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Public Offering Registration - ESSA BANCORP, INC. - 12-7-2006

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Public Offering Registration - ESSA BANCORP, INC. - 12-7-2006 Powered By Docstoc
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As filed with the Securities and Exchange Commission on December 7, 2006 Registration No. 333-________

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-1 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

ESSA BANCORP, INC.
(Exact Name of Registrant as Specified in Its Charter)

Pennsylvania
(State or Other Jurisdiction of Incorporation or Organization)

6712
(Primary Standard Industrial Classification Code Number)

Being applied for
(I.R.S. Employer Identification Number)

200 Palmer Street Stroudsburg, Pennsylvania 18360 (570) 421-0531
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Gary S. Olson 200 Palmer Street Stroudsburg, Pennsylvania 18360 (570) 421-0531
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to: John J. Gorman, Esq. Marc P. Levy, Esq. Luse Gorman Pomerenk & Schick, P.C. 5335 Wisconsin Avenue, N.W., Suite 400 Washington, D.C. 20015 (202) 274-2000 Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:  If this Form is filed to register additional shares for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  If the delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: 

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered

Amount to be registered

Proposed maximum offering price per share

Proposed maximum aggregate offering price

Amount of registration fee

Common Stock, $0.01 par value per share Participation Interests (1) (2) (3)

15,565,825 shares (1) 431,693 interests

$10.00

$155,658,250(2)

$16,656 (3)

Includes shares to be issued to the ESSA Bank & Trust Foundation, a private foundation. Estimated solely for the purpose of calculating the registration fee. The securities of ESSA Bancorp, Inc. to be purchased by the ESSA Bank & Trust 401(k) Plan are included in the amount shown for common stock. However, pursuant to Rule 457(h) of the Securities Act of 1933, as amended, no separate fee is required for the participation interests. Pursuant to such rule, the amount being registered has been calculated on the basis of the number of shares of common stock that may be purchased with the current assets of such plan.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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PROSPECTUS

ESSA BANCORP, INC.
(Proposed Holding Company for ESSA Bank & Trust) Up to 12,650,000 Shares of Common Stock
ESSA Bancorp, Inc., a Pennsylvania corporation, is offering shares of common stock for sale in connection with the conversion of ESSA Bank & Trust, a Pennsylvania-chartered savings association, from the mutual to the stock form of organization. All shares of common stock are being offered for sale at a price of $10.00 per share. Shares of our common stock have been approved for trading on the Nasdaq Global Market under the symbol ―ESSA.‖ There is currently no public market for the shares of our common stock. We also intend to contribute up to 7.0% of the shares of common stock of ESSA Bancorp, Inc. that will be sold in the offering, and up to $1.5 million in cash, to a charitable foundation established by ESSA Bank & Trust. We are offering up to 12,650,000 shares of common stock for sale on a best efforts basis. We may sell up to 14,547,500 shares of common stock because of demand for the shares, changes in market conditions or regulatory considerations without resoliciting subscribers. We must sell a minimum of 9,350,000 shares in order to complete the offering. We are offering the shares of common stock in a ―subscription offering‖ in the following descending order of priority: • • • • First, to depositors of ESSA Bank & Trust with aggregate account balances of at least $50 as of the close of business on April 30, 2005. Second, to ESSA Bank & Trust‘s tax-qualified employee benefit plans. Third, to depositors of ESSA Bank & Trust with aggregate account balances of at least $50 as of the close of business on _____________. Fourth, to depositors of ESSA Bank & Trust as of ____________ and to borrowers of ESSA Bank & Trust as of ___________ whose borrowings remained outstanding as of _________________.

Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a ―community offering.‖ We also may offer for sale shares of common stock not purchased in the subscription offering or community offering through a ―syndicated community offering‖ managed by Ryan Beck & Co., Inc. The minimum number of shares of common stock you may order is 25 shares. The maximum number of shares of common stock that can be ordered through a single qualifying account is 35,000 shares. The offering is expected to expire at 12:00 Noon, Eastern time, on ________. We may extend this expiration date without notice to you until _________, unless the Office of Thrift Supervision approves a later date, which may not be beyond ____________. Once submitted, orders are irrevocable unless the offering is terminated or is extended beyond __________, or the number of shares of common stock to be sold is increased to more than 14,547,500 shares or decreased to less than 9,350,000 shares. If the offering is extended beyond ___________, or if the number of shares of common stock to be sold is increased to more than 14,547,500 shares or decreased to less than 9,350,000 shares, we will resolicit subscribers, giving them an opportunity to change or cancel their orders. Funds received during the offering will be held in a segregated account at ESSA Bank & Trust and will earn interest at our passbook savings rate, which is currently __%. Ryan Beck & Co., Inc. will assist us in selling shares of our common stock on a best efforts basis. Ryan Beck & Co., Inc. is not required to purchase any shares of the common stock that are being offered for sale. Purchasers will not pay a commission to purchase shares of common stock in the offering. This investment involves a degree of risk, including the possible loss of your investment. Please read “

Risk Factors ” beginning on page 18.

TERMS OF THE OFFERING Price: $10.00 per Share
Minimum Maximum Adjusted Maximum

Number of shares Gross offering proceeds

$

9,350,000 93,500,000

$

12,650,000 126,500,000

$

14,547,500 145,475,000

Estimated offering expenses Estimated net proceeds Estimated net proceeds per share
(1) (1)

$ $ $

2,017,000 91,483,000 9.78

$ $ $

2,290,000 124,210,000 9.82

$ $ $

2,420,000 143,055,000 9.83

Includes selling agent fees and expenses. See ―The Conversion-Marketing and Distribution; Compensation‖ for a discussion of Ryan Beck & Co., Inc.‘s compensation for this offering.

These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Neither the Securities and Exchange Commission, the Office of Thrift Supervision, the Pennsylvania Department of Banking nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. For assistance, please call the Stock Information Center, toll free, at ( Ryan Beck & Co., Inc. [LOGO] The date of this prospectus is ___________. ) ___-____.

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Prospectus Supplement Interests in ESSA BANK & TRUST 401(k) PLAN Offering of Participation Interests in up to ESSA BANCORP, INC. Common Stock In connection with the adoption of a stock issuance plan, ESSA Bancorp, Inc. is allowing participants in the ESSA Bank & Trust 401(k) Savings Plan (the ―Plan‖) to invest all or a portion of their accounts in a unitized account which will be invested in the common stock of ESSA Bancorp, Inc. (the ―Common Stock‖). ESSA Bancorp, Inc. has registered a number of participation interests through the Plan in order to enable the trustee of the Plan to purchase up to shares of Common Stock, based upon the value of the Plan assets at , 200 , and assuming a purchase price of $10.00 per share. This prospectus supplement relates to the initial election of Plan participants to direct the trustee of the Plan to invest all or a portion of their Plan accounts in the unitized ESSA Bancorp, Inc. Stock Account at the time of the stock offering. After the stock offering, participants will continue to be able to invest in the Stock Account. ESSA Bancorp, Inc.‘s prospectus, dated , is attached to this prospectus supplement. It contains detailed information regarding the stock offering of ESSA Bancorp, Inc. common stock and the financial condition, results of operations and business of ESSA Bank & Trust. This prospectus supplement provides information regarding the Plan. You should read this prospectus supplement together with the prospectus to which it is attached and keep both for future reference. Shares of

For a discussion of investment risks that you should consider, see “Risk Factors” beginning on page 18 of the prospectus. The interests in the Plan and the offering of the Common Stock have not been approved or disapproved by the Office of Thrift Supervision, the Securities and Exchange Commission or any other federal or state agency. Any representation to the contrary is a criminal offense. The securities offered in this prospectus supplement and in the prospectus are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

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This prospectus supplement may be used only in connection with offers and sales by ESSA Bancorp, Inc., in the stock offering, of stock units representing an interest in shares of Common Stock in the ESSA Bancorp, Inc. Stock Account of the Plan. No one may use this prospectus supplement to reoffer or resell interests in shares of Common Stock acquired through the Plan. You should rely only on the information contained in this prospectus supplement and the attached prospectus. ESSA Bancorp, Inc., ESSA Bank & Trust and the Plan have not authorized anyone to provide you with information that is different. This prospectus supplement does not constitute an offer to sell or solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make an offer or solicitation in that jurisdiction. Neither the delivery of this prospectus supplement and the prospectus nor any sale of Common Stock or stock units representing an ownership interest in Common Stock shall under any circumstances imply that there has been no change in the affairs of ESSA Bank & Trust or the Plan since the date of this prospectus supplement, or that the information contained in this prospectus supplement or incorporated by reference is correct as of any time after the date of this prospectus supplement. The date of this prospectus supplement is .

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TABLE OF CONTENTS THE OFFERING Securities Offered Purchase Priorities Allocation of Units Composition of and Purpose of Stock Units Value of Plan Assets Election to Purchase Stock Units in the Stock Offering How to Order Stock in the Offering Election Form Deadline Irrevocability of Transfer Direction Future Direction to Purchase Common Stock Voting Rights of Common Stock DESCRIPTION OF THE PLAN Introduction Eligibility and Participation Contributions under the Plan Limitations on Contributions Benefits Under the Plan Withdrawals and Distributions from the Plan Investment of Contributions and Account Balances Performance History Investment in Common Stock of ESSA Bancorp, Inc. Administration of the Plan Amendment and Termination Merger, Consolidation or Transfer Federal Income Tax Consequences Additional Employee Retirement Income Security Act (―ERISA‖) Considerations Securities and Exchange Commission Reporting and Short-Swing Profit Liability Financial Information Regarding Plan Assets LEGAL OPINION Statement of Net Assets Available for Benefits as of December 31, 2006 Statement of Changes in Net Assets Available For Plan Benefits 1 1 1 2 3 3 3 4 4 4 4 5 6 6 6 7 7 8 8 8 10 17 18 18 18 19 20 20 21 21 22 23

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THE OFFERING Securities Offered ESSA Bancorp, Inc. is offering stock units in the ESSA Bank & Trust 401(k) Plan (the ―Plan‖). The stock units represent indirect ownership of ESSA Bancorp, Inc.‘s common stock through the ESSA Bancorp, Inc. Stock Account being established under the Plan in connection with the stock offering. Given the purchase price of $10 per share in the stock offering, the Plan may acquire up to _____ shares of ESSA Bancorp, Inc. Common Stock in the stock offering. Only employees of ESSA Bank & Trust may become participants in the Plan and only participants may purchase stock units in the ESSA Bancorp, Inc. Stock Account. Your investment in stock units in connection with the stock offering through the ESSA Bancorp, Inc. Stock Account is subject to the purchase priorities contained in the ESSA Bancorp, Inc. Stock Issuance Plan (the ―Stock Issuance Plan‖). Information with regard to the Plan is contained in this prospectus supplement and information with regard to the financial condition, results of operations and business of ESSA Bancorp, Inc. is contained in the accompanying prospectus. The address of the principal executive office of ESSA Bancorp, Inc. and ESSA Bank & Trust is 200 Palmer Street, Stroudsburg, Pennsylvania 18360. Purchase Priorities In connection with the stock offering, you may elect to transfer all or part of your account balances in the Plan to the ESSA Bancorp, Inc. Stock Account, to be used to purchase stock units representing an ownership interest in the Common Stock issued in the stock offering. The manner in which you make this election and transfer is discussed below under ―Election to Purchase Stock Units in the Stock Offering.‖ All Plan participants are eligible to direct a transfer of Accounts to the ESSA Bancorp, Inc. Stock Account. However, such directions are subject to the purchase priorities in the Stock Issuance Plan, which contemplates a subscription offering and, possibly, a community offering. Subscription offering categories, in descending order of purchase priorities are as follows: (1) eligible account holders; (2) tax-qualified employee benefit plans of ESSA Bank & Trust, including the employee stock ownership plan which we adopted; (3) supplemental eligible account holders; and (4) other depositors. An eligible account holder is a depositor whose deposit account(s) totaled $50.00 or more on April 30, 2005. A supplemental eligible account holder is a depositor whose deposit account(s) totaled $50.00 or more on February , 2007. Other depositors are depositors of the Bank as of __________. If you fall into subscription offering categories (1), (3) or (4), you have subscription rights to subscribe for stock in the subscription offering. You may do so through the Plan and/or outside of the

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Plan. Stock units can be subscribed for through the Plan by using Accounts in the Plan to pay for them. You may also be able to purchase stock units in the subscription offering through the Plan even though you are ineligible to purchase through subscription offering categories (1), (3) or (4) since ESSA Bancorp, Inc. has determined to allow the Plan to purchase stock through subscription offering category (2), reserved for its tax-qualified employee plans. If you choose not to direct the investment of your account balances towards the purchase of any stock units through the ESSA Bancorp, Inc. Stock Account in connection with the offering, your account balances will remain in the investment Accounts of the Plan as previously directed by you. If you are eligible to subscribe for stock in the subscription offering through subscription categories (1), (3), or (4), you will receive a separate mailing, including a Stock Order Form. You may subscribe for stock outside of the Plan by completing the Stock Order Form and submitting it to the Stock Information Center. Allocation of Units The trustee of the ESSA Bancorp, Inc. Stock Account will subscribe for Common Stock in the stock offering in accordance with your directions. No later than the end of the offering period, __________ 2007, the investment amount that you have elected for the purchase of stock units in the ESSA Bancorp, Inc. Stock Account in connection with the stock offering will be removed from the various 401(k) plan investment Accounts and transferred to the ESSA Bancorp, Inc. Stock Account, pending the consummation of the stock offering. After__________, 2007 we will determine whether all or any portion of your order will be filled (if the offering is oversubscribed, you may not receive any or all of your order, depending on your purchase priority, as described above, and whether the Plan will purchase through category 2). The amount that can be used toward your order will be applied to the purchase of stock units. In the event the offering is oversubscribed, i.e. , there are more orders for Common Stock than shares available for sale in the offering, and the trustee is unable to use the full amount allocated by you to purchase interests in Common Stock in the offering, the amount that cannot be invested in Common Stock will remain in cash in the ESSA Bancorp Stock Account until you reallocate it to other 401(k) plan investments. The prospectus describes the allocation procedures in the event of an oversubscription. See ―The Conversion‖ section in the prospectus. 2

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Composition of and Purpose of Stock Units

The ESSA Bancorp, Inc. Stock Account, which is being established in the Plan, will invest in the Common Stock of ESSA Bancorp, Inc. Following the stock offering, the ESSA Bancorp, Inc. Stock Account will maintain a cash component for liquidity purposes. Liquidity is required in order to facilitate daily transactions such as investment transfers or distributions from the ESSA Bancorp, Inc. Stock Account. For purchases in the offering, there will be no cash component. A stock unit will be valued at $10. After the offering, newly issued units will consist of a percentage interest in both the Common Stock and cash held in the ESSA Bancorp, Inc. Stock Account. Unit values (similar to the stock‘s share price) and the number of units (similar to number of shares) will be used to communicate the dollar value of a participant‘s account. Following the stock offering, each day, the stock unit value of the ESSA Bancorp, Inc. Stock Account will be determined by dividing the total market value of the Account at the end of the day by the total number of units held in the Account by all participants as of the previous day‘s end. The change in stock unit value reflects the day‘s change in stock price, any cash dividends accrued and the interest earned on the cash component of the Account, less any investment management fees. The market value and unit holdings of your account in the ESSA Bancorp, Inc. Stock Account will be reported to you on your quarterly statements. As of ___________, the market value of the assets of the Plan eligible to purchase Common Stock in the offering was approximately $_________________. In connection with the stock offering, the Plan will permit you to direct the trustee to transfer all or part of the funds which represent your current beneficial interest in the assets of the Plan to the ESSA Bancorp, Inc. Stock Account. The amount that you wish to invest in stock units will be transferred from the various 401(k) investment alternatives to the ESSA Bancorp, Inc. Stock Account pursuant to your direction on the Special Election Form. The trustee of the Plan will subscribe for ESSA Bancorp, Inc. Common Stock offered for sale in connection with the stock offering, in accordance with each participant‘s direction. In order to purchase stock units representing an ownership interest in Common Stock in the stock offering through the Plan, you must purchase stock units representing an ownership interest in at least 25 shares in the offering through the Plan. The prospectus describes maximum purchase limits for investors in the stock offering. The trustee will pay $10.00 per stock unit, which will be the same price paid by all other persons who purchase shares in the subscription and community offerings. 3

Value of Plan Assets Election to Purchase Stock Units in the Stock Offering

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How to Order Stock in the Offering

Enclosed is a Special Election Form on which you can elect to transfer all or a portion of your account balance in the Plan to the ESSA Bancorp, Inc. Stock Account for the purchase of stock units in connection with the stock offering, provided that you purchase stock units representing an ownership interest in at least 25 shares through the Plan. If you wish to use all or part of your account balance in the Plan to purchase Common Stock issued in the stock offering, you should indicate that decision on the Special Election Form. In order to direct the Trustee to purchase stock units in the offering, you may complete a Special Election Form indicating the dollar amount that you wish to have transferred from the various 401(k) investment Accounts into the ESSA Bancorp, Inc. Stock Account. Please note that you need not invest all the amounts that you have invested in the 401(k) plan in the ESSA Bancorp, Inc. Stock Account. You will file the Special Election Form with Thomas J. Grayuski, at ESSA Bank & Trust, 200 Palmer Street, Stroudsburg, Pennsylvania 18360. You must file the Special Election Form no later than 5:00 p.m., local time, on _______________. If you do not wish to make an election, you should check Box E on the reverse side of the Special Election Form and return the form to Thomas J. Grayuski as indicated above. If you wish to purchase stock units with your Plan account balances, you must return your Special Election Form to Thomas J. Grayuski, at ESSA Bank & Trust, 200 Palmer Street, Stroudsburg, Pennsylvania 18360, to be received no later than 5:00 p.m., local time, on __________________ . You may return your Special Election Form by hand delivery, mail or by faxing it to (570) 476-6258, so long as it is returned by the time specified. This return date is earlier than the deadline for purchases made outside of the Plan. In order to purchase shares outside the Plan, you must complete and return a Stock Order Form along with payment by check or by authorizing withdrawal from your ESSA Bank & Trust deposit account(s) to the Stock Information Center no later than 12:00 p.m., local time, on __________________. You may not change your election to transfer amounts to the ESSA Bancorp, Inc. Stock Account in connection with the stock offering . Your election is irrevocable. You will, however, continue to have the ability to transfer amounts not directed towards the purchase of stock units among all of the other investment Accounts on a daily basis. You will be able to purchase stock units after the offering through your investment in the ESSA Bancorp, Inc. Stock Account. You may direct that your future contributions or your account balance in the Plan be transferred to the ESSA Bancorp, Inc. Stock Account. After the offering, to the extent that shares are available, the trustee of the Plan will acquire Common Stock at your election in open 4

Election Form Deadline

Irrevocability of Transfer Direction

Future Direction to Purchase Common Stock

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market transactions at the prevailing price. You may change your investment allocation on a daily basis. Special restrictions may apply to transfers directed to and from the ESSA Bancorp, Inc. Stock Account by the participants who are subject to the provisions of section 16(b) of the Securities Exchange Act of 1934, as amended, relating to the purchase and sale of securities by officers, directors and principal shareholders of ESSA Bancorp, Inc. Voting Rights of Common Stock The Plan provides that, after the offering, you may direct the trustee how to vote any shares of ESSA Bancorp, Inc. Common Stock held by the ESSA Bancorp, Inc. Stock Account, and the interest in such shares that is credited to your account. If the trustee does not receive your voting instructions, the Plan administrator will exercise these rights as it determines in its discretion and will direct the trustee accordingly. All voting instructions will be kept confidential. 5

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DESCRIPTION OF THE PLAN Introduction ESSA Bank & Trust adopted the ESSA Bank & Trust 401(k) Plan effective December 1, 1985 (the ―Plan‖). The Plan is a tax-qualified plan, with a cash or deferred compensation feature, established in accordance with the requirements under Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as amended (the ―Code‖). ESSA Bank & Trust intends that the Plan, in operation, will comply with the requirements under Section 401(a) and Section 401(k) of the Code. ESSA Bank & Trust will adopt any amendments to the Plan that may be necessary to ensure the continuing qualified status of the Plan under the Code and applicable Treasury Regulations. Employee Retirement Income Security Act (“ERISA”). The Plan is an ―individual account plan‖ other than a ―money purchase pension plan‖ within the meaning of ERISA. As such, the Plan is subject to all of the provisions of Title I (Protection of Employee Benefit Rights) and Title II (Amendments to the Code Relating to Retirement Plans) of ERISA, except to the funding requirements contained in Part 3 of Title I of ERISA which, by their terms, do not apply to an individual account plan (other than a money purchase plan). The Plan is not subject to Title IV (Plan Termination Insurance) of ERISA. The funding requirements contained in Title IV of ERISA are not applicable to participants or beneficiaries under the Plan. Reference to Full Text of Plan. The following portions of this prospectus supplement summarize certain provisions of the Plan. They are not complete and are qualified in their entirety by the full text of the Plan. Copies of the Plan are available to all employees by filing a request with the Plan Administrator at ESSA Bank & Trust, 200 Palmer Street, Stroudsburg, Pennsylvania 18360. You are urged to read carefully the full text of the Plan. Eligibility and Participation Employees who are at least 21 years old and have completed at least one year of employment with ESSA Bank & Trust are eligible to enter the Plan (effective January 1, 2007) on the January 1 or July 1 coincident with or next following the date on which the employee meets the age and year of employment requirements (a year of employment includes the performance of at least 1,000 hours of employment). Prior to January 1, 2007, employees were eligible to enter the Plan on the December 1 or June 1 coincident with or next following the date on which the employee meets the age and year of employment requirements. Employees covered by a collective bargaining agreement and nonresident aliens who receive no income from sources within the United States are not eligible to participate in the Plan. Effective January 1, 2007, the Plan year is the calendar year (the ―Plan Year‖). There was a short Plan Year from December 1, 2006 to December 31, 2006 and before December 1, 2006, the Plan Year was from December 1 to November 30. As of , there were approximately employees and former employees eligible to participate in the Plan. 6

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Contributions under the Plan 401(k) Plan Contributions. You are permitted to defer on a pre-tax basis either a flat dollar amount or between 1% and 100% of your compensation (expressed in terms of whole percentages) for each payroll period, subject to certain restrictions imposed by the Internal Revenue Code, and to have that amount contributed to the Plan on your behalf. For purposes of the Plan, ―compensation‖ means your compensation subject to income tax withholding at the source, as reported on your Form W-2, excluding bonuses and commissions, plus deferred income attributable to any compensation reduction agreement in connection with the Plan or compensation reduction in connection with a Section 125 plan or Internal Revenue Code Section 132(f) benefit. In 2007, the annual compensation of each participant taken into account under the Plan is limited to $225,000. (Limits established by the Internal Revenue Service are subject to increase pursuant to an annual cost-of-living adjustment, as permitted by the Internal Revenue Code). You may elect to modify the amount contributed to the Plan as of any January 1 or July 1 by filing a new elective deferral agreement with the Plan administrator. Employer Matching Contributions. The Plan is intended to be a ―safe harbor‖ 401(k) Plan with respect to automatically satisfying certain IRS rules with respect to nondiscrimination in the amount of contributions for highly compensated employees compared to nonhighly compensated employees. Accordingly, ESSA Bank & Trust will make matching contributions to the Plan in an amount equal to the sum of 100% of the Participant‘s annual elective deferrals that do not exceed 3% of the Participant‘s Compensation, plus 50% of the amount of the Participant‘s annual elective deferrals that do not exceed 5% of the Participant‘s Compensation. If you stop making elective deferrals for any period, ESSA Bank & Trust will also stop making matching contributions for the same period. Limitations on Contributions Limitations on Employee Salary Deferrals. For the Plan Year beginning January 1, 2007, the amount of your before-tax contributions may not exceed $15,500 per calendar year. This amount may be adjusted periodically by law, based on changes in the cost of living. In addition, if you are age 50 or older in 2007, you will be able to make a ―catch-up‖ contribution of up to $5,000, in addition to the $15,500 limit. The ―catch-up‖ contribution limit may be adjusted periodically by law, based on changes in the cost of living. Contributions in excess of these limits, as applicable to you, are known as excess deferrals. If you defer amounts in excess of these limitations, as applicable to you, your gross income for federal income tax purposes will include the excess in the year of the deferral. In addition, unless the excess deferral is distributed before April 15 of the following year, it will be taxed again in the year distributed. Income on the excess deferral distributed by April 15 of the immediately succeeding year will be treated, for federal income tax purposes, as earned and received by you in the tax year in which the contribution is made. Limitation on Plan Contributions for Highly Compensated Employees. Special provisions of the Internal Revenue Code limit the amount of elective deferrals and employer non-matching contributions that may be made to the Plan in any year on behalf of highly compensated employees, in relation to the amount of elective deferrals and employer non-matching contributions made by or on behalf of all other employees eligible to participate in the Plan. 7

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A highly compensated employee includes any employee who (1) was a 5% owner of ESSA Bancorp, Inc. at any time during the current or preceding year, or (2) had compensation for the preceding year of more than $100,000. The dollar amounts in the foregoing sentence may be adjusted annually to reflect increases in the cost of living. If these limitations are exceeded, the level of deferrals by highly compensated employees may have to be adjusted. Benefits Under the Plan Vesting. At all times, you have a fully vested, nonforfeitable interest in the elective deferrals you have made under the Plan. Any employer contributions credited to your account before December 1, 2004 are subject to a 6-year graded vesting schedule pursuant to which such amounts vest in 20% increments after each completed year of service, beginning after the completion of the second year of service, until a participant becomes 100% vested upon completion of 6 years of service. Employer contributions to your account on and after December 1, 2004 are fully vested because the Plan is a ―safe harbor‖ 401(k) plan as of that date. In addition, you will also become 100% vested in the employer contributions and earnings credited to your account upon your death, disability or attainment of age 65. Withdrawals and Distributions from the Plan In-service withdrawals from your 401(k) account are not permitted under the Plan until you attain age 70 loans are not permitted under the Plan.
1

/ 2 . Hardship withdrawals and

Withdrawal upon Termination of Employment. You may make withdrawals from your accounts at any time after you terminate employment. If your vested account balance as of the date of your termination is $1,000 or less, distribution will be made in a lump sum. If your accounts are between $1,000 and $5,000 and you have not made any payment election, the Plan administrator will pay the distribution in a direct rollover to an individual retirement plan designated by the Plan administrator. If your accounts exceed $5,000 upon your termination of employment, payment will be deferred until you reach age 65 unless you elect an optional form of payment such as a lump sum payment or partial withdrawal (subject to a mandatory 20% income tax withholding), a rollover to an individual retirement account or to another employer‘s plan (if permitted by that plan). Distribution due to Disability, Death or Retirement. If your termination of employment is due to normal or postponed retirement, death or disability and your accounts exceed $5,000, distribution will be made in a lump sum payment upon your attainment of age 65 (or, if earlier, date of disability) unless you elect to defer distribution to a postponed retirement date or unless you elect an optional form of payment such as a lump sum payment or partial withdrawal (subject to a mandatory 20% income tax withholding), a rollover to an individual retirement account or to another employer‘s plan (if permitted by that plan). Investment of Contributions and Account Balances All amounts credited to your accounts under the Plan are either held in insurance products or in the Plan trust (the ―Trust‖) which is administered by the trustee appointed by ESSA Bank & Trust‘s Board of Directors. 8

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Prior to the effective date of the offering, you were provided the opportunity to direct the investment of your account into one or more of the following options: • • • • • • • • • • • • • • • • • • • • • • • • • Premier Money Market (Babson Capital) MKSXX Premier Core Bond (Babson Capital) MCBDX Premier High Yield (Babson Capital) DLHYX Premier Strategic Income (OFI) MISLX Conservative Journey Moderate Journey Aggressive Journey Destination Retirement Income MDRLX Destination Retirement 2020 MRTLX Destination Retirement 2030 MYRLX Destination Retirement 2040 MRFLX Premier Core Value Eq (Babson/AllncBer/OFI Inst) Select Large Cap Value (Davis) MLVSX Select Indexed Equity (Northern Trust) MMIEX Spectrum Growth (T. Rowe Price) PRSGX Premier Capital Appreciation (OFI) MCASX Growth (OFI) OGRYX Ultra (American Century) TWCUX Premier Small Co. Opportunities II (OFI Inst) MSCDX Premier Small Cap Value (OFI Institutional) DSMVX Select Mid Cap Growth II (T. Rowe Price) MMELX New Horizons (T. Rowe Price) PRNHX Premier International Equity (OFI) MIEDX Global Opportunities (OFI) OGIYX Select Focused Value (Harris/C&B) MFVSX

In connection with the offering, the Plan now provides that in addition to the Accounts specified above, you may direct the trustee, or its representative, to invest all or a portion of your account in the ESSA Bancorp, Inc. Stock Account. You may elect to have both past contributions and earnings, as well as future contributions to your account invested among the Accounts listed above. If you fail to provide an effective investment direction in connection with the stock offering, your contributions will be invested in the various investment alternatives that you designated until such time as you change your investment directions. You may apply different investment instructions to amounts already accumulated as opposed to future contributions. You may change your investment directions at any time by telephone or electronic medium. 9

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Performance History The following table provides performance data with respect to the investment Accounts available under the Plan through November 30, 2006: P ERFORMANCE A S OF N OVEMBER 30, 2006
S INCE I Stock Accounts 1 Month 1 Year 3 Year 5 Year 10 Year
NCEPTIO N

Premier Money Market (Babson Capital) Premier Core Bond (Babson Capital) Premier High Yield (Babson Capital) Premier Strategic Income (OFI) Conservative Journey Moderate Journey Aggressive Journey Destination Retirement Income Destination Retirement 2020 Destination Retirement 2030 Destination Retirement 2040 Premier Core Value Eq (Babson/AllncBer/OFI Inst) Select Large Cap Value (Davis) Select Indexed Equity (Northern Trust) Spectrum Growth (T. Rowe Price) Premier Capital Appreciation (OFI) Growth (OFI) Ultra (American Century) Premier Small Co. Opportunities II (OFI Inst) Premier Small Cap Value (OFI Institutional) 10

0.40 % 1.09 % 1.28 % 1.36 % 1.33 % 1.80 % 2.14 % 1.23 % 1.58 % 1.90 % 2.09 % 2.30 % 2.08 % 1.84 % 2.54 % 2.82 % 3.20 % 1.42 % 2.80 % 2.07 %

4.54 % 5.40 % 10.73 % 7.47 % 7.61 % 10.10 % 11.16 % 6.33 % 8.32 % 9.86 % 10.99 % 16.66 % 13.29 % 13.69 % 15.36 % 7.99 % 5.14 % -5.15 % 7.69 % 14.26 %

2.62 % 3.99 % 8.63 % 7.02 % 6.30 % 9.22 % 11.12 % 5.48 % 8.50 % 10.48 % 11.75 % 14.27 % 13.25 % 11.34 % 14.61 % 8.17 % 7.46 % 3.20 % 8.75 % 11.94 %

2.02 % 4.86 % 11.01 % 8.80 % 5.54 % 6.87 % 7.33 % 4.90 % 6.28 % 6.77 % 7.39 % 8.55 % 8.90 % 5.61 % 9.59 % 3.47 % 1.44 % 1.19 % 9.46 % 13.87 %

3.66 % 5.82 % N/A 6.49 % 5.98 % 7.22 % 8.42 % 5.70 % 5.68 % 5.35 % 5.68 % 6.45 % 10.14 % 7.58 % 8.44 % 8.40 % 3.20 % 4.49 % 8.25 % 11.38 %

6.63 % 8.01 % 8.95 % 8.43 % 7.69 % 9.25 % 10.62 % 8.16 % 8.20 % 8.47 % 9.21 % 10.08 % 14.39 % 10.34 % 10.73 % 14.11 % 13.73 % 12.28 % 11.43 % 12.56 %

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Select Mid Cap Growth II (T. Rowe Price) New Horizons (T. Rowe Price) Premier International Equity (OFI) Global Opportunities (OFI) Select Focused Value (Harris/C&B)

3.78 % 2.23 % 5.36 % 3.27 % 2.55 %

9.53 % 7.31 % 31.77 % 21.35 % 17.09 %

13.56 % 12.43 % 21.00 % 22.20 % 12.47 %

10.37 % 10.45 % 12.22 % 16.51 % 13.59 %

11.56 % 8.30 % 9.09 % 16.00 % 16.62 %

15.63 % 11.00 % 10.39 % 14.23 % 18.60 %

The following is a description of each of the Plan‘s investment options (excerpted from each option‘s own description): Premier Money Market (Babson Capital) MKSXX. The fund seeks to maximize current income consistent with liquidity and preservation of capital. The fund normally invests in high-quality debt securities with a remaining maturity not exceeding 397 days, including corporate debt securities and U.S. government obligations. It seeks to maintain, but does not guarantee, a stable net asset value of $1.00 per share. The fund invests 95% of assets in Tier 1 securities and no more than 5% of net assets in Tier 2 securities. The former name of the fund is MassMutual Institutional Money Market. The fund is a taxable money market fund. Taxable money market funds invest in short-term money market securities in order to provide a level of current income that is consistent with the preservation of capital. Premier Core Bond (Babson Capital) MCBDX. The fund seeks a high total rate of return consistent with prudent investment risk and preservation of capital. The fund invests at least 80% of assets in investment grade fixed-income securities which include U.S. dollar-denominated corporate obligations, securities issued or guaranteed by the U.S. government or its agencies, U.S. dollar-denominated bonds of foreign issuers, and mortgage-backed and other asset-backed securities. It may also invest up to 10% of assets in below investment grade debt securities. The fund‘s former name is MassMutual Core Bond Fund. The fund is an intermediate-term bond fund. Intermediate-term bond funds have average durations that are greater than 3.5 years and less than six years. Most of the funds rotate among a variety of sectors in the bond market, based upon which appear to offer better values. Whatever types of bonds they hold, these funds are less sensitive to interest rates, and therefore less volatile, than funds that have longer durations. Premier High Yield (Babson Capital) DLHYX. The fund seeks a high level of total return, with an emphasis on current income. The fund normally invests at least 80% of assets in lower-rated fixed-income securities. It may also invest in convertible securities, preferred stocks, warrants, bank borrowings, and other fixed-income securities. The fund has an average dollar-weighted portfolio maturity ranging from 4 to 10 years. The fund‘s former name is DLB High Yield Fund. The fund is a high-yield bond fund. High-yield bond funds concentrate on lower-quality bonds. Because such bonds are riskier than those of higher-quality companies, they offer higher coupons to attract investors. Therefore, these funds generally offer higher yields than other types of funds—but they are also more vulnerable to economic and credit risk. While defaults have been rare lately, these funds can suffer losses from recessions and bankruptcies. 11

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Premier Strategic Income (OFI) MISLX. The fund seeks high current income. The fund invests mainly in debt securities of three market sectors: foreign governments and companies, U.S. government securities, and lower-rated high-yield securities of U.S. and foreign companies. Debt securities include foreign government and U.S. government bonds and notes, CMOs, other mortgage-related securities and asset-backed securities, participation interests in loans, ―structured‖ notes, lower-grade, high-yield domestic and foreign corporate debt obligations, and ―zero-coupon‖ securities. The fund is a multisector bond fund. Multisector bond funds are generally more diversified than other types of bond funds. These funds typically divide their assets among U.S. government bonds, foreign government bonds, foreign corporate bonds, and domestic corporate bonds, including high-yield issues. Some of these funds go even further and invest in municipal bonds and exotic mortgage-backed securities. By spreading assets across many different markets, these funds seek higher yields without taking on undue risk. Conservative Journey . The fund limits exposure to risk while recognizing the importance of equity investments as a hedge against inflation. The portfolio consists of equity, fixed-income and cash investments. The mix of investments should achieve growth, stability and diversification. The fund is a conservative-allocation fund. Conservative-allocation funds seek to provide both capital appreciation and income by investing in three major areas: stocks, bonds, and cash. These funds tend to hold smaller positions in stocks than moderate-allocation funds. These funds typically have 20% to 50% of assets in equities and 50% to 80% of assets in fixed income and cash. Moderate Journey . The fund provides both long-term growth and short-term stability. The portfolio is tilted toward equities but also includes fixed-income and cash investments to take advantage of a variety of markets. This mix offers good growth potential. The fund is a moderate-allocation fund. Moderate-allocation funds seek to provide both capital appreciation and income by investing in three major areas: stocks, bonds, and cash. These funds tend to hold larger positions in stocks than conservative-allocation funds. These funds typically have 50% to 70% of assets in equities and the remainder in fixed income and cash. Aggressive Journey . This fund is a large-blend fund, designed for investors who can keep money invested for long periods, can tolerate market fluctuations and who desire to accumulate a substantial account balance. The fund invests in stocks but diversifies with fixed-income and cash investments. This mix offers high growth potential. Large-blend funds have portfolios that are fairly representative of the overall stock market in size, growth rates, and price. They tend to invest across the spectrum of U.S. industries and, owing to their broad exposure, the funds‘ returns are often similar to those of the S&P 500 index. Destination Retirement Income MDRLX. The fund seeks to achieve high current income and, as a secondary objective, capital appreciation. The fund primarily invests in a combination of MassMutual equity, fixed income, and money market funds, using an asset allocation strategy designed for investors already in retirement. The former name of the fund is MassMutual Destination Retirement Income. The fund is a target-date portfolio. Target-date 12

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portfolios provide diversified exposure to stocks, bonds, and cash for those investors who have a specific date in mind (in this case, the years 2000-2014) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. These portfolios get more conservative as the goal date approaches by investing more in bonds and cash. Investment managers structure these portfolios differently; two funds with the same goal year may have different allocations to equities and therefore different levels of return and risk. Destination Retirement 2020 MRTLX . The fund seeks to achieve as high a total rate of return on an annual basis as is considered consistent with prudent investment risk and the preservation of capital. The fund primarily invests in a combination of MassMutual equity, fixed income, and money market funds, using an asset allocation strategy designed for investors expecting to retire around the year 2020. It allocates assets among underlying MassMutual Select funds and MassMutual Premier funds. The former name of the fund is MassMutual Destination Retirement 2020. The fund is a target-date portfolio. Target-date portfolios provide diversified exposure to stocks, bonds, and cash for those investors who have a specific date in mind (in this case, the years 2015-2029) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. These portfolios get more conservative as the goal date approaches by investing more in bonds and cash. Investment managers structure these portfolios differently; two funds with the same goal year may have different allocations to equities and therefore different levels of return and risk. Destination Retirement 2030 MYRLX. The fund seeks to achieve as high a total rate of return on an annual basis as is considered consistent with prudent investment risk and the preservation of capital. The fund primarily invests in a combination of MassMutual equity, fixed income, and money market funds, using an asset allocation strategy designed for investors expecting to retire around the year 2030. It allocates assets among underlying MassMutual Select funds and MassMutual Premier funds. The former name of the fund is MassMutual Destination Retirement 2030. The fund is a target-date portfolio. Target-date portfolios provide diversified exposure to stocks, bonds, and cash for those investors who have a specific date in mind (in this case, the years 2030+) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. These portfolios get more conservative as the goal date approaches by investing more in bonds and cash. Investment managers structure these portfolios differently; two funds with the same goal year may have different allocations to equities and therefore different levels of return and risk. Destination Retirement 2040 MRFLX. The fund seeks to achieve as high a total rate of return on an annual basis as is considered consistent with prudent investment risk and the preservation of capital. The fund primarily invests in a combination of MassMutual equity, fixed income, and money market funds, using an asset allocation strategy designed for investors expecting to retire around the year 2040. It allocates assets among underlying MassMutual Select funds and MassMutual Premier funds. The former name of the fund is MassMutual Destination Retirement 2040. The fund is a target-date portfolio. Target-date portfolios provide diversified exposure to stocks, bonds, and cash for those investors who have a specific date in mind (in this case, the years 2030+) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based 13

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solely on the target date. These portfolios get more conservative as the goal date approaches by investing more in bonds and cash. Investment managers structure these portfolios differently; two funds with the same goal year may have different allocations to equities and therefore different levels of return and risk. Premier Core Value Eq (Babson/AllncBer/OFI Inst). The investment seeks to achieve long-term growth of capital and income by investing primarily in a diversified portfolio of equity securities of larger, well-established companies. This investment option normally invests at least 80% of its assets in stocks, securities convertible into stocks, and other securities, such as warrants and stock rights, whose value is based on stock prices. The fund is a large-value fund. Large-value funds focus on big companies that are less expensive or growing more slowly than other large-cap stocks. These funds often feature investments in energy, financial, or manufacturing sectors. Select Large Cap Value (Davis) MLVSX. The fund seeks both capital growth and income. The fund will normally invest at least 80% of assets in common stock of companies with market capitalizations at the time of purchase of at least $5 billion. Its strategy is to select these companies for the long-term. The fund may also invest in foreign securities and use derivatives as a hedge against currency risks. The former name of the fund is MassMutual Large Cap Value. The fund is a large-blend fund. Large-blend funds have portfolios that are fairly representative of the overall stock market in size, growth rates, and price. They tend to invest across the spectrum of U.S. industries and owing to their broad exposure, the funds‘ returns are often similar to those of the S&P 500 index. Select Indexed Equity (Northern Trust) MMIEX. The fund seeks to approximate as closely as practicable (before fees and expenses) the capitalization-weighted total rate of return of that portion of the U.S. market for publicly-traded common stocks composed of larger-capitalized companies. The fund normally invests at least 80% of assets in the equity securities of companies that make up the S&P 500 index. It generally purchases securities in proportions that match their index weights. The fund may invest in other instruments whose performance is expected to correspond to the index and may also use derivatives. It is nondiversified. The former name of the funds is MassMutual Indexed Equity. The fund is a large-blend fund. Large-blend funds have portfolios that are fairly representative of the overall stock market in size, growth rates, and price. They tend to invest across the spectrum of U.S. industries and owing to their broad exposure, the funds‘ returns are often similar to those of the S&P 500 index. Spectrum Growth (T. Rowe Price) PRSGX. The investment seeks long-term capital appreciation and growth of income with current income a secondary objective. The fund normally diversifies assets widely among a set of T. Rowe Price mutual funds representing specific market segments. It normally invests in domestic and international equity funds and a money market fund. The fund is a large-blend fund. Large-blend funds have portfolios that are fairly representative of the overall stock market in size, growth rates, and price. They tend to invest across the spectrum of U.S. industries and owing to their broad exposure, the funds‘ returns are often similar to those of the S&P 500 index. 14

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Premier Capital Appreciation (OFI) MCASX. The fund seeks long-term capital appreciation. The fund invests primarily in common stocks of growth companies. Such companies may be newer or established companies of any capitalization range that the sub-adviser believes may appreciate in value over the long-term. It does not expect to invest more than 35% of assets in foreign securities, although it has the ability to invest in them without limit. The fund is a large-growth fund. Large-growth funds invest in big companies that are projected to grow faster than other large-cap stocks. Most of these funds focus on companies in rapidly expanding industries. Growth (OFI) OGRYX. The fund seeks capital appreciation. The fund invests in common stocks of established growth companies that the advisor believes have above-average earnings prospects and are undervalued. It may invest up to 25% of assets in foreign securities and up to 25% of assets in any one industry. The fund is a large-growth fund. Large-growth funds invest in big companies that are projected to grow faster than other large-cap stocks. Most of these funds focus on companies in rapidly expanding industries. Ultra (American Century) TWCUX. The fund seeks long-term capital growth. The fund typically invests in equities selected for their appreciation potential. The majority of these securities are common stocks issued by companies that meet management‘s standards for earnings and revenue growth. The fund may also invest up to 5% of its assets in securities of companies that have operated continuously for three or fewer years. The fund is a large-growth fund. Large-growth funds invest in big companies that are projected to grow faster than other large-cap stocks. Most of these funds focus on companies in rapidly expanding industries. Premier Small Co. Opportunities II (OFI Inst) MSCDX. The fund seeks long-term capital appreciation. The fund invests at least 80% of net assets in the securities of companies whose market capitalizations at the time of purchase are within the range of capitalization of companies included in the Russell 2000 index and the S&P SmallCap 600 index. It may purchase stocks offered in initial public offerings and may sell these securities without regard to how long the fund has held the securities. The former name of the fund is DLB Small Company Opportunities Fund. The fund is a small-blend fund. Small-blend funds favor firms at the smaller end of the market–capitalization range, and are flexible in the types of small caps they buy. Some aim to own an array of value and growth stocks while others employ a discipline that leads to holdings with valuations and growth rates close to the small-cap averages. Premier Small Cap Value (OFI Institutional) DSMVX. The fund seeks long-term capital appreciation. The fund normally invests at least 80% of assets in the securities of companies whose market capitalization at the time of purchase by the fund are within the range of capitalization of companies included in the Russell 2000 index. The range of capitalization of companies included in the Russell 2000 index will fluctuate as market prices increase or decrease. The former name of the fund is DLB Small Cap Value Fund. The fund is a small-blend fund. Small-blend funds favor firms at the smaller end of the market-capitalization range, and are flexible in the types of small caps they buy. Some aim to own an array of value and growth stocks while others employ a discipline that leads to holdings with valuations and growth rates close to the small-cap averages. 15

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Select Mid Cap Growth II (T. Rowe Price ) MMELX. The fund seeks growth of capital over the long-term. The fund normally invests at lest 80% of assets in a broadly diversified portfolio of common stocks of mid-cap companies whose earnings the fund expects to grow at a faster rate than the average company. Mid-cap companies are those whose market capitalizations at the time of purchase fall within the range of companies in either the S&P MidCap 400 index or the Russell MidCap Growth index. It may also invest in other securities, including foreign securities and derivatives. The former name of the fund is MassMutual Mid Cap Growth Equity II. The fund is a mid-cap growth fund. Some mid-cap growth funds invest in stocks of all sizes, thus leading to a mid-cap profile, but others focus on midsize companies. Mid-cap growth funds target firms that are projected to grow faster than other mid-cap stocks, therefore commanding relatively higher prices. Many of these stocks are found in the volatile technology, health-care, and services sectors. New Horizons (T. Rowe Price ) PRNHX. The fund seeks long-term capital growth. The fund will invest primarily in a diversified group of small, emerging growth companies, preferably early in the corporate life cycle before a company becomes widely recognized by the investment community. It may also invest in companies that offer the possibility of accelerating earnings growth because of rejuvenated management, new products, or structural changes in the economy. While the fund invests most assets in U.S. common stocks, it may also purchase other securities including foreign stocks, futures, and options. The fund is a small-growth fund. Small-growth funds focus on faster-growing companies whose shares are at the lower end of the market-capitalization range. These funds tend to favor companies in up-and-coming industries or young firms in their early growth stages. As a result, the category tends to move in sync with the market for initial public offerings. Many of these funds invest in the technology, health-care, and services sectors. Because these businesses are fast-growing and often richly valued, their stocks tend to be volatile. Premier International Equity (OFI) MIEDX. The fund seeks a high total rate of return over the long term. The fund invests at least 80% of assets in stock traded primarily in foreign markets, including markets in Europe, Latin America, and Asia. It focuses on well-positioned, well-managed businesses that have strong revenue growth, sustainable profit margins, capital efficiency and/or business integrity and considers the macroeconomic outlook for various regional economies. The former name of the fund is MassMutual International Equity Fund. The fund is a foreign large-growth fund. Foreign large-growth funds focus on high-priced growth stocks, mainly outside of the United States. Most of these funds divide their assets among a dozen or more developed markets, including Japan, Britain, France, and Germany. They tend to invest the rest in emerging markets such as Hong Kong, Brazil, Mexico and Thailand. These funds typically will have less than 20% of assets invested in U.S. stocks. Global Opportunities (OFI ) OGIYX. The fund seeks capital appreciation, consistent with preservation of principal, while providing current income. The fund may invest in equities and fixed-income securities. It may invest without limit in foreign securities and normally maintains investments in at least three foreign countries. The fund may invest up to 25% of assets in bonds rated below investment-grade. The former name of the fund is Oppenheimer Global Gr & Inc. The fund is a world-stock fund. World-stock 16

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funds have few geographical limitations. It is common for these funds to invest the majority of their assets in the U.S., Europe, and Japan, with the remainder divided among the globe‘s smaller markets. Select Focused Value (Harris/C&B) MFVSX. The fund seeks growth of capital over the long-term. The fund invests primarily in a nondiversified portfolio of U.S. equity securities. It is managed by two sub-advisers. Harris Associates L.P. seeks out companies that are trading at significant discounts to their underlying value. It focuses on companies with market capitalizations over $1 billion. Cooke & Bieler, L.P. invests primarily in the common stocks of companies with middle market capitalizations or in companies whose market capitalizations are within the range of companies contained in the Russell Midcap Value index. The fund is nondiversified. The former name of the fund is MassMutual Focused Value. The fund is a large-blend fund. Large-blend funds have portfolios that are fairly representative of the overall stock market in size, growth rates, and price. They tend to invest across the spectrum of U.S. industries and owing to their broad exposure, the fund‘s returns are often similar to those of the S&P 500 index. An investment in any of the funds listed above is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. As with any mutual fund investment, there is always a risk that you may lose money on your investment in any of the funds listed above. Investment in Common Stock of ESSA Bancorp, Inc. In connection with the offering, the Plan now offers the ESSA Bancorp, Inc. Stock Account as an additional choice to these investments options. The ESSA Bancorp, Inc. Stock Account invests primarily in the common stock of ESSA Bancorp, Inc. In connection with the offering, you may direct the trustee to invest up to 100% of your Plan account in the ESSA Bancorp, Inc. Stock Account as a one-time special election. Subsequent to the offering, you may elect to invest all or a portion of your payroll deduction contributions in the ESSA Bancorp, Inc. Stock Account. Subsequent to the offering, you may also elect to transfer into the ESSA Bancorp, Inc. Stock Account all or a portion of your accounts currently invested in other Accounts under the Plan. The ESSA Bancorp, Inc. Stock Account consists primarily of investments in the Common Stock of ESSA Bancorp, Inc. After the offering, the trustee of the Plan will, to the extent practicable, use all amounts held by it in the ESSA Bancorp, Inc. Stock Account, including cash dividends paid on the Common Stock held in the Account, to purchase additional shares of Common Stock of ESSA Bancorp, Inc. As of the date of this prospectus supplement, none of the shares of ESSA Bancorp, Inc. Common Stock have been issued or are outstanding and there is no established market for ESSA Bancorp, Inc. Common Stock. Accordingly, there is no record of the historical performance of the ESSA Bancorp, Inc. Stock Account. Performance of the ESSA Bancorp, Inc. Stock Account depends on a number of factors, including the financial condition and profitability of ESSA 17

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Bancorp, Inc. and ESSA Bank & Trust and market conditions for ESSA Bancorp, Inc. Common Stock generally. Investments in the ESSA Bancorp, Inc. Stock Account involve special risks common to investments in the Common Stock of ESSA Bancorp, Inc. For a discussion of material risks you should consider, see “Risk Factors” beginning on page 18 of the attached prospectus. Administration of the Plan The Trustee and Custodian . Plan assets are held in a group annuity contract, so the Plan assets are not required to be held in a trust. The stock account will not be held as part of the group annuity contract and the Plan will need a trustee for this asset. MassMutual has a directed Trustee arrangement with Investor’s Bank and Trust. Plan Administrator . Pursuant to the terms of the Plan, the Plan is administered by the Plan Administrator, ESSA Bank & Trust. The address of the Plan Administrator is ESSA Bank & Trust, Attn: Thomas J. Grayuski, 200 Palmer Street, Stroudsburg, Pennsylvania 18360; telephone: (570) 422-0197. The Plan Administrator is responsible for the administration of the Plan, interpretation of the provisions of the Plan, prescribing procedures for filing applications for benefits, preparation and distribution of information explaining the Plan, maintenance of Plan records, books of account and all other data necessary for the proper administration of the Plan, preparation and filing of all returns and reports relating to the Plan which are required to be filed with the U.S. Department of Labor and the Internal Revenue Service, and for all disclosures required to be made to participants, beneficiaries and others under ERISA Sections 104 and 105. Reports to Plan Participants . The Plan Administrator will furnish you a statement at least quarterly showing the balance in your account as of the end of that period, the amount of contributions allocated to your account for that period, and any adjustments to your account to reflect earnings or losses (if any). Amendment and Termination It is the intention of ESSA Bank & Trust to continue the Plan indefinitely. Nevertheless, ESSA Bank & Trust may terminate the Plan at any time. If the Plan is terminated in whole or in part, then regardless of other provisions in the Plan, you will have a fully vested interest in your accounts. ESSA Bank & Trust reserves the right to make any amendment or amendments to the Plan which do not cause any part of the trust to be used for, or diverted to, any purpose other than the exclusive benefit of participants or their beneficiaries; provided, however, that ESSA Bank & Trust may make any amendment it determines necessary or desirable, with or without retroactive effect, to comply with ERISA. Merger, Consolidation or Transfer In the event of the merger or consolidation of the Plan with another plan, or the transfer of the trust assets to another plan, the Plan requires that you would, if either the Plan or the other 18

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plan terminates, receive a benefit immediately after the merger, consolidation or transfer that is equal to the benefit that you would have been entitled to receive immediately before the merger, consolidation or transfer. Federal Income Tax Consequences The following is a brief summary of the material federal income tax aspects of the Plan. You should not rely on this summary as a complete or definitive description of the material federal income tax consequences relating to the Plan. Statutory provisions change, as do their interpretations, and their application may vary in individual circumstances. Finally, the consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws. Please consult your tax advisor with respect to any distribution from the Plan and transactions involving the Plan. As a ―tax-qualified retirement plan,‖ the Code affords the Plan special tax treatment, including: (1) the sponsoring employer is allowed an immediate tax deduction for the amount contributed to the Plan each year; (2) participants pay no current income tax on amounts contributed by the employer on their behalf; and (3) earnings of the Plan are tax-deferred, thereby permitting the tax-free accumulation of income and gains on investments. ESSA Bank & Trust will administer the Plan to comply with the requirements of the Code as of the applicable effective date of any change in the law. Lump-Sum Distribution . A distribution from the Plan to a participant or the beneficiary of a participant will qualify as a lump-sum distribution if it is made within one taxable year, on account of the participant‘s death, disability or separation from service, or after the participant attains age 59 / 2 , and consists of the balance credited to participants under the Plan. The portion of any lump-sum distribution required to be included in your taxable income for federal income tax purposes consists of the entire amount of the lump-sum distribution you have made to this Plan.
1

ESSA Bancorp, Inc. Common Stock Included in Lump-Sum Distribution . If a lump-sum distribution includes ESSA Bancorp, Inc. Common Stock, the distribution generally will be taxed in the manner described above, except that the total taxable amount may be reduced by the amount of any net unrealized appreciation with respect to ESSA Bancorp, Inc. Common Stock; that is, the excess of the value of ESSA Bancorp, Inc. Common Stock at the time of the distribution over its cost of the securities to the trust. The tax basis of ESSA Bancorp, Inc. Common Stock, for purposes of computing gain or loss on its subsequent sale, equals the value of ESSA Bancorp, Inc. Common Stock at the time of distribution, less the amount of net unrealized appreciation. Any gain on a subsequent sale or other taxable disposition of ESSA Bancorp, Inc. Common Stock, to the extent of the amount of net unrealized appreciation at the 19

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time of distribution, will constitute long-term capital gain, regardless of the holding period of ESSA Bancorp, Inc. Common Stock. Any gain on a subsequent sale or other taxable disposition of ESSA Bancorp, Inc. Common Stock, in excess of the amount of net unrealized appreciation at the time of distribution, will be considered long-term capital gain. The recipient of a distribution may elect to include the amount of any net unrealized appreciation in the total taxable amount of the distribution, to the extent allowed by regulations to be issued by the Internal Revenue Service. Distributions: Rollovers and Direct Transfers to Another Qualified Plan or to an IRA . You may roll over virtually all distributions from the Plan to another qualified plan or to an individual retirement account in accordance with the terms of the other plan or account. Additional Employee Retirement Income Security Act (“ERISA”) Considerations As noted above, the Plan is subject to certain provisions of ERISA, including special provisions relating to control over the Plan‘s assets by participants and beneficiaries. The Plan‘s feature that allows you to direct the investment of your account balances is intended to satisfy the requirements of section 404(c) of ERISA relating to control over plan assets by a participant or beneficiary. The effect of this is two-fold. First, you will not be deemed a ―fiduciary‖ because of your exercise of investment discretion. Second, no person who otherwise is a fiduciary, such as ESSA Bank & Trust, the Plan administrator, or the Plan‘s trustee is liable under the fiduciary responsibility provision of ERISA for any loss which results from your exercise of control over the assets in your Plan account. Because you will be entitled to invest all or a portion of your account balance in the Plan in ESSA Bancorp, Inc. Common Stock, the regulations under ERISA section 404(c) require that the Plan establish procedures that ensure the confidentiality of your decision to purchase, hold, or sell employer securities, except to the extent that disclosure of such information is necessary to comply with federal or state laws not preempted by ERISA. These regulations also require that your exercise of voting and similar rights with respect to the Common Stock be conducted in a way that ensures the confidentiality of your exercise of these rights. Securities and Exchange Commission Reporting and Short-Swing Profit Liability Section 16 of the Securities Exchange Act of 1934 imposes reporting and liability requirements on officers, directors, and persons beneficially owning more than 10% of public companies such as ESSA Bancorp, Inc. Section 16(a) of the Securities Exchange Act of 1934 requires the filing of reports of beneficial ownership. Within 10 days of becoming an officer, director or person beneficially owning more than 10% of the shares of ESSA Bancorp, Inc., a Form 3 reporting initial beneficial ownership must be filed with the Securities and Exchange Commission. Changes in beneficial ownership, such as purchases, sales and gifts generally must be reported on a Form 4 within 2 business days after the change occurs. Insiders must file a Form 5 to report any transactions that should have been reported earlier on a Form 4 or were eligible for deferred reporting. If a Form 5 must be filed, it is due 45 days after the end of ESSA Bancorp, Inc.‘s fiscal year. Discretionary transactions in and beneficial ownership of the Common Stock through the ESSA Bancorp, Inc. Stock Account of the Plan by officers, directors 20

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and persons beneficially owning more than 10% of the Common Stock of ESSA Bancorp, Inc. generally must be reported to the Securities and Exchange Commission by such individuals. In addition to the reporting requirements described above, section 16(b) of the Securities Exchange Act of 1934 provides for the recovery by ESSA Bancorp, Inc. of profits realized by an officer, director or any person beneficially owning more than 10% of ESSA Bancorp, Inc.‘s Common Stock resulting from non-exempt purchases and sales of ESSA Bancorp, Inc. Common Stock within any six-month period. The Securities and Exchange Commission has adopted rules that provide exemptions from the profit recovery provisions of section 16(b) for all transactions in employer securities within an employee benefit plan, provided certain requirements are met. These requirements generally involve restrictions upon the timing of elections to acquire or dispose of employer securities for the accounts of section 16(b) persons. Except for distributions of Common Stock due to death, disability, retirement, termination of employment or under a qualified domestic relations order, persons affected by section 16(b) are required to hold shares of Common Stock distributed from the Plan for six months following such distribution and are prohibited from directing additional purchases of units within the ESSA Bancorp, Inc. Stock Account for six months after receiving such a distribution. Financial Information Regarding Plan Assets Financial information representing the net assets available for Plan benefits and the change in net assets available for Plan benefits at December 31, 2006, are attached to this prospectus supplement. LEGAL OPINION The validity of the issuance of the Common Stock has been passed upon by Luse Gorman Pomerenk & Schick, P.C., Washington, D.C., which firm acted as special counsel to ESSA Bank & Trust in connection with ESSA Bancorp, Inc.‘s stock offering. 21

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ESSA BANK & TRUST 401(k) PLAN Statement of Net Assets Available for Benefits as of December 31, 2006
December 31, 2006 Beginning of Year End of Year

Assets Investments Liabilities Net Assets Available for Plan Benefits 22

$ $ $ $

$ $ $

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ESSA BANK & TRUST 401(k) PLAN Statement of Changes in Net Assets Available For Plan Benefits
December 31, 2006

Investment Income Investment Expense Net Investment Income Contributions Total Additions Benefits paid: Withdrawals Increase in Net Assets Net Assets Available for Plan Benefits: Beginning of Year End of Year 23

$ $ $ $ $ $ $ $ $ $ $

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[MAP SHOWING ESSA BANK & TRUST‘S MARKET AREA APPEARS HERE]

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SUMMARY RISK FACTORS SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA FORWARD-LOOKING STATEMENTS HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING OUR POLICY REGARDING DIVIDENDS MARKET FOR THE COMMON STOCK HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE CAPITALIZATION PRO FORMA DATA COMPARISON OF VALUATION AND PRO FORMA INFORMATION WITH AND WITHOUT THE CHARITABLE FOUNDATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ESSA BANCORP, INC. BUSINESS OF ESSA BANCORP, INC. BUSINESS OF ESSA BANK & TRUST REGULATION TAXATION MANAGEMENT OF ESSA BANCORP, INC. SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS THE CONVERSION ESSA BANK & TRUST FOUNDATION RESTRICTIONS ON ACQUISITION OF ESSA BANCORP, INC. DESCRIPTION OF CAPITAL STOCK TRANSFER AGENT EXPERTS LEGAL MATTERS WHERE YOU CAN FIND ADDITIONAL INFORMATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ii

1 18 26 28 29 31 32 34 35 36 40 41 58 59 83 89 90 103 104 126 130 136 138 138 138 138 F-i

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SUMMARY The following summary highlights selected information in this prospectus. It may not contain all the information that is important to you. For additional information, you should read this entire prospectus carefully, including the Consolidated Financial Statements and the notes to the Consolidated Financial Statements. ESSA Bank & Trust ESSA Bank & Trust was organized in 1916. ESSA Bank & Trust is a full-service, community-oriented savings association with total assets of $725.8 million, total net loans of $556.7 million and total deposits of $402.2 million at September 30, 2006. We provide financial services to individuals, families and businesses through our 12 full-service banking offices, located in Monroe and Northampton Counties, Pennsylvania. ESSA Bank & Trust‘s business consists primarily of accepting deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in residential first mortgage loans (including construction mortgage loans), commercial real estate, home equity loans and lines of credit, commercial and consumer loans. In addition, we offer a variety of deposit accounts, including checking, savings and certificates of deposits. We offer asset management and trust services. We also offer investment services through our relationship with PRIMEVEST Financial Services, Inc., a third party broker/dealer and investment advisor. ESSA Bank & Trust‘s executive offices are located at 200 Palmer Street, Stroudsburg, Pennsylvania 18360. Our telephone number at this address is (570) 421-0531. Our website address is www.essabank.com . ESSA Bancorp, Inc. ESSA Bancorp, Inc. is a newly-formed Pennsylvania corporation that will own all of the outstanding shares of common stock of ESSA Bank & Trust upon completion of the mutual-to-stock conversion and the offering. ESSA Bancorp, Inc. has not engaged in any business to date. Our executive offices are located at 200 Palmer Street, Stroudsburg, Pennsylvania 18360. Our telephone number at this address is (570) 421-0531. Our Organizational Structure ESSA Bancorp, Inc., a Pennsylvania corporation, will own 100% of the outstanding shares of common stock of ESSA Bank & Trust. ESSA Bancorp, Inc., a Pennsylvania corporation, has not issued shares of stock to the public. Pursuant to the terms of ESSA Bank & Trust‘s plan of conversion, ESSA Bank & Trust will convert from a mutual savings association to a stock savings association operating in the holding company corporate structure. As part of the conversion, we are offering for sale in a 1

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subscription offering, and, if necessary, a community offering and a syndicated community offering, shares of common stock of ESSA Bancorp, Inc., a Pennsylvania corporation. Business Strategy Our business strategy is to grow and improve our profitability by: • • • • • Increasing customer relationships through the offering of excellent service and the distribution of that service through effective delivery systems; Continuing to transform into a full service community bank by meeting the financial services needs of our customers; Continuing to develop into a high performing financial institution, in part by increasing interest revenue and fee income; Remaining within our risk management parameters; and Employing affordable technology to increase profitability and improve customer service.

A full description of our products and services begins on page 58 of this prospectus. We believe that these strategies will guide our investment of the net proceeds of the offering. We intend to continue to pursue our business strategy after the conversion and the offering, subject to changes necessitated by future market conditions and other factors. We also intend to focus on the following: • Increasing customer relationships through a continued commitment to service and enhancing products and delivery systems. We will continue to increase customer relationships by focusing on customer satisfaction with regards to service, products, systems and operations. We have upgraded and expanded certain of our facilities, including our corporate center, to provide additional capacity to manage future growth and expand our delivery systems. Continuing to transform into a full service community bank. We continue to transform from a traditional savings association into a full service community bank. During the last several years, we have begun to offer a wide variety of commercial loans and deposits, as well as trust and brokerage services. Continuing to develop into a high performing financial institution. We will continue to enhance profitability by focusing on increasing non-interest income as well as increasing commercial products, including our focus on commercial real estate lending, which often have a higher profit margin than more traditional products. We also will pursue lower-cost commercial deposits as part of this strategy. Remaining within our risk management parameters. We place significant emphasis on risk management and compliance training for all of our directors, officers and employees. We focus on establishing regulatory compliance 2

•

•

•

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programs to determine the degree of such compliance and to maintain the trust of our customers and community. • Employing cost-effective technology to increase profitability and improve customer service. We will continue to upgrade our technology in an efficient manner. We have implemented new software for marketing purposes and have upgraded both our internal and external communication systems. Continuing our emphasis on commercial real estate lending to improve our overall performance. We intend to continue to emphasize the origination of higher interest rate margin commercial real estate loans as market conditions, regulations and other factors permit. We have expanded our commercial banking capabilities by adding experienced commercial bankers, and enhancing our direct marketing efforts to local businesses. Expanding our banking franchise through branching and acquisitions. We will attempt to use the net proceeds from the offering, as well as our new stock holding company structure, to expand our market footprint through de novo branching as well as through acquisitions of banks, savings institutions and other financial service providers in our primary market area. We will also consider establishing de novo branches or acquiring financial institutions in contiguous counties. We have received regulatory approval to open a new branch office in Tannersville, Pennsylvania which we anticipate opening in May 2007. There can be no assurance that we will be able to consummate any acquisitions or establish any additional new branches. We may explore acquisition opportunities involving other banks and thrifts, and possibly financial service companies, when and as they arise, as a means of supplementing internal growth, filling gaps in our current geographic market area and expanding our customer base, product lines and internal capabilities. Maintaining the quality of our loan portfolio. Maintaining the quality of our loan portfolio is a key factor in managing our growth. We will continue to use customary risk management techniques, such as internal and external loan reviews, risk-focused portfolio credit analysis and field inspections of collateral in overseeing the performance of our loan portfolio.

•

•

•

See ―Management‘s Discussion and Analysis of Financial Condition and Results of Operations of ESSA Bancorp, Inc.—Business Strategy‖ for a further discussion of our business strategy. Reasons for the Conversion Our primary reasons for converting and raising additional capital through the offering are: • to support our internal growth through lending in communities we serve or may serve in the future; 3

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• • •

to enhance our existing products and services and to support the development of new products and services; to improve our overall competitive position; to provide additional financial resources to pursue de novo branching opportunities and future acquisition opportunities as discussed above in ―—Business Strategy—Expanding our banking franchise through branching and acquisitions.‖ We have no current arrangements or agreements to acquire other banks, thrifts and financial service companies or branch offices. We have received regulatory approval to open a new branch office in Tannersville, Pennsylvania which we anticipate opening in May 2007; to reduce a portion of our existing borrowings; to provide better capital management tools, including the ability to pay dividends and to repurchase shares of our common stock; and to retain and attract qualified personnel by establishing stock benefit plans for management and employees, including a stock option plan, a stock recognition and retention plan and an employee stock ownership plan.

• • •

Terms of the Conversion and the Offering Under ESSA Bank & Trust‘s plan of conversion, our organization will convert to a fully public holding company structure. In connection with the conversion, we are offering between 9,350,000 and 12,650,000 shares of common stock to eligible depositors and borrowers of ESSA Bank & Trust, to our employee benefit plans and, to the extent shares remain available, to the general public. The number of shares of common stock to be sold may be increased up to 14,547,500 as a result of demand for the shares, changes in the market for financial institution stocks or regulatory considerations. Unless the number of shares of common stock to be offered is increased to more than 14,547,500 or decreased to less than 9,350,000 or the offering is extended beyond ______ __, ____, subscribers will not have the opportunity to change or cancel their stock orders. The purchase price of each share of common stock to be issued in the offering is $10.00. All investors will pay the same purchase price per share. Investors will not be charged a commission to purchase shares of common stock in the offering. Ryan Beck & Co., Inc., our marketing advisor in the offering, will use its best efforts to assist us in selling shares of our common stock. Ryan Beck & Co., Inc. is not obligated to purchase any shares of common stock in the offering. 4

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Persons Who May Order Shares of Common Stock in the Offering We are offering the shares of common stock in a ―subscription offering‖ in the following descending order of priority: • • • • First, to depositors of ESSA Bank & Trust with aggregate account balances of at least $50 as of the close of business on April 30, 2005. Second, to ESSA Bank & Trust‘s tax-qualified employee benefit plans. Third, to depositors of ESSA Bank & Trust with aggregate account balances of at least $50 as of the close of business on ______________. Fourth, to depositors of ESSA Bank & Trust as of ____________ and to borrowers of ESSA Bank & Trust as of _____________.

Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a ―community offering,‖ with a preference given to natural persons residing in the Pennsylvania Counties of Monroe and Northampton. The community offering may begin concurrently with, during or promptly after the subscription offering as we may determine at any time. If shares remain available for sale following the subscription offering or community offering, we also may offer for sale shares of common stock through a ―syndicated community offering‖ managed by Ryan Beck & Co., Inc. We have the right to accept or reject, in our sole discretion, orders received in the community offering or syndicated community offering. We have not established any set criteria for determining whether to accept or reject a purchase order in the community offering or the syndicated community offering, and, accordingly, any determination to accept or reject purchase orders in the community offering and the syndicated community offering will be based on the facts and circumstances known to us at the time. To ensure a proper allocation of stock, each subscriber eligible to purchase must list on his or her stock order form all deposit accounts in which he or she had an ownership interest at April 30, 2005, _________ or ________, as applicable or each loan account as of ________. Failure to list all accounts, or providing incorrect information, could result in the loss of all or part of a subscriber‘s stock allocation. We will strive to identify your ownership in all accounts, but we cannot guarantee that we will identify all accounts in which you have an ownership interest. Our interpretation of the terms and conditions of the plan of conversion and of the acceptability of the order forms will be final. If we receive orders for more shares than we are offering, we may not be able to fully or partially fill your order. Shares will be allocated first to categories in the subscription offering. A detailed description of share allocation procedures can be found in the section entitled ―The Conversion.‖ 5

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How We Determined the Offering Range The amount of common stock that we are offering is based on an independent appraisal of the estimated market value of ESSA Bancorp, Inc., assuming the conversion and the offering are completed. RP Financial, LC., our independent appraiser, has estimated that, as of November 24, 2006, this market value ranged from $100.0 million to $135.4 million, with a midpoint of $117.7 million. Based on this valuation and a $10.00 per share price, the number of shares of common stock being offered for sale by us will range from 9,350,000 shares to 12,650,000 shares. In addition, we will contribute between 654,500 shares to 885,500 shares to a charitable foundation established by ESSA Bank & Trust. The $10.00 per share price was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions. RP Financial‘s appraisal is based in part on our financial condition and results of operations, the effect of the additional capital raised by the sale of shares of common stock in the offering and an analysis of a peer group of ten publicly traded savings bank and thrift holding companies that RP Financial considered comparable to us. The following table presents a summary of selected pricing ratios for ESSA Bancorp, Inc. and our peer group companies identified by RP Financial. These ratios are based on earnings for the twelve months ended September 30, 2006 and book value as of September 30, 2006. Compared to the average pricing of the peer group, our pro forma pricing ratios at the maximum of the offering range indicated a premium of 22.5% on a price-to-earnings basis, a discount of 42.6% on a price-to-book value basis and a discount of 45.7% on a price-to-tangible book value basis. The pricing ratios result from our generally having higher levels of equity but lower earnings than the companies in the peer group on a pro forma basis. Our Board of Directors, in reviewing and approving the valuation, considered the range of price-to-core earnings multiples and the range of price-to-book value ratios and price-to-tangible book value ratios at the different amounts of shares to be sold in the offering. The appraisal did not consider one valuation approach to be more important than the other. Instead, the appraisal concluded that these ranges represented the appropriate balance of the two approaches to valuing ESSA Bancorp, Inc., and the number of shares to be sold, in comparison to the identified peer group institutions. The estimated appraised value and the resulting premium/discount took into consideration the potential financial impact of the conversion and offering.
Pro forma price-to-earnings multiple Pro forma price-to-book value ratio Pro forma price-to-tangible book value ratio

ESSA Bancorp, Inc. Maximum Minimum Valuation of peer group companies as of November 24, 2006 Averages Medians

22.73 x 18.18 18.55 x 16.70

81.04 % 72.10 141.13 % 137.70

81.04 % 72.10 149.25 % 145.80

The independent appraisal does not indicate per share market value. Do not assume or expect that the valuation of ESSA Bancorp, Inc. as indicated above means that, after the conversion and the offering, the shares of common stock will trade at or above the $10.00 offering price. Furthermore, the pricing ratios presented above were utilized by RP 6

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Financial to estimate our market value and not to compare the relative value of shares of our common stock with the value of the capital stock of the peer group. The value of the capital stock of a particular company may be affected by a number of factors such as financial performance, asset size and market location. The independent appraisal will be updated prior to the completion of the conversion. If the appraised value decreases below $93.5 million or increases above $145.5 million, we will promptly return, with interest, all funds previously delivered to us to purchase shares of common stock in the offering, and subscribers may be resolicited with the approval of the Office of Thrift Supervision and the Pennsylvania Department of Banking and be given the opportunity to change or cancel their orders. If you do not respond, we will cancel your stock order and return your subscription funds, with interest, and cancel any authorization to withdraw funds from your deposit accounts for the purchase of shares of common stock. For a more complete discussion of the amount of common stock we are offering for sale and the independent appraisal, see ―The Conversion—Determination of Share Price and Number of Shares to be Issued.‖ After-Market Stock Price Performance Provided by Independent Appraiser The appraisal report prepared by RP Financial included examples of after-market stock price performance for transactions completed during the three-month period ended November 24, 2006. The following table presents stock price appreciation information for all standard mutual-to-stock conversions completed between January 1, 2005 and November 24, 2006. Mutual-to-Stock Conversion Offerings with Completed Closing Dates between January 1, 2005 and November 24, 2006
Appreciation from Initial Trading Date Conversion Date Through November 24, 2006

Transaction

1 day

1 week

1 month

Chicopee Bancorp, Inc. Newport Bancorp, Inc. Legacy Bancorp, Inc. BankFinancial Corp. Benjamin Franklin Bancorp, Inc. OC Financial, Inc. Royal Financial, Inc. Average Median

7/20/06 7/7/06 10/26/05 6/24/05 4/5/05 4/1/05 1/21/05

44.6 % 28.0 % 30.3 % 36.0 % 0.6 % 20.0 % 16.0 % 25.1 % 28.0 %

42.5 % 28.8 % 34.0 % 34.0 % 3.9 % 8.0 % 26.0 % 25.3 % 28.8 %

45.2 % 31.0 % 32.0 % 36.0 % 2.5 % 10.0 % 25.4 % 26.0 % 31.0 %

51.1 % 40.0 % 60.2 % 75.5 % 43.1 % 5.0 % 60.0 % 47.8 % 51.1 %

This table is not intended to be indicative of how our stock may perform. Furthermore, this table presents only short-term price performance with respect to several companies that only recently completed their initial public offerings and may not be indicative of the longer-term stock price performance of these companies. Stock price appreciation is affected by many factors, including, but not limited to: general market and economic conditions; the interest rate environment; the amount of proceeds a company raises in its offering; and numerous factors relating to the specific company, including the experience and ability of management, historical and anticipated operating results, the nature 7

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and quality of the company‘s assets, and the company‘s market area. The companies listed in the table above may not be similar to ESSA Bancorp, Inc., the pricing ratios for their stock offerings were in some cases different from the pricing ratios for ESSA Bancorp, Inc.‘s common stock and the market conditions in which these offerings were completed were, in some cases, different from current market conditions. Any or all of these differences may cause our stock to perform differently from these other offerings. RP Financial advised the Board of Directors that the appraisal was prepared in conformance with the regulatory appraisal methodology. That methodology requires a valuation based on an analysis of the trading prices of comparable public companies whose stocks have traded for at least one year prior to the valuation date. RP Financial also advised the Board of Directors that the aftermarket trading experience of recent transactions was considered in the appraisal as a general indicator of current market conditions, but was not relied upon as a primary valuation methodology. Our Board of Directors carefully reviewed the information provided to it by RP Financial through the appraisal process, but did not make any determination regarding whether prior standard mutual-to-stock conversions have been undervalued, nor did the board draw any conclusions regarding how the historical data reflected above may affect ESSA Bancorp, Inc.‘s appraisal. Instead, we engaged RP Financial to help us understand the regulatory process as it applies to the appraisal and to advise the Board of Directors as to how much capital ESSA Bancorp, Inc. would be required to raise under the regulatory appraisal guidelines. There can be no assurance that our stock price will not trade below $10.00 per share, as has been the case for some mutual-to-stock conversions. Before you make an investment decision, we urge you to carefully read this prospectus, including, but not limited to, the section entitled “Risk Factors” beginning on page 18. Limits on How Much Common Stock You May Purchase The minimum number of shares of common stock that may be purchased is 25. Generally, no individual, or individual exercising subscription rights through a single qualifying account held jointly, may purchase more than 35,000 ($350,000) shares of common stock. If any of the following persons purchases shares of common stock, their purchases, in all categories of the offering, when combined with your purchases, cannot exceed 50,000 ($500,000) shares: • • • your spouse or relatives of you or your spouse living in your house; most companies, trusts or other entities in which you are a trustee, have a substantial beneficial interest or hold a senior management position; or other persons who may be your associates or persons acting in concert with you.

See the detailed descriptions of ―acting in concert‖ and ―associate‖ in ―The Conversion—Limitations on Common Stock Purchases.‖ 8

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How You May Purchase Shares of Common Stock In the subscription offering and community offering, you may pay for your shares only by: • • personal check, bank check or money order, made payable to ESSA Bancorp, Inc.; or authorizing us to withdraw funds from the types of ESSA Bank & Trust deposit accounts designated on the stock order form.

ESSA Bank & Trust is not permitted to knowingly lend funds to anyone for the purpose of purchasing shares of common stock in the offering. Additionally, you may not use a check drawn on a ESSA Bank & Trust line of credit or a third party check to pay for shares of common stock. You can subscribe for shares of common stock in the offering by delivering a signed and completed original stock order form, together with full payment or authorization to withdraw from one or more of your ESSA Bank & Trust deposit accounts, so that it is received (not postmarked) the stock order form before 12:00 Noon, Eastern time, ___________, which is the expiration of the offering period. Checks and money orders will be deposited with ESSA Bank & Trust upon receipt. For orders paid for by check or money order, the funds will be promptly cashed and held in a segregated account at ESSA Bank & Trust. We will pay interest on those funds calculated at ESSA Bank & Trust‘s passbook savings rate from the date funds are received until completion or termination of the conversion and the offering. Withdrawals from certificates of deposit to purchase shares of common stock in the offering may be made without incurring an early withdrawal penalty; however, if a withdrawal results in a certificate account with a balance less than the applicable minimum balance requirement, the certificate will be canceled at the time of withdrawal without penalty and the remaining balance will earn interest at the current passbook rate subsequent to the withdrawal. All funds authorized for withdrawal from deposit accounts with ESSA Bank & Trust must be in the accounts at the time the stock order is received. However, funds will not be withdrawn from the accounts until the completion of the offering and will earn interest at the applicable deposit account rate until that time. A hold will be placed on those funds when your stock order is received, making the designated funds unavailable to you. After we receive your order, your order cannot be changed or canceled unless the number of shares of common stock to be offered is increased to more than 14,547,500 or decreased to less than 9,350,000, or the offering is extended beyond ____________. By signing the stock order form, you are acknowledging receipt of a prospectus and that the shares of common stock are not deposits or savings accounts that are federally insured or otherwise guaranteed by ESSA Bank & Trust, the Federal Deposit Insurance Corporation or any other government agency. You may be able to subscribe for shares of common stock using funds in your individual retirement account, or IRA. However, shares of common stock must be purchased through and held in a self-directed retirement account, such as those offered by a brokerage firm. By 9

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regulation, ESSA Bank & Trust‘s individual retirement accounts are not self-directed, so they cannot be used to purchase or hold shares of our common stock. If you wish to use some or all of the funds in your ESSA Bank & Trust individual retirement account to purchase our common stock, the applicable funds must be transferred to a self-directed account maintained by an independent trustee, such as a brokerage firm, and the purchase must be made through that account. If you do not have such an account, you will need to establish one before placing your stock order. It may take several weeks to transfer your ESSA Bank & Trust individual retirement account to an independent trustee, so please allow yourself sufficient time to take this action. An annual administrative fee may be payable to the independent trustee. Because individual circumstances differ and processing of retirement fund orders takes additional time, we recommend that you contact our Stock Information Center promptly, preferably at least two weeks before the _________, 2007 expiration of the offering period, for assistance with purchases using your ESSA Bank & Trust individual retirement account or any other retirement account that you may have. Whether you may use such funds for the purchase of shares in the stock offering may depend on time constraints and, possibly, limitations imposed by the brokerage firm or institution where the funds are held. Delivery of Stock Certificates Certificates representing shares of common stock sold in the offering will be mailed to the persons entitled thereto at the certificate registration address noted by them on the order form, as soon as practicable following consummation of the offering and receipt of all necessary regulatory approvals. It is possible that, until certificates for the common stock are delivered, purchasers might not be able to sell the shares of common stock that they ordered, even though the common stock will have begun trading. How We Intend to Use the Proceeds From the Offering We estimate net proceeds from the offering will be between $91.5 million and $124.2 million, or $143.1 million if the offering range is increased by 15%. Approximately $45.7 million to $62.1 million of the net proceeds, or $71.5 million if the offering range is increased by 15%, will be invested in ESSA Bank & Trust. ESSA Bancorp, Inc. intends to retain between $45.7 million and $62.1 million of the net proceeds, or $71.5 million if the offering range is increased by 15%. A portion of the net proceeds retained by ESSA Bancorp, Inc. will be used for a loan to the employee stock ownership plan to fund its purchase of shares of common stock (between $8.0 million and $10.8 million, or $12.5 million if the offering is increased by 15%). ESSA Bank & Trust intends to contribute up to $1.5 million in cash to a charitable foundation it will establish as part of the stock offering. ESSA Bancorp, Inc. intends to retain the remaining funds of between $36.8 million and $50.0 million of the net proceeds, or $57.6 million if the offering range is increased by 15%. ESSA Bancorp, Inc. may use the remaining funds for investments, to pay cash dividends, to repurchase shares of common stock and other general corporate purposes discussed below. Funds invested in ESSA Bank & Trust will be used to support increased lending and other products and services. The net proceeds retained by ESSA Bancorp, Inc. and ESSA Bank & Trust also may be used for reducing a portion of our existing borrowings, future business 10

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expansion through acquisitions of banking or financial services companies or a limited number of de novo branches as discussed above in ―—Business Strategy—Expanding our banking franchise through branching and acquisitions.‖ We have no current arrangements or agreements to acquire other banks, thrifts and financial service companies or branch offices. We have received regulatory approval to open a branch in Tannersville, Pennsylvania which we anticipate opening in May 2007. Initially, a substantial portion of the net proceeds will be invested in short-term investments, investment-grade debt obligations and mortgage-backed securities. Please see the section of this prospectus entitled ―How We Intend to Use the Proceeds From the Offering‖ for more information on the proposed use of the proceeds from the offering. You May Not Sell or Transfer Your Subscription Rights Office of Thrift Supervision regulations prohibit you from transferring your subscription rights. If you order shares of common stock in the subscription offering, you will be required to state that you are purchasing the shares of common stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights. We intend to take legal action, including reporting persons to federal or state regulatory agencies, against anyone who we believe has sold or given away his or her subscription rights. We will not accept your order if we have reason to believe that you have sold or transferred your subscription rights. When completing your stock order form, you should not add the name(s) of persons who do not have subscription rights or who qualify in a lower subscription priority than you do. In addition, the stock order form requires that you list all deposit or loan accounts, giving all names on each account and the account number at the applicable eligibility date. Your failure to provide this information, or providing incomplete or incorrect information, may result in a loss of part or all of your share allocation, if there is an oversubscription. Deadline for Orders of Common Stock If you wish to purchase shares of common stock in the offering, we must receive a properly completed original stock order form, together with full payment for the shares of common stock, at the Stock Information Center no later than 12:00 Noon, Eastern time, on _________, unless we extend this deadline. A postmark prior to _________ will not entitle you to purchase shares of common stock unless we receive the envelope by 12:00 Noon Eastern time. You may submit your order form by mail using the order reply envelope provided, by overnight courier to the indicated address on the order form, or by delivery to our Stock Information Center, located at __________. Once we receive it, your order is irrevocable unless the offering is terminated or extended beyond ___________ or the number of shares of common stock to be sold is decreased to less than 9,350,000 shares or increased to more than 14,547,500 shares. If the offering is extended beyond ____________, or if the number of shares of common stock to be sold is decreased to less than 9,350,000 shares or is increased to more than 14,547,500 shares, we will, with the approval of the Office of Thrift Supervision, resolicit subscribers, giving them the opportunity to confirm, cancel or change their stock orders during a specified resolicitation period. 11

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Although we will make reasonable attempts to provide a prospectus and offering materials to holders of subscription rights, the subscription offering and all subscription rights will expire at 12:00 Noon, Eastern time, on __________, whether or not we have been able to locate each person entitled to subscription rights. Steps We May Take if We do Not Receive Orders for the Minimum Number of Shares If we do not receive orders for at least 9,350,000 shares of common stock, we may take several steps in order to issue the minimum number of shares of common stock in the offering range. Specifically, we may: • • increase the purchase limitations; and/or seek the approval of the Office of Thrift Supervision and the Pennsylvania Department of Banking to extend the offering beyond the ______________ expiration date, so long as we resolicit subscriptions that we have previously received in the offering.

In addition, we may terminate the offering at any time prior to the special meeting of members of ESSA Bank & Trust that is being called to vote upon the conversion, and at any time after member approval, with the approval of the Office of Thrift Supervision and, if requested, the Secretary of Pennsylvania Department of Banking. Purchases by Officers and Directors We expect our directors and executive officers, together with their associates, to subscribe for 427,000 shares of common stock in the offering, or 4.6% of the shares to be sold at the midpoint of the offering range. The purchase price paid by them for their subscribed shares will be the same $10.00 per share price paid by all other persons who purchase shares of common stock in the offering. Purchases by directors, executive officers and their associates will be included in determining whether the required minimum number of shares has been subscribed for in the offering. Benefits to Management and Potential Dilution to Stockholders Following the Conversion We expect our tax-qualified employee stock ownership plan to purchase 8% of the total number of shares of common stock that we sell in the offering and contribute to our charitable foundation, or 1,082,840 shares of common stock, assuming we sell the maximum of the shares proposed to be sold. If we receive orders for more shares of common stock than the maximum of the offering range, the employee stock ownership plan will have first priority to purchase shares over this maximum, up to a total of 8% of the total number of shares of common stock sold in the offering and contributed to our charitable foundation. We reserve the right to purchase shares of common stock in the open market following the offering in order to fund the employee stock ownership plan. This plan is a tax-qualified retirement plan for the benefit of all our employees. Purchases by the employee stock ownership plan will be included in determining whether the required minimum number of shares has been sold in the offering. 12

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Assuming the employee stock ownership plan purchases 1,082,840 shares in the offering, we will recognize additional compensation expense of $10.8 million over a 30-year period, assuming the shares of common stock have a fair market value of $10.00 per share for the full 30-year period. If, in the future, the shares of common stock have a fair market value greater or less than $10.00, the compensation expense will increase or decrease accordingly. We also intend to implement a stock-based recognition and retention plan and a stock option plan no earlier than six months after completion of the conversion. Stockholder approval of these plans will be required. If adopted within 12 months following the completion of the conversion, the stock recognition and retention plan will reserve a number of shares equal to not more than 4% of the shares sold in the offering and contributed to our charitable foundation, or up to 541,420 shares of common stock at the maximum of the offering range, for awards to key employees and directors, at no cost to the recipients. If adopted within 12 months following the completion of the conversion, the stock option plan will reserve a number of shares equal to not more than 10% of the shares of common stock sold in the offering and contributed to our charitable foundation, or up to 1,353,550 shares of common stock at the maximum of the offering range, for key employees and directors upon their exercise. If the stock recognition and retention plan and the stock option plan are adopted after one year from the date of the completion of the conversion, such plans would be permitted to and may grant or award shares of common stock and options greater than 4% and/or 10%, respectively, of the shares of common stock sold in the offering. We have not yet determined whether we will present these plans for stockholder approval within 12 months following the completion of the conversion or whether we will present these plans for stockholder approval more than 12 months following the completion of the conversion. If the shares of common stock awarded under the stock recognition and retention plan come from authorized but unissued shares of common stock, stockholders would experience dilution of up to approximately 3.9% in their ownership interest in ESSA Bancorp, Inc. If the shares of common stock issued upon the exercise of options granted under the stock option plan come from authorized but unissued shares of common stock, stockholders would experience dilution of approximately 9.1% in their ownership interest in ESSA Bancorp, Inc. Awards made under these plans would be subject to vesting over a period of years. 13

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The following table summarizes the number of shares of common stock and aggregate dollar value of grants (valuing each share granted at the offering price of $10.00) that are available under the stock recognition and retention plan and the stock option plan if such plans are adopted within one year following the completion of the conversion and the offering. The table shows the dilution to stockholders if all these shares are issued from authorized but unissued shares, instead of shares purchased in the open market. The table also sets forth the number of shares of common stock to be acquired by the employee stock ownership plan for allocation to all employees. A portion of the stock grants shown in the table below may be made to non-management employees.
Dilution Resulting From Issuance of Shares for Stock Benefit Plans

Number of Shares to be Granted or Purchased As a Percentage of At At Common Minimum Maximum Stock to be of Offering of Offering Issued in the Range Range Offering (2)

Value of Grants (1)

At At Minimum Maximum of Offering of Offering Range Range (Dollars in thousands)

Employee stock ownership plan Stock recognition and retention plan Stock option plan Total

800,360 400,180 1,000,450 2,200,990

1,082,840 541,420 1,353,550 2,977,810

8.56 % 4.28 10.70 23.54 %

— 3.85 9.09

$

8,004 4,002 3,842 15,848

$

10,828 5,414 5,198 21,440

12.28 % $

$

(1)

The actual value of restricted stock grants will be determined based on their fair value as of the date grants are made. For purposes of this table, fair value is assumed to be the same as the offering price of $10.00 per share. The fair value of stock options has been estimated at $3.84 per option using the Black-Scholes option pricing model with the following assumptions: a grant-date share price and option exercise price of $10.00; dividend yield of 0%; an expected option life of 10 years; a risk free interest rate of 4.64%; and a volatility rate of 11.32% based on an index of publicly traded thrift institutions. The actual expense of the stock option plan will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted which may or may not be Black-Scholes. The stock option plan and stock recognition and retention plan may award a greater number of options and shares, respectively, if the plans are adopted more than one year after the completion of the conversion.

(2)

The actual value of restricted stock grants will be determined based on their fair value (the market price of shares of common stock of ESSA Bancorp, Inc.) as of the date grants are made. The stock recognition and retention plan, which is subject to stockholder approval, cannot be implemented until at least six months after the completion of the conversion. The following table presents the total value of all shares to be available for award and issuance under the stock recognition and retention plan, assuming the shares for the plan are purchased or issued in a range of market prices from $8.00 per share to $16.00 per share at the time of the grant.
400,180 Shares Awarded at Minimum of Offering Range 470,800 Shares Awarded at Midpoint of Offering Range (In thousands, except share price information) 541,420 Shares Awarded at Maximum of Offering Range 622,633 Shares Awarded at Maximum of Offering Range, As Adjusted

Share Price

$ $ $ $ $

8.00 10.00 12.00 14.00 16.00

$

3,201 4,002 4,802 5,603 6,403

$

3,766 4,708 5,650 6,591 7,532 14

$

4,331 5,414 6,497 7,580 8,663

$

4,981 6,226 7,472 8,717 9,962

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The grant-date fair value of the options granted under the stock option plan will be based, in part, on the price of shares of common stock of ESSA Bancorp, Inc. at the time the options are granted, which, subject to stockholder approval, cannot be implemented until at least six months after the completion of the conversion. The value will also depend on the various assumptions utilized in the option-pricing model ultimately adopted. The following table presents the total estimated value of the options to be available for grant under the stock option plan, assuming the range of market prices for the shares are $8.00 per share to $16.00 per share at the time of the grant.
1,000,450 Options 1,177,000 Options at Minimum of at Midpoint of Range Range (In thousands, except share price information) 1,353,550 Options at Maximum of Range 1,556,583 Options at Maximum of Range, As Adjusted

Exercise Price

Grant-Date Fair Value Per Option

$

8.00 10.00 12.00 14.00 16.00

$

3.07 3.84 4.61 5.38 6.15

$

3,071 3,842 4,612 5,382 6,153

$

3,613 4,520 5,426 6,332 7,239

$

4,155 5,198 6,240 7,282 8,324

$

4,779 5,977 7,176 8,374 9,573

The tables presented above are provided for informational purposes only. There can be no assurance that our stock price will not trade below $10.00 per share. Before you make an investment decision, we urge you to carefully read this prospectus, including, but not limited to, the section entitled “Risk Factors” beginning on page 18. Our Issuance of Shares of Common Stock to the ESSA Bank & Trust Foundation To further our commitment to the communities we serve, we intend to establish a charitable foundation as part of the stock offering. Assuming we receive member approval to establish the charitable foundation, we will contribute cash ranging from $935,000 at the minimum of the valuation range to $1.3 million at the maximum of the valuation range and shares of our common stock representing 7.0% of the shares of common stock of ESSA Bancorp, Inc. that will be sold in the offering. The number of shares issued to our charitable foundation will range from 654,500 shares at the minimum of the valuation range to 885,500 shares at the maximum of the valuation range, which shares will have a value of $6.5 million at the minimum of the valuation range and $8.9 million at the maximum of the valuation range, based on the $10.00 per share offering price. As a result of the issuance of shares and the contribution of cash to the charitable foundation, we will record an after-tax expense of approximately $5.6 million at the minimum of the valuation range and of approximately $8.2 million at the maximum of the valuation range, during the quarter in which the stock offering is completed. The charitable foundation will be dedicated exclusively to supporting charitable causes and community development activities in the communities in which we operate. The charitable foundation is expected to make contributions totaling approximately $ in its first year of operation, assuming we sell our shares of common stock at the midpoint of the offering range. 15

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Issuing shares of common stock to the charitable foundation will: • • dilute the voting interests of purchasers of shares of our common stock in the stock offering; and result in an expense, and a reduction in earnings, during the quarter in which the contribution is made, equal to the full amount of the contribution to the charitable foundation, offset in part by a corresponding tax benefit.

The establishment and funding of the charitable foundation has been approved by the Board of Directors of ESSA Bancorp, Inc. and ESSA Bank & Trust and is subject to approval by members of ESSA Bank & Trust. If the members do not approve the charitable foundation, we may, in our discretion, complete the conversion and stock offering without the inclusion of the charitable foundation and without resoliciting subscribers. We may also determine, in our discretion, not to complete the conversion and stock offering if the members do not approve the charitable foundation. See ―Risk Factors—The Contribution of Shares to the Charitable Foundation Will Dilute Your Ownership Interests and Adversely Affect Net Income in Fiscal 2007,‖ ―Comparison of Valuation and Pro Forma Information With and Without the Charitable Foundation‖ and ―ESSA Bank & Trust Foundation.‖ Market for Common Stock We have received approval for shares of our common stock to be listed on the Nasdaq Global Market under the symbol ―ESSA.‖ See ―Market for the Common Stock.‖ Our Policy Regarding Dividends Following completion of the stock offering, our Board of Directors will have the authority to declare dividends on our common stock, subject to statutory and regulatory requirements. However, no decision has been made with respect to the amount, if any, and timing of any dividend payments. The payment and amount of any dividend payments will depend upon a number of factors, including the following: • • • • • regulatory capital requirements; our financial condition and results of operations; tax considerations; statutory and regulatory limitations; and general economic conditions. 16

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Tax Consequences As a general matter, the conversion will not be a taxable transaction for federal or state income tax purposes to ESSA Bank & Trust, ESSA Bancorp, Inc., or persons eligible to subscribe in the subscription offering. Conditions to Completion of the Conversion and the Offering We cannot complete the conversion and the offering unless: • The plan of conversion is approved by at least a majority of votes eligible to be cast by members of ESSA Bank & Trust (consisting of depositors and certain borrowers of ESSA Bank & Trust). A special meeting of members to consider and vote upon the plan of conversion has been set for _________; We have received orders to purchase at least the minimum number of shares of common stock offered; and We receive the final approval of the Office of Thrift Supervision and the Pennsylvania Department of Banking to complete the conversion and the offering.

• •

In addition, in order to establish and fund the charitable foundation, we will need to receive the approval of a majority of votes eligible to be cast by members of ESSA Bank & Trust at the special meeting of members to be held on _________________. If the members do not approve the charitable foundation, we may, in our discretion, complete the conversion and stock offering without the inclusion of the charitable foundation and without resoliciting subscribers. We may also determine in our discretion, not to complete the conversion and stock offering if the members do not approve the charitable foundation. How You Can Obtain Additional Information Our branch office personnel may not, by law, assist with investment-related questions about the offering. If you have any questions regarding the conversion or the offering, please call or visit our Stock Information Center, toll free, at 1-________, Monday through Friday between 10:00 a.m. and 4:00 p.m., Eastern time. The Stock Information Center is located at _______________________________________. The Stock Information Center will be closed on weekends and bank holidays. TO ENSURE THAT EACH PERSON RECEIVES A PROSPECTUS AT LEAST 48 HOURS PRIOR TO THE EXPIRATION DATE OF ________ IN ACCORDANCE WITH FEDERAL LAW, NO PROSPECTUS WILL BE MAILED ANY LATER THAN FIVE DAYS PRIOR TO ________ OR HAND-DELIVERED ANY LATER THAN TWO DAYS PRIOR TO ___________. 17

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RISK FACTORS You should consider carefully the following risk factors in evaluating an investment in the shares of common stock. Risks Related to Our Business Future Changes in Interest Rates Could Reduce Our Profits Our ability to make a profit largely depends on our net interest income, which could be negatively affected by changes in interest rates. Net interest income is the difference between: (1) (2) the interest income we earn on our interest-earning assets, such as loans and securities; and the interest expense we pay on our interest-bearing liabilities, such as deposits and borrowings.

Since September 30, 2004, the Federal Reserve Board of Governors has increased its target for the federal funds rate 17 times, from 1.0% to 5.25%. While these short-term market interest rates (which we use as a guide to price our deposits) have increased, longer-term market interest rates (which we use as a guide to price our longer-term loans) have not increased to the same degree. This ―flattening‖ of the market yield curve has had a negative impact on our interest rate spread and net interest margin, and if short-term interest rates continue to rise, and if rates on our deposits and borrowings continue to reprice upwards faster than the rates on our long-term loans and investments, we would continue to experience compression of our interest rate spread and net interest margin, which would have a negative effect on our profitability. Our average interest rate spread decreased 39 basis points to 2.46% during the 2006 fiscal year from 2.85% during the 2005 fiscal year. In addition, changes in interest rates can affect the average life of loans and mortgage-backed and related securities. A reduction in interest rates results in increased prepayments of loans and mortgage-backed and related securities, as borrowers refinance their loans in order to reduce their borrowing costs. This creates reinvestment risk, which is the risk that we may not be able to reinvest prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities. Increases in interest rates may decrease loan demand and/or make it more difficult for borrowers to repay adjustable rate loans. Changes in interest rates also affect the current market value of our interest-earning securities portfolio. Generally, the value of securities moves inversely with changes in interest rates. At September 30, 2006, the fair value of our available for sale agency securities, mortgage-backed securities and corporate debt obligations totaled $89.1 million. Unrealized net losses on these available for sale securities totaled approximately $287,000 at September 30, 2006 and are reported as a separate component of stockholders‘ equity. Decreases in the fair value of securities available for sale in future periods would have an adverse effect on stockholder‘s equity. 18

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We evaluate interest rate sensitivity by estimating the change in ESSA Bank & Trust‘s net portfolio value over a range of interest rate scenarios. Net portfolio value is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts. At September 30, 2006, in the event of an immediate 200 basis point increase in interest rates, the Office of Thrift Supervision model projects that we would experience a $23.0 million, or 29%, decrease in net portfolio value. See ―Management‘s Discussion and Analysis of Financial Condition and Results of Operations of ESSA Bancorp, Inc.—Management of Market Risk.‖ A Downturn in the Local Economy or a Decline in Real Estate Values Could Reduce Our Profits. Nearly all of our real estate loans are secured by real estate in Monroe and Northampton Counties, Pennsylvania. As a result of this concentration, a downturn in this market area could cause significant increases in nonperforming loans, which would reduce our profits. Additionally, a decrease in asset quality could require additions to our allowance for loan losses through increased provisions for loan losses, which would hurt our profits. In recent years, there have been significant increases in real estate values in our market area. As a result of rising home prices, our loans have been well collateralized. A decline in real estate values could cause some of our mortgage loans to become inadequately collateralized, which would expose us to a greater risk of loss. For a discussion of our market area, see ―Business of ESSA Bank & Trust—Market Area.‖ Our Continued Emphasis On Commercial Real Estate Lending Could Expose Us To Increased Lending Risks. Our business strategy centers on continuing our emphasis on commercial real estate lending. We have grown our loan portfolio in recent years with respect to this type of loan and intend to continue to emphasize this type of lending. At September 30, 2006, $47.5 million, or 8.5%, of our total loan portfolio consisted of commercial real estate loans. Loans secured by commercial real estate generally expose a lender to greater risk of non-payment and loss than one- to four-family residential mortgage loans because repayment of the loans often depends on the successful operation of the property and the income stream of the underlying property. Additionally, such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage loans. Accordingly, an adverse development with respect to one loan or one credit relationship can expose us to greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. We seek to minimize these risks through our underwriting policies, which require such loans to be qualified on the basis of the property‘s collateral value, net income and debt service ratio; however, there is no assurance that our underwriting policies will protect us from credit-related losses. At September 30, 2006, our largest commercial real estate lending relationship was a $2.8 million loan located in Monroe County, Pennsylvania and secured by real estate. See ―Business of ESSA Bank & Trust – Lending Activities – Commercial Real Estate Loans.‖ 19

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Strong Competition Within Our Market Areas May Limit Our Growth and Profitability. Competition in the banking and financial services industry is intense. In our market areas, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Some of our competitors have greater name recognition and market presence that benefit them in attracting business, and offer certain services that we do not or cannot provide. In addition, larger competitors may be able to price loans and deposits more aggressively than we do, which could affect our ability to grow and remain profitable on a long-term basis. Our profitability depends upon our continued ability to successfully compete in our market areas. For additional information see ―Business of ESSA Bank & Trust—Competition.‖ If Our Allowance for Loan Losses is Not Sufficient to Cover Actual Loan Losses, Our Earnings Will Decrease. We make various assumptions and judgments about the collectibility of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance. While our allowance for loan losses was 0.69% of total loans at September 30, 2006, material additions to our allowance could materially decrease our net income. In addition, bank regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities might have a material adverse effect on our financial condition and results of operations. The Federal Deposit Insurance Corporation has Issued New Rules on How it Imposes Deposit Insurance Assessments that Will Increase Our Deposit Insurance Assessments and Will Reduce Our Income. Under its current rules, the Federal Deposit Insurance Corporation does not impose a deposit insurance assessment on financial institutions, such as ESSA Bank & Trust, that are, among other criteria, well-capitalized. On November 2, 2006, the Federal Deposit Insurance Corporation adopted final regulations establishing a risk-based assessment system that will enable the Federal Deposit Insurance Corporation to more closely tie each financial institution‘s premiums to the risk it poses to the deposit insurance fund. Under the new risk-based assessment system, which becomes effective in the beginning of 2007, the Federal Deposit Insurance Corporation will evaluate the risk of each financial institution based on three primary sources of information: (1) its supervisory rating, (2) its financial ratios, and (3) its long-term debt issuer rating, if the institution has one. The new rates for nearly all of the financial 20

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institution industry will vary between five and seven cents for every $100 of domestic deposits. Once effective, this increased assessment may reduce our income. Risks Related to the Stock Offering The Future Price of the Shares of Common Stock May Be Less Than the Purchase Price in the Stock Offering. We cannot assure you that if you purchase shares of common stock in the stock offering you will later be able to sell them at or above the purchase price in the stock offering. The purchase price in the offering is determined by an independent, third-party appraisal, pursuant to federal banking regulations and subject to review and approval by the Office of Thrift Supervision. The appraisal is not intended, and should not be construed, as a recommendation of any kind as to the advisability of purchasing shares of common stock. The Office of Thrift Supervision attempts to ensure that the aftermarket appreciation of standard conversion stocks is not excessive. In recent years, the final independent valuation as approved by the Office of Thrift Supervision has been at the adjusted maximum of the offering range as long as total subscriptions have exceed the adjusted maximum of the offering range. However, the adjusted maximum of the offering range is approximately 30.0% higher than the fair market value of a company as determined by the independent appraisal. Our aggregate pro forma market value as reflected in the final, approved independent appraisal may exceed the market price of our shares of common stock after the completion of the offering, which may result in our stock trading below the initial offering price of $10.00 per share. We Will Need to Implement Additional Finance and Accounting Systems, Procedures and Controls in Order to Satisfy Our New Public Company Reporting Requirements. Upon completion of the stock offering, we will become a public reporting company. The federal securities laws and regulations of the Securities and Exchange Commission require that we file annual, quarterly and current reports and that we maintain effective disclosure controls and procedures and internal controls over financial reporting. We expect that the obligations of being a public company, including substantial public reporting obligations, will require significant expenditures and place additional demands on our management team. These obligations will increase our operating expenses and could divert our management‘s attention from our operations. Compliance with the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the Securities and Exchange Commission will require us to certify the adequacy of our internal controls and procedures, which could require us to upgrade our systems, and/or hire additional staff which will increase our operating costs. Our Return on Equity Will Be Low Compared to Other Financial Institutions. This Could Negatively Affect the Trading Price of Our Shares of Common Stock. Net income divided by average equity, known as ―return on equity,‖ is a ratio many investors use to compare the performance of a financial institution to its peers. For the fiscal year ended September 30, 2006, our return on average equity was 7.0%, compared to the median return on average equity of 6.2% for all publicly traded savings institutions. Following the stock 21

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offering, we expect our consolidated equity to increase from $58.3 million to between $138.8 million at the minimum of the offering range and $183.1 million at the adjusted maximum of the offering range. We expect our return on equity to remain below the industry average until we are able to leverage the additional capital we receive from the stock offering. Our return on equity will be reduced by the capital raised in the stock offering, higher expenses from the costs of being a public company, and added expenses associated with our employee stock ownership plan and the stock-based incentive plan we intend to adopt. Until we can increase our net interest income and non-interest income, we expect our return on equity to be below the industry average, which may reduce the value of our shares of common stock. The Contribution of Shares to the Charitable Foundation Will Dilute Your Ownership Interests and Adversely Affect Net Income in Fiscal 2007. We intend to establish a charitable foundation in connection with the stock offering. We will make a contribution to the charitable foundation in the form of shares of ESSA Bancorp, Inc. common stock and up to $1.5 million in cash. At the midpoint of the offering range, we will contribute 770,000 shares of common stock to the charitable foundation, which equals 7.0% of the shares of common stock sold in the stock offering and $1.1 million in cash, which represents 1.0% of the shares of common stock sold in the stock offering. The aggregate contribution will also have an adverse effect on our net income for the quarter and year in which we make the issuance and contribution to the charitable foundation. The after-tax expense of the contribution will reduce net income in our 2007 fiscal year by approximately $6.9 million at the midpoint of the offering range. Persons purchasing shares in the stock offering will have their ownership and voting interests in ESSA Bancorp, Inc. diluted by 6.5% due to the issuance of shares of common stock to the charitable foundation. Our Contribution to the Charitable Foundation May Not Be Tax Deductible, Which Could Reduce Our Profits. We believe that at least a portion of the contribution to the ESSA Bank & Trust Foundation will be deductible for federal income tax purposes. However, we cannot assure you that the Internal Revenue Service will grant tax-exempt status to the charitable foundation. If the contribution is not deductible, we would not receive any tax benefit from the contribution. In addition, even if the contribution is tax deductible, we are permitted to deduct only up to 10% of our taxable income for federal income tax purposes before charitable contributions. We are permitted under the Internal Revenue Code to carry the excess contribution over the five-year period following the contribution to our charitable foundation. Accordingly, we may not have sufficient profits to be able to use the deduction fully. Our Stock-Based Benefit Plans Will Increase Our Costs, Which Will Reduce Our Income. We anticipate that our employee stock ownership plan will purchase 8.0% of the total shares of common stock outstanding following the stock offering, including shares issued to the ESSA Bank & Trust Foundation, with funds borrowed from ESSA Bancorp, Inc. The cost of acquiring the shares of common stock for the employee stock ownership plan will be between $8.0 million at the minimum of the offering range and $12.5 million at the adjusted maximum of 22

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the offering range. We will record annual employee stock ownership plan expense in an amount equal to the fair value of shares of common stock committed to be released to employees. If shares of common stock appreciate in value over time, compensation expense relating to the employee stock ownership plan will increase. We also intend to adopt a stock-based incentive plan after the stock offering under which plan participants would be awarded shares of our common stock (at no cost to them) or options to purchase shares of our common stock. The number of shares of restricted stock or stock options reserved for issuance under any initial stock-based incentive plan may not exceed 4.0% and 10.0%, respectively, of our total outstanding shares, including shares issued to the ESSA Bank & Trust Foundation, if these plans are adopted within one year at the completion of the conversion. Assuming the market price of the common stock is $10.00 per share; the options are granted with an exercise price of $10.00 per share; the dividend yield on the stock is 0%; the expected option life is ten years; the risk free interest rate is 4.64% (based on the ten-year Treasury rate) and the volatility rate on the shares of common stock is 11.32% (based on an index of publicly traded thrift institutions), the estimated grant-date fair value of the options utilizing a Black-Scholes option pricing analysis is $3.84 per option granted. Assuming this value is amortized over a five-year vesting period, the corresponding annual expense (pre-tax) associated with the stock options would be approximately $1.2 million at the adjusted maximum. In addition, assuming that all shares of restricted stock are awarded at a price of $10.00 per share, and that the awards vest over a five-year period, the corresponding annual expense (pre-tax) associated with shares awarded under the stock-based incentive plan would be approximately $1.2 million at the adjusted maximum. However, if we grant shares of stock or options in excess of these amounts, such grants would increase our costs further. The shares of restricted stock granted under the stock-based incentive plan will be expensed by us over their vesting period at the fair market value of the shares on the date they are awarded. If the shares of restricted stock to be granted under the plan are repurchased in the open market (rather than issued directly from authorized but unissued shares by ESSA Bancorp, Inc.) and cost the same as the purchase price in the stock offering, the reduction to stockholders‘ equity due to the plan would be between $4.0 million at the minimum of the offering range and $6.2 million at the adjusted maximum of the offering range. To the extent we repurchase shares of common stock in the open market to fund the grants of shares under the plan, and the price of such shares exceeds the offering price of $10.00 per share, the reduction to stockholders‘ equity would exceed the range described above. Conversely, to the extent the price of such shares is below the offering price of $10.00 per share, the reduction to stockholders‘ equity would be less than the range described above. 23

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The Implementation of Stock-Based Incentive Plans Will Dilute Your Ownership Interest. We intend to adopt a stock-based incentive plan following the stock offering. This stock-based incentive plan will be funded through either open market purchases of shares of common stock, if permitted, or from the issuance of authorized but unissued shares of common stock. Stockholders would experience a reduction in ownership interest totaling 12.3% in the event newly issued shares are used to fund stock options or awards of shares of common stock under the plan in an amount equal to 10% and 4%, respectively, of the shares issued in the stock offering, including shares issued to the ESSA Bank & Trust Foundation. We Have Broad Discretion in Using the Proceeds of the Stock Offering. Our Failure to Effectively Use Such Proceeds Could Hurt Our Profits. We will use a portion of the net proceeds to finance the purchase of shares of common stock in the stock offering by the employee stock ownership plan and may use the remaining net proceeds to pay dividends to stockholders, repurchase shares of common stock, purchase investment securities, deposit funds in ESSA Bank & Trust, acquire other financial services companies or for other general corporate purposes. ESSA Bank & Trust may use the proceeds it receives to fund new loans, establish or acquire new branches, purchase investment securities, reduce a portion of our borrowings, or for general corporate purposes. In addition, we intend to expand our presence within and contiguous to our primary market area through de novo branching, which may negatively impact our earnings until these branches achieve profitability. We have not, however, identified specific amounts of proceeds for any of these purposes and we will have significant flexibility in determining the amount of net proceeds we apply to different uses and the timing of such applications. Our failure to utilize these funds effectively could reduce our profitability. We have not established a timetable for the effective deployment of the proceeds and we cannot predict how long we will require to effectively deploy the proceeds. Our Stock Value May be Negatively Affected by Federal Regulations That Restrict Takeovers. For three years following the stock offering, Office of Thrift Supervision regulations prohibit any person from acquiring or offering to acquire more than 10% of our common stock without the prior written approval of the Office of Thrift Supervision. See ―Restrictions on Acquisition of ESSA Bancorp, Inc.‖ for a discussion of applicable Office of Thrift Supervision regulations regarding acquisitions. The Corporate Governance Provisions in our Articles of Incorporation and Bylaws and the Corporate Governance Provisions Under Pennsylvania Law May Prevent or Impede the Holders of Our Common Stock From Obtaining Representation on Our Board of Directors. Provisions in our Articles of Incorporation and Bylaws may prevent or impede holders of our common stock from obtaining representation on our Board of Directors. For example, our Board of Directors is divided into three staggered classes. A classified board makes it more difficult for stockholders to change a majority of the directors because it generally takes at least 24

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two annual elections of directors for this to occur. ESSA Bancorp, Inc.‘s Articles of Incorporation includes a provision that no person will be entitled to vote any shares of common stock of ESSA Bancorp, Inc. in excess of 10% of the outstanding shares of common stock of ESSA Bancorp, Inc. This limitation does not apply to the purchase of shares by a tax-qualified employee stock benefit plan of ESSA Bancorp, Inc. or ESSA Bank & Trust. Provisions of the Pennsylvania Business Corporation Law applicable to ESSA Bancorp, Inc. provide among other things, that ESSA Bancorp, Inc. may not engage in a business combination with an ―interested shareholder‖ during the five-year period after the interested shareholder became such except under certain specified circumstances. An interested shareholder is generally a holder of 20% or more of a company‘s voting stock. The Pennsylvania Business Corporation Law also contains provisions providing for the ability of shareholders to object to the acquisition by a person or group of persons acting in concert of 20% or more of its outstanding voting securities and to demand that they be paid a cash payment for the fair value of their shares from the controlling person or group. In addition, there are various regulatory restrictions on acquisitions of ESSA Bancorp, Inc. See ―Restrictions on Acquisition of ESSA Bancorp, Inc.‖ at page 133. 25

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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA The following tables set forth selected consolidated historical financial and other data of ESSA Bank & Trust and its subsidiaries for the years and at the dates indicated. The information at September 30, 2006 and 2005 and for the years ended September 30, 2006, 2005 and 2004 is derived in part from, and should be read together with, the audited consolidated financial statements and notes thereto of ESSA Bank & Trust beginning at page F-2 of this prospectus. The information at September 30, 2006, 2005 and 2004 and for the ten months ended September 30, 2003 and for the year ended November 30, 2002 is derived in part from audited consolidated financial statements that are not included in this prospectus.
At September 30, 2006 At September 30, 2005 At September 30, 2004 (In thousands) At September 30, 2003 At November 30, 2002

Selected Financial Condition Data: Total assets Cash and cash equivalents Investment securities: Available for sale Held to maturity Loans, net FHLB stock Premises and equipment Bank owned life insurance Deposits Borrowed funds Equity

$

725,796 12,730 89,122 19,715 556,677 13,675 11,447 13,376 402,153 259,299 58,337

$

656,066 20,290 62,506 21,505 508,981 11,916 11,560 12,864 374,759 221,479 54,371

$

592,824 21,458 45,074 10,263 477,956 11,358 11,444 10,369 333,201 205,134 50,260

$

533,606 43,087 22,986 3,918 438,539 9,187 10,547 — 319,283 160,920 46,381

$

468,055 27,617 27,301 6,095 390,542 5,304 6,223 — 315,406 104,850 42,219

For the Year Ended September 30, 2006

For the Year Ended September 30, 2005

For the Year Ended September 30, 2004 (In thousands)

For the Ten Months Ended September 30, 2003

For the Year Ended November 30, 2002

Selected Data: Interest income Interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Non-interest income Non-interest expense Income before income tax expense Income tax expense Net income

$

36,451 19,217 17,234 300 16,934 5,518 16,685 5,767 1,813

$

31,919 14,323 17,596 550 17,046 5,281 16,493 5,834 1,383

$

28,810 11,933 16,877 530 16,347 4,280 15,540 5,087 1,172

$

24,743 9,372 15,371 430 14,941 2,976 12,080 5,837 1,681

$

29,065 12,220 16,845 900 15,945 3,477 12,408 7,014 2,314

$

3,954

$

4,451

$

3,915

$

4,156

$

4,700

26

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At or For the Ten Months Ended September 30, 2003

At or For the Year Ended September 30, 2006

At or For the Year Ended September 30, 2005

At or For the Year Ended September 30, 2004

At or For the Year Ended November 30, 2002

Selected Financial Ratios and Other Data: Performance Ratios: Return on average assets Return on average equity Interest rate spread (1) Net interest margin (2) Efficiency ratio (3) Noninterest expense to average total assets Average interest-earning assets to average interest-bearing liabilities Asset Quality Ratios: Non-performing assets as a percent of total assets Non-performing loans as a percent of total loans Allowance for loan losses as a percent of non-performing loans Allowance for loan losses as a percent of total loans Capital Ratios: Total risk-based capital (to risk weighted assets) Tier 1 risk-based capital (to risk weighted assets) Tangible capital (to tangible assets) Tier 1 leverage (core) capital (to adjusted tangible assets) Average equity to average total assets Other Data: Number of full service offices (1) (2) (3)

0.58 % 6.96 % 2.46 % 2.70 % 73.33 % 2.45 % 108.00 %

0.72 % 8.42 % 2.85 % 3.04 % 72.09 % 2.67 % 107.69 %

0.71 % 8.20 % 3.10 % 3.28 % 73.45 % 2.82 % 107.70 %

0.84 % 9.46 % 3.08 % 3.28 % 65.84 % 2.45 % 109.89 %

1.08 % 11.98 % 3.81 % 4.07 % 61.06 % 2.84 % 108.70 %

0.09 % 0.11 % 618.78 % 0.69 %

0.10 % 0.12 % 588.93 % 0.70 %

0.12 % 0.12 % 518.32 % 0.63 %

0.14 % 0.12 % 478.82 % 0.57 %

0.16 % 0.17 % 321.01 % 0.55 %

15.77 % 14.79 % 8.06 % 8.06 % 8.36 % 12

15.55 % 14.59 % 8.30 % 8.30 % 8.55 % 12

16.05 % 15.14 % 8.46 % 8.49 % 8.67 % 12

16.86 % 15.99 % 8.66 % 8.66 % 8.92 % 12

17.52 % 16.67 % 9.00 % 9.00 % 8.99 % 12

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. 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. The efficiency ratio represents non-interest expense divided by the sum of net interest income and non-interest income. 27

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FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements, which can be identified by the use of words such as ―estimate,‖ ―project,‖ ―believe,‖ ―intend,‖ ―anticipate,‖ ―plan,‖ ―seek,‖ ―expect,‖ ―will,‖ ―may‖ and words of similar meaning. These forward-looking statements include, but are not limited to: • • • • statements of our goals, intentions and expectations; statements regarding our business plans, prospects, 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.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this prospectus. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: • • • • • • • • general economic conditions, either nationally or in our market areas, that are worse than expected; competition among depository and other financial institutions; inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments; adverse changes in the securities markets; changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements; our ability to enter new markets successfully and capitalize on growth opportunities; our ability to successfully integrate acquired entities; changes in consumer spending, borrowing and savings habits; 28

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• • • • • •

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board; changes in our organization, compensation and benefit plans; adverse developments concerning Fannie Mae or Freddie Mac and changes in market interest rates affecting the value of the Fannie Mae and Freddie Mac floating rate preferred stocks in our investment securities portfolio; changes in our financial condition or results of operations that reduce capital available to pay dividends; regulatory changes or actions; and changes in the financial condition or future prospects of issuers of securities that we own.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Please see ―Risk Factors‖ beginning on page 18. HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING Although we cannot determine what the actual net proceeds from the sale of the shares of common stock in the offering will be until the offering is completed, we anticipate that the net proceeds will be between $91.5 million and $124.2 million, or $143.1 million if the offering range is increased by 15%. We estimate that we will contribute to ESSA Bank & Trust between $45.7 million and $62.1 million, or $71.5 million if the offering range is increased by 15%. We intend to retain at the holding company between $45.7 million and $62.1 million of the net proceeds, or $71.5 million if the offering range is increased by 15%, to be used for the purposes described below. 29

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A summary of the anticipated net proceeds at the minimum, midpoint, maximum and adjusted maximum of the offering range and the use of the net proceeds is as follows:
9,350,000 Shares Percent of Net Amount Proceeds Based Upon the Sale at $10.00 Per Share of 11,000,000 Shares 12,650,000 Shares Percent Percent of Net of Net Amount Proceeds Amount Proceeds (Dollars in thousands) 14,547,500 Shares (1) Percent of Net Amount Proceeds

Stock offering proceeds Less offering expenses Net offering proceeds Use of net proceeds: To ESSA Bank & Trust To fund loan to employee stock ownership plan Retained by ESSA Bancorp, Inc.

$ 93,500 2,017 $ 91,483

$ 110,000 2,168 100.0 % $ 107,832

$ 126,500 2,290 100.0 % $ 124,210

$ 145,475 2,420 100.0 % $ 143,055 100.0 %

$ 45,742 8,004 $ 37,738

50.0 % $ 8.7 41.3 % $

53,916 9,416 44,500

50.0 % $ 8.7 41.3 % $

62,105 10,828 51,277

50.0 % $ 8.7 41.3 % $

71,528 12,453 59,075

50.0 % 8.7 41.3 %

(1)

As adjusted to give effect to an increase in the number of shares which could occur due to a 15% increase in the offering range to reflect demand for the shares, changes in market or general financial conditions following the commencement of the offering, or regulatory considerations.

Payments for shares of common stock made through withdrawals from existing deposit accounts will not result in the receipt of new funds for investment but will result in a reduction of ESSA Bank & Trust‘s deposits. The net proceeds may vary because the total expenses relating to the offering may be more or less than our estimates. For example, our expenses would increase if a syndicated community offering were used to sell shares of common stock not purchased in the subscription and community offerings. ESSA Bancorp, Inc. May Use the Proceeds it Retains From the Offering: • • • • • • to fund a loan to the employee stock ownership plan to purchase shares of common stock in the offering (between $8.0 million and $10.8 million, or $12.5 million if the offering is increased by 15%); to invest in debt securities issued by the United States government and United States government-sponsored agencies or entities; to finance the acquisition of financial institutions, branches or other financial service companies; to pay cash dividends to stockholders; to repurchase shares of our common stock; and for other general corporate purposes.

Initially, we intend to invest a substantial portion of the net proceeds in short-term investments, investment-grade debt obligations and mortgage-backed securities. 30

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Under current Office of Thrift Supervision regulations, we may not repurchase shares of our common stock during the first year following the conversion, except when extraordinary circumstances exist and with prior regulatory approval. ESSA Bank & Trust May Use the Net Proceeds it Receives From the Offering: • • • • • • to expand its retail and commercial banking franchise by acquiring or establishing new branches, or by acquiring other financial institutions or other financial services companies; to fund new loans, including residential first mortgage loans, commercial loans, commercial real estate and home equity loans and lines of credit; to enhance existing products and services and to support new products and services; to reduce a portion of our existing borrowings; to invest in debt securities issued by the United States government and United States government-sponsored agencies or entities; and for other general corporate purposes.

Our short-term and long-term growth plans anticipate that, upon completion of the offering, we will experience measured growth through increased lending and investment activities, de novo branching and, possibly, acquisitions, with a particular emphasis on attempting to stimulate internal loan growth. We plan to explore acquisition opportunities involving other banks and thrifts, and possibly financial service companies, when and as they arise as a means of supplementing internal growth. We may also consider establishing de novo branches or acquiring financial institutions in our market area and contiguous counties. We have no current arrangements or agreements to acquire other banks, thrifts or financial service companies. We have received regulatory approval to open a new branch office in Tannersville, Pennsylvania which we anticipate opening in May 2007. There can be no assurance that we will be able to consummate any acquisition or establish any other new branches. Initially, the net proceeds will be invested in short-term investments, investment-grade debt obligations and mortgage-backed securities. OUR POLICY REGARDING DIVIDENDS Following completion of the stock offering, our Board of Directors will have the authority to declare dividends on our shares of common stock, subject to statutory and regulatory requirements. However, no decision has been made with respect to the payment of dividends. In determining whether and in what amount to pay a cash dividend, the Board is expected to take into account a number of factors, including capital requirements, our consolidated financial 31

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condition and results of operations, tax considerations, statutory and regulatory limitations and general economic conditions. No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in the future. Special cash dividends, stock dividends or returns of capital, to the extent permitted by Office of Thrift Supervision policy and regulations, may be paid in addition to, or in lieu of, regular cash dividends. We will file a consolidated tax return with ESSA Bank & Trust. Accordingly, it is anticipated that any cash distributions made by ESSA Bancorp, Inc. to its stockholders would be treated as cash dividends and not as a non-taxable return of capital for federal and state tax purposes. Pursuant to our Articles of Incorporation, we are authorized to issue preferred stock. If we issue preferred stock, the holders thereof may have a priority over the holders of our shares of common stock with respect to the payment of dividends. For a further discussion concerning the payment of dividends on our shares of common stock, see ―Description of Capital Stock—Common Stock.‖ Dividends we can declare and pay will depend, in part, upon receipt of dividends from ESSA Bank & Trust, because initially we will have no source of income other than dividends from ESSA Bank & Trust, earnings from the investment of proceeds from the sale of shares of common stock, and interest payments received in connection with the loan to the employee stock ownership plan. A regulation of the Office of Thrift Supervision imposes limitations on ―capital distributions‖ by savings institutions. See ―Regulation—Dividends.‖ See ―Regulation by the Pennsylvania Department of Banking – Dividends‖ for a discussion of Pennsylvania regulations regarding dividends. Any payment of dividends by ESSA Bank & Trust to us that would be deemed to be drawn out of ESSA Bank & Trust‘s bad debt reserves would require a payment of taxes at the then-current tax rate by ESSA Bank & Trust on the amount of earnings deemed to be removed from the reserves for such distribution. ESSA Bank & Trust does not intend to make any distribution to us that would create such a federal tax liability. See ―Federal Taxation‖ and ―State Taxation.‖ Additionally, pursuant to Office of Thrift Supervision regulations, during the three-year period following the stock offering, we will not take any action to declare an extraordinary dividend to stockholders that would be treated by recipients as a tax-free return of capital for federal income tax purposes. MARKET FOR THE COMMON STOCK ESSA Bancorp, Inc. has never issued capital stock and there is no established market for it. Shares of our common stock have been approved for trading on the Nasdaq Global Market under the symbol ―ESSA,‖ subject to completion of the offering and compliance with certain conditions, including the presence of at least three registered and active market makers. Ryan Beck & Co., Inc. has advised us that it intends to make a market in shares of our common stock following the offering, but it is under no obligation to do so or to continue to do so once it begins. While we will attempt before completion of the offering to obtain commitments from at least two other broker-dealers to make a market in shares of our common stock, there can be no assurance that we will be successful in obtaining such commitments. 32

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The development and maintenance of a public market, having the desirable characteristics of depth, liquidity and orderliness, depends on the existence of willing buyers and sellers, the presence of which is not within our control or that of any market maker. The number of active buyers and sellers of shares of our common stock at any particular time may be limited, which may have an adverse effect on the price at which shares of our common stock can be sold. There can be no assurance that persons purchasing the shares of common stock will be able to sell their shares at or above the $10.00 offering purchase price per share. You should have a long-term investment intent if you purchase shares of our common stock and you should recognize that there may be a limited trading market in the shares of common stock. 33

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HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE At September 30, 2006, ESSA Bank & Trust exceeded all of the applicable regulatory capital requirements. The table below sets forth the historical equity capital and regulatory capital of ESSA Bank & Trust at September 30, 2006, and the pro forma regulatory capital of ESSA Bank & Trust, after giving effect to the sale of shares of common stock at a $10.00 per share purchase price. The table assumes the receipt by ESSA Bank & Trust of between $45.7 million and $71.5 million of the net offering proceeds.
ESSA Bank & Trust Historical at September 30, 2006 Percent of Amount Assets (2) Pro Forma at September 30, 2006, Based Upon the Sale in the Offering of 9,350,000 Shares 11,000,000 Shares 12,650,000 Shares Percent of Percent of Percent of Amount Assets (2) Amount Assets (2) Amount Assets (2) (Dollars in thousands)

14,547,500 Shares (1) Percent of Amount Assets (2)

Equity capital Tangible capital Tangible requirement Excess Core capital Core requirement (3) Excess Total risk-based capital (4) Risk-based requirement Excess

$ 58,337 $ 58,333 10,859 $ 47,474 $ 58,333 28,959 $ 29,374

8.04 % $ 92,073 8.06 % $ 92,069 1.50 11,488

12.00 % $ 12.02 % $ 1.50 10.52 % $ 12.02 % $ 4.00 8.02 % $

98,129 98,125 11,600 86,525 98,125 30,934 67,191

12.66 % $ 104,199 12.69 % $ 104,195 1.50 11.19 % $ 11,713 92,482

13.32 % $ 111,186 13.34 % $ 111,182 1.50 11.84 % $ 11,842 99,340

14.05 % 14.08 % 1.50 12.58 % 14.08 % 4.00 10.08 %

6.56 % $ 80,581 8.06 % $ 92,069 4.00 30,635

12.69 % $ 104,195 4.00 8.69 % $ 31,234 72,961

13.34 % $ 111,182 4.00 9.34 % $ 31,578 79,604

4.06 % $ 61,434

$ 62,212 31,557 $ 30,655

15.77 % $ 95,948 8.00 32,224

23.82 % $ 102,004 8.00 15.82 % $ 32,344 69,660

25.23 % $ 108,074 8.00 17.23 % $ 32,464 75,610

26.63 % $ 115,061 8.00 18.63 % $ 32,601 82,460

28.23 % 8.00 20.23 %

7.77 % $ 63,724

(1)

As adjusted to give effect to an increase in the number of shares which could occur due to a 15% increase in the offering range to reflect demand for the shares, changes in market or general financial conditions following the commencement of the offering or regulatory considerations. Tangible and core capital levels are shown as a percentage of total adjusted assets. Risk-based capital levels are shown as a percentage of risk-weighted assets. The current Office of Thrift Supervision core capital requirement for financial institutions is 3% of total adjusted assets for financial institutions that receive the highest supervisory rating for safety and soundness and a 4% to 5% core capital ratio requirement for all other financial institutions. Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 20% risk weighting. 34

(2) (3)

(4)

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CAPITALIZATION The following table presents the historical consolidated capitalization of ESSA Bank & Trust, at September 30, 2006 and the pro forma consolidated capitalization of ESSA Bancorp, Inc., a Pennsylvania corporation, after giving effect to the conversion and the offering, based upon the assumptions set forth in the ―Pro Forma Data‖ section.
ESSA Bank & Trust Historical at September 30, 2006

Pro Forma, Based Upon the Sale in the Offering of 9,350,000 11,000,000 12,650,000 14,547,500 Shares Shares Shares Shares (1) (Dollars in thousands)

Deposits (2) Borrowings Total deposits and borrowed funds Stockholders‘ equity: Preferred stock, $0.01 par value, 10,000,000 shares authorized; none to be issued Common stock $0.01 par value, 40,000,000 shares authorized; shares to be issued as reflected (3) Additional paid-in capital Retained earnings (4) Less: Expense of stock contribution to Foundation Expense of cash contribution to Foundation Plus: Tax benefit of contribution to Foundation (5) Accumulated other comprehensive loss Less: Common stock to be acquired by employee stock ownership plan (6) Common stock to be acquired by stock recognition and retention plan (7) Total stockholders‘ equity Total stockholders‘ equity as a percentage of total assets (1)

$ $

402,153 259,299 661,452

$ 402,153 259,299 $ 661,452

$ 402,153 259,299 $ 661,452

$ 402,153 259,299 $ 661,452

$ 402,153 259,299 $ 661,452

— 0 0 58,526 — —

— 100 97,928 58,526 (6,545 ) (935 ) 1,880 (189 )

— 118 115,414 58,526 (7,700 ) (1,100 ) 1,880 (189 )

— 135 132,930 58,526 (8,855 ) (1,265 ) 1,880 (189 )

— 156 153,082 58,526 (10,183 ) (1,455 ) 1,880 (189 )

(189 )

— — $ 58,337

(8,004 ) (4,002 ) $ 138,760

(9,416 ) (4,708 ) $ 152,825

(10,828 ) (5,414 ) $ 166,920

(12,453 ) (6,226 ) $ 183,138

8.04 %

17.21 %

18.63 %

20.01 %

21.53 %

As adjusted to give effect to an increase in the number of shares of common stock which could occur due to a 15% increase in the offering range to reflect demand for shares, changes in market or general financial conditions following the commencement of the subscription and community offerings or regulatory considerations. Does not reflect withdrawals from deposit accounts for the purchase of shares of common stock in the conversion and offering. These withdrawals would reduce pro forma deposits by the amount of the withdrawals. No effect has been given to the issuance of additional shares of ESSA Bancorp, Inc. common stock pursuant to a stock option plan. If this plan is implemented, an amount up to 10% of the shares of ESSA Bancorp, Inc. common stock sold in the offering will be reserved for issuance upon the exercise of options under the stock option plan. See ―Management of ESSA Bancorp, Inc.‖ The retained earnings of ESSA Bank & Trust will be substantially restricted after the conversion. See ―Our Policy Regarding Dividends,‖ ―The Conversion—Liquidation Rights‖ and ―Regulation.‖ Includes valuation allowance against deferred tax asset of $663,000, $1.1 million, $1.6 million and $2.1 million at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively. Assumes that 8.0% of the shares sold in the offering will be acquired by the employee stock ownership plan financed by a loan from ESSA Bancorp, Inc. The loan will be repaid principally from ESSA Bank & Trust‘s contributions to the employee stock ownership plan.

(2) (3)

(4) (5) (6)

Since ESSA Bancorp, Inc. will finance the employee stock ownership plan debt, this debt will be eliminated through consolidation and no liability will be reflected on ESSA Bancorp, Inc.‘s consolidated financial statements. Accordingly, the amount of shares of common stock acquired by the employee stock ownership plan is shown in this table as a reduction of total stockholders‘ equity. (7) Assumes a number of shares of common stock equal to 4% of the shares of common stock to be sold in the offering will be purchased by the stock recognition and retention plan in open market purchases. The dollar amount of common stock to be purchased is based on the $10.00 per share subscription price in the offering and represents unearned compensation. This amount does not reflect possible increases or decreases in the value of common stock relative to the subscription price in the offering. As ESSA Bancorp, Inc. accrues compensation expense to reflect the vesting of shares pursuant to the stock recognition and retention plan, the credit to equity will be offset by a charge to noninterest expense. Implementation of the stock recognition and retention plan will require stockholder approval. The funds to be used by the stock recognition and retention plan to purchase the shares will be provided by ESSA Bancorp, Inc. 35

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PRO FORMA DATA The following tables summarize historical data of ESSA Bank & Trust and pro forma data of ESSA Bancorp, Inc. at and for the year ended September 30, 2006. This information is based on assumptions set forth below and in the table, and should not be used as a basis for projections of market value of the shares of common stock following the conversion and offering. The net proceeds in the tables are based upon the following assumptions: • • • all shares of common stock will be sold in the subscription and community offerings; 427,000 shares of common stock will be purchased by our executive officers and directors, and their associates; our employee stock ownership plan will purchase 8% of the shares of common stock sold in the stock offering and contributed to our charitable foundation with a loan from ESSA Bancorp, Inc. The loan will be repaid in substantially equal payments of principal and interest over a period of 30 years; Ryan Beck & Co., Inc. will receive a fee equal to 1% of the dollar amount of the first 10,000,000 shares of common stock sold in the stock offering and 0.75% of the dollar value of all shares of common stock sold thereafter in the stock offering. Shares issued to the charitable foundation or purchased by our employee benefit plans or by our officers, directors and employees, and their immediate families will not be included in calculating the shares of common stock sold, for this purpose; and total expenses of the stock offering, including the marketing fees to be paid to Ryan Beck & Co., Inc., will be between $2.0 million at the minimum of the offering range and $2.4 million at the adjusted maximum of the offering range.

•

•

We calculated pro forma consolidated net income for the fiscal year ended September 30, 2006 as if the estimated net proceeds we received had been invested at an assumed interest rate of 4.91% (3.24% on an after-tax basis). This represents the one-year U.S. Treasury Bill as of September 30, 2006, which we consider to more accurately reflect the pro forma reinvestment rate than an arithmetic average method in light of current market interests rates. The following pro forma information may not be representative of the financial effects of the foregoing transactions at the dates on which such transactions actually occur, and should not be taken as indicative of future results of operations. Pro forma consolidated stockholders‘ equity represents the difference between the stated amounts of our assets and liabilities. The pro forma stockholders‘ equity is not intended to represent the fair market value of the shares of common stock. The effect of withdrawals from deposit accounts for the purchase of shares of 36

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common stock has not been reflected. Historical and pro forma per share amounts have been calculated by dividing historical and pro forma amounts by the indicated number of shares of common stock. No effect has been given in the pro forma stockholders‘ equity calculations for the assumed earnings on the net proceeds. It is assumed that ESSA Bancorp, Inc. will loan funds to the employee stock ownership plan, between $8.0 million and $10.8 million of the estimated net proceeds in the offering, or $12.5 million if the offering range is increased by 15%. The actual net proceeds from the sale of shares of common stock will not be determined until the offering is completed. However, we currently estimate the net proceeds to be between $91.5 million and $124.2 million, or $143.1 million if the offering range is increased by 15%. It is assumed that all shares of common stock will be sold in the subscription and community offerings. 37

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At or For the Year Ended September 30, 2006 Based Upon the Sale at $10.00 Per Share of 11,000,000 at Midpoint 12,650,000 at Offering Maximum Range Offering 11,000,000 Range (Dollars in thousands, except per share amounts)

9,350,000 Shares at Minimum Offering Range

14,547,500 at Adjusted Maximum of Offering Range (1)

Gross proceeds of Offering Plus: Shares Issued to the Foundation Pro Forma Market Capitalization Gross Proceeds of Offering Less Expenses Estimated net proceeds Less: Cash Contribution to Foundation Less: Common stock purchased by ESOP (2) Less: Common stock purchased by stock award plan (3) Estimated net cash proceeds For the 12 Months Ended September 30, 2006 Consolidated net income: Historical Pro forma income on net proceeds: Pro forma ESOP adjustment(2) Pro forma stock award adjustment (3) Pro forma stock options adjustment (4) Pro forma net income Per share net income Historical Pro forma income on net proceeds, as adjusted Pro forma ESOP adjustment (2) Pro forma stock award adjustment (3) Pro forma stock option adjustment (4) Pro forma net income per share (5) Offering price as a multiple of pro forma net earnings per share Number of shares outstanding for pro forma net income per share calculations At September 30, 2006 Stockholders‘ equity: Historical Estimated net proceeds Plus: Shares issued to Foundation Less: Shares issued to Foundation Less: Cash contribution to Foundation Plus: Tax benefit of contribution to Foundation(6) Less: Common stock acquired by ESOP (2) Less: Common stock acquired by stock-based incentive (3) (4) Pro forma stockholders‘ equity Stockholders‘ equity per share: Historical Estimated net proceeds Plus: Shares issued to Foundation Less: Shares contribution to Foundation

$ $

93,500 6,545 100,045 93,500 (2,017 ) 91,483 (935 ) (8,004 ) (4,002 )

$ $

110,000 7,700 117,700 110,000 (2,168 ) 107,832 (1,100 ) (9,416 ) (4,708 )

$ $

126,500 8,855 135,355 126,500 (2,290 ) 124,210 (1,265 ) (10,828 ) (5,414 )

$ $

145,475 10,183 155,658 145,475 (2,420 ) 143,055 (1,455 ) (12,453 ) (6,226 )

$

$

$

$

$

78,542

$

92,608

$

106,702

$

122,921

$

3,954 2,545 (176 ) (528 ) (703 )

$

3,954 3,001 (207 ) (621 ) (827 )

$

3,954 3,458 (238 ) (715 ) (951 )

$

3,954 3,983 (274 ) (822 ) (1,094 )

$ $

5,092 0.43 0.28 (0.02 ) (0.06 ) (0.08 ) 0.55 18.18 9,230,819

$ $

5,300 0.37 0.28 (0.02 ) (0.06 ) (0.08 ) 0.49 20.41 10,859,787

$ $

5,508 0.32 0.28 (0.02 ) (0.06 ) (0.08 ) 0.44 22.73 12,488,755

$ $

5,747 0.28 0.28 (0.02 ) (0.06 ) (0.08 ) 0.40 25.00 14,362,068

$

$

$

$

$

58,337 91,483 6,545 (6,545 ) (935 ) 1,880 (8,004 ) (4,002 )

$

58,337 107,832 7,700 (7,700 ) (1,100 ) 1,880 (9,416 ) (4,708 )

$

58,337 124,210 8,855 (8,855 ) (1,265 ) 1,880 (10,828 ) (5,414 )

$

58,337 143,055 10,183 (10,183 ) (1,455 ) 1,880 (12,453 ) (6,226 )

$

138,760

$

152,825

$

166,920

$

183,138

$

5.83 9.14 0.65 (0.65 )

$

4.96 9.16 0.65 (0.65 )

$

4.31 9.18 0.65 (0.65 )

$

3.75 9.19 0.65 (0.65 )

Less: Cash contribution to Foundation Plus: Tax benefit of contribution to Foundation (6) Less: Common stock acquired by ESOP (2) Less: Common stock acquired by stock-based incentive plan (3) (4) Pro forma stockholders‘ equity per share (7) Offering price as percentage of pro forma stockholders‘ equity per share Number of shares outstanding for pro forma book value per share calculations $

(0.09 ) 0.19 (0.80 ) (0.40 ) 13.87 $

(0.09 ) 0.16 (0.80 ) (0.40 ) 12.99 $

(0.09 ) 0.14 (0.80 ) (0.40 ) 12,34 $

(0.09 ) 0.12 (0.80 ) (0.40 ) 11.77

72.10 %

76.98 %

81.04 %

84.96 %

10,004,500

11,770,000

13,535,500

15,565,825

(footnotes begin on following page) 38

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(1)

As adjusted to give effect to an increase in the number of shares which could occur due to a 15% increase in the offering range to reflect demand for the shares, changes in market and financial conditions following the commencement of the offering or regulatory considerations. Assumes that 8% of shares of common stock sold in the offering will be purchased by the employee stock ownership plan. For purposes of this table, the funds used to acquire these shares are assumed to have been borrowed by the employee stock ownership plan from ESSA Bancorp, Inc. ESSA Bank & Trust intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the required principal and interest payments on the debt. ESSA Bank & Trust‘s total annual payments on the employee stock ownership plan debt are based upon 30 equal annual installments of principal and interest. SOP 93-6 requires that an employer record compensation expense in an amount equal to the fair value of the shares committed to be released to employees. The pro forma adjustments assume that the employee stock ownership plan shares are allocated in equal annual installments based on the number of loan repayment installments assumed to be paid by ESSA Bank & Trust, the fair value of the common stock remains equal to the subscription price and the employee stock ownership plan expense reflects an effective combined federal and state tax rate of 34.0%. The unallocated employee stock ownership plan shares are reflected as a reduction of stockholders‘ equity. No reinvestment is assumed on proceeds contributed to fund the employee stock ownership plan. The pro forma net income further assumes that 26,679, 31,387, 36,095 and 41,509 shares were committed to be released during the period at the minimum, midpoint, maximum, and adjusted maximum of the offering range, respectively, and in accordance with SOP 93-6, only the employee stock ownership plan shares committed to be released during the period were considered outstanding for purposes of income per share calculations. If approved by ESSA Bancorp, Inc.‘s stockholders, the stock recognition and retention plan may purchase an aggregate number of shares of common stock equal to 4% of the shares to be sold in the offering (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion). Stockholder approval of the stock recognition and retention plan, and purchases by the plan may not occur earlier than six months after the completion of the conversion. The shares may be acquired directly from ESSA Bancorp, Inc. or through open market purchases. The funds to be used by the stock recognition and retention plan to purchase the shares will be provided by ESSA Bancorp, Inc. The table assumes that (i) the stock recognition and retention plan acquires the shares through open market purchases at $10.00 per share, (ii) 20% of the amount contributed to the stock recognition and retention plan is amortized as an expense during the year ended September 30, 2006 and (iii) the stock recognition and retention plan expense reflects an effective combined federal and state tax rate of 34.0%. Assuming stockholder approval of the stock recognition and retention plan and that shares of common stock (equal to 4% of the shares sold in the offering) are awarded through the use of authorized but unissued shares of common stock, stockholders would have their ownership and voting interests diluted by approximately 3.8%. If approved by ESSA Bancorp, Inc.‘s stockholders, the stock option plan may grant options to acquire an aggregate number of shares of common stock equal to 10% of the shares to be sold in the offering (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion. Stockholder approval of the stock option plan may not occur earlier than six months after the completion of the conversion. In calculating the pro forma effect of the stock option plan, it is assumed that the exercise price of the stock options and the trading price of the common stock at the date of grant were $10.00 per share, the estimated grant-date fair value determined using the Black-Scholes option pricing model was $3.84 for each option, the aggregate grant-date fair value of the stock options was amortized to expense on a straight-line basis over a five-year vesting period of the options, and that 25% of the amortization expense (or the assumed portion relating to options granted to directors) resulted in a tax benefit using an assumed tax rate of 34.0%. The actual expense of the stock option plan will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted. Under the above assumptions, the adoption of the stock option plan will result in no additional shares under the treasury stock method for purposes of calculating earnings per share. There can be no assurance that the actual exercise price of the stock options will be equal to the $10.00 price per share. If a portion of the shares to satisfy the exercise of options under the stock option plan are obtained from the issuance of authorized but unissued shares, our net income per share and stockholders‘ equity per share will decrease. The issuance of authorized but previously unissued shares of common stock pursuant to the exercise of options under such plan would dilute existing stockholders‘ ownership and voting interests by approximately 9.1%. Income per share computations are determined by taking the number of shares assumed to be sold in the offering and, in accordance with SOP 93-6, subtracting the employee stock ownership plan shares that have not been committed for release during the period. See note 2, above. Includes valuation allowance against deferred tax asset of $663,000, $1.1 million, $1.6 million and $2.1 million at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively. The retained earnings of ESSA Bank & Trust will be substantially restricted after the conversion. See ―Our Policy Regarding Dividends,‖ ―The Conversion—Liquidation Rights‖ and ―Regulation.‖ 39

(2)

(3)

(4)

(5)

(6) (7)

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COMPARISON OF VALUATION AND PRO FORMA INFORMATION WITH AND WITHOUT THE CHARITABLE FOUNDATION As reflected in the table below, if the charitable foundation is not established and funded as part of the stock offering, RP Financial, Inc. estimates that our pro forma valuation would be greater and, as a result, a greater number of shares of common stock would be issued in the stock offering. At the minimum, midpoint, maximum and adjusted maximum of the valuation range, our pro forma valuation is $100.0 million, $117.7 million, $135.4 million and $155.7 million with the charitable foundation, as compared to $112.6 million, $132.5 million, $152.4 million and $175.2 million, respectively, without the charitable foundation. There is no assurance that in the event the charitable foundation were not formed, the appraisal prepared at that time would conclude that our pro forma market value would be the same as that estimated in the table below. Any appraisal prepared at that time would be based on the facts and circumstances existing at that time, including, among other things, market and economic conditions. The establishment and funding of the charitable foundation has been approved by the Board of Directors of ESSA Bancorp, Inc. and ESSA Bank & Trust and is subject to approval by members of ESSA Bank & Trust. If the members do not approve the charitable foundation, we may, in our discretion, complete the conversion and stock offering without the inclusion of the charitable foundation and without resoliciting subscribers. We may also determine in our discretion, not to complete the conversion and stock offering if the members do not approve the charitable foundation. For comparative purposes only, set forth below are certain pricing ratios and financial data and ratios at and for the fiscal year ended September 30, 2006 at the minimum, midpoint, maximum and adjusted maximum of the offering range, assuming the stock offering was completed at September 30, 2006, with and without the charitable foundation.
9,350,000 Shares Sold With Without Foundation Foundation(1) 11,000,000 Shares Sold 12,650,000 Shares Sold With Without With Without Foundation Foundation(1) Foundation Foundation(1) (Dollars in thousands, except per share amounts) 14,547,500 Shares Sold With Without Foundation Foundation(1)

Estimated stock offering amount Pro forma market capitalization Estimated pro forma valuation Total assets Total liabilities Pro forma stockholders‘ equity Pro forma net income Pro forma stockholders‘ equity per share Pro forma net income per share Pro forma pricing ratios: Offering price as a percentage of pro forma stockholders‘ equity per share Offering price to pro forma net income per share Pro forma financial ratios: Return on assets Return on equity Equity to assets

$

93,500 100,045 100,045 806,219 667,459

$

112,625 112,625 112,625 822,707 667,459

$ 110,000 117,700 117,700 820,284 667,459

$

132,500 132,500 132,500 840,059 667,459

$ 126,500 135,355 135,355 834,379 667,459

$

152,375 152,375 152,375 857,412 667,459

$ 145,475 155,658 155,658 850,597 667,459

$

175,231 175,231 175,231 877,368 667,459

138,760 5,092

155,248 5,510

152,825 5,300

172,600 5,793

166,920 5,508

189,953 6,075

183,138 5,747

209,909 6,402

13.87 0.55

13.78 0.52

12.99 0.49

13.02 0.46

12.34 0.44

12.47 0.42

11.77 0.40

11.98 0.38

72.10 %

72.57 %

76.98 %

76.80 %

81.04 %

80.19 %

84.96 %

83.47 %

18.18 x

19.23 x

20.41 x

21.74 x

22.73 x

23.81 x

25.00 x

26.32 x

0.63 % 3.67 17.21

0.67 % 3.55 18.87

0.65 % 3.47 18.63

0.69 % 3.36 20.55

0.66 % 3.30 20.01

0.71 % 3.20 22.15

0.68 % 3.14 21.53

0.73 % 3.05 23.92

(1)

The number of shares sold to the public, assuming no charitable foundation would be 11,262,500, 13,250,000, 15,237,500 and 17,523,125 at the minimum, midpoint, maximum and maximum as adjusted, respectively of the offering range. 40

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ESSA BANCORP, INC. This section is intended to help potential investors understand the financial performance of ESSA Bank & Trust through a discussion of the factors affecting our financial condition at September 30, 2006 and September 30, 2005 and our consolidated results of operations for the years ended September 30, 2006, 2005 and 2004. This section should be read in conjunction with the Consolidated Financial Statements and notes to the financial statements that appear elsewhere in this prospectus. ESSA Bancorp, Inc. did not exist at September 30, 2006, therefore the information reflected in this section reflects the financial performance of ESSA Bank & Trust and its subsidiaries. In this section, we sometimes refer to ESSA Bank & Trust and ESSA Bancorp, Inc. together as ―ESSA‖ since the financial condition and results of operation of ESSA Bancorp, Inc. will closely reflect the financial condition and results of operation of its operating subsidiary, ESSA Bank & Trust. Following the completion of the reorganization and offering, we anticipate that our non-interest expense will increase as a result of the increased costs associated with managing a public company, increased compensation expenses associated with the purchases of shares of common stock by our employee stock ownership plan, and the adoption of one or more stock-based incentive plans, if approved by ESSA Bancorp Inc.‘s stockholders. Assuming that the adjusted maximum number of shares are sold in the offering and shares are issued to the ESSA Bank & Trust Foundation: • our employee stock ownership plan will acquire 1,245,266 shares of common stock with a $12.5 million loan that is expected to be repaid over 30 years, resulting in an annual pre-tax expense of approximately $415,000 (assuming that the common stock maintains a value of $10.00 per share); our stock option plan would grant options to purchase shares equal to 10% of the total shares issued in the offering or 1,556,583 shares to eligible participants, which would result in compensation expense over the vesting period of the options. Assuming the market price of the common stock is $10.00 per share; all options are granted with an exercise price of $10.00 per share and have a term of 10 years; the dividend yield on the stock is zero; the expected option life is 10 years; the risk free interest rate is 4.64%; and the volatility rate on the common stock is 11.32%, the estimated grant-date fair value of the options utilizing a Black-Scholes option pricing analysis is $3.84 per option granted. Assuming this value is amortized over the five year vesting period, the corresponding annual pre-tax expense associated with the stock option plan would be approximately $1.2 million; and our recognition and retention plan would award a number of shares equal to 4% of the shares issued in the offering, or 622,633 shares, to eligible participants, which would be expensed as the awards vest. Assuming that all shares are awarded 41

•

•

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under the recognition and retention plan at a price of $10.00 per share, and that the awards vest over a five year period, the corresponding annual pre-tax expense associated with shares awarded under the recognition and retention plan would be approximately $1.2 million. The actual expense that will be recorded for the employee stock ownership plan will be determined by the market value of the shares of common stock as they are released to employees over the term of the loan, and whether the loan is repaid faster than its contractual term. Accordingly, increases in the stock price above $10.00 per share will increase the total employee stock ownership plan expense, and any accelerated repayment of the loan will increase the annual employee stock ownership plan expense. Further, the actual expense of the recognition and retention plan will be determined by the fair market value of the stock on the grant date, which might be greater than $10.00 per share. The actual expense of the stock option plan will be determined by the grant-date fair value of the options which will depend on a number of factors, including the valuation assumptions used in the Black-Scholes option pricing model. Overview Our results of operations depend mainly on our net interest income, which is the difference between the interest income earned on our loan and investment portfolios and interest expense paid on our deposits and borrowed funds. Results of operations are also affected by fee income from banking operations, provisions for loan losses, gains (losses) on sales of loans and other miscellaneous income. Our noninterest expenses consist primarily of compensation and employee benefits, office occupancy, technology, marketing, general administrative expenses and income tax expense. Our results of operations are also significantly affected by general economic and competitive conditions, particularly with respect to changes in interest rates, government policies and actions of regulatory authorities. Future changes in applicable law, regulations or government policies may materially affect our financial condition and results of operations. See ―Risk Factors‖ beginning on page 18. 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 Loan Losses. The allowance for loan losses is the estimated amount considered necessary to cover credit losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses which is charged against income. In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of our most critical. The methodology for determining the allowance for loan losses is considered a critical accounting policy by management due to the high degree of judgment involved, the subjectivity of the assumptions utilized and the potential 42

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for changes in the economic environment that could result in changes to the amount of the recorded allowance for loan losses. As a substantial amount of our loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans and discounted cash flow valuations of properties are critical in determining the amount of the allowance required for specific loans. Assumptions for appraisals and discounted cash flow valuations are instrumental in determining the value of properties. Overly optimistic assumptions or negative changes to assumptions could significantly impact the valuation of a property securing a loan and the related allowance determined. The assumptions supporting such appraisals and discounted cash flow valuations are carefully reviewed by management to determine that the resulting values reasonably reflect amounts realizable on the related loans. Management performs a quarterly evaluation of the adequacy of the allowance for loan losses. Consideration is given to a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal and external loan reviews and other relevant factors. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant revision based on changes in economic and real estate market conditions. The analysis of the allowance for loan losses has two components: specific and general allocations. Specific allocations are made for loans that are determined to be impaired. Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. The general allocation is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history. We also analyze historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations. This analysis establishes factors that are applied to the loan groups to determine the amount of the general allocations. Actual loan losses may be significantly more than the allowance for loan losses we have established which could have a material negative effect on our financial results. Other-than-Temporary Investment Security Impairment. Securities are evaluated periodically to determine whether a decline in their value is other-than-temporary. Management utilizes criteria such as the magnitude and duration of the decline, in addition to the reasons underlying the decline, to determine whether the loss in value is other-than-temporary. The term ―other-than-temporary‖ is not intended to indicate that the decline is permanent, but indicates that the prospect for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Once a decline in value is determined to be other-than-temporary, the value of the security is reduced and a corresponding charge to earnings is recognized. Deferred Income Taxes. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of 43

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existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. We consider the determination of this valuation allowance to be a critical accounting policy because of the need to exercise significant judgment in evaluating the amount and timing of recognition of deferred tax liabilities and assets, including projections of future taxable income. These judgments and estimates are reviewed on a continual basis as regulatory and business factors change. A valuation allowance for deferred tax assets may be required if the amount of taxes recoverable through loss carryback declines, or if we project lower levels of future taxable income. Such a valuation allowance would be established through a charge to income tax expense which would adversely affect our operating results. Business Strategy Our business strategy is to grow and improve our profitability by: • • • • • Increasing customer relationships through the offering of excellent service and the distribution of that service through effective delivery systems; Continuing to transform into a full service community bank by meeting the financial services needs of our customers; Continuing to develop into a high performing financial institution, in part by increasing interest revenue and fee income; Remaining within our risk management parameters; and Employing affordable technology to increase profitability and improve customer service.

A full description of our products and services begins on page 58 of this prospectus. We believe that these strategies will guide our investment of the net proceeds of the offering. We intend to continue to pursue our business strategy after the conversion and the offering, subject to changes necessitated by future market conditions and other factors. We also intend to focus on the following: • Increasing customer relationships through a continued commitment to service and enhancing products and delivery systems. We will continue to increase customer relationships by focusing on customer satisfaction with regards to service, products, systems and operations. We have upgraded and expanded certain of our facilities, including our corporate center, to provide additional capacity to manage future growth and expand our delivery systems. Continuing to transform into a full service community bank. We continue to transform from a traditional savings association into a full service community bank. During the last several years, we have begun to offer a wide variety of commercial loans and deposits, as well as trust and brokerage services. 44

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•

Continuing to develop into a high performing financial institution. We will continue to enhance profitability by focusing on increasing non-interest income as well as increasing commercial products, including commercial real estate lending, which often have a higher profit margin than more traditional products. We also will pursue lower-cost commercial deposits as part of this strategy. Remaining within our risk management parameters. We place significant emphasis on risk management and compliance training for all of our directors, officers and employees. We focus on establishing regulatory compliance programs to determine the degree of such compliance and to maintain the trust of our customers and community. Employing cost-effective technology to increase profitability and improve customer service. We will continue to upgrade our technology in an efficient manner. We have implemented new software for marketing purposes and have upgraded both our internal and external communication systems. Continuing our emphasis on commercial real estate lending to improve our overall performance. We intend to continue to emphasize the origination of higher interest rate margin commercial real estate loans as market conditions, regulations and other factors permit. We have expanded our commercial banking capabilities by adding experienced commercial bankers, and enhancing our direct marketing efforts to local businesses. Expanding our banking franchise through branching and acquisitions. We will attempt to use the net proceeds from the offering, as well as our new stock holding company structure, to expand our market footprint through de novo branching as well as through acquisitions of banks, savings institutions and other financial service providers in our primary market area. We will also consider establishing de novo branches or acquiring financial institutions in contiguous counties. We have received regulatory approval to open a new branch office in Tannersville, Pennsylvania which we anticipate opening in May 2007. There can be no assurance that we will be able to consummate any acquisitions or establish any additional new branches. We may explore acquisition opportunities involving other banks and thrifts, and possibly financial service companies, when and as they arise, as a means of supplementing internal growth, filling gaps in our current geographic market area and expanding our customer base, product lines and internal capabilities. Maintaining the quality of our loan portfolio. Maintaining the quality of our loan portfolio is a key factor in managing our growth. We will continue to use customary risk management techniques, such as independent internal and external loan reviews, risk-focused portfolio credit analysis and field inspections of collateral in overseeing the performance of our loan portfolio.

•

•

•

•

•

Comparison of Financial Condition At September 30, 2006 and September 30, 2005 Total Assets. Total assets increased by $69.7 million, or 10.6%, to $725.8 million at September 30, 2006 from $656.1 million at September 30, 2005. This increase was primarily due 45

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to increases in investment securities and loans receivable which were partially offset by a decrease in commercial paper. Investment Securities. Investment securities increased $24.8 million, or 29.6% to $108.8 million at September 30, 2006, from $84.0 million at September 30, 2005. This increase was due, in part, to ESSA Bank & Trust‘s investing of funds from new deposits and borrowings in mortgage-backed securities and, to a lesser extent, United States government and agency obligations. Commercial Paper. Commercial paper declined from $7.0 million at September 30, 2005 to no outstanding commercial paper at September 30, 2006. This asset matured during fiscal year ended September 30, 2006. Net Loans. Net loans increased $47.7 million, or 9.4%, to $556.7 million at September 30, 2006 from $509.0 million at September 30, 2005. Loan growth was primarily attributable to growth in several product categories as a result of the economic growth in our market area and our increased marketing efforts. One- to four-family residential mortgages increased by $31.2 million to $452.4 million at September 30, 2006 from $421.2 million at September 30, 2005. For the same time periods, commercial real estate loans increased by $10.5 million to $47.5 million from $37.0 million and home equity and lines of credit increased by $6.5 million to $46.8 million from $40.3 million. Deposits. Deposits increased by $27.4 million, or 7.3% to $402.2 million at September 30, 2006, from $374.8 million at September 30, 2005. The increase in deposits was attributable to increases in retail certificates of deposit of $29.3 million and brokered certificates of deposit of $7.1 million. Retail certificates of deposits increased in part in response to rate promotions on selected products. These increases were partially offset by decreases in checking products of $859,000 and other savings products of $8.2 million. At September 30, 2006, we had $28.3 million of brokered certificates of deposit outstanding. Borrowed Funds. Funds borrowed from the Federal Home Loan Bank of Pittsburgh increased by $37.8 million, or 17.1%, to $259.3 million at September 30, 2006, from $221.5 million at September 30, 2005. The increase in borrowed funds, combined with the increase in deposits was used to fund increases in loans and the purchase of investment securities. Total Retained Earnings. Total retained earnings increased by $4.0 million, or 7.3%, to $58.3 million at September 30, 2006 from $54.4 million at September 30, 2005. The increase reflected net income of $4.0 million in addition to a $12,000 decrease in other comprehensive losses due to unrealized losses on investment securities available for sale at September 30, 2006. The decrease in unrealized losses on investments was due to changes in the composition of the investment securities portfolio combined with changes in interest rates. Management concluded that none of our impaired securities have impairments that are other than temporary. 46

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Comparison of Operating Results For The Years Ended September 30, 2006 and September 30, 2005 Net Income. Net income decreased $497,000, or 11.2%, to $4.0 million for fiscal year 2006 from $4.5 million for fiscal year 2005. The decrease was primarily the result of a decrease in net interest income and an increase in total non-interest expense, and an increase in income taxes, partially offset by an increase in total non-interest income. Net Interest Income. Net interest income decreased by $362,000, or 2.1%, to $17.2 million for fiscal year 2006 from $17.6 million for fiscal year 2005. The decrease was primarily attributable to a 39 basis point decrease in our interest rate spread to 2.46% for fiscal year 2006 from 2.85% for fiscal year 2005. The decrease in the net interest margin was due to average yields on interest-earning assets increasing at a slower pace than the cost of interest-bearing liabilities. During fiscal year 2006, the Federal Reserve Board of Governors increased the federal funds rates six times. The tables on pages 52 and 53 set forth the components of our net interest income, yields on interest-earning assets and costs of interest-bearing liabilities, and the effect on net interest income arising from changes in volumes and rates. Interest Income. Interest income increased $4.5 million, or 14.2%, to $36.5 million for fiscal year 2006 from $31.9 million for fiscal year 2005. The increase resulted from a $59.8 million increase in average interest-earning assets which had the effect of increasing interest income by $3.2 million. In addition, there was a 19 basis point increase in the overall yield on interest earning assets to 5.68% for fiscal year 2006, from 5.49% for fiscal year 2005 which increased interest income by $1.3 million. Loans increased on average $39.4 million between the two periods, along with increases in the average balances of investment securities of $16.7 million and mortgage-backed securities of $4.3 million. Federal Home Loan Bank of Pittsburgh stock and other interest earning assets decreased by $643,000 in the aggregate. The average yield on loans increased to 5.95% for the fiscal year 2006, from 5.84% for the fiscal year 2005. The average yields on investment securities increased to 4.49% from 3.87% and the average yield on mortgage backed securities increased to 4.30% from 3.67% for the 2006 and 2005 periods, respectively. Interest Expense. Interest expense increased $4.9 million, or 34.2%, to $19.2 million for fiscal year 2006 from $14.3 million for fiscal year 2005. The increase resulted from a $53.8 million increase in average interest-bearing liabilities, which had the effect of increasing interest expense by $2.5 million. In addition, there was a 58 basis point increase in the overall cost of interest-bearing liabilities to 3.22% for fiscal year 2006 from 2.64% for fiscal year 2005, which increased interest expense by $2.4 million. Money market and savings accounts decreased in the aggregate by approximately $11.0 million, while certificates of deposits increased in the aggregate by $47.8 million between the two periods. The average balance of borrowed funds increased $18.9 million during the same comparative periods. The cost of certificates of deposit increased to 4.02% for fiscal year 2006 from 3.32% for fiscal year 2005. The cost of borrowed funds increased to 4.47% from 4.05% for the same respective periods. The additional deposits and borrowings were used to fund increases in loans and to purchase investment securities. 47

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Provision for Loan Losses. ESSA Bank & Trust establishes provisions for loan losses, which are charged to earnings, at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower‘s ability to repay, the estimated value of any underlying collateral, peer group information and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events occur. After an evaluation of these factors, management made a provision of $300,000 for fiscal year 2006 compared to a $550,000 provision for year ended 2005. The allowance for loan losses was $3.9 million, or 0.69% of loans outstanding at September 30, 2006, compared to $3.6 million, or 0.70% of loans outstanding at September 30, 2005. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Management reviews the level of the allowance on a quarterly basis, and establishes the provision for loan losses based on the factors set forth in the preceding paragraph. Historically, our loan portfolio has consisted primarily of one- to four-family residential mortgage loans. However, our current business plan calls for increases in commercial real estate. As management evaluates the allowance for loan losses, the increased risk associated with larger non-homogenous commercial real estate and commercial business loans may result in large additions to the allowance for loan losses in future periods. Although we believe that we use the best information available to establish the allowance for loan losses, future additions to the allowance may be necessary, based on estimates that are susceptible to change as a result of changes in economic conditions and other factors. In addition, the Office of Thrift Supervision, as an integral part of its examination process, will periodically review our allowance for loan losses. This agency may require us to recognize adjustments to the allowance, based on its judgments about information available to it at the time of its examination. Non-interest Income. Non-interest income increased by $237,000, or 4.5%, to $5.5 million for fiscal year 2006, from $5.3 million for fiscal year 2005. The increase was primarily due to an increase in trust and investment fees of $238,000, partially offset by decreases in gains on sale of loans, net and other non-interest income. The increase in trust and investment fees was due primarily to the addition, by ESSA Bank & Trust of a trust officer and the addition by PRIMEVEST Financial Services, Inc. of two brokers. Other non-interest income decreased by $142,000 for fiscal year 2006 included approximately $45,000 in losses on asset disposals along with a reduction in rental income of approximately $25,000. Other non-interest income for fiscal year 2005 included approximately $47,000 received by us as a result of the sale of the Pulse Electronic Funds Transfer Network to Discover. Additionally, fiscal year 2005 included a $130,000 charge for an other than temporary decline in the value of one of our investment securities. 48

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Non-interest Expense. Non-interest expense increased by $192,000, or 1.2%, to $16.7 million for fiscal year 2006, from $16.5 million for fiscal year 2005. Increases in compensation and employee benefits of $159,000, occupancy and equipment of $177,000, and advertising of $100,000 were partially offset by decreases in professional fees of $92,000 and data processing of $77,000. The increase in compensation and employee benefits was the result of normal merit increases combined with increases in health insurance, pension, and other benefit costs. The increase in occupancy and equipment was the result of increases in depreciation and real estate taxes related to ESSA Bank & Trust‘s property and equipment. Advertising expense increased as a result of our increased efforts to maintain and improve our presence in our market area. Professional fees decreased primarily due to the fact that several miscellaneous, short-term consulting engagements in fiscal year 2005 were not repeated in fiscal year 2006. Data processing decreased primarily as a result of a decrease in the cost of processing ESSA Bank & Trust‘s student loans which were substantially sold during fiscal year 2005. Income Taxes. Income tax expense was $1.8 million for fiscal year 2006, an increase of $430,000, or 31.1%, compared to $1.4 million for fiscal year 2005. The effective tax rate was 31.4% in fiscal year 2006 compared to 23.7% in fiscal year 2005, principally due to the elimination of certain over-accruals for income taxes in fiscal year 2005, and an adjustment to deferred taxes and income tax expense for timing differences related to depreciation in 2006. Comparison of Operating Results For The Years Ended September 30, 2005 and September 30, 2004 Net Income. Net income increased $536,000, or 13.7%, to $4.5 million for fiscal year 2005 from $3.9 million for fiscal year 2004. The increase was primarily the result of an increase in net interest income an increase in total non-interest income partially offset by an increase in income taxes and an increase in total non-interest expense. Net Interest Income. Net interest income increased by $719,000, or 4.3%, to $17.6 million for fiscal year 2005 from $16.9 million for fiscal year 2004. The increase was primarily attributable to the growth of our total interest earning assets offset by a 25 basis point decrease in our interest rate spread to 2.85% for fiscal year 2005 from 3.10% for fiscal year 2004. The decrease in the interest rate spread was due to the yields on interest-earning assets decreasing while the costs of interest-bearing liabilities increased. During fiscal year 2005, the Federal Reserve Board of Governors increased the federal funds rates eight times. The tables on pages 52 and 53 set forth the components of our net interest income, yields on interest-earning assets and costs of interest-bearing liabilities, and the effect on net interest income arising from changes in volumes and rates. Interest Income . Interest income increased $3.1 million, or 10.8%, to $31.9 million for fiscal year 2005 from $28.8 million for fiscal year 2004. The increase resulted from a $64.4 million increase in average interest-earning assets which had the effect of increasing interest income by $3.3 million. Partially offsetting the increase in interest income was an 8 basis point decrease in the overall yield on interest earning assets to 5.49% for fiscal year 2005, from 5.57% 49

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for fiscal year 2004 which decreased interest income by $174,000. Loans increased on average $37.4 million between the two periods, along with increases in the average balances of investment securities of $16.6 million and mortgage-backed securities of $14.1 million. Federal Home Loan Bank stock and other interest earning assets decreased by $3.6 million in the aggregate. The average yield on loans decreased to 5.84% for the fiscal year 2005, from 5.95% for the fiscal year 2004. The average yields on investment securities decreased to 3.87% from 4.63% and the average on mortgage backed securities yield increased to 3.67% from 3.13% for the 2005 and 2004 periods, respectively. Interest Expense. Interest expense increased $2.4 million, or 20.0%, to $14.3 million for fiscal year 2005 from $11.9 million for fiscal year 2004. The increase resulted from a $59.8 million increase in average interest-bearing liabilities, which had the effect of increasing interest expense by $2.4 million. In addition, there was a 17 basis point increase in the overall cost of interest-bearing liabilities to 2.64% for fiscal year 2005 from 2.47% for fiscal year 2004 which increased interest income by $14,000. Money market and savings accounts decreased in the aggregate by approximately $1.8 million, while certificates of deposits increased in the aggregate by approximately $17.1 million between the two periods. The average balance of borrowed funds increased $44.7 million during the same comparative periods. The cost of certificates of deposit increased to 3.32% for fiscal year 2005 from 3.20% for fiscal year 2004. The cost of borrowed funds decreased to 4.05% from 4.21% for the same respective periods. The additional deposits and borrowings were used to fund increases in loans and to purchase investment securities. Provision for Loan Losses . ESSA Bank & Trust establishes provisions for loan losses, which are charged to earnings, at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower‘s ability to repay, the estimated value of any underlying collateral, peer group information and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events occur. After an evaluation of these factors, management made a provision of $550,000 for fiscal year 2005 compared to a $530,000 provision for year ended 2004. The allowance for loan losses was $3.6 million or 0.70% of loans outstanding at September 30, 2005, compared to $3.0 million, or 0.63% of loans outstanding at September 30, 2004. Non-interest Income. Non-interest income increased by $1.0 million, or 23.4%, to $5.3 million for fiscal year 2005, from $4.3 million for fiscal year 2004. The increase was primarily due to increases in service fees on deposit accounts of $922,000, net gain on sale of loans of $96,000, earnings on bank-owned life insurance of $126,000 and other non-interest income of $87,000. The increase in service fees on deposit accounts resulted primarily from increases in non-sufficient fund charges attributable to a new overdraft protection program implemented in May of 2004. The earnings on bank-owned life insurance increased during fiscal year 2005 because 2005 included twelve months of earnings on bank-owned life insurance and fiscal year 2004 included ten months of earnings as a result of when the insurance was originally purchased. 50

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ESSA Bank & Trust also purchased an additional $2.0 million of bank-owned life insurance during fiscal year 2005. Other non-interest income for fiscal year 2005 included approximately $47,000 received by ESSA Bank & Trust as a result of the sale of the Pulse Electronic Funds Transfer Network to Discover. The increases described above were partially offset by a charge during fiscal year 2005 for an other than temporary decline in the value of one of our investment securities of $130,000. Non-interest Expense. Non-interest expense increased by $953,000, or 6.1%, to $16.5 million for fiscal year 2005, from $15.5 million for fiscal year 2004. Increases in compensation and employee benefits of $1.2 million and occupancy and equipment of $164,000 were partially offset by decreases in professional fees of $127,000 and data processing of $267,000. The increase in compensation and employee benefits was the result of normal merit increases, increases in incentive compensation and increases in health insurance, pension, and other benefit costs. The increase in occupancy and equipment was the result of increases in depreciation and real estate taxes related to ESSA Bank & Trust‘s property and equipment. Income Taxes. Income tax expense was $1.4 million for fiscal year 2005, an increase of $211,000, or 18.0%, compared to $1.2 million for fiscal year 2004. The effective tax rate was 23.7% in fiscal year 2005 compared to 23.0% in fiscal year 2004. 51

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The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated, as well as balances and average yields and costs at September 30, 2006. All average balances are monthly 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.
At September 30, 2006 2006 Interest Income/ Expense

For the Years Ended September 30, 2005 Interest Income/ Expense 2004 Interest Income/ Expense

Yield/ Cost

Average Balance

Yield/ Cost

Average Balance (Dollars in thousands)

Yield/ Cost

Average Balance

Yield/ Cost

Interest-earning assets: Loans Investment securities Taxable Exempt from federal income tax
(1) (2) (3) (3) (4)

5.93 % $ 533,351 4.34 % 7.15 % 4.67 % 4.72 % 5.25 % 5.33 % 5.72 % 44,678 5,894 50,572 40,247 12,115 7,422 643,707 (3,694 ) 39,875 $ 679,888

$ 31,744 1,848 278 2,126 1,731 519 331 36,451

5.95 % $ 493,918 4.14 % 7.15 % 4.49 % 4.30 % 4.28 % 4.46 % 5.68 % 28,366 5,513 33,879 35,963 11,604 8,576 583,940 (3,292 ) 37,769 $ 618,417

$ 28,829 906 267 1,173 1,319 317 281 31,919

5.84 % $ 456,566 3.19 % 7.34 % 3.87 % 3.67 % 2.73 % 3.28 % 5.49 % 11,644 5,647 17,291 21,882 9,615 14,198 519,552 (2,748 ) 34,010 $ 550,814

$ 27,152 386 274 660 684 124 190 28,810

5.95 % 3.32 % 7.35 % 4.63 % 3.13 % 1.29 % 1.34 % 5.57 %

Total investment securities Mortgage-backed securities Federal Home Loan Bank stock Other Total interest-earning assets Allowance for loan losses Noninterest-earning assets Total assets Interest-bearing liabilities: NOW accounts Money market accounts Savings and club accounts Certificates of deposit Borrowed funds Total interest-bearing liabilities Non-interest bearing demand accounts Noninterest-bearing liabilities Total liabilities Equity Total liabilities and equity Net interest income Interest rate spread Net interest-earning assets Net interest margin Average interest-earning assets to average interest-bearing liabilities
(5)

0.07 % $ 59,709 2.78 % 31,618 0.40 % 79,452 4.40 % 197,064 4.68 % 228,198 3.55 % 596,041 21,383 5,650 623,074 56,814 $ 679,888

44 687 355 7,926 10,205 19,217

0.07 % $ 61,562 2.17 % 33,386 0.45 % 88,727 4.02 % 149,267 4.47 % 209,284 3.22 % 542,226 17,527 5,815 565,568 52,849 $ 618,417

79 421 388 4,963 8,472 14,323

0.13 % $ 61,792 1.26 % 33,078 0.44 % 90,853 3.32 % 132,119 4.05 % 164,563 2.64 % 482,405 13,281 7,359 503,045 47,769 $ 550,814

100 245 442 4,224 6,922 11,933

0.16 % 0.74 % 0.49 % 3.20 % 4.21 % 2.47 %

$ 17,234 2.17 % $ 2.41 % 47,666 2.70 % 2.46 % $ 41,714

$ 17,596 2.85 % $ 3.04 % 37,174

$ 16,877 3.10 %

3.28 %

107.31 %

108.00 %

107.69 %

107.70 %

(1) (2)

Non-accruing loans are included in the outstanding loan balances. Interest income on loans includes net amortized revenues (costs) on loans totaling $603,000 for 2006, $748,000 for 2005, and $955,000 for 2004.

(3) (4) (5)

Held to maturity securities are reported as amortized cost. Available for sale securities are reported at fair value. Yields on tax exempt securities have been calculated on a fully tax equivalent basis assuming a tax rate of 34%. Represents the difference between interest earned and interest paid, divided by average total interest earning assets. 52

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Rate/Volume Analysis The following table presents the effects of changing rates and volumes on our net interest income for the years indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.
For the Years Ended September 30, 2006 vs. 2005 Increase (Decrease) Due to Volume Rate For the Years Ended September 30, 2005 vs. 2004 Increase (Decrease) Due to Volume Rate Net

Net (In thousands)

Interest-earning assets: Loans Investment securities Mortgage-backed securities Federal Home Loan Bank stock Other Total interest-earning assets Interest-bearing liabilities: NOW accounts Money market accounts Savings and club accounts Certificates of deposit Borrowed funds Total interest-bearing liabilities Net change in interest income

$ 2,338 719 168 15 (42 ) 3,198 (2 ) (23 ) (41 ) 1,790 803 2,527 $ 671

$

577 234 244 187 92 1,334 (33 ) 289 8 1,173 930 2,367

$ 2,915 953 412 202 50 4,532 (35 ) 266 (33 ) 2,963 1,733 4,894 $ (362 )

$

2,188 663 500 30 (98 ) 3,283 — 2 (10 ) 565 1,819 2,376

$ (511 ) (150 ) 135 163 189 (174 ) (21 ) 174 (44 ) 174 (269 ) 14 $ (188 )

$ 1,677 513 635 193 91 3,109 (21 ) 176 (54 ) 739 1,550 2,390 $ 719

$ (1,033 )

$

907

Management of Market Risk General . The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of 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 of the Board of Directors 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 offering will increase our capital and provide management with greater flexibility to manage our interest rate risk. In particular, management intends to leverage the capital we receive to increase our interest-earning assets. 53

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Net Portfolio Value. The Office of Thrift Supervision requires the computation of amounts by which the net present value of an institution‘s cash flow from assets, liabilities and off balance sheet items (the institution‘s net portfolio value or ―NPV‖) would change in the event of a range of assumed changes in market interest rates. The Office of Thrift Supervision provides all institutions that file a Consolidated Maturity/Rate Schedule as a part of their quarterly Thrift Financial Report with an interest rate sensitivity report of net portfolio value. The Office of Thrift Supervision simulation model uses a discounted cash flow analysis and an option-based pricing approach to measuring the interest rate sensitivity of net portfolio value. Historically, the Office of Thrift Supervision model estimated the economic value of each type of asset, liability and off-balance sheet contract under the assumption that the United States Treasury yield curve increases or decreases instantaneously by 100 to 300 basis points (200 basis points in the event of an interest rate decrease) in 100 basis point increments. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the ―Change in Interest Rates‖ column below. The Office of Thrift Supervision provides us the results of the interest rate sensitivity model, which is based on information we provide to the Office of Thrift Supervision to estimate the sensitivity of our net portfolio value. The table below sets forth, as of September 30, 2006, the estimated changes in our net portfolio value that would result from the designated instantaneous changes in the United States Treasury yield curve. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.
Change in Interest Rates (basis points) (1) Estimated NPV (2) Estimated Increase (Decrease) in NPV NPV as a Percentage of Present Value of Assets (3) Increase NPV (Decrease) Ratio (4) (basis points)

Amount (Dollars in thousands)

Percent

+300 +200 +100 — -100 -200 (1) (2) (3) (4) $ 42,893 55,795 68,123 78,761 86,664 91,126 $ (35,869 ) (22,966 ) (10,638 ) — 7,902 12,364

) (46 % (29 ) (14 ) — 10 16

6.23 % 7.89 9.39 10.61 11.46 11.89

(438 ) (273 ) (123 ) — 85 128

Assumes an instantaneous uniform change in interest rates at all maturities. NPV is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts. Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets. NPV Ratio represents NPV divided by the present value of assets.

The table above indicates that at September 30, 2006, in the event of an immediate 100 basis point decrease in interest rates, we would experience a 10% increase in net portfolio value. In the event of an immediate 100 basis point increase in interest rates, we would experience a 14% decrease in net portfolio value. Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in net portfolio value requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market 54

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interest rates. In this regard, the net portfolio value table presented assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the net portfolio value table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results. Liquidity and Capital Resources We maintain liquid assets at levels we consider adequate to meet both our short-term and long-term liquidity needs. We adjust our liquidity levels to fund deposit outflows, repay our borrowings and to fund loan commitments. We also adjust liquidity as appropriate to meet asset and liability management objectives. Our primary sources of liquidity are deposits, amortization and prepayment of loans and mortgage-backed securities, maturities of investment securities and other short-term investments, and earnings and funds provided from operations, as well as access to Federal Home Loan Bank advances. While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competition. We set the interest rates on our deposits to maintain a desired level of total deposits. A portion of our liquidity consists of cash and cash equivalents and borrowings, which are a product of our operating, investing and financing activities. At September 30, 2006, $12.7 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. Short-term investment securities (maturing in one year or less) totaled $23.5 million at September 30, 2006. As of September 30, 2006, we had $259.3 million in borrowings outstanding from the Federal Home Loan Bank of Pittsburgh and we have access to additional Federal Home Loan Bank advances of up to approximately $200.0 million. At September 30, 2006, we had $53.0 million in loan commitments outstanding, which included $15.7 million in undisbursed construction loans, $21.2 million in unused home equity lines of credit, $5.2 million in commercial lines of credit and $7.3 million to originate primarily multi-family and nonresidential mortgage loans. Certificates of deposit due within one year of September 30, 2006 totaled $147.2 million, or 70.3% of certificates of deposit. If these maturing deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before September 30, 2007. We believe, however, based on past experience, that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered. As reported in the Consolidated Statements of Cash Flows, our cash flows are classified for financial reporting purposes as operating, investing or financing cash flows. Net cash provided by operating activities was $1.8 million, $4.9 million and $3.1 million for the years 55

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ended September 30, 2006, 2005 and 2004, 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 in investing activities was $75.2 million, $63.8 million and $82.8 million in fiscal years 2006, 2005 and 2004, respectively, principally reflecting our loan and investment security activities in the respective periods. Investment security cash flows had the most significant effect, as net cash utilized in purchases amounted to $52.2 million, $44.3 million and $48.9 million in the years ended September 30, 2006, 2005 and 2004, respectively. Deposit and borrowing cash flows have comprised most of our financing activities which resulted in net cash provided of $65.8 million in fiscal year 2006, $57.7 million in fiscal year 2005 and $58.1 million in fiscal year 2004. The net effect of our operating, investing and financing activities was to reduce our cash and cash equivalents from $43.1 million at the beginning of fiscal year 2004 to $12.7 million at the end of fiscal year 2006. The following table summarizes our significant fixed and determinable contractual obligations and other funding needs by payment date at September 30, 2006. The payment amounts represent those amounts due to the recipient and do not include any unamortized premiums or discounts or other similar carrying amount adjustments.
Less than One Year Payments Due by Period One to Three Three to Years Five Years (In thousands) More than Five Years

Contractual Obligations

Total

Long-term debt Operating leases Certificates of deposit Total Commitments to extend credit

$

27,493 210 150,142

$

108,837 297 47,242 156,376 528

$

78,754 134 21,412

$

43,689 209 — 43,898 14,043

$ 258,773 850 218,796 $ 478,419 $ 55,770

$ 177,845 $ 35,525

$ $

$ 100,300 $ 5,674

$ $

We also have obligations under our post retirement plan as described in Note 13 to the Consolidated Financial Statements. The post retirement benefit payments represent actuarially determined future payments to eligible plan participants. We expect to contribute $536,000 to our post retirement plan in 2007. In addition, as part of the reorganization and offering, the employee stock ownership plan trust intends to borrow funds from ESSA Bancorp, Inc. and use those funds to purchase a number of shares equal to 8% of the common stock issued in the offering. Off-Balance Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in our financial statements. These transaction involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers‘ requests for funding and take the form of loan commitments and lines of credit. For information about our loan commitments and unused lines of credit, see note 11 of the notes to the Consolidated Financial Statements. For fiscal year 2006, we did not engage in any off-balance-sheet transactions other than loan origination commitments in the normal course of our lending activities. Recent Accounting Pronouncements In February 2006, the FASB issued FAS No. 155, Accounting for Certain Hybrid Instruments (―FAS No. 155‖), an amendment of FASB Statements No. 133 and 140. FAS No. 155 56

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allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. This statement is effective for all financial instruments acquired or issued after the beginning of an entity‘s first fiscal year that begins after September 15, 2006. The adoption of this standard is not expected to have a material effect on our results of operations or financial position. In March 2006, the FASB issued FAS No. 156, Accounting for Servicing of Financial Assets (―FAS No. 156‖). This Statement, which is an amendment to FAS No. 140, will simplify the accounting for servicing assets and liabilities, such as those common with mortgage securitization activities. Specifically, FAS No. 156 addresses the recognition and measurement of separately recognized servicing assets and liabilities and provides an approach to simplify efforts to obtain hedge-like (offset) accounting. FAS No. 156 also clarifies when an obligation to service financial assets should be separately recognized as a servicing asset or a servicing liability, requires that a separately recognized servicing asset or servicing liability be initially measured at fair value, if practicable, and permits an entity with a separately recognized servicing asset or servicing liability to choose either of the amortization or fair value methods for subsequent measurement. The provisions of FAS No. 156 are effective as of the beginning of the first fiscal year that begins after September 15, 2006. We are currently evaluating the impact the adoption of the standard will have on our results of operations. In September 2006, the FASB issued FAS No. 157, Fair Value Measurements (―FAS No. 157‖), which provides enhanced guidance for using fair value to measure assets and liabilities. The standard applies whenever other standards require or permit assets or liabilities to be measured at fair value. The Standard does not expand the use of fair value in any new circumstances. FAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Early adoption is permitted. The adoption of this standard is not expected to have a material effect on our results of operations or financial position. In September 2006, the FASB issued FAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans (―FAS No. 158‖), an amendment of FASB Statements No. 87, 88, 106 and 132(R). FAS No. 158 requires that a company recognize the overfunded or underfunded status of its defined benefit post retirement plans (other than multiemployer plans) as an asset or liability in its statement of financial position and that it recognize changes in the funded status in the year in which the changes occur through other comprehensive income. FAS No. 158 also requires the measurement of defined benefit plan assets and obligations as of the fiscal year end, in addition to footnote disclosures. FAS No. 158 is effective for fiscal years ending after December 15, 2006. We are currently evaluating the impact the adoption of the standard will have on our financial position. In June 2006, the FASB issued FASB Interpretation No. 48 (―FIN 48‖), Accounting for Uncertainty in Income Taxes . FIN 48 is an interpretation of FAS No. 109, Accounting for Income Taxes, and it seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. In addition, FIN No. 48 requires expanded disclosure with respect to the uncertainty in income taxes and is effective for fiscal years beginning after December 15, 2006. We are currently evaluating the impact the adoption of the standard will have on our results of operations. 57

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In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (―SAB 108‖), considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements, providing guidance on quantifying financial statement misstatement and implementation when first applying this guidance. Under SAB No. 108, companies should evaluate a misstatement based on its impact on the current year income statement, as well as the cumulative effect of correcting such misstatements that existed in prior years existing in the current year‘s ending balance sheet. SAB 108 is effective for fiscal years ending after November 15, 2006. We are currently evaluating the impact the adoption of the standard will have on our results of operations. In September 2006, the FASB reached consensus on the guidance provided by Emerging Issues Task Force Issue 06-4 (―EITF 06-4‖), Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements . The guidance is applicable to endorsement split-dollar life insurance arrangements, whereby the employer owns and controls the insurance policy, that are associated with a postretirement benefit. EITF 06-4 requires that for a split-dollar life insurance arrangement within the scope of the Issue, an employer should recognize a liability for future benefits in accordance with FAS No. 106 (if, in substance, a postretirement benefit plan exists) or Accounting Principles Board Opinion No. 12 (if the arrangement is, in substance, an individual deferred compensation contract) based on the substantive agreement with the employee. EITF 06-4 is effective for fiscal years beginning after December 15, 2007. We are currently evaluating the impact the adoption of the standard will have on our results of operations or financial condition. In September 2006, the FASB reached consensus on the guidance provided by Emerging Issues Task force Issue 06-5 (―EITF 06-5‖), Accounting for Purchases of Life Insurance-Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85.4, Accounting for Purchases of Life Insurance. EITF 06-5 states that a policyholder should consider any additional amounts included in the contractual terms of the insurance policy other than the cash surrender value in determining the amount that could be realized under the insurance contract. EITF 06-5 is effective for fiscal years beginning after December 15, 2006. We are currently evaluating the impact the adoption of the standard will have on our results of operations or financial condition. Impact of Inflation and Changing Prices The financial statements and related notes of ESSA Bank & Trust have been prepared in accordance with United States generally accepted accounting principles (―GAAP‖). GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation. BUSINESS OF ESSA BANCORP, INC. ESSA Bancorp, Inc. is incorporated in the Commonwealth of Pennsylvania. We have not engaged in any business to date. Upon completion of the conversion, we will own all of the 58

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issued and outstanding stock of ESSA Bank & Trust. We will retain up to 50% of the net proceeds from the offering and invest 50% of the remaining net proceeds in ESSA Bank & Trust as additional capital in exchange for 100% of the outstanding common stock of ESSA Bank & Trust ESSA Bancorp, Inc. will use a portion of the net proceeds to make a loan to the employee stock ownership plan. At a later date, we may use the net proceeds to pay dividends to stockholders and may repurchase shares of common stock, subject to regulatory limitations. We will invest our initial capital as discussed in ―How We Intend to Use the Proceeds from the Offering.‖ In the future, ESSA Bancorp, Inc., as the holding company of ESSA Bank & Trust, will be authorized to pursue other business activities permitted by applicable laws and regulations, which may include the acquisition of banking and financial services companies. See ―Regulation—Holding Company Regulation‖ for a discussion of the activities that are permitted for savings and loan holding companies. We currently have no specific arrangements or understandings regarding any specific acquisition transaction. We may also borrow funds for reinvestment in ESSA Bank & Trust. Following the offering, our cash flow will depend on earnings from the investment of the net proceeds from the offering that we retain, and any dividends received from ESSA Bank & Trust. Initially, ESSA Bancorp, Inc. will neither own nor lease any property, but will instead pay a fee to ESSA Bank & Trust for the use of its premises, equipment and furniture of ESSA Bank & Trust. At the present time, we intend to employ only persons who are officers of ESSA Bank & Trust to serve as officers of ESSA Bancorp, Inc. We will, however, use the support staff of ESSA Bank & Trust from time to time. We will pay a fee to ESSA Bank & Trust for the time devoted to ESSA Bancorp, Inc. by employees of ESSA Bank & Trust. However, these persons will not be separately compensated by ESSA Bancorp, Inc. ESSA Bancorp, Inc. may hire additional employees, as appropriate, to the extent it expands its business in the future. BUSINESS OF ESSA BANK & TRUST General ESSA Bank & Trust was organized in 1916. ESSA Bank & Trust is a full-service, community-oriented savings association with total assets of $725.8 million, total net loans of $556.7 million and total deposits of $402.2 million at September 30, 2006. We provide financial services to individuals, families and businesses through our 12 full-service banking offices, located in Monroe and Northampton Counties, Pennsylvania. ESSA Bank & Trust‘s business consists primarily of accepting deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in residential first mortgage loans (including construction mortgage loans), commercial real estate loans, home equity loans and lines of credit, commercial loans as well as agency securities and mortgage-backed securities. In addition, we also offer asset management and trust services. We offer investment services through our relationship with PRIMEVEST Financial Services, Inc., a third party broker/dealer and investment advisor. Market Area At September 30, 2006, our 12 full-service banking offices consisted of 11 offices in Monroe County, and one office in Northampton County, Pennsylvania. Our primary market for 59

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deposits is currently concentrated around the areas where our full-service banking offices are located. Our primary lending area consists of the counties where our branch offices are located, and to a lesser extent the contiguous counties in the Commonwealth of Pennsylvania. Monroe County is located in eastern Pennsylvania, situated 90 miles north of Philadelphia, 75 miles west of New York and 116 miles northeast of Harrisburg. Monroe County is comprised of 611 square miles of mostly rural terrain. Monroe County is the second-fastest growing county in Pennsylvania. Major industries include tourism, construction and educational facilities. Northampton County is located south of Monroe County and directly borders New Jersey. As of June 30, 2006, we have deposit market share of approximately 19.2% in Monroe County, which represented the second largest deposit market share in Monroe County and approximately less than 1% in Northampton County. Lending Activities Historically, our principal lending activity has been the origination of first mortgage loans for the purchase or refinancing of one- to four-family residential real property. During the past five years, we have increased our originations of commercial real estate loans in an effort to increase interest income. These loans have increased from 2.6% of our total loan portfolio at November 30, 2002 to 8.4% of our total loan portfolio at September 30, 2006. One- to four-family residential real estate mortgage loans represented $452.4 million, or 80.4%, of our loan portfolio at September 30, 2006. Construction first mortgage loans totaled $5.9 million, or 1.1% of the total loan portfolio at September 30, 2006. Commercial real estate loans totaled $47.5 million, or 8.4% of our total loan portfolio at September 30, 2006, and home equity loans and lines of credit totaled $46.8 million, or 8.3% of the total loan portfolio at September 30, 2006. We originate other consumer loans on a limited basis. 60

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Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio, by type of loan at the dates indicated, excluding loans held for sale.
At September 30, 2006 Amount Percent 2005 Amount Percent 2004 Amount Percent (Dollars in thousands) 2003 Amount Percent At November 30, 2002 Amount Percent

Residential first mortgage loans: One- to four-family $ 452,406 Construction 5,943 Commercial 6,159 Commercial real estate 47,479 Home equity loans and lines of credit 46,796 Other 4,247 Total loans receivable Deferred loan costs (fees) Allowance for loan losses Total loans receivable, net $ 563,030

80.4 % $ 421,169 1.1 7,597 1.1 5,310 8.4 36,984 8.3 0.7 40,342 4,204

81.7 % $ 399,233 1.5 8,309 1.0 2,468 7.2 29,439 7.8 0.8 34,256 10,720

82.4 % $ 378,744 1.7 6,093 0.5 2,255 6.1 18,615 7.1 2.2 26,653 12,358

85.2 % $ 336,399 1.4 7,504 0.5 1,368 4.1 10,418 6.0 2.8 25,697 14,962

84.9 % 1.9 0.3 2.6 6.5 3.8 100.0 %

100.0 % $ 515,606

100.0 % $ 484,425

100.0 % $ 444,718

100.0 % $ 396,348

(2,498 ) (3,855 ) $ 556,677

(3,062 ) (3,563 ) $ 508,981

(3,442 ) (3,027 ) $ 477,956

(3,670 ) (2,509 ) $ 438,539

(3,652 ) (2,154 ) $ 390,542

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Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at September 30, 2006. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.
One- to Four-Family Weighted Average Amount Rate Construction Commercial Weighted Weighted Average Average Amount Rate Amount Rate (Dollars in thousands) Commercial Real Estate Weighted Average Amount Rate

Due During the Years Ending September 30, 2007 2008 2009 2010 to 2011 2012 to 2016 2017 to 2021 2021 and beyond Total

$

245 631 1,042 2,334 35,760 139,904 272,490

6.53 % $ 170 6.43 — 6.34 — 5.88 49 5.27 — 5.23 65 5.95 5,659 $ 5,943

6.25 % $ 2,341 — 63 — 127 6.30 735 — 759 6.25 — 6.35 2,134 $ 6,159

7.35 % $ 6.76 7.05 7.33 7.21 — 5.43 $

5,604 812 202 4,099 28,109 6,805 1,848 47,479

8.67 % 8.12 7.13 6.79 6.65 6.45 7.05

$ 452,406

Home Equity Loans and Lines of Credit Weighted Average Amount Rate

Other Weighted Average Amount Rate (Dollars in thousands)

Total Weighted Average Rate

Amount

Due During the Years Ending September 30, 2007 2008 2009 2010 to 2011 2012 to 2016 2017 to 2021 2021 and beyond Total

$

74 363 702 3,619 9,015 14,738 18,285

6.09 % $ 2,312 5.18 196 5.66 461 5.86 854 6.38 424 6.69 — 8.00 — $ 4,247

8.04 % $ 10,746 8.97 2,065 8.73 2,534 7.37 11,690 7.35 74,067 — 161,512 — 300,416 $ 563,030

8.14 % 7.13 6.68 6.39 5.96 5.42 6.09

$ 46,796

The following table sets forth the scheduled repayments of fixed- and adjustable-rate loans at September 30, 2006 that are contractually due after September 30, 2007.
Due After September 30, 2007 Fixed Adjustable Total (In thousands)

Residential first mortgage loans: One- to four-family Construction Commercial Commercial real estate Home equity loans and lines of credit Other Total

$ 396,189 5,773 3,260 18,396 28,018 1,935 $ 453,571 $

55,972 — 558 23,479 18,704 — 98,713

452,161 5,773 3,818 41,875 46,722 1,935 $ 552,284

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Loan Originations and Repayments . Historically, we have originated residential mortgage loans pursuant to underwriting standards that generally conform to Fannie Mae and Freddie Mac guidelines. Loan origination activities are primarily concentrated in Monroe and Northampton Counties, Pennsylvania. New loans are generated primarily from walk-in customers, customer referrals, a network of mortgage brokers, and other parties with whom we do business, and from the efforts of employees and advertising. Loan applications are underwritten and processed at our corporate center. One- to Four-Family Residential Loans. Historically, our primary lending activity has consisted of the origination of one- to four-family residential mortgage loans secured primarily by properties located in Monroe and Northampton Counties, Pennsylvania. At September 30, 2006, approximately $452.4 million, or 80.4% of our loan portfolio, consisted of one- to four-family residential loans. Our origination of oneto four-family loans increased in fiscal year 2006 compared to fiscal years 2005 and 2004, although such loans are declining as a percentage of our total loan portfolio. Generally, one- to four-family residential mortgage loans are originated in amounts up to 80% of the lesser of the appraised value or purchase price of the property, although loans may be made with higher loan-to-value ratios at a higher interest rate to compensate for the risk. Private mortgage insurance is generally required on loans with a loan-to-value ratio in excess of 80%. Fixed-rate loans are originated for terms of 10, 15, 20 and 30 years. At September 30, 2006, our largest loan secured by one- to four-family real estate had a principal balance of approximately $605,000 and was secured by a single-family residence. This loan was performing in accordance with its terms. We also offer adjustable-rate mortgage loans which have fixed terms of one, three, five or ten-years before converting to an annual adjustment schedule based on changes in a designated United States Treasury index. We originated $11.9 million of adjustable rate one- to four-family residential loans during the year ended September 30, 2006 and $13.7 million during the year ended September 30, 2005. Our adjustable rate mortgage loans provide for maximum rate adjustments of 200 basis points per adjustment, with a lifetime maximum adjustment of 600 basis points. Our adjustable rate mortgage loans amortize over terms of up to 30 years. Adjustable rate mortgage loans decrease the risk associated with changes in market interest rates by periodically repricing, but involve other risks because, as interest rates increase, the interest payments on the loan increase, thus increasing the potential for default by the borrower. At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustment of the contractual interest rate is also limited by the maximum periodic and lifetime interest rate adjustments permitted by our loan documents, and therefore, is potentially limited in effectiveness during periods of rapidly rising interest rates. At September 30, 2006, $56.0 million, or 12.4%, of our one- to four-family residential loans had adjustable rates of interest. All one- to four-family residential mortgage loans that we originate include ―due-on-sale‖ clauses, which give us the right to declare a loan immediately due and payable in the event that, among other things, the borrower sells or otherwise disposes of the real property subject to the mortgage and the loan is not repaid. 63

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Regulations limit the amount that a savings bank may lend relative to the appraised value of the real estate securing the loan, as determined by an appraisal of the property at the time the loan is originated. For all loans, we utilize outside independent appraisers approved by the Board of Directors. All borrowers are required to obtain title insurance. We also require fire and casualty insurance and, where circumstances warrant, flood insurance. Commercial Real Estate Loans. At September 30, 2006, $47.5 million, or 8.4% of our total loan portfolio consisted of commercial real estate loans. Commercial real estate loans are secured by office buildings, mixed-use properties and other commercial properties. We generally originate adjustable rate commercial real estate loans with an initial term of five years and a repricing option, and a maximum term of up to 25 years. The maximum loan-to-value ratio of our commercial real estate loans is 85%. At September 30, 2006, we had 202 commercial real estate loans with an outstanding balance of $47.5 million. At September 30, 2006, our largest commercial real estate loan balance was $2.8 million. At September 30, 2006, all but one of our loans secured by commercial real estate were performing in accordance with their terms. One secured commercial line of credit totaling approximately $50,000 was between 60 and 90 days past due at September 30, 2006. We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including credit history, profitability and expertise, as well as the value and condition of the mortgaged property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower‘s experience in owning or managing similar property and the borrower‘s payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service) to ensure that it is at least 120% of the monthly debt service. All commercial real estate loans in excess of $250,000 are appraised by outside independent appraisers approved by the Board of Directors. Personal guarantees are obtained from commercial real estate borrowers although we will consider waiving this requirement based upon the loan-to-value ratio of the proposed loan. All purchase money and asset refinance borrowers are required to obtain title insurance. We also require fire and casualty insurance and, where circumstances warrant, flood insurance. Loans secured by commercial real estate generally are considered to present greater risk than one- to four-family residential loans. Commercial real estate loans often involve large loan balances to single borrowers or groups of related borrowers. Repayment of these loans depends to a large degree on the results of operations and management of the properties securing the loans or the businesses conducted on such property, and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general. Accordingly, the nature of these loans makes them more difficult for management to monitor and evaluate. First Mortgage Construction Loans . At September 30, 2006, $5.9 million, or 1.1%, of our total loan portfolio consisted of first mortgage construction loans. Most of our first mortgage construction loans are for the first mortgage construction of residential properties. We currently offer fixed and adjustable-rate residential first mortgage construction loans. First mortgage 64

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construction loans are generally structured for permanent mortgage financing once the construction is completed. At September 30, 2006, our largest first mortgage construction loan balance was $600,000. The loan was performing in accordance with its terms. First mortgage construction loans, once converted to permanent financing, generally repay over a thirty-year period. First mortgage construction loans require only the payment of interest during the construction period. First mortgage construction loans will generally be made in amounts of up to 80% of the appraised value of the completed property, or the actual cost of the improvements. In certain circumstances first mortgage construction loans may be made in amounts up to 100% of the appraised value with appropriate credit enhancements such as private mortgage insurance. Funds are disbursed based on our inspections in accordance with a schedule reflecting the completion of portions of the project. First mortgage construction loans generally involve a greater degree of credit risk than one- to four-family residential mortgage loans. The risk of loss on a construction loan depends upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost of construction. For all loans, we utilize outside independent appraisers approved by the Board of Directors. All borrowers are required to obtain title insurance. We also require fire and casualty insurance and, where circumstances warrant, flood insurance on properties. Other Loans . We offer a variety of loans that are either unsecured or secured by property other than real estate. These loans include loans secured by deposits, personal loans and automobile loans. At September 30, 2006, these other loans totaled $4.2 million, or 0.7% of the total loan portfolio. Loan Approval Procedures and Authority . The loan approval process is intended to assess the borrower‘s ability to repay the loan, the viability of the loan, and the adequacy of the value of the property that will secure the loan. To assess the borrower‘s ability to repay, we review each borrower‘s employment and credit history and information on the historical and projected income and expenses of mortgagors. All residential mortgage loans in excess of the conforming loan limit but less than $500,000 must be approved by any two of the following: President, Chief Lending Officer and the Vice President, Retail Lending. All loans in excess of $500,000 but less than $750,000 must be approved by the Chief Executive Officer and either the Chief Lending Officer or the Vice President, Retail Lending. All loans in excess of $750,000 must be approved by the Management Loan Committee and all loans in excess of $1.0 million must be approved by the Director Loan Committee. Non-Performing Loans and Problem Assets After a real estate secured loan becomes 15 days late, we deliver a computer generated late charge notice to the borrower and will attempt to contact the borrower by telephone. When a loan becomes 30 days delinquent, we send a delinquency letter to the borrower. We then attempt to make satisfactory arrangements to bring the account current, including interviewing the borrower, until the mortgage is brought current or a determination is made to recommend foreclosure, deed-in-lieu of foreclosure or other appropriate action. After 60 days, we will generally refer the matter to the Board of Directors who may authorize legal counsel to commence foreclosure proceedings. 65

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Mortgage loans are reviewed on a regular basis and such loans are placed on non-accrual status when they become more than 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 Loans. At September 30, 2006, $623,000 (or less than 1.0% of our total loans) were non-performing loans. As of September 30, 2006, we had no outstanding non-performing commercial real estate loans. 66

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Non-Performing Assets. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated. At each date presented, we had no troubled debt restructurings (loans for which a portion of interest or principal has been forgiven and loans modified at interest rates materially less than current market rates).
2006 At September 30, 2005 2004 2003 (Dollars in thousands) At November 30, 2002

Non-accrual loans: Residential first mortgage loans: One- to four-family Construction Commercial Commercial real estate Home equity loans and lines of credit Other Total Accruing loans 90 days or more past due: Residential first mortgage loans: One- to four-family Construction Commercial Commercial real estate Home equity loans and lines of credit Other Total loans 90 days or more past due Total non-performing loans Real estate owned Other non-performing assets Total non-performing assets Troubled debt restructurings: Residential first mortgage loans:: One- to four-family Construction Commercial Commercial real estate Home equity loans and lines of credit Other Total Ratios: Total non-performing loans to total loans Total non-performing loans to total assets Total non-performing assets to total assets

$ 436 — — — 40 — 476

$ 554 — — — 50 1 605

$ 578 — — — 79 8 665

$ 379 — — — 98 47 524

$

578 — — — 17 76 671

— — — — — — — 476 — — $ 476

— — — — — — — 605 19 — $ 624

— — — — — — — 665 101 — $ 766

— — — — — — — 524 202 — $ 726 $

— — — — — — — 671 101 — 772

$

53 — — — — — 53 0.08 % 0.06 % 0.07 %

$

94 — — — — — 94 0.12 % 0.09 % 0.10 %

$ 167 — — — — — $ 167 0.14 % 0.11 % 0.13 %

$ 270 — — — — — $ 270 0.12 % 0.10 % 0.14 %

$

372 — — — — 15 387 0.17 % 0.14 % 0.16 %

$

$

$

For the year ended September 30, 2006, gross interest income that would have been recorded had our non-accruing loans been current in accordance with their original terms was insignificant. Delinquencies. The following table sets forth certain information with respect to our loan portfolio delinquencies at the dates indicated. Loans delinquent for 90 days or more are generally classified as nonaccrual loans. 67

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Loans Delinquent For 60-89 Days Numbe Amoun r t 90 Days and Over Numbe Amoun r t (Dollars in thousands) Numbe r Total

Amount

At September 30, 2006 Residential first mortgage loans: One- to four-family Construction Commercial Commercial real estate Home equity loans and lines of credit Other Total At September 30, 2005 Residential first mortgage loans: One- to four-family Construction Commercial Commercial real estate Home equity loans and lines of credit Other Total At September 30, 2004 Residential first mortgage loans: One- to four-family Construction Commercial Commercial real estate Home equity loans and lines of credit Other Total At September 30, 2003 Residential first mortgage loans: One- to four-family Construction Commercial Commercial real estate Home equity loans and lines of credit Other Total At September 30, 2002 Residential first mortgage loans: One- to four-family Construction Commercial Commercial real estate Home equity loans and lines of credit Other Total

— — — 1 — — 1 $

— — — 49 — — 49

5 — — — 1 — 6

436 — — — 40 — $ 476

5 — — 1 1 — 7 $

436 — — 49 40 — 525

4 — — — 1 — 5

590 — — — 16 — $ 606

8 — — — 3 1 12

554 — — — 50 1 $ 605

12 — — — 4 1 17

1,144 — — — 66 1 $ 1,211

5 — — — — 1 6

237 — — — — 4 $ 241

5 — — — 5 3 13

497 — — — 79 8 $ 584

10 — — — 5 4 19 $

734 — — — 79 12 825

2 — — — — 1 3

118 — — — — 1 $ 119

5 — — — 6 6 17

379 — — — 98 47 $ 524

7 — — — 6 7 20 $

497 — — — 98 48 643

4 — — — 1 4 9

243 — — — 5 42 $ 290

10 — — — 1 4 15

578 — — — 16 77 $ 671

14 — — — 2 8 24 $

821 — — — 21 119 961

Classified Assets. Banking regulations and our Asset Classification Policy provide that loans and other assets considered to be of lesser quality should be classified as ―substandard,‖ ―doubtful‖ or ―loss‖ assets. An asset is considered ―substandard‖ if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. ―Substandard‖ assets include those characterized by the ―distinct possibility‖ that the institution will sustain ―some loss‖ if the deficiencies are not corrected. Assets classified as ―doubtful‖ have all of the weaknesses inherent in those classified ―substandard,‖ with the added characteristic that the weaknesses present make ―collection or liquidation in full,‖ on the basis of 68

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currently existing facts, conditions, and values, ―highly questionable and improbable.‖ Assets classified as ―loss‖ are those considered ―uncollectible‖ and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. We classify an asset as ―special mention‖ if the asset has a potential weakness that warrants management‘s close attention. While such assets are not impaired, management has concluded that if the potential weakness in the asset is not addressed, the value of the asset may deteriorate, thereby adversely affecting the repayment of the asset. An institution is required to establish general allowances for loan losses in an amount deemed prudent by management for loans classified substandard or doubtful, as well as for other problem loans. General allowances represent loss allowances which have been established to recognize the inherent losses associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When an institution classifies problem assets as ―loss,‖ it is required either to establish a specific allowance for losses equal to 100% of the amount of the asset so classified or to charge off such amount. An institution‘s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the Office of Thrift Supervision which can order the establishment of additional general or specific loss allowances. On the basis of management‘s review of its assets, at September 30, 2006, we classified approximately $3.0 million of our assets as special mention and $586,000 as substandard. At September 30, 2006, none of our assets were classified as doubtful or loss. The loan portfolio is reviewed on a regular basis to determine whether any loans require classification in accordance with applicable regulations. Not all classified assets constitute non-performing assets. Allowance for Loan Losses Our allowance for loan losses is maintained at a level necessary to absorb loan losses that are both probable and reasonably estimable. Management, in determining the allowance for loan losses, considers the losses inherent in its loan portfolio and changes in the nature and volume of loan activities, along with the general economic and real estate market conditions. Our allowance for loan losses consists of two elements: (1) an allocated allowance, which comprises allowances established on specific loans and class allowances based on historical loss experience and current trends, and (2) an unallocated allowance based on general economic conditions and other risk factors in our markets and portfolios. We maintain a loan review system, which allows for a periodic review of our loan portfolio and the early identification of potential impaired 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 loan loss allowances are established for identified losses based on a review of such information. A loan evaluated for impairment is considered to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. All loans identified as impaired are evaluated independently. We do not aggregate such loans for evaluation purposes. Loan impairment is measured based on the fair value of collateral method, taking into account the appraised value, 69

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any valuation assumptions used, estimated costs to sell and trends in the market since the appraisal date. General loan loss allowances are based upon a combination of factors including, but not limited to, actual loan 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 loss provisions may be necessary based on changing economic conditions. Payments received on impaired loans are applied first to accrued interest receivable and then to principal. The allowance for loan losses as of September 30, 2006 is 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 Office of Thrift Supervision and the Pennsylvania Department of Banking, as an integral part of its examination process, periodically reviews our allowance for loan 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. 70

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The following table sets forth activity in our allowance for loan losses for the periods indicated.
At or for the ten months ended September 30, 2003 At or for the year ended November 30, 2002

At or For the Years Ended September 30, 2006 2005 2004 (Dollars in thousands)

Balance at beginning of year Charge-offs: Residential first mortgage loans: One- to four-family Construction Commercial Commercial real estate Home equity loans and lines of credit Other Total charge-offs Recoveries: Residential first mortgage loans: One- to four-family Construction Commercial Commercial real estate Home equity loans and lines of credit Other Total recoveries Net charge-offs Provision for loan losses Balance at end of year Ratios: Net charge-offs to average loans outstanding

$

3,563

$

3,027

$

2,509

$

2,154

$

1,371

— — — — (7 ) (2 ) $ (9 ) $

(10 ) — — — — (5 ) (15 ) $

— — — — (31 ) (4 ) (35 ) $

(28 ) — — — (6 ) (51 ) (85 ) $

(42 ) — — — (11 ) (97 ) (150 )

— — — — — 1 $ 1 (8 ) 300 $ 3,855 $ $

— — — — — 1 1 (14 ) 550 3,563 $ $

7 — — — — 16 23 (12 ) 530 3,027 $ $

2 — — — — 8 10 (75 ) 430 2,509 $ $

12 — — — — 21 33 (117 ) 900 2,154

— % Allowance for loan losses to non-performing loans at end of year Allowance for loan losses to total loans at end of year 809.87 % 0.69 %

— % 588.93 % 0.70 %

— % 455.19 % 0.63 %

) (0.02 % 478.82 % 0.57 %

) (0.03 % 321.01 % 0.55 %

As indicated in the table above, we charged off a de minimus amount of loans since fiscal year 2004, due, in part, to a stable local economy with significant appreciation in real estate values, conservative underwriting of loans and aggressive monitoring of the loan portfolio to identify and address non-performing loans and potential problem assets at an early date. The amount of foreclosures we incurred in the last five years was not material to our financial statements taken as a whole and ESSA Bank & Trust suffered no material losses on foreclosed assets during that period. See ―—Non-Performing Loans and Problem Assets.‖ There can be no assurance that we will not experience a deterioration of its loan portfolio, including increases in non-performing loans, problem assets and charge-offs, in the future. 71

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Allocation of Allowance for Loan Losses. The following tables set forth the allowance for loan losses allocated by loan category, the percent of the allowance to the total allowance and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.
2006 Percent of Allowance to Total Allowance At September 30, 2005 Percent of Allowance to Total Amount Allowance (Dollars in thousands) 2004 Percent of Allowance to Total Allowance

Amount

Percent of Loans in Category to Total Loans

Percent of Loans in Category to Total Loans

Amount

Percent of Loans in Category to Total Loans

Residential first mortgage loans: One- to four-family Construction Commercial Commercial real estate Home equity loans and lines of credit Other Total allocated allowance Unallocated allowance Total allowance for loan losses

$ 2,026 86 133 773 746 46 3,810 45 $ 3,855

52.56 % 2.23 3.45 20.05 19.35 1.19 98.83 1.17 100.00 %

80.36 % $ 1,887 1.06 104 1.09 114 8.43 471 8.31 0.75 100.00 % — 661 39 3,276 287

52.96 % 2.92 3.20 13.22 18.55 1.09 91.94 8.06 100.00 %

81.68 % $ 1,397 1.47 108 1.03 62 7.17 332 7.82 0.83 100.00 % — 504 106 2,509 518

46.15 % 3.57 2.05 10.97 16.65 3.50 82.89 17.11 100.00 %

82.41 % 1.72 0.51 6.08 7.07 2.21 100.00 % — 100.00 %

100.00 % $ 3,563

100.00 % $ 3,027

At September 30, 2003 At November 30, 2002 Percent of Percent of Percent of Percent of Allowance Loans in Allowance Loans in to Total Category to to Total Category to Amount Allowance Total Loans Amount Allowance Total Loans (Dollars in thousands)

Residential first mortgage loans: One- to four-family Construction Commercial Commercial real estate Home equity loans and lines of credit Other Total allocated allowance Unallocated allowance Total allowance for loan losses

$ 1,326 87 44 208 393 123 2,181 328 $ 2,509

52.87 % 3.47 1.75 8.29 15.66 4.90 86.94 13.06 100.00 %

85.16 % $ 1,177 1.37 95 0.51 42 4.19 184 5.99 252 2.78 150 100.00 % — 1,900 254

54.65 % 4.41 1.95 8.54 11.70 6.96 88.21 11.79 100.00 %

84.88 % 1.89 0.35 2.63 6.48 3.77 100.00 % — 100.00 %

100.00 % $ 2,154

72

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We use the accrual method of accounting for all performing loans. The accrual of interest income is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectibility of principal or interest, even though the loan is currently performing. When a loan is placed on nonaccrual status, unpaid interest previously credited to income is reversed. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management‘s judgment as to the collectibility of principal. Generally, residential and consumer loans are restored to accrual status when the obligation is brought in accordance with the contractual terms for a reasonable period of time and ultimate collectibility of total contractual principal and interest is no longer in doubt. Commercial loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and ultimate collectibility of total contractual principal and interest no longer is in doubt. In its collection efforts, we will first attempt to cure any delinquent loan. If a real estate secured loan is placed on nonaccrual status, it will be subject to transfer to the real estate owned (―REO‖) portfolio (properties acquired by or in lieu of foreclosure), upon which our loan servicing department will pursue the sale of the real estate. Prior to this transfer, the loan balance will be reduced, if necessary, to reflect its current market value less estimated costs to sell. Write downs of REO that occur after the initial transfer from the loan portfolio and costs of holding the property are recorded as other operating expenses, except for significant improvements which are capitalized to the extent that the carrying value does not exceed estimated net realizable value. Fair values for determining the value of collateral are estimated from various sources, such as real estate appraisals, financial statements and from any other reliable sources of available information. For those loans deemed to be impaired, collateral value is reduced for the estimated costs to sell. Reductions of collateral value are based on historical loss experience, current market data, and any other source of reliable information specific to the collateral. This analysis process is inherently subjective, as it requires us to make estimates that are susceptible to revisions as more information becomes available. Although we believe that we have established the allowance at levels to absorb probable and estimable losses, future additions may be necessary if economic or other conditions in the future differ from the current environment. Securities Activities Our securities investment policy is established by our Board of Directors. This policy dictates that investment decisions be made based on the safety of the investment, liquidity requirements, potential returns, cash flow targets, and consistency with our interest rate risk management strategy. Our investment policy is reviewed annually by our ALCO/Investment Committee. All policy changes recommended by this Committee must be approved by the Board of Directors. The Committee is composed of three members of the Board of Directors, 73

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one to serve as chairperson. The Chief Financial Officer, Controller, Chairman of the Board of Directors and Chief Executive Officer are ex-officio members of the Investment Committee. Authority to make investments under the approved guidelines will be delegated by the Committee to appropriate officers. While general investment strategies will be developed and authorized by the ALCO / Investment Committee, the execution of specific actions rests with the Chief Financial Officer. The approved investment officers are authorized to execute investment transactions up to $4.0 million per transaction without the prior approval of the ALCO / Investment Committee and within the scope of the established investment policy. These officers are also authorized to execute investment transactions between $4.0 million and $6.0 million with the additional approval from two of the following officers: Chief Executive Officer, Chief Operating Officer, or Chief Lending Officer. Each transaction in excess of $6.0 million must receive prior approval of the Investment Committee. Our current investment policy generally permits securities investments in debt securities issued by the U.S. government and U.S. agencies, municipal bonds, and corporate debt obligations, as well as investments in preferred and common stock of government agencies and government sponsored enterprises such as Fannie Mae, Freddie Mac and the Federal Home Loan Bank of Pittsburgh (federal agency securities) and, to a much lesser extent, other equity securities. Securities in these categories are classified as ―investment securities‖ for financial reporting purposes. The policy also permits investments in mortgage-backed securities, including pass-through securities issued and guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae as well as commercial paper, corporate debt and municipal securities. As of September 30, 2006, we held no asset-backed securities, and other equity securities consisted almost exclusively of securities issued by Fannie Mae and the Federal Home Loan Bank of Pittsburgh. Our current investment strategy uses a risk management approach of diversified investing in fixed-rate securities with short- to intermediate-term maturities, as well as adjustable-rate securities, which may have a longer term to maturity. The emphasis of this approach is to increase overall investment securities yields while managing interest rate risk. SFAS No. 115 requires that, at the time of purchase, we designate a security as held to maturity, available-for-sale, or trading, depending on our ability and intent. Securities available-for-sale are reported at fair value, while securities held to maturity are reported at amortized cost. Mortgage-Backed Securities. We purchase mortgage-backed securities in order to generate positive interest rate spreads with minimal administrative expense, lower credit risk as a result of the guarantees provided by Freddie Mac, Fannie Mae and Ginnie Mae, and increased liquidity. We invest primarily in mortgage-backed securities issued or sponsored by Fannie Mae, Freddie Mac, and Ginnie Mae. To a lesser extent, we also invest in securities backed by U.S. government agencies. At September 30, 2006 our mortgage-backed securities portfolio had a fair value of $54.4 million, consisting of Freddie Mac, Fannie Mae and Ginnie Mae mortgage-backed securities. Mortgage-backed securities are created by pooling mortgages and issuing a security collateralized by the pool of mortgages with an interest rate that is less than the interest rate on 74

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the underlying mortgages. Mortgage-backed securities typically represent a participation interest in a pool of single-family or multi-family mortgages, although most of our mortgage-backed securities are collateralized by single-family mortgages. The issuers of such securities (generally U.S. government agencies and U.S. government sponsored enterprises, including Fannie Mae, Freddie Mac and Ginnie Mae) pool and resell the participation interests in the form of securities to investors, such as ESSA Bank & Trust, and guarantee the payment of principal and interest to these investors. Investments in mortgage-backed securities involve a risk that actual prepayments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments, thereby affecting the net yield on such securities. We review prepayment estimates for our mortgage-backed securities at the time of purchase to ensure that prepayment assumptions are reasonable considering the underlying collateral for the securities at issue and current interest rates, and to determine the yield and estimated maturity of the mortgage-backed securities portfolio. Periodic reviews of current prepayment speeds are performed in order to ascertain whether prepayment estimates require modification that would cause amortization or accretion adjustments. Equity Securities. At September 30, 2006, our equity securities consisted almost entirely of securities issued by Fannie Mae, which are classified as available-for-sale. In addition, we hold Federal Home Loan Bank of Pittsburgh common stock to qualify for membership in the Federal Home Loan Bank System and to be eligible to borrow funds under the Federal Home Loan Bank of Pittsburgh advance program. There is no market for the common stock. The aggregate fair value of our Federal Home Loan Bank of Pittsburgh common stock as of September 30, 2006 was $13.7 million based on its par value. No unrealized gains or losses have been recorded because we have determined that the par value of the common stock represents its fair value. We owned shares of Federal Home Loan Bank of Pittsburgh common stock at September 30, 2006 with a par value that was $189,000 more than we were required to own to maintain our membership in the Federal Home Loan Bank System and to be eligible to obtain advances. We are required to purchase additional stock as our outstanding advances increase. Any excess stock we own is redeemed monthly by the Federal Home Loan Bank of Pittsburgh. We review equity and debt securities with significant declines in fair value on a periodic basis to determine whether they should be considered temporarily or other than temporarily impaired. If a decline in the fair value of a security is determined to be other than temporary, we are required to reduce the carrying value of the security to its fair value and record a non-cash impairment charge in the amount of the decline, net of tax effect, against our current income. Our investment securities portfolio contains unrealized losses of securities, including mortgage-related instruments issued or backed by the full faith and credit of the United States government, or generally viewed as having the implied guarantee of the U.S. government, and debt obligations of a U.S. state or political subdivision. 75

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Our policy is to recognize an other-than-temporary impairment of equity securities where the fair value has been significantly below cost for three consecutive quarters. For fixed maturity investments with unrealized losses due to interest rates where we have the positive intent and ability to hold the investment for a period of time sufficient to allow a market recovery, declines in value below cost are not assumed to be other than temporary. We review our position quarterly and concluded that at September 30, 2006, the declines outlined in the table below represent temporary declines due to interest rate change, and we have the intent and ability to hold those securities either to maturity or to allow a market recovery. However, as of September 30, 2005, we recognized a loss of $130,000 on equity securities that we deemed, through analysis of the security, to be other than a temporary loss. The following table sets forth the composition of our securities portfolio (excluding Federal Home Loan Bank of Pittsburgh common stock) at the dates indicated.
2006 Amortized Cost Fair Value At September 30, 2005 Amortized Fair Cost Value (In thousands) 2004 Amortized Cost Fair Value

Investment securities available for sale: U.S. Government agency obligations Obligations of state and political subdivisions Mortgage-backed securities Corporate notes Total debt securities Equity securities Total investment securities available-for-sale Investment securities held-to-maturity: U.S. Government agency obligations Mortgage-backed securities Total securities held to maturity

$ 41,960 6,240 40,327 — 88,527 882 $ 89,409

$ 41,815 6,465 39,907 — 88,187 935 $ 89,122

$ 34,989 5,102 18,799 3,039 61,929 882 $ 62,811

$ 34,729 5,377 18,491 3,030 61,627 879 $ 62,506

$ 14,981 5,341 20,482 3,041 43,845 1,012 $ 44,857

$ 14,992 5,691 20,444 3,039 44,166 908 $ 45,074

$

4,730 14,985

$

4,681 14,512

$

4,730 16,775

$

4,704 16,593

$

— 10,263

$

— 10,282

$ 19,715

$ 19,193

$ 21,505

$ 21,297

$ 10,263

$ 10,282

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Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at September 30, 2006 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur.
One Year or Less Weighted Amortized Average Cost Yield More than One Year through Five Years Weighted Amortized Average Cost Yield More than Five Years through Ten Years Weighted Amortized Average Cost Yield (Dollars in thousands) More than Ten Years Weighted Amortized Average Cost Yield Total Securities Amortized Cost Fair Value Weighted Average Yield

Investment securities available for sale: U.S. Government agency obligations Obligations of state and political subdivisions Mortgage-backed securities Corporate notes Total debt securities Equity securities Total investment securities available for-sale Investment securities held-to-maturity: U.S. Government agency obligations Mortgage-backed securities Total securities held to maturity

$ 22,968 — 511 — 23,479 882

3.95 % $ 17,070 — 5.29 — 3.98 % — 12,538 — 29,608 —

4.73 % $ — 4.46 — 4.62 %

1,922 — 169 — 2,091 —

5.00 % $ — 5.50 — 5.04 %

— 6,240 27,109 — 33,349 —

— % $ 41,960 4.72 4.88 — 4.85 % 6,240 40,327 — 88,527 882

$ 41,815 6,465 39,907 — 88,187 935

4.32 % 4.72 4.76 — 4.55 %

$ 24,361

$ 29,608

$

2,091

$ 33,349

$ 89,409

$ 89,122

$

— —

— % $ —

4,730 7,261

4.35 % $ 4.54 4.46 % $

— 3,312 3,312

— % $ 4.76 4.76 % $

— 4,412 4,412

— % $ 4.64

4,730 14,985

$

4,681 14,512

4.35 % 4.62 4.55 %

$

—

— % $ 11,991

4.64 % $ 19,715

$ 19,193

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Sources of Funds General. Deposits, borrowings, repayments and prepayments of loans and securities, proceeds from maturing securities and cash flows from operations are the primary sources of our funds for use in lending, investing and for other general purposes. Deposits. We offer a variety of deposit accounts with a range of interest rates and terms. Our deposit accounts consist of savings accounts, NOW accounts, checking accounts, money market accounts, club accounts, certificates of deposit and IRAs and other qualified plan accounts. We provide commercial checking accounts for businesses. At September 30, 2006, our deposits totaled $402.2 million. Interest-bearing NOW, savings and club and money market deposits totaled $168.9 million at September 30, 2006. At September 30, 2006, we had a total of $209.6 million in certificates of deposit. Noninterest-bearing demand deposits totaled $23.7 million. Although we have a significant portion of our deposits in shorter-term certificates of deposit, we monitor activity on these accounts and, based on historical experience and our current pricing strategy, we believe we will retain a large portion of these accounts upon maturity. Our deposits are obtained predominantly from the areas in which our branch offices are located. We rely on our favorable locations, customer service and competitive pricing to attract and retain these deposits. While we accept certificates of deposit in excess of $100,000 for which we may provide preferential rates, we generally do not solicit such deposits as they are more difficult to retain than core deposits. At September 30, 2006, we had a total of $28.4 million of brokered certificates of deposits, an increase of $7.1 million from the prior fiscal year end. Our brokered certificates of deposits range from one- to five-year terms, and are purchased only through pre-approved brokers. The following table sets forth the distribution of total deposit accounts, by account type, at the dates indicated.
2006 Average Balance Weighted Average Rate For the Years Ended September 30, 2005 Weighted Average Average Balance Percent Rate (Dollars in thousands) 2004 Average Balance Weighted Average Rate

Percent

Percent

Deposit type: Noninterest bearing demand accounts Interest bearing NOW Money market Savings and club Certificates of deposit Total deposits

$

21,383 59,709 31,618 79,452 197,064

5.49 % 15.34 8.12 20.41 50.64 100.00 %

— % $ 17,527 0.07 61,562 2.17 33,386 0.45 88,727 4.47 149,267 2.32 % $ 350,469

5.00 % 17.57 9.53 25.32 42.58 100.00 %

— % $ 13,281 0.13 61,792 1.26 33,078 0.44 90,853 3.32 132,119 1.67 % $ 331,123

4.01 % 18.66 9.99 27.44 39.90 100.00 %

— % 0.16 0.74 0.49 3.20 1.51 %

$ 389,226

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As of September 30, 2006, the aggregate amount of outstanding certificates of deposit in amounts greater than or equal to $100,000 was approximately $81.0 million. The following table sets forth the maturity of those certificates as of September 30, 2006.
At September 30, 2006 (In thousands)

Three months or less Over three months through six months Over six months through one year Over one year Total

$

15,157 17,882 22,969 25,027 81,035

$

At September 30, 2006, $147.2 million of our certificates of deposit had maturities of one year or less. We monitor activity on these accounts and, based on historical experience and our current pricing strategy, we believe we will retain a large portion of these accounts upon maturity. The following tables sets forth, by interest rate ranges, information concerning certificates of deposit.
At September 30, 2006 Period to Maturity More Than Two to More Than Three Years Three Years (Dollars in thousands)

Less Than or Equal to One Year

More Than One to Two Years

Total

Percent of Total

Interest Rate Range: 2.00% and below 2.01% to 3.00% 3.01% to 4.00% 4.01% to 5.00% 5.01% to 6.00% 6.01% and above Total

$

49 3,991 42,910 57,345 42,949 3 147,247

$

— 670 11,314 15,300 1,911 —

$

— — 8,683 6,024 200 — 14,907

$

— — 1,860 14,695 1,673 — 18,228

$

49 4,661 64,767 93,364 46,733 3

$

0.02 % 2.22 % 30.90 % 44.56 % 22.30 % — % 100 %

$

$ 29,195

$

$

$ 209,577

$

The following table sets forth time deposits classified by interest rate at the dates indicated.
2006 At September 30, 2005 (In thousands) 2004

Interest Rate 2.00% and below 2.01% to 3.00% 3.01% to 4.00% 4.01% to 5.00% 5.01% to 6.00% 6.01% and above Total

$

49 4,661 64,767 93,364 46,733 3

$

4,737 37,440 80,140 31,470 19,131 226

$

44,520 16,395 24,755 19,560 20,783 1,502

$ 209,577

$ 173,144

$ 127,515

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Borrowings. Our short-term borrowings consist of Federal Home Loan Bank advances. The following table sets forth information concerning balances and interest rates on all of our short-term borrowings at the dates and for the years indicated.
At or For the Years Ended September 30, 2005 (Dollars in thousands)

2006

2004

Balance at end of year Maximum outstanding at any month end Average balance during year Weighted average interest rate at end of year Average interest rate during year

$ 35,299 $ 35,299 $ 21,957 5.40 % 4.92 %

$ 27,479 $ 27,479 $ 18,991 3.84 % 2.92 %

$ 11,134 $ 16,878 $ 10,388 1.96 % 1.36 %

At September 30, 2006, we had the ability to borrow approximately $496.1 million under our credit facilities with the Federal Home Loan Bank of Pittsburgh. Competition We face significant competition in both originating loans and attracting deposits. The counties in which we operate have a significant concentration of financial institutions, many of which are significantly larger institutions and have greater financial resources than we, and many of which are our competitors to varying degrees. Our competition for loans comes principally from commercial banks, savings banks, mortgage banking companies, credit unions, leasing companies, insurance companies and other financial service companies. Our most direct competition for deposits has historically come from commercial banks, savings banks and credit unions. We face additional competition for deposits from nondepository competitors such as the mutual fund industry, securities and brokerage firms and insurance companies. We seek to meet this competition by the convenience of our branch locations, emphasizing personalized banking and the advantage of local decision-making in our banking business. Specifically, we promote and maintain relationships and build customer loyalty within local communities by focusing our marketing and community involvement on the specific needs of individual neighborhoods. As of June 30, 2006 ESSA Bank & Trust had the second largest deposit market share in Monroe County, Pennsylvania. We do not rely on any individual, group, or entity for a material portion of our deposits. Employees As of September 30, 2006, we had 142 full-time employees and 28 part-time employees. The employees are not represented by a collective bargaining unit and we consider our relationship with our employees to be good. 80

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Properties As of September 30, 2006, the net book value of our properties was $6.4 million. The following is a list of our offices:
Location Leased or Owned Year Acquired or Leased Square Footage

Main Office: 200 Palmer Street Stroudsburg, PA 18360 Full Service Branches: Route 940 HC 1 Box 1192 Blakeslee, PA 18610 Route 209 & Lake Mineola Road P.O. Box 35 Brodheadsville, PA 18301 Route 209 7001 Milford Road East Stroudsburg, PA Routes 209 & 447 695 North Courtland Street East Stroudsburg, PA 18301 75 Washington Street East Stroudsburg, PA 18301 Route 209 P.O. Box 1009 Marshalls Creek, PA 18335 Mount Pocono Plaza 601 Route 940 Mt. Pocono, PA 18344 1309 Blue Valley Drive Pen Argyl, PA 18072 744 Main Street P.O. Box L Stroudsburg, PA 18360 Route 611 1070 North Ninth Street Stroudsburg, PA 18360 Route 611 RR1 Box 402 Tannersville, PA 18372 Route 209 & Weir Lake Road P.O. Box 271 Brodheadsville, PA 18322 Other Properties 746-752 Main Street Stroudsburg, PA 18360 81

Owned

2003

36,000

Owned

2002

2,688

Owned

1983

4,100

Leased

1997

1,700

Leased Owned

1999 1966

420 3,300

Leased

1991

1,560

Leased Leased

1999 2001

536 444

Owned

1985

12,000

Leased

2000

488

Leased

1993

611

Leased

1997

576

Owned

2004

4,650

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Subsidiary Activities ESSA Bank & Trust has two wholly-owned subsidiaries, ESSACOR, Inc. and Pocono Investment Company. ESSACOR, Inc. is a Pennsylvania corporation that is currently inactive. Pocono Investment Company is a Delaware corporation formed as an investment company subsidiary to hold and manage certain investments of ESSA Bank & Trust, including certain intellectual property. Legal Proceedings We are not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which, in the aggregate, involve amounts which we believe are immaterial to our consolidated financial condition and results of operations. 82

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REGULATION General ESSA Bancorp, Inc. is a Pennsylvania corporation. As a savings and loan holding company, we are required to file certain reports with, and otherwise comply with the rules and regulations of the Office of Thrift Supervision. ESSA Bank & Trust is a Pennsylvania-chartered savings association and its deposit accounts are insured up to applicable limits by the Federal Deposit Insurance Corporation under the Deposit Insurance Fund (―DIF‖). We are subject to extensive regulation by the Pennsylvania Department of Banking, as its chartering agency, and by the Office of Thrift Supervision, as its primary federal regulator. We must file reports with the Pennsylvania Department of Banking and the Office of Thrift Supervision concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions including, but not limited to, mergers with or acquisitions of other savings institutions. There are periodic examinations by the Pennsylvania Department of Banking and the Office of Thrift Supervision to test our compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of the Federal Deposit Insurance Corporation insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and with their examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such regulation, whether by the Pennsylvania Department of Banking or the Office of Thrift Supervision could have a material adverse impact on us and our operations. Regulation by the Pennsylvania Department of Banking The Pennsylvania Savings Association Code of 1967, as amended (the ―Savings Association Code‖) contains detailed provisions governing the organization, location of offices, rights and responsibilities of directors, officers, employees, and depositors, as well as corporate powers, savings and investment operations and other aspects of ESSA Bank & Trust and its affairs. The Savings Association Code delegates extensive rulemaking power and administrative discretion to the Pennsylvania Department of Banking so that the supervision and regulation of state-chartered savings associations may be flexible and readily responsive to changes in economic conditions and in savings and lending practices. One of the purposes of the Savings Association Code is to provide savings associations with the opportunity to be competitive with each other and with other financial institutions existing under other Pennsylvania laws as well as other state, federal and foreign laws. A Pennsylvania savings association may locate or change the location of its principal place of business and establish an office anywhere in Pennsylvania, with the prior approval of the Pennsylvania Department of Banking. The Department generally examines each savings association not less frequently than once every two years. Although the Department may accept the examinations and reports of the 83

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Office of Thrift Supervision in lieu of the Department‘s examination, the current practice is for the Department to conduct individual examinations. The Department may order any savings association to discontinue any violation of law or unsafe or unsound business practice and may direct any trustee, officer, attorney, or employee of a savings association engaged in an objectionable activity, after the Department has ordered the activity to be terminated, to show cause at a hearing before the Department why such person should not be removed. Regulation by the Office of Thrift Supervision ESSA Bank & Trust is also subject to extensive regulation, examination and supervision by the Office of Thrift Supervision, as its primary federal regulator. Such regulation and supervision: • • • • • • • • • establishes a comprehensive framework of activities in which the Bank can engage; limits the ability of ESSA Bank & Trust to extend credit to any given borrower; significantly limits the transactions in which ESSA Bank & Trust may engage with its affiliates; requires ESSA Bank & Trust to meet a qualified thrift lender test which requires ESSA Bank & Trust to invest in qualified thrift investments, which include primarily residential mortgage loans and related investments; places limitations on capital distributions by savings associations, such as ESSA Bank & Trust, including cash dividends; imposes assessments to the Office of Thrift Supervision to fund their operations; establishes a continuing and affirmative obligation, consistent with ESSA Bank & Trust‘s safe and sound operation, to help meet the credit needs of its community, including low and moderate income neighborhoods; establishes various capital categories resulting in various levels of regulatory scrutiny applied to the institutions in a particular category; and establishes standards for safety and soundness.

The Office of Thrift Supervision generally examines each savings association not less frequently than once every two years. The Office of Thrift Supervision has the authority to order any savings association or its directors, trustees, officers, attorneys or employees to discontinue any violation of law or unsafe or unsound banking practice. See ―- Regulatory Enforcement Authority.‖ 84

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Transactions with Affiliates Sections 23A and 23B of the Federal Reserve Act and its implementing regulations, govern transactions between depository institutions and their affiliates. These provisions are made applicable to savings associations, such as ESSA Bank & Trust, by the Home Owners‘ Loan Act and Office of Thrift Supervision regulation. In a holding company context, the parent holding company of a savings association and any companies that are controlled by the parent holding company, are affiliates of the savings association. Section 23A limits the extent to which the savings association or its subsidiaries may engage in certain transactions with its affiliates. These transactions include, among other things, the making of loans or other extensions of credit to an affiliate and the purchase of assets from an affiliate. Generally, these transactions between the savings association and any one affiliate cannot exceed 10% of the savings association‘s capital stock and surplus, and these transactions between the savings institution and all of its affiliates cannot, in the aggregate, exceed 20% of the savings institution‘s capital stock and surplus. Section 23A also establishes specific collateral requirements for loans or extensions of credit to an affiliate, and for guarantees or acceptances on letters of credit issued on behalf of an affiliate. Applicable regulations prohibit a savings association from lending to any affiliate engaged in activities not permissible for a bank holding company or for the purpose of acquiring the securities of most affiliates. Section 23B requires that transactions covered by Section 23A and a broad list of other specified transactions be on terms and under circumstances substantially the same, or no less favorable to the savings association or its subsidiary, as similar transactions with non-affiliates. In addition to the restrictions on transactions with affiliates that Sections 23A and 23B of the Federal Reserve Act impose on depository institutions, the regulations of the Office of Thrift Supervision also generally prohibit a savings association from purchasing or investing in securities issued by an affiliate. Insurance of Accounts and Regulation by the Federal Deposit Insurance Corporation Deposit accounts in ESSA Bank & Trust are insured by the Federal Deposit Insurance Corporation generally up to a maximum of $100,000 per separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts. ESSA Bank & Trust‘s deposits, therefore, are subject to Federal Deposit Insurance Corporation deposit insurance assessments. On February 15, 2006, federal legislation to reform federal deposit insurance was enacted. This new legislation required, among other things, that the Federal Deposit Insurance Corporation adopt regulations increasing the maximum amount of federal deposit insurance coverage per separately insured depositor to $130,000 (with a cost of living adjustment to become effective in five years) and modifying the deposit fund‘s reserve ratio for a range between 1.15% and 1.50% of estimated insured deposits. On November 2, 2006, the Federal Deposit Insurance Corporation adopted final regulations establishing a risk-based assessment system that will enable the Federal Deposit Insurance Corporation to more closely tie each financial institution‘s premiums to the risk it 85

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poses to the deposit insurance fund. Under the new risk-based assessment system, which becomes effective in the beginning of 2007, the Federal Deposit Insurance Corporation will evaluate the risk of each financial institution based on three primary sources of information: (1) its supervisory rating, (2) its financial ratios, and (3) its long-term debt issuer rating, if the institution has one. The new rates for nearly all of the financial institution industry will vary between five and seven cents for every $100 of domestic deposits. At the same time, the Federal Deposit Insurance Corporation also adopted final regulations designating the reserve ratio for the deposit insurance fund during 2007 at 1.25% of estimated insured deposits. Effective March 31, 2006, the Federal Deposit Insurance Corporation merged the Bank Insurance Fund (―BIF‖) and the Savings Association Insurance Fund (―SAIF‖) into a single insurance fund called the Deposit Insurance Fund. As a result of the merger, the BIF and SAIF were abolished. The merger of the BIF and SAIF into the Deposit Insurance Fund does not affect the authority of the Financing Corporation (―FICO‖) to impose and collect, with approval of the Federal Deposit Insurance Corporation, assessments for anticipated payments, insurance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017 through 2019. For the quarter ended June 30, 2006, the FICO assessment was equal to 1.28 basis points for each $100 in domestic deposits maintained at an institution. Capital Requirements Any savings institution that fails any of the capital requirements is subject to possible enforcement actions by the Office of Thrift Supervision. Such actions could include a capital directive, a cease and desist order, civil money penalties, the establishment of restrictions on an institution‘s operations, termination of federal deposit insurance, and the appointment of a conservator or receiver. Certain actions are required by law. The Office of Thrift Supervision‘s capital regulation provides that such actions, through enforcement proceedings or otherwise, could require one or more of a variety of corrective actions. We are also subject to more stringent capital guidelines of the Department. Although not adopted in regulation form, the Department utilizes capital standards of 6% leverage capital and 10% risk-based capital. The components of leverage and risk-based capital are substantially the same as those defined by the Office of Thrift Supervision. Loans-to-One Borrower Limitation Under federal regulations, with certain limited exceptions, a Pennsylvania chartered savings association may lend to a single or related group of borrowers on an ―unsecured‖ basis an amount equal to 15% of its unimpaired capital and surplus. An additional amount, equal to 10% of unimpaired capital and surplus, may be lent if such loan is secured by readily marketable collateral, which is defined to include certain securities, but generally does not include real estate. Our internal policy, however, is to not make loans either individually or in the aggregate to one entity in excess of $3.0 million in commercial relationships, nor $3.5 million in total loan relationships, including the borrower‘s residential mortgage and consumer loans. However, in special circumstances this limit may be exceeded subject to the approval of the Management Loan Committee in addition to a majority of the members of the Board of Directors. 86

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Prompt Corrective Action Under federal regulations, a savings association is deemed to be (i) ―well capitalized‖ if it has total risk-based capital of 10.0% or more, has a Tier 1 risk-based capital ratio of 6.0% or more, has a Tier I leverage capital ratio of 5.0% or more and is not subject to any written capital order or directive; (ii) ―adequately capitalized‖ if it has a total risk-based capital ratio of 8.0% or more, a Tier I risk-based capital ratio of 4.0% or more and a Tier I leverage capital ratio of 4.0% or more (3.0% under certain circumstances) and does not meet the definition of ―well capitalized‖; (iii) ―undercapitalized‖ if it has a total risk-based capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that is less than 4.0% or a Tier I leverage capital ratio that is less than 4.0% (3.0% under certain circumstances); (iv) ―significantly undercapitalized‖ if it has a total risk-based capital ratio that is less than 6.0%, a Tier I risk-based capital ratio that is less than 3.0% or a Tier I leverage capital ratio that is less than 3.0%; and (v) ―critically undercapitalized‖ if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%. Federal regulations also specify circumstances under which a federal banking agency may reclassify a well capitalized institution as adequately capitalized and may require an adequately capitalized institution to comply with supervisory actions as if it were in the next lower category (except that the Office of Thrift Supervision may not reclassify a significantly undercapitalized institution as critically undercapitalized). As of September 30, 2006, the Bank was a ―well-capitalized institution‖ for this purpose. The USA PATRIOT Act The USA PATRIOT Act of 2001 gave the federal government new powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. The USA PATRIOT Act also required the federal banking agencies to take into consideration the effectiveness of controls designed to combat money laundering activities in determining whether to approve a merger or other acquisition application of a member institution. Accordingly, if we engage in a merger or other acquisition, our controls designed to combat money laundering would be considered as part of the application process. We have established policies, procedures and systems designed to comply with these regulations. Holding Company Regulation Upon completion of the conversion, ESSA Bancorp, Inc. will be a unitary savings and loan holding company, subject to regulation and supervision by the Office of Thrift Supervision. The Office of Thrift Supervision will have enforcement authority over ESSA Bancorp and its non-savings institution subsidiaries. Among other things, this authority permits the Office of Thrift Supervision to restrict or prohibit activities that are determined to be a risk to ESSA Bank & Trust. Under prior law, a unitary savings and loan holding company generally had no regulatory restrictions on the types of business activities in which it could engage, provided that its subsidiary savings association was a qualified thrift lender. The Gramm-Leach-Bliley Act of 1999, however, restricts unitary savings and loan holding companies not existing on, or applied 87

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for before, May 4, 1999 to those activities permissible for financial holding companies or for multiple savings and loan holding companies. The Company will not be a grandfathered unitary savings and loan holding company and, therefore, will be limited to the activities permissible for financial holding companies or for multiple savings and loan holding companies. A financial holding company may engage in activities that are financial in nature, including underwriting equity securities and insurance as well as activities that are incidental to financial activities or complementary to a financial activity. A multiple savings and loan holding company is generally limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to the prior approval of the Office of Thrift Supervision, and certain additional activities authorized by Office of Thrift Supervision regulations. Federal law prohibits a savings and loan holding company, directly or indirectly, or through one or more subsidiaries, from acquiring control of another savings institution or holding company thereof, without prior written approval of the Office of Thrift Supervision. It also prohibits the acquisition or retention of, with specified exceptions, more than 5% of the equity securities of a company engaged in activities that are not closely related to banking or financial in nature or acquiring or retaining control of an institution that is not federally insured. In evaluating applications by holding companies to acquire savings institutions, the Office of Thrift Supervision must consider the financial and managerial resources and future prospects of the savings institution involved, the effect of the acquisition on the risk to the insurance fund, the convenience and needs of the community, the effectiveness of each parties‘ anti-money laundering program, and competitive factors. Federal Securities Laws Shares of ESSA Bancorp, Inc.‘s common stock are registered with the SEC under Section 12(g) of the Securities Exchange Act of 1934, as amended (the ―Exchange Act‖). ESSA Bancorp, Inc. is also subject to the proxy rules, tender offer rules, insider trading restrictions, annual and periodic reporting, and other requirements of the Exchange Act. Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 was enacted in response to public concerns regarding corporate accountability in connection with certain accounting scandals. The stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies, and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. The Sarbanes-Oxley Act generally applies to all companies that file or are required to file periodic reports with the Securities and Exchange Commission, under the Securities Exchange Act of 1934. The Sarbanes-Oxley Act includes specific additional disclosure requirements, requires the Securities and Exchange Commission and national securities exchanges to adopt extensive additional disclosure, corporate governance and other related rules, and mandates further studies of certain issues by the Securities and Exchange Commission. The Sarbanes-Oxley Act 88

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represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees. Although we will incur additional expense in complying with the provisions of the Sarbanes-Oxley Act and the resulting regulations, management does not expect that such compliance will have a material impact on our results of operations or financial condition. Regulatory Enforcement Authority Federal law provides federal banking regulators with substantial enforcement powers. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders, and to initiate injunctive actions against banking organizations and institution-affiliated parties, as defined. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with regulatory authorities. Dividends Our ability to pay dividends depends, to a large extent, upon ESSA Bank & Trust‘s ability to pay dividends to ESSA Bancorp. The Savings Association Code states, in part, that dividends may be declared and paid by the Bank only out of net earnings for the then current year. A dividend may not be declared or paid if it would impair the general reserves of ESSA Bank & Trust required to be maintained under the Savings Association Code. In addition, we are required to notify the Office of Thrift Supervision prior to declaring a dividend to the Company, and receive the nonobjection of the Office of Thrift Supervision to any such dividend. TAXATION Federal Taxation General. ESSA Bancorp, Inc. and ESSA Bank & Trust are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize material federal income tax matters and is not a comprehensive description of the tax rules applicable to ESSA Bancorp, Inc. and ESSA Bank & Trust. Method of Accounting . For federal income tax purposes, ESSA Bank & Trust currently reports its income and expenses on the accrual method of accounting and uses a tax year ending September 30th for filing its consolidated federal income tax returns. The Small Business Protection Act of 1996 eliminated the use of the reserve method of accounting for bad debt reserves by savings institutions, effective for taxable years beginning after 1995. Bad Debt Reserves. Prior to the Small Business Protection Act of 1996, ESSA Bank & Trust was permitted to establish a reserve for bad debts for tax purposes and to make annual additions to the reserve. These additions could, within specified formula limits, be deducted in 89

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arriving at ESSA Bank & Trust‘s taxable income. As a result of the Small Business Protection Act of 1996, ESSA Bank & Trust must use the specific charge off method in computing its bad debt deduction for tax purposes. Taxable Distributions and Recapture. Prior to the Small Business Protection Act of 1996, bad debt reserves created prior to 1988 were subject to recapture into taxable income if ESSA Bank & Trust failed to meet certain thrift asset and definition tests. The Small Business Protection Act of 1996 eliminated these thrift-related recapture rules. However, under current law, pre-1988 reserves remain subject to tax recapture should ESSA Bank & Trust make certain distributions from its tax bad debt reserve or cease to maintain a financial institution charter. At September 30, 2006, ESSA Bank & Trust‘s total federal pre-1988 reserve was approximately $4.3 million. This reserve reflects the cumulative effects of federal tax deductions by ESSA Bank & Trust for which no federal income tax provision has been made. Minimum Tax. The Internal Revenue Code of 1986, as amended, imposes an alternative minimum tax at a rate of 20% on a base of regular taxable income plus certain tax preferences, referred to as ―alternative minimum taxable income.‖ The alternative minimum tax is payable to the extent alternative minimum taxable income is in excess of an exemption amount. Net operating losses can, in general, offset no more than 90% of alternative minimum taxable income. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. At September 30, 2006, ESSA Bank & Trust had no minimum tax credit carryforward. Net Operating Loss Carryovers. A financial institution may carry back net operating losses to the preceding two taxable years (five years for losses incurred in 2001 and 2002) and forward to the succeeding 20 taxable years. At September 30, 2006, ESSA Bank & Trust had no net operating loss carryforward for federal income tax purposes. Corporate Dividends. We may exclude from our income 100% of dividends received from ESSA Bank & Trust as a member of the same affiliated group of corporations. Audit of Tax Returns. ESSA Bank & Trust‘s federal income tax return for the 2004 tax year remains open. State Taxation Pennsylvania State Taxation. As a Pennsylvania business corporation, ESSA Bancorp, Inc. will be required to file annual returns and pay annual fees to the State of Pennsylvania. MANAGEMENT OF ESSA BANCORP, INC. Shared Management Structure The directors of ESSA Bancorp, Inc. are those same persons who are the directors of ESSA Bank & Trust. In addition, each executive officer of ESSA Bancorp, Inc. is also an executive officer of ESSA Bank & Trust. We expect that ESSA Bancorp, Inc. and ESSA Bank & Trust will continue to have common executive officers until there is a business reason to 90

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establish separate management structures. To date, executive officers have been compensated for their services by ESSA Bank & Trust. Executive Officers of ESSA Bancorp, Inc. and ESSA Bank & Trust The following individuals are the executive officers of ESSA Bancorp, Inc. and ESSA Bank & Trust, their ages as of September 30, 2006 and the position they hold.
Name Age Position

Gary S. Olson Allan A. Muto Robert S. Howes, Jr., Diane K. Reimer V. Gail Warner Thomas J. Grayuski

52 46 53 50 50 45

President and Chief Executive Officer Executive Vice President and Chief Financial Officer Senior Vice President, Lending Services Division Vice President, Administrative Services Division Vice President, Retail Services Division Vice President, Human Resource Services Division

The executive officers of ESSA Bancorp, Inc. are elected annually. Directors of ESSA Bank & Trust and ESSA Bancorp, Inc. Composition of our Board . ESSA Bancorp, Inc. has nine directors. Directors serve three-year staggered terms so that approximately one-third of the directors are elected at each annual meeting. Directors of ESSA Bank & Trust are elected by ESSA Bancorp, Inc. as its sole stockholder. The following table states our directors‘ names, their ages as of September 30, 2006, and the years when they began serving as directors of ESSA Bank & Trust and when their current term expires:
Name Position(s) Held With ESSA Bancorp, Inc. Age Director Since Current Term Expires

Daniel J. Henning Frederick E. Kutteroff Elizabeth B. Weekes John E. Burrus John S. Schoonover, Jr. Robert C. Selig, Jr. William P. Douglass Gary S. Olson William A. Viechnicki, D.D.S.

Director Director Director Chairman of the Board Director Director Director Director, President and Chief Executive Officer Director

54 63 47 67 65 58 64 52 62

1995 2005 2001 1970 1989 1990 1978 2000 1981

2007 2007 2007 2008 2008 2008 2009 2009 2009

The Business Background of Our Directors and Executive Officers . The business experience for the past five years of each of our directors and executive officers is set forth below. Unless otherwise indicated, directors and executive officers have held their positions for the past five years. 91

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Directors John E. Burrus has served as Chairman of the Board of ESSA Bank & Trust since 1989. In 2005, Mr. Burrus retired as the owner of John E. Burrus Landscape which designs, sells, installs and maintains landscapes for private homes, and commercial properties in Monroe County, Easton and Scranton, Pennsylvania. Mr. Burrus is a graduate of Rutgers University. William P. Douglass has been President of Douglass Enterprises, Inc., doing business as Olde Engine Works Market Place which is an antiques and collectibles co-operative. Mr. Douglass is a graduate of Texas Christian University. Daniel J. Henning is a builder/real estate developer has been the Owner/President of A.C. Henning Enterprises, Inc., a general contract of custom built homes, multi-family townhouses and light commercial construction and renovation, since 1982. Mr. Henning is a graduate of Spring Garden College. Frederick E. Kutteroff served as President, Chief Executive Officer of Keystone Savings Bank from 1990 until his retirement in 2003. Mr. Kutteroff holds a Certificate of Business Administration from Temple University. Gary S. Olson has been President and Chief Executive Officer of ESSA Bank & Trust since 2000. Mr. Olson began his career at ESSA Bank & Trust in 1977. Mr. Olson is a graduate of East Stroudsburg University. John S. Schoonover, Jr. has been a registered architect/principal in the architectural firm of Schoonover and Vanderhoof, LLC since 1978. He is a licensed architect registered to practice in Pennsylvania, New Jersey, New York and North Carolina. Mr. Schoonover served in the United States Marine Corps from 1962 through 1967. Robert C. Selig, Jr. has served as President of Selig Construction Company since 1972. Selig Construction Company is in the business of building primary and vacation residences. Mr. Selig is a graduate of West Side Area Vocational/Technical School. William A. Viechnicki, D.D.S. has been in the private practice of orthodontics in East Stroudsburg, Pennsylvania since 1971. Dr. Viechnicki is a graduate of Pennsylvania State University and Temple University School of Dentistry where he serves as a professor of orthodontics. Elizabeth B. Weekes has been a partner in the law firm Bensinger and Weekes, P.A. since 1987. Ms. Weekes‘ practice focuses on real estate, civil litigation, domestic relations, banking, municipalities and estates. Ms. Weekes is a graduate of Colgate University and Dickinson School of Law. Executive Officers of ESSA Bank & Trust Who Are Not Also Directors Allan A. Muto has been the Executive Vice President and Chief Financial Officer of ESSA Bank & Trust since January 2006. Prior to that time Mr. Muto served as Executive Vice 92

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President, Chief Operating Officer beginning in 2001. Mr Muto previously served as Senior Vice President, Chief Financial Officer at Pioneer American Bank, N.A. in Carbondale, Pennsylvania. Robert S. Howes, Jr. has been with ESSA Bank & Trust in various capacities since 1985 and has been Senior Vice President, Lending Services Division since 2001. Previously, Mr. Howes served as Branch Manager at Franklin First Federal Savings and Loan Association in Wilkes-Barre, Pennsylvania. Diane K. Reimer has been Vice President, Administrative Services Division since 1998 and first joined ESSA Bank & Trust in 1983. V. Gail Warner has been Vice President, Retail Services Division since 1999. Previously, Ms. Warner served as Assistant Vice President, Branch Sales Manager at First Eastern Bank in Mount Pocono, Pennsylvania. Thomas J. Grayuski has been Vice President, Human Resources Services Division since 2000. Previously, Mr. Grayuski was the Senior Personnel Management Specialist at the United States Army Armament Research, Development and Engineering Center in Dover, New Jersey. Meetings and Committees of the Board of Directors of ESSA Bancorp, Inc. We conduct business through meetings of our Board of Directors and its committees. During the fiscal year ended September 30, 2006, the Board of Directors of ESSA Bancorp, Inc. did not meet and the Board of Directors of ESSA Bank & Trust met 13 times. The Board of Directors of ESSA Bancorp, Inc. has established the following standing committees: the Compensation Committee, the Corporate Governance Committee and the Audit Committee. The Audit Committee, currently consisting of Messrs. Henning (Chair), Douglass, Kutteroff and Viechnicki, is responsible for providing oversight relating to our financial statements and financial reporting process, systems of internal accounting and financial controls, internal audit function, annual independent audit and the compliance and ethics programs established by management and the board. Each member of the Audit Committee is independent in accordance with the listing standards of the Nasdaq Stock Market. The Board of Directors believes that Mr. Kutteroff qualifies as an ―audit committee financial expert‖ as that term is defined in the rules and regulations of the Securities and Exchange Commission. The Audit Committee of ESSA Bank & Trust met four times in fiscal year 2006. The Compensation Committee, currently consisting of Messrs. Douglass (Chair), Burrus, Viechnicki and Olson and Ms. Weekes, is responsible for human resources policies, salaries and benefits, incentive compensation, executive development and management succession planning. Each member of the Compensation Committee, except for Mr. Olson, is independent in accordance with the listing standards of the Nasdaq Stock Market. The Corporate Governance Committee, currently consisting of Messrs. Douglass (Chair), Henning, Selig, Burrus and Olson and Ms. Weekes, is responsible for identifying individuals qualified to become board members and recommending a group of nominees for election as 93

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directors at each annual meeting of stockholders, ensuring that the board and its committees have the benefit of qualified and experienced independent directors, and developing a set of corporate governance policies and procedures. Each of these committees operates under a written charter, which governs its composition, responsibilities and operations. In addition, ESSA Bank & Trust maintains an Operations Committee (chaired by Mr. Selig), ALCO/Investment Committee (chaired by Mr. Viechnicki), Trust Audit Committee (chaired by Mr. Schoonover) and Trust Committee (chaired by Ms. Weekes) and an Executive Committee. Corporate Governance Policies and Procedures In addition to having established committees of the Board of Directors, ESSA Bancorp, Inc. has adopted policies to govern the activities of both ESSA Bancorp, Inc. and ESSA Bank & Trust, including a corporate governance policy and a code of business conduct and ethics. The corporate governance policy sets forth: • • • • • • • the duties and responsibilities of each director; the composition, responsibilities and operation of the Board of Directors; the establishment and operation of board committees, including audit, nominating and compensation committees; succession planning; convening executive sessions of independent directors; the Board of Directors‘ interaction with management and third parties; and the evaluation of the performance of the Board of Directors and the chief executive officer.

ESSA Bancorp, Inc. has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. The code of ethics is designed to deter wrongdoing and to promote honest and ethical conduct, the avoidance of conflicts of interest, full and accurate disclosure and compliance with all applicable laws, rules and regulations. 94

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Director Fees Director Fees . Each of the individuals who serves as a director of ESSA Bancorp, Inc. also serves as a director of ESSA Bank & Trust and earns director fees in that capacity. Each non-employee director (except for the Chairman of the Board) is paid a fee of $2,000 per month for their service and $1,000 for each Board meeting attended. In addition, the Chairperson of a committee is paid $750 for each committee meeting attended and committee members are paid $500 for each committee meeting attended. In lieu of the above mentioned fees, the Chairman of the Board is paid an annual retainer of $60,000 and $1,500 for each Board meeting attended. The Chairman of the Board is not compensated for attendance at any committee meetings. Executive Officer Compensation Summary Compensation Table. The following table sets forth for the fiscal year ended September 30, 2006, certain information as to the total remuneration paid by ESSA Bank & Trust to its Chief Executive Officer as well as to the four most highly compensated executive officers of ESSA Bank & Trust, other than the Chief Executive Officer, who received total annual salary and bonus in excess of $100,000. Each of the individuals listed in the table below is referred to as a Named Executive Officer.
Name and Principal Position Fiscal Year Salary (2) Annual Compensation (1) Other Annual Bonus Compensation (3)

All Other Compensation (4)

Gary S. Olson, President and Chief Executive Officer Allan A. Muto, Executive Vice President and Chief Financial Officer Robert S. Howes, Jr., Senior Vice President, Lending Services Division V. Gail Warner, Vice President, Retail Services Division Diane K. Reimer, Vice President, Administrative Services Division (1) (2) (3)

2006 2006 2006 2006 2006

$ 201,500 $ 131,500 $ 112,800 $ 103,500 $ 92,700

$ 94,000 $ 49,000 $ 37,000 $ 34,000 $ 26,000

— — — — —

$ $ $ $ $

18,700 11,900 10,800 11,900 12,800

Summary compensation information is excluded for the fiscal years ended September 30, 2005 and 2004, as ESSA Bancorp, Inc. was not a public company during those periods. Current base salaries for Messrs. Olson, Muto and Howes and Mmes. Warner and Reimer are $211,900, $141,700, $117,100, $111,500 and $97,200, respectively. ESSA Bank & Trust provides certain of its executive officers with non-cash benefits and perquisites. Management believes that the aggregate value of these benefits for fiscal year 2006 did not, in the case of the named executive officers, exceed the greater of $50,000 or 10% of the aggregate salary and annual bonus reported for them in the Summary Compensation Table. Represents employer contributions under ESSA Bank & Trust‘s 401(k) Plan for Named Executive Officer as well as health, life and disability insurance premiums.

(4)

Benefit Plans Employment Agreements. ESSA Bancorp, Inc. intends to enter into employment agreements with each of Messrs. Olson, Muto, Howes and Grayuski and Ms. Warner and Ms. Reimer. The agreements with Messrs. Olson and Muto will have an initial term of three years. The agreements with Messrs. Howes and Grayuski and Ms. Warner and Ms. Reimer will have terms of two years. Unless notice of non-renewal is provided, the agreements renew annually. Under the agreements, the initial base salaries for Messrs. Olson, Muto, Howes, Ms. Warner, Ms. Reimer and Mr. Grayuski are $211,900, $141,700, $117,100, $111,500, $97,200 and $80,000, respectively. Base salaries will be reviewed at least annually and may be increased, but not 95

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decreased. In addition to the base salary, each agreement will provide for, among other things, participation in bonus programs and other employee pension benefit and fringe benefit plans applicable to executive employees and use of an automobile (in the case of Mr. Olson). The executive‘s employment may be terminated for cause at any time, in which event the executive would have no right to receive compensation or other benefits for any period after termination. Each of the executives is entitled to severance payments and benefits in the event of his or her termination of employment under specified circumstances. In the event the executive‘s employment is terminated for reasons other than for cause, disability or retirement, or in the event the executive resigns within 90 days following (1) the failure to elect or reelect or to appoint or reappoint the executive to his executive position, (2) a material change in the executive‘s functions, duties, or responsibilities, which change would cause executive‘s position to become one of lesser responsibility, importance or scope, (3) the relocation of executive‘s principal place of employment to a location that is more than 50 miles from the location of the Bank‘s principal executive offices as of the date of the agreement, (4) a material reduction in benefits and perquisites including base salary (except for any Bank-wide or officer-wide reduction), (5) the liquidation or dissolution of ESSA Bancorp, Inc. or ESSA Bank & Trust, (6) a change in control of ESSA Bancorp, Inc. or (7) a breach of the employment agreement by ESSA Bancorp, Inc., the executive would be entitled to a severance payment equal to three times (in the case of Messrs. Olson and Muto, two times for Mr. Howes, Ms. Warner, Ms. Reimer and Mr. Grayuski) the sum of the executive‘s base salary and the highest rate of bonus awarded to the executive during the prior three years, payable in a lump sum. In addition, the executive would be entitled, at ESSA Bancorp, Inc.‘s sole expense, to the continuation of life, medical, dental, vision and disability coverage for 36 months (in the case of Messrs. Olson and Muto; twenty-four months for all other executives) after termination of the agreement. The executive would also receive a lump sum payment of the excess, if any, of the present value of the benefits he would be entitled to under the ESSA Bancorp, Inc. or ESSA Bank & Trust‘s defined benefit pension plan if he had continued working for ESSA Bancorp, Inc. for 36 months (in the case of Messrs. Olson and Muto; twenty-four months for all other executives) over the present value of the benefits to which he is actually entitled as of the date of termination. In the event that the severance payment provisions of the employment agreement are triggered for one of the covered executives at September 30, 2006, the executive would be entitled to a cash severance benefit in the amount of approximately $ ,$ ,$ , $ and $ , in the case of Messrs. Olson, Muto, Howes, Ms. Warner, Ms. Reimer or Mr. Grayuski, respectively. The executive would be entitled to no additional benefits under the employment agreement upon retirement at age 65. Upon termination of the executive‘s employment other than in connection with a change in control, the executive agrees not to compete with ESSA Bancorp, Inc. for one year following termination of employment within 50 miles of any existing branch of ESSA Bank & Trust or 50 miles of any office for which ESSA Bank & Trust or a subsidiary has filed an application for regulatory approval. Should the executive become disabled, ESSA Bancorp, Inc. would continue to pay the executive his base salary for the longer of the remaining term of the agreement or one year, provided that any amount paid to the executive pursuant to any disability insurance would reduce the compensation he would receive. In the event the executive dies while employed by ESSA Bancorp, Inc., the executive‘s estate will be paid the executive‘s base salary for one year 96

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and the executive‘s family will be entitled to continuation of medical, dental and vision benefits for one year after the executive‘s death. The employment agreements for Messrs. Howes and Grayuski and Ms. Warner and Ms. Reimer also provide for an automatic reduction in the amount of any payments made in connection with a change in control which would otherwise constitute ―excess parachute payments‖ under Section 280G of the Internal Revenue Code. The total payment owed to the executive upon a change in control will be reduced to an amount that is $1.00 less than the amount that would otherwise be an ―excess parachute payment‖ under Code Section 280G. Messrs. Olson and Muto may elect to have such reductions made in their sole discretion. Change-in-Control Agreements. ESSA Bancorp, Inc. intends to enter into change-in-control agreements with up to six officers who are not entering into employment agreements, which would provide certain benefits in the event of a termination of employment following a change in control of ESSA Bancorp, Inc. or ESSA Bank & Trust. Each of the change-in-control agreements provides for a term of eighteen months. Commencing on each anniversary date, the agreements will be renewed for an additional year so that the remaining term will be eighteen months, subject to notice of non-renewal. The change-in-control agreements enable ESSA Bancorp, Inc. to offer to designated officers certain protections against termination without cause in the event of a change in control (as defined in the agreements). Such protections are frequently offered by other financial institutions, and ESSA Bancorp, Inc. may be at a competitive disadvantage in attracting and retaining key employees if it does not offer similar protections. Following a change in control of ESSA Bancorp, Inc. or ESSA Bank & Trust, an officer is entitled under the agreement to a payment if the officer‘s employment is terminated during the term of such agreement, other than for cause, or if the officer voluntarily terminates employment during the term of such agreement as a result of a demotion, loss of title, office or significant authority (in each case, other than as a result of the fact that either ESSA Bank & Trust or ESSA Bancorp, Inc. is merged into another entity in connection with a change in control and will not operate as a stand-alone, independent entity), reduction in his annual compensation or benefits, or relocation of his or her principal place of employment by more than 30 miles from its location immediately prior to the change in control. In the event an officer who is a party to a change-in-control agreement is entitled to receive payments pursuant to the change-in-control agreement, he will receive a cash payment equal to 1.5 times his or her highest rate of base salary and the highest rate of bonus awarded to the executive during the prior two years, payable in a lump sum. In addition to the cash payment, each covered officer is entitled to receive life, medical, and dental coverage for a period of 18 months from the date of termination. Notwithstanding any provision to the contrary in the change-in-control agreement, payments under the change in control agreements are limited so that they will not constitute an excess parachute payment under Section 280G of the Internal Revenue Code. Director Emeritus Plan. ESSA Bank & Trust maintains a director emeritus plan. Any director who is not an active employee of ESSA Bank & Trust upon retirement from board service as of the next annual meeting following his or her attainment of age 74, is eligible to participate in the plan. In order to receive retirement benefits under the plan, the director must remain a director emeritus in good standing after retirement, must agree to attend meetings if 97

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requested, provide advice and act as a ―goodwill ambassador‖ (as requested) by the Board of Directors and must not engage in any business enterprise which competes with ESSA Bank & Trust nor disclose any confidential information relative to the business of ESSA Bank & Trust. At retirement, an eligible director will receive the then-current monthly Board meeting fee for five additional years (the current monthly board meeting fee for directors is $1,000). At retirement, the Chairman of the Board, will continue to receive the then-current monthly Board meeting fee for five additional years (the current monthly Chairman‘s Board meeting fee is $1,500). Defined Benefit Pension Plan. Since 1969, ESSA Bank & Trust has maintained an individually designed, tax-qualified defined benefit plan (the ―Pension Plan‖). Effective January 1, 2007, the Plan operates on a calendar year basis. Effective January 1, 2007, the Pension Plan will be operated on a calendar year basis. All employees age 21 or older who have completed one year of employment with ESSA Bank & Trust are eligible for membership in the Pension Plan; however, only employees who have been credited with 1,000 or more hours of service with ESSA Bank & Trust are eligible to accrue benefits under the Pension Plan. ESSA Bank & Trust annually contributes an amount to the plan necessary to satisfy the minimum funding requirements established under the Employee Retirement Income Security Act of 1974, as amended (―ERISA‖). The regular form of retirement benefit is a straight life annuity (if single) and a joint and survivor annuity (if married), however, various alternative forms of joint and survivor annuities may be selected instead. Upon termination of employment at or after age 65 with at least 5 years of employment, a participant is entitled to a normal retirement annual benefit equal to a percentage of average monthly compensation determined over the participant‘s high 5-year average salary during the 10 years before the participant‘s retirement. If the participant terminates employment on or after attaining age 60 with 15 years of service, his normal retirement benefit will be reduced by 0.5% for each month by which the participant‘s actual retirement date precedes his or her normal retirement date. A participant may postpone retirement beyond normal retirement date, in which case the participant will continue earning service towards his or her accrued benefit. If a married participant dies while in active service and after having become fully vested (i.e., completed 5 years of service), a qualified 50% survivor spouse benefit will be payable to the participant‘s beneficiary. No pre-retirement death benefits are available to unmarried participants. Upon termination of employment due to disability, the participant will be entitled to an early or normal retirement benefit, where the participant‘s accrued benefit is determined based on service performed through the disability date. 98

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The following table indicates the annual retirement benefit that would be payable under the plan upon retirement at age 65 during the plan year ended November 30, 2006, expressed in the form of a single life annuity for the final average salary and benefit service classification specified below:
Final Average Annual Compensation 5 Years of Benefit Service and Benefit Payable at Retirement 10 20 30 40

$ $ $ $ $ $ $ $ $ $ (1)

10,000 30,000 60,000 90,000 120,000 150,000 160,000 170,000 200,000 220,000 and above

(1)

$ $ $ $ $ $ $ $ $ $

750 2,250 4,500 6,750 9,000 11,250 12,000 12,750 15,000 16,500

$ $ $ $ $ $ $ $ $ $

1,500 4,500 9,000 13,500 18,000 22,500 24,000 25,500 30,000 33,000

$ $ $ $ $ $ $ $ $ $

3,000 9,000 18,000 27,000 36,000 45,000 48,000 51,000 60,000 66,000

$ $ $ $ $ $ $ $ $ $

4,500 13,500 27,000 40,500 54,000 67,500 72,000 76,500 90,000 99,000

$ 5,000 $ 15,000 $ 30,000 $ 45,000 $ 60,000 $ 75,000 $ 80,000 $ 85,000 $ 100,000 $ 110,000

Reflects the maximum benefit payable under the Defined Benefit Pension Plan due to tax law limitations.

At November 30, 2006, Messrs. Olson, Muto, Howes, Ms. Warner and Ms. Reimer had 29, 5, 20, 12 and 23 years of credited service, respectively, under the plan. 401(k) Plan . ESSA Bank & Trust maintains a non-standardized prototype 401(k) plan through Massachusetts Mutual Life Insurance Company (MassMutual). Effective January 1, 2007, the 401(k) plan will be operated on a calendar year basis. Employees may participate in the plan when they have attained age 21 and completed one year of service and have been credited with 1,000 hours during the year of service. Participants may make pre-tax salary deferrals to the plan not to exceed $15,500 (which is the 2007 limit; the limit is adjusted annual for IRS-announced cost-of-living increases). In addition, participants who are 50 or older may make pre-tax ―catch up‖ contributions to the plan up to $5,000 (this limit is also adjusted annually by the IRS for cost-of-living increases). The plan is a 401(k) ―safe harbor‖ which means that the employer matches participant pre-tax salary deferrals dollar for dollar up to 3% of compensation, then the employer matches pre-tax salary deferrals at the rate of 50 cents on the dollar for amounts up to 5% of compensation. All contributions are 100% vested. Distributions will be made upon death, disability, termination of employment, or attainment of age 59 / 2 . In addition to the other self-directed investment alternatives offered under the plan, Participants will be offered the opportunity to purchase stock in the offering through a unitized employer stock fund, consisting of 95% stock and 5% cash. Benefits are paid in the form of lump sum, installments, partial withdrawals, or a joint and 100% survivor annuity.
1

Supplemental Retirement Plan. ESSA Bank & Trust has entered into Executive Salary Continuation Agreements (―Supplemental Retirement Plan‖) with Mr. Olson, Ms. Reimer, Mr. Howes and Mr. Grayuski. If the designated executive has been employed with ESSA Bank & Trust for at least 30 years upon normal retirement age (65) or early retirement age (60), then the benefit described in the agreement will be paid to the executive for no less than 192 months following the executive‘s retirement, unless the executive elects to receive the present value of the payments as a lump sum. The amount of the normal benefit equals 70% of the executive‘s final compensation determined over the participant‘s high 5-year average salary during the 10 years before the participant‘s retirement. The normal retirement benefit is reduced by 0.05% for 99

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each month the executive terminates employment after early retirement age but prior to normal retirement age. If the executive voluntarily terminates employment before age 65 or has his or her employment involuntarily terminated other than for cause, the employer shall pay in a lump sum or 60 monthly installments, the amount accrued to fund the promised benefit as of the date of such termination. If a change in control occurs, then the benefits promised under the Supplemental Retirement Plan at normal retirement age will be paid to the executive at normal retirement age, even if the executive‘s employment terminates before normal retirement age (except no payment shall be made if the termination is due to cause). Benefits become vested after 5 years of service and before completing 5 years of service, benefits are zero percent vested. If the executive dies while actively employed by us, but before attaining age 65, the amount accrued under the plan as of the executive‘s date of death will be paid to the executive‘s designated beneficiaries. If the executive dies after the commencement of payment of benefits under the Supplemental Retirement Plan, remaining payments will be made to the executive‘s beneficiaries. We recorded an expense of $160,155 for the Supplemental Retirement Plan during the fiscal year ended September 30, 2006. Stock Benefit Plans Employee Stock Ownership Plan and Trust . We intend to implement an employee stock ownership plan in connection with the stock offering. As part of the stock offering, the employee stock ownership plan trust intends to borrow funds from ESSA Bancorp, Inc. and use those funds to purchase a number of shares equal to 8% of the common stock sold in the stock offering and issued to the Charitable Foundation. Collateral for the loan will be the common stock purchased by the employee stock ownership plan. The loan will be repaid principally from discretionary contributions by ESSA Bank & Trust to the employee stock ownership plan over a period of up to 30 years. The loan documents will provide that the loan may be repaid over a shorter period, without penalty for prepayments. We anticipate that the interest rate on the loan will equal the prime interest rate at the closing of the stock offering, and will adjust annually at the beginning of each calendar year. Shares purchased by the employee stock ownership plan will be held in a suspense account for allocation among participants as the loan is repaid. Shares released from the suspense account will be allocated among employee stock ownership plan participants on the basis of compensation in the year of allocation. Benefits under the plan will not vest at all until a participant has three years of credited service at which time participants will become fully vested. Credit will be given for vesting purposes to participants for years of service with ESSA Bank & Trust prior to the adoption of the plan. A participant‘s interest in his account under the plan will also fully vest in the event of termination of service due to a participant‘s early or normal retirement, death, disability, or upon a change in control (as defined in the plan). Vested benefits will be payable generally in the form of common stock, or to the extent participants‘ accounts contain cash, benefits will be paid in cash. ESSA Bank & Trust‘s contributions to the employee stock ownership plan are discretionary, subject to the loan terms and tax law limits. Therefore, benefits payable under the employee stock ownership plan cannot be estimated. Pursuant to SOP 93-6, we will be required to record compensation expense each year in an amount equal to the fair market value of the shares released from the suspense account. In the event of a change in control, the employee stock ownership plan will terminate. 100

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Transactions with Certain Related Persons Loans and Extensions of Credit . The Sarbanes-Oxley Act of 2002 generally prohibits us from making loans to our executive officers and directors, but it contains a specific exemption from such prohibition for loans made by ESSA Bank & Trust to our executive officers and directors in compliance with federal banking regulations. Federal regulations require that all loans or extensions of credit to executive officers and directors of insured institutions must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and must not involve more than the normal risk or repayment or present other unfavorable features. ESSA Bank & Trust is therefore prohibited from making any loans or extensions of credit to executive officers and directors at different rates or terms than those offered to the general public, except for loans made under a benefit program generally available to all other employees and that does not give preference to any executive officer or director over any other employee. In addition, loans made to a director or executive officer must be approved in advance by a majority of the disinterested members of the Board of Directors. The aggregate amount of our loans to our officers and directors and their related entities was $2.0 million at September 30, 2006. As of September 30, 2006, these loans were performing according to their original terms. Benefits to be Considered Following Completion of the Conversion We intend to adopt and request stockholder approval of one or more stock-based incentive plans, including a stock option plan and a stock recognition and retention plan, no earlier than six months after the completion of the conversion. The stock option plan and stock recognition and retention plan may be established as separate plans or part of a single stock-based incentive plan. Stock Option Plan. If adopted within one year of the conversion and approved by stockholders, the stock option plan would reserve an amount equal to 10% of the shares of common stock sold in the offering for issuance upon exercise of stock options. 10% of the shares of common stock issued in the offering would amount to 1,000,450 shares, 1,177,000 shares, 1,353,550 shares and 1,556,583 shares at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively. If we adopt the stock option plan after one year following the completion of the conversion, we may grant options in an amount greater than 10% of the shares of common stock sold in the offering. We have not yet determined whether we will present this plan for stockholder approval within 12 months following the completion of the conversion or whether we will present this plan for stockholder approval more than 12 months following the completion of the conversion. No options would be granted under the new stock option plan until stockholder approval of the plan is received. In the event that shares underlying options come from authorized but unissued shares of common stock, stockholders would experience dilution of approximately 9.1% of their ownership interest in ESSA Bancorp, Inc. We will have to recognize compensation expense for accounting purposes ratably over the vesting period, equal to the fair value of the options on the original grant date. The exercise price of the options granted under the stock option plan will be equal to the fair market value of ESSA Bancorp, Inc. common stock on the date of grant of the stock options. 101

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If the stock option plan is adopted within one year following the conversion, options may vest no faster than 20% per year beginning 12 months after the date of grant. Options granted under the stock option plan would be adjusted for capital changes such as stock splits and stock dividends. Awards will be 100% vested upon termination of employment due to death, disability or following a change in control, and if the stock option plan is adopted more than one year after the conversion, awards would be 100% vested upon normal retirement. Under Office of Thrift Supervision regulations, if the stock option plan is adopted within one year of the conversion, no individual officer may receive more than 25% of the awards under the plan, no non-employee director may receive more than 5% of the awards under the plan and all non-employee directors as a group may receive in the aggregate no more than 30% of the awards under the plan. The stock option plan would be administered by a committee of non-employee members of ESSA Bancorp, Inc.‘s Board of Directors. Options granted under the stock option plan to employees may be ―incentive‖ stock options, which are designed to result in a beneficial tax treatment to the employee but no tax deduction to ESSA Bancorp, Inc. Non-qualified stock options may also be granted to employees under the stock option plan, and will be granted to the non-employee directors who receive stock options. In the event an option recipient terminated his or her employment or service as an employee or director, the options would terminate after certain specified periods following termination. Stock Recognition and Retention Plan. If adopted within one year of the conversion and approved by stockholders, the stock recognition and retention plan would reserve an amount equal to 4% of the shares of common stock sold in the offering, or 400,180 shares, 470,800 shares, 541,420 shares and 622,633 shares at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively. If we adopt the recognition and retention plan after one year following the completion of the conversion, we may grant shares in an amount greater than 4% of the shares of common stock sold in the offering. We have not yet determined whether we will present this plan for stockholder approval within 12 months following the completion of the conversion or whether we will present this plan for stockholder approval more than 12 months following the completion of the conversion. We must recognize an expense for shares of common stock awarded over their vesting period at the fair market value of the shares on the date they are awarded. The recipients will be awarded shares of common stock under the stock recognition and retention plan at no cost to them. No awards would be made under the stock recognition and retention plan until the plan is approved by stockholders. If the shares awarded under the stock recognition and retention plan come from authorized but unissued shares of the common stock totaling 4% of the shares sold in the offering, stockholders would experience dilution of approximately 3.8% in their ownership interest in ESSA Bancorp, Inc. Awards granted under the stock recognition and retention plan would be nontransferable and nonassignable. Under Office of Thrift Supervision regulations, if the stock recognition and retention plan is adopted within one year following the conversion, the shares of common stock which are subject to an award may vest no faster than 20% per year beginning 12 months after the date of grant of the award. Awards would be adjusted for capital changes such as stock dividends and stock splits. Awards would be 100% vested upon termination of employment or service due to death, disability or following a change in control, and if the stock recognition and retention plan is adopted more than one year after the conversion, awards also would be 100% vested upon normal retirement. Under Office of Thrift Supervision rules, if the stock recognition 102

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and retention plan is adopted within one year of the conversion, no individual officer may receive more than 25% of the awards under the plan, no non-employee director may receive more than 5% of the awards under the plan, and all non-employee directors as a group may receive no more than 30% of the awards under the plan in the aggregate. The recipient of an award will recognize income equal to the fair market value of the stock earned, determined as of the date of vesting, unless the recipient makes an election under Section 83(b) of the Internal Revenue Code of 1986, as amended, to be taxed earlier. The amount of income recognized by the recipient would be a deductible expense of ESSA Bancorp, Inc. for tax purposes. SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth information regarding intended common stock subscriptions by each of the directors and executive officers of ESSA Bank & Trust and their associates, and by all directors and executive officers as a group. In the event the individual maximum purchase limitation is increased, persons subscribing for the maximum amount may increase their purchase order. Directors and executive officers will purchase shares of common stock at the same $10.00 purchase price per share and on the same terms as other purchasers in the offering. This table excludes shares of common stock to be purchased by the employee stock ownership plan, as well as any recognition and retention plan awards or stock option grants that may be made no earlier than six months after the completion of the offering. The directors and officers have indicated their intention to subscribe in the offering for an aggregate of $4.3 million of shares of common stock, equal to 4.6% of the number of shares of common stock to be sold in the offering at the minimum of the offering range, assuming shares are available. Purchases by directors, executive officers and their associates will be included in determining whether the required minimum number of shares has been subscribed for in the offering.
Name Number of Shares (1) Aggregate Purchase Price (1) Percent at Midpoint

John E. Burrus William P. Douglass Daniel J. Henning Frederick E. Kutteroff Gary S. Olson John S. Schoonover, Jr. Robert C. Selig, Jr. William A. Viechnicki, D.D.S. Elizabeth B. Weekes Allan A. Muto Robert S. Howes, Jr. Diane K. Reimer V. Gail Warner Thomas J. Grayuski All directors and executive officers as a group

10,000 15,000 50,000 25,000 50,000 2,000 50,000 50,000 5,000 25,000 20,000 45,000 35,000 45,000 427,000

$

100,000 150,000 500,000 250,000 500,000 20,000 500,000 500,000 50,000 250,000 200,000 450,000 350,000 450,000 $4.27 million

*% * * * * * * * * * * * * * 4.6 %

* Less than 1%. (1) Includes purchases by the individual‘s spouse and other relatives of the named individual living in the same household. The above named individuals are not aware of any other purchases by a person who, or entity which, would be considered an associate of the named individuals under the Plan of Conversion. 103

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THE CONVERSION The Boards of Directors of ESSA Bancorp, Inc. and ESSA Bank & Trust have approved the plan of conversion. The plan of conversion must also be approved by the members of ESSA Bank & Trust (depositors and certain borrowers of ESSA Bank & Trust at _______). A special meeting of members has been called for this purpose. The Office of Thrift Supervision and the Pennsylvania Department of Banking have each conditionally approved the plan of conversion; however, such approval does not constitute a recommendation or endorsement of the plan of conversion by that agency. General Pursuant to the plan of conversion, ESSA Bank & Trust will convert from mutual to stock form and will be wholly owned by ESSA Bancorp, Inc., a new Pennsylvania corporation. When the conversion is completed, all of the capital stock of ESSA Bank & Trust will be owned by ESSA Bancorp, Inc., our newly formed Pennsylvania holding company, and all of the common stock of ESSA Bancorp, Inc. will be owned by public stockholders. We intend to retain between $91.5 million and $124.2 million of the net proceeds of the offering, or $143.1 million if the offering range is increased by 15%, and to contribute the balance of the net proceeds to ESSA Bank & Trust. The conversion will be consummated only upon the issuance of at least 9,350,000 shares of our common stock offered pursuant to the plan of conversion. The plan of conversion provides that we will offer shares of common stock for sale in the subscription offering to eligible account holders, our tax-qualified employee benefit plans, including the employee stock ownership plan and our 401(k), supplemental eligible account holders and other members (depositors and certain borrowers of ESSA Bank & Trust). If all shares are not subscribed for in the subscription offering, we may, at our discretion, offer common stock for sale in a community offering to members of the general public, with a preference given to natural persons residing in the Pennsylvania Counties of Monroe and Northampton. We have the right to accept or reject, in whole or in part, any orders to purchase shares of the common stock received in the community offering. The community offering, if any, may begin at the same time as, during, or after the subscription offering, and must be completed within 45 days after the completion of the subscription offering unless otherwise extended by us with the approval of the Office of Thrift Supervision. See ―—Community Offering.‖ We determined the number of shares of common stock to be offered in the offering based upon an independent valuation appraisal of the estimated consolidated pro forma market value of ESSA Bancorp, Inc. All shares of common stock to be sold in the offering will be sold at $10.00 per share. Investors will not be charged a commission to purchase shares of common stock in the offering. The independent valuation will be updated and the final number of the shares of common stock to be issued in the offering will be determined at the completion of the offering. See ―—Determination of Share Price and Number of Shares to be Issued‖ for more information as to the determination of the estimated pro forma market value of the common stock. 104

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The following is a brief summary of the conversion and is qualified in its entirety by reference to the provisions of the plan of conversion. A copy of the plan of conversion is available for inspection at each branch office of ESSA Bank & Trust and at the Northeast Regional and the Washington, D.C. offices of the Office of Thrift Supervision. The plan of conversion is also filed as an exhibit to ESSA Bank & Trust‘s application to convert from mutual to stock form of which this prospectus is a part, copies of which may be obtained from the Office of Thrift Supervision. See ―Where You Can Find Additional Information.‖ Reasons for the Conversion The primary reasons for the conversion and related stock offering are: • • • • • • • to support our internal growth through lending in communities we serve or may serve in the future; to enhance our existing products and services and to support the development of new products and services; to improve our overall competitive position; to provide additional financial resources to pursue limited de novo branching opportunities and future acquisition opportunities; to reduce a portion of our existing borrowings; to provide better capital management tools, including the ability to pay dividends and to repurchase shares of our common stock; and to retain and attract qualified personnel by establishing stock benefit plans for management and employees, including a stock option plan, a stock recognition and retention plan and an employee stock ownership plan.

In the stock holding company structure, we will have greater flexibility in structuring mergers and acquisitions. Potential sellers often want stock for at least part of the acquisition consideration. Our new stock holding company structure will enable us to offer stock or cash consideration, or a combination thereof, and will therefore enhance our ability to compete with other bidders when acquisition opportunities arise. We have no current arrangements or agreements to acquire other banks, thrifts and financial service companies or branch offices. We have received regulatory approval to open a new branch office in Tannersville, Pennsylvania which we anticipate opening in May 2007. There can be no assurance that we will be able to consummate any acquisitions or establish any additional new branches. Approvals Required The affirmative vote of a majority of the total eligible votes of the members of ESSA Bank & Trust at the special meeting of members is required to approve the plan of conversion. 105

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The members of ESSA Bank & Trust will also be asked to approve the establishment and funding of ESSA Bank & Trust Foundation. The plan of conversion also must be approved by the Office of Thrift Supervision and the Pennsylvania Banking Department, which have each given its conditional approval. A special meeting of members to consider and vote upon the plan of conversion and the charitable foundation has been set for __________. Effects of Conversion on Depositors, Borrowers and Members Continuity . While the conversion is being accomplished, the normal business of ESSA Bank & Trust of accepting deposits and making loans will continue without interruption. ESSA Bank & Trust will continue to be a Pennsylvania chartered savings association and will continue to be regulated by the Pennsylvania Department of Banking. After the conversion, ESSA Bank & Trust will continue to offer existing services to depositors, borrowers and other customers. The directors serving ESSA Bank & Trust, at the time of the conversion will be the directors of ESSA Bancorp, Inc., a Pennsylvania corporation, and ESSA Bank & Trust after the conversion. Effect on Deposit Accounts . Pursuant to the plan of conversion, each depositor of ESSA Bank & Trust at the time of the conversion will automatically continue as a depositor after the conversion, and the deposit balance, interest rate and other terms of such deposit accounts will not change as a result of the conversion. Each such account will be insured by the Federal Deposit Insurance Corporation to the same extent as before the conversion. Depositors will continue to hold their existing certificates, passbooks and other evidences of their accounts. Effect on Loans . No loan outstanding from ESSA Bank & Trust will be affected by the conversion, and the amount, interest rate, maturity and security for each loan will remain as it was contractually fixed prior to the conversion. Effect on Voting Rights of Members . At present, all depositors and certain borrowers of ESSA Bank & Trust are members of, and have voting rights in, ESSA Bank & Trust as to all matters requiring membership action. Upon completion of the conversion, depositors and borrowers will cease to be members of ESSA Bank & Trust and will no longer have voting rights. Upon completion of the conversion, all voting rights in ESSA Bank & Trust will be vested in ESSA Bancorp, Inc. as the sole stockholder of ESSA Bank & Trust. The stockholders of ESSA Bancorp, Inc. will possess exclusive voting rights with respect to ESSA Bancorp, Inc. common stock. Tax Effects . We will receive an opinion of counsel or tax advisor with regard to federal and state income tax consequences of the conversion to the effect that the conversion will not be taxable for federal or state income tax purposes to ESSA Bank & Trust, ESSA Bancorp, Inc., members of ESSA Bank & Trust, eligible account holders, supplemental eligible account holders, or ESSA Bank & Trust See ―—Material Income Tax Consequences.‖ Effect on Liquidation Rights . Each depositor in ESSA Bank & Trust has both a deposit account in ESSA Bank & Trust and a pro rata ownership interest in the net worth of ESSA Bank & Trust based upon the deposit balance in his or her account. This ownership interest is tied to the depositor‘s account and has no tangible market value separate from the deposit account. This 106

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interest may only be realized in the event of a complete liquidation of ESSA Bank & Trust . Any depositor who opens a deposit account obtains a pro rata ownership interest in ESSA Bank & Trust without any additional payment beyond the amount of the deposit. A depositor who reduces or closes his or her account receives a portion or all, respectively, of the balance in the deposit account but nothing for his or her ownership interest in the net worth of ESSA Bank & Trust, which is lost to the extent that the balance in the account is reduced or closed. Consequently, depositors in a stock subsidiary of a holding company normally have no way of realizing the value of their ownership interest, which has realizable value only in the unlikely event that ESSA Bank & Trust is completely liquidated. If this occurs, the depositors of record at that time, as owners, would share pro rata in any residual surplus and reserves of ESSA Bank & Trust after other claims, including claims of depositors to the amounts of their deposits, are paid. In the unlikely event that ESSA Bank & Trust were to liquidate after the conversion, all claims of creditors, including those of depositors, also would be paid first, followed by distribution of the ―liquidation account‖ to depositors as of ___________ and ____________________ who continue to maintain their deposit accounts as of the date of liquidation, with any assets remaining thereafter distributed to ESSA Bancorp, Inc. as the holder of ESSA Bank & Trust‘s capital stock. Pursuant to the rules and regulations of the Office of Thrift Supervision, a post-conversion merger, consolidation, sale of bulk assets or similar combination or transaction with another insured savings institution would not be considered a liquidation and, in such a transaction, the liquidation account would be assumed by the surviving institution. See ―—Liquidation Rights.‖ Determination of Share Price and Number of Shares to be Issued The plan of conversion and bank regulations require that the aggregate purchase price of the common stock sold in the offering be based on the appraised pro forma market value of the common stock, as determined by an independent valuation. ESSA Bank & Trust and ESSA Bancorp, Inc. have retained RP Financial, LC. to prepare an independent valuation appraisal. For its services in preparing the initial valuation, RP Financial will receive a fee of $90,000, and will be reimbursed for its expenses. RP Financial will receive an additional fee of $10,000 for each update to the valuation appraisal. ESSA Bank & Trust and ESSA Bancorp, Inc. have agreed to indemnify RP Financial and its employees and affiliates against specified losses, including any losses in connection with claims under the federal securities laws, arising out of its services as independent appraiser, except where such liability results from its negligence or bad faith. The independent valuation appraisal considered the pro forma impact of the offering. Consistent with the Office of Thrift Supervision appraisal guidelines, the appraisal applied three primary methodologies: the pro forma price-to-book value approach applied to both reported book value and tangible book value; the pro forma price-to-earnings approach applied to reported and core earnings; and the pro forma price-to-assets approach. The market value ratios applied in the three methodologies were based upon the current market valuations of the peer group companies identified by RP Financial, subject to valuation adjustments applied by RP Financial to account for differences between ESSA Bancorp, Inc. and the peer group. RP 107

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Financial placed the greatest emphasis on the price-to-core earnings and price-to-book value approaches in estimating pro forma market value. The independent valuation was prepared by RP Financial in reliance upon the information contained in this prospectus, including the consolidated financial statements of ESSA Bank & Trust. RP Financial also considered the following factors, among others: • • • • the present results and financial condition of ESSA Bank & Trust, and the projected results and financial condition of ESSA Bancorp, Inc., a Pennsylvania corporation; the economic and demographic conditions in ESSA Bank & Trust‘s existing market area; certain historical, financial and other information relating to ESSA Bank & Trust; a comparative evaluation of the operating and financial characteristics of ESSA Bank & Trust with those of other similarly situated publicly traded savings institutions located in the Commonwealth of Pennsylvania, and other states in the mid-Atlantic and midwest regions of the United States; the impact of the conversion and the offering on ESSA Bancorp, Inc.‘s stockholders‘ equity and earnings potential; the proposed dividend policy of ESSA Bancorp, Inc.; and the trading market for securities of comparable institutions and general conditions in the market for such securities.

• • •

Included in RP Financial‘s independent valuation were certain assumptions as to the pro forma earnings of ESSA Bancorp, Inc. after the conversion that were utilized in determining the appraised value. These assumptions included estimated expenses, an assumed after-tax rate of return on the net offering proceeds and purchases in the open market of 4% of the common stock issued in the offering by the recognition and retention plan at the $10.00 purchase price. See ―Pro Forma Data‖ for additional information concerning these assumptions. The use of different assumptions may yield different results. The independent valuation states that as of November 24, 2006, the estimated pro forma market value of ESSA Bancorp, Inc. ranged from $100.0 million to $135.4 million, with a midpoint of $117.7 million. The Board of Directors of ESSA Bancorp, Inc. decided to offer the shares of common stock for a price of $10.00 per share primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions. The number of shares offered will be equal to the aggregate offering price of the shares divided by the price per share. Based on the valuation range and the $10.00 price per share, the minimum of the offering range will be 9,350,000 shares, the midpoint of the offering range will be 11,000,000 shares and the maximum of the offering range will be 12,650,000 shares, or 14,547,500 if the maximum amount is adjusted because of demand for shares or changes in market conditions. 108

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The following table presents a summary of selected pricing ratios for ESSA Bancorp, Inc. and our peer group companies identified by RP Financial. These ratios are based on earnings for the twelve months ended September 30, 2006 and book value as of September 30, 2006. Compared to the average pricing of the peer group, our pro forma pricing ratios at the maximum of the offering range indicated a premium of 22.5% on a price-to-earnings basis, a discount of 42.6% on a price-to-book value basis and a discount of 45.7% on a price-to-tangible book value basis. The pricing ratios result from our generally having higher levels of equity but lower earnings than the companies in the peer group on a pro forma basis. Our Board of Directors, in reviewing and approving the valuation, considered the range of price-to-core earnings multiples and the range of price-to-book value ratios and price-to-tangible book value ratios at the different amounts of shares to be sold in the offering. The appraisal did not consider one valuation approach to be more important than the other. Instead, the appraisal concluded that these ranges represented the appropriate balance of the two approaches to valuing ESSA Bancorp, Inc., and the number of shares to be sold, in comparison to the identified peer group institutions. Specifically, in approving the valuation, the board believed that ESSA Bancorp, Inc. would not be able to sell its shares at a price-to-book value that was in line with the peer group without unreasonably exceeding the peer group on a price-to-core earnings basis. The estimated appraised value and the resulting premium/discount took into consideration the potential financial impact of the conversion and offering.
Pro forma price-to-earnings multiple Pro forma price-to-book value ratio Pro forma price-to-tangible book value ratio

ESSA Bancorp, Inc. Maximum Minimum Valuation of peer group companies as of November 24, 2006 Averages Medians

22.73 x 18.18 18.55 x 16.70

81.04 % 72.10 141.13 % 137.70

81.04 % 72.10 149.25 % 145.80

The Board of Directors of ESSA Bancorp, Inc. reviewed the independent valuation and, in particular, considered the following: • • • ESSA Bank & Trust‘s financial condition and results of operations; comparison of financial performance ratios of ESSA Bank & Trust to those of other financial institutions of similar size; and market conditions generally and, in particular, for financial institutions.

All of these factors are set forth in the independent valuation. The Board of Directors also reviewed the methodology and the assumptions used by RP Financial, LC. in preparing the independent valuation and believes that such assumptions were reasonable. The offering range may be amended with the approval of the Office of Thrift Supervision, if required, as a result of subsequent developments in the financial condition of ESSA Bancorp, Inc. or ESSA Bank & Trust or market conditions generally. The independent valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing shares of our common 109

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stock. RP Financial, LC. did not independently verify our consolidated financial statements and other information that we provided to them, nor did RP Financial, LC. independently value our assets or liabilities. The independent valuation considers ESSA Bank & Trust as a going concern and should not be considered as an indication of the liquidation value of ESSA Bank & Trust. Moreover, because the valuation is necessarily based upon estimates and projections of a number of matters, all of which may change from time to time, no assurance can be given that persons purchasing our common stock in the offering will thereafter be able to sell their shares at prices at or above the $10.00 offering price per share. Following commencement of the subscription offering, the maximum of the valuation range may be increased by up to 15%, or up to $155.7 million, without resoliciting subscribers, which will result in a corresponding increase of up to 15% in the maximum of the offering range to up to 14,547,500 shares, in addition to the 1,018,325 shares to be issued to the ESSA Bank & Trust charitable foundation to reflect changes in the market and financial conditions or demand for the shares. We will not decrease the minimum of the valuation range and the minimum of the offering range without a resolicitation of subscribers. The subscription price of $10.00 per share will remain fixed. See ―—Limitations on Common Stock Purchases‖ as to the method of distribution and allocation of additional shares that may be issued in the event of an increase in the offering range to fill unfilled orders in the offering. If the update to the independent valuation at the conclusion of the offering results in an increase in the maximum of the valuation range to more than $155.7 million and a corresponding increase in the offering range to more than 14,547,500 shares, or a decrease in the minimum of the valuation range to less than $100.0 million and a corresponding decrease in the offering range to fewer than 9,350,000 shares, then, with regulatory approval, we may terminate the offering and promptly return, with interest at ESSA Bank & Trust‘s passbook savings rate, all funds previously delivered to us to purchase shares of common stock and cancel deposit account withdrawal authorizations, and, after consulting with the Office of Thrift Supervision, we may terminate the plan of conversion. Alternatively, we may establish a new offering range and extend the offering period and commence a resolicitation of subscribers or take other actions as permitted by the Office of Thrift Supervision in order to complete the conversion and the offering. In the event that a resolicitation is commenced, we will notify subscribers of the extension of time and of the rights of subscribers to confirm, change or cancel their stock orders for a specified resolicitation period. If a subscriber does not respond, we will cancel the stock order and return funds, as described above. Any resolicitation following the conclusion of the subscription and community offerings would not exceed 45 days. An increase in the number of shares to be issued in the offering would decrease both a subscriber‘s ownership interest and ESSA Bancorp, Inc.‘s pro forma earnings and stockholders‘ equity on a per share basis while increasing pro forma earnings and stockholders‘ equity on an aggregate basis. A decrease in the number of shares to be issued in the offering would increase both a subscriber‘s ownership interest and ESSA Bancorp, Inc.‘s pro forma earnings and stockholders‘ equity on a per share basis, while decreasing pro forma earnings and stockholders‘ equity on an aggregate basis. For a presentation of the effects of these changes, see ―Pro Forma Data.‖ 110

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Copies of the independent valuation appraisal report of RP Financial, LC. and the detailed memorandum setting forth the method and assumptions used in the appraisal report are available for inspection at the main office of ESSA Bank & Trust and as specified under ―Where You Can Find Additional Information.‖ Subscription Offering and Subscription Rights In accordance with the plan of conversion, rights to subscribe for shares of common stock in the subscription offering have been granted in the following descending order of priority. The filling of all subscriptions that we receive will depend on the availability of common stock after satisfaction of all subscriptions of all persons having prior rights in the subscription offering and to the maximum, minimum and overall purchase limitations set forth in the plan of conversion and as described below under ―—Limitations on Common Stock Purchases.‖ Priority 1: Eligible Account Holders . Each ESSA Bank & Trust depositor with aggregate deposit account balances of $50.00 or more (a ―Qualifying Deposit‖) as of the close of business on April 30, 2005 (an ―Eligible Account Holder‖) will receive, without payment therefor, nontransferable subscription rights to purchase, subject to the overall purchase limitations, up to $350,000 or 35,000 shares of our common stock or, if greater, 15 times the number of subscription shares offered multiplied by a fraction of which the numerator is the aggregate Qualifying Deposit account balances of the Eligible Account Holder and the denominator is the aggregate Qualifying Deposit account balances of all Eligible Account Holders, subject to the overall purchase limitations. See ―—Limitations on Common Stock Purchases.‖ If there are not sufficient shares available to satisfy all subscriptions, shares will first be allocated so as to permit each Eligible Account Holder to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of 100 shares or the number of shares for which he or she subscribed. Thereafter, unallocated shares will be allocated to each Eligible Account Holder whose subscription remains unfilled in the proportion that the amount of his or her Qualifying Deposit bears to the total amount of Qualifying Deposits of all subscribing Eligible Account Holders whose subscriptions remain unfilled. If an amount so allocated exceeds the amount subscribed for by any one or more Eligible Account Holders, the excess shall be reallocated among those Eligible Account Holders whose subscriptions are not fully satisfied until all available shares have been allocated. To ensure proper allocation of shares of our common stock, each Eligible Account Holder must list on his or her stock order form all deposit accounts in which he or she has an ownership interest on April 30, 2005. In the event of oversubscription, failure to list an account could result in fewer shares being allocated than if all accounts had been disclosed. In the event of an oversubscription, the subscription rights of Eligible Account Holders who are also directors or executive officers of ESSA Bancorp, Inc. or their associates will be subordinated to the subscription rights of other Eligible Account Holders to the extent attributable to increased deposits in the twelve months preceding April 30, 2005. Priority 2: Tax-Qualified Plans . Our tax-qualified employee benefit plans, including our employee stock ownership plan and 401(k) plan, will receive, without payment therefor, nontransferable subscription rights to purchase in the aggregate up to 10% of the shares of common stock sold in the offering. 111

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Priority 3: Supplemental Eligible Account Holders . To the extent that there are sufficient shares of common stock remaining after satisfaction of subscriptions by Eligible Account Holders and our tax-qualified employee benefit plans, each ESSA Bank & Trust depositor with a Qualifying Deposit as of the close of business on ____________________ who is not an Eligible Account Holder (―Supplemental Eligible Account Holder‖) will receive, without payment therefor, nontransferable subscription rights to purchase up to $350,000 or 35,000 shares of common stock or, if greater, 15 times the number of subscription shares offered multiplied by a fraction of which the numerator is the aggregate Qualifying Deposit account balances of the Supplemental Eligible Account Holder and the denominator is the aggregate Qualifying Deposit account balances of all Supplemental Eligible Account Holders, subject to the overall purchase limitations. See ―—Limitations on Common Stock Purchases.‖ If there are not sufficient shares available to satisfy all subscriptions, shares will be allocated so as to permit each Supplemental Eligible Account Holder to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of 100 shares of common stock or the number of shares for which he or she subscribed. Thereafter, unallocated shares will be allocated to each Supplemental Eligible Account Holder whose subscription remains unfilled in the proportion that the amount of his or her Qualifying Deposit bears to the total amount of Qualifying Deposits of all Supplemental Eligible Account Holders whose subscriptions remain unfilled. If an amount so allocated exceeds the amount subscribed for by any one or more Supplemental Eligible Account Holders, the excess shall be reallocated among those Supplemental Eligible Account Holders whose subscriptions are not fully satisfied until all available shares have been allocated. To ensure proper allocation of common stock, each Supplemental Eligible Account Holder must list on the stock order form all deposit accounts or loan accounts in which he or she has an ownership interest at ____________________. In the event of oversubscription, failure to list an account could result in fewer shares being allocated than if all accounts had been disclosed. Priority 4: Other Members . To the extent that there are shares of common stock remaining after satisfaction of subscriptions by Eligible Account Holders, our tax-qualified employee benefit plans and Supplemental Eligible Account Holders, each depositor of ESSA Bank & Trust on the voting record date of ____________________ and each borrower as of ___________ who is not an Eligible Account Holder or Supplemental Eligible Account Holder (―Other Members‖) will receive, without payment therefor, nontransferable subscription rights to purchase up to $350,000 or 35,000 shares of common stock, subject to the overall purchase limitations. See ―—Limitations on Common Stock Purchases.‖ If there are not sufficient shares available to satisfy all subscriptions, available shares will be allocated on a pro rata basis based on the size of the order of each Other Member whose order remains unfilled. To ensure proper allocation of common stock, each Other Member must list on the stock order form all deposit accounts or loan accounts in which he or she has an ownership interest at ____________________. In the event of oversubscription, failure to list an account could result in fewer shares being allocated than if all accounts had been disclosed. Expiration Date . The Subscription Offering will expire at 12:00 Noon, Eastern time, on ____________, unless extended by us for up to 45 days or such additional periods with the approval of the Office of Thrift Supervision, if necessary. Subscription rights will expire whether 112

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or not each eligible depositor or borrower can be located. We may decide to extend the expiration date of the subscription offering for any reason, whether or not subscriptions have been received for shares at the minimum, midpoint or maximum of the offering range. Subscription rights which have not been exercised prior to the expiration date will become void. We may extend the offering, without notice, until __________, 2007. We will not execute orders until we have received orders to purchase at least the minimum number of shares of common stock. If we have not received orders to purchase at least 9,350,000 shares by ________, 2007, and the Office of Thrift Supervision has not consented to an extension, all funds delivered to us to purchase shares of common stock in the offering will be returned promptly to the subscribers with interest calculated at ESSA Bank & Trust‘s passbook savings rate and all deposit account withdrawal authorizations will be canceled. If an extension beyond the 45-day period following the expiration date is granted by the Office of Thrift Supervision, for any reason, we will notify all subscribers in the stock offering of the extension of time and of the rights of subscribers to confirm, change or cancel their stock order during a specified resolicitation period. Aggregate extensions may not go beyond _________, which is two years after the special meeting of voting members of ESSA Bank & Trust to vote on the plan of conversion. Community Offering To the extent that shares of common stock remain available for purchase after satisfaction of all subscriptions of the Eligible Account Holders, our tax-qualified employee benefit plans, Supplemental Eligible Account Holders and Other Members, we may offer shares pursuant to the plan of conversion to members of the general public in a community offering. Shares may be offered with a preference to natural persons residing in the Pennsylvania Counties of Monroe and Northampton. Subscribers in the community offering may purchase up to 35,000 shares of common stock, subject to the overall purchase limitations. See ―—Limitations on Common Stock Purchases.‖ The opportunity to purchase shares of common stock in the community offering category is subject to our right, in our sole discretion, to accept or reject any such orders in whole or in part either at the time of receipt of an order or as soon as practicable following the expiration date of the offering. If we do not have sufficient shares of common stock available to fill the orders of natural persons residing in the Pennsylvania Counties of Monroe and Northampton, we will allocate the available shares among those persons in a manner that permits each of them, to the extent possible, to purchase the lesser of 100 shares, or the number of shares subscribed for by such person. Thereafter, unallocated shares will be allocated among natural persons residing in the Pennsylvania Counties of Monroe and Northampton whose orders remain unsatisfied on an equal number of shares basis per order. The term ―residing‖ or ―resident‖ as used in this prospectus means any person who occupies a dwelling within the Pennsylvania Counties of Monroe and Northampton, has a present intent to remain within this community for a period of time and manifests the genuineness of that intent by establishing an ongoing physical presence within the community, 113

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together with an indication that this presence within the community is something other than merely transitory in nature. We may utilize deposit or loan records or other evidence provided to us to decide whether a person is a resident. In all cases, however, the determination shall be in our sole discretion. Expiration Date. The community offering may begin with, during or after the subscription offering, and is currently expected to terminate at the same time as the subscription offering, and must terminate no more than 45 days following the subscription offering. Syndicated Community Offering The plan of conversion provides that, if necessary, shares of common stock not purchased in the subscription offering and community offering may be offered for sale to the general public in a syndicated community offering to be managed by Ryan Beck & Co., Inc., acting as our agent. In such capacity, Ryan Beck & Co., Inc. may form a syndicate of other broker-dealers. Neither Ryan Beck & Co., Inc. nor any registered broker-dealer will have any obligation to take or purchase any shares of the common stock in the syndicated community offering; however, Ryan Beck & Co., Inc. has agreed to use its best efforts in the sale of shares in any syndicated community offering. The syndicated community offering would terminate no later than 45 days after the expiration of the subscription offering, unless extended by us, with approval of the Office of Thrift Supervision. See ―—Community Offering‖ above for a discussion of rights of subscribers in the event an extension is granted. The syndicated community offering, if held, will be managed by Ryan Beck & Co., Inc., acting as our agent. In such capacity, Ryan Beck & Co., Inc., may form a syndicate of other brokers-dealers who are National Association of Securities Dealers, Inc. member firms. Neither Ryan Beck & Co., Inc. nor any registered broker-dealer will have any obligation to take or purchase any shares of the common stock in the syndicated community offering. The syndicated community offering will be conducted in accordance with certain Securities and Exchange Commission rules applicable to best efforts offerings. Generally under those rules, Ryan Beck & Co., Inc., a broker-dealer, will deposit funds it receives prior to closing from interested investors into a separate non-interest-bearing bank account. If and when all the conditions for the closing are met, funds for common stock sold in the syndicated community offering will be promptly delivered to us. If the offering is consummated, but some or all of an interested investor‘s funds are not accepted by us, those funds will be returned to the interested investor promptly, without interest. If the offering is not consummated, funds in the account will be promptly returned, without interest, to the potential investor. Normal customer ticketing will be used for order placement. In the syndicated community offering, order forms will not be used. The opportunity to subscribe for shares of common stock in the syndicated community offering is subject to our right to reject orders, in whole or in part, either at the time of receipt of an order or as soon as practicable following the expiration date of the offering. If your order is rejected in part, you will not have the right to cancel the remainder of your order. Purchasers in the syndicated community offering are eligible to purchase up to $350,000 or 35,000 shares of common stock, subject to the overall purchase limitations. 114

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See ―—Limitations on Common Stock Purchases.‖ We may begin the syndicated community offering at any time following the commencement of the subscription offering. If we are unable to find purchasers from the general public to meet the minimum of the offering range we will make other purchase arrangements, if feasible. Other purchase arrangements must be approved by the Office of Thrift Supervision and may provide for purchases by directors, officers, their associates and other persons in excess of the limitations provided in the plan of conversion and in excess of the proposed director purchases discussed earlier, although no purchases are currently intended. If other purchase arrangements cannot be made, we may do any of the following: terminate the offering and promptly return all funds; set a new offering range, notifying all subscribers of the opportunity to confirm, cancel or change their orders; or take such other actions as may be permitted by the Office of Thrift Supervision. Limitations on Common Stock Purchases The plan of conversion includes the following limitations on the number of shares of common stock that may be purchased in the offering: • • No person (or persons exercising subscription rights through a single qualifying deposit or loan account held jointly) may purchase fewer than 25 shares of common stock or generally more than $350,000 or 35,000 shares; Our tax-qualified stock benefit plans, including our employee stock ownership plan and 401(k) plan may purchase in the aggregate up to 10% of the shares of common stock issued in the offering, including shares issued in the event of an increase in the offering range of up to 15%; Except for the tax-qualified employee benefit plans, as described above, no person or entity, together with associates or persons acting in concert with such person or entity, may purchase more than $500,000 or 50,000 shares in all categories of the offering combined; and The maximum number of shares of common stock that may be purchased in all categories of the offering by our executive officers and directors and their associates, in the aggregate may not exceed 25% of the shares issued in the offering.

•

•

Depending upon market or financial conditions, our Board of Directors, with the approval of the Office of Thrift Supervision and without further approval of members of ESSA Bank & Trust, may decrease or increase the purchase limitations. If a purchase limitation is increased, subscribers in the subscription offering who ordered the maximum amount will be, and, in our sole discretion, some other large subscribers may be, given the opportunity to increase their subscriptions up to the then applicable limit. The effect of this type of resolicitation will be an increase in the number of shares of common stock owned by subscribers who choose to increase their subscriptions. 115

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In the event of an increase in the offering range of up to 15% of the total number of shares of common stock offered in the offering, shares will be allocated in the following order of priority in accordance with the plan of conversion: (1) (2) (3) to fill our tax-qualified employee benefit plans‘ subscriptions for up to 10% of the total number of shares of common stock issued in the offering; in the event that there is an oversubscription at the Eligible Account Holder, Supplemental Eligible Account Holder or Other Member levels, to fill unfulfilled subscriptions of these subscribers according to their respective priorities; and to fill unfulfilled subscriptions in the community offering, with preference given first to natural persons residing in the Pennsylvania Counties of Monroe and Northampton.

The term ―associate‖ of a person means: (1) (2) any corporation or organization, other than ESSA Bancorp, Inc., ESSA Bank & Trust or a majority-owned subsidiary of ESSA Bank & Trust, of which the person is a director, senior officer, partner or 10% beneficial stockholder; any trust or other estate in which the person has a substantial beneficial interest or serves as a trustee or in a fiduciary capacity, excluding any employee stock benefit plan in which the person has a substantial beneficial interest or serves as trustee or in a fiduciary capacity; and any blood or marriage relative of the person, who either lives in the same home as the person or who is a director or senior officer of ESSA Bancorp, Inc. or ESSA Bank & Trust, or a subsidiary of either of them

(3)

The term ―acting in concert‖ means: (1) (2) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement; or a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise.

Any persons or companies having the same address on an account or stock order form may be considered to be acting in concert. A person or company which acts in concert with another person or company (―other party‖) shall also be deemed to be acting in concert with any person or company who is also acting in concert with that other party, except that any tax-qualified employee stock benefit plan will not be deemed to be acting in concert with its trustee or a person who serves in a similar capacity solely for the purpose of determining whether common stock held by the trustee and common stock held by the employee stock benefit plan will be aggregated. 116

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Our directors are not treated as associates of each other solely because of their membership on the Board of Directors. We have the right to determine whether prospective purchasers are associates or acting in concert. Shares of common stock purchased in the offering will be freely transferable except for shares purchased by executive officers and directors of ESSA Bancorp, Inc. or ESSA Bank & Trust and except as described below. Any purchases made by any associate of ESSA Bancorp, Inc. or ESSA Bank & Trust for the explicit purpose of meeting the minimum number of shares of common stock required to be sold in order to complete the offering shall be made for investment purposes only and not with a view toward redistribution. In addition, under the guidelines of the National Association of Securities Dealers, Inc., members of the National Association of Securities Dealers and their associates are subject to certain restrictions on transfer of securities purchased in accordance with subscription rights and to certain reporting requirements upon purchase of these securities. For a further discussion of limitations on purchases of shares of our common stock at the time of conversion and thereafter, see ―—Certain Restrictions on Purchase or Transfer of Our Shares After Conversion‖ and ―Restrictions on Acquisition of ESSA Bancorp, Inc.‖ Marketing and Distribution; Compensation Offering materials have been initially distributed to certain persons by mail, with additional copies made available through our Stock Information Center. We have engaged Ryan Beck & Co., Inc. a broker-dealer registered with the National Association of Securities Dealers, as a financial and marketing advisor in connection with the offering of our common stock. In its role in providing advisory, administrative and marketing services, Ryan Beck & Co. Inc. will assist us in the offering as follows: • • • • • • acting as our financial advisor for the conversion and offering; providing administrative services and managing the Stock Information Center; educating our employees regarding the stock offering; targeting our sales efforts, including assisting in the preparation of marketing materials; soliciting orders for common stock; and assisting in soliciting proxies of our members regarding the special meeting of members.

For these services, Ryan Beck & Co., Inc. will receive an advisory and administrative fee of $50,000 and if the conversion is consummated, a sales fee of 1.0% of the aggregate dollar amount of the common stock sold in the subscription and community offerings up to $100 million; and 0.75% of the aggregate dollar amount in excess of $100 million, excluding in each case shares purchased by our charitable foundation, tax qualified employee benefit plans and shares purchased by our directors, officers and employees and their immediate families. For these services, we made an initial advance payment of $25,000 and a payment of $12,500 upon 117

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the initial filing of this prospectus. We will make another payment of $12,500 upon the closing of the conversion and offering. The plan of conversion provides that, if necessary, all shares of common stock not purchased in the subscription offering and community offering may be offered for sale to the general public in a syndicated community offering to be managed by Ryan Beck & Co., Inc. In such capacity, Ryan Beck & Co., Inc. may form a syndicate of other broker-dealers. Neither Ryan Beck & Co., Inc. nor any registered broker-dealer will have any obligation to take or purchase any shares of the common stock in the syndicated community offering; however, Ryan Beck & Co., Inc. has agreed to use its best efforts in the sale of shares in any syndicated community offering. If there is a syndicated community offering, Ryan Beck & Co., Inc. will receive a management fee of 1.0% of the aggregate dollar amount of the common stock sold in the syndicated community offering. The total fees payable to Ryan Beck & Co., Inc. and other NASD member firms in the syndicated community offering will not exceed 6.0% of the aggregate dollar amount of the common stock sold in the syndicated community offering. We also will reimburse Ryan Beck & Co., Inc. for its reasonable out-of-pocket expenses associated with its marketing effort, up to a maximum of $20,000 unless otherwise agreed by us. We will also reimburse Ryan Beck & Co., Inc. for its legal fees (excluding the out-of-pocket expenses of counsel) up to $75,000. If the plan of conversion is terminated or if Ryan Beck & Co., Inc.‘s engagement is terminated in accordance with the provisions of the agreement, Ryan Beck & Co., Inc. will only receive reimbursement of its reasonable out-of-pocket expenses and will return any amounts paid or advanced by us in excess of these expenses. We will indemnify Ryan Beck & Co., Inc. against liabilities and expenses (including legal fees) incurred in connection with certain claims or litigation arising out of or based upon untrue statements or omissions contained in the offering material for the common stock, including liabilities under the Securities Act of 1933. Our directors and executive officers may participate in the solicitation of offers to purchase common stock. These persons will be reimbursed for their reasonable out-of-pocket expenses incurred in connection with the solicitation. Other trained employees of ESSA Bank & Trust may assist in the offering in ministerial capacities, providing clerical work in effecting a sales transaction or answering questions of a ministerial nature. No offers or sales may be made by tellers or at the teller counters. All sales activity will be conducted in a segregated or separately identifiable area of ESSA Bank & Trust‘s office facility apart from the area accessible to the general public. Other questions of prospective purchasers will be directed to executive officers or registered representatives of Ryan Beck & Co., Inc. Our other employees have been instructed not to solicit offers to purchase shares of common stock or provide advice regarding the purchase of common stock. We will rely on Rule 3a4-1 under the Securities Exchange Act of 1934, as amended, and sales of common stock will be conducted within the requirements of Rule 3a4-1, so as to permit officers, directors and employees to participate in the sale of common stock. None of our officers, directors or employees will be compensated in connection with their participation in the offering by the payment of commissions or other remuneration based either directly or indirectly on the transactions in the shares of common stock. The offering will comply with the requirements of Rule 10b-9 under the Securities Exchange Act of 1934. 118

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Procedure for Purchasing Shares Expiration Date . The subscription offering is expected to expire at 12:00 Noon, Eastern time, on __________. The community offering is expected to expire at the same time. We may extend the offering for up to 45 days without notice to purchasers in the offering. Any extension of the subscription and/or community offering beyond ____________ would require the Office of Thrift Supervision‘s approval. To ensure that each purchaser receives a prospectus at least 48 hours before the expiration date of the offering in accordance with Rule 15c2-8 of the Securities Exchange Act of 1934, as amended, no prospectus will be mailed any later than five days prior to the expiration date or hand delivered any later than two days prior to the expiration date. Execution of an order form will confirm receipt of delivery in accordance with Rule 15c2-8. Order forms will be distributed only with a prospectus. Subscription funds will be maintained in a segregated account at ESSA Bank & Trust or at another insured depository institution and will earn interest at our passbook savings rate from the date of receipt. We reserve the right in our sole discretion to terminate the offering at any time and for any reason, in which case we will cancel any deposit account withdrawal orders and promptly return all funds delivered to us, with interest calculated at ESSA Bank & Trust‘s passbook savings rate from the date of receipt. We have the right to reject any order submitted in the offering by a person who we believe is making false representations or who we otherwise believe, either alone or acting in concert with others, is violating, evading, circumventing, or intends to violate, evade or circumvent the terms and conditions of the plan of conversion. Use of Order Forms . In order to purchase shares of common stock in the subscription offering and community offering, you must complete an order form and remit full payment. We will not be required to accept incomplete order forms, unsigned order forms, orders submitted on photocopied or facsimiled order forms. All order forms must be received (not postmarked) by the Stock Information Center prior to 12:00 Noon, Eastern time, on _____________. We are not required to accept order forms that are not received by that time, are executed defectively or are received without full payment or without appropriate withdrawal instructions. We are not required to notify subscribers of incomplete or improperly executed order forms. We have the right to permit the correction of incomplete or improperly executed order forms or waive 119

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immaterial irregularities. We do not represent, however, that we will do so and we have no affirmative duty to notify any prospective subscriber of any such defects. You may submit your order form and payment by mail using the order reply envelope provided, by bringing your order form to our Stock Information Center or by overnight delivery to the indicated address on the order form. Once tendered, an order form cannot be modified or revoked without our consent. We reserve the absolute right, in our sole discretion, to reject orders received in the community offering, in whole or in part, at the time of receipt or at any time prior to completion of the offering. If you are ordering shares, you must represent that you are purchasing shares for your own account and that you have no agreement or understanding with any person for the sale or transfer of the shares. Our interpretation of the terms and conditions of the plan of conversion and of the acceptability of the order forms will be final, subject to the authority of the Office of Thrift Supervision. By signing the order form, you will be acknowledging that the common stock is not a deposit or savings account and is not federally insured or otherwise guaranteed by ESSA Bank & Trust or the federal government, and that you received a copy of this prospectus. However, signing the order form will not result in you waiving your rights under the Securities Act of 1933 or the Securities Exchange Act of 1934. Payment for Shares . Payment for all shares of common stock will be required to accompany completed order forms, in order for the purchase to be valid. Payment for shares may only be made by: (1) (2) personal check, bank check or money order, made payable to ESSA Bancorp, Inc.; or authorization of withdrawal from the types of ESSA Bank & Trust deposit accounts designated on the stock order form.

Appropriate means for designating withdrawals from deposit accounts at ESSA Bank & Trust are provided on the order form. The funds designated must be available in the account(s) at the time the order form is received. A hold will be placed on these funds, making them unavailable to the depositor. Funds authorized for withdrawal will continue to earn interest within the account at the contract rate until the offering is completed, at which time the designated withdrawal will be made. Interest penalties for early withdrawal applicable to certificate accounts will not apply to withdrawals authorized for the purchase of shares of common stock; however, if a withdrawal results in a certificate account with a balance less than the applicable minimum balance requirement, the certificate will be canceled at the time of withdrawal without penalty and the remaining balance will earn interest at the current passbook rate subsequent to the withdrawal. In the case of payments made by personal check these funds must be available in the account(s). Checks and money orders will be immediately cashed and placed in a segregated account at ESSA Bank & Trust and/or another insured depository institution and will earn interest at ESSA Bank & Trust‘s passbook savings rate from the date payment is received until the offering is completed or terminated. Cash and wire transfers will not be accepted. You may not use a check drawn on a ESSA Bank & Trust line of credit, and we will not accept third-party checks (a check written by 120

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someone other than you) payable to you and endorsed over to ESSA Bancorp, Inc. Once we receive your executed order form, it may not be modified, amended or rescinded without our consent, unless the offering is not completed by the expiration date, in which event purchasers may be given the opportunity to increase, decrease or rescind their orders for a specified period of time. If you are interested in using your individual retirement account funds to purchase shares of common stock, you must do so through a self-directed individual retirement account such as a brokerage firm individual retirement account. By regulation, ESSA Bank & Trust‘s individual retirement accounts are not self-directed, so they cannot be invested in shares of our common stock. Therefore, if you wish to use your funds that are currently in a ESSA Bank & Trust individual retirement account, you may not designate on the order form that you wish funds to be withdrawn from the account for the purchase of common stock. The funds you wish to use for the purchase of common stock will have to be transferred to a brokerage account. It may take several weeks to transfer your ESSA Bank & Trust individual retirement account to an independent trustee, so please allow yourself sufficient time to take this action. An annual administrative fee may be payable to the new trustee. There will be no early withdrawal or Internal Revenue Service interest penalties for these transfers. If you are interested in using funds in an ESSA Bank & Trust individual retirement account or any other retirement account to purchase shares of common stock please contact our Stock Information Center as soon as possible, preferably at least two weeks prior to the end of the offering period, because processing such transactions takes additional time, and whether such funds can be used may depend on limitations imposed by the institutions where such funds are currently held. We cannot guarantee that you will be able to use such funds. We will have the right, in our sole discretion, to permit institutional investors to submit irrevocable orders together with the legally binding commitment for payment and to thereafter pay for the shares of common stock for which they subscribe in the community offering at any time prior to 48 hours before the completion of the offering. This payment may be made by wire transfer. Our employee stock ownership plan will not be required to pay for any shares purchased in the offering until consummation of the offering, provided there is a loan commitment from an unrelated financial institution or ESSA Bancorp, Inc. to lend to the employee stock ownership plan the necessary amount to fund the purchase. Regulations prohibit ESSA Bank & Trust from knowingly lending funds or extending credit to any persons to purchase shares of common stock in the offering. Delivery of Stock Certificates . Certificates representing shares of common stock issued in the offering will be mailed by ESSA Bancorp, Inc. to the persons entitled thereto at the certificate registration address noted by them on the order form, as soon as practicable following consummation of the offering. Any certificates returned as undeliverable will be held by our transfer agent until claimed by persons legally entitled thereto or otherwise disposed of in accordance with applicable law. Until certificates for the shares of common stock are delivered, purchasers may not be able to sell the shares of common stock which they ordered, even though the common stock will have begun trading. 121

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Other Restrictions . Notwithstanding any other provision of the plan of conversion, no person is entitled to purchase any shares of common stock to the extent the purchase would be illegal under any federal or state law or regulation, including state ―blue sky‖ regulations, or would violate regulations or policies of the National Association of Securities Dealers, Inc., particularly those regarding free riding and withholding. We may ask for an acceptable legal opinion from any purchaser as to the legality of his or her purchase and we may refuse to honor any purchase order if an opinion is not timely furnished. In addition, we are not required to offer shares of common stock to any person who resides in a foreign country. Restrictions on Transfer of Subscription Rights and Shares Office of Thrift Supervision regulations prohibit any person with subscription rights, including the Eligible Account Holders, Supplemental Eligible Account Holders and Other Members, from transferring or entering into any agreement or understanding to transfer the legal or beneficial ownership of the subscription rights issued under the plan of conversion or the shares of common stock to be issued upon their exercise. These rights may be exercised only by the person to whom they are granted and only for his or her account. Each person exercising subscription rights will be required to certify that he or she is purchasing shares solely for his or her own account and that he or she has no agreement or understanding regarding the sale or transfer of subscription rights or stock shares. The regulations also prohibit any person from offering or making an announcement of an offer or intent to make an offer to purchase subscription rights or shares of common stock to be issued upon their exercise prior to completion of the offering. We intend to pursue any and all legal and equitable remedies in the event we become aware of the transfer of subscription rights, and we will not honor orders that we believe involve the transfer of subscription rights. How You Can Obtain Additional Information Our branch office personnel may not, by law, assist with investment-related questions about the offering or accept stock order forms or proxy cards. If you have any questions regarding the conversion or the offering, please call or visit our Stock Information Center, toll free, at 1-________, Monday through Friday between 10:00 a.m. and 4:00 p.m., Eastern time. The Stock Information Center is located at _______________________________________. The Stock Information Center will be closed on weekends and bank holidays. Liquidation Rights In the unlikely event of a complete liquidation of ESSA Bancorp, Inc. prior to the conversion, all claims of creditors of ESSA Bancorp, Inc., including those of depositors of ESSA Bank & Trust (to the extent of their deposit balances), would be paid first. Thereafter, if there were any assets of ESSA Bancorp, Inc. remaining, these assets would be distributed to stockholders, including ESSA Bank & Trust. In the unlikely event that ESSA Bank & Trust and ESSA Bancorp, Inc. liquidated prior to the conversion, all claims of their creditors would be paid first. Then, if there were any assets of ESSA Bank & Trust remaining, members of ESSA Bank & Trust would receive those remaining assets, pro rata, based upon the deposit balances in their 122

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deposit account in ESSA Bank & Trust immediately prior to liquidation. In the unlikely event that ESSA Bank & Trust were to liquidate after the conversion, all claims of creditors, including those of depositors, would be paid first, followed by distribution of the ―liquidation account‖ to certain depositors, with any assets remaining thereafter distributed to ESSA Bancorp, Inc. as the holder of ESSA Bank & Trust capital stock. Pursuant to the rules and regulations of the Office of Thrift Supervision, a post-conversion merger, consolidation, sale of bulk assets or similar combination or transaction with another insured savings institution would not be considered a liquidation and, in these types of transactions, the liquidation account would be assumed by the surviving institution. The plan of conversion provides for the establishment, upon the completion of the conversion, of a special ―liquidation account‖ for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders in an amount equal to the total equity of ESSA Bank & Trust as of the date of its latest balance sheet contained in this prospectus. The purpose of the liquidation account is to provide Eligible Account Holders and Supplemental Eligible Account Holders who maintain their deposit accounts with ESSA Bank & Trust after the conversion with a liquidation interest in the unlikely event of the complete liquidation of ESSA Bank & Trust after the conversion. Each Eligible Account Holder and Supplemental Eligible Account Holder that continues to maintain his or her deposit account at ESSA Bank & Trust, would be entitled, on a complete liquidation of ESSA Bank & Trust after the conversion, to an interest in the liquidation account prior to any payment to the stockholders of ESSA Bancorp, Inc. Each Eligible Account Holder and Supplemental Eligible Account Holder would have an initial interest in the liquidation account for each deposit account, including savings accounts, transaction accounts such as negotiable order of withdrawal accounts, money market deposit accounts, and certificates of deposit, with a balance of $50 or more held in ESSA Bank & Trust on April 30, 2005 and ____________________, respectively. Each Eligible Account Holder and Supplemental Eligible Account Holder would have a pro rata interest in the total liquidation account for each such deposit account, based on the proportion that the balance of each such deposit account on April 30, 2005 or ____________________, respectively, bears to the balance of all deposit accounts in ESSA Bank & Trust on such dates. If, however, on any December 31 annual closing date commencing on or after the effective date of the conversion, the amount in any such deposit account is less than the amount in the deposit account on April 30, 2005 or ____________________, as applicable, or any other annual closing date, then the interest in the liquidation account relating to such deposit account would be reduced from time to time by the proportion of any such reduction, and such interest will cease to exist if such deposit account is closed. In addition, no interest in the liquidation account would ever be increased despite any subsequent increase in the related deposit account. Payment pursuant to liquidation rights of Eligible Account Holders and Supplemental Eligible Account Holders would be separate and apart from the payment of any insured deposit accounts to such depositor. Any assets remaining after the above liquidation rights of Eligible Account Holders and Supplemental Eligible Account Holders are satisfied would be distributed to ESSA Bancorp, Inc. as the sole stockholder of ESSA Bank & Trust. 123

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Material Income Tax Consequences Consummation of the conversion is subject to the prior receipt of an opinion of counsel or tax advisor with respect to federal and state income taxation that the conversion will not be a taxable transaction to ESSA Bank & Trust or ESSA Bancorp, Inc., Eligible Account Holders, Supplemental Eligible Account Holders, and other members of ESSA Bank & Trust. Unlike private letter rulings, opinions of counsel or tax advisors are not binding on the Internal Revenue Service or any state taxing authority, and such authorities may disagree with such opinions. In the event of such disagreement, there can be no assurance that ESSA Bancorp, Inc. or ESSA Bank & Trust would prevail in a judicial proceeding. ESSA Bank & Trust and ESSA Bancorp, Inc. have received an opinion of counsel, Luse Gorman Pomerenk & Schick, P.C., regarding all of the material federal income tax consequences of the conversion, which includes the following: 1. 2. The conversion of ESSA Bank & Trust to a Pennsylvania chartered stock savings association will qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code. Neither ESSA Bancorp, Inc., a Pennsylvania corporation nor ESSA Bank & Trust will recognize any gain or loss upon the transfer of assets of ESSA Bancorp, Inc. to ESSA Bank & Trust in exchange for shares of common stock of ESSA Bank & Trust, which will be constructively received by ESSA Bank & Trust (Sections 361 and 1032(a) of the Internal Revenue Code). The basis of the assets of ESSA Bancorp, Inc. and the holding period of such assets to be received by ESSA Bank & Trust will be the same as the basis and holding period in such assets in the hands of ESSA Bancorp, Inc. immediately before the exchange. (Sections 362(b) and 1223(2) of the Internal Revenue Code). The exchange of Eligible Account Holders‘ and Supplemental Account Holders‘ interests in ESSA Bank & Trust for interests in a liquidation account established in ESSA Bank & Trust will satisfy the continuity of interest requirement of Section 1.368-1(b) of the Federal Income Tax Regulations. None of ESSA Bank & Trust, nor Eligible Account Holders, Supplemental Eligible Account Holders or Other Members, will recognize any gain or loss on the transfer of the assets of ESSA Bank & Trust to ESSA Bank & Trust in exchange for an interest in a liquidation account established in ESSA Bank & Trust for the benefit of Eligible Account Holders and Supplemental Eligible Account holders who remain depositors of ESSA Bank & Trust and nontransferable subscription rights to purchase shares of ESSA Bancorp, Inc. common stock. It is more likely than not that the nontransferable subscription rights have no value, based on the fact that these rights are acquired by the recipients without cost, are nontransferable and of short duration, and afford the recipients the right 124

3.

4.

5.

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only to purchase the common stock at a price equal to its estimated fair market value, which will be the same price as the subscription price for the shares of common stock in the offering. Accordingly, no gain or loss will be recognized by Eligible Account Holders, Supplemental Eligible Account Holders or other members upon distribution to them of nontransferable subscription rights to purchase shares of ESSA Bancorp, Inc. common stock, provided that the amount to be paid for ESSA Bancorp, Inc. common stock is equal to the fair market value of ESSA Bancorp, Inc. common stock. 7. The basis of the shares of ESSA Bancorp, Inc. common stock purchased in the offering will be the purchase price. The holding period of the ESSA Bancorp, Inc. common stock purchased pursuant to the exercise of nontransferable subscription rights will commence on the date on which the right to acquire such stock was exercised. No gain or loss will be recognized by ESSA Bancorp, Inc. on the receipt of money in exchange for shares of ESSA Bancorp, Inc. common stock sold in the offering.

8.

In the view of RP Financial, LC. (who is acting as independent appraiser of the value of the shares of ESSA Bancorp, Inc. common stock in connection with the conversion), which view is not binding on the Internal Revenue Service, the subscription rights do not have any value for the reasons set forth in paragraph 6, above. If the subscription rights granted to Eligible Account Holders and Supplemental Eligible Account Holders are deemed to have an ascertainable value, receipt of these rights could result in taxable gain to those Eligible Account Holders and Supplemental Eligible Account Holders who exercise the subscription rights in an amount equal to their value, and ESSA Bancorp, Inc. could recognize gain on a distribution. Eligible Account Holders and Supplemental Eligible Account Holders are encouraged to consult with their own tax advisors as to the tax consequences in the event that subscription rights are deemed to have an ascertainable value. The Internal Revenue Service has announced that it will not issue private letter rulings with respect to the issue of whether nontransferable rights have value. Unlike private letter rulings, an opinion of counsel or the view of an independent appraiser is not binding on the Internal Revenue Service and the Internal Revenue Service could disagree with the conclusions reached therein. Depending on the conclusion or conclusions with which the Internal Revenue Service disagrees, the Internal Revenue Service may take the position that the transaction is taxable to any one or more of ESSA Bank & Trust, the members of ESSA Bank & Trust, ESSA Bancorp, Inc. and the Eligible Account Holders and Supplemental Eligible Account Holders who exercise their subscription rights. In the event of a disagreement, there can be no assurance that ESSA Bancorp, Inc. or ESSA Bank & Trust would prevail in a judicial or administrative proceeding. The federal tax opinion has been filed with the Securities and Exchange Commission as an exhibit to ESSA Bancorp, Inc.‘s registration statement. Advice regarding the Pennsylvania state income tax consequences consistent with the federal tax opinion has been issued by S.R. Snodgrass, A.C. 125

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Certain Restrictions on Purchase or Transfer of Our Shares after Conversion All shares of common stock purchased in the offering by a director or an executive officer of ESSA Bank & Trust generally may not be sold for a period of one year following the closing of the conversion, except in the event of the death of the director or executive officer. Each certificate for restricted shares will bear a legend giving notice of this restriction on transfer, and instructions will be issued to the effect that any transfer within this time period of any certificate or record ownership of the shares other than as provided above is a violation of the restriction. Any shares of common stock issued at a later date as a stock dividend, stock split or otherwise with respect to the restricted stock will be similarly restricted. The directors and executive officers of ESSA Bancorp, Inc. also will be restricted by the insider trading rules promulgated pursuant to the Securities Exchange Act of 1934. Purchases of shares of our common stock by any of our directors, executive officers and their associates, during the three-year period following the closing of the conversion may be made only through a broker or dealer registered with the Securities and Exchange Commission, except with the prior written approval of the Office of Thrift Supervision. This restriction does not apply, however, to negotiated transactions involving more than 1% of our outstanding common stock or to purchases of our common stock by our stock option plan or any of our tax-qualified employee stock benefit plans or nontax-qualified employee stock benefit plans, including any recognition and retention plans or restricted stock plans. Office of Thrift Supervision regulations prohibit ESSA Bancorp, Inc. from repurchasing its shares of common stock during the first year following conversion unless compelling business reasons exist for such repurchases. After one year, the Office of Thrift Supervision does not impose any repurchase restrictions. ESSA BANK & TRUST FOUNDATION General In furtherance of our commitment to our local community, the plan of conversion provides that we will establish ESSA Bank & Trust Foundation as a non-stock, nonprofit Delaware corporation in connection with the stock offering. The charitable foundation will be funded with cash and shares of ESSA Bancorp, Inc. common stock, as further described below. By further enhancing our visibility and reputation in our local community, we believe that the charitable foundation will enhance the long-term value of ESSA Bank & Trust‘s community banking franchise. The stock offering presents us with a unique opportunity to provide a substantial and continuing benefit to our community and to receive the associated tax benefits. The establishment and funding of the charitable foundation has been approved by the Board of Directors of ESSA Bancorp, Inc. and ESSA Bank & Trust and is subject to approval by members of ESSA Bank & Trust. If the members do not approve the charitable foundation, we may, in our discretion, complete the conversion and stock offering without the inclusion of the charitable foundation and without resoliciting subscribers. We may also determine in our discretion, not complete the conversion and stock offering if the members do not approve the charitable foundation. 126

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Purpose of the Charitable Foundation In connection with the closing of the stock offering, ESSA Bancorp, Inc. intends to contribute up to $1.5 million cash and issue a number of shares equal to 7.0% of the shares of common stock that will be sold in the stock offering to ESSA Bank & Trust Foundation. The purpose of the charitable foundation is to provide financial support to charitable organizations in the communities in which we operate and to enable our communities to share in our long-term growth. ESSA Bank & Trust Foundation will be dedicated completely to community activities and the promotion of charitable causes, and may be able to support such activities in ways that are not presently available to us. ESSA Bank & Trust Foundation will also support our ongoing obligations to the community under the Community Reinvestment Act. ESSA Bank & Trust received an ―outstanding‖ rating in its most recent Community Reinvestment Act examination by the Federal Deposit Insurance Corporation. Funding ESSA Bank & Trust Foundation with shares of ESSA Bancorp, Inc. common stock is also intended to allow our community to share in the potential growth and success of ESSA Bank & Trust after the stock offering is completed because ESSA Bank & Trust Foundation will benefit directly from any increases in the value of ESSA Bancorp, Inc. common stock. In addition, ESSA Bank & Trust Foundation will maintain close ties with ESSA Bank & Trust, thereby forming a partnership within the communities in which ESSA Bank & Trust operates. Structure of the Charitable Foundation The ESSA Bank & Trust Foundation will be incorporated under Delaware law as a non-stock, nonprofit corporation. The certificate of incorporation of ESSA Bank & Trust Foundation will provide that the corporation is organized exclusively for charitable purposes as set forth in Section 501(c)(3) of the Internal Revenue Code. ESSA Bank & Trust Foundation‘s certificate of incorporation will further provide that no part of the net earnings of the charitable foundation will inure to the benefit of, or be distributable to, its directors or officers. We have selected Messrs. _______________________________ of our current directors to serve on the initial board of directors of the charitable foundation. As required by Office of Thrift Supervision regulations, we also will select one additional person to serve on the initial board of directors who will not be one of our officers or directors and who will have experience with local charitable organizations and grant making. While there are no plans to change the size of the initial board of directors during the year following the completion of the stock offering, following the first anniversary of the stock offering, the charitable foundation may alter the size and composition of its board of directors. For five years after the stock offering, one seat on the charitable foundation‘s board of directors will be reserved for a person from our local community who has experience with local community charitable organizations and grant making and who is not one of our officers, directors or employees, and one seat on the charitable foundation‘s board of directors will be reserved for one of ESSA Bank & Trust‘s directors. The business experience of our current directors is described in ―Management of ESSA Bancorp, Inc.‖ 127

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The board of directors of ESSA Bank & Trust Foundation will be responsible for establishing its grant and donation policies, consistent with the purposes for which it was established. As directors of a nonprofit corporation, directors of ESSA Bank & Trust Foundation will at all times be bound by their fiduciary duty to advance the charitable foundation‘s charitable goals, to protect its assets and to act in a manner consistent with the charitable purposes for which the charitable foundation is established. The directors of ESSA Bank & Trust Foundation also will be responsible for directing the activities of the charitable foundation, including the management and voting of the shares of common stock of ESSA Bancorp, Inc. held by the charitable foundation. However, as required by Office of Thrift Supervision regulations, all shares of common stock held by ESSA Bank & Trust Foundation must be voted in the same ratio as all other shares of the common stock on all proposals considered by stockholders of ESSA Bancorp, Inc. ESSA Bank & Trust Foundation‘s place of business will be located at our administrative offices. The board of directors of ESSA Bank & Trust Foundation will appoint such officers and employees as may be necessary to manage its operations. To the extent applicable, we will comply with the affiliates restrictions set forth in Sections 23A and 23B of the Federal Reserve Act and the Office of Thrift Supervision regulations governing transactions between ESSA Bank & Trust and the charitable foundation. ESSA Bank & Trust Foundation will receive working capital from its initial cash contribution of up to $1.5 million and: (1) (2) (3) any dividends that may be paid on ESSA Bancorp, Inc.‘s shares of common stock in the future; within the limits of applicable federal and state laws, loans collateralized by the shares of common stock; or the proceeds of the sale of any of the shares of common stock in the open market from time to time.

As a private foundation under Section 501(c)(3) of the Internal Revenue Code, ESSA Bank & Trust Foundation will be required to distribute annually in grants or donations a minimum of 5% of the average fair market value of its net investment assets. One of the conditions imposed on the gift of common stock is that the amount of shares of common stock that may be sold by ESSA Bank & Trust Foundation in any one year shall not exceed 5% of the average market value of the assets held by ESSA Bank & Trust Foundation, except where the board of directors of the charitable foundation determines that the failure to sell an amount of common stock greater than such amount would result in a long-term reduction of the value of its assets and/or would otherwise jeopardize its capacity to carry out its charitable purposes. Tax Considerations Our independent tax advisor, Luse Gorman Pomerenk & Schick, P.C., has advised us that an organization created for the above purposes should qualify as a Section 501(c)(3) exempt organization under the Internal Revenue Code and should be classified as a private foundation. ESSA Bank & Trust Foundation will submit a timely request to the Internal Revenue Service to 128

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be recognized as an exempt organization. As long as ESSA Bank & Trust Foundation files its application for tax-exempt status within 15 months from the date of its organization, and provided the Internal Revenue Service approves the application, its effective date as a Section 501(c)(3) organization will be the date of its organization. Our independent tax advisor, however, has not rendered any advice on whether ESSA Bank & Trust Foundation‘s tax exempt status will be affected by the regulatory requirement that all shares of common stock of ESSA Bancorp, Inc. held by ESSA Bank & Trust Foundation must be voted in the same ratio as all other outstanding shares of common stock of ESSA Bancorp, Inc. on all proposals considered by stockholders of ESSA Bancorp, Inc. ESSA Bancorp, Inc. and ESSA Bank & Trust are authorized by federal law to make charitable contributions. We believe that the stock offering presents a unique opportunity to establish and fund a charitable foundation given the substantial amount of additional capital being raised. In making such a determination, we considered the dilutive impact to our stockholders of the contribution of shares of common stock to ESSA Bank & Trust Foundation. We believe that the contribution to ESSA Bank & Trust Foundation in excess of the 10% annual limitation on charitable deductions described below is justified given ESSA Bank & Trust‘s capital position and its earnings, the substantial additional capital being raised in the stock offering and the potential benefits of ESSA Bank & Trust Foundation to our community. See ―Capitalization,‖ ―Historical and Pro Forma Regulatory Capital Compliance‖, and ―Comparison of Valuation and Pro Forma Information With and Without the Charitable Foundation.‖ The amount of the contribution will not adversely affect our financial condition. We therefore believe that the amount of the charitable contribution is reasonable given our pro forma capital position, and it does not raise safety and soundness concerns. We have received an opinion from our independent tax advisor that ESSA Bancorp, Inc.‘s contribution of its shares of stock to ESSA Bank & Trust Foundation should not constitute an act of self-dealing and that we should be entitled to a deduction in the amount of the fair market value of the stock at the time of the contribution less the nominal amount that ESSA Bank & Trust Foundation is required to pay ESSA Bancorp, Inc. for such stock. We are permitted to deduct only an amount equal to 10% of our annual taxable income in any one year. We are permitted under the Internal Revenue Code to carry the excess contribution over the five-year period following the contribution to ESSA Bank & Trust Foundation. We estimate that most of the contribution should be deductible over the six-year period ( i.e. , the year in which the contribution is made and the succeeding five-year period). However, we do not have any assurance that the Internal Revenue Service will grant tax-exempt status to the charitable foundation. Furthermore, even if the contribution is deductible, we may not have sufficient earnings to be able to use the deduction in full. Any such decision to continue to make additional contributions to ESSA Bank & Trust Foundation in the future would be based on an assessment of, among other factors, our financial condition at that time, the interests of our stockholders and depositors, and the financial condition and operations of the foundation. Although we have received an opinion from our independent tax advisor that we should be entitled to a deduction for the charitable contribution, there can be no assurances that the Internal Revenue Service will recognize ESSA Bank & Trust Foundation as a Section 501(c)(3) exempt organization or that the deduction will be permitted. In such event, our contribution to 129

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ESSA Bank & Trust Foundation would be expensed without tax benefit, resulting in a reduction in earnings in the year in which the Internal Revenue Service makes such a determination. As a private foundation, earnings and gains, if any, from the sale of common stock or other assets are exempt from federal and state income taxation. However, investment income, such as interest, dividends and capital gains, is generally taxed at a rate of 2.0%. ESSA Bank & Trust Foundation will be required to file an annual return with the Internal Revenue Service within four and one-half months after the close of its fiscal year. ESSA Bank & Trust Foundation will be required to make its annual return available for public inspection. The annual return for a private foundation includes, among other things, an itemized list of all grants made or approved, showing the amount of each grant, the recipient, any relationship between a grant recipient and the foundation‘s managers and a concise statement of the purpose of each grant. Regulatory Requirements Imposed on the Charitable Foundation Office of Thrift Supervision regulations impose the following requirements on the establishment of the charitable foundation: • • • • • • the Office of Thrift Supervision may examine the charitable foundation at the foundation‘s expense; the charitable foundation must comply with all supervisory directives imposed by the Office of Thrift Supervision; the charitable foundation must provide annually to the Office of Thrift Supervision a copy of the annual report that the foundation submits to the Internal Revenue Service; the charitable foundation must operate according to written policies adopted by its board of directors, including a conflict of interest policy; the charitable foundation may not engage in self-dealing and must comply with all laws necessary to maintain its tax-exempt status under the Internal Revenue Code; and the charitable foundation must vote its shares in the same ratio as all of the other shares voted on each proposal considered by the stockholders of ESSA Bancorp, Inc.

Within six months of completing the stock offering, the ESSA Bank & Trust Foundation must submit to the Office of Thrift Supervision a three-year operating plan. RESTRICTIONS ON ACQUISITION OF ESSA BANCORP, INC. Although the Board of Directors of ESSA Bancorp, Inc. is not aware of any effort that might be made to obtain control of ESSA Bancorp, Inc. after the conversion, the Board of Directors believes that it is appropriate to include certain provisions as part of ESSA Bancorp, Inc.‘s articles of incorporation to protect the interests of ESSA Bancorp, Inc. and its stockholders 130

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from takeovers which the Board of Directors of ESSA Bancorp, Inc. might conclude are not in the best interests of ESSA Bank & Trust, ESSA Bancorp, Inc. or ESSA Bancorp, Inc.‘s stockholders. The following discussion is a general summary of the material provisions of ESSA Bancorp, Inc.‘s articles of incorporation and bylaws, ESSA Bank & Trust‘s charter and bylaws and certain other statutory and regulatory provisions that may be deemed to have an ―anti-takeover‖ effect. The following description of certain of these provisions is necessarily general and, with respect to provisions contained in ESSA Bancorp, Inc.‘s articles of incorporation and bylaws and ESSA Bank & Trust‘s charter and bylaws, reference should be made in each case to the document in question, each of which is part of ESSA Bank & Trust‘s application for conversion with the Office of Thrift Supervision and ESSA Bancorp, Inc.‘s registration statement filed with the Securities and Exchange Commission. See ―Where You Can Find Additional Information.‖ ESSA Bancorp, Inc.’s Articles of Incorporation and Bylaws ESSA Bancorp, Inc.‘s articles of incorporation and bylaws contain a number of provisions relating to corporate governance and rights of stockholders that might discourage future takeover attempts. As a result, stockholders who might desire to participate in such transactions may not have an opportunity to do so. In addition, these provisions will also render the removal of the Board of Directors or management of ESSA Bancorp, Inc. more difficult. The following description is a summary of the provisions of the articles of incorporation and bylaws. See ―Where You Can Find Additional Information‖ as to how to review a copy of these documents. Directors . Initially, the Board of Directors will be divided into three classes. Only one class of directors will be elected annually. Thus, it would take at least two annual elections to replace a majority of ESSA Bancorp, Inc.‘s Board of Directors. Further, the articles of incorporation authorize the Board of Directors to fill any vacancies so created, including any vacancy created by an increase in the number of directors, by a majority vote of directors then in office. The bylaws impose notice, informational and other requirements and conditions in connection with the nomination by stockholders of candidates for election to the Board of Directors or the proposal by stockholders of business to be acted upon at an annual meeting of stockholders. Any person appointed or elected to ESSA Bancorp, Inc.‘s Board of Directors shall own, or within a reasonable time following such appointment or election shall acquire, at least 1,000 shares of the ESSA Bancorp, Inc.‘s common stock. In addition, at the time of initial appointment/election, such person must reside, or work, in a county in which ESSA Bank & Trust maintains an office or in a county contiguous to a county in which ESSA Bank & Trust maintains an office. Restrictions on Call of Special Meetings . The bylaws provide that special meetings of stockholders can be called by the Chairman of the Board, the President or the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors authorized by our 131

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articles of incorporation and bylaws. The articles of incorporation and the bylaws do not provide for stockholder ability to call a special meeting. Prohibition of Cumulative Voting . The articles of incorporation prohibit cumulative voting for the election of Directors. Limitation of Voting Rights . The articles of incorporation provide that in no event will any person who beneficially owns, directly or indirectly, more than 10% of the then-outstanding shares of common stock, be entitled or permitted to vote any of the shares of common stock held in excess of the 10% limit. Restrictions on Removing Directors from Office . The articles of incorporation provide that directors can be removed from office for cause if the removal is approved by the vote of stockholders owning not less than 60% of the total votes eligible to be cast by stockholders at a duly constituted meeting (after giving effect to the limitation on voting rights discussed above in ―—Limitation of Voting Rights). Authorized but Unissued Shares . After the conversion, ESSA Bancorp, Inc. will have authorized but unissued shares of common and preferred stock. See ―Description of Capital Stock.‖ The articles of incorporation authorize 40,000,000 shares of common stock and 10,000,000 shares of serial preferred stock. The Board of Directors of ESSA Bancorp, Inc. may amend the articles of incorporation, without action by the stockholders, to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that ESSA Bancorp, Inc. has authority to issue. In addition, the Board of Directors of ESSA Bancorp, Inc. is authorized, without further approval of the stockholders, to issue additional shares of common or preferred stock and to classify or reclassify any unissued shares of stock (including common stock and preferred stock) from time to time into one or more classes or series subject to applicable provisions of law, and the Board of Directors is authorized to fix by setting or changing the designations, and the relative preferences, conversion or other rights (including offering rights), voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series, voting rights, if any, including without limitation, offering rights of such shares (which could be multiple or as a separate class). In the event of a proposed merger, tender offer or other attempt to gain control of ESSA Bancorp, Inc. that the Board of Directors does not approve, it might be possible for the Board of Directors to authorize the issuance of common stock or a series of preferred stock with rights and preferences that would impede the completion of the transaction. An effect of the possible issuance of common or preferred stock therefore may be to deter a future attempt to gain control of ESSA Bancorp, Inc. The Board of Directors has no present plan or understanding to issue any preferred stock. Amendments to Articles of Incorporation and Bylaws. Pennsylvania law provides that, subject to limited exceptions, the amendment or repeal of any provision of our articles of incorporation requires the approval of a majority of votes cast by all stockholders entitled to vote on the matter (after giving effect to the limitation on voting rights discussed above in ―—Limitation of Voting Rights‖). Our articles of incorporation, however, provide that amendments to certain provisions of our article of incorporation requires the approval of 80% of shares entitled to vote (after giving effect to the limitation on voting rights discussed above in 132

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―—Limitation of Voting Rights‖). The provisions of our articles of incorporation that require approval of 80% shares entitled to vote relate to the limitation on voting rights, the authority of the Board of Directors to fix terms of preferred stock, the number, classification, terms, prohibition of cumulative voting, board vacancies, removal of directors, meetings of shareholders, liability of directors and officers and the amendment of the articles of incorporation and bylaws. Our articles of incorporation also provide that, in any event, the proposed amendment or repeal of any provision of our articles of incorporation must be approved by a majority of our Board of Directors then in office before it can be submitted for consideration at an annual or special meeting. The bylaws may be amended exclusively by the affirmative vote of a majority of the directors then in office or by the affirmative vote of at least 80% of the shares entitled to vote. Approval of Consolidations, Mergers, and Other Similar Transactions. Pennsylvania law provides that, subject to limited exceptions, consolidations, mergers and other similar transactions require the approval of a majority of the votes cast by shareholders eligible to vote. Pennsylvania General Corporate Law The Pennsylvania Business Corporation Law of 1988, as amended, also contains certain provisions applicable to ESSA Bancorp, Inc. that may have the effect of deterring or discouraging an attempt to take control of ESSA Bancorp, Inc. These provisions, among other things: • Require that, following any acquisition by any person or group of 20% of a public corporation‘s voting power, the remaining shareholders have the right to receive payment for their shares, in cash, from such person or group in an amount equal to the ―fair value‖ of the shares, including an increment representing a proportion of any value payable for control of the corporation (Subchapter 25E of the Business Corporation Law); Prohibit for five years, subject to certain exceptions, a ―business combination‖ (which includes a merger or consolidation of the corporation or a sale, lease or exchange of assets) with a person or group beneficially owning 20% or more of a public corporation‘s voting power (Subchapter 25F of the Business Corporation Law); Prevent a person or group acquiring different levels of voting power (20%, 33% and 50%) from voting any shares over the applicable threshold, unless ―disinterested shareholders‖ approve such voting rights (Subchapter 25G of the Business Corporation Law); Require any person or group that publicly announces that it may acquire control of a corporation, or that acquires or publicly discloses an intent to acquire 20% or more of the voting power of a corporation, to disgorge to the corporation any profits that it receives from sales of the corporation‘s equity securities purchased over the prior 18 months (Subchapter 25H of the Business Corporation Law); 133

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Expand the factors and groups (including shareholders) which a corporation‘s Board of Directors can consider in determining whether an action is in the best interests of the corporation; Provide that a corporation‘s Board of Directors need not consider the interests of any particular group as dominant or controlling; Provide that a corporation‘s directors, in order to satisfy the presumption that they have acted in the best interests of the corporation, need not satisfy any greater obligation or higher burden of proof with respect to actions relating to an acquisition or potential acquisition of control; Provide that actions relating to acquisitions of control that are approved by a majority of ―disinterested directors‖ are presumed to satisfy the directors‘ fiduciary duty, unless it is proven by clear and convincing evidence that the directors did not assent to such action in good faith after reasonable investigation; and Provide that the fiduciary duty of a corporation‘s directors is solely to the corporation and may be enforced by the corporation or by a shareholder in a derivative action, but not by a shareholder directly.

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The Pennsylvania Business Corporation Law also explicitly provides that the fiduciary duty of directors does not require them to: • • Redeem any rights under, or to modify or render inapplicable, any shareholder rights plan; Render inapplicable, or make determinations under, provisions of the Pennsylvania Business Corporation Law relating to control transactions, business combinations, control-share acquisitions or disgorgement by certain controlling shareholders following attempts to acquire control; or Act as the Board of Directors, a committee of the board or an individual director, solely because of the effect the action might have on an acquisition or potential acquisition of control of the corporation or the consideration that might be offered or paid to shareholders in such an acquisition.

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One effect of these provisions may be to make it more difficult for a shareholder to successfully challenge the actions of ESSA Bancorp, Inc.‘s Board of Directors in a potential change in control context. Pennsylvania case law appears to provide that the fiduciary duty standard under the Pennsylvania Business Corporation Law grants directors the statutory authority to reject or refuse to consider any potential or proposed acquisition of the corporation. 134

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Conversion Regulations Office of Thrift Supervision regulations prohibit any person from making an offer, announcing an intent to make an offer or participating in any other arrangement to purchase stock or acquiring stock or subscription rights in a converting institution or its holding company from another person prior to completion of its conversion. Further, without the prior written approval of the Office of Thrift Supervision, no person may make an offer or announcement of an offer to purchase shares or actually acquire shares of a converted institution or its holding company for a period of three years from the date of the completion of the conversion if, upon the completion of such offer, announcement or acquisition, the person would become the beneficial owner of more than 10% of the outstanding stock of the institution or its holding company. The Office of Thrift Supervision has defined ―person‖ to include any individual, group acting in concert, corporation, partnership, association, joint stock company, trust, unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of securities of an insured institution. However, offers made exclusively to a bank or its holding company, or an underwriter or member of a selling group acting on the converting institution‘s or its holding company‘s behalf for resale to the general public are excepted. The regulation also provides civil penalties for willful violation or assistance in any such violation of the regulation by any person connected with the management of the converting institution or its holding company or who controls more than 10% of the outstanding shares or voting rights of a converted institution or its holding company. Change of Control Regulations Under the Change in Bank Control Act, no person may acquire control of an insured federal savings bank or its parent holding company unless the Office of Thrift Supervision has been given 60 days‘ prior written notice and has not issued a notice disapproving the proposed acquisition. In addition, Office of Thrift Supervision regulations provide that no company may acquire control of a savings bank without the prior approval of the Office of Thrift Supervision. Any company that acquires such control becomes a ―savings and loan holding company‖ subject to registration, examination and regulation by the Office of Thrift Supervision. Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the savings bank‘s directors, or a determination by the Office of Thrift Supervision that the acquiror has the power to direct, or directly or indirectly to exercise a controlling influence over, the management or policies of the institution. Acquisition of more than 10% of any class of a savings bank‘s voting stock, if the acquiror is also subject to any one of eight ―control factors,‖ constitutes a rebuttable determination of control under the regulations. Such control factors include the acquiror being one of the two largest stockholders. The determination of control may be rebutted by submission to the Office of Thrift Supervision, prior to the acquisition of stock or the occurrence of any other circumstances giving rise to such determination, of a statement setting forth facts and circumstances which would support a finding that no control relationship will exist and containing certain undertakings. The regulations provide that persons or companies which acquire beneficial ownership exceeding 10% or more of any class of a savings bank‘s stock who do not intend to participate in or seek to exercise control over a savings bank‘s management or policies may qualify for a safe harbor by 135

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filing with the Office of Thrift Supervision a certification form that states, among other things, that the holder is not in control of such institution, is not subject to a rebuttable determination of control and will take no action which would result in a determination or rebuttable determination of control without prior notice to or approval of the Office of Thrift Supervision, as applicable. There are also rebuttable presumptions in the regulations concerning whether a group ―acting in concert‖ exists, including presumed action in concert among members of an ―immediate family.‖ The Office of Thrift Supervision may prohibit an acquisition of control if it finds, among other things, that: (1) (2) (3) the acquisition would result in a monopoly or substantially lessen competition; the financial condition of the acquiring person might jeopardize the financial stability of the institution; or the competence, experience or integrity of the acquiring person indicates that it would not be in the interest of the depositors or the public to permit the acquisition of control by such person. DESCRIPTION OF CAPITAL STOCK General At the effective date, ESSA Bancorp, Inc. will be authorized to issue 40,000,000 shares of common stock, par value of $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share. ESSA Bancorp, Inc. currently expects to issue in the offering up to _________ shares of common stock, subject to adjustment. ESSA Bancorp, Inc. will not issue shares of preferred stock in the conversion. Each share of ESSA Bancorp, Inc. common stock will have the same relative rights as, and will be identical in all respects to, each other share of common stock. Upon payment of the subscription price for the common stock, in accordance with the plan of conversion, all of the shares of common stock will be duly authorized, fully paid and nonassessable. The shares of common stock of ESSA Bancorp, Inc. will represent nonwithdrawable capital, will not be an account of an insurable type, and will not be insured by the Federal Deposit Insurance Corporation or any other government agency. Common Stock Dividends . ESSA Bancorp, Inc. may pay dividends out of statutory surplus or from net earnings if, as and when declared by its Board of Directors. The payment of dividends by ESSA Bancorp, Inc. is subject to limitations that are imposed by law and applicable regulation. The holders of common stock of ESSA Bancorp, Inc. will be entitled to receive and share equally in dividends as may be declared by the Board of Directors of ESSA Bancorp, Inc. out of funds legally available therefor. If ESSA Bancorp, Inc. issues shares of preferred stock, the holders thereof may have a priority over the holders of the common stock with respect to dividends. 136

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Voting Rights . Upon consummation of the conversion, the holders of common stock of ESSA Bancorp, Inc. will have exclusive voting rights in ESSA Bancorp, Inc. They will elect ESSA Bancorp, Inc.‘s Board of Directors and act on other matters as are required to be presented to them under Pennsylvania law or as are otherwise presented to them by the Board of Directors. Generally, each holder of common stock will be entitled to one vote per share and will not have any right to cumulate votes in the election of directors. Any person who beneficially owns more than 10% of the then-outstanding shares of ESSA Bancorp, Inc.‘s common stock, however, will not be entitled or permitted to vote any shares of common stock held in excess of the 10% limit. If ESSA Bancorp, Inc. issues shares of preferred stock, holders of the preferred stock may also possess voting rights. See ―Restrictions on Acquisition of ESSA Bancorp, Inc. – Pennsylvania General Corporate Law‖ for additional information regarding voting rights. As a Pennsylvania stock savings association, corporate powers and control of ESSA Bank & Trust are vested in its Board of Directors, who elect the officers of ESSA Bank & Trust and who fill any vacancies on the Board of Directors. Voting rights of ESSA Bank & Trust are vested exclusively in the owners of the shares of capital stock of ESSA Bank & Trust, which will be ESSA Bancorp, Inc., and voted at the direction of ESSA Bancorp, Inc.‘s Board of Directors. Consequently, the holders of the common stock of ESSA Bancorp, Inc. will not have direct control of ESSA Bank & Trust Liquidation . In the event of any liquidation, dissolution or winding up of ESSA Bank & Trust, ESSA Bancorp, Inc., as the holder of 100% of ESSA Bank & Trust‘s capital stock, would be entitled to receive all assets of ESSA Bank & Trust available for distribution, after payment or provision for payment of all debts and liabilities of ESSA Bank & Trust, including all deposit accounts and accrued interest thereon, and after distribution of the balance in the liquidation account to Eligible Account Holders and Supplemental Eligible Account Holders. In the event of liquidation, dissolution or winding up of ESSA Bancorp, Inc., the holders of its common stock would be entitled to receive, after payment or provision for payment of all its debts and liabilities, all of the assets of ESSA Bancorp, Inc. available for distribution. If preferred stock is issued, the holders thereof may have a priority over the holders of the common stock in the event of liquidation or dissolution. Preemptive Rights . Holders of the common stock of ESSA Bancorp, Inc. will not be entitled to preemptive rights with respect to any shares that may be issued. The common stock is not subject to redemption. Preferred Stock None of the shares of ESSA Bancorp, Inc.‘s authorized preferred stock will be issued as part of the offering. Preferred stock may be issued with preferences and designations as our Board of Directors may from time to time determine. Our Board of Directors may, without stockholder approval, issue shares of preferred stock with voting, dividend, liquidation and conversion rights that could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control. 137

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TRANSFER AGENT The transfer agent and registrar for ESSA Bancorp, Inc.‘s common stock is ______________________. EXPERTS The Consolidated Financial Statements of ESSA Bank & Trust as of September 30, 2006 and 2005, and for the years then ended appearing elsewhere in this prospectus have been included herein and in the registration statement in reliance upon the report of S.R. Snodgrass, A.C. an independent registered public accounting firm, which is included herein and upon the authority of said firm as experts in accounting and auditing. The Consolidated Financial Statements of ESSA Bank & Trust as of September 30, 2004 and for the year then ended elsewhere in this prospectus and in the registration statement have been audited by BMC LLP, an independent registered public accounting firm, as set forth in its report appearing elsewhere in this prospectus and elsewhere in the registration statement are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. RP Financial, LC. has consented to the publication herein of the summary of its report to ESSA Bancorp, Inc. setting forth its opinion as to the estimated pro forma market value of the shares of common stock upon completion of the conversion and offering and its letter with respect to subscription rights. LEGAL MATTERS Luse Gorman Pomerenk & Schick, P.C., Washington, D.C., counsel to ESSA Bancorp, Inc., ESSA Bank & Trust and ESSA Bank & Trust, will issue to ESSA Bancorp, Inc. its opinion regarding the legality of the common stock and the federal income tax consequences of the conversion. Certain legal matters will be passed upon for Ryan Beck & Co., Inc. by Rhoads & Sinon LLP, Harrisburg, Pennsylvania. WHERE YOU CAN FIND ADDITIONAL INFORMATION ESSA Bancorp, Inc. has filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 with respect to the shares of common stock offered hereby. As permitted by the rules and regulations of the Securities and Exchange Commission, this prospectus does not contain all the information set forth in the registration statement. Such information, including the appraisal report which is an exhibit to the registration statement, can be examined without charge at the public reference facilities of the Securities and Exchange Commission located at 100 F Street, N.E., Washington, D.C. 20549, and copies of such material can be obtained from the Securities and Exchange Commission at prescribed rates. The Securities and Exchange Commission telephone number is 1-800-SEC-0330. In addition, the Securities and Exchange Commission maintains a web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission, including ESSA Bancorp, Inc. The statements contained in this prospectus as to the contents of any contract or other 138

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document filed as an exhibit to the registration statement are, of necessity, brief descriptions of the material terms of, and should be read in conjunction with, such contract or document. ESSA Bank & Trust has filed with the Office of Thrift Supervision an Application on Form AC with respect to the conversion. This prospectus omits certain information contained in the application. The application may be examined at the principal office of the Office of Thrift Supervision, 1700 G Street, N.W., Washington, D.C. 20552, and at the Northeast Regional Office of the Office of Thrift Supervision, located at Harborside Financial Center Plaza Five, Suite 1600, Jersey City, New Jersey 07311. In connection with the offering, ESSA Bancorp, Inc. will register its common stock under Section 12(b) of the Securities Exchange Act of 1934 and, upon such registration, ESSA Bancorp, Inc. and the holders of its common stock will become subject to the proxy solicitation rules, reporting requirements and restrictions on common stock purchases and sales by directors, officers and greater than 10% stockholders, the annual and periodic reporting and certain other requirements of the Securities Exchange Act of 1934. Under the plan of conversion, ESSA Bancorp, Inc. has undertaken that it will not terminate such registration for a period of at least three years following the conversion and the offering. 139

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ESSA BANK & TRUST AUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2006
Page Number

Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm Financial Statements Consolidated Balance Sheet Consolidated Statement of Income Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements F-i

F-1 F-2

F-3 F-4 F-5 F-6 F - 7 – F - 30

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors ESSA Bank & Trust We have audited the consolidated balance sheet of ESSA Bank & Trust and subsidiaries as of September 30, 2006 and 2005, and the related consolidated statements of income, changes in equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Bank‘s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ESSA Bank & Trust and subsidiaries as of September 30, 2006 and 2005, and the consolidated results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. /s/ S.R. Snodgrass, A.C. Wexford, PA October 27, 2006 F-1

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R EPORT OF I NDEPENDENT R EGISTERED P UBLIC A CCOUNTING F IRM To the Board of Directors ESSA Bank & Trust Stroudsburg, Pennsylvania We have audited the accompanying consolidated statements of income, changes in equity, and cash flows of ESSA Bank & Trust for the year ended September 30, 2004. These consolidated financial statements are the responsibility of the Bank‘s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Bank is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank‘s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of ESSA Bank & Trust and subsidiaries for the year ended September 30, 2004, in conformity with U.S. generally accepted accounting principles. /s/ Beard Miller Company LLP Beard Miller Company LLP Harrisburg, Pennsylvania October 29, 2004 F-2

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ESSA BANK & TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
September 30, 2006 2005 (dollars in thousands)

ASSETS Cash and due from banks Interest-bearing deposits with other institutions Commercial paper Total cash and cash equivalents Investment securities available for sale Investment securities held to maturity (market value of $19,193 and $21,297) Loans receivable (net of allowance for loan losses of $3,855 and $3,563) Federal Home Loan Bank stock Premises and equipment Bank-owned life insurance Other assets TOTAL ASSETS LIABILITIES Deposits Short-term borrowings Other borrowings Advances by borrowers for taxes and insurance Other liabilities TOTAL LIABILITIES Commitment and contingencies (Note 11) EQUITY Retained earnings Accumulated other comprehensive loss TOTAL EQUITY TOTAL LIABILITIES AND EQUITY

$

11,677 1,053 — 12,730 89,122 19,715 556,677 13,675 11,447 13,376 9,054

$

12,240 1,068 6,982 20,290 62,506 21,505 508,981 11,916 11,560 12,864 6,444

$ 725,796

$ 656,066

$ 402,153 35,299 224,000 2,198 3,809 667,459 — 58,526 (189 ) 58,337 $ 725,796

$ 374,759 27,479 194,000 1,591 3,866 601,695 — 54,572 (201 ) 54,371 $ 656,066

See accompanying notes to the consolidated financial statements. F-3

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ESSA BANK & TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME
2006 Year Ended September 30, 2005 (dollars in thousands) 2004

INTEREST INCOME Loans receivable Investment securities: Taxable Exempt from federal income tax Other investment income Total interest income INTEREST EXPENSE Deposits Short-term borrowings Other borrowings Total interest expense NET INTEREST INCOME Provision for loan losses NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES NONINTEREST INCOME Service fees on deposit accounts Services charges and fees on loans Trust and investment fees Impairment loss on securities Gain on sale of loans, net Earnings on Bank-owned life insurance Other Total noninterest income NONINTEREST EXPENSE Compensation and employee benefits Occupancy and equipment Professional fees Data processing Advertising Contributions Other Total noninterest expense Income before income taxes Income taxes NET INCOME

$ 31,744 3,579 278 850 36,451 9,012 1,081 9,124 19,217 17,234 300 16,934 3,825 491 642 — 7 512 41 5,518 9,194 2,395 736 1,819 577 423 1,541 16,685 5,767 1,813 $ 3,954

$ 28,829 2,225 267 598 31,919 5,851 554 7,918 14,323 17,596 550 17,046 3,747 486 404 (130 ) 96 495 183 5,281 9,035 2,218 828 1,896 477 484 1,555 16,493 5,834 1,383 $ 4,451

$ 27,152 1,070 274 314 28,810 5,011 141 6,781 11,933 16,877 530 16,347 2,825 475 515 — — 369 96 4,280 7,872 2,054 955 2,163 503 416 1,577 15,540 5,087 1,172 $ 3,915

See accompanying notes to the consolidated financial statements. F-4

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ESSA BANK & TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Accumulated Other Comprehensive Total Income (Loss) Equity (dollars in thousands)

Retained Earnings

Comprehensive Income

Balance, September 30, 2003 Net income Other comprehensive loss: Unrealized loss on securities available for sale, net of income tax benefit of $12 Comprehensive income Balance, September 30, 2004 Net income Other comprehensive loss: Unrealized loss on securities available for sale, net of reclassification adjustment, net of income tax benefit of $176 Comprehensive income Balance, September 30, 2005 Net income Other comprehensive income: Unrealized gain on securities available for sale, net of income taxes of $6 Comprehensive income Balance, September 30, 2006

$ 46,206 3,915

$

175 —

$ 46,381 3,915 $ 3,915

—

(36 )

(36 ) $

(36 ) 3,879

50,121 4,451

139

50,260 4,451 $ 4,451

(340 )

(340 ) $

(340 ) 4,111

54,572 3,954

(201 )

54,371 3,954 $ 3,954

12

12 $

12 3,966

$ 58,526

$

(189 )

$ 58,337

2006

2005

2004

Components of other comprehensive income (loss): Change in net unrealized gain (loss) on investment securities available for sale Realized impairment loss included in net income, net of taxes of $44 in 2005 Total

$ 12 — $ 12

$ (426 ) (86 ) $ (340 )

$ (36 ) — $ (36 )

See accompanying notes to the consolidated financial statements. F-5

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ESSA BANK & TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended September 30, 2005 (dollars in thousands)

2006

2004

OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses Provision for depreciation and amortization. Amortization (accretion) of discounts and premiums Impairment loss on securities Gain on sale of loans, net Decrease (increase) in accrued interest receivable Increase (decrease) in accrued interest payable Increase in other receivables Earnings on Bank-owned life insurance Deferred federal income taxes Other, net Net cash provided by operating activities INVESTING ACTIVITIES Investment securities available for sale: Proceeds from principal repayments and maturities Purchases Investment securities held to maturity: Proceeds from principal repayments and maturities Purchases Increase in loans receivable, net Proceeds from sale of loans Redemption of FHLB stock Purchase of FHLB stock Purchase of Bank-owned life insurance Proceeds from sale of other real estate Purchase of premises, equipment, and software Net cash used for investing activities FINANCING ACTIVITIES Increase in deposits, net Net increase (decrease) in short-term borrowings Proceeds from other borrowings Repayment of other borrowings Increase (decrease) in advances by borrowers for taxes and insurance Net cash provided by financing activities Decrease in cash and cash equivalents CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR SUPPLEMENTAL CASH FLOW DISCLOSURES Cash paid: Interest Income taxes Noncash items: Other real estate owned

$

3,954 300 1,063 (500 ) — (7 ) (530 ) 551 (1,841 ) (512 ) 76 (708 ) 1,846

$

4,451 550 969 (394 ) 130 (96 ) (303 ) 139 — (495 ) 159 (180 ) 4,930

$

3,915 530 956 348 — — 76 (2,924 ) — (369 ) 183 352 3,067

23,537 (50,213 ) 3,753 (1,988 ) (47,800 ) 340 2,325 (4,084 ) — 83 (1,180 ) (75,227 ) 27,394 7,820 57,000 (27,000 ) 607 65,821 (7,560 ) 20,290 $ 12,730 $

11,356 (27,126 ) 3,293 (17,191 ) (36,244 ) 5,605 2,696 (3,254 ) (2,000 ) 118 (1,053 ) (63,800 ) 41,232 16,345 23,000 (23,000 ) 125 57,702 (1,168 ) 21,458 20,290 $

16,165 (38,639 ) 3,950 (10,305 ) (39,906 ) — 1,394 (3,565 ) (10,000 ) 221 (2,152 ) (82,837 ) 14,032 (6,786 ) 64,000 (13,000 ) (105 ) 58,141 (21,629 ) 43,087 21,458

$

18,666 1,550 74

$

14,303 900 42

$

11,982 1,375 81

See accompanying notes to the consolidated financial statements. F-6

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ESSA BANK & TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of significant accounting and reporting policies applied in the presentation of the accompanying financial statements follows: Nature of Operations and Basis of Presentation ESSA Bank & Trust (the ―Bank‖) is a Pennsylvania chartered savings and loan institution located in Stroudsburg, Pennsylvania. The Bank‘s primary business consists of the taking of deposits and granting of loans to customers generally in Monroe and Northampton counties, Pennsylvania. The Bank is subject to regulation and supervision by the Pennsylvania Department of Banking and the Office of Thrift Supervision (the ―OTS‖). The consolidated financial statements include the accounts of ESSA Bank & Trust and its wholly owned subsidiaries, ESSACOR Inc. and Pocono Investment Company. All intercompany transactions have been eliminated in consolidation. Use of Estimates in the Preparation of Financial Statements The accounting principles followed by the Bank and its subsidiaries and the methods of applying these principles conform to U.S. generally accepted accounting principles and to general practice within the banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet date and related revenues and expenses for the period. Actual results could differ significantly from those estimates. Securities Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Securities classified as available for sale are those securities that the Bank intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Bank‘s assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. Securities available for sale are carried at fair value. Unrealized gains and losses are reported in other comprehensive income, net of the related deferred tax effects. Realized gains or losses, determined on the basis of the cost of the specific securities sold, are included in earnings. Premiums and discounts are recognized in interest income using the interest method over the period to maturity. Securities classified as held to maturity are those debt securities the Bank has both the intent and ability to hold to maturity regardless of changes in market conditions, liquidity needs, or changes in general economic conditions. These securities are carried at cost adjusted for the amortization of premium and accretion of discount, recognized in interest income using the interest method over the period to maturity. F-7

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Securities (Continued) Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers: (1) the length of time and the extent to which the fair value has been less than cost; (2) the financial condition and near-term prospects of the issuer; and (3) the intent and ability of the Bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Federal law requires a member institution of the Federal Home Loan Bank (―FHLB‖) system to hold stock of its district FHLB according to a predetermined formula. This restricted stock is carried at cost. Loans Receivable Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees and costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Bank is generally amortizing these amounts over the contractual life of the loan. Mortgage loans sold in the secondary market are sold without recourse. The accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectibility of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management‘s judgment as to the collectibility of principal. Generally loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectibility of the total contractual principal and interest is no longer in doubt. Allowance for Loan Losses The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is maintained at a level by management which represents the evaluation of known and inherent risks in the loan portfolio at the consolidated balance sheet date. Management‘s periodic evaluation of the adequacy of the allowance is based on the Bank‘s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower‘s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions, and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows expected to be received on impaired loans. The allowance consists of specific and general components. The specific component related to loans that are classified as either doubtful, substandard, or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassfied loans and is based on historical loss experience adjusted for qualitative factors. F-8

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Allowance for Loan Losses (Continued) A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower‘s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by the present value of expected future cash flows discounted at the loan‘s effective interest rate, the loan‘s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer and residential mortgage loans for impairment disclosures. Loan Servicing Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance to the extent that fair value is less than the capitalized amount. Total servicing assets included in other assets as of September 30, 2006 and 2005, were $215,000 and $253,000, respectively. Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the useful lives of the related assets, which range from 10 to 40 years for building and leasehold improvements and 3 to 7 years for furniture, fixtures, and equipment. Expenditures for maintenance and repairs are charged to operations as incurred. Costs of major additions and improvements are capitalized. Real Estate Owned Real estate owned acquired in settlement of foreclosed loans is carried at the lower of cost or fair value minus estimated costs to sell. Valuation allowances for estimated losses are provided when the carrying value of the real estate acquired exceeds fair value minus estimated costs to sell. Operating expenses of such properties, net of related income, are expensed in the period incurred. Foreclosed real estate included in other assets totaled $0 and $19,000 at September 30, 2006 and 2005, respectively. F-9

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Employee Benefit Plans The Bank maintains a noncontributory, defined benefit pension plan for all employees who have met age and length of service requirements. The Bank‘s funding policy is to contribute annually the maximum amount that can be deducted for federal income tax purposes. The Bank also maintains a defined contribution Section 401(k) plan covering eligible employees. Contributions matching those made by eligible employees and an elective contribution are made annually at the discretion of the Board of Directors. Advertising Costs In accordance with Statement of Position No. 93-7, Reporting on Advertising Costs , the Bank expenses all advertising expenditures incurred. Transfers of Financial Assets Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Federal Income Taxes Deferred tax assets and liabilities are reflected based on the differences between the financial statement and the income tax basis of assets and liabilities using the enacted marginal tax rates. Deferred income tax expense and benefit are based on the changes in the deferred tax assets or liabilities from period to period. The Bank files a consolidated federal income tax return. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which such items are expected to be realized or settled. As changes in tax rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Cash and Cash Equivalents The Bank has defined cash and cash equivalents as cash and due from banks, interest-bearing deposits with other institutions, and commercial paper with original maturities of 90 days or less. Comprehensive Income The Bank is required to present comprehensive income and its components in a full set of general-purpose financial statements for all periods presented. Other comprehensive income is composed exclusively of net unrealized holding gains or losses on its available-for-sale investment and mortgage-backed securities portfolio. The Bank has elected to report the effects of other comprehensive income as part of the Consolidated Statement of Changes in Equity. Reclassification of Comparative Amounts Certain items previously reported have been reclassified to conform to the current year‘s reporting format. Such reclassifications did not affect net income or equity. F-10

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Recent Accounting Pronouncements In December 2004, the Financial Accounting Standards Board (―FASB‖) issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (FAS No. 123R). FAS No. 123R revised FAS No. 123, Accounting for Stock-Based Compensation , and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees , and its related implementation guidance. FAS No. 123R will require compensation costs related to share-based payment transactions to be recognized in the financial statement (with limited exceptions). The amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. Compensation cost will be recognized over the period during which an employee provides service in exchange for the award. In April 2005, the Securities and Exchange Commission adopted a new rule that amends the compliance dates for FAS No. 123R. The statement requires that compensation cost relating to share-based payment transactions be recognized in financial statements and that this cost be measured based on the fair value of the equity or liability instruments issued. FAS No. 123R covers a wide range of share-based compensation arrangements, including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. The Bank will adopt FAS No. 123R on October 1, 2006, and unless options are granted, management does not anticipate any compensation expense as a result of the adoption of this statement. In March 2005, the Securities and Exchange Commission (―SEC‖) issued Staff Accounting Bulletin No. 107 (―SAB No. 107‖), Share-Based Payment , providing guidance on option valuation methods, the accounting for income tax effects of share-based payment arrangements upon adoption of FAS No. 123R, and the disclosures in MD&A subsequent to the adoption. Unless options are granted management does not anticipate any compensation expense as a result of the adoption of this statement. In June 2005, the FASB issued FAS No. 154, Accounting Changes and Errors Corrections, a replacement of APB Opinion No. 20 and FAS No. 3 . The statement applies to all voluntary changes in accounting principle and changes the requirements for accounting for and reporting of a change in accounting principle. FAS No. 154 requires retrospective application to prior periods‘ financial statements of a voluntary change in accounting principle unless it is impractical. APB Opinion No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. FAS No. 154 improves the financial reporting because its requirements enhance the consistency of financial reporting between periods. The provisions of FAS No. 154 are effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of this standard is not expected to have a material effect on the Bank‘s results of operations or financial position. F-11

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Recent Accounting Pronouncements (Continued) In February 2006, the FASB issued FAS No. 155, Accounting for Certain Hybrid Instruments, an amendment of FASB Statements No. 133 and 140 . FAS No. 155 allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. This statement is effective for all financial instruments acquired or issued after the beginning of an entity‘s first fiscal year that begins after September 15, 2006. The adoption of this standard is not expected to have a material effect on the Bank‘s results of operations or financial position. In March 2006, the FASB issued FAS No. 156, Accounting for Servicing of Financial Assets . This Statement, which is an amendment to FAS No. 140, will simplify the accounting for servicing assets and liabilities, such as those common with mortgage securitization activities. Specifically, FAS No. 156 addresses the recognition and measurement of separately recognized servicing assets and liabilities and provides an approach to simplify efforts to obtain hedge-like (offset) accounting. FAS No. 156 also clarifies when an obligation to service financial assets should be separately recognized as a servicing asset or a servicing liability, requires that a separately recognized servicing asset or servicing liability be initially measured at fair value, if practicable, and permits an entity with a separately recognized servicing asset or servicing liability to choose either of the amortization or fair value methods for subsequent measurement. The provisions of FAS No. 156 are effective as of the beginning of the first fiscal year that begins after September 15, 2006. The Bank is currently evaluating the impact the adoption of the standard will have on the Bank‘s results of operations. In September 2006, the FASB issued FAS No. 157, Fair Value Measurements , which provides enhanced guidance for using fair value to measure assets and liabilities. The standard applies whenever other standards require or permit assets or liabilities to be measured at fair value. The Standard does not expand the use of fair value in any new circumstances. FAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Early adoption is permitted. The adoption of this standard is not expected to have a material effect on the Bank‘s results of operations or financial position. In September 2006, the FASB issued FAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R) . FAS No. 158 requires that a company recognize the overfunded or underfunded status of its defined benefit post retirement plans (other than multiemployer plans) as an asset or liability in its statement of financial position and that it recognize changes in the funded status in the year in which the changes occur through other comprehensive income. FAS No. 158 also requires the measurement of defined benefit plan assets and obligations as of the fiscal year end, in addition to footnote disclosures. FAS No. 158 is effective for fiscal years ending after December 15, 2006. The Bank is currently evaluating the impact the adoption of the standard will have on the Bank‘s financial position. In June 2006, the FASB issued FASB Interpretation No. 48 (―FIN 48‖), Accounting for Uncertainty in Income Taxes . FIN 48 is an interpretation of FAS No. 109, Accounting for Income Taxes , and it seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. In addition, FIN No. 48 requires expanded disclosure with respect to the uncertainty in income taxes and is effective for fiscal years beginning after December 15, 2006. The Bank is currently evaluating the impact the adoption of the standard will have on the Bank‘s results of operations. F-12

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Recent Accounting Pronouncements (Continued) In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (―SAB 108‖), Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements , providing guidance on quantifying financial statement misstatement and implementation when first applying this guidance. Under SAB No. 108, companies should evaluate a misstatement based on its impact on the current year income statement, as well as the cumulative effect of correcting such misstatements that existed in prior years existing in the current year‘s ending balance sheet. SAB 108 is effective for fiscal years ending after November 15, 2006. The Bank is currently evaluating the impact the adoption of the standard will have on the Bank‘s results of operations. In September 2006, the FASB reached consensus on the guidance provided by Emerging Issues Task Force Issue 06-4 (―EITF 06-4‖), Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements . The guidance is applicable to endorsement split-dollar life insurance arrangements, whereby the employer owns and controls the insurance policy, that are associated with a postretirement benefit. EITF 06-4 requires that for a split-dollar life insurance arrangement within the scope of the Issue, an employer should recognize a liability for future benefits in accordance with FAS No. 106 (if, in substance, a postretirement benefit plan exists) or Accounting Principles Board Opinion No. 12 (if the arrangement is, in substance, an individual deferred compensation contract) based on the substantive agreement with the employee. EITF 06-4 is effective for fiscal years beginning after December 15, 2007. The Bank is currently evaluating the impact the adoption of the standard will have on the Bank‘s results of operations or financial condition. In September 2006, the FASB reached consensus on the guidance provided by Emerging Issues Task Force Issue 06-5(―EITF 06-5‖), Accounting for Purchases of Life Insurance—Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance . EITF 06-5 states that a policyholder should consider any additional amounts included in the contractual terms of the insurance policy other than the cash surrender value in determining the amount that could be realized under the insurance contract. EITF 06-5 also states that a policyholder should determine the amount that could be realized under the life insurance contract assuming the surrender of an individual-life by individual-life policy (or certificate by certificate in a group policy). EITF 06-5 is effective for fiscal years beginning after December 15, 2006. The Bank is currently evaluating the impact the adoption of the standard will have on the Bank‘s results of operations or financial condition. F-13

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2.

INVESTMENT SECURITIES The amortized cost and estimated market value of investment securities available for sale and held to maturity are summarized as follows (in thousands):
2006 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Market Value

Available for Sale Fannie Mae Freddie Mac Governmental National Mortgage Association securities Total mortgage-backed securities Obligations of states and political subdivisions U.S. government agency securities Total debt securities Equity securities Total Held to Maturity Fannie Mae Freddie Mac Total mortgage-backed securities U.S. government agency securities Total

$

6,988 22,836 10,503 40,327 6,240 41,960 88,527 882

$

33 3 98 134 225 35 394 64

$

(31 ) (523 ) — (554 ) — (180 ) (734 ) (11 )

$

6,990 22,316 10,601 39,907 6,465 41,815 88,187 935

$ 89,409

$

458

$

(745 )

$ 89,122

$

9,263 5,722 14,985 4,730

$ —

4 4 —

$

(309 ) (168 ) (477 ) (49 )

$

8,958 5,554 14,512 4,681

$ 19,715

$

4

$

(526 )

$ 19,193

F-14

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2.

INVESTMENT SECURITIES (Continued)
2005 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Market Value

Available for Sale Fannie Mae Freddie Mac Governmental National Mortgage Association securities Total mortgage-backed securities Obligations of states and political subdivisions U.S. government agency securities Corporate securities Total debt securities Equity securities Total Held to Maturity Fannie Mae Freddie Mac Total mortgage-backed securities U.S. government agency securities Total

$

1,599 17,135 65 18,799 5,102 34,989 3,039 61,929 882

$ —

5 4 9 275 — — 284 15

$

(24 ) (292 ) (1 ) (317 ) — (260 ) (9 ) (586 ) (18 )

$

1,580 16,847 64 18,491 5,377 34,729 3,030 61,627 879

$ 62,811

$

299

$

(604 )

$ 62,506

$ 11,724 5,051 16,775 4,730 $ 21,505

$

5 1 6 —

$

(131 ) (57 ) (188 ) (26 )

$ 11,598 4,995 16,593 4,704 $ 21,297

$

6

$

(214 )

The amortized cost and estimated market value of debt securities at September 30, 2006, 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 Estimated Amortized Market Cost Value HELD TO MATURITY Estimated Amortized Market Cost Value

Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years Total

$ 23,479 29,608 2,091 33,349 $ 88,527

$ 23,399 29,032 2,114 33,642 $ 88,187

$

— 11,991 3,312 4,412

$

— 11,655 3,248 4,290

$ 19,715

$ 19,193

The Bank had no sale of investment securities for the three years ending September 30, 2006. Investment securities with a carrying value of $6,493,000 and $4,448,000 at September 30, 2006 and 2005, respectively, were pledged to secure public deposits and other purposes as required by law. F-15

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3.

UNREALIZED LOSSES ON SECURITIES The following table shows the Bank‘s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position (in thousands):
Less than Twelve Months Estimated Gross Market Unrealized Value Losses 2006 Twelve Months or Greater Estimated Gross Market Unrealized Value Losses Total Estimated Market Value Gross Unrealized Losses

Number of Securities

Fannie Mae Freddie Mac U.S. government agency securities Equity securities Total

11 34 28 1 74

$

3,081 9,911 12,898 489

$

(97 ) (69 ) (32 ) (11 )

$

6,730 15,776 27,509 —

$

(243 ) (622 ) (197 ) —

$

9,811 25,687 40,407 489

$

(340 ) (691 ) (229 ) (11 )

$

26,379

$

(209 )

$

50,015

$

(1,062 )

$ 76,394

$

(1,271 )

Number of Securities

Less than Twelve Months Estimated Gross Market Unrealized Value Losses

2005 Twelve Months or Greater Estimated Gross Market Unrealized Value Losses

Total Estimated Market Value Gross Unrealized Losses

Fannie Mae Freddie Mac Governmental National Mortgage Association securities U.S. government agency securities Corporate securities Equity securities Total

10 28

$

7,104 15,432

$

(88 ) (217 )

$

3,565 5,779

$

(67 ) (132 )

$ 10,669 21,211

$

(155 ) (349 )

1 29 3 1 72 $

64 38,440 3,030 — 64,070 $

(1 ) (279 ) (9 ) — (594 ) $

— 993 — 482 10,819 $

— (7 ) — (18 ) (224 )

64 39,433 3,030 482 $ 74,889 $

(1 ) (286 ) (9 ) (18 ) (818 )

The Bank‘s investment securities portfolio contains unrealized losses on securities, including mortgage-related instruments issued or backed by the full faith and credit of the United States government, or generally viewed as having the implied guarantee of the U.S. government, and debt obligations of a U.S. state or political subdivision. The policy of the Bank is to recognize an other-than-temporary impairment of equity securities where the fair value has been significantly below cost for three consecutive quarters. For fixed maturity investments with unrealized losses due to interest rates where the Bank has the positive intent and ability to hold the investment for a period of time sufficient to allow a market recovery, declines in value below cost are not assumed to be other than temporary. The Bank reviews its position quarterly and has asserted that at September 30, 2006, the declines outlined in the above table represent temporary declines and the Bank does have the intent and ability to hold those securities either to maturity or to allow a market recovery. The Bank has concluded that any impairment of its investment securities portfolio is not other than temporary but is the result of interest rate changes that are not expected to result in the noncollection of principal and interest during the period. However, as of September 30, 2005, the Bank recognized a loss of $130,000 on equity securities that it deemed, through analysis of the security, to be other than a temporary loss. F-16

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4.

LOANS RECEIVABLE Loans receivable consist of the following (in thousands):
2006 2005

Real estate loans: Residential Construction Commercial Commercial Home equity loans and lines of credit Other Less deferred loan fees Less allowance for loan losses Net loans

$ 452,406 5,943 47,479 6,159 46,796 4,247 563,030 2,498 560,532 3,855 $ 556,677

$ 421,169 7,597 36,984 5,310 40,342 4,204 515,606 3,062 512,544 3,563 $ 508,981

Mortgage loans serviced by the Bank for others amounted to $21,894,000 and $25,554,000 at September 30, 2006 and 2005, respectively. At September 30, 2006, 2005, and 2004, the Bank had nonaccrual loans of $476,000, $605,000, and $665,000, respectively. Additional interest income that would have been recorded under the original terms of the loan agreements amounted to $37,000, $56,000, and $23,000 for the years ended September 30, 2006, 2005, and 2004. The Bank‘s primary business activity is with customers located within its local trade area. Commercial, residential, and consumer loans are granted. The Bank also funds commercial and residential loans originated outside its immediate trade area provided such loans meet the Bank‘s credit policy guidelines. Although the Bank has a diversified loan portfolio at September 30, 2006 and 2005, loans outstanding to individuals and businesses are dependent upon the local economic conditions in its immediate trade area. F-17

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4.

LOANS RECEIVABLE (Continued) Activity in the allowance for loan losses for the years ended is summarized as follows (in thousands):
2006 2005 2004

Balance, beginning of period Add: Provision charged to operations Loan recoveries Less loans charged off Balance, end of period

$ 3,563 300 1 3,864 (9 ) $ 3,855

$ 3,027 550 1 3,578 (15 ) $ 3,563

$ 2,509 530 23 3,062 (35 ) $ 3,027

The Bank has had, and may be expected to have in the future, banking transactions in the ordinary course of business with directors, officers, their immediate families, and affiliated companies (commonly referred to as related parties), on the same terms including interest rates and collateral, as those prevailing at the time for comparable transactions with others. At September 30, 2006 and 2005, these persons were indebted to the Bank for loans totaling $1,750,000 and $1,838,000, respectively. During the year ended September 30, 2006, $82,000 of new loans were made and repayments totaled $170,000. 5. FEDERAL HOME LOAN BANK STOCK The Bank is a member of the Federal Home Loan Bank System. As a member, the Bank maintains an investment in the capital stock of the FHLB of Pittsburgh in an amount not less than 70 basis points of the outstanding unused FHLB borrowing capacity or 1/20 of its outstanding FHLB borrowings, whichever is greater, as calculated throughout the year. 6. PREMISES AND EQUIPMENT Premises and equipment consist of the following (in thousands):
2006 2005

Land and land improvements Buildings and leasehold improvements Furniture, fixtures, and equipment Construction in process Less accumulated depreciation Total

$

2,199 10,043 6,070 201 18,513 (7,066 )

$

1,816 9,896 5,828 121 17,661 (6,101 )

$ 11,447

$ 11,560

Depreciation expense amounted to $985,000, $911,000, and $809,000 for the years ended September 30, 2006, 2005, and 2004, respectively. F-18

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7.

DEPOSITS Deposits and their respective weighted average interest rate consist of the following major classifications (in thousands):
2006 Weighted Average Interest Rate Weighted Average Interest Rate 2005

Amount

Amount

Non-interest bearing demand accounts NOW accounts Money market accounts Savings and club accounts Certificates of deposit Total

— % 0.07 2.78 0.40 4.40 2.59 %

$

23,675 59,480 33,255 76,166 209,577 402,153

— % 0.09 1.66 0.40 3.67 1.94 %

$

21,134 62,880 33,749 83,852 173,144 374,759

$

$

2006 Weighted Average Interest Rate

2005 Weighted Average Interest Rate

Amount

Amount

Time certificates of deposit: 0.00 - 2.00% 2.01 - 4.00% 4.01 - 6.00% 6.01 - 8.00% Total

$

49 69,429 140,096 3 209,577

1.76 % 3.66 4.76 6.11 4.40 %

$

4,737 117,580 50,601 226 173,144

1.52 % 3.31 4.70 6.06 3.67 %

$

$

At September 30, scheduled maturities of certificates of deposit are as follows (in thousands): 2007 2008 2009 2010 2011 Total $ 147,246 29,196 14,907 10,944 7,284 209,577

$

The aggregate amount of certificates of deposit with a minimum denomination of $100,000 was $81,035,000 and $56,835,000 at September 30, 2006 and 2005, respectively. The scheduled maturities of time certificates of deposit in denominations of $100,000 or more are as follows (in thousands):
2006

Within three months Three through six months Six through twelve months Over twelve months Total

$ 15,157 17,882 22,969 25,027 $ 81,035

F-19

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7.

DEPOSITS (Continued) A summary of interest expense on deposits for the years ended is as follows (in thousands):
2006 2005 2004

NOW accounts Money market accounts Savings and club accounts Certificates of deposits Total

$

44 687 355 7,926

$

79 421 388 4,963

$

100 245 442 4,224

$ 9,012

$ 5,851

$ 5,011

8.

SHORT-TERM BORROWINGS As of September 30, 2006 and 2005, the Bank had $35,299,000 and $27,479,000 of short-term borrowings, respectively, of which $22,298,000 and $25,479,000, respectively, were advances on a $75,000,000 line of credit with the FHLB. All borrowings from the FHLB are secured by a blanket lien on qualified collateral, defined principally as investment securities and mortgage loans which are owned by the Bank free and clear of any liens or encumbrances. During 2006, the Bank had a borrowing limit of approximately $496 million, with a variable rate of interest, based on the FHLB‘s cost of funds. The following table sets forth information concerning short-term borrowings (in thousands):
2006 2005

Balance at year-end Maximum amount outstanding at any month-end Average balance outstanding during the year Weighted-average interest rate: As of year-end Paid during the year

$ 35,299 35,299 21,957 5.40 % 4.92 %

$ 27,479 27,479 18,991 3.84 % 2.92 %

Average balances outstanding during the year represent daily average balances, and average interest rates represent interest expenses divided by the related average balance. 9. OTHER BORROWINGS The following table presents contractual maturities of FHLB long-term advances (in thousands):
Weightedaverage interest rate to Stated interest rate ranged from to

Maturity range Description from

2006

2005

Convertible Fixed rate Mid-term Total

2/20/2008 11/15/2006 12/22/2006

8/25/2015 5/5/2014 9/21/2009

5.46 % 4.39 4.56

4.17 % 2.49 2.46

6.06 % $ 32,000 5.95 147,000 5.69 45,000 $ 224,000

$

33,000 126,000 35,000

$ 194,000

F-20

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9.

OTHER BORROWINGS (Continued) Maturities of FHLB long-term advances are summarized as follows (in thousands):
Year Ending September 30, Amount Weightedaverage Rate

2007 2008 2009 2010 2011 2012 and thereafter Total

$

27,000 43,000 56,000 20,000 45,000 33,000

3.49 % 4.43 4.61 4.74 5.17 4.67 4.57 %

$ 224,000

Included above are seven convertible notes which total $32,000,000 and are convertible to variable-rate advances on specific dates at the discretion of the FHLB. Should the FHLB convert these advances, the Bank has the option of accepting the variable rate or repaying the advance without penalty. The advances are secured by qualifying assets of the Bank which include the FHLB stock, securities, and first mortgage loans. 10. INCOME TAXES The provision for income taxes consists of (in thousands):
2006 2005 2004

Federal: Current Deferred Total

$ 1,737 76 $ 1,813

$ 1,224 159 $ 1,383

$

989 183

$ 1,172

F-21

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10.

INCOME TAXES (Continued) The tax effects of deductible and taxable temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows (in thousands):
2006 2005

Deferred tax assets: Allowance for loan losses Net unrealized loss on securities Charitable contributions carryover Other Total gross deferred tax assets Deferred tax liabilities: Pension plan Mortgage servicing rights Premises and equipment Other Total gross deferred tax liabilities Net deferred tax assets

$ 1,311 97 145 135 1,688 632 73 568 88 1,361 $ 327

$ 1,211 104 163 232 1,710 468 86 652 94 1,300 $ 410

No valuation allowance was established at September 30, 2006 and 2005, in view of the Bank‘s ability to carryback to taxes paid in previous years and certain tax strategies, coupled with the anticipated future taxable income as evidenced by the Bank‘s earnings potential. The reconciliation of the federal statutory rate and the Bank‘s effective income tax rate is as follows (in thousands):
2006 % of Pre tax Income 2005 % of Pre tax Income 2004 % of Pre tax Income

Amount

Amount

Amount

Provision of statutory rate Income from Bank-owned life insurance Tax-exempt income Low-income housing credits Other, net Actual tax expense and effective rate

$ 1,961 (174 ) (124 ) (68 ) 218 $ 1,813

34.0 % (3.0 ) (2.2 ) (1.2 ) 3.8 31.4 %

$ 1,984 (168 ) (117 ) (72 ) (244 ) $ 1,383

34.0 % (2.9 ) (2.0 ) (1.2 ) (4.2 ) 23.7 %

$ 1,730 (125 ) (116 ) (138 ) (179 ) $ 1,172

34.0 % (2.5 ) (2.3 ) (2.7 ) (3.5 ) 23.0 %

F-22

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10.

INCOME TAXES (Continued) The Bank is subject to the Pennsylvania Mutual Thrift Institutions Tax that is calculated at 11.5 percent of earnings based on U.S. generally accepted accounting principles with certain adjustments. Retained earnings include $4,308,000 at September 30, 2006, for which no provision for federal income tax has been made. This amount represents deductions for bad debt reserves for tax purposes which were only allowed to savings institutions which met certain definitional tests prescribed by the Internal Revenue Code of 1986, as amended. The Small Business Job Protection Act of 1996 eliminated the special bad debt deduction granted solely to thrifts. Under the terms of the Act, there would be no recapture of the pre-1988 (base year) reserves. However, these pre-1988 reserves would be subject to recapture under the rules of the Internal Revenue Code if the Bank itself pays a cash dividend in excess of earnings and profits or liquidates. The Act also provides for the recapture of deductions arising from ―applicable excess reserve: defined as the total amount of reserve over the base year reserve.‖ The Bank‘s total reserve exceeds the base year reserve and deferred taxes have been provided for this excess.

11.

COMMITMENTS In the normal course of business, management makes various commitments which are not reflected in the consolidated financial statements. These commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheet. The Bank‘s exposure to credit loss in the event of nonperformance by the other parties to the financial instruments is represented by the contractual amounts as disclosed. Losses, if any, are charged to the allowance for loan losses. The Bank minimizes its exposure to credit loss under these commitments by subjecting them to credit approval and review procedures and collateral requirements, as deemed necessary, in compliance with lending policy guidelines. The off-balance-sheet commitments consist of the following (in thousands):
2006 2005

Commitments to extend credit Standby letters of credit Unfunded lines of credit

$ 10,939 2,758 42,073

$ 10,333 1,491 42,900

Commitments to extend credit consist of fixed-rate commitments with interest rates ranging from 5.85 percent to 10.25 percent. The commitments outstanding at September 30, 2006, contractually mature in less than one year. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheet. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. The amount of collateral obtained, as deemed necessary, is based upon management‘s credit evaluation in compliance with the lending policy guidelines. Since many of the credit line commitments are expected to expire without being fully drawn upon, the total contractual amounts do not necessarily represent future funding requirements. Standby letters of credit and financial guarantees represent conditional commitments issued to guarantee performance of a customer to a third party. The coverage period for these instruments is typically a one-year period with renewal option subject to prior approval by management. Fees earned from the issuance of these letters are recognized over the coverage period. For secured letters of credit, the collateral is typically Bank deposit instruments. F-23

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12.

LEASE COMMITMENTS AND TOTAL RENTAL EXPENSE The Bank leases various branch locations and other offices under long-term operating leases. Future minimum lease payments by year and in the aggregate, under noncancellable operating leases with initial or remaining terms of one year or more, consisted of the following at September 30, 2006 (in thousands): 2007 2008 2009 2010 2011 2012 and beyond Total $ 210 181 116 78 56 209 $ 850

The total rental expense for the above leases for the years ended September 30, 2006, 2005, and 2004, were $368,000, $343,000, and $361,000, respectively. 13. EMPLOYEE BENEFITS The Bank sponsors a trusteed, noncontributory defined benefit pension plan covering substantially all employees and officers. The plan calls for benefits to be paid to eligible employees at retirement based primarily upon years of service with the Bank and compensation rates near retirement. The Bank‘s funding policy is to make annual contributions, if needed, based upon the funding formula developed by the plan‘s actuary. Pension Plan The following table sets forth the status (in thousands):
2006 2005

Change in benefit obligation Benefit obligation at beginning of year Service cost Interest cost Actuarial loss Benefits paid Benefit obligation at end of year Change in plan assets Fair value of plan assets at beginning of year Actual return on plan assets Employer contribution Benefits paid Fair value of plan assets at end of year Funded status Unrecognized transition adjustment Unrecognized net actuarial loss Unrecognized prior service cost Net Prepaid Benefit Cost Recognized

$ 4,966 534 397 873 (696 ) 6,074 4,322 254 1,654 (696 ) 5,534 (540 ) — 2,383 47 $ 1,890

$ 4,740 377 295 213 (659 ) 4,966 3,106 456 1,419 (659 ) 4,322 (644 ) 2 1,499 56 $ 913

F-24

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13.

EMPLOYEE BENEFITS (Continued) Pension Plan (Continued) The accumulated benefit obligation for the defined benefit pension plan was $3,044,000 and $2,805,000 as of September 30, 2006 and 2005, respectively. The following table comprises the components of net periodic benefit cost for the years ended (in thousands):
2006 2005 2004

Service cost Interest cost Expected return on plan assets Amortization of prior service cost Amortization of unrecognized loss Amortization of transition obligation Net periodic benefit cost

$ 534 397 (387 ) 9 122 2 $ 677

$ 377 295 (235 ) 9 43 3 $ 492

$ 393 314 (186 ) 9 84 3 $ 617

Weighted-average assumptions used to determine benefit obligations:
2006 2005

Discount rate Rate of compensation increase Weighted-average assumptions used to determine net periodic benefit cost for years ended:
2006

6.25 % 5.50

6.25 % 5.50

2005

2004

Discount rate Expected long-term return on plan assets Rate of compensation increase

6.25 % 8.00 5.50

6.25 % 8.00 5.50

7.00 % 8.00 5.50

The expected long-term rate of return was estimated using market benchmarks by which the plan assets would outperform the market in the future, based on historical experience adjusted for changes in asset allocation and expectations for overall lower future returns on similar investments compared to past periods. Plan Assets The Bank‘s pension plan weighted-average asset allocations by asset category are as follows:
2006 2005

Cash and fixed income securities Equity securities Total

35.4 % 64.6 100.0 %

35.4 % 64.6 100.0 %

The Bank believes that the plan‘s risk and liquidity position are, in large part, a function of the asset class mix. The Bank desires to utilize a portfolio mix that results in a balanced investment strategy. Three asset classes are outlined, as above. The target allocations of these classes are as follows: equities, 65 percent; cash and fixed income, 35 percent. F-25

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13.

EMPLOYEE BENEFITS (Continued) Pension Plan (Continued) The Bank expects to contribute $536,000 to its pension plan in 2007. Estimated future benefit payments, which reflect expected future service, as appropriate, are as follows (in thousands): 2007 2008 2009 2010 2011 2012 - 2016 401(k) Plan The Bank also has a savings plan qualified under Section 401(k) of the Internal Revenue Code which covers substantially all employees over 21 years of age. Employees can contribute to the Plan, but are not required to. Employer contributions are allocated based on employee contribution levels. The expense related to the Plan for the years ended September 30, 2006, 2005, and 2004, were $190,000, $152,000, $106,000, respectively. Supplemental Executive Retirement Plan On September 15, 2004, the Bank entered into a salary continuation agreement with certain executives of the Bank, which provides for benefits upon retirement to be paid to the executive for no less than 192 months, unless the executive elects to receive the present value of the payments as a lump sum. The Bank has recorded an accrual of $284,000 and $124,000, at September 30, 2006 and September 30, 2005, respectively, which represents the estimated present value (using a discount rate of 7.5 percent) of the benefits earned under this agreement. $ 40 42 73 74 80 576

14.

REGULATORY RESTRICTIONS The Bank is required to maintain reserve funds in cash or in deposit with the Federal Reserve Bank. The required reserve at September 30, 2006 and 2005, was $4 million and $0, respectively.

15.

REGULATORY CAPITAL REQUIREMENTS Federal regulations require the Bank to maintain certain minimum amounts of capital. Specifically, the Bank is required to maintain certain minimum dollar amounts and ratios of Total and Tier I capital to risk-weighted assets and of Tier I capital to average total assets. In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvement Act (―FDICIA‖) established five capital categories ranging from ―well capitalized‖ to ―critically undercapitalized.‖ Should any institution fail to meet the requirements to be considered ―adequately capitalized,‖ it would become subject to a series of increasingly restrictive regulatory actions. Management believes as of September 30, 2006, the Bank met all capital adequacy requirements to which they are subject. As of September 30, 2006 and 2005, the OTS categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be classified as a well capitalized financial institution, Total risk-based, Tier 1 risk-based, core capital, and tangible equity capital ratios must be at least 10 percent, 6 percent, 5 percent, and 1.5 percent, respectively. There have been no conditions or events since the notification that management believes have changed the Bank‘s category. F-26

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15.

REGULATORY CAPITAL REQUIREMENTS (Continued) The following table reconciles the Bank‘s capital under U.S. generally accepted accounting principles to regulatory capital (in thousands):
2006 2005

Total equity Accumulated other comprehensive loss Disallowed servicing assets Tier I, core, and tangible capital Allowance for loan losses Unrealized gains on equity securities Total risk-based capital

$ 58,337 189 (193 ) 58,333 3,855 24 $ 62,212

$ 54,371 201 (229 ) 54,343 3,563 — $ 57,906

The Bank‘s actual capital ratios are presented in the following table (dollars in thousands):
2006 Amount Ratio 2005 Amount Ratio

Total Capital (to Risk-Weighted Assets) Actual For Capital Adequacy Purposes To Be Well Capitalized Tier I Capital (to Risk-Weighted Assets) Actual For Capital Adequacy Purposes To Be Well Capitalized Tier I Capital (to Average Assets) Actual For Capital Adequacy Purposes To Be Well Capitalized Tangible Capital (to Adjusted Assets) Actual For Capital Adequacy Purposes F-27 $ 58,333 10,859 8.1 % 1.5 $ 54,343 9,822 8.3 % 1.5 $ 58,333 28,959 36,199 8.1 % 4.0 5.0 $ 54,343 26,193 32,741 8.3 % 4.0 5.0 $ 58,333 15,778 23,667 14.8 % 4.0 6.0 $ 54,343 14,897 22,345 14.6 % 4.0 6.0 $ 62,212 31,557 39,446 15.8 % 8.0 10.0 $ 57,906 32,993 37,242 15.6 % 8.0 10.0

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16.

FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair values of the Bank‘s financial instruments are as follows (in thousands):
2006 Carrying Value Fair Value Carrying Value 2005 Fair Value

Financial assets: Cash and cash equivalents Investment and mortgage- backed securities: Available for sale Held to maturity Loans receivable, net Accrued interest receivable FHLB stock Mortgage servicing rights Bank-owned life insurance Financial liabilities: Deposits Short-term borrowings Other borrowings Advances by borrowers for taxes and insurance Accrued interest payable

$

12,730 89,122 19,715 556,677 3,185 13,675 215 13,376

$

12,730 89,122 19,193 554,405 3,185 13,675 244 13,376

$

20,290 62,506 21,505 508,981 2,655 11,916 253 12,864

$

20,290 62,506 21,297 508,162 2,655 11,916 253 12,864

$ 402,153 35,299 224,000 2,198 1,399

$ 401,035 35,299 224,495 2,198 1,399

$ 374,759 27,479 194,000 1,591 848

$ 373,662 27,479 191,652 1,591 848

Financial instruments are defined as cash, evidence of an ownership interest in an entity, or a contract which creates an obligation or right to receive or deliver cash or another financial instrument from/to a second entity on potentially favorable or unfavorable terms. Fair value is defined as the amount at which a financial instrument could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. If a quoted market price is available for a financial instrument, the estimated fair value would be calculated based upon the market price per trading unit of the instrument. If no readily available market exists, the fair value estimates for financial instruments should be based upon management‘s judgment regarding current economic conditions, interest rate risk, expected cash flows, future estimated losses, and other factors as determined through various option pricing formulas or simulation modeling. As many of these assumptions result from judgments made by management based upon estimates which are inherently uncertain, the resulting estimated values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in the assumptions on which the estimated values are based may have a significant impact on the resulting estimated values. As certain assets and liabilities, such as deferred tax assets, premises and equipment, and many other operational elements of the Bank, are not considered financial instruments but have value, this estimated fair value of financial instruments would not represent the full market value of the Bank. F-28

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16.

FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued) The Bank employed simulation modeling in determining the estimated fair value of financial instruments for which quoted market prices were not available based upon the following assumptions: Cash and Cash Equivalents, Accrued Interest Receivable, Short-Term Borrowings, Advances by Borrowers for Taxes and Insurance, and Accrued Interest Payable The fair value approximates the current book value. Bank-Owned Life Insurance The fair value is equal to the cash surrender value of the Bank-owned life insurance. Investment and Mortgage-Backed Securities Available for Sale and Held to Maturity and FHLB Stock The fair value of investment and mortgage-backed securities available for sale is equal to the available quoted market price. If no quoted market price is available, fair value is estimated using the quoted market price for similar securities. Since the FHLB stock is not actively traded on a secondary market and held exclusively by member financial institutions, the estimated fair market value approximates the carrying amount. Loans Receivable, Deposits, Other Borrowings, and Mortgage Servicing Rights The estimated fair values for loans and mortgage servicing rights are estimated by discounting contractual cash flows and adjusting for prepayment estimates. Discount rates are based upon rates generally charged for such loans with similar characteristics. Demand, savings, and money market deposit accounts are valued at the amount payable on demand as of year end. Fair values for time deposits and other borrowings are estimated using a discounted cash flow calculation that applies contractual costs currently being offered in the existing portfolio to current market rates being offered for deposits and borrowings of similar remaining maturities. Commitments to Extend Credit These financial instruments are generally not subject to sale, and estimated fair values are not readily available. The carrying value, represented by the net deferred fee arising from the unrecognized commitment, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, are not considered material for disclosure. The contractual amounts of unfunded commitments are presented in Note 11. F-29

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17.

PLAN OF REORGANIZATION AND STOCK ISSUANCE On July 25, 2006, the Board of Directors of the Bank unanimously adopted a Plan of Conversion (the ―Plan‖) pursuant to which the Bank will convert into a Pennsylvania chartered stock savings association (the ―Stock Savings Association‖) and form ESSA Bancorp, Inc., a Pennsylvania chartered company (the ―Stock Holding Company‖). The newly chartered Stock Holding Company will offer shares of its common stock to the Bank‘s eligible account holders, to the Bank‘s tax-qualified employee benefit plans, and, if necessary, to the general public in accordance with the priorities set forth in the Plan. The Plan is subject to the approval of the OTS, the Pennsylvania Department of Banking, as well as the Members of the Bank, as set forth in the Plan. Following the sale of common stock, all depositors who had membership or liquidation rights with respect to the Bank as of the effective date of the transaction will continue to have such rights solely with respect to the Stock Savings Association as long as they continue to hold deposit accounts with the Bank. In addition, all persons who become depositors of the Bank subsequent to the date of the transaction will have such membership and liquidation rights with respect to the Stock Savings Association. Borrowers of the Bank as of the date of the transaction will have the same membership rights in the Stock Savings Association that they had in the Bank immediately prior to the date of the transaction as long as their existing borrowings remain outstanding. The regulations of the OTS prohibit the Bank from declaring or paying a cash dividend if the effect thereof would cause the Bank‘s regulatory capital to be reduced below either the amount required for the liquidation account or the federal regulatory capital requirement in section 567.2 of the Rules and Regulations of the OTS. Costs associated with the conversion will be deferred and deducted from the proceeds of the stock offering. If, for any reason, the offering is not successful, the deferred costs will be charged to operations. As of September 30, 2006, there was approximately $119,000 of costs incurred with the conversion. F-30

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You should rely only on the information contained in this document or that to which we have referred you. No person has been authorized to give any information or to make any representation other than as contained in this prospectus and, if given or made, such other information or representation must not be relied upon as having been authorized by ESSA Bancorp, Inc. or ESSA Bank & Trust. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby to any person in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Neither the delivery of this prospectus nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of ESSA Bancorp, Inc. or ESSA Bank & Trust since any of the dates as of which information is furnished herein or since the date hereof.

ESSA Bancorp, Inc.
(Proposed Holding Company for ESSA Bank & Trust) 12,650,000 Shares of Common Stock Par value $0.01 per share (Subject to Increase to up to 14,547,500)
PROSPECTUS

Ryan Beck & Co., Inc.

Until __________ or 25 days after commencement of the syndicated community offering, if any, whichever is later, all dealers effecting transactions in the registered securities, whether or not participating in this distribution, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver the prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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PART II: INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. * * * * * * * * * * Other Expenses of Issuance and Distribution
Amount(1)

Registrant‘s Legal Fees and Expenses Marketing Agent Legal Fees and Expenses Registrant‘s Accounting Fees and Expenses Conversion Agent and Data Processing Fees Marketing Agent Fees and Expenses Appraisal and Business Plan Fees and Expenses Printing, Postage and Mailing Filing Fees (OTS, NASD, Nasdaq and SEC) Other Total

$

450,000 75,000 120,000 50,000 1,221,753 127,000 225,000 132,783 18,464 2,420,000

$

* (1)

Estimated ESSA Bancorp, Inc. has retained Ryan Beck & Co., Inc. to assist in the sale of common stock on a best efforts basis in the offerings. Fees are estimated at the midpoint of the offering range. Indemnification of Directors and Officers

Item 14.

Indemnification of Directors and Officers of ESSA Bank & Trust . Article VI of the bylaws of ESSA Bank & Trust, set forth circumstances under which directors, officers, employees and agents of ESSA Bank & Trust may be insured or indemnified against liability which they incur in their capacities as such: Article VI; Indemnification and Liability of Directors and Officers Section 1. Personal Liability of Directors. A director of ESSA Bank & Trust shall not be personally liable for monetary damages for any action taken, or any failure to take any action, as a director except to the extent that by law (including the Director‘s Liability Act, 42 Pa. C.S. 8361 et seq.) a director‘s liability for monetary damages may not be limited. Section 2. Indemnification. The Bank shall indemnify in accordance with its Indemnification Policy any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, including actions by or in the right of ESSA Bank & Trust, whether civil, criminal, administrative or investigative, by reason of the fact that such a person is or was a director or officer of ESSA Bank & Trust, or is or was serving while a director or officer of ESSA Bank & Trust and at the request of ESSA Bank & Trust, as a director, officer, employee, agent, fiduciary or other representative of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys‘ fees), judgments, fines, excise taxes and amounts paid n settlement actually and reasonable incurred by such person in connection with such action, suit or proceeding to the full extent permissible under Pennsylvania law. Section 3. Advancement of Expenses. Reasonable expenses incurred by an officer or director of ESSA Bank & Trust in defending a civil or criminal action, suit or proceeding described in Section 2 shall be paid by ESSA Bank & Trust in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that the person is not entitled to be indemnified by ESSA Bank & Trust. Section 4. Other Rights . The indemnification and advancement of expenses provided by or pursuant to this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled , any insurance or other agreement, vote of shareholders or directors or otherwise, both as to actions in their official capacity and as to actions in another capacity while holding an office, and shall continue as a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. II-1

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Section 5. Insurance . The Bank shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of ESSA Bank & Trust, or is or was serving at the request of ESSA Bank & Trust as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability asserted against him/her and incurred by him/her in any such capacity, or arising out of his/her status as such, whether or not ESSA Bank & Trust should have the power to indemnify him/her against such liability under the provisions of these By-Laws. Section 6. Security Fund; Indemnity Agreements . By action of the Board of Directors (notwithstanding their interest in the transaction) ESSA Bank & Trust may create and fund a trust or fund of any nature, any may enter into agreements with its officers and directors, for the purpose of securing or insuring in any manner its obligation to indemnify or advance expenses provided for in this Article. Section 7. Modification. The duties of ESSA Bank & Trust to indemnify and to advance expenses to a director or officer provided in this Article shall be in the nature of a contract between ESSA Bank & Trust and each such director or officer, and no amendment or repeal of any provision of the Article, and no amendment or termination of any trust or other fund created pursuant to Section 6 shall alter, the detriment of such director or officer, the right of such person to the advance of expenses or indemnification related to a claim based on an act or failure to act which took place prior to such amendment, repeal or termination. Indemnification of Directors and Officers of ESSA Bancorp, Inc . Article VI of the bylaws of ESSA Bancorp, Inc., a Pennsylvania corporation, set forth circumstances under which directors, officers, employees and agents of ESSA Bancorp, Inc. may be insured or indemnified against liability which they incur in their capacities as such: Article VI; Indemnification 6.1 Persons Covered . Subject to, and in accordance with, the provisions of this Article VI, ESSA Bancorp, Inc. shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, including actions by or in the right of ESSA Bancorp, Inc., whether civil, criminal, administrative, or investigative, by reason of the fact that such person is or was a director, officer, employee, fiduciary, trustee, or agent of ESSA Bancorp, Inc., or is or was serving at the request of ESSA Bancorp, Inc. as a director, officer, employee, fiduciary, trustee, or agent of another corporation, partnership, joint venture, trust, or other enterprise. 6.2 Derivative Actions. (a) In the case of a threatened, pending, or completed action or suit by or in the right of ESSA Bancorp, Inc. against a person named in Section 6.1 by reason of such person holding a position named in Section 6.1, ESSA Bancorp, Inc. shall indemnify such person if such person satisfies the standard in Section 6.2(b), for expenses (including attorneys‘ fees) actually and reasonably incurred by such person in connection with the defense or settlement of the action or suit. (b) In the case of a threatened, pending, or completed action or suit by or in the right of ESSA Bancorp, Inc., a person named in Section 6.1 shall be indemnified only if: (1) such person is successful on the merits or otherwise; or (2) such person acted in good faith in the transaction that is the subject of the suit or action, and in a manner reasonably believed to be in, or not opposed to, the best interests of ESSA Bancorp, Inc. However, such person shall not be indemnified in respect of any claim, issue, or matter as to which such person has been adjudged liable to ESSA Bancorp, Inc. unless (and only to the extent that) the court of common pleas or the court in which the suit was brought shall determine, upon application, that despite the adjudication of liability but in view of all the circumstances, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. II-2

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6.3 Third-Party Actions . (a) In case of a threatened, pending, or completed suit, action, or proceeding (whether civil, criminal, administrative, or investigative), other than a suit by or in the right of ESSA Bancorp, Inc., together hereafter referred to as a third-party action, against a person named in Section 6.1 by reason of such person holding a position named in Section 6.1, ESSA Bancorp, Inc. shall indemnify such person if such person satisfies the standard in Section 6.3(b), for amounts actually and reasonably incurred by such person in connection with the defense or settlement of the third-party action, including, but not limited to (i) expenses (including attorneys‘ fees), (ii) amounts paid in settlement, (iii) judgments, and (iv) fines. (b) In case of a third-party action, a person named in Section 6.1 shall be indemnified only if: (1) such person is successful on the merits or otherwise; or (2) such person acted in good faith in the transaction that is the subject of the third-party action and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with respect to any criminal action or proceeding, such person had no reasonable cause to believe such person‘s conduct was unlawful. The termination of a third-party action by judgment, order, settlement, conviction, or upon a pleas of nolo contendere or its equivalent shall not, in itself, create a presumption that the person failed to satisfy the standard of this Section 6.3(b). 6.4 Determination That Standard Has Been Met. A determination that the standard of either Section 6.2(b) or 6.3(b) has been satisfied may be made by a court, or, except as stated in the record sentence of Section 6.2(b), the determination may be made by: (1) the Board of Directors by a majority vote of a quorum consisting of directors of ESSA Bancorp, Inc. who were not parties to the action, suit, or proceeding; (2) if such a quorum is not obtainable or if obtainable and a majority of a quorum of disinterested directors so directs, by independent legal counsel in a written opinion; or (3) the shareholders of ESSA Bancorp, Inc. 6.5 Proration . Anyone making a determination under Section 6.4 may determine that a person has met the standard as to some matters but not as to others, and may reasonably prorate amounts to be indemnified. 6.6 Advancement of Expenses . Reasonable expenses incurred by a director, officer, employee, or agent of ESSA Bancorp, Inc. in defending a civil or criminal action, suit, or proceeding described in Section 6.1 shall be paid by ESSA Bancorp, Inc. in advance of the final disposition of such action, suit, or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that the person is not entitled to be indemnified by ESSA Bancorp, Inc. 6.7 Other Rights . The indemnification and advancement of expenses provided by or pursuant to this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any insurance or other agreement, vote of shareholders or directors, or otherwise, both as to actions in their official capacity and as to actions in another capacity while holding an office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such person. 6.8 Insurance. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person‘s status as such, whether or not ESSA Bancorp, Inc. would have the power to indemnify such person against such liability under the provisions of this Article VI. II-3

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6.9 Security Fund; Indemnity Agreements . By action of the Board of Directors (notwithstanding their interest in the transaction), ESSA Bancorp, Inc. may create and fund a trust fund or fund of any nature, and may enter into agreements with its officers, directors, employees, and agents for the purpose of securing or insuring in any manner its obligation to indemnify or advance expenses provided for in this Article VI. 6.10 Modification . The duties of ESSA Bancorp, Inc. to indemnify and to advance expenses to any person as provided in this Article VI shall be in the nature of a contract between ESSA Bancorp, Inc. and each such person, and no amendment or repeal of any provision of this Article VI, and no amendment or termination of any trust fund or other fund created pursuant to Section 6.9 hereof, shall alter to the detriment of such person the right of such person to the advancement of expenses or indemnification related to a claim based on an act or failure to act which took place prior to such amendment, repeal, or termination. 6.11 Proceedings Initiated by Indemnified Persons . Notwithstanding any other provision in this Article VI, ESSA Bancorp, Inc. shall not indemnify a director, officer, employee, or agent for any liability incurred in an action, suit, or proceeding initiated by (which shall not be deemed to include counter-claims or affirmative defenses) or participated in as an intervenor or amicus curiae by the person seeking indemnification unless such initiation of or participation in the action, suit, or proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors then in office. 6.12 Savings Clause . If this Article VI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then ESSA Bancorp, Inc. shall nevertheless indemnify each director, officer, employee, and agent of ESSA Bancorp, Inc. as to costs, charges, and expenses (including attorneys‘ fees), judgments, fines, and amounts paid in settlement with respect to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, including an action by or in the right of ESSA Bancorp, Inc., to the fullest extent permitted by any applicable portion of this Article VI that shall not have been invalidated and to the fullest extent permitted by applicable law. If the laws of the Commonwealth of Pennsylvania are amended to permit further indemnification of the directors, officers, employees, and agents of ESSA Bancorp, Inc., then ESSA Bancorp, Inc. shall indemnify such persons to the fullest extent permitted by law. Any repeal or modification of this Article VI by the Board of Directors or the shareholders of ESSA Bancorp, Inc. shall not adversely affect any right or protection of a director, officer, employee, or agent existing at the time of such repeal or modification. Item 15. Recent Sales of Unregistered Securities Not Applicable. Item 16. Exhibits and Financial Statement Schedules: The exhibits and financial statement schedules filed as part of this registration statement are as follows: (a) 1.1 1.2 2 3.1 3.2 4 5 8 10.1 List of Exhibits Engagement Letter between ESSA Bank & Trust and Ryan Beck & Co., Inc. Form of Agency Agreement between ESSA Bank & Trust, ESSA Bancorp, Inc., and Ryan Beck & Co., Inc. * Plan of Conversion Articles of Incorporation of ESSA Bancorp, Inc. Bylaws of ESSA Bancorp, Inc. Form of Common Stock Certificate of ESSA Bancorp, Inc. Opinion of Luse Gorman Pomerenk & Schick regarding legality of securities being registered Federal Tax Opinion of Luse Gorman Pomerenk & Schick Form of Employee Stock Ownership Plan II-4

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10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 21 23.1 23.2 23.3 23.4 24 99.1 99.2 99.3 99.4 99.5 * **

Form of Employment Agreement for Chief Executive Officer Form of Employment Agreement for Executive Officers Form of Change in Control Agreement Director Emeritus Plan Supplemental Retirement Plan for Gary S. Olson Supplemental Retirement Plan for Robert S. Howes, Jr. Supplemental Retirement Plan for Diane K. Reimer Supplemental Retirement Plan for Thomas J. Grayuski Subsidiaries of Registrant Consent of Luse Gorman Pomerenk & Schick (contained in Opinions included as Exhibits 5 and 8) Consent of S.R. Snodgrass, A.C. Consent of Beard Miller Company LLP Consent of RP Financial, LC. Power of Attorney (set forth on signature page) Appraisal Agreement between ESSA Bank & Trust and RP Financial, LC. Letter of RP Financial, LC. with respect to Subscription Rights Appraisal Report of RP Financial, LC.** Marketing Materials* Order and Acknowledgment Form* To be filed supplementally or by amendment. Supporting financial schedules filed pursuant to Rule 202 of Regulation S-T. (b) Financial Statement Schedules

No financial statement schedules are filed because the required information is not applicable or is included in the consolidated financial statements or related notes. Item 17. Undertakings

The undersigned Registrant hereby undertakes: (1) To file, during any period in which it offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the ―Calculation of Registration Fee‖ table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5

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(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-6

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SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Stroudsburg, Commonwealth of Pennsylvania on December 7, 2006. ESSA BANCORP, INC. By: /s/ Gary S. Olson Gary S. Olson Chief Executive Officer and President (Duly Authorized Representative) POWER OF ATTORNEY We, the undersigned directors and officers of ESSA Bancorp, Inc. (the ―Company‖) hereby severally constitute and appoint Gary S. Olson as our true and lawful attorney and agent, to do any and all things in our names in the capacities indicated below which said Gary S. Olson may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with the registration statement on Form S-1 relating to the offering of the Company‘s common stock, including specifically, but not limited to, power and authority to sign for us in our names in the capacities indicated below the registration statement and any and all amendments (including post-effective amendments) thereto; and we hereby approve, ratify and confirm all that said Gary S. Olson shall do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signatures Title Date

/s/ Gary S. Olson Gary S. Olson /s/ Allan A. Muto Allan A. Muto /s/ John E. Burrus John E. Burrus /s/ William P. Douglass William P. Douglass /s/ Daniel J. Henning Daniel J. Henning

President, Chief Executive Officer and Director (Principal Executive Officer) Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Director

December 7, 2006

December 7, 2006

December 7, 2006

Director

December 7, 2006

Director

December 7, 2006

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/s/ Frederick E. Kutteroff Frederick E. Kutteroff /s/ Robert C. Selig, Jr. Robert C. Selig, Jr. /s/ John S. Schoonover, Jr. John S. Schoonover, Jr. /s/ William A. Viechnicki, D.D.S. William A. Viechnicki, D.D.S. /s/ Elizabeth B. Weeks Elizabeth B. Weekes

Director

December 7, 2006

Director

December 7, 2006

Director

December 7, 2006

Director

December 7, 2006

Director

December 7, 2006

Exhibit 1.1 May 30, 2006 Mr. Gary S. Olson President & CEO ESSA Bank & Trust 200 Palmer Street P.O. Box L Stroudsburg, PA 18360 CONFIDENTIAL Re: Proposed Mutual-to-Stock Full Conversion – Advisory, Administrative and Marketing Services

Dear Mr. Olson: Ryan Beck & Co., Inc. (―RBCO‖) is pleased to submit this engagement letter setting forth the terms of the proposed engagement between RBCO and ESSA Bank & Trust (the ―Bank‖) in connection with the potential mutual-to-stock full conversion of the Bank and the concurrent sale of common stock of a holding Institution to be formed in connection with the conversion. 1. BACKGROUND ON RYAN BECK

Ryan Beck & Co., Inc. was organized in 1946 and is one of the nation‘s leading investment bankers for financial institutions. The firm is a registered broker-dealer with the Securities and Exchange Commission, a member of the National Association of Securities Dealers, Inc., Securities Industry Association and a member of the Securities Investor Protection Corporation. RBCO‘s Financial Institutions Group is one of the nation‘s largest such groups devoted solely to investment banking services for financial institutions. 2. FULL CONVERSION AND STOCK OFFERING

The Bank is considering converting from the mutual to the stock form of organization (the ―Conversion‖) by forming a stock holding Institution (the Bank and the holding company are referred to herein as the ―Institution‖.) The common stock (the ―Common Stock‖) would be offered in a subscription offering with any remaining shares expected to be sold in a community offering and, if necessary, a syndicated community offering (collectively the ―Offering‖). In connection therewith, the Institution‘s Board of Directors would adopt a Plan of Conversion and engage RBCO as financial advisor to the Institution with respect to the Conversion and Offering and as selling agent with respect to the Offering. Specific terms of services shall be set forth in an agency agreement (the ―Definitive

Agreement‖) between RBCO and the Institution to be executed on the date the offering document is declared effective by the regulatory authorities. The Definitive Agreement will include customary representations and warranties, covenants, conditions, termination provisions and indemnification, contribution and limitation of liability provisions, all to be mutually agreed upon by RBCO and the Institution (and its successors). 3. SERVICES TO BE PROVIDED BY RYAN BECK

RBCO provides and helps coordinate advisory, administrative and marketing services in connection with thrift reorganizations and related stock offerings. Our existing team has worked together on numerous such transactions. a. Advisory Services - As your investment banker, RBCO will work with you and your counsel to evaluate financial, marketing and regulatory issues. Our working knowledge of the law and ―lore‖ of bank regulators, securities regulators and NASD is essential. Our legal, accounting and regulatory background is equally important. Our specific advisory responsibilities include: • • • • • • • • • • Advise with respect to business planning issues in preparation for a public offering; Advise with respect to the choice of charter and form of organization; Review and advise with respect to the stock issuance plan (e.g. sizes of benefit plan purchases; max purchase limits for investors); Advise with respect to which trading venue the shares should trade on; Review and provide input with respect to the business plan to be prepared in connection with the Offering; Discuss the appraisal process and analyze the appraisal with the Board of Directors; Participate in drafting the offering document and any proxy materials, and assist in obtaining all requisite regulatory approvals; Develop a marketing plan for the subscription and community offerings, considering various sales method options, including direct mail, advertising, community meetings and telephone solicitation; Develop a proxy solicitation plan, to include telephone calls and mailings; RBCO does not offer data processing agent, printing and transfer agent functions. Costs of such services will be borne by the Institution and are subject to agreements signed by the Institution and each service provider. RBCO will work with the Institution to provide specifications and assistance in selecting these and any other professionals that will perform administrative functions in connection with the offering and the proxy solicitation process; Develop a layout for the Stock Information Center (the ―Center‖), where stock order and proxy card processing occur; Provide a list of equipment, staff and supplies needed for the Center; and Draft marketing materials including letters, order form, advertisement, brochure. If a community meeting or road show is anticipated, we will help draft the presentation – saving you time and legal expense; and

• • •

•

Consulting with management, determine whether and when to conduct a syndicated community offering through assembling a group of selected broker/dealer (including RBCO) to sell stock remaining after the community offering, on a best-effort basis.

b. Administrative Services and Stock Information Center Management – RBCO manage all aspects of a thrift conversion‘s stock offering and proxy solicitation. Successful stock sale and vote results require thorough planning and an enormous amount of attention to detail. Our efforts are meant to avoid mistakes, costly surprises and lost opportunities. We identify key logistics, define responsibilities and create timetables to help avoid confusion among the many members of the working group. An offering also requires accurate and timely record keeping and reporting. Furthermore, customers must be handled professionally and their questions must be answered accurately. The Stock Information Center is the ―command center‖ during a stock offering. RBCO staff‘s experience in managing many thrift minority stock offerings and full conversion offerings will help them minimize the burden on your management and staff. They will train and supervise the staff that you assign to the Center to help record stock orders, answer customer inquiries and participate in other activities of the Center. Our administrative services include the following: • • • • • • • • • • • • • Provide experienced on-site RBCO registered representatives to manage and supervise the Center. All substantive stock offering and proxy vote matters and customer inquiries will be handled by RBCO; Prepare procedures for processing proxies, stock orders and cash, and for handling requests for material; Provide scripts and training for the telephone team who will solicit proxies and, if needed, help conduct a stock sales telemarketing effort; Educate the Institution‘s directors, officers and employees about the Conversion and Offering, their roles and relevant securities laws; Train branch managers and customer-contact employees on the proper response to stock purchase and proxy vote inquiries; Coordinate functions with and between the data processing agent, printer, transfer agent, stock certificate printer and other professionals; Design and implement procedures for handling IRA and Keogh orders; Supervise Center staff in proxy card and order processing and in proxy solicitation calling efforts; Prepare daily vote and sales reports for management, ensuring funds received balance to the reports; Monitor the proxy vote response and, make any needed revisions to the calling/reminder mailing plan; Manage the pro-ration process in the event of subscription and community offering oversubscription; Coordinate with Nasdaq and DTC to ensure a smooth closing and stock trading; and Provide post-offering subscriber assistance.

c. Securities Marketing Services – RBCO uses various sales techniques including direct mail, advertising, community investor meetings, telephone solicitation, and if necessary, assembling a selling group of broker-dealers for a syndicated community offering. The sales approach for your stock offering will be tailored to fit your specific situation, in order to best mange the offering and attract a stockholder base comprised largely of community-oriented individuals loyal to the Institution. Our specific marketing services include: • • • • • • If applicable, assist management in developing a list of potential investors who are viewed as priority prospects; The RBCO registered representatives at the Center will solicit orders from the eligible prospects described above; Respond to questions related to information in the offering document and in any proxy materials, and answer investment-related questions; If the sales plan calls for community meetings, participate in them. Community meetings can relieve customer anxiety and generate local publicity for the Offering; Continually advise management on sales progress, market conditions and customer/community responsiveness to the Offering; In case of a best-efforts syndicated community offering, manage the selling group, prepare broker ―fact sheets‖ and arrange ―road shows‖ for the purpose of stimulating interest in the stock and informing the brokerage community of the particulars of the Offering; and Contact other market-makers to trade the stock in the after-market.

• 4.

COMPENSATION

For its services hereunder, the Institution will pay to RBCO a the following compensation: a. A conversion and proxy vote advisory and administrative services fee of $50,000 in connection with certain services set forth in section 3.a. and 3.b. hereof. In view of the long preparation phase prior to commencement of the Offering, this fee shall be payable as follows: $25,000 upon executing this letter; $12,500 upon the initial filing of the offering document and $12,500 upon closing of the Conversion and Offering. A sales fee of one percent (1.00%) of the dollar amount of the Common Stock sold in the Offering, up to $100 million; and three quarters of one percent (.75%) of dollar amount of the Common Stock sold in the Offering in excess of $100 million, in either case other than those shares sold pursuant to subparagraph c. below. No fee shall be payable pursuant to this subsection in connection with the sale of stock to officers, directors, employees or immediate family of such persons (―Insiders‖) and qualified and non-qualified employee benefit plans of the Institution or the Insiders, or with respect to shares issued to the Institution‘s charitable foundation in connection with the Offering. For stock sold by a group of selected dealers (including RBCO) pursuant to a syndicated community offering solely managed by RBCO (the ―Selling Group‖), a fee equal to one percent (1.00%) of the aggregate dollar amount of Common Stock sold in the syndicated community offering, which fee paid to RBCO, along with the fee payable directly by the Institution to the other selected dealers shall not exceed six percent (6.00%) of the aggregate dollar amount of Common Stock so sold. In consultation with RBCO, the Institution will determine which NASD member firms will participate in the Selling Group and the extent of

b.

c.

their participation. RBCO will not commence sales of the Common Stock through the Selling Group without the specific prior approval of the Institution. d. If, pursuant to a resolicitation of subscribers undertaken by the Institution, RBCO is required to provide significant additional services, the parties shall mutually agree to the dollar amount of any additional compensation due.

The above compensation, less the amount of advance payments described in subparagraph a., is to be paid to RBCO at the closing of the Offering. If, after adoption of the Plan, (i) the Plan is abandoned or terminated by the Institution; (ii) the Offering is not consummated by December 31, 2007; (iii) RBCO terminates this relationship because there has been a material adverse change in the financial condition or operations of the Institution since June 30, 2006; or (iv) immediately prior to commencement of the Offering, RBCO terminates this relationship because in its opinion, which shall have been formed in good faith after reasonable determination and consideration of all relevant factors, there has been a failure to satisfactorily disclose all relevant information in the offering document or other disclosure documents or market conditions exist which might render the sale of the Common Stock inadvisable; RBCO shall not be entitled to the compensation set forth above, but in addition to reimbursement of its reasonable out-of-pocket expenses as set forth in paragraph 7 below, shall be entitled to payment of $25,000 for its conversion and proxy vote advisory services. 5. MARKET MAKING

RBCO agrees to use its best efforts to maintain a market and to solicit other broker-dealers to make a market in the Common Stock at the conclusion of the Offering. 6. DOCUMENTS

The Institution and its counsel will complete, file with the appropriate regulatory authorities and, as appropriate, amend from time to time, the information to be contained in the Institution‘s applications to banking and securities regulators and any related exhibits thereto. In this regard, the Institution and its counsel will prepare an offering document and any other necessary disclosure documents relating to the offering of the Common Stock in conformance with applicable rules and regulations. As the Institution‘s financial advisor, RBCO will, in conjunction with counsel, conduct an examination of the relevant documents and records of the Institution and will make such other reasonable investigations as deemed necessary and appropriate under the circumstances. The Institution agrees to make all documents, records and other information deemed necessary by RBCO, or its counsel, available to them upon reasonable notice. RBCO‘s counsel will prepare, subject to the approval of Institution‘s counsel, the Definitive Agreement. RBCO‘s counsel shall be selected by RBCO, subject to the approval of the Institution. 7. EXPENSES AND REIMBURSEMENT

The Institution will bear all of its expenses in connection with the Conversion and the Offering of Common Stock including, but not limited to: appraisal and business plan preparation; the Institution‘s attorney fees; NASD filing fees; ―blue sky‖ legal fees and state filing fees; services of the data processing agent, transfer agent, financial and stock certificate printers, auditors and accountants; advertising; postage; ―road show‖ and other syndicated community offering costs; and all costs of

operating the Stock Information Center, including hiring temporary personnel, if necessary. In the event RBCO incurs such expenses on behalf of the Institution, the Institution shall reimburse RBCO for such reasonable fees and expenses regardless of whether the Conversion is successfully completed. RBCO will not incur any single expense of more than $1,000, pursuant to this paragraph without the prior approval of the Institution. The Institution also agrees to reimburse RBCO for its reasonable out-of-pocket expenses, including legal fees and expenses, incurred by RBCO in connection with the services contemplated hereunder. In the subscription and community offering, RBCO will not incur legal fees (excluding the out-of-pocket expenses of counsel) in excess of $75,000 without the approval of the Institution. RBCO will not incur reimbursable direct out-of-pocket expenses in excess of $20,000 without the consent of the Institution. The parties acknowledge, however, that such cap may be increased by the mutual consent of the Institution and RBCO, including in the event of a material delay in the Offering which would require an update of the financial information in tabular form to reflect a period later than that set forth in the original filing of the offering document. In addition, in the event of a syndicated community offering, the Institution will reimburse all reasonable out-of-pocket expenses incurred in connection with that offering phase. Not later than two days before closing, RBCO will provide the Institution with a detailed accounting of all reimbursable expenses of RBCO and its counsel to be paid at closing. 8. BLUE SKY

To the extent required by applicable state law, RBCO and the Institution must obtain or confirm exemptions, qualifications or registration of the Common Stock under applicable state securities laws and NASD policies. The cost of such legal work and related state filing fees will be paid by the Institution to the law firm furnishing such legal work. The Institution will instruct the counsel performing such services to prepare a Blue Sky memorandum related to the Offering including RBCO‘s participation therein and shall furnish RBCO a copy thereof, regarding which such counsel shall state RBCO may rely. 9. AVAILABILITY OF “STARS” PROGRAM

As an additional service to the Institution, RBCO will make available for a period of 1 year following the completion of the Offering, advisory services through the RBCO Strategic Advisory Services (―STARS‖) program. The undersigned will serve as the senior relationship manager for this program. If the Institution elects to avail itself of the STARS program, RBCO will meet with the Institution at its request. RBCO also will provide opinions and recommendations, upon request, for the areas covered below: Valuation Analysis Merger and Acquisition Planning and Analysis Merger and Acquisition Trends Planning, Forecasting & Competitive Strategy Capital, Asset & Liability Structure & Management Stock Repurchase Programs Dividend Policy Dividend Reinvestment Programs Market Development and Sponsorship of Bank Securities

Financial Disclosure Financial Relations Financial Reports Branch Sales and Purchases Stock Benefit Plan Analysis and Advisory Stockholder & Investor Relations Presentations & Programs Fairness Opinions Scanning of Potential Acquisition Candidates Based on Published Statement Information (This screening does not extend to any in-depth merger and acquisition analyses or studies which are available under RBCO‘s normal fee schedule, and does not include retention of RBCO by the Institution for any specific merger/acquisition situation.) If the Institution elects to utilize the STARS program RBCO will waive the regular retainer fee and hourly charges for this program for the first year. The Institution also will reimburse RBCO‘s reasonable out-of-pocket expenses incurred in conjunction with the performance of these services. Such out-of-pocket expenses shall include travel, legal and other miscellaneous expenses. RBCO will not incur any single expense in excess of $1,000 pursuant to this paragraph without the prior approval of the Institution. 10. INDEMNIFICATION

The Definitive Agreement will provide for indemnification of the type usually found in underwriting agreements as to certain liabilities, including liabilities under the Securities Act of 1933. The Institution also agrees to defend, indemnify and hold harmless RBCO and its officers, directors, employees and agents against all claims, losses, actions, judgments, damages or expenses, including but not limited to reasonable attorneys‘ fees, arising solely out of the engagement described herein, except that such indemnification shall not apply to RBCO‘s own bad faith, willful misconduct or gross negligence. 11. CONFIDENTIALITY

To the extent consistent with legal requirements and except as otherwise set forth in the offering document, all information given to RBCO by the Institution, unless publicly available or otherwise available to RBCO without restriction to breach of any confidentiality agreement (―Confidential Information‖), will be held by RBCO in confidence and will not be disclosed to anyone other than RBCO‘s agents without the Institution‘s prior approval or used for any purpose other than those referred to in this engagement letter. Upon the termination of its engagement, RBCO, at the request of the Institution, will promptly deliver to the Institution all materials specifically produced for it and will return to the Institution all Confidential Information provided to RBCO during the course of its engagement. 12. NASD MATTERS

RBCO has an obligation to file certain documents and to make certain representations to the National Association of Security Dealers (―NASD‖) in connection with the Offering. The Institution agrees to cooperate with RBCO and provide such information as may be necessary for RBCO to comply with

all NASD requirements applicable to its participation in the Offering. RBCO is and will remain through completion of the Offering a member in a good standing of the NASD and will comply with all applicable NASD requirements. 13. OBLIGATIONS

Except as set forth below, this engagement letter is merely a statement of intent. While RBCO and the Institution agree in principle to the contents hereof and propose to proceed promptly and in good faith to work out the arrangements with respect to the Offering, any legal obligations between RBCO and the Institution shall be only: (i) those set forth herein in paragraphs 2, 3 and 4 regarding services and payments; (ii) those set forth in paragraph 7 regarding reimbursement for certain expenses; (iii) those set forth in paragraph 10 regarding indemnification; (iv) those set forth in paragraph 11 regarding confidentiality; and (v) as set forth in a duly negotiated and executed Definitive Agreement. The obligation of RBCO to enter into the Definitive Agreement shall be subject to there being, in RBCO‘s opinion, which shall have been formed in good faith after reasonable determination and consideration of all relevant factors: (i) no material adverse change in the condition or operation of the Institution; (ii) satisfactory disclosure of all relevant information in the disclosure documents and a determination that the sale of stock is reasonable given such disclosures; (iii) no market conditions which might render the sale of the shares by the Institution hereby contemplated inadvisable; and (iv) agreement that the price established by the independent appraiser is reasonable in the then-prevailing market conditions. 14. INDEPENDENT CONTRACTOR; NO FIDUCIARY DUTY

The Institution acknowledges and agrees that it is a sophisticated business enterprise and that RBCO has been retained pursuant to this engagement letter to act as financial advisor to the Institution solely with respect to the matters set forth herein. In such capacity, RBCO shall act as an independent contractor, and any duties of RBCO arising out of this engagement pursuant to this letter shall be contractual in nature and shall be owed solely to the Institution. Each party disclaims any intention to impose any fiduciary duty on the other. 15. GOVERNING LAW

This engagement letter shall be governed by and construed in accordance with the laws of the State of New Jersey applicable to contracts executed and to be wholly performed therein without giving effects to its conflicts of laws principles or rules. Any dispute here under shall be brought in a court in the State of New Jersey. 16. WAIVER OF TRIAL BY JURY

BOTH RBCO AND THE INSTITUTION WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) RELATED TO OR ARISING OUT OF THIS AGREEMENT.

Please acknowledge your agreement to the foregoing by signing in the place provided below and returning one copy of this letter to our office together with the retainer payment in the amount of $25,000. We look forward to working with you. RYAN BECK & CO., INC. BY: /s/ Mark B. Cohen Managing Director Accepted and Agreed to This 9 Day of June, 2006
th

ESSA Bank & Trust BY: /s/ Gary S. Olson President & Chief Executive Officer Cc: John J. Gorman

Exhibit 2 ESSA BANK & TRUST STROUDSBURG, PENNSYLVANIA PLAN OF CONVERSION From Mutual to Stock Form of Organization

1.

General

This Plan of Conversion provides for the conversion of ESSA Bank & Trust (the ―Bank‖) from a Pennsylvania chartered mutual savings association to a Pennsylvania chartered stock savings association pursuant to the rules and regulations of the Department and the OTS. As part of the Conversion, the Plan provides for the concurrent formation of a holding company (the ―Holding Company‖) that will own 100% of the common stock of the Bank. The Board of Directors has considered the alternatives available to the Bank with respect to its corporate structure, and has determined that a mutual-to-stock conversion as described in this Plan will be in the best interests of the Bank, its depositors and the communities in which the Bank operates. Restructuring the Bank into the capital stock form of organization will increase its capital base and enhance the Bank‘s ability to expand its franchise and the range of products and services it offers. The conversion proceeds will provide the Bank with additional resources to further develop and enhance its technology capabilities and delivery channels. It will provide the Bank with greater flexibility to structure and finance the expansion of its operations, including the potential acquisition of other financial institutions. The stock form of organization will also enable the Bank to adopt stock benefit plans as a further performance incentive and as a further means of attracting, retaining and compensating management and other key personnel. The stock holding company form of organization will also offer the Bank greater organizational and operating flexibility, including the expanded powers available to holding companies under the recently enacted financial modernization legislation. The Plan provides that non-transferable subscription rights to purchase Conversion Stock will be offered first to Eligible Account Holders of record as of the Eligibility Record Date, then to the Bank‘s Tax-Qualified Employee Plans, then to Supplemental Eligible Account Holders as of the Supplemental Eligibility Record Date and then to Voting Members. Concurrently with, at any time during, or promptly after the Subscription Offering, and subject to availability after the satisfaction of subscription rights, an opportunity to subscribe may also be offered to the general public in a Community Offering with a preference given to natural persons who reside in the Bank‘s Local Community. The price of the Conversion Stock will be based upon an independent appraisal of the Bank and the Holding Company and will reflect its estimated pro forma market value, as converted. No change will be made in the Board of Directors or management as a result of the Conversion. In furtherance of the Bank‘s commitment to its community, this Plan provides for the establishment of a charitable foundation as part of the Conversion. The Foundation is intended to complement the Bank‘s existing community reinvestment activities in a manner that will allow the Bank‘s local communities to share in the growth and profitability of the Holding Company and the Bank over the long term. Consistent with the Bank‘s goal, the Holding Company intends to donate to the Foundation cash and shares of Common Stock, in an aggregate amount up to 8% of the value of the shares of Conversion Stock sold in the Conversion. Upon the Conversion, the legal existence of the Bank shall not terminate but the stock Bank shall be a continuation of the entity of the mutual Bank and all property of the mutual Bank, including its right, title and interest in and to all property of whatever kind and nature, whether real, personal, or mixed, and things, and choses in action, and every right, privilege,

interest and asset of every conceivable value or benefit then existing or pertaining to it, or which would inure to it, immediately by operation of law and without the necessity of any conveyance or transfer and without any further act or deed shall vest in the stock Bank. The stock Bank shall have, hold, and enjoy the same in its own right as fully and to the same extent as the same was possessed, held and enjoyed by the mutual Bank. The stock Bank at the time and the taking effect of the Conversion shall continue to have and succeed to all the rights, obligations and relations of the mutual Bank. All pending actions and other judicial or administrative proceedings to which the Bank was a party shall not be discontinued by reason of the Conversion, but may be prosecuted to final judgment or order in the same manner as if the Conversion had not been made and the stock Bank resulting from the Conversion may continue the actions in its name notwithstanding the Conversion. Upon the Conversion, each Person having a Deposit Account at the Bank prior to the Conversion will continue to have a Deposit Account, without further payment therefore, in the same amount and subject to the same terms and conditions (except for liquidation rights) as in effect prior to the Conversion. All of the Bank‘s insured Deposit Accounts will continue to be insured by the FDIC to the extent provided by applicable law. This Plan has been unanimously approved by the Board of Directors of the Bank and must be approved by the affirmative vote of at least a majority of the eligible votes of Voting Members. Each Voting Member will be entitled to cast one vote for each $100 or fraction thereof of deposits in the Bank on the Voting Record Date, and each Voting Member who is a borrower from the Bank shall be entitled to one vote for all borrowings from the Bank as of the Voting Record Date, providing that no Voting Member shall be entitled to cast more than 1,000 votes. By approving the Plan, the Voting Members will also be approving all steps necessary and incidental to the formation of the Bank (in stock form) and the Holding Company. The Conversion is also subject to the approval of the Secretary and the OTS. 2. Definitions

Acting in Concert: the term ―acting in concert‖ means (i) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement; and (ii) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. A person or company which acts in concert with another person or company (―other party‖) shall also be deemed to be acting in concert with any person or company who is also acting in concert with that other party. A Tax-Qualified Employee Plan will not be deemed to be acting in concert with its trustee or a person who serves in a similar capacity solely for the purpose of determining whether stock held by the trustee and stock held by the plan will be aggregated. Application: The application to be filed with the OTS and the Secretary by the Bank, and by the Holding Company with the OTS, in connection with the Conversion. Associate: The term ―Associate,‖ when used to indicate a relationship with any Person, means: (i) any corporation or organization (other than the Bank, the Holding Company or a majority-owned subsidiary of the Bank or the Holding Company) of which such Person is a 2

senior officer or partner, or beneficially owns, directly or indirectly, 10% or more of any class of equity securities of the corporation or organization; (ii) any trust or other estate, if the Person has a substantial beneficial interest in the trust or estate or is a trustee or fiduciary of the trust or estate (for purposes of §§ 563b.370, 563b.380, 563b.385, 563b.390, 563b.395 and 563b.505 of the Regulations, a Person who has a substantial beneficial interest in a Tax-Qualified or Non-Tax Qualified Employee Plan, or who is a trustee or a fiduciary of the plan, is not an associate of the plan; and for purposes of § 563b.370 of the Regulations, a Tax-Qualified Employee Plan is not an associate of a Person); (iii) any Person who is related by blood or marriage to such Person and (a) who lives in the same house as the Person; or (b) who is a director or senior officer of the Bank or the Holding Company or a subsidiary thereof. Bank: ESSA Bank & Trust, Stroudsburg, Pennsylvania, in its pre-Conversion mutual form or post-Conversion stock form, as indicated by the context in which it is used. Community Offering: The offering to the general public of any unsubscribed shares, which may be effected as provided in Section 5 hereof. The Community Offering may include a Syndicated Community Offering managed by one or more investment banking firms. Control: The possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities of such Person, the ownership of voting securities of any company that possesses such power, or otherwise. Conversion: The conversion and reorganization of the Bank to stock form pursuant to this Plan, and all steps incident or necessary thereto, including the formation of the Holding Company and the Stock Offering. Conversion Stock: Shares of common stock that will be issued and sold by the Holding Company as a part of the Conversion; provided, however, that for purposes of calculating Subscription Rights and maximum purchase limitations under the Plan, references to the number of shares of Conversion Stock shall refer to the number of shares offered in the Subscription Offering. Department: The Pennsylvania Department of Banking. Deposit Account: Any deposit maintained at the Bank, including without limitation, savings, time, demand, negotiable orders of withdrawal (NOW), money market and passbook accounts, but excluding tax, insurance and other escrow accounts. Director: A member of the Board of Directors of the Bank or a member of the Board of Directors of the Holding Company. Eligibility Record Date: The close of business on April 30, 2005. Eligible Account Holder: Any Person holding a Qualifying Deposit in the Bank on the Eligibility Record Date. 3

Employee: Any individual who is employed by the Bank on a substantially full-time basis. ESOP: The Employee Stock Ownership Plan established by the Bank or the Holding Company. Estimated Price Range: The range of the minimum and maximum aggregate values of the Conversion Stock determined by the Board of Directors of the Bank and the Board of Directors of the Holding Company. The Estimated Price Range will be within the estimated pro forma market value of the Conversion Stock as determined by the Independent Appraiser prior to the Subscription Offering as updated from time to time thereafter. Exchange Act: The Securities Exchange Act of 1934, as amended. Foundation: The charitable foundation that will qualify as an exempt organization under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, the establishment and funding of which is contemplated by Section 14 herein. Holding Company: The corporation which, upon completion of the Conversion, will own all of the outstanding common stock of the Bank. Independent Appraiser: An appraiser retained by the Bank to prepare an appraisal of the pro forma market value of the Conversion Stock. Internal Revenue Code: The Internal Revenue Code of 1986, as amended. Liquidation Account: The interest in the Bank received by Eligible Account Holders and Supplemental Eligible Account Holders in connection with the Conversion, as set forth in Section 13 of this Plan. Local Community: The Counties of Monroe and Northhampton in the Commonwealth of Pennsylvania. Market Maker: A dealer ( i.e. , any Person who engages directly or indirectly as agent, broker or principal in the business of offering, buying, selling, or otherwise dealing or trading in securities issued by another Person) who, with respect to a particular security, (i) regularly publishes bona fide , competitive bid and offer quotations in a recognized inter-dealer quotation system; or (ii) furnishes bona fide competitive bid and offer quotations on request; and (iii) is ready, willing, and able to effect transactions in reasonable quantities at his quoted prices with other brokers or dealers. Member: Any Person or entity who qualifies as a member of the Bank pursuant to its articles of incorporation and bylaws. Non-Tax-Qualified Employee Benefit Plan: Any stock option, bonus stock or restricted stock plan or other employee benefit plan that is not a ―Tax-Qualified Employee Benefit Plan‖ and that is maintained by the Bank or the Holding Company for the benefit of Officers, Employees or Directors of the Bank or the Holding Company, or any Affiliate of any of them. 4

Officer: An executive officer of the Holding Company or the Bank, including the Chief Executive Officer, President, Executive or Senior Vice Presidents in charge of principal business functions, Secretary, Treasurer and any other person performing similar functions. Order Form: Any form to be used in the Subscription Offering and in the Community Offering or the Syndicated Community Offering to purchase Conversion Stock. Person: An individual, a corporation, a partnership, an association, a joint-stock company, a trust, any unincorporated organization, or a government or political subdivision thereof. Plan: This Plan of Conversion of the Bank, including any amendment approved as provided in this Plan. Public Offering: The offering for sale by the Underwriters to the general public of any shares of Conversion Stock not subscribed for in the Subscription Offering or the Community Offering. Purchase Price: The price per share, determined as provided in Section 5 of the Plan, at which the Conversion Stock will be sold in accordance with the terms hereof. Qualifying Deposit: The aggregate balance of all Deposit Accounts of an Eligible Account Holder as of the Eligibility Record Date or a Supplemental Eligible Account Holder as of the Supplemental Eligibility Record Date, in each case provided such aggregate balance is not less than $50. Resident and Residence: Any person who occupies a dwelling within the Commonwealth of Pennsylvania or county and establishes an ongoing physical presence within the Commonwealth of Pennsylvania or county together with an indication that such presence is something other than merely transitory in nature. To the extent the person is a corporation or other business entity, the principal place of business or headquarters shall be in the Commonwealth of Pennsylvania or county. To the extent a person is a personal benefit plan, the circumstances of the beneficiary shall apply with respect to this definition. In the case of all other benefit plans, the circumstances of the trustee shall be examined for purposes of this definition. The Bank may utilize deposit or loan records or such other evidence provided to it to make a determination as to whether a person is a Resident. In all cases, however, such a determination shall be made in the sole discretion of the Bank. SEC: Securities and Exchange Commission. Secretary: The Secretary of Pennsylvania Department of Banking. Special Meeting: The Special Meeting of Voting Members called for the purpose of considering and voting upon the Plan of Conversion. Stock Offering: The offering and issuance, pursuant to this Plan, of the Conversion Stock in the Subscription Offering, Community Offering or Syndicated Community Offering, as the case may be. 5

Subscription Offering: The offering of shares of Conversion Stock for subscription and purchase pursuant to Section 5 of the Plan. Subscription Rights: Non-transferable, non-negotiable, personal rights of the Bank‘s Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account Holders, and Voting Members, to subscribe for shares of Conversion Stock in the Subscription Offering. Supplemental Eligibility Record Date: The close of business on the last day of the calendar quarter preceding approval of the Plan by the Secretary. Supplemental Eligible Account Holder: Any person holding a Qualifying Deposit (other than an officer or director of the Bank and their associates) on the Supplemental Eligibility Record Date. Syndicated Community Offering: The offering of Conversion Stock, following or concurrently with the Community Offering, through a syndicate of broker-dealers. Tax-Qualified Employee Plans: Any defined benefit plan or defined contribution plan of the Bank or the Holding Company, such as the ESOP and the Bank‘s 401(k) savings plan, which with its related trust meets the requirements to be ―qualified‖ under Section 401 of the Internal Revenue Code. Underwriters: The investment banking firm or firms agreeing to purchase Conversion Stock in order to offer and sell such Conversion Stock in the Public Offering. Voting Member: Any person holding a Deposit Account on the Voting Record Date, or any borrower who qualifies as a Voting Member on the Voting Record Date. Voting Record Date: The date fixed by the Board of Directors as the date for determining Voting Members of the Bank entitled to notice of and to vote at the Special Meeting, which date shall not be more than 60 nor less than 20 days before the date of the Special Meeting. 3. Regulatory and Depositor Approvals

This Plan, having been unanimously adopted by the Board of Directors of the Bank, shall be submitted, together with an Application, to the OTS and to the Secretary for approval. Following approval of this Plan by the Board of Directors of the Bank, the Bank shall cause notice of the adoption of the Plan, and of its intention to convert to stock form, to be conspicuously posted at its home office and each of its branch offices. The Bank shall also issue a press release containing all of the material terms of the proposed Conversion and may place an advertisement containing such material terms in a newspaper having general circulation in the communities in which the principal office and branches of the Bank are located. Following (i) approval of the Bank‘s Application by the OTS and the Secretary, and (ii) the receipt of any necessary waivers from the OTS or the Secretary, the Bank shall submit the 6

Plan to the Bank‘s Voting Members for approval at the Special Meeting. The Bank shall mail to each Voting Member, at his or her last known address appearing on the records of the Bank, a Notice of Special Meeting, a proxy card and a Proxy Statement and certain other documents relating to the Bank and its Conversion. The Special Meeting shall be held upon written notice given no less than 20 days nor more than 45 days prior to the date of the Special Meeting. At the Special Meeting, each Voting Member shall be entitled to cast one vote in person or by proxy for every one hundred dollars ($100.00) of Deposit Accounts such Voting Member had with the Bank as of the Voting Record Date. Each Voting Member who is a borrower of the Bank shall be entitled to cast one vote for all borrowings from the Bank as of the Voting Record Date. No Voting Member, however, shall be entitled to cast more than 1,000 votes. The Board of Directors shall appoint an independent custodian and tabulator to receive and hold proxies to be voted at the Special Meeting and count the votes cast in favor of and in opposition to the Plan. The Secretary shall be notified of the results of the Special Meeting by a certificate signed by the appropriate Officers of the Bank promptly after the conclusion of the Special Meeting. The Plan must be approved by the affirmative vote of at least a majority of the number of votes entitled to be cast by Voting Members at the Special Meeting. If the Plan is so approved, the Bank shall take all other necessary steps to effect the Conversion subject to the terms and conditions of the Plan. If the Plan is not so approved, upon conclusion of the Special Meeting and any adjournment or postponement thereof, the Plan shall not be implemented without further vote and all funds submitted in the Subscription Offering and Community Offering shall be returned to subscribers, with interest as provided herein, and all withdrawal authorizations shall be canceled. The Board of Directors of the Bank intends to take all necessary steps to form the Holding Company. The Holding Company will make timely applications for any requisite regulatory approvals, including an Application with the Secretary, a savings and loan holding company application with the OTS, and a Registration Statement on Form S-1 with the SEC. 4. Conversion Procedures

The Conversion Stock will be offered for sale in the Subscription Offering to Eligible Account Holders, the Tax-Qualified Employee Plans, Supplemental Eligible Account Holders and Voting Members in the priorities set forth in Section 5.C of this Plan, prior to or within 45 days after the date of the Special Meeting. The Subscription Offering may begin as early as the mailing of the proxy statement for the Special Meeting. The Bank may, either concurrently with, at any time during, or promptly after the Subscription Offering, also offer the Conversion Stock to and accept orders from other Persons in a Community Offering with a preference given to natural persons residing in the Local Community; provided that the Bank‘s Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account Holders and Voting Members shall have the priority rights to subscribe for Conversion Stock set forth in Section 5 of this Plan. The Holding Company and the Bank may delay commencing the Subscription Offering beyond such 45-day period in the event there exists unforeseen material adverse market 7

or financial conditions. If the Subscription Offering commences prior to the Special Meeting, subscriptions will be accepted subject to the approval of the Plan at the Special Meeting. The period for the Subscription Offering will be not less than 20 days nor more than 45 days and the period for the Community Offering will be not more than 45 days, unless extended by the Bank. If, upon completion of the Subscription Offering and any Community Offering, any shares of Conversion Stock remain available for sale, such shares may, if feasible, be offered for sale in a Syndicated Community Offering or sold to the Underwriters for resale to the general public in the Public Offering. If for any reason a Syndicated Community Offering or Public Offering of all shares not sold in the Subscription Offering and Community Offering cannot be effected, the Holding Company and the Bank will use their best efforts to obtain other purchasers, subject to regulatory approval. Completion of the sale of all shares of Conversion Stock not sold in the Subscription Offering and Community Offering is required within 45 days after termination of the Subscription Offering, subject to extension of such 45-day period by the Holding Company and the Bank with the approval of the Secretary, and the OTS if required. The Holding Company and the Bank may jointly seek one or more extensions of such 45-day period if necessary to complete the sale of all shares of Conversion Stock. In connection with such extensions, subscribers and other purchasers will be permitted to increase, decrease or rescind their subscriptions or purchase orders to the extent required by the OTS and/or the Secretary in approving the extensions. Completion of the sale of all shares of Conversion Stock is required within 24 months after the date of the Special Meeting. The Bank may elect to pay fees on a per share basis to brokers who assist Persons in determining to purchase Conversion Stock in the Community Offering and Syndicated Community Offering. The Boards of Directors of the Holding Company and the Bank also intend to take all necessary steps to establish the Foundation and to fund the Foundation in the manner set forth in Section 14 hereof. Upon the issuance of the Conversion Stock, the Holding Company will purchase from the Bank all of the capital stock of the Bank to be issued by the Bank in the Conversion in exchange for at least 50% of the Conversion proceeds. The Boards of Directors of the Bank may determine for any reason at any time prior to the issuance of the Conversion Stock not to utilize a holding company form of organization in the Conversion. If the Board of Directors determines not to complete the Conversion utilizing a holding company form of organization, the stock of the Bank will be issued and sold in accordance with the Plan. In such case, the Holding Company‘s registration statement will be withdrawn from the SEC, the Bank will take steps necessary to complete the Conversion, including filing any necessary documents with the Secretary and the OTS and will issue and sell the Conversion Stock in accordance with this Plan. In such event, any subscriptions or orders received for Conversion Stock of the Holding Company shall be deemed to be subscriptions or orders for Conversion Stock of the Bank, and the Bank shall take such steps as permitted or required by the OTS, the Secretary and the SEC. 8

5.

Stock Offering A. Total Number of Shares and Purchase Price of Conversion Stock

The total number of shares of Conversion Stock to be issued and sold in the Conversion will be determined jointly by the Board of Directors of the Holding Company and the Board of Directors of the Bank prior to the commencement of the Subscription Offering, subject to adjustment if necessitated by market or financial conditions prior to consummation of the Conversion. In particular, the total number of shares may be increased by up to 15% of the number of shares offered in the Subscription and Community Offering if the Estimated Price Range is increased subsequent to the commencement of the Subscription and Community Offering to reflect changes in market and financial conditions, demand for the shares, and regulatory considerations. All shares of Conversion Stock offered for sale in the Subscription Offering, Community Offering, Syndicated Community Offering or Public Offering will be sold at a uniform price per share referred to in this Plan as the Purchase Price. The aggregate price for which all shares of Conversion Stock will be sold will be based on an independent appraisal of the estimated total pro forma market value of the Holding Company and the Bank. The appraisal will be performed in accordance with regulatory guidelines and will be made by an Independent Appraiser experienced in the area of thrift institution appraisals. The appraisal will include, among other things, an analysis of the historical and pro forma operating results and capital of the Bank and a comparison of the Holding Company, the Bank and the Conversion Stock with comparable thrift institutions and holding companies and their respective outstanding capital stock. Prior to the commencement of the Subscription and Community Offerings, an Estimated Price Range will be established, which range will vary within 15% above to 15% below the midpoint of such range. The number of shares of Conversion Stock to be issued and the Purchase Price per share may be increased or decreased by the Bank. In the event that the aggregate Purchase Price of the Conversion Stock to be issued in the Conversion is below the minimum of the Estimated Price Range, or materially above the maximum of the Estimated Price Range, resolicitation of purchasers may be required; provided that up to a 15% increase above the maximum of the Estimated Price Range will not be deemed material so as to require a resolicitation. In the event that the aggregate Purchase Price of the Conversion Stock is below the minimum of the Estimated Price Range or in excess of 15% above the maximum of the Estimated Price Range, and a resolicitation is required, such resolicitation shall be effected in such manner and within such time as the Bank shall establish, with the approval of the OTS and the Secretary, if required. Based upon the independent appraisal, the Board of Directors of the Holding Company and the Board of Directors of the Bank will jointly fix the Purchase Price. The Purchase Price for each share of Conversion Stock will be determined by dividing the estimated appraised aggregate pro forma market value of the Holding Company and the Bank, based on the independent appraisal, by the total number of shares of Conversion Stock to be issued and sold by the Holding Company upon Conversion. If, following completion of the Subscription Offering and any Community Offering or Syndicated Community Offering, a Public Offering is effected, the Purchase Price for each share of Conversion Stock in the Public Offering will be the same as the Purchase Price in the Subscription and Community Offering. 9

The price paid by the Underwriters for each share of Conversion Stock will be the Purchase Price less a negotiated underwriting discount. Notwithstanding the foregoing, no sale of Conversion Stock may be consummated unless, prior to such consummation, the Independent Appraiser confirms to the Bank, the Holding Company and to the Secretary and the OTS that, to the best knowledge of the Independent Appraiser, nothing of a material nature has occurred which, taking into account all relevant factors, would cause the Independent Appraiser to conclude that the aggregate value of the Conversion Stock at the Purchase Price is incompatible with its estimate of the aggregate consolidated pro forma market value of the Holding Company and the Bank. If such confirmation is not received, the Bank may cancel the Subscription and Community Offerings and/or any Syndicated Community Offering or Public Offering, extend the Conversion, establish a new Estimated Price Range, extend, reopen or hold new Subscription, Community or Syndicated Community Offerings, or take such other action as the Secretary and the OTS may permit. B. Purchase by the Holding Company of the Stock of the Bank Upon the consummation of the sale of all of the Conversion Stock, the Holding Company will purchase from the Bank all of the capital stock of the Bank to be issued by the Bank in the Conversion in exchange for at least 50% of the Conversion proceeds. The Holding Company may retain up to 50% of the proceeds of the Conversion. The Conversion proceeds will provide economic strength to the Holding Company and the Bank for the future in a highly competitive and regulated environment and would facilitate expansion through acquisitions, diversification into other related businesses and for other business and investment purposes, including the payment of dividends and future repurchases of Conversion Stock. C. Subscription Rights Non-transferable Subscription Rights to purchase shares will be issued without payment therefor to Eligible Account Holders, the Tax-Qualified Employee Plans, Supplemental Eligible Account Holders and the Voting Members as set forth below. 1. Preference Category No. 1: Eligible Account Holders Each Eligible Account Holder shall receive non-transferable Subscription Rights to subscribe for shares of Conversion Stock in an amount equal to the greater of 35,000 shares, one-tenth of one percent (.10%) of the total offering of shares, or 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares of common stock to be issued by a fraction, the numerator of which is the amount of the Qualifying Deposit of the Eligible Account Holder and the denominator is the total amount of Qualifying Deposits of all Eligible Account Holders as of the Eligibility Record Date. If sufficient shares are not available, shares shall be allocated first to permit each subscribing Eligible Account Holder to purchase to the extent possible 100 shares, and thereafter among each subscribing Eligible Account 10

Holder pro rata in the same proportion as his Qualifying Deposit bears to the total Qualifying Deposits of all subscribing Eligible Account Holders whose subscriptions remain unsatisfied. Non-transferable Subscription Rights to purchase Conversion Stock received by Directors and Officers of the Bank and their Associates, based on their increased deposits in the Bank in the one-year period preceding the Eligibility Record Date, shall be subordinated to all other subscriptions involving the exercise of non-transferable Subscription Rights of Eligible Account Holders. 2. Preference Category No. 2: Tax-Qualified Employee Plans. The Tax-Qualified Employee Plans shall be given the opportunity to purchase in the aggregate up to 10% of the shares issued in the Stock Offering. In the event of an oversubscription in the Stock Offering, subscriptions for shares by the Tax-Qualified Employee Plans may be satisfied, in whole or in part, out of authorized but unissued shares of the Holding Company subject to the maximum purchase limitations applicable to such plans as set forth in Section 5E, or may be satisfied, in whole or in part, through open market purchases by the Tax-Qualified Employee Plans subsequent to the closing of the Stock Offering. If the final valuation exceeds the maximum of the Offering Range, up to 10% of the Common Stock issued in the Stock Offering may be sold to the Tax-Qualified Employee Plans notwithstanding any oversubscription by Eligible Account Holders. 3. Preference Category No. 3: Supplemental Eligible Account Holders Each Supplemental Eligible Account Holder shall receive non-transferable Subscription Rights to subscribe for shares of Conversion Stock in an amount equal to the greater of 35,000 shares, one-tenth of one percent (.10%) of the total offering of shares, or 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares of common stock to be issued by a fraction, the numerator of which is the amount of the qualifying deposit of the Supplemental Eligible Account Holder and the denominator is the total amount of qualifying deposits of all Supplemental Eligible Account Holders in the converting Bank, in each case on the Supplemental Eligibility Record Date. Subscription Rights received pursuant to this category shall be subordinated to all Subscription Rights received by Eligible Account Holders and the Tax-Qualified Employee Plans pursuant to Category Nos. 1 and 2 above. Any non-transferable Subscription Rights to purchase shares received by an Eligible Account Holder in accordance with Category No. 1 shall reduce to the extent thereof the Subscription Rights to be distributed to such person pursuant to this Category. 11

In the event of an oversubscription for shares under the provisions of this subparagraph, the shares available shall be allocated first to permit each subscribing Supplemental Eligible Account Holder, to the extent possible, to purchase a number of shares sufficient to make his total allocation (including the number of shares, if any, allocated in accordance with Category No. 1) equal to 100 shares, and thereafter among each subscribing Supplemental Eligible Account Holder pro rata in the same proportion as his Qualifying Deposit bears to the total Qualifying Deposits of all subscribing Supplemental Eligible Account Holders whose subscriptions remain unsatisfied. 4. Preference Category No. 4: Voting Members To the extent there are sufficient shares remaining after satisfaction of subscriptions by Eligible Account Holders, the Tax-Qualified Employee Plans, and Supplemental Eligible Account Holders, each Voting Member who is not an Eligible Account Holder or Supplemental Eligible Account Holders shall receive non-transferable subscription rights to subscribe for shares of Common Stock offered in the Stock Offering in an amount equal to the greater of 35,000 shares, or one-tenth of one percent (.1%) of the total shares offered in the Stock Offering. In the event Voting Members subscribe for a number of shares which, when added to the shares subscribed for by Eligible Account Holders, the Tax-Qualified Employee Plans, and Supplemental Eligible Account Holders, is in excess of the total shares offered in the Stock Offering, the subscriptions of Voting Members will be allocated among subscribing Voting Members so as to permit each subscribing Voting Member to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of 100 shares or the number of shares for which such person has subscribed. Thereafter, unallocated shares will be allocated to each subscribing Voting Member whose subscription remains unfilled on a pro rata basis based on the size of the order of each Voting Member. D. Community Offering, Syndicated Offering and Public Offering 1. Any remaining shares of Conversion Stock not sold in the Subscription Offering may be offered for sale to the general public through a Community Offering, with preference as to the purchase of Conversion Stock given first to natural persons residing in the Bank‘s Local Community and then to the public at large. The Community Offering, if any, may commence simultaneously with the Subscription Offering, or may commence during or after the commencement of the Subscription Offering, as the Board of Directors of the Holding Company and the Board of Directors of the Bank so determine. The right to subscribe for shares of Conversion Stock in the Community Offering is subject to the right of the Bank and Holding Company to accept or reject such subscriptions in whole or in part in their sole discretion. Conversion Stock being sold in the Community Offering will be offered and sold in a manner that will achieve the widest distribution of the Conversion Stock. No person, by himself or herself, or with an Associate or group of Persons acting in concert, may subscribe for or purchase more than 35,000 shares of Conversion Stock offered in the Community Offering; provided, 12

however, that the amount permitted to be purchased in the Community Offering may be increased to 5% of the total offering of shares without the resolicitation of subscribers, unless required by the Secretary and/or the OTS. If the maximum purchase limit is so increased, orders accepted in the Community Offering shall be filled up to a maximum of 2% of the total offering and thereafter remaining shares shall be allocated on an equal number of shares basis per order until all orders have been filled. Further, the Bank may limit total subscriptions under this Section 5.D.1 so as to assure that the number of shares available for the Public Offering may be up to a specified percentage of the number of shares of Conversion Stock. The Community Offering shall be completed within 45 days after the termination of the Subscription Offering, unless such period is extended. 2 . If any Conversion Stock remains unsold after the close of the Subscription and Community Offerings, the Holding Company and the Bank may use the services of a syndicate of registered broker-dealers to sell such unsold shares on a best efforts basis in a Syndicated Community Offering. The syndicate of registered broker-dealers may be managed by one of the syndicate members who will act as agent of the Holding Company and the Bank to assist the Holding Company and the Bank in the sale of the Conversion Stock. Neither the syndicate manager nor any other syndicate member shall have any obligation to take or purchase any of the shares of Conversion Stock in the Syndicated Community Offering. No person may subscribe for or purchase more than 35,000 shares of Conversion Stock offered in any Syndicated Community Offering, subject to the overall purchase limitations; provided, however, that the amount permitted to be purchased in the Syndicated Community Offering may be increased to 5% of the total offering of shares without the resolicitation of subscribers, unless required by the Secretary and/or the OTS. If the maximum purchase limit is so increased, orders accepted in the Syndicated Community Offering shall be filled up to a maximum of 2% of the total offering and thereafter remaining shares shall be allocated on an equal number of shares basis per order until all orders have been filled. Any shares of Conversion Stock not sold in the Subscription Offering, the Community Offering or the Syndicated Community Offering may be offered for sale through an underwritten firm commitment public offering. Any Syndicated Community Offering shall be completed within 45 days after the termination of the Subscription Offering, unless such period is extended. 3. Any shares of Conversion Stock not sold in the Subscription Offering, the Community Offering or any Syndicated Community Offering, if any, shall then be sold to the Underwriters for resale to the general public in the Public Offering. It is expected that the Public Offering will commence as soon as practicable after termination of the Subscription Offering and any Community Offering or Syndicated Community Offering. No person, by himself or herself, or with an Associate or group of Persons acting in concert, may subscribe for or purchase more than 35,000 shares of Conversion Stock offered in the Public Offering; provided, however, that the amount permitted to be purchased in the Public Offering may be increased to 5% of the total offering of shares without the resolicitation of subscribers, unless required by the Secretary and/or the OTS. The Public Offering shall be completed within 45 days after the termination of the Subscription Offering, unless such period is extended as provided in Section 5 hereof. 13

Each share of Conversion Stock will be offered for sale in the Public Offering at the Purchase Price less any underwriting discount as provided in Section 5.A hereof, and set forth in the underwriting agreement between the Holding Company, the Bank and the Underwriters. Such underwriting agreement shall be filed with the Secretary, the OTS and the SEC. 4. If for any reason a Public Offering of unsubscribed shares of Conversion Stock cannot be effected and any shares remain unsold after the Subscription Offering and any Community Offering/Syndicated Community Offering, the Board of Directors of the Holding Company and the Board of Directors of the Bank will seek to make other arrangements for the sale of the remaining shares. Such other arrangements will be subject to the approval of the Secretary and the OTS and to compliance with applicable securities laws. E. Additional Limitations Upon Purchases of Shares of Conversion Stock The following additional limitations shall be imposed on all purchases of Conversion Stock in the Conversion: 1. The maximum purchase of Conversion Stock in the Subscription Offering by any person or group of persons through a single account is 35,000 shares. No Person, by himself or herself, or with an Associate or group of Persons acting in concert, may purchase more than 50,000 shares of Conversion Stock, except for the ESOP, which may subscribe for up to 8% of the Conversion Stock issued in the Conversion. For purposes of this paragraph, an Associate of a Person does not include a Tax-Qualified or Non-Tax Qualified Employee Plan in which the person has a substantial beneficial interest or serves as a trustee or in a similar fiduciary capacity. Moreover, for purposes of this paragraph, shares held by one or more Tax-Qualified or Non-Tax Qualified Employee Plans attributed to a Person shall not be aggregated with shares purchased directly by or otherwise attributable to that Person. 2. Directors and Officers and their Associates may not purchase in all categories in the Conversion an aggregate of more than 25.0% of the Conversion Stock. For purposes of this paragraph, an Associate of a Person does not include any Tax-Qualified Employee Plan. Moreover, any shares attributable to the Officers and Directors and their Associates, but held by one or more Tax-Qualified Employee Plans shall not be included in calculating the number of shares which may be purchased under the limitation in this paragraph. 3. The minimum number of shares of Conversion Stock that may be purchased by any Person in the Conversion is 25 shares, provided sufficient shares are available. 4. Depending upon market, financial or other conditions, the Board of Directors of the Bank and the Holding Company, with the receipt of any required approvals of the OTS and/or the Secretary and without further approval of Voting Members, may decrease or increase the purchase limitations in this Section 5 of the Plan, provided that the maximum purchase limitations may not be increased to a percentage in 14

excess of 5% of the shares issued in the Stock Offering except as provided below. If the Bank and the Holding Company increase the maximum purchase limitations, the Bank and the Holding Company are only required to resolicit Persons who subscribed for the maximum purchase amount in the Subscription Offering and may, in their sole discretion, resolicit certain other large subscribers. The maximum purchase limitation may be increased to up to 9.99% of the shares issued in the Stock Offering, provided that orders for Common Stock exceeding 5% of the shares of Common Stock issued in the Stock Offering shall not exceed in the aggregate 10% of the total shares of Common Stock issued in the Stock Offering. For purposes of this Section 5, the Directors and/or Officers of the Holding Company and the Bank shall not be deemed to be Associates or a group acting in concert solely as a result of their serving in such capacities. Each Person purchasing Conversion Stock in the Conversion shall be deemed to confirm that such purchase does not conflict with the above purchase limitations. F. Restrictions and Other Characteristics of Conversion Stock Being Sold 1. Transferability of Shares Purchased by Officers and Directors . Shares purchased by Directors or Officers may not be sold or otherwise disposed of for value for a period of one year from the date of Conversion, except for any disposition of such shares following the death of the original purchaser. The certificates representing shares of Conversion Stock issued to Directors and Officers shall bear a legend giving appropriate notice of the one-year holding period restriction. Appropriate instructions shall be given to the transfer agent for such stock with respect to the applicable restrictions relating to the transfer of restricted stock. Any shares of common stock of the Holding Company subsequently issued as a stock dividend, stock split, or otherwise, with respect to any such restricted stock, shall be subject to the same holding period restrictions for Holding Company or Bank Directors and Officers as may be then applicable to such restricted stock. 2. Purchases After Conversion by Officers and Directors . No Director or Officer of the Holding Company or of the Bank, or Associate of such a Director or Officer, shall purchase any outstanding shares of capital stock of the Holding Company, except through a broker or dealer registered with the SEC, for a period of three years following the Conversion without the prior written approval of the Secretary. This restriction does not apply, however, to: (a) negotiated transactions involving more than one percent of the outstanding common stock; (b) the purchase of common stock made pursuant to an employee stock option plan or employee stock purchase plan which meets the requirements of Section 423 of the Internal Revenue Code; or (c) the purchase of common stock pursuant to a non-tax-qualified employee stock benefit plan which may be attributable to individual Officers and Directors of the Bank or Holding Company. As used herein, the term ―negotiated transaction‖ means a transaction in which the securities 15

are offered and the terms and arrangements relating to any sale are arrived at through direct communications between the seller or any Person acting on its behalf and the purchaser or his investment representative. The term ―investment representative‖ shall mean a professional investment advisor acting as agent for the purchaser and independent of the seller and not acting on behalf of the seller in connection with the transaction. 3. Stock Repurchases by the Holding Company . Applicable OTS regulations prohibit the Holding Company from repurchasing its capital stock within one year following the Conversion, except that open market stock repurchases of up to 5% of its outstanding capital stock may be permitted if extraordinary circumstances exist and the OTS does not disapprove of such repurchases. Purchases to fund tax qualified employee stock benefit plans do not count toward this repurchase limitation. Repurchases to fund management recognition plans that have been approved by stockholders do not count toward the repurchase limitations (but prior written notification to the OTS is required). 4 . Voting Rights . After Conversion, holders of deposit accounts will not have voting rights in the Bank or the Holding Company. Exclusive voting rights as to the Bank will be vested in the Holding Company, as the sole stockholder of the Bank. Voting rights as to the Holding Company will be held exclusively by its stockholders. G. Exercise of Subscription Rights; Order Forms 1. If the Subscription Offering occurs concurrently with the solicitation of proxies for the Special Meeting, the subscription prospectus and Order Form may be sent to each Eligible Account Holder, the Tax-Qualified Employee Plans, Supplemental Eligible Account Holders and Voting Members at their last known address as shown on the records of the Bank as of the Voting Record Date. However, the Bank may, and if the Subscription Offering commences after the Special Meeting the Bank shall, furnish a subscription prospectus and Order Form only to Eligible Account Holders, the Tax-Qualified Employee Plans, Supplemental Eligible Account Holders and Voting Members who have returned to the Bank by a specified date prior to the commencement of the Subscription Offering a post card or other written communication requesting a subscription prospectus and Order Form. In such event, the Bank shall provide a postage-paid post card for this purpose and make appropriate disclosure in its proxy statement for the solicitation of proxies to be voted at the Special Meeting and/or letter sent in lieu of the proxy statement to those Eligible Account Holders, the Tax-Qualified Employee Plans, Supplemental Eligible Account Holders who are not Voting Members on the Voting Record Date. 2. Each Order Form will be preceded or accompanied by a prospectus describing the Holding Company and the Bank and the shares of Conversion Stock being offered for subscription and containing all other information required by the OTS, Secretary, or the SEC or necessary to enable Persons to make informed investment decisions regarding the purchase of Conversion Stock. 16

3. The Order Forms (or accompanying instructions) used for the Subscription Offering and any Community will contain, among other things, the following: (i) A clear and intelligible explanation of the Subscription Rights granted under the Plan to Eligible Account Holders, the Tax-Qualified Employee Plans, Supplemental Eligible Account Holders and the Voting Members; (ii) A specified expiration date by which Order Forms must be returned to and actually received by the Bank or its representative for purposes of exercising Subscription Rights, which date will be not less than 20 days after the Order Forms are mailed by the Bank; (iii) The Purchase Price to be paid for each share subscribed for when the Order Form is returned; (iv) A statement that 25 shares is the minimum number of shares of Conversion Stock that may be subscribed for under the Plan; (v) A specifically designated blank space for indicating the number of shares being subscribed for; (vi) A set of detailed instructions as to how to complete the Order Form including a statement as to the available alternative methods of payment for the shares being subscribed for; (vii) Specifically designated blank spaces for dating and signing the Order Form; (viii) An acknowledgment that the subscriber has received the subscription prospectus; (ix) A statement of the consequences of failing to properly complete and return the Order Form, including a statement that the Subscription Rights will expire on the expiration date specified on the Order Form unless such expiration date is extended by the Holding Company and the Bank, and that the Subscription Rights may be exercised only by delivering the Order Form, properly completed and executed, to the Bank or its representative by the expiration date, together with required payment of the Purchase Price for all shares of Conversion Stock subscribed for; (x) A statement that the Subscription Rights are non-transferable and that all shares of Conversion Stock subscribed for upon exercise of Subscription Rights must be purchased on behalf of the Person exercising the Subscription Rights for his own account; and (xi) A statement that, after receipt by the Bank or its representative, an order may not be modified, withdrawn or canceled without the consent of the Bank. 17

H. Method of Payment Full payment for all shares of Conversion Stock at the Purchase Price per share must accompany all completed Order Forms. Payment may be made by check, bank draft or money order, or if the subscriber has a Deposit Account in the Bank (including a certificate of deposit), the subscriber may authorize the Bank to charge the subscriber‘s account. Payment may not be made by wire transfer or any other electronic transfer of funds. If a subscriber authorizes the Bank to charge his or her account, the funds will continue to earn interest, but may not be used by the subscriber until all Conversion Stock has been sold or the Plan is terminated, whichever is earlier. The Bank will allow subscribers to purchase shares by withdrawing funds from certificate accounts without the assessment of early withdrawal penalties with the exception of prepaid interest in the form of promotional gifts. In the case of early withdrawal of only a portion of such account, the certificate evidencing such account shall be canceled if the remaining balance of the account is less than the applicable minimum balance requirement, in which event the remaining balance will earn interest at the passbook rate. This waiver of the early withdrawal penalty is applicable only to withdrawals made in connection with the purchase of Conversion Stock under the Plan. Interest will also be paid, at not less than the then-current passbook rate, on all orders paid in cash, by check or money order, from the date payment is received until consummation of the Conversion. Payments made in cash, by check or money order will be placed by the Bank in an escrow or other account established specifically for this purpose. In the event of an unfilled amount of any order, the Bank will make an appropriate refund or cancel an appropriate portion of the related withdrawal authorization, after consummation of the Conversion. If for any reason the Conversion is not consummated, purchasers will have refunded to them all payments made (with applicable interest) and all withdrawal authorizations will be canceled in the case of subscription payments authorized from accounts at the Bank. If any Tax-Qualified Employee Plans or Non-Tax-Qualified Employee Plans subscribe for shares during the Subscription Offering, such plans will not be required to pay for the shares subscribed for at the time they subscribe, but may pay for such shares of Conversion Stock subscribed for upon consummation of the Conversion. In the event that, after the completion of the Subscription Offering, the number of shares to be issued is increased above the maximum of the appraisal range included in the Prospectus, the Tax-Qualified and Non-Tax Qualified Employee Plans shall be entitled to increase their subscriptions by a percentage equal to the percentage increase in the number of shares to be issued above the maximum of the appraisal range, provided that such subscriptions shall continue to be subject to applicable purchase limits and stock allocation procedures. I. Undelivered, Defective or Late Order Forms; Insufficient Payment The Holding Company and the Bank shall have the absolute right, in their sole discretion, to reject any Order Form, including but not limited to, any Order Forms which (i) are not delivered or are returned by the United States Postal Service (or the addressee cannot be located); (ii) are not received back by the Bank or its representative, or are received after the termination date specified thereon; (iii) are defectively completed or executed; (iv) are not 18

accompanied by the total required payment for the shares of Conversion Stock subscribed for (including cases in which the subscribers‘ Deposit Accounts or certificate accounts are insufficient to cover the authorized withdrawal for the required payment); (v) are photocopies or facsimiles of the printed Order Forms mailed to each Person; or (vi) are submitted by or on behalf of a Person whose representations the Holding Company and the Bank believe to be false or who they otherwise believe, either alone or acting in concert with others, is violating, evading or circumventing, or intends to violate, evade or circumvent, the terms and conditions of this Plan. In such event, the Subscription Rights of the Person to whom such rights have been granted will not be honored and will be treated as though such Person failed to return the completed Order Form within the time period specified therein. The Bank may, but will not be required to, waive any irregularity relating to any Order Form or require submission of corrected Order Forms or the remittance of full payment for subscribed shares by such date as the Bank may specify. The interpretation of the Holding Company and the Bank of the terms and conditions of this Plan and of the proper completion of the Order Form will be final, subject to the authority of the OTS and the Secretary. J. Transfer of Subscriptions Prohibited Subscription Rights are nontransferable, and it is a violation of Federal and state law to either transfer or attempt to transfer Subscription Rights. Persons who transfer or attempt to transfer their Subscription Rights may be prosecuted and will risk forfeiture of such Subscription Rights. K. Member in Non-Qualified States or in Foreign Countries The Holding Company and the Bank will make reasonable efforts to comply with the securities laws of all states in the United States in which Persons entitled to subscribe for Conversion Stock pursuant to the Plan reside. However, no shares will be offered or sold under the Plan of Conversion to any such Person who (1) resides in a foreign country or (2) resides in a state of the United States in which a small number of Persons otherwise eligible to subscribe for shares under the Plan of Conversion reside or as to which the Holding Company and the Bank determine that compliance with the securities laws of such state would be impracticable for reasons of cost or otherwise, including, but not limited to, a requirement that the Holding Company or the Bank or any of their Officers, Directors or Employees register, under the securities laws of such state, as a broker, dealer, salesman or agent. No payments will be made in lieu of the granting of Subscription Rights to any such Person. 6. Stock Certificate of Incorporation and Bylaws

A. As part of the Conversion, the Bank will take all appropriate steps to amend its certificate of incorporation to read in the form of a Pennsylvania stock savings association certificate of incorporation, as prescribed by the Pennsylvania Banking Law. A copy of the proposed stock certificate of incorporation is available upon request. B. The Bank will also take appropriate steps to amend its bylaws to read in the form prescribed by the Banking Law for a capital stock savings association. A copy of the proposed stock bylaws is available upon request. 19

C. The effective date of the adoption of the Bank‘s stock certificate of incorporation and bylaws shall be the date of the issuance and sale of the Conversion Stock as specified by the Secretary. 7. Holding Company Certificate of Incorporation

A copy of the proposed certificate of incorporation and bylaws of the Holding Company will be made available from the Bank upon request. 8. Directors of the Bank

Each Person serving as a member of the Board of Directors of the Bank at the time of the Conversion will thereupon become a Director of the Bank after the Conversion. 9. Stock Benefit Plans

In order to provide an incentive for Directors, Officers and Employees of the Holding Company and its subsidiaries (including the Bank), the Board of Directors of the Holding Company intends to adopt, subject to shareholder approval, a stock based incentive plan following completion of the Conversion, subject to applicable regulatory requirements. 10. Contributions to Tax-Qualified Employee Plans

The Bank and the Holding Company may in their discretion make scheduled contributions to any Tax-Qualified Employee Plans, provided that any such contributions which are for the acquisition of Conversion Stock, or the repayment of debt incurred for such an acquisition, do not cause the Bank to fail to meet its regulatory capital requirements. 11. Securities Registration and Market Making

Promptly following the Conversion, the Holding Company will register its common stock with the SEC pursuant to the Exchange Act. In connection with the registration, the Holding Company will undertake not to deregister such common stock, without the approval of the Secretary for a period of three years thereafter. The Holding Company shall use its best efforts to encourage and assist two or more Market Makers to establish and maintain a market for its common stock promptly following Conversion. The Holding Company will also use its best efforts to cause its common stock to be quoted on the Nasdaq System or to be listed on a national or regional securities exchange. 12. Status of Deposit Accounts and Loans Subsequent to Conversion

Each Deposit Account holder shall retain, without payment, a withdrawable Deposit Account or Accounts in the Bank, equal in amount to the withdrawable value of such account holder‘s Deposit Account or Accounts prior to the Conversion. All Deposit Accounts will continue to be insured by the Federal Deposit Insurance Corporation up to the applicable limits of insurance coverage, and shall be subject to the same terms and conditions (except as to voting and liquidation rights) as such Deposit Account in the Bank at the time of the Conversion. All loans shall retain the same status after Conversion as these loans had prior to Conversion. 20

13.

Liquidation Account

For purposes of granting to Eligible Account Holders and Supplemental Eligible Account Holders who continue to maintain Deposit Accounts at the Bank a priority in the event of a complete liquidation of the Bank, the Bank will, at the time of Conversion, establish a liquidation account in an amount equal to the surplus and reserves of the Bank as shown on its latest statement of financial condition contained in the final offering circular used in connection with the Conversion. The creation and maintenance of the liquidation account will not operate to restrict the use or application of any of the capital accounts of the Bank; provided, however, that such capital accounts will not be voluntarily reduced below the required dollar amount of the liquidation account. Each Eligible Account Holder and Supplemental Eligible Account Holder shall, with respect to the Deposit Account held, have a related inchoate interest in a portion of the liquidation account balance (―subaccount balance‖). The initial subaccount balance of a Deposit Account held by an Eligible Account Holder or Supplemental Eligible Account Holder shall be determined by multiplying the opening balance in the liquidation account by a fraction, the numerator of which is the amount of the Qualifying Deposit in the Deposit Account on the Eligibility Record Date or the Supplemental Eligibility Record Date and the denominator is the total amount of the Qualifying Deposits of all Eligible Account Holders or Supplemental Eligible Account Holders on such record dates in the Bank. Such initial subaccount balance shall not be increased, and it shall be subject to downward adjustment as provided below. If the deposit balance in any Deposit Account of an Eligible Account Holder or Supplemental Eligible Account Holder at the close of business on any annual closing date subsequent to the record date is less than the lesser of (i) the deposit balance in such Deposit Account at the close of business on any other annual closing date subsequent to the Eligibility Record Date or the Supplemental Eligibility Record Date or (ii) the amount of the Qualifying Deposit in such Deposit Account on the Eligibility Record Date or the Supplemental Eligibility Record Date, the subaccount balance shall be reduced in an amount proportionate to the reduction in such deposit balance. In the event of a downward adjustment, the subaccount balance shall not be subsequently increased, notwithstanding any increase in the deposit balance of the related Deposit Account. If all funds in such Deposit Account are withdrawn, the related subaccount balance shall be reduced to zero. In the event of a complete liquidation of the Bank (and only in such event), each Eligible Account Holder and Supplemental Eligible Account Holder shall be entitled to receive a liquidation distribution from the liquidation account in the amount of the then-current adjusted subaccount balances for Deposit Accounts then held before any liquidation distribution may be made to stockholders. No merger, consolidation, bulk purchase of assets with assumptions of Deposit Accounts and other liabilities, or similar transactions with another institution the accounts of which are insured by the Federal Deposit Insurance Corporation, shall be considered to be a complete liquidation. In such transactions, the liquidation account shall be assumed by the surviving institution. 21

14.

Establishment And Funding Of Charitable Foundation .

As part of the Conversion, the Holding Company and the Bank intend to establish the Foundation, which will qualify as an exempt organization under Section 501(c)(3) of the Internal Revenue Code, and to donate to the Foundation cash and shares of Common Stock, in an aggregate amount up to 8% of the value of the shares of Conversion Stock sold in the Conversion. The Foundation is being formed in connection with the Conversion in order to complement the Bank‘s existing community reinvestment activities and to share with the Bank‘s local community a part of the Bank‘s financial success as a locally headquartered, community minded, financial services institution. The funding of the Foundation with Common Stock accomplishes this goal as it enables the community to share in the growth and profitability of the Holding Company and the Bank over the long- term. The Foundation will be dedicated to the promotion of charitable purposes including community development, grants or donations to support housing assistance, not-for-profit community groups and other types of organizations or civic minded projects. The Foundation will annually distribute total grants to assist charitable organizations or to fund projects within its local community of not less than 5% of the average fair market value of Foundation assets each year, less certain expenses. In order to serve the purposes for which it was formed and maintain its Section 501(c)(3) qualification, the Foundation may sell, on an annual basis, a limited portion of the Common Stock contributed to it by the Holding Company. The board of directors of the Foundation will be comprised of individuals who are Officers and/or Directors of the Holding Company or the Bank. The board of directors of the Foundation will be responsible for establishing the policies of the Foundation with respect to grants or donations, consistent with the stated purposes of the Foundation. Depositors shall approve the establishment and funding of the Foundation as required by the OTS. 15. Restrictions on Acquisition of the Bank

Banking regulations limit acquisitions, and offers to acquire, direct or indirect beneficial ownership of more than 10% of any class of an equity security of the Bank or the Holding Company. In addition, the stock certificate of incorporation of the Bank shall provide that for a period of five years following completion of the Conversion: (i) no Person ( i.e. , no individual, group acting in concert, corporation, partnership, association, joint stock company, trust, or unincorporated organization or similar company, syndicate, or any other group formed for the purpose of acquiring, holding or disposing of securities of an insured institution) shall directly or indirectly offer to acquire or acquire beneficial ownership of more than 10% of any class of the Bank‘s equity securities. Shares beneficially owned in violation of this charter provision shall not be counted as shares entitled to vote and shall not be voted by any Person or counted as voting shares in connection with any matter submitted to the shareholders for a vote. 22

16.

Amendment or Termination of the Plan

If deemed necessary or desirable, this Plan may be substantively amended by the Board of Directors of the Bank as a result of comments from the OTS, the Department or otherwise at any time prior to solicitation of proxies from Voting Members to vote on this Plan, and at any time thereafter by the Board of Directors of the Bank with the concurrence of the OTS and if required, the Secretary. Any amendment to this Plan made after approval by Voting Members with the approval of the OTS shall not require further approval by Voting Members unless otherwise required by the OTS or the Secretary. The Board of Directors of the Bank may terminate this Plan at any time prior to the Special Meeting of Members to vote on this Plan, and at any time thereafter with the concurrence of the OTS and if required, the Secretary. The Plan shall terminate if the sale of all shares of Conversion Stock is not completed within 24 months of the date of the Special Meeting. A specific resolution approved by a majority of the Board of Directors of the Bank is required in order for the Bank to terminate the Plan prior to the end of such 24-month period. 17. Expenses of the Conversion

The Holding Company and the Bank shall use their best efforts to assure that expenses incurred by them in connection with the Conversion shall be reasonable. 18. Tax Matters

Consummation of the Conversion is expressly conditioned upon prior receipt of either a ruling of the United States Internal Revenue Service or an opinion of tax counsel or other tax advisor with respect to federal taxation, and either a ruling of the Pennsylvania taxation authorities or an opinion of tax counsel or other tax advisor with respect to Pennsylvania taxation, to the effect that consummation of the transactions contemplated herein will not be taxable to the Holding Company or the Bank. 19. Extension of Credit for Purchase of Common Stock The Bank may not loan funds or otherwise extend credit to any Person to purchase in the Conversion shares of Conversion Stock. 20. Registration Under Securities Exchange Act of 1934

The Holding Company shall register its Conversion Stock under the Securities Exchange Act of 1934, as amended, concurrently with or promptly following the Conversion. The Holding Company shall not deregister such securities for a period of three years thereafter. 21. Conversion Stock Not Insured The Conversion Stock will not be insured by the FDIC or any other federal or state government agency or authority. 23

22.

Interpretation

Subject to applicable law as set forth in Section 23, all interpretations of this Plan and all applications of the provisions of this Plan to particular circumstances by a majority of the Board of Directors of the Bank shall be final, subject to the authority of the OTS and the Secretary. 23. Severability

If any term, provision, covenant or restriction contained in this Plan is held by a court or a federal or state regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions contained in this Plan shall remain in full force and effect, and shall in no way be affected, impaired or invalidated. Approved on July 25, 2006 and amended on November 21, 2006. 24

Exhibit 3.1 ARTICLES OF INCORPORATION OF ESSA BANCORP, INC. ARTICLE I NAME The name of the corporation is ESSA Bancorp, Inc. (hereinafter referred to as the ―Corporation‖). ARTICLE II REGISTERED OFFICE The address of the initial registered office of the Corporation in the Commonwealth of Pennsylvania is 200 Palmer Street, Stroudsburg, Monroe County, Pennsylvania 18360. ARTICLE III NATURE OF BUSINESS The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Business Corporation Law of 1988, as amended, of the Commonwealth of Pennsylvania (the ―BCL‖). The Corporation is incorporated under the provisions of the BCL. ARTICLE IV CAPITAL STOCK A. AUTHORIZED AMOUNT. The total number of shares of capital stock which the Corporation has authority to issue is 50,000,000, of which 10,000,000 shall be serial preferred stock, par value $0.01 per share (hereinafter the ―Preferred Stock‖), and 40,000,000 shall be common stock, par value $0.01 per share (hereinafter the ―Common Stock‖). Except to the extent required by governing law, rule or regulation, the shares of capital stock may be issued from time to time by the Board of Directors without further approval of shareholders. The Corporation shall have the authority to purchase its capital stock out of funds lawfully available therefor. B. COMMON STOCK. Except as provided in this Article IV (or in any resolution or resolutions adopted by the Board of Directors pursuant hereto), the exclusive voting power of the Corporation shall be vested in the Common Stock, with each holder thereof, subject to C below, being entitled to one vote for each share of such Common Stock standing in the holder‘s name on the books of the Corporation. Subject to any rights and preferences of any class of stock having preference over the Common Stock, holders of Common Stock shall be entitled to such dividends as may be declared by the Board of Directors out of funds lawfully available therefor. Upon any liquidation, dissolution or winding up of the affairs of the Corporation, whether

voluntary or involuntary, holders of Common Stock shall be entitled to receive pro rata the remaining assets of the Corporation after the holders of any class of stock having preference over the Common Stock have been paid in full any sums to which they may be entitled. C. LIMITATION ON VOTING BY HOLDERS OF THE COMMON STOCK. 1. Notwithstanding any other provision of this Articles of Incorporation or the bylaws of the Corporation, in no event shall any record owner of any outstanding Common Stock which is beneficially owned, directly or indirectly, by a person who, as of any record date for the determination of stockholders entitled to vote on any matter, beneficially owns in excess of 10% of the then–outstanding shares of Common Stock (the ―Limit‖), be entitled, or permitted to any vote in respect of the shares held in excess of the Limit. The number of votes which may be cast by any record owner by virtue of the provisions hereof in respect of Common Stock beneficially owned by such person owning shares in excess of the Limit shall be a number equal to the total number of votes which a single record owner of all Common Stock owned by such person would be entitled to cast subject to this Section C of this Article IV, multiplied by a fraction, the numerator of which is the number of shares of such class or series which are both beneficially owned by such person and owned of record by such record owner and the denominator of which is the total number of shares of Common Stock beneficially owned by such person owning shares in excess of the Limit. 2. The following definitions shall apply to this Section C of this Article IV: (a) (b) ―Affiliate‖ shall have the meaning ascribed to it in Rule 12b–2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on the date of filing of these Articles of Incorporation. ―Beneficial ownership‖ shall be determined pursuant to Rule 13d–3 of the General Rules and Regulations under the Securities Exchange Act of 1934 (or any successor rule or statutory provision), or, if said Rule 13d–3 shall be rescinded and there shall be no successor rule or statutory provision thereto, pursuant to said Rule 13d–3 as in effect on the date of filing of this Articles of Incorporation; provided, however, that a person shall, in any event, also be deemed the ―beneficial owner‖ of any Common Stock: (i) (ii) which such person or any of its Affiliates beneficially owns, directly or indirectly; or which such person or any of its Affiliates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants, or options or otherwise, or (ii) sole or shared voting or investment power with respect thereto pursuant to any agreement, arrangement, understanding, relationship or otherwise (but shall not be deemed to be the beneficial owner of any voting shares solely by reason of a revocable proxy granted for a particular meeting of 2

stockholders, pursuant to a public solicitation of proxies for such meeting, with respect to shares of which neither such person nor any such Affiliate is otherwise deemed the beneficial owner); or (iii) which are beneficially owned, directly or indirectly, by any other person with which such first mentioned person or any of its Affiliates acts as a partnership, limited partnership, syndicate or other group pursuant to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of this Corporation;

and provided further, however, that (1) no Director or Officer of this Corporation (or any Affiliate of any such Director or Officer) shall, solely by reason of any or all of such Directors or Officers acting in their capacities as such, be deemed, for any purposes hereof, to beneficially own any Common Stock beneficially owned by another such Director or Officer (or any Affiliate thereof), and (2) neither any employee stock ownership plan or similar plan of this Corporation or any subsidiary of this Corporation, nor any trustee with respect thereto or any Affiliate of such trustee (solely by reason of such capacity of such trustee), shall be deemed, for any purposes hereof, to beneficially own any Common Stock held under any such plan. For purposes of computing the percentage of beneficial ownership of Common Stock of a person, the outstanding Common Stock shall include shares deemed owned by such person through application of this subsection but shall not include any other Common Stock which may be issuable by this Corporation pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise. For all other purposes, the outstanding Common Stock shall include only Common Stock then outstanding and shall not include any Common Stock which may be issuable by this Corporation pursuant to any agreement, or upon the exercise of conversion rights, warrants or options, or otherwise. (c) A ―person‖ shall mean any individual, firm, corporation, or other entity.

3. The Board of Directors shall have the power to construe and apply the provisions of this Section C of Article IV and to make all determinations necessary or desirable to implement such provisions, including but not limited to matters with respect to (i) the number of shares of Common Stock beneficially owned by any person, (ii) whether a person is an Affiliate of another, (iii) whether a person has an agreement, arrangement, or understanding with another as to the matters referred to in the definition of beneficial ownership, (iv) the application of any other definition or operative provision of this section to the given facts, or (v) any other matter relating to the applicability or effect of this Section C of Article IV. 4. The Board of Directors shall have the right to demand that any person who is reasonably believed to beneficially own Common Stock in excess of the Limit (or holds of record Common Stock beneficially owned by any person in excess of the Limit) supply the Corporation with complete information as to (i) the record owner(s) of all shares beneficially owned by such person who is reasonably believed to own shares in excess of the Limit, and (ii) 3

any other factual matter relating to the applicability or effect of this Section C of Article IV as may reasonably be requested of such person. 5. Any constructions, applications, or determinations made by the Board of Directors pursuant to this Section C of Article IV in good faith and on the basis of such information and assistance as was then reasonably available for such purpose shall be conclusive and binding upon the Corporation and its stockholders. 6. In the event any provision (or portion thereof) of this Section C of Article IV shall be found to be invalid, prohibited or unenforceable for any reason, the remaining provisions (or portions thereof) of this Section C of Article IV shall remain in full force and effect, and shall be construed as if such invalid, prohibited or unenforceable provision had been stricken herefrom or otherwise rendered inapplicable, it being the intent of this Corporation and its stockholders that such remaining provision (or portion thereof) of this section remain, to the fullest extent permitted by law, applicable and enforceable as to all stockholders, including stockholders owning an amount of stock over the Limit, notwithstanding any such finding. D. AUTHORITY OF BOARD TO FIX TERMS OF PREFERRED STOCK. The Board of Directors shall have the full authority permitted by law to divide the authorized and unissued shares of Preferred Stock into series and to fix by resolution full, limited, multiple or fractional, or no voting rights, and such designations, preferences, qualifications, privileges, limitations, restrictions, options, conversion rights, and other special or relative rights of the Preferred Stock or any series thereof that may be desired. E. PREEMPTIVE RIGHTS. Except as may be provided in a resolution or resolutions of the Board of Directors providing for the issue of any series of Preferred Stock, no holder of shares of capital stock of the Corporation as such shall have any preemptive or preferential right to purchase or subscribe to any part of any new or additional issue of capital stock of any class whatsoever of the Corporation, or of securities convertible into capital stock of any class whatsoever, whether now or hereafter authorized or issued. ARTICLE V INCORPORATOR The name and mailing address of the sole incorporator is as follows:
Name Address

John J. Gorman

5335 Wisconsin Ave, N.W. Suite 400 Washington, DC 20015 4

ARTICLE VI DIRECTORS A. DIRECTORS AND NUMBER OF DIRECTORS. The business and affairs of the Corporation shall be managed under the direction of a Board of Directors. Except as otherwise increased from time to time by the exercise of the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional directors, the number of directors of the Corporation shall be determined in accordance with the Corporation‘s Bylaws. In addition to the powers and authority expressly conferred upon them by statute or by these Articles of Incorporation or the Bylaws of the Corporation, the Directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. B. CLASSIFICATION AND TERMS. The Board of Directors, other than those who may be elected by the holders of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation, shall be divided into three classes, with the term of office of the first class to expire at the first annual meeting of stockholders, the term of office of the second class to expire at the annual meeting of stockholders one year thereafter and the term of office of the third class to expire at the annual meeting of stockholders two years thereafter. At each annual meeting of stockholders following such initial classification and election, Directors elected to succeed those Directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. C. NO CUMULATIVE VOTING. Shareholders of the Corporation shall not be permitted to cumulate their votes for the election of directors. D. VACANCIES. Except as otherwise fixed pursuant to the provisions of Article IV hereof relating to the right to elect directors by the holders of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation, any vacancy occurring in the Board of Directors, including any vacancy created by reason of an increase in the number of directors, shall be filled by a majority vote of the directors then in office, whether or not a quorum is present, or by a sole remaining director, and any director so chosen shall serve until the term of the class to which he was appointed shall expire and until his successor is elected and qualified. When the number of directors is changed, the Board of Directors shall determine the class or classes to which the increased or decreased number of directors shall be apportioned, provided that no decrease in the number of directors shall shorten the term of any incumbent director. E. REMOVAL. Except as otherwise required by law, and subject to the rights of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation to elect directors, any director (including persons elected by directors to fill vacancies in the Board of Directors) may be removed from office by shareholders only for cause and only upon the affirmative vote of not less than sixty percent (60%) of the total votes eligible to be cast by shareholders at a duly constituted meeting of shareholders called expressly for such purpose (after giving effect to the provisions of Article IV.C of these Articles of Incorporation). Cause for removal shall exist only if the director whose removal is proposed has been either declared of 5

unsound mind by an order of a court of competent jurisdiction, convicted of a felony or of an offense punishable by imprisonment for a term of more than one year by a court of competent jurisdiction, or deemed liable by a court of competent jurisdiction for gross negligence or misconduct in the performance of such director‘s duties to the Corporation. ARTICLE VII MEETINGS OF SHAREHOLDERS; ACTION WITHOUT A MEETING A. SPECIAL MEETINGS OF SHAREHOLDERS. Except as otherwise required by law, and subject to the rights of the holders of any class or series of Preferred Stock, special meetings of shareholders may be called only by the Board of Directors of the Corporation pursuant to a resolution approved by the affirmative vote of a majority of the directors then in office. B. ACTION WITHOUT A MEETING. An action permitted to be taken by the shareholders of the Corporation at a meeting of shareholders may be taken without a meeting only if a unanimous written consent setting forth the action so taken is signed by all shareholders who would be entitled to vote at a meeting for such purpose and such consent is filed with the Secretary of the Corporation as part of the corporate records. C. ADVANCE NOTICE OF BUSINESS. Advance notice of shareholder nominations for the election of Directors and of business to be brought by shareholders before any meeting of the shareholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation. D. QUORUM. Except as otherwise provided by law, the presence, in person or by proxy, of holders of a majority of the shares of capital stock of the Corporation entitled to vote at the meeting (after giving effect to the provisions of Article IV.C of these Articles of Incorporation) shall constitute a quorum at all meetings of the stockholders (unless or except to the extent that the presence of a larger number may be required by law), and every reference in this Articles of Incorporation to a majority or other proportion of capital stock (or the holders thereof) for purposes of determining any quorum requirement or any requirement for stockholder consent or approval shall be deemed to refer to such majority or other proportion of the votes (or the holders thereof) then entitled to be cast in respect of such capital stock (after giving effect to the provisions of Article IV.C of these Articles of Incorporation). ARTICLE VIII LIABILITY OF DIRECTORS AND OFFICERS A director shall not be personally liable for monetary damages for any action taken unless the director has breached or failed to perform the duties of his office under the BCL and the breach of failure to perform constitutes self-dealing, willful misconduct or recklessness. In addition to the foregoing, the personal liability of the directors and officers of the Corporation for monetary damages for conduct in their capacities as such shall be eliminated to the fullest extent permitted by the BCL as it exists on the effective date of these Articles of Incorporation or as such law may be thereafter in effect. No amendment, modification or repeal of this Article VIII, nor the adoption of any provision of these Articles of Incorporation inconsistent with this Article 6

VIII, shall adversely affect the rights provided hereby with respect to any claim, issue or matter in any proceeding that is based in any respect on any alleged action or failure to act occurring prior to such amendment, modification, repeal or adoption. ARTICLE IX AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS A. ARTICLES OF INCORPORATION. The Corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation, in the manner now or hereafter prescribed by law, and all rights conferred upon shareholders herein are granted subject to this reservation. No amendment, addition, alteration, change or repeal of these Articles of Incorporation shall be made unless it is first approved by the Board of Directors of the Corporation pursuant to a resolution adopted by the affirmative vote of a majority of the directors then in office, and, to the extent required by applicable law, thereafter is approved by the holders of a majority (except as provided below) of the shares of the Corporation entitled to vote generally in an election of directors (after giving effect to the provisions of Article IV.C of these Articles of Incorporation), voting together as a single class, as well as such additional vote of the Preferred Stock as may be required by the provisions of any series thereof. Notwithstanding the foregoing, and in addition to the approval by the affirmative vote of a majority of the directors then in office, an amendment to the following provisions of these Articles of Incorporation shall require the affirmative vote of eighty percent (80%) of the shares of the Corporation entitled to vote generally in the election of directors (after giving effect to the provisions of Article IV.C of these Articles of Incorporation), voting together as a single class: Article IV.C, IV.D and IV.E; Article VI; Article VII; Article VIII; and Article IX. B. BYLAWS. The Board of Directors, to the extent not prohibited by law, or the shareholders may adopt, alter, amend or repeal the Bylaws of the Corporation. Such action by the Board of Directors shall require the affirmative vote of a majority of the directors then in office at any regular or special meeting of the Board of Directors. Such action by the shareholders shall require the affirmative vote of at least a eighty percent (80%) of the shares of the Corporation entitled to vote generally in the election of directors (after giving effect to the provisions of Article IV.C of these Articles of Incorporation), as well as such additional vote of the Preferred Stock as may be required by the provisions of any series thereof. 7

THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the Business Corporation Law of 1988, as amended, of the Commonwealth of Pennsylvania through these Articles of Incorporation, has caused these Articles of Incorporation to be signed and who hereby declares and certifies that the facts herein stated are true and who has hereunto set his hand this 28 day of November, 2006.
th

/s/John J. Gorman John J. Gorman Incorporator 8

Exhibit 3.2 BYLAWS OF ESSA BANCORP, INC. ARTICLE I OFFICES 1.1 Registered Office and Registered Agent. The registered office ESSA Bancorp, Inc. (―Corporation‖) shall be located in the Commonwealth of Pennsylvania at such place as may be fixed from time to time by the Board of Directors upon filing of such notices as may be required by law, and the registered agent shall have a business office identical with such registered office. 1.2 Other Offices. The Corporation may have other offices within or outside the Commonwealth of Pennsylvania at such place or places as the Board of Directors may from time to time determine. ARTICLE II SHAREHOLDERS’ MEETINGS 2.1 Place of Meetings. All meetings of the shareholders shall be held at such place within or outside the Commonwealth of Pennsylvania as shall be determined by the Board of Directors. 2.2 Annual Meetings. The annual meeting of the shareholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year on such date and time as may be determined by the Board of Directors and stated in the notice of such meeting. 2.3 Organization and Conduct. Each meeting of the shareholders shall be presided over by the President and Chief Executive Officer, or if the President and Chief Executive Officer is not present, by the Chairman of the Board or any Executive Vice President or such other person as the directors may determine. The Secretary, or in his absence any Assistant Secretary or temporary Secretary, shall act as secretary of each meeting of the shareholders. In the absence of the Secretary, Assistant Secretary and any temporary Secretary, the chairman of the meeting may appoint any person present to act as secretary of the meeting. The chairman of any meeting of the shareholders, unless prescribed by law or regulation or unless the Board of Directors has otherwise determined, shall determine the order of the business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussions as shall be deemed appropriate by him in his sole discretion.

2.4 Notice. (a) Written notice of every meeting of shareholders shall be given by, or at the direction of, the Secretary of the Corporation or other authorized person to each shareholder of record entitled to vote at the meeting at least (i) ten days prior to the day named for a meeting that will consider a fundamental change under Chapter 19 of the Pennsylvania Business Corporation Law (―BCL‖), or any successor thereto, or (ii) five days prior to the day named for a meeting in any other case. A notice of meeting shall specify the place, day and hour of the meeting, and in the case of a special meeting, the general nature of the business to be transacted thereat, as well as any other information required by law. (b) When a meeting of shareholders is adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the Board of Directors fixes a new record date for the adjourned meeting or notice of the business to be transacted is required to be given by applicable law and such notice previously has not been given. 2.5 Record Date. The Board of Directors may fix in advance a record date for the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or any adjournment thereof, such date to be not more than 90 days and not less than (i) ten days in the case of a meeting that will consider a fundamental change under Chapter 19 of the BCL, or any successor thereto, or (ii) five days in the case of a meeting for any other purpose, prior to the date of the meeting established by the Board of Directors. 2.6 Voting List. The officer or agent having charge of the transfer books for shares of the Corporation shall make a complete list of the shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order, with the address of and number of shares held by each. The list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof. 2.7 Quorum. Except as otherwise required by law: (a) The presence of shareholders entitled to vote at least a majority of the votes that all shareholders are entitled to cast on a particular matter (after giving effect to the provisions of Article IV.C of the Articles of Incorporation) to be acted upon at a meeting of shareholders shall constitute a quorum for the purposes of consideration and action on the matter. (b) The shareholders present at a duly organized meeting can continue to do business until adjournment notwithstanding the general withdrawal of enough shareholders to leave less than a quorum. 2

2.8 Voting of Shares. (a) Except as otherwise provided by law, the Corporation‘s Articles of Incorporation or paragraph (b) of this Section 2.8, any corporate action to be taken by vote of the shareholders of the Corporation shall be authorized by receiving the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon (after giving effect to the provisions of Article IV.C of these Articles of Incorporation) and, if any shareholders are entitled to vote thereon as a class, upon receiving the affirmative vote of a majority of the votes cast by shareholders entitled to vote as a class. (b) Directors are to be elected by a plurality of votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. If, at any meeting of the shareholders, due to a vacancy or vacancies or otherwise, directors of more than one class of the Board of Directors are to be elected, each class of directors to be elected at the meeting shall be elected in a separate election by a plurality vote. 2.9 Proxies. Every shareholder entitled to vote at a meeting of shareholders may authorize another person to act for him by a proxy duly executed by the shareholder or his duly authorized attorney-in-fact. The presence of, or vote or other action at a meeting of shareholders, by a proxy of a shareholder shall constitute the presence of, or vote or other action by, the shareholder for all purposes. No proxy shall be valid after three years from the date of execution unless a longer time is expressly provided therein. 2.10 Shareholder Proposals. (a) At an annual meeting of shareholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been brought before the annual meeting by, or at the direction of, (a) the Board of Directors or (b) any shareholder of the Corporation who complies with all the requirements set forth in this Section 2.10. (b) Proposals, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation as set forth in this Section 2.10. For shareholder proposals to be included in the Corporation‘s proxy materials, the shareholder must comply with all the timing and informational requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (―Exchange Act‖) (or any successor regulation). With respect to shareholder proposals to be considered at the annual meeting of shareholders but not included in the Corporation‘s proxy materials, the shareholder notice shall be delivered to, or mailed and received at, the principal executive offices of the Corporation not later than (x) 120 days prior to the anniversary date of the initial proxy materials or of a notice of the meeting by the Corporation in connection with the immediately preceding annual meeting of shareholders of the Corporation or (y), with respect to the first annual meeting of shareholders of the Corporation, which is expected to be held in February 2008, notice must be provided by September 3, 2007. Such shareholder‘s notice shall set forth as to each matter the shareholder proposes to bring before the annual meeting (1) a description of the proposal desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (2) the name and address, as they appear on the Corporation‘s books, of the shareholder 3

proposing such business and, to the extent known, any other shareholders known by such shareholder to be supporting such proposal, (3) the class and number of shares of the Corporation‘s stock which are Beneficially Owned (as defined in Section 3.12 (d) hereof) by the shareholder submitting the notice, by any Person who is Acting in Concert with or who is an Affiliate or Associate of such shareholder (as such capitalized terms are defined in Section 3.12 (d) hereof), by any Person who is a member of any group with such shareholder with respect to the Corporation stock or who is known by such shareholder to be supporting such proposal on the date the notice is given to the Corporation, and by each Person who is in control of, is controlled by or is under common control with any of the foregoing Persons (if any of the foregoing Persons is a partnership, corporation, limited liability company, association or trust, information shall be provided regarding the name and address of, and the class and number of shares of Corporation stock which are Beneficially Owned (as defined in Section 3.12(d) hereof) by, each partner in such partnership, each director, executive officer and shareholder in such corporation, each member in such limited liability company or association, and each trustee and beneficiary of such trust, and in each case each Person controlling such entity and each partner, director, executive officer, shareholder, member or trustee of any entity which is ultimately in control of such partnership, corporation, limited liability company, association or trust), (4) the identification of any person retained or to be compensated by the shareholder submitting the proposal, or any person acting on his or her behalf, to make solicitations or recommendations to shareholders for the purpose of assisting in the passage of such proposal and a brief description of the terms of such employment, retainer or arrangement for compensation, and (5) any material interest of the shareholder in such business. (c) The Board of Directors may reject any shareholder proposal not timely made in accordance with the terms of this Section 2.10. If the Board of Directors, or a designated committee thereof or other authorized individual, determines that the information provided in a shareholder‘s notice does not satisfy the information requirements of this Section 2.10 in any material respect, the Secretary of the Corporation or a duly authorized representative of the Corporation shall promptly notify such shareholder of the deficiency in the notice. The shareholder shall have an opportunity to cure the deficiency by providing additional information to the Secretary within such period of time not to exceed five days from the date such deficiency notice is given to the shareholder as the Board of Directors or such committee or other authorized individual shall reasonably determine. If the deficiency is not cured within such period, or if the Board of Directors or such committee or other authorized individual determines that the additional information provided by the shareholder, together with information previously provided, does not satisfy the requirements of this Section 2.10 in any material respect, then the Board of Directors may reject such shareholder‘s proposal. The Secretary of the Corporation or a duly authorized representative of the Corporation shall notify a shareholder in writing whether his proposal has been made in accordance with the time and informational requirements of this Section 2.10. Notwithstanding the procedures set forth in this paragraph, if neither the Board of Directors nor such committee or other authorized individual makes a determination as to the validity of any shareholder proposal, the presiding officer of the annual meeting shall determine and declare at the annual meeting whether the shareholder proposal was made in accordance with the terms of this Section 2.10. If the presiding officer determines that a shareholder proposal was made in accordance with the terms of this Section 2.10, he shall so declare at the annual meeting and ballots shall be provided for use at the meeting with respect to any such proposal. If the 4

presiding officer determines that a shareholder proposal was not made in accordance with the terms of this Section 2.10, he shall so declare at the annual meeting and any such proposal shall not be acted upon at the annual meeting. (d) This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors and committees of the Board of Directors, but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated, filed and received as herein provided. 2.11 Judges of Election. (a) For each meeting of shareholders, the Board of Directors may appoint judges of election, who need not be shareholders, to act at the meeting or any adjournment thereof. If judges of election are not so appointed, the presiding officer of the meeting may, and on the request of any shareholder shall, appoint judges of election at the meeting. The number of judges shall be one or three. A person who is a candidate for office to be filled at the meeting shall not act as a judge. (b) The judges of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. The judges of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. ARTICLE III BOARD OF DIRECTORS 3.1 Number and Powers. The business affairs of the Corporation shall be managed under the direction of a Board of Directors of not less than five nor more than twelve, as set from time to time by resolution of the Board of Directors. In addition to the powers and authorities expressly conferred upon it by these Bylaws and the Articles of Incorporation, all such powers of the Corporation as are not by statute or by the Corporation‘s Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the shareholders, may be exercised by or under the authority of the Board of Directors. 3.2 Classification and Terms. The classification and terms of the directors shall be as set forth in the Corporation‘s Articles of Incorporation, which provisions are incorporated herein with the same effect as if they were set forth herein. 3.3 Vacancies. All vacancies on the Board of Directors shall be filled in the manner provided in the Corporation‘s Articles of Incorporation, which provisions are incorporated herein with the same effect as if they were set forth herein. 5

3.4 Removal of Directors. Directors may be removed in the manner provided in the Corporation‘s Articles of Incorporation, which provisions are incorporated herein with the same effect as if they were set forth herein. 3.5 Regular Meetings. Regular meetings of the Board of Directors or any committee may be held without notice at the principal place of business of the Corporation or at such other place or places, either within or outside the Commonwealth of Pennsylvania, as the Board of Directors or such committee, as the case may be, may from time to time appoint or as may be designated in the notice of the meeting. A regular meeting of the Board of Directors shall be held without notice immediately after the annual meeting of shareholders. 3.6 Special Meetings. (a) Special meetings of the Board of Directors may be called at any time by the Chairman of the Board, the President or by a majority of the authorized number of directors, to be held at the principal place of business of the Corporation or at such other place or places as the Board of Directors or the person or persons calling such meeting may from time to time designate. Notice of all special meetings of the Board of Directors shall be given to each director at least twenty-four (24) hours prior to such meeting if notice is given in person or by telephone, telex, facsimile or other electronic transmission and at least five (5) days prior to such meeting if notice is given in writing and delivered by courier or by postage prepaid mail. Such notice need not specify the business to be transacted at, nor the purpose of, the meeting. Any director may waive notice of any meeting by submitting a signed waiver of notice with the Secretary, whether before or after the meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. (b) Special meetings of any committee may be called at any time by such person or persons and with such notice as shall be specified for such committee by the Board of Directors, or in the absence of such specification, in the manner and with the notice required for special meetings of the Board of Directors. 3.7 Action of Directors by Communications Equipment. One or more persons may participate in a meeting of directors, or of a committee thereof, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. 3.8 Quorum of and Action by Directors. A majority of the Board of Directors then in office shall be necessary at all meetings to constitute a quorum for the transaction of business and the acts of a majority of the directors present and voting at a meeting at which a quorum is present shall be the acts of the Board of Directors. Every director of the Corporation shall be entitled to one vote. 3.9 Presumption of Assent. A director who is present at a meeting of the Board of Directors or of a committee thereof, at which action on a corporate matter is taken on which the 6

director is generally competent to act, shall be presumed to have assented to such action unless his dissent is entered in the minutes of the meeting, or unless he files his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof, or unless he delivers his dissent in writing to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. 3.10 Action by Directors Without a Meeting. Any action which may be taken at a meeting of the directors, or of a committee thereof, may be taken without a meeting if, prior or subsequent to the action, a consent or consents in writing, setting forth the action so taken or to be taken, is signed by all of the directors in office, or by all of the members of the committee, as the case may be, and filed with the Secretary of the Corporation. Such consent shall have the same effect as a unanimous vote. 3.11 Compensation of Directors. The Board of Directors shall have the authority to fix the compensation of directors for their services as directors, including reimbursement for reasonable expenses of attendance at board and committee meetings, and a director may be a salaried officer of the Corporation. 3.12 Nominations of Directors. (a) Nominations of candidates for election as directors at any annual meeting of shareholders may be made (1) by, or at the direction of, a majority of the Board of Directors (or by or at the direction of a majority of a committee of directors) or (2) by any shareholder entitled to vote at such annual meeting. Only persons nominated in accordance with the procedures set forth in this Section 3.12 shall be eligible for election as directors at an annual meeting. Ballots bearing the names of all the persons who have been nominated for election as directors at an annual meeting in accordance with the procedures set forth in this Section 3.12 shall be provided for use at the annual meeting. (b) Nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation as set forth in this Section 3.12. To be timely, a shareholder‘s notice shall be delivered to, or mailed and received at, the principal executive offices of the Corporation not later than (x) 120 days prior to the anniversary date of the initial proxy materials or a notice of the meeting by the Corporation in connection with the immediately preceding annual meeting of shareholders of the Corporation or (y), with respect to the first annual meeting of shareholders of the Corporation, which is expected to be held in February 2008, notice must be provided by September 3, 2007. Such shareholder‘s notice shall set forth (1) the name, age, business address and residence address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (2) the principal occupation or employment of the shareholder submitting the notice and of each person being nominated; (3) the class and number of shares of the Corporation‘s stock which are Beneficially Owned (as defined in Section 3.12(d) hereof) by the shareholder submitting the notice, by any Person who is Acting in Concert with or who is an Affiliate or Associate of such shareholder (as such capitalized terms are defined in Section 3.12(d) hereof), by any Person who is a member of any group with such shareholder with respect to the Corporation stock or who is known by such shareholder to be supporting such nominee(s) on the 7

date the notice is given to the Corporation, by each person being nominated, and by each Person who is in control of, is controlled by or is under common control with any of the foregoing Persons (if any of the foregoing Persons is a partnership, corporation, limited liability company, association or trust, information shall be provided regarding the name and address of, and the class and number of shares of Corporation stock which are Beneficially Owned by, each partner in such partnership, each director, executive officer and shareholder in such corporation, each member in such limited liability company or association, and each trustee and beneficiary of such trust, and in each case each Person controlling such entity and each partner, director, executive officer, shareholder, member or trustee of any entity which is ultimately in control of such partnership, corporation, limited liability company, association or trust); (4) a representation that the shareholder is and will continue to be a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (5) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (6) such other information regarding the shareholder submitting the notice, each nominee proposed by such shareholder and any other Person covered by clause (3) of this paragraph as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, whether or not the Corporation‘s common stock is registered under the Exchange Act; and (7) the consent of each nominee to serve as a director of the Corporation if so elected. At the request of the Board of Directors, any person nominated by, or at the direction of, the Board for election as a director at an annual meeting shall furnish to the Secretary of the Corporation that information required to be set forth in a shareholder‘s notice of nomination which pertains to the nominee. (c) The Board of Directors may reject any nomination by a shareholder not timely made in accordance with the requirements of this Section 3.12. If the Board of Directors, or a designated committee thereof or other authorized individual, determines that the information provided in a shareholder‘s notice does not satisfy the informational requirements of this Section 3.12 in any material respect, the Secretary of the Corporation or a duly authorized representative of the Corporation shall promptly notify such shareholder of the deficiency in the notice. The shareholder shall have an opportunity to cure the deficiency by providing additional information to the Secretary within such period of time, not to exceed five days from the date such deficiency notice is given to the shareholder, as the Board of Directors or such committee or other authorized individual shall reasonably determine. If the deficiency is not cured within such period, or if the Board of Directors or such committee or other authorized individual reasonably determines that the additional information provided by the shareholder, together with information previously provided, does not satisfy the requirements of this Section 3.12 in any material respect, then the Board of Directors may reject such shareholder‘s nomination. The Secretary of the Corporation or a duly authorized representative of the Corporation shall notify a shareholder in writing whether his nomination has been made in accordance with the time and informational requirements of this Section 3.12. Notwithstanding the procedures set forth in this paragraph, if neither the Board of Directors nor such committee or other authorized individual makes a determination as to the validity of any nominations by a shareholder, the presiding officer of the annual meeting shall determine and declare at the annual meeting whether the nomination was made in accordance with the terms of this Section 3.12. If the presiding officer 8

determines that a nomination was made in accordance with the terms of this Section 3.12, he shall so declare at the annual meeting and ballots shall be provided for use at the meeting with respect to such nominee. If the presiding officer determines that a nomination was not made in accordance with the terms of this Section 3.12, he shall so declare at the annual meeting and the defective nomination shall be disregarded. (d) For purposes of these Bylaws, the following capitalized terms shall have the meanings indicated: (1) Acquire. The term ―Acquire‖ includes every type of acquisition, whether effected by purchase, exchange, operation of law or otherwise. (2) Acting in Concert. The term ―Acting in Concert‖ means (a) knowing participation in a joint activity or conscious parallel action towards a common goal whether or not pursuant to an express agreement, or (b) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. (3) Affiliate. An ―Affiliate‖ of, or a Person ―affiliated with,‖ a specified Person, means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. (4) Associate. The term ―Associate‖ used to indicate a relationship with any Person means: (i) Any corporation, partnership, limited liability company or other organization (other than the Corporation or a Subsidiary of the Corporation), or any subsidiary or parent thereof, of which such Person is a director, officer, partner or member or is, directly or indirectly, the Beneficial Owner of 10% or more of any class of equity securities; (ii) Any trust or other estate in which such Person has a 10% or greater beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity, provided, however, such term shall not include any employee stock benefit plan of the Corporation or a Subsidiary of the Corporation in which such Person has a 10% or greater beneficial interest or serves as a trustee or in a similar fiduciary capacity; (iii) Any relative or spouse of such Person (or any relative of such spouse) who has the same home as such Person or who is a director or officer of the Corporation or a Subsidiary of the Corporation (or any subsidiary or parent thereof); or (iv) Any investment company registered under the Investment Company Act of 1940 for which such Person or any Affiliate or Associate of such Person serves as investment advisor. (5) Beneficial Owner (including Beneficially Owned). A Person shall be considered the ―Beneficial Owner‖ of any shares of stock (whether or not owned of record): 9

(i) With respect to which such Person or any Affiliate or Associate of such Person directly or indirectly has or shares (A) voting power, including the power to vote or to direct the voting of such shares of stock, and/or (B) investment power, including the power to dispose of or to direct the disposition of such shares of stock; (ii) Which such Person or any Affiliate or Associate of such Person has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, and/or (B) the right to vote pursuant to any agreement, arrangement or understanding (whether such right is exercisable immediately or only after the passage of time); or (iii) Which are Beneficially Owned within the meaning of (i) or (ii) of this Section 3.12(d)(5) by any other Person with which such first-mentioned Person or any of its Affiliates or Associates either (A) has any agreement, arrangement or understanding, written or oral, with respect to acquiring, holding, voting or disposing of any shares of stock of the Corporation or any Subsidiary of the Corporation or acquiring, holding or disposing of all or substantially all, or any Substantial Part, of the assets or business of the Corporation or a Subsidiary of the Corporation, or (B) is Acting in Concert. For the purpose only of determining whether a Person is the Beneficial Owner of a percentage specified in these Bylaws of the outstanding Voting Shares, such shares shall be deemed to include any Voting Shares which may be issuable pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants, options or otherwise and which are deemed to be Beneficially Owned by such Person pursuant to the foregoing provisions of this Section 3.12(d)(5) but shall not include any other Voting Shares which may be issuable in such manner. (6) Person. The term ―Person‖ shall mean any individual, partnership, corporation, limited liability company, association, trust, group or other entity. When two or more Persons act as a partnership, limited partnership, limited liability company, syndicate, association or other group for the purpose of acquiring, holding or disposing of shares of stock, such partnership, syndicate, associate or group shall be deemed a ―Person.‖ (7) Substantial Part. The term ―Substantial Part‖ as used with reference to the assets of the Corporation or of any Subsidiary means assets having a value of more than 10% of the total consolidated assets of the Corporation and its Subsidiaries as of the end of the Corporation‘s most recent fiscal year ending prior to the time the determination is being made. (8) Subsidiary. ―Subsidiary‖ means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Person in question. 10

(9) Voting Shares. ―Voting Shares‖ shall mean shares of the Corporation entitled to vote generally in an election of directors. 3.13. Director Qualifications. Any person appointed or elected to the Board of Directors shall, in order to qualify as such, shall own at least 1,000 shares of the Corporation‘s common stock (or within a reasonable time following such appointment or election shall acquire such ownership), and shall reside, or work, in a county in which ESSA Bank & Trust (the banking subsidiary of the Corporation) maintains an office (at the time of appointment/election) or in a county contiguous to a county in which ESSA Bank & Trust maintains an office. ARTICLE IV EXECUTIVE AND OTHER COMMITTEES 4.1 Executive Committee. (a) The Board of Directors may appoint from the Board of Directors an Executive Committee of not less than three members, and may delegate to such committee, except as otherwise provided by law or the Articles of Incorporation, the powers of the Board of Directors in the management of the business and affairs of the Corporation in the intervals between meetings of the Board of Directors in all cases in which specific directions shall not have been given by the Board, as well as the power to authorize the seal of the Corporation to be affixed to all papers which may require it, provided, however, that the Executive Committee shall not have the power or authority of the Board of Directors with respect to the following: the submission to shareholders of any action requiring approval of shareholders by law; the creation or filling of vacancies on the Board of Directors; the adoption, amendment or repeal of the Articles of Incorporation or these Bylaws; the amendment or repeal of any resolution of the Board of Directors that by its terms is amendable or repealable only by the Board of Directors; action on matters committed by these Bylaws or resolution of the Board of Directors to another committee of the Board of Directors; the declaration of dividends; and approval of a transaction in which any member of the Executive Committee, directly or indirectly, has any material beneficial interest. (b) Meetings of the Executive Committee shall be held at such times and places as the Chairman of the Executive Committee may determine. The Executive Committee, by a vote of a majority of its members, may appoint a Chairman and fix its rules of procedure, determine its manner of acting and specify what notice, if any, of meetings shall be given, except as otherwise set forth in these Bylaws or as the Board of Directors shall by resolution otherwise provide. (c) The Executive Committee shall keep minutes of all business transacted by it. All completed action by the Executive Committee shall be reported to the Board of Directors at its meeting next succeeding such action or at its meeting held in the month following the taking of such action, and shall be subject to revision or alteration by the Board of Directors. 11

4.2 Other Committees. The Board may, by resolutions passed by a majority of the Board of Directors, designate members of the Board to constitute other committees, which shall in each case consist of one or more directors and shall have and may execute such powers as may be determined and specified in the respective resolutions appointing them. A majority of all the members of any such committee may fix its rules of procedure, determine its manner of acting and fix the time and place of its meetings and specify what notice thereof, if any, shall be given, except as otherwise set forth in these Bylaws or as the Board of Directors shall by resolution otherwise provide. 4.3 Term. A majority of the Board of Directors shall have the power to change the membership of any committee of the Board of Directors at any time, to fill vacancies therein and to discharge any such committee or to remove any member thereof, either with or without cause, at any time. ARTICLE V OFFICERS 5.1 Designations . The Board of Directors shall annually appoint a Chairman of the Board, a President, a Secretary, a Treasurer and such other officers as the Board of Directors may from time to time deem appropriate. The Board of Directors shall designate one officer as the Corporation‘s Chief Executive Officer and may designate another officer as the Chief Operating Officer. One individual may hold the position of Chairman and Chief Executive Officer. 5.2 Powers and Duties . The officers of the Corporation shall have such authority and perform such duties as are specified in these Bylaws and as the Board of Directors may from time to time authorize or determine. In the absence of action by the Board of Directors, the officers shall have such powers and duties as generally pertain to their respective offices. 5.3 Chairman of the Board. The Chairman of the Board, who shall be chosen from among the directors, shall preside at all meetings of the Board of Directors. He shall supervise the carrying out of the policies adopted or approved by the Board of Directors. 5.4 Chief Executive Officer and President . The Chief Executive Officer shall have general executive powers and shall have and may exercise any and all other powers and duties pertaining by law, regulations or practice to the office of the Chief Executive Officer, or imposed by these Bylaws. The President shall have general executive powers and shall have and may exercise any and all other powers and duties pertaining by law, regulations or practice to the office of President, or imposed by these Bylaws. One individual may hold the positions of Chief Executive Officer, President and Chairman of the Board. 5.5 Secretary . The Secretary shall keep the minutes of the meetings of the shareholders and the Board of Directors and shall give notice of all such meetings as required in these Bylaws, the Corporation‘s Articles of Incorporation or by law. The Secretary shall have custody of such minutes, the seal of the Corporation and the stock certificate records of the Corporation, except 12

to the extent some other person is authorized to have custody and possession thereof by a resolution of the Board of Directors. 5.6 Treasurer . The Treasurer shall keep, or cause to be kept, the fiscal accounts of the Corporation, including an account of all monies received or disbursed. 5.7 Term; Removal . Each officer of the Corporation shall hold office for a term of one year and until his successor has been selected and qualified or until his earlier death, resignation or removal. Any officer or agent of the Corporation may be removed at any time, with or without cause, by the Board of Directors, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. 5.8 Compensation. The officers of the Corporation shall receive such salary or compensation as may be determined by or under authority of the Board of Directors. 5.9 Delegation . In the case of absence or inability to act of any officer of the Corporation and of any person herein authorized to act in his place, the Board of Directors may from time to time delegate the powers or duties of such officer to any other officer or any director or other person whom it may select. 5.10 Vacancies . Vacancies in any office arising from any cause may be filled by the Board of Directors at any regular or special meeting of the Board. ARTICLE VI INDEMNIFICATION 6.1 Persons Covered . Subject to, and in accordance with, the provisions of this Article VI, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, including actions by or in the right of the Corporation, whether civil, criminal, administrative, or investigative, by reason of the fact that such person is or was a director, officer, employee, fiduciary, trustee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary, trustee, or agent of another corporation, partnership, joint venture, trust, or other enterprise. 6.2 Derivative Actions. (a) In the case of a threatened, pending, or completed action or suit by or in the right of the Corporation against a person named in Section 6.1 by reason of such person holding a position named in Section 6.1, the Corporation shall indemnify such person if such person satisfies the standard in Section 6.2(b), for expenses (including attorneys‘ fees) actually and reasonably incurred by such person in connection with the defense or settlement of the action or suit. 13

(b) In the case of a threatened, pending, or completed action or suit by or in the right of the Corporation, a person named in Section 6.1 shall be indemnified only if: (1) such person is successful on the merits or otherwise; or (2) such person acted in good faith in the transaction that is the subject of the suit or action, and in a manner reasonably believed to be in, or not opposed to, the best interests of the Corporation. However, such person shall not be indemnified in respect of any claim, issue, or matter as to which such person has been adjudged liable to the Corporation unless (and only to the extent that) the court of common pleas or the court in which the suit was brought shall determine, upon application, that despite the adjudication of liability but in view of all the circumstances, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. 6.3 Third-Party Actions . (a) In case of a threatened, pending, or completed suit, action, or proceeding (whether civil, criminal, administrative, or investigative), other than a suit by or in the right of the Corporation, together hereafter referred to as a third-party action, against a person named in Section 6.1 by reason of such person holding a position named in Section 6.1, the Corporation shall indemnify such person if such person satisfies the standard in Section 6.3(b), for amounts actually and reasonably incurred by such person in connection with the defense or settlement of the third-party action, including, but not limited to (i) expenses (including attorneys‘ fees), (ii) amounts paid in settlement, (iii) judgments, and (iv) fines. (b) In case of a third-party action, a person named in Section 6.1 shall be indemnified only if: (1) such person is successful on the merits or otherwise; or (2) such person acted in good faith in the transaction that is the subject of the third-party action and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with respect to any criminal action or proceeding, such person had no reasonable cause to believe such person‘s conduct was unlawful. The termination of a third-party action by judgment, order, settlement, conviction, or upon a pleas of nolo contendere or its equivalent shall not, in itself, create a presumption that the person failed to satisfy the standard of this Section 6.3(b). 6.4 Determination That Standard Has Been Met. A determination that the standard of either Section 6.2(b) or 6.3(b) has been satisfied may be made by a court, or, except as stated in the record sentence of Section 6.2(b), the determination may be made by: (1) the Board of Directors by a majority vote of a quorum consisting of directors of the Corporation who were not parties to the action, suit, or proceeding; 14

(2) if such a quorum is not obtainable or if obtainable and a majority of a quorum of disinterested directors so directs, by independent legal counsel in a written opinion; or (3) the shareholders of the Corporation. 6.5 Proration . Anyone making a determination under Section 6.4 may determine that a person has met the standard as to some matters but not as to others, and may reasonably prorate amounts to be indemnified. 6.6 Advancement of Expenses . Reasonable expenses incurred by a director, officer, employee, or agent of the Corporation in defending a civil or criminal action, suit, or proceeding described in Section 6.1 shall be paid by the Corporation in advance of the final disposition of such action, suit, or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that the person is not entitled to be indemnified by the Corporation. 6.7 Other Rights . The indemnification and advancement of expenses provided by or pursuant to this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any insurance or other agreement, vote of shareholders or directors, or otherwise, both as to actions in their official capacity and as to actions in another capacity while holding an office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such person. 6.8 Insurance. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person‘s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article VI. 6.9 Security Fund; Indemnity Agreements . By action of the Board of Directors (notwithstanding their interest in the transaction), the Corporation may create and fund a trust fund or fund of any nature, and may enter into agreements with its officers, directors, employees, and agents for the purpose of securing or insuring in any manner its obligation to indemnify or advance expenses provided for in this Article VI. 6.10 Modification . The duties of the Corporation to indemnify and to advance expenses to any person as provided in this Article VI shall be in the nature of a contract between the Corporation and each such person, and no amendment or repeal of any provision of this Article VI, and no amendment or termination of any trust fund or other fund created pursuant to Section 6.9 hereof, shall alter to the detriment of such person the right of such person to the advancement of expenses or indemnification related to a claim based on an act or failure to act which took place prior to such amendment, repeal, or termination. 15

6.11 Proceedings Initiated by Indemnified Persons . Notwithstanding any other provision in this Article VI, the Corporation shall not indemnify a director, officer, employee, or agent for any liability incurred in an action, suit, or proceeding initiated by (which shall not be deemed to include counter-claims or affirmative defenses) or participated in as an intervenor or amicus curiae by the person seeking indemnification unless such initiation of or participation in the action, suit, or proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors then in office. 6.12 Savings Clause . If this Article VI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director, officer, employee, and agent of the Corporation as to costs, charges, and expenses (including attorneys‘ fees), judgments, fines, and amounts paid in settlement with respect to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article VI that shall not have been invalidated and to the fullest extent permitted by applicable law. If the laws of the Commonwealth of Pennsylvania are amended to permit further indemnification of the directors, officers, employees, and agents of the Corporation, then the Corporation shall indemnify such persons to the fullest extent permitted by law. Any repeal or modification of this Article VI by the Board of Directors or the shareholders of the Corporation shall not adversely affect any right or protection of a director, officer, employee, or agent existing at the time of such repeal or modification. ARTICLE VII CAPITAL STOCK 7.1 Certificates . Certificates of stock shall be issued in numerical order, and each shareholder shall be entitled to a certificate signed by the President or a Vice President, and the Secretary or the Treasurer, or in such other manner as the Corporation may determine, and may be sealed with the seal of the Corporation or a facsimile thereof. The signatures of such officers may be facsimiles if the certificate is manually signed on behalf of a transfer agent, or registered by a registrar, other than the Corporation itself or an employee of the Corporation. If an officer who has signed or whose facsimile signature has been placed upon such certificate ceases to be an officer before the certificate is issued, it may be issued by the Corporation with the same effect as if the person were an officer on the date of issue. Each certificate of stock shall state: (a) that the Corporation is incorporated under the laws of the Commonwealth of Pennsylvania; (b) the name of the person to whom issued; (c) the number and class of shares and the designation of the series, if any, which such certificate represents; and 16

(d) the par value of each share represented by such certificate, or a statement that such shares are without par value. 7.2 Transfers . (a) Transfers of stock shall be made only upon the stock transfer books of the Corporation, kept at the registered office of the Corporation or at its principal place of business, or at the office of its transfer agent or registrar, and before a new certificate is issued the old certificate shall be surrendered for cancellation. The Board of Directors may, by resolution, open a share register in any state of the United States, and may employ an agent or agents to keep such register, and to record transfers of shares therein. (b) Shares of stock shall be transferred by delivery of the certificates therefor, accompanied either by an assignment in writing on the back of the certificate or an assignment separate from the certificate, or by a written power of attorney to sell, assign and transfer the same, signed by the holder of said certificate. Subject to the provisions of Section 7.4 hereof, no shares of stock shall be transferred on the books of the Corporation until the outstanding certificates therefor have been surrendered to the Corporation. 7.3 Registered Owner. Registered shareholders shall be treated by the Corporation as the holders in fact of the stock standing in their respective names and the Corporation shall not be bound to recognize any equitable or other claim to or interest in any share on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided below or by the laws of the Commonwealth of Pennsylvania. The Board of Directors may adopt by resolution a procedure whereby a shareholder of the Corporation may certify in writing to the Corporation that all or a portion of the shares registered in the name of such shareholder are held for the account of a specified person or persons. The resolution shall set forth: (a) The classification of shareholder who may certify; (b) The purpose or purposes for which the certification may be made; (c) The form of certification and information to be contained therein; (d) If the certification is with respect to a record date, the time after the record date within which the certification must be received by the Corporation; and (e) Such other provisions with respect to the procedure as are deemed necessary or desirable. Upon receipt by the Corporation of a certification complying with the above requirements, the persons specified in the certification shall be deemed, for the purpose or purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification. 17

7.4 Mutilated, Lost or Destroyed Certificates . In case of any mutilation, loss or destruction of any certificate of stock, another may be issued in its place upon receipt of proof of such mutilation, loss or destruction. The Board of Directors may impose conditions on such issuance and may require the giving of a satisfactory bond or indemnity to the Corporation in such sum as they might determine, or establish such other procedures as they deem necessary. 7.5 Fractional Shares or Scrip . The Corporation may (a) issue fractions of a share which shall entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the Corporation in the event of liquidation; (b) arrange for the disposition of fractional interests by those entitled thereto; (c) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such shares are determined; or (d) issue scrip in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip aggregating a full share. 7.6 Uncertificated Shares . If determined by the Board, any or all classes and series of shares, or any part thereof, may be uncertified shares, except that such a provision shall not apply to shares represented by a certificate until the certificate is surrendered to the Corporation. ARTICLE VIII FISCAL YEAR; ANNUAL AUDIT The fiscal year of the Corporation shall end on the 30th day of September of each year. The Corporation shall be subject to an annual audit as of the end of its fiscal year by independent public accountants appointed by and responsible to the Board of Directors or the Audit Committee of the Board of Directors. ARTICLE IX DIVIDENDS AND FINANCE 9.1 Dividends . Dividends may be declared by the Board of Directors and paid by the Corporation in accordance with the conditions and subject to the limitations imposed by the laws of the Commonwealth of Pennsylvania. The Board of Directors may declare dividends payable only to shareholders of record at the close of business on any business day not more than 90 days prior to the date on which the dividend is paid. 9.2 Depositories . The monies of the Corporation shall be deposited in the name of the Corporation in such bank or banks or trust company or trust companies as the Board of Directors shall designate, and shall be drawn out only by check or other order for payment of money signed by such persons and in such manner as may be determined by resolution of the Board of Directors. ARTICLE X NOTICES 10.1 Notice . Whenever written notice is required to be given to any person pursuant to these Bylaws, it may be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or by electronic mail, telegram (with messenger service specified), telex or TWX (with answerback received) or courier service, charges prepaid, or by facsimile transmission, to his address (or to his telex, TWX or facsimile number), in the case of shareholders, appearing on the books of the Corporation or, in the case of directors, 18

supplied by them to the Corporation for the purpose of notice or, in the case of the Corporation, at the address of its principal executive offices. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of, electronic mail, telex or TWX, when dispatched. 10.2 Written Waiver of Notice . Whenever any written notice is required to be given under these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. 10.3 Waiver of Notice by Attendance . Attendance of a person at any meeting shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. ARTICLE XI SEAL The corporate seal of the Corporation shall be in such form and bear such inscription as may be adopted by resolution of the Board of Directors, or by usage of the officers on behalf of the Corporation. ARTICLE XII BOOKS AND RECORDS The Corporation shall keep correct and complete books and records of account and shall keep minutes and proceedings of meetings of its shareholders and Board of Directors; and it shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of the shares held by each. Any books, records and minutes may be in written form or any other form capable of being converted into written form within a reasonable time. ARTICLE XIII AMENDMENTS The Bylaws may be altered, amended or repealed only as set forth in the Corporation‘s Articles of Incorporation, which are incorporated herein with the same effect as if they were set forth herein. 19

ARTICLE XIV MISCELLANEOUS In these Bylaws, unless otherwise indicated, defined terms in singular shall include the plural as well as vice versa, and the masculine, feminine or neuter gender shall include all genders. 20

Exhibit 4 INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA

No.

ESSA B ANCORP , I NC .
FULLY PAID AND NON-ASSESSABLE PAR VALUE $0.01 EACH

Shares

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS, SEE REVERSE SIDE THIS CERTIFIES that SHARES OF COMMON STOCK is the owner of

ESSA Bancorp, Inc.
a Pennsylvania corporation The shares evidenced by this certificate are transferable only on the books of ESSA Bancorp, Inc. by the holder hereof, in person or by attorney, upon surrender of this certificate properly endorsed. The capital stock evidenced hereby is not an account of an insurable type and is not insured by the Federal Deposit Insurance Corporation or any other Federal or state governmental agency. IN WITNESS WHEREOF, ESSA Bancorp, Inc. has caused this certificate to be executed by the facsimile signatures of its duly authorized officers and has caused a facsimile of its seal to be hereunto affixed.

B y SUZIE T. FARLEY CORPORATE SECRETARY

[SEAL]

B y GARY S. OLSON PRESIDENT AND CHIEF EXECUTIVE OFFICER

The Board of Directors of ESSA Bancorp, Inc. (the ―Company‖) is authorized by resolution or resolutions, from time to time adopted, to provide for the issuance of more than one class of stock, including preferred stock in series, and to fix and state the voting powers, designations, preferences, limitations and restrictions thereof. The Company will furnish to any shareholder upon request and without charge a full description of each class of stock and any series thereof. The shares evidenced by this Certificate are subject to a limitation contained in the Articles of Incorporation that in no event shall any record owner of any outstanding common stock which is beneficially owned, directly or indirectly, by a person who, as of any record date for the determination of stockholders entitled to vote on any matter, beneficially owns in excess of 10% of the then outstanding shares of common stock (the ―Limit‖), be entitled, or permitted to any vote in respect of the shares held in excess of the Limit. The Articles of Incorporation require that, with limited exceptions, no amendment, addition, alteration, change or repeal of the Articles of Incorporation shall be made, unless such is first approved by the Board of Directors of the Company and approved by the stockholders by a majority of the total shares entitled to vote, or in certain circumstances approved by the affirmative vote of eighty percent (80%) of the shares entitled to vote. The following abbreviations when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common UNIF GIFT MIN ACT Custodian (Cust) TEN ENT JT TEN - as tenants by the entireties - as joint tenants with right of survivorship and not as tenants in common (State) Additional abbreviations may also be used though not in the above list For value received, hereby sell, assign and transfer unto Under Uniform Gifts to Minors Act (Minor)

PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER

(please print or typewrite name and address including postal zip code of assignee)

Shares of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said shares on the books of the within named corporation with full power of substitution in the premises. Dated, In the presence of Signature:

NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.

Exhibit 5 LUSE GORMAN POMERENK & SCHICK A PROFESSIONAL CORPORATION ATTORNEYS AT LAW 5335 WISCONSIN AVENUE, N.W., SUITE 400 WASHINGTON, D.C. 20015

TELEPHONE (202) 274-2000 FACSIMILE (202) 362-2902 www.luselaw.com WRITER’S DIRECT DIAL NUMBER (202) 274-2009 December 7, 2006 The Board of Directors ESSA Bancorp, Inc. 200 Palmer Street Stroudsburg, Pennsylvania 18360 Re: ESSA Bancorp, Inc. Common Stock, Par Value $0.01 Per Share Ladies and Gentlemen: You have requested the opinion of this firm as to certain matters in connection with the offer and sale (the ―Offering‖) of ESSA Bancorp, Inc. (the ―Company‖) Common Stock, par value $0.01 per share (―Common Stock‖). We have reviewed the Company‘s Articles of Incorporation, Registration Statement on Form S-1 (the ―Form S-1‖), as well as applicable statutes and regulations governing the Company and the offer and sale of the Common Stock. We are of the opinion that upon the declaration of effectiveness of the Form S-1, the Common Stock, when sold pursuant to the Company‘s prospectus and ESSA Bancorp, Inc. Plan of Conversion, will be legally issued, fully paid and non-assessable. This Opinion has been prepared in connection with the Form S-1. We hereby consent to our firm being referenced under the caption ―Legal and Tax Matters,‖ and for inclusion of this opinion as an exhibit to the Registration Statement on Form S-1. Very truly yours, /s/ Luse Gorman Pomerenk & Schick LUSE GORMAN POMERENK & SCHICK A PROFESSIONAL CORPORATION WRITER’S EMAIL mlevy@luselaw.com

Exhibit 8 (202) 274-2000 December 7, 2006 Board of Directors ESSA Bank & Trust 200 Palmer Street Stroudsburg, PA 18360 Re: Federal Income Tax Opinion Relating to Conversion of ESSA Bank & Trust from a Pennsylvania-Chartered Mutual Savings Institution to a Pennsylvania Stock Savings Institution Ladies and Gentlemen: In accordance with your request, set forth below is the opinion of this firm relating to the material Federal income tax consequences of the proposed conversion (the ―Conversion‖) of ESSA Bank & Trust (the ―Bank‖) from a Pennsylvania-chartered mutual savings association to a Pennsylvania-chartered capital stock savings association (―Stock Bank‖). In the Conversion, all of the Bank‘s to-be-issued capital stock will be acquired by ESSA Bancorp, Inc., a newly organized Pennsylvania corporation (the ―Holding Company‖). For purposes of this opinion, we have examined such documents and questions of law as we have considered necessary or appropriate, including but not limited to the Holding Company‘s Registration Statement on Form S-1 relating to the proposed issuance of up to 12,650,000 shares of common stock par value $0.01 per share and the Plan of Conversion adopted by the Bank on July 25, 2006 and amended on November 21, 2006 (the ―Plan‖), the Pennsylvania Mutual Articles of Incorporation and Bylaws of the Bank, the Pennsylvania Stock Articles of Incorporation and Bylaws of the Bank, and the Pennsylvania Articles of Incorporation and Bylaws of the Holding Company. In such examination, we have assumed and have not independently verified the authenticity of all original documents, the accuracy of all copies, and the genuineness of all signatures. We have further assumed the absence of adverse facts not apparent from the face of the instruments and documents we examined. Capitalized terms used herein but not defined herein, shall have the same meaning as set forth in said documents. In issuing our opinion, we have assumed that the Plan has been duly and validly authorized and has been approved and adopted by the board of directors of the Bank at a meeting duly called and held; that the Bank will comply with the terms and conditions of the Plan, and that the various representations and warranties which are provided to us are accurate, complete, true and correct. Accordingly, we express no opinion concerning the effect, if any, of variations from the foregoing. We specifically express no opinion concerning tax matters relating to the Plan under state and local

ESSA Bank & Trust December 7, 2006 Page 2 tax laws and under Federal income tax laws except on the basis of the documents and assumptions described above. In issuing the opinion set forth below, we have relied solely on existing provisions of the Internal Revenue Code of 1986, as amended (the ―Code‖); existing and proposed Treasury Regulations (the ―Regulations‖) thereunder; current administrative rulings, notices and procedures; and court decisions. Such laws, regulations, administrative rulings, notices and procedures and court decisions are subject to change at any time. Any such change could affect the continuing validity of the opinions set forth below. This opinion is as of the date hereof, and we disclaim any obligation to advise you of any change in any matter considered herein after the date hereof. In rendering our opinion, we have assumed that the persons and entities identified in the Plan of Conversion will at all times comply with applicable state and Federal laws and the factual representations of the Bank. In addition, we have assumed that the activities of the persons and entities identified in the Plan will be conducted strictly in accordance with the Plan. Any variations may affect the opinions we are rendering. For purposes of this opinion, we are relying on the factual representations provided to us by the Bank, which are incorporated herein by reference. BACKGROUND The Bank is a Pennsylvania-chartered mutual savings association which is in the process of converting to a Pennsylvania-chartered stock savings association. As a Pennsylvania-charted mutual savings association, the Bank has no authorized capital stock. Instead the Bank, in mutual form, has a unique equity structure. A depositor in the Bank is entitled to payment of interest on his account balance as declared and paid by the Bank. A depositor has no right to a distribution of any earnings of the Bank except for interest paid on his deposit but rather such earnings become retained earnings of the Bank. However, a depositor has a right to share, pro rata, with respect to the withdrawal value of his account, in any liquidation proceeds distributed in the event the Bank is liquidated. All of the interests held by a depositor cease when such depositor closes his account with the Bank. PROPOSED TRANSACTION The Holding Company has been formed under the laws of the Commonwealth of Pennsylvania for the purpose of the proposed transactions described herein, to engage in business as a savings bank holding company and to hold all of the stock of the Stock Bank. The Holding Company will issue shares of its voting common stock (―Holding Company Conversion Stock‖), upon completion of the mutual-to-stock conversion of the Bank, to persons purchasing such shares as described in greater detail below.

ESSA Bank & Trust December 7, 2006 Page 3 Following regulatory approval, the Plan provides for the offer and sale of shares of Holding Company Conversion Stock in a Subscription Offering pursuant to nontransferable subscription rights on the basis of the following preference categories: (i) Eligible Account Holders of the Bank, (ii) the Bank‘s newly formed employee stock ownership plan and tax-qualified 401(k) retirement plan, (iii) Supplemental Eligible Account Holders of the Bank, and (iv) Voting Members of the Bank, all as described in the Plan. All shares must be sold, and to the extent the stock is available, no subscriber will be allowed to purchase fewer than 25 shares of Holding Company Conversion Stock. If shares remain after all orders are filled in the categories described above, the Plan calls for a Community Offering for the sale of shares not purchased under the preference categories, and a Syndicated Community Offering for the shares not sold in the Community Offering. Pursuant to the Plan, all such shares will be issued and sold at a uniform price per share. The aggregate purchase price at which all shares of Holding Company Conversion Stock will be offered and sold pursuant to the Plan will be equal to the estimated pro forma market value of the Bank, as converted. The estimated pro forma market value will be determined by RP Financial, LC, an independent appraiser. The conversion of the Bank from mutual-to-stock form and the sale of newly issued shares of the stock of the Stock Bank to the Holding Company will be deemed effective concurrently with the closing of the sale of Holding Company Conversion Stock. In furtherance of the Bank‘s commitment to its community, this Plan provides for the establishment of a charitable foundation (―Foundation‖) as part of the Conversion. The Foundation is intended to complement the Bank‘s existing community reinvestment activities in a manner that will allow the Bank‘s local communities to share in the growth and profitability of the Holding Company and the Bank over the long term. Consistent with the Bank‘s goal, the Holding Company intends to donate to the Foundation cash and shares of Common Stock, in an aggregate amount up to 8% of the value of the shares of Holding Company Conversion Stock. OPINION OF COUNSEL This opinion is given as of the date hereof. In issuing our opinion, we have referred solely to existing provisions of the Code, existing and proposed Treasury Regulations promulgated thereunder, current administrative rulings, notices and procedures and court decisions. Such laws, regulations, administrative rulings, notices and procedures and court decisions are subject to change at any time. Any such change could affect the continuing validity of such opinions. We emphasize that the outcome of litigation cannot be predicted with certainty and, although we have attempted in good faith to opine as to the probable outcome of the merits of each tax issue with respect to which an opinion was requested, there can be no assurance that our conclusions are correct or that they would be adopted by the Internal Revenue Service or a court.

ESSA Bank & Trust December 7, 2006 Page 4 Based solely upon the foregoing information, we render the following opinion: 1. The change in the form of operation of the Bank from a Pennsylvania mutual savings association to a Pennsylvania stock savings association, as described above, will constitute a reorganization within the meaning of Code Section 368(a)(1)(F), and no gain or loss will be recognized to either the Bank or to Stock Bank as a result of such Conversion. See Rev. Rul. 80-105, 1980-1 C.B. 78. The Bank and Stock Bank will each be a party to a reorganization within the meaning of Code Section 368(b). Rev. Rul. 72-206, 1972-1 C.B. 104. 2. No gain or loss will be recognized by Stock Bank on the receipt of money from Holding Company in exchange for its shares or by Holding Company upon the receipt of money from the sale of Holding Company Conversion Stock. Code Section 1032(a). 3. The assets of the Bank will have the same basis in the hands of Stock Bank as they had in the hands of the Bank immediately prior to the Conversion. Code Section 362(b). 4. The holding period of the Bank‘s assets to be received by Stock Bank will include the period during which the assets were held by the Bank prior to the Conversion. Code Section 1223(2). 5. No gain or loss will be recognized by the account holders of the Bank upon the issuance to them of withdrawable deposit accounts in Stock Bank in the same dollar amount and under the same terms as their deposit accounts in the Bank and no gain or loss will be recognized by Eligible Account Holders or Supplemental Eligible Account Holders upon receipt by them of an interest in the Liquidation Account of Stock Bank, in exchange for their deemed ownership interests in the Bank. Code Section 354(a). 6. The basis of the account holders‘ deposit accounts in the Stock Bank will be the same as the basis of their deposit accounts in the Bank surrendered in exchange therefor. The basis of each Eligible Account Holder‘s and Supplemental Eligible Account Holder‘s interests in the Liquidation Account of the Stock Bank will be zero, that being the cost of such property. 7. It is more likely than not that the fair market value of the non-transferable subscription rights to purchase Holding Company Conversion Stock will be zero. Accordingly, no gain or loss will be recognized by Eligible Account Holders or Supplemental Eligible Account Holders upon the distribution to them of the nontransferable subscription rights to purchase Holding Company Conversion Stock. No taxable income will be realized by the Eligible Account Holders or Supplemental Eligible Account Holders or other eligible subscribers as a result of the exercise of the nontransferable subscription rights. Rev. Rul. 56-572, 1956-2 C.B. 182.

ESSA Bank & Trust December 7, 2006 Page 5 8. It is more likely than not that the basis of the Holding Company Conversion Stock to its stockholders will be the purchase price thereof. (Section 1012 of the Code). The stockholder‘s holding period will commence upon the exercise of the subscription rights. (Section 1223(6) of the Code). 9. For purposes of Section 381 of the Code, the Stock Bank will be treated as if there had been no reorganization. Accordingly, the taxable year of the Bank will not end on the effective date of the Conversion merely because of the transfer of assets of the Bank to the Stock Bank, and the tax attributes of the Bank will be taken into account by the Stock Bank as if there had been no reorganization. (Treas. Reg. ‗1.381(b)-(1)(a)(2)). 10. The part of the taxable year of the Bank before the reorganization and the part of the taxable year of Stock Bank after the reorganization will constitute a single taxable year of Stock Bank. See Rev. Rul. 57-276, 1957-1 C.B. 126. Consequently, the Bank will not be required to file a federal income tax return for any portion of such taxable year solely by reason of the Conversion. Treas. Reg. ‗ 1.381(b)-1(a)(2). 11. The tax attributes of the Bank enumerated in Code Section 381(c) will be taken into account by Stock Bank. Treas. Reg. ‗ 1.381(b)-1(a)(2). Notwithstanding any reference to Code Section 381 above, no opinion is expressed or intended to be expressed herein as to the effect, if any, of this transaction on the continued existence of, the carryover or carryback of, or the limitation on, any net operating losses of the Bank or its successor, Stock Bank, under the Code. Our opinion under paragraph 7 above is predicated on the representation that no person shall receive any payment, whether in money or property, in lieu of the issuance of subscription rights. Our opinion under paragraphs 7 and 8 is based on the position that the subscription rights to purchase shares of Holding Company Conversion Stock received by Eligible Account Holders and Supplemental Eligible Account Holders have a fair market value of zero. We understand that the subscription rights will be granted at no cost to the recipients, will be legally non-transferable and of short duration, and will provide the recipient with the right only to purchase shares of Holding Company Conversion Stock at the same price to be paid by members of the general public in any Community Offering. We also note that the Internal Revenue Service has not in the past reached a different conclusion with respect to the value of nontransferable subscription rights. Commencing in 1993, however, the Internal Revenue Service has specifically declined to issue advanced rulings on the value of nontransferable subscription rights whenever the issue has been raised in a ruling request. If the subscription rights are subsequently found to have value, income may be recognized by various recipients of the subscription rights (in certain cases, whether or not the rights are

ESSA Bank & Trust December 7, 2006 Page 6 exercised) and the Holding Company and/or Stock Bank may be taxable on the distribution of the subscription rights. CONSENT We hereby consent to the filing of this opinion as an exhibit to the Registration Statement on Form S-1 (―Registration Statement‖) of the Holding Company filed with the Securities and Exchange Commission with respect to the Conversion, as an exhibit to the Application for Approval to Convert to a Stock Savings Association (―Application‖) of the Bank filed with the Pennsylvania Department of Banking with respect to the Conversion and as an exhibit to the Form AC and Form H-(e)(1) (―Filings‖) filed with the Office of Thrift Supervision with respect to the Conversion, as applicable. We also hereby consent to the references to this firm in the prospectus which is a part of the Registration Statement, the Application and the Filings. USE OF OPINION This opinion is rendered solely for the benefit of the Holding Company and the Bank, and may not be quoted in whole or in part or otherwise referred to, nor is it to be filed with any governmental agency or other person without our prior written consent. We expressly consent to the use of and reliance on this opinion by S.R. Snodgrass in issuing its state tax opinion to the Bank. Very truly yours, /s/ Luse Gorman Pomerenk & Schick, A Professional Corporation LUSE GORMAN POMERENK & SCHICK, A PROFESSIONAL CORPORATION

Exhibit 10.1 ESSA BANK & TRUST EMPLOYEE STOCK OWNERSHIP PLAN (adopted effective April 1, 2007)

ESSA BANK & TRUST EMPLOYEE STOCK OWNERSHIP PLAN This Employee Stock Ownership Plan has been executed on the _________ day of _______________, 2007, by ESSA Bank & Trust, a Pennsylvania chartered stock savings bank. ATTEST: ESSA BANK & TRUST

CONTENTS
Page No.

Section 1. 1.1 1.2 1.3 1.4 1.5 1.6 Section 2. Section 3. 3.1 3.2 3.3 3.4 3.5 3.6 3.7 Section 4. 4.1 4.2 4.3 4.4 Section 5. 5.1 5.2 5.3 5.4 Section 6. 6.1 6.2 6.3 6.4 Section 7. 7.1 7.2 Section 8. 8.1 8.2 8.3 8.4 8.5 8.6 Section 9. 9.1 9.2 9.3 9.4

Plan Identity Name Purpose Effective Date Fiscal Period Single Plan for All Employers Interpretation of Provisions Definitions Eligibility for Participation Initial Eligibility Definition of Eligibility Year Terminated Employees Certain Employees Ineligible Participation and Reparticipation Omission of Eligible Employee Inclusion of Ineligible Employee Contributions and Credits Discretionary Contributions Contributions for Stock Obligations Conditions as to Contributions Rollover Contributions Limitations on Contributions and Allocations Limitation on Annual Additions Effect of Limitations Limitations as to Certain Participants Erroneous Allocations Trust Fund and Its Investment. Creation of Trust Fund Stock Fund and Investment Fund Acquisition of Stock Participants’ Option to Diversify Voting Rights and Dividends on Stock Voting and Tendering of Stock Application of Dividends Adjustments to Accounts ESOP Allocations Charges to Accounts Stock Fund Account Investment Fund Account Adjustment to Value of Trust Fund Participant Statements Vesting of Participants’ Interests Vesting in Accounts Computation of Vesting Years Full Vesting Upon Certain Events Full Vesting Upon Plan Termination

1 1 1 1 1 1 1 1 8 8 8 8 8 9 9 9 9 9 10 10 10 11 11 12 12 13 13 13 13 13 14 15 15 16 17 17 18 18 18 18 18 19 19 19 20 21

9.5 9.6 9.7 Section 10. 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 Section 11. 11.1 11.2 11.3 Section 12. 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 12.9 12.10 12.11 12.12 Section 13. 13.1 13.2 13.3 Section 14. 14.1 14.2 14.3 14.4 14.5 14.6 14.7 14.8 14.9 14.10 14.11 14.12 Section 15. 15.1

Forfeiture, Repayment, and Restoral Accounting for Forfeitures Vesting and Nonforfeitability Payment of Benefits Benefits for Participants Time for Distribution Marital Status Delay in Benefit Determination Accounting for Benefit Payments Options to Receive and Sell Stock Restrictions on Disposition of Stock Continuing Loan Provisions; Creations of Protections and Rights Direct Rollover of Eligible Distribution Waiver of 30-Day Period After Notice of Distribution Rules Governing Benefit Claims and Review of Appeals Claim for Benefits Notification by Committee Claims Review Procedure The Committee and its Functions Authority of Committee Identity of Committee Duties of Committee Valuation of Stock. Compliance with ERISA Action by Committee Execution of Documents Adoption of Rules Responsibilities to Participants Alternative Payees in Event of Incapacity Indemnification by Employers Nonparticipation by Interested Member Adoption, Amendment, or Termination of the Plan Adoption of Plan by Other Employers Plan Adoption Subject to Qualification Right to Amend or Terminate Miscellaneous Provisions Plan Creates No Employment Rights Nonassignability of Benefits Limit of Employer Liability Treatment of Expenses Number and Gender Nondiversion of Assets Separability of Provisions Service of Process Governing State Law Employer Contributions Conditioned on Deductibility Unclaimed Accounts Qualified Domestic Relations Order Top-Heavy Provisions Top-Heavy Plan (ii)

21 21 21 21 21 22 23 23 23 23 24 24 24 25 25 25 25 26 26 26 26 26 27 27 27 27 27 27 27 28 28 28 28 28 28 29 29 29 29 29 29 29 29 29 30 30 30 30 31 31

15.2 15.3 15.4 15.5 15.6 15.7

Super Top-Heavy Plan Definitions Top-Heavy Rules of Application Minimum Contributions Minimum Vesting Top-Heavy Provisions Control in Top-Heavy Plan (iii)

31 31 32 33 34 34

ESSA BANK & TRUST EMPLOYEE STOCK OWNERSHIP PLAN Section 1. Plan Identity . 1.1 Name . The name of this Plan is ―ESSA Bank & Trust Employee Stock Ownership Plan.‖ 1.2 Purpose . The purpose of this Plan is to describe the terms and conditions under which contributions made pursuant to the Plan will be credited and paid to the Participants and their Beneficiaries. 1.3 Effective Date . The Effective Date of this Plan is April 1, 2007. 1.4 Fiscal Period . This Plan shall be operated on the basis of a January 1 to December 31 fiscal year for the purpose of keeping the Plan‘s books and records and distributing or filing any reports or returns required by law. 1.5 Single Plan for All Employers . This Plan shall be treated as a single plan with respect to all participating Employers for the purpose of crediting contributions and forfeitures and distributing benefits, determining whether there has been any termination of Service, and applying the limitations set forth in Section 5. 1.6 Interpretation of Provisions . The Employers intend this Plan and the Trust Agreement to be a qualified stock bonus plan under Section 401(a) of the Code and an employee stock ownership plan within the meaning of Section 407(d)(6) of ERISA and Section 4975(e)(7) of the Code. The Plan is intended to have its assets invested primarily in qualifying employer securities of one or more Employers within the meaning of Section 407(d)(3) of ERISA, and to satisfy any requirement under ERISA or the Code applicable to such a plan. Accordingly, the Plan and Trust Agreement shall be interpreted and applied in a manner consistent with this intent and shall be administered at all times and in all respects in a nondiscriminatory manner. Section 2. Definitions . The following capitalized words and phrases shall have the meanings specified when used in this Plan and in the Trust Agreement, unless the context clearly indicates otherwise: “Account” means a Participant‘s interest in the assets accumulated under this Plan as expressed in terms of a separate account balance which is periodically adjusted to reflect his Employer‘s contributions, the Plan‘s investment experience, and distributions and forfeitures. “Active Participant” means a Participant who has satisfied the eligibility requirements under Section 3 and who has at least 1,000 Hours of Service during the current Plan Year. However, a Participant shall not qualify as an Active Participant unless (i) he is in active Service with an Employer as of the last day of the Plan Year, or (ii) he is on a Recognized Absence as of that date, or (iii) his Service terminated during the Plan Year by reason of Disability, death, Early or Normal Retirement. “Bank” means ESSA Bank & Trust and any entity which succeeds to the business of ESSA Bank & Trust and adopts this Plan as its own pursuant to Section 13.1 of the Plan.

“Beneficiary” means the person or persons who are designated by a Participant to receive benefits payable under the Plan on the Participant‘s death. In the absence of any designation or if all the designated Beneficiaries shall die before the Participant dies or shall die before all benefits have been paid, the Participant‘s Beneficiary shall be his surviving Spouse, if any, or his estate if he is not survived by a Spouse. The Committee may rely upon the advice of the Participant‘s executor or administrator as to the identity of the Participant‘s Spouse. “Break in Service” means any Plan Year, or, for the initial eligibility computation period under Section 3.2, the 12-consecutive month period beginning on the first day of which an Employee has an Hour of Service, in which an Employee has 500 or fewer Hours of Service. Solely for this purpose, an Employee shall be considered employed for his normal hours of paid employment during a Recognized Absence (said Employee shall not be credited with more than 501 Hours of Service to avoid a Break in Service), unless he does not resume his Service at the end of the Recognized Absence. Further, if an Employee is absent for any period (i) by reason of the Employee‘s pregnancy, (ii) by reason of the birth of the Employee‘s child, (iii) by reason of the placement of a child with the Employee in connection with the Employee‘s adoption of the child, or (iv) for purposes of caring for such child for a period beginning immediately after such birth or placement, the Employee shall be credited with the Hours of Service which would normally have been credited but for such absence, up to a maximum of 501 Hours of Service. “Code” means the Internal Revenue Code of 1986, as amended. “Committee” means the committee responsible for the administration of this Plan in accordance with Section 12. “Company” means ESSA Bancorp, Inc., the holding company of the Bank, and any successor entity which succeeds to the business of the Company. “Disability” means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An individual shall not be considered to be permanently and totally disabled unless he furnishes proof of the existence thereof in such form and manner, and at such times, as the Committee may require. “Early Retirement” means retirement on or after the date a Participant attains age 60 and has completed 15 years of credited Service with the Bank. “Effective Date” means April 1, 2007. “Eligible Employee ‖ means an Employee, other than an Employee identified in Section 3.4, who has performed 1,000 Hours of Service in the applicable Eligibility Year in accordance with Section 3.2. “Employee” means any individual who is or has been employed or self-employed by an Employer. ―Employee‖ also means an individual employed by a leasing organization who, pursuant to an agreement between an Employer and the leasing organization, has performed services for the Employer and any related persons (within the meaning of Section 414(n)(6) of the Code) on a substantially full-time basis for more than one year, if such services are performed under the primary direction or control of the Employer. However, such a ―leased employee‖ shall not be considered an Employee if (i) he participates in a money purchase pension plan sponsored by the leasing organization which provides for immediate participation, immediate full vesting, and an annual contribution of at least 10 percent of the Employee‘s 415 Compensation, and (ii) leased employees do not constitute more than 20 percent of the Employer‘s total work force (including leased -2-

employees, but excluding Highly Compensated Employees and any other Employees who have not performed services for the Employer on a substantially full-time basis for at least one year). “Employer” means the Bank or any affiliate within the purview of section 414(b), (c) or (m) and 415(h) of the Code, any other corporation, partnership, or proprietorship which adopts this Plan with the Bank‘s consent pursuant to Section 13.1, and any entity which succeeds to the business of any Employer and adopts the Plan pursuant to Section 13.2. “Entry Date” means the Effective Date of the Plan and each July 1 and January 1 of each Plan Year after the Effective Date. “ERISA” means the Employee Retirement Income Security Act of 1974 (P.L. 93-406, as amended). “415 Compensation” shall mean: (a) Wages (including overtime pay, bonuses and commissions), as defined in Code Section 3401(a) for purposes of income tax withholding at the source. (b) Any elective deferral as defined in Code Section 402(g)(3) (any Employer contributions made on behalf of a Participant to the extent not includible in gross income and any Employer contributions to purchase an annuity contract under Code Section 403(b) under a salary reduction agreement) and any amount which is contributed or deferred by the Employer at the election of the Participant and which is not includible in gross income of the Participant by reason of Code Section 125 (Cafeteria Plan), Code Section 457 or 132(f)(4) shall also be included in the definition of 415 Compensation. (c) 415 Compensation in excess of $220,000 (as indexed) shall be disregarded for all Participants. For purposes of this sub-section, the $220,000 limit shall be referred to as the ―applicable limit‖ for the Plan Year in question. The $220,000 limit shall be adjusted for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Code, effective for the Plan Year which begins within the applicable calendar year. For purposes of the applicable limit, 415 Compensation shall be prorated over short Plan Years and only compensation for the portion of the Plan Year during which the individual was a Participant shall be taken into account. “Highly Compensated Employee” for any Plan Year means an Employee who, during either that or the immediately preceding Plan Year was at any time a five percent owner of the Employer (as defined in Code Section 416(i)(1)) or, during the immediately preceding Plan Year, had 415 Compensation exceeding $100,000 and was among the most highly compensated one-fifth of all Employees (the $100,000 amount is adjusted at the same time and in the same manner as under Code Section 415(d)). For these purposes, ―the most highly compensated one-fifth of all Employees‖ shall be determined by taking into account all individuals working for all related Employer entities described in the definition of ―Service,‖ but excluding any individual who has not completed six months of Service, who normally works fewer than 17 / 2 hours per week or in fewer than six months per year, who has not reached age 21, whose employment is covered by a collective bargaining agreement, or who is a nonresident alien who receives no earned income from United States sources. The applicable year for which a determination is being made is called a ―determination year‖ and the preceding 12-month period is called a look-back year.
1

“Hours of Service” means hours to be credited to an Employee under the following rules: (a) Each hour for which an Employee is paid or is entitled to be paid for services to an Employer is an Hour of Service. -3-

(b) Each hour for which an Employee is directly or indirectly paid or is entitled to be paid for a period of vacation, holidays, illness, disability, lay-off, jury duty, temporary military duty, or leave of absence is an Hour of Service. However, except as otherwise specifically provided, no more than 501 Hours of Service shall be credited for any single continuous period which an Employee performs no duties. No more than 501 Hours of Service will be credited under this paragraph for any single continuous period (whether or not such period occurs in a single computation period). Further, no Hours of Service shall be credited on account of payments made solely under a plan maintained to comply with worker‘s compensation, unemployment compensation, or disability insurance laws, or to reimburse an Employee for medical expenses. (c) Each hour for which back pay (ignoring any mitigation of damages) is either awarded or agreed to by an Employer is an Hour of Service. However, no more than 501 Hours of Service shall be credited for any single continuous period during which an Employee would not have performed any duties. The same Hours of Service will not be credited both under paragraph (a) or (b) as the case may be, and under this paragraph (c). These hours will be credited to the employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award agreement or payment is made. (d) Hours of Service shall be credited in any one period only under one of the foregoing paragraphs (a), (b) and (c); an Employee may not get double credit for the same period. (e) If an Employer finds it impractical to count the actual Hours of Service for any class or group of non-hourly Employees, each Employee in that class or group shall be credited with 90 Hours of Service for each bi-weekly pay period in which he has at least one Hour of Service. However, an Employee shall be credited only for his normal working hours during a paid absence. (f) Hours of Service to be credited on account of a payment to an Employee (including back pay) shall be recorded in the period of Service for which the payment was made. If the period overlaps two or more Plan Years, the Hours of Service credit shall be allocated in proportion to the respective portions of the period included in the several Plan Years. However, in the case of periods of 31 days or less, the Administrator may apply a uniform policy of crediting the Hours of Service to either the first Plan Year or the second. (g) In all respects an Employee‘s Hours of Service shall be counted as required by Section 2530.200b-2(b) and (c) of the Department of Labor‘s regulations under Title I of ERISA. “Investment Fund” means that portion of the Trust Fund consisting of assets other than Stock. Notwithstanding the above, assets from the Investment Fund may be used to purchase Stock in the open market or otherwise, or used to pay on the Stock Obligation, and shares so purchased will be allocated to a Participant‘s Stock Fund. “Normal Retirement” means retirement on or after the Participant‘s Normal Retirement Date. “Normal Retirement Date” means the Participant‘s 65 birthday.
th

“Participant” means any Eligible Employee who is an Active Participant participating in the Plan, or Eligible Employee or former Employee who was previously an Active Participant and still has a balance credited to his Account. “Period of Uniformed Service” means the length of time that an Employee serves in the Uniformed Services. -4-

“Plan Year” means the twelve-month period commencing January 1 and ending December 31 and each period of 12 consecutive months beginning on January 1 of each succeeding year. Initially, the Plan Year will be a short Plan Year commencing April 1, 2007 and ending December 31, 2007. “Recognized Absence” means a period for which -(a) an Employer grants an Employee a leave of absence for a limited period, but only if an Employer grants such leave on a nondiscriminatory basis; or (b) an Employee is temporarily laid off by an Employer because of a change in business conditions; or (c) an Employee is on active military duty, but only to the extent that his employment rights are protected by the Military Selective Service Act of 1967 (38 U.S.C. Sec. 2021). “Reemployment After a Period of Uniformed Service” (a) ―Reemployment (or Reemployed) After a Period of Uniformed Service‖ means that an Employee returned to employment with a Participating Employer, within the time frame set forth in subparagraph (b) below, after a Period of Uniformed Service in the Uniformed Services and the following rules corresponding to provisions of the Uniformed Services Employment and Reemployment Rights Act of 1994 (―USERRA‖) apply: (i) he or she gives sufficient notice of leave to the Participating Employer prior to commencing a Period of Uniformed Service, or is excused from providing such notice; (ii) his or her employment with the Participating Employer prior to a Period of Uniformed Service was not of a brief, nonrecurrent nature that would preclude a reasonable expectation that such employment would continue indefinitely or for a significant period; (iii) the Participating Employer‘s circumstances have not changed so that reemployment is unreasonable or an undue hardship to the Participating Employer; and (iv) the applicable cumulative Periods of Uniformed Service under USERRA equals five years or less, unless service in the Uniformed Services: (1) in excess of five years is required to complete an initial Period of Uniformed Service; (2) prevents the Participant from obtaining orders releasing him or her from such Period of Uniformed Service prior to the expiration of a five-year period (through no fault of the Participant); (3) is required in the National Guard for drill and instruction, field exercises or active duty training, or to fulfill necessary additional training, or to fulfill necessary additional training requirements certified in writing by the Secretary of the branch of Uniformed Services concerned; or (4) for a Participant is (A) required other than for training under any provisions of law during a war or national agency declared by the President or Congress; (B) required (other than for training) in support of an operational mission for which personnel have been ordered to active duty other than during war or national emergency; -5-

(C) required in support of a critical mission or requirement of the Uniformed Services; or (D) the result of being called into service as a member of the National Guard by the President in the case of rebellion or danger of rebellion against the authority of the United States Government or if the President is unable to execute the laws of the United States with the regular forces. (b) The applicable statutory time frames within which an Employee must report to a Participating Employer after a Period of Uniformed Service are as follows: (1) If the Period of Uniformed Service was less than 31 days, (A) not later than the beginning of the first full regularly scheduled work period on the first full calendar day following the completion of the Period of Uniformed Service and the expiration of eight hours after a period of time allowing for the safe transportation of the Employee from the place of service in the Uniformed Services to the Employee‘s residence; or (B) as soon as possible after the expiration of the eight-hour period of time referred to in Clause (A), if reporting within the period referred to in such clause is impossible or unreasonable through no fault of the Employee. (2) In the case of an Employee whose Period of Uniformed Service was for more than 30 days but less than 181 days, by submitting an application for reemployment with a Participating Employer not later than 14 days after the completion of the Period of Uniformed Service or, if submitting such application within such period is impossible or unreasonable through no fault of the Employee, the next first full calendar day when submission of such application becomes reasonable. (3) In the case of an Employee whose Period of Uniformed Service was for more than 180 days, by submitting an application for reemployment with a Participating Employer not later than 90 days after the completion of the Period of Uniformed Service. (4) In the case of an Employee who is hospitalized for, or convalescing from, an illness or injury related to the Period of Uniformed Service the Employee shall apply for reemployment with a Participating Employer at the end of the period that is necessary for the Employee to recover. Such period of recovery shall not exceed two years, unless circumstances beyond the Employee‘s control make reporting as above unreasonable or impossible. (c) Notwithstanding subparagraph (a), Reemployment After a Period of Uniformed Service terminates upon the occurrence of any of the following: (1) a dishonorable or bad conduct discharge from the Uniformed Services; (2) any other discharge from the Uniformed Services under circumstances other than an honorable condition; (3) a discharge of a commissioned officer from the Uniformed Services by court martial, by commutation of sentence by court martial, or, in time of war, by the President; or -6-

(4) a demotion of a commissioned officer in the Uniformed Services for absence without authorized leave of at least 3 months confinement under a sentence by court martial, or confinement in a federal or state penitentiary after being found guilty of a crime under a final sentence. “Service” means an Employee‘s period(s) of employment or self-employment with an Employer, excluding for initial eligibility purposes any period in which the individual was a nonresident alien and did not receive from an Employer any earned income which constituted income from sources within the United States. An Employee‘s Service shall include any Service which constitutes Service with a predecessor Employer within the meaning of Section 414(a) of the Code, provided, however, that Service with an acquired entity shall not be considered Service under the Plan unless required by applicable law or agreed to by the parties to such transaction. An Employee‘s Service shall also include any Service with an entity which is not an Employer, but only either (i) in which the other entity is a member of a controlled group of corporations or is under common control with other trades and businesses within the meaning of Section 414(b) or 414(c) of the Code, and a member of the controlled group or one of the trades and businesses is an Employer, (ii) in which the other entity is a member of an affiliated service group within the meaning of Section 414(m) of the Code, and a member of the affiliated service group is an Employer, or (iii) all Employers aggregated with the Employer under Section 414(o) of the Code (but not until the Proposed Regulations under Section 414(o) become effective). Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code. “Spouse” means the individual, if any, to whom a Participant is lawfully married on the date benefit payments to the Participant are to begin, or on the date of the Participant‘s death, if earlier. A former Spouse shall be treated as the Spouse or surviving Spouse to the extent provided under a qualified domestic relations order as described in section 414(p) of the Code. “Stock” means shares of the Company‘s voting common stock or preferred stock meeting the requirements of Section 409(e)(3) of the Code issued by an Employer which is a member of the same controlled group of corporations within the meaning of Code Section 414(b). The term ―Stock‖ shall include fractional shares, unless the context clearly indicates otherwise. “Stock Fund” means that portion of the Trust Fund consisting of Stock. “Stock Obligation” means an indebtedness arising from any extension of credit to the Plan or the Trust which satisfies the requirements set forth in Section 6.3 and which was obtained for any or all of the following purposes: (i) (ii) (iii) to acquire qualifying Employer securities as defined in Treasury Regulations § 54.4975-12; to repay such Stock Obligation; or to repay a prior exempt loan.

“Trust” or “Trust Fund” means the trust fund created under this Plan. “Trust Agreement” means the agreement between the Bank and the Trustee concerning the Trust Fund. If any assets of the Trust Fund are held in a co-mingled trust fund with assets of other qualified retirement plans, ―Trust Agreement‖ shall be deemed to include the trust agreement governing that co-mingled -7-

trust fund. With respect to the allocation of investment responsibility for the assets of the Trust Fund, the provisions of Article II of the Trust Agreement are incorporated herein by reference. “Trustee” means one or more corporate persons or individuals selected from time to time by the Bank to serve as trustee or co-trustees of the Trust Fund. “Unallocated Stock Fund” means that portion of the Stock Fund consisting of the Plan‘s holding of Stock which have been acquired in exchange for one or more Stock Obligations and which have not yet been allocated to the Participant‘s Accounts in accordance with Section 4.2. “Uniformed Service” means the performance of duty on a voluntary or involuntary basis in the uniformed service of the United States, including the U.S. Public Health Services, under competent authority and includes active duty, active duty for training, initial activity duty for training, inactive duty training, full-time National Guard duty, and the period for which a person is absent from a position of employment for purposes of an examination to determine the fitness of the person to perform any such duty. “Valuation Date” means for so long as there is a generally-recognized market for the Stock each business day. If at any time there shall be no generally-recognized market for the Stock, then ―Valuation Date‖ shall mean the last day of the Plan Year and each other date as of which the Committee shall determine the investment experience of the Investment Fund and adjust the Participants‘ Accounts accordingly. “Valuation Period” means the period following a Valuation Date and ending with the next Valuation Date. “Vesting Year” means a unit of Service credited to a Participant pursuant to Section 9.2 for purposes of determining his vested interest in his Account. Section 3. Eligibility for Participation . 3.1 Initial Eligibility . An Eligible Employee shall enter the Plan as of the Entry Date coincident with or next following the last day of the Eligible Employee‘s first Eligibility Year. 3.2 Definition of Eligibility Year . ―Eligibility Year‖ means an applicable eligibility period (as defined below) in which the Eligible Employee has completed 1,000 Hours of Service for the Employer. For this purpose, an Eligible Employee‘s first ―eligibility period‖ is the 12-consecutive month period beginning on the first day on which he has an Hour of Service, and subsequent eligibility periods shall commence on the first anniversary of the date on which the Employee first completed an Hour of Service for the Employer. 3.3 Terminated Employees . No Employee shall have any interest or rights under this Plan if he is never in active Service with an Employer on or after the Effective Date. 3.4 Certain Employees Ineligible . 3.4-1. No Employee shall participate in the Plan while his Service is covered by a collective bargaining agreement between an Employer and the Employee‘s collective bargaining representative if (i) retirement benefits have been the subject of good faith bargaining between the Employer and the representative and (ii) the collective bargaining agreement does not provide for the Employee‘s participation in the Plan. 3.4-2. Leased Employees are not eligible to participate in the Plan. -8-

3.4-3. Employees who are nonresident aliens with no earned income (within the meaning of Code Section 911(d)(2)) from the Employer which constitutes income from sources within the United States (within the meaning of Code Section 861(a)(3)). 3.4-4. An Eligible Employee may elect not to participate in the Plan, provided, however, such election is made solely to meet the requirements of Code Section 409(n). For an election to be effective for a particular Plan Year, the Eligible Employee or Participant must file the election in writing with the Plan Administrator no later than the last day of the Plan Year for which the election is to be effective. The Employer may not make a contribution under the Plan for the Eligible Employee or for the Participant for the Plan Year for which the election is effective, nor for any succeeding Plan Year, unless the Eligible Employee or Participant re-elects to participate in the Plan. The Eligible Employee or Participant may elect again not to participate, but not earlier than the first Plan Year following the Plan Year in which the re-election was first effective. 3.5 Participation and Reparticipation . Subject to the satisfaction of the foregoing requirements, an Eligible Employee shall participate in the Plan during each period of his Service from the date on which he first becomes eligible until his termination. For this purpose, an Eligible Employee who returns before five (5) consecutive one year Breaks in Service who previously satisfied the initial eligibility requirements or who returns after five (5) consecutive one year Breaks in Service with a vested Account balance in the Plan shall re-enter the Plan as of the date of his return to Service with an Employer. 3.6 Omission of Eligible Employee . If, in any Plan Year, any Eligible Employee who should be included as a Participant in the Plan is erroneously omitted and discovery of such omission is not made until after a contribution by his Employer for the year has been made, the Employer shall make a subsequent contribution with respect to the omitted Eligible Employee in the amount which the said Employer would have contributed regardless of whether or not it is deductible in whole or in part in any taxable year under applicable provisions of the Code. 3.7 Inclusion of Ineligible Employee . If, in any Plan Year, any person who should not have been included as a Participant in the Plan is erroneously included and discovery of such incorrect inclusion is not made until after a contribution for the year has been made, the Employer shall not be entitled to recover the contribution made with respect to the ineligible person regardless of whether or not a deduction is allowable with respect to such contribution. In such event, the amount contributed with respect to the ineligible person shall constitute a forfeiture for the fiscal year in which the discovery is made. Any person who, after the close of a Plan Year, is retroactively treated by the Company, an affiliated company or any other party as an Employee for such prior Plan Year shall not, for purposes of the Plan, be considered an Employee for such prior Plan Year unless expressly so treated as such by the Company. Section 4. Contributions and Credits . 4.1 Discretionary Contributions . 4.1-1. The Employer shall from time to time contribute, with respect to a Plan Year, such amounts as it may determine from time to time. The Employer shall have no obligation to contribute any amount under this Plan except as so determined in its sole discretion. The Employer‘s contributions and available forfeitures for a Plan Year shall be credited as of the last day of the year to the Accounts of the Active Participants in the manner set forth in Section 8.1-2. -9-

4.1-2. Upon a Participant‘s Reemployment After a Period of Uniformed Service, the Employer shall make an additional contribution on behalf of such Participant that would have been made on his or her behalf during the Plan Year or Years corresponding to the Participant‘s Period of Uniformed Service. 4.2 Contributions for Stock Obligations . If the Trustee, upon instructions from the Committee, incurs any Stock Obligation upon the purchase of Stock, the Employer may contribute for each Plan Year an amount sufficient to cover all payments of principal and interest as they come due under the terms of the Stock Obligation. If there is more than one Stock Obligation, the Employer shall designate the one to which any contribution is to be applied. Investment earnings realized on Employer contributions and any dividends paid by the Employer on Stock held in the Unallocated Stock Account, shall be applied to the Stock Obligation related to that Stock, subject to Section 7.2. In each Plan Year in which Employer contributions, earnings on contributions, or dividends on Stock in the Unallocated Stock Fund are used as payments under a Stock Obligation, a certain number of shares of the Stock acquired with that Stock Obligation which is then held in the Unallocated Stock Fund shall be released for allocation among the Participants. The number of shares released shall bear the same ratio to the total number of those shares then held in the Unallocated Stock Fund (prior to the release) as (i) the principal and interest payments made on the Stock Obligation in the current Plan Year bears to (ii) the sum of (i) above, and the remaining principal and interest payments required (or projected to be required on the basis of the interest rate in effect at the end of the Plan Year) to satisfy the Stock Obligation. At the direction of the Committee, the current and projected payments of interest under a Stock Obligation may be ignored in calculating the number of shares to be released in each year if (i) the Stock Obligation provides for annual payments of principal and interest at a cumulative rate that is not less rapid at any time than level annual payments of such amounts for 10 years, (ii) the interest included in any payment is ignored only to the extent that it would be determined to be interest under standard loan amortization tables, and (iii) the term of the Stock Obligation, by reason of renewal, extension, or refinancing, has not exceeded 10 years from the original acquisition of the Stock. 4.3 Conditions as to Contributions . Employers‘ contributions shall in all events be subject to the limitations set forth in Section 5. Contributions may be made in the form of cash, or securities and other property to the extent permissible under ERISA, including Stock, and shall be held by the Trustee in accordance with the Trust Agreement. In addition to the provisions of Section 13.3 for the return of an Employer‘s contributions in connection with a failure of the Plan to qualify initially under the Code, any amount contributed by an Employer due to a good faith mistake of fact, or based upon a good faith but erroneous determination of its deductibility under Section 404 of the Code, shall be returned to the Employer within one year after the date on which the contribution was originally made, or within one year after its nondeductibility has been finally determined. However, the amount to be returned shall be reduced to take account of any adverse investment experience within the Trust Fund in order that the balance credited to each Participant‘s Account is not less that it would have been if the contribution had never been made. 4.4 Rollover Contributions . This Plan shall not accept a direct rollover or rollover contribution of an ―eligible rollover distribution‖ as such term is defined in Section 10.9-1 of the Plan. -10-

Section 5. Limitations on Contributions and Allocations . 5.1 Limitation on Annual Additions . Notwithstanding anything herein to the contrary, allocation of Employer contributions for any Plan Year shall be subject to the following: 5.1-1 If allocation of Employer contributions in accordance with Section 4.1 will result in an allocation of more than one-third the total contributions for a Plan Year to the Accounts of Highly Compensated Employees, then allocation of such amount shall be adjusted so that such excess will not occur. 5.1-2 After adjustment, if any, required by the preceding paragraph, the annual additions during any Plan Year to any Participant‘s Account under this and any other defined contribution plans maintained by the Employer or an affiliate (within the purview of Section 414(b), (c) and (m) and Section 415(h) of the Code, which affiliate shall be deemed the Employer for this purpose) shall not exceed the lesser of $44,000 (or such other dollar amount which results from cost-of-living adjustments under Section 415(d) of the Code) (the ―dollar limitation‖) or 100 percent of the Participant‘s 415 Compensation for such limitation year (the ―percentage limitation‖). The percentage limitation shall not apply to any contribution for medical benefits after separation from service (within the meaning of Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise treated as an annual addition. If, as a result of the allocation of forfeitures, a reasonable error in estimating a Participant‘s annual compensation, a reasonable error in determining the amount of elective deferrals (within the meaning of Code Section 402(g)(3)) that may be made with respect to any individual under the limits of Code Section 415, or under other limited facts and circumstances that the Commissioner of the Internal Revenue Service finds justify the availability of the rules set forth in this paragraph, the annual additions under the terms of the Plan for a particular Participant would cause the limitations of Code Section 415 applicable to that Participant for the limitation year to be exceeded, the excess amounts shall not be deemed annual additions in that limitation year if they are treated in accordance with any one of the following: (i) Any excess amount at the end of the Plan Year that cannot be allocated to the Participant‘s Account shall be reallocated to the remaining Participants who are eligible for an allocation of Employer contributions for the Plan Year. The reallocation shall be made in accordance with Section 4.1 of the Plan as if the Participant whose Account otherwise would receive the excess amount is not eligible for an allocation of Employer contributions. (ii) If the allocation or reallocation of the excess amounts causes the limitations of Code section 415 to be exceeded with respect to each Participant for the limitation year, then the excess amount will be held unallocated in a suspense account. The suspense account will be applied to reduce future Employer contributions for all remaining Participants in the next limitation year and each succeeding limitation year if necessary. (iii) If a suspense account is in existence at any time during a limitation year, it will not participate in any allocation of investment gains and losses. All amounts held in suspense accounts must be allocated to Participants‘ Accounts before any contributions may be made to the Plan for the limitation year. (iv) If a suspense account exists at the time of Plan termination, amounts held in the suspense account that cannot be allocated shall revert to the Employer. -11-

5.1-3 For purposes of this Section 5.1, the ―annual addition‖ to a Participant‘s Accounts means the sum of (i) Employer contributions, (ii) Employee contributions, if any, and (iii) forfeitures. For these purposes, annual additions to a defined contribution plan shall not include the allocation of the excess amounts remaining in the Unallocated Stock Fund subsequent to a sale of stock from such fund in accordance with a transaction described in Section 8.1 of the Plan. 5.1-4 Notwithstanding the foregoing, if no more than one-third of the Employer contributions to the Plan for a year which are deductible under Section 404(a)(9) of the Code are allocated to Highly Compensated Employees (within the meaning of Section 414(q) of the Internal Revenue Code), the limitations imposed herein shall not apply to: (i) forfeitures of Employer securities (within the meaning of Section 409 of the Code) under the Plan if such securities were acquired with the proceeds of a loan described in Section 404(a)(9)(A) of the Code), or (ii) Employer contributions to the Plan which are deductible under Section 404(a)(9)(B) and charged against a Participant‘s Account. 5.1-5 If the Employer contributes amounts, on behalf of Eligible Employees covered by this Plan, to other ―defined contribution plans‖ as defined in Section 3(34) of ERISA, the limitation on annual additions provided in this Section shall be applied to annual additions in the aggregate to this Plan and to such other plans. Reduction of annual additions, where required, shall be accomplished first by reductions under such other plan pursuant to the directions of the named fiduciary for administration of such other plans or under priorities, if any, established under the terms of such other plans and then by allocating any remaining excess for this Plan in the manner and priority set out above with respect to this Plan. 5.1-6 A limitation year shall mean each 12 consecutive month period ending on December 31. 5.2 Effect of Limitations . The Committee shall take whatever action may be necessary from time to time to assure compliance with the limitations set forth in Section 5.1. Specifically, the Committee shall see that each Employer restrict its contributions for any Plan Year to an amount which, taking into account the amount of available forfeitures, may be completely allocated to the Participants consistent with those limitations. Where the limitations would otherwise be exceeded by any Participant, further allocations to the Participant shall be curtailed to the extent necessary to satisfy the limitations. Where an excessive amount is contributed on account of a mistake as to one or more Participants‘ compensation, or there is an amount of forfeitures which may not be credited in the Plan Year in which it becomes available, the amount shall be corrected in accordance with Section 5.1-2 of the Plan. If it is determined at any time that the Committee and/or Trustee has erred in accepting and allocating any contributions or forfeitures under this Plan, or in allocating net gain or loss pursuant to Sections 8.2 and 8.3, then the Committee, in a uniform and nondiscriminatory manner, shall determine the manner in which such error shall be corrected and shall promptly advise the Trustee in writing of such error and of the method for correcting such error. The Accounts of any or all Participants may be revised, if necessary, in order to correct such error. 5.3 Limitations as to Certain Participants . Aside from the limitations set forth in Section 5.1, if the Plan acquires any Stock in a transaction as to which a selling shareholder or the estate of a deceased shareholder is claiming the benefit of Section 1042 of the Code, the Committee shall see that none of such Stock, and no other assets in lieu of such Stock, are allocated to the Accounts of certain Participants in order to comply with Section 409(n) of the Code. -12-

This restriction shall apply at all times to a Participant who owns (taking into account the attribution rules under Section 318(a) of the Code, without regard to the exception for employee plan trusts in Section 318(a)(2)(B)(i) more than 25 percent of any class of stock of a corporation which issued the Stock acquired by the Plan, or another corporation within the same controlled group, as defined in Section 409(l)(4) of the Code (any such class of stock hereafter called a ―Related Class‖). For this purpose, a Participant who owns more than 25 percent of any Related Class at any time within the one year preceding the Plan‘s purchase of the Stock shall be subject to the restriction as to all allocations of the Stock, but any other Participant shall be subject to the restriction only as to allocations which occur at a time when he owns more than 25 percent of any Related Class. Further, this restriction shall apply to the selling shareholder claiming the benefit of Section 1042 and any other Participant who is related to such a shareholder within the meaning of Section 267(b) of the Code, during the period beginning on the date of sale and ending on the later of (1) the date that is ten years after the date of sale, or (2) the date of the Plan allocation attributable to the final payment of acquisition indebtedness incurred in connection with the sale. This restriction shall not apply to any Participant who is a lineal descendant of a selling shareholder if the aggregate amounts allocated under the Plan for the benefit of all such descendants do not exceed five percent of the Stock acquired from the shareholder. 5.4 Erroneous Allocations . No Participant shall be entitled to any annual additions or other allocations to his Account in excess of those permitted under Section 5. If it is determined at any time that the administrator and/or Trustee have erred in accepting and allocating any contributions or forfeitures under this Plan, or in allocating investment adjustments, or in excluding or including any person as a Participant, then the administrator, in a uniform and nondiscriminatory manner, shall determine the manner in which such error shall be corrected, after taking into consideration Sections 3.6 and 3.7, if applicable, and shall promptly advise the Trustee in writing of such error and of the method for correcting such error. The Accounts of any or all Participants may be revised, if necessary, in order to correct such error. Section 6. Trust Fund and Its Investment . 6.1 Creation of Trust Fund . All amounts received under the Plan from Employers and investments shall be held as the Trust Fund pursuant to the terms of this Plan and of the Trust Agreement between the Bank and the Trustee. The benefits described in this Plan shall be payable only from the assets of the Trust Fund, and none of the Bank, any other Employer, its board of directors or trustees, its stockholders, its officers, its employees, the Committee, and the Trustee shall be liable for payment of any benefit under this Plan except from the Trust Fund. 6.2 Stock Fund and Investment Fund . The Trust Fund held by the Trustee shall be divided into the Stock Fund, consisting entirely of Stock, and the Investment Fund, consisting of all assets of the Trust other than Stock. The Trustee shall have no investment responsibility for the Stock Fund, but shall accept any Employer contributions made in the form of Stock, and shall acquire, sell, exchange, distribute, and otherwise deal with and dispose of Stock in accordance with the instructions of the Committee. The Trustee shall have full responsibility for the investment of the Investment Fund, except to the extent such responsibility may be delegated from time to time to one or more investment managers pursuant to Section 2.3 of the Trust Agreement, or to the extent the Committee directs the Trustee to purchase Stock with the assets in the Investment Fund. 6.3 Acquisition of Stock . From time to time the Committee may, in its sole discretion, direct the Trustee to acquire Stock from the issuing Employer or from shareholders, including shareholders who are or -13-

have been Employees, Participants, or fiduciaries with respect to the Plan. The Trustee shall pay for such Stock no more than its fair market value, which shall be determined conclusively by the Committee pursuant to Section 12.4. The Committee may direct the Trustee to finance the acquisition of Stock by incurring or assuming indebtedness to the seller or another party which indebtedness shall be called a ―Stock Obligation.‖ The term ―Stock Obligation‖ shall refer to a loan made to the Plan by a disqualified person within the meaning of Section 4975(e)(2) of the Code, or a loan to the Plan which is guaranteed by a disqualified person. A Stock Obligation includes a direct loan of cash, a purchase-money transaction, and an assumption of an obligation of a tax-qualified employee stock ownership plan under Section 4975(e)(7) of the Code (―ESOP‖). For these purposes, the term ―guarantee‖ shall include an unsecured guarantee and the use of assets of a disqualified person as collateral for a loan, even though the use of assets may not be a guarantee under applicable state law. An amendment of a Stock Obligation in order to qualify as an ―exempt loan‖ is not a refinancing of the Stock Obligation or the making of another Stock Obligation. The term ―exempt loan‖ refers to a loan that satisfies the provisions of this paragraph. A ―non-exempt loan‖ fails to satisfy this paragraph. Any Stock Obligation shall be subject to the following conditions and limitations: 6.3-1 A Stock Obligation shall be for a specific term, shall not be payable on demand except in the event of default, and shall bear a reasonable rate of interest. 6.3-2 A Stock Obligation may, but need not, be secured by a collateral pledge of either the Stock acquired in exchange for the Stock Obligation, or the Stock previously pledged in connection with a prior Stock Obligation which is being repaid with the proceeds of the current Stock Obligation. No other assets of the Plan and Trust may be used as collateral for a Stock Obligation, and no creditor under a Stock Obligation shall have any right or recourse to any Plan and Trust assets other than Stock remaining subject to a collateral pledge. 6.3-3 Any pledge of Stock to secure a Stock Obligation must provide for the release of pledged Stock in connection with payments on the Stock obligations in the ratio prescribed in Section 4.2. 6.3-4 Repayments of principal and interest on any Stock Obligation shall be made by the Trustee only from Employer cash contributions designated for such payments, from earnings on such contributions, and from cash dividends received on Stock, in the last case, however, subject to the further requirements of Section 7.2. 6.3-5 In the event of default of a Stock Obligation, the value of Plan assets transferred in satisfaction of the Stock Obligation must not exceed the amount of the default. If the lender is a disqualified person within the meaning of Section 4975 of the Code, a Stock Obligation must provide for a transfer of Plan assets upon default only upon and to the extent of the failure of the Plan to meet the payment schedule of said Stock Obligation. For purposes of this paragraph, the making of a guarantee does not make a person a lender. 6.4 Participants’ Option to Diversify . The Committee shall provide for a procedure under which each Participant may, during the qualified election period, elect to ―diversify‖ a portion of the Employer Stock allocated to his Account, as provided in Section 401(a)(28)(B) of the Code. An election to diversify must be made on the prescribed form and filed with the Committee within the period specified herein. For each of the first five (5) Plan years in the qualified election period, the Participant may elect to diversify an amount which does not exceed 25% of the number of shares allocated to his Account since the inception of the Plan, less all shares with respect to which an election under this Section -14-

has already been made. For the last year of the qualified election period, the Participant may elect to have up to 50 percent of the value of his Account committed to other investments, less all shares with respect to which an election under this Section has already been made. The term ―qualified election period‖ shall mean the six (6) Plan Year period beginning with the first Plan Year in which a Participant has both attained age 55 and completed 10 years of participation in the Plan. A Participant‘s election to diversify his Account may be made within each year of the qualified election period and shall continue for the 90-day period immediately following the last day of each year in the qualified election period. Once a Participant makes such election, the Plan must complete diversification in accordance with such election within 90 days after the end of the period during which the election could be made for the Plan Year. In the discretion of the Committee, the Plan may satisfy the diversification requirement by any of the following methods: 6.4-1 The Plan may distribute all or part of the amount subject to the diversification election. 6.4-2 The Plan may offer the Participant at least three other distinct investment options, if available under the Plan. The other investment options shall satisfy the requirements of Regulations under Section 404(c) of the Employee Retirement Income Security Act of 1974, as amended (―ERISA‖). 6.4-3 The Plan may transfer the portion of the Participant‘s Account subject to the diversification election to another qualified defined contribution plan of the Employer that offers at least three investment options satisfying the requirements of the Regulations under Section 404(c) of ERISA. Section 7. Voting Rights and Dividends on Stock . 7.1 Voting and Tendering of Stock . 7.1-1. The Trustee generally shall vote all shares of Stock held under the Plan in accordance with the written instructions of the Committee. However, if any Employer has registration-type class of securities within the meaning of Section 409(e)(4) of the Code, or if a matter submitted to the holders of the Stock involves a merger, consolidation, recapitalization, reclassification, liquidation, dissolution, or sale of substantially all assets of an entity, then (i) the shares of Stock which have been allocated to Participants‘ Accounts shall be voted by the Trustee in accordance with the Participants‘ written instructions, and (ii) the Trustee shall vote any unallocated Stock, allocated Stock for which it has received no voting instructions, and Stock for which Participants vote to ―abstain,‖ in the same proportions as it votes the allocated Stock for which it has received instructions from Participants; provided, however, that if an exempt loan, as defined in Section 4975(d) of the Code, is outstanding and the Plan is in default on such exempt loan, as default is defined in the loan documents, then to the extent that such loan documents require the lender to exercise voting rights with respect to the unallocated shares, the loan documents will prevail. In the event no shares of Stock have been allocated to Participants‘ Accounts at the time Stock is to be voted and any exempt loan which may be outstanding is not in default, each Participant shall be deemed to have one share of Stock allocated to his or her Account for the sole purpose of providing the Trustee with voting instructions. Notwithstanding any provision hereunder to the contrary, all unallocated shares of Stock must be voted by the Trustee in a manner determined by the Trustee to be for the exclusive benefit of the Participants and Beneficiaries. Whenever such voting rights are to be exercised, the Employers shall provide the Trustee, in a timely manner, with the same notices and other materials as are provided to other holders of the Stock, which the Trustee shall distribute to the Participants. The Participants shall be provided with adequate opportunity to deliver their instructions to the Trustee regarding the voting of Stock allocated to their Accounts. The instructions of the Participants‘ with respect to the voting of allocated shares hereunder shall be confidential. -15-

7.1-2 In the event of a tender offer, Stock shall be tendered by the Trustee in the same manner as set forth above with respect to the voting of Stock. Notwithstanding any provision hereunder to the contrary, Stock must be tendered by the Trustee in a manner determined by the Trustee to be for the exclusive benefit of the Participants and Beneficiaries. 7.2 Application of Dividends . 7.2-1 Stock Dividends . Dividends on Stock which are received by the Trustee in the form of additional Stock shall be retained in the Stock Fund, and shall be allocated among the Participants‘ Accounts and the Unallocated Stock Fund in accordance with their holdings of the Stock on which the dividends are paid. 7.2-2 Cash Dividends . The treatment of dividends paid in cash shall be determined after consideration to whether the cash dividends are paid on Stock held in Participants‘ Accounts or the Unallocated Stock Fund. (i) On Stock in Participants‘ Accounts . (A) Employer Exercises Discretion . Dividends on Stock credited to Participants‘ Accounts which are received by the Trustee in the form of cash shall, at the direction of the Employer paying the dividends, either (i) be credited to the Accounts in accordance with Section 8.4(c) and invested as part of the Investment Fund, (ii) be distributed immediately to the Participants in proportion with the Participants‘ Stock Fund Account balance (iii) be distributed to the Participants within 90 days of the close of the Plan Year in which paid in proportion with the Participants‘ Stock Fund Account balance or (iv) be used to make payments on the Stock Obligation. If dividends on Stock allocated to a Participant‘s Account are used to repay the Stock Obligation, Stock with a fair market value equal to the dividends so used must be allocated to such Participant‘s Account in lieu of the dividends. (B) Participant Exercises Discretion over Dividend . In addition, in the sole discretion of the Employer, the Employer may grant Participants the right to elect: (I) to have cash dividends paid on shares of Stock credited to such Participants‘ Stock Fund Accounts distributed to the Participant, or (II) to leave the cash dividends allocated to the Participant‘s Account in the Plan, to be credited to the Stock Fund Account and invested in shares of Stock. Dividends on which such election may be made will be fully vested in the Participant (even if not otherwise vested, absent the ability to make such election). Accordingly, the Employer may choose to offer this election only to Participants who are fully vested in their Account. In the event the Employer elects to give Participants the right to determine the treatment of such dividends, the Participant‘s election shall be made by filing with the Committee the appropriate written direction as provided by the Committee at such time and in accordance with such procedures and limitations which the Committee may from time to time establish; provided, however, that the procedures established by the Committee shall provide a reasonable opportunity to change the election at least annually, may establish a default election if a Participant fails to make an affirmative election within the time established for making elections, may provide that the election is applicable for the Plan Year and cannot be revoked with respect to such Plan Year, shall otherwise be implemented in a manner such that the dividends paid or reinvested will constitute ―applicable dividends‖ which may be deducted under Code Section 404(k), and are in accordance with applicable guidance issued or to be issued by the Secretary of the Treasury. If the Employer elects to give Participants the right to exercise the discretion in this Paragraph 7.2-2(i)(B), the ability to make such election shall be available to the Participant with respect to dividends paid for the entire Plan Year. -16-

(ii) On Stock in the Unallocated Stock Fund . Dividends received on shares of Stock held in the Unallocated Stock Fund shall be applied to the repayment of principal and interest then due on the Stock Obligation used to acquire such shares. If the amount of dividends exceeds the amount needed to repay such principal and interest (including any prepayments of principal and interest deemed advisable by the Employer), then in the sole discretion of the Committee, the excess shall: (A) be allocated to Active Participants on a non-discriminatory basis, consistent with Section 7.2-2(i) above, and in the discretion of the Committee, treated as a dividend described in such Section, or (B) be deemed to be general earnings of the Trust Fund and used for paying appropriate Plan or Trust related expenditures for the Plan Year. Notwithstanding the foregoing, dividends paid on a share of Stock may not be used to make payments on a particular Stock Obligation unless the share was acquired with the proceeds of such loan or a refinancing of such loan. Section 8. Adjustments to Accounts . 8.1 ESOP Allocations . Amounts available for allocation for a particular Plan Year will be divided into two categories. The first category relates to shares of Stock released from the Unallocated Stock Fund attributable to using cash dividends to make Stock Obligation payments. The second category relates to contributions made by the Employer, shares of Stock released from the Unallocated Stock Fund on the basis of Employer contributions (or on the basis of the complete repayment of the Stock Obligation through the sale or other disposition of Stock in the Unallocated Stock Fund) and amounts forfeited from Stock Fund Accounts pursuant to Section 9.5. 8.1-1. Shares of Stock attributable to the first category will be allocated to the Stock Fund Accounts of eligible Participants as follows: (i) first, if dividends paid on shares of Stock held in Participants‘ Stock Fund Accounts are used to make payments on an Stock Obligation, there shall be allocated to each such account a number of shares of Stock released from the Unallocated Stock Fund with a fair market value (determined as of the Valuation Date coincident with or immediately preceding the loan payment date) that at least equals the amount of dividends so used, (ii) second, if necessary, any remaining shares of Stock shall be applied to reinstate amounts forfeited from Stock Fund Accounts of former employees who are entitled to a reinstatement under Section 9.5, and (iii) finally, any remaining shares of Stock shall be allocated as a general investment gain in proportion to the number of shares held in the Active Participants‘ Stock Fund Accounts as of the last Valuation Date of the Plan Year for which they are allocated in the same manner as described in Section 7.2-2(i). 8.1-2. Shares of Stock or cash attributable to the second category (i.e., Employer contributions, Stock released from the Unallocated Stock Fund on the basis of Employer contributions, and amounts forfeited) will be allocated to the Stock Fund Accounts or Investment Fund Accounts, as the case may be, pro rata, in proportion to the 415 Compensation of each Active Participant that was earned by such Participant during the period of the Plan Year in which such person participated in the Plan compared to total 415 Compensation for all Active Participants. 8.1-3. Shares of Stock or cash attributable to contributions made under Section 4.1-2 shall be allocated specifically to the Participants on whose behalf such contributions were made. -17-

8.2 Charges to Accounts . When a Valuation Date occurs, any distributions made to or on behalf of any Participant or Beneficiary since the last preceding Valuation Date shall be charged to the proper Accounts maintained for that Participant or Beneficiary. 8.3 Stock Fund Account . Subject to the provisions of Sections 5 and 8.1, as of the last day of each Plan Year, the Trustee shall credit to each Participant‘s Stock Fund Account: (a) the Participant‘s allocable share of Stock purchased by the Trustee or contributed by the Employer to the Trust Fund for that year; (b) the Participant‘s allocable share of the Stock that is released from the Unallocated Stock Fund for that year; (c) the Participant‘s allocable share of any forfeitures of Stock arising under the Plan during that year; and (d) any stock dividends declared and paid during that year on Stock credited to the Participant‘s Stock Fund Account. If, in any Plan Year during which an outstanding Stock Obligation exists, the Employer directs the Trustee to sell or otherwise dispose of a number of shares of Stock in the Unallocated Stock Fund sufficient to repay, in its entirety, the Stock Obligations, and following such repayment, there remains Stock or other assets in the Unallocated Stock Fund, such Stock or other assets shall be allocated as of the last day of the Plan Year in which the repayment occurred as earnings of the Plan to Active Participants, in proportion to the number of shares held in Active Participants‘ Stock Fund Accounts. 8.4 Investment Fund Account . Subject to the provisions of Sections 5 and 8.1 as of the last day of each Plan Year, the Trustee shall credit to each Participant‘s Investment Fund Account: (a) the Participant‘s allocable share of any contribution for that year made by the Employer in cash or in property other than Stock that is not used by the Trustee to purchase Employer Stock or to make payments due under a Stock Obligation; (b) the Participant‘s allocable share of any forfeitures from the Investment Fund Accounts of other Participants arising under the Plan during that year; (c) any cash dividends paid during that year on Stock credited to the Participant‘s Stock Fund Account, other than dividends which are paid directly to the Participant and other than dividends which are used to repay Stock Obligation; and (d) the share of the net income or loss of the Trust Fund properly allocable to that Participant‘s Investment Fund Account, as provided in Section 8.5. 8.5 Adjustment to Value of Trust Fund . As of the last day of each Plan Year, the Trustee shall determine: (i) the net worth of that portion of the Trust Fund which consists of properties other than Stock (the ―Investment Fund‖); and (ii) the increase or decrease in the net worth of the Investment Fund since the last day of the preceding Plan Year. The net worth of the Investment Fund shall be the fair market value of all properties held by the Trustee under the Trust Agreement other than Stock, net of liabilities other than liabilities to Participants and their beneficiaries. The Trustee shall allocate to the Investment Fund Account of each Participant that percentage of the increase or decrease in the net worth of the Investment Fund equal to the ratio which the balances credited to the Participant‘s Investment Fund Account bear to the total amount credited to all Participants‘ Investments Fund Accounts. This allocation shall be made after application of Section 7.2, but before application of Sections 8.1, 8.4 and 5.1. 8.6 Participant Statements . Each Plan Year, the Trustee will provide each Participant with a statement of his or her Account balances as of the last day of the Plan Year. -18-

Section 9. Vesting of Participants’ Interests . 9.1 Vesting in Accounts . A Participant‘s vested interest in his Account shall be based on his Vesting Years in accordance with the following table, subject to the balance of this Section 9:
Vesting Years Percentage of Interest Vested

Fewer than 3 3 or more

0% 100 %

9.2 Computation of Vesting Years . For purposes of this Plan, a ―Vesting Year‖ means generally a Plan Year in which an Eligible Employee has performed at least 1,000 Hours of Service, beginning with the first Plan Year in which the Eligible Employee has completed an Hour of Service with the Employer, and including Service with other Employers as provided in the definition of ―Service.‖ Notwithstanding the above, an Eligible Employee who was employed with the Bank in its pre-conversion mutual form (the ―Mutual Bank‖) shall receive credit for vesting purposes for each calendar year, up to three years, of continuous employment with the Mutual Bank in which such Eligible Employee completed 1,000 Hours of Service (such years shall also be referred to as ―Vesting Years‖). However, a Participant‘s Vesting Years shall be computed subject to the following conditions and qualifications: 9.2-1 A Participant‘s Vesting Years shall not include any Service prior to the date on which an Employee attains age 18. 9.2-2 To the extent applicable, a Participant‘s vested interest in his Account accumulated before five (5) consecutive one year Breaks in Service shall be determined without regard to any Service after such five consecutive Breaks in Service. Further, if a Participant has five (5) consecutive one year Breaks in Service before his interest in his Account has become vested to some extent, pre-Break in Service years of Service shall not be required to be taken into account for purposes of determining his post-Break in Service vested percentage. 9.2-3 To the extent applicable, in the case of a Participant who has five (5) or more consecutive one year Breaks in Service, the Participant‘s pre-Break in Service will count in vesting of the Employer-derived post-Break in Service accrued benefit only if either: (i) such Participant has any nonforfeitable interest in the accrued benefit attributable to Employer contributions at the time of separation from Service, or (ii) upon returning to Service the number of consecutive one year Breaks in Service is less than the number of years of Service. 9.2-4 Notwithstanding any provision of the Plan to the contrary, calculation of service for determining Vesting Years with respect to qualified military service will be provided in accordance with Section 414(u) of the Code. 9.2-5 To the extent applicable, if any amendment changes the vesting schedule, including an automatic change to or from a top-heavy vesting schedule, any Participant with three (3) or more Vesting Years may, by filing a written request with the Employer, elect to have his vested percentage computed under the vesting schedule in effect prior to the amendment. The election period must begin not later than the later of sixty (60) days after the amendment is adopted, the amendment -19-

becomes effective, or the Participant is issued written notice of the amendment by the Employer or the Committee. 9.3 Full Vesting Upon Certain Events . 9.3-1 Notwithstanding Section 9.1, a Participant‘s interest in his Account shall fully vest on the Participant‘s Normal Retirement Date. The Participant‘s interest shall also fully vest in the event that his Service is terminated by Early Retirement, Disability or by death. 9.3-2 The Participant‘s interest in his Account shall also fully vest in the event of a ―Change in Control‖ of the Bank, or the Company. For these purposes, ―Change in Control‖ shall mean an event of a nature that (i) would be required to be reported in response to Item 5.01 of the Current Report on Form 8K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the ―Exchange Act‖); or (ii) results in a Change in Control of the Bank or the Company within the meaning of the Home Owners‘ Loan Act, as amended, and applicable rules and regulations promulgated thereunder as in effect at the time of the Change in Control (collectively, the ―HOLA‖); or (iii) without limitation such a Change in Control shall be deemed to have occurred at such time as (a) any ―Person‖ (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the ―beneficial owner‖ (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank or the Company representing 25% or more of the Bank‘s or the Company‘s outstanding securities except for any securities purchased by the Bank‘s employee stock ownership plan or trust; or (b) individuals who constitute the Board on the date hereof (the ―Incumbent Board‖) cease for any reason to constitute at least a majority thereof, provided , however , that this sub-section (b) shall not apply if the Incumbent Board is replaced by the appointment by a Federal banking agency of a conservator or receiver for the Bank and, provided further that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least two-thirds of the directors comprising the Incumbent Board or whose nomination for election by the Company‘s stockholders was approved by the same Nominating Committee serving under an Incumbent Board, shall be, for purposes of this clause (b), considered as though he were a member of the Incumbent Board; or (c) a reorganization, merger, consolidation, sale of all or substantially all the assets of the Bank or the Company, or similar transaction in which the Bank or Company is not the surviving institution occurs; or (d) a proxy statement is distributed soliciting proxies from stockholders of the Company, by someone other than the current management of the Company, seeking stockholder approval of a plan of reorganization, merger or consolidation of the Company or similar transaction with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the Plan are to be exchanged for or converted into cash or property or securities not issued by the Company; or (e) a tender offer is made for 25% or more of the voting securities of the Company and the shareholders owning beneficially or of record 25% or more of the outstanding securities of the Company have tendered or offered to sell their shares pursuant to such tender offer and such tendered shares have been accepted by the tender offeror. Notwithstanding anything herein to the contrary, the reorganization of the Company by way of a second step conversion shall not be considered a ―Change in Control.‖ 9.3-3 Upon a Change in Control described in 9.3-2, the Plan shall be terminated and the Plan Administrator shall direct the Trustee to sell a sufficient amount of Stock from the Unallocated Stock Fund to repay any outstanding Stock Obligation in full. The proceeds of such sale shall be used to repay such Stock Obligation. After repayment of the Stock Obligation, all remaining shares in the Unallocated Stock Fund (or the proceeds thereof, if applicable) shall be deemed to be earnings and shall be allocated in accordance with the requirements of Section 8.1. -20-

9.4 Full Vesting Upon Plan Termination . Notwithstanding Section 9.1, a Participant‘s interest in his Account shall fully vest upon termination of this Plan or upon the permanent and complete discontinuance of contributions by his Employer. In the event of a partial termination, the interest of each affected Participant shall fully vest with respect to that part of the Plan which is terminated. 9.5 Forfeiture, Repayment, and Restoral . If a Participant‘s Service terminates before his interest in his Account is fully vested, that portion which has not vested shall be forfeited after a one-year break in service. If a Participant‘s Service terminates prior to having any portion of his Account become vested, such Participant shall be deemed to have received a distribution of his vested interest immediately upon his termination of Service. If a Participant who has suffered a forfeiture of the nonvested portion of his Account returns to Service before he has five (5) consecutive one-year Breaks in Service, the nonvested portion shall be restored, provided that, if the Participant had received a distribution of his vested Account balance, the amount distributed shall be repaid prior to such restoral. The Participant may repay such amount at any time within five years after he has returned to Service. The amount repaid shall be credited to his Account at the time it is repaid; an additional amount equal to that portion of his Account which was previously forfeited shall be restored to his Account at the same time from other Employees‘ forfeitures and, if such forfeitures are insufficient, then from amounts allocated in accordance with Section 8.1-1(ii), and if insufficient, then from a special contribution by his Employer for that year. If the Participant did not receive a distribution of his vested Account balance, any forfeiture restored shall include earnings that would have been credited to the Account but for the forfeiture. A Participant who was deemed to have received a distribution of his vested interest in the Plan shall have his Account restored as of the first day on which he performs an Hour of Service after his return. 9.6 Accounting for Forfeitures . If a portion of a Participant‘s Account is forfeited, Stock allocated to said Participant‘s Account shall be forfeited only after other assets are forfeited. If interests in more than one class of Stock have been allocated to a Participant‘s Account, the Participant must be treated as forfeiting the same proportion of each class of Stock. A forfeiture shall be charged to the Participant‘s Account as of the first day of the first Valuation Period in which the forfeiture becomes certain pursuant to Section 9.5. Except as otherwise provided in that Section, a forfeiture shall be added to the contributions of the terminated Participant‘s Employer which are to be credited to other Participants pursuant to Section 4.1 as of the last day of the Plan Year in which the forfeiture becomes certain. 9.7 Vesting and Nonforfeitability . A Participant‘s interest in his Account which has become vested shall be nonforfeitable for any reason. Section 10. Payment of Benefits . 10.1 Benefits for Participants . For a Participant whose Service ends for any reason, distribution will be made to or for the benefit of the Participant or, in the case of the Participant‘s death, his Beneficiary, by payment in a lump sum, in accordance with Section 10.2. Notwithstanding any provision to the contrary, if the value of a Participant‘s vested Account balance at the time of any distribution does not exceed $1,000, then such Participant‘s vested Account shall be distributed in a lump sum within 60 days after the end of the Plan Year in which employment terminates without the Participant‘s consent. If the value of a Participant‘s vested Account balance is in excess of $5,000, then his benefits shall not be paid prior to his Normal Retirement Date unless he elects an early payment date in a written election filed with the Committee. A Participant may modify such an election at any time, provided any new benefit payment date is at least 30 days after a modified election is delivered to the Committee. Failure of a Participant to consent to a distribution prior his Normal Retirement Date shall be deemed to be an election to defer commencement of payment of any benefit under this section. Notwithstanding the foregoing, unless a Participant elects to receive a distribution, the Plan -21-

administrator shall transfer accounts of $1,000 or more, but not exceeding $5,000, in a direct rollover to an individual retirement plan designated by the Plan administrator in accordance with Code Section 401(a)(31)(B) and the regulations promulgated thereunder. All distributions of $5,000 or less that are made pursuant to this Section without the Participant‘s consent shall be made in cash. 10.2 Time for Distribution . 10.2-1 If the Participant and, if applicable, with the consent of the Participant‘s spouse, elects the distribution of the Participant‘s Account balance in the Plan, distribution shall commence as soon as practicable following his termination of Service, but no later than one year after the close of the Plan Year in which the Participant separates from service by reason of attainment of Normal Retirement Age under the Plan, Disability, or death. 10.2-2 Unless the Participant elects otherwise, the distribution of the balance of a Participant‘s Account shall commence not later than the 60th day after the latest of the close of the Plan Year in which (i) the Participant attains the age of 65; (ii) occurs the tenth anniversary of the year in which the Participant commenced participation in the Plan; or (iii) the Participant terminates his Service with the Employer. 10.2-3 Notwithstanding anything to the contrary, (1) with respect to a 5-percent owner (as defined in Code Section 416), distribution of a Participant‘s Account shall commence (whether or not he remains in the employ of the Employer) not later than the April 1 of the calendar year next following the calendar year in which the Participant attains age 70 / 2 , and (2) with respect to all other Participants, payment of a Participant‘s benefit will commence not later than April 1 of the calendar year following the calendar year in which the Participant attains age 702, or, if later, the year in which the Participant retires. A Participant‘s benefit from that portion of his Account committed to the Investment Fund shall be calculated on the basis of the most recent Valuation Date before the date of payment.
1

10.2-4 Distribution of a Participant‘s Account balance after his death shall comply with the following requirements: (i) If a Participant dies before his distributions have commenced, distribution of his Account to his Beneficiary shall commence not later than one year after the end of the Plan Year in which the Participant died; however, if the Participant‘s Beneficiary is his surviving Spouse, distributions may commence on the date on which the Participant would have attained age 70 / 2 . In either case, distributions shall be completed within five years after they commence.
1

(ii) If the Participant dies after distribution has commenced pursuant to Section 10.1 but before his entire interest in the Plan has been distributed to him, then the remaining portion of that interest shall, in accordance with Section 401(a)(9) of the Code, be distributed at least as rapidly as under the method of distribution being used under Section 10.1 at the date of his death. (iii) If a married Participant dies before his benefit payments begin, then the Committee shall cause the balance in his Account to be paid to his Beneficiary, provided, however, that no election by a married Participant of a different Beneficiary than his surviving Spouse shall be valid -22-

unless the election is accompanied by the Spouse‘s written consent, which (i) must acknowledge the effect of the election, (ii) must explicitly provide either that the designated Beneficiary may not subsequently be changed by the Participant without the Spouse‘s further consent, or that it may be changed without such consent, and (iii) must be witnessed by the Committee, its representative, or a notary public. This requirement shall not apply if the Participant establishes to the Committee‘s satisfaction that the Spouse may not be located. 10.2-5 All distributions under this section shall be determined and made in accordance with Code Section 401(a)(9) and final Treasury Regulations Sections 1.401(a)(9)-1 through 1.401(a)(9)-9, including the minimum distribution incidental benefit requirements of Code Section 401(a)(9)(G). These provisions override any distribution options in the Plan inconsistent with Code Section 401(a)(9). 10.3 Marital Status . The Committee, the Plan, the Trustee, and the Employers shall be fully protected and discharged from any liability to the extent of any benefit payments made as a result of the Committee‘s good faith and reasonable reliance upon information obtained from a Participant and his Employer as to his marital status. 10.4 Delay in Benefit Determination . If the Committee is unable to determine the benefits payable to a Participant or Beneficiary on or before the latest date prescribed for payment pursuant to Section 10.1 or 10.2, the benefits shall in any event be paid within 60 days after they can first be determined, with whatever makeup payments may be appropriate in view of the delay. 10.5 Accounting for Benefit Payments . Any benefit payment shall be charged to the Participant‘s Account as of the first day of the Valuation Period in which the payment is made. 10.6 Options to Receive Stock . Unless ownership of virtually all Stock is restricted to active Employees and qualified retirement plans for the benefit of Employees pursuant to the certificates of incorporation or by-laws of the Employers issuing Stock, a terminated Participant or the Beneficiary of a deceased Participant may instruct the Committee to distribute the Participant‘s entire vested interest in his Account in the form of Stock. In that event, the Committee shall apply the Participant‘s vested interest in the Investment Fund to purchase sufficient Stock from the Stock Fund or from any owner of Stock to make the required distribution. In all other cases, other than as specifically set forth in Section 10.1, the Participant‘s vested interest in the Stock Fund shall be distributed in shares of Stock, and his vested interest in the Investment Fund shall be distributed in cash. Any Participant who receives Stock pursuant to Section 10.1, and any person who has received Stock from the Plan or from such a Participant by reason of the Participant‘s death or incompetence, by reason of divorce or separation from the Participant, or by reason of a rollover contribution described in Section 402(a)(5) of the Code, shall have the right to require the Employer which issued the Stock to purchase the Stock for its current fair market value (hereinafter referred to as the ―put right‖). The put right shall be exercisable by written notice to the Committee during the first 60 days after the Stock is distributed by the Plan, and, if not exercised in that period, during the first 60 days in the following Plan Year after the Committee has communicated to the Participant its determination as to the Stock‘s current fair market value. However, the put right shall not apply to the extent that the Stock, at the time the put right would otherwise be exercisable, may be sold on an established market in accordance with federal and state securities laws and regulations. Similarly, the put option shall not apply with respect to the portion of a Participant‘s Account which the Employee elected to have reinvested under Code Section 401(a)(28)(B). If the put right is exercised, the Trustee may, if so directed by the Committee in its sole discretion, assume the Employer‘s rights and obligations with respect to purchasing the Stock. Notwithstanding anything herein to the contrary, in the case -23-

of a plan established by a bank (as defined in Code Section 581), the put option shall not apply if prohibited by a federal or state law and Participants are entitled to elect their benefits be distributed in cash. The Employer or the Trustee, as the case may be, may elect to pay for the Stock in equal periodic installments, not less frequently than annually, over a period beginning not later than 30 days after the exercise of the put right and not exceeding five years, with adequate security and interest at a reasonable rate on the unpaid balance, all such terms to be set forth in a promissory note delivered to the seller with normal terms as to acceleration upon any uncured default. Nothing contained herein shall be deemed to obligate any Employer to register any Stock under any federal or state securities law or to create or maintain a public market to facilitate the transfer or disposition of any Stock. The put right described herein may only be exercised by a person described in the second preceding paragraph, and may not be transferred with any Stock to any other person. As to all Stock purchased by the Plan in exchange for any Stock Obligation, the put right shall be nonterminable. The put right for Stock acquired through a Stock Obligation shall continue with respect to such Stock after the Stock Obligation is repaid or the Plan ceases to be an employee stock ownership plan. 10.7 Restrictions on Disposition of Stock . Except in the case of Stock which is traded on an established market, a Participant who receives Stock pursuant to Section 10.1, and any person who has received Stock from the Plan or from such a Participant by reason of the Participant‘s death or incompetence, by reason of divorce or separation from the Participant, or by reason of a rollover contribution described in Section 402(a)(5) of the Code, shall, prior to any sale or other transfer of the Stock to any other person, first offer the Stock to the issuing Employer and to the Plan at the greater of (i) its current fair market value, or (ii) the purchase price offered in good faith by an independent third party purchaser. This restriction shall apply to any transfer, whether voluntary, involuntary, or by operation of law, and whether for consideration or gratuitous. Either the Employer or the Trustee may accept the offer within 14 days after it is delivered. Any Stock distributed by the Plan shall bear a conspicuous legend describing the right of first refusal under this Section 10.7, as well as any other restrictions upon the transfer of the Stock imposed by federal and state securities laws and regulations. 10.8 Continuing Loan Provisions; Creations of Protections and Rights . Except as otherwise provided in Sections 10.6 and 10.7 and this Section, no shares of Employer Stock held or distributed by the Trustee may be subject to a put, call or other option, or buy-sell arrangement. The provisions of this Section shall continue to be applicable to such Stock even if the Plan ceases to be an employee stock ownership plan under Section 4975(e)(7) of the Code. 10.9 Direct Rollover of Eligible Distribution . A Participant or distributee may elect, at the time and in the manner prescribed by the Trustee or the Committee, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the Participant or distributee in a direct rollover. 10.9-1 An ―eligible rollover‖ is any distribution that does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the Participant and the Participant‘s Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9); any hardship distribution described in Section 401(k)(2)(B)(i)(IV) of the Code; and the portion of any distribution that is not included in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). A portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions -24-

which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in section 401(a) or 403(a) of the Code that agrees to separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible. 10.9-2 An ―eligible retirement plan‖ is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a), that accepts the distributee‘s eligible rollover distribution. An eligible retirement plan shall also include an annuity contract described in Section 403(b) of the Code and an eligible plan under Section 457(b) of the Code which is maintained by a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. In the case of an eligible rollover distribution to a surviving Spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. 10.9-3 A ―direct rollover‖ is a payment by the Plan to the eligible retirement plan specified by the distributee. 10.9-4 The term ―distributee‖ shall refer to a deceased Participant‘s Spouse or a Participant‘s former Spouse who is the alternate payee under a qualified domestic relations order, as defined in Code Section 414(p). 10.10 Waiver of 30-Day Period After Notice of Distribution . If a distribution is one to which Sections 401(a)(11) and 417 of the Code do not apply, such distribution may commence less than 30 days after the notice required under Section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: (i) the Trustee or Committee, as applicable, clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular option), and (ii) the Participant, after receiving the notice, affirmatively elects a distribution. Section 11. Rules Governing Benefit Claims and Review of Appeals . 11.1 Claim for Benefits . Any Participant or Beneficiary who qualifies for the payment of benefits shall file a claim for his benefits with the Committee on a form provided by the Committee. The claim, including any election of an alternative benefit form, shall be filed at least 30 days before the date on which the benefits are to begin. If a Participant or Beneficiary fails to file a claim by the day before the date on which benefits become payable, he shall be presumed to have filed a claim for payment for the Participant‘s benefits in the standard form prescribed by Sections 10.1 or 10.2. 11.2 Notification by Committee . Within 90 days after receiving a claim for benefits (or within 180 days, if special circumstances require an extension of time and written notice of the extension is given to the Participant or Beneficiary within 90 days after receiving the claim for benefits), the Committee shall notify the Participant or Beneficiary whether the claim has been approved or denied. If the Committee denies a claim in any respect, the Committee shall set forth in a written notice to the Participant or Beneficiary: (i) each specific reason for the denial; (ii) specific references to the pertinent Plan provisions on which the denial is based; -25-

(iii) a description of any additional material or information which could be submitted by the Participant or Beneficiary to support his claim, with an explanation of the relevance of such information; and (iv) an explanation of the claims review procedures set forth in Section 11.3. 11.3 Claims Review Procedure . Within 60 days after a Participant or Beneficiary receives notice from the Committee that his claim for benefits has been denied in any respect, he may file with the Committee a written notice of appeal setting forth his reasons for disputing the Committee‘s determination. In connection with his appeal the Participant or Beneficiary or his representative may inspect or purchase copies of pertinent documents and records to the extent not inconsistent with other Participants‘ and Beneficiaries‘ rights of privacy. Within 60 days after receiving a notice of appeal from a prior determination (or within 120 days, if special circumstances require an extension of time and written notice of the extension is given to the Participant or Beneficiary and his representative within 60 days after receiving the notice of appeal), the Committee shall furnish to the Participant or Beneficiary and his representative, if any, a written statement of the Committee‘s final decision with respect to his claim, including the reasons for such decision and the particular Plan provisions upon which it is based. Section 12. The Committee and its Functions . 12.1 Authority of Committee . The Committee shall be the ―plan administrator‖ within the meaning of ERISA and shall have exclusive responsibility and authority to control and manage the operation and administration of the Plan, including the interpretation and application of its provisions, except to the extent such responsibility and authority are otherwise specifically (i) allocated to the Bank, the Employers, or the Trustee under the Plan and Trust Agreement, (ii) delegated in writing to other persons by the Bank, the Employers, the Committee, or the Trustee, or (iii) allocated to other parties by operation of law. The Committee shall have exclusive responsibility regarding decisions concerning the payment of benefits under the Plan. The Committee shall have no investment responsibility with respect to the Investment Fund except to the extent, if any, specifically provided in the Trust Agreement. In the discharge of its duties, the Committee may employ accountants, actuaries, legal counsel, and other agents (who also may be employed by an Employer or the Trustee in the same or some other capacity) and may pay their reasonable expenses and compensation. 12.2 Identity of Committee . The Committee shall consist of three or more individuals selected by the Bank. Any individual, including a director, trustee, shareholder, officer, or Employee of an Employer, shall be eligible to serve as a member of the Committee. The Bank shall have the power to remove any individual serving on the Committee at any time without cause upon 10 days written notice, and any individual may resign from the Committee at any time upon 10 days written notice to the Bank. The Bank shall notify the Trustee of any change in membership of the Committee. 12.3 Duties of Committee . The Committee shall keep whatever records may be necessary to implement the Plan and shall furnish whatever reports may be required from time to time by the Bank. The Committee shall furnish to the Trustee whatever information may be necessary to properly administer the Trust. The Committee shall see to the filing with the appropriate government agencies of all reports and returns required of the Plan under ERISA and other laws. Further, the Committee shall have exclusive responsibility and authority with respect to the Plan‘s holdings of Stock and shall direct the Trustee in all respects regarding the purchase, retention, sale, exchange, and pledge of Stock and the creation and satisfaction of Stock Obligations. The Committee shall at all times act consistently with the Bank‘s long-term intention that the Plan, as an employee stock ownership plan, be -26-

invested primarily in Stock. Subject to the direction of the board as to the application of Employer contributions to Stock Obligations, and subject to the provisions of Sections 6.4 and 10.6 as to Participants‘ rights under certain circumstances to have their Accounts invested in Stock or in assets other than Stock, the Committee shall determine in its sole discretion the extent to which assets of the Trust shall be used to repay Stock Obligations, to purchase Stock, or to invest in other assets to be selected by the Trustee or an investment manager. No provision of the Plan relating to the allocation or vesting of any interests in the Stock Fund or the Investment Fund shall restrict the Committee from changing any holdings of the Trust, whether the changes involve an increase or a decrease in the Stock or other assets credited to Participants‘ Accounts. In determining the proper extent of the Trust‘s investment in Stock, the Committee shall be authorized to employ investment counsel, legal counsel, appraisers, and other agents and to pay their reasonable expenses and compensation. 12.4 Valuation of Stock . If the valuation of any Stock is not established by reported trading on a generally recognized public market, the valuation of such Stock shall be determined by an independent appraiser. For purposes of the preceding sentence, the term ―independent appraiser‖ means any appraiser meeting requirements similar to the requirements of the regulations prescribed under Section 170(a)(1) of the Code. 12.5 Compliance with ERISA . The Committee shall perform all acts necessary to comply with ERISA. Each individual member or employee of the Committee shall discharge his duties in good faith and in accordance with the applicable requirements of ERISA. 12.6 Action by Committee . All actions of the Committee shall be governed by the affirmative vote of a number of members which is a majority of the total number of members currently appointed, including vacancies. 12.7 Execution of Documents . Any instrument executed by the Committee shall be signed by any member or employee of the Committee. 12.8 Adoption of Rules . The Committee shall adopt such rules and regulations of uniform applicability as it deems necessary or appropriate for the proper administration and interpretation of the Plan. 12.9 Responsibilities to Participants . The Committee shall determine which Employees qualify to enter the Plan. The Committee shall furnish to each Eligible Employee whatever summary plan descriptions, summary annual reports, and other notices and information may be required under ERISA. The Committee also shall determine when a Participant or his Beneficiary qualifies for the payment of benefits under the Plan. The Committee shall furnish to each such Participant or Beneficiary whatever information is required under ERISA (or is otherwise appropriate) to enable the Participant or Beneficiary to make whatever elections may be available pursuant to Sections 6 and 10, and the Committee shall provide for the payment of benefits in the proper form and amount from the assets of the Trust Fund. The Committee may decide in its sole discretion to permit modifications of elections and to defer or accelerate benefits to the extent consistent with applicable law and the best interests of the individuals concerned. 12.10 Alternative Payees in Event of Incapacity . If the Committee finds at any time that an individual qualifying for benefits under this Plan is a minor or is incompetent, the Committee may direct the benefits to be paid, in the case of a minor, to his parents, his legal guardian, or a custodian for him under the Uniform Gifts to Minors Act, or, in the case of an incompetent, to his spouse, or his legal guardian, the payments to be used for the individual‘s benefit. The Committee and the Trustee shall not be obligated to inquire as to the actual use of the funds by the person receiving them under this Section 12.10, and any such -27-

payment shall completely discharge the obligations of the Plan, the Trustee, the Committee, and the Employers to the extent of the payment. 12.11 Indemnification by Employers . Except as separately agreed in writing, the Committee, and any member or employee of the Committee, shall be indemnified and held harmless by the Employer, jointly and severally, to the fullest extent permitted by ERISA, and subject to and conditioned upon compliance with 12 C.F.R. Section 545.121, to the extent applicable, against any and all costs, damages, expenses, and liabilities reasonably incurred by or imposed upon it or him in connection with any claim made against it or him or in which it or he may be involved by reason of its or his being, or having been, the Committee, or a member or employee of the Committee, to the extent such amounts are not paid by insurance. 12.12 Nonparticipation by Interested Member . Any member of the Committee who also is a Participant in the Plan shall take no part in any determination specifically relating to his own participation or benefits, unless his abstention would leave the Committee incapable of acting on the matter. Section 13. Adoption, Amendment, or Termination of the Plan . 13.1 Adoption of Plan by Other Employers . With the consent of the Bank, any entity may become a participating Employer under the Plan by (i) taking such action as shall be necessary to adopt the Plan, (ii) becoming a party to the Trust Agreement establishing the Trust Fund, and (iii) executing and delivering such instruments and taking such other action as may be necessary or desirable to put the Plan into effect with respect to the entity‘s Employees. 13.2 Plan Adoption Subject to Qualification . Notwithstanding any other provision of the Plan, the adoption of the Plan and the execution of the Trust Agreement are conditioned upon their being determined initially by the Internal Revenue Service to meet the qualification requirements of Section 401(a) of the Code, so that the Employers may deduct currently for federal income tax purposes their contributions to the Trust and so that the Participants may exclude the contributions from their gross income and recognize income only when they receive benefits. In the event that this Plan is held by the Internal Revenue Service not to qualify initially under Section 401(a), the Plan may be amended retroactively to the earliest date permitted by U.S. Treasury Regulations in order to secure qualification under Section 401(a). If this Plan is held by the Internal Revenue Service not to qualify initially under Section 401(a) either as originally adopted or as amended, each Employer‘s contributions to the Trust under this Plan (including any earnings thereon) shall be returned to it and this Plan shall be terminated. In the event that this Plan is amended after its initial qualification and the Plan as amended is held by the Internal Revenue Service not to qualify under Section 401(a), the amendment may be modified retroactively to the earliest date permitted by U.S. Treasury Regulations in order to secure approval of the amendment under Section 401(a). 13.3 Right to Amend or Terminate . The Bank intends to continue this Plan as a permanent program. However, each participating Employer separately reserves the right to suspend, supersede, or terminate the Plan at any time and for any reason, as it applies to that Employer‘s Employees, and the Bank reserves the right to amend, suspend, supersede, merge, consolidate, or terminate the Plan at any time and for any reason, as it applies to the Employees of each Employer. No amendment, suspension, supersession, merger, consolidation, or termination of the Plan shall (i) reduce any Participant‘s or Beneficiary‘s proportionate interest in the Trust Fund, (ii) reduce or restrict, either directly or indirectly, the benefit provided any Participant prior to the amendment, or (iii) divert any portion of the Trust Fund to purposes other than the exclusive benefit of the Participants and their Beneficiaries prior to the satisfaction of all liabilities under the Plan. Moreover, there shall not be any transfer of assets to a successor plan or merger or consolidation with another plan unless, in the event of the termination of the successor plan or the surviving plan immediately following such transfer, merger, or consolidation, each participant or beneficiary would be entitled to a benefit -28-

equal to or greater than the benefit he would have been entitled to if the plan in which he was previously a participant or beneficiary had terminated immediately prior to such transfer, merger, or consolidation. Following a termination of this Plan by the Bank, the Trustee shall continue to administer the Trust and pay benefits in accordance with the Plan as amended from time to time and the Committee‘s instructions. Section 14. Miscellaneous Provisions . 14.1 Plan Creates No Employment Rights . Nothing in this Plan shall be interpreted as giving any Employee the right to be retained as an Employee by an Employer, or as limiting or affecting the rights of an Employer to control its Employees or to terminate the Service of any Employee at any time and for any reason, subject to any applicable employment or collective bargaining agreements. 14.2 Nonassignability of Benefits . No assignment, pledge, or other anticipation of benefits from the Plan will be permitted or recognized by the Employer, the Committee, or the Trustee. Moreover, benefits from the Plan shall not be subject to attachment, garnishment, or other legal process for debts or liabilities of any Participant or Beneficiary, to the extent permitted by law. This prohibition on assignment or alienation shall apply to any judgment, decree, or order (including approval of a property settlement agreement) which relates to the provision of child support, alimony, or property rights to a present or former spouse, child or other dependent of a Participant pursuant to a state domestic relations or community property law, unless the judgment, decree, or order is determined by the Committee to be a qualified domestic relations order within the meaning of Section 414(p) of the Code, as more fully set forth in Section 14.12 hereof. 14.3 Limit of Employer Liability . The liability of the Employer with respect to Participants under this Plan shall be limited to making contributions to the Trust from time to time, in accordance with Section 4. 14.4 Treatment of Expenses . All expenses incurred by the Committee and the Trustee in connection with administering this Plan and Trust Fund shall be paid by the Trustee from the Trust Fund to the extent the expenses have not been paid or assumed by the Employer or by the Trustee. The Committee may determine that, and shall inform the Trustee when, reasonable expenses may be charged directly to the Account or Accounts of a Participant or group of Participants to whom or for whose benefit such expenses are allocable, subject to the guidelines set forth in Field Assistance Bulletin 2003-03, to the extent not superseded, or any successor directive issued by the Department of Labor. 14.5 Number and Gender . Any use of the singular shall be interpreted to include the plural, and the plural the singular. Any use of the masculine, feminine, or neuter shall be interpreted to include the masculine, feminine, or neuter, as the context shall require. 14.6 Nondiversion of Assets . Except as provided in Sections 5.2 and 14.12, under no circumstances shall any portion of the Trust Fund be diverted to or used for any purpose other than the exclusive benefit of the Participants and their Beneficiaries prior to the satisfaction of all liabilities under the Plan. 14.7 Separability of Provisions . If any provision of this Plan is held to be invalid or unenforceable, the other provisions of the Plan shall not be affected but shall be applied as if the invalid or unenforceable provision had not been included in the Plan. 14.8 Service of Process . The agent for the service of process upon the Plan shall be the president of the Bank, or such other person as may be designated from time to time by the Bank. -29-

14.9 Governing State Law . This Plan shall be interpreted in accordance with the laws of the Commonwealth of Pennsylvania to the extent those laws are applicable under the provisions of ERISA. 14.10 Employer Contributions Conditioned on Deductibility . Employer Contributions to the Plan are conditioned on deductibility under Code Section 404. In the event that the Internal Revenue Service shall determine that all or any portion of an Employer Contribution is not deductible under that Section, the nondeductible portion shall be returned to the Employer within one year of the disallowance of the deduction. 14.11 Unclaimed Accounts . Neither the Employer nor the Trustees shall be under any obligation to search for, or ascertain the whereabouts of, any Participant or Beneficiary. The Employer or the Trustees, by certified or registered mail addressed to his last known address of record with the Employer, shall notify any Participant or Beneficiary that he is entitled to a distribution under this Plan, and the notice shall quote the provisions of this Section. If the Participant or Beneficiary fails to claim his benefits or make his whereabouts known in writing to the Employer or the Trustees within seven (7) calendar years after the date of notification, the benefits of the Participant or Beneficiary under the Plan will be disposed of as follows: (i) If the whereabouts of the Participant is unknown but the whereabouts of the Participant‘s Beneficiary is known to the Trustees, distribution will be made to the Beneficiary. (ii) If the whereabouts of the Participant and his Beneficiary are unknown to the Trustees, the Plan will forfeit the benefit, provided that the benefit is subject to a claim for reinstatement if the Participant or Beneficiary make a claim for the forfeited benefit. Any payment made pursuant to the power herein conferred upon the Trustees shall operate as a complete discharge of all obligations of the Trustees, to the extent of the distributions so made. 14.12 Qualified Domestic Relations Order . Section 14.2 shall not apply to a ―qualified domestic relations order‖ defined in Code Section 414(p), and such other domestic relations orders permitted to be so treated under the provisions of the Retirement Equity Act of 1984. Further, to the extent provided under a ―qualified domestic relations order,‖ a former Spouse of a Participant shall be treated as the Spouse or surviving Spouse for all purposes under the Plan. In the case of any domestic relations order received by the Plan: (i) The Employer or the Committee shall promptly notify the Participant and any other alternate payee of the receipt of such order and the Plan‘s procedures for determining the qualified status of domestic relations orders, and (ii) Within a reasonable period after receipt of such order, the Employer or the Committee shall determine whether such order is a qualified domestic relations order and notify the Participant and each alternate payee of such determination. The Employer or the Committee shall establish reasonable procedures to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders. During any period in which the issue of whether a domestic relations order is a qualified domestic relations order is being determined (by the Employer or Committee, by a court of competent jurisdiction, or otherwise), the Employer or the Committee shall segregate in a separate account in the Plan or in an escrow account the amounts which would have been payable to the alternate payee during such period if the order had been determined to be a qualified domestic relations order. If within eighteen (18) months the order (or modification thereof) is determined to be a qualified domestic relations order, the Employer or the Committee shall pay the segregated amounts (plus any interest thereon) to the person or persons entitled thereto. If within -30-

eighteen (18) months it is determined that the order is not a qualified domestic relations order, or the issue as to whether such order is a qualified domestic relations order is not resolved, then the Employer or the Committee shall pay the segregated amounts (plus any interest thereon) to the person or persons who would have been entitled to such amounts if there had been no order. Any determination that an order is a qualified domestic relations order which is made after the close of the eighteen (18) month period shall be applied prospectively only. The term ―alternate payee‖ means any Spouse, former Spouse, child or other dependent of a Participant who is recognized by a domestic relations order as having a right to receive all, or a portion of, the benefit payable under a Plan with respect to such Participant. Section 15. Top-Heavy Provisions . 15.1 Top-Heavy Plan . This Plan is top-heavy if any of the following conditions exist: (i) If the top-heavy ratio for this Plan exceeds sixty percent (60%) and this Plan is not part of any required aggregation group or permissive aggregation group; (ii) If this Plan is a part of a required aggregation group (but is not part of a permissive aggregation group) and the aggregate top-heavy ratio for the group of Plans exceeds sixty percent (60%); or (iii) If this Plan is a part of a required aggregation group and part of a permissive aggregation group and the aggregate top-heavy ratio for the permissive aggregation group exceeds sixty percent (60%). 15.2 Super Top-Heavy Plan . This Plan will be a super top-heavy Plan if any of the following conditions exist: (i) If the top-heavy ratio for this Plan exceeds ninety percent (90%) and this Plan is not part of any required aggregation group or permissive aggregation group. (ii) If this Plan is a part of a required aggregation group (but is not part of a permissive aggregation group) and the aggregate top-heavy ratio for the group of Plans exceeds ninety percent (90%), or (iii) If this Plan is a part of a required aggregation group and part of a permissive aggregation group and the aggregate top-heavy ratio for the permissive aggregation group exceeds ninety percent (90%). 15.3 Definitions . In making this determination, the Committee shall use the following definitions and principles: 15.3-1 The ―Determination Date,‖ with respect to the first Plan Year of any plan, means the last day of that Plan Year, and with respect to each subsequent Plan Year, means the last day of the preceding Plan Year. If any other plan has a Determination Date which differs from this Plan‘s Determination Date, the top-heaviness of this Plan shall be determined on the basis of the other plan‘s Determination Date falling within the same calendar years as this Plan‘s Determination Date. 15.3-2 A ―Key Employee‖ means any employee or former employee (including any deceased employee) who at any time during the plan year that includes the determination date was an officer of -31-

the employer having annual compensation greater than $135,000 (as adjusted under section 416(i)(1) of the Code), a 5-percent owner of the employer, or a 1-percent owner of the employer having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of section 415(c)(3) of the Code. The determination of who is a key employee will be made in accordance with section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder. 15.3-3 A ―Non-key Employee‖ means an Employee who at any time during the five years ending on the top-heavy Determination Date for the Plan Year has received compensation from an Employer and who has never been a Key Employee, and the Beneficiary of any such Employee. 15.3-4 A ―required aggregation group‖ includes (a) each qualified Plan of the Employer in which at least one Key Employee participates in the Plan Year containing the Determination Date and (b) any other qualified Plan of the Employer which enables a Plan described in (a) to meet the requirements of Code Sections 401(a)(4) or 410. For purposes of the preceding sentence, a qualified Plan of the Employer includes a terminated Plan maintained by the Employer within the period ending on the Determination Date. In the case of a required aggregation group, each Plan in the group will be considered a top-heavy Plan if the required aggregation group is a top-heavy group. No Plan in the required aggregation group will be considered a top-heavy Plan if the required aggregation group is not a top-heavy group. All Employers aggregated under Code Sections 414(b), (c) or (m) or (o) (but only after the Code Section 414(o) regulations become effective) are considered a single Employer. 15.3-5 A ―permissive aggregation group‖ includes the required aggregation group of Plans plus any other qualified Plan(s) of the Employer that are not required to be aggregated but which, when considered as a group with the required aggregation group, satisfy the requirements of Code Sections 401(a)(4) and 410 and are comparable to the Plans in the required aggregation group. No Plan in the permissive aggregation group will be considered a top-heavy Plan if the permissive aggregation group is not a top-heavy group. Only a Plan that is part of the required aggregation group will be considered a top-heavy Plan if the permissive aggregation group is top-heavy. 15.4 Top-Heavy Rules of Application . For purposes of determining the value of Account balances and the present value of accrued benefits the following provisions shall apply: 15.4-1 The value of Account balances and the present value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the twelve (12) month period ending on the Determination Date. 15.4-2 For purposes of testing whether this Plan is top-heavy, the present value of an individual‘s accrued benefits and an individual‘s Account balances is counted only once each year. 15.4-3 The Account balances and accrued benefits of a Participant who is not presently a Key Employee but who was a Key Employee in a Plan Year beginning on or after January 1, 1984 will be disregarded. 15.4-4 Employer contributions attributable to a salary reduction or similar arrangement will be taken into account. Employer matching contributions also shall be taken into account for purposes of satisfying the minimum contribution requirements of Section 416(c)(2) of the Code and the Plan. -32-

15.4-5 When aggregating Plans, the value of Account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. 15.4-6 The present values of accrued benefits and the amounts of account balances of an employee as of the determination date shall be increased by the distributions made with respect to the employee under the plan and any plan aggregated with the plan under Section 416(g)(2) of the Code during the 1-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting ―five (5) year period‖ for ―one (1) year period.‖ 15.4-7 Accrued benefits and Account balances of an individual shall not be taken into account for purposes of determining the top-heavy ratios if the individual has performed no services for the Employer during the one (1) year period ending on the applicable Determination Date. Compensation for purposes of this subparagraph shall not include any payments made to an individual by the Employer pursuant to a qualified or non-qualified deferred compensation plan. 15.4-8 The present value of the accrued benefits or the amount of the Account balances of any Employee participating in this Plan shall not include any rollover contributions or other transfers voluntarily initiated by the Employee except as described below. If this Plan transfers or rolls over funds to another Plan in a transaction voluntarily initiated by the Employee, then this Plan shall count the distribution for purposes of determining Account balances or the present value of accrued benefits. A transfer incident to a merger or consolidation of two or more Plans of the Employer (including Plans of related Employers treated as a single Employer under Code Section 414), or a transfer or rollover between Plans of the Employer, shall not be considered as voluntarily initiated by the Employee. 15.5 Minimum Contributions . For any Top-Heavy Year, each Employer shall make a special contribution on behalf of each Participant to the extent that the total allocations to his Account pursuant to Section 4 is less than the lesser of: (i) three percent of his 415 Compensation for that year, or (ii) the highest ratio of such allocation to 415 Compensation received by any Key Employee for that year. For purposes of the special contribution of this Section 15.2, a Key Employee‘s 415 Compensation shall include amounts the Key Employee elected to defer under a qualified 401(k) arrangement. Such a special contribution shall be made on behalf of each Participant who is employed by an Employer on the last day of the Plan Year, regardless of the number of his Hours of Service, and shall be allocated to his Account. If the Employer maintains a qualified plan in addition to this Plan and more than one such plan is determined to be Top-Heavy, a minimum contribution or a minimum benefit shall be provided in one of such other plans, including a plan that consists solely of a cash or deferred arrangement which meets the requirements of Section 401(k)(12) of the Code and matching contributions with respect to which the requirements of Section 401(m)(11) of the Code are met. If the Employer has both a Top-Heavy defined benefit plan and a Top-Heavy defined contribution plan and a minimum contribution is to be provided only in the defined contribution plan, then the sum of the Employer contributions and forfeitures allocated to the Account of each Non-key Employee shall be equal to at least five percent (5%) of such Non-key Employee‘s 415 Compensation for that year. -33-

15.6 Minimum Vesting . For any Plan Year in which this Plan is Top-Heavy, Participant‘s vested interest in his Account shall be based on the following ―top-heavy table‖:
Vesting Years Percentage of Interest Vested

Fewer than 3 years 3 years

0% 100 %

15.7 Top-Heavy Provisions Control in Top-Heavy Plan . In the event this Plan becomes top-heavy and a conflict arises between the top-heavy provisions herein set forth and the remaining provisions set forth in this Plan, the top-heavy provisions shall control. -34-

Exhibit 10.2 EMPLOYMENT AGREEMENT This Agreement is made effective as of (the ―Effective Date‖), by and between ESSA Bank & Trust, a Pennsylvania chartered stock savings association with its principal office in Stroudsburg, Pennsylvania (the ―Bank‖), ESSA Bancorp, Inc. a Pennsylvania corporation that owns 100% of the common stock of the Bank (the ―Company‖), and Gary S. Olson (―Executive‖). WHEREAS , Executive is serving as President and Chief Executive Officer of the Bank and the Bank wishes to assure itself of the services of Executive as an officer of the Bank for the period provided in this Agreement; and WHEREAS, in order to induce Executive to remain in the employ of the Bank and to provide further incentive to achieve the financial and performance objectives of the Bank and the Company, the parties desire to enter into this Agreement as set forth below. NOW, THEREFORE , in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows: 1. POSITION AND RESPONSIBILITIES. During the period of his employment hereunder, Executive agrees to serve as President and Chief Executive Officer of the Bank and Company (the ―Executive Position‖). Executive shall be responsible for the overall management, and shall be responsible for establishing the business objectives, policies and strategic plan in conjunction with the Board of Directors (the ―Board‖). Executive shall also be responsible for providing leadership and direction to all departments or divisions, and shall be the primary contact between the Board and the staff. As Chief Executive Officer, Executive shall directly report to the Board. Executive shall also be nominated as a member of the Board, subject to election by shareholders. Executive also agrees to serve, if elected, as an officer and director of any affiliate of the Bank. 2. TERM AND DUTIES. (a) Three Year Contract; Daily Renewal . Executive‘s period of employment with the Bank (―Employment Period‖) shall begin on the Effective Date and shall renew daily, such that the remaining unexpired term of the Agreement shall always be thirty-six (36) months, until the date that the Bank gives Executive written notice of non-renewal (―Non-Renewal Notice‖). The Employment Period shall end on the date that is thirty-six (36) months after the date of the Non-Renewal Notice, unless the parties agree that the Employment Period shall end on an earlier date. (b) Annual Performance Evaluation . On either a fiscal year or calendar year basis, (consistently applied from year to year), the Bank shall conduct an annual evaluation of Executive‘s performance. The annual performance evaluation proceedings shall be included in the minutes of the Board meeting that next follows such annual performance review. (c) Continued Employment Following Termination of Employment Period . Nothing in this Agreement shall mandate or prohibit a continuation of Executive‘s employment following the expiration of the Employment Period upon such terms and conditions as the Bank and Executive may mutually agree.

(d) Duties; Membership on Other Boards . During the Employment Period, except for periods of absence occasioned by illness, reasonable vacation periods, and reasonable leaves of absence approved by the Board, Executive shall devote substantially all his business time, attention, skill, and efforts to the faithful performance of his duties hereunder including activities and services related to the organization, operation and management of the Bank; provided, however, that, with the approval of the Board, as evidenced by a resolution of such Board, from time to time, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, business companies or business organizations, which, in the Board‘s judgment, will not present any conflict of interest with the Bank, or materially affect the performance of Executive‘s duties pursuant to this Agreement it being understood that membership in and service on boards or committees of social, religious, charitable or similar organizations does not require Board approval pursuant to this Section. For purposes of this Section, Board approval shall be deemed to have been granted as to service with any such business company or organization that Executive was serving as of the date of this Agreement. 3. COMPENSATION, BENEFITS AND REIMBURSEMENT. (a) Base Salary . The compensation specified under this Agreement shall constitute the salary and benefits paid for the duties described in Section 2. The Bank shall pay Executive as compensation a salary of not less than $ per year (―Base Salary‖). Such Base Salary shall be payable biweekly, or with such other frequency as officers and employees are generally paid. During the period of this Agreement, Executive‘s Base Salary shall be reviewed at least annually. Such review may be conducted by a Committee designated by the Board, and the Bank may increase, but not decrease (except a decrease that is generally applicable to all employees) Executive‘s Base Salary (with any increase in Base Salary to become ―Base Salary‖ for purposes of this Agreement). (b) Bonus and Incentive Compensation . Executive will be entitled to incentive compensation and bonuses as provided in any plan of the Bank in which Executive is eligible to participate. Nothing paid to Executive under any such plan or arrangement will be deemed to be in lieu of other compensation to which Executive is entitled under this Agreement. (c) Employee Benefits . The Bank will provide Executive with employee benefit plans, arrangements and perquisites substantially equivalent to those in which Executive was participating or otherwise deriving benefit from immediately prior to the beginning of the term of this Agreement, and the Bank will not, without Executive‘s prior written consent, make any changes in such plans, arrangements or perquisites which would adversely affect Executive‘s rights or benefits thereunder, except as to any changes that are applicable to all participating employees or as reasonably or customarily available. Without limiting the generality of the foregoing provisions of this Subsection (c), Executive will be entitled to participate in or receive benefits under any employee benefit plans including, but not limited to, retirement plans, supplemental retirement plans, pension plans, profit-sharing plans, health-and-accident insurance plans, medical coverage or any other employee benefit plan or arrangement made available by the Bank in the future to its senior executives, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. 2

(d) Paid Time Off . Executive shall be entitled to paid vacation time each year during the Employment Period (measured on a fiscal or calendar year basis, in accordance with the Bank‘s usual practices), as well as sick leave, holidays and other paid absences in accordance with the Bank‘s policies and procedures for senior executives. Any unused paid time off during an annual period shall be treated in accordance with the Bank‘s personnel policies as in effect from time to time. (e) Expense Reimbursements . During the Employment Period, the Bank shall pay or reimburse Executive for the full cost of the use of an automobile that is mutually agreeable to the Bank and Executive. The Bank shall also pay or reimburse Executive for all reasonable travel, entertainment and other reasonable expenses incurred by Executive during the course of performing his obligations under this Agreement, including, without limitation, fees for memberships in such clubs and organizations as Executive and the Board shall mutually agree are necessary and appropriate in connection with the performance of his duties under this Agreement, upon presentation to the Bank of an itemized account of such expenses in such form as the Bank may reasonably require. 4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION. (a) Upon the occurrence of an Event of Termination (as herein defined) during Executive‘s term of employment under this Agreement, the provisions of this section shall apply; provided, however, that benefits shall be provided either under Section 4 or Section 5 (related to a Change in Control), but not both, such that to the extent the Executive has received payments under one of those Sections, the Executive shall not receive payments under the other Section. As used in this Agreement, an ―Event of Termination‖ shall mean and include any one or more of the following: (i) the termination by the Bank of Executive‘s full-time employment hereunder for any reason other than a Change in Control, as defined in Section 5 hereof, a termination for Cause, as defined in Section 8 hereof, or a termination upon Retirement as defined in Section 7 hereof, or a termination for disability as set forth in Section 6 hereof; and (ii) Executive‘s resignation from the Bank‘s employ upon any of the following (which shall be treated as termination of employment for ―Good Reason‖), unless consented to by Executive: (A) failure to appoint Executive to the Executive Position set forth in Section 1 above, or a material change in Executive‘s function, duties, or responsibilities, which change would cause Executive‘s position to become one of lesser responsibility, importance, or scope from the position and responsibilities described in Section 1 above, to which Executive has not agreed in writing (and any such material change shall be deemed a continuing breach of this Agreement); 3

(B) a relocation of Executive‘s principal place of employment to a location that is more than 50 miles from the location of the Bank‘s principal executive offices as of the date of this Agreement; (C) a material reduction in the benefits and perquisites, including Base Salary, to Executive from those being provided as of the effective date of this Agreement (except for any reduction that is part of a reduction in pay or benefits that is generally applicable to officers or employees); (D) a liquidation or dissolution of the Bank or the Company; (E) a material breach of this Agreement by the Bank; or Upon the occurrence of any event described in clause (ii) above, Executive shall have the right to elect to terminate his employment under this Agreement by resignation upon not less than 30 days prior written notice given within a reasonable period of time (not to exceed, except in case of a continuing breach, 90 days) after the event giving rise to said right to elect, which termination by Executive shall be an Event of Termination. No payments or benefits shall be due to Executive under this Agreement upon the termination of Executive‘s employment except as provided in Section 4 or 5 hereof. (b) Upon the occurrence of an Event of Termination, the Bank shall pay Executive, or, in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay or liquidated damages, or both, a lump sum cash amount equal to three times the sum of (i) the highest annual rate of Base Salary paid to Executive at any time under the Agreement, plus (ii) the highest bonus paid to Executive with respect to the three completed fiscal years prior to the Event of Termination. Such payments shall not be reduced in the event Executive obtains other employment following termination of employment. Notwithstanding the foregoing, in the event the Executive is a Specified Employee (as defined herein), no payment shall be made to the Executive prior to the first day of the seventh month following such Event of Termination. ―Specified Employee‖ shall be interpreted to comply with Code section 409A and shall mean a key employee within the meaning of Code Section 416(i) (without regard to paragraph 5 thereof) but an individual shall be a ―Specified Employee‖ only if the Bank or Company is a publicly traded company. (c) Upon the occurrence of an Event of Termination, the Bank shall pay Executive, or in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, a lump sum equal to the excess, if any, of the present value of the benefit that Executive would have been entitled to under the Bank‘s defined benefit pension plan if Executive had continued working for the Bank for thirty-six (36) months after the effective date of such Event of Termination, over the present value of the benefits to which Executive was actually entitled as of the effective date of such Event of Termination. (d) Upon the occurrence of an Event of Termination, the Bank will provide at the Bank‘s expense, life, medical and dental coverage substantially comparable, as reasonably or customarily available, to the coverage maintained by the Bank for Executive prior to his termination, except to the extent such coverage may be changed in its application to all Bank 4

employees. Such coverage shall cease thirty-six (36) months following the Event of Termination. In the alternative, the Bank shall pay to Executive a cash amount equal to Executive‘s cost of obtaining such benefits on his own, adjusted for any federal or state income taxes Executive has to pay on the cash amount. 5. CHANGE IN CONTROL. (a) Any payment made under this Section 5 is in lieu of any payments that may otherwise be owed to the Executive under Section 4, such that the Executive shall either receive payments under Section 4 or under Section 5, but not under both Sections. (b) Except for payments that are subject to Code Section 409A, for purposes of this Agreement, the term ―Change in Control‖ shall mean: (i) a change in control of a nature that would be required to be reported in response to Item 5.01(a) of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the ―Exchange Act‖); or (ii) a change in control of the Bank or the Company within the meaning of the Home Owners Loan Act, as amended (―HOLA‖), and applicable rules and regulations promulgated thereunder, as in effect at the time of the Change in Control; or (iii) any of the following events, upon which a Change in Control shall be deemed to have occurred: (A) any ―person‖ (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the ―beneficial owner‖ (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of Company‘s outstanding securities except for any securities purchased by the Bank‘s employee stock ownership plan or trust; or (B) individuals who constitute the Board on the date hereof (the ―Incumbent Board‖) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company‘s stockholders was approved by the same Nominating Committee serving under an Incumbent Board, shall be, for purposes of this subsection (B), considered as though he were a member of the Incumbent Board; or (C) a sale of all or substantially all the assets of the Bank or the Company, or a plan of reorganization, merger, consolidation, or similar transaction occurs in which the security holders of the Company immediately prior to the consummation of the transaction do not own at least 50.1% of the securities of the surviving entity to be outstanding upon consummation of the transaction; or (D) a proxy statement is issued soliciting proxies from stockholders of the Company by someone other than the current management of the Company, seeking stockholder approval of a plan of reorganization, merger or consolidation of the Company or 5

similar transaction with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan are to be exchanged for or converted into cash or property or securities not issued by the Company; or (E) a tender offer is made for 25% or more of the voting securities of the Company and the shareholders owning beneficially or of record 25% or more of the outstanding securities of the Company have tendered or offered to sell their shares pursuant to such tender offer and such tendered shares have been accepted by the tender offeror. (c) With respect to any payments hereunder that are subject to Code Section 409A, ―Change in Control‖ shall mean (i) a change in the ownership of the Bank or the Company, (ii) a change in the effective control of the Bank or Company, or (iii) a change in the ownership of a substantial portion of the assets of the Bank or Company, as described below. (i) A change in ownership occurs on the date that any one person, or more than one person acting as a group (as defined in Proposed Treasury Regulations section 1.409A-3(g)(5)(v)(B)), acquires ownership of stock of the Bank or Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such corporation. (ii) A change in the effective control of the Bank or Company occurs on the date that either (i) any one person, or more than one person acting as a group (as defined in Proposed Treasury Regulations section 1.409A-3(g)(5)(vi)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Bank or Company possessing 35% or more of the total voting power of the stock of the Bank or Company, or (ii) a majority of the members of the Bank‘s or Company‘s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Bank‘s or Company‘s board of directors prior to the date of the appointment or election, provided that this subsection 9(b)(2) is inapplicable where a majority shareholder of the Bank or Company is another corporation. (iii) A change in a substantial portion of the Bank‘s or Company‘s assets occurs on the date that any one person or more than one person acting as a group (as defined in Proposed Treasury Regulations section 1.409A-3(g)(5)(vii)(C)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Bank or Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of (i) all of the assets of the Bank or Company, or (ii) the value of the assets being disposed of, either of which is determined without regard to any liabilities associated with such assets. For all purposes of this subsection 9(b), the definition of Change in Control shall be construed to be consistent with the requirements of Proposed Treasury Regulations section 1.409A-3(g)(5), except to the extent that such proposed regulations are superseded by subsequent guidance. (d) Upon the occurrence of a Change in Control, Executive, or, in the event of his death following a Change in Control, his beneficiary or beneficiaries, or his estate, as the case may be, shall receive as severance pay or liquidated damages, or both, a lump sum payment equal to three times the sum of (i) Executive‘s highest annual rate of Base Salary plus (ii) the highest rate of bonus awarded to Executive during the prior three years. 6

(e) Upon the termination of the Executive‘s employment (other than for cause) following a Change in Control, the Bank shall pay Executive, or in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, a lump sum equal to the excess, if any, of the present value of the benefit that Executive would have been entitled to under the Bank‘s defined benefit pension plan if Executive had continued working for the Bank for thirty-six (36) months after the effective date of such termination of employment, over the present value of the benefits to which Executive was actually entitled as of the effective date of such termination of employment. (f) Upon the termination of the Executive‘s employment (other than for cause) following a Change in Control, the Bank will provide at the Bank‘s expense, life, medical and dental coverage substantially comparable, as reasonably or customarily available, to the coverage maintained by the Bank for Executive prior to his termination, except to the extent such coverage may be changed in its application to all Bank employees. Such coverage shall cease thirty-six (36) months following the Executive‘s termination of employment. In the alternative, the Bank shall pay to Executive a cash amount equal to Executive‘s cost of obtaining such benefits on his own, adjusted for any federal or state income taxes Executive has to pay on the cash amount. (g) Notwithstanding the preceding paragraphs of this Section, in the event that the aggregate payments or benefits to be made or afforded to Executive in the event of a Change in Control would be deemed to include an ―excess parachute payment‖ under Section 280G of the Code or any successor thereto, then at the election of Executive, (i) such payments or benefits shall be payable or provided to Executive over the minimum period necessary to reduce the present value of such payments or benefits to an amount which is one dollar ($1.00) less than three times Executive‘s ―base amount‖ under Section 280G of the Code or (ii) the payments or benefits to be provided under this Section 5 shall be reduced to the extent necessary to avoid treatment as an excess parachute payment with the allocation of the reduction among such payments and benefits to be determined by Executive. 6. TERMINATION FOR DISABILITY OR DEATH. (a) Termination of Executive‘s employment based on ―Disability‖ shall be construed to comply with Code section 409A and shall be deemed to have occurred if (i) the Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death, or last for a continuous period of not less than 12 months; (ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death, or last for a continuous period of not less than 12 months, the Executive is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank or Company; or (iii) the Executive is determined to be totally disabled by the Social Security Administration. The provisions of paragraph 6(b) and (c) shall apply upon the termination of the Executive‘s employment for Disability. 7

(b) The Executive shall be entitled to receive benefits under any short or long term disability plan maintained by the Bank. To the extent such benefits are less than the Executive‘s Base Salary, the Bank will pay Executive an amount equal to the difference between such disability plan benefits and the amount of Executive‘s Base Salary for the longer of (i) the remaining term of the Agreement or (ii) one year following his termination of employment due to Disability. (c) The Bank will cause to be continued life, medical and dental coverage substantially comparable, as reasonable or customarily available, to the coverage maintained by the Bank for Executive prior to his termination for Disability, except to the extent such coverage may be changed in its application to all Bank employees or not available on an individual basis to an employee terminated for Disability. This coverage shall cease upon the earlier of (i) the date Executive returns to the full-time employment of the Bank; (ii) Executive‘s full-time employment by another employer; (iii) Executive attaining the age of 65; or (iv) Executive‘s death. (d) In the event of Executive‘s death during the term of the Agreement, his estate, legal representatives or named beneficiaries (as directed by executive in writing) shall be paid Executive‘s Base Salary as defined in paragraph 3(a) at the rate in effect at the time of Executive‘s death for a period of one (1) year from the date of Executive‘s death, and the Bank will continue to provide medical, dental and other insurance benefits normally provided for Executive‘s family (in accordance with its customary co-pay percentages) for one (1) year after Executive‘s death. Such payments are in addition to any other life insurance benefits that the Executive‘s beneficiaries may be entitled to receive under any employee benefit plan maintained by the Bank for the benefit of the Executive, including, but not limited to, the Bank‘s tax-qualified retirement plans and the Executive Salary Continuation Agreement (SERP). 7. TERMINATION UPON RETIREMENT. Termination of Executive‘s employment based on ―Retirement‖ shall mean termination of Executive‘s employment at age 65 or in accordance with any retirement policy established by the Board with Executive‘s consent with respect to him. Upon termination of Executive based on Retirement, no amounts or benefits shall be due Executive under this Agreement, and Executive shall be entitled to all benefits under any retirement plan of the Bank and other plans to which Executive is a party. 8. TERMINATION FOR CAUSE. (a) The Bank may terminate the Executive‘s employment at any time, but any termination other than termination for ―cause,‖ as defined herein, shall not prejudice the Executive‘s right to compensation or other benefits under the Agreement. The Executive shall have no right to receive compensation or other benefits for any period after termination for ―cause.‖ Termination for ―cause‖ shall include termination because of the Executive‘s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, material breach of the Bank‘s Code of Ethics, material violation of the Sarbanes-Oxley requirements for officers of public companies that in the reasonable opinion of the Board will likely cause substantial financial harm or substantial injury to the reputation of the Company or 8

the Bank, willfully engaging in actions that in the reasonable opinion of the Board will likely cause substantial financial harm or substantial injury to the business reputation of the Company or Bank, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than routine traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of the contract. (b) For purposes of this Section, no act or failure to act, on the part of the Executive, shall be considered ―willful‖ unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive‘s action or omission was in the best interests of the Bank. Any act, or failure to act, based upon the direction of the Board or based upon the advice of counsel for the Bank shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Bank. 9. RESIGNATION FROM BOARDS OF DIRECTORS In the event of Executive‘s termination of employment for any reason, Executive‘s service as a director of the Bank, the Company and any affiliate shall immediately terminate. This Section of the Agreement shall constitute a resignation notice for such purposes. 10. NOTICE. (a) Any purported termination by the Bank for Cause shall be communicated by Notice of Termination to Executive. If, within thirty (30) days after any Notice of Termination for Cause is given, Executive notifies the Bank that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration, as provided in Section 20 below. Notwithstanding the pendency of any such dispute, the Bank shall discontinue paying Executive‘s compensation until the dispute is finally resolved in accordance with this Agreement. If it is determined that Executive is entitled to compensation and benefits under Section 4 or 5 of this Agreement, the payment of such compensation and benefits by the Bank shall commence immediately following the date of resolution by arbitration, with interest due Executive on the cash amount that would have been paid pending arbitration (at the prime rate as published in The Wall Street Journal from time to time). (b) Any other purported termination by the Bank or by Executive shall be communicated by a Notice of Termination to the other party. If, within thirty (30) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration as provided in Section 20 below. Notwithstanding the pendency of any such dispute, the Bank shall continue to pay Executive his Base Salary, and other compensation and benefits in effect when the notice giving rise to the dispute was given (except as to termination of Executive for Cause); provided, however, that such payments and benefits shall not continue beyond the date that is 36 months from the date the Notice of Termination is given. In the event the voluntary termination by Executive of his employment is disputed by the Bank, and if it is determined in arbitration that Executive is not entitled to termination benefits pursuant to this Agreement, he shall return all cash payments made to him pending resolution by arbitration, with interest thereon at the prime rate as published in The Wall Street Journal from time to time if it is determined in arbitration that Executive‘s voluntary termination of employment was not taken in 9

good faith and not in the reasonable belief that grounds existed for his voluntary termination. If it is determined that the Executive is entitled to receive severance benefits under this Agreement, then any continuation of Base Salary and other compensation and benefits made to the Executive under this Section shall offset the amount of any severance benefits that are due to the Executive under this Agreement. (c) For purposes of this Agreement, a ―Notice of Termination‖ shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive‘s employment under the provision so indicated and ―Date of Termination‖ shall mean the date of the Notice of Termination. 11. POST-TERMINATION OBLIGATIONS. (a) The Executive hereby covenants and agrees that, for a period of one year following his termination of employment with the Bank, he shall not, without the written consent of the Bank, either directly or indirectly: (i) solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any officer or employee of the Bank, the Company or any of their respective subsidiaries or affiliates to terminate his or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity whatsoever to, any business whatsoever that competes with the business of the Bank or the Company or any of their direct or indirect subsidiaries or affiliates or has headquarters or offices within 50 miles of the locations in which the Bank or the Company has business operations or has filed an application for regulatory approval to establish an office; (ii) become an officer, employee, consultant, director, independent contractor, agent, sole proprietor, joint venturer, greater than 5% equity-owner or stockholder, partner or trustee of any savings bank, savings and loan association, savings and loan holding company, credit union, bank or bank holding company, insurance company or agency, any mortgage or loan broker or any other entity competing with the Bank or its affiliates in the same geographic locations where the Bank or its affiliates has material business interests; provided, however, that this restriction shall not apply if the Executive‘s employment is terminated following a Change in Control; or (iii) solicit, provide any information, advice or recommendation or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any customer of the Bank or the Company to terminate an existing business or commercial relationship with the Bank or the Company. (b) Executive shall, upon reasonable notice, furnish such information and assistance to the Bank and/or the Company, as may reasonably be required by the Bank and/or the Company, in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party; provided, however, that Executive shall not be required to provide information or assistance with respect to any litigation between the Executive and the Bank, the Company or any of its subsidiaries or affiliates. 10

(c) All payments and benefits to the Executive under this Agreement shall be subject to the Executive‘s compliance with this Section. The parties hereto, recognizing that irreparable injury will result to the Bank, its business and property in the event of the Executive‘s breach of this Section, agree that, in the event of any such breach by the Executive, the Bank will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by the Executive and all persons acting for or with the Executive. The Executive represents and admits that the Executive‘s experience and capabilities are such that the Executive can obtain employment in a business engaged in other lines and/or of a different nature than the Bank, and that the enforcement of a remedy by way of injunction will not prevent the Executive from earning a livelihood. Nothing herein will be construed as prohibiting the Bank and the Company from pursuing any other remedies available to them for such breach or threatened breach, including the recovery of damages from the Executive. 12. SOURCE OF PAYMENTS. All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Bank. The Company, however, guarantees payment and provision of all amounts and benefits due hereunder to Executive, and if such amounts and benefits due from the Bank are not timely paid or provided by the Bank, such amounts and benefits shall be paid or provided by the Company. 13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS. This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between the Bank or any predecessor of the Bank and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement. 14. NO ATTACHMENT; BINDING ON SUCCESSORS. (a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void, and of no effect. (b) This Agreement shall be binding upon, and inure to the benefit of, Executive and the Bank and their respective successors and assigns. 15. MODIFICATION AND WAIVER. (a) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. 11

(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived. 16. REQUIRED PROVISIONS. (a) The Bank may terminate Executive‘s employment at any time, but any termination by the Bank‘s Board other than Termination for Cause as defined in Section 8 hereof shall not prejudice Executive‘s right to compensation or other benefits under this Agreement. Executive shall have no right to receive compensation or other benefits for any period after Termination for Cause. (b) If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank‘s affairs by a notice served under Section 8(e)(3) [12 USC §1818(e)(3)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal Deposit Insurance Act, the Bank‘s obligations under this contract shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part) any of its obligations which were suspended. (c) If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank‘s affairs by an order issued under Section 8(e)(4) [12 USC §1818(e)(4)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal Deposit Insurance Act, all obligations of the Bank under this contract shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected. (d) If the Bank is in default as defined in Section 3(x)(1) [12 USC §1813(x)(1)] of the Federal Deposit Insurance Act, all obligations of the Bank under this contract shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties. (e) All obligations under this contract shall be terminated, except to the extent determined that continuation of the contract is necessary for the continued operation of the Bank, (i) by the Director of the OTS or his or her designee, at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) [12 USC §1823(c)] of the Federal Deposit Insurance Act; or (ii) by the Director or his or her designee at the time the Director or his or her designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action. (f) Notwithstanding anything herein contained to the contrary, any payments to Executive by the Company, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359. 12

17. SEVERABILITY. If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect. 18. HEADINGS FOR REFERENCE ONLY. The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 19. GOVERNING LAW. This Agreement shall be governed by the laws of the Commonwealth of Pennsylvania but only to the extent not superseded by federal law. 20. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in a location selected by the Executive within twenty-five miles of Stroudsburg, Pennsylvania in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator‘s award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. 21. INDEMNIFICATION. (a) The Executive shall be provided with coverage under a standard directors‘ and officers‘ liability insurance policy, and shall be indemnified for the term of the Agreement and for a period of six years thereafter to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Bank or any affiliate (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys‘ fees and the cost of reasonable settlements (such settlements must be approved by the Board), provided, however, the Executive shall not be indemnified or reimbursed for legal expenses or liabilities incurred in connection with an action, suit or proceeding arising from any illegal or fraudulent act committed by Executive. Any such indemnification shall be made consistent with Section 545.121 of the OTS Regulations and Section 18(K) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(K), and the regulations issued thereunder in 12 C.F.R. Part 359. 13

(b) Any indemnification by the Bank shall be subject to compliance with any applicable regulations of the OTS. 22. NOTICE. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below: To the Company: ESSA Bancorp, Inc. 200 Palmer Street Stroudsburg, PA 18360 ESSA Bank & Trust 200 Palmer Street Stroudsburg, PA 18360 Gary S. Olson

To the Bank:

To Executive:

SIGNATURES IN WITNESS WHEREOF , the Company and the Bank have caused this Agreement to be executed by their duly authorized representatives, and Executive has signed this Agreement, on the date first above written. ESSA BANCORP, INC. By: Date John E. Burrus, Chairman of the Board ESSA BANK & TRUST By: Date John E. Burrus, Chairman of the Board EXECUTIVE:

Date 14

Gary S. Olson

Exhibit 10.3 EMPLOYMENT AGREEMENT This Agreement is made effective as of (the ―Effective Date‖), by and between ESSA Bank & Trust, a Pennsylvania chartered stock savings association with its principal office in Stroudsburg, Pennsylvania (the ―Bank‖), and (―Executive‖). WHEREAS , Executive is serving as of the Bank and the Bank wishes to assure itself of the services of Executive as an officer of the Bank for the period provided in this Agreement; and WHEREAS, in order to induce Executive to remain in the employ of the Bank and to provide further incentive to achieve the financial and performance objectives of the Bank, the parties desire to enter into this Agreement as set forth below. NOW, THEREFORE , in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows: 1. POSITION AND RESPONSIBILITIES. During the period of his employment hereunder, Executive agrees to serve as of the Bank (the ―Executive Position‖). Executive shall be responsible for the overall management of the Bank‘s functions, and shall be responsible for establishing the business objectives, policies and strategic plan in conjunction with the Chief Executive Officer (the ―CEO‖). 2. TERM AND DUTIES. (a) Two Year Contract; Daily Renewal . Executive‘s period of employment with the Bank (―Employment Period‖) shall begin on the Effective Date and shall renew daily, such that the remaining unexpired term of the Agreement shall always be twenty-four (24) months, until the date that the Bank gives Executive written notice of non-renewal (―Non-Renewal Notice‖). The Employment Period shall end on the date that is twenty-four (24) months after the date of the Non-Renewal Notice, unless the parties agree that the Employment Period shall end on an earlier date. (b) Annual Performance Evaluation . On either a fiscal year or calendar year basis, (consistently applied from year to year), the Bank shall conduct an annual evaluation of Executive‘s performance. The annual performance evaluation proceedings shall be included in the minutes of the Board meeting that next follows such annual performance review. (c) Continued Employment Following Termination of Employment Period . Nothing in this Agreement shall mandate or prohibit a continuation of Executive‘s employment following the expiration of the Employment Period upon such terms and conditions as the Bank and Executive may mutually agree. (d) Duties; Membership on Other Boards . During the Employment Period, except for periods of absence occasioned by illness, reasonable vacation periods, and reasonable leaves of

absence approved by the CEO, Executive shall devote substantially all his business time, attention, skill, and efforts to the faithful performance of his duties hereunder including activities and services related to the organization, operation and management of the Bank; provided, however, that, with the approval of the CEO, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, business companies or business organizations, which, in the CEO‘s judgment, will not present any conflict of interest with the Bank, or materially affect the performance of Executive‘s duties pursuant to this Agreement it being understood that membership in and service on boards or committees of social, religious, charitable or similar organizations does not require CEO approval pursuant to this Section. For purposes of this Section, CEO approval shall be deemed to have been granted as to service with any such business company or organization that Executive was serving as of the date of this Agreement. 3. COMPENSATION, BENEFITS AND REIMBURSEMENT. (a) Base Salary . The compensation specified under this Agreement shall constitute the salary and benefits paid for the duties described in Section 2. The Bank shall pay Executive as compensation a salary of not less than $ per year (―Base Salary‖). Such Base Salary shall be payable biweekly, or with such other frequency as officers and employees are generally paid. During the period of this Agreement, Executive‘s Base Salary shall be reviewed at least annually. Such review may be conducted by the CEO, and the Bank may increase, but not decrease (except a decrease that is generally applicable to all employees) Executive‘s Base Salary (with any increase in Base Salary to become ―Base Salary‖ for purposes of this Agreement). (b) Bonus and Incentive Compensation . Executive will be entitled to incentive compensation and bonuses as provided in any plan of the Bank in which Executive is eligible to participate. Nothing paid to Executive under any such plan or arrangement will be deemed to be in lieu of other compensation to which Executive is entitled under this Agreement. (c) Employee Benefits . The Bank will provide Executive with employee benefit plans, arrangements and perquisites substantially equivalent to those in which Executive was participating or otherwise deriving benefit from immediately prior to the beginning of the term of this Agreement, and the Bank will not, without Executive‘s prior written consent, make any changes in such plans, arrangements or perquisites which would adversely affect Executive‘s rights or benefits thereunder, except as to any changes that are applicable to all participating employees or as reasonably or customarily available. Without limiting the generality of the foregoing provisions of this Subsection (c), Executive will be entitled to participate in or receive benefits under any employee benefit plans including, but not limited to, retirement plans, supplemental retirement plans, pension plans, profit-sharing plans, health-and-accident insurance plans, medical coverage or any other employee benefit plan or arrangement made available by the Bank in the future to its senior executives, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. (d) Paid Time Off . Executive shall be entitled to paid vacation time each year during the Employment Period (measured on a fiscal or calendar year basis, in accordance with the Bank‘s usual practices), as well as sick leave, holidays and other paid absences in accordance 2

with the Bank‘s policies and procedures for senior executives. Any unused paid time off during an annual period shall be treated in accordance with the Bank‘s personnel policies as in effect from time to time. (e) Expense Reimbursements . During the Employment Period, the Bank shall pay or reimburse Executive for all reasonable travel, entertainment and other reasonable expenses incurred by Executive during the course of performing his obligations under this Agreement, upon presentation to the Bank of an itemized account of such expenses in such form as the Bank may reasonably require. 4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION. (a) Upon the occurrence of an Event of Termination (as herein defined) during Executive‘s term of employment under this Agreement, the provisions of this section shall apply. As used in this Agreement, an ―Event of Termination‖ shall mean and include any one or more of the following: (i) the termination by the Bank of Executive‘s full-time employment hereunder for any reason other than a termination for Cause, as defined in Section 8 hereof, or a termination upon Retirement as defined in Section 7 hereof, or a termination for disability as set forth in Section 6 hereof; and (ii) Executive‘s resignation from the Bank‘s employ upon any of the following (which shall be treated as termination of employment for ―Good Reason‖), unless consented to by Executive: (A) failure to appoint Executive to the Executive Position set forth in Section 1 above, or a material change in Executive‘s function, duties, or responsibilities, which change would cause Executive‘s position to become one of lesser responsibility, importance, or scope from the position and responsibilities described in Section 1 above, to which Executive has not agreed in writing (and any such material change shall be deemed a continuing breach of this Agreement); (B) a relocation of Executive‘s principal place of employment to a location that is more than 50 miles from the location of the Bank‘s principal executive offices as of the date of this Agreement; (C) a material reduction in the benefits and perquisites, including Base Salary, to Executive from those being provided as of the effective date of this Agreement (except for any reduction that is part of a reduction in pay or benefits that is generally applicable to officers or employees); (D) a liquidation or dissolution of the Bank; (E) a material breach of this Agreement by the Bank; or (F) a Change in Control of the Bank. 3

Upon the occurrence of any event described in clause (ii) above, Executive shall have the right to elect to terminate his employment under this Agreement by resignation upon not less than 30 days prior written notice given within a reasonable period of time (not to exceed, except in case of a continuing breach, 90 days) after the event giving rise to said right to elect, which termination by Executive shall be an Event of Termination. No payments or benefits shall be due to Executive under this Agreement upon the termination of Executive‘s employment except as provided in Section 4 or 5 hereof. (b) Upon the occurrence of an Event of Termination, the Bank shall pay Executive, or, in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay or liquidated damages, or both, a lump sum cash amount equal to two times the sum of (i) the highest annual rate of Base Salary paid to Executive at any time under the Agreement, plus (ii) the highest bonus paid to Executive with respect to the two completed fiscal years prior to the Event of Termination. Such payments shall not be reduced in the event Executive obtains other employment following termination of employment. Notwithstanding the foregoing, in the event the Executive is a Specified Employee (as defined herein), no payment shall be made to the Executive prior to the first day of the seventh month following such Event of Termination. ―Specified Employee‖ shall be interpreted to comply with Code section 409A and shall mean a key employee within the meaning of Code Section 416(i) (without regard to paragraph 5 thereof) but an individual shall be a ―Specified Employee‖ only if the Bank or any affiliate is a publicly traded company. (c) Upon the occurrence of an Event of Termination, the Bank shall pay Executive, or in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, a lump sum equal to the excess, if any, of the present value of the benefit that Executive would have been entitled to under the Bank‘s defined benefit pension plan if Executive had continued working for the Bank for twenty-four (24) months after the effective date of such Event of Termination, over the present value of the benefits to which Executive was actually entitled as of the effective date of such Event of Termination. (d) Upon the occurrence of an Event of Termination, the Bank will provide at the Bank‘s expense, life, medical, dental and vision coverage substantially comparable, as reasonably or customarily available, to the coverage maintained by the Bank for Executive prior to his termination, except to the extent such coverage may be changed in its application to all Bank employees. Such coverage shall cease twenty-four (24) months following the Event of Termination. In the alternative, the Bank shall pay to Executive a cash amount equal to Executive‘s cost of obtaining such benefits on his own, adjusted for any federal or state income taxes Executive has to pay on the cash amount. 5. CHANGE IN CONTROL. (a) Except for payments that are subject to Code Section 409A, for purposes of this Agreement, the term ―Change in Control‖ shall mean: (i) a change in control of a nature that would be required to be reported in response to Item 5.01(a) of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the ―Exchange Act‖); or 4

(ii) a change in control of the Bank or ESSA Bancorp, Inc. (the ―Company‖)within the meaning of the Home Owners Loan Act, as amended (―HOLA‖), and applicable rules and regulations promulgated thereunder, as in effect at the time of the Change in Control; or (iii) any of the following events, upon which a Change in Control shall be deemed to have occurred: (A) any ―person‖ (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the ―beneficial owner‖ (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of Company‘s outstanding securities except for any securities purchased by the Bank‘s employee stock ownership plan or trust; or (B) individuals who constitute the Board on the date hereof (the ―Incumbent Board‖) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company‘s stockholders was approved by the same Nominating Committee serving under an Incumbent Board, shall be, for purposes of this subsection (B), considered as though he were a member of the Incumbent Board; or (C) a sale of all or substantially all the assets of the Bank or the Company, or a plan of reorganization, merger, consolidation, or similar transaction occurs in which the security holders of the Company immediately prior to the consummation of the transaction do not own at least 50.1% of the securities of the surviving entity to be outstanding upon consummation of the transaction; or (D) a proxy statement is issued soliciting proxies from stockholders of the Company by someone other than the current management of the Company, seeking stockholder approval of a plan of reorganization, merger or consolidation of the Company or similar transaction with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan are to be exchanged for or converted into cash or property or securities not issued by the Company; or (E) a tender offer is made for 25% or more of the voting securities of the Company and the shareholders owning beneficially or of record 25% or more of the outstanding securities of the Company have tendered or offered to sell their shares pursuant to such tender offer and such tendered shares have been accepted by the tender offeror. (b) With respect to any payments hereunder that are subject to Code Section 409A, ―Change in Control‖ shall mean (i) a change in the ownership of the Bank or the Company, (ii) a change in the effective control of the Bank or Company, or (iii) a change in the ownership of a substantial portion of the assets of the Bank or Company, as described below. (i) A change in ownership occurs on the date that any one person, or more than one person acting as a group (as defined in Proposed Treasury Regulations section 1.409A-3(g)(5)(v)(B)), 5

acquires ownership of stock of the Bank or Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such corporation. (ii) A change in the effective control of the Bank or Company occurs on the date that either (i) any one person, or more than one person acting as a group (as defined in Proposed Treasury Regulations section 1.409A-3(g)(5)(vi)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Bank or Company possessing 35% or more of the total voting power of the stock of the Bank or Company, or (ii) a majority of the members of the Bank‘s or Company‘s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Bank‘s or Company‘s board of directors prior to the date of the appointment or election, provided that this subsection 9(b)(2) is inapplicable where a majority shareholder of the Bank or Company is another corporation. (iii) A change in a substantial portion of the Bank‘s or Company‘s assets occurs on the date that any one person or more than one person acting as a group (as defined in Proposed Treasury Regulations section 1.409A-3(g)(5)(vii)(C)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Bank or Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of (i) all of the assets of the Bank or Company, or (ii) the value of the assets being disposed of, either of which is determined without regard to any liabilities associated with such assets. For all purposes of this subsection 9(b), the definition of Change in Control shall be construed to be consistent with the requirements of Proposed Treasury Regulations section 1.409A-3(g)(5), except to the extent that such proposed regulations are superseded by subsequent guidance. (c) Notwithstanding the preceding paragraphs of this Section, in the event that the aggregate payments or benefits to be made or afforded to Executive in the event of a Change in Control would be deemed to include an ―excess parachute payment‖ under Section 280G of the Code or any successor thereto, then the payments or benefits to be provided shall be reduced to the extent necessary to avoid treatment as an excess parachute payment with the allocation of the reduction among such payments and benefits to be determined by the Bank. 6. TERMINATION FOR DISABILITY OR DEATH. (a) Termination of Executive‘s employment based on ―Disability‖ shall be construed to comply with Code section 409A and shall be deemed to have occurred if (i) the Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death, or last for a continuous period of not less than 12 months; (ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death, or last for a continuous period of not less than 12 months, the Executive is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank; or (iii) the Executive is determined to be totally disabled by the Social Security Administration. The provisions of paragraph 6(b) and (c) shall apply upon the termination of the Executive‘s employment for Disability. 6

(b) The Executive shall be entitled to receive benefits under any short or long term disability plan maintained by the Bank. To the extent such benefits are less than the Executive‘s Base Salary, the Bank will pay Executive an amount equal to the difference between such disability plan benefits and the amount of Executive‘s Base Salary for the longer of (i) the remaining term of the Agreement or (ii) one year following his termination of employment due to Disability. (c) The Bank will cause to be continued life, medical, dental and vision coverage substantially comparable, as reasonable or customarily available, to the coverage maintained by the Bank for Executive prior to his termination for Disability, except to the extent such coverage may be changed in its application to all Bank employees or not available on an individual basis to an employee terminated for Disability. This coverage shall cease upon the earlier of (i) the date Executive returns to the full-time employment of the Bank; (ii) Executive‘s full-time employment by another employer; (iii) Executive attaining the age of 65; or (iv) Executive‘s death. (d) In the event of Executive‘s death during the term of the Agreement, his estate, legal representatives or named beneficiaries (as directed by executive in writing) shall be paid Executive‘s Base Salary as defined in paragraph 3(a) at the rate in effect at the time of Executive‘s death for a period of one (1) year from the date of Executive‘s death, and the Bank will continue to provide medical, dental, vision and other insurance benefits normally provided for Executive‘s family (in accordance with its customary co-pay percentages) for one (1) year after Executive‘s death. Such payments are in addition to any other life insurance benefits that the Executive‘s beneficiaries may be entitled to receive under any employee benefit plan maintained by the Bank for the benefit of the Executive, including, but not limited to, the Bank‘s tax-qualified retirement plans and the Executive Salary Continuation Agreement (SERP). 7. TERMINATION UPON RETIREMENT. Termination of Executive‘s employment based on ―Retirement‖ shall mean termination of Executive‘s employment at age 65 or in accordance with any retirement policy established by the Board with Executive‘s consent with respect to him. Upon termination of Executive based on Retirement, no amounts or benefits shall be due Executive under this Agreement, and Executive shall be entitled to all benefits under any retirement plan of the Bank and other plans to which Executive is a party. 8. TERMINATION FOR CAUSE. (a) The Bank may terminate the Executive‘s employment at any time, but any termination other than termination for ―cause,‖ as defined herein, shall not prejudice the Executive‘s right to compensation or other benefits under the Agreement. The Executive shall have no right to receive compensation or other benefits for any period after termination for ―cause.‖ Termination for ―cause‖ shall include termination because of the Executive‘s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, material breach of the Bank‘s Code of Ethics, material violation of the Sarbanes-Oxley requirements for officers of public companies that in the reasonable opinion of the CEO or the Board will likely cause substantial financial harm or substantial injury to the reputation of the the 7

Bank, willfully engaging in actions that in the reasonable opinion of the CEO or the Board will likely cause substantial financial harm or substantial injury to the business reputation of the Bank, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than routine traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of the contract. (b) For purposes of this Section, no act or failure to act, on the part of the Executive, shall be considered ―willful‖ unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive‘s action or omission was in the best interests of the Bank. Any act, or failure to act, based upon the direction of the CEO or based upon the advice of counsel for the Bank shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Bank. 9. NOTICE. (a) Any purported termination by the Bank for Cause shall be communicated by Notice of Termination to Executive. If, within thirty (30) days after any Notice of Termination for Cause is given, Executive notifies the Bank that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration. Notwithstanding the pendency of any such dispute, the Bank shall discontinue paying Executive‘s compensation until the dispute is finally resolved in accordance with this Agreement. If it is determined that Executive is entitled to compensation and benefits under Section 4of this Agreement, the payment of such compensation and benefits by the Bank shall commence immediately following the date of resolution by arbitration, with interest due Executive on the cash amount that would have been paid pending arbitration (at the prime rate as published in The Wall Street Journal from time to time). (b) Any other purported termination by the Bank or by Executive shall be communicated by a Notice of Termination to the other party. If, within thirty (30) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration as provided in Section 20 of this Agreement. Notwithstanding the pendency of any such dispute, the Bank shall continue to pay Executive his Base Salary, and other compensation and benefits in effect when the notice giving rise to the dispute was given (except as to termination of Executive for Cause); provided, however, that such payments and benefits shall not continue beyond the date that is 24 months from the date the Notice of Termination is given. In the event the voluntary termination by Executive of his employment is disputed by the Bank, and if it is determined in arbitration that Executive is not entitled to termination benefits pursuant to this Agreement, he shall return all cash payments made to him pending resolution by arbitration, with interest thereon at the prime rate as published in The Wall Street Journal from time to time if it is determined in arbitration that Executive‘s voluntary termination of employment was not taken in good faith and not in the reasonable belief that grounds existed for his voluntary termination. If it is determined that the Executive is entitled to receive severance benefits under this Agreement, then any continuation of Base Salary and other compensation and benefits made to the Executive under this Section shall offset the amount of any severance benefits that are due to the Executive under this Agreement. 8

(c) For purposes of this Agreement, a ―Notice of Termination‖ shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive‘s employment under the provision so indicated and ―Date of Termination‖ shall mean the date of the Notice of Termination. 10. POST-TERMINATION OBLIGATIONS. (a) The Executive hereby covenants and agrees that, for a period of one year following his termination of employment with the Bank, he shall not, without the written consent of the Bank, either directly or indirectly: (i) solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any officer or employee of the Bank or any of its affiliates to terminate his or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity whatsoever to, any business whatsoever that competes with the business of the Bank or any of its affiliates or has headquarters or offices within 50 miles of the locations in which the Bank or its affiliates has business operations or has filed an application for regulatory approval to establish an office; (ii) become an officer, employee, consultant, director, independent contractor, agent, sole proprietor, joint venturer, greater than 5% equity-owner or stockholder, partner or trustee of any savings bank, savings and loan association, savings and loan holding company, credit union, bank or bank holding company, insurance company or agency, any mortgage or loan broker or any other entity competing with the Bank or its affiliates in the same geographic locations where the Bank or its affiliates has material business interests; provided, however, that this restriction shall not apply if the Executive‘s employment is terminated following a Change in Control; or (iii) solicit, provide any information, advice or recommendation or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any customer of the Bank or its affiliates to terminate an existing business or commercial relationship with the Bank or its affiliates. (b) Executive shall, upon reasonable notice, furnish such information and assistance to the Bank and/or its affiliates, as may reasonably be required by the Bank and/or its affiliates, in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party; provided, however, that Executive shall not be required to provide information or assistance with respect to any litigation between the Executive and the Bank, or any of its affiliates. (c) All payments and benefits to the Executive under this Agreement shall be subject to the Executive‘s compliance with this Section. The parties hereto, recognizing that irreparable injury will result to the Bank, its business and property in the event of the Executive‘s breach of this Section, agree that, in the event of any such breach by the Executive, the Bank will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the 9

violation hereof by the Executive and all persons acting for or with the Executive. The Executive represents and admits that the Executive‘s experience and capabilities are such that the Executive can obtain employment in a business engaged in other lines and/or of a different nature than the Bank, and that the enforcement of a remedy by way of injunction will not prevent the Executive from earning a livelihood. Nothing herein will be construed as prohibiting the Bank from pursuing any other remedies for such breach or threatened breach, including the recovery of damages from the Executive. 11. SOURCE OF PAYMENTS. All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Bank. 12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS. This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between the Bank or any predecessor of the Bank and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement. 13. NO ATTACHMENT; BINDING ON SUCCESSORS. (a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void, and of no effect. (b) This Agreement shall be binding upon, and inure to the benefit of, Executive and the Bank and their respective successors and assigns. 14. MODIFICATION AND WAIVER. (a) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. (b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived. 10

15. REQUIRED PROVISIONS. (a) The Bank may terminate Executive‘s employment at any time, but any termination by the Bank‘s Board other than Termination for Cause as defined in Section 8 hereof shall not prejudice Executive‘s right to compensation or other benefits under this Agreement. Executive shall have no right to receive compensation or other benefits for any period after Termination for Cause. (b) If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank‘s affairs by a notice served under Section 8(e)(3) [12 USC §1818(e)(3)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal Deposit Insurance Act, the Bank‘s obligations under this contract shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part) any of its obligations which were suspended. (c) If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank‘s affairs by an order issued under Section 8(e)(4) [12 USC §1818(e)(4)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal Deposit Insurance Act, all obligations of the Bank under this contract shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected. (d) If the Bank is in default as defined in Section 3(x)(1) [12 USC §1813(x)(1)] of the Federal Deposit Insurance Act, all obligations of the Bank under this contract shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties. (e) All obligations under this contract shall be terminated, except to the extent determined that continuation of the contract is necessary for the continued operation of the Bank, (i) by the Director of the OTS or his or her designee, at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) [12 USC §1823(c)] of the Federal Deposit Insurance Act; or (ii) by the Director or his or her designee at the time the Director or his or her designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action. (f) Notwithstanding anything herein contained to the contrary, any payments to Executive, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359. 16. SEVERABILITY. If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect. 11

17. HEADINGS FOR REFERENCE ONLY. The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 18. GOVERNING LAW. This Agreement shall be governed by the laws of the Commonwealth of Pennsylvania but only to the extent not superseded by federal law. 19. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a single arbitrator sitting in a location selected by the Executive within twenty-five miles of Stroudsburg, Pennsylvania in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator‘s award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. 20. INDEMNIFICATION. (a) The Executive shall be provided with coverage under a standard directors‘ and officers‘ liability insurance policy. The Bank shall indemnify Executive to the fullest extent permitted against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been an officer of the Bank (whether or not he continues to be an officer at the time of the of incurring such expenses or liabilities) such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys‘ fees and the cost of reasonable settlements (such settlements must be approved by the Board), provided that the Bank shall not be required to indemnify or reimburse Executive for legal expenses or liabilities incurred in connection with an action, suit or proceeding arising from any illegal or fraudulent act committed by Executive. Any such indemnification shall be made consistent with Section 545.121 of the OTS Regulations and Section 18(K) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(K), and the regulations issued thereunder in 12 C.F.R. Part 359. 21. NOTICE. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below: 12

To the Bank:

ESSA Bank & Trust 200 Palmer Street Stroudsburg, PA 18360

To Executive:

SIGNATURES IN WITNESS WHEREOF , the Bank has caused this Agreement to be executed by itsduly authorized representative, and Executive has signed this Agreement, on the date first above written. ESSA BANK & TRUST By: Date John E. Burrus, Chairman of the Board EXECUTIVE:

Date 13

Exhibit 10.4 ESSA BANK & TRUST CHANGE IN CONTROL AGREEMENT This Agreement is made effective as of , 2007 (the ―Effective Date‖), by and between ESSA Bancorp, Inc. (the ―Company‖), a Pennsylvania corporation that owns 100% of the common stock of ESSA Bank & Trust (the ―Bank‖), a Pennsylvania chartered stock savings association, and (―Executive‖). WHEREAS , the Company recognizes the substantial contribution the Executive has made to the Bank and wishes to protect his position therewith for the period provided in this Agreement; and WHEREAS , the Executive currently serves in the position of for the Bank, a position of substantial responsibility;

NOW, THEREFORE , in consideration of the contribution of the Executive, and upon the other terms and conditions hereinafter provided, the parties hereto agree as follows: 1. TERM OF AGREEMENT The ―term‖ of this Agreement shall be eighteen (18) full calendar months from the effective date of this Agreement set forth above, and shall include any extension or renewal made pursuant to this Section. Commencing on , and continuing on of each year thereafter (the ―Anniversary Date‖), this Agreement shall renew for an additional year such that the remaining term shall be eighteen (18) full calendar months unless written notice of non-renewal (―Non-Renewal Notice‖) is provided to Executive at least thirty (30) days and not more than sixty (60) days prior to any such Anniversary Date, that this Agreement shall terminate at the end of eighteen (18) months following such Anniversary Date. 2. PAYMENTS TO EXECUTIVE UPON CHANGE IN CONTROL This Agreement provides for certain payments and benefits to Executive only in the event of Change in Control followed by a termination of Executive‘s services with the Bank as set forth in this Agreement. (a) Upon the occurrence of a Change in Control of the Company or the Bank (as herein defined) during the term of this Agreement, followed by Executive‘s voluntary termination of employment in accordance with this Section 2(a), or involuntary termination of the Executive‘s employment, other than for Cause (as defined in Section 2(c) hereof), the provisions of Section 3 shall apply. Upon the occurrence of a Change in Control, the Executive shall have the right to elect to voluntarily terminate his employment with the Bank and the Company at any time during the term of this Agreement following a demotion, loss of title, office or significant authority (in each case, other than as a result of the fact that either the Bank or the Company is merged into another entity in connection with the Change in Control and will not operate as a stand-alone, independent entity), a reduction in his annual compensation or benefits, or relocation of his principal place of employment by more than 50 miles from its location immediately prior to the Change in Control.

(b) A ―Change in Control‖ of the Company or the Bank shall mean (i) a change in control of a nature that would be required to be reported in response to Item 5.01(a) of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the ―Exchange Act‖); or (ii) a change in control of the Bank or the Company within the meaning of the Home Owners Loan Act, as amended (―HOLA‖), and applicable rules and regulations promulgated thereunder, as in effect at the time of the Change in Control; or (iii) any of the following events, upon which a Change in Control shall be deemed to have occurred: (A) any ―person‖ (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the ―beneficial owner‖ (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of Company‘s outstanding securities except for any securities purchased by the Bank‘s employee stock ownership plan or trust; or (B) individuals who constitute the Board on the date hereof (the ―Incumbent Board‖) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company‘s stockholders was approved by the same Nominating Committee serving under an Incumbent Board, shall be, for purposes of this subsection (B), considered as though he were a member of the Incumbent Board; or (C) a sale of all or substantially all the assets of the Bank or the Company, or a plan of reorganization, merger, consolidation, or similar transaction occurs in which the security holders of the Company immediately prior to the consummation of the transaction do not own at least 50.1% of the securities of the surviving entity to be outstanding upon consummation of the transaction; or (D) a proxy statement is issued soliciting proxies from stockholders of the Company by someone other than the current management of the Company, seeking stockholder approval of a plan of reorganization, merger or consolidation of the Company or similar transaction with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan are to be exchanged for or converted into cash or property or securities not issued by the Company; or (E) a tender offer is made for 25% or more of the voting securities of the Company and the shareholders owning beneficially or of record 25% or more of the outstanding securities of the Company have tendered or offered to sell their shares pursuant to such tender offer and such tendered shares have been accepted by the tender offeror. (c) Even if a Change in Control shall occur, the Executive shall not have the right to receive termination benefits pursuant to Section 3 hereof upon termination of employment for Cause. ―Cause‖ as used herein, shall include termination because of the Executive‘s personal 2

dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, material breach of the Company‘s or the Bank‘s Code of Ethics, material violation of the Sarbanes-Oxley requirements for officers of public companies that in the reasonable opinion of the Chief Executive Officer will likely cause substantial financial harm or substantial injury to the reputation of the Bank or the Company, willfully engaging in actions that in the reasonable opinion of the Chief Executive Officer will likely cause substantial financial harm or substantial injury to the business reputation of the Bank or the Company, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than routine traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of the contract. 3. TERMINATION (a) Upon the occurrence of a Change in Control, followed at any time during the term of this Agreement by the involuntary termination of the Executive‘s employment other than for Cause, or voluntary termination for one or more of the reasons set forth in Section 2(a) hereof, the Company shall be obligated to pay the Executive, or in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay, a sum equal to one and one half times the sum of (i) the highest rate of base salary, and (ii) highest rate of bonus awarded to the Executive during the prior two years, subject to applicable withholding taxes. If the Executive has been employed by the Bank for less than one year, then the severance pay shall be a sum equal to eighteen times the highest monthly salary (highest rate of annual base salary divided by twelve), and one and one half times the highest rate of annual bonus (if any) awarded to Executive. (b) Upon the occurrence of a Change in Control of the Company followed at any time during the term of this Agreement by the Executive‘s involuntary termination of employment other than for termination for Cause, or voluntary termination for one or more of the reasons set forth in Section 2(a) hereof, the Company shall cause to be continued at no cost to Executive, life, medical, dental and vision coverage substantially identical to the coverage maintained by the Company for the Executive prior to his severance. Such coverage and payments shall cease upon expiration of eighteen months. Such coverage shall be treated as ―COBRA‖ coverage under applicable law. (c) Upon the occurrence of a Change in Control, the Executive will have such rights as specified in any other employee benefit plan with respect to options and such other rights as may have been granted to the Executive under such plans. (d) Any cash severance payments shall be made in a lump sum within thirty (30) days (or, in the event Section 409A of the Code is applicable, on the first day of the seventh full month) of Executive‘s termination of employment. Such payments shall not be reduced in the event the Executive obtains other employment following termination of employment with the Company. (e) Notwithstanding the preceding paragraphs of this Section 3, in no event shall the aggregate payments or benefits to be made or afforded to the Executive under said paragraphs (the ―Termination Benefits‖) constitute an ―excess parachute payment‖ under Section 280G of 3

the Code or any successor thereto, and in order to avoid such a result, Termination Benefits will be reduced, if necessary, to an amount (the ―Non-Triggering Amount‖), the value of which is one dollar ($1.00) less than an amount equal to three (3) times the Executive‘s ―base amount‖, as determined in accordance with said Section 280G. The allocation of the reduction required hereby among Termination Benefits provided by the preceding paragraphs of this Section 3 shall be determined by the Executive. 4. NOTICE OF TERMINATION Any purported termination of employment by the Company or the Bank or by the Executive shall be communicated by Notice of Termination to the other party hereto. For purposes of this Agreement, a ―Notice of Termination‖ shall mean a written notice which shall indicate the Date of Termination and, in the event of termination by the Executive, the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive‘s employment under the provision so indicated. ―Date of Termination‖ shall mean the date specified in the Notice of Termination (which, in the case of a termination for Cause, shall be immediate). In no event shall the Date of Termination exceed 30 days from the date Notice of Termination is given. 5. SOURCE OF PAYMENTS It is intended by the parties hereto that all payments provided in this Agreement shall be paid in cash or check from the general funds of the Company, provided, however, that in the event that the payment of any amounts due under Section 3 above is made by the Bank, such payment shall offset the payment due from the Company hereunder. 6. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS This Agreement contains the entire understanding between the parties hereto and supersedes any prior agreement between the Company and the Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to the Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that the Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement. 7. NO ATTACHMENT (a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect. (b) This Agreement shall be binding upon, and inure to the benefit of, the Executive, the Company and their respective successors and assigns. 4

8. MODIFICATION AND WAIVER (a) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. (b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 9. REQUIRED PROVISIONS (b) If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank‘s affairs by a notice served under Section 8(e)(3) [12 USC §1818(e)(3)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal Deposit Insurance Act, the Bank‘s obligations under this contract shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part) any of its obligations which were suspended. (c) If Executive is removed and/or permanently prohibited from participating in the conduc