UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
Commission file number 0-20141
Mid Penn Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1666413
(State or other jurisdiction of (IRS Employer ID No)
Incorporation or Organization)
349 Union Street, Millersburg, PA 17061
(Address of principal executive offices) (Zip Code)
(717) 692-2133
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the classes of common
stock, as of the latest practical date.
3,036,417 shares of Common Stock, $1.00 par value per share, were outstanding as
of June 30, 2002.
MID PENN BANCORP, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited; Dollars in thousands)
June 30, Dec. 31,
2002 2001
------- -------
ASSETS:
Cash and due from banks 7,830 9,028
Interest-bearing balances 55,042 53,042
Available-for-sale securities 56,969 55,348
Federal funds sold 600 0
Loans 210,018 202,836
Less,
Allowance for loan losses 2,950 2,856
------- -------
Net loans 207,068 199,980
------- -------
Bank premises and equip't, net 3,346 3,395
Other real estate 1,705 1,693
Accrued interest receivable 2,059 2,091
Cash surrender value of life insurance 4,626 4,504
Deferred income taxes 614 1,037
Other assets 679 517
------- -------
Total Assets 340,538 330,635
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY:
Deposits:
Demand 27,098 29,226
NOW 32,853 30,795
Money Market 37,024 27,734
Savings 27,481 26,398
Time 143,251 139,952
------- -------
Total deposits 267,707 254,105
------- -------
Short-term borrowings 3,739 9,610
Accrued interest payable 1,705 1,292
Other liabilities 1,526 1,344
Long-term debt 32,477 32,568
------- -------
Total Liabilities 307,154 298,919
------- -------
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share;
authorized 10,000,000 shares; issued
3,056,501 shares at June 30, 2002 and
December 31, 2001 3,057 3,057
Additional paid-in capital 20,368 20,368
Retained earnings 9,746 8,880
Accumulated other comprehensive inc (loss) 763 -56
Treasury stock at cost
(20,084 and 19,065 shs., resp.) -550 -533
------- -------
Total Stockholders' Equity 33,384 31,716
------- -------
Total Liabilities & Equity 340,538 330,635
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
Note: The balance sheet at December 31, 2001, has been derived from the audited
financial statements at that date but does not include all the information and
notes required by generally accepted accounting principles for complete
financial statements.
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited; dollars in thousands)
Three Months Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
--------- --------- --------- ---------
INTEREST INCOME:
Interest & fees on loans 3,882 4,152 7,881 8,229
Int.-bearing balances 685 781 1,401 1,528
Treas. & Agency securities 170 392 352 883
Municipal securities 507 441 999 850
Other securities 22 54 50 114
Fed funds sold and repos 8 20 11 20
--------- --------- --------- ---------
Total Int. Income 5,274 5,840 10,694 11,624
--------- --------- --------- ---------
INTEREST EXPENSE:
Deposits 1,958 2,389 3,937 4,754
Short-term borrowings 8 87 30 380
Long-term borrowings 517 545 1,027 1,035
--------- --------- --------- ---------
Total Int. Expense 2,483 3,021 4,994 6,169
--------- --------- --------- ---------
Net Int. Income 2,791 2,819 5,700 5,455
PROVISION FOR LOAN LOSSES 100 75 200 150
--------- --------- --------- ---------
Net Int. Inc. after Prov. 2,691 2,744 5,500 5,305
--------- --------- --------- ---------
NON-INTEREST INCOME:
Trust dept 43 32 86 68
Service chgs. on deposits 253 222 503 435
Investment sec. gains (losses), net 0 -7 5 -18
Gain on sale of loans 0 0 0 0
Other 158 190 328 390
--------- --------- --------- ---------
Total Non-Interest Income 454 437 922 875
--------- --------- --------- ---------
NON-INTEREST EXPENSE:
Salaries and benefits 1,036 1,039 2,063 2,036
Occupancy, net 95 97 191 212
Equipment 132 127 258 238
PA Bank Shares tax 65 65 128 130
Other 582 524 1,114 973
--------- --------- --------- ---------
Tot. Non-int. Exp. 1,910 1,852 3,754 3,589
--------- --------- --------- ---------
Income before income taxes 1,235 1,329 2,668 2,591
INCOME TAX EXPENSE 259 312 586 603
--------- --------- --------- ---------
NET INCOME 976 1,017 2,082 1,988
========= ========= ========= =========
NET INCOME PER SHARE 0.32 0.33 0.69 0.65
========= ========= ========= =========
DIVIDENDS PER SHARE 0.20 0.20 0.40 0.40
========= ========= ========= =========
Weighted Average No. of
Shares Outstanding 3,034,906 3,035,994 3,039,438 3,039,180
The accompanying notes are an integral part of these consolidated financial
statements.
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; Dollars in thousands)
For the six months ended:
June 30, June 30,
2002 2001
------- ------
Operating Activities:
Net Income 2,082 1,988
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 200 150
Depreciation 183 183
Incr. in cash-surr. value of life ins. -122 -99
Loss (gain) on sale of investment
securities -5 18
Loss (gain) on sale/disposal of bank
premises and equipment 0 0
Loss (gain) on the sale of foreclosed
assets -3 0
Loss (gain) on the sale of loans 0 0
Change in accrued interest receivable 32 351
Change in other assets -162 -200
Change in accrued interest payable 413 566
Change in other liabilities 182 -59
------- ------
Net cash provided by
operating activities: 2,800 2,898
------- ------
Investing Activities:
Net (incr)decr in int-bearing balances -2,000 -5,579
Incr. in federal funds sold -600 -3,600
Proceeds from sale of securities 1,730 11,284
Proceeds from the maturity of secs. 3,227 12,458
Purchase of investment securities -5,331 -6,750
Proceeds from the sale of loans 0 0
Net increase in loans -7,288 -8,067
Purchases of fixed assets -134 -82
Proceeds from sale of other real estate 71 0
Capitalized additions - ORE -80 0
------- ------
Net cash used in
investing activities -10,405 -336
------- ------
Financing Activities:
Net (decr)incr in demand & svngs deps. 10,303 7,582
Net incr(decr) in time deposits 3,299 5,696
Net decrease in sh-term borrowings -5,871 -16,720
Net incr(decr) in long-term borrowings -91 4,915
Cash dividend declared -1,216 -1,215
Net sale of treasury stock -17 0
------- ------
Net cash provided by
financing activities 6,407 258
------- ------
Net increase in cash & due from banks -1,198 2,820
Cash & due from banks, beg of period 9,028 5,986
------- ------
Cash & due from banks, end of period 7,830 8,806
======= ======
Supplemental Noncash Disclosures:
Loan charge-offs 140 139
Transfers to other real estate 0 98
The accompanying notes are an integral part of these consolidated financial
statements.
Mid Penn Bancorp, Inc.
Notes to Consolidated Financial Statements
1. The consolidated interim financial statements have been prepared by the
Corporation, without audit, according to the rules and regulations of the
Securities and Exchange Commission with respect to Form 10-Q. The financial
information reflects all adjustments (consisting only of normal recurring
adjustments) which are, in our opinion, necessary for a fair statement of
results for the periods covered. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted according to these
rules and regulations. We believe, however, that the disclosures are adequate so
that the information is not misleading. You should read these interim financial
statements along with the financial statements including the notes included in
the Corporation's most recent Form 10-K.
2. Interim statements are subject to possible adjustments in connection with the
annual audit of the Corporation's accounts for the full fiscal year. In our
opinion, all necessary adjustments have been included so that the interim
financial statements are not misleading.
3. The results of operations for the interim periods presented are not
necessarily an indicator of the results expected for the full year.
4. Management considers the allowance for loan losses to be adequate at this
time.
5. Short-term borrowings as of June 30, 2002, and December 31, 2001, consisted
of:
(Dollars in thousands)
6/30/02 12/31/01
------- --------
Federal funds purchased $ 0 $5,800
Repurchase agreements 2,679 2,666
Treasury, tax and loan note 512 196
Due to broker 548 948
------ ------
$3,739 $9,610
====== ======
Securities sold under repurchase agreements generally mature between one day and
one year. Treasury, tax and loan notes are open-ended interest bearing notes
payable to the U.S. Treasury upon call. All tax deposits accepted by the Bank
are placed in the Treasury note option account. The due-to-broker balance
represents previous day balances transferred from deposit accounts under a sweep
account agreement.
6. Earnings per share is computed by dividing net income by the weighted average
number of common shares outstanding during each of the periods presented, giving
retroactive effect to stock dividends. The Corporation's basic and diluted
earnings per share are the same since there are no dilutive securities
outstanding.
7. The purpose of reporting comprehensive income (loss) is to report a measure
of all changes in the Corporation's equity resulting from economic events other
than transactions with stockholders in their capacity as stockholders. For the
Corporation, "comprehensive income(loss)" includes traditional income statement
amounts as well as unrealized gains and losses on certain investments in debt
and equity securities (i.e. available for sale securities). Because unrealized
gains and losses are part of comprehensive income (loss), comprehensive income
(loss) may vary substantially between reporting periods due to fluctuations in
the market prices of securities held.
(In thousands) Three Months Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
------ ------ ------ ------
Net Income $ 976 $1,017 $2,082 $1,988
------ ------ ------ ------
Other comprehensive income(loss):
Unrealized holding gains(losses)
on securities arising during
the period 1,488 51 1,241 854
Less: reclassification
adjustments for (gains) losses
included in net income 0 7 -5 18
------ ------ ------ ------
Other comprehensive income(loss)
before income tax
(provision)benefit 1,488 58 1,236 872
Income tax (provision)benefit
related to other comprehensive
income(loss) -506 -20 -420 -297
------ ------ ------ ------
Other comprehensive inc(loss) 982 38 816 575
------ ------ ------ ------
Comprehensive Income(Loss) $1,958 $1,055 $2,898 $2,563
====== ====== ====== ======
Mid Penn Bancorp, Inc.
Millersburg, Pennsylvania
Management's Discussion of Consolidated Financial Condition as of June 30, 2002,
compared to year-end 2001 and the Results of Operations for the second quarter
and the first six months of 2002 compared to the same periods in 2001.
CONSOLIDATED FINANCIAL CONDITION
Total assets as of June 30, 2002, increased to $340,538,000, from $330,635,000
as of December 31, 2001.
During the first half of 2002, net loans outstanding increased by $7,088,000, or
3.5% from year end.
Total deposits increased by $13,602,000 during the first six months of 2002.
Money market accounts increased by $9,290,000 over year end largely due to the
popularity of a new indexed money market product offered by the bank. Time
deposits increased by $3,299,000.
Short-term borrowings decreased by $5.9 million from year end. These borrowings
were decreased largely through funds generated by operations.
All components of long-term debt are advances from the FHLB. Long-term debt
advances were initiated in order to secure an adequate spread on certain pools
of loans and investments of the Bank.
As of June 30, 2002, the Bank's capital ratios are well in excess of the minimum
and well-capitalized guidelines and the Corporation's capital ratios are in
excess of the Bank's capital ratios.
RESULTS OF OPERATIONS
Net income for the first six months of 2002 was $2,082,000, compared with
$1,988,000 earned in the same period of 2001. Net income per share for the same
period of 2002 and 2001 was $.69 and $.65, respectively. Net income as a
percentage of stockholders' equity, also known as return on equity, (ROE), was
13.1% on an annualized basis for the first half of both 2002 and 2001.
Net income for the second quarter of 2002 was $976,000, compared with $1,017,000
earned in the same quarter of 2001. Net income per share for the second quarters
of 2002 and 2001 was $.32 and $.33, respectively.
Net interest income of $2,791,000 for the quarter ended June 30, 2002, decreased
slightly from the $2,819,000 earned in the same quarter of 2001. Year-to-date,
we have managed to maintain the bank's interest spread despite the drastic
reduction in interest rates and keen interest rate competition.
During the second quarter of 2002, we analyzed interest rate risk using the
Profitstar Asset-Liability Management Model. Using the computerized model,
management reviews interest rate risk on a periodic basis. This analysis
includes an earnings scenario whereby interest rates are increased by 200 basis
points (2 percentage points) and another whereby they are decreased by 200 basis
points. At June 30, 2002, these scenarios indicate that there would be a
variance of less than +/- 4.7% in net interest income at the one-year time frame
due to interest rate changes; however, actual results could vary significantly
from the calculations prepared by management.
The Bank made a provision for loan losses of $100,000 during the second quarters
of both 2002 and 2001. On a quarterly basis, senior management reviews
potentially unsound loans taking into consideration judgments regarding risk of
error, economic conditions, trends and other factors in determining a reasonable
provision for the period.
Non-interest income amounted to $454,000 for the second quarter of 2002 compared
to $437,000 earned during the same quarter of 2001. Service charges on deposits
grew by 14% during the second quarter of 2002 compared to the same period of
2001 as the bank continues to focus on fee and service charge income. One
significant contributor to non-interest income is insufficient fund (NSF) fee
income. NSF fee income contributed in excess of $391,000 during the first half
of 2002.
Non-interest expense increased by 3.1% during the second quarter of 2002
compared to the same quarter of 2001. The main reason for the increase was
$59,000 in expenses incurred relating to maintaining and preparing other real
estate in preparation of sale.
LIQUIDITY
The Bank's objective is to maintain adequate liquidity while minimizing interest
rate risk. Adequate liquidity provides resources for credit needs of borrowers,
for depositor withdrawals, and for funding Corporate operations. Sources of
liquidity include maturing investment securities, overnight borrowings of
federal funds (and Flex Line), payments received on loans, and increases in
deposit liabilities.
Funds generated from operations contributed a major source of funds for the
first half of 2002. The major source of funds came from the net increase in
money market funds of $9,290,000 mainly in the area of our new indexed money
market. Another source of funds was the net increase of $3,299,000 in time
deposits.
The major use of funds during the period was a net increase in loans of
$7,288,000. The other major use of funds was the net increase in
interest-bearing balances, investments in insured certificates of deposit of
other banks, of $2,000,000 purchased in anticipation of falling interest rates.
CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES
Total non-performing assets increased slightly to $4,769,000 representing 1.40%
of total assets at June 30, 2002, from $4,744,000 or 1.44% of total assets at
December 31, 2001. Most non-performing assets are supported by collateral value
that appears to be adequate at June 30, 2002.
The allowance for loan losses at June 30, 2002, was $2,950,000 or 1.38% of
loans, net of unearned interest, as compared to $2,856,000 or 1.41% of loans,
net of unearned interest, at December 31, 2001.
Based upon the ongoing analysis of the Bank's loan portfolio by the loan review
department, the latest quarterly analysis of potentially unsound loans and
non-performing assets, we consider the Allowance for Loan Losses to be adequate
to absorb any reasonable, foreseeable loan losses.
MID PENN BANCORP, INC.
June 30, Dec. 31,
2002 2001
-------- --------
Non-Performing Assets:
Non-accrual loans 1,601 1,686
Past due 90 days or more 928 828
Restructured loans 535 537
----- -----
Total non-performing loans 3,064 3,051
Other real estate 1,705 1,693
----- -----
Total 4,769 4,744
===== =====
Percentage of total loans outstanding 2.27 2.34
Percentage of total assets 1.40 1.44
Analysis of the Allowance for Loan Losses:
Balance beginning of period 2,856 2,815
Loans charged off:
Commercial real estate, construction
and land development 0 249
Commercial, industrial and agricultural 32 118
Real estate - residential mortgage 0 0
Consumer 108 122
----- -----
Total loans charged off 140 489
----- -----
Recoveries of loans previously charged off:
Commercial real estate, construction
and land development 17 0
Commercial, industrial and agricultural 0 1
Real estate - residential mortgage 0 0
Consumer 17 29
----- -----
Total recoveries 34 30
----- -----
Net (charge-offs) recoveries -106 -459
----- -----
Current period provision for
loan losses 200 500
----- -----
Balance end of period 2,950 2,856
===== =====
Mid Penn Bancorp, Inc.
PART II - OTHER INFORMATION:
Item 1. Legal Proceedings - Nothing to report
Item 2. Changes in Securities - Nothing to report
Item 3. Defaults Upon Senior Securities - Nothing to report
Item 4. Submission of Matters to a Vote of Security Holders:
At the Annual Meeting of Shareholders held on April 23, 2002, a vote
was held for the election of Class A directors: Gregory M. Kerwin,
Warren A. Miller, Edwin D. Schlegel, and Eugene F. Shaffer to serve
for a three-year term, and to ratify the selection of Parente Randolph
as external auditors for the corporation for the year ending December
31, 2002. Gregory Kerwin received 2,528,847 votes for and 3,959 votes
withheld. Warren Miller received 2,528,666 votes for and 4,140 votes
withheld. Edwin Schlegel received 2,531,804 votes for and 1,002 votes
withheld. Eugene Shaffer received 2,531,804 votes for and 1,002
withheld. The selection of external auditors received 2,529,819 votes
for, 153 votes against, and 2,833 votes abstaining.
Item 5. Other Information - Nothing to report
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - None.
b. Reports on Form 8-K - None.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Mid Penn Bancorp, Inc.
Registrant
/s/ Alan W. Dakey /s/ Kevin W. Laudenslager
- -------------------------- -------------------------
By: Alan W. Dakey By: Kevin W. Laudenslager
President & CEO Treasurer
Date: August 12, 2002 Date: August 12, 2002
Certification of Principal Executive Officer and Principal
Financial Officer Pursuant to 18 U.S.C. Section 1350
In connection with the Quarterly Report of Mid Penn Bancorp, Inc. (the
"Company") on Form 10-Q for the six month period ended June 30, 2002, as filed
with the Securities and Exchange Commission (the "Report"), I, Alan W. Dakey,
President and CEO, and I, Kevin W. Laudenslager, Treasurer, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company as of the dates and for the periods expressed in the
Report.
/s/ Alan W. Dakey /s/ Kevin W. Laudenslager
- ----------------- -------------------------
By: Alan W. Dakey By: Kevin W. Laudenslager
President & CEO Treasurer
Date: August 12, 2002 Date: August 12, 2002