | ||||||||||
| For the Three Months Ended March 31, |
For the Six Months Ended March 31, |
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| 2013 | 2012 | 2013 | 2012 | |||||||||||
| (dollars in thousands) | (dollars in thousands) | |||||||||||||
| CONSOLIDATED AVERAGE BALANCES: | ||||||||||||||
| Total assets | $ | 1,393,004 | $ | 1,096,608 | $ | 1,395,870 | $ | 1,094,182 | ||||||
| Total interest-earning assets | 1,300,283 | 1,042,812 | 1,302,189 | 1,039,992 | ||||||||||
| Total interest-bearing liabilities | 1,142,032 | 887,760 | 1,149,526 | 887,399 | ||||||||||
| Total stockholders' equity | 175,697 | 162,948 | 176,517 | 162,414 | ||||||||||
| PER COMMON SHARE DATA: | ||||||||||||||
| Average shares outstanding - basic | 11,763,581 | 10,840,604 | 11,932,539 | 10,829,027 | ||||||||||
| Average shares outstanding - diluted | 11,763,581 | 10,840,604 | 11,932,539 | 10,829,027 | ||||||||||
| Book value shares | 12,589,699 | 12,109,622 | 12,589,699 | 12,109,622 | ||||||||||
| Net interest rate spread | 2.97 | % | 2.36 | % | 3.06 | % | 2.34 | % | ||||||
| Net interest margin | 3.08 | % | 2.63 | % | 3.17 | % | 2.63 | % | ||||||