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.


CONTACTS

Rory G. Ritrievi
President & Chief Executive Officer

Justin T. Webb
Interim Chief Financial Officer

1-866-642-7736

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Source: Mid Penn Bancorp

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