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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2024

OR

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to __________

Commission File No. 001-33384

 

ESSA Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 

 

Pennsylvania

20-8023072

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

 

200 Palmer Street, Stroudsburg, Pennsylvania

18360

(Address of Principal Executive Offices)

(Zip Code)

(570) 421-0531

(Registrant’s telephone number)

N/A

(Former name or former address, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common

ESSA

Nasdaq Stock Market LLC

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filers,” “accelerated filers,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

   ☐

Accelerated filer

☐

 

 

 

 

Non-accelerated filer

   ☒

Smaller reporting company

☒

 

 

 

 

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. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 7, 2024, there were 10,131,521 shares of the Registrant’s common stock, par value $0.01 per share, outstanding.

 

 

 

ESSA Bancorp, Inc.

FORM 10-Q

Table of Contents

 

 

Page

 

Part I. Financial Information

 

 

 

 

 

 

Item 1.

Financial Statements (unaudited)

 

2

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

38

 

 

 

 

Item 3

Quantitative and Qualitative Disclosures About Market Risk

 

46

 

 

 

 

Item 4

Controls and Procedures

 

47

 

 

 

 

 

Part II. Other Information

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

48

 

 

 

 

Item 1A.

Risk Factors

 

48

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

48

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

48

 

 

 

 

Item 4.

Mine Safety Disclosures

 

48

 

 

 

 

Item 5.

Other Information

 

48

 

 

 

 

Item 6.

Exhibits

 

50

 

 

 

 

Signature Page

 

51

 

 

 

 

Part I. Financial Information

Item 1. Financial Statements

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

 

 

 

June 30,

 

 

September 30,

 

 

 

2024

 

 

2023

 

 

 

(dollars in thousands)

 

ASSETS

 

 

 

 

 

 

Cash and due from banks

 

$

55,300

 

 

$

39,008

 

Interest-bearing deposits with other institutions

 

 

72,699

 

 

 

46,394

 

Total cash and cash equivalents

 

 

127,999

 

 

 

85,402

 

Investment securities available for sale, at fair value (net of allowance for credit losses of $0)

 

 

215,201

 

 

 

334,056

 

Investment securities held to maturity, at amortized cost net of allowance for credit losses of $0

 

 

48,632

 

 

 

52,242

 

Loans held for sale

 

 

140

 

 

 

250

 

Loans receivable (net of allowance for credit losses of $15,298 and $18,525)

 

 

1,708,572

 

 

 

1,680,525

 

Regulatory stock, at cost

 

 

18,758

 

 

 

17,890

 

Premises and equipment, net

 

 

11,368

 

 

 

12,913

 

Bank-owned life insurance

 

 

39,678

 

 

 

39,026

 

Foreclosed real estate

 

 

3,195

 

 

 

3,311

 

Intangible assets, net

 

 

—

 

 

 

91

 

Goodwill

 

 

13,801

 

 

 

13,801

 

Deferred income taxes

 

 

5,797

 

 

 

6,877

 

Derivative and hedging assets

 

 

12,289

 

 

 

19,662

 

Other assets

 

 

28,204

 

 

 

27,200

 

TOTAL ASSETS

 

$

2,233,634

 

 

$

2,293,246

 

LIABILITIES

 

 

 

 

 

 

Deposits

 

$

1,554,300

 

 

$

1,661,016

 

Short-term borrowings

 

 

396,458

 

 

 

374,652

 

Other borrowings

 

 

10,000

 

 

 

-

 

Advances by borrowers for taxes and insurance

 

 

15,242

 

 

 

6,550

 

Derivative and hedging liabilities

 

 

7,565

 

 

 

9,579

 

Other liabilities

 

 

24,574

 

 

 

21,741

 

TOTAL LIABILITIES

 

 

2,008,139

 

 

 

2,073,538

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Preferred stock ($0.01 par value; 10,000,000 shares authorized, none issued)

 

 

-

 

 

 

-

 

Common stock ($0.01 par value; 40,000,000 shares authorized, 18,133,095 issued;
   10,131,521 and 10,394,689 outstanding at June 30, 2024 and September 30,
   2023, respectively)

 

 

181

 

 

 

181

 

Additional paid in capital

 

 

182,889

 

 

 

182,681

 

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

 

 

(5,670

)

 

 

(6,009

)

Retained earnings

 

 

160,770

 

 

 

151,856

 

Treasury stock, at cost; 8,001,574 and 7,738,406 shares outstanding at
   June 30, 2024 and September 30, 2023, respectively

 

 

(104,050

)

 

 

(99,508

)

Accumulated other comprehensive loss

 

 

(8,625

)

 

 

(9,493

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

225,495

 

 

 

219,708

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

2,233,634

 

 

$

2,293,246

 

 

See accompanying notes to the unaudited consolidated financial statements.

2

 

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

 

 

For the Three Months
Ended June 30,

 

 

For the Nine Months
Ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(dollars in thousands, except per
share data)

 

 

(dollars in thousands, except per
share data)

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable, including fees

 

$

21,965

 

 

$

19,132

 

 

$

65,103

 

 

$

52,721

 

Investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

2,564

 

 

 

2,161

 

 

 

9,201

 

 

 

6,348

 

Exempt from federal income tax

 

 

11

 

 

 

11

 

 

 

32

 

 

 

32

 

Other investment income

 

 

1,122

 

 

 

461

 

 

 

3,066

 

 

 

1,337

 

Total interest income

 

 

25,662

 

 

 

21,765

 

 

 

77,402

 

 

 

60,438

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

7,973

 

 

 

4,915

 

 

 

24,025

 

 

 

10,733

 

Short-term borrowings

 

 

3,380

 

 

 

1,606

 

 

 

9,100

 

 

 

3,691

 

Other borrowings

 

 

144

 

 

 

-

 

 

 

394

 

 

 

-

 

Total interest expense

 

 

11,497

 

 

 

6,521

 

 

 

33,519

 

 

 

14,424

 

NET INTEREST INCOME

 

 

14,165

 

 

 

15,244

 

 

 

43,883

 

 

 

46,014

 

(Release of) provision for credit losses

 

 

(347

)

 

 

150

 

 

 

(1,240

)

 

 

450

 

NET INTEREST INCOME AFTER (RELEASE OF) PROVISION FOR CREDIT
   LOSSES

 

 

14,512

 

 

 

15,094

 

 

 

45,123

 

 

 

45,564

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

Service fees on deposit accounts

 

 

719

 

 

 

782

 

 

 

2,089

 

 

 

2,343

 

Services charges and fees on loans

 

 

356

 

 

 

288

 

 

 

981

 

 

 

985

 

Loan swap fees

 

 

53

 

 

 

-

 

 

 

127

 

 

 

138

 

Unrealized loss on equity securities, net

 

 

(1

)

 

 

(1

)

 

 

(6

)

 

 

(4

)

Trust and investment fees

 

 

400

 

 

 

426

 

 

 

1,211

 

 

 

1,231

 

Gain on sale of loans, net

 

 

112

 

 

 

39

 

 

 

288

 

 

 

97

 

Earnings on bank-owned life insurance

 

 

220

 

 

 

196

 

 

 

652

 

 

 

582

 

Insurance commissions

 

 

133

 

 

 

145

 

 

 

395

 

 

 

459

 

Other

 

 

127

 

 

 

64

 

 

 

347

 

 

 

92

 

Total noninterest income

 

 

2,119

 

 

 

1,939

 

 

 

6,084

 

 

 

5,923

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

 

6,771

 

 

 

6,622

 

 

 

20,190

 

 

 

20,154

 

Occupancy and equipment

 

 

1,170

 

 

 

1,068

 

 

 

3,627

 

 

 

3,223

 

Professional fees

 

 

1,218

 

 

 

1,223

 

 

 

3,282

 

 

 

3,581

 

Data processing

 

 

1,364

 

 

 

1,296

 

 

 

4,066

 

 

 

3,697

 

Advertising

 

 

116

 

 

 

181

 

 

 

491

 

 

 

535

 

Federal Deposit Insurance Corporation (FDIC) premiums

 

 

454

 

 

 

380

 

 

 

1,309

 

 

 

748

 

Foreclosed real estate

 

 

-

 

 

 

(1

)

 

 

101

 

 

 

(4

)

Amortization of intangible assets

 

 

-

 

 

 

47

 

 

 

91

 

 

 

142

 

Other

 

 

715

 

 

 

677

 

 

 

2,222

 

 

 

2,143

 

Total noninterest expense

 

 

11,808

 

 

 

11,493

 

 

 

35,379

 

 

 

34,219

 

Income before income taxes

 

 

4,823

 

 

 

5,540

 

 

 

15,828

 

 

 

17,268

 

Income taxes

 

 

909

 

 

 

1,144

 

 

 

3,015

 

 

 

3,321

 

NET INCOME

 

$

3,914

 

 

$

4,396

 

 

$

12,813

 

 

$

13,947

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.41

 

 

$

0.45

 

 

$

1.34

 

 

$

1.44

 

Diluted

 

$

0.41

 

 

$

0.45

 

 

$

1.34

 

 

$

1.44

 

Dividends per share

 

$

0.15

 

 

$

0.15

 

 

$

0.45

 

 

$

0.45

 

 

See accompanying notes to the unaudited consolidated financial statements.

3

 

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

For the Three Months
Ended June 30,

 

 

For the Nine Months
Ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(dollars in thousands)

 

Net income

 

$

3,914

 

 

$

4,396

 

 

$

12,813

 

 

$

13,947

 

Other comprehensive (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (gains) losses

 

 

(96

)

 

 

(4,007

)

 

 

6,457

 

 

 

(1,331

)

Tax effect

 

 

20

 

 

 

841

 

 

 

(1,356

)

 

 

280

 

Net of tax amount

 

 

(76

)

 

 

(3,166

)

 

 

5,101

 

 

 

(1,051

)

Derivative and hedging activities adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Changes in unrealized holding gains (losses) on derivatives included in net income

 

 

1,124

 

 

 

2,330

 

 

 

1,384

 

 

 

2,525

 

Tax effect

 

 

(235

)

 

 

(489

)

 

 

(290

)

 

 

(529

)

Reclassification adjustment for gains (losses) on derivatives included in net income

 

 

(2,025

)

 

 

(2,498

)

 

 

(6,743

)

 

 

(6,625

)

Tax effect

 

 

425

 

 

 

524

 

 

 

1,416

 

 

 

1,391

 

Net of tax amount

 

 

(711

)

 

 

(133

)

 

 

(4,233

)

 

 

(3,238

)

Total other comprehensive (loss) income

 

 

(787

)

 

 

(3,299

)

 

 

868

 

 

 

(4,289

)

Comprehensive income

 

$

3,127

 

 

$

1,097

 

 

$

13,681

 

 

$

9,658

 

 

See accompanying notes to the unaudited consolidated financial statements.

4

 

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED) NINE MONTHS ENDED JUNE 30, 2024 AND 2023

 

 

 

 

 

 

 

 

 

 

 

Unallocated

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Common

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Number of

 

 

 

 

 

Paid In

 

 

Stock Held by

 

 

Retained

 

 

Treasury

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

the ESOP

 

 

Earnings

 

 

Stock

 

 

Loss

 

 

Equity

 

 

 

(dollars in thousands except share data)

 

Balance, September 30, 2022

 

 

10,371,022

 

 

$

181

 

 

$

182,173

 

 

$

(6,462

)

 

$

139,139

 

 

$

(99,800

)

 

$

(2,894

)

 

$

212,337

 

Net Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,947

 

 

 

 

 

 

 

 

 

13,947

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,289

)

 

 

(4,289

)

Cash dividends declared ($0.45 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,393

)

 

 

 

 

 

 

 

 

(4,393

)

Stock based compensation

 

 

 

 

 

 

 

 

471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

471

 

Allocation of ESOP stock

 

 

 

 

 

 

 

 

279

 

 

 

339

 

 

 

 

 

 

 

 

 

 

 

 

618

 

Allocation of treasury shares to incentive plan

 

 

30,183

 

 

 

 

 

 

(397

)

 

 

 

 

 

 

 

 

390

 

 

 

 

 

 

(7

)

Balance, June 30, 2023

 

 

10,401,205

 

 

$

181

 

 

$

182,526

 

 

$

(6,123

)

 

$

148,693

 

 

$

(99,410

)

 

$

(7,183

)

 

$

218,684

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unallocated

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Common

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Number of

 

 

 

 

 

Paid In

 

 

Stock Held by

 

 

Retained

 

 

Treasury

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

the ESOP

 

 

Earnings

 

 

Stock

 

 

Loss

 

 

Equity

 

 

 

(dollars in thousands except share data)

 

Balance, September 30, 2023

 

 

10,394,689

 

 

$

181

 

 

$

182,681

 

 

$

(6,009

)

 

$

151,856

 

 

$

(99,508

)

 

$

(9,493

)

 

$

219,708

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,813

 

 

 

 

 

 

 

 

 

12,813

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

868

 

 

 

868

 

Cash dividends declared ($0.45 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,429

)

 

 

 

 

 

 

 

 

(4,429

)

Cumulative effect of adoption of ASU 2016-13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

530

 

 

 

 

 

 

 

 

 

530

 

Stock based compensation

 

 

 

 

 

 

 

 

478

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

478

 

Allocation of ESOP stock

 

 

 

 

 

 

 

 

251

 

 

 

339

 

 

 

 

 

 

 

 

 

 

 

 

590

 

Allocation of treasury shares to incentive plan

 

 

40,441

 

 

 

 

 

 

(521

)

 

 

 

 

 

 

 

 

521

 

 

 

 

 

 

—

 

Purchase of treasury stock

 

 

(303,609

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,063

)

 

 

 

 

 

(5,063

)

Balance, June 30, 2024

 

 

10,131,521

 

 

$

181

 

 

$

182,889

 

 

$

(5,670

)

 

$

160,770

 

 

$

(104,050

)

 

$

(8,625

)

 

$

225,495

 

 

See accompanying notes to the unaudited consolidated financial statements.

5

 

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED) THREE MONTHS ENDED JUNE 30, 2024 AND 2023

 

 

 

 

 

 

 

 

 

 

 

Unallocated

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Common

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Number of

 

 

 

 

 

Paid In

 

 

Stock Held by

 

 

Retained

 

 

Treasury