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8-K - FORM 8-K - ESSA Bancorp, Inc.d14198d8k.htm

Exhibit 99.1

 

LOGO

 

 

 

Date:    July 29, 2015
Contact:    Gary S. Olson, President & CEO
Corporate Office:    200 Palmer Street
   Stroudsburg, Pennsylvania 18360
Telephone:    (570) 421-0531

ESSA BANCORP, INC. ANNOUNCES FISCAL THIRD QUARTER FINANCIAL RESULTS

Stroudsburg, Pennsylvania, July 29, 2015 — ESSA Bancorp, Inc. (the “Company”) (NASDAQ Global MarketSM: ESSA) today reported net income of $2.5 million, or $0.23 per diluted share, for the quarter ended June 30, 2015, compared with net income of $2.6 million, or $0.24 per diluted share, for the same quarter, last year. Net income for the first nine months of fiscal 2015 increased to $7.5 million, or $0.71 per diluted share, compared with net income of $6.1 million, or $0.56 per diluted share, for the nine months of fiscal 2014. Year-over-year comparisons reflect the acquisition of Franklin Security Bancorp in April 2014.

The Company is the holding company for ESSA Bank & Trust, a $1.6 billion asset institution, which provides full service retail and commercial banking, financial, and investment services from 26 locations in eastern Pennsylvania.

THIRD QUARTER HIGHLIGHTS

 

    Disciplined loan growth. Total loans increased 1.3% (not annualized) on a sequential quarter basis, and 3.2% (not annualized) during the nine months ended June 30, 2015. Loan growth was driven primarily by increases in commercial and indirect auto loans.

 

    Net interest income remained steady. Net interest income was approximately $11.0 million for the second consecutive quarter despite continued net interest margin compression. The net interest margin was 2.96% for the quarter ending June 30, 2015, compared with 3.03% for the quarter ended March 31, 2015 and 3.09% for the quarter ending June 30, 2014.

 

    Asset quality improved. Non-performing assets declined to $23.4 million, or 1.46% of total assets, as of June 30, 2015 from $24.7 million, or 1.56% of total assets as of March 31, 2015.

 

    Capital management. A quarterly cash dividend of $0.09 per share was paid on June 30, 2015. During the June 2015 quarter, the Company repurchased 36,900 shares at an average price of $12.85. Tangible book value per share increased to $13.94 at June 30, 2015, from $13.34 at September 30, 2014.

 

    Previously announced acquisition. Subsequent to the third fiscal quarter, the Company announced a definitive agreement on July 29, 2015 to purchase Eagle National Bancorp (“ENB”) in an all-cash transaction. ENB had total assets of $175.7 million, total loans of $125.1 million, and total deposits of $148.7 million as of June 30, 2015.

Gary S. Olson, President and CEO, commented: “Our third quarter results reflect our ability to deliver consistent results despite the earnings challenges presented by continued low interest rates. As we expand into faster-growing markets, we remain focused on loan growth, asset quality, and controlled operating expenses while our efforts to build commercial relationships continue to gain traction.”

 

 

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


As noted when our merger with Eagle National Bancorp was first announced, “We are excited to have this opportunity to expand our market share and establish a commercial presence in an attractive suburban Philadelphia market.”

Income Statement Review

Net interest income decreased $86,000, or 0.8%, to $11.0 million for the three months ended June 30, 2015, from $11.1 million for the comparable period in 2014. Net interest income increased $3.5 million, or 12.0%, to $33.1 million for the nine months ended June 30, 2015, from $29.5 million for the comparable period in 2014, reflecting increases in the Company’s loan portfolio.

Interest expense decreased $171,000 for the nine months ended June 30, 2015 compared to the comparable period in 2014, while interest income increased $3.4 million on growing loan volume. Increases in interest income from indirect auto loans, commercial loans and investment securities helped offset a decrease in interest income from mortgage loans.

The Company’s net interest rate spread was 2.90% for the three months ended June 30, 2015, down from 3.02% for the comparable 2014 period. The Company’s net interest rate spread rose to 2.93% for the nine months ended June 30, 2015 compared to 2.91% for the nine months ended June 30, 2014. Net interest margin was unchanged at 2.99% for the nine months ended June 30, 2015 and 2014.

The Company’s provision for loan losses increased to $525,000 for the three months ended June 30, 2015, compared with $500,000 for the three months ended June 30, 2014. The Company’s provision for loan losses decreased to $1.5 million for the nine months ended June 30, 2015, compared with $2.0 million for the nine months ended June 30, 2014. Net loan charge-offs in fiscal third quarter 2015 were $425,000 compared to $326,000 in fiscal third quarter 2014. Net loan charge-offs for the nine months ended June 30, 2015 were $1.4 million compared to $1.2 million in the 2014 period.

Noninterest income decreased 7.2% to $1.9 million for the three months ended June 30, 2015, compared with $2.1 million for the three months ended June 30, 2014 due principally to declines in trust and investment fees, gain on acquisition, and other income which were partially offset by an increase in gain on sale of investments, net. Noninterest income increased 3.4% to $5.7 million for the nine months ended June 30, 2015, compared with the nine months ended June 30, 2014. The increase was due primarily to increases in service fees and charges related to loans and gain on sale of investments offset in part by a decline in gain on acquisition.

Noninterest expense was $9.4 million for the three months ended June 30, 2015 compared with $9.1 million for the comparable period in 2014. Noninterest expense was $27.4 million for the nine months ended June 30, 2015 compared with $24.7 million for the comparable period in 2014. Increases in expenses primarily reflect additional facilities and costs related to the Franklin Security Bank acquisition.

Balance Sheet, Asset Quality and Capital Adequacy

Total assets were $1.60 billion at June 30, 2015 compared with $1.57 billion at September 30, 2014. Total loans receivable, net of allowance for loan losses, were $1.09 billion at June 30, 2015 compared to $1.06 billion at September 30, 2014.

Total deposits decreased $58.3 million, or 5.1%, to $1.08 billion at June 30, 2015, from $1.13 billion at September 30, 2014. Decreases in interest bearing demand deposits, money market and certificate of deposit accounts were partially offset by increases in non-interest bearing demand and savings and club accounts. During the same period, borrowings increased $70.3 million, reflecting the Company’s ability to obtain borrowed funds at what management believes represent attractive rates.

 

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Nonperforming assets totaled $23.4 million, or 1.46%, of total assets at June 30, 2015, compared with $25.0 million, or 1.59%, of total assets at September 30, 2014, and $26.2 million, or 1.68% of total assets a year earlier. The decrease in nonperforming assets of $1.6 million at June 30, 2015 compared to September 30, 2014 was due primarily to decreases in non-performing commercial mortgages and foreclosed real estate.

The Company’s provision for loan losses was $525,000 for the three-month period ended June 30, 2015, compared with a provision of $500,000 for the comparable period in 2014, primarily reflecting continued disciplined credit and underwriting standards. The allowance for loan losses was $8.8 million, or 0.80%, of loans outstanding at June 30, 2015, compared to $8.6 million, or 0.81%, of loans outstanding at September 30, 2014.

The Bank continued to demonstrate financial strength, with a tier 1 leverage ratio of 10.02%, exceeding accepted regulatory standards for a well-capitalized institution. The Company maintained a tangible equity to total assets ratio of 9.85%.

Stockholders’ equity increased $4.0 million to $171.3 million at June 30, 2015, from $167.3 million at September 30, 2014. During the three months ended June 30, 2015, the Company repurchased 36,900 shares at an average cost of $12.85 per share. Tangible book value per share at June 30, 2015 increased to $13.94 compared with $13.34 at September 30, 2014.

For the fiscal third quarter of 2015, the Company’s return on average assets and return on average equity were 0.62% and 5.67%, compared with 0.68% and 6.17%,respectively, in the corresponding period of fiscal 2014.

ESSA Bank & Trust, a wholly-owned subsidiary of ESSA Bancorp, Inc., has total assets of $1.60 billion and is the leading service-oriented financial institution headquartered in Stroudsburg, Pennsylvania. ESSA Bank & Trust maintains its corporate headquarters in Stroudsburg, Pennsylvania and has 26 community offices throughout the Greater Pocono, Lehigh Valley, and Scranton/Wilkes-Barre areas in Pennsylvania. In addition to being one of the region’s largest mortgage lenders, ESSA Bank & Trust offers a full range of consumer and commercial banking products and services, employee benefit solutions, Trust & Asset management, and brokerage services. 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, and the Risk Factors disclosed in our annual and quarterly reports.

 

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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)

 

     June 30,
2015
    September 30,
2014
 
     (dollars in thousands)  

ASSETS

    

Cash and due from banks

   $ 16,017      $ 20,884   

Interest-bearing deposits with other institutions

     1,675        1,417   
  

 

 

   

 

 

 

Total cash and cash equivalents

     17,692        22,301   

Certificates of deposit

     1,750        1,767   

Investment securities available for sale

     381,375        383,078   

Loans receivable (net of allowance for loan losses of $8,767 and $8,634)

     1,092,527        1,058,267   

Regulatory stock, at cost

     14,537        14,284   

Premises and equipment, net

     16,655        16,957   

Bank-owned life insurance

     30,421        29,720   

Foreclosed real estate

     2,595        2,759   

Intangible assets, net

     1,910        2,396   

Goodwill

     10,259        10,259   

Deferred income taxes

     11,045        12,027   

Other assets

     18,058        21,000   
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 1,598,824      $ 1,574,815   
  

 

 

   

 

 

 

LIABILITIES

    

Deposits

   $ 1,075,553      $ 1,133,889   

Short-term borrowings

     120,856        108,020   

Other borrowings

     208,805        151,300   

Advances by borrowers for taxes and insurance

     11,617        4,093   

Other liabilities

     10,666        10,204   
  

 

 

   

 

 

 

TOTAL LIABILITIES

     1,427,497        1,407,506   
  

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY

    

Common stock

     181        181   

Additional paid in capital

     182,358        182,486   

Unallocated common stock held by the Employee Stock Ownership Plan

     (9,740     (10,079

Retained earnings

     82,289        77,413   

Treasury stock, at cost

     (82,105     (80,113

Accumulated other comprehensive loss

     (1,656     (2,579
  

 

 

   

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

     171,327        167,309   
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 1,598,824      $ 1,574,815   
  

 

 

   

 

 

 

 

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ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)

 

     For the Three Months
Ended June 30
    For the Nine Months
Ended June 30
 
     2015      2014     2015     2014  
     (dollars in thousands)  

INTEREST INCOME

         

Loans receivable

   $ 11,398       $ 11,807      $ 33,947      $ 32,173   

Investment securities:

         

Taxable

     1,741         1,632        5,429        4,682   

Exempt from federal income tax

     248         173        721        318   

Other investment income

     181         173        759        317   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total interest income

     13,568         13,785        40,856        37,490   
  

 

 

    

 

 

   

 

 

   

 

 

 

INTEREST EXPENSE

         

Deposits

     1,800         2,015        5,643        5,909   

Short-term borrowings

     118         54        324        104   

Other borrowings

     639         619        1,826        1,951   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total interest expense

     2,557         2,688        7,793        7,964   
  

 

 

    

 

 

   

 

 

   

 

 

 

NET INTEREST INCOME

     11,011         11,097        33,063        29,526   

Provision for loan losses

     525         500        1,500        2,000   
  

 

 

    

 

 

   

 

 

   

 

 

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

     10,486         10,597        31,563        27,526   
  

 

 

    

 

 

   

 

 

   

 

 

 

NONINTEREST INCOME

         

Service fees on deposit accounts

     842         828        2,426        2,342   

Services charges and fees on loans

     274         283        863        572   

Trust and investment fees

     218         260        660        701   

Gain (loss) on sale of investments, net

     194         (10     398        226   

Earnings on Bank-owned life insurance

     231         234        701        687   

Insurance commissions

     183         205        582        625   

Gain on acquisition

     —           241        —          241   

Other

     6         59        33        85   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total noninterest income

     1,948         2,100        5,663        5,479   
  

 

 

    

 

 

   

 

 

   

 

 

 

NONINTEREST EXPENSE

         

Compensation and employee benefits

     5,213         4,912        15,559        13,577   

Occupancy and equipment

     996         1,051        3,111        3,034   

Professional fees

     517         441        1,438        1,348   

Data processing

     861         977        2,566        2,426   

Advertising

     373         243        725        463   

Federal Deposit Insurance Corporation Premiums

     269         266        850        730   

Loss (Gain) on foreclosed real estate

     8         (65     (167     (116

Merger related costs

     —           176        —          522   

Amortization of intangible assets

     156         282        485        756   

Other

     966         812        2,856        1,987   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total noninterest expense

     9,359         9,095        27,423        24,727   
  

 

 

    

 

 

   

 

 

   

 

 

 

Income before income taxes

     3,075         3,602        9,803        8,278   

Income taxes

     618         976        2,318        2,146   
  

 

 

    

 

 

   

 

 

   

 

 

 

Net Income

   $ 2,457       $ 2,626      $ 7,485      $ 6,132   
  

 

 

    

 

 

   

 

 

   

 

 

 

 

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     For the Three Months
Ended June 30
     For the Nine Months
Ended June 30
 
     2015      2014      2015      2014  

Earnings per share:

           

Basic

   $ 0.24       $ 0.24       $ 0.72       $ 0.56   

Diluted

   $ 0.23       $ 0.24       $ 0.71       $ 0.56   

 

     For the Three Month
Ended June 30,
    For the Nine Month
Ended June 30,
 
     2015     2014     2015     2014  
     (dollars in thousands)     (dollars in thousands)  

CONSOLIDATED AVERAGE BALANCES:

        

Total assets

   $ 1,587,965      $ 1,546,622      $ 1,576,752      $ 1,421,091   

Total interest-earning assets

     1,489,831        1,442,235        1,476,752        1,321,142   

Total interest-bearing liabilities

     1,292,034        1,290,266        1,302,249        1,173,645   

Total stockholders’ equity

     173,678        170,265        171,905        168,977   

PER COMMON SHARE DATA:

        

Average shares outstanding - basic

     10,431,461        10,837,592        10,464,084        10,864,362   

Average shares outstanding - diluted

     10,565,123        10,837,592        10,533,704        10,864,362   

Book value shares

     11,419,321        11,823,878        11,419,321        11,823,878   

Net interest rate spread

     2.90     3.02     2.93     2.91

Net interest margin

     2.96     3.09     2.99     2.99

 

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