ESSA Bancorp, Inc. (the “Company”) (NASDAQ:ESSA) today reported net
income of $1.6 million, or $0.15 per diluted share, for the quarter
ended March 31, 2017, compared with net income of $2.1 million, or
$0.20 per diluted share, for the same quarter last year. For the
six months ended March 31, 2017, the Company reported net income of
$3.6 million or $0.34 per diluted share compared with $4.1 million
or $0.39 per diluted share for the six months ended March 31, 2016.
The Company is the holding company for ESSA Bank
& Trust (the “Bank”), a $1.8 billion asset institution, which
provides full service retail and commercial banking, financial, and
investment services from 26 locations in eastern Pennsylvania,
including the Poconos, Lehigh Valley, Scranton/Wilkes-Barre and
suburban Philadelphia markets.
SECOND QUARTER, FIRST HALF 2017
HIGHLIGHTS
- For the six months of 2017, total interest income was $29.03
million compared with $29.00 million for the six months of 2016,
reflecting a decline in income contributions from loans
receivable which was more that offset by increased investment
income.
- New Lehigh Valley and Philadelphia regional offices opened in
first half 2017.
- Asset quality remained strong, with non-performing assets of
$21.2 million, or 1.20% of total assets, at March 31, 2017 compared
to $22.0 million, or 1.24% of total assets at September 30,
2016.
- Lower-cost core deposits (non-interest and interest bearing
demand accounts, money market and savings) as a percentage of total
deposits were 56% of total deposits at March 31, 2017 compared with
50% a year earlier.
- Total stockholders’ equity increased to $178.8 million at March
31, 2017 from $176.3 million at September 30, 2016 and $174.6
million at March 31, 2016. Tangible book value per share at March
31, 2017 increased to $14.07, compared with $14.05 at September 30,
2016, and $13.89 at March 31, 2016.
- Retained earnings demonstrated continued growth, growing to
$89.3 million at March 31, 2017, compared to $87.6 million at
September 30, 2016 and $85.9 million at March 31, 2016.
- The Company paid a quarterly cash dividend of $0.09 per share
on March 31, 2017, its 36th consecutive quarterly cash dividend to
shareholders.
Gary S. Olson, President and CEO, commented: “We
continued to make headway in building our commercial lending
business, growing the ESSA team and expanding our commercial
banking capabilities while doing a good job of managing operating
expenses, maintaining solid asset quality, and building shareholder
value.
"We have significantly more resources than a year
ago, yet noninterest expense was lower in quarter-over-quarter
comparison, and essentially flat from first half 2016 to first half
2017. Our net income in the second quarter and first half reflected
the impact of interest rate hikes that increased interest expense,
while there continued to be a great deal of pricing pressure on
lending.
"Commercial real estate and construction lending
grew, and we had relatively stable year-over-year activity in
municipal and indirect auto lending which were positives for us.
Following a fiscal 2016 in which we closed a record number of
loans, the first half slowing of commercial & industrial
lending was disappointing. We believe this reflected, in part, a
‘wait and see’ attitude about external economic factors such as tax
reform, interest rates, and the overall outlook for the
economy.
"We continue to build the small business lending
teams in all of our markets to more effectively compete for a
larger share of the business that is available. Additional
marketing expenditures, a larger and very experienced commercial
banking team, new facilities and enhanced products and business
banking services are supporting our transformation from a
retail-focused franchise to a commercial banking-focused
organization.”
Quarterly, First Half 2017 Income Statement
Review
Total interest income was $14.4 million for the
three months ended March 31, 2017, down from $15.2 million for the
three months ended March 31, 2016. Interest income from loans
declined to $11.8 million in fiscal second quarter 2017, compared
to $12.8 million a year earlier. Interest expense increased
$200,000 for the quarter ended March 31, 2017 compared to the
comparable period in 2016, partially reflecting a larger base of
deposits and increasing short-term interest rates. Total interest
income for the six months ended March 31, 2017 increased $55,000 to
$29.0 million compared to the comparable period in 2016.
Total interest expense increased $495,000 to $6.1 million for the
six months ended March 31, 2017 compared to the same period in
2016.
Net interest income decreased $980,000, or 8.0%, to
$11.3 million for the three months ended March 31, 2017, from $12.3
million for the comparable period in 2016. Net interest
income for the six months ended March 31, 2017 declined $440,000 to
$22.9 million at March 31, 2017 from $23.4 million in the prior
comparable period.
The Company’s provision for loan losses increased
to $750,000 for the three months ended March 31, 2017, compared
with $600,000 for the three months ended March 31, 2016. The
Company’s provision for loan losses increased to $1.5 million for
the six months ended March 31, 2017, compared with $1.2 million for
the six months ended March 31, 2016. These increases reflected
additional provisioning related to increased loan charge-offs.
The net interest margin for the second quarter of
2017 was 2.80%, which was unchanged from the previous quarter, and
compares to 3.00% for the second quarter of fiscal 2016. While the
Company continues to address margin compression, it has been
successful in maintaining relative margin stability in the past
several quarters. The net interest margin for the six months ended
March 31, 2017 was 2.80% compared to 2.93% for the six months
ended March 31, 2016.
Noninterest income decreased $493,000 or 21.7%, to
$1.8 million for the three months ended March 31, 2017, compared
with $2.3 million for the three months ended March 31, 2016. The
decrease in fiscal second quarter 2017 primarily reflected a
decreased gain on sale of investments of $365,000.
Noninterest income decreased $453,000 to $3.6
million for the six months ended March 31, 2017, compared with $4.1
million for the six months ended March 31, 2016. This
decrease was primarily due to a decrease in gain on sale of
investments of $368,000 in the fiscal 2017 year-to-date period
compared to the 2016 year-to-date period.
Noninterest expense decreased $602,000 or 5.4%, to
$10.5 million for the three months ended March 31, 2017 compared
with $11.1 million for the comparable period in 2016. Period over
period decreases in several expense categories are due primarily to
management's continued efforts to increase efficiencies and reduce
costs. Noninterest expense increased $14,000 to $20.9 million for
the six months ended March 31, 2017 compared with the comparable
period in 2016.
The Company’s effective tax rates declined for both
the three and six month periods ended March 31, 2017 compared to
the same periods in 2016. The declines were due primarily to
the previously disclosed adoption, by the Company, of ASU 2016-09
during the first fiscal quarter of 2017. The adoption resulted in
the recognition of all excess tax benefits for share-based payment
awards being recognized in income taxes. Previously, such tax
benefits were recognized in additional paid in capital.
Balance Sheet, Asset Quality and Capital
Adequacy Review
Total assets declined $13.8 million to $1.76
billion at March 31, 2017, from $1.77 billion at September 30,
2016, primarily reflecting declines in total cash and cash
equivalents and loans receivable, which were partially offset by
increased investment securities available for sale.
Total net loans declined $10.7 million at March 31,
2017, to $1.21 billion, compared to $1.22 billion at September 30,
2016. The primary impact was from the continuing decline of the
Company’s residential mortgage loan portfolio, which reflects
ongoing soft residential real estate markets in the Company’s
served markets. Commercial real estate, construction and municipal
loans increased from September 30, 2016. Consumer loans and
indirect auto loans declined from September 30, 2016.
Total deposits increased $23.6 million, or 1.9%, to
$1.24 billion at March 31, 2017, from $1.21 billion at September
30, 2016. During the same period, borrowings decreased $39.9
million. Core deposits were $691.3 million, or 56% of total
deposits at March 31, 2017, compared with $605.4 million or 50% of
total deposits at March 31, 2016.
Asset quality remained strong. Nonperforming assets
totaled $21.2 million, or 1.20% of total assets, at March 31, 2017,
compared to $25.0 million, or 1.42% of total assets, at March 31,
2016 and $22.0 million, or 1.24% of total assets at September 30,
2016. The allowance for loan losses was $9.4 million, or 0.77% of
loans outstanding, at March 31, 2017, compared to $9.1 million, or
0.74% of loans outstanding at September 30, 2016.
For the fiscal second quarter of 2017, the
Company’s return on average assets and return on average equity
were 0.38% and 3.80%, compared with 0.49% and 4.92%, respectively,
in the corresponding period of fiscal 2016. For the six
months ended March 31, 2017, the Company’s return on average assets
and return on average equity were 0.41% and 4.09%, compared with
0.48% and 4.72%, respectively, in the corresponding period of
fiscal 2016.
The Bank continued to demonstrate financial
strength, with a Tier 1 leverage ratio of 9.06%, exceeding
regulatory standards for a well-capitalized institution. The
Company maintained a tangible equity to total assets ratio of
8.83%.
Total stockholders’ equity increased $2.4 million
to $178.8 million at March 31, 2017, from $176.3 million at
September 30, 2016. Total stockholders’ equity was also up
year-over-year. Tangible book value per share at March 31, 2017
increased to $14.07, compared with $14.05 at September 30, 2016,
and $13.89 at March 31, 2016.
Olson concluded: “We were pleased that our results
reflected meaningful increases in the Company’s deposits and in the
value to shareholders, including total stockholders’ equity,
retained earnings, and tangible book value per share. We feel
confident our team can make the most of every opportunity
available, and we will certainly maintain our strong commitment to
credit and risk management and to building shareholder value.”
About the Company: ESSA Bancorp,
Inc. is the holding company for its wholly-owned subsidiary, ESSA
Bank & Trust, which was formed in 1916. Headquartered in
Stroudsburg, Pennsylvania, the Company has total assets of $1.8
billion and has 26 community offices throughout the Greater Pocono,
Lehigh Valley, Scranton/Wilkes-Barre, and suburban
Philadelphia. ESSA Bank & Trust offers a full range of
commercial and retail financial services, 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, and
the Risk Factors disclosed in our annual and quarterly reports.
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, 2017 |
|
September 30,
2016 |
|
(dollars in thousands) |
ASSETS |
|
|
Cash and
due from banks |
$ |
26,495 |
|
|
$ |
31,815 |
|
Interest-bearing deposits with other institutions |
|
9,948 |
|
|
|
11,843 |
|
|
|
|
|
|
|
|
|
Total
cash and cash equivalents |
|
36,443 |
|
|
|
43,658 |
|
Certificates of deposit |
|
1,000 |
|
|
|
1,250 |
|
Investment securities available for sale |
|
395,315 |
|
|
|
390,410 |
|
Loans
receivable (net of allowance for loan losses of $9,366 and
$9,056) |
|
1,208,497 |
|
|
|
1,219,213 |
|
Regulatory stock, at cost |
|
13,972 |
|
|
|
15,463 |
|
Premises
and equipment, net |
|
16,539 |
|
|
|
16,844 |
|
Bank-owned life insurance |
|
37,112 |
|
|
|
36,593 |
|
Foreclosed real estate |
|
3,315 |
|
|
|
2,659 |
|
Intangible assets, net |
|
2,160 |
|
|
|
2,487 |
|
Goodwill |
|
13,801 |
|
|
|
13,801 |
|
Deferred
income taxes |
|
12,171 |
|
|
|
11,885 |
|
Other
assets |
|
18,404 |
|
|
|
18,216 |
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS |
$ |
1,758,729 |
|
|
$ |
1,772,479 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
Deposits |
$ |
1,238,375 |
|
|
$ |
1,214,820 |
|
Short-term borrowings |
|
120,951 |
|
|
|
129,460 |
|
Other
borrowings |
|
199,168 |
|
|
|
230,601 |
|
Advances
by borrowers for taxes and insurance |
|
9,115 |
|
|
|
4,956 |
|
Other
liabilities |
|
12,351 |
|
|
|
16,298 |
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES |
|
1,579,960 |
|
|
|
1,596,135 |
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY |
|
|
Common
stock |
|
181 |
|
|
|
181 |
|
Additional paid in capital |
|
180,729 |
|
|
|
181,900 |
|
Unallocated common stock held by the Employee Stock Ownership
Plan |
|
(8,947 |
) |
|
|
(9,174 |
) |
Retained
earnings |
|
89,299 |
|
|
|
87,638 |
|
Treasury
stock, at cost |
|
(80,129 |
) |
|
|
(82,369 |
) |
Accumulated other comprehensive loss |
|
(2,364 |
) |
|
|
(1,832 |
) |
|
|
|
|
|
|
|
|
TOTAL
STOCKHOLDERS’ EQUITY |
|
178,769 |
|
|
|
176,344 |
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
1,758,729 |
|
|
$ |
1,772,479 |
|
|
|
|
|
|
|
|
|
ESSA BANCORP, INC. AND SUBSIDIARY |
CONSOLIDATED STATEMENT OF INCOME |
(UNAUDITED) |
|
|
For the Three Months Ended March
31, |
For the Six Months Ended March
31, |
|
|
2017 |
|
|
2016 |
|
2017 |
|
|
2016 |
|
|
(dollars in thousands) |
|
INTEREST INCOME |
|
|
|
|
|
|
|
|
|
|
|
Loans
receivable |
$ |
11,799 |
|
$ |
12,805 |
$ |
24,050 |
|
$ |
24,379 |
|
Investment securities: |
|
|
|
|
|
Taxable |
|
2,043 |
|
|
1,903 |
|
3,917 |
|
|
3,721 |
|
Exempt
from federal income tax |
|
303 |
|
|
255 |
|
612 |
|
|
499 |
|
Other
investment income |
|
234 |
|
|
196 |
|
450 |
|
|
375 |
|
Total
interest income |
|
14,379 |
|
|
15,159 |
|
29,029 |
|
|
28,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE |
|
|
|
|
|
Deposits |
|
2,069 |
|
|
1,944 |
|
4,081 |
|
|
3,789 |
|
Short-term borrowings |
|
296 |
|
|
115 |
|
547 |
|
|
209 |
|
Other
borrowings |
|
710 |
|
|
816 |
|
1,465 |
|
|
1,600 |
|
Total
interest expense |
|
3,075 |
|
|
2,875 |
|
6,093 |
|
|
5,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST
INCOME |
|
11,304 |
|
|
12,284 |
|
22,936 |
|
|
23,376 |
|
Provision
for loan losses |
|
750 |
|
|
600 |
|
1,500 |
|
|
1,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME
AFTER PROVISION FOR LOAN LOSSES |
|
10,554 |
|
|
11,684 |
|
21,436 |
|
|
22,176 |
|
|
|
|
|
|
|
NONINTEREST INCOME |
|
|
|
|
|
Service
fees on deposit accounts |
|
813 |
|
|
875 |
|
1,677 |
|
|
1,738 |
|
Services
charges and fees on loans |
|
273 |
|
|
297 |
|
627 |
|
|
577 |
|
Trust and
investment fees |
|
214 |
|
|
194 |
|
364 |
|
|
407 |
|
Gain on
sale of investments, net |
|
- |
|
|
365 |
|
- |
|
|
368 |
|
Earnings
on Bank-owned life insurance |
|
256 |
|
|
234 |
|
519 |
|
|
464 |
|
Insurance
commissions |
|
203 |
|
|
217 |
|
396 |
|
|
416 |
|
Other |
|
25 |
|
|
95 |
|
58 |
|
|
124 |
|
Total
noninterest income |
|
1,784 |
|
|
2,277 |
|
3,641 |
|
|
4,094 |
|
|
|
|
|
|
|
NONINTEREST
EXPENSE |
|
|
|
|
|
Compensation and employee benefits |
|
6,056 |
|
|
6,003 |
|
12,233 |
|
|
11,581 |
|
Occupancy
and equipment |
|
1,190 |
|
|
1,422 |
|
2,281 |
|
|
2,531 |
|
Professional fees |
|
835 |
|
|
672 |
|
1,580 |
|
|
1,125 |
|
Data
processing |
|
931 |
|
|
1,079 |
|
1,865 |
|
|
1,998 |
|
Advertising |
|
241 |
|
|
153 |
|
546 |
|
|
240 |
|
Federal
Deposit Insurance Corporation Premiums |
|
213 |
|
|
322 |
|
400 |
|
|
600 |
|
(Gain)loss on foreclosed real estate |
|
(5 |
) |
|
161 |
|
(101 |
) |
|
151 |
|
Merger
related costs |
|
- |
|
|
- |
|
- |
|
|
245 |
|
Amortization of intangible assets |
|
164 |
|
|
223 |
|
327 |
|
|
397 |
|
Other |
|
879 |
|
|
1,071 |
|
1,775 |
|
|
2,024 |
|
Total
noninterest expense |
|
10,504 |
|
|
11,106 |
|
20,906 |
|
|
20,892 |
|
|
|
|
|
|
|
Income before income
taxes |
|
1,834 |
|
|
2,855 |
|
4,171 |
|
|
5,378 |
|
Income
taxes |
|
203 |
|
|
726 |
|
603 |
|
|
1,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
$ |
1,631 |
|
$ |
2,129 |
$ |
3,568 |
|
$ |
4,086 |
|
|
|
|
|
|
|
Earnings per
share: |
|
|
|
|
|
Basic |
$ |
0.15 |
|
$ |
0.20 |
$ |
0.34 |
|
$ |
0.39 |
|
Diluted |
$ |
0.15 |
|
$ |
0.20 |
$ |
0.34 |
|
$ |
0.39 |
|
|
|
|
|
|
|
|
For the Three Months
Ended March 31, |
For the Six Months
Ended March 31, |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
|
(dollars in thousands) |
|
CONSOLIDATED AVERAGE
BALANCES: |
|
|
|
|
|
Total
assets |
$ |
1,762,076 |
|
$ |
1,757,983 |
|
$ |
1,765,294 |
|
$ |
1,704,095 |
|
|
Total
interest-earning assets |
|
1,636,516 |
|
|
1,647,423 |
|
|
1,641,759 |
|
|
1,597,582 |
|
|
Total
interest-bearing liabilities |
|
1,419,385 |
|
|
1,411,758 |
|
|
1,423,974 |
|
|
1,379,842 |
|
|
Total
stockholders’ equity |
|
173,857 |
|
|
173,918 |
|
|
174,892 |
|
|
173,280 |
|
|
|
|
|
|
|
|
PER COMMON SHARE
DATA: |
|
|
|
|
|
Average
shares outstanding - basic |
|
10,592,997 |
|
|
10,385,154 |
|
|
10,526,084 |
|
|
10,375,614 |
|
|
Average
shares outstanding - diluted |
|
10,691,960 |
|
|
10,524,697 |
|
|
10,617,241 |
|
|
10,515,770 |
|
|
Book
value shares |
|
11,574,829 |
|
|
11,367,654 |
|
|
11,574,829 |
|
|
11,367,654 |
|
|
|
|
|
|
|
|
Net interest rate
spread |
|
2.72 |
% |
|
2.91 |
% |
|
2.72 |
% |
|
2.85 |
% |
|
Net interest
margin |
|
2.80 |
% |
|
3.00 |
% |
|
2.80 |
% |
|
2.93 |
% |
|
Contact:
Gary S. Olson, President & CEO
Corporate Office: 200 Palmer Street, Stroudsburg, Pennsylvania 18360
Telephone:(570) 421-0531
Grafico Azioni ESSA Bancorp (NASDAQ:ESSA)
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