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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2024

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-40255

WILLIAM PENN BANCORPORATION

(Exact Name of Registrant as Specified in Its Charter)


Maryland	85-3898797
(Statement or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
10 Canal Street, Suite 104, Bristol, Pennsylvania	19007
(Address of Principal Executive Offices)	(Zip Code)

(267) 540-8500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	WMPN	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒	Emerging growth company	☒

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the issuer’s common stock, as of February 6, 2025: 9,208,217 shares.

Table of Contents

WILLIAM PENN BANCORPORATION

TABLE OF CONTENTS


		Page

Part I	Financial Information

Item 1.	Financial Statements (Unaudited)

	Consolidated Statements of Financial Condition as of December 31, 2024 and June 30, 2024	3

	Consolidated Statements of Income for the Three and Six Months Ended December 31, 2024 and 2023	4

	Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended December 31, 2024 and 2023	5

	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended December 31, 2024 and 2023	6

	Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2024 and 2023	7

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	46

Item 4.	Controls and Procedures	48

Part II	Other Information

Item 1.	Legal Proceedings	48

Item 1A.	Risk Factors	48

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51

Item 3.	Defaults Upon Senior Securities	52

Item 4.	Mine Safety Disclosures	52

Item 5.	Other Information	52

Item 6.	Exhibits	52



Signatures

Table of Contents

PART I —FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

WILLIAM PENN BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except share and per share amounts)

As of December 31, 2024 and June 30, 2024 (unaudited)


	December 31,		June 30,
	2024		2024

ASSETS
Cash and due from banks	$	4,730	$	6,539
Interest bearing deposits with other banks		11,290		12,070
Federal funds sold		—		1,589
Total cash and cash equivalents		16,020		20,198
Interest-bearing time deposits		100		100
Securities available for sale, at fair value		145,089		150,755
Securities held to maturity, net of allowance for credit losses of $0 as of December 31, 2024 and June 30, 2024 (fair value of $68,316 and $76,827 as of December 31, 2024 and June 30, 2024, respectively)		85,098		93,056
Equity securities		2,297		2,016
Loans receivable, net of allowance for credit losses of $2,598 and $2,989 as of December 31, 2024 and June 30, 2024, respectively		467,510		470,572
Premises and equipment, net		6,877		7,186
Regulatory stock, at cost		2,311		3,062
Deferred income taxes		9,171		9,586
Bank-owned life insurance		42,481		41,819
Goodwill		4,858		4,858
Intangible assets		289		356
Operating lease right-of-use assets		9,763		8,300
Accrued interest receivable and other assets		4,564		6,883
TOTAL ASSETS	$	796,428	$	818,747

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Deposits	$	627,436	$	629,810
Advances from Federal Home Loan Bank		28,000		48,000
Advances from borrowers for taxes and insurance		2,223		2,891
Operating lease liabilities		10,062		8,553
Accrued interest payable and other liabilities		4,506		4,892
TOTAL LIABILITIES		672,227		694,146
Commitments and contingencies (note 12)		—		—
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares issued		—		—
Common stock, $0.01 par value, 150,000,000 shares authorized; 9,208,217 shares issued and outstanding at December 31, 2024 and 9,343,900 shares issued and outstanding at June 30, 2024		92		93
Additional paid-in capital		97,135		97,723
Unearned common stock held by employee stock ownership plan		(8,586)		(8,789)
Retained earnings		56,070		57,587
Accumulated other comprehensive loss		(20,510)		(22,013)
TOTAL STOCKHOLDERS' EQUITY		124,201		124,601
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	796,428	$	818,747

See accompanying notes to consolidated financial statements

Table of Contents

WILLIAM PENN BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except share and per share amounts)

For the Three and Six Months Ended December 31, 2024 and 2023 (unaudited)


	Three Months Ended December 31,				Six Months Ended December 31,
	2024		2023		2024		2023

INTEREST INCOME
Loans receivable, including fees	$	6,250	$	6,194	$	12,778	$	12,333
Securities		1,504		1,700		3,053		3,411
Other		140		169		311		330
Total interest income		7,894		8,063		16,142		16,074
INTEREST EXPENSE
Deposits		3,502		3,220		6,993		5,950
Borrowings		336		632		952		1,169
Total interest expense		3,838		3,852		7,945		7,119

Net interest income		4,056		4,211		8,197		8,955

Provision (recovery) for credit losses		14		25		(381)		30

NET INTEREST INCOME AFTER PROVISION (RECOVERY) FOR CREDIT LOSSES		4,042		4,186		8,578		8,925
OTHER INCOME
Service fees		221		225		432		440
Net gain on sale of securities		—		85		—		85
Earnings on bank-owned life insurance		333		309		662		603
Net gain on disposition of premises and equipment		211		—		211		—
Unrealized gain on equity securities		202		148		281		221
Other		8		61		39		129
Total other income		975		828		1,625		1,478
OTHER EXPENSES
Salaries and employee benefits		3,223		2,861		6,182		5,796
Occupancy and equipment		713		728		1,419		1,488
Data processing		519		504		1,025		998
Professional fees		193		192		416		402
Amortization of intangible assets		34		41		67		82
Merger related expenses		731		—		836		—
Other		769		745		1,560		1,530
Total other expense		6,182		5,071		11,505		10,296

(Loss) income before income taxes		(1,165)		(57)		(1,302)		107

Income tax benefit		(177)		(68)		(293)		(83)
NET (LOSS) INCOME	$	(988)	$	11	$	(1,009)	$	190

Basic (loss) earnings per share	$	(0.12)	$	0.00	$	(0.12)	$	0.02
Diluted (loss) earnings per share	$	(0.12)	$	0.00	$	(0.12)	$	0.02

See accompanying notes to consolidated financial statements

Table of Contents

WILLIAM PENN BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Dollars in thousands)

For the Three and Six Months Ended December 31, 2024 and 2023 (unaudited)


	Three Months Ended December 31,				Six Months Ended December 31,
	2024		2023		2024		2023

Net (loss) income	$	(988)	$	11	$	(1,009)	$	190

Other comprehensive (loss) income:
Changes in net unrealized gain (loss) on securities available for sale		(4,316)		9,206		1,918		3,249
Tax effect		997		(2,118)		(415)		(748)
Reclassification adjustment for gain recognized in net income		—		(85)		—		(85)
Tax effect		—		20		—		20
Other comprehensive (loss) income, net of tax		(3,319)		7,023		1,503		2,436
Comprehensive (loss) income	$	(4,307)	$	7,034	$	494	$	2,626

See accompanying notes to consolidated financial statements

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WILLIAM PENN BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Dollars in thousands, except share amounts)

For the Three and Six Months Ended December 31, 2024 and 2023 (unaudited)


						Unearned				Accumulated
						Common				Other		Total
	Number	Common Stock		Additional		Stock		Retained		Comprehensive		Stockholders'
	of Shares, net	Stock		Paid-in capital		held by ESOP		Earnings		Loss		Equity
Balance, June 30, 2024	9,343,900	$	93	$	97,723	$	(8,789)	$	57,587	$	(22,013)	$	124,601
Net loss	—		—		—		—		(21)		—		(21)
Other comprehensive income	—		—		—		—		—		4,822		4,822
Restricted stock expense	—		—		298		—		—		—		298
Stock option expense	—		—		206		—		—		—		206
Stock purchased and retired	(125,441)		(1)		(1,501)		—		—		—		(1,502)
ESOP shares committed to be released	—		—		4		101		—		—		105
Regular cash dividend paid ($0.03 per share)	—		—		—		—		(256)		—		(256)
Balance, September 30, 2024	9,218,459	$	92	$	96,730	$	(8,688)	$	57,310	$	(17,191)	$	128,253
Net loss	—		—		—		—		(988)		—		(988)
Other comprehensive loss	—		—		—		—		—		(3,319)		(3,319)
Restricted stock expense	—		—		298		—		—		—		298
Stock option expense	—		—		206		—		—		—		206
Stock purchased and retired	(10,242)		—		(110)		—		—		—		(110)
ESOP shares committed to be released	—		—		11		102		—		—		113
Regular cash dividend paid ($0.03 per share)	—		—		—		—		(252)		—		(252)
Balance, December 31, 2024	9,208,217	$	92	$	97,135	$	(8,586)	$	56,070	$	(20,510)	$	124,201


						Unearned				Accumulated
						Common				Other		Total
	Number	Common Stock		Additional		Stock		Retained		Comprehensive		Stockholders'
	of Shares, net	Stock		Paid-in capital		held by ESOP		Earnings		Loss		Equity
Balance, June 30, 2023	12,452,921	$	125	$	134,387	$	(9,194)	$	58,805	$	(23,378)	$	160,745
Net income	—		—		—		—		179		—		179
Other comprehensive loss	—		—		—		—		—		(4,587)		(4,587)
Cumulative effect of adoption of ASU 2016-13	—		—		—		—		(226)		—		(226)
Restricted stock expense	—		—		282		—		—		—		282
Stock option expense	—		—		195		—		—		—		195
Stock purchased and retired	(1,624,018)		(17)		(19,931)		—		—		—		(19,948)
ESOP shares committed to be released	—		—		1		101		—		—		102
Regular cash dividend paid ($0.03 per share)	—		—		—		—		(348)		—		(348)
Balance, September 30, 2023	10,828,903	$	108	$	114,934	$	(9,093)	$	58,410	$	(27,965)	$	136,394
Net income	—		—		—		—		11		—		11
Other comprehensive income	—		—		—		—		—		7,023		7,023
Restricted stock expense	—		—		281		—		—		—		281
Stock option expense	—		—		195		—		—		—		195
Stock purchased and retired	(1,191,831)		(12)		(14,766)		—		—		—		(14,778)
ESOP shares committed to be released	—		—		7		102		—		—		109
Regular cash dividend paid ($0.03 per share)	—		—		—		—		(289)		—		(289)
Balance, December 31, 2023	9,637,072	$	96	$	100,651	$	(8,991)	$	58,132	$	(20,942)	$	128,946

See accompanying notes to consolidated financial statements

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WILLIAM PENN BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

For the Six Months Ended December 31, 2024 and 2023 (unaudited)


	Six Months Ended
	December 31,
	2024		2023

Cash flows from operating activities
Net (loss) income	$	(1,009)	$	190
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
(Recovery) provision for credit losses		(381)		30
Depreciation expense		339		400
Other accretion, net		(177)		(281)
Deferred income taxes		(64)		(295)
Net gain on disposition of premises and equipment		(211)		—
Amortization of core deposit intangibles		67		82
Amortization of ESOP		218		211
Net gain on sale of securities		—		(85)
Unrealized gain on equity securities		(281)		(221)
Earnings on bank-owned life insurance		(662)		(603)
Stock based compensation expense		1,008		953
Other, net		(139)		335
Net cash (used in) provided by operating activities		(1,292)		716
Cash flows from investing activities
Securities available for sale:
Purchases		—		(1,152)
Maturities, calls and principal paydowns		7,497		6,015
Proceeds from sale of securities		—		2,438
Securities held to maturity:
Purchases		(998)		(998)
Maturities, calls and principal paydowns		8,979		4,301
Net decrease in loans receivable		3,662		10,384
Interest bearing time deposits:
Maturities and principal paydowns		—		500
Regulatory stock purchases		(1,830)		(3,341)
Regulatory stock redemptions		2,581		2,605
Purchases of premises and equipment, net		(30)		(104)
Proceeds from the sale of premises and equipment held for sale		2,399		—
Net cash provided by investing activities		22,260		20,648
Cash flows from financing activities
Net decrease in deposits		(2,359)		(8,525)
Net (repayment) increase of short-term borrowed funds		(20,000)		20,000
Repurchase of common stock		(1,612)		(34,726)
Decrease in advances from borrowers for taxes and insurance		(667)		(745)
Cash dividends		(508)		(637)
Net cash used in financing activities		(25,146)		(24,633)
Net decrease in cash and cash equivalents		(4,178)		(3,269)
Cash and cash equivalents - beginning		20,198		20,793
Cash and cash equivalents - ending	$	16,020	$	17,524
Supplementary cash flows information
Interest paid	$	8,014	$	7,084
Income tax payments		—		221
Operating lease right-of-use asset recorded		1,798		—
Operating lease liabilities recorded		1,798		—
Premises transferred to held for sale		—		1,237

See accompanying notes to consolidated financial statements

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Notes to the Consolidated Financial Statements

Note 1 - Nature of Operations

William Penn Bancorporation (the “Company” or “William Penn”) is a Maryland corporation that was incorporated in July 2020 to be the successor to William Penn Bancorp, Inc. (“William Penn Bancorp”) upon completion of the second-step conversion of William Penn Bank (the “Bank”) from the two-tier mutual holding company structure to the stock holding company structure. William Penn, MHC was the former mutual holding company for William Penn Bancorp prior to completion of the second-step conversion. In conjunction with the second-step conversion, each of William Penn, MHC and William Penn Bancorp ceased to exist. The second-step conversion was completed on March 24, 2021, at which time the Company sold, for gross proceeds of $126.4 million, a total of 12,640,035 shares of common stock at $10.00 per share. As part of the second-step conversion, each of the existing 776,647 outstanding shares of William Penn Bancorp common stock owned by persons other than William Penn, MHC was converted into 3.2585 shares of Company common stock. In addition, $5.4 million of cash held by William Penn, MHC was transferred to the Company and recorded as an increase to additional paid-in capital following the completion of the second-step conversion.

In connection with the second-step conversion offering, the William Penn Bank Employee Stock Ownership Plan (“ESOP”) trustees subscribed for, and intended to purchase, on behalf of the ESOP, 8% of the shares of the Company common stock sold in the offering and to fund its stock purchase through a loan from the Company equal to 100% of the aggregate purchase price of the common stock. As a result of the second-step conversion offering being oversubscribed in the first tier of subscription priorities, the ESOP trustees were unable to purchase shares of the Company’s common stock in the second-step conversion offering. Subsequent to the completion of the second-step conversion on March 24, 2021, the ESOP trustees purchased 881,130 shares, or $10.1 million, of the Company’s common stock in the open market. Such shares represent 6.97% of the shares of the Company common stock sold in the offering. The ESOP did not purchase any additional shares of Company common stock in connection with the second-step conversion and offering.

The Company owns 100% of the outstanding common stock of the Bank, a Pennsylvania chartered stock savings bank. The Bank offers consumer and commercial banking services to individuals, businesses, and nonprofit organizations throughout the Delaware Valley area through twelve full-service branch offices in Bucks County and Philadelphia, Pennsylvania, and Burlington, Camden, and Mercer Counties in New Jersey. The Company is subject to regulation and supervision by the Board of Governors of the Federal Reserve System. The Bank is supervised and regulated by the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking and Securities.

On October 31, 2024, the Company and Mid Penn Bancorp, Inc. (“Mid Penn”) entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which the Company will merge with and into Mid Penn with Mid Penn as the surviving corporation (the “Merger”). Immediately after the Merger, the Bank will merge with and into Mid Penn Bank, with Mid Penn Bank as the surviving institution. Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each share of Company common stock then issued and outstanding will be converted into the right to receive 0.426 shares of Mid Penn common stock, with cash to be paid in lieu of any fractional shares. Mid Penn will also assume all outstanding options to acquire shares of Company common stock pursuant to their terms, subject to adjustment to reflect the 0.426 exchange ratio set forth in the Merger Agreement. Consummation of the Merger is subject to the satisfaction of customary closing conditions, including receipt of necessary shareholder and regulatory approvals, and the parties currently expect the Merger to be completed in the second calendar quarter of 2025.

Note 2 - Summary of Significant Accounting Policies

The unaudited financial statements and other financial information contained in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements, and related notes, of the Company at and for the year ended June 30, 2024.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, and its wholly owned subsidiary, the Bank, as well as the Bank’s wholly owned subsidiary, WPSLA Investment Corporation (“WPSLA”). WPSLA is a Delaware corporation organized in April 2000 to hold certain investment securities for the Bank. At December 31, 2024, WPSLA held $221.7 million of the Bank’s $230.2 million investment securities portfolio. All significant intercompany accounts and transactions have been eliminated. Management makes significant operating decisions based upon the analysis of the entire Company and financial performance is evaluated on a company-wide basis.

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Use of Estimates in the Preparation of Financial Statements

These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the rules of the U.S. Securities and Exchange Commission for Quarterly Reports on Form 10-Q. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. The significant estimates include the allowance for credit losses, goodwill, and income taxes. Actual results could differ from those estimates and assumptions.

The interim unaudited consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, considered necessary for a fair presentation of the financial condition and results of operations for the periods presented. The results of operations for the three and six months ended December 31, 2024 are not necessarily indicative of the results of operations that may be expected for the entire fiscal year or any other period. Certain reclassifications have been made in the consolidated financial statements to conform with current year classifications.

Presentation of Cash Flows

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and interest-bearing demand deposits.

Revenue Recognition

Management determined that the primary sources of revenue emanating from interest and dividend income on loans and investments, along with noninterest revenue resulting from investment security and loan gains (losses) and earnings on bank owned life insurances, are not within the scope of Accounting Standards Codification (“ASC”) 606. The main types of noninterest income within the scope of ASC 606 include service charges on deposit accounts. The Company has contracts with its deposit customers where fees are charged if certain parameters are not met. These agreements can be cancelled at any time by either the Company or the deposit customer. Revenue from these transactions is recognized on a monthly basis as the Company has an unconditional right to the fee consideration. The Company also has transaction fees related to specific transactions or activities resulting from a customer request or activity that include overdraft fees, online banking fees, interchange fees, ATM fees and other transaction fees. These fees are attributable to specific performance obligations of the Company where the revenue is recognized at a defined point in time upon the completion of the requested service/transaction.

Segment Reporting

The Company acts as an independent community financial services provider and offers traditional banking and related financial services to individual, business, and government customers. Through its branch network, the Bank offers a full array of commercial and retail financial services, including the taking of time, savings, and demand deposits; the making of commercial and mortgage loans; and the providing of other financial services. Management does not separately allocate expenses, including the cost of funding loan demand, between the commercial and retail operations of the Bank. As such, discrete financial information is not available and segment reporting would not be meaningful.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU were issued to enhance the transparency and decision usefulness of income tax disclosures. The amendments in the update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. These updates are not expected to have a significant impact on the Company’s financial statements.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments in this ASU were issued in response to the SEC’s August 2018 final rule that updated and simplified disclosure requirements that the SEC believed were “redundant, duplicative, overlapping, outdated, or superseded.” The new guidance is intended to align U.S. GAAP requirements with those of the SEC and to facilitate the application of U.S. GAAP for all entities. Some of the amendments introduced by the ASU are technical corrections or clarifications of the FASB’s current disclosure or presentation requirements. These updates are not expected to have a significant impact on the Company’s financial statements.

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Recent Accounting Pronouncements Adopted

In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The sunset provision included in Topic 848 was based on the expectations of when LIBOR would cease being published. In March 2021, the UK Financial Conduct Authority announced that the intended cessation date of LIBOR would be June 30, 2024, which is beyond the established sunset date of Topic 848. In December 2023, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The amendments in this ASU provide temporary relief by deferring the sunset date provision included in Topic 848. The amendments in ASU 2023-06 defer the effective date for all entities upon issuance through December 31, 2024. The Company adopted these updates effective December 31, 2024 and these updates did not have a significant impact on the Company’s financial statements.

Allowance for Credit Losses on Loans

The Company maintains its allowance for credit losses (“ACL”) at a level that management believes to be appropriate to absorb estimated credit losses as of the date of the Consolidated Statements of Financial Condition. The Company established its allowance in accordance with the guidance included in Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses (“ASC 326”). The ACL is a valuation reserve established and maintained by charges against income and is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged-off against the ACL when they are deemed uncollectible. Expected recoveries do not exceed the aggregate amounts previously charged-off and expected to be charged-off. The ACL is an estimate of expected credit losses, measured over the contractual life of a loan, that considers our historical loss experience, the historical loss experience of a peer group of banks identified by management, current conditions and forecasts of future economic conditions. The determination of an appropriate ACL is inherently subjective and may have significant changes from period to period. The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans. The ACL is measured on a collective (pool) basis when similar characteristics exist. The Company’s loan portfolio is segmented by loan types that have similar risk characteristics and behave similarly during economic cycles.

Historical credit loss experience is the basis for the estimate of expected credit losses. We apply our historical loss rates and the historical loss rates of a group of peer banks identified by management to pools of loans with similar risk characteristics using the Weighted-Average Remaining Maturity (“WARM”) method. The remaining contractual life of the pools of loans with similar risk characteristics is adjusted by expected scheduled payments and prepayments. After consideration of the historical loss calculation, management applies qualitative adjustments to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information. Our reasonable and supportable forecast adjustment is based on a regional economic indicator obtained from the St. Louis Federal Reserve economic database. The Company selected eight qualitative metrics which were correlated with the Bank and its peer group’s historical loss patterns. The eight qualitative metrics include: changes in lending policies and procedures, changes in national and local economic conditions as well as business conditions, changes in the nature, complexity, and volume of the portfolio, changes in the experience, ability, and depth of lenders and lending management, changes in the volume and severity of past due and classified loans, changes in the quality of the Bank’s loan review system, changes in the value of collateral securing the loans, and changes in or the existence of credit concentrations. The adjustments are weighted for relevance before applying to each pool of loans. Each quarter, management reviews the recommended adjustment factors and applies any additional adjustments based on local and current conditions.

The Company has elected to exclude $2.0 million of accrued interest receivable as of December 31, 2024 and June 30, 2024 from the measurement of its ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income. Accrued interest on loans is reported in the accrued interest receivable and other assets line on the consolidated statements of financial condition.

The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer shares similar risk characteristics with other pooled loans and, therefore, should be individually assessed. We evaluate all commercial loans that meet

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the following criteria: (1) when it is determined that foreclosure is probable, (2) substandard, doubtful and nonperforming loans when repayment is expected to be provided substantially through the operation or sale of the collateral, (3) when it is determined by management that a loan does not share similar risk characteristics with other loans. Credit loss estimates are calculated based on the following three acceptable methods for measuring the ACL: 1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral when the loan is collateral dependent. Our individual loan evaluations consist primarily of the fair value of collateral method because most of our loans are collateral dependent. Collateral values are discounted to consider disposition costs when appropriate. A charge-off is recorded if the fair value of the loan is less than the loan balance.

Allowance for Credit Losses on Unfunded Loan Commitments

The Company estimates expected credit losses over the contractual period in which the Bank is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Bank. The allowance for credit losses on unfunded loan commitments is included in accrued interest payable and other liabilities in the Company’s Statements of Financial Condition and is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

Allowance for Credit Losses on Held to Maturity Securities

The Company accounts for its held to maturity securities in accordance with Accounting Standards Codification (ASC) 326-20, Financial Instruments – Credit Loss – Measured at Amortized Cost, which requires that the Company measure expected credit losses on held to maturity debt securities on a collective basis by major security type. The estimate of expected credit losses considers historical credit loss information that is adjusted for current economic conditions and reasonable and supportable forecasts.

The Company classifies its held to maturity debt securities into the following major security types: mortgage-backed securities, U.S. government agency securities and municipal bonds. Generally, the mortgage-backed securities and U.S. government agency securities are government guaranteed with a history of no credit losses and the municipal bonds are highly rated with a history of no credit losses. Credit ratings of the municipal bonds are reviewed on a quarterly basis. Based on the government guarantee, our historical experience including no credit losses, and the high credit rating of our municipal bonds, the Company determined that an allowance for credit losses on its held to maturity portfolio is not required as of December 31, 2024 and June 30, 2024.

Accrued interest receivable on held to maturity debt securities totaled $112 thousand and $170 thousand as of December 31, 2024 and June 30, 2024, respectively, and is included within accrued interest receivable and other assets on the Company’s Consolidated Statements of Financial Condition. This amount is excluded from the estimate of expected credit losses. Generally, held to maturity debt securities are classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When held to maturity debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed against interest income.

Allowance for Credit Losses on Available for Sale Securities

The Company measures expected credit losses on available for sale debt securities when the Bank intends to sell, or when it is not more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the amortized cost basis of the security is written down to fair value through income. For available for sale debt securities that do not meet the previously mentioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

The ACL on available for sale debt securities is included within securities available for sale on the Consolidated Statements of Financial Condition. Changes in the allowance for credit losses are recorded within provision for credit losses on the Consolidated Statements of Income. Losses are charged against the allowance when the Company believes the collectability of an available for sale security is in jeopardy or when either of the criteria regarding intent or requirement to sell is met.

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Accrued interest receivable on available for sale debt securities totaled $647 thousand and $662 thousand as of December 31, 2024 and June 30, 2024, respectively, and is included within accrued interest receivable and other assets on the Company’s Consolidated Statements of Financial Condition. This amount is excluded from the estimate of expected credit losses. Generally, available for sale debt securities are classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available for sale debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed against interest income.

Note 3 - Earnings Per Share

The following table presents a calculation of basic and diluted earnings per share for the three and six months ended December 31, 2024 and 2023. Earnings per share is computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding. The difference between common shares issued and basic average common shares outstanding, for purposes of calculating basic earnings per share, is a result of subtracting unallocated ESOP shares and unvested restricted stock shares. There are no convertible securities which would affect the numerator in calculating basic and diluted earnings per share; therefore, the net loss of $988 thousand and $1.0 million for the three and six months ended December 31, 2024, respectively, and the net income of $11 thousand and $190 thousand for the three and six months ended December 31, 2023, respectively, were used as the numerators. See Note 11 to these consolidated financial statements for further discussion of stock grants.

The following table sets forth the composition of the weighted average common shares (denominator) used in the basic and diluted earnings per share computation.


	Three Months Ended				Six Months Ended
	December 31,				December 31,
(Dollars in thousands, except share and per share amounts)	2024		2023		2024		2023
Basic and diluted (loss) earnings per share:
Net (loss) income	$	(988)	$	11	$	(1,009)	$	190

Basic average common shares outstanding		8,140,493		8,845,633		8,172,952		9,723,078
Effect of dilutive securities		67,354		64,680		48,140		43,066
Dilutive average shares outstanding		8,207,847		8,910,313		8,221,092		9,766,144
(Loss) earnings per share:
Basic	$	(0.12)	$	0.00	$	(0.12)	$	0.02
Diluted	$	(0.12)	$	0.00	$	(0.12)	$	0.02

Anti-dilutive shares are common stock equivalents with weighted average exercise prices in excess of the weighted average market value for the periods presented. There were 1,264,000 stock options that were anti-dilutive for both the three and six months ended December 31, 2024. There were 1,197,640 stock options that were anti-dilutive for both the three and six months ended December 31, 2023.

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Note 4 – Changes in and Reclassifications Out of Accumulated Other Comprehensive Loss

The following tables present the changes in the balances of each component of accumulated other comprehensive loss (“AOCL”) for the three and six months ended December 31, 2024 and 2023.


(Dollars in thousands)
	Unrealized Losses on Securities
	Available for Sale
Accumulated Other Comprehensive Loss (1)	2024		2023
Balance at June 30,	$	(22,013)	$	(23,378)
Other comprehensive income (loss) before reclassifications		4,822		(4,587)
Amounts reclassified from accumulated other comprehensive loss		—		—
Period change		4,822		(4,587)
Balance at September 30,	$	(17,191)	$	(27,965)
Other comprehensive (loss) income before reclassifications		(3,319)		7,088
Amounts reclassified from accumulated other comprehensive loss		—		(65)
Period change		(3,319)		7,023
Balance at December 31,	$	(20,510)	$	(20,942)

(1) All amounts are net of tax. Related income tax expense is calculated using an income tax rate approximating 23% for both 2024 and 2023.

The following tables present the reclassifications out of AOCL by component during the three and six months ended December 31, 2024

and 2023:


(Dollars in thousands)	Amounts Reclassified from Accumulated
	Other Comprehensive Loss (1)
Details about Accumulated Other Comprehensive	Three Months Ended December 31,				Affected Line Item in the
Loss Components	2024		2023		Consolidated Statements of Income
Securities available for sale:
Net securities gains reclassified into net income	$	—	$	(85)	Net gain on sale of securities
Related income tax expense		—		20	Income tax benefit
	$	—	$	(65)

(1)	Amounts in parenthesis indicate debits.


(Dollars in thousands)	Amounts Reclassified from Accumulated
	Other Comprehensive Loss (2)
Details about Accumulated Other Comprehensive	Six Months Ended December 31,				Affected Line Item in the
Loss Components	2024		2023		Consolidated Statements of Income
Securities available for sale:
Net securities gains reclassified into net income	$	—	$	(85)	Net gain on sale of securities
Related income tax expense		—		20	Income tax benefit
	$	—	$	(65)

(2)	Amounts in parenthesis indicate debits.

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Note 5 – Investment Securities

Debt Securities

The amortized cost, gross unrealized gains and losses, and fair value of investments in debt securities are as follows:


	December 31, 2024
			Gross		Gross		Allowance
	Amortized		Unrealized		Unrealized		for Credit		Fair
(Dollars in thousands)	Cost		Gains		Losses		Losses		Value
Available For Sale:
Mortgage-backed securities	$	107,394	$	19	$	(17,593)	$	—	$	89,820
U.S. agency collateralized mortgage obligations		8,594		—		(1,654)		—		6,940
U.S. government agency securities		614		—		(76)		—		538
Municipal bonds		19,958		—		(5,043)		—		14,915
Corporate bonds		35,200		—		(2,324)		—		32,876
Total Available For Sale	$	171,760	$	19	$	(26,690)	$	—	$	145,089

	December 31, 2024
			Gross		Gross				Allowance
	Amortized		Unrealized		Unrealized		Fair		for Credit
(Dollars in thousands)	Cost		Gains		Losses		Value		Losses
Held To Maturity:
Mortgage-backed securities	$	84,093	$	—	$	(16,782)	$	67,311	$	—
U.S. government agency securities		969		—		—		969		—
Municipal bonds		36		—		—		36		—
Total Held To Maturity	$	85,098	$	—	$	(16,782)	$	68,316	$	—


	June 30, 2024
			Gross		Gross		Allowance
	Amortized		Unrealized		Unrealized		for Credit		Fair
(Dollars in thousands)	Cost		Gains		Losses		Losses		Value
Available For Sale:
Mortgage-backed securities	$	112,439	$	20	$	(17,334)	$	—	$	95,125
U.S. agency collateralized mortgage obligations		8,937		—		(1,737)		—		7,200
U.S. government agency securities		769		1		(77)		—		693
Municipal bonds		19,999		—		(5,030)		—		14,969
Corporate bonds		37,200		—		(4,432)		—		32,768
Total Available For Sale	$	179,344	$	21	$	(28,610)	$	—	$	150,755

	June 30, 2024
			Gross		Gross				Allowance
	Amortized		Unrealized		Unrealized		Fair		for Credit
(Dollars in thousands)	Cost		Gains		Losses		Value		Losses
Held To Maturity:
Mortgage-backed securities	$	87,526	$	—	$	(16,216)	$	71,310	$	—
U.S. government agency securities		5,482		—		(13)		5,469		—
Municipal bonds		48		—		—		48		—
Total Held To Maturity	$	93,056	$	—	$	(16,229)	$	76,827	$	—

The Company did not sell any investment securities during the three and six months ended December 31, 2024. The Company recognized $85 thousand of gross gains on the sale of $2.4 million of investment securities during the three and six months ended December 31, 2023.

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The amortized cost and fair value of debt securities, by contractual maturity, are shown below. Maturities for mortgage-backed securities are dependent upon the rate environment and prepayments of the underlying loans. Expected maturities may differ from contractual maturities because the securities may be called or prepaid with or without penalties.


	December 31, 2024
	Available For Sale				Held To Maturity
	Amortized		Fair		Amortized		Fair
(Dollars in thousands)	Cost		Value		Cost		Value
Due in one year or less	$	—	$	—	$	1,005	$	1,005
Due after one year through five years		1,500		1,453		—		—
Due after five years through ten years		41,178		37,369		—		—
Due after ten years		129,082		106,267		84,093		67,311
	$	171,760	$	145,089	$	85,098	$	68,316

The following tables provide information on the gross unrealized losses and fair market value of the Company's investments for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2024 and June 30, 2024:


	December 31, 2024
	Less than 12 Months				12 Months or More				Total		Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
Available For Sale:
Mortgage-backed securities	$	—	$	—	$	88,815	$	(17,593)	$	88,815	$	(17,593)
U.S. agency collateralized mortgage obligations		—		—		6,940		(1,654)		6,940		(1,654)
U.S. government agency securities		42		(1)		496		(75)		538		(76)
Municipal bonds		—		—		14,915		(5,043)		14,915		(5,043)
Corporate bonds		—		—		31,976		(2,324)		31,976		(2,324)
		42		(1)		143,142		(26,689)		143,184		(26,690)
Held To Maturity:
Mortgage-backed securities		—		—		67,311		(16,782)		67,311		(16,782)
		—		—		67,311		(16,782)		67,311		(16,782)
	$	42	$	(1)	$	210,453	$	(43,471)	$	210,495	$	(43,472)


	June 30, 2024
	Less than 12 Months				12 Months or More				Total		Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
Available For Sale:
Mortgage-backed securities	$	—	$	—	$	94,110	$	(17,334)	$	94,110	$	(17,334)
U.S. agency collateralized mortgage obligations		—		—		7,200		(1,737)		7,200		(1,737)
U.S. government agency securities		—		—		556		(77)		556		(77)
Municipal bonds		—		—		14,969		(5,030)		14,969		(5,030)
Corporate bonds		—		—		32,768		(4,432)		32,768		(4,432)
		—		—		149,603		(28,610)		149,603		(28,610)
Held To Maturity:
Mortgage-backed securities		—		—		71,310		(16,216)		71,310		(16,216)
U.S. government agency securities		982		(1)		4,487		(12)		5,469		(13)
		982		(1)		75,797		(16,228)		76,779		(16,229)
	$	982	$	(1)	$	225,400	$	(44,838)	$	226,382	$	(44,839)

At December 31, 2024, the Company had one security in the less than 12 months loss position and 120 securities in the 12 months or greater loss position. At June 30, 2024, the Company had one security in the less than 12 months loss position and 124 securities in the 12 months or greater loss position. The unrealized loss on securities is due to current interest rate levels relative to the Company’s cost. Because the unrealized losses are due to current interest rate levels relative to the Company’s cost and not credit quality, and because 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 these

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investments before recovery of its amortized cost, which may be at maturity, the Company does not consider the unrealized losses to be credit losses at December 31, 2024 and June 30, 2024. The Company did not recognize any credit losses on these securities for the three and six months ended December 31, 2024 and 2023.

At December 31, 2024 and June 30, 2024, $2.5 million and $2.6 million, respectively, in the carrying value of investment securities were pledged to secure municipal deposits.

Equity Securities

The Company had one equity security with a fair value of $2.3 million as of December 31, 2024 and $2.0 million as of June 30, 2024. During the three and six months ended December 31, 2024, the Company recorded $202 thousand and $281 thousand of unrealized gains, respectively, and during the three and six months ended December 31, 2023, the Company recorded $148 thousand and $221 thousand of unrealized gains, respectively, which were recorded in Unrealized gain on equity securities in the Consolidated Statements of Income.

Note 6 – Loans

Major classifications of loans, net of deferred loan fees of $501 thousand and $545 thousand at December 31, 2024 and June 30, 2024, respectively, are summarized as follows:


	December 31,				June 30,
	2024				2024
(Dollars in thousands)	Amount		Percent		Amount		Percent
Residential real estate:
1 - 4 family	$	125,477	26.69	%	$	127,911	27.00	%
Home equity and HELOCs		29,999	6.38			30,767	6.50
Construction -residential		3,734	0.80			8,802	1.86
Commercial real estate:
1 - 4 family investor		88,692	18.87			92,284	19.49
Multi-family (five or more)		15,543	3.31			15,619	3.30
Commercial non-residential		178,041	37.87			158,481	33.46
Construction and land		10,267	2.18			22,687	4.79
Commercial		16,652	3.54			15,090	3.19
Consumer loans		1,703	0.36			1,920	0.41
Total Loans		470,108	100.00	%		473,561	100.00	%

Allowance for credit losses		(2,598)				(2,989)
Net Loans	$	467,510			$	470,572

Mortgage loans serviced for others are not included in the accompanying Consolidated Statements of Financial Condition. The total amount of loans serviced for the benefit of others was approximately $10.3 million and $11.2 million at December 31, 2024 and June 30, 2024, respectively. The Bank retained the related servicing rights for the loans that were sold and receives a 25 basis point servicing fee from the purchasers of the loans. Custodial escrow balances maintained in connection with the foregoing loan servicing are included in advances from borrowers for taxes and insurance.

Allowance for Credit Losses. The following tables set forth the allocation of the Bank’s allowance for credit losses by loan category at the dates indicated. The portion of the credit loss allowance allocated to each loan category does not represent the total available for future losses which may occur within the loan category since the total credit loss allowance is a valuation allocation applicable to the entire loan portfolio. The Company generally charges-off the collateral or discounted cash flow deficiency on all loans at 90 days past due and all loans rated substandard or worse that are 90 days past due.

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The following table presents, by loan portfolio segment, the changes in the allowance for credit losses for the three months ended December 31, 2024 and 2023:


December 31, 2024	Residential real estate:						Commercial real estate:
			Home Equity		Construction-		1 - 4 family		Multi-family		Commercial		Construction
(Dollar amounts in thousands)	1 - 4 family		and HELOCs		residential		investor		(five or more)		non-residential		and Land		Commercial		Consumer		Total
Allowance for credit losses:
Beginning balance	$	321	$	97	$	42	$	183	$	33	$	1,154	$	125	$	327	$	240	$	2,522
Charge-offs		—		—		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		—		—		—		—		—
Provision (recovery)		(2)		2		(29)		(1)		—		178		(63)		8		(17)		76
Ending Balance	$	319	$	99	$	13	$	182	$	33	$	1,332	$	62	$	335	$	223	$	2,598


December 31, 2023	Residential real estate:						Commercial real estate:
			Home Equity		Construction-		1 - 4 family		Multi-family		Commercial		Construction
(Dollar amounts in thousands)	1-4 family		and HELOCs		residential		investor		(five or more)		non-residential		and Land		Commercial		Consumer		Total
Allowance for credit losses:
Beginning balance	$	407	$	131	$	39	$	325	$	53	$	1,767	$	233	$	340	$	292	$	3,587
Charge-offs		—		—		—		—		—		—		—		—		(13)		(13)
Recoveries		—		—		—		—		—		—		—		—		2		2
Provision (recovery)		(4)		84		5		(8)		(1)		(13)		7		(18)		(27)		25
Ending Balance	$	403	$	215	$	44	$	317

William Penn Bancorporation 10-Q