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Section 1: 8-K (FORM 8-K)

Form 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): April 25, 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 April 25, 2018, ESSA Bancorp, Inc. (the “Company”) issued a press release reporting its financial results for the period ended March 31, 2018.

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 April 25, 2018 announcing its financial results for the period ended March 31, 2018.


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: April 26, 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

Second Quarter, First Half Financial Results

Stroudsburg, PA. – April 25, 2018 — ESSA Bancorp, Inc. (the “Company”) (NASDAQ ESSA) today reported net income of $2.3 million, or $0.21 per diluted share, for the quarter ended March 31, 2018, compared with net income of $1.6 million, or $0.15 per diluted share, for the same quarter last year. For the six months ended March 31, 2018, the Company reported net income of $625,000 or $0.06 per diluted share compared to $3.6 million or $0.34 per diluted share for the six months ended March 31, 2017. Results for the six months ended March 31, 2018 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.

Gary S. Olson, President and CEO, commented: “The Company’s financial results and net income in the second quarter of 2018 demonstrated the positive impact of our growth strategy, with a strong focus on commercial lending, and an expanded banking team that is producing impressive results. In the first six months of our fiscal year, we have grown commercial real estate and commercial & industrial loans by more than $70 million, which has generated expanded interest income and earnings growth.”

SECOND QUARTER 2018 HIGHLIGHTS

 

    Loan growth was the primary driver of the 5.6% growth in net interest income to $11.9 million in the fiscal second quarter of 2018 compared with $11.3 million for the comparable period in fiscal 2017.

 

    Total interest income increased to $15.8 million in the fiscal second quarter of 2018 from $14.4 million in the fiscal second quarter of 2017, primarily reflecting higher interest income generated by loans.

 

    Total net loans at March 31, 2018 increased $54.6 million to $1.29 billion from September 30, 2017, primarily reflecting growth in commercial and commercial real estate lending of $70.4 million. Net loans at March 31, 2018 were up 6.9% compared with net loans at March 31, 2017, primarily reflecting commercial loan growth.

 

    Asset quality remained strong, with non-performing assets of $15.2 million, or 0.83% of total assets, at March 31, 2018 compared to $15.7 million, or 0.88% of total assets, at September 30, 2017.

 

    Total noninterest expense decreased 4.9% for the quarter ended March 31, 2018 compared to the comparable period in 2017, reflecting decreases in compensation and employee benefits, professional fees, data processing, 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 March 30, 2018, its 40th consecutive quarterly cash dividend to shareholders.

 

 

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


“Net loans after provision for loan losses have increased during the past year, driven by 32% year-over-year growth in our commercial real estate portfolio and 44% growth in the commercial loan portfolio,” said Olson. “We have also been successful in growing relationships with clients, reflected by year-over-year growth in noninterest bearing demand account deposits frequently associated with commercial banking relationships.” Lower-cost core deposits at March 31, 2018 comprised 59% of the Company’s total deposits, up from 56% at March 31, 2017.

“In addition to positive growth of interest income in both the second quarter and six months of 2018 compared to those periods in 2017, we have been pleased with growth in noninterest income, which was up 9% in the second quarter of 2018 compared with the second quarter of 2017 and rose 7.5% in the first half of 2018 compared with the first half of 2018. Fees from our lending activity have risen, and we have generated increasing income from our Asset Management & Services group, where we have also invested in building our team and earning new business. A year-over-year decline in noninterest expense has supported profitability as we continue to focus on operating with greater efficiency and productivity.”

“As we have been growing commercial lending, asset quality is a top priority. Our credit analysis and disciplined underwriting practices have enabled us to grow while maintaining strong asset quality. We continue to see positive results of our investments made to expand our commercial and retail lending teams during the past year, and the leadership provided by a new executive management structure focused on productive growth.”

Income Statement Review

Total interest income was $15.8 million for the three months ended March 31, 2018, up from $14.4 million for the three months ended March 31, 2017. The primary driver was growth in interest income from loans to $13.0 million in fiscal second quarter 2018, up from $11.8 million a year earlier. Total interest income for the six months ended March 31, 2018 was $31.2 million, up from $29.0 million in the comparable period in 2017.

Interest expense increased $837,000 to $3.9 million for the quarter ended March 31, 2018 compared to the comparable period in 2017, partially reflecting a larger base of deposits and short-term borrowings along with interest rate increases from the Federal Reserve. Interest expense increased by $1.4 million to $7.5 million for the six months ended March 31, 2018 compared to the comparable period in 2017.

Net interest income increased $631,000, or 5.6%, to $11.9 million for the three months ended March 31, 2018, from $11.3 million for the comparable period in 2017. Net interest income increased $767,000, or 3.4%, to $23.7 million for the six months ended March 31, 2018, from $22.9 million for the comparable period in 2017.

The Company’s provision for loan losses increased to $1.1 million for the three months ended March 31, 2018, compared with $750,000 for the three months ended March 31, 2017. The Company’s provision for loan losses increased to $2.1 million for the six months ended March 31, 2018 compared with $1.5 million for the six months ended March 31, 2017. These increases reflected additional provisioning primarily related to expanded lending activity.

The net interest margin for the second quarter of 2018 was 2.84%, compared with 2.78% for the previous quarter, and 2.80% for the second quarter of fiscal 2017. The net interest margin for the first six months of fiscal 2018 was 2.81%, compared to 2.80% for the comparable period in 2017. The net interest rate spread was 2.71% in fiscal second quarter 2018, compared with 2.67% for the previous quarter and 2.72% in fiscal second quarter 2017. The net interest spread was 2.69% in the first six months of fiscal 2018 compared to 2.72% for the comparable period in 2017.

 

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Noninterest income increased $161,000, or 9.0%, to $1.9 million for the three months ended March 31, 2018, compared with $1.8 million for the three months ended March 31, 2017. Growth in fee income from lending, gain on sale of investments net and trust and investment activity were the primary drivers of noninterest income growth. Noninterest income increased $273,000, or 7.5% to $3.9 million for the six months ended March 31, 2018, compared with $3.6 million for the six months ended March 31, 2017. Growth in trust and investment fee income, gain on sale of investments and service fee income were primarily responsible for the increase in noninterest income.

Noninterest expense decreased $516,000 or 4.9%, to $10.0 million for the three months ended March 31, 2018 compared with $10.5 million for the comparable period in 2017. The decrease reflects decreases in compensation and employee benefits, professional fees, data processing and advertising. Noninterest expense decreased $636,000 or 3.0%, to $20.3 million for the six months ended March 31, 2018 compared with $20.9 million for the comparable period in 2017. The decrease reflects decreases in compensation and employee benefits, professional fees, and advertising expenses. These decreases were partially offset by an expense 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 $35.7 million to $1.82 billion at March 31, 2018, from $1.79 billion at September 30, 2017. Total net loans increased $54.6 million to $1.29 billion at March 31, 2018 from $1.24 billion at September 30, 2017. Commercial real estate loans were $383.6 million at March 31,2018, up from $318.3 million at September 30, 2017 and $290.4 million at March 31, 2017. Commercial loans rose 10.6% during the six months ended March 31, 2018 to $49.3 million. Residential real estate loans were $583.9 million at March 31, 2018 compared with $586.7 million at September 30, 2017. Auto loans were $178.4 million at March 31, 2018 compared with $186.6 million at September 30, 2017.

Total deposits decreased $35.5 million, or 2.8%, to $1.24 billion at March 31, 2018, from $1.27 billion at September 30, 2017, primarily due to a decrease in municipal deposits. During the same period, borrowings increased $69.2 million. Core deposits were $727.6 million, or 58.7% of total deposits, at March 31, 2018.

Asset quality has remained strong. Nonperforming assets totaled $15.2 million, or 0.83% of total assets, at March 31, 2018, compared to $15.7 million, or 0.88% of total assets, at September 30, 2017 and $21.2 million, or 1.20% of total assets, at March 31, 2017. The allowance for loan losses was $10.5 million, or 0.81% of loans outstanding, at March 31, 2018, compared to $9.4 million, or 0.75% of loans outstanding, at September 30, 2017.

For the six months ended March 31, 2018, the Company’s return on average assets and return on average equity were 0.07% and 0.69%, compared with 0.41% and 4.09%, respectively, in the comparable period of fiscal 2017. The decrease in returns for the first six months of 2018 was primarily the result of the impact of the one-time charge to income tax expense due to the passage of the Tax Cuts and Jobs Act in December 2017.

The Bank continued to demonstrate financial strength, with a Tier 1 leverage ratio of 9.05%, exceeding regulatory standards for a well-capitalized institution. The Company maintained a tangible equity to tangible assets ratio of 8.66%.

Total stockholders’ equity decreased $5.3 million to $177.4 million at March 31, 2018, from $182.7 million at September 30, 2017, primarily reflecting the one-time charge to income tax expense in the first quarter and an increase in other comprehensive loss, which primarily reflected mark-to-market adjustments to the value of investment securities classified as available for sale. Tangible book value per share at March 31, 2018 decreased to $13.81, compared with $14.41 at September 30, 2017.

 

3


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 areas. 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

 

4


ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

 

     March 31,
2018
    September 30,
2017
 
     (dollars in thousands)  

ASSETS

    

Cash and due from banks

   $ 29,112     $ 36,008  

Interest-bearing deposits with other institutions

     5,692       5,675  
  

 

 

   

 

 

 

Total cash and cash equivalents

     34,804       41,683  

Certificates of deposit

     500       500  

Investment securities available for sale, at fair value

     377,375       390,452  

Loans receivable (net of allowance for loan losses of $10,510 and $9,365)

     1,291,262       1,236,681  

Regulatory stock, at cost

     17,234       13,832  

Premises and equipment, net

     15,604       16,234  

Bank-owned life insurance

     38,130       37,626  

Foreclosed real estate

     1,279       1,424  

Intangible assets, net

     1,565       1,844  

Goodwill

     13,801       13,801  

Deferred income taxes

     8,299       10,422  

Other assets

     21,071       20,719  
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 1,820,924     $ 1,785,218  
  

 

 

   

 

 

 

LIABILITIES

    

Deposits

   $ 1,239,353     $ 1,274,861  

Short-term borrowings

     241,345       137,446  

Other borrowings

     139,434       174,168  

Advances by borrowers for taxes and insurance

     12,188       5,163  

Other liabilities

     11,226       10,853  
  

 

 

   

 

 

 

TOTAL LIABILITIES

     1,643,546       1,602,491  
  

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY

    

Common stock

     181       181  

Additional paid in capital

     180,466       180,764  

Unallocated common stock held by the Employee Stock Ownership Plan

     (8,488     (8,720

Retained earnings

     90,179       91,147  

Treasury stock, at cost

     (78,225     (79,891

Accumulated other comprehensive loss

     (6,735     (754
  

 

 

   

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

     177,378       182,727  
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 1,820,924     $ 1,785,218  
  

 

 

   

 

 

 

 

5


ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

     Three Months
Ended March 31,
    Six Months
Ended March 31,
 
     2018      2017     2018     2017  
     (dollars in thousands)  

INTEREST INCOME

         

Loans receivable

   $ 12,953      $ 11,799     $ 25,736     $ 24,050  

Investment securities:

         

Taxable

     2,186        2,043       4,244       3,917  

Exempt from federal income tax

     285        303       573       612  

Other investment income

     423        234       670       450  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total interest income

     15,847        14,379       31,223       29,029  
  

 

 

    

 

 

   

 

 

   

 

 

 

INTEREST EXPENSE

         

Deposits

     2,359        2,069       4,736       4,081  

Short-term borrowings

     951        296       1,535       547  

Other borrowings

     602        710       1,249       1,465  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total interest expense

     3,912        3,075       7,520       6,093  
  

 

 

    

 

 

   

 

 

   

 

 

 

NET INTEREST INCOME

     11,935        11,304       23,703       22,936  

Provision for loan losses

     1,100        750       2,100       1,500  
  

 

 

    

 

 

   

 

 

   

 

 

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

     10,835        10,554       21,603       21,436  
  

 

 

    

 

 

   

 

 

   

 

 

 

NONINTEREST INCOME

         

Service fees on deposit accounts

     821        813       1,704       1,677  

Services charges and fees on loans

     299        273       668       627  

Trust and investment fees

     237        214       477       364  

Gain on sale of investments, net

     75        —         75       —    

Earnings on Bank-owned life insurance

     249        256       504       519  

Insurance commissions

     204        203       375       396  

Other

     60        25       111       58  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total noninterest income

     1,945        1,784       3,914       3,641  
  

 

 

    

 

 

   

 

 

   

 

 

 

NONINTEREST EXPENSE

         

Compensation and employee benefits

     5,900        6,056       11,908       12,233  

Occupancy and equipment

     1,186        1,190       2,371       2,281  

Professional fees

     626        835       1,192       1,580  

Data processing

     888        931       1,817       1,865  

Advertising

     201        241       359       546  

Federal Deposit Insurance Corporation Premiums

     256        213       445       400  

Loss(gain) on foreclosed real estate

     32        (5     (4     (101

Amortization of intangible assets

     135        164       279       327  

Other

     764        879       1,903       1,775  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total noninterest expense

     9,988        10,504       20,270       20,906  
  

 

 

    

 

 

   

 

 

   

 

 

 

Income before income taxes

     2,792        1,834       5,247       4,171  

Income taxes

     529        203       4,622       603  
  

 

 

    

 

 

   

 

 

   

 

 

 

Net Income

   $ 2,263      $ 1,631     $ 625     $ 3,568  
  

 

 

    

 

 

   

 

 

   

 

 

 

 

6


     Three Months
Ended March 31,
     Six Months
Ended March 31,
 
     2018      2017      2018      2017  
     (UNAUDITED)  

Earnings per share:

           

Basic

   $ 0.21      $ 0.15      $ 0.06      $ 0.34  

Diluted

   $ 0.21      $ 0.15      $ 0.06      $ 0.34  

 

     For the Three Months
Ended March 31,
    For the Six Months
Ended March 31,
 
     2018     2017     2018     2017  
    

(dollars in thousands)

(UNAUDITED)

   

(dollars in thousands)

(UNAUDITED)

 

CONSOLIDATED AVERAGE BALANCES:

        

Total assets

   $ 1,822,352     $ 1,762,076     $ 1,812,366     $ 1,765,294  

Total interest-earning assets

     1,702,982       1,636,516       1,689,856       1,641,759  

Total interest-bearing liabilities

     1,469,427       1,419,385       1,457,205       1,423,974  

Total stockholders’ equity

     179,250       173,857       181,719       174,892  

PER COMMON SHARE DATA:

        

Average shares outstanding – basic

     10,796,353       10,592,997       10,749,088       10,526,084  

Average shares outstanding – diluted

     10,822,108       10,691,960       10,780,380       10,617,241  

Book value shares

     11,732,222       11,574,829       11,732,222       11,574,829  

Net interest rate spread

     2.71     2.72     2.69     2.72

Net interest margin

     2.84     2.80     2.81     2.80

 

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

 

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