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 September 30, 1999March 31, 2000
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.
2,892,9883,036,762 shares of Common Stock, $1.00 par value per share,
were outstanding as of September 30, 1999.March 31, 2000.
Independent Auditors' Report
The Board of Directors and Stockholders
Mid Penn Bancorp, Inc.
Millersburg, Pennsylvania
We have reviewed the accompanying consolidated balance sheet
of Mid Penn Bancorp, Inc. and subsidiaries (collectively,
the "Corporation") as of March 31, 2000, and the
related consolidated statements of income and cash flows for
the three-month period then ended. These financial
statements are the responsibility of the Corporation's
management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying
consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet
as of December 31, 1999, and the related consolidated
statements of income, changes in stockholders' equity, and
cash flows for the year then ended (not presented herein);
and in our report dated January 21, 2000, we expressed an
unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of
December 31, 1999, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from
which it has been derived.
PARENTE RANDOLPH, PC
Williamsport, Pennsylvania
May 3, 2000
MID PENN BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
Sept. 30,March 31, Dec. 31,
2000 1999 1998
-------- --------
ASSETS:
Cash and due from banks 5,869 5,651
Interest bearing5,561 7,474
Interest-bearing balances 38,222 42,88332,083 34,570
Available-for-sale securities 63,159 67,93363,333 64,099
Federal funds sold 0 0
Loans 162,426 152,993179,195 172,294
Less:
Allowance for loan losses 2,454 2,3132,570 2,505
------- -------
Net loans 159,972 150,680176,625 169,789
------- -------
Bank premises and equip't, net 3,385 3,4983,216 3,307
Other real estate 53 34754 63
Accrued interest receivable 2,050 1,9072,111 2,120
Cash surrender value of life insurance 4,040 3,9004,137 4,089
Deferred income taxes 1,923 1,676
Other assets 1,864 1,028671 355
------- -------
Total Assets 278,614 277,827289,714 287,542
======= =======
LIABILITIES & STOCKHOLDERSSTOCKHOLDERS' EQUITY:
Deposits:
Demand 22,249 20,97121,556 22,331
NOW 26,866 28,23428,412 26,962
Money Market 21,768 17,15818,154 22,899
Savings 26,010 25,30525,749 25,815
Time 122,247 125,134125,896 119,833
------- -------
Total deposits 219,140 216,802219,767 217,840
------- -------
Short-term borrowings 14,371 12,15916,195 24,636
Accrued interest payable 1,959 1,2401,634 1,202
Other liabilities 1,191 5401,321 899
Long-term debt 15,439 15,55024,362 16,400
------- -------
Total Liabilities 252,100 246,291263,279 260,977
------- -------
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share;
authorized 10,000,000 shares; issued
2,912,2673,056,501 shares at Sept. 30, 1999March 31, 2000 and
December 31, 1998 2,912 2,912
Surplus 17,181 17,181
Undivided profits 8,448 11,640
Unrealized holding gain on securities,
net of estimated tax effect -1,489 3441999 3,057 3,057
Additional paid-in capital 20,368 20,368
Retained earnings 5,898 5,557
Accumulated other comprehensive income -2,340 -1,861
Less: Treasury Stock at cost
(19,279(19,739 and 19,337 shares) 538 54119,996 shs., resp.) 548 556
------- -------
Total Stockholders Equity 26,514 31,53626,435 26,565
------- ------
Total Liabilities & Equity 278,614 277,827289,714 287,542
======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
Note: The balance sheet at December 31, 1999, has been
derived from the audited financial statements at that date
but does not include all the information and notes required
by generally accepted accounting principles for complete
financial statements.
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; dollars in thousands)
Three Months
Nine Months
Ended Sept 30, Ended Sept 30,March 31,
2000 1999 1998 1999 1998
INTEREST INCOME: ----- ----- ----- -----
Interest & fees on loans 3,402 3,698 10,090 10,7973,775 3,347
Int.-bearing balances 598 639 1,853 1,916499 633
Treas. & Agency securities 610 599 1,853 1,770564 625
Municipal securities 333 250 987 715345 324
Other securities 35 18 99 4447 29
Fed funds sold and repos 0 15 0 40
----- -----
----- -----
Total Int. Income 4,978 5,219 14,882 15,282
----- -----5,230 4,958
----- -----
INTEREST EXPENSE:
Deposits 2,048 2,164 6,242 6,5252,035 2,111
Short-term borrowings 118 27 261 139239 80
Long-term borrowings 220 217 655 546
----- -----378 212
----- -----
Total Int. Expense 2,386 2,408 7,158 7,210
----- -----2,652 2,403
----- -----
Net Int. Income 2,592 2,811 7,724 8,0722,578 2,555
PROVISION FOR LOAN LOSSES 100 50 250 104
----- -----75 75
----- -----
Net Int. Inc. after Prov. 2,492 2,761 7,474 7,968
----- -----2,503 2,480
----- -----
NON-INTEREST INCOME:
Trust Dept 9 8 82 6353 18
Service Chgs. on Deposits 129153 125 373 336
Investment sec. gains, net 0 3 50
11
GainIncome on sale of loans 0 42 0 65life insurance 48 55
Other 190 226 848 640
----- -----160 206
----- -----
Total Non-Interest Income 328 404 1,353 1,115
----- -----414 454
----- -----
NON-INTEREST EXPENSE:
Salaries and benefits 919 798 2,858 2,518927 979
Occupancy, net 81 84 248 247101 89
Equipment 124 119 354 375118 115
PA Bank Shares tax 7067 69
208 213
Other 399 510 1,355 1,552
----- -----440 403
----- -----
Tot. Non-int. Exp. 1,593 1,580 5,023 4,905
----- -----1,653 1,655
----- -----
Income before income taxes 1,227 1,585 3,804 4,1781,264 1,279
INCOME TAX EXPENSE 297 523 950 1,213
----- -----316 327
----- -----
NET INCOME 930 1,062 2,854 2,965948 952
===== =====
===== =====
Other Comprehensive Income, net
of tax:
Unrealized holding losses on
securities arising during the
period -228 373 -1,833 351
Less: reclassification
adjustments for gains included
in net income 0 3 50 11
---- ---- ---- ----
Other comprehensive income -228 370 -1,883 340
---- ---- ---- ----
Comprehensive Income 702 1,432 971 3,305
===== =====CASH DIVIDENDS PER SHARE 0.20 1.61
===== =====
NET INCOME PER SHARE 0.32 0.37 .99 1.03
===== =====0.31 0.31
===== =====
Weighted Average No. of
Shares Outstanding 2,893,197 2,893,705
2,893,049 2,892,2203,035,170 3,037,908
The accompanying notes are an integral part of these
consolidated financial statements.
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
For the ninethree months ended:
Sept 30, Sept 30,March 31, March 31,
2000 1999 1998
-------- --------
Operating Activities:
Net Income 2,854 2,965948 952
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 250 10475 75
Depreciation 303 304106 100
Incr. in cash-surr. value of life insurance-48 -47
Loss (gain) on sale of investment
securities 0 -50
Loss (gain) on sale/disposal of bank
premises and equipment 0 0
Loss (gain) on the sale of foreclosed
assets -15 -59
Change in accrued interest receivable -143 529 -144
Change in other assets -146 270-316 -257
Change in accrued interest payable 719 784432 354
Change in other liabilities 651 562
Other, net 0 0422 853
------- -------
Net cash provided by
operating activities: 4,488 5,0411,613 1,777
------- -------
Investing Activities:
Net decrease in int-bearing balances 4,661 -4,3852,487 2,974
Proceeds from sale of securities 0 3,811 2,150
Proceeds from the maturity of secs. 7,998 19,096
Purchase1,272 1,463
Purchases of investment securities -9,905 -27,986
Proceeds from the sale of loans 0 6,132-1,232 -7,642
Net (increase)decrease in loans -9,542 -6,852
Purchase of loans 0 0
Net purchases-6,911 436
Purchases of fixed assets -190 -452-15 -38
Proceeds from sale of other real estate 504 1,36824 232
Capitalized additions - ORE 0 0
------- -------
Net cash provided byby(used in)
investing activities -2,663 -10,929-4,375 1,236
------- -------
Financing Activities:
Net increase(decr)incr. in demand and savings 5,225 3,787-4,136 2,644
Net increase in time deposits -2,887 -6,0506,063 4,497
Net increasedecrease in sh-term borrowings 2,212 -1,527-8,441 -6,311
Net increaseincr.(decr) in long-termlg-term borrowings -111 9,8977,962 -37
Cash dividend declared -6,046 -1,554-607 -4,889
Net (purchase)sale of treasury stock 8 7
------- -------
Net cash provided byby(used in)
financing activities -1,607 4,553849 -4,089
------- -------
Net increasedecrease in cash & equivalents 218 -1,335due from banks -1,913 -1,076
Cash & cash equivalents,due from banks, beg of period 7,474 5,651 6,998
------- -------
Cash & cash equivalents,due from banks, end of period 5,869 5,6635,561 4,575
======= =======
Supplemental Noncash Disclosures:
Loan charge-offs 189 10719 42
Transfers to other real estate 0 1690
The accompanying notes are an integral part of these
consolidated financial statements.
Mid Penn Bancorp, Inc.
Notes to Consolidated Financial Statements
1. The consolidated interim financial statements included
here have been prepared by the Company,Corporation, without audit,
according to the rules and regulations of the Securities and
Exchange Commission with respect to Form 10-Q. The
financial information included here reflects all
adjustments (consisting only of normal recurring
adjustments) which are, in our opinion,
necessary for a fair statement of results for the
periods covered. Certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted according to these
rules and regulations. We believe, however, that the
disclosures made here are adequate so that the information
is not misleading. You should read these interim financial
statements along with the financial statements including the
notes included in the Company'sCorporation's most recent Form 10-K.
The unaudited financial data included herein as of March 31,
2000, and for the three-month period then ended, has been
reviewed by the registrant's independent public accountants.
2. Interim statements are subject to possible adjustments
in connection with the annual audit of the Company'sCorporation's
accounts for the full fiscal year. In our opinion, all
necessary adjustments have been included so that the interim
financial statements are not misleading.
3. The results of operations for the interim periods
presented are not necessarily an indicator of the results
expected for the full year.
4. Management considers the Allowance for Loan Losses to be
adequate at this time.
5. Short-term borrowings as of March 31, 2000, and
December 31, 1999, consisted of:
(Dollars in thousands)
3/31/00 12/31/99
------- --------
Federal funds purchased $13,200 $22,300
Repurchase agreements 2,612 1,313
Treasury, tax and loan note 383 1,023
------- --------
$16,195 $24,636
======= =======
Federal funds purchased represent overnight funds as of
March 31, 2000. Securities sold under repurchase agreements
generally mature between one day and one year. Treasury,
tax and loan notes are open-ended interest bearing notes
payable to the U.S. Treasury upon call. All tax deposits
accepted by the Bank are placed in the Treasury note option
account.
6. Long-term debt as of the quarter ended March 31, 2000,
and the year ended December 31, 1999, was $24,362,000
and $16,400,000, respectively. The Bank is a member of
the Federal Home Loan Bank of Pittsburgh (FHLB) and
through its membership, the Bank can access a number of
credit products which are utilized to provide various forms
of liquidity. The Bank entered into two long-term
borrowings with the FHLB during the period: $5,000,000 in
five year/two year convertible borrowing at 6.28% with a
final maturity of January 14, 2010; and a $5,000,000 ten
year/three year convertible borrowing at 6.71% with a final
maturity of February 22, 2010.
7. Earnings per share is computed by dividing net income by
the weighted average number of common shares outstanding
during each of the periods presented, giving retroactive
effect to stock dividends and stock splits. The
Corporation's basic and diluted earnings per share are the
same since there are no dilutive shares of potential common
stock outstanding.
8. The purpose of reporting comprehensive income (loss) is
to report a measure of all changes in the Corporation's
equity resulting from economic events other than
transactions with stockholders in their capacity as
stockholders. For the Corporation "comprehensive
income(loss)" includes traditional income statement amounts
as well as unrealized gains and losses on certain
investments in debt and equity securities (i.e. available
for sale securities). Because unrealized gains and losses
are part of comprehensive income (loss), comprehensive
income (loss) may vary substantially between reporting
periods due to fluctuations in the market prices of
securities held. This is evidenced by the fact that the
Corporation's net income decreased for the three months
ended March 2000 compared to the corresponding period in
1999, but comprehensive income (loss) over the same period
has increased.
(In thousands) Three Months
Ended March 31,
2000 1999
---- ----
Net Income $948 $952
---- ----
Other comprehensive income(loss):
Unrealized holding losses on
securities arising during the
period -726 -758
Less: reclassification
adjustments for gains included
in net income 0 50
----- -----
Other comprehensive loss
before income tax provision -726 -808
Income tax benefit related
to other comprehensive loss 247 275
----- -----
Other comprehensive loss -479 -533
----- -----
Comprehensive Income $ 469 $ 419
===== =====
Mid Penn Bancorp, Inc.
Millersburg, Pennsylvania
Management's Discussion of Consolidated Financial Condition
for the ninethree months ended September 30, 1999,March 31, 2000, compared to year-end 1998year-
end 1999 and the Results of Operations for the thirdfirst quarter
and first nine months of 19992000 compared to the same periodsperiod in 1998.1999.
CONSOLIDATED FINANCIAL CONDITION
Total assets as of September 30, 1999, amountedMarch 31, 2000, increased to
$278,614,000, compared to $277,827,000 the total assets$289,714,000, from $287,542,000 as of December 31,1999.
During the first quarter of 2000, loans outstanding
increased by $6,836,000, or 4%.
Cash balances, which were higher than normal levels at
December 31, 1998.1999 due to projected cash needs in conjunction
with Y2K, decreased by $1,913,000 by March 31, 2000.
Our entire portfolio of investment securities is considered
available for sale.available-for-sale. As such, the investments are recorded
on our Balance Sheet at market value. Our investments: US
Treasury, Agency and Municipal securities are givenassigned a
market price relative to investments of the same type with
similar maturity dates. Since the interest rate environment
of these securities has increased by as much as 2.10more than 2 percentage
points in the past twelveeighteen months, our existing securities
are valued lower in comparison. This difference in value,
or unrealized loss, amounted to $1,489,000,$2,340,000, net of tax, as
of the end of the quarter.March 31, 2000. However, the investments are all high
credit quality United States and municipal securities that if held to maturity are
expected to yield no loss to the bank.
Despite some large payoffs in the commercial loan portfolio
along with a continuing competitive pricing environment,
loansTotal deposits increased by $9,433,000$1,927,000 during the first
three quartersmonths of 1999. The majority2000. Certificates of deposit increased by
$6,063,000 while money market balances decreased by
$4,745,000 indicating a movement toward time deposits at
this growth occurred
during the third quarterpoint in the commercial loan portfolio.
Loan demand remains strong into the fourth quarter.
Foreclosed assets held for sale (real estate ownedinterest rate cycle.
Short-term borrowings, consisting mainly of overnight
borrowings, decreased by the
Corporation resulting$8.4 million from loan transactions) decreased to
$53,000year end. These
borrowings had been increased during the first three quarters of 1999 due to the
sale of a commercial property and several lots of
undeveloped land. These sales of other real estate resulted
in a net after-tax gain of approximately $183,000. As of
September 30, 1999, the balance of foreclosed assets held
for sale consisted exclusively of undeveloped land.
Total deposits increased by $2,338,000 during the first
nine months of 1999. This increase was seen mainly in our
money market deposit and demand accounts. During the third
quarter of this year, we experienced heightened competition
in the deposit area, particularly in the area of
certificates of deposit. This competitive deposit
environment continues into the fourth quarter as well.of
1999 to fund the strong loan growth, and to allow for
sufficient liquidity to meet Y2K needs. In the first
quarter of 2000, we have refinanced approximately 8 million
of short-term funds using longer term borrowings in light of
rising interest rates.
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 certain pools of loans and investments of
the Bank.
DuringFunds from maturing interest-bearing balances were also used
to fund loan growth; thus, balances decreased from
$34,670,000 at year-end to $32,083,000 on March 31.
As of March 31, 2000, the Bank's capital ratios are well in
excess of the minimum and well-capitalized guidelines and
the Corporation's capital ratios are in excess of the Bank's
capital ratios.
We launched a comprehensive interactive, internet banking
package during the first quarter of 1999 our Board of Directors
declared a special cash dividend of $1.50 per share. This
special dividend is not expected to affect future regular
dividends. The special dividend was declared to reduce the
capital levels of Mid Penn Bancorp, Inc., increase return on
equity (ROE), and enhance shareholder value. We have
enjoyed a very solid capital position due to strong
financial performance. After payment of this special
dividend, Mid Penn will maintain capital levels well above
regulatory requirements. In the2000. Our internet
banking industry, thereprogram has been a general shift from return on assets (ROA)well received by our customers who
are using the service in increasing numbers. The web site
and online banking program can be found at
www.midpennbank.com. In addition to ROE as a
measure of financial performance. By lowering capital
through this special dividend,the complete online
banking product, we will be improving ROE,
thus improving this ratio importantcontinue to research sites in the
greater Harrisburg area for an additional branch location
that may add value for our bank stock analysis.
We have also modified our employee performance incentives to
encourage activities that will emphasize earnings per share
and return on equity instead of our traditional return on
assets approach. We believe over time this change in
emphasis will improve the bank's performance measures
that are utilized by investors in bank stocks.its shareholders.
RESULTS OF OPERATIONOPERATIONS
Net income for the first three quartersquarter of 19992000 was $2,854,000,$948,000,
compared with $2,965,000$952,000 earned in the same periodquarter
of 1998.1999. Net income per share for the first halfquarters of
both 2000 and 1999 and 1998 was $.99 and $1.03, respectively.$.31. Net income as a percentage
of stockholders' equity, also known as return on equity,(ROE), was 14.2%14.3% on an annualized basis for the first
nine monthsquarter of 19992000 as compared to 13.2%13.6% for the same period in
1998.
Third quarter net income was $930,000 or $.32 per share, in
1999 as compared to $1,062,000, or $.37 per share, during
the same period of 1998.1999.
Net interest income of $7,724,000$2,578,000 for the periodquarter ended
September 30, 1999, decreased 4.3% fromMarch 31, 2000, remained flat compared to the $8,072,000$2,555,000
earned in the same periodquarter of 1998.1999. Margins continuedcontinue to
be challenged by strong rate competition for loans. In
addition, this decrease reflectsboth loans and
deposits.
During the effectfirst quarter of 2000, we analyzed interest rate
risk using the Vining Sparks Asset-Liability Management
Model. Using the computerized model, management reviews
interest rate risk on a commercial
loanperiodic basis. This analysis
includes an earnings scenario whereby interest rates are
increased by 200 basis points (2 percentage points) and
another whereby they are decreased by 200 basis points. At
February 28, 2000, these scenarios indicate that was entered intothere would
not be a non-accrual status. As such,
all interest earned by the bank on this loan that was not
yet collected, approximately $49,000, was deducted from the
bank's incomesignificant variance in the third quarter. Due to the competitive
pressures that continue to challenge net interest income management is actively pursuing alternative sources of fee
income forat the
bank.one-year time frame due to interest rate changes; however,
actual results could vary significantly from the
calculations prepared by management.
The Bank made a provision for loan losses of $250,000 and
$104,000$75,000 during
the first nine monthsquarters of 1999both 2000 and 1998,
respectively. 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 stronger economic times.1999. On a
quarterly basis, senior management reviews potentially
unsound loans taking into consideration judgments regarding
risk or error, economic conditions, trends and other
factors.factors in determining a reasonable provision for the
period.
Non-interest income was $328,000amounted to $414,000 for the thirdfirst
quarter of 19992000 compared with $404,000to $454,000 earned during the same
periodquarter of 1998. Gains resulting from1999. In the first quarter of 1999, we realized
a gain of $50,000 on the sale of student loans amounted to $68,000 during the first nine
months of 1998. These gains realized last year account, in
part, for the difference in non-interest income as no such
sale occurred during the same period of 1998.investment securities. A
significant contribution to non-interest income is
non-
sufficient fundsinsufficient fund (NSF) fee income. NSF fee income
contributed in excess of $283,000$106,000 during the first nine
monthsquarter
of 2000. Gains resulting from the sale of other real estate
amounted to $15,000 during the first quarter of 2000 in
comparison to the $59,000 earned during the same period of
1999.
Non-interest expense increased slightly to $5,023,000 forduring the first nine monthsquarter of 19992000
of $1,653,000 changed little compared to $4,905,000 foran expense of
$1,655,000 during the same period of 1998. We do anticipate higher non-interest
expense in1999. Additional
advertising dollars were spent during the upcoming quarters as we update our technology
so asfirst quarter of
2000 to be able to provide internet banking services to our
customers by yearend orpromote several certificate of deposit specials of
the beginning of next year. We
have also hired a business development officer for our trust
department in order to increase our market penetration and
fee income potential in the areas of asset management and
trust services.bank.
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 nine monthsquarter of 1999.2000 The major source of
funds came from the increase in demand and savingstime deposits of $6,063,000
mainly the $4,610,000an increase in money market
deposit accounts.certificates of deposits. Other major
sources of funds included the $4,661,000$7,962,000 net increase in net
long-term borrowings, and the $2,487,000 net decrease in
investment certificates of
deposit, and the proceeds of the sale of other real estate
of $504,000.interest bearing balances.
The major use of funds during the period was a net increasedecrease
in loansshort-term borrowings of $9,542,000.$8,441,000. The other major use
of funds was for the paymentnet increase in loans of $6,911,000.
YEAR 2000 COMPLIANCE: MANAGEMENT INFORMATION SYSTEMS
In 1998 we established a Year 2000 compliance committee to
address the risks of the first three quarter regular dividendscritical internal bank systems that
may have been affected by date sensitive applications, as
well as external systems provided by third parties. A
comprehensive Year 2000 Business Action Plan was developed
detailing the sequence of events and actions to be taken as
the Year 2000 approached.
In November 1997, the Company purchased and installed an
upgrade to its current computer systems to improve
efficiencies of operations and position itself for future
growth. The cost of the new system was approximately
$284,000. Testing demonstrated that the new hardware and
software were Year 2000 compliant. In addition, the
Corporation hired a third-party Year 2000 consultant. With
the aid of the consultant, we developed a testing master
plan, organization chart and detailed work plan. The
testing plan included several phases of testing in
accordance with regulatory guidelines. We successfully
completed the testing of all systems critical to the
operation of the bank on February special dividend of $1.50 per share, having
a combined cash outflow of $6,046,000.3, 1999. Mid Penn Bank
proved its readiness for the new millennium with no problems
encountered as we moved into the current year, nor do we
expect any problems with critical dates in the future.
CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES
Total non-performing assets decreased to $2,765,000$2,065,000
representing 0.99%0.71% of total assets at September 30, 1999,March 31, 2000, from
$3,064,000$2,217,000 or 1.10%0.77% of total assets at December 31, 1998. Included in the past-due category at September 30,
1999 is a commercial loan relationship loan with an
outstanding principal balance exceeding $600,000. This loan
relationship is fully secured by marketable securities, and
a work-out plan continues into the fourth quarter.1999.
Most non-performing assets are supported by collateral value
that appears to be adequate at September 30, 1999.March 31, 2000.
The Allowanceallowance for Loan Lossesloan losses at September 30, 1999,March 31, 2000, was
$2,454,000$2,570,000 or 1.51%1.43% of loans, net of unearned interest, as
compared to $2,313,000 also 1.51%$2,505,000 or 1.45% of loans, net of unearned
interest, at December 31, 1998.1999.
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,
we consider the Allowance for Loan Losses to be
adequate to absorb any reasonable, foreseeable loan losses.
YEAR 2000 COMPLIANCE: MANAGEMENT INFORMATION SYSTEMS
We have established a Year 2000 compliance committee to
address the risks of the critical internal bank systems that
are affected by date sensitive applications, as well as
external systems provided by third parties. A comprehensive
Year 2000 Business Action Plan was developed detailing the
sequence of events and actions to be taken as the Year 2000
approaches.
In November 1997, the Company purchased and installed an
upgrade to its current computer systems to improve
efficiencies of operations and position itself for future
growth. The cost of the new system was approximately
$284,000. Anticipated additional costs prior to year 2000
are estimated to be $47,000. Testing demonstrated that the
new hardware and software are Year 2000 compliant. In
addition, the Corporation has hired a third-party Year 2000
consultant. With the aid of the consultant, we have
developed a Year 2000 testing master plan, organization
chart and detailed work plan. The testing plan includes
several phases of testing in accordance with regulatory
guidelines. We successfully completed the testing of all
systems critical the operation of the bank on February 3,
1999.
MID PENN BANCORP, INC.
Sept. 30,March 31, Dec. 31,
2000 1999 1998
-------- --------
Non-Performing Assets:
Non-accrual loans 1,017 376730 890
Past due 90 days or more 813 844384 386
Restructured loans 882 1,497897 878
------- -------
Total non-performing loans 2,712 2,7172,011 2,154
Other real estate 53 34754 63
------- -------
Total 2,765 3,0642,065 2,217
======= =======
Percentage of total loans outstanding 1.70 2.001.15 1.29
Percentage of total assets 0.99 1.100.71 0.77
Analysis of the Allowance for Loan Losses:
Balance beginning of period 2,505 2,313 2,281
Loans charged off:
Commercial real estate, construction
and land development 0 400
Commercial, industrial and agricultural 144 2000 146
Real estate - residential mortgage 0 400
Consumer 45 3719 78
------- -------
Total loans charged off 189 31719 224
------- -------
Recoveries of loans previously charged off:
Commercial real estate, construction
and land development 0 55 10
Commercial, industrial and agricultural 0 1 56
Real estate - residential mortgage 0 0
Consumer 24 299 35
------- -------
Total recoveries 80 959 91
------- -------
Net charge-offs (recoveries) -109 -222(charge-offs) recoveries -10 -133
------- -------
Current period provision for
loan losses 250 25475 325
------- -------
Balance end of period 2,454 2,3132,570 2,505
======= ======
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-Nothing to report
Item 5. Other Information - Nothing to Reportreport
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - (27) Financial Data Schedule
Reports on Form 8-K - NoneNone.
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/ Kevin W. Laudenslager
By:Eugene F. Shaffer By:Kevin W. Laudenslager
Chairman, Pres. & CEO Treasurer
Date: November 1, 1999May 10, 2000 Date: November 1, 1999May 10, 2000