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 months ended
December 31, 2009. The Company reported net income of $794,000, or
$0.06 per diluted share, for the three months ended December 31,
2009, as compared to net income of $1.8 million, or $0.13 per
diluted share, for the corresponding 2008 period. Net income of
$794,000 for the three months ending December 31, 2009, included a
pre-tax write-down of $1.2 million in the value of the Company’s
foreclosed real estate portfolio. The charge related to a single
property in the Bank’s foreclosed real estate portfolio, and was
made to reflect a more current appraisal. Net income for the three
months ended December 31, 2008, included a one time tax benefit of
$317,000.
“Overall, we continue to feel that our credit quality is strong,
our fundamental banking business is solid and our capital position
is outstanding,” commented Gary S. Olson, President and Chief
Executive Officer of the Company. “The Bank continues to lend and
meet the credit needs of our community. However, until the economic
recovery accelerates in our market area, we will continue to see
pressure in our delinquent and problem loan trends. We are taking
the actions necessary to stay ahead of these trends including
actively monitoring our loan portfolio, writing down our
foreclosed real estate and adding to our loan loss allowance.”
Net Interest Income:
Net interest income increased $289,000, or 4.1%, to $7.3 million
for the three months ended December 31, 2009, from $7.0 million for
the comparable period in 2008. The increase was primarily
attributable to an increase in the Company’s interest rate spread
to 2.45% for the three months ended December 31, 2009, from 2.28%
for the comparable period in 2008, offset in part by a decrease in
the Company’s average net earning assets of $7.2 million.
Provision for Loan Losses:
The provision for loan losses increased $125,000 or 33.3%, to
$500,000 for the three months ended December 31, 2009, from
$375,000 for the comparable period in 2008.
In evaluating the level of the allowance for loan losses,
management considers historical loss experience, the types of loans
and the amount of loans in the loan portfolio, adverse situations
that may affect a borrower’s ability to repay, the estimated value
of any underlying collateral, peer group information, and
prevailing economic conditions. This evaluation is inherently
subjective as it requires estimates that are subject to
interpretation and revision as more information becomes available
or as future events occur. The changes in the provision for loan
losses for the three-month period ended December 31, 2009, as
compared to the comparable 2008 period was in response to this
evaluation.
Noninterest Income:
Noninterest income increased $131,000, or 9.9%, to $1.5 million
for the three months ended December 31, 2009, from $1.3 million for
the comparable period in 2008. The primary reason for the increase
was the gains on the sale of loans of $155,000 during the 2009
period. The Company sold $5.7 million of long-term fixed-rate
residential loans during the three months ended December 31, 2009,
as part of an overall interest rate risk management strategy.
Noninterest Expense:
Noninterest expense increased $1.5 million, or 25.4%, to $7.2
million for the three months ended December 31, 2009, from $5.8
million for the comparable period in 2008. The primary reason for
the increase was the write-down of foreclosed real estate of $1.2
million in the 2009 period, along with increases in FDIC insurance
premiums of $330,000 and compensation and employee benefits of
$152,000. These increases were offset, in part, by decreases in
occupancy and equipment expense of $151,000 and advertising expense
of $105,000.
Balance Sheet:
Total assets decreased $8.2 million, or 0.8%, to $1,034.0
million at December 31, 2009, compared to $1,042.1 million at
September 30, 2009. The primary reasons for the decrease in assets
were decreases in certificates of deposit of $1.7 million, net
loans receivable of $3.7 million, investment securities available
for sale of $2.6 million, and investment securities held to
maturity of $1.0 million. The decrease in net loans receivable
included a decrease in residential loans of $6.4 million, which was
partially offset by increases in commercial real estate loans of
$2.1 million and commercial loans of $853,000. The Company sold
$5.7 million of long-term fixed rate residential loans during the
three months ended December 31, 2009, as part of an overall
interest rate risk management strategy.
Total deposits decreased $8.7 million at December 31, 2009,
compared to September 30, 2009, primarily as a result of a decrease
in certificates of deposit accounts of $14.5 million which included
a decrease of $3.4 million in brokered certificates of deposit.
These decreases were partially offset by an increase in noninterest
bearing demand accounts of $2.0 million, NOW accounts of $2.6
million and savings and club accounts of $2.0 million. Borrowed
funds increased during the same time period by $3.1 million.
Stockholders’ equity decreased $3.3 million to $182.2 million at
December 31, 2009, compared to $185.5 million at September 30,
2009, primarily as a result of a previously announced stock
repurchase program the Company began in June 2008. In June, 2009,
the Company announced that it had completed its first stock
repurchase program having purchased 2,547,135 shares at a weighted
average cost of $13.14. It was also announced that the Company’s
Board of Directors authorized a second stock repurchase program to
purchase up to an additional 10% of its outstanding shares. As of
December 31, 2009, the Company had purchased an additional 395,300
shares at a weighted average cost of $12.78 per share under the
second stock repurchase program including the repurchase of 283,300
shares at an average cost of $12.68 during the three months ended
December 31, 2009.
Asset Quality:
Nonperforming assets totaled $9.9 million, or 0.96%, of total
assets at December 31, 2009, compared to $7.7 million, or 0.74%, of
total assets at September 30, 2009. The increase was due to
increases of $1.1 million in nonperforming residential loans and
$2.1 million in commercial loans offset, in part, by a decrease of
$834,000 in foreclosed real estate. Commercial nonperforming loans
increased primarily as a result of the addition of two commercial
real estate relationships. Foreclosed real estate declined
primarily as a result of the write-down of $1.2 million in the
value of one property. The Company, in response to these and other
trends, made a provision for loan losses of $500,000 for the three
months ended December 31, 2009, compared to a provision of $375,000
for the comparable three-month period in 2008. The allowance for
loan losses was $6.2 million, or 0.84%, of loans outstanding at
December 31, 2009, compared to $5.8 million, or 0.79%, of loans
outstanding at September 30, 2008.
ESSA Bank & Trust, a wholly-owned subsidiary of ESSA
Bancorp, Inc., has total assets of over $1.0 billion 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
SUBSIDIARYCONSOLIDATED BALANCE SHEET(UNAUDITED)
December 31,2009
September
30,2009
(dollars in thousands) ASSETS Cash and due from banks $
7,245 $ 7,103 Interest-bearing deposits with other institutions
10,827 11,490 Total cash and cash
equivalents 18,072 18,593 Certificates of deposit 3,684 5,355
Investment securities available for sale 214,937 217,566 Investment
securities held to maturity (fair value of $5,857 and $6,923) 5,679
6,709 Loans receivable (net of allowance for loan losses of $6,204
and $5,815) 729,861 733,580 Federal Home Loan Bank stock 20,727
20,727 Premises and equipment 11,246 10,620 Bank-owned life
insurance 15,211 15,072 Foreclosed real estate 1,745 2,579 Other
assets 12,795 11,318 TOTAL ASSETS $
1,033,957 $ 1,042,119 LIABILITIES Deposits $
400,168 $ 408,855 Short-term borrowings 61,013 48,091 Other
borrowings 380,707 390,507 Advances by borrowers for taxes and
insurance 3,004 1,377 Other liabilities 6,834
7,783 TOTAL LIABILITIES 851,726 856,613
Commitment and contingencies — — STOCKHOLDERS’ EQUITY
Preferred Stock — — Common stock 170 170 Additional paid in capital
162,809 162,243 Unallocated common stock held by the Employee Stock
Ownership Plan (12,226 ) (12,339 ) Retained earnings 62,464 62,337
Treasury stock, at cost (31,287 ) (27,695 ) Accumulated other
comprehensive income 301 790 TOTAL
STOCKHOLDERS’ EQUITY 182,231 185,506
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,033,957 $
1,042,119
ESSA BANCORP, INC. AND
SUBSIDIARYCONSOLIDATED STATEMENT OF INCOME(UNAUDITED)
For the Three
MonthsEnded December 31,
2009 2008 (dollars in thousands)
INTEREST INCOME Loans receivable
$
10,341
$
10,601
Investment securities: Taxable 2,237 2,453 Exempt from federal
income tax 83 83 Other investment income 1 119
Total interest income 12,662 13,256
INTEREST EXPENSE Deposits 1,406 1,971 Short-term
borrowings 49 155 Other borrowings 3,924 4,136
Total interest expense 5,379 6,262
NET INTEREST INCOME 7,283 6,994 Provision for loan
losses 500 375 NET INTEREST
INCOME AFTER PROVISION FOR LOAN LOSSES 6,783
6,619 NONINTEREST INCOME Service fees on deposit
accounts 827 840 Services charges and fees on loans 101 121 Trust
and investment fees 220 209 Gain on sale of loans, net 155 -
Earnings on Bank-owned life insurance 140 139 Other 13
16 Total noninterest income 1,456
1,325 NONINTEREST EXPENSE
Compensation and employee benefits 3,736 3,584 Occupancy and
equipment 559 710 Professional fees 377 335 Data processing 450 469
Advertising 98 203 FDIC premiums 358 28 Loss on foreclosed real
estate 1,200 - Other 453 438 Total
noninterest expense
7,231
5,767 Income before income taxes 1,008 2,177
Income taxes 214 347 NET INCOME
$ 794 $ 1,830 EARNINGS PER SHARE Basic $ 0.06
$ 0.13 Diluted 0.06 0.13
ESSA BANCORP, INC. AND
SUBSIDIARYOTHER FINANCIAL DATA(UNAUDITED)
For the Three
MonthsEnded December 31,
For the Year endedEnded
December 31,
2009 2008 2009 2008 (dollars in
thousands, except per share data) CONSOLIDATED AVERAGE
BALANCES: Total assets $ 1,031,067 $ 1,002,374 $ 1,031,067 $
1,002,374 Total interest-earning assets 989,470 959,617 989,470
959,617 Total interest-bearing liabilities 809,204 772,157 809,204
772,157
Total stockholders’ equity
185,779 197,136 185,779 197,136 PER COMMON SHARE DATA:
Average shares outstanding - basic 13,076,894 14,579,030 13,076,894
14,579,030 Average shares outstanding - diluted 13,076,894
14,602,412 13,076,894 14,602,412 Book value share computation:
Issued 16,980,900 16,980,900 16,980,900 16,980,900 Treasury shares
(2,857,111 ) (1,462,500 ) (2,857,111 )
(1,462,500 ) Shares outstanding 14,123,789 15,518,400 14,123,789
15,518,400 Unvested restricted stock awards 471,531
589,414 471,531 589,414
Book value shares 14,595,320 16,107,814 14,595,320 16,107,814
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