ESSA Bancorp, Inc. (the “Company”) (NASDAQ Global Market SM “ESSA”) the holding company for ESSA Bank & Trust (the “Bank”) today announced its operating results for the three and six months ended March 31, 2010. The Company reported net income of $1.6 million, or $0.12 per diluted share, for the three months ended March 31, 2010, as compared to net income of $1.5 million, or $0.11 per diluted share, for the corresponding 2009 period. For the six months ended March 31, 2010, the Company reported net income of $2.4 million or $0.18 per diluted share, as compared to net income of $3.4 million or $0.24 per diluted share for the corresponding 2009 period.

Net income of $2.4 million for the six months ending March 31, 2010, included a pre-tax write-down of $1.2 million in the value of the Company’s foreclosed real estate portfolio. The charge related to a single property in the Bank’s foreclosed real estate portfolio and was made during the first fiscal quarter of 2010 to reflect an updated appraisal. Net income for the six months ended March 31, 2009, included a one-time tax benefit of $317,000 which was made during the first fiscal quarter of 2009. This benefit was related to the Company’s other than temporary impairment charge taken in the fourth fiscal quarter of 2008.

“The economy in our market area has changed little since our last quarterly report,” commented Gary S. Olson, President and Chief Executive Officer of the Company. “Persistent unemployment remains a key deterrent to a local turnaround. It is the primary reason our loan loss provision increased from quarter to quarter. Overall, the Company has achieved positive results. Most noteworthy, our earnings for the quarter were strong, deposits grew at an unprecedented rate, and we opened three new branches. Our capital position remains rock solid and our credit quality remains well above industry norms.”

Net Interest Income:

Net interest income decreased $5,000, or 0.1%, to $7.2 million for the three months ended March 31, 2010, compared to the same period in 2009. The decrease was primarily attributable to a decrease in the Company’s average net earning assets of $11.1 million, offset in part by an increase in the Company’s interest rate spread to 2.50% for the three months ended March 31, 2010, from 2.39% for the comparable period in 2009.

Net interest income increased $284,000, or 2.0%, to $14.5 million for the six months ended March 31, 2010, from $14.2 million for the comparable period in 2009. The increase was primarily attributable to an increase in the Company’s interest rate spread to 2.48% for the six months ended March 31, 2010, from 2.33% for the comparable period in 2009, offset in part by a decrease of $9.1 million in the Company’s average net earning assets.

Provision for Loan Losses and Net Charge-Offs:

The provision for loan losses increased $275,000, or 73.3%, to $650,000 for the three months ended March 31, 2010, from $375,000 for the comparable period in 2009. The provision for loan losses increased $400,000, or 53.3%, to $1.2 million for the six months ended March 31, 2010, from $750,000 for the comparable period in 2009. Net charge-offs increased $260,000 for the three months ended March 31, 2010 to $259,000 compared to the three-month period ended March 31, 2009 which showed a net recovery of $1,000. Net charge-offs decreased $115,000 for the six months ended March 31, 2010 to $370,000 compared to the same period in 2009.

In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect a borrower’s ability to repay, the estimated value of any underlying collateral, peer group information, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are subject to interpretation and revision as more information becomes available or as future events occur. The increases in the provision for loan losses for both the three- and six-month periods ended March 31, 2010, as compared to the comparable 2009 periods were in response to this evaluation.

Noninterest Income:

Noninterest income increased $345,000, or 27.3%, to $1.6 million for the three months ended March 31, 2010, from $1.3 million for the comparable period in 2009. The primary reason for the increase was a gain on the sale of investment securities of $308,000 during the 2010 period. The Company sold $13.7 million of adjustable rate investment securities during the three months ended March 31, 2010, as part of a strategy to minimize the impact of the current low interest rate environment.

Noninterest income increased $476,000, or 18.4%, to $3.1 million for the six months ended March 31, 2010, from $2.6 million for the comparable period in 2009. The primary reasons for the increase were gains on sales of investment securities of $308,000 and gains on sales of loans of $195,000. In addition to the sale of $13.7 million in investment securities, the Company sold $8.2 million of long-term fixed rate mortgages during the six months ended March 31, 2010, as part of an overall interest rate risk management strategy.

Noninterest Expense:

Noninterest expense increased $146,000, or 2.5%, to $6.0 million for the three months ended March 31, 2010, from $5.9 million for the comparable period in 2009. The primary reasons for the increase were increases in FDIC insurance premiums of $66,000 and other expenses of $44,000.

Noninterest expense increased $1.6 million, or 13.8%, to $13.3 million for the six months ended March 31, 2010, from $11.7 million for the comparable period in 2009. The primary reasons for the increase were the write-down of foreclosed real estate of $1.2 million in the 2010 period, along with increases in FDIC insurance of $396,000 and compensation and employee benefits of $163,000. These increases were offset, in part, by decreases in occupancy and equipment expense of $142,000 and advertising expense of $88,000.

Balance Sheet:

Total assets increased $16.6 million, or 1.6%, to $1,058.7 million at March 31, 2010, compared to $1,042.1 million at September 30, 2009. The primary reasons for the increase in assets were increases in interest-bearing deposits with other institutions of $8.0 million, investment securities available for sale of $5.4 million, and investment securities held to maturity of $8.5 million. These increases were partially offset by a decrease in net loans receivable of $4.8 million. The Company sold $8.2 million of long-term fixed rate residential loans during the six months ended March 31, 2010, as part of an overall interest rate risk management strategy.

Total deposits increased $73.7 million at March 31, 2010, compared to September 30, 2009, primarily as a result of an increase in certificates of deposit accounts of $55.4 million which included an increase of $36.5 million in brokered certificates of deposit and an increase of $19.0 million in traditional certificates of deposit. These increases were supplemented by an increase in noninterest-bearing demand accounts of $2.3 million, NOW accounts of $2.8 million, money market accounts of $9.0 million, and savings and club accounts of $4.3 million. Borrowed funds decreased during the same time period by $52.8 million primarily because brokered certificates of deposits were a less expensive funding source and because of the other deposit increases noted above.

Stockholders’ equity decreased $6.4 million to $179.1 million at March 31, 2010, compared to $185.5 million at September 30, 2009, primarily as a result of a previously announced stock repurchase program the Company began in June 2008. In June 2009, the Company announced that it had completed its first stock repurchase program having purchased 2,547,135 shares at a weighted average cost of $13.14. It was also announced that the Company’s Board of Directors authorized a second stock repurchase program to purchase up to an additional 10% of its outstanding shares. As of March 31, 2010, the Company had purchased an additional 754,529 shares at a weighted average cost of $12.59 per share under the second stock repurchase program including the repurchase of 359,229 shares at an average cost of $12.38 during the three months ended March 31, 2010.

Asset Quality:

Nonperforming assets totaled $11.9 million, or 1.12%, of total assets at March 31, 2010, compared to $7.7 million, or 0.74%, of total assets at September 30, 2009. The increase was due to increases of $3.2 million in nonperforming residential loans and $2.0 million in commercial loans offset, in part, by a decrease of $779,000 in foreclosed real estate. Commercial nonperforming loans increased primarily as a result of the addition of two commercial real estate relationships in the quarter ended December 31, 2009. Foreclosed real estate declined primarily as a result of the write-down of $1.2 million in the value of one property in the quarter ended December 31, 2009. The Company, in response to these and other trends, made a provision for loan losses of $1.2 million for the six months ended March 31, 2010, compared to a provision of $750,000 for the comparable six-month period in 2009. The allowance for loan losses was $6.6 million, or 0.90%, of loans outstanding at March 31, 2010, compared to $5.8 million, or 0.79%, of loans outstanding at September 30, 2009.

ESSA Bank & Trust is a wholly owned subsidiary of ESSA Bancorp, Inc. which has total assets of over $1 billion and is the leading service-oriented financial institution headquartered in the greater Pocono, Pennsylvania region. Corporate headquarters are located in downtown Stroudsburg, Pennsylvania. With the recent opening of the Mountainhome Office in Monroe County and the two new Lehigh Valley branches, ESSA Bank & Trust now has 16 community offices throughout the Pocono, Pennsylvania area and the Lehigh Valley. 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 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.
ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
  March 31,2010   September 30,2009
(dollars in thousands)
ASSETS
Cash and due from banks $ 6,402 $ 7,103
Interest-bearing deposits with other institutions   19,513     11,490  
Total cash and cash equivalents 25,915 18,593
Certificates of deposit 1,991 5,355
Investment securities available for sale 223,000 217,566
Investment securities held to maturity (fair value of $15,445 and $6,923) 15,230 6,709
Loans receivable (net of allowance for loan losses of $6,595 and $5,815) 728,739 733,580
Federal Home Loan Bank stock 20,727 20,727
Premises and equipment 12,230 10,620
Bank-owned life insurance 15,347 15,072
Foreclosed real estate 1,801 2,579
Other assets   13,712     11,318  
TOTAL ASSETS $ 1,058,692   $ 1,042,119  
 
 
LIABILITIES
Deposits $ 482,527 $ 408,855
Short-term borrowings 15,000 48,091
Other borrowings 370,757 390,507
Advances by borrowers for taxes and insurance 4,223 1,377
Other liabilities   7,121     7,783  
TOTAL LIABILITIES   879,628     856,613  
 
Commitment and contingencies
 
STOCKHOLDERS’ EQUITY
Preferred Stock
Common Stock 170 170
Additional paid in capital 163,386 162,243
Unallocated common stock held by the Employee Stock Ownership Plan (12,113 ) (12,339 )
Retained earnings 63,411 62,337
Treasury Stock, at cost (35,754 ) (27,695 )
Accumulated other comprehensive income (loss)   (36 )   790  
TOTAL STOCKHOLDERS’ EQUITY   179,064     185,506  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,058,692   $ 1,042,119  
ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
   
For the Three MonthsEnded March 31, For the Six MonthsEnded March 31,
2010   2009 2010   2009
(dollars in thousands)
INTEREST INCOME
Loans receivable $ 10,166 $ 10,523 $ 20,507 $ 21,124
Investment securities:
Taxable 2,164 2,644 4,401 5,097
Exempt from federal income tax 77 82 160 165
Other investment income   1   119   2   120
Total interest income   12,408   13,250   25,070   26,506
 
 
INTEREST EXPENSE
Deposits 1,458 1,788 2,864 3,759
Short-term borrowings 35 118 84 273
Other borrowings   3,711   4,135   7,635   8,271
Total interest expense   5,204   6,041   10,583   12,303
 
 
NET INTEREST INCOME 7,204 7,209 14,487 14,203
Provision for loan losses   650   375   1,150   750
 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   6,554   6,834   13,337   13,453
 
 
NONINTEREST INCOME
Service fees on deposit accounts 777 739 1,604 1,579
Services charges and fees on loans 124 171 225 292
Trust and investment fees 212 205 432 414
Gain on sale of investments, net 308 - 308 -
Gain on sale of loans, net 40 - 195 -
Earnings on Bank-owned life insurance 135 139 275 278
Other   11   8   24   24
Total noninterest income   1,607   1,262   3,063   2,587
 
     
NONINTEREST EXPENSE
Compensation and employee benefits 3,601 3,590 7,337 7,174
Occupancy and equipment 763 754 1,322 1,464
Professional fees 386 387 763 722
Data processing 467 467 917 936
Advertising 166 149 264 352
FDIC Premiums 123 57 481 85
Loss on foreclosed real estate - - 1,200 -
Other   539   495   992   933
Total noninterest expense   6,045   5,899   13,276   11,666
 
Income before income taxes 2,116 2,197 3,124 4,374
Income taxes   513   660   727   1,007
 
NET INCOME $ 1,603 $ 1,537 $ 2,397 $ 3,367
 
EARNINGS PER SHARE
Basic $ 0.12 $ 0.11 $ 0.18 $ 0.24
Diluted 0.12 0.11 0.18 0.24
ESSA BANCORP, INC. AND SUBSIDIARY
OTHER FINANCIAL DATA
(UNAUDITED)
 
  For the Three MonthsEnded March 31,   For the Six Months Ended March 31,
2010   2009   2010   2009
(dollars in thousands, except per share data)
CONSOLIDATED AVERAGE BALANCES:      
Total assets $ $ 1,037,882 $ $ 1,032,621 $ $ 1,034,474 $ $ 1,017,588
Total interest-earning assets 994,175 992,710 991,822 976,163
Total interest-earning liabilities 817,484 804,938 813,345 788,547

Total stockholders’ equity
183,219 193,602 184,514 195,460
 
PER COMMON SHARE DATA:
Average shares outstanding - basic 12,880,729 1 14,048,861 1 12,984,905 1 14,321,875
Average shares outstanding - diluted 12,880,729 1 14,048,861 1 12,984,905 1 14,321,875
Book value share computation:
Issued 1 16,980,900 16,980,900 1 16,980,900 1 16,980,900
Repurchased shares   3,217,940     2,086,059     3,217,940     2,086,059
Shares outstanding 13,762,960 14,894,841 13,762,960 14,894,841
Unvested restricted stock awards   471,531     589,414     471,531     589,414
Book value shares 14,234,491 15,484,255 14,234,491 15,484,255

Copyright Business Wire 2010

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