- - 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, 2004 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. 3,188,721 shares of Common Stock, $1.00 par value per share, were outstanding as of March 31, 2004.
MID PENN BANCORP, INC. CONSOLIDATED BALANCE SHEETS (Unaudited; Dollars in thousands) <TABLE> <CAPTION> March 31, Dec. 31, 2004 2003 --------- ------- <S> <C> <C> ASSETS: Cash and due from banks $6,740 $7,456 Interest-bearing balances 70,177 69,918 Available-for-sale securities 50,392 54,093 Federal funds sold 0 0 Loans 239,734 232,078 Less, Allowance for loan losses 2,956 2,992 -------- -------- Net loans 236,778 229,086 -------- -------- Bank premises and equip't, net 5,050 3,920 Foreclosed assets held for sale 290 1,117 Accrued interest receivable 1,746 1,763 Cash surrender value of life insurance 5,571 4,953 Deferred income taxes 141 303 Other assets 1,067 857 -------- -------- Total Assets 377,952 373,466 ======== ========= LIABILITIES & STOCKHOLDERS' EQUITY: Deposits: Demand 33,047 30,762 NOW 34,435 36,917 Money Market 43,991 45,457 Savings 28,814 27,754 Time 149,658 147,448 -------- -------- Total deposits 289,945 288,338 -------- -------- Short-term borrowings 14,204 9,688 Accrued interest payable 1,330 1,045 Other liabilities 1,900 1,350 Long-term debt 35,632 35,684 -------- -------- Total Liabilities 343,011 336,105 -------- -------- STOCKHOLDERS' EQUITY: Common stock, par value $1 per share; authorized 10,000,000 shares; issued 3,207,912 shares at March 31, 2004 and December 31, 2003 3,208 3,208 Additional paid-in capital 23,472 23,472 Retained earnings 7,064 9,805 Accumulated other comprehensive inc(loss) 1,732 1,415 Treasury Stock at cost (19,191 and 19,408 shs., resp.) -535 -539 -------- -------- Total Stockholders' Equity 34,941 37,361 -------- -------- Total Liabilities & Equity 377,952 373,466 ======== ======== </TABLE> The accompanying notes are an integral part of these consolidated financial statements.
MID PENN BANCORP, INC. CONSOLIDATED STATEMENT OF INCOME (Unaudited; dollars in thousands) <TABLE> <CAPTION> For the Quarter Ended Mar. 31, 2004 2003 ------ ------- <S> <C> <C> INTEREST INCOME: Interest & fees on loans $3,739 $3,900 Int.-bearing balances 448 595 Treas. & Agency securities 152 151 Municipal securities 388 477 Other securities 9 16 Fed funds sold and repos 0 0 ------ ------- Total Int. Income 4,736 5,139 ------ ------- INTEREST EXPENSE: Deposits 1,387 1,709 Short-term borrowings 31 64 Long-term borrowings 509 508 ------ ------- Total Int. Expense 1,927 2,281 ------ ------- Net Int. Income 2,809 2,858 PROVISION FOR LOAN LOSSES 0 190 ------ ------- Net Int. Inc. after Prov. 2,809 2,668 ------ ------- NON-INTEREST INCOME: Trust dept 54 48 Service chgs. on deposits 344 288 Investment securities Gains(losses), net 202 0 Income on life insurance 57 60 Mortgage banking income 32 50 Other 194 152 ------ ------- Total Non-Interest Income 883 598 ------ ------- NON-INTEREST EXPENSE: Salaries and benefits 1,229 1,062 Occupancy, net 134 134 Equipment 174 132 PA Bank Shares tax 63 67 ATM/Debit card expenses 81 55 Consultant fees 50 41 Director fees and benefits 47 54 Computer software licenses and maintenance 41 27 Stationery and supplies 43 45 Other 415 331 ------ ------- Tot. Non-int. Exp. 2,277 1,948 ------ ------- Income before income taxes 1,415 1,318 INCOME TAX EXPENSE 329 266 ------ ------- NET INCOME $1,086 $1,052 ====== ======= NET INCOME PER SHARE $0.34 $0.33 ====== ======= DIVIDENDS PER SHARE $1.20 $0.19 ====== ======= Weighted Average No. of Shares Outstanding 3,187,555 3,188,718 </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) <TABLE> <CAPTION> For the Quarter Ended March 31, 2004 2003 ------ ------- <S> <C> <C> Operating Activities: Net Income $1,086 $1,052 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 0 190 Depreciation 118 91 Incr. in cash-surr. value of life insurance -618 -60 Investment securities gains, net -202 0 Loss (gain) on sale/disposal of bank premises and equipment 0 0 Loss (gain) on the sale of foreclosed assets 8 -20 Deferred income taxes 162 64 Change in accrued interest receivable 17 18 Change in other assets -380 213 Change in accrued interest payable 285 335 Change in other liabilities 550 237 ------- ------- Net cash provided by operating activities 1,026 2,120 ------- ------- Investing Activities: Net (incr)decr in int-bearing balances -259 -2,360 Proceeds from sale of securities 6,482 0 Proceeds from the maturity of secs. 2,839 3,735 Purchases of investment securities -4,931 -2,666 Net increase in loans -7,692 -3,528 Purchases of bank premises & equip't -1,248 -825 Proceeds from sale of foreclosed assets 819 55 ------- ------- Net cash used in investing activities -3,990 -5,589 ------- ------- Financing Activities: Net (decr)incr. in demand and savings -603 6,084 Net incr.(decr) in time deposits 2,210 -2,051 Net decrease in federal funds sold 0 0 Net incr.(decr) in short-term borrowings 4,516 -156 Long-term debt repayments -52 -49 Cash dividend paid -3,827 -606 Reissue (purchase) of treasury stock 4 -11 ------- ------- Net cash provided by(used in) financing activities 2,248 3,211 ------- ------- Net decrease in cash & due from banks -716 -258 Cash & due from banks, beg of period 7,456 8,095 ------- ------- Cash & due from banks, end of period 6,740 7,837 ======= ======= Supplemental Disclosures of Cash Flow Information: Interest paid 1,642 1,947 Income taxes paid 0 0 Supplemental Noncash Disclosures: Loan charge-offs 44 241 </TABLE> 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, with the exception of the consolidated balance sheet dated December 31, 2003, 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 March 31, 2004, and December 31, 2003, consisted of: (Dollars in thousands) 3/31/04 12/31/03 ------- -------- Federal funds purchased $10,400 $ 6,000 Repurchase agreements 3,592 3,246 Treasury, tax and loan note 194 254 Due to broker 18 188 ------- -------- $14,204 $ 9,688 ======= ======= Federal funds purchased represent overnight funds. 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. The due to broker balance represents previous day balances transferred from deposit accounts under a sweep account agreement. 6. MPB has an unfunded noncontributory defined benefit pension plan for directors. The plan provides defined benefits based on years of service. MPB also has other postretirement benefit plans covering full-time employees. These health care and life insurance plans are noncontributory. MPB uses a December 31 measurement date for its plans. The components of net periodic benefit costs from these benefit plans are as follows: Three months ended March 31: (Dollars in thousands) Pension Benefits Other Benefits 2004 2003 2004 2003 ---- ---- ---- ---- Service cost $6 $5 $9 $7 Interest cost 10 9 8 7 Expected return on plan assets 0 0 0 0 Amortization of transition obligation 0 0 4 4 Amortization of prior service cost 6 7 0 0 Amortization of net (gain) loss 0 0 0 (1) --- -- -- --- Net periodic benefit cost $22 $21 $21 $17 --- -- -- --- 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. The Corporation's basic and diluted earnings per share are the same since there are no dilutive shares of 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 Ended March 31: 2004 2003 ------ -------- Net Income $1,086 $1,052 ------ ------ Other comprehensive income(loss): Unrealized holding gains (losses) on securities arising during the period 689 188 Less: reclassification adjs for gains included in net income -202 0 ------ ------ Other comprehensive income(loss) before income tax (provision) benefit 487 188 Income tax (provision) benefit related to other comp.income (loss) -170 -64 ------ ------ Other comprehensive inc(loss) 317 124 ------ ------ Comprehensive Income 1,403 1,176 ====== ======
Mid Penn Bancorp, Inc. Millersburg, Pennsylvania Management's Discussion of Consolidated Financial Condition as of March 31, 2004, compared to year-end 2003 and the Results of Operations for the first quarter of 2004 compared to the same period in 2003. CONSOLIDATED FINANCIAL CONDITION Total assets as of March 31, 2004, increased to $377,952,000 from $373,466,000 as of December 31,2003. During the first quarter of 2004, net loans outstanding increased by $7,692,000, or 3.4%. Interest-bearing balances, insured certificates of deposits in other financial institutions, increased by $259,000 as we continue to invest in these instruments to remain poised for rates to again rebound from their present levels, which remain near forty-year lows. Total deposits increased by $1,607,000 during the first three months of 2004. The most significant component of this increase came from demand deposit accounts, which increased by $2,285,000. This increase comes in response to a continued effort to increase penetration of demand deposit products among the bank's loan customers. Short-term borrowings increased by approximately $4,516,000 from year-end. These funds are being purchased overnight at the current federal fund rate of approximately 1.20%. It is anticipated that these additional borrowings will be repaid in June of this year when the bank acquires the deposits it is purchasing from the Dauphin Branch of Vartan National Bank. 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. A $5,000,000 fixed-rate borrowing was entered into during the quarter with the FHLB at a fixed rate of 2.17%. As of March 31, 2004, 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. While we maintain a significant portion of our original market(the rural areas north of Harrisburg in Dauphin County), we are experiencing most of our growth and opportunity in the Harrisburg (Capital) metropolitan region. Thus, we feel that additional offices in the Capital region will afford us greater exposure and opportunities to reach new customers in this market. Thus, subject to regulatory approval, the bank will be acquiring approximately $12 million of deposits and $3.5 million of loans from the Dauphin Office of Vartan National Bank. These accounts will be serviced through existing capacity at Mid Penn Bank's Dauphin Office. During the quarter, we also purchased a property at 5500 Allentown Boulevard in Harrisburg for a future branch office site, as well as having entered into an agreement to lease office space near Market Square in downtown Harrisburg for a future downtown operation. In addition to our brick-and-mortar offices, Mid Penn Bank offers complete online banking services through our website at www.midpennbank.com. RESULTS OF OPERATIONS Net income for the first quarter of 2004 was $1,086,000, compared with $1,052,000 earned in the same quarter of 2003. Net income per share for the first quarters of 2004 and 2003 was $.34 and $.33, respectively. Net income as a percentage of stockholders' equity, also known as return on equity, (ROE), was 12.5% on an annualized basis for the first quarter of 2004 as compared to 11.9% for the same period in 2003. Net interest income decreased as it continues to be very difficult for banks to reduce the cost of funds at a rate which keeps pace with the reduction in the return on assets. Net interest income of $2,809,000 for the quarter ended March 31, 2004, declined by 1.7% compared to the $2,858,000 earned in the same quarter of 2003. We continue to closely monitor net interest income, positioning the balance sheet so as to benefit in a rising rate environment. According to the recent statement by the Federal Reserve, it would appear that the next move in interest rates will be an increase. The Bank made no provision for loan losses during the first quarter of 2004 and a provision of $190,000 during the first quarter of 2003. 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. Due to an improved economic environment and across-the-board improvements in all areas of nonperforming assets, management recommended following the results of the analysis and made no provision during this quarter. Non-interest income amounted to $883,000 for the first quarter of 2004 compared to $598,000 earned during the same quarter of 2003. Gains on the sale of securities amounted to $202,000 during the first quarter of 2004. No securities were sold during the same quarter of 2003. A significant contribution to non-interest income continues to be insufficient fund (NSF) fee income. NSF fee income contributed in excess of $297,000 during the first quarter of 2004. Non-interest expense amounted to $2,277,000 for the first quarter of 2004 compared to $1,948,000 incurred during the same quarter of 2003. The largest increase in non- interest expense during the first quarter of 2004 as compared to the same period in 2003, was the $167,000 increase in salary and benefits expense, which is largely attributable to the addition of three officer level employees, including two seasoned loan officers. The new personnel will all be helping to expand the bank's penetration in the Capital Region. The bank also incurred a one-time charge of approximately $40,000 in the transfer of debit card processors. By making this change, the bank expects to significantly lower ongoing costs in the processing of debit card transactions. 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 approximately $1 million of funds for the first quarter of 2004. Another significant source of funds came from the sale and maturity of investment securities, which generated over $9 million in funds. These funds were reinvested in higher-yielding loans as loan demand heightened during the quarter. With interest rates being at record lows, security calls continue to be heavy. Securities were sold during the quarter to take advantage of temporary gains and to help reposition the portfolio for the increasing probability of rising rates. Short-term borrowings increased by approximately $4,516,000 from year-end. These funds are being purchased overnight at the current federal fund rate of approximately 1.20%. It is anticipated that these additional borrowings will be repaid in June of this year when the bank acquires the deposits it is purchasing from the Dauphin Branch of Vartan National Bank. Another source of funds came from the $1.6 million increase in deposits, the majority of which came from growth in demand and time deposits. The major use of funds during the period was the net increase in loans of $7.6 million, particularly in the area of commercial loans secured by real estate. Another major use of cash during the first quarter was the payment of a special $1 per share dividend. The Board felt that in light of the current favorable tax treatment of dividend income that it could pay out some of the Bank's excess capital to shareholders in the form of a special dividend. CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES Total non-performing assets decreased to $1,791,000 representing 0.47% of total assets at March 31, 2004, from $2,767,000 or 0.74% of total assets at December 31, 2003. Most non-performing assets are supported by collateral value that appears to be adequate at March 31, 2004. The allowance for loan losses at March 31, 2004, was $2,956,000 or 1.23% of loans, net of unearned interest, as compared to $2,992,000 or 1.29% of loans, net of unearned interest, at December 31, 2003. 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.
<TABLE> <CAPTION> March 31, Dec. 31, 2004 2003 -------- -------- <S> <C> <C> Non-Performing Assets: Non-accrual loans 898 984 Past due 90 days or more 603 666 Restructured loans 0 0 -------- -------- Total non-performing loans 1,501 1,650 Other real estate 290 1,117 -------- -------- Total 1,791 2,767 ======== ======== Percentage of total loans outstanding 0.75% 1.18% Percentage of total assets 0.47% 0.74% Analysis of the Allowance for Loan Losses: Balance beginning of period 2,992 3,051 Loans charged off: Commercial real estate, construction and land development 0 171 Commercial, industrial and agricultural 5 140 Real estate - residential mortgage 0 0 Consumer 39 98 -------- -------- Total loans charged off 44 409 -------- -------- Recoveries of loans previously charged off: Commercial real estate, construction and land development 0 0 Commercial, industrial and agricultural 0 14 Real estate - residential mortgage 0 0 Consumer 8 46 -------- -------- Total recoveries 8 60 -------- -------- Net (charge-offs) recoveries -36 -349 -------- -------- Current period provision for loan losses 0 290 -------- -------- Balance end of period 2,956 2,992 ======== ======== </TABLE>
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 to report 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 Pres. & CEO Treasurer Date: May 4, 2004 Date: May 4, 2004