Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days. ~~YES~~Yes ☒ NONo ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ~~YES~~ Yes☒ NONo ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filers,” “accelerated filers,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~YES~~Yes ☐ NONo ☒

As of February ~~5, 2020,~~8, 2021, there were ~~11,290,451~~10,820,816 shares of the Registrant’s common stock, par value $0.01 per share, outstanding.

	December 31,				September 30,			December 31,			September 30,
	2019				2019			2020			2020
	(dollars in thousands)							(dollars in thousands)
ASSETS
Cash and due from banks	$	35,581			$	48,426		$	157,574		$	101,447
Interest-bearing deposits with other institutions		6,971				3,816			59,640			54,470
Total cash and cash equivalents		42,552				52,242			217,214			155,917
Investment securities available for sale, at fair value		312,768				313,393			174,076			212,484
Loans receivable (net of allowance for loan losses of $12,747 and $12,630)		1,345,311				1,328,653
Loans held for sale									623			208
Loans receivable (net of allowance for loan losses of $16,141 and $15,400)									1,375,295			1,417,974
Regulatory stock, at cost		11,126				11,579			3,641			7,344
Premises and equipment, net		14,373				14,335			14,186			14,230
Bank-owned life insurance		39,842				39,601			36,903			40,546
Foreclosed real estate		343				240			365			269
Intangible assets, net		994				1,066			723			791
Goodwill		13,801				13,801			13,801			13,801
Deferred income taxes		4,781				5,122			5,685			5,993
Other assets		24,752				19,395			26,306			23,958
TOTAL ASSETS	$	1,810,643		��	$	1,799,427		$	1,868,818		$	1,893,515
LIABILITIES
Deposits	$	1,349,364			$	1,342,830		$	1,630,334		$	1,543,696
Short-term borrowings		104,719				107,701			569			111,713
Other borrowings		137,960				140,581			14,164			14,164
Advances by borrowers for taxes and insurance		10,361				6,700			8,749			7,858
Other liabilities		16,876				12,107			20,849			24,687
TOTAL LIABILITIES		1,619,280				1,609,919			1,674,665			1,702,118
STOCKHOLDERS’ EQUITY
Preferred Stock ($0.01 par value; 10,000,000 shares authorized, none issued)		—				—
Common stock ($0.01 par value; 40,000,000 shares authorized, 18,133,095 issued; 11,290,451 and 11,321,417 outstanding at December 31, 2019 and September 30, 2019, respectively)		181				181
Preferred Stock ($0.01 par value; 10,000,000 shares authorized, NaN issued)									—			—
Common stock ($0.01 par value; 40,000,000 shares authorized, 18,133,095 issued; 10,820,816 and 10,876,869 outstanding at December 31, 2020 and September 30, 2020, respectively)									181			181
Additional paid in capital		181,056				181,161			181,199			181,487
Unallocated common stock held by the Employee Stock Ownership Plan (ESOP)		(7,689	)			(7,803	)		(7,237	)		(7,350	)
Retained earnings		105,012				102,465			115,645			112,612
Treasury stock, at cost; 6,842,644 and 6,811,678 shares outstanding at December 31, 2019 and September 30, 2019, respectively		(85,845	)			(85,216	)
Treasury stock, at cost; 7,312,279 and 7,256,226 shares outstanding at December 31, 2020 and September 30, 2020, respectively									(92,338	)		(91,477	)
Accumulated other comprehensive loss		(1,352	)			(1,280	)		(3,297	)		(4,056	)
TOTAL STOCKHOLDERS’ EQUITY		191,363				189,508			194,153			191,397
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,810,643			$	1,799,427		$	1,868,818		$	1,893,515

	For the Three Months Ended						For the Three Months Ended
	December 31,						December 31,
	2019			2018			2020			2019
	(dollars in thousands, except per share data)						(dollars in thousands, except per share data)
INTEREST INCOME
Loans receivable, including fees	$	14,190		$	13,907		$	13,760		$	14,190
Investment securities:
Taxable		1,957			2,482			997			1,957
Exempt from federal income tax		48			136			40			48
Other investment income		318			344			115			318
Total interest income		16,513			16,869			14,912			16,513
INTEREST EXPENSE
Deposits		3,333			3,388			1,772			3,333
Short-term borrowings		505			1,077			189			505
Other borrowings		849			519			39			849
Total interest expense		4,687			4,984			2,000			4,687
NET INTEREST INCOME		11,826			11,885			12,912			11,826
Provision for loan losses		375			876			900			375
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		11,451			11,009			12,012			11,451
NONINTEREST INCOME						��
Service fees on deposit accounts		827			863			789			827
Services charges and fees on loans		533			330			425			533
Realized and unrealized gain (loss) on equity securities		1			(2	)
Loan swap fees								211			—
Realized and unrealized gain on equity securities								7			1
Trust and investment fees		318			239			331			318
Gain on sale of investment securities available for sale, net		221			4			—			221
Gain on sale of loans, net								818			—
Earnings on Bank-owned life insurance		241			244			343			241
Insurance commissions		208			201			168			208
Other		77			247			43			77
Total noninterest income		2,426			2,126			3,135			2,426
NONINTEREST EXPENSE
Compensation and employee benefits		6,238			6,124			6,396			6,238
Occupancy and equipment		1,067			1,026			1,067			1,067
Professional fees		459			524			533			459
Data processing		1,017			903			1,082			1,017
Advertising		116			155			101			116
Federal Deposit Insurance Corporation (FDIC) premiums		133			187			273			133
Gain on foreclosed real estate		(20	)		(115	)		(19	)		(20	)
Amortization of intangible assets		72			84			68			72
Other		681			764			677			681
Total noninterest expense		9,763			9,652			10,178			9,763
Income before income taxes		4,114			3,483			4,969			4,114
Income taxes		704			474			834			704
NET INCOME	$	3,410		$	3,009		$	4,135		$	3,410
Earnings per share
Basic	$	0.33		$	0.27		$	0.41		$	0.33
Diluted	$	0.33		$	0.27		$	0.41		$	0.33
Dividends per share	$	0.11		$	0.10		$	0.11		$	0.11

	For the Three Months Ended						For the Three Months Ended
	December 31,						December 31,
	2019			2018			2020			2019
	(dollars in thousands)						(dollars in thousands)
Net income	$	3,410		$	3,009		$	4,135		$	3,410
Other comprehensive (loss) income
Other comprehensive income (loss)
Investment securities available for sale:
Unrealized holding (loss) gain		(21	)		5,059
Unrealized holding loss								(225	)		(21	)
Tax effect		5			(1,068	)		47			5
Reclassification of gains recognized in net income		(221	)		(4	)		—			(221	)
Tax effect		46			1			—			46
Net of tax amount		(191	)		3,988			(178	)		(191	)
Derivative and hedging activities adjustments:
Changes in unrealized holding gains (losses) on derivatives included in net income		219			(725	)
Changes in unrealized holding gains on derivatives included in net income								516			219
Tax effect		(46	)		152			(107	)		(46	)
Reclassification adjustment for gains on derivatives included in net income		(68	)		(217	)
Reclassification adjustment for losses (gains) on derivatives included in net income								667			(68	)
Tax effect		14			46			(139	)		14
Net of tax amount		119			(744	)		937			119
Total other comprehensive (loss) income		(72	)		3,244
Total other comprehensive income (loss)								759			(72	)
Comprehensive income	$	3,338		$	6,253		$	4,894		$	3,338

									Unallocated									Accumulated
	Common Stock					Additional			Common									Other			Total
	Number of					Paid In			Stock Held by			Retained			Treasury			Comprehensive			Stockholders’
	Shares			Amount		Capital			the ESOP			Earnings			Stock			Loss			Equity
	(dollars in thousands except share data)
Balance, September 30, 2019		11,321,417		$	181	$	181,161		$	(7,803	)	$	102,465		$	(85,216	)	$	(1,280	)	$	189,508
Net income													3,410									3,410
Other comprehensive loss																			(72	)		(72	)
Cash dividends declared ($0.11 per share)													(1,153	)								(1,153	)
Change in accounting principal for adoption of ASU 2016-02													290									290
Stock based compensation							240															240
Allocation of ESOP stock							75		114													189
Allocation of treasury shares to incentive plan		33,134					(420	)							416							(4	)
Purchase of common stock		(64,100	)													(1,045	)					(1,045	)
Balance, December 31, 2019		11,290,451		$	181	$	181,056		$	(7,689	)	$	105,012		$	(85,845	)	$	(1,352	)	$	191,363


									Unallocated									Accumulated
	Common Stock					Additional			Common									Other			Total
	Number of					Paid In			Stock Held by			Retained			Treasury			Comprehensive			Stockholders’
	Shares			Amount		Capital			the ESOP			Earnings			Stock			Loss			Equity
	(dollars in thousands except share data)
Balance, September 30, 2020		10,876,869		$	181	$	181,487		$	(7,350	)	$	112,612		$	(91,477	)	$	(4,056	)	$	191,397
Net income													4,135									4,135
Other comprehensive income																			759			759
Cash dividends declared ($0.11 per share)													(1,102	)								(1,102	)
Stock based compensation							232															232
Allocation of ESOP stock							30			113												143
Allocation of treasury shares to incentive plan		43,647					(550	)								550
Purchase of common stock		(99,700	)													(1,411	)					(1,411	)
Balance, December 31, 2020		10,820,816		$	181	$	181,199		$	(7,237	)	$	115,645		$	(92,338	)	$	(3,297	)	$	194,153

	For the Three Months Ended
	December 31,
	2020			2019
	(dollars in thousands)
OPERATING ACTIVITIES
Net income	$	4,135		$	3,410
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		900			375
Provision for depreciation and amortization		265			263
Amortization and accretion of discounts and premiums, net		(99	)		600
Net gain on sale of investment securities, available for sale		—			(221	)
Realized and unrealized gain on equity securities		(7	)		(1	)
Gain on sale of loans, net		(818	)		—
Origination of residential real estate loans for sale		(19,341	)		—
Proceeds on sale of residential real estate loans		19,744			—
Compensation expense on ESOP		143			189
Amortization of right-of-use asset		220			211
Stock based compensation		232			240
Decrease (increase) in accrued interest receivable		719			(53	)
Increase (decrease) in accrued interest payable		37			(5	)
Earnings on bank-owned life insurance		(223	)		(241	)
Deferred federal income taxes		106			360
Decrease in accrued pension liability		(121	)		(148	)
Gain on foreclosed real estate, net		(19	)		(20	)
Amortization of intangible assets		68			72
Other, net		(2,013	)		(128	)
Net cash provided by operating activities		3,928			4,903
INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from sale of investment securities		—			13,024
Proceeds from principal repayments and maturities		48,319			13,434
Purchases		(10,476	)		(26,235	)
Decrease (increase) in loans receivable, net		42,058			(17,446	)
Redemption of regulatory stock		4,884			3,882
Purchase of regulatory stock		(1,181	)		(3,429	)
Proceeds from sale of foreclosed real estate		83			111
Purchase of premises, equipment and software		(190	)		(328	)
Net cash provided by (used for) investing activities		83,497			(16,987	)
FINANCING ACTIVITIES
Increase in deposits, net		86,638			6,534
Net decrease in short-term borrowings		(111,144	)		(2,982	)
Proceeds from other borrowings		—			13,928
Repayment of other borrowings		—			(16,549	)
Increase in advances by borrowers for taxes and insurance		891			3,661
Purchase of common stock		(1,411	)		(1,045	)
Dividends on common stock		(1,102	)		(1,153	)
Net cash (used for) provided by financing activities		(26,128	)		2,394
Increase (decrease) in cash and cash equivalents		61,297			(9,690	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		155,917			52,242
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	217,214		$	42,552
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash Paid:
Interest	$	1,963		$	4,692
Income taxes		—			3
Noncash items:
Transfers from loans to foreclosed real estate		160			194
Death benefit receivable on BOLI		(3,865	)		—
Initial recognition of operating right-of-use asset		—			(7,272	)
Initial recognition of operating lease liability		—			7,272
Unrealized holding gains		(225	)		(242	)

Unallocated

Accumulated

Common Stock

Additional

Common

Other

Total

Number of

Paid In

Stock Held by

Retained

Treasury

Comprehensive

Stockholders’

Shares

Amount

Capital

the ESOP

Earnings

Stock

Loss

Equity

(dollars in thousands except share data)

Balance, September 30, 2018

11,782,718

$
181

$
180,765

$
(8,255
)

$
94,112

$
(77,707
)

$
(9,910
)

$
179,186

Net Income

3,009

3,009

Other comprehensive income

3,244

3,244

Change in accounting principal for adoption of ASU 2016-01

(4
)

4

—

Cash dividends declared ($0.10
   per share)

(1,091
)

(1,091
)
Stock based compensation

252

252

Allocation of ESOP stock

62

113

175

Stock options exercised

37,096

(448
)

448

—

Balance, December 31, 2018

11,819,814

$
181

$
180,631

$
(8,142
)

$
96,026

$
(77,259
)

$
(6,662
)

$
184,775

Unallocated

Accumulated

Common Stock

Additional

Common

Other

Total

Number of

Paid In

Stock Held by

Retained

Treasury

Comprehensive

Stockholders’

Shares

Amount

Capital

the ESOP

Earnings

Stock

Loss

Equity

(dollars in thousands except share data)

Balance, September 30, 2019

11,321,417

$
181

$
181,161

$
(7,803
)

$
102,465

$
(85,216
)

$
(1,280
)

$
189,508

Net income

3,410

3,410

Other comprehensive loss

(72
)

(72
)
Cash dividends declared ($0.11
   per share)

(1,153
)

(1,153
)
Change in accounting principal for adoption of ASU 2016-02

290

290

Stock based compensation

240

240

Allocation of ESOP stock

75

114

189

Allocation of treasury shares to
   incentive plan

33,134

(420
)

416

(4
)
Purchase of common stock

(64,100
)

(1,045
)

(1,045
)
Balance, December 31, 2019

11,290,451

$
181

$
181,056

$
(7,689
)

$
105,012

$
(85,845
)

$
(1,352
)

$
191,363

For the Three Months Ended

December 31,

2019

2018

(dollars in thousands)

OPERATING ACTIVITIES

Net income

$
3,410

$
3,009

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for loan losses

375

876

Provision for depreciation and amortization

263

286

Amortization and accretion of discounts and premiums, net

600

848

Net gain on sale of investment securities

(221
)

(4
)
Realized and unrealized (gains) losses on equity and securities

(1
)

2

Compensation expense on ESOP

189

175

Amortization of right-of-use asset

211

—

Stock based compensation

240

252

(Decrease) increase in accrued interest receivable

(53
)

379

(Decrease) increase in accrued interest payable

(5
)

119

Earnings on bank-owned life insurance

(241
)

(244
)
Deferred federal income taxes

360

743

Decrease in accrued pension liability

(148
)

(119
)
Gain on foreclosed real estate, net

(20
)

(115
)
Amortization of identifiable assets

72

84

Other, net

(128
)

(2,942
)
Net cash provided by operating activities

4,903

3,349

INVESTING ACTIVITIES

Investment securities available for sale:

Proceeds from sale of investment securities

13,024

9,931

Proceeds from principal repayments and maturities

13,434

10,833

Purchases

(26,235
)

(20,729
)
Increase in loans receivable, net

(17,446
)

(30,601
)
Redemption of regulatory stock

3,882

4,239

Purchase of regulatory stock

(3,429
)

(6,387
)
Proceeds from sale of foreclosed real estate

111

432

Purchase of premises, equipment and software

(328
)

(237
)
Net cash used for investing activities

(16,987
)

(32,519
)
FINANCING ACTIVITIES

Increase (decrease) in deposits, net

6,534

(28,938
)
Net (decrease) increase in short-term borrowings

(2,982
)

60,051

Proceeds from other borrowings

13,928

20,000

Repayment of other borrowings

(16,549
)

(26,350
)
Increase in advances by borrowers for taxes and insurance

3,661

1,609

Purchase of treasury shares

(1,045
)

—

Dividends on common stock

(1,153
)

(1,091
)
Net cash provided by financing activities

2,394

25,281

Decrease in cash and cash equivalents

(9,690
)

(3,889
)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

52,242

43,539

CASH AND CASH EQUIVALENTS AT END OF YEAR

$
42,552

$
39,650

SUPPLEMENTAL CASH FLOW DISCLOSURES

Cash Paid:

Interest

$
4,692

$
4,865

Income taxes

3

—

Noncash items:

Transfers from loans to foreclosed real estate

194

52

Initial recognition of operating right-of-use asset

(7,272
)

—

Initial recognition of operating lease liability

7,272

—

Unrealized holding (losses) gains

(242
)

5,055

The consolidated financial statements include the accounts of ESSA Bancorp, Inc. (the “Company”), its wholly owned subsidiary, ESSA Bank & Trust (the “Bank”), and the Bank’s wholly owned subsidiaries, ESSACOR Inc.; Pocono Investments Company; ESSA Advisory Services, LLC; Integrated Financial Corporation; and Integrated Abstract Incorporated, a wholly owned subsidiary of Integrated Financial Corporation. The primary purpose of the Company is to act as a holding company for the Bank. The Bank’s primary business consists of the taking of deposits and granting of loans to customers generally in Monroe, Northampton, Lehigh, Delaware, Chester, Montgomery, Lackawanna, and Luzerne Counties, Pennsylvania. The Bank is a Pennsylvania chartered ~~Savings~~savings bank and is subject to regulation and supervision by the Pennsylvania Department of Banking and Securities and the Federal Deposit Insurance Corporation (the “FDIC”). The investment in the Bank on the parent company’s financial statements is carried at the parent company’s equity in the underlying net assets.

ESSACOR, Inc. is a Pennsylvania corporation that has been used to purchase properties at tax sales that represent collateral for delinquent loans of the Bank and is currently inactive. Pocono Investment Company is a Delaware corporation formed as an investment company subsidiary to hold and manage certain investments, including certain intellectual property. ESSA Advisory Services, LLC is a Pennsylvania limited liability company owned 100 percent by ESSA Bank & Trust. ESSA Advisory Services, LLC is a full-service insurance benefits consulting company offering group services such as health insurance, life insurance, short-term and long-term disability, dental, vision, and 401(k) retirement planning as well as individual health products. Integrated Financial Corporation is a Pennsylvania corporation that provided investment advisory services to the general public and is currently inactive. Integrated Abstract Incorporated is a Pennsylvania corporation that provided title insurance services and is currently inactive. All significant intercompany accounts and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements reflect all adjustments, which in the opinion of management, are necessary for a fair presentation of the results of the interim periods and are of a normal and recurring nature. Operating results for the three month ~~period~~periods ended December 31, 2020 and 2019 are not necessarily indicative of the results that may be expected for the year ending September 30, ~~2020.~~2021.

The following table sets forth the composition of the weighted-average common shares (denominator) used in the basic and diluted earnings per share computation for the three month periods ended December 31, ~~2019~~2020 and ~~2018.~~2019.

	Three Months Ended						Three Months Ended
	December 31,			December 31,			December 31,			December 31,
	2019			2018			2020			2019
Weighted-average common shares outstanding		18,133,095			18,133,095			18,133,095			18,133,095
Average treasury stock shares		(6,830,518	)		(6,316,361	)		(7,279,981	)		(6,830,518	)
Average unearned ESOP shares		(763,787	)		(809,051	)		(718,523	)		(763,787	)
Average unearned non-vested shares		(56,517	)		(56,327	)		(63,504	)		(56,517	)
Weighted average common shares and common stock equivalents used to calculate basic earnings per share		10,482,273			10,951,356			10,071,087			10,482,273
Additional common stock equivalents (stock options) used to calculate diluted earnings per share		10			—
Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share								2,820			10
Weighted average common shares and common stock equivalents used to calculate diluted earnings per share		10,482,283			10,951,356			10,073,907			10,482,283

~~For~~At December 31, 2020 there were 32,107 shares of nonvested stock outstanding at an average weighted price of $16.13 per share that were not included in the ~~three months ended~~computation of diluted earnings per share because to do so would have been anti-dilutive. At December 31, 2019 there were 53,257 shares of nonvested stock outstanding at an average weighted price of $16.16 per share that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive. For the three months ended December 31, 2018 there were 52,272 shares of nonvested stock outstanding at an average weighted price of $15.95 per share that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive.

The accounting principles followed by the Company and its subsidiaries and the methods of applying these principles conform to U.S. generally accepted accounting principles (“GAAP”) and to general practice within the banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the Consolidated Balance Sheet date and related revenues and expenses for the period. Actual results could differ from those estimates.

~~In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02,~~ ~~Leases.~~ The new leases standard applies a right-of-use (ROU) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the statement of cash flows, differs depending on the lease classification.

The new leases standard requires a lessor to classify leases as either sales-type, direct financing or operating, similar to existing U.S. GAAP. Classification depends on the same five criteria used by lessees plus certain additional factors. The subsequent accounting treatment for all three lease types is substantially equivalent to existing U.S. GAAP for sales-type leases, direct financing leases, and operating leases. However, the new standard updates certain aspects of the lessor accounting model to align it with the new lessee accounting model, as well as with the new revenue standard under Topic 606.

Lessees and lessors are required to provide certain qualitative and quantitative disclosures to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

The new leases standard addresses other considerations including identification of a lease, separating lease and non-lease components of a contract, sale and leaseback transactions, modifications, combining contracts, reassessment of the lease term, and re-measurement of lease payments. It also contains comprehensive implementation guidance with practical examples

ASU 2016-02 was adopted by us on October 1, 2019 and initially required transition using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In January 2018, the FASB issued ASU 2018-01, ~~Leases (Topic 842)~~, which provides an optional transition practical expedient to not evaluate under Topic 842 existing or expired land easements that were not previously accounted for as leases under the current lease guidance in Topic 840. In July 2018, the FASB issued ASU 2018-11, ~~“Leases (Topic 842) - Targeted Improvements,”~~ which, among other things, provides an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In December 2018, the FASB also issued ~~ASU 2018-20, “Leases (Topic 842) - Narrow-Scope Improvements for Lessors,”~~ ~~which provides for certain policy elections and changes lessor accounting for sales and similar taxes and certain lessor costs. In March 2019, the FASB issued ASU 2019-01,~~ ~~Leases (Topic 842): Codification Improvements,~~ which addresses 1) determining the fair value of the underlying asset by the lessor that are not manufacturers or dealers (generally financial institutions and captive finance companies), and 2) lessors that are depository and lending institutions should classify principal and payments received under sales-type and direct financing leases within investing activities in the cash flow statement

Upon adoption of ASU 2016-02, ASU 2018-01, ASU 2018-11, ASU 2018-20, and ASU 2019-01 on October 1, 2019, we recognized right-of-use assets and related lease liabilities totaling $7.3 million and $7.3 million, respectively.

We elected to apply certain practical expedients provided under ASU 2016-02 whereby we will not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. We also did not apply the recognition requirements of ASU 2016-02 to any short-term leases (as defined by related accounting guidance). We utilized the modified-retrospective transition approach prescribed by ASU 2018-11.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining

life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. A public business entity that is not an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020. All other entities, including not-for-profit entities, that are adopting the amendments in this Update should do so for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In ~~July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivative and Hedging (Topic 815)~~. The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down-round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down-round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down-round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down-round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down- round features are now subject to the specialized guidance for contingent beneficial conversion features (in ~~Subtopic 470-20, Debt ‒ Debt with Conversion and Other Options~~), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Accounting Standards Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part I of this Update should be applied either retrospectively to outstanding financial instruments with a down-round feature by means of a cumulative-effect adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective or retrospectively to outstanding financial instruments with a down-round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10. The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect. This Update is not expected to have a significant impact on the Company’s financial statements.

~~In August 2018, the FASB issued~~ ~~ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes the Disclosure Requirements for Fair Value Measurements~~. The Update removes the requirement to disclose the amount of and reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The Update requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level III fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level III fair value measurements. This Update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This Update is not expected to have a significant impact on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits (Topic 715-20). This Update amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The Update eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year. The Update also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care benefits. This Update is effective for public business entities for fiscal years ending after December 15, 2020, and must be applied on a retrospective basis. For all other entities, this Update is effective for fiscal years ending after December 15, 2021. This Update is not expected to have a significant impact on the Company’s financial statements.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. Topic 326, Financial Instruments – Credit Losses amendments are effective for SEC registrants for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other public business entities, the effective date is for fiscal years beginning after December 15, 2020, and for all other entities, the effective date is for fiscal years beginning after December 15, 2021. Topic 815, Derivatives and Hedging amendments are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. For entities that have adopted the amendments in Update 2017-12, the effective date is as of the beginning of the first annual period beginning after the issuance of this Update. Topic 825, Financial Instruments amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In May 2019, the FASB issued ASU 2019-05, Financial Instruments – Credit Losses, Topic 326, which allows entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost upon adoption of the new credit losses standard. To be eligible for the transition election, the existing financial asset must otherwise be both within the scope of the new credit losses standard and eligible for the applying the fair value option in ASC 825-10.3. The election must be applied on an instrument-by-instrument basis and is not available for either available-for-sale or held-to-maturity debt securities. For entities that elect the fair value option, the difference between the carrying amount and the fair value of the financial asset would be recognized through a cumulative-effect adjustment to opening retained earnings as of the date an entity adopted ASU 2016-13. Changes in fair value of that financial asset would subsequently be reported in current earnings. For entities that have not yet adopted ASU 2016-13, the effective dates and transition requirements are the same as those in ASU 2016-13. For entities that have adopted ASU 2016-13, ASU 2019-05 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted once ASU 2016-13 has been adopted. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In ~~May 2019, the FASB issued ASU 2019-06,~~ Intangibles – Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities, which extend the scope of the goodwill accounting alternative provided in ASU 2014-02 and the intangible asset accounting alternative provided in ASU 2014-18 to not-for-profit entities. Instead of testing goodwill for impairment annually at the reporting unit level, a not-for-profit entity may now elect the goodwill accounting alternative to (a) amortize goodwill on a straight-line basis over 10 years or less than 10 years if the entity demonstrates that another useful life is more appropriate, (b) make a policy election to test goodwill for impairment at either the entity level or the reporting unit level, and (c) test goodwill for impairment only when a triggering event occurs that indicates that the fair value of an entity (or a reporting unit) may be below its carrying amount. Furthermore, for identifiable intangible assets, instead of separately recognizing most intangible assets at fair value on the transaction date, a not-for-profit entity may now elect the intangible asset accounting alternative to subsume the following intangible assets into goodwill: (a) customer-related intangible assets that aren’t capable of being sold or licensed independently from the other assets of the business, and (b) noncompetition agreements acquired in an acquisition. The goodwill accounting alternative must be elected if the intangible asset accounting alternative is elected. However, the goodwill accounting alternative may be elected without electing the intangible asset accounting alternative. The amendments are effective immediately. This Update did not have a significant impact on the Company’s financial statements.

~~In November 2019, the FASB issued ASU 2019-10,~~ ~~Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)~~. The Update defers the effective dates of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This Update also amends the mandatory effective date for the elimination of Step 2 from the goodwill impairment test under ASU No. 2017-04, ~~Intangibles ‒ Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (Goodwill)~~, to align with those used for credit losses. Furthermore, the ASU provides a one-year deferral of the effective dates of the ASUs on derivatives and hedging and leases for companies that are not public business entities. The Company qualifies as a smaller reporting company and does not expect to early adopt these ASUs.

In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, to clarify its new credit impairment guidance in ASC 326, based on implementation issues raised by stakeholders. This Update clarified, among other things, that expected recoveries are to be included in the allowance for credit losses for these financial assets;

an accounting policy election can be made to adjust the effective interest rate for existing troubled debt restructurings based on the prepayment assumptions instead of the prepayment assumptions applicable immediately prior to the restructuring event; and extends the practical expedient to exclude accrued interest receivable from all additional relevant disclosures involving amortized cost basis. The effective dates in this Update are the same as those applicable for ASU 2019-10. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), to simplify the accounting for income taxes, change the accounting for certain tax transactions, and make minor improvements to the codification. This Update provides a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax and provides guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized or a separate transaction. The Update also changes current guidance for making an intraperiod allocation, if there is a loss in continuing operations and gains outside of continuing operations; determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of accounting; accounting for tax law changes and year-to-date losses in interim periods; and determining how to apply the income tax guidance to franchise taxes that are partially based on income. For public business entities, the amendments in this Update are effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. This Update is not expected to have a significant impact on the Company’s financial statements.

In January 2020, the FASB issued ASU 2020-1, Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), to clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The amendments also clarify that, for the purpose of applying paragraph 815-10-15-141(a) an entity should not consider whether, upon the settlement of the forward contract or exercise of the purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method in Topic 323 or the fair value option, in accordance with the financial instruments guidance in Topic 825. An entity also would evaluate the remaining characteristics in paragraph 815-10-15-141 to determine the accounting for those forward contracts and purchased options. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2020, the FASB issued ASU 2020-3, Codification Improvements to Financial Instruments. This ASU was issued to improve and clarify various financial instruments topics, including the current expected credit losses (CECL) standard issued in 2016. The ASU includes seven issues that describe the areas of improvement and the related amendments to GAAP; they are intended to make the standards easier to understand and apply and to eliminate inconsistencies, and they are narrow in scope and are not expected to significantly change practice for most entities. Among its provisions, the ASU clarifies that all entities, other than public business entities that elected the fair value option, are required to provide certain fair value disclosures under ASC 825, Financial Instruments, in both interim and annual financial statements. It also clarifies that the contractual term of a net investment in a lease under Topic 842 should be the contractual term used to measure expected credit losses under Topic 326. Amendments related to ASU 2019-04 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is not permitted before an entity’s adoption of ASU 2016-01. Amendments related to ASU 2016-13 for entities that have not yet adopted that guidance are effective upon adoption of the amendments in ASU 2016-13. Early adoption is not permitted before an entity’s adoption of ASU 2016-13. Amendments related to ASU 2016-13 for entities that have adopted that guidance are effective for fiscal years beginning after December 15, 2019, including interim periods within those years. Other amendments are effective upon issuance of this ASU. This Update is not expected to have a significant impact on the Company’s financial statements.

In January 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for all entities upon issuance through December 31, 2022. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. This ASU removes from U.S. GAAP the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (2) a convertible debt instrument was issued at a substantial premium. This ASU requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity’s financial statements, and information about events, conditions, and circumstances that can affect how to assess the amount or timing of an entity’s future cash flows related to those instruments. The amendments in this ASU are effective for public business entities that are not smaller reporting companies, for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. For all other entities, this ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The guidance may be early adopted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs, which clarifies that, for each reporting period, an entity should reevaluate whether a callable debt security is within the scope of ASC 310-20-35-33. For public business entities, ASU 2020-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early application is not permitted. For all other entities, ASU 2020-08 is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. This Update is not expected to have a significant impact on the Company’s financial statements.

In October 2020, the FASB issued ASU 2020-09, Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762, which codifies, as appropriate, the amended financial statement disclosure requirements in Regulation S-X Rules 13-01 and 13-02. The amendments are effective January 4, 2021. This Update did not have a significant impact on the Company’s financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which makes minor technical corrections and clarifications to the ASC. The amendments in Sections B and C of the ASU are effective for annual periods beginning after December

15, 2020, for public business entities. For all other entities, the amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. This Update is not expected to have a significant impact on the Company’s financial statements.

In November 2020, the FASB issued ASU 2020-11, Financial Services – Insurance (Topic 944), which was made in consideration of the implications of the Coronavirus Disease 2019 (COVID-19) pandemic on an insurance entity’s ability to effectively implement the amendments in Accounting Standards Update No. 2018-12, Financial Services— Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI). The amendments in this Update defer the effective date of LDTI for all entities by one year, as (1) for public business entities that meet the definition of an SEC filer and are not SRCs, LDTI is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years; and (2) for all other entities, LDTI is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025. This Update is not expected to have a significant impact on the Company’s financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which provides optional temporary guidance for entities transitioning away from the London Interbank Offered Rate(LIBOR) and other interbank offered rates (IBORs) to new references rates so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions within Topic848. ASU 2021-01 clarifies that the derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848. ASU 2021-01 is effective immediately for all entities. Entities may elect to apply the amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued. The

amendments in this update do not apply to contract modifications made, as well as new hedging relationships entered into, after December 31, 2022, and to existing hedging relationships evaluated for effectiveness for periods after December 31, 2022, except for certain hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

The amortized cost, gross unrealized gains and losses, and fair value of investment securities available for sale are summarized as follows (in thousands):

	December 31, 2019									December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale
Fannie Mae	$	117,582	$	869	$	(502	)	$	117,949	$	36,177	$	1,205	$	(79	)	$	37,303
Freddie Mac		80,412		454		(288	)		80,578		27,906		893		(2	)		28,797
Governmental National Mortgage Association		17,654		132		(165	)		17,621		12,992		349		(54	)		13,287
Total mortgage-backed securities		215,648		1,455		(955	)		216,148		77,075		2,447		(135	)		79,387
Obligations of states and political subdivisions		22,414		269		(69	)		22,614		21,127		746		—			21,873
U.S. government agency securities		14,393		235		(48	)		14,580		1,998		31		—			2,029
Corporate obligations		43,547		596		(470	)		43,673		56,596		918		(479	)		57,035
Other debt securities		15,987		31		(265	)		15,753		13,494		394		(136	)		13,752
Total	$	311,989	$	2,586	$	(1,807	)	$	312,768	$	170,290	$	4,536	$	(750	)	$	174,076

	September 30, 2019									September 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale
Fannie Mae	$	126,672	$	987	$	(554	)	$	127,105	$	41,961	$	1,385	$	(88	)	$	43,258
Freddie Mac		80,639		453		(331	)		80,761		31,642		964		(2	)		32,604
Governmental National Mortgage Association		18,590		182		(198	)		18,574		15,300		368		(99	)		15,569
Total mortgage-backed securities		225,901		1,622		(1,083	)		226,440		88,903		2,717		(189	)		91,431
Obligations of states and political subdivisions		19,860		356		(4	)		20,212		21,136		795		—			21,931
U.S. government agency securities		6,454		234		—			6,688		24,990		—		—			24,990
U.S. government treasury securities											7,991		57		—			8,048
Corporate obligations		43,121		594		(581	)		43,134		51,188		807		(521	)		51,474
Other debt securities		17,036		84		(201	)		16,919		14,265		495		(150	)		14,610
Total	$	312,372	$	2,890	$	(1,869	)	$	313,393	$	208,473	$	4,871	$	(860	)	$	212,484

The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three months ended December 31, 2020 and 2019.

(in thousands)	Three Months Ended December 31, 2019		Three Months Ended December 31, 2018			Three Months Ended December 31, 2020		Three Months Ended December 31, 2019
Net gains (losses) recognized during the period on equity securities	$	1	$	(2	)
Net gains recognized during the period on equity securities						$	7	$	1
Less: Net gains recognized during the period on equity securities sold during the period		—		—			—		—
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date	$	1	$	(2	)
Unrealized gains recognized during the reporting period on equity securities still held at the reporting date						$	7	$	1

The amortized cost and fair value of debt securities at December 31, ~~2019,~~2020, 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				Available For Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	—	$	—	$	3,382	$	3,399
Due after one year through five years		24,157		24,564		28,945		29,688
Due after five years through ten years		88,948		89,287		50,959		51,586
Due after ten years		198,884		198,917		87,004		89,403
Total	$	311,989	$	312,768	$	170,290	$	174,076

For the three months ended December 31, 2020, there were 0 sales of investment securities. For the three months ended December 31, 2019, the Company realized gross gains of $221,000 and no0 gross losses ~~on proceeds from the sale of investment securities of $13.0 million. For the three months ended December 31, 2018, the Company realized gross gains of $43,000 and gross losses of $39,000~~ on proceeds from the sale on investment securities of ~~$9.9 million.~~ $13.0 million

The following tables show the Company’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 ~~(dollars in~~(in thousands):

	December 31, 2019																	December 31, 2020
	Number of Securities		Less than Twelve Months					Twelve Months or Greater					Total					Number of Securities		Less than Twelve Months					Twelve Months or Greater					Total
			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses					Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fannie Mae		41	$	5,458	$	(55	)	$	35,154	$	(447	)	$	40,612	$	(502	)		10	$	1,513	$	(16	)	$	5,109	$	(63	)	$	6,622	$	(79	)
Freddie Mac		29		1,826		(8	)		23,211		(280	)		25,037		(288	)		0		—		—			314		(2	)		314		(2	)
Governmental National Mortgage Association		11		1,222		(3	)		7,536		(162	)		8,758		(165	)		6		1,266		(19	)		3,067		(35	)		4,333		(54	)
Obligations of states and political subdivisions		6		7,191		(69	)		—		—			7,191		(69	)
U.S. government agency securities		4		7,943		(48	)		—		—			7,943		(48	)
Corporate obligations		14		2,194		(16	)		12,015		(454	)		14,209		(470	)		24		18,570		(175	)		4,066		(304	)		22,636		(479	)
Other debt securities		17		7,000		(72	)		5,712		(193	)		12,712		(265	)		10		—		—			3,652		(136	)		3,652		(136	)
Total		122	$	32,834	$	(271	)	$	83,628	$	(1,536	)	$	116,462	$	(1,807	)		50	$	21,349	$	(210	)	$	16,208	$	(540	)	$	37,557	$	(750	)

	September 30, 2019																	September 30, 2020
			Less than Twelve Months					Twelve Months or Greater					Total							Less than Twelve Months					Twelve Months or Greater					Total
	Number of Securities		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Number of Securities		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fannie Mae		48	$	5,568	$	(6	)	$	45,867	$	(548	)	$	51,435	$	(554	)		8	$	1,397	$	(19	)	$	5,827	$	(69	)	$	7,224	$	(88	)
Freddie Mac		32		765		—			29,661		(331	)		30,426		(331	)		1		330		(2	)		—		—			330		(2	)
Governmental National Mortgage Association		12		345		(1	)		8,242		(197	)		8,587		(198	)		7		4,428		(61	)		2,996		(38	)		7,424		(99	)
Obligations of states and political subdivisions		2		2,159		(4	)		—		—			2,159		(4	)
Corporate obligations		13		2,063		(5	)		12,015		(576	)		14,078		(581	)		20		13,213		(93	)		6,573		(428	)		19,786		(521	)
Other debt securities		14		3,493		(16	)		6,132		(185	)		9,625		(201	)		10		—		0			3,879		(150	)		3,879		(150	)
Total		121	$	14,393	$	(32	)	$	101,917	$	(1,837	)	$	116,310	$	(1,869	)		46	$	19,368	$	(175	)	$	19,275	$	(685	)	$	38,643	$	(860	)

The Company’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, other mortgage backed securities, debt obligations of a U.S. state or political subdivision, U.S. government agency securities, corporate obligations, other debt securities and equity securities.

The Company reviews its position quarterly and has asserted that at December 31, ~~2019,~~2020, the declines outlined in the above table represent temporary declines and the Company would not be required to sell the above securities before their anticipated recovery in market value.

The Company 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 non-collection of principal and interest during the period.

	December 31, 2019		September 30, 2019		December 31, 2020		September 30, 2020
Real estate loans:
Residential	$	601,425	$	597,514	$	601,530	$	610,172
Construction		8,761		5,672		11,626		11,853
Commercial		483,520		480,647		508,043		509,628
Commercial		71,256		55,559		123,376		139,603
Obligations of states and political subdivisions		75,932		71,828		72,527		79,230
Home equity loans and lines of credit		45,020		45,156		40,459		40,800
Auto loans		69,576		81,983		32,013		39,795
Other		2,568		2,924		1,862		2,293
		1,358,058		1,341,283		1,391,436		1,433,374
Less allowance for loan losses		12,747		12,630		16,141		15,400
Net loans	$	1,345,311	$	1,328,653	$	1,375,295	$	1,417,974

During 2020 the Company participated in the Paycheck Protection Program (“PPP”), administered directly by the U.S. SBA. The PPP provides loans to small businesses who were affected by economic conditions as a result of COVID-19 to provide cash-flow assistance to employers who maintain their payroll (including healthcare and certain related expenses), mortgage interest, rent, leases, utilities and interest on existing debt during the COVID-19 emergency. The PPP loans are fully guaranteed by the SBA and may be eligible for forgiveness by the SBA to the extent that the proceeds are used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up to 24 weeks after the loan is made as long as certain conditions are met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to the Company. PPP loans are included in the Commercial loan category.

In accordance with the SBA terms and conditions on these PPP loans, the Company received approximately $2.4 million in fees associated with the processing of these loans. Upon funding of the loan, these fees were deferred and will be amortized over the life of the loan as an adjustment to yield in accordance with FASB ASC 310-20-25-2.

Included in commercial loans in the above table are 596 loans totaling $67.5 million originated by the Company under the Payroll Protection Program during the quarter ended December 31, 2020. These loans mature in two years.

Purchased loans acquired in a business combination are recorded at fair value on their purchase date without a carryover of the related allowance for loan losses.

The following table presents additional information regarding loans acquired and accounted for in accordance with ASC 310-30 (in thousands):

	December 31, 2019		September 30, 2019		December 31, 2020		September 30, 2020
	Acquired Loans with Specific Evidence or Deterioration in Credit Quality (ASC 310-30)		Acquired Loans with Specific Evidence or Deterioration in Credit Quality (ASC 310-30)		Acquired Loans with Specific Evidence or Deterioration in Credit Quality (ASC 310-30)		Acquired Loans with Specific Evidence or Deterioration in Credit Quality (ASC 310-30)
Outstanding balance	$	1,302	$	1,392	$	992	$	1,086
Carrying amount	$	1,211	$	1,299	$	931	$	1,025

The following tables show the amount of loans in each category that were individually and collectively evaluated for impairment at the dates indicated (in thousands):

	Total Loans		Individually Evaluated for Impairment		Loans Acquired with Deteriorated Credit Quality		Collectively Evaluated for Impairment		Total Loans		Individually Evaluated for Impairment		Loans Acquired with Deteriorated Credit Quality		Collectively Evaluated for Impairment
December 31, 2019
December 31, 2020
Real estate loans:
Residential	$	601,425	$	4,176	$	—	$	597,249	$	601,530	$	3,580	$	—	$	597,950
Construction		8,761		—		—		8,761		11,626		—		—		11,626
Commercial		483,520		2,451		1,211		479,858		508,043		11,088		931		496,024
Commercial		71,256		432		—		70,824		123,376		1,195		—		122,181
Obligations of states and political subdivisions		75,932		—		—		75,932		72,527		—		—		72,527
Home equity loans and lines of credit		45,020		304		—		44,716		40,459		96		—		40,363
Auto loans		69,576		364		—		69,212		32,013		131		—		31,882
Other		2,568		29		—		2,539		1,862		11		—		1,851
Total	$	1,358,058	$	7,756	$	1,211	$	1,349,091	$	1,391,436	$	16,101	$	931	$	1,374,404

	Total Loans		Individually Evaluated for Impairment		Loans Acquired with Deteriorated Credit Quality		Collectively Evaluated for Impairment		Total Loans		Individually Evaluated for Impairment		Loans Acquired with Deteriorated Credit Quality		Collectively Evaluated for Impairment
September 30, 2019
September 30, 2020
Real estate loans:
Residential	$	597,514	$	4,281	$	—	$	593,233	$	610,172	$	3,949	$	—	$	606,223
Construction		5,672		—		—		5,672		11,853		—		—		11,853
Commercial		480,647		2,633		1,299		476,715		509,628		11,322		1,025		497,281
Commercial		55,559		448		—		55,111		139,603		1,595		—		138,008
Obligations of states and political sub divisions		71,828		—		—		71,828		79,230		—		—		79,230
Home equity loans and lines of credit		45,156		400		—		44,756		40,800		117		—		40,683
Auto loans		81,983		583		—		81,400		39,795		210		—		39,585
Other		2,924		31		—		2,893		2,293		11		—		2,282
Total	$	1,341,283	$	8,376	$	1,299	$	1,331,608	$	1,433,374	$	17,204	$	1,025	$	1,415,145

The Company maintains a loan review system that 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. The Company does not aggregate such loans for evaluation purposes. 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 Company does not separately identify individual consumer and residential mortgage loans for impairment disclosures, unless such loans are part of a larger relationship that is impaired, or are classified as a troubled debt restructuring.

A loan is considered to be a troubled debt restructuring (“TDR”) loan when the Company grants a concession to the borrower that it would not otherwise consider because of the borrower’s financial condition. Such concessions include the reduction of interest rates, forgiveness of principal or interest, or other modifications of interest rates that are less than the current market rate for new obligations with similar risk. TDR loans that are in compliance with their modified terms and that yield a market rate at the time of modification may be removed from TDR status after one year of performance.

The following tables include the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount at the dates indicated, if applicable (in thousands):

	Recorded Investment		Unpaid Principal Balance		Associated Allowance		Recorded Investment		Unpaid Principal Balance		Associated Allowance
December 31, 2019
December 31, 2020
With no specific allowance recorded:
Real estate loans
Residential	$	3,975	$	5,432	$	—	$	3,367	$	4,619	$	—
Construction		—		—		—		—		—		—
Commercial		2,272		4,193		—		4,054		6,241		—
Commercial		432		471		—		1,195		1,291		—
Obligations of states and political subdivisions		—		—		—		—		—		—
Home equity loans and lines of credit		304		331		—		96		182		—
Auto loans		119		233		—		63		95		—
Other		14		23		—		11		22		—
Total		7,116		10,683		—		8,786		12,450		—
With an allowance recorded:
Real estate loans
Residential		201		226		31		213		271		21
Construction		—		—		—		—		—		—
Commercial		179		215		55		7,034		7,145		61
Commercial		—		—		—		—		—		—
Obligations of states and political subdivisions		—		—		—		—		—		—
Home equity loans and lines of credit		—		—		—		—		—		—
Auto loans		245		276		116		68		74		20
Other		15		16		8		—		—		—
Total		640		733		210		7,315		7,490		102
Total:
Real estate loans
Residential		4,176		5,658		31		3,580		4,890		21
Construction		—		—		—		—		—		—
Commercial		2,451		4,408		55		11,088		13,386		61
Commercial		432		471		—		1,195		1,291		—
Obligations of states and political subdivisions		—		—		—		—		—		—
Home equity loans and lines of credit		304		331		—		96		182		—
Auto loans		364		509		116		131		169		20
Other		29		39		8		11		22		—
Total Impaired Loans	$	7,756	$	11,416	$	210	$	16,101	$	19,940	$	102

	Recorded Investment		Unpaid Principal Balance		Associated Allowance		Recorded Investment		Unpaid Principal Balance		Associated Allowance
September 30, 2019
September 30, 2020
With no specific allowance recorded:
Real Estate Loans
Residential	$	3,935	$	5,309	$	—	$	3,699	$	5,070	$	—
Construction		—		—		—		—		—		—
Commercial		2,385		4,269		—		4,203		6,342		—
Commercial		354		475		—		1,539		1,625		—
Obligations of states and political subdivisions		—		—		—		—		—		—
Home equity loans and lines of credit		400		465		—		117		222		—
Auto Loans		161		248		—		72		131		—
Other		15		22		—		11		22		—
Total		7,250		10,788		—		9,641		13,412		—
With an allowance recorded:
Real Estate Loans
Residential		346		398		36		250		271		26
Construction		—		—		—		—		—		—
Commercial		248		294		56		7,119		7,169		132
Commercial		94		223		6		56		57		20
Obligations of states and political subdivisions		—		—		—		—		—		—
Home equity loans and lines of credit		—		—		—		—		—		—
Auto Loans		422		426		144		138		143		43
Other		16		17		6		—		—		—
Total		1,126		1,358		248		7,563		7,640		221
Total:
Real Estate Loans
Residential		4,281		5,707		36		3,949		5,341		26
Construction		—		—		—		—		—		—
Commercial		2,633		4,563		56		11,322		13,511		132
Commercial		448		698		6		1,595		1,682		20
Obligations of states and political subdivisions		—		—		—		—		—		—
Home equity loans and lines of credit		400		465		—		117		222		—
Auto Loans		583		674		144		210		274		43
Other		31		39		6		11		22		—
Total Impaired Loans	$	8,376	$	12,146	$	248	$	17,204	$	21,052	$	221

The following table represents the average recorded investments in the impaired loans and the related amount of interest recognized during the time within the period that the impaired loans were impaired (in thousands):

	For the Three Months Ended December 31,								For the Three Months Ended December 31,
	2019		2018		2019		2018		2020		2019		2020		2019
	Average Recorded Investment		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized		Average Recorded Investment		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized
With no specific allowance recorded:
Real estate loans
Residential	$	3,933	$	4,167	$	1	$	3	$	1,436	$	3,933	$	1	$	1
Construction		—		—		—		—		—		—		—		—
Commercial		2,398		4,484		—		45		11,131		2,398		—		—
Commercial		392		84		—		—		1,313		392		—		—
Obligations of states and political subdivisions		—		—		—		—		—		—		—		—
Home equity loans and lines of credit		322		151		—		—		109		322		—		—
Auto loans		116		87		1		1		55		116		—		1
Other		19		17		—		—		11		19		—		—
Total		7,180		8,990		2		49		14,055		7,180		1		2
With an allowance recorded:
Real estate loans
Residential		297		815		—		—		221		297		—		—
Construction		—		—		—		—		—		—		—		—
Commercial		333		—		—		—		2,581		333		—		—
Commercial		65		—		—		—		37		65		—		—
Obligations of states and political subdivisions		—		—		—		—		—		—		—		—
Home equity loans and lines of credit		—		13		—		—		—		0		—		—
Auto loans		212		204		—		—		40		212		—		—
Other		5		—		—		—		—		5		—		—
Total		912		1,032		—		—		2,879		912		—		—
Total:
Real estate loans
Residential		4,230		4,982		1		3		1,657		4,230		1		1
Construction		—		—		—		—		—		—		—		—
Commercial		2,731		4,484		—		45		13,712		2,731		—		—
Commercial		457		84		—		—		1,350		457		—		—
Obligations of states and political subdivisions		—		—		—		—		—		—		—		—
Home equity loans and lines of credit		322		164		—		—		109		322		—		—
Auto loans		328		291		1		1		95		328		—		1
Other		24		17		—		—		11		24		—		—
Total Impaired Loans	$	8,092	$	10,022	$	2	$	49	$	16,934	$	8,092	$	1	$	2

The Company uses a ten-point internal risk-rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized and are aggregated as Pass-rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are fundamentally sound yet exhibit potentially unacceptable credit risk or deteriorating trends or characteristics which, if left uncorrected, may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans that are 90 or more days past due are considered Substandard. Loans in the Doubtful category have all the weaknesses inherent in loans classified as Substandard with the added characteristic that their weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loans in the Loss category are considered uncollectible and of little value that their continuance as bankable assets is not warranted. Certain residential real estate loans, construction loans, home equity loans and lines of credit, auto loans and other consumer loans are underwritten and structured using standardized criteria and characteristics, primarily payment performance, and are normally risk rated and monitored collectively on a monthly basis. These are typically loans to individuals in the consumer categories and are delineated as either performing or non-performing.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as bankruptcy, repossession, or death occurs to raise awareness of a possible credit event. The Bank’s commercial loan officers are responsible for the timely and accurate risk rating recommendation for the loans in their portfolios at origination and on an ongoing basis. The Bank’s commercial loan officers perform an annual review of all commercial relationships $750,000 or greater. Confirmation of the appropriate risk grade is included in the review on an ongoing basis. The Bank engages an external consultant to conduct loan reviews on at least a semi-annual basis. Generally, the external consultant reviews commercial relationships greater than $1,000,000 and/or all criticized relationships. Detailed reviews, including plans for resolution, are performed on loans classified as Substandard on a quarterly basis. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

The following tables present the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard, and Doubtful or Loss within the internal risk rating system at December 31, ~~2019~~2020 and September 30, ~~2019~~2020 (in thousands):

	Pass		Special Mention		Substandard		Doubtful or Loss		Total		Pass		Special Mention		Substandard		Doubtful or Loss		Total
December 31, 2019
December 31, 2020
Commercial real estate loans	$	465,560	$	10,180	$	7,780	$	—	$	483,520	$	469,972	$	18,608	$	19,463	$	—	$	508,043
Commercial		68,505				2,751		—		71,256		121,932		108		1,336		—		123,376
Obligations of states and political subdivisions		75,932		—		—		—		75,932		72,527		—		—		—		72,527
Total	$	609,997	$	10,180	$	10,531	$	—	$	630,708	$	664,431	$	18,716	$	20,799	$	—	$	703,946

	Pass		Special Mention		Substandard		Doubtful or Loss		Total		Pass		Special Mention		Substandard		Doubtful or Loss		Total
September 30, 2019
September 30, 2020
Commercial real estate loans	$	461,701	$	7,492	$	11,454	$	—	$	480,647	$	479,475	$	15,022	$	15,131	$	—	$	509,628
Commercial		52,486		—		3,073		—		55,559		137,860		—		1,743		—		139,603
Obligations of states and political subdivisions		71,828		—		—		—		71,828		79,230		—		—		—		79,230
Total	$	586,015	$	7,492	$	14,527	$	—	$	608,034	$	696,565	$	15,022	$	16,874	$	—	$	728,461

All other loans are underwritten and structured using standardized criteria and characteristics, primarily payment performance, and are normally risk rated and monitored collectively on a monthly basis. These are typically loans to individuals in the consumer categories and are delineated as either performing or non-performing. The following tables present the risk ratings in the consumer categories of performing and non-performing loans at December 31, ~~2019~~2020 and September 30, ~~2019~~2020 (in thousands):

	Performing		Non- performing		Total		Performing		Non- performing		Total
December 31, 2019
December 31, 2020
Real estate loans:
Residential	$	597,010	$	4,415	$	601,425	$	596,489	$	5,041	$	601,530
Construction		8,761		—		8,761		11,626		—		11,626
Home equity loans and lines of credit		44,449		571		45,020		40,262		197		40,459
Auto loans		69,132		443		69,575		31,873		140		32,013
Other		2,536		32		2,568		1,844		18		1,862
Total	$	721,888	$	5,461	$	727,349	$	682,094	$	5,396	$	687,490

	Performing		Non- performing		Total		Performing		Non- performing		Total
September 30, 2019
September 30, 2020
Real estate loans:
Residential	$	592,907	$	4,607	$	597,514	$	605,549	$	4,623	$	610,172
Construction		5,672		—		5,672		11,853		—		11,853
Home equity loans and lines of credit		44,534		622		45,156		40,581		219		40,800
Auto loans		81,317		666		81,983		39,572		223		39,795
Other		2,883		41		2,924		2,282		11		2,293
Total	$	727,313	$	5,936	$	733,249	$	699,837	$	5,076	$	704,913

The Company further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of December 31, ~~2019~~2020 and September 30, ~~2019~~2020 (in thousands):

			31-60 Days		61-89 Days		90 + Days Past Due and				Total		Purchased Credit Impaired				Total				31-60 Days		61-89 Days		90 + Days Past Due and				Total		Purchased Credit Impaired				Total
	Current		Past Due		Past Due		Accruing		Nonaccrual		Past Due		Accruing		Nonaccrual		Loans		Current		Past Due		Past Due		Accruing		Nonaccrual		Past Due		Accruing		Nonaccrual		Loans
December 31, 2019
December 31, 2020
Real estate loans:
Residential	$	594,814	$	1,682	$	514	$	—	$	4,415	$	6,611	$	—	$	—	$	601,425	$	594,713	$	1,192	$	584	$	—	$	5,041	$	6,817	$	—	$	—	$	601,530
Construction		8,761		—		—		—		—		—		—		—		8,761		11,626		—		—		—		—		—		—		—		11,626
Commercial		478,794		713		—		—		2,802		3,515		240		971		483,520		485,544		8,464		105		—		12,999		21,568		233		698		508,043
Commercial		68,922		99		1,664		—		571		2,334		—		—		71,256		121,882		15		10		—		1,469		1,494		—		—		123,376
Obligations of states and political subdivisions		75,932		—		—		—		—		—		—		—		75,932		72,527		—		—		—		—		—		—		—		72,527
Home equity loans and lines of credit		44,255		98		96		—		571		765		—		—		45,020		40,086		176		—		—		197		373		—		—		40,459
Auto loans		67,278		1,855		—		—		443		2,298		—		—		69,576		31,103		766		4		—		140		910		—		—		32,013
Other		2,526		—		10		—		32		42		—		—		2,568		1,844		—		—		—		18		18		—		—		1,862
Total	$	1,341,282	$	4,447	$	2,284	$	—	$	8,834	$	15,565	$	240	$	971	$	1,358,058	$	1,359,325	$	10,613	$	703	$	—	$	19,864	$	31,180	$	233	$	698	$	1,391,436

			31-60 Days		61-89 Days		90 + Days Past Due and				Total		Purchased Credit Impaired				Total				31-60 Days		61-89 Days		90 + Days Past Due and				Total		Purchased Credit Impaired				Total
	Current		Past Due		Past Due		Accruing		Nonaccrual		Past Due		Accruing		Nonaccrual		Loans		Current		Past Due		Past Due		Accruing		Nonaccrual		Past Due		Accruing		Nonaccrual		Loans
September 30, 2019
September 30, 2020
Real estate loans:
Residential	$	590,457	$	2,187	$	263	$	—	$	4,607	$	7,057	$	—	$	—	$	597,514	$	604,168	$	979	$	402	$	—	$	4,623	$	6,004	$	—	$	—	$	610,172
Construction		5,672		—		—		—		—		—		—		—		5,672		11,853		—		—		—		—		—		—		—		11,853
Commercial		476,644		236		—		—		2,468		2,704		243		1,056		480,647		494,881		1,085		—		—		12,637		13,722		236		789		509,628
Commercial		54,899		20		37		—		603		660		—		—		55,559		137,769		6		—		—		1,828		1,834		—		—		139,603
Obligations of states and political subdivisions		71,828		—		—		—		—		—		—		—		71,828		79,230		—		—		—		—		—		—		—		79,230
Home equity loans and lines of credit		44,319		47		168		—		622		837		—		—		45,156		40,533		48		—		—		219		267		—		—		40,800
Auto loans		80,090		1,227		—		—		666		1,893		—		—		81,983		38,971		593		8		—		223		824		—		—		39,795
Other		2,883		—		—		—		41		41		—		—		2,924		2,282		—		—		—		11		11		—		—		2,293
Total	$	1,326,792	$	3,717	$	468	$	—	$	9,007	$	13,192	$	243	$	1,056	$	1,341,283	$	1,409,687	$	2,711	$	410	$	—	$	19,541	$	22,662	$	236	$	789	$	1,433,374

The 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. The 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 ~~allocated~~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. 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. In addition, for the three months ended December 31, 2020, consideration was given and a credit provision was recorded for loans granted short term payment relief 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 generally are either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. The allowance for loan losses as of December 31, ~~2019~~2020 was maintained at a level that represents management’s best estimate of losses inherent in the loan portfolio, and such losses were both probable and reasonably estimable.

In addition, the FDIC and the Pennsylvania Department of Banking and Securities, as an integral part of their examination process, have periodically reviewed 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.

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the allowance for loan losses (“ALL”). When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.

The following table summarizes changes in the primary segments of the ALL for the three months ended December 31, ~~2019~~2020 and ~~2018~~2019 (in thousands):

															Home																												Home
												Obligations of			Equity																									Obligations of			Equity
												States and			Loans and																									States and			Loans and
	Real Estate Loans								Commercial			Political			Lines of						Other								Real Estate Loans								Commercial			Political			Lines of						Other
	Residential			Construction		Commercial			Loans			Subdivisions			Credit			Auto Loans			Loans			Unallocated		Total			Residential			Construction		Commercial			Loans			Subdivisions			Credit			Auto Loans			Loans			Unallocated		Total
ALL balance at September 30, 2020																													$	4,301		$	127	$	7,209		$	874		$	555		$	337		$	780		$	25		$	1,192	$	15,400
Charge-offs																														—			—		(76	)		(9	)		—			(8	)		(155	)		(1	)		—		(249	)
Recoveries																														—			—		17			—			—			1			72			—			—		90
Provision																														206			8		712			39			(47	)		20			(77	)		(2	)		41		900
ALL balance at December 31, 2020																													$	4,507		$	135	$	7,862		$	904		$	508		$	350		$	620		$	22		$	1,233	$	16,141
ALL balance at September 30, 2019	$	4,243		$	53	$	3,806		$	1,870		$	343		$	329		$	1,384		$	28		$	574	$	12,630		$	4,243		$	53	$	3,806		$	1,870		$	343		$	329		$	1,384		$	28		$	574	$	12,630
Charge-offs		(22	)		—		(40	)		—			—			(29	)		(372	)		(2	)		—		(465	)		(22	)		—		(40	)		—			—			(29	)		(372	)		(2	)				(465	)
Recoveries		1			—		42			1			—			1			161			1			—		207			1			—		42			1			—			1			161			1					207
Provision		(61	)		29		(204	)		370			(3	)		68			59			(3	)		120		375			(61	)		29		(204	)		370			(3	)		68			59			(3	)		120		375
ALL balance at December 31, 2019	$	4,161		$	82	$	3,604		$	2,241		$	340		$	369		$	1,232		$	24		$	694	$	12,747		$	4,161		$	82	$	3,604		$	2,241		$	340		$	369		$	1,232		$	24		$	694	$	12,747
ALL balance at September 30, 2018	$	3,605		$	35	$	3,458		$	1,462		$	323		$	296		$	1,859		$	23		$	627	$	11,688
Charge-offs		(142	)		—		—			(22	)		—			—			(368	)		—			—		(532	)
Recoveries		6			—		—			—			—			1			181			1			—		189
Provision		276			8		38			264			(28	)		1			22			2			293		876
ALL balance at December 31, 2018	$	3,745		$	43	$	3,496		$	1,704		$	295		$	298		$	1,694		$	26		$	920	$	12,221

During the three months ended December 31, 2020, the Company recorded provision expense for the residential real estate loans, construction real estate loans, commercial real estate loans, commercial loans, construction loans and home equity loans and lines of credit segments, due to either increased loan balances, changes in the loan mix within the pool, and/or charge-off activity in those segments. Provision expense was also recorded for possible loan losses due to the economic slowdown caused by COVID-19 restrictions. Credit provisions were recorded for loan loss for the obligations of states and political subdivisions, auto loan and other loan segments.

During the three months ended December 31, 2019, the Company recorded provision expense for the construction real estate

loans, commercial, home equity loans and lines of credit and auto loan segments, due to either increased loan balances, changes in the

loan mix within the pool, and/or charge-off activity in those segments. Credit provisions were recorded for loan loss for the residential real estate, commercial real estate, obligations of states and political subdivisions and other loan segments.

~~During the three months ended~~The Company is closely monitoring all customer credit positions, particularly loans requesting payment relief. Such loans, as of December 31, ~~2018 the Company recorded provision expense for the residential real estate, construction~~2020, amounted to approximately 2.3% of total loans outstanding, including $28.1 million in commercial real estate loans, $108,000 in commercial ~~home equity~~loans, $3.3 million in mortgage loans and ~~lines of credit,~~$160,000 in auto ~~and other loan segments,~~loans. As the economic slowdown continues to evolve due to ~~either increased~~COVID-19 restrictions, our customers may experience decreased cash flows, which may correlate to an inability to make timely loan ~~balances, changes~~payments. This, in turn, may require further increases in our allowance for loan losses and increases in the level of charge-offs in our loan ~~mix within the pool, and/or charge-off activity in those segments. Credit provisions were recorded for loan loss for the obligations of states and political subdivisions segment.~~portfolio.

The following table summarizes the primary segments of the ALL, segregated into two categories, the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of December 31, ~~2019~~2020 and September 30, ~~2019~~2020 (in thousands):

											Home																				Home
��									Obligations of		Equity
																													Obligations of		Equity
									States and		Loans and																		States and		Loans and
	Real Estate Loans						Commercial		Political		Lines of				Other						Real Estate Loans						Commercial		Political		Lines of				Other
	Residential		Construction		Commercial		Loans		Subdivisions		Credit		Auto Loans		Loans		Unallocated		Total		Residential		Construction		Commercial		Loans		Subdivisions		Credit		Auto Loans		Loans		Unallocated		Total
Individually evaluated for impairment	$	31	$	—	$	55	$	—	$	—	$	—	$	116	$	8	$	—	$	210	$	21	$	—	$	61	$	—	$	—	$	—	$	20	$	—	$	—	$	102
Collectively evaluated for impairment		4,130		82		3,549		2,241		340		369		1,116		16		694		12,537		4,486		135		7,801		904		508		350		600		22		1,233		16,039
ALL balance at December 31, 2019	$	4,161	$	82	$	3,604	$	2,241	$	340	$	369	$	1,232	$	24	$	694	$	12,747
ALL balance at December 31, 2020																					$	4,507	$	135	$	7,862	$	904	$	508	$	350	$	620	$	22	$	1,233	$	16,141
Individually evaluated for impairment	$	36	$	—	$	56	$	6	$	—	$	—	$	144	$	6	$	—	$	248	$	26	$	—	$	132	$	20	$	—	$	—	$	43	$	—	$	—	$	221
Collectively evaluated for impairment		4,207		53		3,750		1,864		343		329		1,240		22		574		12,382		4,275		127		7,077		854		555		337		737		25		1,192		15,179
ALL balance at September 30, 2019	$	4,243	$	53	$	3,806	$	1,870	$	343	$	329	$	1,384	$	28	$	574	$	12,630
ALL balance at September 30, 2020																					$	4,301	$	127	$	7,209	$	874	$	555	$	337	$	780	$	25	$	1,192	$	15,400

The allowance for loan losses is based on estimates, and actual losses will vary from current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date. Despite the above allocations, the allowance for loan losses is general in nature and is available to absorb losses from any loan segment.

There were 0 new troubled debt restructurings granted for the three months ended December 31, 2020.

The following is a summary of troubled debt restructuring granted during the three months ended December 31, 2019 ~~and 2018~~ (dollars in thousands):

	For the Three Months Ended December 31, 2018						For the Three Months Ended December 31, 2019
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Real estate loans:
Residential		2	$	95	$	95		1	$	534	$	534
Construction		—		—		—		—		—		—
Commercial		—		—		—		—		—		—
Commercial		—		—		—		—		—		—
Obligations of states and political subdivisions		—		—		—		—		—		—
Home equity loans and lines of credit		2		159		159		—		—		—
Auto loans		1		21		21		—		—		—
Other		—		—		—		—		—		—
Total		5	$	275	$	275		1	$	534	$	534

The ~~one~~1 new troubled debt restructuring granted for the three months ended December 31, 2019, totaled ~~$540,000~~$534,000 and was granted an interest rate concession.

Of the five new troubled debt restructurings granted for the three months ended December 31, 2018, one loan totaling $14,000 was granted terms concessions, one loan totaling $81,000 was granted an interest rate concession, and three loans totaling $180,000 were granted term and rate concessions.

For the three months ended December 31, 2020 and 2019, ~~and 2018, no~~0 loans defaulted on a restructuring agreement within one year of modification.

As of December 31, 2020, approximately 15 of our commercial clients had requested loan payment deferrals or payments of interest only on loans totaling $28.2 million. We have had similar request from approximately 17 mortgage customers and approximately 22 auto loan customers. In accordance with interagency guidance issued in March 2020, these short-term deferrals are not considered troubled debt restructurings (“TDRs”) unless the borrower was previously experiencing financial difficulty.

In addition, the risk-rating on COVID-19 modified loans did not change, and these loans will not be considered past due until after the deferral period is over and scheduled payments resume. The credit quality of these loans will be reevaluated after the deferral period ends.

At December 31, 2020, our non-performing assets were not yet materially impacted by the economic pressures of COVID-19, although there can be no assurance that our non-performing assets will not increase in the future. In addition, we will continue to closely monitor credit risk and our exposure to increased loan losses resulting from the impact of COVID-19 on our commercial and consumer clients..

	December 31, 2019		September 30, 2019		December 31, 2020		September 30, 2020
Non-interest bearing demand accounts	$	175,320	$	175,932	$	256,202	$	242,642
Interest bearing demand accounts		218,783		224,673		314,509		274,722
Money market accounts		350,630		364,635		390,173		401,863
Savings and club accounts		137,481		135,012		168,435		160,975
Certificates of deposit		467,150		442,578		501,015		463,494
Total	$	1,349,364	$	1,342,830	$	1,630,334	$	1,543,696

For a detailed disclosure on the Bank’s pension and employee benefits plans, please refer to Note 12 of the Company’s Consolidated Financial Statements for the year ended September 30, ~~2019~~2020 included in the Company’s Annual Report on Form 10-K.

The following table comprises the components of net periodic benefit cost for the three month ~~period~~periods ended December 31, ~~2019~~2020 and ~~2018~~2019 (in thousands):

	For the Three Months Ended December 31,						For the Three Months Ended December 31,
	2019			2018			2020			2019
Service Cost	$	—		$	—		$	—		$	—
Interest Cost		121			174			113			121
Expected return on plan assets		(269	)		(293	)		(289	)		(269	)
Amortization of unrecognized loss		—			—
Amortization of net loss from earlier periods								55			—
Net periodic benefit cost	$	(148	)	$	(119	)	$	(121	)	$	(148	)

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

The Company previously maintained the ESSA Bancorp, Inc. 2007 Equity Incentive Plan (the “Plan”). The Plan provided for a total of 2,377,326 shares of common stock for issuance upon the grant or exercise of awards. Of the shares that were available under the Plan, 1,698,090 were available to be issued in connection with the exercise of stock options and 679,236 were available to be issued as restricted stock. The Plan allowed for the granting of non-qualified stock options (“NSOs”), incentive stock options (“ISOs”), and restricted stock. Options granted under the plan were granted at no less than the fair value of the Company’s common stock on the date of the grant. As of the effective date of the 2016 Equity Incentive Plan (detailed below), no0 further grants will be made under the Plan and forfeitures of outstanding awards under the Plan will be added to the shares available under the 2016 Equity Incentive Plan.

The Company replaced the 2007 Equity Incentive Plan with the ESSA Bancorp, Inc. 2016 Equity Incentive Plan (the “2016 Plan”) which was approved by shareholders on March 3, 2016. The 2016 Plan provides for a total of 250,000 shares of common stock

for issuance upon the grant or exercise of awards. The 2016 Plan allows for the granting of restricted stock, restricted stock units, ISOs and NSOs.

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

Restricted stock shares outstanding at December 31, ~~2019~~2020 vest over periods ranging from 89 to 45 months. The product of the number of shares granted and the grant date market price of the Company’s common stock determines the fair value of restricted shares under the Company’s restricted stock plan. The Company expenses the fair value of all share based compensation grants over the requisite service period.

For the three months ended December 31, ~~2019~~2020 and ~~2018,~~2019, the Company recorded ~~$240,000~~$232,000 and ~~$252,000~~$240,000 of share-based compensation expense, respectively, comprised of restricted stock expense. Expected future compensation expense relating to the restricted shares outstanding at December 31, ~~2019~~2020 is ~~$865,000~~$867,000 over the remaining vesting period of 3.75 years.

The following is a summary of the status of the Company’s restricted stock as of December 31, ~~2019,~~2020, and changes therein during the three month period then ended:

	Number of Restricted Stock			Weighted- average Grant Date Fair Value		Number of Restricted Stock		Weighted- average Grant Date Fair Value
Nonvested at September 30, 2019		34,963		$	16.13
Nonvested at September 30, 2020							35,245	$	16.15
Granted		33,367			16.19		43,939		12.56
Vested		(819	)		15.52		—		—
Forfeited		—			—		—		—
Nonvested at December 31, 2019		67,511		$	16.17
Nonvested at December 31, 2020							79,184	$	14.16

The following disclosures show the hierarchal disclosure framework associated within the level of pricing observations utilized in measuring assets and liabilities at fair value. The definition of fair value maintains the exchange price notion in earlier definitions of fair value but focuses on the exit price of the asset or liability. The exit price is the price that would be received to sell the asset or paid to transfer the liability adjusted for certain inherent risks and restrictions. Expanded disclosures are also required about the use of fair value to measure assets and liabilities.

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

The following tables provide the fair value for assets and ~~liabilties~~liabilities required to be measured and reported at fair value on a recurring basis on the Consolidated Balance Sheet as of December 31, ~~2019~~2020 and September 30, ~~2019~~2020 by level within the fair value hierarchy (in thousands).

Recurring Fair Value Measurements at Reporting Date	Recurring Fair Value Measurements at Reporting Date									Recurring Fair Value Measurements at Reporting Date
		December 31, 2019									December 31, 2020
Assets		Level I		Level II		Level III		Total			Level I		Level II		Level III		Total
Investment securities available for sale:
Mortgage backed securities		$	—	$	216,148	$	—	$	216,148		$	—	$	79,387	$	—	$	79,387
Obligations of states and political subdivisions			—		22,614		—		22,614			—		21,873		—		21,873
U.S. government agencies			—		14,580		—		14,580			—		2,029		—		2,029
Corporate obligations			—		35,852		7,821		43,673			—		51,647		5,388		57,035
Other debt securities			—		15,753		—		15,753			—		13,752		—		13,752
Total Debt Securities		$	—	$	304,947	$	7,821	$	312,768
Total debt securities											$	—	$	168,688	$	5,388	$	174,076
Equity securities- financial services			26		—		—		26			24		—		—		24
Derivatives and hedging activities:			—		273		—		273
Derivatives and hedging activities												—		1,694		—		1,694
Liabilities
Derivatives and hedging activities:			—		846		—		846
Derivatives and hedging activities												—		5,315		—		5,315

		September 30, 2019									September 30, 2020
		Level I		Level II		Level III		Total
Assets											Level I		Level II		Level III		Total
Investment securities available for sale:
Mortgage backed securities		$	—	$	226,440	$	—	$	226,440		$	—	$	91,431	$	—	$	91,431
Obligations of states and political subdivisions			—		20,212		—		20,212			—		21,931		—		21,931
U.S. government treasury securities												—		24,990		—		24,990
U.S. government agencies			—		6,688		—		6,688			—		8,048		—		8,048
Corporate obligations			—		35,342		7,792		43,134			—		43,214		8,260		51,474
Other debt securities			—		16,919		—		16,919			—		14,610		—		14,610
Total debt securities		$	—	$	305,601	$	7,792	$	313,393		$	—	$	204,224	$	8,260	$	212,484
Equity securities-financial services			25		—		—		25			17		—		—		17
Derivatives and hedging activities			—		303		—		303			—		2,192		—		2,192
Liabilities:
Derivatives and hedging activities:			—		1,011		—		1,011
Derivatives and hedging activities												—		7,002		—		7,002

The following table presents a summary of changes in the fair value of the Company’s Level III investments for the three month periods ended December 31, ~~2019~~2020 and ~~2018~~2019 (in thousands).

	Fair Value Measurement Using Significant Unobservable Inputs (Level III)					Fair Value Measurement Using Significant Unobservable Inputs (Level III)
	Three Months Ended					Three Months Ended
	December 31, 2019		December 31, 2018			December 31, 2020			December 31, 2019
Beginning balance	$	7,792	$	7,738		$	8,260		$	7,792
Purchases, sales, issuances, settlements, net		—		—			(3,000	)		—
Total unrealized gain (loss):
Included in earnings		—		—			—			—
Included in other comprehensive income (loss)		29		(96	)		128			29
Transfers in and/or out of Level III		—		—			—			—
	$	7,821	$	7,642		$	5,388		$	7,821

Each financial asset and liability is identified as having been valued according to a specified level of input, 1, 2 or 3. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset, either directly or indirectly. Level 2 inputs include quoted prices for similar assets in active markets, and

inputs other than quoted prices that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair

value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy, within which the fair value measurement in its entirety falls, has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset.

The measurement of fair value should be consistent with one of the following valuation techniques: market approach, income approach, and/or cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). For example, valuation techniques consistent with the market approach often use market multiples derived from a set of comparable. Multiples might lie in ranges with a different multiple for each comparable. The selection of where within the range the appropriate multiple falls requires judgment, considering factors specific to the measurement (qualitative and quantitative). Valuation techniques consistent with the market approach include matrix pricing. Matrix pricing is a mathematical technique used principally to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on a security’s relationship to other benchmark quoted securities. Most of the securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quoted market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. Securities reported at fair value utilizing Level 1 inputs are limited to actively traded equity securities whose market price is readily available from the New York Stock Exchange or the NASDAQ exchange. A few securities are valued using Level 3 inputs, all of these are classified as available for sale and are reported at fair value using Level 3 inputs.

Assets and Liabilities Required to be Measured and Reported on a Non-Recurring Basis

The following tables provide the fair value for assets required to be measured and reported at fair value on a non recurring basis on the Consolidated Balance Sheet as of December 31, ~~2019~~2020 and September 30, ~~2019~~2020 by level within the fair value hierarchy:

Non-Recurring Fair Value Measurements at Reporting Date (in thousands)	Non-Recurring Fair Value Measurements at Reporting Date (in thousands)									Non-Recurring Fair Value Measurements at Reporting Date (in thousands)
		December 31, 2019									December 31, 2020
		Level I		Level II		Level III		Total			Level I		Level II		Level III		Total
Foreclosed real estate		$	—	$	—	$	343	$	343		$	—	$	—	$	160	$	160
Impaired loans			—		—		7,546		7,546			—		—		7,213		7,213


		September 30, 2019									September 30, 2020
		Level I		Level II		Level III		Total			Level I		Level II		Level III		Total
Foreclosed real estate		$	—	$	—	$	240	$	240		$	—	$	—	$	269	$	269
Impaired loans			—		—		8,128		8,128			—		—		16,983		16,983

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

Quantitative Information about Level 3 Fair Value Measurements

(dollars in thousands)

Fair Value

Estimate

Valuation

Techniques

Unobservable

Input

Range

Fair Value

Estimate

Valuation

Techniques

Unobservable

Input

Range

December 31, 2019

December 31, 2020

Impaired loans

7,546

Appraisal of

collateral (1)

Appraisal

adjustments (2)

0% to 35%

(20.7%)

7,213

Appraisal of

collateral (1)

Appraisal

adjustments (2)

0% to 35%

(20.4%)

Foreclosed real estate owned

343

Appraisal of

collateral (1)

Appraisal

adjustments (2)

20% to 46%

(25.9%)

160

Appraisal of

collateral (1)

Appraisal

adjustments (2)

20% to 35%

(27.9%)

Quantitative Information about Level 3 Fair Value Measurements

(dollars in thousands)

Fair Value

Estimate

Valuation

Techniques

Unobservable

Input

Range

Fair Value

Estimate

Valuation

Techniques

Unobservable

Input

Range

September 30, 2019

September 30, 2020

Impaired loans

8,128

Appraisal of

collateral (1)

Appraisal

adjustments (2)

0% to 35%

(20.3%)

16,983

Appraisal of

collateral (1)

Appraisal

adjustments (2)

0% to 35%

(20.5%)

Foreclosed real estate owned

240

Appraisal of

collateral (1)

Appraisal

adjustments (2)

20% to 35%

(26.6%)

269

Appraisal of

collateral (1)

Appraisal

adjustments (2)

20% to 35%

(25.7%)

Foreclosed real estate is measured at fair value, less cost to sell at the date of foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value, less cost to sell. Income and expenses from operations and changes in valuation allowance are included in the net expenses from foreclosed real estate. Impaired loans are reported at fair value utilizing level three inputs. For these loans, a review of the collateral is conducted and an appropriate allowance for loan losses is allocated to the loan. At December 31, ~~2019, 123~~2020, 14 impaired loans with a carrying value of ~~$7.8~~$7.3 million were reduced by specific valuation allowance totaling ~~$210,000~~$102,000 resulting in a net fair value of ~~$7.5~~$7.2 million based on Level 3 inputs. At September 30, ~~2019, 138~~2020, 111 impaired loans with a carrying value of ~~$8.4~~$17.2 million were reduced by a specific valuation totaling ~~$248,000~~$221,000 resulting in a net fair value of ~~$8.1~~$17.0 million based on Level 3 inputs.

The following tables provide the carrying value and fair value for certain financial instruments that are not required to be measured or reported at fair value on the consolidated Balance Sheet at December 31, ~~2019~~2020 and September 30, ~~2019~~2020 by level within the fair value hierarchy:

	December 31, 2019										December 31, 2020
(in thousands)	Carrying Value		Level I		Level II		Level III		Total Fair Value		Carrying Value		Level I		Level II		Level III		Total Fair Value
Financial assets:
Cash and cash equivalents	$	42,552	$	42,552	$	—	$	—	$	42,552
Loans receivable, net		1,345,311		—		—		1,332,511		1,332,511		1,375,295		—		—		1,387,543		1,387,543
Accrued interest receivable		6,308		6,308		—		—		6,308
Regulatory stock		11,126		11,126		—		—		11,126
Mortgage servicing rights		167		—		—		241		241		511		—		—		511		511
Bank owned life insurance		39,842		39,842		—		—		39,842
Financial liabilities:
Deposits	$	1,349,364	$	882,214	$	—	$	467,567	$	1,349,781	$	1,630,334	$	1,129,319	$	—	$	505,649	$	1,634,968
Short-term borrowings		104,719		104,719		—		—		104,719
Other borrowings		137,960		—		—		138,776		138,776		14,164		—		—		15,392		15,392
Advances by borrowers for taxes and insurance		10,361		10,361		—		—		10,361
Accrued interest payable		1,379		1,379		—		—		1,379

September 30, 2019

(in thousands)

Carrying Value

Level I

Level II

Level III

Total Fair
Value

Financial assets:

Cash and cash equivalents

$
52,242

$
52,242

$
—

$
—

$
52,242

Certificates of deposit

—

—

—

—

—

Loans receivable, net

1,328,653

—

—

1,313,231

1,313,231

Accrued interest receivable

6,225

6,225

—

—

6,225

Regulatory stock

11,579

11,579

—

—

11,579

Mortgage servicing rights

177

—

—

241

241

Bank owned life insurance

39,601

39,601

—

—

39,601

Financial liabilities:

Deposits

$
1,342,830

$
900,252

$
—

$
443,063

$
1,343,315

Short-term borrowings

107,701

107,701

—

—

107,701

Other borrowings

140,581

—

—

141,427

141,427

Advances by borrowers for taxes and insurance

6,700

6,700

—

—

6,700

Accrued interest payable

1,384

1,384

—

—

1,384

	September 30, 2020
(in thousands)	Carrying Value		Level I		Level II		Level III		Total Fair Value
Financial assets:
Loans receivable, net		1,418,182		—		—		1,426,962		1,426,962
Mortgage servicing rights		393		—		—		393		393
Financial liabilities:
Deposits	$	1,543,696	$	1,080,201	$	—	$	467,630	$	1,547,831
Other borrowings		14,164		—		—		17,721		17,721

For Cash and Cash Equivalents, Accrued Interest Receivable, Regulatory Stock, Bank Owned Life Insurance, Short-Term Borrowings, Advances by Borrowers for Taxes and Insurance, and Accrued Interest Payable the carrying value is a reasonable estimate of the fair value and are considered Level 1 measurements.

The activity in accumulated other comprehensive ~~loss~~income (loss) for the three month periods ended December 31, ~~2019~~2020 and ~~2018~~2019 is as follows (in thousands):

	Accumulated Other Comprehensive Loss												Accumulated Other Comprehensive Income/(Loss)
	Defined Benefit Pension Plan			Unrealized Gains (Losses) on Securities Available for Sale			Derivatives			Total			Defined Benefit Pension Plan			Unrealized Gains (Losses) on Securities Available for Sale			Derivatives			Total
Balance at September 30, 2020													$	(3,432	)	$	3,167		$	(3,791	)	$	(4,056	)
Other comprehensive income (loss) before reclassifications														—			(174	)		406			232
Amounts reclassified from accumulated other comprehensive income (loss)														—			—			527			527
Period change														—			(174	)		933			759
Balance at December 31, 2020													$	(3,432	)	$	2,993		$	(2,858	)	$	(3,297	)
Balance at September 30, 2019	$	(1,527	)	$	807		$	(560	)	$	(1,280	)	$	(1,527	)	$	807		$	(560	)	$	(1,280	)
Other comprehensive income (loss) before reclassifications		—			(16	)		173			157			—			(16	)		173			157
Amounts reclassified from accumulated other comprehensive loss		—			(175	)		(54	)		(229	)
Amounts reclassified from accumulated other comprehensive income (loss)														—			(175	)		(54	)		(229	)
Period change		—			(191	)		119			(72	)		—			(191	)		119			(72	)
Balance at December 31, 2019	$	(1,527	)	$	616		$	(441	)	$	(1,352	)	$	(1,527	)	$	616		$	(441	)	$	(1,352	)
Balance at September 30, 2018	$	(477	)	$	(11,369	)	$	1,936		$	(9,910	)
Other comprehensive income (loss) before reclassifications		—			3,991			(573	)		3,418
Amounts reclassified from accumulated other comprehensive loss		—			(3	)		(171	)		(174	)
Change in account prinicpal for adoption of ASU 2016-01		—			4			—			4
Period change		—			3,992			(744	)		3,248
Balance at December 31, 2018	$	(477	)	$	(7,377	)	$	1,192		$	(6,662	)

The following table presents significant amounts reclassified out of each component of accumulated other comprehensive ~~loss~~income (loss) for the three month ~~period~~periods ended December 31, ~~2019~~2020 and ~~2018~~2019 (in thousands):

	Amount Reclassified from Accumulated Other Comprehensive Loss							Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
Details About Accumulated Other Comprehensive Loss Components	Accumulated Other Comprehensive Loss for the Three Months Ended December 31,						Affected Line Item in the Consolidated Statement of Income
Details About Accumulated Other Comprehensive Income (Loss) Components								Accumulated Other Comprehensive Income (Loss) for the Three Months Ended December 31,						Affected Line Item in the Consolidated Statement of Income
	2019			2018				2020			2019
Securities available for sale
Net securities gains reclassified into earnings	$	221		$	4		Gain on sale of investment available for sale	$	—		$	221		Gain on sale of investment securities available for sale, net
Related income tax expense		(46	)		(1	)	Income taxes		—			(46	)	Income taxes
Net effect on accumulated other comprehensive loss for the period		175			3
Net effect on accumulated other comprehensive income (loss) for the period									—			175
Derivatives and hedging activities:
Interest expense, effective portion		68			217		Interest expense		(667	)		68		Deposits and short-term borrowings interest expense
Related income tax expense		(14	)		(46	)	Income taxes		140			(14	)	Income taxes
Net effect on accumulated other comprehensive loss for the period		54			171
Net effect on accumulated other comprehensive income (loss) for the period									(527	)		54
Total reclassification for the period	$	229		$	174			$	(527	)	$	229

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and through the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment

of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain variable rate borrowings.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheet as of December 31, ~~2019~~2020 and September 30, ~~2019~~2020 (in thousands).

			Fair Values of Derivative Instruments										Fair Values of Derivative Instruments
			Asset Derivatives										Asset Derivatives
			As of December 31, 2019					As of September 30, 2019					As of December 31, 2020					As of September 30, 2020
Hedged Item	Notional Amount		Balance Sheet Location	Fair Value		Notional Amount		Balance Sheet Location	Fair Value		Notional Amount		Balance Sheet Location	Fair Value		Notional Amount		Balance Sheet Location	Fair Value

FHLB Advances	$	50,000	Other Assets	$	219	$	50,000	Other Assets	$	303
Commercial Loans		8,701	Other Assets		56		-	Other Assets		-	$	62,765	Other Assets	$	1,694	$	55,784	Other Assets	$	2,192
Total	$	58,701		$	275	$	50,000		$	303	$	62,765		$	1,694	$	55,784		$	2,192

			Fair Values of Derivative Instruments										Fair Values of Derivative Instruments
			Liability Derivatives										Liability Derivatives
			As of December 31, 2019					As of September 30, 2019					As of December 31, 2020					As of September 30, 2020
Hedged Item	Notional Amount		Balance Sheet Location	Fair Value		Notional Amount		Balance Sheet Location	Fair Value		Notional Amount		Balance Sheet Location	Fair Value		Notional Amount		Balance Sheet Location	Fair Value

FHLB Advances	$	35,000	Other Liabilties	$	401	$	35,000	Other Liabilties	$	513	$	-	Other Liabilities	$	-	$	25,000	Other Liabilities	$	700
Brokered Deposits		50,000	Other Liabilties		377		50,000	Other Liabilties		498		420,000	Other Liabilities		3,616		410,000	Other Liabilities		4,098
Commercial Loans		14,932	Other Liabilties		70		-	Other Liabilties		-		77,716	Other Liabilities		1,699		70,784	Other Liabilities		2,204
Total	$	99,932		$	848	$	85,000		$	1,011	$	497,716		$	5,315	$	505,784		$	7,002

The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed payments. As of December 31, ~~2019,~~2020, the Company had ~~twelve~~18 interest rate swaps with a notional principal amount of ~~$158.6~~$420 million associated with the Company’s cash outflows associated with various ~~FHLB advances,~~ brokered certificates and $78 million associated with associated with various commercial loans.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings), net of tax, and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. The Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions. The Company did not recognize any hedge ineffectiveness in earnings during the periods ended December 31, ~~2019~~2020 and ~~2018.~~2019.

Amounts reported in accumulated other comprehensive ~~loss~~income ( loss) related to derivatives that will be reclassified to interest income/expense as interest payments are made/received on the Company’s variable-rate assets/liabilities. During the three months ended December 31, ~~2019~~2020 and ~~2018,~~2019, the Company had ~~$68,000~~$667,000 of losses which resulted in an increase to interest expense and ~~$217,000 respectively,~~$68,000 of gains reclassified which resulted in a decrease to interest expense. During the next twelve months, the Company estimates that ~~$254,000~~$2.0 million will be reclassified as a ~~decrease in~~increase to interest expense.

The table below presents the effect of the Company’s cash flow hedge accounting on Accumulated Other Comprehensive Income (Loss) for the three month periods ended December 31, ~~2019~~2020 and ~~2018~~2019 (in thousands).

The Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income
The Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss)											The Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss)
Derivatives in Hedging Relationships	Gain (Loss) Recognized in OCI on Derivative (Effective Portion) Three Months Ended December 31,						Gain Recognized in OCI on Derivative (Effective Portion) Three Months Ended December 31,					Loss Recognized in OCI on Derivative (Effective Portion) Three Months Ended December 31,				Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	(Loss) Gain Recognized in OCI on Derivative (Effective Portion) Three Months Ended December 31,
Derivatives in Cash Flow Hedging Relationships	2019		2018			Location of Gain Reclassified from Accumulated OCI into Income	2019		2018			2020		2019			2020			2019
Interest Rate Products	$	151	$	(941	)	Interest expense	$	68	$	217		$	1,181	$	151	Interest expense	$	(667	)	$	68
Total	$	151	$	(941	)		$	68	$	217		$	1,181	$	151		$	(667	)	$	68

The Company has agreements with its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

The Company also has agreements with certain of its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well / adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

As of December 31, ~~2019,~~2020, the Company had derivatives in a net liability position and was required to post ~~$500,000~~$5.3 million in collateral against its obligations under these agreements. As of September 30, 2019, the Company was required to post ~~$710,000~~$7.5 million in collateral against its obligations under these agreements. If the Company had breached any of these provisions at December 31, ~~2019~~2020 and September 30, ~~2019,~~2020, it could have been required to settle its obligations under the agreements at the termination value.

The Company and its subsidiaries are subject to various legal actions arising in the normal course of business. In the opinion of Management, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s results of operations.

The Bank was named as a defendant in an action commenced on December 8, 2016 by ~~one~~1 plaintiff who will also seek to pursue this action as a class action on behalf of the entire class of people similarly situated. The plaintiff alleges that a bank previously acquired by ESSA Bancorp received unearned fees and kickbacks in the process of making loans, in violation of the Real Estate Settlement Procedures Act. In an order dated January 29, 2018, the district court granted the Bank’s motion to dismiss the case. The plaintiff appealed the court’s ruling. In an opinion and order dated April 26, 2019, the appellate court reversed the district court’s order dismissing the plaintiff’s case against the Bank, and remanded the case back to the district court in order to continue the litigation. The litigation is now proceeding before the district court. On December 9, 2019, the court permitted an amendment to the complaint to add 2 new plaintiffs to the case asserting similar claims. On May 21, 2020, the court granted the plaintiffs’ motion for class certification. The case is currently stayed while the parties explore the possibility of a negotiated resolution to the case. In an order dated November 24, 2020, the Court referred the case to Magistrate Judge Timothy J. Sullivan to assist in mediation efforts. If these discussions are not successful, the Bank will continue to ~~vigorously~~ defend against such allegations. To the extent that ~~pending or threatened~~this matter could result in exposure to the Bank, the amount of such exposures cannot currently be estimated.

On May 29, 2020, the Bank was named as a defendant in a second action commenced by 3 plaintiffs who will also seek to pursue this action as a class action on behalf of the entire class of people similarly situated. The plaintiffs allege that a bank previously acquired by ESSA Bancorp received unearned fees and kickbacks from a different title company than the one involved in the previously discussed litigation in the process of making loans. The original complaint alleged violations of the Real Estate Settlement Procedures Act, the Sherman Act, and the Racketeer Influenced and Corrupt Organizations Act (“RICO”). The plaintiffs filed an Amended complaint on September 30, 2020 that dropped the RICO claim, but they are continuing to pursue the Real Estate Settlement Procedures Act and Sherman Act claims. The Bank moved to dismiss the Sherman Act claim on October 14, 2020, and that motion is now fully briefed and awaiting a decision from the court. The Bank intends to defend against such allegations. To the extent that this matter could result in exposure to the Bank, the amount of such exposure ~~is not~~cannot currently ~~estimable.~~be estimated.

~~Effective October 1, 2018, the Company adopted ASU 2014-09~~ ~~Revenue from Contracts with Customers- Topic 606~~ and all subsequent ASC’s that modified ASC 606. The Company has elected to apply the standard utilizing the modified retrospective approach with a cumulative effect of adoption for the impact from uncompleted contracts as of the date of adoption.

Management determined that ~~since~~ the ~~guidance does not apply to~~primary sources of revenue ~~associated with financial instruments, including loans and securities that are accounted for under other GAAP, the new guidance did not have a material impact on revenue most closely~~ associated with financial instruments, including interest income on loans and ~~expense~~investments, along with ~~non interest~~certain noninterest revenue ~~resulting from non interest~~sources including investment security gains, loan servicing ~~commitment fees~~charges, gains on the sale of loans, and ~~fees from financial guarantees.~~earnings on bank owned life insurance are not within the scope of Topic 606. As a result, no changes were made during the period related to these sources of revenue, which cumulatively comprise 90.3% of the total revenue of the ~~Company.~~Corporation.

~~The main types of non interest~~Noninterest income within the scope of ~~the standard are:~~Topic 606 are as follows:

Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customer’s accounts. The Company does not earn performance-based incentives. Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e. as incurred). Payment is received shortly after services are rendered.

Service charges on deposit accounts consist of account analysis fees (i.e. net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Company’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

Fees, interchange, and other service charges are primarily comprised of debit card income, ATM fees, cash management income, and other services charges. Debit card income is primarily comprised of interchange fees earned whenever the Company’s debit cards are processed through card payment networks such as Mastercard. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a company ATM. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized when the services are rendered or upon completion., Payment is typically received immediately or in the following month.

Insurance income primarily consists of commissions received on product sales. The Company acts as an intermediary between the Company’s customer and the insurance carrier. The Company’s performance obligation is generally satisfied upon the issuance of the policy. Shortly after the policy is issued, the carrier remits the commission payment to the Company, and the Company recognizes the revenue.

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On October 1, 2019, the Company adopted ASU No. 2016-02 “Leases” (Topic 842) and all subsequent ASUs that modified Topic 842. For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee.

Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches, ATM locations, and office space with terms extending through 2044. ~~Substantially all~~All of our leases are classified as operating leases, and therefore, were previously not recognized on the Company’s Consolidated Balance sheet. With the adoption of Topic 842, operating lease agreements are required to be recognized on the Consolidated Balance sheet as a right-of-use (“ROU”) asset and a corresponding lease liability.

The following table presents the Consolidated Balance ~~sheet~~Sheet classification of the Company’s ROU assets and lease liabilities. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the Consolidated Balance sheet.

(in thousands)		12/31/2019			December 31, 2020
Lease Right-of-Use Assets	Classification			Classification
Operating lease right-of-use assets	Other assets	$	7,061	Other assets	$	6,885
Total Lease Right-Of-Use Assets		$	7,061		$	6,885

(in thousands)		12/31/2019			December 31, 2020
Lease Liabilities	Classification			Classification
Operating lease Liabilities	Other liabilities	$	7,083	Other liabilities	$	6,984
Total Lease Liabilities		$	7,083		$	6,984

(in thousands)					September 30, 2020
Lease Right-of-Use Assets				Classification
Operating lease right-of-use assets				Other assets	$	7,082
Total Lease Right-Of-Use Assets					$	7,082

(in thousands)					September 30, 2020
Lease Liabilities				Classification
Operating lease Liabilities				Other liabilities	$	7,161
Total Lease Liabilities					$	7,161

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For operating leases existing prior to October 1, 2019, the rate for the remaining lease term as of October 1, 2019 was used.

The following table represents lease costs and other lease information. As the Company elected, for all classes of underlying assets, not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities.

Lease Costs (in thousands)	Three Months Ended 12/31/2019		Three Months Ended December 31, 2020
Operating lease cost	$	254	$	263
Variable lease cost		59		64
Net lease cost	$	313	$	327


Lease Costs (in thousands)			Three Months Ended December 31,2019
Operating lease cost			$	254
Variable lease cost				59
Net lease cost			$	313

Future minimum payments for finance leases and operating leases with initial or remaining terms of one year or more as of December 31, ~~2019~~2020 were as follows:

(in thousands)	Operating leases			Operating leases
Twelves months Ended:
December 31, 2020	$	927
Twelve months Ended:
December 31, 2021		840		$	963
December 31, 2022		708			1,247
December 31, 2023		707			711
December 31, 2024		554			536
Therafter		4,766
December 31, 2025					509
Thereafter					4,998
Total future minimum lease payments		8,502			8,964
Amounts representing interest		(1,419	)		(1,980	)
Present Value of Net Future Minimum Lease Payments	$	7,083		$	6,984

This Quarterly Report on Form 10-Q contains forward-looking statements, which can be identified by the use of such words as estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. These forward-looking statements include:

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

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

Comparison of Financial Condition at December 31, ~~2019~~2020 and September 30, ~~2019~~2020

Total Assets. Total assets ~~increased~~decreased by ~~$11.2~~$61.3 million, or ~~0.62%~~1.3%, to ~~$1.81~~$1.87 billion at December 31, ~~2019~~2020 from ~~$1.80~~$1.89 billion at September 30, ~~2019~~2020 due primarily to ~~increases~~a decline in investment securities available for sale and loans receivable partially offset by ~~declines in cash and due from banks.~~

~~Total Cash and Cash Equivalents~~. ~~Total cash and cash equivalents decreased $9.7 million, or 18.6%, to $42.6 million at December 31, 2019 from $52.2 million at September 30, 2019. Decreases~~increases in cash and due from banks ~~of $12.8 million, which were partially offset by an increase in~~and interest bearing deposits with other ~~institutions~~institutions. At the onset of ~~$3.2~~the pandemic, the Company moved quickly to build its liquidity as an offset to the economic uncertainty caused by the resulting economic slowdown. The Company built a laddered maturity of primarily FHLB borrowings at attractive interest rates to support that liquidity. The Company will continue to maintain a strong liquidity position against the changing economic forecasts through daily monitoring.

Total Cash and Cash Equivalents. Total cash and cash equivalents increased $61.3 million, ~~were the reasons~~or 39.3%, to $217.2 million at December 31, 2020 from $155.9 million at September 30, 2020 as a result of pandemic-oriented balance sheet adjustments made to mitigate related risks. Decreases in investment and loan balances outstanding, offset in part by a decrease in liabilities accounted for the ~~net decrease.~~majority of the first quarter increase. The Company built the majority of its cash position in the fiscal second quarter of 2020 and has maintained that position through the first quarter of fiscal 2021 to remain prepared for ongoing economic uncertainties.

Net Loans. Net loans ~~increased $16.7~~decreased $42.7 million, or ~~1.3%~~3.0%, to ~~$1.35~~$1.38 billion at December 31, ~~2019~~2020 from ~~$1.33~~$1.42 billion at September 30, ~~2019.~~2020. During this period, residential loans ~~increased $3.9~~decreased $8.6 million to ~~$601.4~~$601.5 million, construction loans ~~increased $3.1 million~~decreased $227,000 to ~~$8.8~~$11.6 million, commercial real estate loans ~~increased $2.9~~decreased $1.6 million to ~~$483.5~~$508.0 million, commercial loans ~~increased $15.7~~decreased $16.2 million to ~~$71.3~~$123.4 million partially due to the repayment of $9.7 million in PPP loans carried in the commercial loan portfolio, obligations of states and political subdivisions ~~increased $4.1~~decreased $6.7 million to ~~$75.9~~$72.5 million, home equity loans and lines of credit decreased ~~$136,000~~$341,000 to ~~$45.0~~$40.5 million, auto loans decreased ~~$12.4~~$7.8 million to ~~$69.6~~$32.0 million reflecting expected runoff of the portfolio following the Company’s previously announced discontinuation of indirect auto lending in July 2018, and other loans decreased ~~$356,000~~$431,000 to ~~$2.6~~$1.9 million.The Company sold $18.7 million in residential mortgage loans to the Federal Home Loan Bank of Pittsburgh during the fiscal first quarter, recording gains on the sale of these loans in noninterest income.

Investment Securities Available for Sale. Investment securities available for sale decreased ~~$625,000,~~$38.4 million, or ~~0.2%~~18.1%, to ~~$312.8~~$174.1 million at December 31, ~~2019~~2020 from ~~$313.4~~$212.5 million at September 30, ~~2019.~~2020 due primarily to the maturity of a $25.0 million United States treasury security. The Company has continued to maintain a liquid position in cash and cash equivalents and has limited its investment purchases.

Deposits. Deposits increased ~~$6.5~~$86.6 million, or ~~0.49%~~5.6%, to ~~$1.35~~$1.63 billion at December 31, ~~2019~~2020 from ~~$1.34~~$1.54 billion at September 30, ~~2019~~2020 due primarily to an increase in ~~certificate of deposits offset by a decline in~~ interest bearing demand accounts, certificate of deposits, non-interest bearing demand accounts and savings and club accounts offset by a decrease in money markets accounts. ~~An increase~~Increases in ~~certificates~~non-interest bearing demand accounts of ~~deposit of $24.6~~$13.6 million, ~~which was offset in part by decreases in~~ interest bearing demand accounts of ~~$5.9~~$39.8 million, certificates of deposit of $37.5 million and savings and club accounts of $7.5 million were offset in part by a decrease in money market accounts of ~~$14.0~~$11.7 million. The overall increase in certificates of deposit, reflected ~~a decrease in retail certificates of $40.8 million partially offset by~~ an increase in brokered certificates of ~~deposit of $32.4~~$111.6 million as the Company shifted its wholesale funding from borrowed funds to ~~$190.9 million.~~cheaper costing brokered deposits.

Borrowed Funds. Borrowed funds decreased by ~~$5.6~~$111.4 million, or ~~2.3%~~88.3%, to ~~$242.7~~$14.7 million at December 31, ~~2019,~~2020, from ~~$248.3~~$125.9 million at September 30, ~~2019.~~2020. The decrease in borrowed funds was due to a decrease in short term borrowings of ~~$3.0 million and a decrease in other borrowings of $2.6~~$111.1 million. All borrowings at December 31, ~~2019~~2020 represent advances from the Federal Home Loan Bank of Pittsburgh (the “FHLB”). and were a result of pandemic-oriented balance sheet adjustments made to mitigate related risks.

~~Stockholders’~~Stockholders’ Equity. Stockholders’ equity increased by ~~$1.9~~$2.8 million, or ~~1.0%~~1.4%, to ~~$191.4~~$194.2 million at December 31, ~~2019~~2020 from ~~$189.5~~$191.4 million at September 30, ~~2019.~~2020. The increase in stockholders’ equity was primarily due to net income of ~~$3.4~~$4.1 million, which was partially offset by an increase in treasury stock due to the repurchase by the Company of ~~64,100~~99,700 shares of its common stock at an aggregate cost of ~~$1.0~~$1.41 million under a previously disclosed stock repurchase plan and regular cash dividends of $0.11 per share, which reduced ~~stockholders~~stockholders’ equity by ~~$1.2~~$1.1 million.

Average Balance Sheets for the Three Months Ended December 31, ~~2019~~2020 and ~~2018~~2019

The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances, the yields set forth below include the effect of deferred fees and discounts and premiums that are amortized or accreted to interest income.

	For the Three Months Ended December 31,																		For the Three Months Ended December 31,
	2019									2018									2020									2019
	Average Balance			Interest Income/ Expense			Yield/Cost			Average Balance			Interest Income/ Expense			Yield/Cost			Average Balance			Interest Income/ Expense			Yield/Cost			Average Balance			Interest Income/ Expense			Yield/Cost
	(dollars in thousands)																		(dollars in thousands)
Interest-earning assets:
Loans⁽¹⁾	$	1,342,449		$	14,190			4.21	%	$	1,320,053		$	13,907			4.18	%	$	1,419,348		$	13,760			3.85	%	$	1,342,449		$	14,190			4.21	%
Investment Securities
Taxable⁽²⁾		66,300			626			3.76	%		68,190			676			3.93	%		94,568			632			2.65	%		66,300			626			3.76	%
Exempt from federal income tax⁽²⁾⁽³⁾		9,674			48			2.50	%		25,377			136			2.69	%		8,474			40			2.37	%		9,674			48			2.50	%
Total investment securities		75,974			674			3.60	%		93,567			812			3.60	%		103,042			672			2.63	%		75,974			674			3.60	%
Mortgage-backed securities		235,132			1,331			2.25	%		278,425			1,806			2.57	%		100,070			365			1.45	%		235,132			1,331			2.25	%
Federal Home Loan Bank stock		11,104			208			7.45	%		13,464			222			6.54	%		5,428			77			5.63	%		11,104			208			7.45	%
Other		29,075			110			1.61	%		24,386			122			1.98	%		178,228			38			0.08	%		29,075			110			1.51	%
Total interest-earning assets		1,693,734			16,513			3.88	%		1,729,895			16,869			3.88	%		1,806,116			14,912			3.28	%		1,693,734			16,513			3.88	%
Allowance for loan losses		(12,666	)								(11,864	)								(15,678	)								(12,666	)
Noninterest-earning assets		107,133									114,591									118,985									107,133
Total assets	$	1,788,201								$	1,832,622								$	1,909,423								$	1,788,201
Interest-bearing liabilities:
NOW accounts	$	224,362		$	229			0.41	%	$	209,035		$	188			0.36	%	$	261,026		$	97			0.15	%	$	224,362		$	229			0.41	%
Money market accounts		347,855			974			1.11	%		315,439			821			1.03	%		412,381			201			0.19	%		347,855			974			1.11	%
Savings and club accounts		136,171			18			0.05	%		131,181			18			0.05	%		163,805			22			0.05	%		136,171			18			0.05	%
Certificates of deposit		442,516			2,112			1.90	%		512,533			2,361			1.83	%		536,021			1,452			1.07	%		442,516			2,112			1.90	%
Borrowed funds		247,906			1,354			2.17	%		307,102			1,596			2.06	%		64,471			228			1.40	%		247,906			1,354			2.17	%
Total interest-bearing liabilities		1,398,810			4,687			1.33	%		1,475,290			4,984			1.34	%		1,437,704			2,000			0.55	%		1,398,810			4,687			1.33	%
Non-interest-bearing NOW accounts		178,332									157,993									247,345									178,332
Non-interest-bearing liabilities		19,802									18,171									30,269									19,802
Total liabilities		1,596,944									1,651,454									1,715,318									1,596,944
Equity		191,257									181,168									194,105									191,257
Total liabilities and equity	$	1,788,201								$	1,832,622								$	1,909,423								$	1,788,201
Net interest income				$	11,826								$	11,885								$	12,912								$	11,826
Interest rate spread								2.55	%								2.54	%								2.73	%								2.55	%
Net interest-earning assets	$	294,924								$	254,605								$	368,412								$	294,924
Net interest margin⁽⁴⁾								2.78	%								2.73	%								2.84	%								2.78	%
Average interest-earning assets to average interest-bearing liabilities					121.08	%								117.26	%								125.63	%								121.08	%

Comparison of Operating Results for the Three Months Ended December 31, ~~2019~~2020 and December 31, ~~2018~~2019

Net Income. Net income increased ~~$401,000,~~$725,000, or ~~13.3%~~21.3%, to ~~$3.4~~$4.1 million for the three months ended December 31, ~~2019~~2020 compared to net income of ~~$3.0~~$3.4 million for the comparable period in ~~2018.~~2019. The increase was primarily due to ~~a decrease~~increases in ~~the provision for loan losses~~net interest income and ~~an increase in~~ non-interest income partially offset by increases in ~~non-interest~~noninterest expense, the provision for loan losses and the income tax provision.

Net Interest Income. Net interest income ~~decreased $59,000,~~increased $1.8 million, or ~~0.5%~~9.2%, to ~~$11.8~~$12.9 million for the three months ended December 31, ~~2019 from $11.9~~2020 compared to $11.8 million for the comparable period in ~~2018.~~2019.

Interest Income. ~~Interest~~ Total interest income ~~decreased $356,000, or 2.1%, to~~was $14.9 million for the three months ended December 31, 2020 compared with $16.5 million for the three months ended December 31, 2019 ~~from $16.9 million for the comparable 2018 period. The decrease resulted primarily from~~reflecting a decline in interest rates and a decrease in the total yield on average balance of interest earnings assets of $36.2 million from the comparable 2018 period. The average balance of loans increased $22.4 million between the two periods. In addition, between the two periods, the average balance of investment securities decreased $17.6 million, mortgage-backed securities decreased $43.3 million, FHLB stock decreased $2.4 million and other interest earning assets ~~increased $4.7 million.~~from 3.88% for the quarter ended December 31, 2019 to 3.28% for the quarter ended December 31, 2020. The decline in rates was partially offset by growth of $112.4 million in average interest earning assets. The majority of the growth, however, was in the lower yielding cash category of interest earning assets.

Interest Expense. Interest expense ~~decreased $297,000, or 6.0%,~~declined to $2.0 million for the quarter ended December 31, 2020 compared to $4.7 million for the ~~three months ended December 31, 2019 from $5.0 million for the comparable 2018 period.~~same period in 2019. The ~~decrease resulted from a decrease in the~~ cost of interest bearing liabilities ~~of one basis point~~declined from ~~1.34% to~~ 1.33% ~~and a decrease in the average balance of interest bearing liabilities of $76.5 million between the two periods. The interest expense decrease of $297,000~~ for the ~~three months ended December 31,~~ 2019 ~~was due primarily~~period to ~~an decrease in certificates~~0.55% for the 2020 period, reflecting lower interest rates, timely repricing of ~~deposit expense~~deposits, roll-off of ~~$249,000~~higher-cost borrowings and strong balance sheet management. Balance sheet management includes the effect of the deleverage transaction completed by the Company during the fourth quarter of 2020 that decreased the Company’s borrowed funds ~~of $242,000.~~by approximately $123.0 million. Average interest-bearing liabilities grew $38.9 million year-over-year.

Provision for Loan Losses. In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect a borrower’s ability to repay, the estimated value of any underlying collateral, peer group information and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are subject to interpretation and revision as more information becomes available or as future events occur. After an evaluation of these factors, management made a provision for loan losses of $900,000 for the three month period ended December 31, 2020 compared to $375,000 for the three month period ended December 31, ~~2019 compared to $876,000 for the three month period ended December 31, 2018.~~2019. The allowance for loan losses was ~~$12.7~~$16.1 million, or ~~0.94%~~1.16% of loans outstanding at December 31, ~~2019,~~2020, compared to ~~$12.6~~$15.4 million, or ~~0.94%~~1.07% of loans outstanding, at September 30, ~~2019.~~2020. As the economic slowdown continues to evolve due to COVID-19 restrictions, our customers may experience decreased cash flows, which may correlate to an inability to make timely loan payments. This, in turn may require further increases in our allowance for loan losses and increases in the level of charge-offs in our loan portfolio.

Non-interest Income. ~~Non-interest~~ Noninterest income increased ~~$300,000, or 14.1%,~~29% to $3.1 million for the three months ended December 31, 2020, compared with $2.4 million for the three months ended December 31, ~~2019 from $2.1 million at December 31, 2018. Increases~~2019. Noninterest income in ~~service changes~~the fiscal first quarter of 2021 included approximately $818,000 in gains on sales of residential mortgages, primarily lower-interest 30-year fixed rate loans. The Company’s strategy continues to focus on commercial banking and decreasing the amount of long-term, low interest, retained residential mortgages. Loan swap fees were $211,000 in fiscal first quarter 2021 compared to no similar fees in fiscal first quarter 2020. In addition, the Company recorded $120,000 in earnings on ~~loans~~bank-owned life insurance during this fiscal first quarter due to the notice of ~~$203,000, trust and investment fees~~death of ~~$79,000 and gain on sale of investment securities available for sale, net, were partially offset by declines~~a former executive included in ~~other income of $170,000 and service fees on deposit accounts of $36,000.~~the Company’s bank-owned life insurance policies.

Non-interest Expense. ~~Non-interest~~ Noninterest expense increased ~~$111,000, or 1.1%,~~$415,000 of 4.3% to ~~$9.8~~$10.2 million for the three months ended December 31, ~~2019 from $9.7~~2020 compared with $9.8 million for the comparable period ~~in 2018. Increases~~a year earlier primarily reflecting increases in compensation and employee benefits ~~occupancy~~expenses and ~~equipment and data processing and a decrease in gain on foreclosed real estate were partially offset by decreases in professional fees, advertising, FDIC premiums and other expenses~~Federal Deposit Insurance Corporation premiums.

Income Taxes. Income tax expense increased ~~$230,000~~$130,000 to ~~$704,000~~$834,000 for the three months ended December 31, ~~2019~~2020 from ~~$474,000~~$704,000 for the comparable ~~2018~~2019 period. The effective tax rate for the three months ended December 31, ~~2019~~2020 was ~~17.1%~~16.8% compared to ~~13.6%~~17.1% for the ~~2018~~2019 period.

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

	December 31, 2019			September 30, 2019			December 31, 2020			September 30, 2020
Non-performing assets:
Non-accruing loans	$	8,833		$	9,007		$	19,864		$	19,541
Non-accruing purchased credit impaired loans		971			1,056			698			789
Total non-performing loans		9,804			10,063			20,562			20,330
Foreclosed real estate		343			240			365			269
Other repossessed assets		9			9
Total non-performing assets	$	10,156		$	10,312		$	20,927		$	20,599
Ratio of non-performing loans to total loans		0.72	%		0.75	%		1.48	%		1.42	%
Ratio of non-performing loans to total assets		0.54	%		0.56	%		1.10	%		1.07	%
Ratio of non-performing assets to total assets		0.56	%		0.57	%		1.12	%		1.09	%
Ratio of allowance for loan losses to total loans		0.94	%		0.94	%		1.16	%		1.07	%

Loans are reviewed on a regular basis and are placed on non-accrual status when they become 90 days delinquent. When loans are placed on non-accrual status, unpaid accrued interest is fully reserved, and further income is recognized only to the extent received. Non-performing assets ~~decreased $155,000~~increased $328,000 from September 30, ~~2019~~2020 to December 31, ~~2019.~~2020. The primary reason for the increase in nonperforming assets at December 31, 2020 as compared to September 30, 2020 was the an increase in non-performing residential loans of $417,000. Included in non-performing assets are two nonperforming commercial real estate loans totaling $9.3 million. These loans are well collateralized and carry personal guarantees. The number of nonperforming residential loans was 5158 at December 31, ~~2019~~2020 compared to 5256 at September 30, ~~2019.~~2020. The ~~$9.8~~$20.6 million of non-accruing loans at December 31, ~~2019~~2020 included 5158 residential loans with an aggregate outstanding balance of ~~$4.4~~$5.0 million, 2839 commercial and commercial real estate loans with aggregate outstanding balances of ~~$4.3~~$15.2 million and 7454 consumer loans with aggregate balances of ~~$1.0 million.~~$355,000. Within the residential loan balance were ~~$2.5~~$2.7 million of loans less than 90 days past due. In the quarter ended December 31, ~~2019,~~2020, the Company identified 1822 residential loans which, although paying as agreed, have a high probability of default. Foreclosed real estate increased ~~$103,000~~$96,000 to ~~$343,000~~$365,000 at December 31, ~~2019.~~2020. Foreclosed real estate consists of ~~seven~~nine residential ~~properties and one commercial property.~~properties.

At December 31, ~~2019,~~2020, the principal balance of troubled debt restructures (“TDRs”) was ~~$3.5~~$2.1 million compared to ~~$3.1~~$2.7 million at September 30, ~~2019. Of~~2020. All of the ~~$3.5~~$2.1 million of troubled debt restructures at December 31, ~~2019, $76,000 are performing loans and $3.4 million~~2020 are non-accrual loans.

As of December 31, ~~2019,~~2020, TDRs were comprised of 1914 residential loans totaling ~~$2.5~~$1.5 million, three commercial and commercial real estate loans totaling ~~$722,000~~$544,000 and ~~nine~~five consumer loans (home equity loans, home equity lines and credit, indirect auto and ~~other) loans~~other loans) totaling ~~$242,000.~~$72,000.

For the three month period ended December 31, ~~2019, two~~2020, three loans were paid in full and removed from non-performing TDR ~~status.~~status and one loan was removed due to completion of one year of consecutive on time payments.

We maintain liquid assets at levels we consider adequate to meet both our short-term and long-term liquidity needs. We adjust our liquidity levels to fund deposit outflows, repay our borrowings and to fund loan commitments. We also adjust liquidity as appropriate to meet asset and liability management objectives.

Our primary sources of liquidity are deposits, prepayment and repayment of loans and mortgage-backed securities, maturities of investment securities and other short-term investments, and earnings and funds provided from operations, as well as access to FHLB advances and other borrowing sources. While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competition. We set the interest rates on our deposits to maintain a desired level of total deposits.

A portion of our liquidity consists of cash and cash equivalents and borrowings, which are a product of our operating, investing and financing activities. At December 31, ~~2019, $42.6~~2020, $170.8 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.~~accounts and borrowings. As of December 31, ~~2019,~~2020, we had ~~$242.7~~$289.5 million in borrowings outstanding from the Pittsburgh FHLB. We have access to total FHLB advances of up to approximately ~~$668.0~~$687.7 million.

At December 31, ~~2019,~~2020, we had ~~$196.4~~$231.9 million in loan commitments outstanding, which included, in part, ~~$51.2~~$89.2 million in undisbursed construction loans and land development loans, ~~$40.0~~$45.2 million in unused home equity lines of credit, ~~$92.3~~$80.4 million in commercial lines of credit and commitments to originate commercial loans, ~~$6.6~~$9.8 million in performance standby letters of credit and ~~$6.5~~$12.3 million in other unused commitments which are primarily to originate residential mortgage loans and multifamily loans. Certificates of deposit due within one year of December 31, ~~2019~~2020 totaled ~~$397.0~~$405.9 million, or ~~85.0%~~81.0% 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 December 31, ~~2020.~~2021. We believe, however, based on past experience that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

As reported in the Consolidated Statements of Cash Flow, our cash flows are classified for financial reporting purposes as operating, investing or financing cash flows. Net cash provided by operating activities was ~~$4.9 million~~$58,000 and ~~$3.3~~$4.9 million for the three months ended December 31, ~~2019~~2020 and ~~2018,~~2019, respectively. These amounts differ from our net income because of a variety of cash receipts and disbursements that did not affect net income for the respective periods. Net cash ~~used for~~provided by (used for) investing activities was ~~$17.0~~$87.4 million and ~~$32.5~~$(17.0) million for the three months ended December 31, ~~2019~~2020 and ~~2018,~~2019, respectively, principally reflecting our loan and investment security activities. Deposit and borrowing cash flows have comprised most of our financing activities, which resulted in net cash (used for) provided by, of ~~$2.4~~$(26.1) million and ~~$25.3~~$2.4 million for the three months ended December 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

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 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.

Goodwill and Intangible Assets. Goodwill is not amortized, but it is tested at least annually for impairment in the fourth quarter, or more frequently if indicators of impairment are present. If the estimated current fair value of a reporting unit exceeds its carrying value, no additional testing is required and an impairment loss is not recorded. The Company uses market capitalization and multiples of tangible book value methods to determine the estimated current fair value of its reporting unit. Based on this analysis, no impairment was recorded in ~~2019~~2020 or ~~2018.~~2019.

The other intangibles assets are assigned useful lives, which are amortized on an accelerated basis over their weighted-average lives. The Company periodically reviews the intangible assets for impairment as events or changes in circumstances indicate that the carrying amount of such asset may not be recoverable. Based on these reviews, no impairment was recorded in ~~2019 and 2018.~~2020 or 2019.

Derivative Instruments and Hedging Activities. The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

Fair Value Measurements. We group our assets at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

We base our fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy in generally accepted accounting principles.

Fair value measurements for most of our assets are obtained from independent pricing services that we have engaged for this purpose. When available, we, or our independent pricing service, use quoted market prices to measure fair value. If market prices are not available, fair value measurement is based upon models that incorporate available trade, bid, and other market information. Subsequently, all of our financial instruments use either of the foregoing methodologies to determine fair value adjustments recorded to our financial statements. In certain cases, however, when market observable inputs for model-based valuation techniques may not be readily available, we are required to make judgments about assumptions market participants would use in estimating the fair value of financial instruments. The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market parameters. For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. When observable market prices and parameters are not fully available, management judgment is necessary to estimate fair value. In addition, changes in the market conditions may reduce the availability of quoted prices or observable data. When market data is not available, we use valuation techniques requiring more management judgment to estimate the appropriate fair value measurement. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, that could significantly affect the results of current or future valuations.

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 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 that would adversely affect our operating results.

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

The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits and borrowings. As a result, a principal part of our business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Accordingly, our Board of Directors has approved guidelines for managing the interest rate risk inherent in our assets and liabilities, given our business strategy, operating environment, capital, liquidity and performance objectives. Senior management monitors the level of interest rate risk on a regular basis and the asset/liability committee meets quarterly to review our asset/liability policies and interest rate risk position.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. The net proceeds from the Company’s stock offering increased our capital and provided management with greater flexibility to manage our interest rate risk. In particular, management used the majority of the capital we received to increase our interest-earning assets. There have been no material changes in our interest rate risk since September 30, ~~2019.~~2020.

Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this Report, our disclosure controls and procedures were effective.

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

The Bank was named as a defendant in an action commenced on December 8, 2016 by one plaintiff who will also seek to pursue this action as a class action on behalf of the entire class of people similarly situated. The plaintiff alleges that a bank previously acquired by ESSA Bancorp received unearned fees and kickbacks in the process of making loans, in violation of the Real Estate Settlement Procedures Act. In an order dated January 29, 2018, the district court granted the Bank’s motion to dismiss the case. The plaintiff appealed the court’s ruling. In an opinion and order dated April 26, 2019, the appellate court reversed the district court’s order dismissing the plaintiff’s case against the Bank, and remanded the case back to the district court in order to continue the litigation. The litigation is now proceeding before the district court. On December 9, 2019, the court permitted an amendment to the complaint to add two new plaintiffs to the case asserting similar claims. On May 21, 2020, the court granted the plaintiffs’ motion for class certification. The case is currently stayed while the parties explore the possibility of a negotiated resolution to the case. In an order dated November 24, 2020, the court referred the case to Magistrate Judge Timothy J. Sullivan to assist in mediation efforts. If these discussions are not successful, the Bank will continue to ~~vigorously~~ defend against such allegations. To the extent that ~~pending or threatened litigation~~this matter could result in exposure to the Bank, the amount of such exposure is not currently estimable.

There have been no material changes in the “Risk Factors” as disclosed in the Company’s response to Item 1A in Part 1 of its Annual Report on Form 10-K for the year ended September 30, ~~2019,~~2020, filed on December ~~16, 2019.~~14, 2020.

Company Purchases of Common Stock	Company Purchases of Common Stock									Company Purchases of Common Stock
Month Ending		Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs(1)		Maximum number of shares that may yet be purchased under the plans or programs			Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs(1)		Maximum number of shares that may yet be purchased under the plans or programs
October 31, 2019			49,100	$	16.27		49,100		369,600
November 30, 2019			15,000	$	16.44		15,000		354,600
December 31, 2019			—	$	—		—		—
October 31, 2020												40,900	$	13.06		40,900		459,100
November 30, 2020												58,800	$	14.54		58,800		400,300
December 31, 2020												—	$	—		—		400,300
Total			64,100	$	16.31		64,100		354,600			99,700	$	13.49		99,700

(1) On ~~July~~August 25, ~~2019~~2020 the Company announced the authorization of an eighth repurchase program for up to 500,000 shares of its common stock. This program has no expiration date.

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

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pennsylvania	20-8023072
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

200 Palmer Street, Stroudsburg, Pennsylvania	18360
(Address of Principal Executive Offices)	(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common	ESSA	Nasdaq Stock Market LLC

Large accelerated filer	☐	Accelerated filer	☒☐

Non-accelerated filer	☐☒	Smaller reporting company	☒

Emerging growth company	☐

		Page
	Part I. Financial Information

Item 1.	Financial Statements (unaudited)	2

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3334

Item 3	Quantitative and Qualitative Disclosures About Market Risk	4041

Item 4	Controls and Procedures	4041

	Part II. Other Information

Item 1.	Legal Proceedings	41

~~Item 1A.~~	~~Risk Factors~~	41

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	41

~~Item 3.~~	~~Defaults Upon Senior Securities~~	41

~~Item 4.~~	~~Mine Safety Disclosures~~	41

~~Item 5.~~	~~Other Information~~	41

~~Item 6.~~	~~Exhibits~~	42

Item 1A.	~~Signature Page~~Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3.	Defaults Upon Senior Securities	43

Item 4.	Mine Safety Disclosures	43

Item 5.	Other Information	43

Item 6.	Exhibits	44

Signature Page		45

	~~12/31/2019~~December 31, 2020
Weighted average remaining lease term
Operating leases	~~14.0~~13.3 years
Weighted average discount rate
Operating leases		~~2.37~~2.40	%

3.1	Articles of Incorporation of ESSA Bancorp, Inc. (incorporated by reference to the Registration Statement on Form S-1 of ESSA Bancorp, Inc. (file no. 333-139157), originally filed with the Securities and Exchange Commission on December 7, 2006)

�� 3.2	Bylaws of ESSA Bancorp, Inc. (incorporated by reference to the Registration Statement on Form S-1 of ESSA Bancorp, Inc. (file no. 333-139157), originally filed with the Securities and Exchange Commission on December 7, 2006)

4	Form of Common Stock Certificate of ESSA Bancorp, Inc. (incorporated by reference to the Registration Statement on Form S-1 of ESSA Bancorp, Inc. (file no. 333-139157), originally filed with the Securities and Exchange Commission on December 7, 2006)

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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

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

	ESSA BANCORP, INC.

Date: February ~~10, 2020~~9, 2021	/s/ Gary S. Olson
	Gary S. Olson
	President and Chief Executive Officer

Date: February ~~10, 2020~~9, 2021	/s/ Allan A. Muto
	Allan A. Muto
	Executive Vice President and Chief Financial Officer