Mid Penn Bancorp Inc 8-K/A, filed Jul 11, 2025
Mid Penn Bancorp Inc (MPB)
About this 8-K/A
Mid Penn Bancorp Inc filed this 8-K/A on July 11, 2025, reporting on events of April 30, 2025.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Amendment No. 1)
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
(Exact Name of Registrant as Specified in its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
| |
||||
| (Address of Principal Executive Offices) | (Registrant’s telephone number, including area code) | (Zip Code) |
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Trading |
Name of each exchange | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4( c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
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. ☐
MID PENN BANCORP, INC.
FORM 8-K
Explanatory Note
| Item 9.01 | Financial Statements and Exhibits. |
| (a) | Financial Statements of Business Acquired. |
The financial information required by this Item 9.01(a) of Form 8-K is attached as Exhibit 99.2 to this Current Report on Form 8-K/A.
| (b) | Pro Forma Financial Information. |
The financial information required by this Item 9.01(b) of Form 8-K is attached as Exhibit 99.3 to this Current Report on Form 8-K/A.
| (d) | Exhibits: |
| Exhibit No. |
||
| 99.2 | Unaudited financial statements for William Penn Bancorporation for the six months ended December 31, 2024. | |
| 99.3 | Unaudited pro forma condensed combined financial statements as of and for the year ended December 31, 2024. | |
| 104 | Cover Page Interactive Date File (embedded within the XBRL document) | |
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 hereunto duly authorized.
| MID PENN BANCORP, INC. | ||||||
| Dated: July 11, 2025 | ||||||
| By: | /s/ Rory G. Ritrievi | |||||
| Rory G. Ritrievi | ||||||
| President and Chief Executive Officer | ||||||
Exhibit 99.2
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 December 31, 2024 and June 30, 2024 (unaudited)
| December 31, 2024 |
June 30, 2024 |
|||||||
| ASSETS |
||||||||
| Cash and due from banks |
$ | 4,730 | $ | 6,539 | ||||
| Interest bearing deposits with other banks |
11,290 | 12,070 | ||||||
| Federal funds sold |
— | 1,589 | ||||||
|
|
|
|
|
|||||
| Total cash and cash equivalents |
16,020 | 20,198 | ||||||
| Interest-bearing time deposits |
100 | 100 | ||||||
| Securities available for sale, at fair value |
145,089 | 150,755 | ||||||
| Securities held to maturity, net of allowance for credit losses of $0 as of December 31, 2024 and June 30, 2024 (fair value of $68,316 and $76,827 as of December 31, 2024 and June 30, 2024, respectively) |
85,098 | 93,056 | ||||||
| Equity securities |
2,297 | 2,016 | ||||||
| Loans receivable, net of allowance for credit losses of $2,598 and $2,989 as of December 31, 2024 and June 30, 2024, respectively |
467,510 | 470,572 | ||||||
| Premises and equipment, net |
6,877 | 7,186 | ||||||
| Regulatory stock, at cost |
2,311 | 3,062 | ||||||
| Deferred income taxes |
9,171 | 9,586 | ||||||
| Bank-owned life insurance |
42,481 | 41,819 | ||||||
| Goodwill |
4,858 | 4,858 | ||||||
| Intangible assets |
289 | 356 | ||||||
| Operating lease right-of-use assets |
9,763 | 8,300 | ||||||
| Accrued interest receivable and other assets |
4,564 | 6,883 | ||||||
|
|
|
|
|
|||||
| TOTAL ASSETS |
$ | 796,428 | $ | 818,747 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| LIABILITIES |
||||||||
| Deposits |
$ | 627,436 | $ | 629,810 | ||||
| Advances from Federal Home Loan Bank |
28,000 | 48,000 | ||||||
| Advances from borrowers for taxes and insurance |
2,223 | 2,891 | ||||||
| Operating lease liabilities |
10,062 | 8,553 | ||||||
| Accrued interest payable and other liabilities |
4,506 | 4,892 | ||||||
|
|
|
|
|
|||||
| TOTAL LIABILITIES |
672,227 | 694,146 | ||||||
|
|
|
|
|
|||||
| Commitments and contingencies (note 12) |
— | — | ||||||
| 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; 9,208,217 shares issued and outstanding at December 31, 2024 and 9,343,900 shares issued and outstanding at June 30, 2024 |
92 | 93 | ||||||
| Additional paid-in capital |
97,135 | 97,723 | ||||||
| Unearned common stock held by employee stock ownership plan |
(8,586 | ) | (8,789 | ) | ||||
| Retained earnings |
56,070 | 57,587 | ||||||
| Accumulated other comprehensive loss |
(20,510 | ) | (22,013 | ) | ||||
|
|
|
|
|
|||||
| TOTAL STOCKHOLDERS’ EQUITY |
124,201 | 124,601 | ||||||
|
|
|
|
|
|||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 796,428 | $ | 818,747 | ||||
|
|
|
|
|
|||||
See accompanying notes to consolidated financial statements
1
WILLIAM PENN BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share and per share amounts)
For the Three and Six Months Ended December 31, 2024 and 2023 (unaudited)
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| INTEREST INCOME |
||||||||||||||||
| Loans receivable, including fees |
$ | 6,250 | $ | 6,194 | $ | 12,778 | $ | 12,333 | ||||||||
| Securities |
1,504 | 1,700 | 3,053 | 3,411 | ||||||||||||
| Other |
140 | 169 | 311 | 330 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total interest income |
7,894 | 8,063 | 16,142 | 16,074 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INTEREST EXPENSE |
||||||||||||||||
| Deposits |
3,502 | 3,220 | 6,993 | 5,950 | ||||||||||||
| Borrowings |
336 | 632 | 952 | 1,169 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total interest expense |
3,838 | 3,852 | 7,945 | 7,119 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net interest income |
4,056 | 4,211 | 8,197 | 8,955 | ||||||||||||
| Provision (recovery) for credit losses |
14 | 25 | (381 | ) | 30 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| NET INTEREST INCOME AFTER PROVISION (RECOVERY) FOR CREDIT LOSSES |
4,042 | 4,186 | 8,578 | 8,925 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| OTHER INCOME |
||||||||||||||||
| Service fees |
221 | 225 | 432 | 440 | ||||||||||||
| Net gain on sale of securities |
— | 85 | — | 85 | ||||||||||||
| Earnings on bank-owned life insurance |
333 | 309 | 662 | 603 | ||||||||||||
| Net gain on disposition of premises and equipment |
211 | — | 211 | — | ||||||||||||
| Unrealized gain on equity securities |
202 | 148 | 281 | 221 | ||||||||||||
| Other |
8 | 61 | 39 | 129 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other income |
975 | 828 | 1,625 | 1,478 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| OTHER EXPENSES |
||||||||||||||||
| Salaries and employee benefits |
3,223 | 2,861 | 6,182 | 5,796 | ||||||||||||
| Occupancy and equipment |
713 | 728 | 1,419 | 1,488 | ||||||||||||
| Data processing |
519 | 504 | 1,025 | 998 | ||||||||||||
| Professional fees |
193 | 192 | 416 | 402 | ||||||||||||
| Amortization of intangible assets |
34 | 41 | 67 | 82 | ||||||||||||
| Merger related expenses |
731 | — | 836 | — | ||||||||||||
| Other |
769 | 745 | 1,560 | 1,530 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other expense |
6,182 | 5,071 | 11,505 | 10,296 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (Loss) income before income taxes |
(1,165 | ) | (57 | ) | (1,302 | ) | 107 | |||||||||
| Income tax benefit |
(177 | ) | (68 | ) | (293 | ) | (83 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| NET (LOSS) INCOME |
$ | (988 | ) | $ | 11 | $ | (1,009 | ) | $ | 190 | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Basic (loss) earnings per share |
$ | (0.12 | ) | $ | 0.00 | $ | (0.12 | ) | $ | 0.02 | ||||||
| Diluted (loss) earnings per share |
$ | (0.12 | ) | $ | 0.00 | $ | (0.12 | ) | $ | 0.02 | ||||||
See accompanying notes to consolidated financial statements
2
WILLIAM PENN BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Dollars in thousands)
For the Three and Six Months Ended December 31, 2024 and 2023 (unaudited)
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net (loss) income |
$ | (988 | ) | $ | 11 | $ | (1,009 | ) | $ | 190 | ||||||
| Other comprehensive (loss) income: |
||||||||||||||||
| Changes in net unrealized gain (loss) on securities available for sale |
(4,316 | ) | 9,206 | 1,918 | 3,249 | |||||||||||
| Tax effect |
997 | (2,118 | ) | (415 | ) | (748 | ) | |||||||||
| Reclassification adjustment for gain recognized in net income |
— | (85 | ) | — | (85 | ) | ||||||||||
| Tax effect |
— | 20 | — | 20 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other comprehensive (loss) income, net of tax |
(3,319 | ) | 7,023 | 1,503 | 2,436 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Comprehensive (loss) income |
$ | (4,307 | ) | $ | 7,034 | $ | 494 | $ | 2,626 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
See accompanying notes to consolidated financial statements
3
WILLIAM PENN BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Dollars in thousands, except share amounts)
For the Three and Six Months Ended December 31, 2024 and 2023 (unaudited)
| Number of Shares, net |
Common Stock Stock |
Additional Paid-in capital |
Unearned Common Stock held by ESOP |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Total Stockholders’ Equity |
||||||||||||||||||||||
| Balance, June 30, 2024 |
9,343,900 | $ | 93 | $ | 97,723 | $ | (8,789 | ) | $ | 57,587 | $ | (22,013 | ) | $ | 124,601 | |||||||||||||
| Net loss |
— | — | — | — | (21 | ) | — | (21 | ) | |||||||||||||||||||
| Other comprehensive income |
— | — | — | — | — | 4,822 | 4,822 | |||||||||||||||||||||
| Restricted stock expense |
— | — | 298 | — | — | — | 298 | |||||||||||||||||||||
| Stock option expense |
— | — | 206 | — | — | — | 206 | |||||||||||||||||||||
| Stock purchased and retired |
(125,441 | ) | (1 | ) | (1,501 | ) | — | — | — | (1,502 | ) | |||||||||||||||||
| ESOP shares committed to be released |
— | — | 4 | 101 | — | — | 105 | |||||||||||||||||||||
| Regular cash dividend paid |
— | — | — | — | (256 | ) | — | (256 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance, September 30, 2024 |
9,218,459 | $ | 92 | $ | 96,730 | $ | (8,688 | ) | $ | 57,310 | $ | (17,191 | ) | $ | 128,253 | |||||||||||||
| Net loss |
— | — | — | — | (988 | ) | — | (988 | ) | |||||||||||||||||||
| Other comprehensive loss |
— | — | — | — | — | (3,319 | ) | (3,319 | ) | |||||||||||||||||||
| Restricted stock expense |
— | — | 298 | — | — | — | 298 | |||||||||||||||||||||
| Stock option expense |
— | — | 206 | — | — | — | 206 | |||||||||||||||||||||
| Stock purchased and retired |
(10,242 | ) | — | (110 | ) | — | — | — | (110 | ) | ||||||||||||||||||
| ESOP shares committed to be released |
— | — | 11 | 102 | — | — | 113 | |||||||||||||||||||||
| Regular cash dividend paid |
— | — | — | — | (252 | ) | — | (252 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance, December 31, 2024 |
9,208,217 | $ | 92 | $ | 97,135 | $ | (8,586 | ) | $ | 56,070 | $ | (20,510 | ) | $ | 124,201 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Number of Shares, net |
Common Stock Stock |
Additional Paid-in capital |
Unearned Common Stock held by ESOP |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Total Stockholders’ Equity |
||||||||||||||||||||||
| Balance, June 30, 2023 |
12,452,921 | $ | 125 | $ | 134,387 | $ | (9,194 | ) | $ | 58,805 | $ | (23,378 | ) | $ | 160,745 | |||||||||||||
| Net income |
— | — | — | — | 179 | — | 179 | |||||||||||||||||||||
| Other comprehensive loss |
— | — | — | — | — | (4,587 | ) | (4,587 | ) | |||||||||||||||||||
| Cumulative effect of adoption of ASU 2016-13 |
— | — | — | — | (226 | ) | — | (226 | ) | |||||||||||||||||||
| Restricted stock expense |
— | — | 282 | — | — | — | 282 | |||||||||||||||||||||
| Stock option expense |
— | — | 195 | — | — | — | 195 | |||||||||||||||||||||
| Stock purchased and retired |
(1,624,018 | ) | (17 | ) | (19,931 | ) | — | — | — | (19,948 | ) | |||||||||||||||||
| ESOP shares committed to be released |
— | — | 1 | 101 | — | — | 102 | |||||||||||||||||||||
| Regular cash dividend paid |
— | — | — | — | (348 | ) | — | (348 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance, September 30, 2023 |
10,828,903 | $ | 108 | $ | 114,934 | $ | (9,093 | ) | $ | 58,410 | $ | (27,965 | ) | $ | 136,394 | |||||||||||||
| Net income |
— | — | — | — | 11 | — | 11 | |||||||||||||||||||||
| Other comprehensive income |
— | — | — | — | — | 7,023 | 7,023 | |||||||||||||||||||||
| Restricted stock expense |
— | — | 281 | — | — | — | 281 | |||||||||||||||||||||
| Stock option expense |
— | — | 195 | — | — | — | 195 | |||||||||||||||||||||
| Stock purchased and retired |
(1,191,831 | ) | (12 | ) | (14,766 | ) | — | — | — | (14,778 | ) | |||||||||||||||||
| ESOP shares committed to be released |
— | — | 7 | 102 | — | — | 109 | |||||||||||||||||||||
| Regular cash dividend paid |
— | — | — | — | (289 | ) | — | (289 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance, December 31, 2023 |
9,637,072 | $ | 96 | $ | 100,651 | $ | (8,991 | ) | $ | 58,132 | $ | (20,942 | ) | $ | 128,946 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
See accompanying notes to consolidated financial statements
4
WILLIAM PENN BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the Six Months Ended December 31, 2024 and 2023 (unaudited)
| Six Months Ended December 31, |
||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities |
||||||||
| Net (loss) income |
$ | (1,009 | ) | $ | 190 | |||
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |
||||||||
| (Recovery) provision for credit losses |
(381 | ) | 30 | |||||
| Depreciation expense |
339 | 400 | ||||||
| Other accretion, net |
(177 | ) | (281 | ) | ||||
| Deferred income taxes |
(64 | ) | (295 | ) | ||||
| Net gain on disposition of premises and equipment |
(211 | ) | — | |||||
| Amortization of core deposit intangibles |
67 | 82 | ||||||
| Amortization of ESOP |
218 | 211 | ||||||
| Net gain on sale of securities |
— | (85 | ) | |||||
| Unrealized gain on equity securities |
(281 | ) | (221 | ) | ||||
| Earnings on bank-owned life insurance |
(662 | ) | (603 | ) | ||||
| Stock based compensation expense |
1,008 | 953 | ||||||
| Other, net |
(139 | ) | 335 | |||||
|
|
|
|
|
|||||
| Net cash (used in) provided by operating activities |
(1,292 | ) | 716 | |||||
|
|
|
|
|
|||||
| Cash flows from investing activities |
||||||||
| Securities available for sale: |
||||||||
| Purchases |
— | (1,152 | ) | |||||
| Maturities, calls and principal paydowns |
7,497 | 6,015 | ||||||
| Proceeds from sale of securities |
— | 2,438 | ||||||
| Securities held to maturity: |
||||||||
| Purchases |
(998 | ) | (998 | ) | ||||
| Maturities, calls and principal paydowns |
8,979 | 4,301 | ||||||
| Net decrease in loans receivable |
3,662 | 10,384 | ||||||
| Interest bearing time deposits: |
||||||||
| Maturities and principal paydowns |
— | 500 | ||||||
| Regulatory stock purchases |
(1,830 | ) | (3,341 | ) | ||||
| Regulatory stock redemptions |
2,581 | 2,605 | ||||||
| Purchases of premises and equipment, net |
(30 | ) | (104 | ) | ||||
| Proceeds from the sale of premises and equipment held for sale |
2,399 | — | ||||||
|
|
|
|
|
|||||
| Net cash provided by investing activities |
22,260 | 20,648 | ||||||
|
|
|
|
|
|||||
| Cash flows from financing activities |
||||||||
| Net decrease in deposits |
(2,359 | ) | (8,525 | ) | ||||
| Net (repayment) increase of short-term borrowed funds |
(20,000 | ) | 20,000 | |||||
| Repurchase of common stock |
(1,612 | ) | (34,726 | ) | ||||
| Decrease in advances from borrowers for taxes and insurance |
(667 | ) | (745 | ) | ||||
| Cash dividends |
(508 | ) | (637 | ) | ||||
|
|
|
|
|
|||||
| Net cash used in financing activities |
(25,146 | ) | (24,633 | ) | ||||
|
|
|
|
|
|||||
| Net decrease in cash and cash equivalents |
(4,178 | ) | (3,269 | ) | ||||
| Cash and cash equivalents - beginning |
20,198 | 20,793 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents - ending |
$ | 16,020 | $ | 17,524 | ||||
|
|
|
|
|
|||||
| Supplementary cash flows information |
||||||||
| Interest paid |
$ | 8,014 | $ | 7,084 | ||||
| Income tax payments |
— | 221 | ||||||
| Operating lease right-of-use asset recorded |
1,798 | — | ||||||
| Operating lease liabilities recorded |
1,798 | — | ||||||
| Premises transferred to held for sale |
— | 1,237 | ||||||
See accompanying notes to consolidated financial statements
5
Notes to the Consolidated Financial Statements
Note 1 - Nature of Operations
William Penn Bancorporation (the “Company” or “William Penn”) 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.
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 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 twelve 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.
On October 31, 2024, the Company and Mid Penn Bancorp, Inc. (“Mid Penn”) entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which the Company will merge with and into Mid Penn with Mid Penn as the surviving corporation (the “Merger”). Immediately after the Merger, the Bank will merge with and into Mid Penn Bank, with Mid Penn Bank as the surviving institution. Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each share of Company common stock then issued and outstanding will be converted into the right to receive 0.426 shares of Mid Penn common stock, with cash to be paid in lieu of any fractional shares. Mid Penn will also assume all outstanding options to acquire shares of Company common stock pursuant to their terms, subject to adjustment to reflect the 0.426 exchange ratio set forth in the Merger Agreement. Consummation of the Merger is subject to the satisfaction of customary closing conditions, including receipt of necessary shareholder and regulatory approvals, and the parties currently expect the Merger to be completed in the second calendar quarter of 2025.
Note 2 - Summary of Significant Accounting Policies
The unaudited financial statements and other financial information contained in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements, and related notes, of the Company at and for the year ended June 30, 2024.
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 December 31, 2024, WPSLA held $221.7 million of the Bank’s $230.2 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.
6
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 credit losses, goodwill, and income taxes. 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 six months ended December 31, 2024 are not necessarily indicative of the results of operations 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 Accounting Standards Codification (“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 Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU were issued to enhance the transparency and decision usefulness of income tax disclosures. The amendments in the update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. These updates are not expected to have a significant impact on the Company’s financial statements.
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments in this ASU were issued in response to the SEC’s August 2018 final rule that updated and simplified disclosure requirements that the SEC believed were “redundant, duplicative, overlapping, outdated, or superseded.” The new guidance is intended to align U.S. GAAP requirements with those of the SEC and to facilitate the application of U.S. GAAP for all entities. Some of the amendments introduced by the ASU are technical corrections or clarifications of the FASB’s current disclosure or presentation requirements. These updates are not expected to have a significant impact on the Company’s financial statements.
7
Recent Accounting Pronouncements Adopted
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 sunset provision included in Topic 848 was based on the expectations of when LIBOR would cease being published. In March 2021, the UK Financial Conduct Authority announced that the intended cessation date of LIBOR would be June 30, 2024, which is beyond the established sunset date of Topic 848. In December 2023, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The amendments in this ASU provide temporary relief by deferring the sunset date provision included in Topic 848. The amendments in ASU 2023-06 defer the effective date for all entities upon issuance through December 31, 2024. The Company adopted these updates effective December 31, 2024 and these updates did not have a significant impact on the Company’s financial statements.
Allowance for Credit Losses on Loans
The Company maintains its allowance for credit losses (“ACL”) at a level that management believes to be appropriate to absorb estimated credit losses as of the date of the Consolidated Statements of Financial Condition. The Company established its allowance in accordance with the guidance included in Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses (“ASC 326”). The ACL is a valuation reserve established and maintained by charges against income and is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged-off against the ACL when they are deemed uncollectible. Expected recoveries do not exceed the aggregate amounts previously charged-off and expected to be charged-off. The ACL is an estimate of expected credit losses, measured over the contractual life of a loan, that considers our historical loss experience, the historical loss experience of a peer group of banks identified by management, current conditions and forecasts of future economic conditions. The determination of an appropriate ACL is inherently subjective and may have significant changes from period to period. The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans. The ACL is measured on a collective (pool) basis when similar characteristics exist. The Company’s loan portfolio is segmented by loan types that have similar risk characteristics and behave similarly during economic cycles.
Historical credit loss experience is the basis for the estimate of expected credit losses. We apply our historical loss rates and the historical loss rates of a group of peer banks identified by management to pools of loans with similar risk characteristics using the Weighted-Average Remaining Maturity (“WARM”) method. The remaining contractual life of the pools of loans with similar risk characteristics is adjusted by expected scheduled payments and prepayments. After consideration of the historical loss calculation, management applies qualitative adjustments to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information. Our reasonable and supportable forecast adjustment is based on a regional economic indicator obtained from the St. Louis Federal Reserve economic database. The Company selected eight qualitative metrics which were correlated with the Bank and its peer group’s historical loss patterns. The eight qualitative metrics include: changes in lending policies and procedures, changes in national and local economic conditions as well as business conditions, changes in the nature, complexity, and volume of the portfolio, changes in the experience, ability, and depth of lenders and lending management, changes in the volume and severity of past due and classified loans, changes in the quality of the Bank’s loan review system, changes in the value of collateral securing the loans, and changes in or the existence of credit concentrations. The adjustments are weighted for relevance before applying to each pool of loans. Each quarter, management reviews the recommended adjustment factors and applies any additional adjustments based on local and current conditions.
The Company has elected to exclude $2.0 million of accrued interest receivable as of December 31, 2024 and June 30, 2024 from the measurement of its ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income. Accrued interest on loans is reported in the accrued interest receivable and other assets line on the consolidated statements of financial condition.
8
The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer shares similar risk characteristics with other pooled loans and, therefore, should be individually assessed. We evaluate all commercial loans that meet the following criteria: (1) when it is determined that foreclosure is probable, (2) substandard, doubtful and nonperforming loans when repayment is expected to be provided substantially through the operation or sale of the collateral, (3) when it is determined by management that a loan does not share similar risk characteristics with other loans. Credit loss estimates are calculated based on the following three acceptable methods for measuring the ACL: 1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral when the loan is collateral dependent. Our individual loan evaluations consist primarily of the fair value of collateral method because most of our loans are collateral dependent. Collateral values are discounted to consider disposition costs when appropriate. A charge-off is recorded if the fair value of the loan is less than the loan balance.
Allowance for Credit Losses on Unfunded Loan Commitments
The Company estimates expected credit losses over the contractual period in which the Bank is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Bank. The allowance for credit losses on unfunded loan commitments is included in accrued interest payable and other liabilities in the Company’s Statements of Financial Condition and is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.
Allowance for Credit Losses on Held to Maturity Securities
The Company accounts for its held to maturity securities in accordance with Accounting Standards Codification (ASC) 326-20, Financial Instruments – Credit Loss – Measured at Amortized Cost, which requires that the Company measure expected credit losses on held to maturity debt securities on a collective basis by major security type. The estimate of expected credit losses considers historical credit loss information that is adjusted for current economic conditions and reasonable and supportable forecasts.
The Company classifies its held to maturity debt securities into the following major security types: mortgage-backed securities, U.S. government agency securities and municipal bonds. Generally, the mortgage-backed securities and U.S. government agency securities are government guaranteed with a history of no credit losses and the municipal bonds are highly rated with a history of no credit losses. Credit ratings of the municipal bonds are reviewed on a quarterly basis. Based on the government guarantee, our historical experience including no credit losses, and the high credit rating of our municipal bonds, the Company determined that an allowance for credit losses on its held to maturity portfolio is not required as of December 31, 2024 and June 30, 2024.
Accrued interest receivable on held to maturity debt securities totaled $112 thousand and $170 thousand as of December 31, 2024 and June 30, 2024, respectively, and is included within accrued interest receivable and other assets on the Company’s Consolidated Statements of Financial Condition. This amount is excluded from the estimate of expected credit losses. Generally, held to maturity debt securities are classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When held to maturity debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed against interest income.
Allowance for Credit Losses on Available for Sale Securities
The Company measures expected credit losses on available for sale debt securities when the Bank intends to sell, or when it is not more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the amortized cost basis of the security is written down to fair value through income. For available for sale debt securities that do not meet the previously mentioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
The ACL on available for sale debt securities is included within securities available for sale on the Consolidated Statements of Financial Condition. Changes in the allowance for credit losses are recorded within provision for credit losses on the Consolidated Statements of Income. Losses are charged against the allowance when the Company believes the collectability of an available for sale security is in jeopardy or when either of the criteria regarding intent or requirement to sell is met.
9
Accrued interest receivable on available for sale debt securities totaled $647 thousand and $662 thousand as of December 31, 2024 and June 30, 2024, respectively, and is included within accrued interest receivable and other assets on the Company’s Consolidated Statements of Financial Condition. This amount is excluded from the estimate of expected credit losses. Generally, available for sale debt securities are classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available for sale debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed against interest income.
Note 3 - Earnings Per Share
The following table presents a calculation of basic and diluted earnings per share for the three and six months ended December 31, 2024 and 2023. Earnings per share is computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding. The difference between common shares issued and basic average common shares outstanding, for purposes of calculating basic earnings per share, is a result of subtracting unallocated ESOP shares and unvested restricted stock shares. There are no convertible securities which would affect the numerator in calculating basic and diluted earnings per share; therefore, the net loss of $988 thousand and $1.0 million for the three and six months ended December 31, 2024, respectively, and the net income of $11 thousand and $190 thousand for the three and six months ended December 31, 2023, respectively, were used as the numerators. See Note 11 to these consolidated financial statements for further discussion of stock grants.
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 December 31, |
Six Months Ended December 31, |
|||||||||||||||
| (Dollars in thousands, except share and per share amounts) |
2024 | 2023 | 2024 | 2023 | ||||||||||||
| Basic and diluted (loss) earnings per share: |
||||||||||||||||
| Net (loss) income |
$ | (988 | ) | $ | 11 | $ | (1,009 | ) | $ | 190 | ||||||
| Basic average common shares outstanding |
8,140,493 | 8,845,633 | 8,172,952 | 9,723,078 | ||||||||||||
| Effect of dilutive securities |
67,354 | 64,680 | 48,140 | 43,066 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Dilutive average shares outstanding |
8,207,847 | 8,910,313 | 8,221,092 | 9,766,144 | ||||||||||||
| (Loss) earnings per share: |
||||||||||||||||
| Basic |
$ | (0.12 | ) | $ | 0.00 | $ | (0.12 | ) | $ | 0.02 | ||||||
| Diluted |
$ | (0.12 | ) | $ | 0.00 | $ | (0.12 | ) | $ | 0.02 | ||||||
Anti-dilutive shares are common stock equivalents with weighted average exercise prices in excess of the weighted average market value for the periods presented. There were 1,264,000 stock options that were anti-dilutive for both the three and six months ended December 31, 2024. There were 1,197,640 stock options that were anti-dilutive for both the three and six months ended December 31, 2023.
10
Note 4 – Changes in and Reclassifications Out of Accumulated Other Comprehensive Loss
The following tables present the changes in the balances of each component of accumulated other comprehensive loss (“AOCL”) for the three and six months ended December 31, 2024 and 2023.
| (Dollars in thousands) | Unrealized Losses on Securities Available for Sale |
|||||||
| Accumulated Other Comprehensive Loss (1) |
2024 | 2023 | ||||||
| Balance at June 30, |
$ | (22,013 | ) | $ | (23,378 | ) | ||
| Other comprehensive income (loss) before reclassifications |
4,822 | (4,587 | ) | |||||
| Amounts reclassified from accumulated other comprehensive loss |
— | — | ||||||
|
|
|
|
|
|||||
| Period change |
4,822 | (4,587 | ) | |||||
|
|
|
|
|
|||||
| Balance at September 30, |
$ | (17,191 | ) | $ | (27,965 | ) | ||
|
|
|
|
|
|||||
| Other comprehensive (loss) income before reclassifications |
(3,319 | ) | 7,088 | |||||
| Amounts reclassified from accumulated other comprehensive loss |
— | (65 | ) | |||||
|
|
|
|
|
|||||
| Period change |
(3,319 | ) | 7,023 | |||||
|
|
|
|
|
|||||
| Balance at December 31, |
$ | (20,510 | ) | $ | (20,942 | ) | ||
|
|
|
|
|
|||||
(1) All amounts are net of tax. Related income tax expense is calculated using an income tax rate approximating 23% for both 2024 and 2023.
The following tables present the reclassifications out of AOCL by component during the three and six months ended December 31, 2024 and 2023:
| (Dollars in thousands) | Amounts Reclassified from Accumulated Other Comprehensive Loss (1) |
|||||||||
| Details about Accumulated Other Comprehensive |
Three Months Ended December 31, | Affected Line Item in the | ||||||||
| 2024 | 2023 | |||||||||
| Securities available for sale: |
||||||||||
| Net securities gains reclassified into net income |
$ | — | $ | (85 | ) | Net gain on sale of securities | ||||
| Related income tax expense |
— | 20 | Income tax benefit | |||||||
|
|
|
|
|
|||||||
| $ | — | $ | (65 | ) | ||||||
|
|
|
|
|
|||||||
| (1) | Amounts in parenthesis indicate debits. |
| (Dollars in thousands) | Amounts Reclassified from Accumulated Other Comprehensive Loss (2) |
| ||||||||
|
Details about Accumulated Other Comprehensive |
Six Months Ended December 31, | Affected Line Item in the | ||||||||
| 2024 | 2023 | |||||||||
| Securities available for sale: |
||||||||||
| Net securities gains reclassified into net income |
$ | — | $ | (85 | ) | Net gain on sale of securities | ||||
| Related income tax expense |
— | 20 | Income tax benefit | |||||||
|
|
|
|
|
|||||||
| $ | — | $ | (65 | ) | ||||||
|
|
|
|
|
|||||||
| (2) | Amounts in parenthesis indicate debits. |
11
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:
| December 31, 2024 | ||||||||||||||||||||
| (Dollars in thousands) |
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Allowance for Credit Losses |
Fair Value |
|||||||||||||||
| Available For Sale: |
||||||||||||||||||||
| Mortgage-backed securities |
$ | 107,394 | $ | 19 | $ | (17,593 | ) | $ | — | $ | 89,820 | |||||||||
| U.S. agency collateralized mortgage obligations |
8,594 | — | (1,654 | ) | — | 6,940 | ||||||||||||||
| U.S. government agency securities |
614 | — | (76 | ) | — | 538 | ||||||||||||||
| Municipal bonds |
19,958 | — | (5,043 | ) | — | 14,915 | ||||||||||||||
| Corporate bonds |
35,200 | — | (2,324 | ) | — | 32,876 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Available For Sale |
$ | 171,760 | $ | 19 | $ | (26,690 | ) | $ | — | $ | 145,089 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| December 31, 2024 | ||||||||||||||||||||
| (Dollars in thousands) |
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
Allowance for Credit Losses |
|||||||||||||||
| Held To Maturity: |
||||||||||||||||||||
| Mortgage-backed securities |
$ | 84,093 | $ | — | $ | (16,782 | ) | $ | 67,311 | $ | — | |||||||||
| U.S. government agency securities |
969 | — | — | 969 | — | |||||||||||||||
| Municipal bonds |
36 | — | — | 36 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Held To Maturity |
$ | 85,098 | $ | — | $ | (16,782 | ) | $ | 68,316 | $ | — | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| June 30, 2024 | ||||||||||||||||||||
| (Dollars in thousands) |
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Allowance for Credit Losses |
Fair Value |
|||||||||||||||
| Available For Sale: |
||||||||||||||||||||
| Mortgage-backed securities |
$ | 112,439 | $ | 20 | $ | (17,334 | ) | $ | — | $ | 95,125 | |||||||||
| U.S. agency collateralized mortgage obligations |
8,937 | — | (1,737 | ) | — | 7,200 | ||||||||||||||
| U.S. government agency securities |
769 | 1 | (77 | ) | — | 693 | ||||||||||||||
| Municipal bonds |
19,999 | — | (5,030 | ) | — | 14,969 | ||||||||||||||
| Corporate bonds |
37,200 | — | (4,432 | ) | — | 32,768 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Available For Sale |
$ | 179,344 | $ | 21 | $ | (28,610 | ) | $ | — | $ | 150,755 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| June 30, 2024 | ||||||||||||||||||||
| (Dollars in thousands) |
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
Allowance for Credit Losses |
|||||||||||||||
| Held To Maturity: |
||||||||||||||||||||
| Mortgage-backed securities |
$ | 87,526 | $ | — | $ | (16,216 | ) | $ | 71,310 | $ | — | |||||||||
| U.S. government agency securities |
5,482 | — | (13 | ) | 5,469 | — | ||||||||||||||
| Municipal bonds |
48 | — | — | 48 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Held To Maturity |
$ | 93,056 | $ | — | $ | (16,229 | ) | $ | 76,827 | $ | — | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
The Company did not sell any investment securities during the three and six months ended December 31, 2024. The Company recognized $85 thousand of gross gains on the sale of $2.4 million of investment securities during the three and six months ended December 31, 2023.
12
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.
| December 31, 2024 | ||||||||||||||||
| Available For Sale | Held To Maturity | |||||||||||||||
| (Dollars in thousands) |
Amortized Cost |
Fair Value | Amortized Cost |
Fair Value |
||||||||||||
| Due in one year or less |
$ | — | $ | — | $ | 1,005 | $ | 1,005 | ||||||||
| Due after one year through five years |
1,500 | 1,453 | — | — | ||||||||||||
| Due after five years through ten years |
41,178 | 37,369 | — | — | ||||||||||||
| Due after ten years |
129,082 | 106,267 | 84,093 | 67,311 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 171,760 | $ | 145,089 | $ | 85,098 | $ | 68,316 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The following tables provide information on the gross unrealized losses and fair market value of the Company’s investments for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2024 and June 30, 2024:
| December 31, 2024 | ||||||||||||||||||||||||
| Less than 12 Months | 12 Months or More | Total Fair Value |
Total Unrealized Losses |
|||||||||||||||||||||
| (Dollars in thousands) |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||||
| Available For Sale: |
||||||||||||||||||||||||
| Mortgage-backed securities |
$ | — | $ | — | $ | 88,815 | $ | (17,593 | ) | $ | 88,815 | $ | (17,593 | ) | ||||||||||
| U.S. agency collateralized mortgage obligations |
— | — | 6,940 | (1,654 | ) | 6,940 | (1,654 | ) | ||||||||||||||||
| U.S. government agency securities |
42 | (1 | ) | 496 | (75 | ) | 538 | (76 | ) | |||||||||||||||
| Municipal bonds |
— | — | 14,915 | (5,043 | ) | 14,915 | (5,043 | ) | ||||||||||||||||
| Corporate bonds |
— | — | 31,976 | (2,324 | ) | 31,976 | (2,324 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| 42 | (1 | ) | 143,142 | (26,689 | ) | 143,184 | (26,690 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Held To Maturity: |
||||||||||||||||||||||||
| Mortgage-backed securities |
— | — | 67,311 | (16,782 | ) | 67,311 | (16,782 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| — | — | 67,311 | (16,782 | ) | 67,311 | (16,782 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| $ | 42 | $ | (1 | ) | $ | 210,453 | $ | (43,471 | ) | $ | 210,495 | $ | (43,472 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| June 30, 2024 | ||||||||||||||||||||||||
| Less than 12 Months | 12 Months or More | Total Fair Value |
Total Unrealized Losses |
|||||||||||||||||||||
| (Dollars in thousands) |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||||
| Available For Sale: |
||||||||||||||||||||||||
| Mortgage-backed securities |
$ | — | $ | — | $ | 94,110 | $ | (17,334 | ) | $ | 94,110 | $ | (17,334 | ) | ||||||||||
| U.S. agency collateralized mortgage obligations |
— | — | 7,200 | (1,737 | ) | 7,200 | (1,737 | ) | ||||||||||||||||
| U.S. government agency securities |
— | — | 556 | (77 | ) | 556 | (77 | ) | ||||||||||||||||
| Municipal bonds |
— | — | 14,969 | (5,030 | ) | 14,969 | (5,030 | ) | ||||||||||||||||
| Corporate bonds |
— | — | 32,768 | (4,432 | ) | 32,768 | (4,432 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| — | — | 149,603 | (28,610 | ) | 149,603 | (28,610 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Held To Maturity: |
||||||||||||||||||||||||
| Mortgage-backed securities |
— | — | 71,310 | (16,216 | ) | 71,310 | (16,216 | ) | ||||||||||||||||
| U.S. government agency securities |
982 | (1 | ) | 4,487 | (12 | ) | 5,469 | (13 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| 982 | (1 | ) | 75,797 | (16,228 | ) | 76,779 | (16,229 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| $ | 982 | $ | (1 | ) | $ | 225,400 | $ | (44,838 | ) | $ | 226,382 | $ | (44,839 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
13
At December 31, 2024, the Company had one security in the less than 12 months loss position and 120 securities in the 12 months or greater loss position. At June 30, 2024, the Company had one security in the less than 12 months loss position and 124 securities in the 12 months or greater loss position. 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 the unrealized losses to be credit losses at December 31, 2024 and June 30, 2024. The Company did not recognize any credit losses on these securities for the three and six months ended December 31, 2024 and 2023.
At December 31, 2024 and June 30, 2024, $2.5 million and $2.6 million, respectively, in the carrying value of investment securities were pledged to secure municipal deposits.
Equity Securities
The Company had one equity security with a fair value of $2.3 million as of December 31, 2024 and $2.0 million as of June 30, 2024. During the three and six months ended December 31, 2024, the Company recorded $202 thousand and $281 thousand of unrealized gains, respectively, and during the three and six months ended December 31, 2023, the Company recorded $148 thousand and $221 thousand of unrealized gains, respectively, which were recorded in Unrealized gain on equity securities in the Consolidated Statements of Income.
Note 6 - Loans
Major classifications of loans, net of deferred loan fees of $501 thousand and $545 thousand at December 31, 2024 and June 30, 2024, respectively, are summarized as follows:
| (Dollars in thousands) |
December 31, 2024 |
June 30, 2024 |
||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||
| Residential real estate: |
||||||||||||||||
| 1 - 4 family |
$ | 125,477 | 26.69 | % | $ | 127,911 | 27.00 | % | ||||||||
| Home equity and HELOCs |
29,999 | 6.38 | 30,767 | 6.50 | ||||||||||||
| Construction -residential |
3,734 | 0.80 | 8,802 | 1.86 | ||||||||||||
| Commercial real estate: |
||||||||||||||||
| 1 - 4 family investor |
88,692 | 18.87 | 92,284 | 19.49 | ||||||||||||
| Multi-family (five or more) |
15,543 | 3.31 | 15,619 | 3.30 | ||||||||||||
| Commercial non-residential |
178,041 | 37.87 | 158,481 | 33.46 | ||||||||||||
| Construction and land |
10,267 | 2.18 | 22,687 | 4.79 | ||||||||||||
| Commercial |
16,652 | 3.54 | 15,090 | 3.19 | ||||||||||||
| Consumer loans |
1,703 | 0.36 | 1,920 | 0.41 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Loans |
470,108 | 100.00 | % | 473,561 | 100.00 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Allowance for credit losses |
(2,598 | ) | (2,989 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
| Net Loans |
$ | 467,510 | $ | 470,572 | ||||||||||||
|
|
|
|
|
|||||||||||||
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 $10.3 million and $11.2 million at December 31, 2024 and June 30, 2024, 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 Credit Losses. The following tables set forth the allocation of the Bank’s allowance for credit losses by loan category at the dates indicated. The portion of the credit loss allowance allocated to each loan category does not represent the total available for future losses which may occur within the loan category since the total credit 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 and all loans rated substandard or worse that are 90 days past due.
14
The following table presents, by loan portfolio segment, the changes in the allowance for credit losses for the three months ended December 31, 2024 and 2023:
| December 31, 2024 | Residential real estate: | Commercial real estate: | ||||||||||||||||||||||||||||||||||||||
| (Dollar amounts
in |
Home Equity | Construction- | 1 - 4 family | Multi-family | Commercial | Construction | ||||||||||||||||||||||||||||||||||
| 1 - 4 family | and HELOCs | residential | investor | (five or more) | non-residential | and Land | Commercial | Consumer | Total | |||||||||||||||||||||||||||||||
| Allowance for credit losses: |
||||||||||||||||||||||||||||||||||||||||
| Beginning balance |
$ | 321 | $ | 97 | $ | 42 | $ | 183 | $ | 33 | $ | 1,154 | $ | 125 | $ | 327 | $ | 240 | $ | 2,522 | ||||||||||||||||||||
| Charge-offs |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Recoveries |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Provision (recovery) |
(2 | ) | 2 | (29 | ) | (1 | ) | — | 178 | (63 | ) | 8 | (17 | ) | 76 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Ending Balance |
$ | 319 | $ | 99 | $ | 13 | $ | 182 | $ | 33 | $ | 1,332 | $ | 62 | $ | 335 | $ | 223 | $ | 2,598 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| December 31, 2023 | Residential real estate: | Commercial real estate: | ||||||||||||||||||||||||||||||||||||||
| (Dollar amounts
in |
Home Equity | Construction- | 1 - 4 family | Multi-family | Commercial | Construction | ||||||||||||||||||||||||||||||||||
| 1 - 4 family | and HELOCs | residential | investor | (five or more) | non-residential | and Land | Commercial | Consumer | Total | |||||||||||||||||||||||||||||||
| Allowance for credit losses: |
||||||||||||||||||||||||||||||||||||||||
| Beginning balance |
$ | 407 | $ | 131 | $ | 39 | $ | 325 | $ | 53 | $ | 1,767 | $ | 233 | $ | 340 | $ | 292 | $ | 3,587 | ||||||||||||||||||||
| Charge-offs |
— | — | — | — | — | — | — | — | (13 | ) | (13 | ) | ||||||||||||||||||||||||||||
| Recoveries |
— | — | — | — | — | — | — | — | 2 | 2 | ||||||||||||||||||||||||||||||
| Provision (recovery) |
(4 | ) | 84 | 5 | (8 | ) | (1 | ) | (13 | ) | 7 | (18 | ) | (27 | ) | 25 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Ending Balance |
$ | 403 | $ | 215 | $ | 44 | $ | 317 | $ | 52 | $ | 1,754 | $ | 240 | $ | 322 | $ | 254 | $ | 3,601 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
The following table presents, by loan portfolio segment, the changes in the allowance for credit losses for the six months ended December 31, 2024 and 2023:
| December 31, 2024 | Residential real estate: | Commercial real estate: | ||||||||||||||||||||||||||||||||||||||
| (Dollar amounts
in |
Home Equity | Construction- | 1 - 4 family | Multi-family | Commercial | Construction | ||||||||||||||||||||||||||||||||||
| 1 - 4 family | and HELOCs | residential | investor | (five or more) | non-residential | and Land | Commercial | Consumer | Total | |||||||||||||||||||||||||||||||
| Allowance for credit losses: |
||||||||||||||||||||||||||||||||||||||||
| Beginning balance |
$ | 325 | $ | 100 | $ | 31 | $ | 268 | $ | 32 | $ | 1,533 | $ | 147 | $ | 304 | $ | 249 | $ | 2,989 | ||||||||||||||||||||
| Charge-offs |
— | — | — | — | — | — | — | — | (18 | ) | (18 | ) | ||||||||||||||||||||||||||||
| Recoveries |
— | — | — | — | — | — | — | — | 1 | 1 | ||||||||||||||||||||||||||||||
| Provision (recovery) |
(6 | ) | (1 | ) | (18 | ) | (86 | ) | 1 | (201 | ) | (85 | ) | 31 | (9 | ) | (374 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Ending Balance |
$ | 319 | $ | 99 | $ | 13 | $ | 182 | $ | 33 | $ | 1,332 | $ | 62 | $ | 335 | $ | 223 | $ | 2,598 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| December 31, 2023 | Residential real estate: | Commercial real estate: | ||||||||||||||||||||||||||||||||||||||
| (Dollar amounts
in |
Home Equity | Construction- | 1 - 4 family | Multi-family | Commercial | Construction | ||||||||||||||||||||||||||||||||||
| 1 - 4 family | and HELOCs | residential | investor | (five or more) | non-residential | and Land | Commercial | Consumer | Total | |||||||||||||||||||||||||||||||
| Allowance for credit losses: |
||||||||||||||||||||||||||||||||||||||||
| Beginning balance |
$ | 486 | $ | 113 | $ | 214 | $ | 569 | $ | 89 | $ | 1,420 | $ | 281 | $ | 82 | $ | 59 | $ | 3,313 | ||||||||||||||||||||
| Impact of adopting ASU 2016-13 |
(67 | ) | 19 | (174 | ) | (241 | ) | (30 | ) | 379 | (93 | ) | 254 | 196 | 243 | |||||||||||||||||||||||||
| Charge-offs |
— | — | — | — | — | — | — | — | (13 | ) | (13 | ) | ||||||||||||||||||||||||||||
| Recoveries |
— | — | — | — | — | — | — | — | 28 | 28 | ||||||||||||||||||||||||||||||
| Provision (recovery) |
(16 | ) | 83 | 4 | (11 | ) | (7 | ) | (45 | ) | 52 | (14 | ) | (16 | ) | 30 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Ending Balance |
$ | 403 | $ | 215 | $ | 44 | $ | 317 | $ | 52 | $ | 1,754 | $ | 240 | $ | 322 | $ | 254 | $ | 3,601 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
During the three and six months ended December 31, 2024, the changes in the provision for credit losses for each portfolio of loans were primarily due to fluctuations in the outstanding balance of each portfolio of loans collectively evaluated for impairment. The overall decrease in the allowance during the six months ended December 31, 2024 can be primarily attributed to a decrease in delinquent 1-4 family investor loans and commercial non-residential loans, as well as consistently low levels of net charge-offs, strong asset quality metrics and continued conservative lending practices.
During the three and six months ended December 31, 2023, and exclusive of the impact of the adoption of ASU 2016-13, the changes in the provision for credit losses for each portfolio of loans were primarily due to fluctuations in the outstanding balance of each portfolio of loans collectively evaluated for impairment. During the three months ended December 31, 2023, we experienced an increase in delinquent home equity loans and home equity lines of credit and a corresponding increase in the provision for credit losses for this portfolio. The overall increase in the allowance during the six months ended December 31, 2023 can be primarily attributed to the previously mentioned increase in delinquent home equity loans and home equity lines of credit, partially offset by a decrease in the outstanding balance of our total loan portfolio.
15
Under the provisions of ASC 326, loans evaluated individually for impairment consist of non-accrual loans. The following table presents the allowance for credit losses and recorded investment by loan portfolio classification at December 31, 2024 and June 30, 2024:
| December 31, 2024 | Residential real estate: | Commercial real estate: | ||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in |
Home Equity | Construction- | 1 - 4 family | Multi-family | Commercial | Construction | ||||||||||||||||||||||||||||||||||
| 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 |
319 | 99 | 13 | 182 | 33 | 1,332 | 62 | 335 | 223 | 2,598 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total allowance |
$ | 319 | $ | 99 | $ | 13 | $ | 182 | $ | 33 | $ | 1,332 | $ | 62 | $ | 335 | $ | 223 | $ | 2,598 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Loans receivable ending balance: |
||||||||||||||||||||||||||||||||||||||||
| Individually evaluated for impairment |
$ | 1,003 | $ | 42 | $ | — | $ | 922 | $ | — | $ | 331 | $ | — | $ | — | $ | 105 | $ | 2,403 | ||||||||||||||||||||
| Collectively evaluated for impairment |
124,474 | 29,957 | 3,734 | 87,770 | 15,543 | 177,710 | 10,267 | 16,652 | 1,598 | 467,705 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total portfolio |
$ |
125,477 |
|
$ | 29,999 | $ | 3,734 | $ | 88,692 | $ | 15,543 | $ | 178,041 | $ | 10,267 | $ | 16,652 | $ | 1,703 | $ | 470,108 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| June 30, 2024 | Residential real estate: | Commercial real estate: | ||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in |
Home Equity | Construction- | 1 - 4 family | Multi-family | Commercial | Construction | ||||||||||||||||||||||||||||||||||
| 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 |
325 | 100 | 31 | 268 | 32 | 1,533 | 147 | 304 | 249 | 2,989 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total allowance |
$ | 325 | $ | 100 | $ | 31 | $ | 268 | $ | 32 | $ | 1,533 | $ | 147 | $ | 304 | $ | 249 | $ | 2,989 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Loans receivable ending balance: |
||||||||||||||||||||||||||||||||||||||||
| Individually evaluated for impairment |
$ | 1,221 | $ | 426 | $ | — | $ | 1,007 | $ | 194 | $ | 337 | $ | — | $ | — | $ | 126 | $ | 3,311 | ||||||||||||||||||||
| Collectively evaluated for impairment |
126,690 | 30,341 | 8,802 | 91,277 | 15,425 | 158,144 | 22,687 | 15,090 | 1,794 | 470,250 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total portfolio |
$ | 127,911 | $ | 30,767 | $ | 8,802 | $ | 92,284 | $ | 15,619 | $ | 158,481 | $ | 22,687 | $ | 15,090 | $ | 1,920 | $ | 473,561 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Credit Quality Information
The following tables represent credit exposures by internally assigned grades as of December 31, 2024 and June 30, 2024 that management uses to monitor the credit quality of the overall loan portfolio. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. All loans greater than 90 days past due are considered Substandard. 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.
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 Bank has a structured loan rating process with several layers of internal and external oversight to help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed. Generally, consumer and residential mortgage loans are included in the Pass category unless a specific action, such as nonperformance, repossession, or death occurs to raise awareness of a possible credit event. The Company’s Credit Department is responsible for the timely and accurate risk rating of the loans on an ongoing basis. Every credit which must be approved by Loan Committee or the Board of Directors is assigned a risk rating at time of consideration. The Credit Department also annually reviews commercial relationships of $500,000 or greater to assign or re-affirm risk ratings.
16
The following tables set forth the amounts of the portfolio of classified asset categories for the commercial loan portfolios at December 31, 2024 and June 30, 2024:
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Fiscal Year | Revolving Loans | Revolving Loans | ||||||||||||||||||||||||||||||||||
| Amortized | Converted | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Cost Basis | to Term | Total | ||||||||||||||||||||||||||||
| 1 - 4 family investor |
||||||||||||||||||||||||||||||||||||
| Pass |
$ | 627 | $ | 3,796 | $ | 9,740 | $ | 6,960 | $ | 17,047 | $ | 44,744 | $ | 3,403 | $ | 696 | $ | 87,013 | ||||||||||||||||||
| Special Mention |
— | — | — | — | — | 757 | — | — | 757 | |||||||||||||||||||||||||||
| Substandard |
— | — | 890 | — | — | 32 | — | — | 922 | |||||||||||||||||||||||||||
| Doubtful |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Loss |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total 1 - 4 family investor |
$ | 627 | $ | 3,796 | $ | 10,630 | $ | 6,960 | $ | 17,047 | $ | 45,533 | $ | 3,403 | $ | 696 | $ | 88,692 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Multi-family (five or more) |
||||||||||||||||||||||||||||||||||||
| Pass |
$ | 486 | $ | 329 | $ | 1,289 | $ | 1,284 | $ | 3,778 | $ | 8,377 | $ | — | $ | — | $ | 15,543 | ||||||||||||||||||
| Special Mention |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Substandard |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Doubtful |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Loss |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total Multi-family |
$ | 486 | $ | 329 | $ | 1,289 | $ | 1,284 | $ | 3,778 | $ | 8,377 | $ | — | $ | — | $ | 15,543 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Commercial non-residential |
||||||||||||||||||||||||||||||||||||
| Pass |
$ | 12,065 | $ | 12,999 | $ | 21,191 | $ | 69,317 | $ | 24,268 | $ | 32,852 | $ | — | $ | 87 | $ | 172,779 | ||||||||||||||||||
| Special Mention |
— | — | — | — | 4,931 | — | — | — | 4,931 | |||||||||||||||||||||||||||
| Substandard |
— | — | — | — | 319 | 12 | — | — | 331 | |||||||||||||||||||||||||||
| Doubtful |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Loss |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total Commercial non-residential |
$ | 12,065 | $ | 12,999 | $ | 21,191 | $ | 69,317 | $ | 29,518 | $ | 32,864 | $ | — | $ | 87 | $ | 178,041 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Construction and land |
||||||||||||||||||||||||||||||||||||
| Pass |
$ | 1,294 | $ | 6,668 | $ | 798 | $ | — | $ | — | $ | 1,507 | $ | — | $ | — | $ | 10,267 | ||||||||||||||||||
| Special Mention |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Substandard |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Doubtful |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Loss |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total Construction and land |
$ | 1,294 | $ | 6,668 | $ | 798 | $ | — | $ | — | $ | 1,507 | $ | — | $ | — | $ | 10,267 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Commercial |
||||||||||||||||||||||||||||||||||||
| Pass |
$ | 96 | $ | 853 | $ | 7,591 | $ | 7,717 | $ | — | $ | 395 | $ | — | $ | — | $ | 16,652 | ||||||||||||||||||
| Special Mention |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Substandard |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Doubtful |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Loss |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total Commercial |
$ | 96 | $ | 853 | $ | 7,591 | $ | 7,717 | $ | — | $ | 395 | $ | — | $ | — | $ | 16,652 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
17
| June 30, 2024 | ||||||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Fiscal Year | Revolving Loans Amortized Cost Basis |
Revolving Loans Converted to Term |
Total | |||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior | |||||||||||||||||||||||||||||||
| 1 - 4 family investor |
||||||||||||||||||||||||||||||||||||
| Pass |
$ | 3,852 | $ | 10,948 | $ | 6,228 | $ | 17,462 | $ | 11,855 | $ | 36,635 | $ | 2,702 | $ | 706 | $ | 90,388 | ||||||||||||||||||
| Special Mention |
— | — | — | — | — | 889 | — | — | 889 | |||||||||||||||||||||||||||
| Substandard |
— | — | 930 | — | — | 77 | — | — | 1,007 | |||||||||||||||||||||||||||
| Doubtful |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Loss |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total 1 - 4 family investor |
$ | 3,852 | $ | 10,948 | $ | 7,158 | $ | 17,462 | $ | 11,855 | $ | 37,601 | $ | 2,702 | $ | 706 | $ | 92,284 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Multi-family (five or more) |
||||||||||||||||||||||||||||||||||||
| Pass |
$ | 331 | $ | 1,307 | $ | 1,310 | $ | 4,072 | $ | 5,508 | $ | 2,897 | $ | — | $ | — | $ | 15,425 | ||||||||||||||||||
| Special Mention |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Substandard |
— | — | — | — | — | 194 | — | — | 194 | |||||||||||||||||||||||||||
| Doubtful |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Loss |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total Multi-family |
$ | 331 | $ | 1,307 | $ | 1,310 | $ | 4,072 | $ | 5,508 | $ | 3,091 | $ | — | $ | — | $ | 15,619 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Commercial non-residential |
||||||||||||||||||||||||||||||||||||
| Pass |
$ | 11,970 | $ | 20,964 | $ | 59,973 | $ | 30,013 | $ | 15,668 | $ | 19,465 | $ | — | $ | 91 | $ | 158,144 | ||||||||||||||||||
| Special Mention |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Substandard |
— | — | — | 319 | — | 18 | — | — | 337 | |||||||||||||||||||||||||||
| Doubtful |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Loss |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total Commercial non-residential |
$ | 11,970 | $ | 20,964 | $ | 59,973 | $ | 30,332 | $ | 15,668 | $ | 19,483 | $ | — | $ | 91 | $ | 158,481 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Construction and land |
||||||||||||||||||||||||||||||||||||
| Pass |
$ | 4,341 | $ | 5,797 | $ | 10,501 | $ | — | $ | — | $ | 2,048 | $ | — | $ | — | $ | 22,687 | ||||||||||||||||||
| Special Mention |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Substandard |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Doubtful |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Loss |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total Construction and land |
$ | 4,341 | $ | 5,797 | $ | 10,501 | $ | — | $ | — | $ | 2,048 | $ | — | $ | — | $ | 22,687 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Commercial |
||||||||||||||||||||||||||||||||||||
| Pass |
$ | 593 | $ | 6,914 | $ | 7,367 | $ | — | $ | 14 | $ | 202 | $ | — | $ | — | $ | 15,090 | ||||||||||||||||||
| Special Mention |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Substandard |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Doubtful |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Loss |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total Commercial |
$ | 593 | $ | 6,914 | $ | 7,367 | $ | — | $ | 14 | $ | 202 | $ | — | $ | — | $ | 15,090 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
18
The Company monitors the credit risk profile by payment activity for residential and consumer loans. Generally, residential and consumer loans on nonaccrual status and 90 or more days past due and accruing are considered non-performing and are reviewed monthly. 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 December 31, 2024 and June 30, 2024:
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Fiscal Year | Revolving Loans Amortized Cost Basis |
Revolving Loans Converted to Term |
Total | |||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | |||||||||||||||||||||||||||||||
| 1 - 4 family residential |
||||||||||||||||||||||||||||||||||||
| Performing |
$ | 6,356 | $ | 10,286 | $ | 7,540 | $ | 12,926 | $ | 14,599 | $ | 72,767 | $ | — | $ | — | $ | 124,474 | ||||||||||||||||||
| Non-performing |
— | — | — | — | — | 1,003 | — | — | 1,003 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total 1 - 4 family residential |
$ | 6,356 | $ | 10,286 | $ | 7,540 | $ | 12,926 | $ | 14,599 | $ | 73,770 | $ | — | $ | — | $ | 125,477 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Home equity & HELOCs |
||||||||||||||||||||||||||||||||||||
| Performing |
$ | 633 | $ | 1,587 | $ | 2,046 | $ | 444 | $ | 764 | $ | 4,493 | $ | 18,469 | $ | 1,521 | $ | 29,957 | ||||||||||||||||||
| Non-performing |
— | — | — | — | — | — | — | 42 | 42 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total Home equity & HELOCs |
$ | 633 | $ | 1,587 | $ | 2,046 | $ | 444 | $ | 764 | $ | 4,493 | $ | 18,469 | $ | 1,563 | $ | 29,999 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Construction residential |
||||||||||||||||||||||||||||||||||||
| Performing |
$ | 1,331 | $ | 2,308 | $ | — | $ | — | $ | 95 | $ | — | $ | — | $ | — | $ | 3,734 | ||||||||||||||||||
| Non-performing |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total construction residential |
$ | 1,331 | $ | 2,308 | $ | — | $ | — | $ | 95 | $ | — | $ | — | $ | — | $ | 3,734 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Consumer |
||||||||||||||||||||||||||||||||||||
| Performing |
$ | — | $ | 108 | $ | — | $ | 30 | $ | — | $ | 957 | $ | — | $ | 503 | $ | 1,598 | ||||||||||||||||||
| Non-performing |
— | — | — | — | — | 105 | — | — | 105 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total Consumer |
$ | — | $ | 108 | $ | — | $ | 30 | $ | — | $ | 1,062 | $ | — | $ | 503 | $ | 1,703 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | 18 | $ | — | $ | — | $ | 18 | ||||||||||||||||||
19
| June 30, 2024 | ||||||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Fiscal Year |
Revolving Loans Amortized Cost Basis |
Revolving Loans Converted to Term |
Total | |||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior | |||||||||||||||||||||||||||||||
| 1 - 4 family residential |
||||||||||||||||||||||||||||||||||||
| Performing |
$ | 11,987 | $ | 7,765 | $ | 13,307 | $ | 15,162 | $ | 8,412 | $ | 70,057 | $ | — | $ | — | $ | 126,690 | ||||||||||||||||||
| Non-performing |
— | — | — | — | — | 1,221 | — | — | 1,221 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total 1 - 4 family residential |
$ | 11,987 | $ | 7,765 | $ | 13,307 | $ | 15,162 | $ | 8,412 | $ | 71,278 | $ | — | $ | — | $ | 127,911 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Home equity & HELOCs |
||||||||||||||||||||||||||||||||||||
| Performing |
$ | 1,685 | $ | 2,164 | $ | 474 | $ | 859 | $ | 576 | $ | 4,595 | $ | 18,333 | $ | 1,655 | $ | 30,341 | ||||||||||||||||||
| Non-performing |
— | — | — | — | — | — | 381 | 45 | 426 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total Home equity & HELOCs |
$ | 1,685 | $ | 2,164 | $ | 474 | $ | 859 | $ | 576 | $ | 4,595 | $ | 18,714 | $ | 1,700 | $ | 30,767 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Construction residential |
||||||||||||||||||||||||||||||||||||
| Performing |
$ | 5,180 | $ | 2,510 | $ | 105 | $ | 1,007 | $ | — | $ | — | $ | — | $ | — | $ | 8,802 | ||||||||||||||||||
| Non-performing |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total construction residential |
$ | 5,180 | $ | 2,510 | $ | 105 | $ | 1,007 | $ | — | $ | — | $ | — | $ | — | $ | 8,802 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Consumer |
||||||||||||||||||||||||||||||||||||
| Performing |
$ | 123 | $ | 116 | $ | 45 | $ | — | $ | 3 | $ | 1,507 | $ | — | $ | — | $ | 1,794 | ||||||||||||||||||
| Non-performing |
— | — | — | — | — | 126 | — | — | 126 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total Consumer |
$ | 123 | $ | 116 | $ | 45 | $ | — | $ | 3 | $ | 1,633 | $ | — | $ | — | $ | 1,920 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Current period gross charge-offs |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | 13 | $ | — | $ | — | $ | 13 | ||||||||||||||||||
Loan Delinquencies and Non-accrual Loans
Management further monitors the performance and credit quality of the loan portfolio by analyzing the length of time a recorded payment is past due. The following are tables which include an aging analysis of the recorded investment of past due loans as of December 31, 2024 and June 30, 2024. All non-accrual loans included in the tables below do not have an associated allowance for credit losses because any impairment is charged-off at the time the loan moves to non-accrual status. As of December 31, 2024, $2.3 million of the non-accrual loans included in the table below are secured by real estate and $105 thousand are unsecured.
| Aged Analysis of Past Due and Non-accrual Loans As of December 31, 2024 |
||||||||||||||||||||||||||||||||
| (Dollar amounts in thousands) |
30 - 59 Days Past Due |
60 - 89 Days Past Due |
90 Days Or Greater |
Total Past Due |
Current | Total Loans Receivable |
Recorded Investment >90 Days and Accruing |
Recorded Investment Loans on Non-Accrual |
||||||||||||||||||||||||
| Residential real estate: |
||||||||||||||||||||||||||||||||
| 1 - 4 family |
$ | 80 | $ | 10 | $ | 712 | $ | 802 | $ | 124,675 | $ | 125,477 | $ | — | $ | 1,003 | ||||||||||||||||
| Home equity and HELOCs |
19 | — | 42 | 61 | 29,938 | 29,999 | — | 42 | ||||||||||||||||||||||||
| Construction - residential |
— | 6 | — | 6 | 3,728 | 3,734 | — | — | ||||||||||||||||||||||||
| Commercial real estate: |
||||||||||||||||||||||||||||||||
| 1 - 4 family investor |
— | 15 | — | 15 | 88,677 | 88,692 | — | 922 | ||||||||||||||||||||||||
| Multi-family |
— | — | — | — | 15,543 | 15,543 | — | — | ||||||||||||||||||||||||
| Commercial non-residential |
— | — | 331 | 331 | 177,710 | 178,041 | — | 331 | ||||||||||||||||||||||||
| Construction and land |
— | — | — | — | 10,267 | 10,267 | — | — | ||||||||||||||||||||||||
| Commercial |
— | — | — | — | 16,652 | 16,652 | — | — | ||||||||||||||||||||||||
| Consumer |
— | 13 | — | 13 | 1,690 | 1,703 | — | 105 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
$ | 99 | $ | 44 | $ | 1,085 | $ | 1,228 | $ | 468,880 | $ | 470,108 | $ | — | $ | 2,403 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
20
| Aged Analysis of Past Due and Non-accrual Loans As of June 30, 2024 |
||||||||||||||||||||||||||||||||
| 30 (Dollar amounts in thousands) |
30 - 59 Days Past Due |
60 - 89 Days Past Due |
90 Days Or Greater |
Total Past Due |
Current | Total Loans Receivable |
Recorded Investment >90 Days and Accruing |
Recorded Investment Loans on Non-Accrual |
||||||||||||||||||||||||
| Residential real estate: |
||||||||||||||||||||||||||||||||
| 1 - 4 family |
$ | 153 | $ | 539 | $ | 162 | $ | 854 | $ | 127,057 | $ | 127,911 | $ | — | $ | 1,221 | ||||||||||||||||
| Home equity and HELOCs |
49 | — | — | 49 | 30,718 | 30,767 | — | 426 | ||||||||||||||||||||||||
| Construction - residential |
— | — | — | — | 8,802 | 8,802 | — | — | ||||||||||||||||||||||||
| Commercial real estate: |
||||||||||||||||||||||||||||||||
| 1 - 4 family investor |
85 | 930 | — | 1,015 | 91,269 | 92,284 | — | 1,007 | ||||||||||||||||||||||||
| Multi-family |
— | — | — | — | 15,619 | 15,619 | — | 194 | ||||||||||||||||||||||||
| Commercial non-residential |
60 | — | 337 | 397 | 158,084 | 158,481 | — | 337 | ||||||||||||||||||||||||
| Construction and land |
— | — | — | — | 22,687 | 22,687 | — | — | ||||||||||||||||||||||||
| Commercial |
— | — | — | — | 15,090 | 15,090 | — | — | ||||||||||||||||||||||||
| Consumer |
— | — | 18 | 18 | 1,902 | 1,920 | — | 126 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
$ | 347 | $ | 1,469 | $ | 517 | $ | 2,333 | $ | 471,228 | $ | 473,561 | $ | — | $ | 3,311 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Interest income on non-accrual loans that would have been recorded if these loans had performed in accordance with their terms was approximately $35 thousand, $72 thousand, $54 thousand and $106 thousand during the three and six months ended December 31, 2024 and 2023, respectively.
Concentration of Credit Risk
The Company’s primary business activity as of December 31, 2024 was with customers throughout the Delaware Valley through twelve full-service branch offices located in Bucks and Philadelphia Counties in Pennsylvania, as well as Burlington, Camden, and Mercer Counties in New Jersey. Accordingly, the Company has extended credit primarily to residential borrowers and commercial entities in this area whose ability to repay their loans is influenced by the region’s economy.
As of December 31, 2024, the Company considered its concentration of credit risk to be acceptable. As of December 31, 2024, commercial real estate loans secured by retail space totaled approximately $62.7 million, or 13.3% of total loans, and were comprised of $51.9 million of non-owner-occupied properties and $10.8 million of owner-occupied properties. The Company’s non-owner occupied commercial real estate loans that are secured by retail space have high occupancy rates with longstanding tenants.
Loans with Modified Terms to Borrowers Experiencing Financial Difficulty
During the three and six months ended December 31, 2024 and 2023, there were no loans modified to borrowers experiencing financial difficulty.
Note 7 – Premises and Equipment
The components of premises and equipment are as follows as of December 31, 2024 and June 30, 2024:
| (Dollars in thousands) |
December 31, 2024 |
June 30, 2024 |
||||||
| Land |
$ | 1,441 | $ | 1,441 | ||||
| Office buildings and improvements |
7,953 | 7,921 | ||||||
| Furniture, fixtures and equipment |
2,291 | 2,293 | ||||||
| Automobiles |
58 | 58 | ||||||
|
|
|
|
|
|||||
| 11,743 | 11,713 | |||||||
| Accumulated depreciation |
(4,866 | ) | (4,527 | ) | ||||
|
|
|
|
|
|||||
| $ | 6,877 | $ | 7,186 | |||||
|
|
|
|
|
|||||
Depreciation expense amounted to $167 thousand and $339 thousand for the three and six months ended December 31, 2024 and $203 thousand and $400 thousand for the three and six months ended December 31, 2023, respectively.
21
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 December 31, 2024 and June 30, 2024, the other intangibles consisted of $289 thousand and $356 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, 2024, management included considerations of the current economic environment 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, 2024. During the three and six months ended December 31, 2024, management considered the current economic environment 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 six months ended December 31, 2024.
Goodwill and other intangibles are summarized as follows for the periods presented:
| (Dollars in thousands) |
Goodwill | Core Deposit Intangibles |
||||||
| Balance, June 30, 2024 |
$ | 4,858 | $ | 356 | ||||
| Adjustments: |
||||||||
| Additions |
— | — | ||||||
| Amortization |
— | (33 | ) | |||||
|
|
|
|
|
|||||
| Balance, September 30, 2024 |
$ | 4,858 | $ | 323 | ||||
| Adjustments: |
||||||||
| Additions |
— | — | ||||||
| Amortization |
— | (34 | ) | |||||
|
|
|
|
|
|||||
| Balance, December 31, 2024 |
$ | 4,858 | $ | 289 | ||||
|
|
|
|
|
|||||
| (Dollars in thousands) |
Goodwill | Core Deposit Intangibles |
||||||
| Balance, June 30, 2023 |
$ | 4,858 | $ | 519 | ||||
| Adjustments: |
||||||||
| Additions |
— | — | ||||||
| Amortization |
— | (41 | ) | |||||
|
|
|
|
|
|||||
| Balance, September 30, 2023 |
$ | 4,858 | $ | 478 | ||||
| Adjustments: |
||||||||
| Additions |
— | — | ||||||
| Amortization |
— | (41 | ) | |||||
|
|
|
|
|
|||||
| Balance, December 31, 2023 |
$ | 4,858 | $ | 437 | ||||
|
|
|
|
|
|||||
Aggregate amortization expense was $34 thousand and $67 thousand for the three and six months ended December 31, 2024 and $41 thousand and $82 thousand for the three and six months ended December 31, 2023, respectively.
22
Note 9 – Deposits
Deposits consist of the following major classifications as of December 31, 2024 and June 30, 2024:
| (Dollars in thousands) |
December 31, 2024 | June 30, 2024 | ||||||
| Non-interest bearing checking |
$ | 59,201 | $ | 64,627 | ||||
| Interest bearing checking |
130,436 | 132,927 | ||||||
| Money market accounts |
171,881 | 176,422 | ||||||
| Savings and club accounts |
78,138 | 82,173 | ||||||
| Certificates of deposit |
187,780 | 173,661 | ||||||
|
|
|
|
|
|||||
| $ | 627,436 | $ | 629,810 | |||||
|
|
|
|
|
|||||
Note 10 – Borrowings
The Bank is a member of the Federal Home Loan Bank (“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 $279.5 million and $287.3 million at December 31, 2024 and June 30, 2024, respectively. FHLB advances are secured by qualifying assets of the Bank, which include Federal Home Loan Bank stock and loans. The Bank had $405.1 million and $415.9 million of loans pledged as collateral as of December 31, 2024 and June 30, 2024, 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 $2.0 million and $2.8 million at December 31, 2024 and June 30, 2024, respectively.
Advances from the FHLB of Pittsburgh consisted of $28.0 million and $48.0 million of fixed rate short-term borrowings as of December 31, 2024 and June 30, 2024, respectively.
As of December 31, 2024 and June 30, 2024, the Bank had $8.6 million and $8.8 million of loans pledged as collateral to secure a $4.0 million and $3.6 million overnight line of credit from the Federal Reserve Bank, respectively. There was no outstanding balance for the overnight line of credit from the Federal Reserve Bank as of December 31, 2024 and June 30, 2024. In addition, as of December 31, 2024 and June 30, 2024, the Bank had $10.0 million of available credit from Atlantic Community Bankers Bank to purchase federal funds.
Note 11 – Stock Based Compensation
Stock-based compensation is accounted for in accordance with FASB ASC Topic 718 for Compensation — Stock Compensation. The Company establishes fair value for its equity awards to determine their cost. The Company recognizes the related expense for employees over the appropriate vesting period, or when applicable, service period, using the straight-line method. However, consistent with the guidance, the amount of stock-based compensation recognized at any date must at least equal the portion of the grant date value of the award that is vested at that date. As a result, it may be necessary to recognize the expense using a ratable method.
On May 10, 2022, the shareholders of the Company approved the William Penn Bancorporation 2022 Equity Incentive Plan (the “Plan”). The Plan provides for the issuance of up to 1,769,604 shares (505,601 restricted stock awards and 1,264,003 stock options) of Company common stock.
Under the Plan, the Company has granted 505,600 shares of restricted stock, net of forfeitures, with a weighted average grant date fair value of $11.71 per share. To fund the grant of restricted common stock, the Company issued shares from authorized but unissued shares. Restricted shares granted under the Plan vest in equal installments over a five year period. Compensation expense related to the restricted shares is recognized ratably over the vesting period in an amount which totals the market price of the Company’s stock at the grant date. The expense recognized for the restricted shares for the three and six months ended December 31, 2024 was $298 thousand and $596 thousand, respectively, and $281 thousand and $563 thousand for the three and six months ended December 31, 2023, respectively. The expected future compensation expense related to the 313,989 non-vested restricted shares outstanding at December 31, 2024 was $2.9 million over a weighted average period of 2.52 years. The expected future compensation expense related to the 383,258 non-vested restricted shares outstanding at December 31, 2023 was $3.8 million over a weighted average period of 3.37 years.
23
The following is a summary of the Company’s restricted stock activity during the six months ended December 31, 2024:
| Summary of Non-vested Restricted Stock Award Activity | Number of Shares |
Weighted Average Grant Price |
||||||
| Non-vested Restricted Stock Awards outstanding July 1, 2024 |
313,989 | $ | 11.73 | |||||
| Issued |
— | — | ||||||
| Vested |
— | — | ||||||
| Forfeited |
— | — | ||||||
|
|
|
|||||||
| Non-vested Restricted Stock Awards outstanding December 31, 2024 |
313,989 | $ | 11.73 | |||||
|
|
|
|||||||
The following is a summary of the Company’s restricted stock activity during the six months ended December 31, 2023:
| Summary of Non-vested Restricted Stock Award Activity | Number of Shares |
Weighted Average Grant Price |
||||||
| Non-vested Restricted Stock Awards outstanding July 1, 2023 |
383,258 | $ | 11.66 | |||||
| Issued |
— | — | ||||||
| Vested |
— | — | ||||||
| Forfeited |
— | — | ||||||
|
|
|
|||||||
| Non-vested Restricted Stock Awards outstanding December 31, 2023 |
383,258 | $ | 11.66 | |||||
|
|
|
|||||||
Under the Plan, the Company granted 1,264,000 stock options, net of forfeitures, with a weighted average grant date fair value of $3.24 per share. Stock options granted under the Plan vest in equal installments over a five year period. Stock options were granted at a weighted average exercise price of $11.71, which represents the fair value of the Company’s common stock price on the grant date based on the closing market price, and have an expiration period of 10 years. The fair value of stock options granted was valued using the Black-Scholes option pricing model using the following weighted average assumptions: expected life of 6.5 years, risk-free rate of return of 2.98%, volatility of 24.60%, and a dividend yield of 1.02%. Compensation expense recognized for the stock options for the three and six months ended December 31, 2024 was $206 thousand and $412 thousand, respectively. Compensation expense recognized for the stock options for the three and six months ended December 31, 2023 was $195 thousand and $390 thousand, respectively. The expected future compensation expense related to the 1,264,000 stock options outstanding at December 31, 2024 was $2.0 million over a weighted average period of 2.52 years. The expected future compensation expense related to the 1,197,640 stock options outstanding at December 31, 2023 was $2.6 million over a weighted average period of 3.37 years.
The following is a summary of the Company’s stock option activity during the six months ended December 31, 2024:
| Summary of Stock Option Activity | Number of Options |
Weighted Exercise Price per Shares |
||||||
| Beginning balance July 1, 2024 |
1,264,000 | $ | 11.71 | |||||
| Granted |
— | — | ||||||
| Exercised |
||||||||
| Forfeited |
— | — | ||||||
| Expired |
— | — | ||||||
|
|
|
|||||||
| Ending balance December 31, 2024 |
1,264,000 | $ | 11.71 | |||||
|
|
|
|||||||
The following is a summary of the Company’s stock option activity during the six months ended December 31, 2023:
| Summary of Stock Option Activity | Number of Options |
Weighted Exercise Price per Shares |
||||||
| Beginning balance July 1, 2023 |
1,197,640 | $ | 11.66 | |||||
| Granted |
— | — | ||||||
| Exercised |
— | — | ||||||
| Forfeited |
— | — | ||||||
| Expired |
— | — | ||||||
|
|
|
|||||||
| Ending balance December 31, 2023 |
1,197,640 | $ | 11.66 | |||||
|
|
|
|||||||
24
The weighted average remaining contractual term was approximately 7.47 years and the aggregate intrinsic value was $401 thousand for options outstanding as of December 31, 2024. As of December 31, 2024, exercisable options totaled 479,056 with a weighted average exercise of price of $11.66 per share, a weighted average remaining contractual term of approximately 7.38 years, and the aggregate intrinsic value was $161 thousand. The weighted average remaining contractual term was approximately 8.38 years and the aggregate intrinsic value was $653 thousand for options outstanding as of December 31, 2023. As of December 31, 2023, exercisable options totaled 239,528 with a weighted average exercise of price of $11.66 per share, a weighted average remaining contractual term of approximately 8.38 years, and the aggregate intrinsic value was $131 thousand.
Note 12 – 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 December 31, 2024 and June 30, 2024:
| (Dollars in thousands) |
December 31, 2024 |
June 30, 2024 |
||||||
| Commitments to extend credit |
$ | 16,171 | $ | 15,676 | ||||
| Unfunded commitments under lines of credit |
65,044 | 65,705 | ||||||
| Standby letters of credit |
118 | 86 | ||||||
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.
As of December 31, 2024 and June 30, 2024, the allowance for credit losses on unfunded lending commitments was $121 thousand and $128 thousand, respectively. The recovery for credit losses on unfunded lending commitments recognized for the three and six months ended December 31, 2024 was $62 thousand and $7 thousand, respectively. The Company did not record a provision for credit losses on unfunded lending commitments for the three and six months ended December 31, 2023.
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 13 – 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 December 31, 2024 and June 30, 2024, the most recent notification from the regulators categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action.
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
25
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.
| As of December 31, 2024 | Actual | CBLR Framework Requirement |
||||||||||||||
| (Dollars in thousands except for ratios) |
Amount | Ratio | Amount | Ratio | ||||||||||||
| William Penn Bank: |
||||||||||||||||
| Tier 1 leverage |
$ | 134,541 | 16.66 | % | $ | 72,688 | 9.00 | % | ||||||||
| As of June 30, 2024 | Actual | CBLR Framework Requirement |
||||||||||||||
| (Dollars in thousands except for ratios) |
Amount | Ratio | Amount | Ratio | ||||||||||||
| William Penn Bank: |
||||||||||||||||
| Tier 1 leverage |
$ | 134,494 | 16.10 | % | $ | 75,164 | 9.00 | % | ||||||||
Note 14 – 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. | |
| 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. | |
26
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 December 31, 2024 and June 30, 2024, 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.
| December 31, 2024 | ||||||||||||||||
| (Dollars in thousands) |
Level I | Level II | Level III | Total | ||||||||||||
| Assets: |
||||||||||||||||
| Investments available for sale: |
||||||||||||||||
| Mortgage-backed securities |
$ | — | $ | 89,820 | $ | — | $ | 89,820 | ||||||||
| U.S. agency collateralized mortgage obligations |
— | 6,940 | — | 6,940 | ||||||||||||
| U.S. government agency securities |
— | 538 | — | 538 | ||||||||||||
| Municipal bonds |
— | 14,915 | — | 14,915 | ||||||||||||
| Corporate bonds |
— | 32,876 | — | 32,876 | ||||||||||||
| Equity securities |
2,297 | — | — | 2,297 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Assets |
$ | 2,297 | $ | 145,089 | $ | — | $ | 147,386 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| June 30,2024 | ||||||||||||||||
| (Dollars in thousands) |
Level I | Level II | Level III | Total | ||||||||||||
| Assets: |
||||||||||||||||
| Investments available for sale: |
||||||||||||||||
| Mortgage-backed securities |
$ | — | $ | 95,125 | $ | — | $ | 95,125 | ||||||||
| U.S. agency collateralized mortgage obligations |
— | 7,200 | — | 7,200 | ||||||||||||
| U.S. government agency securities |
— | 693 | — | 693 | ||||||||||||
| Municipal bonds |
— | 14,969 | — | 14,969 | ||||||||||||
| Corporate bonds |
— | 32,768 | — | 32,768 | ||||||||||||
| Equity securities |
2,016 | — | — | 2,016 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Assets |
$ | 2,016 | $ | 150,755 | $ | — | $ | 152,771 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
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.
Loans individually evaluated for impairment are generally measured for impairment using the fair value of the collateral supporting the loan. Evaluating the collateral for these loans 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 December 31, 2024 and June 30, 2024, the Company charged-off the collateral deficiency on loans evaluated individually for impairment. As a result, there were no specific reserves on loans evaluated individually for impairment as of December 31, 2024 and June 30, 2024.
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 December 31, 2024 and June 30, 2024, there were no assets required to be measured and reported at fair value on a non-recurring basis.
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.
27
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.
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.
28
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 December 31,2024 | ||||||||||||||||||||
| (Dollars in thousands) |
Carrying Amount |
Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||||
| Financial instruments - assets: |
||||||||||||||||||||
| Loans receivable, net |
$ | 467,510 | $ | 438,764 | $ | — | $ | — | $ | 438,764 | ||||||||||
| Securities held to maturity |
85,098 | 68,316 | — | 68,316 | — | |||||||||||||||
| Financial instruments - liabilities: |
||||||||||||||||||||
| Certificates of deposit |
187,780 | 186,718 | — | — | 186,718 | |||||||||||||||
| Advances from Federal Home Loan Bank |
28,000 | 28,000 | — | — | 28,000 | |||||||||||||||
| Off-balance sheet financial instruments |
— | — | — | — | — | |||||||||||||||
| Fair Value Measurements at June 30, 2024 | ||||||||||||||||||||
| (Dollars in thousands) |
Carrying Amount |
Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||||
| Financial instruments - assets: |
||||||||||||||||||||
| Loans receivable, net |
$ | 470,572 | $ | 439,118 | $ | — | $ | — | $ | 439,118 | ||||||||||
| Securities held to maturity |
93,056 | 76,827 | — | 76,827 | — | |||||||||||||||
| Financial instruments - liabilities: |
||||||||||||||||||||
| Certificates of deposit |
173,661 | 171,613 | — | — | 171,613 | |||||||||||||||
| Advances from Federal Home Loan Bank |
48,000 | 48,000 | — | — | 48,000 | |||||||||||||||
| Off-balance sheet financial instruments |
— | — | — | — | — | |||||||||||||||
Note 15 – 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. Topic 842 requires the Company to recognize a right-of-use (“ROU”) asset and corresponding lease liability for each of its operating leases. The operating lease ROU asset was $9.8 million and $8.3 million as of December 31, 2024 and June 30, 2024, respectively, and the operating lease liability was $10.1 million and $8.6 million as of December 31, 2024 and June 30, 2024, respectively. 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.
29
The calculated amount of the ROU assets and lease liabilities 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.
| December 31, 2024 |
||||
| Weighted average remaining lease term |
||||
| Operating leases |
16.2 years | |||
| Weighted average discount rate |
||||
| Operating leases |
3.30% | |||
| June 30, 2024 |
||||
| Weighted average remaining lease term |
||||
| Operating leases |
15.8 years | |||
| Weighted average discount rate |
||||
| Operating leases |
2.92% | |||
The Company recorded $260 thousand and $482 thousands of net lease costs during the three and six months ended December 31, 2024, respectively, and $224 thousand and $446 thousands of net lease costs during the three and six months ended December 31, 2023, respectively. Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2024 were as follows:
| December 31, 2024 |
||||
| (in thousands) |
Operating Leases |
|||
| For the twelve months ended December 31, |
||||
| 2025 |
$ | 835 | ||
| 2026 |
743 | |||
| 2027 |
762 | |||
| 2028 |
776 | |||
| 2029 |
790 | |||
| Thereafter |
9,403 | |||
|
|
|
|||
| Total future minimum lease payments |
$ | 13,309 | ||
| Amounts representing interest |
(3,247 | ) | ||
|
|
|
|||
| Present value of net future minimum lease payments |
$ | 10,062 | ||
|
|
|
|||
Note 16 – Subsequent Events
On January 15, 2025, the Company declared a cash dividend of $0.03 per share, payable on February 6, 2025, to common shareholders of record at the close of business on January 27, 2025.
30
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS AND PER SHARE DATA
The unaudited pro forma combined condensed consolidated financial information has been prepared using the acquisition method of accounting under the provisions of the Financial Accounting Standards Board Accounting Standards Codification 805, “Business Combinations”, giving effect to the proposed merger of William Penn Bancorporation (“William Penn”) with and into Mid Penn Bancorp, Inc. (“Mid Penn”), with Mid Penn as the surviving corporation. Under this method, William Penn assets and liabilities as of the date of the acquisition will be recorded at their respective fair values and added to those of Mid Penn. Any difference between the purchase price for William Penn and the fair value of the identifiable net assets acquired (including core deposit intangibles) will be recorded as goodwill. The goodwill resulting from the acquisition will not be amortized to expense but instead will be reviewed for impairment at least annually. Any core deposit intangible and other intangible assets with estimated useful lives to be recorded by Mid Penn in connection with the acquisition will be amortized to expense over such intangible asset’s estimated useful life. The financial statements of Mid Penn issued after the acquisition will reflect the results attributable to the acquired operations of William Penn beginning on the date of completion of the acquisition. The merger was consummated on April 30, 2025.
The following unaudited pro forma condensed combined financial information and accompanying notes are based on and should be read in conjunction with the following historical financial statements and accompanying notes:
| • | the historical audited consolidated financial statements of Mid Penn as of and for the twelve months ended December 31, 2024 (included in Mid Penn’s Annual Report on Form 10-K for the year ended December 31, 2024); and |
| • | the historical unaudited consolidated financial statements of William Penn as of and for the three and six months ended December 31, 2024 (included as Exhibit 99.2 to the Amendment No. 1 to Mid Penn’s Current Report on Form 8-K filed on July 11, 2025), and the historical audited consolidated financial statements of William Penn as of and for the twelve months ended June 30, 2024 (included as Exhibit 99.2 to Mid Penn’s Current Report on Form 8-K filed on November 1, 2024). |
The unaudited pro forma condensed combined financial information is provided for illustrative information purposes only. The unaudited pro forma condensed combined financial information is not necessarily, and should not be assumed to be, an indication of the actual results that would have been achieved had the merger been completed as of the dates indicated or that may be achieved in the future. The unaudited pro forma combined condensed financial statements have been prepared in accordance with Article 11 of Regulation S-X, Pro Forma Information, which requires the depiction of the accounting for the transaction, which we refer to as transaction accounting adjustments. Regulation S-X also allows for management adjustments that could include presentation of the reasonably estimable cost savings and revenue enhancements and other transaction effects that have occurred or are reasonably expected to occur. Mid Penn has elected to present one management adjustment which includes the post-closing balance sheet restructuring of selling $215.7 million of investment securities, which includes available for sale, held to maturity and equity securities, with an assumed yield of 2.90% and reinvested into federal funds sold with a yield of 4.25%.
The following unaudited pro forma combined consolidated balance sheet as of December 31, 2024, combines the audited consolidated balance sheet of Mid Penn of December 31, 2024, with the unaudited statement of
| 1 | P a g e | |
financial condition of William Penn as of December 31, 2024. The unaudited pro forma condensed combined statements of income for the twelve months ended December 31, 2024, combines the audited consolidated statements of income of Mid Penn for the twelve months ended December 31, 2024, with the unaudited consolidated statement of income of William Penn for the twelve months ended December 31, 2024, giving effect to the transaction and the common stock as if it had been consummated on January 1, 2025. Certain reclassification adjustments have been made to William Penn’ financial statements to conform to Mid Penn’s financial statement presentation.
The unaudited pro forma condensed consolidated financial statements were prepared with Mid Penn as the accounting acquirer and William Penn as the accounting acquiree under the acquisition method of accounting. Accordingly, the consideration paid by Mid Penn to complete the acquisition of William Penn will be allocated to William Penn’ assets and liabilities based upon their estimated fair values as of the date of completion of the acquisition. The fair value adjustments made to the acquired assets and liabilities herein are considered preliminary and to changes as Mid Penn finalizes its fair value determinations. The allocation is dependent upon certain valuations and other studies that have not been finalized at this time; however, preliminary significant valuations based on the fair value of the acquired assets and liabilities have been estimated and included in the unaudited condensed pro forma financial statements.
The final allocation of the purchase price will be determined after the merger is completed and after completion of thorough analyses to determine the fair value of William Penn’s tangible and identifiable intangible assets and liabilities as of the April 30, 2025, closing date. Increases or decreases in the estimated fair values of the net assets as compared with the information shown in the unaudited pro forma combined condensed consolidated financial information may change the amount of the purchase price allocated to goodwill and other assets and liabilities and may impact Mid Penn’s consolidated statements of income due to adjustments in yield and/or amortization of the adjusted assets or liabilities. Any changes to William Penn’s shareholders’ equity, including results of operations from December 31, 2024, through the closing date will also change the purchase price allocation, which may include the recording of a lower or higher amount of goodwill. The final adjustments may be materially different from the transaction accounting adjustments presented herein.
The pro forma statements of income and per share data information does not include anticipated cost savings or revenue enhancements. Mid Penn is currently in the process of assessing the two companies’ personnel, benefits plans, premises, equipment, computer systems and service contracts to determine where the companies may take advantage of redundancies or where it will be beneficial or necessary to convert to one system. Certain decisions arising from these assessments may involve canceling contracts between either William Penn or Mid Penn and certain service providers. There is no assurance that the anticipated cost savings will be realized on the anticipated time schedule or at all.
The pro forma combined basic and diluted earnings per share of Mid Penn common stock is based on the pro forma combined net income per common share for William Penn and Mid Penn divided by the pro forma basic or diluted common shares of the combined entities for the periods presented on such statements of income, including the diluted shares impact of pro forma William Penn’s rolled over unvested restricted stock awards and vested and unvested stock options. The pro forma information includes adjustments related to the fair value of assets and liabilities of William Penn and is subject to adjustment as additional information becomes available and as final merger date analyses are performed. The pro forma combined balance sheet and book value per share data includes the impact of merger related expenses on the balance sheet with Mid Penn’s after-tax estimated charges of $8.7 million, illustrated as an adjustment to statements of income, retained earnings and to accrued other liabilities. The pro forma combined book value per share of Mid Penn common stock is based on the pro forma combined common stockholders’ equity of William Penn and Mid Penn divided by total pro forma common shares of the combined entities.
The unaudited pro forma data are qualified by the statements set forth under this caption and should not be considered indicative of the market value of Mid Penn common stock or the actual or future results of operations of Mid Penn for any period. Actual results may be materially different than the pro forma information presented.
| 2 | P a g e | |
| 3 | P a g e | |
Mid Penn Bancorp, Inc.
Unaudited Combined Pro Forma Balance Sheets as of December 31, 2024
($ In Thousands)
| Mid Penn Bancorp, Inc. |
WPB Bancorp, Inc. |
Transaction Accounting Adjustments |
Mid Penn Bancorp, Inc. Pro Forma Combined before Management Adjustments |
Management Adjustments |
Mid Penn Bancorp, Inc. Pro Forma Combined after Management Adjustments |
|||||||||||||||||||
| Assets |
||||||||||||||||||||||||
| Cash and due from banks |
$ | 37,002 | $ | 4,730 | $ | — | $ | 41,732 | $ | — | $ | 41,732 | ||||||||||||
| Interest-bearing deposits with banks |
14,490 | 11,390 | (7 | )(1) | 25,873 | — | 25,873 | |||||||||||||||||
| Federal funds sold |
19,072 | — | — | 19,072 | 215,702 | (14) | 234,774 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Cash and Cash Equivalents |
70,564 | 16,120 | (7 | ) | 86,677 | 215,702 | 302,379 | |||||||||||||||||
| Investment securities: |
||||||||||||||||||||||||
| Securities held to maturity |
382,447 | 85,098 | (16,782 | )(3) | 450,763 | (68,316 | )(14) | 382,447 | ||||||||||||||||
| Securities available for sale, at fair value |
260,477 | 145,089 | — | (3) | 405,566 | (145,089 | )(14) | 260,477 | ||||||||||||||||
| Equity securities, at fair value |
428 | 2,297 | — | (3) | 2,725 | (2,297 | )(14) | 428 | ||||||||||||||||
| Loans held for sale at fair value |
7,064 | — | 7,064 | — | 7,064 | |||||||||||||||||||
| Total loans, net of unearned income |
4,443,070 | 470,108 | (28,268 | )(4)(5) | 4,884,910 | — | 4,884,910 | |||||||||||||||||
| Less: ACL - Loans |
(35,514 | ) | (2,598 | ) | (92 | )(5) | (38,204 | ) | — | (38,204 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loans |
4,407,556 | 467,510 | (28,360 | ) | 4,846,706 | — | 4,846,706 | |||||||||||||||||
| Premises and equipment, net |
38,806 | 6,877 | 167 | (6) | 45,850 | — | 45,850 | |||||||||||||||||
| Operating lease right of use asset |
7,699 | 9,763 | (3,188 | )(7) | 14,274 | — | 14,274 | |||||||||||||||||
| Finance lease right of use asset |
2,548 | — | — | 2,548 | — | 2,548 | ||||||||||||||||||
| Cash surrender value of life insurance |
51,521 | 42,481 | — | 94,002 | — | 94,002 | ||||||||||||||||||
| Restricted investment in bank stocks |
7,461 | 2,311 | — | 9,772 | — | 9,772 | ||||||||||||||||||
| Accrued interest receivable |
26,846 | 2,771 | — | 29,617 | — | 29,617 | ||||||||||||||||||
| Deferred income taxes |
22,747 | 9,171 | 10,055 | (8) | 41,973 | 41,973 | ||||||||||||||||||
| Goodwill |
128,160 | 4,858 | 5,338 | (1) | 138,356 | — | 138,356 | |||||||||||||||||
| Core deposit and other intangibles, net |
6,242 | 289 | 8,713 | (9) | 15,244 | — | 15,244 | |||||||||||||||||
| Foreclosed assets held for sale |
44 | — | — | 44 | — | 44 | ||||||||||||||||||
| Other assets |
50,326 | 1,793 | — | 52,119 | — | 52,119 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Assets |
$ | 5,470,936 | $ | 796,428 | $ | (24,064 | ) | $ | 6,243,300 | $ | — | $ | 6,243,300 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Liabilities and Shareholders’ Equity |
||||||||||||||||||||||||
| Deposits: |
||||||||||||||||||||||||
| Noninterest-bearing |
$ | 759,169 | $ | 57,997 | $ | — | $ | 817,166 | $ | — | $ | 817,166 | ||||||||||||
| Interest-bearing |
3,930,758 | 569,439 | (1,521 | )(10) | 4,498,676 | — | 4,498,676 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Deposits |
4,689,927 | 627,436 | (1,521 | ) | 5,315,842 | — | 5,315,842 | |||||||||||||||||
| — | ||||||||||||||||||||||||
| Borrowings |
25,603 | 28,000 | — | (11) | 53,603 | — | 53,603 | |||||||||||||||||
| Subordinated debt |
45,741 | — | 45,741 | — | 45,741 | |||||||||||||||||||
| Operating lease liability |
8,092 | 10,062 | (3,518 | )(12) | 14,636 | — | 14,636 | |||||||||||||||||
| Accrued interest payable |
13,484 | 15 | — | 13,499 | — | 13,499 | ||||||||||||||||||
| Other liabilities |
33,071 | 6,714 | 12,445 | (13) | 52,230 | — | 52,230 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Liabilities |
4,815,918 | 672,227 | 7,406 | 5,495,551 | — | 5,495,551 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Shareholders’ equity: |
||||||||||||||||||||||||
| Common stock |
19,797 | 92 | 3,415 | (1)(2) | 23,304 | — | 23,304 | |||||||||||||||||
| Additional paid-in capital |
480,491 | 97,135 | 2,564 | (1)(2) | 580,190 | — | 580,190 | |||||||||||||||||
| Unearned common stock helod by employee stock ownership plan |
— | (8,586 | ) | 8,586 | (2) | — | — | — | ||||||||||||||||
| Retained earnings |
181,597 | 56,070 | (66,545 | )(2)(5)(13) | 171,122 | — | 171,122 | |||||||||||||||||
| Accumulated other comprehensive loss |
(16,825 | ) | (20,510 | ) | 20,510 | (2) | (16,825 | ) | — | (16,825 | ) | |||||||||||||
| Treasury stock |
(10,042 | ) | — | — | (10,042 | ) | — | (10,042 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Shareholders’ Equity |
655,018 | 124,201 | (31,470 | ) | 747,749 | — | 747,749 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Liabilities and Shareholders’ Equity |
$ | 5,470,936 | $ | 796,428 | $ | (24,064 | ) | $ | 6,243,300 | $ | — | $ | 6,243,300 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Per Share Data |
||||||||||||||||||||||||
| Shares Outstanding |
19,355,797 | 9,208,217 | (5,701,422 | )(1) | 22,862,592 | 22,862,592 | ||||||||||||||||||
| Book Value Per Share |
$ | 33.84 | $ | 13.49 | $ | 32.71 | $ | $ | 32.71 | |||||||||||||||
| 4 | P a g e | |
Mid Penn Bancorp, Inc.
Unaudited Pro Forma Combined Statements of Income for twelve months ended December 31, 2024
($ In Thousands, Except Per Share Data)
| Mid Penn Bancorp, Inc. |
WPB Bancorp, Inc. |
Transaction Accounting Adjustments |
Mid Penn Bancorp, Inc. Pro Forma Combined before Management Adjustments |
Management Adjustments |
Mid Penn Bancorp, Inc. Pro Forma Combined After Management Adjustments |
|||||||||||||||||||
| Interest Income |
||||||||||||||||||||||||
| Loans, including fees |
$ | 265,522 | $ | 25,574 | $ | 5,251 | (4) | $ | 296,347 | $ | — | $ | 296,347 | |||||||||||
| Investment securities |
18,006 | 6,330 | — | (3) | 24,336 | (6,330 | )(14) | 18,006 | ||||||||||||||||
| Other interest-bearing balances |
1,127 | 689 | — | 1,816 | — | 1,816 | ||||||||||||||||||
| Federal funds sold |
1,928 | — | — | 1,928 | 9,167 | (14) | 11,095 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Interest Income |
286,583 | 32,593 | 5,251 | 324,427 | 2,837 | 327,264 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Interest Expense |
||||||||||||||||||||||||
| Deposits |
116,320 | 13,515 | 879 | (9) | 130,714 | — | 130,714 | |||||||||||||||||
| Borrowings |
13,592 | 2,715 | — | (10) | 16,307 | — | 16,307 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Interest Expense |
129,912 | 16,230 | 879 | 147,021 | — | 147,021 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net Interest Income |
156,671 | 16,363 | 4,372 | 177,406 | 2,837 | 180,243 | ||||||||||||||||||
| Provision for credit losses - loans |
2,144 | (1,017 | ) | 2,347 | 3,474 | — | 3,474 | |||||||||||||||||
| (Benefit)/Provision for credit losses - CCL |
(628 | ) | — | — | (628 | ) | — | (628 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net Interest Income After Provision for Credit Losses |
155,155 | 17,380 | 2,025 | 174,560 | 2,837 | 177,397 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Noninterest Income |
||||||||||||||||||||||||
| Fiduciary and wealth management |
4,680 | — | — | 4,680 | — | 4,680 | ||||||||||||||||||
| ATM debit card interchange |
3,851 | 381 | — | 4,232 | — | 4,232 | ||||||||||||||||||
| Service charges on deposits |
2,176 | 494 | — | 2,670 | — | 2,670 | ||||||||||||||||||
| Mortgage banking |
2,476 | — | — | 2,476 | — | 2,476 | ||||||||||||||||||
| Mortgage hedging |
10 | — | — | 10 | — | 10 | ||||||||||||||||||
| Net gain on sales of SBA loans |
347 | — | — | 347 | — | 347 | ||||||||||||||||||
| Earnings from cash surrender value of life insurance |
1,141 | 1,303 | — | 2,444 | — | 2,444 | ||||||||||||||||||
| Other |
7,812 | 809 | — | 8,621 | — | 8,621 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Noninterest Income |
22,493 | 2,987 | — | 25,480 | — | 25,480 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Noninterest Expenses |
||||||||||||||||||||||||
| Salaries and employee benefits |
64,098 | 12,164 | — | 76,262 | — | 76,262 | ||||||||||||||||||
| Software licensing and utilization |
9,300 | 2,059 | — | 11,359 | — | 11,359 | ||||||||||||||||||
| Occupancy, net |
7,571 | 2,066 | 70 | (6) | 9,707 | — | 9,707 | |||||||||||||||||
| Equipment |
4,928 | 845 | — | 5,773 | — | 5,773 | ||||||||||||||||||
| Shares tax |
2,350 | — | — | 2,350 | — | 2,350 | ||||||||||||||||||
| Legal and professional fees |
4,306 | 855 | — | 5,161 | — | 5,161 | ||||||||||||||||||
| ATM/card processing |
2,284 | 100 | — | 2,384 | — | 2,384 | ||||||||||||||||||
| Intangible amortization |
1,784 | 148 | 1,637 | (7) | 3,569 | — | 3,569 | |||||||||||||||||
| FDIC Assessment |
4,170 | 348 | — | 4,518 | — | 4,518 | ||||||||||||||||||
| Loss (Gain) on sale of foreclosed assets, net |
80 | 4 | — | 84 | — | 84 | ||||||||||||||||||
| Merger and acquisition |
545 | 836 | 10,831 | (13) | 12,212 | |||||||||||||||||||
| Other |
16,200 | 2,641 | — | 18,841 | — | 18,841 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Noninterest Expenses |
117,616 | 22,066 | 12,538 | 152,220 | — | 140,008 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income before Provision for Income Taxes |
60,032 | (1,699 | ) | (10,513 | ) | 47,820 | 2,837 | 62,869 | ||||||||||||||||
| Provision for income taxes |
10,595 | (668 | ) | (2,109 | )(8) | 7,818 | 632 | (14) | 8,450 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net Income |
$ | 49,437 | $ | (1,031 | ) | $ | (8,404 | ) | $ | 40,002 | $ | 2,205 | $ | 54,419 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Per Common Share Data: |
||||||||||||||||||||||||
| Basic earnings per common share |
$ | 2.90 | $ | (0.12) | — | 1.95 | 2.65 | |||||||||||||||||
| Diluted earnings per common share |
$ | 2.90 | $ | (0.12) | — | 1.92 | 2.61 | |||||||||||||||||
| Cash dividends per common share |
$ | 1.26 | $ | 0.12 | — | $ | 1.26 | $ | — | |||||||||||||||
| Weighted-average basic shares outstanding |
17,026,240 | 8,550,205 | (5,043,410 | ) (1) | 20,533,035 | 20,533,035 | ||||||||||||||||||
| Weighted-average diluted shares outstanding |
17,070,862 | 8,614,248 | (4,822,002 | ) (1) | 20,863,108 | 20,863,108 | ||||||||||||||||||
Mid Penn Bancorp, Inc.
Unaudited Pro Forma Per Share Data
For The Twelve Months Ended December 31, 2024
($ in Thousands, Except Per Share Data)
| Mid Penn Bancorp, Inc. |
WPB Bancorp, Inc. |
Pro Forma Combined |
Pro Forma Equivalent WPB Share |
|||||||||||||
| For The Twelve Months Ended December 31, 2024: |
||||||||||||||||
| Earnings per share: |
||||||||||||||||
| Net income per share (Basic) |
$ | 2.90 | $ | (0.12 | ) | $ | 2.65 | $ | 1.13 | |||||||
| Net income per share (Diluted) |
$ | 2.90 | $ | (0.12 | ) | $ | 2.61 | $ | 1.11 | |||||||
| Cash Dividends Per Share |
$ | 1.26 | $ | 0.12 | $ | 1.26 | $ | — | ||||||||
| Book Value per common share as of December 31, 2024 |
$ | 33.84 | $ | 13.49 | $ | 32.71 | $ | 13.93 | ||||||||
| 5 | P a g e | |
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
TRANSACTION ACCOUNTING ADJUSTMENTS:
| (1) | At the closing date of the transaction, each share of William Penn’ common stock issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive 0.426 shares of Mid Penn common stock. It is noted that in this pro forma analysis the number of shares of William Penn common stock vested William Penn stock options and vested William Penn restricted stock awards outstanding on April 30, 2025, the effective date of the merger, were employed in estimating the fair values purchase price consideration. Mid Penn’s common stock price of $29.05 as of April 30, 2025, and the William Penn merger consideration per common share was assumed to equal $12.38. No fraction of a whole share of Mid Penn common stock shall be issued in connection with the Merger. Pursuant to the Merger Agreement, any former William Penn shareholder who would otherwise be entitled to receive a fraction of a share of Mid Penn common stock shall receive, in lieu thereof, cash, rounded to the nearest cent and without interest, equal to the product of (i) the fraction of a share of Mid Penn Common Stock entitled and (ii) $27.05. |
Additionally, as part of purchase price consideration, Mid Penn included the fair value of rolled over vested William Penn stock options. Mid Penn measured the fair value of the William Penn vested stock options rolled over using the Black Scholes Model. At the closing date of the transaction 623,152 vested stock options to purchase shares of William Penn common were converted into 265,462 Mid Penn vested stock options, with fair value estimate of $1.3 million.
In connection with the William Penn’s second-step conversion offering, completed on March 21, 2021, the William Penn Bank Employee Stock Ownership Plan (“William Penn ESOP”) trustees subscribed for, and intended to purchase, on behalf of the ESOP, 8.00% 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. The second-step conversion offering being oversubscribed in the first tier of subscription priorities, the ESOP trustees were unable to purchase shares of the William Penn’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 William Penn’s common stock in the open market.
In accordance with the Merger Agreement, the William Penn ESOP was terminated immediately prior to the closing date of the transaction (the “ESOP Termination Date”). On the ESOP Termination Date, William Penn was required to direct the William Penn ESOP trustee(s) to remit to William Penn a sufficient number of shares of William Penn Common Stock held by the Willima Penn ESOP’s unallocated suspense account to William Penn to repay the full outstanding balance of the loan between the William Penn ESOP and William Penn (the “William Penn ESOP Loan”) (and with such William Penn Common Stock valued on the ESOP Termination Date) and, if after remitting such shares there remains any unpaid amount under the William Penn ESOP Loan, such unpaid amount, including any unpaid but accrued interest, shall be forgiven by William Penn at the closing date of the transaction. All remaining shares of William Penn Common Stock held by the William Penn ESOP as of the Effective Time shall were to be converted into the right to receive the merger consideration. In this pro forma analysis it was assumed that the William Penn ESOP Loan had a balance of $9,029,390 as of April 30, 2025, and was paid off with the of retirement of 748,261 William Penn shares.
At the close of the transaction, all shares of William Penn Common Stock held in the treasury of William Penn (“Treasury Stock”), prior to the closing of the transaction were cancelled, and no payment or distribution shall be made in consideration therefor.
| 6 | P a g e | |
The total estimated purchase price for the purpose of this pro forma financial information is $103.2 million. The adjustment for shares outstanding on the pro forma balance sheet and the basic, and diluted weighted average common shares outstanding on the income statement are adjusted to shares to equal the new common shares issued and diluted common share equivalents (all converted William Penn stock options and unvested restricted stock awards – MPB please validate) in the transaction.
The following is a summary of the preliminary fair value of assets acquired and liabilities assumed resulting in goodwill. Goodwill is created when the purchase price consideration exceeds the fair value of the net assets acquired or a bargain purchase gain results when the current fair value of the net assets acquired exceeds the purchase price consideration. For purposes of this analysis as of December 31, 2024, goodwill of $10.2 million results from the transaction; however, the final purchase accounting analysis will be performed as of the merger date and amounts therein are subject to change based on operations subsequent to December 31, 2024, as additional information becomes available and as additional analyses are performed.
| (dollars in thousands, except per share data) | ||||
| Purchase Price Consideration in Common Stock |
||||
| William Penn common shares outstanding as of 4/30/2025 includes vested restrict stock awards |
8,980,748 | |||
| Vested RSA |
— | |||
|
|
|
|||
| William Penn Bancorporation common shares outstanding exluding unvested RSA |
8,980,748 | |||
| Less: William Penn Bancorporation common shares used to terminate William Penn ESOP Loan |
||||
| ESOP loan balance as of 4/30/2025 |
9,029,390 | |||
| Less: estimated shares of William Penn Common Stock to pay off ESOP loan balance as of 4/30/2025 |
(748,261 | ) | ||
|
|
|
|||
| William Penn common shares as of 4/30/2025 less ESOP shares to payoff ESOP loan settled for stock |
8,232,487 | |||
|
|
|
|||
| Exchange Ratio |
0.426 | |||
| Mid Penn shares to be issued in the merger and adjusted for fractional shares |
3,506,795 | |||
| Fair Value price per share of Mid Penn Bancorp, Inc. common stock (closing stock price as of April 30, 2025) |
$ | 29.05 | ||
|
|
|
|||
| Purchase price consideration for common stock |
101,872 | |||
|
|
|
|||
| Purchase Price Consideration - Fair Value of Vested Stock Options |
||||
| William Penn vested stock options as of 4/30/2025 |
$ | 623,152 | ||
| Mid Penn vested vested stock options issued as of 4/30/2025 |
$ | 265,463 | ||
| Fair value of Mid Penn stock option as of 4/30/2025 |
$ | 5.03 | ||
|
|
|
|||
| Fair value of vested stock options |
1,334 | |||
|
|
|
|||
| Purchase Price Consideration - Cash |
||||
| Cash in lieu of fractional shares |
$ | 7 | ||
|
|
|
|||
| Total purchase price consideration |
103,213 | |||
|
|
|
|||
| 7 | P a g e | |
| (dollars in thousands) | WPB Bancorp, Inc. Book Value 12/31/2024 |
Fair Value Adjustments |
WPB Bancorp, Inc. Fair Value 12/31/2024 |
|||||||||
| Total purchase price consideration |
$ | 103,213 | ||||||||||
| Recognized amounts of identifiable assets acquired and liabilities assumed |
|
|||||||||||
| Cash and cash equivalents |
$ | 16,120 | $ | — | $ | 16,120 | ||||||
| Federal funds sold |
— | — | — | |||||||||
| Equity securities |
2,297 | — | (3) | 2,297 | ||||||||
| Securities held to maturity |
85,098 | (16,782 | )(3) | 68,316 | ||||||||
| Securities, available for sale |
145,089 | — | (3) | 145,089 | ||||||||
| Loans gross |
470,108 | (28,268 | )(4)(5) | 441,840 | ||||||||
| Allowance for credit losses |
(2,598 | ) | 2,255 | (5) | (343 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Loans, net of allowance |
467,510 | (26,013 | ) | 441,497 | ||||||||
| Premises and equipment,net |
6,877 | 167 | (6) | 7,044 | ||||||||
| Operating lease right of use asset |
9,763 | (3,188 | )(7) | 6,575 | ||||||||
| Restricted investment in bank stocks |
2,311 | — | 2,311 | |||||||||
| Bank owned life insurance |
42,481 | — | 42,481 | |||||||||
| Core deposit intangibles |
289 | 8,713 | (8) | 9,002 | ||||||||
| Other assets |
13,735 | 7,352 | (9) | 21,087 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total identifiable assets acquired |
791,570 | (29,751 | ) | 761,819 | ||||||||
| Deposits |
627,436 | (1,521 | )(10) | 625,915 | ||||||||
| Borrowings |
28,000 | — | (11) | 28,000 | ||||||||
| Lease liability |
10,062 | (3,518 | )(12) | 6,544 | ||||||||
| Other liabilities |
6,729 | 1,614 | (13) | 8,343 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total liabilities assumed |
44,791 | (1,904 | ) | 668,802 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total identifiable net assets |
$ | 746,779 | (27,847 | ) | 93,017 | |||||||
|
|
|
|
|
|
|
|||||||
| Goodwill |
$ | 10,196 | ||||||||||
|
|
|
|||||||||||
| (2) | Balance sheet adjustments to reflect the reversal of William Penn’ historical equity accounts to additional paid-in capital (“APIC”) and record the purchase price consideration for common stock. The following tables summarize the transaction accounting adjustments for the equity accounts. |
| Balance Sheet | ||||||||
| December 31, 2024 | ||||||||
| Transaction accounting adjustment for common stock |
||||||||
| Reversal of William Penn’ common stock |
$ | (92 | ) | |||||
| Number of shares of Mid Penn common stock issued |
3,506,795 | |||||||
| Par value of Mid Penn common stock |
$ | 1.00 | ||||||
| Par value of Mid Penn shares issued for merger |
3,507 | |||||||
|
|
|
|||||||
| Total transaction accounting adjustment for common stock |
$ | 3,415 | ||||||
|
|
|
|||||||
| 8 | P a g e | |
| Balance Sheet | ||||||||
| (dollars in thousands, except per share data) | December 31, 2024 | |||||||
| Transaction accounting adjustment for APIC |
||||||||
| Reversal of William Penn common stock to APIC |
$ | 92 | ||||||
| Reversal of William Penn unearned common stock helod by employee stock ownership plan |
$ | (8,586 | ) | |||||
| Reversal of William Penn retained earnings to APIC |
56,070 | |||||||
| Reversal of William Penn accumulated other comprehensive loss to APIC |
(20,510 | ) | ||||||
| Issued and outstanding shares of William Penn common stock (including vested restricted stock awards as of 4/30/2025) |
8,232,487 | |||||||
| Exchange ratio |
0.426 | |||||||
| Number of Mid Penn Shares issued |
3,506,795 | |||||||
| Closing price of Mid Penn common stock on April 30, 2025 |
$ | 29.05 | ||||||
|
|
|
|||||||
| Purchase price consideration for common stock |
101,872 | |||||||
| Par value of Mid Penn shares issued for merger at $1.00 per share |
$ | 1.00 | ||||||
| Less: par value of Mid Penn common stock |
3,507 | |||||||
|
|
|
|||||||
| APIC adjustment for Mid Penn shares issued |
98,365 | |||||||
| Less: William Penn common equity |
(124,201 | ) | ||||||
|
|
|
|||||||
| Net adjustment to APIC for stock consideration |
(25,836 | ) | ||||||
| Purchase Price Consideration - Fair Value of Vested Stock Options |
|
|||||||
| William Penn vested stock options as of 4/30/2025 |
623,152 | |||||||
| Mid Penn stock options issued as of 4/30/2025 |
265,463 | |||||||
| Fair value of Mid Penn stock option as of 4/30/2025 |
$ | 5.03 | ||||||
| Fair value of vested stock options |
1,334 | |||||||
|
|
|
|||||||
| Total transaction accounting adjustment for APIC |
$ | 2,564 | ||||||
|
|
|
|||||||
| Balance Sheet | ||||
| December 31, 2024 | ||||
| Transaction accounting adjustment for unearned common stock helod by employee stock ownership plan |
| |||
| Reversal of William Penn retained earnings |
$ | 8,586 | ||
|
|
|
|||
| Total transaction accounting adjustment for unearned common stock helod by employee stock ownership plan |
$ | 8,586 | ||
|
|
|
|||
| Balance Sheet | ||||
| December 31, 2024 | ||||
| Transaction accounting adjustment for retained earnings |
||||
| Reversal of William Penn retained earnings |
$ | (56,070 | ) | |
| Mid Penn merger costs, net of taxes |
(8,651 | ) | ||
| Provision for credit losses for non-PCD loans, net of taxes |
(1,824 | ) | ||
|
|
|
|||
| Total transaction accounting adjustment for retained earnings |
$ | (66,545 | ) | |
|
|
|
|||
| 9 | P a g e | |
| Balance Sheet | ||||
| December 31, 2024 | ||||
| Transaction accounting adjustment for accumulated other comprehensive loss |
||||
| Reversal of William Penn accumulated other comprehensive loss |
$ | 20,510 | ||
|
|
|
|||
| Total transaction accounting adjustment for accumulated other comprehensive loss |
$ | 20,510 | ||
|
|
|
|||
| (3) | Securities available-for-sale and equity securities were recorded at fair value at December 31, 2024, therefore no balance sheet adjustment is necessary. No adjustment to the statements of income was required since the Company plans to sell the available-for-sale securities post-date of acquisition. |
Securities held-to-maturity fair value adjustment to reflect at fair value discount of $16.8 million at December 31, 2024. No adjustment to the statements of income was required since the Company plans to sell the held-to-maturity securities post-date of acquisition.
| Balance Sheet | Statements of Income |
|||||||
| December 31, 2024 |
Twelve Months Ended December 31, 2024 |
|||||||
| Securities held to maturity |
||||||||
| Securities held to maturity fair value adjustment |
$ | (16,782 | ) | $ | — | |||
|
|
|
|
|
|||||
| Total adjustments for securities held to maturity |
$ | (16,782 | ) | $ | — | |||
|
|
|
|
|
|||||
| (4) | Balance sheet adjustment to reflect the fair value discount for acquired purchased credit deteriorated (“PCD”) loans and non-PCD loans and other loan adjustments. The accruing loan fair value adjustments will be substantially recognized over the expected life of the loans. Balance sheet and income statement interest rate adjustment to reflect the reversal of existing deferred net loan fees and the existing loan purchase accounting discounts from prior William Penn mergers. |
| Balance Sheet | Statements of Income |
|||||||
| December 31, 2024 |
Twelve Months Ended December 31, 2024 |
|||||||
| Fair value adjustments on loans acquired |
||||||||
| Non-PCD loan fair value |
$ | (28,647 | ) | $ | 4,877 | |||
|
|
|
|
|
|||||
| Total fair value adjustment assigned to Non-PCD loans |
(28,647 | ) | 4,877 | |||||
|
|
|
|
|
|||||
| PCD accruing loans fair value |
(2,072 | ) | 374 | |||||
| PCD non-accruing loans fair value |
(307 | ) | — | |||||
|
|
|
|
|
|||||
| Total fair value adjustment assigned to PCD loans |
(2,379 | ) | 374 | |||||
|
|
|
|
|
|||||
| Total fair value adjustments for loans |
(31,026 | ) | 5,251 | |||||
| PCD accruing loan ACL |
343 | — | ||||||
|
|
|
|
|
|||||
| Total fair value of PCD loans assigned to allowance for credit losses |
343 | — | ||||||
|
|
|
|
|
|||||
| Total loan fair value adjustment |
(30,683 | ) | 5,251 | |||||
| Reversal of deferred loan fees, net |
482 | — | ||||||
| Reversal of existing purchase accounting adjustments |
1,933 | — | ||||||
|
|
|
|
|
|||||
| Total adjustments for loans |
$ | (28,268 | ) | $ | 5,251 | |||
|
|
|
|
|
|||||
| 10 | P a g e | |
| (5) | Balance sheet adjustment for the reversal of William Penn’s existing allowance for loan losses of $2.6 million. Balance sheet adjustment of $343 thousand of PCD loan fair value assigned to the allowance for credit losses. Balance sheet and retained earnings adjustment for the allowance for credit losses of $2.3 million for acquired non-PCD loans. The pro forma statements of income does include a one-time provision expense of $2.3 million related to allowance for credit losses for non-PCD loans. |
| Balance Sheet | Statements of Income |
|||||||
| December 31, 2024 |
Twelve Months Ended December 31, 2024 |
|||||||
| Allowance for credit losses |
||||||||
| Reversal of existing allowance for credit losses |
$ | 2,598 | $ | — | ||||
| Fair value of PCD Accruing loans assigned to allowance for credit losses |
(343 | ) | — | |||||
|
|
|
|
|
|||||
| Subtotal allowance for credit losses excluding ACL for non-PCD loans |
2,255 | — | ||||||
| Fair value of PCD Non-Accruing loans assigned to allowance for credit losses |
— | — | ||||||
| ACL for non-PCD loans |
(2,347 | ) | 2,347 | |||||
|
|
|
|
|
|||||
| Total adjustments for allowance for credit losses |
$ | (92 | ) | $ | 2,347 | |||
|
|
|
|
|
|||||
| (6) | Balance sheet and statements of income adjustment to reflect the fair value of owned buildings and land and the related amortization adjustment based on an expected life of the properties. Balance sheet and statements of income adjustment to reflect the fair value of leasehold improvements and the related amortization adjustment based on an expected life of the property. Balance sheet and statements of income adjustment to reflect the fair value of lease premise contract and the related amortization adjustment based on expected term of the lease. Balance sheet adjustment to reflect the write-off of obsolete fixed assets. |
| Balance Sheet | Statements of Income |
|||||||
| December 31, 2024 |
Twelve Months Ended December 31, 2024 |
|||||||
| Premises and equipment, net |
||||||||
| Owned premise fair value |
$ | 1,498 | $ | 25 | ||||
| Leashold improvements fair value |
(348 | ) | $ | (18 | ) | |||
| Lease premise contract fair value |
(440 | ) | $ | 63 | ||||
| Write-off of obsolete fixed assets |
(543 | ) | — | |||||
|
|
|
|
|
|||||
| Total adjustments for premises and equipment, net |
$ | 167 | $ | 70 | ||||
|
|
|
|
|
|||||
| (7) | Balance sheet adjustment for the reversal of William Penn’s existing right of use asset of $9.5 million. Balance sheet adjustment to reflect the right of use asset using Mid Penn’s right of use asset methodology. |
| 11 | P a g e | |
| Balance Sheet | Statements of Income |
|||||||
| December 31, 2024 |
Twelve Months Ended December 31, 2024 |
|||||||
| Right of use Asset |
||||||||
| Reversal of existing right of use asset |
$ | (9,528 | ) | $ | — | |||
| Right of use asset using Mid Penn’s right of use asset methodology |
6,340 | — | ||||||
|
|
|
|
|
|||||
| Total adjustments to other assets |
$ | (3,188 | ) | $ | — | |||
|
|
|
|
|
|||||
| (8) | Balance sheet adjustment to reflect the net deferred tax asset, at a statutory rate of 22.26%, related to fair value adjustments and tax benefits related to one-time merger charges and related statements of income adjustments to pro forma adjustments using a statutory tax rate of 22.26% for book income tax expense. |
| Balance Sheet | Statements of Income |
|||||||
| December 31, 2024 |
Twelve Months Ended December 31, 2024 |
|||||||
| Deferred tax impact |
||||||||
| Fair value adjustments |
$ | 7,190 | $ | 593 | ||||
| Mid Penn accrual for one-time merger related charges |
2,180 | (2,180 | ) | |||||
| William Penn accrual for one-time merger related charges |
163 | — | ||||||
| Allowance for credit losses for Non-PCD loans |
522 | (522 | ) | |||||
|
|
|
|
|
|||||
| Total adjustments for other assets |
$ | 10,055 | $ | (2,109 | ) | |||
|
|
|
|
|
|||||
| (9) | Balance sheet adjustment to intangible assets to reflect the elimination of the previously recorded core deposit intangible and the creation of a new core deposit intangible fair value of $9.0 million for acquired core deposit intangible assets. The related statements of income amortization adjustments based upon an expected life of 10 years using sum of the year’s digits method. |
| Balance Sheet | Statements of Income |
|||||||
| December 31, 2024 |
Twelve Months Ended December 31, 2024 |
|||||||
| Core deposit intangible asset |
||||||||
| Reversal of existing core deposit intangible asset |
$ | (289 | ) | $ | — | |||
| Core deposit intangible asset fair value |
9,002 | 1,637 | ||||||
|
|
|
|
|
|||||
| Total adjustments for core deposit intangible asset |
$ | 8,713 | $ | 1,637 | ||||
|
|
|
|
|
|||||
| (10) | Balance sheet and statements of income adjustment related to the fair value of interest-bearing time deposits and corresponding statements of income adjustments related to the amortization of discount on interest-bearing time deposits based on the expected life of interest-bearing time deposits. |
| 12 | P a g e | |
| Balance Sheet | Statements of Income |
|||||||
| December 31, 2024 |
Twelve Months Ended December 31, 2024 |
|||||||
| Certificates of deposit |
||||||||
| Reversal of existing certificate of deposit premium |
$ | (4 | ) | $ | — | |||
| Certificates of deposit fair value adjustment |
(1,517 | ) | 879 | |||||
|
|
|
|
|
|||||
| Total adjustments for certificates of deposits |
$ | (1,521 | ) | $ | 879 | |||
|
|
|
|
|
|||||
| (11) | No balance sheet adjustment is needed for borrowings since the borrowings were short term in nature. |
| Balance Sheet | Statements of Income |
|||||||
| December 31, 2024 |
Ended December 31, 2024 |
|||||||
| Borrowings |
||||||||
| Borrowings fair value |
$ | — | $ | — | ||||
|
|
|
|
|
|||||
| Total adjustments for borrowings |
$ | — | $ | — | ||||
|
|
|
|
|
|||||
| (12) | Balance sheet adjustment for the reversal of William Penn’s existing lease liability of $9.9 million. Balance sheet adjustment to reflect the lease liability using Mid Penn’s lease liability methodology. |
| Balance Sheet | Statements of Income |
|||||||
| December 31, 2024 |
Twelve Months Ended December 31, 2024 |
|||||||
| Lease Liability |
||||||||
| Reversal of existing lease liability |
$ | (9,858 | ) | $ | — | |||
| Right of use asset using Mid Penn’s right of use asset methodology |
6,340 | — | ||||||
|
|
|
|
|
|||||
| Total adjustments to lease liability |
$ | (3,518 | ) | $ | — | |||
|
|
|
|
|
|||||
| (13) | Balance sheet adjustment to reflect the accrual of one-time merger-related charges for Mid Penn and William Penn: (a) William Penn pre-tax charges are estimated at $1.4 million ($1.3 million after-tax) and are included as a pro forma fair value liability accrual, and (b) Mid Penn pre-tax charges are estimated at $10.8 million ($8.7 million after-tax) and are included as a pro forma liability accrual with the after-tax cost as reduction to retained earnings The pro forma statements of income does include an accrual for Mid Penn’s one-time merger related charges of $10.8 million. It is noted that a tax benefit was not taken for certain merger obligations and costs that were not considered to be tax deductible. |
Balance sheet adjustments to reflect the reserve for unfunded commitments using Mid Penn’s allowance for credit loss methodology.
| 13 | P a g e | |
| Balance Sheet | Statements of Income |
|||||||
| December 31, 2024 |
Twelve Months Ended December 31, 2024 |
|||||||
| Other Liabilities |
||||||||
| Mid Penn accrual for one-time merger related charges |
$ | 10,831 | $ | 10,831 | ||||
| William Penn accrual for one-time merger related charges |
1,420 | — | ||||||
| Reversal of existing reserve for unfunded commitments |
(81 | ) | — | |||||
| Reserve for unfunded commitments |
275 | — | ||||||
|
|
|
|
|
|||||
| Total adjustments for other liabilities |
$ | 12,445 | $ | 10,831 | ||||
|
|
|
|
|
|||||
MANAGEMENT ADJUSTMENTS:
| (14) | Balance sheet and income statement adjustment to reflect the post-closing balance sheet restructuring of selling $215.7 million of investment securities, which includes available for sale, held to maturity and equity securities, with an assumed yield of 2.90% and reinvested in federal funds sold with a yield of 4.25%. The adjustment also includes a book income tax expense assuming a 22.26% tax rate. |
| Balance Sheet | Statements of Income |
|||||||
| 12/31/2024 | Twelve Months ended 12/31/2024 |
|||||||
| Management Adjustments |
||||||||
| Federal Funds |
$ | 215,702 | $ | 9,167 | ||||
| Total investment securities (includes available for sale, held to maturity and equity securities) |
(215,702 | ) | (6,330 | ) | ||||
| Impact to interest income |
— | 2,837 | ||||||
| Income tax expense |
— | 632 | ||||||
| 14 | P a g e | |