William Penn Bancorporation (NASDAQ:WMPN) is a Maryland-based bank holding company that operates through its wholly-owned subsidiary, William Penn Bank. The company provides a range of consumer and commercial banking services to individuals, businesses, and nonprofit organizations throughout the Delaware Valley area.

Financials

In the latest quarter ended March 31, 2024, WMPN reported net income of $136,000, or $0.02 per basic and diluted share, compared to net income of $183,000, or $0.01 per basic and diluted share, in the prior-year quarter. For the nine months ended March 31, 2024, the company reported net income of $326,000, or $0.04 per basic share and $0.03 per diluted share, compared to net income of $2.3 million, or $0.17 per basic and diluted share, in the same period of the prior year.

The company's total revenue for the nine months ended March 31, 2024 was $34.9 million, an increase of 1.9% compared to the same period in the prior year. This increase was primarily driven by a $1.9 million, or 9.0%, increase in interest income on loans, partially offset by a $4.8 million, or 27.2%, decrease in net interest income. The decrease in net interest income was due to a rise in interest expense on deposits and borrowings, which outpaced the increase in interest income on loans and investments.

WMPN's net interest margin decreased to 2.32% for the nine months ended March 31, 2024, compared to 3.04% in the same period of the prior year. This decline was primarily attributable to the rising interest rate environment, which caused the cost of the company's interest-bearing liabilities to increase at a faster pace than the yield on its interest-earning assets.

The company's provision for credit losses for the nine months ended March 31, 2024 was a $475,000 recovery, compared to no provision in the prior-year period. This recovery was due to consistently low levels of net charge-offs, strong asset quality metrics, and the company's continued conservative lending practices. As of March 31, 2024, WMPN's allowance for credit losses totaled $3.1 million, or 0.65% of total loans, compared to $3.3 million, or 0.69% of total loans, as of June 30, 2023.

WMPN's non-interest income for the nine months ended March 31, 2024 increased by $845,000, or 62.2%, to $2.2 million, primarily due to a $1.0 million increase in the unrealized gain on equity securities and a $99,000 increase in earnings on bank-owned life insurance. These increases were partially offset by a $396,000 decrease in net gains on the sale of premises and equipment.

Non-interest expenses for the nine months ended March 31, 2024 decreased by $1.2 million, or 6.9%, to $15.6 million, primarily due to a $893,000 decrease in salaries and employee benefits and a $245,000 decrease in occupancy and equipment expenses. These decreases were consistent with the company's expense management initiatives.

Balance Sheet

WMPN's total assets as of March 31, 2024 were $833.2 million, a decrease of $14.4 million, or 1.7%, from June 30, 2023. This decrease was primarily due to a $13.3 million decline in the company's available-for-sale and held-to-maturity investment portfolios. Net loans increased by $714,000, or 0.1%, to $478.3 million as of March 31, 2024, compared to $477.5 million as of June 30, 2023.

Deposits decreased by $9.5 million, or 1.5%, to $625.8 million as of March 31, 2024, from $635.3 million as of June 30, 2023. This decrease was primarily due to a $22.6 million decline in money market accounts and a $7.1 million decrease in savings accounts, partially offset by an $11.8 million increase in interest-bearing checking accounts and a $9.3 million increase in certificate of deposit accounts.

Borrowings increased by $31.0 million, or 91.2%, to $65.0 million as of March 31, 2024, from $34.0 million as of June 30, 2023. This increase was primarily due to the company borrowing from the Federal Home Loan Bank of Pittsburgh to fund a portion of its $36.8 million in share repurchases during the nine months ended March 31, 2024.

Stockholders' equity decreased by $34.9 million, or 21.8%, to $125.8 million as of March 31, 2024, from $160.7 million as of June 30, 2023. This decrease was primarily due to the repurchase of 3,021,498 shares at a total cost of $36.8 million, the payment of $900,000 in quarterly cash dividends, and a $226,000 one-time cumulative effect decrease to retained earnings from the adoption of the Current Expected Credit Losses (CECL) accounting standard. These decreases were partially offset by a $1.3 million decrease in the accumulated other comprehensive loss component of equity related to the unrealized loss on available-for-sale securities and $326,000 of net income during the nine months ended March 31, 2024.

As of March 31, 2024, WMPN's book value per share was $13.30, and its tangible book value per share was $12.74. The company's total credit losses coverage ratio, including the fair value mark on acquired loans, was 1.10% as of March 31, 2024, compared to 1.20% as of June 30, 2023.

Asset Quality and Liquidity

WMPN's asset quality metrics remain strong, with non-performing assets to total assets decreasing to 0.41% as of March 31, 2024, from 0.49% as of June 30, 2023. The company had no loans modified to borrowers experiencing financial difficulty during the nine months ended March 31, 2024.

The company's liquidity ratio was 38.9% as of March 31, 2024, compared to 40.8% as of June 30, 2023. WMPN maintains a liquidity ratio policy that requires this metric to be above 10.0% to provide for the effective management of extension risk and other interest rate risks.

Capital Position

In terms of capital, WMPN's Tier 1 leverage ratio was 16.01% as of March 31, 2024, well above the 9.0% regulatory requirement for a "well-capitalized" institution. The company's strong capital position provides it with the flexibility to navigate the current economic environment and pursue strategic growth opportunities.

Outlook

Looking ahead, WMPN has not provided any specific financial guidance for the remainder of fiscal year 2024. However, the company's management team remains focused on maintaining its conservative lending practices, disciplined expense management, and strong asset quality metrics to navigate the challenging interest rate and economic environment.

Conclusion

Overall, WMPN's solid fundamentals, including its strong capital position, conservative lending practices, and disciplined expense management, position the company well to weather the current economic headwinds. The company's focus on serving its local communities and prudent risk management strategies should continue to support its long-term growth and profitability.