Essa Bancorp Inc. Annual Report 2018

FY2018 Annual Report · Essa Bancorp Inc.

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The Path to Performance
2018 Annual Report

ESSA Tower 6 branch and business center in downtown Allentown.
Photo courtesy of City Center Allentown.

Fellow
Shareholders:

In recent years, ESSA Bancorp, Inc. has embarked on a
course to transform itself from a thrift operating primarily
in Monroe County into a diversiÿed community bank
with a commercial focus spanning a larger geography
in Eastern Pennsylvania. This led us to acquiring three
ÿnancial institutions in other markets over the past ÿve
years. This past year we used our strategic planning
process to continue our development toward becoming
a high-performing diversiÿed community bank. The plan
focused on regionalizing our banking teams, making
operational enhancements to support productivity,
analyzing facilities and business lines to maximize
e°ciency, and implementing new technologies to support
decision-making. Ultimately, building shareholder value
through improved earnings is our foremost goal.

In ÿscal 2018, ESSA’s ÿnancial results supported our belief
that our strategy and actions have set us on a path to
better performance. If we look at income before taxes,
the Company had a much stronger year in ÿscal 2018
compared to ÿscal 2017. Income before income taxes
increased 36.6% to $12.2 million for the year ended
September 30, 2018 compared to $8.9 million for the
year ended September 30, 2017.

Net income for the year ended September 30, 2018 was
negatively impacted by a one-time charge to income tax
expense of $3.7 million recorded in the Company’s ÿrst
ÿscal quarter. This was due to the reduction in the carrying
value of the Company’s deferred tax assets, which resulted
from the reduction in the federal corporate income tax
rate under the Tax Cuts and Jobs Act of 2017. Our net
income decreased from $7.3 million, or $0.69 per diluted
share for ÿscal 2017 to $6.5 million, or $0.60 per diluted
share for the year ended September 30, 2018.

Again, if we eliminate income taxes from the year-over-
year comparison, growth and increased e°ciencies were
the primary drivers of the Company’s success during ÿscal
2018. Total loans originated during ÿscal 2018 were $433.6
million, a record year. Net loan growth of 5.5% was the
primary reason our net interest income increased by $2.7
million or 6.0% in ÿscal 2018 compared to ÿscal 2017. The
Company’s e°ciency ratio improved to 71.11% for ÿscal
2018 from 77.14% for ÿscal 2017 or by 7.8%.

During the year ended September 30, 2018 the Company
closed its remaining three supermarket branches,
restructured several retail departments, sold two unused
properties, and developed and implemented a cost
accounting system with the goal of improving
management’s analytical capabilities. As a result, total
noninterest expense declined by $1.6 million or 3.8%
for ÿscal 2018 compared to ÿscal 2017.

Accelerating Interest Income

Total interest income in ÿscal 2018 rose to $64.5 million
from $58.3 million a year earlier, which directly re˛ected
our emphasis on loan growth as the primary driver of
revenue growth. Net interest income in ÿscal 2018
increased to $48.2 million, up 6.0% from $45.5 million in
ÿscal 2017. Net interest income after provision for loan
losses was $44.2 million in ÿscal 2018 compared to $42.2
million in ÿscal 2017.

The net interest margin was 2.85% for the 12 months
ended September 30, 2018 compared with 2.77% for the
12 months ended September 30, 2017. The net interest
spread was 2.71% for the ÿscal year ended September 30,
2018 compared to a net interest rate spread of 2.69% for
the ÿscal year ended September 20, 2017.

Asset Growth Led by Commercial Banking

While the Company demonstrated a year-over-year
5.5% growth in net loans, total commercial loans
(commercial and industrial, commercial real estate,
and government) grew by 28%. Commercial loans
increased to $539.4 million at September 30, 2018
compared to $420.5 million a year earlier. The Company’s
loan portfolio composition re˛ected this growth, with all
commercial loans comprising 41% of total loans in ÿscal
2018, compared to 34% in ÿscal 2017. Our progress toward
moving the asset mix to a ratio of two-thirds commercial/
one-third consumer is consistent with our goal of becoming
a diversiÿed community bank with a commercial focus.

The key to commercial lending growth was reorganizing
our bankers by regions. The commercial banking team
focused on quality loan production, acquiring new
customers, and strong client retention. Commercial real
estate (CRE) activity led the way, with $416.6 million in
loans at September 30, 2018, up 31% from $318.3 million
at September 30, 2017. Commercial and industrial loans
(C&I) increased to $49.5 million during the same period,
up 12% from $44.1 million a year earlier. In ÿscal 2018,
the Company produced $433.6 million in total loans,
which was a Company-record number, and closed
a record 293 commercial loans totaling $296 million.

As we added new lending relationships and focused on
retaining clients through superior service, our team has
sought out opportunities to expand relationships with
commercial clients, providing deposit products, a wide
array of treasury management services, employee beneÿts,
and investment capabilities. Going forward, we expect
new analytical tools will support the goal of expanding
relationships with commercial lending clients.

Gary S. Olson,
President & CEO

We used our

strategic planning

process to continue

our development

toward becoming a

high-performing

diversifed

community bank.

Asset Quality

Maintaining asset quality through disciplined loan
underwriting and credit quality standards is of critical
importance to ESSA. Safe, stable operation is one of the
guiding principles of our mission statement. As we
continue to grow, ensuring the proÿtability and quality
of assets provides assurance that our growth and risk
appetite is sustainable.

The performance of our loan portfolio in 2018 continued
to re˛ect attention to quality, with nonperforming assets
of $11.7 million, or 0.64% of total assets at September 30,
2018, improving from $15.7 million, or 0.88% of total
assets at September 30, 2017. Net loan charge-o˝s were
$1.7 million in ÿscal 2018, down from $3.0 million in ÿscal
2017. Based on continuing asset quality and prudent
reserving, the allowance for loan losses to total loans
at ÿscal year-end 2018 increased to 0.89% from 0.75% at
ÿscal year-end 2017.

Growing Core Deposits to Fund Lending

An expanding base of core deposits (demand, savings
and money market accounts) has been a critical
component of our strategic plan, providing the most
attractively priced source of funding for lending.
These deposits comprised nearly 61% of total deposits
at September 30, 2018, representing the Company’s
highest-ever level of core deposits.

Total deposits increased 5% in 2018 from a year earlier.
Although deposit growth enabled us to reduce
borrowings by $13 million in 2018, loan growth
still required borrowed funds, which have become
costlier as short-term interest rates have risen. The most
e˝ective means for generating funds and maintaining
sound margins on loans will be to keep growing the
Company’s core demand deposits—a high priority in
the coming year.

We made further investments in human capital, creating
a Retail Sales Manager position. This position will provide
training and sales and service leadership. The primary
focus will be to build core deposits, improve the customer
experience, and drive more revenue through our
21-branch retail bank network.

Operational Effciency, Accelerated
Productivity

Our strategic plan targeted improved operational
e°ciency, focusing resources and expenditures on lines
of business that provide the best opportunity to meet
stringent goals for productivity and proÿtability. Early in
ÿscal 2018, we completed an organizational realignment
that has proven its value in supporting e°cient and
productive operation, providing clear lines of reporting
and more direct management of an expanded and
geographically diverse banking team. We formalized
our three operating regions: the Lehigh Valley region,
Northern region (Poconos and Scranton/Wilkes-Barre),
and Philadelphia region. Fiscal 2018 was the ÿrst full year
of operation for this three-region structure organized
under three new regional presidents.

Managing compensation and employee beneÿt costs
and overall operating expenses, new and more productive
regional o°ces, and savings related to closing the
Company’s remaining grocery store branch locations
and winding down the indirect auto lending business all
contributed to the reduction in total noninterest expense
during ÿscal 2018 compared to ÿscal 2017. We anticipate
further improvement with our continued focus on
managing expenses.

The quality, skill, and dedication of employees is the most
important driver of growth. Employee-related costs are,
by far, the most signiÿcant part of the Company’s expenses.
Organizational adjustments, a new reporting structure
that mirrors our business activities, clear standards for job
expectations, and compensation linked to performance
are giving our team members clear direction, supporting
a productive and satisfying work experience.

Systems, Processes to Enhance
Performance

During the past year, the Company implemented
several processes to enhance analysis and ÿnancial
modeling that are improving our ability to analyze
performance and maintain an optimal asset and liability
mix. We continue to move ESSA’s balance sheet to be
more consistent with a high-performing ÿnancial
institution. Our new cost accounting system allows us
access to ÿnancial data that helps management initiate
strategic plans and validate the results of these plans
along with other ongoing operations.

We also implemented systems to utilize the extensive
amounts of data we generate to better serve customers
and identify product and service opportunities. Notable
among our new capabilities is a sophisticated Marketing
Customer Information File (MCIF) system that enables us
to unlock the value of the vast amounts of data ESSA
generates on a daily basis. As we access the capabilities
of MCIF, we expect to gain a clearer understanding of
customer activity, use of products and services, and
opportunities to proactively o˝er speciÿc ÿnancial
solutions to commercial and retail customers. We have
already seen positive results from initial implementation,
and look forward to taking full advantage of these
systems and processes in 2019 and beyond.

Path to Performance: 2019 Outlook

We are enthusiastic about the gains made throughout
ÿscal 2018. We believe the Company is well positioned
to continue growing and improving in the coming year.
We have set higher standards for ÿnancial performance
in ÿscal 2019. Our focus on commercial banking will
continue, and while we plan to continue appropriate
investment in people, technology, and facilities, we will
not lose our focus on serving customers as e°ciently
as possible. We look forward to continuing our
transformative path, delivering superior service and
products to customers, serving the community, being
a great place to work, and building the Company’s
long-term value for shareholders.

Sincerely,
Sincerely,

Gary S. Olson, President & CEO
Gary S. Olson, President & CEO

As we
continue to grow,
ensuring the proftability
and quality of assets
provides assurance that our
growth and risk appetite
is sustainable.

Consolidated
Financial
Highlights

The following information is derived from the audited Consolidated

Financial Statements of ESSA Bancorp, Inc. For additional information,

reference is made to “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the Consolidated Financial Statements

of ESSA Bancorp, Inc. and related notes included in Form 10-K as ÿled with the

Securities and Exchange Commission.

Selected Balance Sheet Data (Years ended September 30; data in thousands)

2018

2017

2016

2015

2014

Total assets

$1,833,790

$1,785,218

$1,772,479

$1,606,544

$1,574,815

Investment securities:
Available for sale

Loans, net

Deposits

371,438

390,452

390,410

379,407

383,078

1,305,071

1,236,681

1,219,213

1,102,118

1,058,267

1,336,855

1,274,861

1,214,820

1,096,754

1,133,889

Borrowed funds

298,496

311,614

360,061

320,440

259,320

Equity

179,186

182,727

176,344

171,280

167,309

Selected Operations Data (Years ended September 30; data in thousands)

2018

2017

2016

2015

2014

Net interest income

$48,235

$45,519

$46,935

$43,789

$40,149

Provisions for loan losses

4,000

3,350

2,550

2,075

2,350

Net interest income after
provisions for loan losses

Noninterest income

Noninterest expense

Income before
income tax expense

44,235

42,169

44,385

41,714

37,799

7,813

39,853

8,199

8,783

7,896

41,438

42,858

36,865

7,407

33,811

12,195

8,930

10,310

12,745

11,395

Income tax expense

5,664

1,591

2,583

2,954

2,891

Net income

$6,531

$7,339

$7,727

$9,791

$8,504

Earnings per share:

Basic

Diluted

$0.60

$0.69

$0.74

$0.73

$0.94

$0.93

$0.79

Selected Other Data (Years ended September 30)

Return on average assets

Return on average equity

Interest rate spread(1)

Net interest margin(2)

Non-performing assets as
a percentage of total assets

Tier 1 core capital
(to adjusted tangible assets)

2018

0.36%

3.61%

2.71%

2.85%

2017

0.42%

4.11%

2.69%

2.77%

2016

0.45%

4.40%

2.81%

2.89%

2015

0.62%

5.68%

2.89%

2.96%

2014

0.59%

5.01%

2.89%

2.97%

0.64%

0.88%

1.24%

1.41%

1.58%

9.28%

9.19%

8.76%

10.03%

10.04%

(1) The interest rate spread represents the difference between the weighted-average yield on a fully tax-equivalent basis on interest-earning
assets and the weighted-average cost of interest-bearing liabilities for the year.

(2) The net interest margin represents net interest income on a fully tax-equivalent basis as a percent of average interest-earning assets for
the year.

Stock Price & Market Capitalization

$24.00

$21.00

$18.00
E
C
R
P

$15.00

K
C
O
T
S

$12.00

$9.00

2014

2015

2016

2017

2018

(Years ended September 30)

$210,000,000

$190,000,000

$170,000,000

$150,000,000

$130,000,000

$110,000,000

N
O

I
T
A
Z
I
L
A
T
I

P
A
C

T
E
K
R
A
M

Dividends per Share

Earnings per Share (Diluted)

$1.00

$0.80

$0.60

$0.40

$0.20

$0.93

$0.79

$0.73 $0.69

$0.60

2014 2015 2016 2017 2018

(Years ended September 30)

$0.34

$0.36

$0.36 $0.36*

$0.26

$0.50

$0.40

$0.30

$0.20

$0.10

2014 2015 2016 2017 2018

(Years ended September 30)

*Increased to $0.40 1st Quarter 2019.

Tangible Book Value (Per Share)

$15

$12

$14.03 $14.05 $14.41 $13.92

$13.34

2014 2015 2016 2017 2018

(Years ended September 30)

Consolidated Financial Highlights (cont’d)

Net Income (in Thousands)

Deposits (in Thousands)

1
9
7
,
9
$

4
0
5
,
8
$

7
2
7
,
7
$

9
3
3
,
7
$

1
3
5
,
6
$

$10,000

$8,000

$6,000

$4,000

$2,000

$1,500,000

$1,200,000

$900,000

$600,000

$300,000

1
6
8
,
4
7
2
,
1
$

5
5
8
,
6
3
3
,
1
$

0
2
8
,
4
1
2
,
1
$

9
8
8
,
3
3
1
,
1
$

4
5
7
,
6
9
0
,
1
$

2014 2015 2016 2017 2018

(Years ended September 30)

2014 2015 2016 2017 2018

(Years ended September 30)

Return on Average Equity

Net Interest Margin

5.68%

5.01%

4.40% 4.11%

3.61%

2.97% 2.96% 2.89% 2.77% 2.85%

2014 2015 2016 2017 2018

(Years ended September 30)

2014 2015 2016 2017 2018

(Years ended September 30)

Revenue* (in Thousands)

$80,000

$60,000

$40,000

$20,000

5
8
6
,
1
5
$

6
5
5
,
7
4
$

8
1
7
,
5
5
$

8
1
7
,
3
5
$

8
4
0
,
6
5
$

2014 2015 2016 2017 2018

(Years ended September 30)

*Net interest income plus noninterest income.

Stockholders’ Equity (in Thousands)

$200,000

$160,000

$120,000

$80,000

$40,000

9
0
3
,
7
6
1
$

0
8
2
,
1
7
1
$

4
4
3
,
6
7
1
$

7
2
7
,
2
8
1
$

6
8
1
,
9
7
1
$

2014 2015 2016 2017 2018

(Years ended September 30)

Executive Personnel

BOARD OF DIRECTORS & GENERAL COUNSEL

William A. Viechnicki, D.D.S.
Chairman of the Board
Orthodontist

Robert C. Selig, Jr.
Vice Chairman of the Board
President – Selig Construction Company

Joseph S. Durkin
Executive Vice President – Reilly Associates

Timothy S. Fallon
CEO – PBS 39

Christine D. Gordon, Esq.
Deputy Chief Compliance O˜cer –
Olympus Corporation of the Americas

Daniel J. Henning
President – A.C. Henning Enterprises, Inc.

Philip H. Hosbach IV
Vice President, Global Public A°airs for Vaccines
– Sanoÿ Pasteur (retired)

Frederick E. Kuttero˜
President – Keystone Savings Bank (retired)

Gary S. Olson
President & CEO – ESSA Bank & Trust

Brian T. Regan, CPA
Shareholder – Regan, Levin, Bloss,
Brown & Savchak, P.C.

Elizabeth Bensinger Weekes, Esq.
Partner – Bensinger & Weekes, PA

John E. Burrus
Director Emeritus

William P. Douglass
Director Emeritus

John S. Schoonover, Jr.
Director Emeritus

James V. Fareri, Esq.
General Counsel

OFFICERS

Gary S. Olson
President & CEO

Allan A. Muto
Executive Vice President & CFO

Robert L. Selitto
Vice President & Controller

Charles D. Hangen
Executive Vice President & COO

Peter A. Gray
Executive Vice President & CBO

ESSA Bancorp, Inc.
200 Palmer Street
Stroudsburg, PA 18360

Mailing Address
P.O. Box L
Stroudsburg, PA 18360

Diane K. Reimer
Senior Vice President,
Administrative/Operations Division

Stephanie Le˜erson
Corporate Secretary,
Investor & Community Relations

Thomas J. Grayuski
Senior Vice President,
Human Resources Division

CORPORATE HEADQUARTERS

Auditors
S.R. Snodgrass, P.C.
2009 Mackenzie Way, Suite 340
Cranberry Township, PA16066

General Counsel
Newman, Williams, Mishkin,
Corveleyn, Wolfe & Fareri, P.C.
712 Monroe Street
Stroudsburg, PA 18360

The Path to Performance

2017 OCT

—

Implemented new cost accounting and proÿtability system

Implemented MCIF system to better understand customer data

—

Rationalized our retail network and closed remaining supermarket branches

DEC

— Consolidated from four to three regions

—

Reorganized leadership team and lines of business to better serve customers

2018 JUL

— Discontinued indirect auto lending and have exited that line of business

— Authorized share repurchase program

AUG

—

Relocated Allentown branch and o°ce to Tower 6 in the Neighborhood
Improvement Zone in downtown Allentown

Reduced our overall corporate real estate to improve e°ciency

Photo courtesy of City Center Allentown.

ESSA Locations
by Region

1. Corporate Center
200 Palmer Street
P.O. Box L
Stroudsburg, PA 18360

191

309

115

476

380

191

611

402

209

191

7
1

940

115

209

191

NORTHERN REGION

4. Brodheadsville
1881 Route 209
Brodheadsville, PA 18322

5. East Stroudsburg
75 Washington Street
East Stroudsburg, PA 18301

6. Marshalls Creek
5120 Milford Road
East Stroudsburg, PA 18302

7. Stroudsburg
744 Main Street
Stroudsburg, PA 18360

8. Tannersville
2826 Route 611
Tannersville, PA 18372

9. Blakeslee
249 Route 940
Blakeslee, PA 18610

10. Mountainhome
975 Route 390
Cresco, PA 18326

11. Scranton
300 Mulberry Street
Scranton, PA 18503

12. Wilkes-Barre
1065 Highway 315
Wilkes-Barre, PA 18702

2. Lehigh Valley Regional O˜ce
190 Brodhead Road
Suite 200
Bethlehem, PA 18017

3. Philadelphia Regional O˜ce
450 Plymouth Road
Suite 101
Plymouth Meeting, PA 19462

611

512

611

422

476

276

202

476

309

100

LEHIGH VALLEY REGION

PHILADELPHIA REGION

13. Alburtis
11 North Main Street
Alburtis, PA 18011

17. Nazareth
14 South Main Street
Nazareth, PA 18064

14. Allentown
600 Hamilton Street, Suite 100
Allentown, PA 18101

18. New Tripoli
6302 Route 309
New Tripoli, PA 18066

15. Bath
358 South Walnut Street
Bath, PA 18014

16. Bethlehem
418 West Broad Street
Bethlehem, PA 18018

19. Palmer
2415 Park Avenue
Easton, PA 18045

20. Wind Gap
1430 Jacobsburg Road
Wind Gap, PA 18091

21. Devon
227 West Lancaster Avenue
Devon, PA 19333

23. Lansdowne
48 West Marshall Road
Lansdowne, PA 19050

22. Haverford
354 West Lancaster Avenue
Haverford, PA 19041

24. Upper Darby
8045 West Chester Pike
Upper Darby, PA 19082

ADDITIONAL SERVICES

Asset Management & Trust Services
744 Main Street, Suite 3A
Stroudsburg, PA 18360

ESSA Advisory Services
190 Brodhead Road, Suite 200
Bethlehem, PA 18017

ESSA Investment Services*
746 Main Street
Stroudsburg, PA 18360

*A Cetera Investment Services, LLC Program

OUR GUIDING PRINCIPLES

There are ÿve Guiding Principles on which
our Mission Statement is based:

We believe in long-term success, operating as a safe, sound,
and stable institution. Long-term success is dependent upon proÿts,
but never will proÿt-seeking compromise our mission.

We believe in satisfying the wants and needs of our customers.
Satisfaction is dependent upon a continual improvement of our service,
products, systems, and operations.

We believe our employees are our most valuable asset. Our employees will be
provided with a work environment which is “the best in town.”

We believe our decisions should enhance ESSA’s value. Enhanced value is achieved
through quality earnings, growth, and strong management practices.

We believe in supporting our community through employee volunteering and
charitable giving to improve the quality of life. The ESSA Bank & Trust Foundation has
been established to support this principle.

ESSA CODE OF ETHICS & CONFLICT OF INTEREST POLICY

The ESSA Bancorp, Inc. Board of Directors has approved an Insider Code of Ethics and
Con˛ict of Interest policy. This policy provides Directors and employees with speciÿc
guidance promoting honest and ethical conduct and deterring wrongdoing.

Our policy may be found on our website at essabank.com.

Mission
Statement

ESSA Bank & Trust will be the

leading service-oriented

community ÿnancial institution

o°ering a full range of ÿnancial

products to greater Eastern

Pennsylvania customers.

We will ensure our long-term

prosperity by providing

products and service in

a manner consistent with

high standards of quality,

on a proÿtable basis, at the

fairest price, in order to create

the best possible value for

our customers. They will be

delivered through distribution

systems sta°ed and supported

by customer-driven, friendly,

productive employees with a high

degree of integrity.

Corporate Information

STOCK LISTING

CORPORATE GOVERNANCE

ESSA Bancorp, Inc. common stock is listed
on the NASDAQ Global MarketSM under the
symbol “ESSA.”

INTERNET INFORMATION

ESSA Bancorp, Inc. ÿnancial reports and
information about the products and services
of its wholly owned subsidiary, ESSA Bank &
Trust, are available at essabank.com.

FINANCIAL INFORMATION

We are subject to the informational
requirements of the Securities Exchange
Act of 1934. Therefore, we ÿle annual,
quarterly, and current reports as well as
proxy materials with the Securities and
Exchange Commission (SEC). You can
obtain copies of these and other ÿlings,
including exhibits, electronically at the
SEC’s website at sec.gov or through the
ESSA website at essabank.com by clicking
on the Investor Relations link. Copies of
our Annual Report and Form 10-K may also
be obtained by contacting Investor
Relations at 570-422-0182 or via email
at sle˛erson@essabank.com.

FORWARD-LOOKING STATEMENTS

essabank.com

. Shareholders who

I
nformation about our Board and its
committees and about corporate
governance at ESSA is available in the
Governance Documents section of the
Investor Relations link on the ESSA website
at
would like to request printed copies of the
Code of Ethics or the charters of our Board’s
Nominating and Corporate Governance,
Audit, and Compensation committees
(all of which are posted on the ESSA
website through the Investor Relations
link) may do so by sending their requests
in writing to Stephanie Le˝erson, Corporate
Secretary, Investor and Community
Relations, at corporate headquarters at
P.O. Box L, Stroudsburg, PA 18360.

INQUIRIES

Individual investors should contact Stephanie
Le˝erson, Corporate Secretary, Investor and
Community Relations, at 570-422-0182 or
via email at sle˛erson@essabank.com.

News media representatives and others
seeking general information should contact
Peter A. Gray, Executive Vice President, CBO,
at 570-422-0198 or via email at
pgray@essabank.com.

ANNUAL SHAREHOLDERS’ MEETING

All eligible shareholders are invited to attend
the ESSA Bancorp, Inc. annual meeting on
Thursday, February 28, 2019, at 10 a.m.
The meeting will be held at:
Northampton Community College,
Monroe Campus
2411 Route 715
Tannersville, PA 18372

REGISTRAR & TRANSFER AGENT

Computershare, Inc.
P.O. Box 505000
Louisville, KY 40233-5000
800-368-5948
computershare.com/investor

Analysts and institutional investors should
contact Allan Muto, Executive Vice President
and CFO, at 570-422-0181 or via email at
amuto@essabank.com.

SPECIAL COUNSEL

Luse Gorman, PC
5335 Wisconsin Avenue, N.W., Suite 780
Washington, DC 20015

Certain statements contained in this Annual Report are “forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identifed by reference to a future
period or periods, or by use of forward-looking terminology, such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,”
“project,” and other similar words and expressions. Our forward-looking statements are subject to numerous risks and uncertainties, including,
but not limited to, those related to the economic environment, particularly in the market areas in which the Company operates, competitive
products and pricing, fscal and monetary policies of the U.S. Government, changes in government regulations a˝ecting fnancial institutions,
legal developments, technological advances, changes in prevailing interest rates, acquisitions and the integration of acquired businesses,
credit risk management, asset-liability management, the fnancial and securities markets, and the availability of and costs associated with
sources of liquidity.

Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. The Company wishes
to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company
does not undertake and specifcally declines any obligation to publicly release the result of any revisions, which may be made to any
forward-looking statements to refect events or circumstances after the date of such statements or to refect the occurrence of anticipated or
unanticipated events. The Company wishes to advise readers that the factors listed above could a˝ect the Company’s fnancial performance
and could cause the Company’s actual results for future periods to di˝er materially from any opinions or statements expressed with respect
to future periods in any current statements. We provide greater detail regarding these factors in our Form 10-K for the year ended September
30, 2018, including the Risk Factors section. Our forward-looking statements may also be subject to other risks and uncertainties, including
those discussed elsewhere in this Annual Report or in our flings with the SEC, accessible on the SEC’s website at sec.gov or through the
Investor Relations link on our corporate website at essabank.com.

Equal Opportunity Lender • Member FDIC

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