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

Taken individually, there were several transactions during the three months ended June 30, 2009 that had a significant impact on the Company's quarterly earnings. In response to continued low interest rates on residential mortgage loans the Company sold $23.8 million of its thirty-year, fixed rate residential mortgage loans. The sales resulted in a pre-tax gain of $372,000 during the quarter. The proceeds from the sales were reinvested in shorter duration mortgage-backed securities issued by United States government sponsored agencies or entities and additional loan production. The Company also sold $15.9 million of adjustable rate mortgage-backed securities that had interest rates scheduled to reset in the next twelve months. The sale resulted in a pre-tax gain of $148,000 during the quarter. The proceeds from the sale were reinvested in shorter duration mortgage-backed securities issued by United States government sponsored agencies or entities. Also during the quarter the Company recorded a pre-tax other than temporary impairment (OTTI) charge of $68,000. The charge was for the remaining value of the Company's investment in Fannie Mae preferred stock which had been previously written down during the fiscal year ended September 30, 2008. Finally, in addition to its regular assessment increase, the Federal Deposit Insurance Corporation (FDIC) issued a special assessment to all FDIC insured banks to replenish reserves depleted by bank failures during the previous two years. This assessment totaled $400,000. Collectively, these transactions increased earnings for the quarter by $52,000 before income taxes.

"Despite the difficult market conditions that persist for our customers and our Company, our third quarter witnessed some very positive results," noted Mr. Gary S. Olson, President and Chief Executive Officer of the Company. "Since the beginning of the fiscal year, the Company's total assets have grown by $59.5 million, or 6.0%; our net interest income after provisions for loan losses is up 8.0% over the previous year. We completed our first stock repurchase program and announced a second and our capital position and asset quality remain fundamentally sound. We have also purchased property in Mountainhome, Pennsylvania and intend to begin construction of our fourteenth, full service branch in the near future."

Net Interest Income:

Net interest income increased $573,000, or 8.3%, to $7.4 million for the three months ended June 30, 2009, from $6.9 million for the comparable period in 2008. The increase was primarily attributable to an increase in the Company's interest rate spread to 2.49% for the three months ended June 30, 2009, from 2.18% for the comparable period in 2008, offset in part by a decrease in the Company's average net earning assets of $29.9 million.

Net interest income increased $2.2 million, or 11.3%, to $21.6 million for the nine months ended June 30, 2009, from $19.4 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 nine months ended June 30, 2009, from 2.04% for the comparable period in 2008, offset in part by a decrease in the Company's average net earning assets of $19.5 million.

Provision for Loan Losses:

The provision for loan losses increased $225,000 or 150.0%, to $375,000 for the three months ended June 30, 2009, from $150,000 for the comparable period in 2008. The provision for loan losses increased $675,000 or 150.0%, to $1.1 million for the nine months ended June 30, 2009, from $450,000 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 nine month periods ended June 30, 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 increased $337,000 or 23.9%, to $1.7 million for the three months ended June 30, 2009, from $1.4 million for the comparable period in 2008. The primary reasons for the increase were gains on the sale of $23.8 million in residential mortgage loans of $372,000 and gains on the sale of investment securities of $148,000, which were partially offset by decreases in service charges and fees on deposit accounts of $83,000 and impairment losses on investment securities of $68,000.

Noninterest income increased $136,000, or 3.2%, to $4.3 million for the nine months ended June 30, 2009, from $4.2 million for the comparable period in 2008. The primary reasons for the increase were increases in net gain on the sale of loans of $372,000 and net gain on sale of investments of $148,000 which were partially offset by a decline in service fees on deposit accounts of $250,000 and impairment losses on investment securities of $68,000.

Noninterest Expense:

Noninterest expense increased $972,000, or 18.3%, to $6.3 million for the three months ended June 30, 2009, from $5.3 million for the comparable period in 2008. The primary reason for the increase was an increase in compensation and employee benefits of $467,000 and Federal Deposit Insurance Corporation (FDIC) premiums of $446,000. Compensation and employee benefits increased primarily as a result of an increase of $347,000 for the three months ended June 30, 2009 compared to the comparable period in 2008, 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. Deposit insurance premiums increased primarily as a result of a special FDIC assessment of $400,000 along with an increase in the FDIC quarterly assessment.

Noninterest expense increased $2.4 million, or 15.5%, to $18.0 million for the nine months ended June 30, 2009, from $15.5 million for the comparable period in 2008. The primary reasons for the increase were increases in compensation and employee benefits of $1.6 million, and deposit insurance premiums of $509,000. Compensation and employee benefits increased primarily as a result of an increase of $1.4 million related to the Company's Equity Incentive Plan. FDIC premiums increased primarily as a result of a special assessment of $400,000 along with increases in the quarterly regular FDIC assessment.

Balance Sheet:

Total assets increased $59.5 million, or 6.0%, to $1.1 billion at June 30, 2009, compared to $993.5 million at September 30, 2008. The primary reasons for the increase in assets were increases in net loans receivable of $29.9 million, and investment securities available for sale of $28.4 million. The increase in net loans receivable included net increases in residential loans of $33.3 million and commercial loans of $4.9 million which were partially offset by decreases in commercial real estate loans of $2.8 million, construction loans of $3.6 million, and home equity loans and lines of credit of $1.5 million.

Total deposits increased $30.7 million at June 30, 2009, compared to September 30, 2008, primarily as a result of increases in money market accounts of $31.3 million. Borrowed funds increased during the same time period by $41.9 million.

Stockholders' equity decreased $15.0 million to $185.1 million at June 30, 2009, compared to $200.1 million at September 30, 2008, primarily as a result of the Company's stock repurchase program. In June, 2009 the Company announced that it had completed its first stock repurchase program after having purchased 2,547,135 shares at a weighted average cost of $13.14. It was also announced that the Company's Board of Directors authorized a second stock repurchase program to purchase up to an additional 10% of its outstanding shares.

Asset Quality:

Nonperforming assets totaled $7.1 million, or 0.67%, of total assets at June 30, 2009, compared to $4.0 million, or 0.40%, of total assets at September 30, 2008. The allowance for loan losses was $5.5 million, or 0.74%, of loans outstanding at June 30, 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 $1.0 billion 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)
                                                                    June 30,     September 30,
                                                                    2009         2008
                                                                    (dollars in thousands)
ASSETS
Cash and due from banks                                             $ 7,655      $ 8,382
Interest-bearing deposits with other institutions                   2,770        4,232
Total cash and cash equivalents                                     10,425       12,614
Certificates of deposit                                             3,342        3,777
Investment securities available for sale                            232,443      204,078
Investment securities held to maturity (fair value of $9,876 and    9,723        11,857
$11,924)
Loans receivable (net of allowance for loan losses of $5,494 and    736,765      706,890
$4,915)
Federal Home Loan Bank stock                                        20,727       19,188
Premises and equipment                                              10,762       10,662
Bank-owned life insurance                                           14,931       14,516
Foreclosed real estate                                              2,698        31
Other assets                                                        11,126       9,869
TOTAL ASSETS                                                        $ 1,052,942  $ 993,482
LIABILITIES
Deposits                                                            $ 401,239    $ 370,529
Short-term borrowings                                               68,153       39,510
Other borrowings                                                    386,507      373,247
Advances by borrowers for taxes and insurance                       6,285        2,047
Other liabilities                                                   5,632        8,063
TOTAL LIABILITIES                                                   867,816      793,396
Commitment and contingencies                                        --           --
STOCKHOLDERS' EQUITY
Preferred stock                                                     --           --
Common stock                                                        170          170
Additional paid in capital                                          161,669      159,919
Unallocated common stock held by the Employee Stock Ownership Plan  (12,453)     (12,792)
Retained earnings                                                   61,583       58,227
Treasury stock, at cost                                             (26,234)     (2,753)
Accumulated other comprehensive income (loss)                       391          (2,685)
TOTAL STOCKHOLDERS' EQUITY                                          185,126      200,086
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $ 1,052,942  $ 993,482

ESSA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
                                                     For the Three Months        For the Nine Months
                                                     Ended June 30,              Ended June 30,
                                                     2009            2008        2009            2008
                                                     (dollars in thousands, except per share data)
INTEREST INCOME
Loans receivable                                     $   10,682      $   10,130  $   31,806      $   29,797
Investment securities:
Taxable                                                  2,467           2,674       7,564           8,013
Exempt from federal income tax                           83              83          248             249
Other investment income                                  1               217         121             825
Total interest income                                    13,233          13,104      39,739          38,884
INTEREST EXPENSE
Deposits                                                 1,635           2,018       5,394           7,154
Short-term borrowings                                    70              1,052       343             1,815
Other borrowings                                         4,085           3,164       12,356          10,470
Total interest expense                                   5,790           6,234       18,093          19,439
NET INTEREST INCOME                                      7,443           6,870       21,646          19,445
Provision for loan losses                                375             150         1,125           450
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES      7,068           6,720       20,521          18,995
NONINTEREST INCOME
Service fees on deposit accounts                         790             873         2,369           2,619
Services charges and fees on loans                       158             174         450             472
Impairment loss on securities                            (68    )        -           (68    )        -
Gain on sale of investments, net                         148             -           148             -
Gain on sale of loans, net                               372             -           372             -
Trust and investment fees                                209             208         623             645
Earnings on Bank-owned life insurance                    137             146         415             429
Other                                                    1               9           25              33
Total noninterest income                                 1,747           1,410       4,334           4,198
NONINTEREST EXPENSE
Compensation and employee benefits                       3,636           3,169       10,810          9,174
Occupancy and equipment                                  696             705         2,160           2,108
Professional fees                                        306             379         1,028           1,067
Data processing                                          466             443         1,402           1,400
Advertising                                              191             155         543             447
FDIC premiums                                            457             11          542             33
Other                                                    535             453         1,468           1,311
Total noninterest expense                                6,287           5,315       17,953          15,540
Income before income taxes                               2,528           2,815       6,902           7,653
Income taxes                                             787             849         1,794           2,336
NET INCOME          $ 1,741   $ 1,966  $ 5,108   $ 5,317
EARNINGS PER SHARE
Basic               $ 0.13    $ 0.13   $ 0.36    $ 0.34
Diluted             $ 0.13    $ 0.12   $ 0.36    $ 0.33

ESSA BANCORP, INC. AND SUBSIDIARY
OTHER FINANCIAL DATA
(UNAUDITED)
                                      For the Three Months                    For the Nine Months
                                      Ended June 30,                          Ended June 30,
                                      2009                2008                2009                2008
                                      (dollars in thousands, except per share data)
CONSOLIDATED AVERAGE BALANCES:
Total assets                          $   1,041,657       $   979,040         $   1,025,536       $   946,868
Total interest-earning assets             996,752             942,363             983,027             908,996
Total interest-bearing liabilities        816,123             731,792             797,740             704,216
Total stockholders' equity                188,350             211,044             193,015             209,141
PER COMMON SHARE DATA:
Average shares outstanding - basic        13,450,852          15,659,446          14,033,648          15,665,685
Average shares outstanding - diluted      13,468,712          16,046,636          14,033,648          16,238,561
Book value share computation:
Issued                                    16,980,900          16,980,900          16,980,900          16,980,900
Treasury shares                           (2,461,835 )        (192,500   )        (2,461,835 )        (192,500   )
Shares outstanding                        14,519,065          16,788,400          14,519,065          16,788,400
Unvested restricted stock awards          471,531             192,500             471,531             192,500
Book value shares                         14,990,596          16,980,900          14,990,596          16,980,900

SOURCE: ESSA Bancorp, Inc.

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