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, 2011. The Company reported net income of $1.8
million, or $0.16 per diluted share, for the three months ended
September 30, 2011, compared to net income of $1.0 million, or
$0.09 per diluted share, for the corresponding 2010 period. The
$743,000 quarterly increase in net income was due to increases in
net interest income and noninterest income along with a decrease in
operating expenses. For the year ended September 30, 2011, the
Company reported net income of $5.3 million, or $0.46 per diluted
share, compared to net income of $4.5 million, or $0.36 per diluted
share for the corresponding 2010 period. The $746,000 annual
increase in net income was due primarily to increased net interest
income.
“We are pleased to report solid increases in our net income and
earnings per share results for the fourth quarter and annual
periods,” stated Gary S. Olson, President and Chief Executive
Officer of the Company. “During a period of sustained uncertainty
regarding the economy and while interest rates remain at historic
lows, we were able to improve our net interest income and increase
our total assets. An 18% increase in our deposits during the year
allowed us to replace maturing wholesale borrowings at a lower cost
and helped improve our net interest income. Growth in our
commercial loan portfolio was the driving force behind our total
loan growth during the year. While the economic environment
continues to dampen loan demand, we remain committed to the
creditworthy consumers and businesses in the communities we serve
with ample funds to lend. During the quarter we continued to
repurchase our stock as another way of increasing shareholder
value. Finally, we firmly believe that our strong capital position,
sound credit quality and underwriting standards, outstanding
customer service and knowledge of the markets we serve have
positioned us well for continuing success.”
Net Interest Income:
Net interest income increased $271,000, or 4.0%, to $7.1 million
for the three months ended September 30, 2011, from $6.8 million
for the comparable period in 2010. The increase was primarily
attributable to an increase in the Company’s interest rate spread
to 2.37% for the three months ended September 30, 2011, from 2.24%
for the comparable period in 2010, offset in part by a decrease of
$19.4 million in the Company’s average net earning assets.
Net interest income increased $945,000, or 3.4%, to $28.9
million for the year ended September 30, 2011 from $28.0 million
for the comparable period in 2010. The increase was primarily
attributable to an increase in the Company’s interest rate spread
to 2.47% from 2.34% for the comparable period in 2010, offset in
part by a decrease of $17.2 million in the Company’s average net
earning assets.
Provision for Loan Losses:
The provision for loan losses decreased $75,000, or 14.3%, to
$450,000 for the three months ended September 30, 2011, from
$525,000 for the comparable period in 2010. The provision for loan
losses decreased $120,000, or 5.5%, to $2.1 million for the year
ended September 30, 2011 from $2.2 million for the comparable
period in 2010.
The allowance for loan losses was $8.2 million, or 1.09% of
loans outstanding at September 30, 2011, compared to $7.4 million,
or 1.01% of loans outstanding at September 30, 2010.
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 provision for loan losses was in
response to this evaluation.
Noninterest Income:
Noninterest income increased $182,000, or 9.0%, to $2.2 million
for the three months ended September 30, 2011, from $2.0 million
for the comparable period in 2010. The primary reason for the
increase was an increase in insurance commissions of $236,000
during the 2011 period. The increase in insurance commissions is
primarily the result of the Company purchasing, as previously
disclosed, a benefits consulting business in the third quarter of
2011.
Noninterest income decreased $383,000, or 5.7%, to $6.3 million
for the year ended September 30, 2011, from $6.7 million for the
comparable period in 2010. The primary reasons for the decrease
were declines in both the gains on sales of investment securities
of $442,000 and the gains on sales of loans of $351,000. The
Company recorded gains on sales of investment securities of $1.2
million and gains on sales of loans of $354,000 for the year ended
September 30, 2010, as compared to $778,000 and $3,000,
respectively, for the year ended September 30, 2011. These
decreases were partially offset by an increase in insurance
commissions of $361,000.
Noninterest Expense:
Noninterest expense decreased $132,000, or 2.0%, to $6.4 million
for the three months ended September 30, 2011, from $6.5 million
for the comparable period in 2010. The primary reasons for the
decrease were declines in all noninterest expense categories with
the exceptions of compensation and employee benefits which
increased $240,000, and amortization of intangible assets which
increased $81,000.
Noninterest expense decreased $83,000, or 0.3%, to $26.0 million
for the year ended September 30, 2011, from $26.1 million for the
comparable period in 2010. The primary reason for the decrease was
a decrease in loss on foreclosed real estate of $1.2 million. This
decrease was offset, in part, by increases in compensation and
employee benefits of $884,000 and amortization of intangible assets
of $135,000. The increase in compensation and employee benefits
primarily related to four new branches opened during the second and
third quarters of 2010 along with an increase in accrued incentive
compensation in 2011. The increase in amortization expense was due
to the purchase of a benefits consulting business in the third
quarter of 2011.
Balance Sheet:
Total assets increased $25.5 million, or 2.4%, to $1,097.5
million at September 30, 2011, compared to $1,072.0 million at
September 30, 2010. The primary reasons for the increase in assets
were increases in net loans receivable of $7.8 million and in cash
and cash equivalents of $30.8 million. The increase in net loans
receivable included an increase in commercial real estate loans of
$27.3 million which was partially offset by declines in commercial
loans, home equity loans and lines of credit, residential loans,
construction loans, and other loans of $1.8 million, $3.1 million,
$12.9 million, $611,000 and $468,000, respectively. During the
fourth quarter of 2011, the Company sold $16.3 million of
investment securities in response to a rapid decline in market
interest rates.
Total deposits increased $97.5 million, or 18.0%, to $637.9
million at September 30, 2011, from $540.4 million at September 30,
2010. The primary reason for the increase was an increase in
certificate of deposit accounts of $90.8, million including an
increase of $50.2 million in brokered certificates. Noninterest
bearing demand accounts, NOW accounts and savings and club accounts
also increased $2.8 million, $3.2 million and $5.3 million,
respectively. These increases were partially offset by a decrease
in money market accounts of $4.6 million. Borrowed funds decreased
during the same time period by $61.7 million.
Stockholders’ equity decreased $9.9 million, or 5.8%, to $161.7
million at September 30, 2011, from $171.6 million at September 30,
2010, primarily as a result of previously announced stock
repurchase programs offset, in part, by current year net income. In
June 2009, the Company announced it had completed its first stock
repurchase program having purchased 2,547,135 shares at a weighted
average cost of $13.14. On October 6, 2010, the Company announced
it had completed its second stock repurchase program having
purchased 1,499,100 shares at a weighted average cost of $12.36. In
April 2011, the Company announced that it completed the third stock
repurchase program having purchased 679,900 shares at a weighted
average cost of $12.82. In September 2011, the Company announced it
completed the fourth stock repurchase program having purchased
637,200 shares at a weighted average cost of $11.57. For the
quarter ending September 30, 2011, the Company purchased a total of
535,900 shares at a weighted average cost of $11.52 per share.
Asset Quality:
Nonperforming assets totaled $13.9 million, or 1.26%, of total
assets at September 30, 2011, compared to $12.9 million, or 1.20%,
of total assets at September 30, 2010. The increase was primarily
due to increases of $2.2 million in nonperforming commercial loans
and $322,000 in foreclosed real estate offset, in part, by a
decrease of $1.5 million in nonperforming residential loans.
Commercial nonperforming loans increased primarily as a result of
the addition of four commercial real estate relationships. The
number of nonperforming residential loans at September 30, 2011
decreased to 41 compared to 50 at September 30, 2010. The Company,
in response to these and other trends, made a provision for loan
losses of $2.1 million for the year ended September 30, 2011,
compared to a provision of $2.2 million for the comparable period
in 2010. The allowance for loan losses was $8.2 million, or 1.09%,
of loans outstanding at September 30, 2011, compared to $7.4
million, or 1.01%, of loans outstanding at September 30, 2010.
ESSA Bank & Trust, a wholly-owned subsidiary of ESSA
Bancorp, Inc., has total assets of over $1.0 billion 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 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 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)
September 30,2011 September
30,2010 (dollars in thousands) ASSETS Cash and
due from banks $ 9,801 $ 7,454 Interest-bearing deposits with other
institutions 31,893 3,436 Total
cash and cash equivalents 41.694 10,890 Investment securities
available for sale 245,393 252,341 Investment securities held to
maturity (fair value of $13,254) - 12,795 Loans receivable (net of
allowance for loan losses of $8,170 and $7,448) 738,619 730,842
Federal Home Loan Bank stock 16,882 20,727 Premises and equipment
11,494 12,189 Bank-owned life insurance 23,256 15,618 Foreclosed
real estate 2,356 2,034 Intangible assets, net 1,825 - Goodwill 40
- Other assets 15,921 14,561
TOTAL ASSETS $ 1,097,480 $ 1,071,997
LIABILITIES Deposits $ 637,924 $ 540,410 Short-term borrowings
4,000 14,719 Other borrowings 284,410 335,357 Advances by borrowers
for taxes and insurance 1,381 1,465 Other liabilities 8,086
8,423 TOTAL LIABILITIES 935,801
900,374 Commitment and contingencies -
- STOCKHOLDERS’ EQUITY Preferred stock - - Common stock 170
170 Additional paid in capital 166,758 164,494 Unallocated common
stock held by the Employee Stock Ownership Plan (11,438 ) (11,891 )
Retained earnings 67,215 64,272 Treasury stock, at cost (61,612 )
(44,870 ) Accumulated other comprehensive income (loss) 586
(552 ) TOTAL STOCKHOLDERS’ EQUITY
161,679 171,623 TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY $ 1,097,480 $ 1,071,997
ESSA BANCORP, INC, AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the Three MonthsEnded September 30 For
the YearEnded September 30, 2011 2010
2011 2010 (dollars in thousands) INTEREST
INCOME Loans receivable $ 9,627 $ 9,986 $ 38,949 $ 40,598
Investment securities: Taxable 1,934 2,011 7,964 8,337 Exempt from
federal income tax 39 77 258 315 Other investment income 3
2 5 7 Total interest income
11,603 12,076 47,176 49,257
INTEREST EXPENSE Deposits 2,063 1,753 7,486 6,386
Short-term borrowings - 3 46 88 Other borrowings 2,476
3,527 10,748 14,832 Total
interest expense 4,539 5,283 18,280
21,306 NET INTEREST INCOME 7,064 6,793 28,896
27,951 Provision for loan losses 450 525
2,055 2,175 NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6,614 6,268
26,841 25,776 NONINTEREST INCOME Service fees on
deposit accounts 760 788 3,019 3,191 Services charges and fees on
loans 142 164 639 515 Trust and investment fees 255 207 851 842
Gain on sale of investments, net 607 607 778 1,220 Gain on sale of
loans, net - 118 3 354 Earnings on Bank-owned life insurance 200
137 638 547 Insurance commissions 236 - 361 - Other 8
5 36 39 Total noninterest income
2,208 2,026 6,325 6,708
NONINTEREST EXPENSE Compensation and employee benefits 4,153 3,913
15,865 14,981 Occupancy and equipment 740 806 3,071 2,951
Professional fees 228 355 1,488 1,491 Data processing 469 530 1,876
1,971 Advertising 124 154 658 626 Federal Deposit Insurance
Corporation (FDIC) Premiums 161 183 763 821 Loss (gain) on
foreclosed real estate, net (58 ) - 35 1,200 Amortization of
intangible assets 81 - 135 - Other 487 576
2,154 2,087 Total noninterest expense
6,385 6,517 26,045 26,128 Income
before income taxes 2,437 1,777 7,121 6,356 Income taxes 647
730 1,863 1,844 NET INCOME $
1,790 $ 1,047 $ 5,258 $ 4,512 Earnings per share
Basic $ 0.16 $ 0.09 $ 0.46 $ 0.36 Diluted 0.16 0.09 0.46 0.36
ESSA BANCORP, INC, AND SUBSIDIARY
OTHER FINANCIAL DATA
(UNAUDITED)
For the Three MonthsEnded September 30,
For the YearEnded September 30,
2011 2010
2011 2010 (dollars in
thousands) CONSOLIDATED AVERAGE BALANCES: Total assets $
1,109,390 $ 1,067,253 $ 1,091,297 $ 1,049,883 Total
interest-earning assets 1,054,780 1,022,010 1,041,233 1,005,821
Total interest-bearing liabilities 902,619 850,411 883,165 830,525
Total stockholders’ equity 163,711 176,544 166,616 181,182
PER COMMON SHARE DATA: Average shares outstanding - basic
11,009,812 12,166,642 11,487,915 12,677,136 Average shares
outstanding - diluted 11,009,812 12,166,642 11,487,915 12,677,136
Book value shares 12,109,622 13,482,612 12,109,622 13,482,612
Net interest rate spread 2.37 % 2.24 % 2.47 % 2.34 % Net
interest margin 2.66 % 2.64 % 2.78 % 2.78 %
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