UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
[X] Quarterly Report Pursuant To Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2007
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _________
--------- ---------
Commission File No. 001-33384
ESSA Bancorp, Inc.
------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 20-8023072
------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 Palmer Street, Stroudsburg, Pennsylvania 18360
-------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(570) 421-0531
--------------
(Registrant's telephone number)
N/A
---
(Former name or former address, if changed since last report)
----------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
requirements for the past 90 days. YES [ X ] NO [ ].
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [ X ]
As of August 14, 2007 there were 16,980,900 shares of the Registrant's
common stock, par value $0.01 per share, outstanding.
Explanatory Note
----------------
This Amendment to Form 10-Q (this "Amendment") is being filed by ESSA
Bancorp, Inc. (the "Company") to amend its Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2007 filed with the Securities and Exchange
Commission on August 14, 2007 (the "Initial Form 10-Q"). This Amendment is
required due to the restatement of earnings per share on the Consolidated
Statement of Income (Loss) included in the Initial Form 10-Q related to
corrections that became necessary following a review of current year earnings
from the April 3, 2007 until the end of the period. Our net loss for this period
of $9.0 million has been corrected in Note 3 to our unaudited Consolidated
Financial Statements contained herein. This correction did not necessitate any
change in our Consolidated Statement of Income (Loss).
This Amendment includes a restatement which changes Part I - Items 1.
Except as otherwise specifically noted, all information contained herein is as
of June 30, 2007 and for the nine-months then ended does not reflect any events
or changes that have occurred subsequent to that date. We are not required to
and we have not updated any forward-looking statements previously included in
the Initial Form 10-Q.
ESSA Bancorp, Inc.
FORM 10-Q
Index
Page
--------
Part I. Financial Information
Item 1. Financial Statements (unaudited) 4
Part II. Other Information
Item 6. Exhibits 14
Signature Page 15
3
Part I. Financial Information
Item 1. Financial Statements
ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30, September 30,
2007 2006
------------------ -------------------
(dollars in thousands)
ASSETS
Cash and due from banks..............................................................$ 15,033 $ 11,677
Interest-bearing deposits with other institutions.................................... 6,074 1,053
------------------ -------------------
-
Total cash and cash equivalents................................................ 21,107 12,730
Investment securities available for sale............................................. 203,185 89,122
Investment securities held to maturity (market value of $17,250 and $19,193)......... 17,657 19,715
Loans receivable (net of allowance for loan losses of $4,116 and $3,855)............. 599,656 556,677
Federal Home Loan Bank stock......................................................... 15,231 13,675
Premises and equipment............................................................... 11,391 11,447
Bank-owned life insurance............................................................ 13,786 13,376
Other assets......................................................................... 10,242 9,054
------------------ -------------------
TOTAL ASSETS...................................................................$ 892,255 $ 725,796
================== ==================
=
LIABILITIES
Deposits.............................................................................$ 397,480 $ 402,153
Short-term borrowings................................................................ 33,031 35,299
Other borrowings..................................................................... 248,000 224,000
Advances by borrowers for taxes and insurance........................................ 5,156 2,198
Other liabilities.................................................................... 4,216 3,809
------------------ -------------------
-
TOTAL LIABILITIES.............................................................. 687,883 667,459
------------------ -------------------
-
Commitment and contingencies......................................................... -- --
STOCKHOLDERS' EQUITY
Preferred stock ($.01 par value: 10,000,000 shares authorized, none issued).......... -- --
Common stock ($.01 par value; 40,000,000 shares authorized, 16,980,900 shares issued
and outstanding).................................................................. 170 --
Additional paid in capital........................................................... 166,769 --
Unallocated common stock held by the Employee Stock Ownership Plan................... (13,434) --
Retained earnings.................................................................... 51,682 58,526
Accumulated other comprehensive loss................................................. (815) (189)
------------------ -------------------
-
TOTAL STOCKHOLDERS' EQUITY..................................................... 204,372 58,337
------------------ -------------------
-
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.....................................$ 892,255 $ 725,796
================== ==================
See accompanying notes to the unaudited consolidated financial statements.
4
ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME (LOSS)
(UNAUDITED)
For the Three Months For the Nine Months
Ended June 30, Ended June 30,
----------------------- --------------------
2007 2006 2007 2007
--------- ------- ------ ------
(dollars in thousands, except per share data)
INTEREST INCOME
Loans receivable................................................................$ 9,041 $ 8051 $ 26,426 $ 23,399
Investment securities:..........................................................
Taxable................................................................... 2,634 954 5,127 2,490
Exempt from federal income tax............................................ 74 71 221 204
Other investment income......................................................... 424 228 1,209 641
--------- -------- ------- -------
Total interest income..................................................... 12,173 9,304 32,983 26,734
--------- -------- ------- -------
INTEREST EXPENSE
Deposits........................................................................ 2,546 2,340 7,912 6,443
Short-term borrowings........................................................... 480 23 1,319 433
Other borrowings................................................................ 2,821 2,530 8,238 6,947
---------- ------- --------- -------
Total interest expense.................................................... 5,847 4,893 17,469 13,823
---------- -------- --------- -------
NET INTEREST INCOME................................................................... 6,326 4,411 15,514 12,911
Provision for loan losses....................................................... 90 75 270 225
---------- -------- --------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES................................... 6,236 4,336 15,244 12,686
---------- -------- --------- -------
NONINTEREST INCOME
Service fees on deposit accounts................................................ 873 933 2,629 2,853
Services charges and fees on loans.............................................. 178 120 434 355
Trust and investment fees....................................................... 195 179 595 498
Gain on sale of loans, net...................................................... -- 7 12 7
Earnings on Bank-owned life insurance........................................... 143 131 410 381
Other........................................................................... 22 25 56 73
---------- -------- ------- -------
Total noninterest income.................................................. 1,411 1,395 4,136 4,167
---------- -------- ------- -------
NONINTEREST EXPENSE
Compensation and employee benefits.............................................. 2,828 2,381 7,995 6,952
Occupancy and equipment......................................................... 690 606 1,951 1,819
Professional fees............................................................... 278 206 586 602
Data processing................................................................. 475 433 1,358 1,341
Advertising..................................................................... 178 135 514 446
Contribution to charitable foundation........................................... 12,693 97 12,693 303
Other........................................................................... 426 394 1,206 1,164
---------- -------- --------- -------
Total noninterest expense................................................. 17,568 4,252 26,303 12,627
---------- -------- --------- -------
Income (loss) before income tax expense (benefit)..................................... (9,921) 1,479 (6,923) 4,226
Income tax expense (benefit).......................................................... (915) 457 (79) 1,276
---------- ------- --------- -------
NET INCOME (LOSS).....................................................................$ (9,006) $ 1,022 $ (6,844) $ 2,950
=========== ========== =========== =========
Basic loss per common share, from date of initial stock offering:.....................$ (0.58) $ - $ (0.58) $ -
============ ===========
See accompanying notes to the unaudited consolidated financial statements.
5
ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
Nine Months Ended June 30, 2007
(dollars in thousands)
Additional Unallocated Accumulated Other
Common Paid In Common Stock Retained Comprehensive Total Comprehensive
Stock Capital Held by the Earnings Loss Stockholders' Loss
---- ------ ESOP ------- ---- Equity ----
---- ------
Balance, September 30, 2006
$- $- $- $58,526 $ (189) $58,337
Net loss.................. ( 6,844) - (6,844) (6,844)
Other comprehensive loss:
Unrealized loss on
securities available for
sale, net of tax expense
benefit of $322......... (626) (626) (626)
Sale of 16,980,900 shares of
common stock in the
initial public offering.. 170 166,745 (13,585) 153,330
Allocation of ESOP stock.. 24 151 175
----------- -------------- -------------- ----------- ------------------- --------------- -----------
----------- -------------- -------------- ----------- ------------------- --------------- -----------
Comprehensive loss........ $(7,470)
========
Balance, June 30, 2007.... $170 $166,769 $ (13,434) $51,682 $(815) $204,372
---- -------- ---------- ------- ------ ========
See accompanying notes to the unaudited consolidated financial statements.
6
ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Nine Months
Ended June 30,
---------------------
2007 2006
-------- ---------
(dollars in thousands)
OPERATING ACTIVITIES
Net income (loss)...............................................................................$ (6,844) $ 2,950
Adjustments to reconcile net income (loss) to net cash provided by (used for)
operating activities:........
Provision for loan losses................................................................. 270 225
Provision for depreciation and amortization............................................... 873 827
Accretion of discounts and premiums....................................................... (217) 12
Amortization of unallocated common stock held by ESOP..................................... 175 -
Gain on sale of loans, net................................................................ (12) (7)
Origination of loans held for sale........................................................ (899) -
Proceeds from sale of loans............................................................... 911 -
Increase in accrued interest receivable................................................... (1,528) (335)
Increase (decrease) in accrued interest payable........................................... (38) 399
Earnings on Bank-owned life insurance..................................................... (410) (381)
Deferred federal income taxes (benefit)................................................... (2,276) (293)
Other, net................................................................................ 3,148 (490)
-------- ------
Net cash provided by (used for) operating activities...................................... (6,577) 2,907
-------- ------
INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from principal repayments and maturities......................................... 36,771 19,907
Purchases.................................................................................(151,656) (37,790)
Investment securities held to maturity:.........................................................
Proceeds from principal repayments and maturities......................................... 2,046 2,916
Purchases................................................................................. 0 (1,988)
Increase in loans receivable, net............................................................... (43,146) (32,427)
Proceeds from the sale of loans................................................................. - 340
Redemption of FHLB stock........................................................................ 1,622 1,489
Purchase of FHLB stock.......................................................................... (3,178) (2,665)
Purchase of premises, equipment, and software................................................... (852) (1,046)
--------- --------
Net cash used for investing activities....................................................(158,393) (51,264)
--------- --------
FINANCING ACTIVITIES
Decrease (increase) in deposits, net............................................................ (4,673) 26,368
Net decrease in short-term borrowings........................................................... (2,268) (9,741)
Proceeds from long-term FHLB borrowings......................................................... 36,000 31,000
Repayment of long-term FHLB borrowings.......................................................... (12,000) (8,000)
Increase (decrease) in advances by borrowers for taxes and insurance............................ 2,958 3,178
Proceeds from the issuance of common stock...................................................... 153,330 -
--------- --------
Net cash provided by financing activities................................................. 173,347 42,805
--------- --------
Increase (decrease) in cash and cash equivalents.......................................... 8,377 (5,552)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...................................................... 12,730 20,290
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................................................$ 21,107 $ 14,738
--------- ---------
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid:......................................................................................
Interest..................................................................................$ 17,507 $ 13,424
Income taxes.............................................................................. 1,140 1,225
See accompanying notes to the unaudited consolidated financial statements.
7
ESSA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(unaudited)
1. Nature of Operations and Basis of Presentation
The unaudited, consolidated financial statements include the accounts of
ESSA Bancorp, Inc. (the "Company"), ESSA Bank & Trust (the "Bank"), and the
Bank's wholly owned subsidiaries, ESSACOR Inc. and Pocono Investment Company.
The Bank is a Pennsylvania chartered savings association located in Stroudsburg,
Pennsylvania. The Bank's primary business consists of the taking of deposits and
granting of loans to customers generally in Monroe and Northampton counties,
Pennsylvania. The Bank is subject to regulation and supervision by the
Pennsylvania Department of Banking and the Office of Thrift Supervision (the
"OTS").
ESSACOR, Inc. is a Pennsylvania corporation that is currently inactive.
Pocono Investment Company is a Delaware corporation formed as an investment
company subsidiary to hold and manage certain investments of ESSA Bank & Trust,
including certain intellectual property. All intercompany transactions have been
eliminated in consolidation.
The unaudited consolidated financial statements reflect all adjustments,
which in the opinion of management are necessary for a fair presentation of the
results of the interim periods and are of a normal and recurring nature.
Operating results for the three- and nine-month periods ended June 30, 2007 are
not necessarily indicative of the results that may be expected for the year
ending September 30, 2007.
2. Completion of Initial Public Offering
On July 25, 2006, the ESSA Bank & Trust's Board of Directors adopted a Plan
of Conversion (the "Plan") pursuant to which the Bank converted to a
Pennsylvania chartered stock association and formed ESSA Bancorp, Inc., a
Pennsylvania chartered company (the "Company"). On December 7, 2006 the Company
filed a Registration Statement on Form S-1 with the Securities and Exchange
Commission (File No. 333-139157) with respect to the shares to be offered and
sold pursuant to the Plan. The Company registered for offer and sale 16,980,900
shares of common stock, par value $0.01 per share, at a sales price of $10.00
per share.
The stock offering was consummated on April 3, 2007, resulting in gross
proceeds of $158.7 million, through the sale of 15,870,000 shares at a price of
$10.00 per share. The Company also contributed 1,110,900 shares of its common
stock to the ESSA Bank & Trust Foundation and $1.6 million in cash. Expenses
related to the offering were approximately $2.9 million which resulted in net
proceeds of approximately $155.9 million prior to the contribution to the ESSA
Bank & Trust Foundation.
The Company lent approximately $13.6 million to the Bank's Employee Stock
Ownership Plan. The Company retained approximately $64.3 million of the net
proceeds of the offering prior to the contribution to the ESSA Bank & Trust
Foundation, and the remainder of the net proceeds were contributed to the Bank.
3. Earnings per Share
Basic loss per common share has been calculated based on a net loss of $9.0
million from April 3, 2007 to June 30, 2007 (the period during which the common
stock was outstanding), and weighted average common shares of 15,627,802
outstanding for the period. The number of shares outstanding for this purpose
excludes unallocated ESOP shares.
4. Use of Estimates in the Preparation of Financial Statements
The accounting principles followed by the Bank and its subsidiaries and the
methods of applying these principles conform to U.S. generally accepted
accounting principles and to general practice within the banking industry. In
preparing the consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
8
liabilities as of the balance sheet date and related revenues and expenses for
the period. Actual results could differ significantly from those estimates.
5. Comprehensive Income (Loss)
The components of comprehensive income (loss) consist exclusively of
unrealized gains and losses on available for sale securities. For the nine
months ended June 30, 2007, this activity is shown under the heading
Comprehensive Income (Loss) as presented in the Consolidated Statement of
Changes in Stockholders' Equity (Unaudited). For the three months ended June 30,
2007, comprehensive (loss) totaled $9.9 million. For the three and nine months
ended June 30, 2006, comprehensive income totaled $678,000 and $2.4 million,
respectively.
6. Recent Accounting Pronouncements
In September 2006, the FASB issued FAS No. 157, Fair Value Measurements,
which provides enhanced guidance for using fair value to measure assets and
liabilities. The standard applies whenever other standards require or permit
assets or liabilities to be measured at fair value. The Standard does not expand
the use of fair value in any new circumstances. FAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007
and interim periods within those fiscal years. Early adoption is permitted. The
Company is currently evaluating the impact the adoption of the standard will
have on the Company's financial position and results of operations.
In September 2006, the FASB issued FAS No. 158, Employers' Accounting for
Defined Benefit Pension and Other Post Retirement Plans, an amendment of FASB
Statements No. 87, 88, 106 and 132(R). FAS No. 158 requires that a company
recognize the overfunded or underfunded status of its defined benefit post
retirement plans (other than multiemployer plans) as an asset or liability in
its statement of financial position and that it recognize changes in the funded
status in the year in which the changes occur through other comprehensive
income. FAS No. 158 also requires the measurement of defined benefit plan assets
and obligations as of the fiscal year end, in addition to footnote disclosures.
FAS No. 158 is effective for fiscal years ending after December 15, 2006. The
Company is currently evaluating the impact the adoption of the standard will
have on the Company's financial position.
In February 2007, the FASB issued FAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No. 115, which provides all entities with an option to report selected
financial assets and liabilities at fair value. The objective of the FAS No. 159
is to improve financial reporting by providing entities with the opportunity to
mitigate volatility in earnings caused by measuring related assets and
liabilities differently without having to apply the complex provisions of hedge
accounting. FAS No. 159 is effective as of the beginning of an entity's first
fiscal year beginning after November 15, 2007. Early adoption is permitted as of
the beginning of a fiscal year that begins on or before November 15, 2007
provided the entity also elects to apply the provisions of FAS No. 157, Fair
Value Measurements. The adoption of this standard is not expected to have a
material effect on the Company's results of operations or financial position.
In June 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"),
Accounting for Uncertainty in Income Taxes. FIN 48 is an interpretation of FAS
No. 109, Accounting for Income Taxes, and it seeks to reduce the diversity in
practice associated with certain aspects of measurement and recognition in
accounting for income taxes. In addition, FIN No. 48 requires expanded
disclosure with respect to the uncertainty in income taxes and is effective for
fiscal years beginning after December 15, 2006. The Company is currently
evaluating the impact the adoption of the standard will have on the Company's
results of operations.
In September 2006, the SEC issued Staff Accounting Bulletin No. 108 ("SAB
108"), Considering the Effects of Prior Year Misstatements When Quantifying
Misstatements in Current Year Financial Statements, providing guidance on
quantifying financial statement misstatement and implementation when first
applying this guidance. Under SAB No. 108, companies should evaluate a
9
misstatement based on its impact on the current year income statement, as well
as the cumulative effect of correcting such misstatements that existed in prior
years existing in the current year's ending balance sheet. SAB 108 is effective
for fiscal years ending after November 15, 2006. The Company is currently
evaluating the impact the adoption of the standard will have on the Company's
results of operations.
In September 2006, the FASB reached consensus on the guidance provided by
Emerging Issues Task Force Issue 06-4 ("EITF 06-4"), Accounting for Deferred
Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life
Insurance Arrangements. The guidance is applicable to endorsement split-dollar
life insurance arrangements, whereby the employer owns and controls the
insurance policy, that are associated with a postretirement benefit. EITF 06-4
requires that for a split-dollar life insurance arrangement within the scope of
the Issue, an employer should recognize a liability for future benefits in
accordance with FAS No. 106 (if, in substance, a postretirement benefit plan
exists) or Accounting Principles Board Opinion No. 12 (if the arrangement is, in
substance, an individual deferred compensation contract) based on the
substantive agreement with the employee. EITF 06-4 is effective for fiscal years
beginning after December 15, 2007. The Company is currently evaluating the
impact the adoption of the EITF will have on the Company's results of operations
or financial condition.
In September 2006, the FASB reached consensus on the guidance provided by
Emerging Issues Task Force Issue 06-5("EITF 06-5"), Accounting for Purchases of
Life Insurance--Determining the Amount That Could Be Realized in Accordance with
FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance.
EITF 06-5 states that a policyholder should consider any additional amounts
included in the contractual terms of the insurance policy other than the cash
surrender value in determining the amount that could be realized under the
insurance contract. EITF 06-5 also states that a policyholder should determine
the amount that could be realized under the life insurance contract assuming the
surrender of an individual-life by individual-life policy (or certificate by
certificate in a group policy). EITF 06-5 is effective for fiscal years
beginning after December 15, 2006. The Company is currently evaluating the
impact the adoption of the standard will have on the Company's results of
operations or financial condition.
In March 2007, the FASB ratified Emerging Issues Task Force Issue No. 06-10
("EITF 06-10"), Accounting for Collateral Assignment Split-Dollar Life Insurance
Agreements. EITF 06-10 provides guidance for determining a liability for the
postretirement benefit obligation as well as recognition and measurement of the
associated asset on the basis of the terms of the collateral assignment
agreement. EITF 06-10 is effective for fiscal years beginning after December 15,
2007. The Company is currently evaluating the impact the adoption of the EITF
will have on the Company's results of operations or financial condition.
In June 2007, the FASB ratified Emerging Issues Task Force Issue No. 06-11
("EITF 06-11"), Accounting for Income Tax Benefits of Dividends on Share-Based
Payment Awards. EITF 06-11 applies to share-based payment arrangements with
dividend protection features that entitle employees to receive (a) dividends on
equity-classified nonvested shares, (b) dividend equivalents on
equity-classified nonvested share units, or (c) payments equal to the dividends
paid on the underlying shares while an equity-classified share option is
outstanding, when those dividends or dividend equivalents are charged to
retained earnings under FAS No. 123R, Share-Based Payment, and result in an
income tax deduction for the employer. A consensus was reached that a realized
income tax benefit from dividends or dividend equivalents that are charged to
retained earnings and are paid to employees for equity-classified nonvested
equity shares, nonvested equity share units, and outstanding equity share
options should be recognized as an increase in additional paid-in capital. EITF
06-11 is effective for fiscal years beginning after December 15, 2007, and
interim periods within those fiscal years. The Company is currently evaluating
the impact the adoption of the EITF will have on the Company's financial
condition.
10
7. Investment Securities
The amortized cost and estimated market value of investment securities
available for sale and held to maturity are summarized as follows (in
thousands):
June 30, 2007
-------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ------------ ----------- ----------
Available for Sale
Fannie Mae................................................................$ 21,189 $ 29 $ (176) $ 21,042
Freddie Mac............................................................... 70,145 15 (1,052) 69,108
Governmental National Mortgage
Association securities.............................................. 15,797 70 (119) 15,748
------------- ---------- ---------- ----------
Total mortgage-backed securities 107,131 114 (1,347) 105,898
Obligations of states and political subdivisions.......................... 7,173 131 (70) 7,234
U.S. government agency securities......................................... 89,225 36 (177) 89,084
------------- --------- ---------- ---------
Total debt securities............................................... 203,529 281 (1,594) 202,216
Equity securities......................................................... 882 100 (14) 969
------------- -------- ---------- ---------
Total.........................................................$ 204,411 $ 381 $ (1,608) $ 203,185
============= ============= ============== ============
=
Held to Maturity
Fannie Mae................................................................$ 8,055 $ 2 $ (257) $ 7,800
Freddie Mac............................................................... 4,871 -- (112) 4,759
------------- ------------- ------------- ------------
Total mortgage-backed securities.................................... 12,926 2 (369) 12,559
U.S. government agency securities......................................... 4,731 -- (40) 4,691
------------- ------------- ------------- ------------
Total.........................................................$ 17,657 $ 2 $ (409) $ 17,250
============= ============= ============= =============
=
September 30, 2006
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ------------ ----------- ----------
Available for Sale
Fannie Mae..................................................................$ 6,988 $ 33 $ (31) $ 6,990
Freddie Mac................................................................. 22,836 3 (523) 22,316
Governmental National Mortgage
Association securities................................................ 10,503 98 -- 0,601
------------ ------------ ------------- -----------
Total mortgage-backed securities................................ 40,327 134 (554) 39,907
Obligations of states and political subdivisions............................ 6,240 225 -- 6,465
U.S. government agency securities........................................... 41,960 35 (180) 41,815
------------ ------------ ------------- -----------
Total debt securities................................................. 88,527 394 (734) 88,187
Equity securities........................................................... 882 64 (11) 9
------------ ----------- ------------- -----------
Total.................................................................$ 89,409 $ 458 $ (745) $ 89,122
============ =========== ============= ===========
Held to Maturity
Fannie Mae..................................................................$ 9,263 $ 4 $ (309) $ 8,958
Freddie Mac................................................................. 5,722 -- (168) 5,554
------------
Total mortgage-backed securities...................................... 14,985 4 (477) 14,512
U.S. government agency securities........................................... 4,730 -- (49) 4,681
------------
Total...........................................................$ 19,715 $ 4 $ (526) $ 19,193
============ ============ ============ ==========
11
The amortized cost and estimated market value of debt securities at June
30, 2007, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties (in
thousands):
Available For Held To
Sale Maturity
-------------------------- ----------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
------------- ------------- --------------- ------------
Due in one year or less....................................................$ 74,696 $ 74,517 $ 2,735 $ 2,719
Due after one year through five years...................................... 23,230 22,829 8,292 8,115
Due after five years through ten years..................................... 2,000 1,970 2,825 2,749
Due after ten years........................................................ 104,485 103,869 3,805 3,667
------------- ------------ -------------- ------------
Total................................................................$ 204,411 $ 203,185 $ 17,657 $ 17,250
============= =========== ============== ============
The Bank had no sale of investment securities for the nine months ended
June 30, 2007 and 2006.
8. Loans Receivable, Net and Allowance for Loan Losses
Loans receivable consist of the following (in thousands):
June 30 September
2007 30, 2006
-------------- ---------
Real Estate Loans:
Residential.............................................................................$ 484,310 $ 452,406
Construction........................................................................... 6,705 5,943
Commercial............................................................................ 54,778 47,479
Commercial...................................................................................... 7,281 6,159
Home equity loans and lines of credit........................................................... 47,811 46,796
Other........................................................................................... 4,600 4,247
----------------------------
605,485 563,030
Less deferred loan fees......................................................................... 1,713 2,498
---------------------------
603,772 560,532
Less allowance for loan losses.................................................................. 4,116 3,855
---------------------------
Net loans...........................................................................$ 599,656 $ 556,677
============ ============
The activity in the allowance for loan losses is summarized as follows
(in thousands):
Three Months Ended Nine Months Ended
June 30, 2007 June 30, 2007
------------- -------------
2007 2006 2007 2006
------ ------ ---- ----
Balance, beginning of period................ $ 4,028 $ 3,705 $ 3,855 $ 3,563
Add
Provision charged to operations........ 90 75 270 225
Loan recoveries........................ - - 1 1
------------ ------------- ------------- -----------
90 75 271 226
Less loans charged off...................... 2 - 10 9
------------ ------------- ------------- -----------
Balance, end of period...................... $ 4,116 $ 3,780 $ 4,116 $ 3,780
============ ============= ============= ===========
12
9. Deposits
Deposits consist of the following major classifications (in
thousands):
June 30, September
2007 30, 2006
------------- -----------
Non-interest bearing demand accounts........................................................ $ 28,418 $ 23,675
NOW accounts................................................................................ 63,303 59,480
Money market accounts....................................................................... 31,645 33,255
Savings and club accounts................................................................... 72,240 76,166
Certificates of deposit..................................................................... 201,874 209,577
=========================
Total....................................................................................... $ 397,480 $402,153
=========================
10. Net Periodic Benefit Cost-Defined Benefit Plan
For a detailed disclosure on the Bank's pension and employee benefits
plans, please refer to Note 13 of the Bank's Consolidated Financial Statements
for the year ended September 30, 2006 included in the Registration Statement on
Form S-1.
The following table comprises the components of net periodic benefit cost
for the periods ended (in thousands):
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------- --------------------
2007 2006 2007 2006
------------ ----------- --------- ---------
Service Cost.........................................................................$ 154 $ 134 $ 462 $ 402
Interest Cost........................................................................ 120 99 360 297
Expected return on plan assets....................................................... (111) (97) (333) (291)
Amortization of prior service cost................................................... 2 2 6 6
Amortization of unrecognized loss.................................................... 46 31 138 92
Amortization of transition obligation................................................ -- -- -- 1
---------- ----------- ---------- ---------
Net periodic benefit cost............................................................$ 211 $ 169 $ 633 $ 507
=========== =========== ========== =========
The Bank expects to contribute $1.3 million to its pension plan in 2007.
11. Employee Stock Ownership Plan
The Company has an ESOP for the benefit of employees who meet the eligibility
requirements. The ESOP trust purchased 1,358,472 shares of common stock in the
initial public offering with proceeds from a loan with the Company. The Bank
will make cash contributions to the ESOP on an annual basis sufficient to enable
the ESOP to make the required loan payments to the Company. The loan bears an
interest rate of 8.25% with principal and interest payable in annual
installments over thirty years. The loan is secured by the shares of the stock
purchased.
As the debt is repaid, shares are released from the collateral and allocated to
qualified employees based on the proportion of debt service paid during the
year. Accordingly, the shares pledged as collateral are reported as unallocated
common stock held by the ESOP in the Consolidated Balance Sheet. As shares are
released from collateral, the Company reports compensation expense equal to the
current market price of the shares, and the shares become outstanding for
earnings-per-share computations.
13
The following table presents the components of the ESOP shares:
June 30, 2007
---------------
Shares released for allocation................................................. 15,094
Unreleased shares.............................................................. 1,358,472
---------
Total ESOP shares.............................................................. 1,343,378
=========
Fair value of unreleased shares................................................ $15,011,116
===========
Item 6. Exhibits
The following exhibits are either filed as part of this report or are
incorporated herein by reference:
3.1 Charter of ESSA Bancorp, Inc. *
3.2 Bylaws of ESSA Bancorp, Inc. *
4 Form of Common Stock Certificate of ESSA Bancorp, Inc.*
10.1 Form of Employee Stock Ownership Plan*
10.2 Form of Employment Agreement for Chief Executive Officer*
10.3 Form of Employment Agreement for Executive Officers*
10.4 Form of Change in Control Agreement*
10.5 [Reserved]
10.6 Supplemental Retirement Plan for Gary S. Olson*
10.7 Supplemental Retirement Plan for Robert S. Howes, Jr.*
10.8 Supplemental Retirement Plan for Diane K. Reimer*
10.9 Supplemental Retirement Plan for Thomas J. Grayuski*
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
- -----------------------------------------------
* Filed as exhibits to the Company's Registration Statement on Form S-1, and
any amendments thereto, with the Securities and Exchange Commission
(Registration No. 333-139157).
14
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ESSA BANCORP, INC.
Date: November 27, 2007 /s/ Gary S. Olson
-------------------------------------
-------------------------------------
Gary S. Olson
President and Chief Executive Officer
Date: November 27, 2007 /s/ Allan A. Muto
-------------------------------------
-------------------------------------
Allan A. Muto
Executive Vice President and
Chief Financial Officer
15
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Gary S. Olson, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of ESSA Bancorp, Inc., a
Pennsylvania corporation;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors:
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: November 26, 2007 /s/ Gary S. Olson
---------------------------------
---------------------------------
Gary S. Olson
President and Chief Executive Officer
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Allan A. Muto, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of ESSA Bancorp, Inc., a
Pennsylvania corporation;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors:
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: November 26, 2007 /s/ Allan A. Muto
-------------------------------------------
-------------------------------------------
Allan A. Muto
Executive Vice President and
Chief Financial Officer
Exhibit 32
Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Gary S. Olson, Chief Executive Officer and President of ESSA Bancorp, Inc.,
a Pennsylvania corporation (the "Company") and Allan A. Muto, Executive Vice
President and Chief Financial Officer of the Company, each certify in his
capacity as an officer of the Company that he has reviewed the quarterly report
on Form 10-Q for the period ended June 30, 2007 (the "Report") and that to the
best of his knowledge:
1. the Report fully complies with the requirements of Sections 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
Date: November 26, 2007 /s/ Gary S. Olson
------------------------------------------
------------------------------------------
Gary S. Olson
President and Chief Executive Officer
Date: November 26, 2007 /s/ Allan A. Muto
------------------------------------------
------------------------------------------
Allan A. Muto
Executive Vice President and
Chief Financial Officer
A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.