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 September 30, 1996
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.
1,183,105 shares of Common Stock, $1.00 par value per share,
were outstanding as of September 30, 1996.
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
<CAPTION>
Sept. 30, Dec. 31,
1996 1995
-------- --------
<S> <C> <C>
ASSETS:
Cash and due from banks 5,245 3,389
Interest bearing balances 27,467 30,059
Available-for-sale securities 28,112 25,184
Federal funds sold 0 0
Loans 141,979 133,665
Less:
Unearned discount 1,878 1,729
Allowance for loan losses 2,200 2,347
------- -------
Net loans 137,901 129,589
------- -------
Bank premises and equip't, net 3,491 3,451
Other real estate 219 507
Accrued interest receivable 1,363 1,386
Other assets 1,222 1,146
------- -------
Total Assets 205,020 194,711
======= =======
LIABILITIES & STOCKHOLDERS EQUITY:
Deposits:
Demand 14,289 11,766
NOW 24,594 25,223
Money Market 10,421 10,298
Savings 16,766 17,412
Time 106,099 97,569
------- -------
Total deposits 172,169 162,268
------- -------
Short-term borrowings 1,631 4,314
Accrued interest payable 1,731 1,052
Other liabilities 1,116 1,054
Long-term debt 4,741 3,329
------- -------
Total Liabilities 181,388 172,017
------- -------
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share;
authorized 10,000,000 shares; issued
1,202,161 shares at Sept. 30, 1996 and
December 31, 1995 1,202 1,202
Surplus 9,889 9,889
Undivided profits 12,997 11,788
Unrealized holding gain on securities,
net of estimated tax effect 77 348
Less: Treasury Stock at cost
(19,056 shares) 533 533
------- -------
Total Stockholders Equity 23,632 22,694
------- ------
Total Liabilities & Equity 205,020 194,711
======= =======
</TABLE>
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; dollars in thousands)
<CAPTION>
Three Months Nine Months
Ended Sept 30, Ended Sept 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME: ----- ----- ----- -----
Interest & fees on loans 3,257 2,994 9,329 8,628
Int.-bearing balances 474 450 1,483 1,212
Treas. & Agency securities 230 165 647 505
Municipal securities 184 201 541 638
Other securities 11 11 40 27
Fed funds sold and repos 0 10 3 38
----- ----- ----- -----
Total Int. Income 4,156 3,831 12,043 11,048
----- ----- ----- -----
INTEREST EXPENSE:
Deposits 1,810 1,650 5,350 4,656
Short-term borrowings 37 60 166 124
Long-term borrowings 49 25 109 100
----- ----- ----- -----
Total Int. Expense 1,896 1,735 5,625 4,880
----- ----- ----- -----
Net Int. Income 2,260 2,096 6,418 6,168
PROVISION FOR LOAN LOSSES 0 0 0 0
----- ----- ----- -----
Net Int. Inc. after Prov. 2,260 2,096 6,418 6,168
----- ----- ----- -----
NON-INTEREST INCOME:
Trust Dept 6 6 44 36
Service Chgs. on Deposits 61 73 185 185
Investment sec. gains, net 0 -1 12 12
Other 85 83 273 294
----- ----- ----- -----
Total Non-Interest Income 152 161 514 527
----- ----- ----- -----
NON-INTEREST EXPENSE:
Salaries and benefits 635 612 1,878 1,798
Occupancy, net 73 95 224 217
Equipment 90 86 270 253
PA Bank Shares tax 58 53 172 163
Other 301 301 1,030 1,100
----- ----- ----- -----
Tot. Non-int. Exp. 1,157 1,147 3,574 3,531
----- ----- ----- -----
Income before income taxes 1,255 1,110 3,358 3,164
INCOME TAX EXPENSE 360 314 965 871
----- ----- ----- -----
NET INCOME 895 796 2,393 2,293
===== ===== ===== =====
NET INCOME PER SHARE 0.76 0.67 2.02 1.94
===== ===== ===== =====
Weighted Average No. of
Shares Outstanding 1,183,105 1,183,105
1,183,105 1,183,105
</TABLE>
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
<CAPTION>
For the nine months ended:
Sept 30, Sept 30,
1996 1995
-------- --------
<S> <C> <C>
Operating Activities:
Net Income 2,393 2,293
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 0 0
Depreciation 253 224
Change in interest receivable 23 -66
Change in other assets -76 34
Change in interest payable 679 917
Change in other liabilities 62 -123
Other, net 0 -38
------- -------
Net cash provided by
operating activities: 3,334 3,241
------- -------
Investing Activities:
Net decrease in int-bearing balances 2,592 -4,358
Proceeds from sale of securities 3,336 2,455
Proceeds from the maturity of secs. 3,041 4,413
Purchase of investment securities -9,648 -4,673
Net decrease in loans -8,312 -13,309
Purchase of loans 0 0
Net purchases of fixed assets -293 -1,179
Proceeds from sale of other real estate 372 196
Capitalized additions - ORE -13 -152
------- -------
Net cash provided by
investing activities -8,925 -16,607
------- -------
Financing Activities:
Net increase in demand and savings 1,371 -4,316
Net increase in time deposits 8,530 11,838
Net increase in sh-term borrowings -2,683 7,745
Net increase in long-term borrowings 1,412 -2,082
Cash dividend declared -1,183 -1,146
------- -------
Net cash provided by
financing activities 7,447 12,039
------- -------
Net increase in cash & equivalents 1,856 -1,327
Cash & cash equivalents, beg of period 3,389 4,764
------- -------
Cash & cash equivalents, end of period 5,245 3,437
======= =======
Supplemental Noncash Disclosures:
Loan charge-offs 348 282
Transfers to other real estate 14 338
</TABLE>
<PAGE>
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.
<PAGE>
Mid Penn Bancorp, Inc.
Millersburg, Pennsylvania
Management's Discussion of Consolidated Financial Condition
for the nine months ended Sept 30, 1996 compared to year end
1995 and the Results of Operations for the third quarter
compared to the same period in 1995.
CONSOLIDATED FINANCIAL CONDITION
Total assets as of September 30, 1996, amounted to
$205,020,000,an increase of $10,309,000 or 5.3% over the
total assets as of December 31, 1995.
During 1995, interest rates on short and intermediate term
U.S. Treasury Notes and other similar government issues, on
average, decreased over 40%. At the end of 1995, there was
considerable discussion about the Federal Reserve further
lowering interest rates in 1996, and the discount rate was
lowered on January 31, 1996, from 5.25% to 5.00%.
In anticipation of the possibility that short term interest
rates would continue to fall in 1996, during January
$3,275,000 in interest bearing balances from other
institutions was purchased. Although the focus in the
beginning of 1996 was that interest rates would decline
further, the actual results were opposite. At the end of
June, the interest rate on the one-year U.S. Treasury Note
was up 12.6% from December 31, 1995, while the two-year note
was up 18.3%, and the five year note was up 20.1%. The Bank
added $2,928,000 in U.S. Treasury and Agency investments to
its portfolio during the first nine months of 1996 as these
securities offered more attractive yields than interest
bearing balances of similar terms. As a net result,
interest-bearing balances from other institutions decreased
$2,592,000 from December 31, 1995 to September 30, 1996.
Interest bearing balances with other financial institutions
are fully insured by the FDIC and provide liquidity while
offering a competitive return.
Although loan demand was sporatic during the beginning of
1996 as the banking industry continues to aggressively
pursue borrowers by offering very competitive long-term,
fixed interest rates, commercial loan demand increased
during the second and third quarters. The Bank increased
net loans by $8,312,000 or 6.4% during the first nine months
of 1996, comprised primarily of commercial real estate
loans.
Foreclosed assets held for sale decreased $292,000 to
$219,000 during the first nine months of 1996. The sale of
a $200,000 commercial property greatly contributed to the
decrease. As of September 30, 1996, the balance of
foreclosed assets held for sale consists of undeveloped
land.
Total deposits increased by $9,901,000, or 6.1% from
$162,268,000 at December 31, 1995, to $172,169,000 at
September 30, 1996. Time deposits, which increased
$8,530,000 to $106,099,000 at September 30, 1996, from
$97,569,000 at December 31, 1995, accounted for the majority
of the increase.
Long term debt increased from $3,329,000 at December 31,
1995 to $4,741,000 at September 30, 1996. In February a
$2,000,000 borrowing from the Federal Home Loan Bank of
Pittsburgh matured and was subsequently repaid. The note
was originally replaced by a 30-day short term note that was
then repaid with cash from operations and funds
generated by increased deposits. In the third quarter, the
Bank borrowed $2,000,000 due August 4, 1997, and $1,500,000
due September 4, 2001, both bullet loan borrowings from the
FHLB. These fixed-rate borrowings were initiated in order
to insure an adequate spread on several recent loans written
by the Bank.
RESULTS OF OPERATION
Net income for the third quarter was $895,000, a $99,000 or
12.4% increase from the $796,000 earned in the same quarter
of 1995, while net income for the first nine months was
$2,393,000 compared to the $2,293,000 earned in the like
period of 1995. Net income per share for the nine months
ended September 30, 1996, increased to $2.02 from $1.94
earned in the same period of 1995. Net income on an
annualized basis at September 30, 1996, as a percent of
total average assets, also known as return on assets (ROA)
was 1.6% as compared to 1.7% for the same period in 1995.
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 nine months of 1996 as compared to 14.0%
for the same period in 1995.
Net interest income as of September 30, 1996, was $6,418,000
as compared to $6,168,000 for the first nine months of 1995.
The national prime rate, the rate used by the Bank as its
index to price most of its short-term variable rate
commercial loans, decreased from 8.75% at the end of
September 1995 to 8.25%, at September 30, 1996. As a
result, the annualized rate of interest income on average
earning assets decreased to 8.6% at September 30, 1996, from
8.9% at September 30, 1995. With most of the growth in
deposits being in the more costly time deposits, the
annualized rate of interest expense on average costing
liabilities increased from 4.5% at September 1995 to 4.6% at
September 30, 1996. The growth in net interest income
between the third quarter of 1996 and the third quarter of
1995 was the result of volume as opposed to yield. The net
interest margin on average earning assets was 4.6% at
September 30, 1996, as compared to 5.1% at September 30,
1995.
The Bank made no provision for loan losses during the first
nine months of 1996 or the same period in 1995. On a
quarterly basis, senior management reviews potentially
unsound loans. Taking into consideration judgments
regarding risk or error, economic conditions, trends and
other factors, management determined that no provision for
loan losses was necessary during the first three quarters of
1996.
Non-interest income remained fairly constant at $514,000 for
the first nine months of 1996 as compared to $527,000 for
the same period of 1995. A significant contribution to non-
interest income is NSF fee income. NSF fee income
contributed in excess of $140,000 during the first nine
months of 1996.
Non-interest expense increased by $43,000 from $3,531,000 at
September 30, 1995, to $3,574,000 at September 30, 1996. A
major factor contributing to the increase was an increase in
salaries and employee benefits expense. Other non-interest
expense decreased from $1,100,000 at September 30, 1995, to
$1,030,000 at September 30, 1996. The significant factor
resulting in the decrease was the FDIC insurance premium.
Being a well-capitalized institution, the Bank was assessed
the minimum assessment of $500 per quarter or $1,500 for the
first nine months of 1996. During the same period of 1995,
FDIC expense amounted to $167,000.
As part of the fiscal year 1997 Omnibus Appropriations Bill
signed into law by the President on September 30, 1996,
beginning on January 1, 1997, the banking industry will be
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. Based on the Bank's current FDIC assessment base
of $170,000,000, at 1.29 cents per $100 in deposits, the
projected annual FICO assessment for 1997 would be
approximately $21,930. The current annual statutory minimum
assessment of $2,000 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 for the first nine months of 1996. Another major
source of funds came from the net increase in time deposits,
which contributed $8,530,000 during the period, while net
demand and savings balances increased by $1,371,000. The
majority of these deposit increases took place at our newest
branch office which was opened in September of 1995.
Deposits at this Mechanicsburg (Carlisle Pike) Office
increased by $3,116,000 during the first nine months of
1996. A net increase in long-term borrowings contributed
$1,412,000 in funds. In the third quarter, the Bank had a
$2,000,000 bullet loan borrowing from the Federal Home Loan
Bank of Pittsburgh due August 4, 1997, and $1,500,000 bullet
loan due September 4, 2001. Additionally, $2,592,000 in net
interest-bearing balances was allowed to run off in order
to fund loan demand.
The major uses of funds during the nine months included a
net increase in investment securities of approximately
$3,000,000. Even in an environment of strong
competition among banks for commercial loans, the Bank
achieved a net increase of $8,312,000 in net loans during
the first nine months of 1996. Also during the first nine
months, a $2,000,000 borrowing from the Federal Home Loan
Bank of Pittsburgh matured and was subsequently repaid with
generated funds.
CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES
The total of non-accrual loans decreased by $201,000 or
11.5% from December 31, 1995. During the quarter, a payment
of $754,000 was received on a non-accrual loan; however, a
commercial loan relationship of $695,000 was then added on
non-accrual status. Most non-performing assets
are supported by collateral value that appears to be
adequate at September 30, 1996.
Total non-performing assets decreased to $2,173,000
representing 1.06% of total assets at September 30, 1996
from $2,455,000 or 1.26% of total assets at December 31,
1995.
Credit card delinquencies remain a concern of bankers.
While net credit card charge-offs decreased to approximately
$100,000 during the first nine months of 1996 from
approximately $117,000 during the same period of 1995,
credit card delinquencies are reaching new heights industry-
wide. This fact coupled with the rising rate of consumer
bankruptcy has prompted the Bank to pursue a screening
program of its credit card portfolio. It is hoped that this
program will help to identify potentially troubled borrowers
at an earlier level so as to improve the efficacy of
collection efforts in this area.
The Allowance for Loan Losses at September 30, 1996, was
$2,200,000 or 1.57% of loans, net of unearned interest, as
compared to $2,347,000 or 1.78% of loans, net of unearned
interest, at December 31, 1995.
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.
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
<CAPTION>
Sept. 30, Dec. 31,
1996 1995
-------- --------
<S> <C> <C>
Non-Performing Assets:
Non-accrual loans 1,552 1,753
Past due 90 days or more 279 195
Restructured loans 123 0
------- -------
Total non-performing loans 1,954 1,948
Other real estate 219 507
------- -------
Total 2,173 2,455
======= =======
Percentage of total loans outstanding 1.53 1.84
Percentage of total assets 1.06 1.26
Analysis of the Allowance for Loan Losses:
Balance beginning of period 2,347 2,511
Loans charged off:
Commercial real estate, construction
and land development 0 86
Commercial, industrial and agricultural 168 54
Real estate - residential mortgage 0 0
Consumer 180 226
------- -------
Total loans charged off 348 366
------- -------
Recoveries of loans previously charged off:
Commercial real estate, construction
and land development 35 33
Commercial, industrial and agricultural 84 110
Real estate - residential mortgage 35 4
Consumer 47 55
------- -------
Total recoveries 201 202
------- -------
Net charge-offs (recoveries) 147 164
------- -------
Current period provision for
loan losses 0 0
------- -------
Balance end of period 2,200 2,347
======= ======
</TABLE>
<PAGE>
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 - At the end of the second
quarter, Mid Penn Bancorp, Inc. contracted the services of
Invest Financial Corporation, a third-party provider of
investment services headquartered in Tampa, Florida.
Invest provides financial planning and investment services,
particularly mutual fund and annuity-type investments, by
referral to interested bank customers.
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: October 21, 1996 Date: October 21, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 5245
<INT-BEARING-DEPOSITS> 27467
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28112
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 140101
<ALLOWANCE> 2200
<TOTAL-ASSETS> 205020
<DEPOSITS> 172169
<SHORT-TERM> 1631
<LIABILITIES-OTHER> 2847
<LONG-TERM> 4741
0
0
<COMMON> 1202
<OTHER-SE> 22430
<TOTAL-LIABILITIES-AND-EQUITY> 205020
<INTEREST-LOAN> 9329
<INTEREST-INVEST> 2711
<INTEREST-OTHER> 3
<INTEREST-TOTAL> 12043
<INTEREST-DEPOSIT> 5350
<INTEREST-EXPENSE> 5625
<INTEREST-INCOME-NET> 6418
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 12
<EXPENSE-OTHER> 3574
<INCOME-PRETAX> 3358
<INCOME-PRE-EXTRAORDINARY> 3358
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2393
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 2.02
<YIELD-ACTUAL> 8.6
<LOANS-NON> 1522
<LOANS-PAST> 279
<LOANS-TROUBLED> 123
<LOANS-PROBLEM> 1533
<ALLOWANCE-OPEN> 2347
<CHARGE-OFFS> 348
<RECOVERIES> 201
<ALLOWANCE-CLOSE> 2200
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
