Toggle SGML Header (+)


Section 1: 8-K (8-K)

mpb-8k_20180630.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):  July 25, 2018

 

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 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 July 27, 2018, Mid Penn Bancorp, Inc. (the “Corporation”) issued a press release discussing its financial results for the quarter ended June 30, 2018.  Attached hereto as Exhibit 99.1 is a copy of the Corporation’s press release dated July 27, 2018.

ITEM 8.01OTHER EVENTS

 

On July 25, 2018, the Board of Directors of the Corporation declared a quarterly cash dividend of $0.15 per share of common stock payable August 27, 2018 to shareholders of record as of August 8, 2018.

ITEM 9.01FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits.

99.1Press release, dated July 27, 2018, 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:  July 27, 2018

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 SECOND QUARTER 2018 EARNINGS AND

DECLARES QUARTERLY DIVIDEND

 

July 27, 2018 – Millersburg, PA – Mid Penn Bancorp, Inc. (“Mid Penn”) (NASDAQ: MPB), the parent company of Mid Penn Bank (the “Bank”), today reported net income (earnings) for the quarter ended June 30, 2018, of $2,779,000 or $0.45 per common share basic and diluted, compared to earnings of $2,345,000 or $0.55 per common share basic and diluted for the quarter ended June 30, 2017. Earnings for the six months ended June 30, 2018, were $3,783,000 or $0.63 per common share basic and diluted, compared to earnings of $4,339,000 or $1.02 per common share basic and diluted for the six months ended June 30, 2017.

 

Mid Penn also reported that its Board of Directors, at a meeting held on July 25, 2018, declared a dividend per common share of $0.15 payable on August 27, 2018 to shareholders of record as of August 8, 2018.

 

The results for the three and six months ended June 30, 2018 and 2017 included merger and acquisition expenses resulting from the acquisition of The Scottdale Bank & Trust Company (“Scottdale”), which was announced during the first quarter of 2017 and legally closed on January 8, 2018.  For the three and six months ended June 30, 2018, the merger expenses also included costs associated with the pending merger with First Priority Financial Corp. (“First Priority”), which was announced on January 16, 2018 and has since received all required regulatory and shareholder approvals and is expected to close during the third quarter of 2018.  Please refer to the discussion under “Merger and Acquisition Activities” for more information on Mid Penn’s closed acquisition of Scottdale and pending merger with First Priority.  Adjusted earnings, when excluding the after-tax impact of the merger expenses (with such adjusted earnings being a non-GAAP measure), were $3,004,000 or $0.49 per share basic and diluted for the three months ended June 30, 2018, compared to adjusted earnings for the three months ended June 30, 2017 of $2,359,000 or $0.56 per share basic and diluted.  For the six months ended June 30, 2018, adjusted earnings were $5,428,000 or $0.90 per common share basic and diluted, compared to adjusted earnings of $4,545,000 or $1.07 per share basic and diluted for the six months ended June 30, 2017.  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 June 30, 2018 and 2017 and other periods.

 

In addition to the merger expenses, Mid Penn recorded an additional non-cash expense of $225,000 and $449,000 for the three and six months ended June 30, 2018, respectively, related to the amortization of the core deposit intangible asset which was recorded as a result of the Scottdale acquisition.  

 

Mid Penn’s tangible book value per common share, a non-GAAP measure that is regularly reported in the banking industry, favorably increased to $18.58 as of June 30, 2018, compared to $16.82 as of December 31, 2017, and $16.82 as of June 30, 2017.  Book value per share, the most directly comparable GAAP measure to tangible book value per common share, favorably increased to $23.15 as of June 30, 2018 compared to $17.85 at December 31, 2017, and $17.86 at June 30, 2017.

 

Mid Penn also reported total assets of $1,415,647,000 as of June 30, 2018, reflecting an increase of $245,293,000 or 21 percent compared to total assets of $1,170,354,000 as of December 31, 2017.  Total assets as of June 30, 2018 reflect an increase of $303,771,000 or 27 percent compared to total assets of $1,111,876,000 as of June 30, 2017. Asset growth during the first half of 2018 includes the acquired loans, investments, cash, facilities, goodwill and core deposit intangible recorded from the legal closing of the Scottdale transaction.

 

In general, the results of operations and the financial condition as of and for the periods ended June 30, 2018, as compared to prior periods and certain period-end dates  in 2017, have been materially impacted by the January 8, 2018 acquisition of Scottdale and pending acquisition of First Priority.

 

1


MERGER & ACQUISITION ACTIVITIES

 

On January 8, 2018, Mid Penn announced the successful completion of the legal acquisition of The Scottdale Bank & Trust Company, pursuant to which each share of Scottdale common stock issued and outstanding immediately prior to January 8, 2018 converted into the right to receive either (i) $1,166 in cash without interest, or (ii) 38.88 shares of Mid Penn common stock. As a result of the elections of the Scottdale shareholders, Mid Penn issued 1,878,827 shares of Mid Penn common stock and cash of $2,790,000 in merger consideration. Mid Penn also recorded goodwill of $19,189,000 and a core deposit intangible asset of $4,940,000 as a result of the Scottdale acquisition.  The assets purchased and liabilities assumed in the Scottdale acquisition were recorded at their estimated fair values at the time of the legal closing, and may be adjusted for up to one year subsequent to the acquisition.  

 

Additionally, on January 16, 2018, Mid Penn entered into an Agreement and Plan of Merger (the “Merger Agreement”) with First Priority Financial Corp. pursuant to which First Priority will merge with and into Mid Penn (the “Merger”), with Mid Penn being the surviving corporation in the Merger. The acquisition will expand Mid Penn’s footprint into southeastern Pennsylvania, including Chester, Berks, Montgomery, and Bucks counties. On a pro forma basis, the combined company will have over $2 billion in total assets. The parties have obtained the required regulatory and shareholder approvals to move forward with the combination and related integration activities contemplated by the Merger Agreement.  The transaction is expected to close during the third quarter of 2018.

 

PRESIDENT’S STATEMENT

 

Our core banking activities reflect continued solid performance, with loans, deposits, and trust assets under management all experiencing double-digit percentage increases since a year ago, while our financial results for the three and six months ended June 30, 2018 reflect the continued growth of our franchise, including the transaction costs associated with both our successful completion of the acquisition of The Scottdale Bank & Trust Company, and our pending merger with First Priority Financial Corp.  As we recently reported, we have now received all the required regulatory and shareholder approvals needed to move forward with our merger of First Priority, with legal merger expected during the third quarter.  Our teams at both Mid Penn and First Priority have developed and are prepared to implement extensive integration plans to ensure a smooth transition as we welcome First Priority’s customers, communities, and employees to Mid Penn.  This merger provides us with the opportunity to build upon our shared values of customer-focused relationship management with expanded capabilities in the new and dynamic markets of southeastern Pennsylvania.

 

During the second quarter, we also completed the full integration of our Scottdale acquisition that closed during the first quarter, ensuring that the products, services, and systems supporting our offices and customers in that market are in full alignment with Mid Penn’s community banking operating profile.  We also began to reposition the Scottdale assets from primarily short-term investments to an increasing volume of higher-yielding loans and investments, and continue to work towards realizing the growth and increasing profitability potential of this acquisition.

 

We are also pleased to report that our Board of Directors declared a quarterly dividend of $0.15 per common share to ensure that, as we continue to realize favorable growth and increases in both our net interest income and fee-based revenues, we consistently provide a cash return to our shareholders.

 

We remain confident that our core banking capabilities, when leveraged across our expanding franchise, will continue to strengthen our financial condition and performance, and support increased value for our shareholders.

 

OPERATING RESULTS

 

Net Interest Income and Net Interest Margin

 

Net interest income was $11,414,000 for the three months ended June 30, 2018, an increase of $2,004,000 or 21 percent compared to net interest income of $9,410,000 for the three months ended June 30, 2017. Through the first six months of 2018, net interest income was $22,292,000, an increase of $3,707,000 or 20 percent compared to net interest income of $18,585,000 for the same period in 2017.  The primary source of the revenue growth was an increase in interest and fees on loans, as total loans increased $174,172,000 or over 20 percent since June 30, 2017.  Of this substantial year-over-year increase in total loans outstanding, $108,941,000 was from organic loan growth, and $65,231,000 reflects the balance, as of June 30, 2018, of loans acquired from Scottdale.

 

For the three months ended June 30, 2018, Mid Penn’s tax-equivalent net interest margin was 3.60% compared to 3.74% for the three months ended June 30, 2017. For the six months ended June 30, 2018, Mid Penn’s tax-equivalent net interest margin was 3.53% versus 3.78% for the six months ended June 30, 2017.  The decrease in the net interest margin year over year was attributed primarily to an increase in the cost of funds and a lower yield earned on the loan portfolio. The cost of funds increased to 0.85% during the first half of 2018, versus 0.68% for the first half of 2017, primarily as a result of the impact of the Federal Open Market Committee (“FOMC”) rate increases in the past twelve months.

 


2


Noninterest Income

 

During the three months ended June 30, 2018, noninterest income was $1,559,000 reflecting an increase of $197,000 or 14 percent compared to noninterest income of $1,362,000 for the three months ended June 30, 2017.  For the six months ended June 30, 2018, noninterest income totaled $3,206,000, an increase of $408,000 or 15 percent, compared to noninterest income of $2,798,000 for the same period in 2017.

 

Income from fiduciary activities was $526,000 for the six months ended June 30, 2018, an increase of $130,000 or 33 percent compared to fiduciary income of $396,000 for the six months ended June 30, 2017. These additional revenues were attributed to continued growth in trust assets under management as a result of successful business development efforts by Mid Penn’s wealth management team.

 

For the six months ended June 30, 2018, service charges on deposits were $425,000, an increase of $46,000 or 12 percent, compared to service charges of $379,000 for the six months ended June 30, 2017.  This increase was driven by an increase in the volume of transactional deposit accounts, including acquired deposit accounts from the Scottdale acquisition, and an increase in charges collected.

 

Net gains on sales of securities were $102,000 for the six months ended June 30, 2018, an increase of $82,000 compared to net gains on sales of securities of $20,000 during the same period of 2017. Some investment securities acquired from Scottdale were subsequently sold to ensure the overall portfolio was in greater alignment with Mid Penn’s investment management objectives.

 

ATM debit card interchange income was $591,000 for the six months ended June 30, 2018, an increase of $135,000 or 30 percent compared to interchange income of $456,000 for the same period in 2017. The additional income is a result of an increased volume of checking accounts, and an increase in Mid Penn Bank ATM and debit card activity, which included an increase in transaction volume resulting from accounts added from the Scottdale acquisition.

 

Other income was $492,000 for the six months ended June 30, 2018, an increase of $99,000 or 25 percent compared to other income of $393,000 for the same period of 2017.  The increase in other income was primarily driven by increases in letter of credit renewal fees and other service fees.

 

Mortgage banking income was $361,000 for the six months ended June 30, 2018, a decrease of $55,000 or 13 percent compared to the six months ended June 30, 2017. Rising longer-term interest rates have resulted in a lower volume of mortgage refinance activity in the first half of 2018 when compared to the same period in 2017.

 

Noninterest Expense

 

During the three months ended June 30, 2018, noninterest expenses totaled $9,742,000, an increase of $2,184,000 or 29 percent compared to noninterest expenses of $7,558,000 for the three months ended June 30, 2017.  Noninterest expense for the six months ended June 30, 2018 totaled $20,925,000, and increase of $5,565,000 or 36 percent compared to noninterest expenses of $15,360,000 for the first six months of 2017.  

 

During the first half of 2018, merger and acquisition expenses of $1,916,000 were incurred in connection with (i) the completed acquisition of Scottdale on January 8, 2018 and the subsequent systems conversion activities, with such expenses including severance costs, legal and professional fees, investment banking fees, and information technology costs; and (ii) the planned acquisition of First Priority, with such expenses including primarily investment banking fees, merger-related legal expenses, and professional fees related to the preparation and filing of merger documents.  Merger and acquisition expenses of $224,000 recorded during the first half of 2017 were investment banking and legal fees related to the initial stages of the Scottdale acquisition.

 

Salaries and employee benefits expense increased $1,217,000 or 15 percent during the six months ended June 30, 2018, versus the same period in 2017, with the increase attributable to (i) the retail staff additions at the five retail locations added through the Scottdale acquisition and the opening of the Halifax, PA branch, all effective January 8, 2018, and (ii) the addition of commercial lending personnel and credit support staff in alignment with Mid Penn’s core banking growth.

 

Occupancy expenses increased $426,000 or 34 percent during the first six months of 2018 compared to the same period in 2017.  Similarly, equipment expense increased $201,000 or 27 percent during the first six months of 2018 compared to the first six months of 2017.  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 above-noted Scottdale market and Halifax, PA branch offices, and (ii) depreciation and occupancy costs related to Mid Penn’s move to new administrative facilities in the Capital Region.  

 

3


FDIC assessment expense was $321,000 for the six months ended June 30, 2018, a decrease of $67,000 or 17 percent compared to $388,000 for the six months ended June 30, 2017.  As a result of the Scottdale acquisition and successful workouts of non-performing assets, Mid Penn has reported more favorable capital and asset quality ratios, resulting in a lower FDIC Assessment rate for the second quarter of 2018.

 

Legal and professional fees for the six months ended June 30, 2018 increased by $114,000 or 31 percent compared to the same period in 2017 due to increased third-party services for wealth management, audit, and public relations activities.

 

Marketing and advertising expense increased 76 percent, from $238,000 for the six months ended June 30, 2017 to $419,000 for the same period in 2018.  The increased costs were a result of increased marketing and branding initiatives related to the Scottdale acquisition, and market-specific business development promotions across Mid Penn’s footprint.  

 

Software licensing costs were $1,026,000 during the six months ended June 30, 2018, an increase of $327,000 or 47 percent compared to $699,000 for the six months ended June 30, 2017. The increase is a result of additional costs to license all the Scottdale locations and new branches, upgrades to internal systems to enhance data management and storage capabilities given the larger company profile, and increases in certain core processing fees as our customer base and transaction volume continues to grow.

 

Intangible amortization increased from $53,000 during the six months ended June 30, 2017 to $496,000 during the same period in 2018. As a result of the Scottdale acquisition, Mid Penn added a core deposit intangible (CDI) asset of $4,940,000 which will amortize using the sum of the years’ digit method over a ten year period.  The resulting additional amortization recorded during the first half of 2018, related to the Scottdale CDI, was $449,000.

 

Other expense was $3,394,000 during the six months ended June 30, 2018, an increase of $1,060,000 or 45 percent compared to other expense of $2,334,000 for the same period in 2017.  Several categories within other expense drove this overall increase, including but not limited to: (i) increases to stationary and supplies, printing, postage, and insurance costs as a result of additional branches added since June 30, 2017;  (ii) increased loan collection costs and foreclosed real estate expenses; and (iii) higher subscription, travel and lodging, and employee relations costs, as both the Scottdale acquisition and organic growth have increased the organization’s geographic profile and employee base.  

 

FINANCIAL CONDITION

 

Loans

 

Total loans at June 30, 2018 were $1,036,479,000 compared to $910,404,000 at December 31, 2017, an increase of $126,075,000 or over 13 percent since year-end 2017.  As a result of the Scottdale acquisition, on January 8, 2018, Mid Penn added to its loan portfolio, primarily within the residential mortgage and commercial real estate mortgage categories.  As of June 30, 2018, the outstanding balance of Scottdale acquired loans was $65,231,000.  The majority of Mid Penn’s organic loan growth in legacy markets continues to be commercial loans, including both commercial and industrial financing, and commercial real estate credits.

 

Deposits

 

Total deposits increased $212,950,000 or 21 percent, from $1,023,568,000 at December 31, 2017 to $1,236,518,000 at June 30, 2018.  The increase in total deposits since year end 2017 was substantially from the lower-cost deposits assumed through the acquisition of Scottdale during the first quarter of 2018.  

 

Investments

 

During the first half of 2018, additional held-to-maturity securities were purchased, resulting in the held-to-maturity securities increasing over 50 percent to $153,321,000 as of June 30, 2018 as compared to $101,356,000 as of December 31, 2017 (with such investments recorded at amortized cost).  Mid Penn’s total available-for-sale securities portfolio increased $18,226,000 or 19 percent, from $93,465,000 at December 31, 2017 to $111,691,000 at June 30, 2018. The increase to the investment securities during the first half of 2018 was primarily investments acquired from Scottdale, with some acquired available-for-sale securities being sold after the merger date and the proceeds reinvested in held-to-maturity securities and certain portfolio segments in alignment with Mid Penn’s investment management objectives.  

 


4


Capital

 

Shareholders’ equity increased by $66,072,000 or 87 percent, from $75,703,000 at December 31, 2017 to $141,775,000 at June 30, 2018. The increase during the six months ended June 30, 2018 was attributed to (i) the issuance of 1,878,827 shares of Mid Penn common stock in connection with the acquisition of Scottdale, and (ii) growth in retained earnings through year-to-date net income.  These increases were partially offset by other comprehensive losses primarily due to the after-tax impact of the unrealized reduction in market value within the available-for-sale investment portfolio since December 31, 2017.  Regulatory capital ratios for both Mid Penn and the Bank exceeded regulatory “well-capitalized” levels at both June 30, 2018 and 2017.

 

ASSET QUALITY

 

The allowance for loan and lease losses as a percentage of total loans was 0.79% at June 30, 2018, compared to 0.84% at December 31, 2017, and 0.89% at June 30, 2017. Loan loss reserves as a percentage of nonperforming loans were 90% at June 30, 2018, compared to 68% at December 31, 2017, and 134% at June 30, 2017. The ratios as of June 30, 2018, were affected by the addition of the Scottdale acquired loans, which, in accordance with purchase accounting principles, were recorded at fair value at the time of acquisition with no related allowance for loan losses.  Total nonperforming assets were $10,055,000 at June 30, 2018, compared to $11,308,000 at December 31, 2017 and $5,775,000 at June 30, 2017. The ratio of nonperforming assets to total loans and other real estate was 0.97% as of June 30, 2018, compared to 1.24% as of December 31, 2017, and 0.67% as of June 30, 2017. The increase in nonperforming assets was primarily due to two larger loan relationships being placed on nonaccrual status.

For the six months ended June 30, 2018, Mid Penn had net recoveries of $458,000 compared to net recoveries of $305,000 during the same period of 2017.  The primary reason for this favorable net recovery amount was that, during the second quarter of 2018, Mid Penn recovered $777,000 of principal from the successful workout of a commercial real estate relationship that originally had a partial charge-off in 2009.  Similarly, during the first quarter of 2017, Mid Penn recovered $318,000 of principal, as well as collected $279,000 in interest income, from the successful workout of a different commercial real estate relationship that was partially charged-off in 2010.  

Management performs a monthly evaluation of the adequacy of the loan and lease loss allowance, and based on this evaluation, which includes consideration of the substantial recovery realized in the second quarter of 2018, no loan loss provision was recorded for the three months ended June 30, 2018.  Mid Penn had recorded a loan loss provision of $100,000 for the three months ended June 30, 2017. During the six months ended June 30, 2018, the provision for loan and lease losses was $125,000 compared to $225,000 for the six months ended June 30, 2017.  Management believes, based on information currently available, that the allowance for loan and lease losses of $8,189,000 is adequate as of June 30, 2018 to cover probable and estimated loan losses in the portfolio.


5


FINANCIAL HIGHLIGHTS (Unaudited):

(Dollars in thousands, except per share data)

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

 

 

2018

 

 

2018

 

 

2017

 

 

2017

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

1,415,647

 

 

$

1,391,217

 

 

$

1,170,354

 

 

$

1,153,373

 

 

$

1,111,876

 

Total Loans

 

 

1,036,479

 

 

 

1,007,138

 

 

 

910,404

 

 

 

877,386

 

 

 

862,307

 

Total Deposits

 

 

1,236,518

 

 

 

1,212,423

 

 

 

1,023,568

 

 

 

1,026,675

 

 

 

987,468

 

Total Equity

 

 

141,775

 

 

 

139,124

 

 

 

75,703

 

 

 

77,391

 

 

 

75,636

 

Book Value per Share

 

 

23.15

 

 

 

22.72

 

 

 

17.85

 

 

 

18.25

 

 

 

17.86

 

Tangible Book Value per Share *

 

 

18.58

 

 

 

18.21

 

 

 

16.82

 

 

 

17.22

 

 

 

16.82

 

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

 

OPERATING HIGHLIGHTS (Unaudited):

 

Three Months Ended

 

 

Six Months Ended

 

(Dollars in thousands, except per share data)

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

 

June 30,

 

 

 

2018

 

 

2018

 

 

2017

 

 

2017

 

 

2017

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest Income

 

$

11,414

 

 

$

10,878

 

 

$

9,487

 

 

$

9,516

 

 

$

9,410

 

 

$

22,292

 

 

$

18,585

 

Net Income

 

$

2,779

 

 

$

1,004

 

 

$

501

 

 

$

2,249

 

 

$

2,345

 

 

$

3,783

 

 

$

4,339

 

Basic Earnings per Common Share

 

$

0.45

 

 

$

0.17

 

 

$

0.12

 

 

$

0.53

 

 

$

0.55

 

 

$

0.63

 

 

$

1.02

 

Adjusted Earnings per Common Share *

 

$

0.49

 

 

$

0.41

 

 

$

0.43

 

 

$

0.59

 

 

$

0.56

 

 

$

0.90

 

 

$

1.07

 

Return on Average Equity

 

 

7.90

%

 

 

0.30

%

 

 

2.58

%

 

 

11.61

%

 

 

12.74

%

 

 

5.34

%

 

 

12.05

%

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

CAPITAL RATIOS (Unaudited):

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

 

 

2018

 

 

2018

 

 

2017

 

 

2017

 

 

2017

 

Leverage Ratio

 

8.4%

 

 

8.5%

 

 

6.5%

 

 

6.8%

 

 

6.8%

 

Common Tier 1 Capital (to Risk Weighted Assets)

 

11.4%

 

 

11.6%

 

 

8.4%

 

 

8.9%

 

 

8.7%

 

Tier 1 Capital (to Risk Weighted Assets)

 

11.4%

 

 

11.6%

 

 

8.4%

 

 

8.9%

 

 

8.7%

 

Total Capital (to Risk Weighted Assets)

 

13.9%

 

 

14.1%

 

 

11.3%

 

 

10.7%

 

 

10.5%

 

 

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 and the adjustment of the deferred tax asset 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

  

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

(Dollars in thousands, except per share data)

 

2018

 

 

2018

 

 

2017

 

 

2017

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholder's Equity

 

$

141,775

 

 

$

139,124

 

 

$

75,703

 

 

$

77,391

 

 

$

75,636

 

Less: Goodwill

 

 

23,107

 

 

 

22,528

 

 

 

3,918

 

 

 

3,918

 

 

 

3,918

 

Less: Core Deposit and Other Intangibles

 

 

4,879

 

 

 

5,126

 

 

 

434

 

 

 

460

 

 

 

486

 

Tangible Equity

 

$

113,789

 

 

$

111,470

 

 

$

71,351

 

 

$

73,013

 

 

$

71,232

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares Issued and Outstanding

 

 

6,124,517

 

 

 

6,122,717

 

 

 

4,242,216

 

 

 

4,240,754

 

 

 

4,235,237

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible Book Value per Share

 

$

18.58

 

 

$

18.21

 

 

$

16.82

 

 

$

17.22

 

 

$

16.82

 

 

Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses

 

Three Months Ended

 

 

Six Months Ended

 

(Dollars in thousands, except per share data)

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

 

June 30,

 

 

 

2018

 

 

2018

 

 

2017

 

 

2017

 

 

2017

 

 

2018

 

 

2017

 

Net Income

 

$

2,779

 

 

$

1,004

 

 

$

501

 

 

$

2,249

 

 

$

2,345

 

 

$

3,783

 

 

$

4,339

 

Plus: Merger and Acquisition Expenses

 

 

222

 

 

 

1,694

 

 

 

152

 

 

 

243

 

 

 

14

 

 

 

1,916

 

 

 

224

 

Less: Tax Effect of Merger and Acquisition Expenses

 

 

(3

)

 

 

274

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

271

 

 

 

18

 

Plus: Adjustment of Deferred Tax Asset

 

 

-

 

 

 

-

 

 

 

1,169

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net Income Excluding Non-Recurring Expenses

 

$

3,004

 

 

$

2,424

 

 

$

1,820

 

 

$

2,492

 

 

$

2,359

 

 

$

5,428

 

 

$

4,545

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding - denominator

 

 

6,122,757

 

 

 

5,974,949

 

 

 

4,240,802

 

 

 

4,237,965

 

 

 

4,234,291

 

 

 

6,049,261

 

 

 

4,233,802

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses

 

$

0.49

 

 

$

0.41

 

 

$

0.43

 

 

$

0.59

 

 

$

0.56

 

 

$

0.90

 

 

$

1.07

 

 

7


CONSOLIDATED BALANCE SHEETS (Unaudited):

(Dollars in thousands, except share data)

 

June 30, 2018

 

 

December 31, 2017

 

 

June 30, 2017

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

25,436

 

 

$

19,795

 

 

$

25,246

 

Interest-bearing balances with other financial institutions

 

 

4,775

 

 

 

3,028

 

 

 

2,813

 

Federal funds sold

 

 

9,196

 

 

 

691

 

 

 

1,120

 

Total cash and cash equivalents

 

 

39,407

 

 

 

23,514

 

 

 

29,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available for sale, at fair value

 

 

111,691

 

 

 

93,465

 

 

 

111,353

 

Investment securities held to maturity, at amortized cost

 

 

 

 

 

 

 

 

 

 

 

 

(fair value $150,016, $100,483, and $71,199)

 

 

153,321

 

 

 

101,356

 

 

 

71,096

 

Loans held for sale

 

 

1,185

 

 

 

1,040

 

 

 

2,369

 

Loans and leases, net of unearned interest

 

 

1,036,479

 

 

 

910,404

 

 

 

862,307

 

Less:  Allowance for loan and lease losses

 

 

(8,189

)

 

 

(7,606

)

 

 

(7,713

)

Net loans and leases

 

 

1,028,290

 

 

 

902,798

 

 

 

854,594

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank premises and equipment, net

 

 

23,905

 

 

 

16,168

 

 

 

11,190

 

Cash surrender value of life insurance

 

 

13,171

 

 

 

13,042

 

 

 

12,911

 

Restricted investment in bank stocks

 

 

2,765

 

 

 

4,384

 

 

 

3,985

 

Foreclosed assets held for sale

 

 

912

 

 

 

189

 

 

 

-

 

Accrued interest receivable

 

 

5,372

 

 

 

4,564

 

 

 

3,991

 

Deferred income taxes

 

 

2,540

 

 

 

1,888

 

 

 

3,396

 

Goodwill

 

 

23,107

 

 

 

3,918

 

 

 

3,918

 

Core deposit and other intangibles, net

 

 

4,879

 

 

 

434

 

 

 

486

 

Other assets

 

 

5,102

 

 

 

3,594

 

 

 

3,408

 

Total Assets

 

$

1,415,647

 

 

$

1,170,354

 

 

$

1,111,876

 

LIABILITIES & SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

207,014

 

 

$

163,714

 

 

$

140,837

 

Interest-bearing demand

 

 

349,109

 

 

 

349,241

 

 

 

339,057

 

Money Market

 

 

273,214

 

 

 

246,220

 

 

 

240,107

 

Savings

 

 

171,845

 

 

 

62,770

 

 

 

63,232

 

Time

 

 

235,336

 

 

 

201,623

 

 

 

204,235

 

Total Deposits

 

 

1,236,518

 

 

 

1,023,568

 

 

 

987,468

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term borrowings

 

 

 

 

 

34,611

 

 

 

21,468

 

Long-term debt

 

 

12,241

 

 

 

12,352

 

 

 

13,467

 

Subordinated debt

 

 

17,342

 

 

 

17,338

 

 

 

7,419

 

Accrued interest payable

 

 

1,186

 

 

 

645

 

 

 

788

 

Other liabilities

 

 

6,585

 

 

 

6,137

 

 

 

5,630

 

Total Liabilities

 

 

1,273,872

 

 

 

1,094,651

 

 

 

1,036,240

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

6,124,517, 4,242,216, and 4,234,280 shares issued and outstanding at

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2018, December 31, 2017 and at March 31, 2017, respectively

 

 

6,125

 

 

 

4,242

 

 

 

4,235

 

Additional paid-in capital

 

 

103,498

 

 

 

40,970

 

 

 

40,775

 

Retained earnings

 

 

35,386

 

 

 

32,565

 

 

 

31,637

 

Accumulated other comprehensive loss

 

 

(3,234

)

 

 

(2,074

)

 

 

(1,011

)

Total Shareholders’ Equity

 

 

141,775

 

 

 

75,703

 

 

 

75,636

 

Total Liabilities and Shareholders' Equity

 

$

1,415,647

 

 

$

1,170,354

 

 

$

1,111,876

 

8


CONSOLIDATED STATEMENTS OF INCOME (Unaudited):

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

 

2018

 

 

 

2017

 

 

 

2018

 

 

 

2017

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans and leases

 

$

12,073

 

 

$

9,949

 

 

$

23,410

 

 

$

19,651

 

Interest on interest-bearing balances

 

 

17

 

 

 

5

 

 

 

26

 

 

 

7

 

Interest on federal funds sold

 

 

153

 

 

 

23

 

 

 

321

 

 

 

74

 

Interest and dividends on investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and government agencies

 

 

884

 

 

 

574

 

 

 

1,636

 

 

 

1,019

 

State and political subdivision obligations, tax-exempt

 

 

517

 

 

 

264

 

 

 

1,059

 

 

 

580

 

Other securities

 

 

76

 

 

 

64

 

 

 

248

 

 

 

107

 

Total Interest Income

 

 

13,720

 

 

 

10,879

 

 

 

26,700

 

 

 

21,438

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

1,997

 

 

 

1,277

 

 

 

3,777

 

 

 

2,481

 

Interest on short-term borrowings

 

 

 

 

 

13

 

 

 

12

 

 

 

13

 

Interest on long-term and subordinated debt

 

 

309

 

 

 

179

 

 

 

619

 

 

 

359

 

Total Interest Expense

 

 

2,306

 

 

 

1,469

 

 

 

4,408

 

 

 

2,853

 

Net Interest Income

 

 

11,414

 

 

 

9,410

 

 

 

22,292

 

 

 

18,585

 

PROVISION FOR LOAN AND LEASE LOSSES

 

 

 

 

 

100

 

 

 

125

 

 

 

225

 

Net Interest Income After Provision for Loan and Lease Losses

 

 

11,414

 

 

 

9,310

 

 

 

22,167

 

 

 

18,360

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from fiduciary activities

 

 

286

 

 

 

200

 

 

 

526

 

 

 

396

 

Service charges on deposits

 

 

222

 

 

 

174

 

 

 

425

 

 

 

379

 

Net gain on sales of investment securities

 

 

4

 

 

 

12

 

 

 

102

 

 

 

20

 

Earnings from cash surrender value of life insurance

 

 

65

 

 

 

66

 

 

 

129

 

 

 

131

 

Mortgage banking income

 

 

205

 

 

 

225

 

 

 

361

 

 

 

416

 

ATM debit card interchange income

 

 

326

 

 

 

232

 

 

 

591

 

 

 

456

 

Merchant services income

 

 

93

 

 

 

92

 

 

 

171

 

 

 

166

 

Net gain on sales of SBA loans

 

 

152

 

 

 

157

 

 

 

409

 

 

 

441

 

Other income

 

 

206

 

 

 

204

 

 

 

492

 

 

 

393

 

Total Noninterest Income

 

 

1,559

 

 

 

1,362

 

 

 

3,206

 

 

 

2,798

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

4,542

 

 

 

4,159

 

 

 

9,606

 

 

 

8,389

 

Occupancy expense, net

 

 

870

 

 

 

593

 

 

 

1,667

 

 

 

1,241

 

Equipment expense

 

 

544

 

 

 

370

 

 

 

952

 

 

 

751

 

Pennsylvania bank shares tax expense

 

 

171

 

 

 

160

 

 

 

342

 

 

 

330

 

FDIC Assessment

 

 

93

 

 

 

194

 

 

 

321

 

 

 

388

 

Legal and professional fees

 

 

256

 

 

 

189

 

 

 

480

 

 

 

366

 

Marketing and advertising expense

 

 

230

 

 

 

131

 

 

 

419

 

 

 

238

 

Software licensing

 

 

512

 

 

 

370

 

 

 

1,026

 

 

 

699

 

Telephone expense

 

 

156

 

 

 

133

 

 

 

303

 

 

 

259

 

Loss on sale or write-down of foreclosed assets

 

 

1

 

 

 

6

 

 

 

3

 

 

 

88

 

Intangible amortization

 

 

248

 

 

 

24

 

 

 

496

 

 

 

53

 

Merger and acquisition expense

 

 

222

 

 

 

14

 

 

 

1,916

 

 

 

224