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Mid Penn Bancorp, Inc. Reports Second Quarter Earnings and Declares Dividend
Source: Nasdaq GlobeNewswire / 27 Jul 2023 18:03:08 America/New_York
HARRISBURG, Pa., July 27, 2023 (GLOBE NEWSWIRE) -- Mid Penn Bancorp, Inc. (NASDAQ: MPB) ("Mid Penn"), the parent company of Mid Penn Bank (the "Bank") and MPB Financial Services, LLC, today reported net income available to common shareholders ("earnings") for the quarter ended June 30, 2023, of $4.8 million, or $0.29 per diluted common share. Adjusted net income excluding non-recurring expenses(1) for the second quarter 2023 was $11.1 million and adjusted earnings per share common share excluding non-recurring expenses was $0.68, which excluded $6.3 million of after-tax merger-related expenses.
Key Highlights of the Second Quarter of 2023
- Completed the acquisition of Brunswick Bancorp ("Brunswick"), which added total assets of $391.9 million comprised primarily of $324.8 million of loans.
- Organic deposit growth for the quarter was $126.0 million, or 13% (annualized), from the first quarter of 2023.
- Organic loan growth for the quarter was $98.3 million, or 10.9% (annualized), from the first quarter of 2023.
- Repurchased 204,379 shares of common stock at an average price of $22.41.
- Total accumulated other comprehensive loss was 4.5% of tangible shareholders' equity(1) at June 30, 2023.
- Book value per common share was $32.05 for the second quarter, compared to $32.15 for the first quarter of 2023. Tangible book value per share(1) was $23.79 at June 30, 2023, compared to $24.52, at March 31, 2023.
“During the second quarter, while completing the acquisition of Brunswick Bancorp, Mid Penn achieved 13% annualized organic deposit growth and 10.9% annualized organic loan growth, demonstrating our resilience in the face of recent turbulence in the banking industry. The Brunswick acquisition added $325 million in quality loans and $283 million in core deposits while giving Mid Penn entry into the dynamic central New Jersey market. We look forward to complementing Brunswick’s talented team of bankers with the resources of a $5+ billion balance sheet to help them compete effectively in a market with very attractive demographics,” Chair, President, and CEO Rory G. Ritrievi said.
Ritrievi added, “As a result of the interest rate yield curve being inverted throughout the quarter, our net interest margin remained under pressure, as is the case for most community banks that compete in the spread business. Notwithstanding the rate increase announced this week, we feel we are nearing an end of that margin compression with the expectation that we will now begin to build that margin back to the level we saw in FY2021 and 2022. As we do that, we will remain diligent in controlling noninterest expenses so that our final FY2023 operating results will meet the expectations of our shareholders and analysts.”
For the second quarter, the Board is pleased to announce a quarterly cash dividend of $0.20 per share of common stock, which was declared at its meeting on July 26, 2023, payable on August 28, 2023, to shareholders of record as of August 10, 2023.
(1) Non-GAAP financial measure. Refer to the calculation on the section titled “Reconciliation of Non-GAAP Measures” at the end of this document.
Net Interest Income
For the three months ended June 30, 2023, net interest income was $36.4 million compared to net interest income of $36.0 million for the three months ended March 31, 2023, and $35.4 million for the three months ended June 30, 2022. The tax-equivalent net interest margin for the three months ended June 30, 2023, was 3.29% compared to 3.49% for the first quarter of 2023, and 3.45% for the second quarter of 2022, a 20 and 16 basis point ("bp") decrease, respectively, compared to the prior quarter and the same period in 2022.
The yield on interest-earning assets increased to 5.10% for the quarter ended June 30, 2023, from 4.86% for the quarter ended March 31, 2023, and 3.73% for the quarter ended June 30, 2022. The increase was due to assets continuing to reprice at higher rates during the quarter. Increased yields on interest-earning assets were more than offset by increases in funding costs for the quarter with overall cost of interest-bearing liabilities increasing to 2.35% during the second quarter of 2023, compared to 1.81% at March 31, 2023, and 0.36% at June 30, 2022.
For the six months ended June 30, 2023, net interest income increased $2.6 million to $72.5 million compared to net interest income of $69.8 million for the same period of 2022.
Both interest-earning assets and interest-bearing liabilities associated with the Brunswick acquisition had substantially similar yields to the corresponding Mid Penn portfolios. We do not anticipate a material change in net interest margin resulting from the acquisition.
Average Balances
Average balances were significantly impacted by the Brunswick acquisition given that the acquisition closed on May 19, 2023. Day one increases in loans, total assets, deposits, borrowings, and total liabilities were $324.8 million, $391.9 million, $282.6 million, $60.1 million, and $346.3 million, respectively.
Average loans increased $253.3 million to $3.8 billion at June 30, 2023, compared to $3.6 billion at March 31, 2023, and $3.1 billion at June 30, 2022. Average deposits were $4.1 billion for the second quarter of 2023, reflecting an increase of $274.6 million, or 7.3%, compared to total average deposits in the first quarter of 2023, and $220.5 million, or 5.8%, compared to total average deposits of $3.8 billion for the second quarter of 2022. The average cost of deposits was 1.77% for the second quarter of 2023, representing a 48 bp and 156 bp increase from the first quarter of 2023 and the second quarter of 2022, respectively. We continue to face headwinds with respect to deposit pricing as customers in many product types have become increasingly rate sensitive. Our primary focus with respect to deposit strategy is stability, ensuring that our rates are competitive and our product mix satisfies the needs of our customers. Additionally, Mid Penn also maintains interest rate swaps designated as cash flow hedges to hedge the cash flows associated with existing brokered CDs to mitigate the impact of rising deposit costs.
As a result of the Brunswick acquisition and organic movement, the mix of deposits has shifted from the prior quarter. Time deposits represented 22.8% of total deposits at March 31, 2023, and increased to 29.8% at June 30, 2023. Nearly all of this increase corresponds to movement out of interest-bearing transaction accounts. The mix of non-interest bearing deposits remained stable, representing approximately 20% of total deposits for both March 31 and June 30, 2023. The average duration of the non-hedged time deposit portfolio is 12 months at June 30, 2023. We believe this positions us well to reprice the portfolio at lower rates in the future.
Asset Quality
On January 1, 2023, Mid Penn adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology, and is referred to as CECL. Results for reporting periods beginning after January 1, 2023, are presented under CECL, while prior period results are reported in accordance with the previously applicable incurred loss methodology.
The provision for credit losses on loans was $1.2 million for the three months ended June 30, 2023, an increase of $667 thousand compared to the provision for credit losses of $490 thousand for the three months ended March 31, 2023. The increase in provision was primarily due to reserving for the loans acquired through the Brunswick acquisition which was $2.0 million for non-PCD loans. The provision for credit losses on loans was $1.6 million for the six months ended June 30, 2023, a decrease of $578 thousand compared to the provision for credit losses of $2.2 million for the six months ended June 30, 2022. The ratio of allowance for credit losses to total loans declined to 0.81% at June 30, 2023, from 0.87% at March 31, 2023, primarily due to improved economic forecasts.
Total nonperforming assets were $16.3 million at June 30, 2023, compared to nonperforming assets of $14.2 million and $8.0 million at March 31, 2023, and June 30, 2022, respectively. The increase during the second quarter primarily related to $3.9 million of non-accrual loans acquired from Brunswick, partially offset by reductions to other non-accrual loans. Delinquency as a percentage of total loans was 0.47% at June 30, 2023.
Capital
Shareholders’ equity increased $18.9 million, or 3.68%, from $512.1 million as of December 31, 2022, to $531.0 million as of June 30, 2023. The increase was primarily due to the Brunswick acquisition. Regulatory capital ratios for both Mid Penn and its banking subsidiary indicate regulatory capital levels in excess of both the regulatory minimums and the levels necessary for the Bank to be considered "well capitalized" at June 30, 2023. Additionally, Mid Penn declared $3.2 million in dividends during the second quarter of 2023.
On May 11, 2023, Mid Penn’s Board of Directors reauthorized its treasury stock repurchase program ("Program") effective through May 11, 2024. The Program authorizes the repurchase of up to $15.0 million of Mid Penn’s outstanding common stock. During the six months ended June 30, 2023, Mid Penn repurchased 204,379 shares of common stock at an average price of $22.41. As of June 30, 2023, Mid Penn repurchased 412,722 shares of common stock at an average price of $22.92 per share under the Program. The Program had $5.5 million remaining available for repurchase as of June 30, 2023.
Noninterest Income
For the three months ended June 30, 2023, noninterest income totaled $5.2 million, an increase of $895 thousand, compared to noninterest income of $4.3 million for the first quarter of 2023. The primary driver of the increase was a death benefit claim related to BOLI and increased insurance revenues from the MPB Insurance division, which are included in other income. The Brunswick acquisition provides a market with an attractive demographic in which to create new wealth management and insurance customer relationships, which would help bolster noninterest income.
For the six months ended June 30, 2023, noninterest income totaled $9.5 million, a decrease of $1.4 million, compared to noninterest income of $11.0 million for the six months ended June 30, 2022. The decrease in noninterest income is primarily due to mortgage banking hedging activities. Given the rising interest rate environment and lower demand for mortgages, hedging the mortgage pipeline becomes more difficult and adds volatility to earnings.
Noninterest Expense
Noninterest expense totaled $35.5 million, an increase of $9.5 million, or 36.3%, for the three months ended June 30, 2023, compared to noninterest expense of $26.1 million for the first quarter of 2023. Noninterest expense for the three months ended June 30, 2023, includes $7.9 million of merger related expenses. Excluding merger related expenses, overall noninterest expense remained relatively flat for the second quarter of 2023. For the six months ended June 30, 2023, noninterest expense totaled $61.6 million, an increase of $11.9 million, or 24.0%, compared to noninterest expense of $49.7 million for the six months ended June 30, 2022. Noninterest expense for the six months ended June 30, 2023, includes $8.2 million of merger-related expenses.
The efficiency ratio(1) was 65.40% in the second quarter of 2023, compared to 63.16% in the first quarter of 2023, and 57.57% in the second quarter of 2022. Mid Penn is currently evaluating levels of noninterest expense for opportunities to reduce operating costs throughout the organization.
Brunswick Acquisition
On May 19, 2023, Mid Penn completed its acquisition of Brunswick through the merger of Brunswick with and into Mid Penn, with Mid Penn being the surviving corporation. In connection with this acquisition, Brunswick Bank and Trust Company, a wholly-owned subsidiary of Brunswick, merged with and into Mid Penn Bank, a wholly-owned subsidiary of Mid Penn.
Pursuant to the terms of the Merger Agreement, each share of Brunswick common stock issued and outstanding as of May 19, 2023, was converted into the right to receive, at the election of the holder, either 0.598 shares of Mid Penn common stock or $18.00 cash, subject to adjustment and proration procedures described in the Merger Agreement requiring that fifty percent (50%) of the outstanding shares of Brunswick common stock be converted into the right to receive cash and the balance converted into the right to receive Mid Penn common stock. Cash was paid to Brunswick shareholders in lieu of any fractional shares. As a result of the merger, Mid Penn paid holders of Brunswick common stock approximately $25.6 million in cash and issued approximately 849,510 shares of Mid Penn common stock.
Subsequent Events
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 disclaims any obligation to update this information.
(1) Non-GAAP financial measure. Refer to the calculation on the section titled “Reconciliation of Non-GAAP Measures” at the end of this document.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
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; results of the regulatory examination and supervision process and oversight, including changes in 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; the availability of financial resources in the amounts, at the times and on the terms required to support Mid Penn and Mid Penn Bank’s future businesses; 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; the possibility that the anticipated benefits of the transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in legacy Mid Penn and Brunswick markets; diversion of management’s attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction; the ability to complete the integration of Mid Penn and Brunswick successfully; the dilution caused by Mid Penn’s issuance of additional shares of its capital stock in connection with the transaction; and other factors that may affect the future results of Mid Penn.
For a more detailed description of these and other factors which would affect our results, please see Mid Penn’s filings with the SEC, including those risk factors identified in the "Risk Factors" section and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2022 and subsequent filings with the SEC. 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.
SUMMARY FINANCIAL HIGHLIGHTS (Unaudited):
(Dollars in thousands, except per share data) Jun. 30,
2023Mar. 31,
2023Dec. 31,
2022Sep. 30,
2022Jun. 30,
2022Ending Balances: Investment securities $ 634,038 $ 633,831 $ 637,802 $ 644,766 $ 618,184 Loans, net of unearned interest 4,001,922 3,580,082 3,495,162 3,303,977 3,163,157 Total assets 5,093,887 4,583,465 4,497,954 4,333,903 4,310,163 Total deposits 4,286,686 3,878,081 3,778,331 3,729,596 3,702,587 Shareholders' equity 530,962 510,793 512,099 499,105 495,835 Average Balances: Investment securities 630,750 636,151 640,792 626,447 580,406 Loans, net of unearned interest 3,808,717 3,555,375 3,395,308 3,237,587 3,129,334 Total assets 4,827,786 4,520,869 4,381,213 4,339,783 4,465,906 Total deposits 4,057,605 3,782,990 3,727,287 3,726,658 3,837,135 Shareholders' equity 504,535 510,857 505,769 502,082 495,681 Three Months Ended Income Statement: Jun. 30,
2023Mar. 31,
2023Dec. 31,
2022Sep. 30,
2022Jun. 30,
2022Net interest income $ 36,444 $ 36,049 $ 38,577 $ 39,409 $ 35,433 Provision for credit losses 1,157 490 525 1,550 1,725 Noninterest income 5,220 4,325 6,714 5,963 5,230 Noninterest expense 35,529 26,070 25,468 24,715 23,915 Income before provision for income taxes 4,978 13,814 19,298 19,107 15,023 Provision for income taxes 142 2,587 3,579 3,626 2,771 Net income available to shareholders 4,836 11,227 15,719 15,481 12,252 Net income excluding non-recurring expenses (1) 11,112 11,404 15,951 15,481 12,252 Per Share: Basic earnings per common share $ 0.29 $ 0.71 $ 0.99 $ 0.97 $ 0.77 Diluted earnings per common share 0.29 0.70 0.99 0.97 0.77 Cash dividends declared 0.20 0.20 0.20 0.20 0.20 Book value per common share 32.05 32.15 32.24 31.42 31.23 Tangible book value per common share (1) 23.79 24.52 24.59 23.80 23.57 Asset Quality: Net charge-offs (recoveries) to average loans (annualized) 0.018 % 0.013 % 0.006 % (0.007 %) (0.001 %) Non-performing loans to total loans 0.39 0.38 0.25 0.23 0.25 Non-performing asset to total loans and other real estate 0.40 0.39 0.25 0.23 0.25 Non-performing asset to total assets 0.32 0.31 0.21 0.18 0.19 ACL on loans to total loans 0.81 0.87 0.54 0.56 0.53 ACL on loans to nonperforming loans 205.65 225.71 220.82 242.23 211.66 Profitability: Return on average assets 0.40 % 1.01 % 1.42 % 1.42 % 1.10 % Return on average equity 3.84 8.91 12.33 12.23 9.91 Return on average tangible common equity (1) 5.53 11.97 16.61 16.55 13.59 Net interest margin 3.29 3.49 3.80 3.92 3.45 Efficiency ratio (1) 65.40 63.16 54.59 53.46 57.57 Capital Ratios: Tier 1 Capital (to Average Assets) (2) 9.6 % 9.2 % 10.7 % 9.6 % 9.0 % Common Tier 1 Capital (to Risk Weighted Assets) (2) 10.7 10.8 12.5 11.4 11.5 Tier 1 Capital (to Risk Weighted Assets) (2) 10.7 10.8 12.5 11.7 11.8 Total Capital (to Risk Weighted Assets) (2) 11.5 13.1 14.5 13.8 14.1
(1) Non-GAAP financial measure. Refer to the calculation on the section titled “Reconciliation of Non-GAAP Measures” at the end of this document.
(2) Regulatory capital ratios as of June 30, 2023 are preliminary and prior periods are actual.CONSOLIDATED BALANCE SHEETS (Unaudited):
(In thousands, except share data) Jun. 30, 2023 Mar. 31, 2023 Dec. 31, 2022 Sep. 30, 2022 Jun. 30, 2022 ASSETS Cash and due from banks $ 75,906 $ 51,158 $ 53,368 $ 76,018 $ 64,440 Interest-bearing balances with other financial institutions 13,332 4,996 4,405 4,520 4,909 Federal funds sold 9,711 6,017 3,108 14,140 167,437 Total cash and cash equivalents 98,949 62,171 60,881 94,678 236,786 Investment Securities: Held to maturity, at amortized cost 404,831 396,784 399,494 402,142 399,032 Available for sale, at fair value 228,774 236,609 237,878 242,195 218,698 Equity securities available for sale, at fair value 433 438 430 428 454 Loans held for sale 7,258 2,677 2,475 5,997 9,574 Loans, net of unearned interest 4,034,510 3,611,347 3,514,119 3,322,457 3,180,033 Less: Allowance for credit losses (32,588 ) (31,265 ) (18,957 ) (18,480 ) (16,876 ) Net loans 4,001,922 3,580,082 3,495,162 3,303,977 3,163,157 Premises and equipment, net 39,230 34,191 34,471 33,854 33,732 Operating lease right of use asset 9,106 8,414 8,798 8,352 8,326 Finance lease right of use asset 2,817 2,862 2,907 2,952 2,997 Cash surrender value of life insurance 53,931 50,928 50,674 50,419 50,169 Restricted investment in bank stocks 11,646 8,041 8,315 4,595 4,234 Accrued interest receivable 19,626 19,205 18,405 15,861 12,902 Deferred income taxes 24,309 15,548 13,674 16,093 13,780 Goodwill 129,403 114,231 114,231 113,871 113,835 Core deposit and other intangibles, net 7,453 6,916 7,260 7,215 7,729 Foreclosed assets held for sale 489 248 43 49 69 Other assets 53,710 44,120 42,856 31,225 34,689 Total Assets $ 5,093,887 $ 4,583,465 $ 4,497,954 $ 4,333,903 $ 4,310,163 LIABILITIES & SHAREHOLDERS’ EQUITY Deposits: Noninterest-bearing demand $ 830,479 $ 797,038 $ 793,939 $ 863,037 $ 850,180 Interest-bearing transaction accounts 2,180,312 2,197,216 2,325,847 2,414,272 2,377,260 Time 1,275,895 883,827 658,545 452,287 475,147 Total Deposits 4,286,686 3,878,081 3,778,331 3,729,596 3,702,587 Short-term borrowings 112,442 88,000 102,647 — — Long-term debt 58,982 4,316 4,409 4,501 4,592 Subordinated debt and trust preferred securities 45,929 56,794 56,941 66,357 73,995 Operating lease liability 9,894 9,270 9,725 10,261 10,324 Accrued interest payable 11,834 5,809 2,303 1,841 1,542 Other liabilities 37,158 30,402 31,499 22,242 21,288 Total Liabilities 4,562,925 4,072,672 3,985,855 3,834,798 3,814,328 Shareholders' Equity: Common stock, par value $1.00 per share; 40.0 million shares authorized 16,980 16,098 16,094 16,091 16,081 Additional paid-in capital 409,976 387,332 386,987 386,452 386,128 Retained earnings 131,271 129,617 133,114 120,572 108,265 Accumulated other comprehensive loss (17,805 ) (17,374 ) (19,216 ) (19,130 ) (9,759 ) Treasury stock (9,460 ) (4,880 ) (4,880 ) (4,880 ) (4,880 ) Total Shareholders’ Equity 530,962 510,793 512,099 499,105 495,835 Total Liabilities and Shareholders' Equity $ 5,093,887 $ 4,583,465 $ 4,497,954 $ 4,333,903 $ 4,310,163 CONSOLIDATED STATEMENTS OF INCOME (Unaudited):
Three Months Ended Six Months Ended (Dollars in thousands, except per share data) Jun. 30, 2023 Mar. 31, 2023 Dec. 31, 2022 Sep. 30, 2022 Jun. 30, 2022 Jun. 30, 2023 Jun. 30, 2022 INTEREST INCOME Loans, including fees $ 52,094 $ 45,865 $ 42,492 $ 38,484 $ 34,264 $ 97,959 $ 69,280 Investment securities: Taxable 3,962 3,874 3,784 3,382 2,833 7,836 4,786 Tax-exempt 391 389 390 392 379 780 715 Other interest-bearing balances 83 53 36 12 8 136 21 Federal funds sold 49 45 40 736 736 94 1,050 Total Interest Income 56,579 50,226 46,742 43,006 38,220 106,805 75,852 INTEREST EXPENSE Deposits 17,927 12,001 6,995 2,836 2,019 29,928 4,313 Short-term borrowings 1,507 1,490 441 — — 2,997 — Long-term and subordinated debt 701 686 729 761 768 1,387 1,692 Total Interest Expense 20,135 14,177 8,165 3,597 2,787 34,312 6,005 Net Interest Income 36,444 36,049 38,577 39,409 35,433 72,493 69,847 PROVISION FOR CREDIT LOSSES 1,157 490 525 1,550 1,725 1,647 2,225 Net Interest Income After Provision for Credit Losses 35,287 35,559 38,052 37,859 33,708 70,846 67,622 NONINTEREST INCOME Fiduciary and wealth management 1,204 1,236 1,085 1,729 1,205 2,440 2,257 ATM debit card interchange 998 1,056 1,099 1,078 1,128 2,054 2,185 Service charges on deposits 514 435 461 483 450 949 1,134 Mortgage banking 287 384 237 536 305 671 834 Mortgage hedging 128 20 150 217 538 148 1,104 Net gain on sales of SBA loans 128 — — 152 119 128 110 Earnings from cash surrender value of life insurance 292 254 255 250 262 546 508 Other 1,669 940 3,427 1,518 1,223 2,609 2,848 Total Noninterest Income 5,220 4,325 6,714 5,963 5,230 9,545 10,980 NONINTEREST EXPENSE Salaries and employee benefits 15,027 13,844 13,434 13,583 12,340 28,871 25,584 Software licensing and utilization 2,070 1,946 1,793 1,804 1,821 4,016 3,927 Occupancy, net 1,750 1,886 1,812 1,634 1,655 3,636 3,454 Equipment 1,248 1,251 1,249 1,121 1,112 2,499 2,123 Shares tax 751 899 160 920 480 1,650 1,706 Legal and professional fees 602 800 900 528 694 1,402 1,333 ATM/card processing 532 493 534 518 571 1,025 1,087 Intangible amortization 461 344 496 514 521 805 1,002 FDIC Assessment 684 340 243 254 506 1,024 1,097 (Gain) loss on sale or write-down of foreclosed assets, net (126 ) — (45 ) (57 ) (15 ) (126 ) (31 ) Merger and acquisition 4,992 224 294 — — 5,216 — Post-acquisition restructuring 2,952 — — — — 2,952 329 Other 4,586 4,043 4,598 3,896 4,230 8,629 8,049 Total Noninterest Expense 35,529 26,070 25,468 24,715 23,915 61,599 49,660 INCOME BEFORE PROVISION FOR INCOME TAXES 4,978 13,814 19,298 19,107 15,023 18,792 28,942 Provision for income taxes 142 2,587 3,579 3,626 2,771 2,729 5,336 NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 4,836 $ 11,227 $ 15,719 $ 15,481 $ 12,252 $ 16,063 $ 23,606 PER COMMON SHARE DATA: Basic Earnings Per Common Share $ 0.29 $ 0.71 $ 0.99 $ 0.97 $ 0.77 $ 1.00 $ 1.48 Diluted Earnings Per Common Share $ 0.29 $ 0.70 $ 0.99 $ 0.97 $ 0.77 $ 1.00 $ 1.48 Cash Dividends Declared $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.40 CONSOLIDATED – AVERAGE BALANCE SHEET AND NET INTEREST INCOME ANALYSIS (Unaudited):
Average Balances, Income and Interest Rates on a Taxable Equivalent Basis For the Three Months Ended June 30, 2023 March 31, 2023 June 30, 2022 (Dollars in thousands) Average Balance Interest (1) Yield/
RateAverage Balance Interest (1) Yield/
RateAverage Balance Interest (1) Yield/
RateASSETS: Interest Bearing Balances $ 7,777 $ 83 4.28 % $ 5,761 $ 53 3.73 % $ 5,920 $ 8 0.54 % Investment Securities: Taxable 551,832 3,783 2.75 556,901 3,764 2.74 501,631 2,740 2.19 Tax-Exempt 78,918 495 2.52 79,250 493 2.52 78,775 480 2.44 Total Securities 630,750 4,278 2.72 636,151 4,257 2.71 580,406 3,220 2.23 Federal Funds Sold 6,035 49 3.26 3,775 45 4.83 415,405 736 0.71 Loans, Net of Unearned Interest 3,808,717 52,192 5.50 3,555,375 45,961 5.24 3,129,334 34,354 4.40 Restricted Investment in Bank Stocks 10,177 179 7.05 9,542 110 4.68 4,854 94 7.77 Total Earning Assets 4,463,456 56,781 5.10 4,210,604 50,426 4.86 4,135,919 38,412 3.73 Cash and Due from Banks 70,378 51,444 59,822 Other Assets 293,952 258,821 270,165 Total Assets $ 4,827,786 $ 4,520,869 $ 4,465,906 LIABILITIES & SHAREHOLDERS' EQUITY: Interest-bearing Demand $ 936,687 $ 3,216 1.38 % $ 968,951 $ 2,691 1.13 % $ 1,030,237 $ 462 0.18 % Money Market 929,774 5,104 2.20 940,286 4,084 1.76 1,079,900 584 0.22 Savings 319,728 64 0.08 330,773 54 0.07 357,433 43 0.05 Time 1,061,276 9,543 3.61 749,598 5,172 2.80 516,346 930 0.72 Total Interest-bearing Deposits 3,247,465 17,927 2.21 2,989,608 12,001 1.63 2,983,916 2,019 0.27 Short term borrowings 94,067 1,507 6.43 121,898 1,490 4.96 — — — Long-term debt 54,347 194 1.43 4,350 44 4.10 9,238 107 4.65 Subordinated debt and trust preferred securities 47,782 507 4.26 56,875 642 4.58 74,062 661 3.58 Total Interest-bearing Liabilities 3,443,661 20,135 2.35 3,172,731 14,177 1.81 3,067,216 2,787 0.36 Noninterest-bearing Demand 810,140 793,382 853,219 Other Liabilities 69,451 43,899 49,790 Shareholders' Equity 504,535 510,857 495,681 Total Liabilities & Shareholders' Equity $ 4,827,787 $ 4,520,869 $ 4,465,906 Net Interest Income (taxable equivalent basis) $ 36,646 $ 36,249 $ 35,625 Taxable Equivalent Adjustment (202 ) (200 ) (192 ) Net Interest Income $ 36,444 $ 36,049 $ 35,433 Total Yield on Earning Assets 5.10 % 4.86 % 3.73 % Rate on Supporting Liabilities 2.35 1.81 0.36 Average Interest Spread 2.76 3.04 3.37 Net Interest Margin 3.29 3.49 3.45
(1) Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowance.ALLOWANCE FOR CREDIT LOSSES AND ASSET QUALITY (Unaudited):
(Dollars in thousands) Jun. 30,
2023Mar. 31,
2023Dec. 31,
2022Sep. 30,
2022Jun. 30,
2022Allowance for Credit Losses on Loans: Beginning balance $ 31,265 $ 18,957 $ 18,480 $ 16,876 $ 15,147 Impact of adopting CECL — 11,931 — — — Purchase credit deteriorated loans 336 — — — — Loans Charged off Commercial real estate — (16 ) (7 ) — — Commercial and industrial (109 ) (111 ) — (1 ) — Construction — — — — — Residential mortgage — (4 ) (23 ) (3 ) — Consumer (65 ) (19 ) (20 ) (11 ) (9 ) Total loans charged off (174 ) (150 ) (50 ) (15 ) (9 ) Recoveries of loans previously charged off Commercial real estate — — — 63 — Commercial and industrial — — — — — Construction — — — — — Residential mortgage — 30 — — 3 Consumer 4 7 2 6 10 Total recoveries 4 37 2 69 13 Balance before provision 31,431 30,775 18,432 16,930 15,151 Provision for credit losses 1,157 490 525 1,550 1,725 Balance, end of quarter $ 32,588 $ 31,265 $ 18,957 $ 18,480 $ 16,876 Nonperforming Assets Total nonperforming loans 15,846 13,909 8,585 7,629 7,973 Foreclosed real estate 489 248 43 49 69 Total nonperforming assets 16,335 14,157 8,628 7,678 8,042 Accruing loans 90 days or more past due 9 7 654 633 — Total risk elements $ 16,344 $ 14,164 $ 9,282 $ 8,311 $ 8,042 PPP Summary
(Dollars in thousands) Jun. 30,
2023Mar. 31,
2023Dec. 31,
2022Sep. 30,
2022Jun. 30,
2022PPP loans, net of deferred fees $ 1,633 $ 1,752 $ 2,600 $ 2,800 $ 4,966 PPP Fees recognized $ 3 $ 5 $ 29 $ 99 $ 652 RECONCILIATION OF NON-GAAP MEASURES (Unaudited)
Explanatory note: This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). Mid Penn’s management uses these non-GAAP financial measures in their analysis of Mid Penn’s performance. 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. 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. Non-PPP core banking loans are meaningful to investors as they are indicative of portfolio loans and related growth from traditional bank activities and excludes short-term or nonrecurring loans from special programs like the PPP. Adjusted earnings per common share excludes from income available to common shareholders certain expenses related to significant non-core activities, including merger-related expenses, net of income taxes. For return on average tangible common equity, the most directly comparable financial measure calculated in accordance with GAAP is return on average equity. The efficiency ratio is often used by management to measure its noninterest expense as a percentage of its revenue. 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. The reconciliation of the non-GAAP to comparable GAAP financial measures can be found in the tables below.Tangible Book Value Per Share
(Dollars in thousands, except per share data) Jun. 30,
2023Mar. 31,
2023Dec. 31,
2022Sep. 30,
2022Jun. 30,
2022Shareholders' Equity $ 530,962 $ 510,793 $ 512,099 $ 499,105 $ 495,835 Less: Goodwill 129,403 114,231 114,231 113,871 113,835 Less: Core Deposit and Other Intangibles 7,453 6,916 7,260 7,215 7,729 Tangible Equity $ 394,106 $ 389,646 $ 390,608 $ 378,019 $ 374,271 Common Shares Outstanding 16,567,578 15,890,011 15,886,143 15,882,853 15,878,193 Tangible Book Value per Share $ 23.79 $ 24.52 $ 24.59 $ 23.80 $ 23.57 Non-PPP Core Banking Loans
(Dollars in thousands) Jun. 30,
2023Mar. 31,
2023Dec. 31,
2022Sep. 30,
2022Jun. 30,
2022Loans, net of unearned interest $ 4,034,510 $ 3,611,347 $ 3,514,119 $ 3,322,457 $ 3,180,033 Less: PPP loans, net of deferred fees 1,633 1,752 2,600 2,800 4,966 Non-PPP core banking loans $ 4,032,877 $ 3,609,595 $ 3,511,519 $ 3,319,657 $ 3,175,067 Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses
Three Months Ended (Dollars in thousands, except per share data) Jun. 30,
2023Mar. 31,
2023Dec. 31,
2022Sep. 30,
2022Jun. 30,
2022Net Income Available to Common Shareholders $ 4,836 $ 11,227 $ 15,719 $ 15,481 $ 12,252 Plus: Merger and Acquisition Expenses 7,944 224 294 — — Less: Tax Effect of Merger and Acquisition Expenses 1,668 47 62 — — Net Income Excluding Non-Recurring Expenses $ 11,112 $ 11,404 $ 15,951 $ 15,481 $ 12,252 Weighted Average Shares Outstanding 16,235,106 15,886,186 15,883,003 15,877,592 15,934,083 Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses $ 0.68 $ 0.72 $ 0.99 $ 0.97 $ 0.77 Return on Average Tangible Common Equity
Three Months Ended (Dollars in thousands) Jun. 30,
2023Mar. 31,
2023Dec. 31,
2022Sep. 30,
2022Jun. 30,
2022Net income available to common shareholders $ 4,836 $ 11,227 $ 15,719 $ 15,481 $ 12,252 Plus: Intangible amortization, net of tax 364 272 392 406 412 $ 5,200 $ 11,499 $ 16,111 $ 15,887 $ 12,664 Average shareholders' equity $ 504,535 $ 510,857 $ 505,769 $ 502,082 $ 495,681 Less: Average goodwill 120,284 114,231 113,879 113,835 113,835 Less: Average core deposit and other intangibles 7,016 7,129 6,966 7,465 7,983 Average tangible shareholders' equity $ 377,235 $ 389,497 $ 384,924 $ 380,782 $ 373,863 Return on average tangible common equity 5.53 % 11.97 % 16.61 % 16.55 % 13.59 % Efficiency Ratio
Three Months Ended (Dollars in thousands) Jun. 30,
2023Mar. 31,
2023Dec. 31,
2022Sep. 30,
2022Jun. 30,
2022Noninterest expense $ 35,529 $ 26,070 $ 25,468 $ 24,715 $ 23,915 Less: Merger and acquisition expenses 7,944 224 294 — — Less: Intangible amortization 461 344 496 514 521 Less: (Gain) loss on sale or write-down of foreclosed assets, net (126 ) — (45 ) (57 ) (15 ) Efficiency ratio numerator $ 27,250 $ 25,502 $ 24,723 $ 24,258 $ 23,409 Net interest income 36,444 36,049 38,577 39,409 35,433 Noninterest income 5,220 4,325 6,714 5,963 5,230 Efficiency ratio denominator $ 41,664 $ 40,374 $ 45,291 $ 45,372 $ 40,663 Efficiency ratio 65.40 % 63.16 % 54.59 % 53.46 % 57.57 % 
Mid Penn Bancorp, Inc. 2407 Park Drive Harrisburg, PA 17110 1-866-642-7736 CONTACTS Rory G. Ritrievi Chair, President & Chief Executive Officer Allison S. Johnson Chief Financial Officer
