UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 1997
Commission file number 0-20141
Mid Penn Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1666413
(State or other jurisdiction of (IRS Employer ID No)
Incorporation or Organization)
349 Union Street, Millersburg, PA 17061
(Address of principal executive offices) (Zip Code)
(717) 692-2133
(Registrant's telephone number, including area code)
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 registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the
classes of common stock, as of the latest practical date.
1,241,9731,303,776 shares of Common Stock, $1.00 par value per share,
were outstanding as of March 31,June 30, 1997.
MID PENN BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
March 31,June 30, Dec. 31,
1997 1996
-------- --------
ASSETS:
Cash and due from banks 4,6744,950 4,442
Interest bearing balances 27,27230,704 28,433
Available-for-sale securities 27,84032,500 28,733
Federal funds sold 0 0
Loans 146,730145,812 146,393
Less:
Unearned discount 1,8992,019 1,879
Allowance for loan losses 2,2102,182 2,173
------- -------
Net loans 142,621141,611 142,341
------- -------
Bank premises and equip't, net 3,3303,286 3,397
Other real estate 512721 548
Accrued interest receivable 1,4021,404 1,335
Other assets 1,3861,122 943
------- -------
Total Assets 209,037216,298 210,172
======= =======
LIABILITIES & STOCKHOLDERS EQUITY:
Deposits:
Demand 16,04316,093 15,350
NOW 23,56623,274 24,211
Money Market 10,98811,955 11,575
Savings 17,27517,426 17,061
Time 106,290105,016 106,474
------- -------
Total deposits 174,162173,764 174,671
------- -------
Short-term borrowings 74010,035 4,512
Accrued interest payable 1,3461,440 1,020
Other liabilities 1,170818 609
Long-term debt 6,7864,754 4,710
------- -------
Total Liabilities 184,204190,811 185,522
------- -------
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share;
authorized 10,000,000 shares; issued
1,322,832 and 1,261,029 shares at
March 31,June 30, 1997 and December 31, 1996 1,2611,323 1,261
Surplus 11,81713,872 11,817
Undivided profits 12,33710,700 11,937
Unrealized holding gain on securities,
net of estimated tax effect -49125 168
Less: Treasury Stock at cost
(19,056 shares) 533 533
------- -------
Total Stockholders Equity 24,83325,487 24,650
------- ------
Total Liabilities & Equity 209,037216,298 210,172
======= =======
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; dollars in thousands)
Three Months Six Months
Ended March 31,June 30, Ended June 30,
1997 1996 1997 1996
INTEREST INCOME: ----- ----- ----- -----
Interest & fees on loans 3,275 3,0413,419 3,031 6,694 6,072
Int.-bearing balances 444 519453 490 897 1,009
Treas. & Agency securities 225 194261 223 486 417
Municipal securities 185 181186 176 371 357
Other securities 13 1219 17 32 29
Fed funds sold and repos 0 09 3 9 3
----- ----- ----- -----
Total Int. Income 4,142 3,9474,347 3,940 8,489 7,887
----- ----- ----- -----
INTEREST EXPENSE:
Deposits 1,779 1,7641,798 1,776 3,577 3,540
Short-term borrowings 39 8841 41 110 129
Long-term borrowings 80 3779 23 129 60
----- ----- ----- -----
Total Int. Expense 1,898 1,8891,918 1,840 3,816 3,729
----- ----- ----- -----
Net Int. Income 2,244 2,0582,429 2,100 4,673 4,158
PROVISION FOR LOAN LOSSES 25 0 50 0
----- ----- ----- -----
Net Int. Inc. after Prov. 2,219 2,0582,404 2,100 4,623 4,158
----- ----- ----- -----
NON-INTEREST INCOME:
Trust Dept 4 934 29 38 38
Service Chgs. on Deposits 70 6073 64 143 124
Investment sec. gains, net 0 12 -1 12
Gain on sale of loans 64 0 64 0
Other 95 11180 77 175 188
----- ----- ----- -----
Total Non-Interest Income 168 180251 182 419 362
----- ----- ----- -----
NON-INTEREST EXPENSE:
Salaries and benefits 639 616666 627 1,305 1,243
Occupancy, net 74 8475 67 149 151
Equipment 87 8992 91 179 180
PA Bank Shares tax 6160 57 121 114
Other 299 351390 378 689 729
----- ----- ----- -----
Tot. Non-int. Exp. 1,160 1,1971,283 1,220 2,443 2,417
----- ----- ----- -----
Income before income taxes 1,227 1,0411,372 1,062 2,599 2,103
INCOME TAX EXPENSE 354 296410 309 764 605
----- ----- ----- -----
NET INCOME 873 745962 753 1,835 1,498
===== ===== ===== =====
NET INCOME PER SHARE 0.70 0.600.74 0.58 1.41 1.15
===== ===== ===== =====
Weighted Average No. of
Shares Outstanding 1,241,973 1,241,9731,303,776 1,303,776
1,303,776 1,303,776
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
For the threesix months ended:
March 31, March 31,June 30, June 30,
1997 1996
-------- --------
Operating Activities:
Net Income 873 7451,835 1,498
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 2550 0
Depreciation 83 84166 168
Change in interest receivable -67 -19-69 -21
Change in other assets -443 -256-179 -122
Change in interest payable 326 315420 360
Change in other liabilities 561 -116209 67
Other, net 0 012
------- -------
Net cash provided by
operating activities: 1,358 7532,432 1,962
------- -------
Investing Activities:
Net decrease in int-bearing balances 1,161 -1,412-2,271 417
Proceeds from sale of securities 2,166 7453,267 2,570
Proceeds from the maturity of secs. 3,266 4782,926 1,831
Purchase of investment securities -4,757 -3,773-10,003 -7,182
Proceeds from the sale of loans 2,338 0
Net decrease in loans -305 -791-1,984 -5,613
Net purchases of fixed assets -16 -132-55 -260
Proceeds from sale of other real estate 36 218153 299
Capitalized additions - ORE 0 2-5
------- -------
Net cash provided by
investing activities 1,551 -4,665-5,629 -7,943
------- -------
Financing Activities:
Net increase in demand and savings -325 735551 2,594
Net increase in time deposits -184 2,500-1,458 6,715
Net increase in sh-term borrowings -3,772 3,3345,523 -515
Net increase in long-term borrowings 2,076 -2,02944 -2,058
Cash dividend declared -472-955 -601
------- -------
Net cash provided by
financing activities -2,677 3,9393,705 6,135
------- -------
Net increase in cash & equivalents 232 27508 154
Cash & cash equivalents, beg of period 4,442 3,389
------- -------
Cash & cash equivalents, end of period 4,674 3,4164,950 3,543
======= =======
Supplemental Noncash Disclosures:
Loan charge-offs 46 207138 316
Transfers to other real estate 0326 0
Mid Penn Bancorp, Inc.
Notes to Consolidated Financial Statements
1. The consolidated interim financial statements included
herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission with respect to Form 10-Q. The
financial information included herein reflects all
adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim
periods. Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the
disclosures made herein are adequate to make the information
not misleading. It is suggested that these interim
financial statements be read in conjunction with the
financial statements and the notes thereto included in the
Company's most recent Form 10-K.
2. Interim statements are subject to possible adjustments
in connection with the annual audit of the Company's
accounts for the full fiscal year. In the Company's
opinion, all adjustments necessary in order to make the
interim financial statements not misleading have been
included.
3. The results of operations for the interim periods
presented are not necessarily indicative of the results
expected for the full year.
4. Management considers the Allowance for Loan Losses to be
adequate at this time.
Mid Penn Bancorp, Inc.
Millersburg, Pennsylvania
Management's Discussion of Consolidated Financial Condition
for the threesix months ended March 31,June 30, 1997 compared to year-year end
1996 and the Results of Operations for the second quarter
and first quarterhalf of 19971996 compared to the same periodperiods in 1996.
CONSOLIDATED FINANCIAL CONDITION
Total assets as of March 31,June 30, 1997, amounted to $209,037,000,
a slight decrease$216,298,000,
an increase of $1,135,000$6,126,000 or .5% from2.9% over the total assets as
of December 31, 1996.
Due to the growth of the economy during the first quarter of
1997, the Federal Open Market Committee, at its March 25th
meeting, raised the overnight bank rate target by a quarter
point to 5.50%. In anticipation of the expected increase,
rates on short to intermediate U.S. Treasury securities
increased approximately 50 to 75 basis points during the
quarter. Because of the lag time involved between the time
when Treasury rates increase and financial institutions
increase rates on deposits, $1,161,000 in maturing interest
bearing balances was not re-invested.re-invested during the first
quarter. In addition, in anticipation of possible further
action being taken by the Federal Open Market Committee to
increase interest rates, $893,000 from the maturity, call or
sale of available-for-
saleavailable-for-sale securities was not reinvested.re-invested.
Shortly after the end of the first quarter, economic
statistics seemed to indicate that growth for the year
peaked in the first quarter, and, along with great
inflationary news, caused a substantial rally in the bond
market. At June 30, 1997, the net result in the bond market
was interest rates within 10 basis points of rates at
December 31, 1996.
During this unanticipated rally, in May and June, interest
bearing deposits with other financial institutions were
increased by more than $2.7 million, taking advantage of the
same lag time as described above. These purchases were
funded by short-term borrowings. In addition, in early May,
the Bank sold over $2.3 million of student loans, and those
funds along with approximately $2.4 million in short-term
borrowings, were invested in available-for-sale securities,
mainly in short to intermediate term agency securities with
call features.
Loan demand wascontinues to be sporadic during the first quarterhalf
of 1997 as the banking industry continues to aggressively
pursue borrowers by offering very competitive long-term,
fixed interest rates. Net loans remained fairly constant
during the quarterfirst half at $142,621,000$141,611,000 on March 31,June 30, 1997 with
the $2.3 million sale of student loans, compared to
$142,341,000 at December 31, 1996.
Foreclosed assets held for sale decreased $36,000increased $173,000 to
$512,000$721,000 during the first quarterhalf of 1997 due to the sale of
a residential property.1997. Two properties
totaling $326,000 were added while previously held
properties totaling $153,000 were sold. As of March 31,June 30,
1997, the balance of foreclosed assets held for sale
consisted of undeveloped land.land, farmland and a single family
residential property.
Total deposits also remained fairly flat at $174,162,000$173,764,000 on June
30, 1997 compared to $174,671,000 at December 31, 1996.
A significant reason forShort-term borrowings, including funds borrowed from the dropUS
Treasury, Fed Funds, and a $2 million bullet loan from the
FHLB maturing within the year which was included in short-term borrowing
from $4,512,000long-
term borrowings at December 31, 1996, to $740,000 at March
31, 1997, was the available proceedsincreased by $5.5
million from the decrease in
interest-bearing balances and available-for-sale securities.
Long-term debt increased to $6,786,000 at March 31, 1997,
from $4,710,000 at December 31, 1996, due to receiving a
$2,000,000 5yr/2yr putable advance from the Federal Home
Loan Bank of Pittsburgh (FHLB) in March.yearend. All components of long-term debt are
advances from the FHLB. Long-term debt advances were
initiated in order to secure an adequate spread on several
loans written by the Bank.
RESULTS OF OPERATION
Net income for the first quarterhalf of 1997 was $873,000,$1,835,000, or a
$128,000$337,000 or 17.2%22.5% increase from the $745,000$1,498,000 earned in the
same quarterperiod of 1996. Net income per share for the first quartersix
months ended March 31,June 30, 1997, increased to $.70$1.41 from $.60$1.15
earned in the same period of 1996. Net income on an
annualized basis at March 31,June 30, 1997, as a percent of total
average assets, also known as return on assets (ROA)
was 1.7% as compared to 1.5% for the same period in 1996.
Net income as a percentage of stockholders' equity, also
known as return on equity, (ROE), was 14.1%14.8% on an annualized
basis for the first half of 1996 as compared to 13.0% for
the same period in 1996.
Second quarter ofnet income was $962,000, or $.74 per share,
in 1997 as compared to 12.8% for$753,000, or $.58 per share, during
the same period inof 1996.
The principal reason for the increase in net income was an
increase in net interest income. The reason for the
increase in net interest income is two fold; a 12 basis
point increase in yield on average earning assets and a 6
basis point reduction in cost of funds from June 30, 1996 to
June 30, 1997. Net interest income as of March 31,June 30, 1997, was
$2,244,000$4,673,000 as compared to $2,058,000$4,158,000 for the first quarterhalf of
1996. The net interest margin on average earning assets was
4.70%4.88% at March 31,June 30, 1997, as compared to 4.56%4.64% at March 31,June 30, 1996. The major component of
the increase in net interest margin is a thirteen basis
point reduction in the bank's cost of funds from March 31,
1996, to March 31, 1997, due largely to the discontinuance
of a special rate NOW account promotion that was offered
through our Carlisle Pike Office.
A significant contribution to the increase in net interest
income was an increase in volume in addition to the increase
in yield.
The Bank made a provision for loan losses of $25,000$50,000 during
the first quarterhalf of 1997. Due to the cyclical nature of the
economy coupled with the Bank's substantial involvement in
commercial loans and the record number of nationwide
consumer bankruptcies, management thought it prudent to make
this allocation now during strongerthe present period of economic
times.strength. On a quarterly basis, senior management reviews
potentially unsound loans taking into consideration
judgments regarding risk or error, economic conditions,
trends and other factors.
Non-interest income decreased slightlyincreased to $168,000$419,000 for the first quarterhalf
of 1997 as compared to $180,000$362,000 for the same period of 1996.
AThe major component of the increase is a gain of $64,000 on
the sale of a block of student loans. Management sees an
opportunity for greater return on these funds than realized
in the student loan portfolio. Another significant
contribution to non-
interestnon-interest income is NSF fee income. NSF
fee income contributed in excess of $54,000$115,000 during the
first quarterhalf of 1997.
Non-interest expense increased by $26,000 from $2,417,000 at
June 30, 1996, to $2,443,000 at June 30, 1997. The reason formajor
factor contributing to the decreaseincrease was an increase in
non-interest income
lies primarily in an $8,000 reduction in income from
withdrawal penaltiessalaries and a $24,000 reduction in income from
the sale of other real estateemployee benefits expense which were earnedincreased
$62,000 during the first quarterhalf of 1997 over the same period
of 1996. Non-interestWhile employee expense decreased by $37,000 from $1,197,000 at
March 31, 1996, to $1,160,000 at March 31, 1997. The
decrease was due to several factors.increased, other expense
decreased. Stationery and supplies expense decreased by
approximately $14,000 while advertising expense decreased by
$22,000. Much of these decreases may be attributed to the
fact that the Bank was heavily promoting its newest offices
during the first quarterhalf of 1996. No such promotion occurred
during the same quarterperiod of 1997. In addition, bank
maintenance expense was higher by nearly $11,000$8,000 in the first
quarterhalf of 1996 than during the same quarterperiod of 1997. This
difference was due mainly to the high cost of snow removal
during this period in 1996. Finally, the Bank incurred
approximately $8,000$6,000 less in expenses associated with other
real estate than was incurred in the same period of 1996.
As part of the fiscal year 19997 Omnibus Appropriations Bill
signed into law by the President on September 30, 1996,
beginning on January 1, 1997, the banking industry is now
required to help pay the annual $780 million Financing
Corporation (FICO) bond obligation. It is currently
estimated that for three years, until January 1, 2000, banks
will be required to pay 1.29 cents per $100 in deposits as
FICO assessment. After January 1, 2000, the FICO assessment
on bank deposits is anticipated to be 2.4 cents per $100 in
deposits, the projected annual FICO assessment for 1997
would be approximately $21,930. The current annual
statutory minimum assessment of $2000 has been repealed. So
long as the Bank Insurance Fund (BIF) remains fully
capitalized, healthy banks will pay no premium for the BIF
fund. They will only pay the FICO assessment.
LIQUIDITY
The Bank's objective is to maintain adequate liquidity while
minimizing interest rate risk. Adequate liquidity provides
resources for credit needs of borrowers, for depositor
withdrawals, and for funding Corporate operations. Sources
of liquidity include maturing investment securities,
overnight borrowings of federal funds (and Flex Line),
payments received on loans, and increases in deposit
liabilities.
Funds generated from operations contributed a major source
of funds for the first six months of 1997. Another major
source of funds came from the decreasenet increase in interest bearing balancesshort-term
borrowings of $1,161,000. A net decrease of investment securities also
provided $676,000 in funds during the period$5,523,000 while loans and deposits remained
fairly flat.flat with $1,984,000 of the $2,338,000 in proceeds of
the sale of student loans reinvested in the loan portfolio.
The major useuses of funds during the period was the reductionincluded a net
increase of total borrowings by $1,696,000. Short-term borrowings
have been reduced to $740,000 at March 31, 1997,$3,810,000 in investment securities and the
long-term borrowings consist mainlya net
increase of fixed-rate borrowings
with the FHLB which have been borrowed to insure spread on
certain assets$2,271,000 in lightinterest bearing balances
purchased in anticipation of expected risingfalling interest rates.
CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES
Total non-performing assetsThe total of non-accrual loans decreased to $2,179,000$2,089,000
representing 1.04%0.97% of total assets at March 31,June 30, 1997, from
$2,395,000 or 1.14% of total assets at December 31, 1996. Most non-performing assets
are supported by collateral value that appears to be
adequate at June 30, 1996.1997.
The Allowance for Loan Losses at March 31,June 30, 1997, was
$2,210,000$2,182,000 or 1.53%1.52% of loans, net of unearned interest, as
compared to $2,173,000 or 1.50% of loans, net of unearned
interest, at December 31, 1996.
Based upon the ongoing analysis of the Bank's loan portfolio
by the loan review department, the latest quarterly analysis
of potentially unsound loans and non-performing assets,
Management considers the Allowance for Loan Losses to be
adequate to absorb any reasonable, foreseeable loan losses.
MID PENN BANCORP, INC.
March 31, Dec. 31,June 30, June 30,
1997 1996
-------- --------
Non-Performing Assets:
Non-accrual loans 1,171965 1,183
Past due 90 days or more 496403 519
Restructured loans 0 145
------- -------
Total non-performing loans 1,6671,368 1,847
Other real estate 512721 548
------- -------
Total 2,1792,089 2,395
======= =======
Percentage of total loans outstanding 1.491.43 1.64
Percentage of total assets 1.040.97 1.14
Analysis of the Allowance for Loan Losses:
Balance beginning of period 2,173 2,347
Loans charged off:
Commercial real estate, construction
and land development 0 25
Commercial, industrial and agricultural 67 213
Real estate - residential mortgage 012 0
Consumer 40119 226
------- -------
Total loans charged off 46138 464
------- -------
Recoveries of loans previously charged off:
Commercial real estate, construction
and land development 14 38
Commercial, industrial and agricultural 4270 106
Real estate - residential mortgage 0 35
Consumer 1523 61
------- -------
Total recoveries 5897 240
------- -------
Net charge-offs (recoveries) -1241 224
------- -------
Current period provision for
loan losses 2550 50
------- -------
Balance end of period 2,2102,182 2,173
======= ======
Mid Penn Bancorp, Inc.
PART II - OTHER INFORMATION:
Item 1. Legal Proceedings - Nothing to report
Item 2. Changes in Securities - Nothing to report
Item 3. Defaults Upon Senior Securities - Nothing to report
Item 4. Submission of Matters to a Vote of Security Holders
- -Nothing- At the Annual Meeting of Shareholders held on April 22,
1997, a vote was held for the election of Class B directors:
Jere M. Coxon, Alan W. Dakey, Charles F. Lebo and
Guy J. Snyder, Jr. to reportserve for a three-year term, and to
ratify the selection of Parente, Randolph, Orlando, Carey
and Associates as external auditors for the corporation for
the year ending December 31, 1997. Jere M. Coxon
received 962,393.7358 votes for and 2,488.5339 votes
withheld. Alan W. Dakey received 961,389.1914 votes
for and 3,493.0783 votes withheld. Charles F. Lebo
received 961,420.1914 votes for and 3,462.0783 votes
withheld. And Guy J. Snyder, Jr. received 962,393.7358
votes for and 2488.5339 votes withheld. The selection of
external auditors received 963,816.0913 votes for, 992 votes
against, and 74.1784 votes abstaining.
Item 5. Other Information - Nothing to report
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - (27) Financial Data Schedule
b. Reports on Form 8-K - None
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Mid Penn Bancorp, Inc.
Registrant
/s/ Eugene F. Shaffer /s/ Gerald D. Schoffstall
By:Eugene F. Shaffer By:Gerald D. Schoffstall
Chairman, Pres. & CEO Treasurer
Date: April 1,July 31, 1997 Date: April 1,July 31, 1997