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Mid Penn Bancorp, Inc. Reports Second Quarter Earnings and Declares Dividend
ソース: Nasdaq GlobeNewswire / 27 7 2022 13:47:17 America/New_York
HARRISBURG, Pa., July 27, 2022 (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, 2022 of $12.3 million, or $0.77 per common share basic and diluted.
Key Highlights in the Second Quarter of 2022
- Earnings increased $898 thousand and $0.06 per common share diluted to $12.3 million, or $0.77, respectively, for the quarter ended June 30, 2022 compared to the quarter ended March 31, 2022.
- Tax equivalent net interest margin increased to 3.45% from 3.21% in the prior quarter and 3.34% in the same period prior year.
- Loans grew 8% (annualized) during the three months ended June 30, 2022 from the first quarter of 2022. Loans, excluding Payroll Protection Program (“PPP”) loans (1), grew 11% (annualized) during the three months ended June 30, 2022 from the first quarter of 2022.
- Asset quality continues to remain strong with both nonperforming loans to total loans and nonperforming assets to total loans plus other real estate at 25 basis points (“bp”) at June 30, 2022.
- Book value per common share increased to $31.23 and tangible book value per share (1) increased to $23.57 at June 30, 2022, compared to $30.96 and $23.31, respectively, at March 31, 2022.
“The team at Mid Penn is proud to deliver these second quarter results to our shareholders. The second quarter was our first full quarter after the completion of the Riverview acquisition and resulting customer conversion and branch optimization plan and it was also the first quarter in the last 8 with very little impact from PPP loans,” said Rory G. Ritrievi, President and CEO. “The quarter was successful due to strong, high quality and profitable organic loan growth of 11% annualized, smart balance sheet management, continued strength in asset quality and of course a healthy reduction in expenses. Within the quarter, we saw a 7.6% improvement in net interest margin, a 12.2% improvement in ROA, a 6.4% improvement in ROE, a 6.0% improvement in ROTCE, a 7.3% improvement in our efficiency ratio(1) and an increase in the allowance of loan and lease losses to nonperforming assets to 211.7%. Those trends are all encouraging as we head into the last half of the year.”
With this successful quarter, the Board is pleased to announce a quarterly cash dividend of $0.20 per share of common stock was declared at its meeting on July 27, 2022, payable on August 22, 2022 to shareholders of record as of August 10, 2022.
(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 and Average Balance Sheet
For the three months ended June 30, 2022, net interest income was $35.4 million compared to net interest income of $34.4 million for the three months ended March 31, 2022 and $26.9 million for the three months ended June 30, 2021. The tax-equivalent net interest margin for the three months ended June 30, 2022 was 3.45% versus 3.21% for the first quarter of 2022 and 3.34% for the second quarter of 2021, a 24 and 11 bp, respectively, increase compared to the prior quarter and the same period in 2021.The linked quarter increase was the result of a 22 bp increase in the yield on interest-earning assets and a 4 bp decrease in the rate on interest-bearing liabilities, partially offset by a $236.5 million decrease in average interest-earning assets. The increase in the yield on interest-earning assets was the result of a combination of excess cash being re-deployed into higher yielding investment securities and the increase in fed fund rates during the second quarter of 2022. The decrease in the rate on interest-bearing liabilities was primarily the result of a lag in the repricing of deposits as well as the strategic decision to allow higher cost time deposits obtained through the Riverview acquisition to run-off.
For the six months ended June 30, 2022, net interest income was $69.8 million, a $17.6 million, or 33.8%, increase compared to net interest income of $52.2 million for the six months ended June 30, 2021. The year-over-year increase in net interest income was positively impacted by (i) the acquisition of Riverview; (ii) the deployment of Fed Funds into higher yielding investment securities since September 30, 2021; (iii) interest and fees from core loan growth since June 30, 2021; and (iv) reduced interest expense due to the lower cost of deposits in the six months ended June 30, 2022 when compared to the same period in 2021. The tax-equivalent net interest margin for the six months ended June 30, 2022 was 3.33%, a 7 bp decrease compared to 3.40% for six months ended June 30, 2021. The decrease was primarily the result of a 28 bp decrease in the yield on interest-earning assets. The overall decrease in net interest margin for the six months ended June 30, 2022 was driven by the reduction of PPP fees recognized during the first six months of 2021, partially offset by the improvement in cost of interest-bearing liabilities.
The three months ended June 30, 2022 included the recognition of $652 thousand of PPP loan processing fees, a decrease of $5.6 million compared to $6.2 million of PPP loan processing fees recognized during the same period in 2021. These PPP fees are recognized as interest income over the term of the respective loan, or sooner if the loans are forgiven by the U.S. Small Business Administration (“SBA”), or the borrower otherwise pays down principal prior to the loan’s stated maturity. The six months ended June 30, 2022 included the recognition of $3.6 million of PPP loan processing fees, a decrease of $7.7 million compared to $11.3 million of PPP loan processing fees recognized during the same period in 2021. These PPP fees are recognized as interest income over the term of the respective loan, or sooner if the loans are forgiven by the U.S. Small Business Administration (“SBA”), or the borrower otherwise pays down principal prior to the loan’s stated maturity. As of June 30, 2022, there was $171 thousand in deferred fees related to PPP loans that we anticipate will be recognized during the third quarter of 2022.
Total average assets were $4.5 billion for the second quarter of 2022, reflecting a decrease of $231.0 million, or 4.9%, compared to total average assets of $4.7 billion for the first quarter of 2022, and an increase of $1.1 billion, or 29.9%, compared to total average assets of $3.4 billion second quarter of 2021. The decrease in total average assets from the prior quarter was primarily due to the reduction in federal funds sold. Total average assets were $4.6 billion for the first half of 2022, reflecting an increase of $1.3 billion, or 38.3%, compared to total average assets of $3.3 billion the same period of 2021. The increase in total average assets for both the quarter and year to date as of June 30, 2021 to June 30, 2022 was primarily attributable to the acquisition of Riverview, effective November 30, 2021.
Total average loans were $3.1 billion for the second quarter of 2022, reflecting a decrease of $25.9 million, or 0.8%, compared to total average loans in the first quarter of 2022, and an increase of $520.0 million, or 19.9%, compared to total average loans of $2.6 billion for the second quarter of June 30, 2021. The decrease from the prior quarter was a result of the forgiveness of $34.9 million in PPP loans, which was partially offset by new loan originations. Total average loans were $3.1 billion for the first six months of 2022, reflecting an increase of $545.4 million, or 21.2%, compared to total average loans in the same period of 2021. The year-over-year growth is largely attributable to the Riverview acquisition on November 30, 2021.
Total average deposits were $3.8 billion for the second quarter of 2022, reflecting a decrease of $162.0 million, or 4.0%, compared to total average deposits in the first quarter of 2022, and an increase of $1.1 billion, or 19.9%, compared to total average deposits of $2.6 billion second quarter of 2021. The decrease in total average deposits during the second quarter was attributable to the maturity of certificates of deposit, which have renewed into lower rates, migrated to other deposit or retail investment products, or exited the Bank. We strategically right-sized our average cost of deposits through our targeted deposit run-off. The average cost of deposits was 0.21% for the second quarter of 2022, representing a 2 bp decrease from the first quarter of 2022 and a 22 bp decrease from the second quarter of 2021. Total average deposits were $3.9 billion for the first half of 2022, reflecting an increase of $1.3 billion, or 47.9%, compared to total average deposits of $2.6 billion same period of 2021. The growth in average deposits compared to June 30, 2021 was positively impacted by the Riverview acquisition and significant increases in noninterest-bearing, interest-bearing, and money market deposits, primarily due to both expanded cash management and commercial deposit account relationships, and new deposits established as a result of Mid Penn’s PPP loan funding activities.
Asset Quality
The provision for loan and lease losses was $1.7 million for the three months ended June 30, 2022, an increase of $1.2 million compared to the provision for loan losses of $500 thousand for the three months ended March 31, 2022 and an increase of $525 thousand compared to the three months ended June 30, 2021. The provision for loan and lease losses was $2.2 million for the six months ended June 30, 2022, an increase of $75 thousand compared to the provision for loan losses for the same period of 2021. The increase in the provision for the three and six months ended June 30, 2022 was the result of one partially legacy commercial relationship that was downgraded from substandard accrual to substandard non-accrual during the quarter and the growth in total loans since the end of the second quarter of 2021. The allowance for loan and lease losses and the related provision reflects Mid Penn’s continued application of the incurred loss method for estimating credit losses. We will adopt the current expected credit loss (“CECL”) accounting standard, as required, effective January 1, 2023.
Total nonperforming assets were $8.0 million at June 30, 2022, a decrease compared to nonperforming assets of $10.5 million at December 31, 2021 and $8.7 million at June 30, 2021. The decrease in nonperforming assets since December 31, 2021 was primarily the result of the successful workout of two non-accrual home equity loans amongst one relationship totaling $2.3 million during the first quarter of 2022. The nonperforming assets included acquired impaired loans assumed in the Riverview transaction totaling $3.3 million as of December 31, 2021.
The allowance for loan and lease losses as a percentage of total loans including PPP loans was 0.53% at June 30, 2022, compared to 0.49% at March 31, 2022 and 0.47% at December 31, 2021. The ratios as of June 30, 2022 and December 31, 2021, were affected by the addition of the Riverview acquired loans, which, in accordance with purchase accounting principles, were recorded at fair value at the time of acquisition with no related allowance for loan and lease losses.
Capital
Shareholders’ equity increased $5.8 million, or 1.2%, from $490.1 million as of December 31, 2021 to $495.8 million as of June 30, 2022. Regulatory capital ratios for both Mid Penn and its banking subsidiary indicate regulatory capital levels in excess of the regulatory minimums and the levels necessary for the Bank to be considered “well capitalized” at both June 30, 2022 and December 31, 2021.
Share Repurchase Program
During the second quarter of 2022, Mid Penn repurchased 103,912 shares of outstanding common stock at an average price of $26.88 under its treasury stock repurchase program (“Program”). The Program authorized the repurchase of up to $15.0 million of Mid Penn’s outstanding common stock, of which $10.3 million remains available for repurchase.
Noninterest Income
For the three months ended June 30, 2022, noninterest income totaled $5.2 million, a decrease of $520 thousand, or 9.0%, compared to noninterest income of $5.8 million for the first quarter of 2022, primarily driven by decreases of $444 thousand in other income, $234 thousand in service charges on deposits, $224 thousand in mortgage banking income and a $166 thousand change in the net gain on sales of SBA loans. The decrease in other income was primarily the result of a higher fair value gain on a swap in the first quarter of 2022 compared to the second quarter of 2022. Service charges on deposits decreased as a result of certain Riverview legacy fees being aligned with Mid Penn fees at the end of the first quarter of 2022. The decrease in mortgage banking income was the result of increasing mortgage interest rates slowing mortgage loan originations and secondary-market loan sales and gains during the second quarter of 2022. These decreases were partially offset by increases of $153 thousand in income from fiduciary activities, $71 thousand in ATM debit card interchange income and $14 thousand in merchant services income.
Compared to the second quarter of 2021, noninterest income in the second quarter of 2022 decreased $422 thousand, or 7.5%, driven by a $2.5 million decrease in mortgage banking income, a $122 thousand decrease in merchant services income and a $114 thousand lower net gain on sales of SBA loans. The decreases were partially offset by an $877 thousand increase in other income, a $663 thousand increase in income from fiduciary activities, a $472 thousand increase in ATM debit card interchange income and a $273 thousand increase in service charges on deposits. Other income increased as a result of income in the second quarter of 2022 from a hedging program related to mortgage derivative activities that Mid Penn did not participate in during the second quarter of 2021, as well as a result of a fair value gain on a swap in the second quarter of 2022 compared to no fair value gain in the second quarter of 2021. The increase in income from fiduciary activities was attributable to favorable growth in trust assets under management and increased sales of retail investments products, as a result of successful business development efforts by Mid Penn’s trust and wealth management team. ATM debit card interchange income and service charges on deposits increased primarily as a result of a higher volume of transactional deposit accounts, including deposit accounts assumed in the Riverview acquisition.
For the six months ended June 30, 2022, noninterest income totaled $11.0 million, an increase of $616 thousand, or 5.9%, compared to noninterest income of $10.4 million for the first six months of 2021, primarily driven by increases of $2.2 million in other income, $1.2 million in income from fiduciary activities, $961 thousand in ATM debit card interchange income and $805 thousand in service charges on deposits. The increase in other income was primarily the result of a fair value gain on a swap in the first half of 2022 compared to the same period of 2021. The increases in fiduciary activities was a result of increased activity in the wealth management area and the Riverview transaction. The other increases mentioned were primarily the result of the Riverview transaction. These favorable variances were partially offset by a decrease in mortgage banking income of $4.3 million for the six months ended June 30, 2022 compared to the same period of 2021 due to increasing mortgage interest rates slowing mortgage loan originations and secondary-market loan sales and gains during 2022.
Mortgage banking income decreased as interest rates increased in response to the increase in the fed funds rate during the first half of 2022. As a result of the corresponding mortgage rate increases and an increase in property values driven by supply shortfalls and high liquidity levels among buyers, the mortgage loan refinancing market has slowed, and purchase money mortgage originations have slowed relative to the lending volumes seen in the past several years.
Noninterest Expense
For the three months ended June 30, 2022, noninterest expense totaled $23.9 million, a decrease of $1.8 million, or 7.1%, compared to noninterest expense of $25.7 million for the first quarter of 2022. Most categories of noninterest expense decreased during the second quarter of 2022, as a result of cost savings fully recognized in the second quarter of 2022 from the completion of the Riverview acquisition. The most significant cost savings were in salaries and benefits.
Compared to the second quarter of 2021, noninterest expense in the second quarter of 2022 increased $4.5 million, or 22.9%, primarily as a result of higher expenses from the Riverview acquisition, most significantly increases of $2.4 million in salaries and benefits and $2.0 million in other expenses. The increases were partially offset by decreases of $712 thousand in mortgage banking profit-sharing expense, $522 thousand of post-acquisition restructuring expense in 2021 and $240 thousand in charitable contributions qualifying for state tax credits.
For the six months ended June 30, 2022, noninterest expense totaled $49.7 million, an increase of $12.6 million, or 34.2%, compared to noninterest expense of $37.1 million for the same period of 2021 primarily as a result of higher expenses from the Riverview acquisition, most significantly increases of $6.1 million in salaries and benefits and $4.7 million in other expenses.
The provision for income taxes was $2.8 million during the three months ended June 30, 2022, compared to $2.6 million and $2.3 million of income tax provision recorded for the first quarter of 2022 and the second quarter of 2021, respectively. The provision for income taxes for the three months ended June 30, 2022 reflects a combined Federal and State effective tax rate of 18.5% compared to 18.4% and 19.4% for the first quarter of 2022 and the second quarter of 2021, respectively. The provision for income taxes was $5.3 million during the six months ended June 30, 2022, compared to $4.5 million of income tax provision recorded for the first half of 2021. The provision for income taxes for the six months ended June 30, 2022 reflects a combined Federal and State effective tax rate of 18.4% compared to 19.1% for the same period of 2021. The decrease in the effective tax rate compared to the periods of the prior year reflects higher tax-exempt interest recognized due to an increase in tax-exempt securities being held in the investment security portfolio when compared to the prior year, the favorable treatment of the increase in cash surrender value on bank owned life insurance policies, which are nontaxable for federal tax purposes, and the expansion of low income housing tax credit projects (“Projects”) acquired in the Riverview transaction, as well as Mid Penn legacy Projects. These decreases were partially offset by higher income before taxes in both periods of 2022.
The efficiency ratio(1) was 57.57% in the second quarter of 2022, compared to 62.12% in the first quarter of 2022, and 57.42% in the second quarter of 2021. The improvement in the efficiency ratio during the second quarter 2022 was due to the cost savings being realized from the Riverview acquisition. The efficiency ratio was 59.83% for the six months ended June 30, 2022, compared to 57.47% for the six months ended June 30, 2021. The increase in the efficiency ratio during the six months ended June 30, 2022 was primarily due to the increase in salary and benefit expenses related to Riverview employees retained through conversion.
Merger & Acquisition Activity
On November 30, 2021, Mid Penn announced the successful completion of the merger acquisition of Riverview. The acquisition of Riverview impacted periods presented within this report. For more information regarding this transaction, please see Mid Penn’s Annual Report on Form 10-K for the year ended December 31, 2021.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; the length and extent of the COVID-19 pandemic; 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; the success and timing of PPP loan repayment and forgiveness; 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 Riverview 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 the areas where Mid Penn does business; 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 Riverview transaction; the ability to complete the integration of Mid Penn and Riverview successfully; the dilution caused by Mid Penn’s issuance of additional shares of its capital stock in connection with the Riverview 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, 2021 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):
Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, (Dollars in thousands, except per share data) 2022 2022 2021 2021 2021 Ending Balances: Investment securities $ 618,184 $ 508,658 $ 392,619 $ 158,311 $ 161,702 Net loans 3,163,157 3,106,384 3,089,799 2,356,196 2,480,476 Total assets 4,310,163 4,667,174 4,689,425 3,453,187 3,461,792 Total deposits 3,702,587 3,989,037 4,002,016 2,961,881 2,782,124 Shareholders' equity 495,835 494,161 490,076 349,308 341,569 Average Balances: Investment securities 580,406 462,648 286,134 158,296 148,972 Net loans 3,129,334 3,103,469 2,319,544 2,422,378 2,609,803 Total assets 4,465,906 4,696,894 3,579,649 3,508,757 3,437,692 Total deposits 3,837,135 3,999,074 3,007,955 2,870,885 2,715,875 Shareholders' equity 495,681 494,019 403,010 345,816 312,006 Income Statement: Three Months Ended Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, (Dollars in thousands, except per share data) 2022 2022 2021 2021 2021 Net interest income $ 35,433 $ 34,414 $ 29,372 $ 26,994 $ 26,877 Provision for loan and lease losses 1,725 500 370 425 1,150 Noninterest income 5,230 5,750 5,660 5,509 5,652 Noninterest expense 23,915 25,745 34,072 20,019 19,456 Income before provision for income taxes 15,023 13,919 590 12,059 11,923 Provision for income taxes 2,771 2,565 (17 ) 2,272 2,310 Net income available to shareholders 12,252 11,354 607 9,787 9,613 Net income excluding non-recurring expenses (1) 12,252 11,614 10,266 9,943 10,025 Per Share: Basic earnings per common share $ 0.77 $ 0.71 $ 0.05 $ 0.86 $ 0.93 Diluted earnings per common share $ 0.77 $ 0.71 $ 0.05 $ 0.86 $ 0.93 Cash dividends declared $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20 Book value per common share $ 31.23 $ 30.96 $ 30.71 $ 30.55 $ 29.94 Tangible book value per common share (1) $ 23.57 $ 23.31 $ 22.99 $ 24.75 $ 24.10 Asset Quality: Net charge-offs (recoveries) to average loans (annualized) -0.001 % -0.007 % 0.001 % 0.149 % 0.004 % Non-performing loans to total loans 0.25 % 0.25 % 0.32 % 0.29 % 0.35 % Non-performing asset to total loans and other real estate 0.25 % 0.26 % 0.32 % 0.29 % 0.35 % Non-performing asset to total assets 0.19 % 0.18 % 0.22 % 0.20 % 0.25 % ALLL to total loans 0.53 % 0.49 % 0.47 % 0.60 % 0.59 % ALLL to nonperforming loans 211.66 % 190.84 % 146.23 % 209.90 % 169.50 % Profitability: Return on average assets 1.10 % 0.98 % 0.06 % 1.11 % 1.12 % Return on average equity 9.91 % 9.32 % 0.61 % 11.23 % 12.36 % Return on average tangible common equity (1) 13.59 % 12.82 % 1.26 % 14.20 % 15.72 % Net interest margin 3.45 % 3.21 % 3.48 % 3.26 % 3.34 % Efficiency ratio (1) 57.57 % 62.12 % 61.34 % 60.33 % 57.42 % Capital Ratios: Tier 1 Capital (to Average Assets) 9.0 % 8.4 % 8.1 % 8.6 % 8.8 % Common Tier 1 Capital (to Risk Weighted Assets) 11.5 % 11.7 % 11.7 % 13.2 % 13.1 % Tier 1 Capital (to Risk Weighted Assets) 11.8 % 12.0 % 12.0 % 13.2 % 13.1 % Total Capital (to Risk Weighted Assets) 14.1 % 14.4 % 14.6 % 15.8 % 15.8 % (1) Non-GAAP financial measure. Refer to the calculation on the section titled “Reconciliation of Non-GAAP Measures” at the end of this document.
CONSOLIDATED BALANCE SHEETS (Unaudited): (Dollars in thousands, except share data) Jun. 30, 2022 Mar. 31, 2022 Dec. 31, 2021 Sept. 30, 2021 Jun. 30, 2021 ASSETS Cash and due from banks $ 64,440 $ 54,961 $ 41,100 $ 40,134 $ 35,815 Interest-bearing balances with other financial institutions 4,909 3,187 146,031 2,536 1,234 Federal funds sold 167,437 700,283 726,621 712,272 599,298 Total cash and cash equivalents 236,786 758,431 913,752 754,942 636,347 Investment securities held to maturity, at amortized cost 399,032 363,145 329,257 152,791 153,032 Investment securities available for sale, at fair value 218,698 145,039 62,862 5,015 8,162 Equity securities available for sale, at fair value 454 474 500 505 508 Loans held for sale 9,574 7,474 11,514 23,154 24,202 Loans and leases, net of unearned interest 3,180,033 3,121,531 3,104,396 2,370,429 2,495,192 Less: Allowance for loan and lease losses (16,876 ) (15,147 ) (14,597 ) (14,233 ) (14,716 ) Net loans and leases 3,163,157 3,106,384 3,089,799 2,356,196 2,480,476 Bank premises and equipment, net 33,732 33,612 33,232 25,562 24,758 Bank premises and equipment held for sale 2,574 3,098 3,907 — — Operating lease right of use asset 8,326 8,751 9,055 9,942 10,364 Finance lease right of use asset 2,997 3,042 3,087 3,132 3,177 Cash surrender value of life insurance 50,169 49,907 49,661 17,406 17,332 Restricted investment in bank stocks 4,234 7,637 9,134 7,906 6,816 Accrued interest receivable 12,902 11,584 11,328 10,008 10,638 Deferred income taxes 13,780 11,974 10,779 4,133 5,465 Goodwill 113,835 113,835 113,835 62,840 62,840 Core deposit and other intangibles, net 7,729 8,250 9,436 3,537 3,804 Foreclosed assets held for sale 69 125 — 11 11 Other assets 32,115 34,412 28,287 16,107 13,860 Total Assets $ 4,310,163 $ 4,667,174 $ 4,689,425 $ 3,453,187 $ 3,461,792 LIABILITIES & SHAREHOLDERS’ EQUITY Deposits: Noninterest-bearing demand $ 850,180 $ 866,965 $ 850,438 $ 661,890 $ 692,016 Interest-bearing demand 1,023,027 1,050,923 1,066,852 745,833 629,375 Money Market 999,556 1,159,809 1,076,593 905,742 810,067 Savings 354,677 358,186 381,476 205,842 206,724 Time 475,147 553,154 626,657 442,574 443,942 Total Deposits 3,702,587 3,989,037 4,002,016 2,961,881 2,782,124 Short-term borrowings — — — — 196,889 Long-term debt 4,592 74,681 81,270 74,858 74,944 Subordinated debt 73,995 74,134 73,645 44,599 44,593 Operating lease liability 10,324 10,923 11,363 10,950 11,387 Accrued interest payable 1,542 2,067 1,791 1,901 2,122 Other liabilities 21,288 22,171 29,264 9,690 8,164 Total Liabilities 3,814,328 4,173,013 4,199,349 3,103,879 3,120,223 Shareholders' Equity: Common stock, par value $1.00 per share; 20.0 million shares authorized 16,081 16,059 16,056 11,532 11,507 Additional paid-in capital 386,128 385,765 384,742 246,830 246,546 Retained earnings 108,265 99,206 91,043 92,722 85,220 Accumulated other comprehensive (loss) income (9,759 ) (4,946 ) 158 147 219 Treasury stock (4,880 ) (1,923 ) (1,923 ) (1,923 ) (1,923 ) Total Shareholders’ Equity 495,835 494,161 490,076 349,308 341,569 Total Liabilities and Shareholders' Equity $ 4,310,163 $ 4,667,174 $ 4,689,425 $ 3,453,187 $ 3,461,792 CONSOLIDATED STATEMENTS OF INCOME (Unaudited): (Dollars in thousands, except per share data) Three Months Ended Six Months Ended Jun. 30 Mar. 31 Dec. 31 Sept. 30 Jun. 30 Jun. 30 Jun. 30 2022 2022 2021 2021 2021 2022 2021 INTEREST INCOME Interest and fees on loans and leases $ 34,264 $ 35,016 $ 31,021 $ 29,590 $ 29,835 $ 69,280 $ 58,165 Interest and dividends on investment securities: U.S. Treasury and government agencies 2,329 1,536 715 285 225 3,865 403 State and political subdivision obligations, tax-exempt 379 336 288 279 278 715 555 Other securities 504 417 329 277 291 921 593 Total Interest and Dividends on Investment Securities 3,212 2,289 1,332 841 794 5,501 1,551 Interest on other interest-bearing balances 8 13 8 1 2 21 4 Interest on federal funds sold 736 314 324 308 98 1,050 177 Total Interest Income 38,220 37,632 32,685 30,740 30,729 75,852 59,897 INTEREST EXPENSE Interest on deposits 2,019 2,294 2,536 2,909 2,916 4,313 5,882 Interest on short-term borrowings — — — 133 232 — 406 Interest on long-term and subordinated debt 768 924 777 704 704 1,692 1,407 Total Interest Expense 2,787 3,218 3,313 3,746 3,852 6,005 7,695 Net Interest Income 35,433 34,414 29,372 26,994 26,877 69,847 52,202 PROVISION FOR LOAN AND LEASE LOSSES 1,725 500 370 425 1,150 2,225 2,150 Net Interest Income After Provision for Loan and Lease Losses 33,708 33,914 29,002 26,569 25,727 67,622 50,052 NONINTEREST INCOME Mortgage banking income 305 529 1,932 3,162 2,841 834 5,220 Income from fiduciary and wealth management activities 1,205 1,052 778 618 542 2,257 1,098 Service charges on deposits 450 684 439 223 177 1,134 329 ATM debit card interchange income 1,128 1,057 834 630 656 2,185 1,224 Net gain (loss) on sales of SBA loans 119 (9 ) 409 105 355 110 455 Merchant services income 87 73 72 58 209 160 301 Earnings from cash surrender value of life insurance 262 246 135 74 75 508 149 Net gain on sales of investment securities — — — 79 — — — Other income 1,674 2,118 1,061 560 797 3,792 1,588 Total Noninterest Income 5,230 5,750 5,660 5,509 5,652 10,980 10,364 NONINTEREST EXPENSE Salaries and employee benefits 12,340 13,244 11,838 10,342 9,933 25,584 19,531 Occupancy expense, net 1,655 1,799 1,412 1,318 1,317 3,454 2,797 Equipment expense 1,112 1,011 864 745 741 2,123 1,492 Software licensing and utilization 1,821 2,106 1,839 1,551 1,497 3,927 2,942 FDIC Assessment 506 591 524 461 433 1,097 903 Legal and professional fees 694 639 388 610 555 1,333 981 Charitable contributions qualifying for State tax credits 125 65 797 — 365 190 635 Mortgage banking profit-sharing expense 33 145 566 1,140 745 178 865 (Gain) loss on sale or write-down of foreclosed assets, net (15 ) (16 ) 1 (7 ) (19 ) (31 ) (19 ) Intangible amortization 521 481 357 266 276 1,002 557 Merger and acquisition expense — — 2,347 198 522 — 522 Post-acquisition restructuring expense — 329 9,880 — — 329 — Other expenses 5,123 5,351 3,259 3,395 3,091 10,474 5,808 Total Noninterest Expense 23,915 25,745 34,072 20,019 19,456 49,660 37,014 INCOME BEFORE PROVISION FOR INCOME TAXES 15,023 13,919 590 12,059 11,923 28,942 23,402 Provision for income taxes 2,771 2,565 (17 ) 2,272 2,310 5,336 4,477 NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 12,252 $ 11,354 $ 607 $ 9,787 $ 9,613 $ 23,606 $ 18,925 PER COMMON SHARE DATA: Basic and Diluted Earnings Per Common Share $ 0.77 $ 0.71 $ 0.05 $ 0.86 $ 0.93 $ 1.48 $ 2.02 Diluted Earnings Per Common Share $ 0.77 $ 0.71 $ 0.05 $ 0.86 $ 0.93 $ 1.48 $ 2.02 Cash Dividends Declared $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.40 $ 0.39 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 (Dollars in thousands) June 30, 2022 March 31, 2022 June 30, 2021 Average Yield/ Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate Balance Interest Rate ASSETS: Interest Bearing Balances $ 5,920 $ 8 0.54 % $ 91,543 $ 13 0.06 % $ 1,284 $ 2 0.62 % Investment Securities: Taxable 501,631 2,740 2.19 % 389,034 1,822 1.90 % 93,161 430 1.85 % Tax-Exempt 78,775 480 (a) 2.44 % 73,614 425 (a) 2.34 % 55,811 352 (a) 2.53 % Total Securities 580,406 3,220 2.23 % 462,648 2,247 1.97 % 148,972 782 2.11 % Federal Funds Sold 415,405 736 0.71 % 706,411 314 0.18 % 477,001 98 0.08 % Loans and Leases, Net 3,129,334 34,354 (b) 4.40 % 3,103,469 35,123 (b) 4.59 % 2,609,803 29,908 (b) 4.60 % Restricted Investment in Bank Stocks 4,854 94 7.77 % 8,347 131 6.36 % 6,865 86 5.02 % Total Earning Assets 4,135,919 38,412 3.73 % 4,372,418 37,828 3.51 % 3,243,925 30,876 3.82 % Cash and Due from Banks 59,822 57,397 34,683 Other Assets 270,165 267,079 159,084 Total Assets $ 4,465,906 $ 4,696,894 $ 3,437,692 LIABILITIES & SHAREHOLDERS' EQUITY: Interest-bearing Demand $ 1,030,237 $ 462 0.18 % $ 1,045,678 $ 461 0.18 % $ 614,435 $ 579 0.38 % Money Market 1,079,900 584 0.22 % 1,125,094 600 0.22 % 791,498 819 0.42 % Savings 357,433 43 0.05 % 376,006 58 0.06 % 203,468 58 0.11 % Time 516,346 930 0.72 % 592,833 1,175 0.80 % 432,739 1,460 1.35 % Total Interest-bearing Deposits 2,983,916 2,019 0.27 % 3,139,611 2,294 0.30 % 2,042,140 2,916 0.57 % Short Term Borrowings — — 0.00 % — — 0.00 % 264,661 232 0.35 % Long-term Debt 9,238 107 4.65 % 76,157 284 1.51 % 74,976 204 1.09 % Subordinated Debt 74,062 661 3.58 % 74,189 640 3.50 % 44,589 500 4.50 % Total Interest-bearing Liabilities 3,067,216 2,787 0.36 % 3,289,957 3,218 0.40 % 2,426,366 3,852 0.64 % Noninterest-bearing Demand 853,219 859,463 673,735 Other Liabilities 49,790 53,455 25,585 Shareholders' Equity 495,681 494,019 312,006 Total Liabilities & Shareholders' Equity $ 4,465,906 $ 4,696,894 $ 3,437,692 Net Interest Income (taxable equivalent basis) $ 35,625 $ 34,610 $ 27,024 Taxable Equivalent Adjustment (192 ) (196 ) (147 ) Net Interest Income $ 35,433 $ 34,414 $ 26,877 Total Yield on Earning Assets 3.73 % 3.51 % 3.82 % Rate on Supporting Liabilities 0.36 % 0.40 % 0.64 % Average Interest Spread 3.37 % 3.11 % 3.18 % Net Interest Margin 3.45 % 3.21 % 3.34 % (a) Includes tax-equivalent adjustments (calculated using statutory rates of 21 percent) of $101 thousand, $89 thousand and $74 thousand for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively, resulting from the tax-free municipal securities in the investment portfolio.
(b) Includes tax-equivalent adjustments (calculated using statutory rates of 21 percent) of $91 thousand, $107 thousand and $73 thousand for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively, resulting from the tax-free municipal loans in the commercial loans portfolio.Average Balances, Income and Interest Rates on a Taxable Equivalent Basis For the Six Months Ended (Dollars in thousands) June 30, 2022 June 30, 2021 Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate ASSETS: Interest Bearing Balances $ 48,495 $ 21 0.09 % $ 1,342 $ 4 0.60 % Investment Securities: Taxable 445,644 4,561 2.06 % 85,849 815 1.91 % Tax-Exempt 76,208 905 (a) 2.39 % 55,377 702 (a) 2.56 % Total Securities 521,852 5,466 2.11 % 141,226 1,517 2.17 % Federal Funds Sold 560,105 1,050 0.38 % 396,041 177 0.09 % Loans and Leases, Net 3,116,473 69,477 (b) 4.50 % 2,571,075 58,314 (b) 4.57 % Restricted Investment in Bank Stocks 6,590 225 6.89 % 6,958 181 5.25 % Total Earning Assets 4,253,515 76,239 3.61 % 3,116,642 60,193 3.89 % Cash and Due from Banks 54,177 34,363 Other Assets 272,922 161,661 Total Assets $ 4,580,614 $ 3,312,666 LIABILITIES & SHAREHOLDERS' EQUITY: Interest-bearing Demand $ 1,037,915 $ 923 0.18 % $ 608,259 $ 1,157 0.38 % Money Market 1,102,372 1,184 0.22 % 767,877 1,597 0.42 % Savings 366,668 101 0.06 % 200,686 122 0.12 % Time 554,378 2,105 0.77 % 423,259 3,006 1.43 % Total Interest-bearing Deposits 3,061,333 4,313 0.28 % 2,000,081 5,882 0.59 % Short-term Borrowings - - 0.00 % 234,258 406 0.35 % Long-term Debt 42,513 391 1.85 % 75,019 408 1.10 % Subordinated Debt 74,126 1,301 3.54 % 44,586 999 4.52 % Total Interest-bearing Liabilities 3,177,972 6,005 0.38 % 2,353,944 7,695 0.66 % Noninterest-bearing Demand 856,324 648,537 Other Liabilities 51,612 24,529 Shareholders' Equity 494,706 285,656 Total Liabilities & Shareholders' Equity $ 4,580,614 $ 3,312,666 Net Interest Income (taxable equivalent basis) $ 70,234 $ 52,498 Taxable Equivalent Adjustment (387 ) (296 ) Net Interest Income $ 69,847 $ 52,202 Total Yield on Earning Assets 3.61 % 3.89 % Rate on Supporting Liabilities 0.38 % 0.66 % Average Interest Spread 3.23 % 3.24 % Net Interest Margin 3.33 % 3.40 % (a) Includes tax-equivalent adjustments (calculated using statutory rates of 21 percent) of $190 thousand and $147 thousand for the six months ended June 30, 2022 and June 30, 2021, respectively, resulting from the tax-free municipal securities in the investment portfolio.
(b) Includes tax-equivalent adjustments (calculated using statutory rates of 21 percent) of $197 thousand and $149 thousand for the six months ended June 30, 2022 and June 30, 2021, respectively, resulting from the tax-free municipal loans in the commercial loans portfolio.ALLOWANCE FOR LOAN AND LEASE LOSSES AND ASSET QUALITY (Unaudited):
(Dollars in thousands, except Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, per share data) 2022 2022 2021 2021 2021 Allowance for Loan and Lease Losses: Beginning balance $ 15,147 $ 14,597 $ 14,233 $ 14,716 $ 13,591 Loans Charged off Commercial and industrial — — (7 ) — — Commercial real estate — — (1 ) (1,043 ) — Commercial real estate - construction — — — — (23 ) Residential mortgage — — — (3 ) (7 ) Home equity — — — — — Consumer (9 ) (57 ) (19 ) (11 ) (9 ) Total loans charged off (9 ) (57 ) (27 ) (1,057 ) (39 ) Recoveries of loans previously charged off Commercial and industrial — 13 10 1 1 Commercial real estate — 65 1 140 10 Commercial real estate - construction — 24 7 — — Residential mortgage 2 — — 2 1 Home equity 1 1 — — — Consumer 10 4 3 6 2 Total recoveries 13 107 21 149 14 Balance before provision 15,151 14,647 14,227 13,808 13,566 Provision for loan and lease losses 1,725 500 370 425 1,150 Balance, end of quarter $ 16,876 $ 15,147 $ 14,597 $ 14,233 $ 14,716 Nonperforming Assets Nonaccrual loans $ 7,551 $ 7,507 $ 9,547 $ 6,339 $ 8,233 Accruing trouble debt restructured loans 422 430 435 442 449 Total nonperforming loans 7,973 7,937 9,982 6,781 8,682 Foreclosed real estate 69 125 — 11 11 Total nonperforming assets 8,042 8,062 9,982 6,792 8,693 Accruing loans 90 days or more past due — 133 515 — — Total risk elements $ 8,042 $ 8,195 $ 10,497 $ 6,792 $ 8,693 PPP Summary
Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, (Dollars in thousands) 2022 2022 2021 2021 2021 PPP loans, net of deferred fees $ 4,966 $ 34,124 $ 111,286 $ 229,679 $ 391,826 PPP Fees recognized $ 652 $ 2,989 $ 4,426 $ 8,382 $ 4,109 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 the Company’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. 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. Core 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. 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 at the end of this release.
Tangible Book Value Per Share
(Dollars in thousands, except Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, per share data) 2022 2022 2021 2021 2021 Shareholders' Equity $ 495,835 $ 494,161 $ 490,076 $ 349,308 $ 341,569 Less: Goodwill 113,835 113,835 113,835 62,840 62,840 Less: Core Deposit and Other Intangibles 7,729 8,250 9,436 3,537 3,804 Tangible Equity $ 374,271 $ 372,076 $ 366,805 $ 282,931 $ 274,925 Common Shares Outstanding 15,878,193 15,960,916 15,957,830 11,433,554 11,408,712 Tangible Book Value per Share $ 23.57 $ 23.31 $ 22.99 $ 24.75 $ 24.10 Non-PPP Core Banking Loans
Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, (Dollars in thousands) 2022 2022 2021 2021 2021 Loans and leases, net of unearned interest $ 3,180,033 $ 3,121,531 $ 3,104,396 $ 2,370,429 $ 2,495,192 Less: PPP loans, net of deferred fees 4,966 34,124 111,286 229,679 391,826 Non-PPP core banking loans $ 3,175,067 $ 3,087,407 $ 2,993,110 $ 2,140,750 $ 2,103,366 Core Earnings Per Common Share Excluding Non-Recurring Expenses
Three Months Ended Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, (Dollars in thousands, except per share data) 2022 2022 2021 2021 2021 Net Income Available to Common Shareholders $ 12,252 $ 11,354 $ 607 $ 9,787 $ 9,613 Plus: Merger and Acquisition Expenses — 329 12,227 198 522 Less: Tax Effect of Merger and Acquisition Expenses — 69 2,568 42 110 Net Income Excluding Non-Recurring Expenses $ 12,252 $ 11,614 $ 10,266 $ 9,943 $ 10,025 Weighted Average Shares Outstanding - denominator 15,935,003 15,957,864 13,005,895 11,423,487 10,321,838 Core Earnings Per Common Share Excluding Non-Recurring Expenses $ 0.77 $ 0.73 $ 0.79 $ 0.87 $ 0.97 Return on Average Tangible Common Equity Three Months Ended Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, (Dollars in thousands, except per share data) 2022 2022 2021 2021 2021 Net income available to common shareholders $ 12,252 $ 11,354 $ 607 $ 9,787 $ 9,613 Plus: Intangible amortization, net of tax 412 380 282 210 218 $ 12,664 $ 11,734 $ 889 $ 9,997 $ 9,831 Average shareholder's equity $ 495,681 $ 494,019 $ 403,010 $ 345,816 $ 312,006 Less: Average goodwill 113,835 113,835 113,835 62,840 62,840 Less: Average core deposit and other intangibles 7,983 8,950 9,436 3,666 3,938 Average tangible shareholder's equity $ 373,863 $ 371,234 $ 279,739 $ 279,310 $ 245,228 Return on average tangible common equity 13.59 % 12.82 % 1.26 % 14.20 % 15.72 % Efficiency Ratio Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, (Dollars in thousands) 2022 2022 2021 2021 2021 Noninterest expense $ 23,915 $ 25,745 $ 34,072 $ 20,019 $ 19,456 Less: Merger and acquisition expenses — 329 12,227 198 522 Less: Intangible amortization 521 481 357 266 276 Less: (Gain) loss on sale or write-down of foreclosed assets, net (15 ) (16 ) 1 (7 ) (19 ) Efficiency ratio numerator $ 23,409 $ 24,951 $ 21,487 $ 19,562 $ 18,677 Net interest income 35,433 34,414 29,372 26,994 26,877 Noninterest income 5,230 5,750 5,660 5,509 5,652 Less: Net gain on sales of investment securities — — — 79 — Efficiency ratio denominator $ 40,663 $ 40,164 $ 35,032 $ 32,424 $ 32,529 Efficiency ratio 57.57 % 62.12 % 61.34 % 60.33 % 57.42 % 
CONTACTS Rory G. Ritrievi President & Chief Executive Officer Allison S. Johnson Chief Financial Officer 1-866-642-7736
- Earnings increased $898 thousand and $0.06 per common share diluted to $12.3 million, or $0.77, respectively, for the quarter ended June 30, 2022 compared to the quarter ended March 31, 2022.