Exhibit 99.1

PRESS RELEASE

Mid Penn Bancorp, Inc.

349 Union Street

Millersburg, PA  17061

1-866-642-7736

CONTACTS

 

Rory G. Ritrievi

President & Chief Executive Officer

Michael D. Peduzzi, CPA

Chief Financial Officer

 

MID PENN BANCORP, INC. REPORTS 2019 ANNUAL EARNINGS

AND DECLARES BOTH A QUARTERLY AND ANNUAL DIVIDEND

 

January 28, 2020 – Millersburg, PA – Mid Penn Bancorp, Inc. (“Mid Penn”) (NASDAQ: MPB), the parent company of Mid Penn Bank (the “Bank”), today reported net income to common shareholders (earnings) for the year ended December 31, 2019 of $17,701,000 or $2.09 per common share basic and diluted, compared to earnings of $10,494,000 or $1.49 per common share basic and diluted for the year ended December 31, 2018. The results for the year ended December 31, 2018 included $4,790,000 of merger and acquisition expenses resulting from both (i) Mid Penn’s acquisition of First Priority Financial Corp. (“First Priority”) on July 31, 2018, and (ii) Mid Penn’s acquisition of The Scottdale Bank & Trust Company (“Scottdale”) on January 8, 2018.  Adjusted earnings for the year ended December 31, 2018, when excluding the after-tax impact of the merger and acquisition expenses (with such adjusted earnings being a non-GAAP measure), were $14,472,000 or $2.05 per share basic and diluted.  No merger and acquisition expenses were recorded during the year ended December 31, 2019.  Please refer to the section included herein under the heading “Reconciliation of Non-GAAP Measures (Unaudited)” for a discussion of our use of non-GAAP adjusted financial information, which includes tables reconciling GAAP and non-GAAP adjusted financial measures for the quarters ended December 31, 2019 and 2018 and certain other periods.  Earnings for the quarter ended December 31, 2019 were $4,408,000 or $0.52 per common share basic and diluted, compared to earnings of $4,585,000 or $0.54 per common share basic and diluted for the quarter ended December 31, 2018.  No merger and acquisition expenses were incurred in the fourth quarters of 2018 or 2019.       

 

Tangible book value per common share, a non-GAAP measure that is regularly reported in the banking industry and the most directly comparable non-GAAP measure to book value per share, was $19.96 as of December 31, 2019, an increase of over 10 percent compared to tangible book value per common share of $18.10 as of December 31, 2018.  Mid Penn’s GAAP book value per share was $28.05 at December 31, 2019, an increase of over 6 percent compared to GAAP book value per share of $26.38 as of December 31, 2018.    

 

Mid Penn also reported continued growth in total assets to $2,231,175,000 as of December 31, 2019, reflecting an increase of $153,194,000 or 7 percent compared to total assets of $2,077,981,000 as of December 31, 2018.  Asset growth during the year ended December 31, 2019 was primarily attributable to net organic loan growth, an increase in liquid assets from demand deposit growth, and the recording of operating and finance lease right of use assets as a result of Mid Penn’s adoption of Accounting Standard Codification (ASC) 842 – Leases effective January 1, 2019.

 

In general, the results of operations and the financial condition as of and for the periods ended December 31, 2019, as compared to prior periods and certain period-end dates in 2018, have been materially impacted by Mid Penn’s 2018 acquisitions of First Priority and Scottdale.

 

Mid Penn also reported that, based upon its fourth quarter and 2019 full-year results, the Board of Directors, at a meeting held on January 22, 2020, declared a regular quarterly dividend per common share of $0.18, and an additional annual dividend per common share of $0.05, with both dividends payable on February 24, 2020, to shareholders of record as of February 5, 2020.  

 


1


PRESIDENT’S STATEMENT

 

We are pleased to report that, for the fourth quarter and full year of 2019, we continued to have favorable operating results that are reflected by our success in building shareholder value and providing a favorable cash return to our shareholders through both our quarterly and annual dividends. Our performance reflects conservative yet continued sound organic commercial loan growth and related increases in net interest income; continued success in growing retail deposits and reducing the level of higher-cost wholesale borrowings and funding sources; a sound net interest margin even in the face of a challenging rate environment for 2019 including an inverted yield curve; significant increases in noninterest income from mortgage banking, SBA lending, and trust and wealth management activities; controlled noninterest expenses; and continued favorable asset quality measures.  We also made continuing investments in our information technology infrastructure and our mortgage banking and wealth management divisions, to further complement our successful core banking and business development capabilities.  We look back on 2019 as a successful transition year for Mid Penn after the significant integration efforts from two major acquisitions in 2018, and we look forward to 2020 with the intent to further take advantage of our larger scale and expanded products and services to deliver continued accretive earnings and increasing value for our dedicated shareholders.

 

OPERATING RESULTS

 

Net Interest Income and Net Interest Margin

 

For the year ended December 31, 2019, net interest income was $70,148,000, an increase of $14,214,000 or 25 percent compared to net interest income of $55,934,000 for the year ended December 31, 2018.  The primary source of the net interest income growth for the year was an increase in interest and fees on loans, as total loans increased $138,689,000 or 9 percent since December 31, 2018, with $120,398,000 of this growth being in commercial real estate and commercial and industrial credits.  

 

For the year ended December 31, 2019, Mid Penn’s tax-equivalent net interest margin was 3.57% versus 3.67% for the year ended December 31, 2018. Despite year-over-year increases in yields on interest-earning assets and growth in noninterest-bearing deposits, the decrease in net interest margin was driven by both (i) the higher cost of deposits and borrowed funds as a result of higher short-term rates for much of 2019 and defensive deposit rate increase responsive to strong bank and nonbank competition for retail deposit customer market share, and (ii) the full-year impact of the higher-cost wholesale funding sources assumed effective July 31, 2018 with the First Priority acquisition, including brokered time deposits and subordinated debt.  

 

Noninterest Income

 

For the year ended December 31, 2019, noninterest income totaled $12,621,000, an increase of $5,159,000 or 69 percent, compared to noninterest income of $7,462,000 for the year ended December 31, 2018.

 

Mortgage banking income was $3,771,000 for the year ended December 31, 2019, an increase of $3,020,000 or over 400 percent compared to mortgage banking income of $751,000 for the year ended December 31, 2018.  Longer-term mortgage interest rates have declined significantly over the past twelve months, resulting in a higher level of mortgage originations and secondary-market loan sales when comparing 2019 to 2018.  Additionally, Mid Penn expanded its team of residential mortgage originators in southeastern Pennsylvania during 2019, contributing to the larger volume of mortgage loans originated and sold during the year.

 

Net gains on sales of securities were $1,878,000 for the year ended December 31, 2019, an increase of $1,741,000 compared to net gains on sales of securities of $137,000 for the year ended December 31, 2018. As previously reported on a Form 8-K dated November 20, 2019, Mid Penn early adopted Accounting Standards Update (“ASU”) 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments), and as part of the adoption, Mid Penn reclassified 113 held-to-maturity debt securities with an aggregate amortized cost of $67.1 million to the available-for-sale category.  Through implementation of planned organic hedging activities as part of Mid Penn’s interest rate risk management, all 113 securities were subsequently sold during the fourth quarter, and Mid Penn realized a pre-tax gain on the sales of $1,779,000 which offset some of the market impact of lower earning-asset yields in the second half of 2019.  

 

Income from fiduciary activities was $1,416,000 for the year ended December 31, 2019, an increase of $261,000 or 23 percent, compared to fiduciary income of $1,155,000 for the year ended December 31, 2018. These additional revenues were attributed to growth in trust assets under management and increased sales of retail investment products, as a result of successful continued business development efforts by Mid Penn’s trust and wealth management team.

 

ATM debit card interchange income was $1,594,000 for the year ended December 31, 2019, an increase of $341,000 or 27 percent compared to interchange income of $1,253,000 for the year ended December 31, 2018. The increase resulted from increasing card-based transaction usage across our customer base, as well as the full-year impact of the added volume from demand deposit accounts assumed in the 2018 First Priority acquisition.

 

2


Net gains on sales of SBA loans were $831,000 for the year ended December 31, 2019, an increase of $270,000 or 48 percent compared to net gains on sales of SBA loans of $561,000 during 2018.  The increase reflects Mid Penn’s continued growth in SBA loan production, reflective of both the Bank’s expanded footprint and its reputation as a preferred small business lender.

 

For the twelve months ended December 31, 2019, merchant services income totaled $413,000, an increase of $66,000 or 19 percent, compared to $347,000 for the twelve months ended December 31, 2018, reflecting an increase in the volume of business customers utilizing Mid Penn’s merchant services to process their debit card transactions, cash advances, and other related products.  Mid Penn also established a relationship with a new merchant services vendor that has resulted in more favorable retention of revenues for the Bank.

 

Other income was $1,520,000 for the year ended December 31, 2019, a decrease of $519,000 compared to other income of $2,039,000 for the year ended December 31, 2018.  During 2018, Mid Penn recognized $737,000 of defined benefit pension plan settlement gains from certain plan participants receiving lump sum benefit payouts (the plan and related liabilities were assumed as a result of the Scottdale acquisition in January 2018).  During the year ended December 31, 2019, a lower amount of pension plan lump sum payouts occurred, with related settlement gains totaling $34,000.  Pension settlement gains are not expected to be a recurring item on a going-forward basis.

 

Noninterest Expense

For the year ended December 31, 2019, noninterest expense totaled $59,953,000, an increase of $9,782,000 or 20 percent, compared to noninterest expense of $50,171,000 for the twelve months ended December 31, 2018.  The increase in noninterest expense for the twelve month period was driven by both (i) the impact of the staff, facilities, and technology licensing costs added as a result of the acquisition of First Priority in July 2018, (ii) the 2019 expansion of Mid Penn’s mortgage banking division in the southeastern Pennsylvania market, and (iii) the addition of business development professionals, primarily in our recently-acquired markets, to better take advantage of our acquired markets and increase our revenues from lending and wealth management activities.

 

Salaries and employee benefits expenses were $32,360,000 during the year ended December 31, 2019, an increase of $8,498,000 or 36 percent, versus the same period in 2018, with the increase primarily attributable to (i) the full-year impact of the compensation and benefit costs of the commercial business officers and the retail staff from the First Priority acquisition, effective July 31, 2018, (ii) the personnel added as a result of the significant expansion of the mortgage banking division, and (iii) staff added as part of the new Hazle Township office opened during the fourth quarter of 2019.

 

Occupancy expenses increased $1,333,000 or 33 percent during the year ended December 31, 2019 compared to the twelve months ended December 31, 2018.  Similarly, equipment expense increased $461,000 or 21 percent during the year ended December 31, 2019 compared to the twelve months ended December 31, 2018.  These increases related to (i) the full-year impact of the incremental facilities operating costs, including rent, utilities, and depreciation expense associated with the acquisition of First Priority, and (ii) expansion of the corporate administrative facilities to include expanded employee education facilities, and to realize additional efficiencies after the two 2018 mergers by further centralizing several back-office functions supporting the broader franchise.  

 

Pennsylvania bank shares tax expense was $777,000 for the year ended December 31, 2019, an increase of $552,000 or over 200 percent compared to $225,000 for the year ended December 31, 2018.  The increase in assessment expense generally reflects the larger total shareholder equity balance upon which the tax is based (from both acquisition and organic growth activity) as of the tax measurement date of January 1, 2019 when compared to January 1, 2018.  Both years also reflected the impact of Pennsylvania tax credits generated from the Bank’s Educational Improvement Tax Credit (EITC) and Neighborhood Assistance Program (NAP) community giving, with these credits totaling $677,000 in 2019 and $522,000 in 2018.

 

FDIC assessment expense was $839,000 for the year ended December 31, 2019, an increase of $67,000 or 9 percent compared to $772,000 for the year ended December 31, 2018.  During the third quarter of 2019, Mid Penn received notification from the FDIC that the FDIC’s Deposit Insurance Fund reserve ratio met a threshold resulting in the FDIC providing the Bank with a $492,000 credit, which was applied to assessment liability accruals for both the second and third quarters of 2019.  The credit received during 2019 partially offset an increase in total assessment expense when comparing to the full year of 2018, primarily due the year-over-year increase in total average assets of the Bank on which the assessment is based.  

 

Legal and professional fees for the year ended December 31, 2019 increased by $562,000 or 50 percent compared to the same period in 2018 due to the increased size of the franchise and related expanded use and increased costs of third-party providers for information technology support, human resources services, external audit, and loan review services.

 


3


Software licensing and utilization costs were $4,394,000 for the year ended December 31, 2019, an increase of $785,000 or 22 percent compared to $3,609,000 for the year ended December 31, 2018. The year-over-year increase is a result of additional transaction volume based costs and licensing fees related to the addition of the locations, staff and accounts for the First Priority offices acquired in July 2018,  the expansion of the mortgage banking division during 2019, and the addition of the Hazle Township branch added in 2019.  Additionally, Mid Penn continued to invest in upgrades to internal systems, networks, storage capabilities, and data security mechanisms to enhance data management and security capabilities responsive to both the larger company profile and increasing complexity of information technology management.

 

Intangible amortization increased from $1,224,000 during the year ended December 31, 2018 to $1,430,000 during the year ended December 31, 2019 due to the full-year impact of amortization resulting from the core deposit intangible asset added from the First Priority acquisition on July 31, 2018.

 

Other expenses were $8,975,000 during the twelve months ended December 31, 2019, an increase of $2,258,000 or 34 percent compared to other expense of $6,717,000 for the same period in 2018.  As the First Priority acquisition and organic growth have significantly increased the organization’s geographic profile and employee base, several categories within other expense experienced related increases, including insurance costs, stationary and supplies, printing, loan collection costs, charitable and community giving and sponsorships, and directors’ fees.

 

No merger expenses were recorded during the year ended December 31, 2019.  During the twelve months ended December 31, 2018, merger and acquisition expenses totaling $4,790,000 were recorded including investment banking fees, merger-related legal and professional fees, severance costs, and information technology conversion/termination costs incurred for the two 2018 acquisitions of First Priority and Scottdale.

 

The provision for income taxes was $3,725,000 during the year ended December 31, 2019, an increase of $1,596,000 or 75 percent compared to $2,129,000 for the same period in 2018.  The provision for income taxes for the twelve months ended December 31, 2019 reflects (i) an effective federal tax rate of 17.8%, with the reduction from the statutory tax rate of 21% mostly related to tax-exempt income on municipal securities and loans;  (ii) a favorable adjustment to federal income tax expense of $277,000 for certain permanent nonrecurring tax benefits recorded during 2019; and (iii) New Jersey income tax expense of $185,000 attributable to increased New Jersey sourced income primarily from First Priority legacy customers.

 

FINANCIAL CONDITION

 

Loans

 

Total loans at December 31, 2019 were $1,762,756,000 compared to $1,624,067,000 at December 31, 2018, an increase of $138,689,000 or 9 percent since year-end 2018.  The increase in total loans was primarily comprised of year-over-year growth of $67,769,000 in commercial real estate loans and $52,629,000 in commercial and industrial financing loans.

 

Deposits

 

Total deposits increased $186,368,000 or 11 percent, from $1,726,026,000 at December 31, 2018, to $1,912,394,000 at December 31, 2019.  Deposit growth was led by substantial increases in money market deposits and noninterest-bearing balances, primarily due to both new and expanded cash management and commercial deposit account relationships.

 

Investments

 

Mid Penn’s portfolio of held-to-maturity securities decreased $31,893,000 to $136,477,000 as of December 31, 2019, as compared to $168,370,000 as of December 31, 2018 (held-to-maturity investments are recorded at amortized cost).  Mid Penn’s total available-for-sale securities portfolio decreased $74,914,000 or 67 percent, from $111,923,000 at December 31, 2018 to $37,009,000 at December 31, 2019.  As previously reported on a Form 8-K dated November 20, 2019, Mid Penn early adopted Accounting Standards Update (“ASU”) 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments).  As part of the adoption, Mid Penn reclassified 113 held-to-maturity debt securities with an aggregate amortized cost of $67.1 million to the available-for-sale category, and Mid Penn subsequently sold all 113 securities realizing a collective pre-tax gain on the sales of $1,779,000 in the fourth quarter of 2019.

 


4


Capital

 

Shareholders’ equity increased by $14,664,000 or 7 percent from $223,209,000 as of December 31, 2018 to $237,874,000 as of December 31, 2019. The increase in shareholders’ equity reflects (i) the growth in retained earnings through year-to-date net income, net of dividends paid, (ii) a $316,000 favorable prior period adjustment posted as part of the adoption of the new GAAP leasing standard, and (iii) other comprehensive income from the significant after-tax appreciation in the available-for-sale portfolio, much of which has been realized from securities sales during 2019.  Regulatory capital ratios for both Mid Penn and its banking subsidiary exceeded regulatory “well-capitalized” levels at both December 31, 2019 and 2018.

 

ASSET QUALITY

 

The allowance for loan and lease losses as a percentage of total loans was 0.54% at December 31, 2019, compared to 0.52% at December 31, 2018 and 0.84% at December 31, 2017.  Mid Penn had net loan charge-offs of $272,000 for the year ended December 31, 2019 compared to net recoveries of ($291,000) during the year ended December 31, 2018.  The net charge-off position in 2019 was primarily due to a $205,000 charge-off taken on one relationship during the second quarter of 2019.  The favorable net recovery position during 2018 was driven by the recovery of $777,000 of principal from the successful workout of a commercial real estate relationship that originally had a large partial charge-off in 2009.

 

Loan loss reserves as a percentage of nonperforming loans were 79% at December 31, 2019, compared to 75% at December 31, 2018, and 68% at December 31, 2017.  The increase in the loan loss reserves as a percentage of nonperforming loans at December 31, 2019 as compared to both December 31, 2018 and 2017 was primarily the result of an increase in the allowance balance related to general allocations provided for loan growth.

 

Total nonperforming assets were $12,157,000 at December 31, 2019, compared to nonperforming assets of $12,283,000 at December 31, 2018, and $11,308,000 at December 31, 2017. Nonperforming assets were 0.69% of the total of loans plus other real estate assets as of December 31, 2019, compared to 0.76% as of December 31, 2018 and 1.24% as of December 31, 2017.

Based upon management’s evaluation of the adequacy of the loan and lease loss allowance, a loan loss provision of $1,390,000 was recorded for the year ended December 31, 2019 compared to $500,000 recorded during the same period of 2018.  The increase in the provision amount year-over-year was warranted to support both (i) the adequacy of the ALLL given the organic loan portfolio growth during the twelve months ended December 31, 2019, and (ii) the impact of historical loss factor changes due to charge-offs taken during the first half of 2019.  Management believes, based on information currently available, that the allowance for loan and lease losses of $9,515,000 is adequate as of December 31, 2019, to cover probable and estimated loan losses in the portfolio.

FINANCIAL HIGHLIGHTS (Unaudited):

(Dollars in thousands, except

 

Dec. 31,

 

 

Sept. 30,

 

 

June 30,

 

 

Mar. 31,

 

 

Dec. 31,

 

per share data)

 

2019

 

 

2019

 

 

2019

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

139,030

 

 

$

160,879

 

 

$

48,145

 

 

$

86,968

 

 

$

40,065

 

Investment securities

 

 

173,486

 

 

 

222,891

 

 

 

243,586

 

 

 

264,323

 

 

 

280,293

 

Loans

 

 

1,762,756

 

 

 

1,710,434

 

 

 

1,688,173

 

 

 

1,646,686

 

 

 

1,624,067

 

Allowance for loan and lease losses

 

 

(9,515

)

 

 

(9,316

)

 

 

(8,771

)

 

 

(8,502

)

 

 

(8,397

)

Net loans

 

 

1,753,241

 

 

 

1,701,118

 

 

 

1,679,402

 

 

 

1,638,184

 

 

 

1,615,670

 

Goodwill and other intangibles

 

 

68,598

 

 

 

68,949

 

 

 

69,304

 

 

 

69,665

 

 

 

70,061

 

Other assets

 

 

96,820

 

 

 

95,062

 

 

 

95,685

 

 

 

88,677

 

 

 

71,892

 

Total assets

 

$

2,231,175

 

 

$

2,248,899

 

 

$

2,136,122

 

 

$

2,147,817

 

 

$

2,077,981

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

310,036

 

 

$

298,885

 

 

$

287,183

 

 

$

290,902

 

 

$

269,870

 

Interest-bearing deposits

 

 

1,602,358

 

 

 

1,591,208

 

 

 

1,491,218

 

 

 

1,493,278

 

 

 

1,456,156

 

Total deposits

 

 

1,912,394

 

 

 

1,890,093

 

 

 

1,778,401

 

 

 

1,784,180

 

 

 

1,726,026

 

Borrowings and subordinated debt

 

 

59,973

 

 

 

102,038

 

 

 

105,105

 

 

 

113,661

 

 

 

118,206

 

Other liabilities

 

 

20,934

 

 

 

22,156

 

 

 

21,354

 

 

 

22,539

 

 

 

10,540

 

Shareholders' equity

 

 

237,874

 

 

 

234,612

 

 

 

231,262

 

 

 

227,437

 

 

 

223,209

 

Total liabilities and shareholders' equity

 

$

2,231,175

 

 

$

2,248,899

 

 

$

2,136,122

 

 

$

2,147,817

 

 

$

2,077,981

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book Value per Common Share

 

$

28.05

 

 

$

27.67

 

 

$

27.32

 

 

$

26.88

 

 

$

26.38

 

Tangible Book Value per Common Share *

 

$

19.96

 

 

$

19.54

 

 

$

19.13

 

 

$

18.64

 

 

$

18.10

 

* Non-GAAP measure; see Reconciliation of Non-GAAP Measures

5


OPERATING HIGHLIGHTS (Unaudited):

 

 

Three Months Ended

 

 

For the Year Ended

 

(Dollars in thousands, except

 

Dec. 31,

 

 

Sept. 30,

 

 

June 30,

 

 

Mar. 31,

 

 

Dec. 31,

 

 

Dec. 31,

 

per share data)

 

2019

 

 

2019

 

 

2019

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

23,935

 

 

$

24,513

 

 

$

23,998

 

 

$

22,866

 

 

$

22,371

 

 

$

95,312

 

 

$

68,654

 

Interest expense

 

 

6,630

 

 

 

6,746

 

 

 

6,228

 

 

 

5,560

 

 

 

4,640

 

 

 

25,164

 

 

 

12,720

 

Net Interest Income

 

 

17,305

 

 

 

17,767

 

 

 

17,770

 

 

 

17,306

 

 

 

17,731

 

 

 

70,148

 

 

 

55,934

 

Provision for loan and lease losses

 

 

235

 

 

 

565

 

 

 

465

 

 

 

125

 

 

 

275

 

 

 

1,390

 

 

 

500

 

Noninterest income

 

 

4,695

 

 

 

3,003

 

 

 

2,874

 

 

 

2,049

 

 

 

2,091

 

 

 

12,621

 

 

 

7,462

 

Noninterest expense

 

 

16,171

 

 

 

14,683

 

 

 

14,796

 

 

 

14,303

 

 

 

13,982

 

 

 

59,953

 

 

 

50,171

 

Income before provision for income taxes

 

 

5,594

 

 

 

5,522

 

 

 

5,383

 

 

 

4,927

 

 

 

5,565

 

 

 

21,426

 

 

 

12,725

 

Provision for income taxes

 

 

1,186

 

 

 

709

 

 

 

980

 

 

 

850

 

 

 

916

 

 

 

3,725

 

 

 

2,129

 

Net income

 

 

4,408

 

 

 

4,813

 

 

 

4,403

 

 

 

4,077

 

 

 

4,649

 

 

 

17,701

 

 

 

10,596

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

64

 

 

 

 

 

 

102

 

Net income available to common shareholders

 

$

4,408

 

 

$

4,813

 

 

$

4,403

 

 

$

4,077

 

 

$

4,585

 

 

$

17,701

 

 

$

10,494

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings per Common Share

 

$

0.52

 

 

$

0.57

 

 

$

0.52

 

 

$

0.48

 

 

$

0.54

 

 

$

2.09

 

 

$

1.48

 

Return on Average Equity

 

 

7.41

%

 

 

8.34

%

 

 

7.71

%

 

 

7.35

%

 

 

8.19

%

 

 

7.67

%

 

 

5.98

%

 

 

Dec. 31,

 

 

Sept. 30,

 

 

June 30,

 

 

Mar. 31,

 

 

Dec. 31,

 

 

 

2019

 

 

2019

 

 

2019

 

 

2019

 

 

2018

 

Tier 1 Capital (to Average Assets)

 

7.8%

 

 

7.7%

 

 

7.8%

 

 

7.8%

 

 

8.0%

 

Common Tier 1 Capital (to Risk Weighted Assets)

 

9.8%

 

 

9.9%

 

 

9.8%

 

 

9.9%

 

 

10.0%

 

Tier 1 Capital (to Risk Weighted Assets)

 

9.8%

 

 

9.9%

 

 

9.8%

 

 

9.9%

 

 

10.0%

 

Total Capital (to Risk Weighted Assets)

 

11.9%

 

 

12.1%

 

 

12.0%

 

 

12.2%

 

 

12.3%

 

 

 

RECONCILIATION OF NON-GAAP MEASURES (Unaudited:)

 

This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). For tangible book value, the most directly comparable financial measure calculated in accordance with GAAP is book value.  We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets.  Goodwill and other intangible assets have the effect of increasing total book value while not increasing tangible book value.   We believe earnings per share excluding the after-tax impact of merger-related expenses provides important supplemental information in evaluating Mid Penn’s operating results because these charges are not incurred as a result of ongoing operations.  Income tax effects of non-GAAP adjustments are calculated using the applicable statutory tax rate for the jurisdictions in which the charges (benefits) are incurred, while taking into consideration any valuation allowances or non-deductible portions of the non-GAAP adjustments. This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial measures determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of Mid Penn’s results and financial condition as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. Management believes that this non-GAAP supplemental information will be helpful in understanding Mid Penn’s ongoing operating results. This supplemental presentation should not be construed as an inference that Mid Penn’s future results will be unaffected by similar adjustments to be determined in accordance with GAAP.

6


RECONCILIATION OF NON-GAAP MEASURES, CONTINUED (Unaudited:)

 

 

Tangible Book Value Per Share

 

(Dollars in thousands, except

 

Dec. 31,

 

 

Sept. 30,

 

 

June 30,

 

 

Mar. 31,

 

 

Dec. 31,

 

per share data)

 

2019

 

 

2019

 

 

2019

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholder's Equity

 

$

237,874

 

 

$

234,612

 

 

$

231,262

 

 

$

227,437

 

 

$

223,209

 

Less: Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Goodwill

 

 

62,840

 

 

 

62,840

 

 

 

62,840

 

 

 

62,840

 

 

 

62,840

 

Less: Core Deposit and Other Intangibles

 

 

5,758

 

 

 

6,109

 

 

 

6,464

 

 

 

6,825

 

 

 

7,221

 

Tangible Equity

 

$

169,276

 

 

$

165,663

 

 

$

161,958

 

 

$

157,772

 

 

$

153,148

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares Issued and Outstanding

 

 

8,480,938

 

 

 

8,478,461

 

 

 

8,465,178

 

 

 

8,462,431

 

 

 

8,459,918

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible Book Value per Share

 

$

19.96

 

 

$

19.54

 

 

$

19.13

 

 

$

18.64

 

 

$

18.10

 

 

 

Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses

 

(Dollars in thousands, except

 

Three Months Ended

 

 

For the Year Ended

 

per share data)

 

Dec. 31,

 

 

Sept. 30,

 

 

June 30,

 

 

Mar. 31,

 

 

Dec. 31,

 

 

Dec. 31,

 

 

 

2019

 

 

2019

 

 

2019

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net Income Available to Common Shareholders

 

$

4,408

 

 

$

4,813

 

 

$

4,403

 

 

$

4,077

 

 

$

4,585

 

 

$

17,701

 

 

$

10,494

 

Plus: Merger and Acquisition Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,790

 

Less: Tax Effect of Merger and Acquisition Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

812

 

Net Income Excluding Non-Recurring Expenses

 

$

4,408

 

 

$

4,813

 

 

$

4,403

 

 

$

4,077

 

 

$

4,585

 

 

$

17,701

 

 

$

14,472

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding - denominator

 

 

8,478,488

 

 

 

8,473,080

 

 

 

8,462,522

 

 

 

8,460,002

 

 

 

8,457,054

 

 

 

8,468,586

 

 

 

7,071,091

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses

 

$

0.52

 

 

$

0.57

 

 

$

0.52

 

 

$

0.48

 

 

$

0.54

 

 

$

2.09

 

 

$

2.05

 

7


CONSOLIDATED BALANCE SHEETS (Unaudited):

(Dollars in thousands, except share data)

 

Dec. 31, 2019

 

 

Dec. 31, 2018

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

25,746

 

 

$

24,600

 

Interest-bearing balances with other financial institutions

 

 

4,657

 

 

 

4,572

 

Federal funds sold

 

 

108,627

 

 

 

10,893

 

Total cash and cash equivalents

 

 

139,030

 

 

 

40,065

 

 

 

 

 

 

 

 

 

 

Investment securities available for sale, at fair value

 

 

37,009

 

 

 

111,923

 

Investment securities held to maturity, at amortized cost

 

 

 

 

 

 

 

 

(fair value $137,476 and $166,582)

 

 

136,477

 

 

 

168,370

 

Loans held for sale

 

 

8,422

 

 

 

1,702

 

Loans and leases, net of unearned interest

 

 

1,762,756

 

 

 

1,624,067

 

Less:  Allowance for loan and lease losses

 

 

(9,515

)

 

 

(8,397

)

Net loans and leases

 

 

1,753,241

 

 

 

1,615,670

 

 

 

 

 

 

 

 

 

 

Bank premises and equipment, net

 

 

24,937

 

 

 

25,303

 

Operating lease right of use asset

 

 

11,442

 

 

 

 

Finance lease right of use asset

 

 

3,447

 

 

 

 

Cash surrender value of life insurance

 

 

16,881

 

 

 

16,691

 

Restricted investment in bank stocks

 

 

4,902

 

 

 

6,646

 

Accrued interest receivable

 

 

7,964

 

 

 

8,244

 

Deferred income taxes

 

 

2,810

 

 

 

4,696

 

Goodwill

 

 

62,840

 

 

 

62,840

 

Core deposit and other intangibles, net

 

 

5,758

 

 

 

7,221

 

Foreclosed assets held for sale

 

 

196

 

 

 

1,017

 

Other assets

 

 

15,819

 

 

 

7,593

 

Total Assets

 

$

2,231,175

 

 

$

2,077,981

 

LIABILITIES & SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

310,036

 

 

$

269,870

 

Interest-bearing demand

 

 

458,451

 

 

 

384,834

 

Money Market

 

 

488,748

 

 

 

375,648

 

Savings

 

 

177,737

 

 

 

209,345

 

Time

 

 

477,422

 

 

 

486,329

 

Total Deposits

 

 

1,912,394

 

 

 

1,726,026

 

 

 

 

 

 

 

 

 

 

Short-term borrowings

 

 

 

 

 

43,100

 

Long-term debt

 

 

32,903

 

 

 

48,024

 

Subordinated debt

 

 

27,070

 

 

 

27,082

 

Operating lease liability

 

 

12,544

 

 

 

 

Accrued interest payable

 

 

2,208

 

 

 

2,262

 

Other liabilities

 

 

6,182

 

 

 

8,278

 

Total Liabilities

 

 

1,993,301

 

 

 

1,854,772

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

 

 

 

Common stock, par value $1.00 per share; 20,000,000 shares authorized at December 31, 2019; 8,480,938 shares issued and outstanding at December 31, 2019; 10,000,000 shares authorized at December 31, 2018; 8,459,918 shares issued and outstanding at December 31, 2018

 

 

8,481

 

 

 

8,460

 

Additional paid-in capital

 

 

178,159

 

 

 

177,565

 

Retained earnings

 

 

50,891

 

 

 

39,562

 

Accumulated other comprehensive income (loss)

 

 

343

 

 

 

(2,378

)

Total Shareholders’ Equity

 

 

237,874

 

 

 

223,209

 

Total Liabilities and Shareholders' Equity

 

$

2,231,175

 

 

$

2,077,981

 

 

 

 

 

 

 

 

8


CONSOLIDATED STATEMENTS OF INCOME (Unaudited):

 

(Dollars in thousands, except per share data)

 

Years Ended December 31,

 

 

 

2019

 

 

2018

 

 

2017

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans and leases

 

$

88,078

 

 

$

61,692

 

 

$

40,156

 

Interest on interest-bearing balances

 

 

100

 

 

 

75

 

 

 

18

 

Interest on federal funds sold

 

 

1,222

 

 

 

451

 

 

 

115

 

Interest and dividends on investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and government agencies

 

 

3,084

 

 

 

3,518

 

 

 

2,273

 

State and political subdivision obligations, tax-exempt

 

 

2,046

 

 

 

2,323

 

 

 

1,113

 

Other securities

 

 

782

 

 

 

595

 

 

 

217

 

Total Interest Income

 

 

95,312

 

 

 

68,654

 

 

 

43,892

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

21,550

 

 

 

10,884

 

 

 

5,463

 

Interest on short-term borrowings

 

 

470

 

 

 

207

 

 

 

111

 

Interest on long-term and subordinated debt

 

 

3,144

 

 

 

1,629

 

 

 

730

 

Total Interest Expense

 

 

25,164

 

 

 

12,720

 

 

 

6,304

 

Net Interest Income

 

 

70,148

 

 

 

55,934

 

 

 

37,588

 

PROVISION FOR LOAN AND LEASE LOSSES

 

 

1,390

 

 

 

500

 

 

 

325

 

Net Interest Income After Provision for Loan and Lease Losses

 

 

68,758

 

 

 

55,434

 

 

 

37,263

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

Income from fiduciary activities

 

 

1,416

 

 

 

1,155

 

 

 

845

 

Service charges on deposits

 

 

884

 

 

 

933

 

 

 

721

 

Net gain on sales of investment securities

 

 

1,878

 

 

 

137

 

 

 

42

 

Earnings from cash surrender value of life insurance

 

 

314

 

 

 

286

 

 

 

262

 

Mortgage banking income

 

 

3,771

 

 

 

751

 

 

 

872

 

ATM debit card interchange income

 

 

1,594

 

 

 

1,253

 

 

 

937

 

Merchant services income

 

 

413

 

 

 

347

 

 

 

335

 

Net gain on sales of SBA loans

 

 

831

 

 

 

561

 

 

 

800

 

Other income

 

 

1,520

 

 

 

2,039

 

 

 

893

 

Total Noninterest Income

 

 

12,621

 

 

 

7,462

 

 

 

5,707

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

32,360

 

 

 

23,862

 

 

 

16,929

 

Occupancy expense, net

 

 

5,352