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 months and year
ended September 30, 2010. The Company reported net income of $1.0
million, or $0.09 per diluted share, for the three months ended
September 30, 2010, as compared to net income of $1.4 million, or
$0.11 per diluted share for the corresponding 2009 period. For the
year ended September 30, 2010, the Company reported net income of
$4.5 million, or $0.36 per diluted share, as compared to net income
of $6.6 million, or $0.47 per diluted share for the corresponding
2009 period.
The decline in net income for the three months ended September
30, 2010, compared to the same period in 2009 was primarily the
result of a decrease in net interest income due to tepid loan
demand and historically low reinvestment rates which contributed to
a decrease in the Company’s interest rate spread. Net income of
$4.5 million, for the year ending September 30, 2010, which was
also significantly affected by a year-over-year decrease in
interest rate spread, also included a pre-tax write-down of $1.2
million in the value of the Company’s foreclosed real estate
portfolio. The charge related to a single property in the Bank’s
foreclosed real estate portfolio and was made during the first
fiscal quarter of 2010 to reflect an updated appraisal. Net income
for the year ended September 30, 2009, included a one-time tax
benefit of $317,000 which was made during the first fiscal quarter
of 2009. This benefit was related to the Company’s
other-than-temporary impairment charge taken in the fourth fiscal
quarter of 2008.
“A soft real estate market, continued low interest rates, and an
unemployment rate slightly higher than our state and national
averages are current realities in our market area. Slow growth, a
declining net interest spread and a slight increase in our
nonperforming assets are the consequences to our Company,”
commented Gary S. Olson, President and Chief Executive Officer of
the Company. “Our operating results, while not where we would like
them to be, are still strong compared to the majority of our
industry peers. We continue to work toward growing our balance
sheet by providing funds to qualified borrowers, improving our net
interest spread by managing our interest costs and improving our
credit quality by proactively working with our borrowers. Overall,
we have a strong capital position and sound credit quality. We are
confident in our continued ability to manage through the current
economic environment and prosper as the economy improves.”
Net Interest Income:
Net interest income decreased $555,000, or 7.6%, to $6.8 million
for the three months ended September 30, 2010, compared to the same
period in 2009. The decrease was attributable to a decrease of
$11.9 million in the Company’s average net earning assets for the
three months ended September 30, 2010, compared to the same period
ended September 30, 2009, along with a decrease in the Company’s
interest rate spread to 2.24% from 2.42% for the same comparative
periods.
Net interest income decreased $1.0 million, or 3.6%, to $28.0
million for the year ended September 30, 2010, from $29.0 million
for the comparable period in 2009. The decrease was attributable to
a decrease of $9.5 million in the Company’s average net earning
assets for the year ended September 30, 2010, compared to the same
period ended September 30, 2009, along with a decrease in the
Company’s interest rate spread for the year ended September 30,
2010 to 2.34% from 2.40% for the same comparable periods.
Provision for Loan Losses and Net Charge-Offs:
The provision for loan losses increased $150,000, or 40.0%, to
$525,000 for the three months ended September 30, 2010, from
$375,000 for the comparable period in 2009. The provision for loan
losses increased $675,000, or 45.0%, to $2.2 million for the year
ended September 30, 2010, from $1.5 million for the comparable
period in 2009. Net charge-offs increased $46,000 for the three
months ended September 30, 2010 to $100,000 compared to $54,000 for
the three-month period ended September 30, 2009. Net charge-offs
decreased $58,000 for the year ended September 30, 2010 to $542,000
compared to the same period in 2009. Nonperforming assets increased
to 1.20% of total assets at September 30, 2010 compared to 0.74% of
total assets at September 30, 2009.
In evaluating the level of the allowance for loan losses,
management considers historical loss experience, the types of loans
and the amount of loans in the loan portfolio, adverse situations
that may affect a borrower’s ability to repay, the estimated value
of any underlying collateral, peer group information, and
prevailing economic conditions. This evaluation is inherently
subjective as it requires estimates that are subject to
interpretation and revision as more information becomes available
or as future events occur. The increases in the provision for loan
losses for both the three-month and full-year periods ended
September 30, 2010, as compared to the comparable 2009 periods,
were in response to this evaluation.
Noninterest Income:
Noninterest income increased $632,000, or 45.3%, to $2.0 million
for the three months ended September 30, 2010, from $1.4 million
for the comparable period in 2009. The primary reason for the
increase was an increase in gains on sales of investments of
$577,000 for the three months ended September 30, 2010 compared to
the comparable period in 2009. The company sold $15.6 million of
mortgage-backed investment securities during the three months ended
September 30, 2010, as part of an overall strategy to minmize the
impact of the current low interest rate environment.
Noninterest income increased $980,000, or 17.1%, to $6.7 million
for the year ended September 30, 2010, from $5.7 million for the
comparable period in 2009. The primary reason for the increase was
an increase in gains on investment sales of $1.0 million for the
year ended September 30, 2010 compared to the same period in 2009.
This increase was partially offset by decreases in gains on loan
sales of $76,000 and service charges and fees on loans of $52,000
for the same period.
Noninterest Expense:
Noninterest expense increased $357,000, or 5.8%, to $6.5 million
for the three months ended September 30, 2010, from $6.2 million
for the comparable period in 2009. The primary reasons for the
increase were increases in compensation and employee benefits,
occupancy and equipment, FDIC premiums, and data processing of
$146,000, $50,000, $43,000, and $46,000, respectively for the three
months ended September 30, 2010 compared to the same period in
2009.
Noninterest expense increased $2.0 million, or 8.4%, to $26.1
million for the year ended September 30, 2010, from $24.1 million
for the comparable period in 2009. The primary reasons for the
increase were the write-down of foreclosed real estate of $1.2
million in the 2010 period, along with increases in compensation
and employee benefits of $404,000, FDIC premiums of $139,000, and
professional fees of $115,000. These increases were offset, in
part, by a decrease in advertising expense of $46,000 for the same
period.
Balance Sheet:
Total assets increased $29.9 million, or 2.9%, to $1,072.0
million at September 30, 2010, compared to $1,042.1 million at
September 30, 2009. The primary reasons for the increase in assets
were increases in investment securities available for sale of $34.8
million and investment securities held to maturity of $6.1 million.
These increases were partially offset by decreases in net loans
receivable of $2.7 million and interest-bearing deposits with other
institutions of $8.1 million. The Company sold $13.8 million of
long-term fixed rate residential loans during the year ended
September 30, 2010, as part of an overall interest rate risk
management strategy.
Total deposits increased $131.6 million at September 30, 2010,
compared to September 30, 2009, primarily as a result of an
increase in certificates of deposit accounts of $107.9 million
which included an increase of $48.7 million in brokered
certificates of deposit and an increase of $59.2 million in
traditional certificates of deposit. These increases were
supplemented by an increase in noninterest-bearing demand accounts
of $5.0 million, NOW accounts of $7.2 million, money market
accounts of $10.0 million, and savings and club accounts of $1.5
million. Borrowed funds decreased during the same time period by
$88.5 million primarily because as borrowings from FHLBank
Pittsburgh matured, brokered certificates of deposits were utilized
as a less expensive funding source and also due to increases in
deposits as noted above.
Stockholders’ equity decreased $13.9 million to $171.6 million
at September 30, 2010, compared to $185.5 million at September 30,
2009, primarily as a result of a previously announced stock
repurchase program the Company began in June 2008. In June 2009,
the Company announced that it had completed its first stock
repurchase program having purchased 2,547,135 shares at a weighted
average cost of $13.14. At the same time, it was also announced
that the Company’s Board of Directors authorized a second stock
repurchase program to purchase up to an additional 10% of its
outstanding shares. As of September 30, 2010, the Company had
purchased an additional 1,475,400 shares at a weighted average cost
of $12.36 per share under the second stock repurchase program
including the repurchase of 394,000 shares at an average cost of
$11.66 during the three months ended September 30, 2010, and the
repurchase of 1,363,400 shares at an average cost of $12.30 during
the year ended September 30, 2010. The Company previously announced
it had completed the second stock repurchase program on October 6,
2010 and also announced authorization of a third repurchase program
to purchase up to an additional 5% of outstanding shares.
Asset Quality:
Nonperforming assets totaled $12.9 million, or 1.20%, of total
assets at September 30, 2010, compared to $7.7 million, or 0.74%,
of total assets at September 30, 2009. The increase was due to
increases of $4.8 million in nonperforming residential loans,
$908,000 in commercial loans, and $208,000 in consumer loans,
offset, in part, by decreases of $546,000 in foreclosed real estate
and $229,000 in troubled debt restructures. Nonperforming
residential loans increased due to increases in the number of
nonperforming residential loans to 50 at September 30, 2010 from 19
at September 30, 2009. Nonperforming commercial loans increased
primarily as a result of the addition of two commercial real estate
relationships in the year ended September 30, 2010. Foreclosed real
estate declined primarily as a result of the write-down of $1.2
million in the value of one property in the quarter ended December
31, 2009. The Company, in response to these and other trends, made
a provision for loan losses of $2.2 million for the year ended
September 30, 2010, compared to a provision of $1.5 million for the
comparable period in 2009. The allowance for loan losses was $7.4
million, or 1.02%, of loans outstanding at September 30, 2010,
compared to $5.8 million, or 0.79%, of loans outstanding at
September 30, 2009.
ESSA Bank & Trust, a wholly-owned subsidiary of ESSA
Bancorp, Inc., has total assets of over $1 billion and is the
leading service-oriented financial institution headquartered in the
greater Pocono, Pennsylvania region. Corporate headquarters are
located in downtown Stroudsburg, Pennsylvania, and the Bank has 17
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, investment, trust, 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.
Except as required by law, 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)
September 30,2010
September 30,2009 (dollars in thousands)
ASSETS Cash and due from banks $ 7,454 $ 7,103 Interest-bearing
deposits with other institutions 3,436 11,490
Total cash and cash equivalents 10,890 18,593
Certificates of deposit — 5,355 Investment securities available for
sale 252,341 217,566 Investment securities held to maturity (fair
value of $13,254 and $6,923) 12,795 6,709 Loans receivable (net of
allowance for loan losses of $7,448 and $5,815) 730,842 733,580
Federal Home Loan Bank stock 20,727 20,727 Premises and equipment
12,189 10,620 Bank-owned life insurance 15,618 15,072 Foreclosed
real estate 2,034 2,579 Other assets 14,561
11,318 TOTAL ASSETS $ 1,071,997 $ 1,042,119
LIABILITIES Deposits $ 540,410 $ 408,855 Short-term
borrowings 14,719 48,091 Other borrowings 335,357 390,507 Advances
by borrowers for taxes and insurance 1,465 1,377 Other liabilities
8,423 7,783 TOTAL LIABILITIES
900,374 856,613 Commitment and
contingencies — — STOCKHOLDERS’ EQUITY Preferred Stock — —
Common Stock 170 170 Additional paid in capital 164,494 162,243
Unallocated common stock held by the Employee Stock Ownership Plan
(11,891 ) (12,339 ) Retained earnings 64,272 62,337 Treasury Stock,
at cost (44,870 ) (27,695 ) Accumulated other comprehensive income
(loss) (552 ) 790 TOTAL STOCKHOLDERS’
EQUITY 171,623 185,506 TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,071,997 $ 1,042,119
ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the Three MonthsEnded September 30, For
the YearEnded September 30, 2010
2009 2010 2009 (dollars in
thousands) INTEREST INCOME Loans receivable $ 9,986 $
10,484 $ 40,598 $ 42,290 Investment
securities: Taxable 2,011 2,426 8,337 9,990 Exempt from federal
income tax 77 83 315 331 Other investment income 2
1 7 122
Total interest income 12,076 12,994
49,257 52,733 INTEREST
EXPENSE Deposits 1,753 1,548 6,386 6,942 Short-term borrowings 3 52
88 395 Other borrowings 3,527 4,046
14,832 16,402 Total
interest expense 5,283 5,646
21,306 23,739 NET INTEREST
INCOME 6,793 7,348 27,951 28,994 Provision for loan losses
525 375 2,175
1,500 NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 6,268 6,973
25,776 27,494 NONINTEREST INCOME
Service fees on deposit accounts 788 812 3,191 3,181 Services
charges and fees on loans 164 117 515 567 Trust and investment fees
207 224 842 847 Impairment loss on securities — — — (68 ) Gain on
sale of investments, net 607 30 1,220 178 Gain on sale of loans,
net 118 58 354 430 Earnings on Bank-owned life insurance 137 141
547 556 Other 5 12 39
37
Total noninterest income
2,026 1,394 6,708
5,728 NONINTEREST EXPENSE Compensation and
employee benefits 3,913 3,767 14,981 14,577 Occupancy and equipment
806 756 2,951 2,916 Professional fees 355 348 1,491 1,376 Data
processing 530 484 1,971 1,886 Advertising 154 129 626 672 FDIC
Premiums 183 140 821 682 Loss on foreclosed real estate — — 1,200 —
Other 576 536 2,087
2,004 Total noninterest expense
6,517 6,160 26,128
24,113 Income before income taxes 1,777 2,207 6,356
9,109 Income taxes 730 759
1,844 2,553 NET INCOME $
1,047 $ 1,448 $ 4,512 $ 6,556
EARNINGS PER SHARE Basic $ 0.09 $ 0.11 $ 0.36 $ 0.47 Diluted
0.09 0.11 0.36 0.47
ESSA BANCORP, INC. AND SUBSIDIARY
OTHER FINANCIAL DATA
(UNAUDITED)
For the Three Months
Ended September 30,
For the YearEnded September 30,
2010 2009 2010
2009 (dollars in thousands, except per
share data) CONSOLIDATED AVERAGE BALANCES: Total assets $
1,067,253 $ 1,045,130 $ 1,049,883 $
1,030,435 Total interest-earning assets 1,022,010 1,004,797
1,005,821 988,469 Total interest-bearing liabilities 850,411
821,315 830,525 803,633 Total stockholders’ equity 176,544 187,136
181,182 191,545 PER COMMON SHARE DATA: Average shares
outstanding - basic 12,166,642 13,246,385 12,677,136 13,842,887
Average shares outstanding - diluted 12,166,642 13,288,359
12,677,136 13,905,061 Book value shares 13,482,612 14,878,620
13,482,612 14,878,620
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