ESSA ESSA Bancorp Inc

ESSA Bancorp, Inc. (the �Company�) (NASDAQ Global MarketSM: �ESSA�) the holding company for ESSA Bank & Trust (the �Bank�) today announced its operating results for the three and nine months ended June 30, 2008. The Company reported net income of $2.0 million, or $0.12 per diluted share, for the three months ended June 30, 2008, as compared to a net loss of $9.0 million for the corresponding 2007 period. The net loss of $9.0 million for the three months ending June 30, 2007, was primarily due to a one time allocation of $12.7 million made by the Company to the ESSA Bank & Trust Foundation (the �Foundation�), in conjunction with the Company�s stock offering which was consummated on April 3, 2007. For the nine months ended June 30, 2008, the Company reported net income of $5.3 million, or $0.33 per diluted share, as compared to a net loss of $6.8 million for the comparable period in 2007. The primary reason for the increase in net income for the nine month period was the Company�s contribution to the Foundation during the prior period. In addition, increases in average net earning assets added to net income during the current period. Average net earning assets increased $95.7 million, average loans outstanding increased $76.3 million and average investments and mortgage-backed securities increased $80.3 million for the nine months ended June 30, 2008, as compared to the comparable period in 2007. �It has been a successful and eventful quarter for the Company and our stockholders,� noted Gary S. Olson, President and Chief Executive Officer of the Company. �In addition to holding our first annual meeting of stockholders in May, our Board of Directors, at its regularly scheduled May meeting, authorized the repurchase of up to 15% of the Company�s outstanding stock and declared a $.04 per share dividend which was paid on June 30, 2008.� Mr. Olson continued, �Our operating results were strong as our net interest spread improved from the previous quarter and we continued to grow our Company through prudent loan originations. Our asset quality remains strong, as evidenced by our low ratio of non-performing assets to total assets.� Net Interest Income: Net interest income increased $548,000, or 8.7%, to $6.9 million for the three months ended June 30, 2008, from $6.3 million for the comparable period in 2007. The increase was primarily attributable to an increase in average net earning assets of $15.4 million, offset in part by a one basis point decrease in the Company�s interest rate spread to 2.18% for the three months ended June 30, 2008, from 2.19% for the comparable period in 2007. Net interest income increased $4.0 million, or 25.4%, to $19.5 million for the nine months ended June 30, 2008, from $15.5 million for the comparable period in 2007. The increase was primarily attributable to an increase in average net earning assets of $95.7 million to $204.8 million for the nine months ended June 30, 2008, from $109.1 million for the comparable period in 2007 and was offset in part by a 20 basis point decrease in the Company�s interest rate spread to 2.04% for the nine months ended June 30, 2008, from 2.24% for the comparable period in 2007. NonInterest Income: Noninterest income was unchanged in the 2008 period compared to the 2007 period, remaining at $1.4 million for the three months ended June 30, 2008 and 2007, respectively. Noninterest income increased $62,000, or 1.5%, to $4.2 million for the nine months ended June 30, 2008, from $4.1 million for the comparable period in 2007. Increases in service charges and fees on loans, trust and investment fees and earnings on bank-owned life insurance were offset, in part, by decreases in service fees on deposit accounts, net gain on sale of loans and other income. NonInterest Expense: Noninterest expense decreased $12.3 million, or 69.7%, to $5.3 million for the three months ended June 30, 2008, from $17.6 million for the comparable period in 2007. The primary reason for the decrease was the Company�s contribution of $12.7 million to the Foundation in April 2007. Excluding the contribution, noninterest expense increased $444,000 or 9.1%. The primary reasons for the increase excluding the contribution were increases in compensation and employee benefits of $341,000 and professional fees of $101,000. Compensation and employee benefits increased primarily as a result of normal compensation increases of $168,000 in addition to an expense of $191,000 related to the Company�s equity incentive plan. As previously announced, the Company�s stockholders approved the ESSA Bancorp, Inc. 2007 Equity Incentive Plan at the 2008 Annual Meeting of Stockholders on May 8, 2008. Awards granted under the Equity Incentive Plan were made on May 23, 2008. Professional fees increased primarily as a result of increased legal, accounting and regulatory fees associated with being a public reporting company and included approximately $72,000 related to the Company�s compliance with section 404 of the Sarbanes-Oxley Act. Noninterest expense decreased $10.8 million, or 40.9%, to $15.5 million for the nine months ended June 30, 2008, from $26.3 million for the comparable period in 2007. The primary reason for the nine-month decrease was the $12.7 million contribution to the Foundation. Excluding the contribution, noninterest expense increased $1.9 million or 14.2%. The primary reasons for the increase excluding the contribution were increases in compensation and employee benefits of $1.2 million, occupancy and equipment of $157,000, professional fees of $481,000 and other expenses of $142,000. Compensation and employee benefits increased primarily as a result of normal compensation increases of $574,000, along with an increase in the expense related to the Employee Stock Ownership Plan of $264,000 and the additional expense of $191,000 related to the Equity Incentive Plan. Occupancy and equipment costs increased primarily as a result of increases in rental costs of $49,000, along with increases in depreciation expense of $58,000. Professional fees increased primarily as a result of increased legal, accounting and regulatory fees associated with being a public reporting company, including approximately $216,000 related to the Company�s compliance with Section 404 of the Sarbanes-Oxley Act. Other expense increased primarily due to increased loan processing costs related to increased volume. Balance Sheet Total assets increased $74.5 million, or 8.2%, to $984.9 million at June 30, 2008, compared to $910.4 million at September 30, 2007. The primary reasons for the increase in assets were increases in certificates of deposit of $3.8 million, net loans receivable of $66.8 million and an increase in cash and cash equivalents of $3.1 million. The increase in net loans receivable included net increases in residential loans of $53.8 million, commercial loans of $14.3 million and a decrease in consumer loans of $1.3 million. Retail deposits decreased $5.0 million and brokered certificates of deposit decreased $9.0 million at June 30, 2008, compared to September 30, 2007. Borrowed funds increased during the same time period by $79.4 million. Stockholders� equity increased $3.2 million to $207.9 million at June 30, 2008, compared to $204.7 million at September 30, 2007. Asset Quality: Nonperforming assets totaled $1.1 million or 0.11% of total assets at June 30, 2008, compared to $555,000, or 0.06%, of total assets at September 30, 2007. The Company, in response to continued loan growth, made a provision for loan losses of $150,000 for the three months ended June 30, 2008, as compared to a provision of $90,000 for the comparable three-month period in 2007. The Company made a provision for loan losses of $450,000 for the nine months ended June 30, 2008, as compared to a provision of $270,000 for the comparable nine month period in 2007. The allowance for loan losses was $4.5 million, or 0.65%, of loans outstanding at June 30, 2008, compared to $4.2 million, or 0.67%, of loans outstanding at September 30, 2007. ESSA Bank & Trust, a wholly-owned subsidiary of ESSA Bancorp, Inc., has total assets of over $919 million and is the leading service-oriented financial institution headquartered in the greater Pocono, Pennsylvania region. The Bank maintains its corporate headquarters in downtown Stroudsburg, Pennsylvania and has 13 community offices throughout the Pocono, Pennsylvania area. In addition to being one of the region�s largest mortgage lenders, ESSA Bank & Trust offers a full range of retail and commercial financial services. 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 regulatory fees 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, which 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. ESSA BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET (UNAUDITED) � � � � June 30,2008 September 30,2007 (dollars in thousands) ASSETS Cash and due from banks $ 9,126 $ 10,604 Interest-bearing deposits with other institutions � 10,782 � � 6,175 � � Total cash and cash equivalents 19,908 16,779 Certificates of deposit 3,836 � Investment securities available for sale 209,345 205,267 Investment securities held to maturity (fair value of $12,358 and $16,876) 12,358 17,130 Loans receivable (net of allowance for loan losses of $4,464 and $4,206) 686,609 619,845 Federal Home Loan Bank stock 18,430 16,453 Premises and equipment 10,885 11,277 Bank-owned life insurance 14,370 13,941 Other assets � 9,116 � � 9,723 � � TOTAL ASSETS $ 984,857 � $ 910,415 � � � LIABILITIES Deposits $ 370,677 $ 384,716 Short-term borrowings 44,526 34,230 Other borrowings 348,847 279,697 Advances by borrowers for taxes and insurance 6,278 1,423 Other liabilities � 6,626 � � 5,657 � � TOTAL LIABILITIES � 776,954 � � 705,723 � � Commitment and contingencies � � � STOCKHOLDERS� EQUITY Preferred Stock � � Common stock 170 170 Additional paid in capital 164,577 166,782 Unallocated common stock held by the Employee Stock Ownership Plan (12,906 ) (13,283 ) Retained earnings 58,092 53,400 Accumulated other comprehensive loss � (2,030 ) � (2,377 ) � TOTAL STOCKHOLDERS� EQUITY � 207,903 � � 204,692 � � TOTAL LIABILITIES AND STOCKHOLDERS� EQUITY $ 984,857 � $ 910,415 � ESSA BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) � � � � For the Three MonthsEnded June 30, For the Nine MonthsEnded June 30, 2008 2007 2008 2007 (dollars in thousands) INTEREST INCOME Loans receivable $ 10,130 $ 9,041 $ 29,797 $ 26,426 Investment securities: Taxable 2,674 2,634 8,013 5,127 Exempt from federal income tax 83 74 249 221 Other investment income � 217 � 424 � � 825 � 1,209 � � Total interest income � 13,104 � 12,173 � � 38,884 � 32,983 � � � INTEREST EXPENSE Deposits 2,018 2,550 7,154 7,916 Short-term borrowings 1,052 480 1,815 1,319 Other borrowings � 3,164 � 2,821 � � 10,470 � 8,238 � � Total interest expense � 6,234 � 5,851 � � 19,439 � 17,473 � � � NET INTEREST INCOME 6,870 6,322 19,445 15,510 Provision for loan losses � 150 � 90 � � 450 � 270 � � � NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES � 6,720 � 6,232 � � 18,995 � 15,240 � � � NONINTEREST INCOME Service fees on deposit accounts 873 873 2,619 2,629 Services charges and fees on loans 174 178 472 434 Trust and investment fees 208 195 645 595 Gain on sale of loans, net � � � 12 Earnings on Bank-owned life insurance 146 143 429 410 Other � 9 � 22 � � 33 � 56 � � Total noninterest income � 1,410 � 1,411 � � 4,198 � 4,136 � � � � NONINTEREST EXPENSE Compensation and employee benefits 3,169 2,828 9,174 7,995 Occupancy and equipment 705 690 2,108 1,951 Professional fees 379 278 1,067 586 Data processing 443 475 1,400 1,358 Advertising 155 178 447 514 Contribution to Charitable Foundation � 12,693 � 12,693 Other � 464 � 422 � � 1,344 � 1,202 � � Total noninterest expense � 5,315 � 17,564 � � 15,540 � 26,299 � � Income (loss ) before income taxes (benefit) 2,815 (9,921 ) 7,653 (6,923 ) Income taxes (benefit) � 849 � (915 ) � 2,336 � (79 ) � � NET INCOME (LOSS) $ 1,966 $ (9,006 ) $ 5,317 $ (6,844 ) EARNINGS PER SHARE Basic $ 0.13 (0.58 ) 0.34 (0.58 ) Diluted 0.12 (0.58 ) 0.33 (0.58 ) � Prior period earnings per share are calculated for the period beginning with the date of conversion or April 3, 2007.