Investment Securities

6 Months Ended

Dec. 31, 2020

Investment Securities

Investment Securities

Note 5 – Investment Securities

The amortized cost, gross unrealized gains and losses, and estimated fair value of investments in debt securities are as follows:

	December 31, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
Available For Sale:
Mortgage-backed securities	$	55,202	$	427	$	(124)	$	55,505
U.S. agency collateralized mortgage obligations		1,984		39		(40)		1,983
U.S. government agency securities		11,017		4		(104)		10,917
Municipal bonds		22,362		314		(98)		22,578
Corporate bonds		21,400		526		—		21,926
Total Available For Sale	$	111,965	$	1,310	$	(366)	$	112,909

	June 30, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
Available For Sale:
Mortgage-backed securities	$	51,570	$	272	$	(104)	$	51,738
U.S. agency collateralized mortgage obligations		3,215		33		(33)		3,215
U.S. government agency securities		6,226		2		(73)		6,155
U.S. treasury securitites		1,000		—		—		1,000
Municipal bonds		10,485		33		(10)		10,508
Corporate bonds		17,399		60		(77)		17,382
Total Available For Sale	$	89,895	$	400	$	(297)	$	89,998

William Penn Bancorp recognized $23 thousand of gross gains and $53 thousand of gross losses on the sale of $7.9 million of investment securities during the three and six months ended December 31, 2020, respectively. William Penn Bancorp recognized $93 thousand of gross gains on the sale of $4.3 million of investment securities during the six months ended December 31, 2019. William Penn Bancorp did not sell any investment securities during the three months ended December 31, 2019.

The amortized cost and fair value of debt securities, by contractual maturity, are shown below. Maturities for mortgage-backed securities are dependent upon the rate environment and prepayments of the underlying loans. Expected maturities may differ from contractual maturities because the securities may be called or prepaid with or without penalties.

	December 31, 2020				June 30, 2020
	Available For Sale				Available For Sale
	Amortized		Fair		Amortized		Fair
(Dollars in thousands)	Cost		Value		Cost		Value
Due in one year or less	$	5	$	5	$	2,904	$	2,893
Due after one year through five years		11,999		12,285		9,632		9,611
Due after five years through ten years		15,371		15,582		7,606		7,602
Due after ten years		84,590		85,037		69,753		69,892
	$	111,965	$	112,909	$	89,895	$	89,998

The following tables provide information on the gross unrealized losses and fair market value of William Penn Bancorp's investments with unrealized losses that are not deemed to be other than temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2020 and June 30, 2020:

	December 31, 2020
	Less than 12 Months				12 Months or More					Total		Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses			Value		Losses		Value		Losses
Available For Sale:
Mortgage-backed securities	$	16,027	$	82		$	6,207	$	42	$	22,234	$	124
U.S. agency collateralized mortgage obligations		352		5			1,061		35		1,413		40
U.S. government agency securities		9,006		86			1,656		18		10,662		104
Municipal bonds		9,401		98			—		—		9,401		98
Total Temporarily Impaired Securities	$	34,786	$	271		$	8,924	$	95	$	43,710	$	366

	June 30, 2020
	Less than 12 Months				12 Months or More				Total		Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
Available For Sale:
Mortgage-backed securities	$	22,082	$	104	$	—	$	—	$	22,082	$	104
U.S. agency collateralized mortgage obligations		1,513		14		1,129		19		2,642		33
U.S. government agency securities		4,922		49		914		24		5,836		73
Municipal bonds		3,694		10		—		—		3,694		10
Corporate bonds		5,222		77		—		—		5,222		77
Total Temporarily Impaired Securities	$	37,433	$	254	$	2,043	$	43	$	39,476	$	297

William Penn Bancorp evaluates its investment securities holdings for other-than-temporary impairment (“OTTI”) on at least a quarterly basis. As part of this process, management considers its intent to sell each debt security and whether it is more likely than not William Penn Bancorp will be required to sell the security before its anticipated recovery. If either of these conditions is met, OTTI is recognized in earnings equal to the entire difference between the security’s amortized cost basis and its fair value at the most recent balance sheet date. For securities that meet neither of these conditions, management performs analysis to determine whether any of these securities are at risk for OTTI. To determine which individual securities are at risk for OTTI and should be quantitatively evaluated utilizing a detailed analysis, management uses indicators which consider various characteristics of each security including, but not limited to, the following: the credit rating; the duration and level of the unrealized loss; prepayment assumptions; and certain other collateral-related characteristics such as delinquency rates, the security’s performance, and the severity of expected collateral losses.

The unrealized loss on securities greater than 12 months is due to current interest rate levels relative to William Penn Bancorp’s cost. Because the unrealized losses are due to current interest rate levels relative to William Penn Bancorp’s cost and not credit quality, and because William Penn Bancorp does not intend to sell the investments and it is not more likely than not that William Penn Bancorp will be required to sell these investments before recovery of its amortized cost, which may be at maturity, William Penn Bancorp does not consider these investments to be other-than temporarily impaired at December 31, 2020 and June 30, 2020. There were 29 investment securities that were temporarily impaired at December 31, 2020.

Based on its analysis, management has concluded that the investment securities portfolio has experienced unrealized losses and a decrease in fair value due to interest rate volatility. However, the decline is considered temporary, and William Penn Bancorp does not intend to sell these securities nor is it more likely than not William Penn Bancorp would be required to sell the security before its anticipated recovery, which may be maturity.

At December 31, 2020, $4.6 million of investment securities were pledged to secure municipal deposits. At June 30, 2020, $3.7 million of investment securities were pledged to secure municipal deposits.