Mid Penn Bancorp, Inc. Reports Second Quarter Earnings and Declares Dividend


HARRISBURG, Pa., July 27, 2022 (GLOBE NEWSWIRE) -- Mid Penn Bancorp, Inc. (NASDAQ: MPB) (“Mid Penn”), the parent company of Mid Penn Bank (the “Bank”) and MPB Financial Services, LLC, today reported net income available to common shareholders (“earnings”) for the quarter ended June 30, 2022 of $12.3 million, or $0.77 per common share basic and diluted.

Key Highlights in the Second Quarter of 2022

  • Earnings increased $898 thousand and $0.06 per common share diluted to $12.3 million, or $0.77, respectively, for the quarter ended June 30, 2022 compared to the quarter ended March 31, 2022.

  • Tax equivalent net interest margin increased to 3.45% from 3.21% in the prior quarter and 3.34% in the same period prior year.

  • Loans grew 8% (annualized) during the three months ended June 30, 2022 from the first quarter of 2022. Loans, excluding Payroll Protection Program (“PPP”) loans (1), grew 11% (annualized) during the three months ended June 30, 2022 from the first quarter of 2022.

  • Asset quality continues to remain strong with both nonperforming loans to total loans and nonperforming assets to total loans plus other real estate at 25 basis points (“bp”) at June 30, 2022.

  • Book value per common share increased to $31.23 and tangible book value per share (1) increased to $23.57 at June 30, 2022, compared to $30.96 and $23.31, respectively, at March 31, 2022.

“The team at Mid Penn is proud to deliver these second quarter results to our shareholders. The second quarter was our first full quarter after the completion of the Riverview acquisition and resulting customer conversion and branch optimization plan and it was also the first quarter in the last 8 with very little impact from PPP loans,” said Rory G. Ritrievi, President and CEO. “The quarter was successful due to strong, high quality and profitable organic loan growth of 11% annualized, smart balance sheet management, continued strength in asset quality and of course a healthy reduction in expenses. Within the quarter, we saw a 7.6% improvement in net interest margin, a 12.2% improvement in ROA, a 6.4% improvement in ROE, a 6.0% improvement in ROTCE, a 7.3% improvement in our efficiency ratio(1) and an increase in the allowance of loan and lease losses to nonperforming assets to 211.7%. Those trends are all encouraging as we head into the last half of the year.”

With this successful quarter, the Board is pleased to announce a quarterly cash dividend of $0.20 per share of common stock was declared at its meeting on July 27, 2022, payable on August 22, 2022 to shareholders of record as of August 10, 2022.

(1) Non-GAAP financial measure. Refer to the calculation on the section titled “Reconciliation of Non-GAAP Measures” at the end of this document.

Net Interest Income and Average Balance Sheet

For the three months ended June 30, 2022, net interest income was $35.4 million compared to net interest income of $34.4 million for the three months ended March 31, 2022 and $26.9 million for the three months ended June 30, 2021. The tax-equivalent net interest margin for the three months ended June 30, 2022 was 3.45% versus 3.21% for the first quarter of 2022 and 3.34% for the second quarter of 2021, a 24 and 11 bp, respectively, increase compared to the prior quarter and the same period in 2021.The linked quarter increase was the result of a 22 bp increase in the yield on interest-earning assets and a 4 bp decrease in the rate on interest-bearing liabilities, partially offset by a $236.5 million decrease in average interest-earning assets. The increase in the yield on interest-earning assets was the result of a combination of excess cash being re-deployed into higher yielding investment securities and the increase in fed fund rates during the second quarter of 2022. The decrease in the rate on interest-bearing liabilities was primarily the result of a lag in the repricing of deposits as well as the strategic decision to allow higher cost time deposits obtained through the Riverview acquisition to run-off.

For the six months ended June 30, 2022, net interest income was $69.8 million, a $17.6 million, or 33.8%, increase compared to net interest income of $52.2 million for the six months ended June 30, 2021. The year-over-year increase in net interest income was positively impacted by (i) the acquisition of Riverview; (ii) the deployment of Fed Funds into higher yielding investment securities since September 30, 2021; (iii) interest and fees from core loan growth since June 30, 2021; and (iv) reduced interest expense due to the lower cost of deposits in the six months ended June 30, 2022 when compared to the same period in 2021. The tax-equivalent net interest margin for the six months ended June 30, 2022 was 3.33%, a 7 bp decrease compared to 3.40% for six months ended June 30, 2021. The decrease was primarily the result of a 28 bp decrease in the yield on interest-earning assets. The overall decrease in net interest margin for the six months ended June 30, 2022 was driven by the reduction of PPP fees recognized during the first six months of 2021, partially offset by the improvement in cost of interest-bearing liabilities.

The three months ended June 30, 2022 included the recognition of $652 thousand of PPP loan processing fees, a decrease of $5.6 million compared to $6.2 million of PPP loan processing fees recognized during the same period in 2021. These PPP fees are recognized as interest income over the term of the respective loan, or sooner if the loans are forgiven by the U.S. Small Business Administration (“SBA”), or the borrower otherwise pays down principal prior to the loan’s stated maturity. The six months ended June 30, 2022 included the recognition of $3.6 million of PPP loan processing fees, a decrease of $7.7 million compared to $11.3 million of PPP loan processing fees recognized during the same period in 2021. These PPP fees are recognized as interest income over the term of the respective loan, or sooner if the loans are forgiven by the U.S. Small Business Administration (“SBA”), or the borrower otherwise pays down principal prior to the loan’s stated maturity. As of June 30, 2022, there was $171 thousand in deferred fees related to PPP loans that we anticipate will be recognized during the third quarter of 2022.

Total average assets were $4.5 billion for the second quarter of 2022, reflecting a decrease of $231.0 million, or 4.9%, compared to total average assets of $4.7 billion for the first quarter of 2022, and an increase of $1.1 billion, or 29.9%, compared to total average assets of $3.4 billion second quarter of 2021. The decrease in total average assets from the prior quarter was primarily due to the reduction in federal funds sold. Total average assets were $4.6 billion for the first half of 2022, reflecting an increase of $1.3 billion, or 38.3%, compared to total average assets of $3.3 billion the same period of 2021. The increase in total average assets for both the quarter and year to date as of June 30, 2021 to June 30, 2022 was primarily attributable to the acquisition of Riverview, effective November 30, 2021.

Total average loans were $3.1 billion for the second quarter of 2022, reflecting a decrease of $25.9 million, or 0.8%, compared to total average loans in the first quarter of 2022, and an increase of $520.0 million, or 19.9%, compared to total average loans of $2.6 billion for the second quarter of June 30, 2021. The decrease from the prior quarter was a result of the forgiveness of $34.9 million in PPP loans, which was partially offset by new loan originations. Total average loans were $3.1 billion for the first six months of 2022, reflecting an increase of $545.4 million, or 21.2%, compared to total average loans in the same period of 2021. The year-over-year growth is largely attributable to the Riverview acquisition on November 30, 2021.

Total average deposits were $3.8 billion for the second quarter of 2022, reflecting a decrease of $162.0 million, or 4.0%, compared to total average deposits in the first quarter of 2022, and an increase of $1.1 billion, or 19.9%, compared to total average deposits of $2.6 billion second quarter of 2021. The decrease in total average deposits during the second quarter was attributable to the maturity of certificates of deposit, which have renewed into lower rates, migrated to other deposit or retail investment products, or exited the Bank. We strategically right-sized our average cost of deposits through our targeted deposit run-off. The average cost of deposits was 0.21% for the second quarter of 2022, representing a 2 bp decrease from the first quarter of 2022 and a 22 bp decrease from the second quarter of 2021. Total average deposits were $3.9 billion for the first half of 2022, reflecting an increase of $1.3 billion, or 47.9%, compared to total average deposits of $2.6 billion same period of 2021. The growth in average deposits compared to June 30, 2021 was positively impacted by the Riverview acquisition and significant increases in noninterest-bearing, interest-bearing, and money market deposits, primarily due to both expanded cash management and commercial deposit account relationships, and new deposits established as a result of Mid Penn’s PPP loan funding activities.

Asset Quality

The provision for loan and lease losses was $1.7 million for the three months ended June 30, 2022, an increase of $1.2 million compared to the provision for loan losses of $500 thousand for the three months ended March 31, 2022 and an increase of $525 thousand compared to the three months ended June 30, 2021. The provision for loan and lease losses was $2.2 million for the six months ended June 30, 2022, an increase of $75 thousand compared to the provision for loan losses for the same period of 2021. The increase in the provision for the three and six months ended June 30, 2022 was the result of one partially legacy commercial relationship that was downgraded from substandard accrual to substandard non-accrual during the quarter and the growth in total loans since the end of the second quarter of 2021. The allowance for loan and lease losses and the related provision reflects Mid Penn’s continued application of the incurred loss method for estimating credit losses. We will adopt the current expected credit loss (“CECL”) accounting standard, as required, effective January 1, 2023.

Total nonperforming assets were $8.0 million at June 30, 2022, a decrease compared to nonperforming assets of $10.5 million at December 31, 2021 and $8.7 million at June 30, 2021. The decrease in nonperforming assets since December 31, 2021 was primarily the result of the successful workout of two non-accrual home equity loans amongst one relationship totaling $2.3 million during the first quarter of 2022. The nonperforming assets included acquired impaired loans assumed in the Riverview transaction totaling $3.3 million as of December 31, 2021.

The allowance for loan and lease losses as a percentage of total loans including PPP loans was 0.53% at June 30, 2022, compared to 0.49% at March 31, 2022 and 0.47% at December 31, 2021. The ratios as of June 30, 2022 and December 31, 2021, were affected by the addition of the Riverview 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 and lease losses. 

Capital

Shareholders’ equity increased $5.8 million, or 1.2%, from $490.1 million as of December 31, 2021 to $495.8 million as of June 30, 2022. Regulatory capital ratios for both Mid Penn and its banking subsidiary indicate regulatory capital levels in excess of the regulatory minimums and the levels necessary for the Bank to be considered “well capitalized” at both June 30, 2022 and December 31, 2021.

Share Repurchase Program

During the second quarter of 2022, Mid Penn repurchased 103,912 shares of outstanding common stock at an average price of $26.88 under its treasury stock repurchase program (“Program”). The Program authorized the repurchase of up to $15.0 million of Mid Penn’s outstanding common stock, of which $10.3 million remains available for repurchase.

Noninterest Income

For the three months ended June 30, 2022, noninterest income totaled $5.2 million, a decrease of $520 thousand, or 9.0%, compared to noninterest income of $5.8 million for the first quarter of 2022, primarily driven by decreases of $444 thousand in other income, $234 thousand in service charges on deposits, $224 thousand in mortgage banking income and a $166 thousand change in the net gain on sales of SBA loans. The decrease in other income was primarily the result of a higher fair value gain on a swap in the first quarter of 2022 compared to the second quarter of 2022. Service charges on deposits decreased as a result of certain Riverview legacy fees being aligned with Mid Penn fees at the end of the first quarter of 2022. The decrease in mortgage banking income was the result of increasing mortgage interest rates slowing mortgage loan originations and secondary-market loan sales and gains during the second quarter of 2022. These decreases were partially offset by increases of $153 thousand in income from fiduciary activities, $71 thousand in ATM debit card interchange income and $14 thousand in merchant services income.

Compared to the second quarter of 2021, noninterest income in the second quarter of 2022 decreased $422 thousand, or 7.5%, driven by a $2.5 million decrease in mortgage banking income, a $122 thousand decrease in merchant services income and a $114 thousand lower net gain on sales of SBA loans. The decreases were partially offset by an $877 thousand increase in other income, a $663 thousand increase in income from fiduciary activities, a $472 thousand increase in ATM debit card interchange income and a $273 thousand increase in service charges on deposits. Other income increased as a result of income in the second quarter of 2022 from a hedging program related to mortgage derivative activities that Mid Penn did not participate in during the second quarter of 2021, as well as a result of a fair value gain on a swap in the second quarter of 2022 compared to no fair value gain in the second quarter of 2021. The increase in income from fiduciary activities was attributable to favorable growth in trust assets under management and increased sales of retail investments products, as a result of successful business development efforts by Mid Penn’s trust and wealth management team. ATM debit card interchange income and service charges on deposits increased primarily as a result of a higher volume of transactional deposit accounts, including deposit accounts assumed in the Riverview acquisition.

For the six months ended June 30, 2022, noninterest income totaled $11.0 million, an increase of $616 thousand, or 5.9%, compared to noninterest income of $10.4 million for the first six months of 2021, primarily driven by increases of $2.2 million in other income, $1.2 million in income from fiduciary activities, $961 thousand in ATM debit card interchange income and $805 thousand in service charges on deposits. The increase in other income was primarily the result of a fair value gain on a swap in the first half of 2022 compared to the same period of 2021. The increases in fiduciary activities was a result of increased activity in the wealth management area and the Riverview transaction. The other increases mentioned were primarily the result of the Riverview transaction. These favorable variances were partially offset by a decrease in mortgage banking income of $4.3 million for the six months ended June 30, 2022 compared to the same period of 2021 due to increasing mortgage interest rates slowing mortgage loan originations and secondary-market loan sales and gains during 2022.

Mortgage banking income decreased as interest rates increased in response to the increase in the fed funds rate during the first half of 2022. As a result of the corresponding mortgage rate increases and an increase in property values driven by supply shortfalls and high liquidity levels among buyers, the mortgage loan refinancing market has slowed, and purchase money mortgage originations have slowed relative to the lending volumes seen in the past several years.

Noninterest Expense

For the three months ended June 30, 2022, noninterest expense totaled $23.9 million, a decrease of $1.8 million, or 7.1%, compared to noninterest expense of $25.7 million for the first quarter of 2022. Most categories of noninterest expense decreased during the second quarter of 2022, as a result of cost savings fully recognized in the second quarter of 2022 from the completion of the Riverview acquisition. The most significant cost savings were in salaries and benefits.

Compared to the second quarter of 2021, noninterest expense in the second quarter of 2022 increased $4.5 million, or 22.9%, primarily as a result of higher expenses from the Riverview acquisition, most significantly increases of $2.4 million in salaries and benefits and $2.0 million in other expenses. The increases were partially offset by decreases of $712 thousand in mortgage banking profit-sharing expense, $522 thousand of post-acquisition restructuring expense in 2021 and $240 thousand in charitable contributions qualifying for state tax credits.

For the six months ended June 30, 2022, noninterest expense totaled $49.7 million, an increase of $12.6 million, or 34.2%, compared to noninterest expense of $37.1 million for the same period of 2021 primarily as a result of higher expenses from the Riverview acquisition, most significantly increases of $6.1 million in salaries and benefits and $4.7 million in other expenses.

The provision for income taxes was $2.8 million during the three months ended June 30, 2022, compared to $2.6 million and $2.3 million of income tax provision recorded for the first quarter of 2022 and the second quarter of 2021, respectively. The provision for income taxes for the three months ended June 30, 2022 reflects a combined Federal and State effective tax rate of 18.5% compared to 18.4% and 19.4% for the first quarter of 2022 and the second quarter of 2021, respectively. The provision for income taxes was $5.3 million during the six months ended June 30, 2022, compared to $4.5 million of income tax provision recorded for the first half of 2021. The provision for income taxes for the six months ended June 30, 2022 reflects a combined Federal and State effective tax rate of 18.4% compared to 19.1% for the same period of 2021. The decrease in the effective tax rate compared to the periods of the prior year reflects higher tax-exempt interest recognized due to an increase in tax-exempt securities being held in the investment security portfolio when compared to the prior year, the favorable treatment of the increase in cash surrender value on bank owned life insurance policies, which are nontaxable for federal tax purposes, and the expansion of low income housing tax credit projects (“Projects”) acquired in the Riverview transaction, as well as Mid Penn legacy Projects. These decreases were partially offset by higher income before taxes in both periods of 2022.

The efficiency ratio(1) was 57.57% in the second quarter of 2022, compared to 62.12% in the first quarter of 2022, and 57.42% in the second quarter of 2021. The improvement in the efficiency ratio during the second quarter 2022 was due to the cost savings being realized from the Riverview acquisition. The efficiency ratio was 59.83% for the six months ended June 30, 2022, compared to 57.47% for the six months ended June 30, 2021. The increase in the efficiency ratio during the six months ended June 30, 2022 was primarily due to the increase in salary and benefit expenses related to Riverview employees retained through conversion.

Merger & Acquisition Activity
  
On November 30, 2021, Mid Penn announced the successful completion of the merger acquisition of Riverview. The acquisition of Riverview impacted periods presented within this report. For more information regarding this transaction, please see Mid Penn’s Annual Report on Form 10-K for the year ended December 31, 2021.

Management considers subsequent events occurring after the balance sheet date for matters which may require adjustment to, or disclosure in, the consolidated financial statements. The review period for subsequent events extends up to and including the filing date of a public company’s consolidated financial statements when filed with the Securities and Exchange Commission (“SEC”).  Accordingly, the financial information in this announcement is subject to change. The statements are valid only as of the date hereof and Mid Penn disclaims any obligation to update this information.

(1) Non-GAAP financial measure. Refer to the calculation on the section titled “Reconciliation of Non-GAAP Measures” at the end of this document.

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This press release, and oral statements made regarding the subjects of this release, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management's confidence and strategies and management's current views and expectations about new and existing programs and products, relationships, opportunities, technology and market conditions. These statements may be identified by such forward-looking terminology as "continues," "expect," "look," "believe," "anticipate," "may," "will," "should," "projects," "strategy" or similar statements. Actual results may differ materially from such forward-looking statements, and no reliance should be placed on any forward-looking statement.  Factors that may cause results to differ materially from such forward-looking statements include, but are not limited to, changes in interest rates, spreads on earning assets and interest-bearing liabilities, and interest rate sensitivity; prepayment speeds, loan originations, credit losses and market values on loans, collateral securing loans, and other assets; sources of liquidity; common shares outstanding; common stock price volatility; the length and extent of the COVID-19 pandemic; fair value of and number of stock-based compensation awards to be issued in future periods; the impact of changes in market values on securities held in Mid Penn’s portfolio; the success and timing of PPP loan repayment and forgiveness; legislation affecting the financial services industry as a whole, and Mid Penn and Mid Penn Bank individually or collectively, including tax legislation; results of the regulatory examination and supervision process and oversight, including changes in monetary policy and capital requirements; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or regulatory agencies; increasing price and product/service competition by competitors, including new entrants; rapid technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; the mix of products/services; containing costs and expenses; governmental and public policy changes; protection and validity of intellectual property rights; reliance on large customers; technological, implementation and cost/financial risks in large, multi-year contracts; the outcome of future litigation and governmental proceedings, including tax-related examinations and other matters; continued availability of financing; the availability of financial resources in the amounts, at the times and on the terms required to support Mid Penn and Mid Penn Bank’s future businesses; material differences in the actual financial results of merger, acquisition and investment activities compared with Mid Penn’s initial expectations, including the full realization of anticipated cost savings and revenue enhancements; the possibility that the anticipated benefits of the Riverview transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where Mid Penn does business; diversion of management’s attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the Riverview transaction; the ability to complete the integration of Mid Penn and Riverview successfully; the dilution caused by Mid Penn’s issuance of additional shares of its capital stock in connection with the Riverview transaction; and other factors that may affect the future results of Mid Penn. 

For a more detailed description of these and other factors which would affect our results, please see Mid Penn’s filings with the SEC, including those risk factors identified in the "Risk Factors" section and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2021 and subsequent filings with the SEC. The statements in this press release are made as of the date of this press release, even if subsequently made available by Mid Penn on its website or otherwise. Mid Penn assumes no obligation for updating any such forward-looking statements at any time, except as required by law.

SUMMARY FINANCIAL HIGHLIGHTS (Unaudited):

  Jun. 30,  Mar. 31,  Dec. 31,  Sept. 30,  Jun. 30, 
(Dollars in thousands, except per share data) 2022  2022  2021  2021  2021 
Ending Balances:                    
Investment securities $618,184  $508,658  $392,619  $158,311  $161,702 
Net loans  3,163,157   3,106,384   3,089,799   2,356,196   2,480,476 
Total assets  4,310,163   4,667,174   4,689,425   3,453,187   3,461,792 
Total deposits  3,702,587   3,989,037   4,002,016   2,961,881   2,782,124 
Shareholders' equity  495,835   494,161   490,076   349,308   341,569 
Average Balances:                    
Investment securities  580,406   462,648   286,134   158,296   148,972 
Net loans  3,129,334   3,103,469   2,319,544   2,422,378   2,609,803 
Total assets  4,465,906   4,696,894   3,579,649   3,508,757   3,437,692 
Total deposits  3,837,135   3,999,074   3,007,955   2,870,885   2,715,875 
Shareholders' equity  495,681   494,019   403,010   345,816   312,006 
                     
Income Statement: Three Months Ended 
  Jun. 30,  Mar. 31,  Dec. 31,  Sept. 30,  Jun. 30, 
(Dollars in thousands, except per share data) 2022  2022  2021  2021  2021 
Net interest income $35,433  $34,414  $29,372  $26,994  $26,877 
Provision for loan and lease losses  1,725   500   370   425   1,150 
Noninterest income  5,230   5,750   5,660   5,509   5,652 
Noninterest expense  23,915   25,745   34,072   20,019   19,456 
Income before provision for income taxes  15,023   13,919   590   12,059   11,923 
Provision for income taxes  2,771   2,565   (17)  2,272   2,310 
Net income available to shareholders  12,252   11,354   607   9,787   9,613 
Net income excluding non-recurring expenses (1)  12,252   11,614   10,266   9,943   10,025 
                     
Per Share:                    
Basic earnings per common share $0.77  $0.71  $0.05  $0.86  $0.93 
Diluted earnings per common share $0.77  $0.71  $0.05  $0.86  $0.93 
Cash dividends declared $0.20  $0.20  $0.20  $0.20  $0.20 
Book value per common share $31.23  $30.96  $30.71  $30.55  $29.94 
Tangible book value per common share (1) $23.57  $23.31  $22.99  $24.75  $24.10 
                     
Asset Quality:                    
Net charge-offs (recoveries) to average loans (annualized)  -0.001%  -0.007%  0.001%  0.149%  0.004%
Non-performing loans to total loans  0.25%  0.25%  0.32%  0.29%  0.35%
Non-performing asset to total loans and other real estate  0.25%  0.26%  0.32%  0.29%  0.35%
Non-performing asset to total assets  0.19%  0.18%  0.22%  0.20%  0.25%
ALLL to total loans  0.53%  0.49%  0.47%  0.60%  0.59%
ALLL to nonperforming loans  211.66%  190.84%  146.23%  209.90%  169.50%
                     
Profitability:                    
Return on average assets  1.10%  0.98%  0.06%  1.11%  1.12%
Return on average equity  9.91%  9.32%  0.61%  11.23%  12.36%
Return on average tangible common equity (1)  13.59%  12.82%  1.26%  14.20%  15.72%
Net interest margin  3.45%  3.21%  3.48%  3.26%  3.34%
Efficiency ratio (1)  57.57%  62.12%  61.34%  60.33%  57.42%
                     
Capital Ratios:                    
Tier 1 Capital (to Average Assets)  9.0%  8.4%  8.1%  8.6%  8.8%
Common Tier 1 Capital (to Risk Weighted Assets)  11.5%  11.7%  11.7%  13.2%  13.1%
Tier 1 Capital (to Risk Weighted Assets)  11.8%  12.0%  12.0%  13.2%  13.1%
Total Capital (to Risk Weighted Assets)  14.1%  14.4%  14.6%  15.8%  15.8%
                     

(1) Non-GAAP financial measure. Refer to the calculation on the section titled “Reconciliation of Non-GAAP Measures” at the end of this document.

CONSOLIDATED BALANCE SHEETS (Unaudited):                    
(Dollars in thousands, except share data) Jun. 30, 2022  Mar. 31, 2022  Dec. 31, 2021  Sept. 30, 2021  Jun. 30, 2021 
ASSETS                    
Cash and due from banks $64,440  $54,961  $41,100  $40,134  $35,815 
Interest-bearing balances with other financial institutions  4,909   3,187   146,031   2,536   1,234 
Federal funds sold  167,437   700,283   726,621   712,272   599,298 
Total cash and cash equivalents  236,786   758,431   913,752   754,942   636,347 
                     
Investment securities held to maturity, at amortized cost  399,032   363,145   329,257   152,791   153,032 
Investment securities available for sale, at fair value  218,698   145,039   62,862   5,015   8,162 
Equity securities available for sale, at fair value  454   474   500   505   508 
Loans held for sale  9,574   7,474   11,514   23,154   24,202 
Loans and leases, net of unearned interest  3,180,033   3,121,531   3,104,396   2,370,429   2,495,192 
Less: Allowance for loan and lease losses  (16,876)  (15,147)  (14,597)  (14,233)  (14,716)
Net loans and leases  3,163,157   3,106,384   3,089,799   2,356,196   2,480,476 
                     
Bank premises and equipment, net  33,732   33,612   33,232   25,562   24,758 
Bank premises and equipment held for sale  2,574   3,098   3,907       
Operating lease right of use asset  8,326   8,751   9,055   9,942   10,364 
Finance lease right of use asset  2,997   3,042   3,087   3,132   3,177 
Cash surrender value of life insurance  50,169   49,907   49,661   17,406   17,332 
Restricted investment in bank stocks  4,234   7,637   9,134   7,906   6,816 
Accrued interest receivable  12,902   11,584   11,328   10,008   10,638 
Deferred income taxes  13,780   11,974   10,779   4,133   5,465 
Goodwill  113,835   113,835   113,835   62,840   62,840 
Core deposit and other intangibles, net  7,729   8,250   9,436   3,537   3,804 
Foreclosed assets held for sale  69   125      11   11 
Other assets  32,115   34,412   28,287   16,107   13,860 
Total Assets $4,310,163  $4,667,174  $4,689,425  $3,453,187  $3,461,792 
LIABILITIES & SHAREHOLDERS’ EQUITY                    
Deposits:                    
Noninterest-bearing demand $850,180  $866,965  $850,438  $661,890  $692,016 
Interest-bearing demand  1,023,027   1,050,923   1,066,852   745,833   629,375 
Money Market  999,556   1,159,809   1,076,593   905,742   810,067 
Savings  354,677   358,186   381,476   205,842   206,724 
Time  475,147   553,154   626,657   442,574   443,942 
Total Deposits  3,702,587   3,989,037   4,002,016   2,961,881   2,782,124 
                     
Short-term borrowings              196,889 
Long-term debt  4,592   74,681   81,270   74,858   74,944 
Subordinated debt  73,995   74,134   73,645   44,599   44,593 
Operating lease liability  10,324   10,923   11,363   10,950   11,387 
Accrued interest payable  1,542   2,067   1,791   1,901   2,122 
Other liabilities  21,288   22,171   29,264   9,690   8,164 
Total Liabilities  3,814,328   4,173,013   4,199,349   3,103,879   3,120,223 
                     
Shareholders' Equity:                    
Common stock, par value $1.00 per share; 20.0 million shares authorized  16,081   16,059   16,056   11,532   11,507 
Additional paid-in capital  386,128   385,765   384,742   246,830   246,546 
Retained earnings  108,265   99,206   91,043   92,722   85,220 
Accumulated other comprehensive (loss) income  (9,759)  (4,946)  158   147   219 
Treasury stock  (4,880)  (1,923)  (1,923)  (1,923)  (1,923)
Total Shareholders’ Equity  495,835   494,161   490,076   349,308   341,569 
Total Liabilities and Shareholders' Equity $4,310,163  $4,667,174  $4,689,425  $3,453,187  $3,461,792 
                     


CONSOLIDATED STATEMENTS OF INCOME (Unaudited):         
(Dollars in thousands, except per share data) Three Months Ended  Six Months Ended 
  Jun. 30  Mar. 31  Dec. 31  Sept. 30  Jun. 30  Jun. 30  Jun. 30 
  2022  2022  2021  2021  2021  2022  2021 
INTEREST INCOME                            
Interest and fees on loans and leases $34,264  $35,016  $31,021  $29,590  $29,835  $69,280  $58,165 
Interest and dividends on investment securities:                            
U.S. Treasury and government agencies  2,329   1,536   715   285   225   3,865   403 
State and political subdivision obligations, tax-exempt  379   336   288   279   278   715   555 
Other securities  504   417   329   277   291   921   593 
Total Interest and Dividends on Investment Securities  3,212   2,289   1,332   841   794   5,501   1,551 
                             
Interest on other interest-bearing balances  8   13   8   1   2   21   4 
Interest on federal funds sold  736   314   324   308   98   1,050   177 
Total Interest Income  38,220   37,632   32,685   30,740   30,729   75,852   59,897 
INTEREST EXPENSE                            
Interest on deposits  2,019   2,294   2,536   2,909   2,916   4,313   5,882 
Interest on short-term borrowings           133   232      406 
Interest on long-term and subordinated debt  768   924   777   704   704   1,692   1,407 
Total Interest Expense  2,787   3,218   3,313   3,746   3,852   6,005   7,695 
Net Interest Income  35,433   34,414   29,372   26,994   26,877   69,847   52,202 
PROVISION FOR LOAN AND LEASE LOSSES  1,725   500   370   425   1,150   2,225   2,150 
Net Interest Income After Provision for Loan and Lease Losses  33,708   33,914   29,002   26,569   25,727   67,622   50,052 
NONINTEREST INCOME                            
Mortgage banking income  305   529   1,932   3,162   2,841   834   5,220 
Income from fiduciary and wealth management activities  1,205   1,052   778   618   542   2,257   1,098 
Service charges on deposits  450   684   439   223   177   1,134   329 
ATM debit card interchange income  1,128   1,057   834   630   656   2,185   1,224 
Net gain (loss) on sales of SBA loans  119   (9)  409   105   355   110   455 
Merchant services income  87   73   72   58   209   160   301 
Earnings from cash surrender value of life insurance  262   246   135   74   75   508   149 
Net gain on sales of investment securities           79          
Other income  1,674   2,118   1,061   560   797   3,792   1,588 
Total Noninterest Income  5,230   5,750   5,660   5,509   5,652   10,980   10,364 
NONINTEREST EXPENSE                            
Salaries and employee benefits  12,340   13,244   11,838   10,342   9,933   25,584   19,531 
Occupancy expense, net  1,655   1,799   1,412   1,318   1,317   3,454   2,797 
Equipment expense  1,112   1,011   864   745   741   2,123   1,492 
Software licensing and utilization  1,821   2,106   1,839   1,551   1,497   3,927   2,942 
FDIC Assessment  506   591   524   461   433   1,097   903 
Legal and professional fees  694   639   388   610   555   1,333   981 
Charitable contributions qualifying for State tax credits  125   65   797      365   190   635 
Mortgage banking profit-sharing expense  33   145   566   1,140   745   178   865 
(Gain) loss on sale or write-down of foreclosed assets, net  (15)  (16)  1   (7)  (19)  (31)  (19)
Intangible amortization  521   481   357   266   276   1,002   557 
Merger and acquisition expense        2,347   198   522      522 
Post-acquisition restructuring expense     329   9,880         329    
Other expenses  5,123   5,351   3,259   3,395   3,091   10,474   5,808 
Total Noninterest Expense  23,915   25,745   34,072   20,019   19,456   49,660   37,014 
INCOME BEFORE PROVISION FOR INCOME TAXES  15,023   13,919   590   12,059   11,923   28,942   23,402 
Provision for income taxes  2,771   2,565   (17)  2,272   2,310   5,336   4,477 
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $12,252  $11,354  $607  $9,787  $9,613  $23,606  $18,925 
                             
PER COMMON SHARE DATA:                            
Basic and Diluted Earnings Per Common Share $0.77  $0.71  $0.05  $0.86  $0.93  $1.48  $2.02 
Diluted Earnings Per Common Share $0.77  $0.71  $0.05  $0.86  $0.93  $1.48  $2.02 
Cash Dividends Declared $0.20  $0.20  $0.20  $0.20  $0.20  $0.40  $0.39 
                             

CONSOLIDATED – AVERAGE BALANCE SHEET AND NET INTEREST INCOME ANALYSIS (Unaudited):

  Average Balances, Income and Interest Rates on a Taxable Equivalent Basis 
  For the Three Months Ended 
(Dollars in thousands) June 30, 2022  March 31, 2022  June 30, 2021 
  Average     Yield/  Average     Yield/  Average     Yield/ 
  Balance  Interest  Rate  Balance  Interest  Rate  Balance  Interest  Rate 
ASSETS:                                          
Interest Bearing Balances $ 5,920  $ 8   0.54% $ 91,543  $ 13   0.06% $ 1,284  $ 2   0.62%
Investment Securities:                                          
Taxable   501,631    2,740   2.19%   389,034    1,822   1.90%   93,161    430   1.85%
Tax-Exempt   78,775    480 (a) 2.44%   73,614    425 (a) 2.34%   55,811    352 (a) 2.53%
Total Securities   580,406    3,220   2.23%   462,648    2,247   1.97%   148,972    782   2.11%
                                           
Federal Funds Sold   415,405    736   0.71%   706,411    314   0.18%   477,001    98   0.08%
Loans and Leases, Net   3,129,334    34,354 (b) 4.40%   3,103,469    35,123 (b) 4.59%   2,609,803    29,908 (b) 4.60%
Restricted Investment in Bank Stocks   4,854    94   7.77%   8,347    131   6.36%   6,865    86   5.02%
Total Earning Assets   4,135,919    38,412   3.73%   4,372,418    37,828   3.51%   3,243,925    30,876   3.82%
                                           
Cash and Due from Banks   59,822             57,397             34,683          
Other Assets   270,165             267,079             159,084          
Total Assets $ 4,465,906           $ 4,696,894           $ 3,437,692          
                                           
LIABILITIES & SHAREHOLDERS' EQUITY:                                          
Interest-bearing Demand $ 1,030,237  $ 462   0.18% $ 1,045,678  $ 461   0.18% $ 614,435  $ 579   0.38%
Money Market   1,079,900    584   0.22%   1,125,094    600   0.22%   791,498    819   0.42%
Savings   357,433    43   0.05%   376,006    58   0.06%   203,468    58   0.11%
Time   516,346    930   0.72%   592,833    1,175   0.80%   432,739    1,460   1.35%
Total Interest-bearing Deposits   2,983,916    2,019   0.27%   3,139,611    2,294   0.30%   2,042,140    2,916   0.57%
                                           
Short Term Borrowings          0.00%          0.00%   264,661    232   0.35%
Long-term Debt   9,238    107   4.65%   76,157    284   1.51%   74,976    204   1.09%
Subordinated Debt   74,062    661   3.58%   74,189    640   3.50%   44,589    500   4.50%
Total Interest-bearing Liabilities   3,067,216    2,787   0.36%   3,289,957    3,218   0.40%   2,426,366    3,852   0.64%
                                           
Noninterest-bearing Demand   853,219             859,463             673,735          
Other Liabilities   49,790             53,455             25,585          
Shareholders' Equity   495,681             494,019             312,006          
Total Liabilities & Shareholders' Equity $ 4,465,906           $ 4,696,894           $ 3,437,692          
                                           
Net Interest Income (taxable equivalent basis)      $ 35,625           $ 34,610           $ 27,024     
Taxable Equivalent Adjustment        (192)            (196)            (147)    
Net Interest Income      $ 35,433           $ 34,414           $ 26,877     
                                           
Total Yield on Earning Assets            3.73%            3.51%            3.82%
Rate on Supporting Liabilities            0.36%            0.40%            0.64%
Average Interest Spread            3.37%            3.11%            3.18%
Net Interest Margin            3.45%            3.21%            3.34%
                                           

(a) Includes tax-equivalent adjustments (calculated using statutory rates of 21 percent) of $101 thousand, $89 thousand and $74 thousand for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively, resulting from the tax-free municipal securities in the investment portfolio.
(b) Includes tax-equivalent adjustments (calculated using statutory rates of 21 percent) of $91 thousand, $107 thousand and $73 thousand for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively, resulting from the tax-free municipal loans in the commercial loans portfolio.

  Average Balances, Income and Interest Rates on a Taxable Equivalent Basis 
  For the Six Months Ended 
(Dollars in thousands) June 30, 2022  June 30, 2021 
  Average     Yield/  Average     Yield/ 
  Balance  Interest  Rate  Balance  Interest  Rate 
ASSETS:                            
Interest Bearing Balances $ 48,495  $ 21   0.09% $ 1,342  $ 4   0.60%
Investment Securities:                            
Taxable   445,644    4,561   2.06%   85,849    815   1.91%
Tax-Exempt   76,208    905 (a) 2.39%   55,377    702 (a) 2.56%
Total Securities   521,852    5,466   2.11%   141,226    1,517   2.17%
                             
Federal Funds Sold   560,105    1,050   0.38%   396,041    177   0.09%
Loans and Leases, Net   3,116,473    69,477 (b) 4.50%   2,571,075    58,314 (b) 4.57%
Restricted Investment in Bank Stocks   6,590    225   6.89%   6,958    181   5.25%
Total Earning Assets   4,253,515    76,239   3.61%   3,116,642    60,193   3.89%
                             
Cash and Due from Banks   54,177             34,363          
Other Assets   272,922             161,661          
Total Assets $ 4,580,614           $ 3,312,666          
                             
LIABILITIES & SHAREHOLDERS' EQUITY:                            
Interest-bearing Demand $ 1,037,915  $ 923   0.18% $ 608,259  $ 1,157   0.38%
Money Market   1,102,372    1,184   0.22%   767,877    1,597   0.42%
Savings   366,668    101   0.06%   200,686    122   0.12%
Time   554,378    2,105   0.77%   423,259    3,006   1.43%
Total Interest-bearing Deposits   3,061,333    4,313   0.28%   2,000,081    5,882   0.59%
                             
Short-term Borrowings   -    -   0.00%   234,258    406   0.35%
Long-term Debt   42,513    391   1.85%   75,019    408   1.10%
Subordinated Debt   74,126    1,301   3.54%   44,586    999   4.52%
Total Interest-bearing Liabilities   3,177,972    6,005   0.38%   2,353,944    7,695   0.66%
                             
Noninterest-bearing Demand   856,324             648,537          
Other Liabilities   51,612             24,529          
Shareholders' Equity   494,706             285,656          
Total Liabilities & Shareholders' Equity $ 4,580,614           $ 3,312,666          
                             
Net Interest Income (taxable equivalent basis)      $ 70,234           $ 52,498     
Taxable Equivalent Adjustment        (387)            (296)    
Net Interest Income      $ 69,847           $ 52,202     
                             
Total Yield on Earning Assets            3.61%            3.89%
Rate on Supporting Liabilities            0.38%            0.66%
Average Interest Spread            3.23%            3.24%
Net Interest Margin            3.33%            3.40%
                             

(a) Includes tax-equivalent adjustments (calculated using statutory rates of 21 percent) of $190 thousand and $147 thousand for the six months ended June 30, 2022 and June 30, 2021, respectively, resulting from the tax-free municipal securities in the investment portfolio.
(b) Includes tax-equivalent adjustments (calculated using statutory rates of 21 percent) of $197 thousand and $149 thousand for the six months ended June 30, 2022 and June 30, 2021, respectively, resulting from the tax-free municipal loans in the commercial loans portfolio.

ALLOWANCE FOR LOAN AND LEASE LOSSES AND ASSET QUALITY (Unaudited):

(Dollars in thousands, except Jun. 30,  Mar. 31,  Dec. 31,  Sept. 30,  Jun. 30, 
per share data) 2022  2022  2021  2021  2021 
Allowance for Loan and Lease Losses:                    
Beginning balance $15,147  $14,597  $14,233  $14,716  $13,591 
Loans Charged off                    
Commercial and industrial        (7)      
Commercial real estate        (1)  (1,043)   
Commercial real estate - construction              (23)
Residential mortgage           (3)  (7)
Home equity               
Consumer  (9)  (57)  (19)  (11)  (9)
Total loans charged off  (9)  (57)  (27)  (1,057)  (39)
Recoveries of loans previously charged off                    
Commercial and industrial     13   10   1   1 
Commercial real estate     65   1   140   10 
Commercial real estate - construction     24   7       
Residential mortgage  2         2   1 
Home equity  1   1          
Consumer  10   4   3   6   2 
Total recoveries  13   107   21   149   14 
Balance before provision  15,151   14,647   14,227   13,808   13,566 
Provision for loan and lease losses  1,725   500   370   425   1,150 
Balance, end of quarter $16,876  $15,147  $14,597  $14,233  $14,716 
                     
Nonperforming Assets                    
Nonaccrual loans $7,551  $7,507  $9,547  $6,339  $8,233 
Accruing trouble debt restructured loans  422   430   435   442   449 
Total nonperforming loans  7,973   7,937   9,982   6,781   8,682 
                     
Foreclosed real estate  69   125      11   11 
Total nonperforming assets  8,042   8,062   9,982   6,792   8,693 
                     
Accruing loans 90 days or more past due     133   515       
Total risk elements $8,042  $8,195  $10,497  $6,792  $8,693 
                     

PPP Summary

  Jun. 30,  Mar. 31,  Dec. 31,  Sept. 30,  Jun. 30, 
(Dollars in thousands) 2022  2022  2021  2021  2021 
                     
PPP loans, net of deferred fees $4,966  $34,124  $111,286  $229,679  $391,826 
                     
PPP Fees recognized $652  $2,989  $4,426  $8,382  $4,109 
                     

RECONCILIATION OF NON-GAAP MEASURES (Unaudited)

Explanatory note: This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). Mid Penn’s management uses these non-GAAP financial measures in their analysis of the Company’s performance. 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. 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. Non-PPP core banking loans are meaningful to investors as they are indicative of portfolio loans and related growth from traditional bank activities and excludes short-term or nonrecurring loans from special programs like the PPP. 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. Core earnings per common share excludes from income available to common shareholders certain expenses related to significant non-core activities, including merger-related expenses, net of income taxes. For return on average tangible common equity, the most directly comparable financial measure calculated in accordance with GAAP is return on average equity. The efficiency ratio is often used by management to measure its noninterest expense as a percentage of its revenue. 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. The reconciliation of the non-GAAP to comparable GAAP financial measures can be found in the tables at the end of this release.

Tangible Book Value Per Share

(Dollars in thousands, except Jun. 30,  Mar. 31,  Dec. 31,  Sept. 30,  Jun. 30, 
per share data) 2022  2022  2021  2021  2021 
                     
Shareholders' Equity $495,835  $494,161  $490,076  $349,308  $341,569 
Less: Goodwill  113,835   113,835   113,835   62,840   62,840 
Less: Core Deposit and Other Intangibles  7,729   8,250   9,436   3,537   3,804 
Tangible Equity $374,271  $372,076  $366,805  $282,931  $274,925 
                     
Common Shares Outstanding  15,878,193   15,960,916   15,957,830   11,433,554   11,408,712 
                     
Tangible Book Value per Share $23.57  $23.31  $22.99  $24.75  $24.10 
                     

Non-PPP Core Banking Loans

  Jun. 30,  Mar. 31,  Dec. 31,  Sept. 30,  Jun. 30, 
(Dollars in thousands) 2022  2022  2021  2021  2021 
                     
Loans and leases, net of unearned interest $3,180,033  $3,121,531  $3,104,396  $2,370,429  $2,495,192 
Less: PPP loans, net of deferred fees  4,966   34,124   111,286   229,679   391,826 
Non-PPP core banking loans $3,175,067  $3,087,407  $2,993,110  $2,140,750  $2,103,366 
                     

Core Earnings Per Common Share Excluding Non-Recurring Expenses

  Three Months Ended 
  Jun. 30,  Mar. 31,  Dec. 31,  Sept. 30,  Jun. 30, 
(Dollars in thousands, except per share data) 2022  2022  2021  2021  2021 
Net Income Available to Common Shareholders $12,252  $11,354  $607  $9,787  $9,613 
Plus: Merger and Acquisition Expenses     329   12,227   198   522 
Less: Tax Effect of Merger and Acquisition Expenses     69   2,568   42   110 
Net Income Excluding Non-Recurring Expenses $12,252  $11,614  $10,266  $9,943  $10,025 
                     
Weighted Average Shares Outstanding - denominator  15,935,003   15,957,864   13,005,895   11,423,487   10,321,838 
                     
Core Earnings Per Common Share Excluding Non-Recurring Expenses $0.77  $0.73  $0.79  $0.87  $0.97 
                     


Return on Average Tangible Common Equity                    
  Three Months Ended 
  Jun. 30,  Mar. 31,  Dec. 31,  Sept. 30,  Jun. 30, 
(Dollars in thousands, except per share data) 2022  2022  2021  2021  2021 
                     
Net income available to common shareholders $12,252  $11,354  $607  $9,787  $9,613 
Plus: Intangible amortization, net of tax  412   380   282   210   218 
  $12,664  $11,734  $889  $9,997  $9,831 
                     
Average shareholder's equity $495,681  $494,019  $403,010  $345,816  $312,006 
Less: Average goodwill  113,835   113,835   113,835   62,840   62,840 
Less: Average core deposit and other intangibles  7,983   8,950   9,436   3,666   3,938 
Average tangible shareholder's equity $373,863  $371,234  $279,739  $279,310  $245,228 
                     
Return on average tangible common equity  13.59%  12.82%  1.26%  14.20%  15.72%
                     


Efficiency Ratio                    
  Jun. 30,  Mar. 31,  Dec. 31,  Sept. 30,  Jun. 30, 
(Dollars in thousands) 2022  2022  2021  2021  2021 
                     
Noninterest expense $23,915  $25,745  $34,072  $20,019  $19,456 
Less: Merger and acquisition expenses     329   12,227   198   522 
Less: Intangible amortization  521   481   357   266   276 
Less: (Gain) loss on sale or write-down of foreclosed assets, net  (15)  (16)  1   (7)  (19)
Efficiency ratio numerator $23,409  $24,951  $21,487  $19,562  $18,677 
                     
Net interest income  35,433   34,414   29,372   26,994   26,877 
Noninterest income  5,230   5,750   5,660   5,509   5,652 
Less: Net gain on sales of investment securities           79    
Efficiency ratio denominator $40,663  $40,164  $35,032  $32,424  $32,529 
                     
Efficiency ratio  57.57%  62.12%  61.34%  60.33%  57.42%
                     
 

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