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Essa Bancorp, Inc. (ESSA) SEC Filing 8-K Material Event for the period ending Wednesday, April 28, 2021

Essa Bancorp, Inc.

CIK: 1382230 Ticker: ESSA

Exhibit 99.1

 

LOGO

 

ESSA Bancorp, Inc. Announces Fiscal 2021 Second Quarter,

First Half Financial Results

Stroudsburg, PA. – April 28, 2021 — ESSA Bancorp, Inc. (the “Company”) (NASDAQ:ESSA), the holding company for ESSA Bank & Trust (the “Bank”), a $2.0 billion asset financial institution providing full service commercial and retail banking, financial, and investment services in eastern Pennsylvania, today announced financial results for the fiscal second quarter and first half of 2021.

Net income was $4.3 million, or $0.43 per diluted share, for the three months ended March 31, 2021, up 27% compared with $3.4 million, or $0.33 per diluted share, for the three months ended March 31, 2020. Net income increased 24% to $8.5 million, or $0.84 per diluted share, for the six months ended March 31, 2021, compared with $6.8 million, or $0.65 per diluted share, for the six months ended March 31, 2020.

Gary S. Olson, President and CEO, commented: “The Company’s earnings reflected stable commercial banking activity, the ability to maximize the value of opportunities presented by strong demand for residential mortgage originations, Paycheck Protection Program (PPP) lending and interest expense management.

“Noninterest income growth made a significant contribution to earnings in the quarter and first half, reflecting brisk residential mortgage originations and subsequent gains on the sales of longer-term low-interest loans to the secondary market, a strategy consistent with the Company’s commitment to serve retail customers while supporting our strategy of being a commercially-focused institution. Our active participation in PPP lending generated processing fee income as PPP loans were repaid or forgiven. The Company also generated income from commercial loan interest rate swaps”.

“Responding to the prevailing low interest rate environment, the Company considerably lowered interest expense through timely repricing of deposits, roll-off of higher-cost borrowings and strong balance sheet management. These actions partially offset lower period-over-period interest income from loans and investment securities. Although deposits have steadily increased, the growth was in higher levels of low-cost core deposits.

“Considering the overall slowdown in commercial lending that reflected pandemic- and economic-related uncertainties for many businesses, we were satisfied with the continuing stability of our total commercial loan portfolio. Commercial real estate loans grew significantly compared with the past several quarters reflecting new loans in our Philadelphia market. Our focus in commercial banking has been to provide customers the financial solutions and support they need to help them navigate challenges.

“Asset quality and nonperforming loan to total loan ratios remain sound. However, because of the potential risk and uncertainties that remain, the Company has maintained strong cash reserves and increased the provision for loan losses. Management’s continued focus on managing expenses and efficient operations contributed to increased return on average assets and return on average equity.

“The Company delivered shareholder value through growth in equity, retained earnings and tangible book value per share. The strong earnings enabled the Company to increase the quarterly dividend per share for the second quarter of 2021.

“Throughout the period, we continued to operate with the highest concern for the health and safety of our employees and customers. Our increased use of digital capabilities has enabled our team to effectively and safely provide superior service with less reliance on physical facilities and interaction.

 

 


 

FISCAL SECOND QUARTER, FIRST HALF 2021 HIGHLIGHTS

 

   

Net interest income after provision for loan losses increased to $12.1 million in the second quarter of 2021 from $11.2 million a year earlier as the Company more than offset lower year-over-year total interest income and increased loan loss provision with lower interest expense. First half 2021 net interest income after provision for loan losses rose to $24.1 million from $22.7 million in the first half of 2020.

 

   

Quarterly interest expense declined sharply to $1.6 million from $4.6 million a year earlier, reflecting repriced deposits as a result of the low interest rate environment and a sharp reduction of higher-cost borrowings, and active balance sheet management. The Company’s cost of funds declined to 0.47% in the fiscal second quarter of 2021 from 1.32% a year earlier. First half 2021 interest expense declined to $3.6 million from $9.3 million in the first half of 2020.

 

   

Noninterest income growth contributed significantly to the Company’s net income in the second quarter of 2021, rising 30% to $3.5 million compared with $2.7 million a year earlier. The year-over-year increase primarily reflected additional income from commercial loan swap fees and gains on the sale of long-term residential mortgages to the secondary market. In the first half of 2021, noninterest income also increased 30% to $6.7 million from $5.1 million a year earlier.

 

   

Total net loans at March 31, 2021 declined to $1.39 billion compared with $1.42 billion at September 30, 2020, primarily reflecting sales of $41.3 million of residential mortgage loans, paydowns of Paycheck Protection Program (PPP) loans and continuing roll-off of indirect auto loans.

 

   

Lending activity was highlighted by 9% growth in commercial real estate loans to $555.4 million from $509.6 million at September 30, 2020. Commercial and construction loans declined by $26.6 million during the period, and the residential mortgage loan portfolio also declined, reflecting the Company’s focus on selling long-term, lower interest rate residential mortgages to the secondary market.

 

   

The Company maintained its focus on credit quality and increased its loan loss provision based on economic conditions. Nonperforming assets were 1.27% of total assets at March 31, 2021 compared to 1.09% of total assets at September 30, 2020. The allowance for loan losses was 1.22% of loans outstanding at March 31, 2021 compared to 1.07% at September 30, 2020.

 

   

Total deposits increased by $196.4 million to $1.74 billion at March 31, 2021 from $1.54 billion at September 30, 2020, as a reduction in time deposits was more than offset by growth in lower-cost core deposits (demand accounts, savings and money market), which comprised 76% of total deposits at March 31, 2021. The increase reflected increased commercial customer deposits, including some positive impact from PPP and stimulus funds.

 

   

The Bank continued to demonstrate financial strength with a Tier 1 leverage ratio of 9.62% at March 31, 2021, exceeding regulatory standards for a well-capitalized institution.

 

   

Total stockholders’ equity increased to $198.6 million at March 31, 2021 compared with $191.4 million at September 30, 2020 and tangible book value per share at March 31, 2021 increased to $17.16, compared with $16.26 at September 30, 2020.

 

   

The Company increased its quarterly cash dividend to $0.12 per share from $0.11 in prior quarters.


 

Fiscal Second Quarter, First Half 2021 Income Statement Review

Total interest income was $14.7 million for the three months ended March 31, 2021 compared with $16.3 million for the three months ended March 31, 2020 reflecting a decline in interest rates and a decrease in the total yield on average interest earning assets from 3.85% for the quarter ended March 31, 2020 to 3.32% for the quarter ended March 31, 2021. An increase of $68.8 million in average interest earning assets helped to partially offset the decline in interest income.

Total interest income was $29.6 million for the six months ended March 31, 2021 compared with $32.9 million for the six months ended March 31, 2020 reflecting a decline in interest rates and a decrease in the total yield on average interest earning assets from 3.86% for the six months ended March 31, 2020 to 3.30% for the six months ended March 31, 2021. An increase of $89.7 million in average interest earning assets partially offset the decline in interest income.

Interest expense was $1.6 million for the quarter ended March 31, 2021 compared to $4.6 million for the same period in 2020. The cost of interest bearing liabilities declined to 0.47% in the second quarter of 2021 from 1.32% a year earlier, reflecting lower interest rates, timely repricing of deposits, roll-off of higher-cost borrowings and active balance sheet management. For the six months of 2021, interest expense declined to $3.6 million compared to $9.3 million for the same period in 2020. The cost of interest bearing liabilities declined to 0.51% from 1.32% for the six months of 2020

Net interest income for the three months ended March 31, 2021 was $13.0 million compared with $11.7 million for the three months ended March 31, 2020. The net interest margin for three months ended March 31, 2021 was 2.95% compared with 2.76% for the comparable period of fiscal 2020 and 2.84% for the three months ended December 31, 2020. The net interest rate spread was 2.85% for the three months ended March 31, 2021, 2.53% for the same three months of fiscal 2020 and 2.73% for the three months ended December 31, 2020.

For the six months of 2021, net interest income was $25.9 million compared with $23.6 million for the six months of 2020. The net interest margin for the six months of 2021 was 2.89% compared with 2.77% for the comparable period of fiscal 2020. The net interest rate spread was 2.79% for the six months of 2021 compared with 2.54% for the six months of fiscal 2020.

Net interest income after provision for loan losses in the three months of fiscal 2021 reflected a higher provision for loan losses, primarily due to prudent reserving practices in light of economic conditions and uncertainties. The Company’s provision for loan losses was $900,000 for the three months ended March 31, 2021, compared with $500,000 for the three months ended March 31, 2020. The Company’s provision for loan losses was $1.8 million for the six months ended March 31, 2021, compared with $875,000 for the six months ended March 31, 2020.

Noninterest income increased 30% to $3.5 million for the three months ended March 31, 2021, compared with $2.7 million for the three months ended March 31, 2020. Noninterest income in the fiscal second quarter of 2021 included an increase of $525,000 in gains on sales of residential mortgages, primarily lower-interest 30-year fixed rate loans compared to the same period in 2020. The Company’s strategy continues to focus on commercial banking and decreasing the amount of long-term, low interest, retained residential mortgages. Loan swap fees were $410,000 in fiscal second quarter 2021 compared to $359,000 in fiscal second quarter 2020. In addition, the Company recorded an increase of $257,000 in gain on sale of investments.

Noninterest income increased 30% to $6.7 million for the six months ended March 31, 2021, compared with $5.1 million for the six months ended March 31, 2020. Noninterest income in the six months ended March 31, 2021 included an increase of $1.3 million in gains on sales of residential mortgages, primarily lower-interest 30-year fixed rate loans compared to the same period in 2020. Loan swap fees were $621,000 in the six months ended March 31, 2021 compared to $573,000 in the six months ended March 31, 2020.


 

Noninterest expense was $10.4 million for the three months ended March 31, 2021 compared with $9.8 million for the comparable period a year earlier, primarily reflecting increases in compensation and employee benefits expenses and other operating expenses. Noninterest expense was $20.6 million for the six months ended March 31, 2021 compared with $19.6 million for the comparable period a year earlier primarily reflecting increases in compensation and employee benefits expenses and other operating expenses. In both periods of 2021, increased compensation and employee benefits included performance-based commissions paid to residential mortgage team members, reflecting strong mortgage origination activity.

Balance Sheet, Asset Quality and Capital Adequacy Review

Total assets increased $76.3 million to $1.97 billion at March 31, 2021, from $1.89 billion at September 30, 2020, primarily due to increases in cash and cash equivalents offset in part by declines in investment securities available for sale and loans receivable. The Company built the majority of its cash position in the fiscal second quarter of 2020 and has maintained that position through the second quarter of fiscal 2021 to remain prepared for ongoing economic uncertainties. At March 31, 2021, cash and cash equivalents were $310.9 million.

Total net loans were $1.39 billion at March 31, 2021 compared with $1.42 billion at September 30, 2020. Residential real estate loans were $588.8 million at March 31, 2021 compared to $610.4 million at September 30, 2020. The Company sold $41.3 million in residential mortgage loans to the Federal Home Loan Bank of Pittsburgh during the six months ended March 31, 2021, recording gains on the sale of these loans in noninterest income. Indirect auto loans declined by $15.2 million during the second quarter of fiscal 2021, reflecting expected runoff of the portfolio as the Company exits the indirect auto lending business.

Commercial real estate loans were $555.4 million at March 31, 2021 compared with $509.6 million at September 30, 2020, with growth reflecting new loans, primarily in the Philadelphia market. Commercial loans were $115.2 million, compared with $139.6 million at September 30, 2020, primarily reflecting the net decrease of $12.3 million in PPP loans during fiscal 2021. Construction loans, declined to $9.7 million at March 31, 2021 from $11.9 million at September 30, 2020.

Loans still in forbearance at March 31, 2021 included $38.4 million in commercial real estate, $738,000 in commercial and $2.2 million in mortgage. In total, these loans represent 2.9% of our total outstanding loans at March 31, 2021 compared to 4.5% at September 30, 2020 and 12.4% at June 30, 2020.

Total deposits were $1.74 billion at March 31, 2021 up 13% compared with $1.54 billion at September 30, 2020. Core deposits (demand accounts, savings and money market) were $1.32 billion, or 76% of total deposits, at March 31, 2021. Noninterest bearing demand accounts were $273.9 million, up 13% from September 30, 2020, interest bearing demand accounts rose 64% to $451.4 million from September 30, 2020 levels, and money market accounts were $408.9 million, up $7.1 million or 1.8% from September 30, 2020. Total borrowings decreased to zero at March 31, 2021 from $125.9 million at September 30, 2020 as the Company shifted its wholesale funding to lower costing brokered deposits.

Nonperforming assets were $25.1 million, or 1.27% of total assets, at March 31, 2021, compared with $20.6 million, or 1.09% of total assets, at September 30, 2020 and $11.0 million, or 0.56% of total assets at March 31, 2020. Nonperforming assets include two nonperforming commercial real estate loans totaling $9.3 million and one commercial loan relationship totaling $5.9 million. The commercial real estate loans are well collateralized and carry personal guarantees.

For the three months ended March 31, 2021, the Company’s return on average assets and return on average equity were 0.93% and 8.89%, compared with 0.75% and 7.06%, respectively, in the comparable period of fiscal 2020.    

The Bank continued to demonstrate financial strength with a Tier 1 leverage ratio of 9.62% at March 31, 2021, exceeding regulatory standards for a well-capitalized institution.


 

Total stockholders’ equity increased $7.2 million to $198.6 million at March 31, 2021, from $191.4 million at September 30, 2020, primarily reflecting net income growth and an increase in comprehensive income, offset in part by dividends paid to shareholders and an increase in treasury stock. Tangible book value per share at March 31, 2021 was $17.16 compared to $16.26 at September 30, 2020 and $16.11 at March 31, 2020.

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 $1.9 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, asset management and trust services, investment services through Ameriprise Financial Institutions Group and insurance benefit services through ESSA Advisory Services, LLC. 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. In addition, the COVID-19 pandemic continues to have an adverse impact on the Company, its customers and the communities it serves. The adverse effect of the COVID-19 pandemic on the Company, its customers and the communities where it operates will continue to adversely affect the Company’s business, results of operations and financial condition for an indefinite period of time.

The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake and specifically declines any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.


 

FINANCIAL TABLES FOLLOW


 

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

 

     March 31,     September 30,  
     2021     2020  
     (dollars in thousands)  

ASSETS

    

Cash and due from banks

   $ 196,535     $ 101,447  

Interest-bearing deposits with other institutions

     114,402       54,470  
  

 

 

   

 

 

 

Total cash and cash equivalents

     310,937       155,917  

Investment securities available for sale, at fair value

     161,240       212,484  

Investment securities held to maturity, at amortized cost

     6,096       —    

Loans receivable (net of allowance for loan losses of $17,154 and $15,400)

     1,386,805       1,417,974  

Loans, held for sale

     912       208  

Regulatory stock, at cost

     3,846       7,344  

Premises and equipment, net

     14,148       14,230  

Bank-owned life insurance

     37,094       40,546  

Foreclosed real estate

     394       269  

Intangible assets, net

     655       791  

Goodwill

     13,801       13,801  

Deferred income taxes

     5,190       5,993  

Other assets

     28,671       23,958  
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 1,969,789     $ 1,893,515  
  

 

 

   

 

 

 

LIABILITIES

    

Deposits

   $ 1,740,140     $ 1,543,696  

Short-term borrowings

     —         111,713  

Other borrowings

     —         14,164  

Advances by borrowers for taxes and insurance

     11,668       7,858  

Other liabilities

     19,373       24,687  
  

 

 

   

 

 

 

TOTAL LIABILITIES

     1,771,181       1,702,118  
  

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY

    

Common stock

     181       181  

Additional paid-in capital

     181,353       181,487  

Unallocated common stock held by the Employee Stock Ownership Plan (“ESOP”)

     (7,132     (7,350

Retained earnings

     118,769       112,612  

Treasury stock, at cost

     (93,785     (91,477

Accumulated other comprehensive loss

     (778     (4,056
  

 

 

   

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

     198,608       191,397  
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 1,969,789     $ 1,893,515  
  

 

 

   

 

 

 


 

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

     Three months Ended
March 31,
    Six Months Ended
March 31,
 
     2021     2020     2021     2020  
           (dollars in thousands,
except per share data)
       

INTEREST INCOME

        

Loans receivable, including fees

   $ 13,670     $ 14,005     $ 27,430     $ 28,195  

Investment securities:

        

Taxable

     882       1,945       1,879       3,902  

Exempt from federal income tax

     41       48       81       96  

Other investment income

     70       346       185       664  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     14,663       16,344       29,575       32,857  
  

 

 

   

 

 

   

 

 

   

 

 

 

INTEREST EXPENSE

        

Deposits

     1,589       3,228       3,361       6,561  

Short-term borrowings

     20       489       209       994  

Other borrowings

     23       895       62       1,744  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     1,632       4,612       3,632       9,299  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INTEREST INCOME

     13,031       11,732       25,943       23,558  

Provision for loan losses

     900       500       1,800       875  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

     12,131       11,232       24,143       22,683  
  

 

 

   

 

 

   

 

 

   

 

 

 

NONINTEREST INCOME

        

Service fees on deposit accounts

     735       778       1,524       1,605  

Services charges and fees on loans

     492       341       917       660  

Loan swap fees

     410       359       621       573  

Unrealized gains (losses) on equity securities

     4       (6     11       (5

Trust and investment fees

     345       429       676       747  

Gain on sale of investments, net

     417       160       417       381  

Gain on sale of loans, net

     669       144       1,487       144  

Earnings on bank-owned life insurance

     191       235       534       476  

Insurance commissions

     166       238       334       446  

Other

     86       27       129       104  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     3,515       2,705       6,650       5,131  
  

 

 

   

 

 

   

 

 

   

 

 

 

NONINTEREST EXPENSE

        

Compensation and employee benefits

     6,372       6,077       12,768       12,315  

Occupancy and equipment

     1,130       1,069       2,197       2,136  

Professional fees

     524       533       1,057       992  

Data processing

     1,139       1,085       2,221       2,102  

Advertising

     152       118       253       234  

Federal Deposit Insurance Corporation (“FDIC”) premiums

     281       205       554       338  

(Gain) loss on foreclosed real estate

     (86     86       (105     66  

Amortization of intangible assets

     67       68       135       140  

Other

     856       583       1,533       1,264  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

     10,435       9,824       20,613       19,587  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     5,211       4,113       10,180       8,227  

Income taxes

     871       706       1,705       1,410  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME

   $ 4,340     $ 3,407     $ 8,475     $ 6,817  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Basic

   $ 0.43     $ 0.33     $ 0.84     $ 0.65  

Diluted

   $ 0.43     $ 0.33     $ 0.84     $ 0.65  

Dividends per share

   $ 0.12     $ 0.11     $ 0.23     $ 0.22  


 

     For the Three Months     For the Six Months  
     Ended March 31,     Ended March 31,  
     2021     2020     2021     2020  
           (dollars in thousands, except
per share data)
       

CONSOLIDATED AVERAGE BALANCES:

        

Total assets

     1,894,759     $ 1,826,470     $ 1,902,081     $ 1,807,336  

Total interest-earning assets

     1,790,029       1,721,272       1,797,986       1,708,262  

Total interest-bearing liabilities

     1,405,253       1,420,734       1,421,478       1,409,772  

Total stockholders’ equity

     198,011       194,135       196,058       192,696  

PER COMMON SHARE DATA:

        

Average shares outstanding - basic

     10,033,012       10,462,013       10,053,089       10,473,466  

Average shares outstanding - diluted

     10,035,027       10,462,013       10,055,551       10,473,466  

Book value shares

     10,731,235       11,105,887       10,731,235       11,105,887  

Net interest rate spread:

     2.85     2.53     2.79     2.54

Net interest margin:

     2.95     2.76     2.89     2.77

 

Contact:

  

Gary S. Olson, President & CEO

Corporate Office:

  

200 Palmer Street

  

Stroudsburg, Pennsylvania 18360

Telephone:

   (570) 421-0531

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Ticker: ESSA
CIK: 1382230
Form Type: 8-K Corporate News
Accession Number: 0001193125-21-144929
Submitted to the SEC: Fri Apr 30 2021 4:01:04 PM EST
Accepted by the SEC: Fri Apr 30 2021
Period: Wednesday, April 28, 2021
Industry: Savings Institutions Not Federally Chartered
Events:
  1. Earnings Release
  2. Financial Exhibit

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