Date: April 24, 2008
Contact: Gary S. Olson, President & CEO
Corporate Office: 200 Palmer Street
Stroudsburg, Pennsylvania 18360
Telephone: (570) 421-0531
ESSA BANCORP, INC. ANNOUNCES OPERATING RESULTS
FOR THE SECOND FISCAL QUARTER OF 2008
Stroudsburg, Pennsylvania, April 24, 2008 -- ESSA Bancorp, Inc. (the "Company")
(NASDAQ: "ESSA") the holding company for ESSA Bank & Trust (the "Bank") today
announced its operating results for the three and six months ended March 31,
2008. The Company reported net income of $1.7 million, or $0.11 per share, for
the three months ended March 31, 2008, as compared to net income of $1.3 million
for the corresponding 2007 period. The Company's net average interest-earning
assets for the three months ended March 31, 2008 increased $124.4 million, or
155.8%, as compared to net average interest-earning assets for the three months
ended March 31, 2007. The increase was the result of a $74.3 million increase in
average loans outstanding as compared to the comparable period in 2007 along
with a combined increase of $106.9 million in average investment and
mortgage-backed securities as compared to the comparable period in 2007. The
securities increased primarily due to the investment of the net proceeds from
the Bank's mutual-to-stock conversion and the Company's stock offering.
For the six months ended March 31, 2008, the Company reported net income of $3.4
million, or $0.21 per share, as compared to net income of $2.2 million for the
comparable period in 2007. The primary reasons for the increase in net income
for the six month period are the same as those described above for the
three-month increase. Net average earning assets increased $135.9 million,
average loans outstanding increased $71.6 million and average investments and
mortgage-backed securities increased $110.5 million for the six months ended
March 31, 2008, as compared to the comparable period in 2007.
"We are pleased to report a solid second quarter," said Gary S. Olson, President
and Chief Executive Officer of the Company. "Our results are particularly
gratifying in light of the difficult interest rate and competitive environment
financial institutions are operating in at this time. We continue to focus on
the growth of our loan portfolio, which grew over 3.4 percent during the quarter
and 6.6 percent since the beginning of our fiscal year. At the same time, we
continue to avoid subprime loans and other high risk assets. Our asset quality
remains strong as evidenced by our low ratio of non-performing assets to total
assets."
The Bank underwent a mutual-to-stock conversion as part of the Company's stock
offering that was consummated on April 3, 2007. The stock offering resulted 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 contributed 1,110,900 shares of its
common stock to the ESSA Bank & Trust Foundation (the "Foundation") along with
$1.6 million in cash. Net proceeds from the stock offering prior to this
contribution to the Foundation were $155.8 million. Concurrent with the
conversion, 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 prior to the contribution to the Foundation, and the remaining net
proceeds were contributed to the Bank. The stock offering proceeds have been
invested in short-term, investment-grade debt obligations and mortgage-backed
securities debt issued by United States government-sponsored agencies or
entities. Approximately $29.7 million of the net proceeds of the stock offering
were used to pay down short-term debt at the Bank.
Net Interest Income:
Net interest income increased $1.5 million, or 29.5%, to $6.4 million for the
three months ended March 31, 2008, from $4.9 million for the comparable period
in 2007. The increase was primarily attributable to the increase in net average
earning assets and was offset in part by a 34 basis point decrease in the
Company's interest rate spread to 2.00% for the three months ended March 31,
2008, from 2.34% for the comparable period in 2007.
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Net interest income increased $3.4 million, or 36.9%, to $12.6 million for the
six months ended March 31, 2008, from $9.2 million for the comparable period in
2007. The increase was primarily attributable to the increase in net average
earning assets and was offset in part by a 30 basis point decrease in the
Company's interest rate spread to 1.97% for the six months ended March 31, 2008,
from 2.27% for the comparable period in 2007.
Non-Interest Income:
Non-interest income was unchanged in the 2008 period compared to the 2007
period, remaining at $1.3 million for the three months ended March 31, 2008 and
2007, respectively.
Non-interest income increased $63,000, or 2.3%, to $2.8 million for the six
months ended March 31, 2008, from $2.7 million for the comparable period in
2007. Increases in service charges and fees on loans, trust and investment fees
and earnings on bank-owned life insurance were offset, in part, by decreases in
service fees on deposit accounts, net gain on sale of loans and other income.
Non-Interest Expense:
Non-interest expense increased $889,000, or 20.7%, to $5.2 million for the three
months ended March 31, 2008, from $4.3 million for the comparable period in
2007. The primary reasons for the increase were increases in compensation and
employee benefits of $416,000, occupancy and equipment of $75,000, professional
fees of $228,000 and other expenses of $150,000. Compensation and employee
benefits increased primarily as a result of normal compensation increases of
$222,000 in addition to an expense of $129,000 related to the Employee Stock
Ownership Plan which was implemented in April 2007. Occupancy and equipment
costs increased primarily as a result of increases in rental costs of $30,000
along with increases in depreciation expense of $17,000. Professional fees
increased primarily as a result of increased legal, accounting and regulatory
fees associated with being a public reporting company, and included
approximately $72,000 related to the Company's compliance with Section 404 of
the Sarbanes-Oxley Act. Other expenses increased primarily due to the reversal,
in March 2007, of a $101,000 accrued expense for contributions to the Bank's
former charitable
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foundation. Prior to the Bank's mutual-to-stock conversion, the Bank had been
setting aside approximately 10% of its net income as a contribution to its
charitable foundation. This practice was discontinued in March 2007, in
contemplation of the Bank's impending conversion and the Company's stock
offering. As described earlier, the Company made a $12.6 million contribution to
a new charitable foundation in April 2007 concurrent with the Company's stock
offering.
Non-interest expense increased $1.5 million, or 17.1%, to $10.2 million for the
six months ended March 31, 2008, from $8.7 million for the comparable period in
2007. The primary reasons for the increase were increases in compensation and
employee benefits of $838,000, occupancy and equipment of $142,000, professional
fees of $380,000 and other expenses of $100,000. Compensation and employee
benefits increased primarily as a result of normal compensation increases of
$407,000 along with an expense of $300,000 related to the Employee Stock
Ownership Plan which was implemented in April 2007. Occupancy and equipment
costs increased primarily as a result of increases in rental costs of $51,000
along with increases in depreciation expense of $40,000. Professional fees
increased primarily as a result of increased legal, accounting and regulatory
fees associated with being a public reporting company, including approximately
$144,000 related to the Company's compliance with Section 404 of the
Sarbanes-Oxley Act. Other expense increased primarily due to increased loan
processing costs related to increased volume.
Balance Sheet
Total assets increased $57.4 million, or 6.3%, to $967.8 million at March 31,
2008, compared to $910.4 million at September 30, 2007. The primary reasons for
the increase in assets were increases in certificates of deposit and investment
securities of $13.3 million, net loans receivable of $41.1 million and an
increase in cash and cash equivalents of $2.0 million. The increase in loans
receivable included increases in residential loans of $31.1 million, commercial
loans of $11.0 million, and a decrease in consumer loans of $1.2 million.
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Retail deposits decreased $7.5 million and brokered certificates of deposit
decreased $7.8 million at March 31, 2008, compared to September 30, 2007.
Borrowed funds increased during the same time period by $65.6 million.
Stockholders' equity increased $4.7 million to $209.4 million at March 31, 2008,
compared to $204.7 million at September 30, 2007.
Asset Quality:
Asset quality remains strong. Nonperforming assets totaled $891,000 or 0.09% of
total assets at March 31, 2008, compared to $555,000, or 0.06%, of total assets
at September 30, 2007. The Company, in response to continued loan growth, made a
provision for loan losses of $150,000 for the three months ended March 31, 2008,
as compared to a provision of $90,000 for the comparable three-month period in
2007. The Company made a provision for loan losses of $300,000 for the six
months ended March 31, 2008, as compared to a provision of $180,000 for the
comparable six month period in 2007. The allowance for loan losses was $4.4
million, or 0.66%, of loans outstanding at March 31, 2008, compared to $4.2
million, or 0.67%, of loans outstanding at September 30, 2007.
ESSA Bank & Trust, a wholly-owned subsidiary of ESSA Bancorp, Inc., has total
assets of over $850 million and is the leading service-oriented financial
institution headquartered in the greater Pocono, Pennsylvania region. The Bank
maintains its corporate headquarters in downtown Stroudsburg, Pennsylvania and
has 13 community offices throughout the Pocono, Pennsylvania area. In addition
to being one of the region's largest mortgage lenders, ESSA Bank & Trust offers
a full range of retail and commercial financial services. ESSA Bancorp, Inc.
stock trades on The NASDAQ Global 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
5
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.
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ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, Septpember 30,
2008 2007
--------------- ------------------
(dollars in thousands)
ASSETS
Cash and due from banks................................................$ 10,490 $ 10,604
Interest-bearing deposits with other institutions...................... 8,307 6,175
--------------- ----------------
Total cash and cash equivalents.................................. 18,797 16,779
Certificates of deposit................................................ 3,797 --
Investment securities available for sale............................... 217,633 205,267
Investment securities held to maturity (fair value of $14,380 and
$16,876)............................................................ 14,270 17,130
Loans receivable (net of allowance for loan losses of $4,420 and
$4,206)............................................................. 660,911 619,845
Federal Home Loan Bank stock........................................... 18,301 16,453
Premises and equipment................................................. 11,040 11,277
Bank-owned life insurance.............................................. 14,224 13,941
Other assets........................................................... 8,837 9,723
--------------- ---------------
TOTAL ASSETS.....................................................$ 967,810 $ 910,415
=============== ===============
LIABILITIES
Deposits...............................................................$ 369,408 $ 384,716
Short-term borrowings.................................................. 30,585 34,230
Other borrowings....................................................... 348,947 279,697
Advances by borrowers for taxes and insurance.......................... 4,040 1,423
Other liabilities...................................................... 5,444 5,657
--------------- --------------
TOTAL LIABILITIES................................................ 758,424 705,723
--------------- --------------
Commitment and contingencies........................................... -- --
STOCKHOLDERS' EQUITY
Preferred stock........................................................ -- --
Common stock........................................................... 170 170
Additional paid in capital............................................. 166,819 166,782
Unallocated common stock held by the Employee Stock Ownership Plan..... (13,019) (13,283)
Retained earnings...................................................... 56,750 53,400
Accumulated other comprehensive loss................................... (1,334) (2,377)
--------------- ---------------
TOTAL STOCKHOLDERS' EQUITY....................................... 209,386 204,692
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......................$ 967,810 $ 910,415
================ ===============
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ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the Three Months For the Six Months
Ended March 31, Ended March 31,
------------------------ ----------------------
2008 2007 2008 2007
------------ ------------ ---------- ----------
(dollars in thousands)
INTEREST INCOME
Loans receivablele........................................................$ 9,884 $ 8,762 $ 19,667 $ 17,385
Investment securities:
Taxable............................................................. 2,637 1,279 5,339 2,493
Exempt from federal income tax...................................... 83 74 166 147
Other investment income................................................... 287 601 608 785
------------ ------------ ------------ ---------
Total interest income............................................... 12,891 10,716 25,780 20,810
------------ ------------ ------------ ---------
INTEREST EXPENSE
Deposits.................................................................. 2,447 2,699 5,136 5,366
Short-term borrowings..................................................... 325 627 763 839
Other borrowings.......................................................... 3,743 2,462 7,306 5,417
------------ ------------ ---------- ---------
Total interest expense.............................................. 6,515 5,788 13,205 11,622
------------ ------------ ---------- ---------
NET INTEREST INCOME............................................................. 6,376 4,928 12,575 9,188
Provision for loan losses................................................. 150 90 300 180
------------ ----------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES............................. 6,226 4,838 12,275 9,008
------------ ----------- --------- ---------
NONINTEREST INCOME
Service fees on deposit accounts.......................................... 840 837 1,746 1,756
Services charges and fees on loans........................................ 146 122 298 256
Trust and investment fees................................................. 191 189 437 400
Gain on sale of loans, net................................................ -- 1 -- 12
Earnings on Bank-owned life insurance..................................... 140 132 283 267
Other..................................................................... 8 16 24 34
------------ ---------- -------- ---------
Total noninterest income............................................ 1,325 1,297 2,788 2,725
------------ ---------- -------- ---------
NONINTEREST EXPENSE
Compensation and employee benefits........................................ 3,010 2,594 6,005 5,167
Occupancy and equipment................................................... 719 644 1,403 1,261
Professional fees......................................................... 399 171 688 308
Data processing........................................................... 478 456 957 883
Advertising............................................................... 147 149 292 336
Other..................................................................... 440 290 880 780
------------ ---------- ------- --------
Total noninterest expense........................................... 5,193 4,304 10,225 8,735
------------ ---------- ------- ---------
Income before income taxes...................................................... 2,358 1,831 4,838 2,998
Income taxes.................................................................... 704 530 1,487 836
------------ ---------- ------- ---------
NET INCOME......................................................................$ 1,654 $ 1,301 $ 3,351 $ 2,162
Basic and diluted earnings per share(1).........................................$ 0.11 $ -- $ 0.21 $ --
============ ========== ======= =========
(1) Due to the completion of the Company's initial public offering on April 3,
2007, earnings per share for the three and six months ended March 31, 2007 is
not considered meaningful.
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