ESSA BANCORP INC (ESSA) 12.87 $0.09 (0.70%) 08:04PM (15 mins delay)

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, 2009. The Company reported net income of $1.5 million, or $0.11 per diluted share, for the three months ended March 31, 2009, as compared to net income of $1.7 million, or $0.11 per diluted share, for the corresponding 2008 period. For the six months ended March 31, 2009, the Company reported net income of $3.4 million or $0.24 per diluted share as compared to net income of $3.4 million or $0.21 per diluted share for the corresponding 2008 period.

Mr. Gary S. Olson, President and Chief Executive Officer of the Company, noted that, “the overall weakness and uncertainty that continues to stress the national economy also continues to stress economic conditions throughout the Company’s market area. Despite these economic realities, the Company maintained its high level of capital, solid earnings, and stable asset quality. The 5.7% increase in our total assets so far this fiscal year was fueled primarily by a $38.7 million, or 5.5% increase in our net loans outstanding. Our asset quality, as exhibited by our non-performing assets to total asset ratio, remains strong. Our operating results for the quarter and year-to-date periods, which in 2009 include the cost of our equity incentive plan, were solid. We are particularly pleased with the year-to-date increase of 9.6% in our net interest income after provision for loan losses compared to the 2008 year-to-date period.”

Net Interest Income:

Net interest income increased $833,000, or 13.1%, to $7.2 million for the three months ended March 31, 2009, from $6.4 million for the comparable period in 2008. The increase was primarily attributable to an increase in the Company’s interest rate spread to 2.39% for the three months ended March 31, 2009, from 2.00% for the comparable period in 2008, offset in part by a decrease in the Company’s average net earning assets of $16.6 million.

Net interest income increased $1.6 million, or 13.0%, to $14.2 million for the six months ended March 31, 2009, from $12.6 million for the comparable period in 2008. The increase was primarily attributable to an increase in the Company’s interest rate spread to 2.33% for the six months ended March 31, 2009, from 1.97% for the comparable period in 2008, offset in part by a decrease in the Company’s average net earning assets of $14.3 million.

Provision for Loan Losses:

The provision for loan losses increased $225,000 or 150.0%, to $375,000 for the three months ended March 31, 2009, from $150,000 for the comparable period in 2008. The provision for loan losses increased $450,000 or 150.0%, to $750,000 for the six months ended March 31, 2009, from $300,000 for the comparable period in 2008.

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 increase in the provision for loan losses for both the three and six month periods ended March 31, 2009, as compared to the comparable 2008 periods was in response to this evaluation and to the growth in the Company’s loan portfolio.

Noninterest Income:

Noninterest income decreased $64,000 or 4.8%, to $1.3 million for the three months ended March 31, 2009, from $1.3 million for the comparable period in 2008. The primary reasons for the decrease were declines in service fees on deposit accounts of $101,000, which were partially offset by increases in service charges and fees on loans of $25,000 and trust and investment fees of $14,000.

Noninterest income decreased $202,000, or 7.3%, to $2.6 million for the six months ended March 31, 2009, from $2.8 million for the comparable period in 2008. The primary reasons for the decrease were declines in service fees on deposit accounts of $167,000 and trust and investment fees of $23,000.

Noninterest Expense:

Noninterest expense increased $705,000, or 13.6%, to $5.9 million for the three months ended March 31, 2009, from $5.2 million for the comparable period in 2008. The primary reason for the increase was an increase in compensation and employee benefits of $580,000. Compensation and employee benefits increased primarily as a result of an expense of $538,000 for the three months ended March 31, 2009, related to the Company’s equity incentive plan. As previously announced, the Company’s stockholders approved the ESSA Bancorp, Inc. 2007 Equity Incentive Plan at the 2008 Annual Meeting of Stockholders on May 8, 2008. Awards granted under the Equity Incentive Plan were made on May 23, 2008.

Noninterest expense increased $1.4 million, or 14.1%, to $11.7 million for the six months ended March 31, 2009, from $10.2 million for the comparable period in 2008. The primary reasons for the increase were increases in compensation and employee benefits of $1.2 million, occupancy and equipment of $61,000, and other expenses of $138,000. Compensation and employee benefits increased primarily as a result of an expense of $1.1 million related to the Company’s Equity Incentive Plan. Occupancy and equipment costs increased primarily as a result of an increase in general repairs and maintenance of $35,000. Other expenses increased primarily as a result of increases in FDIC insurance of $62,000 and REO expense of $60,000.

Balance Sheet:

Total assets increased $57.1 million, or 5.7%, to $1.05 billion at March 31, 2009, compared to $993.5 million at September 30, 2008. The primary reasons for the increase in assets were increases in cash and cash equivalents of $4.7 million, certificates of deposit of $1.1 million, net loans receivable of $38.7 million, and investment securities available for sale of $8.7 million. The increase in net loans receivable included net increases in residential loans of $40.2 million and construction loans of $596,000 which were partially offset by decreases in commercial real estate loans of $1.8 million, commercial loans of $272,000, and consumer loans of $205,000.

Total deposits increased $28.8 million at March 31, 2009, compared to September 30, 2008, primarily as a result of increases in money market accounts of $25.1 million. Borrowed funds increased during the same time period by $37.6 million.

Stockholders’ equity decreased $10.5 million to $189.6 million at March 31, 2009, compared to $200.1 million at September 30, 2008, primarily as a result of a previously announced stock repurchase program the Company began in June 2008. As of March 31, 2009, the Company had purchased 2,086,059 shares at an average price of $13.00 per share.

Asset Quality:

Nonperforming assets totaled $5.4 million, or 0.51%, of total assets at March 31, 2009, compared to $4.0 million, or 0.40%, of total assets at September 30, 2008. The allowance for loan losses was $5.2 million, or 0.69%, of loans outstanding at March 31, 2009, compared to $4.9 million, or 0.69%, of loans outstanding at September 30, 2008.

ESSA Bank & Trust, a wholly-owned subsidiary of ESSA Bancorp, Inc., has total assets of over $980 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 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.
Gary S. Olson, 570-421-0531
President & CEO