10-K

SECURITIES AND EXCHANGE COMMISSION

100 F Street NE

Washington, D.C. 20549

FORM 10-K

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

For the Fiscal Year Ended September 30, 2024

☐ 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)

(855) 713-8001

(Registrant’s telephone number)

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 Stock, $0.01 par value	ESSA	The NASDAQ Stock Market, LLC

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 twelve 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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 December 11, 2024, there were 18,133,095 shares issued and 10,154,664 shares outstanding of the Registrant’s Common Stock.

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the last sale price on March 31, 2024, was $170,886,106.

DOCUMENTS INCORPORATED BY REFERENCE

•

Proxy Statement for the 2024 Annual Meeting of Stockholders of the Registrant (Part III).

TABLE OF CONTENTS


PART I
Item 1.	Business	3
Item 1A.	Risk Factors	23
Item 1B.	Unresolved Staff Comments	27
Item 1C.	Cybersecurity	27
Item 2.	Properties	27
Item 3.	Legal Proceedings	28
Item 4.	Mine Safety Disclosures	28
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
Item 6.	[Reserved]	29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 8.	Financial Statements and Supplementary Data	37
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	37
Item 9A.	Controls and Procedures	37
Item 9B.	Other Information	37
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	38
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	39
Item 11.	Executive Compensation	39
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	39
Item 13.	Certain Relationships and Related Transactions, and Director Independence	39
Item 14.	Principal Accounting Fees and Services	39
PART IV
Item 15.	Exhibits and Financial Statement Schedules	40
Item 16.	Form 10-K Summary	42

Forward Looking Statements

This Annual Report on Form 10-K contains certain “forward-looking statements” which may be identified by the use of words such as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated” and “potential.” Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operations and business that are subject to various factors which could cause actual results to differ materially from these estimates and most other statements that are not historical in nature. These factors include, but are not limited to, general and local economic conditions, changes in interest rates, inflation, deposit flows, demand for mortgage and other loans, real estate values, competition, changes in accounting principles, policies, or guidelines, changes in legislation or regulation, and other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the ability to successfully complete or close transactions. Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Please also see “Item 1A. Risk Factors.”

PART I

Item 1. Business

ESSA Bancorp, Inc.

ESSA Bancorp, Inc. (“ESSA Bancorp” or the “Company”) is a Pennsylvania-chartered holding company for ESSA Bank & Trust (the “Bank”). ESSA Bancorp owns 100% of the outstanding shares of common stock of the Bank. Since being formed in 2006, ESSA Bancorp has engaged primarily in the business of holding the common stock of the Bank. Our executive offices are located at 200 Palmer Street, Stroudsburg, Pennsylvania 18360. Our telephone number at this address is (855) 713-8001. ESSA Bancorp is subject to comprehensive regulation and examination by the Federal Reserve Board of Governors. At September 30, 2024, ESSA Bancorp had consolidated assets of $2.2 billion, consolidated deposits of $1.6 billion and consolidated stockholders’ equity of $230.4 million. Consolidated net income for the fiscal year ended September 30, 2024 was $17.0 million.

The Company is a public company, and files interim, quarterly and annual reports with the Securities and Exchange Commission (“SEC”). The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers such as the Company that file electronically with the SEC. All filed SEC reports and interim filings can also be obtained from the Bank’s website (www.essabank.com), on the “Investor Relations” page, without charge from the Company. Information on the Company’s website is not and should not be considered a part of this Annual Report on Form 10-K.

ESSA Bank & Trust

General

The Bank was organized in 1916. The Bank is a Pennsylvania chartered full-service, community-oriented savings bank. We provide financial services to individuals, families and businesses through our 21 community offices, located in Monroe, Northampton, Lehigh, Lackawanna, Luzerne, Chester, Delaware and Montgomery Counties, Pennsylvania. The Bank is subject to comprehensive regulation and examination by the Pennsylvania Department of Banking and Securities and the Federal Deposit Insurance Corporation.

The Bank’s business consists primarily of accepting deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in residential first mortgage loans (including construction mortgage loans), commercial real estate loans, home equity loans and lines of credit and commercial and industrial loans. We offer a variety of deposit accounts, including checking, savings and certificates of deposits. We also offer asset management and trust services. We offer investment services through our relationship with Ameriprise Financial Services, LLC, a third-party broker/dealer and registered investment advisor. We offer insurance benefit consulting services through our wholly owned subsidiary, ESSA Advisory Services, LLC.

The Bank’s executive offices are located at 200 Palmer Street, Stroudsburg, Pennsylvania 18360. Our telephone number at this address is (855) 713-8001. Our website address is www.essabank.com.

Market Area

At September 30, 2024, our 21 community offices consisted of seven offices in Monroe County, three offices in Lehigh County, five offices in Northampton County, one office in Lackawanna County, one office in Luzerne County, one office in Chester County, two offices in Delaware County and one office in Montgomery County, Pennsylvania. Our primary market for deposits is currently concentrated around the areas where our full-service banking offices are located. Our primary lending area consists of the counties where our branch offices are located. On October 1, 2024 the Haverford office, located in Delaware County, was closed, reducing our number of community offices to 20.

Monroe County is located in eastern Pennsylvania, situated 90 miles north of Philadelphia, 75 miles west of New York and 116 miles northeast of Harrisburg. Monroe County is comprised of 611 square miles of mostly rural terrain. Major industries include tourism, healthcare and educational facilities. Northampton County is located south of Monroe County and directly borders New Jersey. Lehigh County is located southwest of Monroe County. Luzerne and Lackawanna Counties are located north of Monroe County. Chester and Montgomery Counties are located south and Delaware County southwest of Monroe County. As of June 30, 2024, the most recent date for which FDIC market share data is available, we had a deposit market share of approximately 29.3% in Monroe County, which represented the largest deposit market share in Monroe County, 2.4% in Northampton County, 1.5% in Lehigh County, 0.3% in Lackawanna County, 0.7% in Luzerne County, 0.1% in Chester County, 0.1% in Montgomery County and 0.4% in Delaware County.

Lending Activities

Historically, our principal lending activity had been the origination of first mortgage loans for the purchase, construction or refinancing of one- to four-family residential real estate property. For years, we have been increasing our originations of commercial loans and commercial real estate loans in an effort to increase interest income, diversify our loan portfolio, and better serve the community. Commercial real estate loans have increased from $822.0 million or 48.3% of our total loan portfolio at September 30, 2023 to $884.6 million, or 50.3%, of our total loan portfolio at September 30, 2024. One- to four-family residential real estate mortgage loans represented $721.5 million, or 41.0% of our loan portfolio at September 30, 2024. Home equity loans and lines of credit totaled $51.3 million, or 2.9%, of our loan portfolio at September 30, 2024. Commercial loans totaled $36.8 million, or 2.1%, of our loan portfolio at September 30, 2024 and construction first mortgage loans totaled $14.9 million, or 0.8%, of the total loan portfolio at September 30, 2024. Obligations of states and political subdivisions totaled $48.6 million, or 2.8%, of our loan portfolio at September 30, 2024. Auto loans totaled $65,000 or less than 0.1% of the total loan portfolio at September 30, 2024. As previously disclosed, the Bank discontinued originating indirect auto loans in July 2018. We originate other consumer loans on a limited basis.

Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio, by type of loan at the dates indicated, excluding loans held for sale.


	At September 30,
	2024						2023
	Amount			Percent			Amount			Percent
	(Dollars in thousands)
Residential first mortgage loans:
One- to four-family	$	721,505			41.0	%	$	713,326			42.0	%
Construction		14,851			0.8			16,768			1.0
Commercial		36,799			2.1			48,143			2.8
Commercial real estate		884,621			50.3			821,958			48.3
Obligations of states and political subdivisions		48,570			2.8			48,118			2.8
Home equity loans and lines of credit		51,306			2.9			48,212			2.9
Auto loans		65			-			523			0.1
Other		1,873			0.1			2,002			0.1
Total loans receivable	$	1,759,590			100.0	%	$	1,699,050			100.0	%
Allowance for credit losses		(15,306	)					(18,525	)
Total loans receivable, net	$	1,744,284					$	1,680,525

Loan Portfolio Maturities. The following table summarizes the scheduled repayments of our loan portfolio at September 30, 2024. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.


	One-to four- family		Construction		Commercial		Commercial Real Estate
	(Dollars in thousands)

One year or less	$	506	$	-	$	11,592	$	104,951
After one year through five years		18,925		-		14,410		358,502
After five years through 15 years		155,096		-		8,350		385,882
After 15 years		546,978		14,851		2,447		35,286
Total	$	721,505	$	14,851	$	36,799	$	884,621


	Obligations of States and Political Subdivisions		Home Equity Loans and Lines of Credit		Auto Loans		Other		Total
	(Dollars in thousands)

One year or less	$	2,180	$	238	$	65	$	175	$	119,707
After one year through five years		1,128		4,074		-		1,525		398,564
After five years through 15 years		15,542		22,888		-		15		587,773
After 15 years		29,720		24,106		-		158		653,546
Total	$	48,570	$	51,306	$	65	$	1,873	$	1,759,590

The following table sets forth the scheduled repayments of fixed- and adjustable-rate loans at September 30, 2024 that are contractually due after September 30, 2025.


	Due After September 30, 2025
	Fixed		Adjustable		Total
	(In thousands)
Residential first mortgage loans:
One- to four-family	$	660,002	$	60,997	$	720,999
Construction		6,187		8,664		14,851
Commercial		17,004		8,203		25,207
Commercial real estate		444,152		335,518		779,670
Obligations of states and political subdivisions		6,498		39,892		46,390
Home equity loans and lines of credit		29,744		21,324		51,068
Auto loans		-		-		-
Other		1,524		174		1,698
Total	$	1,165,111	$	474,772	$	1,639,883

Loan Originations and Repayments. We originate residential mortgage loans pursuant to underwriting standards that generally conform to Fannie Mae and Freddie Mac guidelines. Loan origination activities are primarily concentrated in Monroe, Northampton, Lehigh, Lackawanna, Luzerne, Chester, Delaware, and Montgomery Counties, Pennsylvania. New loans are generated primarily from the efforts of employees and advertising, a network of select mortgage brokers, other parties with whom we do business, customer referrals, and from walk-in customers. Loan applications are centrally underwritten and processed at our corporate center. At September 30, 2024, $721.5 million, or 41.0%, of our loan portfolio, consisted of one- to four-family residential loans. Generally, one- to four-family residential mortgage loans are originated in amounts up to 80% of the lesser of the appraised value or purchase price of the property, although loans may be made with higher loan-to-value ratios, including those that qualify for our First Time Home Buyers Program and Community First Loan Program. Private mortgage insurance is required to compensate for the risk. Fixed-rate loans are originated for terms of 10, 15, 20 and 30 years.

We also offer adjustable-rate mortgage loans which have initial fixed terms of one, three, five or seven-years before converting to an annual adjustment schedule based on changes in a designated United States Treasury index. We originated $7.1 million and $21.0 million in adjustable rate one- to four-family residential loans during the years ended September 30, 2024 and 2023, respectively. Our adjustable rate mortgage loans provide for maximum rate adjustments of 200 basis points per adjustment, with a lifetime maximum adjustment of 500 basis points. Our adjustable rate mortgage loans amortize over terms of up to 30 years.

Adjustable rate mortgage loans decrease the risk associated with changes in market interest rates by periodically repricing but involve other risks. As interest rates increase, the principal and interest payments on the loan increase, thus increasing the potential for default by the borrower. At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates. Adjustment of the contractual interest rate is limited by the periodic and lifetime interest rate adjustments specified by our loan documents and therefore, is potentially limited in effectiveness during periods of rapidly rising interest rates. At September 30, 2024, $61.5 million, or 8.5%, of our one- to four-family residential loans had adjustable rates of interest.

All one- to four-family residential mortgage loans that we originate include a “due-on-sale” clause, which provides the right to declare a loan immediately due and payable in the event that the borrower sells or otherwise conveys title to the real property subject to the mortgage and the loan is not repaid.

Regulations limit the amount that a savings bank may lend relative to the value of the real estate securing the loan, as determined by an appraisal of the property at the time the loan is originated. For all purchase money loans, we utilize outside independent appraisers approved in accordance with the Bank’s appraisal policy. All purchase money and most refinance loans require a lender’s title insurance policy. Certain modest refinance requests may utilize an exterior inspection report and title search. We also require fire and casualty insurance and, where circumstances warrant, flood insurance.

Home Equity Loans and Lines of Credit. Home equity loans and lines of credit are generated by our loan originators. Eligible properties include primary and vacation homes located in Monroe, Northampton, Lackawanna, Luzerne, Lehigh, Chester, Delaware, and Montgomery Counties, Pennsylvania and secondarily in other Pennsylvania counties contiguous to our primary market area. As of September 30, 2024, home equity loans and lines of credit totaled about $51.3 million, or 2.9% of our loan portfolio.

The maximum combined loan-to-value originated is generally 80% although a maximum of 85% is permitted with more restrictive underwriting parameters depending on the collateral. There is a small portion of the portfolio originated in years past that contains original combined loan-to-values of up to 90%. Our home equity lines of credit typically feature a 10-year draw period with interest-only payments permitted, followed by another 20 years of fully amortizing payments with no further ability to draw funds. Similar combined loan-to-value characteristics and standards exist for the lines as are outlined above for the loans.

Loan underwriting standards limit the maximum size of a junior lien loan to between $10,000 and $500,000, depending on the loan type and collateral. All loans exceeding 75% of value require an appraisal by bank-approved, licensed appraisers. Loans up to $25,000 with lesser loan-to-value ratios may utilize an automated valuation model. Title/lien searches are secured on all home equity loans and lines.

Commercial Real Estate Loans. At September 30, 2024, $884.6 million, or 50.3%, of our total loan portfolio consisted of commercial real estate loans. Commercial real estate loans are secured by office and industrial buildings, multi-family, mixed-use properties and other commercial properties. We generally originate fixed rate commercial real estate loans with an initial term of five to seven years and a repricing option, and a maximum term of up to 25 years for existing properties and 30 years for new construction. The maximum loan-to-value ratio for most commercial real estate loans is 75% to 80%.

We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including credit history, profitability and expertise, as well as the value and condition of the mortgaged property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service) to ensure that it is at least 120% of the monthly debt service. All commercial real estate loans in excess of $500,000 are appraised by outside independent appraisers approved in accordance with the Bank’s Appraisal Policy. Personal guarantees are obtained from commercial real estate borrowers although we may occasionally waive this requirement given very strong loan to value and debt service coverage ratios. All purchase money and most asset refinance borrowers are required to obtain title insurance. We also require fire and casualty insurance and, where circumstances warrant, flood insurance.

Loans secured by commercial real estate generally are considered to present greater risk than one- to four-family residential loans. Commercial real estate loans often involve large loan balances to single borrowers or groups of related borrowers. Repayment of these loans depends to a large degree on the results of operations and management of the properties securing the loans or the businesses conducted on such property and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general. Accordingly, the nature of these loans makes them more difficult for management to monitor and evaluate.

First Mortgage Construction Loans. At September 30, 2024, $14.9 million, or 0.8%, of our total loan portfolio consisted of first mortgage construction loans. Our first mortgage construction loans are for the construction of residential properties. We currently offer fixed- and adjustable-rate residential first mortgage construction loans. First mortgage construction loans are generally structured for permanent mortgage financing once the construction is completed. First mortgage construction loans will generally be made in amounts of up to 80% of the appraised value of the completed property, or the actual cost of the improvements. First mortgage construction loans require only the payment of interest during the construction period. Once converted to permanent financing, they generally repay over a 30-year period. Funds are disbursed based on our inspections in accordance with a schedule reflecting the completion of portions of the project.

First mortgage construction loans generally involve a greater degree of credit risk than other one- to four-family residential mortgage loans. The risk of loss on a construction loan depends, in part, upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost of construction and the successful completion of construction within budget.

For all such loans, we utilize outside independent appraisers approved in accordance with the Bank’s Appraisal Policy. All borrowers are required to obtain title insurance. We also require fire and casualty insurance and, where circumstances warrant, flood insurance on properties.

Commercial Loans. At September 30, 2024, $36.8 million, or 2.1%, of our loan portfolio, consisted of commercial loans. We generally offer commercial loans to businesses located in our primary market area. The commercial loan portfolio includes lines of credit, equipment loans, vehicle loans, improvement loans and term loans. These loans are primarily secured by vehicles, machinery and equipment, inventory, accounts receivable, marketable securities, deposit accounts and real estate.

Obligations of States and Political Subdivisions. At September 30, 2024, $48.6 million, or 2.8%, of our total loan portfolio consisted of loan transactions including tax and revenue anticipation notes, general obligation notes, and authority general revenue notes. The financial strength of the state or political subdivision, type of transaction, relationship efforts, and profitability of return are considered when pricing and structuring each transaction.

Auto Loans. At September 30, 2024, $65,000, or less than 0.1%, of our total loan portfolio consisted of auto loans. Although collateralized, these loans require stringent underwriting standards and procedures. Each loan decision is based primarily on the credit history of the individual(s) and their ability to repay the loan. Collision and comprehensive insurance is required and the Bank must be listed as the loss payee. As previously disclosed, the Bank discontinued originating indirect auto loans in July 2018.

Other Loans. We offer a variety of loans that are either unsecured or secured by property other than real estate. These loans include loans secured by deposits and personal unsecured loans. At September 30, 2024, these other loans totaled $1.9 million, or 0.1%, of the total loan portfolio.

Loan Approval Procedures and Authority. The loan approval process is intended to assess the borrower’s ability to repay the loan, the viability of the loan, and the adequacy of the value of the property that will secure the loan. To assess the borrower’s ability to repay, we review each borrower’s employment and credit history and information on the historical and projected income and expenses of the borrower. For all loans the Board has established a lending authority policy. Larger and more complex loan requests require the involvement of senior management or the Board.

Non-Performing Loans and Problem Assets

Performance of the loan portfolio is reviewed on a regular basis by Bank management. A number of factors regarding the borrower, such as overall financial strength, collateral values and repayment ability, are considered in deciding what actions should be taken when determining the collectability of interest for accrual purposes.

When a loan, including a loan that is impaired, is classified as nonaccrual, the accrual of interest on such a loan is discontinued. A loan is typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid accrued interest is fully reversed. Interest payments received on nonaccrual loans are either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal.

Loans are usually restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Non-performing Loans. At September 30, 2024, $9.0 million, or 0.51% of our total loans, were non-performing loans. The majority of these loans were commercial real estate loans and residential mortgage loans. Non-performing commercial real estate loans totaled $6.4 million at September 30, 2024. Two loan relationships accounted for $5.1 million of the total non-accrual commercial real estate loans. Non-performing residential first mortgage loans totaled $2.0 million at September 30, 2024.

Real Estate Owned. At September 30, 2024, the Company had $3.2 million of real estate owned consisting of one property. This property is being actively marketed and additional losses may occur.

Non-Performing Assets. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated.


	At September 30,
	2024			2023
	(Dollars in thousands)
Non-accrual loans:
Residential first mortgage loans:
One- to four-family	$	1,955		$	2,569
Construction		-			-
Commercial		1,136			652
Commercial real estate		5,876			7,763
Home equity loans and lines of credit		35			47
Auto loans		1			-
Other		23			30
Total		9,026			11,061
Accruing loans 90 days or more past due:
Residential first mortgage loans:
One- to four-family		-			-
Construction		-			-
Commercial		-			-
Commercial real estate		-			-
Home equity loans and lines of credit		-			-
Auto Loans		-			-
Other		-			-
Total loans 90 days or more past due and accruing		-			-
Total non-performing loans		9,026			11,061
Real estate owned		3,195			3,311
Other repossessed assets		-			-
Total non-performing assets	$	12,221		$	14,372
Ratios:
Total non-performing loans to total loans		0.51	%		0.65	%
Total non-performing loans to total assets		0.41	%		0.48	%
Total non-performing assets to total assets		0.56	%		0.63	%

At September 30, 2024, the principal balance of loan modifications was $6.0 million as compared to $7.8 million at September 30, 2023. All of the $6.0 million of loan modifications at September 30, 2024 were non-accrual loans.

Loan modifications at September 30, 2024 were comprised of four residential loans totaling $146,000, six commercial real estate loans totaling $5.8 million and one home equity loan totaling $20,000.

For the year ended September 30, 2024, one loans totaling $202,000 was removed from modification status due to the completion of timely payments or paying off the balance.

Delinquencies. The following table sets forth certain information with respect to our loan portfolio delinquencies at the dates indicated. Loans delinquent for 90 days or more are generally classified as nonaccrual loans.


	Loans Delinquent For
	60-89 Days				90 Days and Over				Total
	Number		Amount		Number		Amount		Number		Amount
	(Dollars in thousands)
At September 30, 2024
Residential first mortgage loans:
One- to four-family		7	$	760		2	$	1,117		9	$	1,877
Construction		-		-		-		-		-		-
Commercial		-		-		1		210		1		210
Commercial real estate		1		2,673		4		455		5		3,128
Obligations of states and political subdivisions		-		-		-		-		-		-
Home equity loans and lines of credit		1		22		-		-		1		22
Auto loans		-		-		1		1		1		1
Other		-		-		1		23		1		23
Total		9	$	3,455		9	$	1,806		18	$	5,261
At September 30, 2023
Residential first mortgage loans:
One- to four-family		5	$	199		10	$	2,045		15	$	2,244
Construction		-		-		-		-		-		-
Commercial		-		-		3		250		3		250
Commercial real estate		-		-		4		865		4		865
Obligations of states and political subdivisions		-		-		-		-		-		-
Home equity loans and lines of credit		-		-		1		21		1		21
Auto loans		1		1		-		-		1		1
Other		3		33		-		-		3		33
Total		9	$	233		18	$	3,181		27	$	3,414

Classified Assets. Banking regulations and our Asset Classification Policy provide that loans and other assets considered to be of lesser quality should be classified as “Substandard,” “Doubtful” or “Loss” assets. An asset is considered Substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Assets classified as Doubtful have all of the weaknesses inherent in those classified Substandard, with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Assets classified as Loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. We classify an asset as “Special Mention” if the asset has a potential weakness that warrants management’s close attention. While such assets are not impaired, management has concluded that if the potential weakness in the asset is not addressed, the value of the asset may deteriorate, thereby adversely affecting the repayment of the asset.

At September 30, 2024, the Company classified approximately $24.5 million of our assets as Special Mention, of which $23.7 million were commercial and commercial real estate loans, and $11.7 million as Substandard, of which $10.5 million were commercial and commercial real estate loans. No loans were classified Doubtful or Loss. At September 30, 2023, we classified approximately $4.3 million of our assets as Special Mention, of which $3.2 million were commercial and commercial real estate loans, and $14.3 million as Substandard, of which $12.7 million were commercial and commercial real estate loans. No loans were classified as Doubtful or Loss.

The loan portfolio is reviewed on a regular basis to determine whether any loans require classification in accordance with applicable regulations. Not all classified assets constitute non-performing assets.

Allowance for Credit Losses

Our allowance for credit losses is maintained at a level necessary to absorb credit losses that are both probable and reasonably estimable. Management, in determining the allowance for credit losses, considers the losses inherent in its loan portfolio and changes in the nature and volume of loan activities, along with the general economic and real estate market conditions. The

allowance for credit losses is evaluated on a quarterly basis by management, with assistance from a third-party provider and incorporates a discounted cash flow model utilizing various government and industry forecasts and is impacted by the size and composition of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. We maintain a loan review system, which allows for a periodic review (at least quarterly) of our loan portfolio and the early identification of potential loans with credit loss. Such system takes into consideration, among other things, delinquency status, size of loans, type and market value of collateral and financial condition of the borrowers. Specific credit loss allowances are established for identified losses based on a review of such information. A loan evaluated for credit loss is considered to be have a credit loss when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. All loans identified as having a credit loss are evaluated independently. We do not aggregate such loans for evaluation purposes. Loan credit loss is measured based on the fair value of collateral method, taking into account the appraised value, any valuation assumptions used, estimated costs to sell and trends in the market since the appraisal date. The allowance is increased through provisions charged against current earnings and recoveries of previously charged-off loans. Loans that are determined to be uncollectible are charged against the allowance. While management uses available information to recognize probable and reasonably estimable credit losses, future loss provisions may be necessary based on changing economic conditions. Payments received on individually evaluated loans with credit loss generally are either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. The allowance for credit losses as of September 30, 2024 is maintained at a level that represents management’s best estimate of losses inherent in the loan portfolio.

In addition, the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking and Securities, as an integral part of their examination process, periodically review our allowance for loan losses. The banking regulators may require that we recognize additions to the allowance based on their analysis and review of information available to them at the time of their examination.

The following table sets forth activity in our allowance for credit losses for the periods indicated.


	At or For the Years Ended September 30,
	2024			2023
	(Dollars in thousands)
Balance at beginning of year	$	18,525		$	18,528
Charge-offs:
Residential first mortgage loans:
One- to four-family		-			-
Construction		-			-
Commercial		(22	)		(269	)
Commercial real estate		(15	)		(615	)
Obligations of states and political subdivisions		-			-
Home equity loans and lines of credit		(32	)		-
Auto loans		(5	)		(28	)
Other		(10	)		-
Total charge-offs		(84	)		(912	)
Recoveries:
Residential first mortgage loans:
One- to four-family		14			45
Construction		-			-
Commercial		-			-
Commercial real estate		188			20
Obligations of states and political subdivisions		-			-
Home equity loans and lines of credit		6			66
Auto loans		12			78
Other		-			-
Total recoveries		220			209
Net (charge-offs) recoveries		136			(703	)
(Release of) Provision for credit losses		(600	)		700
Impact of adopting ASC 326		(2,755	)		-
Balance at end of year	$	15,306		$	18,525
Net charge-offs to average loans outstanding:
Residential first mortgage loans:
One- to four-family		0.00	%		0.00	%
Construction		0.00	%		0.00	%
Commercial		0.05	%		(0.04	)%
Commercial real estate		0.00	%		(0.02	)%
Obligations of states and political subdivisions		0.00	%		0.00	%
Home equity loans and lines of credit		0.05	%		0.00	%
Auto loans		0.00	%		0.00	%
Other		0.58	%		0.00	%
Total Net (charge-offs) recoveries		0.68	%		(0.06	)%
Credit quality ratios:
Allowance for credit losses to non-performing loans at end of year		169.58	%		167.48	%
Allowance for credit losses to total loans at end of year		0.87	%		1.09	%

See “Non-Performing Loans and Problem Assets.” There can be no assurance that we will not experience a deterioration of our loan portfolio, including increases in non-performing loans, problem assets and charge-offs, in the future.

Allocation of Allowance for Credit Losses. The following table sets forth the allowance for credit losses allocated by loan category, the percent of the allowance to the total allowance and the percent of loans in each category to total loans at the dates indicated. The allowance for credit losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.


	2024								2023
	Amount		Percent of Allowance to Total Allowance			Percent of Loans in Category to Total Loans			Amount		Percent of Allowance to Total Allowance			Percent of Loans in Category to Total Loans
	(Dollars in thousands)
Residential first mortgage loans:
One- to four-family	$	5,379		35.14	%		41.00	%	$	4,897		26.43	%		41.98	%
Construction		268		1.75			0.84			183		0.99			0.99
Commercial		760		4.97			2.09			941		5.08			2.84
Commercial real estate		7,815		51.06			50.27			11,983		64.69			48.28
Obligations of states and political subdivisions		281		1.84			2.76			110		0.59			2.84
Home equity loans and lines of credit		773		5.05			2.92			346		1.87			2.84
Auto loans		2		0.01			0.01			2		0.01			0.13
Other		28		0.18			0.11			22		0.12			0.10
Total allocated allowance		15,306		100.00			100.00			18,484		99.78			100.00
Unallocated allowance		-		-			-			41		0.22			-
Total allowance for credit losses	$	15,306		100.00	%		100.00	%	$	18,525		100.00	%		100.00	%

We use the accrual method of accounting for all performing loans. The accrual of interest income is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. When a loan is placed on nonaccrual status, unpaid interest previously credited to income is reversed. Interest received on nonaccrual loans is either applied against principal or reported as interest income, according to managements’ judgement as to the collectability of principal. Generally, residential and consumer loans are restored to accrual status when the obligation is brought current in accordance with the contractual terms for a reasonable period of time and ultimate collectability of total contractual principal and interest is no longer in doubt. Commercial loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and ultimate collectability of total contractual principal and interest no longer is in doubt.

In our collection efforts, we will first attempt to cure any delinquent loan. If a real estate secured loan is placed on nonaccrual status, it could be subject to transfer to the real estate owned (“REO”) portfolio (comprised of properties acquired by or in lieu of foreclosure), upon which our credit administration department will pursue the sale of the real estate. Prior to this transfer, the loan balance will be reduced, if necessary, to reflect its current market value less estimated costs to sell. Write downs of REO that occur after the initial transfer from the loan portfolio and costs of holding the property are recorded as other operating expenses, except for significant improvements which are capitalized to the extent that the carrying value does not exceed estimated net realizable value.

Fair values for determining the value of collateral are estimated from various sources, such as real estate appraisals, financial statements and from any other reliable sources of available information. For those loans deemed to be impaired, collateral value is reduced for the estimated costs to sell. Reductions of collateral value are based on historical loss experience, current market data, and any other source of reliable information specific to the collateral.

This analysis process is inherently subjective, as it requires us to make estimates that are susceptible to revisions as more information becomes available. Although we believe that we have established the allowance at levels to absorb probable and estimable losses, future additions may be necessary if economic or other conditions in the future differ from the current environment.

Securities Activities

Our securities investment policy is established by our Board of Directors. This policy dictates that investment decisions be made based on the safety of the investment, liquidity requirements, potential returns, cash flow targets, and consistency with our interest rate risk management strategy. Our investment policy is reviewed annually by our ALCO/Investment Management Committee. All policy changes recommended by this management committee must be approved by the Board of Directors. The Committee is comprised of the Chief Executive Officer, Chief Financial Officer, Controller, Chief Operating Officer, Chief Banking Officer, Director of Consumer Lending, Chief Risk Officer, Senior Credit Officer, Regional President - Lehigh Valley. Authority to make investments under the approved guidelines is delegated by the Committee to appropriate officers. While general investment strategies are developed and authorized by the ALCO/Investment Management Committee, the execution of specific actions rests with the Chief Financial Officer and Controller.

The approved investment officers are authorized to execute investment transactions up to $5.0 million per transaction without the prior approval of the ALCO/Investment Management Committee and within the scope of the established investment policy. These officers are also authorized to execute investment transactions between $5.0 million and $10.0 million with the additional approval from the Chief Executive Officer. Each transaction in excess of $10.0 million must receive prior approval of the ALCO/Investment Management Committee.

Our current investment policy generally permits investments in debt securities issued by the U.S. government and U.S. agencies, obligations of states and political subdivisions, and corporate debt obligations, as well as investments in the Federal Home Loan Bank of Pittsburgh (federal agency securities) and, to a much lesser extent, other equity securities. Securities in these categories are classified as “investment securities” for financial reporting purposes. The policy also permits investments in mortgage-backed securities, including pass-through securities issued and guaranteed by Fannie Mae, Freddie Mac and Government National Mortgage Association (“GNMA”) as well as commercial paper. Our current investment strategy uses a risk management approach of diversified investing in fixed-rate securities with short- to intermediate-term maturities, as well as adjustable-rate securities, which may have a longer term to maturity. The emphasis of this approach is to increase overall investment securities yields while managing interest rate risk.

Our policy is that, at the time of purchase, we designate a security as held to maturity, available-for-sale, or trading, depending on our ability and intent. Securities that are available-for-sale or held for trading are reported at fair value, while securities held to maturity are reported at amortized cost.

FHLB Securities. We hold Federal Home Loan Bank of Pittsburgh (“FHLB-Pittsburgh”) common stock to qualify for membership in the Federal Home Loan Bank System and to be eligible to borrow funds under the FHLB advance program. There is no market for the common stock.

The aggregate fair value of our FHLB-Pittsburgh common stock as of September 30, 2024 was $18.6 million based on its par value. No unrealized gains or losses have been recorded because we have determined that the par value of the common stock represents its fair value. We owned shares of FHLB-Pittsburgh common stock at September 30, 2024 with a par value that was equal to what we were required to own to maintain our membership in the Federal Home Loan Bank System and to be eligible to obtain advances. We are required to purchase additional stock as our outstanding advances increase. Any excess stock we own is redeemed weekly by the FHLB-Pittsburgh.

Evaluation of Securities Portfolio. The Bank measures expected credit losses on available-for-sale debt securities when the Bank does not intend to sell, or when it is not more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, the Bank evaluates whether the decline in fair value has resulted from credit losses or other factors.

The Bank measures expected credit losses on held-to-maturity debt securities on a collective basis by security investment grade. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio not carried at fair value at September 30, 2024 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur.


	One Year or Less					More than One Year through Five Years					More than Five Years through Ten Years					More than Ten Years					Total Securities
	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Fair Value		Weighted Average Yield
	(Dollars in thousands)
Investment securities held to maturity:
Mortgage-backed securities	$	-		-	%	$	-	$	-	%	$	3,723		1.33	%	$	41,204		1.64	%	$	44,927	$	39,373		1.61	%
U.S. government agency securities		-		-			-		-			2,451		2.03			-		-			2,451		2,146		2.03
Total investment securities held to-maturity	$	-		-	%	$	-		-	%	$	6,174		1.61	%	$	41,204		1.74	%	$	47,378	$	41,519		1.63	%

Sources of Funds

General. Deposits, borrowings, repayments and prepayments of loans and securities, proceeds from maturing securities and cash flows from operations are the primary sources of our funds for use in lending, investing and for other general purposes.

Deposits. We offer a variety of deposit accounts with a range of interest rates and terms. Our deposit accounts consist of savings accounts, interest bearing demand accounts, checking accounts, money market accounts, club accounts, certificates of deposit and IRAs and other qualified plan accounts. We provide commercial checking accounts for businesses.

At September 30, 2024, our deposits totaled $1.6 billion. Interest-bearing demand, savings and club, and money market deposits totaled $790.4 million at September 30, 2024. At September 30, 2024, we had a total of $582.1 million in certificates of deposit. Noninterest-bearing demand deposits totaled $256.6 million.

Our deposits are obtained predominantly from the areas in which our branch offices are located. We rely on our favorable locations, customer service and competitive pricing to attract and retain these deposits. While we accept certificates of deposit in excess of $100,000 for which we may provide preferential rates, we generally do not solicit such deposits as they are more difficult to retain than core deposits. At September 30, 2024, we had brokered certificates of deposits totaling $252.0 million.

The following table sets forth the distribution of average deposit accounts, by account type, at the dates indicated.


	For the Years Ended September 30,
	2024								2023
	Average Balance		Percent			Average Rate Paid			Average Balance		Percent			Average Rate Paid
	(Dollars in thousands)
Deposit type:
Noninterest bearing demand accounts	$	253,441		16.34	%		-	%	$	262,089		18.10	%		-	%
Interest bearing demand accounts		307,427		19.82	%		0.83	%		330,772		22.85	%		0.67	%
Money market		323,447		20.86	%		2.31	%		358,520		24.76	%		1.48	%
Savings and club		153,903		9.93	%		0.08	%		177,576		12.26	%		0.06	%
Certificates of deposit		512,511		33.05	%		4.52	%		318,937		22.03	%		3.07	%
Total deposits	$	1,550,729		100.00	%		2.15	%	$	1,447,894		100.00	%		1.20	%

As of September 30, 2024, the aggregate amount of uninsured deposits (deposits in amounts greater than or equal to $250,000, which is the maximum amount for federal deposit insurance) was $482.1 million. In addition, as of September 30, 2024, the

portion of certificates of deposit in excess of the FDIC insurance limit which are included in uninsured deposits previously noted was $84.2 million. The following table sets forth the maturity of those certificates as of September 30, 2024.


	At September 30, 2024
	(In thousands)
Three months or less	$	19,805
Over three months through six months		38,743
Over six months through one year		10,300
Over one year		15,393
Total	$	84,241

At September 30, 2024, $462.4 million of our certificates of deposit had maturities of one year or less.

Borrowings

At September 30, 2024, we had the ability to borrow approximately $890.7 million under our credit facilities with the FHLB-Pittsburgh.

Competition

We face significant competition in both originating loans and attracting deposits. The counties in which we operate have a significant concentration of financial institutions, many of which are significantly larger institutions and have greater financial resources, and many of which are our competitors to varying degrees. Our competition for loans comes principally from commercial banks, savings banks, mortgage banking companies, credit unions, leasing companies, insurance companies and other financial service companies. Our most direct competition for deposits has historically come from commercial banks, savings banks and credit unions. We face additional competition for deposits from nondepository competitors such as the mutual fund industry, securities and brokerage firms and insurance companies.

We seek to meet this competition by the convenience of our branch locations, emphasizing personalized banking, electronic banking solutions and the advantage of local decision-making in our banking business. Specifically, we promote and maintain relationships and build customer loyalty within local communities by focusing our marketing and community involvement on the specific needs of individual neighborhoods. As of September 30, 2024, the Bank had the largest deposit market share in Monroe County, Pennsylvania. We do not rely on any individual, group, or entity for a material portion of our deposits.

Employees and Human Capital Resources

As of September 30, 2024, we had 236 full-time employees, and 17 part-time employees. The employees are not represented by a collective bargaining unit and we consider our relationship with our employees to be good.

We encourage and support the growth and development of our employees and, wherever possible, seek to fill positions by promotion and transfer from within the organization. Continual learning and career development is advanced through ongoing performance and development conversations with employees, internally developed training programs, customized corporate training engagements and educational reimbursement programs. Reimbursement is available to employees enrolled in pre-approved degree or certification programs at accredited institutions that teach skills or knowledge relevant to our business, in compliance with Section 127 of the Internal Revenue Code, and for seminars, conferences, and other training events employees attend in connection with their job duties.

Employee retention helps us operate efficiently and achieve one of our business objectives, which is being a low-cost provider. We believe our commitment to living out our core values, actively prioritizing concern for our employees’ well-being, supporting our employees’ career goals, offering competitive wages and providing valuable fringe benefits aids in retention of our top-performing employees. In addition, nearly all of our employees are stockholders of the Company through participation in our employee stock ownership plan, which aligns associate and stockholder interests by providing stock ownership on a tax-deferred basis at no investment cost to our associates.

Subsidiary Activities

The Bank has four wholly owned subsidiaries, ESSACOR, Inc., Pocono Investment Company, ESSA Advisory Services, LLC, and Integrated Financial Corporation and its fully owned subsidiary Integrated Abstract Incorporated. ESSACOR, Inc. is a

Pennsylvania corporation that has been used to purchase properties at tax sales that represent collateral for delinquent loans of the Bank. Pocono Investment Company is a Delaware corporation formed as an investment company subsidiary to hold and manage certain investments of the Bank, including certain intellectual property. ESSA Advisory Services, LLC is a Pennsylvania limited liability company owned by the Bank. ESSA Advisory Services, LLC is a Pennsylvania limited liability company that is a full-service insurance benefits consulting company offering group services such as health insurance, life insurance, short term and long term disability, dental, vision and 401(k) retirement planning as well as individual health products. Integrated Financial Corporation is a Pennsylvania corporation that provided investment advisory services to the general public and is currently inactive. Integrated Abstract Incorporated is a Pennsylvania corporation that provided title insurance services and is currently inactive.

SUPERVISION AND REGULATION

General

The Company is a Pennsylvania corporation. As a bank holding company, we are required to file certain reports with, and otherwise comply with the rules and regulations of the Federal Reserve Board.

The Bank is a Pennsylvania-chartered savings bank and its deposit accounts are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC“) under the Deposit Insurance Fund (“DIF”). We are subject to extensive regulation by the Pennsylvania Department of Banking and Securities (the “Department”), our chartering agency, and by the FDIC, our primary federal regulator. We must file reports with the Department and the FDIC concerning our activities and financial condition, in addition to obtaining regulatory approvals prior to entering into certain transactions including, but not limited to, mergers with or acquisitions of other savings institutions. There are periodic examinations by the Department and the FDIC to test our compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of the DIF and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and with their examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such regulation, whether by the Department or the FDIC could have a material adverse impact on us and our operations.

Regulation by the Pennsylvania Department of Banking and Securities

The Pennsylvania Banking Code of 1965, as amended (the “Banking Code”), contains detailed provisions governing the organization, location of offices, rights and responsibilities of directors, officers, employees, and depositors, as well as corporate powers, savings and investment operations and other aspects of the Bank and its affairs. The Banking Code delegates extensive rulemaking power and administrative discretion to the Department so that the supervision and regulation of state-chartered savings banks may be flexible and readily responsive to changes in economic conditions and in savings and lending practices. The Department may also take enforcement actions against savings banks and may appoint a receiver or conservator for a savings bank under certain circumstances.

The Department generally examines each savings bank not less frequently than once every two years. Although the Department may accept the examinations and reports of the FDIC in lieu of the Department’s examination, the current practice is for the Department to conduct individual examinations. The Department may order any savings bank to discontinue any violation of law or unsafe or unsound business practice and may direct any trustee, officer, attorney, or employee of a savings bank engaged in an objectionable activity, after the Department has ordered the activity to be terminated, to show cause at a hearing before the Department why such person should not be removed.

Regulation by the Federal Deposit Insurance Corporation

The Bank is also subject to extensive regulation, examination and supervision by the FDIC as its primary federal regulator. Such regulation and supervision:

•

limits the activities and investment authority of the Bank;

•

establishes a continuing and affirmative obligation, consistent with the Bank’s safe and sound operation, to help meet the credit needs of its community, including low and moderate income neighborhoods;

•

establishes various capital categories resulting in various levels of regulatory scrutiny applied to the institutions in a particular category; and

•

establishes standards for safety and soundness.

The FDIC is required by law to examine each regulated institution every twelve months, subject to an exception for institutions of less than $3 billion of total assets that satisfy certain other criteria, which are on an eighteen-month examination schedule. The FDIC has the authority to order any savings bank and its directors, officers, attorneys or employees to discontinue any violation of law or unsafe or unsound banking practice.

Federal law and FDIC regulations generally limit the activities as principal and investments of state-chartered FDIC insured banks and their subsidiaries to those permissible for national banks and their subsidiaries, unless such activities and investments are specifically exempted by law or consented to by the FDIC.

Before engaging in a new activity as principal that is not permissible for a national bank or otherwise permissible under federal law or FDIC regulations, an insured savings bank must seek approval from the FDIC to engage in such activity. The FDIC will not approve the activity unless the savings bank meets its minimum capital requirements, and the FDIC determines that the activity does not present a significant risk to the DIF. Certain activities of subsidiaries that are engaged in activities permitted for national banks only through a “financial subsidiary” are subject to additional restrictions. Although the Bank meets all conditions necessary to establish and engage in permitted activities through financial subsidiaries, it has not chosen to engage in such activities.

Transactions with Affiliates

Transactions between an insured bank, such as the Bank, and any of its affiliates are governed by Sections 23A and 23B of the Federal Reserve Act and implementing regulations. An affiliate of a bank includes, but is not limited to, any company or entity that controls, is controlled by, or is under common control with, the bank. Generally, a subsidiary of a bank that is not also a depository institution or financial subsidiary is not treated as an affiliate of the bank under Sections 23A and 23B, but instead is considered part of the bank for purposes of the applicable limits and requirements.

Section 23A:

•

limits the extent to which a bank and its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of such bank’s capital stock and surplus, and limits all “covered transactions” with all affiliates to an amount equal to 20% of such bank’s capital stock and surplus; and

•

requires that all “covered transactions” be on terms and conditions that are consistent with safe and sound banking practices

The term “covered transaction” includes extensions of credit, purchase of securities and assets, issuance of guarantees, and other types transactions defined by statute and regulation. Most loans by a bank to its affiliates must be secured by collateral in amounts ranging from 100% to 130% of the loan amounts, depending on the type of collateral.

In addition, under Section 23B, any “covered transaction” by a bank with an affiliate, and certain other specified transactions, including the purchase of assets or services by a bank from an affiliate, must be on terms that are substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions involving a non-affiliate.

Insurance of Accounts and Regulation by the Federal Deposit Insurance Corporation

Deposit accounts in the Bank are insured by the FDIC’s DIF generally up to a maximum of $250,000 per depositor for each account ownership category.

The FDIC charges insured depository institutions risk-based assessments to maintain the DIF. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) required the FDIC to revise its procedures to base its assessments upon each insured institution’s total assets less tangible equity instead of deposits. Assessments for most banks are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of failure over three years. . As of January 1, 2024, the assessment range (inclusive of possible adjustments) for institutions of the Bank’s size is 2.5 basis points to 32 basis points of total assets less tangible equity.

The FDIC has authority to increase insurance assessments, except that no adjustment can be made without notice and comment rulemaking. No institution may pay a dividend if in default of the federal deposit insurance assessment.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or

condition imposed by the FDIC. The Bank does not believe that it is taking or is subject to any action, condition or violation that could lead to termination of its deposit insurance.

Capital Requirements

Federal regulations require FDIC insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets ratio, and a Tier 1 capital to total adjusted assets leverage ratio. The existing capital requirements were effective January 1, 2015 and are the result of a final rule implementing regulatory amendments based on recommendations of the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Act.

The capital standards require the maintenance of common equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively, and a leverage ratio of at least 4% Tier 1 capital. Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities). The Bank elected to opt out of this requirement. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests) are multiplied by a risk weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one- to four- family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted asset above the amount necessary to meet its minimum risk-based capital requirements. A bank’s failure to achieve the “capital conservation buffer” will result in restrictions on paying dividends, engaging in stock repurchases and paying discretionary bonuses.

Institutions with total consolidated assets of less than $10 billion that meet certain other requirements (including off-balance sheet exposure of 25% or less of total assets and trading assets and liabilities of 5% or less of total assets) may elect to use the optional community bank leverage ratio framework, which requires maintaining a leverage ratio of greater than 8.5% for calendar year 2021 and 9% thereafter. Eligible institutions with a capital level meeting or exceeding the specified requirement and electing to use the community bank leverage ratio framework are considered to comply with the applicable regulatory capital requirements, including the risk-based requirements. A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly call report. An institution that ceases to meet any qualifying criteria is provided with a two-quarter grace period to either comply with the community bank leverage ratio requirements or comply with the general capital regulations, including the risk-based capital requirements. The Bank did not opt into the community bank leverage ratio framework as of September 30, 2024.

In assessing an institution’s capital adequacy, the FDIC takes into consideration, not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where deemed necessary.

At September 30, 2024, the Bank’s capital exceeded all applicable requirements.

Any state-chartered savings bank that fails any of the capital requirements is subject to possible enforcement actions by the FDIC. Such actions could include a capital directive, a cease-and-desist order, civil money penalties, the establishment of

restrictions on an institution’s operations, termination of federal deposit insurance and the appointment of a conservator or receiver. Certain corrective actions are required by law, as described further under “Prompt Corrective Action.”

We are also subject to capital regulations of the Department which generally incorporate federal leverage and risk-based capital requirements.

Dividends from ESSA Bank & Trust

Our ability to pay dividends depends, to a large extent, upon the Bank’s ability to pay dividends to the Company. The Banking Code states that no dividend may be paid out of surplus without approval of the Department. Dividends may be paid out of accumulated net earnings. No dividend may generally be paid that would result in the Bank failing to comply with its regulatory capital requirements.

Prompt Corrective Action

Under the federal Prompt Corrective Action regulations, a savings bank is deemed to be (i) “well capitalized” if it has a total risk-based capital ratio of 10.0% or more, a Tier 1 risk-based capital ratio of 8.0% or more, a Tier 1 leverage capital ratio of 5.0% or more, a common equity Tier 1 ratio of 6.5% or more, and is not subject to any to any written agreement, order, capital directive or prompt corrective action directive issued under certain statutes and regulations, to maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 6.0% or more, a Tier 1 leverage capital ratio of 4.0% or more, a common equity Tier 1 capital ratio of 4.5% or more, and does not meet the definition of “well capitalized”; (iii) “undercapitalized” if it has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio that is less than 6.0%, a Tier 1 leverage capital ratio that is less than 4.0%, or a common equity Tier 1 leverage ratio of less than 4.5%; (iv) “significantly undercapitalized” if it has a total risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital ratio that is less than 4.0%, a Tier 1 leverage capital ratio that is less than 3.0%, or a common equity Tier 1 ratio of less than 3%; and (v) “critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%. Federal regulations also specify circumstances under which a federal banking agency may reclassify a well-capitalized institution as adequately capitalized and may require an adequately capitalized institution to comply with supervisory actions as if it were in the next lower category (except that the FDIC may not reclassify a significantly undercapitalized institution as critically undercapitalized).

Generally, the FDIC is required to appoint a receiver or conservator within specific time frames for a savings bank that becomes “critically undercapitalized.” The regulations also provide that a capital restoration plan must be filed with the FDIC within 45 days of the date a savings bank receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” The holding company for a savings bank required to submit a capital restoration plan must guarantee the lesser of: an amount equal to 5% of a savings bank’s assets at the time it was notified or deemed to be undercapitalized by the FDIC, or the amount necessary to restore the savings bank to adequately capitalized status. The guarantee remains in place until the FDIC notifies the savings bank that it has maintained adequately capitalized status for each of four consecutive calendar quarters. Undercapitalized institutions are subject to certain mandatory restrictions, including on capital distributions and growth. Significantly undercapitalized and critically undercapitalized institutions are subject to additional restrictions. The FDIC may also take any one of a number of discretionary supervisory actions against an undercapitalized savings bank, including the issuance of a capital directive and the replacement of senior executive officers and directors.

The Prompt Corrective Action categories discussed above were effective January 1, 2015 and reflect the revised regulatory capital requirements effective the same date. The final rule establishing the community bank leverage ratio provides that an institution electing and complying with that alternative regulatory capital framework is considered to be “well capitalized” under the Prompt Corrective Actions regulations.

As of September 30, 2024, the Bank was a “well-capitalized institution” under the Prompt Corrective Action regulations.

Community Reinvestment Act

Under the Community Reinvestment Act (the “CRA”), every insured depository institution, including the Bank, has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community. The CRA requires the FDIC to assess the depository institution’s record of meeting the credit needs of its community and consider that record in its consideration of certain applications by the institution, such as for a merger or the

establishment of a branch office. The FDIC may use an unsatisfactory CRA examination rating as the basis for denying such an application. The Bank received a “Needs to Improve” CRA rating from the FDIC in its most recent CRA evaluation.

On October 24, 2024, the FDIC, the Federal Reserve Board, and the Office of the Comptroller of the Currency issued a final rule to strengthen and modernize the CRA regulations. Under the final rule, banks with assets of at least $600 million as of December 31 in both of the prior two calendar years and less than $2 billion as of December 31 in either of the prior two calendar years will be an “intermediate bank,” and banks with assets of at least $2 billion as of December 31 in both of the prior two calendar years will be a “large bank.” The agencies will evaluate large banks under four performance tests: the Retail Lending Test, the Retail Services and Products Test, the Community Development Financing Test, and the Community Development Services Test. The agencies will evaluate intermediate banks under the Retail Lending Test and either the current community development test, referred to in the final rule as the Intermediate Bank Community Development Test, or, at the bank’s option, the Community Development Financing Test. The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027.

The Bank Secrecy Act and USA PATRIOT Act

The Bank Secrecy Act (“BSA”) and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”) require the Bank to implement a compliance program to detect and prevent money laundering, terrorist financing, and illicit crime. Together, the BSA and USA PATRIOT Act require the Bank to implement internal controls, conduct customer due diligence, maintain records, and file reports. The USA PATRIOT Act also required the federal banking agencies to take into consideration the effectiveness of controls designed to combat money laundering activities in determining whether to approve a merger or other acquisition application. Accordingly, if we engage in a merger or other acquisition, our controls designed to combat money laundering would be considered as part of the application process. We have established policies, procedures and systems designed to comply with the BSA, USA PATRIOT Act, and regulations implemented thereunder.

Holding Company Regulation

The Company is a bank holding company that has elected to be a financial holding company and is subject to examination, regulation and periodic reporting under the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”), as administered by the Federal Reserve Board. The Federal Reserve Board has adopted capital adequacy regulations for bank holding companies on a consolidated basis. Consolidated regulatory capital requirements identical to those applicable to the subsidiary institutions apply to bank holding companies with $3 billion or more in consolidated assets. Bank holding companies with under $3 billion of consolidated assets, including the Company, are not subject to the consolidated requirements unless otherwise directed by the Federal Reserve Board.

Regulations of the Federal Reserve Board provide that a bank holding company must serve as a source of strength to any of its subsidiary banks and must not conduct its activities in an unsafe or unsound manner. The Dodd-Frank Act codified the source of strength policy and required the issuance of implementing regulations. Under the prompt corrective action provisions of the Federal Deposit Insurance Act, a bank holding company parent of an undercapitalized subsidiary bank must guarantee, within limitations, the capital restoration plan that is required of an undercapitalized bank. If an undercapitalized bank fails to file an acceptable capital restoration plan or to implement an accepted plan, the Federal Reserve Board may prohibit the bank holding company parent of the undercapitalized bank from paying any dividend or making any other form of capital distribution. In addition, Federal Reserve Board policy is that a bank holding company should pay cash dividends only to the extent that the company’s net income for the past year is consistent with the Company’s capital needs, asset quality and overall financial condition.

A bank holding company is required to give the Federal Reserve Board prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, will equal 10% or more of the Company’s consolidated net worth. The Federal Reserve Board may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice, or would violate any law, regulation, Federal Reserve Board order or directive, or any condition imposed by, or written agreement with, the Federal Reserve Board. Such notice and approval is not required for a bank holding company that is “well capitalized” under applicable regulations of the Federal Reserve Board, has received at least an overall “satisfactory” composite rating, as well as “satisfactory” rating for management, at its most recent bank holding company examination by the Federal Reserve Board, and that is not the subject of any unresolved supervisory issues. In addition, Federal Reserve Board guidance provides for agency prior review of bank holding company dividends and stock redemptions and repurchases in certain circumstances, which may affect our ability to pay dividends, or engage in redemptions or repurchases.

As a financial holding company, we are permitted (1) to engage in other activities that the Federal Reserve Board determines to be financial in nature, incidental to an activity that is financial in nature, or complementary to a financial activity, and that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally, or (2) to acquire shares of companies engaged in such activities. We may not, however, directly or indirectly acquire the ownership or control

of more than 5% of any class of voting shares, or substantially all of the assets, of a bank holding company or a bank without the prior approval of the Federal Reserve Board.

In order to maintain our status as a financial holding company, we must remain “well capitalized” and “well managed” under applicable regulations and maintain a “satisfactory” or better rating under the Community Reinvestment Act. Failure to meet one or more of the requirements would mean, depending on the requirements not met, that we could not undertake new activities, make acquisitions other than those permitted generally for bank holding companies, or continue certain activities.

Regulatory Enforcement Authority

Federal law provides federal banking regulators with substantial enforcement powers over regulated depository institutions and their institution-affiliated parties (“IAPs”). This enforcement authority includes, among other things, the ability to assess civil money penalties and issue cease-and-desist orders, and to prohibit or remove IAPs from their positions. In general, these enforcement actions may be premised on violations of laws and regulations, unsafe or unsound practices, or non-compliance with agency conditions or agreements. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with regulatory authorities.

Federal Securities Laws

Shares of the Company’s common stock are registered with the SEC under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company is also subject to the proxy rules, tender offer rules, insider trading restrictions, annual and periodic reporting, and other requirements of the Exchange Act.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies, and protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. The Company has policies, procedures and systems designed to comply with this Act and its implementing regulations.

FEDERAL AND STATE TAXATION

Federal Taxation

General. ESSA Bancorp and the Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize material federal income tax matters and is not a comprehensive description of the tax rules applicable to ESSA Bancorp and the Bank.

Method of Accounting. For federal income tax purposes, ESSA Bancorp currently reports its income and expenses on the accrual method of accounting and uses a tax year ending September 30 for filing its consolidated federal income tax returns. The Small Business Protection Act of 1996 eliminated the use of the reserve method of accounting for bad debt reserves by savings institutions, effective for taxable years beginning after 1995.

Bad Debt Reserves. Prior to the Small Business Protection Act of 1996, the Bank was permitted to establish a reserve for bad debts for tax purposes and to make annual additions to the reserve. These additions could, within specified formula limits, be deducted in arriving at the Bank’s taxable income. As a result of the Small Business Protection Act of 1996, the Bank must use the specific charge off method in computing its bad debt deduction for tax purposes.

Taxable Distributions and Recapture. Prior to the Small Business Protection Act of 1996, bad debt reserves created prior to 1988 were subject to recapture into taxable income if the Bank failed to meet certain thrift asset and definition tests. The Small Business Protection Act of 1996 eliminated these thrift-related recapture rules. However, under current law, pre-1988 reserves remain subject to tax recapture should the Bank make certain distributions from its tax bad debt reserve or cease to maintain a financial institution charter. At September 30, 2024, the Bank’s total federal pre-1988 reserve was approximately $4.6 million. This reserve reflects the cumulative effects of federal tax deductions by the Bank for which no federal income tax provision has been made.

Minimum Tax. The alternative minimum tax for corporations has been repealed for tax years beginning after December 31, 2017. Any unused minimum tax credit of a corporation may be used to offset regular tax liability for any tax year. In addition, a portion of unused minimum tax credit was refundable in 2018 through 2021. The refundable portion is 100% for the tax years beginning after December 31, 2018 of the excess of the minimum tax credit for the year over any credit allowable against regular tax for that year. At September 30, 2024, the Bank had no minimum tax credit carryforward.

Net Operating Loss Carryovers. Effective with the passage of the Tax Cuts and Jobs Act, net operating loss carrybacks are no longer permitted, and net operating losses are allowed to be carried forward indefinitely. Net operating loss carryforwards arising from tax years beginning after January 1, 2019 are limited to offset a maximum of 80% of a future year’s taxable income. At September 30, 2024, the Bank had no net operating loss carryforward for federal income tax purposes.

Corporate Dividends. We may exclude from our income 100% of dividends received from the Bank as a member of the same affiliated group of corporations.

Audit of Tax Returns. ESSA Bancorp’s federal income tax returns have not been audited in the most recent three-year period. The 2020, 2021, 2022 and 2023 tax years remain open. The tax returns filed for the fiscal years ended September 30, 2021, 2022 and 2023 represents tax years 2020, 2021, and 2022, respectively. The Company has not yet filed its tax return for the fiscal year ended September 30, 2024 which represents the 2023 tax year.

State Taxation

ESSA Bancorp, Inc. is subject to the Pennsylvania Corporate Net Income Tax. The Corporation Net Income Tax rate for fiscal year 2024 is 9.99% and is imposed on unconsolidated taxable income for federal purposes with certain adjustments. The Bank is subject to tax under the Pennsylvania Mutual Thrift Institutions Tax Act, as amended to include thrift institutions having capital stock. Pursuant to the Mutual Thrift Institutions Tax, the tax rate is 11.5%. The Mutual Thrift Institutions Tax exempts the Bank from other taxes imposed by the Commonwealth of Pennsylvania for state income tax purposes and from all local taxation imposed by political subdivisions, except taxes on real estate and real estate transfers. The Mutual Thrift Institutions Tax is a tax upon net earnings or income received or accrued from all sources during the year, determined in accordance with generally accepted accounting principles with certain adjustments. The Mutual Thrift Institutions Tax, in computing income according to generally accepted accounting principles, allows for the deduction of interest earned on state and federal obligations, while disallowing a percentage of thrift’s interest expense deduction in the proportion of interest income on those securities to the overall interest income of the Bank. Net operating losses, if any, thereafter, can be carried forward three years for Mutual Thrift Institutions Tax purposes.

Item 1A. Risk Factors

In addition to factors discussed in the description of our business and elsewhere in this report, the following are factors that could adversely affect our future results of operations and financial condition.

Economic and Market Area

Changes in economic conditions, in particular an economic slowdown in the markets we operate in, could materially and negatively affect our business.

Our business is directly impacted by factors such as economic, political and market conditions, broad trends in industry and finance, legislative and regulatory changes, changes in government monetary and fiscal policies and inflation, all of which are beyond our control. Any deterioration in economic conditions, whether caused by national or local concerns, in particular any further economic slowdown in the markets we operate in, could result in the following consequences, any of which could hurt our business materially: loan delinquencies may increase; problem assets and foreclosures may increase; demand for our products and services may decrease; low cost or non-interest bearing deposits may decrease; and collateral for loans made by us, especially real estate, may decline in value, in turn reducing customers’ borrowing power, and reducing the value of assets and collateral associated with our existing loans.

Our success significantly depends upon the growth in population, income levels, deposits, and housing starts in our markets. If the communities in which we operate do not grow or if prevailing economic conditions locally or nationally are unfavorable, our business may not succeed. An economic downturn or prolonged recession may result in the deterioration of the quality of our loan portfolio and reduce our level of deposits, which in turn would hurt its business. If we experience an economic downturn or a prolonged economic recession occurs in the economy as a whole, borrowers will be less likely to repay their loans as scheduled. Unlike many larger institutions, we are not able to spread the risks of unfavorable local economic conditions across a large number of diversified economies. An economic downturn could, therefore, result in losses that materially and adversely affect our business.

Inflationary pressures and rising prices may affect our results of operations and financial condition.

Inflation rose sharply at the end of 2021 and remained at an elevated level through 2023 and early 2024. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition. Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition.

Concentration of Loans in Our Primary Market Area May Increase the Risk of Increased Nonperforming Assets.

Our success depends primarily on the general economic conditions in the Pennsylvania counties of Monroe, Northampton, Lehigh, Lackawanna, Luzerne, Chester, Delaware and Montgomery as nearly all of our loans are to customers in these markets. Accordingly, the local economic conditions in these market areas have a significant impact on the ability of borrowers to repay loans as well as our ability to originate new loans. As such, decline in real estate values in these market areas would also lower the value of the collateral securing loans on properties in these market areas. In addition, weakening in general economic conditions such as inflation, recession, unemployment or other factors beyond our control could negatively affect our financial results.

Strong Competition Within Our Market Areas May Limit Our Growth and Profitability.

Competition in the banking and financial services industry is intense. In our market areas, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Some of our competitors have greater name recognition and market presence that benefit them in attracting business, and offer certain services that we do not or cannot provide. In addition, larger competitors may be able to price loans and deposits more aggressively than we do, which could affect our ability to grow and remain profitable on a long-term basis. Our profitability depends upon our continued ability to successfully compete in our market areas. For additional information see “Item 1. Business—Competition.”

The Soundness of Other Financial Services Institutions May Adversely Affect Our Credit Risk.

We rely on other financial services institutions through trading, clearing, counterparty, and other relationships. We maintain limits and monitor concentration levels of our counterparties as specified in our internal policies. Our reliance on other

financial services institutions exposes us to credit risk in the event of default by these institutions or counterparties. These losses could adversely affect our results of operations and financial condition.

Interest Rate and Asset Quality

Future Changes in Interest Rates Could Reduce Our Profits.

Our ability to make a profit largely depends on our net interest income, which could be negatively affected by changes in interest rates. Net interest income is the difference between:

the interest income we earn on our interest-earning assets, such as loans and securities; and

the interest expense we pay on our interest-bearing liabilities, such as deposits and borrowings.

The rates we earn on our assets and the rates we pay on our liabilities are generally fixed for a contractual period of times. Like many banks, our liabilities generally have shorter contractual maturities than our assets. This imbalance can create significant earnings volatility, as market interest rates change over time. In a period of declining interest rates, the interest income earned on our assets may decrease more rapidly than the interest paid on our liabilities, as borrowers speed up prepayments of mortgage loans, and mortgage-backed securities and callable investment securities are called, requiring us to reinvest those cash flows at lower interest rates. In a period of rising interest rates, the interest income earned on our assets may not increase as rapidly as the interest paid on our liabilities. Furthermore, increases in interest rates may adversely affect our ability to originate loans and/or the ability of our borrowers to make loan repayments on adjustable-rate loans, as the interest owed on such loans would increase as interest rates increase.

In addition, changes in interest rates can affect the average life of loans and mortgage-backed and related securities. A reduction in interest rates may result in increased prepayments of loans and mortgage-backed and related securities, as borrowers refinance their loans in order to reduce their borrowing costs. This creates reinvestment risk, which is the risk that we may not be able to reinvest prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities. Alternatively, increases in interest rates may decrease loan demand and/or make it more difficult for borrowers to repay adjustable rate loans.

Changes in interest rates also affect the current market value of our interest-earning securities portfolio. Generally, the value of securities moves inversely with changes in interest rates. At September 30, 2024, the fair value of our investment securities available for sale totaled $215.9 million. Unrealized net losses on these available for sale securities totaled approximately $10.6 million at September 30, 2024 and are reported as a separate component of stockholders’ equity. Decreases in the fair value of securities available for sale in future periods would have an adverse effect on stockholders’ equity.

We evaluate interest rate sensitivity by estimating the change in the Bank’s Economic Value of Equity (“EVE”) over a range of interest rate scenarios. EVE is the net present value of the Company’s asset cash flows minus the net present value of the Company’s liability cash flows. At September 30, 2024, in the event of an immediate 200 basis point increase in interest rates, the Company’s model projects that we would experience a $2.4 million, or 4.0%, decrease in net portfolio value. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Management of Market Risk.”

A significant portion of our assets consists of investment securities, which generally have lower yields than loans, and we classify a significant portion of our investment securities as available for sale, which creates potential volatility in our equity and may have an adverse impact on our net income.

As of September 30, 2024, our securities portfolio totaled $263.2 million, or 12.0% of our total assets. Investment securities typically have lower yields than loans. However, for the year ended September 30, 2024, the weighted average yield of our investment securities portfolio was 5.13%, as compared to 5.10% for our loan portfolio.

At September 30, 2024, $215.9 million, or 82.0% of our investment securities, were classified as available for sale and reported at fair value with unrealized gains or losses excluded from earnings and reported in other comprehensive income, which affects our reported equity. Accordingly, given the significant size of the investment securities portfolio classified as available for sale and due to possible mark-to-market adjustments of that portion of the portfolio resulting from market conditions, we may experience greater volatility in the value of reported equity. Moreover, given that we actively manage our investment securities portfolio classified as available for sale, we may sell securities which could result in a realized loss, thereby reducing our net income.

Our Continued Emphasis on Commercial Real Estate Lending Increases Our Exposure to Increased Lending Risks.

Our business strategy centers on continuing our emphasis on commercial real estate lending. We have grown our loan portfolio in recent years with respect to this type of loan and intend to continue to emphasize this type of lending. At September 30, 2024, $884.6 million, or 50.3%, of our total loan portfolio consisted of commercial real estate loans. Loans secured by commercial real estate generally expose a lender to greater risk of non-payment and loss than one- to four-family residential mortgage loans

because repayment of the commercial real estate loans often depends on the successful operation of the property and the income stream of the underlying property. Additionally, such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage loans. Accordingly, an adverse development with respect to one loan or one credit relationship can expose us to greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. We seek to minimize these risks through our underwriting policies, which require such loans to be qualified on the basis of the property’s collateral value, net income and debt service ratio; however, there is no assurance that our underwriting policies will protect us from credit-related losses.

Increases to the Allowance for Credit Losses May Cause Our Earnings to Decrease.

Our customers may not repay their loans according to the original terms, and the collateral securing the payment of those loans may be insufficient to pay any remaining loan balance. In addition, the estimates used to determine the fair value of such loans as of the acquisition date may be inconsistent with the actual performance of the acquired loans. Hence, we may experience significant credit losses, which could have a material adverse effect on our operating results. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. In determining the amount of the allowance for credit losses, we rely on loan quality reviews, past loss experience, and an evaluation of economic conditions, among other factors. If our assumptions prove to be incorrect, our allowance for credit losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to the allowance. Material additions to the allowance would materially decrease our net income.

Our emphasis on the origination of commercial real estate and business loans is one of the more significant factors in evaluating our allowance for credit losses. As we continue to increase the amount of these loans, additional or increased provisions for credit losses may be necessary and as a result would decrease our earnings.

Source of Funds

Our funding sources may prove insufficient to replace deposits at maturity and support our future growth.

A lack of liquidity could adversely affect our financial condition and results of operations and result in regulatory limits being placed on the Company.

We must maintain sufficient funds to respond to the needs of depositors and borrowers. Deposits have traditionally been our primary source of funds for use in lending and investment activities. We also receive funds from loan repayments, investment maturities and income on other interest-earning assets. While we emphasize the generation of low-cost core deposits as a source of funding, there is strong competition for such deposits in our market area. Additionally, deposit balances can decrease if customers perceive alternative investments as providing a better risk/return tradeoff. Accordingly, as a part of our liquidity management, we must use a number of funding sources in addition to deposits and repayments and maturities of loans and investments. As we continue to grow, we may become more dependent on these sources, which could include Federal Home Loan Bank advances, federal funds purchased and brokered certificates of deposit. Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources.

Any decline in available funding could adversely impact our ability to originate loans, invest in securities, pay our expenses, or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations.

A lack of liquidity could also attract increased regulatory scrutiny and potential restraints imposed on us by regulators. Depending on the capitalization status and regulatory treatment of depository institutions, including whether an institution is subject to a supervisory prompt corrective action directive, certain additional regulatory restrictions and prohibitions may apply, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends and restrictions on the acceptance of brokered deposits.

Our reliance on wholesale funding could adversely affect our liquidity and operating results.

Among other sources of funds, we rely on wholesale funding, including short- and long-term borrowings, brokered deposits and non-brokered deposits acquired through listing services, to provide funds with which to make loans, purchase investment securities and provide for other liquidity needs. On September 30, 2024, wholesale funding totaled $567.8 million, or approximately 26.0% of total assets.

In the future, this funding may not be readily replaced as it matures, or we may have to pay a higher rate of interest to maintain it. Not being able to maintain or replace those funds as they mature would adversely affect our liquidity. Paying higher interest rates to maintain or replace funding would adversely affect our net interest margin and operating results.

Regulatory Matters

We Operate in a Highly Regulated Environment and May Be Adversely Affected by Changes in Laws and Regulations.

We are subject to extensive regulation, supervision, and examination by the Federal Reserve Board, the FDIC and the Department. Such regulators govern the activities in which we may engage, primarily for the protection of depositors. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a bank, the classification of assets by a bank, the imposition of higher capital requirements, and the adequacy of a bank’s allowance for credit losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, or legislation, could have a material impact on us and our operations. We believe that we are in substantial compliance with applicable federal, state and local laws, rules and regulations. Because our business is highly regulated, the laws, rules and applicable regulations are subject to regular modification and change. There can be no assurance that proposed laws, rules and regulations, or any other laws, rules or regulations, will not be adopted in the future, which could make compliance more difficult or expensive or otherwise adversely affect our business, financial condition or prospects.

Security

Risks Associated with System Failures, Interruptions, Or Breaches of Security Could Negatively Affect Our Earnings.

Information technology systems are critical to our business. We use various technology systems to manage our customer relationships, general ledger, securities investments, deposits, and loans. We have established policies and procedures to prevent or limit the impact of system failures, interruptions, and security breaches (including privacy breaches), but such events may still occur or may not be adequately addressed if they do occur. In addition, any compromise of our systems could deter customers from using our products and services. Although we rely on security systems to provide security and authentication necessary to effect the secure transmission of data, these precautions may not protect our systems from compromises or breaches of security.

In addition, we outsource a majority of our data processing to certain third-party providers. If these third-party providers encounter difficulties, or if we have difficulty communicating with them, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

The occurrence of any system failures, interruption, or breach of security could damage our reputation and result in a loss of customers and business thereby subjecting us to additional regulatory scrutiny, or could expose us to litigation and possible financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations.

Risks Associated with Cyber-Security Could Negatively Affect Our Earnings.

The financial services industry has experienced an increase in both the number and severity of reported cyber-attacks aimed at gaining unauthorized access to bank systems as a way to misappropriate assets and sensitive information, corrupt and destroy data, or cause operational disruptions.

We have established policies and procedures to prevent or limit the impact of security breaches, but such events may still occur or may not be adequately addressed if they do occur. Although we rely on security safeguards to secure our data, these safeguards may not fully protect our systems from compromises or breaches.

We also rely on the integrity and security of a variety of third-party processors, payment, clearing and settlement systems, as well as the various participants involved in these systems, many of which have no direct relationship with us. Failure by these participants or their systems to protect our customers’ transaction data may put us at risk for possible losses due to fraud or operational disruption.

Our customers are also the target of cyber-attacks and identity theft. Large scale identity theft could result in customers’ accounts being compromised and fraudulent activities being performed in their name. We have implemented certain safeguards against these types of activities but they may not fully protect us from fraudulent financial losses.

The occurrence of a breach of security involving our customers’ information, regardless of its origin, could damage our reputation and result in a loss of customers and business and subject us to additional regulatory scrutiny, and could expose us to litigation and possible financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations.

While our Board of Directors takes an active role in cybersecurity risk tolerance, we rely to a large degree on management and outside consultants in overseeing cybersecurity risk management.

Our Board of Directors takes an active role in the cybersecurity risk tolerance of the Company and all members receive cybersecurity training annually. The Board reviews the annual risk assessments and approves information technology policies, which include cybersecurity. Furthermore, our Audit Committee is responsible for reviewing all audit findings related to information technology general controls, internal and external vulnerability, and penetration testing. We also engage outside consultants to support our cybersecurity efforts. However, our directors do not have significant experience in cybersecurity risk management outside of the Company and therefore, its ability to fulfill its oversight function remains dependent on the input it receives from management and outside consultants.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 1C. Cybersecurity

Incident Response Plan

The Board of Directors is responsible for overseeing the risks from cybersecurity threats.

ESSA Bank and Trust has adopted an Incident Response Plan (the “IR PPlan”) for responding to cybersecurity incidents. This IR Plan applies to both potential and actual incidents. The IR Plan should be invoked in any context where the Bank believes that an incident may have occurred. The IR Plan applies to all employees, contractors, and third parties. The objectives of the IR Plan are to ensure the protection of customer data and all organization assets from security incidents and ensure timely detection, mitigation, and communication of security incidents to appropriate parties.

Implementation of the IR Plan requires cross-functional efforts from across the organization. The roles/functions involved and the related responsibilities in enforcing the IR Plan are spread across the entire organization of the Bank’s senior.

Once the possibility of a cybersecurity incident has been noted, employees assigned to appropriate teams do the necessary research and analysis to confirm either that there is an incident requiring additional action, or that no further action is necessary. This will typically involve some combination of Operations and Information Technology. If an incident is confirmed, an incident response team is formed, and the team takes steps to contain the incident to limit damage, eradicate the incident to restore our full control of all Bank systems and eliminate unauthorized access, and recover data and full functionality. Detection and analysis continue during this phase as necessary to ensure that this phase has been successfully executed. This phase also involves communication as needed with employees, customers, partners and service providers, legal representatives, insurance provider, law-enforcement authorities, and regulatory bodies as necessary and appropriate.

In the post-incident phase, the Bank analyzes the root cause of the incident, identifies any changes that need to be made to policies, procedures, training, documentation, and technology to protect against similar incidents in the future, and institutes a plan to implement them. In addition, the Bank undertakes any additional communication with the necessary parties and the public, if appropriate, and the Bank’s legal representatives, insurance provider, law-enforcement authorities, and regulatory bodies as appropriate to fully address the impact of the incident, and fully documents the entire incident.

During the fiscal year ended September 30, 2024, the risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected the Company, its business strategy, results of operations, or financial condition.

Item 2. Properties

At September 30, 2024, the Company and the Bank conducted our business through 21 full-service branch offices located in Monroe, Northampton, Lehigh, Lackawanna, Luzerne, Chester, Delaware and Montgomery Counties, Pennsylvania. We own 13 properties and lease 12 properties inclusive of the 21 full service-branch offices referred to above. On October 1, 2024 the Haverford office, located in Delaware County, was closed.

The net book value of our premises, land and equipment was $11.3 million at September 30, 2024.

Item 3. Legal Proceedings

The Company and its subsidiaries are subject to various legal actions arising in the normal course of business. In the opinion of Management, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s results of operations. The Company and its subsidiary, ESSA Bank and Trust (“ESSA B&T”) were named as defendants, among others, in an action commenced on December 8, 2016 by one plaintiff who sought to pursue the suit as a class action on behalf of the entire class of people similarly situated. The plaintiff alleged that a subsidiary of a bank previously acquired by the Company received unearned fees and kickbacks in the process of making loans, in violation of the Real Estate Settlement Procedures Act. In an order dated January 29, 2018, the district court granted the defendants’ motion to dismiss the case. The plaintiff appealed the court’s ruling. In an opinion and order dated April 26, 2019, the appellate court reversed the district court’s order dismissing the plaintiff’s case against the Company and remanded the case to the district court in order to continue the litigation. The litigation is now proceeding before the district court. On December 9, 2019, the court permitted an amendment to the complaint to add two new plaintiffs to the case asserting similar claims. On May 21, 2020, the court granted the plaintiffs’ motion for class certification. Fact and expert discovery were completed, and the Company and ESSA B&T filed motions seeking to have the case dismissed (in whole or in part) and/or the class de-certified, as well as for other relief. Plaintiffs opposed the motions. On August 18, 2023 the Court granted the motions to dismiss as to the Company and ESSA B&T, with the result that the only remaining defendant is a now-dissolved former wholly-owned subsidiary of a previously-acquired company. The Court also amended its class certification order, and severed one of the original plaintiffs’ claims from those of the class, ordering a separate trial for that plaintiff. Plaintiffs sought permission to appeal from these and other related rulings but the court denied their request. Plaintiffs have filed a motion seeking relief from some of the court’s prior orders. The Company and ESSA B&T will continue to vigorously defend against plaintiffs’ allegations. To the extent that this matter could result in exposure to the Company and/or ESSA B&T, the amount or range of such exposure is not currently estimable but could be substantial

On May 29, 2020, the Company and ESSA B&T were named as defendants in a second action commenced by three plaintiffs who also sought to pursue the action as a class action on behalf of the entire class of people similarly situated. The plaintiffs allege that a subsidiary of a bank previously acquired by the Company received unearned fees and kickbacks from a different title company than the one involved in the previously discussed litigation in the process of making loans. The original complaint alleged violations of the Real Estate Settlement Procedures Act, the Sherman Act, and the Racketeer Influenced and Corrupt Organizations Act (“RICO”). The plaintiffs filed an Amended Complaint on September 30, 2020 that dropped the RICO claim, but they are continuing to pursue the Real Estate Settlement Procedures Act and Sherman Act claims. The defendants moved to dismiss the Sherman Act claim on October 14, 2020, and that motion was denied on April 2, 2021. On March 13, 2023 the court granted plaintiffs’ motion for class certification. The case is currently in the discovery phase. The Company and ESSA B&T intend to vigorously defend against plaintiffs’ allegations. To the extent that this matter could result in exposure to the Company and/or ESSA B&T, the amount or range of such exposure is not currently estimable but could be substantial.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s shares of common stock are traded on the Nasdaq Global Market under the symbol “ESSA.” The approximate number of holders of record of ESSA Bancorp’s common stock as of September 30, 2024 was 1,622. Certain shares of ESSA Bancorp are held in “nominee” or “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number.

The Board of Directors has the authority to declare cash dividends on shares of common stock, subject to statutory and regulatory requirements. In determining whether and in what amount to pay a cash dividend in the future, the Board takes into account a number of factors, including capital requirements, our consolidated financial condition and results of operations, tax considerations, statutory and regulatory limitations and general economic conditions. No assurances can be given that cash dividends will not be reduced or eliminated in the future.

The sources of funds for the payment of a cash dividend are interest and principal payments with respect to ESSA Bancorp loan to the Employee Stock Ownership Plan, and dividends from the Bank. For a discussion of the limitations applicable to the Bank’s ability to pay dividends, see “Item 1. Business—Supervision and Regulation.”

On May 25, 2022 the Company announced that its Board of Directors had approved a tenth stock repurchase program for up to 500,000 shares of its common stock. The Company has purchased 303,609 shares pursuant to this plan during the fiscal year ended September 30, 2024. As of September 30, 2024, 86,242 shares remain to be purchased under the agreement. The Company may repurchase the shares from time to time through open market purchases, privately negotiated stock transactions or in any other manner that is compliant with applicable securities law. The plan has no expiration date.

Item 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Strategy

Our business strategy is to grow and improve our profitability by:

•

Increasing customer relationships through the offering of excellent service and the distribution of that service through effective delivery systems;

•

Continuing to transform into a full service community bank by meeting the financial services needs of our customers;

•

Continuing to develop into a high performing financial institution, in part by increasing net interest and fee income and managing operating expenses efficiently;

•

Remaining within our risk management parameters; and

•

Employing affordable technology to increase profitability and improve customer service.

We intend to continue to pursue our business strategy, subject to changes necessitated by future market conditions and other factors. We also intend to continue focusing on the following:

•

Increasing customer relationships through a continued commitment to service and enhancing products and delivery systems. We will continue to increase customer relationships by focusing on customer satisfaction with regard to service, products, systems and operations. We have upgraded and expanded certain of our facilities, including our corporate center and added additional facilities to provide additional capacity to manage future growth and expand our delivery systems.

•

Continuing to develop into a high performing financial institution. We will continue to enhance profitability by focusing on increasing non-interest income as well as increasing commercial products, including commercial real estate lending, which often have a higher profit margin than more traditional products. We also will pursue lower-cost commercial deposits as part of this strategy.

•

Remaining within our risk management parameters. We place significant emphasis on risk management and compliance training for all of our directors, officers and employees. We focus on establishing regulatory compliance programs to determine the degree of such compliance and to maintain the trust of our customers and community.

•

Employing cost-effective technology to increase profitability and improve customer service. We will continue to upgrade our technology in an efficient manner. We have implemented new software for marketing purposes and have upgraded both our internal and external communication systems.

•

Continuing our emphasis on commercial real estate lending to improve our overall performance. We intend to continue to emphasize the origination of higher interest rate margin commercial real estate loans as market conditions, regulations and other factors permit. We have expanded our commercial banking capabilities by adding experienced commercial bankers, and enhancing our direct marketing efforts to local businesses.

•

Expanding our banking franchise through branching and acquisitions. We will attempt to use our stock holding company structure to expand our market footprint through de novo branching as well as through additional acquisitions of banks, savings institutions and other financial service providers in our primary market area. We will also consider establishing de novo branches or acquiring additional financial institutions in contiguous counties. We will continue to review and assess locations for new branches both within Monroe County and the counties around Monroe. There can be no assurance that we will be able to consummate any new acquisitions or establish any additional new branches. We may continue to explore acquisition opportunities involving other banks and thrifts, and possibly financial service companies, when and as they arise, as a means of supplementing internal growth, filling gaps in our current geographic market area and expanding our customer base, product lines and internal capabilities, although we have no current plans, arrangements or understandings to make any acquisitions.

•

Maintaining the quality of our loan portfolio. Maintaining the quality of our loan portfolio is a key factor in managing our growth. We will continue to use customary risk management techniques, such as independent internal and external loan reviews, risk-focused portfolio credit analysis and field inspections of collateral in overseeing the performance of our loan portfolio.

Critical Accounting Policies

We consider accounting policies that require management to exercise significant judgment or discretion or make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income, to be critical accounting policies. We consider the following to be our critical accounting policies:

Allowance for Credit Losses.The following discussion is regarding the critical accounting estimates related to the application of current expected credit losses ("CECL"), which was adopted on October 1, 2023.

The allowance for credit losses (ACL) represents an amount which, in management’s judgment, is adequate to absorb expected credit losses on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics to the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions and prepayment experience. The ACL is measured on a collective (pooled) basis for loan segments that share similar risk characteristics, including collateral type, credit ratings/scores, size, duration, interest rate structure, origination vintage and payment structure. The Company utilizes the discounted cash flow method for calculating the ACL. Qualitative adjustments are made for differences in loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, acquisition status, current levels of delinquencies, net charge-offs and risk ratings, as well as actual and forecasted macroeconomic variables. Macroeconomic data includes unemployment rates, changes in collateral values such as home prices and commercial real estate prices, gross domestic product and other relevant factors. Management utilizes judgment in determining and applying the qualitative factors and weighting the economic scenarios used, which include baseline, upside and downside forecasts. The ACL is reduced by charge-offs, net of recoveries of previous losses, and is increased or decreased by a provision for credit losses, which is recorded as a current period operating expense. Specific credit loss allowances are established for identified losses based on a review of such information. A loan evaluated for credit loss is considered to be have a credit loss when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. All loans identified as having a credit loss are evaluated independently. We do not aggregate such loans for evaluation purposes

Determination of an appropriate ACL is inherently complex and requires the use of significant and highly subjective estimates. The reasonableness of the ACL is reviewed quarterly by management. Management believes it uses relevant information available to make determinations about the ACL and that it has established the existing allowance in accordance with GAAP. However, the determination of the ACL requires significant judgment, and estimates of expected credit losses in the loan portfolio can vary from the amounts actually observed. While management uses available information to recognize expected credit losses, future additions to the ACL may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes in the interest rate environment which may directly impact prepayment and curtailment rate assumption, and changes in the financial condition of the borrowers.

Goodwill and Intangible Assets. Goodwill is not amortized, but it is tested at least annually for impairment in the fourth quarter, or more frequently if indicators of impairment are present. If the estimated current fair value of a reporting unit exceeds its carrying value, no additional testing is required and an impairment loss is not recorded. The Company uses market capitalization and multiples of tangible book value methods to determine the estimated current fair value of its reporting unit. Based on this analysis, no impairment was recorded in fiscal 2024 or fiscal 2023.

The other intangibles assets are assigned useful lives, which are amortized on an accelerated basis over their weighted-average lives. The Company periodically reviews the intangible assets for impairment as events or changes in circumstances indicate that the carrying amount of such asset may not be recoverable. Based on these reviews, no impairment was recorded in fiscal 2024 or fiscal 2023.

Comparison of Financial Condition at September 30, 2024 and September 30, 2023

Total Assets. Total assets decreased $105.5 million, or 4.6%, to $2.2 billion at September 30, 2024, compared to $2.3 billion at September 30, 2023. The decrease primarily reflects a decrease in investments securities available for sale and total cash and cash equivalents partially offset by growth in total net loans outstanding.

Cash and Due from Banks. Cash and due from banks decreased $325,000, or 0.8%, to $38.7 million at September 30, 2024 from $39.0 million at September 30, 2023.

Interest-Bearing Deposits with Other Institutions. Interest-bearing deposits with other institutions decreased $36.5 million, or 78.7%, to $9.9 million at September 30, 2024 from $46.4 million at September 30, 2023.

Investment Securities Available for Sale and Held to Maturity. Investment securities available for sale decreased $118.2 million, or 35.4%, to $215.9 million at September 30, 2024 from $334.1 million at September 30, 2023. The decrease was due primarily to decreases in US government treasury securities of $123.6 million and US government agency securities of $22.7 million The Company purchased $125.0 million of US government treasury securities and $25.0 million of US government agency securities during the quarter ended September 30, 2023 that matured during fiscal year 2024. Held to maturity securities decreased $4.9 million to $47.4 million at September 30, 2024.

Net Loans. Net loans increased $63.8 million, or 3.8%, to $1.7 billion at September 30, 2024 from September 30, 2023. The primary reasons for the increase were increases in residential real estate loans, obligations of states and political subdivisions, commercial real estate loans and home equity loans and lines of credit, offset in part by decreases in construction loans, commercial loans, other loans and auto loans. Commercial real estate loans increased by $62.7 million to $884.6 million at September 30, 2024 from $822.0 million at September 30, 2023. Commercial loans decreased $11.3 million to $36.8 million at September 30, 2024 from $48.1 million at September 30, 2023. Obligations of states and political subdivisions increased by $452,000 to $48.6 million at September 30, 2024 from $48.1 million at September 30, 2023. One- to four-family loans increased by $8.2 million to $721.5 million at September 30, 2024 from $713.3 million at September 30, 2023. Home equity loans and lines of credit increased by $3.1 million to $51.3 million at September 30, 2024 from $48.2 million at September 30, 2023. Auto loans decreased $458,000 to $65,000 at September 30, 2024 from $523,000 at September 30, 2023. The Company discontinued indirect auto lending in July 2018.

Deposits. Deposits decreased by $32.0 million, or 1.9%, to $1.6 billion at September 30, 2024, primarily as a result of decreases in interest bearing demand accounts, money market accounts, savings accounts and non-interest bearing demand accounts partially offset by an increase in certificates of deposit. Noninterest bearing demand accounts were $256.6 million, down 8.5% from September 30, 2023. Interest bearing demand accounts decreased to $312.7 million from September 30, 2023. Money market accounts were $334.6 million at September 30, 2024, down 8.8% from September 30, 2023. Certificates of deposit increased to $582.1 million from $504.1 million at September 30, 2023.

Borrowed Funds. Borrowed funds, short term and other, decreased to $290.0 million at September 30, 2024 from $374.7 million at September 30, 2023. FHLB borrowings were $290.0 million at September 30, 2024.

Stockholders’ Equity. Stockholders’ equity increased by $10.7 million, or 4.9%, to $230.4 million at September 30, 2024 from $219.7 million at September 30, 2023. The increase was primarily due to net income of $17.0 million and other comprehensive income of $2.9 million partially offset by treasury shares purchased of $5.1 million and cash dividends paid of $5.9 million.

Comparison of Operating Results for the Years Ended September 30, 2024 and September 30, 2023

Net Income. Net income decreased by $1.6 million, or 8.5%, to $17.0 million for the fiscal year ended September 30, 2024 from $18.6 million for the fiscal year ended September 30, 2023. The decrease was primarily due to an increase in noninterest

expense and a decrease in net interest income partially offset by decreases in the provision for credit losses and income taxes and an increase in noninterest income.

Net Interest Income. Net interest income decreased by $3.3 million, or 5.3%, to $58.3 million for fiscal year 2024 from $61.5 million for fiscal year 2023, primarily due to an increase in total interest expense from deposits and short-term borrowings partially offset by increases in interest income.

Interest Income. Interest income increased $18.0 million, or 21.0%, to $103.5 million for fiscal year 2024 from $85.5 million for fiscal year 2023. The increase resulted from an increase of 47 basis points in the overall yield on interest earning assets to 4.98% from 4.51%, which had the effect of increasing interest income by $9.2 million along with an increase of $181.0 million in average interest earning assets, which had the effect of increasing interest income by $8.7 million. The increase in average interest earning assets during 2024 compared to 2023 included increases in average loans receivable of $144.0 million. Average mortgage backed securities increased $8.6 million, average FHLB stock increased $1.7 million and average investment securities increased $2.9 million. The average yield on loans increased to 5.10% for the fiscal year 2024, from 4.65% for the fiscal year 2023. The average yields on investment securities increased to 5.13% for fiscal year 2024 from 4.50% for fiscal year 2023 and the average yields on mortgage backed securities increased to 3.24% for fiscal 2024 from 2.79% for the fiscal 2023 period.

Interest Expense. Interest expense increased $21.2 million, or 88.7%, to $45.2 million for fiscal year 2024 from $23.9 million for fiscal year 2023. The increase in interest expense resulted from a 109 basis point increase in the overall cost of interest bearing liabilities to 2.70% for fiscal 2024 from 1.61% for fiscal 2023 which had the effect of increasing interest expense by $12.6 million along with an increase in average interest bearing liabilities which had the effect of increasing interest expense by $8.5 million. For fiscal 2024, average borrowed funds increased $68.3 million compared to fiscal 2023. Average savings and club accounts decreased by $23.7 million, average interest bearing demand deposit accounts decreased $23.3 million, average money market accounts decreased $35.1 million and average certificates of deposit increased $193.6 million. The cost of money market accounts increased to 2.31 % for fiscal year 2024 from 1.48% for fiscal year 2024. The cost of interest bearing demand deposit accounts increased to 0.83 % for fiscal year 2024 from 0.67% for fiscal year 2024. The cost of savings and club accounts increased to 0.08% for fiscal year 2024 from 0.06% for fiscal 2023. The cost of certificates of deposit increased to 4.52% from 3.07% and the cost of borrowed funds increased to 3.18% from 2.14% for fiscal years 2024 and 2023, respectively.

Provision for Credit Losses. The Company establishes provisions for credit losses, which are charged to earnings, at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements.On October 1, 2023 we implemented ASU 2016-13 Financial Instruments - Credit Losses. This resulted in a decrease to the allowance for credit losses of $2.8 million. The Company made a credit loss release of $1.4 million for fiscal year 2024 compared to a credit loss provision of 700,000 for fiscal year 2023. The Company did not recognize any credit losses on held-to-maturity debt securities for the year ended September 30, 2024. For more information about our provision and allowance for credit losses and our loss experience, see Note 4 - Loans Receivable, Net of Allowance For Credit Losses on Loans to the unaudited consolidated financial statements.The allowance for credit losses was $15.3 million, or 0.87% of loans outstanding, at September 30, 2024, compared to $18.5 million, or 1.09% of loans outstanding, at September 30, 2023.

Determining the amount of the allowance for credit losses necessarily involves a high degree of judgment. Management reviews the level of the allowance on a quarterly basis, and establishes the provision for credit losses based on the factors set forth in the preceding paragraph. Historically, the Bank’s loan portfolio has consisted primarily of one- to four-family residential mortgage loans. However, our current business plan calls for increases in commercial real estate loan originations. As management evaluates the allowance for credit losses, the increased risk associated with larger non-homogenous commercial real estate may result in large additions to the allowance for credit losses in future periods. Loans secured by commercial real estate generally expose a lender to greater risk of non-payment and loss than one- to four-family residential mortgage loans because repayment of the loans often depends on the successful operation of the property and the income stream of the underlying property. Additionally, such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage loans. Accordingly, an adverse development with respect to one loan or one credit relationship can expose us to greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan.

Although we believe that we use the best information available to establish the allowance for credit losses, future additions to the allowance may be necessary, based on estimates that are susceptible to change as a result of changes in economic conditions and other factors. In addition, the FDIC, as an integral part of its examination process, will periodically review our allowance for credit losses. This agency may require us to recognize adjustments to the allowance, based on its judgments about information available to it at the time of its examination.

Non-Interest Income. Non-interest income increased $298,000, or 3.8%, to $8.2 million for the year ended September 30, 2024, from $7.9 million for the comparable 2023 period. The increase was primarily due to increases in loss on sale of investments, net of $121,000, earnings on bank owned life insurance of $145,000, gain on sale of loans, net of $203,000 and other noninterest

income of $274,000. These increases were offset, in part, by decreases in service fees on deposit accounts of $267,000, insurance commissions of $57,000, service charges and fees on loans of $19,000 and loan swap fees of $100,000.

Non-Interest Expense. Non-interest expense increased $1.2 million, or 2.6%, to $46.9 million for fiscal year 2024 from $45.7 million for the comparable period in 2023. The primary reasons for the increase in noninterest expense were increases in compensation and employee benefits of $285,000, occupancy and equipment of $501,000, data processing of $489,000, FDIC insurance premiums of $560,000, advertising of $32,000, and other expenses of $18,000. These increases were partially offset by decreases in professional fees of $465,000 and foreclosed real estate of $130,000.

Income Taxes. Income tax expense of $4.0 million was recognized for fiscal year 2024 compared to an income tax expense of $4.5 million recognized for fiscal year 2023. The effective tax rate for the year ended September 30, 2024 was 18.9% compared to 19.5% for the 2023 period.

Average Balance Sheets for the Years Ended September 30, 2024 and 2023

The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances, the yields set forth below include the effect of deferred fees and discounts and premiums that are amortized or accreted to interest income.


	For the Years Ended September 30,
	2024									2023
	Average Balance			Interest Income/ Expense			Yield/ Cost			Average Balance			Interest Income/ Expense			Yield/ Cost
	(Dollars in thousands)
Interest-earning assets:
Loans (1) (2)	$	1,720,732		$	87,688			5.10	%	$	1,576,764		$	73,329			4.65	%
Investment securities
Taxable (3)		118,440			6,119			5.17	%		115,574			5,229			4.52	%
Exempt from federal income tax (3) (4)		1,859			42			2.86	%		1,858			42			2.86	%
Total investment securities		120,299			6,161			5.13	%		117,432			5,271			4.50	%
Mortgage-backed securities		173,693			5,633			3.24	%		165,125			4,605			2.79	%
Regulatory stock		18,401			1,599			8.69	%		16,709			1,333			7.98	%
Other		44,863			2,376			5.30	%		20,958			961			4.59	%
Total interest-earning assets		2,077,988			103,457			4.98	%		1,896,988			85,499			4.51	%
Allowance for credit losses		(16,228	)								(18,485	)
Noninterest-earning assets		130,376									132,826
Total assets	$	2,192,136								$	2,011,329
Interest-bearing liabilities:
Interest bearing demand accounts		307,427			2,541			0.83	%		330,772			2,217			0.67	%
Money market accounts		323,447			7,466			2.31	%		358,520			5,294			1.48	%
Savings and club accounts		153,903			121			0.08	%		177,576			102			0.06	%
Certificates of deposit		512,511			23,194			4.52	%		318,937			9,786			3.07	%
Borrowed funds		373,917			11,856			3.18	%		305,623			6,546			2.14	%
Total interest-bearing liabilities		1,671,205			45,178			2.70	%		1,491,428			23,945			1.61	%
Non-interest bearing demand accounts		253,441									262,089
Noninterest-bearing liabilities		43,240									38,283
Total liabilities		1,967,886									1,791,800
Equity		224,250									219,529
Total liabilities and equity	$	2,192,136								$	2,011,329
Net interest income				$	58,279								$	61,554
Interest rate spread								2.28	%								2.90	%
Net interest-earning assets	$	406,783								$	405,560
Net interest margin (5)								2.80	%								3.24	%
Average interest-earning assets to average interest-bearing liabilities					124.34	%								127.19	%

(1)

Non-accruing loans are included in the outstanding loan balances.

(2)

Interest income on loans includes net amortized costs on loans totaling $448,000 in 2024 and $486,000 in 2023.

(3)

Held to maturity securities are reported as amortized cost. Available for sale securities are reported at fair value.

(4)

Yields on tax exempt securities have been calculated on a fully tax equivalent basis assuming a tax rate of 21%.

(5)

Represents the difference between interest earned and interest paid, divided by average total interest earning assets.

Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the years indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments for 2024 or 2023.


	For the Years Ended September 30, 2024 vs. 2023
	Increase (Decrease) Due to
	Volume			Rate			Net
	(In thousands)
Interest-earning assets:
Loans	$	6,971		$	7,388		$	14,359
Investment securities		131			759			890
Mortgage-backed securities		250			778			1,028
Regulatory stock		142			124			266
Other		1,246			169			1,415
Total interest-earning assets		8,740			9,218			17,958
Interest-bearing liabilities:
Interest bearing demand accounts		(136	)		460			324
Money market accounts		(459	)		2,631			2,172
Savings and club accounts		(13	)		32			19
Certificates of deposit		7,540			5,868			13,408
Borrowed funds		1,673			3,637			5,310
Total interest-bearing liabilities		8,605			12,628			21,233
Net change in interest income	$	135		$	(3,410	)	$	(3,275	)

Management of Market Risk

General. The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of loans, having longer maturities than our liabilities, consisting primarily of deposits and borrowings. As a result, a principal part of our business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Accordingly, our Board of Directors has approved guidelines for managing the interest rate risk inherent in our assets and liabilities, given our business strategy, operating environment, capital, liquidity and performance objectives. Senior management monitors the level of interest rate risk on a regular basis and the asset/liability committee meets quarterly to review our asset/liability policies and interest rate risk position. We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates.

Net interest income, which is the primary source of the Company’s earnings, is impacted by changes in interest rates and the relationship of different interest rates. To manage the impact of the rate changes, the balance sheet should be structured so that repricing opportunities exist for both assets and liabilities at approximately the same time intervals. The Company uses net interest simulation to assist in interest rate risk management. The process includes simulating various interest rate environments and their impact on net interest income. As of September 30, 2024, the level of net interest income at risk in a 200 basis points increase or a 200 basis point decrease was within the Company’s policy limit of a decline less than 10% of net interest income.

The following table sets forth the results of the twelve month projected net interest income model as of September 30, 2024.


	Net Interest Income
Change in Interest Rates in Basis Points (Rate Shock)	Amount $		Change $			Change (%)
	(Dollars in thousands)

-400		60,133		(182	)		(0.3	)
-300		60,728		413			0.7
-200		60,760		445			0.7
-100		60,745		430			0.7
Static		60,315		-			-
+100		59,732		(583	)		(1.0	)
+200		58,710		(1,605	)		(2.7	)
+300		57,904		(2,411	)		(4.0	)
+400		57,053		(3,262	)		(5.4	)

The above table indicates that as of September 30, 2024, in the event of a 400 basis point instantaneous increase in interest rates, the Company would experience an 5.4%, or $3.3 million, decrease in net interest income. In the event of a 400 basis point decrease in interest rates, the Company would experience a 0.3%, or $182,000, decrease in net interest income.

Another measure of interest rate sensitivity is to model changes in the economic value of equity through the use of immediate and sustained interest rate shocks. The following table illustrates the economic value of equity model results as of September 30, 2024.


	Economic Value of Equity
Change in Interest Rates in Basis Points	Amount $		Change $			Change (%)
	(Dollars in thousands)
-400		215,286		(43,674	)		(16.9	)
-300		258,944		(16	)		(0.0	)
-200		267,303		8,343			3.2
-100		267,414		8,454			3.3
Flat		258,960		-			-
+100		246,902		(12,058	)		(4.7	)
+200		229,340		(29,620	)		(11.4	)
+300		214,038		(44,922	)		(17.3	)
+400		198,568		(60,392	)		(23.3	)

The preceding table indicates that as of September 30, 2024, in the event of an immediate and sustained 400 basis point increase in interest rates, the Company would experience a 23.3%, or $60.4 million, decrease in the present value of equity. If rates were to decrease 400 basis points, the Company would experience a 16.9%, or $43.7 million, decrease in the present value of equity.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes in net interest income requires the making of certain assumptions regarding prepayment and deposit decay rates, which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. While management believes such assumptions are reasonable, there can be no assurance that assumed prepayment rates and decay rates will approximate actual future loan prepayment and deposit withdrawal activity. Moreover, the net interest income table presented assumes that the composition of interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the net interest income table provides an indication of the Company’s interest rate risk exposure at a particular point in time, such measurement is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on net interest income and will differ from actual results.

Liquidity and Capital Resources

We maintain liquid assets at levels we consider adequate to meet both our short-term and long-term liquidity needs. We adjust our liquidity levels to fund deposit outflows, repay our borrowings and to fund loan commitments. We also adjust liquidity as appropriate to meet asset and liability management objectives.

Our primary sources of liquidity are deposits, amortization and prepayment of loans and mortgage-backed securities, maturities of investment securities and other short-term investments, and earnings and funds provided from operations, as well as

access to FHLB advances and other borrowings. While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competition. We set the interest rates on our deposits to maintain a desired level of total deposits.

A portion of our liquidity consists of cash and cash equivalents and borrowings, which are a product of our operating, investing and financing activities. At September 30, 2024, $48.6 million of our assets were invested in cash and cash equivalents. Our primary sources of cash are principal repayments on loans, proceeds from the maturities of investment securities, principal repayments of mortgage-backed securities, increases in deposit accounts and borrowings. There were $9.3 million in short-term investment securities (maturing in one year or less) at September 30, 2024. As of September 30, 2024, we had $290 million in borrowings outstanding from the FHLB-Pittsburgh. We have access to FHLB advances of up to approximately $890.7 million.

At September 30, 2024, we had $418.1 million in loan commitments outstanding, which included $111.6 million in undisbursed construction loans, $57.5 million in unused home equity lines of credit, $75.7 million in commercial lines of credit and $173.3 million in other unused commitments. Certificates of deposit due within one year of September 30, 2024 totaled $462.4 million, or 79.4% of certificates of deposit. If these maturing deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before September 30, 2025. We believe, however, based on past experience that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

As reported in the Consolidated Statements of Cash Flows, our cash flows are classified for financial reporting purposes as operating, investing or financing cash flows. Net cash provided by operating activities was $15.1 million and $20.9 million for the years ended September 30, 2024 and 2023, respectively. These amounts differ from our net income because of a variety of cash receipts and disbursements that did not affect net income for the respective periods. Net cash provided by (used for) investing activities was $75.4 million and $(377.1) million in fiscal years 2024 and 2023, respectively, principally reflecting our loan and investment security activities in the respective periods. Cash proceeds from principal repayments, maturities and sales of investment securities amounted to $171.3 million and $26.2 million in the years ended September 30, 2024 and 2023, respectively. Deposit and borrowing cash flows have traditionally comprised most of our financing activities which resulted in net cash (used for) provided by financing activities of $(127.3) million in fiscal year 2024, and $413.7 million in fiscal year 2023.

We also have obligations under our post retirement plan as described in Note 11 to the Consolidated Financial Statements. The post retirement benefit payments represent actuarially determined future payments to eligible plan participants. We froze our pension plan in fiscal year 2017.

Off-Balance Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. For information about our loan commitments, letters of credit and unused lines of credit, see Note 9 of the notes to the Consolidated Financial Statements. The Company also uses derivative financial instruments to manage interest rate risk. For information about the Company’s derivatives and hedging activities, see Note 16 of the notes to the Consolidated Financial Statements.

For fiscal year 2024, we did not engage in any off-balance-sheet transactions other than loan origination commitments and standby letters of credit in the normal course of our lending activities. The Company used derivative financial instruments as part of its interest rate hedging activities in 2024.

Impact of Inflation and Changing Prices

The financial statements and related notes of the Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

For information regarding market risk, see “Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operation.”

Item 8. Financial Statements and Supplementary Data

The Financial Statements are included in Part IV, Item 15 of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not Applicable.

Item 9A. Controls and Procedures

(a)

Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of our management, including our Principle Executive Officer and Principle Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the fiscal year (the “Evaluation Date”). Based upon that evaluation, the Principle Executive Officer and Principle Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.

(b)

Changes in internal controls.

There were no changes in our internal control over financial reporting that occurred during the fourth quarter of fiscal 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

(c)

Management report on internal control over financial reporting.

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system is a process designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of ESSA Bancorp; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of ESSA Bancorp’s assets that could have a material effect on our financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

ESSA Bancorp, Inc.’s management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2024. In making this assessment, we used the criteria set forth in 2013, by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on our assessment we believe that, as of September 30, 2024, the Company’s internal control over financial reporting is effective based on those criteria.

The Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company's registered public accounting firm pursuant to exemption rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this Annual Report on Form 10-K.

The Sarbanes-Oxley Act Section 302 Certifications have been filed with the SEC as Exhibit 31.1 and Exhibit 31.2 to this Annual Report on Form 10-K.

Item 9B. Other Information

Rule 10b5-1 Trading Plans

During the quarter ended September 30, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information regarding the Company’s insider trading policy and the directors, executive officers and corporate governance of the Company is presented under the headings “Proposal 1 — Election of Directors,” “— Directors and Executive Officers,” “— Corporate Governance and Code of Ethics and Business Conduct” and “— Board Meetings and Committees” in the Company’s definitive Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the Company’s fiscal year end (the “Proxy Statement”) and is incorporated herein by reference.

Item 11. Executive Compensation

Information regarding executive compensation is presented under the headings “Compensation Matters” “— Summary Compensation Table,” “— Other Benefit Plans and Agreements,” and “— Director Compensation” in the Proxy Statement and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information regarding security ownership of certain beneficial owners and management is presented under the heading “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement and is incorporated herein by reference.

Securities Authorized for Issuance Under Equity Compensation Plans

Set forth below is information, as of September 30, 2024 regarding equity compensation plans categorized by those plans that have been approved by stockholders and those plans that have not been approved by stockholders.


Plan	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans
Equity compensation plans approved by stockholders		—	$	—		202,090
Equity compensation plans not approved by stockholders		—		—		—
Total		—	$	—		202,090

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information regarding certain relationships and related transactions, and director independence is presented under the heading “Proposal I — Election of Directors” “— Director Independence” and “— Transactions with Certain Related Persons” in the Proxy Statement and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

Information regarding principal accounting fees and services is presented under the heading “Proposal II — Ratification of the Appointment of Independent Registered Public Accountants” in the Proxy Statement and is incorporated herein by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)(1) Financial Statements

The following documents are filed as part of this Annual Report on Form 10-K.

(A)

Report on Management’s Assessment of Internal Control over Financial Reporting

(B)

Report of Independent Registered Public Accounting Firm

(C)

Consolidated Balance Sheet - at September 30, 2024 and 2023

(D)

Consolidated Statement of Income - Years ended September 30, 2024 and 2023

(E)

Consolidated Statement of Comprehensive Income (Loss) – Years ended September 30, 2024 and 2023

(F)

Consolidated Statement of Changes in Stockholders’ Equity - Years ended September 30, 2024 and 2023

(G)

Consolidated Statement of Cash Flows - Years ended September 30, 2024 and 2023

(H)

Notes to the Consolidated Financial Statements

(a)(2) Financial Statement Schedules

None.(a)(3) Exhibits


3.1		Articles of Incorporation of ESSA Bancorp, Inc.(1)

3.2		Bylaws of ESSA Bancorp, Inc.(1)

4.1		Form of Common Stock Certificate of ESSA Bancorp, Inc.(1)

4.2		Description of Capital Stock of ESSA Bancorp, Inc.(2)

10.1		Amended and Restated Employment Agreement between ESSA Bancorp, Inc., ESSA Bank & Trust and Gary S. Olson dated April 23, 2013(3)

10.2		Amended and Restated Employment Agreement between ESSA Bancorp, Inc., ESSA Bank & Trust and Allan A. Muto dated January 3, 2022(4)

10.3		Amended and Restated Employment Agreement between ESSA Bancorp, Inc., ESSA Bank & Trust and Peter A. Gray dated January 3, 2022(4)

10.4		Amended and Restated Employment Agreement between ESSA Bancorp, Inc., ESSA Bank & Trust and Charles D. Hangen dated January 3, 2022(4)

10.5		Supplemental Executive Retirement Plan(5)

10.6		Endorsement Split Dollar Life Insurance Agreement for Gary S. Olson(5)

10.7		Endorsement Split Dollar Life Insurance Agreement for Allan A. Muto(5)

10.8		Endorsement Split Dollar Life Insurance Agreement for Charles D Hangen(5)

10.9		Endorsement Split Dollar Life Insurance Agreement for Ms. Weekes and Messrs. Henning, Kutteroff, Selig, and Regan(5)

10.10		ESSA Bancorp, Inc. 2016 Equity Incentive Plan(6)

10.11		ESSA Bank & Trust Performance Based Long-Term Incentive Plan(7)

10.12		ESSA Bank & Trust Amended and Restated Executive/Management Annual Incentive Compensation Plan(8)

19.1		ESSA Bancorp, Inc. Policies and Procedures Regarding Insider Trading and the Confidentiality of Information

21		Subsidiaries of Registrant

23		Consent of S.R. Snodgrass, P.C.

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97		ESSA Bank and Trust Clawback Plan(9)

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents

104		Cover Page Interactive data File (formatted as Inline XBRL and contained in Exhibit 101)

Incorporated by reference to the Registration Statement on Form S-1 of ESSA Bancorp, Inc. (file no. 333-139157), originally filed with the Securities and Exchange Commission on December 7, 2006.

Incorporated by reference to Exhibit 4.2 of ESSA Bancorp, Inc.’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 14, 2020.

Incorporated by reference to ESSA Bancorp, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 1, 2013.

Incorporated by reference to ESSA Bancorp, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 2022.

Incorporated by reference to ESSA Bancorp, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 6, 2008.

Incorporated by reference to Appendix A to the Proxy Statement for the Annual Meeting of Stockholders of ESSA Bancorp, Inc. (file no. 001-33384), filed by ESSA Bancorp, Inc. under the Exchange Act on January 26, 2016.

Incorporated by reference to ESSA Bancorp, Inc’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 16, 2019.

Incorporated by reference to ESSA Bancorp, Inc’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 14, 2021.

Incorporated by reference to ESSA Bancorp, Inc’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 14, 2023.

Item 16. Form 10-K Summary

None.

ESSA BANCORP, INC. AND SUBSIDIARY

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024


		Page Number

Report on Management’s Assessment of Internal Control Over Financial Reporting		F-1

Report of Independent Registered Public Accounting Firm on Financial Statements (PCAOB ID 00074)		F-2

Financial Statements

Consolidated Balance Sheet		F-4

Consolidated Statement of Income		F-5

Consolidated Statement of Comprehensive Income		F-6

Consolidated Statement of Changes in Stockholders’ Equity		F-7

Consolidated Statement of Cash Flows		F-8

Notes to the Consolidated Financial Statements		F-10

REPORT ON MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL

OVER FINANCIAL REPORTING

ESSA Bancorp, Inc. (the “Company”) is responsible for the preparation, integrity, and fair presentation of the consolidated financial statements included in this annual report. The consolidated financial statements and notes included in this annual report have been prepared in conformity with United States generally accepted accounting principles and necessarily include some amounts that are based on management’s best estimates and judgments.

We, as management of the Company, are responsible for establishing and maintaining effective internal control over financial reporting that is designed to produce reliable financial statements in conformity with United States generally accepted accounting principles. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

Management assessed the Company’s system of internal control over financial reporting as of September 30, 2024, in relation to criteria for effective internal control over financial reporting as described in “Internal Control — Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this assessment, management concludes that, as of September 30, 2024, its system of internal control over financial reporting is effective and meets the criteria of the “Internal Control — Integrated Framework”.

    /s/ Gary S. Olson 

   

    Gary S. Olson

   

    President and Chief Executive Officer

   

    /s/ Allan A. Muto 

   

    Allan A. Muto

   

    Executive Vice President and Chief Financial Officer

   

December 13, 2024

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of ESSA Bancorp, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of ESSA Bancorp, Inc. and subsidiary (the “Company”) as of September 30, 2024 and 2023; the related consolidated statement of income, comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended; and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company changed its method of accounting for credit losses effective October 1, 2023, due to the adoption of Accounting Standards Codification (ASC) Topic 326, Financial Instruments – Credit Losses.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent, with respect to the Company, in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


PITTSBURGH, PA	PHILADELPHIA, PA	WHEELING, WV	STEUBENVILLE, OH
2009 Mackenzie Way • Suite340	161 Washington Street • Suite 200	980 National Road	511 N. FourthStreet
Cranberry Township, PA 16066	Conshohocken, PA 19428	Wheeling, WV 26003	Steubenville, OH43952
(724) 934-0344	(610) 278-9800	(304) 233-5030	(304) 233-5030

S.R. Snodgrass, P.C. d/b/a S.R. Snodgrass, A.C. in West Virginia

F-2

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the Audit Committee and that: (1) relate to accounts or disclosures that are material to the financial statements; and (2) involve our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter, in any way, our opinion on the financial statements taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Credit Losses (ACL) – Qualitative Factors

Description of the Matter

The Company’s loan portfolio totaled $1.76 billion as of September 30, 2024, and the associated ACL was $15.3 million. As discussed in Notes 1 and 4 to the consolidated financial statements, estimating an appropriate allowance for credit losses requires management to make certain assumptions about expected losses on loans in the loan portfolio over their remaining contractual life as of the balance sheet date. The allowance for credit losses is measured on a collective pool basis when similar risk characteristics exist. Loans that do not share similar risk characteristics are evaluated on an individual basis, at the balance sheet date. The measurement of expected credit losses on collectively evaluated loans is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the amortized cost basis. Management applies qualitative adjustments to reflect the inherent losses that exist in the loan portfolio at the balance sheet date that are not reflected in the historical loss experience. Qualitative adjustments are made based upon changes in economic conditions, portfolio composition, and delinquent and classified trends.

We identified these qualitative adjustments within the ACL as critical audit matters because they involve a high degree of subjectivity. While the determination of these qualitative adjustments includes analysis of observable data over the historical loss period, the judgments required to assess the directionality and magnitude of adjustments is highly subjective. Auditing these complex judgments and assumptions involved especially challenging auditor judgment due to the nature of audit evidence and the nature and extent of effort required to address these matters.

How We Addressed the Matter in Our Audit

The primary procedures we performed to address this critical audit matter included:

•

Testing the design, implementation, and operating effectiveness of internal controls over the calculation of the allowance for credit losses, including the qualitative factor adjustments.

•

Testing the completeness and accuracy of the data inputs used by management as a basis for the qualitative factors by agreeing them to internal and external data sources.

•

Testing management’s process and evaluating the reasonableness of their inputs and assumptions by evaluating the reasonableness of the qualitative adjustments, including the magnitude and directional consistency of the adjustments.

We have served as the Company’s auditor since 2005.

S.R. Snodgrass, P.C.

Conshohocken, Pennsylvania

December 13, 2024

F-3

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET


	September 30,
	2024			2023
	(dollars in thousands)
ASSETS
Cash and due from banks	$	38,683		$	39,008
Interest-bearing deposits with other institutions		9,897			46,394
Total cash and cash equivalents		48,580			85,402
Investment securities available for sale, at fair value (net of allowance for credit losses of $0)		215,869			334,056
Investment securities held to maturity, at amortized cost (net of allowance for credit losses of $0)		47,378			52,242
Loans receivable (net of allowance for credit losses of $15,306 and $18,525)		1,744,284			1,680,525
Loans held for sale		-			250
Regulatory stock, at cost		18,750			17,890
Premises and equipment, net		11,253			12,913
Bank-owned life insurance		39,571			39,026
Foreclosed real estate		3,195			3,311
Intangible assets, net		-			91
Goodwill		13,801			13,801
Deferred income taxes		3,889			6,877
Derivative and hedging assets		8,203			19,662
Other assets		32,944			27,200
TOTAL ASSETS	$	2,187,717		$	2,293,246
LIABILITIES
Deposits	$	1,629,051		$	1,661,016
Short-term borrowings		280,000			374,652
Other borrowings		10,000			-
Advances by borrowers for taxes and insurance		6,870			6,550
Derivative and hedging liabilities		9,183			9,579
Other liabilities		22,192			21,741
TOTAL LIABILITIES		1,957,296			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; 10,123,708 and 10,394,689 outstanding at September 30, 2024 and 2023, respectively)		181			181
Additional paid-in capital		183,073			182,681
Unallocated common stock held by the Employee Stock Ownership Plan (“ESOP”)		(5,557	)		(6,009	)
Retained earnings		163,473			151,856
Treasury stock, at cost; 8,009,387 and 7,738,406 shares outstanding at September 30, 2024 and 2023, respectively		(104,184	)		(99,508	)
Accumulated other comprehensive loss		(6,565	)		(9,493	)
TOTAL STOCKHOLDERS’ EQUITY		230,421			219,708
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,187,717		$	2,293,246

See accompanying notes to the consolidated financial statements.

F-4

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME


	Years Ended September 30,
	2024			2023
	(dollars in thousands except per share data)
INTEREST INCOME
Loans receivable, including fees	$	87,688		$	73,329
Investment securities:
Taxable		11,752			9,834
Exempt from federal income tax		42			42
Other investment income		3,975			2,294
Total interest income		103,457			85,499
INTEREST EXPENSE
Deposits		33,322			17,399
Short-term borrowings		11,317			6,546
Other borrowings		539			-
Total interest expense		45,178			23,945
NET INTEREST INCOME		58,279			61,554
(Release of) provision for credit losses		(1,360	)		700
NET INTEREST INCOME AFTER (RELEASE OF) PROVISION FOR CREDIT LOSSES		59,639			60,854
NONINTEREST INCOME
Service fees on deposit accounts		2,808			3,075
Services charges and fees on loans		1,331			1,350
Loan swap fees		163			263
Unrealized loss on equity securities		(6	)		(4	)
Trust and investment fees		1,640			1,640
Loss on sale of investment securities, net		-			(121	)
Gain on sale of loans, net		375			172
Earnings on bank-owned life insurance		931			786
Insurance commissions		527			584
Other		435			161
Total noninterest income		8,204			7,906
NONINTEREST EXPENSE
Compensation and employee benefits		26,906			26,621
Occupancy and equipment		4,842			4,341
Professional fees		4,295			4,760
Data processing		5,399			4,910
Advertising		680			648
Federal Deposit Insurance Corporation (“FDIC”) premiums		1,638			1,078
Foreclosed real estate		101			231
Amortization of intangible assets		91			190
Other		2,929			2,911
Total noninterest expense		46,881			45,690
Income before income taxes		20,962			23,070
Income taxes		3,970			4,494
NET INCOME	$	16,992		$	18,576
Earnings per share:
Basic	$	1.78		$	1.91
Diluted	$	1.78		$	1.91
Dividends per share	$	0.60		$	0.60

See accompanying notes to the consolidated financial statements.

F-5

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


	Years Ended September 30,
	2024			2023
	(dollars in thousands)
Net income	$	16,992		$	18,576
Other comprehensive income (loss):
Investment securities available for sale:
Unrealized holding income (loss)		12,457			(4,737	)
Tax effect		(2,617	)		995
Reclassification of gains (losses) recognized in net income		-			121
Tax effect		-			(25	)
Net of tax amount		9,840			(3,646	)
Pension plan adjustment:
Unrealized holding gain		2,309			1,486
Tax effect		(484	)		(312	)
Reclassification adjustment related to actuarial gain		-			-
Tax effect		-			-
Net of tax amount		1,825			1,174
Derivative and hedging activities adjustments:
Changes in unrealized (loss) gain on derivative included in net income		(2,103	)		3,900
Tax effect		444			(821	)
Reclassification adjustment for gains on derivatives included in net income		(8,960	)		(9,122	)
Tax effect		1,882			1,916
Net of tax amount		(8,737	)		(4,127	)
Total other comprehensive income (loss)		2,928			(6,599	)
Comprehensive income	$	19,920		$	11,977

See accompanying notes to the consolidated financial statements.

F-6

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY


	Common Stock					Additional			Unallocated Common									Accumulated Other			Total
	Number of Shares			Amount		Paid-In Capital			Stock Held by the ESOP			Retained Earnings			Treasury Stock			Comprehensive Loss			Stockholders’ Equity
				(dollars in thousands except share and per share data)
Balance, September 30, 2022		10,371,022		$	181	$	182,173		$	(6,462	)	$	139,139		$	(99,800	)	$	(2,894	)		212,337
Net income													18,576									18,576
Other comprehensive loss																			(6,599	)		(6,599	)
Cash dividends declared ($0.60 per share)													(5,859	)								(5,859	)
Stock-based compensation							560															560
Allocation of ESOP stock							345			453												798
Allocation of treasury shares to incentive plan		23,667					(397	)								292						(105	)
Balance, September 30, 2023		10,394,689			181		182,681			(6,009	)		151,856			(99,508	)		(9,493	)		219,708
Net income													16,992									16,992
Other comprehensive income																			2,928			2,928
Cash dividends declared ($0.60 per share)													(5,905	)								(5,905	)
Cumulative effect of adoption of ASU 2016-13													530									530
Stock-based compensation							568															568
Allocation of ESOP stock							345			452												797
Allocation of treasury shares to incentive plan		32,628					(521	)								387						(134	)
Treasury shares purchased		(303,609	)													(5,063	)					(5,063	)

Balance, September 30, 2024		10,123,708		$	181	$	183,073		$	(5,557	)	$	163,473		$	(104,184	)	$	(6,565	)	$	230,421

See accompanying notes to the consolidated financial statements.

F-7

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS


	Years Ended September 30,
	2024			2023
	(dollars in thousands)
OPERATING ACTIVITIES
Net income	$	16,992		$	18,576
Adjustments to reconcile net income to net cash provided by operating activities:
(Release of) provision for credit losses		(1,360	)		700
Provision for depreciation and amortization		1,111			1,110
Amortization and accretion of discounts and premiums, net		(2,220	)		(1,390	)
Net loss on sale of investment securities		-			121
Compensation expense on ESOP		797			798
Stock-based compensation		568			560
Amortization of right-of-use-asset		903			815
Unrealized loss on equity securities		6			4
Gain on sale of loans, net		(375	)		(172	)
Origination of residential real estate loans for sale		(19,582	)		(13,031	)
Proceeds from sale of residential real estate loans		20,207			12,953
Increase in accrued interest receivable		(205	)		(3,282	)
(Decrease) increase in accrued interest payable		(724	)		4,993
Earnings on bank-owned life insurance		(879	)		(786	)
Deferred federal income taxes		2,069			252
Decrease in accrued pension liability		(357	)		(312	)
Loss on foreclosed real estate		101			231
Amortization of intangible assets		91			190
Other, net		(3,716	)		(1,470	)
Net cash provided by operating activities		13,427			20,860
INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from sale of investment securities		-			881
Proceeds from principal repayments and maturities		171,376			26,192
Purchases		(38,891	)		(156,233	)
Investment securities held to maturity:
Proceeds from principal repayments and maturities		4,793			4,961
Increase in loans receivable, net		(59,196	)		(248,502	)
Redemption of regulatory stock		22,383			31,425
Purchase of regulatory stock		(23,243	)		(34,922	)
Proceeds from sale of foreclosed real estate		15			33
Purchase of premises, equipment, and software		(221	)		(955	)
Net cash provided by (used for) investing activities		77,016			(377,120	)
FINANCING ACTIVITIES
Decrease (increase) in deposits, net		(31,965	)		280,995
Net (decrease) increase in short-term borrowings		(94,652	)		143,842
Proceeds from other borrowings		10,000			-
Increase (decrease) in advances by borrowers for taxes and insurance		320			(5,253	)
Purchase of common stock		(5,063	)		-
Dividends on common stock		(5,905	)		(5,859	)
Net cash (used for) provided by financing activities		(127,265	)		413,725
(Decrease) increase in cash and cash equivalents		(36,822	)		57,465
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		85,402			27,937
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	48,580		$	85,402

See accompanying notes to the consolidated financial statements.

F-8

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)

SUPPLEMENTAL CASH FLOW DISCLOSURES


	Years Ended September 30,
	2024		2023
	(dollars in thousands)
Cash paid:
Interest	$	45,902	$	18,952
Income taxes		3,260		3,600
Noncash items:
Transfers from loans to foreclosed real estate		-		3,546
Initial recognition of operating right-of-use asset		554		840
Initial recognition of operating lease liability		554		840
Unrealized holding gian (loss) on investment securities available for sale		12,457		(4,616	)

See accompanying notes to the consolidated financial statements.

F-9

ESSA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting and reporting policies applied in the presentation of the accompanying financial statements follows:

Nature of Operations and Basis of Presentation

The consolidated financial statements include the accounts of ESSA Bancorp, Inc. (the “Company”), its wholly owned subsidiary, ESSA Bank & Trust (the “Bank”), and the Bank’s wholly owned subsidiaries, ESSACOR Inc.; Pocono Investments Company; ESSA Advisory Services, LLC; Integrated Financial Corporation; and Integrated Abstract Incorporated, a wholly owned subsidiary of Integrated Financial Corporation. The primary purpose of the Company is to act as a holding company for the Bank. The Bank’s primary business consists of the taking of deposits and granting of loans to customers generally in Monroe, Northampton, Lehigh, Lackawanna, Luzerne, Delaware, Chester, and Montgomery counties, Pennsylvania. The Bank is subject to regulation and supervision by the Pennsylvania Department of Banking and Securities and the Federal Deposit Insurance Corporation. The investment in subsidiary on the parent company’s financial statements is carried at the parent company’s equity in the underlying net assets.

ESSACOR, Inc. is a Pennsylvania corporation that has been used to purchase properties at tax sales that represent collateral for delinquent loans of the Bank. Pocono Investment Company is a Delaware corporation formed as an investment company subsidiary to hold and manage certain investments, including certain intellectual property. ESSA Advisory Services, LLC is a Pennsylvania limited liability company owned 100 percent by ESSA Bank & Trust. ESSA Advisory Services, LLC is a full-service insurance benefits consulting company offering group services such as health insurance, life insurance, short-term and long-term disability, dental, vision, and 401(k) retirement planning as well as individual health products. Integrated Financial Corporation is a Pennsylvania Corporation that provided investment advisory services to the general public and is currently inactive. Integrated Abstract Incorporated is a Pennsylvania Corporation that provided title insurance services and is currently inactive. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates in the Preparation of Financial Statements

The accounting principles followed by the Company and its subsidiary and the methods of applying these principles conform to U.S. generally accepted accounting principles and to general practice within the banking industry. In preparing the consolidated financial statements, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the Consolidated Balance Sheet date and related revenues and expenses for the period. Actual results could differ from those estimates.

Securities

The Company determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date.

Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors.

Securities available for sale are carried at fair value. Unrealized gains and losses are reported in other comprehensive income (loss), net of the related deferred tax effects. Realized gains or losses, determined on the basis of the cost of the specific securities sold, are included in earnings. Premiums and discounts are recognized in interest income using the interest method over the period to maturity.

F-10

Securities classified as held-to-maturity are those that the Company has the positive intent and ability to hold until maturity. These securities are reported at amortized cost.

Prior to adopting ASU 2016-13, declines in the fair value of securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, the Company considers: (1) the length of time and the extent to which the fair value has been less than cost; (2) the financial condition and near-term prospects of the issuer; and (3) the Company’s intent to sell the security or whether it’s more likely than not that the Company would be required to sell the security before its anticipated recovery in market value.

The fair market value of the equity securities tends to fluctuate with the overall equity markets as well as the trends specific to each institution. The equity securities portfolio is reviewed in a similar manner as that of the debt securities with greater emphasis placed on the length of time the market value has been less than the carrying value and the financial sector outlook. The Company also reviews dividend payment activities, levels of non-performing assets and loan loss reserves. The starting point for the equity analysis is the length and severity of market value decline. The realized loss is recognized as impairment charges on securities on the consolidated statements of income. The previous cost basis less the OTTI recognized in earnings becomes the new cost basis of the investment.

Certain equity securities that do not have a readily determinable fair value are stated at cost, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. These securities include restricted stock of the Federal Home Loan Bank of Pittsburgh, as well as other equity securities.

Allowance for Credit Losses – Available for Sale Securities

The Bank measures expected credit losses on available-for-sale debt securities when the Bank does not intend to sell, or when it is not more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, the Bank evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Bank considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

The allowance for credit losses on available-for-sale debt securities is included within Investment securities available-for-sale on the consolidated balance sheet. Changes in the allowance for credit losses are recorded within Provision for credit losses on the consolidated statement of income. Losses are charged against the allowance when the Bank believes the collectability of an available-for-sale security is in jeopardy or when either of the criteria regarding intent or requirement to sell is met.

Available-for-sale debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed.

Allowance for Credit Losses - Held to Maturity Securities:

The Bank's held-to-maturity debt securities portfolio consistes entirely of mortgage-backed securities issued by U.S. government entities and agencies These securities are highly rated with a history of no credit losses, and are assigned ratings based on the most recent data from ratings agencies depending on the availability of data for the security. Credit ratings of held-to-maturity debt securities, which are a significant input in calculating the expected credit loss, are reviewed on a quarterly basis. Based on the credit ratings of our held-to-maturity securities and our historical experience including no losses, we have determined that an allowance for credit loss on the held-to-maturity portfolio is not required.
Accrued interest receivable on held-to-maturity debt securities is excluded from the estimate of credit losses and is included in Accrued interest receivable on the Consolidated Statements of Financial Condition.

F-11

Loans Receivable

Loans receivable that the Company has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for credit losses and any deferred fees and costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Company is generally amortizing these amounts over the contractual life of the loan.

The accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or the Company has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income is reversed. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to the Company’s judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current and has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Loans Acquired

Prior to adopting ASU 2016-13 loans acquired were recorded as follows. Loans acquired including loans that have evidence of deterioration of credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments receivable, are initially recorded at fair value (as determined by the present value of expected future cash flows) with no valuation allowance. Loans are evaluated individually to determine if there is evidence of deterioration of credit quality since origination. The difference between the undiscounted cash flows expected at acquisition and the investment in the loan, or the “accretable yield,” is recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “non-accretable difference,” are not recognized as a yield adjustment or as a loss accrual or a valuation allowance. Increases in expected cash flows subsequent to the initial investment are recognized prospectively through adjustment of the yield on the loan over its remaining estimated life. Decreases in expected cash flows are recognized immediately as impairment. Any valuation allowances on these impaired loans reflect only losses incurred after acquisition.

For purchased loans acquired that are not deemed impaired at acquisition, credit discounts representing the principal losses expected over the life of the loan are a component of the initial fair value. Loans are aggregated and accounted for as a pool of loans if the loans being aggregated have common risk characteristics. Subsequent to the purchase date, the methods utilized to estimate the required allowance for credit losses for these loans is similar to originated loans; however, the Company records a provision for loan losses only when the required allowance exceeds any remaining credit discounts. The remaining differences between the purchase price and the unpaid principal balance at the date of acquisition are recorded in interest income over the life of the loans.

Allowance for Credit Losses

The following discussion is regarding the critical accounting estimates related to the application of current expected credit losses ("CECL"), which was adopted on October 1, 2023.

The allowance for credit losses (ACL) represents an amount which, in management’s judgment, is adequate to absorb expected credit losses on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics ot the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions and prepayment experience. The ACL is measured on a collective (pooled) basis for loan segments that share similar risk characteristics, including collateral type, credit ratings/scores, size, duration, interest rate structure, origination vintage and payment structure. The Company utilizes the discounted cash flow method for calculating the ACL. Qualitative adjustments are made for differences in loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, acquisition status, current levels of delinquencies, net charge-offs and risk ratings, as well as actual and forecasted macroeconomic variables. Macroeconomic data includes unemployment rates, changes in collateral values such as home prices and commercial real estate prices, gross domestic product and other relevant factors. Management utilizes judgment in determining and applying the qualitative factors and weighting the economic scenarios used, which include baseline, upside and downside forecasts. The ACL is reduced by charge-offs, net of recoveries of previous losses, and is increased or decreased by a provision for credit losses, which is recorded as a current period operating expense. Specific credit loss allowances are established for identified losses based on a review of such information. A loan evaluated for credit loss is considered to be have a credit loss when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. All loans identified as having a credit loss are evaluated independently. We do not aggregate such loans for evaluation purposes

F-12

Allowance for Loan Losses

Prior to adopting ASU 2016-13, the allowance for loan losses was established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance for loan losses.

The allowance for loan losses is maintained at a level by management which represents the evaluation of known and inherent risks in the loan portfolio at the Consolidated Balance Sheet date. Management’s periodic evaluation of the adequacy of the allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions, and other relevant factors. This evaluation is inherently subjective, since it requires material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows expected to be received on impaired loans.

The allowance for loan losses consists of specific and general components. The specific component relates to loans that are classified as impaired. For such loans an allowance for loan losses is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical loss experience adjusted for qualitative factors.

All loans are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement and all loan types are considered impaired if the loan is restructured in a troubled debt restructuring. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral-dependent.

Large groups of smaller-balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential mortgage loans for impairment disclosures unless such loans are part of a larger relationship that is impaired or classified as a troubled debt restructuring or is more than 180 days past due.

A loan is considered to be a troubled debt restructuring (“TDR”) loan when the Company grants a concession to the borrower because of the borrower’s financial condition that it would not otherwise consider. Such concessions include the reduction of interest rates, forgiveness of principal or interest, or other modifications of interest rates that are less than the current market rate for new obligations with similar risk. TDR loans that are in compliance with their modified terms and that yield a market rate may be removed from the TDR status after one year of performance.

Regulatory Stock

Regulatory stock consists of Federal Home Loan Bank (“FHLB”) of Pittsburgh stock and Atlantic Community Bankers Bank stock. Regulatory stock is carried at cost. The Company is a member of the Federal Home Loan Bank System and holds stock in the Federal Home Loan Bank of Pittsburgh. As a member, the Company maintains an investment in the capital stock of the FHLB of Pittsburgh in an amount not less than 10 basis points of the outstanding member asset value plus 4.0 percent of its outstanding FHLB borrowings, as calculated throughout the year. The equity security is accounted for at cost and classified

F-13

separately on the Consolidated Balance Sheet. The stock is bought from and sold to the FHLB based upon its $100 par value. The stock does not have a readily determinable fair value and as such is classified as restricted stock, carried at cost and evaluated by management. The stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. The determination of whether the par value will ultimately be recovered is influenced by criteria such as the following: (a) The significance of the decline in net assets of the FHLB as compared to the capital stock amount and the length of time this situation has persisted; (b) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance; (c) the impact of legislative and regulatory changes on the customer base of the FHLB; and (d) the liquidity position of the FHLB. With consideration given to these factors, management concluded that the stock was not impaired at September 30, 2024.

Loan Servicing

Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based upon a third-party appraisal. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance to the extent that fair value is less than the capitalized amount. The Company’s loan servicing assets at September 30, 2024 and 2023, were not impaired. Total servicing assets included in other assets as of September 30, 2024 and 2023, were $1.1 million and $874,000, respectively.

Premises and Equipment

Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the useful lives of the related assets, which range from 10 to 40 years for buildings, land improvements, and leasehold improvements and three to seven years for furniture, fixtures, and equipment. Expenditures for maintenance and repairs are charged to operations as incurred. Costs of major additions and improvements are capitalized.

Derivative Instruments and Hedging Activities

The Company records all derivatives on the Consolidated Balance Sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

In accordance with the FASB’s fair value measurement guidance, the Company has elected to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Bank-Owned Life Insurance (“BOLI”)

The Company owns insurance on the lives of a certain group of key employees. The policies were purchased to help offset the increase in the costs of various fringe benefit plans, including healthcare. The cash surrender value of these policies is included as an asset on the Consolidated Balance Sheet, and any increase in cash surrender value is recorded as noninterest income on the Consolidated Statement of Income. In the event of the death of an insured individual under these policies, the Company would receive a death benefit which would be recorded as noninterest income.

Foreclosed Real Estate

Real estate owned acquired in settlement of foreclosed loans is carried at fair value minus estimated costs to sell. At acquisition of real estate acquired in settlement of foreclosed loans, the excess of the remaining loan balance over the asset’s estimated fair value less cost to sell is charged off against the allowance for credit losses. Subsequent declines in the asset’s value are

F-14

recognized as noninterest expense in the Consolidated Statement of Income. Operating expenses of such properties, net of related income, are expensed in the period incurred.

Goodwill and Intangible Assets

Goodwill is not amortized, but it is tested at least annually for impairment in the fourth quarter, or more frequently if indicators of impairment are present. If the estimated current fair value of a reporting unit exceeds its carrying value, no additional testing is required and an impairment loss is not recorded. The Company uses market capitalization and multiples of tangible book value methods to determine the estimated current fair value of its reporting unit. Based on this analysis, no impairment was recorded in 2024 or 2023.

The other intangible assets are assigned useful lives, which are amortized on an accelerated basis over their weighted-average lives. The Company periodically reviews intangible assets for impairment as events or changes in circumstances indicate that the carrying amount of such asset may not be recoverable. Based on these reviews, no impairment was recorded in 2024 and 2023.

The following tables provide information for the carrying amount of goodwill and intangible assets (in thousands):


Goodwill	2024		2023
Balance at beginning of year	$	13,801	$	13,801
Goodwill acquired		-		-
Balance at end of year	$	13,801	$	13,801


Intangible assets	2024			2023
Balance at beginning of year	$	91		$	281
Intangible assets acquired		-			-
Amortization		(91	)		(190	)
Balance at end of year	$	-		$	91

Amortizable intangible assets were composed of the following (in thousands):


			September 30,
			2024		2023
	Gross Carrying Amount		Accumulated Amortization
	(dollars in thousands)
Core deposit intangible	$	4,787	$	4,787	$	4,696


	2024		2023
Aggregate amortization expense:
As of the years ended September 30	$	91	$	190

Employee Benefit Plans

The Bank maintains a noncontributory, defined benefit pension plan for all employees who have met age and length of service requirements. The Bank also maintains a defined contribution Section 401(k) plan covering eligible employees. The Company created an ESOP for the benefit of employees who meet certain eligibility requirements. The Company makes cash contributions to the ESOP on an annual basis.

The Company maintains an equity incentive plan to provide for issuance or granting of shares of common stock for stock options or restricted stock. The Company has recorded stock-based employee compensation cost using the fair value method as allowed under generally accepted accounting principles. Management estimated the fair values of all option grants using the Black-Scholes option-pricing model. Management estimated the expected life of the options using the simplified method as allowed under generally accepted accounting principles. The risk-free rate was determined utilizing the treasury yield for the expected life of the option contract.

Advertising Costs

The Company expenses all advertising expenditures incurred.

F-15

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company; (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Income Taxes

Deferred tax assets and liabilities are reflected based on the differences between the financial statement and the income tax basis of assets and liabilities using the enacted marginal tax rates. Deferred income tax expense and benefit are based on the changes in the deferred tax assets or liabilities from period to period. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which such items are expected to be realized or settled. As changes in tax rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. The Company files a consolidated federal income tax return and individual state income tax returns.

The Company prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met.

Cash and Cash Equivalents

The Company has defined cash and cash equivalents as cash and due from banks and interest-bearing deposits with other institutions with original maturities of less than 90 days.

Earnings Per Share

The Company provides dual presentation of basic and diluted earnings per share. Basic earnings per share are calculated utilizing net income as reported as the numerator and average shares outstanding as the denominator. The computation of diluted earnings per share differs in that the dilutive effects of any options are adjusted for in the denominator.

Comprehensive Income (Loss)

The Company is required to present comprehensive income (loss) and its components in a full set of general-purpose financial statements for all periods presented. Other comprehensive income (loss) is composed of net unrealized holding gains or losses on its available-for-sale investment and mortgage-backed securities portfolio and derivative instruments, and changes in unrecognized pension cost.

Fair Value Measurements

The Company groups assets and liabilities carried at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

•

Level I – Valuation is based upon quoted prices for identical instruments traded in active markets.

•

Level II – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

•

Level III – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset.

The Company determines fair value based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is our policy to maximize the use of observable

F-16

inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy in generally accepted accounting principles.

Fair value measurements for most of the Company’s assets are obtained from independent pricing services that we have engaged for this purpose. When available, the Company, or the Company’s independent pricing service, use quoted market prices to measure fair value. If market prices are not available, fair value measurement is based upon models that incorporate available trade, bid, and other market information. Subsequently, all of the Company’s financial instruments use either of the foregoing methodologies to determine fair value adjustments recorded to our financial statements. In certain cases, however, when market observable inputs for model-based valuation techniques may not be readily available, we are required to make judgments about assumptions market participants would use in estimating the fair value of financial instruments. The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market parameters. For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. When observable market prices and parameters are not fully available, management judgment is necessary to estimate fair value. In addition, changes in the market conditions may reduce the availability of quoted prices or observable data. When market data is not available, we use valuation techniques requiring more management judgment to estimate the appropriate fair value measurement. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, that could significantly affect the results of current or future valuations.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

The Company estimates expected credit losses over the contractual period in which it is exposed to credit risk on contractual obligations to extend credit, unless the obligation is unconditionally cancellable by the Company. The allowance for credit losses on lending-related commitments is recorded in other liabilities in the consolidated balance sheet and is recorded as a provision for credit losses in the consolidated income statement. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives. The lifetime loss rates for off-balance sheet credit exposures are calculated in the same manner as on-balance sheet credit exposures, using the same model and economic forecasts, adjusted for the estimated likelihood that funding will occur.

Reclassification of Comparative Amounts

Certain items previously reported have been reclassified to conform to the current year’s reporting format. Such reclassifications did not affect consolidated net income or consolidated stockholders’ equity.

Accounting Pronouncements Recently Adopted

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and subsequent related updates. This ASU replaces the incurred loss methodology for recognizing credit losses and requires the Company to measure the current expected credit losses (CECL) on financial assets measured at amortized cost, including loans, held to maturity investment securities, off-balance sheet credit exposures such as unfunded commitments, and other financial instruments. In addition, ASC 326 requires credit losses on available-for-sale debt securities to be presented as an allowance rather than as a write-down when management does not intend to sell or believes that it is not more likely than not they will be required to sell. This guidance became effective on October 1, 2023 for the Bank. The results reported for periods beginning after October 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable accounting standards.

The Company adopted this guidance, and subsequent related updates, using the modified retrospective approach for all financial assets measured at amortized cost, including loans, held to maturity debt securities and unfunded commitments. As a result the allowance for credit losses related to loans was decreased by $2,755,000. No reserve was required for investment securities held to maturity. The Company also recorded a reserve for unfunded commitments of $2,083,000. The corresponding increase to retained earnings as a result of these reserve changes was $672,000, before taxes and $530,000, net of tax.

The Company adopted the provisions of ASC 326 related to presenting other-than-temporary impairment on available-for-sale debt securities prior to October 1, 2023 using the prospective transition approach, though no such charges had been recorded on the securities held by the Company as of the date of adoption.

F-17

The impact of the change from the incurred loss model to the current expected credit loss model is detailed below (in thousands).


	October 1, 2023
	Pre-adoption		Adoption Impact			As Reported
Assets
ACL on debt securities held-to-maturity	$	-	$	-		$	-
ACL on debt securities available for sale		-		-			-
Real estate loans:
Residential		4,897		503			5,400
Construction		183		254			437
Commercial		11,983		(3,729	)		8,254
Commercial		941		(292	)		649
Obligations of states and political subdivisions		110		129			239
Home equity loans and lines of credit		346		423			769
Auto loans		2		2			4
Other		22		(4	)		18
Unallocated		41		(41	)		-
Liabilites
ACL for unfunded commitments		52		2,083			2,135
	$	18,577	$	(672	)	$	17,905

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (ASC 326): Troubled Debt Restructurings (TDRs) and Vintage Disclosures. The guidance amends ASC 326 to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a new loan or continuation of existing loan. These amendments are intended to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, the amendments to ASC 326 require that an entity disclose current-period gross writeoffs by year of origination within the vintage disclosures, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. The guidance is only for entities that have adopted the amendments in Update 2016-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption using prospective application, including adoption in an interim period where the guidance should be applied as of the beginning of the fiscal year. The Company adopted this guidance on October 1, 2023.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Public entities are required to adopt the changes retrospectively, recasting each prior-period disclosure for which a comparative income statement is presented in the period of adoption. This Update is not expected to have a significant impact on the Company’s financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides for improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This ASU is effective for public business entities for annual period beginning after December 15, 2024. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2024, the FASB issued ASU 2024-01, Compensation – Stock Compensation (Topic 718), amended the guidance in ASC 718 to add an example showing how to apply the scope guidance to determine whether profits interest and similar awards should be accounted for as share-based payment arrangements. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. For all other entities, it is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

F-18

EARNINGS PER SHARE

The following table sets forth the composition of the weighted-average common shares (denominator) used in the basic and diluted earnings per share computation for the years ended September 30, 2024 and 2023.


	2024			2023
Weighted-average common shares outstanding		18,133,095			18,133,095
Average treasury stock shares		(7,966,827	)		(7,732,056	)
Average unearned ESOP shares		(586,633	)		(631,882	)
Average unearned nonvested shares		(46,913	)		(43,953	)
Weighted-average common shares and common stock equivalents used to calculate basic earnings per share		9,532,722			9,725,204
Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share		-			-
Additional common stock equivalents (stock options) used to calculate diluted earnings per share		-			-
Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share		9,532,722			9,725,204

At September 30, 2024, there were 8,938 shares of nonvested stock outstanding at an average weighted price of $18.45 per share that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive. At September 30, 2023 there were 11,588 shares of nonvested stock outstanding at an average weighted price of $16.54 per share that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive.

INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, allowance for credit losses and fair value of investment securities are summarized as follows (in thousands):


	2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Allowance for Credit Losses		Fair Value
Available for sale
Fannie Mae	$	55,287	$	342	$	(2,604	)	$	-	$	53,025
Freddie Mac		54,075		157		(1,770	)		-		52,462
Governmental National Mortgage Association securities		16,860		214		(336	)		-		16,738
Total mortgage-backed securities		126,222		713		(4,710	)		-		122,225
Obligations of states and political subdivisions		9,025		-		(234	)		-		8,791
U.S. government agency securities		6,280		5		(19	)		-		6,266
Corporate obligations		76,262		51		(5,196	)		-		71,117
Other debt securities		7,810		88		(428	)		-		7,470
Total debt securities	$	225,599	$	857	$	(10,587	)	$	-	$	215,869

Held to maturity
Fannie Mae	$	24,774	$	-	$	(3,030	)	$	-	$	21,744
Freddie Mac		20,153		-		(2,524	)		-		17,629
Total		44,927		-		(5,554	)		-		39,373
U.S. government agency securities		2,451		-		(305	)		-		2,146
Total debt securities	$	47,378	$	-	$	(5,859	)	$	-	$	41,519

F-19


	2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
Fannie Mae	$	55,878	$	-	$	(6,418	)	$	49,460
Freddie Mac		49,833		1		(5,552	)		44,282
Governmental National Mortgage Association securities		6,986		-		(397	)		6,589
Total mortgage-backed securities		112,697		1		(12,367	)		100,331
Obligations of states and political subdivisions		9,794		-		(742	)		9,052
U.S. government treasury securities		123,562		19		(1	)		123,580
U.S. government agency securities		29,089		-		(137	)		28,952
Corporate obligations		73,962		-		(8,241	)		65,721
Other debt securities		7,139		-		(719	)		6,420
Total debt securities	$	356,243	$	20	$	(22,207	)	$	334,056

Held to maturity
Fannie Mae	$	27,652	$	-	$	(5,217	)	$	22,435
Freddie Mac		22,145		-		(4,424	)		17,721
Total		49,797		-		(9,641	)		40,156
U.S. government agency securities		2,445		-		(511	)		1,934
Total debt securities	$	52,242	$	-	$	(10,152	)	$	42,090

The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the twelve months ended September 30, 2024 and 2023.


(Dollars in thousands)	2024			2023
Net losses recognized during the period on equity securities	$	(6	)	$	(4	)
Less: Net gains recognized during the period on equity securities sold during the period		-			-
Unrealized losses recognized during the reporting period on equity securities still held at the reporting date	$	(6	)	$	(4	)

The amortized cost and fair value of debt securities at September 30, 2024, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands):


	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	9,391	$	9,339	$	-	$	-
Due after one year through five years		34,533		33,483		-		-
Due after five years through ten years		67,997		63,050		6,174		5,579
Due after ten years		113,678		109,997		41,204		35,940
Total	$	225,599	$	215,869	$	47,378	$	41,519

For the year ended September 30, 2024, the Company did not sell any investment securities. For the year ended September 30, 2023 the Company realized no gross gains and gross losses of $121,000 on proceeds from the sale of investment securities of $1.0 million.

Investment securities with carrying values of $147.5 million and $289.4 million at September 30, 2024 and 2023, respectively, were pledged to secure public deposits and other purposes as required by law. Investment securities with carrying values of $104.3 million and $57.3 million at September 30, 2024 and 2023, respectively were pledged to the Federal Reserve Bank.

F-20

The following tables show the gross unrealized losses and fair value of the Company's investments for which an allowance for credit losses has not been recorded, which are aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2024 and September 30, 2023 (dollars in thousands):


	2024
			Less than Twelve Months					Twelve Months or Greater					Total
	Number of Securities		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fannie Mae		73	$	1,968	$	(5	)	$	63,409	$	(5,629	)	$	65,377	$	(5,634	)
Freddie Mac		61		2,717		(19	)		54,159		(4,275	)		56,876		(4,294	)
Governmental National Mortgage Association securities		14		-		-			6,164		(336	)		6,164		(336	)
Obligations of states and political subdivisions		9		-		-			7,791		(234	)		7,791		(234	)
U.S. government agency securities		2		-		-			4,628		(324	)		4,628		(324	)
Corporate obligations		77		4,585		(175	)		56,881		(5,021	)		61,466		(5,196	)
Other debt securities		17		355		-			5,220		(428	)		5,575		(428	)

Total		253	$	9,625	$	(199	)	$	198,252	$	(16,247	)	$	207,877	$	(16,446	)


	2023
			Less than Twelve Months					Twelve Months or Greater					Total
	Number of Securities		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fannie Mae		77	$	5,675	$	(196	)	$	66,220	$	(11,439	)	$	71,895	$	(11,635	)
Freddie Mac		63		3,828		(159	)		57,168		(9,817	)		60,996		(9,976	)
Governmental National Mortgage Association securities		14		2,151		(51	)		4,438		(346	)		6,589		(397	)
Obligations of states and political subdivisions		11		-		-			9,052		(742	)		9,052		(742	)
U.S. government treasury securities		1		24,705		(1	)		-		-			24,705		(1	)
U.S. government agency securities		4		24,582		(6	)		6,304		(642	)		30,886		(648	)
Corporate obligations		87		6,045		(273	)		59,677		(7,968	)		65,722		(8,241	)
Other debt securities		17		395		-			6,025		(719	)		6,420		(719	)
Total		274	$	67,381	$	(686	)	$	208,884	$	(31,673	)	$	276,265	$	(32,359	)

At September 30, 2024, the fair value of available-for-sale securities in an unrealized loss position for which an allowance for credit losses has not been recorded was $166.4 million, including unrealized losses of $10.6 million. The Corporation does not intend to sell the securities in an unrealized loss position and is unlikely to be required to sell these securities before a recovery of fair value, which may be maturity. The Corporation concluded that the decline in fair value of these securities was not indicative of a credit loss. Accrued interest receivable on available-for-sale debt securities totaled $1.5 million at September 30, 2024 and is included within other assets on the consolidated balance sheet. This amount is excluded from the estimate of expected credit losses.

At September 30, 2024, the fair value of held-to-maturity securities in an unrealized loss position for which an allowance for credit losses has not been recorded was $41.5 million, including unrealized losses of $5.9 million. The Corporation did not recognize any credit losses on held-to-maturity debt securities for the year ended September 30, 2024 or other-than-temporary impairment charges during 2023. Accrued interest receivable on held-to-maturity debt securities totaled $63,000 at September 30, 2024 and is included within other assets on the consolidated balance sheet. This amount is excluded from the estimate of expected credit losses.

Securities classified as held-to-maturity are included under the CECL methodology. Calculation of expected credit loss under CECL is done on a collective (“pooled”) basis, with assets grouped when similar risk characteristics exist. The Company notes that at September 30, 2024 all securities in the held-to-maturity classification are U.S. government agency and US government mortgage-backed securities; therefore, they share the same risk characteristics and can be evaluated on a collective basis. The expected credit loss on these securities is evaluated based on historical credit losses of this security type and the expected

F-21

possibility of default in the future, and these securities are guaranteed by the U.S. government. U.S. government agency and mortgage-backed securities often receive the highest credit rating by rating agencies and the Company has concluded that the possibility of default is considered remote. The U.S. government agency and mortgage-backed securities held by the Company in the held-to-maturity category carry an AA+ rating from Standard & Poor’s, Aaa from Moody’s Investor Services, and AAA from Fitch. The Company concludes that the long history with no credit losses for these securities (adjusted for current conditions and reasonable and supportable forecasts) indicates an expectation that nonpayment of the amortized cost basis is zero. Management has concluded that there is no prepayment risk and it is expected to recover the recorded investment. The Company has the intent and ability to hold the securities to maturity.

LOANS RECEIVABLE

Loans receivable consist of the following (in thousands):


	2024		2023
Real estate loans:
Residential	$	721,505	$	713,326
Construction		14,851		16,768
Commercial		884,621		821,958
Commercial		36,799		48,143
Obligations of states and political subdivisions		48,570		48,118
Home equity loans and lines of credit		51,306		48,212
Auto loans		65		523
Other		1,873		2,002
		1,759,590		1,699,050
Less allowance for credit losses		15,306		18,525
Net loans	$	1,744,284	$	1,680,525

As of September 30, 2024 and 2023, the Company considered its concentration of credit risk to be acceptable. As of September 30, 2024, the highest concentrations are in lessors of residential buildings and dwellings and the lessors of non-residential buildings and dwellings categories, with loans outstanding of $346.9 million, or 19.7% of loans outstanding, to residential lessors, and $296.1 million, or 16.8% of loans outstanding, to commercial lessors. There were no charge-offs on loans within these concentrations in 2024. For the year ended September 30, 2023, the Company recognized no charge offs on commercial lessors and $476,000 on residential lessors.

Loans serviced by the Company for others amounted to $243.4 million and $217.0 million at September 30, 2024 and 2023, respectively. The Company began selling current production residential real estate loans to the FHLB in February 2020.

The Company’s primary business activity is with customers located in counties where its branch offices are located and to a lesser extent, the contiguous counties in the Commonwealth of Pennsylvania. Commercial, residential, and consumer loans are granted. The Company also funds commercial and residential loans originated outside its immediate trade area provided such loans meet the Company’s credit policy guidelines. Although the Company has a diversified loan portfolio at September 30, 2024 and 2023, loans outstanding to individuals and businesses are dependent upon the local economic conditions in its immediate trade area.

F-22

The following table shows the amount of loans in each category that were individually and collectively evaluated for credit loss at the dates indicated (in thousands):


	Total Loans		Individually Evaluated for Credit Loss		Collectively Evaluated for Credit Loss
September 30, 2024
Real estate loans:
Residential	$	721,505	$	1,122	$	720,383
Construction		14,851		-		14,851
Commercial		884,621		5,552		879,069
Commercial		36,799		906		35,893
Obligations of states and political subdivisions		48,570		-		48,570
Home equity loans and lines of credit		51,306		35		51,271
Auto Loans		65		-		65
Other		1,873		-		1,873
Total	$	1,759,590	$	7,615	$	1,751,975

The following table shows the amount of loans in each category that were individually and collectively evaluated for impairment at the dates indicated (in thousands):


	Total Loans		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
September 30, 2023
Real estate loans:
Residential	$	713,326	$	1,393	$	711,933
Construction		16,768		-		16,768
Commercial		821,958		7,664		814,294
Commercial		48,143		648		47,495
Obligations of states and political subdivisions		48,118		-		48,118
Home equity loans and lines of credit		48,212		27		48,185
Auto Loans		523		-		523
Other		2,002		3		1,999
Total	$	1,699,050	$	9,735	$	1,689,315

The Company maintains a loan review system that allows for a periodic review of our loan portfolio and the early identification of potential credit deterioration in loans. Such system takes into consideration, among other things, delinquency status, size of loans, type and market value of collateral and financial condition of the borrowers. Specific credit loss allowances are established for identified losses based on a review of such information. A loan is analyzed for credit loss when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. All loans are evaluated independently. The Company does not aggregate such loans for evaluation purposes. Credit loss is measured on a loan-by-loan basis for commercial and construction loans by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral-dependent.

F-23

The following tables include the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable, under ASC 310, excluding purchased impaired credit loans. Also presented are the average recorded investments in the impaired loans and the related amount of interest recognized during the time within the period that the impaired loans were impaired (in thousands).


	Recorded Investment		Unpaid Principal Balance		Associated Allowance		Average Recorded Investment		Interest Income Recognized
September 30, 2023
With no specific allowance recorded:
Real estate loans:
Residential	$	1,294	$	2,091	$	-	$	1,140	$	3
Construction		-		-		-		-		-
Commercial		6,240		7,094		-		8,182		1
Commercial		648		960		-		549		-
Obligations of states and political subdivisions		-		-		-		-		-
Home equity loans and lines of credit		27		62		-		32		-
Auto loans		-		-		-		3		-
Other		3		17		-		5		-
Subtotal		8,212		10,224		-		9,911		4
With an allowance recorded:
Real estate loans:
Residential		99		103		7		101		-
Construction		-		-		-		-		-
Commercial		1,424		1,562		35		1,490		-
Commercial		-		-		-		267		-
Obligations of states and political subdivisions		-		-		-		-		-
Home equity loans and lines of credit		-		-		-		-		-
Auto loans		-		-		-		-		-
Other		-		-		-		-		-
Subtotal		1,523		1,665		42		1,858		-
Total:
Real estate loans:
Residential		1,393		2,194		7		1,241		3
Construction		-		-		-		-		-
Commercial		7,664		8,656		35		9,672		1
Commercial		648		960		-		816		-
Obligations of states and political subdivisions		-		-		-		-		-
Home equity loans and lines of credit		27		62		-		32		-
Auto loans		-		-		-		3		-
Other		3		17		-		5		-
Total	$	9,735	$	11,889	$	42	$	11,769	$	4

The Company uses a dual risk rating methodology to monitor the credit quality of the overall commercial loan portfolio. This rating system consists of a borrower rating scale from 1 to 14 and a collateral coverage rating scale from A to J that provides a mechanism to separate borrower creditworthiness from the value of collateral recovery in the event of default. The two ratings are combined using a matrix to develop an overall composite loan quality risk rating. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are fundamentally sound yet, exhibit potentially unacceptable credit risk or deteriorating trends or characteristics which if left uncorrected, may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. Loans in the Doubtful category have all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loans in the Loss category are considered uncollectible and of little value that their continuance as bankable assets is not warranted.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as bankruptcy, repossession, or

F-24

death, occurs to raise awareness of a possible credit event. The Company’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis. The Company’s credit management team performs an annual review of all commercial relationships $2,000,000 or greater. Confirmation of the appropriate risk grade is included in the review on an ongoing basis. The Company engages an external consultant to conduct loan reviews on at least a semiannual basis. Generally, the external consultant reviews commercial relationships greater than $1,000,000 and/or all criticized relationships equal to or greater than $500,000. Detailed reviews, including plans for resolution, are performed on loans classified as Substandard on a quarterly basis. Loans in the Substandard category that are evaluated for impairment are given separate consideration in the determination of the allowance.

The Bank uses the following definitions for risk ratings:

Pass. Loans classified as pass are loans in which the condition of the borrower and the performance of the loans are satisfactory of better

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

F-25

Based on the most recent analysis performed, the following table presents the recorded investment in non-homogenous pools by internal risk rating systems under ASC 326 (in thousands);



													Revolving		Revolving
	Term Loans Amortized on Cost Basis by Origination Year												Loans		Loans
													Amortized		Converted
September 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	86,925	$	144,838	$	221,196	$	143,090	$	65,522	$	175,306	$	16,084	$	-	$	852,961
Special Mention		437		10,675		357		-		11,247		62		-		-		22,778
Substandard		-		-		-		132		-		8,750		-		-		8,882
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	87,362	$	155,513	$	221,553	$	143,222	$	76,769	$	184,118	$	16,084	$	-	$	884,621

Commercial real estate
Current period gross charge-offs	$	-	$	-	$	-	$	15	$	-	$	-	$	-	$	-	$	15

Commercial
Risk Rating
Pass	$	2,274	$	6,147	$	3,926	$	1,649	$	1,240	$	7,570	$	11,488	$	-	$	34,294
Special Mention		-		-		-		-		36		-		865		-		901
Substandard		-		470		-		226		290		406		212		-		1,604
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	2,274	$	6,617	$	3,926	$	1,875	$	1,566	$	7,976	$	12,565	$	-	$	36,799

Commercial
Current period gross charge-offs	$	-	$	-	$	-	$	22	$	-	$	-	$	-	$	-	$	22

Obligations of states and political subdivisions
Risk Rating
Pass	$	2,289	$	1,492	$	4,629	$	11,604	$	7,808	$	20,748	$	-	$	-	$	48,570
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	2,289	$	1,492	$	4,629	$	11,604	$	7,808	$	20,748	$	-	$	-	$	48,570

Obligations of states and political subdivisions
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Total

Pass	$	91,488	$	152,477	$	229,751	$	156,343	$	74,570	$	203,624	$	27,572	$	-	$	935,825
Special Mention		437		10,675		357		-		11,283		62		865		-		23,679
Substandard		-		470		-		358		290		9,156		212		-		10,486
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	91,925	$	163,622	$	230,108	$	156,701	$	86,143	$	212,842	$	28,649	$	-	$	969,990

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard, and Doubtful or Loss within the internal risk rating system at September 30, 2023 under ASC 310 (in thousands):


	Pass		Special Mention		Substandard		Doubtful		Total
September 30, 2023
Commercial real estate loans	$	807,736	$	3,200	$	11,022	$	-	$	821,958
Commercial		46,452		-		1,691		-		48,143
Obligations of states and political subdivisions		48,118		-		-		-		48,118
Total	$	902,306	$	3,200	$	12,713	$	-	$	918,219

F-26

The Company monitors the credit risk profile by payment activity for residential and consumer loan classes. Loans past due over 90 days and loans on nonaccrual status are considered nonperforming. Nonperforming loans are reviewed monthly. The following table presents the carrying value of residential and consumer loans based on payment activity under ASC 326 (in thousands):



													Revolving		Revolving
	Term Loans Amortized on Cost Basis by Origination Year												Loans		Loans
													Amortized		Converted
September 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	45,845	$	101,439	$	151,329	$	133,147	$	101,061	$	186,729	$	-	$	-	$	719,550
Nonperforming		-		-		283		-		96		1,576		-		-		1,955
Total	$	45,845	$	101,439	$	151,612	$	133,147	$	101,157	$	188,305	$	-	$	-	$	721,505

Residential real estate
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Construction
Payment Performance
Performing	$	11,252	$	3,599	$	-	$	-	$	-	$	-	$	-	$	-	$	14,851
Nonperforming		-		-		-		-		-		-		-		-		-
Total	$	11,252	$	3,599	$	-	$	-	$	-	$	-	$	-	$	-	$	14,851

Construction
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Home equity loans and lines of credit										-
Payment Performance
Performing	$	4,372	$	10,198	$	7,076	$	1,816	$	1,343	$	2,888	$	21,454	$	2,124	$	51,271
Nonperforming		-		-		-		-		-		35		-		-		35
Total	$	4,372	$	10,198	$	7,076	$	1,816	$	1,343	$	2,923	$	21,454	$	2,124	$	51,306

Home equity loans and lines of credit
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	32	$	-	$	-	$	32

Auto										-
Payment Performance
Performing	$	-	$	-			$	-	$	-	$	64	$	-	$	-	$	64
Nonperforming		-		-		-		-		-		1		-		-		1
Total	$	-	$	-	$	-	$	-	$	-	$	65	$	-	$	-	$	65

Auto
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	5	$	-	$	-	$	5

Other										-
Payment Performance
Performing	$	369	$	239	$	88	$	4	$	10	$	112	$	1,028	$	-	$	1,850
Nonperforming		-		-		-		-		-		23		-		-		23
Total	$	369	$	239	$	88	$	4	$	10	$	135	$	1,028	$	-	$	1,873

Other
Current period gross charge-offs	$	-	$	-	$	10	$	-	$	-	$	-	$	-	$	-	$	10

Total
Payment Performance
Performing	$	61,838	$	115,475	$	158,493	$	134,967	$	102,414	$	189,793	$	22,482	$	2,124	$	787,586
Nonperforming		-		-		283		-		96		1,635		-		-		2,014
Total	$	61,838	$	115,475	$	158,776	$	134,967	$	102,510	$	191,428	$	22,482	$	2,124	$	789,600

F-27

The following table presents the risk ratings in the consumer categories of performing and non-performing loans at September 30, 2023 under ASC 310 (in thousands):


	Performing		Nonperforming		Total
September 30, 2023
Real estate loans:
Residential	$	710,757	$	2,569	$	713,326
Construction		16,768		-		16,768
Home equity loans and lines of credit		48,165		47		48,212
Auto loans		523		-		523
Other		1,972		30		2,002
Total	$	778,185	$	2,646	$	780,831

The Company further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the aging categories as of September 30, 2024 and 2023 (in thousands):


			31-60 Days		61-90 Days		Greater than 90 Days		Total		Total
	Current		Past Due		Past Due		Past Due		Past Due		Loans
September 30, 2024
Real estate loans:
Residential	$	717,766	$	1,862	$	760	$	1,117	$	3,739	$	721,505
Construction		14,851		-		-		-		-		14,851
Commercial		880,939		554		2,673		455		3,682		884,621
Commercial		36,589		-		-		210		210		36,799
Obligations of states and political subdivisions		48,570		-		-		-		-		48,570
Home equity loans and lines of credit		51,264		20		22		-		42		51,306
Auto loans		63		1		-		1		2		65
Other		1,850		-		-		23		23		1,873
Total	$	1,751,892	$	2,437	$	3,455	$	1,806	$	7,698	$	1,759,590
September 30, 2023
Real estate loans:
Residential	$	710,290	$	792	$	199	$	2,045	$	3,036	$	713,326
Construction		16,768		-		-		-		-		16,768
Commercial		820,853		240		-		865		1,105		821,958
Commercial		47,893		-		-		250		250		48,143
Obligations of states and political subdivisions		48,118		-		-		-		-		48,118
Home equity loans and lines of credit		48,191		-		-		21		21		48,212
Auto loans		485		37		1		-		38		523
Other		1,959		10		33		-		43		2,002
Total	$	1,694,557	$	1,079	$	233	$	3,181	$	4,493	$	1,699,050

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due 90 days or more and still accruing interest as of September 30, 2024 under ASC 326 (in thousands):


	Nonaccrual with No ACL		Nonaccrual with ACL		Total Nonaccrual		Loans Past Due Over 90 Days and Still Accruing		Total Nonperforming
September 30, 2024
Real estate loans:
Residential	$	1,955	$	-	$	1,955	$	-	$	1,955
Construction		-		-		-		-		-
Commercial		5,876		-		5,876		-		5,876
Commercial		1,136		-		1,136		-		1,136
Obligations of states and political subdivisions		-		-		-		-		-
Home equity loans and lines of credit		35		-		35		-		35
Auto loans		1		-		1		-		1
Other		23		-		23		-		23
Total	$	9,026	$	-	$	9,026	$	-	$	9,026

F-28

The following table presents the non-accrual loans at September 30, 2023 under ASC 310 (in thousands):


Non-Accrual Loans	September 30, 2023
Real estate loans:
Residential	$	2,569
Construction		-
Commercial		7,763
Commercial		652
Obligations of states and political subdivisions		-
Home equity loans and lines of credit		47
Auto loans		-
Other		30
Total	$	11,061

There were no loans greater than 90 days delinquent and still accruing interest at September 30, 2024 and 2023.

We maintain the ACL at a level that we believe to be appropriate to absorb estimated credit losses in the loan portfolios as of the balance sheet date. We established our allowance in accordance with guidance provided in Accounting Standard Codification ("ASC") - Financial Instruments - Credit Losses ("ASC 326").

The allowance for credit losses represents management’s estimate of expected losses inherent in the Company’s lending activities excluding loans accounted for under fair value. The allowance for credit losses are maintained through charges to the provision for credit losses in the Consolidated Statements of Income as expected losses are estimated. Loans or portions thereof that are determined to be uncollectible are charged against the allowance, and subsequent recoveries, if any, are credited to the allowance.

We maintain a credit review system, which allows for a periodic review of our loan portfolio and the early identification of potential non performing loans. Such system takes into consideration, among other things, delinquency status, size of loans, type and market value of collateral and financial condition of the borrowers. General credit loss allowances are based upon a combination of factors including, but not limited to, actual credit loss experience, composition of the loan portfolio, current economic conditions, management’s judgment and losses which are probable and reasonably estimable. The allowance is increased through provisions charged against current earnings and recoveries of previously charged-off loans. Loans that are determined to be uncollectible are charged against the allowance. While management uses available information to recognize probable and reasonably estimable loan losses, future credit provisions may be necessary, based on changing economic conditions. Payments received on non performing loans generally are either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. The allowance for credit losses as of September 30, 2024 was maintained at a level that represents management’s best estimate of losses inherent in the loan portfolio, and such losses were both probable and reasonably estimable.

In addition, the FDIC and the Pennsylvania Department of Banking and Securities, as an integral part of their examination process, periodically review our allowance for credit losses. The banking regulators may require that we recognize additions to the allowance based on its analysis and review of information available to it at the time of its examination.

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ACL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ACL.

F-29

The following table summarizes the primary segments of the ACL, segregated into the amount required for loans individually evaluated for credit loss and the amount required for loans collectively evaluated for credit loss as of September 30, 2024 and 2023 (in thousands):


	Real Estate Loans												Obligations of States and Political			Home Equity Loans and Lines of
	Residential			Construction			Commercial			Commercial			Subdivisions			Credit			Auto			Other			Unallocated			Total
ALL balance at September 30, 2022	$	5,122		$	319		$	10,754		$	698		$	283		$	361		$	22		$	22		$	947		$	18,528
Charge-offs		-			-			(615	)		(269	)		-			-			(28	)		-			-			(912	)
Recoveries		45			-			20			-			-			66			78			-			-			209
Provision		(270	)		(136	)		1,824			512			(173	)		(81	)		(70	)		-			(906	)		700
ALL balance at September 30, 2023	$	4,897		$	183		$	11,983		$	941		$	110		$	346		$	2		$	22		$	41		$	18,525

ACL balance at September 30, 2023	$	4,897		$	183		$	11,983		$	941		$	110		$	346		$	2		$	22		$	41		$	18,525
Impact of adopting ASC 326	$	503		$	254		$	(3,729	)	$	(292	)	$	129		$	423		$	2		$	(4	)	$	(41	)	$	(2,755	)
Charge-offs		-			-			(15	)		(22	)		-			(32	)		(5	)		(10	)		-			(84	)
Recoveries		14			-			188			-			-			6			12			-			-			220
Provision		(35	)		(169	)		(612	)		133			42			30			(9	)		20			-			(600	)
ACL balance at September 30, 2024	$	5,379		$	268		$	7,815		$	760		$	281		$	773		$	2		$	28		$	-		$	15,306

The shift in allocation and the changes in the provision for credit losses for the year ending September 30, 2024 are primarily due to changes in the credit metrics within the loan portfolio and the ACL model coupled with the adoption of CECL on October 1, 2023.

During the year ended September 30, 2023, the allowance for loan loss for commercial real estate loans increased $1.8 million due primarily to an increase in commercial real estate loans of $143.1 million. Credit provisions were recorded for loan loss for the commercial loans, obligations of states and political subdivisions, and auto loans segments due to either decreased loan balances, improved asset quality, changes in the loan mix within the pool, and/or decreased charge-off activity in those segments.

The following table summarizes the amount of loans in each segments that were individually and collectively evaluated for credit loss as of September 30, 2024 (in thousands):


Individually evaluated for credit loss	$	2	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	2
Collectively evaluated for credit loss		5,377		268		7,815		760		281		773		2		28		-		15,304
ACL balance at September 30, 2024	$	5,379	$	268	$	7,815	$	760	$	281	$	773	$	2	$	28	$	-	$	15,306

The following table summarizes the primary segments of the ALL, segregated into two categories, the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of September 30, 2023 (in thousands):


Individually evaluated for impairment	$	7	$	-	$	35	$	-	$	-	$	-	$	-	$	-	$	-	$	42
Collectively evaluated for impairment		4,890		183		11,948		941		110		346		2		22		41		18,483
ALL balance at September 30, 2023	$	4,897	$	183	$	11,983	$	941	$	110	$	346	$	2	$	22	$	41	$	18,525

Collateral-Dependent Loans

F-30

The following table presents, by class of loans, the carrying value of collateral dependent nonaccrual loans and type of collateral as of September 30, 2024 (in thousands):


	Real Estate		Business Assets		Other
September 30, 2024
Real estate loans:
Residential	$	1,122	$	-	$	-
Construction		-		-		-
Commercial		5,552		-		-
Commercial		-		906		-
Obligations of states and political subdivisions		-		-		-
Home equity loans and lines of credit		35		-		-
Auto loans		-		-		-
Other		-		-		-
Total	$	6,709	$	906	$	-

Occasionally, the Company modifies loans to borrowers in financial distress by providing term extensions and interest rate reductions. In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession,
such as and interest rate reduction, may be granted.

The following table shows the amortized cost basis of the loans modified to borrowers experiencing financial difficulty during the year ended September 30, 2024, disaggregated by class of financing receivable and type of concession granted under ASC 326 (in thousands):


Loan Modifications Made to Borrowers Experiencing Financial Difficulty

	Combination - Term Extension and Interest Rate Reduction

	Amortized Cost Basis		% of Total Class of
	at September 30, 2024		Financing Receivable			Financial Effect

Real estate loans:

Residential	$	71		0.01	%	Reduced weighted-average contractual interest rate from 7.25% to 5%. Extended term for 360 months.

Total	S	71

	Principal Payment Deferral

	Amortized Cost Basis		% of Total Class of
	at September 30, 2024		Financing Receivable

Real estate loans:
Commercial	$	366		0.04	%	Deferred principal for 9 months.

Total	S	366

F-31

The Bank closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the performance of loans that have been modified in the past year under ASC 326 (in thousands):


			31-60 Days		61-89 Days		90 + Days		Total
	Current		Past Due		Past Due		Past Due		Past Due
September 30, 2024
Real estate loans:
Residential	$	71	$	-	$	-	$	-	$	-
Construction		-		-		-		-		-
Commercial		366		-		-		-		-
Commercial		-		-		-		-		-
Obligations of states and political subdivisions		-		-		-		-		-
Home equity loans and lines of credit		-		-		-		-		-
Auto loans		-		-		-		-		-
Other		-		-		-		-		-
Total	$	437	$	-	$	-	$	-	$	-

On October 1, 2023, the Bank adopted ASU 2022-02 on a modified retrospective basis. ASU 2022-02 eliminates the TDR accounting model, and requires that the Bank evaluate, based on the accounting for loan modifications, whether the borrower is experiencing financial difficulty and the modification results in a more-than-insignificant direct change in the contractual cash flows and represents a new loan or a continuation of an existing loan. This change required all loan modifications to be accounted for under the general loan modification guidance in ASC 310-20, Receivables – Nonrefundable Fees and Other Costs, and subject entities to new disclosure requirements on loan modifications to borrowers experiencing financial difficulty. Upon adoption of CECL, the TDRs were evaluated and included in the CECL loan segment pools if the loans shared similar risk characteristics to other loans in the pool or remained with individually evaluated loans for which the ACL was measured using the collateral-dependent or discounted cash flow method.

The following tables present the most comparable required information for the prior period for impaired loans that were TDRs, with the recorded investment at September 30, 2023 under ASC 310 (dollars in thousands):


	For the Year Ended September 30, 2023
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings
Real estate loans:
Residential		3	$	295	$	355
Construction		-		-		-
Commercial		3		6,058		6,058
Commercial		-		-		-
Obligations of states and political subdivisions		-		-		-
Home equity loans and lines of credit		-		-		-
Auto loans		-		-		-
Other		-		-		-
Total		6	$	6,353	$	6,413

For the year ended September 30, 2023 there was no loan modifications classified as troubled debt restructurings that subsequently defaulted within one year of modification.

As of September 30, 2024, the Company has initiated formal foreclosure proceedings on $1.1 million of consumer residential mortgages which have not yet been transferred into foreclosed assets.

F-32

PREMISES AND EQUIPMENT

Premises and equipment consist of the following (in thousands):


	2024			2023
Land and land improvements	$	4,878		$	6,075
Buildings and leasehold improvements		16,060			16,100
Furniture, fixtures, and equipment		15,004			14,565
Construction in process		130			44
		36,072			36,784
Less accumulated depreciation		(24,819	)		(23,871	)
Total	$	11,253		$	12,913

Depreciation expense amounted to $944,000 and $919,000 for the years ended September 30, 2024 and 2023 respectively.

DEPOSITS

Deposits and their respective weighted-average interest rates consist of the following major classifications (dollars in thousands):


	2024					2023
	Weighted- Average Interest Rate			Amount		Weighted- Average Interest Rate			Amount
Noninterest-bearing demand accounts		-	%	$	256,638		-	%	$	280,473
Interest bearing demand accounts		1.14			312,683		0.65			346,458
Money market accounts		2.64			334,638		2.02			366,866
Savings and club accounts		0.07			143,031		0.06			163,248
Certificates of deposit		4.45			582,061		3.99			503,971
Total		2.36	%	$	1,629,051		1.80	%	$	1,661,016

At September 30, 2024 scheduled maturities of certificates of deposit are as follows (in thousands):


2025	$	462,408
2026		96,091
2027		14,112
2028		5,120
2029		4,330
Total	$	582,061

Brokered deposits totaled $252.0 and $214.2 million at September 30, 2024 and 2023, respectively. The aggregate amount of certificates of deposit with a minimum denomination of $250,000 were $84.2 million and $72.0 million at September 30, 2024 and 2023, respectively.

The scheduled maturities of certificates of deposit in denominations of $250,000 or more as of September 30, 2024, are as follows (in thousands):


Within three months	$	19,805
Three through six months		38,743
Six through twelve months		10,300
Over twelve months		15,393
Total	$	84,241

SHORT-TERM AND OTHER BORROWINGS

As of September 30, 2024, and 2023, the Company had $280.0 million and $374.7 million of short-term borrowings, respectively. There were no advances in 2024 and $59.7 million in advances in 2023 on a $150.0 million line of credit with the FHLB. There were also $280.0 million and $255.0 million in advances on other short term borrowings in 2024 and 2023,

F-33

respectively with the FHLB. The Company also had a $60.0 advance with the Federal Reserve Bank in 2023 and none at September 30, 2024.

All borrowings from the FHLB are secured by a blanket lien on qualified collateral, defined principally as investment securities and mortgage loans that are owned by the Company free and clear of any liens or encumbrances. The Federal Reserve borrowing is secured by investment securities. At September 30, 2024, the Company had a borrowing limit of approximately $890.7 million, with a variable rate of interest, based on the FHLB’s cost of funds.

The following table sets forth information concerning short-term borrowings (in thousands):


	2024			2023
Balance at year-end	$	280,000		$	374,652
Maximum amount outstanding at any month-end		467,917			464,041
Average balance outstanding during the year		364,536			305,623
Weighted-average interest rate:
As of year-end		5.40	%		5.56	%
Paid during the year		3.11	%		2.14	%

Average balances outstanding during the year represent daily average balances, and average interest rates represent interest expenses divided by the related average balance.

The Company has one other (long-term) borrowing for $10.0 million at September 30, 2024 and none at September 30, 2023. The borrowing is from the FHLB and has an interest rate of 5.65% and mature in February of 2025. The FHLB long-term advances are secured by qualifying assets of the Bank, which include the FHLB stock, securities, and first mortgage loans.

INCOME TAXES

The provision for income taxes consists of (in thousands):


	2024		2023
Current:
Federal	$	1,892	$	4,183
State		9		59
Total current taxes		1,901		4,242
Deferred income tax expense		2,069		252
Total income tax provision	$	3,970	$	4,494

F-34

The tax effects of deductible and taxable temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows (in thousands):


	2024			2023
Deferred tax assets:
Allowance for credit losses	$	3,214		$	3,890
Net unrealized loss on pension plan		(502	)		—
Investment losses subject to Section 382 limitation		1,348			1,516
Net unrealized loss on securities		2,044			4,659
Net unrealized loss on derivatives		204			—
Deferred compensation		270			293
Other real estate owned		214			195
Nonaccrual interest		66			95
Employee stock ownership plan		618			596
Other		2,125			2,102
Total gross deferred tax assets		9,601			13,346
Deferred tax liabilities:
Pension plan		1,228			1,152
Mortgage servicing rights		221			184
Premises and equipment		300			264
Net unrealized gain on derivatives		—			2,118
Low income housing tax credits		1,217			1,164
Other		2,746			1,587
Total gross deferred tax liabilities		5,712			6,469
Net deferred tax assets	$	3,889		$	6,877

The Company establishes a valuation allowance for deferred tax assets when management believes that the deferred tax assets are not likely to be realized either through a carryback to taxable income in prior years, future reversals of existing taxable temporary differences, and, to a lesser extent, future taxable income.

Accounting principles prescribe a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met.

There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Consolidated Statement of Income. The Company’s federal and state income tax returns for taxable years through 2019 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.

The reconciliation of the federal statutory rate and the Company’s effective income tax rate is as follows (dollars in thousands):


	2024						2023
	Amount			% of Pretax Income			Amount			% of Pretax Income
Provision at statutory rate	$	4,402			21.0	%	$	4,845			21.0	%
Income from bank-owned life insurance		(196	)		(0.9	)		(165	)		(0.7	)
Tax-exempt income		(366	)		(1.7	)		(317	)		(1.3	)
Low-income housing credits		(34	)		(0.2	)		(36	)		(0.1	)
Other, net		164			0.6			167			0.6
Actual tax expense and effective rate	$	3,970			18.8	%	$	4,494			19.5	%

The Bank is subject to the Pennsylvania Mutual Thrift Institutions Tax that is calculated at 11.5 percent of earnings based on U.S. generally accepted accounting principles with certain adjustments.

F-35

COMMITMENTS AND CONTINGENT LIABILITIES

In the normal course of business, management makes various commitments that are not reflected in the consolidated financial statements. These commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheet. The Company’s exposure to credit loss in the event of nonperformance by the other parties to the financial instruments is represented by the contractual amounts as disclosed. Losses, if any, are charged to the allowance for credit losses. The Company minimizes its exposure to credit loss under these commitments by subjecting them to credit approval and review procedures and collateral requirements, as deemed necessary, in compliance with lending policy guidelines. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making and monitoring commitments and conditional obligations as it does for on-balance sheet instruments. As of September 30, 2024, the Company has an allowance for credit losses for off-balance sheet instruments of $1.4 million which is included in other liabilities section of the balance sheet.

The off-balance sheet commitments consist of the following (in thousands):


	2024		2023
Commitments to extend credit	$	122,909	$	188,685
Standby and performance letters of credit		17,557		13,815
Unfunded lines of credit		126,619		114,350
Other off balance sheet liablities		151,000		—

The commitments outstanding at September 30, 2024, contractually mature in less than one year.

The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheet. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The amount of collateral obtained, as deemed necessary, is based upon management’s credit evaluation in compliance with the lending policy guidelines. Since many of the credit line commitments are expected to expire without being fully drawn upon, the total contractual amounts do not necessarily represent future funding requirements.

Standby letters of credit and financial guarantees represent conditional commitments issued to guarantee performance of a customer to a third party. The coverage period for these instruments is typically a one-year period with renewal option subject to prior approval by management. Fees earned from the issuance of these letters are recognized over the coverage period. For secured letters of credit, the collateral is typically Company deposit instruments.

The Company is required to maintain a reserve balance with certain third party providers. At September 30, 2024 the reserve balance was $1.2 million.

Legal Proceedings

F-36

10.

LEASES

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company accounts for all its leases in accordance with Topic 842. For the Company, Topic 842 primarily affects the accounting treatment for operating lease agreements in which the Company is the lessee.

Lessee Accounting

Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches, ATM locations, and office space with terms extending through 2044. All of our leases are classified as operating leases on the Company’s Consolidated Balance Sheet for both periods.

The following table presents the Consolidated Balance Sheet classification of the Company’s right-of-use assets and lease liabilities. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the Consolidated Balance sheet.


(in thousands)		September 30, 2024
Lease Right-of-Use Assets	Classification
Operating lease right-of-use assets	Other assets	$	5,697
Total Lease Right-Of-Use Assets		$	5,697

(in thousands)		September 30, 2024
Lease Liabilities	Classification
Operating lease liabilities	Other liabilities	$	5,985
Total Lease Liabilities		$	5,985

(in thousands)		September 30, 2023
Lease Right-of-Use Assets	Classification
Operating lease right-of-use assets	Other assets	$	6,046
Total Lease Right-Of-Use Assets		$	6,046

(in thousands)		September 30, 2023
Lease Liabilities	Classification
Operating lease liabilities	Other liabilities	$	6,288
Total Lease Liabilities		$	6,288

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.

F-37


	September 30, 2024
Weighted average remaining lease term
Operating leases	10.9 years
Weighted average discount rate
Operating leases		3.48	%

	September 30, 2023
Weighted average remaining lease term
Operating leases	11.7 years
Weighted average discount rate
Operating leases		3.29	%

The following table represents lease costs and other lease information. As the Company elected, for all classes of underlying assets, not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities.


Lease Costs (in thousands)	Twelve Months Ended September 30, 2024
Operating lease cost	$	1,109
Variable lease cost		337
Net lease cost	$	1,446
Lease Costs (in thousands)	Twelve Months Ended September 30, 2023
Operating lease cost	$	977
Variable lease cost		245
Net lease cost	$	1,222

Future minimum payments for leases with initial or remaining terms of one year or more as of September 30, 2024 were as follows:


(in thousands)	Leases
Twelve months Ended:
September 30, 2025	$	909
September 30, 2026		870
September 30, 2027		728
September 30, 2028		708
September 30, 2029		513
Thereafter		3,567
Total future minimum lease payments		7,295
Amounts representing interest		(1,310	)
Present Value of Net Future Minimum Lease Payments	$	5,985

11.

EMPLOYEE BENEFITS

Employee Stock Ownership Plan (“ESOP”)

The Company created an ESOP for the benefit of employees who meet the eligibility requirements, which include having completed one year of service with the Company or its subsidiary and attained age 21. The ESOP trust acquired 1,358,472 shares of the Company’s stock in 2007 from proceeds from a loan with the Company. The Company makes cash contributions to the ESOP on an annual basis sufficient to enable the ESOP to make the required loan payments. Cash dividends paid on allocated shares are distributed to participants and cash dividends paid on unallocated shares are used to repay the outstanding debt of the ESOP. The ESOP trust’s outstanding loan bears interest at prime, adjustable each January 1st, which was 8.50% at September 30, 2024 and requires an annual payment of principal and interest through December of 2036. The Company’s ESOP, which is internally leveraged, does not report the loans receivable extended to the ESOP as assets and does not report the ESOP debt due to the Company.

As the debt is repaid, shares are released from the collateral and allocated to qualified employees based on the proportion of payments made during the year to the remaining amount of payments due on the loan through maturity. Accordingly, the shares pledged as collateral are reported as unallocated common stock held by the ESOP shares in the Consolidated Balance Sheet. As shares are released from collateral, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings-per-share computations. The Company recognized ESOP expense of $797,000 for the years ended September 30, 2024 and 2023.

F-38

The following table presents the components of the ESOP shares:


	2024		2023
Allocated shares		425,508		411,696
Shares committed to be released		33,962		33,962
Unreleased shares		554,709		599,992
Total ESOP shares		1,014,179		1,045,650
Fair value of unreleased shares (in thousands)	$	11,314	$	9,516

Equity Incentive Plan

The Company previously maintained the ESSA Bancorp, Inc. 2007 Equity Incentive Plan (the “Plan”). The Plan provided for a total of 2,377,326 shares of common stock for issuance upon the grant or exercise of awards. Of the shares available under the Plan, 1,698,090 were available to be issued in connection with the exercise of stock options and 679,236 were available to be issued as restricted stock. The Plan allowed for the granting of non-qualified stock options (“NSOs”), incentive stock options (“ISOs”), and restricted stock. Options under the plan were granted at no less than the fair value of the Company’s common stock on the date of the grant. As of the effective date of the 2016 Equity Incentive Plan (detailed below), no further grants will be made under the plan and forfeitures of outstanding awards under the plan will be added to the shares available under the 2016 Equity Incentive Plan.

The Company replaced the 2007 Equity Incentive Plan with the ESSA Bancorp, Inc. 2016 Equity Incentive Plan (the “2016 Plan”). The 2016 Plan provides for a total of 250,000 shares of common stock for issuance upon the grant or exercise of awards. The 2016 Plan allows for the granting of restricted stock, restricted stock units, incentive stock options and non-qualified stock options.

The Company replaced the 2016 Equity Incentive Plan with the ESSA Bancorp, Inc. 2024 Equity Incentive Plan (the “2024 Plan”). The 2024 Plan which was approved by shareholders on March 7, 2024, provides for a total of 200,000 shares of common stock for issuance upon the grant or exercise of awards. The 2024 Plan allows for the granting of restricted stock, restricted stock units, incentive stock options and non-qualified stock options.

The Company classifies share-based compensation for employees and outside directors within “Compensation and employee benefits” in the Consolidated Statement of Income to correspond with the same line item as compensation paid.

Restricted stock shares outstanding at September 30, 2024 vest over periods ranging from 1 year to 3 years. The product of the number of shares granted and the grant date market price of the Company’s common stock determines the fair value of restricted shares under the Company’s restricted stock plan. The Company expenses the fair value of all share based compensation grants over the requisite service period.

During the years ended September 30, 2024 and 2023, the Company recorded $568,000 and $560,000 of share-based compensation expense consisting of restricted stock expense. Expected future compensation expense relating to the restricted shares outstanding, at September 30, 2024 is $567,000 over the remaining vesting period of 3.0 years.

The following is a summary of the status of the Company’s nonvested restricted stock as of September 30, 2024, and changes therein during the year then ended:


	Number of Restricted Stock			Weighted- Average Grant Date Fair Value
Nonvested at September 30, 2023		32,512		$	17.03
Granted		40,586			14.85
Vested		(37,435	)		15.18
Forfeited		(833	)		15.01
Nonvested at September 30, 2024		34,830		$	16.53

Defined Benefit Plan

The Bank sponsors a trusteed, noncontributory defined benefit pension plan covering substantially all employees and officers. The plan calls for benefits to be paid to eligible employees at retirement based primarily upon years of service with the Bank and compensation rates near retirement. The Bank’s funding policy is to make annual contributions, if needed, based upon the funding formula developed by the plan’s actuary. In February 2017, the Bank amended the defined benefit pension plan to provide that no additional participants would enter the plan and no additional benefits would accrue beyond February 28, 2017.

F-39

The following table sets forth the change in plan assets and benefit obligation at September 30 (in thousands):


	2024			2023
Change in benefit projected obligation:
Projected benefit obligation at beginning of year	$	12,196		$	12,776
Service cost		-			-
Interest cost		687			656
Actuarial (gains) losses		578			(568	)
Benefits paid		(636	)		(668	)
Projected benefit obligation at end of year		12,825			12,196
Change in plan assets:
Fair value of plan assets at beginning of year		17,769			16,551
Actual return on plan assets		3,932			1,886
Contributions		-			-
Benefits paid		(636	)		(668	)
Fair value of plan assets at end of year		21,065			17,769
Funded status	$	8,240		$	5,573

Amounts not yet recognized as a component of net periodic pension cost at September 30 (in thousands):


	2024			2023
Amounts recognized in accumulated other comprehensive income consist of:
Net (gain) loss	$	(2,394	)	$	(85	)

The accumulated benefit obligation for the defined benefit pension plan was $12.8 million and $12.2 million at September 30, 2024 and 2023, respectively.

The following table comprises the components of net periodic benefit cost for the years ended September 30 (in thousands):


	2024			2023
Service cost	$	-		$	-
Interest cost		687			656
Expected return on plan assets		(1,045	)		(968	)
Recognized net actuarial loss		-			-
Settlement loss		-			-
Net periodic benefit	$	(358	)	$	(312	)

Weighted-average assumptions used to determine benefit obligations for the years ended September 30:


	2024			2023
Discount rate		4.91	%		5.80	%
Rate of compensation increase	N/A			N/A

Weighted-average assumptions used to determine net periodic benefit cost for the years ended September 30:


	2024			2023
Discount rate		5.80	%		5.31	%
Expected long-term return on plan assets		6.00	%		6.00	%
Rate of compensation increase	N/A			N/A

The expected long-term rate of return was estimated using market benchmarks by which the plan assets would outperform the market in the future, based on historical experience adjusted for changes in asset allocation and expectations for overall lower future returns on similar investments compared with past periods.

F-40

Plan Assets

The following tables set forth by level, within the fair value hierarchy, the plan’s financial assets at fair value as of September 30, 2024 and 2023 (in thousands):


	September 30, 2024
	Level I		Level II		Level III		Total
Investment in collective trusts:
Fixed income	$	-	$	8,342	$	-	$	8,342
Equity		-		12,681		-		12,681
Investment in short-term investments		-		42		-		42
Total assets at fair value	$	-	$	21,065	$	-	$	21,065


	September 30, 2023
	Level I		Level II		Level III		Total
Investment in collective trusts:
Fixed income	$	-	$	7,081	$	-	$	7,081
Equity		-		10,661		-		10,661
Investment in short-term investments		-		27		-		27
Total assets at fair value	$	-	$	17,769	$	-	$	17,769

Investments in collective trusts and short-term investments are valued at the net asset value of shares held by the plan.

The Bank’s defined benefit pension plan weighted-average asset allocations at September 30, 2024 and 2023 by asset category, are as follows:


	September 30,
Asset Category	2024			2023
Fixed income securities		39.6	%		39.8	%
Equity securities		60.2			60.0
Other		0.2			0.2
Total		100.0	%		100.0	%

The Bank believes that the plan’s risk and liquidity position are, in large part, a function of the asset class mix. The Bank desires to utilize a portfolio mix that results in a balanced investment strategy. Three asset classes are outlined, as above. The target allocations of these classes are as follows: equity securities, 65 percent, and cash and fixed income securities, 35 percent.

Cash Flows

The Bank does not expect to make any contributions to its pension plan in fiscal 2024.

Estimated future benefit payments, which reflect expected future service, as appropriate, are as follows (in thousands):


2025	$	1,340
2026		813
2027		1,390
2028		632
2029		447
2030-2034		3,009

401(k) Plan

The Bank also has a savings plan qualified under Section 401(k) of the Internal Revenue Code, which covers substantially all employees over 21 years of age. Employees can contribute to the plan, but are not required to. Employer contributions were reinstated in March 2017. Employer contributions are allocated based on employee contribution levels. The expense related to the plan for the year ended September 30, 2024 and 2023 was $546,000 and $517,000, respectively.

F-41

Supplemental Executive Retirement Plan

The Bank maintains a salary continuation agreement with certain executives of the Bank, which provides for benefits upon retirement to be paid to the executive for no less than 192 months, unless the executive elects to receive the present value of the payments as a lump sum. The Bank has recorded accruals of $3.0 million and $3.0 million at September 30, 2024 and 2023, respectively which represent the estimated present value (using a discount rate of 6.00 percent) of the benefits earned under this agreement. There was $233,000 and $391,000 in expense related to the supplemental executive retirement plan for the years ended September 30, 2024 and 2023, respectively.

12.

REGULATORY RESTRICTIONS

Reserve Requirements

The Bank is required to maintain reserve funds in cash or in deposit with the Federal Reserve Bank. The Federal Reserve Bank reduced the reserve requirement to zero effective March 26, 2020. As a result, there was no required reserve at September 30, 2024 and 2023.

Dividend Restrictions

Federal banking laws, regulations, and policies limit the Bank’s ability to pay dividends to the Company. Dividends may be declared and paid by the Bank only out of net earnings for the then current year. A dividend may not be declared or paid if it would impair the general reserves of the Bank as required to be maintained under the Pennsylvania Banking.

13.

REGULATORY CAPITAL REQUIREMENTS

Federal regulations require the Bank and the Company to maintain certain minimum amounts of capital. Specifically, the Bank is required to maintain certain minimum dollar amounts and ratios of Total and Tier 1 capital to risk-weighted assets, of Tier 1 capital to average total assets, and common equity Tier 1 capital to risk-weighted assets.

Bank holding companies are generally subject to statutory capital requirements, which were implemented by certain of the new capital regulations described above that became effective on January 1, 2015. However, the Small Banking Holding Company Policy Statement exempts certain small bank holding companies like the Company from those requirements provided that they meet certain conditions.

In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) established five capital categories ranging from “well capitalized” to “critically undercapitalized.” Should any institution fail to meet the requirements to be considered “adequately capitalized,” it would become subject to a series of increasingly restrictive regulatory actions. Management believes that, as of September 30, 2024, the Bank met all capital adequacy requirements to which it is subject.

As of September 30, 2024, and 2023, the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be classified as a well-capitalized financial institution, Total risk-based, Tier 1 risk-based, common equity Tier 1 capital and Tier 1 leverage capital must be at least 10 percent, 8 percent, 6.5 percent, and 5 percent, respectively. There have been no conditions or events since the notification that management believes have changed the Bank’s or the Company’s category.

F-42

The Bank’s actual capital ratios for the years ended September 30 are presented in the following table (dollars in thousands):


	2024					2023
	Amount		Ratio			Amount		Ratio
Total capital (to risk-weighted assets)

Actual	$	232,615		14.2	%	$	224,683		13.0	%
For capital adequacy purposes		130,883		8.0			138,582		8.0
To be well capitalized		163,604		10.0			173,228		10.0

Tier 1 capital (to risk-weighted assets)

Actual	$	215,933		13.2	%	$	206,106		11.9	%
For capital adequacy purposes		98,162		6.0			103,937		6.0
To be well capitalized		130,883		8.0			138,582		8.0

Common equity tier 1 capital (to risk-weighted assets)

Actual	$	215,933		13.2	%	$	206,106		11.9	%
For capital adequacy purposes		73,622		4.5			77,953		4.5
To be well capitalized		106,342		6.5			112,598		6.5

Tier 1 capital (to adjusted assets)

Actual	$	215,933		10.0	%	$	206,106		9.4	%
For capital adequacy purposes		65,442		4.0			87,671		4.0
To be well capitalized		81,802		5.0			109,589		5.0

14.

FAIR VALUE

The following disclosures show the hierarchal disclosure framework associated within the level of pricing observations utilized in measuring assets and liabilities at fair value. The definition of fair value maintains the exchange price notion in earlier definitions of fair value but focuses on the exit price of the asset or liability. The exit price is the price that would be received to sell the asset or paid to transfer the liability adjusted for certain inherent risks and restrictions. Expanded disclosures are also required about the use of fair value to measure assets and liabilities.

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

The following tables provide the fair value for assets and liabilities required to be measured and reported at fair value on a recurring basis on the Consolidated Balance Sheet as of September 30, 2024 and September 30, 2023 by level within the fair value hierarchy (in thousands).

F-43


Reoccurring Fair Value Measurements at Reporting Date
	September 30, 2024
	Level I		Level II		Level III		Total
Assets:
Investment securities available for sale:
Mortgage-backed securities	$	-	$	122,225	$	-	$	122,225
Obligations of states and political subdivisions		-		8,791		-		8,791
U.S. government agency securities		-		6,266		-		6,266
Corporate obligations		-		66,561		4,556		71,117
Other debt securities		-		7,470		-		7,470
Total debt securities		-		211,313		4,556		215,869
Equity securities - financial services		26		-		-		26
Derivatives and hedging activities		-		8,203		-		8,203
Liabilities:
Derivatives and hedging activities		-		9,183		-		9,183


Reoccurring Fair Value Measurements at Reporting Date
	September 30, 2023
	Level I		Level II		Level III		Total
Assets:
Investment securities available for sale:
Mortgage-backed securities	$	-	$	100,331	$	-	$	100,331
Obligations of states and political subdivisions		-		9,052		-		9,052
U.S. government treasury securities		-		123,580		-		123,580
U.S. government agency securities		-		28,952		-		28,952
Corporate obligations		-		62,885		2,836		65,721
Other debt securities		-		6,420		-		6,420
Total debt securities		-		331,220		2,836		334,056
Equity securities - financial services		32		-		-		32
Derivatives and hedging activities		-		19,662		-		19,662
Liabilities:
Derivatives and hedging activities		-		9,579		-		9,579

The following tables present a summary of changes in the fair value of the Company’s Level III investments for years ended September 30, 2024 and 2023 (in thousands).


	Fair Value Measurement Using Significant Unobservable Inputs (Level III)
	September 30, 2024		September 30, 2023
Beginning balance	$	2,836	$	7,374
Purchases, sales, issuances, settlements, net		-		-
Total unrealized gain:
Included in earnings		-		-
Included in other comprehensive income		15		(188	)
Transfers into Level III		1,705		-
Transfers out of Level III		-		(4,350	)
	$	4,556	$	2,836

Each financial asset and liability is identified as having been valued according to a specified level of input, 1, 2 or 3. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset, either directly or indirectly. Level 2 inputs include quoted prices for similar assets in active markets, and inputs other than quoted prices that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy, within which the fair value measurement in its entirety falls, has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset.

F-44

The measurement of fair value should be consistent with one of the following valuation techniques: market approach, income approach, and/or cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). For example, valuation techniques consistent with the market approach often use market multiples derived from a set of comparable. Multiples might lie in ranges with a different multiple for each comparable. The selection of where within the range the appropriate multiple falls requires judgment, considering factors specific to the measurement (qualitative and quantitative). Valuation techniques consistent with the market approach include matrix pricing. Matrix pricing is a mathematical technique used principally to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on a security’s relationship to other benchmark quoted securities. Most of the securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quoted market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. Securities reported at fair value utilizing Level 1 inputs are limited to actively traded equity securities whose market price is readily available from the New York Stock Exchange or the NASDAQ exchange. A few securities are valued using Level 3 inputs, all of these are classified as available for sale and are reported at fair value using Level 3 inputs.

Assets and Liabilities Required to be Measured and Reported on a Non-Recurring Basis

The following tables provide the fair value for assets required to be measured and reported at fair value on a non recurring basis on the Consolidated Balance Sheet as of September 30, 2024 and September 30, 2023 by level within the fair value hierarchy:


	September 30, 2024
		Level I		Level II		Level III		Total Fair Value
Financial assets:
Foreclosed real estate owned		$	-	$	-	$	3,195	$	3,195
Individually evaluated loans held for investment			-		-		7,615		7,615

	September 30, 2023
		Level I		Level II		Level III		Total Fair Value
Financial assets:
Foreclosed real estate owned		$	-	$	-	$	3,311	$	3,311
Impaired loans			-		-		9,693		9,693

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:


	Quantitative Information About Level III Fair Value Measurements
	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
September 30, 2024
Individually evaluated loans held for investment	$	7,615	Appraisal of collateral (1)	Appraisal adjustments (2)	0% to 35% (20.9%)
Foreclosed real estate owned		3,195	Appraisal of collateral (1)	Appraisal adjustments (2)	10% (10.0%)
September 30, 2023
Impaired loans	$	9,693	Appraisal of collateral (1)	Appraisal adjustments (2)	0% to 35% (20.8%)
Foreclosed real estate owned		3,311	Appraisal of collateral (1)	Appraisal adjustments (2)	10 to 35% (10.2%)

(1)

Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

(2)

Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

F-45

Investment Securities Available for Sale

The fair value of securities available for sale are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices. For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence (Level 3). In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support on certain Level 3 investments. Internal cash flow models using a present value formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) are used to support fair values of certain Level 3 investments, if applicable.

Equity Securities

The fair value of equity securities are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1).

Individually Analyzed Loans (generally carried at fair value)

The Company has measured impairment on individually evaluated loans generally based on the fair value of the loan’s collateral. Individually evaluated loans are evaluated on the collateral method based on Level II inputs utilizing outside appraisals. Those individually evaluated loans for which management incorporates significant adjustments for sales costs and other discount assumptions regarding market conditions are considered Level III fair values. The fair value investment in individually analyzed loans totaled $7.6 million less their valuation allowances of $2,000 at September 30, 2024. The fair value consists of the loan balances of $9.7 million less their valuation allowances of $42,000 at September 30, 2023.

Foreclosed Real Estate Owned

Foreclosed real estate owned is measured at fair value, less cost to sell at the date of foreclosure; valuations are periodically performed by management; and the assets are carried at fair value, less cost to sell. Income and expenses from operations and changes in valuation allowance are included in the net expenses from foreclosed real estate.

Derivatives

Assets and Liabilities not Required to be Measured and Reported at Fair Value

The methods and assumptions used by the Company in estimating fair values of financial instruments at September 30, 2024 and 2023 is in accordance with ASC Topic 825, Financial Instruments which requires public entities to use exit pricing in the calculations of the tables below.

F-46


	September 30, 2024
	Carrying Value		Level I		Level II		Level III		Total Fair Value
Financial assets:
Loans receivable, net	$	1,744,284	$	-	$	-	$	1,635,032	$	1,635,032
Mortgage servicing rights		1,051		-		-		1,450		1,450
Investment securities held to maturity		47,378		-		41,519		-		41,519
Financial liabilities:
Deposits		1,629,051		1,046,990		-		581,842		1,628,832
Short-term borrowings		280,000		-		-		280,631		280,631
Other borrowings		10,000		-		-		10,042		10,042


	September 30, 2023
	Carrying Value		Level I		Level II		Level III		Total Fair Value
Financial assets:
Loans receivable, net	$	1,680,525	$	-	$	-	$	1,524,615	$	1,524,615
Mortgage servicing rights		874		-		-		1,470		1,470
Investment securities held to maturity		52,242		-		42,090		-		42,090
Financial liabilities:
Deposits		1,661,016		1,157,045		-		499,101		1,656,146
Short-term borrowings		374,652		-		-		364,291		364,291

For Cash and Cash Equivalents, Accrued Interest Receivable, Regulatory Stock, Bank Owned Life Insurance, Advances by Borrowers for Taxes and Insurance, and Accrued Interest Payable the carrying value is a reasonable estimate of the fair value and are considered Level 1 measurements.

The fair value approximates the current book value.

15.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The activity in accumulated other comprehensive loss for the years ended September 30, 2024 and 2023, is as follows (in thousands):


	Accumulated Other Comprehensive Loss (1)
	Defined Benefit Pension Plan			Unrealized Gains (Losses) on Securities Available for Sale			Derivatives			Total
Balance at September 30, 2023	$	66		$	(17,525	)	$	7,966		$	(9,493	)
Other comprehensive income (loss) before reclassifications		1,825			9,840			(1,659	)		10,006
Amounts reclassified from accumulated other comprehensive loss		-			-			(7,078	)		(7,078	)
Period change		1,825			9,840			(8,737	)		2,928
Balance at September 30, 2024	$	1,891		$	(7,685	)	$	(771	)	$	(6,565	)
Balance at September 30, 2022	$	(1,108	)	$	(13,879	)	$	12,093		$	(2,894	)
Other comprehensive income (loss) before reclassifications		1,174			(3,742	)		3,079			511
Amounts reclassified from accumulated other comprehensive loss		-			96			(7,206	)		(7,110	)
Period change		1,174			(3,646	)		(4,127	)		(6,599	)
Balance at September 30, 2023	$	66		$	(17,525	)	$	7,966		$	(9,493	)

(1)

All amounts are net of tax. Related income tax expense or benefit is calculated using an income tax rate approximating 21% in Fiscal 2024 and 2023.

F-47


Details About Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) For the Year Ended September 30, (3)						Affected Line Item in the Consolidated
(in thousands)	2024			2023			Statement of Income
Securities available for sale (1):
Net securities gains reclassified into earnings	$	-		$	(121	)	Gain on sale of investment securities, net
Related income tax expense		-			25		Income taxes
Net effect on accumulated other comprehensive loss for the period		-			(96	)
Derivatives and Hedging Activities (2):
Interest expense, effective portion		8,960			9,122		Interest expense
Related income tax expense		(1,882	)		(1,916	)	Income taxes
Net effect on accumulated other comprehensive loss for the period		7,078			7,206
Total reclassifications for the period	$	7,078		$	7,110

(1)

For additional details related to unrealized gains on securities and related amounts reclassified from accumulated other comprehensive income (loss) see Note 3, “Investment Securities.”

(2)

For additional details related to derivative financial instruments see Note16, “Derivatives and Hedging Activities.”

(3)

Amounts in parenthesis indicate debits.

16.

DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments.

Fair Values of Derivative Instruments on the Consolidated Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheet as of September 30, 2024 and 2023, (in thousands).


			Fair Values of Derivative Instruments
			Asset Derivatives
			As of September 30, 2024					As of September 30, 2023
Hedged Item	Notional Amount		Balance Sheet Location	Fair Value		Notional Amount		Balance Sheet Location	Fair Value
FHLB Advances		125,000	Derivative and hedging assets		2,375		230,000	Derivative and hedging assets		10,086
Commercial Loans		97,089	Derivative and hedging assets		5,828		86,265	Derivative and hedging assets		9,576
Total derivatives designated as hedging instruments	$	222,089		$	8,203	$	316,265		$	19,662

			Fair Values of Derivative Instruments
			Liability Derivatives
			As of September 30, 2024					As of September 30, 2023
Hedged Item	Notional Amount		Balance Sheet Location	Fair Value		Notional Amount		Balance Sheet Location	Fair Value
FHLB Advances		255,000	Derivative and hedging liabilities		3,348		-	Derivative and hedging liabilities		-
Commercial Loans		127,497	Derivative and hedging liabilities		5,835		117,516	Derivative and hedging liabilities		9,579
Total derivatives designated as hedging instruments	$	382,497		$	9,183	$	117,516		$	9,579

F-48

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed payments. As of September 30, 2024, the Company had 17 interest rate swaps with a notional of $380 million associated with the Company’s cash outflows associated with various FHLB advances and 48 interest rate swaps with a notional amount of $225 million associated with commercial loans. As of September 30, 2023, the Company had ten interest rate swaps with a notional of $230 million associated with the Company’s cash outflows associated with various brokered deposits and $204 million associated with commercial loans.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings), net of tax, and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. The Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions. The Company did not recognize any hedge ineffectiveness in earnings during the periods ended September 30, 2024 and 2023.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest income/expense as interest payments are made/received on the Company’s variable-rate assets/liabilities. During the 12 months ended September 30, 2024 and 2023, the Company had $9.0 million and $9.1 million in gains, classified to interest expense, respectively. During the next twelve months, the Company estimates that $1.7 million will be reclassified as a decrease in interest expense.

The table below presents the effect of the Company’s cash flow hedge accounting on Accumulated Other Comprehensive Income for the periods ended September 30, 2024 and 2023 (in thousands).


The Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income
Derivatives in Hedging Relationships	Amount of (Loss) Gain Recognized in OCI on Derivative							Amount of Gain Reclassified from Accumulated OCI into Income
	Year Ended September 30,			Year Ended September 30,			Location of Gain Reclassified from	Year Ended September 30,		Year Ended September 30,
	2024			2023			Accumulated OCI into Income	2024		2023
Derivatives in Cash Flow Hedging Relationships
Interest Rate Products	$	(11,063	)	$	(5,222	)	Interest Expense	$	8,960	$	9,122
Total	$	(11,063	)	$	(5,222	)		$	8,960	$	9,122

Credit-risk-related Contingent Features

The Company has agreements with its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

The Company also has agreements with certain of its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well / adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

As of September 30, 2024 and 2023 the Company had derivatives in a net asset position and was not required to post collateral against its obligations under these agreements. If the Company had breached any of these provisions at September 30, 2024 and 2023, it could have been required to settle its obligations under the agreements at the termination value.

17.

REVENUE RECOGNITION

F-49

The Company accounts for its applicable revenue in accordance with ASC Topic 606 – Revenue from Contracts with Customers. The core principle of Topic 606 is that an entity recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer. Topic 606 requires entities to exercise judgment when considering the terms of a contract. Topic 606 applies to all contracts with customers to provide goods or services in the ordinary course of business, except for contracts that are specifically excluded from its scope.

Topic 606 does not apply to revenue associated with interest income on financial instruments, including loans and securities. Additionally, certain noninterest income streams, such as income from bank-owned life insurance, gains on loans sold, and gains and losses on sales of debt and equity securities, are out of scope of Topic 606. The Company has evaluated the nature of its contracts with customers and determined that further disaggregation beyond what is presented in the Consolidated Statement of Income was not necessary.

The main types of non interest income within the scope of the standard are:

Trust and Investment Fees

Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customer’s accounts. The Company does not earn performance-based incentives. Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e. as incurred). Payment is received shortly after services are rendered.

Service Charges on Deposit Accounts

Service charges on deposit accounts consist of account analysis fees (i.e. net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Company’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

Fees, Exchange, and Other Service Charges

Fees, interchange, and other service charges are primarily comprised of debit card income, ATM fees, cash management income, and other services charges. Debit card income is primarily comprised of interchange fees earned whenever the Company’s debit cards are processed through card payment networks such as Mastercard. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a company ATM. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

F-50

Insurance Commissions

Insurance income primarily consists of commissions received on product sales. The Company acts as an intermediary between the Company’s customer and the insurance carrier. The Company’s performance obligation is generally satisfied upon the issuance of the policy. Shortly after the policy is issued, the carrier remits the commission payment to the Company, and the Company recognizes the revenue.

18.

PARENT COMPANY

Condensed financial statements of ESSA Bancorp, Inc. are as follows (in thousands):

CONDENSED BALANCE SHEET


	September 30,
	2024		2023
ASSETS
Cash and due from banks	$	3,714	$	5,564
Equity securities		26		32
Investment in subsidiary		223,169		210,505
Premises and equipment, net		371		381
Other assets		3,314		3,377
TOTAL ASSETS	$	230,594	$	219,859
LIABILITIES AND STOCKHOLDERS’ EQUITY
Other liabilities	$	173	$	151
Stockholders’ equity		230,421		219,708
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	230,594	$	219,859

CONDENSED STATEMENT OF INCOME


	Year Ended September 30,
	2024			2023
INCOME
Interest income	$	937		$	718
Unrealized (loss) gain on equity securities		(6	)		4
Dividends		8,000			6,000
Other		15			-
Total income		8,946			6,722
EXPENSES
Professional fees		466			657
Other		30			30
Total expenses		496			687
Income before income tax benefit		8,450			6,035
Income tax benefit		96			7
Income before equity in undistributed net earnings of subsidiary		8,354			6,028
Equity in undistributed net earnings of subsidiary		8,638			12,548
NET INCOME	$	16,992		$	18,576
COMPREHENSIVE INCOME	$	19,920		$	11,977

F-51

CONDENSED STATEMENT OF CASH FLOWS


	Year Ended September 30,
	2024			2023
OPERATING ACTIVITIES
Net income	$	16,992		$	18,576
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net earnings of subsidiary		(8,638	)		(12,548	)
Provision for depreciation		10			10
Increase in accrued income taxes		(96	)		(1,443	)
Increase in accrued interest receivable		-			(248	)
Other, net		850			721
Net cash provided by operating activities		9,118			5,068
FINANCING ACTIVITIES
Purchase of treasury stock shares		(5,063	)		-
Dividends on common stock		(5,905	)		(5,859	)
Net cash used for financing activities		(10,968	)		(5,859	)
Decrease in cash		(1,850	)		(791	)
CASH AT BEGINNING OF YEAR		5,564			6,355
CASH AT END OF YEAR	$	3,714		$	5,564

F-52

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	ESSA BANCORP, INC.

December 13, 2024	By:	/s/ Gary S. Olson
		Gary S. Olson President and Chief Executive Officer (Duly Authorized Representative)

Pursuant to the requirements of the Securities Exchange of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


Signatures	Title	Date

/s/ Gary S. Olson	President, Chief Executive Officer and Director	December 13, 2024
Gary S. Olson	(Principal Executive Officer)

/s/ Allan A. Muto	Executive Vice President and Chief Financial Officer	December 13, 2024
Allan A. Muto	(Principal Financial and Accounting Officer)

/s/ Robert C. Selig, Jr.	Chairman of the Board	December 13, 2024
Robert C. Selig, Jr.

/s/ Joseph S. Durkin	Director	December 13, 2024
Joseph S. Durkin

/s/ Daniel J. Henning	Director	December 13, 2024
Daniel J. Henning

/s/ Christine D. Gordon, J.D.	Director	December 13, 2024
Christine D. Gordon, J.D.

/s/ Philip H. Hosbach, IV	Director	December 13, 2024
Philip H. Hosbach, IV

/s/ Tina Q. Richardson	Director	December 13, 2024
Tina Q. Richardson

/s/ Carolyn P. Stennett	Director	December 13, 2024
Carolyn P. Stennett

/s/ Elizabeth B. Weekes	Director	December 13, 2024
Elizabeth B. Weekes