Essa Bancorp Inc.
Annual Report 2016

Plain-text annual report

Fellow Shareholders: It is a rare privilege for any company to celebrate 100 years of operation. In November 2016, ESSA Bancorp, Inc. marked the centennial of East Stroudsburg Building & Loan Association opening its doors to the community. Our executive team was at the Nasdaq Stock Market on November 16, 2016 to ring the closing bell to celebrate this milestone. It was nearly a decade earlier that we rang the Nasdaq bell in April 2007 to mark ESSA Bancorp, Inc. becoming a publicly traded company. During the past several years, the Company completed acquisitions that have enabled ESSA to greatly expand its market scope. From its legacy core market in the Poconos, the Company has expanded into the Lehigh Valley, Scranton/Wilkes-Barre, and suburban Philadelphia markets. The acquisition of Eagle National Bank (“ENB”), a business-focused institution serving suburban Philadelphia, closed early in fi scal 2016 and has been fully integrated into ESSA’s operations. Gary S. Olson, President and CEO In 2016, we focused on solidifying our gains and market position following four years of acquisitions. Our goals included generating quality earnings from a larger franchise through loan growth while maintaining asset quality, taking advantage of our opportunities by making selective investments in people and operations, positioning for continued growth, and generating value for shareholders. In the fi scal year ended September 30, 2016, ESSA Bancorp reported net income of $7.7 million or $0.73 per diluted share, compared to $9.8 million or $0.93 per diluted share in fi scal 2015. The Company closed the year with $1.77 billion in assets, $1.22 billion in net loans, and deposits of $1.21 billion. The year-over-year decline in earnings refl ected the impact of a prolonged and fl attening yield curve. As a result, our net interest margin was reduced by 7 basis points to 2.89% from 2.96% in fi scal 2015. Even as we committed a portion of revenue to positioning for the future, we were pleased to deliver increased value to shareholders. Total stockholders’ equity rose to $176.3 million in fi scal 2016 from $171.3 million a year earlier. Retained earnings increased to $87.6 million from $83.7 million, and tangible book value per share increased to $14.05 compared with $14.03 a year earlier. We also provided value to shareholders by paying quarterly cash dividends. Our fourth quarter 2016 dividend represented the 35th consecutive quarterly cash dividend paid by ESSA to its shareholders. Earnings refl ected a year-over-year $4.2 million rise in total interest income to a Company record $58.4 million in fi scal 2016. 1 FINANCIAL PERFORMANCE REFLECTS GROWTH, INVESTMENT Earnings refl ected a year-over-year $4.2 million rise in total interest income to a Company record $58.4 million in fi scal 2016 from $54.2 million a year earlier. Diligent interest expense management and growth in low-cost core demand deposits to 58% of total deposits from 46% of total deposits the year before contributed to relatively slower expansion of total interest expense, which was $11.4 million in fi scal 2016 compared with $10.4 million in fi scal 2015. Net interest income increased to $46.9 million in fi scal 2016 from $43.8 million in fi scal 2015. We were pleased that despite continuing pressure on margins, a low-interest rate environment, and stable but soft economic conditions throughout our markets, we grew net interest income through a combination of greater total interest income and careful interest rate management. Noninterest income increased by $887 thousand from fi scal 2015, primarily refl ecting increased fee income and gains from opportunistic investment portfolio management. We were pleased that the Company’s interest income growth refl ected the positives resulting from loans acquired in the ENB transaction, and the record $275 million in loans booked during fi scal 2016. Particularly encouraging was the income generated from expanded commercial lending activity and solid performance by indirect auto lending. Going forward, these banking sectors provide our greatest growth and revenue opportunities. Following several years of steady year- over-year earnings growth, our net income in fi scal 2016 refl ected approximately $6 million of higher noninterest expense compared with the previous year. Some of this increase refl ects higher occupancy and equipment costs related to the ENB acquisition. The increase also refl ected new team members from the ENB acquisition, and investment in new and current team members who we expect to drive revenue. A FOCUS ON EFFICIENCY, PRODUCTIVITY Noninterest expense refl ected both investment in our future and expense management. As in past years, we kept a close eye on the productivity of every facility and took advantage of the opportunity to make operations more effi cient and eff ective. The Company closed fi ve branch locations in fi scal 2016, including one acquired in the ENB transaction, consolidating their operations into other ESSA locations, and relocated a branch to improve visibility in the market. We believe physical locations are vitally important, especially for a community bank focused on service, and we are always looking for the opportunity to maximize the productivity and value of our branches. Technology has supported branch effi ciency through enhanced processing capabilities and communication between locations and throughout our operation. Electronic banking services and business online banking, increasingly used by customers for many transactions, have enabled us to trim some facilities and still provide excellent customer support. 2 NOVEMBER 1, 1916 ESSA Bank & Trust founded by John Gish and other local businessmen at 93 Crystal Street in East Stroudsburg (above) 1933 Total assets reach $250,000 1941 Company name becomes East Stroudsburg Savings, Building & Loan Association 1949 Total assets reach $1 million 1956 Board minutes with John Gish’s original signature 1966 ESSA celebrates its 50th anniversary; Company moves to new headquarters at 75 Washington Street in East Stroudsburg (below) In 2016, we enhanced our electronic banking capabilities, particularly for business customers; expanded our scope of web-based banking services; and introduced a new and robust website. Of course, security remains a top priority. Staying current with the latest encryption, anti-hacking, and system monitoring capabilities is critical. reinforce our brand and the message of Banking Confi dently with ESSA. Conveying that message to the community is vitally important as we compete for customers and credits. Positioning ESSA as the premier resource for fi nancial solutions, service, and support is an important component in making our case for being a one-stop resource for customers. BALANCE SHEET REFLECTS GROWTH, QUALITY Loans receivable, net of allowance for loan losses, were $1.22 billion at September 30, 2016 compared with $1.10 billion at September 30, 2015. Loan growth primarily refl ected the acquisition of ENB, and took place halfway through the fi scal year. ESSA’s commercial real estate portfolio increased to $288.4 million at fi scal year-end 2016 from $200.0 million a year earlier, while commercial and industrial loans increased to $40.0 million at fi scal year-end 2016 from $34.3 million the previous year. Some of our production gains in commercial lending were off set by customer payoff s of loans. We are confi dent that most of these were not because customers went elsewhere to borrow, but because they pulled back on plans to deploy more capital in their businesses. This refl ects the continuing mood of caution throughout the business community. We believe that steady economic improvement in our markets; Facilities, systems, and superior products are supporting our culture of service delivered by an experienced, dedicated team of bankers. Fiscal 2016 expenses refl ect the investment in proven performers, both new hires and those already with the Company. The success of our commercial banking teams in our served markets, particularly in the Lehigh Valley, drove the decision to expand our commercial banking team. During the year, six experienced commercial banking experts joined the ESSA team, enhancing our capabilities in lending, relationship management, small business lending, loan portfolio management, and corporate cash management services. In July 2016, we welcomed Stephen H. Patterson, a 30-year veteran of the banking industry with a strong background in commercial lending, to lead ESSA’s consumer and commercial initiatives as Senior Vice President and Chief Lending Offi cer. This newly created position at ESSA refl ects the importance we place on building a strong, coordinated lending outreach across all markets. We also expanded our indirect auto lending team, and gave increased responsibility to several top-performing individuals in commercial and indirect auto lending. The Company increased spending on advertising and marketing to We continue to build on a tradition of leadership by offering superior products and services and providing integrated fi nancial solutions to customers. expansion of the Company’s indirect auto lending business, which increased 19% to $193.1 million at September 30, 2016 from $162.2 million at September 30, 2015. Residential mortgage loans declined year-over-year as the housing market throughout our markets continued to refl ect softness in demand and pricing. Commercial loan growth partially refl ected the addition of loans from organic growth and the ENB acquisition: ESSA closed a record $102.5 million of commercial real estate and commercial and industrial loans during the year. This only partially refl ected the production power of an expanded commercial lending team, much of which potential changes to the corporate tax structure; and the hard work and dedication of our banking team to identify new opportunities in business banking, indirect auto lending, and retail lending will support overall growth. Commercial lending opens the door to our broad array of business products and services. We remain focused on building and expanding relationships with our business clients via new deposits, fee-based accounts such as treasury management and merchant services, investment services, and advisory services such as employee benefi ts consulting and management. ESSA’s strength is exceeding the customized 3 personal service expected of a community bank and off ering the robust products and capabilities of a larger institution. As we pursue growth, maintaining the quality of our loan portfolio is paramount. Through prudent asset management practices and disciplined risk management underwriting practices in retail, consumer, and commercial lending, we maintained low ratios of nonperforming assets and net loan charge-off s—consistent with previous years. Nonperforming assets were 1.24% of total assets at September 30, 2016 and net charge-off s as a percent of total average loans were 0.20% in fi scal 2016. Sound asset quality has enabled us to maximize the value of the revenue we generate. The Company’s value also refl ected its capital strength, including capital ratios that exceeded accepted regulatory standards for a well-capitalized institution. The Company’s tangible equity to tangible assets ratio was 9.11% at September 30, 2016. OUTLOOK The coming year off ers the opportunity to demonstrate value to all of our constituents. We continue to build on a tradition of leadership by off ering superior products and services and providing integrated fi nancial solutions to customers. We believe we have developed the products and built a team capable of delivering results that will put us on track for earnings growth. Entering the new fi scal year, we face the challenges of margin pressure, low interest rates, and an optimistic but cautious attitude among consumers and businesses. The potential for some relief on the interest rate front and possible changes to the corporate tax structure would be welcome, but the key to success lies squarely with our ability to grow market share, earn new customers, and retain quality credits. We welcome that opportunity, and we fi rmly believe in the ability of our team to generate results. From its modest beginnings in East Stroudsburg, ESSA Bank & Trust has grown to a $1.77 billion asset institution, ranking ESSA Bancorp by asset size among the top 15 publicly traded fi nancial institutions based in Pennsylvania. During the past several years, we have spoken about transformation, and ESSA has completed the transformation from a retail-focused thrift serving one market to a commercial and retail savings bank providing lending, deposit, brokerage, insurance, employee benefi t, and asset management and trust services throughout Eastern Pennsylvania. Through the years, our guiding principles have remained steadfast: succeeding through safe, sound, and stable operation; maintaining uncompromising dedication to customer satisfaction; hiring, retaining, and recognizing talented employees; building the Company’s value; and giving back to the community through charitable, civic, and service contributions. We appreciate the loyalty and support of you, our valued shareholders. We are committed to work diligently alongside our directors and banking professionals as stewards of your investment in ESSA Bancorp. Sincerely, Gary S. Olson, President and CEO 4 1970 ESSA merges with Commonwealth Building & Loan Association 1971 ESSA merges with Keystone Building & Loan Association; Company name becomes East Stroudsburg Savings Association; total assets reach $20 million 1978 First branch offi ce opens inside the Stroud Mall in Stroudsburg 1983-1997 Locations added in Brodheadsville, Stroudsburg, Mount Pocono, Marshalls Creek, Tannersville (Weis Markets), and Bushkill 1984 Total assets reach $100 million 1985 Corporate headquarters move to 744 Main Street in Stroudsburg (above) 1986 Annual net income reaches $1 million Consolidated Financial Highlights The following information is derived from the audited Consolidated Financial Statements of ESSA Bancorp, Inc. For additional information, reference is made to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements of ESSA Bancorp, Inc. and related notes included in Form 10-K as fi led with the Securities and Exchange Commission. Selected Balance Sheet Data (Years ended September 30; data in thousands) 2016 2015 2014 2013 2012 Total assets $1,772,479 $1,606,544 $1,574,815 $1,372,315 $1,418,786 Investment securities: Available for sale Loans, net Deposits Borrowed funds Equity 390,410 1,219,213 1,214,820 360,061 176,344 379,407 383,078 315,622 329,585 1,102,118 1,058,267 928,230 950,355 1,096,754 1,133,889 1,041,059 995,634 320,440 259,320 152,260 234,741 171,280 167,309 166,446 175,411 Selected Operations Data (Years ended September 30; data in thousands) Net interest income Provisions for loan losses Net interest income after provisions for loan losses Noninterest income Noninterest expense Income tax expense Net income Earnings per share: Basic Diluted 2016 $46,935 2,550 44,385 8,783 42,858 2,583 $7,727 $0.74 $0.73 2015 2014 2013 2012 $43,789 $40,149 $39,845 $29,068 2,075 2,350 3,750 2,550 41,714 37,799 36,095 26,518 7,896 7,407 8,024 6,735 36,865 33,811 32,462 33,005 2,954 2,891 2,834 $9,791 $8,504 $8,823 $0.94 $0.93 $0.79 $0.79 $0.76 $0.76 Selected Other Data (Years ended September 30) Return on average assets Return on average equity Interest rate spread(1) Net interest margin(2) Net charge-offs as a percent of total loans Tier 1 core capital (to adjusted tangible assets) 2016 0.45% 4.40% 2.81% 2.89% 0.20% 8.76% 2015 0.62% 5.68% 2.89% 2.96% 2014 0.59% 5.01% 2.89% 2.97% 2013 0.64% 5.12% 2.97% 3.08% 0.16% 0.17% 0.32% 0.36% 10.03% 10.04% 11.03% 11.08% (1) The interest rate spread represents the diff erence between the weighted-average yield on a fully tax-equivalent basis on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the year. (2) The net interest margin represents net interest income on a fully tax-equivalent basis as a percent of average interest-earning assets for the year. 5 33 $215 $0.02 $0.02 2012 0.02% 0.13% 2.42% 2.65% Stock Price & Market Capitalization I E C R P K C O T S $21.00 $18.00 $15.00 $12.00 $9.00 0 $190,000,000 $170,000,000 $150,000,000 $130,000,000 $110,000,000 0 N O I T A Z I L A T I P A C T E K R A M 2012 2013 2014 2015 2016 (Years ended September 30) Dividends per Share Earnings per Share (Diluted) $0.50 $0.40 $0.30 $0.20 $0.10 0 $0.34 $0.36 $0.26 $0.20 $0.20 2012 2013 2014 2015 2016 (Years ended September 30) $1.00 $0.80 $0.60 $0.40 $0.20 0 Tangible Book Value (Per Share) $12.99 $13.34 $12.35 $14.03 $14.05 $15 $12 $9 $6 $3 0 2012 2013 2014 2015 2016 (Years ended September 30) 6 $0.93 $0.76 $0.79 $0.73 $0.02 2012 2013 2014 2015 2016 (Years ended September 30) 2003 1996 First Company website launched at essabank.com 1998 Brodheadsville Weis Markets branch opens; Asset Management & Trust Division added; ESSA Foundation formed 1999-2001 Three additional Weis Market locations open in East Stroudsburg, Stroudsburg, and Pen Argyl 2000 Previous President and CEO W. Jack Wallie retires; Gary Olson named new President and CEO 2002 Blakeslee branch opens; ESSA introduces internet banking Construction of new corporate headquarters in Stroudsburg completed; total assets reach $500 million 2004 Company name changes to ESSA Bank & Trust Consolidated Financial Highlights (cont’d) Net Income (in Thousands) Net Interest Margin $9,791 $8,823 $8,504 $7,727 $10,000 $8,000 $6,000 $4,000 $2,000 $215 0 2012 2013 2014 2015 2016 (Years ended September 30) 5% 4% 3% 2% 1% 0 3.08% 2.97% 2.96% 2.89% 2.65% 2012 2013 2014 2015 2016 (Years ended September 30) Return on Average Equity Revenue* (in Thousands) 8% 6% 4% 2% 0 5.68% 5.12% 5.01% 4.40% 0.13% 2012 2013 2014 2015 2016 (Years ended September 30) $80,000 $60,000 $40,000 $20,000 0 8 1 7 , 5 5 $ 5 8 6 , 1 5 $ 9 6 8 , 7 4 $ 6 5 5 , 7 4 $ 3 0 8 , 5 3 $ 2012 2013 2014 2015 2016 (Years ended September 30) *Net interest income plus noninterest income. Deposits (in Thousands) Stockholders’ Equity (in Thousands) $1,500,000 $1,200,000 $900,000 $600,000 $300,000 0 0 2 8 , 4 1 2 , 1 $ 9 8 8 , 3 3 1 , 1 $ 4 5 7 , 6 9 0 , 1 $ 4 3 6 , 5 9 9 $ 9 5 0 , 1 4 0 , 1 $ $200,000 $160,000 $120,000 $80,000 $40,000 0 1 1 4 , 5 7 1 $ 6 4 4 , 6 6 1 $ 9 0 3 , 7 6 1 $ 0 8 2 , 1 7 1 $ 4 4 3 , 6 7 1 $ 2012 2013 2014 2015 2016 (Years ended September 30) 2012 2013 2014 2015 2016 (Years ended September 30) 7 2006 ESSA Bancorp, Inc., the holding company for ESSA Bank & Trust, formed 2007 Shares of ESSA Bancorp’s common stock begin trading on the Nasdaq Stock Market; Tannersville branch opens Total Assets (in Thousands) $2,000,000 $1,600,000 $1,200,000 $800,000 $400,000 0 9 7 4 , 2 7 7 , 1 $ 4 4 5 , 6 0 6 , 1 $ 5 1 8 , 4 7 5 , 1 $ 6 8 7 , 8 1 4 , 1 $ 5 1 3 , 2 7 3 , 1 $ 2012 2013 2014 2015 2016 (Years ended September 30) 2008 Total assets reach $1 billion 2010 Branches open in Mountainhome, Bethlehem (Weis Markets), Allentown (Weis Markets), and Schnecksville (Weis Markets) 2011 Lehigh Valley expansion continues with the opening of Bethlehem office; ESSA Advisory Services formed 2012 ESSA acquires First Star Bancorp, Inc., adding nine branches throughout the Lehigh Valley (Bethlehem branch shown below); total assets reach $1.5 billion Total Loans (in Thousands) $1,400,000 $1,200,000 $900,000 $600,000 $300,000 0 9 6 2 , 8 2 2 , 1 $ 7 3 0 , 1 1 1 , 1 $ 7 5 6 , 7 5 9 $ 4 9 2 , 6 3 9 $ 1 0 9 , 6 6 0 , 1 $ 2012 2013 2014 2015 2016 (Years ended September 30) NPLs & Charge-Offs i s n a o L g n m r o f r e P - n o N s n a o L l a t o T o t 5% 4% 3% 2% 1% 0 2012 2013 2014 2015 2016 (Years ended September 30) 8 0.5% 0.4% 0.3% 0.2% 0.1% 0 o t s f f O - e g r a h C t e N g n i d n a t s t u O s n a o L e g a r e v A Executive Personnel BOARD OF DIRECTORS & GENERAL COUNSEL William A. Viechnicki, D.D.S. Chairman of the Board Orthodontist Robert C. Selig, Jr. Vice Chairman of the Board President – Selig Construction Company Joseph S. Durkin Executive Vice President – Reilly Associates Frederick E. Kutteroff President – Keystone Savings Bank (retired) John E. Burrus Director Emeritus Timothy S. Fallon CEO – PBS 39 Christine D. Gordon, Esq. Deputy Chief Compliance Offi cer – Olympus Corporation of the Americas Gary S. Olson President & CEO – ESSA Bank & Trust Brian T. Regan, CPA Shareholder – Regan, Levin, Bloss, Brown & Savchak, P.C. Daniel J. Henning President – A.C. Henning Enterprises, Inc. Elizabeth Bensinger Weekes, Esq. Partner – Bensinger & Weekes, PA John S. Schoonover, Jr. Director Emeritus William P. Douglass Director Emeritus James V. Fareri, Esq. General Counsel Gary S. Olson President & CEO Allan A. Muto Executive Vice President & CFO Charles D. Hangen Senior Vice President & COO ESSA Bancorp, Inc. 200 Palmer Street Stroudsburg, PA 18360 Mailing Address P.O. Box L Stroudsburg, PA 18360 OFFICERS Stephen H. Patterson Senior Vice President & CLO Thomas J. Grayuski Vice President, Human Resources Division Diane K. Reimer Senior Vice President, Administrative/Operations Division V. Gail Bryant Senior Vice President, Retail Banking Division James R. Gillen Vice President, Strategic Planning Suzie T. Farley Vice President, Corporate Secretary, Investor & Community Relations CORPORATE HEADQUARTERS Auditors S.R. Snodgrass, P.C. 2100 Corporate Drive, Suite 400 Wexford, PA 15090 General Counsel Newman, Williams, Mishkin, Corveleyn, Wolfe & Fareri, P.C. 712 Monroe Street Stroudsburg, PA 18360 9 100 YEARS OF SERVICE, GROWTH, AND INNOVATION ESSA Bank & Trust was established in 1916 when John Gish and other local businessmen founded the East Stroudsburg Building & Loan Association. In 1941 the Company was renamed the East Stroudsburg Savings, Building & Loan Association and subsequently changed again in 1971 to East Stroudsburg Savings Association after the acquisition of two local thrifts, Commonwealth Building & Loan Association and Keystone Building & Loan Association. ESSA operated with one office until 1978, when its first branch office opened in the Stroud Mall. For decades, most of ESSA’s business was tied to mortgages, initially focusing on loans for primary residences, then adding loans for vacation homes. In the 1970s and 1980s Monroe County became one of the fastest-growing counties in Pennsylvania, and hence, the demand for mortgages fueled ESSA’s growth. Responding to this growth, ESSA expanded its capabilities as a hometown bank. From 1983 through 2002, ESSA opened branch locations throughout Monroe County, grew its employee base, and expanded its physical presence and delivery channels to include in-store branches, ATMs, and telephone and internet banking. Products and services grew as well to include checking, money market accounts, IRA’s, and home equity loans. In 1998, in accordance with our Guiding Principles, the ESSA Foundation (later renamed the ESSA Bank & Trust Foundation) was formed to fund the needs of civic and charitable organizations in Monroe County. That year, ESSA also added its Asset Management & Trust Division. In 2003, the Company completed construction of its new corporate headquarters in downtown Stroudsburg, and reached a milestone $500 million in assets. Early in the new millennium, ESSA began to offer business banking products and services. This led to a more focused effort on business banking which required additional resources. To sustain this growth, ESSA Bank & Trust converted from a mutual to a publicly traded company in 2007. The IPO raised $160 million in capital with proceeds leveraged to fund balance sheet growth, acquire other banks/ branches, fund our charitable foundation and employee ESOP plan, and other general purposes. Assets topped $1 billion in 2009, and in the next three years ESSA added business banking capabilities and a variety of financial products and services, including employee benefits and insurance counseling through ESSA Advisory Services, cash management, and electronic banking services. In 2012, ESSA expanded its Lehigh Valley presence with the acquisition of First Star Bancorp, Inc. With the 2014 acquisition of Franklin Security Bancorp, Inc., ESSA entered the Scranton/ Wilkes-Barre market, expanded its commercial banking capabilities, and entered the indirect auto lending business. Also in 2014, ESSA purchased deposits, loans, and a branch facility from FNCB. In the first quarter of fiscal 2016, ESSA closed its acquisition of Eagle National Bancorp. This acquisition further increased ESSA’s commercial lending portfolio and gave ESSA an entry into the suburban Philadelphia market. With locations in eight counties and clients throughout Eastern Pennsylvania, ESSA’s geographic market coverage and broad range of financial, investment, and insurance products represents a long and prosperous journey. As markets and opportunities have grown and changed, so has ESSA, positioning the Company for an exciting future. 10 2014 ESSA purchases the deposits, loans, and branch facility in Marshalls Creek from First National Community Bank ESSA acquires Franklin Security Bancorp, Inc., with two branches serving Scranton (shown) and Wilkes-Barre 2015 ESSA acquires Eagle National Bancorp, Inc., adding five branches in the western suburbs of Philadelphia; total assets reach $1.8 billion 2016 ESSA opens a Philadelphia regional office in Plymouth Meeting NOVEMBER 1, 2016 ESSA Bank & Trust celebrates its 100th anniversary ESSA rings the closing bell at the Nasdaq Stock Market on November 16, 2016 ESSA Locations by Region 1. Corporate Center 200 Palmer Street P.O. Box L Stroudsburg, PA 18360 380 611 10 80 191 5 6 1 8 9 115 4 3 209 33 191 7 209 80 611 512 14 191 84 309 11 15 81 115 309 476 380 191 13 611 12 11 940 80 POCONOS 3. Brodheadsville 1881 Route 209 Brodheadsville, PA 18322 4. Brodheadsville Weis Markets 924 Weir Lake Road Brodheadsville, PA 18322 5. East Stroudsburg – Eagle Valley Weis Markets 695 North Courtland Street East Stroudsburg, PA 18301 6. East Stroudsburg 75 Washington Street East Stroudsburg, PA 18301 7. Marshalls Creek 5120 Milford Road East Stroudsburg, PA 18302 8. Stroud Township Weis Markets 1070 North Ninth Street Stroudsburg, PA 18360 9. Stroudsburg 744 Main Street Stroudsburg, PA 18360 10. Tannersville 2826 Route 611 Tannersville, PA 18372 SCRANTON/WILKES-BARRE 11. Blakeslee 249 Route 940 Blakeslee, PA 18610 14. Scranton 300 Mulberry Street Scranton, PA 18503 15. Wilkes-Barre 1065 Highway 315 Wilkes-Barre, PA 18702 12. Mount Pocono Weis Markets 3236 Route 940 Mount Pocono, PA 18344 13. Mountainhome 975 Route 390 Cresco, PA 18326 11 2. Philadelphia Regional Office 450 Plymouth Road Suite 101 Plymouth Meeting, PA 19462 611 422 476 2 276 276 202 24 76 1 25 27 26 13 611 1 PHILADELPHIA REGION 24. Devon 227 West Lancaster Avenue Devon, PA 19333 26. Lansdowne 48 West Marshall Road Lansdowne, PA 19050 25. Haverford 354 West Lancaster Avenue Haverford, PA 19041 27. Upper Darby 8045 West Chester Pike Upper Darby, PA 19082 476 309 21 78 100 209 16 LEHIGH VALLEY 16. Alburtis 11 North Main Street Alburtis, PA 18011 17. Allentown 471 West Wabash Street Allentown, PA 18103 18. Bath 358 South Walnut Street Bath, PA 18014 23 20 33 22 18 22 19 17 78 20. Nazareth 14 South Main Street Nazareth, PA 18064 21. New Tripoli 6302 Route 309 New Tripoli, PA 18066 22. Palmer 2415 Park Avenue Easton, PA 18045 19. Bethlehem 418 West Broad Street Bethlehem, PA 18018 23. Wind Gap 1430 Jacobsburg Road Wind Gap, PA 18091 ADDITIONAL SERVICES Asset Management & Trust Services 744 Main Street, Suite 3A Stroudsburg, PA 18360 ESSA Advisory Services 414 West Broad Street Bethlehem, PA 18018 ESSA Investment Services* 746 Main Street Stroudsburg, PA 18360 12 *A Cetera Investment Services, LLC Program Mission Statement ESSA Bank & Trust will be the leading service-oriented community fi nancial institution off ering a full range of fi nancial products to Greater Eastern OUR GUIDING PRINCIPLES Pennsylvania area customers. We will ensure There are fi ve Guiding Principles on which our our long-term prosperity by providing Mission Statement is based: products and service in a manner consistent with high standards of quality, on a profi table basis, at the fairest price, in order to create the best possible value for our We believe in long-term success, operating as a safe, sound, and stable institution. Long-term success is dependent upon profi ts, but never will profi t-seeking compromise our mission. We believe in satisfying the wants and needs of our customers. Satisfaction is dependent upon a continual improvement of our service, products, systems, and operations. customers. They will be delivered We believe our employees are our most valuable asset. Our employees through distribution systems staff ed and supported by customer-driven, friendly, productive employees with will be provided with a work environment that is “the best in town.” We believe our decisions should enhance ESSA’s value. Enhanced value is achieved through quality earnings, growth, and strong management practices. We believe in supporting our community through employee volunteering and charitable giving to improve the quality of life. The ESSA Bank & Trust a high degree of integrity. Foundation has been established to support this principle. ESSA CODE OF ETHICS AND CONFLICT OF INTEREST POLICY No profession or industry has maintained higher standards of conduct nor provided greater public service than the community banking industry. The ESSA Bancorp, Inc. Board of Directors has approved an Insider Code of Ethics and Confl ict of Interest policy. This policy provides Directors and employees with specifi c guidance promoting honest and ethical conduct and deterring wrongdoing. Our policy may be found on our website at essabank.com. 13 Corporate Information STOCK LISTING ESSA Bancorp, Inc. common stock is listed on the NASDAQ Global MarketSM under the symbol “ESSA.” INTERNET INFORMATION ESSA Bancorp, Inc. fi nancial reports and information about the products and services of its wholly owned subsidiary, ESSA Bank & Trust, are available at essabank.com. FINANCIAL INFORMATION We are subject to the informational requirements of the Securities Exchange Act of 1934. Therefore, we fi le annual, quarterly, and current reports as well as proxy materials with the Securities and Exchange Commission (SEC). You can obtain copies of these and other fi lings, including exhibits, electronically at the SEC’s website at sec.gov or through the ESSA website at essabank.com by clicking on the Investor Relations link. Copies of our Annual Report and Form 10-K may also be obtained by contacting Investor Relations at (570) 422-0182 or via email at sfarley@essabank.com. CORPORATE GOVERNANCE Information about our Board and its committees and about corporate governance at ESSA is available in the Governance Documents section of the Investor Relations link on the ESSA website at essabank.com. Shareholders who would like to request printed copies of the Code of Ethics or the charters of our Board’s Nominating and Corporate Governance, Audit, and Compensation committees (all of which are posted on the ESSA website through the Investor Relations link) may do so by sending their requests in writing to Suzie Farley, Vice President, Corporate Secretary, Investor and Community Relations, at corporate headquarters at P.O. Box L, Stroudsburg, PA 18360. INQUIRIES Individual investors should contact Suzie Farley, Vice President, Corporate Secretary, Investor and Community Relations, at (570) 422-0182 or via email at sfarley@essabank.com. Analysts and institutional investors should contact Allan Muto, Executive Vice President and CFO, at (570) 422-0181 or via email at amuto@essabank.com. News media representatives and others seeking general information should contact James Gillen, Vice President, Strategic Planning, at (570) 420-5189 or via email at jgillen@essabank.com. ANNUAL SHAREHOLDERS’ MEETING All shareholders are invited to attend the ESSA Bancorp, Inc. annual meeting on Thursday, March 2, 2017, at 10 a.m. The meeting will be held at: Northampton Community College, Monroe Campus 2411 Route 715 Tannersville, PA 18372 REGISTRAR & TRANSFER AGENT Computershare, Inc. P.O. Box 30170 College Station, TX 77842 800-368-5948 SPECIAL COUNSEL Luse Gorman, PC 5335 Wisconsin Avenue, N.W., Suite 780 Washington, DC 20015 FORWARD-LOOKING STATEMENTS Certain statements contained in this Annual Report 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. Forward-looking statements may be identified by reference to a future period or periods, or by use of forward-looking terminology, such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” and other similar words and expressions. Our 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 aff ecting financial institutions, legal developments, technological advances, 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. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. 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 aff ect the Company’s financial performance and could cause the Company’s actual results for future periods to diff er 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. We provide greater detail regarding these factors in our Form 10-K for the year ended September 30, 2016, including the Risk Factors section. Our forward-looking statements may also be subject to other risks and uncertainties, including those discussed elsewhere in this Annual Report or in our filings with the SEC, accessible on the SEC’s website at sec.gov or through the Investor Relations link on our corporate website at essabank.com. 14 Equal Opportunity Lender • Member FDIC ©2017 ESSA Bancorp, Inc. essabank.com 

Continue reading text version or see original annual report in PDF format above