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, 2001 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. 3,037,361 shares of Common Stock, $1.00 par value per share, were outstanding as of June 30, 2001.
MID PENN BANCORP, INC. CONSOLIDATED BALANCE SHEET (Unaudited; Dollars in thousands) June 30, Dec. 31, 2001 2000 -------- ------- ASSETS: Cash and due from banks 8,806 5,986 Interest-bearing balances 47,955 42,376 Available-for-sale securities 57,746 73,885 Federal funds sold 3,600 0 Loans 192,056 184,211 Less, Allowance for loan losses 2,841 2,815 ------- ------- Net loans 189,215 181,396 ------- ------- Bank premises and equipment, net 3,480 3,581 Other real estate 168 70 Accrued interest receivable 2,151 2,502 Cash surrender value of life insurance 4,387 4,288 Deferred income taxes 773 1,069 Other assets 631 431 ------- ------- Total Assets 318,912 315,584 ======= ======= LIABILITIES & STOCKHOLDERS' EQUITY: Deposits: Demand 23,633 23,274 NOW 28,916 28,293 Money Market 24,076 17,494 Savings 25,930 25,912 Time 142,131 136,435 ------- ------- Total deposits 244,686 231,408 ------- ------- Short-term borrowings 6,018 22,738 Accrued interest payable 2,112 1,546 Other liabilities 966 1,025 Long-term debt 34,156 29,241 ------- ------- Total Liabilities 287,938 285,958 ------- ------- STOCKHOLDERS' EQUITY: Common stock, par value $1 per share; authorized 10,000,000 shares; issued (3,056,501 shares at June 30, 2001 and December 31, 2000 3,057 3,057 Additional paid-in capital 20,368 20,368 Retained earnings 7,851 7,078 Accumulated other comprehensive income (loss) 231 (344) Treasury stock at cost (19,140 and 19,057 shs., resp.) (533) (533) ------- ------- Total Stockholders' Equity 30,974 29,626 ------- ------- Total Liabilities & Equity 318,912 315,584 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. Note: The balance sheet at December 31, 2000, 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.
<TABLE> MID PENN BANCORP, INC. CONSOLIDATED STATEMENT OF INCOME (Unaudited; dollars in thousands) <CAPTION> Three Months Six Months Ended June 30, Ended June 30, 2001 2000 2001 2000 <S> <C> <C> <C> <C> INTEREST INCOME: -------- -------- --------- --------- Interest & fees on loans 4,152 3,946 8,229 7,721 Interest-bearing balances 781 498 1,528 997 Treas. & Agency securities 392 547 883 1,111 Municipal securities 441 360 850 705 Other securities 54 56 114 103 Fed. funds sold and repos. 20 0 20 0 --------- --------- --------- --------- Total Int. Income 5,840 5,407 11,624 10,637 --------- --------- --------- --------- INTEREST EXPENSE: Deposits 2,389 2,191 4,754 4,226 Short-term borrowings 87 152 380 391 Long-term borrowings 545 400 1,035 778 --------- --------- --------- --------- Total Int. Expense 3,021 2,743 6,169 5,395 --------- --------- --------- --------- Net Int. Income 2,819 2,664 5,455 5,242 PROVISION FOR LOAN LOSSES 75 100 150 175 --------- --------- --------- --------- Net Int. Inc. after Prov. 2,744 2,564 5,305 5,067 --------- --------- --------- --------- NON-INTEREST INCOME: Trust dept. 32 45 68 98 Service chgs. on deposits 222 144 435 297 Investment sec. gains (losses), net (7) (4) (18) (4) Gain on sale of loans 0 31 0 31 Other 190 181 390 389 --------- --------- --------- --------- Total Non-Interest Income 437 397 875 811 --------- --------- --------- --------- NON-INTEREST EXPENSE: Salaries and benefits 1,039 964 2,036 1,891 Occupancy, net 97 80 212 181 Equipment 127 129 238 247 PA Bank Shares tax 65 68 130 135 Other 524 443 973 883 --------- --------- --------- --------- Total Non-Interest Expense 1,852 1,684 3,589 3,337 --------- --------- --------- --------- Income before income taxes 1,329 1,277 2,591 2,541 INCOME TAX EXPENSE 312 308 603 624 --------- --------- --------- --------- NET INCOME 1,017 969 1,988 1,917 ========= ========= ========= ========= NET INCOME PER SHARE 0.33 0.32 .65 .63 ========= ========= ========= ========= DIVIDENDS PER SHARE 0.20 0.20 .40 .40 ========= ========= ========= ========= Weighted Average Number of Shares Outstanding 3,039,438 3,035,403 3,039,180 3,035,300 </TABLE> 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, 2001 2000 -------- ------- Operating Activities: Net Income 1,988 1,917 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 150 175 Depreciation 183 211 Increase in cash-surrender value of life insurance (99) (95) Loss (gain) on sale of investment securities 18 4 Loss (gain) on sale/disposal of bank premises and equipment 0 0 Loss (gain) on the sale of foreclosed assets 0 (40) Loss (gain) on the sale of loans 0 (31) Change in interest receivable 351 (130) Change in other assets (200) (298) Change in interest payable 566 636 Change in other liabilities (59) 188 ------ ------ Net cash provided by operating activities 2,898 2,537 ------ ------ Investing Activities: Net (increase) decrease in interest-bearing balances (5,579) 13 Increase in federal funds sold (3,600) 0 Proceeds from sale of securities 11,284 3,515 Proceeds from the maturity of securities 12,458 2,200 Purchase of investment securities (6,750) (6,417) Proceeds from the sale of loans 0 3,622 Net increase in loans (8,067) (8,311) Purchases of fixed assets (82) (67) Proceeds from sale of other real estate 0 68 Capitalized additions - ORE 0 0 ------ ------ Net cash used in investing activities (336) (5,377) ------ ------ Financing Activities: Net (decrease) increase in demand & savings deposits 7,582 (3,317) Net increase (decrease) in time deposits 5,696 12,141 Net decrease in short-term borrowings (16,720) (12,637) Net increase (decrease) in long-term borrowings 4,915 7,922 Cash dividend declared (1,215) (1,213) Net sale of treasury stock 0 23 ------ ------ Net cash provided by (used in) financing activities 258 2,919 ------ ------ Net increase in cash & due from banks 2,820 79 Cash & due from banks, beginning of period 5,986 7,474 ------ ------ Cash & due from banks, end of period 8,806 7,553 ====== ====== Supplemental Noncash Disclosures: Loan charge-offs 139 32 Transfers to other real estate 98 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 statements 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, 2001, and December 31, 2000, consisted of: (Dollars in thousands) 6/30/01 12/31/00 ------- -------- Federal funds purchased $ 0 $20,800 Repurchase agreements 5,010 1,459 Treasury, tax and loan note 1,008 479 ------ ------- $6,018 $22,738 ====== ======= 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, 2001, and the year ended December 31, 2000, was $34,156,000 and $29,241,000, 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 one long-term borrowing with the FHLB during the period: $5,000,000 in a three-year fixed-rate borrowing at 5.20% with a final maturity of March 12, 2004. 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, if any. The Corporation's basic and diluted earnings per share are the same since there are no dilutive securities 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. (In thousands) Three Months Six Months Ended June 30, Ended June 30, 2001 2000 2001 2000 ------ ------ ------ ------ Net Income $1,017 $ 969 $1,988 $1,917 ------ ------ ------ ------ Other comprehensive income (loss): Unrealized holding gains (losses) on securities arising during the period 51 18 854 (708) Less: reclassification adjustments for (gains) losses included in net income 7 4 18 4 ------ ------ ------ ------ Other comprehensive income (loss) before income tax (provision) benefit 58 22 872 (704) Income tax (provision) benefit related to other comprehensive income (loss) (20) (6) (297) 241 ------ ------ ------ ------ Other comprehensive income (loss) 38 16 575 (463) ------ ------ ------ ------ Comprehensive Income (Loss) $1,055 $ 985 $2,563 $1,454 ====== ====== ====== ======
Mid Penn Bancorp, Inc. Millersburg, Pennsylvania Management's Discussion of Consolidated Financial Condition as of June 30, 2001, compared to year-end 2000 and the Results of Operations for the second quarter and the first six months of 2001 compared to the same periods in 2000. CONSOLIDATED FINANCIAL CONDITION Total assets as of June 30, 2001, increased to $318,912,000, from $315,584,000 as of December 31, 2000. During the first half of 2001, net loans outstanding increased by $7,819,000, or 4% from year end. Total deposits increased by $13,278,000 during the first six months of 2001. Money market accounts increased by $6,582,000 over year end largely due to the popularity of a new indexed money market product offered by the bank. Time deposits increased by $5,696,000. Short-term borrowings decreased by $16.7 million from year end. These borrowings were decreased largely through funds generated by operations and through funds generated by the sale, maturity and call of investment securities. 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, 2001, 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. RESULTS OF OPERATIONS Net income for the first six months of 2001 was $1,988,000, compared with $1,917,000 earned in the same period of 2000. Net income per share for the same period of 2001 and 2000 was $.65 and $.63, respectively. Net income as a percentage of stockholders' equity, also known as return on equity, (ROE), was 13.1% on an annualized basis for the first half of 2001 as compared to 14.4% for the same period in 2000. The decrease in ROE is due largely to the increase in shareholders equity resulting from the unrealized gain on investment securities arising in the current rate environment. Net income for the second quarter of 2001 was $1,017,000, compared with $969,000 earned in the same quarter of 2000. Net income per share for the second quarters of 2001 and 2000 was $.33 and $.32, respectively. Net interest income of $2,819,000 for the quarter ended June 30, 2001, increased by 5.8% compared to the $2,664,000 earned in the same quarter of 2000. This rise indicates an increase in interest spread during the quarter despite keen interest rate competition. During the second quarter of 2001, 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 May 31, 2001, 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 $75,000 during the second quarter of 2001 and $100,000 during the second quarter of 2000. 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 $437,000 for the second quarter of 2001 compared to $397,000 earned during the same quarter of 2000. Service charges on deposits grew by more than 50% during the second quarter of 2001 compared to the same period of 2000 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 $354,000 during the first half of 2001. Due mainly to the addition of a new Harrisburg branch office in August of 2000, non-interest expense during the second quarter of 2001 of $1,852,000 increased slightly as compared to an expense of $1,684,000 during the same period of 2000 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 2001. The major source of funds came from the net decrease in investment securities of $17,010,000 due to the sale, call and maturity of bonds. As the current rate environment has dropped to very low levels, many callable securities have been called during the quarter. Other major sources of funds included a net increase in money market funds of $6,582,000 mainly in the area of our new indexed money market, and a net increase in time deposits of $5,696,000. The major use of funds during the period was a net decrease in short-term borrowings of $16,720,000. The other major uses of funds included a net increase in loans of $8,067,000 and a net increase of $5,579,000 in interest bearing balances purchased in anticipation of falling interest rates. CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES Total non-performing assets increased to $2,587,000 representing 0.81% of total assets at June 30, 2001, from $2,312,000 or 0.73% of total assets at December 31, 2000. Most non-performing assets are supported by collateral value that appears to be adequate at June 30, 2001. The allowance for loan losses at June 30, 2001, was $2,841,000 or 1.48% of loans, net of unearned interest, as compared to $2,815,000 or 1.53% of loans, net of unearned interest, at December 31, 2000. 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, 2001 2000 ----- ------ Non-Performing Assets: Non-accrual loans 1,291 1,116 Past due 90 days or more 506 504 Restructured loans 622 622 ----- ----- Total non-performing loans 2,419 2,242 Other real estate 168 70 ----- ----- Total 2,587 2,312 ===== ===== Percentage of total loans outstanding 1.35 1.26 Percentage of total assets 0.81 0.73 Analysis of the Allowance for Loan Losses: Balance beginning of period 2,815 2,505 Loans charged off: Commercial real estate, construction and land development 0 1 Commercial, industrial and agricultural 65 12 Real estate - residential mortgage 0 0 Consumer 74 61 ----- ----- Total loans charged off 139 74 ----- ----- Recoveries of loans previously charged off: Commercial real estate, construction and land development 0 28 Commercial, industrial and agricultural 0 5 Real estate - residential mortgage 2 0 Consumer 13 26 ----- ----- Total recoveries 15 59 ----- ----- Net (charge-offs) recoveries (124) (15) ----- ----- Current period provision for loan losses 150 325 ----- ----- Balance end of period 2,841 2,815 ===== =====
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 24, 2001, a vote was held for the election of Class B directors: Earl R. Etzweiler, William G. Nelson and Donald E. Sauve 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, 2001. Earl Etzweiler received 2,320,611 votes for and 7,779 votes withheld. William Nelson received 2,315,826 votes for and 12,564 votes withheld. Donald Sauve received 2,266,958 votes for and 61,432 votes withheld. The selection of external auditors received 2,318,867 votes for, 2,846 votes against, and 6,677 votes abstaining. Item 5. Other Information - Nothing to report Item 6. Exhibits and Reports on Form 8-K a. Exhibits - None. 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, 2001 Date: July 26, 2001