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, 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 July 18, 1996.
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
<CAPTION>
June 30, Dec. 31,
1996 1995
-------- --------
<S> <C> <C>
ASSETS:
Cash and due from banks 3,543 3,389
Interest bearing balances 29,642 30,059
Available-for-sale securities 27,417 25,184
Federal funds sold 0 0
Loans 139,177 133,665
Less:
Unearned discount 1,825 1,729
Allowance for loan losses 2,150 2,347
------- -------
Net loans 135,202 129,589
------- -------
Bank premises and equip't, net 3,543 3,451
Other real estate 215 507
Accrued interest receivable 1,407 1,386
Other assets 1,268 1,146
------- -------
Total Assets 202,237 194,711
======= =======
LIABILITIES & STOCKHOLDERS EQUITY:
Deposits:
Demand 13,023 11,766
NOW 25,287 25,223
Money Market 11,309 10,298
Savings 17,674 17,412
Time 104,284 97,569
------- -------
Total deposits 171,577 162,268
------- -------
Short-term borrowings 3,799 4,314
Accrued interest payable 1,412 1,052
Other liabilities 937 1,054
Long-term debt 1,271 3,329
------- -------
Total Liabilities 178,996 172,017
------- -------
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share;
authorized 10,000,000 shares; issued
1,202,161 shares at June 30, 1996 and
December 31, 1995 1,202 1,202
Surplus 9,889 9,889
Undivided profits 12,693 11,788
Unrealized holding gain on securities,
net of estimated tax effect -10 348
Less: Treasury Stock at cost
(19,056 shares) 533 533
------- -------
Total Stockholders Equity 23,241 22,694
------- ------
Total Liabilities & Equity 202,237 194,711
======= =======
</TABLE>
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; dollars in thousands)
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME: ----- ----- ----- -----
Interest & fees on loans 3,031 2,835 6,072 5,634
Int.-bearing balances 490 403 1,009 762
Treas. & Agency securities 223 167 417 340
Municipal securities 176 210 357 437
Other securities 17 8 29 16
Fed funds sold and repos 3 14 3 28
----- ----- ----- -----
Total Int. Income 3,940 3,637 7,887 7,217
----- ----- ----- -----
INTEREST EXPENSE:
Deposits 1,776 1,553 3,540 3,006
Short-term borrowings 41 43 129 64
Long-term borrowings 23 25 60 75
----- ----- ----- -----
Total Int. Expense 1,840 1,621 3,729 3,145
----- ----- ----- -----
Net Int. Income 2,100 2,016 4,158 4,072
PROVISION FOR LOAN LOSSES 0 0 0 0
----- ----- ----- -----
Net Int. Inc. after Prov. 2,100 2,016 4,158 4,072
----- ----- ----- -----
NON-INTEREST INCOME:
Trust Dept 29 24 38 30
Service Chgs. on Deposits 64 59 124 112
Investment sec. gains, net 12 -13 12 13
Other 77 87 188 211
----- ----- ----- -----
Total Non-Interest Income 182 157 362 366
----- ----- ----- -----
NON-INTEREST EXPENSE:
Salaries and benefits 627 609 1,243 1,186
Occupancy, net 67 27 151 122
Equipment 91 84 180 167
PA Bank Shares tax 57 53 114 110
Other 378 435 729 799
----- ----- ----- -----
Tot. Non-int. Exp. 1,220 1,208 2,417 2,384
----- ----- ----- -----
Income before income taxes 1,062 965 2,103 2,054
INCOME TAX EXPENSE 309 257 605 557
----- ----- ----- -----
NET INCOME 753 708 1,498 1,497
===== ===== ===== =====
NET INCOME PER SHARE 0.64 0.60 1.27 1.27
===== ===== ===== =====
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 six months ended:
June 30, June 30,
1996 1995
-------- --------
<S> <C> <C>
Operating Activities:
Net Income 1,498 1,497
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 0 0
Depreciation 168 149
Change in interest receivable -21 -24
Change in other assets -122 -34
Change in interest payable 360 548
Change in other liabilities 67 -447
Other, net 12 28
------- -------
Net cash provided by
operating activities: 1,962 1,717
------- -------
Investing Activities:
Net decrease in int-bearing balances 417 -2,779
Proceeds from sale of securities 2,570 1,282
Proceeds from the maturity of secs. 1,831 3,665
Purchase of investment securities -7,182 -1,938
Net decrease in loans -5,613 -4,117
Purchase of loans 0 0
Net purchases of fixed assets -260 -707
Proceeds from sale of other real estate 299 181
Capitalized additions - ORE -5 -83
------- -------
Net cash provided by
investing activities -7,943 -4,496
------- -------
Financing Activities:
Net increase in demand and savings 2,594 -4,700
Net increase in time deposits 6,715 8,217
Net increase in sh-term borrowings -515 1,763
Net increase in long-term borrowings -2,058 -2,054
Cash dividend declared -601 -564
------- -------
Net cash provided by
financing activities 6,135 2,662
------- -------
Net increase in cash & equivalents 154 -117
Cash & cash equivalents, beg of period 3,389 4,764
------- -------
Cash & cash equivalents, end of period 3,543 4,647
======= =======
Supplemental Noncash Disclosures:
Loan charge-offs 316 148
Transfers to other real estate 0 18
</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 six months ended June 30, 1996 compared to year end
1995 and the Results of Operations for the second quarter
and first half of 1996 compared to the same periods in 1995.
CONSOLIDATED FINANCIAL CONDITION
Total assets as of June 30, 1996, amounted to $202,237,000,
an increase of $7,526,000 or 3.9% 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 $2,900,000 in U.S. Treasury and Agency investments to
its portfolio during the first half 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
$417,000 from December 31, 1995 to June 30, 1996. Interest
bearing balances with other financial institutions are fully
insured by the FDIC and provide liquidity while offering a
competitive return.
Although there was considerable discussion with potential
borrowers during the first quarter, loan demand continues to
be sporadic. The Bank increased net loans by $5,600,000 or
4.3% during the first six months of 1996. The banking
industry continues to aggressively pursue borrowers by
offering very competitive interest rates for extended
periods of time.
Foreclosed assets held for sale decreased $292,000 to
$215,000 during the first half of 1996. The sale of a
$200,000 commercial property greatly contributed to the
decrease. As of June 30, 1996, the balance of foreclosed
assets held for sale consists of undeveloped land.
Total deposits increased by $9,309,000, or 5.7% from
$162,268,000 at December 31, 1995, to $171,577,000 at June
30, 1996. Time deposits, which increased $6,715,000 to
$104,284,000 at June 30, 1996, from $97,569,000 at December
31, 1995, accounted for the majority of the increase.
Long term debt decreased substantially from $3,329,000 at
December 31, 1995 to $1,271,000 at June 30, 1996. The
decrease resulted from the February maturity and subsequent
repayment of a $2,000,000 borrowing from the Federal Home
Loan Bank of Pittsburgh. The note was originally replaced
by a 30-day short term note that has since been repaid with
cash from operations and funds generated by increased
deposits.
RESULTS OF OPERATION
Net income for the second quarter was $753,000, a $45,000 or
6.4% increase from the $708,000 earned in the same quarter
of 1995, while net income for the first six months was
$1,498,000 compared to the $1,497,000 earned in the like
period of 1995. Net income per share for the six months
ended June 30, 1996, remained constant with that for the six
months ended June 30, 1995, at $1.27 per share. Net income
on an annualized basis at June 30, 1996, as a percent of
total average assets, also known as return on assets (ROA)
was 1.5% 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 13.0% on an annualized
basis for the first half of 1996 as compared to 14.0% for
the same period in 1995.
Net interest income as of June 30, 1996, was $2,100,000 as
compared to $2,016,000 for the second quarter 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 9.00% at the end of March 1995 to
8.25%, the prime rate at June 30, 1996. As a result, the
annualized rate of interest income on average earning assets
decreased to 8.6% at June 30, 1996, from 8.7% at June 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 4.4%
at the end of June 1995 to 4.6% at June 30, 1996. The
growth in net interest income between the second quarter of
1996 and the second quarter of 1995 was the result of volume
as opposed to yield. The net interest margin on average
earning assets was 4.6% at June 30, 1996, as compared to
5.0% at June 30, 1995.
The Bank made no provision for loan losses during the first
half 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 two quarters of 1996.
Non-interest income remained fairly constant at $362,000 for
the first half of 1996 as compared to $366,000 for the same
period of 1995. A significant contribution to non-interest
income is NSF fee income. NSF fee income contributed in
excess of $94,000 during the first six months of 1996.
Non-interest expense increased by $33,000 from $2,384,000 at
June 30, 1995, to $2,417,000 at June 30, 1996. A major
factor contributing to the increase was an increase in
salaries and employee benefits expense. Due largely to the
opening of the Carlisle Pike Office in late September of
1995, the number of full-time equivalent employees increased
to 84 at June 30, 1996, as compared to 77 at June 30, 1995.
Other non-interest expense decreased from $799,000 at June
30, 1995, to $729,000 at June 30, 1996. The significant
factor resulting in the decrease was the FDIC insurance
premium. Being a well-capitalized institution, the Bank was
assigned an assessment rating of 1A for the period January
1, 1996, through June 30, 1996, resulting in the Bank being
assessed the minimum assessment of $1000 for the period.
During the same period of 1995, FDIC expense amounted to
$166,000.
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 six months of 1996. Another major
source of funds came from the net increase in time deposits,
which contributed $6,715,000 during the half, while net
demand and savings balances increased by $2,594,000. 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 $3,249,000 during the first half of 1996.
The major uses of funds during the six months included a net
increase in investment securities of $2,781,000. Even in an
environment of strong competition among banks for commercial
loans, the Bank achieved a net increase of $5,613,000 in net
loans during the first six months of 1996. Also during the
first half, 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 $109,000 or 6.2%
from December 31, 1995. Most non-performing assets are
supported by collateral value that appears to be adequate at
June 30, 1996.
The balance of loans past due 90 days or more increased by
$4,000 to $199,000 from December 31, 1995, to June 30, 1996.
This represents a 2.1% increase.
The Allowance for Loan Losses at June 30, 1996, was
$2,150,000 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>
June 30, June 30,
1996 1995
-------- --------
<S> <C> <C>
Non-Performing Assets:
Non-accrual loans 1,644 1,753
Past due 90 days or more 199 195
Restructured loans 877 0
------- -------
Total non-performing loans 2,720 1,948
Other real estate 215 507
------- -------
Total 2,935 2,455
======= =======
Percentage of total loans outstanding 2.11 1.84
Percentage of total assets 1.45 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 167 54
Real estate - residential mortgage 0 0
Consumer 149 226
------- -------
Total loans charged off 316 366
------- -------
Recoveries of loans previously charged off:
Commercial real estate, construction
and land development 10 33
Commercial, industrial and agricultural 70 110
Real estate - residential mortgage 3 4
Consumer 36 55
------- -------
Total recoveries 119 202
------- -------
Net charge-offs (recoveries) 197 164
------- -------
Current period provision for
loan losses 0 0
------- -------
Balance end of period 2,150 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
- - - At the Annual Meeting of Shareholders held on April 23,
1996, a vote was held for the election of Class A directors:
Warren A. Miller, Charles R. Phillips, Edwin D. Schlegel and
Eugene F. Shaffer to serve for a three year term, and to
ratify the selection of Parente, Randolph, Orlando, Carey
and Associates as external auditors for the corporation for
the year ending December 31, 1996. Warren A. Miller
received 962,058.2059 votes for and 30,636.5506 votes
withheld. Charles R. Phillips received 961,475.0116 votes
for and 31,219.7449 votes withheld. Edwin D. Schlegel
received 962,563.1154 votes for and 30,131.6411 votes
withheld. And Eugene F. Shaffer received 962,854.7565 votes
for and 29,840 votes withheld. The selection of external
auditors received 957,379.1608 votes for, 1,831.4095 votes
against, and 33,484.1862 votes abstaining.
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: August 2, 1996 Date: August 2, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,543
<INT-BEARING-DEPOSITS> 29,642
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 27,417
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 137,352
<ALLOWANCE> 2,150
<TOTAL-ASSETS> 202,237
<DEPOSITS> 171,577
<SHORT-TERM> 3,799
<LIABILITIES-OTHER> 2,349
<LONG-TERM> 1,271
0
0
<COMMON> 1,202
<OTHER-SE> 22,039
<TOTAL-LIABILITIES-AND-EQUITY> 202,237
<INTEREST-LOAN> 6,072
<INTEREST-INVEST> 1,812
<INTEREST-OTHER> 3
<INTEREST-TOTAL> 7,887
<INTEREST-DEPOSIT> 3,540
<INTEREST-EXPENSE> 3,729
<INTEREST-INCOME-NET> 4,158
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 12
<EXPENSE-OTHER> 2,417
<INCOME-PRETAX> 2,103
<INCOME-PRE-EXTRAORDINARY> 2,103
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,498
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.27
<YIELD-ACTUAL> 8.6
<LOANS-NON> 1,644
<LOANS-PAST> 199
<LOANS-TROUBLED> 877
<LOANS-PROBLEM> 921
<ALLOWANCE-OPEN> 2,347
<CHARGE-OFFS> 316
<RECOVERIES> 119
<ALLOWANCE-CLOSE> 2,150
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
