ESSA Bancorp, Inc. Announces Fiscal Second Quarter and Fiscal First Half 2024 Financial Results
- Net income was $4.6 million for the fiscal second quarter of 2024, compared to $4.7 million in the same period in 2023.
- Total interest income increased by 27.9% to $25.7 million in the second quarter of 2024.
- Net interest income after provision for credit losses was $15.4 million in the second quarter of 2024.
- Total assets were $2.2 billion at March 31, 2024, with total net loans at $1.71 billion.
- Tier 1 capital ratio was 9.5% at March 31, 2024, exceeding regulatory standards for a well-capitalized institution.
- Tangible book value per share increased to $20.70 at March 31, 2024.
- The company adopted the CECL accounting standard, impacting the allowance for credit losses.
- None.
Insights
The net income for ESSA Bancorp, Inc. appears relatively stable on a per-share basis year-over-year. While the
The growth of net interest income after release of provision for credit losses is marginal, suggesting that while the bank has managed to navigate higher interest rates well, the benefit has largely been offset by the cost of interest-bearing liabilities. Investors should be aware of the bank's net interest margin's modest improvement, which is a sign of resilience in a challenging rate environment but also could indicate limited upward potential in the near term. The challenge for ESSA Bancorp moving forward will be in balancing the growth in assets, particularly through commercial real estate loans, against the cost of funds and interest rate pressures.
Asset quality measures such as nonperforming assets and allowance for credit losses are essential metrics. The relatively stable nonperforming assets ratio suggests the bank has healthy asset quality, however, the drop in the allowance for credit losses to total loans ratio might raise some concerns about whether the bank is adequately reserved against future potential credit losses.
ESSA Bancorp's capital adequacy, with a Tier 1 capital ratio of
ESSA Bancorp's efforts in managing noninterest expense only resulted in a year-over-year quarterly and year-to-date increase of
From a market perspective, the bank's statement acknowledges a challenging interest rate environment, which has been a headwind for growth. The bank's loan activity seems to be struggling under these conditions, implying that future periods might not reflect substantial earnings growth unless the situation changes. Investors should note the bank's intent to continue attracting and retaining deposits through integrated banking capabilities, which if successful, may lead to increased customer loyalty and deposit base stability.
Lastly, the adoption of the CECL accounting standard has led to a decrease in allowance for credit losses, but the impact on retained earnings was somewhat muted. The new standard could lead to more volatility in provisions for credit losses depending on economic forecasts, which investors will need to monitor closely.
STROUDSBURG, PA / ACCESSWIRE / April 24, 2024 / ESSA Bancorp, Inc. (the "Company") (NASDAQ:ESSA), the holding company for ESSA Bank & Trust (the "Bank"), a
Net income was
Net income was
Gary S. Olson, President and CEO, commented: "The Company's solid financial performance and growth in shareholder value reflected a focus on net interest income and noninterest expense management, generating higher net interest margins compared to the linked quarter, solid asset quality and capital strength.
"We are navigating a challenging and still unsettled interest rate environment that has impeded loan activity and growth. At the same time, it has placed pressure on margins, particularly with the higher cost of interest-bearing liabilities that include borrowings and deposits.
"We are continually evaluating our loan pricing, seeking optimal pricing on borrowings to manage cost of funds, and paying close attention to efficiency and productivity across our operations. Diligently controlling operating costs held year-over-year quarterly and year-to-date noninterest expense increases to
"Although a year-over-year comparison of margins reflects the extreme impact higher interest rates have had on interest expense, we are encouraged by margins stabilizing and even improving during the past two quarters. We believe that in coming months, we may see modest improvement in the balance between interest income and interest expense. However, we anticipate significant pressure on margins will continue.
"Attracting and retaining deposits will continue to be an important initiative in the coming months. Building lasting, long-term customer loyalty with integrated banking capabilities such as credit card and commercial treasury services remains a key factor in retaining core deposits. We have carefully managed rates on interest-bearing accounts and avoided chasing customers by offering the highest rates. We are committed to maintaining a desirable loan-to-deposit ratio .
"Ensuring exceptional asset quality through risk monitoring and credit management will continue to be an important factor in generating quality earnings. Looking ahead, although we anticipate subdued lending activity, we have a solid loan pipeline and continue to work with current and prospective customers to develop mutually beneficial financial solutions."
FISCAL SECOND QUARTER 2024 HIGHLIGHTS
Total interest income increased
Total yield on average interest earning assets increased to
Net interest income after (release of) provision for credit losses was
In the first half of 2024, net interest income after (release of) provision for credit losses was
Total net loans at March 31, 2024, were
Lending activity was highlighted by
Demonstrating moderate stabilization and the positive impact of variable rate loan repricing during the first six months of fiscal 2024, net interest margin improved to
Asset quality remained strong, with a ratio of nonperforming assets to total assets of
Total deposits were
The Bank maintained strong levels of on-balance sheet liquidity and has access to significant sources of additional borrowing capacity.
The Bank continued to demonstrate financial strength, with a Tier 1 capital ratio of
Measures of shareholder value demonstrated growth. Tangible book value per share at March 31, 2024, increased to
Effective October 1, 2023, the Company adopted Accounting Standards Update 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", referred to as the current expected credit loss model ("CECL"). This accounting standard requires that credit losses for financial assets and off-balance sheet credit exposures be measured based on expected credit losses, rather than on incurred credit losses as in prior periods. As a result, at the time of adoption, the allowance for credit losses was decreased by
Fiscal Second Quarter 2024 Income Statement Review
Total interest income increased to
Total interest income increased to
Interest expense was
Interest expense was
The provision for credit losses decreased
The provision for credit losses decreased
The net interest margin for the second quarter of 2024 was
The net interest margin for the six months ended March 31, 2024, was
Noninterest income was
Noninterest income was
Noninterest expense for the second quarter of 2024 was
Noninterest expense for the six months ended March 31, 2024, was
Balance Sheet, Asset Quality and Capital Adequacy Review
Total assets were
Total net loans were
Nonperforming assets were
Total deposits were
Noninterest bearing demand accounts at March 31, 2024, were
The Bank maintained a strong capital position with a Tier 1 capital ratio of
About the Company: ESSA Bancorp, Inc. is the holding company for its wholly owned subsidiary, ESSA Bank & Trust, which was formed in 1916. The Company has total assets of
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, the recent turmoil in the banking industry , 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, quarterly and current 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.
Contact:
Gary S. Olson, President & CEO
Corporate Office: 200 Palmer Street
Stroudsburg, Pennsylvania 18360
Telephone: (570) 421-0531
ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| (dollars in thousands) | ||||||||
ASSETS | ||||||||
Cash and due from banks | $ | 68,735 | $ | 39,008 | ||||
Interest-bearing deposits with other institutions | 10,454 | 46,394 | ||||||
Total cash and cash equivalents | 79,189 | 85,402 | ||||||
Investment securities available for sale, at fair value | 215,321 | 334,056 | ||||||
Investment securities held to maturity, at amortized cost | ||||||||
(net of allowance for credit losses of | 49,923 | 52,242 | ||||||
Loans, held for sale | 749 | 250 | ||||||
Loans receivable (net of allowance for credit losses | ||||||||
of | 1,708,221 | 1,680,525 | ||||||
Regulatory stock, at cost | 21,493 | 17,890 | ||||||
Premises and equipment, net | 11,479 | 12,913 | ||||||
Bank-owned life insurance | 39,458 | 39,026 | ||||||
Foreclosed real estate | 3,195 | 3,311 | ||||||
Intangible assets, net | - | 91 | ||||||
Goodwill | 13,801 | 13,801 | ||||||
Deferred income taxes | 6,081 | 6,877 | ||||||
Derivative and hedging assets | 13,414 | 19,662 | ||||||
Other assets | 28,778 | 27,200 | ||||||
TOTAL ASSETS | $ | 2,191,102 | $ | 2,293,246 | ||||
LIABILITIES | ||||||||
Deposits | $ | 1,446,305 | $ | 1,661,016 | ||||
Short-term borrowings | 467,917 | 374,652 | ||||||
Other borrowings | 10,000 | - | ||||||
Advances by borrowers for taxes and insurance | 12,780 | 6,550 | ||||||
Derivative and hedging liabilities | 7,789 | 9,579 | ||||||
Other liabilities | 22,771 | 21,741 | ||||||
TOTAL LIABILITIES | 1,967,562 | 2,073,538 | ||||||
STOCKHOLDERS' EQUITY | ||||||||
Common stock | 181 | 181 | ||||||
Additional paid-in capital | 182,696 | 182,681 | ||||||
Unallocated common stock held by the | ||||||||
Employee Stock Ownership Plan ("ESOP") | (5,783 | ) | (6,009 | ) | ||||
Retained earnings | 158,334 | 151,856 | ||||||
Treasury stock, at cost | (104,050 | ) | (99,508 | ) | ||||
Accumulated other comprehensive loss | (7,838 | ) | (9,493 | ) | ||||
TOTAL STOCKHOLDERS' EQUITY | 223,540 | 219,708 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 2,191,102 | $ | 2,293,246 | ||||
ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
| Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (dollars in thousands, except per share data) | ||||||||||||||||
INTEREST INCOME | ||||||||||||||||
Loans receivable, including fees | $ | 21,724 | 17,504 | 43,138 | 33,589 | |||||||||||
Investment securities: | ||||||||||||||||
Taxable | 2,750 | 2,096 | 6,637 | 4,187 | ||||||||||||
Exempt from federal income tax | 10 | 10 | 21 | 21 | ||||||||||||
Other investment income | 1,166 | 444 | 1,944 | 876 | ||||||||||||
Total interest income | 25,650 | 20,054 | 51,740 | 38,673 | ||||||||||||
INTEREST EXPENSE | ||||||||||||||||
Deposits | 7,590 | 3,817 | 16,052 | 5,818 | ||||||||||||
Short-term borrowings | 3,064 | 1,127 | 5,720 | 2,085 | ||||||||||||
Other borrowings | 142 | - | 250 | - | ||||||||||||
Total interest expense | 10,796 | 4,944 | 22,022 | 7,903 | ||||||||||||
NET INTEREST INCOME | 14,854 | 15,110 | 29,718 | 30,770 | ||||||||||||
(Release of) Provision for credit losses | (496 | ) | 150 | (893 | ) | 300 | ||||||||||
NET INTEREST INCOME AFTER (RELEASE OF) PROVISION | ||||||||||||||||
FOR CREDIT LOSSES | 15,350 | 14,960 | 30,611 | 30,470 | ||||||||||||
NONINTEREST INCOME | ||||||||||||||||
Service fees on deposit accounts | 674 | 762 | 1,370 | 1,561 | ||||||||||||
Services charges and fees on loans | 295 | 330 | 625 | 697 | ||||||||||||
Loan swap fees | 74 | 136 | 74 | 138 | ||||||||||||
Unrealized loss on equity securities | (2 | ) | (5 | ) | (5 | ) | (3 | ) | ||||||||
Trust and investment fees | 418 | 403 | 811 | 805 | ||||||||||||
Gain on sale of loans, net | 58 | 58 | 176 | 58 | ||||||||||||
Earnings on bank-owned life insurance | 220 | 195 | 432 | 386 | ||||||||||||
Insurance commissions | 134 | 168 | 262 | 314 | ||||||||||||
Other | 133 | 22 | 220 | 28 | ||||||||||||
Total noninterest income | 2,004 | 2,069 | 3,965 | 3,984 | ||||||||||||
NONINTEREST EXPENSE | ||||||||||||||||
Compensation and employee benefits | 6,673 | 6,792 | 13,419 | 13,532 | ||||||||||||
Occupancy and equipment | 1,228 | 1,109 | 2,457 | 2,155 | ||||||||||||
Professional fees | 1,039 | 1,115 | 2,064 | 2,358 | ||||||||||||
Data processing | 1,360 | 1,222 | 2,702 | 2,401 | ||||||||||||
Advertising | 239 | 168 | 375 | 354 | ||||||||||||
Federal Deposit Insurance Corporation ("FDIC") | ||||||||||||||||
premiums | 475 | 180 | 855 | 368 | ||||||||||||
Foreclosed real estate | - | - | 101 | (3 | ) | |||||||||||
Amortization of intangible assets | 44 | 48 | 91 | 95 | ||||||||||||
Other | 656 | 658 | 1,507 | 1,466 | ||||||||||||
Total noninterest expense | 11,714 | 11,292 | 23,571 | 22,726 | ||||||||||||
Income before income taxes | 5,640 | 5,737 | 11,005 | 11,728 | ||||||||||||
Income taxes | 1,078 | 1,052 | 2,106 | 2,177 | ||||||||||||
NET INCOME | $ | 4,562 | $ | 4,685 | $ | 8,899 | $ | 9,551 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.48 | $ | 0.48 | $ | 0.93 | $ | 0.98 | ||||||||
Diluted | $ | 0.48 | $ | 0.48 | $ | 0.93 | $ | 0.98 | ||||||||
Dividends per share | $ | 0.15 | $ | 0.15 | $ | 0.30 | $ | 0.30 | ||||||||
| For the Three Months | For the Six Months | |||||||||||||||
| Ended March 31, | Ended March 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (unaudited) | ||||||||||||||||
| (dollars in thousands, except per share data) | ||||||||||||||||
CONSOLIDATED AVERAGE BALANCES: | ||||||||||||||||
Total assets | $ | 2,191,544 | $ | 1,947,510 | $ | 2,213,976 | $ | 1,919,828 | ||||||||
Total interest-earning assets | 2,077,074 | 1,837,251 | 2,099,284 | 1,806,908 | ||||||||||||
Total interest-bearing liabilities | 1,675,831 | 1,429,077 | 1,698,571 | 1,398,875 | ||||||||||||
Total stockholders' equity | 222,906 | 220,219 | 221,265 | 217,701 | ||||||||||||
PER COMMON SHARE DATA: | ||||||||||||||||
Average shares outstanding - basic | 9,513,798 | 9,717,899 | 9,575,730 | 9,707,796 | ||||||||||||
Average shares outstanding - diluted | 9,513,798 | 9,721,036 | 9,575,730 | 9,711,599 | ||||||||||||
Book value shares | 10,131,521 | 10,402,537 | 10,131,521 | 10,402,537 | ||||||||||||
Net interest rate spread: | 2.37 | % | 3.03 | % | 2.33 | % | 3.16 | % | ||||||||
Net interest margin: | 2.87 | % | 3.34 | % | 2.82 | % | 3.42 | % | ||||||||
SOURCE: ESSA Bancorp Inc.
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FAQ
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