Introduction

William Penn Bancorporation, a Maryland-based bank holding company, has been a mainstay in the Delaware Valley region for decades. Established in 1920, the company has weathered economic cycles and emerged as a respected community banking institution, catering to the diverse financial needs of individuals, businesses, and nonprofit organizations throughout Bucks County, Philadelphia, and the surrounding areas in Pennsylvania and New Jersey.

Company History

The company’s history is a testament to its resilience and adaptability. William Penn Bancorporation was incorporated in July 2020 to be the successor to William Penn Bancorp, Inc. after the completion of the second-step conversion of William Penn Bank from a two-tier mutual holding company structure to a stock holding company structure. In conjunction with this conversion, William Penn, MHC and William Penn Bancorp ceased to exist. The second-step conversion was completed on March 24, 2021, with the company selling a total of 12.64 million shares of common stock at $10 per share for gross proceeds of $126.4 million. This transformative event provided the company with the capital necessary to enhance its product offerings, expand its geographic reach, and strengthen its position in the competitive banking landscape.

As part of the second-step conversion, each of the existing 776,650 outstanding shares of William Penn Bancorp common stock owned by persons other than William Penn, MHC was converted into 3.26 shares of the company’s common stock. Additionally, $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.

Current Operations

Today, William Penn Bancorporation operates through its wholly-owned subsidiary, William Penn Bank, which maintains a network of twelve full-service branch offices. The bank’s lending portfolio is diversified across various sectors, including residential real estate, commercial real estate, construction and land development, and commercial and consumer loans. As of September 30, 2024, the company reported total assets of $812.2 million, with a loan portfolio of $464.7 million and total deposits of $629.8 million.

Financials

The company’s financial performance has been relatively stable, though it has experienced some volatility in recent years. For the fiscal year ended June 30, 2024, William Penn Bancorporation reported net income of $168,000, a decline from the $2.8 million in net income recorded for the previous fiscal year. This decrease was primarily attributable to a rise in interest expense, which outpaced the growth in interest income, as well as an increase in non-interest expenses, particularly in the areas of professional fees and data processing.

In the most recent quarter (Q1 2025), the company reported revenue of $4,791,000 and a net loss of $21,000. Operating cash flow for the quarter was negative $25,000, while free cash flow was negative $51,000. These figures indicate ongoing challenges in the current economic environment.

Despite the dip in net income, the company’s balance sheet remains healthy, with a Tier 1 leverage ratio of 16.52% as of September 30, 2024, well above the regulatory minimum of 9.00% required for the community bank leverage ratio framework. This strong capital position provides the company with the flexibility to navigate economic headwinds and pursue strategic growth opportunities.

Credit Risk Management

One of the key factors contributing to William Penn Bancorporation’s stability is its conservative lending practices and disciplined credit risk management. The company’s non-performing asset ratio stood at 0.38% as of September 30, 2024, a slight improvement from the 0.40% reported as of June 30, 2024. This low level of non-performing assets reflects the company’s diligent underwriting processes and proactive approach to managing credit risk within its loan portfolio.

The company’s allowance for credit losses (ACL) totaled $2.52 million as of September 30, 2024, or 0.54% of total loans. This ACL level reflects management’s estimate of expected lifetime credit losses in the loan portfolio based on historical loss experience, current conditions, and reasonable and supportable forecasts. The total credit losses coverage ratio, including the ACL and fair value marks on acquired loans, was 0.99 as of the same date, indicating a prudent approach to credit risk management.

Liquidity

In terms of liquidity, William Penn Bancorporation maintains a healthy cash position, with cash and cash equivalents totaling $26.5 million as of September 30, 2024. The company’s loan-to-deposit ratio of 73.5% suggests a balanced funding structure, allowing it to meet the borrowing needs of its customers while maintaining a prudent level of liquidity.

The company’s debt-to-equity ratio stands at 0.30, indicating a relatively low level of leverage. Both the current ratio and quick ratio are reported at 22.30, suggesting strong short-term liquidity. Additionally, William Penn Bancorporation has access to a maximum borrowing capacity of approximately $283.60 million with the Federal Home Loan Bank of Pittsburgh as of September 30, 2024, providing further liquidity support if needed.

Shareholder Value

The company’s commitment to shareholder value is evident in its dividend policy. William Penn Bancorporation has consistently paid quarterly cash dividends to its shareholders, with the most recent dividend of $0.03 per share declared on October 16, 2024, payable on November 7, 2024, to shareholders of record as of October 28, 2024.

Challenges and Opportunities

Looking ahead, the company faces both challenges and opportunities. The ongoing low-interest-rate environment, coupled with the pressure to maintain net interest margins, may continue to weigh on the company’s profitability. Additionally, the COVID-19 pandemic has introduced new uncertainties and risks that the company must navigate, particularly in terms of potential credit quality deterioration and changes in customer behavior.

However, William Penn Bancorporation’s experienced management team, strong capital position, and diversified business model position it well to weather these challenges. The company’s focus on serving the needs of its local communities, coupled with its disciplined approach to risk management, provides a solid foundation for long-term growth and success.

Strategic Priorities

In the near term, the company’s strategic priorities include expanding its presence in the attractive Greater Philadelphia metropolitan area, leveraging technological advancements to enhance the customer experience, and maintaining a strong focus on asset quality and operational efficiency. The company’s recent announcement of a merger agreement with Mid Penn Bancorp, Inc., a larger regional bank, further exemplifies its commitment to growth and value creation for shareholders.

Loan Portfolio Composition

William Penn Bancorporation’s loan portfolio is well-diversified across various lending categories. As of September 30, 2024, the residential real estate 1-4 family loan portfolio totaled $126.42 million, representing 27.2% of the total loan portfolio. The home equity and HELOC portfolio amounted to $29.54 million, or 6.36% of total loans. The commercial real estate 1-4 family investor portfolio totaled $89.42 million, or 19.24% of total loans, while the multi-family (five or more units) portfolio was $15.96 million, or 3.43% of the total.

The commercial non-residential loan portfolio was the largest lending segment, accounting for $154.61 million, or 33.27% of total loans. The construction and land loan portfolio amounted to $20.87 million, or 4.49% of total loans. The commercial loan portfolio totaled $16.25 million, or 3.50% of the overall loan mix, and the consumer loan portfolio was $1.84 million, representing 0.40% of total loans.

Geographic Presence

William Penn Bancorporation primarily operates in the Delaware Valley area through its network of 12 full-service branch offices. These branches are strategically located in Bucks County and Philadelphia, Pennsylvania, as well as Burlington, Camden, and Mercer Counties in New Jersey. This geographic focus allows the company to maintain a strong community presence and cater to the specific needs of customers in these areas.

Conclusion

Overall, William Penn Bancorporation’s history, financial stability, and strategic direction position it as a reliable community banking institution capable of navigating the challenges and capturing the opportunities in the Delaware Valley region. The company’s diversified loan portfolio, strong liquidity position, and conservative credit risk management practices provide a solid foundation for future growth. As the company continues to evolve and adapt to the changing financial landscape, investors may find it a compelling opportunity to consider, particularly given its strong community roots and commitment to shareholder value.

Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.