10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2025

☐ 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)

(570) 421-0531

(Registrant’s telephone number)

N/A

(Former name or former address, if changed since last report)

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	ESSA	Nasdaq Stock Market LLC

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 12 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filers,” “accelerated filers,” “smaller reporting company,” and “emerging growth 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 7, 2025, there were 10,154,664 shares of the Registrant’s common stock, par value $0.01 per share, outstanding.

ESSA Bancorp, Inc.

FORM 10-Q

Table of Contents


		Page
	Part I. Financial Information

Item 1.	Financial Statements (unaudited)	2

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36

Item 3	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4	Controls and Procedures	45

	Part II. Other Information

Item 1.	Legal Proceedings	46

Item 1A.	Risk Factors	46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3.	Defaults Upon Senior Securities	47

Item 4.	Mine Safety Disclosures	47

Item 5.	Other Information	47

Item 6.	Exhibits	48

Signature Page		49

Part I. Financial Information

Item 1. Financial Statements

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)


	March 31,			September 30,
	2025			2024
	(dollars in thousands)
ASSETS
Cash and due from banks	$	26,553		$	38,683
Interest-bearing deposits with other institutions		2,999			9,897
Total cash and cash equivalents		29,552			48,580
Investment securities available for sale, at fair value (net of allowance for credit losses of $0)		209,937			215,869
Investment securities held to maturity, at amortized cost (net of allowance for credit losses of $0)		44,997			47,378
Loans receivable (net of allowance for credit losses of $14,950 and $15,306)		1,757,056			1,744,284
Regulatory stock, at cost		15,506			18,750
Premises and equipment, net		11,296			11,253
Bank-owned life insurance		40,020			39,571
Foreclosed real estate		3,667			3,195
Goodwill		13,801			13,801
Deferred income taxes		4,562			3,889
Derivative and hedging assets		7,586			8,203
Other assets		29,644			32,944
TOTAL ASSETS	$	2,167,624		$	2,187,717
LIABILITIES
Deposits	$	1,689,754		$	1,629,051
Short-term borrowings		200,739			280,000
Other borrowings		-			10,000
Advances by borrowers for taxes and insurance		13,242			6,870
Derivative and hedging liabilities		7,126			9,183
Other liabilities		20,277			22,192
TOTAL LIABILITIES		1,931,138			1,957,296
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; 10,154,664 and 10,123,708 outstanding at March 31, 2025 and September 30, 2024, respectively)		181			181
Additional paid in capital		183,278			183,073
Unallocated common stock held by the Employee Stock Ownership Plan (ESOP)		(5,327	)		(5,557	)
Retained earnings		167,241			163,473
Treasury stock, at cost; 7,978,431 and 8,009,387 shares outstanding at March 31, 2025 and September 30, 2024, respectively		(103,826	)		(104,184	)
Accumulated other comprehensive loss		(5,061	)		(6,565	)
TOTAL STOCKHOLDERS’ EQUITY		236,486			230,421
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,167,624		$	2,187,717

See accompanying notes to the unaudited consolidated financial statements.

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)


	For the Three Months Ended March 31,						For the Six Months Ended March 31,
	2025			2024			2025			2024
	(dollars in thousands, except per share data)						(dollars in thousands, except per share data)
INTEREST INCOME
Loans receivable, including fees	$	22,520		$	21,724		$	45,513		$	43,138
Investment securities:
Taxable		2,438			2,750			4,948			6,637
Exempt from federal income tax		7			10			18			21
Other investment income		667			1,166			1,525			1,944
Total interest income		25,632			25,650			52,004			51,740
INTEREST EXPENSE
Deposits		9,813			7,590			20,142			16,052
Short-term borrowings		1,530			3,064			3,285			5,720
Other borrowings		79			142			223			250
Total interest expense		11,422			10,796			23,650			22,022
NET INTEREST INCOME		14,210			14,854			28,354			29,718
Release of credit losses		(42	)		(496	)		(649	)		(893	)
NET INTEREST INCOME AFTER RELEASE OF CREDIT LOSSES		14,252			15,350			29,003			30,611
NONINTEREST INCOME
Service fees on deposit accounts		665			674			1,380			1,370
Services charges and fees on loans		329			295			609			625
Loan swap fees		33			74			132			74
Unrealized loss on equity securities, net		(1	)		(2	)		-			(5	)
Trust and investment fees		435			418			910			811
Gain on sale of loans, net		98			58			158			176
Earnings on bank-owned life insurance		220			220			454			432
Insurance commissions		125			134			245			262
Other		113			133			187			220
Total noninterest income		2,017			2,004			4,075			3,965
NONINTEREST EXPENSE
Compensation and employee benefits		6,880			6,673			14,080			13,419
Occupancy and equipment		1,215			1,228			2,403			2,457
Professional fees		1,133			1,039			2,096			2,064
Data processing		1,432			1,360			2,900			2,702
Advertising		168			239			272			375
Federal Deposit Insurance Corporation (FDIC) premiums		398			475			755			855
Foreclosed real estate		-			-			-			101
Merger-related costs		1,044			-			1,044			-
Amortization of intangible assets		-			44			-			91
Other		537			656			1,191			1,507
Total noninterest expense		12,807			11,714			24,741			23,571
Income before income taxes		3,462			5,640			8,337			11,005
Income taxes		727			1,078			1,646			2,106
NET INCOME	$	2,735		$	4,562		$	6,691		$	8,899
Earnings per share
Basic	$	0.29		$	0.48		$	0.70		$	0.93
Diluted	$	0.29		$	0.48		$	0.70		$	0.93
Dividends per share	$	0.15		$	0.15		$	0.30		$	0.30

See accompanying notes to the unaudited consolidated financial statements.

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)


	For the Three Months Ended March 31,						For the Six Months Ended March 31,
	2025			2024			2025			2024
	(dollars in thousands)
Net income	$	2,735		$	4,562		$	6,691		$	8,899
Other comprehensive income (loss)
Investment securities available for sale:
Unrealized holding gains (losses)		3,739			(1,332	)		467			6,553
Tax effect		(785	)		280			(98	)		(1,376	)
Net of tax amount		2,954			(1,052	)		369			5,177
Derivative and hedging activities adjustments:
Changes in unrealized holding (losses) gains on derivatives included in net income		(1,724	)		3,005			3,918			260
Tax effect		362			(634	)		(825	)		(55	)
Reclassification adjustment for losses on derivatives included in net income		(1,089	)		(2,368	)		(2,478	)		(4,718	)
Tax effect		228			497			520			991
Net of tax amount		(2,223	)		500			1,135			(3,522	)
Total other comprehensive income (loss)		731			(552	)		1,504			1,655
Comprehensive income	$	3,466		$	4,010		$	8,195		$	10,554

See accompanying notes to the unaudited consolidated financial statements.

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)


									Unallocated									Accumulated
	Common Stock					Additional			Common									Other			Total
	Number of					Paid In			Stock Held by			Retained			Treasury			Comprehensive			Stockholders’
	Shares			Amount		Capital			the ESOP			Earnings			Stock			Loss			Equity
	(dollars in thousands except share data)
Balance, September 30, 2023		10,394,689		$	181	$	182,681		$	(6,009	)	$	151,856		$	(99,508	)	$	(9,493	)	$	219,708
Net income													8,899									8,899
Other comprehensive income																			1,655			1,655
Cash dividends declared ($0.30 per share)													(2,951	)								(2,951	)
Cumulative effect of adoption of ASU 2016-13													530									530
Stock based compensation							385															385
Allocation of ESOP stock							151			226												377
Allocation of treasury shares to incentive plan		40,441					(521	)								521						—
Purchase of treasury stock		(303,609	)													(5,063	)					(5,063	)
Balance, March 31, 2024		10,131,521		$	181	$	182,696		$	(5,783	)	$	158,334		$	(104,050	)	$	(7,838	)	$	223,540


									Unallocated									Accumulated
	Common Stock					Additional			Common									Other			Total
	Number of					Paid In			Stock Held by			Retained			Treasury			Comprehensive			Stockholders’
	Shares			Amount		Capital			the ESOP			Earnings			Stock			Loss			Equity
	(dollars in thousands except share data)
Balance, September 30, 2024		10,123,708		$	181	$	183,073		$	(5,557	)	$	163,473		$	(104,184	)	$	(6,565	)	$	230,421
Net income													6,691									6,691
Other comprehensive income																			1,504			1,504
Cash dividends declared ($0.30 per share)													(2,923	)								(2,923	)
Stock based compensation							387															387
Allocation of ESOP stock							223			230												453
Allocation of treasury shares to incentive plan		30,956					(405	)								358						(47	)
Balance, March 31, 2025		10,154,664		$	181	$	183,278		$	(5,327	)	$	167,241		$	(103,826	)	$	(5,061	)	$	236,486

See accompanying notes to the unaudited consolidated financial statements.

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)


							Unallocated									Accumulated
	Common Stock				Additional		Common									Other			Total
	Number of				Paid In		Stock Held by			Retained			Treasury			Comprehensive			Stockholders’
	Shares		Amount		Capital		the ESOP			Earnings			Stock			Loss			Equity
	(dollars in thousands except share data)
Balance, December 31, 2023		10,131,521	$	181	$	182,528	$	(5,896	)	$	155,247		$	(104,050	)	$	(7,286	)	$	220,724
Net income											4,562									4,562
Other comprehensive loss																	(552	)		(552	)
Cash dividends declared ($0.15 per share)											(1,475	)								(1,475	)
Stock based compensation						92														92
Allocation of ESOP stock						76	113													189
Balance, March 31, 2024		10,131,521	$	181	$	182,696	$	(5,783	)	$	158,334		$	(104,050	)	$	(7,838	)	$	223,540


							Unallocated									Accumulated
	Common Stock				Additional		Common									Other			Total
	Number of				Paid In		Stock Held by			Retained			Treasury			Comprehensive			Stockholders’
	Shares		Amount		Capital		the ESOP			Earnings			Stock			Loss			Equity
	(dollars in thousands except share data)
Balance, December 31, 2024		10,154,664	$	181	$	183,071	$	(5,443	)	$	165,948		$	(103,782	)	$	(5,792	)	$	234,183
Net income											2,735									2,735
Other comprehensive income																	731			731
Cash dividends declared ($0.15 per share)											(1,442	)								(1,442	)
Stock based compensation						93														93
Allocation of ESOP stock						114		116												230
Allocation of treasury shares to incentive plan														(44	)					(44	)
Balance, March 31, 2025		10,154,664	$	181	$	183,278	$	(5,327	)	$	167,241		$	(103,826	)	$	(5,061	)	$	236,486

See accompanying notes to the unaudited consolidated financial statements.

ESSA BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)


	For the Six Months Ended March 31,
	2025			2024
	(dollars in thousands)
OPERATING ACTIVITIES
Net income	$	6,691		$	8,899
Adjustments to reconcile net income to net cash provided by operating activities:
Release of credit losses		(649	)		(893	)
Provision for depreciation and amortization		504			562
Amortization of discounts and premiums, net		(246	)		(2,021	)
Unrealized loss on equity securities		-			5
Gain on sale of loans, net		(158	)		(176	)
Origination of residential real estate loans for sale		(6,865	)		(8,991	)
Proceeds on sale of residential real estate loans		7,023			8,668
Compensation expense on ESOP		453			377
Amortization of right-of-use asset		385			449
Stock based compensation		387			385
Decrease (increase) in accrued interest receivable		429			(613	)
(Decrease) increase in accrued interest payable		(820	)		869
Earnings on bank-owned life insurance		(454	)		(432	)
Deferred federal income taxes		(1,073	)		356
Decrease in accrued pension		(329	)		(179	)
Loss on foreclosed real estate, net		-			101
Amortization of intangible assets		-			91
Other, net		1,620			(501	)
Net cash provided by operating activities		6,898			6,956
INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from principal repayments and maturities		13,544			161,093
Purchases		(7,102	)		(34,016	)
Investment securities held to maturity:
Proceeds from principal repayments and maturities		2,349			2,307
Increase in loans receivable, net		(12,360	)		(25,888	)
Redemption of regulatory stock		13,076			10,530
Purchase of regulatory stock		(9,832	)		(14,133	)
Proceeds from sale of foreclosed real estate		-			15
Disposal of premises, equipment and software, net		(492	)		153
Net cash (used for) provided by investing activities		(817	)		100,061
FINANCING ACTIVITIES
Increase (decrease) in deposits, net		60,703			(214,711	)
Net (decrease) increase in short-term borrowings		(79,261	)		93,265
Proceeds from other borrowings		-			10,000
Repayment of other borrowings		(10,000	)		-
Purchase of common stock		-			(5,063	)
Increase in advances by borrowers for taxes and insurance		6,372			6,230
Dividends on common stock		(2,923	)		(2,951	)
Net cash used for financing activities		(25,109	)		(113,230	)
Decrease in cash and cash equivalents		(19,028	)		(6,213	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		48,580			85,402
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	29,552		$	79,189
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash Paid:
Interest	$	24,470		$	21,154
Income taxes		850			2,310
Noncash items:
Transfers from loans to foreclosed real estate		472			-
Unrealized holding gains		467			6,553

See accompanying notes to the unaudited consolidated financial statements.

ESSA BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(unaudited)

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, Delaware, Chester, Montgomery, Lackawanna, and Luzerne Counties, Pennsylvania. The Bank is a Pennsylvania chartered savings bank and is subject to regulation and supervision by the Pennsylvania Department of Banking and Securities and the Federal Deposit Insurance Corporation (the “FDIC”). The investment in the Bank 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 wholly owned 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.

The unaudited consolidated financial statements reflect all adjustments, which in the opinion of management, are necessary for a fair presentation of the results of the interim periods and are of a normal and recurring nature. Operating results for the three and six month periods ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending September 30, 2025.

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 three and six months ended March 31, 2025 and 2024.


	Three Months Ended						Six Months Ended
	March 31,			March 31,			March 31,			March 31,
	2025			2024			2025			2024
Weighted-average common shares outstanding		18,133,095			18,133,095			18,133,095			18,133,095
Average treasury stock shares		(8,009,386	)		(8,001,574	)		(7,979,870	)		(7,931,665	)
Average unearned ESOP shares		(558,335	)		(592,281	)		(552,737	)		(597,970	)
Average unearned non-vested shares		(28,164	)		(25,584	)		(30,224	)		(27,730	)
Weighted average common shares and common stock equivalents used to calculate basic earnings per share		9,537,210			9,513,656			9,570,264			9,575,730
Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share		23,068			142			22,418			—
Weighted average common shares and common stock equivalents used to calculate diluted earnings per share		9,560,278			9,513,798			9,592,682			9,575,730

. At March 31, 2025 and 2024 there were no shares of nonvested stock outstanding that were not included in the computation of diluted earnings per share because to do so would have been antidilutive.

Use of Estimates in the Preparation of Financial Statements

The accounting principles followed by the Company and its subsidiaries and the methods of applying these principles conform to U.S. generally accepted accounting principles (“GAAP”) and to general practice within the banking industry. In preparing the consolidated financial statements, management 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.

Accounting Pronouncements

Recent Accounting Pronouncements

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 guidance is effective for public business entities for annual periods beginning after December 15, 2024, and for annual periods beginning after December 15, 2025, for all other entities. The Company adopted the new disclosures for the annual periods beginning on January 1, 2025. The Company will include the applicable and relevant required disclosures in the Income Taxes footnote in the Form 10-K.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures. This ASU requires disclosure in the notes to financial statements of specified information about certain costs and expenses. Specific disclosures are required for (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil and gas producing activities. The amendments in this Update do not change or remove current expense disclosure requirements. However, the amendments affect where this information appears in the notes to financial statements because entities are required to include certain current disclosures in the same tabular format disclosure as the other disaggregation requirements in the amendments. The amendments in ASU 2024-03 apply only to public business entities and are effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this new guidance on its financial statements.

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):


	March 31, 2025
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Allowance for Credit Losses		Fair Value
Available for Sale
Fannie Mae	$	51,618	$	211	$	(3,201	)	$	-	$	48,628
Freddie Mac		52,548		42		(2,445	)		-		50,145
Governmental National Mortgage Association		17,561		160		(376	)		-		17,345
Total mortgage-backed securities		121,727		413		(6,022	)		-		116,118
Obligations of states and political subdivisions		8,022		-		(259	)		-		7,763
U.S. government agency securities		7,252		1		(12	)		-		7,241
Corporate obligations		74,854		176		(3,229	)		-		71,801
Other debt securities		7,345		68		(399	)		-		7,014
Total	$	219,200	$	658	$	(9,921	)	$	-	$	209,937

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Allowance for Credit Losses
Held to Maturity
Fannie Mae	$	23,390	$	-	$	(3,266	)	$	20,124	$	-
Freddie Mac		19,152		-		(2,815	)		16,337		-
Total mortgage-backed securities		42,542		-		(6,081	)		36,461		-
U.S. government agency securities		2,455		-		(326	)		2,129		-
Total	$	44,997	$	-	$	(6,407	)	$	38,590	$	-


	September 30, 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		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	$	225,599	$	857	$	(10,587	)	$	-	$	215,869

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Allowance for Credit Losses
Held to Maturity
Fannie Mae	$	24,774	$	-	$	(3,030	)	$	21,744	$	-
Freddie Mac		20,153		-		(2,524	)		17,629		-
Total mortgage-backed securities		44,927		-		(5,554	)		39,373		-
U.S. government agency securities		2,451		-		(305	)		2,146		-
Total	$	47,378	$	-	$	(5,859	)	$	41,519	$	-

The amortized cost and fair value of debt securities at March 31, 2025, 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	$	6,955	$	6,934	$	-	$	-
Due after one year through five years		33,851		33,107		-		-
Due after five years through ten years		69,142		65,664		5,770		5,179
Due after ten years		109,252		104,232		39,227		33,411
Total	$	219,200	$	209,937	$	44,997	$	38,590

For the three and six months ended March 31, 2025 and 2024, the Company realized no gross gains or gross losses on proceeds from the sale on investment securities.

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 March 31, 2025 and September 30, 2024 (dollars in thousands):


	March 31, 2025
	Number of Securities		Less than Twelve Months					Twelve Months or Greater					Total
			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fannie Mae		74	$	1,417	$	(20	)	$	58,453	$	(6,447	)	$	59,870	$	(6,467	)
Freddie Mac		67		6,989		(83	)		52,503		(5,177	)		59,492		(5,260	)
Governmental National Mortgage Association		13		-		-			5,809		(376	)		5,809		(376	)
U.S. government agency securities		3		1,644		(9	)		4,626		(329	)		6,270		(338	)
Obligations of states and political subdivisions		9		997		(3	)		6,766		(256	)		7,763		(259	)
Corporate obligations		73		5,630		(176	)		55,866		(3,053	)		61,496		(3,229	)
Other debt securities		15		333		(1	)		4,870		(398	)		5,203		(399	)
Total		254	$	17,010	$	(292	)	$	188,893	$	(16,036	)	$	205,903	$	(16,328	)


	September 30, 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	)

At March 31, 2025, 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 $167.3 million, including unrealized losses of $9.9 million. The Company 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 Company 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 $1.1 million at March 31, 2025 and is included within other assets on the consolidated balance sheet. This amount is excluded from the estimate of expected credit losses.

At March 31, 2025, 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 $38.6 million, including unrealized losses of $6.4 million. The Company did not recognize any credit losses on held-to-maturity debt securities for the three and six months ended March 31, 2025 and 2024. Accrued interest receivable on held-to-maturity debt securities totaled $60,000 at March 31, 2025 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 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 Company 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 Company 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 Company 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 March 31, 2025 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 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, Net and Allowance for Credit Losses on Loans

Loans receivable consist of the following (in thousands):


	March 31, 2025		September 30, 2024
Real estate loans:
Residential	$	734,751	$	721,505
Construction		15,083		14,851
Commercial		870,770		884,621
Commercial		48,559		36,799
Obligations of states and political subdivisions		48,305		48,570
Home equity loans and lines of credit		52,534		51,306
Auto loans		-		65
Other		2,004		1,873
		1,772,006		1,759,590
Less allowance for credit losses		14,950		15,306
Net loans	$	1,757,056	$	1,744,284

As of March 31, 2025 and September 30, 2024, the Company considered its concentration of credit risk to be acceptable. As of March 31, 2025, the highest concentrations are in lessors of residential buildings and dwellings and the lessors of nonresidential buildings and dwellings categories, with loans outstanding of $317.8 million, or 17.9% of loans outstanding, to residential lessors, and $298.7 million, or 16.9% of loans outstanding, to commercial lessors. As of September 30, 2024, the highest concentrations are in lessors of residential buildings and dwellings and the lessors of nonresidential 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 the six months ended March 31, 2025.

The following tables show 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
March 31, 2025
Real estate loans:
Residential	$	734,751	$	682	$	734,069
Construction		15,083		-		15,083
Commercial		870,770		5,579		865,191
Commercial		48,559		600		47,959
Obligations of states and political subdivisions		48,305		-		48,305
Home equity loans and lines of credit		52,534		16		52,518
Auto loans		-		-		-
Other		2,004		-		2,004
Total	$	1,772,006	$	6,877	$	1,765,129


	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 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.

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 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 analysed for credit loss 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.

Based on the most recent analysis performed, the following tables present the recorded investment in non-homogenous pools by internal risk rating systems (in thousands);



							Revolving	Revolving
	Term Loans Amortized on Cost Basis by Origination Year						Loans	Loans
							Amortized	Converted
March 31, 2025	2025	2024	2023	2022	2021	Prior	Cost Basis	to Term	Total
Commercial real estate
Risk Rating
Pass	$19,716	$100,351	$135,332	$210,925	$127,505	$231,309	$14,349	$-	$839,487
Special Mention	-	425	11,221	-	-	11,703	-	-	23,349
Substandard	-	-	-	-	-	7,934	-	-	7,934
Doubtful	-	-	-	-	-	-	-	-	-
Total	$19,716	$100,776	$146,553	$210,925	$127,505	$250,946	$14,349	$-	$870,770

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

Commercial
Risk Rating
Pass	$11,503	$2,066	$6,536	$3,711	$1,354	$7,651	$13,911	$-	$46,732
Special Mention	-	-	-	-	-	777	-	-	777
Substandard	-	-	450	-	-	600	-	-	1,050
Doubtful	-	-	-	-	-	-	-	-	-
Total	$11,503	$2,066	$6,986	$3,711	$1,354	$9,028	$13,911	$-	$48,559

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

Obligations of states and political subdivisions
Risk Rating
Pass	$-	$2,218	$3,890	$4,456	$11,393	$26,348	$-	$-	$48,305
Special Mention	-	-	-	-	-	-	-	-	-
Substandard	-	-	-	-	-	-	-	-	-
Doubtful	-	-	-	-	-	-	-	-	-
Total	$-	$2,218	$3,890	$4,456	$11,393	$26,348	$-	$-	$48,305

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

Total

Pass	$31,219	$104,635	$145,758	$219,092	$140,252	$265,308	$28,260	$-	$934,524
Special Mention	-	425	11,221	-	-	12,480	-	-	24,126
Substandard	-	-	450	-	-	8,534	-	-	8,984
Doubtful	-	-	-	-	-	-	-	-	-
Total	$31,219	$105,060	$157,429	$219,092	$140,252	$286,322	$28,260	$-	$967,634



													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 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 tables present the carrying value of residential and consumer loans based on payment activity (in thousands):



													Revolving		Revolving
	Term Loans Amortized on Cost Basis by Origination Year												Loans		Loans
													Amortized		Converted
March 31, 2025	2025		2024		2023		2022		2021		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	28,988	$	57,325	$	102,582	$	145,502	$	129,244	$	269,267	$	-	$	-	$	732,908
Nonperforming		-		187		-		111		-		1,545		-		-		1,843
Total	$	28,988	$	57,512	$	102,582	$	145,613	$	129,244	$	270,812	$	-	$	-	$	734,751

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

Construction
Payment Performance
Performing	$	3,725	$	10,438	$	920	$	-	$	-	$	-	$	-	$	-	$	15,083
Nonperforming		-		-		-		-		-		-		-		-		-
Total	$	3,725	$	10,438	$	920	$	-	$	-	$	-	$	-	$	-	$	15,083

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

Home equity loans and lines of credit										-
Payment Performance
Performing	$	3,213	$	5,902	$	9,171	$	6,457	$	1,589	$	3,686	$	19,790	$	2,698	$	52,506
Nonperforming		-		-		-		-		-		28		-		-		28
Total	$	3,213	$	5,902	$	9,171	$	6,457	$	1,589	$	3,714	$	19,790	$	2,698	$	52,534

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

Auto										-
Payment Performance
Performing	$	-	$	-			$	-	$	-	$	-	$	-	$	-	$	-
Nonperforming		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

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

Other										-
Payment Performance
Performing	$	139	$	557	$	180	$	41	$	-	$	143	$	923	$	-	$	1,983
Nonperforming		-		-		-		-		-		21		-		-		21
Total	$	139	$	557	$	180	$	41	$	-	$	164	$	923	$	-	$	2,004

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

Total
Payment Performance
Performing	$	36,065	$	74,222	$	112,853	$	152,000	$	130,833	$	273,096	$	20,713	$	2,698	$	802,480
Nonperforming		-		187		-		111		-		1,594		-		-		1,892
Total	$	36,065	$	74,409	$	112,853	$	152,111	$	130,833	$	274,690	$	20,713	$	2,698	$	804,372



													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

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 of performing loans and nonaccrual loans as of March 31, 2025 and September 30, 2024 (in thousands):


			31-60 Days		61-89 Days		90 + Days		Total		Total
	Current		Past Due		Past Due		Past Due		Past Due		Loans
March 31, 2025
Real estate loans:
Residential	$	730,181	$	2,622	$	1,562	$	386	$	4,570	$	734,751
Construction		15,083		-		-		-		-		15,083
Commercial		863,531		5,676		-		1,563		7,239		870,770
Commercial		48,350		209		-		-		209		48,559
Obligations of states and political subdivisions		48,305		-		-		-		-		48,305
Home equity loans and lines of credit		52,467		67		-		-		67		52,534
Auto loans		-		-		-		-		-		-
Other		1,983		-		-		21		21		2,004
Total	$	1,759,900	$	8,574	$	1,562	$	1,970	$	12,106	$	1,772,006


			31-60 Days		61-89 Days		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

The following tables presents the amortized cost basis of loans on nonaccrual status and loans past due 90 days or more and still accruing interest as of March 31, 2025 (in thousands):


	Nonaccrual with No ACL		Nonaccrual with ACL		Total Nonaccrual		Loans Past Due Over 90 Days and Still Accruing		Total Nonperforming
March 31, 2025
Real estate loans:
Residential	$	1,843	$	-	$	1,843	$	-	$	1,843
Construction		-		-		-		-		-
Commercial		5,499		81		5,580		-		5,580
Commercial		601		-		601		-		601
Obligations of states and political subdivisions		-		-		-		-		-
Home equity loans and lines of credit		28		-		28		-		28
Auto loans		-		-		-		-		-
Other		21		-		21		-		21
Total	$	7,992	$	81	$	8,073	$	-	$	8,073

	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

There are no loans 90 days or more past due that are accruing interest at March 31, 2025 or September 30, 2024.

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 Operations 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 March 31, 2025 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.

The following table summarizes changes in the primary segments of the allowance for credit losses during the three and six months ended March 31, 2025 and 2024 (in thousands):


															Home
													Obligations of		Equity
													States and		Loans and
	Real Estate Loans									Commercial			Political		Lines of			Auto			Other
	Residential			Construction			Commercial			Loans			Subdivisions		Credit			Loans			Loans			Unallocated			Total
ACL balance at December 31, 2024	$	5,443		$	289		$	7,501		$	736		$	286	$	794		$	2		$	31		$	-		$	15,082
Charge-offs		-			-			-			-			-		-			-			-			-			-
Recoveries		13			-			18			-			-		1			4			-			-			36
Provision		(50	)		(27	)		(217	)		129			3		8			(4	)		(10	)		-			(168	)
ACL balance at March 31, 2025	$	5,406		$	262		$	7,302		$	865		$	289	$	803		$	2		$	21		$	-		$	14,950

ALL balance at December 31, 2023	$	4,889		$	431		$	8,377		$	690		$	276	$	746		$	3		$	18		$	-			15,430
Charge-offs		-			-			(15	)		(22	)		-		-			(6	)		-			-			(43	)
Recoveries		1			-			37			-			-		1			1			-			-			40
Provision		63			(98	)		(368	)		375			2		13			4			(2	)		-			(11	)
ALL balance at March 31, 2024	$	4,953		$	333		$	8,031		$	1,043		$	278	$	760		$	2		$	16		$	-		$	15,416

ALL balance at September 30, 2024	$	5,379		$	268		$	7,815		$	760		$	281	$	773		$	2		$	28		$	0		$	15,306
Charge-offs		-			-			-			-			-		-			-			-			-			-
Recoveries		26			-			34			-			-		2			10			-			-			72
Provision		1			(6	)		(547	)		105			8		28			(10	)		(7	)		-			(428	)
ACL balance at March 31, 2025	$	5,406		$	262		$	7,302		$	865		$	289	$	803		$	2		$	21		$	-		$	14,950

ALL balance at September 30, 2023	$	4,897		$	183		$	11,983		$	941		$	110	$	346		$	2		$	22		$	41		$	18,525
Impact or adopting ASC 326	$	503		$	254		$	(3,729	)	$	(292	)	$	129	$	423		$	2		$	(4	)	$	(41	)		(2,755	)
Charge-offs		—			-			(15	)		(22	)		-		-			(6	)		(10	)		-			(53	)
Recoveries		1			-			37			-			-		4			8			-			-			50
Provision		(448	)		(104	)		(245	)		416			39		(13	)		(4	)		8			0			(351	)
ALL balance at March 31, 2024	$	4,953		$	333		$	8,031		$	1,043		$	278	$	760		$	2		$	16		$	0		$	15,416

During the three months ended March 31, 2025, the Company recorded release of allowance for credit losses for construction real estate loans, residential real estate loans, commercial real estate loans, other loans and auto loan segments due to decreased loan balances, improved asset quality, changes in the loan mix within the pool, and/or decreased charge-off activity in those segments. The Company recorded credit provision expense for the commercial loans, obligations of states and political subdivisions and home equity loans and lines of credit due to increased loan balances, changes in the loan mix within the pool, and/or charge-off activity in those segments.

During the three months ended March 31, 2024, the Company recorded release of allowance for credit losses for residential real estate loans, construction real estate loans, home equity loans and lines of credit and auto loans 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 Company recorded credit provision expense for the commercial real estate loans, commercial loans segments, obligations of states and political subdivisions and other loans due to increased loan balances, changes in the loan mix within the pool, and/or charge-off activity in those segments.

During the six months ended March 31, 2025, the Company recorded release of allowance for credit losses for construction real estate loans, commercial real estate loans, other loans and auto loan segments due to decreased loan balances, improved asset quality, changes in the loan mix within the pool, and/or decreased charge-off activity in those segments. The Company recorded credit provision expense for the residential real estate loans, commercial loans, obligations of states and political subdivisions and home equity loans and lines of credit due to increased loan balances, changes in the loan mix within the pool, and/or charge-off activity in those segments.

During the six months ended March 31, 2024, the Company recorded provision expense for the obligations of states and political subdivisions, other loans and commercial loans segments due to either increased loan balances, changes in the loan mix within the pool, and/or charge-off activity in those segments. Credit provisions were recorded for loan loss for the residential real estate loans, construction real estate loans, commercial real estate loans, home equity loans and lines of credit and auto loans 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 tables summarizes the amount of loans in each segments that were individually and collectively evaluated for credit loss as of March 31, 2025 and September 30, 2024 (in thousands):


											Home
									Obligations of		Equity
									States and		Loans and
	Real Estate Loans						Commercial		Political		Lines of				Other
	Residential		Construction		Commercial		Loans		Subdivisions		Credit		Auto Loans		Loans		Total
Individually evaluated for Credit Loss	$	-	$	-	$	82	$	-	$	-	$	-	$	-	$	-	$	82
Collectively evaluated for Credit Loss		5,406		262		7,220		865		289		803		2		21		14,868
Ending balance at March 31, 2025	$	5,406	$	262	$	7,302	$	865	$	289	$	803	$	2	$	21	$	14,950


											Home
									Obligations of		Equity
									States and		Loans and
	Real Estate Loans						Commercial		Political		Lines of				Other
	Residential		Construction		Commercial		Loans		Subdivisions		Credit		Auto Loans		Loans		Total
Individually evaluated for Credit Loss	$	2	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	2
Collectively evaluated for Credit Loss		5,377		268		7,815		760		281		773		2		28		15,304
Ending balance at September 30, 2024	$	5,379	$	268	$	7,815	$	760	$	281	$	773	$	2	$	28	$	15,306

Collateral-Dependent Loans

The following tables present the collateral-dependent loans by portfolio segment at December 31, 2024 and September 30, 2024 (in thousands):


	Real Estate		Business Assets		Other
March 31, 2025
Real estate loans:
Residential	$	682	$	-	$	-
Construction		-		-		-
Commercial		5,579		-		-
Commercial		-		600		-
Obligations of states and political subdivisions		-		-		-
Home equity loans and lines of credit		16		-		-
Auto loans		-		-		-
Other		-		-		-
Total	$	6,277	$	600	$	-


	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. During the three and six months ended March 31, 2025 no modifications were made to borrowers experiencing financial difficulty.

Deposits

Deposits consist of the following major classifications (in thousands):


	March 31, 2025		September 30, 2024
Non-interest bearing demand accounts	$	264,827	$	256,638
Interest bearing demand accounts		285,849		312,683
Money market accounts		348,203		334,638
Savings and club accounts		143,386		143,031
Certificates of deposit		647,489		582,061
Total	$	1,689,754	$	1,629,051

Net Periodic Benefit Cost-Defined Benefit Plan

For a detailed disclosure on the Bank’s pension and employee benefits plans, please refer to Note 12 of the Company’s Consolidated Financial Statements for the year ended September 30, 2024 included in the Company’s Annual Report on Form 10-K.

The following table comprises the components of net periodic benefit cost (income) for the three and six months ended March 31, 2025 and 2024 (in thousands):


	For the Three Months Ended March 31,						For the Six Months Ended March 31,
	2025			2024			2025			2024
Service Cost	$	-		$	-		$	-		$	-
Interest Cost		149			173			297			344
Expected return on plan assets		(305	)		(262	)		(610	)		(523	)
Partial settlement		-			-			-			-
Amortization of net loss from earlier periods		(7	)		-			(15	)		-
Net periodic benefit income	$	(163	)	$	(89	)	$	(328	)	$	(179	)

The Company’s board of directors adopted resolutions to freeze the status of the Defined Benefit Plan (“the plan”) effective February 28, 2017 (“the freeze date”). Accordingly, no additional participants have been allowed to enter the plan since February 28, 2017; no additional years of service for benefit accrual purposes have been credited since the freeze date under the plan; and compensation earned by participants after the freeze date is not taken into account under the plan.

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 that were 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 granted 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”) which was approved by shareholders on March 3, 2016. 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, ISOs and NSOs.

The Company replaced the 2016 Equity Incentive Plan with the ESSA Bancorp, Inc. 2024 Equity Incentive Plan (the “2024 Plan”) which was approved by shareholders on March 7, 2024. The 2024 Plan 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, ISO’s and NSO’s.

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

Restricted stock shares outstanding at March 31, 2025 vest over periods ranging from six to 39 months. 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.

For the three months ended March 31, 2025 and 2024, the Company recorded $93,000 and $92,000 of share-based compensation expense, respectively, comprised of restricted stock expense. For the six months ended March 31, 2025 and 2024, the Company recorded $387,000 and $385,000 of shared-based compensation expense, respectively, comprised of restricted stock expense. Expected future compensation expense relating to the restricted shares outstanding at March 31, 2025 is $769,000 over the remaining vesting period of 3.50 years.

The following is a summary of the status of the Company’s restricted stock as of March 31, 2025, and changes therein during the three month period then ended:


	Number of Restricted Stock			Weighted- average Grant Date Fair Value
Nonvested at September 30, 2024		34,830		$	16.53
Granted		31,106			18.97
Vested		(10,604	)		19.75
Forfeited		—			—
Nonvested at March 31, 2025		55,332		$	17.28

10.

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 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 March 31, 2025 and September 30, 2024 by level within the fair value hierarchy (in thousands).


Recurring Fair Value Measurements at Reporting Date
	March 31, 2025
Assets	Level I		Level II		Level III		Total
Investment securities available for sale:
Mortgage backed securities	$	-	$	116,118	$	-	$	116,118
Obligations of states and political subdivisions		-		7,763		-		7,763
U.S. government agency securities		-		7,241		-		7,241
Corporate obligations		-		66,748		5,053		71,801
Other debt securities		-		7,014		-		7,014
Total debt securities	$	-	$	204,884	$	5,053	$	209,937
Equity securities- financial services		25		-		-		25
Derivatives and hedging activities		-		7,586		-		7,586
Liabilities
Derivatives and hedging activities	$	-	$	7,126	$	-	$	7,126

	September 30, 2024
Assets	Level I		Level II		Level III		Total
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

The following table presents a summary of changes in the fair value of the Company’s Level III investments for the three and six months ended March 31, 2025 and 2024 (in thousands).


	Fair Value Measurement Using Significant Unobservable Inputs (Level III)
	Three Months Ended
	March 31, 2025		March 31, 2024
Beginning balance	$	4,900	$	2,975
Purchases, sales, issuances, settlements, net		-		-
Total unrealized (loss) gain:
Included in earnings		-		-
Included in other comprehensive (loss) income		153		84
Transfers in and/or out of Level III		-		-
	$	5,053	$	3,059


	Fair Value Measurement Using Significant Unobservable Inputs (Level III)
	Six Months Ended
	March 31, 2025		March 31, 2024
Beginning balance	$	4,556	$	2,836
Purchases, sales, issuances, settlements, net		-		-
Total unrealized gain (loss):
Included in earnings		-		-
Included in other comprehensive (loss) income		497		223
Transfers in and/or out of Level III		-		-
	$	5,053	$	3,059

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.

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 March 31, 2025 and September 30, 2024 by level within the fair value hierarchy:


Non-Recurring Fair Value Measurements at Reporting Date (in thousands)
	March 31, 2025
	Level I		Level II		Level III		Total
Foreclosed real estate	$	-	$	-	$	3,667	$	3,667
Individually evaluated loans held for investment		-		-		6,877		6,877

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

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 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Average)
March 31, 2025
Individually evaluated loans held for investment	$	6,877	Appraisal of collateral (1)	Appraisal adjustments (2)	0% to 35% (20.7%)
Foreclosed real estate owned		3,667	Appraisal of collateral (1)	Appraisal adjustments (2)	10% to 40% (13.9%)


	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Average)
September 30, 2024
Individually evaluated loans held for investment	$	7,615	Appraisal of collateral (1)	Appraisal adjustments (2)	0% to 35% (20.8%)
Foreclosed real estate owned		3,195	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.

Foreclosed real estate 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 the lower of carrying amount or 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.

Individually evaluated loans are reported at fair value utilizing level three inputs. For these loans, a review of the collateral is conducted and an appropriate allowance for credit losses is allocated to the loan. At March 31, 2025, 33 individually analyzed loans with a carrying value of $7.0 million were reduced by an ACL totaling $81,000 resulting in a net fair value of $6.9 million based on Level 3 inputs.

At September 30, 2024, 36 impaired loans with a carrying value of $7.6 million were reduced by a specific valuation totaling $2,000 resulting in a net fair value of $7.6 million based on Level 3 inputs.

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

The following tables provide the carrying value and fair value for certain financial instruments that are not required to be measured or reported at fair value on the Consolidated Balance Sheet at March 31, 2025 and September 30, 2024 by level within the fair value hierarchy:


	March 31, 2025
(in thousands)	Carrying Value		Level I		Level II		Level III		Total Fair Value
Financial assets:
Investment securities held to maturity	$	44,997	$	-	$	38,590	$	-	$	38,590
Loans receivable, net		1,757,056		-		-		1,627,778		1,627,778
Mortgage servicing rights		1,100		-		-		1,600		1,600
Financial liabilities:
Deposits	$	1,689,754	$	1,042,265	$	-	$	646,486	$	1,688,751
Short term borrowings		200,739		-		-		200,071		200,071
Other borrowings		-		-		-		-		-


	September 30, 2024
(in thousands)	Carrying Value		Level I		Level II		Level III		Total Fair Value
Financial assets:
Investment securities held to maturity	$	47,378	$	-	$	41,519	$	-	$	41,519
Loans receivable, net		1,744,284		-		-		1,635,032		1,635,032
Mortgage servicing rights		1,051		-		-		1,450		1,450
Financial liabilities:
Deposits	$	1,629,051	$	1,046,990	$	-	$	581,842	$	1,628,832

Short-term borrowings		280,000		-		-		280,000		280,000
Other borrowings		10,000		-		-		10,042		10,042

11.

Accumulated Other Comprehensive Income (Loss)

The activity in accumulated other comprehensive income (loss) for the three and six months ended March 31, 2025 and 2024 is as follows (in thousands):


	Accumulated Other Comprehensive Income/(Loss)
	Defined Benefit Pension Plan		Unrealized Gains (Losses) on Securities Available for Sale			Derivatives			Total
Balance at December 31, 2024	$	1,891	$	(10,270	)	$	2,587		$	(5,792	)
Other comprehensive (loss) income before reclassifications		-		2,954			(1,362	)		1,592
Amounts reclassified from accumulated other comprehensive income (loss)		-		-			(861	)		(861	)
Period change		-		2,954			(2,223	)		731
Balance at March 31, 2025	$	1,891	$	(7,316	)	$	364		$	(5,061	)
Balance at December 31, 2023	$	66	$	(11,296	)	$	3,944		$	(7,286	)
Other comprehensive (loss) income before reclassifications		-		(1,052	)		2,371			1,319
Amounts reclassified from accumulated other comprehensive (loss) income		-		-			(1,871	)		(1,871	)
Period change		-		(1,052	)		500			(552	)
Balance at March 31, 2024	$	66	$	(12,348	)	$	4,444		$	(7,838	)

	Accumulated Other Comprehensive Income/(Loss)
	Defined Benefit Pension Plan		Unrealized Gains (Losses) on Securities Available for Sale			Derivatives			Total
Balance at September 30, 2024	$	1,891	$	(7,685	)	$	(771	)	$	(6,565	)
Other comprehensive income (loss) before reclassifications		-		369			3,093			3,462
Amounts reclassified from accumulated other comprehensive income (loss)		-		-			(1,958	)		(1,958	)
Period change		-		369			1,135			1,504
Balance at March 31, 2025	$	1,891	$	(7,316	)	$	364		$	(5,061	)
Balance at September 30, 2023	$	66	$	(17,525	)	$	7,966		$	(9,493	)
Other comprehensive income (loss) before reclassifications		-		5,177			205			5,382
Amounts reclassified from accumulated other comprehensive income (loss)		-		-			(3,727	)		(3,727	)
Period change		-		5,177			(3,522	)		1,655
Balance at March 31, 2024	$	66	$	(12,348	)	$	4,444		$	(7,838	)

The following table presents significant amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three and six months ended March 31, 2025 and 2024 (in thousands):


	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
Details About Accumulated Other Comprehensive Income (Loss) Components	Accumulated Other Comprehensive Income (Loss) for the Three Months Ended March 31,						Affected Line Item in the Consolidated Statement of Operations
	2025			2024
Derivatives and hedging activities:
Interest expense, effective portion	$	1,089		$	2,368		Interest expense
Related income tax expense		(228	)		(497	)	Income taxes
Net effect on accumulated other comprehensive income (loss) for the period		861			1,871
Total reclassification for the period	$	861		$	1,871


	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
	Accumulated Other Comprehensive Income (Loss) For the Six Months Ended March 31,						Affected Line Item in the Consolidated Statement of Operations
	2025			2024
Derivative and hedging activities:
Interest expense, effective portion	$	2,478		$	4,718		Interest expense
Related income tax expense		(520	)		(991	)	Income taxes
Net effect on accumulated other comprehensive income (loss) for the period		1,958			3,727
Total reclassification for the period	$	1,958		$	3,727

12.

Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks 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 through 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 principally related to certain variable rate borrowings.

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 of March 31, 2025 and September 30, 2024 (in thousands).


Fair Values of Derivative Instruments
Asset Derivatives
	As of March 31, 2025				As of September 30, 2024
Hedged Item	Notional Amount		Fair Value		Notional Amount		Fair Value
FHLB Advances	$	200,000	$	1,708	$	125,000	$	2,375
Commercial Loans		100,815		5,878		97,089		5,828
Total	$	300,815	$	7,586	$	222,089	$	8,203

Fair Values of Derivative Instruments
Liability Derivatives
	As of March 31, 2025				As of September 30, 2024
Hedged Item	Notional Amount		Fair Value		Notional Amount		Fair Value
FHLB Advances	$	155,000	$	1,243	$	255,000	$	3,348
Commercial Loans		130,785		5,883		127,497		5,835
Total	$	285,785	$	7,126	$	382,497	$	9,183

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 March 31, 2025, the Company had seventeen interest rate swaps with a notional principal amount of $355.0 million associated with the Company’s cash outflows associated with various FHLB advances and $231.6 million associated with associated with various 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 three or six months ended March 31, 2025 and 2024.

Amounts reported in accumulated other comprehensive income (loss) related to derivatives that will be reclassified to interest income/expense as interest payments are made/received on the Company’s variable-rate assets/liabilities. During the three months ended March 31, 2025, the Company had $1.1 million of gains, which resulted in a decrease to interest expense. During the three months ended March 31, 2024, the Company had $2.4 million of gains which resulted in a decrease to interest expense. During the six months ended March 31, 2025, the Company had $2.5 million of gains, which resulted in a decrease to interest expense. During the six months ended March 31, 2024, the Company had $4.7 million of gains which resulted in a decrease to interest expense. During the next twelve months, the Company estimates that $1.1 million will be reclassified as a decrease to interest expense.

The table below presents the effect of the Company’s cash flow hedge accounting on Accumulated Other Comprehensive Income (Loss) for the three and six months ended March 31, 2025 and 2024 (in thousands).


The Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss)
Derivatives in Hedging Relationships	(Gain) Loss Recognized in OCI on Derivative (Effective Portion) Three Months Ended March 31,						Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Three Months Ended March 31,
Derivatives in Cash Flow Hedging Relationships	2025			2024				2025		2024
Interest Rate Products	$	(2,813	)	$	637		Interest expense	$	1,089	$	2,368
Total	$	(2,813	)	$	637			$	1,089	$	2,368
Derivatives in Cash Flow Hedging Relationships	Gain (Loss) Recognized in OCI on Derivative (Effective Portion) Six Months Ended March 31,						Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Gain (Loss) Recognized in OCI on Derivative (Effective Portion) Six Months Ended March 31,
	2025			2024				2025		2024
Interest Rate Products	$	1,440		$	(4,458	)	Interest expense	$	2,478	$	4,718
Total	$	1,440		$	(4,458	)		$	2,478	$	4,718

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 March 31, 2025 and September 30, 2024, the Company had no derivatives in a net liability position and was not required to post collateral against its obligations under these agreements. If the Company had breached any of these provisions at March 31, 2025 and September 30, 2024, it could have been required to settle its obligations under the agreements at the termination value.

13.

Contingent Liabilities

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, but, as explained below, have recently been re-opened. 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 was 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 then filed a motion seeking relief from some of the Court’s prior orders. On November 20, 2024 the Court granted Plaintiffs’ motion and vacated the prior orders that had granted summary judgment in favor of all defendants except the now-dissolved former wholly-owned

subsidiary alleged to have employed the individuals who allegedly violated RESPA. The Court also allowed Plaintiffs additional discovery. 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 now-dissolved former wholly-owned subsidiary of a bankpreviously 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. Discovery is now complete. . 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.

On February 21, 2025, the Company and ESSA B&T were named as defendants in an action commenced by a plaintiff who had previously been a member of the class of plaintiffs in the first lawsuit described in this Item. As a result of that Court’s subsequent ruling re-defining that class, the plaintiff in this action no longer met the Court-ordered definition for the class membership. The plaintiff alleges that a now-dissolved former wholly-owned subsidiary of a bank previously acquired by the Company received unearned fees and kickbacks, and that he was charged an incorrect title insurance premium in connection with the process of making his loan, allegedly violating the Real Estate Settlement Procedures Act. The plaintiff also seeks to pursue the action as a class action on behalf of the entire class of people similarly situated to him. The Company has not yet been served with the Complaint. The Company and ESSA B&T intend to vigorously defend against plaintiff’s 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.

14.

Revenue Recognition

Management determined that the primary sources of revenue associated with financial instruments, including interest income on loans and investments, along with certain noninterest revenue sources including investment security gains, loan servicing charges, gains on the sale of loans, and earnings on bank owned life insurance are not within the scope of Topic 606.

Noninterest income within the scope of Topic 606 are as follows:

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.

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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, which can be identified by the use of such words as estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. These forward-looking statements are based largely on the expectations of the Company’s management and are subject to a number of risks and uncertainties, including but not limited to: our proposed merger with CNB Financial Corporation (“CNB”), which may not be consummated or may take longer or be more expensive to accomplish than expected, and which may divert our resources and management’s attention from ongoing business operations and opportunities. These forward-looking statements also include:

•

statements of our goals, intentions and expectations;

•

statements regarding our business plans and prospects and growth and operating strategies;

•

statements regarding the asset quality of our loan and investment portfolios; and

•

estimates of our risks and future costs and benefits.

By identifying these forward-looking statements for you in this manner, we are alerting you to the possibility that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Important factors that could cause our actual results and financial condition to differ from those indicated in the forward-looking statements include, among others, those discussed under “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K, as amended, and Part II, Item 1A of this and any previous Quarterly Report on Form 10-Q filed since our most recent Annual Report on Form 10-K, as well as the following factors:

•

significantly increased competition among depository and other financial institutions;

•

inflation and/or changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;

•

general economic conditions, either nationally or in our market areas, that are worse than expected;

•

adverse changes in the securities markets;

•

legislative or regulatory changes that adversely affect our business;

•

changes in consumer spending, borrowing and savings habits;

•

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies and the FASB; and

•

changes in our organization, compensation and benefit plans.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

On January 9, 2025, ESSA Bancorp, Inc. and ESSA Bank entered into an agreement and plan of merger with CNB Financial Corporation (“CNB”) and CNB Bank, pursuant to which CNB will acquire ESSA Bancorp, Inc. Under the terms of the merger agreement, each outstanding share of ESSA common stock will be converted into the right to receive 0.8547 shares of CNB common stock. The merger is subject to customary closing conditions, including the receipt of regulatory approvals and approval by the shareholders of CNB and ESSA, and is expected to close in the second half of 2025. For further information on the merger agreement, see the Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on January 10, 2025.

Comparison of Financial Condition at March 31, 2025 and September 30, 2024

Total Assets. Total assets decreased by $20.1 million, or 0.9%, to $2.2 billion at March 31, 2025 from September 30, 2024 due primarily to decreases in total cash and cash equivalents, investment securities available for sale, regulatory stock and other assets partially offset by an increase in loans receivable.

Total Cash and Cash Equivalents. Total cash and cash equivalents decreased $19.0 million, or 39.2%, to $29.6 million at March 31, 2025 from $48.6 million at September 30, 2024.

Net Loans. Net loans increased $12.8 million, or 0.7%, to $1.76 billion at March 31, 2025 from $1.74 billion at September 30, 2024. During this period, residential loans increased $13.2 million to $734.8 million as the Company sold $6.9 million of residential mortgage loans, construction loans increased $232,000 to $15.1 million, commercial real estate loans decreased $13.9 million to $870.8 million, commercial loans increased $11.8 million to $48.6 million, obligations of states and political subdivisions decreased

$265,000 to $48.3 million, home equity loans and lines of credit increased $1.2 million to $52.5 million, auto loans decreased $65,000 to zero reflecting expected runoff of the portfolio following the Company’s previously announced discontinuation of indirect auto lending in July 2018, and other loans increased $131,000 to $2.0 million.

Investment Securities Available for Sale. Investment securities available for sale decreased $5.9 million, or 2.8%, to $209.9 million at March 31, 2025 from $215.9 million at September 30, 2024 due primarily to runoff of mortgage backed securities.

Investment Securities Held to Maturity. Investment securities held to maturity decreased to $45.0 million at March 31, 2025 from $47.4 million at September 30, 2024. The Company carries some investment securities as held to maturity to manage fluctuations in comprehensive loss caused by interest rate changes.

Foreclosed Real Estate. Foreclosed real estate increased to $3.7 million at March 31, 2025 from $3.2 million at September 30, 2024. The Company has two commercial real estate properties which it is actively marketing.

Deposits. Deposits increased $60.7 million, or 3.7%, to $1.69 billion at March 31, 2025 from $1.63 billion at September 30, 2024. The increase was comprised of increases in certificates of deposit of $65.4 million, money market accounts of $13.6 million, savings and club accounts of $355,000 and non-interest bearing demand accounts of $8.2 million, partially offset by decreases in interest bearing demand accounts of $26.8 million.

Short-Term and Other Borrowings. Short-term borrowings decreased to $200.7 million at March 31, 2025 from $280.0 million at September 30, 2024. Other borrowings of terms over one year from the FHLB decreased $10.0 million from September 30, 2024 to March 31, 2025.

Stockholders’ Equity. Stockholders’ equity increased by$6.1 million, or 2.6%, to $236.5 million at March 31, 2025 from $230.4 million at September 30, 2024. The increase in stockholders’ equity was primarily due to net income of $6.7 million and other comprehensive income of $1.5 million partially offset by regular cash dividends of $0.30 per share which reduced stockholders’ equity by $2.9 million.

Average Balance Sheets for the Three and Six Months ended March 31, 2025 and 2024

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 Three Months Ended March 31,
	2025									2024
	Average Balance			Interest Income/ Expense			Yield/Cost			Average Balance			Interest Income/ Expense			Yield/Cost
	(dollars in thousands)
Interest-earning assets:
Loans(1)	$	1,770,177		$	22,520			5.16	%	$	1,719,854		$	21,724			5.07	%
Investment securities
Taxable(2)		88,217			1,064			4.89	%		102,779			1,329			5.19	%
Exempt from federal income tax(2)(3)		1,446			7			2.49	%		1,864			10			2.72	%
Total investment securities		89,663			1,071			4.85	%		104,643			1,339			5.14	%
Mortgage-backed securities		166,154			1,374			3.35	%		177,571			1,421			3.21	%
Federal Home Loan Bank stock		16,287			347			8.64	%		18,542			395			8.54	%
Other		33,899			320			3.83	%		56,464			771			5.48	%
Total interest-earning assets		2,076,180			25,632			5.01	%		2,077,074			25,650			4.95	%
Allowance for credit losses		(15,107	)								(15,520	)
Noninterest-earning assets		122,600									129,990
Total assets	$	2,183,673								$	2,191,544
Interest-bearing liabilities:
Interest bearing demand accounts	$	290,534		$	492			0.69	%	$	305,131		$	383			0.50	%
Money market accounts		364,114			2,358			2.63	%		334,119			1,787			2.15	%
Savings and club accounts		141,681			24			0.07	%		156,047			35			0.09	%
Certificates of deposit		627,492			6,939			4.48	%		474,821			5,385			4.55	%
Borrowed funds		230,688			1,609			2.84	%		405,713			3,206			3.17	%
Total interest-bearing liabilities		1,654,509			11,422			2.80	%		1,675,831			10,796			2.58	%
Non-interest-bearing NOW accounts		252,879									248,604
Non-interest-bearing liabilities		40,069									44,203
Total liabilities		1,947,457									1,968,638
Equity		236,216									222,906
Total liabilities and equity	$	2,183,673								$	2,191,544
Net interest income				$	14,210								$	14,854
Interest rate spread								2.21	%								2.37	%
Net interest-earning assets	$	421,671								$	401,243
Net interest margin(4)								2.78	%								2.87	%
Average interest-earning assets to average interest-bearing liabilities					125.49	%								123.94	%

__________________


	For the Six Months Ended March 31,
	2025									2024
	Average Balance			Interest Income/ Expense			Yield/Cost			Average Balance			Interest Income/ Expense			Yield/Cost
	(dollars in thousands)
Interest-earning assets:
Loans(1)	$	1,770,651		$	45,513			5.15	%	$	1,713,405		$	43,138			5.02	%
Investment securities
Taxable(2)		87,487			2,161			4.95	%		150,802			3,913			5.18	%
Exempt from federal income tax(2)(3)		1,679			18			2.72	%		1,847			21			2.87	%
Total investment securities		89,166			2,179			4.91	%		152,649			3,934			5.15	%
Mortgage-backed securities		169,126			2,787			3.30	%		171,965			2,724			3.16	%
Federal Home Loan Bank stock		16,690			723			8.69	%		18,197			771			8.45	%
Other		37,626			802			4.27	%		43,068			1,173			5.43	%
Total interest-earning assets		2,083,259			52,004			5.01	%		2,099,284			51,740			4.92	%
Allowance for credit losses		(15,215	)								(17,082	)
Noninterest-earning assets		124,364									131,774
Total assets	$	2,192,408								$	2,213,976
Interest-bearing liabilities:
Interest bearing demand accounts	$	292,163		$	1,018			0.70	%	$	310,743		$	800			0.51	%
Money market accounts		360,808			4,802			2.67	%		348,601			3,809			2.18	%
Savings and club accounts		142,635			50			0.07	%		157,492			60			0.08	%
Certificates of deposit		627,317			14,272			4.56	%		499,981			11,383			4.54	%
Borrowed funds		241,653			3,508			2.91	%		381,754			5,970			3.12	%
Total interest-bearing liabilities		1,664,576			23,650			2.85	%		1,698,571			22,022			2.59	%
Non-interest-bearing NOW accounts		254,166									252,028
Non-interest-bearing liabilities		38,843									42,112
Total liabilities		1,957,585									1,992,711
Equity		234,823									221,265
Total liabilities and equity	$	2,192,408								$	2,213,976
Net interest income				$	28,354								$	29,718
Interest rate spread								2.16	%								2.33	%
Net interest-earning assets	$	418,683								$	400,713
Net interest margin(4)								2.73	%								2.82	%
Average interest-earning assets to average interest-bearing liabilities					125.15	%								123.59	%

(1)

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

(2)

Available for sale securities are reported at fair value.

(3)

Yields on tax exempt securities have been calculated on a fully tax equivalent basis assuming a tax rate of 21.00% for the three and six months ended March 31, 2025 and 2024.

(4)

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

Comparison of Operating Results for the Three Months Ended March 31, 2025 and 2024

Net Income. Net income decreased $1.8 million, or 40.0%, to $2.7 million for the three months ended March 31, 2025 compared to net income of $4.6 million for the comparable period in 2024. The decrease was primarily due to merger related costs, increases in non-interest expense, a decrease in the release of credit losses and a decrease in net interest income.

Net Interest Income. Net interest income decreased $644,000, or 4.3%, to $14.2 million for the three months ended March 31, 2025 compared to $14.9 million for the comparable period in 2024.

Interest Income. Total interest income was $25.6 million for the three months ended March 31, 2025 compared with $25.7 million for the three months ended March 31, 2024 reflecting increases in interest rates and total yield on average interest earning assets from 4.95% for the three months ended March 31, 2024 to 5.01% for the three months ended March 31, 2025. A decrease of $894,000 in average interest earning assets a partially offset the increase in interest income.

Interest Expense. Interest expense was $11.4 million for the quarter ended March 31, 2025 compared to $10.8 million for the same period in 2024. The cost of interest-bearing liabilities increased to 2.80% for the quarter ended March 31, 2025 from 2.58% for the comparable period in 2024, reflecting higher interest rates, repricing of deposits and higher-cost borrowings. The average balance of interest-bearing liabilities decreased $21.3 million year-over-year.

Provision for Credit Losses. For the three months ended March 31, 2025, the release of credit losses decreased $454,000, compared to the three months ended March 31, 2024. For the three months ended March 31, 2025, we recorded a release of the allowance for credit losses of $42,000 that comprised of a release of $168,000 for loans and $125,000 provision for off balance sheet credit exposure. The Company did not recognize any credit losses on held-to-maturity debt securities for the year to date period ended March 31, 2025. For more information about our provision and allowance for credit losses and our loss experience, see “Financial Condition-Allowance for Credit Losses” below and Note 6 - Loans Receivable, Net of Allowance For Credit Losses on Loans to the unaudited consolidated financial statements. The allowance for credit losses was $15.0 million, or 0.84% of loans outstanding, at March 31, 2025, compared to $15.3 million, or 0.87% of loans outstanding, at September 30, 2024.

Non-interest Income. Noninterest income increased 0.7% to $2.0 million for the three months ended March 31, 2025, compared with the three months ended March 31, 2024. Increases in service charges and fees on loans of $34,000, gain on sale of loans of $40,000 and trust and investments fees of $17,000 were partially offset by decreases in loan swap fees of $41,000 for the quarter ended March 31, 2025 compared with the comparable period in 2024.

Non-interest Expense. Noninterest expense increased $1.1 million, or 9.3%, to $12.8 million for the three months ended March 31, 2025 compared with the comparable period a year earlier primarily reflecting increases in merger-related costs of $1.0 million and compensation and employee benefits of $207,000, professional fees of $94,000 and data processing of $72,000, partially offset by decreases in advertising of $71,000, FDIC insurance of $77,000 and other expenses of $119,000.

Income Taxes. Income tax expense decreased $351,000 to $727,000 for the three months ended March 31, 2025 from the comparable 2024 period. The effective tax rate for the three months ended March 31, 2025 and 2024 was 21.0% and 19.1%, respectively.

Comparison of Operating Results for the Six Months Ended March 31, 2025 and 2024

Net Income. Net income decreased $2.2 million, or 24.8%, to $6.7 million for the six months ended March 31, 2025 compared to net income of $8.9 million for the comparable period in 2024. The decrease was primarily due to merger related costs, increases in non-interest expense, a decrease in the release of credit losses and a decrease in net interest income..

Net Interest Income. Net interest income decreased $1.4 million, or 4.6%, to $28.4 million for the six months ended March 31, 2025 compared to $29.7 million for the comparable period in 2024.

Interest Income. Total interest income was $52.0 million for the six months ended March 31, 2025 compared with $51.7 million for the six months ended March 31, 2024 reflecting increases in interest rates and total yield on average interest earning assets from 4.92% for the six months ended March 31, 2024 to 5.01% for the six months ended March 31, 2025. A decrease of $16.0 million in average interest earning assets partially offset the increase in interest income.

Interest Expense. Interest expense was $23.7 million for the six months ended March 31, 2025 compared to $22.0 million for the same period in 2024. The cost of interest-bearing liabilities increased to 2.85% for the six months ended March 31, 2025 from 2.59% for the comparable period in 2024, reflecting higher interest rates, repricing of deposits and higher-cost borrowings. The average balance of interest-bearing liabilities decreased $34.0 million year-over-year.

Provision for Credit Losses. For the six months ended March 31, 2025, the release of credit losses decreased $244,000, compared to the six months ended March 31, 2024. For the six months ended March 31, 2025, we recorded a release of the allowance for credit losses of $649,000 comprised of a release of $429,000 for loans and $220,000 for off balance sheet credit exposure. The Company did not recognize any credit losses on held-to-maturity debt securities for the year to date period ended March 31, 2025. For more information about our provision and allowance for credit losses and our loss experience, see “Financial Condition-Allowance for Credit Losses” below and Note 6 - Loans Receivable, Net of Allowance For Credit Losses on Loans to the unaudited consolidated financial statements. The allowance for credit losses was $15.0 million, or 0.84% of loans outstanding, at March 31, 2025, compared to $15.3 million, or 0.87% of loans outstanding, at September 30, 2024.

Non-interest Income. Noninterest income increased 2.8% to $4.1 million for the six months ended March 31, 2025, compared with $4.0 million for the six months ended March 31, 2024. Increases in loan swap fees of $58,000 and trust and investments fees of $99,000 were partially offset by decreases in gain on sale of loans, net of $18,000 and other expenses of $33,000 for the six months ended March 31, 2025 compared with the comparable period in 2024.

Non-interest Expense. Noninterest expense increased $1.2 million, or 5.0%, to $24.7 million for the six months ended March 31, 2025 compared with the comparable period a year earlier primarily reflecting increases in merger-related costs of $1.0 million, compensation and employee benefits of $661,000 and data processing of $198,000, partially offset by decreases in other expenses of $316,000.

Income Taxes. Income tax expense decreased $460,000 to $1.6 million for the six months ended March 31, 2025 from the comparable 2024 period. The effective tax rate for the six months ended March 31, 2025 and 2024 was 19.7% and 19.1%, respectively.

The following table provides information with respect to the Bank’s non-performing assets at the dates indicated (dollars in thousands).


	March 31, 2025			September 30, 2024
Non-performing assets:
Non-accruing loans	$	8,073		$	9,026
Loans 90+ days delinquent and accruing interest		-			-
Total non-performing loans		8,073			9,026
Foreclosed real estate		3,667			3,195
Total non-performing assets	$	11,740		$	12,221
Ratio of non-performing loans to total loans		0.46	%		0.51	%
Ratio of non-performing loans to total assets		0.37	%		0.48	%
Ratio of non-performing assets to total assets		0.54	%		0.56	%
Ratio of allowance for credit losses to total loans		0.84	%		0.87	%

Loans are reviewed on a regular basis and are placed on non-accrual status when they become 90 days delinquent. When loans are placed on non-accrual status, unpaid accrued interest is fully reserved, and further income is recognized only to the extent received. Non-performing assets decreased $481,000 from September 30, 2024 to March 31, 2025. The $8.1 million of non-accruing loans at March 31, 2025 included 20 residential loans with an aggregate outstanding balance of $1.8 million, 15 commercial and commercial real estate loans with aggregate outstanding balances of $6.2 million and six consumer loans with aggregate balances of $49,000. Within the residential loan balance were $205,000 of loans past due less than 90 days. In the quarter ended March 31, 2025, the Company identified five residential loans which, although paying as agreed, have a high probability of default. Foreclosed real estate increased to $3.7 million at March 31, 2025 from $3.2 million at September 30, 2024 . Foreclosed real estate consists of two commercial properties at March 31, 2025.

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, prepayment and repayment 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 borrowing sources. 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 March 31, 2025, $29.6 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 and increases in deposit accounts and borrowings. As of March 31, 2025, we had $290.0 million of borrowings outstanding from the Pittsburgh FHLB. We have access to total FHLB advances of up to approximately $877.1 million. The Company also has access to a fully secured $90.0 million borrowing from the Federal Reserve Bank of Philadelphia.

At March 31, 2025, we had $376.0 million in loan commitments outstanding, which included, in part, $87.8 million in undisbursed construction loans and land development loans, $58.7 million in unused home equity lines of credit, $96.9 million in commercial lines of credit and commitments to originate commercial loans, $13.5 million in performance and standby letters of credit, $115.0 million in standby letters of credit issued by the Pittsburgh FHLB on the Company’s behalf and $1.2 million in other unused commitments which are primarily to originate residential mortgage loans and multifamily loans. Certificates of deposit due within one year of March 31, 2025 totaled $531.4 million, or 82.1% 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 March 31, 2026. 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 Flow, our cash flows are classified for financial reporting purposes as operating, investing or financing cash flows. Net cash provided by operating activities was $6.9 million and $7.0 million for the six months ended March 31, 2025 and 2024, 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 (used for) provided by investing activities was $(0.8) million and $100.1 million for the six months ended March 31, 2025 and 2024, respectively, principally reflecting our loan and investment security activities. Deposit and borrowing cash flows have comprised most of our financing activities, which resulted in net cash used for financing activities of $(25.1) million and $(113.2) million for the six months ended March 31, 2025 and 2024, respectively.

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 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 and recorded upon the initial recognition of a financial asset. 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.

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 2025 or 2024.

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 2025 or 2024.

Fair Value Measurements. We group our assets 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.

We base our fair values 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 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 our assets are obtained from independent pricing services that we have engaged for this purpose. When available, we, or our 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 our 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.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements (as such term is defined in applicable Securities and Exchange Commission rules) that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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 mortgage loans, have 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. The net proceeds from the Company’s stock offering increased our capital and provided management with greater flexibility to manage our interest rate risk. In particular, management used the majority of the capital we received to increase our interest-earning assets. There have been no material changes in our interest rate risk since September 30, 2024.

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal 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 Securities Exchange Act of 1934) as of the end of the period covered by this Report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this Report, our disclosure controls and procedures were effective.

There were no changes made in the Company’s internal controls over financial reporting (as defined by Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) or in other factors that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting during the period covered by this Quarterly Report on Form 10-Q.

Part II – Other Information

Item 1. Legal Proceedings

Item 1A. Risk Factors

There were no changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, as filed with the SEC on December 13, 2024 and our Quarterly Report on Form 10-Q for the quarter ended December 31, 2024, as filed with the SEC on February 10, 2025.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

On June 6, 2022 the Company announced the authorization of a ninth repurchase program for up to 500,000 shares of its common stock. This program has no expiration date. The Company made no purchases of its common stock under this program

during the three month period ended March 31, 2025. There are currently 86,242 shares that may yet be repurchased under the

program.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Securities Trading Plans of Directors and Executive Officers.

During the six months ended March 31, 2025, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

Item 6. Exhibits

The following exhibits are either filed as part of this Report or are incorporated herein by reference:


2.1	Exhibit 2.1 Agreement and Plan of Merger, dated January 9, 2025, by and among CNB Financial Corporation, CNB Bank, ESSA Bancorp, Inc. and ESSA Bank & Trust (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (Registration No. 001-33384) filed on January 10, 2025).


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

3.2	Bylaws of ESSA Bancorp, Inc. (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)

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

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

101	Interactive data files pursuant to Rule 405 of Regulation S-T, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Condition; (ii) the Consolidated Statement of Income; (iii) the Consolidated Statement of Changes in Stockholder Equity; (iv) the Consolidated Statement of Cash Flows; and (v) the Notes to Consolidated Financial Statements.

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

SIGNATURES

Pursuant to the requirements 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.

Date: May 9, 2025	/s/ Gary S. Olson
	Gary S. Olson
	President and Chief Executive Officer

Date: May 9, 2025	/s/ Allan A. Muto
	Allan A. Muto
	Executive Vice President and Chief Financial Officer