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.
<PAGE>
<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>
<PAGE>
<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>
<PAGE>
<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>
<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 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.
<PAGE>
<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>
<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 - 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
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,674
<INT-BEARING-DEPOSITS> 27,272
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 27,840
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 144,831
<ALLOWANCE> 2,210
<TOTAL-ASSETS> 209,037
<DEPOSITS> 174,162
<SHORT-TERM> 740
<LIABILITIES-OTHER> 2,516
<LONG-TERM> 6,786
0
0
<COMMON> 1,261
<OTHER-SE> 23,572
<TOTAL-LIABILITIES-AND-EQUITY> 209,037
<INTEREST-LOAN> 3,275
<INTEREST-INVEST> 867
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4,142
<INTEREST-DEPOSIT> 1,779
<INTEREST-EXPENSE> 1,898
<INTEREST-INCOME-NET> 2,244
<LOAN-LOSSES> 25
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 1,160
<INCOME-PRETAX> 1,227
<INCOME-PRE-EXTRAORDINARY> 1,227
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 873
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
<YIELD-ACTUAL> 8.5
<LOANS-NON> 1,171
<LOANS-PAST> 496
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 4,069
<ALLOWANCE-OPEN> 2,173
<CHARGE-OFFS> 46
<RECOVERIES> 58
<ALLOWANCE-CLOSE> 2,210
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
