ESSA Bancorp, Inc. Announces Operating Results for the Second Fiscal Quarter of 2009

Mr. Gary S. Olson, President and Chief Executive Officer of the Company, noted that, "the overall weakness and uncertainty that continues to stress the national economy also continues to stress economic conditions throughout the Company's market area. Despite these economic realities, the Company maintained its high level of capital, solid earnings, and stable asset quality. The 5.7% increase in our total assets so far this fiscal year was fueled primarily by a $38.7 million, or 5.5% increase in our net loans outstanding. Our asset quality, as exhibited by our non-performing assets to total asset ratio, remains strong. Our operating results for the quarter and year-to-date periods, which in 2009 include the cost of our equity incentive plan, were solid. We are particularly pleased with the year-to-date increase of 9.6% in our net interest income after provision for loan losses compared to the 2008 year-to-date period."

Net Interest Income:

Net interest income increased $833,000, or 13.1%, to $7.2 million for the three months ended March 31, 2009, from $6.4 million for the comparable period in 2008. The increase was primarily attributable to an increase in the Company's interest rate spread to 2.39% for the three months ended March 31, 2009, from 2.00% for the comparable period in 2008, offset in part by a decrease in the Company's average net earning assets of $16.6 million.

Net interest income increased $1.6 million, or 13.0%, to $14.2 million for the six months ended March 31, 2009, from $12.6 million for the comparable period in 2008. The increase was primarily attributable to an increase in the Company's interest rate spread to 2.33% for the six months ended March 31, 2009, from 1.97% for the comparable period in 2008, offset in part by a decrease in the Company's average net earning assets of $14.3 million.

Provision for Loan Losses:

The provision for loan losses increased $225,000 or 150.0%, to $375,000 for the three months ended March 31, 2009, from $150,000 for the comparable period in 2008. The provision for loan losses increased $450,000 or 150.0%, to $750,000 for the six months ended March 31, 2009, from $300,000 for the comparable period in 2008.

In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect a borrower's ability to repay, the estimated value of any underlying collateral, peer group information, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are subject to interpretation and revision as more information becomes available or as future events occur. The increase in the provision for loan losses for both the three and six month periods ended March 31, 2009, as compared to the comparable 2008 periods was in response to this evaluation and to the growth in the Company's loan portfolio.

Noninterest Income:

Noninterest income decreased $64,000 or 4.8%, to $1.3 million for the three months ended March 31, 2009, from $1.3 million for the comparable period in 2008. The primary reasons for the decrease were declines in service fees on deposit accounts of $101,000, which were partially offset by increases in service charges and fees on loans of $25,000 and trust and investment fees of $14,000.

Noninterest income decreased $202,000, or 7.3%, to $2.6 million for the six months ended March 31, 2009, from $2.8 million for the comparable period in 2008. The primary reasons for the decrease were declines in service fees on deposit accounts of $167,000 and trust and investment fees of $23,000.

Noninterest Expense:

Noninterest expense increased $705,000, or 13.6%, to $5.9 million for the three months ended March 31, 2009, from $5.2 million for the comparable period in 2008. The primary reason for the increase was an increase in compensation and employee benefits of $580,000. Compensation and employee benefits increased primarily as a result of an expense of $538,000 for the three months ended March 31, 2009, related to the Company's equity incentive plan. As previously announced, the Company's stockholders approved the ESSA Bancorp, Inc. 2007 Equity Incentive Plan at the 2008 Annual Meeting of Stockholders on May 8, 2008. Awards granted under the Equity Incentive Plan were made on May 23, 2008.

Noninterest expense increased $1.4 million, or 14.1%, to $11.7 million for the six months ended March 31, 2009, from $10.2 million for the comparable period in 2008. The primary reasons for the increase were increases in compensation and employee benefits of $1.2 million, occupancy and equipment of $61,000, and other expenses of $138,000. Compensation and employee benefits increased primarily as a result of an expense of $1.1 million related to the Company's Equity Incentive Plan. Occupancy and equipment costs increased primarily as a result of an increase in general repairs and maintenance of $35,000. Other expenses increased primarily as a result of increases in FDIC insurance of $62,000 and REO expense of $60,000.

Balance Sheet:

Total assets increased $57.1 million, or 5.7%, to $1.05 billion at March 31, 2009, compared to $993.5 million at September 30, 2008. The primary reasons for the increase in assets were increases in cash and cash equivalents of $4.7 million, certificates of deposit of $1.1 million, net loans receivable of $38.7 million, and investment securities available for sale of $8.7 million. The increase in net loans receivable included net increases in residential loans of $40.2 million and construction loans of $596,000 which were partially offset by decreases in commercial real estate loans of $1.8 million, commercial loans of $272,000, and consumer loans of $205,000.

Total deposits increased $28.8 million at March 31, 2009, compared to September 30, 2008, primarily as a result of increases in money market accounts of $25.1 million. Borrowed funds increased during the same time period by $37.6 million.

Stockholders' equity decreased $10.5 million to $189.6 million at March 31, 2009, compared to $200.1 million at September 30, 2008, primarily as a result of a previously announced stock repurchase program the Company began in June 2008. As of March 31, 2009, the Company had purchased 2,086,059 shares at an average price of $13.00 per share.

Asset Quality:

Nonperforming assets totaled $5.4 million, or 0.51%, of total assets at March 31, 2009, compared to $4.0 million, or 0.40%, of total assets at September 30, 2008. The allowance for loan losses was $5.2 million, or 0.69%, of loans outstanding at March 31, 2009, compared to $4.9 million, or 0.69%, of loans outstanding at September 30, 2008.

ESSA Bank & Trust, a wholly-owned subsidiary of ESSA Bancorp, Inc., has total assets of over $980 million and is the leading service-oriented financial institution headquartered in the greater Pocono, Pennsylvania region. The Bank maintains its corporate headquarters in downtown Stroudsburg, Pennsylvania and has 13 community offices throughout the Pocono, Pennsylvania area. In addition to being one of the region's largest mortgage lenders, ESSA Bank & Trust offers a full range of retail and commercial financial services. ESSA Bancorp, Inc. stock trades on The NASDAQ Global Market(SM) under the symbol "ESSA."

Forward-Looking Statements

Certain statements contained herein are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "estimate," "anticipate," "continue," or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.

The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake and specifically declines any obligation to publicly release the result of any revisions, which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
                                                                    March 31,          September 30,
                                                                    2009               2008
                                                                    (dollars in thousands)
ASSETS
Cash and due from banks                                             $   7,984          $    8,382
Interest-bearing deposits with other institutions                       9,316               4,232
Total cash and cash equivalents                                         17,300              12,614
Certificates of deposit                                                 4,903               3,777
Investment securities available for sale                                212,785             204,078
Investment securities held to maturity (fair value of $10,795 and       10,592              11,857
$11,924)
Loans receivable (net of allowance for loan losses of $5,209 and        745,596             706,890
$4,915)
Federal Home Loan Bank stock                                            20,727              19,188
Premises and equipment                                                  10,451              10,662
Bank-owned life insurance                                               14,793              14,516
Foreclosed real estate                                                  2,144               31
Other assets                                                            11,343              9,869
TOTAL ASSETS                                                        $   1,050,634      $    993,482
LIABILITIES
Deposits                                                            $   399,346        $    370,529
Short-term borrowings                                                   61,290              39,510
Other borrowings                                                        389,107             373,247
Advances by borrowers for taxes and insurance                           4,282               2,047
Other liabilities                                                       7,041               8,063
TOTAL LIABILITIES                                                       861,066             793,396
Commitment and contingencies                                            --                  --
STOCKHOLDERS' EQUITY
Preferred stock                                                         --                  --
Common stock                                                            170                 170
Additional paid in capital                                              161,092             159,919
Unallocated common stock held by the Employee Stock Ownership Plan      (12,566   )         (12,792 )
Retained earnings                                                       60,393              58,227
Treasury stock, at cost                                                 (19,474   )         (2,753  )
Accumulated other comprehensive loss                                    (47       )         (2,685  )
TOTAL STOCKHOLDERS' EQUITY                                              189,568             200,086
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $   1,050,634      $    993,482

ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
                                                     For the Three Months      For the Six Months
                                                     Ended March 31,           Ended March 31,
                                                     2009         2008         2009         2008
                                                     (dollars in thousands, except per share data)
INTEREST INCOME
Loans receivable                                     $    10,523  $    9,884   $    21,124  $    19,667
Investment securities:
Taxable                                                   2,644        2,637        5,097        5,339
Exempt from federal income tax                            82           83           165          166
Other investment income                                   1            287          120          608
Total interest income                                     13,250       12,891       26,506       25,780
INTEREST EXPENSE
Deposits                                                  1,788        2,447        3,759        5,136
Short-term borrowings                                     118          325          273          763
Other borrowings                                          4,135        3,743        8,271        7,306
Total interest expense                                    6,041        6,515        12,303       13,205
NET INTEREST INCOME                                       7,209        6,376        14,203       12,575
Provision for loan losses                                 375          150          750          300
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES       6,834        6,226        13,453       12,275
NONINTEREST INCOME
Service fees on deposit accounts                          739          840          1,579        1,746
Services charges and fees on loans                        171          146          292          298
Trust and investment fees                                 205          191          414          437
Earnings on Bank-owned life insurance                     139          140          278          283
Other                                                     8            8            24           24
Total noninterest income                                  1,262        1,325        2,587        2,788
NONINTEREST EXPENSE
Compensation and employee benefits                        3,590        3,010        7,174        6,005
Occupancy and equipment                                   754          719          1,464        1,403
Professional fees                                         387          399          722          688
Data processing                                           467          478          936          957
Advertising                                               149          147          352          292
Other                                                     552          440          1,018        880
Total noninterest expense                                 5,899        5,193        11,666       10,225
Income before income taxes                                2,197        2,358        4,374        4,838
Income taxes                                              660          704          1,007        1,487
NET INCOME                                           $    1,537   $    1,654   $    3,367   $    3,351
EARNINGS PER SHARE
Basic    $ 0.11  $ 0.11  $ 0.24  $ 0.21
Diluted  $ 0.11  $ 0.11  $ 0.24  $ 0.21

SOURCE: ESSA Bancorp, Inc.

ESSA Bancorp, Inc. 
Gary S. Olson, 570-421-0531 
President & CEO