Employee and Director Benefit Plans

12 Months Ended

Jun. 30, 2023

Employee and Director Benefit Plans

Employee and Director Benefit Plans

Note 13 – Employee and Director Benefit Plans

401(k) Plan

The Bank has a savings plan qualified under Section 401(k) of the Internal Revenue Code which covers substantially all of its employees. Employees can contribute up to 50% of gross pay and the Bank matches 100% of such contributions up to 6%. The Company recorded $421 thousand, and $393 thousand of expense associated with the 401(k) plan during the years ended June 30, 2023 and 2022, respectively.

Employee Stock Ownership Plan (“ESOP”)

The Company offers ESOP benefits to employees who meet certain eligibility requirements.  In connection with the second-step conversion offering, and as previously disclosed, the William Penn Bank ESOP trustees subscribed for, and intended to purchase, on behalf of the ESOP, 8% of the shares of the Company common stock sold in the offering and to fund its stock purchase through a loan from the Company equal to 100% of the aggregate purchase price of the common stock.  As previously disclosed, as a result of the second-step conversion offering being oversubscribed in the first tier of subscription priorities, the ESOP trustees were unable to purchase shares of the Company’s common stock in the second-step conversion offering.  Subsequent to the completion of the second-step conversion on March 24, 2021, the ESOP trustees purchased 881,130 shares, or $10.1 million, of the Company’s common stock in the open market.  

In connection with the purchase of the shares, the ESOP borrowed $10.1 million from the Company at a fixed interest rate of 3.25% with a twenty-five-year term to fund the purchase of 881,130 shares.  The Company makes annual contributions to the ESOP equal to the ESOP’s debt service or equal to the debt service less the dividends received by the ESOP on unallocated shares.  Shares purchased

with the loan proceeds were initially pledged as collateral for the term loan and are held in a suspense account for future allocation among participants.  Contributions to the ESOP and shares released from the suspense account are allocated among the participants on the basis of compensation, as described by the ESOP, in the year of allocation.  The ESOP shares pledged as collateral are reported as unearned ESOP shares in the Company’s consolidated statements of financial condition. As shares are committed to be released from collateral, the Bank reports compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings-per-share computations. The Company recognized $395 thousand and $430 thousand of ESOP expense associated with the release of shares from collateral during the years ended June 30, 2023 and 2022, respectively.

	June 30,
	2023		2022
Allocated shares		219,141		213,937
Shares committed to be released		17,479		17,479
Unreleased shares		801,272		836,517
Total ESOP shares		1,037,892		1,067,933
Fair value of unrealized shares	$	8,132,911	$	9,787,249

Directors Retirement Plan

The Bank has a retirement plan for the directors of the Bank. Upon retirement, a director who agrees to serve as a consulting director to the Bank will receive a monthly benefit amount for a period of up to 120 months. The plan was amended in October 2017 to allow credit for service as a director while also serving as an employee. As of June 30, 2023, the Company performed a discounted cash flow analysis for this plan to evaluate the balance of the liability and determined that the liability balance was overaccrued.  The Company recognized a credit of $45 thousand, and expense of $30 thousand, respectively, for these benefits in its Consolidated Statements of Income for the years ended June 30, 2023 and 2022. At both June 30, 2023 and 2022, approximately $1.6 million had been accrued under this plan.

Director Deferred Compensation Plan

The Bank has deferred compensation plans for certain directors of the Bank whereby they can elect to defer their directors’ fees. Under the plans’ provisions, benefits which accrue at the Bank’s highest certificate of deposit rate will be payable upon retirement, death, or permanent disability. The Company recognized $21 thousand and $9 thousand, respectively, of interest expense for these benefits in its Consolidated Statements of Income for the years ended June 30, 2023 and 2022.  At June 30, 2023 and 2022, approximately $1.1 million and $1.2 million, respectively, had been accrued for this benefit plan.