HARRISBURG, Pa.--(BUSINESS WIRE)--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 December 31, 2023, of $12.1 million, or $0.73 per diluted common share.
Key Highlights of the Fourth Quarter of 2023:
- Net income available to common shareholders increased 31.0% to $12.1 million, or $0.73 per diluted common share for the fourth quarter of 2023, compared to net income of $9.2 million, or $0.56 per diluted common share for the third quarter of 2023.
- Return on average assets was 0.92% and return on average equity was 8.93% for the quarter ended December 31, 2023, compared to return on average assets of 0.72% and return on average equity of 6.93% in the third quarter of 2023.
- Loan growth for the fourth quarter of 2023 was $107.1 million, or 10.5% (annualized), from the third quarter of 2023. Total loans increased $738.7 million compared to the prior year. Organic loan growth for the year ended December 31, 2023, was $423.6 million or 10.8% (excluding Brunswick acquisition loans of $324.5 million).
- Total interest income increased 4.26% to $66.1 million for the quarter ended December 31, 2023, driven by an increase in interest income on loans of $2.5 million from the third quarter of 2023.
- Deposits decreased $35.4 million, or 3.2% (annualized), for the quarter ended December 31, 2023, from the third quarter of 2023, primarily driven by a decrease in interest bearing transaction accounts partially offset by an increase in time deposits. Organic deposits increased $285.3 million or 7.5% (excluding Brunswick acquisition deposits) for the year ended December 31, 2023, compared to the prior year.
- Total interest expense increased 12.26% to $29.1 million for the quarter ended December 31, 2023, driven by an increase in the cost of deposits of $2.2 million from the third quarter of 2023.
- Total noninterest income decreased $229.0 thousand to $5.1 million in the fourth quarter of 2023 from $5.3 million in the prior quarter.
- Total noninterest expense decreased $2.4 million to $27.5 million in the fourth quarter of 2023 from $29.9 million in the prior quarter.
- The Board declared a cash dividend of $0.20 per share, payable February 20, 2024, to shareholders of record as of February 9, 2024.
"Our performance in the fourth quarter of 2023, while an improvement over the linked third quarter of 2023, was still heavily impacted by the continuation of an inverted yield curve and the rigorous competition for core deposits," Chair, President, and CEO Rory G. Ritrievi said. "The measures we implemented in the third quarter, such as slowing down organic loan growth and cutting operating expenses, helped shape the fourth quarter improvement while positioning our strategy for fiscal year 2024."
Ritrievi continued, "We expect 2024 to be another difficult operating environment for financial institutions, particularly ones with a heavy reliance on the spread business. Accordingly, our measured approach to growth and expense control will persist throughout the year."
For the fourth quarter of 2023, 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 January 24, 2024, payable on February 20, 2024, to shareholders of record as of February 9, 2024.
Net Interest Income
For the three months ended December 31, 2023, net interest income was $37.0 million compared to net interest income of $37.5 million for the three months ended September 30, 2023, and $38.6 million for the three months ended December 31, 2022. The tax-equivalent net interest margin for the three months ended December 31, 2023, was 3.02% compared to 3.16% for the third quarter of 2023, and 3.80% for the fourth quarter of 2022, representing a 14 basis point ("bp") decrease compared to the prior quarter, and a 78 bp decrease compared to the same period in 2022, primarily driven by rising interest rates and persistent inflation.
The yield on interest-earning assets increased to 5.39% for the quarter ended December 31, 2023, from 5.35% for the quarter ended September 30, 2023, and 4.58% for the quarter ended December 31, 2022. These increases were due to assets continuing to reprice at higher rates during the fourth quarter of 2023. Increased yields on interest-earning assets were more than offset by increases in funding costs for the fourth quarter of 2023, with overall cost of interest-bearing liabilities increasing to 3.02% during the fourth quarter of 2023, compared to 2.79% for the three months ended September 30, 2023, and 1.08% for the three months ended December 31, 2022.
For the twelve months ended December 31, 2023, net interest income decreased $860.0 thousand to $147.0 million compared to net interest income of $147.8 million for the same period of 2022.
Average Balances
Average loans increased $147.6 million to $4.2 billion for the quarter ended December 31, 2023, compared to $4.1 billion for the quarter ended September 30, 2023, and $3.4 billion for the quarter ended December 31, 2022. Average deposits were $4.4 billion for the fourth quarter of 2023, reflecting an increase of $41.5 million, or 1.0%, compared to total average deposits in the third quarter of 2023, and $675.3 million, or 18.1%, compared to total average deposits of $3.7 billion for the fourth quarter of 2022. The average cost of deposits was 2.33% for the fourth quarter of 2023, representing an 18 bp increase and a 158 bp increase from the third quarter of 2023 and the fourth quarter of 2022, respectively. We continue to face headwinds with respect to deposit pricing, given rising interest rates and competition for deposits across all product types. 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 to hedge the cash flows associated with existing brokered CDs to mitigate the impact of rising deposit costs.
The mix of deposits continues to shift as customers move funds from non-interest-bearing accounts to time deposits given prevailing thought that current rates are at highs. Time deposits represented 31.0% of total deposits at September 30, 2023, and increased to 33.6% at December 31, 2023. The mix of non-interest-bearing deposits remained flat during the quarter, representing approximately 18.4% of total deposits at December 31, 2023, compared to 18.4% at September 30, 2023, 19.4% at June 30, 2023, and 20.6% at March 31, 2023. The average duration of the non-hedged time deposit portfolio is 12 months at December 31, 2023.
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 $221.0 thousand for the three months ended December 31, 2023, a decrease of $1.2 million compared to the provision for credit losses of $1.4 million for the three months ended September 30, 2023. The provision for credit losses on loans was $3.3 million for the twelve months ended December 31, 2023, a decrease of $1.0 million compared to the provision for credit losses of $4.3 million for the twelve months ended December 31, 2022. The decrease in provision for the twelve months ended December 31, 2023, is primarily due to a decrease in nonperforming individually-evaluated loans. Net chargeoffs for the twelve months ended December 31, 2023, were $332.0 thousand or less than 1% of total loans.
Total nonperforming assets were $14.5 million at December 31, 2023, compared to nonperforming assets of $14.4 million and $8.6 million at September 30, 2023, and December 31, 2022, respectively. The increase during the fourth quarter of 2023 primarily related to payoffs on nonaccrual loans. Delinquency as a percentage of total loans was 0.49% at December 31, 2023.
Capital
Shareholders' equity increased $31.5 million, or 6.15%, from $512.1 million as of December 31, 2022, to $543.6 million as of December 31, 2023. The increase was primarily due to the acquisition of Brunswick Bancorp in the second quarter of 2023. Retained earnings increased $12.9 million or 9.67% from $133.1 million as of December 31, 2022, to $146.0 million as of December 31, 2023. 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 December 31, 2023. Additionally, Mid Penn declared $3.3 million in dividends during the fourth 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. There were 12,500 share repurchases during the three months ended December 31, 2023. During the twelve months ended December 31, 2023, Mid Penn repurchased 216,879 shares of common stock at an average price of $22.31. As of December 31, 2023, Mid Penn repurchased 425,222 shares of common stock at an average price of $22.86 per share under the Program. The Program had $5.3 million remaining available for repurchase as of December 31, 2023.
Noninterest Income
For the three months ended December 31, 2023, noninterest income totaled $5.1 million, which was relatively consistent with noninterest income of $5.3 million for the third quarter of 2023.
For the twelve months ended December 31, 2023, noninterest income totaled $20.0 million, a decrease of $3.6 million, compared to noninterest income of $23.7 million for the twelve months ended December 31, 2022. The decrease in noninterest income is primarily due to a $1.2 million decrease in residential mortgage business, and a $1.8 million decrease in other miscellaneous income. Given the rising interest rate environment and overall lower demand for mortgages, that industry continues to be a drag on all other earnings.
Noninterest Expense
Noninterest expense totaled $27.5 million, a decrease of $2.4 million, or 8.0%, for the three months ended December 31, 2023, compared to noninterest expense of $29.9 million for the third quarter of 2023. For the twelve months ended December 31, 2023, noninterest expense totaled $119.0 million, an increase of $19.1 million, or 19.2%, compared to noninterest expense of $99.8 million for the twelve months ended December 31, 2022. The increase in noninterest expense for the twelve months ended December 31, 2023, is driven by $8.5 million of merger-related expenses, a $6.7 million increase in salaries and benefits expense, and a $1.9 million increase in FDIC charges due to special assessments levied to recover the losses to the Deposit Insurance Fund resulting from the bank failures in 2023.
The efficiency ratio(1) was 64.1% in the fourth quarter of 2023, compared to 67.9% in the third quarter of 2023, and 54.6% in the fourth quarter of 2022. Mid Penn continues to evaluate levels of noninterest expense for opportunities to reduce operating costs throughout the organization.
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 a 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 target 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 a transaction; the ability to complete the integration of Mid Penn and its target successfully; the dilution caused by Mid Penn's issuance of additional shares of its capital stock in connection with a 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 does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of unanticipated events, except as required by law.
SUMMARY FINANCIAL HIGHLIGHTS (Unaudited):
(Dollars in thousands, except per share data) | Dec. 31,
| Sep. 30,
| Jun. 30,
| Mar. 31,
| Dec. 31,
| ||||||||||||||
Ending Balances: | |||||||||||||||||||
Investment securities | $ | 623,121 | $ | 620,038 | $ | 634,038 | $ | 633,831 | $ | 637,802 | |||||||||
Loans, net of unearned interest | 4,218,605 | 4,111,653 | 4,001,922 | 3,580,082 | 3,495,162 | ||||||||||||||
Total assets | 5,292,053 | 5,215,963 | 5,088,813 | 4,583,465 | 4,497,954 | ||||||||||||||
Total deposits | 4,346,212 | 4,381,616 | 4,286,686 | 3,878,081 | 3,778,331 | ||||||||||||||
Shareholders' equity | 543,611 | 528,711 | 525,888 | 510,793 | 512,099 | ||||||||||||||
Average Balances: | |||||||||||||||||||
Investment securities | 606,946 | 619,071 | 630,750 | 636,151 | 640,792 | ||||||||||||||
Loans, net of unearned interest | 4,201,092 | 4,053,514 | 3,808,717 | 3,555,375 | 3,395,308 | ||||||||||||||
Total assets | 5,226,382 | 5,106,103 | 4,827,786 | 4,520,869 | 4,381,213 | ||||||||||||||
Total deposits | 4,402,565 | 4,361,067 | 4,057,605 | 3,782,990 | 3,727,287 | ||||||||||||||
Shareholders' equity | 537,219 | 529,067 | 504,535 | 510,857 | 505,769 | ||||||||||||||
Three Months Ended | |||||||||||||||||||
Income Statement: | Dec. 31,
| Sep. 30,
| Jun. 30,
| Mar. 31,
| Dec. 31,
| ||||||||||||||
Net interest income | $ | 37,000 | $ | 37,480 | $ | 36,444 | $ | 36,049 | $ | 38,577 | |||||||||
Provision for credit losses | 221 | 1,427 | 1,157 | 490 | 525 | ||||||||||||||
Noninterest income | 5,117 | 5,346 | 5,220 | 4,325 | 6,714 | ||||||||||||||
Noninterest expense | 27,504 | 29,889 | 35,529 | 26,070 | 25,468 | ||||||||||||||
Income before provision for income taxes | 14,392 | 11,510 | 4,978 | 13,814 | 19,298 | ||||||||||||||
Provision for income taxes | 2,294 | 2,274 | 142 | 2,587 | 3,579 | ||||||||||||||
Net income available to shareholders | 12,098 | 9,236 | 4,836 | 11,227 | 15,719 | ||||||||||||||
Net income excluding non-recurring expenses (1) | 12,098 | 9,514 | 11,112 | 11,404 | 15,951 | ||||||||||||||
Per Share: | |||||||||||||||||||
Basic earnings per common share | $ | 0.73 | $ | 0.56 | $ | 0.29 | $ | 0.71 | $ | 0.99 | |||||||||
Diluted earnings per common share | 0.73 | 0.56 | 0.29 | 0.70 | 0.99 | ||||||||||||||
Cash dividends declared | 0.20 | 0.20 | 0.20 | 0.20 | 0.20 | ||||||||||||||
Book value per common share | 32.80 | 31.89 | 31.74 | 32.15 | 32.24 | ||||||||||||||
Tangible book value per common share (1) | 24.74 | 23.64 | 23.48 | 24.52 | 24.59 | ||||||||||||||
Asset Quality: | |||||||||||||||||||
Net charge-offs (recoveries) to average loans (annualized) | 0.004 | % | 0.001 | % | 0.018 | % | 0.013 | % | 0.006 | % | |||||||||
Non-performing loans to total loans | 0.33 | 0.32 | 0.39 | 0.38 | 0.25 | ||||||||||||||
Non-performing asset to total loans and other real estate | 0.34 | 0.35 | 0.40 | 0.39 | 0.25 | ||||||||||||||
Non-performing asset to total assets | 0.27 | 0.28 | 0.32 | 0.31 | 0.21 | ||||||||||||||
ACL on loans to total loans | 0.80 | 0.82 | 0.81 | 0.87 | 0.54 | ||||||||||||||
ACL on loans to nonperforming loans | 240.48 | 252.67 | 205.65 | 225.71 | 220.82 | ||||||||||||||
Profitability: | |||||||||||||||||||
Return on average assets | 0.92 | % | 0.72 | % | 0.40 | % | 1.01 | % | 1.42 | % | |||||||||
Return on average equity | 8.93 | 6.93 | 3.84 | 8.91 | 12.33 | ||||||||||||||
Return on average tangible common equity (1) | 12.36 | 9.72 | 5.53 | 11.97 | 16.61 | ||||||||||||||
Net interest margin | 3.02 | 3.16 | 3.29 | 3.49 | 3.80 | ||||||||||||||
Efficiency ratio (1) | 64.14 | 67.88 | 65.40 | 63.16 | 54.59 | ||||||||||||||
Capital Ratios: | |||||||||||||||||||
Tier 1 Capital (to Average Assets) (2) | 8.3 | % | 8.4 | % | 9.6 | % | 9.2 | % | 10.7 | % | |||||||||
Common Tier 1 Capital (to Risk Weighted Assets) (2) | 9.7 | 9.7 | 10.7 | 10.8 | 12.5 | ||||||||||||||
Tier 1 Capital (to Risk Weighted Assets) (2) | 9.7 | 9.7 | 10.7 | 10.8 | 12.5 | ||||||||||||||
Total Capital (to Risk Weighted Assets) (2) | 11.6 | 11.7 | 11.5 | 13.1 | 14.5 | ||||||||||||||
(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 December 31, 2023 are preliminary and prior periods are actual. |
CONSOLIDATED BALANCE SHEETS (Unaudited):
(In thousands, except share data) | Dec. 31, 2023 | Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Dec. 31, 2022 | ||||||||||||||
ASSETS | |||||||||||||||||||
Cash and due from banks | $ | 45,435 | $ | 52,509 | $ | 70,832 | $ | 51,158 | $ | 53,368 | |||||||||
Interest-bearing balances with other financial institutions | 34,668 | 12,739 | 13,332 | 4,996 | 4,405 | ||||||||||||||
Federal funds sold | 16,660 | 52,851 | 9,711 | 6,017 | 3,108 | ||||||||||||||
Total cash and cash equivalents | 96,763 | 118,099 | 93,875 | 62,171 | 60,881 | ||||||||||||||
Investment Securities: | |||||||||||||||||||
Held to maturity, at amortized cost | 399,128 | 401,561 | 404,831 | 396,784 | 399,494 | ||||||||||||||
Available for sale, at fair value | 223,555 | 218,064 | 228,774 | 236,609 | 237,878 | ||||||||||||||
Equity securities available for sale, at fair value | 438 | 413 | 433 | 438 | 430 | ||||||||||||||
Loans held for sale | 3,855 | 4,270 | 7,258 | 2,677 | 2,475 | ||||||||||||||
Loans, net of unearned interest | 4,252,792 | 4,145,657 | 4,034,510 | 3,611,347 | 3,514,119 | ||||||||||||||
Less: Allowance for credit losses | (34,187 | ) | (34,004 | ) | (32,588 | ) | (31,265 | ) | (18,957 | ) | |||||||||
Net loans | 4,218,605 | 4,111,653 | 4,001,922 | 3,580,082 | 3,495,162 | ||||||||||||||
Premises and equipment, net | 36,799 | 38,849 | 39,230 | 34,191 | 34,471 | ||||||||||||||
Operating lease right of use asset | 8,953 | 8,693 | 9,106 | 8,414 | 8,798 | ||||||||||||||
Finance lease right of use asset | 2,728 | 2,773 | 2,817 | 2,862 | 2,907 | ||||||||||||||
Cash surrender value of life insurance | 54,497 | 54,209 | 53,931 | 50,928 | 50,674 | ||||||||||||||
Restricted investment in bank stocks | 16,768 | 13,554 | 11,646 | 8,041 | 8,315 | ||||||||||||||
Accrued interest receivable | 25,820 | 24,230 | 19,626 | 19,205 | 18,405 | ||||||||||||||
Deferred income taxes | 25,372 | 25,509 | 24,309 | 15,548 | 13,674 | ||||||||||||||
Goodwill | 127,054 | 129,752 | 129,403 | 114,231 | 114,231 | ||||||||||||||
Core deposit and other intangibles, net | 6,479 | 6,970 | 7,453 | 6,916 | 7,260 | ||||||||||||||
Foreclosed assets held for sale | 293 | 905 | 489 | 248 | 43 | ||||||||||||||
Other assets | 44,946 | 56,459 | 53,710 | 44,120 | 42,856 | ||||||||||||||
Total Assets | $ | 5,292,053 | $ | 5,215,963 | $ | 5,088,813 | $ | 4,583,465 | $ | 4,497,954 | |||||||||
LIABILITIES & SHAREHOLDERS' EQUITY | |||||||||||||||||||
Deposits: | |||||||||||||||||||
Noninterest-bearing demand | $ | 801,312 | $ | 804,785 | $ | 830,479 | $ | 797,038 | $ | 793,939 | |||||||||
Interest-bearing transaction accounts | 2,086,450 | 2,217,885 | 2,180,312 | 2,197,216 | 2,325,847 | ||||||||||||||
Time | 1,458,450 | 1,358,946 | 1,275,895 | 883,827 | 658,545 | ||||||||||||||
Total Deposits | 4,346,212 | 4,381,616 | 4,286,686 | 3,878,081 | 3,778,331 | ||||||||||||||
Short-term borrowings | 241,532 | 139,000 | 112,442 | 88,000 | 102,647 | ||||||||||||||
Long-term debt | 59,003 | 58,992 | 58,982 | 4,316 | 4,409 | ||||||||||||||
Subordinated debt and trust preferred securities | 46,354 | 46,501 | 46,648 | 56,794 | 56,941 | ||||||||||||||
Operating lease liability | 9,285 | 9,097 | 9,894 | 9,270 | 9,725 | ||||||||||||||
Accrued interest payable | 14,257 | 14,657 | 11,115 | 5,809 | 2,303 | ||||||||||||||
Other liabilities | 31,799 | 37,389 | 37,158 | 30,402 | 31,499 | ||||||||||||||
Total Liabilities | 4,748,442 | 4,687,252 | 4,562,925 | 4,072,672 | 3,985,855 | ||||||||||||||
Shareholders' Equity: | |||||||||||||||||||
Common stock, par value $1.00 per share; 40.0 million shares authorized | 16,999 | 16,993 | 16,980 | 16,098 | 16,094 | ||||||||||||||
Additional paid-in capital | 406,986 | 405,341 | 404,902 | 387,332 | 386,987 | ||||||||||||||
Retained earnings | 145,982 | 137,199 | 131,271 | 129,617 | 133,114 | ||||||||||||||
Accumulated other comprehensive loss | (16,637 | ) | (21,362 | ) | (17,805 | ) | (17,374 | ) | (19,216 | ) | |||||||||
Treasury stock | (9,719 | ) | (9,460 | ) | (9,460 | ) | (4,880 | ) | (4,880 | ) | |||||||||
Total Shareholders' Equity | 543,611 | 528,711 | 525,888 | 510,793 | 512,099 | ||||||||||||||
Total Liabilities and Shareholders' Equity | $ | 5,292,053 | $ | 5,215,963 | $ | 5,088,813 | $ | 4,583,465 | $ | 4,497,954 | |||||||||
CONSOLIDATED STATEMENTS OF INCOME (Unaudited):
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||||
(Dollars in thousands, except per share data) | Dec. 31,
| Sep. 30,
| Jun. 30,
| Mar. 31,
| Dec. 31,
| Dec. 31,
| Dec. 31,
| ||||||||||||||||||
INTEREST INCOME | |||||||||||||||||||||||||
Loans, including fees | $ | 61,309 | $ | 58,792 | $ | 52,094 | $ | 45,865 | $ | 42,492 | $ | 218,060 | $ | 150,256 | |||||||||||
Investment securities: | |||||||||||||||||||||||||
Taxable | 4,063 | 4,106 | 3,962 | 3,874 | 3,784 | 16,005 | 11,952 | ||||||||||||||||||
Tax-exempt | 378 | 382 | 391 | 389 | 390 | 1,540 | 1,497 | ||||||||||||||||||
Other interest-bearing balances | 139 | 86 | 83 | 53 | 36 | 361 | 69 | ||||||||||||||||||
Federal funds sold | 228 | 51 | 49 | 45 | 40 | 373 | 1,826 | ||||||||||||||||||
Total Interest Income | 66,117 | 63,417 | 56,579 | 50,226 | 46,742 | 236,339 | 165,600 | ||||||||||||||||||
INTEREST EXPENSE |
| ||||||||||||||||||||||||
Deposits | 25,808 | 23,559 | 17,927 | 12,001 | 6,995 | 79,295 | 14,144 | ||||||||||||||||||
Short-term borrowings | 2,506 | 1,584 | 1,507 | 1,490 | 441 | 7,087 | 441 | ||||||||||||||||||
Long-term and subordinated debt | 803 | 794 | 701 | 686 | 729 | 2,984 | 3,182 | ||||||||||||||||||
Total Interest Expense | 29,117 | 25,937 | 20,135 | 14,177 | 8,165 | 89,366 | 17,767 | ||||||||||||||||||
Net Interest Income | 37,000 | 37,480 | 36,444 | 36,049 | 38,577 | 146,973 | 147,833 | ||||||||||||||||||
PROVISION FOR CREDIT LOSSES | 221 | 1,427 | 1,157 | 490 | 525 | 3,295 | 4,300 | ||||||||||||||||||
Net Interest Income After Provision for Credit Losses | 36,779 | 36,053 | 35,287 | 35,559 | 38,052 | 143,678 | 143,533 | ||||||||||||||||||
NONINTEREST INCOME | |||||||||||||||||||||||||
Fiduciary and wealth management | 1,323 | 1,296 | 1,204 | 1,236 | 1,085 | 5,059 | 5,071 | ||||||||||||||||||
ATM debit card interchange | 979 | 986 | 998 | 1,056 | 1,099 | 4,019 | 4,362 | ||||||||||||||||||
Service charges on deposits | 485 | 509 | 514 | 435 | 461 | 1,943 | 2,078 | ||||||||||||||||||
Mortgage banking | 300 | 382 | 287 | 384 | 237 | 1,353 | 1,607 | ||||||||||||||||||
Mortgage hedging | 109 | 67 | 128 | 20 | 150 | 324 | 1,471 | ||||||||||||||||||
Net gain on sales of SBA loans | 358 | 85 | 128 | - | - | 571 | 262 | ||||||||||||||||||
Earnings from cash surrender value of life insurance | 288 | 278 | 292 | 254 | 255 | 1,112 | 1,013 | ||||||||||||||||||
Other | 1,275 | 1,743 | 1,669 | 940 | 3,427 | 5,627 | 7,793 | ||||||||||||||||||
Total Noninterest Income | 5,117 | 5,346 | 5,220 | 4,325 | 6,714 | 20,008 | 23,657 | ||||||||||||||||||
NONINTEREST EXPENSE | |||||||||||||||||||||||||
Salaries and employee benefits | 15,215 | 15,259 | 15,027 | 13,844 | 13,434 | 59,345 | 52,601 | ||||||||||||||||||
Software licensing and utilization | 1,826 | 2,085 | 2,070 | 1,946 | 1,793 | 7,927 | 7,524 | ||||||||||||||||||
Occupancy, net | 1,952 | 1,761 | 1,750 | 1,886 | 1,812 | 7,349 | 6,900 | ||||||||||||||||||
Equipment | 1,330 | 1,292 | 1,248 | 1,251 | 1,249 | 5,121 | 4,493 | ||||||||||||||||||
Shares tax | 255 | 808 | 751 | 899 | 160 | 2,713 | 2,786 | ||||||||||||||||||
Legal and professional fees | 653 | 890 | 602 | 800 | 900 | 2,945 | 2,761 | ||||||||||||||||||
ATM/card processing | 442 | 641 | 532 | 493 | 534 | 2,108 | 2,139 | ||||||||||||||||||
Intangible amortization | 491 | 484 | 461 | 344 | 496 | 1,780 | 2,012 | ||||||||||||||||||
FDIC Assessment | 730 | 1,746 | 684 | 340 | 243 | 3,500 | 1,594 | ||||||||||||||||||
(Gain) loss on sale or write-down of foreclosed assets, net | - | (18 | ) | (126 | ) | - | (45 | ) | (144 | ) | (133 | ) | |||||||||||||
Merger and acquisition | - | 352 | 4,992 | 224 | 294 | 5,544 | 294 | ||||||||||||||||||
Post-acquisition restructuring | - | - | 2,952 | - | - | 2,952 | 329 | ||||||||||||||||||
Other | 4,610 | 4,589 | 4,586 | 4,043 | 4,598 | 17,852 | 16,543 | ||||||||||||||||||
Total Noninterest Expense | 27,504 | 29,889 | 35,529 | 26,070 | 25,468 | 118,992 | 99,843 | ||||||||||||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 14,392 | 11,510 | 4,978 | 13,814 | 19,298 | 44,694 | 67,347 | ||||||||||||||||||
Provision for income taxes | 2,294 | 2,274 | 142 | 2,587 | 3,579 | 7,297 | 12,541 | ||||||||||||||||||
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS | $ | 12,098 | $ | 9,236 | $ | 4,836 | $ | 11,227 | $ | 15,719 | $ | 37,397 | $ | 54,806 | |||||||||||
PER COMMON SHARE DATA: | |||||||||||||||||||||||||
Basic Earnings Per Common Share | $ | 0.73 | $ | 0.56 | $ | 0.29 | $ | 0.71 | $ | 0.99 | $ | 2.29 | $ | 3.44 | |||||||||||
Diluted Earnings Per Common Share | $ | 0.73 | $ | 0.56 | $ | 0.29 | $ | 0.70 | $ | 0.99 | $ | 2.29 | $ | 3.44 | |||||||||||
Cash Dividends Declared | $ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.80 | $ | 0.80 | |||||||||||
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 | ||||||||||||||||||||||||||
December 31, 2023 | September 30, 2023 | December 31, 2022 | ||||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Interest(1) | Yield/ Rate | Average Balance | Interest(1) | Yield/ Rate | Average Balance | Interest(1) | Yield/ Rate | |||||||||||||||||
ASSETS: | ||||||||||||||||||||||||||
Interest Bearing Balances | $ | 30,715 | $ | 139 | 1.80 | % | $ | 12,804 | $ | 86 | 2.66 | % | $ | 4,671 | $ | 36 | 3.06 | % | ||||||||
Investment Securities: | ||||||||||||||||||||||||||
Taxable | 530,099 | 3,199 | 2.39 | 541,403 | 3,846 | 2.82 | 561,119 | 3,733 | 2.64 | |||||||||||||||||
Tax-Exempt | 76,847 | 378 | 1.95 | 77,668 | 382 | 1.95 | 79,673 | 390 | 1.94 | |||||||||||||||||
Total Securities | 606,946 | 3,577 | 2.34 | 619,071 | 4,228 | 2.71 | 640,792 | 4,123 | 2.55 | |||||||||||||||||
Federal Funds Sold | 12,224 | 228 | 7.40 | 8,260 | 51 | 2.45 | 4,749 | 40 | 3.34 | |||||||||||||||||
Loans, Net of Unearned Interest | 4,201,092 | 61,309 | 5.79 | 4,053,514 | 58,792 | 5.75 | 3,395,308 | 42,492 | 4.97 | |||||||||||||||||
Restricted Investment in Bank Stocks | 13,754 | 864 | 24.92 | 10,968 | 260 | 9.40 | 6,694 | 51 | 3.02 | |||||||||||||||||
Total Earning Assets | 4,864,731 | 66,117 | 5.39 | 4,704,617 | 63,417 | 5.35 | 4,052,214 | 46,742 | 4.58 | |||||||||||||||||
Cash and Due from Banks | 38,370 | 77,122 | 45,385 | |||||||||||||||||||||||
Other Assets | 323,281 | 324,364 | 192,969 | |||||||||||||||||||||||
Total Assets | $ | 5,226,382 | $ | 5,106,103 | $ | 4,290,568 | ||||||||||||||||||||
LIABILITIES & SHAREHOLDERS' EQUITY: | ||||||||||||||||||||||||||
Interest-bearing Demand | $ | 938,246 | $ | 4,087 | 1.73 | % | $ | 960,052 | $ | 3,899 | 1.61 | % | $ | 1,057,649 | $ | 2,051 | 0.77 | % | ||||||||
Money Market | 925,902 | 6,266 | 2.68 | 929,036 | 5,969 | 2.55 | 965,866 | 2,996 | 1.23 | |||||||||||||||||
Savings | 295,757 | 53 | 0.07 | 308,732 | 60 | 0.08 | 335,928 | 49 | 0.06 | |||||||||||||||||
Time | 1,405,927 | 15,403 | 4.35 | 1,308,945 | 13,631 | 4.13 | 527,708 | 1,899 | 1.43 | |||||||||||||||||
Total Interest-bearing Deposits | 3,565,832 | 25,809 | 2.87 | 3,506,765 | 23,559 | 2.67 | 2,887,151 | 6,995 | 0.96 | |||||||||||||||||
| ||||||||||||||||||||||||||
Short term borrowings | 149,218 | 2,506 | 6.66 | 64,282 | 1,584 | 9.78 | 47,262 | 441 | 3.70 | |||||||||||||||||
Long-term debt | 58,987 | 373 | 2.51 | 76,515 | 333 | 1.73 | 4,441 | 46 | 4.11 | |||||||||||||||||
Subordinated debt and trust preferred securities | 46,425 | 429 | 3.67 | 46,377 | 461 | 3.94 | 64,673 | 683 | 4.19 | |||||||||||||||||
Total Interest-bearing Liabilities | 3,820,462 | 29,117 | 3.02 | 3,693,939 | 25,937 | 2.79 | 3,003,527 | 8,165 | 1.08 | |||||||||||||||||
Noninterest-bearing Demand | 836,733 | 854,302 | 840,136 | |||||||||||||||||||||||
Other Liabilities | 31,968 | 28,795 | 31,781 | |||||||||||||||||||||||
Shareholders' Equity | 537,219 | 529,067 | 505,769 | |||||||||||||||||||||||
Total Liabilities & Shareholders' Equity | $ | 5,226,382 | $ | 5,106,103 | $ | 4,381,213 | ||||||||||||||||||||
Net Interest Income | $ | 37,000 | $ | 37,480 | $ | 38,577 | ||||||||||||||||||||
Taxable Equivalent Adjustment (1) | 33 | 33 | 197 | |||||||||||||||||||||||
Net Interest Income (taxable equivalent basis) | $ | 37,033 | $ | 37,513 | $ | 38,774 | ||||||||||||||||||||
Total Yield on Earning Assets | 5.39 | % | 5.35 | % | 4.58 | % | ||||||||||||||||||||
Rate on Supporting Liabilities | 3.02 | 2.79 | 1.08 | |||||||||||||||||||||||
Average Interest Spread | 2.37 | 2.56 | 3.50 | |||||||||||||||||||||||
Net Interest Margin | 3.02 | 3.16 | 3.80 | |||||||||||||||||||||||
(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) | Dec. 31,
| Sep. 30,
| Jun. 30,
| Mar. 31,
| Dec. 31,
| ||||||||||||||
Allowance for Credit Losses on Loans: | |||||||||||||||||||
Beginning balance | $ | 34,004 | $ | 32,588 | $ | 31,265 | $ | 18,957 | $ | 18,480 | |||||||||
Impact of adopting CECL | - | - | - | 11,931 | - | ||||||||||||||
Purchase credit deteriorated loans | - | - | 336 | - | - | ||||||||||||||
Loans Charged off | |||||||||||||||||||
Commercial real estate | - | - | - | (16 | ) | (7 | ) | ||||||||||||
Commercial and industrial | (19 | ) | - | (109 | ) | (111 | ) | - | |||||||||||
Construction | - | - | - | - | - | ||||||||||||||
Residential mortgage | (9 | ) | - | - | (4 | ) | (23 | ) | |||||||||||
Consumer | (17 | ) | (32 | ) | (65 | ) | (19 | ) | (20 | ) | |||||||||
Total loans charged off | (45 | ) | (32 | ) | (174 | ) | (150 | ) | (50 | ) | |||||||||
Recoveries of loans previously charged off | |||||||||||||||||||
Commercial real estate | - | - | - | - | - | ||||||||||||||
Commercial and industrial | - | - | - | - | - | ||||||||||||||
Construction | - | - | - | - | - | ||||||||||||||
Residential mortgage | - | 7 | - | 30 | - | ||||||||||||||
Consumer | 7 | 14 | 4 | 7 | 2 | ||||||||||||||
Total recoveries | 7 | 21 | 4 | 37 | 2 | ||||||||||||||
Balance before provision | 33,966 | 32,577 | 31,431 | 30,775 | 18,432 | ||||||||||||||
Provision for credit losses | 221 | 1,427 | 1,157 | 490 | 525 | ||||||||||||||
Balance, end of quarter | $ | 34,187 | $ | 34,004 | $ | 32,588 | $ | 31,265 | $ | 18,957 | |||||||||
Nonperforming Assets | |||||||||||||||||||
Total nonperforming loans | 14,216 | 13,458 | 15,846 | 13,909 | 8,585 | ||||||||||||||
Foreclosed real estate | 293 | 905 | 489 | 248 | 43 | ||||||||||||||
Total nonperforming assets | 14,509 | 14,363 | 16,335 | 14,157 | 8,628 | ||||||||||||||
Accruing loans 90 days or more past due | - | 12 | 9 | 7 | 654 | ||||||||||||||
Total risk elements | $ | 14,509 | $ | 14,375 | $ | 16,344 | $ | 14,164 | $ | 9,282 | |||||||||
PPP Summary
(Dollars in thousands) | Dec. 31,
| Sep. 30,
| Jun. 30,
| Mar. 31,
| Dec. 31,
| |||||||||
PPP loans, net of deferred fees | $ | 1,426 | $ | 1,547 | $ | 1,633 | $ | 1,752 | $ | 2,600 | ||||
PPP Fees recognized | $ | 3 | $ | 3 | $ | 3 | $ | 5 | $ | 29 | ||||
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) | Dec. 31,
| Sep. 30,
| Jun. 30,
| Mar. 31,
| Dec. 31,
| |||||||||
Shareholders' Equity | $ | 543,611 | $ | 528,711 | $ | 525,888 | $ | 510,793 | $ | 512,099 | ||||
Less: Goodwill | 127,054 | 129,752 | 129,403 | 114,231 | 114,231 | |||||||||
Less: Core Deposit and Other Intangibles | 6,479 | 6,970 | 7,453 | 6,916 | 7,260 | |||||||||
Tangible Equity | $ | 410,078 | $ | 391,989 | $ | 389,032 | $ | 389,646 | $ | 390,608 | ||||
Common Shares Outstanding | 16,573,707 | 16,580,347 | 16,567,578 | 15,890,011 | 15,886,143 | |||||||||
Tangible Book Value per Share | $ | 24.74 | $ | 23.64 | $ | 23.48 | $ | 24.52 | $ | 24.59 | ||||
Non-PPP Core Banking Loans
(Dollars in thousands) | Dec. 31,
| Sep. 30,
| Jun. 30,
| Mar. 31,
| Dec. 31,
| |||||||||
Loans, net of unearned interest | $ | 4,252,792 | $ | 4,145,657 | $ | 4,034,510 | $ | 3,611,347 | $ | 3,514,119 | ||||
Less: PPP loans, net of deferred fees | 1,426 | 1,547 | 1,633 | 1,752 | 2,600 | |||||||||
Non-PPP core banking loans | $ | 4,251,366 | $ | 4,144,110 | $ | 4,032,877 | $ | 3,609,595 | $ | 3,511,519 | ||||
Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses
Three Months Ended | ||||||||||||||
(Dollars in thousands, except per share data) | Dec. 31,
| Sep. 30,
| Jun. 30,
| Mar. 31,
| Dec. 31,
| |||||||||
Net Income Available to Common Shareholders | $ | 12,098 | $ | 9,236 | $ | 4,836 | $ | 11,227 | $ | 15,719 | ||||
Plus: Merger and Acquisition Expenses | - | 352 | 7,944 | 224 | 294 | |||||||||
Less: Tax Effect of Merger and Acquisition Expenses | - | 74 | 1,668 | 47 | 62 | |||||||||
Net Income Excluding Non-Recurring Expenses | $ | 12,098 | $ | 9,514 | $ | 11,112 | $ | 11,404 | $ | 15,951 | ||||
Weighted Average Shares Outstanding | 16,574,199 | 16,571,825 | 16,235,106 | 15,886,186 | 15,883,003 | |||||||||
Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses | $ | 0.73 | $ | 0.57 | $ | 0.68 | $ | 0.72 | $ | 0.99 | ||||
Return on Average Tangible Common Equity
Three Months Ended | |||||||||||||||||||
(Dollars in thousands) | Dec. 31,
| Sep. 30,
| Jun. 30,
| Mar. 31,
| Dec. 31,
| ||||||||||||||
Net income available to common shareholders | $ | 12,098 | $ | 9,236 | $ | 4,836 | $ | 11,227 | $ | 15,719 | |||||||||
Plus: Intangible amortization, net of tax | 388 | 382 | 364 | 272 | 392 | ||||||||||||||
$ | 12,486 | $ | 9,618 | $ | 5,200 | $ | 11,499 | $ | 16,111 | ||||||||||
Average shareholders' equity | $ | 537,219 | $ | 529,067 | $ | 504,535 | $ | 510,857 | $ | 505,769 | |||||||||
Less: Average goodwill | 129,869 | 129,428 | 120,284 | 114,231 | 113,879 | ||||||||||||||
Less: Average core deposit and other intangibles | 6,716 | 7,210 | 7,016 | 7,129 | 6,966 | ||||||||||||||
Average tangible shareholders' equity | $ | 400,634 | $ | 392,429 | $ | 377,235 | $ | 389,497 | $ | 384,924 | |||||||||
Return on average tangible common equity | 12.36 | % | 9.72 | % | 5.53 | % | 11.97 | % | 16.61 | % | |||||||||
Efficiency Ratio
Three Months Ended | |||||||||||||||||||
(Dollars in thousands) | Dec. 31,
| Sep. 30,
| Jun. 30,
| Mar. 31,
| Dec. 31,
| ||||||||||||||
Noninterest expense | $ | 27,504 | $ | 29,889 | $ | 35,529 | $ | 26,070 | $ | 25,468 | |||||||||
Less: Merger and acquisition expenses | - | 352 | 7,944 | 224 | 294 | ||||||||||||||
Less: Intangible amortization | 491 | 484 | 461 | 344 | 496 | ||||||||||||||
Less: (Gain) loss on sale or write-down of foreclosed assets, net | - | (18 | ) | (126 | ) | - | (45 | ) | |||||||||||
Efficiency ratio numerator | $ | 27,013 | $ | 29,071 | $ | 27,250 | $ | 25,502 | $ | 24,723 | |||||||||
Net interest income | 37,000 | 37,480 | 36,444 | 36,049 | 38,577 | ||||||||||||||
Noninterest income | 5,117 | 5,346 | 5,220 | 4,325 | 6,714 | ||||||||||||||
Efficiency ratio denominator | $ | 42,117 | $ | 42,826 | $ | 41,664 | $ | 40,374 | $ | 45,291 | |||||||||
Efficiency ratio | 64.14 | % | 67.88 | % | 65.40 | % | 63.16 | % | 54.59 | % | |||||||||
Contacts
Mid Penn Bancorp, Inc.
1-866-642-7736
Rory G. Ritrievi
Chair, President & Chief Executive Officer
Justin T. Webb
Chief Financial Officer
