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Essa Bank & Trust

Investor Relations

Press Release

ESSA Bancorp, Inc. Reports Fiscal 2017 Second Quarter, First Half Financial Results

Company Release - 4/26/2017 5:15 PM ET

STROUDSBURG, Pa., April 26, 2017 (GLOBE NEWSWIRE) -- 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

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Source: ESSA Bancorp