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Section 1: 8-K (8-K)

mpb-8k_20191023.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):  October 23, 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)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $1.00 par value per share

 

MPB

 

The NASDAQ Stock Market LLC

 

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:

 

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 October 25, 2019, Mid Penn Bancorp, Inc. (the “Corporation”) issued a press release discussing its financial results for the three and nine months ended September 30, 2019.  A copy of the Corporation’s press release dated October 25, 2019 is furnished herewith as Exhibit 99.1, and is incorporated herein by reference.

ITEM 8.01OTHER EVENTS

 

On October 23, 2019, the Board of Directors of the Corporation declared a quarterly cash dividend of $0.18 per common share payable on November 25, 2019 to shareholders of record as of November 6, 2019.

ITEM 9.01FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits.

99.1Press release, dated October 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:  October 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 THIRD QUARTER 2019 EARNINGS

AND DECLARES QUARTERLY DIVIDEND

 

October 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 September 30, 2019 of $4,813,000 or $0.57 per common share basic and diluted, compared to earnings of $2,126,000 or $0.28 per common share basic and diluted for the quarter ended September 30, 2018.  The results for the three months ended September 30, 2018 included merger and acquisition expenses resulting from Mid Penn’s acquisition of First Priority Financial Corp. (“First Priority”) on July 31, 2018.

 

Earnings for the nine months ended September 30, 2019 were $13,293,000 or $1.57 per common share basic and diluted, compared to earnings of $5,909,000 or $0.89 per common share basic and diluted for the nine months ended September 30, 2018. The results for the nine months ended September 30, 2018 included merger and acquisition expenses resulting from both (i) Mid Penn’s acquisition of First Priority on July 31, 2018, and (ii) Mid Penn’s acquisition of The Scottdale Bank & Trust Company (“Scottdale”) on January 8, 2018.  No merger and acquisition expenses were recorded during the nine months ended September 30, 2019.  Adjusted earnings for the nine months ended September 30, 2018, when excluding the after-tax impact of merger and acquisition expenses (with such adjusted earnings being a non-GAAP measure), were $10,017,000 or $1.52 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 September 30, 2019 and 2018 and certain other periods.  

 

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 $19.54 as of September 30, 2019, compared to $18.10 as of December 31, 2018, and $17.50 as of September 30, 2018.  Mid Penn’s GAAP book value per share increased to $27.67 at September 30, 2019, compared to $26.38 as of December 31, 2018, and $25.83 at September 30, 2018.    

 

Mid Penn also reported continued growth in total assets to $2,248,899,000 as of September 30, 2019, reflecting an increase of $170,918,000 or 8 percent compared to total assets of $2,077,981,000 as of December 31, 2018, and an increase of $204,619,000 or 10 percent compared to total assets of $2,044,280,000 as of September 30, 2018.  Asset growth during the first nine months of 2019 was primarily attributable to net organic loan growth, an increase in liquid assets from demand deposit growth, and the recording of operating and finance lease right of use assets as a result of Mid Penn’s adoption of Accounting Standard Codification (ASC) 842 – Leases effective January 1, 2019.

 

In general, the results of operations and the financial condition as of and for the periods ended September 30, 2019, as compared to prior periods and certain period-end dates in 2018, have been materially impacted by Mid Penn’s 2018 acquisitions of First Priority and Scottdale.

 

Mid Penn also reported that its Board of Directors, at a meeting held on October 23, 2019, declared a quarterly dividend per common share of $0.18 payable on November 25, 2019, to shareholders of record as of November 6, 2019.  

 


1


PRESIDENT’S STATEMENT

 

We are pleased to announce our third quarter results of operations and our quarterly dividend. The three months ended September 30, 2019 were demonstrative of our continued strong organic growth in our legacy markets of Dauphin, Cumberland, Schuylkill and Lancaster counties, as well as the success of our 2018 acquisitions of Scottdale and First Priority.  Our performance reflects strong increases in net interest income; a sound net interest margin even in the face of an inverted yield curve; significant increases in noninterest income sources including mortgage banking, fiduciary, SBA and interchange revenues; a decrease in noninterest expenses; and very favorable asset quality measures.  It is that last item of which I am most proud.  We are a community bank and we derive the bulk of our revenues and income from our loan portfolio. To end the quarter with a 0.36% nonperforming asset ratio is indicative of the strength of our designed business development culture, our commitment to pristine underwriting, our commitment to best in class documentation and portfolio management that is the best I have seen. With all of the success in revenue growth and expense control, we delivered a strong quarter in net income available to common shareholders, earnings per share and tangible book value appreciation. With that, we are sharing the wealth with the announcement of a $0.18 per share common stock dividend.

 

OPERATING RESULTS

 

Net Interest Income and Net Interest Margin

 

Net interest income was $17,767,000 for the three months ended September 30, 2019, an increase of $1,856,000 or 12 percent compared to net interest income of $15,911,000 for the three months ended September 30, 2018.  Through the first nine months of 2019, net interest income was $52,843,000, an increase of $14,640,000 or 38 percent compared to net interest income of $38,203,000 for the same period in 2018.  The primary source of the net interest income growth for both the three and nine month periods was an increase in interest and fees on loans, as total loans increased $143,148,000 or 9 percent since September 30, 2018.  

 

For the nine months ended September 30, 2019, Mid Penn’s tax-equivalent net interest margin was 3.64% versus 3.62% for the nine months ended September 30, 2018. 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 brokered time deposits and subordinated debt assumed in the First Priority acquisition, and other short-term borrowings added since September 30, 2018 to support liquidity and interest rate management while also partially funding loan growth.

 

For the three months ended September 30, 2019, Mid Penn’s tax-equivalent net interest margin was 3.53% compared to 3.69% for the three months ended June 30, 2019.  This decrease in net interest margin was driven by successful growth in deposits in both the third quarter and full-year 2019, as Mid Penn had a higher average balance of demand deposits and liquid assets which were temporarily invested in overnight federal funds sold in anticipation of redeployment of some of this excess funding for future loan growth, repayment of maturing wholesale borrowings, and near-term redemptions of brokered CDs. The net interest margin was also impacted by an increase in the cost of deposits, particularly money market accounts and time deposits.

 

Noninterest Income

 

During the three months ended September 30, 2019, noninterest income totaled $3,003,000, an increase of $832,000 or 38 percent, compared to noninterest income of $2,171,000 for the three months ended September 30, 2018.  For the nine months ended September 30, 2019, noninterest income totaled $7,926,000, an increase of $2,485,000 or 46 percent, compared to noninterest income of $5,441,000 for the same period in 2018.

 

Mortgage banking income was $2,605,000 for the nine months ended September 30, 2019, an increase of $2,047,000 or over 350 percent compared to mortgage banking income of $558,000 for the nine months ended September 30, 2018.  Longer-term mortgage interest rates have declined significantly in the first nine months of 2019, resulting in a higher level of mortgage originations and secondary-market loan sales during the first nine months 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 nine months ended September 30, 2019.

 

Income from fiduciary activities was $1,092,000 for the nine months ended September 30, 2019, an increase of $241,000 or 28 percent, compared to fiduciary income of $851,000 for the nine months ended September 30, 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.

 

ATM debit card interchange income was $1,148,000 for the nine months ended September 30, 2019, an increase of $240,000 or 26 percent compared to interchange income of $908,000 for the nine months ended September 30, 2018. The increase resulted from increasing card-transaction usage across our customer base, as well as the added volume from demand deposit accounts assumed in the First Priority acquisition.

 

2


Net gains on sales of SBA loans were $710,000 for the nine months ended September 30, 2019, an increase of $233,000 or 49 percent compared to net gains on sales of SBA loans of $477,000 during the same period in 2018.  The increase reflects a higher volume of loans settling in 2019 despite less favorable SBA loan rates year-over-year.

 

For the nine months ended September 30, 2019, merchant services income totaled $304,000, an increase of $43,000 or 16 percent, compared $261,000 for the nine months ended September 30, 2018, reflecting an increase in the volume of business customers utilizing merchant services to process their debit card transactions, cash advances, and other related products.

 

Other income was $1,096,000 for the nine months ended September 30, 2019, a decrease of $286,000 compared to other income of $1,382,000 for the nine months ended September 30, 2018.  Although wire transfer, letter of credit, and other fees increased in 2019, these were more than offset by a decline in pension settlement gain income year over year. During the first three quarters of 2018, Mid Penn recognized $497,000 of defined benefit pension plan settlement gains from certain plan participants receiving lump sum benefit payouts (the plan and related liabilities were assumed as a result of the Scottdale acquisition).  During the first three quarters of 2019, a lower amount of pension plan lump sum payouts occurred, with related settlement gains totaling $37,000.  Pension settlement gains are not expected to be a recurring item on a going-forward basis.

 

Net gains on sales of securities were $70,000 for the nine months ended September 30, 2019, a decrease of $62,000 compared to net gains on sales of securities of $132,000 for the nine months ended September 30, 2018. During the first three quarters 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 less during the first nine months of 2019, with such sales related primarily in support of interest rate risk and liquidity management.

 

Noninterest Expense

Noninterest expense for the three months ended September 30, 2019 totaled $14,683,000, a decrease of $587,000 or 4 percent compared to noninterest expenses of $15,270,000 for the three months ended September 30, 2018.  For the nine months ended September 30, 2019, noninterest expense totaled $43,782,000, an increase of $7,523,000 or 21 percent, compared to noninterest expense of $36,259,000 for the same period in 2018.  The increase in noninterest expense for the nine-month period was driven by both (i) the impact of the staff, facilities, and technology licensing costs added as a result of the acquisition of First Priority in July 2018, and (ii) the 2019 expansion of Mid Penn’s mortgage banking division in the southeastern Pennsylvania market.

 

Salaries and employee benefits expenses were $23,970,000 during the nine months ended September 30, 2019, an increase of $7,684,000 or 47 percent, versus the same period in 2018, with the increase primarily attributable to (i) the full-year impact of the compensation and benefit costs of the staff additions at the eight office locations added through the First Priority acquisition, effective July 31, 2018, and (ii) the back-office and loan originator staff additions as a result of the expansion of the mortgage banking division.

 

Occupancy expenses increased $1,247,000 or 46 percent during the first nine months of 2019 compared to the same period in 2018.  Similarly, equipment expense increased $425,000 or 28 percent during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018.  These increases related to (i) the incremental facilities operating costs, including rent, utilities, and depreciation expense for the buildings and equipment associated with the acquisition of the First Priority retail offices, and (ii) an investment in a corporate administrative facility to promote long-term operational and processing efficiencies by centralizing several back-office functions supporting the broader franchise.  

 

Pennsylvania bank shares tax expense was $740,000 for the nine months ended September 30, 2019, an increase of $267,000 or 56 percent compared to $473,000 for the nine months ended September 30, 2018.  The increase in assessment expense generally reflects the larger total shareholder equity balance (from both acquisition and organic growth activity) upon which the tax is based.  

 

FDIC assessment expense was $542,000 for the nine months ended September 30, 2019, an increase of $34,000 or 7 percent compared to $508,000 for the nine months ended September 30, 2018.  The third quarter of 2019 reflects the receipt of $492,000 of FDIC small bank assessment credits which were applied to FDIC assessment expense.  Mid Penn received notification from the FDIC that the FDIC’s Deposit Insurance Fund reserve ratio met a threshold resulting in the FDIC providing the Bank with the credit, which was applied to assessment liability accruals for both the second and third quarters of 2019.

 

Legal and professional fees for the nine months ended September 30, 2019 increased by $452,000 or 60 percent compared to the same period in 2018 due to increased use and costs of third-party providers for information technology support, human resources services, external audit, and loan review services.

 


3


Software licensing and utilization costs were $3,282,000 during the nine months ended September 30, 2019, an increase of $648,000 or 25 percent compared to $2,634,000 for the nine months ended September 30, 2018. The increase is a result of additional transaction volume based costs and licensing fees related to the addition of the locations, staff and accounts for the First Priority offices acquired in July 2018, the Pillow branch added in September 2018, and the expanded mortgage banking division added during the first quarter of 2019.  Additionally, Mid Penn continued to invest in upgrades to internal systems to enhance data management and storage capabilities given the larger company profile.

 

Intangible amortization increased from $837,000 during the nine months ended September 30, 2018 to $1,078,000 during the same period in 2019 due to the full nine-month impact of the core deposit intangible asset added from the First Priority acquisition on July 31, 2018.

 

Other expenses were $5,947,000 during the nine months ended September 30, 2019, an increase of $1,615,000 or 37 percent compared to other expense of $4,332,000 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 nine months ended September 30, 2019.  During the first nine months of 2018, merger and acquisition expenses totaling $4,955,000 were recorded including investment banking fees, merger-related legal and professional fees, severance costs, and information technology conversion/termination costs incurred for the 2018 acquisitions of First Priority and Scottdale.

 

The provision for income taxes was $2,539,000 during the nine months ended September 30, 2019, an increase of $1,326,000 or 109 percent compared to $1,213,000 for the same period in 2018.  The third quarter of 2019 reflects a favorable adjustment to income tax expense of $277,000 for certain permanent nonrecurring tax benefits recorded within the current quarter.

 

FINANCIAL CONDITION

 

Loans

 

Total loans at September 30, 2019 were $1,710,434,000 compared to $1,624,067,000 at December 31, 2018, an increase of $86,367,000 or 5 percent since year-end 2018.  The majority of the growth was commercial and industrial financing, and commercial real estate credits.

 

Deposits

 

Total deposits increased $164,067,000 or 10 percent, from $1,726,026,000 at December 31, 2018, to $1,890,093,000 at September 30, 2019.  The increase was attributed to both new and expanded cash management and commercial deposit account relationships, and some volume from the third quarter cyclical growth due to real estate tax collections by our public fund depositors.

 

Investments

 

Mid Penn’s portfolio of held-to-maturity securities increased $2,102,000 to $170,472,000 as of September 30, 2019, as compared to $168,370,000 as of December 31, 2018 (held-to-maturity investments are recorded at amortized cost).  Mid Penn’s total available-for-sale securities portfolio decreased $59,504,000 or 53 percent, from $111,923,000 at December 31, 2018 to $52,419,000 at September 30, 2019 due to both mortgage-backed securities repayments, and from investment sales related to portfolio strategies in support of both liquidity and interest rate risk management.

 

Capital

 

Shareholders’ equity increased by $11,403,000 or 5 percent from $223,209,000 as of December 31, 2018 to $234,612,000 as of September 30, 2019. The increase in shareholders’ equity reflects both (i) the growth in retained earnings through year-to-date net income, net of dividends paid, through the first nine months of 2019, and (ii) the year-to-date accumulated other comprehensive income from the after-tax appreciation in the market value of the available-for-sale investment portfolio.  Regulatory capital ratios for both Mid Penn and its banking subsidiary exceeded regulatory “well-capitalized” levels at both September 30, 2019 and 2018.

 


4


ASSET QUALITY

 

Total nonperforming assets were $5,553,000 at September 30, 2019, a significant decrease compared to nonperforming assets of $12,283,000 at December 31, 2018, and $11,978,000 at September 30, 2018. Nonperforming assets were 0.32% of the total of loans plus other real estate assets as of September 30, 2019, compared to 0.76% for the same measure as of both December 31, 2018 and September 30, 2018.  The decrease was primarily due to the successful workout of one nonaccrual commercial credit relationship totaling $4,302,000 and one nonaccrual residential mortgage relationship totaling $701,000 during the first nine months of 2019.

 

The allowance for loan and lease losses as a percentage of total loans was 0.54% at September 30, 2019, compared to 0.52% at December 31, 2018 and 0.53% at September 30, 2018.  Mid Penn had net loan charge-offs of $236,000 for the nine months ended September 30, 2019 compared to net recoveries of ($398,000) during the same period in 2018.  The net charge-off position in 2019 was primarily due to a $205,000 charge-off taken on one relationship during the second quarter of 2019.  The favorable net recovery position during the first nine months of 2018 was driven by the recovery of $777,000 of principal from the successful workout of a commercial real estate relationship that originally had a large partial charge-off in 2009.

 

Loan loss reserves as a percentage of nonperforming loans were 172% at September 30, 2019, compared to 75% at December 31, 2018, and 76% at September 30, 2018.  The increase in the loan loss reserves as a percentage of nonperforming loans at September 30, 2019 as compared to both the prior year-end and September 30, 2018 was a result of both an increase in the allowance balance related to general allocations provided for loan growth, and the year-over-year decrease in nonperforming loans.

Based upon management’s evaluation of the adequacy of the loan and lease loss allowance, a loan loss provision of $1,155,000 was recorded for the nine months ended September 30, 2019 compared to $225,000 recorded during the same period of 2018.  The increase in the provision amount year-over-year was warranted to support both (i) the adequacy of the ALLL given the organic loan portfolio growth during the first nine months of 2019, and (ii) the impact of historical loss factor changes due to charge-offs taken during the first half of 2019.  Management believes, based on information currently available, that the allowance for loan and lease losses of $9,316,000 is adequate as of September 30, 2019, to cover probable and estimated loan losses in the portfolio.

FINANCIAL HIGHLIGHTS (Unaudited):

(Dollars in thousands, except

 

Sept. 30,

 

 

June 30,

 

 

Mar. 31,

 

 

Dec. 31,

 

 

Sept. 30,

 

per share data)

 

2019

 

 

2019

 

 

2019

 

 

2018

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

160,879

 

 

$

48,145

 

 

$

86,968

 

 

$

40,065

 

 

$

62,085

 

Investment securities

 

 

222,891

 

 

 

243,586

 

 

 

264,323

 

 

 

280,293

 

 

 

282,048

 

Loans

 

 

1,710,434

 

 

 

1,688,173

 

 

 

1,646,686

 

 

 

1,624,067

 

 

 

1,567,286

 

Allowance for loan and lease losses

 

 

(9,316

)

 

 

(8,771

)

 

 

(8,502

)

 

 

(8,397

)

 

 

(8,229

)

Net loans

 

 

1,701,118

 

 

 

1,679,402

 

 

 

1,638,184

 

 

 

1,615,670

 

 

 

1,559,057

 

Goodwill and other intangibles

 

 

68,949

 

 

 

69,304

 

 

 

69,665

 

 

 

70,061

 

 

 

70,475

 

Other assets

 

 

95,062

 

 

 

95,685

 

 

 

88,677

 

 

 

71,892

 

 

 

70,615

 

Total assets

 

$

2,248,899

 

 

$

2,136,122

 

 

$

2,147,817

 

 

$

2,077,981

 

 

$

2,044,280

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

298,885

 

 

$

287,183

 

 

$

290,902

 

 

$

269,870

 

 

$

271,142

 

Interest-bearing deposits

 

 

1,591,208

 

 

 

1,491,218

 

 

 

1,493,278

 

 

 

1,456,156

 

 

 

1,491,323

 

Total deposits

 

 

1,890,093

 

 

 

1,778,401

 

 

 

1,784,180

 

 

 

1,726,026

 

 

 

1,762,465

 

Borrowings and subordinated debt

 

 

102,038

 

 

 

105,105

 

 

 

113,661

 

 

 

118,206

 

 

 

46,923

 

Other liabilities

 

 

22,156

 

 

 

21,354

 

 

 

22,539

 

 

 

10,540

 

 

 

13,057

 

Shareholders' equity

 

 

234,612

 

 

 

231,262

 

 

 

227,437

 

 

 

223,209

 

 

 

221,835

 

Total liabilities and shareholders' equity

 

$

2,248,899

 

 

$

2,136,122

 

 

$

2,147,817

 

 

$

2,077,981

 

 

$

2,044,280

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book Value per Common Share

 

$

27.67

 

 

$

27.32

 

 

$

26.88

 

 

$

26.38

 

 

$

25.83

 

Tangible Book Value per Common Share *

 

$

19.54

 

 

$

19.13

 

 

$

18.64

 

 

$

18.10

 

 

$

17.50

 

 

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

5


OPERATING HIGHLIGHTS (Unaudited):

 

 

Three Months Ended

 

 

Nine Months Ended

 

(Dollars in thousands, except

 

Sept. 30,

 

 

June 30,

 

 

Mar. 31,

 

 

Dec. 31,

 

 

Sept. 30,

 

 

Sept. 30,

 

per share data)

 

2019

 

 

2019

 

 

2019

 

 

2018

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

24,513

 

 

$

23,998

 

 

$

22,866

 

 

$

22,371

 

 

$

19,583

 

 

$

71,377

 

 

$

46,283

 

Interest expense

 

 

6,746

 

 

 

6,228

 

 

 

5,560

 

 

 

4,640

 

 

 

3,672

 

 

 

18,534

 

 

 

8,080

 

Net Interest Income

 

 

17,767

 

 

 

17,770

 

 

 

17,306

 

 

 

17,731

 

 

 

15,911

 

 

 

52,843

 

 

 

38,203

 

Provision for loan and lease losses

 

 

565

 

 

 

465

 

 

 

125

 

 

 

275

 

 

 

100

 

 

 

1,155

 

 

 

225

 

Noninterest income

 

 

3,003

 

 

 

2,874

 

 

 

2,049

 

 

 

2,091

 

 

 

2,171

 

 

 

7,926

 

 

 

5,441

 

Noninterest expense

 

 

14,683

 

 

 

14,796

 

 

 

14,303

 

 

 

13,982

 

 

 

15,270

 

 

 

43,782

 

 

 

36,259

 

Income before provision for income taxes

 

 

5,522

 

 

 

5,383

 

 

 

4,927

 

 

 

5,565

 

 

 

2,712

 

 

 

15,832

 

 

 

7,160

 

Provision for income taxes

 

 

709

 

 

 

980

 

 

 

850

 

 

 

916

 

 

 

548

 

 

 

2,539

 

 

 

1,213

 

Net income

 

 

4,813

 

 

 

4,403

 

 

 

4,077

 

 

 

4,649

 

 

 

2,164

 

 

 

13,293

 

 

 

5,947

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

64

 

 

 

38

 

 

 

 

 

 

38

 

Net income available to common shareholders

 

$

4,813

 

 

$

4,403

 

 

$

4,077

 

 

$

4,585

 

 

$

2,126

 

 

$

13,293

 

 

$

5,909

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings per Common Share

 

$

0.57

 

 

$

0.52

 

 

$

0.48

 

 

$

0.54

 

 

$

0.28

 

 

$

1.57

 

 

$

0.89

 

Return on Average Equity

 

 

8.34

%

 

 

7.71

%

 

 

7.35

%

 

 

8.19

%

 

 

4.26

%

 

 

7.54

%

 

 

4.94

%

 

 

Sept. 30,

 

 

June 30,

 

 

Mar. 31,

 

 

Dec. 31,

 

 

Sept. 30,

 

 

 

2019

 

 

2019

 

 

2019

 

 

2018

 

 

2018

 

Tier 1 Capital (to Average Assets)

 

7.7%

 

 

7.8%

 

 

7.8%

 

 

8.0%

 

 

7.7%

 

Common Tier 1 Capital (to Risk Weighted Assets)

 

9.9%

 

 

9.8%

 

 

9.9%

 

 

10.0%

 

 

10.1%

 

Tier 1 Capital (to Risk Weighted Assets)

 

9.9%

 

 

9.8%

 

 

9.9%

 

 

10.0%

 

 

10.1%

 

Total Capital (to Risk Weighted Assets)

 

12.1%

 

 

12.0%

 

 

12.2%

 

 

12.3%

 

 

12.4%

 

 

 

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 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 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.

6


RECONCILIATION OF NON-GAAP MEASURES, CONTINUED (Unaudited:)

 

 

Tangible Book Value Per Share

 

(Dollars in thousands, except

 

Sept. 30,

 

 

June 30,

 

 

Mar. 31,

 

 

Dec. 31,

 

 

Sept. 30,

 

per share data)

 

2019

 

 

2019

 

 

2019

 

 

2018

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholder's Equity

 

$

234,612

 

 

$

231,262

 

 

$

227,437

 

 

$

223,209

 

 

$

221,835

 

Less: Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,404

 

Less: Goodwill

 

 

62,840

 

 

 

62,840

 

 

 

62,840

 

 

 

62,840

 

 

 

62,767

 

Less: Core Deposit and Other Intangibles

 

 

6,109

 

 

 

6,464

 

 

 

6,825

 

 

 

7,221

 

 

 

7,708

 

Tangible Equity

 

$

165,663

 

 

$

161,958

 

 

$

157,772

 

 

$

153,148

 

 

$

147,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares Issued and Outstanding

 

 

8,478,461

 

 

 

8,465,178

 

 

 

8,462,431

 

 

 

8,459,918

 

 

 

8,457,023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible Book Value per Share

 

$

19.54

 

 

$

19.13

 

 

$

18.64

 

 

$

18.10

 

 

$

17.50

 

 

 

Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses

 

(Dollars in thousands, except

 

Three Months Ended

 

 

Nine Months Ended

 

per share data)

 

Sept. 30,

 

 

June 30,

 

 

Mar. 31,

 

 

Dec. 31,

 

 

Sept. 30,

 

 

Sept. 30,

 

 

 

2019

 

 

2019

 

 

2019

 

 

2018

 

 

2018

 

 

2019

 

 

2018

 

Net Income Available to Common Shareholders

 

$

4,813

 

 

$

4,403

 

 

$

4,077

 

 

$

4,585

 

 

$

2,126

 

 

$

13,293

 

 

$

5,909

 

Plus: Merger and Acquisition Expenses

 

 

 

 

 

 

 

 

 

 

 

(164

)

 

 

3,038

 

 

 

 

 

 

4,955

 

Less: Tax Effect of Merger and Acquisition Expenses

 

 

 

 

 

 

 

 

 

 

 

(35

)

 

 

576

 

 

 

 

 

 

847

 

Net Income Excluding Non-Recurring Expenses

 

$

4,813

 

 

$

4,403

 

 

$

4,077

 

 

$

4,456

 

 

$

4,588

 

 

$

13,293

 

 

$

10,017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding - denominator

 

 

8,473,080

 

 

 

8,462,522

 

 

 

8,460,002

 

 

 

8,457,054

 

 

 

7,695,469

 

 

 

8,465,249

 

 

 

6,604,027

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses

 

$

0.57

 

 

$

0.52

 

 

$

0.48

 

 

$

0.53

 

 

$

0.60

 

 

$

1.57

 

 

$

1.52

 

7


CONSOLIDATED BALANCE SHEETS (Unaudited):

(Dollars in thousands, except share data)

 

September 30, 2019

 

 

Dec. 31, 2018

 

 

September 30, 2018

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

54,756

 

 

$

24,600

 

 

$

31,110

 

Interest-bearing balances with other financial institutions

 

 

4,393

 

 

 

4,572

 

 

 

5,241

 

Federal funds sold

 

 

101,730

 

 

 

10,893

 

 

 

25,734

 

Total cash and cash equivalents

 

 

160,879

 

 

 

40,065

 

 

 

62,085

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available for sale, at fair value

 

 

52,419

 

 

 

111,923

 

 

 

110,527

 

Investment securities held to maturity, at amortized cost

 

 

 

 

 

 

 

 

 

 

 

 

(fair value $173,722, $166,582, and $169,382)

 

 

170,472

 

 

 

168,370

 

 

 

171,521

 

Loans held for sale

 

 

7,115

 

 

 

1,702

 

 

 

3,181

 

Loans and leases, net of unearned interest

 

 

1,710,434

 

 

 

1,624,067

 

 

 

1,567,286

 

Less:  Allowance for loan and lease losses

 

 

(9,316

)

 

 

(8,397

)

 

 

(8,229

)

Net loans and leases

 

 

1,701,118

 

 

 

1,615,670

 

 

 

1,559,057

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank premises and equipment, net

 

 

23,357

 

 

 

25,303

 

 

 

25,467

 

Bank premises and equipment held for sale

 

 

1,274

 

 

 

 

 

 

 

Operating lease right of use asset

 

 

10,416

 

 

 

 

 

 

 

Finance lease right of use asset

 

 

3,492

 

 

 

 

 

 

 

Cash surrender value of life insurance

 

 

16,804

 

 

 

16,691

 

 

 

16,610

 

Restricted investment in bank stocks

 

 

6,105

 

 

 

6,646

 

 

 

3,373

 

Accrued interest receivable

 

 

8,414

 

 

 

8,244

 

 

 

7,491

 

Deferred income taxes

 

 

3,922

 

 

 

4,696

 

 

 

4,432

 

Goodwill

 

 

62,840

 

 

 

62,840

 

 

 

62,767

 

Core deposit and other intangibles, net

 

 

6,109

 

 

 

7,221

 

 

 

7,708

 

Foreclosed assets held for sale

 

 

130

 

 

 

1,017

 

 

 

1,101

 

Other assets

 

 

14,033

 

 

 

7,593

 

 

 

8,960

 

Total Assets

 

$

2,248,899

 

 

$

2,077,981

 

 

$

2,044,280

 

LIABILITIES & SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

298,885

 

 

$

269,870

 

 

$

271,142

 

Interest-bearing demand

 

 

465,745

 

 

 

384,834

 

 

 

438,928

 

Money Market

 

 

486,131

 

 

 

375,648

 

 

 

356,729

 

Savings

 

 

180,927

 

 

 

209,345

 

 

 

224,746

 

Time

 

 

458,405

 

 

 

486,329

 

 

 

470,920

 

Total Deposits

 

 

1,890,093

 

 

 

1,726,026

 

 

 

1,762,465

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term borrowings

 

 

12,000

 

 

 

43,100

 

 

 

1,771

 

Long-term debt

 

 

62,971

 

 

 

48,024

 

 

 

18,064

 

Subordinated debt

 

 

27,067

 

 

 

27,082

 

 

 

27,088

 

Operating lease liability

 

 

11,534

 

 

 

 

 

 

 

Accrued interest payable

 

 

2,823

 

 

 

2,262

 

 

 

2,262

 

Other liabilities

 

 

7,799

 

 

 

8,278

 

 

 

10,795

 

Total Liabilities

 

 

2,014,287

 

 

 

1,854,772

 

 

 

1,822,445

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Series D preferred stock, par value $1.00; liquidation value $1,000; authorized 3,404 shares; 9% cumulative dividend; 0 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively, and 3,404 shares issued and outstanding at September 30, 2018

 

 

 

 

 

 

 

 

3,404

 

Common stock, par value $1.00 per share; 20,000,000 shares authorized at September 30, 2019; 8,478,461 shares issued and outstanding at September 30, 2019; 10,000,000 shares authorized at December 31, 2018 and September 30, 2018, respectively; 8,459,918 and 8,457,023 shares issued and outstanding at December 31, 2018 and September 30, 2018, respectively

 

 

8,478

 

 

 

8,460

 

 

 

8,457

 

Additional paid-in capital

 

 

177,994

 

 

 

177,565

 

 

 

177,421

 

Retained earnings

 

 

48,009

 

 

 

39,562

 

 

 

36,244

 

Accumulated other comprehensive income (loss)

 

 

131

 

 

 

(2,378

)

 

 

(3,691

)

Total Shareholders’ Equity

 

 

234,612

 

 

 

223,209

 

 

 

221,835

 

Total Liabilities and Shareholders' Equity

 

$

2,248,899

 

 

$

2,077,981

 

 

$

2,044,280

 

8


CONSOLIDATED STATEMENTS OF INCOME (Unaudited):

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans and leases

 

$

22,573

 

 

$

17,715

 

 

$

65,865

 

 

$

41,125

 

Interest on interest-bearing balances

 

 

23

 

 

 

26

 

 

 

80

 

 

 

52

 

Interest on federal funds sold

 

 

506

 

 

 

78

 

 

 

704

 

 

 

399

 

Interest and dividends on investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and government agencies

 

 

701

 

 

 

965

 

 

 

2,433

 

 

 

2,601

 

State and political subdivision obligations, tax-exempt

 

 

495

 

 

 

636

 

 

 

1,698

 

 

 

1,695

 

Other securities

 

 

215