a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); andUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, DC 20549
FORM 10-K
[X]FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
x ANNUAL REPORT PURSUANT TO SECTION 13
orOR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
EXCHANGE ACT OF 1934 For the fiscal year ended December 31,
2000 or [ ]2002OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
EXCHANGE ACT OF 1934 For the transition period from
_____________to________________Commission
File Number: 001-13677file number 1-13677MID PENN BANCORP, INC.
---------------------- (Exact(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 25-1666413 ------------ ---------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 349 Union Street Millersburg, Pennsylvania 17061 ------------------------- ----- (Address of Principal Executive Offices) (Zip Code) (717) 692-2133 -------------- (Registrant's Telephone Number, Including Area Code)
Pennsylvania
25-1666413
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification Number)
349 Union Street
17061
Millersburg, Pennsylvania
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code 717.692.2133
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $1.00 Par Value ----------------------------- (Title of Class)
Title of Each Class
Name of Each Exchange on Which Registered
Common Stock, $1.00
Amercian Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NoneNone.Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesXx No---- ----¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
Registrant'sregistrant’s knowledge, indefinitivedefinitiv proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.[X]Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes No
The aggregate market value of the
sharesRegistrant’s voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as ofcommon stockJune 28, 2002, the last business day of theRegistrant held by nonaffiliates of the RegistrantRegistrant’s most recently completed second fiscal quarter was$33,386,790 at February 23, 2001 (a date within 60 days of the date hereof).approximately $37,539,000.As of February
23, 2001,21, 2003, the Registrant had3,037,4443,033,379 shares of common stock outstanding.DOCUMENTS INCORPORATED BY
REFERENCE:REFERENCEExcerpts from the
Registrant's 2000Registrant’s Annual Report to Shareholders are incorporated herein by reference in response to Part II,and Part IV,hereof. TheRegistrant'sRegistrant’s definitive proxy statement to be used in connection with the20012003 Annual Meeting of Shareholders is incorporated herein by reference in partial response to Part III, hereof.FORM 10-K
INDEX
Page
Business
1
- Business.....................................................1Item
2 - Properties..................................................122—Properties
11
Legal
Proceedings...........................................13Proceedings12
Submission of Matters to a Vote of
Securities Holders.......13Security Holders12
Market for
Corporation'sRegistrant’s Common Equity and Related ShareholderMatters.................................13Matters13
Selected Financial
Data.....................................14Data13
Management’s Discussion and Analysis of Financial Condition and Results of
Operation................14Operation13
Quantitative and Qualitative Disclosure About Market
Risk...14Risk13
Financial Statements and Supplementary
Data.................14Data13
Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure......................14Disclosure13
Directors and Executive Officers of the
Corporation.........14RegistrantExecutive
Compensation......................................15Compensation14
Item 12—Security Ownership of Certain Beneficial Owners and
Management..............................................15Management14
Certain Relationships and Related
Transactions..............15TransactionsControls and Procedures
14
Exhibits, Financial Statements, Schedules and Reports on Form
8-K.........................................168-K15
17
21
SignaturesForward Looking Statements
Mid Penn Bancorp, Inc. (“MPB”) may include forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters in this and other filings with the SEC. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, MPB notes that a variety of factors could cause MPB’s actual results and experience to differ materially from the anticipated results or other expectations expressed in MPB’s forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of MPB’s business include the following: general economic conditions, interest rates, financial and capital markets, including their impact on capital expenditures; business conditions in the banking industry; the regulatory environment; rapidly changing technology and evolving banking industry standards; competitive factors, including increased competition with community, regional and national financial institutions; new service and product offerings by competitors and price pressures; and similar items.
ITEM 1. BUSINESS.
- ------ -------- GeneralMid Penn Bancorp, Inc.
Mid Penn Bancorp, Inc. is a one bank holding company, incorporated in the Commonwealth of Pennsylvania in August 1991. On December 31, 1991,
the corporationMPB acquired, as part of the holding company formation, all of the outstanding common stock of Mid Penn Bank, and the bank became awholly ownedwholly-owned subsidiary ofthe corporation. The bankMPB. MPB’s other wholly-owned subsidiaries are Mid Penn Insurance Services, LLC which provides a range of personal and investment insurance products and Mid Penn Investment Corporation which is engaged in investingactivities, areactivities. MPB’s primary business is thecorporation's wholly-owned subsidiaries.operation of Mid Penn Bank which is managed as a single business segment.MPB’s consolidated financial condition and results of operations consist almost entirely of that of Mid Penn Bank. At December 31, 2002, MPB had total consolidated assets of $363,284,000, total deposits of $274,703,000 and total shareholders’ equity of $35,204,000.
As of December 31, 2002, the holding company did not own or lease any property and had no employees.
Mid Penn Bank
Millersburg Bank, the predecessor to Mid Penn Bank, was organized in 1868, and became a state chartered bank in 1931, obtaining trust powers in 1935, at which time its name was changed to Millersburg Trust Company. In 1962, the Lykens Valley Bank merged with and into Millersburg Trust Company. In 1971,
Farmer'sFarmer’s State Bank of Dalmatia merged with Millersburg Trust Company and the resulting entity adopted the name"Mid“Mid Penn Bank."” In 1985, the bank acquired Tower City National Bank. Effective July 10, 1998,the corporationMPB acquired Miners Bank of Lykens, which was merged into the bank. The bank is supervised by the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation.The corporation'sMPB’s and thebank'sbank’s legal headquartersisare located at 349 Union Street, Millersburg, Pennsylvania 17061.The bank presently has 12
offices, including the two offices opened in 2000 - -- our "virtual office" at www.midpennbank.com, added in February and our second ------------------- Harrisburg office at 2615 North Front Street, added in August.offices. The bank,headquartedheadquartered in Millersburg, Dauphin County, Pennsylvania, has offices in Dauphin, Northumberland, Schuylkill, and Cumberland Counties, Pennsylvania with total assets ofover $315approximately $363 million as of December 31,2000. At December 31, 2000, the corporation's consolidated assets, deposits and shareholders' equity were approximately $315,584,000, $231,408,000 and $29,626,000, respectively. The corporation's2002.MPB’s primary business consists of attracting deposits from its network of community banking offices operated by the bank. The bank engages in
afull-service commercial banking and trust business, making available to the community a wide range of financial services, including, but not limited to, installment loans, personal loans, mortgage and home equity loans, secured and unsecured commercial and consumer loans, lines of credit, construction financing, farm loans, community development and local government loans and various types of time and demand deposits.TheDeposits of the bankalso offers cash management, mobile banking, telephone banking, and Check Card and ATM service. In addition, the bank's trust department provides a full range of trust services, including estate planning, retirement planning and investment services. Bank depositsare insured by theFDIC'sBank Insurance Fund of the FDIC to the maximum extent provided by law. In addition,to historical information, this Form 10-K contains forward- looking statements. We have made forward-looking 1statements in this document, and in documents that we incorporate by reference, that are subject to risks and uncertainties. Forward-looking statements includetheinformation concerning possible or assumed future resultsbank provides a full range ofoperations of Mid Penn Bancorp, Inc. andtrust services through itssubsidiaries. When we use words such as "believes," "expects," "anticipates," or similar expressions, we are making forward-looking statements. Shareholders should note that many factors, some of which are discussed elsewhere in this document and in the documents that we incorporate by reference, could affect the future financial results of the corporation and its subsidiaries and could cause actual results to differ materially from those expressed in the forward-looking statements contained or incorporated by reference in this document. These factors include, among others, the following: . operating, legal and regulatory risks; . economic, political and competitive forces affecting our banking, securities, asset management and credit services businesses; and . the risk that our analyses of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful. The corporation operates in a heavily regulated environment. Changes in laws and regulations affecting the corporation and its banking subsidiary,Trust Department. Mid Penn Bankmay have an impact on operations. See the sections entitled "Supervisionalso offers other services such as Internet banking, telephone banking, cash management services, automated teller services andRegulation - The Corporation" and "Supervision and Regulation - The Bank". Employeessafe deposit boxes.At December 31,
2000, the corporation2002, Mid Penn Bank had86106 full-time and3126 part-time employees.None of theseNo employeesisare represented by a collective bargaining agent, and thecorporationbank believes it enjoys good relations with its personnel.Competition The corporation experiences substantial competition in attracting and retaining deposits and in lending funds. Primary factors in competing for deposits are the abilityLending Activities
Mid Penn Bank offers a variety of loan products to
offer attractive rates and the convenience of office locations. Direct competition for deposits comes primarily from other commercial banks and thrift institutions. Competition for deposits also comes from money market mutual funds, corporate and government securities and credit unions. The primary factors in the competition forits customers, including loansare interest rates, loan origination fees and the range of products and services offered. Competition for origination ofsecured by real estate, commercial and consumer loans. The bank’s lending objectives are as follows:to establish a diversified commercial loan portfolio;to provide a satisfactory return to the company’s shareholders by properly pricing loansnormally comes from otherto include the cost of funds, administrative costs, bad debts, local economic conditions, competition, customer relationships, the term of the loan, credit risk, collateral quality and a reasonable profit margin.Credit risk is managed through portfolio diversification, underwriting policies and procedures and loan monitoring practices. The bank generally secures its loans with real estate with such collateral values dependent and subject to change based on real estate market conditions within its market area. As of December 31, 2002, Mid Penn Bank’s highest concentrations of credit were in mobile home park land and commercial
banks, thrift institutions, mortgage bankers, mortgage brokersreal estate office financings andinsurance companies.most of the bank’s business activity with customers was located in Central Pennsylvania, specifically in Dauphin, lower Northumberland, Western Schuylkill, and Cumberland Counties.Investment Activities
MPB’s investment portfolio is used to improve earnings through investments of funds in higher-yielding assets, while maintaining asset quality, which provide the necessary balance sheet liquidity for MPB. MPB does not have any significant concentrations of investment securities.
MPB’s entire portfolio of investment securities is considered available for sale. As such, the investments are recorded on the balance sheet at market value. MPB’s investments include US Treasury, agency and municipal securities that are given a market price relative to investments of the same type with similar maturity dates. As the interest rate environment of these securities changes, MPB’s existing securities are valued differently in comparison. This difference in value, or unrealized gain, amounted to $1,357,000, net of tax, as of December 31, 2002. The investments are all high quality United States and municipal securities that if held to maturity are expected to yield no loss to the bank.
For additional information with respect to
the corporation'sMPB’s business activities, see Part II, Item 7 of this report.Sources of Funds
Mid Penn Bank primarily uses deposits and borrowings to finance lending and investment activities. Borrowing sources include advances from the Federal Home Loan Bank of Pittsburgh, repurchase agreements with investment banks and overnight borrowings from Mid Penn Bank’s customers and correspondent bank. All borrowings, except for the line of credit with Mid Penn Bank’s correspondent bank, require collateral in the form of loans or securities. Borrowings are, therefore, limited by collateral levels and the available lines of credit extended by the bank’s creditors. As a result, deposits remain key to the future funding and growth of the business. Deposit growth within the banking industry has been generally slow due to strong competition from a variety of financial services companies. This competition may require financial institutions to adjust their product offerings and pricing to adequately grow deposits.
Competition
Mid Penn Bank actively competes with other financial services companies for deposit and loan business. Competitors include other commercial banks, savings banks, savings and loan associations, insurance companies, securities brokerage firms, credit unions, finance companies, mutual funds, and money market funds. Financial institutions compete primarily on the quality of services rendered, interest rates on loans and deposits, service charges, the convenience of banking facilities, location and hours of operation and, in the case of loans to larger commercial borrowers, relative lending limits.
Many competitors are significantly larger than Mid Penn Bank and have significantly greater financial resources, personnel and locations from which to conduct business. In addition, the bank is subject to banking regulations while certain competitors may not be. There are relatively few barriers for companies wanting to enter into the financial services industry. For more information, see the “Supervision and Regulation” section below.
The growth of mutual funds over the past decade has made it increasingly difficult for financial institutions to attract deposits. The continued flow of cash into mutual funds, much of which is made through tax deferred investment vehicles such as 401(k) plans, and a generally strong economy, have, until recently, fueled high returns for these investments, in particular, certain equity funds. These returns perpetuated the flow of additional investment dollars into mutual funds and other products not traditionally offered by banks. In addition, insurance companies recently have become more significant competitors for deposits through their thrift subsidiaries.
Supervision and Regulation
General
Bank holding companies and banks are extensively regulated under both Federal and state laws. The regulation and supervision of MPB and Mid Penn Bank are designed primarily for the protection of depositors, the FDIC and the monetary system, and not MPB or its shareholders. Enforcement actions may include the imposition of a conservator or receiver, cease-and-desist orders and written agreements, the termination of insurance on deposits, the imposition of civil money penalties and removal and prohibition orders. If any enforcement action is taken by a banking regulator, the value of an equity investment in MPB could be substantially reduced or eliminated.
Holding Company Regulation
As a registered bank holding company under the Bank Holding Company Act of 1956 and a Pennsylvania business corporation, we are regulated by the Federal Reserve Board and the provisions of Section 115 of the Pennsylvania Banking Code of 1965.
The Bank Holding Company Act requires MPB to file an annual report with the Federal Reserve Board regarding the holding company and its subsidiary bank. The Federal Reserve Board also makes examinations of the holding company. Mid Penn Bank is not a member of the Federal Reserve System; however, the Federal Reserve Board possesses cease-and-desist powers over bank holding companies and their subsidiaries where their actions would constitute an unsafe or unsound practice or violation of law.
The Bank Holding Company Act restricts a bank holding company’s ability to acquire control of additional banks. In addition, the Act restricts the activities in which bank holding companies may engage directly or through non-bank subsidiaries.
The Gramm-Leach-Bliley Financial Services Modernization Act of l999 (the “Gramm-Leach-Bliley Act”) amended the Bank Holding Company Act of 1956 to create a new category of holding company—the “financial holding company.” To be designated as a financial holding company, a bank holding company must file an application with the Federal Reserve Board. The holding company must be well capitalized and well managed, as determined by Federal Reserve Board regulations. When a bank holding company becomes a financial holding company, the holding company or its affiliates may engage in any financial activities that are “financial in nature or incidental to such activities.” Furthermore, the Federal Reserve may approve a proposed activity if it is “complementary” to financial activities and does not threaten the safety and soundness of banking. The Act provides an initial list of activities that constitute activities that are financial in nature, including:
lending and deposit activities,insurance activities, including underwriting, agency and brokerage,providing financial investment advisory services,underwriting in, and acting as a broker or dealer in, securities,merchant banking,insurance company portfolio investment,support services,making equity and debt investments in corporations or projects designed primarily to promote community welfare, and providing advisory services to these programs,subject to certain limitations, providing others financially oriented data processing or bookkeeping services,issuing and selling money orders, travelers’ checks and United States savings bonds,providing consumer financial counseling that involves counseling, educational courses and distribution of instructional materials to individuals on consumer-oriented financial management matters, including debt consolidation, mortgage applications, bankruptcy, budget management, real estate tax shelters, tax planning, retirement and estate planning, insurance and general investment management, so long as this activity does not include the sale of specific products or investments; andproviding tax planning and preparation advice.In addition to permitting financial services providers to enter into new lines of business, the law allows firms the freedom to streamline existing operations and to potentially reduce costs. The Act may increase both opportunity as well as competition. Many community banks are less able to devote the capital and management resources needed to facilitate broad expansion of financial services including insurance and brokerage services.
Bank Regulation
Mid Penn Bank is subject to supervision, regulation and examination by the Pennsylvania Department of Banking and the FDIC. In addition, the bank is subject to a variety of local, state and federal laws that affect its operations.
Banking regulations include, but are not limited to, permissible types and amounts of loans, investments and other activities, capital adequacy, branching, interest rates on loans and the safety and soundness of banking practices.
Capital Requirements
Under risk-based capital requirements for bank holding companies, MPB is required to maintain a minimum ratio of total capital to risk-weighted assets (including certain off-balance-sheet activities, such as standby letters of credit) of eight percent. At least half of the total capital is to be composed of common equity, retained earnings and qualifying perpetual preferred stock, less goodwill (“tier 1 capital” and together with tier 2 capital “total capital”). The remainder may consist of subordinated debt, non-qualifying preferred stock and a limited amount of the loan loss allowance (“tier 2 capital”).
In addition, the Federal Reserve Board has established minimum leverage ratio requirements for bank holding companies. These requirements provide for a minimum leverage ratio of tier 1 capital to adjusted average quarterly assets (“leverage ratio”) equal to three percent for bank holding companies that meet certain specified criteria, including having the highest regulatory rating. All other bank holding companies will generally be required to maintain a leverage ratio of from at least four to five percent. The requirements also provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Furthermore, the requirements indicate that the Federal Reserve Board will continue to consider a “tangible tier 1 leverage ratio” (deducting all intangibles) in evaluating proposals for expansion or new activity. The Federal Reserve Board has not advised MPB of any specific minimum tier 1 leverage ratio applicable to it.
Mid Penn Bank is subject to similar capital requirements adopted by the FDIC. The FDIC has not advised the bank of any specific minimum leverage ratios applicable to it.
The capital ratios of MPB and Mid Penn Bank are described in Note 15 to MPB’s Consolidated Financial Statements.
Banking regulators continue to indicate their desire to further develop capital requirements applicable to banking organizations. Changes to capital requirements could materially affect the profitability of MPB or the market value of MPB stock.
Prompt Corrective Action
In addition to the required minimum capital levels described above, federal law establishes a system of “prompt corrective actions” which Federal banking agencies are required to take, and certain actions which they have discretion to take, based upon the capital category into which a federally regulated depository institution falls. Regulations set forth detailed procedures and criteria for implementing prompt corrective action in the case of any institution which is not adequately capitalized. Under the rules, an institution will be deemed to be “adequately capitalized” or better if it exceeds the minimum Federal regulatory capital requirements. However, it will be deemed “undercapitalized” if it fails to meet the minimum capital requirements, “significantly undercapitalized” if it has a total risk-based capital ratio that is less than 6.0 percent, a Tier 1 risk-based capital ratio that is less than 3.0 percent, or a leverage ratio that is less than 3.0 percent, and “critically undercapitalized” if the institution has a ratio of tangible equity to total assets that is equal to or less than 2.0 percent.
The prompt corrective action rules require an undercapitalized institution to file a written capital restoration plan, along with a performance guaranty by its holding company or a third party. In addition, an undercapitalized institution becomes subject to certain automatic restrictions including a prohibition on payment of dividends, a limitation on asset growth and expansion, in certain cases, a limitation on the payment of bonuses or raises to senior executive officers, and a prohibition on the payment of certain “management fees” to any “controlling person”. Institutions that are classified as undercapitalized are also subject to certain additional supervisory actions, including increased reporting burdens and regulatory monitoring, a limitation on the institution’s ability to make acquisitions, open new branch offices, or engage in new lines of business, obligations to raise additional capital, restrictions on transactions with affiliates, and restrictions on interest rates paid by the institution on deposits. In certain cases, bank regulatory agencies may require replacement of senior executive officers or directors, or sale of the institution to a willing purchaser. If an institution is deemed to be “critically undercapitalized” and continues in that category for four quarters, the statute requires, with certain narrowly limited exceptions, that the institution be placed in receivership.
Deposit Insurance
Deposits of the Bank are insured by the FDIC through the Bank Insurance Fund (“BIF”). The insurance assessments paid by an institution are to be based on the probability that the fund will incur a loss with respect to the institution. The FDIC has adopted deposit insurance regulations under which insured institutions are assigned to one of the following three capital groups based on their capital levels: “well-capitalized,” “adequately capitalized” and “undercapitalized.” Banks in each of these three groups are further classified into three subgroups based upon the level of supervisory concern with respect to each bank. The resulting matrix creates nine assessment risk classifications to which are assigned deposit insurance premiums ranging from 0.00% for the best capitalized, healthiest institutions, to 0.27% for undercapitalized institutions with substantial supervisory concerns.
The FDIC sets deposit insurance assessment rates on a semiannual basis and will increase deposit insurance assessments whenever the ratio of reserves to insured deposits in a fund is less than 1.25. While under the current assessment matrix, Mid Penn Bank does not pay any assessments for deposit insurance, because of past bank failures there is a possibility that the FDIC will adjust the assessment matrix in the future and that as a result Mid Penn Bank may have to start paying insurance assessments.
Mid Penn Bank is also subject to quarterly assessments relating to interest payments on Financing Corporation (FICO) bonds issued in connection with the resolution of the thrift industry crisis. The FICO assessment rate is adjusted quarterly to reflect changes in the assessment bases of the BIF. The FICO assessments on BIF-insured deposits are set at an annual rate of .0168% of assessable deposits.
Environmental Laws
Neither the corporation nor the bankManagement does not anticipate that compliance with environmental laws and regulations will have any material effect on MPB’s capital, expenditures, earnings, or
on its 2competitive position. However, environmentally related hazards have become a source of high risk and potentially unlimited liability for financial institutions. Environmentally contaminated properties ownedIn 1995, the Pennsylvania General Assembly enacted the Economic Development Agency, Fiduciary and Lender Environmental Liability Protection Act which, among other things, provides protection to lenders from environmental liability and remediation costs under the environmental laws for releases and contamination caused by
an institution's borrowers may resultingothers. A lender who engages ina drastic reduction in the value of the collateral securing the institution's loans to such borrowers, high environmental clean up costs to the borrower affecting its ability to repay the loans, the subordination of any lien in favor of the institution to a state or federal lien securing clean up costs, and liability to the institution for clean up costs if it forecloses on the contaminated property or becomesactivities involved in themanagementroutine practices of commercial lending, including, but not limited to, the providing of financial services, holding of security interests, workout practices, foreclosure or the recovery of funds from the sale of property shall not be liable under the environmental acts or common law equivalents to the Pennsylvania Department of Environmental Resources or to any other person by virtue of theborrower. To minimize this risk,fact that thebank may requirelender engages in such commercial lending practice. A lender, however, will be liable if it, its employees or agents, directly cause an immediate release or directly exacerbate a release of regulated substance on or from the property, or known and willfully compelled the borrower to commit an action which caused such release or violate an environmentalexaminationact. The Economic Development Agency, Fiduciary and Lender Environmental Liability Protection Act, however, does not limit federal liability which still exists under certain circumstances.Federal Reserve Board Requirements
Regulation D of the Federal Reserve Board requires all depository institutions to maintain reserves on transaction accounts. These reserves may be in the form of cash or non-interest-bearing deposits with the Federal Reserve Bank of Philadelphia. Under Regulation D, Mid Penn Bank’s reserve requirement was $500,000 and
report with respect$2,554,000 at December 31, 2002 and 2001, respectively.Recent Developments
USA Patriot Act of 2001. In October 2001, the USA Patriot Act of 2001 was enacted in response to the
property of any borrower or prospective borrower if circumstances affecting the property indicate a potential for contamination, taking into consideration a potential lossterrorist attacks in New York, Pennsylvania and Washington D.C. which occurred on September 11, 2001. The Patriot Act is intended tothe institution in relation to the borrower. Such examination must be performed by an engineering firm experienced in environmental risk studies and acceptable to the institution,strengthen U.S. law enforcement’s and thecostintelligence communities’ abilities to work cohesively to combat terrorism on a variety ofsuch examinations and reports are the responsibilityfronts. The potential impact of theborrower. These costsPatriot Act on financial institutions of all kinds is significant and wide ranging. The Patriot Act contains sweeping anti-money laundering and financial transparency laws and imposes various regulations, including standards for verifying client identification at account opening, and rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may besubstantial and may deter prospective borrower from entering into a loan transaction with the bank. The corporation is not aware of any borrower who is currently subject to any environmental investigationinvolved in terrorism orclean up proceeding that is likely to have a material adverse effect on the financial condition or results of operationsmoney laundering.IMLAFATA. As part of the
bank. As discussed above, there are several federalUSA Patriot Act, Congress adopted the International Money Laundering Abatement andstate statutesFinancial Anti-Terrorism Act of 2001 (IMLAFATA). IMLAFATA amended the Bank Secrecy Act and adopted certain additional measures thatregulateincrease theobligations and liabilitiesobligation of financial institutions,pertainingincluding MPB, toenvironmental issues.identify their customers, watch for and report upon suspicious transactions, respond to requests for information by federal banking regulatory authorities and law enforcement agencies, and share information with other financial institutions. The Secretary of the Treasury has adopted several regulations to implement these provisions. MPB is also barred from dealing with foreign “shell” banks. In addition,toIMLAFATA expands thepotential for attachment of liability resulting from its own actions,circumstances under which funds in a bank account may beheld liable under certain circumstances for the actions of its borrowers, or third parties, when such actions result in environmental problems on properties that collateralize loans held by the bank. Further, the liability has the potential to far exceed the original amount of the loan issued by the bank. Currently, neither the corporation nor the bank is a party to any pending legal proceeding pursuant to any environmental statute, nor is the corporation or the bank aware of any circumstances that may give rise to liability under any such statute. Supervision and Regulation - The Corporation Mid Penn Bancorp, Inc. is a bank holding company within the meaning offorfeited. IMLAFATA also amended the Bank Holding Company Actof 1956, as amended (the BHC Act) and is registered with, and subject to examination and regulation by, the Federal Reserve. The corporation's depository institution, Mid Penn Bank, is subject to supervision and examination by the Pennsylvania Department of Banking as well as the Federal Deposit Insurance Corporation. The activities of bank holding companies are generally limited to the business of banking, managing or controlling banks, and other activities that the Federal Reserve determines to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In addition, under the Gramm-Leach-Bliley Act (the GLB Act), which was effective in most significant respects on March 11, 2000, bank holding companies, such as the corporation, whose controlled depository institutions are "well capitalized" and "well managed", as defined in Federal Reserve Regulation Y, and which obtain satisfactory Community Reinvestment Act ratings, are eligible to declare themselves to be "financial holding companies" and engage in a broader spectrum of activities than those generally permitted, including insurance underwriting and brokerage (including annuities), and underwriting and dealing securities without a revenue 3limit and without limits on the amounts of equity securities it may hold in conducting its underwriting and dealing activities. Financial holding companies that do not continue to meet all of the requirements for such status, will, depending on which requirement they fail to meet, face not being able to undertake new activities or acquisitions that are financial in nature, or losing their ability to continue those activities that are not generally permissible for bank holding companies. The corporation currently meets the requirements to make an election to become a financial holding company. The corporation's management has not determined at this time whether it will seek an election to become a financial holding company. The corporation is examining its strategic business plan to determine whether, based on market conditions, the relative financial conditions of the corporation and its subsidiaries, regulatory capital requirements, general economic conditions, and other factors, the corporation desires to utilize any of its expanded powers provided in the GLB Act. Under the BHC Act, nonbank acquisitions have generally been limited to 5% of the voting shares unless the Federal Reserve determines that the acquisition is so closely rated to banking as to be a proper incident to banking or managing or controlling banks. Under the GLB Act, financial holding companies will be able to make acquisitions in companies that engage in activities that are financial in nature. The Federal Reserve's prior approval will not be required for such acquisitions, although it is possible that the Federal Reserve will issue regulations imposing some limitations or conditions on such acquisitions. In addition, under a new merchant banking authority added by the GLB Act, financial holding companies will be authorized to invest in companies that engage in activities that are not financial in nature, as long as the financial holding company makes its investment with the intention of limiting the investment in duration, does not manage the company on a day-to-day basis,and theinvestee company does not cross-market with any of the financial holding company's controlled depository institutions. This authority appliesBank Merger Act toinvestments both in the United States and outside the United States. It is possible that regulations conditioning this authority may be promulgated. Bank holding companies will also retain their authority, subject to prior specific or general Federal Reserve consent, to acquire less than 20% of the voting securities of a company that does not do business in the United States, and 20% or more of the voting securities of any such company if the Federal Reserve finds by regulation or order that its activities are usual in connection with banking or finance outside the United States. In general, bank holding companies that are not financial holding companies may engage in a broader range of activities outside the United States than they may engage in inside the United States, including sponsoring, distributing, and advising open-end mutual funds, and underwriting and dealing in debt and, to a limited extent, equity securities, subject to local country laws. At present, the corporation does not engage in merchant banking activities. However, the corporation will continue to examine its strategic business plan to determine whether, based on market conditions, the relative financial conditions of the corporation and its subsidiaries, regulatory capital requirements, general economic conditions, and other factors, the corporation desires to engage in merchant banking activities in the future. Subject to certain limitations and restrictions, a U.S. bank holding companies and U.S. domestic banks, with the prior approval of the Federal Reserve, may acquire out-of-state banks 4and out of state bank branches. A Pennsylvania-chartered bank is generally permitted to open a de novo branch in any state. The corporation's earnings and activities are affected by legislation, by actions of its regulators, and by local legislative and administrative bodies and decisions of courts in the jurisdictions in which the corporation and its subsidiaries conduct business. For example, these include limitations on the ability of certain subsidiaries to pay dividends to their intermediate holding companies and on the abilities of those holding companies to pay dividends to the corporation. It is the policy of the Federal Reserve that bank holding companies should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization's expected future needs and financial condition. The policy provides that bank holding companies should not maintain a level of cash dividends that undermines the bank holding company's ability to serve as a source of strength to its banking subsidiaries. Various federal and state statutory provisions limit the amount of dividends that subsidiary banks can pay to their holding companies without regulatory approval. In addition to these explicit limitations, the federal regulatory agencies are authorized to prohibit a banking subsidiary or bank holding company from engaging in an unsafe or unsound banking practice. Depending upon the circumstances, the agencies could take the position that paying a dividend would constitute an unsafe or unsound banking practice. Numerous other federal and state laws also affect the corporation's earnings and activities including federal and state consumer protection laws. Legislation may be enacted or regulation imposed in the United States or its political subdivisions, or in any other jurisdiction where the corporation does business, to further regulate banking and financial services or to limit finance charges or other fees or charges earned in such activities. There can be no assurance whether any such legislation or regulation will place additional limitations on the corporation's operations or adversely affect its earnings. Various legal restrictions exist on the extent to which a bank holding company and certain of its nonbank subsidiaries can borrow or otherwise obtain credit from banking subsidiaries or engage in certain other transactions with or involving those banking subsidiaries. In general, these restrictions require that any such transactions must be on terms that would ordinarily be offered to unaffiliated entities and secured by designated amounts of specified collateral. Transactions between a banking subsidiary and the bank holding company or any nonbank subsidiary are limited to 10% of the banking subsidiary's capital stock and surplus, and as to the holding company and all such nonbank subsidiaries in the aggregate, to 20% of the bank's capital stock and surplus. The corporation's right to participate in the distribution of assets of any subsidiary upon the subsidiary's liquidation or reorganization will be subject to the prior claims of the subsidiary's creditors. In the event of a liquidation or other resolution of an insured depository institution, the claims of depositors and other general or subordinated creditors are entitled to a priority of payment over the claims of holders of any obligation of the institution to its 5shareholders, including any depository institution holding company (such as the corporation) or any shareholder or creditor thereof. A financial institution insured by the FDIC that is under common control with a failed or failing FDIC-insured institution can be required to indemnify the FDIC for losses resulting from the insolvency of the failed institution, even if this causes the affiliated institution also to become insolvent. Any obligations or liability owed by a subsidiary depository institution to its parent company is subordinate to the subsidiary's cross-guarantee liability with respect to commonly controlled insured depository institutions and to the rights of depositors. Under Federal Reserve policy, a bank holding company is expected to act as a source of financial strength to each of its banking subsidiaries and commit resources to their support. As a result of that policy, the corporation may be required to commit resources to Mid Penn Bank in certain circumstances. However, under the GLB Act, the Federal Reserve will not be able to compel a bank holding company to remove capital from its regulated securities or insurance subsidiaries in order to commit such resources to its subsidiary banks. The Federal Reserve, the FDIC and other federal regulators have issued certain risk-based capital guidelines, which supplement existing capital requirements. The guidelines require all United States banks and bank holding companies to maintain a minimum risk-based capital ratio of 8%, at least 4% of which must be in the form of common stockholders' equity. The risk-based capital rules are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies and to minimize disincentives for holding liquid assets. The corporation and the bank have capital ratios exceeding regulatory requirements. For information concerning the corporation's ratios, please see page 20 of the corporation's 2000 Annual Report to Shareholders, which page is included at Exhibit 13 hereto and incorporated herein by reference. We include a detailed discussion of the bank's regulatory capital requirements in the section entitled "Supervision and Regulation--The Bank", below. The GLB Act included the most extensive consumer privacy provisions ever enacted by Congress. These provisions, among other things, require full disclosure of the corporation's privacy policy to consumers and mandate offering the consumer the ability to "opt out" of having non-public customer information disclosed to third parties. In addition, these provisionsrequire the federal bankingregulatorsregulatory authorities to consider the effectiveness of a financial institution’s anti-money laundering activities when reviewing an application to expand operations. MPB has in place a Bank Secrecy Act compliance program.Sarbanes-Oxley Act of 2002. On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002. The stated goals of the Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.
The Act is the most far-reaching U.S. securities legislation enacted in decades. The Act generally applies to all companies, both U.S. and non-U.S., that file or are required to file periodic reports with the Securities and Exchange Commission under the Securities Exchange Act of 1934. Due to the SEC’s extensive role in implementing rules relating to many of the Act’s new requirements, the final scope of these requirements remains to be determined.
The Act includes very specific additional disclosure requirements and new corporate governance rules, requires the SEC and securities exchanges to adopt
privacy regulationsextensive additional disclosure, corporate governance andpermitother related rules and mandates further studies of certain issues by thestatesSEC. The Act represents significant federal involvement in matters traditionally left toadopt more extensive privacy protections through legislation or regulation. We can provide no assurance whether anystate regulatory systems, suchlegislation oras the regulationwill place additional limitations onof thecorporation's operations or adversely affectaccounting profession, and to state corporate law, such as the relationship between a board of directors and management and between a board of directors and itsearnings. From time to time, legislation is introduced in Congress that may change banking statutescommittees.The Act addresses, among other matters:
audit committees for all reporting companies;certification of financial statements by the chief executive officer and theoperating environmentchief financial officer;the forfeiture of bonuses or other incentive-based compensation and profits from thecorporationsale of an issuer’s securities by directors and senior officers in the twelve month period following initial publication of any financial statements that later require restatement;a prohibition on insider trading during pension plan black out periods;disclosure of off-balance sheet transactions;a prohibition on personal loans to directors and officers; expedited filing requirements for Forms 4’s;disclosure of a code of ethics and filing a Form 8-K for a change or waiver of such code;“real time” filing of periodic reports;the formation of a public accounting oversight board;auditor independence; andvarious increased criminal penalties for violations of securities laws.The Act contains provisions that were effective upon enactment on July 30, 2002 and provisions that will be phased in for up to one year after enactment. The SEC was delegated the task of enacting rules to implement various provisions with respect to, among other matters, disclosure in periodic filings pursuant to the Exchange Act.
Regulation W. Transactions between a bank and its
banking subsidiary“affiliates” are quantitatively and qualitatively restricted under the Federal Reserve Act. The Federal Deposit Insurance Act applies Sections 23A and 23B to insured nonmember banks insubstantialthe same manner andunpredictable ways. The corporation cannot determine whether any such proposed legislation will be enacted and,to the same extent as ifenacted, the ultimate effect that any such potential legislation or implementing regulations would have upon the financial condition or results of operations of the corporation or its depository subsidiary. 6Supervision and Regulation - The Bank Mid Penn Bank is a Pennsylvania chartered bank. It's deposits are insured by the FDIC. The bank is not a memberthey were members of the Federal Reserve System. Thebank is subject to supervision, regulationFederal Reserve Board has also recently issued Regulation W, which codifies prior regulations under Sections 23A andexamination by the Pennsylvania Department23B ofBanking and by the FDIC. In addition, the bank is subject to a variety of local, state and federal laws that affect its operation. The laws of Pennsylvania applicable to the bank include provisions that, among other things: . require the maintenance of certain reserves against deposits; . limit the type and amount of loans that may be made and the interest that may be charged thereon; . restrict investments and other activities; . set limits on the payment of dividends; and . regulate activities of the bank with respect to mergers and consolidations and the establishment of branches. The amount of funds that the bank can lend to a single borrower is limited, generally, under Pennsylvania law, to 15% of the aggregate of its capital, surplus, undivided profits and loan loss reserves and capital securities, all as defined by statute and by regulation. Further, the bank, as a subsidiary bank of a bank holding company, is subject to certain restrictions imposed bythe Federal Reserve Acton: .and interpretative guidance with respect to affiliate transactions. Regulation W incorporates the exemption from the affiliate transaction rules but expands the exemption to cover the purchase of anyextensionstype of loan or extension of credit from an affiliate. Affiliates of a bank include, among other entities, the bank’s holding company and companies that are under common control with the bank. MPB is considered to be an affiliate of Mid Penn Bank. In general, subject to certain specified exemptions, a bank or its subsidiaries are limited in their ability to engage in “covered transactions” with affiliates:to an amount equal to 10% of the bank’s capital and surplus, in the case of covered transactions with any one affiliate; andto an amount equal to 20% of the bank’s capital and surplus, in the case of covered transactions with all affiliates.In addition, a bank and its subsidiaries may engage in covered transactions and other specified transactions only on terms and under circumstances that are substantially the same, or at least as favorable to the bank or its subsidiary, as those prevailing at the time for comparable transactions with nonaffiliated companies. A “covered transaction” includes:
a loan or extension of credit to an affiliate;a purchase of, or an investment in, securities issued by an affiliate;a purchase of assets from an affiliate, with some exceptions;thecorporation or its subsidiaries; . investments in the stock or otheracceptance of securitiesof the corporation or its subsidiaries; and . taking such stock or securitiesissued by an affiliate as collateral forloans. The Federal Reserve Acta loan or extension of credit to any party; andFederal Reserve Board regulations also place certain limitationsthe issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate.In addition, under Regulation W:
a bank andreporting requirementsits subsidiaries may not purchase a low-quality asset from an affiliate;covered transactions and other specified transactions between a bank or its subsidiaries and an affiliate must be onextensionsterms and conditions that are consistent with safe and sound banking practices; andwith some exceptions, each loan or extension of credit by a bank toprincipal shareholdersan affiliate must be secured by collateral with a market value ranging from 100% to 130%, depending on the type ofits parent holding company, among others, and to related interestscollateral, ofsuch principal shareholders. In addition, legislation and regulations promulgated thereunder may affect the terms upon which any person becoming a principal shareholder of a holding company may obtain credit from banks with which the subsidiary bank maintains a correspondent relationship. Under the Federal Deposit Insurance Corporation Improvement Act of 1991, federal regulatory agencies classify institutions into one of five defined capital categories: . Well capitalized, . Adequately capitalized, . Under capitalized, . Significantly undercapitalized, and . Critically undercapitalized. The table below illustrates these capital categories. 7
Total Tier 1 Under a Risk- Risk- Tier 1 Capital Based Based Leverage Order or Ratio Ratio Ratio Directive ----- ------ --------- ---------CAPITAL CATEGORY Well capitalized 10.0 6.0 5.0 No Adequately capitalized 8.0 4.0 4.0* Undercapitalized 8.0 4.0 4.0* Significantly undercapitalized 6.0 3.0 3.0 Critically undercapitalized 2.0*3.0 for those banks having the highest available regulatory rating. In the event an institution's capital deteriorates to the undercapitalized category or below, FDICIA prescribes an increasing amount of regulatory intervention, including: . The bank's implementation of a capital restoration plan and a guarantee of the plan by a parent institution; and . The placement of a "hold" on increases in assets, number of branches or lines of business. If capital has reached the significantly or critically undercapitalized level, further material restrictions can be imposed, including: . restrictions on interest payable on accounts, . dismissal of management, and . in critically undercapitalized situations, the appointment of a receiver. For well capitalized institutions, FDICIA provides authority for regulatory intervention where the institution is deemed to be engaging in unsafe or unsound practices or receives a less than satisfactory examination report rating for asset quality, management, earnings or liquidity. All but well capitalized institutions are prohibited from accepting brokered deposits without prior regulatory approval. Under FDICIA, financial institutions are subject to increased regulatory scrutiny and must comply with certain operational, managerial and compensation standards to be developed by Federal Reserve regulations. Under the Federal Deposit Insurance Act, federal regulatory agencies possess the power to prohibit institutions from engaging in any activity that would be an unsafe or unsound banking practice or would otherwise be in violation of law. Moreover, the Financial Institutions Regulatory and Interest Rate Control Act of 1978 generally expanded the circumstances under which officers or directors of a bank may be removed by the institution's federal supervisory agency, restricts lending by a bank to its executive officers, directors, principal shareholders or related interests thereof and restricts management personnel of a bank from serving as directors or in other management positions with certain depository institutions whose assets exceed a specified amount or which have an office within a specified geographic area, and restricts the 8relationships of management personnel of a bank with securities companies and securities dealers. Additionally, FIRA prohibits acquisition of control of a bank unless the appropriate federal supervisory agency has received 60 days prior written notice, and, within that time, has not disapproved the acquisition of control or otherwise extended the period for disapproval. Control, for purposes of FIRA, means the power to direct, either directly or indirectly, the management or policies or to vote 25% or more of any class of outstanding stock of a financial institution or its respective holding company. Persons or groups holding revocable proxies to vote 25% or more of the outstanding common stock of a financial institution or holding company would be presumed to be in control of the institution for purposes of FIRA. Under the Community Reinvestment Act of 1977, as amended, an institution's federal regulator is required to assess a financial institutions record to determine if the institution is meeting the credit needs of the community, including low and moderate income neighborhoods, which it serves and to take this record into account evaluating any application made by an institution for, among other things, approval of a branch or other deposit facility, office relocation, a merger or any acquisition of bank shares. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 amended the CRA to require, among other things, that a bank's record of meeting the credit needs of its community, including low and moderate income neighborhoods be made available to the public. This evaluation includes a descriptive rating: . "outstanding" . "satisfactory" . "needs to improve" or . "substantially non compliance" and . a statement describing the basis for the rating. These ratings are publicly disclosed. Under the Bank Secrecy Act, banks and other financial institutions are required to report to the Internal Revenue Service currency transactions of more than $10,000 or multiple transactions of which the bank is aware in any one day that aggregate in excess of $10,000. Civil and criminal penalties are provided under the BSA for failure to file a required report, for failure to supply information required by the BSA or for filing a false or fraudulent report. The Competitive Equality Banking Act, included the legislation which: . imposes certain restrictions on transactions between banks and their affiliates;. . expands the powers available to Federal bank regulators in assisting failed or failing banks; . limitsthe amount oftime banks may hold certain deposits prior to making such funds available for withdrawalthe loan or extension of credit.Regulation W generally excludes all non-bank and
any interest thereon; and . requires that any adjustable rate mortgage loan secured by a lien on a one-to-four family dwelling include a limitation on the maximum rate at which interest may accrue on the principal balance during the term of such loan. 9The GLB Act includes a new section of the Federal Deposit Insurance Act governingnon-savings association subsidiaries ofstatebanksthat engage in "activitiesfrom treatment asprincipal that would only be permissible" for a national bank to conduct in a financial subsidiary. It expressly preserves the ability of a state bank to retain all existing subsidiaries. Because Pennsylvania permits commercial banks chartered by the state to engage in any activity permissible for national banks, the bank will be permitted to form subsidiaries to engage in the activities authorized by the GLB Act, to the same extent as a national bank. In order to form a financial subsidiary, the bank must be well-capitalized, and the bank would be subject to the same capital deduction, risk management and affiliate transaction rules as applicable to national banks. The corporation and the bank do not believe that the GLB Act will have a material adverse effect on our operations in the near-term. However,affiliates, except to the extent thatit permits banks, securities firms,the Federal Reserve Board decides to treat these subsidiaries as affiliates.Concurrently with the adoption of Regulation W, the Federal Reserve Board has proposed a regulation which would further limit the amount of loans that could be purchased by a bank from an affiliate to not more than 100% of the bank’s capital and surplus.
Effects of Government Policy and Potential Changes in Regulation
Changes in regulations applicable to MPB or Mid Penn Bank, or shifts in monetary or other government policies, could have a material affect on their business. MPB’s and the
insurance companies to affiliate,bank’s business is also affected by the state of the financial services industrymay experience further consolidation. The GLB Act is intended to grant to community banks certain powers asin general. As amatter or right that larger institutions have accumulated on an ad hoc basis. Nevertheless, this Act may have theresult ofincreasing the amount of competitionlegal and industry changes, management believes that thecorporationindustry will continue to experience an increased rate of change as the financial services industry strives for greater product offerings, market share andthe bank face from larger institutions and other typeseconomies ofcompanies offering financial products, many of which may have substantially more financial resources than the corporation and the bank.scale.From time to time, legislation is enacted that has the effect of increasing the cost of doing business, limiting or expanding permissible activities or affecting the competitive balance between banks and other financial institutions. Proposals to change the laws and regulations governing the operations and taxation of banks, bank holding companies and other financial institutions are frequently made in Congress, and before various bank regulatory agencies.
The corporation cannotMPB can not predict the likelihood of any major changes or the impact such changes might have onthe corporationMPB and/or the bank.The corporation'sVarious congressional bills andbank's earningother proposals have proposed a sweeping overhaul of the banking system, including provisions for: limitations on deposit insurance coverage; changing the timing and method financial institutions use to pay for deposit insurance; expanding the power of banks by removing the restrictions on bank underwriting activities; and tightening the regulation of bank derivatives activities; and allowing commercial enterprises to own banks.MPB’s earnings are and will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The monetary policies of the Federal Reserve have had, and will likely continue to have, an impact on the operating results of commercial banks because of the Federal
Reserve'sReserve’s power to implement national monetary policy, to, among other things, curb inflation or combat recession. The Federal Reserve has a major impact on the levels of bank loans, investments and deposits through its open market operations in United States government securities and through its regulation of, among other things, the discount rate on borrowings of member banks and the reserve requirements against member bank deposits. It is not possible to predict the nature and impact of future changes in monetary and fiscal policies.Further, the business of the corporation is also affected by the state of the financial services industry in general. As a result of legal and industry changes, management predicts that the industry will continue to experience an increase in consolidations and mergers as the financial services industry strives for greater cost efficiencies and market share. Management also expects increased diversification of financial products and services offered by the bank and its competitors. Management believes that such consolidations and mergers, and diversification of products and services may enhance the bank's competitive position. 10From time to time, various types of federal and state legislation have been proposed that could result in additional regulation of, and restrictions on, the business of the bank. It cannot be predicted whether any such legislation will be adopted or, if adopted, how such legislation would affect the business of the bank. As a consequence of the extensive regulation of commercial banking activities in the United States, the
bank'sbank’s business is particularly susceptible to being affected by federal legislation and regulations that may increase the costs of doing business.Pending Legislation ManagementAvailable Information
Mid Penn Bancorp Inc.’s common stock is
not awareregistered under Section 12(b) ofany other current specific recommendations by regulatory authorities or proposed legislation which, if they were implemented, would have a material adverse effect upontheliquidity, capital resources, or resultsSecurities Exchange Act ofoperations, although the general cost of compliance with numerous1934 andmultiple federal and state laws and regulations does have, and in the future may have, a negative impactis traded on thecorporation's results of operations. Federal Taxation The corporation andAmerican Stock Exchange under thebank are subject to those rules of federal income taxation generally applicable to corporations and report their respective income and expenses on the accrual method of accounting. The corporation and its subsidiaries file a consolidated federal income tax return on a calendar year basis. Intercompany distributions (including dividends) and certain other items of income and loss derived from intercompany transactions are eliminated upon consolidation of all the consolidated group members' respective taxable income and losses. The Internal Revenue Code imposes a corporate alternative minimum tax. The corporate AMT only applies if such alternative minimum tax exceeds a corporation's regular tax liability. The excess of the calculated AMT over the regular tax for the taxable year is the taxpayer's net minimum tax liability. State Tax The corporationtrading symbol MBP. Mid Penn Bancorp, Inc. is subject to thePennsylvania Corporate Net Income Taxinformational requirements of the Exchange Act, and,Capital Stock Tax.accordingly, files reports, proxy statements and other information with the Securities and Exchange Commission. Thecurrent Corporate Net Income Tax rate is 9.99%reports, proxy statements andis imposed upon a corporate taxpayer's unconsolidated taxable incomeother information filed with the SEC are available forfederal tax purposes with certain adjustments. In general,inspection and copying at theCapital Stock Tax is a property tax imposedSEC’s Public Reference Room at Judiciary Plaza, 450 Fifth Street, N.W, Washington, D.C. 20549. You may obtain information ona corporate taxpayer's capital stock value apportionable totheCommonwealthoperation ofPennsylvania, which is determined in accordance with a fixed formula based upon average book income and net worth. Inthecase of a holding company, an optional elective method permitsPublic Reference Room by calling thecorporate taxpayer to be taxed on only 10% of such capital stock value. The Capital Stock Tax rate for 2000 was .00899%. 11ITEM 2. PROPERTIES. - ------ ---------- The principal office ofSEC at 1-800-SEC-0330. Mid Penn Bancorp, Inc. is an electronic filer with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The SEC’s Internet site address is: http://www.sec.gov. Our Internet site address is: http//www.midpennbank.com.You may also inspect materials and other information concerning Mid Penn
Bank are locatedBancorp, Inc. at349 Union Street, Millersburg, Pennsylvania.the offices of the American Stock Exchange, Inc. at 86 Trinity Place, New York, New York 10006 because our common stock is listed on the American Stock Exchange under the trading symbol MBP. The American Stock Exchange’s Internet site address is: http://www.amex.com.The bank owns its main office,
allbranch offices and certain parking facilities related to its banking offices, all of which are free and clear of any lien. The bank’s main office and all branch offices are located in Pennsylvania. The table below sets forth the location of each of thebank'sbank’s properties.Office and Address Description of Property - ------------------ ----------------------- Main Office Main Bank Office 349 Union Street Millersburg, PA 17061 Tremont Branch Office Branch Bank 7-9 East Main Street Tremont, PA 17981 Elizabethville Branch Office Branch Bank 2 East Main Street Elizabethville, PA 17023 Elizabethville Branch Office Drive-In 11 East Main Street Elizabethville, PA 17023 Dalmatia Branch Office Branch Bank School House Road Dalmatia, PA 17017 Halifax Branch Office Branch Bank Halifax Shopping Center 3763 Peters Mountain Road Halifax, PA 17032 Carlisle Pike Branch Office Branch Bank 4622 Carlisle Pike Mechanicsburg, PA 17055 Harrisburg Branch Office Branch Bank 4098 Derry Street Harrisburg, PA 17111 Harrisburg Branch Office Branch Office 2615 North Front Street Harrisburg, PA 17110 12Tower City Branch Office Branch Bank 545 East Grand Avenue Tower City, PA 17980 Dauphin Branch Office Branch Bank 1001 Peters Mountain Road Dauphin, PA 17018 Lykens Branch Office Branch Bank 550 Main Street Lykens, PA 17048
Office and Address
Description of Property
Main Office
Main Bank Office
349 Union Street
Millersburg, PA 17061
Tremont Branch Office
Branch Bank
7-9 East Main Street
Tremont, PA 17981
Elizabethville Branch Office
Branch Bank
2 East Main Street
Elizabethville, PA 17023
Elizabethville Branch Office
Drive-In
11 East Main Street
Elizabethville, PA 17023
Dalmatia Branch Office
Branch Bank
School House Road
Dalmatia, PA 17017
Halifax Branch Office
Branch Bank
Halifax Shopping Center
3763 Peters Mountain Road
Halifax, PA 17032
Carlisle Pike Branch Office
Branch Bank
4622 Carlisle Pike
Mechanicsburg, PA 17055
Harrisburg Branch Office
Branch Bank
4098 Derry Street
Harrisburg, PA 17111
Harrisburg Branch Office
Branch Bank
2615 North Front Street
Harrisburg, PA 17110
Tower City Branch Office
Branch Bank
545 East Grand Avenue
Tower City, PA 17980
Dauphin Branch Office
Branch Bank
1001 Peters Mountain Road
Dauphin, PA 17018
Miners-Lykens Branch Office
Branch Bank
550 Main Street
Lykens, PA 17048
All of these properties are in good condition and are deemed by management to be adequate for the
bank'sbank’s purposes.ITEM 3. LEGAL PROCEEDINGS.
- ------ -----------------Management
after consulting with the corporation's legal counsel,is not aware of any litigation that would have a material adverse effect on the consolidated financial position ofthe corporation.MPB. There are no proceedings pending other than ordinary routine litigation incident to the business ofthe corporationMPB and of the bank. In addition, management does not know of any material proceedings contemplated by governmental authorities againstthe corporationMPB or the bank.ITEM 4. SUBMISSION
OFMATTERSOF MATTERS TO A VOTE OF SECURITY HOLDERS.- ------ -------------------------------------------------- No matters were submitted during the fourth quarter of 2000 to the corporation's shareholders for a vote.None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. - ------ ------------------------------------------------- -------------------
ITEM 5. MARKET FOR MPB’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The information required by this Item, regarding market value, dividend payments, and number of shareholders is set forth on page
32 ofthe corporation'sMPB’s Annual Report to Shareholders, which page is included at Exhibit 13 hereto, and incorporated herein by reference.As of
March 28, 2001,February 21, 2003, there were approximately969971 shareholders of record ofthe corporation'sMPB’s common stock.13ITEM 6. SELECTED FINANCIAL DATA. - ------ -----------------------
ITEM 6. SELECTED FINANCIAL DATA. The information required by this Item is set forth on page 39 of
the corporation'sMPB’s Annual Report to Shareholders, which page is included at Exhibit 13 hereto, and incorporated herein by reference.ITEM
7. MANAGEMENT'S7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS- ------ -----------------------------------------------------------------------OFOPERATION. -------------OPERATIONS.The information required by this Item is set forth on pages 24 through 38 of
the corporation'sMPB’s Annual Report to Shareholders, which pages are included at Exhibit 13 hereto, and incorporated herein by reference.ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURESDISCLOSURE ABOUT MARKETRISKS. - ------- ----------------------------------------------------- ------RISK.The information required by this Item is set forth on pages 34 through 37 of
the corporation'sMPB’s Annual Report to Shareholders, which pages are included at Exhibit 13, hereto and incorporated herein by reference.ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA. - ------ -------------------------------------------DATA.The information required by this Item is set forth on pages
65 through 23 ofthe corporation'sMPB’s Annual Report to Shareholders, which pages are included at Exhibit 13 hereto, and incorporated herein by reference.ITEM
9.9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND- ------ ---------------------------------------------------------------FINANCIAL DISCLOSURE.---------------------None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. - ------- --------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF MPB. The information required by this Item, relating to directors, executive officers, and control persons is set forth
under the heading "Boardon pages 9-10 and 16-17 ofDirectors and Executive Officers" of the corporation'sMPB’s definitive proxy statement to be used in connection with the20012003 Annual Meeting of Shareholders, whichsection ispages are incorporated herein by reference.COMPLIANCE WITH SECTION 16(A) REPORTING Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that officers and directors, and persons who own more than 10% of a registered class of the corporation's equity securities, file reports of ownership and changes in ownership with the Securities and 14Exchange Commission. Officers, directors, and greater than 10% shareholders are required by SEC regulation to furnish the corporation with copies of all Section 16(a) forms they file. Based solely on our review of the copies of these forms, or written representations from certain reporting persons that no Forms 5 were required for those persons, Mid Penn Bancorp, Inc. believes that during the period from January 1, 2000, through December 31, 2000, its officers and directors complied with all applicable filing requirements. ITEM 11. EXECUTIVE COMPENSATION. - ------- ----------------------
ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item, relating to executive compensation, is set forth
under the headings "Executive Compensation," "Compensationon pages 13-15 ofthe Board of Directors," "Compensation Committee Interlocks and Insider Participation," "Salary Personnel Committee Report on Executive Compensation," and "Shareholder Return Performance Graph" of the corporation'sMPB’s definitive proxy statement to be used in connection with the20012003 Annual Meeting of Shareholders, whichsectionspages are incorporated herein by reference.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. - ------- --------------------------------------------------------------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this Item, relating to beneficial ownership of
the corporation'sMPB’s common stock, is set forthunder the heading "Beneficial Ownershipon pages 16-17 ofMid Penn Bancorp's Stock Held by Principal Shareholders and Management" of the corporation'sMPB’s definitive proxy statement to be used in connection with the20012003 Annual Meeting of Shareholders, whichsection ispages are incorporated herein by reference.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. - ------- ----------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item, relating to transactions with management and others, certain business relationships and indebtedness of management, is set forth
under the heading "Certain Relationships and Related Transactions"on page 15 ofthe corporation'sMPB’s definitive proxy statement to be used in connection with the20012003 Annual Meeting of Shareholders, whichsectionpage is incorporated herein by reference.15PART IVITEM 14. Controls and Procedures.
Within 90 days prior to the date of this Form 10-K, MPB carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, MPB’s disclosure controls and procedures are effective in timely alerting them to material information relating to MPB (including its consolidated subsidiaries) required to be included in our periodic SEC filings. There have been no significant changes in MPB’s internal controls or, to its knowledge, in other factors that could significantly affect internal controls subsequent to the date MPB carried out its evaluation.
ITEM 15. EXHIBITS, FINANCIAL
STAEMENT,STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K.- ------- ---------------------------------------------------------------
PAGE* - ----- (a) 1. Consolidated Financial Statements. MID PENN BANCORP, INC. AND SUBSIDIARIES:.(a) 1. Financial Statements
The following financial statements are included by reference in Part II, Item 8 hereof:
Report
of Independent Certified Public Accountants............................5 . Consolidated Balance Sheet, as of December 31, 2000 and 1999..................6 . Consolidated Statement of Income, for the years ended December 31, 2000, 1999 and 1998...........................................................7 . Consolidated Statement of Changes in Stockholders' Equity for the years ended December 31, 2000, 1999 and 1998..................................8 . Consolidated Statement of Cash Flows for the years ended December 31, 2000, 1999 and 1998..............................................9 . Notes to Consolidated Financial Statements for 2000 report..................10-23*Refers to the respective pageofthe Annual Report to Shareholders. TheIndependent Certified Public Accountants.Consolidated
Financial Statements andBalance Sheet.Consolidated Statement of Income.
Consolidated Statement of Changes in Stockholders’ Equity.
Consolidated Statement of Cash Flows.
Notes to Consolidated Financial
Statements and Auditor's Report thereon on pages 5 to 23 of the Annual Report to Shareholders, are incorporated herein by reference and attached at Exhibit 13 to this Annual Report on Form 10-K. With the exception of the portions of such Annual Report specifically incorporated by reference in this Item and in Items 1, 5, 6, 7 and 8, such Annual Report shall not be deemed filed as part of this Annual Report on Form 10-K or otherwise subject to the liabilities of Section 18 of the Securities Exchange Act of 1934.Statements.2. Financial Statement Schedules.
Financial Statement Schedules are omitted because the required information is either not applicable, not required or
the informationisincludedshown in theconsolidatedrespective financial statements or in the notes thereto.3. The following Exhibits are filed herewith or incorporated by reference as a part of
thethis Annual Report.3(i) Corporation's Articles of Incorporation. (Incorporated by reference to Exhibit 3(i) to the Corporation's Annual Report on Form 10-K for the year ended December 31, 1996, and filed with the Commission on March 31, 1997.) 3(ii) Corporation's Bylaws. (Incorporated by reference to Exhibit 3(ii) to the Corporation's Annual Report on Form 10-K for the year ended December 31, 1996, and filed with the Commission on March 31, 1997.) 10.1 Retirement Bonus Plan for the Board of Directors of Mid Penn Bank. (Incorporated by reference to Exhibit 10 to the Corporation's Annual Report on Form 10-K for the year ended December 31, 1996, and filed with the Commission on March 31, 1997. 1610.2 Mid Penn Bancorp, Inc. Amended and Restated Dividend Reinvestment Plan. (Incorporated by reference to the Corporation's Registration Statement No. 333-39341 on Form S-8, filed with the Commission on November 3, 1997.) 11 Statement re: Computation of Per Share Earnings. (Included herein at Exhibit 13, at page 7 of the Corporation's Annual Report to Shareholders.) 12 Statements re: Computation of Ratios. (Included herein at Exhibit 13, at page 39 of the Corporation's Annual Report to Shareholders.) 13 Excerpts from the Corporation's 2000 Annual Report to Shareholders. 21 Subsidiaries of the Corporation. 23 Consent of Parente Randolph, P.C., independent auditors.
3(i)
The Registrant’s Articles of Incorporation. (Incorporated by reference to Registrant’s Annual Report on Form 10-K filed with the SEC on March 29, 2002.)
(3)(ii)
The Registrant’s By-laws. (Incorporated by reference to Registrant’s Annual Report on Form 10-K filed with the SEC on March 29, 2002.)
10.1
Mid Penn Bank’s Profit Sharing Retirement Plan. (Incorporated by reference to Registrant’s Annual Report on Form 10-K filed with the SEC on March 29, 2002.)
10.2
Mid Penn Bank’s Employee Stock Ownership Plan. (Incorporated by reference to Registrant’s Annual Report on Form 10-K filed with the SEC on March 29, 2002.)
10.3
The Registrant’s Dividend Reinvestment Plan, as amended and restated. (Incorporated by reference to Registrant’s Registration Statement on Form S-3, filed with the SEC on November 3, 1997.)
10.4
Salary Continuation Agreement between Mid Penn Bank and Alan W. Dakey.
11
Statement re: Computation of Per Share Earnings. (Included herein at Exhibit 13, at page 6 of Registrant’s Annual Report to Shareholders.)
12
Statements re: Computation of Ratios. (Included herein at Exhibit 13, at page 39 of Registrant’s Annual Report to Shareholders.)
13
Excerpts from Registrant’s Annual Report to Shareholders.
21
Subsidiaries of Registrant.
23
Consent of Parente Randolph, PC, independent auditors.
99.1
Chief Executive Officer’s §906 Certification.
99.2
Chief Financial Officer’s §906 Certification.
(b) Reports on Form 8-K.
No Current
ReportReports on Form 8-Kwaswere filed bythe CorporationRegistrant during the fourth quarter of the fiscal year endedDecember 31,
2000.2002.(c) The exhibits required herein are included at
Item 14(a)item 15(a), above.(d) Not Applicable.
17.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the RegistrantMid Penn Bancorp, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.MID PENN BANCORP, INC. (Registrant) By: /s/ Alan W. Dakey ----------------- Alan W. Dakey, President and Chief Executive Officer
MID PENN BANCORP, INC.
(Registrant)
By
/s/ Alan W. Dakey
Alan W. Dakey
President and Chief Executive Officer
Dated: March
28, 200127, 2003Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the corporationMid Penn Bancorp, Inc. and in the capacities and on the dates indicated.By /s/ Eugene F. Shaffer March 28, 2001 --------------------- Eugene F. Shaffer, Chairman of the Board of Directors By /s/ Alan W. Dakey March 28, 2001 ---------------------
Date
By /s/ Eugene F. Shaffer
March 27, 2003
Eugene F. Shaffer
Chairman of the Board of Directors
By /s/ Alan W. Dakey
March 27, 2003
Alan W. Dakey, President,
Chief Executive Officer and Director
(Principal Executive Officer)
By /s/ Kevin W. Laudenslager
March 27, 2003
Kevin W. Laudenslager
Treasurer (Principal Financial and Principal Accounting Officer)
By /s/ Jere M. Coxon
March 27, 2003
Jere M. Coxon, Director
By /s/ Earl R. Etzweiler
March 27, 2003
Earl R. Etzweiler, Director
By /s/ Gregory M. Kerwin
March 27, 2003
Gregory M. Kerwin, Director
By /s/ Charles F. Lebo
March 27, 2003
Charles F. Lebo, Director
Date
By /s/ William G. Nelson
March 27, 2003
William G. Nelson, Director
By /s/ Donald E. Sauve
March 27, 2003
Donald E. Sauve, Director
By /s/ Edwin D. Schlegel
March 27, 2003
Edwin D. Schlegel, Director
By /s/ Guy J. Snyder, Jr.
March 27, 2003
Guy J. Snyder, Jr., Director
By /s/ Warren A. Miller
March 27, 2003
Warren A. Miller, Director
CERTIFICATION
I, Alan W. Dakey, President and Chief Executive Officer,
and Director (Principal executive officer) By /s/ Kevin W. Laudenslager March 28, 2001 ------------------------- Kevin W. Laudenslager, Treasurer (principal financial and accounting officer) By March __, 2001 ----------------------- Jere M. Coxon, DirectorBy /s/ Earl R. Etzweiler March 28, 2001 --------------------- Earl R. Etzweiler, Director By /s/ Gregory M. Kerwin March 28, 2001 --------------------- Gregory M. Kerwin, Director By /s/ Charles F. Lebo March 28, 2001 ------------------- Charles F. Lebo, Director By /s/ Warren A. Miller March 28, 2001 -------------------- Warren A. Miller, Director By /s/ William G. Nelson March 28, 2001 --------------------- William G. Nelson, Director By /s/ Donald E. Sauve March 28, 2001 ------------------- Donald E. Sauve, Director By /s/ Edwin D. Schlegel March 28, 2001 --------------------- Edwin D. Schlegel, Director By /s/ Guy J. Snyder, Jr. March 28, 2001 ---------------------- Guy J. Snyder, Jr., DirectorEXHIBIT INDEX Page Number in Manually Signed Original Exhibit No. - ----------- 3(i) Corporation's Articles of Incorporation. * (Incorporated by referenceto Exhibit 3(i) to the Corporation's Annual Reportcertify, that:1. I have reviewed this annual report on Form 10-K
for the year ended December 31, 1996, and filed with the Commission on March 31, 1997.) 3(ii) Corporation's Bylaws. (Incorporated by reference * to Exhibit 3(ii) to the Corporation's Annual Report on Form 10-K for the year ended December 31, 1996, and filed with the Commission on March 31, 1997.) 10.1 Retirement Plan for the BoardofDirectors of Mid * Penn Bank. (Incorporated by reference to Exhibit 10 to the Corporation's Annual Report on Form 10-K for the year ended December 31, 1996, and filed with the Commission on March 31, 1997.) 10.2Mid Penn Bancorp, Inc.Amended and Restated Dividend * Reinvestment Plan. (Incorporated by reference;2. Based on my knowledge, the annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
Corporation's Registration Statement No. 333-39341period covered by this annual report;3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies in the design or operation of the internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect the internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date:
March 27, 2003
By:
/s/ Alan W. Dakey
Alan W. Dakey
President and Chief Executive Officer
CERTIFICATION
I, Kevin W. Laudenslager, Chief Financial Officer, certify, that:
1. I have reviewed this annual report on Form
S-8, filed with10-K of Mid Penn Bancorp, Inc.;2. Based on my knowledge, the
Commission on November 3, 1997.) 11 Statement re: Computationannual report does not contain any untrue statement ofPer Share Earnings. 27 (Included herein at Exhibit 13, at page 7a material fact or omit to state a material fact necessary to make the statements made, in light of theCorporation's Annual Reportcircumstances under which such statements were made, not misleading with respect toShareholders.) 12 Statements re: Computationthe period covered by this annual report;3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of
Ratios. (Included herein 59 at Exhibit 13, at page 39operations and cash flows of theCorporation's Annual Reportregistrant as of, and for, the periods presented in this annual report;4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to
Shareholders.) 13 Excerpts fromensure that material information relating to theCorporation's Annual Reportregistrant, including its consolidated subsidiaries, is made known to23 Shareholders. 21 Subsidiariesus by others within those entities, particularly during the period in which this annual report is being prepared;(b) evaluated the effectiveness of the
Corporation. 60 23 Consentregistrant’s disclosure controls and procedures as ofParente Randolph, P.C., independent auditors. 61 * Incorporated by reference.
(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies in the design or operation of the internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect the internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: | March 27, 2003 | By: | /s/ Kevin W. Laudenslager | |||||
Kevin W. Laudenslager, Chief Financial Officer |
Exhibit No. | Page Number in Manually Signed Original | ||||
3 | (i) | The Registrant’s Articles of Incorporation. (Incorporated by reference to Registrant’s Annual Report on Form 10-K filed with the SEC on March 29, 2002.) | * | ||
3 | (ii) | The Registrant’s By-laws. (Incorporated by reference to Registrant’s Annual Report on Form 10-K filed with the SEC on March 29, 2002.) | * | ||
10.1 |
| Mid Penn Bank’s Profit Sharing Retirement Plan. (Incorporated by reference to Registrant’s Annual Report on Form 10-K filed with the SEC on March 29, 2002.) | * | ||
10.2 |
| Mid Penn Bank’s Employee Stock Ownership Plan. (Incorporated by reference to Registrant’s Annual Report on Form 10-K filed with the SEC on March 29, 2002.) | * | ||
10.3 |
| The Registrant’ Dividend Reinvestment Plan. (Incorporated by reference to Registrant’s Annual Report on Form 10-K filed with the SEC on November 3, 1997.) | * | ||
10.4 |
| Salary Continuation Agreement between Mid Penn Bank and Alan W. Dakey. | 22 | ||
11 |
| Statement re: Computation of Per Share Earnings. (Included herein at Exhibit 13, at page 6 of Registrant’s Annual Report to Shareholders.) | * | ||
12 |
| Statement re: Computation of Ratios. (Included herein at Exhibit 13, at page 39 of Registrant’s Annual Report to Shareholders.) | * | ||
13 |
| Excerpts from Registrant’s Annual Report to Shareholders. | 36 | ||
21 |
| Subsidiaries of Registrant. | 74 | ||
23 |
| Consent of Parente Randolph, PC, independent auditors. | 75 | ||
99.1 |
| Chief Executive Officer’s §906 Certification. | 76 | ||
99.2 |
| Chief Financial Officer’s §906 Certification. | 77 |
* | Incorprated by reference. |