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, 2002 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. 3,037,364 shares of Common Stock, $1.00 par value per share, were outstanding as of March 31, 2002.
MID PENN BANCORP, INC. CONSOLIDATED BALANCE SHEETS (Unaudited; Dollars in thousands) March 31, Dec. 31, 2002 2001 -------- -------- ASSETS: Cash and due from banks 6,269 9,028 Interest-bearing balances 52,568 53,042 Available-for-sale securities 53,960 55,348 Federal funds sold 1,600 0 Loans 208,134 202,836 Less, Allowance for loan losses 2,889 2,856 ------- ------- Net loans 205,245 199,980 ------- ------- Bank premises and equip't, net 3,409 3,395 Other real estate 1,625 1,693 Accrued interest receivable 2,073 2,091 Cash surrender value of life insurance 4,566 4,504 Deferred income taxes 1,121 1,037 Other assets 823 517 ------- ------- Total Assets 333,259 330,635 ======= ======= LIABILITIES & STOCKHOLDERS' EQUITY: Deposits: Demand 27,080 29,226 NOW 31,825 30,795 Money Market 33,585 27,734 Savings 26,992 26,398 Time 141,020 139,952 ------- ------- Total deposits 260,502 254,105 ------- ------- Short-term borrowings 4,954 9,610 Accrued interest payable 1,771 1,292 Other liabilities 1,459 1,344 Long-term debt 32,523 32,568 ------- ------- Total Liabilities 301,209 298,919 ------- ------- STOCKHOLDERS' EQUITY: Common stock, par value $1 per share; authorized 10,000,000 shares; issued 3,056,501 shares at March 31, 2002 and December 31, 2001 3,057 3,057 Additional paid-in capital 20,368 20,368 Retained earnings 9,378 8,880 Accumulated other comprehensive inc(loss) -219 -56 Treasury Stock at cost (19,137 and 19,065 shs., resp.) -534 -533 ------- ------- Total Stockholders' Equity 32,050 31,716 ------- ------ Total Liabilities & Equity 333,259 330,635 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. Note: The balance sheet at December 31, 2001, 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 Ended March 31, 2002 2001 INTEREST INCOME: ----- ----- Interest & fees on loans 3,999 4,077 Int.-bearing balances 716 747 Treas. & Agency securities 182 491 Municipal securities 492 408 Other securities 29 60 Fed funds sold and repos 2 0 ----- ----- Total Int. Income 5,420 5,783 ----- ----- INTEREST EXPENSE: Deposits 1,979 2,365 Short-term borrowings 22 293 Long-term borrowings 510 489 ----- ----- Total Int. Expense 2,511 3,147 ----- ----- Net Int. Income 2,909 2,636 PROVISION FOR LOAN LOSSES 100 75 ----- ----- Net Int. Inc. after Prov. 2,809 2,561 ----- ----- NON-INTEREST INCOME: Trust dept 42 37 Service chgs. on deposits 250 213 Investment securities Gains(losses), net 5 -11 Income on life insurance 62 49 Other 108 150 ----- ----- Total Non-Interest Income 467 438 ----- ----- NON-INTEREST EXPENSE: Salaries and benefits 1,028 998 Occupancy, net 96 115 Equipment 126 110 PA Bank Shares tax 62 65 Other 531 449 ----- ----- Tot. Non-int. Exp. 1,843 1,737 ----- ----- Income before income taxes 1,433 1,262 INCOME TAX EXPENSE 327 291 ----- ----- NET INCOME 1,106 971 ===== ===== NET INCOME PER SHARE 0.36 0.32 ===== ===== DIVIDENDS PER SHARE 0.20 0.20 ===== ===== Weighted Average No. of Shares Outstanding 3,037,095 3,038,920 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 three months ended: March 31, March 31, 2002 2001 -------- -------- Operating Activities: Net Income 1,106 971 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 100 75 Depreciation 91 91 Incr. in cash-surr. value of life insurance -62 -49 Loss (gain) on sale of investment securities -5 11 Loss (gain) on sale/disposal of bank premises and equipment 0 0 Loss (gain) on the sale of foreclosed assets -3 0 Change in accrued interest receivable 18 218 Change in other assets -306 -315 Change in accrued interest payable 479 420 Change in other liabilities 115 529 ------- ------- Net cash provided by operating activities 1,533 1,951 ------- ------- Investing Activities: Net (incr)decr in int-bearing balances 474 -3,511 Proceeds from sale of securities 1,730 7,477 Proceeds from the maturity of secs. 1,907 4,058 Purchases of investment securities -2,491 -1,250 Net (increase)decrease in loans -5,365 -4,939 Purchases of fixed assets -105 -32 Proceeds from sale of other real estate 71 0 Capitalized additions - ORE 0 0 ------- ------- Net cash provided by(used in) investing activities -3,779 1,803 ------- ------- Financing Activities: Net (decr)incr. in demand and savings 5,329 3,277 Net increase in time deposits 1,068 2,478 Net increase in federal funds sold -1,600 0 Net decrease in sh-term borrowings -4,656 -12,495 Net incr.(decr) in lg-term borrowings -45 4,958 Cash dividend declared -608 -608 Net (purchase)sale of treasury stock -1 -5 ------- ------- Net cash provided by(used in) financing activities -513 -2,395 ------- ------- Net incr(decr) in cash & due from banks -2,759 1,359 Cash & due from banks, beg of period 9,028 5,986 ------- ------- Cash & due from banks, end of period 6,269 7,345 ======= ======= Supplemental Noncash Disclosures: Loan charge-offs 69 65 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 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 March 31, 2002, and December 31, 2001, consisted of: (Dollars in thousands) 3/31/02 12/31/01 ------- -------- Federal funds purchased $ 0 $5,800 Repurchase agreements 3,731 2,666 Treasury, tax and loan note 1,040 196 Due to broker 183 948 ------ ------ $4,954 $9,610 ====== ====== 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. 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. 7. 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, 2002 2001 ---- ---- Net Income $1,106 $ 971 ------ ------ Other comprehensive income(loss): Unrealized holding gains (losses) on securities arising during the period -242 803 Less: reclassification adjs for losses(gains) included in net income 5 -11 ------ ------ Other comprehensive income(loss) before income tax (provision) benefit -247 814 Income tax (provision) benefit related to other comp.income (loss) 84 -277 ------ ------ Other comprehensive inc(loss) -163 537 ------ ------ Comprehensive Income $ 943 $1,508 ====== ======
Mid Penn Bancorp, Inc. Millersburg, Pennsylvania Management's Discussion of Consolidated Financial Condition for the three months ended March 31, 2002, compared to year-end 2001 and the Results of Operations for the first quarter of 2002 compared to the same period in 2001. CONSOLIDATED FINANCIAL CONDITION Total assets as of March 31, 2002, increased to $333,259,000, from $330,635,000 as of December 31,2001. During the first quarter of 2002, net loans outstanding increased by $5,265,000, or 2.6%. Total deposits increased by $6,397,000 during the first three months of 2002. The most significant component of this increase in deposits was money market accounts, which increased by $5,851,000. This increase comes in response to the promotion of our indexed rate, which offered a competitive variable rate of up to 2.53%. The competitive rate and liquid accessibility of this account was very attractive to investors looking for an alternative to the stock market during the first quarter of the year. Short-term borrowings decreased by approximately $4.7 million from year end through funds generated from operations and deposit growth. 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. No new advances were initiated during the quarter. As of March 31, 2002, 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 retain 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, we continue to research sites in the greater Harrisburg area for further branch locations that may add value for our bank and its shareholders. 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 2002 was $1,106,000, compared with $971,000 earned in the same quarter of 2001. Net income per share for the first quarters of 2002 and 2001 was $.36 and $.32, respectively. Net income as a percentage of stockholders' equity, also known as return on equity, (ROE), was 13.9% on an annualized basis for the first quarter of 2002 as compared to 12.9% for the same period in 2001. The majority of the increase in net income is due to an increase in net interest income. We have been able to reduce the cost of funds to a greater extent than the reduction in our return on assets. Net interest income of $2,909,000 for the quarter ended March 31, 2002, increased by 10.4% compared to the $2,636,000 earned in the same quarter of 2001. The cost of funds will continue to decrease into the second quarter as certificates of deposit mature are repriced at lower interest rates. The Bank made a provision for loan losses of $100,000 and $75,000 during the first quarters of 2002 and 2001, respectively. On a quarterly basis, senior management reviews potentially unsound loans taking into consideration judgments regarding risk or error, economic conditions, trends and other factors in determining a reasonable provision for the period. Non-interest income amounted to $467,000 for the first quarter of 2002 compared to $438,000 earned during the same quarter of 2001. A significant contribution to non-interest income continues to be insufficient fund (NSF) fee income. NSF fee income contributed in excess of $192,000 during the first quarter of 2002. Non-interest expense amounted to $1,843,000 for the first quarter of 2002 compared to $1,737,000 incurred during the same quarter of 2001. The largest increase in non-interest expense during the first quarter of 2002 as compared to the same period in 2001, was the $30,000 increase in salary and benefits expense. 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 quarter of 2002. An other major source of funds came from the $6.4 million increase in deposits, the majority of which came from growth in the indexed money market product. The major use of funds during the period was the net increase in loans of $5.3 million, particularly in the area of commercial loans secured by real estate. CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES Total non-performing assets decreased to $4,610,000 representing 1.38% of total assets at March 31, 2002, from $4,744,000 or 1.44% of total assets at December 31, 2001. Most non-performing assets are supported by collateral value that appears to be adequate at March 31, 2002. The allowance for loan losses at March 31, 2002, was $2,889,000 or 1.39% of loans, net of unearned interest, as compared to $2,856,000 or 1.41% of loans, net of unearned interest, at December 31, 2001. 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. March 31, Dec. 31, 2002 2001 -------- ------- Non-Performing Assets: Non-accrual loans 1,586 1,686 Past due 90 days or more 863 828 Restructured loans 536 537 ------- ------- Total non-performing loans 2,985 3,051 Other real estate 1,625 1,693 ------- ------- Total 4,610 4,744 ======= ======= Percentage of total loans outstanding 2.21 2.34 Percentage of total assets 1.38 1.44 Analysis of the Allowance for Loan Losses: Balance beginning of period 2,856 2,815 Loans charged off: Commercial real estate, construction and land development 0 249 Commercial, industrial and agricultural 0 118 Real estate - residential mortgage 0 0 Consumer 69 122 ------- ------- Total loans charged off 69 489 ------- ------- Recoveries of loans previously charged off: Commercial real estate, construction and land development 0 0 Commercial, industrial and agricultural 0 1 Real estate - residential mortgage 0 0 Consumer 2 29 ------- ------- Total recoveries 2 30 ------- ------- Net (charge-offs) recoveries -67 -459 ------- ------- Current period provision for loan losses 100 500 ------- ------- Balance end of period 2,889 2,856 ======= =======
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 9, 2002 Date: May 9, 2002