Mid Penn Bancorp, Inc. Reports Fourth Quarter Earnings And D...| MENAFN.COM

Saturday, 04 February 2023 10:31 GMT

Mid Penn Bancorp, Inc. Reports Fourth Quarter Earnings And Declares Dividend


(MENAFN- GlobeNewsWire - Nasdaq)

HARRISBURG, Pa., Jan. 25, 2023 (GLOBE NEWSWIRE) -- Mid Penn Bancorp, Inc. (NASDAQ: MPB) ('Mid Penn'), the parent company of Mid Penn Bank (the 'Bank') and MPB Financial Services, LLC, today reported net income available to common shareholders ('earnings') for the quarter ended December 31, 2022 of $15.7 million, or $0.99 per common share basic and diluted.

Key Highlights in the Fourth Quarter of 2022

  • Earnings increased $238 thousand to $15.7 million, or 1.5%, for the quarter ended December 31, 2022 compared to $15.5 million for the quarter ended September 30, 2022.
  • Tax equivalent net interest margin was 3.80% compared to 3.92% in the prior quarter and 3.16% in the fourth quarter of 2021.
  • Loans and leases, net ('loans') grew 22.9% (annualized) during the three months ended December 31, 2022 from the third quarter of 2022.
  • Return on average assets was 1.42% for the quarter ended December 31, 2022.
  • Return on average equity and return on average tangible common equity(1) were 12.33% and 16.61%, respectively, for the fourth quarter of 2022, up from 12.23% and 16.55%, respectively, for the third quarter of 2022.
  • Book value per common share increased to $32.24 for the fourth quarter, up from $31.42 in the third quarter, while tangible book value per share(1) increased to $24.59 at December 31, 2022, compared to $23.80, at September 30, 2022.

'It is with great enthusiasm that we deliver these fourth quarter and full year earnings report. For the quarter, we generated net income available to common shareholders of $15.7 million, or $0.99 per common share, which compares favorably to both the $607 thousand, or $0.05 per common share, generated in the fourth quarter of 2021, which was negatively impacted by merger and acquisition charges, and the $15.5 million, or $0.97 per common share, generated in the third quarter of 2022.' said Rory G. Ritrievi, President and CEO. 'For the year, we generated net income available to common shareholders of $54.8 million, or $3.44 per common share, which compares favorably to the $29.3 million, or $2.71 per common share, for the year ended December 31, 2021. This year's net income and our earnings per common share are both records for the company. We accomplished this great quarter and this great year through continued successes in: high quality loan growth of 22.9% (annualized) for the quarter and 13.2% for the full year, noninterest income growth of 18.6% for the quarter compared to the fourth quarter of 2021 and 9.9% for the year, and a controlled growth in operating expenses.'

'Those successes were accomplished by our incredible employees working together within our customer relationship focused model to deliver the best service in our footprint. The Board is very proud of that employee group for following our strategic plan to a tee and delivering the best annual results our shareholders have seen,' said Mr. Ritrievi.

With this successful quarter, the Board is pleased to announce a quarterly cash dividend of $0.20 per share of common stock was declared at its meeting on January 25, 2023, payable on February 20, 2023 to shareholders of record as of February 10, 2023.

(1) Non-GAAP financial measure. Refer to the calculation on the section titled“Reconciliation of Non-GAAP Measures” at the end of this document.

Net Interest Income and Average Balance Sheet

For the three months ended December 31, 2022, net interest income was $38.6 million compared to net interest income of $39.4 million for the three months ended September 30, 2022 and $29.4 million for the three months ended December 31, 2021. The tax-equivalent net interest margin for the three months ended December 31, 2022 was 3.80% compared to 3.92% for the third quarter of 2022 and 3.16% for the fourth quarter of 2021, a 12 basis point(s) ('bp') decrease and a 64 bp increase, respectively, compared to the prior quarter and the same period in 2021. The linked quarter decrease was primarily the result of a 60 bp increase in the rate on interest-bearing liabilities, partially offset by a 32 bp increase in the yield on interest-earning assets. The increase in the rate on interest-bearing liabilities compared to the linked quarter was primarily the result of higher deposit pricing to attract and retain new and existing customers. The increase in the yield on interest-earning assets was primarily driven by the increase of the yield on loans by 25 bp, to 4.98% during the fourth quarter of 2022.

The 108 bp increase in the yield on interest-earning assets compared to the fourth quarter of 2021 was primarily driven by the increase of loan yields of 22 bp and the increase on the yield of taxable investment securities of 98 bp. Additionally, average interest-earning assets increased $346.5 million and average interest-bearing liabilities increased $263.8 million from the fourth quarter of 2021, primarily due to the inclusion of only one month in 2021 in the average balances of the assets and liabilities obtained through the acquisition of Riverview Financial Corporation ('Riverview'), which closed on November 30, 2021. The increase in average interest-earning assets was also impacted by loan growth and re-deployment of cash into investment securities partially offset by a decrease in federal funds sold. The increase in the yield on interest-earning assets was the result of a combination of excess cash being re-deployed into higher yielding investment securities and the increases in the fed fund rate during 2022. The increase in the rate on interest-bearing liabilities was primarily the result of higher deposit pricing to attract and retain new and existing customers.

For the year ended December 31, 2022, net interest income was $147.8 million, a $39.3 million, or 36.2%, increase compared to net interest income of $108.6 million for the year ended December 31, 2021. The year-over-year increase in net interest income was positively impacted by the Riverview acquisition in the fourth quarter of 2021, the deployment of fed funds into higher yielding investment securities in the first half of 2022, interest and fees from core loan growth and lower cost of deposits in the year ended December 31, 2022, when compared to the same period in 2021. The tax-equivalent net interest margin for the year ended December 31, 2022 was 3.59%, a 29 bp increase compared to 3.30% for the year ended December 31, 2021. The increase was primarily the result of a $828.1 million increase in the average balance of interest-earning assets and an increase in the yield of total interest-earning assets of 28 bp, partially offset by a $601.4 million increase in average interest-bearing liabilities and the reduction of Paycheck Protection Program ('PPP') fees recognized during 2022 compared to the same period in 2021.

The three months ended December 31, 2022 included the recognition of $29 thousand of PPP loan processing fees compared to $4.4 million of PPP loan processing fees recognized during the three months ended December 31, 2021. The year ended December 31, 2022 included the recognition of $3.8 million of PPP loan processing fees, a decrease of $18.2 million compared to $22.0 million of PPP loan processing fees recognized during the year ended 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. As of December 31, 2022, $43 thousand of PPP fees remained.

Total average assets were $4.4 billion for the fourth quarter of 2022, reflecting an increase of $41.4 million, or 1.0%, and $437.1 million, or 11.1% compared to total average assets of $4.3 billion and $3.9 billion for the third quarter of 2022 and the fourth quarter of 2021, respectively. Total average assets were $4.5 billion for the year ended 2022, reflecting an increase of $948.9 million, or 27.0%, compared to total average assets of $3.5 billion for the year ended 2021. The increase in total average assets for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily attributable to the Riverview acquisition, effective November 30, 2021.

Total average loans were $3.4 billion for the fourth quarter of 2022, reflecting an increase of $157.7 million, or 4.9%, compared to total average loans of $3.2 billion in the third quarter of 2022, and an increase of $800.2 million, or 30.8%, compared to total average loans of $2.6 billion for the fourth quarter of 2021. Total average loans were $3.2 billion for the year ended 2022, reflecting an increase of $678.2 million, or 26.7%, compared to total average loans for the year ended 2021. The year-over-year growth is largely attributable to the Riverview acquisition.

Total average deposits were $3.7 billion for the fourth quarter of 2022, reflecting an increase of $629 thousand compared to total average deposits in the third quarter of 2022, and an increase of $359.2 million, or 10.7%, compared to total average deposits of $3.4 billion for the fourth quarter of 2021. The average cost of deposits was 0.74% for the fourth quarter of 2022, representing a 44 bp increase from the third quarter of 2022 and the fourth quarter of 2021. Total average deposits were $3.8 billion for the year ended December 31, 2022, reflecting an increase of $937.0 million, or 32.5%, compared to total average deposits of $2.9 billion for the same period of 2021. The year-over-year growth in average deposits 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.

Asset Quality

The provision for loan and lease losses was $525 thousand for the three months ended December 31, 2022, a decrease of $1.0 million compared to the provision for loan and lease losses of $1.6 million for the three months ended September 30, 2022 and an increase of $155 thousand compared to the provision for loan and lease losses of $370 thousand for the three months ended December 31, 2021. The provision for loan and lease losses was $4.3 million for the year ended December 31, 2022, an increase of $1.4 million compared to the $2.9 million provision for loan and lease losses for the year ended December 31, 2021. This reduction in the provision for the fourth quarter was primarily due to an improvement in credit quality, driven by positive risk rate migration in large portfolios. The increase in the provision for loan and lease losses for the year ended December 31, 2022 was primarily the result of one commercial relationship that was downgraded from substandard accrual to substandard non-accrual during the second quarter of 2022 and the growth in total loans during 2022.

Total nonperforming assets were $8.6 million at December 31, 2022, compared to nonperforming assets of $10.0 million at December 31, 2021. The decrease in nonperforming assets since December 31, 2021 was primarily the result of the successful workout of two non-accrual home equity loans amongst one relationship totaling $2.3 million during the first quarter of 2022. The nonperforming assets included acquired impaired loans assumed in the Riverview acquisition totaling $2.9 million and $3.3 million as of December 31, 2022 and 2021, respectively.

The allowance for loan and lease losses as a percentage of total loans, including PPP loans, was 0.54% at December 31, 2022, compared to 0.56% at September 30, 2022 and 0.47% at December 31, 2021.

Capital

Shareholders' equity increased $22.0 million, or 4.49%, from $490.1 million as of December 31, 2021 to $512.1 million as of December 31, 2022. Mid Penn declared $12.7 million in dividends during 2022 and repurchased $3.0 million of common stock through its treasury stock repurchase program. Regulatory capital ratios for both Mid Penn and its banking subsidiary indicate regulatory capital levels in excess of the regulatory minimums and the levels necessary for the Bank to be considered 'well capitalized' at both December 31, 2022 and December 31, 2021.

Noninterest Income

For the three months ended December 31, 2022, noninterest income totaled $6.7 million, an increase of $751 thousand, or 12.6%, compared to noninterest income of $6.0 million for the third quarter of 2022, primarily a result of increases in other income, which included a branch sale. For the three months ended December 31, 2022, noninterest income increased $1.1 million, or 18.6%, compared to noninterest income of $5.7 million for the fourth quarter of 2021, primarily driven by increases of $2.3 million in other income, $307 thousand in income from fiduciary and wealth management activities and $265 thousand in ATM debit card interchange income, partially offset by a decrease of $1.7 million in mortgage banking income. The increase in income from fiduciary activities was attributable to favorable growth in trust assets under management and increased sales of retail investment products, as a result of successful business development efforts by Mid Penn's trust and wealth management team. ATM debit card interchange income and service charges on deposits increased primarily as a result of a higher volume of transactional deposit accounts, including deposit accounts assumed in the Riverview acquisition. The decrease in mortgage banking income was the result of increasing mortgage interest rates slowing mortgage loan originations and secondary-market loan sales and gains during 2022.

For the year ended December 31, 2022, noninterest income totaled $23.7 million, an increase of $2.1 million, or 9.9%, compared to noninterest income of $21.5 million for the year ended December 31, 2021, primarily driven by increases of $4.2 million in other income, $2.6 million in income from fiduciary activities, $1.7 million in ATM debit card interchange income and $1.1 million in service charges on deposits. The increase in other income was primarily the result of higher insurance commissions, letter of credit fees, a gain on sale of a branch office and income from the early termination of a lease in 2022 compared to the year ended December 31, 2021. The increases in fiduciary activities was a result of increased activity in the wealth management area and the Riverview acquisition. ATM debit card interchange income and service charges on deposits increased primarily as a result of a higher volume of transactional deposit accounts, including deposit accounts assumed in the Riverview acquisition. These favorable variances were partially offset by a decrease in mortgage banking income of $8.7 million for the year ended December 31, 2022 compared to the same period of 2021. Mortgage banking income decreased as interest rates increased in response to the increase in the fed funds rate during 2022. 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, and purchase money mortgage originations have slowed relative to the lending volumes seen in the past several years.

Noninterest Expense

Noninterest expense totaled $25.5 million, an increase of $753 thousand, or 3.0%, for the three months ended December 31, 2022, compared to noninterest expense of $24.7 million for the third quarter of 2022. The increase was primarily the result of a $843 thousand increase in charitable contributions qualifying for state tax credits, which typically occur more frequently towards the end of the year, a $372 thousand increase in legal and professional fees and $294 thousand of merger and acquisition expenses recorded in the fourth quarter of 2022.

Compared to the fourth quarter of 2021, noninterest expense in the fourth quarter of 2022 decreased $8.6 million, or 25.3%, from $34.1 million to $25.5 million as a result of merger and acquisition and post-acquisition restructuring expenses totaling $12.2 million. This decrease in noninterest expense was partially offset by increases in operating expenses from the Riverview acquisition. The most significant increases were $1.6 million in salaries and benefits, $631 thousand in other expenses, $400 thousand in occupancy and $385 thousand in equipment expense. In addition, legal and professional fees were $512 thousand higher in the fourth quarter of 2022 compared to the fourth quarter in 2021.

For the year ended December 31, 2022, noninterest expense totaled $99.8 million, an increase of $8.7 million, or 9.6%, compared to noninterest expense of $91.1 million for the year ended December 31, 2021, primarily as the result of higher expenses attributable to the Riverview acquisition, most significantly increases of $10.9 million in salaries and benefits and $4.7 million in other expenses. The increase in expense was partially offset by $623 thousand in merger and acquisition and post-acquisition restructuring expenses for the year ended December 31, 2022 compared to $12.9 million for the year ended 2021.

The efficiency ratio(1) was 54.59% in the fourth quarter of 2022, compared to 53.46% in the third quarter of 2022, and 61.34% in the fourth quarter of 2021. The change in the efficiency ratio during the fourth quarter 2022 compared to the third quarter of 2022 was the result of lower net interest income and higher noninterest expenses, partially offset by higher noninterest income. The improvement in the efficiency ratio during the fourth quarter 2022 compared to the fourth quarter of 2021 was the result of higher net interest income, partially offset by higher noninterest expenses, excluding the merger and acquisition expense.

Merger & Acquisition Activity

On November 30, 2021, Mid Penn announced the successful completion of the merger acquisition of Riverview. The acquisition of Riverview impacted periods presented within this release. For more information regarding this transaction, please see Mid Penn's Annual Report on Form 10-K for the year ended December 31, 2021.

On December 20, 2022, Mid Penn announced its entry into an agreement and plan of merger with Brunswick Bancorp ('Brunswick'). The acquisition will result in a meaningful expansion for Mid Penn into the attractive central New Jersey market. Mid Penn will acquire Brunswick in a combination cash and stock transaction valued at approximately $53.9 million (based on Mid Penn's closing stock price of $30.95 for the trading day ending December 19, 2022).

Management considers subsequent events occurring after the balance sheet date for matters which may require adjustment to, or disclosure in, the consolidated financial statements. The review period for subsequent events extends up to and including the filing date of a public company's consolidated financial statements when filed with the Securities and Exchange Commission ('SEC'). Accordingly, the financial information in this announcement is subject to change. The statements are valid only as of the date hereof and Mid Penn disclaims any obligation to update this information.

(1) Non-GAAP financial measure. Refer to the calculation on the section titled“Reconciliation of Non-GAAP Measures” at the end of this document.

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This press release, and oral statements made regarding the subjects of this release, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management's confidence and strategies and management's current views and expectations about new and existing programs and products, relationships, opportunities, technology and market conditions. These statements may be identified by such forward-looking terminology as 'continues,' 'expect,' 'look,' 'believe,' 'anticipate,' 'may,' 'will,' 'should,' 'projects,' 'strategy' or similar statements. Actual results may differ materially from such forward-looking statements, and no reliance should be placed on any forward-looking statement. Factors that may cause results to differ materially from such forward-looking statements include, but are not limited to, changes in interest rates, spreads on earning assets and interest-bearing liabilities, and interest rate sensitivity; prepayment speeds, loan originations, credit losses and market values on loans, collateral securing loans, and other assets; sources of liquidity; common shares outstanding; common stock price volatility; 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 occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement between Mid Penn and Brunswick; the outcome of any legal proceedings that may be instituted against Mid Penn or Brunswick; delays in completing the transaction; the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction); the failure to obtain shareholder approvals or to satisfy any of the other conditions to the transaction on a timely basis or at all; the possibility that the anticipated benefits of the 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 and Brunswick do business; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; 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 transaction; the ability to complete the transaction and integration of Mid Penn and Brunswick successfully; the dilution caused by Mid Penn's issuance of additional shares of its capital stock in connection with the transaction; and other factors that may affect the future results of Mid Penn and Brunswick.

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.

SUMMARY FINANCIAL HIGHLIGHTS (Unaudited):

(Dollars in thousands, except per share data) Dec. 31,
2022
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
Ending Balances:
Investment securities $ 637,802 $ 644,766 $ 618,184 $ 508,658 $ 392,619
Net loans and leases 3,495,162 3,303,977 3,163,157 3,106,384 3,089,799
Total assets 4,486,257 4,333,903 4,310,163 4,667,174 4,689,425
Total deposits 3,778,331 3,729,596 3,702,587 3,989,037 4,002,016
Shareholders' equity 512,099 499,105 495,835 494,161 490,076
Average Balances:
Investment securities 640,792 626,447 580,406 462,648 286,134
Net loans 3,395,308 3,237,587 3,129,334 3,103,469 2,319,544
Total assets 4,381,213 4,339,783 4,465,906 4,696,894 3,579,649
Total deposits 3,727,287 3,726,658 3,837,135 3,999,074 3,007,955
Shareholders' equity 505,769 502,082 495,681 494,019 403,010
Income Statement: Three Months Ended
Dec. 31,
2022
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
Net interest income $ 38,577 $ 39,409 $ 35,433 $ 34,414 $ 29,372
Provision for loan and lease losses 525 1,550 1,725 500 370
Noninterest income 6,714 5,963 5,230 5,750 5,660
Noninterest expense 25,468 24,715 23,915 25,745 34,072
Income before provision for income taxes 19,298 19,107 15,023 13,919 590
Provision for income taxes 3,579 3,626 2,771 2,565 (17 )
Net income available to shareholders 15,719 15,481 12,252 11,354 607
Net income excluding non-recurring expenses (1) 15,951 15,481 12,252 11,614 10,266
Per Share:
Basic earnings per common share $ 0.99 $ 0.97 $ 0.77 $ 0.71 $ 0.05
Diluted earnings per common share $ 0.99 $ 0.97 $ 0.77 $ 0.71 $ 0.05
Cash dividends declared $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20
Book value per common share $ 32.24 $ 31.42 $ 31.23 $ 30.96 $ 30.71
Tangible book value per common share (1) $ 24.59 $ 23.80 $ 23.57 $ 23.31 $ 22.99
Asset Quality:
Net charge-offs (recoveries) to average loans (annualized) 0.006 % -0.007 % -0.001 % -0.007 % 0.001 %
Non-performing loans to total loans 0.25 % 0.23 % 0.25 % 0.25 % 0.32 %
Non-performing asset to total loans and other real estate 0.25 % 0.23 % 0.25 % 0.26 % 0.32 %
Non-performing asset to total assets 0.21 % 0.18 % 0.19 % 0.18 % 0.22 %
ALLL to total loans 0.54 % 0.56 % 0.53 % 0.49 % 0.47 %
ALLL to nonperforming loans 220.82 % 242.23 % 211.66 % 190.84 % 146.23 %
Profitability:
Return on average assets 1.42 % 1.42 % 1.10 % 0.98 % 0.06 %
Return on average equity 12.33 % 12.23 % 9.91 % 9.32 % 0.61 %
Return on average tangible common equity (1) 16.61 % 16.55 % 13.59 % 12.82 % 1.26 %
Net interest margin 3.80 % 3.92 % 3.45 % 3.21 % 3.16 %
Efficiency ratio (1) 54.59 % 53.46 % 57.57 % 62.12 % 61.34 %
Capital Ratios:
Tier 1 Capital (to Average Assets) (2) 10.7 % 9.6 % 9.0 % 8.4 % 8.1 %
Common Tier 1 Capital (to Risk Weighted Assets) (2) 12.5 % 11.4 % 11.5 % 11.7 % 11.7 %
Tier 1 Capital (to Risk Weighted Assets) (2) 12.5 % 11.7 % 11.8 % 12.0 % 12.0 %
Total Capital (to Risk Weighted Assets) (2) 14.5 % 13.8 % 14.1 % 14.4 % 14.6 %

(1) Non-GAAP financial measure. Refer to the calculation on the section titled“Reconciliation of Non-GAAP Measures” at the end of this document
(2) Regulatory capital ratios as of December 31, 2022 are preliminary and prior periods are actual.
CONSOLIDATED BALANCE SHEETS (Unaudited):

(In thousands, except share data) Dec. 31,
2022
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
ASSETS
Cash and due from banks $ 53,368 $ 76,018 $ 64,440 $ 54,961 $ 41,100
Interest-bearing balances with other financial institutions 4,405 4,520 4,909 3,187 146,031
Federal funds sold 3,108 14,140 167,437 700,283 726,621
Total cash and cash equivalents 60,881 94,678 236,786 758,431 913,752
Investment Securities:
Held to maturity, at amortized cost 399,494 402,142 399,032 363,145 329,257
Available for sale, at fair value 237,878 242,195 218,698 145,039 62,862
Equity securities available for sale, at fair value 430 428 454 474 500
Loans held for sale 2,475 5,997 9,574 7,474 11,514
Loans and leases, net of unearned interest 3,514,119 3,322,457 3,180,033 3,121,531 3,104,396
Less: Allowance for loan and lease losses (18,957 ) (18,480 ) (16,876 ) (15,147 ) (14,597 )
Net loans and leases 3,495,162 3,303,977 3,163,157 3,106,384 3,089,799
Premises and equipment, net 34,471 33,854 33,732 33,612 33,232
Bank premises and equipment held for sale 1,306 2,262 2,574 3,098 3,907
Operating lease right of use asset 8,798 8,352 8,326 8,751 9,055
Finance lease right of use asset 2,907 2,952 2,997 3,042 3,087
Cash surrender value of life insurance 50,674 50,419 50,169 49,907 49,661
Restricted investment in bank stocks 8,315 4,595 4,234 7,637 9,134
Accrued interest receivable 18,405 15,861 12,902 11,584 11,328
Deferred income taxes 13,674 16,093 13,780 11,974 10,779
Goodwill 114,231 113,871 113,835 113,835 113,835
Core deposit and other intangibles, net 7,260 7,215 7,729 8,250 9,436
Foreclosed assets held for sale 43 49 69 125 -
Other assets 29,853 28,963 32,115 34,412 28,287
Total Assets $ 4,486,257 $ 4,333,903 $ 4,310,163 $ 4,667,174 $ 4,689,425
LIABILITIES & SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 793,939 $ 863,037 $ 850,180 $ 866,965 $ 850,438
Interest-bearing transaction accounts 2,325,847 2,414,272 2,377,260 2,568,918 2,524,921
Time 658,545 452,287 475,147 553,154 626,657
Total Deposits 3,778,331 3,729,596 3,702,587 3,989,037 4,002,016
Short-term borrowings 102,647 - - - -
Long-term debt 4,409 4,501 4,592 74,681 81,270
Subordinated debt and trust preferred securities 56,941 66,357 73,995 74,134 73,645
Operating lease liability 9,725 10,261 10,324 10,923 11,363
Accrued interest payable 2,303 1,841 1,542 2,067 1,791
Other liabilities 19,802 22,242 21,288 22,171 29,264
Total Liabilities 3,974,158 3,834,798 3,814,328 4,173,013 4,199,349
Shareholders' Equity:
Common stock, par value $1.00 per share; 20.0 million shares authorized 16,094 16,091 16,081 16,059 16,056
Additional paid-in capital 386,987 386,452 386,128 385,765 384,742
Retained earnings 133,114 120,572 108,265 99,206 91,043
Accumulated other comprehensive (loss) income (19,216 ) (19,130 ) (9,759 ) (4,946 ) 158
Treasury stock (4,880 ) (4,880 ) (4,880 ) (1,923 ) (1,923 )
Total Shareholders' Equity 512,099 499,105 495,835 494,161 490,076
Total Liabilities and Shareholders' Equity $ 4,486,257 $ 4,333,903 $ 4,310,163 $ 4,667,174 $ 4,689,425


CONSOLIDATED STATEMENTS OF INCOME (Unaudited):

Three Months Ended Year Ended
(Dollars in thousands, except per share data) Dec. 31,
2022
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
Dec. 31,
2022
Dec. 31,
2021
INTEREST INCOME
Loans including fees, and lease $ 42,492 $ 38,484 $ 34,264 $ 35,016 $ 31,021 $ 150,256 $ 118,776
Investment securities:
Taxable 3,784 3,382 2,833 1,953 1,044 11,952 2,602
Tax-exempt 390 392 379 336 288 1,497 1,122
Interest on other interest-bearing balances 36 12 8 13 8 69 13
Interest on federal funds sold 40 736 736 314 324 1,826 809
Total Interest Income 46,742 43,006 38,220 37,632 32,685 165,600 123,322
INTEREST EXPENSE
Deposits 6,995 2,836 2,019 2,294 2,536 14,144 11,327
Short-term borrowings 441 - - - - 441 539
Long-term and subordinated debt 729 761 768 924 777 3,182 2,888
Total Interest Expense 8,165 3,597 2,787 3,218 3,313 17,767 14,754
Net Interest Income 38,577 39,409 35,433 34,414 29,372 147,833 108,568
PROVISION FOR LOAN AND LEASE LOSSES 525 1,550 1,725 500 370 4,300 2,945
Net Interest Income After Provision for Loan and Lease Losses 38,052 37,859 33,708 33,914 29,002 143,533 105,623
NONINTEREST INCOME
Fiduciary and wealth management 1,085 1,729 1,205 1,052 778 5,071 2,494
ATM debit card interchange 1,099 1,078 1,128 1,057 834 4,362 2,688
Service charges on deposits 461 483 450 684 439 2,078 991
Mortgage banking 237 536 305 529 1,932 1,607 10,314
Mortgage hedging 150 217 538 566 42 1,471 64
Net gain (loss) on sales of SBA loans - 152 119 (9 ) 409 262 969
Earnings from cash surrender value of life insurance 255 250 262 246 135 1,013 358
Net gain on sales of investment securities - - - - - - 79
Other 3,427 1,518 1,223 1,625 1,091 7,793 3,576
Total Noninterest Income 6,714 5,963 5,230 5,750 5,660 23,657 21,533
NONINTEREST EXPENSE
Salaries and employee benefits 13,434 13,583 12,340 13,244 11,838 52,601 41,711
Software licensing and utilization 1,793 1,804 1,821 2,106 1,839 7,524 6,332
Occupancy, net 1,812 1,634 1,655 1,799 1,412 6,900 5,527
Equipment 1,249 1,121 1,112 1,011 864 4,493 3,101
Shares tax 160 920 480 920 (222 ) 2,786 800
Legal and professional fees 900 528 694 639 388 2,761 1,979
ATM/card processing 534 518 571 517 357 2,139 1,053
Intangible amortization 496 514 521 481 357 2,012 1,180
FDIC Assessment 243 254 506 591 524 1,594 1,888
Charitable contributions qualifying for State tax credits 843 - 125 65 797 1,033 1,432
Mortgage banking profit-sharing - - 33 145 566 178 2,571
(Gain) loss on sale or write-down of foreclosed assets, net (45 ) (57 ) (15 ) (16 ) 1 (133 ) (25 )
Merger and acquisition 294 - - - 2,347 294 3,067
Post-acquisition restructuring - - - 329 9,880 329 9,880
Other 3,755 3,896 4,072 3,914 3,124 15,332 10,609
Total Noninterest Expense 25,468 24,715 23,915 25,745 34,072 99,843 91,105
INCOME BEFORE PROVISION FOR INCOME TAXES 19,298 19,107 15,023 13,919 590 67,347 36,051
Provision for income taxes 3,579 3,626 2,771 2,565 (17 ) 12,541 6,732
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 15,719 $ 15,481 $ 12,252 $ 11,354 $ 607 $ 54,806 $ 29,319
PER COMMON SHARE DATA:
Basic and Diluted Earnings Per Common Share $ 0.99 $ 0.97 $ 0.77 $ 0.71 $ 0.05 $ 3.44 $ 2.71
Cash Dividends Declared $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.80 $ 0.79


CONSOLIDATED – AVERAGE BALANCE SHEET AND NET INTEREST INCOME ANALYSIS (Unaudited):

Average Balances, Income and Interest Rates on a Taxable Equivalent Basis
For the Three Months Ended
December 31, 2022 September 30, 2022 December 31, 2021
(Dollars in thousands) Average
Balance
Interest (1) Yield/
Rate
Average
Balance
Interest (1) Yield/
Rate
Average
Balance
Interest (1) Yield/
Rate
ASSETS:
Interest Bearing Balances $ 4,671 $ 36 3.06 % $ 5,583 $ 12 0.85 % $ 58,015 $ 8 0.05 %
Investment Securities:
Taxable 561,119 3,733 2.64 546,439 3,369 2.45 223,546 938 1.66
Tax-Exempt 79,673 494 2.46 80,008 496 2.46 62,588 365 2.31
Total Securities 640,792 4,227 2.62 626,447 3,865 2.45 286,134 1,303 1.81
Federal Funds Sold 4,749 40 3.34 131,089 736 2.23 758,165 324 0.17
Loans and Leases, Net 3,395,308 42,585 4.98 3,237,587 38,573 4.73 2,595,090 31,108 4.76
Restricted Investment in Bank Stocks 6,694 51 3.02 4,322 13 1.19 8,328 106 5.05
Total Earning Assets 4,052,214 46,939 4.60 4,005,028 43,199 4.28 3,705,732 32,849 3.52
Cash and Due from Banks 67,284 69,751 45,385
Other Assets 261,715 265,004 192,969
Total Assets $ 4,381,213 $ 4,339,783 $ 3,944,086
LIABILITIES & SHAREHOLDERS' EQUITY:
Interest-bearing Demand $ 1,057,649 $ 2,051 0.77 % $ 1,072,496 $ 873 0.32 % $ 855,060 $ 548 0.25 %
Money Market 965,866 2,996 1.23 994,446 1,097 0.44 976,601 696 0.28
Savings 335,928 49 0.06 352,024 43 0.05 264,547 55 0.08
Time 527,708 1,899 1.43 464,273 823 0.70 511,953 1,236 0.96
Total Interest-bearing Deposits 2,887,151 6,995 0.96 2,883,239 2,836 0.39 2,608,161 2,535 0.39
Short term borrowings 47,262 441 3.70 - - - - - -
Long-term debt 4,441 46 4.11 4,537 47 4.11 76,990 209 1.08
Subordinated debt and trust preferred securities 64,673 683 4.19 69,523 714 4.07 54,615 569 4.13
Total Interest-bearing Liabilities 3,003,527 8,165 1.08 2,957,299 3,597 0.48 2,739,766 3,313 0.48
Noninterest-bearing Demand 840,136 843,419 759,897
Other Liabilities 31,781 36,983 46,659
Shareholders' Equity 505,769 502,082 397,764
Total Liabilities & Shareholders' Equity $ 4,381,213 $ 4,339,783 $ 3,944,086
Net Interest Income (taxable equivalent basis) $ 38,774 $ 39,602 $ 29,536
Taxable Equivalent Adjustment (197 ) (193 ) (164 )
Net Interest Income $ 38,577 $ 39,409 $ 29,372
Total Yield on Earning Assets 4.60 % 4.28 % 3.52 %
Rate on Supporting Liabilities 1.08 0.48 0.48
Average Interest Spread 3.52 3.80 3.04
Net Interest Margin 3.80 3.92 3.16

(1) Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowance.


Average Balances, Income and Interest Rates on a Taxable Equivalent Basis
For the Year Ended
December 31, 2022 December 31, 2021
(Dollars in thousands) Average
Balance
Interest (1) Yield/
Rate
Average
Balance
Interest (1) Yield/
Rate
ASSETS:
Interest Bearing Balances $ 26,633 $ 69 0.26 % $ 15,916 $ 13 0.08 %
Investment Securities:
Taxable 500,156 11,663 2.33 124,692 2,257 1.81
Tax-Exempt 78,039 1,895 2.43 57,361 1,420 2.48
Total Securities 578,195 13,558 2.34 182,053 3,677 2.02
Federal Funds Sold 311,989 1,826 0.59 567,647 809 0.14
Loans and Leases, Net 3,217,282 150,636 4.68 2,539,074 119,082 4.69
Restricted Investment in Bank Stocks 6,045 289 4.78 7,351 345 4.69
Total Interest-earning Assets 4,140,144 166,378 4.02 3,312,041 123,926 3.74
Cash and Due from Banks 63,608 38,517
Other Assets 265,691 169,946
Total Assets $ 4,469,443 $ 3,520,504
LIABILITIES & SHAREHOLDERS' EQUITY:
Interest-bearing Demand $ 1,051,605 $ 3,847 0.37 % $ 688,595 $ 2,330 0.34 %
Money Market 1,040,762 5,277 0.51 842,107 3,157 0.37
Savings 355,229 193 0.05 218,546 237 0.11
Time 524,944 4,827 0.92 451,277 5,603 1.24
Total Interest-bearing Deposits 2,972,540 14,144 0.48 2,200,525 11,327 0.51
Short-term borrowings 11,914 441 - 153,850 539 0.35
Long-term debt 23,344 352 1.51 75,483 821 1.09
Subordinated debt and trust preferred securities 70,583 2,830 4.01 47,116 2,067 4.39
Total Interest-bearing Liabilities 3,078,381 17,767 0.58 2,476,974 14,754 0.60
Noninterest-bearing Demand 848,991 684,022
Other Liabilities 43,133 30,433
Shareholders' Equity 498,938 329,075
Total Liabilities & Shareholders' Equity $ 4,469,443 $ 3,520,504
Net Interest Income (taxable-equivalent basis) $ 148,611 $ 109,172
Taxable Equivalent Adjustment (778 ) (604 )
Net Interest Income $ 147,833 $ 108,568
Total Yield on Earning Assets 4.02 % 3.74 %
Rate on Supporting Liabilities 0.58 0.60
Average Interest Spread 3.44 3.15
Net Interest Margin 3.59 3.30

(1) Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowance.


ALLOWANCE FOR LOAN AND LEASE LOSSES AND ASSET QUALITY (Unaudited):

(Dollars in thousands) Dec. 31,
2022
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
Allowance for Loan and Lease Losses:
Beginning balance $ 18,480 $ 16,876 $ 15,147 $ 14,597 $ 14,233
Loans Charged off
Commercial and industrial - (1 ) - - (7 )
Commercial real estate (7 ) - - - (1 )
Commercial real estate - construction - - - - -
Residential mortgage (23 ) (2 ) - - -
Home equity - (1 ) - - -
Consumer (20 ) (11 ) (9 ) (57 ) (19 )
Total loans charged off (50 ) (15 ) (9 ) (57 ) (27 )
Recoveries of loans previously charged off
Commercial and industrial - - - 13 10
Commercial real estate - 63 - 65 1
Commercial real estate - construction - - - 24 7
Residential mortgage - - 2 - -
Home equity - - 1 1 -
Consumer 2 6 10 4 3
Total recoveries 2 69 13 107 21
Balance before provision 18,432 16,930 15,151 14,647 14,227
Provision for loan and lease losses 525 1,550 1,725 500 370
Balance, end of quarter $ 18,957 $ 18,480 $ 16,876 $ 15,147 $ 14,597
Nonperforming Assets
Nonaccrual loans $ 8,195 $ 7,233 $ 7,551 $ 7,507 $ 9,547
Accruing trouble debt restructured loans 390 396 422 430 435
Total nonperforming loans 8,585 7,629 7,973 7,937 9,982
Foreclosed real estate 43 49 69 125 -
Total nonperforming assets 8,628 7,678 8,042 8,062 9,982
Accruing loans 90 days or more past due 654 633 - 133 515
Total risk elements $ 9,282 $ 8,311 $ 8,042 $ 8,195 $ 10,497


PPP Summary

(Dollars in thousands) Dec. 31,
2022
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
PPP loans, net of deferred fees $ 2,600 $ 2,800 $ 4,966 $ 34,124 $ 111,286
PPP Fees recognized $ 29 $ 99 $ 652 $ 2,989 $ 4,426


RECONCILIATION OF NON-GAAP MEASURES (Unaudited)
Explanatory note: This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles ('GAAP'). Mid Penn's management uses these non-GAAP financial measures in their analysis of Mid Penn's performance. For tangible book value, the most directly comparable financial measure calculated in accordance with GAAP is book value. We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing total book value while not increasing tangible book value. Income tax effects of non-GAAP adjustments are calculated using the applicable statutory tax rate for the jurisdictions in which the charges (benefits) are incurred, while taking into consideration any valuation allowances or non-deductible portions of the non-GAAP adjustments. Non-PPP core banking loans are meaningful to investors as they are indicative of portfolio loans and related growth from traditional bank activities and excludes short-term or nonrecurring loans from special programs like the PPP. Core earnings per common share excludes from income available to common shareholders certain expenses related to significant non-core activities, including merger-related expenses, net of income taxes. For return on average tangible common equity, the most directly comparable financial measure calculated in accordance with GAAP is return on average equity. The efficiency ratio is often used by management to measure its noninterest expense as a percentage of its revenue. This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial measures determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of Mid Penn's results and financial condition as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. Management believes that this non-GAAP supplemental information will be helpful in understanding Mid Penn's ongoing operating results. This supplemental presentation should not be construed as an inference that Mid Penn's future results will be unaffected by similar adjustments to be determined in accordance with GAAP. The reconciliation of the non-GAAP to comparable GAAP financial measures can be found in the tables below.

Tangible Book Value Per Share

(Dollars in thousands, except per share data) Dec. 31,
2022
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
Shareholders' Equity $ 512,099 $ 499,105 $ 495,835 $ 494,161 $ 490,076
Less: Goodwill 114,231 113,871 113,835 113,835 113,835
Less: Core Deposit and Other Intangibles 7,260 7,215 7,729 8,250 9,436
Tangible Equity $ 390,608 $ 378,019 $ 374,271 $ 372,076 $ 366,805
Common Shares Outstanding 15,886,143 15,882,853 15,878,193 15,960,916 15,957,830
Tangible Book Value per Share $ 24.59 $ 23.80 $ 23.57 $ 23.31 $ 22.99


Non-PPP Core Banking Loans

(Dollars in thousands) Dec. 31,
2022
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
Loans and leases, net of unearned interest $ 3,514,119 $ 3,322,457 $ 3,180,033 $ 3,121,531 $ 3,104,396
Less: PPP loans, net of deferred fees 2,600 2,800 4,966 34,124 111,286
Non-PPP core banking loans $ 3,511,519 $ 3,319,657 $ 3,175,067 $ 3,087,407 $ 2,993,110


Core Earnings Per Common Share Excluding Non-Recurring Expenses

Three Months Ended
(Dollars in thousands, except per share data) Dec. 31,
2022
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
Net Income Available to Common Shareholders $ 15,719 $ 15,481 $ 12,252 $ 11,354 $ 607
Plus: Merger and Acquisition Expenses 294 - - 329 12,227
Less: Tax Effect of Merger and Acquisition Expenses 62 - - 69 2,568
Net Income Excluding Non-Recurring Expenses $ 15,951 $ 15,481 $ 12,252 $ 11,614 $ 10,266
Weighted Average Shares Outstanding 15,883,003 15,877,592 15,934,083 15,957,864 13,005,895
Core Earnings Per Common Share Excluding Non-Recurring Expenses $ 0.99 $ 0.97 $ 0.77 $ 0.73 $ 0.79


Return on Average Tangible Common Equity

Three Months Ended
(Dollars in thousands) Dec. 31,
2022
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
Net income available to common shareholders $ 15,719 $ 15,481 $ 12,252 $ 11,354 $ 607
Plus: Intangible amortization, net of tax 392 406 412 380 282
$ 16,111 $ 15,887 $ 12,664 $ 11,734 $ 889
Average shareholders' equity $ 505,769 $ 502,082 $ 495,681 $ 494,019 $ 403,010
Less: Average goodwill 113,879 113,835 113,835 113,835 113,835
Less: Average core deposit and other intangibles 6,966 7,465 7,983 8,950 9,436
Average tangible shareholders' equity $ 384,924 $ 380,782 $ 373,863 $ 371,234 $ 279,739
Return on average tangible common equity 16.61 % 16.55 % 13.59 % 12.82 % 1.26 %


Efficiency Ratio

Three Months Ended
(Dollars in thousands) Dec. 31,
2022
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
Noninterest expense $ 25,468 $ 24,715 $ 23,915 $ 25,745 $ 34,072
Less: Merger and acquisition expenses 294 - - 329 12,227
Less: Intangible amortization 496 514 521 481 357
Less: (Gain) loss on sale or write-down of foreclosed assets, net (45 ) (57 ) (15 ) (16 ) 1
Efficiency ratio numerator $ 24,723 $ 24,258 $ 23,409 $ 24,951 $ 21,487
Net interest income 38,577 39,409 35,433 34,414 29,372
Noninterest income 6,714 5,963 5,230 5,750 5,660
Efficiency ratio denominator $ 45,291 $ 45,372 $ 40,663 $ 40,164 $ 35,032
Efficiency ratio 54.59 % 53.46 % 57.57 % 62.12 % 61.34 %



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