William Penn Bancorp, Inc. Announces First Quarter Results
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William Penn Bancorp, Inc. Announces First Quarter Results

Friday, November 6, 2020 5:00 AM
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BRISTOL, PA / ACCESSWIRE / November 6, 2020 / William Penn Bancorp, Inc. ("William Penn" or the "Company") (OTC PINK: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.

William Penn Bancorp, Inc.
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