ESSA Bancorp, Inc. (Nasdaq:ESSA), the holding company for ESSA Bank
& Trust, a $1.56 billion asset financial institution providing
full service retail and commercial banking, financial and
investment services, today announced results for the fiscal three
and nine month periods ended June 30, 2014.
The Company reported net income of $2.6 million, or $0.24 per
diluted share, for the three months ended June 30, 2014, compared
with net income of $1.9 million, or $0.16 per diluted share, for
the three months ended June 30, 2013.
For the nine months ended June 30, 2014, the Company reported
net income of $6.1 million, or $0.56 per diluted share, compared
with net income of $6.8 million, or $0.58 per diluted share, for
the corresponding 2013 period. Results for the three and nine month
periods ended June 30, 2014 reflect earnings contribution from
Franklin Security Bancorp, acquired in April, 2014, a reduced
provision for loan losses, declines in the accretion of the fair
market adjustments that resulted from the Company's acquisition of
First Star Bancorp, along with lower gains from the sales of
investments and loans compared to the three and nine month periods
ended June 30, 2013.
The Company's year-to-date 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, expanding the Company's presence in the
Wilkes-Barre and Scranton, Pennsylvania markets, adding
approximately $219.5 million in total assets, $155.5 million in
loans and $163.1 million in deposits.
Gary S. Olson, President and CEO, commented: "The positive
contribution of the earnings-accretive Franklin acquisition was
immediately evident in our net income, total assets, loan and
deposit portfolios. Further, the acquisition added clients in
commercial banking, and contributions from indirect automobile
lending, which represents a new line of business and opportunity
for ESSA."
"As we anticipated, the acquisition did not have a negative
impact on the Company's overall asset quality, demonstrated in part
by a nonperforming assets to total assets ratio of 1.68% in our
fiscal third quarter, compared with 1.89% at the start of our
fiscal year, before the acquisition closed. We have also carefully
analyzed the Company's sensitivity to interest rate risk, and we
have maintained a stable risk profile when comparing pre- and
post-acquisition levels.
"We have been very pleased with the earnings and asset
contributions made by our Franklin and First Star Bancorp
acquisitions, which we believe have demonstrated our ability to
continue transitioning to a larger and more geographically diverse
organization. While acquisitions and their related expenses add a
certain level of distraction to the financial statements, we feel
the Company's core earnings clearly reflect the benefits we have
derived from our acquisitions."
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 $7.3 million in the fiscal
year-to-date ended June 30, 2014 compared with $5.5 million in the
fiscal year-to-date ended June 30, 2013. In fiscal third quarter
2014, core earnings were $3.3 million compared with $1.7 million in
fiscal third quarter 2013.
"We believe our core strategy to enhance shareholder value
through organic and acquisitive growth is adding value for the
Company and its shareholders," Olson explained. "Key measures of
shareholder value resulting from the Company's operating
performance have increased, which we have enhanced through stock
repurchases and cash dividends. Throughout this period of
significant activity and growth, we have leveraged our capital to
generate earnings, while maintaining a capital position exceeding
regulatory standards for a well-capitalized institution."
The Company's total stockholders' equity increased to $171.3
million at June 30, 2014 compared to $166.4 million at the
beginning of fiscal 2014, and the Company's tangible book value
rose to $13.40 per share at June 30, 2014, up from $12.57 a year
ago. 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 June 30, 2014, the Company
repurchased 61,900 shares at an average cost of $10.53 per share,
and has repurchased 121,125 shares during the fiscal year-to-date
2014 at an average cost of $10.92 per share.
Income Statement Review
Net interest income increased $1.2 million, or 12.67%, to $11.1
million for the three months ended June 30, 2014, from $9.8 million
for the comparable period in 2013, reflecting increased interest
from commercial, consumer, and retained residential mortgage loans
receivable and an increase in the Company's interest rate spread to
3.02% from 2.95% compared with the prior year's fiscal third
quarter. These increases were partially offset by a decline in the
Company's average net earning assets of $8.7 million.
For the nine months of fiscal 2014, net interest income
decreased 3.04% to $29.5 million from $30.5 million for the
comparable period in 2013. The decline was primarily attributable
to a decrease in the Company's interest rate spread to 2.91% for
the 2014 period from 3.03% for the comparable period in 2013, the
previously noted decline in the accretion of fair market value
adjustments, and a decrease in the Company's average net earning
assets of $7.8 million.
The net interest margin was 3.09% for the three months ended
June 30, 2014 compared to a net interest margin of 3.06% for the
comparable period in 2013. The net interest margin was 2.99% for
the nine months ended June 30, 2014 compared to a net interest
margin of 3.14% for the comparable period in 2013. The Company's
net interest rate spread was 2.79% and the net interest margin was
2.89% for the quarter ended March 31, 2014.
The Company's provision for loan losses declined by 54.55% to
$500,000 for the three months ended June 30, 2014, compared to $1.1
million for the three months ended June 30, 2013. Net loan
charge-offs in fiscal third quarter 2014 were $326,000 compared
with $588,000 in fiscal third quarter 2013. The provision for loan
losses decreased to $2.0 million for the nine months ended June 30,
2014, compared with $3.0 million for the nine months ended June 30,
2013. Net loan chargeoffs for the year-to-date 2014 period were
$1.2 million compared to chargeoffs of $2.1 million for the
comparable 2013 period, a 42.86% decrease.
Noninterest income increased 16.67% to $2.1 million for the
three months ended June 30, 2014, compared with the three months
ended June 30, 2013, reflecting increased service fees on deposit
accounts, growth in trust and investment fees, and growth in other
income. For the nine months ended June 30, 2014, noninterest income
declined to $5.5 million compared with $6.3 million for the nine
months of 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 decline in gain on sale of investments, lower
service fees on loan accounts, and no gain on loan sales during the
nine months ended June 30, 2014, compared with a $426,000 gain on
loan sales in the nine months of 2013. In fiscal 2014, the Company
has primarily retained originated residential mortgage loans rather
than selling them in the secondary market, to capture the benefits
of generating interest income from loans approved under what
management believes is high credit standards and a strong
underwriting process.
Noninterest expense increased 11.54% to $9.1 million for the
three months ended June 30, 2014 compared to $8.2 million for the
comparable period in 2013, primarily reflecting expenses related to
the April 4, 2014 merger with Franklin Security Bancorp.
Noninterest expense increased 1.14% to $24.7 million for the
nine month period ended June 30, 2014 compared to $24.4 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 increase in data processing expense of $271,000. Gain on
foreclosed real estate decreased $382,000. These increases were
partially offset by lower compensation and employee benefits of
$737,000 and other expenses of $190,000. Compensation and employee
benefits declined primarily due to decreases in employee incentive
and pension expenses.
Balance Sheet, Asset Quality and Capital
Adequacy
Total assets increased $186.9 million, or 13.62%, to $1.56
billion at June 30, 2014, compared to $1.37 billion at September
30, 2013 due primarily to the April 4, 2014 merger with
Franklin.
Loans receivable, net of an $8.8 million allowance for loan
losses, were $1.05 billion at June 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
$83.2 million of indirect auto loans and $58.7 million of
commercial loans to its portfolio at June 30, 2014 compared with
September 30, 2013, primarily reflecting loans added in the
Franklin acquisition.
Total deposits increased $102.0 million, or 9.80%, to $1.14
billion at June 30, 2014, from $1.04 billion at September 30, 2013.
During the same period, borrowings increased $72.0 million. Olson
explained that in fiscal 2014, FHLB borrowings have been
attractively priced compared to brokered certificates. A highlight
of the deposit growth was a 33.35% increase in non-interest bearing
checking accounts, primarily reflecting new accounts added as a
result of the Franklin acquisition. Nonperforming assets totaled
$26.2 million, or 1.68%, of total assets at June 30, 2014, compared
with $26.0 million, or 1.89%, of total assets at September 30,
2013. The allowance for loan losses was $8.8 million, or 0.83%, of
loans outstanding at June 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. No allowance was provided for these loans at June 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 9.85%.
The Company's return on average assets and return on average
equity, respectively, were 0.68% and 5.95% for the three months
ended June 30, 2014 compared with 0.54% and 4.36% for the
corresponding period of fiscal 2013. The Company's return on
average assets and return on average equity, respectively, were
0.58% and 4.78% for the nine months ended June 30, 2014 compared to
0.65% and 5.19% for the comparable period in fiscal 2013.
Olson concluded: "We believe the Company has demonstrated
success integrating acquisitions and maximizing the benefits from
growing our franchise. We have also been able to maintain a strong
capital position throughout this period and have built shareholder
value in the process. Difficult economic conditions in our served
markets present challenges. We are looking to meet those challenges
head-on by competing aggressively for lending business on all
fronts, expanding our geographical footprint, and offering a wide
range of what we feel are best-of-class banking capabilities to
build relationships with retail customers and businesses."
About The Company
ESSA Bancorp (Nasdaq:ESSA), headquartered in Stroudsburg, PA, is
the holding company for ESSA Bank & Trust, a $1.56 billion
asset institution with 27 banking offices serving markets in
Northeastern Pennsylvania, including Monroe County and Lehigh and
Northampton Counties in the Lehigh Valley. The Bank provides a full
range of retail and commercial banking services, asset management,
investment advisory, insurance and employee benefits
consulting.
ESSA Bank & Trust, a wholly-owned subsidiary of ESSA
Bancorp, Inc., has total assets of more than $1.55 billion and is
the leading service-oriented financial institution headquartered in
Stroudsburg, Pennsylvania. ESSA Bank & Trust maintains its
corporate headquarters in downtown Stroudsburg, Pennsylvania and
has 27 community offices throughout the Greater Pocono, Lehigh
Valley, Scranton and Wilkes-Barre markets 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
Select 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.
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) |
|
|
June 30,
2014 |
September 30,
2013 |
|
(dollars in
thousands) |
ASSETS |
|
|
Cash and due from
banks |
$ 18,600 |
$ 22,393 |
Interest-bearing deposits with
other institutions |
4,880 |
4,255 |
|
|
|
Total cash and cash
equivalents |
23,480 |
26,648 |
Certificates of
deposit |
1,767 |
1,767 |
Investment securities available
for sale |
375,024 |
315,622 |
Loans receivable (net of
allowance for loan losses of $8,836 and $8,064) |
1,050,125 |
928,230 |
Regulatory stock, at
cost |
12,757 |
9,415 |
Premises and equipment,
net |
17,121 |
15,747 |
Bank-owned life
insurance |
29,484 |
28,797 |
Foreclosed real
estate |
2,967 |
2,111 |
Intangible assets,
net |
2,599 |
2,466 |
Goodwill |
10,259 |
8,817 |
Deferred income
taxes |
10,971 |
11,183 |
Other assets |
22,624 |
21,512 |
|
|
|
TOTAL ASSETS |
$ 1,559,178 |
$ 1,372,315 |
|
|
|
|
|
|
LIABILITIES |
|
|
Deposits |
$ 1,143,095 |
$ 1,041,059 |
Short-term
borrowings |
78,749 |
23,000 |
Other borrowings |
145,550 |
129,260 |
Advances by borrowers for taxes
and insurance |
11,924 |
4,962 |
Other liabilities |
8,563 |
7,588 |
|
|
|
TOTAL LIABILITIES |
1,387,881 |
1,205,869 |
|
|
|
|
|
|
STOCKHOLDERS' EQUITY |
|
|
Common stock |
181 |
181 |
Additional paid in
capital |
182,642 |
182,440 |
Unallocated common stock held
by the Employee Stock Ownership Plan |
(10,193) |
(10,532) |
Retained earnings |
75,781 |
71,709 |
Treasury stock, at
cost |
(77,445) |
(76,117) |
Accumulated other comprehensive
income (loss) |
331 |
(1,235) |
|
|
|
TOTAL STOCKHOLDERS'
EQUITY |
171,297 |
166,446 |
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY |
$ 1,559,178 |
$ 1,372,315 |
|
|
|
|
|
ESSA BANCORP, INC. AND
SUBSIDIARY |
CONSOLIDATED STATEMENT OF
INCOME |
(UNAUDITED) |
|
|
|
|
For the Three Months Ended June
30 |
For the Nine Months Ended June
30 |
|
2014 |
2013 |
2014 |
2013 |
|
(dollars in
thousands) |
|
|
INTEREST INCOME |
|
|
|
|
Loans receivable |
$ 11,807 |
$ 11,032 |
$ 32,173 |
$ 34,310 |
Investment securities: |
|
|
|
|
Taxable |
1,632 |
1,370 |
4,682 |
4,558 |
Exempt from federal income
tax |
173 |
73 |
318 |
200 |
Other investment
income |
173 |
16 |
317 |
63 |
Total interest
income |
13,785 |
12,491 |
37,490 |
39,131 |
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE |
|
|
|
|
Deposits |
2,015 |
1,757 |
5,909 |
5,576 |
Short-term borrowings |
54 |
27 |
104 |
109 |
Other borrowings |
619 |
858 |
1,951 |
2,994 |
Total interest
expense |
2,688 |
2,642 |
7,964 |
8,679 |
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME |
11,097 |
9,849 |
29,526 |
30,452 |
Provision for loan
losses |
500 |
1,100 |
2,000 |
2,950 |
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES |
10,597 |
8,749 |
27,526 |
27,502 |
|
|
|
|
|
NONINTEREST INCOME |
|
|
|
|
Service fees on deposit
accounts |
828 |
797 |
2,342 |
2,315 |
Services charges and fees on
loans |
283 |
277 |
572 |
774 |
Trust and investment
fees |
260 |
230 |
701 |
641 |
Gain(loss) on sale of
investments, net |
(10) |
11 |
226 |
749 |
Gain on sale of loans,
net |
- |
11 |
- |
426 |
Earnings on Bank-owned life
insurance |
234 |
235 |
687 |
709 |
Insurance
commissions |
205 |
231 |
625 |
638 |
Other |
300 |
8 |
326 |
32 |
Total noninterest
income |
2,100 |
1,800 |
5,479 |
6,284 |
|
|
|
|
|
NONINTEREST EXPENSE |
|
|
|
|
Compensation and employee
benefits |
4,912 |
4,690 |
13,577 |
14,314 |
Occupancy and
equipment |
1,051 |
956 |
3,034 |
2,935 |
Professional fees |
441 |
549 |
1,348 |
1,453 |
Data processing |
977 |
687 |
2,426 |
2,155 |
Advertising |
243 |
170 |
463 |
425 |
Federal Deposit Insurance
Corporation Premiums |
266 |
261 |
730 |
739 |
Gain on foreclosed real
estate |
(65) |
(100) |
(116) |
(498) |
Merger related costs |
176 |
- |
522 |
- |
Amortization of intangible
assets |
282 |
250 |
756 |
749 |
Other |
812 |
691 |
1,987 |
2,177 |
Total noninterest
expense |
9,095 |
8,154 |
24,727 |
24,449 |
|
|
|
|
|
Income before income taxes |
3,602 |
2,395 |
8,278 |
9,337 |
Income taxes |
976 |
519 |
2,146 |
2,542 |
|
|
|
|
|
|
|
|
|
|
Net Income |
$ 2,626 |
$ 1,876 |
$ 6,132 |
$ 6,795 |
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
Basic |
$ 0.24 |
$ 0.16 |
$ 0.56 |
$ 0.58 |
Diluted |
$ 0.24 |
$ 0.16 |
$ 0.56 |
$ 0.58 |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June
30, |
For the Nine Months Ended June
30, |
|
2014 |
2013 |
2014 |
2013 |
|
(dollars in
thousands) |
(dollars in
thousands) |
CONSOLIDATED AVERAGE BALANCES: |
|
|
|
|
Total assets |
$ 1,552,943 |
$ 1,384,932 |
$ 1,423,198 |
$ 1,392,223 |
Total interest-earning
assets |
1,442,235 |
1,291,018 |
1,321,142 |
1,298,466 |
Total interest-bearing
liabilities |
1,290,266 |
1,130,375 |
1,173,645 |
1,143,141 |
Total stockholders' equity |
176,586 |
172,101 |
171,084 |
175,045 |
|
|
|
|
|
PER COMMON SHARE DATA: |
|
|
|
|
Average shares outstanding -
basic |
10,837,591 |
11,409,791 |
10,864,361 |
11,764,901 |
Average shares outstanding -
diluted |
10,837,591 |
11,409,791 |
10,864,361 |
11,764,901 |
Book value shares |
11,823,878 |
12,215,811 |
11,823,878 |
12,215,811 |
|
|
|
|
|
Net interest rate spread |
3.02% |
2.95% |
2.91% |
3.03% |
Net interest margin |
3.09% |
3.06% |
2.99% |
3.14% |
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES: |
For the Three Months Ended June
30, |
For the Nine Months Ended June
30, |
|
2014 |
2013 |
2014 |
2013 |
|
(dollars in
thousands) |
(dollars in
thousands) |
|
|
|
|
|
Income before income taxes |
$ 3,602 |
$ 2,395 |
$ 8,278 |
$ 9,337 |
Deduct: accretion of fair
market value adjustments from acquisitions |
462 |
653 |
1,315 |
2,705 |
Deduct gains/add losses from
sales of loans and investments |
(10) |
22 |
226 |
1,175 |
Add: Merger related costs |
176 |
- |
522 |
- |
|
|
|
|
|
Pre-tax core earnings: |
$ 3,326 |
$ 1,720 |
$ 7,259 |
$ 5,457 |
|
|
|
|
|
CONTACT: Gary S. Olson, President & CEO
200 Palmer Street
Stroudsburg, Pennsylvania 18360
(570) 421-0531
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