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William Penn Bancorp, Inc. Announces First Quarter Results

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BRISTOL, PA / ACCESSWIRE / November 6, 2020 / William Penn Bancorp, Inc. ("William Penn" or the "Company") (OTC:WMPN), the parent company of William Penn Bank (the "Bank"), today announced its financial results for the quarter ended September 30, 2020. William Penn recorded net income of $670 thousand, or $0.15 per diluted share, for the quarter ended September 30, 2020, compared to net income of $854 thousand, or $0.21 per diluted share, for the quarter ended September 30, 2019. Net income for the quarter ended September 30, 2020 included $161 thousand, or $0.04 per diluted share, of prepayment penalties associated with the prepayment of $23.2 million of higher-cost advances from the Federal Home Loan Bank of Pittsburgh ("FHLB").

Kenneth J. Stephon, William Penn's President and CEO, stated "We continue to experience a difficult operating environment related to the COVID-19 pandemic. The low interest rate environment has made it challenging to effectively deploy the excess cash we hold on our balance sheet from two recent acquisitions. During the quarter, we made a strategic decision to use $23.2 million of cash to prepay higher-cost advances from the FHLB that will effectively lower our future borrowing costs and become accretive to our overall earnings following the quarter ended December 31, 2020. We continue to experience strong growth in deposits, which increased at an annualized rate of 15.5% during the first quarter. We remain focused on maintaining a high-quality investment portfolio that provides a steady stream of cash flows both in the current and in rising interest rate environments. In addition, we have maintained consistent and conservative lending practices in our market footprint."

Highlights for the quarter ended September 30, 2020 are as follows:

  • William Penn prepaid $23.2 million of higher-cost advances from the FHLB and incurred $161 thousand of prepayment penalties.
  • William Penn maintained strong credit reserves amidst the uncertain economic environment and recorded a $66 thousand provision for credit losses during the quarter ended September 30, 2020.
  • During the quarter ended September 30, 2020, William Penn recorded net income of $670 thousand, or $0.15 per diluted share.
  • Tangible book value per share measured $19.94 as of September 30, 2020, compared to $17.42 as of September 30, 2019, an increase of $2.52, or 14.5%.
  • Net interest income increased $1.8 million, or 54.7%, for the quarter ended September 30, 2020 compared to the same period in the prior year.
  • Non-interest income increased $53 thousand, or 15.3%, for the quarter ended September 30, 2020 compared to the same period in the prior year.
  • Asset quality metrics continued to remain strong with non-performing assets to total assets of 0.67% as of September 30, 2020. Our allowance for loan losses totaled $3.6 million, or 1.27% of total loans, excluding acquired loans, as of September 30, 2020, compared to $3.5 million, or 1.26% of total loans, excluding acquired loans, as of June 30, 2020.
  • The balance of loans on deferral in accordance with the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") decreased to $6.1 million as of September 30, 2020, compared to $49.8 million at June 30, 2020.

Balance Sheet

Total assets decreased $4.9 million, or 0.7%, to $731.6 million at September 30, 2020, from $736.5 million of total assets at June 30, 2020. The decrease in total assets can primarily be attributed to a $26.8 million decrease in total cash and cash equivalents and a $10.9 million decrease in gross loans, partially offset by a $33.6 million increase in investment securities.

Cash and cash equivalents decreased $26.8 million, or 32.4%, to $56.1 million at September 30, 2020, from $82.9 million at June 30, 2020. The decrease in cash and cash equivalents was primarily driven by a $33.6 million increase in investment securities as we continue to deploy our excess cash through the purchase of high-quality investment securities and a $23.9 million decrease in advances from the FHLB due to the previously discussed prepayment of $23.2 million of higher-cost advances from the FHLB. These decreases to cash and cash equivalents were partially offset by a $10.9 million decrease in gross loans and a $21.6 million increase in deposits.

Investments increased $33.6 million, or 37.3%, to $123.6 million at September 30, 2020, from $90.0 million at June 30, 2020. We focus on maintaining a high-quality investment portfolio that provides a steady stream of cash flows both in the current and in rising interest rate environments.

Gross loans decreased $10.9 million, or 2.1%, to $501.2 million at September 30, 2020, from $512.1 million at June 30, 2020. The COVID-19 pandemic and low interest rate environment have created a highly competitive market for residential lending. The Company maintains conservative lending practices and is focused on lending to borrowers with high credit quality within its market footprint.

Deposits increased $21.6 million, or 3.9%, to $581.5 million at September 30, 2020, from $559.9 million at June 30, 2020. Deposit growth was achieved through strong organic growth and the successful opening of a new branch location located in Collingswood, New Jersey during the quarter ended June 30, 2020.

Borrowings decreased $23.9 million, or 36.8%, to $41.0 million at September 30, 2020, from $64.9 million at June 30, 2020. The decrease in borrowings was primarily due to the previously discussed prepayment of $23.2 million of higher-cost advances from the FHLB.

Stockholders' equity decreased $859 thousand, or 0.9%, to $95.5 million at September 30, 2020, from $96.4 million at June 30, 2020. The decrease in stockholders' equity was due to $1.9 million of dividends paid to common shareholders in August 2020, partially offset by $670 thousand of net income and a $357 thousand increase in the accumulated other comprehensive income component of the unrealized gain on available-for-sale investment securities during the quarter ended September 30, 2020. Tangible book value per share totaled $19.94 as of September 30, 2020, compared to $17.42 as of September 30, 2019.

Net Interest Income

For the quarter ended September 30, 2020, net interest income was $5.2 million, an increase of $1.8 million, or 54.7%, from the quarter ended September 30, 2019. The increase in net interest income was primarily due to an increase in interest-earning assets as a result of the acquisitions of Washington Savings Bank ("Washington") and Fidelity Savings and Loan Association of Bucks County ("Fidelity") effective May 1, 2020. The net interest margin totaled 3.11% for the quarter ended September 30, 2020 compared to 3.52% for the same period in 2019. The decrease in the net interest margin is consistent with the recent decrease in interest rates and current margin compression primarily due to the COVID-19 pandemic and its impact on the economy and interest rate environment.

Non-interest Income

For the quarter ended September 30, 2020, non-interest income totaled $400 thousand, an increase of $53 thousand, or 15.3%, from the quarter ended September 30, 2019. The increase was primarily due to an increase in service fees as a result of higher deposit transaction volume due primarily to the acquisitions of Washington and Fidelity effective May 1, 2020, as well as an increase in rental income, partially offset by a decrease in the gain on sale of investment securities.

Non-interest Expense

For the quarter ended September 30, 2020, non-interest expense totaled $4.7 million, an increase of $2.1 million, or 78.9%, from the quarter ended September 30, 2019. The increase in non-interest expense was primarily due to a $983 thousand increase in salaries and employee benefits due to the addition of new employees from the acquisitions of Washington and Fidelity and a $464 thousand increase in occupancy and equipment expense due to additional operating costs from new branch offices and increased depreciation expense associated with premises and equipment from the acquisitions of Washington and Fidelity. In addition, the quarter ended September 30, 2020 included $161 thousand of prepayment penalties associated with the prepayment of $23.2 million of higher-cost advances from the FHLB. The increase in other non-interest expense can be attributed to operating a larger organization that has resulted from the two acquisitions by William Penn Bank completed on May 1, 2020.

Income Taxes

For the quarter ended September 30, 2020, we recorded a provision for income taxes of $146 thousand, reflecting an effective tax rate of 17.9%, compared to a provision for income taxes of $220 thousand, reflecting an effective tax rate of 20.5%, for the same period in 2019. The decrease in the provision for income taxes for the quarter ended September 30, 2020 compared to the same period a year ago is primarily due to lower income before income taxes. The decrease in the effective tax rate for the quarter ended September 30, 2020 compared to the same period a year ago is primarily due to a higher ratio of tax-exempt income on the Company's investment in bank-owned life insurance and municipal securities relative to income before income taxes.

Asset Quality

Our ratio of non-performing assets to total assets remained low at 0.67% as of September 30, 2020. In addition, we did not record any charge-offs during the quarter ended September 30, 2020. As a result of the continued economic uncertainty due to the COVID-19 pandemic, we recorded a $66 thousand provision for loan losses during the quarter ended September 30, 2020 compared to no provision for loan losses during the same period in 2019. Our allowance for loan losses totaled $3.6 million, or 1.27% of total loans, excluding acquired loans, as of September 30, 2020, compared to $3.5 million, or 1.26% of total loans, excluding acquired loans, as of June 30, 2020. In addition, the balance of loans on deferral in accordance with the provisions of the CARES Act decreased to $6.1 million as of September 30, 2020, compared to $49.8 million at June 30, 2020.

Capital

The Bank's capital position remains strong relative to current regulatory requirements. The Bank continues to have substantial liquidity that has been retained in cash or invested in high quality government-backed securities. As of September 30, 2020, William Penn's tangible capital to tangible assets totaled 12.34%. In addition, at September 30, 2020, we had the ability to borrow up to $304.1 million from the Federal Home Loan Bank of Pittsburgh. The federal regulators issued a final rule, effective January 1, 2020, that set the elective community bank leverage ratio at 9% tier 1 capital to average total consolidated assets. William Penn Bank has elected to follow this alternative framework. As of September 30, 2020, William Penn Bank had a community bank leverage ratio of 11.92% and is considered well-capitalized under the prompt corrective action framework.

About William Penn Bancorp, Inc.

William Penn Bancorp, Inc., headquartered in Bristol, Pennsylvania, is the holding company for William Penn Bank, which serves the Delaware Valley area through twelve full-service branch offices in Bucks County and Philadelphia, Pennsylvania, and Burlington and Camden Counties in New Jersey. The Company's executive offices are located at 10 Canal Street, Suite 104, Bristol, Pennsylvania 19007. William Penn Bank's deposits are insured up to the legal maximum (generally $250,000 per depositor) by the Federal Deposit Insurance Corporation (FDIC). The primary federal regulator for William Penn Bank is the FDIC. For more information about the Bank and William Penn, please visit www.williampenn.bank.

Forward Looking Statements

This news release may contain forward-looking statements, which can be identified by the use of words such as "believes," "expects," "anticipates," "estimates" or similar expressions. Such forward-looking statements and all other statements that are not historic facts are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors. These factors include, but are not limited to, general economic conditions, the effect of the COVID-19 pandemic (including its impact on our business operations and credit quality, on our customers and their ability to repay their loan obligations and on general economic and financial market conditions), changes in the interest rate environment, legislative or regulatory changes that may adversely affect our business, changes in accounting policies and practices, changes in competition and demand for financial services, adverse changes in the securities markets, changes in deposit flows, changes in the quality or composition of our loan or investment portfolios and our ability to successfully integrate the business operations of Fidelity Savings and Loan Association of Bucks County and Washington Savings Bank, each of which we recently acquired on May 1, 2020, into our business operations. Additionally, other risks and uncertainties may be described in William Penn's Annual Report, which is available through the Company's website www.williampenn.bank. Should one or more of these risks materialize, actual results may vary from those anticipated, estimated or projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as may be required by applicable law or regulation, William Penn assumes no obligation to update any forward-looking statements.

WILLIAM PENN BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Financial Condition
(Dollars in thousands, except share amounts)

September 30, June 30, September 30,
2020 2020 2019
ASSETS
Cash and due from banks
$ 11,336 $ 21,385 $ 7,317
Interest bearing deposits with other banks
34,539 56,755 7,685
Federal funds sold
10,207 4,775 -
Total cash and cash equivalents
56,082 82,915 15,002
Interest-bearing time deposits
2,300 2,300 6,487
Securities available for sale
123,597 89,998 36,749
Loans receivable, net of allowance for loan losses of
$3,585, $3,519, and $3,151, respectively
497,630 508,605 326,592
Premises and equipment, net
13,924 16,733 9,017
Regulatory stock, at cost
3,219 4,200 2,778
Deferred income taxes
4,448 4,817 1,472
Bank-owned life insurance
14,870 14,758 11,286
Goodwill
4,858 4,858 4,858
Intangible assets
1,128 1,192 1,113
Accrued interest receivable and other assets
9,497 6,076 2,539
TOTAL ASSETS
$ 731,553 $ 736,452 $ 417,893
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
$ 581,493 $ 559,848 $ 286,371
Advances from Federal Home Loan Bank
41,000 64,892 50,000
Advances from borrowers for taxes and insurance
2,910 4,536 2,033
Accrued interest payable and other liabilities
10,644 10,811 4,178
TOTAL LIABILITIES
636,047 640,087 342,582
Commitments and contingencies
- - -
STOCKHOLDERS' EQUITY
Preferred stock, no par value
- - -
Common Stock, $.10 par value
467 467 416
Additional paid-in capital
42,932 42,932 22,441
Treasury stock
(3,710 ) (3,710 ) (3,710 )
Retained earnings
55,384 56,600 56,126
Accumulated other comprehensive income
433 76 38
TOTAL STOCKHOLDERS' EQUITY
95,506 96,365 75,311
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 731,553 $ 736,452 $ 417,893

WILLIAM PENN BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Income
(Dollars in thousands, except per share amounts)

Three months ended
September 30, 2020 June 30,
2020
September 30, 2019
INTEREST INCOME
Loans receivable, including fees
$ 5,893 $ 5,414 $ 4,151
Securities
653 355 273
Other
111 42 152
Total Interest Income
6,657 5,811 4,576
INTEREST EXPENSE
Deposits
1,081 946 873
Borrowings
359 350 330
Total Interest Expense
1,440 1,296 1,203
Net Interest Income
5,217 4,515 3,373
Provision for Loan Losses
66 605 -
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES
5,151 3,910 3,373
OTHER INCOME
Service fees
183 124 139
Gain on sale of securities
- 41 93
Earnings on bank-owned life insurance
112 98 83
Gain on bargain purchase
- 746 -
Gain on sale of premises and equipment
15 - -
Other
90 132 32
Total Other Income
400 1,141 347
OTHER EXPENSES
Salaries and employee benefits
2,554 2,229 1,571
Occupancy and equipment
759 576 295
Data processing
422 356 304
Professional fees
188 49 102
Merger related expenses
- 3,294 -
Amortization on intangible assets
64 66 59
Prepayment penalties
161 - -
Other
587 252 315
Total Other Expense
4,735 6,822 2,646
Income (Loss) Before Income Taxes
816 (1,771 ) 1,074
Income Tax Expense (Benefit)
146 (479 ) 220
NET INCOME (LOSS)
$ 670 $ (1,292 ) $ 854
Basic and diluted earnings per share
$ 0.15 $ (0.30 ) $ 0.21

WILLIAM PENN BANCORP, INC. AND SUBSIDIARIES
Unaudited Selected Consolidated Financial and Other Data
(Dollars in thousands)

Three months ended
September 30, 2020 June 30, 2020 September 30, 2019
Average Balance Interest and Dividends Yield/Cost Average Balance Interest and Dividends Yield/Cost Average Balance Interest and Dividends Yield/Cost
Interest-earning assets:
Loans
$ 504,463 $ 5,893 4.67 % $ 432,797 $ 5,414 5.00 % $ 329,964 $ 4,151 5.03 %
Investment securities
109,663 653 2.53 68,637 355 2.17 30,828 273 3.54
Other interest-earning assets
63,051 111 0.70 44,125 42 0.38 22,821 152 2.66
Total interest-earning assets
677,177 6,657 3.96 545,559 5,811 4.27 383,613 4,576 4.77
Non-interest-earning assets
58,669 50,826 34,156
Total assets
$ 735,846 $ 596,385 $ 417,769
Interest-bearing liabilities:
Interest-bearing checking accounts
$ 101,272 51 0.20 % $ 77,074 36 0.19 % $ 55,394 16 0.12 %
Money market deposit accounts
136,543 326 0.96 108,257 233 0.86 70,500 287 1.63
Savings, including club deposits
94,586 43 0.18 62,789 32 0.20 32,105 12 0.15
Certificates of deposit
198,933 661 1.33 154,973 645 1.66 113,628 558 1.96
Total interest-bearing deposits
531,334 1,081 0.81 403,093 946 0.94 271,627 873 1.29
FHLB advances
52,608 359 2.73 62,204 350 2.25 50,000 330 2.64
Total interest-bearing liabilities
583,942 1,440 0.99 465,297 1,296 1.11 321,627 1,203 1.50
Non-interest-bearing liabilities:
Non-interest-bearing deposits
41,145 32,180 13,049
Other non-interest-bearing liabilities
14,938 11,827 7,471
Total liabilities
640,025 509,304 342,147
Total equity
95,821 87,081 75,622
Total liabilities and equity
$ 735,846 $ 596,385 $ 417,769
Net interest income
$ 5,217 $ 4,515 $ 3,373
Interest rate spread
2.96 % 3.15 % 3.27 %
Net interest-earning assets
$ 93,235 $ 80,262 $ 61,986
Net interest margin
3.11 % 3.32 % 3.52 %
Ratio of interest-earning assets to interest-bearing liabilities
115.97 % 117.25 % 119.27 %

Key performance ratios (annualized) are as follows for the three months ended (unaudited):

ASSET QUALITY INDICATORS
September 30, June 30, September 30,
(Dollars in thousands)
2020 2020 2019
Non-performing assets:
Non-accruing loans
$ 4,775 $ 3,172 $ 1,917
Accruing loans past due 90 days or more
28 90 139
Total non-performing loans
$ 4,803 $ 3,262 $ 2,056
Real estate owned
100 100 -
Total non-performing assets
$ 4,903 $ 3,362 $ 2,056
Non-performing loans to total loans and leases
0.96 % 0.64 % 0.62 %
Non-performing assets to total assets
0.67 % 0.46 % 0.49 %
ALLL to total loans and leases
0.72 % 0.69 % 0.96 %
ALLL to non-performing loans
74.64 % 107.88 % 153.26 %

Key annualized performance ratios are as follows for the three months ended (unaudited):

For the Three Months Ended
September 30, June 30, September 30,
2020 2020 2019
PERFORMANCE RATIOS:
(annualized)
Return on average assets
0.36 % -0.87 % 0.82 %
Return on average assets (excluding merger charges and gain on bargain purchase)
0.36 % 0.84 % 0.82 %
Return on average equity
2.80 % -5.93 % 4.52 %
Return on average equity (excluding merger charges and gain on bargain purchase)
2.80 % 5.77 % 4.52 %
Net interest margin
3.11 % 3.32 % 3.52 %
Net charge-off ratio
0.00 % 0.02 % 0.00 %
Efficiency ratio
85.30 % 135.06 % 71.13 %
Efficiency ratio (excluding merger charges and gain on bargain purchase)
85.30 % 81.95 % 71.13 %
Tangible common equity
12.34 % 12.37 % 16.83 %

CONTACT:

Kenneth J. Stephon
President and CEO
PHONE: (856) 656-2201, ext. 1009

SOURCE: William Penn Bancorp, Inc.

View source version on accesswire.com:
https://www.accesswire.com/615050/William-Penn-Bancorp-Inc-Announces-First-Quarter-Results

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