Mid Penn Bancorp, Inc. Reports Record Quarterly Earnings and Total Assets of Over $1 Billion

MILLERSBURG, Pa., July 21, 2016 (GLOBE NEWSWIRE) -- Mid Penn Bancorp, Inc. (“Mid Penn”) (NASDAQ:MPB), the parent company of Mid Penn Bank, today reported a net income available to common shareholders (earnings) of $2,022,000 or $0.48 per common share basic and diluted for the quarter ended June 30, 2016, compared to earnings of $1,952,000 or $0.46 per common share basic and diluted for the quarter ended June 30, 2015.  The earnings for the second quarter of 2016 represent a record high for Mid Penn.  For the six months ended June 30, 2016, earnings were $3,827,000 or $0.91 per common share basic and diluted, compared to earnings of $2,828,000 or $0.71 per common share basic and diluted for the same period in 2015.

Mid Penn also reported that total assets as of June 30, 2016 grew to $1,012,884,000, reflecting an increase of 8.7%, compared to total assets of $931,638,000 as of December 31, 2015.  For the six months ending June 30, 2016, loan growth was $29,962,000, and investments increased $31,621,000.  The year-to-date increase in these interest-earning assets was funded by strong deposit growth, as total deposits at the end of the second quarter of 2016 increased by $116,397,000 compared to year-end 2015.  In addition to supporting loan and investment growth, the additional funds from the year-to-date deposit growth were used to repay $41,707,000 in short- and long-term borrowings.


On behalf of our Board of Directors and our team of dedicated employees, I am very pleased to report that Mid Penn achieved record levels of both quarterly earnings and total assets for the period ending June 30, 2016.  Reflecting our favorable operating performance, our Return on Average Equity increased to 11.28% for the second quarter of 2016.  Mid Penn is now a community banking franchise with over $1 billion in total assets reflecting a high-credit-quality loan portfolio, funded primarily by lower-cost deposits, with client-focused products and solutions to develop new and expanded relationships with both commercial and retail customers.  As we strive to increase shareholder value while delivering sound returns, we look to maintain this positive earnings momentum through continued qualitative growth in interest-earning assets and core banking revenues, while seeking to further expand noninterest income sources from fee-based deposit account activities, small business lending, mortgage banking, and wealth management and trust services.  We also remain committed to identifying and implementing operating efficiencies in our back office, and expanding our delivery channels, to benefit from both technology and economies of scale to effectively add new customers and integrate new markets. 


Net Interest Income and Net Interest Margin

Net interest income increased $47,000 or 0.6% to $8,533,000 for the three months ended June 30, 2016 compared to $8,486,000 for the three months ended June 30, 2015.  Through the first six months of 2016, net interest income was $16,948,000, an increase of $1,424,000 or 9.2% compared to net interest income of $15,524,000 during the same period in 2015.  Net interest income in 2016 was positively impacted by core loan growth, as well as a full six months of income on the interest-earning assets from the Phoenix Bancorp acquisition (the reported earnings for the first half of 2015 included only four months of interest income from acquired assets as the Phoenix acquisition was effective on March 1, 2015).

For the three months ended June 30, 2016, Mid Penn’s tax-equivalent net interest margin was 3.85% as compared to 4.22% for the three months ended June 30, 2015.  For the six months ended June 30, 2016, Mid Penn’s tax-equivalent net interest margin was 3.90% versus 4.10% for the six months ended June 30, 2015.  The higher net interest margin in 2015 was predominantly the result of the recognition of $452,000 of income in both the three and six months ended June 30, 2015 from the successful resolution of three legacy Phoenix loans acquired with credit deterioration.  Also, the investment portfolio had a lower yield during the three and six months ended June 30, 2016, versus the same periods in 2015, as several securities which matured or were called in the first half of 2016 had higher yields compared to replacement investments purchased in the persistent lower-yield bond market conditions.

Noninterest Income

Noninterest income increased $305,000 or 27.9% during the three months ended June 30, 2016, compared to the three months ended June 30, 2015.  During the six months ended June 30, 2016, noninterest income increased $588,000 or 28.8% versus the six months ended June 30, 2015. 

For the first half of 2016, mortgage banking income favorably increased $212,000 over the same period in 2015.  Increased residential real estate financing activity throughout Mid Penn’s footprint, favorably low mortgage market interest rates, and the addition of seasoned loan originators collectively contributed to the increased revenue from this business line. 

Mid Penn also experienced increased origination and sales activity in Small Business Administration (“SBA”) loans, resulting in an increase of $122,000 of related loan sale gains during the first six months of 2016 compared to the same period in 2015.  More qualified borrowers continue to take advantage of Mid Penn’s Preferred Lender status with the SBA. 

During the second quarter of 2016, Mid Penn took advantage of increased market values on several securities to reposition some of its investment portfolio, including selling a large volume of longer-term and rate-sensitive CMOs, as well as certain municipal bonds and agency notes.  Mid Penn realized $213,000 in securities gains in the first half of 2016 as a result of these investment management activities.  In comparison, during the first six months of 2015, Mid Penn realized $177,000 from gains on sales of securities.

Other noninterest income increased $117,000 for the six months ended June 30, 2016 compared to the six months ended June 30, 2015, primarily as a result of the $86,000 gain on the sale of insurance policies upon the dissolution of Mid Penn Insurance Services, LLC, a wholly-owned subsidiary of Mid Penn Bank, effective March 1, 2016.  The decision was made to liquidate the subsidiary due to the lack of consistent profitability and growth. 

Noninterest Expense

Noninterest expenses increased $279,000 or 4.2% during the three months ended June 30, 2016, versus the same period in 2015.  During the six months ended June 30, 2015, noninterest expenses increased $621,000 or 4.7%, versus the six months ended June 30, 2015. 

Mid Penn’s efficiency ratio during the second quarter of 2016 was 67.9% compared to 66.4% in the second quarter of 2015.  During the first six months of 2016, the efficiency ratio was 68.6%, versus 68.5% during the same period in 2015.

Salaries and employee benefit expenses increased $686,000 during the six months ended June 30, 2016 versus the same period in 2015.  The increase primarily was attributable to franchise expansion, including (i) the addition of employees from the March 1, 2015 Phoenix acquisition, (ii) staff added to serve in Mid Penn’s branch in the Mechanicsburg, PA market opened in June 2015, and (iii) an increase in lending personnel and credit support staff in alignment with Mid Penn’s core banking growth.

In connection with the acquisition of Phoenix in March 2015, Mid Penn incurred $762,000 of nonrecurring merger-related expenses in the first half of 2015, while no merger expenses were incurred in the first six months of 2016.

Mid Penn realized losses of $132,000 on the sale/write-down of foreclosed assets during the first half of 2016, as compared to $17,000 for the same period in 2015, reflecting the workout of certain holdings in the Bank’s portfolio of other real estate owned. 

Occupancy expenses for the six months ended June 30, 2016 increased by $96,000 compared to the same period in 2015.  This increase was impacted by the inclusion of rent and other occupancy costs from the four acquired Phoenix branches and the addition of the Mechanicsburg, PA branch.  Equipment expenses, bank shares tax expense, and other expenses also saw increases for the first six months of 2016 compared to the same period of 2015 related primarily to franchise growth.



Total loans at June 30, 2016 were $769,153,000 compared to $739,191,000 at December 31, 2015, an increase of $29,962,000, or 4.1%.  The main driver of Mid Penn’s loan growth continues to be commercial loans, including both commercial and industrial financing, and commercial real estate credits.


Total deposits increased $116,397,000, or 15.0%, from $777,043,000 at December 31, 2015 to $893,440,000 at June 30, 2016.  Over the last six months, all deposit categories increased due to both strong retail branch deposit growth and cash management sales efforts.  Mid Penn continues to shift its funding composition towards lower-cost deposits from higher-cost borrowings.


Mid Penn’s total available-for-sale securities portfolio increased $31,621,000, or 23.3%, from $135,721,000 at December 31, 2015 to $167,342,000 at June 30, 2016.  Mid Penn increased its investment holdings primarily to maintain pledging requirements related to an increase in public fund and other collateralized nonprofit deposit balances during the first six months of 2016.


Shareholders’ equity increased by $4,406,000, or 6.3%, from $70,068,000 at December 31, 2015 to $74,474,000 at June 30, 2016, due to retained earnings and an increase in accumulated other comprehensive income for the first six month from the normal operations of Mid Penn.  Regulatory capital ratios for both the holding company and the Bank at June 30, 2016 and December 31, 2015 exceeded regulatory “well-capitalized” levels.


Total nonperforming assets at June 30, 2016 were $5,468,000, a reduction compared to $6,062,000 at December 31, 2015, and $9,341,000 at June 30, 2015.  The ratio of nonperforming assets to total loans and other real estate decreased to 0.71% as of June 30, 2016, as compared to 0.82% as of December 31, 2015 and 1.32% as of June 30, 2015.  The reduced level of nonperforming assets has primarily been the result of thorough underwriting and risk analysis of new extensions of credit, as well as diligent portfolio monitoring, and timely collection and workout efforts, which have resulted in reduced delinquency.

Mid Penn had net loan recoveries of $9,000 during the first six months of 2016, compared to net charge-offs of $465,000 during the same period in 2015.

Based upon its analysis of loan and lease loss allowance adequacy, management recorded a $395,000 loan loss provision for the three months ended June 30, 2016, compared to a provision of $300,000 for the three months ended June 30, 2015.  During the six months ended June 30, 2016, the provision for loan and lease losses was $735,000, compared to $600,000 for the six months ended June 30, 2015.  The allowance for loan and lease losses as a percentage of total loans was 0.90% at June 30, 2016, compared to 0.83% at December 31, 2015.  Loan loss reserves as a percentage of nonperforming loans was 140.28% at June 30, 2016, compared to 126.46% at December 31, 2015.  Management believes, based on information currently available, that the allowance for loan and lease losses of $6,912,000 is adequate as of June 30, 2016 to cover specifically identifiable loan losses, as well as estimated losses inherent in the portfolio.


 June 30, December 31, Change
(Dollars in thousands)2016 2015   $    % 
Total Assets$ 1,012,884 $ 931,638 $ 81,246  8.7%
Total Loans  769,153   739,191   29,962  4.1%
Total Deposits  893,440   777,043   116,397  15.0%
Total Equity  74,474   70,068   4,406  6.3%


 Three Months Ended   Six Months Ended  
(Dollars in thousands, except per shareJune 30, Change June 30, Change
data)2016 2015   $    %  2016 2015   $    % 
Net Interest Income$  8,533  $  8,486  $ 47  0.6% $  16,948  $  15,524  $ 1,424  9.2%
Net Income Available to Common Shareholders  2,022    1,952   70  3.6%   3,827    2,828   999  35.3%
Basic Earnings per Common Share  0.48    0.46   0.02  4.3%   0.91    0.71   0.20  28.2%
Return on Average Equity  11.28%   11.21%  N/A  0.6%   10.75%   8.89%  N/A  20.9%


      To Be Well-Capitalized
      Under Prompt
      Corrective Action
  June 30, 2016 December 31, 2015 Provisions:
Leverage Ratio  6.9%  7.1%  5.0%
Common Tier 1 Capital (to Risk Weighted Assets)  9.2%  9.1%  6.5%
Tier 1 Capital (to Risk Weighted Assets)  9.2%  9.1%  8.0%
Total Capital (to Risk Weighted Assets)  11.2%  11.0%  10.0%


(Dollars in thousands, except share data)     
 June 30, 2016 December 31, 2015
Cash and due from banks$  14,625  $  12,329 
Interest-bearing balances with other financial institutions   1,232     955 
Federal funds sold   25,103     - 
Total cash and cash equivalents   40,960     13,284 
Interest-bearing time deposits with other financial institutions   987     4,317 
Investment securities available for sale   167,342     135,721 
Loans and leases, net of unearned interest   769,153     739,191 
Less:  Allowance for loan and lease losses   (6,912)    (6,168)
Net loans and leases   762,241     733,023 
Bank premises and equipment, net   13,492     13,993 
Cash surrender value of life insurance   12,651     12,516 
Restricted investment in bank stocks   2,643     4,266 
Foreclosed assets held for sale   540     1,185 
Accrued interest receivable   3,943     3,813 
Deferred income taxes   618     1,821 
Goodwill   3,918     3,918 
Core deposit and other intangibles, net   594     665 
Other assets   2,955     3,116 
Total Assets$  1,012,884  $  931,638 
Noninterest bearing demand$  122,731  $  103,721 
Interest bearing demand   297,838     247,356 
Money Market   239,878     208,386 
Savings   60,767     56,731 
Time   172,226     160,849 
Total Deposits    893,440     777,043 
Short-term borrowings   -     31,596 
Long-term debt   30,194     40,305 
Subordinated debt   7,409     7,414 
Accrued interest payable   698     390 
Other liabilities   6,669     4,822 
Total Liabilities   938,410     861,570 
Shareholders' Equity:     
Common stock, par value $1.00; authorized 10,000,000 shares;     
4,229,006 and 4,226,717 shares issued and outstanding at     
June 30, 2016 and at December 31, 2015, respectively   4,229     4,227 
Additional paid-in capital   40,609     40,559 
Retained earnings   25,860     23,470 
Accumulated other comprehensive income   3,776     1,812 
Total Shareholders’ Equity   74,474     70,068 
Total Liabilities and Shareholders' Equity$  1,012,884  $  931,638 


(Dollars in thousands, except per share data)Three Months Ended June 30, Six Months Ended June 30,
 2016 2015 2016 2015
Interest & fees on loans and leases$ 8,905 $  8,743  $ 17,712 $ 15,897
Interest on interest-bearing balances  2    11    9   22
Interest and dividends on investment securities:           
U.S. Treasury and government agencies  311    304    633   635
State and political subdivision obligations, tax-exempt  548    517    1,012   1,048
Other securities  78    68    172   199
Interest on federal funds sold and securities purchased under agreements to resell  15    1    18   1
Total Interest Income   9,859    9,644    19,556   17,802
Interest on deposits  1,092    980    2,131   1,894
Interest on short-term borrowings  12    11    25   22
Interest on long-term debt  222    167    452   362
Total Interest Expense   1,326    1,158    2,608   2,278
Net Interest Income   8,533    8,486    16,948   15,524
PROVISION FOR LOAN AND LEASE LOSSES  395    300    735   600
Net Interest Income After Provision for Loan and Lease Losses  8,138    8,186    16,213   14,924
Income from fiduciary activities  139    120    245   247
Service charges on deposits  158    167    313   317
Net gain on sales of investment securities  213    -    213   177
Earnings from cash surrender value of life insurance  65    71    135   127
Mortgage banking income  246    153    432   220
ATM debit card interchange income  209    196    409   351
Merchant services income  85    61    152   111
Net gain on sales of SBA loans  75    143    265   143
Other income  208    182    466   349
Total Noninterest Income   1,398    1,093    2,630   2,042
Salaries and employee benefits  3,723    3,440    7,446   6,760
Occupancy expense, net  499    496    1,046   950
Equipment expense  411    422    846   735
Pennsylvania Bank Shares tax expense  206    116    409   231
FDIC Assessment  147    165    300   304
Legal and professional fees  183    161    385   304
Marketing and advertising expense  139    147    223   235
Software licensing  334    404    665   723
Telephone expense  143    140    285   263
Loss on sale/write-down of foreclosed assets  28    (15)   132   17
Intangible amortization  34    29    71   43
Merger and acquisition expense  -    -    -   762
Other expenses  1,074    1,137    2,095   1,955
Total Noninterest Expense   6,921    6,642    13,903   13,282
INCOME BEFORE PROVISION FOR INCOME TAXES  2,615    2,637    4,940   3,684
Provision for income taxes  593    593    1,113   677
NET INCOME  2,022    2,044    3,827   3,007
Series B preferred stock dividends  -    88    -   175
Series C preferred stock dividend  -    4    -   4
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS$ 2,022 $  1,952  $ 3,827 $ 2,828
Basic Earnings Per Common Share$ 0.48 $  0.46  $ 0.91 $ 0.71
Cash Dividends Distributed$ 0.12 $  0.10  $ 0.34 $ 0.20

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, 2015. 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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