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William Penn Bancorporation - Quarter Report: 2022 March (Form 10-Q)

Table of Contents

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 March 31, 2022

OR

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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

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 May 4, 2022: 15,033,466 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 March 31, 2022 and June 30, 2021

3

Consolidated Statements of Income for the Three and Nine Months Ended March 31, 2022 and 2021

4

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended March 31, 2022 and 2021

5

Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended March 31, 2022 and 2021

6

Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2022 and 2021

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

47

Item 4.

Controls and Procedures

49

Part II

Other Information

Item 1.

Legal Proceedings

49

Item 1A.

Risk Factors

49

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

49

Item 3.

Defaults Upon Senior Securities

49

Item 4.

Mine Safety Disclosures

49

Item 5.

Other Information

50

Item 6.

Exhibits

51

Signatures

2

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 March 31, 2022 and June 30, 2021 (unaudited)

March 31, 

    

June 30, 

2022

    

2021

ASSETS

 

  

Cash and due from banks

$

13,221

$

11,102

Interest bearing deposits with other banks

 

45,025

 

157,620

Total cash and cash equivalents

 

58,246

 

168,722

Interest-bearing time deposits

 

1,100

 

1,850

Securities available for sale

 

169,613

 

123,335

Securities held to maturity, fair value of $95,102 and $0, as of March 31, 2022 and June 30, 2021, respectively

 

104,227

 

Equity securities

2,404

Loans receivable, net of allowance for loan losses of $3,479 and $3,613 as of March 31, 2022 and June 30, 2021, respectively

 

457,178

 

461,196

Premises and equipment, net

 

13,361

 

13,439

Regulatory stock, at cost

 

1,963

 

2,954

Deferred income taxes

 

6,019

 

3,574

Bank-owned life insurance

 

38,006

 

35,231

Goodwill

 

4,858

 

4,858

Intangible assets

 

768

 

937

Accrued interest receivable and other assets

 

11,238

 

6,312

TOTAL ASSETS

$

868,981

$

822,408

LIABILITIES AND STOCKHOLDERS' EQUITY

 

  

 

  

LIABILITIES

 

  

 

  

Deposits

$

621,404

$

553,103

Advances from Federal Home Loan Bank

 

20,000

 

41,000

Advances from borrowers for taxes and insurance

 

3,163

 

3,731

Accrued interest payable and other liabilities

 

18,134

 

7,648

TOTAL LIABILITIES

 

662,701

 

605,482

Commitments and contingencies (note 11)

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; 15,147,766 shares issued and outstanding at March 31, 2022 and 15,170,566 shares issued and outstanding at June 30, 2021

 

151

 

152

Additional paid-in capital

 

168,078

 

168,349

Unearned common stock held by employee stock ownership plan

(9,700)

(10,004)

Retained earnings

 

56,936

 

58,493

Accumulated other comprehensive loss

 

(9,185)

 

(64)

TOTAL WILLIAM PENN BANCORPORATION STOCKHOLDERS' EQUITY

 

206,280

 

216,926

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

868,981

$

822,408

See accompanying notes to consolidated financial statements

3

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 Nine Months Ended March 31, 2022 and 2021 (unaudited)

Three Months Ended March 31, 

    

Nine Months Ended March 31, 

2022

2021

2022

2021

INTEREST INCOME

Loans receivable, including fees

$

5,212

$

5,701

$

15,535

$

17,827

Securities

 

1,329

 

449

 

3,026

 

1,574

Other

 

43

 

80

 

189

 

270

Total interest income

 

6,584

 

6,230

 

18,750

 

19,671

INTEREST EXPENSE

 

  

 

  

 

  

 

  

Deposits

 

424

 

652

 

1,329

 

2,651

Borrowings

 

180

 

262

 

649

 

888

Total interest expense

 

604

 

914

 

1,978

 

3,539

Net interest income

 

5,980

 

5,316

 

16,772

 

16,132

Provision (recovery) for loan losses

 

10

 

15

 

(20)

 

113

 

  

 

  

 

  

 

  

NET INTEREST INCOME AFTER PROVISION (RECOVERY) FOR LOAN LOSSES

 

5,970

 

5,301

 

16,792

 

16,019

OTHER INCOME

 

  

 

  

 

  

 

  

Service fees

 

196

 

199

 

652

 

568

Net gain on sale of other real estate owned

160

206

Net gain on sale of securities

 

 

35

 

62

 

5

Earnings on bank-owned life insurance

 

259

 

110

 

775

 

320

Unrealized loss on equity securities

 

(236)

 

 

(96)

 

Net gain (loss) on disposition of premises and equipment

15

(34)

15

435

Other

 

81

 

65

 

276

 

241

Total other income

 

315

 

535

 

1,684

 

1,775

OTHER EXPENSES

 

  

 

  

 

  

 

  

Salaries and employee benefits

 

2,932

 

2,490

 

8,440

 

7,570

Occupancy and equipment

 

836

 

813

 

2,237

 

2,227

Data processing

 

451

 

419

 

1,291

 

1,350

Professional fees

 

289

 

193

 

778

 

598

Amortization of intangible assets

 

56

 

64

 

169

 

192

Gain on lease abandonment

(117)

(117)

Prepayment penalties

 

209

 

 

273

 

161

Other

 

645

 

517

 

1,936

 

1,794

Total other expense

 

5,301

 

4,496

 

15,007

 

13,892

Income before income taxes

 

984

 

1,340

 

3,469

 

3,902

Income tax expense

 

160

 

273

 

310

 

789

NET INCOME

$

824

$

1,067

$

3,159

$

3,113

Basic and diluted earnings per share

$

0.06

$

0.07

$

0.22

$

0.21

See accompanying notes to consolidated financial statements

4

Table of Contents

WILLIAM PENN BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Dollars in thousands)

For the Three and Nine Months Ended March 31, 2022 and 2021 (unaudited)

    

Three Months Ended March 31, 

    

Nine Months Ended March 31, 

    

2022

    

2021

    

2022

    

2021

Net income

$

824

$

1,067

$

3,159

$

3,113

Other comprehensive loss:

 

  

 

  

 

  

 

  

Changes in net unrealized loss on securities available for sale

 

(10,408)

 

(2,448)

 

(11,693)

 

(1,620)

Tax effect

 

2,332

 

551

 

2,620

 

364

Reclassification adjustment for gain recognized in net income

 

 

(35)

 

(62)

 

(5)

Tax effect

 

 

8

 

14

 

1

Other comprehensive loss, net of tax

 

(8,076)

 

(1,924)

 

(9,121)

 

(1,260)

Comprehensive (loss) income

$

(7,252)

$

(857)

$

(5,962)

$

1,853

See accompanying notes to consolidated financial statements

5

Table of Contents

WILLIAM PENN BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Dollars in thousands, except share amounts)

For the Three and Nine Months Ended March 31, 2022 and 2021 (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

    

Income (Loss)

    

Equity

Balance, June 30, 2021

15,170,566

$

152

$

168,349

$

(10,004)

$

58,493

$

(64)

$

216,926

Net income

 

 

 

 

 

1,160

 

 

1,160

Other comprehensive loss

 

 

 

 

 

 

(598)

 

(598)

ESOP shares committed to be released

5

103

108

Special cash dividend paid ($0.30 per share)

 

 

 

 

 

(4,551)

 

 

(4,551)

Balance, September 30, 2021

 

15,170,566

$

152

$

168,354

$

(9,901)

$

55,102

$

(662)

$

213,045

Net income

 

 

 

 

 

1,175

 

 

1,175

Other comprehensive loss

 

 

 

 

 

 

(447)

 

(447)

ESOP shares committed to be released

6

101

107

Balance, December 31, 2021

 

15,170,566

$

152

$

168,360

$

(9,800)

$

56,277

$

(1,109)

$

213,880

Net income

 

 

 

 

 

824

 

 

824

Regular cash dividend paid ($0.03 per share), net of dividends on unallocated ESOP shares

 

 

 

 

 

 

(165)

 

 

 

(165)

Other comprehensive loss

 

 

 

 

 

 

(8,076)

 

(8,076)

Stock purchased and retired

(22,800)

(1)

(292)

(293)

ESOP shares committed to be released

10

100

110

Balance, March 31, 2022

 

15,147,766

$

151

$

168,078

$

(9,700)

$

56,936

$

(9,185)

$

206,280

    

    

    

    

    

    

    

    

    

Unearned

    

    

    

Accumulated

    

    

Common

Other

Total

Number

Common Stock

Additional

Treasury

Stock

Retained

Comprehensive

Stockholders'

    

of Shares, net

    

Stock

    

Paid-in capital

    

Stock

    

held by ESOP

    

Earnings

    

Income (Loss)

    

Equity

Balance, June 30, 2020

14,628,530

$

467

$

42,932

$

(3,710)

$

$

56,600

$

76

$

96,365

Net income

 

 

 

 

 

 

670

 

 

670

Other comprehensive income

 

 

 

 

 

 

 

357

 

357

Regular cash dividend paid ($0.13 per share)

 

 

 

 

 

 

(1,886)

 

 

(1,886)

Balance, September 30, 2020

 

14,628,530

$

467

$

42,932

$

(3,710)

$

$

55,384

$

433

$

95,506

Net income

 

 

 

 

 

 

1,376

 

 

1,376

Other comprehensive income

 

 

 

 

 

 

 

307

 

307

Balance, December 31, 2020

 

14,628,530

$

467

$

42,932

$

(3,710)

$

$

56,760

$

740

$

97,189

Net income

 

 

 

 

 

 

1,067

 

 

1,067

Other comprehensive loss

 

 

 

 

 

 

 

(1,924)

 

(1,924)

ESOP shares committed to be released

8

8

Purchase of treasury stock

(5,156)

(49)

(49)

Second-step conversion and stock offering:

William Penn, MHC shares sold in public offering, net of offering costs

12,640,035

(315)

129,176

128,861

Retirement of MHC shares

(12,092,669)

Fractional shares and other adjustments resulting from conversion of existing shares at 3.2585 exchange ratio

(174)

Treasury stock retired

(3,759)

3,759

Purchase of unearned common stock held by employee stock ownership plan

(10,112)

(10,112)

Balance, March 31, 2021

 

15,170,566

$

152

$

168,349

$

$

(10,104)

$

57,827

$

(1,184)

$

215,040

See accompanying notes to consolidated financial statements

6

Table of Contents

WILLIAM PENN BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

For the Nine Months Ended March 31, 2022 and 2021 (unaudited)

Nine Months Ended

March 31, 

2022

    

2021

Cash flows from operating activities

 

  

Net income

$

3,159

$

3,113

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

  

(Recovery) provision for loan losses

(20)

 

113

Depreciation expense

722

 

757

Other accretion, net

(810)

 

(1,779)

Deferred income taxes

210

 

1,101

Gain on lease abandonment

(117)

 

Net gain on disposition of premises and equipment

(15)

(435)

Net gain on sale of other real estate owned

(206)

Amortization of core deposit intangibles

169

 

192

Amortization of ESOP

325

8

Net gain on sale of securities

(62)

 

(5)

Unrealized loss on equity securities

96

 

Earnings on bank-owned life insurance

(775)

 

(320)

Decrease in pension liabilities

(2,735)

Other, net

683

 

(689)

Net cash provided by (used in) operating activities

3,565

 

(885)

Cash flows from investing activities

 

  

Securities available for sale:

 

  

Purchases

(68,068)

 

(59,840)

Maturities, calls and principal paydowns

9,635

 

25,642

Proceeds from sale of securities

5,008

 

12,365

Securities held to maturity:

 

  

Purchases

(106,967)

 

Maturities, calls and principal paydowns

2,723

 

Equity securities:

 

  

Purchases

(2,500)

 

Net decrease in loans receivable

4,971

 

34,134

Interest bearing time deposits:

 

  

Purchases

 

(500)

Maturities and principal paydowns

750

 

750

Purchase of bank-owned life insurance

(2,000)

Regulatory stock purchases

(1)

 

Regulatory stock redemptions

992

 

1,175

Proceeds from sale of other real estate owned

 

367

Purchases of premises and equipment, net

(649)

 

(757)

Proceeds from the sale of premises and equipment

20

 

2,661

Net cash (used in) provided by investing activities

(156,086)

 

15,997

Cash flows from financing activities

 

  

Net increase (decrease) in deposits

68,622

 

(10,954)

Repayment of borrowed funds

(21,000)

 

(23,197)

Purchase of unearned common stock held by employee stock ownership plan

(10,112)

Issuance of common stock funded by stock subscriptions

128,861

Purchase of treasury stock

(49)

Repurchase of common stock

(293)

Decrease in advances from borrowers for taxes and insurance

(568)

 

(1,133)

Cash dividends

(4,716)

 

(1,886)

Net cash provided by financing activities

42,045

 

81,530

Net (decrease) increase in cash and cash equivalents

(110,476)

 

96,642

Cash and cash equivalents - beginning

168,722

 

82,915

Cash and cash equivalents - ending

$

58,246

$

179,557

Supplementary cash flows information

 

  

Interest paid

$

2,359

$

3,627

Income tax (refunds) payments

(666)

 

400

Operating lease right-of-use asset recorded

5,202

1,157

Operating lease liabilities recorded

5,202

1,157

Unsettled purchases of securities available for sale

4,972

Premises transferred to held for sale

 

3,199

Transfer of loans to other real estate owned

161

See accompanying notes to consolidated financial statements

7

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Notes to the Consolidated Financial Statements

Note 1 - Nature of Operations

William Penn Bancorporation (“the Company”) 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. As a result of the second-step conversion, all share information included in this report has been subsequently revised to reflect the 3.2585 exchange ratio, unless otherwise noted.

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 previously disclosed, 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 thirteen 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.

Note 2 - Summary of Significant Accounting Policies

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 March 31, 2022, WPSLA held $264.8 million of the Bank’s $276.2 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.

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 loan losses, goodwill, intangible assets, income taxes, postretirement benefits, and the fair value of investment securities. 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 nine months ended March 31, 2022 are not necessarily indicative of the results of operations

8

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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 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

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management's current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. With certain exceptions, transition to the new requirements will be through a cumulative-effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. This update is effective for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies, to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company expects to recognize a one-time cumulative-effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

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 amendments in this ASU are effective for all entities upon issuance through December 31, 2022. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position and results of operations.

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In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The amendments in this ASU eliminate the accounting guidance for troubled debt restructurings (TDRs) by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinances and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, for public business entities, the amendments in this ASU require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost. For entities that have not yet adopted the amendments in Update 2016-13, which is discussed in greater detail above, the effective dates for the amendments in this update are the same as the effective dates in Update 2016-13.  The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position and results of operations.

Note 3 - Earnings Per Share

The following table presents a calculation of basic and diluted earnings per share for the three and nine months ended March 31, 2022 and 2021. Earnings per share is computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding. There are no convertible securities which would affect the numerator in calculating basic and diluted earnings per share; therefore, the net income of $824 thousand and $3.2 million for the three and nine months ended March 31, 2022, respectively, and $1.1 million and $3.1 million for the three and nine months ended March 31, 2021, respectively, were used as the numerators.

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

Nine Months Ended

March 31, 

March 31, 

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

2022

2021

2022

2021

Weighted-average common shares and common stock equivalents used to calculate basic and diluted earnings per share

14,318,839

14,613,210

14,310,484

14,623,497

Net income

$

824

$

1,067

$

3,159

$

3,113

Basic and diluted earnings per share

$

0.06

$

0.07

$

0.22

$

0.21

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

The following tables present the changes in the balances of each component of accumulated other comprehensive (loss) income (“AOCI”) for the three and nine months ended March 31, 2022 and 2021.

(Dollars in thousands)

Gains on Securities

Available for Sale

Accumulated Other Comprehensive (Loss) Income (1)

2022

2021

Balance at June 30, 

$

(64)

$

76

Other comprehensive (loss) income before reclassifications

 

(550)

 

357

Amounts reclassified from accumulated other comprehensive (loss) income

 

(48)

 

Period change

 

(598)

 

357

Balance at September 30, 

$

(662)

$

433

Other comprehensive (loss) income before reclassifications

 

(447)

284

Amounts reclassified from accumulated other comprehensive (loss) income

 

23

Period change

 

(447)

 

307

Balance at December 31, 

$

(1,109)

$

740

Other comprehensive loss before reclassifications

(8,076)

(1,897)

Amounts reclassified from accumulated other comprehensive (loss) income

(27)

Period change

(8,076)

(1,924)

Balance at March 31, 

$

(9,185)

$

(1,184)

(1) All amounts are net of tax. Related income tax expense is calculated using an income tax rate approximating 22.4%.

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The following tables present reclassifications out of AOCI by component for the three and nine months ended March 31, 2022 and 2021:

(Dollars in thousands)

Amounts Reclassified from Accumulated

Other Comprehensive (Loss) Income (1)

Details about Accumulated Other Comprehensive

Three Months Ended March 31, 

Affected Line Item in the

(Loss) Income Components

    

2022

2021

    

Consolidated Statements of Income

Securities available for sale:

  

Net securities gains reclassified into net income

$

$

35

Net gain on sale of securities

Related income tax expense

(8)

 

Income tax expense

$

$

27

(1)Amounts in parenthesis indicate debits.

(Dollars in thousands)

Amounts Reclassified from Accumulated

Other Comprehensive (Loss) Income (2)

Details about Accumulated Other Comprehensive

Nine Months Ended March 31, 

Affected Line Item in the

(Loss) Income Components

    

2022

2021

    

Consolidated Statements of Income

Securities available for sale:

    

  

Net securities gains reclassified into net income

$

62

$

5

Net gain on sale of securities

Related income tax expense

(14)

(1)

Income tax expense

$

48

$

4

(2)Amounts in parenthesis indicate debits.

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:

    

March 31, 2022

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

(Dollars in thousands)

Cost

Gains

Losses

Value

Available For Sale:

    

  

    

 

  

    

 

  

    

 

  

Mortgage-backed securities

$

107,948

$

$

(7,431)

$

100,517

U.S. agency collateralized mortgage obligations

11,792

(1,040)

10,752

U.S. government agency securities

5,730

(46)

5,684

Municipal bonds

20,180

(2,724)

17,456

Corporate bonds

35,800

209

(805)

35,204

Total Available For Sale

$

181,450

$

209

$

(12,046)

$

169,613

Held To Maturity:

    

  

    

 

  

    

 

  

    

 

  

Mortgage-backed securities

$

104,227

$

$

(9,125)

$

95,102

Total Held To Maturity

$

104,227

$

$

(9,125)

$

95,102

June 30, 2021

    

    

Gross

    

Gross

    

    

Amortized

Unrealized

Unrealized

Fair

(Dollars in thousands)

    

Cost

    

Gains

    

Losses

    

Value

Available For Sale:

 

  

 

  

 

  

 

  

Mortgage-backed securities

$

55,385

$

53

$

(374)

$

55,064

U.S. agency collateralized mortgage obligations

 

15,641

 

47

 

(255)

 

15,433

U.S. government agency securities

 

6,952

 

 

(56)

 

6,896

Municipal bonds

 

20,239

 

11

 

(389)

 

19,861

Corporate bonds

 

25,200

 

881

 

 

26,081

Total Available For Sale

$

123,417

$

992

$

(1,074)

$

123,335

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The Company recognized $62 thousand of gross gains on the sale of $5.0 million of investment securities during the nine months ended March 31, 2022.  There were no sales of securities available for sale during the three months ended March 31, 2022.  The Company recognized $35 thousand of gross gains on the sale of $4.5 million of investment securities available for sale during the three months ended March 31, 2021.  The Company recognized $58 thousand of gross gains and $53 thousand of gross losses on the sale of $12.4 million of investment securities during the nine months ended March 31, 2021.

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.

March 31, 2022

March 31, 2022

Available For Sale

Held To Maturity

    

Amortized

Fair

    

Amortized

Fair

(Dollars in thousands)

Cost

Value

Cost

Value

Due in one year or less

$

$

$

$

Due after one year through five years

 

49

 

48

 

 

Due after five years through ten years

 

38,085

 

37,416

 

 

Due after ten years

143,316

132,149

104,227

95,102

$

181,450

$

169,613

$

104,227

$

95,102

The following tables provide information on the gross unrealized losses and fair market value of the Company's investments with unrealized losses that are not deemed to be other than temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2022 and June 30, 2021:

March 31, 2022

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

 

$

87,009

 

$

(6,472)

 

$

8,536

 

$

(959)

 

$

95,545

 

$

(7,431)

U.S. agency collateralized mortgage obligations

 

 

3,200

 

 

(370)

 

 

7,552

 

(670)

 

 

10,752

 

 

(1,040)

U.S. government agency securities

 

 

1,280

 

 

(7)

 

 

4,404

 

 

(39)

 

 

5,684

 

 

(46)

Municipal bonds

 

 

8,214

 

 

(1,189)

 

 

9,242

 

 

(1,535)

 

 

17,456

 

 

(2,724)

Corporate bonds

 

20,245

 

(805)

 

 

 

20,245

 

(805)

119,948

(8,843)

29,734

(3,203)

149,682

(12,046)

Held To Maturity:

Mortgage-backed securities

 

95,102

 

(9,125)

 

 

95,102

 

(9,125)

 

95,102

 

(9,125)

 

 

 

95,102

 

(9,125)

Total Temporarily Impaired Securities

 

$

215,050

 

$

(17,968)

 

$

29,734

 

$

(3,203)

 

$

244,784

 

$

(21,171)

    

June 30, 2021

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

    

$

43,152

    

$

(374)

    

$

    

$

    

$

43,152

    

$

(374)

U.S. agency collateralized mortgage obligations

 

10,613

 

(202)

 

2,407

 

(53)

 

13,020

 

(255)

U.S. government agency securities

 

6,896

 

(56)

 

 

 

6,896

 

(56)

Municipal bonds

 

17,748

 

(389)

 

 

 

17,748

 

(389)

Total Temporarily Impaired Securities

$

78,409

$

(1,021)

$

2,407

$

(53)

$

80,816

$

(1,074)

The Company evaluates its investment securities holdings for other-than-temporary impairment (“OTTI”) on at least a quarterly basis. As part of this process, management considers its intent to sell each debt security and whether it is more likely than not the Company will be required to sell the security before its anticipated recovery. If either of these conditions is met, OTTI is recognized in earnings equal to the entire difference between the security’s amortized cost basis and its fair value at the most recent Statement of Financial Condition date. For securities that meet neither of these conditions, management performs analysis to determine whether any of these

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securities are at risk for OTTI. To determine which individual securities are at risk for OTTI and should be quantitatively evaluated utilizing a detailed analysis, management uses indicators which consider various characteristics of each security including, but not limited to, the following: the credit rating; the duration and level of the unrealized loss; prepayment assumptions; and certain other collateral-related characteristics such as delinquency rates, the security’s performance, and the severity of expected collateral losses.

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 investments before recovery of its amortized cost, which may be at maturity, the Company does not consider these investments to be other-than temporarily impaired at March 31, 2022 and June 30, 2021. There were 104 investment securities that were temporarily impaired at March 31, 2022 and 42 investment securities that were temporarily impaired at June 30, 2021.

At March 31, 2022 and June 30, 2021, $2.5 million and $3.8 million, respectively, of investment securities were pledged to secure municipal deposits.

Equity Securities

The Company had one equity security with a fair value of $2.4 million as of March 31, 2022.  During the three and nine months ended March 31, 2022, the Company recorded $236 thousand and $96 thousand, respectively, of unrealized losses, which were recorded in Unrealized loss on equity securities in the Consolidated Statements of Income.

Note 6 – Loans

Major classifications of loans at March 31, 2022 and June 30, 2021 are summarized as follows:

March 31, 

June 30, 

 

2022

2021

 

(Dollars in thousands)

 

Amount

 

Percent

Amount

 

Percent

Residential real estate:

1 - 4 family

    

$

151,435

    

32.82

%

$

173,306

    

37.22

%

Home equity and HELOCs

 

32,886

7.13

 

37,222

7.99

    

Construction -residential

 

10,917

2.36

 

10,841

2.33

Commercial real estate:

 

 

1 - 4 family investor

102,857

22.29

120,581

25.90

Multi-family (five or more)

 

12,417

2.69

 

12,315

2.64

Commercial non-residential

 

138,280

29.97

 

96,612

20.75

Construction and land

4,979

1.08

6,377

1.37

Commercial

 

5,291

1.15

 

5,145

1.10

Consumer loans

 

2,362

0.51

 

3,230

0.70

Total Loans

 

461,424

100.00

%

 

465,629

100.00

%

Unearned loan origination fees

 

(767)

 

 

(820)

Allowance for loan losses

 

(3,479)

 

 

(3,613)

Net Loans

$

457,178

 

$

461,196

As of March 31, 2022 and June 30, 2021, the Bank had $21 thousand and $1.5 million of outstanding Paycheck Protection Program (PPP) loans to one and 44 new and existing customers, respectively, that are included in commercial loans in the above table and are guaranteed by the Small Business Administration and mature in two years.  

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 $14.8 million and $18.6 million at March 31, 2022 and June 30, 2021, 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 Loan Losses. The following tables set forth the allocation of the Bank’s allowance for loan losses by loan category at the dates indicated. The portion of the loan loss allowance allocated to each loan category does not represent the total available for future

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Table of Contents

losses which may occur within the loan category since the total loan 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.

The provision for loan losses was determined by management to be an amount necessary to maintain a balance of allowance for loan losses at a level that considers all known and current losses in the loan portfolio as well as potential losses due to unknown factors such as the economic environment. Changes in the provision were based on management’s analysis of various factors such as: estimated fair value of underlying collateral, recent loss experience in particular segments of the portfolio, levels and trends in delinquent loans, and changes in general economic and business conditions. The Company considers the allowance for loan losses of $3.5 million and $3.6 million adequate to cover loan losses inherent in the loan portfolio at both March 31, 2022 and June 30, 2021, respectively.

The following table presents by portfolio segment, the changes in the allowance for loan losses for the three months ended March 31, 2022 and 2021:

March 31, 2022

    

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

$

605

$

109

$

326

$

742

$

116

$

1,320

$

265

$

31

$

50

$

3,564

Charge-offs

 

(73)

(23)

(96)

Recoveries

1

1

Provision (recovery)

50

19

23

(113)

6

58

(79)

24

22

10

Ending Balance

$

582

$

128

$

349

$

629

$

122

$

1,378

$

186

$

55

$

50

$

3,479

March 31, 2021

    

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

$

766

$

130

$

463

$

835

$

161

$

851

$

334

$

32

$

15

$

3,587

Charge-offs

 

(3)

 

 

 

 

 

 

 

 

 

(3)

Recoveries

 

 

 

 

 

 

 

 

 

 

Provision (recovery)

 

(48)

 

7

 

41

 

1

 

11

 

(9)

 

15

 

(3)

 

 

15

Ending Balance

$

715

$

137

$

504

$

836

$

172

$

842

$

349

$

29

$

15

$

3,599

The following table presents by portfolio segment, the changes in the allowance for loan losses for the nine months ended March 31, 2022 and 2021:

March 31, 2022

    

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

$

709

$

133

$

487

$

843

$

159

$

854

$

362

$

51

$

15

$

3,613

Charge-offs

 

(88)

(55)

(23)

(166)

Recoveries

8

42

2

52

Provision (recovery)

(39)

(13)

(138)

(201)

(37)

524

(176)

4

56

(20)

Ending Balance

$

582

$

128

$

349

$

629

$

122

$

1,378

$

186

$

55

$

50

$

3,479

March 31, 2021

    

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

$

682

$

166

$

526

$

801

$

123

$

727

$

396

$

83

$

15

$

3,519

Charge-offs

 

(3)

 

 

 

 

 

 

 

 

(30)

 

(33)

Recoveries

 

 

 

 

 

 

 

 

 

 

Provision (recovery)

 

36

 

(29)

 

(22)

 

35

 

49

 

115

 

(47)

 

(54)

 

30

 

113

Ending Balance

$

715

$

137

$

504

$

836

$

172

$

842

$

349

$

29

$

15

$

3,599

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Table of Contents

The following tables present the allowance for loan losses and recorded investment by loan portfolio classification as March 31, 2022 and June 30, 2021:

March 31, 2022

    

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 ending balance:

 

  

 

  

 

  

 

  

  

 

  

 

  

 

  

 

  

  

Individually evaluated for impairment

$

$

$

$

$

$

$

$

$

$

Collectively evaluated for impairment

 

582

 

128

 

349

 

629

 

122

 

1,378

 

186

 

55

 

50

 

3,479

Total allowance

$

582

$

128

$

349

$

629

$

122

$

1,378

$

186

$

55

$

50

$

3,479

Loans receivable ending balance:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Individually evaluated for impairment

$

3,435

$

451

$

$

183

$

470

$

1,239

$

$

$

$

5,778

Collectively evaluated for impairment

 

79,242

 

16,344

 

10,387

 

85,253

 

11,947

 

115,767

 

4,979

 

4,431

 

528

 

328,878

Acquired non-credit impaired loans (1)

 

68,619

 

16,068

 

530

 

17,421

 

 

21,274

 

 

860

 

1,834

 

126,606

Acquired credit impaired loans (2)

 

139

 

23

 

 

 

 

 

 

 

 

162

Total portfolio

$

151,435

$

32,886

$

10,917

$

102,857

$

12,417

$

138,280

$

4,979

$

5,291

$

2,362

$

461,424

(1)

Acquired non-credit impaired loans are evaluated collectively, excluding loans that have subsequently moved to non-accrual status which are individually evaluated for impairment.

(2)

Acquired credit impaired loans are evaluated on an individual basis.

June 30, 2021

    

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 ending balance:

 

  

 

  

 

  

 

  

  

 

  

 

  

 

  

 

  

  

Individually evaluated for impairment

$

$

$

$

$

$

$

$

$

$

Collectively evaluated for impairment

 

709

 

133

 

487

 

843

 

159

 

854

 

362

 

51

 

15

 

3,613

Total allowance

$

709

$

133

$

487

$

843

$

159

$

854

$

362

$

51

$

15

$

3,613

Loans receivable ending balance:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Individually evaluated for impairment

$

1,907

$

578

$

$

433

$

176

$

892

$

$

$

$

3,986

Collectively evaluated for impairment

 

87,540

 

14,617

 

8,582

 

98,043

 

12,008

 

68,530

 

6,377

 

4,151

 

535

 

300,383

Acquired non-credit impaired loans (1)

 

83,721

 

22,004

 

2,259

 

22,105

 

131

 

27,190

 

 

994

 

2,695

 

161,099

Acquired credit impaired loans (2)

 

138

 

23

 

 

 

 

 

 

 

 

161

Total portfolio

$

173,306

$

37,222

$

10,841

$

120,581

$

12,315

$

96,612

$

6,377

$

5,145

$

3,230

$

465,629

(1)Acquired non-credit impaired loans are evaluated collectively, excluding loans that have subsequently moved to non-accrual status which are individually evaluated for impairment.

(2)Acquired credit impaired loans are evaluated on an individual basis.

During the three and nine months ended March 31, 2022, the changes in the provision for loan losses for each portfolio of loans were primarily due to fluctuations in the outstanding balance of each portfolio of loans collectively evaluated for impairment.  Specifically, we experienced significant growth in our commercial non-residential real estate portfolio and a corresponding increase in the provision for loan losses for this portfolio.  The overall decrease in the allowance and provision credit during the nine months ended March 31, 2022 can be primarily attributed to an improving economic outlook.

During the year ended June 30, 2021, the changes in the provision for loan losses related to one- to four-family residential real estate loans, residential real estate construction loans and commercial real estate land loans were primarily due to concerns with the risk profile of these portfolios in the then-current economic environment as impacted by the COVID-19 pandemic. The increase in reserves due to the COVID-19 pandemic was limited by the Bank making enhancements to its credit management function by adding new experienced team members and implementing an enhanced internal credit measurement and monitoring processes.

Credit Quality Information

The following tables represent credit exposures by internally assigned grades as of March 31, 2022 and June 30, 2021. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly graded loans.

The Company’s internally assigned grades are as follows:

Pass – loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

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Substandard – loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful – loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

Loss – loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.

The following tables set forth the amounts of the portfolio of classified asset categories for the commercial loan portfolios at March 31, 2022 and June 30, 2021:

March 31, 2022

Commercial Real Estate

1 - 4 family

Construction

investor

Multi-family

Non-residential

and land

Commercial

Total

Pass

    

$

101,185

$

11,947

    

$

137,040

    

$

4,979

    

$

5,291

    

$

260,442

Special Mention

1,561

311

1,872

Substandard

111

470

929

1,510

Doubtful

Loss

Ending Balance

$

102,857

$

12,417

$

138,280

$

4,979

$

5,291

$

263,824

June 30, 2021

Commercial Real Estate

1 - 4 family

Construction 

investor

Multi-family

Non-residential

and land

Commercial

Total

Pass

    

$

118,175

$

12,139

    

$

95,720

    

$

6,377

    

$

5,145

    

$

237,556

Special Mention

 

2,054

356

2,410

Substandard

 

352

176

536

1,064

Doubtful

 

Loss

 

Ending Balance

$

120,581

$

12,315

$

96,612

$

6,377

$

5,145

$

241,030

The following tables set forth the amounts of the portfolio that are not rated by class of loans for the residential and consumer loan portfolios at March 31, 2022 and June 30, 2021:

Residential Real Estate and Consumer Loans

Credit Risk Internally Assigned

(Dollars in thousands)

March 31, 2022

Residential Real Estate

Home equity &

 

1 - 4 family

 

HELOCs

 

Construction

 

Consumer

 

Total

Performing

    

$

146,813

    

$

32,570

    

$

10,917

    

$

2,239

    

$

192,539

Non-performing

4,622

316

 

 

123

 

5,061

$

151,435

$

32,886

$

10,917

$

2,362

$

197,600

June 30, 2021

Residential Real Estate

Home equity &

 

1 - 4 family

 

HELOCs

 

Construction

 

Consumer

 

Total

Performing

    

$

169,532

    

$

36,877

    

$

10,841

    

$

3,112

    

$

220,362

Non-performing

 

3,774

345

 

 

118

 

4,237

$

173,306

$

37,222

$

10,841

$

3,230

$

224,599

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Table of Contents

Loans Acquired with Deteriorated Credit Quality

The outstanding principal and related carrying amount of loans acquired with deteriorated credit quality, for which the Company applies the provisions of ASC 310-30, as of March 31, 2022 and June 30, 2021, are as follows:

(Dollars in thousands)

    

March 31, 2022

    

June 30, 2021

Outstanding principal balance

$

236

$

247

Carrying amount

 

162

 

161

The following table presents changes in the accretable discount on loans acquired with deteriorated credit quality, for which the Company applies the provisions of ASC 310-30, for the period presented:

(Dollars in thousands)

    

Accretable Discount

Balance, May 1, 2020

$

57

Accretion

 

(4)

Balance, June 30, 2020

$

53

Accretion

 

(40)

Balance, June 30, 2021

$

13

Accretion

 

(12)

Balance, March 31, 2022

$

1

Loan Delinquencies and Non-accrual Loans

Following are tables which include an aging analysis of the recorded investment of past due loans as of March 31, 2022 and June 30, 2021.

    

Aged Analysis of Past Due and Non-accrual Loans

As of March 31, 2022

Recorded

Recorded

  

Acquired

  

  

Investment

Investment

30 - 59 Days

60 - 89 Days

90 Days

Total Past

Credit

Total Loans

>90 Days and

Loans on

(Dollar amounts in thousands)

 

Past Due

 

Past Due

 

Or Greater

 

Due

 

Impaired

 

Current

 

Receivable

 

Accruing

 

Non-Accrual

Residential real estate:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

1 - 4 family

    

$

1,098

    

$

197

    

$

2,601

    

$

3,896

    

$

139

    

$

147,400

    

$

151,435

    

$

    

$

4,622

Home equity and HELOCs

95

16

205

316

23

32,547

32,886

316

Construction - residential

10,917

10,917

Commercial real estate:

  

  

  

  

  

  

  

  

1 - 4 family investor

102,857

102,857

111

Multi-family

165

165

12,252

12,417

470

Commercial non-residential

1,145

1,145

137,135

138,280

894

Construction and land

4,979

4,979

Commercial

5,291

5,291

Consumer

32

6

38

2,324

2,362

123

Total

$

2,338

$

245

$

2,977

$

5,560

$

162

$

455,702

$

461,424

$

$

6,536

    

Aged Analysis of Past Due and Non-accrual Loans

As of June 30, 2021

Recorded

Recorded

Acquired

  

Investment

Investment

30 - 59 Days

60 - 89 Days

90 Days

Total Past

Credit

Total Loans

>90 Days and

Loans on

(Dollar amounts in thousands)

 

Past Due

    

Past Due

    

Or Greater

    

Due

    

Impaired

    

Current

    

Receivable

    

Accruing

    

Non-Accrual

Residential real estate:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

1 - 4 family

    

$

1,658

    

$

561

    

$

989

    

$

3,208

    

$

138

    

$

169,960

    

$

173,306

    

$

    

$

3,774

Home equity and HELOCs

 

58

150

80

288

23

36,911

37,222

345

Construction - residential

 

10,841

10,841

Commercial real estate:

 

  

  

  

  

  

  

  

  

1 - 4 family investor

81

271

352

120,229

120,581

352

Multi-family

 

344

176

520

11,795

12,315

176

Commercial non-residential

 

92

491

583

96,029

96,612

536

Construction and land

 

6,377

6,377

Commercial

 

5,145

5,145

Consumer

 

64

64

3,166

3,230

118

Total

$

1,953

$

1,546

$

1,516

$

5,015

$

161

$

460,453

$

465,629

$

$

5,301

Interest income on non-accrual loans that would have been recorded if these loans had performed in accordance with their terms was approximately $76 thousand, $229 thousand, $8 thousand, and $71 thousand, respectively, during the three and nine months ended March 31, 2022 and 2021, respectively.

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Impaired Loans

Management considers commercial loans and commercial real estate loans which are 90 days or more past due to be impaired. Larger commercial loans and commercial real estate loans which are 60 days or more past due are selected for impairment testing in accordance with GAAP. Factors considered by management in determining impairment include payment status and collateral value. The amount of impairment for these types of loans is determined by the difference between the present value of the expected cash flows related to the loan, using the original interest rate, and its recorded value, or as a practical expedient in the case of collateralized loans, the difference between the fair value of the collateral and the recorded amount of the loans. These loans are analyzed to determine if it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. If management determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance for loan losses.

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Table of Contents

The following tables include the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable, at March 31, 2022 and June 30, 2021.

March 31, 2022

Unpaid

Recorded

Principal

Related

(Dollars in thousands)

    

Investment

    

Balance

    

Allowance

With no related allowance recorded:

 

  

 

  

 

  

1 - 4 family residential real estate

$

3,435

$

3,598

$

Home equity and HELOCs

 

451

 

451

 

Construction residential

 

 

 

1 - 4 family investor commercial real estate

183

192

Multi-family

470

492

Commercial non-residential

 

1,239

 

1,287

 

Construction and land

 

 

 

Commercial

 

 

 

Consumer

 

 

 

With an allowance recorded:

 

  

 

  

 

  

1 - 4 family residential real estate

$

$

$

Home equity and HELOCs

 

 

 

Construction residential

 

 

 

1 - 4 family investor commercial real estate

Multi-family

 

 

 

Commercial non-residential

 

 

 

Construction and land

 

 

 

Commercial

 

 

 

Consumer

 

 

 

Total:

 

  

 

  

 

  

1 - 4 family residential real estate

$

3,435

$

3,598

$

Home equity and HELOCs

 

451

 

451

 

Construction residential

 

 

 

1 - 4 family investor commercial real estate

183

192

Multi-family

 

470

 

492

 

Commercial non-residential

 

1,239

 

1,287

 

Construction and land

 

 

 

Commercial

 

 

 

Consumer

 

 

 

The impaired loans table above includes accruing troubled debt restructurings (“TDRs”) in the amount of $772 thousand that are performing in accordance with their modified terms. The Company recognized $10 thousand and $33 thousand of interest income on accruing TDRs during the three and nine months ended March 31, 2022, respectively. The table above does not include $162 thousand of loans acquired with deteriorated credit quality, which have been recorded at their fair value at acquisition.

19

Table of Contents

June 30, 2021

Unpaid

Recorded

Principal

Related

(Dollars in thousands)

    

Investment

    

Balance

    

Allowance

With no related allowance recorded:

 

  

 

  

 

  

1-4 family residential real estate

$

1,907

$

1,943

$

Home equity and HELOCs

 

578

 

587

 

Construction residential

 

 

 

1 - 4 family investor commercial real estate

433

477

Multi-family

 

176

180

Commercial non-residential

 

892

 

900

 

Construction and land

 

 

 

Commercial

 

 

 

Consumer

 

 

 

With an allowance recorded:

 

  

 

  

 

  

1-4 family residential real estate

$

$

$

Home equity and HELOCs

 

 

 

Construction residential

 

 

 

1 - 4 family investor commercial real estate

Multi-family

 

 

 

Commercial non-residential

 

 

 

Construction and land

 

 

 

Commercial

 

 

 

Consumer

 

 

 

Total:

 

  

 

  

 

  

1-4 family residential real estate

$

1,907

$

1,943

$

Home equity and HELOCs

 

578

 

587

 

Construction residential

 

 

 

1 - 4 family investor commercial real estate

433

477

Multi-family

 

176

 

180

 

Commercial non-residential

 

892

 

900

 

Construction and land

 

 

 

Commercial

 

 

 

Consumer

 

 

 

The impaired loans table above includes accruing TDRs in the amount of $964 thousand that are performing in accordance with their modified terms. The table above does not include $161 thousand of loans acquired with deteriorated credit quality, which have been recorded at their fair value at acquisition.

20

Table of Contents

The following tables include the average recorded investment balances for impaired loans and the interest income recognized for the three and nine months ended March 31, 2022 and 2021.

March 31, 2022

Three Months Ended

Nine Months Ended

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

(Dollars in thousands)

    

Investment

    

Recognized

    

Investment

    

Recognized

With no related allowance recorded:

 

  

 

  

 

  

 

  

1-4 family residential real estate

$

3,042

$

$

2,301

$

Home equity and HELOCs

 

445

 

4

 

491

 

13

Construction residential

 

 

 

 

1-4 family investor commercial real estate

207

1

340

3

Multi-family

 

474

 

 

394

 

Commercial non-residential

 

1,249

 

6

 

1,023

 

17

Construction and land

 

 

 

 

Commercial

 

5

 

 

2

 

Consumer

 

 

 

 

With an allowance recorded:

 

  

 

  

 

  

 

  

1-4 family residential real estate

$

$

$

$

Home equity and HELOCs

 

 

 

 

Construction residential

 

 

 

 

1-4 family investor commercial real estate

Multi-family

 

 

 

 

Commercial non-residential

 

 

 

 

Construction and land

 

 

 

 

Commercial

 

 

 

 

Consumer

 

 

 

 

Total:

 

  

 

  

 

  

 

  

1-4 family residential real estate

$

3,042

$

$

2,301

$

Home equity and HELOCs

 

445

 

4

 

491

 

13

Construction residential

 

 

 

 

1-4 family investor commercial real estate

207

1

340

3

Multi-family

 

474

 

 

394

 

Commercial non-residential

 

1,249

 

6

 

1,023

 

17

Construction and land

 

 

 

 

Commercial

 

5

 

 

2

 

Consumer

 

 

 

 

21

Table of Contents

March 31, 2021

Three Months Ended

Nine Months Ended

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

(Dollars in thousands)

    

Investment

    

Recognized

    

Investment

    

Recognized

With no related allowance recorded:

 

  

 

  

 

  

 

  

1-4 family residential real estate

$

1,885

$

$

1,465

$

9

Home equity and HELOCs

 

626

 

5

 

643

 

15

Construction residential

 

 

 

 

1-4 family investor commercial real estate

324

1

324

4

Multi-family

 

182

 

 

183

 

Commercial non-residential

 

1,059

 

8

 

897

 

26

Construction and land

 

 

 

 

Commercial

 

 

 

 

Consumer

 

 

 

 

With an allowance recorded:

 

  

 

  

 

  

 

  

1-4 family residential real estate

$

$

$

$

Home equity and HELOCs

 

 

 

 

Construction residential

 

 

 

 

1-4 family investor commercial real estate

Multi-family

 

 

 

 

Commercial non-residential

 

 

 

 

Construction and land

 

 

 

 

Commercial

 

 

 

 

Consumer

 

 

 

 

Total:

 

  

 

  

 

  

 

  

1-4 family residential real estate

$

1,885

$

$

1,465

$

9

Home equity and HELOCs

 

626

 

5

 

643

 

15

Construction residential

 

 

 

 

1-4 family investor commercial real estate

324

1

324

4

Multi-family

 

182

 

 

183

 

Commercial non-residential

 

1,059

 

8

 

897

 

26

Construction and land

 

 

 

 

Commercial

 

 

 

 

Consumer

 

 

 

 

Generally, the Bank will charge-off the collateral or discounted cash flow deficiency on all impaired loans. Interest income that would have been recorded for the three and nine months ended March 31, 2022, had impaired loans been current according to their original terms, amounted to $55 thousand and $128 thousand, respectively.  Interest income that would have been recorded for the three and nine months ended March 31, 2021, had impaired loans been current according to their original terms, amounted to $50 thousand and $150 thousand, respectively.

Troubled Debt Restructurings

The Bank determines whether a restructuring of debt constitutes a TDR in accordance with guidance under FASB ASC Topic 310 Receivables. The Bank considers a loan a TDR when the borrower is experiencing financial difficulty and the Bank grants a concession that they would not otherwise consider but for the borrower’s financial difficulties. A TDR includes a modification of debt terms or assets received in satisfaction of the debt (including a foreclosure or a deed in lieu of foreclosure) or a combination of types. The Bank evaluates selective criteria to determine if a borrower is experiencing financial difficulty, including the ability of the borrower to obtain funds from sources other than the Bank at market rates. The Bank considers all TDR loans as impaired loans and, generally, they are put on non-accrual status. The Bank will not consider the loan a TDR if the loan modification was made for customer retention purposes and the modification reflects prevailing market conditions. The Bank’s policy for returning a loan to accruing status requires the preparation of a well-documented credit evaluation which includes the following:

A review of the borrower’s current financial condition in which the borrower must demonstrate sufficient cash flow to support the repayment of all principal and interest including any amounts previously charged-off;

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An updated appraisal or home valuation which must demonstrate sufficient collateral value to support the debt; and
Sustained performance based on the restructured terms for at least six consecutive months.

During the three months ended June 30, 2020, the Bank began providing customer relief programs, such as payment deferrals or interest only payments on loans, in accordance with the CARES Act. The Bank does not consider a modification to be a TDR if it occurred as a result of the loan forbearance program under the CARES Act. The CARES Act provides that a loan term modification does not automatically result in TDR status if the modification is made on a good-faith basis in response to COVID-19 to borrowers who were classified as current and not more than 30 days past due as of December 31, 2019, and executed between March 1, 2020 and the earlier of (a) 60 days after the date of termination of the COVID-19 pandemic national emergency, or (b) January 1, 2022. Following January 1, 2022, this provision of the CARES Act is no longer in effect.  During the three months ended June 30, 2020, the Bank modified approximately $49.8 million of loans to provide its customers this monetary relief. Generally, these modifications included the deferral of principal and interest payments for a period of three months, although interest income continued to accrue.  The three-month deferral period has ended on the loans on deferral and, as of March 31, 2022, no loans remain on deferral under the CARES Act.

During the nine months ended March 31, 2022 and 2021, there were no loans modified that were identified as a TDR. The Company did not experience any re-defaulted TDRs subsequent to the loan being modified during the nine months ended March 31, 2022 and 2021.

Note 7 – Premises and Equipment

The components of premises and equipment are as follows as of March 31, 2022 and June 30, 2021:

    

March 31, 

June 30, 

(Dollars in thousands)

2022

2021

Land

$

2,581

$

2,581

Office buildings and improvements

 

13,346

 

12,932

Furniture, fixtures and equipment

 

2,606

 

2,428

Automobiles

 

58

 

50

 

18,591

 

17,991

Accumulated depreciation

 

(5,230)

 

(4,552)

$

13,361

$

13,439

Depreciation expense amounted to $252 thousand and $722 thousand for the three and nine months ended March 31, 2022, respectively, and $229 thousand and $757 thousand for the three and nine months ended March 31, 2021, respectively.

Note 8 – Goodwill and Intangibles

The goodwill and intangible assets arising from acquisitions is accounted for in accordance with the accounting guidance in FASB ASC Topic 350 for Intangibles — Goodwill and Other. The Company recorded goodwill of $4.9 million and core deposit intangibles of $1.4 million in connection with the 2018 acquisition of Audubon Savings Bank. The Company also recorded core deposit intangibles totaling $65 thousand and $197 thousand in connection with the 2020 acquisitions of Fidelity Savings and Loan Association of Bucks County (“Fidelity”) and Washington Savings Bank (“Washington”), respectively. As of March 31, 2022 and June 30, 2021, the other intangibles consisted of $768 thousand and $937 thousand, respectively, of core deposit intangibles, which are amortized over an estimated useful life of ten years.

The Company performs its annual impairment evaluation on June 30 or more frequently if events and circumstances indicate that the fair value of the banking unit is less than its carrying value. During the year ended June 30, 2021, management included considerations of the current economic environment caused by COVID-19 in its evaluation, and determined that it is not more likely than not that the carrying value of goodwill is impaired. No goodwill impairment existed at June 30, 2021. During the nine months ended March 31, 2022, management considered the current economic environment caused by the COVID-19 pandemic in its evaluation, and determined based on the totality of its qualitative assessment that it is not more likely than not that the carrying value of goodwill is impaired. No goodwill impairment existed during the nine months ended March 31, 2022.

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Table of Contents

Goodwill and other intangibles are summarized as follows for the periods presented:

    

    

Core Deposit

(Dollars in thousands)

Goodwill

Intangibles

Balance, June 30, 2021

$

4,858

$

937

Adjustments:

 

  

 

  

Additions

 

 

Amortization

 

 

(57)

Balance, September 30, 2021

$

4,858

$

880

Adjustments:

 

  

 

  

Additions

 

 

Amortization

 

 

(56)

Balance, December 31, 2021

$

4,858

$

824

Adjustments:

Additions

Amortization

(56)

Balance, March 31, 2022

$

4,858

$

768

    

    

Core Deposit

(Dollars in thousands)

Goodwill

Intangibles

Balance, June 30, 2020

$

4,858

$

1,192

Adjustments:

 

  

 

  

Additions

 

 

Amortization

 

 

(64)

Balance, September 30, 2020

$

4,858

$

1,128

Adjustments:

 

  

 

  

Additions

 

 

Amortization

 

 

(64)

Balance, December 31, 2020

$

4,858

$

1,064

Adjustments:

Additions

Amortization

(64)

Balance, March 31, 2021

$

4,858

$

1,000

Aggregate amortization expense was $56 thousand and $169 thousand for the three and nine months ended March 31, 2022, respectively, and $64 thousand and $192 thousand for the three and nine months ended March 31, 2021, respectively.

Note 9 – Deposits

Deposits consist of the following major classifications as of March 31, 2022 and June 30, 2021:

(Dollars in thousands)

March 31, 2022

June 30, 2021

Non-interest bearing checking

 

$

62,356

 

$

51,086

Interest bearing checking

128,471

104,214

Money market accounts

188,638

136,719

Savings and club accounts

 

 

106,099

 

 

100,781

Certificates of deposit

 

 

135,840

 

 

160,303

 

$

621,404

 

$

553,103

Note 10 – Advances from Federal Home Loan Bank

The Bank is a member of the FHLB system, which consists of 11 regional Federal Home Loan Banks. The FHLB provides a central credit facility primarily for member institutions. The Bank had a maximum borrowing capacity with the FHLB of Pittsburgh of approximately $291.2 million and $280.8 million at March 31, 2022 and June 30, 2021, respectively. FHLB advances are secured by qualifying assets of the Bank, which include Federal Home Loan Bank stock and loans. The Bank had $420.8 million and $407.4 million

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of loans pledged as collateral as of March 31, 2022 and June 30, 2021, respectively. The Bank, as a member of the FHLB of Pittsburgh, is required to acquire and hold shares of capital stock in the FHLB of Pittsburgh. The Bank was in compliance with the requirements for the FHLB of Pittsburgh with an investment of $1.7 million and $2.7 million at March 31, 2022 and June 30, 2021, respectively. During the nine months ended March 31, 2022, the Bank paid off $21.0 million of advances from the FHLB of Pittsburgh due to the low interest rate environment and excess cash held on the Company’s Consolidated Statements of Financial Condition.

Advances from the FHLB of Pittsburgh consisted of the following as of March 31, 2022 and June 30, 2021:

(Dollars in thousands)

    

March 31, 2022

    

June 30, 2021

FHLB advances:

 

  

 

  

Convertible

$

20,000

$

20,000

Fixed

 

14,000

Mid-term

 

7,000

Total FHLB advances

$

20,000

$

41,000

Note 11 – Commitments and Contingencies

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company’s Consolidated Statements of Financial Condition.

A summary of the Company's loan commitments is as follows as of March 31, 2022 and June 30, 2021:

    

March 31, 

June 30, 

(Dollars in thousands)

2022

2021

Commitments to extend credit

$

30,119

$

35,350

Unfunded commitments under lines of credit

 

65,652

 

50,583

Standby letters of credit

 

 

2,000

Commitments to extend credit are agreements to lend to a customer if there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments generally have 90-day fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation. Collateral held varies, but primarily includes residential and commercial real estate.

Periodically, there have been other various claims and lawsuits against the Bank, such as claims to enforce liens, condemnation proceedings on properties in which it holds security interests, claims involving the making and servicing of real property loans and other issues incident to its business. The Bank is not a party to any pending legal proceedings that it believes would have a material adverse effect on its financial condition, results of operations or cash flows.

Note 12 - Regulatory Capital Requirements

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (described below) of tangible and core capital to total adjusted assets and of total capital to risk-weighted assets.

As of March 31, 2022 and June 30, 2021, the most recent notification from the regulators categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action.

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Federal banking agencies have established an optional “community bank leverage ratio” of between 8% to 10% tangible equity to average total consolidated assets for qualifying institutions with assets of less than $10 billion of assets. Institutions with capital meeting the specified requirement and electing to follow the alternative framework would be deemed to comply with the applicable regulatory capital requirements, including the risk-based requirements and would be considered well-capitalized under the prompt corrective action framework.  In April 2020, the Federal banking regulatory agencies modified the original Community Bank Leverage Ratio (CBLR) framework and provided that, as of the second quarter 2020, a banking organization with a leverage ratio of 8 percent or greater and that meets the other existing qualifying criteria may elect to use the community bank leverage ratio framework. The modified rule also states that the community bank leverage ratio requirement will be greater than 8 percent for the second through fourth quarters of calendar year 2020, greater than 8.5 percent for calendar year 2021, and greater than 9 percent thereafter. The transition rule also maintains a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 100 basis points below the applicable community bank leverage ratio requirement.

The Bank has elected to adopt the optional community bank leverage ratio framework.  Management believes, as of March 31, 2022 and June 30, 2021, that the Bank meets all capital adequacy requirements to which it is subject.  The leverage ratios of the Bank at March 31, 2022 and June 30, 2021 are as follows:

To be Well Capitalized Under

For Capital

Prompt Corrective Action

As of March 31, 2022

Actual

Adequacy Purposes

Provisions

(Dollars in thousands except for ratios)

    

Amount

Ratio

Amount

Ratio

Amount

Ratio

 

William Penn Bank:

  

    

  

    

  

  

    

  

  

    

  

  

    

  

  

 

Tier 1 leverage

$

155,769

18.25

$

34,135

4.00

$

42,668

5.00

%

To be Well Capitalized Under

For Capital

Prompt Corrective Action

As of June 30, 2021

Actual

Adequacy Purposes

Provisions

(Dollars in thousands except for ratios)

    

Amount

Ratio

Amount

Ratio

Amount

Ratio

 

William Penn Bank:

  

    

  

    

  

  

    

  

  

    

  

  

    

  

  

 

Tier 1 leverage

$

152,104

18.89

$

32,203

4.00

$

40,254

5.00

%

Note 13 – Fair Value of Financial Instruments

The Company follows authoritative guidance under FASB ASC Topic 820 for Fair Value Measurements and Disclosures which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The definition of fair value under ASC 820 is the exchange price. The guidance clarifies that the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability. The definition focuses on the price that would be received to sell the asset or paid to transfer the liability (an exit price), not the price that would be paid to acquire the asset or received to assume the liability (an entry price). The guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement.

Fair value is based on quoted market prices, when available. If listed prices or quotes are not available, fair value is based on fair value models that use market participant or independently sourced market data which include: discount rate, interest rate yield curves, credit risk, default rates and expected cash flow assumptions. In addition, valuation adjustments may be made in the determination of fair value. These fair value adjustments may include amounts to reflect counter party credit quality, creditworthiness, liquidity, and other unobservable inputs that are applied consistently over time. These adjustments are estimated and, therefore, subject to significant management judgment, and at times, may be necessary to mitigate the possibility of error or revision in the model-based estimate of the fair value provided by the model. The methods described above may produce fair value calculations that may not be indicative of the net realizable value. While the Company believes its valuation methods are consistent with other financial institutions, the use of different methods or assumptions to determine fair values could result in different estimates of fair value. FASB ASC Topic 820 for Fair Value Measurements and Disclosures describes three levels of inputs that may be used to measure fair value:

Level 1:

Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level 2:

Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

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Level 3:

Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

The following table presents the assets required to be measured and reported on a recurring basis on the Company’s Consolidated Statements of Financial Condition at their fair value as of March 31, 2022 and June 30, 2021, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

    

March 31, 2022

(Dollars in thousands)

    

Level I

Level II

Level III

Total

Assets:

 

  

 

  

 

  

 

  

Investments available for sale:

    

  

    

  

    

  

    

  

Mortgage-backed securities

$

$

100,517

$

$

100,517

U.S. agency collateralized mortgage obligations

10,752

10,752

U.S. government agency securities

5,684

5,684

Municipal bonds

17,456

17,456

Corporate bonds

35,204

35,204

Equity securities

2,404

2,404

Total Assets

$

2,404

$

169,613

$

$

172,017

    

June 30, 2021

(Dollars in thousands)

    

Level I

Level II

Level III

Total

Assets:

 

  

 

  

 

  

 

  

Investments available for sale:

    

  

    

  

    

  

    

  

Mortgage-backed securities

$

$

55,064

$

$

55,064

U.S. agency collateralized mortgage obligations

 

 

15,433

 

 

15,433

U.S. government agency securities

 

 

6,896

 

 

6,896

Municipal bonds

 

 

19,861

 

 

19,861

Corporate bonds

 

 

26,081

 

 

26,081

Total Assets

$

$

123,335

$

$

123,335

Assets and Liabilities Measured on a Non-Recurring Basis

Certain assets and liabilities may be required to be measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition. Generally, nonrecurring valuation is the result of the application of other accounting pronouncements which require assets and liabilities to be assessed for impairment or recorded at the lower of cost or fair value.

Impaired loans are generally measured for impairment using the fair value of the collateral supporting the loan. Evaluating impaired loan collateral is based on Level 3 inputs utilizing outside appraisals adjusted by management for sales costs and other assumptions regarding market conditions to arrive at fair value. As of March 31, 2022 and June 30, 2021, the Company charged-off the collateral deficiency on impaired loans. As a result, there were no specific reserves on impaired loans as of March 31, 2022 and June 30, 2021.

Other real estate owned (OREO) is measured at fair value, based on appraisals less cost to sell at the date of foreclosure. Valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value, less cost to sell. Income and expenses from operations and changes in valuation allowance are included in the net expenses from OREO.

As of March 31, 2022 and June 30, 2021, assets required to be measured and reported at fair value on a non-recurring basis are summarized as follows:

March 31, 2022

(Dollars in thousands)

Level I

Level II

Level III

Total

Assets:

 

  

 

  

 

  

 

  

Impaired loans

$

$

$

1,756

$

1,756

$

$

$

1,756

$

1,756

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June 30, 2021

(Dollars in thousands)

Level I

Level II

Level III

Total

Assets:

 

  

 

  

 

  

 

  

Other real estate owned

$

$

$

75

$

75

$

$

$

75

$

75

Quantitative information regarding assets measured at fair value on a non-recurring basis as of March 31, 2022 and June 30, 2021 is as follows:

    

Quantitative Information about Level 3 Fair Value Measurements

 

Fair Value

Valuation

Unobservable

 

(Dollars in thousands)

    

Estimate

    

Techniques

    

Input

    

Range

 

March 31, 2022

 

  

 

  

 

  

 

  

Impaired loans

$

1,756

 

Appraisal of collateral (1)

 

Appraisal adjustments (2)

 

0-7

%

    

Quantitative Information about Level 3 Fair Value Measurements

 

Fair Value

Valuation

Unobservable

 

(Dollars in thousands)

    

Estimate

    

Techniques

    

Input

    

Range

 

June 30, 2021

 

  

 

  

 

  

 

  

Foreclosed real estate owned

$

75

 

Appraisal of collateral (1)(3)

 

Liquidation expenses (2)

 

0

%

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable, less any associated allowance.
(2)Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.
(3)Includes qualitative adjustments by management and estimated liquidation expenses.

Management uses its best judgment in estimating the fair value of the Company's financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends and have not been reevaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.

The following information should not be interpreted as an estimate of the fair value of the entire company since a fair value calculation is only provided for a limited portion of the Company's assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company's disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments.

Cash and Due from Banks and Interest-Bearing Time Deposits

The carrying amounts of cash and amounts due from banks and interest-bearing time deposits approximate their fair value due to the relatively short time between origination of the instrument and its expected realization.

Securities Available for Sale and Held to Maturity

The fair value of investment and mortgage-backed securities is equal to the available quoted market price. If no quoted market price is available, fair value is estimated using the quoted market price for similar securities.

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Equity Securities

The fair value of equity securities is equal to the available quoted market price.

Loans Receivable

The fair value is estimated by discounting future cash flows using current market inputs at which loans with similar terms are adjusted for liquidity and credit risk.

Regulatory Stock

The carrying amount of Federal Home Loan Bank stock approximates fair value because Federal Home Loan Bank stock can only be redeemed or sold at par value and only to the respective issuing government supported institution or to another member institution.

Bank-Owned Life Insurance

The Company reports bank-owned life insurance on its Consolidated Statements of Financial Condition at the cash surrender value.  The carrying amount of bank-owned life insurance approximates fair value because the fair value of bank-owned life insurance is equal to the cash surrender value of the life insurance policies.

Accrued Interest Receivable and Payable

The carrying amount of accrued interest receivable and payable approximates fair value.

Deposits

Fair values for demand deposits, NOW accounts, savings and club accounts, and money market deposits are, by definition, equal to the amount payable on demand at the reporting date as these products have no stated maturity. Fair values of fixed-maturity certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates currently being offered on similar instruments with similar maturities.

Advances from Federal Home Loan Bank

Fair value of advances from Federal Home Loan Bank is estimated using discounted cash flow analyses, based on rates currently available to the Company for advances from Federal Home Loan Bank with similar terms and remaining maturities.

Off-Balance Sheet Financial Instruments

Fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, considering market interest rates, the remaining terms and present credit worthiness of the counterparties.

In accordance with FASB ASC Topic 825 for Financial Instruments, Disclosures about Fair Value of Financial Instruments, the Company is required to disclose the fair value of financial instruments. The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a distressed sale. Fair value is best determined using observable market prices; however, for many of the Company’s financial instruments no quoted market prices are readily available. In instances where quoted market prices are not readily available, fair value is determined using present value or other techniques appropriate for the particular instrument. These techniques involve some degree of judgment, and as a result, are not necessarily indicative of the amounts the Company would realize in a current market exchange. Different assumptions or estimation techniques may have a material effect on the estimated fair value.

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Table of Contents

The following tables set forth the carrying value of financial assets and liabilities and the fair value for certain financial instruments that are not required to be measured or reported at fair value on the Consolidated Statements of Financial Condition for the periods indicated.  The tables below exclude financial instruments for which the carrying amount approximates fair value.

    

Fair Value Measurements at March 31, 2022

Quoted Prices

Significant

Significant

in Active Markets

Other Observable

Unobservable

Carrying

Fair

for Identical Assets

Inputs

Inputs

(Dollars in thousands)

Amount

    

Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

Financial instruments - assets:

 

  

 

  

 

  

 

  

 

  

Loans receivable, net

$

457,178

$

460,400

$

$

$

460,400

Securities held to maturity

104,227

95,102

95,102

Financial instruments - liabilities:

Certificates of deposit

 

135,840

 

136,909

 

 

 

136,909

Advances from Federal Home Loan Bank

 

20,000

 

20,260

 

 

 

20,260

Off-balance sheet financial instruments

 

 

 

 

 

    

Fair Value Measurements at June 30, 2021

Quoted Prices

Significant

Significant

in Active Markets

Other Observable

Unobservable

Carrying

Fair

for Identical Assets

Inputs

Inputs

(Dollars in thousands)

    

Amount

    

Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

Financial instruments - assets:

 

  

 

  

 

  

 

  

 

  

Loans receivable, net

$

461,196

$

472,292

$

$

$

472,292

Financial instruments - liabilities:

Certificates of deposit

 

160,303

 

161,057

 

 

 

161,057

Advances from Federal Home Loan Bank

 

41,000

 

42,098

 

 

 

42,098

Off-balance sheet financial instruments

 

 

 

 

 

Note 14 – Leases

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration.

Substantially all of the leases in which the Company is the lessee include real estate property for branches and office space with terms extending through 2043. All of the Company’s leases are classified as operating leases. Accounting standard topic 842 requires the Company to recognize a right-of-use (“ROU”) asset and corresponding lease liability included in accrued interest receivable and other assets and accrued interest payable and other liabilities, respectively, on the Company’s Consolidated Statements of Financial Condition.

The following tables present the Consolidated Statements of Financial Condition classification of the Company’s ROU assets and lease liabilities. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months of less), or equipment leases (deemed immaterial) on the Consolidated Statements of Financial Condition.

(in thousands)

    

March 31, 2022

Lease Right-of-Use Assets

 

Classification

  

Operating lease right-of-use assets

Other assets

$

6,970

Total Right-of-Use Assets

  

$

6,970

(in thousands)

    

March 31, 2022

Lease Liabilities

 

Classification

  

Operating lease liabilities

 

Other liabilities

$

7,064

Total Lease Liabilities

 

  

$

7,064

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Table of Contents

(in thousands)

    

June 30, 2021

Lease Right-of-Use Assets

 

Classification

  

Operating lease right-of-use assets

 

Other assets

$

2,108

Total Right-of-Use Assets

 

  

$

2,108

(in thousands)

    

    

June 30, 2021

Lease Liabilities

 

Classification

  

Operating lease liabilities

 

Other liabilities

$

2,307

Total Lease Liabilities

$

2,307

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.

During the nine months ended March 31, 2022 the Company opened two new branch offices, one located in Doylestown in Bucks County, Pennsylvania and one located in Hamilton Township in Mercer County, New Jersey. During the nine months ended March 31, 2022, the Company’s lease agreements for these branch offices commenced, which resulted in an increase of the ROU asset and lease liability of $5.2 million.

    

March 31, 

 

2022

 

Weighted average remaining lease term

 

  

Operating leases

 

17.7

years

Weighted average discount rate

 

Operating leases

 

2.01

%

    

June 30, 

 

2021

 

Weighted average remaining lease term

 

  

Operating leases

 

9.8

years

Weighted average discount rate

 

  

Operating leases

 

1.76

%

The Company recorded $162 thousand and $427 thousand of net lease costs during the three and nine months ended March 31, 2022, respectively. The Company recorded $103 thousand and $260 thousand of net lease costs during the three and nine months ended March 31, 2021, respectively. Future minimum payments for operating leases with initial or remaining terms of one year or more as of March 31, 2022 were as follows:

The Company recorded $162 thousand and $427 thousand of net lease costs during the three and nine months ended March 31, 2022, respectively. The Company recorded $103 thousand and $260 thousand of net lease costs during the three and nine months ended March 31, 2021, respectively. Future minimum payments for operating leases with initial or remaining terms of one year or more as of March 31, 2022 were as follows:The Company recorded $162 thousand and $427 thousand of net lease costs during the three and nine months ended March 31, 2022, respectively. The Company recorded $103 thousand and $260 thousand of net lease costs during the three and nine months ended March 31, 2021, respectively. Future minimum payments for operating leases with initial or remaining terms of one year or more as of March 31, 2022 were as follows:

    

March 31, 

2022

Operating

(in thousands)

Leases

Twelve months ended March 31,

 

  

2023

$

605

2024

 

613

2025

 

604

2026

 

441

2027

 

395

Thereafter

 

5,876

Total future minimum lease payments

$

8,534

Amounts representing interest

 

(1,470)

Present value of net future minimum lease payments

$

7,064

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Note 15 – Subsequent Events

On April 13, 2022, the Company prepaid a $5.0 million advance from the FHLB of Pittsburgh due to the low interest rate environment and incurred a $12 thousand prepayment penalty. On April 27, 2022, the Company prepaid the remaining $15.0 million of advances from the FHLB of Pittsburgh due to the low interest rate environment and incurred a total of $176 thousand of prepayment penalties.  

On April 20, 2022, the Company declared a cash dividend of $0.03 per share, payable on May 12, 2022, to common shareholders of record at the close of business on May 2, 2022.  

Since March 31, 2022, the Company purchased and retired 114,300 shares of its common stock at an average price per share of $12.40 as part of its previously announced stock repurchase program that commenced on March 25, 2022.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Statements contained in this report that are not historical facts may constitute forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended), which involve significant risks and uncertainties. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by the use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “plan,” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain and actual results may differ from those predicted. The Company undertakes no obligation to update these forward-looking statements in the future.

The Company cautions readers of this report that a number of important factors could cause the Company’s actual results to differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from those predicted and could affect the future prospects of the Company include, but are not limited to: (i) general economic conditions, either nationally or in our market area, that are worse than expected; (ii) changes in the interest rate environment that reduce our interest margins, reduce the fair value of financial instruments or reduce the demand for our loan products; (iii) increased competitive pressures among financial services companies; (iv) changes in consumer spending, borrowing and savings habits; (v) changes in the quality and composition of our loan or investment portfolios; (vi) changes in real estate market values in our market area; (vii) decreased demand for loan products, deposit flows, competition, or decreased demand for financial services in our market area; (viii) major catastrophes such as earthquakes, floods or other natural or human disasters and infectious disease outbreaks, including the current coronavirus (COVID-19) pandemic, the related disruption to local, regional and global economic activity and financial markets, and the impact that any of the foregoing may have on us and our customers and other constituencies; (ix) legislative or regulatory changes that adversely affect our business or changes in the monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board; (x) technological changes that may be more difficult or expensive than expected; (xi) success or consummation of new business initiatives may be more difficult or expensive than expected; (xii) our ability to successfully execute our business plan and integrate the business operations of acquired businesses into our business operations, (xiii) the inability to successfully deploy the proceeds raised in our recently completed second-step conversion offering; (xiv) adverse changes in the securities markets; (xv) the inability of third party service providers to perform; and (xvi) changes in accounting policies and practices, as may be adopted by bank regulatory agencies or the Financial Accounting Standards Board.

Critical Accounting Policies

We consider accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. We consider these accounting policies to be our critical accounting policies. The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations.

Allowance for Loan Losses

We consider the allowance for loan and losses to be a critical accounting policy. The allowance for loan losses is determined by management based upon portfolio segments, past historical experience, evaluation of estimated losses and impairment in the loan portfolio, current economic conditions, and other pertinent factors. Management also considers risk characteristics by portfolio segments including, but not limited to, renewals and real estate valuations. The allowance for loan losses is maintained at a level that management considers adequate to provide for estimated losses and impairment based upon an evaluation of known and inherent risk in the loan portfolio. Loan impairment is evaluated based on the fair value of collateral or present value of expected cash flows. While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations.

The allowance for loan losses is established through a provision for loan losses charged to expense, which is based upon past loan loss experience and an evaluation of estimated losses in the current loan portfolio, including the evaluation of impaired loans. Determining

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the amount of the allowance for loan losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are: overall economic conditions; value of collateral; strength of guarantors; loss exposure at default; the amount and timing of future cash flows on impaired loans; and determination of loss factors to be applied to the various segments of the portfolio. All of these estimates are susceptible to significant change. Management regularly reviews the level of loss experience, current economic conditions and other factors related to the collectability of the loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the Federal Deposit Insurance Corporation and the Pennsylvania Department of Banking and Securities, as an integral part of their examination process, periodically review our allowance for loan losses.

Our financial results are affected by the changes in and the level of the allowance for loan losses. This process involves our analysis of complex internal and external variables, and it requires that we exercise judgment to estimate an appropriate allowance for loan losses. As a result of the uncertainty associated with this subjectivity, we cannot assure the precision of the amount reserved, should we experience sizeable loan losses in any particular period. For example, changes in the financial condition of individual borrowers, economic conditions, or the condition of various markets in which collateral may be sold could require us to significantly decrease or increase the level of the allowance for loan losses. Such an adjustment could materially affect net income as a result of the change in provision for loan losses. We also have approximately $6.6 million as of March 31, 2022 in non-performing assets consisting of non-performing loans and other real estate owned. Most of these assets are collateral dependent loans where we have incurred credit losses to write the assets down to their current appraised value less selling costs. We continue to assess the collectability of these loans and update our appraisals on these loans each year. To the extent the property values continue to decline, there could be additional losses incurred on these non-performing loans which may be material. In recent periods, we experienced strong asset quality metrics including low levels of delinquencies, net charge-offs and non-performing assets. Management considered market conditions in deriving the estimated allowance for loan losses; however, given the continued economic difficulties and uncertainties and the COVID-19 pandemic, the ultimate amount of loss could vary from that estimate.

In June 2016, the FASB issued ASU 2016-13: Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Topic 326 amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. This update affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update are expected to be effective for us on July 1, 2023. We are in the process of evaluating the impact of this guidance but expect that the impact will likely be material to our consolidated financial statements.

Goodwill

The acquisition method of accounting for business combinations requires us to record assets acquired, liabilities assumed, and consideration paid at their estimated fair values as of the acquisition date. The excess of consideration paid (or the fair value of the equity of the acquiree) over the fair value of net assets acquired represents goodwill. Goodwill totaled $4.9 million at March 31, 2022. Goodwill and other indefinite lived intangible assets are not amortized on a recurring basis, but rather are subject to periodic impairment testing. The provisions of Accounting Standards Codification (“ASC”) Topic 350 allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test.

During the three and nine months ended March 31, 2022, management considered the then current economic environment caused by the COVID-19 pandemic in its evaluation, and determined, based on the totality of its qualitative assessment, that it is not more likely than not that the carrying value of goodwill is impaired. No goodwill impairment existed during the three and nine months ended March 31, 2022.

Income Taxes

We are subject to the income tax laws of the various jurisdictions where we conduct business and estimate income tax expense based on amounts expected to be owed to these various tax jurisdictions. The estimated income tax expense (benefit) is reported in the Consolidated Statements of Income. The evaluation pertaining to the tax expense and related tax asset and liability balances involves a high degree of judgment and subjectivity around the ultimate measurement and resolution of these matters.

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Accrued taxes represent the net estimated amount due to or to be received from tax jurisdictions either currently or in the future and are reported in other assets on our Consolidated Statements of Financial Condition. We assess the appropriate tax treatment of transactions and filing positions after considering statutes, regulations, judicial precedent and other pertinent information and maintain tax accruals consistent with our evaluation. Changes in the estimate of accrued taxes occur periodically due to changes in tax rates, interpretations of tax laws, the status of examinations by the authorities and newly issued or enacted statutory, judicial and regulatory guidance that could impact the relative merits of tax positions. These changes, when they occur, impact accrued taxes and can materially affect our operating results. We regularly evaluate our uncertain tax positions and estimate the appropriate level of reserves related to each of these positions.

As of March 31, 2022, we had net deferred tax assets totaling $6.0 million. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial carrying amounts of existing assets and liabilities and their respective tax bases. If currently available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax assets and liabilities. These judgments require us to make projections of future taxable income. Management believes, based upon current facts, that it is more likely than not that there will be sufficient taxable income in future years to realize the deferred tax assets. The judgments and estimates we make in determining our deferred tax assets are inherently subjective and are reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance that results in additional income tax expense in the period in which it is recognized would negatively affect earnings. Our net deferred tax assets were determined based on the current enacted federal tax rate of 21%. Any possible future reduction in federal tax rates, would reduce the value of our net deferred tax assets and result in immediate write-down of the net deferred tax assets though our statement of operations, the effect of which would be material.

Comparison of Financial Condition at March 31, 2022 and June 30, 2021

Summary.  Total assets increased $46.6 million, or 5.7%, to $869.0 million at March 31, 2022, from $822.4 million at June 30, 2021, primarily due to a $68.3 million increase in total deposits, partially offset by a $21.0 million decrease in advances from the FHLB of Pittsburgh.

Cash and cash equivalents decreased $110.5 million, or 65.5%, to $58.2 million at March 31, 2022, from $168.7 million at June 30, 2021.  The decrease in cash and cash equivalents was primarily driven by a $152.9 million increase in total investments, a $21.0 million decrease in advances from the FHLB of Pittsburgh, the payment of cash dividends totaling $5.0 million and a $2.8 million increase in bank-owned life insurance, partially offset by a $68.3 million increase in deposits and a $4.0 million decrease in net loans.

Investments.  Total investments increased $152.9 million, or 124.0%, to $276.2 million at March 31, 2022, from $123.3 million at June 30, 2021. During the nine months ended March 31, 2022, the Company invested a portion of the excess cash on its statement of financial condition in available for sale, held to maturity, and equity securities.  The Company remains 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.

Loans.  Net loans decreased $4.0 million, or 0.9%, to $457.2 million at March 31, 2022, from $461.2 million at June 30, 2021.  During the nine months ended March 31, 2022, the Company originated $69.2 million of new loans that were more than offset by $73.2 million of loan paydowns and payoffs.  The COVID-19 pandemic and low interest rate environment have created a highly competitive market for lending.  The Company maintains conservative lending practices and is focused on lending to borrowers with high credit quality within its market footprint.

As of March 31, 2022 and June 30, 2021, the Bank had $21 thousand and $1.5 million of outstanding Paycheck Protection Program (PPP) loans to one and 44 new and existing customers, respectively, that are guaranteed by the Small Business Administration and mature in two years.  During the year ended June 30, 2020, the Bank modified approximately $49.8 million of existing loans in accordance with the provisions of the CARES Act to provide its customers with monetary relief.  Generally, these modifications included the deferral of principal and interest payments for a period of three months, although interest income continued to accrue. The three-month deferral period has ended on the loans on deferral and, as of March 31, 2022, there are no loans on deferral under the CARES Act.  For more information, see note 6 to the Consolidated Financial Statements of the Company included in Item 1 of this Quarterly Report on Form 10-Q.

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Bank-owned life insurance. Bank-owned life insurance increased $2.8 million, or 7.9%, to $38.0 million at March 31, 2022, from $35.2 million at June 30, 2021.  Management purchased $2.0 million of bank-owned life insurance during the nine months ended March 31, 2022.  Management believes that bank-owned life insurance is a low-risk investment alternative with an attractive yield.

Deposits.  Deposits increased $68.3 million, or 12.3%, to $621.4 million at March 31, 2022, from $553.1 million at June 30, 2021.  The increase in deposits was primarily due to a $92.8 million increase in core deposits, partially offset by a $24.5 million decrease in time deposits.  The decrease in time deposits was consistent with the planned run-off associated with our re-pricing of higher-cost, non-relationship-based deposit accounts.

Borrowings.  Borrowings decreased $21.0 million, or 51.2%, to $20.0 million at March 31, 2022, from $41.0 million at June 30, 2021.  The decrease in borrowings was due to the strategic prepayment of $21.0 million of higher-cost advances from the FHLB of Pittsburgh during the nine months ended March 31, 2022. We made a strategic decision to use $21.0 million of cash to prepay higher-cost advances from the FHLB of Pittsburgh that effectively removed a negative spread from our Statement of Financial Condition.

Stockholders’ Equity.  Stockholders’ equity decreased $10.6 million, or 4.9%, to $206.3 million at March 31, 2022, from $216.9 million at June 30, 2021.  The decrease in stockholders’ equity was primarily due to the payment of a $0.30 per share one-time special cash dividend in August 2021 totaling $4.6 million and a $0.03 quarterly cash dividend in February 2022 totaling $455 thousand, as well as a $9.1 million increase in the accumulated other comprehensive loss component of the unrealized loss on available-for-sale securities, partially offset by $3.2 million of net income recorded during the nine months ended March 31, 2022.  

Book value per share measured $13.62 as of March 31, 2022 compared to $14.30 as of June 30, 2021, and tangible book value per share(3) measured $13.25 as of March 31, 2022 compared to $13.92 as of June 30, 2021. Tangible book value per share is a non-GAAP financial measure that excludes goodwill and other intangible assets. Please refer to the “Non-GAAP Financial Information” section below for a reconciliation of tangible book value per share to book value per share.

The Company commenced its previously announced stock repurchase program on March 25, 2022 following the one-year anniversary of the completion of its second-step conversion on March 24, 2021. The Company purchased and retired a total of 22,800 shares of its common stock under the stock repurchase program during the three months ended March 31, 2022.  

Results of Operations for the Three Months Ended March 31, 2022 and 2021

Summary

The following table sets forth the income summary for the periods indicated:

Three Months Ended March 31, 

    

    

    

Change Fiscal 2022/2021

(Dollars in thousands)

 

2022

 

2021

$

 

%

Net interest income

$

5,980

$

5,316

$

664

12.49

%

Provision for loan losses

10

 

15

 

(5)

 

(33.33)

Non-interest income

315

 

535

 

(220)

 

(41.12)

Non-interest expenses

5,301

 

4,496

 

805

 

17.90

Income tax expense

160

 

273

 

(113)

 

(41.39)

Net income

$

824

$

1,067

$

(243)

 

(22.77)

Return on average assets (annualized)

 

0.38

%  

0.54

%

Core return on average assets(1) (non-GAAP) (annualized)

0.50

0.55

Return on average equity (annualized)

 

1.57

 

4.03

Core return on average equity(1) (non-GAAP) (annualized)

2.03

4.13

(1)Core return on average assets and core return on average equity are non-GAAP financial measures. Please refer to the “Non-GAAP Financial Information” section below for a reconciliation of core return on average assets to return on average assets and core return on average equity to return on average equity.

General

The Company recorded net income of $824 thousand, or $0.06 per basic and diluted share, for the three months ended March 31, 2022, compared to net income of $1.1 million, or $0.07 per basic and diluted share, for the three months ended March 31, 2021.  The Company

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recorded core net income of $1.1 million, or $0.07 per basic and diluted share, for the three months ended March 31, 2022, compared to core net income of $1.1 million, or $0.07 per basic diluted share, for the three months ended March 31, 2021.  Core net income is a non-GAAP financial measure that excludes certain pre-tax adjustments and the tax impact of such adjustments, and income tax benefit adjustments.  Please refer to the “Non-GAAP Financial Information” section below for a reconciliation of core net income to net income.

Net Interest Income

For the three months ended March 31, 2022, net interest income was $6.0 million, an increase of $664 thousand, or 12.5%, from the quarter ended March 31, 2021.  The increase in net interest income was primarily due to an increase in the interest income on investments and a decrease in interest expense on deposits and borrowings, partially offset by a decrease in interest income on loans.  We improved our asset mix by utilizing some of the excess cash on our statement of financial condition to purchase high-quality investments resulting in an increase in the average balance and yield on investments.  We also originated $25.2 million of new loans, including $20.7 million of commercial loans, that were offset by significant payoffs primarily in the residential portfolio.  In addition, we experienced a $310 thousand decrease in interest expense primarily due to the re-pricing of deposits and the prepayment of advances from the FHLB of Pittsburgh.  The net interest margin measured 3.06% for the three months ended March 31, 2022 compared to 3.00% for the three months ended December 31, 2021 and 2.91% for the three months ended March 31, 2021.  The increase in the net interest margin during the three months ended March 31, 2022 compared to the three months ended December 31, 2021 was primarily due to the previously mentioned improvement in asset mix.  The year-over-year increase in the net interest margin was primarily due to the decrease in the cost of deposit funds and borrowed funds, as well as an increase in our yield on investment securities.

Provision for Loan Losses

We recorded a $10 thousand provision for loan losses during the three months ended March 31, 2022 compared to a provision for loan losses of $15 thousand during the three months ended March 31, 2021.  The decrease in the provision for the three months ended March 31, 2022 compared to the same period a year ago was primarily due to an improving economic outlook combined with stable asset quality metrics, including continued low levels of net charge-offs and non-performing assets.   Our allowance for loan losses totaled $3.5 million, or 1.04% of total loans, excluding acquired loans, as of March 31, 2022, compared to $3.6 million, or 1.19% of total loans, excluding acquired loans , as of June 30, 2021.  Total loans, excluding acquired loans, is non-GAAP financial measure that excludes loans acquired in a business combination.  Please refer to the “Non-GAAP Financial Information” section below for a reconciliation of the ratio of the allowance for loan losses to total loans, excluding acquired loans, to the ratio of the allowance for loan losses to total loans. Based on a review of the loans that were in the loan portfolio at March 31, 2022, management believes that the allowance is maintained at a level that represents its best estimate of inherent losses in the loan portfolio that were both probable and reasonably estimable at such date.

Management uses available information to establish the appropriate level of the allowance for loan losses. Future additions or reductions to the allowance may be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors. As a result, our allowance for loan losses may not be sufficient to cover actual loan losses, and future provisions for loan losses could materially adversely affect our operating results. In addition, various bank regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses.

Non-Interest Income

The following table sets forth a summary of non-interest income for the periods indicated:

Three Months Ended March 31,

(Dollars in thousands)

2022

    

2021

Service fees

$

196

$

199

Net gain on sale of other real estate owned

 

160

Net gain on sale of securities

 

35

Earnings on bank-owned life insurance

259

110

Unrealized loss on equity securities

(236)

Net gain on disposition of premises and equipment

15

(34)

Other

81

 

65

Total

$

315

$

535

For the three months ended March 31, 2022, non-interest income totaled $315 thousand, a decrease of $220 thousand, or 41.1%, from the three months ended March 31, 2021.  The decrease was primarily due to a $160 thousand net gain on sale of other real estate owned

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during the three months ended March 31, 2021 and a $236 thousand unrealized loss on equity securities recorded during the three months ended March 31, 2022.  These decreases to non-interest income were partially offset by a $149 thousand increase in earnings on bank-owned life insurance due to the purchase of additional BOLI during the fourth quarter of 2021 and the first quarter of 2022.

Non-Interest Expense

The following table sets forth an analysis of non-interest expense for the periods indicated:

Three Months Ended

March 31, 

(Dollars in thousands)

    

2022

    

2021

Salaries and employee benefits

$

2,932

$

2,490

Occupancy and equipment

 

836

 

813

Data processing

 

451

 

419

Professional fees

 

289

 

193

Amortization of intangible assets

 

56

 

64

Gain on lease abandonment

(117)

Prepayment penalties

209

Other

 

645

 

517

Total

$

5,301

$

4,496

For the three months ended March 31, 2022, non-interest expense totaled $5.3 million, an increase of $805 thousand, or 17.9%, from the three months ended March 31, 2021.  The increase in non-interest expense was primarily due to a $442 thousand increase in salaries and employee benefits due to annual merit increases and the addition of new employees in connection with the build out of the Company’s commercial lending and credit functions and branch expansion, $209 thousand of prepayment penalties associated with the prepayment of $14.0 million of advances from the FHLB of Pittsburgh during the three months ended March 31, 2022 and a $96 thousand increase in professional fees.  These increases to non-interest expense were partially offset by a $117 thousand gain on lease abandonment associated with the release from a lease agreement related to a former branch office that was closed during the quarter ended June 30, 2021.

Income Taxes

For the three months ended March 31, 2022, we recorded a provision for income taxes of $160 thousand, reflecting an effective tax rate of 16.3%, compared to a $273 thousand provision for income taxes, reflecting an effective tax rate of 20.4%, for the same period in 2021.  The decrease in the provision for income taxes for the three months ended March 31, 2022 compared to the same period a year ago is primarily due a decrease in income before income taxes.  The decrease in the effective tax rate for the three months ended March 31, 2022 compared to the same period a year ago is primarily due to a higher ratio of tax-exempt income from bank-owned life insurance to income before income taxes.

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Results of Operations for the Nine Months Ended March 31, 2022 and 2021

Summary

The following table sets forth the income summary for the periods indicated:

The following table sets forth the income summary for the periods indicated:

Nine Months Ended March 31, 

    

    

    

Change 2022/2021

(Dollars in thousands)

 

2022

 

2021

$

 

%

Net interest income

$

16,772

$

16,132

$

640

3.97

%

(Recovery) provision for loan losses

(20)

 

113

 

(133)

 

(117.70)

Non-interest income

1,684

 

1,775

 

(91)

 

(5.13)

Non-interest expenses

15,007

 

13,892

 

1,115

 

8.03

Income tax expense

310

 

789

 

(479)

 

(60.71)

Net income

$

3,159

$

3,113

$

46

 

1.48

Return on average assets (annualized)

0.51

%

 

0.55

%  

Core return on average assets(1) (non-GAAP) (annualized)

 

0.49

 

0.51

Return on average equity (annualized)

 

1.96

 

4.17

Core return on average equity(1) (non-GAAP) (annualized)

1.90

3.88

(1)Core return on average assets and core return on average equity are non-GAAP financial measures. Please refer to the “Non-GAAP Financial Information” section below for a reconciliation of core return on average assets to return on average assets and core return on average equity to return on average equity.

General

The Company recorded net income of $3.2 million, or $0.22 per basic and diluted share, for the nine months ended March 31, 2022, compared to net income of $3.1 million, or $0.21 per basic and diluted share, for the nine months ended March 31, 2021. The Company recorded core net income  of $3.1 million, or $0.21 per basic and diluted share, for the nine months ended March 31, 2022, compared to core net income of $2.9 million, or $0.20 per basic and diluted share, for the nine months ended March 31, 2021.  Core net income is a non-GAAP financial measure that excludes certain pre-tax adjustments and the tax impact of such adjustments, and income tax benefit adjustments.  Please refer to the “Non-GAAP Financial Information” section below for a reconciliation of core net income to net income.

Net Interest Income

For the nine months ended March 31, 2022, net interest income was $16.8 million, an increase of $640 thousand, or 4.0%, from the nine months ended March 31, 2021.  The increase in net interest income was primarily due to an increase in the interest income on investments and a decrease in interest expense on deposits and borrowings, partially offset by a decrease in interest income on loans.  As previously discussed, we improved our asset mix by utilizing some of the excess cash we hold on our statement of financial condition to purchase high-quality investments resulting in an increase in interest income on investments. We also originated $69.2 million of new loans, including $57.2 million of commercial loans, that were offset by significant payoffs primarily in the residential portfolio. In addition, we experienced a $1.6 million decrease in interest expense primarily due to the re-pricing of deposits and the prepayment of advances from the FHLB of Pittsburgh.  The net interest margin measured 2.96% for the nine months ended March 31, 2022 compared to 3.08% for the same period in 2021.  The decrease in the net interest margin is consistent with the decrease in interest rates and margin compression during that period that was primarily due to the COVID-19 pandemic and its impact on the economy and interest rate environment.

Provision for Loan Losses

The provision for loan losses was a $20 thousand credit during the nine months ended March 31, 2022 compared to an expense of $113 thousand during the nine months ended March 31, 2021.  The provision credit for the nine months ended March 31, 2022 was primarily due to an improving economic outlook combined with continued stable asset quality metrics, including continued low levels of net charge-offs and non-performing assets.  Our allowance for loan losses totaled $3.5 million, or 1.04% of total loans, excluding acquired loans , as of March 31, 2022, compared to $3.6 million, or 1.19% of total loans, excluding acquired loans , as of June 30, 2021.  Total loans, excluding acquired loans, is non-GAAP financial measure that excludes loans acquired in a business combination.   Please refer to the “Non-GAAP Financial Information” section below for a reconciliation of the ratio of the allowance for loan losses to total loans, excluding acquired loans, to the ratio of the allowance for loan losses to total loans.  Based on a review of the loans that were in the loan

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portfolio at March 31, 2022, management believes that the allowance is maintained at a level that represents its best estimate of inherent losses in the loan portfolio that were both probable and reasonably estimable at such date.

Management uses available information to establish the appropriate level of the allowance for loan losses. Future additions or reductions to the allowance may be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors. As a result, our allowance for loan losses may not be sufficient to cover actual loan losses, and future provisions for loan losses could materially adversely affect our operating results. In addition, various bank regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses.

Non-Interest Income

The following table sets forth a summary of non-interest income for the periods indicated:

Nine Months Ended March 31,

(Dollars in thousands)

2022

    

2021

Service fees

$

652

$

568

Net gain on sale of other real estate owned

 

206

Net gain on sale of securities

62

 

5

Earnings on bank-owned life insurance

775

320

Unrealized loss on equity securities

(96)

Net gain on disposition of premises and equipment

15

435

Other

276

 

241

Total

$

1,684

$

1,775

For the nine months ended March 31, 2022, non-interest income totaled $1.7 million, a decrease of $91 thousand, or 5.1%, from the nine months ended March 31, 2021.  The decrease in non-interest income was primarily due to a $435 thousand net gain on the disposition of premises recorded during the nine months ended March 31, 2021 in connection with the sale of several properties acquired as part of the acquisitions of Fidelity Savings Association of Bucks County and Washington Savings Bank in May 2020 and a $96 thousand unrealized net loss on equity securities recorded during the nine months ended March 31, 2022.  These decreases to non-interest income were partially offset by a $455 thousand increase in earnings on bank-owned life insurance and an $84 thousand increase in service fees consistent with our increase in core deposits.

Non-Interest Expense

The following table sets forth an analysis of non-interest expense for the periods indicated:

Nine Months Ended March 31,

(Dollars in thousands)

2022

    

2021

Salaries and employee benefits

$

8,440

$

7,570

Occupancy and equipment

 

2,237

2,227

Data processing

 

1,291

1,350

Professional fees

 

778

598

Amortization of intangible assets

 

169

192

Gain on lease abandonment

(117)

Prepayment penalties

273

161

Other

 

1,936

1,794

Total

$

15,007

$

13,892

For the nine months ended March 31, 2022, non-interest expense totaled $15.0 million, an increase of $1.1 million, or 8.0%, from the nine months ended March 31, 2021.  The increase in non-interest expense was primarily due to an $870 thousand increase in salaries and employee benefits due to annual merit increases and the addition of new employees in connection with the build out of the Company’s commercial lending and credit functions and branch expansion, a $180 thousand increase in professional fees and a $112 thousand increase in prepayment penalties associated with the prepayment of advances from the FHLB of Pittsburgh.  These increases to non-interest expense were partially offset by a $117 thousand gain on lease abandonment associated with the release from a lease agreement related to a former branch office that was closed during the quarter ended June 30, 2021.

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Income Taxes

For the nine months ended March 31, 2022, we recorded a provision for income taxes of $310 thousand, reflecting an effective tax rate of 8.9%, compared to a $789 thousand provision for income taxes, reflecting an effective tax rate of 20.2%, for the same period in 2021.   The decrease in the provision for income taxes for the nine months ended March 31, 2022 compared to the same period a year ago is primarily due to a $288 thousand income tax benefit recorded during the 2022 period related to refunds received associated with the carryback of net operating losses under the CARES Act and a decrease in income before income taxes.  The effective tax rate for the nine months ended March 31, 2022 compared to the same period a year ago was also impacted by the previously discussed income tax benefit from refunds received associated with the carryback of net operating losses under the CARES Act.

Asset Quality

During the nine months ended March 31, 2022, nonperforming assets increased 23.0% to $6.6 million from $5.4 million as of June 30, 2021. The increase in nonperforming assets was driven by an increase in nonaccrual loans primarily due to one $1.8 million one-to four-family residential real estate loan that moved to non-accrual status during the three months ended March 31, 2022.  The Company recorded a $71 thousand partial charge-off of this loan during the three months ended March 31, 2022 based on a recent impairment analysis.  Management will continue to closely monitor this loan and may adjust the carrying value of the loan as new information becomes available during the fourth quarter.

Total nonperforming loans consisted of 38 loans to 37 unrelated borrowers at March 31, 2022, as compared to 38 loans to 37 unrelated borrowers at June 30, 2021.  Interest income related to non-performing loans would have been approximately $229 thousand during the nine months ended March 31, 2022 if these loans had performed in accordance with their terms during the period rather than having been on non-accrual.

There are circumstances when foreclosure and liquidations are the remedy pursued. However, from time to time, as part of our loss mitigation strategy, we may renegotiate the loan terms (i.e., interest rate, structure, repayment term, etc.) based on the economic or legal reasons related to the borrower’s financial difficulties.  We had no new troubled debt restructurings (“TDRs”) during the nine months ended March 31, 2022.

Impaired loans at March 31, 2022 included $772 thousand of performing loans whose terms have been modified in TDRs, compared to $935 thousand at June 30, 2021. The amount of TDR loans included in impaired loans decreased as a result principal payments and pay-offs. These restructured loans are being monitored by management and are performing in accordance with their restructured terms. At March 31, 2022, none of our thirty-eight substandard loans with an aggregate balance of $6.6 million were considered TDRs.

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Average Balances and Yields

The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average daily balances of assets or liabilities, respectively, for the periods presented. Loan fees, including prepayment fees, are included in interest income on loans and are not material. Non-accrual loans are included in the average balances only.  Any adjustments necessary to present yields on a tax-equivalent basis are insignificant.

    

Three Months Ended March 31, 

2022

2021

Average

Interest and

Yield/

Average

Interest and

Yield/

(Dollars in thousands)

Balance

Dividends

Cost

Balance

Dividends

Cost

Interest-earning assets:

    

  

    

  

    

  

    

  

    

  

    

  

    

Loans(1)

$

459,414

$

5,212

 

4.54

%  

$

487,549

$

5,701

 

4.68

%  

Investment securities(2)

 

267,221

 

1,329

 

1.99

 

109,204

 

449

 

1.64

Other interest-earning assets

 

53,886

 

43

 

0.32

 

135,204

 

80

 

0.24

Total interest-earning assets

 

780,521

 

6,584

 

3.37

 

731,957

 

6,230

 

3.40

Non-interest-earning assets

 

79,280

 

61,811

 

Total assets

$

859,801

$

793,768

 

Interest-bearing liabilities:

 

  

 

  

 

 

  

 

  

 

Interest-bearing accounts

$

125,217

 

12

 

0.04

%  

$

99,812

 

17

 

0.07

%  

Money market deposit accounts

 

180,933

 

164

 

0.36

 

157,016

 

166

 

0.42

Savings and club accounts

    

106,144

    

13

    

0.05

100,044

    

24

    

0.10

Certificates of deposit

 

138,827

 

235

 

0.68

182,477

 

445

 

0.98

Total interest-bearing deposits

 

551,121

 

424

 

0.31

539,349

 

652

 

0.48

FHLB advances

 

25,556

 

180

 

2.82

41,000

 

262

 

2.55

Total interest-bearing liabilities

 

576,677

 

604

 

0.42

580,349

 

914

 

0.63

Non-interest-bearing liabilities:

 

  

 

  

 

  

  

 

  

 

  

 

Non-interest-bearing deposits

 

57,550

 

100,570

 

 

 

Other non-interest-bearing liabilities

 

15,316

 

6,898

 

 

 

Total liabilities

 

649,543

 

687,817

 

 

 

Total stockholders' equity

 

210,258

 

105,951

 

 

 

Total liabilities and equity

$

859,801

$

793,768

 

 

Net interest income

$

5,980

$

5,316

 

Interest rate spread(3)

 

2.95

%

 

2.77

%

Net interest-earning assets(4)

$

203,844

$

151,608

 

 

Net interest margin(5)

 

3.06

%  

 

2.91

%

Ratio of interest-earning assets to interest-bearing liabilities

 

135.35%

 

126.12%

 

 

(1) Includes nonaccrual loan balances and interest recognized on such loans.

(2) Includes securities available for sale, securities held to maturity, and equity securities.

(3) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(5) Net interest margin represents net interest income divided by average total interest-earning assets.

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Nine Months Ended March 31, 

2022

2021

 

Average

Interest and

Yield/

Average

Interest and

Yield/

 

(Dollars in thousands)

    

Balance

    

Dividends

    

Cost

    

Balance

    

Dividends

    

Cost

    

Interest-earning assets:

  

  

  

  

  

  

Loans(1)

$

458,664

$

15,535

4.52

%

$

497,794

$

17,827

4.77

%

Investment securities(2)

 

202,383

 

3,026

1.99

 

115,888

 

1,574

1.81

Other interest-earning assets

 

94,919

 

189

 

0.27

 

85,477

 

270

 

0.42

Total interest-earning assets

 

755,966

18,750

 

3.31

 

699,159

 

19,671

 

3.75

Non-interest-earning assets

 

75,375

60,572

Total assets

$

831,341

$

759,731

Interest-bearing liabilities:

Interest-bearing checking accounts

$

111,697

45

 

0.05

%

$

101,719

 

89

 

0.12

%

Money market deposit accounts

 

161,634

407

 

0.34

 

150,055

 

740

 

0.66

Savings and club accounts

 

103,271

54

 

0.07

 

97,028

 

91

 

0.12

Certificates of deposit

 

147,330

823

 

0.74

 

194,226

 

1,731

 

1.19

Total interest-bearing deposits

 

523,932

1,329

 

0.34

 

543,028

 

2,651

 

0.65

FHLB advances and other borrowings

 

31,718

649

 

2.73

 

45,720

 

888

 

2.59

Total interest-bearing liabilities

 

555,650

1,978

 

0.47

 

588,748

 

3,539

 

0.80

Non-interest-bearing liabilities:

 

 

 

  

 

  

 

  

Non-interest-bearing deposits

 

53,925

 

 

59,423

 

 

Other non-interest-bearing liabilities

 

6,877

 

 

11,973

 

 

Total liabilities

 

616,452

 

 

660,144

 

 

Total equity

 

214,889

 

 

99,587

 

 

Total liabilities and equity

$

831,341

 

$

759,731

 

 

Net interest income

$

16,772

 

 

$

16,132

Interest rate spread(3)

 

2.84

%

 

 

2.95

%

Net interest-earning assets(4)

$

200,316

$

110,411

 

Net interest margin(5)

 

2.96

%

 

 

3.08

%

Ratio of interest-earning assets to interest-bearing liabilities

 

136.05%

 

118.75%

 

(1) Includes nonaccrual loan balances and interest recognized on such loans.

(2) Includes securities available for sale, securities held to maturity, and equity securities.

(3) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(5) Net interest margin represents net interest income divided by average total interest-earning assets.

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Table of Contents

Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by current rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately based on the changes due to rate and volume.

    

Three Months Ended 3/31/2022

    

Nine Months Ended 3/31/2022

Compared to

Compared to

Three Months Ended 3/31/2021

Nine Months Ended 3/31/2021

Increase (Decrease)

Increase (Decrease)

Due to

Due to

(Dollars in thousands)

    

Volume

    

Rate

    

Total

    

Volume

    

Rate

    

Total

Interest income:

Loans

$

1,797

$

(2,286)

$

(489)

$

591

$

(2,883)

$

(2,292)

Investment securities

 

708

 

172

 

880

1,194

258

1,452

Other interest-earning assets

 

(165)

 

128

 

(37)

41

(122)

(81)

Total interest-earning assets

 

2,340

 

(1,986)

 

354

1,826

(2,747)

(921)

Interest expense:

 

  

 

  

 

  

Interest-bearing checking accounts

 

20

(25)

 

(5)

14

(58)

(44)

Money market deposit accounts

 

97

 

(99)

 

(2)

86

(419)

(333)

Savings and club accounts

 

9

 

(20)

 

(11)

8

(45)

(37)

Certificates of deposit

 

(3,154)

 

2,944

 

(210)

(1,484)

576

(908)

Total interest-bearing deposits

 

(3,028)

 

2,800

 

(228)

(1,376)

54

(1,322)

FHLB advances and other borrowings

 

(237)

 

155

 

(82)

(312)

73

(239)

Total interest-bearing liabilities

 

(3,265)

 

2,955

 

(310)

(1,688)

127

(1,561)

Net change in net interest income

$

5,605

$

(4,941)

$

664

$

3,514

$

(2,874)

$

640

Non-GAAP Financial Information

In this report, we present the non-GAAP financial measures discussed below, which are used to evaluate our performance and exclude the effects of certain transactions and one-time events that we believe are unrelated to our core business and not necessarily indicative of our current performance or financial position. Management believes excluding these items facilitates greater visibility into our core businesses and underlying trends that may, to some extent, be obscured by inclusion of such items.

Tangible Book Value per Share.  Tangible book value per share represents our total equity less goodwill and other intangible assets divided by total common shares outstanding. Management believes tangible book value per share helps management and investors better understand and assess changes from period to period in stockholders’ equity exclusive of changes in intangible assets. This non-GAAP data should be considered in addition to results prepared in accordance with Generally Accepted Accounting Principles in the U.S. (GAAP), and is not a substitute for, or superior to, GAAP results. The following table provides a reconciliation of tangible book value per share of common stock to book value per share of common stock, the most directly comparable GAAP financial measure, for the periods presented.

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

 

As of March 31, 

As of June 30, 

Calculation of Tangible Book Value per Share:

    

2022

    

2021

 

Total stockholders' equity

$

206,280

$

216,926

Less: goodwill and other intangible assets

 

5,626

 

5,795

Total tangible equity (non-GAAP)

 

200,654

 

211,131

Total common shares outstanding

15,147,766

15,170,566

Book value per share (GAAP)

$

13.62

$

14.30

Tangible book value per share (non-GAAP)

$

13.25

$

13.92

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Ratio of the Allowance for Loan Losses to Total Loans, Excluding Acquired Loans.  The ratio of the allowance for loan losses to total loans, excluding acquired loans, represents our allowance for loan losses divided by our gross loans receivable less loans acquired in a business combination.  We believe the ratio of the allowance for loan losses to total loans, excluding acquired loans, helps management and investors better understand and assess changes from period to period in the allowance for loan losses exclusive of acquired loans. This non-GAAP data should be considered in addition to results prepared in accordance with Generally Accepted Accounting Principles in the U.S. (GAAP), and is not a substitute for, or superior to, GAAP results. The following table provides a reconciliation of the ratio of the allowance for loan losses to total loans, excluding acquired loans, to the ratio of the allowance for loan losses to total loans, the most directly comparable GAAP financial measure.

(Dollars in thousands)

 

As of March 31, 

As of June 30, 

 

Calculation of Allowance for Loan Losses to Total Loans, Excluding Acquired Loans:

    

2022

    

2021

Gross loans receivable

$

461,424

$

465,629

Less: Loans acquired in a business combination

 

126,768

 

161,260

Gross loans receivable, excluding acquired loans (non-GAAP)

 

334,656

 

304,369

Allowance for loan losses

$

3,479

$

3,613

Allowance for loan losses to total loans (GAAP)

0.75

%

0.78

%

Allowance for loan losses to total loans, excluding acquired loans (non-GAAP)

1.04

%

1.19

%

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Core net income, core earnings per share, core return on average assets, and core return on average equity.  These non-GAAP financial measures exclude certain pre-tax adjustments and the tax impact of such adjustments, and income tax benefit adjustments.  We believe these ratios help management and investors better understand the earnings attributable to our core business. This non-GAAP data should be considered in addition to results prepared in accordance with Generally Accepted Accounting Principles in the U.S. (GAAP), and is not a substitute for, or superior to, GAAP results. The following table provides a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.

For the Three Months Ended

For the Nine Months Ended

March 31,

March 31,

March 31,

March 31,

2022

    

2021

2022

    

2021

Calculation of core net income:

Net income (GAAP)

$

824

$

1,067

$

3,159

$

3,113

Less pre-tax adjustments:

Net gain (loss) on disposition of premises and equipment

(15)

34

(15)

(435)

Unrealized (loss) gain on equity securities

236

-

96

-

Gain on lease abandonment

(117)

-

(117)

-

Prepayment penalties

209

-

273

161

Tax impact of pre-tax adjustments

(70)

(8)

(53)

61

Income tax benefit adjustment

-

-

(288)

-

Core net income (non-GAAP)

$

1,067

$

1,093

$

3,055

$

2,900

Calculation of core earnings per share:

Earnings per share (GAAP)

$

0.06

$

0.07

$

0.22

$

0.21

Less pre-tax adjustments:

Net gain on disposition of premises and equipment

-

-

-

(0.02)

Unrealized (loss) gain on equity securities

0.01

-

0.01

-

Gain on lease abandonment

(0.01)

-

(0.01)

-

Prepayment penalties

0.01

-

0.02

0.01

Tax impact of pre-tax adjustments

-

-

(0.01)

-

Income tax benefit adjustment

-

-

(0.02)

-

Core earnings per share (non-GAAP)

$

0.07

$

0.07

$

0.21

$

0.20

Calculation of core return on average assets:

Return on average assets (GAAP)

0.38%

0.54%

0.51%

0.55%

Less pre-tax adjustments:

Net gain on disposition of premises and equipment

(0.01)

0.01

-

(0.10)

Unrealized (loss) gain on equity securities

0.11

-

0.02

-

Gain on lease abandonment

(0.05)

-

(0.02)

-

Prepayment penalties

0.10

-

0.04

0.04

Tax impact of pre-tax adjustments

(0.03)

-

(0.01)

0.02

Income tax benefit adjustment

-

-

(0.05)

-

Core return on average assets (non-GAAP)

0.50%

0.55%

0.49%

0.51%

Average assets

$

859,801

$

793,768

$

831,341

$

759,731

Calculation of core return on average equity:

Return on average equity (GAAP)

1.57%

4.03%

1.96%

4.17%

Less pre-tax adjustments:

Net gain on disposition of premises and equipment

(0.03)

0.13

(0.01)

(0.59)

Unrealized (loss) gain on equity securities

0.44

-

0.06

-

Gain on lease abandonment

(0.22)

-

(0.07)

-

Prepayment penalties

0.40

-

0.17

0.22

Tax impact of pre-tax adjustments

(0.13)

(0.03)

(0.03)

0.08

Income tax benefit adjustment

-

-

(0.18)

-

Core return on average equity (non-GAAP)

2.03%

4.13%

1.90%

3.88%

Average equity

$

210,258

$

105,951

$

214,889

$

99,587

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Liquidity and Capital Resources

We maintain liquid assets at levels we believe are adequate to meet our liquidity needs. The Bank’s liquidity ratio was 46.7% as of March 31, 2022 compared to 44.3% as of June 30, 2021. We adjust our liquidity levels to fund deposit outflows, pay real estate taxes on mortgage loans, repay our borrowings, and to fund loan commitments. We also adjust liquidity as appropriate to meet asset and liability management objectives. Our liquidity ratio is calculated as the sum of total cash and cash equivalents and unencumbered investments securities divided by the sum of total deposits and advances from the FHLB of Pittsburgh. The Bank 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.

Our primary sources of liquidity are deposits, amortization and prepayment of loans and mortgage-backed securities, maturities of investment securities, other short-term investments, earnings, and funds provided from operations. While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competition. We set the interest rates on our deposits to maintain a desired level of total deposits. In addition, we invest excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements.

Liquidity management is both a daily and long-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLB of Pittsburgh to provide advances. As a member of the FHLB of Pittsburgh, we are required to own capital stock in the FHLB of Pittsburgh and are authorized to apply for advances on the security of such stock and certain of our mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met. We had an available borrowing limit of $291.2 million with the FHLB of Pittsburgh at March 31, 2022. There were $20.0 million of FHLB of Pittsburgh advances outstanding at March 31, 2022.

At March 31, 2022, we had outstanding commitments to originate loans of $30.1 million and unfunded commitments under lines of credit of $65.7 million. At March 31, 2022, certificates of deposit scheduled to mature in less than one year totaled $83.7 million. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In the event a significant portion of our deposits are not retained by us, we will have to utilize other funding sources, such as FHLB of Pittsburgh advances, in order to maintain our level of assets. Alternatively, we could reduce our level of liquid assets, such as our cash and cash equivalents. In addition, the cost of such deposits may be significantly higher if market interest rates are higher at the time of renewal.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk is defined as the exposure to current and future earnings and capital that arises from adverse movements in interest rates. Depending on a bank’s asset/liability structure, adverse movements in interest rates could be either rising or falling interest rates. For example, a bank with predominantly long-term fixed-rate assets and short-term liabilities could have an adverse earnings exposure to a rising rate environment. Conversely, a short-term or variable-rate asset base funded by longer term liabilities could be negatively affected by falling rates. This is referred to as re-pricing or maturity mismatch risk.

Interest rate risk also arises from changes in the slope of the yield curve (yield curve risk), from imperfect correlations in the adjustment of rates earned and paid on different instruments with otherwise similar re-pricing characteristics (basis risk), and from interest rate related options embedded in our assets and liabilities (option risk).

Our objective is to manage our interest rate risk by determining whether a given movement in interest rates affects our net interest income and the market value of our portfolio equity in a positive or negative way and to execute strategies to maintain interest rate risk within established limits. The analysis at March 31, 2022 indicates a level of risk within the parameters of our model. Our management believes that the March 31, 2022 analysis indicates a profile that reflects interest rate risk exposures in both rising and declining rate environments for both net interest income and economic value.

Model Simulation Analysis. We view interest rate risk from two different perspectives. The traditional accounting perspective, which defines and measures interest rate risk as the change in net interest income and earnings caused by a change in interest rates, provides the best view of short-term interest rate risk exposure. We also view interest rate risk from an economic perspective, which defines and measures interest rate risk as the change in the market value of portfolio equity caused by changes in the values of assets and liabilities,

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Table of Contents

which fluctuate due to changes in interest rates. The market value of portfolio equity, also referred to as the economic value of equity, is defined as the present value of future cash flows from existing assets, minus the present value of future cash flows from existing liabilities.

These two perspectives give rise to income simulation and economic value simulation, each of which presents a unique picture of our risk of any movement in interest rates. Income simulation identifies the timing and magnitude of changes in income resulting from changes in prevailing interest rates over a short-term time horizon (usually one or two years). Economic value simulation reflects the interest rate sensitivity of assets and liabilities in a more comprehensive fashion, reflecting all future time periods. It can identify the quantity of interest rate risk as a function of the changes in the economic values of assets and liabilities, and the corresponding change in the economic value of equity of the Bank. Both types of simulation assist in identifying, measuring, monitoring, and controlling interest rate risk and are employed by management to ensure that variations in interest rate risk exposure will be maintained within policy guidelines.

We produce these simulation reports and discuss them with our management Asset and Liability Committee and Board Risk Committee on at least a quarterly basis. The simulation reports compare baseline (no interest rate change) to the results of an interest rate shock, to illustrate the specific impact of the interest rate scenario tested on income and equity. The model, which incorporates all asset and liability rate information, simulates the effect of various interest rate movements on income and equity value. The reports identify and measure our interest rate risk exposure present in our current asset/liability structure. Management considers both a static (current position) and dynamic (forecast changes in volume) analysis as well as non-parallel and gradual changes in interest rates and the yield curve in assessing interest rate exposures.

If the results produce quantifiable interest rate risk exposure beyond our limits, then the testing will have served as a monitoring mechanism to allow us to initiate asset/liability strategies designed to reduce and therefore mitigate interest rate risk. The table below sets forth an approximation of our interest rate risk exposure. The simulation uses projected repricing of assets and liabilities at March 31, 2022. The income simulation analysis presented represents a one-year impact of the interest scenario assuming a static balance sheet. Various assumptions are made regarding the prepayment speed and optionality of loans, investment securities and deposits, which are based on analysis and market information. The assumptions regarding optionality, such as prepayments of loans and the effective lives and repricing of non-maturity deposit products, are documented periodically through evaluation of current market conditions and historical correlations to our specific asset and liability products under varying interest rate scenarios. Because the prospective effects of hypothetical interest rate changes are based on a number of assumptions, these computations should not be relied upon as indicative of actual results. While we believe such assumptions to be reasonable, assumed prepayment rates may not approximate actual future prepayment activity on mortgage-backed securities or agency issued collateralized obligations (secured by one- to four-family loans and multi-family loans). Further, the computation does not reflect any actions that management may undertake in response to changes in interest rates and assumes a constant asset base. Management periodically reviews the rate assumptions based on existing and projected economic conditions and consults with industry experts to validate our model and simulation results.

The table below sets forth, as of March 31, 2022, the Bank’s net portfolio value, the estimated changes in our net portfolio value and net interest income that would result from the designated instantaneous parallel changes in market interest rates.

    

Twelve Month

    

    

    

    

 

Net Interest

Net Portfolio 

 

 Income

Value

Percent

Estimated

Percent

 

Change in Interest Rates (Basis Points)

    

of Change

    

NPV

    

of Change

 

+200

 

0.46

%

$

235,610

(10.35)

%

+100

 

0.29

248,999

(5.25)

0

 

262,804

-100

 

(2.17)

275,786

4.94

As of March 31, 2022, based on the scenarios above, net interest income would increase by approximately 0.29% to 0.46%, over a one-year time horizon in a rising interest rate environment. One-year net interest income would decrease by approximately 2.17% in a declining interest rate environment over the same period.

Economic value at risk would be negatively impacted by a rise in interest rates and would be positively impacted by a decline in interest rates.  We have established an interest rate floor of zero percent for measuring interest rate risk. The difference between the two results reflects the relatively long terms of a portion of our assets which is captured by the economic value at risk but has less impact on the one-year net interest income sensitivity.

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Overall, our March 31, 2022 analysis indicates that we are adequately positioned with an acceptable net interest income and economic value at risk and that all interest rate risk results continue to be within our policy guidelines.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure (1) that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms; and (2) that they are alerted in a timely manner about material information relating to the Company required to be filed in its periodic Securities and Exchange Commission filings.

During the quarter ended March 31, 2022, there were no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in various legal actions and claims arising in the normal course of business. In the opinion of management, these legal actions and claims are not expected to have a material adverse impact on the Company’s financial condition.

ITEM 1A. RISK FACTORS

For information regarding the Company’s risk factors, refer to the “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended June 30, 2021, filed with the Securities and Exchange Commission on September 15, 2021 (the “Form 10-K”).  As of March 31, 2022, the risk factors of the Company have not changed materially from those disclosed in the Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On March 11, 2022, the Company issued a press release announcing that the Company’s Board of Directors has authorized a stock repurchase program to acquire up to 758,528 shares of the Company’s outstanding common stock, or approximately 5% of outstanding shares. The stock repurchase program became effective on March 25, 2022.  

The following table provides information on repurchases by the Company of its common stock under the Company’s Board approved program.

    

    

    

    

Total Number of

 

Maximum Number

Shares Purchased

 

of Shares that May

Total Number

as Part of Publicly

Yet Be Purchased

of Shares

Average Price

Announced Plans

 

Under the Plans

Period

    

Purchased

    

Paid Per Share

    

or Programs

 

or Programs

January 1 - 31, 2022

 

$

$

-

758,528

February 1 - 28, 2022

 

-

758,528

March 1 - 31, 2022

 

22,800

12.82

22,800

735,728

Total

 

22,800

$

12.82

$

22,800

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

See Exhibit Index.

EXHIBIT INDEX

Exhibit

No.

    

Description

3.1

Amended and Restated Articles of Incorporation of William Penn Bancorporation (Incorporated by reference to Exhibit 3.1 to William Penn Bancorporation’s Registration Statement on Form S-1 (Registration No. 333-249492))

3.2

Bylaws of William Penn Bancorporation (Incorporated by reference to Exhibit 3.2 to William Penn Bancorporation’s Registration Statement on Form S-1 (Registration No. 333-249492))

31.1

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of William Penn Bancorporation

31.2

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of William Penn Bancorporation

32.1

Certification of Chief Executive Officer of William Penn Bancorporation Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer of William Penn Bancorporation Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.0

The following materials from the Company’s Quarterly Report to Stockholders on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Financial Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholder’s Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WILLIAM PENN BANCORPORATION

Date: May 5, 2022

By:

/s/ Kenneth J. Stephon

Kenneth J. Stephon

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

Date: May 5, 2022

By:

/s/ Jonathan T. Logan

Jonathan T. Logan

Executive Vice President and Chief Financial Officer

(Principal Financial and Chief Accounting Officer)

52