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 and
six months ended March 31, 2012. The Company reported net income of
$659,000, or $0.06 per diluted share, for the three months ended
March 31, 2012, as compared to net income of $1.2 million, or $0.10
per diluted share, for the corresponding 2011 period.
For the six months ended March 31, 2012, the Company reported
net income of $1.5 million, or $0.14 per diluted share, compared to
net income of $2.2 million, or $0.19 per diluted share, for the
corresponding 2011 period. The three-and six-month periods ended
March 31, 2012 include merger related expenses of $227,000 and
$376,000, respectively.
Gary S. Olson, President and CEO, commented: “Low interest rates
along with continuing soft economic conditions in our market
impacted our ability to find quality lending opportunities and also
put significant pressure on our net interest margin. The impact of
merger related costs further reduced our operating results for the
three-and six-month periods ended March 31, 2012.
“Our asset quality remained strong compared to peers, with
nonperforming assets comprising 1.51% of total assets. The
Company’s allowance for loan losses represented 1.08% of gross
loans and approximately 48% of non-performing assets. The Bank’s
capital position is exceptionally strong, with capital ratios far
exceeding regulatory standards for a well-capitalized institution.
With a Texas Ratio of approximately 10.0%, ESSA stands above most
peers with respect to asset quality.
“Our previously announced intent to acquire First Star Bancorp
is proceeding smoothly and there has been tremendous cooperation
between both sides. ESSA is well- positioned to pursue lending and
deposit opportunities in the Lehigh Valley, and to maintain our
position of market leadership in Monroe County. We are enthusiastic
about the prospect of creating a significantly larger institution
with an expanded customer base and access to new markets.”
Net Interest Income:
Net interest income decreased $571,000, or 7.8%, to $6.8 million
for the three months ended March 31, 2012, from $7.3 million for
the comparable period in 2011. The decrease was primarily
attributable to a decrease in the Company’s average net earning
assets of $6.0 million, and a decrease in the Company’s interest
rate spread to 2.36% for the three months ended March 31, 2012,
from 2.54% for the comparable period in 2011.
Net interest income decreased $993,000, or 6.9%, to $13.5
million for the six months ended March 31, 2012, from $14.5 million
for the comparable period in 2011. The decrease was primarily
attributable to a decrease in the Company’s average net earning
assets of $9.8 million, and a decrease in the Company’s interest
rate spread to 2.34% for the six months ended March 31, 2012 from
2.49% for the comparable period in 2011.
Provision for Loan Losses:
The provision for loan losses was unchanged at $650,000 for the
three months ended March 31, 2012, compared to the prior year’s
quarter. The provision for loan losses increased $20,000, or 1.8%,
to $1.2 million for the six months ended March 31, 2012, from the
comparable period in 2011. The allowance for loan losses was $8.1
million, or 1.08% of loans outstanding at March 31, 2012, compared
to $8.2 million, or 1.09% of loans outstanding at September 30,
2011.
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 provision for loan losses for the
three- and six-month periods ended March 31, 2012, and the
comparable 2011 periods were in response to this evaluation.
Noninterest Income:
Noninterest income increased $300,000, or 22.7%, to $1.6 million
for the three months ended March 31, 2012, from $1.3 million for
the comparable period in 2011. The primary reason for the increase
was an increase in insurance commissions of $195,000 during the
2012 period. As previously disclosed, the Company acquired its
insurance subsidiary during the third fiscal quarter of 2011.
Noninterest income increased $489,000, or 18.4%, to $3.1 million
for the six months ended March 31, 2012, from $2.7 million for the
comparable period in 2011. The primary reasons for the increase
were increases in insurance commissions of $386,000 and bank-owned
life insurance of $126,000. The Company purchased $7.0 million of
additional bank-owned life insurance during the second and third
fiscal quarters of 2011.
Noninterest Expense:
Noninterest expense increased $419,000, or 6.5%, to $6.9 million
for the three months ended March 31, 2012, from $6.5 million for
the comparable period in 2011. The increase was due primarily to
increases in the loss on foreclosed real estate of $134,000, merger
related costs of $227,000 and other operating expenses of $112,000.
These increases were offset, in part, by a decrease in advertising
costs of $116,000. The increase in the loss on foreclosed real
estate was due primarily to declining values of foreclosed real
estate held by the Company. The increase in other operating
expenses was due primarily to increases in loan production costs
related to increased volume. The decrease in advertising costs was
due primarily to fewer marketing campaigns.
Noninterest expense increased $443,000, or 3.4%, to $13.5
million for the six months ended March 31, 2012, from $13.1 million
for the comparable period in 2011. The increase was due primarily
to increases in merger related costs of $376,000 and amortization
of intangible assets related to the insurance consulting subsidiary
of $162,000. These increases were offset, in part, by decreases in
advertising costs of $216,000 and professional fees of
$105,000.
Balance Sheet:
Total assets increased $16.7 million, or 1.52%, to $1,114.2
million at March 31, 2012, compared to $1,097.5 million at
September 30, 2011. Increases in loans receivable and investment
securities available for sale were partially offset by a decrease
in interest bearing deposits with other institutions. Net loans
receivable increased $3.0 million. The increase in net loans
receivable included increases in residential loans of $6.7 million,
obligations of states and political subdivisions of $3.3 million,
commercial real estate loans of $62,000, construction loans of $1.2
million and other loans of $54,000 which were partially offset by
declines in commercial loans and home equity and home improvement
loans of $6.2 million and $2.2 million respectively. Investment
securities available for sale increased $32.2 million due primarily
to additional purchases of municipal securities and government
sponsored mortgage backed securities. Interest-bearing deposits
with other institutions decreased primarily due to the use of cash
for loan growth and investment securities purchases.
Total deposits increased $37.9 million, or 6.0%, to $675.9
million at March 31, 2012, from $637.9 million at September 30,
2011. The primary reason for the increase was an increase in
certificates of deposit accounts of $33.0 million including an
increase of $25.8 million in brokered certificates. This increase
was partially offset by decreases in NOW accounts of $1.0 million
and money market accounts of $4.3 million. Borrowed funds decreased
during the same time period by $25.5 million. The increase in
brokered deposits reflects the refinancing, at a lower cost, of
maturing borrowings.
Stockholders’ equity increased $351,000, or 0.2%, to $162.0
million at March 31, 2012, from $161.7 million at September 30,
2011, primarily as a result of net income, offset in part by an
increase in the Company’s accumulated other comprehensive loss. The
accumulated other comprehensive loss was $811,000 at March 31,
2012, compared to other comprehensive income of $586,000 at
September 30, 2011, primarily due to a decrease in the unrealized
gain, net of taxes on the Company’s investment securities available
for sale.
Asset Quality:
Nonperforming assets totaled $16.8 million, or 1.51%, of total
assets at March 31, 2012, compared to $13.9 million, or 1.26%, of
total assets at September 30, 2011. The increase was primarily due
to an increase of $3.6 million in nonperforming residential loans.
The number of nonperforming residential loans increased to 62 at
March 31, 2012, from 41 at September 30, 2011. The Company, in
response to these and other trends, made a provision for loan
losses of $650,000 for the three months ended March 31, 2012,
compared to a provision of $650,000 for the comparable three-month
period in 2011. The allowance for loan losses was $8.1 million, or
1.08%, of loans outstanding at March 31, 2012, compared to $8.2
million, or 1.09%, of loans outstanding at September 30, 2011.
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 17 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 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 SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31,
2012
September 30,
2011
(dollars in thousands) ASSETS Cash and due from banks $
6,432 $ 9,801 Interest-bearing deposits with other institutions
16,633 31,893 Total cash and
cash equivalents 23,065 41,694 Investment securities available for
sale 277,576 245,393 Loans receivable (net of allowance for loan
losses of $8,098 and $8,170) 741,617 738,619 Federal Home Loan Bank
stock 15,236 16,882 Premises and equipment 11,384 11,494 Bank-owned
life insurance 23,650 23,256 Foreclosed real estate 1,914 2,356
Intangible assets, net 1,663 1,825 Goodwill 40 40 Other assets
18,059 15,921 TOTAL ASSETS $
1,114,204 $ 1,097,480 LIABILITIES
Deposits $ 675,870 $ 637,924 Short-term borrowings 10,000 4,000
Other borrowings 252,910 284,410 Advances by borrowers for taxes
and insurance 5,209 1,381 Other liabilities 8,185
8,086 TOTAL LIABILITIES 952,174
935,801 STOCKHOLDERS’ EQUITY Preferred
stock - - Common stock 170 170 Additional paid in capital 167,831
166,758 Unallocated common stock held by the Employee Stock
Ownership Plan (11,212 ) (11,438 ) Retained earnings 67,664 67,215
Treasury stock, at cost (61,612 ) (61,612 ) Accumulated other
comprehensive (loss)/income (811 ) 586
TOTAL STOCKHOLDERS’ EQUITY 162,030 161,679
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $
1,114,204 $ 1,097,480
ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the Three Months
Ended March 31
For the Six Months
Ended March 31
2012 2011 2012 2011
(dollars in thousands) INTEREST INCOME Loans receivable,
Including fees $ 9,145 $ 9,795 $ 18,486 $ 19,639 Investment
securities: Taxable 1,628 2,016 3,266 3,938 Exempt from federal
income tax 55 75 103 153 Other investment income 6 1
8 1 Total interest income 10,834
11,887 21,863 23,731 INTEREST EXPENSE
Deposits 1,836 1,795 3,747 3,491 Short-term borrowings 6 23 11 45
Other borrowings 2,221 2,727 4,626
5,723 Total interest expense 4,063 4,545
8,384 9,259 NET INTEREST INCOME 6,771
7,342 13,479 14,472 Provision for loan losses 650 650
1,150 1,130 NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6,121 6,692 12,329
13,342 NONINTEREST INCOME Service fees on deposit
accounts 661 729 1,388 1,491 Services charges and fees on loans 200
145 384 355 Trust and investment fees 207 195 422 406 Gain on sale
of investments, net 147 115 147 115 Gain on sale of loans, net 8 -
8 3 Earnings on Bank-owned life insurance 196 131 394 268 Insurance
commissions 195 - 386 - Other 9 8 18 20
Total noninterest income 1,623 1,323
3,147 2,658 NONINTEREST EXPENSE Compensation and
employee benefits 3,980 3,933 7,916 7,813 Occupancy and equipment
776 796 1,532 1,573 Professional fees 403 420 744 849 Data
processing 507 481 989 930 Advertising 67 183 153 369 Federal
Deposit Insurance Corporation (FDIC) Premiums 167 222 329 406
Loss/(Gain) on foreclosed real estate 40 (94) 107 12 Merger related
costs 227 - 376 - Amortization of intangible assets 81 - 162 -
Other 626 514 1,228 1,141 Total
noninterest expense 6,874 6,455 13,536
13,093 Income before income taxes 870 1,560 1,940 2,907
Income taxes 211 345 395 680
NET INCOME $ 659 $ 1,215 $ 1,545 $ 2,227 Earnings per
share Basic $ 0.06 $ 0.10 $ 0.14 $ 0.19 Diluted 0.06 0.10 0.14 0.19
For the Three Months
Ended March 31,
For the Six Months
Ended March 31,
2012 2011
2012 2011 (dollars in thousands)
CONSOLIDATED AVERAGE BALANCES: Total assets $
1,096,608 $ 1,090,493 $ 1,094,182 $ 1,079,374 Total
interest-earning assets 1,042,812 1,043,835 1,039,992 1,032,583
Total interest-bearing liabilities 887,760 882,815 887,399 870,236
Total stockholders’ equity 162,948 167,227 162,414 169,217
PER COMMON SHARE DATA: Average shares outstanding - basic
10,840,603 11,676,190 10,829,026 11,772,750 Average shares
outstanding - diluted 10,840,603 11,685,880 10,829,026 11,779,023
Book value shares 12,109,622 12,819,971 12,109,622 12,819,971
Net interest rate spread 2.36% 2.54% 2.34% 2.49% Net
interest margin 2.63% 2.85% 2.60% 2.81%
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