STROUDSBURG, Pa., April 26, 2017 (GLOBE NEWSWIRE) — ESSA Bancorp, Inc. (the “Company”) (NASDAQ:ESSA) today reported net income of $1.6 million, or $0.15 per diluted share, for the quarter ended March 31, 2017, compared with net income of $2.1 million, or $0.20 per diluted share, for the same quarter last year. For the six months ended March 31, 2017, the Company reported net income of $3.6 million or $0.34 per diluted share compared with $4.1 million or $0.39 per diluted share for the six months ended March 31, 2016.
The Company is the holding company for ESSA Bank & Trust (the “Bank”), a $1.8 billion asset institution, which provides full service retail and commercial banking, financial, and investment services from 26 locations in eastern Pennsylvania, including the Poconos, Lehigh Valley, Scranton/Wilkes-Barre and suburban Philadelphia markets.
SECOND QUARTER, FIRST HALF 2017 HIGHLIGHTS
- For the six months of 2017, total interest income was $29.03 million compared with $29.00 million for the six months of 2016, reflecting a decline in income contributions from loans receivable which was more that offset by increased investment income.
- New Lehigh Valley and Philadelphia regional offices opened in first half 2017.
- Asset quality remained strong, with non-performing assets of $21.2 million, or 1.20% of total assets, at March 31, 2017 compared to $22.0 million, or 1.24% of total assets at September 30, 2016.
- Lower-cost core deposits (non-interest and interest bearing demand accounts, money market and savings) as a percentage of total deposits were 56% of total deposits at March 31, 2017 compared with 50% a year earlier.
- Total stockholders’ equity increased to $178.8 million at March 31, 2017 from $176.3 million at September 30, 2016 and $174.6 million at March 31, 2016. Tangible book value per share at March 31, 2017 increased to $14.07, compared with $14.05 at September 30, 2016, and $13.89 at March 31, 2016.
- Retained earnings demonstrated continued growth, growing to $89.3 million at March 31, 2017, compared to $87.6 million at September 30, 2016 and $85.9 million at March 31, 2016.
- The Company paid a quarterly cash dividend of $0.09 per share on March 31, 2017, its 36th consecutive quarterly cash dividend to shareholders.
Gary S. Olson, President and CEO, commented: “We continued to make headway in building our commercial lending business, growing the ESSA team and expanding our commercial banking capabilities while doing a good job of managing operating expenses, maintaining solid asset quality, and building shareholder value.
“We have significantly more resources than a year ago, yet noninterest expense was lower in quarter-over-quarter comparison, and essentially flat from first half 2016 to first half 2017. Our net income in the second quarter and first half reflected the impact of interest rate hikes that increased interest expense, while there continued to be a great deal of pricing pressure on lending.
“Commercial real estate and construction lending grew, and we had relatively stable year-over-year activity in municipal and indirect auto lending which were positives for us. Following a fiscal 2016 in which we closed a record number of loans, the first half slowing of commercial & industrial lending was disappointing. We believe this reflected, in part, a ‘wait and see’ attitude about external economic factors such as tax reform, interest rates, and the overall outlook for the economy.
“We continue to build the small business lending teams in all of our markets to more effectively compete for a larger share of the business that is available. Additional marketing expenditures, a larger and very experienced commercial banking team, new facilities and enhanced products and business banking services are supporting our transformation from a retail-focused franchise to a commercial banking-focused organization.”
Quarterly, First Half 2017 Income Statement Review
Total interest income was $14.4 million for the three months ended March 31, 2017, down from $15.2 million for the three months ended March 31, 2016. Interest income from loans declined to $11.8 million in fiscal second quarter 2017, compared to $12.8 million a year earlier. Interest expense increased $200,000 for the quarter ended March 31, 2017 compared to the comparable period in 2016, partially reflecting a larger base of deposits and increasing short-term interest rates. Total interest income for the six months ended March 31, 2017 increased $55,000 to $29.0 million compared to the comparable period in 2016. Total interest expense increased $495,000 to $6.1 million for the six months ended March 31, 2017 compared to the same period in 2016.
Net interest income decreased $980,000, or 8.0%, to $11.3 million for the three months ended March 31, 2017, from $12.3 million for the comparable period in 2016. Net interest income for the six months ended March 31, 2017 declined $440,000 to $22.9 million at March 31, 2017 from $23.4 million in the prior comparable period.
The Company’s provision for loan losses increased to $750,000 for the three months ended March 31, 2017, compared with $600,000 for the three months ended March 31, 2016. The Company’s provision for loan losses increased to $1.5 million for the six months ended March 31, 2017, compared with $1.2 million for the six months ended March 31, 2016. These increases reflected additional provisioning related to increased loan charge-offs.
The net interest margin for the second quarter of 2017 was 2.80%, which was unchanged from the previous quarter, and compares to 3.00% for the second quarter of fiscal 2016. While the Company continues to address margin compression, it has been successful in maintaining relative margin stability in the past several quarters. The net interest margin for the six months ended March 31, 2017 was 2.80% compared to 2.93% for the six months ended March 31, 2016.
Noninterest income decreased $493,000 or 21.7%, to $1.8 million for the three months ended March 31, 2017, compared with $2.3 million for the three months ended March 31, 2016. The decrease in fiscal second quarter 2017 primarily reflected a decreased gain on sale of investments of $365,000.
Noninterest income decreased $453,000 to $3.6 million for the six months ended March 31, 2017, compared with $4.1 million for the six months ended March 31, 2016. This decrease was primarily due to a decrease in gain on sale of investments of $368,000 in the fiscal 2017 year-to-date period compared to the 2016 year-to-date period.
Noninterest expense decreased $602,000 or 5.4%, to $10.5 million for the three months ended March 31, 2017 compared with $11.1 million for the comparable period in 2016. Period over period decreases in several expense categories are due primarily to management’s continued efforts to increase efficiencies and reduce costs. Noninterest expense increased $14,000 to $20.9 million for the six months ended March 31, 2017 compared with the comparable period in 2016.
The Company’s effective tax rates declined for both the three and six month periods ended March 31, 2017 compared to the same periods in 2016. The declines were due primarily to the previously disclosed adoption, by the Company, of ASU 2016-09 during the first fiscal quarter of 2017. The adoption resulted in the recognition of all excess tax benefits for share-based payment awards being recognized in income taxes. Previously, such tax benefits were recognized in additional paid in capital.
Balance Sheet, Asset Quality and Capital Adequacy Review
Total assets declined $13.8 million to $1.76 billion at March 31, 2017, from $1.77 billion at September 30, 2016, primarily reflecting declines in total cash and cash equivalents and loans receivable, which were partially offset by increased investment securities available for sale.
Total net loans declined $10.7 million at March 31, 2017, to $1.21 billion, compared to $1.22 billion at September 30, 2016. The primary impact was from the continuing decline of the Company’s residential mortgage loan portfolio, which reflects ongoing soft residential real estate markets in the Company’s served markets. Commercial real estate, construction and municipal loans increased from September 30, 2016. Consumer loans and indirect auto loans declined from September 30, 2016.
Total deposits increased $23.6 million, or 1.9%, to $1.24 billion at March 31, 2017, from $1.21 billion at September 30, 2016. During the same period, borrowings decreased $39.9 million. Core deposits were $691.3 million, or 56% of total deposits at March 31, 2017, compared with $605.4 million or 50% of total deposits at March 31, 2016.
Asset quality remained strong. Nonperforming assets totaled $21.2 million, or 1.20% of total assets, at March 31, 2017, compared to $25.0 million, or 1.42% of total assets, at March 31, 2016 and $22.0 million, or 1.24% of total assets at September 30, 2016. The allowance for loan losses was $9.4 million, or 0.77% of loans outstanding, at March 31, 2017, compared to $9.1 million, or 0.74% of loans outstanding at September 30, 2016.
For the fiscal second quarter of 2017, the Company’s return on average assets and return on average equity were 0.38% and 3.80%, compared with 0.49% and 4.92%, respectively, in the corresponding period of fiscal 2016. For the six months ended March 31, 2017, the Company’s return on average assets and return on average equity were 0.41% and 4.09%, compared with 0.48% and 4.72%, respectively, in the corresponding period of fiscal 2016.
The Bank continued to demonstrate financial strength, with a Tier 1 leverage ratio of 9.06%, exceeding regulatory standards for a well-capitalized institution. The Company maintained a tangible equity to total assets ratio of 8.83%.
Total stockholders’ equity increased $2.4 million to $178.8 million at March 31, 2017, from $176.3 million at September 30, 2016. Total stockholders’ equity was also up year-over-year. Tangible book value per share at March 31, 2017 increased to $14.07, compared with $14.05 at September 30, 2016, and $13.89 at March 31, 2016.
Olson concluded: “We were pleased that our results reflected meaningful increases in the Company’s deposits and in the value to shareholders, including total stockholders’ equity, retained earnings, and tangible book value per share. We feel confident our team can make the most of every opportunity available, and we will certainly maintain our strong commitment to credit and risk management and to building shareholder value.”
About the Company: ESSA Bancorp, Inc. is the holding company for its wholly-owned subsidiary, ESSA Bank & Trust, which was formed in 1916. Headquartered in Stroudsburg, Pennsylvania, the Company has total assets of $1.8 billion and has 26 community offices throughout the Greater Pocono, Lehigh Valley, Scranton/Wilkes-Barre, and suburban Philadelphia. ESSA Bank & Trust offers a full range of commercial and retail financial services, financial advisory and asset management capabilities. ESSA Bancorp Inc. stock trades on the NASDAQ Global 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.
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
| ESSA BANCORP, INC. AND SUBSIDIARY | |||||||
| CONSOLIDATED BALANCE SHEET | |||||||
| (UNAUDITED) | |||||||
| March 31, 2017 |
September 30, 2016 |
||||||
| (dollars in thousands) | |||||||
| ASSETS | |||||||
| Cash and due from banks | $ | 26,495 | $ | 31,815 | |||
| Interest-bearing deposits with other institutions | 9,948 | 11,843 | |||||
| Total cash and cash equivalents | 36,443 | 43,658 | |||||
| Certificates of deposit | 1,000 | 1,250 | |||||
| Investment securities available for sale | 395,315 | 390,410 | |||||
| Loans receivable (net of allowance for loan losses of $9,366 and $9,056) | 1,208,497 | 1,219,213 | |||||
| Regulatory stock, at cost | 13,972 | 15,463 | |||||
| Premises and equipment, net | 16,539 | 16,844 | |||||
| Bank-owned life insurance | 37,112 | 36,593 | |||||
| Foreclosed real estate | 3,315 | 2,659 | |||||
| Intangible assets, net | 2,160 | 2,487 | |||||
| Goodwill | 13,801 | 13,801 | |||||
| Deferred income taxes | 12,171 | 11,885 | |||||
| Other assets | 18,404 | 18,216 | |||||
| TOTAL ASSETS | $ | 1,758,729 | $ | 1,772,479 | |||
| LIABILITIES | |||||||
| Deposits | $ | 1,238,375 | $ | 1,214,820 | |||
| Short-term borrowings | 120,951 | 129,460 | |||||
| Other borrowings | 199,168 | 230,601 | |||||
| Advances by borrowers for taxes and insurance | 9,115 | 4,956 | |||||
| Other liabilities | 12,351 | 16,298 | |||||
| TOTAL LIABILITIES | 1,579,960 | 1,596,135 | |||||
| STOCKHOLDERS’ EQUITY | |||||||
| Common stock | 181 | 181 | |||||
| Additional paid in capital | 180,729 | 181,900 | |||||
| Unallocated common stock held by the Employee Stock Ownership Plan | (8,947 | ) | (9,174 | ) | |||
| Retained earnings | 89,299 | 87,638 | |||||
| Treasury stock, at cost | (80,129 | ) | (82,369 | ) | |||
| Accumulated other comprehensive loss | (2,364 | ) | (1,832 | ) | |||
| TOTAL STOCKHOLDERS’ EQUITY | 178,769 | 176,344 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,758,729 | $ | 1,772,479 | |||
| ESSA BANCORP, INC. AND SUBSIDIARY | |||||||||||
| CONSOLIDATED STATEMENT OF INCOME | |||||||||||
| (UNAUDITED) | |||||||||||
| For the Three Months Ended March 31, |
For the Six Months Ended March 31, |
||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||
| (dollars in thousands) | |||||||||||
| INTEREST INCOME | |||||||||||
| Loans receivable | $ | 11,799 | $ | 12,805 | $ | 24,050 | $ | 24,379 | |||
| Investment securities: | |||||||||||
| Taxable | 2,043 | 1,903 | 3,917 | 3,721 | |||||||
| Exempt from federal income tax | 303 | 255 | 612 | 499 | |||||||
| Other investment income | 234 | 196 | 450 | 375 | |||||||
| Total interest income | 14,379 | 15,159 | 29,029 | 28,974 | |||||||
| INTEREST EXPENSE | |||||||||||
| Deposits | 2,069 | 1,944 | 4,081 | 3,789 | |||||||
| Short-term borrowings | 296 | 115 | 547 | 209 | |||||||
| Other borrowings | 710 | 816 | 1,465 | 1,600 | |||||||
| Total interest expense | 3,075 | 2,875 | 6,093 | 5,598 | |||||||
| NET INTEREST INCOME | 11,304 | 12,284 | 22,936 | 23,376 | |||||||
| Provision for loan losses | 750 | 600 | 1,500 | 1,200 | |||||||
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 10,554 | 11,684 | 21,436 | 22,176 | |||||||
| NONINTEREST INCOME | |||||||||||
| Service fees on deposit accounts | 813 | 875 | 1,677 | 1,738 | |||||||
| Services charges and fees on loans | 273 | 297 | 627 | 577 | |||||||
| Trust and investment fees | 214 | 194 | 364 | 407 | |||||||
| Gain on sale of investments, net | – | 365 | – | 368 | |||||||
| Earnings on Bank-owned life insurance | 256 | 234 | 519 | 464 | |||||||
| Insurance commissions | 203 | 217 | 396 | 416 | |||||||
| Other | 25 | 95 | 58 | 124 | |||||||
| Total noninterest income | 1,784 | 2,277 | 3,641 | 4,094 | |||||||
| NONINTEREST EXPENSE | |||||||||||
| Compensation and employee benefits | 6,056 | 6,003 | 12,233 | 11,581 | |||||||
| Occupancy and equipment | 1,190 | 1,422 | 2,281 | 2,531 | |||||||
| Professional fees | 835 | 672 | 1,580 | 1,125 | |||||||
| Data processing | 931 | 1,079 | 1,865 | 1,998 | |||||||
| Advertising | 241 | 153 | 546 | 240 | |||||||
| Federal Deposit Insurance Corporation Premiums | 213 | 322 | 400 | 600 | |||||||
| (Gain)loss on foreclosed real estate | (5 | ) | 161 | (101 | ) | 151 | |||||
| Merger related costs | – | – | – | 245 | |||||||
| Amortization of intangible assets | 164 | 223 | 327 | 397 | |||||||
| Other | 879 | 1,071 | 1,775 | 2,024 | |||||||
| Total noninterest expense | 10,504 | 11,106 | 20,906 | 20,892 | |||||||
| Income before income taxes | 1,834 | 2,855 | 4,171 | 5,378 | |||||||
| Income taxes | 203 | 726 | 603 | 1,292 | |||||||
| Net Income | $ | 1,631 | $ | 2,129 | $ | 3,568 | $ | 4,086 | |||
| Earnings per share: | |||||||||||
| Basic | $ | 0.15 | $ | 0.20 | $ | 0.34 | $ | 0.39 | |||
| Diluted | $ | 0.15 | $ | 0.20 | $ | 0.34 | $ | 0.39 | |||
| For the Three Months Ended March 31, |
For the Six Months Ended March 31, |
|||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||
| (dollars in thousands) | ||||||||||||||
| CONSOLIDATED AVERAGE BALANCES: | ||||||||||||||
| Total assets | $ | 1,762,076 | $ | 1,757,983 | $ | 1,765,294 | $ | 1,704,095 | ||||||
| Total interest-earning assets | 1,636,516 | 1,647,423 | 1,641,759 | 1,597,582 | ||||||||||
| Total interest-bearing liabilities | 1,419,385 | 1,411,758 | 1,423,974 | 1,379,842 | ||||||||||
| Total stockholders’ equity | 173,857 | 173,918 | 174,892 | 173,280 | ||||||||||
| PER COMMON SHARE DATA: | ||||||||||||||
| Average shares outstanding – basic | 10,592,997 | 10,385,154 | 10,526,084 | 10,375,614 | ||||||||||
| Average shares outstanding – diluted | 10,691,960 | 10,524,697 | 10,617,241 | 10,515,770 | ||||||||||
| Book value shares | 11,574,829 | 11,367,654 | 11,574,829 | 11,367,654 | ||||||||||
| Net interest rate spread | 2.72 | % | 2.91 | % | 2.72 | % | 2.85 | % | ||||||
| Net interest margin | 2.80 | % | 3.00 | % | 2.80 | % | 2.93 | % | ||||||
CONTACT: Contact: Gary S. Olson, President & CEO Corporate Office: 200 Palmer Street, Stroudsburg, Pennsylvania 18360 Telephone:(570) 421-0531