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, 1997 Commission file number 0-20141 Mid Penn Bancorp, Inc. (Exact name of registrant as specified in its charter) Pennsylvania 25-1666413 (State or other jurisdiction of (IRS Employer ID No) Incorporation or Organization) 349 Union Street, Millersburg, PA 17061 (Address of principal executive offices) (Zip Code) (717) 692-2133 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ X ] Yes [ ] No Indicate the number of shares outstanding of each of the classes of common stock, as of the latest practical date. 1,241,973 shares of Common Stock, $1.00 par value per share, were outstanding as of March 31, 1997.
<TABLE> MID PENN BANCORP, INC. CONSOLIDATED BALANCE SHEETS (Unaudited; Dollars in thousands) <CAPTION> March 31, Dec. 31, 1997 1996 -------- -------- <S> <C> <C> ASSETS: Cash and due from banks 4,674 4,442 Interest bearing balances 27,272 28,433 Available-for-sale securities 27,840 28,733 Federal funds sold 0 0 Loans 146,730 146,393 Less: Unearned discount 1,899 1,879 Allowance for loan losses 2,210 2,173 ------- ------- Net loans 142,621 142,341 ------- ------- Bank premises and equip't, net 3,330 3,397 Other real estate 512 548 Accrued interest receivable 1,402 1,335 Other assets 1,386 943 ------- ------- Total Assets 209,037 210,172 ======= ======= LIABILITIES & STOCKHOLDERS EQUITY: Deposits: Demand 16,043 15,350 NOW 23,566 24,211 Money Market 10,988 11,575 Savings 17,275 17,061 Time 106,290 106,474 ------- ------- Total deposits 174,162 174,671 ------- ------- Short-term borrowings 740 4,512 Accrued interest payable 1,346 1,020 Other liabilities 1,170 609 Long-term debt 6,786 4,710 ------- ------- Total Liabilities 184,204 185,522 ------- ------- STOCKHOLDERS' EQUITY: Common stock, par value $1 per share; authorized 10,000,000 shares; issued 1,261,029 shares at March 31, 1997 and December 31, 1996 1,261 1,261 Surplus 11,817 11,817 Undivided profits 12,337 11,937 Unrealized holding gain on securities, net of estimated tax effect -49 168 Less: Treasury Stock at cost (19,056 shares) 533 533 ------- ------- Total Stockholders Equity 24,833 24,650 ------- ------ Total Liabilities & Equity 209,037 210,172 ======= ======= </TABLE>
<TABLE> MID PENN BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited; dollars in thousands) <CAPTION> Three Months Ended March 31, 1997 1996 <S> <C> <C> INTEREST INCOME: ----- ----- Interest & fees on loans 3,275 3,041 Int.-bearing balances 444 519 Treas. & Agency securities 225 194 Municipal securities 185 181 Other securities 13 12 Fed funds sold and repos 0 0 ----- ----- Total Int. Income 4,142 3,947 ----- ----- INTEREST EXPENSE: Deposits 1,779 1,764 Short-term borrowings 39 88 Long-term borrowings 80 37 ----- ----- Total Int. Expense 1,898 1,889 ----- ----- Net Int. Income 2,244 2,058 PROVISION FOR LOAN LOSSES 25 0 ----- ----- Net Int. Inc. after Prov. 2,219 2,058 ----- ----- NON-INTEREST INCOME: Trust Dept 4 9 Service Chgs. on Deposits 70 60 Investment sec. gains, net -1 0 Other 95 111 ----- ----- Total Non-Interest Income 168 180 ----- ----- NON-INTEREST EXPENSE: Salaries and benefits 639 616 Occupancy, net 74 84 Equipment 87 89 PA Bank Shares tax 61 57 Other 299 351 ----- ----- Tot. Non-int. Exp. 1,160 1,197 ----- ----- Income before income taxes 1,227 1,041 INCOME TAX EXPENSE 354 296 ----- ----- NET INCOME 873 745 ===== ===== NET INCOME PER SHARE 0.70 0.60 ===== ===== Weighted Average No. of Shares Outstanding 1,241,973 1,241,973 </TABLE>
<TABLE> MID PENN BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; Dollars in thousands) <CAPTION> For the three months ended: March 31, March 31, 1997 1996 -------- -------- <S> <C> <C> Operating Activities: Net Income 873 745 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 25 0 Depreciation 83 84 Change in interest receivable -67 -19 Change in other assets -443 -256 Change in interest payable 326 315 Change in other liabilities 561 -116 Other, net 0 0 ------- ------- Net cash provided by operating activities: 1,358 753 ------- ------- Investing Activities: Net decrease in int-bearing balances 1,161 -1,412 Proceeds from sale of securities 2,166 745 Proceeds from the maturity of secs. 3,266 478 Purchase of investment securities -4,757 -3,773 Net decrease in loans -305 -791 Net purchases of fixed assets -16 -132 Proceeds from sale of other real estate 36 218 Capitalized additions - ORE 0 2 ------- ------- Net cash provided by investing activities 1,551 -4,665 ------- ------- Financing Activities: Net increase in demand and savings -325 735 Net increase in time deposits -184 2,500 Net increase in sh-term borrowings -3,772 3,334 Net increase in long-term borrowings 2,076 -2,029 Cash dividend declared -472 -601 ------- ------- Net cash provided by financing activities -2,677 3,939 ------- ------- Net increase in cash & equivalents 232 27 Cash & cash equivalents, beg of period 4,442 3,389 ------- ------- Cash & cash equivalents, end of period 4,674 3,416 ======= ======= Supplemental Noncash Disclosures: Loan charge-offs 46 207 Transfers to other real estate 0 0 </TABLE>
Mid Penn Bancorp, Inc. Notes to Consolidated Financial Statements 1. The consolidated interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission with respect to Form 10-Q. The financial information included herein reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made herein are adequate to make the information not misleading. It is suggested that these interim financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's most recent Form 10-K. 2. Interim statements are subject to possible adjustments in connection with the annual audit of the Company's accounts for the full fiscal year. In the Company's opinion, all adjustments necessary in order to make the interim financial statements not misleading have been included. 3. The results of operations for the interim periods presented are not necessarily indicative of the results expected for the full year. 4. Management considers the Allowance for Loan Losses to be adequate at this time.
Mid Penn Bancorp, Inc. Millersburg, Pennsylvania Management's Discussion of Consolidated Financial Condition for the three months ended March 31, 1997, compared to year- end 1996 and the Results of Operations for the first quarter of 1997 compared to the same period in 1996. CONSOLIDATED FINANCIAL CONDITION Total assets as of March 31, 1997, amounted to $209,037,000, a slight decrease of $1,135,000 or .5% from the total assets as of December 31, 1996. Due to the growth of the economy during the first quarter of 1997, the Federal Open Market Committee, at its March 25th meeting, raised the overnight bank rate target by a quarter point to 5.50%. In anticipation of the expected increase, rates on short to intermediate U.S. Treasury securities increased approximately 50 to 75 basis points during the quarter. Because of the lag time involved between the time when Treasury rates increase and financial institutions increase rates on deposits, $1,161,000 in maturing interest bearing balances was not re-invested. In addition, in anticipation of possible further action being taken by the Federal Open Market Committee to increase interest rates, $893,000 from the maturity, call or sale of available-for- sale securities was not reinvested. Loan demand was sporadic during the first quarter of 1997 as the banking industry continues to aggressively pursue borrowers by offering very competitive long-term, fixed interest rates. Net loans remained fairly constant during the quarter at $142,621,000 on March 31, 1997, compared to $142,341,000 at December 31, 1996. Foreclosed assets held for sale decreased $36,000 to $512,000 during the first quarter of 1997 due to the sale of a residential property. As of March 31, 1997, the balance of foreclosed assets held for sale consisted of undeveloped land. Total deposits also remained fairly flat at $174,162,000 compared to $174,671,000 at December 31, 1996. A significant reason for the drop in short-term borrowing from $4,512,000 at December 31, 1996, to $740,000 at March 31, 1997, was the available proceeds from the decrease in interest-bearing balances and available-for-sale securities. Long-term debt increased to $6,786,000 at March 31, 1997, from $4,710,000 at December 31, 1996, due to receiving a $2,000,000 5yr/2yr putable advance from the Federal Home Loan Bank of Pittsburgh (FHLB) in March. All components of long-term debt are advances from the FHLB. Long-term debt advances were initiated in order to secure an adequate spread on several loans written by the Bank. RESULTS OF OPERATION Net income for the first quarter was $873,000, a $128,000 or 17.2% increase from the $745,000 earned in the same quarter of 1996. Net income per share for the first quarter ended March 31, 1997, increased to $.70 from $.60 earned in the same period of 1996. Net income on an annualized basis at March 31, 1997, as a percent of total average assets, also known as return on assets (ROA) was 1.7% as compared to 1.5% for the same period in 1996. Net income as a percentage of stockholders' equity, also known as return on equity, (ROE), was 14.1% on an annualized basis for the first quarter of 1997 as compared to 12.8% for the same period in 1996. The principal reason for the increase in net income was an increase in net interest income. Net interest income as of March 31, 1997, was $2,244,000 as compared to $2,058,000 for the first quarter of 1996. The net interest margin on average earning assets was 4.70% at March 31, 1997, as compared to 4.56% at March 31, 1996. The major component of the increase in net interest margin is a thirteen basis point reduction in the bank's cost of funds from March 31, 1996, to March 31, 1997, due largely to the discontinuance of a special rate NOW account promotion that was offered through our Carlisle Pike Office. A significant contribution to the increase in net interest income was an increase in volume in addition to the increase in yield. The Bank made a provision for loan losses of $25,000 during the first quarter of 1997. Due to the cyclical nature of the economy coupled with the Bank's substantial involvement in commercial loans and the record number of nationwide consumer bankruptcies, management thought it prudent to make this allocation now during stronger economic times. On a quarterly basis, senior management reviews potentially unsound loans taking into consideration judgments regarding risk or error, economic conditions, trends and other factors. Non-interest income decreased slightly to $168,000 for the first quarter of 1997 as compared to $180,000 for the same period of 1996. A significant contribution to non- interest income is NSF fee income. NSF fee income contributed in excess of $54,000 during the first quarter of 1997. The reason for the decrease in non-interest income lies primarily in an $8,000 reduction in income from withdrawal penalties and a $24,000 reduction in income from the sale of other real estate which were earned during the first quarter of 1996. Non-interest expense decreased by $37,000 from $1,197,000 at March 31, 1996, to $1,160,000 at March 31, 1997. The decrease was due to several factors. Stationery and supplies expense decreased by approximately $14,000 while advertising expense decreased by $22,000. Much of these decreases may be attributed to the fact that the Bank was heavily promoting its newest offices during the first quarter of 1996. No such promotion occurred during the same quarter of 1997. In addition, bank maintenance expense was higher by nearly $11,000 in the first quarter of 1996 than during the same quarter of 1997. This difference was due mainly to the high cost of snow removal during this period in 1996. Finally, the Bank incurred approximately $8,000 less in expenses associated with other real estate than was incurred in the same period of 1996. As part of the fiscal year 19997 Omnibus Appropriations Bill signed into law by the President on September 30, 1996, beginning on January 1, 1997, the banking industry is now required to help pay the annual $780 million Financing Corporation (FICO) bond obligation. It is currently estimated that for three years, until January 1, 2000, banks will be required to pay 1.29 cents per $100 in deposits as FICO assessment. After January 1, 2000, the FICO assessment on bank deposits is anticipated to be 2.4 cents per $100 in deposits, the projected annual FICO assessment for 1997 would be approximately $21,930. The current annual statutory minimum assessment of $2000 has been repealed. So long as the Bank Insurance Fund (BIF) remains fully capitalized, healthy banks will pay no premium for the BIF fund. They will only pay the FICO assessment. LIQUIDITY The Bank's objective is to maintain adequate liquidity while minimizing interest rate risk. Adequate liquidity provides resources for credit needs of borrowers, for depositor withdrawals, and for funding Corporate operations. Sources of liquidity include maturing investment securities, overnight borrowings of federal funds (and Flex Line), payments received on loans, and increases in deposit liabilities. Funds generated from operations contributed a major source of funds came from the decrease in interest bearing balances of $1,161,000. A net decrease of investment securities also provided $676,000 in funds during the period while loans and deposits remained fairly flat. The major use of funds during the period was the reduction of total borrowings by $1,696,000. Short-term borrowings have been reduced to $740,000 at March 31, 1997, and the long-term borrowings consist mainly of fixed-rate borrowings with the FHLB which have been borrowed to insure spread on certain assets in light of expected rising interest rates. CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES Total non-performing assets decreased to $2,179,000 representing 1.04% of total assets at March 31, 1997, from $2,395,000 or 1.14% of total assets at December 31, 1996. Most non-performing assets are supported by collateral value that appears to be adequate at June 30, 1996. The Allowance for Loan Losses at March 31, 1997, was $2,210,000 or 1.53% of loans, net of unearned interest, as compared to $2,173,000 or 1.50% of loans, net of unearned interest, at December 31, 1996. Based upon the ongoing analysis of the Bank's loan portfolio by the loan review department, the latest quarterly analysis of potentially unsound loans and non-performing assets, Management considers the Allowance for Loan Losses to be adequate to absorb any reasonable, foreseeable loan losses.
<TABLE> MID PENN BANCORP, INC. <CAPTION> March 31, Dec. 31, 1997 1996 -------- -------- <S> <C> <C> Non-Performing Assets: Non-accrual loans 1,171 1,183 Past due 90 days or more 496 519 Restructured loans 0 145 ------- ------- Total non-performing loans 1,667 1,847 Other real estate 512 548 ------- ------- Total 2,179 2,395 ======= ======= Percentage of total loans outstanding 1.49 1.64 Percentage of total assets 1.04 1.14 Analysis of the Allowance for Loan Losses: Balance beginning of period 2,173 2,347 Loans charged off: Commercial real estate, construction and land development 0 25 Commercial, industrial and agricultural 6 213 Real estate - residential mortgage 0 0 Consumer 40 226 ------- ------- Total loans charged off 46 464 ------- ------- Recoveries of loans previously charged off: Commercial real estate, construction and land development 1 38 Commercial, industrial and agricultural 42 106 Real estate - residential mortgage 0 35 Consumer 15 61 ------- ------- Total recoveries 58 240 ------- ------- Net charge-offs (recoveries) -12 224 ------- ------- Current period provision for loan losses 25 50 ------- ------- Balance end of period 2,210 2,173 ======= ====== </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 - (27) Financial Data Schedule b. Reports on Form 8-K - None Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Mid Penn Bancorp, Inc. Registrant /s/ Eugene F. Shaffer /s/ Gerald D. Schoffstall By:Eugene F. Shaffer By:Gerald D. Schoffstall Chairman, Pres. & CEO Treasurer Date: April 1, 1997 Date: April 1, 1997