About William Penn Bancorporation

William Penn Bancorporation operates as a bank holding company for William Penn Bank that offers traditional banking and related financial services to individual, business, and government customers. Through its branch network, the company offers an 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. Market Area The company is headquartered in Bristol, Pennsylvania and operates thirteen full-service branch offices in Bucks and Philadelphia counties in Pennsylvania and in Burlington, Camden, and Mercer counties in New Jersey. The company periodically evaluates its network of banking offices to optimize the penetration in its market area. The company’s business strategy includes opening new branches in and around its market area, which may include neighboring counties. The company considers its primary market area to be the Philadelphia suburbs of central and lower Bucks County and Northeast Philadelphia in Pennsylvania and the New Jersey counties of Burlington, Camden, Gloucester, and Mercer. Lending Activities The company’s loan portfolio consists primarily of one- to four-family residential mortgage loans, one- to four-family investor commercial real estate loans, and commercial non-residential real estate loans. The company’s loan portfolio also includes multi-family residential loans, commercial business and consumer loans. Substantially all of the company’s loans are secured by properties located within its local markets. One- to Four-Family Residential Loans: One of the company’s primary lending activities is the origination of mortgage loans to enable borrowers to purchase or refinance existing homes in its market area. The company offers fixed-rate and adjustable-rate mortgage loans with terms up to 30 years. Borrower demand for adjustable-rate loans rather than fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, the difference between the interest rates and loan fees offered for fixed-rate mortgage loans and the initial period interest rates and loan fees for adjustable-rate loans. The relative amount of fixed-rate mortgage loans (as opposed to adjustable interest rates) and adjustable-rate mortgage loans that can be originated or purchased at any time is largely determined by the demand for each in a competitive environment and the effect each has on its interest rate risk. The company offers fixed-rate loans with terms of either 10, 15, 20 or up to 30 years. The company’s adjustable-rate mortgage loans are also based on a 10, 15, 20 or up to 30 year amortization schedule. Interest rates and payments on its adjustable-rate mortgage loans adjust every three, five, seven or ten years. Interest rates and payments on its adjustable-rate loans generally are adjusted to a rate that is based on the respective three, five, seven or ten year monthly Constant Maturity U.S. Treasury indices. The company requires title insurance on all first mortgage loans. Borrowers must obtain hazard insurance and/or flood insurance for loans on property located in a flood zone, before closing the loan. One- to Four-Family Investor Commercial Real Estate Loans: One of the company’s other primary lending activities is the origination of loans secured by non-owner occupied one- to four-family residential properties. These borrowers generally include individuals that purchase an investment property to generate rental income. The company offers fixed-rate and adjustable-rate non-owner occupied one- to four-family commercial real estate loans with terms up to 25 years. Borrower demand for adjustable-rate loans rather than fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, the difference between the interest rates and loan fees offered for fixed-rate mortgage loans and the initial period interest rates and loan fees for adjustable-rate loans. The company offers fixed-rate loans with terms of either 10, 15, 20 or up to 25 years. The company’s adjustable-rate mortgage loans are also based on a 10, 15, 20 or up to 25 year amortization schedule. Interest rates and payments on the company’s adjustable-rate mortgage loans adjust every three, five, seven or ten years. Interest rates and payments on the company’s adjustable-rate loans generally are adjusted to a rate that is based on the respective three, five, seven or ten year monthly Constant Maturity U.S. Treasury indexes. Non-Residential Real Estate and Multi-Family Loans: Another one of the company’s other primary lending activities is the origination of fixed rate and adjustable-rate mortgage loans secured by commercial real estate, multi-family residential real estate and land. The company’s non-residential and multi-family real estate loans are generally secured by office buildings, retail and mixed-use properties, condominiums, apartment buildings, single-family subdivisions and owner-occupied properties used for businesses. The company originates multi-family and non-residential real estate loans with terms generally up to 25 years. Interest rates and payments on the company’s adjustable-rate loans generally are adjusted to a rate typically equal to the interest rate used for one-to four-family loan products, plus a spread based on credit-worthiness and risk. Home Equity Loans and Lines of Credit: The company offers home equity loans and lines of credit, which have adjustable rates of interest. The company also offers secured and unsecured lines of credit for well-qualified individuals and small businesses. Residential and Commercial Construction Loans and Land Loans: The company originates residential construction loans to individuals that finance the construction of owner-occupied residential dwellings for personal use, which it classifies within its residential real estate loan portfolio; commercial construction loans for the development of projects, including non-owner occupied residential dwellings, condominiums, apartment buildings, single-family subdivisions, single-family investor loans, as well as owner-occupied properties used for business, which it classifies within its commercial real estate loan portfolio; and commercial land loans for the purchase and development of raw land. The company’s residential construction loans generally provide for the payment of interest only during the construction phase, which can be up to 18 months. The company also requires periodic inspections of the property during the term of the construction. Substantially all of the company’s loans automatically convert to permanent mortgage loans. Construction loans generally can be made with a maximum loan to value ratio of 80% of the appraised value with maximum terms of 30 years. The company’s construction loans may include loans for the development of real estate for a variety of projects and properties. Generally, the owner’s equity must be injected upfront prior to the bank advancing funds. Generally, the company’s commercial construction loans provide for payment of interest only during the construction phase and may, in the case of an apartment or commercial building, convert to a permanent mortgage loan upon the completion of construction. The company also requires periodic inspections of the property during the term of the construction loan. The company requires a minimum debt service coverage ratio of 1.25X on a stand-alone basis upon conversion to permanent financing. Commercial Business Loans: These loans consist of operating lines of credit secured by general business assets and equipment. The operating lines of credit are generally short term in nature with interest rates tied to short-term rates and adjustments occurring daily, monthly, or quarterly based on the original contract. For adjustable loans, there is also an interest rate floor. Consumer Loans: In the past, the company offered a variety of consumer loans, which include student, automobile and personal secured and unsecured loans to its customer base. Investment Activities The company has legal authority to invest in various types of liquid assets, including but not limited to, mortgage-backed securities, securities of various federal agencies and of state and municipal governments, subordinated debt and certificates of deposit of federally insured institutions. As of June 30, 2022, the company’s investment portfolio consisted primarily of mortgage-backed securities issued by Fannie Mae, Freddie Mac or Gennie Mae with stated final maturities of 30 years or less, municipal securities with maturities of 20 years or less, corporate bonds, and preferred stock. Deposit Activities Deposits and loan repayments are the major sources of the company’s funds for lending and other investment activities. The vast majority of the company’s depositors are residents of Southeastern Pennsylvania and Southern and Central New Jersey. Deposits are raised primarily from within the company’s primary market area through the offering of a broad selection of deposit instruments, including checking accounts, money market accounts, regular savings accounts, club savings accounts, certificate accounts and various retirement accounts. Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit, and the interest rate among other factors. The company generally reviews its deposit mix and pricing weekly. The company’s strategy is to offer competitive rates, but not be the market leader in every type and maturity. Subsidiaries The bank has one wholly owned subsidiary, WPSLA Investment Corporation (WPSLA). WPSLA is a Delaware corporation organized to hold certain investment securities for the bank. Regulation and Supervision The bank’s deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation. The bank is subject to extensive regulation by the Pennsylvania Department of Banking and Securities, as its chartering agency, and by the Federal Deposit Insurance Corporation, as its primary federal regulator. The bank is required to file reports with, and is periodically examined by, the Federal Deposit Insurance Corporation and the Pennsylvania Department of Banking and Securities, concerning its activities and financial condition and must obtain regulatory approvals prior to entering into certain transactions, including but not limited to, mergers with or acquisitions of other financial institutions. The bank is a member of the Federal Home Loan Bank of Pittsburgh. As a bank holding company, the company must comply with the rules and regulations of the Federal Reserve Board and file certain reports with the Federal Reserve Board and is subject to examination by and the enforcement authority of the Federal Reserve Board. The company is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws. The bank is subject to the USA PATRIOT Act, which gave federal agencies additional powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened anti-money laundering requirements. By way of amendments to the Bank Secrecy Act, Title III of the USA PATRIOT Act provided measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents, and parties registered under the Commodity Exchange Act. The bank, as a member of the Federal Home Loan Bank of Pittsburgh, is required to acquire and hold shares of capital stock in that Federal Home Loan Bank. The bank was in compliance with requirements for the Federal Home Loan Bank of Pittsburgh. Interest and other charges collected or contracted for by the bank are subject to state usury laws and federal laws concerning interest rates. Loan operations are also subject to state and federal laws applicable to credit transactions, such as the: Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; and Rules and regulations of the various federal and state agencies charged with the responsibility of implementing such federal and state laws. The deposit operations of William Penn Bank also are subject to, among others, the: Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; Check Clearing for the 21st Century Act (also known as Check 21), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; and Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services. The bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank provides a central credit facility primarily for member institutions. The company is subject to examination, regulation, and periodic reporting under the Bank Holding Company Act of 1956, as amended, as administered by the Federal Reserve Board. The company is required to obtain the prior approval of the Federal Reserve Board to acquire all, or substantially all, of the assets of any bank or bank holding company. The company is subject to the Federal Reserve Board’s capital adequacy guidelines for bank holding companies (on a consolidated basis) which have historically been similar to, though less stringent than, those of the Federal Deposit Insurance Corporation for the bank. The common stock of the company is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. As a result, the company is required to file quarterly and annual reports with the Securities and Exchange Commission and is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934. The bank, as a savings bank conducting business in Pennsylvania, is subject to tax under the Pennsylvania Mutual Thrift Institutions Tax (MTIT) Act, as amended to include thrift institutions having capital stock. The bank is a member of the Deposit Insurance Fund, which is administered by the Federal Deposit Insurance Corporation. Deposit accounts in the bank are insured up to a maximum of $250,000 for each separately insured depositor. The bank’s latest Federal Deposit Insurance Corporation CRA rating was Satisfactory. In addition, as a savings bank conducting business in Philadelphia, the bank is subject to the City of Philadelphia Business Privilege Tax. The bank is subject to New Jersey’s Corporation Business Tax at the rate of 9.0% on its separate company apportioned taxable income. History William Penn Bancorporation was founded in 1870. The company was incorporated under the laws of the United States in 2020.