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 June 30, 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.
3,037,407 shares of Common Stock, $1.00 par value per share,
were outstanding as of June 30, 2000.
MID PENN BANCORP, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited; Dollars in thousands)
June 30, Dec. 31,
2000 1999
-------- --------
ASSETS:
Cash and due from banks 7,553 7,474
Interest-bearing balances 34,557 34,570
Available-for-sale securities 64,089 64,099
Federal funds sold 0 0
Loans 176,999 172,294
Less,
Allowance for loan losses 2,665 2,505
------- -------
Net loans 174,334 169,789
------- -------
Bank premises and equip't, net 3,163 3,307
Other real estate 35 63
Accrued interest receivable 2,250 2,120
Cash surrender value of life insurance 4,184 4,089
Deferred income taxes 1,917 1,676
Other assets 653 355
------- -------
Total Assets 292,735 287,542
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY:
Deposits:
Demand 22,240 22,331
NOW 28,243 26,962
Money market 17,961 22,899
Savings 26,246 25,815
Time 131,974 119,833
------- -------
Total deposits 226,664 217,840
------- -------
Short-term borrowings 11,999 24,636
Accrued interest payable 1,838 1,202
Other liabilities 1,087 899
Long-term debt 24,322 16,400
------- -------
Total Liabilities 265,910 260,977
------- -------
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share;
authorized 10,000,000 shares; issued
3,056,501 shares at June 30, 2000 and
December 31, 1999 3,057 3,057
Additional paid-in capital 20,368 20,368
Retained earnings 6,261 5,557
Accumulated other comprehensive loss -2,328 -1,861
Less: Treasury stock at cost
(19,094 and 19,996 shs., resp.) 533 556
------- -------
Total Stockholders Equity 26,825 26,565
------- ------
Total Liabilities & Equity 292,735 287,542
======= =======
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 STATEMENT OF INCOME
(Unaudited; dollars in thousands)
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
INTEREST INCOME: ----- ----- ----- -----
Interest & fees on loans 3,946 3,341 7,721 6,688
Int.-bearing balances 498 622 997 1,255
Treas. & Agency securities 547 618 1,111 1,243
Municipal securities 360 330 705 654
Other securities 56 35 103 64
Fed funds sold and repos 0 0 0 0
----- ----- ----- -----
Total Int. Income 5,407 4,946 10,637 9,904
----- ----- ----- -----
INTEREST EXPENSE:
Deposits 2,191 2,083 4,226 4,194
Short-term borrowings 152 63 391 143
Long-term borrowings 400 223 778 435
----- ----- ----- -----
Total Int. Expense 2,743 2,369 5,395 4,772
----- ----- ----- -----
Net Int. Income 2,664 2,577 5,242 5,132
PROVISION FOR LOAN LOSSES 100 75 175 150
----- ----- ----- -----
Net Int. Inc. after Prov. 2,564 2,502 5,067 4,982
----- ----- ----- -----
NON-INTEREST INCOME:
Trust dept 45 55 98 73
Service chgs. on deposits 144 119 297 244
Investment sec. gains (losses),
net -4 0 -4 50
Gain on sale of loans 31 0 31 0
Other 181 397 389 658
----- ----- ----- -----
Total Non-Interest Income 397 571 811 1,025
----- ----- ----- -----
NON-INTEREST EXPENSE:
Salaries and benefits 964 960 1,891 1,939
Occupancy, net 80 78 181 167
Equipment 129 115 247 230
PA Bank Shares tax 68 69 135 138
Other 443 553 883 956
----- ----- ----- -----
Tot. Non-int. Exp. 1,684 1,775 3,337 3,430
----- ----- ----- -----
Income before income taxes 1,277 1,298 2,541 2,577
INCOME TAX EXPENSE 308 326 624 653
----- ----- ----- -----
NET INCOME 969 972 1,917 1,924
===== ===== ===== ===== NET INCOME PER SHARE 0.32 0.32 .63 .63
===== ===== ===== =====
DIVIDENDS PER SHARE 0.20 0.19 .40 1.80
===== ===== ===== =====
Weighted Average No. of
Shares Outstanding 3,035,403 3,035,300
3,039,406 3,038,661
The accompanying notes are an integral part of these
consolidated financial statements.
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; Dollars in thousands)
For the six months ended:
June 30, June 30,
2000 1999
-------- --------
Operating Activities:
Net Income 1,917 1,924
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 175 150
Depreciation 211 201
Incr. in cash-surr. value of life insurance-95 -93
Loss (gain) on sale of investment
securities 4 -50
Loss (gain) on sale/disposal of bank
premises and equipment 0 0
Loss (gain) on the sale of foreclosed
assets -40 -229
Loss (gain) on the sale of loans -31 0
Change in interest receivable -130 -273
Change in other assets -298 -97
Change in interest payable 636 471
Change in other liabilities 188 668
------- -------
Net cash provided by
operating activities: 2,537 2,672
------- -------
Investing Activities:
Net decrease in int-bearing balances 13 1,970
Proceeds from sale of securities 3,515 3,811
Proceeds from the maturity of secs. 2,200 4,773
Purchase of investment securities -6,417 -9,272
Proceeds from the sale of loans 3,622 0
Net increase in loans -8,311 -2,114
Purchases of fixed assets -67 -65
Proceeds from sale of other real estate 68 523
Capitalized additions - ORE 0 0
------- -------
Net cash used in
investing activities -5,377 -374
------- -------
Financing Activities:
Net (decr)incr in demand and savings -3,317 4,627
Net incr(decr) in time deposits 12,141 -199
Net decrease in sh-term borrowings -12,637 -1,077
Net incr(decr) in long-term borrowings 7,922 -73
Cash dividend declared -1,213 -5,467
Net sale of treasury stock 23 8
------- -------
Net cash provided by(used in)
financing activities 2,919 -2,181
------- -------
Net increase in cash & due from banks 79 117
Cash & due from banks, beg of period 7,474 5,651
------- -------
Cash & due from banks, end of period 7,553 5,768
======= =======
Supplemental Noncash Disclosures:
Loan charge-offs 32 99
Transfers to other real estate 0 0
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 have been prepared by
the Corporation, without audit, according to the rules and
regulations of the Securities and Exchange Commission with
respect to Form 10-Q. The financial information 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 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 Corporation's
most recent Form 10-K.
2. Interim statements are subject to possible adjustments
in connection with the annual audit of the Corporation'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 June 30, 2000, and
December 31, 1999, consisted of:
(Dollars in thousands)
6/30/00 12/31/99
------- --------
Federal funds purchased $8,400 $22,300
Repurchase agreements 2,603 1,313
Treasury, tax and loan note 996 1,023
------- --------
$11,999 $24,636
======= =======
Federal funds purchased represent overnight funds as of
June 30, 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 June 30, 2000,
and the year ended December 31, 1999, was $24,322,000
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 ended June 30,
2000: $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 six months
ended June 2000 compared to the corresponding period in
1999, but comprehensive income over the same period
has increased.
(In thousands) Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
---- ---- ---- ----
Net Income $969 $972 $1,917 $1,924
---- ---- ---- ----
Other comprehensive income(loss):
Unrealized holding gains(losses)
on securities arising during
the period 18 -1,700 -708 -2,432
Less: reclassification
adjustments for gains(losses)
included in net income -4 0 -4 50
----- ----- ----- -----
Other comprehensive income(loss)
before income tax provision 22 -1,700 -704 -2,482
Income tax benefit related
to other comprehensive
income(loss) -6 578 241 827
----- ----- ----- -----
Other comprehensive inc(loss) 16 -1,122 -463 -1,655
----- ----- ----- -----
Comprehensive Income(Loss) $ 985 $-150 1,454 269
===== ===== ===== =====
Mid Penn Bancorp, Inc.
Millersburg, Pennsylvania
Management's Discussion of Consolidated Financial Condition
as of June 30, 2000, compared to year-end 1999 and the
Results of Operations for the second quarter and the first
six months of 2000 compared to the same periods in 1999.
CONSOLIDATED FINANCIAL CONDITION
Total assets as of June 30, 2000, increased to $292,735,000,
or 2%, from $287,542,000 as of December 31,1999.
During the first half of 2000, loans outstanding increased
by $4,705,000, or 3% despite a sale of $3,622,000 in student
loans.
Our entire portfolio of investment securities is considered
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 assigned 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 more than 2 percentage
points in the past twenty-four months, our existing
securities are valued lower in comparison. This difference
in value, or unrealized loss, amounted to $2,328,000, net of
tax, as of June 30, 2000. However, the investments are all
high credit quality securities that if held to maturity are
expected to yield no loss to the bank.
Total deposits increased by $8,824,000 during the first
six months of 2000. Certificates of deposit increased by
$12,141,000 while money market balances decreased by
$4,938,000 indicating a movement toward time deposits at
this point in the interest rate cycle.
Short-term borrowings, consisting mainly of overnight
borrowings, decreased by $12.6 million from year end. These
borrowings had been increased during the fourth quarter of
1999 to fund strong loan growth, and to allow for
sufficient liquidity to meet Y2K needs. During the first
quarter of 2000, we 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.
As of June 30, 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 2000. Our internet
banking program has been 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 the complete online
banking product, we continue to research sites in the
greater Harrisburg area for an additional branch location
that may add value for our bank and its shareholders.
RESULTS OF OPERATIONS
Net income for the first six months of 2000 was $1,917,000,
compared with $1,924,000 earned in the same period
of 1999. Net income per share for the same period of
both 2000 and 1999 was $.63. Net income as a percentage
of stockholders' equity, also known as return on equity,
(ROE), was 14.4% on an annualized basis for the first
half of 2000 as compared to 14.5% for the same period in
1999.
Net income for the second quarter of 2000 was $969,000,
compared with $972,000 earned in the same quarter
of 1999. Net income per share for the second quarters of
both 2000 and 1999 was $.32.
Net interest income of $2,664,000 for the quarter ended
June 30, 2000, increased by 3.4% compared to the $2,577,000
earned in the same quarter of 1999. This rise indicates an
increase in interest spread during the quarter despite
higher interest rates and keen competition.
During the second 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 periodic 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
April 30, 2000, these scenarios indicate that there would
not be a significant variance in net interest income at the
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 $100,000 and
$75,000 during the second quarters of 2000 and 1999,
respectively. On a quarterly basis, senior management
reviews potentially unsound loans taking into consideration
judgments regarding risk of error, economic conditions,
trends and other factors in determining a reasonable
provision for the period.
Non-interest income amounted to $397,000 for the second
quarter of 2000 compared to $571,000 earned during the same
quarter of 1999. In the second quarter of 1999, we realized
a one-time gain of $149,000 on the sale of a parcel of other
real estate held for sale. Service charges on deposits grew
by more than 20% during the second quarter of 2000 compared
to the same period of 1999 as the bank continues to focus on
fee and service charge income. One significant contributor
to non-interest income is insufficient fund (NSF) fee
income. NSF fee income contributed in excess of $118,000
during the second quarter of 2000. Gains resulting from the
sale of student loans amounted to $31,000 during the second
quarter of 2000. These loans yielded the bank a slight
premium upon sale, and we were able to reinvest the funds in
higher yielding assets.
Non-interest expense during the second quarter of 2000
of $1,684,000 decreased slightly as compared to an expense
of $1,775,000 during the same period of 1999 as we continue
to strive to maintain low overhead.
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 half of 2000 The major source of
funds came from the increase in time deposits of $12,141,000
mainly an increase in certificates of deposits particularly
a new-money, three-year offer at 6.88%. Other major
sources of funds included the $7,922,000 net increase in net
long-term borrowings, and the $3,622,000 received in
principal on the sale of a block of student loans.
The major use of funds during the period was a net decrease
in short-term borrowings of $12,637,000. The other major
use of funds was for the net increase in loans of
$8,311,000.
CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES
Total non-performing assets increased to $2,554,000
representing 0.87% of total assets at June 30, 2000, from
$2,217,000 or 0.77% of total assets at December 31, 1999.
Most non-performing assets are supported by collateral value
that appears to be adequate at June 30, 2000.
The allowance for loan losses at June 30, 2000, was
$2,665,000 or 1.51% of loans, net of unearned interest, as
compared to $2,505,000 or 1.45% of loans, net of unearned
interest, at December 31, 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.
MID PENN BANCORP, INC.
June 30, Dec. 31,
2000 1999
-------- --------
Non-Performing Assets:
Non-accrual loans 757 890
Past due 90 days or more 1,047 386
Restructured loans 715 878
------- -------
Total non-performing loans 2,519 2,154
Other real estate 35 63
------- -------
Total 2,554 2,217
======= =======
Percentage of loans, net of unearned
interest, outstanding 1.44 1.29
Percentage of total assets 0.87 0.77
Analysis of the Allowance for Loan Losses:
Balance beginning of period 2,505 2,313
Loans charged off:
Commercial real estate, construction
and land development 0 0
Commercial, industrial and agricultural 1 146
Real estate - residential mortgage 0 0
Consumer 31 78
------- -------
Total loans charged off 32 224
------- -------
Recoveries of loans previously charged off:
Commercial real estate, construction
and land development 0 55
Commercial, industrial and agricultural 0 1
Real estate - residential mortgage 0 0
Consumer 17 35
------- -------
Total recoveries 17 91
------- -------
Net (charge-offs) recoveries -15 -133
------- -------
Current period provision for
loan losses 175 325
------- -------
Balance end of period 2,665 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
- - At the Annual Meeting of Shareholders held on April 25,
2000, a vote was held for the election of Class B directors:
Jere M. Coxon, Alan W. Dakey, Charles F. Lebo, Guy J.
Snyder, Jr. to serve for a three-year term, and to
ratify the selection of Parente Randolph as external
auditors for the corporation for the year ending December
31, 2000. Jere Coxon received 2,638,076 votes for and
8,454 votes withheld. Alan Dakey received 2,621,761 votes
for and 24,769 votes withheld. Charles Lebo received
2,638,076 votes for and 8,454 votes withheld. Guy Snyder
received 2,638,044 votes for and 8,486 votes withheld. The
selection of external auditors received 2,632,456 votes for,
7821 votes against, and 6,253 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/ Alan W. Dakey /s/ Kevin W. Laudenslager
By: Alan W. Dakey By: Kevin W. Laudenslager
President & CEO Treasurer
Date: July 26, 2000 Date: July 26, 2000