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, 1998
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.
2,607,289 shares of Common Stock, $1.00 par value per share,
were outstanding as of March 31, 1998.
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
<CAPTION>
March 31, Dec. 31,
1998 1997
-------- --------
<S> <C> <C>
ASSETS:
Cash and due from banks 3,946 4,409
Interest bearing balances 40,786 35,727
Available-for-sale securities 42,331 39,501
Federal funds sold 0 400
Loans 147,706 145,629
Less:
Unearned discount 1,916 1,943
Allowance for loan losses 2,220 2,176
------- -------
Net loans 143,570 141,510
------- -------
Bank premises and equip't, net 3,504 3,186
Other real estate 462 1,355
Accrued interest receivable 1,648 1,594
Other assets 951 1,093
------- -------
Total Assets 237,198 228,775
======= =======
LIABILITIES & STOCKHOLDERS EQUITY:
Deposits:
Demand 18,341 19,612
NOW 23,646 23,086
Money Market 13,817 11,675
Savings 17,905 17,454
Time 117,296 120,412
------- -------
Total deposits 191,005 192,239
------- -------
Short-term borrowings 5,686 2,234
Accrued interest payable 1,455 1,178
Other liabilities 1,126 553
Long-term debt 10,654 5,688
------- -------
Total Liabilities 209,926 201,892
------- -------
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share;
authorized 10,000,000 shares; issued
2,626,608 shares at March 31, 1998 and
December 31, 1997 2,627 2,627
Surplus 13,872 13,872
Undivided profits 11,033 10,605
Unrealized holding gain on securities,
net of estimated tax effect 281 318
Less: Treasury Stock at cost
(19,319 and 19,241 shs., resp.) 541 539
------- -------
Total Stockholders Equity 27,272 26,883
------- ------
Total Liabilities & Equity 237,198 228,775
======= =======
</TABLE>
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; dollars in thousands)
<CAPTION>
Three Months
Ended March 31,
1998 1997
<S> <C> <C>
INTEREST INCOME: ----- -----
Interest & fees on loans 3,274 3,275
Int.-bearing balances 591 444
Treas. & Agency securities 366 225
Municipal securities 220 185
Other securities 11 13
Fed funds sold and repos 0 0
----- -----
Total Int. Income 4,462 4,142
----- -----
INTEREST EXPENSE:
Deposits 1,946 1,779
Short-term borrowings 86 39
Long-term borrowings 116 80
----- -----
Total Int. Expense 2,148 1,898
----- -----
Net Int. Income 2,314 2,244
PROVISION FOR LOAN LOSSES 25 25
----- -----
Net Int. Inc. after Prov. 2,289 2,219
----- -----
NON-INTEREST INCOME:
Trust Dept 8 4
Service Chgs. on Deposits 95 70
Investment sec. gains, net 0 -1
Other 299 95
----- -----
Total Non-Interest Income 402 168
----- -----
NON-INTEREST EXPENSE:
Salaries and benefits 704 639
Occupancy, net 75 74
Equipment 103 87
PA Bank Shares tax 74 61
Other 445 299
----- -----
Tot. Non-int. Exp. 1,401 1,160
----- -----
Income before income taxes 1,290 1,227
INCOME TAX EXPENSE 367 354
----- -----
NET INCOME 923 873
===== =====
Other Comprehensive Income, net
of tax:
Unrealized holding losses on
securities arising during the
period -37 -217
Less: reclassification
adjustments for gains included
in net income 0 0
----- -----
Other comprehensive income -37 -217
----- -----
Comprehensive Income 886 656
===== =====
NET INCOME PER SHARE 0.35 0.33
===== =====
Weighted Average No. of
Shares Outstanding 2,606,138 2,608,143
</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,
1998 1997
-------- --------
<S> <C> <C>
Operating Activities:
Net Income 923 873
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 25 25
Depreciation 83 83
Loss (gain) on sale of investment
securities 0 -1
Loss (gain) on sale/disposal of bank
premises and equipment 0 0
Loss (gain) on the sale of foreclosed
assets -209 0
Change in interest receivable -54 -67
Change in other assets 142 -443
Change in interest payable 277 326
Change in other liabilities 573 561
Other, net 0 0
------- -------
Net cash provided by
operating activities: 1,760 1,357
------- -------
Investing Activities:
Net decrease in int-bearing balances -5,059 1,161
Proceeds from sale of securities 2,460 2,166
Proceeds from the maturity of secs. 0 3,267
Purchase of investment securities -5,355 -4,757
Net decrease in loans -2,085 -305
Net purchases of fixed assets -401 -16
Proceeds from sale of other real estate 1,128 36
Capitalized additions - ORE 0 0
------- -------
Net cash provided by
investing activities -9,312 1,552
------- -------
Financing Activities:
Net increase in demand and savings 1,882 -325
Net increase in time deposits -3,116 -184
Net increase in sh-term borrowings 3,452 -3,772
Net increase in long-term borrowings 4,966 2,076
Cash dividend declared -495 -472
------- -------
Net cash provided by
financing activities .6,689 -2,677
------- -------
Net increase in cash & equivalents -863 232
Cash & cash equivalents, beg of period 4,809 4,442
------- -------
Cash & cash equivalents, end of period 3,946 4,674
======= =======
Supplemental Noncash Disclosures:
Loan charge-offs 5 46
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, 1998, compared to year-
end 1997 and the Results of Operations for the first quarter
of 1998 compared to the same period in 1997.
CONSOLIDATED FINANCIAL CONDITION
Total assets as of March 31, 1998, amounted to $237,198,000,
an increase of $8,423,000 or 3.7% from the total assets
as of December 31, 1997.
During the first quarter of 1998, insured jumbo certificates
of deposit of other institutions, interest bearing balances,
were yielding a higher return than other comparable
investments. Management took this opportunity to increase
the Bank's investment in interest bearing balances by
approximately $5 million. These balances were funded with a
10 year/1 year convertible FHLB borrowing securing a
positive spread.
Available for sale securities were also increased during the
quarter in response to favorable return opportunities on
certain agency and municipal bonds.
Loan demand, particularly in the area of commercial real
estate, showed some renewed strength during the first three
months of 1998. Even though the Bank experienced some large
payoffs in the commercial loan portfolio along with a
continued competitive pricing environment, net loans
increased by more than $2 million during the quarter with
additional funding activity to carry over into the second
quarter.
Foreclosed assets held for sale decreased to $462,000 during
the first quarter of 1998 due to the sale of
one residential property, one commercial property, and
several lots of undeveloped land. These sales of other real
estate resulted in an after-tax gain of approximately
$127,000. As of March 31, 1998, the balance
of foreclosed assets held for sale consisted of undeveloped
land including farmland, one single-family residence and one
commercial property.
Total deposits decreased by $1,234,000 during the first
three months of 1998. This decrease was largely due to the
run-off of some short-term jumbo certificates of deposit
issued to municipalities. Lower costing demand and savings
deposits actually increased by $1,882,000 during the
quarter.
Short-term borrowings, consisting of overnight borrowings,
increased by $3.5 million from year end.
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.
RESULTS OF OPERATION
Net income for the first quarter of 1998 was $923,000,
compared with $873,000 earned in the same quarter
of 1997. Net income per share for the first quarter
ended March 31, 1998, increased to $.35 from $.33 earned in
the same period of 1997. Net income on an annualized basis
at March 31, 1998, 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 1997. Net income as a percentage
of stockholders' equity, also known as return on equity,
(ROE), was 13.6% on an annualized basis for the first
quarter of 1998 as compared to 14.1% for the same period in
1997.
A principal reason for the increase in net income was an
increase in net interest income. Net interest income was
$2,314,000 for the quarter ended March 31, 1998, an increase
of $70,000 over the same period of 1997. The net interest
margin on average earning assets was 4.4% at March 31, 1998,
compared to 4.7% at March 31, 1997 as margins continued to
be challenged by strong rate competition for loans. A
significant contribution to the increase in net interest
income was the increase in volume in earning assets as the
corporation poises to use increased leverage, in light of a
very strong equity position, to increase earnings
The Bank made a provision for loan losses of $25,000 during
the first quarters of 1998 and 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 increased to $402,000 for the first
quarter of 1998 over $168,000 earned during the same quarter
of 1997. The major increase in non-interest income came
from the gain on several parcels of other real estate which
were sold during the first quarter of 1998. The pretax gain
on these sales amounted to $192,000. Another significant
contribution to non-interest income is insufficient fund
(NSF) fee income. NSF fee income contributed in excess of
$54,000 during the first quarter of 1998. The Corporation
has also implemented service charges for non-customer usage
of Mid Penn Bank owned cash machines. Expected income from
ATM service charging should yield in excess of $60,000 by
year end.
Non-interest expense during the first quarter of 1998
increased significantly over the same period of 1997 due to
several factors. The Corporation spent 24,000 additional
dollars in 1998 on advertising. The additional advertising
was used to promote the Bank's free business checking
account and the Bank's IRA program in light of the new IRA
options including Roth and educational IRAs. The additional
advertising was also spurred by the bank merger activity in
our market area which created opportunities for attracting
new customers who were unhappy with their former banks'
mergers. The Corporation also incurred $18,000 in legal and
administrative costs associated with the Bancorp's proposed
merger with Miners Bank of Lykens, a one office bank with
approximately $28 million in assets at December 31, 1997.
Also the Bank incurred $17,000 additionally in the first
quarter of 1998 on losses, including both realized and
unrealized, on the residential mortgages sold to FNMA.
These losses are offset by both up-front origination fees
and ongoing servicing fees associated with these loans.
Additionally, the Corporation incurred $20,000 in costs
associated with the property held for sale as other real
estate, and in excess of $15,000 in finder's fees for the
hire additional Bank management talent.
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 1998. The major source of
funds came from borrowings from the FHLB. Net short-term
borrowings increased by $3,452,000, and long-term borrowings
by $4,966,000. Proceeds of the sale of other real estate
provided an additional $1,128,000.
The major use of funds during the period was a net increase
of $5,059,000 in interest bearing balances and a net
increase of $2,895,000 in investments purchased to realize a
spread over the cost of corresponding funding. Another
major use of funds is the $2,085,000 increase net loans.
CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES
Total non-performing assets decreased to $1,791,000
representing 0.76% of total assets at March 31, 1998, from
$2,086,000 or 0.91% of total assets at December 31, 1997.
Most non-performing assets are supported by collateral value
that appears to be adequate at March 31, 1998.
The Allowance for Loan Losses at March 31, 1998, was
$2,220,000 or 1.52% of loans, net of unearned interest, as
compared to $2,176,000 or 1.51% of loans, net of unearned
interest, at December 31, 1997.
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,
1998 1997
-------- --------
<S> <C> <C>
Non-Performing Assets:
Non-accrual loans 358 312
Past due 90 days or more 385 207
Restructured loans 586 212
------- -------
Total non-performing loans 1,329 731
Other real estate 462 1,355
------- -------
Total 1,791 2,086
======= =======
Percentage of total loans outstanding 1.23 1.43
Percentage of total assets 0.76 0.91
Analysis of the Allowance for Loan Losses:
Balance beginning of period 2,176 2,173
Loans charged off:
Commercial real estate, construction
and land development 0 4
Commercial, industrial and agricultural 0 32
Real estate - residential mortgage 0 12
Consumer 5 194
------- -------
Total loans charged off 5 242
------- -------
Recoveries of loans previously charged off:
Commercial real estate, construction
and land development 6 4
Commercial, industrial and agricultural 9 107
Real estate - residential mortgage 0 3
Consumer 9 31
------- -------
Total recoveries 24 145
------- -------
Net (charge-offs) recoveries 19 (97)
------- -------
Current period provision for
loan losses 25 100
------- -------
Balance end of period 2,220 2,176
======= ======
</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 - The Corporation filed a Current
Report on Form 8-K dated January, 9, 1998, with respect
to the proposed acquisition of Miners Bank of Lykens,
which Report was filed with the Commission on January
16, 1998.
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/ Kevin W. Laudenslager
By:Eugene F. Shaffer By:Kevin W. Laudenslager
Chairman, Pres. & CEO Treasurer
Date: April 12, 1998 Date: April 12, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 3946
<INT-BEARING-DEPOSITS> 40786
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 42331
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 145790
<ALLOWANCE> 2220
<TOTAL-ASSETS> 237198
<DEPOSITS> 191005
<SHORT-TERM> 5686
<LIABILITIES-OTHER> 2581
<LONG-TERM> 10654
0
0
<COMMON> 2627
<OTHER-SE> 24645
<TOTAL-LIABILITIES-AND-EQUITY> 237198
<INTEREST-LOAN> 3274
<INTEREST-INVEST> 1188
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4462
<INTEREST-DEPOSIT> 1946
<INTEREST-EXPENSE> 2148
<INTEREST-INCOME-NET> 2314
<LOAN-LOSSES> 25
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1401
<INCOME-PRETAX> 1290
<INCOME-PRE-EXTRAORDINARY> 1290
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 923
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
<YIELD-ACTUAL> 8.4
<LOANS-NON> 358
<LOANS-PAST> 385
<LOANS-TROUBLED> 210
<LOANS-PROBLEM> 2650
<ALLOWANCE-OPEN> 2176
<CHARGE-OFFS> 5
<RECOVERIES> 24
<ALLOWANCE-CLOSE> 2220
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
