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, 2000
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.
3,036,994 shares of Common Stock, $1.00 par value per share,
were outstanding as of September 30, 2000.
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited; Dollars in thousands)
<CAPTION>
Sept. 30, Dec. 31,
2000 1999
-------- --------
<S> <C> <C>
ASSETS:
Cash and due from banks 5,910 7,474
Interest-bearing balances 41,186 34,570
Available-for-sale securities 67,258 64,099
Federal funds sold 0 0
Loans 180,154 172,294
Less,
Allowance for loan losses 2,716 2,505
------- -------
Net loans 177,438 169,789
------- -------
Bank premises and equip't, net 3,512 3,307
Other real estate 70 63
Accrued interest receivable 2,195 2,120
Cash surrender value of life insurance 4,237 4,089
Deferred income taxes 1,579 1,676
Other assets 560 355
------- -------
Total Assets 303,945 287,542
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY:
Deposits:
Demand 22,903 22,331
NOW 28,072 26,962
Money market 17,792 22,899
Savings 24,851 25,815
Time 135,996 119,833
------- -------
Total deposits 229,614 217,840
------- -------
Short-term borrowings 18,331 24,636
Accrued interest payable 2,338 1,202
Other liabilities 1,570 899
Long-term debt 24,282 16,400
------- -------
Total Liabilities 276,135 260,977
------- -------
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share;
authorized 10,000,000 shares; issued
3,056,501 shares at September 30, 2000 and
December 31, 1999 3,057 3,057
Additional paid-in capital 20,368 20,368
Retained earnings 6,600 5,557
Accumulated other comprehensive loss -1,674 -1,861
Treasury stock at cost
(19,507 and 19,996 shs., resp.) -541 -556
------- -------
Total Stockholders' Equity 27,810 26,565
------- ------
Total Liabilities & Equity 303,945 287,542
======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
Note: The balance sheet at December 31, 1999, 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.
</TABLE>
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited; dollars in thousands)
<CAPTION>
Three Months Nine Months
Ended Sept 30, Ended Sept 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
INTEREST INCOME: ----- ----- ----- -----
Interest & fees on loans 3,933 3,402 11,654 10,090
Int.-bearing balances 616 598 1,613 1,853
Treas. & Agency securities 581 610 1,692 1,853
Municipal securities 377 333 1,082 987
Other securities 57 35 160 99
Fed funds sold and repos 0 0 0 0
----- ----- ----- -----
Total Int. Income 5,564 4,978 16,201 14,882
----- ----- ----- -----
INTEREST EXPENSE:
Deposits 2,325 2,048 6,551 6,242
Short-term borrowings 202 118 593 261
Long-term borrowings 403 220 1,181 655
----- ----- ----- -----
Total Int. Expense 2,930 2,386 8,325 7,158
----- ----- ----- -----
Net Int. Income 2,634 2,592 7,876 7,724
PROVISION FOR LOAN LOSSES 75 100 250 250
----- ----- ----- -----
Net Int. Inc. after Prov. 2,559 2,492 7,626 7,474
----- ----- ----- -----
NON-INTEREST INCOME:
Trust dept 60 9 158 82
Service chgs. on deposits 143 129 440 373
Investment sec. gains (losses),
net 0 0 -4 50
Gain on sale of loans 0 0 31 0
Other 171 190 560 848
----- ----- ----- -----
Total Non-Interest Income 374 328 1,185 1,353
----- ----- ----- -----
NON-INTEREST EXPENSE:
Salaries and benefits 971 919 2,862 2,858
Occupancy, net 93 81 274 248
Equipment 137 124 384 354
PA Bank Shares tax 68 70 203 208
Other 437 399 1,320 1,355
----- ----- ----- -----
Tot. Non-int. Exp. 1,706 1,593 5,043 5,023
----- ----- ----- -----
Income before income taxes 1,227 1,227 3,768 3,804
INCOME TAX EXPENSE 280 297 904 950
----- ----- ----- -----
NET INCOME 947 930 2,864 2,854
===== ===== ===== =====
NET INCOME PER SHARE 0.31 0.31 .94 .94
===== ===== ===== =====
DIVIDENDS PER SHARE 0.20 0.19 .60 1.99
===== ===== ===== =====
Weighted Average No. of
Shares Outstanding 3,036,387 3,035,665
3,037,857 3,038,390
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; Dollars in thousands)
<CAPTION>
For the nine months ended:
Sept. 30, Sept. 30,
2000 1999
-------- --------
<S> <C> <C>
Operating Activities:
Net Income 2,864 2,854
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 250 250
Depreciation 318 303
Incr. in cash-surr. value of life ins. -148 -140
Loss (gain) on sale of investment
securities 4 -50
Loss (gain) on sale/disposal of bank
premises and equipment 0 0
Loss (gain) on the sale of foreclosed
assets -40 -229
Loss (gain) on the sale of loans -31 0
Change in interest receivable -75 -143
Change in other assets -205 -69
Change in interest payable 1,136 719
Change in other liabilities 671 828
------- -------
Net cash provided by
operating activities: 4,744 4,323
------- -------
Investing Activities:
Net (incr)decr in int-bearing balances -6,616 4,661
Proceeds from sale of securities 3,515 3,811
Proceeds from the maturity of secs. 2,315 7,998
Purchase of investment securities -8,709 -9,762
Proceeds from the sale of loans 3,622 0
Net increase in loans -11,525 -9,542
Purchases of fixed assets -523 -190
Proceeds from sale of other real estate 68 523
Capitalized additions - ORE 0 0
------- -------
Net cash used in
investing activities -17,853 -2,501
------- -------
Financing Activities:
Net (decr)incr in demand and savings -4,389 5,225
Net incr(decr) in time deposits 16,163 -2,887
Net incr(decr) in sh-term borrowings -6,305 2,212
Net incr(decr) in long-term borrowings 7,882 -111
Cash dividend declared -1,821 -6,046
Net sale of treasury stock 15 3
------- -------
Net cash provided by(used in)
financing activities 11,545 -1,604
------- -------
Net incr(decr) in cash & due from banks -1,564 218
Cash & due from banks, beg of period 7,474 5,651
------- -------
Cash & due from banks, end of period 5,910 5,869
======= =======
Supplemental Noncash Disclosures:
Loan charge-offs 60 189
Transfers to other real estate 35 0
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<PAGE>
Mid Penn Bancorp, Inc.
Notes to Consolidated Financial Statements
1. The consol. interim finan. stmts. 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 Sept. 30, 2000, and
December 31, 1999, consisted of:
(Dollars in thousands)
9/30/00 12/31/99
------- --------
Federal funds purchased $15,700 $22,300
Repurchase agreements 2,107 1,313
Treasury, tax and loan note 524 1,023
------- --------
$18,331 $24,636
======= =======
Federal funds purchased represent overnight funds as of
Sept. 30, 2000. 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.
6. Long-term debt as of the quarter ended Sept. 30, 2000,
and the year ended December 31, 1999, was $24,282,000
and $16,400,000, respectively. The Bank is a member of
the Federal Home Loan Bank of Pittsburgh (FHLB) and
through its membership, the Bank can access a number of
credit products which are utilized to provide various forms
of liquidity. The Bank entered into two long-term
borrowings with the FHLB during the period: $5,000,000 in a
five year/two year convertible borrowing at 6.28% with a
final maturity of January 14, 2010; and a $5,000,000 ten
year/three year convertible borrowing at 6.71% with a final
maturity of February 22, 2010.
7. 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 and stock splits. The
Corporation's basic and diluted earnings per share are the
same since there are no dilutive shares of potential common
stock outstanding.
8. 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 Nine Months
Ended Sept 30, Ended Sept 30,
2000 1999 2000 1999
---- ---- ---- ----
Net Income $947 $930 $2,864 $2,854
---- ---- ---- ----
Other comprehensive income(loss):
Unrealized holding gains(losses)
on securities arising during
the period 991 -345 283 -2,777
Less: reclassification
adjustments for (gains) losses
included in net income 0 0 4 -50
----- ----- ----- -----
Other comprehensive income(loss)
before income tax provision 991 -345 287 -2,827
Income tax (expense)benefit
related to other comprehensive
income(loss) -337 117 -96 944
----- ----- ----- -----
Other comprehensive inc(loss) 654 -228 191 -1,883
----- ----- ----- -----
Comprehensive Income $1,601 $702 3,055 971
===== ===== ===== =====
<PAGE>
Mid Penn Bancorp, Inc.
Millersburg, Pennsylvania
Management's Discussion of Consolidated Financial Condition
as of September 30, 2000, compared to year-end 1999 and the
Results of Operations for the third quarter and the first
nine months of 2000 compared to the same periods in 1999.
CONSOLIDATED FINANCIAL CONDITION
Total assets as of September 30, 2000, increased to
$303,945,000, or 6%, from $287,542,000 as of December
31,1999.
During the first three quarters of 2000, loans outstanding
Increased by $7,860,000, or 5% despite a sale of $3,622,000
in student loans.
Our entire portfolio of investment securities is considered
available-for-sale. As such, the investments are recorded
on our Balance Sheet at market value. Our investments: US
Treasury, Agency and Municipal securities are assigned a
market price relative to investments of the same type with
similar maturity dates. Since the interest rate environment
of these securities has increased by more than 1.5
percentage points in the past twenty-four months, our
existing securities are valued lower in comparison. This
difference in value, or unrealized loss, amounted to
$1,674,000, net of tax, as of Sept. 30, 2000. However, the
investments are all high credit quality securities that if
held to maturity are expected to yield no loss to the bank.
Total deposits increased by $11,774,000 during the first
nine months of 2000. Certificates of deposit increased by
$16,163,000 while money market balances decreased by
$5,107,000 indicating a movement toward time deposits at
this point in the interest rate cycle.
Short-term borrowings, consisting mainly of overnight
borrowings, decreased by $6.3 million from year end. These
borrowings had been increased during the fourth quarter of
1999 to fund strong loan growth, and to allow for
sufficient liquidity to meet Y2K needs. During the first
quarter of 2000, we refinanced approximately $8 million
of short-term funds using longer term borrowings in light of
rising interest rates.
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.
As of Sept. 30, 2000, 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.
We launched a comprehensive interactive, internet banking
package during the first quarter of 2000. Our internet
banking program has been well received by our customers who
are using the service in increasing numbers. The web site
and online banking program can be found at
www.midpennbank.com
During the third quarter, the Bank purchased an office
location on Front Street in uptown Harrisburg and has
received approval for branch operation from the appropriate
regulatory agencies. The office, which opened for business
in late August, is located in an area of the city occupied
by many legal and medical practices. This office will offer
excellent exposure for the Bank in the Harrisburg city
market.
RESULTS OF OPERATIONS
Net income for the first nine months of 2000 was $2,864,000,
compared with $2,854,000 earned in the same period
of 1999. Net income per share for the same period of
both 2000 and 1999 was $.94. Net income as a percentage
of stockholders' equity, also known as return on equity,
(ROE), was 13.7% on an annualized basis for the first
three quarters of 2000 as compared to 14.3% for the same
period in 1999.
Net income for the third quarter of 2000 was $947,000,
compared with $930,000 earned in the same quarter
of 1999. Net income per share for the third quarters of
both 2000 and 1999 was $.31.
Net interest income of $2,634,000 for the quarter ended
September 30, 2000, increased by 1.6% compared to the
$2,592,000 earned in the same quarter of 1999. This rise
indicates an increase in interest spread during the quarter
despite higher interest rates and keen competition.
During the third quarter of 2000, we analyzed interest rate
risk using the Vining Sparks Asset-Liability Management
Model. Using the computerized model, management reviews
interest rate risk on a periodic basis. This analysis
includes an earnings scenario whereby interest rates are
increased by 200 basis points (2 percentage points) and
another whereby they are decreased by 200 basis points. At
Aug. 31, 2000, these scenarios indicate that there would
not be a significant variance in net interest income at the
one-year time frame due to interest rate changes; however,
actual results could vary significantly from the
calculations prepared by management.
The Bank made a provision for loan losses of $75,000 and
$100,000 during the third quarters of 2000 and 1999,
respectively. On a quarterly basis, senior management
reviews potentially unsound loans taking into consideration
judgments regarding risk of error, economic conditions,
trends and other factors in determining a reasonable
provision for the period.
Non-interest income amounted to $374,000 for the third
quarter of 2000 compared to $328,000 earned during the same
quarter of 1999. Service charges on deposits grew
by more than 10% during the third quarter of 2000 compared
to the same period of 1999 as the bank continues to focus on
fee and service charge income. One significant contributor
to non-interest income is insufficient fund (NSF) fee
income. NSF fee income contributed in excess of $110,000
during the third quarter of 2000.
Non-interest expense during the third quarter of 2000
of $1,706,000 increased as compared to an expense
of $1,593,000 during the same period of 1999.
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 three quarters of 2000 The major
source of funds came from the increase in time deposits of
$16,163,000 mainly an increase in certificates of deposits
particularly a new-money, three-year offer at 6.88%. Other
major sources of funds included the $7,882,000 net increase
in net long-term borrowings, and the $3,622,000 received in
principal on the sale of a block of student loans.
The major use of funds during the period was an increase in
loans of $11,525,000. The other major uses of funds
included the $6,616,000 increase in interest bearing
balances (certificates of deposit of other banks), which
were purchased at a positive spread to cost of funds, and
finally a $6,305,000 decrease in short-term borrowings.
CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES
Total non-performing assets increased to $2,775,000
representing 0.91% of total assets at September 30, 2000,
from $2,217,000 or 0.77% of total assets at December 31,
1999. Most non-performing assets are supported by
collateral value that appears to be adequate at September
30, 2000.
The allowance for loan losses at September 30, 2000, was
$2,716,000 or 1.51% of loans, net of unearned interest, as
compared to $2,505,000 or 1.45% of loans, net of unearned
interest, at December 31, 1999.
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.
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
<CAPTION>
Sept 30, Dec. 31,
2000 1999
-------- --------
<S> <C> <C>
Non-Performing Assets:
Non-accrual loans 737 890
Past due 90 days or more 1,214 386
Restructured loans 754 878
------- -------
Total non-performing loans 2,705 2,154
Other real estate 70 63
------- -------
Total 2,775 2,217
======= =======
Percentage of loans, net of unearned
interest, outstanding 1.54 1.29
Percentage of total assets 0.91 0.77
Analysis of the Allowance for Loan Losses:
Balance beginning of period 2,505 2,313
Loans charged off:
Commercial real estate, construction
and land development 2 0
Commercial, industrial and agricultural 12 146
Real estate - residential mortgage 0 0
Consumer 46 78
------- -------
Total loans charged off 60 224
------- -------
Recoveries of loans previously charged off:
Commercial real estate, construction
and land development 0 55
Commercial, industrial and agricultural 0 1
Real estate - residential mortgage 0 0
Consumer 21 35
------- -------
Total recoveries 21 91
------- -------
Net (charge-offs) recoveries -39 -133
------- -------
Current period provision for
loan losses 250 325
------- -------
Balance end of period 2,716 2,505
======= ======
</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/ Alan W. Dakey /s/ Kevin W. Laudenslager
By: Alan W. Dakey By: Kevin W. Laudenslager
President & CEO Treasurer
Date: November 10, 2000 Date: November 10, 2000
