Mid Penn Bancorp, Inc. Reports First Quarter Earnings and

HARRISBURG, Pa. , April 27, 2022 (GLOBE NEWSWIRE) — Mid Penn Bancorp, Inc. (“Mid Penn”) (NASDAQ: MPB), 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 March 31, 2022 of $11,354,000 or $0.71 per common share basic and diluted compared to earnings of $9,312,000 or $1.11 per common share basic and $1.10 per common share diluted for the quarter ended March 31, 2021 and earnings of $607,000 or $0.05 per common share basic and diluted for the quarter ended December 31, 2021. Earnings for the quarter ended March 31, 2022 reflect a 22 percent increase over the same period in the prior year.  

The results for the three months ended March 31, 2022 include post-acquisition restructuring expenses of $329,000 resulting from Mid Penn’s acquisition of Riverview Financial Corporation (“Riverview”), which was announced on June 30, 2021 and legally closed on November 30, 2021. Please refer to the discussion under “Merger and Acquisition Activity” for more information on Mid Penn’s acquisition of Riverview.

Tangible book value per common share, a non-GAAP measure that is regularly reported in the banking industry, favorably increased to $23.31 as of March 31, 2022, compared to $22.99 as of December 31, 2021. The GAAP measure of book value per share was $30.96 as of March 31, 2022 compared to $30.71 as of December 31, 2021. Please refer to the section included herein under the heading “Reconciliation of Non-GAAP Measures (Unaudited)” for a discussion of our use of non-GAAP adjusted financial information, which includes tables reconciling GAAP and non-GAAP adjusted financial measures for these and certain other periods ended between March 31, 2021 and March 31, 2022.

Mid Penn also reported total assets of $4,667,174,000 as of March 31, 2022, reflecting a decrease of $22,251,000 or 0.47 percent compared to total assets of $4,689,425,000 as of December 31, 2021, and an increase of $1,285,137,000 or 38 percent compared to total assets of $3,382,038,000 as of March 31, 2021. The decrease in assets from December 31, 2021 to March 31, 2022 was due to the reduction in deposit balances of $12,979,000 and borrowings of $6,100,000, causing a decrease to both cash and liabilities. Asset growth from March 31, 2021 to March 31, 2022 was primarily attributable to the acquisition of Riverview, effective November 30, 2021. In general, the results of operations and the financial condition as of and for the periods ended March 31, 2022, as compared to prior periods and certain period-end dates in 2021, have been materially impacted by the Riverview acquisition.

PRESIDENT’S COMMENTS

We are pleased to deliver this first quarter earnings summary to our shareholders which represents a beat versus our own internal expectations. While the quarter was consumed with the wrap up of the Riverview acquisition and the conversion of its customers on to the Mid Penn platform, we still managed to have great organic growth in many balance sheet and revenue numbers.

Organic, core loan growth, excluding PPP loans, quarter-over-quarter annualized at just under 13 percent, which is a great start to the year, particularly in that the first quarter is traditionally our slowest growth quarter of any year.

Organic, core deposit growth, excluding time deposits, annualized at 7 percent, which also helped us drive down our overall cost of deposits and cost of funds since the end of the year, helping to stabilize net interest margin.

Our earnings performance drove an increase in tangible book value per common share of $0.32 per share, a quarter-over-quarter annualized increase of over 5 percent from the end of 2021. This increase in tangible book value per common share would have been $0.35 higher without the negative impact of unrealized losses related to available-for-sale securities on tangible equity.

Even with a significant fall off in our residential mortgage business both year-over-year and quarter-over-quarter, we still managed to increase noninterest income over 6 percent on an annualized basis. Growth in assets under management at both our bank and non-bank subsidiaries contributed to that success.

Our first quarter success with organic growth and the successful completion and conversion of Riverview, including the recognition of the key cost saves we projected in that transaction, gives us great confidence heading in to the last three quarters of 2022.

With this successful quarter, the Board is pleased to announce a $0.20 per share common stock dividend was declared at its meeting on April 27, 2022, payable on May 23, 2022 to shareholders of record as of May 10, 2022.

FINANCIAL CONDITION

Loans

Total loans as of March 31, 2022 were $3,121,531,000 compared to $3,104,396,000 as of December 31, 2021, an increase of $17,135,000 since year-end 2021. This increase was driven by organic loan growth, which excludes PPP loans, net of deferred fees, of $95,483,000, or 13 percent annualized, within Mid Penn’s commercial real estate and commercial and industrial financing portfolios, which was partially offset by PPP loan forgiveness experienced during the first quarter of 2022.  

Total loans increased by $475,295,000 or 18 percent since March 31, 2021. The year-over-year growth is largely attributable to the Riverview acquisition on November 30, 2021. Total loans were also significantly impacted by organic loan growth within Mid Penn’s legacy markets, less forgiveness of PPP loans, net of deferred fees, originated by Mid Penn and Riverview of $555,911,000. Organic loan growth occurred primarily within Mid Penn’s commercial real estate and commercial and industrial financing portfolios.

Mid Penn was a significant participating lender under the Paycheck Protection Program (“PPP”), which was originally created as a result of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act in 2020. The PPP loan program was reinstated with the Consolidated Appropriations Act of 2021. Included in total assets as of March 31, 2022 are $34,124,000 of PPP loans, net of deferred fees. The remaining balance of PPP loans, net of deferred fees, is primarily comprised of loans originated during the first six months of 2021, with the majority of the forgiveness substantially completed on the PPP loans originated during 2020. As of March 31, 2022, there are $822,000 in deferred fees related to these loans that will be recognized over the remaining life of the underlying loans.

Deposits

Total deposits decreased $12,979,000 or 0.32 percent, from $4,002,016,000 on December 31, 2021, to $3,989,037,000 at March 31, 2022. The decrease in total deposits since year-end 2021 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.

    Mar. 31,     Dec. 31,          
(Dollars in thousands)   2022     2021          
    Balance     Balance     Variance  
Noninterest-bearing demand deposits   $ 866,965     $ 850,438     $ 16,527  
Interest-bearing demand deposits     1,050,923       1,066,852       (15,929 )
Money market     1,159,809       1,076,593       83,216  
Savings     358,186       381,476       (23,290 )
Time     553,154       626,657       (73,503 )
    $ 3,989,037     $ 4,002,016     $ (12,979 )
                         

Deposit growth of $1,322,210,000 since March 31, 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.

Capital

Shareholders’ equity increased by $4,085,000 or 0.83 percent from $490,076,000 as of December 31, 2021 to $494,161,000 as of March 31, 2022, primarily due to (i) earnings for the quarter ended March 31, 2022 of $11,354,000; less (ii) dividends paid of $3,191,000 during the calendar quarter; and (iii) a decrease in the carrying value of the available-for-sale investment portfolio during the quarter of $5,230,000. Regulatory capital ratios for both Mid Penn and its banking subsidiary exceeded regulatory “well-capitalized” levels at both March 31, 2022 and December 31, 2021.

MERGER & ACQUISITION ACTIVITY
  
On November 30, 2021, Mid Penn announced the successful completion of the merger acquisition of Riverview, pursuant to which each share of Riverview common stock issued and outstanding immediately prior to November 30, 2021 was converted into the right to receive 0.4833 shares of Mid Penn common stock. As a result of the acquisition, Mid Penn issued 4,519,776 shares of Mid Penn common stock and cash of $791,000 in merger consideration for a total purchase price of $142,983,000. Mid Penn also recorded goodwill of $50,995,000, a customer list intangible asset of $2,160,000, and a core deposit intangible asset of $4,096,000 as a result of the Riverview acquisition. 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.

The assets purchased and liabilities assumed in the Riverview transaction were recorded at their estimated fair values as of the respective date of acquisition and may be adjusted for up to one year subsequent to legal closing.

OPERATING RESULTS

Net Interest Income and Net Interest Margin

For the three months ended March 31, 2022, net interest income was $34,414,000, an increase of $9,089,000 or 36 percent compared to net interest income of $25,325,000 for the three months ended March 31, 2021. The year-over-year increase in net interest income was positively impacted by (i) the acquisition of Riverview; (ii) the deployment of $350,347,000 of Fed Funds into higher yielding investment securities since September 30, 2021; (iii) interest and fees from core loan growth since March 31, 2021; and (iv) reduced interest expense due to the lower cost of deposits in the three months ended March 31, 2022 when compared to the same period in 2021.

The three months ended March 31, 2022 included the recognition of $2,989,000 of PPP loan processing fees, a decrease of $2,058,000 compared to $5,047,000 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.

For the three months ended March 31, 2022, Mid Penn’s tax-equivalent net interest margin was 3.21 percent versus 3.46 percent during the three months ended March 31, 2021. The overall decrease in net interest margin for the three months ended March 31, 2022 was driven by the reduction in PPP fees recognized in the first quarter of 2022 of $2,058,000, or 41 percent, from the first quarter of 2021, offset by the improvement in cost of interest-bearing liabilities.

Noninterest Income

For the three months ended March 31, 2022, noninterest income totaled $5,750,000, an increase of $1,038,000 or 22 percent, compared to noninterest income of $4,712,000 for the same period in 2021. Several components of noninterest income increased as a result of higher account and transaction volume due to both the Riverview acquisition and organic growth.

Mortgage banking income was $529,000 for the three months ended March 31, 2022, a decrease of $1,850,000, compared to the $2,379,000 of mortgage banking income for the three months ended March 31, 2021. Mortgage interest rates declined as a result of market responses to the pandemic, resulting in a significant increase in mortgage loan originations and secondary-market loan sales and gains during the first quarter of 2021. During the first quarter of 2022, the Fed announced a 25 basis point increase to the fed funds rate, with several additional rate increases expected to be announced throughout the remainder of 2022, as curbing inflation has become a central focus of the Fed. 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 precipitously, and purchase money mortgage originations have slowed relative to historical lending volumes.

As another prong of Mid Penn’s mortgage banking program, a mortgage hedging program was established in the latter half of 2021. For the three months ended March 31, 2022, $533,000 in mortgage hedging gains were recognized while no similar gains were recognized during the same quarter of the prior year. This item is a component of other noninterest income, discussed more fully below.

Income from fiduciary and wealth management activities was $1,052,000 for the three months ended March 31, 2022, an increase of $496,000 or 89 percent, compared to $556,000 during the three months ended March 31, 2021. The additional revenue 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.

Service charges on deposits were $684,000 for the three months ended March 31, 2022, an increase of $532,000, compared to $152,000 for the same period in 2021. This increase was driven by an increase in collected charges on a higher volume of transactional deposit accounts, including deposit accounts assumed in the Riverview acquisition.

ATM debit card interchange income was $1,057,000 for the three months ended March 31, 2022, an increase of $489,000 or 86 percent, compared to the three months ended March 31, 2021. The additional income is a result of an increased volume of checking accounts, and an increase in Mid Penn ATM and debit card activity, which included an increase in transaction volume resulting from the accounts acquired in the Riverview transaction.

Earnings from cash surrender value of life insurance was $246,000 for the three months ended March 31, 2022, an increase of $172,000, compared to $74,000 for the same period of 2021. The increase is a result of additional policies assumed during the Riverview acquisition.

Other income was $2,118,000 for the three months ended March 31, 2022, an increase of $1,327,000, compared to $791,000 during the three months ended March 31, 2021. Mid Penn also reflected increases in other miscellaneous income amounts as a result of the Riverview acquisition.

Noninterest Expense

For the three months ended March 31, 2022, noninterest expense totaled $25,745,000, an increase of $8,187,000 or 47 percent, compared to noninterest expense of $17,558,000 for the same period in 2021. Several components of noninterest expense increased as a result of higher fixed and variable expenses due to both the Riverview acquisition and organic growth.

Salaries and employee benefits were $13,244,000 for the three months ended March 31, 2022, an increase of $3,646,000 or 38 percent, versus the same period in 2021, with the increase attributable to (i) the retail staff additions at the seven retail locations added through the Riverview acquisition; (ii) the retention of various Riverview team members through the completion of the systems integration, which occurred on March 4, 2022; and (iii) the addition of wealth management professionals, commercial lending professionals, and other staff additions in alignment with Mid Penn’s core banking and nonbanking growth strategies.

Occupancy expenses increased $319,000 or 22 percent during the first three months of 2022 compared to the same period in 2021. Similarly, equipment expense increased $260,000 or 35 percent during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. These increases were driven by the facility operating costs and increased depreciation expense for building, furniture, and equipment associated with the addition of the Riverview acquisition.

Software licensing and utilization costs were $2,106,000 for the three months ended March 31, 2022, an increase of $661,000 or 46 percent compared to $1,445,000 for the three months ended March 31, 2021. The increase is a result of additional costs to license (i) the additional Riverview branches; (ii) upgrades to internal systems, networks, storage capabilities, cybersecurity management, and data security mechanisms to enhance data management and security capabilities responsive to both the larger company profile and the increasing complexity of information technology management; and (iii) increases in certain core processing fees as our customer base and transaction volume continue to grow.

FDIC assessment expense was $591,000 for the three months ended March 31, 2022, an increase of $121,000 or 26 percent compared to $470,000 for the three months ended March 31, 2021. As a result of the Riverview acquisition and organic growth, the increased FDIC assessment aligns with the year-over-year growth of the average assets of the Bank on which the assessment is based.

Legal and professional fees were $639,000 for the three months ended March 31, 2022, an increase of $213,000 or 50 percent compared to $426,000 for the three months ended March 31, 2021, with this increase being attributable to consulting expenses related to strengthening and enhancing Mid Penn’s commercial online banking facility, as well as other information technology and cybersecurity management activities.

Charitable contributions qualifying for state tax credits were $65,000 for the three months ended March 31, 2022 compared to $270,000 for the same three-month period during 2021. Mid Penn continues to maximize the amount of contributions qualifying for state credits that can be made during 2022 and makes qualifying contributions, as allowable.

Intangible amortization increased from $281,000 during the first quarter of 2021 to $481,000 during the first quarter of 2022. Mid Penn recorded a customer list intangible asset of $2,160,000, and a core deposit intangible asset of $4,096,000 as a result of the Riverview acquisition. During the three months ended March 31, 2022, Mid Penn recorded $98,000 of expense related to the customer list and $143,000 of expense related to the core deposit intangible asset.

Post-acquisition restructuring expenses totaled $329,000 for the three months ended March 31, 2022 and primarily consisted of contract termination fees related to the Riverview acquisition.

Other expenses increased $2,634,000 or 97 percent from $2,717,000 during the three months ended March 31, 2021 to $5,351,000 for the same period in 2022. With the Riverview acquisition and organic growth, several categories within other expense experienced increases, including, Pennsylvania Bank Shares taxes, which accounted for $620,000 of the difference, marketing, telephone, postage, courier, ATM and card processing, payroll processing, employee travel costs, and director fees. In addition, the quarter ended March 31, 2022 contained an impaired asset write-off of $664,000, representing the disposal of certain fixed assets and leasehold improvements from Riverview offices not being retained.

The provision for income taxes was $2,565,000 during the three months ended March 31, 2022, compared to $2,167,000 of income tax provision recorded for the same period in 2021. The provision for income taxes for the three months ended March 31, 2022 reflects a combined Federal and State effective tax rate of 18.4 percent compared to 18.1 percent for the three months ended March 31, 2021. The decrease in the effective tax rate reflects (i) 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, and (ii) the favorable treatment of the increase in cash surrender value on bank owned life insurance policies, which are nontaxable for federal tax purposes.

ASSET QUALITY  

Excluding PPP loans, which are guaranteed by the SBA, the allowance for loan and lease losses as a percentage of core loans (a non-GAAP measure) were 0.49 percent at both March 31, 2022 and December 31, 2021. The allowance for loan and lease losses as a percentage of total loans including PPP loans was 0.49 percent at March 31, 2022, compared to 0.47 percent at December 31, 2021. The ratios as of March 31, 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 losses. 

The provision for loan losses was $500,000 for the three months ended March 31, 2022, a decrease of 50 percent compared to the provision for loan losses of $1,000,000 for the three months ended March 31, 2021. The allowance for loan losses and the related provision reflects Mid Penn’s continued application of the incurred loss method for estimating credit losses. Mid Penn will adopt the current expected credit loss (“CECL”) accounting standard, as required, effective January 1, 2023.  

Total nonperforming assets were $8,195,000 at March 31, 2022, a decrease compared to nonperforming assets of $10,497,000 at December 31, 2021 and an increase compared to $6,831,000 at March 31, 2021. The decrease in nonperforming assets since December 31, 2021 was primarily the result of the successful workout of two nonaccrual home equity loans amongst one relationship totaling $2,278,000 during the three months ended March 31, 2022. The nonperforming assets included acquired impaired loans assumed in the Riverview transaction totaling $3,289,000 as of December 31, 2021. Foreclosed real estate held for sale increased from zero at December 31, 2021 to $125,000 as of March 31, 2022, due to two residential mortgage loans that went into foreclosure during the first quarter of 2022.
  
Asset quality measures did not reflect any new impaired assets or specific reserve allocations related to the financial impact of the COVID-19 pandemic, though Bank management is continuously and closely monitoring and evaluating the impact of the COVID-19 situation on the portfolio.    Management believes, based on information currently available, that the allowance for loan and lease losses of $15,147,000 is adequate as of March 31, 2022.

FINANCIAL HIGHLIGHTS (Unaudited):

(Dollars in thousands, except   Mar. 31,     Dec. 31,     Sept. 30,     June 30,     Mar. 31,  
per share data)   2022     2021     2021     2021     2021  
                                         
Cash and cash equivalents   $ 758,431     $ 913,752     $ 754,942     $ 636,347     $ 427,371  
Investment securities     508,658       392,619       158,311       161,702       134,318  
Loans     3,121,531       3,104,396       2,370,429       2,495,192       2,646,236  
Allowance for loan and lease losses     (15,147 )     (14,597 )     (14,233 )     (14,716 )     (13,591 )
Net loans     3,106,384       3,089,799       2,356,196       2,480,476       2,632,645  
Goodwill and other intangibles     122,085       123,271       66,377       66,644       66,919  
Other assets     171,616       169,984       117,361       116,623       120,785  
Total assets   $ 4,667,174     $ 4,689,425     $ 3,453,187     $ 3,461,792     $ 3,382,038  
                                         
Noninterest-bearing deposits   $ 866,965     $ 850,438     $ 661,890     $ 692,016     $ 676,717  
Interest-bearing deposits     3,122,072       3,151,578       2,299,991       2,090,108       1,990,110  
Total deposits     3,989,037       4,002,016       2,961,881       2,782,124       2,666,827  
Borrowings and subordinated debt     148,815       154,915       119,457       316,426       427,369  
Other liabilities     35,161       42,418       22,541       21,673       23,806  
Shareholders’ equity     494,161       490,076       349,308       341,569       264,036  
Total liabilities and shareholders’ equity   $ 4,667,174     $ 4,689,425     $ 3,453,187     $ 3,461,792     $ 3,382,038  
                                         
Book Value per Common Share   $ 30.96     $ 30.71     $ 30.55     $ 29.94     $ 31.37  
Tangible Book Value per Common Share (a)   $ 23.31     $ 22.99     $ 24.75     $ 24.10     $ 23.42  
Nonperforming assets as a % of total loans outstanding and other real estate     0.26 %     0.32 %     0.29 %     0.35 %     0.26 %

(a) Non-GAAP measure; see Reconciliation of Non-GAAP Measures

OPERATING HIGHLIGHTS (Unaudited):

    Three Months Ended  
(Dollars in thousands, except   Mar. 31,     Dec. 31,     Sept. 30,     June 30,     Mar. 31,  
per share data)   2022     2021     2021     2021     2021  
                                         
Interest income   $ 37,632     $ 32,685     $ 30,740     $ 30,729     $ 29,168  
Interest expense     3,218       3,313       3,746       3,852       3,843  
Net interest income     34,414       29,372       26,994       26,877       25,325  
Provision for loan and lease losses     500       370       425       1,150       1,000  
Noninterest income     5,750       5,660       5,509       5,652       4,712  
Noninterest expense     25,745       34,072       20,019       19,456       17,558  
Income before provision for income taxes     13,919       590       12,059       11,923       11,479  
Provision for income taxes     2,565       (17 )     2,272       2,310       2,167  
Net income   $ 11,354     $ 607     $ 9,787     $ 9,613     $ 9,312  
                                         
Basic Earnings per Common Share   $ 0.71     $ 0.05     $ 0.86     $ 0.93     $ 1.11  
Diluted Earnings per Common Share   $ 0.71     $ 0.05     $ 0.86     $ 0.93     $ 1.10  
Return on Average Assets     0.98 %     0.06 %     1.11 %     1.12 %     1.19 %
Return on Average Equity     9.32 %     0.61 %     11.23 %     12.36 %     14.58 %
Return on Average Tangible Common Equity     12.40 %     0.74 %     14.05 %     15.72 %     19.46 %
    Mar. 31,     Dec. 31,     Sept. 30,     June 30,     Mar. 31,  
    2022     2021     2021     2021     2021  
Tier 1 Capital (to Average Assets)   8.4%     8.1%     8.6%     8.8%     6.7%  
Common Tier 1 Capital (to Risk Weighted Assets)   11.7%     11.7%     13.2%     13.1%     9.7%  
Tier 1 Capital (to Risk Weighted Assets)   12.0%     12.0%     13.2%     13.1%     9.7%  
Total Capital (to Risk Weighted Assets)   14.4%     14.6%     15.8%     15.8%     12.5%  

RECONCILIATION OF NON-GAAP MEASURES (Unaudited):

This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). For tangible book value, the most directly comparable financial measure calculated in accordance with GAAP is book value.  We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets.  Goodwill and other intangible assets have the effect of increasing total book value while not increasing tangible book value.   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. 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.

Tangible Book Value Per Share

(Dollars in thousands, except   Mar. 31,     Dec. 31,     Sept. 30,     June 30,     Mar. 31,  
per share data)   2022     2021     2021     2021     2021  
                                         
Shareholders’ Equity   $ 494,161     $ 490,076     $ 349,308     $ 341,569     $ 264,036  
Less: Goodwill     113,835       113,835       62,840       62,840       62,840  
Less: Core Deposit and Other Intangibles     8,250       9,436       3,537       3,804       4,079  
Tangible Equity   $ 372,076     $ 366,805     $ 282,931     $ 274,925     $ 197,117  
                                         
Common Shares Outstanding     15,960,916       15,957,830       11,433,554       11,408,712       8,416,095  
                                         
Tangible Book Value per Share   $ 23.31     $ 22.99     $ 24.75     $ 24.10     $ 23.42  
                                         

Non-PPP Core Banking Loans

    Mar. 31,     Dec. 31,     Sept. 30,     June 30,     Mar. 31,  
(Dollars in thousands)   2022     2021     2021     2021     2021  
                                         
Loans and leases, net of unearned interest   $ 3,121,531     $ 3,104,396     $ 2,370,429     $ 2,495,192     $ 2,646,236  
Less: PPP loans, net of deferred fees     34,124       111,286       229,679       391,826       590,035  
Non-PPP core banking loans   $ 3,087,407     $ 2,993,110     $ 2,140,750     $ 2,103,366     $ 2,056,201  

CONSOLIDATED BALANCE SHEETS (Unaudited):

(Dollars in thousands, except share data)   Mar. 31, 2022     Dec. 31, 2021     Mar. 31, 2021  
ASSETS                        
Cash and due from banks   $ 54,961     $ 41,100     $ 36,109  
Interest-bearing balances with other financial institutions     3,187       146,031       1,243  
Federal funds sold     700,283       726,621       390,019  
Total cash and cash equivalents     758,431       913,752       427,371  
                         
Investment securities held to maturity, at amortized cost     363,145       329,257       130,560  
(fair value $343,023, $330,626, and $133,519)                        
Investment securities available for sale, at fair value     145,039       62,862       3,250  
Equity securities available for sale, at fair value     474       500       508  
Loans held for sale     7,474       11,514       25,842  
Loans and leases, net of unearned interest     3,121,531       3,104,396       2,646,236  
Less: Allowance for loan and lease losses     (15,147 )     (14,597 )     (13,591 )
Net loans and leases     3,106,384       3,089,799       2,632,645  
                         
Bank premises and equipment, net     33,612       33,232       24,710  
Bank premises and equipment held for sale     3,098       3,907        
Operating lease right of use asset     8,751       9,055       10,791  
Finance lease right of use asset     3,042       3,087       3,222  
Cash surrender value of life insurance     49,907       49,661       17,257  
Restricted investment in bank stocks     7,637       9,134       6,860  
Accrued interest receivable     11,584       11,328       11,855  
Deferred income taxes     11,974       10,779       5,427  
Goodwill     113,835       113,835       62,840  
Core deposit and other intangibles, net     8,250       9,436       4,079  
Foreclosed assets held for sale     125             154  
Other assets     34,412       28,287       14,667  
Total Assets   $ 4,667,174     $ 4,689,425     $ 3,382,038  
LIABILITIES & SHAREHOLDERS’ EQUITY                        
Deposits:                        
Noninterest-bearing demand   $ 866,965     $ 850,438     $ 676,717  
Interest-bearing demand     1,050,923       1,066,852       601,220  
Money Market     1,159,809       1,076,593       770,800  
Savings     358,186       381,476       201,225  
Time     553,154       626,657       416,865  
Total Deposits     3,989,037       4,002,016       2,666,827  
                         
Short-term borrowings                 307,753  
Long-term debt     74,681       81,270       75,030  
Subordinated debt     74,134       73,645       44,586  
Operating lease liability     10,923       11,363       11,828  
Accrued interest payable     2,067       1,791       1,902  
Federal income tax payable                 1,321  
Other liabilities     22,171       29,264       8,755  
Total Liabilities     4,173,013       4,199,349       3,118,002  
                         
Shareholders’ Equity:                        
Common stock, par value $1.00 per share; 20,000,000 shares authorized;
Shares issued: 16,059,368 at March 31, 2022, 16,056,282 at December 31, 2021, and 8,514,547 at March 31, 2021;
Shares outstanding: 15,960,916 at March 31, 2022, 15,957,830 at December 31, 2021, and 8,416,095 at March 31, 2021
    16,059       16,056       8,515  
Additional paid-in capital     385,765       384,742       179,055  
Retained earnings     99,206       91,043       77,888  
Accumulated other comprehensive income (loss)     (4,946 )     158       501  
Treasury stock, at cost; 98,452 shares at March 31, 2022, 98,452 shares at December 31, 2021, and 98, 452 at March 31, 2021     (1,923 )     (1,923 )     (1,923 )
Total Shareholders’ Equity     494,161       490,076       264,036  
Total Liabilities and Shareholders’ Equity   $ 4,667,174     $ 4,689,425     $ 3,382,038  

CONSOLIDATED STATEMENTS OF INCOME (Unaudited):

                 
(Dollars in thousands, except per share data)   Three Months Ended March 31,  
      2022       2021  
INTEREST INCOME                
Interest and fees on loans and leases   $ 35,016     $ 28,330  
Interest and dividends on investment securities:                
U.S. Treasury and government agencies     1,536       178  
State and political subdivision obligations, tax-exempt     336       277  
Other securities     417       302  
Total Interest and Dividends on Investment Securities     2,289       757  
                 
Interest on other interest-bearing balances     13       2  
Interest on federal funds sold     314       79  
Total Interest Income     37,632       29,168  
INTEREST EXPENSE                
Interest on deposits     2,294       2,966  
Interest on short-term borrowings           174  
Interest on long-term and subordinated debt     924       703  
Total Interest Expense     3,218       3,843  
Net Interest Income     34,414       25,325  
PROVISION FOR LOAN AND LEASE LOSSES     500       1,000  
Net Interest Income After Provision for Loan and Lease Losses     33,914       24,325  
NONINTEREST INCOME                
Mortgage banking income     529       2,379  
Income from fiduciary and wealth management activities     1,052       556  
Service charges on deposits     684       152  
ATM debit card interchange income     1,057       568  
Net (loss) gain on sales of SBA loans     (9 )     100  
Merchant services income     73       92  
Earnings from cash surrender value of life insurance     246       74  
Other income     2,118       791  
Total Noninterest Income     5,750       4,712  
NONINTEREST EXPENSE                
Salaries and employee benefits     13,244       9,598  
Occupancy expense, net     1,799       1,480  
Equipment expense     1,011       751  
Software licensing and utilization     2,106       1,445  
FDIC Assessment     591       470  
Legal and professional fees     639       426  
Charitable contributions qualifying for State tax credits     65       270  
Mortgage banking profit-sharing expense     145       120  
Gain on sale or write-down of foreclosed assets, net     (16 )      
Intangible amortization     481       281  
Post-acquisition restructuring expense     329        
Other expenses     5,351       2,717  
Total Noninterest Expense     25,745       17,558  
INCOME BEFORE PROVISION FOR INCOME TAXES     13,919       11,479  
Provision for income taxes     2,565       2,167  
NET INCOME   $ 11,354     $ 9,312  
                 
PER COMMON SHARE DATA:                
Basic and Diluted Earnings Per Common Share   $ 0.71     $ 1.11  
Diluted Earnings Per Common Share   $ 0.71     $ 1.10  
Cash Dividends Declared   $ 0.20     $ 0.19  

NET INTEREST MARGIN (Unaudited):

                                                         
    Average Balances, Income and Interest Rates on a Taxable Equivalent Basis  
    For the Three Months Ended  
(Dollars in thousands)   March 31, 2022     December 31, 2021  
    Average           Average     Average           Average  
    Balance     Interest     Rates     Balance     Interest     Rates  
ASSETS:                                                        
Interest Bearing Balances   $   91,543     $   13       0.06 %   $   58,015     $   8       0.05 %
Investment Securities:                                                        
Taxable       389,034         1,822       1.90 %       223,546         938       1.66 %
Tax-Exempt       73,614         425   (a)   2.34 %       62,588         365   (a)   2.31 %
Total Securities       462,648         2,247       1.97 %       286,134         1,303       1.81 %
                                                         
Federal Funds Sold       706,411         314       0.18 %       758,165         324       0.17 %
Loans and Leases, Net       3,103,469         35,123   (b)   4.59 %       2,595,090         31,108   (b)   4.76 %
Restricted Investment in Bank Stocks       8,347         131       6.36 %       8,328         106       5.05 %
Total Earning Assets       4,372,418         37,828       3.51 %       3,705,732         32,849       3.52 %
                                                         
Cash and Due from Banks       57,397                           45,385                    
Other Assets       267,079                           192,969                    
Total Assets   $   4,696,894                       $   3,944,086                    
                                                         
LIABILITIES & SHAREHOLDERS’ EQUITY:                                                        
Interest-bearing Demand   $   1,045,678     $   461       0.18 %   $   855,060     $   548       0.25 %
Money Market       1,125,094         600       0.22 %       976,601         696       0.28 %
Savings       376,006         58       0.06 %       264,547         55       0.08 %
Time       592,833         1,175       0.80 %       511,953         1,236       0.96 %
Total Interest-bearing Deposits       3,139,611         2,294       0.30 %       2,608,161         2,535       0.39 %
                                                         
Short Term Borrowings                     0.00 %                     0.00 %
Long-term Debt       76,157         284       1.51 %       76,990         219       1.13 %
Subordinated Debt       74,189         640       3.50 %       54,615         559       4.06 %
Total Interest-bearing Liabilities       3,289,957         3,218       0.40 %       2,739,766         3,313       0.48 %
                                                         
Noninterest-bearing Demand       859,463                           759,897                    
Other Liabilities       53,455                           46,659                    
Shareholders’ Equity       494,019                           397,764                    
Total Liabilities & Shareholders’ Equity   $   4,696,894                       $   3,944,086                    
                                                         
Net Interest Income (taxable equivalent basis)             $   34,610                       $   29,536          
Taxable Equivalent Adjustment                 (196 )                         (164 )        
Net Interest Income             $   34,414                       $   29,372          
                                                         
Total Yield on Earning Assets                         3.51 %                         3.52 %
Rate on Supporting Liabilities                         0.40 %                         0.48 %
Average Interest Spread                         3.11 %                         3.04 %
Net Interest Margin                         3.21 %                         3.16 %
(a) Includes tax-equivalent adjustments (calculated using statutory rates of 21 percent) of $89,000 and $87,000 for the three months ended March 31, 2022 and December 31, 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 $107,000 and $77,000 for the three months ended March 31, 2022 and December 31, 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 Three Months Ended  
(Dollars in thousands)   March 31, 2022     March 31, 2021  
    Average           Average     Average           Average  
    Balance     Interest     Rates     Balance     Interest     Rates  
ASSETS:                                                        
Interest Bearing Balances   $   91,543     $   13       0.06 %   $   1,401     $   2       0.58 %
Investment Securities:                                                        
Taxable       389,034         1,822       1.90 %       78,456         385       1.99 %
Tax-Exempt       73,614         425   (a)   2.34 %       54,937         351   (a)   2.59 %
Total Securities       462,648         2,247       1.97 %       133,393         736       2.24 %
                                                         
Federal Funds Sold       706,411         314       0.18 %       314,181         79       0.10 %
Loans and Leases, Net       3,103,469         35,123   (b)   4.59 %       2,531,917         28,406   (b)   4.55 %
Restricted Investment in Bank Stocks       8,347         131       6.36 %       7,052         95       5.46 %
Total Earning Assets       4,372,418         37,828       3.51 %       2,987,944         29,318       3.98 %
                                                         
Cash and Due from Banks       57,397                           34,040                    
Other Assets       267,079                           164,266                    
Total Assets   $   4,696,894                       $   3,186,250                    
                                                         
LIABILITIES & SHAREHOLDERS’ EQUITY:                                                        
Interest-bearing Demand   $   1,045,678     $   461       0.18 %   $   602,015     $   578       0.39 %
Money Market       1,125,094         600       0.22 %       743,994         778       0.42 %
Savings       376,006         58       0.06 %       197,873         64       0.13 %
Time       592,833         1,175       0.80 %       413,673         1,546       1.52 %
Total Interest-bearing Deposits       3,139,611         2,294       0.30 %       1,957,555         2,966       0.61 %
                                                         
Short-term Borrowings                     0.00 %       203,518         174       0.35 %
Long-term Debt       76,157         284       1.51 %       75,062         204       1.10 %
Subordinated Debt       74,189         640       3.50 %       44,583         499       4.54 %
Total Interest-bearing Liabilities       3,289,957         3,218       0.40 %       2,280,718         3,843       0.68 %
                                                         
Noninterest-bearing Demand       859,463                           623,058                    
Other Liabilities       53,455                           23,462                    
Shareholders’ Equity       494,019                           259,012                    
Total Liabilities & Shareholders’ Equity   $   4,696,894                       $   3,186,250                    
                                                         
Net Interest Income (taxable equivalent basis)             $   34,610                       $   25,475          
Taxable Equivalent Adjustment                 (196 )                         (150 )        
Net Interest Income             $   34,414                       $   25,325          
                                                         
Total Yield on Earning Assets                         3.51 %                         3.98 %
Rate on Supporting Liabilities                         0.40 %                         0.68 %
Average Interest Spread                         3.11 %                         3.30 %
Net Interest Margin                         3.21 %                         3.46 %
(a) Includes tax-equivalent adjustments (calculated using statutory rates of 21 percent) of $89,000 and $74,000 for the three months ended March 31, 2022 and March 31, 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 $107,000 and $76,000 for the three months ended March 31, 2022 and March 31, 2021, respectively, resulting from the tax-free municipal loans in the commercial loans portfolio.

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.

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.


        

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