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Section 1: 8-K (8-K-MPB-033119)

mpb-8k_20190424.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  April 24, 2019

 

MID PENN BANCORP, INC.

(Exact Name of Registrant as Specified in its Charter)

 



 

 

 

 

 

Pennsylvania

1-13677

25-1666413

(State or Other Jurisdiction of

Incorporation or Organization)

(Commission File Number)

(I.R.S. Employer

Identification Number)

 

 

349 Union Street

Millersburg, Pennsylvania

1.866.642.7736

17061

(Address of Principal Executive Offices)

( Registrant’s telephone number, including area code)

(Zip Code)

 

 

 

 

Not Applicable

 

(Former Name or Former Address, if Changed Since Last Report)

 

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b) )

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4( c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 


 

 

MID PENN BANCORP, INC.

CURRENT REPORT ON FORM 8-K

 

ITEM 2.02RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On April 25, 2019, Mid Penn Bancorp, Inc. (the “Corporation”) issued a press release discussing its financial results for the three months ended March 31, 2019.  A copy of the Corporation’s press release dated April 25, 2019 is furnished herewith as Exhibit 99.1, and is incorporated herein by reference.

ITEM 8.01OTHER EVENTS

 

On April 24, 2019, the Board of Directors of the Corporation declared a quarterly cash dividend of $0.18 per common share payable on May 27, 2019 to shareholders of record as of May 8, 2019.

ITEM 9.01FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits.

99.1Press release, dated April 25, 2019, of Mid Penn Bancorp, Inc.


SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

MID PENN BANCORP, INC.

(Registrant)

 

 

 

Date:  April 25, 2019

By:

/s/ Rory G. Ritrievi

 

Rory G. Ritrievi

 

President and Chief Executive Officer

 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

mpb-ex991_6.htm

Exhibit 99.1

PRESS RELEASE

Mid Penn Bancorp, Inc.

349 Union Street

Millersburg, PA  17061

1-866-642-7736

CONTACTS

 

Rory G. Ritrievi

President & Chief Executive Officer

Michael D. Peduzzi, CPA

Chief Financial Officer

 

MID PENN BANCORP, INC. REPORTS FIRST QUARTER 2019 EARNINGS

AND DECLARES INCREASED QUARTERLY DIVIDEND

 

April 25, 2019 – Millersburg, PA – Mid Penn Bancorp, Inc. (“Mid Penn”) (NASDAQ: MPB), the parent company of Mid Penn Bank (the “Bank”), today reported net income to common shareholders (earnings) for the quarter ended March 31, 2019 of $4,077,000 or $0.48 per common share basic and diluted, compared to earnings of $1,004,000 or $0.17 per common share basic and diluted for the quarter ended March 31, 2018. Adjusted earnings for the three months ended March 31, 2018, when excluding the after-tax impact of $1,694,000 of merger and acquisition expenses (with such adjusted earnings being a non-GAAP measure), were $2,424,000 or $0.41 per share basic and diluted.  Please refer to the section included herein under the heading “Reconciliation of Non-GAAP Measures (Unaudited)” for a discussion of our use of non-GAAP adjusted financial information, which includes tables reconciling GAAP and non-GAAP adjusted financial measures for the quarters ended March 31, 2019 and 2018 and other periods.  The merger and acquisition expenses recorded in the first quarter of 2018 resulted from (i) Mid Penn’s legal closing of its acquisition of The Scottdale Bank & Trust Company (“Scottdale”) on January 8, 2018, and (ii) Mid Penn entering into a merger agreement with First Priority Financial Corp. (“First Priority”) on January 16, 2018.  The First Priority acquisition legally closed on July 31, 2018.  No merger and acquisition expenses were recorded in the first quarter of 2019.  

 

Tangible book value per common share, a non-GAAP measure that is regularly reported in the banking industry and the most directly comparable non-GAAP measure to book value per share, favorably increased to $18.64 as of March 31, 2019, compared to $18.10 as of December 31, 2018, and $18.21 as of March 31, 2018.  Mid Penn’s book value per share increased to $26.88 at March 31, 2019, compared to $26.38 as of December 31, 2018, and $22.72 at March 31, 2018.    

 

Mid Penn also reported total assets of $2,147,817,000 as of March 31, 2019, reflecting an increase of $69,836,000 or 3 percent compared to total assets of $2,077,981,000 as of December 31, 2018, and an increase of $756,600,000 or 54 percent compared to total assets of $1,391,217,000 as of March 31, 2018.  Asset growth during the first quarter of 2019 was primarily attributable to (i) net organic loan growth, (ii) an increase in liquid assets primarily from demand deposit growth, and (iii) Mid Penn’s recording of operating and finance lease right of use assets as a result of its adoption of Accounting Standard Codification (ASC) 842 – Leases effective January 1, 2019, which required adopting entities to record a right of use asset and related liability for leases of property or equipment.

 

A significant portion of the asset growth in the twelve months ending March 31, 2019 resulted from assets Mid Penn acquired from First Priority effective July 31, 2018.  In general, the results of operations and the financial condition as of and for the periods ended March 31, 2019, as compared to prior periods and certain period-end dates in 2018, have been materially impacted by Mid Penn’s acquisition of First Priority which closed on July 31, 2018, and the Scottdale acquisition which closed January 8, 2018.

 

Mid Penn also reported that its Board of Directors, at a meeting held on April 24, 2019, declared a quarterly dividend per common share of $0.18 payable on May 27, 2019 to shareholders of record as of May 8, 2019.  The regular dividend was increased to $0.18 per share as compared to $0.15 per share, which was the regular dividend in the previous four quarters.

 

PRESIDENT’S STATEMENT

 

This earnings report reflects the excellent work by our entire Mid Penn team to grow the Bank and increase shareholder return by successfully integrating our 2018 acquisitions, and maintaining our focus on establishing and nurturing highly-qualitative relationships with commercial, retail, and wealth management customers.  Mid Penn's operating results for the first quarter of 2019, compared to the same period in 2018, reflect a 17 percent accretion in merger-adjusted earnings per share, reflecting both the expected benefits of our 2018 acquisitions, and our continued successful organic core banking growth.

 

1


We are pleased to share this increased income with our shareholders as our Board of Directors increased our regular quarterly dividend from $0.15 per share as paid during 2018, to $0.18 per share.  We are confident that the impact of our core growth and acquisitions will continue to have accretive benefits as we further implement new business development and overhead management activities.

 

As we continue to manage the longer-term integration of our 2018 acquisitions in our commercial and retail banking functions, we also are focused on growing our noninterest income sources.  During the first quarter of 2019, we invested in expanding Mid Penn’s mortgage origination capabilities in the southeastern Pennsylvania market, and continued to expand our wealth management revenues and assets under management.  We also continue to evaluate our delivery channels to provide our customers with a continuously improving banking experience. On April 3, 2019, we announced that we had received regulatory approval to relocate our Allentown Boulevard branch to a significantly improved location on Jonestown Road in Lower Paxton Township, Pennsylvania.  We are excited to serve both our existing and new customers in this new facility.

 

We are dedicated to building on the positive momentum generated by our two successful acquisitions in 2018, and the positive earnings growth reflected by our performance for the first quarter of 2019, and remain focused on successfully growing our core banking business and profitability to further increase our shareholders’ value and returns.

 

OPERATING RESULTS

 

Net Interest Income and Net Interest Margin

 

Net interest income was $17,306,000 for the three months ended March 31, 2019, an increase of $6,428,000 or 59 percent compared to net interest income of $10,878,000 for the three months ended March 31, 2018.  The primary source of the revenue growth was an increase in interest and fees on loans, as total loans increased $639,548,000 or over 63 percent since March 31, 2018.  The substantial year-over-year increase in total loans outstanding was comprised of organic loan growth of $160,852,000 and $478,696,000 of loans acquired from First Priority. Net interest income for the first quarter of 2019 decreased by $425,000 compared to the fourth quarter of 2018 as increases in both the volume and costs of deposits, particularly money market accounts, more than offset interest income increases from both loan growth and increasing yields on interest-earning assets.  The increase in the cost of funds for the first quarter of 2019, compared to previous quarters in 2018, was in response to the four 0.25% Federal Open Market Committee (“FOMC”) rate increases during 2018, which increased deposit and short-term borrowing rates for liquidity management.

 

For the three months ended March 31, 2019, Mid Penn’s tax-equivalent net interest margin was 3.70% compared to 3.52% for the three months ended March 31, 2018, as year-over-year increases in yields on interest-earning assets and growth in noninterest-bearing deposits more than offset the impact of both (i) the rising cost of both deposit and borrowed funds as a result of the FOMC rate increases in 2018, and (ii) the higher volume of wholesale funding sources, including the assumption of some higher-cost brokered time deposits and subordinated debt in the First Priority acquisition, and certain short-term borrowings added during the fourth quarter for 2018, to fund anticipated near-term loan growth, and to support liquidity and interest rate management.

 

Noninterest Income

 

During the three months ended March 31, 2019 noninterest income totaled $2,049,000, an increase of $402,000 or 24 percent, compared to noninterest income of $1,647,000 for the three months ended March 31, 2018.  

 

Income from fiduciary activities was $359,000 for the three months ended March 31, 2019, an increase of $119,000 or over 49 percent, compared to fiduciary income of $240,000 for the three months ended March 31, 2018. These additional revenues were attributed to continued growth in trust assets under management, and increased sales of retail investment products, as a result of successful business development efforts by Mid Penn’s trust and wealth management team.

 

Mortgage banking income was $437,000 for the three months ended March 31, 2019, an increase of $281,000 or 180 percent compared to the three months ended March 31, 2018. Longer-term mortgage interest rates have declined since March 31, 2018, resulting in a higher level of mortgage originations and sales during the first quarter of 2019 when compared to the same period in 2018.  Additionally, Mid Penn expanded its team of residential mortgage originators in southeastern Pennsylvania during the first quarter of 2019, contributing to the larger volume of mortgage loans originated and sold in the three months ended March 31, 2019.

 

ATM debit card interchange income was $334,000 for the three months ended March 31, 2019, an increase of $69,000 or over 26 percent compared to interchange income of $265,000 for the three months ended March 31, 2018. The increase resulted from both increasing card-based transaction volume, as well as new demand deposit accounts, including those acquired in the First Priority and Scottdale transactions in 2018.

 

Other income was $330,000 for the three months ended March 31, 2019, an increase of $44,000 compared to other income of $286,000 for the three months ended March 31, 2018.  The increase in other income was primarily driven by increases in wire transfer fees and other service fees.

2


Net gains on sales of SBA loans was $202,000 for the three months ended March 31, 2019, a decrease of $55,000 when compared to the same period in 2018.  Increased interest rates on SBA loans, and tighter market pricing on secondary market sales yields, resulted in lower levels of loan sales and related gains in the first quarter of 2019 versus the same period in the prior year.

 

Net gains on sales of securities were $7,000 for the three months ended March 31, 2019, a decrease of $91,000 compared to net gains on sales of securities of $98,000 for the three months ended March 31, 2018. During the first quarter of 2018, some investment securities acquired from Scottdale were subsequently sold at gains to ensure that the overall portfolio was in alignment with Mid Penn’s investment management objectives.  The volume of investment sales, and realized gains, were much less in the first quarter of 2019.

 

Noninterest Expense

Noninterest expense for the three months ended March 31, 2019 totaled $14,303,000, an increase of $3,120,000 or 28 percent compared to noninterest expenses of $11,183,000 for the three months ended March 31, 2018.  The significant increase in noninterest expense was driven by continued franchise expansion which occurred in the twelve months following March 31, 2018, including the acquisition of First Priority in July 2018, and efforts to drive organic loan growth and fee-based activities, particularly the expansion of Mid Penn’s mortgage banking division in the southeastern Pennsylvania market.

 

Salaries and employee benefits expenses were $7,759,000 during the three months ended March 31, 2019, an increase of $2,695,000 or 53 percent, versus the same period in 2018, with the increase primarily attributable to (i) the retail staff additions at the eight retail locations added through the First Priority acquisition, effective July 31, 2018, (ii) the back-office and loan originator staff additions as a result of the expansion of the mortgage banking division, and (iii) the addition of commercial lending and credit administration personnel and other staff additions in alignment with Mid Penn’s core banking growth.

 

Occupancy expenses increased $604,000 or 76 percent during the first three months of 2019 compared to the same period in 2018.  Similarly, equipment expense increased $219,000 or 54 percent during the three months ended March 31, 2019 compared to the three months ended March 31, 2018.  These increases were driven by (i) the facility operating costs and increased depreciation expense for building, furniture, and equipment associated with the addition of the acquired First Priority offices and the opening of the Pillow branch office in the second half of 2018, and (ii) depreciation and occupancy costs related to Mid Penn’s acquisition and renovation of certain administrative, operations, and training facilities in Dauphin County, Pennsylvania after March 31, 2018, to support recent and future expansion of the franchise.  

 

FDIC assessment expense was $359,000 for the three months ended March 31, 2019, an increase of $131,000 or 57 percent compared to $228,000 for the three months ended March 31, 2018.  The increase in assessment expense generally reflects the larger total asset profile upon which the assessment is based.  

 

Legal and professional fees for the three months ended March 31, 2019 increased by $198,000 or 88 percent compared to the same period in 2018 due to increased third-party services for audit, information technology, and human resources services.

 

Software licensing and utilization costs were $848,000 during the three months ended March 31, 2019, an increase of $163,000 or 24 percent compared to $685,000 for the three months ended March 31, 2018. The increase is a result of additional costs to license (i) all of the First Priority locations, the new Pillow branch, and the expanded mortgage banking division, (ii) upgrades to internal systems to enhance data management and storage capabilities given the larger company profile, and (iii) increases in certain core processing fees as our customer base and transaction volume continue to grow.

 

Intangible amortization increased from $248,000 during the three months ended March 31, 2018 to $363,000 during the same period in 2019 due to the core deposit intangible asset added from the First Priority acquisition in July 2018 which, similar to other core deposit intangible assets previously recorded, is being amortized using the sum of the years’ digit method over a ten year period.

 

Other expenses were $2,059,000 during the three months ended March 31, 2019, an increase of $733,000 or 55 percent compared to other expense of $1,326,000 for the same period in 2018.  As the First Priority acquisition and organic growth have increased the organization’s geographic profile and employee base, several categories within other expense experienced increases, including insurance costs, charitable donations, stationary and supplies, printing, loan collection costs, and directors’ fees.

 

No merger expenses were recorded during the first quarter of 2019, while during the three months ended March 31, 2018, merger and acquisition expenses were $1,694,000 and included investment banking fees, merger-related legal and professional fees, severance costs, and information technology conversion/termination costs incurred in connection with the acquisitions of First Priority and Scottdale.

 

Pennsylvania bank shares tax expense decreased $35,000, or over 20 percent, from $171,000 for the three months ended March 31, 2018 to $136,000 for the same period in 2019, primarily due to the timing of charitable donations made during the first quarter of 2019 which resulted in Pennsylvania bank shares tax credits.  Similar credits were not recognized during the three months ended March 31, 2018.

3


FINANCIAL CONDITION

 

Loans

 

Total loans at March 31, 2019 were $1,646,686,000 compared to $1,624,067,000 at December 31, 2018, an increase of $22,619,000 or over 1 percent since year-end 2018.  The majority of the growth was due to both commercial and industrial financing, and commercial real estate credits.

 

Deposits

 

Total deposits increased $58,154,000 or 3 percent, from $1,726,026,000 at December 31, 2018 to $1,784,180,000 at March 31, 2019 due to both retail branch deposit growth and cash management sales efforts.  In addition to Mid Penn repricing certain deposits to retain existing customer relationships given significant increases in market competition and pricing for deposits, many new customers in Mid Penn’s acquired markets have opened money market and time deposits accounts.  

 

Investments

 

Mid Penn’s portfolio of held-to-maturity securities decreased over 3 percent to $162,791,000 as of March 31, 2019, as compared to $168,370,000 as of December 31, 2018 (held-to-maturity investments are recorded at amortized cost), primarily from principal repayments on mortgage-backed securities.  Mid Penn’s total available-for-sale securities portfolio decreased $10,391,000 or 9 percent, from $111,923,000 at December 31, 2018 to $101,532,000 at March 31, 2019 due to both mortgage-backed securities repayments and certain investment sales related to portfolio interest rate management strategies.

 

Capital

 

Shareholders’ equity increased by $4,228,000 or over 1 percent from $223,209,000 as of December 31, 2018 to $227,437,000 as of March 31, 2019. The increase in shareholders’ equity reflects both (i) the growth in retained earnings through year-to-date net income available to common shareholders, net of dividends paid in the first quarter of 2019, and (ii) the year-to-date increase, on an after-tax basis, in the market value of the available-for-sale investment portfolio given the continued flattening middle-section and long-end of the treasury yield curve (as the FOMC indicated a pause in future rate hikes).  Regulatory capital ratios for both Mid Penn and its banking subsidiary continued to exceed regulatory “well-capitalized” levels at both March 31, 2019 and 2018.

 

ASSET QUALITY

 

Total nonperforming assets were $7,517,000 at March 31, 2019, a significant decrease compared to nonperforming assets of $12,283,000 at December 31, 2018, and $13,615,000 at March 31, 2018. The ratio of nonperforming assets to the total of loans plus other real estate assets was 0.46% as of March 31, 2019, compared to 0.76% as of December 31, 2018, and 1.35% as of March 31, 2018.  The decrease was primarily due to the successful workout and repayment of a nonaccrual commercial credit relationship totaling $4,302,000 during the first quarter of 2019.

 

The allowance for loan and lease losses as a percentage of total loans was 0.52% at March 31, 2019, compared to 0.52% at December 31, 2018, and 0.76% at March 31, 2018.  Mid Penn had net loan charge-offs of $20,000 and $65,000 for the three months ended March 31, 2019 and 2018, respectively.  Loan loss reserves as a percentage of nonperforming loans were 119% at March 31, 2019, compared to 75% at December 31, 2018, and 60% at March 31, 2018.  The increase in the loan loss reserves as a percentage of nonperforming loans at March 31, 2019 as compared to March 31, 2018 was a result of both the year-over-year decrease in nonperforming loans, and the favorable impact of acquired loans from First Priority not having a notable volume of nonperforming assets.

Based upon management’s evaluation of the adequacy of the loan and lease loss allowance, a loan loss provision of $125,000 was recorded for the three months ended March 31, 2019 and 2018.  Management believes, based on information currently available, that the allowance for loan and lease losses of $8,502,000 is adequate as of March 31, 2019 to cover probable and estimated loan losses in the portfolio.


4


FINANCIAL HIGHLIGHTS (Unaudited):

 

(Dollars in thousands, except

 

Mar. 31,

 

 

Dec. 31,

 

 

Sept. 30,

 

 

June 30,

 

 

Mar. 31,

 

per share data)

 

2019

 

 

2018

 

 

2018

 

 

2018

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

86,968

 

 

$

40,065

 

 

$

62,085

 

 

$

39,407

 

 

$

59,175

 

Investment securities

 

 

264,323

 

 

 

280,293

 

 

 

282,048

 

 

 

265,012

 

 

 

253,635

 

Loans

 

 

1,646,686

 

 

 

1,624,067

 

 

 

1,567,286

 

 

 

1,036,479

 

 

 

1,007,138

 

Allowance for loan and lease losses

 

 

(8,502

)

 

 

(8,397

)

 

 

(8,229

)

 

 

(8,189

)

 

 

(7,666

)

Net loans

 

 

1,638,184

 

 

 

1,615,670

 

 

 

1,559,057

 

 

 

1,028,290

 

 

 

999,472

 

Goodwill and other intangibles

 

 

69,665

 

 

 

70,061

 

 

 

70,475

 

 

 

27,985

 

 

 

27,654

 

Other assets

 

 

88,677

 

 

 

71,892

 

 

 

70,615

 

 

 

54,953

 

 

 

51,281

 

Total assets

 

$

2,147,817

 

 

$

2,077,981

 

 

$

2,044,280

 

 

$

1,415,647

 

 

$

1,391,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

290,902

 

 

$

269,870

 

 

$

271,142

 

 

$

207,013

 

 

$

195,330

 

Interest-bearing deposits

 

 

1,493,278

 

 

 

1,456,156

 

 

 

1,491,323

 

 

 

1,029,505

 

 

 

1,017,093

 

Total deposits

 

 

1,784,180

 

 

 

1,726,026

 

 

 

1,762,465

 

 

 

1,236,518

 

 

 

1,212,423

 

Borrowings and subordinated debt

 

 

113,661

 

 

 

118,206

 

 

 

46,923

 

 

 

29,583

 

 

 

29,632

 

Other liabilities

 

 

22,539

 

 

 

10,540

 

 

 

13,057

 

 

 

7,771

 

 

 

10,038

 

Shareholders' equity

 

 

227,437

 

 

 

223,209

 

 

 

221,835

 

 

 

141,775

 

 

 

139,124

 

Total liabilities and shareholders' equity

 

$

2,147,817

 

 

$

2,077,981

 

 

$

2,044,280

 

 

$

1,415,647

 

 

$

1,391,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book Value per Common Share

 

$

26.88

 

 

$

26.38

 

 

$

25.83

 

 

$

23.15

 

 

$

22.72

 

Tangible Book Value per Common Share *

 

$

18.64

 

 

$

18.10

 

 

$

17.50

 

 

$

18.58

 

 

$

18.21

 

* Non-GAAP measure; see Reconciliation of Non-GAAP Measures

 

OPERATING HIGHLIGHTS (Unaudited):

 

 

Three Months Ended

 

(Dollars in thousands, except

 

Mar. 31,

 

 

Dec. 31,

 

 

Sept. 30,

 

 

June 30,

 

 

Mar. 31,

 

per share data)

 

2019

 

 

2018

 

 

2018

 

 

2018

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

22,866

 

 

$

22,371

 

 

$

19,583

 

 

$

13,720

 

 

$

12,980

 

Interest expense

 

 

5,560

 

 

 

4,640

 

 

 

3,672

 

 

 

2,306

 

 

 

2,102

 

Net Interest Income

 

 

17,306

 

 

 

17,731

 

 

 

15,911

 

 

 

11,414

 

 

 

10,878

 

Provision for loan and lease losses

 

 

125

 

 

 

275

 

 

 

100

 

 

 

 

 

 

125

 

Noninterest income

 

 

2,049

 

 

 

2,091

 

 

 

2,165

 

 

 

1,559

 

 

 

1,647

 

Noninterest expense

 

 

14,303

 

 

 

13,982

 

 

 

15,264

 

 

 

9,742

 

 

 

11,183

 

Income before provision for income taxes

 

 

4,927

 

 

 

5,565

 

 

 

2,712

 

 

 

3,231

 

 

 

1,217

 

Provision for income taxes

 

 

850

 

 

 

916

 

 

 

548

 

 

 

452

 

 

 

213

 

Net income

 

 

4,077

 

 

 

4,649

 

 

 

2,164

 

 

 

2,779

 

 

 

1,004

 

Preferred stock dividends

 

 

 

 

 

64

 

 

 

38

 

 

 

 

 

 

 

Net income available to common shareholders

 

$

4,077

 

 

$

4,585

 

 

$

2,126

 

 

$

2,779

 

 

$

1,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings per Common Share

 

$

0.48

 

 

$

0.54

 

 

$

0.28

 

 

$

0.45

 

 

$

0.17

 

Return on Average Equity

 

 

7.35

%

 

 

8.19

%

 

 

4.26

%

 

 

7.90

%

 

 

2.78

%

 

 

Mar. 31,

 

 

Dec. 31,

 

 

Sept. 30,

 

 

June 30,

 

 

Mar. 31,

 

 

 

2019

 

 

2018

 

 

2018

 

 

2018

 

 

2018

 

Tier 1 Capital (to Average Assets)

 

7.8%

 

 

8.0%

 

 

7.7%

 

 

8.4%

 

 

8.5%

 

Common Tier 1 Capital (to Risk Weighted Assets)

 

9.9%

 

 

10.0%

 

 

10.1%

 

 

11.4%

 

 

11.6%

 

Tier 1 Capital (to Risk Weighted Assets)

 

9.9%

 

 

10.0%

 

 

10.1%

 

 

11.4%

 

 

11.6%

 

Total Capital (to Risk Weighted Assets)

 

12.2%

 

 

12.3%

 

 

12.4%

 

 

13.8%

 

 

14.1%

 

 

 

5


RECONCILIATION OF NON-GAAP MEASURES (Unaudited:)

This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). For tangible book value, the most directly comparable financial measure calculated in accordance with GAAP is our book value.  We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets.  Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.   We believe earnings per share excluding the after-tax impact of merger-related expenses provides important supplemental information in evaluating Mid Penn’s operating results because these charges are not incurred as a result of ongoing operations.  Income tax effects of non-GAAP adjustments are calculated using the applicable statutory tax rate for the jurisdictions in which the charges (benefits) are incurred, while taking into consideration any valuation allowances or non-deductible portions of the non-GAAP adjustments. This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial measures determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of Mid Penn’s results and financial condition as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. Management believes that this non-GAAP supplemental information will be helpful in understanding Mid Penn’s ongoing operating results. This supplemental presentation should not be construed as an inference that Mid Penn’s future results will be unaffected by similar adjustments to be determined in accordance with GAAP.

Tangible Book Value Per Share

 

(Dollars in thousands, except

 

Mar. 31,

 

 

Dec. 31,

 

 

Sept. 30,

 

 

June 30,

 

 

March 31,

 

per share data)

 

2019

 

 

2018

 

 

2018

 

 

2018

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholder's Equity

 

$

227,437

 

 

$

223,209

 

 

$

221,835

 

 

$

141,775

 

 

$

139,124

 

Less: Preferred Stock

 

 

 

 

 

 

 

 

3,404

 

 

 

 

 

 

 

Less: Goodwill

 

 

62,840

 

 

 

62,840

 

 

 

62,767

 

 

 

23,107

 

 

 

22,528

 

Less: Core Deposit and Other Intangibles

 

 

6,825

 

 

 

7,221

 

 

 

7,708

 

 

 

4,879

 

 

 

5,126

 

Tangible Equity

 

$

157,772

 

 

$

153,148

 

 

$

147,956

 

 

$

113,789

 

 

$

111,470

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares Issued and Outstanding

 

 

8,462,431

 

 

 

8,459,918

 

 

 

8,457,023

 

 

 

6,124,517

 

 

 

6,122,717

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible Book Value per Share

 

$

18.64

 

 

$

18.10

 

 

$

17.50

 

 

$

18.58

 

 

$

18.21

 

 

Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses

(Dollars in thousands, except

 

Three Months Ended

 

per share data)

 

Mar. 31,

 

 

Dec. 31,

 

 

Sept. 30,

 

 

June 30,

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

2018

 

 

2018

 

 

2018

 

Net Income Available to Common Shareholders

 

$

4,077

 

 

$

4,585

 

 

$

2,126

 

 

$

2,779

 

 

$

1,004

 

Plus: Merger and Acquisition Expenses

 

 

 

 

 

(164

)

 

 

3,038

 

 

 

222

 

 

 

1,694

 

Less: Tax Effect of Merger and Acquisition Expenses

 

 

 

 

 

(35

)

 

 

576

 

 

 

(3

)

 

 

274

 

Net Income Excluding Non-Recurring Expenses

 

$

4,077

 

 

$

4,456

 

 

$

4,588

 

 

$

3,004

 

 

$

2,424

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding - denominator

 

 

8,460,002

 

 

 

8,457,054

 

 

 

7,695,469

 

 

 

6,122,757

 

 

 

5,974,949

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses

 

$

0.48

 

 

$

0.53

 

 

$

0.60

 

 

$

0.49

 

 

$

0.41

 

 

 


6


CONSOLIDATED BALANCE SHEETS (Unaudited):

(Dollars in thousands, except share data)

 

March 31, 2019

 

 

December 31, 2018

 

 

March 31, 2018

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

35,573

 

 

$

24,600

 

 

$

20,866

 

Interest-bearing balances with other financial institutions

 

 

5,049

 

 

 

4,572

 

 

 

5,346

 

Federal funds sold

 

 

46,346

 

 

 

10,893

 

 

 

32,963

 

Total cash and cash equivalents

 

 

86,968

 

 

 

40,065

 

 

 

59,175

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available for sale, at fair value

 

 

101,532

 

 

 

111,923

 

 

 

122,342

 

Investment securities held to maturity, at amortized cost

 

 

 

 

 

 

 

 

 

 

 

 

(fair value $163,723, $166,582, and $128,352)

 

 

162,791

 

 

 

168,370

 

 

 

131,293

 

Loans held for sale

 

 

4,050

 

 

 

1,702

 

 

 

1,348

 

Loans and leases, net of unearned interest

 

 

1,646,686

 

 

 

1,624,067

 

 

 

1,007,138

 

Less:  Allowance for loan and lease losses

 

 

(8,502

)

 

 

(8,397

)

 

 

(7,666

)

Net loans and leases

 

 

1,638,184

 

 

 

1,615,670

 

 

 

999,472

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank premises and equipment, net

 

 

23,881

 

 

 

25,303

 

 

 

20,015

 

Bank premises and equipment held for sale

 

 

1,274

 

 

 

 

 

 

 

Operating lease right of use asset

 

 

11,249

 

 

 

 

 

 

 

Finance lease right of use asset

 

 

3,582

 

 

 

 

 

 

 

Cash surrender value of life insurance

 

 

16,769

 

 

 

16,691

 

 

 

13,106

 

Restricted investment in bank stocks

 

 

5,933

 

 

 

6,646

 

 

 

2,759

 

Foreclosed assets held for sale

 

 

350

 

 

 

1,017

 

 

 

745

 

Accrued interest receivable

 

 

8,527

 

 

 

8,244

 

 

 

5,079

 

Deferred income taxes

 

 

4,018

 

 

 

4,696

 

 

 

3,821

 

Goodwill

 

 

62,840

 

 

 

62,840

 

 

 

22,528

 

Core deposit and other intangibles, net

 

 

6,825

 

 

 

7,221

 

 

 

5,126

 

Other assets

 

 

9,044

 

 

 

7,593

 

 

 

4,408

 

Total Assets

 

$

2,147,817

 

 

$

2,077,981

 

 

$

1,391,217

 

LIABILITIES & SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

290,902

 

 

$

269,870

 

 

$

195,330

 

Interest-bearing demand

 

 

397,959

 

 

 

384,834

 

 

 

355,939

 

Money Market

 

 

414,503

 

 

 

375,648

 

 

 

270,489

 

Savings

 

 

195,226

 

 

 

209,345

 

 

 

174,920

 

Time

 

 

485,590

 

 

 

486,329

 

 

 

215,745

 

Total Deposits

 

 

1,784,180

 

 

 

1,726,026

 

 

 

1,212,423

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term borrowings

 

 

35,000

 

 

 

43,100

 

 

 

 

Long-term debt

 

 

51,585

 

 

 

48,024

 

 

 

12,297

 

Subordinated debt

 

 

27,076

 

 

 

27,082

 

 

 

17,335

 

Operating lease liability

 

 

12,428

 

 

 

 

 

 

 

Accrued interest payable

 

 

2,921

 

 

 

2,262

 

 

 

922

 

Other liabilities

 

 

7,190

 

 

 

8,278

 

 

 

9,116

 

Total Liabilities

 

 

1,920,380

 

 

 

1,854,772

 

 

 

1,252,093

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, par value $1.00; authorized 10,000,000 shares;

 

 

 

 

 

 

 

 

 

 

 

 

8,462,431, 8,459,918, and 6,122,717 shares issued and outstanding at

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019, December 31, 2018 and March 31, 2018, respectively

 

 

8,462

 

 

 

8,460

 

 

 

6,123

 

Additional paid-in capital

 

 

177,704

 

 

 

177,565

 

 

 

103,382

 

Retained earnings

 

 

41,842

 

 

 

39,562

 

 

 

33,525

 

Accumulated other comprehensive loss

 

 

(571

)

 

 

(2,378

)

 

 

(3,906

)

Total Shareholders’ Equity

 

 

227,437

 

 

 

223,209

 

 

 

139,124

 

Total Liabilities and Shareholders' Equity

 

$

2,147,817

 

 

$

2,077,981

 

 

$

1,391,217

 

 

7


CONSOLIDATED STATEMENTS OF INCOME (Unaudited):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

Three Months Ended March 31,

 

 

 

 

2019

 

 

 

2018

 

INTEREST INCOME

 

 

 

 

 

 

 

 

Interest and fees on loans and leases

 

$

21,078

 

 

$

11,337

 

Interest on interest-bearing balances

 

 

30

 

 

 

9

 

Interest on federal funds sold

 

 

68

 

 

 

168

 

Interest and dividends on investment securities:

 

 

 

 

 

 

 

 

U.S. Treasury and government agencies

 

 

893

 

 

 

752

 

State and political subdivision obligations, tax-exempt

 

 

619

 

 

 

542

 

Other securities

 

 

178

 

 

 

172

 

Total Interest Income

 

 

22,866

 

 

 

12,980

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

Interest on deposits

 

 

4,586

 

 

 

1,780

 

Interest on short-term borrowings

 

 

232

 

 

 

12

 

Interest on long-term and subordinated debt

 

 

742

 

 

 

310

 

Total Interest Expense

 

 

5,560

 

 

 

2,102

 

Net Interest Income

 

 

17,306

 

 

 

10,878

 

PROVISION FOR LOAN AND LEASE LOSSES

 

 

125

 

 

 

125

 

Net Interest Income After Provision for Loan and Lease Losses

 

 

17,181

 

 

 

10,753

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

Income from fiduciary activities

 

 

359

 

 

 

240

 

Service charges on deposits

 

 

217

 

 

 

203

 

Net gain on sales of investment securities

 

 

7

 

 

 

98

 

Earnings from cash surrender value of life insurance

 

 

78

 

 

 

64

 

Mortgage banking income

 

 

437

 

 

 

156

 

ATM debit card interchange income

 

 

334

 

 

 

265

 

Merchant services income

 

 

85

 

 

 

78

 

Net gain on sales of SBA loans

 

 

202

 

 

 

257

 

Other income

 

 

330

 

 

 

286

 

Total Noninterest Income

 

 

2,049

 

 

 

1,647

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

7,759

 

 

 

5,064

 

Occupancy expense, net

 

 

1,401

 

 

 

797

 

Equipment expense

 

 

627

 

 

 

408

 

Pennsylvania bank shares tax expense

 

 

136

 

 

 

171

 

FDIC Assessment

 

 

359

 

 

 

228

 

Legal and professional fees

 

 

422

 

 

 

224

 

Marketing and advertising expense

 

 

179

 

 

 

189

 

Software licensing and utilization

 

 

848

 

 

 

685

 

Telephone expense

 

 

154

 

 

 

147

 

(Gain) loss on sale or write-down of foreclosed assets

 

 

(4

)

 

 

2

 

Intangible amortization

 

 

363