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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ________________
Commission File Number: 001-13677
MID PENN BANCORP, INC.
----------------------
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 25-1666413
------------ ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
349 Union Street
Millersburg, Pennsylvania 17061
------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(717) 692-2133
--------------
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $1.00 Par Value
-----------------------------
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
None
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. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the shares of common stock of the Registrant
held by nonaffiliates of the Registrant was $33,386,790 at February 23, 2001 (a
date within 60 days of the date hereof). As of February 23, 2001, the
Registrant had 3,037,444 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Excerpts from the Registrant's 2000 Annual Report to Shareholders are
incorporated herein by reference in response to Part II and Part IV, hereof.
The Registrant's proxy statement to be used in connection with the 2001 Annual
Meeting of Shareholders is incorporated herein by reference in partial response
to Part III, hereof.
MID PENN BANCORP, INC.
FORM 10-K
INDEX
PART I PAGE PAGE
- -------
Item 1 - Business.....................................................1
Item 2 - Properties..................................................12
Item 3 - Legal Proceedings...........................................13
Item 4 - Submission of Matters to a Vote of Securities Holders.......13
PART II
- -------
Item 5 - Market for Corporation's Common Equity and
Related Shareholder Matters.................................13
Item 6 - Selected Financial Data.....................................14
Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operation................14
Item 7A - Quantitative and Qualitative Disclosure About Market Risk...14
Item 8 - Financial Statements and Supplementary Data.................14
Item 9 - Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure......................14
PART III
- --------
Item 10 - Directors and Executive Officers of the Corporation.........14
Item 11 - Executive Compensation......................................15
Item 12 - Security Ownership of Certain Beneficial Owners
and Management..............................................15
Item 13 - Certain Relationships and Related Transactions..............15
PART IV
- -------
Item 14 - Exhibits, Financial Statements, Schedules and
Reports on Form 8-K.........................................16
Signatures
PART I
ITEM 1. BUSINESS.
- ------ --------
General
Mid Penn Bancorp, Inc. is a one bank holding company, incorporated in the
Commonwealth of Pennsylvania in August, 1991. On December 31, 1991, the
corporation acquired, as part of the holding company formation, all of the
outstanding common stock of Mid Penn Bank, and the bank became a wholly owned
subsidiary of the corporation. The bank and Mid Penn Investment Corporation,
which is engaged in investing activities, are the corporation's wholly-owned
subsidiaries.
Millersburg Bank, the predecessor to Mid Penn Bank, was organized in 1868,
and became a state chartered bank in 1931, obtaining trust powers in 1935, at
which time its name was changed to Millersburg Trust Company. In 1962, the
Lykens Valley Bank merged with and into Millersburg Trust Company. In 1971,
Farmer's State Bank of Dalmatia merged with Millersburg Trust Company and the
resulting entity adopted the name "Mid Penn Bank." In 1985, the bank acquired
Tower City National Bank. Effective July 10, 1998, the corporation acquired
Miners Bank of Lykens, which was merged into the bank. The bank is supervised
by the Pennsylvania Department of Banking and the Federal Deposit Insurance
Corporation. The corporation's and the bank's legal headquarters is located at
349 Union Street, Millersburg, Pennsylvania 17061.
The bank presently has 12 offices, including the two offices opened in 2000
- -- our "virtual office" at www.midpennbank.com, added in February and our second
-------------------
Harrisburg office at 2615 North Front Street, added in August. The bank,
headquarted in Millersburg, Dauphin County, Pennsylvania, has offices in
Dauphin, Northumberland, Schuylkill, and Cumberland Counties, Pennsylvania with
total assets of over $315 million as of December 31, 2000.
At December 31, 2000, the corporation's consolidated assets, deposits and
shareholders' equity were approximately $315,584,000, $231,408,000 and
$29,626,000, respectively. The corporation's primary business consists of
attracting deposits from its network of community banking offices operated by
the bank. The bank engages in a full-service commercial banking and trust
business, making available to the community a wide range of financial services,
including, but not limited to, personal loans, mortgage and home equity loans,
secured and unsecured commercial loans, lines of credit, construction financing,
farm loans, community development and local government loans and various types
of time and demand deposits. The bank also offers cash management, mobile
banking, telephone banking, and Check Card and ATM service. In addition, the
bank's trust department provides a full range of trust services, including
estate planning, retirement planning and investment services. Bank deposits are
insured by the FDIC's Bank Insurance Fund to the maximum extent provided by law.
In addition to historical information, this Form 10-K contains forward-
looking statements. We have made forward-looking
1
statements in this document, and in documents that we incorporate by reference,
that are subject to risks and uncertainties. Forward-looking statements include
the information concerning possible or assumed future results of operations of
Mid Penn Bancorp, Inc. and its subsidiaries. When we use words such as
"believes," "expects," "anticipates," or similar expressions, we are making
forward-looking statements.
Shareholders should note that many factors, some of which are discussed
elsewhere in this document and in the documents that we incorporate by
reference, could affect the future financial results of the corporation and its
subsidiaries and could cause actual results to differ materially from those
expressed in the forward-looking statements contained or incorporated by
reference in this document. These factors include, among others, the following:
. operating, legal and regulatory risks;
. economic, political and competitive forces affecting our banking,
securities, asset management and credit services businesses; and
. the risk that our analyses of these risks and forces could be incorrect
and/or that the strategies developed to address them could be unsuccessful.
The corporation operates in a heavily regulated environment. Changes in
laws and regulations affecting the corporation and its banking subsidiary, Mid
Penn Bank, may have an impact on operations. See the sections entitled
"Supervision and Regulation - The Corporation" and "Supervision and Regulation -
The Bank".
Employees
At December 31, 2000, the corporation had 86 full-time and 31 part-time
employees. None of these employees is represented by a collective bargaining
agent, and the corporation believes it enjoys good relations with its personnel.
Competition
The corporation experiences substantial competition in attracting and
retaining deposits and in lending funds. Primary factors in competing for
deposits are the ability to offer attractive rates and the convenience of office
locations. Direct competition for deposits comes primarily from other
commercial banks and thrift institutions. Competition for deposits also comes
from money market mutual funds, corporate and government securities and credit
unions. The primary factors in the competition for loans are interest rates,
loan origination fees and the range of products and services offered.
Competition for origination of real estate loans normally comes from other
commercial banks, thrift institutions, mortgage bankers, mortgage brokers and
insurance companies.
For additional information with respect to the corporation's business
activities, see Part II, Item 7 of this report.
Environmental Laws
Neither the corporation nor the bank anticipate that compliance with
environmental laws and regulations will have any material effect on capital,
expenditures, earnings, or on its
2
competitive position. However, environmentally related hazards have become a
source of high risk and potentially unlimited liability for financial
institutions. Environmentally contaminated properties owned by an institution's
borrowers may resulting in a drastic reduction in the value of the collateral
securing the institution's loans to such borrowers, high environmental clean up
costs to the borrower affecting its ability to repay the loans, the
subordination of any lien in favor of the institution to a state or federal lien
securing clean up costs, and liability to the institution for clean up costs if
it forecloses on the contaminated property or becomes involved in the management
of the borrower. To minimize this risk, the bank may require an environmental
examination of and report with respect to the property of any borrower or
prospective borrower if circumstances affecting the property indicate a
potential for contamination, taking into consideration a potential loss to the
institution in relation to the borrower. Such examination must be performed by
an engineering firm experienced in environmental risk studies and acceptable to
the institution, and the cost of such examinations and reports are the
responsibility of the borrower. These costs may be substantial and may deter
prospective borrower from entering into a loan transaction with the bank. The
corporation is not aware of any borrower who is currently subject to any
environmental investigation or clean up proceeding that is likely to have a
material adverse effect on the financial condition or results of operations of
the bank.
As discussed above, there are several federal and state statutes that
regulate the obligations and liabilities of financial institutions pertaining to
environmental issues. In addition to the potential for attachment of liability
resulting from its own actions, a bank may be held liable under certain
circumstances for the actions of its borrowers, or third parties, when such
actions result in environmental problems on properties that collateralize loans
held by the bank. Further, the liability has the potential to far exceed the
original amount of the loan issued by the bank. Currently, neither the
corporation nor the bank is a party to any pending legal proceeding pursuant to
any environmental statute, nor is the corporation or the bank aware of any
circumstances that may give rise to liability under any such statute.
Supervision and Regulation - The Corporation
Mid Penn Bancorp, Inc. is a bank holding company within the meaning of
the Bank Holding Company Act of 1956, as amended (the BHC Act) and is registered
with, and subject to examination and regulation by, the Federal Reserve. The
corporation's depository institution, Mid Penn Bank, is subject to supervision
and examination by the Pennsylvania Department of Banking as well as the Federal
Deposit Insurance Corporation.
The activities of bank holding companies are generally limited to the
business of banking, managing or controlling banks, and other activities that
the Federal Reserve determines to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto. In addition, under the
Gramm-Leach-Bliley Act (the GLB Act), which was effective in most significant
respects on March 11, 2000, bank holding companies, such as the corporation,
whose controlled depository institutions are "well capitalized" and "well
managed", as defined in Federal Reserve Regulation Y, and which obtain
satisfactory Community Reinvestment Act ratings, are eligible to declare
themselves to be "financial holding companies" and engage in a broader spectrum
of activities than those generally permitted, including insurance underwriting
and brokerage (including annuities), and underwriting and dealing securities
without a revenue
3
limit and without limits on the amounts of equity securities it may hold in
conducting its underwriting and dealing activities. Financial holding companies
that do not continue to meet all of the requirements for such status, will,
depending on which requirement they fail to meet, face not being able to
undertake new activities or acquisitions that are financial in nature, or losing
their ability to continue those activities that are not generally permissible
for bank holding companies.
The corporation currently meets the requirements to make an election to
become a financial holding company. The corporation's management has not
determined at this time whether it will seek an election to become a financial
holding company. The corporation is examining its strategic business plan to
determine whether, based on market conditions, the relative financial conditions
of the corporation and its subsidiaries, regulatory capital requirements,
general economic conditions, and other factors, the corporation desires to
utilize any of its expanded powers provided in the GLB Act.
Under the BHC Act, nonbank acquisitions have generally been limited to
5% of the voting shares unless the Federal Reserve determines that the
acquisition is so closely rated to banking as to be a proper incident to banking
or managing or controlling banks. Under the GLB Act, financial holding
companies will be able to make acquisitions in companies that engage in
activities that are financial in nature. The Federal Reserve's prior approval
will not be required for such acquisitions, although it is possible that the
Federal Reserve will issue regulations imposing some limitations or conditions
on such acquisitions. In addition, under a new merchant banking authority added
by the GLB Act, financial holding companies will be authorized to invest in
companies that engage in activities that are not financial in nature, as long as
the financial holding company makes its investment with the intention of
limiting the investment in duration, does not manage the company on a day-to-day
basis, and the investee company does not cross-market with any of the financial
holding company's controlled depository institutions. This authority applies to
investments both in the United States and outside the United States. It is
possible that regulations conditioning this authority may be promulgated. Bank
holding companies will also retain their authority, subject to prior specific or
general Federal Reserve consent, to acquire less than 20% of the voting
securities of a company that does not do business in the United States, and 20%
or more of the voting securities of any such company if the Federal Reserve
finds by regulation or order that its activities are usual in connection with
banking or finance outside the United States. In general, bank holding
companies that are not financial holding companies may engage in a broader range
of activities outside the United States than they may engage in inside the
United States, including sponsoring, distributing, and advising open-end mutual
funds, and underwriting and dealing in debt and, to a limited extent, equity
securities, subject to local country laws. At present, the corporation does not
engage in merchant banking activities. However, the corporation will continue
to examine its strategic business plan to determine whether, based on market
conditions, the relative financial conditions of the corporation and its
subsidiaries, regulatory capital requirements, general economic conditions, and
other factors, the corporation desires to engage in merchant banking activities
in the future.
Subject to certain limitations and restrictions, a U.S. bank holding
companies and U.S. domestic banks, with the prior approval of the Federal
Reserve, may acquire out-of-state banks
4
and out of state bank branches. A Pennsylvania-chartered bank is generally
permitted to open a de novo branch in any state.
The corporation's earnings and activities are affected by legislation,
by actions of its regulators, and by local legislative and administrative bodies
and decisions of courts in the jurisdictions in which the corporation and its
subsidiaries conduct business. For example, these include limitations on the
ability of certain subsidiaries to pay dividends to their intermediate holding
companies and on the abilities of those holding companies to pay dividends to
the corporation. It is the policy of the Federal Reserve that bank holding
companies should pay cash dividends on common stock only out of income available
over the past year and only if prospective earnings retention is consistent with
the organization's expected future needs and financial condition. The policy
provides that bank holding companies should not maintain a level of cash
dividends that undermines the bank holding company's ability to serve as a
source of strength to its banking subsidiaries.
Various federal and state statutory provisions limit the amount of
dividends that subsidiary banks can pay to their holding companies without
regulatory approval. In addition to these explicit limitations, the federal
regulatory agencies are authorized to prohibit a banking subsidiary or bank
holding company from engaging in an unsafe or unsound banking practice.
Depending upon the circumstances, the agencies could take the position that
paying a dividend would constitute an unsafe or unsound banking practice.
Numerous other federal and state laws also affect the corporation's
earnings and activities including federal and state consumer protection laws.
Legislation may be enacted or regulation imposed in the United States or its
political subdivisions, or in any other jurisdiction where the corporation does
business, to further regulate banking and financial services or to limit finance
charges or other fees or charges earned in such activities. There can be no
assurance whether any such legislation or regulation will place additional
limitations on the corporation's operations or adversely affect its earnings.
Various legal restrictions exist on the extent to which a bank holding
company and certain of its nonbank subsidiaries can borrow or otherwise obtain
credit from banking subsidiaries or engage in certain other transactions with or
involving those banking subsidiaries. In general, these restrictions require
that any such transactions must be on terms that would ordinarily be offered to
unaffiliated entities and secured by designated amounts of specified collateral.
Transactions between a banking subsidiary and the bank holding company or any
nonbank subsidiary are limited to 10% of the banking subsidiary's capital stock
and surplus, and as to the holding company and all such nonbank subsidiaries in
the aggregate, to 20% of the bank's capital stock and surplus.
The corporation's right to participate in the distribution of assets
of any subsidiary upon the subsidiary's liquidation or reorganization will be
subject to the prior claims of the subsidiary's creditors. In the event of a
liquidation or other resolution of an insured depository institution, the claims
of depositors and other general or subordinated creditors are entitled to a
priority of payment over the claims of holders of any obligation of the
institution to its
5
shareholders, including any depository institution holding company (such as the
corporation) or any shareholder or creditor thereof.
A financial institution insured by the FDIC that is under common control
with a failed or failing FDIC-insured institution can be required to indemnify
the FDIC for losses resulting from the insolvency of the failed institution,
even if this causes the affiliated institution also to become insolvent. Any
obligations or liability owed by a subsidiary depository institution to its
parent company is subordinate to the subsidiary's cross-guarantee liability with
respect to commonly controlled insured depository institutions and to the rights
of depositors.
Under Federal Reserve policy, a bank holding company is expected to act as
a source of financial strength to each of its banking subsidiaries and commit
resources to their support. As a result of that policy, the corporation may be
required to commit resources to Mid Penn Bank in certain circumstances. However,
under the GLB Act, the Federal Reserve will not be able to compel a bank holding
company to remove capital from its regulated securities or insurance
subsidiaries in order to commit such resources to its subsidiary banks.
The Federal Reserve, the FDIC and other federal regulators have issued
certain risk-based capital guidelines, which supplement existing capital
requirements. The guidelines require all United States banks and bank holding
companies to maintain a minimum risk-based capital ratio of 8%, at least 4% of
which must be in the form of common stockholders' equity. The risk-based
capital rules are designed to make regulatory capital requirements more
sensitive to differences in risk profiles among banks and bank holding companies
and to minimize disincentives for holding liquid assets. The corporation and
the bank have capital ratios exceeding regulatory requirements. For information
concerning the corporation's ratios, please see page 20 of the corporation's
2000 Annual Report to Shareholders, which page is included at Exhibit 13 hereto
and incorporated herein by reference. We include a detailed discussion of the
bank's regulatory capital requirements in the section entitled "Supervision and
Regulation--The Bank", below.
The GLB Act included the most extensive consumer privacy provisions ever
enacted by Congress. These provisions, among other things, require full
disclosure of the corporation's privacy policy to consumers and mandate offering
the consumer the ability to "opt out" of having non-public customer information
disclosed to third parties. In addition, these provisions require the federal
banking regulators to adopt privacy regulations and permit the states to adopt
more extensive privacy protections through legislation or regulation. We can
provide no assurance whether any such legislation or regulation will place
additional limitations on the corporation's operations or adversely affect its
earnings.
From time to time, legislation is introduced in Congress that may change
banking statutes and the operating environment of the corporation and its
banking subsidiary in substantial and unpredictable ways. The corporation cannot
determine whether any such proposed legislation will be enacted and, if enacted,
the ultimate effect that any such potential legislation or implementing
regulations would have upon the financial condition or results of operations of
the corporation or its depository subsidiary.
6
Supervision and Regulation - The Bank
Mid Penn Bank is a Pennsylvania chartered bank. It's deposits are insured
by the FDIC. The bank is not a member of the Federal Reserve System. The bank
is subject to supervision, regulation and examination by the Pennsylvania
Department of Banking and by the FDIC. In addition, the bank is subject to a
variety of local, state and federal laws that affect its operation.
The laws of Pennsylvania applicable to the bank include provisions that,
among other things:
. require the maintenance of certain reserves against deposits;
. limit the type and amount of loans that may be made and the interest
that may be charged thereon;
. restrict investments and other activities;
. set limits on the payment of dividends; and
. regulate activities of the bank with respect to mergers and
consolidations and the establishment of branches.
The amount of funds that the bank can lend to a single borrower is limited,
generally, under Pennsylvania law, to 15% of the aggregate of its capital,
surplus, undivided profits and loan loss reserves and capital securities, all as
defined by statute and by regulation.
Further, the bank, as a subsidiary bank of a bank holding company, is
subject to certain restrictions imposed by the Federal Reserve Act, on:
. any extensions of credit to the corporation or its subsidiaries;
. investments in the stock or other securities of the corporation or its
subsidiaries; and
. taking such stock or securities as collateral for loans.
The Federal Reserve Act and Federal Reserve Board regulations also place certain
limitations and reporting requirements on extensions of credit by a bank to
principal shareholders of its parent holding company, among others, and to
related interests of such principal shareholders. In addition, legislation and
regulations promulgated thereunder may affect the terms upon which any person
becoming a principal shareholder of a holding company may obtain credit from
banks with which the subsidiary bank maintains a correspondent relationship.
Under the Federal Deposit Insurance Corporation Improvement Act of 1991,
federal regulatory agencies classify institutions into one of five defined
capital categories:
. Well capitalized,
. Adequately capitalized,
. Under capitalized,
. Significantly undercapitalized, and
. Critically undercapitalized.
The table below illustrates these capital categories.
7
Total Tier 1 Under a
Risk- Risk- Tier 1 Capital
Based Based Leverage Order or
Ratio Ratio Ratio Directive
----- ------ --------- ---------
CAPITAL CATEGORY
Well capitalized 10.0 6.0 5.0 No
Adequately capitalized 8.0 4.0 4.0*
Undercapitalized 8.0 4.0 4.0*
Significantly undercapitalized 6.0 3.0 3.0
Critically undercapitalized 2.0
*3.0 for those banks having the highest available regulatory rating.
In the event an institution's capital deteriorates to the
undercapitalized category or below, FDICIA prescribes an increasing amount of
regulatory intervention, including:
. The bank's implementation of a capital restoration plan and a
guarantee of the plan by a parent institution; and
. The placement of a "hold" on increases in assets, number of
branches or lines of business.
If capital has reached the significantly or critically undercapitalized level,
further material restrictions can be imposed, including:
. restrictions on interest payable on accounts,
. dismissal of management, and
. in critically undercapitalized situations, the appointment of a
receiver.
For well capitalized institutions, FDICIA provides authority for regulatory
intervention where the institution is deemed to be engaging in unsafe or unsound
practices or receives a less than satisfactory examination report rating for
asset quality, management, earnings or liquidity. All but well capitalized
institutions are prohibited from accepting brokered deposits without prior
regulatory approval.
Under FDICIA, financial institutions are subject to increased
regulatory scrutiny and must comply with certain operational, managerial and
compensation standards to be developed by Federal Reserve regulations.
Under the Federal Deposit Insurance Act, federal regulatory agencies
possess the power to prohibit institutions from engaging in any activity that
would be an unsafe or unsound banking practice or would otherwise be in
violation of law. Moreover, the Financial Institutions Regulatory and Interest
Rate Control Act of 1978 generally expanded the circumstances under which
officers or directors of a bank may be removed by the institution's federal
supervisory agency, restricts lending by a bank to its executive officers,
directors, principal shareholders or related interests thereof and restricts
management personnel of a bank from serving as directors or in other management
positions with certain depository institutions whose assets exceed a specified
amount or which have an office within a specified geographic area, and restricts
the
8
relationships of management personnel of a bank with securities companies
and securities dealers. Additionally, FIRA prohibits acquisition of control of
a bank unless the appropriate federal supervisory agency has received 60 days
prior written notice, and, within that time, has not disapproved the acquisition
of control or otherwise extended the period for disapproval. Control, for
purposes of FIRA, means the power to direct, either directly or indirectly, the
management or policies or to vote 25% or more of any class of outstanding stock
of a financial institution or its respective holding company. Persons or
groups holding revocable proxies to vote 25% or more of the outstanding common
stock of a financial institution or holding company would be presumed to be in
control of the institution for purposes of FIRA.
Under the Community Reinvestment Act of 1977, as amended, an
institution's federal regulator is required to assess a financial institutions
record to determine if the institution is meeting the credit needs of the
community, including low and moderate income neighborhoods, which it serves and
to take this record into account evaluating any application made by an
institution for, among other things, approval of a branch or other deposit
facility, office relocation, a merger or any acquisition of bank shares. The
Financial Institutions Reform, Recovery and Enforcement Act of 1989 amended the
CRA to require, among other things, that a bank's record of meeting the credit
needs of its community, including low and moderate income neighborhoods be made
available to the public. This evaluation includes a descriptive rating:
. "outstanding"
. "satisfactory"
. "needs to improve" or
. "substantially non compliance" and
. a statement describing the basis for the rating.
These ratings are publicly disclosed.
Under the Bank Secrecy Act, banks and other financial institutions are
required to report to the Internal Revenue Service currency transactions of more
than $10,000 or multiple transactions of which the bank is aware in any one day
that aggregate in excess of $10,000. Civil and criminal penalties are provided
under the BSA for failure to file a required report, for failure to supply
information required by the BSA or for filing a false or fraudulent report.
The Competitive Equality Banking Act, included the legislation which:
. imposes certain restrictions on transactions between banks and their
affiliates;.
. expands the powers available to Federal bank regulators in assisting
failed or failing banks;
. limits the amount of time banks may hold certain deposits prior to
making such funds available for withdrawal and any interest thereon;
and
. requires that any adjustable rate mortgage loan secured by a lien on a
one-to-four family dwelling include a limitation on the maximum rate
at which interest may accrue on the principal balance during the term
of such loan.
9
The GLB Act includes a new section of the Federal Deposit Insurance Act
governing subsidiaries of state banks that engage in "activities as principal
that would only be permissible" for a national bank to conduct in a financial
subsidiary. It expressly preserves the ability of a state bank to retain all
existing subsidiaries. Because Pennsylvania permits commercial banks chartered
by the state to engage in any activity permissible for national banks, the bank
will be permitted to form subsidiaries to engage in the activities authorized by
the GLB Act, to the same extent as a national bank. In order to form a
financial subsidiary, the bank must be well-capitalized, and the bank would be
subject to the same capital deduction, risk management and affiliate transaction
rules as applicable to national banks.
The corporation and the bank do not believe that the GLB Act will have a
material adverse effect on our operations in the near-term. However, to the
extent that it permits banks, securities firms, and the insurance companies to
affiliate, the financial services industry may experience further consolidation.
The GLB Act is intended to grant to community banks certain powers as a matter
or right that larger institutions have accumulated on an ad hoc basis.
Nevertheless, this Act may have the result of increasing the amount of
competition that the corporation and the bank face from larger institutions and
other types of companies offering financial products, many of which may have
substantially more financial resources than the corporation and the bank.
From time to time, legislation is enacted that has the effect of increasing
the cost of doing business, limiting or expanding permissible activities or
affecting the competitive balance between banks and other financial
institutions. Proposals to change the laws and regulations governing the
operations and taxation of banks, bank holding companies and other financial
institutions are frequently made in Congress, and before various bank regulatory
agencies. The corporation cannot predict the likelihood of any major changes or
the impact such changes might have on the corporation and/or the bank.
The corporation's and bank's earning are and will be affected by domestic
economic conditions and the monetary and fiscal policies of the United States
government and its agencies. The monetary policies of the Federal Reserve have
had, and will likely continue to have, an impact on the operating results of
commercial banks because of the Federal Reserve's power to implement national
monetary policy, to, among other things, curb inflation or combat recession.
The Federal Reserve has a major impact on the levels of bank loans, investments
and deposits through its open market operations in United States government
securities and through its regulation of, among other things, the discount rate
on borrowings of member banks and the reserve requirements against member bank
deposits. It is not possible to predict the nature and impact of future changes
in monetary and fiscal policies.
Further, the business of the corporation is also affected by the state of
the financial services industry in general. As a result of legal and industry
changes, management predicts that the industry will continue to experience an
increase in consolidations and mergers as the financial services industry
strives for greater cost efficiencies and market share. Management also expects
increased diversification of financial products and services offered by the bank
and its competitors. Management believes that such consolidations and mergers,
and diversification of products and services may enhance the bank's competitive
position.
10
From time to time, various types of federal and state legislation have been
proposed that could result in additional regulation of, and restrictions on, the
business of the bank. It cannot be predicted whether any such legislation will
be adopted or, if adopted, how such legislation would affect the business of the
bank. As a consequence of the extensive regulation of commercial banking
activities in the United States, the bank's business is particularly susceptible
to being affected by federal legislation and regulations that may increase the
costs of doing business.
Pending Legislation
Management is not aware of any other current specific recommendations by
regulatory authorities or proposed legislation which, if they were implemented,
would have a material adverse effect upon the liquidity, capital resources, or
results of operations, although the general cost of compliance with numerous and
multiple federal and state laws and regulations does have, and in the future may
have, a negative impact on the corporation's results of operations.
Federal Taxation
The corporation and the bank are subject to those rules of federal income
taxation generally applicable to corporations and report their respective income
and expenses on the accrual method of accounting. The corporation and its
subsidiaries file a consolidated federal income tax return on a calendar year
basis. Intercompany distributions (including dividends) and certain other items
of income and loss derived from intercompany transactions are eliminated upon
consolidation of all the consolidated group members' respective taxable income
and losses.
The Internal Revenue Code imposes a corporate alternative minimum tax. The
corporate AMT only applies if such alternative minimum tax exceeds a
corporation's regular tax liability. The excess of the calculated AMT over the
regular tax for the taxable year is the taxpayer's net minimum tax liability.
State Tax
The corporation is subject to the Pennsylvania Corporate Net Income Tax and
Capital Stock Tax. The current Corporate Net Income Tax rate is 9.99% and is
imposed upon a corporate taxpayer's unconsolidated taxable income for federal
tax purposes with certain adjustments. In general, the Capital Stock Tax is a
property tax imposed on a corporate taxpayer's capital stock value apportionable
to the Commonwealth of Pennsylvania, which is determined in accordance with a
fixed formula based upon average book income and net worth. In the case of a
holding company, an optional elective method permits the corporate taxpayer to
be taxed on only 10% of such capital stock value. The Capital Stock Tax rate
for 2000 was .00899%.
11
ITEM 2. PROPERTIES.
- ------ ----------
The principal office of Mid Penn Bancorp, Inc. and Mid Penn Bank are
located at 349 Union Street, Millersburg, Pennsylvania. The bank owns its main
office, all branch offices and certain parking facilities related to its banking
offices, all of which are free and clear of any lien. The table below sets
forth the location of each of the bank's properties.
Office and Address Description of Property
- ------------------ -----------------------
Main Office Main Bank Office
349 Union Street
Millersburg, PA 17061
Tremont Branch Office Branch Bank
7-9 East Main Street
Tremont, PA 17981
Elizabethville Branch Office Branch Bank
2 East Main Street
Elizabethville, PA 17023
Elizabethville Branch Office Drive-In
11 East Main Street
Elizabethville, PA 17023
Dalmatia Branch Office Branch Bank
School House Road
Dalmatia, PA 17017
Halifax Branch Office Branch Bank
Halifax Shopping Center
3763 Peters Mountain Road
Halifax, PA 17032
Carlisle Pike Branch Office Branch Bank
4622 Carlisle Pike
Mechanicsburg, PA 17055
Harrisburg Branch Office Branch Bank
4098 Derry Street
Harrisburg, PA 17111
Harrisburg Branch Office Branch Office
2615 North Front Street
Harrisburg, PA 17110
12
Tower City Branch Office Branch Bank
545 East Grand Avenue
Tower City, PA 17980
Dauphin Branch Office Branch Bank
1001 Peters Mountain Road
Dauphin, PA 17018
Lykens Branch Office Branch Bank
550 Main Street
Lykens, PA 17048
All of these properties are in good condition and are deemed by management
to be adequate for the bank's purposes.
ITEM 3. LEGAL PROCEEDINGS.
- ------ -----------------
Management, after consulting with the corporation's legal counsel, is not
aware of any litigation that would have a material adverse effect on the
consolidated financial position of the corporation. There are no proceedings
pending other than ordinary routine litigation incident to the business of the
corporation and of the bank. In addition, management does not know of any
material proceedings contemplated by governmental authorities against the
corporation or the bank.
ITEM 4. SUBMISSION OFMATTERS TO A VOTE OF SECURITY HOLDERS.
- ------ --------------------------------------------------
No matters were submitted during the fourth quarter of 2000 to the
corporation's shareholders for a vote.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- ------ ------------------------------------------------- -------------------
The information required by this Item, regarding market value, dividend
payments, and number of shareholders is set forth on page 3 of the corporation's
Annual Report to Shareholders, which page is included at Exhibit 13 hereto, and
incorporated herein by reference.
As of March 28, 2001, there were approximately 969 shareholders of record
of the corporation's common stock.
13
ITEM 6. SELECTED FINANCIAL DATA.
- ------ -----------------------
The information required by this Item is set forth on page 39 of the
corporation's Annual Report to Shareholders, which page is included at Exhibit
13 hereto, and incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------ -----------------------------------------------------------------------
OF OPERATION.
-------------
The information required by this Item is set forth on pages 24 through 38
of the corporation's Annual Report to Shareholders, which pages are included at
Exhibit 13 hereto, and incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
- ------- ----------------------------------------------------- ------
The information required by this Item is set forth on pages 34 through 37
of the corporation's Annual Report to Shareholders, which pages are included at
Exhibit 13 hereto and incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------ -------------------------------------------
The information required by this Item is set forth on pages 6 through 23 of
the corporation's Annual Report to Shareholders, which pages are included at
Exhibit 13 hereto, and incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ ---------------------------------------------------------------
FINANCIAL DISCLOSURE.
---------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- ------- --------------------------------------------------
The information required by this Item, relating to directors, executive
officers and control persons is set forth under the heading "Board of Directors
and Executive Officers" of the corporation's definitive proxy statement to be
used in connection with the 2001 Annual Meeting of Shareholders, which section
is incorporated herein by reference.
COMPLIANCE WITH SECTION 16(A) REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that officers and directors, and persons who own more than 10% of a registered
class of the corporation's equity securities, file reports of ownership and
changes in ownership with the Securities and
14
Exchange Commission. Officers, directors, and greater than 10% shareholders are
required by SEC regulation to furnish the corporation with copies of all Section
16(a) forms they file.
Based solely on our review of the copies of these forms, or written
representations from certain reporting persons that no Forms 5 were required for
those persons, Mid Penn Bancorp, Inc. believes that during the period from
January 1, 2000, through December 31, 2000, its officers and directors complied
with all applicable filing requirements.
ITEM 11. EXECUTIVE COMPENSATION.
- ------- ----------------------
The information required by this Item, relating to executive compensation,
is set forth under the headings "Executive Compensation," "Compensation of the
Board of Directors," "Compensation Committee Interlocks and Insider
Participation," "Salary Personnel Committee Report on Executive Compensation,"
and "Shareholder Return Performance Graph" of the corporation's definitive proxy
statement to be used in connection with the 2001 Annual Meeting of Shareholders,
which sections are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------- --------------------------------------------------------------
The information required by this Item, relating to beneficial ownership of
the corporation's common stock, is set forth under the heading "Beneficial
Ownership of Mid Penn Bancorp's Stock Held by Principal Shareholders and
Management" of the corporation's definitive proxy statement to be used in
connection with the 2001 Annual Meeting of Shareholders, which section is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- ------- ----------------------------------------------
The information required by this Item, relating to transactions with
management and others, certain business relationships and indebtedness of
management, is set forth under the heading "Certain Relationships and Related
Transactions" of the corporation's definitive proxy statement to be used in
connection with the 2001 Annual Meeting of Shareholders, which section is
incorporated herein by reference.
15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STAEMENT, SCHEDULES AND REPORTS ON FORM 8-K.
- ------- ---------------------------------------------------------------
PAGE*
- -----
(a) 1. Consolidated Financial Statements.
MID PENN BANCORP, INC. AND SUBSIDIARIES:
. Report of Independent Certified Public Accountants............................5
. Consolidated Balance Sheet, as of December 31, 2000 and 1999..................6
. Consolidated Statement of Income, for the years ended December 31,
2000, 1999 and 1998...........................................................7
. Consolidated Statement of Changes in Stockholders' Equity for the
years ended December 31, 2000, 1999 and 1998..................................8
. Consolidated Statement of Cash Flows for the years ended
December 31, 2000, 1999 and 1998..............................................9
. Notes to Consolidated Financial Statements for 2000 report..................10-23
*Refers to the respective page of the Annual Report to Shareholders. The
Consolidated Financial Statements and Notes to Consolidated Financial
Statements and Auditor's Report thereon on pages 5 to 23 of the Annual
Report to Shareholders, are incorporated herein by reference and
attached at Exhibit 13 to this Annual Report on Form 10-K. With the
exception of the portions of such Annual Report specifically
incorporated by reference in this Item and in Items 1, 5, 6, 7 and 8,
such Annual Report shall not be deemed filed as part of this Annual
Report on Form 10-K or otherwise subject to the liabilities of Section
18 of the Securities Exchange Act of 1934.
2. Financial Statement Schedules.
Financial Statement Schedules are omitted because the required
information is either not applicable, not required, or the information
is included in the consolidated financial statements or in the notes
thereto.
3. The following Exhibits are filed herewith or incorporated by reference
as a part of the Annual Report.
3(i) Corporation's Articles of Incorporation. (Incorporated by
reference to Exhibit 3(i) to the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1996, and filed with the
Commission on March 31, 1997.)
3(ii) Corporation's Bylaws. (Incorporated by reference to Exhibit 3(ii)
to the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1996, and filed with the Commission on March 31,
1997.)
10.1 Retirement Bonus Plan for the Board of Directors of Mid Penn Bank.
(Incorporated by reference to Exhibit 10 to the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1996,
and filed with the Commission on March 31, 1997.
16
10.2 Mid Penn Bancorp, Inc. Amended and Restated Dividend Reinvestment
Plan. (Incorporated by reference to the Corporation's Registration
Statement No. 333-39341 on Form S-8, filed with the Commission on
November 3, 1997.)
11 Statement re: Computation of Per Share Earnings. (Included herein
at Exhibit 13, at page 7 of the Corporation's Annual Report to
Shareholders.)
12 Statements re: Computation of Ratios. (Included herein at Exhibit
13, at page 39 of the Corporation's Annual Report to
Shareholders.)
13 Excerpts from the Corporation's 2000 Annual Report to
Shareholders.
21 Subsidiaries of the Corporation.
23 Consent of Parente Randolph, P.C., independent auditors.
(b) Reports on Form 8-K.
No Current Report on Form 8-K was filed by the Corporation during
the fourth quarter of the fiscal year ended December 31, 2000.
(c) The exhibits required herein are included at Item 14(a), above.
(d) Not Applicable.
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ Alan W. Dakey
-----------------
Alan W. Dakey,
President and Chief Executive Officer
Dated: March 28, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
corporation and in the capacities and on the dates indicated.
By /s/ Eugene F. Shaffer March 28, 2001
---------------------
Eugene F. Shaffer,
Chairman of the Board of Directors
By /s/ Alan W. Dakey March 28, 2001
---------------------
Alan W. Dakey, President,
Chief Executive Officer and Director
(Principal executive officer)
By /s/ Kevin W. Laudenslager March 28, 2001
-------------------------
Kevin W. Laudenslager,
Treasurer (principal financial and
accounting officer)
By March __, 2001
-----------------------
Jere M. Coxon, Director
By /s/ Earl R. Etzweiler March 28, 2001
---------------------
Earl R. Etzweiler, Director
By /s/ Gregory M. Kerwin March 28, 2001
---------------------
Gregory M. Kerwin, Director
By /s/ Charles F. Lebo March 28, 2001
-------------------
Charles F. Lebo, Director
By /s/ Warren A. Miller March 28, 2001
--------------------
Warren A. Miller, Director
By /s/ William G. Nelson March 28, 2001
---------------------
William G. Nelson, Director
By /s/ Donald E. Sauve March 28, 2001
-------------------
Donald E. Sauve, Director
By /s/ Edwin D. Schlegel March 28, 2001
---------------------
Edwin D. Schlegel, Director
By /s/ Guy J. Snyder, Jr. March 28, 2001
----------------------
Guy J. Snyder, Jr., Director
EXHIBIT INDEX
Page Number in
Manually Signed
Original
Exhibit No.
- -----------
3(i) Corporation's Articles of Incorporation. *
(Incorporated by referenceto Exhibit 3(i) to
the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1996, and filed with
the Commission on March 31, 1997.)
3(ii) Corporation's Bylaws. (Incorporated by reference *
to Exhibit 3(ii) to the Corporation's Annual
Report on Form 10-K for the year ended
December 31, 1996, and filed with the Commission
on March 31, 1997.)
10.1 Retirement Plan for the Board of Directors of Mid *
Penn Bank. (Incorporated by reference to Exhibit
10 to the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1996, and filed with
the Commission on March 31, 1997.)
10.2 Mid Penn Bancorp, Inc. Amended and Restated Dividend *
Reinvestment Plan. (Incorporated by reference to the
Corporation's Registration Statement No. 333-39341
on Form S-8, filed with the Commission on November 3,
1997.)
11 Statement re: Computation of Per Share Earnings. 27
(Included herein at Exhibit 13, at page 7 of the
Corporation's Annual Report to Shareholders.)
12 Statements re: Computation of Ratios. (Included herein 59
at Exhibit 13, at page 39 of the Corporation's Annual
Report to Shareholders.)
13 Excerpts from the Corporation's Annual Report to 23
Shareholders.
21 Subsidiaries of the Corporation. 60
23 Consent of Parente Randolph, P.C., independent auditors. 61
* Incorporated by reference.