ESSA Bancorp, Inc. :ESSA-US: Earnings Analysis: 2016 By the Numbers : January 12, 2017

ESSA Bancorp, Inc. reports financial results for the year ended September 30, 2016.

Highlights

  • Net interest income margins narrowed from 86.28% to 84.28% compared to the same period last year.
  • Net loan assets changed 10.62% compared to same period last year and 10.62% from previous period, total deposits changed 10.77% compared to same period last year and 10.77% from previous period.
  • Change in operating cash flow of -6.09% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline from worsening in operating margins as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 55.69 51.83 47.78 48.34 35.69
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 7.73 9.79 8.5 8.82 0.22
Earnings Growth (YOY) -21.08 15.13 -3.62 4003.72 -95.91
Net Margin 13.87 18.89 17.8 18.25 0.6
EPS 0.73 0.93 0.79 0.76 0.02
Return on Equity 4.45 5.78 5.1 5.16 0.13
Return on Assets 0.46 0.61 0.58 0.63 0.02

Access our Ratings and Scores for ESSA Bancorp, Inc.

Earnings Growth Analysis

ESSA-US‘s year-on-year decline in earnings was influenced by a weakening of net interest income margins from 86.28% to 84.28% as well as issues with loan loss provisions. As a result, net interest income after provisions margins went from 82.28% to 79.70% in this period. For comparison, net interest income margins were 86.28% and net interest income after provisions margins 82.28% in the last period. In addition, loan loss provisions as a percentage of net interest income were 5.43% this period and 4.64% a year ago.

Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (HY YOY)
Total Deposits Growth Rate History (HY YOY)

The firm’s decline in net interest income margins came despite the relative increase in the levels of net loan assets. In addition, total deposits as a percentage of equity went from 6.40% to 6.89%. On an absolute basis, net loan assets changed 10.62% compared to the same period last year and 10.62% from the previous period. Total deposits changed 10.77% compared to the same period last year and 10.77% from the previous period.

Cash Versus Earnings – Sustainable Performance?

ESSA-US‘s year-on-year change in operating cash flow of -6.09% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Contraction of operating margins from 25.14% to 18.95% and (2) One-time items that contributed to a decrease in pretax margins from 24.59% to 18.51%

EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for ESSA Bancorp, Inc.

Company Profile

ESSA Bancorp, Inc. is a stock holding company, which engages in the provision of banking, trust, and advisory services. It offers personal and business banking; government financial services; investment and wealth management; retirement planning; and insurance products. The company was founded in 2006 and is headquartered in Stroudsburg, PA.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of ESSA-US.