Mid Penn Bancorp, Inc. Reports Annual Earnings Increase of 13% and Declares Quarterly and Special Dividends

MILLERSBURG, Pa., Jan. 27, 2016 (GLOBE NEWSWIRE) -- Mid Penn Bancorp, Inc. (“Mid Penn”) (NASDAQ:MPB), the parent company of Mid Penn Bank, today reported net income for the three months ended December 31, 2015 of $1,627,000, an 83.2% increase over the same period in 2014.  Net income for the twelve months ended December 31, 2015 was $6,528,000, a 14.5% increase from 2014.  Net income available to common shareholders for the twelve months ended December 31, 2015 was $6,038,000, or $1.47 per common share, a 12.8% increase from the same period in 2014.  Excluding merger and acquisition expenses incurred in conjunction with the acquisition of Phoenix Bancorp, Inc. (“Phoenix”), and the corresponding tax impact, net income available to common shareholders for the twelve months ended December 31, 2015 would have been $6,576,000, an increase of 11.6% over the adjusted results for the twelve months ended December 31, 2014.  Mid Penn also reported increases of $167,658,000 (29.3%) in total loans, $175,981,000 (23.3%) in total assets, and $139,121,000 (21.8%) in total deposits over December 31, 2014.  The comparability of the financial condition and results of operations as of and for the three and twelve month periods ended December 31, 2015 and 2014, in general, have been favorably impacted by the acquisition of Phoenix. 


I am very pleased to announce not only our results for the fourth quarter of 2015, but for the entire fiscal year.  In a year challenged with the purchase and integration of Phoenix Bancorp, Inc., the opening of two new retail locations, and the issuance of subordinated debt to repay preferred shareholders, we exceeded even our own expectations in growth and income generation.

While we feel good about 2015, we acknowledge that there is much work to do and we are focused on continuing the positive momentum throughout 2016.  

On behalf of the Board of Directors, I also announce today that Mid Penn is declaring a cash dividend of $0.12 per common share based on fourth quarter earnings and a special dividend of $0.10 per common share based upon 2015's total earnings. The dividends will be payable February 22, 2016 to shareholders of record as of February 10, 2016.


Net Interest Income and Net Interest Margin

Net interest income increased $5,683,000, or 21.7%, to $31,883,000 for the twelve months ended December 31, 2015 from $26,200,000 during the twelve months ended December 31, 2014.  Net interest income was positively impacted by the Phoenix acquisition and also increased due to strong loan growth and a lower cost of funds in 2015.

For the twelve months ended December 31, 2015, Mid Penn’s tax-equivalent net interest margin increased to 4.06%, versus 3.99% for the twelve months ended December 31, 2014.  Included in the twelve months ended December 31, 2015 is $558,000 in income from the successful resolution of six legacy Phoenix loans acquired with credit deterioration.

Noninterest Income

During the twelve months ended December 31, 2015, noninterest income, excluding securities gains of $325,000, increased $682,000, or 22.1%, versus the twelve months ended December 31, 2014, excluding security gains of $168,000.  The twelve months ended December 31, 2015 was positively impacted by the addition of Phoenix to the income stream.  Items of particular note are detailed below.

Income from fiduciary activities decreased $86,000 during the twelve months ended, December 31, 2015 versus the same period in 2014 due to a change in the commission structure.  Mortgage banking income increased $143,000 for the twelve months ended December 31, 2015 over December 31, 2014.  Improved real estate activity throughout Mid Penn’s footprint and favorable interest rate conditions have contributed to increasing revenue from this business line.  Mid Penn has experienced significant activity in Small Business Administration (“SBA”) loans year-to-date as more qualified borrowers have taken advantage of Mid Penn’s Preferred Lender status with the SBA. 

During the year 2015, Mid Penn took advantage of opportunities within its investment portfolio to better align the portfolio for a rising interest rate environment thereby increasing realized gains on sales of investments. 

Noninterest Expense

Noninterest expenses increased $6,065,000, or 29.3%, during the twelve months ended December 31, 2015, versus the same period in 2014.  Both periods were impacted by the addition of Phoenix to the expense stream.  Items of particular note are detailed below.

Salaries and employee benefits increased during the year ended December 31, 2015 by $3,164,000 versus 2014.  The increase was driven by the addition of the Phoenix employees to Mid Penn’s employee pool, an increase in staffing levels due to Mid Penn’s entry into the Lancaster County and Mechanicsburg markets, and an increase in lending personnel and support staff to augment the expanding reach of Mid Penn.  Occupancy expenses for the twelve months ended December 31, 2015 increased by $634,000.  This increase was impacted by the inclusion of rent for the new Corporate Administration offices on North Front Street in Harrisburg, the new Elizabethtown branch office, and the new Simpson Ferry Road branch office. Equipment, Pennsylvania bank shares tax, marketing and advertising, software licensing, telephone, and other expenses all saw increases related to the inclusion of Phoenix’s normal operating expenses to Mid Penn’s expense stream year-to-date.  Legal and professional fees increased $72,000 during the twelve months ended December 31, 2015 compared to the same period in 2014 due to the increase in consultant fees incurred for cyber penetration testing of Mid Penn’s computer network, implementation of Mid Penn’s mobile banking app, routine legal fees generated through the normal conduct of business, and the periodic examination of potential merger and acquisition opportunities as they become available.  Merger and acquisition expenses in connection with the acquisition of Phoenix decreased $189,000 in 2015 versus 2014.  All expenses in connection with the merger have been recognized.


The increase in Mid Penn’s total assets was impacted by the inclusion of Phoenix’s assets and liabilities on the balance sheet.  In addition to this, the loan growth also came as a result of business development efforts by a more experienced loan team. As a result of this solid growth, short-term borrowings increased $31,018,000 to $31,596,000 at December 31, 2015 over the same period in 2014 to aid in funding these loans.


Mid Penn’s total available-for-sale securities portfolio decreased $5,913,000 from $141,634,000 at December 31, 2014 to $135,721,000 at December 31, 2015.  Due to the growth in the loan portfolio, Mid Penn has utilized the cash flows from the investment portfolio to supplement deposits and borrowings in funding this growth.


Total loans at December 31, 2015 were $739,191,000 compared to $571,533,000 at December 31, 2014, an increase of $167,658,000, or 29.3%.  Along with the addition of Phoenix’s loan portfolio, the other main driver of Mid Penn’s loan growth has been in the commercial loan area, specifically in commercial and industrial, and commercial real estate loans.  Mid Penn has realigned its commercial loan team over the past five years and now has professional lenders who focus their efforts on developing and maintaining complete business relationships versus a previous focus on prospect-specific speculative real estate financing.  We believe the positive results of these efforts are now evident and position us properly for the future.


Total deposits increased $139,121,000 from $637,922,000 at December 31, 2014 to $777,043,000 at December 31, 2015.  Over the last twelve months, all deposit categories increased, mainly due to the inclusion of Phoenix’s deposits, but also due to strong cash management and retail efforts.  Mid Penn continues to allow non-relationship deposits to run off and shift the funding composition towards lower-cost deposits, including public funds.  This strategy, coupled with strong earning assets, has provided positive momentum to net interest income during 2015.


Shareholders’ equity increased by $10,938,000, or 18.5%, at December 31, 2015 from $59,130,000 at December 31, 2014, primarily due to the issuance of 723,851 shares valued at $11,292,000 in common stock as merger consideration in the Phoenix acquisition, as well as an increase in retained earnings from the normal operations of Mid Penn.  During the fourth quarter of 2015, Mid Penn redeemed all of its Series B Preferred Stock, for an aggregate redemption price of $5,123,000, and Series C Preferred Stock, for an aggregate redemption price of $1,754,000, using the net proceeds from its issuance and sale of $7,500,000 in aggregate principal amount of its subordinated notes.  These redemptions negatively impacted shareholders’ equity in 2015.

Mid Penn Bank’s regulatory capital ratios at December 31, 2015 and December 31, 2014 exceed all regulatory (well-capitalized) minimums.


Total nonperforming assets at December 31, 2015 amounted to $6,062,000, or 0.82% of loans and other real estate owned as of such date, compared to $11,507,000, or 2.01% of loans and other real estate owned as of December 31, 2014.  During the fourth quarter of 2015, two loans to unrelated borrowers totaling $3,403,000 were charged off, reducing nonperforming assets.  The remaining improvement has primarily been the result of well-structured workout plans, which have yielded very positive results, including improved delinquency, as well as the addition of the Phoenix loan portfolio into the equation.

Mid Penn had net charge-offs of $1,613,000 during the year ended 2015, compared to net charge-offs of $1,218,000 during the same period in 2014.  On an annualized basis, net charge-offs during 2015 were 0.23% of average total loans compared to 0.22% during 2014.

Following its model for loan and lease loss allowance adequacy, management recorded a $200,000 provision for the three months ended December 31, 2015, compared to a provision of $400,000 for the three months ended December 31, 2014.  During the year ended December 31, 2015, the provision for loan and lease losses was $1,065,000, compared to $1,617,000 for the year ended December 31, 2014.  The allowance for loan and lease losses as a percentage of total loans was 0.83% at December 31, 2015, compared to 1.18% at December 31, 2014. This ratio was impacted by the inclusion of the Phoenix loan portfolio in the calculation coupled with the elimination of Phoenix’s allowance for loan and lease losses in conformity with GAAP purchase accounting treatment.  Loan loss reserves as a percentage of nonperforming loans was 101.75% at December 31, 2015 compared to 58.36% at the same point in 2014.  Management believes, based on information currently available, that the allowance for loan and lease losses of $6,168,000 is adequate as of December 31, 2015 to provide for losses that can be reasonably anticipated.

Mid Penn recognizes asset quality as a high priority and continues its efforts to mitigate future losses through capturing and monitoring credit risk within the portfolio, as well as proactively working with its customers.  Furthermore, active monitoring and follow-up will continue on loans previously charged off in order to realize recoveries when borrowers’ conditions have improved.

(Dollars in thousands)As of December 31, Change
 2015 2014   $    % 
Total Assets$ 931,638 $ 755,657 $ 175,981  23.29%
Total Loans  739,191   571,533   167,658  29.33%
Total Deposits  777,043   637,922   139,121  21.81%
Core Deposits  699,353   588,531   110,822  18.83%
Total Equity  70,068   59,130   10,938  18.50%

(Dollars in thousands, except per share data)  Three Months Ended December 31, Change   Year Ended December 31, Change
 2015 2014   $    %  2015 2014 $   % 
Net Interest Income$  8,170  $  6,633  $ 1,537  23.17% $  31,883  $  26,200  $  5,683   21.69%
Net Income Available to Common Shareholders  1,408    801   607  75.78%   6,038    5,351     687   12.84%
Basic Earnings per Common Share  0.35    0.23   0.12  52.17%   1.47    1.53     (0.06)  (3.92%)
Return on Average Equity  8.68%   5.92%  N/A  46.66%   9.16%   9.95%   N/A   (7.90%)

  Three Months Ended December 31, Change Year Ended December 31, Change
   2015   2014  %  2015   2014  %
Net Interest Margin  3.92%  3.86%  1.55%  4.06%  3.99%  1.75%
Cost of Funds  0.64%  0.69%  (7.25%)  0.64%  0.71%  (9.86%)
Yield on Earning Assets  4.46%  4.45%  0.22%  4.61%  4.62%  (0.22%)

(Dollars in thousands)At December 31,
 2015 2014
  Cash and due from banks$  12,329   $  8,869  
  Interest-bearing balances with other financial institutions   955      1,013  
  Federal funds sold   -     - 
  Total cash and cash equivalents   13,284      9,882  
  Interest-bearing time deposits with other financial institutions   4,317      5,772  
  Available for sale investment securities   135,721      141,634  
  Loans and leases, net of unearned interest   739,191      571,533  
  Less:  Allowance for loan and lease losses   (6,168)    (6,716)
  Net loans and leases   733,023      564,817  
  Bank premises and equipment, net   13,993      12,225  
  Restricted investment in bank stocks   4,266      3,181  
  Foreclosed assets held for sale   1,185      565  
  Accrued interest receivable   3,813      3,058  
  Deferred income taxes   1,821      2,125  
  Goodwill   3,918      1,016  
  Core deposit and other intangibles, net   665      187  
  Cash surrender value of life insurance   12,516      8,575  
  Other assets   3,116      2,620  
  Total Assets$  931,638   $  755,657  
  Noninterest bearing demand$  103,721   $  60,613  
  Interest bearing demand   247,356      222,712  
  Money Market   208,386      197,418  
  Savings   56,731      32,394  
  Time   160,849      124,785  
  Total Deposits    777,043      637,922  
  Short-term borrowings   31,596      578  
  Long-term debt   40,219      52,961  
  Subordinated debt   7,500      - 
  Accrued interest payable   390      349  
  Other liabilities   4,822      4,717  
  Total Liabilities   861,570      696,527  
  Shareholders' Equity:     
  Series B Preferred stock, par value $1.00; liquidation value $1,000; authorized     
  5,000 shares; 7% non-cumulative dividend; 0 shares issued and outstanding at     
  December 31, 2015 and 5,000 shares issued and outstanding at December 31, 2014   -     5,000  
  Series C Preferred stock, par value $1.00; liquidation value $1,000; authorized 1,750 shares;     
  1% non-cumulative dividend; 0 shares issued and outstanding at December 31, 2015 and     
  at December 31, 2014; total redemption value $1,750,000   -     - 
  Common stock, par value $1.00; authorized 10,000,000 shares; 4,226,717 shares     
  issued and outstanding at December 31, 2015 and 3,497,829 at December 31, 2014   4,227      3,498  
  Additional paid-in capital   40,559      29,902  
  Retained earnings   23,470      19,217  
  Accumulated other comprehensive income   1,812      1,513  
  Total Shareholders’ Equity   70,068      59,130  
  Total Liabilities and Shareholders' Equity$  931,638   $  755,657  

(Dollars in thousands, except per share data)Year Ended December 31,
 2015 2014 2013
  Interest & fees on loans and leases$ 32,840  $ 26,905  $  26,305  
  Interest on interest-bearing balances  44    41     109  
  Interest and dividends on investment securities:        
  U.S. Treasury and government agencies  1,222    1,346     591  
  State and political subdivision obligations, tax-exempt  2,000    2,180     1,921  
  Other securities  382    155     46  
Interest on federal funds sold and securities purchased under agreements to resell  2    -    11  
  Total Interest Income   36,490    30,627     28,983  
  Interest on deposits  3,889    3,852     4,436  
  Interest on short-term borrowings  47    55     26  
  Interest on long-term debt  671    520     595  
  Total Interest Expense   4,607    4,427     5,057  
  Net Interest Income   31,883    26,200     23,926  
PROVISION FOR LOAN AND LEASE LOSSES  1,065    1,617     1,685  
Net Interest Income After Provision for Loan and Lease Losses  30,818    24,583     22,241  
  Income from fiduciary activities  466    552     492  
  Service charges on deposits  690    584     576  
  Net gain on sales of investment securities  325    168     220  
  Earnings from cash surrender value of life insurance  269    201     231  
  Mortgage banking income  456    313     348  
  ATM debit card interchange income  741    544     508  
  Merchant services income  235    254     330  
  Net gain on sales of SBA loans  252    119     - 
  Other income  653    513     585  
  Total Noninterest Income   4,087    3,248     3,290  
  Salaries and employee benefits  14,043    10,879     10,788  
  Occupancy expense, net  1,947    1,313     1,128  
  Equipment expense  1,477    1,205     1,299  
  Pennsylvania Bank Shares tax expense  408    365     464  
  FDIC Assessment  613    542     486  
  Legal and professional fees  588    516     705  
  Director fees and benefits expense  363    377     319  
  Marketing and advertising expense  533    308     253  
  Software licensing  1,472    965     947  
  Telephone expense  569    467     436  
  Loss (gain) on sale/write-down of foreclosed assets  111    204     (302)
  Intangible amortization  88    27     29  
  Loan collection costs  306    288     214  
  Merger and acquisition expense  762    573     - 
  Other expenses  3,453    2,639     2,625  
  Total Noninterest Expense   26,733    20,668     19,391  
  Provision for income taxes  1,644    1,462     1,201  
NET INCOME  6,528    5,701     4,939  
  Series A preferred stock dividends and discount accretion  -   -    14  
  Series B preferred stock dividends and redemption premium  473    350     309  
  Series C preferred stock dividends  17    -    - 
  Basic Earnings Per Common Share$ 1.47  $ 1.53  $  1.32  
  Cash Dividends  0.44    0.45     0.25  

Management considers subsequent events occurring after the balance sheet date for matters which may require adjustment to, or disclosure in, the consolidated financial statements.  The review period for subsequent events extends up to and including the filing date of a public company’s consolidated financial statements when filed with the Securities and Exchange Commission (“SEC”).  Accordingly, the financial information in this announcement is subject to change.  The statements are valid only as of the date hereof and Mid Penn Bancorp, Inc. disclaims any obligation to update this information.


This press release, and oral statements made regarding the subjects of this release, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management's confidence and strategies and management's current views and expectations about new and existing programs and products, relationships, opportunities, technology and market conditions. These statements may be identified by such forward-looking terminology as "continues," "expect," "look," "believe," "anticipate," "may," "will," "should," "projects," "strategy" or similar statements. Actual results may differ materially from such forward-looking statements, and no reliance should be placed on any forward-looking statement.  Factors that may cause results to differ materially from such forward-looking statements include, but are not limited to, changes in interest rates, spreads on earning assets and interest-bearing liabilities, and interest rate sensitivity; prepayment speeds, loan originations, credit losses and market values on loans, collateral securing loans, and other assets; sources of liquidity; common shares outstanding; common stock price volatility; fair value of and number of stock-based compensation awards to be issued in future periods; the impact of changes in market values on securities held in Mid Penn’s portfolio; legislation affecting the financial services industry as a whole, and Mid Penn and Mid Penn Bank individually or collectively, including tax legislation; regulatory supervision and oversight, including monetary policy and capital requirements; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or regulatory agencies; increasing price and product/service competition by competitors, including new entrants; rapid technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; the mix of products/services; containing costs and expenses; governmental and public policy changes; protection and validity of intellectual property rights; reliance on large customers; technological, implementation and cost/financial risks in large, multi-year contracts; the outcome of future litigation and governmental proceedings, including tax-related examinations and other matters; continued availability of financing; financial resources in the amounts, at the times and on the terms required to support Mid Penn and Mid Penn Bank’s future businesses; and material differences in the actual financial results of merger, acquisition and investment activities compared with Mid Penn’s initial expectations, including the full realization of anticipated cost savings and revenue enhancements.  For a list of other factors which would affect our results, see Mid Penn’s filings with the SEC, including those risk factors identified in the "Risk Factor" section and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2014. The statements in this press release are made as of the date of this press release, even if subsequently made available by Mid Penn on its website or otherwise. Mid Penn assumes no obligation for updating any such forward-looking statements at any time, except as required by law.


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