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8-K - FORM 8-K - ESSA Bancorp, Inc.d526604d8k.htm

Exhibit 99.1

 

LOGO

 

 

Date:

   April 24, 2013

Contact:

   Gary S. Olson, President & CEO

Corporate Office:

  

200 Palmer Street

Stroudsburg, Pennsylvania 18360

Telephone:

   (570) 421-0531

 

ESSA BANCORP, INC. ANNOUNCES OPERATING RESULTS

FOR THE SECOND FISCAL QUARTER OF 2013

Stroudsburg, Pennsylvania, April 24, 2013 — ESSA Bancorp, Inc. (NASDAQ Global MarketSM: ESSA), the holding company for ESSA Bank & Trust, today announced its operating results for the three and six months ended March 31, 2013. The Company reported net income of $2.0 million, or $0.17 per diluted share, for the three months ended March 31, 2013, compared with net income of $659,000, or $0.06 per diluted share, for the Company’s second fiscal quarter 2012. The Company’s return on average assets (ROAA), and return on average equity (ROAE), respectively, were 0.59% and 4.71%, compared with 0.24% and 1.62%, in the corresponding period of fiscal 2012.

For the six months ended March 31, 2013, ESSA reported net income of $4.9 million, or $0.41 per diluted share, compared to net income of $1.5 million, or $0.14 per diluted share, for the corresponding 2012 period. The Company’s ROAA, and ROAE, respectively, were 0.71% and 5.59% for the 2013 period, compared with 0.28% and 1.90%, in the corresponding period of 2012.

ESSA Bancorp completed its acquisition of First Star Bancorp on July 31, 2012. The results for the periods ended March 31, 2013, reflect the effects of the acquisition in fiscal 2013. Total assets were $1.4 billion and total deposits were $1.0 billion at March 31, 2013.

Gary S. Olson, President and CEO, commented: “ESSA’s mid-2012 acquisition of First Star is clearly proving accretive to our earnings, and our expanded presence in the Lehigh Valley is providing ESSA with access to a vibrant market and a larger base of new customers and prospective customers. Additionally, we are realizing an approximate 30% cost savings from First Star’s operating expenses, right in line with our previously stated goals pertaining to the acquisition.”

“We are encouraged by the increasing loan demand in our Lehigh Valley market. Fiscal year-to-date, ESSA closed $72.2 million of residential mortgages and $22.6 million of commercial loans. A slightly reduced net loan balance at March 31, 2013 compared with September 30, 2012 primarily reflected loan pay-offs, which are expected during this protracted low interest rate environment and the sale of $19.2 million of mortgage loans.

“We are cautiously optimistic that continued economic expansion, combined with our new, larger market will provide significant lending growth opportunities for the Company. ESSA has the capital strength to support both organic and other growth as prudent opportunities arise.

“ESSA’s board of directors continues to believe repurchasing the Company’s stock is a good use of our capital, and our repurchase program remains ongoing. For the six months ended March 31, 2013, the Company repurchased 640,209 shares at an average cost of $11.07 per share.”

 

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Corporate Center: 200 Palmer Street PO Box L Stroudsburg, PA 18360-0160 570-421-0531 Fax: 570-421-7158


Income Statement

Net interest income increased $3.1 million, or 45.98%, to $9.9 million for the three months ended March 31, 2013, from $6.8 million for the comparable period in 2012. The increase was primarily attributable to an increase in the Company’s interest rate spread to 2.97% for the three months ended March 31, 2013, from 2.36% for the comparable period in 2012 combined with an increase in the Company’s average net earning assets of $3.2 million. A decrease in the yield on the Company’s total average interest earning assets to 3.97% for the 2013 period from 4.22% for the 2012 period was more than offset by a decrease in the cost of the Company’s total average interest bearing liabilities to 1.00% from 1.86% for the same comparative periods. Net interest margin was 3.08% for the three months ended March 31, 2013 compared to net interest margin of 2.63% for the comparable period in 2012.

Olson stated: “While low interest rates continue to put pressure on our net interest margin, ESSA has demonstrated success in reducing its cost of funds while retaining core deposit customers.”

Interest income for the three months ended March 31, 2013 includes approximately $443,000 of net accretion of fair market value adjustments for credit and yield applied to First Star loans at the acquisition closing date of July 31, 2012. In addition, net income for the quarter includes approximately $210,000 of the recapture of fair value adjustments to loans acquired as part of the First Star acquisition that were either fully or partially repaid during the quarter.

Interest income for the six months ended March 31, 2013 includes approximately $866,000 of net accretion of fair market value adjustments for credit and yield applied to First Star loans at the acquisition closing date of July 31, 2012. In addition, net income for the six months included approximately $1.2 million of the recapture of fair value adjustments to loans acquired as part of the First Star acquisition that were either fully or partially repaid during the six months ended March 31, 2013.

Interest expense decreased primarily as a result of a decrease in interest rates and a decrease in higher rate borrowings for the three and six months ended March 31, 2013 compared with the comparable periods in 2012.

The provision for loan losses increased $200,000 to $850,000 for the three months ended March 31, 2013, from $650,000 for the comparable period in 2012. The provision for loan losses increased $700,000 to $1.9 million for the six months ended March 31, 2013, from $1.2 million for the comparable period in 2012. Net loan charge-offs for the three months ended March 31, 2013 were $747,000 compared to $277,000 for the comparable period in 2012. Net loan charge-offs for the six months ended March 31, 2013 were $1.5 million compared to $1.2 million for the comparable period in 2012.

Noninterest income increased $835,000, or 51.45%, to $2.5 million for the three months ended March 31, 2013, compared with the three months ended March 31, 2012, primarily reflecting an increase in the gain on sale of investments of $561,000. The quarter ended March 31, 2013, included gains on the sale of investments of $708,000 before tax compared with $147,000 for the quarter ended March 31, 2012.

Noninterest income increased $1.3 million, or 42.48% to $4.5 million for the six months ended March 31, 2012 from $3.1 million for the comparable period in 2012. The primary reasons for the increase were increases in service fees on deposit accounts of $130,000, services charges and fees on loans of $113,000, gain on sale of investments of $591,000 and gain on sale of loans of $407,000.

Allan Muto, EVP and CFO, commented: “While our fiscal second quarter and six month results reflect the continued positive impact of the recapture of fair value adjustments and net accretion as a result of the acquired performing and non-performing loans from First Star, we expect these accounting related adjustments

 

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to become less significant by the end of fiscal 2013. We sold certain mortgage backed securities at a gain and provided some necessary liquidity to our holding company, in order to fund our continued stock repurchase program. We remain diligently focused on improving our financial performance in all areas of our business.”

Noninterest expense increased $1.9 million to $8.8 million or 27.87%, for the three months ended March 31, 2013, from $6.9 million for the comparable period in 2012, reflecting increases in compensation and employee benefits of $1.1 million, occupancy and equipment of $254,000, data processing of $298,000 and professional fees of $189,000. These increases were partially offset by decreases in merger related costs of $227,000 and a decrease in the cost to liquidate foreclosed real estate of $212,000.

Noninterest expense increased $2.8 million to $16.3 million or 20.38%, for the six months ended March 31, 2013, from $13.5 million for the comparable period in 2012, reflecting increases in compensation and employee benefits of $1.7 million, occupancy and equipment of $447,000, data processing of $479,000 and amortization of intangible assets of $337,000. These increases were partially offset by decreases in merger related costs of $376,000 and a decrease in the cost to liquidate foreclosed real estate of $505,000.

The increases in noninterest expenses were due primarily to the larger organization in the 2013 periods compared with the 2012 periods.

Balance Sheet, Asset Quality and Capital Adequacy

Total assets decreased $32.9 million, or 2.32%, to $1.39 billion at March 31, 2013, compared to $1.42 billion at September 30, 2012, although up significantly compared with pre-merger total assets. Increases in cash and cash equivalents of $8.4 million, compared with September 30, 2012, were offset by decreases in total investment securities of $14.6 million, loans receivable of $11.2 million, regulatory stock of $5.6 million and other assets of $8.6 million.

Total deposits increased $8.4 million, or 0.84%, to $1.0 billion at March 31, 2013, from $995.6 million at September 30, 2012. Borrowings decreased $43.6 million to $191.1 million from $234.7 million during the same period.

Nonperforming assets totaled $28.6 million, or 2.06%, of total assets at March 31, 2013, compared with $27.2 million, or 1.92%, of total assets at September 30, 2012. The increase in nonperforming assets of $1.4 million at March 31, 2013 compared to September 30, 2012 was due primarily to an increase in non-performing residential mortgage loans of $2.4 million which was offset in part by a decline in foreclosed real estate of $1.3 million. The Company made a provision for loan losses of $850,000 and $1.9 million for the three and six month periods ended March 31, 2013, respectively, compared with provisions of $650,000 and $1.2 million for the comparable three and six month periods in 2012. The allowance for loan losses was $7.7 million, or 0.81%, of loans outstanding at March 31, 2013, compared to $7.3 million, or 0.76%, of loans outstanding at September 30, 2012.

Stockholders’ equity decreased $3.7 million, or 2.08%, to $171.8 million at March 31, 2013, from $175.4 million at September 30, 2012. The decrease was due primarily to the stock repurchase program announced during the first fiscal quarter. For the six months ended March 31, 2013, the Company repurchased 640,209 shares at an average cost of $11.07 per share. The Company’s tier 1 leverage ratio was 12.10%, and tangible equity to total assets was 11.56%.

Olson concluded: “Our primary focus is on growing shareholder value in a prudent manner, despite a difficult prolonged interest rate and economic environment for all financial institutions. Our strong capital position and newly established positioning as a go-to commercial and residential lender in the Lehigh Valley provides management and the board with great confidence in ESSA’s future. We remain nimble as an organization and will continue to look for ways to increase value for shareholders in the coming periods.”

 

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ESSA Bank & Trust, a wholly-owned subsidiary of ESSA Bancorp, Inc., has total assets of over $1.3 billion and is the leading service-oriented financial institution headquartered in Stroudsburg, Pennsylvania. The Bank maintains its corporate headquarters in downtown Stroudsburg, Pennsylvania and has 26 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, commercial financial services, and financial advisory and asset management capabilities. 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 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.

 

FINANCIAL TABLES FOLLOW

 

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ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

 

     March 31,
2013
    September 30,
2012
 
     (dollars in thousands)  

ASSETS

    

Cash and due from banks

   $ 11,006      $ 11,034   

Interest-bearing deposits with other institutions

     12,954        4,516   
  

 

 

   

 

 

 

Total cash and cash equivalents

     23,960        15,550   

Certificates of deposit

     1,766        1,266   

Investment securities available for sale

     314,961        329,585   

Loans receivable held for sale

     —          346   

Loans receivable (net of allowance for loan losses of $7,671 and $7,302)

     938,782        950,009   

Regulatory stock, at cost

     16,262        21,914   

Premises and equipment, net

     16,017        16,170   

Bank-owned life insurance

     28,323        27,848   

Foreclosed real estate

     1,699        2,998   

Intangible assets, net

     2,957        3,457   

Goodwill

     8,541        8,541   

Deferred income taxes

     11,413        11,336   

Other assets

     21,195        29,766   
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 1,385,876      $ 1,418,786   
  

 

 

   

 

 

 

LIABILITIES

    

Deposits

   $ 1,004,032      $ 995,634   

Short-term borrowings

     33,038        43,281   

Other borrowings

     158,060        191,460   

Advances by borrowers for taxes and insurance

     9,425        3,432   

Other liabilities

     9,564        9,568   
  

 

 

   

 

 

 

TOTAL LIABILITIES

     1,214,119        1,243,375   
  

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY

    

Common stock

     181        181   

Additional paid in capital

     182,288        181,220   

Unallocated common stock held by the Employee Stock Ownership Plan

     (10,759     (10,985

Retained earnings

     68,918        65,181   

Treasury stock, at cost

     (69,034     (61,944

Accumulated other comprehensive income

     163        1,758   
  

 

 

   

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

     171,757        175,411   
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 1,385,876      $ 1,418,786   
  

 

 

   

 

 

 

 

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ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)

 

     For the Three Months
Ended March 31
     For the Six Months
Ended March 31
 
     2013     2012      2013     2012  
     (dollars in thousands)  

INTEREST INCOME

         

Loans receivable

   $ 11,041      $ 9,145       $ 23,278      $ 18,486   

Investment securities:

         

Taxable

     1,558        1,628         3,188        3,266   

Exempt from federal income tax

     73        55         127        103   

Other investment income

     18        6         47        8   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total interest income

     12,690        10,834         26,640        21,863   
  

 

 

   

 

 

    

 

 

   

 

 

 

INTEREST EXPENSE

         

Deposits

     1,848        1,836         3,819        3,747   

Short-term borrowings

     46        6         82        11   

Other borrowings

     912        2,221         2,136        4,626   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total interest expense

     2,806        4,063         6,037        8,384   
  

 

 

   

 

 

    

 

 

   

 

 

 

NET INTEREST INCOME

     9,884        6,771         20,603        13,479   

Provision for loan losses

     850        650         1,850        1,150   
  

 

 

   

 

 

    

 

 

   

 

 

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

     9,034        6,121         18,753        12,329   
  

 

 

   

 

 

    

 

 

   

 

 

 

NONINTEREST INCOME

         

Service fees on deposit accounts

     711        661         1,518        1,388   

Services charges and fees on loans

     268        200         497        384   

Trust and investment fees

     196        207         411        422   

Gain on sale of investments, net

     708        147         738        147   

Gain on sale of loans, net

     81        8         415        8   

Earnings on Bank-owned life insurance

     248        196         474        394   

Insurance commissions

     232        195         407        386   

Other

     14        9         24        18   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total noninterest income

     2,458        1,623         4,484        3,147   
  

 

 

   

 

 

    

 

 

   

 

 

 

NONINTEREST EXPENSE

         

Compensation and employee benefits

     5,068        3,980         9,624        7,916   

Occupancy and equipment

     1,030        776         1,979        1,532   

Professional fees

     592        403         904        744   

Data processing

     805        507         1,468        989   

Advertising

     145        67         255        153   

Federal Deposit Insurance Corporation (FDIC) Premiums

     293        167         478        329   

Loss (Gain) on foreclosed real estate

     (172     40         (398     107   

Merger related costs

     —          227         —          376   

Amortization of intangible assets

     249        81         499        162   

Other

     780        626         1,486        1,228   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total noninterest expense

     8,790        6,874         16,295        13,536   
  

 

 

   

 

 

    

 

 

   

 

 

 

Income before income taxes

     2,702        870         6,942        1,940   

Income taxes

     662        211         2,023        395   

 

 

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      For the Three Months
Ended March 31,
     For the Six Months
Ended March 31,
 

Net Income

   $ 2,040       $ 659       $ 4,919       $ 1,545   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share:

           

Basic

   $ 0.17       $ 0.06       $ 0.41       $ 0.14   

Diluted

   $ 0.17       $ 0.06       $ 0.41       $ 0.14   

 

     For the Three Months
Ended March 31,
    For the Six Months
Ended March 31,
 
     2013     2012     2013     2012  
     (dollars in thousands)     (dollars in thousands)  

CONSOLIDATED AVERAGE BALANCES:

        

Total assets

   $ 1,393,004      $ 1,096,608      $ 1,395,870      $ 1,094,182   

Total interest-earning assets

     1,300,283        1,042,812        1,302,189        1,039,992   

Total interest-bearing liabilities

     1,142,032        887,760        1,149,526        887,399   

Total stockholders’ equity

     175,697        162,948        176,517        162,414   

PER COMMON SHARE DATA:

        

Average shares outstanding—basic

     11,763,581        10,840,604        11,932,539        10,829,027   

Average shares outstanding—diluted

     11,763,581        10,840,604        11,932,539        10,829,027   

Book value shares

     12,589,699        12,109,622        12,589,699        12,109,622   

Net interest rate spread

     2.97     2.36     3.06     2.34

Net interest margin

     3.08     2.63     3.17     2.63

 

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