10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15 (d) of

the Securities Exchange Act of 1934

For Quarter Ended: September 30, 2012

Commission File Number: 0-19345

ESB FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania	25-1659846
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
600 Lawrence Avenue, Ellwood City, PA	16117
(Address of principal executive offices)	(Zip Code)

(724) 758-5584

(Registrant’s telephone number, including area code)

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 filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

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

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act)    Yes  ¨    No  x

Number of shares of common stock outstanding as of October 31, 2012:

Common Stock, $0.01 par value	14,671,757 shares
(Class)	(Outstanding)

ESB FINANCIAL CORPORATION

TABLE OF CONTENTS

	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Financial Condition as of September 30, 2012 and December 31, 2011 (Unaudited)	1
	Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011 (Unaudited)	2
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30,2012 and 2011 (Unaudited)	3
	Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2012 (Unaudited)	4
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 (Unaudited)	5
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition	40
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	55
Item 4.	Controls and Procedures	55
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	56
	Signatures	57

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

ESB Financial Corporation and Subsidiaries

Consolidated Statements of Financial Condition

As of September 30, 2012 and December 31, 2011

(Dollar amounts in thousands)

(Unaudited)

	September 30, 2012			December 31, 2011
Assets
Cash on hand and in banks	$	4,507		$	4,720
Interest-earning deposits		14,208			34,117
Federal funds sold		11			11
Cash and cash equivalents		18,726			38,848
Securities available for sale; cost of $1,085,034 and $1,091,497		1,136,615			1,130,116
Loans receivable, net of allowance for loan losses of $6,564 and $6,537		671,936			648,921
Accrued interest receivable		8,281			9,227
Federal Home Loan Bank (FHLB) stock		17,348			21,256
Premises and equipment, net		14,722			15,071
Real estate acquired through foreclosure, net		2,803			3,883
Real estate held for investment		12,532			15,268
Goodwill		41,599			41,599
Intangible assets		357			554
Bank owned life insurance		29,864			30,802
Securities receivable		2,380			1,148
Prepaid expenses and other assets		7,089			8,098
Total assets	$	1,964,252		$	1,964,791
Liabilities and Stockholders’ Equity
Liabilities:
Deposits	$	1,193,383		$	1,156,410
FHLB advances		203,679			207,355
Repurchase agreements		288,000			343,000
Other borrowings		6,652			10,212
Junior subordinated notes		46,393			46,393
Advance payments by borrowers for taxes and insurance		1,331			2,519
Accounts payable for land development		2,118			2,634
Accrued expenses and other liabilities		26,531			17,193
Total liabilities		1,768,087			1,785,716
Stockholders’ Equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued		—			—
Common stock, $.01 par value, 30,000,000 shares authorized;
16,278,045 and 16,278,045 shares issued;
14,666,461 and 14,600,871 shares outstanding		163			163
Additional paid-in capital		102,744			102,667
Treasury stock, at cost; 1,611,584 and 1,677,174 shares		(18,806	)		(19,537	)
Unearned Employee Stock Ownership Plan (ESOP) shares		(3,391	)		(4,184	)
Retained earnings		87,078			80,231
Accumulated other comprehensive income, net		29,535			20,904
Total ESB Financial Corporation’s stockholders’ equity		197,323			180,244
Noncontrolling interest		(1,158	)		(1,169	)
Total stockholders’ equity		196,165			179,075
Total liabilities and stockholders’ equity	$	1,964,252		$	1,964,791

See accompanying notes to unaudited consolidated financial statements.

1

ESB Financial Corporation and Subsidiaries

Consolidated Statements of Operations

For the three and nine months ended September 30, 2012 and 2011 (Unaudited)

(Dollar amounts in thousands, except share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Interest income:
Loans receivable	$	8,334		$	8,746		$	25,017		$	26,161
Taxable securities available for sale		7,946			9,436			25,346			29,022
Tax free securities available for sale		1,654			1,619			4,966			4,767
FHLB Stock		4			—			20			—
Deposits with banks and federal funds sold		5			16			54			21
Total interest income		17,943			19,817			55,403			59,971
Interest expense:
Deposits		2,225			2,931			7,213			9,247
Borrowed funds		4,325			5,180			13,568			15,775
Junior subordinated notes and guaranteed preferred beneficial interest in subordinated debt		618			612			1,841			1,818
Total interest expense		7,168			8,723			22,622			26,840
Net interest income		10,775			11,094			32,781			33,131
Provision for loan losses		350			300			850			800
Net interest income after provision for loan losses		10,425			10,794			31,931			32,331
Noninterest income:
Fees and service charges		860			919			2,522			2,610
Net gain on sale of loans		—			—			—			6
Increase of cash surrender value of bank owned life insurance		142			181			448			524
Net realized gain on securities available for sale		197			406			464			937
Total other-than-temporary impairment losses		—			(452	)		(406	)		(452	)
Portion of loss recognized in other comprehensive income before taxes		—			369			375			369
Net impairment losses on investment securities		—			(83	)		(31	)		(83	)
Net realized loss on derivatives		(138	)		(989	)		(538	)		(1,857	)
Income from real estate joint ventures		413			642			1,532			1,804
Other		163			122			502			424
Total noninterest income		1,637			1,198			4,899			4,365
Noninterest expense:
Compensation and employee benefits		4,306			4,078			12,989			12,195
Premises and equipment		640			627			2,074			1,984
Federal deposit insurance premiums		337			284			1,095			1,066
Data processing		608			577			1,791			1,727
Amortization of intangible assets		61			82			190			251
Advertising		174			156			457			392
Other		1,122			899			3,866			3,293
Total noninterest expense		7,248			6,703			22,462			20,908
Income before income taxes		4,814			5,289			14,368			15,788
Provision for income taxes		793			1,010			2,437			3,066
Net income before noncontrolling interest		4,021			4,279			11,931			12,722
Less: net income attributable to the noncontrolling interest		87			315			531			813
Net income attributable to ESB Financial Corporation	$	3,934		$	3,964		$	11,400		$	11,909
Net income per share
Basic	$	0.27		$	0.27		$	0.80		$	0.82
Diluted	$	0.27		$	0.27		$	0.79		$	0.82
Cash dividends declared per share	$	0.10		$	0.10		$	0.30		$	0.28
Weighted average shares outstanding		14,362,375			14,489,740			14,329,149			14,455,677
Weighted average shares and share equivalents outstanding		14,490,450			14,589,597			14,458,419			14,567,200

See accompanying notes to unaudited consolidated financial statements.

2

ESB Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

For the three and nine months ended September 30, 2012 and 2011 (Unaudited)

(Dollar amounts in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net Income before noncontrolling interest	$	4,021		$	4,279		$	11,931		$	12,722
Other comprehensive income (net of tax and reclassifications)
Net change in unrealized gains (losses):
Securities available for sale other-than-temporarily impaired:
Total losses		—			(452	)		(406	)		(452	)
Losses recognized in earnings		—			83			31			83
Losses recognized in comprehensive income		—			(369	)		(375	)		(369	)
Income tax effect		—			125			127			125
Unrealized holding losses on other-than-temporarily impaired securities available for sale, net of tax		—			(244	)		(248	)		(244	)
Securities available for sale not other-than-temporarily impaired:
Gains arising during the period of $105 in 2010		9,956			6,218			14,386			15,335
Income tax effect		(3,385	)		(2,114	)		(4,891	)		(5,214	)
		6,571			4,104			9,495			10,121
Gains recognized in earnings		197			406			464			937
Income tax effect		(67	)		(138	)		(158	)		(319	)
		130			268			306			618
Unrealized holding gains on securities available for sale not other-than-temporarily-impaired, net of tax		6,441			3,836			9,189			9,503
Unrealized holding gain on securities, net		6,441			3,592			8,941			9,259
Pension and Postretirement Amortization		52			46			157			137
Income tax effect		(18	)		(16	)		(53	)		(47	)
		34			30			104			90
Fair Value adjustment on derivatives		(222	)		(2,090	)		(628	)		(2,681	)
Income tax effect		76			711			214			912
		(146	)		(1,379	)		(414	)		(1,769	)
Other comprehensive income		6,329			2,243			8,631			7,580
Net comprehensive income before noncontrolling interest		10,350			6,522			20,562			20,302
Less: net income attributable to the noncontrolling interest		87			315			531			813
Net comprehensive income attributable to ESB Financial Corporation	$	10,263		$	6,207		$	20,031		$	19,489

See accompanying notes to unaudited consolidated financial statements.

3

ESB Financial Corporation and Subsidiaries

Consolidated Statement of Changes in Stockholders’ Equity

For the nine months ended September 30, 2012 (Unaudited)

(Dollar amounts in thousands, except share data)

	Common stock		Additional paid-in capital			Treasury stock			Unearned ESOP shares			Retained earnings			Accumulated other comprehensive income, net of tax		Noncontrolling Interest			Total stockholders’ equity
Balance at January 1, 2012	$	163	$	102,667		$	(19,537	)	$	(4,184	)	$	80,231		$	20,904	$	(1,169	)	$	179,075
Net income		—		—			—			—			11,400			—		531			11,931
Other comprehensive income, net		—		—			—			—			—			8,631		—			8,631
Cash dividends at $0.30 per share		—		—			—			—			(4,295	)		—		—			(4,295	)
Purchase of treasury stock, at cost (13,255 shares)		—		—			(175	)		—			—			—		—			(175	)
Reissuance of treasury stock for stock option exercises (78,845 shares)		—		—			906			—			(258	)		—		—			648
Compensation expense ESOP		—		294			—			793			—			—		—			1,087
Additional ESOP shares purchased		—		(250	)		—			—			—			—		—			(250	)
Tax effect of compensatory stock options		—		33			—			—			—			—		—			33
Capital disbursement for noncontrolling interest		—		—			—			—			—			—		(520	)		(520	)
Balance at September 30, 2012	$	163	$	102,744		$	(18,806	)	$	(3,391	)	$	87,078		$	29,535	$	(1,158	)	$	196,165

See accompanying notes to unaudited consolidated financial statements.

4

ESB Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2012 and 2011 (Unaudited)

(Dollar amounts in thousands)

	Nine months ended September 30,
	2012			2011
Operating activities:
Net income	$	11,931		$	12,722
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization for premises and equipment		767			705
Provision for loan losses		850			800
Amortization of premiums and accretion of discounts		2,549			1,753
Origination of loans available for sale		—			(325	)
Proceeds from sale of loans available for sale		—			411
Gain on sale of loans available for sale		—			(6	)
Net gain on sale of securities available for sale		(464	)		(937	)
Impairment losses on investment securities		31			83
Net realized loss on derivatives		538			1,857
Amortization of intangible assets		190			251
Compensation expense on ESOP and MRP		1,087			1,001
Increases in cash surrender value of Bank owned life insurance		(448	)		(524	)
Decrease in accrued interest receivable		946			902
Decrease in prepaid FDIC assessment		1,007			982
Increase in prepaid expenses and other assets		(1,761	)		(1,716	)
Increase in accrued expenses and other liabilities		5,005			4,119
Gain on sale of real estate acquired through foreclosure		(44	)		(6	)
Writedown of real estate held for investment		—			112
Other		(706	)		(499	)
Net cash provided by operating activities		21,478			21,685
Investing activities:
Loan originations		(163,958	)		(124,276	)
Purchases of:
Securities available for sale		(196,027	)		(221,981	)
Premises and equipment		(418	)		(1,746	)
Principal repayments of:
Loans receivable		143,494			119,883
Securities available for sale		199,861			165,888
Proceeds from the sale of:
Securities available for sale		1,084			25,359
Real estate acquired through foreclosure		1,927			820
Proceeds from bank owned life insurance		1,386			—
Redemption of FHLB stock		3,908			3,723
Funding of real estate held for investment		(7,495	)		(7,957	)
Proceeds from real estate held for investment		4,553			7,238
Net cash used in investing activities		(11,685	)		(33,049	)
Financing activities:
Net increase in deposits		36,973			149,968
Proceeds from long-term borrowings		7,512			10,859
Repayments of long-term borrowings		(79,043	)		(87,500	)
Net increase (decrease) in short-term borrowings		9,295			(1,803	)
Capital disbursement to noncontrolling interest		(520	)		(1,146	)
Proceeds received from exercise of stock options		681			581
Dividends paid		(4,388	)		(3,922	)
Payments to acquire treasury stock		(175	)		(559	)
Stock purchased by ESOP		(250	)		(461	)
Net cash provided by (used in) financing activities		(29,915	)		66,017
Net (decrease) increase in cash equivalents		(20,122	)		54,653
Cash equivalents at beginning of period		38,848			35,707
Cash equivalents at end of period	$	18,726		$	90,360

5

ESB Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows, (Continued)

For the nine months ended September 30, 2012 and 2011 (Unaudited)

(Dollar amounts in thousands)

	Nine months ended September 30,
	2012		2011
Supplemental information:
Interest paid	$	20,402	$	25,631
Income taxes paid		2,960		2,949
Supplemental schedule of non-cash investing and financing activities:
Transfers from loans receivable to real estate acquired through foreclosure		1,192		3,752
Transfers from loan originations to proceeds on real estate held for investment		5,162		4,060
Dividends declared but not paid		1,467		1,487
Unfunded security commitments		1,000		—

See accompanying notes to unaudited consolidated financial statements.

6

ESB Financial Corporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Principles of Consolidation

ESB Financial Corporation (the Company) is a publicly traded Pennsylvania thrift holding company. The consolidated financial statements include the accounts of the Company and its direct and indirect wholly-owned subsidiaries, which are ESB Bank (ESB or the Bank), THF, Inc. (THF), ESB Financial Services, Inc. (EFS) and AMSCO, Inc. (AMSCO). ESB is a Pennsylvania chartered, Federal Deposit Insurance Corporation (FDIC) insured stock savings bank.

AMSCO is engaged in real estate development and construction of 1-4 family residential units independently or in conjunction with its joint ventures. AMSCO is currently involved in nine real estate joint ventures, all of which are owned 51% or greater by AMSCO. The Bank has provided all development and construction financing. These joint ventures have been included in the consolidated financial statements and reflected within the consolidated statements of financial condition as real estate held for investment and related operating income and expenses are reflected within other non-interest income or expense. The Bank’s loans to AMSCO and related interest have been eliminated in consolidation.

In addition to the elimination of the loans and interest to the joint ventures described above, all other significant intercompany transactions and balances have been eliminated in consolidation.

Basis of Presentation

The accompanying unaudited consolidated financial statements for the interim periods include all adjustments, consisting only of normal recurring accruals, which are necessary, in the opinion of management, to fairly reflect the Company’s financial position and results of operations. Additionally, these consolidated financial statements for the interim periods have been prepared in accordance with instructions for the Securities and Exchange Commission’s Form 10-Q and therefore do not include all information or footnotes necessary for a complete presentation of financial condition, results of operations and cash flows in conformity with U.S. generally accepted accounting principles (GAAP). For further information, refer to the audited consolidated financial statements and footnotes thereto for the year ended December 31, 2011, as contained in the Company’s 2011 Annual Report to Stockholders.

The results of operations for the nine month period ended September 30, 2012 are not necessarily indicative of the results that may be expected for the entire year. Certain amounts previously reported have been reclassified to conform to the current periods’ reporting format, such reclassifications did not have an effect on stockholders’ equity or net income.

The accounting principles followed by the Company and the methods of applying these principles conform with GAAP and with 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 Statement of Financial Condition date and revenues and expenses for the period. Actual results could differ significantly from those estimates.

Operating Segments

An operating segment is defined as a component of an enterprise that engages in business activities that generate revenue and incur expense, the operating results of which are reviewed by management. At September 30, 2012, the Company was doing business through 25 full service banking branches, one loan production office and through its various other subsidiaries. Loans and deposits are primarily generated from the areas where banking branches are located. The Company derives its income predominantly from

7

interest on loans and securities and to a lesser extent, non-interest income. The Company’s principal expenses are interest paid on deposits and borrowed funds and normal operating costs. The Company’s operations are principally in the banking industry. Consistent with internal reporting, the Company’s operations are reported in one operating segment, which is community banking.

Stock Based Compensation

During the three and nine months ended September 30, 2012, the Company recorded approximately $116,000 and $327,000, respectively, in compensation expense and a tax benefit of $6,000 and $23,000, respectively, related to our share-based compensation awards that are expected to vest in 2012. During the three and nine months ended September 30, 2011, the Company recorded approximately $94,000 and $290,000, respectively, in compensation expense and a tax benefit of $6,500 and $13,100, respectively, related to our share-based compensation awards that were expected to vest in 2011. As of September 30, 2012, there was approximately $630,000 of unrecognized compensation cost related to unvested share-based compensation awards granted. That cost is expected to be recognized over the next four years.

As required by GAAP, cash flows from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for stock-based awards (excess tax benefits) are classified as financing cash flows.

Financial Instruments

As part of its overall interest rate risk management activities, the Company utilizes derivative instruments to manage its exposure to various types of interest rate risk. Interest rate swaps and interest rate caps are the primary instruments the Company uses for interest rate risk management. Derivative instruments are recorded at fair value as either part of prepaid expenses and other assets or accrued expenses and other liabilities on the consolidated statements of financial condition. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge 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 used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

The Company formally documents the relationship between the hedging instruments and hedged items, as well as the risk management objective and strategy, before undertaking an accounting hedge. To qualify for hedge accounting, the derivatives and related hedged items must be designated as a hedge at inception of the hedge relationship. For accounting hedge relationships, we formally assess, both at the inception of the hedge and on an ongoing basis, if the derivatives are highly effective in offsetting designated changes in the fair value or cash flows of the hedged item. If it is determined that the derivative instrument is not highly effective, hedge accounting is discontinued.

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. To the extent the change in fair value of the derivative does not offset the change in fair value of the hedged item, the difference or ineffectiveness is reflected in earnings in the same financial statement category as the hedged item.

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 (OCI) 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 fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges, changes in fair value are recognized in earnings.

8

At September 30, 2012, there were sixteen interest rate cap contracts outstanding with notional amounts totaling $170.0 million. These derivative instruments are not hedged and therefore adjustments to fair value are recorded in current earnings.

The Company entered into two interest rate swap contracts to manage its exposure to interest rate risk. These interest rate swap transactions involved the exchange of the Company’s interest payment on $35.0 million in junior subordinated notes which became floating rate notes in 2011 for a fixed rate interest payment without the exchange of the underlying principal amount. Entering into interest rate derivatives potentially exposes the Company to the risk of counterparties’ failure to fulfill their legal obligations including, but not limited to, potential amounts due or payable under each derivative contract. Notional principal amounts are often used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller. Management utilizes the Change in Variable Cash Flows Method to measure hedge ineffectiveness. To the extent that the cumulative change in anticipated cash flows from the hedging derivative offsets from 80% to 125% of the cumulative change in anticipated cash flows from the hedged exposure, the hedged is deemed effective. As of September 30, 2012 the interest rate swaps were deemed to be effective, therefore no amounts were charged to current earnings. The Company also does not expect to reclassify any hedge related amounts from OCI to earnings over the next twelve months.

The fixed rate interest rate swap contract outstanding at September 30, 2012 is being utilized to hedge $35.0 million in floating rate junior subordinated notes. Below is a summary of the interest rate swap contract and the terms at September 30, 2012:

(Dollars in thousands)	Notional Amount		Effective Date		Pay Rate			Receive Rate(*)			Maturity Date		Unrealized
													Gain		Loss
Cash Flow Hedge	$	20,000		2/10/2011		4.18	%		0.44	%		2/10/2018	$	—	$	3,596
Cash Flow Hedge		15,000		2/10/2011		3.91	%		0.44	%		2/10/2018		—		2,479
	$	35,000											$	—	$	6,075

* Variable receive rate based upon contract rates in effect at September 30, 2012

Recent Accounting and Regulatory Pronouncements

In December 2011, the FASB issued ASU 2011-10, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate-a Scope Clarification. The amendments in this Update affect entities that cease to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt. Under the amendments in this Update, when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling financial interest under Subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. The amendments in this Update should be applied on a prospective basis to deconsolidation events occurring after the effective date. Prior periods should not be adjusted even if the reporting entity has continuing involvement with previously derecognized in substance real estate entities. For public entities, the amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2013, and interim and annual periods thereafter. Early adoption is permitted. This ASU did not have a significant impact on the Company’s financial statements.

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In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in this Update affect all entities that have financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement. The requirements amend the disclosure requirements on offsetting in Section 210-20-50. This information will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments in the scope of this Update. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. This ASU is not expected to have a significant impact on the Company’s financial statements.

In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. Entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. Nonpublic entities should begin applying these requirements for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The Company has provided the necessary disclosure in Statement of Comprehensive Income.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other Topics (Topic 350), Testing Goodwill for Impairment. The objective of this update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments in this Update apply to all entities, both public and nonpublic, that report goodwill in their financial statements and are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. This ASU did not have a significant impact on the Company’s financial statements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. The amendments in this Update improve the comparability, clarity, consistency, and transparency of financial reporting and increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP and IFRS, the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should

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present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. All entities that report items of comprehensive income, in any period presented, will be affected by the changes in this update. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The amendments in this Update should be applied retrospectively, and early adoption is permitted. The Company has provided the necessary disclosure in the Statement of Comprehensive Income.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The Company has included the disclosure requirements in Footnote Nine.

2. Securities

The Company’s securities available for sale portfolio is summarized as follows:

(Dollars amounts in thousands)	Amortized cost		Unrealized gains		Unrealized losses			Fair value
September 30, 2012:
Trust preferred securities	$	45,893	$	353	$	(8,587	)	$	37,659
Municipal securities		178,281		14,594		(239	)		192,636
Equity securities		1,235		700		—			1,935
Corporate bonds		207,033		6,762		(1,712	)		212,083
Mortgage-backed securities
U.S. sponsored entities		645,785		39,549		—			685,334
Private label		6,807		193		(32	)		6,968
Subtotal mortgage-backed securities		652,592		39,742		(32	)		692,302
Total securities	$	1,085,034	$	62,151	$	(10,570	)	$	1,136,615
December 31, 2011:
Trust preferred securities	$	45,894	$	265	$	(8,615	)	$	37,544
Municipal securities		174,288		10,427		(230	)		184,485
Equity securities		1,754		351		(2	)		2,103
Corporate bonds		165,923		1,784		(2,928	)		164,779
Mortgage-backed securities
U.S. sponsored entities		694,674		37,636		(8	)		732,302
Private label		8,964		241		(302	)		8,903
Subtotal mortgage-backed securities		703,638		37,877		(310	)		741,205
Total securities	$	1,091,497	$	50,704	$	(12,085	)	$	1,130,116

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The following table shows the Company’s investments gross unrealized losses and fair value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2012:

As of September 30, 2012
	Less than 12 Months						12 Months or more						Total
(Dollars amounts in thousands)	# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses
Trust preferred securities		—	$	—	$	—		9	$	35,822	$	8,587		9	$	35,822	$	8,587
Municipal securities		2		3,005		239		—		—		—		2		3,005		239
Corporate bonds		1		3,800		2		6		23,289		1,710		7		27,089		1,712
Mortgage-backed securities
Private label		—		—		—		1		1,279		32		1		1,279		32
Total		3	$	6,805	$	241		16	$	60,390	$	10,329		19	$	67,195	$	10,570

The following table shows the Company’s investments gross unrealized losses and fair value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2011:

As of December 31, 2011
	Less than 12 Months						12 Months or more						Total
(Dollars amounts in thousands)	# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses
Trust preferred securities		—	$	—	$	—		9	$	35,789	$	8,615		9	$	35,789	$	8,615
Municipal securities		2		3,094		149		3		2,627		81		5		5,721		230
Equity securities		—		—		—		1		130		2		1		130		2
Corporate bonds		27		91,046		2,928		—		—		—		27		91,046		2,928
Mortgage-backed securities
U.S. sponsored entities		1		4,596		8		—		—		—		1		4,596		8
Private label		3		3,084		302		—		—		—		3		3,084		302
Subtotal mortgage-backed securities		4		7,680		310		—		—		—		4		7,680		310
Total		33	$	101,820	$	3,387		13	$	38,546	$	8,698		46	$	140,366	$	12,085

The Company primarily invests in mortgage-backed securities, variable and fixed rate corporate bonds, municipal bonds, trust preferred securities and to a lesser extent equity securities. The policy of the Company is to recognize other than temporary impairment (OTTI) on equity securities where the fair value has been significantly below cost for three consecutive quarters. Declines in the fair value of the debt securities that can be attributed to specific adverse conditions affecting the credit quality of the investment would be recorded as OTTI and charged to earnings. In order to determine if a decline in fair value is other than temporary, the Company reviews corporate ratings of the investment, analyst reports and SEC filings of the issuers. For fixed maturity investments with unrealized losses due to interest rates where the Company expects to recover the entire amortized cost basis of the security, declines in value below cost are not assumed to be other than temporary. The Company reviews its position quarterly and

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has asserted that at September 30, 2012, the declines outlined in the above table represent temporary declines due to changes in interest rates and are not reflections of impairment in the credit quality of the securities. Additionally, the Company does not intend to sell the investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis.

The Company reviews investment in debt securities on an ongoing basis for the presence of OTTI with formal reviews performed quarterly. Credit-related OTTI losses on individual securities are recognized in earnings while noncredit-related OTTI on securities not expected to be sold is recognized in accumulated other comprehensive income. There were no OTTI losses on individual securities during the third quarter of 2012. The $31,000 credit-related OTTI recognized during the second quarter 2012 consisted of $5,000 on a pooled trust preferred security having a book value of $503,000 and $26,000 on one of the Company’s equity investments in community banks that had experienced a decline in its fair value for the last several quarters. There was noncredit-related OTTI on these securities recognized in OCI during the second quarter of approximately $375,000.

One pooled trust preferred security has previously been determined to be other than temporarily impaired due solely to credit related factors. This security is a collateralized debt obligation currently comprised of trust preferred securities of 10 financial institutions and has a Moody’s rating of Ca, which is below investment grade. The Company utilized a discounted cash flow method to determine the amount of impairment. During this analysis, the Company determined that three of these financial institutions are currently deferring interest payments. In addition, four financial institutions have previously defaulted. Currently seven of the ten remaining financial institutions are performing. Two of the three financial institutions that are deferring interest payments as of September 2012 either lost money or broke even for the most recently reported quarter and had a Tier 1 Risk Ratio at or less than the required well capitalized institution level under prompt corrective action provisions of 6%. Also, there were three financial institutions (including two of the three deferrals) within this pool that the non-performing assets to loans plus real estate owned ratio was greater than 10%. One of the three financial institutions currently deferring interest payments was able to raise capital in 2010 and is anticipated to ultimately recover.

Because of the subprime crisis current markets for variable rate corporate trust preferred securities are illiquid. This includes the Company’s eight stand alone trust preferred securities and the Company’s one pooled trust preferred security. The Company used a discounted cash flow method to price these securities due to the lack of liquidity for resale of this investment type and the absence of reliable pricing information. This method is described more fully in footnote 9, “Fair Value”.

As of September 30, 2012
	Available for sale
(Dollar amounts in thousands)	Weighted Average Yield			Amortized cost		Fair value
Due in one year or less		3.93	%	$	21,514	$	21,820
Due from one year to five years		3.18	%		174,718		181,660
Due from five to ten years		3.79	%		101,673		105,645
Due after ten years		3.44	%		785,894		825,555
		3.44	%	$	1,083,799	$	1,134,680

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As of December 31, 2011
	Available for sale
(Dollar amounts in thousands)	Weighted Average Yield			Amortized cost		Fair value
Due in one year or less		4.65	%	$	43,232	$	43,644
Due from one year to five years		3.62	%		106,858		107,452
Due from five to ten years		5.03	%		102,525		106,384
Due after ten years		3.74	%		837,128		870,533
		3.89	%	$	1,089,743	$	1,128,013

For purposes of the maturity table, mortgage backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on weighted-average contractual maturities of underlying collateral. The mortgage-backed securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

The proceeds from the sale of securities for the three month period ended September 30, 2012 were $316,000 resulting in gross realized gains of $197,000 and the proceeds from the sale of securities for the nine month period ended September 30, 2012 were $1.1 million resulting in gross realized gains of $464,000. The proceeds from the sale of securities for the three month period ended September 30, 2011 were $20.3 million resulting in gross realized gains of $406,000 and the proceeds from the sale of securities for the nine month period ended September 30, 2011 were $25.4 million resulting in gross realized gains of $937,000. There were no losses from the sale of securities during the three and nine month periods ended September 30, 2012 and 2011.

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3. Loans Receivable

The Company’s loans receivable as of the respective dates are summarized as follows:

(In thousands)	September 30, 2012			December 31, 2011
Mortgage loans:
Residential real estate
Single family	$	327,805		$	312,723
Construction		46,109			45,363
Multi family		32,888			32,370
Total residential real estate		406,802			390,456
Commercial real estate
Commercial		78,974			83,447
Construction		18,410			17,307
Total commercial real estate		97,384			100,754
Subtotal mortgage loans		504,186			491,210
Other loans:
Consumer loans
Home equity loans		76,780			72,493
Dealer auto and RV loans		48,300			47,039
Other loans		8,045			9,255
Total consumer loans		133,125			128,787
Commercial business		54,358			50,337
Subtotal other loans		187,483			179,124
Total loans receivable		691,669			670,334
Less:
Allowance for loan losses		6,564			6,537
Deferred loan fees and net discounts		(1,951	)		(1,852	)
Loans in process		15,120			16,728
Subtotal		19,733			21,413
Net loans receivable	$	671,936		$	648,921

At September 30, 2012 and December 31, 2011, the Company conducted its business through 25 offices in Allegheny, Beaver, Butler and Lawrence counties in Pennsylvania which also serves as its primary lending area. Management does not believe it has significant concentrations of credit risk to any one group of borrowers given its underwriting and collateral requirements.

Management has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for loan losses, the Company has segmented certain loans in the portfolio by product type. Loans are segmented into the following pools: commercial business loans, commercial real estate loans, residential real estate loans and consumer loans. The Company sub-segments residential real estate loans into the following three classes: single family, construction and multi-family. Commercial real estate is sub-segmented into commercial and construction classes. The Company also sub-segments the consumer loan portfolio into the following three classes: home equity, dealer automobile and recreational vehicle (RV) and other consumer loans. Historical loss percentages for each risk category are calculated and used as the basis for calculating allowance allocations. These historical loss percentages are calculated over a three

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year period for all portfolio segments. Certain qualitative factors are then added to the historical loss percentages to get the adjusted factor to be applied to non classified loans. The following qualitative factors are analyzed for each portfolio segment:

• Levels of and trends in delinquencies and nonaccruals

• Changes in lending policies and procedures

• Volatility of losses within each risk category

• Loans and Lending staff acquired through acquisition

• Economic trends

• Concentrations of credit

• Trends in volume and terms

• Experience depth and ability of management

These qualitative factors are reviewed each quarter and adjusted based upon relevant changes within the portfolio. During 2012, the qualitative factors for levels of and trends in delinquencies & nonaccruals were increased for residential mortgages, commercial loans and consumer loans. Trends in volume and terms were also increased for residential mortgages.

In terms of the Company’s loan portfolio, the consumer, commercial business and commercial real estate loans are deemed to have more risk than the residential real estate loans in the portfolio. The commercial loans not secured by real estate are highly dependent on the borrowers’ financial condition and are more dependent on economic conditions. The commercial loans secured by real estate are also dependent on economic conditions but generally have stronger forms of collateral. Within the consumer loan portfolio, the dealer auto and RV loans have historically carried more risk than the other segments of the consumer portfolio.

Loans by Segment

The total allowance for loan losses reflects management’s estimate of loan losses inherent in the loan portfolio at the statement of financial condition date. The Company considers the allowance for loan losses of $6.6 million adequate to cover loan losses inherent in the loan portfolio, at September 30, 2012. The following tables present by portfolio segment, the changes in the allowance for loan losses for the three and nine month periods ended September 30, 2012 and 2011.

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As of the three months ended September 30, 2012
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	434		$	2,299		$	1,004	$	2,519		$	485		$	6,741
Charge-offs		32			163			206		153			—			554
Recoveries		—			—			27		—			—			27
Provision		94			—			174		82			—			350
Reallocations		—			(62	)		—		97			(35	)		—
Ending Balance	$	496		$	2,074		$	999	$	2,545		$	450		$	6,564
As of the three months ended September 30, 2011
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	367		$	2,027		$	1,108	$	2,636		$	515		$	6,653
Charge-offs		—			—			124		650			—			774
Recoveries		1			—			21		48			—			70
Provision		—			100			50		150			—			300
Reallocations		(11	)		331			80		(61	)		(339	)		—
Ending Balance	$	357		$	2,458		$	1,135	$	2,123		$	176		$	6,249
As of the nine months ended September 30, 2012
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	384		$	2,442		$	1,045	$	2,115		$	551		$	6,537
Charge-offs		32			163			445		277			—			917
Recoveries		—			—			77		17			—			94
Provision		144			—			322		384			—			850
Reallocations		—			(205	)		—		306			(101	)		—
Ending Balance	$	496		$	2,074		$	999	$	2,545		$	450		$	6,564
As of the nine months ended September 30, 2011
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	784		$	1,831		$	1,125	$	2,573		$	234		$	6,547
Charge-offs		178			—			391		708			—			1,277
Recoveries		25			—			105		49			—			179
Provision		—			125			275		325			75			800
Reallocations		(274	)		502			21		(116	)		(133	)		—
Ending Balance	$	357		$	2,458		$	1,135	$	2,123		$	176		$	6,249

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The following tables present by portfolio segment, the recorded investment in loans at September 30, 2012 and December 31, 2011.

As of September 30, 2012
(Dollar amounts in thousands)	Commercial		Commercial Real Estate		Consumer		Residential		Unallocated		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	3	$	1,169	$	48	$	—	$	—	$	1,220
Ending balance: collectively evaluated for impairment	$	493	$	905	$	951	$	2,545	$	450	$	5,344
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—
Loans Receivable:
Ending Balance	$	54,358	$	97,384	$	133,125	$	406,802	$	—	$	691,669
Ending balance: individually evaluated for impairment	$	38	$	13,513	$	291	$	2,305	$	—	$	16,147
Ending balance: collectively evaluated for impairment	$	54,320	$	83,871	$	132,834	$	404,497	$	—	$	675,522
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—

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As of December 31, 2011
(Dollar amounts in thousands)	Commercial		Commercial Real Estate		Consumer		Residential		Unallocated		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	10	$	1,489	$	50	$	—	$	—	$	1,549
Ending balance: collectively evaluated for impairment	$	374	$	953	$	995	$	2,115	$	551	$	4,988
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—
Loans Receivable:
Ending Balance	$	50,337	$	100,754	$	128,787	$	390,456	$	—	$	670,334
Ending balance: individually evaluated for impairment	$	63	$	14,023	$	153	$	1,364	$	—	$	15,603
Ending balance: collectively evaluated for impairment	$	50,274	$	86,731	$	128,634	$	389,092	$	—	$	654,731
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—

Credit Quality Information

The following tables represent credit exposures by internally assigned grades as of September 30, 2012 and December 31, 2011. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly graded loans.

The Company’s internally assigned grades are as follows:

Pass – loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

Substandard – loans that have a well-defined weakness based on objective evidence and be characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful – loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

Loss – loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.

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As of September 30, 2012
(Dollar amounts in thousands)	Residential Real Estate Multi - family		Residential Real Estate Construction		Commercial Real Estate Commercial		Commercial Real Estate Construction		Commercial
Pass	$	32,888	$	39,802	$	63,417	$	18,410	$	53,783
Special Mention		—		5,363		1,475		—		539
Substandard		—		944		14,082		—		36
Doubtful		—		—		—		—		—
Loss		—		—		—		—		—
Ending Balance	$	32,888	$	46,109	$	78,974	$	18,410	$	54,358
As of December 31, 2011
(Dollar amounts in thousands)	Residential Real Estate Multi - family		Residential Real Estate Construction		Commercial Real Estate Commercial		Commercial Real Estate Construction		Commercial
Pass	$	32,370	$	38,219	$	67,119	$	17,307	$	50,232
Special Mention		—		7,144		2,319		—		57
Substandard		—		—		14,009		—		39
Doubtful		—		—		—		—		—
Loss		—		—		—		—		9
Ending Balance	$	32,370	$	45,363	$	83,447	$	17,307	$	50,337

The following tables present performing and nonperforming single family residential and consumer loans based on payment activity as of September 30, 2012 and December 31, 2011. Payment activity is reviewed by management on a monthly basis to determine how loans are performing. Loans are considered to be nonperforming when they become 90 days delinquent.

As of September 30, 2012
(Dollar amounts in thousands)	Residential Real Estate Single Family		Consumer Home Equity		Dealer Auto and RV		Other Consumer
Performing	$	324,227	$	76,282	$	48,192	$	7,949
Nonperforming		3,578		498		108		96
Total	$	327,805	$	76,780	$	48,300	$	8,045
As of December 31, 2011
(Dollar amounts in thousands)	Residential Real Estate Single Family		Consumer Home Equity		Dealer Auto and RV		Other Consumer
Performing	$	310,263	$	72,091	$	46,907	$	9,162
Nonperforming		2,460		402		132		93
Total	$	312,723	$	72,493	$	47,039	$	9,255

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Nonperforming loans also include certain loans that have been modified and classified as troubled debt restructuring (TDR) where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.

Non-performing loans, which include non-accrual loans and TDRs, were $15.6 million and $13.4 million at September 30, 2012 and December 31, 2011. The TDRs amounted to $8.6 million and $7.8 million at September 30, 2012 and December 31, 2011, respectively. The Company is not committed to lend additional funds to debtors whose loans are on non-accrual status.

Age Analysis of Past Due Loans Receivable by Class

Following tables are an aging analysis of the investment of past due loans receivable as of September 30, 2012 and December 31, 2011.

(Dollar amounts in thousands)													Recorded
As of September 30, 2012	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans Receivable		Investment > 90 Days and Accruing
Residential real estate
Single family	$	222	$	422	$	3,578	$	4,222	$	323,583	$	327,805	$	—
Construction		—		—		—		—		46,109		46,109		—
Multi-family		—		—		—		—		32,888		32,888		—
Commercial Real Estate
Commercial		188		796		3,076		4,060		74,914		78,974		—
Construction		—		—		—		—		18,410		18,410		—
Consumer
Consumer - home equity		43		—		207		250		76,530		76,780		—
Consumer - dealer auto and RV		601		126		108		835		47,465		48,300		—
Consumer - other		16		17		96		129		7,916		8,045		—
Commercial		504		—		38		542		53,816		54,358		—
Total	$	1,574	$	1,361	$	7,103	$	10,038	$	681,631	$	691,669	$	—
(Dollar amounts in thousands)													Recorded
As of December 31, 2011	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans Receivable		Investment > 90 Days and Accruing
Residential real estate
Single family	$	464	$	2,933	$	2,460	$	5,857	$	306,866	$	312,723	$	—
Construction		—		—		—		—		45,363		45,363		—
Multi-family		—		—		—		—		32,370		32,370		—
Commercial Real Estate
Commercial		48		1,507		2,629		4,184		79,263		83,447		—
Construction		—		—		—		—		17,307		17,307		—
Consumer
Consumer - home equity		143		9		249		401		72,092		72,493		—
Consumer - dealer auto and RV		698		101		132		931		46,108		47,039		—
Consumer - other		98		23		93		214		9,041		9,255		—
Commercial		59		—		54		113		50,224		50,337		—
Total	$	1,510	$	4,573	$	5,617	$	11,700	$	658,634	$	670,334	$	—

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Impaired Loans

Management considers commercial loans, commercial real estate loans and multi-family real estate loans which are 90 days or more past due to be impaired. Larger commercial loans, commercial real estate loans and multi-family real estate loans which are 60 days or more past due, including any troubled debt restructuring, are selected for impairment testing in accordance with GAAP. These loans are analyzed to determine if it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. If management determines that the fair value of the impaired loan is less than the recorded investment in the loan, impairment is recognized through a provision for loan loss estimate or a charge-off to the allowance for loan losses. The Company collectively reviews all single family residential real estate and consumer loans for impairment.

The following tables summarize impaired loans:

Impaired Loans

As of September 30, 2012 and December 31, 2011

(Dollar amounts in thousands)	September 30, 2012						December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	5,413	$	5,520	$	—	$	5,568	$	5,675	$	—
Commercial business loans		—		—		—		39		39		—
Residential loans		1,361		1,361		—		1,364		1,364		—
Residential construction loans		944		944		—		—		—		—
Consumer Loans:
Home Equity		139		139		—		—		—		—
With an allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	8,100	$	8,264	$	1,169	$	8,454	$	8,454	$	1,489
Consumer Loans:
Home Equity		152		152		48		153		153		50
Commercial business loans		38		38		3		25		25		10
Total:
Commercial Real Estate	$	13,513	$	13,784	$	1,169	$	14,023	$	14,129	$	1,489
Consumer		291		291		48		153		153		50
Residential		1,361		1,361		—		1,364		1,364		—
Residential construction loans		944		944		—		—		—		—
Commercial		38		38		3		63		63		10

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(Dollar amounts in thousands)	Three months ended September 30, 2012				Three months ended September 30, 2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	5,451	$	58	$	1,056	$	18
Commercial business loans		—		—		163		10
Residential loans		1,361		2		—		—
Residential construction loans		102		10		—		—
Consumer Loans:
Home Equity		91		10		—		—
With an allowance recorded:
Residential Real Estate
Construction	$	—	$	—	$	—	$	—
Commercial Real Estate:
Commercial Real Estate		8,248		105		5,678		408
Consumer Loans:
Home Equity		152		1		154		7
Commercial business loans		37		2		25		3
Total:
Commercial Real Estate	$	13,699	$	163	$	6,734	$	426
Consumer		243		11		154		7
Residential		1,361		2		—		—
Residential construction loans		102		10		—		—
Commercial		37		2		188		13

23

(Dollar amounts in thousands)	Nine months ended September 30, 2012				Nine months ended September 30, 2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	5,488	$	170	$	1,138	$	18
Commercial business loans		—		—		77		10
Residential loans		1,362		7		—		—
Residential construction loans		421		32		—		—
Consumer Loans:
Home Equity		43		10		—		—
With an allowance recorded:
Residential Real Estate
Construction	$	—	$	—	$	1,432	$	—
Commercial Real Estate:
Commercial Real Estate		8,353		319		7,363		408
Consumer Loans:
Home Equity		153		6		155		7
Commercial business loans		41		2		151		3
Total:
Commercial Real Estate	$	13,841	$	489	$	8,501	$	426
Consumer		196		16		155		7
Residential		1,362		7		—		—
Residential construction loans		421		32		1,432		—
Commercial		41		2		228		13

Nonaccrual Loans

Loans are considered nonaccrual upon reaching 90 days delinquency, although the Company may be receiving partial payments of interest and partial repayments of principal on such loans. When a loan is placed in nonaccrual status, previously accrued but unpaid interest is deducted from interest income.

On the following table are the loans receivable on nonaccrual status as of September 30, 2012 and December 31, 2011. The balances are presented by class of loans:

(Dollar amounts in thousands)	September 30, 2012		December 31, 2011
Commercial	$	38	$	54
Commercial Real Estate		11,338		10,237
Consumer
Consumer - Home Equity		359		402
Consumer - Dealer auto and RV		108		132
Consumer - Other		96		93
Residential		3,578		2,460
Total	$	15,517	$	13,378

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Modifications

The Company’s loan portfolio also includes TDR’s, where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.

When the Company modifies a loan, management evaluates any possible impairment based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral. In these cases, management uses the current fair value of the collateral, less selling costs, instead of discounted cash flows. If management determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized by segment or class of loan, as applicable, through an allowance estimate or a charge-off to the allowance. Segment and class status is determined by the loan’s classification at origination.

The following table includes the recorded investment and number of modifications for modified loans, for the three and nine months ended September 2012 and 2011. The Company reports the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured.

(Dollar amounts in thousands)	For the three months ended September 30, 2012
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Consumer
Home Equity		6	$	139	$	139	$	—	$	—	$	139
Total Troubled Debt Restructurings		6	$	139	$	139	$	—	$	—	$	139
(Dollar amounts in thousands)	For the three months ended September 30, 2011
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Consumer
Home Equity		—	$	—	$	—	$	—	$	—	$	—
Total Troubled Debt Restructurings		—	$	—	$	—	$	—	$	—	$	—

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(Dollar amounts in thousands)	For the nine months ended September 30, 2012
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Residential construction loans		3	$	947	$	947	$	—	$	—	$	947
Commercial Real Estate		1		100		—		—		100		100
Consumer
Home Equity		6		139		139		—		—		139
Total Troubled Debt Restructurings		10	$	1,186	$	1,086	$	—	$	100	$	1,186
(Dollar amounts in thousands)	For the nine months ended September 30, 2011
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Residential construction loans		—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate		3		7,372		—		7,305		125		7,430
Consumer
Home Equity		—		—		—		—		—		—
Total Troubled Debt Restructurings		3	$	7,372	$	—	$	7,305	$	125	$	7,430

The Company did not have any TDR’s that defaulted subsequent to their modification during the periods reported.

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4. Deposits

The Company’s deposits as of the respective dates are summarized as follows:

(Dollar amounts in thousands)	September 30, 2012					December 31, 2011
Type of accounts	Amount		%			Amount		%
Noninterest-bearing deposits	$	107,810		9.0	%	$	95,691		8.3	%
NOW account deposits		246,887		20.7	%		208,975		18.1	%
Money Market deposits		44,807		3.8	%		34,484		3.0	%
Passbook account deposits		173,009		14.5	%		153,644		13.3	%
Time deposits		620,870		52.0	%		663,616		57.3	%
	$	1,193,383		100.0	%	$	1,156,410		100.0	%
Time deposits mature as follows:
Within one year	$	362,053		58.3	%	$	387,857		58.5	%
After one year through two years		117,667		19.0	%		118,470		17.9	%
After two years through three years		78,248		12.6	%		81,282		12.2	%
After three years through four years		38,665		6.2	%		33,395		5.0	%
After four years through five years		19,321		3.1	%		37,235		5.6	%
Thereafter		4,916		0.8	%		5,377		0.8	%
	$	620,870		100.0	%	$	663,616		100.0	%

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5. Borrowed Funds

The Company’s borrowed funds as of the respective dates are summarized as follows:

(Dollar amounts in thousands)	September 30, 2012					December 31, 2011
	Weighted average rate			Amount		Weighted average rate			Amount
FHLB advances:
Due within 12 months		3.07	%	$	70,759		2.80	%	$	30,684
Due beyond 12 months but within 2 years		3.16	%		88,317		3.62	%		72,647
Due beyond 2 years but within 3 years		2.96	%		19,288		2.88	%		71,392
Due beyond 3 years but within 4 years		2.25	%		7,462		3.36	%		14,613
Due beyond 4 years but within 5 years		1.16	%		7,853		2.15	%		8,019
Due beyond 5 years		3.61	%		10,000		3.61	%		10,000
				$	203,679				$	207,355
Repurchase agreements:
Due within 12 months		2.98	%	$	148,000		3.12	%	$	93,000
Due beyond 12 months but within 2 years		3.28	%		60,000		3.30	%		130,000
Due beyond 2 years but within 3 years		4.12	%		10,000		3.07	%		40,000
Due beyond 3 years but within 4 years		—			—		4.12	%		10,000
Due beyond 4 years but within 5 years		4.28	%		25,000		—			—
Due beyond 5 years		4.49	%		45,000		4.42	%		70,000
				$	288,000				$	343,000
Other borrowings:
ESOP borrowings
Due within 12 months		4.68	%	$	1,000		4.68	%	$	1,000
Due beyond 12 months but within 2 years		4.68	%		1,000		4.68	%		1,000
Due beyond 2 years but within 3 years		4.68	%		1,000		4.68	%		1,000
Due beyond 3 years but within 4 years		4.68	%		500		4.68	%		1,000
Due beyond 4 years but within 5 years		—			—		4.68	%		250
				$	3,500				$	4,250
Corporate borrowings
Due within 12 months		6.30	%	$	1,400		6.30	%	$	1,400
Due beyond 12 months but within 2 years		6.30	%		1,400		6.30	%		1,400
Due beyond 2 years but within 3 years		—			—		6.30	%		1,400
				$	2,800				$	4,200
Borrowings for joint ventures
Due beyond 2 years but within 3 years		3.75	%	$	352		3.75	%	$	1,762
Junior subordinated notes
Due beyond 5 years		2.54	%	$	46,393		2.56	%	$	46,393

Included in the $203.7 million of FHLB advances at September 30, 2012 are $50.0 million in structured advances with imbedded caps at various strike rates based on the 3 month LIBOR rate. If during the term of the advance, the 3 month LIBOR rate exceeds the strike rate, the interest rate on the structured advance is reduced by the difference between the rate and the strike rate.

Included in the $288.0 million of Repurchase Agreements (REPOs) are $30.0 million in structured REPOs with imbedded caps at various strike rates based on the 3 month LIBOR rate. If during the term of the REPO,

28

the 3 month LIBOR rate exceeds the strike rate, the interest rate on the structured REPO is reduced by the difference between the rate and the strike rate. In addition, the Company has $25.0 million in structured REPOs with double, or $50.0 million notional amount of imbedded caps, at a strike rate of 3.75% based on the 3 month LIBOR rate. The terms and conditions of these structured REPOs are that the rate is fixed for five years and after 5 years, on a specified date the counterparty has the one time right (European Call) to call the REPO. If the counterparty does not call the REPO on the specified date, the rate remains the same for the remaining five years. These structured REPOs also include a double imbedded cap for the first five year period with a strike rate to the 3 month LIBOR rate. If during the first five years, the 3 month LIBOR rate exceeds the strike rate, the interest rate on the structured REPO is reduced by two times the difference between the rate and the strike rate. At no point shall the interest rate on these structured REPOs with imbedded caps be less than zero.

Also included in the $288.0 million of REPOs is a $25.0 million structured REPO in which the Company pays a fixed rate of interest. At the reset date and every quarterly period thereafter, the counterparty has the right to terminate the transaction. It has historically been the Company’s position to pay off any borrowings and replace them with fixed rate funding if converted by the counterparty.

The Company enters into sales of securities under agreements to repurchase. Such REPOs are treated as borrowed funds. The dollar amount of the securities underlying the agreements remains in their respective asset accounts.

REPOs are collateralized by various securities that are either held in safekeeping at the FHLB or delivered to the dealer who arranged the transaction and the Company maintains control of these securities.

The market value of such securities exceeded the amortized cost of the securities sold under agreements to repurchase. The market value of the securities as of September 30, 2012 was $342.4 million with an amortized cost of $317.3 million. The market value of the securities as of December 31, 2011 was $402.1 million with an amortized cost of $375.0 million. The average maturity date of the mortgage backed securities sold under agreements to repurchase was greater than 90 days for the periods ended September 30, 2012 and December 31, 2011.

As of September 30, 2012 and December 31, 2011, the Company had REPOs with Citigroup of $135.0 million and $145.0 million, respectively, Barclays Capital of $40.0 million and $70.0 million, respectively, Credit Suisse of $83.0 million and $93.0 million, respectively, PNC Bank of $0 and $5.0 million, respectively, and Morgan Stanley of $30.0 million and $30.0 million, respectively.

As of September 30, 2012, the REPOs with Citigroup had $17.1 million at risk (where the market value of the securities exceeded the borrowing), with a weighted average maturity of 18 months, Barclays Capital had $4.6 million at risk with a weighted average maturity of 45 months, Credit Suisse had $14.9 million at risk with a weighted average maturity of 25 months and Morgan Stanley had $2.2 million at risk with a weighted average maturity of 16 months.

Borrowings under REPOs averaged $294.7 million and $315.8 million, respectively, during the three and nine month periods ended September 30, 2012. The maximum amount outstanding at any month-end was $308.0 million and $343.0 million, respectively, during the three and nine months ended September 30, 2012.

The junior subordinated notes have various maturities, interest rate structures and call dates. The characteristics of these notes are detailed in the following paragraphs.

On April 10, 2003, ESB Capital Trust II (Trust II), a statutory business trust established under Delaware law that is a subsidiary of the Company, issued $10.0 million variable rate preferred securities with a stated value and liquidation preference of $1,000 per share. The Company purchased $310,000 of common securities of Trust II. The dividend rate, on the preferred securities resets quarterly to equal the LIBOR plus 3.25%. Trust II’s obligations under the preferred securities issued are fully and unconditionally guaranteed by the Company. The proceeds from the sale of the preferred securities and the common securities were utilized by Trust II to invest in $10.3 million of variable rate subordinated debt of the Company. The subordinated debt is unsecured and ranks

29

subordinate and junior in right of payment to all indebtedness, liabilities and obligations of the Company. The subordinated debt primarily represents the sole assets of Trust II. Dividends on the preferred securities are cumulative and payable quarterly in arrears. The Company has the right to optionally redeem the subordinated debt prior to the maturity date of April 24, 2033, on or after April 24, 2008, at the redemption price, plus accrued and unpaid distributions, if any, at the redemption date. Under the occurrence of certain events, specifically, a tax event, investment company event or capital treatment event as more fully defined in the Indenture dated April 10, 2003, the Company may redeem in whole, but not in part, the subordinated debt at any time within 90 days following the occurrence of such event. Proceeds from any redemption of the subordinated debt would cause a mandatory redemption of the preferred securities and the common securities having an aggregate liquidation amount equal to the principal amount of the subordinated debt redeemed. On July 23, 2008, the Company redeemed $5.0 million of the preferred securities of ESB Capital Trust II with proceeds from a $14.0 million loan with First Tennessee Bank National Association (“First Tennessee”). The remainder of the First Tennessee loan was used to repay an existing loan with First Tennessee with a remaining balance of $9.0 million, which had an interest rate of 5.55% and was due on December 31, 2008. No unamortized deferred debt issuance costs remain on this issuance.

On December 17, 2003, ESB Statutory Trust (Trust III), a statutory business trust established under Delaware law that is a subsidiary of the Company, issued $5.0 million variable rate preferred securities with a stated value and liquidation preference of $1,000 per share. The Company purchased $155,000 of common securities of Trust III. The dividend rate on the preferred securities resets quarterly to equal the LIBOR Index plus 2.95%. Trust III’s obligations under the preferred securities issued are fully and unconditionally guaranteed by the Company. The proceeds from the sale of the preferred securities and the common securities were utilized by Trust III to invest in $5.2 million of variable rate subordinated debt of the Company. The subordinated debt is unsecured and ranks subordinate and junior in right of payment to all indebtedness, liabilities and obligations of the Company. The subordinated debt primarily represents the sole assets of Trust III. Interest on the preferred securities is cumulative and payable quarterly in arrears. The Company has the right to optionally redeem the subordinated debt prior to the maturity date of December 17, 2033, on or after December 17, 2008, at the redemption price, plus accrued and unpaid distributions, if any, at the redemption date. Under the occurrence of certain events, specifically, a tax event, investment company event or capital treatment event as more fully defined in the Indenture dated December 17, 2003; the Company may redeem in whole, but not in part, the subordinated debt at any time within 90 days following the occurrence of such event. Proceeds from any redemption of the subordinated debt would cause a mandatory redemption of the preferred securities and the common securities having an aggregate liquidation amount equal to the principal amount of the subordinated debt redeemed. No unamortized deferred debt issuance costs remain on this issuance.

On February 10, 2005, ESB Capital Trust IV (Trust IV), a statutory business trust established under Delaware law that is a subsidiary of the Company, issued $35.0 million fixed rate preferred securities. The Company purchased $1.1 million of common securities of Trust IV. The dividend rate on the preferred securities was fixed at a rate of 6.03% for six years and now are variable at three month LIBOR plus 1.82%. The preferred securities have a stated maturity of thirty years. Trust IV’s obligations under the preferred securities issued are fully and unconditionally guaranteed by the Company. The proceeds from the sale of the preferred securities and the common securities were utilized by Trust IV to invest in $36.1 million of fixed/variable rate subordinated debt of the Company. The subordinated debt is unsecured and ranks subordinate and junior in right of payment to all indebtedness, liabilities and obligations of the Company. The subordinated debt primarily represents the sole assets of Trust IV. Interest on the preferred securities is cumulative and payable quarterly in arrears. The Company has the right to optionally redeem the subordinated debt prior to the maturity date of February 10, 2035, on or after February 10, 2011, at the redemption price, which is equal to the liquidation amount, plus accrued and unpaid distributions, if any, at the redemption date. Under the occurrence of certain events, specifically, a tax event, investment company event or capital treatment event as more fully defined in the Indenture dated February 10, 2005, the Company may redeem in whole, but not in part, the subordinated debt at any time within 90 days following the occurrence of such event. Proceeds from any redemption of the subordinated debt would cause a mandatory redemption of the preferred securities and the common securities having an aggregate liquidation amount equal to the principal amount of the subordinated debt redeemed. The Company did not have any deferred debt issuance costs associated with the preferred securities.

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6. Net Income Per Share

The following table summarizes the Company’s net income per share:

(Amounts, except earnings per share, in thousands)
	Three Months Ended September 30, 2012		Three Months Ended September 30, 2011
Net income	$	3,934	$	3,964
Weighted-average common shares outstanding		14,362		14,490
Basic earnings per share	$	0.27	$	0.27
Weighted-average common shares outstanding		14,362		14,490
Common stock equivalents due to effect of stock options		128		100
Total weighted-average common shares and equivalents		14,490		14,590
Diluted earnings per share	$	0.27	$	0.27
	Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2011
Net income	$	11,400	$	11,909
Weighted-average common shares outstanding		14,329		14,456
Basic earnings per share	$	0.80	$	0.82
Weighted-average common shares outstanding		14,329		14,456
Common stock equivalents due to effect of stock options		129		111
Total weighted-average common shares and equivalents		14,458		14,567
Diluted earnings per share	$	0.79	$	0.82

The shares controlled by the Company’s Employee Stock Ownership Plan (ESOP) of 329,656 and 393,959 at September 30, 2012 and September 30, 2011, respectively, are not considered in the weighted average shares outstanding until the shares are committed for allocation to an employee’s individual account.

At September 30, 2012 all outstanding options to purchase shares were included in the computation of diluted earnings per share because the options’ exercise price was less than the average market price of the common shares.

Options to purchases 84,816 shares at $12.80 per diluted share expiring November 2013, 92,892 shares at $12.08 per diluted share expiring November 2014 and 150,996 shares at $12.42 per diluted share expiring November 2015 were outstanding as of June 30, 2011 but were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares.

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7. Comprehensive Income

The Company has developed the following table to present the components of accumulated other comprehensive income:

(Dollar amounts in thousands)	September 30, 2012			December 31, 2011
Net unrealized gain on securities available for sale	$	34,044		$	25,101
Accumulated loss on effective cash flow hedging derivatives		(4,010	)		(3,596	)
Net unrecognized pension cost		(499	)		(601	)
Total	$	29,535		$	20,904

8. Retirement Plans

Supplemental Executive Retirement Plan and Directors’ Retirement Plan

The Company maintains a Supplemental Executive Benefit Plan (SERP) in order to provide supplemental retirement and death benefits for certain key employees of the Company. Under the SERP, participants shall receive an annual retirement benefit following retirement at age 65 equal to 25% of the participant’s final average pay multiplied by a ratio, ranging from 1.25% to 25.0%, based on the participant’s total years of service. Final average pay is based upon the participant’s last three year’s compensation. The maximum ratio of 25% requires twenty or more years of credited service and the minimum ratio of 1.25% requires one year of credited service. Benefits under the plan are payable in either a lump sum or ten equal annual payments and a lesser benefit is payable upon early retirement at age 50 with at least twelve years of service. If a participant dies prior to retirement, the participant’s estate will receive a lump sum payment equal to the net present value of future benefit payments under the plan. At September 30, 2012, the participants in the plan had credited service under the SERP ranging from 21 to 33 years.

The Company and the Bank maintain the ESB Financial Corporation Directors’ Retirement Plan and have entered into director retirement agreements with each director of the Company and the Bank. The plan provides that any retiring director with a minimum of five or more years of service with the Company or the Bank and a minimum of 10 total years of service, including years of service with any bank acquired by the Company or the Bank, that remains in continuous service as a board member until age 75 will be entitled to receive an annual retirement benefit equal to his or her director’s fees earned during the last full calendar year prior to his or her retirement date, multiplied by a ratio, ranging from 25% to 80%, based on the director’s total years of service. The maximum ratio of 80% of fees requires 20 or more years of service and the minimum ratio of 25% of fees requires 10 years of service. Retirement benefits may also be payable under the plan if a director retires from service as a director prior to attaining age 75. Three directors are currently receiving monthly benefits under the plan.

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The following table illustrates the components of the net periodic pension cost for the SERP and Directors Retirement Plan as of September 30, 2012 and 2011:

(Dollar amounts in thousands)	SERP				SERP
	Three Months Ended September 30, 2012		Three Months Ended September 30, 2011		Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2011
Components of net periodic pension cost
Service cost	$	20	$	16	$	60	$	48
Interest cost		31		31		93		93
Amortization of unrecognized gains and losses		20		14		60		42
Amortization of prior service cost		10		10		30		30
Net periodic pension cost	$	81	$	71	$	243	$	213
(Dollar amounts in thousands)	Directors’ Retirement Plan				Directors’ Retirement Plan
	Three Months Ended September 30, 2012		Three Months Ended September 30, 2011		Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2011
Components of net periodic pension cost
Service cost	$	1	$	1	$	3	$	3
Interest cost		9		10		27		30
Amortization of prior service cost		21		22		67		66
Net periodic pension cost	$	31	$	33	$	97	$	99

9. Fair Value

Fair value is defined by GAAP as the amount that an asset could be bought or sold, or a liability incurred or settled, between willing parties, other than during a liquidation. GAAP established a fair value hierarchy that prioritizes the use of inputs in valuation methodologies into the following three levels:

Level I:	Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets, as of the reported date. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available. A contractually binding sales price also provides reliable evidence of fair value.
Level II:	Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets: inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that utilize the model-based techniques for which all significant assumptions are observable in the market.
Level III:	Inputs to the valuation methodology are unobservable and significant to the fair value measurement; inputs to the valuation methodology that utilize a model-based techniques for which significant assumptions are not observable in the market; or inputs to the valuation methodology that requires significant management judgment or estimation, some of which may be internally developed.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

Investment Securities Available-for-Sale

Management classifies the Company’s equity securities as Level 1 measurements since quoted market prices were available, unadjusted, for identical securities in active markets. Declines in the fair value of individual equity securities that are deemed to be other than temporary, will be written down to current market value and included in earnings as realized losses. Level 2 investment securities are primarily comprised of debt securities issued by states and municipalities and corporations as well as mortgage-backed securities issued by government agencies. On a monthly basis, the fair values for securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. Due to recent uncertainties in the credit markets broadly, and the lack of both trading and new issuance of floating rate trust preferred securities, market price indications generally reflect the lack of liquidity in these markets, therefore the Company classifies these securities as Level III. Due to this lack of practical quoted prices, fair value for floating rate trust preferred securities has been determined using a discounted cash-flow technique. Cash flows are estimated based upon the contractual terms of each instrument. Market rates have been calculated based upon the five year historical discount margin for these instruments from August 2002 through August 2007, when the market was more liquid. These market rates were then adjusted for credit spreads and liquidity risk given the current markets. Credit spreads are based upon the Moody’s rating for each bond and range from 55 to 90 basis points. Liquidity risk adjustments ranged from 20 to 65 basis points where the securities of the 15 largest banks in the United States are assigned 20 to 40 basis points and banks outside of the top 15 were given a higher liquidity risk adjustment. Approximately $17.6 million or 49.5% of the $35.6 million in floating rate trust preferred securities represent investments in three of the four largest banks in the United States.

Derivative Financial Instruments

Derivative financial instruments recorded at fair value on a recurring basis are comprised of interest rate caps and interest rate swap agreements. The Company classifies these instruments as Level II. The Company determines the fair value of the interest rate caps quarterly by using quoted prices from two brokers. The maximum market indication used is the highest price obtained from the brokers, unless this price is Level III as indicated by the broker. If so this price is excluded and the highest Level II is used. The Company utilizes a third-party pricing service to measure its interest rate swap contracts. This service provides pricing information by utilizing evaluated pricing models, supported with market data information. Cash flows are projected for each payment date using the index forward curve. These swap cash flows are then discounted to time zero using LIBOR zero-coupon interest rates, the accepted cost of funds for a financial institution. The implicit assumption is that the risk associated with the cash flows on the derivative is the same as the risk associated with a loan in the interbank market. The present value of the fixed portion is then added to the present value of the floating portion. The sum of both is the fair market value of the interest rate swap.

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The following tables present the assets and liabilities reported on the consolidated statements of financial condition at their fair value on a recurring basis as of September 30, 2012 and December 31, 2011 by level within the fair value hierarchy. As required by GAAP, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	As of September 30, 2012
(Dollar amounts in thousands)	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		Total
Assets:
Securities available for sale
Trust preferred securities	$	—	$	1,837	$	35,822	$	37,659
Municipal securities		—		192,636		—		192,636
Equity securities		1,935		—		—		1,935
Corporate bonds		—		212,083		—		212,083
Mortgage backed securities
U.S. sponsored entities		—		685,334		—		685,334
Private label		—		6,968		—		6,968
Subtotal mortgage-backed securities		—		692,302		—		692,302
Total securities available for sale	$	1,935	$	1,098,858	$	35,822	$	1,136,615
Other Assets
Interest rate caps	$	—	$	102	$	—	$	102
Total other assets	$	—	$	102	$	—	$	102
Liabilities
Other Liabilities
Interest rate swaps	$	—	$	6,075	$	—	$	6,075
Total other liabilities	$	—	$	6,075	$	—	$	6,075

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As of December 31, 2011
(Dollar amounts in thousands)	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		Total
Assets:
Securities available for sale
Trust preferred securities	$	—	$	1,755	$	35,789	$	37,544
Municipal securities		—		184,485		—		184,485
Equity securities		2,103		—		—		2,103
Corporate bonds		—		164,779		—		164,779
Mortgage backed securities
U.S. sponsored entities		—		732,302		—		732,302
Private label		—		8,903		—		8,903
Subtotal mortgage-backed securities		—		741,205		—		741,205
Total securities available for sale	$	2,103	$	1,092,224	$	35,789	$	1,130,116
Other Assets
Interest rate caps	$	—	$	532	$	—	$	532
Total other assets	$	—	$	532	$	—	$	532
Liabilities:
Other Liabilities
Interest rate swaps	$	—	$	5,532	$	—	$	5,532
Total other liabilities	$	—	$	5,532	$	—	$	5,532

There were no transfers between Level I and Level II assets measured at fair value. The following table presents the changes in the Level III assets measured at fair value on a recurring basis for the three and nine month periods ended September 30, 2012 and 2011.

Fair value measurements using significant unobservable inputs (Level III):

	Securities available for sale Three Months Ended September 30,					Securities available for sale Nine Months Ended September 30,
	2012		2011			2012			2011
Beginning balance	$	35,604	$	37,681		$	35,789		$	37,361
Total net realized/unrealized gains (losses) Included in earnings:
Interest income on securities		4		3			11			10
Net realized loss on securities available for sale		—		(78	)		(5	)		(78	)
Included in other comprehensive income		214		(1,601	)		27			(788	)
Transfers in and/or out of Level III		—		—			—			—
Purchases, issuances and settlements
Purchases		—		—			—			—
Issuances		—		—			—			—
Sales		—		—			—			—
Settlements		—		—			—			(500	)
Ending balance	$	35,822	$	36,005		$	35,822		$	36,005

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The following table summarizes changes in unrealized gains and losses recorded in earnings for the three and nine month periods ended September 30, 2012 and 2011 for Level III assets and liabilities that are still held at September 30, 2012 and 2011.

	Securities available for sale Three Months Ended September 30,					Securities available for sale Nine Months Ended September 30,
	2012		2011			2012			2011
Interest income on securities	$	4	$	3		$	11		$	10
Net realized loss on securities available for sale		—		(78	)		(5	)		(78	)
Total	$	4	$	(75	)	$	6		$	(68	)

For Level III assets measured at fair value on a recurring or non-recurring basis as of September 30, 2012, the significant observable inputs used in the fair value measurements were as follows:

(Dollar amounts in thousands)	Fair Value at September 30, 2012		Fair Value at December 31, 2011		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Trust Preferred Securities	$	35,822	$	35,789	Discounted Cash Flow	Credit Spreads	40-85 basis points
						Liquidity Risk Adjustments	15-65 basis points
						Default Rates	.5% - 1%
Impaired Loans		14,927		14,054	Discounted Cash Flow	N/A	N/A
					Appraisal of collateral (1)	N/A	N/A
Real estate acquired through foreclosure		2,803		3,883	Appraisal of collateral (1)	N/A	N/A
Servicing assets		8		16	Discounted Cash Flow	N/A	N/A

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally includes various level III inputs which are not identifiable.

The significant unobservable inputs in the fair value measurement of the Company’s trust preferred securities are the credit spreads, liquidity risk adjustments and default rates as described above under Investment Securities Available for Sale. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company may be required periodically to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower-of-cost-or-fair value accounting or impairment write-downs of individual assets. During the nine month period ended September 30, 2012 and 2011, the Company incurred write-downs on its REO properties during the three months ended September 30, 2012 and 2011 of $7,000 and $746,000, respectively, and during the nine month period ended September 30, 2012 and 2011 of $368,000 and $827,000, respectively. There were no adjustments to the fair value for the Company’s remaining assets and liabilities measured at fair value on a nonrecurring basis in accordance with GAAP during the respective periods.

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10. Financial Instruments

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments, consisting of commitments to extend credit, commitments under line of credit lending arrangements and letters of credit. Such financial instruments are recorded in the financial statements when they are funded or related fees are received.

The following methods and assumptions were used in estimating fair values of financial instruments.

Cash and cash equivalents – The carrying amounts of cash equivalents approximate their fair values.

Securities – With the exception of floating rate trust preferred securities (the valuation of the trust preferred securities is discussed in footnote 9, Fair Value), fair values for securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique which is widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.

Securities receivable – The carrying amount of securities receivable approximates their fair values.

Loans receivable and held for sale – Fair values for loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values of impaired loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable. The carrying amounts of loans held for sale approximate their fair values.

Accrued interest receivable and payable – The carrying amounts of accrued interest approximate their fair values.

FHLB stock – FHLB stock is restricted from trading purposes and thus, the carrying value approximates its fair value.

Bank owned life insurance (BOLI) – The fair value of BOLI at September 30, 2012 and December 31, 2011 approximated the cash surrender value of the policies at those dates.

Interest rate cap and interest rate swap contracts – Fair values of interest rate cap and interest rate swap contracts are based on dealer quotes.

Deposits – The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date. Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies current market interest rates to a schedule of aggregated expected monthly maturities.

Borrowed funds and junior subordinated notes – For variable rate borrowings, fair values are based on carrying values. For fixed rate borrowings, fair values are based on the discounted value of contractual cash flows and on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. Fair values of structured borrowings are based on dealer quotes.

Advance payments by borrowers for taxes and insurance – The fair value of the advance payments by borrowers for taxes and insurance approximated the carrying value of those commitments at those dates.

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The following table sets forth the carrying amount and fair value of the Company’s financial instruments included in the consolidated statement of financial condition as of September 30, 2012:

September 30, 2012
(Dollar amounts in thousands)	Carrying amount		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		Total Fair Value
Financial Assets:
Cash and Cash Equivalents	$	18,726	$	18,726	$	—	$	—	$	18,726
Securities		1,136,615		1,935		1,098,858		35,822		1,136,615
Securities Receivable		2,380		2,380		—		—		2,380
Loans receivable and held for sale		671,936		—		—		710,070		710,070
Accrued Interest Receivable		8,281		8,281		—		—		8,281
FHLB Stock		17,348		17,348		—		—		17,348
Bank owned life insurance		29,864		29,864		—		—		29,864
Interest rate cap contracts		102		—		102		—		102
Financial Liabilities:
Deposits		1,193,383		572,513		—		631,303		1,203,816
Borrowed funds		498,331		—		262,155		265,235		527,390
Junior subordinated notes		46,393		—		24,073		—		24,073
Advance payments by borrowers for taxes and insurance		1,331		1,331		—		—		1,331
Accrued interest payable		3,896		3,896		—		—		3,896
Interest rate swap contracts		6,075		—		6,075		—		6,075

The following table sets forth the carrying amount and fair value of the Company’s financial instruments included in the consolidated statement of financial condition as of December 31, 2011:

	December 31, 2011
(Dollar amounts in thousands)	Carrying amount		Fair value
Financial assets:
Cash and cash equivalents	$	38,848	$	38,848
Securities		1,130,116		1,130,116
Securities receivable		1,148		1,148
Loans receivable and held for sale		648,921		679,819
Accrued interest receivable		9,227		9,227
FHLB stock		21,256		21,256
Bank owned life insurance		30,802		30,802
Interest rate cap contracts		532		532
Financial liabilities:
Deposits		1,156,410		1,168,438
Borrowed funds		560,567		594,080
Junior subordinated notes		46,393		20,361
Advance payment by borrowers for taxes and insurance		2,519		2,519
Accrued interest payable		1,676		1,676
Interest rate swap contracts		5,531		5,531

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

The following discussion and analysis provides further detail to the financial condition and results of operations of the Company. The section should be read in conjunction with the notes and financial statements presented elsewhere in this report.

The Company’s critical accounting policies involving the significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of September 30, 2012 have remained unchanged from the disclosures presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 under the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Forward-looking statements in this report relating to the Company’s plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The information contained in this report should be read in conjunction with ESB's most recent annual report filed with the Securities and Exchange Commission on Form 10-K for the year ended December 31, 2011, which is available at the SEC's website, www.sec.gov, or at ESB's website, www.esbbank.com. Investors are cautioned that forward-looking statements, which are not historical fact, involve risks and uncertainties that could cause actual results to differ materially from those contemplated by such statements, including without limitation, the effect of changing regional and national economic conditions; changes in interest rates, spreads on earning assets and interest-bearing liabilities, and associated interest rate sensitivity; sources of liquidity available to the parent company and its related subsidiary operations; potential future credit losses and the credit risk of commercial, real estate, and consumer loan customers and their borrowing activities; actions of the Federal Reserve Board, Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and other regulatory bodies; potential legislative and federal and state regulatory actions and reform; competitive conditions in the financial services industry; rapidly changing technology affecting financial services, and/or other external developments materially impacting the Company’s operational and financial performance. The Company does not assume any duty to update forward-looking statements.

OVERVIEW

ESB Financial Corporation is a Pennsylvania corporation and thrift holding company that provides a wide array of retail and commercial financial products and services to customers in Western Pennsylvania through its wholly-owned subsidiary ESB Bank. ESB Bank currently operates 25 branches.

During the three months ended September 30, 2012, the Company reported net income of $3.9 million, a decrease of approximately $30,000, or 0.8%, over the same period last year. The Company had a decrease in interest income of approximately $1.9 million over the same quarter last year, offset partially by a decrease in interest expense of $1.6 million during the same period. The result was a decrease of $319,000 in net interest income. The Company recorded an increase of $439,000 in noninterest income when compared to the same quarter last year, offset by an increase in noninterest expense of $545,000.

During the nine months ended September 30, 2012, the Company reported net income of $11.4 million, a decrease of approximately $509,000, or 4.3%, over the same period last year. The Company had a decrease in interest income of $4.6 million and interest expense of approximately $4.2 million resulting in a decrease in net interest income of $350,000 over the same period in the prior year. Additionally, the Company had an increase of $1.6 million in noninterest expense, partially offset by an increase in noninterest income of $533,000.

The Company is continuing efforts to improve the net interest margin by employing strategies to decrease the cost of funds, while attempting to increase the yield from the investment portfolio. The Company employs a strategy of purchasing cash-flowing fixed and variable rate mortgage-backed securities funded by wholesale borrowings, which are comprised of FHLB advances and repurchase agreements. This is referred to as the Company’s wholesale strategy. As part of the wholesale strategy, the Company uses a laddered maturity schedule of two to five years on the wholesale borrowings. Recently, as part of its ongoing interest rate risk strategy, the Company continues to purchase stand-alone interest rate caps as part of our macro strategy. These interest rate caps will aid in insulating the Company’s net interest margin against a rapid rise in interest rates which can cause significant pressure to the Company’s interest rate margin.

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During the nine months ended September 30, 2012, the Company had approximately $75.7 million of maturing wholesale borrowings at a weighted average rate of 3.40% and an original call/maturity of 3.7 years. The borrowings that matured were replaced with the deposit growth of approximately $37.0 million during the period.

The wholesale strategy operates with a lower cost of operations, although with lower interest rate spreads and therefore at a lower margin than the retail operations of the Company. The Company has utilized this strategy for several years. The Company manages this strategy through its interest rate risk management on a macro level. This strategy historically produces wider margins during periods of lower short-term interest rates, reflected in a steep yield curve and can be susceptible to net interest margin strain in both rapidly rising rates and rapidly declining rates as well as a sustained inverted yield curve.

Management continues to pursue methods of insulating this wholesale strategy from significant fluctuations in interest rates by: (1) incorporating a laddered maturity schedule of up to five years on the wholesale borrowings; (2) the purchase of off-balance sheet interest rate caps and interest rate caps imbedded in structured borrowing’s, which help to insulate the Company’s interest rate risk position from increases in interest rates; (3) providing structure in the investment portfolio in the form of corporate bonds and municipals securities; (4) utilizing cash flows from fixed and adjustable rate mortgage-backed securities; and (5) the placing of the Company’s securities in the available for sale portfolio thereby creating the flexibility to change the composition of the portfolio through restructuring as management deems it necessary due to interest rate fluctuations. Management believes that this insulation affords them the ability to react to measured changes in interest rates and restructure the Company’s statement of financial condition accordingly. This strategy is continually evaluated by management on an ongoing basis.

RESULTS OF OPERATIONS

Earnings Summary. The Company recorded net income of $3.9 million for the three months ended September 30, 2012 as compared to $4.0 million for the same period in the prior year. The $30,000, or 0.8%, decrease in net income for the quarter ended September 30, 2012 as compared to the same period in the prior year was primarily the result of a decrease in net interest income of $319,000 and increases in provision for loan losses and noninterest expense of $50,000 and $545,000, respectively, partially offset by an increase in noninterest income of $439,000 as well as decreases in provision for income taxes and income attributable to the non-controlling interest of $217,000 and $228,000, respectively.

The Company recorded net income of $11.4 million for the nine months ended September 30, 2012 as compared to $11.9 million for the same period in the prior year. The $509,000, or 4.3%, decrease in net income for the nine months ended September 30, 2012 as compared to the same period in the prior year was primarily the result of a decrease in net interest income of $350,000 and increases in provision for loan losses and noninterest expense of $50,000 and $1.6 million, respectively, partially offset by an increase in noninterest income of $533,000 as well as decreases in provision for income taxes and income attributable to the non-controlling interest of $629,000 and $282,000, respectively.

Net interest income. Net interest income, the primary source of revenue for the Company, is determined by the Company’s interest rate spread, which is defined as the difference between income on earning assets and the cost of funds supporting those assets, and the relative amounts of interest earning assets and interest bearing liabilities. Management periodically adjusts the mix of assets and liabilities, as well as the rates earned or paid on those assets and liabilities in order to manage and improve net interest income. The level of interest rates and changes in the amount and composition of interest earning assets and liabilities affect the Company’s net interest income. Historically from an interest rate risk perspective, it has been management’s perception that differing interest rate environments, these being, extended low long-term interest rates, rapidly rising short-term interest rates as well as a sustained inverted yield curve, can cause sensitivity to the Company’s net interest income.

41

Net interest income decreased $ 319,000, or 2.9%, to $10.8 million for the three months ended September 30, 2012, compared to $11.1 million for the same period in the prior year. This decrease in net interest income was the result of a decrease in interest income of $1.9 million, partially offset by a decrease in interest expense of $1.6 million.

Net interest income decreased $ 350,000, or 1.1%, to $32.8 million for the nine months ended September 30, 2012, compared to $33.1 million for the same period in the prior year. This decrease in net interest income was the result of a decrease in interest income of $4.6 million, partially offset by a decrease in interest expense of $4.2 million.

Interest income. Interest income decreased $1.9 million, or 9.5%, for the three months ended September 30, 2012, compared to the same period in the prior year. This decrease can primarily be attributed to decreases in interest earned on loans receivable and securities available for sale of $412,000 and $1.5 million, respectively.

Interest earned on loans receivable decreased $412,000, or 4.7%, for the three months ended September 30, 2012, compared to the same period in the prior year. This decrease was primarily attributable to a decrease in the yield on the portfolio of 44 basis points to 5.03% for the three months ended September 30, 2012, compared to 5.47% for the same period in the prior year, partially offset by an increase in the average balance of loans outstanding of $27.1 million, or 4.2%, to $675.5 million for the three months ended September 30, 2012, compared to $648.4 million for the same period in the prior year.

Interest earned on securities decreased $1.5 million, or 13.2%, for the three months ended September 30, 2012, compared to the same period in the prior year. This decrease was primarily the result of a 58 basis point decrease in the tax equivalent yield on securities to 3.80% for the three months ended September 30, 2012 from 4.38% for the three months ended September 30, 2011, partially offset by an increase in the average balance of the securities portfolio of $11.0 million, or 1.0%, to $1.1 billion at September 30, 2012.

Interest income decreased $4.6 million, or 7.6%, for the nine months ended September 30, 2012, compared to the same period in the prior year. This decrease can primarily be attributed to decreases in interest earned on loans receivable and securities available for sale of $1.1 million and $3.5 million, respectively.

Interest earned on loans receivable decreased $1.1 million, or 4.4%, for the nine months ended September 30, 2012, compared to the same period in the prior year. This decrease was primarily attributable to a decrease in the yield on the portfolio of 40 basis points to 5.09% for the nine months ended September 30, 2012, compared to 5.49% for the same period in the prior year, partially offset by an increase in the average balance of loans outstanding of $22.9 million, or 3.5%, to $668.6 million for the nine months ended September 30, 2012, compared to $645.8 million for the same period in the prior year.

Interest earned on securities decreased $3.5 million, or 10.3%, for the nine months ended September 30, 2012, compared to the same period in the prior year. This decrease was primarily the result of a 47 basis point decrease in the tax equivalent yield on securities to 4.00% for the nine months ended September 30, 2012 from 4.47% for the nine months ended September 30, 2011, partially offset by an increase in the average balance of the securities portfolio of $13.4 million, or 1.2%, to $1.1 billion at September 30, 2012.

Interest expense. Interest expense decreased $1.6 million, or 17.8%, for the three months ended September 30, 2012, compared to the same period in the prior year. This decrease in interest expense can be attributed to decreases in interest incurred on deposits and borrowed funds of $706,000 and $855,000, respectively.

Interest incurred on deposits decreased $706,000, or 24.1%, for the three months September 30, 2012, compared to the same period in the prior year. This decrease was due to a decrease in the cost of interest-bearing deposits of 31 basis points to 0.81% from 1.12% for the quarters ended September 30, 2012 and 2011, respectively, partially offset by an increase in the average balance of interest-bearing deposits of $62.0 million, or 6.0% to $1.1 billion for the three months ended September 30, 2012, compared to $1.0 billion for the same period in the prior year. The Company manages its cost of interest bearing deposits by diligently monitoring the interest rates on its products as well as the rates being offered by its competition through weekly interest rate committee meetings and utilizing rate surveys and hence subsequently adjusting rates accordingly.

42

Interest incurred on borrowed funds decreased $855,000, or 16.5%, for the three months ended September 30, 2012 compared to the same period in the prior year. This decrease was primarily attributable to a decrease in the average balance of borrowed funds of $100.9 million, or 16.7%, partially offset by an increase in the cost of these funds to 3.43% for the quarter ended September 30, 2012 as compared to 3.41%, for the quarter ended September 30, 2011.

Interest expense decreased $4.2 million, or 15.7%, for the nine months ended September 30, 2012, compared to the same period in the prior year. This decrease in interest expense can be attributed to decreases in interest incurred on deposits and borrowed funds of $2.0 million and $2.2 million, respectively.

Interest incurred on deposits decreased $2.0 million, or 22.0%, for the nine months ended September 30, 2012, compared to the same period in the prior year. This decrease was due to a decrease in the cost of interest-bearing deposits of 36 basis points to 0.88% from 1.24% for the periods ended September 30, 2012 and 2011, respectively, partially offset by an increase in the average balance of interest-bearing deposits of $99.6 million, or 10.0% to $1.1 billion for the nine months ended September 30, 2012, compared to $993.0 million for the same period in the prior year. The Company manages its cost of interest bearing deposits by diligently monitoring the interest rates on its products as well as the rates being offered by its competition through weekly interest rate committee meetings and utilizing rate surveys and hence subsequently adjusting rates accordingly.

Interest incurred on borrowed funds decreased $2.2 million, or 14.0%, for the nine months ended September 30, 2012 compared to the same period in the prior year. This decrease was primarily attributable to a decrease in the average balance of borrowed funds of $97.9 million, or 15.7%, partially offset by an increase in the cost of these funds to 3.45% for the nine months ended September 30, 2012 as compared to 3.38%, for the nine months ended September 30, 2011.

In addition to its wholesale strategy, the Company manages its cost of borrowings through the use of debt associated with the issuance of trust preferred securities. During the quarter ended September 30, 2012, the interest incurred on these borrowings increased by $6,000, or 1.0%, due to an increase in the cost of these funds to 5.29% from 5.23% for the same period in the prior year. During the nine months ended September 30, 2012, the interest incurred on these borrowings increased by $23,000, or 1.3%, due to an increase in the cost of these funds to 5.30% from 5.24% for the same period in the prior year.

Average Balance Sheet and Yield/Rate Analysis. The following tables set forth, for the periods indicated, information concerning the total dollar amounts of interest income from interest-earning assets and the resultant average yields, the total dollar amounts of interest expense on interest-bearing liabilities and the resultant average costs, net interest income, interest rate spread and the net interest margin earned on average interest-earning assets. For purposes of these tables, average balances are calculated using monthly averages and the average loan balances include non-accrual loans and exclude the allowance for loan losses, and interest income includes accretion of net deferred loan fees. Yields on tax-exempt securities (tax-exempt for federal income tax purposes) are shown on a fully tax equivalent basis utilizing a federal tax rate of 34%. Yields and rates have been calculated on an annualized basis utilizing monthly interest amounts.

43

(Dollar amounts in thousands)	Three months ended September 30,
	2012							2011
	Average Balance		Interest		Yield / Rate			Average Balance		Interest		Yield / Rate
Interest-earning assets:
Taxable securities available for sale	$	696,108	$	6,032		3.47	%	$	790,130	$	8,018		4.06	%
Taxable corporate bonds available for sale		251,833		1,914		3.00	%		151,088		1,418		3.72	%
Tax-exempt securities available for sale		148,275		1,654		6.76	% (1)		144,041		1,619		6.81	% (1)
		1,096,216		9,600		3.80	% (1)		1,085,259		11,055		4.38	% (1)
Mortgage loans		488,729		6,118		5.01	%		469,275		6,410		5.46	%
Other loans		150,400		1,888		4.99	%		151,009		2,062		5.42	%
Tax-exempt loans		36,350		328		5.45	% (1)		28,067		274		5.87	% (1)
		675,479		8,334		5.03	% (1)		648,351		8,746		5.47	% (1)
Cash equivalents		19,183		5		0.10	%		57,024		16		0.11	%
FHLB stock		17,654		4		0.11	%		22,571		—		—
		36,837		9		0.11	%		79,595		16		0.08	%
Total interest-earning assets		1,808,532		17,943		4.19	% (1)		1,813,205		19,817		4.58	% (1)
Other noninterest-earning assets		165,319		—		—			169,763		—		—
Total assets	$	1,973,851	$	17,943		3.84	% (1)	$	1,982,968	$	19,817		4.19	% (1)
Interest-bearing liabilities:
Interest-bearing demand deposits	$	460,833	$	89		0.08	%	$	387,055	$	269		0.28	%
Time deposits		635,022		2,136		1.34	%		646,754		2,662		1.63	%
		1,095,855		2,225		0.81	%		1,033,809		2,931		1.12	%
FHLB advances		195,059		1,568		3.20	%		233,534		1,870		3.18	%
Repurchase Agreements		299,667		2,660		3.53	%		354,667		3,146		3.52	%
Other borrowings		7,250		97		5.27	%		14,707		164		4.42	%
		501,976		4,325		3.43	%		602,908		5,180		3.41	%
Junior subordinated notes- fixed		36,083		528		5.81	%		36,083		526		5.78	%
Junior subordinated notes- adjustable		10,310		90		3.47	%		10,310		86		3.31	%
		46,393		618		5.29	%		46,393		612		5.23	%
Total interest-bearing liabilities		1,644,224		7,168		1.73	%		1,683,110		8,723		2.06	%
Noninterest-bearing demand deposits		109,823		—		—			92,777		—		—
Other noninterest-bearing liabilities		26,750		—		—			22,579		—		—
Total liabilities		1,780,797		7,168		1.60	%		1,798,466		8,723		1.92	%
Stockholders’ equity		193,054		—		—			184,502		—		—
Total liabilities and equity	$	1,973,851	$	7,168		1.44	%	$	1,982,968	$	8,723		1.75	%
Net interest income			$	10,775						$	11,094
Interest rate spread (difference between						2.46	% (1)						2.52	% (1)
weighted average rate on interest-earning assets and interest-bearing liabilities)
Net interest margin (net interest						2.61	% (1)						2.67	% (1)
income as a percentage of average interest-earning assets)

44

(Dollar amounts in thousands)	Nine months ended September 30,
	2012							2011
	Average Balance		Interest		Yield/ Rate			Average Balance		Interest		Yield/ Rate
Interest-earning assets:
Taxable securities available for sale	$	714,365	$	19,523		3.64	%	$	787,275	$	24,599		4.17	%
Taxable corporate bonds available for sale		232,639		5,823		3.31	%		152,101		4,423		3.89	%
Tax-exempt securities available for sale		147,101		4,966		6.82	% (1)		141,330		4,767		6.81	% (1)
		1,094,105		30,312		4.00	% (1)		1,080,706		33,789		4.47	% (1)
Mortgage loans		484,252		18,460		5.08	%		469,024		19,260		5.48	%
Other loans		148,879		5,601		5.03	%		150,854		6,151		5.45	%
Tax-exempt loans		35,513		956		5.45	% (1)		25,883		750		5.87	% (1)
		668,644		25,017		5.09	% (1)		645,761		26,161		5.49	% (1)
Cash equivalents		35,501		54		0.20	%		34,520		21		0.08	%
FHLB stock		19,243		20		0.14	%		23,924		—		—
		54,744		74		0.18	%		58,444		21		0.05	%
Total interest-earning assets		1,817,493		55,403		4.28	% (1)		1,784,911		59,971		4.69	% (1)
Other noninterest-earning assets		165,526		—		—			163,210		—		—
									—
Total assets	$	1,983,019	$	55,403		3.93	% (1)	$	1,948,121	$	59,971		4.30	% (1)
Interest-bearing liabilities:
Interest-bearing demand deposits	$	440,171	$	415		0.13	%	$	348,710	$	866		0.33	%
Time deposits		652,638		6,798		1.39	%		644,527		8,381		1.74	%
		1,092,809		7,213		0.88	%		993,237		9,247		1.24	%
FHLB advances		197,772		4,785		3.23	%		245,017		5,760		3.14	%
Repurchase Agreements		318,833		8,455		3.54	%		360,778		9,399		3.48	%
Other borrowings		8,722		328		5.01	%		17,402		616		4.73	%
		525,327		13,568		3.45	%		623,197		15,775		3.38	%
Junior subordinated notes-fixed		36,083		1,568		5.80	%		36,083		1,561		5.78	%
Junior subordinated notes-adjustable		10,310		273		3.54	%		10,310		257		3.33	%
		46,393		1,841		5.30	%		46,393		1,818		5.24	%
Total interest-bearing liabilities		1,664,529		22,622		1.82	%		1,662,827		26,840		2.16	%
Noninterest-bearing demand deposits		104,634		—		—			89,253		—		—
Other noninterest-bearing liabilities		25,147		—		—			19,446		—		—
Total liabilities		1,794,310		22,622		1.68	%		1,771,526		26,840		2.03	%
Stockholders’ equity		188,709		—		—			176,595		—		—
Total liabilities and equity	$	1,983,019	$	22,622		1.52	%	$	1,948,121	$	26,840		1.84	%
Net interest income			$	32,781						$	33,131
Interest rate spread (difference between weighted average rate on interest-earning assets and interest-bearing liabilities)						2.46	% (1)						2.53	% (1)
Net interest margin (net interest income as a percentage of average interest-earning assets)						2.62	% (1)						2.68	% (1)

(1) The yield on earning assets and the net interest margin are presented on a fully taxable-equivalent (FTE) and annualized basis. The FTE basis adjusts for the tax benefit of income on certain tax-exempt investments and tax-exempt loans using the federal statutory rate of 34% for each period presented. ESB believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.

45

Analysis of Changes in Net Interest Income. The following tables analyze the changes in interest income and interest expense, for the three and nine month periods ended September 30, 2012 in terms of: (1) changes in volume of interest-earning assets and interest-bearing liabilities and (2) changes in yields and rates. The table reflects the extent to which changes in the Company’s interest income and interest expense are attributable to changes in rate (change in rate multiplied by prior period volume), changes in volume (changes in volume multiplied by prior period rate) and changes attributable to the combined impact of volume/rate (change in rate multiplied by change in volume). The changes attributable to the combined impact of volume/rate are allocated on a consistent basis between the volume and rate variances. Changes in interest income on securities reflects the changes in interest income on a fully tax equivalent basis.

(Dollar amounts in thousands)	Three months ended, September 30, 2012 versus 2011 Increase (decrease) due to
	Volume			Rate			Total
Interest income:
Securities	$	111		$	(1,566	)	$	(1,455	)
Loans		356			(768	)		(412	)
Cash equivalents		(10	)		(1	)		(11	)
FHLB stock		—			4			4
Total interest-earning assets		457			(2,331	)		(1,874	)
Interest expense:
Deposits		167			(873	)		(706	)
FHLB advances		(309	)		7			(302	)
Repurchase agreements		(488	)		2			(486	)
Other borrowings		(95	)		28			(67	)
Junior subordinated notes		—			6			6
Total interest-bearing liabilities		(725	)		(830	)		(1,555	)
Net interest income	$	1,182		$	(1,501	)	$	(319	)

(Dollar amounts in thousands)	Nine months ended September 30, 2012 versus 2011 Increase (decrease) due to
	Volume			Rate			Total
Interest income:
Securities	$	414		$	(3,891	)	$	(3,477	)
Loans		905			(2,049	)		(1,144	)
Cash equivalents		1			32			33
FHLB stock		—			20			20
Total interest-earning assets		1,320			(5,888	)		(4,568	)
Interest expense:
Deposits		858			(2,892	)		(2,034	)
FHLB advances		(1,139	)		164			(975	)
Repurchase agreements		(1,110	)		166			(944	)
Other borrowings		(324	)		36			(288	)
Junior subordinated notes		—			23			23
Total interest-bearing liabilities		(1,715	)		(2,503	)		(4,218	)
Net interest income	$	3,035		$	(3,385	)	$	(350	)

46

Provision for loan losses. The provision for loan losses increased $50,000 to $350,000 for the quarter ended September 30, 2012 when compared to the quarter ended September 30, 2011 and increased $50,000 to $850,000 for the nine months ended September 30, 2012 when compared to the same period ended September 30, 2011. These provisions were part of the normal operations of the Company for the periods ending September 30, 2012. In determining the appropriate level of allowance for loan losses, management considers historical loss experience, the financial condition of borrowers, economic conditions (particularly as they relate to markets where the Company originates loans), the status of non-performing assets, the estimated underlying value of the collateral and other factors related to the collectability of the loan portfolio. The Company’s total allowance for losses on loans at September 30, 2012 amounted to $6.6 million, or 0.95% of the Company’s total loan portfolio, as compared to $6.5 million, or 0.98%, at December 31, 2011. The Company’s allowance for losses on loans as a percentage of non-performing loans was 41.86% and 48.94% at September 30, 2012 and December 31, 2011, respectively.

Non-interest income. Non-interest income increased $439,000, or 36.6%, for the three months ended September 30, 2012 compared to the same period in the prior year. The increase in non-interest income was primarily due to decreases in the net realized loss on derivatives of $851,000 and net impairment losses on securities of $83,000, as well as an increase in other income of $41,000. These increases in non-interest income were partially offset by decreases to fees and service charges, cash surrender value of bank owned life insurance, net realized gain on securities available for sale and income from real estate joint ventures of $59,000, $39,000, $209,000 and $229,000, respectively.

Non-interest income increased $533,000, or 12.2%, for the nine months ended September 30, 2012 compared to the same period in the prior year. The increase in non-interest income was primarily due to decreases in the net realized loss on derivatives of $1.3 million and net impairment losses on securities of $52,000, as well as an increase in other income of $78,000. These increases in non-interest income were partially offset by decreases to fees and service charges, cash surrender value of bank owned life insurance, net realized gain on securities available for sale and income from real estate joint ventures of $88,000, $76,000, $473,000 and $272,000, respectively.

Net realized gain on securities available for sale decreased $209,000 and $473,000 for the three and nine months ended September 30, 2012, respectively. During the nine months ended September 30, 2012, the Company had $500,000 in equity sales from the portfolio in the first quarter, no sales in second quarter, and $120,000 of equity sales in the third quarter, resulting in a gain of $197,000 for the quarter and $464,000 for the nine month period. During the nine months ended September 30, 2011, the Company had $25.3 million in sales from the portfolio, consisting of sales of fixed-rate mortgage backed securities of $24.5 million, adjustable-rate mortgage back securities of $648,000 and common stock of $204,000 resulting in a gain of $937,000.

The Company had losses on derivatives during the quarter ended September 30, 2012 of $138,000 compared to losses in the same period in 2011 of $989,000, resulting in an increase between the periods of $851,000. The Company had losses on derivatives during the nine months ended September 30, 2012 of $538,000 compared to losses in the same period in 2011 of $1.9 million, resulting in an increase between the periods of $1.3 million. These fluctuations were due to market value adjustments to the Company’s interest rate caps.

Real estate joint venture income decreased $229,000 and $272,000 for the three and nine months ended September 30, 2012 when compared to the same periods in the prior year. The Company has a 51% ownership in its real estate joint ventures. The Company has a mixture of joint ventures in which it participates either in land development only or construction of units.

Non-interest expense. Non-interest expense increased $545,000, or 8.1%, to $7.2 million for the three months ended September 30, 2012 as compared to $6.7 million for the same period in the prior year. This increase was primarily related to increases in compensation and employee benefits, premises and equipment, federal deposit insurance premiums, data processing, advertising and other expenses of $228,000, $13,000, $53,000, $31,000, $18,000 and $223,000, respectively, partially offset by a decrease in amortization of intangible assets of $21,000.

47

Non-interest expense increased $1.6 million, or 7.4%, to $22.5 million for the nine months ended September 30, 2012 as compared to $20.9 million for the same period in the prior year. This increase was primarily related to increases in compensation and employee benefits, premises and equipment, federal deposit insurance premiums, data processing, advertising and other expenses of $794,000, $90,000, $29,000, $64,000, $65,000 and $572,000, respectively, partially offset by a decrease in amortization of intangible assets of $61,000.

Compensation and employee benefits increased $228,000 and $794,000 for the three and nine months ended September 30, 2012, as compared to the same period in the prior year. The increases were primarily due to normal salary adjustments between the periods as well as increases to compensation expense related to retirement expenses, stock options, the management recognition plan (MRP), the restricted stock grants and group life and hospital insurance expense.

Other expenses increased $223,000 and $572,000 for the three and nine months ended September 30, 2012 as compared to the same period in the prior year. The increases were primarily due to increased costs related to the Company’s REO properties.

Provision for income taxes. The provision for income taxes decreased $217,000, or 21.5%, to $793,000 for the three months ended September 30, 2012, compared to $1.0 million for the same period in the prior year. This provision for income taxes reflects an effective tax rate of 16.8% for the quarter ended September 30, 2012 as compared to 20.3% for the same period in the prior year.

The provision for income taxes decreased $629,000, or 20.5%, to $2.4 million for the nine months ended September 30, 2012, compared to $3.1 million for the same period in the prior year. This provision for income taxes reflects an effective tax rate of 17.6% for the nine months ended September 30, 2012 as compared to 20.5% for the same period in the prior year.

Net Income Attributable to the noncontrolling interest. Noncontrolling interest decreased $228,000, or 72.4%, to income of $87,000 for the three months ended September 30, 2012 compared to income of $315,000 for the three months ended September 30, 2011 and decreased $282,000, or 34.7%, to income of $531,000 for the nine months ended September 30, 2012 $813,000 for the nine months ended September 30, 2011. This represents the portion of the Company’s profits on the consolidated joint ventures earned by the partners.

CHANGES IN FINANCIAL CONDITION

General. The Company’s total assets decreased by $539,000, or 0.03%, to $1.96 billion at September 30, 2012. This decrease resulted primarily from decreases to cash and cash equivalents, accrued interest receivable, FHLB stock, premises and equipment, real estate acquired through foreclosure, real estate held for investment, intangible assets, bank owned life insurance and prepaid expenses and other assets of $20.1 million, or 51.8%, $946,000, or 10.3%, $3.9 million, or 18.4%, $349,000, or 2.3%, $1.1 million, or 27.8%, $2.7 million, or 17.9%, $197,000, or 35.6%, $938,000, or 3.1% and $1.0 million, or 12.5%. These decreases were partially offset by increases in securities available for sale, loans receivable and securities receivable of $6.5 million, or 0.6%, $23.0 million, or 3.6% and $1.2 million, or 107.3%. Total non-performing assets increased to $18.6 million at September 30, 2012 compared to $17.3 million at December 31, 2011 and non-performing assets to total assets were 0.95% at September 30, 2012 compared to 0.88% at December 31, 2011. The Company’s total liabilities decreased $17.6 million, or 1.0%, to $1.8 billion at September 30, 2012. This decrease resulted primarily from decreases in borrowed funds, advance payments by borrowers for taxes and insurance and accounts payable for land development of $62.2 million, or 10.3%, $1.2 million, or 47.2%, and $516,000, or 19.6%, respectively, partially offset by an increase in deposits and accrued expenses and other liabilities of $37.0 million, or 3.2% and $9.3 million, or 54.3%, respectively. Stockholders’ equity increased $17.1 million, or 9.5%, to $196.2 million at September 30, 2012 from $179.1 million at December 31, 2011. The increase in stockholders’ equity was primarily the result of increases in retained earnings and accumulated other comprehensive income of $6.8 million and $8.6 million, respectively. Average stockholders’ equity to average assets was 9.52%, and book value per share was $13.45 at September 30, 2012 compared to 9.08% and $12.34, respectively, at December 31, 2011.

48

Cash on hand, Interest-earning deposits and Federal funds sold. Cash on hand, interest-earning deposits and federal funds sold represent cash equivalents. Cash equivalents decreased a combined $20.1 million, or 51.8%, to $18.7 million at September 30, 2012 from $38.8 million at December 31, 2011. These accounts are typically increased by deposits from customers into saving and checking accounts, loan and security repayments and proceeds from borrowed funds. Decreases result from customer withdrawals, new loan originations, security purchases and repayments of borrowed funds.

Securities. The Company’s securities and loan portfolios represent its two largest balance sheet asset classifications, respectively. The Company’s securities portfolio increased by $6.5 million, or 0.6%, to $1.1 billion at September 30, 2012. During the nine months ended September 30, 2012, the Company recorded purchases of available for sale securities of $196.0 million, consisting of purchases of fixed-rate mortgage backed securities of $93.7 million, adjustable-rate mortgage backed securities of $13.4 million, $10.9 million of municipal bonds, $77.9 million of corporate bonds and $127,000 of equity securities. In addition, the portfolio increased by $13.0 million due to increases in market value. These fair value adjustments represent temporary fluctuations resulting from changes in market rates in relation to average yields in the available for sale portfolio. Offsetting these increases were sales of $1.1 million, consisting of sales of common stock resulting in a gain of $464,000. In addition, there were repayments and maturities of securities of $199.9 million, premium amortizations of $1.9 million and realized losses of $31,000.

The Company’s investment strategy for 2012 is to utilize the cash flows from the mortgage backed security and investment portfolios for the funding of loans and for reinvestment into similar investment products to maintain or improve the Company’s interest rate sensitivity. The Company continues to also purchase corporate or municipal bonds to provide structure during this historically low interest rate environment. As an additional step to aid interest rate sensitivity, the Company at September 30, 2012 had $105.0 million of wholesale borrowings with embedded interest rate caps totaling $130.0 million to help insulate the net interest margin against a rapid rise in short term interest rates and $170.0 million, notional amount, of interest rate caps that are unhedged and marked to market quarterly through the income statement. In the first nine months of 2012, this resulted in approximately a $538,000 decrease in non-interest income due to decreases in the fair value of these interest rate caps.

Quarterly, the Company reviews its securities portfolio for other-than-temporary impairment. This review includes an assessment of the following factors; the rating of the security, the length of time that the decline in fair value has existed, the financial condition of the issuer and the issuer’s ability to continue to pay interest or dividends, whether the decline can be attributed to specific adverse conditions in the geographic area or industry, the extent that fair value is below cost and management’s ability to hold the investment for a period of time to allow for recovery.

As of September 30, 2012, the Company had securities with unrealized losses for greater than twelve months of $10.3 million, as more fully described in footnote 2 “Securities” to the Unaudited Consolidated Financial Statements. The $10.3 million primarily consists of unrealized losses attributed to the Company’s floating rate trust preferred corporate bonds. Management’s conclusion after reviewing all of the factors, is that although the market value of these securities is below book value and will most likely remain so until the economic environment changes, management believes it to be a function of widening credit spreads that have affected the corporate bond market in general as the economy has weakened and is not a reflection of the issuers’ credit worthiness. Therefore, although some of the bonds exhibit a few of the indicators of an other-than-temporary impairment, the majority of the evidence indicates that no impairment exists at this time and the decline is due to the widening credit spreads as well as the current interest rate environment. Finally, the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, and considers the securities an important part of managing its interest rate risk profile.

Loans receivable. The loans receivable category consists primarily of single family mortgage loans used to purchase or refinance personal residences located within the Company’s market area and commercial real estate loans used to finance properties that are used in the borrowers businesses or to finance investor-owned rental properties, and to a lesser extent commercial and consumer loans. Net loans receivable increased $23.0 million, or 3.6%, to $671.9 million at September 30, 2012 from $648.9 million at December 31, 2011. Included in this

49

increase in loans receivable were increases in mortgage loans, consumer loans and commercial loans of $13.0 million, or 2.6%, $4.3 million, or 3.4%, and $4.0 million, or 8.0%, respectively. Additionally, the portfolio was increased by changes in the allowance for loan losses, deferred loan fees and loans in process which combined decreased $1.7 million, or 7.8%, during the nine months ended September 30, 2012.

Non-performing assets. Nonperforming assets consist of nonaccrual loans, repossessed automobiles, real estate acquired through foreclosure (REO) and troubled debt restructuring (TDR). A loan is placed on nonaccrual status when, in the judgment of management, the probability of collection of interest is deemed insufficient to warrant further accrual. When a loan is placed on nonaccrual status, previously accrued but uncollected interest is deducted from interest income. The Company does not accrue interest on loans past due 90 days or more.

Non-performing assets amounted to $18.6 million, or 0.95%, of total assets at September 30, 2012 compared to $17.3 million, or 0.88%, of total assets at December 31, 2011. The increase in non-performing assets of approximately $1.3 million was primarily the result of increases in the balances of non-performing loans and TDR’s of $1.5 million and $800,000, respectively, partially offset by a decrease to REO of approximately $1.0 million. The Company had an increase in its loans past due over 90 days and restructured approximately $159,000 of consumer loans in the quarter ended September 30, 2012.

FHLB Stock. FHLB stock decreased by $3.9 million, or 18.4%, to $17.3 million at September 30, 2012 compared to $21.3 million at December 31, 2011, due to redemption of the stock by the FHLB. The Bank is required to maintain an investment in capital stock of the FHLB of Pittsburgh in an amount not less than 5.0% of its outstanding notes payable to the FHLB of Pittsburgh. In 2008, the FHLB suspended both the payment of dividends and the repurchase of excess capital stock. During the fourth quarter of 2010, the FHLB partially lifted the suspension with a limited repurchase of excess stock. This repurchase restriction could result in the Bank’s investment in FHLB stock being greater than 5.0% of its outstanding notes payable to the FHLB.

Real Estate Held for Investment. The Company’s real estate held for investment decreased by $2.7 million, or 17.9%, to $12.5 million at September 30, 2012 from $15.3 million at December 31, 2011. This decrease was partially the result of sales activity in the joint ventures in which the Company has a 51% ownership, offset by construction activity within those joint ventures.

Intangible assets. Intangible assets decreased $197,000, or 35.6%, to $357,000 at September 30, 2012 from $554,000 at December 31, 2011. The decrease primarily resulted from normal amortization of the core deposit intangible from acquisitions. Amortization is expected to total $250,000, $170,000, $110,000 and $8,000 for the years 2012, 2013, 2014 and 2015, respectively.

Bank owned life insurance. Bank owned life insurance (BOLI) is universal life insurance, purchased by the Bank, on the lives of the Bank’s employees. The beneficial aspects of these universal life insurance policies are tax-free earnings and a tax-free death benefit, which are realized by ESB as the owner of the policies. The cash surrender value of the BOLI as of September 30, 2012 was $29.9 million.

Prepaid Expenses and Other Assets. Prepaid expenses and other assets decreased $1.0 million, or 12.5%, to $7.1 million at September 30, 2012 from $8.1 million at December 31, 2011. This decrease is primarily due to a decrease in the prepaid FDIC assessment of $1.0 million as well as declines in the Company’s receivables. In 2009, the FDIC amended its regulations and required insured institutions to prepay their estimated quarterly risk-based assessments through the year 2012. The Company’s prepaid assessment was $3.4 million at December 31, 2011 and has declined to $2.4 million at September 30, 2012.

Deposits. The Company considers various sources when evaluating funding needs, including but not limited to deposits, which are a significant source of funds. Deposits totaled $1.2 billion, or 68.7%, of the Company’s total funding sources at September 30, 2012. Total deposits increased $37.0 million, or 3.2%, during the nine months ended September 30, 2012. Interest-bearing demand deposits increased $67.6 million and time deposits decreased $42.7 million, during the nine months ended September 30, 2012, while non-interest bearing deposits increased approximately $12.1 million during the same period. The deposit growth was comprised primarily of low interest core deposits which increased approximately $79.7 million during the period. The Company continues to pursue low cost core deposit funding through its ongoing campaign to increase commercial, public and personal checking accounts throughout its 25 branch network.

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Borrowed funds. The Company utilizes short and long-term borrowings as another source of funding used for asset growth and liquidity needs. These borrowings include FHLB advances and repurchase agreement borrowings. Borrowed funds decreased $62.2 million, or 10.3%, to $544.7 million at September 30, 2012 from $607.0 million at December 31, 2011. FHLB advances decreased $3.7 million, or 1.8%, repurchase agreements decreased $55.0 million, or 16.0%, other borrowings decreased approximately $3.6 million, or 34.9%, while junior subordinated notes remained the same at $46.4 million during the nine months ended September 30, 2012. Borrowed funds and deposits are two of the primary sources of funds for the Company. As part of its general business practice, the Company seeks out the most competitive rate on the products and will adjust the mix of FHLB advances and repurchase agreements accordingly.

Accounts payable for land development. The accounts payable for land development decreased $516,000, or 19.6%, to $2.1 million at September 30, 2012 from $2.6 million at December 31, 2011. This account represents the unpaid portion of the development costs for the Company’s joint ventures.

Accrued Expenses and Other Liabilities. Accrued expenses and other liabilities increased by $9.3 million, or 54.3%, to $26.5 million at September 30, 2012 from $17.2 million at December 31, 2011. The increase was primarily due to increases in various accrued expenses including escrow accounts related to the mortgage and commercial loans and the deferred tax liability related to the fair value on the securities available for sale portfolio.

Stockholders’ equity. Stockholders’ equity increased $17.1 million, or 9.5%, to $196.2 million at September 30, 2012 from $179.1 million at December 31, 2011. The increase in stockholders’ equity was primarily the result of increases in retained earnings and accumulated other comprehensive income of $6.8 million and $8.6 million, respectively. Average stockholders’ equity to average assets was 9.52%, and book value per share was $13.45 at September 30, 2012 compared to 9.08% and $12.34, respectively, at December 31, 2011.

ASSET AND LIABILITY MANAGEMENT

The primary objective of the Company’s asset and liability management function is to maximize the Company’s net interest income while simultaneously maintaining an acceptable level of interest rate risk given the Company’s operating environment, capital and liquidity requirements, performance objectives and overall business focus. The principal determinant of the exposure of the Company’s earnings to interest rate risk is the timing difference between the repricing or maturity of interest-earning assets and the repricing or maturity of its interest-bearing liabilities. The Company’s asset and liability management policies are designed to decrease interest rate sensitivity primarily by shortening the maturities of interest-earning assets while at the same time extending the maturities of interest-bearing liabilities. The Board of Directors of the Company continues to believe in strong asset/liability management in order to insulate the Company from material and prolonged increases in interest rates. As a result of this policy, the Company emphasizes a larger, more diversified portfolio of residential mortgage loans in the form of mortgage-backed securities. Mortgage-backed securities generally increase the quality of the Company’s assets by virtue of the insurance or guarantees that back them, are more liquid than individual mortgage loans and may be used to collateralize borrowings or other obligations of the Company.

The Company’s Board of Directors has established an Asset and Liability Management Committee consisting of outside directors, the President and Chief Executive Officer, Group Senior Vice President/Chief Financial Officer, Group Senior Vice President/Operations and Group Senior Vice President/Lending. This committee, which meets quarterly, generally monitors various asset and liability management policies and strategies, which were implemented by the Company over the past few years. These strategies have included: (i) an emphasis on the investment in adjustable-rate mortgage-backed securities, corporate bonds and trust preferred securities, (ii) an emphasis on the origination of single-family residential adjustable-rate mortgages (ARMs), residential construction loans and commercial real estate loans, which generally have adjustable or floating interest rates and/or shorter maturities than traditional single-family residential loans, and consumer loans, which generally

51

have shorter terms and higher interest rates than mortgage loans, (iii) increase the duration of the liability base of the Company by extending the maturities of savings deposits, borrowed funds and repurchase agreements and (iv) the purchase of off-balance sheet interest rate caps and structured borrowings with imbedded caps which help to insulate the Bank’s interest rate risk position from increases in interest rates.

As of September 30, 2012, the implementation of these asset and liability initiatives resulted in the following: (i) $142.5 million or 20.6% of the Company’s mortgage-backed securities portfolio, $127.5 million or 60.1% of the Company’s corporate bond portfolio and $35.8 million or 95.1% of the Company’s trust preferred securities portfolio were secured by ARMs; (ii) $192.0 million or 27.8% of the Company’s total loan portfolio had adjustable interest rates or maturities of 12 months or less and $56.2 million or 16.0% of the Company’s portfolio of single-family residential mortgage loans (including residential construction loans) consisted of ARMs, (iii) the weighted average call/maturity of the Company’s FHLB advances and repurchase agreements was 4.1 years and (iv) the Company had $170.0 million in notional amount of interest rate caps and $105.0 million in structured borrowings with $130.0 million in notional amount of imbedded caps.

The implementation of the foregoing asset and liability initiatives and strategies, combined with other external factors such as demand for the Company’s products and economic and interest rate environments in general, has resulted in the Company historically being able to maintain a one-year interest rate sensitivity gap (GAP) ranging between 0.0% of total assets to a negative 20.0% of total assets. The one-year interest rate sensitivity gap is defined as the difference between the Company’s interest-earning assets, which are scheduled to mature or reprice within one year and its interest-bearing liabilities, which are scheduled to mature or reprice within one year. At September 30, 2012, the Company’s interest-earning assets maturing or repricing within one year totaled $733.0 million while the Company’s interest-bearing liabilities maturing or repricing within one-year totaled $759.4 million, providing a deficiency of interest-earning assets over interest-bearing liabilities of $26.4 million or a negative 1.4% of total assets. At September 30, 2012, the percentage of the Company’s assets to liabilities maturing or repricing within one year was 96.5%. The Company normally strives to maintain its one-year interest rate sensitivity gap between a range of 0.0% and a negative 20.0% of total assets.

Historically, the one-year interest rate sensitivity gap has been the most common industry standard used to measure an institution’s interest rate risk position. In recent years, in addition to utilizing interest rate sensitivity gap analysis, the Company has increased its emphasis on the utilization of interest rate sensitivity simulation analysis to evaluate and manage interest rate risk.

The Company also utilizes income simulation modeling in measuring its interest rate risk and managing its interest rate sensitivity. The Asset and Liability Management Committee of the Company believes that simulation modeling enables the Company to more accurately evaluate and manage the possible effects on net interest income due to the exposure to changing market interest rates, the slope of the yield curve and different loan and mortgage-backed security prepayment and deposit decay assumptions under various interest rate scenarios.

As with gap analysis and earnings simulation modeling, assumptions about the timing and variability of cash flows are critical in economic value of equity (EVE) valuation analysis. Particularly important are the assumptions driving mortgage prepayments and the assumptions about expected attrition of the core deposit portfolios. These assumptions are based on the Company’s historical experience and industry standards and are applied consistently across the different rate risk measures.

The Company has established the following guidelines for assessing interest rate risk:

Net interest income simulation: Given a 200 basis point parallel and gradual increase or decrease in market interest rates, the Company strives to maintain the change in net interest income to no more than approximately 10% for a one-year period.

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Economic Value of Equity (EVE): EVE is the net present value of the Company’s existing assets and liabilities. EVE is expressed as a percentage of the value of equity to total assets. Given a 200 basis point immediate and permanent increase or decrease in market interest rates, the Company strives to maintain the EVE increase or decrease to no more than approximately 50% of stockholders equity.

The following table presents the simulated impact of a 100 basis point or 200 basis point upward or downward shift of market interest rates on net interest income, return on average equity, diluted earnings per share and the change in EVE. This analysis was done assuming that the interest-earning asset and interest-bearing liability levels at September 30, 2012 remained constant. The impact of the market rate movements was developed by simulating the effects of rates changing gradually over a one-year period from the September 30, 2012 levels for net interest income, return on average equity and diluted earnings per share. The impact of market rate movements was developed by simulating the effects of an immediate and permanent change in rates at September 30, 2012 for the change in EVE. The impact of the rate change for net interest income is compared to the base amount which can fluctuate from period to period.

	Increase						Decrease
	+100 BP			+200 BP			-100 BP			-200 BP
Net interest income - increase (decrease)		2.87	%		5.55	%		(3.14	%)		N/A
Return on average equity - increase (decrease)		5.83	%		11.30	%		(6.36	%)		N/A
Diluted earnings per share - increase (decrease)		6.05	%		11.60	%		(6.61	%)		N/A
EVE - decrease		(0.51	%)		(6.57	%)		(13.01	%)		N/A

The following table presents the simulated impact of a 100 basis point or 200 basis point upward or downward shift of market interest rates on net interest income, return on average equity, diluted earnings per share and the change in EVE. This analysis was done assuming that the interest-earning asset and interest-bearing liability levels at December 31, 2011 remained constant. The impact of the market rate movements was developed by simulating the effects of rates changing gradually over a one-year period from the December 31, 2011 levels for net interest income, return on average equity and diluted earnings per share. The impact of market rate movements was developed by simulating the effects of an immediate and permanent change in rates at December 31, 2011 for the change in EVE. The impact of the rate change for net interest income is compared to the base amount which can fluctuate from period to period.

	Increase						Decrease
	+100 BP			+200 BP			-100 BP			-200 BP
Net interest income - increase (decrease)		3.35	%		6.05	%		(4.14	%)		N/A
Return on average equity - increase (decrease)		6.47	%		11.63	%		(7.91	%)		N/A
Diluted earnings per share - increase (decrease)		6.72	%		12.13	%		(8.21	%)		N/A
EVE - increase (decrease)		0.84	%		(9.80	%)		(9.24	%)		N/A

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LIQUIDITY

The Company’s primary sources of funds generally have been deposits obtained through the offices of the Bank, borrowings from the FHLB, repurchase agreement borrowings and amortization and prepayments of outstanding loans and maturing investment securities.

Net cash provided by operating activities totaled $20.9 million for the nine months ended September 30, 2012. Net cash provided by operating activities was primarily comprised of net income of $11.9 million and increases in amortization of premiums and discounts and accrued expenses and other liabilities of $2.5 million and $5.0 million, respectively, as well as decreases in the prepaid FDIC assessment and prepaid expenses and other assets of $1.0 million and $1.7 million respectively, as well as slight variances in other operating activities. The decrease in prepaid expenses and other assets is primarily related to the change in the securities receivable.

Funds used in investing activities totaled $11.7 million during the nine months ended September 30, 2012. Primary uses of funds included $196.0 million for purchases of securities available for sale and $164.0 million for loan originations and purchases. These uses were partially offset by sources of funds from principal repayments of loans receivable and securities available for sale of $143.4 million and $200.0 million, respectively.

Funds used by financing activities totaled $29.4 million for the nine months ended September 30, 2012. The primary sources of funds were from an increase in deposits, proceeds from short-term borrowings and proceeds from long-term borrowings of $37.0 million, $9.3 million and $7.5 million, partially offset by uses of funds including repayments of long-term borrowings and payments of dividends of $79.0 million and $4.4 million, respectively.

At September 30, 2012, the total approved loan commitments outstanding amounted to $6.3 million. At the same date, commitments under unused lines of credit and credit card lines amounted to $78.6 million and the unadvanced portion of construction loans approximated $15.1 million. Certificates of deposit scheduled to mature in one year or less at September 30, 2012 totaled $361.9 million.

Historically, the Company used its sources of funds primarily to meet its ongoing commitments to pay maturing savings certificates and savings withdrawals, fund loan commitments and maintain a substantial portfolio of investment securities. The Company has been able to generate sufficient cash through the retail deposit market, its traditional funding source, and through FHLB advances and other borrowings, to provide the cash utilized in investing activities. Management believes that the Company currently has adequate liquidity available to respond to liquidity demands.

On September 18, 2012 the Company's Board of Directors declared a cash dividend of $0.10 per share of common stock payable October 25, 2012, to shareholders of record at the close of business on September 28, 2012. Dividends are subject to determination and declaration by the Board of Directors, which take into account the Company's financial condition, statutory and regulatory restrictions, general economic conditions and other factors. There can be no assurance that dividends will in fact be paid on the common stock in future periods or that, if paid, such dividends will not be reduced or eliminated.

REGULATORY CAPITAL REQUIREMENTS

Current regulatory requirements specify that the Bank and similar institutions must maintain leverage capital equal to 4% of adjusted total assets and total risk-based capital equal to 8% of risk-weighted assets. The Federal Deposit Insurance Corporation (FDIC) may require higher core capital ratios if warranted, and institutions are to maintain capital levels consistent with their risk exposures. The FDIC reserves the right to apply this higher standard to any insured financial institution when considering an institution’s capital adequacy. At September 30, 2012, ESB Bank was in compliance with all regulatory capital requirements with leverage and total risk-based capital ratios of 8.5% and 14.7%, respectively.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Quantitative and qualitative disclosures about market risk are presented at December 31, 2011 in Item 7A of the Company’s Annual Report on Form 10-K, for the year ended December 31, 2011, filed with the SEC on March 15, 2012. Management believes there have been no material changes in the Company’s market risk since December 31, 2011.

Item 4. Controls and Procedures

As of September 30, 2012, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), on the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2012. During the period ended September 30, 2012 there have been no significant changes in the Company’s internal controls over financial reporting or in other factors that could significantly affect internal controls.

Disclosure controls and procedures are the controls and other procedures that are designed to ensure that the information required to be disclosed by the Company in its reports filed and submitted under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in its reports filed under the Exchange Act is accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company and its subsidiaries are involved in various legal proceedings occurring in the ordinary course of business. It is the opinion of management, after consultation with legal counsel, that these matters will not materially affect the Company’s consolidated financial position or results of operations.

Item 1A. Risk Factors

There are no material changes to the risk factors included in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

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

(a) – (b)	Not applicable
(c)	The following table sets forth information with respect to purchases made by or on behalf of the Company of shares of common stock of the Company during the indicated periods.

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Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July l 1-31, 2012		2,538	$	13.77		2,538		64,606
August 1-31, 2012		1,220		13.79		1,220		63,386
September 1-30, 2012		963		13.40		963		62,423
Totals		4,721	$	13.70		4,721		62,423

(1) On May 20, 2009, the Company announced a new program to repurchase up to 5% of the outstanding shares of common stock of the Company, or 600,000 shares, of the Company’s outstanding common stock. The program began upon the completion of the existing plan. The program does not have an expiration date and all shares are purchased in the open market or in privately negotiated transactions, as in the opinion of management, market conditions warrant.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits:

31.1	Certification of Chief Executive Officer Pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant Section 906 of the Sarbanes-Oxley Act of 2002. (18 U.S.C. 1350)
32.2	Certification of Chief Financial Officer Pursuant Section 906 of the Sarbanes-Oxley Act of 2002. (18 U.S.C. 1350)

101.INS	XBRL Instance Document *
101.SCH	XBRL Taxonomy Extension Schema Document *
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document *
101.LAB	XBRL Taxonomy Extension Label Linkbase Document *
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document *
101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document *

* These interactive data files shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections.

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Signatures

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

ESB FINANCIAL CORPORATION
Date: November 9, 2012	By:        /s/ Charlotte A. Zuschlag
	Charlotte A. Zuschlag
	President and Chief Executive Officer

Date: November 9, 2012	By:        /s/ Charles P. Evanoski
	Charles P. Evanoski
	Group Senior Vice President and
	Chief Financial Officer

57

EX-31.1

Certifications

Exhibit 31.1

Certification of Chief Executive Officer

I, Charlotte A. Zuschlag, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ESB Financial Corporation (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by other within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant’s ability to record, process, summarize and report financial data and have identified for the Registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls.

Date: November 9, 2012	By:  /s/ Charlotte A. Zuschlag
	Charlotte A. Zuschlag
	President and Chief Executive Officer

58

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

I, Charles P. Evanoski, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ESB Financial Corporation (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by other within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent function):

a. all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant’s ability to record, process, summarize and report financial data and have identified for the Registrant’s auditors any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls;

Date: November 9, 2012	By: /s/ Charles P. Evanoski
	Charles P. Evanoski
	Group Senior Vice President and
	Chief Financial Officer

59

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

The undersigned executive officer of ESB Financial Corporation (the “Registrant”) hereby certifies that the Registrant’s Form 10-Q for the period ending September 30, 2012 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

By: /s/ Charlotte A. Zuschlag

Charlotte A. Zuschlag

President and Chief Executive Officer

Date: November 9, 2012

A signed original of this written statement required by Section 906 has been provided to ESB Financial Corporation and will be retained by ESB Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

The undersigned executive officer of ESB Financial Corporation (the “Registrant”) hereby certifies that the Registrant’s Form 10-Q for the period ending September 30, 2012 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

By: /s/ Charles P. Evanoski

Charles P. Evanoski

Group Senior Vice President and

Chief Financial Officer

Date: November 9, 2012

A signed original of this written statement required by Section 906 has been provided to ESB Financial Corporation and will be retained by ESB Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

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Loans Receivable (Details 3) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Residential Real Estate Multi-family [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	$ 32,888	$ 32,370
Residential Real Estate Multi-family [Member] | Pass [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	32,888	32,370
Residential Real Estate Multi-family [Member] | Special Mention [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable
Residential Real Estate Multi-family [Member] | Substandard [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable
Residential Real Estate Multi-family [Member] | Doubtful [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable
Residential Real Estate Multi-family [Member] | Loss [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable
Residential Real Estate, Construction [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	46,109	45,363
Residential Real Estate, Construction [Member] | Pass [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	39,802	38,219
Residential Real Estate, Construction [Member] | Special Mention [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	5,363	7,144
Residential Real Estate, Construction [Member] | Substandard [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	944
Residential Real Estate, Construction [Member] | Doubtful [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable
Residential Real Estate, Construction [Member] | Loss [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable
Commercial Real Estate [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	78,974	83,447
Commercial Real Estate [Member] | Pass [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	63,417	67,119
Commercial Real Estate [Member] | Special Mention [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	1,475	2,319
Commercial Real Estate [Member] | Substandard [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	14,082	14,009
Commercial Real Estate [Member] | Doubtful [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable
Commercial Real Estate [Member] | Loss [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable
Commercial Real Estate, Construction [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	18,410	17,307
Commercial Real Estate, Construction [Member] | Pass [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	18,410	17,307
Commercial Real Estate, Construction [Member] | Special Mention [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable
Commercial Real Estate, Construction [Member] | Substandard [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable
Commercial Real Estate, Construction [Member] | Doubtful [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable
Commercial Real Estate, Construction [Member] | Loss [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable
Commercial [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	54,358	50,337
Commercial [Member] | Pass [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	53,783	50,232
Commercial [Member] | Special Mention [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	539	57
Commercial [Member] | Substandard [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable	36	39
Commercial [Member] | Doubtful [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable
Commercial [Member] | Loss [Member]
Schedule of credit exposures by internally assigned grades
Financing Receivable		$ 9

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Retirement Plans (Details Textual)	9 Months Ended
	Sep. 30, 2012	Jun. 30, 2012
SERP [Member]
Retirement Plans (Textual) [Abstract]
Defined Benefit Plan description	The Company maintains a Supplemental Executive Benefit Plan (SERP) in order to provide supplemental retirement and death benefits for certain key employees of the Company. Under the SERP, participants shall receive an annual retirement benefit following retirement at age 65 equal to 25% of the participant’s final average pay multiplied by a ratio, ranging from 1.25% to 25.0%, based on the participant’s total years of service. Final average pay is based upon the participant’s last three year’s compensation. The maximum ratio of 25% requires twenty or more years of credited service and the minimum ratio of 1.25% requires one year of credited service. Benefits under the plan are payable in either a lump sum or ten equal annual payments and a lesser benefit is payable upon early retirement at age 50 with at least twelve years of service. If a participant dies prior to retirement, the participant’s estate will receive a lump sum payment equal to the net present value of future benefit payments under the plan. At June 30, 2012,, the participants in the plan had credited service under the SERP ranging from 21 to 33 years.
Annual retirement age	65
Annual retirement benefit	25.00%
Final average pay	3 years
Credited service description	twenty or more years
Credited service	1 year
Number of payments	lump sum or ten equal annual payments
Early retirement age	50
Early retirement age, period	12 years
SERP [Member] | Maximum [Member]
Retirement Plans (Textual) [Abstract]
Final average pay multiplied by a ratio	25.00%
Service credited to participants under SERP		33 years
SERP [Member] | Minimum [Member]
Retirement Plans (Textual) [Abstract]
Final average pay multiplied by a ratio	1.25%
Service credited to participants under SERP		21 years
Directors' Retirement Plan [Member]
Retirement Plans (Textual) [Abstract]
Defined Benefit Plan description	The Company and the Bank maintain the ESB Financial Corporation Directors’ Retirement Plan and have entered into director retirement agreements with each director of the Company and the Bank. The plan provides that any retiring director with a minimum of five or more years of service with the Company or the Bank and a minimum of 10 total years of service, including years of service with any bank acquired by the Company or the Bank, that remains in continuous service as a board member until age 75 will be entitled to receive an annual retirement benefit equal to his or her director’s fees earned during the last full calendar year prior to his or her retirement date, multiplied by a ratio, ranging from 25% to 80%, based on the director’s total years of service. The maximum ratio of 80% of fees requires 20 or more years of service and the minimum ratio of 25% of fees requires 10 years of service. Retirement benefits may also be payable under the plan if a director retires from service as a director prior to attaining age 75. Three directors are currently receiving monthly benefits under the plan.
Minimum service required to get annual retirement benefit under Director's Retirement Plan	five or more years
Service required for Maximum ratio of 80% of fees	20 or more years of service
Service required for Minimum ratio of 25% of fees	10 years
Directors retirement age	75
Number of directors receiving benefits	3
Directors' Retirement Plan [Member] | Maximum [Member]
Retirement Plans (Textual) [Abstract]
Final average pay multiplied by a ratio	80.00%
Directors' Retirement Plan [Member] | Minimum [Member]
Retirement Plans (Textual) [Abstract]
Final average pay multiplied by a ratio	25.00%
Minimum service in banking sector required to get annual retirement benefit under Director's Retirement Plan	10 years

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Borrowed Funds (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Summary of borrowed funds
Due within 12 months, Weighted average rate	3.07%	2.80%
Due beyond 12 months but within 2 years, Weighted average rate	3.16%	3.62%
Due beyond 2 years but within 3 years, Weighted average rate	2.96%	2.88%
Due beyond 3 years but within 4 years, Weighted average rate	2.25%	3.36%
Due beyond 4 years but within 5 years, Weighted average rate	1.16%	2.15%
Due beyond 5 years, Weighted average rate	3.61%	3.61%
Due within 12 months	$ 70,759	$ 30,684
Due beyond 12 months but within 2 years	88,317	72,647
Due beyond 2 years but within 3 years	19,288	71,392
Due beyond 3 years but within 4 years	7,462	14,613
Due beyond 4 years but within 5 years	7,853	8,019
Due beyond 5 years	10,000	10,000
FHLB advances	203,679	207,355
Repurchase agreements [Member]
Summary of borrowed funds
Due within 12 months, Weighted average rate	2.98%	3.12%
Due beyond 12 months but within 2 years, Weighted average rate	3.28%	3.30%
Due beyond 2 years but within 3 years, Weighted average rate	4.12%	3.07%
Due beyond 3 years but within 4 years, Weighted average rate		4.12%
Due beyond 4 years but within 5 years, Weighted average rate	4.28%
Due beyond 5 years, Weighted average rate	4.49%	4.42%
Due within 12 months	148,000	93,000
Due beyond 12 months but within 2 years	60,000	130,000
Due beyond 2 years but within 3 years	10,000	40,000
Due beyond 3 years but within 4 years		10,000
Due beyond 4 years but within 5 years	25,000
Due beyond 5 years	45,000	70,000
FHLB advances	288,000	343,000
ESOP borrowings [Member]
Summary of borrowed funds
Due within 12 months, Weighted average rate	4.68%	4.68%
Due beyond 12 months but within 2 years, Weighted average rate	4.68%	4.68%
Due beyond 2 years but within 3 years, Weighted average rate	4.68%	4.68%
Due beyond 3 years but within 4 years, Weighted average rate	4.68%	4.68%
Due beyond 4 years but within 5 years, Weighted average rate		4.68%
Due within 12 months, Amount	1,000	1,000
Due beyond 12 months but within 2 years	1,000	1,000
Due beyond 2 years but within 3 years	1,000	1,000
Due beyond 3 years but within 4 years	500	1,000
Due beyond 4 years but within 5 years		250
Total	3,500	4,250
Corporate borrowings [Member]
Summary of borrowed funds
Due within 12 months, Weighted average rate	6.30%	6.30%
Due beyond 12 months but within 2 years, Weighted average rate	6.30%	6.30%
Due beyond 2 years but within 3 years, Weighted average rate		6.30%
Due within 12 months, Amount	1,400	1,400
Due beyond 12 months but within 2 years	1,400	1,400
Due beyond 2 years but within 3 years		1,400
Total	2,800	4,200
Borrowings for joint ventures [Member]
Summary of borrowed funds
Due beyond 2 years but within 3 years, Weighted average rate	3.75%	3.75%
Due beyond 2 years but within 3 years	352	1,762
Junior subordinated notes [Member]
Summary of borrowed funds
Due beyond 5 years, Weighted average rate	2.54%	2.56%
Due beyond 5 years	$ 46,393	$ 46,393

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Fair Value (Details) (Fair Value, Measurements, Recurring [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale	$ 1,136,615	$ 1,130,116
Mortgage-backed securities	692,302	741,205
Total other assets	102	532
Total other liabilities	6,075	5,532
Trust preferred securities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale	37,659	37,544
Municipal securities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale	192,636	184,485
Equity securities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale	1,935	2,103
Corporate bonds [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale	212,083	164,779
U.S. sponsored entities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Mortgage-backed securities	685,334	732,302
Private label [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Mortgage-backed securities	6,968	8,903
Interest rate caps [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Total other assets	102	532
Interest rate swaps [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Total other liabilities	6,075	5,532
Level 1 [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale	1,935	2,103
Mortgage-backed securities
Total other assets
Total other liabilities
Level 1 [Member] | Trust preferred securities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale
Level 1 [Member] | Municipal securities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale
Level 1 [Member] | Equity securities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale	1,935	2,103
Level 1 [Member] | Corporate bonds [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale
Level 1 [Member] | U.S. sponsored entities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Mortgage-backed securities
Level 1 [Member] | Private label [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Mortgage-backed securities
Level 1 [Member] | Interest rate caps [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Total other assets
Level 1 [Member] | Interest rate swaps [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Total other liabilities
Level 2 [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale	1,098,858	1,092,224
Mortgage-backed securities	692,302	741,205
Total other assets	102	532
Total other liabilities	6,075	5,532
Level 2 [Member] | Trust preferred securities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale	1,837	1,755
Level 2 [Member] | Municipal securities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale	192,636	184,485
Level 2 [Member] | Equity securities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale
Level 2 [Member] | Corporate bonds [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale	212,083	164,779
Level 2 [Member] | U.S. sponsored entities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Mortgage-backed securities	685,334	732,302
Level 2 [Member] | Private label [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Mortgage-backed securities	6,968	8,903
Level 2 [Member] | Interest rate caps [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Total other assets	102	532
Level 2 [Member] | Interest rate swaps [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Total other liabilities	6,075	5,532
Level 3 [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale	35,822	35,789
Mortgage-backed securities
Total other assets
Total other liabilities
Level 3 [Member] | Trust preferred securities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale	35,822	35,789
Level 3 [Member] | Municipal securities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale
Level 3 [Member] | Equity securities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale
Level 3 [Member] | Corporate bonds [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Securities available for sale
Level 3 [Member] | U.S. sponsored entities [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Mortgage-backed securities
Level 3 [Member] | Private label [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Mortgage-backed securities
Level 3 [Member] | Interest rate caps [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Total other assets
Level 3 [Member] | Interest rate swaps [Member]
Assets and liabilities reported on the consolidated statements of financial condition on a recurring basis
Total other liabilities

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Deposits (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Summary of deposits
Noninterest-bearing deposits	$ 107,810	$ 95,691
NOW account deposits	246,887	208,975
Money Market deposits	44,807	34,484
Passbook account deposits	173,009	153,644
Time deposits	620,870	663,616
Total	$ 1,193,383	$ 1,156,410
Percentage of noninterest-bearing deposits	9.00%	8.30%
Percentage of NOW account deposits	20.70%	18.10%
Percentage of Money Market deposits	3.80%	3.00%
Percentage of Passbook account deposits	14.50%	13.30%
Percentage of Time deposits	52.00%	57.30%
Percentage of deposits, total	100.00%	100.00%

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Securities (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012 Securities	Dec. 31, 2011 Securities
Schedule of investments gross unrealized losses and fair value
Less than 12 Months, # of Securities	3	33
Less than 12 Months, Fair Value	$ 6,805	$ 101,820
Less than 12 Months, Unrealized losses	241	3,387
12 Months or more, # of Securities	16	13
12 Months or more, Fair Value	60,390	38,546
12 Months or more, Unrealized losses	10,329	8,698
Total, # of Securities	19	46
Total, Fair Value	67,195	140,366
Total, Unrealized losses	10,570	12,085
Trust preferred securities [Member]
Schedule of investments gross unrealized losses and fair value
Less than 12 Months, # of Securities
Less than 12 Months, Fair Value
Less than 12 Months, Unrealized losses
12 Months or more, # of Securities	9	9
12 Months or more, Fair Value	35,822	35,789
12 Months or more, Unrealized losses	8,587	8,615
Total, # of Securities	9	9
Total, Fair Value	35,822	35,789
Total, Unrealized losses	8,587	8,615
Municipal securities [Member]
Schedule of investments gross unrealized losses and fair value
Less than 12 Months, # of Securities	2	2
Less than 12 Months, Fair Value	3,005	3,094
Less than 12 Months, Unrealized losses	239	149
12 Months or more, # of Securities		3
12 Months or more, Fair Value		2,627
12 Months or more, Unrealized losses		81
Total, # of Securities	2	5
Total, Fair Value	3,005	5,721
Total, Unrealized losses	239	230
Equity securities [Member]
Schedule of investments gross unrealized losses and fair value
Less than 12 Months, # of Securities
Less than 12 Months, Fair Value
Less than 12 Months, Unrealized losses
12 Months or more, # of Securities		1
12 Months or more, Fair Value		130
12 Months or more, Unrealized losses		2
Total, # of Securities		1
Total, Fair Value		130
Total, Unrealized losses		2
Corporate bonds [Member]
Schedule of investments gross unrealized losses and fair value
Less than 12 Months, # of Securities	1	27
Less than 12 Months, Fair Value	3,800	91,046
Less than 12 Months, Unrealized losses	2	2,928
12 Months or more, # of Securities	6
12 Months or more, Fair Value	23,289
12 Months or more, Unrealized losses	1,710
Total, # of Securities	7	27
Total, Fair Value	27,089	91,046
Total, Unrealized losses	1,712	2,928
U.S. sponsored entities [Member]
Schedule of investments gross unrealized losses and fair value
Less than 12 Months, # of Securities		1
Less than 12 Months, Fair Value		4,596
Less than 12 Months, Unrealized losses		8
12 Months or more, # of Securities
12 Months or more, Fair Value
12 Months or more, Unrealized losses
Total, # of Securities		1
Total, Fair Value		4,596
Total, Unrealized losses		8
Private label [Member]
Schedule of investments gross unrealized losses and fair value
Less than 12 Months, # of Securities		3
Less than 12 Months, Fair Value		3,084
Less than 12 Months, Unrealized losses		302
12 Months or more, # of Securities	1
12 Months or more, Fair Value	1,279
12 Months or more, Unrealized losses	32
Total, # of Securities	1	3
Total, Fair Value	1,279	3,084
Total, Unrealized losses	32	302
Subtotal mortgage-backed securities [Member]
Schedule of investments gross unrealized losses and fair value
Less than 12 Months, # of Securities		4
Less than 12 Months, Fair Value		7,680
Less than 12 Months, Unrealized losses		310
12 Months or more, # of Securities
12 Months or more, Fair Value
12 Months or more, Unrealized losses
Total, # of Securities		4
Total, Fair Value		7,680
Total, Unrealized losses		$ 310

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Fair Value (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Changes in unrealized gains and losses recorded in earnings for Level III assets and liabilities
Interest income on securities	$ 4	$ 3	$ 11	$ 10
Net realized loss on securities available for sale		(78)	(5)	(78)
Total	$ 4	$ (75)	$ 6	$ (68)

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Net Income Per Share (Tables)

9 Months Ended

Sep. 30, 2012

Net Income Per Share [Abstract]

Summary of net income per share

(Amounts, except earnings per share, in thousands)
	Three Months Ended September 30, 2012		Three Months Ended September 30, 2011
Net income	$	3,934	$	3,964
Weighted-average common shares outstanding		14,362		14,490
Basic earnings per share	$	0.27	$	0.27
Weighted-average common shares outstanding		14,362		14,490
Common stock equivalents due to effect of stock options		128		100
Total weighted-average common shares and equivalents		14,490		14,590
Diluted earnings per share	$	0.27	$	0.27
	Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2011
Net income	$	11,400	$	11,909
Weighted-average common shares outstanding		14,329		14,456
Basic earnings per share	$	0.80	$	0.82
Weighted-average common shares outstanding		14,329		14,456
Common stock equivalents due to effect of stock options		129		111
Total weighted-average common shares and equivalents		14,458		14,567
Diluted earnings per share	$	0.79	$	0.82

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Net Income Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Summary of net income per share
Net income	$ 3,934	$ 3,964	$ 11,400	$ 11,909
Weighted-average common shares outstanding	14,362,000	14,490,000	14,329,000	14,456,000
Basic earnings per share	$ 0.27	$ 0.27	$ 0.80	$ 0.82
Weighted-average common shares outstanding	14,362,375	14,489,740	14,329,149	14,455,677
Common stock equivalents due to effect of stock options	128,000	100,000	129,000	111,000
Total weighted-average common shares and equivalents	14,490,000	14,590,000	14,458,000	14,567,000
Diluted earnings per share	$ 0.27	$ 0.27	$ 0.79	$ 0.82

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Loans Receivable (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Consumer Home Equity [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Interest Income Recognized	$ 10
Commercial business loans [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Interest Income Recognized		10
Commercial Real Estate [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Recorded Investment	13,513		13,513		14,023
Unpaid Principal Balance	13,784		13,784		14,129
Related Allowance	1,169		1,169		1,489
Average Recorded Investment	13,699	6,734	13,841	8,501
Interest Income Recognized	163	426	489	426
Consumer [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Recorded Investment	291		291		153
Unpaid Principal Balance	291		291		153
Related Allowance	48		48		50
Average Recorded Investment	243	154	196	155
Interest Income Recognized	11	7	16	7
Commercial [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Recorded Investment	38		38		63
Unpaid Principal Balance	38		38		63
Related Allowance	3		3		10
Average Recorded Investment	37	188	41	228
Interest Income Recognized	2	13	2	13
Residential [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Recorded Investment	1,361		1,361		1,364
Unpaid Principal Balance	1,361		1,361		1,364
Related Allowance
Average Recorded Investment	1,361		1,362
Interest Income Recognized	2		7
Residential Construction Loans [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Recorded Investment	944		944
Unpaid Principal Balance	944		944
Related Allowance
Average Recorded Investment	102		421	1,432
Interest Income Recognized	10		32
With an allowance recorded [Member] | Consumer Home Equity [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Recorded Investment	152		152		153
Unpaid Principal Balance	152		152		153
Related Allowance	48		48		50
Average Recorded Investment	152	154	153	155
Interest Income Recognized	1	7	6	7
With an allowance recorded [Member] | Commercial business loans [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Recorded Investment	38		38		25
Unpaid Principal Balance	38		38		25
Related Allowance	3		3		10
Average Recorded Investment	37	25	41	151
Interest Income Recognized	2	3	2	3
With an allowance recorded [Member] | Commercial Real Estate [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Recorded Investment	8,100		8,100		8,454
Unpaid Principal Balance	8,264		8,264		8,454
Related Allowance	1,169		1,169		1,489
Average Recorded Investment	8,248	5,678	8,353	7,363
Interest Income Recognized	105	408	319	408
With an allowance recorded [Member] | Residential Real Estate, Construction [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Average Recorded Investment				1,432
Interest Income Recognized
With no related allowance recorded [Member] | Consumer Home Equity [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Recorded Investment	139		139
Unpaid Principal Balance	139		139
Related Allowance
Average Recorded Investment	91		43
Interest Income Recognized			10
With no related allowance recorded [Member] | Commercial business loans [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Recorded Investment					39
Unpaid Principal Balance					39
Related Allowance
Average Recorded Investment		163		77
Interest Income Recognized				10
With no related allowance recorded [Member] | Commercial Real Estate [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Recorded Investment	5,413		5,413		5,568
Unpaid Principal Balance	5,520		5,520		5,675
Related Allowance
Average Recorded Investment	5,451	1,056	5,488	1,138
Interest Income Recognized	58	18	170	18
With no related allowance recorded [Member] | Residential loans [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Recorded Investment	1,361		1,361		1,364
Unpaid Principal Balance	1,361		1,361		1,364
Related Allowance
Average Recorded Investment	1,361		1,362
Interest Income Recognized	2		7
With no related allowance recorded [Member] | Residential Construction Loans [Member]
Recorded investment and unpaid principal balances for impaired loans receivable
Recorded Investment	944		944
Unpaid Principal Balance	944		944
Related Allowance
Average Recorded Investment	102		421
Interest Income Recognized	$ 10		$ 32

XML

Loans Receivable (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Schedule of recorded investment in loans
Beginning balance	$ 6,741	$ 6,653	$ 6,537	$ 6,547
Charge-offs	554	774	917	1,277
Recoveries	27	70	94	179
Provision	350	300	850	800
Reallocations
Ending Balance	6,564	6,249	6,564	6,249
Commercial [Member]
Schedule of recorded investment in loans
Beginning balance	434	367	384	784
Charge-offs	32		32	178
Recoveries		1		25
Provision	94		144
Reallocations		(11)		(274)
Ending Balance	496	357	496	357
Consumer [Member]
Schedule of recorded investment in loans
Beginning balance	1,004	1,108	1,045	1,125
Charge-offs	206	124	445	391
Recoveries	27	21	77	105
Provision	174	50	322	275
Reallocations		80		21
Ending Balance	999	1,135	999	1,135
Residential [Member]
Schedule of recorded investment in loans
Beginning balance	2,519	2,636	2,115	2,573
Charge-offs	153	650	277	708
Recoveries		48	17	49
Provision	82	150	384	325
Reallocations	97	(61)	306	(116)
Ending Balance	2,545	2,123	2,545	2,123
Unallocated [Member]
Schedule of recorded investment in loans
Beginning balance	485	515	551	234
Charge-offs
Recoveries
Provision				75
Reallocations	(35)	(339)	(101)	(133)
Ending Balance	450	176	450	176
Commercial Real Estate [Member]
Schedule of recorded investment in loans
Beginning balance	2,299	2,027	2,442	1,831
Charge-offs	163		163
Recoveries
Provision		100		125
Reallocations	(62)	331	(205)	502
Ending Balance	$ 2,074	$ 2,458	$ 2,074	$ 2,458

XML

Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Components of accumulated Other Comprehensive Income
Net unrealized gain on securities available for sale	$ 34,044	$ 25,101
Accumulated loss on effective cash flow hedging derivatives	(4,010)	(3,596)
Net unrecognized pension cost	(499)	(601)
Total	$ 29,535	$ 20,904

XML

Deposits (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Summary of time deposits maturity
Within one year	$ 362,053	$ 387,857
After one year through two years	117,667	118,470
After two years through three years	78,248	81,282
After three years through four years	38,665	33,395
After four years through five years	19,321	37,235
Thereafter	4,916	5,377
Total	$ 620,870	$ 663,616
Within one year, Weighted average rate	58.30%	58.50%
After one year through two years, Weighted average rate	19.00%	17.90%
After two years through three years, Weighted average rate	12.60%	12.20%
After three years through four years, Weighted average rate	6.20%	5.00%
After four years through five years, Weighted average rate	3.10%	5.60%
Thereafter, Weighted average rate	0.80%	0.80%
Total, Weighted average rate	100.00%	100.00%

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

Principles of Consolidation

ESB Financial Corporation (the Company) is a publicly traded Pennsylvania thrift holding company. The consolidated financial statements include the accounts of the Company and its direct and indirect wholly-owned subsidiaries, which are ESB Bank (ESB or the Bank), THF, Inc. (THF), ESB Financial Services, Inc. (EFS) and AMSCO, Inc. (AMSCO). ESB is a Pennsylvania chartered, Federal Deposit Insurance Corporation (FDIC) insured stock savings bank.

AMSCO is engaged in real estate development and construction of 1-4 family residential units independently or in conjunction with its joint ventures. AMSCO is currently involved in nine real estate joint ventures, all of which are owned 51% or greater by AMSCO. The Bank has provided all development and construction financing. These joint ventures have been included in the consolidated financial statements and reflected within the consolidated statements of financial condition as real estate held for investment and related operating income and expenses are reflected within other non-interest income or expense. The Bank’s loans to AMSCO and related interest have been eliminated in consolidation.

In addition to the elimination of the loans and interest to the joint ventures described above, all other significant intercompany transactions and balances have been eliminated in consolidation.

Basis of Presentation

The accompanying unaudited consolidated financial statements for the interim periods include all adjustments, consisting only of normal recurring accruals, which are necessary, in the opinion of management, to fairly reflect the Company’s financial position and results of operations. Additionally, these consolidated financial statements for the interim periods have been prepared in accordance with instructions for the Securities and Exchange Commission’s Form 10-Q and therefore do not include all information or footnotes necessary for a complete presentation of financial condition, results of operations and cash flows in conformity with U.S. generally accepted accounting principles (GAAP). For further information, refer to the audited consolidated financial statements and footnotes thereto for the year ended December 31, 2011, as contained in the Company’s 2011 Annual Report to Stockholders.

The results of operations for the nine month period ended September 30, 2012 are not necessarily indicative of the results that may be expected for the entire year. Certain amounts previously reported have been reclassified to conform to the current periods’ reporting format, such reclassifications did not have an effect on stockholders’ equity or net income.

The accounting principles followed by the Company and the methods of applying these principles conform with GAAP and with 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 Statement of Financial Condition date and revenues and expenses for the period. Actual results could differ significantly from those estimates.

Operating Segments

An operating segment is defined as a component of an enterprise that engages in business activities that generate revenue and incur expense, the operating results of which are reviewed by management. At September 30, 2012, the Company was doing business through 25 full service banking branches, one loan production office and through its various other subsidiaries. Loans and deposits are primarily generated from the areas where banking branches are located. The Company derives its income predominantly from interest on loans and securities and to a lesser extent, non-interest income. The Company’s principal expenses are interest paid on deposits and borrowed funds and normal operating costs. The Company’s operations are principally in the banking industry. Consistent with internal reporting, the Company’s operations are reported in one operating segment, which is community banking.

Stock Based Compensation

During the three and nine months ended September 30, 2012, the Company recorded approximately $116,000 and $327,000, respectively, in compensation expense and a tax benefit of $6,000 and $23,000, respectively, related to our share-based compensation awards that are expected to vest in 2012. During the three and nine months ended September 30, 2011, the Company recorded approximately $94,000 and $290,000, respectively, in compensation expense and a tax benefit of $6,500 and $13,100, respectively, related to our share-based compensation awards that were expected to vest in 2011. As of September 30, 2012, there was approximately $630,000 of unrecognized compensation cost related to unvested share-based compensation awards granted. That cost is expected to be recognized over the next four years.

As required by GAAP, cash flows from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for stock-based awards (excess tax benefits) are classified as financing cash flows.

Financial Instruments

As part of its overall interest rate risk management activities, the Company utilizes derivative instruments to manage its exposure to various types of interest rate risk. Interest rate swaps and interest rate caps are the primary instruments the Company uses for interest rate risk management. Derivative instruments are recorded at fair value as either part of prepaid expenses and other assets or accrued expenses and other liabilities on the consolidated statements of financial condition. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge 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 used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

The Company formally documents the relationship between the hedging instruments and hedged items, as well as the risk management objective and strategy, before undertaking an accounting hedge. To qualify for hedge accounting, the derivatives and related hedged items must be designated as a hedge at inception of the hedge relationship. For accounting hedge relationships, we formally assess, both at the inception of the hedge and on an ongoing basis, if the derivatives are highly effective in offsetting designated changes in the fair value or cash flows of the hedged item. If it is determined that the derivative instrument is not highly effective, hedge accounting is discontinued.

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. To the extent the change in fair value of the derivative does not offset the change in fair value of the hedged item, the difference or ineffectiveness is reflected in earnings in the same financial statement category as the hedged item.

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 (OCI) 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 fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges, changes in fair value are recognized in earnings.

At September 30, 2012, there were sixteen interest rate cap contracts outstanding with notional amounts totaling $170.0 million. These derivative instruments are not hedged and therefore adjustments to fair value are recorded in current earnings.

The Company entered into two interest rate swap contracts to manage its exposure to interest rate risk. These interest rate swap transactions involved the exchange of the Company’s interest payment on $35.0 million in junior subordinated notes which became floating rate notes in 2011 for a fixed rate interest payment without the exchange of the underlying principal amount. Entering into interest rate derivatives potentially exposes the Company to the risk of counterparties’ failure to fulfill their legal obligations including, but not limited to, potential amounts due or payable under each derivative contract. Notional principal amounts are often used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller. Management utilizes the Change in Variable Cash Flows Method to measure hedge ineffectiveness. To the extent that the cumulative change in anticipated cash flows from the hedging derivative offsets from 80% to 125% of the cumulative change in anticipated cash flows from the hedged exposure, the hedged is deemed effective. As of September 30, 2012 the interest rate swaps were deemed to be effective, therefore no amounts were charged to current earnings. The Company also does not expect to reclassify any hedge related amounts from OCI to earnings over the next twelve months.

The fixed rate interest rate swap contract outstanding at September 30, 2012 is being utilized to hedge $35.0 million in floating rate junior subordinated notes. Below is a summary of the interest rate swap contract and the terms at September 30, 2012:

(Dollars in thousands)	Notional Amount		Effective Date		Pay Rate			Receive Rate(*)			Maturity Date		Unrealized
													Gain		Loss
Cash Flow Hedge	$	20,000		2/10/2011		4.18	%		0.44	%		2/10/2018	$	—	$	3,596
Cash Flow Hedge		15,000		2/10/2011		3.91	%		0.44	%		2/10/2018		—		2,479
	$	35,000											$	—	$	6,075

* Variable receive rate based upon contract rates in effect at September 30, 2012

Recent Accounting and Regulatory Pronouncements

In December 2011, the FASB issued ASU 2011-10, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate-a Scope Clarification. The amendments in this Update affect entities that cease to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt. Under the amendments in this Update, when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling financial interest under Subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. The amendments in this Update should be applied on a prospective basis to deconsolidation events occurring after the effective date. Prior periods should not be adjusted even if the reporting entity has continuing involvement with previously derecognized in substance real estate entities. For public entities, the amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2013, and interim and annual periods thereafter. Early adoption is permitted. This ASU did not have a significant impact on the Company’s financial statements.

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in this Update affect all entities that have financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement. The requirements amend the disclosure requirements on offsetting in Section 210-20-50. This information will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments in the scope of this Update. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. This ASU is not expected to have a significant impact on the Company’s financial statements.

In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. Entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. Nonpublic entities should begin applying these requirements for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The Company has provided the necessary disclosure in Statement of Comprehensive Income.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other Topics (Topic 350), Testing Goodwill for Impairment. The objective of this update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments in this Update apply to all entities, both public and nonpublic, that report goodwill in their financial statements and are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. This ASU did not have a significant impact on the Company’s financial statements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. The amendments in this Update improve the comparability, clarity, consistency, and transparency of financial reporting and increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP and IFRS, the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. All entities that report items of comprehensive income, in any period presented, will be affected by the changes in this update. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The amendments in this Update should be applied retrospectively, and early adoption is permitted. The Company has provided the necessary disclosure in the Statement of Comprehensive Income.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The Company has included the disclosure requirements in Footnote Nine.

XML

Loans Receivable (Details 7) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Schedule of loans receivable on nonaccrual status
Loans receivable on nonaccrual status	$ 15,517	$ 13,378
Commercial [Member]
Schedule of loans receivable on nonaccrual status
Loans receivable on nonaccrual status	38	54
Commercial Real Estate [Member]
Schedule of loans receivable on nonaccrual status
Loans receivable on nonaccrual status	11,338	10,237
Consumer - Home Equity [Member]
Schedule of loans receivable on nonaccrual status
Loans receivable on nonaccrual status	359	402
Consumer - Dealer Auto and RV Loans [Member]
Schedule of loans receivable on nonaccrual status
Loans receivable on nonaccrual status	108	132
Consumer - Other [Member]
Schedule of loans receivable on nonaccrual status
Loans receivable on nonaccrual status	96	93
Residential [Member]
Schedule of loans receivable on nonaccrual status
Loans receivable on nonaccrual status	$ 3,578	$ 2,460

XML

Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2012

Financial Instruments [Abstract]

Carrying Amount and Fair Value of the Financial Instruments Included In the Consolidated Statement of Financial Condition

September 30, 2012
(Dollar amounts in thousands)	Carrying amount		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		Total Fair Value
Financial Assets:
Cash and Cash Equivalents	$	18,726	$	18,726	$	—	$	—	$	18,726
Securities		1,136,615		1,935		1,098,858		35,822		1,136,615
Securities Receivable		2,380		2,380		—		—		2,380
Loans receivable and held for sale		671,936		—		—		710,070		710,070
Accrued Interest Receivable		8,281		8,281		—		—		8,281
FHLB Stock		17,348		17,348		—		—		17,348
Bank owned life insurance		29,864		29,864		—		—		29,864
Interest rate cap contracts		102		—		102		—		102
Financial Liabilities:
Deposits		1,193,383		572,513		—		631,303		1,203,816
Borrowed funds		498,331		—		262,155		265,235		527,390
Junior subordinated notes		46,393		—		24,073		—		24,073
Advance payments by borrowers for taxes and insurance		1,331		1,331		—		—		1,331
Accrued interest payable		3,896		3,896		—		—		3,896
Interest rate swap contracts		6,075		—		6,075		—		6,075

	December 31, 2011
(Dollar amounts in thousands)	Carrying amount		Fair value
Financial assets:
Cash and cash equivalents	$	38,848	$	38,848
Securities		1,130,116		1,130,116
Securities receivable		1,148		1,148
Loans receivable and held for sale		648,921		679,819
Accrued interest receivable		9,227		9,227
FHLB stock		21,256		21,256
Bank owned life insurance		30,802		30,802
Interest rate cap contracts		532		532
Financial liabilities:
Deposits		1,156,410		1,168,438
Borrowed funds		560,567		594,080
Junior subordinated notes		46,393		20,361
Advance payment by borrowers for taxes and insurance		2,519		2,519
Accrued interest payable		1,676		1,676
Interest rate swap contracts		5,531		5,531

XML

Fair Value (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value [Abstract]

Assets and Liabilities Reported on the Consolidated Statements of Financial Condition at their Fair Value on a Recurring Basis

	As of September 30, 2012
(Dollar amounts in thousands)	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		Total
Assets:
Securities available for sale
Trust preferred securities	$	—	$	1,837	$	35,822	$	37,659
Municipal securities		—		192,636		—		192,636
Equity securities		1,935		—		—		1,935
Corporate bonds		—		212,083		—		212,083
Mortgage backed securities
U.S. sponsored entities		—		685,334		—		685,334
Private label		—		6,968		—		6,968
Subtotal mortgage-backed securities		—		692,302		—		692,302
Total securities available for sale	$	1,935	$	1,098,858	$	35,822	$	1,136,615
Other Assets
Interest rate caps	$	—	$	102	$	—	$	102
Total other assets	$	—	$	102	$	—	$	102
Liabilities
Other Liabilities
Interest rate swaps	$	—	$	6,075	$	—	$	6,075
Total other liabilities	$	—	$	6,075	$	—	$	6,075

As of December 31, 2011
(Dollar amounts in thousands)	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		Total
Assets:
Securities available for sale
Trust preferred securities	$	—	$	1,755	$	35,789	$	37,544
Municipal securities		—		184,485		—		184,485
Equity securities		2,103		—		—		2,103
Corporate bonds		—		164,779		—		164,779
Mortgage backed securities
U.S. sponsored entities		—		732,302		—		732,302
Private label		—		8,903		—		8,903
Subtotal mortgage-backed securities		—		741,205		—		741,205
Total securities available for sale	$	2,103	$	1,092,224	$	35,789	$	1,130,116
Other Assets
Interest rate caps	$	—	$	532	$	—	$	532
Total other assets	$	—	$	532	$	—	$	532
Liabilities:
Other Liabilities
Interest rate swaps	$	—	$	5,532	$	—	$	5,532
Total other liabilities	$	—	$	5,532	$	—	$	5,532

Fair Value Measurements Using Significant Unobservable Inputs (Level III)

	Securities available for sale Three Months Ended September 30,					Securities available for sale Nine Months Ended September 30,
	2012		2011			2012			2011
Beginning balance	$	35,604	$	37,681		$	35,789		$	37,361
Total net realized/unrealized gains (losses) Included in earnings:
Interest income on securities		4		3			11			10
Net realized loss on securities available for sale		—		(78	)		(5	)		(78	)
Included in other comprehensive income		214		(1,601	)		27			(788	)
Transfers in and/or out of Level III		—		—			—			—
Purchases, issuances and settlements
Purchases		—		—			—			—
Issuances		—		—			—			—
Sales		—		—			—			—
Settlements		—		—			—			(500	)
Ending balance	$	35,822	$	36,005		$	35,822		$	36,005

Changes in Unrealized Gains and Losses Recorded in Earnings for Level III Assets and Liabilities

	Securities available for sale Three Months Ended September 30,					Securities available for sale Nine Months Ended September 30,
	2012		2011			2012			2011
Interest income on securities	$	4	$	3		$	11		$	10
Net realized loss on securities available for sale		—		(78	)		(5	)		(78	)
Total	$	4	$	(75	)	$	6		$	(68	)

Schedule of fair value level III assets measured at fair value on a recurring or non-recurring basis

(Dollar amounts in thousands)	Fair Value at September 30, 2012		Fair Value at December 31, 2011		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Trust Preferred Securities	$	35,822	$	35,789	Discounted Cash Flow	Credit Spreads	40-85 basis points
						Liquidity Risk Adjustments	15-65 basis points
						Default Rates	.5% - 1%
Impaired Loans		14,927		14,054	Discounted Cash Flow	N/A	N/A
					Appraisal of collateral (1)	N/A	N/A
Real estate acquired through foreclosure		2,803		3,883	Appraisal of collateral (1)	N/A	N/A
Servicing assets		8		16	Discounted Cash Flow	N/A	N/A

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally includes various level III inputs which are not identifiable.

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Fair Value (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Fair value measurements using significant unobservable inputs (Level III)
Interest income on securities	$ 4	$ 3	$ 11	$ 10
Net realized loss on securities available for sale		(78)	(5)	(78)
Level 3 [Member]
Fair value measurements using significant unobservable inputs (Level III)
Beginning balance January 1	35,604	37,681	35,789	37,361
Interest income on securities	4	3	11	10
Net realized loss on securities available for sale		(78)	(5)	(78)
Included in other comprehensive income	214	(1,601)	27	(788)
Transfers in and/or out of Level III
Purchases, issuances and settlements
Purchases
Issuances
Sales
Settlements				(500)
Ending balance, June 30	$ 35,822	$ 36,005	$ 35,822	$ 36,005

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Loans Receivable (Details 8) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012 Contract	Sep. 30, 2011 Contract	Sep. 30, 2012 Contract	Sep. 30, 2011 Contract
Summery of information relating to troubled debt restructuring by class of loans
Number of Contracts	6		10	3
Pre-Modification Outstanding Recorded Investment	$ 139		$ 1,186	$ 7,372
Maturity Date Extension	139		1,086
Deferral of Principal Payments				7,305
Other Post Modification Outstanding Recorded Investment			100	125
Post-Modification Outstanding Recorded Investment, Total	139		1,186	7,430
Residential Construction Loans [Member]
Summery of information relating to troubled debt restructuring by class of loans
Number of Contracts			3
Pre-Modification Outstanding Recorded Investment			947
Maturity Date Extension			947
Deferral of Principal Payments
Other Post Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment, Total			947
Commercial Real Estate [Member]
Summery of information relating to troubled debt restructuring by class of loans
Number of Contracts			1	3
Pre-Modification Outstanding Recorded Investment			100	7,372
Maturity Date Extension
Deferral of Principal Payments				7,305
Other Post Modification Outstanding Recorded Investment			100	125
Post-Modification Outstanding Recorded Investment, Total			100	7,430
Consumer [Member]
Summery of information relating to troubled debt restructuring by class of loans
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Maturity Date Extension
Deferral of Principal Payments
Other Post Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment, Total
Consumer - Home Equity [Member]
Summery of information relating to troubled debt restructuring by class of loans
Number of Contracts	6		6
Pre-Modification Outstanding Recorded Investment	139		139
Maturity Date Extension	139		139
Deferral of Principal Payments
Other Post Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment, Total	$ 139		$ 139

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Summary of Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Summary of the interest rate swap contract
Notional Amount	$ 35,000
Unrealized Gain
Unrealized Loss	6,075
4.18 % Cash Flow Hedge [Member]
Summary of the interest rate swap contract
Notional Amount	20,000
Effective Date	Feb. 10, 2011
Pay Rate	4.18%
Receive Rate	0.44%
Maturity Date	Feb. 10, 2018
Unrealized Gain
Unrealized Loss	3,596
3.91 % Cash Flow Hedge [Member]
Summary of the interest rate swap contract
Notional Amount	15,000
Effective Date	Feb. 10, 2011
Pay Rate	3.91%
Receive Rate	0.44%
Maturity Date	Feb. 10, 2018
Unrealized Gain
Unrealized Loss	$ 2,479

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Summary of Significant Accounting Policies (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012 Contract	Sep. 30, 2011	Sep. 30, 2012 Contract RealEstate Branches Offices	Sep. 30, 2011
Summary of Significant Accounting Policies (Textual) [Abstract]
Number of real estate joint ventures currently involved			9
Number of full service banking branches			25
Number of loan production offices			1
Stock-based compensation expense	$ 116,000,000	$ 94,000,000	$ 327,000,000	$ 290,000,000
Tax benefit from compensation expense	6,000,000	6,500,000	23,000,000	13,100,000
Unrecognized compensation cost	630,000,000		630,000,000
Share-based compensation expense recognized, years			4 years
Interest rate cap contracts outstanding	16		16
Notional amount of interest rate cap derivatives	170,000,000		170,000,000
Number of interest rate swap contracts			2
Interest payment in junior subordinated notes	$ 35,000,000		$ 35,000,000
Minimum cumulative percentage change in anticipated cash flows			80.00%
Maximum cumulative percentage change in anticipated cash flows			125.00%
Maximum probability of threshold percentage			50.00%
AMSCO [Member]
Summary Of Significant Accounting Policies [Line Items]
Ownership percentage			51.00%

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Operating activities:
Net income	$ 11,931	$ 12,722
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization for premises and equipment	767	705
Provision for loan losses	850	800
Amortization of premiums and accretion of discounts	2,549	1,753
Origination of loans available for sale		(325)
Proceeds from sale of loans available for sale		411
Gain on sale of loans available for sale		(6)
Net gain on sale of securities available for sale	(464)	(937)
Impairment losses on investment securities	31	83
Net realized loss on derivatives	538	1,857
Amortization of intangible assets	190	251
Compensation expense on ESOP and MRP	1,087	1,001
Increases in cash surrender value of Bank owned Life Insurance	(448)	(524)
Decrease in accrued interest receivable	946	902
Decrease in prepaid FDIC assessment	1,007	982
Increase in prepaid expenses and other assets	(1,761)	(1,716)
Increase in accrued expenses and other liabilities	5,005	4,119
Gain on sale of real estate acquired through foreclosure	(44)	(6)
Write down of real estate held for investment		112
Other	(706)	(499)
Net cash provided by operating activities	21,478	21,685
Investing activities:
Loan originations	(163,958)	(124,276)
Purchases of:
Securities available for sale	(196,027)	(221,981)
Premises and equipment	(418)	(1,746)
Principal repayments of:
Loans receivable	143,494	119,883
Securities available for sale	199,861	165,888
Proceeds from the sale of:
Securities available for sale	1,084	25,359
Real estate acquired through foreclosure	1,927	820
Proceeds from bank owned life insurance	1,386
Redemption of FHLB stock	3,908	3,723
Funding of real estate held for investment	(7,495)	(7,957)
Proceeds from real estate held for investment	4,553	7,238
Net cash used in investing activities	(11,685)	(33,049)
Financing activities:
Net increase in deposits	36,973	149,968
Proceeds from long-term borrowings	7,512	10,859
Repayments of long-term borrowings	(79,043)	(87,500)
Net increase (decrease) in short-term borrowings	9,295	(1,803)
Capital Disbursement to noncontrolling interest	(520)	(1,146)
Proceeds received from exercise of stock options	681	581
Dividends paid	(4,388)	(3,922)
Payments to acquire treasury stock	(175)	(559)
Additional ESOP shares purchased	(250)	(461)
Net cash provided by (used in) financing activities	(29,915)	66,017
Net (decrease) increase in cash equivalents	(20,122)	54,653
Cash equivalents at beginning of period	38,848	35,707
Cash equivalents at end of period	18,726	90,360
Supplemental information:
Interest paid	20,402	25,631
Income taxes paid	2,960	2,949
Supplemental schedule of non-cash investing and financing activities:
Transfers from loans receivable to real estate acquired through foreclosure	1,192	3,752
Transfers from loan originations to proceeds on real estate held for investment	5,162	4,060
Dividends declared but not paid	1,467	1,487
Unfunded Security Commitments	$ 1,000

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Securities (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Schedule of securities available for sale portfolio
Amortized cost	$ 1,085,034	$ 1,091,497
Unrealized gains	62,151	50,704
Unrealized losses	(10,570)	(12,085)
Fair value, Securities	1,136,615	1,130,116
Trust preferred securities [Member]
Schedule of securities available for sale portfolio
Amortized cost	45,893	45,894
Unrealized gains	353	265
Unrealized losses	(8,587)	(8,615)
Fair value, Securities	37,659	37,544
Municipal securities [Member]
Schedule of securities available for sale portfolio
Amortized cost	178,281	174,288
Unrealized gains	14,594	10,427
Unrealized losses	(239)	(230)
Fair value, Securities	192,636	184,485
Equity securities [Member]
Schedule of securities available for sale portfolio
Amortized cost	1,235	1,754
Unrealized gains	700	351
Unrealized losses		(2)
Fair value, Securities	1,935	2,103
Corporate bonds [Member]
Schedule of securities available for sale portfolio
Amortized cost	207,033	165,923
Unrealized gains	6,762	1,784
Unrealized losses	(1,712)	(2,928)
Fair value, Securities	212,083	164,779
U.S. sponsored entities [Member]
Schedule of securities available for sale portfolio
Amortized cost	645,785	694,674
Unrealized gains	39,549	37,636
Unrealized losses		(8)
Fair value, Securities	685,334	732,302
Private label [Member]
Schedule of securities available for sale portfolio
Amortized cost	6,807	8,964
Unrealized gains	193	241
Unrealized losses	(32)	(302)
Fair value, Securities	6,968	8,903
Subtotal mortgage-backed securities [Member]
Schedule of securities available for sale portfolio
Amortized cost	652,592	703,638
Unrealized gains	39,742	37,877
Unrealized losses	(32)	(310)
Fair value, Securities	$ 692,302	$ 741,205

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Loans Receivable (Details 4) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Residential Real Estate, Single Family [Member]
Performing and nonperforming single family residential and consumer loans based on payment activity
Financing Receivable	$ 327,805	$ 312,723
Consumer Home Equity [Member]
Performing and nonperforming single family residential and consumer loans based on payment activity
Financing Receivable	76,780	72,493
Consumer - Dealer Auto and RV Loans [Member]
Performing and nonperforming single family residential and consumer loans based on payment activity
Financing Receivable	48,300	47,039
Consumer - Other [Member]
Performing and nonperforming single family residential and consumer loans based on payment activity
Financing Receivable	8,045	9,255
Performing [Member] | Residential Real Estate, Single Family [Member]
Performing and nonperforming single family residential and consumer loans based on payment activity
Financing Receivable	324,227	310,263
Performing [Member] | Consumer Home Equity [Member]
Performing and nonperforming single family residential and consumer loans based on payment activity
Financing Receivable	76,282	72,091
Performing [Member] | Consumer - Dealer Auto and RV Loans [Member]
Performing and nonperforming single family residential and consumer loans based on payment activity
Financing Receivable	48,192	46,907
Performing [Member] | Consumer - Other [Member]
Performing and nonperforming single family residential and consumer loans based on payment activity
Financing Receivable	7,949	9,162
Nonperforming [Member] | Residential Real Estate, Single Family [Member]
Performing and nonperforming single family residential and consumer loans based on payment activity
Financing Receivable	3,578	2,460
Nonperforming [Member] | Consumer Home Equity [Member]
Performing and nonperforming single family residential and consumer loans based on payment activity
Financing Receivable	498	402
Nonperforming [Member] | Consumer - Dealer Auto and RV Loans [Member]
Performing and nonperforming single family residential and consumer loans based on payment activity
Financing Receivable	108	132
Nonperforming [Member] | Consumer - Other [Member]
Performing and nonperforming single family residential and consumer loans based on payment activity
Financing Receivable	$ 96	$ 93

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Retirement Plans (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
SERP [Member]
Components of net periodic pension cost for the SERP and Directors Retirement Plan
Service cost	$ 20	$ 16	$ 60	$ 48
Interest cost	31	31	93	93
Amortization of unrecognized gains and losses	20	14	60	42
Amortization of prior service cost	10	10	30	30
Net periodic pension cost	81	71	243	213
Directors' Retirement Plan [Member]
Components of net periodic pension cost for the SERP and Directors Retirement Plan
Service cost	1	1	3	3
Interest cost	9	10	27	30
Amortization of prior service cost	21	22	67	66
Net periodic pension cost	$ 31	$ 33	$ 97	$ 99

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Consolidated Statements of Financial Condition (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Assets
Cash on hand and in banks	$ 4,507	$ 4,720
Interest-earning deposits	14,208	34,117
Federal funds sold	11	11
Cash and cash equivalents	18,726	38,848
Securities available for sale; cost of $1,085,034 and $1,091,497	1,136,615	1,130,116
Loans receivable, net of allowance for loan losses of $6,564 and $6,537	671,936	648,921
Accrued Interest receivable	8,281	9,227
Federal Home Loan Bank (FHLB) stock	17,348	21,256
Premises and equipment, net	14,722	15,071
Real estate acquired through foreclosure, net	2,803	3,883
Real estate held for investment	12,532	15,268
Goodwill	41,599	41,599
Intangible assets	357	554
Bank owned life insurance	29,864	30,802
Securities receivable	2,380	1,148
Prepaid expenses and other assets	7,089	8,098
Total assets	1,964,252	1,964,791
Liabilities:
Deposits	1,193,383	1,156,410
FHLB advances	203,679	207,355
Repurchase agreements	288,000	343,000
Other borrowings	6,652	10,212
Junior subordinated notes	46,393	46,393
Advance payments by borrowers for taxes and insurance	1,331	2,519
Accounts payable for land development	2,118	2,634
Accrued expenses and other liabilities	26,531	17,193
Total liabilities	1,768,087	1,785,716
Stockholders' Equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued
Common stock, $.01 par value, 30,000,000 shares authorized; 16,278,045 and 16,278,045 shares issued; 14,666,461 and 14,600,871 shares outstanding	163	163
Additional paid-in capital	102,744	102,667
Treasury stock, at cost; 1,611,584 and 1,677,174 shares	(18,806)	(19,537)
Unearned Employee Stock Ownership Plan (ESOP) shares	(3,391)	(4,184)
Retained earnings	87,078	80,231
Accumulated other comprehensive income, net	29,535	20,904
Total ESB Financial Corporation's stockholders' equity	197,323	180,244
Noncontrolling interest	(1,158)	(1,169)
Total stockholders' equity	196,165	179,075
Total liabilities and stockholders' equity	$ 1,964,252	$ 1,964,791

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Loans Receivable (Details Textual) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2012 Offices	Dec. 31, 2011 Offices
Loans Receivable (Textual) [Abstract]
Non-performing loans, including non-accrual loans and TDRs	$ 15,517,000	$ 13,378,000
Troubled debt restructuring (TDRs)	8,600,000	7,800,000
Allowance for loan losses	$ 6,564,000	$ 6,537,000
Maturity period of impaired loans	90 days
Maturity period of Larger commercial loans	60 days
Number of offices of company	25	25
Description of Loans	Loans are considered nonaccrual upon reaching 90 days delinquency
Historical loss calculation period	3 years
Borrowers sustained repayment period	6 months

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Consolidated Statement of Changes in Stockholders' Equity (Unaudited) (USD $) In Thousands, unless otherwise specified	Total	Common stock	Additional paid-in capital	Treasury stock	Unearned ESOP shares	Retained earnings	Accumulated other comprehensive income, net of tax	Noncontrolling interest
Beginning balance at Dec. 31, 2011	$ 179,075	$ 163	$ 102,667	$ (19,537)	$ (4,184)	$ 80,231	$ 20,904	$ (1,169)
Comprehensive results:
Net income	11,931					11,400		531
Other Comprehensive Income, net	8,631						8,631
Cash dividends at $0.30 per share	(4,295)					(4,295)
Purchase of treasury stock, at cost (13,225 shares)	(175)			(175)
Reissuance of treasury stock for stock option exercises (78,845 shares)	648			906		(258)
Compensation expense ESOP	1,087		294		793
Additional ESOP shares purchased	(250)		(250)
Tax effect of compensatory stock options	33		33
Capital disbursement for noncontrolling interest	(520)							(520)
Ending balance at Sep. 30, 2012	$ 196,165	$ 163	$ 102,744	$ (18,806)	$ (3,391)	$ 87,078	$ 29,535	$ (1,158)

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Fair Value (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Fair Value (Textual) [Abstract]
Credit spreads on Moody's rating			55-90 basis points
Liquidity risk adjustments ranged			20-65 basis points
Liquidity risk adjustments ranged, securities of 15 largest banks			20-40 basis points
Investments in three largest banks	$ 17,600,000		$ 17,600,000
Investment in three largest banks percentage			49.50%
Investment in Floating rate trust preferred securities			35,600,000
Write-downs on REO properties	$ 7,000	$ 746,000	$ 368,000	$ 827,000

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Securities (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Entity	Sep. 30, 2011
Schedule of Equity Method Investments [Line Items]
OTTI Recognized		$ 452	$ 406	$ 452
Securities (Textual) [Abstract]
Rate of Risk Ratio			6.00%
Rate of non-performing assets to loans plus real estate owned ratio			10.00%
Proceeds from the sale of securities	316,000	20,300	1,100	25,400
Gross realized gains from the sale of securities	197,000	406,000	464,000	937,000
Number of financial institutions collateralized debt obligation			10
Number of financial institutions deferring interest payments			3
Number of financial institutions defaulted interest payments			4
Number of financial institutions Currently performing			7
Losses from the sale of securities	0	0	0	0
Credit Related OTTI [Member]
Schedule of Equity Method Investments [Line Items]
OTTI Recognized			31,000
Equity method investments, book value	503,000		503,000
Non Credit Related OTTI [Member]
Schedule of Equity Method Investments [Line Items]
OTTI Recognized			375,000
Pooled Trust Preferred Security [Member] | Credit Related OTTI [Member]
Schedule of Equity Method Investments [Line Items]
OTTI Recognized			5,000
Equity method investments, book value	26,000		26,000
Individual securities [Member]
Schedule of Equity Method Investments [Line Items]
OTTI Recognized			$ 0

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Loans Receivable (Tables)

9 Months Ended

Sep. 30, 2012

Loans Receivable [Abstract]

Schedule of loans receivable

(In thousands)	September 30, 2012			December 31, 2011
Mortgage loans:
Residential real estate
Single family	$	327,805		$	312,723
Construction		46,109			45,363
Multi family		32,888			32,370
Total residential real estate		406,802			390,456
Commercial real estate
Commercial		78,974			83,447
Construction		18,410			17,307
Total commercial real estate		97,384			100,754
Subtotal mortgage loans		504,186			491,210
Other loans:
Consumer loans
Home equity loans		76,780			72,493
Dealer auto and RV loans		48,300			47,039
Other loans		8,045			9,255
Total consumer loans		133,125			128,787
Commercial business		54,358			50,337
Subtotal other loans		187,483			179,124
Total loans receivable		691,669			670,334
Less:
Allowance for loan losses		6,564			6,537
Deferred loan fees and net discounts		(1,951	)		(1,852	)
Loans in process		15,120			16,728
Subtotal		19,733			21,413
Net loans receivable	$	671,936		$	648,921

Changes in allowance for loan losses and recorded investment in loans

As of the three months ended September 30, 2012
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	434		$	2,299		$	1,004	$	2,519		$	485		$	6,741
Charge-offs		32			163			206		153			—			554
Recoveries		—			—			27		—			—			27
Provision		94			—			174		82			—			350
Reallocations		—			(62	)		—		97			(35	)		—
Ending Balance	$	496		$	2,074		$	999	$	2,545		$	450		$	6,564
As of the three months ended September 30, 2011
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	367		$	2,027		$	1,108	$	2,636		$	515		$	6,653
Charge-offs		—			—			124		650			—			774
Recoveries		1			—			21		48			—			70
Provision		—			100			50		150			—			300
Reallocations		(11	)		331			80		(61	)		(339	)		—
Ending Balance	$	357		$	2,458		$	1,135	$	2,123		$	176		$	6,249
As of the nine months ended September 30, 2012
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	384		$	2,442		$	1,045	$	2,115		$	551		$	6,537
Charge-offs		32			163			445		277			—			917
Recoveries		—			—			77		17			—			94
Provision		144			—			322		384			—			850
Reallocations		—			(205	)		—		306			(101	)		—
Ending Balance	$	496		$	2,074		$	999	$	2,545		$	450		$	6,564
As of the nine months ended September 30, 2011
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	784		$	1,831		$	1,125	$	2,573		$	234		$	6,547
Charge-offs		178			—			391		708			—			1,277
Recoveries		25			—			105		49			—			179
Provision		—			125			275		325			75			800
Reallocations		(274	)		502			21		(116	)		(133	)		—
Ending Balance	$	357		$	2,458		$	1,135	$	2,123		$	176		$	6,249

Schedule of recorded investment in loans

As of September 30, 2012
(Dollar amounts in thousands)	Commercial		Commercial Real Estate		Consumer		Residential		Unallocated		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	3	$	1,169	$	48	$	—	$	—	$	1,220
Ending balance: collectively evaluated for impairment	$	493	$	905	$	951	$	2,545	$	450	$	5,344
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—
Loans Receivable:
Ending Balance	$	54,358	$	97,384	$	133,125	$	406,802	$	—	$	691,669
Ending balance: individually evaluated for impairment	$	38	$	13,513	$	291	$	2,305	$	—	$	16,147
Ending balance: collectively evaluated for impairment	$	54,320	$	83,871	$	132,834	$	404,497	$	—	$	675,522
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—

As of December 31, 2011
(Dollar amounts in thousands)	Commercial		Commercial Real Estate		Consumer		Residential		Unallocated		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	10	$	1,489	$	50	$	—	$	—	$	1,549
Ending balance: collectively evaluated for impairment	$	374	$	953	$	995	$	2,115	$	551	$	4,988
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—
Loans Receivable:
Ending Balance	$	50,337	$	100,754	$	128,787	$	390,456	$	—	$	670,334
Ending balance: individually evaluated for impairment	$	63	$	14,023	$	153	$	1,364	$	—	$	15,603
Ending balance: collectively evaluated for impairment	$	50,274	$	86,731	$	128,634	$	389,092	$	—	$	654,731
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—

Schedule of credit exposures by internally assigned grades

As of September 30, 2012
(Dollar amounts in thousands)	Residential Real Estate Multi - family		Residential Real Estate Construction		Commercial Real Estate Commercial		Commercial Real Estate Construction		Commercial
Pass	$	32,888	$	39,802	$	63,417	$	18,410	$	53,783
Special Mention		—		5,363		1,475		—		539
Substandard		—		944		14,082		—		36
Doubtful		—		—		—		—		—
Loss		—		—		—		—		—
Ending Balance	$	32,888	$	46,109	$	78,974	$	18,410	$	54,358
As of December 31, 2011
(Dollar amounts in thousands)	Residential Real Estate Multi - family		Residential Real Estate Construction		Commercial Real Estate Commercial		Commercial Real Estate Construction		Commercial
Pass	$	32,370	$	38,219	$	67,119	$	17,307	$	50,232
Special Mention		—		7,144		2,319		—		57
Substandard		—		—		14,009		—		39
Doubtful		—		—		—		—		—
Loss		—		—		—		—		9
Ending Balance	$	32,370	$	45,363	$	83,447	$	17,307	$	50,337

Performing and nonperforming single family residential and consumer loans based on payment activity

As of September 30, 2012
(Dollar amounts in thousands)	Residential Real Estate Single Family		Consumer Home Equity		Dealer Auto and RV		Other Consumer
Performing	$	324,227	$	76,282	$	48,192	$	7,949
Nonperforming		3,578		498		108		96
Total	$	327,805	$	76,780	$	48,300	$	8,045
As of December 31, 2011
(Dollar amounts in thousands)	Residential Real Estate Single Family		Consumer Home Equity		Dealer Auto and RV		Other Consumer
Performing	$	310,263	$	72,091	$	46,907	$	9,162
Nonperforming		2,460		402		132		93
Total	$	312,723	$	72,493	$	47,039	$	9,255

Aging analysis of investment of past due loans receivable

(Dollar amounts in thousands)													Recorded
As of September 30, 2012	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans Receivable		Investment > 90 Days and Accruing
Residential real estate
Single family	$	222	$	422	$	3,578	$	4,222	$	323,583	$	327,805	$	—
Construction		—		—		—		—		46,109		46,109		—
Multi-family		—		—		—		—		32,888		32,888		—
Commercial Real Estate
Commercial		188		796		3,076		4,060		74,914		78,974		—
Construction		—		—		—		—		18,410		18,410		—
Consumer
Consumer - home equity		43		—		207		250		76,530		76,780		—
Consumer - dealer auto and RV		601		126		108		835		47,465		48,300		—
Consumer - other		16		17		96		129		7,916		8,045		—
Commercial		504		—		38		542		53,816		54,358		—
Total	$	1,574	$	1,361	$	7,103	$	10,038	$	681,631	$	691,669	$	—
(Dollar amounts in thousands)													Recorded
As of December 31, 2011	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans Receivable		Investment > 90 Days and Accruing
Residential real estate
Single family	$	464	$	2,933	$	2,460	$	5,857	$	306,866	$	312,723	$	—
Construction		—		—		—		—		45,363		45,363		—
Multi-family		—		—		—		—		32,370		32,370		—
Commercial Real Estate
Commercial		48		1,507		2,629		4,184		79,263		83,447		—
Construction		—		—		—		—		17,307		17,307		—
Consumer
Consumer - home equity		143		9		249		401		72,092		72,493		—
Consumer - dealer auto and RV		698		101		132		931		46,108		47,039		—
Consumer - other		98		23		93		214		9,041		9,255		—
Commercial		59		—		54		113		50,224		50,337		—
Total	$	1,510	$	4,573	$	5,617	$	11,700	$	658,634	$	670,334	$	—

Recorded investment and unpaid principal balances for impaired loans receivable

(Dollar amounts in thousands)	September 30, 2012						December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	5,413	$	5,520	$	—	$	5,568	$	5,675	$	—
Commercial business loans		—		—		—		39		39		—
Residential loans		1,361		1,361		—		1,364		1,364		—
Residential construction loans		944		944		—		—		—		—
Consumer Loans:
Home Equity		139		139		—		—		—		—
With an allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	8,100	$	8,264	$	1,169	$	8,454	$	8,454	$	1,489
Consumer Loans:
Home Equity		152		152		48		153		153		50
Commercial business loans		38		38		3		25		25		10
Total:
Commercial Real Estate	$	13,513	$	13,784	$	1,169	$	14,023	$	14,129	$	1,489
Consumer		291		291		48		153		153		50
Residential		1,361		1,361		—		1,364		1,364		—
Residential construction loans		944		944		—		—		—		—
Commercial		38		38		3		63		63		10

(Dollar amounts in thousands)	Three months ended September 30, 2012				Three months ended September 30, 2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	5,451	$	58	$	1,056	$	18
Commercial business loans		—		—		163		10
Residential loans		1,361		2		—		—
Residential construction loans		102		10		—		—
Consumer Loans:
Home Equity		91		10		—		—
With an allowance recorded:
Residential Real Estate
Construction	$	—	$	—	$	—	$	—
Commercial Real Estate:
Commercial Real Estate		8,248		105		5,678		408
Consumer Loans:
Home Equity		152		1		154		7
Commercial business loans		37		2		25		3
Total:
Commercial Real Estate	$	13,699	$	163	$	6,734	$	426
Consumer		243		11		154		7
Residential		1,361		2		—		—
Residential construction loans		102		10		—		—
Commercial		37		2		188		13

(Dollar amounts in thousands)	Nine months ended September 30, 2012				Nine months ended September 30, 2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	5,488	$	170	$	1,138	$	18
Commercial business loans		—		—		77		10
Residential loans		1,362		7		—		—
Residential construction loans		421		32		—		—
Consumer Loans:
Home Equity		43		10		—		—
With an allowance recorded:
Residential Real Estate
Construction	$	—	$	—	$	1,432	$	—
Commercial Real Estate:
Commercial Real Estate		8,353		319		7,363		408
Consumer Loans:
Home Equity		153		6		155		7
Commercial business loans		41		2		151		3
Total:
Commercial Real Estate	$	13,841	$	489	$	8,501	$	426
Consumer		196		16		155		7
Residential		1,362		7		—		—
Residential construction loans		421		32		1,432		—
Commercial		41		2		228		13

Schedule of loans receivable on nonaccrual status

(Dollar amounts in thousands)	September 30, 2012		December 31, 2011
Commercial	$	38	$	54
Commercial Real Estate		11,338		10,237
Consumer
Consumer - Home Equity		359		402
Consumer - Dealer auto and RV		108		132
Consumer - Other		96		93
Residential		3,578		2,460
Total	$	15,517	$	13,378

Summery of information relating to troubled debt restructuring by class of loans

(Dollar amounts in thousands)	For the three months ended September 30, 2012
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Consumer
Home Equity		6	$	139	$	139	$	—	$	—	$	139
Total Troubled Debt Restructurings		6	$	139	$	139	$	—	$	—	$	139
(Dollar amounts in thousands)	For the three months ended September 30, 2011
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Consumer
Home Equity		—	$	—	$	—	$	—	$	—	$	—
Total Troubled Debt Restructurings		—	$	—	$	—	$	—	$	—	$	—

(Dollar amounts in thousands)	For the nine months ended September 30, 2012
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Residential construction loans		3	$	947	$	947	$	—	$	—	$	947
Commercial Real Estate		1		100		—		—		100		100
Consumer
Home Equity		6		139		139		—		—		139
Total Troubled Debt Restructurings		10	$	1,186	$	1,086	$	—	$	100	$	1,186
(Dollar amounts in thousands)	For the nine months ended September 30, 2011
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Residential construction loans		—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate		3		7,372		—		7,305		125		7,430
Consumer
Home Equity		—		—		—		—		—		—
Total Troubled Debt Restructurings		3	$	7,372	$	—	$	7,305	$	125	$	7,430

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Loans Receivable (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Schedule of loans receivable
Total residential real estate	$ 406,802	$ 390,456
Total commercial real estate	97,384	100,754
Subtotal mortgage loans	504,186	491,210
Total consumer loans	133,125	128,787
Commercial business	54,358	50,337
Subtotal other loans	187,483	179,124
Total loans receivable	691,669	670,334
Allowance for loan losses	6,564	6,537
Deferred loan fees and net discounts	(1,951)	(1,852)
Loans in process	15,120	16,728
Subtotal	19,733	21,413
Loans receivable and held for sale	671,936	648,921
Residential Real Estate, Single Family [Member]
Schedule of loans receivable
Total residential real estate	327,805	312,723
Total loans receivable	327,805	312,723
Residential Real Estate, Construction [Member]
Schedule of loans receivable
Total residential real estate	46,109	45,363
Total loans receivable	46,109	45,363
Residential Real Estate Multi-family [Member]
Schedule of loans receivable
Total residential real estate	32,888	32,370
Total loans receivable	32,888	32,370
Commercial Real Estate [Member]
Schedule of loans receivable
Total commercial real estate	78,974	83,447
Total loans receivable	97,384	100,754
Commercial Real Estate, Construction [Member]
Schedule of loans receivable
Total commercial real estate	18,410	17,307
Total loans receivable	18,410	17,307
Consumer Home Equity [Member]
Schedule of loans receivable
Total consumer loans	76,780	72,493
Total loans receivable	76,780	72,493
Consumer - Dealer Auto and RV Loans [Member]
Schedule of loans receivable
Total consumer loans	48,300	47,039
Total loans receivable	48,300	47,039
Consumer - Other [Member]
Schedule of loans receivable
Total consumer loans	8,045	9,255
Total loans receivable	$ 8,045	$ 9,255

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Borrowed Funds (Tables)

9 Months Ended

Sep. 30, 2012

Borrowed Funds [Abstract]

Summary of borrowed funds

(Dollar amounts in thousands)	September 30, 2012					December 31, 2011
	Weighted average rate			Amount		Weighted average rate			Amount
FHLB advances:
Due within 12 months		3.07	%	$	70,759		2.80	%	$	30,684
Due beyond 12 months but within 2 years		3.16	%		88,317		3.62	%		72,647
Due beyond 2 years but within 3 years		2.96	%		19,288		2.88	%		71,392
Due beyond 3 years but within 4 years		2.25	%		7,462		3.36	%		14,613
Due beyond 4 years but within 5 years		1.16	%		7,853		2.15	%		8,019
Due beyond 5 years		3.61	%		10,000		3.61	%		10,000
				$	203,679				$	207,355
Repurchase agreements:
Due within 12 months		2.98	%	$	148,000		3.12	%	$	93,000
Due beyond 12 months but within 2 years		3.28	%		60,000		3.30	%		130,000
Due beyond 2 years but within 3 years		4.12	%		10,000		3.07	%		40,000
Due beyond 3 years but within 4 years		—			—		4.12	%		10,000
Due beyond 4 years but within 5 years		4.28	%		25,000		—			—
Due beyond 5 years		4.49	%		45,000		4.42	%		70,000
				$	288,000				$	343,000
Other borrowings:
ESOP borrowings
Due within 12 months		4.68	%	$	1,000		4.68	%	$	1,000
Due beyond 12 months but within 2 years		4.68	%		1,000		4.68	%		1,000
Due beyond 2 years but within 3 years		4.68	%		1,000		4.68	%		1,000
Due beyond 3 years but within 4 years		4.68	%		500		4.68	%		1,000
Due beyond 4 years but within 5 years		—			—		4.68	%		250
				$	3,500				$	4,250
Corporate borrowings
Due within 12 months		6.30	%	$	1,400		6.30	%	$	1,400
Due beyond 12 months but within 2 years		6.30	%		1,400		6.30	%		1,400
Due beyond 2 years but within 3 years		—			—		6.30	%		1,400
				$	2,800				$	4,200
Borrowings for joint ventures
Due beyond 2 years but within 3 years		3.75	%	$	352		3.75	%	$	1,762
Junior subordinated notes
Due beyond 5 years		2.54	%	$	46,393		2.56	%	$	46,393

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Consolidated Statement of Changes in Stockholders' Equity (Parenthetical) (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Cash dividends per share	$ 0.30
Purchase of treasury stock, shares	13,255
Reissuance of treasury stock for stock option exercises, shares	78,845
Treasury stock
Purchase of treasury stock, shares	13,255
Reissuance of treasury stock for stock option exercises, shares	78,845
Retained earnings
Cash dividends per share	$ 0.30
Reissuance of treasury stock for stock option exercises, shares	78,845

XML

Consolidated Statements of Financial Condition (Parenthetical) (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Consolidated Statements of Financial Condition [Abstract]
Securities available for sale, cost	$ 1,085,034	$ 1,091,497
Loans receivable, allowance for loan losses	$ 6,564	$ 6,537
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	16,278,045	16,278,045
Common stock, shares outstanding	14,666,461	14,600,871
Treasury stock, shares	1,611,584	1,677,174

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Fair Value

9 Months Ended

Sep. 30, 2012

Fair Value [Abstract]

Fair Value

9. Fair Value

Fair value is defined by GAAP as the amount that an asset could be bought or sold, or a liability incurred or settled, between willing parties, other than during a liquidation. GAAP established a fair value hierarchy that prioritizes the use of inputs in valuation methodologies into the following three levels:

Level I:	Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets, as of the reported date. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available. A contractually binding sales price also provides reliable evidence of fair value.
Level II:	Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets: inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that utilize the model-based techniques for which all significant assumptions are observable in the market.
Level III:	Inputs to the valuation methodology are unobservable and significant to the fair value measurement; inputs to the valuation methodology that utilize a model-based techniques for which significant assumptions are not observable in the market; or inputs to the valuation methodology that requires significant management judgment or estimation, some of which may be internally developed.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Investment Securities Available-for-Sale

Management classifies the Company’s equity securities as Level 1 measurements since quoted market prices were available, unadjusted, for identical securities in active markets. Declines in the fair value of individual equity securities that are deemed to be other than temporary, will be written down to current market value and included in earnings as realized losses. Level 2 investment securities are primarily comprised of debt securities issued by states and municipalities and corporations as well as mortgage-backed securities issued by government agencies. On a monthly basis, the fair values for securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. Due to recent uncertainties in the credit markets broadly, and the lack of both trading and new issuance of floating rate trust preferred securities, market price indications generally reflect the lack of liquidity in these markets, therefore the Company classifies these securities as Level III. Due to this lack of practical quoted prices, fair value for floating rate trust preferred securities has been determined using a discounted cash-flow technique. Cash flows are estimated based upon the contractual terms of each instrument. Market rates have been calculated based upon the five year historical discount margin for these instruments from August 2002 through August 2007, when the market was more liquid. These market rates were then adjusted for credit spreads and liquidity risk given the current markets. Credit spreads are based upon the Moody’s rating for each bond and range from 55 to 90 basis points. Liquidity risk adjustments ranged from 20 to 65 basis points where the securities of the 15 largest banks in the United States are assigned 20 to 40 basis points and banks outside of the top 15 were given a higher liquidity risk adjustment. Approximately $17.6 million or 49.5% of the $35.6 million in floating rate trust preferred securities represent investments in three of the four largest banks in the United States.

Derivative Financial Instruments

Derivative financial instruments recorded at fair value on a recurring basis are comprised of interest rate caps and interest rate swap agreements. The Company classifies these instruments as Level II. The Company determines the fair value of the interest rate caps quarterly by using quoted prices from two brokers. The maximum market indication used is the highest price obtained from the brokers, unless this price is Level III as indicated by the broker. If so this price is excluded and the highest Level II is used. The Company utilizes a third-party pricing service to measure its interest rate swap contracts. This service provides pricing information by utilizing evaluated pricing models, supported with market data information. Cash flows are projected for each payment date using the index forward curve. These swap cash flows are then discounted to time zero using LIBOR zero-coupon interest rates, the accepted cost of funds for a financial institution. The implicit assumption is that the risk associated with the cash flows on the derivative is the same as the risk associated with a loan in the interbank market. The present value of the fixed portion is then added to the present value of the floating portion. The sum of both is the fair market value of the interest rate swap.

The following tables present the assets and liabilities reported on the consolidated statements of financial condition at their fair value on a recurring basis as of September 30, 2012 and December 31, 2011 by level within the fair value hierarchy. As required by GAAP, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	As of September 30, 2012
(Dollar amounts in thousands)	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		Total
Assets:
Securities available for sale
Trust preferred securities	$	—	$	1,837	$	35,822	$	37,659
Municipal securities		—		192,636		—		192,636
Equity securities		1,935		—		—		1,935
Corporate bonds		—		212,083		—		212,083
Mortgage backed securities
U.S. sponsored entities		—		685,334		—		685,334
Private label		—		6,968		—		6,968
Subtotal mortgage-backed securities		—		692,302		—		692,302
Total securities available for sale	$	1,935	$	1,098,858	$	35,822	$	1,136,615
Other Assets
Interest rate caps	$	—	$	102	$	—	$	102
Total other assets	$	—	$	102	$	—	$	102
Liabilities
Other Liabilities
Interest rate swaps	$	—	$	6,075	$	—	$	6,075
Total other liabilities	$	—	$	6,075	$	—	$	6,075

As of December 31, 2011
(Dollar amounts in thousands)	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		Total
Assets:
Securities available for sale
Trust preferred securities	$	—	$	1,755	$	35,789	$	37,544
Municipal securities		—		184,485		—		184,485
Equity securities		2,103		—		—		2,103
Corporate bonds		—		164,779		—		164,779
Mortgage backed securities
U.S. sponsored entities		—		732,302		—		732,302
Private label		—		8,903		—		8,903
Subtotal mortgage-backed securities		—		741,205		—		741,205
Total securities available for sale	$	2,103	$	1,092,224	$	35,789	$	1,130,116
Other Assets
Interest rate caps	$	—	$	532	$	—	$	532
Total other assets	$	—	$	532	$	—	$	532
Liabilities:
Other Liabilities
Interest rate swaps	$	—	$	5,532	$	—	$	5,532
Total other liabilities	$	—	$	5,532	$	—	$	5,532

There were no transfers between Level I and Level II assets measured at fair value. The following table presents the changes in the Level III assets measured at fair value on a recurring basis for the three and nine month periods ended September 30, 2012 and 2011.

Fair value measurements using significant unobservable inputs (Level III):

	Securities available for sale Three Months Ended September 30,					Securities available for sale Nine Months Ended September 30,
	2012		2011			2012			2011
Beginning balance	$	35,604	$	37,681		$	35,789		$	37,361
Total net realized/unrealized gains (losses) Included in earnings:
Interest income on securities		4		3			11			10
Net realized loss on securities available for sale		—		(78	)		(5	)		(78	)
Included in other comprehensive income		214		(1,601	)		27			(788	)
Transfers in and/or out of Level III		—		—			—			—
Purchases, issuances and settlements
Purchases		—		—			—			—
Issuances		—		—			—			—
Sales		—		—			—			—
Settlements		—		—			—			(500	)
Ending balance	$	35,822	$	36,005		$	35,822		$	36,005

The following table summarizes changes in unrealized gains and losses recorded in earnings for the three and nine month periods ended September 30, 2012 and 2011 for Level III assets and liabilities that are still held at September 30, 2012 and 2011.

	Securities available for sale Three Months Ended September 30,					Securities available for sale Nine Months Ended September 30,
	2012		2011			2012			2011
Interest income on securities	$	4	$	3		$	11		$	10
Net realized loss on securities available for sale		—		(78	)		(5	)		(78	)
Total	$	4	$	(75	)	$	6		$	(68	)

For Level III assets measured at fair value on a recurring or non-recurring basis as of September 30, 2012, the significant observable inputs used in the fair value measurements were as follows:

(Dollar amounts in thousands)	Fair Value at September 30, 2012		Fair Value at December 31, 2011		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Trust Preferred Securities	$	35,822	$	35,789	Discounted Cash Flow	Credit Spreads	40-85 basis points
						Liquidity Risk Adjustments	15-65 basis points
						Default Rates	.5% - 1%
Impaired Loans		14,927		14,054	Discounted Cash Flow	N/A	N/A
					Appraisal of collateral (1)	N/A	N/A
Real estate acquired through foreclosure		2,803		3,883	Appraisal of collateral (1)	N/A	N/A
Servicing assets		8		16	Discounted Cash Flow	N/A	N/A

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally includes various level III inputs which are not identifiable.

The significant unobservable inputs in the fair value measurement of the Company’s trust preferred securities are the credit spreads, liquidity risk adjustments and default rates as described above under Investment Securities Available for Sale. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company may be required periodically to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower-of-cost-or-fair value accounting or impairment write-downs of individual assets. During the nine month period ended September 30, 2012 and 2011, the Company incurred write-downs on its REO properties during the three months ended September 30, 2012 and 2011 of $7,000 and $746,000, respectively, and during the nine month period ended September 30, 2012 and 2011 of $368,000 and $827,000, respectively. There were no adjustments to the fair value for the Company’s remaining assets and liabilities measured at fair value on a nonrecurring basis in accordance with GAAP during the respective periods.

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 31, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	ESB FINANCIAL CORP
Entity Central Index Key	0000872835
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		14,671,757

XML

Financial Instruments

9 Months Ended

Sep. 30, 2012

Financial Instruments [Abstract]

Financial Instruments

10. Financial Instruments

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments, consisting of commitments to extend credit, commitments under line of credit lending arrangements and letters of credit. Such financial instruments are recorded in the financial statements when they are funded or related fees are received.

The following methods and assumptions were used in estimating fair values of financial instruments.

Cash and cash equivalents – The carrying amounts of cash equivalents approximate their fair values.

Securities – With the exception of floating rate trust preferred securities (the valuation of the trust preferred securities is discussed in footnote 9, Fair Value), fair values for securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique which is widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.

Securities receivable – The carrying amount of securities receivable approximates their fair values.

Loans receivable and held for sale – Fair values for loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values of impaired loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable. The carrying amounts of loans held for sale approximate their fair values.

Accrued interest receivable and payable – The carrying amounts of accrued interest approximate their fair values.

FHLB stock – FHLB stock is restricted from trading purposes and thus, the carrying value approximates its fair value.

Bank owned life insurance (BOLI) – The fair value of BOLI at September 30, 2012 and December 31, 2011 approximated the cash surrender value of the policies at those dates.

Interest rate cap and interest rate swap contracts – Fair values of interest rate cap and interest rate swap contracts are based on dealer quotes.

Deposits – The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date. Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies current market interest rates to a schedule of aggregated expected monthly maturities.

Borrowed funds and junior subordinated notes – For variable rate borrowings, fair values are based on carrying values. For fixed rate borrowings, fair values are based on the discounted value of contractual cash flows and on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. Fair values of structured borrowings are based on dealer quotes.

Advance payments by borrowers for taxes and insurance – The fair value of the advance payments by borrowers for taxes and insurance approximated the carrying value of those commitments at those dates.

The following table sets forth the carrying amount and fair value of the Company’s financial instruments included in the consolidated statement of financial condition as of September 30, 2012:

September 30, 2012
(Dollar amounts in thousands)	Carrying amount		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		Total Fair Value
Financial Assets:
Cash and Cash Equivalents	$	18,726	$	18,726	$	—	$	—	$	18,726
Securities		1,136,615		1,935		1,098,858		35,822		1,136,615
Securities Receivable		2,380		2,380		—		—		2,380
Loans receivable and held for sale		671,936		—		—		710,070		710,070
Accrued Interest Receivable		8,281		8,281		—		—		8,281
FHLB Stock		17,348		17,348		—		—		17,348
Bank owned life insurance		29,864		29,864		—		—		29,864
Interest rate cap contracts		102		—		102		—		102
Financial Liabilities:
Deposits		1,193,383		572,513		—		631,303		1,203,816
Borrowed funds		498,331		—		262,155		265,235		527,390
Junior subordinated notes		46,393		—		24,073		—		24,073
Advance payments by borrowers for taxes and insurance		1,331		1,331		—		—		1,331
Accrued interest payable		3,896		3,896		—		—		3,896
Interest rate swap contracts		6,075		—		6,075		—		6,075

The following table sets forth the carrying amount and fair value of the Company’s financial instruments included in the consolidated statement of financial condition as of December 31, 2011:

	December 31, 2011
(Dollar amounts in thousands)	Carrying amount		Fair value
Financial assets:
Cash and cash equivalents	$	38,848	$	38,848
Securities		1,130,116		1,130,116
Securities receivable		1,148		1,148
Loans receivable and held for sale		648,921		679,819
Accrued interest receivable		9,227		9,227
FHLB stock		21,256		21,256
Bank owned life insurance		30,802		30,802
Interest rate cap contracts		532		532
Financial liabilities:
Deposits		1,156,410		1,168,438
Borrowed funds		560,567		594,080
Junior subordinated notes		46,393		20,361
Advance payment by borrowers for taxes and insurance		2,519		2,519
Accrued interest payable		1,676		1,676
Interest rate swap contracts		5,531		5,531

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Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Interest income:
Loans receivable	$ 8,334	$ 8,746	$ 25,017	$ 26,161
Taxable securities available for sale	7,946	9,436	25,346	29,022
Tax free securities available for sale	1,654	1,619	4,966	4,767
FHLB Stock	4		20
Deposits with banks and federal funds sold	5	16	54	21
Total interest income	17,943	19,817	55,403	59,971
Interest expense:
Deposits	2,225	2,931	7,213	9,247
Borrowed funds	4,325	5,180	13,568	15,775
Junior subordinated notes and guaranteed preferred beneficial interest in subordinated debt	618	612	1,841	1,818
Total interest expense	7,168	8,723	22,622	26,840
Net interest income	10,775	11,094	32,781	33,131
Provision for loan losses	350	300	850	800
Net interest income after provision for loan losses	10,425	10,794	31,931	32,331
Noninterest income:
Fees and service charges	860	919	2,522	2,610
Gain on sale of loans available for sale				(6)
Increase of cash surrender value of bank owned life insurance	142	181	448	524
Net realized gain on securities available for sale	197	406	464	937
Total other-than-temporary impairment losses		(452)	(406)	(452)
Portion of loss recognized in other comprehensive income before taxes		369	375	369
Net impairment losses on investment securities		(83)	(31)	(83)
Net realized loss on derivatives	(138)	(989)	(538)	(1,857)
Income from real estate joint ventures	413	642	1,532	1,804
Other	163	122	502	424
Total noninterest income	1,637	1,198	4,899	4,365
Noninterest expense:
Compensation and employee benefits	4,306	4,078	12,989	12,195
Premises and equipment	640	627	2,074	1,984
Federal deposit insurance premiums	337	284	1,095	1,066
Data processing	608	577	1,791	1,727
Amortization of intangible assets	61	82	190	251
Advertising	174	156	457	392
Other	1,122	899	3,866	3,293
Total noninterest expense	7,248	6,703	22,462	20,908
Income before income taxes	4,814	5,289	14,368	15,788
Provision for income taxes	793	1,010	2,437	3,066
Net income before noncontrolling interest	4,021	4,279	11,931	12,722
Less: net income attributable to the noncontrolling interest	87	315	531	813
Net income attributable to ESB Financial Corporation	$ 3,934	$ 3,964	$ 11,400	$ 11,909
Net income per share
Basic	$ 0.27	$ 0.27	$ 0.80	$ 0.82
Diluted	$ 0.27	$ 0.27	$ 0.79	$ 0.82
Cash dividends declared per share	$ 0.10	$ 0.10	$ 0.30	$ 0.28
Weighted average shares outstanding	14,362,375	14,489,740	14,329,149	14,455,677
Weighted average shares and share equivalents outstanding	14,490,450	14,589,597	14,458,419	14,567,200

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Deposits

9 Months Ended

Sep. 30, 2012

Deposits [Abstract]

Deposits

4. Deposits

The Company’s deposits as of the respective dates are summarized as follows:

(Dollar amounts in thousands)	September 30, 2012					December 31, 2011
Type of accounts	Amount		%			Amount		%
Noninterest-bearing deposits	$	107,810		9.0	%	$	95,691		8.3	%
NOW account deposits		246,887		20.7	%		208,975		18.1	%
Money Market deposits		44,807		3.8	%		34,484		3.0	%
Passbook account deposits		173,009		14.5	%		153,644		13.3	%
Time deposits		620,870		52.0	%		663,616		57.3	%
	$	1,193,383		100.0	%	$	1,156,410		100.0	%
Time deposits mature as follows:
Within one year	$	362,053		58.3	%	$	387,857		58.5	%
After one year through two years		117,667		19.0	%		118,470		17.9	%
After two years through three years		78,248		12.6	%		81,282		12.2	%
After three years through four years		38,665		6.2	%		33,395		5.0	%
After four years through five years		19,321		3.1	%		37,235		5.6	%
Thereafter		4,916		0.8	%		5,377		0.8	%
	$	620,870		100.0	%	$	663,616		100.0	%

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Loans Receivable

9 Months Ended

Sep. 30, 2012

Loans Receivable [Abstract]

Loans Receivable

3. Loans Receivable

The Company’s loans receivable as of the respective dates are summarized as follows:

(In thousands)	September 30, 2012			December 31, 2011
Mortgage loans:
Residential real estate
Single family	$	327,805		$	312,723
Construction		46,109			45,363
Multi family		32,888			32,370
Total residential real estate		406,802			390,456
Commercial real estate
Commercial		78,974			83,447
Construction		18,410			17,307
Total commercial real estate		97,384			100,754
Subtotal mortgage loans		504,186			491,210
Other loans:
Consumer loans
Home equity loans		76,780			72,493
Dealer auto and RV loans		48,300			47,039
Other loans		8,045			9,255
Total consumer loans		133,125			128,787
Commercial business		54,358			50,337
Subtotal other loans		187,483			179,124
Total loans receivable		691,669			670,334
Less:
Allowance for loan losses		6,564			6,537
Deferred loan fees and net discounts		(1,951	)		(1,852	)
Loans in process		15,120			16,728
Subtotal		19,733			21,413
Net loans receivable	$	671,936		$	648,921

At September 30, 2012 and December 31, 2011, the Company conducted its business through 25 offices in Allegheny, Beaver, Butler and Lawrence counties in Pennsylvania which also serves as its primary lending area. Management does not believe it has significant concentrations of credit risk to any one group of borrowers given its underwriting and collateral requirements.

Management has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for loan losses, the Company has segmented certain loans in the portfolio by product type. Loans are segmented into the following pools: commercial business loans, commercial real estate loans, residential real estate loans and consumer loans. The Company sub-segments residential real estate loans into the following three classes: single family, construction and multi-family. Commercial real estate is sub-segmented into commercial and construction classes. The Company also sub-segments the consumer loan portfolio into the following three classes: home equity, dealer automobile and recreational vehicle (RV) and other consumer loans. Historical loss percentages for each risk category are calculated and used as the basis for calculating allowance allocations. These historical loss percentages are calculated over a three year period for all portfolio segments. Certain qualitative factors are then added to the historical loss percentages to get the adjusted factor to be applied to non classified loans. The following qualitative factors are analyzed for each portfolio segment:

• Levels of and trends in delinquencies and nonaccruals

• Changes in lending policies and procedures

• Volatility of losses within each risk category

• Loans and Lending staff acquired through acquisition

• Economic trends

• Concentrations of credit

• Trends in volume and terms

• Experience depth and ability of management

These qualitative factors are reviewed each quarter and adjusted based upon relevant changes within the portfolio. During 2012, the qualitative factors for levels of and trends in delinquencies & nonaccruals were increased for residential mortgages, commercial loans and consumer loans. Trends in volume and terms were also increased for residential mortgages.

In terms of the Company’s loan portfolio, the consumer, commercial business and commercial real estate loans are deemed to have more risk than the residential real estate loans in the portfolio. The commercial loans not secured by real estate are highly dependent on the borrowers’ financial condition and are more dependent on economic conditions. The commercial loans secured by real estate are also dependent on economic conditions but generally have stronger forms of collateral. Within the consumer loan portfolio, the dealer auto and RV loans have historically carried more risk than the other segments of the consumer portfolio.

Loans by Segment

The total allowance for loan losses reflects management’s estimate of loan losses inherent in the loan portfolio at the statement of financial condition date. The Company considers the allowance for loan losses of $6.6 million adequate to cover loan losses inherent in the loan portfolio, at September 30, 2012. The following tables present by portfolio segment, the changes in the allowance for loan losses for the three and nine month periods ended September 30, 2012 and 2011.

As of the three months ended September 30, 2012
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	434		$	2,299		$	1,004	$	2,519		$	485		$	6,741
Charge-offs		32			163			206		153			—			554
Recoveries		—			—			27		—			—			27
Provision		94			—			174		82			—			350
Reallocations		—			(62	)		—		97			(35	)		—
Ending Balance	$	496		$	2,074		$	999	$	2,545		$	450		$	6,564
As of the three months ended September 30, 2011
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	367		$	2,027		$	1,108	$	2,636		$	515		$	6,653
Charge-offs		—			—			124		650			—			774
Recoveries		1			—			21		48			—			70
Provision		—			100			50		150			—			300
Reallocations		(11	)		331			80		(61	)		(339	)		—
Ending Balance	$	357		$	2,458		$	1,135	$	2,123		$	176		$	6,249
As of the nine months ended September 30, 2012
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	384		$	2,442		$	1,045	$	2,115		$	551		$	6,537
Charge-offs		32			163			445		277			—			917
Recoveries		—			—			77		17			—			94
Provision		144			—			322		384			—			850
Reallocations		—			(205	)		—		306			(101	)		—
Ending Balance	$	496		$	2,074		$	999	$	2,545		$	450		$	6,564
As of the nine months ended September 30, 2011
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	784		$	1,831		$	1,125	$	2,573		$	234		$	6,547
Charge-offs		178			—			391		708			—			1,277
Recoveries		25			—			105		49			—			179
Provision		—			125			275		325			75			800
Reallocations		(274	)		502			21		(116	)		(133	)		—
Ending Balance	$	357		$	2,458		$	1,135	$	2,123		$	176		$	6,249

The following tables present by portfolio segment, the recorded investment in loans at September 30, 2012 and December 31, 2011.

As of September 30, 2012
(Dollar amounts in thousands)	Commercial		Commercial Real Estate		Consumer		Residential		Unallocated		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	3	$	1,169	$	48	$	—	$	—	$	1,220
Ending balance: collectively evaluated for impairment	$	493	$	905	$	951	$	2,545	$	450	$	5,344
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—
Loans Receivable:
Ending Balance	$	54,358	$	97,384	$	133,125	$	406,802	$	—	$	691,669
Ending balance: individually evaluated for impairment	$	38	$	13,513	$	291	$	2,305	$	—	$	16,147
Ending balance: collectively evaluated for impairment	$	54,320	$	83,871	$	132,834	$	404,497	$	—	$	675,522
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—

As of December 31, 2011
(Dollar amounts in thousands)	Commercial		Commercial Real Estate		Consumer		Residential		Unallocated		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	10	$	1,489	$	50	$	—	$	—	$	1,549
Ending balance: collectively evaluated for impairment	$	374	$	953	$	995	$	2,115	$	551	$	4,988
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—
Loans Receivable:
Ending Balance	$	50,337	$	100,754	$	128,787	$	390,456	$	—	$	670,334
Ending balance: individually evaluated for impairment	$	63	$	14,023	$	153	$	1,364	$	—	$	15,603
Ending balance: collectively evaluated for impairment	$	50,274	$	86,731	$	128,634	$	389,092	$	—	$	654,731
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—

Credit Quality Information

The following tables represent credit exposures by internally assigned grades as of September 30, 2012 and December 31, 2011. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly graded loans.

The Company’s internally assigned grades are as follows:

Pass – loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

Substandard – loans that have a well-defined weakness based on objective evidence and be characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful – loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

Loss – loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.

As of September 30, 2012
(Dollar amounts in thousands)	Residential Real Estate Multi - family		Residential Real Estate Construction		Commercial Real Estate Commercial		Commercial Real Estate Construction		Commercial
Pass	$	32,888	$	39,802	$	63,417	$	18,410	$	53,783
Special Mention		—		5,363		1,475		—		539
Substandard		—		944		14,082		—		36
Doubtful		—		—		—		—		—
Loss		—		—		—		—		—
Ending Balance	$	32,888	$	46,109	$	78,974	$	18,410	$	54,358
As of December 31, 2011
(Dollar amounts in thousands)	Residential Real Estate Multi - family		Residential Real Estate Construction		Commercial Real Estate Commercial		Commercial Real Estate Construction		Commercial
Pass	$	32,370	$	38,219	$	67,119	$	17,307	$	50,232
Special Mention		—		7,144		2,319		—		57
Substandard		—		—		14,009		—		39
Doubtful		—		—		—		—		—
Loss		—		—		—		—		9
Ending Balance	$	32,370	$	45,363	$	83,447	$	17,307	$	50,337

The following tables present performing and nonperforming single family residential and consumer loans based on payment activity as of September 30, 2012 and December 31, 2011. Payment activity is reviewed by management on a monthly basis to determine how loans are performing. Loans are considered to be nonperforming when they become 90 days delinquent.

As of September 30, 2012
(Dollar amounts in thousands)	Residential Real Estate Single Family		Consumer Home Equity		Dealer Auto and RV		Other Consumer
Performing	$	324,227	$	76,282	$	48,192	$	7,949
Nonperforming		3,578		498		108		96
Total	$	327,805	$	76,780	$	48,300	$	8,045
As of December 31, 2011
(Dollar amounts in thousands)	Residential Real Estate Single Family		Consumer Home Equity		Dealer Auto and RV		Other Consumer
Performing	$	310,263	$	72,091	$	46,907	$	9,162
Nonperforming		2,460		402		132		93
Total	$	312,723	$	72,493	$	47,039	$	9,255

Nonperforming loans also include certain loans that have been modified and classified as troubled debt restructuring (TDR) where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.

Non-performing loans, which include non-accrual loans and TDRs, were $15.6 million and $13.4 million at September 30, 2012 and December 31, 2011. The TDRs amounted to $8.6 million and $7.8 million at September 30, 2012 and December 31, 2011, respectively. The Company is not committed to lend additional funds to debtors whose loans are on non-accrual status.

Age Analysis of Past Due Loans Receivable by Class

Following tables are an aging analysis of the investment of past due loans receivable as of September 30, 2012 and December 31, 2011.

(Dollar amounts in thousands)													Recorded
As of September 30, 2012	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans Receivable		Investment > 90 Days and Accruing
Residential real estate
Single family	$	222	$	422	$	3,578	$	4,222	$	323,583	$	327,805	$	—
Construction		—		—		—		—		46,109		46,109		—
Multi-family		—		—		—		—		32,888		32,888		—
Commercial Real Estate
Commercial		188		796		3,076		4,060		74,914		78,974		—
Construction		—		—		—		—		18,410		18,410		—
Consumer
Consumer - home equity		43		—		207		250		76,530		76,780		—
Consumer - dealer auto and RV		601		126		108		835		47,465		48,300		—
Consumer - other		16		17		96		129		7,916		8,045		—
Commercial		504		—		38		542		53,816		54,358		—
Total	$	1,574	$	1,361	$	7,103	$	10,038	$	681,631	$	691,669	$	—
(Dollar amounts in thousands)													Recorded
As of December 31, 2011	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans Receivable		Investment > 90 Days and Accruing
Residential real estate
Single family	$	464	$	2,933	$	2,460	$	5,857	$	306,866	$	312,723	$	—
Construction		—		—		—		—		45,363		45,363		—
Multi-family		—		—		—		—		32,370		32,370		—
Commercial Real Estate
Commercial		48		1,507		2,629		4,184		79,263		83,447		—
Construction		—		—		—		—		17,307		17,307		—
Consumer
Consumer - home equity		143		9		249		401		72,092		72,493		—
Consumer - dealer auto and RV		698		101		132		931		46,108		47,039		—
Consumer - other		98		23		93		214		9,041		9,255		—
Commercial		59		—		54		113		50,224		50,337		—
Total	$	1,510	$	4,573	$	5,617	$	11,700	$	658,634	$	670,334	$	—

Impaired Loans

Management considers commercial loans, commercial real estate loans and multi-family real estate loans which are 90 days or more past due to be impaired. Larger commercial loans, commercial real estate loans and multi-family real estate loans which are 60 days or more past due, including any troubled debt restructuring, are selected for impairment testing in accordance with GAAP. These loans are analyzed to determine if it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. If management determines that the fair value of the impaired loan is less than the recorded investment in the loan, impairment is recognized through a provision for loan loss estimate or a charge-off to the allowance for loan losses. The Company collectively reviews all single family residential real estate and consumer loans for impairment.

The following tables summarize impaired loans:

Impaired Loans

As of September 30, 2012 and December 31, 2011

(Dollar amounts in thousands)	September 30, 2012						December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	5,413	$	5,520	$	—	$	5,568	$	5,675	$	—
Commercial business loans		—		—		—		39		39		—
Residential loans		1,361		1,361		—		1,364		1,364		—
Residential construction loans		944		944		—		—		—		—
Consumer Loans:
Home Equity		139		139		—		—		—		—
With an allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	8,100	$	8,264	$	1,169	$	8,454	$	8,454	$	1,489
Consumer Loans:
Home Equity		152		152		48		153		153		50
Commercial business loans		38		38		3		25		25		10
Total:
Commercial Real Estate	$	13,513	$	13,784	$	1,169	$	14,023	$	14,129	$	1,489
Consumer		291		291		48		153		153		50
Residential		1,361		1,361		—		1,364		1,364		—
Residential construction loans		944		944		—		—		—		—
Commercial		38		38		3		63		63		10

(Dollar amounts in thousands)	Three months ended September 30, 2012				Three months ended September 30, 2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	5,451	$	58	$	1,056	$	18
Commercial business loans		—		—		163		10
Residential loans		1,361		2		—		—
Residential construction loans		102		10		—		—
Consumer Loans:
Home Equity		91		10		—		—
With an allowance recorded:
Residential Real Estate
Construction	$	—	$	—	$	—	$	—
Commercial Real Estate:
Commercial Real Estate		8,248		105		5,678		408
Consumer Loans:
Home Equity		152		1		154		7
Commercial business loans		37		2		25		3
Total:
Commercial Real Estate	$	13,699	$	163	$	6,734	$	426
Consumer		243		11		154		7
Residential		1,361		2		—		—
Residential construction loans		102		10		—		—
Commercial		37		2		188		13

(Dollar amounts in thousands)	Nine months ended September 30, 2012				Nine months ended September 30, 2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	5,488	$	170	$	1,138	$	18
Commercial business loans		—		—		77		10
Residential loans		1,362		7		—		—
Residential construction loans		421		32		—		—
Consumer Loans:
Home Equity		43		10		—		—
With an allowance recorded:
Residential Real Estate
Construction	$	—	$	—	$	1,432	$	—
Commercial Real Estate:
Commercial Real Estate		8,353		319		7,363		408
Consumer Loans:
Home Equity		153		6		155		7
Commercial business loans		41		2		151		3
Total:
Commercial Real Estate	$	13,841	$	489	$	8,501	$	426
Consumer		196		16		155		7
Residential		1,362		7		—		—
Residential construction loans		421		32		1,432		—
Commercial		41		2		228		13

Nonaccrual Loans

Loans are considered nonaccrual upon reaching 90 days delinquency, although the Company may be receiving partial payments of interest and partial repayments of principal on such loans. When a loan is placed in nonaccrual status, previously accrued but unpaid interest is deducted from interest income.

On the following table are the loans receivable on nonaccrual status as of September 30, 2012 and December 31, 2011. The balances are presented by class of loans:

(Dollar amounts in thousands)	September 30, 2012		December 31, 2011
Commercial	$	38	$	54
Commercial Real Estate		11,338		10,237
Consumer
Consumer - Home Equity		359		402
Consumer - Dealer auto and RV		108		132
Consumer - Other		96		93
Residential		3,578		2,460
Total	$	15,517	$	13,378

Modifications

The Company’s loan portfolio also includes TDR’s, where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.

When the Company modifies a loan, management evaluates any possible impairment based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral. In these cases, management uses the current fair value of the collateral, less selling costs, instead of discounted cash flows. If management determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized by segment or class of loan, as applicable, through an allowance estimate or a charge-off to the allowance. Segment and class status is determined by the loan’s classification at origination.

The following table includes the recorded investment and number of modifications for modified loans, for the three and nine months ended September 2012 and 2011. The Company reports the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured.

(Dollar amounts in thousands)	For the three months ended September 30, 2012
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Consumer
Home Equity		6	$	139	$	139	$	—	$	—	$	139
Total Troubled Debt Restructurings		6	$	139	$	139	$	—	$	—	$	139
(Dollar amounts in thousands)	For the three months ended September 30, 2011
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Consumer
Home Equity		—	$	—	$	—	$	—	$	—	$	—
Total Troubled Debt Restructurings		—	$	—	$	—	$	—	$	—	$	—

(Dollar amounts in thousands)	For the nine months ended September 30, 2012
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Residential construction loans		3	$	947	$	947	$	—	$	—	$	947
Commercial Real Estate		1		100		—		—		100		100
Consumer
Home Equity		6		139		139		—		—		139
Total Troubled Debt Restructurings		10	$	1,186	$	1,086	$	—	$	100	$	1,186
(Dollar amounts in thousands)	For the nine months ended September 30, 2011
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Residential construction loans		—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate		3		7,372		—		7,305		125		7,430
Consumer
Home Equity		—		—		—		—		—		—
Total Troubled Debt Restructurings		3	$	7,372	$	—	$	7,305	$	125	$	7,430

The Company did not have any TDR’s that defaulted subsequent to their modification during the periods reported.

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Deposits (Tables)

9 Months Ended

Sep. 30, 2012

Deposits [Abstract]

Summary of deposits

(Dollar amounts in thousands)	September 30, 2012					December 31, 2011
Type of accounts	Amount		%			Amount		%
Noninterest-bearing deposits	$	107,810		9.0	%	$	95,691		8.3	%
NOW account deposits		246,887		20.7	%		208,975		18.1	%
Money Market deposits		44,807		3.8	%		34,484		3.0	%
Passbook account deposits		173,009		14.5	%		153,644		13.3	%
Time deposits		620,870		52.0	%		663,616		57.3	%
	$	1,193,383		100.0	%	$	1,156,410		100.0	%

Summary of time deposits maturity

Within one year	$	362,053	58.3	%	$	387,857	58.5	%
After one year through two years		117,667	19.0	%		118,470	17.9	%
After two years through three years		78,248	12.6	%		81,282	12.2	%
After three years through four years		38,665	6.2	%		33,395	5.0	%
After four years through five years		19,321	3.1	%		37,235	5.6	%
Thereafter		4,916	0.8	%		5,377	0.8	%
	$	620,870	100.0	%	$	663,616	100.0	%

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

ESB Financial Corporation (the Company) is a publicly traded Pennsylvania thrift holding company. The consolidated financial statements include the accounts of the Company and its direct and indirect wholly-owned subsidiaries, which are ESB Bank (ESB or the Bank), THF, Inc. (THF), ESB Financial Services, Inc. (EFS) and AMSCO, Inc. (AMSCO). ESB is a Pennsylvania chartered, Federal Deposit Insurance Corporation (FDIC) insured stock savings bank.

AMSCO is engaged in real estate development and construction of 1-4 family residential units independently or in conjunction with its joint ventures. AMSCO is currently involved in nine real estate joint ventures, all of which are owned 51% or greater by AMSCO. The Bank has provided all development and construction financing. These joint ventures have been included in the consolidated financial statements and reflected within the consolidated statements of financial condition as real estate held for investment and related operating income and expenses are reflected within other non-interest income or expense. The Bank’s loans to AMSCO and related interest have been eliminated in consolidation.

In addition to the elimination of the loans and interest to the joint ventures described above, all other significant intercompany transactions and balances have been eliminated in consolidation.

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements for the interim periods include all adjustments, consisting only of normal recurring accruals, which are necessary, in the opinion of management, to fairly reflect the Company’s financial position and results of operations. Additionally, these consolidated financial statements for the interim periods have been prepared in accordance with instructions for the Securities and Exchange Commission’s Form 10-Q and therefore do not include all information or footnotes necessary for a complete presentation of financial condition, results of operations and cash flows in conformity with U.S. generally accepted accounting principles (GAAP). For further information, refer to the audited consolidated financial statements and footnotes thereto for the year ended December 31, 2011, as contained in the Company’s 2011 Annual Report to Stockholders.

The results of operations for the nine month period ended September 30, 2012 are not necessarily indicative of the results that may be expected for the entire year. Certain amounts previously reported have been reclassified to conform to the current periods’ reporting format, such reclassifications did not have an effect on stockholders’ equity or net income.

The accounting principles followed by the Company and the methods of applying these principles conform with GAAP and with 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 Statement of Financial Condition date and revenues and expenses for the period. Actual results could differ significantly from those estimates.

Operating Segments

Operating Segments

An operating segment is defined as a component of an enterprise that engages in business activities that generate revenue and incur expense, the operating results of which are reviewed by management. At September 30, 2012, the Company was doing business through 25 full service banking branches, one loan production office and through its various other subsidiaries. Loans and deposits are primarily generated from the areas where banking branches are located. The Company derives its income predominantly from interest on loans and securities and to a lesser extent, non-interest income. The Company’s principal expenses are interest paid on deposits and borrowed funds and normal operating costs. The Company’s operations are principally in the banking industry. Consistent with internal reporting, the Company’s operations are reported in one operating segment, which is community banking.

Stock Based compensation

Stock Based Compensation

During the three and nine months ended September 30, 2012, the Company recorded approximately $116,000 and $327,000, respectively, in compensation expense and a tax benefit of $6,000 and $23,000, respectively, related to our share-based compensation awards that are expected to vest in 2012. During the three and nine months ended September 30, 2011, the Company recorded approximately $94,000 and $290,000, respectively, in compensation expense and a tax benefit of $6,500 and $13,100, respectively, related to our share-based compensation awards that were expected to vest in 2011. As of September 30, 2012, there was approximately $630,000 of unrecognized compensation cost related to unvested share-based compensation awards granted. That cost is expected to be recognized over the next four years.

As required by GAAP, cash flows from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for stock-based awards (excess tax benefits) are classified as financing cash flows.

Financial Instruments

Financial Instruments

As part of its overall interest rate risk management activities, the Company utilizes derivative instruments to manage its exposure to various types of interest rate risk. Interest rate swaps and interest rate caps are the primary instruments the Company uses for interest rate risk management. Derivative instruments are recorded at fair value as either part of prepaid expenses and other assets or accrued expenses and other liabilities on the consolidated statements of financial condition. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge 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 used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

The Company formally documents the relationship between the hedging instruments and hedged items, as well as the risk management objective and strategy, before undertaking an accounting hedge. To qualify for hedge accounting, the derivatives and related hedged items must be designated as a hedge at inception of the hedge relationship. For accounting hedge relationships, we formally assess, both at the inception of the hedge and on an ongoing basis, if the derivatives are highly effective in offsetting designated changes in the fair value or cash flows of the hedged item. If it is determined that the derivative instrument is not highly effective, hedge accounting is discontinued.

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. To the extent the change in fair value of the derivative does not offset the change in fair value of the hedged item, the difference or ineffectiveness is reflected in earnings in the same financial statement category as the hedged item.

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 (OCI) 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 fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges, changes in fair value are recognized in earnings.

Recent Accounting and Regulatory Pronouncements

Recent Accounting and Regulatory Pronouncements

In December 2011, the FASB issued ASU 2011-10, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate-a Scope Clarification. The amendments in this Update affect entities that cease to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt. Under the amendments in this Update, when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling financial interest under Subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. The amendments in this Update should be applied on a prospective basis to deconsolidation events occurring after the effective date. Prior periods should not be adjusted even if the reporting entity has continuing involvement with previously derecognized in substance real estate entities. For public entities, the amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2013, and interim and annual periods thereafter. Early adoption is permitted. This ASU did not have a significant impact on the Company’s financial statements.

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in this Update affect all entities that have financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement. The requirements amend the disclosure requirements on offsetting in Section 210-20-50. This information will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments in the scope of this Update. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. This ASU is not expected to have a significant impact on the Company’s financial statements.

In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. Entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. Nonpublic entities should begin applying these requirements for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The Company has provided the necessary disclosure in Statement of Comprehensive Income.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other Topics (Topic 350), Testing Goodwill for Impairment. The objective of this update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments in this Update apply to all entities, both public and nonpublic, that report goodwill in their financial statements and are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. This ASU did not have a significant impact on the Company’s financial statements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. The amendments in this Update improve the comparability, clarity, consistency, and transparency of financial reporting and increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP and IFRS, the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. All entities that report items of comprehensive income, in any period presented, will be affected by the changes in this update. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The amendments in this Update should be applied retrospectively, and early adoption is permitted. The Company has provided the necessary disclosure in the Statement of Comprehensive Income.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The Company has included the disclosure requirements in Footnote Nine.

Property, Plant, and Equipment

In December 2011, the FASB issued ASU 2011-10, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate-a Scope Clarification. The amendments in this Update affect entities that cease to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt. Under the amendments in this Update, when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling financial interest under Subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. The amendments in this Update should be applied on a prospective basis to deconsolidation events occurring after the effective date. Prior periods should not be adjusted even if the reporting entity has continuing involvement with previously derecognized in substance real estate entities. For public entities, the amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2013, and interim and annual periods thereafter. Early adoption is permitted. This ASU did not have a significant impact on the Company’s financial statements.

Balance Sheet

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in this Update affect all entities that have financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement. The requirements amend the disclosure requirements on offsetting in Section 210-20-50. This information will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments in the scope of this Update. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. This ASU is not expected to have a significant impact on the Company’s financial statements.

Presentation of Comprehensive Income

In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. Entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. Nonpublic entities should begin applying these requirements for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The Company has provided the necessary disclosure in Statement of Comprehensive Income.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. The amendments in this Update improve the comparability, clarity, consistency, and transparency of financial reporting and increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP and IFRS, the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. All entities that report items of comprehensive income, in any period presented, will be affected by the changes in this update. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The amendments in this Update should be applied retrospectively, and early adoption is permitted. The Company has provided the necessary disclosure in the Statement of Comprehensive Income.

Intangibles- Goodwill and Other Topics Testing Goodwill for Impairment

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other Topics (Topic 350), Testing Goodwill for Impairment. The objective of this update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments in this Update apply to all entities, both public and nonpublic, that report goodwill in their financial statements and are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. This ASU did not have a significant impact on the Company’s financial statements.

Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The Company has included the disclosure requirements in Footnote Nine.

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Comprehensive Income

9 Months Ended

Sep. 30, 2012

Comprehensive Income [Abstract]

Comprehensive Income

7. Comprehensive Income

The Company has developed the following table to present the components of accumulated other comprehensive income:

(Dollar amounts in thousands)	September 30, 2012			December 31, 2011
Net unrealized gain on securities available for sale	$	34,044		$	25,101
Accumulated loss on effective cash flow hedging derivatives		(4,010	)		(3,596	)
Net unrecognized pension cost		(499	)		(601	)
Total	$	29,535		$	20,904

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Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012		Dec. 31, 2011
Financial Assets:
Cash and Cash Equivalents	$ 18,726		$ 38,848
Fair value, Securities	1,136,615		1,130,116
Securities receivable	2,380		1,148
Loans receivable and held for sale	671,936		648,921
Accrued Interest receivable	8,281		9,227
FHLB Stock	17,348		21,256
Bank owned life insurance	29,864		30,802
Financial Liabilities:
Deposits	1,193,383		1,156,410
Junior subordinated notes	46,393		46,393
Advance payments by borrowers for taxes and insurance	1,331		2,519
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level I) [Member]
Financial Assets:
Cash and Cash Equivalents	18,726
Fair value, Securities	1,935
Securities receivable	2,380
Loans receivable and held for sale
Accrued Interest receivable	8,281
FHLB Stock	17,348
Bank owned life insurance	29,864
Interest rate cap contracts
Financial Liabilities:
Deposits	572,513
Borrowed funds
Junior subordinated notes
Advance payments by borrowers for taxes and insurance	1,331
Accrued interest payable	3,896
Interest rate swap contracts
Significant Other Observable Inputs (Level II) [Member]
Financial Assets:
Cash and Cash Equivalents
Fair value, Securities	1,098,858	[1]
Securities receivable
Loans receivable and held for sale
Accrued Interest receivable
FHLB Stock
Bank owned life insurance
Interest rate cap contracts	102
Financial Liabilities:
Deposits
Borrowed funds	262,155
Junior subordinated notes	24,073
Advance payments by borrowers for taxes and insurance
Accrued interest payable
Interest rate swap contracts	6,075
Significant Unobservable Inputs (Level III) [Member]
Financial Assets:
Cash and Cash Equivalents
Fair value, Securities	35,822
Securities receivable
Loans receivable and held for sale	710,070
Accrued Interest receivable
FHLB Stock
Bank owned life insurance
Interest rate cap contracts
Financial Liabilities:
Deposits	631,303
Borrowed funds	265,235
Junior subordinated notes
Advance payments by borrowers for taxes and insurance
Accrued interest payable
Interest rate swap contracts
Carrying amount [Member]
Financial Assets:
Cash and Cash Equivalents	18,726		38,848
Fair value, Securities	1,136,615		1,130,116
Securities receivable	2,380		1,148
Loans receivable and held for sale	671,936		648,921
Accrued Interest receivable	8,281		9,227
FHLB Stock	17,348		21,256
Bank owned life insurance	29,864		30,802
Interest rate cap contracts	102		532
Financial Liabilities:
Deposits	1,193,383		1,156,410
Borrowed funds	498,331		560,567
Junior subordinated notes	46,393		46,393
Advance payments by borrowers for taxes and insurance	1,331		2,519
Accrued interest payable	3,896		1,676
Interest rate swap contracts	6,075		5,531
Fair Value [Member]
Financial Assets:
Cash and Cash Equivalents	18,726		38,848
Fair value, Securities	1,136,615		1,130,116
Securities receivable	2,380		1,148
Loans receivable and held for sale	710,070		679,819
Accrued Interest receivable	8,281		9,227
FHLB Stock	17,348		21,256
Bank owned life insurance	29,864		30,802
Interest rate cap contracts	102		532
Financial Liabilities:
Deposits	1,203,816		1,168,438
Borrowed funds	527,390		594,080
Junior subordinated notes	24,073		20,361
Advance payments by borrowers for taxes and insurance	1,331		2,519
Accrued interest payable	3,896		1,676
Interest rate swap contracts	$ 6,075		$ 5,531

[1]

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Borrowed Funds

9 Months Ended

Sep. 30, 2012

Borrowed Funds [Abstract]

Borrowed Funds

5. Borrowed Funds

The Company’s borrowed funds as of the respective dates are summarized as follows:

(Dollar amounts in thousands)	September 30, 2012					December 31, 2011
	Weighted average rate			Amount		Weighted average rate			Amount
FHLB advances:
Due within 12 months		3.07	%	$	70,759		2.80	%	$	30,684
Due beyond 12 months but within 2 years		3.16	%		88,317		3.62	%		72,647
Due beyond 2 years but within 3 years		2.96	%		19,288		2.88	%		71,392
Due beyond 3 years but within 4 years		2.25	%		7,462		3.36	%		14,613
Due beyond 4 years but within 5 years		1.16	%		7,853		2.15	%		8,019
Due beyond 5 years		3.61	%		10,000		3.61	%		10,000
				$	203,679				$	207,355
Repurchase agreements:
Due within 12 months		2.98	%	$	148,000		3.12	%	$	93,000
Due beyond 12 months but within 2 years		3.28	%		60,000		3.30	%		130,000
Due beyond 2 years but within 3 years		4.12	%		10,000		3.07	%		40,000
Due beyond 3 years but within 4 years		—			—		4.12	%		10,000
Due beyond 4 years but within 5 years		4.28	%		25,000		—			—
Due beyond 5 years		4.49	%		45,000		4.42	%		70,000
				$	288,000				$	343,000
Other borrowings:
ESOP borrowings
Due within 12 months		4.68	%	$	1,000		4.68	%	$	1,000
Due beyond 12 months but within 2 years		4.68	%		1,000		4.68	%		1,000
Due beyond 2 years but within 3 years		4.68	%		1,000		4.68	%		1,000
Due beyond 3 years but within 4 years		4.68	%		500		4.68	%		1,000
Due beyond 4 years but within 5 years		—			—		4.68	%		250
				$	3,500				$	4,250
Corporate borrowings
Due within 12 months		6.30	%	$	1,400		6.30	%	$	1,400
Due beyond 12 months but within 2 years		6.30	%		1,400		6.30	%		1,400
Due beyond 2 years but within 3 years		—			—		6.30	%		1,400
				$	2,800				$	4,200
Borrowings for joint ventures
Due beyond 2 years but within 3 years		3.75	%	$	352		3.75	%	$	1,762
Junior subordinated notes
Due beyond 5 years		2.54	%	$	46,393		2.56	%	$	46,393

Included in the $203.7 million of FHLB advances at September 30, 2012 are $50.0 million in structured advances with imbedded caps at various strike rates based on the 3 month LIBOR rate. If during the term of the advance, the 3 month LIBOR rate exceeds the strike rate, the interest rate on the structured advance is reduced by the difference between the rate and the strike rate.

Included in the $288.0 million of Repurchase Agreements (REPOs) are $30.0 million in structured REPOs with imbedded caps at various strike rates based on the 3 month LIBOR rate. If during the term of the REPO, the 3 month LIBOR rate exceeds the strike rate, the interest rate on the structured REPO is reduced by the difference between the rate and the strike rate. In addition, the Company has $25.0 million in structured REPOs with double, or $50.0 million notional amount of imbedded caps, at a strike rate of 3.75% based on the 3 month LIBOR rate. The terms and conditions of these structured REPOs are that the rate is fixed for five years and after 5 years, on a specified date the counterparty has the one time right (European Call) to call the REPO. If the counterparty does not call the REPO on the specified date, the rate remains the same for the remaining five years. These structured REPOs also include a double imbedded cap for the first five year period with a strike rate to the 3 month LIBOR rate. If during the first five years, the 3 month LIBOR rate exceeds the strike rate, the interest rate on the structured REPO is reduced by two times the difference between the rate and the strike rate. At no point shall the interest rate on these structured REPOs with imbedded caps be less than zero.

Also included in the $288.0 million of REPOs is a $25.0 million structured REPO in which the Company pays a fixed rate of interest. At the reset date and every quarterly period thereafter, the counterparty has the right to terminate the transaction. It has historically been the Company’s position to pay off any borrowings and replace them with fixed rate funding if converted by the counterparty.

The Company enters into sales of securities under agreements to repurchase. Such REPOs are treated as borrowed funds. The dollar amount of the securities underlying the agreements remains in their respective asset accounts.

REPOs are collateralized by various securities that are either held in safekeeping at the FHLB or delivered to the dealer who arranged the transaction and the Company maintains control of these securities.

The market value of such securities exceeded the amortized cost of the securities sold under agreements to repurchase. The market value of the securities as of September 30, 2012 was $342.4 million with an amortized cost of $317.3 million. The market value of the securities as of December 31, 2011 was $402.1 million with an amortized cost of $375.0 million. The average maturity date of the mortgage backed securities sold under agreements to repurchase was greater than 90 days for the periods ended September 30, 2012 and December 31, 2011.

As of September 30, 2012 and December 31, 2011, the Company had REPOs with Citigroup of $135.0 million and $145.0 million, respectively, Barclays Capital of $40.0 million and $70.0 million, respectively, Credit Suisse of $83.0 million and $93.0 million, respectively, PNC Bank of $0 and $5.0 million, respectively, and Morgan Stanley of $30.0 million and $30.0 million, respectively.

As of September 30, 2012, the REPOs with Citigroup had $17.1 million at risk (where the market value of the securities exceeded the borrowing), with a weighted average maturity of 18 months, Barclays Capital had $4.6 million at risk with a weighted average maturity of 45 months, Credit Suisse had $14.9 million at risk with a weighted average maturity of 25 months and Morgan Stanley had $2.2 million at risk with a weighted average maturity of 16 months.

Borrowings under REPOs averaged $294.7 million and $315.8 million, respectively, during the three and nine month periods ended September 30, 2012. The maximum amount outstanding at any month-end was $308.0 million and $343.0 million, respectively, during the three and nine months ended September 30, 2012.

The junior subordinated notes have various maturities, interest rate structures and call dates. The characteristics of these notes are detailed in the following paragraphs.

On April 10, 2003, ESB Capital Trust II (Trust II), a statutory business trust established under Delaware law that is a subsidiary of the Company, issued $10.0 million variable rate preferred securities with a stated value and liquidation preference of $1,000 per share. The Company purchased $310,000 of common securities of Trust II. The dividend rate, on the preferred securities resets quarterly to equal the LIBOR plus 3.25%. Trust II’s obligations under the preferred securities issued are fully and unconditionally guaranteed by the Company. The proceeds from the sale of the preferred securities and the common securities were utilized by Trust II to invest in $10.3 million of variable rate subordinated debt of the Company. The subordinated debt is unsecured and ranks subordinate and junior in right of payment to all indebtedness, liabilities and obligations of the Company. The subordinated debt primarily represents the sole assets of Trust II. Dividends on the preferred securities are cumulative and payable quarterly in arrears. The Company has the right to optionally redeem the subordinated debt prior to the maturity date of April 24, 2033, on or after April 24, 2008, at the redemption price, plus accrued and unpaid distributions, if any, at the redemption date. Under the occurrence of certain events, specifically, a tax event, investment company event or capital treatment event as more fully defined in the Indenture dated April 10, 2003, the Company may redeem in whole, but not in part, the subordinated debt at any time within 90 days following the occurrence of such event. Proceeds from any redemption of the subordinated debt would cause a mandatory redemption of the preferred securities and the common securities having an aggregate liquidation amount equal to the principal amount of the subordinated debt redeemed. On July 23, 2008, the Company redeemed $5.0 million of the preferred securities of ESB Capital Trust II with proceeds from a $14.0 million loan with First Tennessee Bank National Association (“First Tennessee”). The remainder of the First Tennessee loan was used to repay an existing loan with First Tennessee with a remaining balance of $9.0 million, which had an interest rate of 5.55% and was due on December 31, 2008. No unamortized deferred debt issuance costs remain on this issuance.

On December 17, 2003, ESB Statutory Trust (Trust III), a statutory business trust established under Delaware law that is a subsidiary of the Company, issued $5.0 million variable rate preferred securities with a stated value and liquidation preference of $1,000 per share. The Company purchased $155,000 of common securities of Trust III. The dividend rate on the preferred securities resets quarterly to equal the LIBOR Index plus 2.95%. Trust III’s obligations under the preferred securities issued are fully and unconditionally guaranteed by the Company. The proceeds from the sale of the preferred securities and the common securities were utilized by Trust III to invest in $5.2 million of variable rate subordinated debt of the Company. The subordinated debt is unsecured and ranks subordinate and junior in right of payment to all indebtedness, liabilities and obligations of the Company. The subordinated debt primarily represents the sole assets of Trust III. Interest on the preferred securities is cumulative and payable quarterly in arrears. The Company has the right to optionally redeem the subordinated debt prior to the maturity date of December 17, 2033, on or after December 17, 2008, at the redemption price, plus accrued and unpaid distributions, if any, at the redemption date. Under the occurrence of certain events, specifically, a tax event, investment company event or capital treatment event as more fully defined in the Indenture dated December 17, 2003; the Company may redeem in whole, but not in part, the subordinated debt at any time within 90 days following the occurrence of such event. Proceeds from any redemption of the subordinated debt would cause a mandatory redemption of the preferred securities and the common securities having an aggregate liquidation amount equal to the principal amount of the subordinated debt redeemed. No unamortized deferred debt issuance costs remain on this issuance.

On February 10, 2005, ESB Capital Trust IV (Trust IV), a statutory business trust established under Delaware law that is a subsidiary of the Company, issued $35.0 million fixed rate preferred securities. The Company purchased $1.1 million of common securities of Trust IV. The dividend rate on the preferred securities was fixed at a rate of 6.03% for six years and now are variable at three month LIBOR plus 1.82%. The preferred securities have a stated maturity of thirty years. Trust IV’s obligations under the preferred securities issued are fully and unconditionally guaranteed by the Company. The proceeds from the sale of the preferred securities and the common securities were utilized by Trust IV to invest in $36.1 million of fixed/variable rate subordinated debt of the Company. The subordinated debt is unsecured and ranks subordinate and junior in right of payment to all indebtedness, liabilities and obligations of the Company. The subordinated debt primarily represents the sole assets of Trust IV. Interest on the preferred securities is cumulative and payable quarterly in arrears. The Company has the right to optionally redeem the subordinated debt prior to the maturity date of February 10, 2035, on or after February 10, 2011, at the redemption price, which is equal to the liquidation amount, plus accrued and unpaid distributions, if any, at the redemption date. Under the occurrence of certain events, specifically, a tax event, investment company event or capital treatment event as more fully defined in the Indenture dated February 10, 2005, the Company may redeem in whole, but not in part, the subordinated debt at any time within 90 days following the occurrence of such event. Proceeds from any redemption of the subordinated debt would cause a mandatory redemption of the preferred securities and the common securities having an aggregate liquidation amount equal to the principal amount of the subordinated debt redeemed. The Company did not have any deferred debt issuance costs associated with the preferred securities.

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Net Income Per Share

9 Months Ended

Sep. 30, 2012

Net Income Per Share [Abstract]

Net Income Per Share

6. Net Income Per Share

The following table summarizes the Company’s net income per share:

(Amounts, except earnings per share, in thousands)
	Three Months Ended September 30, 2012		Three Months Ended September 30, 2011
Net income	$	3,934	$	3,964
Weighted-average common shares outstanding		14,362		14,490
Basic earnings per share	$	0.27	$	0.27
Weighted-average common shares outstanding		14,362		14,490
Common stock equivalents due to effect of stock options		128		100
Total weighted-average common shares and equivalents		14,490		14,590
Diluted earnings per share	$	0.27	$	0.27
	Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2011
Net income	$	11,400	$	11,909
Weighted-average common shares outstanding		14,329		14,456
Basic earnings per share	$	0.80	$	0.82
Weighted-average common shares outstanding		14,329		14,456
Common stock equivalents due to effect of stock options		129		111
Total weighted-average common shares and equivalents		14,458		14,567
Diluted earnings per share	$	0.79	$	0.82

The shares controlled by the Company’s Employee Stock Ownership Plan (ESOP) of 329,656 and 393,959 at September 30, 2012 and September 30, 2011, respectively, are not considered in the weighted average shares outstanding until the shares are committed for allocation to an employee’s individual account.

At September 30, 2012 all outstanding options to purchase shares were included in the computation of diluted earnings per share because the options’ exercise price was less than the average market price of the common shares.

Options to purchases 84,816 shares at $12.80 per diluted share expiring November 2013, 92,892 shares at $12.08 per diluted share expiring November 2014 and 150,996 shares at $12.42 per diluted share expiring November 2015 were outstanding as of June 30, 2011 but were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares.

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Retirement Plans

9 Months Ended

Sep. 30, 2012

Retirement Plans [Abstract]

Retirement Plans

8. Retirement Plans

Supplemental Executive Retirement Plan and Directors’ Retirement Plan

The Company maintains a Supplemental Executive Benefit Plan (SERP) in order to provide supplemental retirement and death benefits for certain key employees of the Company. Under the SERP, participants shall receive an annual retirement benefit following retirement at age 65 equal to 25% of the participant’s final average pay multiplied by a ratio, ranging from 1.25% to 25.0%, based on the participant’s total years of service. Final average pay is based upon the participant’s last three year’s compensation. The maximum ratio of 25% requires twenty or more years of credited service and the minimum ratio of 1.25% requires one year of credited service. Benefits under the plan are payable in either a lump sum or ten equal annual payments and a lesser benefit is payable upon early retirement at age 50 with at least twelve years of service. If a participant dies prior to retirement, the participant’s estate will receive a lump sum payment equal to the net present value of future benefit payments under the plan. At September 30, 2012, the participants in the plan had credited service under the SERP ranging from 21 to 33 years.

The Company and the Bank maintain the ESB Financial Corporation Directors’ Retirement Plan and have entered into director retirement agreements with each director of the Company and the Bank. The plan provides that any retiring director with a minimum of five or more years of service with the Company or the Bank and a minimum of 10 total years of service, including years of service with any bank acquired by the Company or the Bank, that remains in continuous service as a board member until age 75 will be entitled to receive an annual retirement benefit equal to his or her director’s fees earned during the last full calendar year prior to his or her retirement date, multiplied by a ratio, ranging from 25% to 80%, based on the director’s total years of service. The maximum ratio of 80% of fees requires 20 or more years of service and the minimum ratio of 25% of fees requires 10 years of service. Retirement benefits may also be payable under the plan if a director retires from service as a director prior to attaining age 75. Three directors are currently receiving monthly benefits under the plan.

The following table illustrates the components of the net periodic pension cost for the SERP and Directors Retirement Plan as of September 30, 2012 and 2011:

(Dollar amounts in thousands)	SERP				SERP
	Three Months Ended September 30, 2012		Three Months Ended September 30, 2011		Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2011
Components of net periodic pension cost
Service cost	$	20	$	16	$	60	$	48
Interest cost		31		31		93		93
Amortization of unrecognized gains and losses		20		14		60		42
Amortization of prior service cost		10		10		30		30
Net periodic pension cost	$	81	$	71	$	243	$	213
(Dollar amounts in thousands)	Directors’ Retirement Plan				Directors’ Retirement Plan
	Three Months Ended September 30, 2012		Three Months Ended September 30, 2011		Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2011
Components of net periodic pension cost
Service cost	$	1	$	1	$	3	$	3
Interest cost		9		10		27		30
Amortization of prior service cost		21		22		67		66
Net periodic pension cost	$	31	$	33	$	97	$	99

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Securities (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Scheduled maturities of securities
Weighted Average Yield, Due in one year or less	3.93%	4.65%
Amortized cost, Due in one year or less	$ 21,514	$ 43,232
Fair value, Due in one year or less	21,820	43,644
Weighted Average Yield, Due from one year to five years	3.18%	3.62%
Amortized cost, Due from one year to five years	174,718	106,858
Fair value, Due from one year to five years	181,660	107,452
Weighted Average Yield, Due from five to ten years	3.79%	5.03%
Amortized cost, Due from five to ten years	101,673	102,525
Fair value, Due from five to ten years	105,645	106,384
Weighted Average Yield, Due after ten years	3.44%	3.74%
Amortized cost, Due after ten years	785,894	837,128
Fair value, Due after ten years	825,555	870,533
Weighted Average Yield, Total	3.44%	3.89%
Amortized cost, Total	1,083,799	1,089,743
Fair value, Total	$ 1,134,680	$ 1,128,013

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Net Income Per Share (Details Textual) (USD $)			6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2011 Options Expiring November 2013 [Member]	Jun. 30, 2011 Options Expiring November 2014 [Member]	Jun. 30, 2011 Options Expiring November 2015 [Member]
Net Income Per Share (Textual) [Abstract]
Options excluded from computation of earnings per share			84,816	92,892	150,996
Options purchase price per diluted share			$ 12.80	$ 12.08	$ 12.42
Net Income Per Share (Additional Textual) [Abstract]
Shares controlled by Employee Stock Ownership Plan (ESOP)	329,656	393,959

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Securities (Tables)

9 Months Ended

Sep. 30, 2012

Securities [Abstract]

Schedule of securities available for sale portfolio

(Dollars amounts in thousands)	Amortized cost		Unrealized gains		Unrealized losses			Fair value
September 30, 2012:
Trust preferred securities	$	45,893	$	353	$	(8,587	)	$	37,659
Municipal securities		178,281		14,594		(239	)		192,636
Equity securities		1,235		700		—			1,935
Corporate bonds		207,033		6,762		(1,712	)		212,083
Mortgage-backed securities
U.S. sponsored entities		645,785		39,549		—			685,334
Private label		6,807		193		(32	)		6,968
Subtotal mortgage-backed securities		652,592		39,742		(32	)		692,302
Total securities	$	1,085,034	$	62,151	$	(10,570	)	$	1,136,615
December 31, 2011:
Trust preferred securities	$	45,894	$	265	$	(8,615	)	$	37,544
Municipal securities		174,288		10,427		(230	)		184,485
Equity securities		1,754		351		(2	)		2,103
Corporate bonds		165,923		1,784		(2,928	)		164,779
Mortgage-backed securities
U.S. sponsored entities		694,674		37,636		(8	)		732,302
Private label		8,964		241		(302	)		8,903
Subtotal mortgage-backed securities		703,638		37,877		(310	)		741,205
Total securities	$	1,091,497	$	50,704	$	(12,085	)	$	1,130,116

Schedule of investments gross unrealized losses and fair value

As of September 30, 2012
	Less than 12 Months						12 Months or more						Total
(Dollars amounts in thousands)	# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses
Trust preferred securities		—	$	—	$	—		9	$	35,822	$	8,587		9	$	35,822	$	8,587
Municipal securities		2		3,005		239		—		—		—		2		3,005		239
Corporate bonds		1		3,800		2		6		23,289		1,710		7		27,089		1,712
Mortgage-backed securities
Private label		—		—		—		1		1,279		32		1		1,279		32
Total		3	$	6,805	$	241		16	$	60,390	$	10,329		19	$	67,195	$	10,570

As of December 31, 2011
	Less than 12 Months						12 Months or more						Total
(Dollars amounts in thousands)	# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses
Trust preferred securities		—	$	—	$	—		9	$	35,789	$	8,615		9	$	35,789	$	8,615
Municipal securities		2		3,094		149		3		2,627		81		5		5,721		230
Equity securities		—		—		—		1		130		2		1		130		2
Corporate bonds		27		91,046		2,928		—		—		—		27		91,046		2,928
Mortgage-backed securities
U.S. sponsored entities		1		4,596		8		—		—		—		1		4,596		8
Private label		3		3,084		302		—		—		—		3		3,084		302
Subtotal mortgage-backed securities		4		7,680		310		—		—		—		4		7,680		310
Total		33	$	101,820	$	3,387		13	$	38,546	$	8,698		46	$	140,366	$	12,085

Scheduled maturities of securities

As of September 30, 2012
	Available for sale
(Dollar amounts in thousands)	Weighted Average Yield			Amortized cost		Fair value
Due in one year or less		3.93	%	$	21,514	$	21,820
Due from one year to five years		3.18	%		174,718		181,660
Due from five to ten years		3.79	%		101,673		105,645
Due after ten years		3.44	%		785,894		825,555
		3.44	%	$	1,083,799	$	1,134,680

As of December 31, 2011
	Available for sale
(Dollar amounts in thousands)	Weighted Average Yield			Amortized cost		Fair value
Due in one year or less		4.65	%	$	43,232	$	43,644
Due from one year to five years		3.62	%		106,858		107,452
Due from five to ten years		5.03	%		102,525		106,384
Due after ten years		3.74	%		837,128		870,533
		3.89	%	$	1,089,743	$	1,128,013

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Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2012

Comprehensive Income [Abstract]

Schedule of Accumulated Other comprehensive income

(Dollar amounts in thousands)	September 30, 2012			December 31, 2011
Net unrealized gain on securities available for sale	$	34,044		$	25,101
Accumulated loss on effective cash flow hedging derivatives		(4,010	)		(3,596	)
Net unrecognized pension cost		(499	)		(601	)
Total	$	29,535		$	20,904

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Borrowed Funds (Details Textual) (USD $)	3 Months Ended	9 Months Ended	12 Months Ended	0 Months Ended	9 Months Ended		9 Months Ended			9 Months Ended								9 Months Ended		9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Dec. 31, 2011	Jul. 23, 2008 ESB Capital Trust II (Trust II) [Member]	Sep. 30, 2012 ESB Capital Trust II (Trust II) [Member]	Apr. 10, 2003 ESB Capital Trust II (Trust II) [Member]	Sep. 30, 2012 ESB Capital Trust IV (Trust IV) [Member]	Sep. 30, 2012 ESB Statutory Trust (Trust III) [Member]	Dec. 17, 2003 ESB Statutory Trust (Trust III) [Member]	Sep. 30, 2012 Structured advances [Member]	Sep. 30, 2012 Repurchase agreements [Member]	Dec. 31, 2011 Repurchase agreements [Member]	Feb. 10, 2005 Fixed rate [Member] ESB Capital Trust IV (Trust IV) [Member]	Sep. 30, 2012 Variable rate [Member] ESB Capital Trust II (Trust II) [Member]	Apr. 10, 2003 Variable rate [Member] ESB Capital Trust II (Trust II) [Member]	Sep. 30, 2012 Variable rate [Member] ESB Statutory Trust (Trust III) [Member]	Dec. 17, 2003 Variable rate [Member] ESB Statutory Trust (Trust III) [Member]	Sep. 30, 2012 Structured REPOs [Member]	Dec. 31, 2011 Structured REPOs [Member]	Sep. 30, 2012 Citigroup [Member]	Dec. 31, 2011 Citigroup [Member]	Sep. 30, 2012 Barclays Capital [Member]	Dec. 31, 2011 Barclays Capital [Member]	Sep. 30, 2012 Credit Suisse [Member]	Dec. 31, 2011 Credit Suisse [Member]	Sep. 30, 2012 PNC Bank [Member]	Dec. 31, 2011 PNC Bank [Member]	Sep. 30, 2012 Morgan Stanley [Member]	Dec. 31, 2011 Morgan Stanley [Member]
Borrowed Funds (Textual) [Abstract]
FHLB advances	$ 203,679,000	$ 203,679,000	$ 207,355,000							$ 203,700,000	$ 288,000,000	$ 343,000,000
Structured advances										50,000,000
Structured REPO's											288,000,000
Period of fixed interest rate											5 years							4 years
Debt instrument variable rates basis										The Company also has $50.0 million in structured advances with imbedded caps at various strike rates based on the 3 month LIBOR rate.
Repurchase agreements with flexible interest rates																		30,000,000
REPO interest rate term																		3.75% based on the 3 month LIBOR rate
Repurchase agreements with fixed interest rate																		25,000,000
Securities available for sale, cost	1,085,034,000	1,085,034,000	1,091,497,000															317,300,000	375,000,000
REPO's with other banks																				135,000,000	145,000,000	40,000,000	70,000,000	83,000,000	93,000,000	0	5,000,000	30,000,000	30,000,000
Risk related to repurchase agreement amount																				17,100,000		4,600,000		14,900,000				2,200,000
Weighted average maturity																				18 months		45 months		25 months				16 months
Preferred securities													35,000,000		10,000,000		5,000,000
Liquidation preference per share						$ 1,000			$ 1,000
Redeemed preferred securities				5,000,000
Purchase of common securities					310,000		1,100,000	155,000
Proceeds from bank loan				14,000,000
Loans Payable					9,000,000
Interest rate					5.55%
Subordinated debt							36,100,000							10,300,000		5,200,000
Maturity date of subordinated debt					Apr. 24, 2033		Feb. 10, 2035	Dec. 17, 2033
Preferred securities fixed interest rate							6.03% for six years
Preferred securities variable interest rate					LIBOR plus 3.25%		Three month LIBOR plus 1.82%	LIBOR Index plus 2.95%
Maturity year of preferred securities							30 years
Maturity date of subordinated debt start date range					Apr. 24, 2008		Feb. 10, 2011	Dec. 17, 2008
Maturity date of subordinated debt end date range					Apr. 24, 2033		Feb. 10, 2035	Dec. 17, 2033
Borrowed Funds (Additional Textual) [Abstract]
Notional amount of imbedded caps	50,000,000	50,000,000
Market value of the securities	342,400,000	342,400,000	402,100,000
Repurchase agreements, maturities	Greater than 90 days		Greater than 90 days
Average borrowings under REPO	294,700,000	315,800,000
Maximum month-end outstanding amount	$ 308,000,000	$ 343,000,000
Subordinated debt redemption description		the Company may redeem in whole, but not in part, the subordinated debt at any time within 90 days following the occurrence of such event
LIBOR Rate		3 months

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Loans Receivable (Details 5) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Aging analysis of investment of past due loans receivable
30-59 Days Past Due	$ 1,574	$ 1,510
60-89 Days Past Due	1,361	4,573
90 Days Or Greater	7,103	5,617
Total Past Due	10,038	11,700
Current	681,631	658,634
Total loans receivable	691,669	670,334
Recorded Investment > 90 Days and Accruing
Residential Real Estate, Single Family [Member]
Aging analysis of investment of past due loans receivable
30-59 Days Past Due	222	464
60-89 Days Past Due	422	2,933
90 Days Or Greater	3,578	2,460
Total Past Due	4,222	5,857
Current	323,583	306,866
Total loans receivable	327,805	312,723
Recorded Investment > 90 Days and Accruing
Residential Real Estate, Construction [Member]
Aging analysis of investment of past due loans receivable
30-59 Days Past Due
60-89 Days Past Due
90 Days Or Greater
Total Past Due
Current	46,109	45,363
Total loans receivable	46,109	45,363
Recorded Investment > 90 Days and Accruing
Residential Real Estate Multi-family [Member]
Aging analysis of investment of past due loans receivable
30-59 Days Past Due
60-89 Days Past Due
90 Days Or Greater
Total Past Due
Current	32,888	32,370
Total loans receivable	32,888	32,370
Recorded Investment > 90 Days and Accruing
Commercial Real Estate [Member]
Aging analysis of investment of past due loans receivable
30-59 Days Past Due	188	48
60-89 Days Past Due	796	1,507
90 Days Or Greater	3,076	2,629
Total Past Due	4,060	4,184
Current	74,914	79,263
Total loans receivable	97,384	100,754
Recorded Investment > 90 Days and Accruing
Commercial Real Estate, Construction [Member]
Aging analysis of investment of past due loans receivable
30-59 Days Past Due
60-89 Days Past Due
90 Days Or Greater
Total Past Due
Current	18,410	17,307
Total loans receivable	18,410	17,307
Recorded Investment > 90 Days and Accruing
Consumer Home Equity [Member]
Aging analysis of investment of past due loans receivable
30-59 Days Past Due	43	143
60-89 Days Past Due		9
90 Days Or Greater	207	249
Total Past Due	250	401
Current	76,530	72,092
Total loans receivable	76,780	72,493
Recorded Investment > 90 Days and Accruing
Consumer - Dealer Auto and RV Loans [Member]
Aging analysis of investment of past due loans receivable
30-59 Days Past Due	601	698
60-89 Days Past Due	126	101
90 Days Or Greater	108	132
Total Past Due	835	931
Current	47,465	46,108
Total loans receivable	48,300	47,039
Recorded Investment > 90 Days and Accruing
Consumer - Other [Member]
Aging analysis of investment of past due loans receivable
30-59 Days Past Due	16	98
60-89 Days Past Due	17	23
90 Days Or Greater	96	93
Total Past Due	129	214
Current	7,916	9,041
Total loans receivable	8,045	9,255
Recorded Investment > 90 Days and Accruing
Commercial [Member]
Aging analysis of investment of past due loans receivable
30-59 Days Past Due	504	59
60-89 Days Past Due
90 Days Or Greater	38	54
Total Past Due	542	113
Current	53,816	50,224
Total loans receivable	54,358	50,337
Recorded Investment > 90 Days and Accruing

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Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Consolidated Statements of Comprehensive Income [Abstract]
Net income before noncontrolling interest	$ 4,021	$ 4,279	$ 11,931	$ 12,722
Securities available for sale other-than-temporarily impaired:
Total losses		(452)	(406)	(452)
Losses recognized in earnings		83	31	83
Losses recognized in comprehensive income		(369)	(375)	(369)
Income tax effect		125	127	125
Unrealized holding losses on other-than-temporarily impaired securities available for sale, net of tax		(244)	(248)	(244)
Securities available for sale not other-than-temporarily impaired:
Gains arising during the year	9,956	6,218	14,386	15,335
Income tax effect	(3,385)	(2,114)	(4,891)	(5,214)
Gains arising during the year, net of tax	6,571	4,104	9,495	10,121
Gains recognized in earnings	197	406	464	937
Income tax effect	(67)	(138)	(158)	(319)
Gains recognized in earnings, net of tax	130	268	306	618
Unrealized holding gains on securities available for sale not other-than-temporarily-impaired, net of tax	6,441	3,836	9,189	9,503
Unrealized holding gain on securities, net	6,441	3,592	8,941	9,259
Pension and Postretirement Amortization	52	46	157	137
Income tax effect	(18)	(16)	(53)	(47)
Pension and Postretirement Amortization, net of tax	34	30	104	90
Fair Value adjustment on derivatives	(222)	(2,090)	(628)	(2,681)
Income tax effect	76	711	214	912
Fair Value adjustment on derivatives, net of tax	(146)	(1,379)	(414)	(1,769)
Other comprehensive income	6,329	2,243	8,631	7,580
Net comprehensive income before noncontrolling interest	10,350	6,522	20,562	20,302
Less: net income attributable to the noncontrolling interest	87	315	531	813
Net comprehensive income attributable to ESB Financial Corporation	$ 10,263	$ 6,207	$ 20,031	$ 19,489

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Securities

9 Months Ended

Sep. 30, 2012

Securities [Abstract]

Securities

2. Securities

The Company’s securities available for sale portfolio is summarized as follows:

(Dollars amounts in thousands)	Amortized cost		Unrealized gains		Unrealized losses			Fair value
September 30, 2012:
Trust preferred securities	$	45,893	$	353	$	(8,587	)	$	37,659
Municipal securities		178,281		14,594		(239	)		192,636
Equity securities		1,235		700		—			1,935
Corporate bonds		207,033		6,762		(1,712	)		212,083
Mortgage-backed securities
U.S. sponsored entities		645,785		39,549		—			685,334
Private label		6,807		193		(32	)		6,968
Subtotal mortgage-backed securities		652,592		39,742		(32	)		692,302
Total securities	$	1,085,034	$	62,151	$	(10,570	)	$	1,136,615
December 31, 2011:
Trust preferred securities	$	45,894	$	265	$	(8,615	)	$	37,544
Municipal securities		174,288		10,427		(230	)		184,485
Equity securities		1,754		351		(2	)		2,103
Corporate bonds		165,923		1,784		(2,928	)		164,779
Mortgage-backed securities
U.S. sponsored entities		694,674		37,636		(8	)		732,302
Private label		8,964		241		(302	)		8,903
Subtotal mortgage-backed securities		703,638		37,877		(310	)		741,205
Total securities	$	1,091,497	$	50,704	$	(12,085	)	$	1,130,116

The following table shows the Company’s investments gross unrealized losses and fair value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2012:

As of September 30, 2012
	Less than 12 Months						12 Months or more						Total
(Dollars amounts in thousands)	# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses
Trust preferred securities		—	$	—	$	—		9	$	35,822	$	8,587		9	$	35,822	$	8,587
Municipal securities		2		3,005		239		—		—		—		2		3,005		239
Corporate bonds		1		3,800		2		6		23,289		1,710		7		27,089		1,712
Mortgage-backed securities
Private label		—		—		—		1		1,279		32		1		1,279		32
Total		3	$	6,805	$	241		16	$	60,390	$	10,329		19	$	67,195	$	10,570

The following table shows the Company’s investments gross unrealized losses and fair value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2011:

As of December 31, 2011
	Less than 12 Months						12 Months or more						Total
(Dollars amounts in thousands)	# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses
Trust preferred securities		—	$	—	$	—		9	$	35,789	$	8,615		9	$	35,789	$	8,615
Municipal securities		2		3,094		149		3		2,627		81		5		5,721		230
Equity securities		—		—		—		1		130		2		1		130		2
Corporate bonds		27		91,046		2,928		—		—		—		27		91,046		2,928
Mortgage-backed securities
U.S. sponsored entities		1		4,596		8		—		—		—		1		4,596		8
Private label		3		3,084		302		—		—		—		3		3,084		302
Subtotal mortgage-backed securities		4		7,680		310		—		—		—		4		7,680		310
Total		33	$	101,820	$	3,387		13	$	38,546	$	8,698		46	$	140,366	$	12,085

The Company primarily invests in mortgage-backed securities, variable and fixed rate corporate bonds, municipal bonds, trust preferred securities and to a lesser extent equity securities. The policy of the Company is to recognize other than temporary impairment (OTTI) on equity securities where the fair value has been significantly below cost for three consecutive quarters. Declines in the fair value of the debt securities that can be attributed to specific adverse conditions affecting the credit quality of the investment would be recorded as OTTI and charged to earnings. In order to determine if a decline in fair value is other than temporary, the Company reviews corporate ratings of the investment, analyst reports and SEC filings of the issuers. For fixed maturity investments with unrealized losses due to interest rates where the Company expects to recover the entire amortized cost basis of the security, declines in value below cost are not assumed to be other than temporary. The Company reviews its position quarterly and has asserted that at September 30, 2012, the declines outlined in the above table represent temporary declines due to changes in interest rates and are not reflections of impairment in the credit quality of the securities. Additionally, the Company does not intend to sell the investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis.

The Company reviews investment in debt securities on an ongoing basis for the presence of OTTI with formal reviews performed quarterly. Credit-related OTTI losses on individual securities are recognized in earnings while noncredit-related OTTI on securities not expected to be sold is recognized in accumulated other comprehensive income. There were no OTTI losses on individual securities during the third quarter of 2012. The $31,000 credit-related OTTI recognized during the second quarter 2012 consisted of $5,000 on a pooled trust preferred security having a book value of $503,000 and $26,000 on one of the Company’s equity investments in community banks that had experienced a decline in its fair value for the last several quarters. There was noncredit-related OTTI on these securities recognized in OCI during the second quarter of approximately $375,000.

One pooled trust preferred security has previously been determined to be other than temporarily impaired due solely to credit related factors. This security is a collateralized debt obligation currently comprised of trust preferred securities of 10 financial institutions and has a Moody’s rating of Ca, which is below investment grade. The Company utilized a discounted cash flow method to determine the amount of impairment. During this analysis, the Company determined that three of these financial institutions are currently deferring interest payments. In addition, four financial institutions have previously defaulted. Currently seven of the ten remaining financial institutions are performing. Two of the three financial institutions that are deferring interest payments as of September 2012 either lost money or broke even for the most recently reported quarter and had a Tier 1 Risk Ratio at or less than the required well capitalized institution level under prompt corrective action provisions of 6%. Also, there were three financial institutions (including two of the three deferrals) within this pool that the non-performing assets to loans plus real estate owned ratio was greater than 10%. One of the three financial institutions currently deferring interest payments was able to raise capital in 2010 and is anticipated to ultimately recover.

Because of the subprime crisis current markets for variable rate corporate trust preferred securities are illiquid. This includes the Company’s eight stand alone trust preferred securities and the Company’s one pooled trust preferred security. The Company used a discounted cash flow method to price these securities due to the lack of liquidity for resale of this investment type and the absence of reliable pricing information. This method is described more fully in footnote 9, “Fair Value”.

As of September 30, 2012
	Available for sale
(Dollar amounts in thousands)	Weighted Average Yield			Amortized cost		Fair value
Due in one year or less		3.93	%	$	21,514	$	21,820
Due from one year to five years		3.18	%		174,718		181,660
Due from five to ten years		3.79	%		101,673		105,645
Due after ten years		3.44	%		785,894		825,555
		3.44	%	$	1,083,799	$	1,134,680

As of December 31, 2011
	Available for sale
(Dollar amounts in thousands)	Weighted Average Yield			Amortized cost		Fair value
Due in one year or less		4.65	%	$	43,232	$	43,644
Due from one year to five years		3.62	%		106,858		107,452
Due from five to ten years		5.03	%		102,525		106,384
Due after ten years		3.74	%		837,128		870,533
		3.89	%	$	1,089,743	$	1,128,013

For purposes of the maturity table, mortgage backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on weighted-average contractual maturities of underlying collateral. The mortgage-backed securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

The proceeds from the sale of securities for the three month period ended September 30, 2012 were $316,000 resulting in gross realized gains of $197,000 and the proceeds from the sale of securities for the nine month period ended September 30, 2012 were $1.1 million resulting in gross realized gains of $464,000. The proceeds from the sale of securities for the three month period ended September 30, 2011 were $20.3 million resulting in gross realized gains of $406,000 and the proceeds from the sale of securities for the nine month period ended September 30, 2011 were $25.4 million resulting in gross realized gains of $937,000. There were no losses from the sale of securities during the three and nine month periods ended September 30, 2012 and 2011.

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Fair Value (Details 3) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Level III assets measured at fair value on recurring or non-recurring basis
Valuation Technique	Appraisal of collateral (1)
Impaired Loans [Member]
Level III assets measured at fair value on recurring or non-recurring basis
Fair Value of Assets	$ 14,927	$ 14,054
Valuation Technique	Discounted Cash Flow
Real estate acquired through foreclosure [Member]
Level III assets measured at fair value on recurring or non-recurring basis
Fair Value of Assets	2,803	3,883
Valuation Technique	Appraisal of collateral (1)
Servicing assets [Member]
Level III assets measured at fair value on recurring or non-recurring basis
Fair Value of Assets	8	16
Valuation Technique	Discounted Cash Flow
Trust preferred securities [Member]
Level III assets measured at fair value on recurring or non-recurring basis
Fair Value of Assets	$ 35,822	$ 35,789
Valuation Technique	Discounted Cash Flow
Trust Preferred Securities Credit Spreads [Member]
Level III assets measured at fair value on recurring or non-recurring basis
Significant Unobservable Inputs	Credit Spreads
Significant Unobservable Input Value	40-85 basis points
Trust Preferred Securities Liquidity Risk Adjustments [Member]
Level III assets measured at fair value on recurring or non-recurring basis
Significant Unobservable Inputs	Liquidity Risk Adjustments
Significant Unobservable Input Value	15-65 basis points
Trust Preferred Securities Default Rates [Member]
Level III assets measured at fair value on recurring or non-recurring basis
Significant Unobservable Inputs	Default Rates
Significant Unobservable Input Value	.5%-1%

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Retirement Plans (Tables)

9 Months Ended

Sep. 30, 2012

Retirement Plans [Abstract]

Schedule of net periodic pension cost for retirement plan

(Dollar amounts in thousands)	SERP				SERP
	Three Months Ended September 30, 2012		Three Months Ended September 30, 2011		Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2011
Components of net periodic pension cost
Service cost	$	20	$	16	$	60	$	48
Interest cost		31		31		93		93
Amortization of unrecognized gains and losses		20		14		60		42
Amortization of prior service cost		10		10		30		30
Net periodic pension cost	$	81	$	71	$	243	$	213
(Dollar amounts in thousands)	Directors’ Retirement Plan				Directors’ Retirement Plan
	Three Months Ended September 30, 2012		Three Months Ended September 30, 2011		Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2011
Components of net periodic pension cost
Service cost	$	1	$	1	$	3	$	3
Interest cost		9		10		27		30
Amortization of prior service cost		21		22		67		66
Net periodic pension cost	$	31	$	33	$	97	$	99

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Loans Receivable (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Schedule of recorded investment in loans
Ending balance: individually evaluated for impairment	$ 1,220	$ 1,549
Ending balance: collectively evaluated for impairment	5,344	4,988
Ending balance: loans acquired with deteriorated credit quality
Loans Receivable:
Loans Receivable, Ending Balance	691,669	670,334
Ending balance: individually evaluated for impairment	16,147	15,603
Ending balance: collectively evaluated for impairment	675,522	654,731
Ending balance: loans acquired with deteriorated credit quality
Commercial [Member]
Schedule of recorded investment in loans
Ending balance: individually evaluated for impairment	3	10
Ending balance: collectively evaluated for impairment	493	374
Ending balance: loans acquired with deteriorated credit quality
Loans Receivable:
Loans Receivable, Ending Balance	54,358	50,337
Ending balance: individually evaluated for impairment	38	63
Ending balance: collectively evaluated for impairment	54,320	50,274
Ending balance: loans acquired with deteriorated credit quality
Consumer [Member]
Schedule of recorded investment in loans
Ending balance: individually evaluated for impairment	48	50
Ending balance: collectively evaluated for impairment	951	995
Ending balance: loans acquired with deteriorated credit quality
Loans Receivable:
Loans Receivable, Ending Balance	133,125	128,787
Ending balance: individually evaluated for impairment	291	153
Ending balance: collectively evaluated for impairment	132,834	128,634
Ending balance: loans acquired with deteriorated credit quality
Residential [Member]
Schedule of recorded investment in loans
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	2,545	2,115
Ending balance: loans acquired with deteriorated credit quality
Loans Receivable:
Loans Receivable, Ending Balance	406,802	390,456
Ending balance: individually evaluated for impairment	2,305	1,364
Ending balance: collectively evaluated for impairment	404,497	389,092
Ending balance: loans acquired with deteriorated credit quality
Unallocated [Member]
Schedule of recorded investment in loans
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	450	551
Ending balance: loans acquired with deteriorated credit quality
Loans Receivable:
Loans Receivable, Ending Balance
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment
Ending balance: loans acquired with deteriorated credit quality
Commercial Real Estate [Member]
Schedule of recorded investment in loans
Ending balance: individually evaluated for impairment	1,169	1,489
Ending balance: collectively evaluated for impairment	905	953
Ending balance: loans acquired with deteriorated credit quality
Loans Receivable:
Loans Receivable, Ending Balance	97,384	100,754
Ending balance: individually evaluated for impairment	13,513	14,023
Ending balance: collectively evaluated for impairment	83,871	86,731
Ending balance: loans acquired with deteriorated credit quality

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Summary of the interest rate swap contract

(Dollars in thousands)	Notional Amount		Effective Date		Pay Rate			Receive Rate(*)			Maturity Date		Unrealized
													Gain		Loss
Cash Flow Hedge	$	20,000		2/10/2011		4.18	%		0.44	%		2/10/2018	$	—	$	3,596
Cash Flow Hedge		15,000		2/10/2011		3.91	%		0.44	%		2/10/2018		—		2,479
	$	35,000											$	—	$	6,075

* Variable receive rate based upon contract rates in effect at September 30, 2012