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Section 1: 8-K (8-K)

8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 24, 2018

 

 

ESSA Bancorp, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Pennsylvania   001-33384   20-8023072

(State or Other Jurisdiction)

of Incorporation)

 

(Commission

File No.)

 

(I.R.S. Employer

Identification No.)

 

200 Palmer Street,

Stroudsburg, Pennsylvania

  18360
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (570) 421-0531

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17

CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

 

 


Item 2.02 Results of Operation and Financial Condition.

On January 24, 2018, ESSA Bancorp, Inc. (the “Company”) issued a press release reporting its financial results for the period ended December 31, 2017.

A copy of the press release announcing the results is attached as Exhibit 99.1. The information in the preceding Item, as well as Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

 

Item 9.01 Financial Statements and Exhibits.

 

  (a) Financial Statements of Businesses Acquired. Not applicable.

 

  (b) Pro Forma Financial Information. Not applicable.

 

  (c) Shell Company Transactions. Not applicable.

(d)     Exhibits.

 

Exhibit
No.

  

Description

99.1    Press release issued by the Company on January 24, 2018 announcing its financial results for the period ended December 31, 2017.


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, hereunto duly authorized.

 

    ESSA BANCORP, INC.

DATE: January 25, 2018

    By:  

/s/ Gary S. Olson

     

Gary S. Olson, President and

Chief Executive Officer

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Section 2: EX-99.1 (EX-99.1)

EX-99.1

Exhibit 99.1

 

LOGO

ESSA Bancorp, Inc. Announces Fiscal 2018 First Quarter Financial Results

Stroudsburg, PA. – January 24, 2018 — ESSA Bancorp, Inc. (the “Company”) (NASDAQ ESSA) today reported a net loss of $1.6 million, or $(0.15) per diluted share, for the quarter ended December 31, 2017, compared with net income of $1.9 million, or $0.18 per diluted share, for the same quarter last year. Results for the quarter ended December 31, 2017 reflect a one-time charge to income tax expense of $3.8 million related to the reduction in the carrying value of the Company’s deferred tax assets , which resulted from the reduction in the federal corporate income tax rate under the Tax Cuts and Jobs Act of 2017.

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 22 locations in eastern Pennsylvania, including the Poconos, Lehigh Valley, Scranton/Wilkes-Barre and suburban Philadelphia markets.

FIRST QUARTER 2018 HIGHLIGHTS

 

    Loan growth was the primary driver of the 1.2% growth in net interest income to $11.8 million in the fiscal first quarter of 2018 compared with $11.6 million for the comparable period in fiscal 2017.

 

    Total interest income increased to $15.4 million in the fiscal first quarter of 2018 from $14.7 million in the fiscal first quarter of 2017, primarily reflecting higher interest income generated by loans.

 

    Income before income taxes was $2.5 million in the fiscal first quarter of 2018 compared with $2.3 million in the fiscal first quarter of 2017, reflecting earnings growth prior to the impact of income taxes and the one-time charge to income tax expense, described above.

 

    Total net loans at December 31, 2017 increased $39.7 million to $1.28 billion from September 30, 2017, primarily reflecting growth in commercial and commercial real estate lending of $39.9 million. Net loans at December 31, 2017 were up 4.3% compared with net loans at December 31, 2016, primarily reflecting commercial loan growth.

 

    Asset quality remained strong, with non-performing assets of $15.7 million, or 0.86% of total assets, at December 31, 2017 compared to $15.7 million or 0.88% of total assets at September 30, 2017.

 

    Total noninterest expense decreased 1.2% for the quarter ended December 31, 2017 compared to the comparable period in 2017 reflecting decreases in compensation and employee benefits, professional fees and advertising. The Company closed its remaining three supermarket branches on December 29, 2017.

 

    The Company paid a quarterly cash dividend of $0.09 per share on December 30, 2017, its 39th consecutive quarterly cash dividend to shareholders.

Gary S. Olson, President and CEO, commented: “Our first quarter of 2018 reflected continued positive trends in commercial lending that generated higher interest income and higher noninterest fee income from lending activity. We were pleased with the growth in our Asset Management & Trust Services group, which generated a significant year-over-year increase in noninterest income from trust and investment fees.

 

Corporate Center:  200 Palmer Street PO Box L Stroudsburg, PA 18360-0160    570-421-0531    Fax: 570-421-7158


“Changes in the tax law and the one-time income tax adjustment had a significant adverse impact on the quarter’s net income. It is worth noting, however, that pre-tax income more clearly reflected our growth and progress, with year-over-year gains in both interest and noninterest income, and a decline in noninterest expense that reflected initiatives to manage the Company’s cost structure and support increasingly efficient operations.

“We were pleased to begin fiscal 2018 with a first quarter that reflected net loan growth and gains in construction, commercial real estate and commercial & industrial lending from the Company’s fiscal 2017 year-end, especially considering the typically slower activity in winter. Comparing first quarter 2018 to a year earlier, commercial real estate loans grew 21% and commercial & industrial loans grew 44%, which we feel is a significant accomplishment. We are seeing the results of our investments made to expand our commercial and retail lending teams during the past year.

“Also in the fiscal first quarter of 2018, we completed the transition to a new executive management structure to enhance the performance of our team, and formalized the structure of ESSA’s three operating regions, each headed by a regional president. We anticipate the positive impact of these changes will be evident in the coming year.”

Income Statement Review

Total interest income was $15.4 million for the three months ended December 31, 2017, up from $14.7 million for the three months ended December 31, 2016. The primary driver was growth in interest income from loans to $12.8 million in fiscal first quarter 2017, up from $12.3 million a year earlier. Interest expense increased $590,000 for the quarter ended December 31, 2017 compared to the comparable period in 2016, partially reflecting a larger base of deposits and short-term borrowings along with several interest rate increases from the Federal Reserve.

Net interest income increased $136,000, or 1.2%, to $11.8 million for the three months ended December 31, 2017, from $11.6 million for the comparable period in 2016. The Company’s provision for loan losses increased to $1.0 million for the three months ended December 31, 2017, compared with $750,000 for the three months ended December 31, 2016. This increase reflected additional provisioning related to expanded lending activity.

The net interest margin for the first quarter of 2018 was 2.78%, compared with 2.75% for the previous quarter, and 2.80% for the first quarter of fiscal 2017. Olson noted that, 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 rate spread was 2.67% in fiscal first quarter 2018, compared with 2.65% for the previous quarter and 2.73% in first fiscal quarter 2017.

Noninterest income increased $112,000 or 6.0%, to $2.0 million for the three months ended December 31, 2017, compared with $1.9 million for the three months ended December 31, 2016. Growth in fee income from lending and trust and investment activity were the primary drivers of noninterest income growth.

Noninterest expense decreased $120,000 or 1.2%, to $10.3 million for the three months ended December 31, 2017 compared with $10.4 million for the comparable period in 2016. The decrease reflects decreases in compensation and employee benefits, professional fees and advertising. These decreases were partially offset by an increase of $245,000 caused primarily by one time charges related to the closing of three supermarket branches in December, 2017.

Balance Sheet, Asset Quality and Capital Adequacy Review

Total assets grew $37.2 million to $1.82 billion at December 31, 2017, from $1.79 billion at September 30, 2017. Total net loans increased $39.7 million to $1.28 billion at December 31, 2017 from $1.24 billion at

 

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September 30, 2017. Commercial real estate loans were $356.1 million in the fiscal first quarter of 2018, up from $318.3 million in the fiscal fourth quarter of 2017 and $293.57 million a year earlier. Commercial loans rose 10% to $48.8 million in the fiscal first quarter of 2018 compared with $44.1 million in the fiscal fourth quarter of 2017 and up 44.0% compared with the fiscal first quarter of 2017. Construction lending also grew significantly year-over-year.

Total deposits decreased $23.8 million, or 1.9%, to $1.25 billion at December 31, 2017, from $1.27 billion at September 30, 2017, primarily due to a decrease in municipal deposits. During the same period, borrowings increased $57.2 million, reflecting the Company’s ability to obtain borrowed funds at what management believes represent attractive rates. Core deposits were $727.8 million, or 58% of total deposits at December 31, 2017.

Asset quality has remained strong. Nonperforming assets totaled $15.7 million, or 0.86% of total assets, at December 31, 2017, compared to $15.7 million, or 0.88% of total assets at September 30, 2017 and $22.8 million, or 1.28% of total assets, at December 31, 2016. The allowance for loan losses was $9.8 million, or 0.76% of loans outstanding, at December 31, 2017, compared to $9.4 million, or 0.75% of loans outstanding at September 30, 2017.

For the fiscal first quarter of 2018, the Company’s return on average assets and return on average equity were (0.36%) and (3.53%), compared with 0.43% and 4.37%, respectively, in the corresponding period of fiscal 2017. The returns in the fiscal first quarter of 2018 primarily reflected the impact of the one-time charge to income tax expense.

The Bank continued to demonstrate financial strength, with a Tier 1 leverage ratio of 8.94%, exceeding regulatory standards for a well-capitalized institution. The Company maintained a tangible equity to tangible assets ratio of 8.82%.

Total stockholders’ equity decreased $3.2 million to $179.5 million at December 31, 2017, from $182.7 million at September 30, 2017, primarily reflecting the net loss for the quarter. Tangible book value per share at December 31, 2017 decreased to $14.09, compared with $14.41 at September 30, 2017, but rose compared with tangible book value of $13.55 at December 31, 2016.

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 22 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.

 

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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

 

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ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

 

     December 31,
2017
    September 30,
2017
 
     (dollars in thousands)  

ASSETS

    

Cash and due from banks

   $ 33,638     $ 36,008  

Interest-bearing deposits with other institutions

     5,147       5,675  
  

 

 

   

 

 

 

Total cash and cash equivalents

     38,785       41,683  

Certificates of deposit

     500       500  

Investment securities available for sale

     391,202       390,452  

Loans receivable (net of allowance for loan losses of $9,833 and $9,365)

     1,276,335       1,236,681  

Regulatory stock, at cost

     16,845       13,832  

Premises and equipment, net

     15,736       16,234  

Bank-owned life insurance

     37,881       37,626  

Foreclosed real estate

     1,365       1,424  

Intangible assets, net

     1,700       1,844  

Goodwill

     13,801       13,801  

Deferred income taxes

     7,263       10,422  

Other assets

     21,003       20,719  
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 1,822,416     $ 1,785,218  
  

 

 

   

 

 

 

LIABILITIES

    

Deposits

   $ 1,251,021     $ 1,274,861  

Short-term borrowings

     214,036       137,446  

Other borrowings

     154,768       174,168  

Advances by borrowers for taxes and insurance

     11,409       5,163  

Other liabilities

     11,703       10,853  
  

 

 

   

 

 

 

TOTAL LIABILITIES

     1,642,937       1,602,491  
  

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY

    

Common stock

     181       181  

Additional paid in capital

     180,532       180,764  

Unallocated common stock held by the Employee Stock Ownership Plan

     (8,604     (8,720

Retained earnings

     88,546       91,147  

Treasury stock, at cost

     (79,420     (79,891

Accumulated other comprehensive loss

     (1,756     (754
  

 

 

   

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

     179,479       182,727  
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 1,822,416     $ 1,785,218  
  

 

 

   

 

 

 

 

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ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

     For the Three Months
Ended December 31,
 
     2017     2016  
     (dollars in thousands)  

INTEREST INCOME

    

Loans receivable

   $ 12,783     $ 12,251  

Investment securities:

    

Taxable

     2,058       1,874  

Exempt from federal income tax

     288       309  

Other investment income

     247       216  
  

 

 

   

 

 

 

Total interest income

     15,376       14,650  
  

 

 

   

 

 

 

INTEREST EXPENSE

    

Deposits

     2,377       2,012  

Short-term borrowings

     584       251  

Other borrowings

     647       755  
  

 

 

   

 

 

 

Total interest expense

     3,608       3,018  
  

 

 

   

 

 

 

NET INTEREST INCOME

     11,768       11,632  

Provision for loan losses

     1,000       750  
  

 

 

   

 

 

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

     10,768       10,882  
  

 

 

   

 

 

 
  

 

 

   

 

 

 

NONINTEREST INCOME

    

Service fees on deposit accounts

     883       864  

Services charges and fees on loans

     369       354  

Trust and investment fees

     240       150  

Earnings on Bank-owned life insurance

     256       263  

Insurance commissions

     171       193  

Other

     50       33  
  

 

 

   

 

 

 

Total noninterest income

     1,969       1,857  
  

 

 

   

 

 

 
  

 

 

   

 

 

 

NONINTEREST EXPENSE

    

Compensation and employee benefits

     6,008       6,177  

Occupancy and equipment

     1,185       1,091  

Professional fees

     566       745  

Data processing

     929       934  

Advertising

     158       305  

Federal Deposit Insurance Corporation Premiums

     189       187  

Gain on foreclosed real estate

     (36     (96

Amortization of intangible assets

     144       163  

Other

     1,139       896  
  

 

 

   

 

 

 

Total noninterest expense

     10,282       10,402  
  

 

 

   

 

 

 
  

 

 

   

 

 

 

Income before income taxes

     2,455       2,337  

Income taxes

     4,093       400  
  

 

 

   

 

 

 
  

 

 

   

 

 

 

Net (loss) Income

   $ (1,638   $ 1,937  
  

 

 

   

 

 

 

 

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     For the Three Months
Ended December 31,
 
     2017     2016  

Earnings per share:

    

Basic

   $ (0.15   $ 0.18  

Diluted

   $ (0.15   $ 0.18  

 

     For the Three Months
Ended December 31,
 
     2017     2016  
    

(dollars in thousands)

(UNAUDITED)

 

CONSOLIDATED AVERAGE BALANCES:

    

Total assets

   $ 1,802,381     $ 1,768,512  

Total interest-earning assets

     1,676,729       1,646,647  

Total interest-bearing liabilities

     1,444,985       1,428,562  

Total stockholders’ equity

     184,188       175,927  

PER COMMON SHARE DATA:

    

Average shares outstanding—basic

     10,717,138       10,475,032  

Average shares outstanding—diluted

     10,717,138       10,604,072  

Book value shares

     11,634,790       11,463,785  

Net interest rate spread

     2.67     2.73

Net interest margin

     2.78     2.80

 

Contact: Gary S. Olson, President & CEO
Corporate Office: 200 Palmer Street
     Stroudsburg, Pennsylvania 18360
Telephone: (570) 421-0531

 

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