Exhibit 99.1

Dated as of September 2, 2020

1311-A Dolley Madison Boulevard 

Suite 2A 

McLean, Virginia 22101 

703.528.1700 

rpfinancial.com

September 2, 2020

Boards of Directors

William Penn, MHC

William Penn Bancorp, Inc.
William Penn Bancorporation 

William Penn Bank 

10 Canal Street 

Bristol, Pennsylvania 19007 

Members of the Boards of Directors:

At your request, we have completed and hereby provide an independent appraisal ("Appraisal") of the estimated pro forma market value of the common stock which is to be issued in connection with the mutual-to-stock conversion transaction described below.

This Appraisal is furnished pursuant to the requirements stipulated in the Code of Federal Regulations and has been prepared in accordance with the “Guidelines for Appraisal Reports for the Valuation of Savings and Loan Associations Converting from Mutual to Stock Form of Organization” (the “Valuation Guidelines”) of the Office of Thrift Supervision (“OTS”) and accepted by the Federal Reserve Board (“FRB”), the Federal Deposit Insurance Corporation (“FDIC”) and the Office of the Comptroller of the Currency (“OCC”), and applicable regulatory interpretations thereof.

Description of Plan of Conversion

On September 16, 2020, the Boards of Directors of William Penn, MHC (the “MHC”) and William Penn Bancorp, Inc. (“WMPN”) adopted a plan of conversion whereby the MHC will convert to stock form. As a result of the conversion, WMPN, which currently owns all of the issued and outstanding common stock of William Penn Bank (the “Bank”), will be succeeded by a new Maryland corporation with the name of William Penn Bancorporation (the “Company”). Following the conversion, the MHC will no longer exist. For purposes of this document, the existing consolidated entity will hereinafter also be referred to as William Penn Bancorporation or the Company, unless otherwise identified as WMPN. As of June 30, 2020, the MHC had a majority ownership interest in, and its principal asset consisted of, approximately 82.66% of the common stock (the “MHC Shares”) of WMPN. The remaining 17.34% of WMPN’s common stock is owned by public stockholders.

It is our understanding that William Penn Bancorporation will offer its stock, representing the majority ownership interest held by the MHC, in a subscription offering to Eligible Account Holders, Tax-Qualified Employee Benefit Plans including the Bank’s employee stock ownership plan (the “ESOP”), Supplemental Eligible Account Holders and Other Members. To the extent that shares remain available for purchase after satisfaction of all subscriptions received in the subscription offering, the shares may be offered for sale to the public at large in a

community offering and a syndicated community offering. Upon completing the mutual-to-stock conversion and stock offering (the “second-step conversion”), the Company will be 100% owned by public shareholders, the publicly-held shares of WMPN will be exchanged for shares in the Company at a ratio that retains their ownership interest at the time the conversion is completed and the MHC assets will be consolidated with the Company.

RP^® Financial, LC.

RP^® Financial, LC. (“RP Financial”) is a financial consulting firm serving the financial services industry nationwide that, among other things, specializes in financial valuations and analyses of business enterprises and securities, including the pro forma valuation for savings institutions converting from mutual-to-stock form. The background and experience of RP Financial is detailed in Exhibit V-1. We believe that, except for the fee we will receive for the Appraisal, we are independent of the Company, WMPN, the Bank, the MHC and the other parties engaged by the Bank or the Company to assist in the second-step conversion process.

Valuation Methodology

In preparing our Appraisal, we have reviewed the regulatory applications of the Company, the Bank and the MHC, including the prospectus as filed with the FRB and the Securities and Exchange Commission (“SEC”). We have conducted a financial analysis of the Company, the Bank and the MHC that has included a review of audited financial information for the fiscal years ended June 30, 2016 through June 30, 2020, a review of various unaudited information and internal financial reports through June 30, 2020, and due diligence related discussions with the Company’s management; S.R. Snodgrass, P.C., the Company’s independent auditor; Kilpatrick Townsend & Stockton LLP, the Company’s conversion counsel and Piper Sandler & Co., the Company’s marketing advisor in connection with the stock offering. All assumptions and conclusions set forth in the Appraisal were reached independently from such discussions. In addition, where appropriate, we have considered information based on other available published sources that we believe are reliable. While we believe the information and data gathered from all these sources are reliable, we cannot guarantee the accuracy and completeness of such information.

We have investigated the competitive environment within which William Penn Bancorporation operates and have assessed William Penn Bancorporation’s relative strengths and weaknesses. We have kept abreast of the changing regulatory and legislative environment for financial institutions and analyzed the potential impact on William Penn Bancorporation and the industry as a whole. We have analyzed the potential effects of the stock conversion on William Penn Bancorporation’s operating characteristics and financial performance as they relate to the pro forma market value of William Penn Bancorporation. We have analyzed the assets held by the MHC, which will be consolidated with William Penn Bancorporation’s assets and equity pursuant to the completion of the second-step conversion. We have reviewed the economic and demographic characteristics of the Company’s primary market area. We have compared William Penn Bancorporation’s financial performance and condition with selected publicly-traded thrifts in accordance with the Valuation Guidelines, as well as all publicly-traded thrifts and thrift holding companies. We have reviewed the current conditions in the securities markets in general and the market for thrift stocks in particular, including the market for existing

thrift issues, initial public offerings by thrifts and thrift holding companies and second-step conversion offerings. We have excluded from such analyses thrifts subject to announced or rumored acquisition, and/or institutions that exhibit other unusual characteristics.

The Appraisal is based on William Penn Bancorporation’s representation that the information contained in the regulatory applications and additional information furnished to us by William Penn Bancorporation and its independent auditor, legal counsel and other authorized agents are truthful, accurate and complete. We did not independently verify the financial statements and other information provided by William Penn Bancorporation, or its independent auditor, legal counsel and other authorized agents nor did we independently value the assets or liabilities of William Penn Bancorporation. The valuation considers William Penn Bancorporation only as a going concern and should not be considered as an indication of William Penn Bancorporation’s liquidation value.

Our appraised value is predicated on a continuation of the current operating environment for William Penn Bancorporation and for all thrifts and their holding companies. Changes in the local, state and national economy, the legislative and regulatory environment for financial institutions and mutual holding companies, the stock market, interest rates, and other external forces (such as natural disasters or significant world events) may occur from time to time, often with great unpredictability and may materially impact the value of thrift stocks as a whole or the value of William Penn Bancorporation’s stock alone. It is our understanding that there are no current plans for selling control of William Penn Bancorporation following completion of the second-step conversion. To the extent that such factors can be foreseen, they have been factored into our analysis.

The estimated pro forma market value is defined as the price at which William Penn Bancorporation’s common stock, immediately upon completion of the second-step stock offering, would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

In preparing the pro forma pricing analysis we have taken into account the pro forma impact of the MHC’s net assets (i.e., unconsolidated equity) that will be consolidated with the Company and thus will increase equity. After accounting for the impact of the MHC’s net assets, the public shareholders’ ownership interest was reduced by approximately 0.52%. Accordingly, for purposes of the Company’s pro forma valuation, the public shareholders’ pro forma ownership interest was reduced from 17.34% to 16.82% and the MHC’s ownership interest was increased from 82.66% to 83.18%.

Valuation Conclusion

It is our opinion that, as of September 2, 2020, the estimated aggregate pro forma valuation of the shares of the Company to be issued and outstanding at the end of the conversion offering – including (1) newly-issued shares representing the MHC’s current ownership interest in the Company and (2) exchange shares issued to existing public shareholders of WMPN – was $132,248,840 at the midpoint, equal to 13,224,884 shares at $10.00 per share. The resulting range of value and pro forma shares, all based on $10.00 per share, are as follows: $112,411,510 or 11,241,151 shares at the minimum and $152,086,160 or 15,208,616 shares at the maximum.

Based on this valuation and taking into account the ownership interest represented by the shares owned by the MHC, the midpoint of the offering range is $110,000,000 equal to 11,000,000 shares at $10.00 per share. The resulting offering range and offering shares, all based on $10.00 per share, are as follows: $93,500,000 or 9,350,000 shares at the minimum and $126,500,000 or 12,650,000 shares at the maximum.

Establishment of the Exchange Ratio

The conversion regulations provide that in a conversion of a mutual holding company, the minority stockholders are entitled to exchange the public shares for newly issued shares in the fully converted company. The Boards of Directors of the MHC and WMPN have independently determined the exchange ratio, which has been designed to preserve the current aggregate percentage ownership in the Company (adjusted for the dilution resulting from the consolidation of the MHC’s unconsolidated equity into the Company). The exchange ratio to be received by the existing minority shareholders of the Company will be determined at the end of the offering, based on the total number of shares sold in the offering and the final appraisal. Based on the valuation conclusion herein, the resulting offering value and the $10.00 per share offering price, the indicated exchange ratio at the midpoint is 2.8589 shares of the Company’s stock for every one share held by public shareholders. Furthermore, based on the offering range of value, the indicated exchange ratio is 2.4301 at the minimum and 3.2877 at the maximum. RP Financial expresses no opinion on the proposed exchange of newly issued Company shares for the shares held by the public stockholders or on the proposed exchange ratio.

Limiting Factors and Considerations

The valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing shares of the common stock. Moreover, because such valuation is determined in accordance with applicable regulatory guidelines and is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of common stock in the conversion offering, or prior to that time, will thereafter be able to buy or sell such shares at prices related to the foregoing valuation of the estimated pro forma market value thereof. The appraisal reflects only a valuation range as of this date for the pro forma market value of William Penn Bancorporation immediately upon issuance of the stock and does not take into account any trading activity with respect to the purchase and sale of common stock in the secondary market on the date of issuance of such securities or at anytime thereafter following the completion of the second-step conversion.

RP Financial’s valuation was based on the financial condition, operations and shares outstanding of WMPN as of June 30, 2020, the date of the financial data included in the prospectus. The proposed exchange ratio to be received by the current public stockholders of WMPN and the exchange of the public shares for newly issued shares of William Penn Bancorporation’s common stock as a full public company was determined independently by the Boards of Directors of the MHC and WMPN. RP Financial expresses no opinion on the proposed exchange ratio to public stockholders or the exchange of public shares for newly issued shares.

RP Financial is not a seller of securities within the meaning of any federal and state securities laws and any report prepared by RP Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities. RP Financial maintains a policy which prohibits RP Financial, its principals or employees from purchasing stock of its client institutions.

This valuation may be updated as provided for in the conversion regulations and guidelines. These updates will consider, among other things, any developments or changes in the financial performance and condition of William Penn Bancorporation, management policies, and current conditions in the equity markets for thrift shares, both existing issues and new issues. These updates may also consider changes in other external factors which impact value including, but not limited to: various changes in the legislative and regulatory environment for financial institutions, the stock market and the market for thrift stocks, and interest rates. Should any such new developments or changes be material, in our opinion, to the valuation of the shares, appropriate adjustments to the estimated pro forma market value will be made. The reasons for any such adjustments will be explained in the update at the date of the release of the update. The valuation will also be updated at the completion of William Penn Bancorporation’s stock offering.

	Respectfully submitted,
	RP® FINANCIAL, LC.

	Ronald S. Riggins
	President and Managing Director
	Gregory E. Dunn
	Director

TABLE OF CONTENTS
WILLIAM PENN BANCORPORATION
WILLIAM PENN BANK
Bristol, Pennsylvania

TABLE OF CONTENTS
WILLIAM PENN BANCORPORATION
WILLIAM PENN BANK
Bristol, Pennsylvania 

(continued)

LIST OF TABLES
WILLIAM PENN BANCORPORATION
WILLIAM PENN BANK
Bristol, Pennsylvania

 I. Overview and Financial Analysis

Introduction

William Penn Bank, or the “Bank”, established in 1870, is a Pennsylvania chartered stock savings bank headquartered in Bristol, Pennsylvania. William Penn Bank serves the Philadelphia metropolitan area through the headquarters office and 12 branch offices. Eight of the branches are located in the Pennsylvania counties of Bucks (four branches) and Philadelphia (four branches), with the remaining four branches located in the New Jersey counties of Camden (three branches) and Burlington (one branch). A map of The William Penn Bank’s full serve branch office locations is provided in Exhibit I-1. William Penn Bank is a member of the Federal Home Loan Bank (“FHLB”) system and its deposits are insured up to the maximum allowable amount by the Federal Deposit Insurance Corporation (“FDIC”).

William Penn Bancorp, Inc. (“WMPN”) is the federally chartered mid-tier holding company of the Bank. WMPN owns 100% of the outstanding common stock of the Bank. Since its formation in 2008, WMPN has been engaged primarily in the business of holding the common stock of the Bank. WMPN completed its initial public offering on April 15, 2008, pursuant to which it sold 1,025,283 shares or 28.2% of its outstanding common stock to the public and issued 2,548,713 shares or 70.0% of its common stock outstanding to William Penn, MHC (the “MHC”), the mutual holding company parent of WMPN. Additionally, WMPN issued 67,022 shares of common stock or 1.8% of its common stock outstanding to the William Penn Community Foundation (the “Foundation”). The MHC and WMPN are subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board” or the “FRB”). At June 30, 2020, WMPN had total consolidated assets of $736.5 million, deposits of $559.8 million and equity of $96.4 million or 13.09% of total assets. Excluding goodwill and core deposit intangibles of $6.1 million, WMPN’s tangible equity equaled $90.3 million or 12.26% of total assets at June 30, 2020. WMPN’s audited financial statements for the most recent period are included by reference as Exhibit I-2.

Plan of Conversion

On September 16, 2020, the respective Board of Directors of the MHC and WMPN adopted a Plan of Conversion, whereby the MHC will convert to stock form. As a result of the conversion, WMPN, which currently owns all of the issued and outstanding common stock of the

Bank, will be succeeded by William Penn Bancorporation (the “Company”), a newly formed Maryland corporation. Following the conversion, the MHC will no longer exist. For purposes of this document, the existing consolidated entity will also hereinafter be also referred to as William Penn Bancorporation or the Company, unless otherwise identified as WMPN. As of June 30, 2020, the MHC had a majority ownership interest of approximately 82.66% in and its principal asset consisted of 3,711,114 common stock shares of WMPN (the “MHC Shares”). The remaining 778,231 shares or approximately 17.34% of WMPN’s common stock was owned by public shareholders.

It is our understanding that William Penn Bancorporation will offer its stock, representing the majority ownership interest held by the MHC, in a subscription offering to Eligible Account Holders, Tax-Qualified Plans including the Bank’s employee stock ownership plan (the “ESOP”), Supplemental Eligible Account Holders and Other Members. To the extent that shares remain available for purchase after satisfaction of all subscriptions received in the subscription offering, the shares may be offered for sale to the public at large in a community offering and a syndicated offering. Upon completing the mutual-to-stock conversion and stock offering (the “second-step conversion”), the Company will be 100% owned by public shareholders, the publicly-held shares of WMPN will be exchanged for shares in the Company at a ratio that retains their ownership interest at the time the conversion is completed and the MHC assets will be consolidated with the Company.

Strategic Overview

William Penn Bancorporation maintains a local community banking emphasis, with a primary strategic objective of meeting the borrowing and savings needs of its local customer base. The Company is pursuing a strategy of strengthening its community bank franchise dedicated to meeting the banking needs of business and retail customers in the communities that are served by the Company. Growth strategies are emphasizing increased lending diversification that is primarily targeting growth of commercial real estate and commercial business loans. The Company’s objective is to fund asset growth primarily through deposit growth, emphasizing growth of lower cost core deposits. Core deposit growth is expected to be in part facilitated by growth of commercial lending relationships, pursuant to which the Company is seeking to establish a full service banking relationship with its commercial loan customers through offering a full range of commercial loan products that can be packaged with lower cost commercial deposit products.

In recent years, the Company has supplemented organic growth with the acquisition of three mutual institutions. On July 1, 2018, the Bank completed the acquisition of Audubon Savings Bank, Audubon, New Jersey. With the acquisition of Audubon Savings Bank, the Bank added $149 million in assets, $107 million in deposits and three branch offices in southern New Jersey. In connection with the completion of the acquisition, William Penn Bancorporation issued 517,095 shares of common stock to the MHC. On May 1, 2020, the Bank completed the acquisitions of Fidelity Savings and Loan Association of Bucks County, Bristol, Pennsylvania (“Fidelity Savings”), and Washington Savings Bank, Philadelphia, Pennsylvania (“Washington Savings”). With the acquisition of Fidelity Savings, the Company added $86 million in assets, $66 million in deposits and two branch offices in Bucks County. With the acquisition of Washington Savings, the Company added $159 million in assets, $136 million in deposits and four branch offices in Philadelphia County. In connection with the completion of the acquisitions of Fidelity Savings and Washington Savings, William Penn Bancorporation issued 509,191 shares of common stock to the MHC.

Loans constitute the major portion of the Company’s composition of interest-earning assets, with 1-4 family permanent mortgage comprising more than half of the Company’s loan portfolio composition. Investments serve as a supplement to the Company’s lending activities and the investment portfolio is considered to be indicative of a low risk investment philosophy, as government-sponsored residential mortgage-backed securities constitute the largest concentration of the Company’s investment portfolio.

Deposits have consistently served as the primary funding source for the Company, supplemented with borrowings as an alternative funding source for purposes of managing funding costs and interest rate risk. Core deposits, consisting of transaction and savings account deposits, constitute the largest portion of the Company’s deposit base. Borrowings currently held by the Company consist of FHLB advances.

William Penn Bancorporation’s earnings base is largely dependent upon net interest income and operating expense levels. The Company experienced net interest margin expansion in fiscal years 2018 and 2019, which was facilitated by an increase in yield earned on interest-earnings assets and a decrease in the cost of funds paid on interest-bearing liabilities. Comparatively, the Company experienced net interest margin compression during fiscal year 2020, as the result of a decline in yield earned on interest-earning assets and an increase in the cost of funds paid on interest-bearing liabilities. Operating expense ratios have trended higher

in recent years, primarily in connection with the infrastructure and personnel added with the acquisitions of the three mutual institutions. Non-interest operating income has been a somewhat limited contributor to the Company’s earnings, with the acquisitions of the three mutual institutions serving to increase the earnings contribution realized from sources of non-interest operating income. Loan loss provisions were a minor factor in the Company’s earnings during fiscal years 2016 through 2019. In fiscal year 2020 loan loss provisions were a more prominent component of the Company’s earnings, as the Company established additional loan loss provisions to address the continued economic uncertainty resulting from the COVID-19 pandemic.

A key component of the Company’s business plan is to complete a second-step conversion offering. The Company’s strengthened capital position will increase operating flexibility and facilitate implementation of planned growth strategies. Additionally, in the near term, the second-step offering will serve to substantially increase regulator capital and liquidity and, thereby, facilitate building and maintaining loss reserves while also providing the Company with greater flexibility to work with borrowers affected by the COVID-19-induced recession. The Company’s strengthened capital position will also provide more of a cushion against potential credit quality related losses in future periods. William Penn Bancorporation’s higher capital position resulting from the infusion of stock proceeds will also serve to reduce interest rate risk, particularly through enhancing the Company’s interest-earning assets/interest-bearing liabilities (“IEA/IBL”) ratio. The additional funds realized from the stock offering will serve to raise the level of interest-earning assets funded with equity and, thereby, reduce the ratio of interest-earning assets funded with interest-bearing liabilities as the balance of interest-bearing liabilities will initially remain relatively unchanged following the conversion, which may facilitate a reduction in William Penn Bancorporation’s funding costs. William Penn Bancorporation’s strengthened capital position will also position the Company to pursue additional expansion opportunities. Such expansion could potentially include establishing or acquiring additional banking offices to gain a market presence in nearby markets that are complementary to the Company’s existing branch network. As a fully-converted institution, the Company’s stronger capital position and greater capacity to offer stock as consideration for an acquisition may also facilitate increased opportunities to grow through acquisitions. At this time, the Company has no specific plans for further expansion through additional acquisitions.

The projected uses of proceeds are highlighted below.

Overall, it is the Company’s objective to pursue growth that will serve to increase returns, while, at the same time, growth will not be pursued that could potentially compromise the overall risk associated with William Penn Bancorporation’s operations.

Balance Sheet Trends

Table 1.1 shows the Company’s historical balance sheet data for the past five fiscal years. Since fiscal yearend 2016, the Company’s assets ranged from a low of $301.1 million at fiscal yearend 2018 to a high of $736.5 million at fiscal yearend 2020. Asset growth since fiscal yearend 2018 was largely realized through the acquisitions of the three mutual institutions. Overall, assets increased at an annual rate of 23.75% from fiscal yearend 2016 through fiscal yearend 2020. Asset growth was primarily driven by loan growth and mostly funded by deposit growth, most of which consisted of the loan portfolios and deposit bases acquired from the three mutual institutions. A summary of William Penn Bancorporation’s key operating ratios for the past five fiscal years is presented in Exhibit I-3.

William Penn Bancorporation’s loans receivable portfolio increased at a 21.69% annual rate from fiscal yearend 2016 through fiscal yearend 2020, with most of the loan growth occurring in fiscal years 2019 and 2020 in connection with the acquisitions completed during those years. The Company’s comparatively stronger asset growth relative to loan growth provided for a decrease in the loans-to-assets ratio from 73.84% at fiscal yearend 2016 to 69.06% at fiscal yearend 2020.

Over the past four fiscal years, 1-4 family permanent mortgage have been the most significant area of loan growth and such loans comprise the largest concentration of Company’s loan portfolio. Trends in the Company’s loan portfolio composition since fiscal yearend 2016

Table 1.1

William Penn Bancorporation

Historical Balance Sheet Data

(1) Ratios are as a percent of ending assets.

Sources: William Penn Bancorporation's prospectus, auditedfinancial statements, and RP Financial calculations.

show that the concentration of 1-4 family permanent mortgage loans comprising total loans has remained fairly stable, equaling 66.26% of total loans at fiscal yearend 2016 and 66.85% of total loans at fiscal yearend 2020. Comparatively, from fiscal yearend 2016 through fiscal yearend 2020, commercial real estate loans, including multi-family loans, increased from 16.03% to 17.72% of total loans and construction and land loans decreased from 7.09% to 4.34% of total loans. Over the same time period, the relative concentrations of home equity loans and lines of credit decreased from 10.12% of total loans to 9.10% of total loans, commercial business loans increased from 0.02% of total loans to 1.24% of total loans and consumer loans increased from 0.48% of total loans to 0.75% of total loans.

The intent of the Company’s investment policy is to provide adequate liquidity and to generate a favorable return within the context of supporting overall credit and interest rate risk objectives. It is anticipated that proceeds retained at the holding company level will initially be primarily invested into liquid funds, some of which may be held as a deposit at the Bank. Since fiscal yearend 2016, the Company’s level of cash and investment securities (inclusive of FHLB stock) ranged from a low of 14.43% of assets at fiscal yearend 2019 to a high of 24.36% of assets at fiscal yearend 2020. As of June 30, 2020, the Company held investment securities totaling $90.0 million or 12.22% of assets. Mortgage-backed securities totaling $55.0 million comprised the most significant component of the Company’s investment portfolio at June 30, 2020. Other investments held by the Company at June 30, 2020 consisted of corporate bonds ($17.4 million), municipal bonds ($10.5 million), U.S. Government agency securities ($6.2 million) and U.S. Treasury securities ($1.0 million). As of June 30, 2020, the entire investment portfolio was maintained as available for sale and had a net unrealized gain of $103,000 at June 30, 2020. Exhibit I-4 provides historical detail of the Company’s investment portfolio. As of June 30, 2020, the Company also held $82.9 million of cash and cash equivalents, $2.3 million of interest-bearing time deposits and $4.2 million of FHLB/ACBB stock.

The Company also maintains an investment in bank-owned life insurance (“BOLI”) policies, which covers the lives of certain former officers of the Company and certain current and former Board members of the Company. The life insurance policies earn tax-exempt income through cash value accumulation and death proceeds. As of June 30, 2020, the cash surrender value of the Company’s BOLI equaled $14.8 million or 2.00% of assets.

William Penn Bancorporation’s funding needs have been addressed through a combination of deposits, borrowings and internal cash flows. From fiscal yearend 2016 through

fiscal yearend 2020, the Company’s deposits increased at a 33.30% annual rate. Most of the Company’s deposit growth was realized through the three mutual institutions acquired in fiscal years 2019 and 2020. The acquisitions of the three mutual institutions served to increase the concentration of core deposits that comprise total deposits. Core deposits equaled 65.26% of total deposits at June 30, 2020, versus 53.60% of total deposits at June 30, 2018.

Borrowings serve as an alternative funding source for the Company to address funding needs for growth and to support management of deposit costs and interest rate risk. Over the five-year period covered in Table 1.1, borrowings ranged from a low of $50.0 million or 12.02% of assets at fiscal yearend 2019 to a high of $70.5 million or 22.45% of assets at fiscal yearend 2016. As of June 30, 2020, borrowings totaled $64.9 million or 8.81% of assets and consisted entirely of FHLB advances.

The Company’s equity increased at a 12.62% annual rate from fiscal yearend 2016 through fiscal yearend 2020, with most of the growth occurring in fiscal years 2019 and 2020 in connection with acquisitions of the three mutual institutions. Largely as the result of the acquisitions of the three mutual institutions, stronger asset growth relative to capital growth provided for a decrease in the Company’s equity-to-assets ratio from 19.07% at fiscal yearend 2016 to 13.09% at June 30, 2020. Comparatively, as the result of the goodwill and intangibles created from the acquisitions of the three mutual institutions, the Company’s tangible equity-to-assets ratio decreased from 19.07% at fiscal yearend 2016 to 12.26% at fiscal yearend 2020. Goodwill and other intangibles totaled $6.1 million or 0.82% of assets at June 30, 2020. The Bank maintained capital surpluses relative to all of its regulatory capital requirements at June 30, 2020. The addition of stock proceeds will serve to strengthen the Company’s capital position, as well as support growth opportunities. At the same time, the significant increase in William Penn Bancorporation’s pro forma capital position will initially depress its ROE.

Income and Expense Trends

Table 1.2 shows the Company’s historical income statements for the fiscal years ended June 30, 2016 through June 30, 2020. During the period covered in Table 1.2, the Company’s reported earnings from a low of $1.3 million or 0.27% of average assets during fiscal year 2020 to a high of $3.8 million or 0.92% of average assets during fiscal year 2019. The Company’s earnings for fiscal year 2020 included merger related expenses totaling $3.3 million or 0.67% of average assets. Net interest income and operating expenses represent the primary components of the Company’s earnings, while non-interest operating income has been a fairly

Table 1.2

William Penn Bancorporation

Historical Income Statements

(1) Ratios are as a percent of average assets.

(2) Assumes a 34.0% effective tax rate for fiscal years 2016 through 2018 and a 22.5% effective tax rate for fiscal years 2019 and 2020.

(3) Expense coverage ratio calculated as net interest income before provisions for loan losses divided by operating expenses.

(4) Efficiency ratio calculated as operating expenses divided by the sum of net interest income before provisions for loan losses plus non-interest operating income.

Sources: William Penn Bancorporation's prospectus, audited financial statements and RP Financial calculations.

limited contributor to the Company’s earnings. Loan loss provisions have typically been a relatively minor factor in the Company’s earnings, but were a more significant earnings factor during fiscal year 2020 for purposes of addressing continued economic uncertainty resulting from the COVID-19 pandemic. With the exception of merger related expenses recorded during fiscal years 2019 and 2020 and the gain on bargain purchase recorded during fiscal year 2020, non-operating income and losses have been a relatively minor earnings factor throughout the period covered in Table 1.2

For the period covered in Table 1.2, the Company’s net interest income to average assets ratio ranged from a low of 2.70% during fiscal year 2017 to a high of 3.48% during fiscal year 2019 and then declined to 3.01% of average assets during fiscal year 2020. The increase in the Company’s net interest income ratio from fiscal year 2017 through fiscal year 2019 was realized through an increase in the interest income ratio and a decrease in the interest expense ratio. The increase in the interest income ratio was facilitated by a shift in the Company’s interest-earning asset composition towards a higher concentration of comparatively higher yielding loans relative to investments, which served to increase the Company’s overall yield on interest-earning assets. Likewise, the decrease in the interest expense ratio was facilitate by a shift in the Company’s funding composition towards lower costing deposits relative to borrowings, which served to reduce the Company’s overall cost of funds. The decline in the Company’s net interest income ratio during fiscal year 2020 was due to interest rate spread compression that resulted from a decrease in the yield on interest-earnings assets and an increase in the cost of interest-bearing liabilities. During fiscal year 2020, the decline in yield earned on interest-earning reflects a shift in the Company’s interest-earning asset composition towards a higher concentration of comparatively lower yielding investments relative to loans, as well as a decline in the weighted average yield earned on loans. Comparatively, the increase in the Company interest expense ratio during fiscal year 2020 was largely related to an increase in the weighted average cost of interest-bearing deposits. Overall, during the past five fiscal years, the Company’s interest rate spread ranged from a low of 2.62% during fiscal year 2017 to a high of 3.57% during fiscal year 2019 and equaled 3.05% during fiscal year 2020. The Company’s net interest rate spreads and yields and costs for the past five fiscal years are set forth in Exhibit I-3 and Exhibit I-5.

Non-interest operating income has been somewhat of a limited contributor to the Company’s earnings over the past five fiscal years, although those sources of revenues have become a slightly larger earnings factor pursuant to the non-interest operating income added

through the acquisitions of the three mutual institutions. Throughout the period shown in Table 1.2, sources of non-interest operating income ranged from a low of $493,000 or 0.16% of average assets during fiscal year 2016 to a high of $1.2 million or 0.24% of average assets during fiscal year 2020. Fees and service charges and income earned on BOLI constitute the major sources of the Company’s non-interest operating revenues.

Operating expenses represent the other major component of the Bank’s earnings, ranging from a low of $5.2 million or 1.65% of average assets during fiscal year 2017 to a high of $12.1 million or 2.46% of average assets during fiscal year 2020. Most of the increase in operating expenses occurred during fiscal years 2019 and 2020, as the result of the infrastructure and personnel that were added with the acquisitions of the three mutual institutions.

Overall, the general trends in the Company’s net interest income ratio and operating expense ratio showed a decline in core earnings, as indicated by the Company’s expense coverage ratios (net interest income divided by operating expenses). William Penn Bancorporation’s expense coverage ratio equaled 1.59 times during fiscal year 2016, versus a ratio of 1.22 times during fiscal year 2020. Likewise, William Penn Bancorporation’s efficiency ratio (operating expenses as a percent of the sum of net interest income and other operating income) of 59.40% during fiscal year 2016 was more favorable compared to its efficiency ratio of 75.69% recorded during fiscal year 2020.

During the period covered in Table 1.2, the amount of loan loss provisions and recoveries recorded by the Company ranged from a recovery of $120,000 or 0.04% of average assets during fiscal year 2018 to loan loss provisions of $626,000 or 0.13% of average assets during fiscal year 2020. Significantly higher loan loss provisions were established in the fourth quarter of fiscal year 2020 to address the continued economic uncertainty resulting from the COVID-19 pandemic. As of June 30, 2020, the Company maintained valuation allowances of $3.5 million, equal to 0.68% of total loans and 107.88% of non-performing loans. As of June 30, 2020, non-performing loans totaled $3.3 million or 0.63% of total loans. After taking into account the $3.680 million of fair value credit adjustment applied to the loan portfolios of Fidelity Savings and Washington Savings, the Company’s reserve coverage ratios equaled 1.39% of total loans and 220.69% of non-performing loans. Exhibit I-6 sets forth the Company’s loan loss allowance activity during the past five fiscal years.

Except for merger expenses related to the acquisitions of the three mutual institutions and the gain on bargain purchase related to the acquisitions of Fidelity Savings and Washington Savings, non-operating income and losses have not been a significant factor in the Company’s earnings. Merger related expenses equaled $375,000 or 0.12% of average assets during fiscal year 2018, $796,000 or 0.19% of average assets during fiscal year 2019 and $3.3 million or 0.67% of average assets during fiscal year 2020. In fiscal year 2020, the Company recorded a gain on bargain purchase of $746,000 or 0.15% of average assets. Other sources of non-operating income and losses consisted of gains and losses on the sale other real estate owned (“OREO”) and gains on the sale of investment securities. Overall, during the period covered in Table 1.2, net non-operating income and losses ranged from a loss of $2.3 million or 0.47% of average assets during fiscal year 2020 to non-operating income of $96,000 or 0.03% of average assets during fiscal year 2017. Overall, the items that comprise the Company’s non-operating income and losses are not viewed to be part of the Company’s core or recurring earnings base.

The Company’s effective tax rate ranged from 57.82% during fiscal year 2018 to a tax benefit of 41.13% during fiscal year 2020. The relatively high effective tax rate recorded for fiscal year 2018 includes a reduction in the value of William Penn Bancorporation’s deferred tax assets and a corresponding charge to income tax expense of $959,000 as a result of the enactment of the Tax Cuts and Jobs Act of 2017, which reduced the maximum federal corporate income tax rate to 21% from 35%. As set forth in the prospectus, the Company’s effective marginal tax rate is 22.5%.

Interest Rate Risk Management

The Company’s balance sheet is liability-sensitive in the short-term (less than one year) and, thus, the net interest margin will typically be adversely affected during periods of rising and higher interest rates. As interest rates have remained at or near historically low levels for an extended period of time, the Company experienced interest spread compression during fiscal year 2020 as the average yield on interest-earning assets declined and the average cost of interest-bearing liabilities increased. The Company’s interest rate risk analysis indicated that as of June 30, 2020, in the event of a 200 basis point instantaneous parallel increase in interest rates, net interest income would decline by 1.38% in year 1 and net portfolio value would decrease by 4.16% (see Exhibit I-7).

The Company pursues a number of strategies to manage interest rate risk, particularly with respect to seeking to limit the repricing mismatch between interest rate sensitive assets

and liabilities. The Company manages interest rate risk from the asset side of the balance sheet through investing in securities that have adjustable interest rates, maintaining the investment securities portfolio as available for sale and lending diversification into other types of lending beyond 1-4 family permanent mortgage loans which consist primarily of adjustable rate or shorter term fixed rate loans. As of June 30, 2020, ARM loans comprised 42.42% of the dollar amount of all loans due after June 30, 2021 (see Exhibit I-8). On the liability side of the balance sheet, management of interest rate risk has been pursued through emphasizing growth of lower costing and less interest rate sensitive transaction, money market and savings account deposits and utilizing longer term fixed rate FHLB advances with laddered terms. Transaction, money market and savings deposits comprised 65.26% of William Penn Bancorporation’s total deposits at June 30, 2020.

The infusion of stock proceeds will serve to further limit the Company’s interest rate risk exposure, as most of the net proceeds will be redeployed into interest-earning assets and the increase in the Company’s capital position will lessen the proportion of interest rate sensitive liabilities funding assets.

Lending Activities and Strategy

William Penn Bancorporation’s lending activities have emphasized 1-4 family permanent mortgage loans and such loans comprise the largest concentration of the Company’s loan portfolio. Beyond 1-4 family loans, lending diversification by the Company has emphasized commercial real estate/multi-family loans followed by home equity loans and lines of credit. Other areas of lending diversification for the Company include construction/land loans commercial business loans and consumer loans. Pursuant to the Company’s strategic plan, the Company is pursuing a diversified lending strategy emphasizing commercial real estate and commercial business loans as the primary areas of targeted loan growth. Exhibit I-9 provides historical detail of William Penn Bancorporation’s loan portfolio composition over the past five fiscal years and Exhibit I-10 provides the contractual maturity of the Company’s loan portfolio by loan type as of June 30, 2020.

1-4 Family Residential Real Estate Loans. William Penn Bancorporation offers both fixed rate and adjustable rate 1-4 family residential real estate loans with terms of up to 30 years, which are substantially secured by local properties. Loan originations are generally underwritten to secondary market guidelines, so as to provide the Company with the flexibility to

sell the loans into the secondary market for purposes of managing interest rate risk. The Company’s current practice is to generally retain all originations for investment. ARM loans offered by the Company have initial repricing terms of up to ten years and then reprice annually for the balance of the loan term. ARM loans are indexed to the comparable monthly Constant Maturity Treasury indices. The Company’s 1-4 family lending activities include origination of loans secured by non-owner occupied 1-4 family residential properties. As of June 30, 2020, the Company’s outstanding balance of 1-4 family residential real estate loans totaled $345.9 million equal to 66.85% of total loans outstanding. As of June 30, 2020, loans secured by non-owner-occupied properties totaled $114.1 million equal to 33.0% of the 1-4 family loan portfolio.

Commercial Real Estate and Multi-family Loans Commercial real estate and multi-family loans consist largely of loans originated by the Company, which are generally collateralized by properties in the Company’s regional lending area. On a limited basis, the Company supplements originations of commercial real estate and multi-family loans with purchased loan participations from local banks. Loan participations are subject to the same underwriting criteria and loan approvals as applied to loans originated by the Company. As of June 30, 2020, the Company’s loan portfolio included $5.7 million in purchased loan participations outstanding. William Penn Bancorporation generally originates commercial real estate and multi-family loans up to a loan-to-value (“LTV”) ratio of 80% and generally requires a minimum debt-coverage ratio of 1.25 times. Commercial real estate and multi-family loans are originated with amortization terms of up to 25 years. Loan terms offered on commercial real estate and multi-family loans include fixed rate and adjustable rate loans. Interest rates for adjustable rate loans are typically adjusted to a rate equal to the interest rate for 1-4 family loan products, plus an additional spread based on credit-worthiness and risk. Properties securing the commercial real estate and multi-family loan portfolio include office buildings, retail and mixed-use properties, condominiums, apartment buildings, single-family subdivisions and owner occupied properties used for businesses. At June 30, 2020, the Company’s largest commercial real estate loan had an outstanding balance of $6.1 million and was secured by a shopping center and church. At June 30, 2020, this loan was performing in accordance with its original terms. As of June 30, 2020, the Company’s outstanding balance of commercial real estate and multi-family loans totaled $91.7 million equal to 17.72% of total loans outstanding.

Home Equity Loans and Lines of Credit. The Company’s 1-4 family lending activities include home equity loans and lines of credit. Home equity loans are originated as fixed rate loans with amortization terms up to 20 years. Home equity lines of credit are tied to the prime

rate as published in The Wall Street Journal and are generally offered with terms of up to a ten year draw period followed by a repayment term of 15 years. The Company will generally originate home equity loans and lines of credit up to a maximum loan-to value (“LTV”) ratio of 80%, inclusive of other liens on the property, on owner occupied properties. As of June 30, 2020, the Company’s outstanding balance of home equity loans and lines of credit totaled $47.1 million equal to 9.10% of total loans outstanding.

Construction and Land Loans. Residential construction loans originated by the Company consist of loans to individuals that finance the construction of residential dwellings for personal use. Commercial construction loans originated by the Company consist of loans for the development of projects including condominiums, apartment buildings, single-family subdivisions, non-owner-occupied residential dwellings and owner-occupied properties used for business. Residential construction loans are originated as interest-only loans during the construction phase, which is typically up to 18 months. At the end of the construction phase, the loan may convert to a permanent mortgage loan or the loan may be paid in full. Residential construction loans are generally originated up to a maximum LTV ratio of 80% of the appraised market value. Commercial construction loans are originated up to a maximum LTV ratio of 75% of the lower of cost or the appraised market value. The Company does not currently offer land loans, but has historically offered land loans to individuals on approved residential building lots for personal use. Land loans in the Company’s loan portfolio have terms of up to 15 years and a maximum LTV ratio of 80%. The largest construction or land loan in the Company’s loan portfolio at June 30, 2020 was a commercial land loan for $3.0 million, of which $2.9 million was disbursed and outstanding. At June 30, 2020, this loan was performing in accordance with its original terms. As of June 30, 2020, William Penn Bancorporation’s outstanding balance of construction and land loans equaled $22.5 million or 4.35% of total loans outstanding.

Commercial Business Loans. The commercial business loan portfolio is generated through extending loans to small-to medium-sized businesses operating in the local market area. Commercial business lending is a targeted area of loan growth for the Company, pursuant to which the Company is seeking to become a full service community bank to its commercial loan customers through offering a full range of commercial loan products that can be packaged with lower cost commercial deposit products. Commercial business loans offered by the Company include operating lines of credit secured by general business assets and equipment. Operating lines of credit are generally floating rate loans with repricing occurring daily, monthly or quarterly. Equipment loans are typically fixed rate loans with terms of five

years or less. As of June 30, 2020, the Bank’s outstanding balance of commercial business loans totaled $6.5 million equal to 1.24% of total loans outstanding.

Consumer Loans. Consumer lending other than home equity loans and lines of credit has been a limited area of lending diversification for the Company, with such loans consisting of automobile loans and personal secured and unsecured loans. As of June 30, 2020, the Company held $3.9 million of consumer loans equal to 0.75% of total loans outstanding.

Asset Quality

Over the past five fiscal years, William Penn Bancorporation’s balance of non-performing assets ranged from a low of $2.0 million or 0.48% of assets at June 30, 2019 to a high of $5.7 million or 1.81% of assets at June 30, 2017. As of June 30, 2020, non-performing assets totaled $3.4 million or 0.46% of assets. As shown in Exhibit I-11, non-performing assets at June 30, 2020 consisted of $3.2 million of non-accruing loans, $90,000 of accruing loans 90 days or more past due and $100,000 of OREO. The increase in the balance of non-performing assets during fiscal year 2020 was primarily due to an increase in non-accruing 1-4 family loans, which increased from $1.3 million at fiscal yearend 2019 to $2.4 million at fiscal yearend 2020 and mostly consisted of loans that were acquired with the acquisitions of Fidelity Savings and Washington Savings.

To track the Company’s asset quality and the adequacy of valuation allowances, the Company has established detailed asset classification policies and procedures which are consistent with regulatory guidelines. Classified assets are reviewed monthly by senior management and the Board. Pursuant to these procedures, when needed, the Company establishes additional valuation allowances to cover anticipated losses in classified or non-classified assets. As of June 30, 2020, the Company maintained loan loss allowances of $3.5 million, equal to 0.68% of total loans outstanding and 107.88% of non-performing loans. After taking into account the $3.680 million of fair value credit adjustment applied to the loan portfolios of Fidelity Savings and Washington Savings, the Company’s reserve coverage ratios equaled 1.39% of total loans and 220.69% of non-performing loans.

Funding Composition and Strategy

Deposits have consistently served as the Company’s primary funding source and at June 30, 2020 deposits accounted for 89.61% of William Penn Bancorporation’s combined

balance of deposits and borrowings. Exhibit I-12 sets forth the Company’s deposit composition for the past three fiscal years. Transaction and savings account deposits constituted 65.26% of total deposits at June 30, 2020, as compared to 53.60% of total deposits at June 30, 2018. The increase in the concentration of core deposits comprising total deposits since fiscal yearend 2018 was largely related to the deposits acquired in the acquisitions of the three mutual institutions. As of June 30, 2020, checking accounts and money market accounts comprised the two largest concentrations of the Company’s core deposits equaling 38.93% and 35.32% of core deposits, respectively.

The balance of the Company’s deposits consists of CDs, which equaled 34.74% of total deposits at June 30, 2020 compared to 46.40% of total deposits at June 30, 2018. William Penn Bancorporation’s current CD composition reflects a higher concentration of short-term CDs (maturities of one year or less). The CD portfolio totaled $194.5 million at June 30, 2020 and $113.6 million or 58.41% of the CDs were scheduled to mature in one year or less. Exhibit I-13 sets forth the maturity schedule of the Company’s CDs as of June 30, 2020. As of June 30, 2020, jumbo CDs (CD accounts with balances of $100,000 or more) amounted to $84.8 million or 43.59% of total CDs. The Company held $3.8 million of brokered CDs at June 30, 2020.

Borrowings serve as an alternative funding source for the Company to facilitate management of funding costs and interest rate risk. FHLB advances have been the only source of borrowings utilized by the Company over the past five fiscal years. The Company maintained $64.9 million of FHLB advances at June 30, 2020 with a weighted average rate of 2.53%. FHLB advances held by the Company at June 30, 2020 had laddered terms, most of which had maturity dates by fiscal year 2025. Exhibit I-14 provides further detail of the Company’s borrowings activities during the past three fiscal years.

Subsidiaries

The Company’s only subsidiary is William Penn Bank. The Bank maintains the following subsidiaries:

WPSLA Investment Corporation is a Delaware corporation organized in April 2000 to hold certain investment securities and loans for William Penn Bank. At June 30, 2020, WPSLA Investment Corporation held $60.0 million of William Penn Bank’s $90.0 million securities portfolio and $31.1 million of William Penn Bank’s $517.5 million loan portfolio.

Fidelity Asset Recovery Specialists, LLC is a Pennsylvania limited liability company organized in March 2015 that William Penn Bank acquired in connection with its acquisition of Fidelity Savings. This subsidiary, which is currently inactive and in the process of dissolution, was formerly utilized by Fidelity Savings to manage and hold other real estate owned properties in Pennsylvania until disposition.

Washington Service Corporation is a Pennsylvania corporation organized in October 2000 that William Penn Bank acquired in connection with its acquisition of Washington Savings. This subsidiary holds commercial real estate, including a branch office, located in Philadelphia, Pennsylvania that was previously owned by Washington Savings.

Legal Proceedings

From time to time, the Company is involved in routine legal proceedings in the ordinary course of business.  Such routine legal proceedings, in the aggregate, are believed by management to be immaterial to the Company’s financial condition, results of operations and cash flows.

II. MARKET AREA

William Penn Bancorporation serves the Philadelphia metropolitan area through the headquarters office and 12 branch offices. Eight of the branches are located in the Pennsylvania counties of Bucks (four branches) and Philadelphia (four branches), with the remaining four branches located in the New Jersey counties of Camden (three branches) and Burlington (one branch). Exhibit II-1 provides information on the Company’s office properties.

With operations in a major metropolitan area, the Company’s competitive environment includes a significant number of thrifts, commercial banks and other financial services companies, some of which have a regional or national presence and are larger than the Company in terms of deposits, loans, scope of operations, and number of branches. These institutions also have greater resources at their disposal than the Company.

Future growth opportunities for William Penn Bancorporation depend on the future growth and stability of the national and regional economy, demographic growth trends and the nature and intensity of the competitive environment. These factors have been examined to help determine the growth potential that exists for the Company, the relative economic health of the Company’s market area, and the resultant impact on value.

National Economic Factors

The future success of the Company’s operations is partially dependent upon various national and local economic trends. In assessing national economic trends over the past few quarters, manufacturing activity for January 2020 expanded for the first time since July 2019, with an index reading of 50.9. January service sector activity also accelerated to an index reading of 55.5, which was its highest reading since August 2019. U.S. employers added 225,000 jobs in January and the unemployment rate for January increased to 3.6%. Low mortgage rates and more housing inventory spurred an 11.8% increase in February existing home sales. February new home sales increased 4.9%, which was an 11-month high. Manufacturing activity for February slowed to an index reading of 50.1, while February service sector activity accelerated to a 1-year high index reading of 57.3. February’s employment report showed a pick-up in hiring, as U.S. employers added 275,000 jobs and the February unemployment rate dropped to 3.5%. Retail sales for February showed a decline of 0.5%. February existing home sales showed a healthy increase of 11.8%, while February new home

sales declined 4.4%. The impact that the COVID-19 pandemic was starting to have on the U.S. economy was evident in the economic data for March. Manufacturing activity for March fell to an index reading of 49.1, while service sector activity for March slowed to a more than three and one-half year low index reading of 52.5. The U.S. economy shed 701,000 jobs in March and the March unemployment rate jumped to 4.4%. Retail sales for March plunged 8.7%. Existing and new home sales for March fell 8.5% and 15.4%, respectively. First quarter GDP contracted at a 4.8% annual rate (subsequently revised to a 5.0% annualized rate of contraction).

April 2020 data showed that the damage the COVID-19 pandemic was having on the U.S. economy was becoming more devastating. Manufacturing activity for April contracted at the sharpest rate since the last recession, with an index reading of 41.5. Similarly, service sector activity for April fell to an index reading of 41.8, its lowest level since March 2009. The U.S. economy shed a record 20.5 million jobs in April and the April unemployment rate jumped to 14.7%, the highest level since the Great Depression. The April consumer price index declined 0.8%, which was the largest monthly decline since December 2008. Retail sales for April plummeted 16.4%. Existing home sales tumbled 17.8% in April, while new home sales for April increased 0.7%. Mortgage delinquencies spiked by 1.6 million in April, which was the largest 1-month increase ever recorded. Durable-goods orders for April fell 17.2%. May manufacturing activity increased to an index reading of 43.1, indicating some modest easing in the COVID-19 pandemic driven slowdown in industrial activity. Similarly, service sector activity for May increased to an index reading of 45.4. The U.S. economy unexpectedly added 2.5 million jobs in May and the May unemployment rate fell to 13.3%. May retail sales rebounded by 17.7%, adding another sign that the economy was recovering from earlier lockdowns to contain the pandemic. Existing home sales for May declined 9.7%, while new home sales for May increased 16.6%. Manufacturing and service sector activity for June continued to pick-up, with respective index readings of 52.6 and 57.1. The June employment report also showed the U.S. economy was making progress towards a recovery, as 4.8 million jobs were added in June and the June unemployment rate fell to 11.1%. Likewise, retail sales for June beat expectations, increasing 7.5% from May. Record low mortgage rates helped to fuel a rebound in June home sales, as June existing and new home sales rose by 20.7% and 13.8%, respectively.

July 2020 manufacturing activity increased to an index reading of 54.2, while July service sector activity accelerated to an index reading of 58.1. U.S. employers added 1.8 million jobs in July and the July unemployment rate fell to 10.2%. In late-July, economic data

suggested that the economic recovery was stalling, as filings for initial unemployment claims rose for two consecutive weeks after nearly four months of declining weekly unemployment claims and second quarter GDP contracted at a record annual rate of 32.9%. July existing home sales increased 24.7%, while new home sales in July rose 13.9%. At the same time, the number of homeowners that were at least 90 days delinquent soared to a 10-year high in July. August manufacturing activity accelerated to an index reading of 56.0. Comparatively, August service sector activity slowed to an index 56.9.

In terms of interest rates trends over the past few quarters, long-term Treasury yields edged lower at the start of 2020 and then stabilized through mid-January as investors reacted to a report that December manufacturing activity declined to its lowest reading since the financial crisis. The downward trend in long-term Treasury yields resumed during the second half of January, as the Federal Reserve concluded its late-January policy meeting leaving its benchmark interest rate unchanged and reaffirmed its current policy stance. Some favorable economic reports pushed Treasury yields higher in early-February, which was followed by a rally in Treasury bonds in the final week of February and the first week of March as long-term yields fell to record lows. On March 3^rd the Federal Reserve executed an emergency half-percentage point rate cut, based on increased recession risks as the result of the coronavirus. Long-term Treasury yields fell to new record lows following the rate cut, as investors moved into safe haven investments amid growing worries that the COVID-19 pandemic could seriously disrupt an already sluggish global economy. The yield on the 30-year Treasury fell below 1% for the first time in its history. The Federal Reserve delivered another emergency rate cut of 1% on March 13^th, which slashed its target rate to a range between 0% and 0.25%. Long-term Treasury yields spiked higher going into the second of March, as investors dumped long-term bonds for cash and short-term Treasuries. After spiking up to a yield of 1.26% on March 18^th, the yield on the 10-year Treasury trended lower as the Federal Reserve took further steps to increase market liquidity by extending loans and buying unlimited amounts of U.S. government debt.

The downward trend in long-term Treasury yields continued into early-April 2020, with the 10-year Treasury yield declining to 0.59% following the release of the March employment report. A stock market rally provided for a slight upward trend in long-term Treasury yields going into mid-April, which was followed by long-term Treasury yields edging lower on news that March retail sales plunged 8.7%. With the collapse in oil prices heading into late-April, the 10-year Treasury yield dipped below 0.6%. The Federal Reserve concluded its end of April policy

meeting keeping its benchmark interest rate near zero. Following the Federal Reserve meeting, the 10-year Treasury yield stabilized in the range of 0.6% to 0.7% through the first half of May. The 10-year Treasury yield edged back above 0.7% going into the second half of May, as investors retreated from bonds in favor of stocks on promising data for a coronavirus vaccine. With the release of more economic data showing the significant disruption the COVID-19 pandemic was inflicting on the U.S. economy, the 10-year Treasury yield settled in a range of 0.65% to 0.70% through the end of May and into early-June. The 10-year Treasury yield increased to 0.90% with the release of the stronger-than-expected May employment report and then declined back to a range of 0.65% to 0.70% following the Federal Reserve’s June policy meeting that concluded on June 10^th. At the conclusion of its June policy meeting, the Federal Reserve signaled plans to keep it benchmark interest rate near zero for years.

The stable interest rate environment continued to prevail at the start of the third quarter of 2020, which was followed by long-term Treasury yields edging lower going into the second half of July as a surge in coronavirus cases forced a number of states to reimpose lockdown measures. In mid-July, the average rate on a 30-year fixed rate mortgage fell to 2.98%, its lowest level on record. The 10-year Treasury yield edged below 0.60% going into late-July. At the conclusion of its late-July policy meeting, the Federal Reserve left its benchmark rate near zero and reiterated that it would continue to support the economy. The 10-year Treasury yield remained below 0.60% heading into mid-August and then trended up slightly to above 0.70% in late-August after the Federal Reserve dropped its long standing practice of pre-emptively lifting interest rates to head off higher inflation. At the start of September, the 10-year Treasury yield edged back below 0.70%. As of September 2, 2020, the bond equivalent yields for U.S. Treasury bonds with terms of one and ten years equaled 0.13% and 0.65%, respectively, versus comparable year ago yields of 1.76% and 1.50%. Exhibit II-2 provides historical interest rate trends.

Based on the consensus outlook of economists surveyed by The Wall Street Journal in August 2020, GDP was projected to contract 5.3% in 2020. The U.S. unemployment rate was forecasted to equal 9.0% in December 2020 and then decline to 7.6% in June 2021. An average of 829,000 jobs were projected to be added per month over the next four quarters. On average, the economists forecasted the federal funds rate to equal 0.13% in December 2020 and 0.15% in June 2021. On average, the economists forecasted that the 10-year Treasury yield would equal 0.76% in December 2020 and then increase to 0.96% in June 2021. The surveyed economists also forecasted home prices would increase by 3.6% in 2020 housing

starts were forecasted to decrease from 1.29 million in 2019 to 1.24 million in 2020.

The August 2020 mortgage finance forecast from the Mortgage Bankers Association was for 2020 existing home sales to decrease by 3.2% from 2019 sales, while 2020 new home sales were forecasted to increase by 6.9% from 2019 sales. The 2020 median sale prices for existing and new homes were projected to increase by 4.8% and 2.3%, respectively. Total mortgage production was forecasted to increase in 2020 to $2.986 trillion, compared to $2.173 trillion in 2019. The forecasted increase in 2020 originations was based on a 5.3% increase in purchase volume and an 82.7% increase in refinancing volume. Purchase mortgage originations were forecasted to total $1.340 trillion in 2020, versus refinancing volume totaling $1.646 trillion. Housing starts for 2020 were projected to increase by 2.7% to total 1.330 million.

Market Area Demographics

Demographic and economic growth trends, measured by changes in population, number of households, age distribution and median household income, provide key insight into the health of the market area served by William Penn Bancorporation. Demographic data for Bucks, Philadelphia, Camden and Burlington Counties, as well as for Pennsylvania, New Jersey and the U.S., is provided in Table 2.1.

Population and household data indicate that the market area served by the Company’s branches is a mix of urban and suburban markets. For 2020, the Company’s market area counties ranged in population from a low of 445,000 in Camden County, New Jersey to a high of 1.6 million in Philadelphia County, Pennsylvania. From 2015 through 2020, annual population growth rates ranged from a 0.3% decrease in population for Burlington County to a 0.4% increase in population for Philadelphia County. Comparatively, both Pennsylvania and New Jersey essentially showed no change in their respective populations over the past five years, versus a comparable annual population growth rate for the U.S. of 0.7%. Comparative growth trends for households generally paralleled population growth trends, as Philadelphia County experienced the strongest growth in households and both Camden County and Burlington County recorded slight declines in households over the past five years. Population and household growth trends for Bucks County and Philadelphia County are generally projected to continue over the next five years through 2025, while projected growth trends for Camden County and Burlington County show population and households remaining fairly stable over the next five years.

Table 2.1

William Penn Bancorporation

Summary Demographic Data

Income measures show that the counties of Bucks and Burlington are relatively affluent markets, with median household and per capita income measures that were above the comparable state and U.S. measures. Median household and per capita income measures for Camden County were also higher than the U.S. measures, but were lower than the New Jersey measures. Comparatively, median household and per capita income measures for Philadelphia County were somewhat lower than the comparable Pennsylvania and U.S. measures, reflecting some areas of poverty in the inner city. Projected income growth rates for the primary market area counties were generally in line with the comparable projected growth rates for Pennsylvania, New Jersey and the U.S, with the strongest growth projected for Bucks County.

A comparison of household income distribution measures provides another indication of the relative affluence of Bucks and Burlington Counties, which maintained higher percentages of households with incomes above $100,000 compared to the U.S and state measures. Camden County also maintained a high percentage of households with incomes above $100,000 compared to the U.S., but was at a lower percentage compared to New Jersey. The less affluent nature of Philadelphia County is also indicated by the household income distribution measures, which show that, in comparison to the U.S. and Pennsylvania, Philadelphia County maintained a much higher percentage of households with incomes of less than $25,000 and a much lower percentage of households with incomes above $100,000.

Age distribution measures for the primary market area counties were fairly similar to the comparable U.S. and state measures, with Bucks County exhibiting a slightly older population and Philadelphia County exhibiting a slight younger population among the four primary market area counties.

Regional Economy

Comparative employment data shown in Table 2.2 shows that, except for Bucks County and New Jersey, employment in education/healthcare/social services followed by services were the largest and second largest employment sectors in all of the primary market area counties, as well as Pennsylvania. Service jobs constituted the largest employment sector for Bucks County and New Jersey, followed by employment in education/healthcare/social services. Wholesale/retail trade jobs were the third largest employment sector for all four of the primary area counties, as well as for Pennsylvania and New Jersey. Other noteworthy employment sectors for the primary market area counties included manufacturing and finance/insurance/real

estate. Overall, the distribution of employment exhibited in the primary market area is indicative of a diverse economic environment.

Table 2.2

William Penn Bancorporation

Primary Market Area Employment Sectors

(Percent of Labor Force)

Source: S&P Global Market Intelligence

The market area served by the Company, characterized primarily as the Philadelphia metropolitan area, has a highly developed and diverse economy, with the region’s many colleges and universities serving to attract industries in need of a highly skilled and educated workforce. In addition to the colleges and universities, healthcare, financial services, bio-technology and pharmaceutical companies constitute major sources of employment in the Company’s regional market area. Table 2.3 lists the major employers in Philadelphia metropolitan area.

Table 2.3

William Penn Bancorporation

Largest Employers in Local Market Area

Source: BizJournals Philadelphia

Unemployment Trends

Comparative unemployment rates for the primary market area counties, as well as for the U.S., Pennsylvania and New Jersey, are shown in Table 2.4. July 2020 unemployment rates for the primary market area counties ranged from a low of 13.2% for Bucks County to a high of 19.6% for Philadelphia County. Comparative unemployment rates for the U.S., Pennsylvania and New Jersey equaled 10.5%, 14.1% and 14.0%, respectively. Pursuant to the coronavirus-induced recession, the July 2020 unemployment rates for the primary market area counties, Pennsylvania, New Jersey and the U.S. were all significantly higher compared to a year ago.

Table 2.4

William Penn Bancorporation

Unemployment Trends(1)

Market Area Deposit Characteristics and Competition

The Company’s deposit base is closely tied to the economic fortunes of the Philadelphia metropolitan area and, in particular, the areas that are nearby to one of William Penn Bancorporation’s branches. The deposit and branches acquired with the acquisitions of the three mutual institutions are include included in the data for William Penn Bancorporation. Table 2.5 displays deposit market trends from June 30, 2014 through June 30, 2019 for all commercial bank and savings institution branches located in the market area counties, as well as Pennsylvania and New Jersey. Consistent with Pennsylvania and New Jersey, commercial banks maintained a larger market share of deposits than savings institutions in all the primary

market area counties. Overall, from June 30, 2014 to June 30, 2019, bank and thrift deposits increased in all of the primary market area counties.

Table 2.5

William Penn Bancorporation

Deposit Summary(1)

(1) Deposit data for William Penn Bancorporation includes deposits that were acquired subsequent to the periods shown.

Source: FDIC.

The Company maintains its largest balance of deposits in Bucks County, where the Company is headquartered. Based on June 30, 2019 deposit data, William Penn Bancorporation’s $247.4 million of deposits provided for a 1.3% market share of bank and thrift deposits in Bucks County. The Bank’s deposit market share in the primary market area counties ranged from 0.2% in Burlington County to 1.3% in Bucks County. Five year annual deposit growth rates for the primary market area counties ranged from 3.7% for Bucks County to 4.4% for Camden County. Inclusive of the acquired deposits, the Company’s deposits declined in all four of the primary market area counties during the five year period shown in Table 2.5.

As implied by the Company’s relatively low market shares of deposits in the primary market area counties, competition among financial institutions in the Company’s market area is significant. Among the Company’s competitors are much larger and more diversified institutions, which have greater resources than maintained by William Penn Bancorporation. Financial institution competitors in the Company’s primary market area include other locally based thrifts and banks, as well as regional, super regional and money center banks. From a competitive standpoint, William Penn Bancorporation has sought to emphasize its community orientation in the markets served by its branches. Table 2.6 lists the Company’s largest competitors in the market area counties, based on deposit market share.

Table 2.6

William Penn Bancorporation

Market Area Deposit Competitors