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Mid Penn Bancorp, Inc. Reports First Quarter 2019 Earnings and Declares Increased Quarterly Dividend

MILLERSBURG, Pa., April 25, 2019 (GLOBE NEWSWIRE) -- Mid Penn Bancorp, Inc. (“Mid Penn”) (MPB), the parent company of Mid Penn Bank (the “Bank”), today reported net income to common shareholders (earnings) for the quarter ended March 31, 2019 of $4,077,000 or $0.48 per common share basic and diluted, compared to earnings of $1,004,000 or $0.17 per common share basic and diluted for the quarter ended March 31, 2018. Adjusted earnings for the three months ended March 31, 2018, when excluding the after-tax impact of $1,694,000 of merger and acquisition expenses (with such adjusted earnings being a non-GAAP measure), were $2,424,000 or $0.41 per share basic and diluted.  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 the quarters ended March 31, 2019 and 2018 and other periods.  The merger and acquisition expenses recorded in the first quarter of 2018 resulted from (i) Mid Penn’s legal closing of its acquisition of The Scottdale Bank & Trust Company (“Scottdale”) on January 8, 2018, and (ii) Mid Penn entering into a merger agreement with First Priority Financial Corp. (“First Priority”) on January 16, 2018.  The First Priority acquisition legally closed on July 31, 2018.  No merger and acquisition expenses were recorded in the first quarter of 2019. 

Tangible book value per common share, a non-GAAP measure that is regularly reported in the banking industry and the most directly comparable non-GAAP measure to book value per share, favorably increased to $18.64 as of March 31, 2019, compared to $18.10 as of December 31, 2018, and $18.21 as of March 31, 2018.  Mid Penn’s book value per share increased to $26.88 at March 31, 2019, compared to $26.38 as of December 31, 2018, and $22.72 at March 31, 2018.   

Mid Penn also reported total assets of $2,147,817,000 as of March 31, 2019, reflecting an increase of $69,836,000 or 3 percent compared to total assets of $2,077,981,000 as of December 31, 2018, and an increase of $756,600,000 or 54 percent compared to total assets of $1,391,217,000 as of March 31, 2018.  Asset growth during the first quarter of 2019 was primarily attributable to (i) net organic loan growth, (ii) an increase in liquid assets primarily from demand deposit growth, and (iii) Mid Penn’s recording of operating and finance lease right of use assets as a result of its adoption of Accounting Standard Codification (ASC) 842 – Leases effective January 1, 2019, which required adopting entities to record a right of use asset and related liability for leases of property or equipment.

A significant portion of the asset growth in the twelve months ending March 31, 2019 resulted from assets Mid Penn acquired from First Priority effective July 31, 2018.  In general, the results of operations and the financial condition as of and for the periods ended March 31, 2019, as compared to prior periods and certain period-end dates in 2018, have been materially impacted by Mid Penn’s acquisition of First Priority which closed on July 31, 2018, and the Scottdale acquisition which closed January 8, 2018.

Mid Penn also reported that its Board of Directors, at a meeting held on April 24, 2019, declared a quarterly dividend per common share of $0.18 payable on May 27, 2019 to shareholders of record as of May 8, 2019.  The regular dividend was increased to $0.18 per share as compared to $0.15 per share, which was the regular dividend in the previous four quarters.

PRESIDENT’S STATEMENT

This earnings report reflects the excellent work by our entire Mid Penn team to grow the Bank and increase shareholder return by successfully integrating our 2018 acquisitions, and maintaining our focus on establishing and nurturing highly-qualitative relationships with commercial, retail, and wealth management customers.  Mid Penn's operating results for the first quarter of 2019, compared to the same period in 2018, reflect a 17 percent accretion in merger-adjusted earnings per share, reflecting both the expected benefits of our 2018 acquisitions, and our continued successful organic core banking growth.

We are pleased to share this increased income with our shareholders as our Board of Directors increased our regular quarterly dividend from $0.15 per share as paid during 2018, to $0.18 per share.  We are confident that the impact of our core growth and acquisitions will continue to have accretive benefits as we further implement new business development and overhead management activities.

As we continue to manage the longer-term integration of our 2018 acquisitions in our commercial and retail banking functions, we also are focused on growing our noninterest income sources.  During the first quarter of 2019, we invested in expanding Mid Penn’s mortgage origination capabilities in the southeastern Pennsylvania market, and continued to expand our wealth management revenues and assets under management.  We also continue to evaluate our delivery channels to provide our customers with a continuously improving banking experience. On April 3, 2019, we announced that we had received regulatory approval to relocate our Allentown Boulevard branch to a significantly improved location on Jonestown Road in Lower Paxton Township, Pennsylvania.  We are excited to serve both our existing and new customers in this new facility.

We are dedicated to building on the positive momentum generated by our two successful acquisitions in 2018, and the positive earnings growth reflected by our performance for the first quarter of 2019, and remain focused on successfully growing our core banking business and profitability to further increase our shareholders’ value and returns.

OPERATING RESULTS

Net Interest Income and Net Interest Margin

Net interest income was $17,306,000 for the three months ended March 31, 2019, an increase of $6,428,000 or 59 percent compared to net interest income of $10,878,000 for the three months ended March 31, 2018.  The primary source of the revenue growth was an increase in interest and fees on loans, as total loans increased $639,548,000 or over 63 percent since March 31, 2018.  The substantial year-over-year increase in total loans outstanding was comprised of organic loan growth of $160,852,000 and $478,696,000 of loans acquired from First Priority.  Net interest income for the first quarter of 2019 decreased by $425,000 compared to the fourth quarter of 2018 as increases in both the volume and costs of deposits, particularly money market accounts, more than offset interest income increases from both loan growth and increasing yields on interest-earning assets.  The increase in the cost of funds for the first quarter of 2019, compared to previous quarters in 2018, was in response to the four 0.25% Federal Open Market Committee (“FOMC”) rate increases during 2018, which increased deposit and short-term borrowing rates for liquidity management.

For the three months ended March 31, 2019, Mid Penn’s tax-equivalent net interest margin was 3.70% compared to 3.52% for the three months ended March 31, 2018, as year-over-year increases in yields on interest-earning assets and growth in noninterest-bearing deposits more than offset the impact of both (i) the rising cost of both deposit and borrowed funds as a result of the FOMC rate increases in 2018, and (ii) the higher volume of wholesale funding sources, including the assumption of some higher-cost brokered time deposits and subordinated debt in the First Priority acquisition, and certain short-term borrowings added during the fourth quarter for 2018, to fund anticipated near-term loan growth, and to support liquidity and interest rate management.

Noninterest Income

During the three months ended March 31, 2019 noninterest income totaled $2,049,000, an increase of $402,000 or 24 percent, compared to noninterest income of $1,647,000 for the three months ended March 31, 2018. 

Income from fiduciary activities was $359,000 for the three months ended March 31, 2019, an increase of $119,000 or over 49 percent, compared to fiduciary income of $240,000 for the three months ended March 31, 2018. These additional revenues were attributed to continued 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.

Mortgage banking income was $437,000 for the three months ended March 31, 2019, an increase of $281,000 or 180 percent compared to the three months ended March 31, 2018. Longer-term mortgage interest rates have declined since March 31, 2018, resulting in a higher level of mortgage originations and sales during the first quarter of 2019 when compared to the same period in 2018.  Additionally, Mid Penn expanded its team of residential mortgage originators in southeastern Pennsylvania during the first quarter of 2019, contributing to the larger volume of mortgage loans originated and sold in the three months ended March 31, 2019.

ATM debit card interchange income was $334,000 for the three months ended March 31, 2019, an increase of $69,000 or over 26 percent compared to interchange income of $265,000 for the three months ended March 31, 2018. The increase resulted from both increasing card-based transaction volume, as well as new demand deposit accounts, including those acquired in the First Priority and Scottdale transactions in 2018.

Other income was $330,000 for the three months ended March 31, 2019, an increase of $44,000 compared to other income of $286,000 for the three months ended March 31, 2018.  The increase in other income was primarily driven by increases in wire transfer fees and other service fees.

Net gains on sales of SBA loans was $202,000 for the three months ended March 31, 2019, a decrease of $55,000 when compared to the same period in 2018.  Increased interest rates on SBA loans, and tighter market pricing on secondary market sales yields, resulted in lower levels of loan sales and related gains in the first quarter of 2019 versus the same period in the prior year.

Net gains on sales of securities were $7,000 for the three months ended March 31, 2019, a decrease of $91,000 compared to net gains on sales of securities of $98,000 for the three months ended March 31, 2018. During the first quarter of 2018, some investment securities acquired from Scottdale were subsequently sold at gains to ensure that the overall portfolio was in alignment with Mid Penn’s investment management objectives.  The volume of investment sales, and realized gains, were much less in the first quarter of 2019.

Noninterest Expense

Noninterest expense for the three months ended March 31, 2019 totaled $14,303,000, an increase of $3,120,000 or 28 percent compared to noninterest expenses of $11,183,000 for the three months ended March 31, 2018.  The significant increase in noninterest expense was driven by continued franchise expansion which occurred in the twelve months following March 31, 2018, including the acquisition of First Priority in July 2018, and efforts to drive organic loan growth and fee-based activities, particularly the expansion of Mid Penn’s mortgage banking division in the southeastern Pennsylvania market.

Salaries and employee benefits expenses were $7,759,000 during the three months ended March 31, 2019, an increase of $2,695,000 or 53 percent, versus the same period in 2018, with the increase primarily attributable to (i) the retail staff additions at the eight retail locations added through the First Priority acquisition, effective July 31, 2018, (ii) the back-office and loan originator staff additions as a result of the expansion of the mortgage banking division, and (iii) the addition of commercial lending and credit administration personnel and other staff additions in alignment with Mid Penn’s core banking growth.

Occupancy expenses increased $604,000 or 76 percent during the first three months of 2019 compared to the same period in 2018.  Similarly, equipment expense increased $219,000 or 54 percent during the three months ended March 31, 2019 compared to the three months ended March 31, 2018.  These increases were driven by (i) the facility operating costs and increased depreciation expense for building, furniture, and equipment associated with the addition of the acquired First Priority offices and the opening of the Pillow branch office in the second half of 2018, and (ii) depreciation and occupancy costs related to Mid Penn’s acquisition and renovation of certain administrative, operations, and training facilities in Dauphin County, Pennsylvania after March 31, 2018, to support recent and future expansion of the franchise. 

FDIC assessment expense was $359,000 for the three months ended March 31, 2019, an increase of $131,000 or 57 percent compared to $228,000 for the three months ended March 31, 2018.  The increase in assessment expense generally reflects the larger total asset profile upon which the assessment is based. 

Legal and professional fees for the three months ended March 31, 2019 increased by $198,000 or 88 percent compared to the same period in 2018 due to increased third-party services for audit, information technology, and human resources services.

Software licensing and utilization costs were $848,000 during the three months ended March 31, 2019, an increase of $163,000 or 24 percent compared to $685,000 for the three months ended March 31, 2018. The increase is a result of additional costs to license (i) all of the First Priority locations, the new Pillow branch, and the expanded mortgage banking division, (ii) upgrades to internal systems to enhance data management and storage capabilities given the larger company profile, and (iii) increases in certain core processing fees as our customer base and transaction volume continue to grow.

Intangible amortization increased from $248,000 during the three months ended March 31, 2018 to $363,000 during the same period in 2019 due to the core deposit intangible asset added from the First Priority acquisition in July 2018 which, similar to other core deposit intangible assets previously recorded, is being amortized using the sum of the years’ digit method over a ten year period.

Other expenses were $2,059,000 during the three months ended March 31, 2019, an increase of $733,000 or 55 percent compared to other expense of $1,326,000 for the same period in 2018.  As the First Priority acquisition and organic growth have increased the organization’s geographic profile and employee base, several categories within other expense experienced increases, including insurance costs, charitable donations, stationary and supplies, printing, loan collection costs, and directors’ fees.

No merger expenses were recorded during the first quarter of 2019, while during the three months ended March 31, 2018, merger and acquisition expenses were $1,694,000 and included investment banking fees, merger-related legal and professional fees, severance costs, and information technology conversion/termination costs incurred in connection with the acquisitions of First Priority and Scottdale.

Pennsylvania bank shares tax expense decreased $35,000, or over 20 percent, from $171,000 for the three months ended March 31, 2018 to $136,000 for the same period in 2019, primarily due to the timing of charitable donations made during the first quarter of 2019 which resulted in Pennsylvania bank shares tax credits.  Similar credits were not recognized during the three months ended March 31, 2018.

FINANCIAL CONDITION

Loans

Total loans at March 31, 2019 were $1,646,686,000 compared to $1,624,067,000 at December 31, 2018, an increase of $22,619,000 or over 1 percent since year-end 2018.  The majority of the growth was due to both commercial and industrial financing, and commercial real estate credits.

Deposits

Total deposits increased $58,154,000 or 3 percent, from $1,726,026,000 at December 31, 2018 to $1,784,180,000 at March 31, 2019 due to both retail branch deposit growth and cash management sales efforts.  In addition to Mid Penn repricing certain deposits to retain existing customer relationships given significant increases in market competition and pricing for deposits, many new customers in Mid Penn’s acquired markets have opened money market and time deposits accounts. 

Investments

Mid Penn’s portfolio of held-to-maturity securities decreased over 3 percent to $162,791,000 as of March 31, 2019, as compared to $168,370,000 as of December 31, 2018 (held-to-maturity investments are recorded at amortized cost), primarily from principal repayments on mortgage-backed securities.  Mid Penn’s total available-for-sale securities portfolio decreased $10,391,000 or 9 percent, from $111,923,000 at December 31, 2018 to $101,532,000 at March 31, 2019 due to both mortgage-backed securities repayments and certain investment sales related to portfolio interest rate management strategies.

Capital

Shareholders’ equity increased by $4,228,000 or over 1 percent from $223,209,000 as of December 31, 2018 to $227,437,000 as of March 31, 2019. The increase in shareholders’ equity reflects both (i) the growth in retained earnings through year-to-date net income available to common shareholders, net of dividends paid in the first quarter of 2019, and (ii) the year-to-date increase, on an after-tax basis, in the market value of the available-for-sale investment portfolio given the continued flattening middle-section and long-end of the treasury yield curve (as the FOMC indicated a pause in future rate hikes).  Regulatory capital ratios for both Mid Penn and its banking subsidiary continued to exceed regulatory “well-capitalized” levels at both March 31, 2019 and 2018.

ASSET QUALITY

Total nonperforming assets were $7,517,000 at March 31, 2019, a significant decrease compared to nonperforming assets of $12,283,000 at December 31, 2018, and $13,615,000 at March 31, 2018. The ratio of nonperforming assets to the total of loans plus other real estate assets was 0.46% as of March 31, 2019, compared to 0.76% as of December 31, 2018, and 1.35% as of March 31, 2018.  The decrease was primarily due to the successful workout and repayment of a nonaccrual commercial credit relationship totaling $4,302,000 during the first quarter of 2019.

The allowance for loan and lease losses as a percentage of total loans was 0.52% at March 31, 2019, compared to 0.52% at December 31, 2018, and 0.76% at March 31, 2018.  Mid Penn had net loan charge-offs of $20,000 and $65,000 for the three months ended March 31, 2019 and 2018, respectively.  Loan loss reserves as a percentage of nonperforming loans were 119% at March 31, 2019, compared to 75% at December 31, 2018, and 60% at March 31, 2018.  The increase in the loan loss reserves as a percentage of nonperforming loans at March 31, 2019 as compared to March 31, 2018 was a result of both the year-over-year decrease in nonperforming loans, and the favorable impact of acquired loans from First Priority not having a notable volume of nonperforming assets.

Based upon management’s evaluation of the adequacy of the loan and lease loss allowance, a loan loss provision of $125,000 was recorded for the three months ended March 31, 2019 and 2018.  Management believes, based on information currently available, that the allowance for loan and lease losses of $8,502,000 is adequate as of March 31, 2019 to cover probable and estimated loan losses in the portfolio.

FINANCIAL HIGHLIGHTS (Unaudited):

(Dollars in thousands, except   Mar. 31,     Dec. 31,     Sept. 30,     June 30,     Mar. 31,  
 per share data)   2019     2018     2018     2018     2018  
                                         
Cash and cash equivalents   $ 86,968     $ 40,065     $ 62,085     $ 39,407     $ 59,175  
Investment securities     264,323       280,293       282,048       265,012       253,635  
Loans     1,646,686       1,624,067       1,567,286       1,036,479       1,007,138  
Allowance for loan and lease losses     (8,502 )     (8,397 )     (8,229 )     (8,189 )     (7,666 )
Net loans     1,638,184       1,615,670       1,559,057       1,028,290       999,472  
Goodwill and other intangibles     69,665       70,061       70,475       27,985       27,654  
Other assets     88,677       71,892       70,615       54,953       51,281  
Total assets   $ 2,147,817     $ 2,077,981     $ 2,044,280     $ 1,415,647     $ 1,391,217  
                                         
Noninterest-bearing deposits   $ 290,902     $ 269,870     $ 271,142     $ 207,013     $ 195,330  
Interest-bearing deposits     1,493,278       1,456,156       1,491,323       1,029,505       1,017,093  
Total deposits     1,784,180       1,726,026       1,762,465       1,236,518       1,212,423  
Borrowings and subordinated debt     113,661       118,206       46,923       29,583       29,632  
Other liabilities     22,539       10,540       13,057       7,771       10,038  
Shareholders' equity     227,437       223,209       221,835       141,775       139,124  
Total liabilities and shareholders' equity   $ 2,147,817     $ 2,077,981     $ 2,044,280     $ 1,415,647     $ 1,391,217  
                                         
Book Value per Common Share   $ 26.88     $ 26.38     $ 25.83     $ 23.15     $ 22.72  
Tangible Book Value per Common Share *   $ 18.64     $ 18.10     $ 17.50     $ 18.58     $ 18.21  

* 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)   2019     2018     2018     2018     2018  
                                         
Interest income   $ 22,866     $ 22,371     $ 19,583     $ 13,720     $ 12,980  
Interest expense     5,560       4,640       3,672       2,306       2,102  
Net Interest Income     17,306       17,731       15,911       11,414       10,878  
Provision for loan and lease losses     125       275       100             125  
Noninterest income     2,049       2,091       2,165       1,559       1,647  
Noninterest expense     14,303       13,982       15,264       9,742       11,183  
Income before provision for income taxes     4,927       5,565       2,712       3,231       1,217  
Provision for income taxes     850       916       548       452       213  
Net income     4,077       4,649       2,164       2,779       1,004  
Preferred stock dividends           64       38              
Net income available to common shareholders   $ 4,077     $ 4,585     $ 2,126     $ 2,779     $ 1,004  
                                         
Basic Earnings per Common Share   $ 0.48     $ 0.54     $ 0.28     $ 0.45     $ 0.17  
Return on Average Equity     7.35 %     8.19 %     4.26 %     7.90 %     2.78 %


    Mar. 31,     Dec. 31,     Sept. 30,     June 30,     Mar. 31,  
    2019       2018       2018       2018       2018    
Tier 1 Capital (to Average Assets)   7.8 %     8.0 %     7.7 %     8.4 %     8.5 %  
Common Tier 1 Capital (to Risk Weighted Assets)   9.9 %     10.0 %     10.1 %     11.4 %     11.6 %  
Tier 1 Capital (to Risk Weighted Assets)   9.9 %     10.0 %     10.1 %     11.4 %     11.6 %  
Total Capital (to Risk Weighted Assets)   12.2 %     12.3 %     12.4 %     13.8 %     14.1 %  
                                         

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 our 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 our tangible book value.   We believe earnings per share excluding the after-tax impact of merger-related expenses provides important supplemental information in evaluating Mid Penn’s operating results because these charges are not incurred as a result of ongoing operations.  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. 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,     March 31,  
per share data)   2019     2018     2018     2018     2018  
                                         
Shareholder's Equity   $ 227,437     $ 223,209     $ 221,835     $ 141,775     $ 139,124  
Less: Preferred Stock                 3,404              
Less: Goodwill     62,840       62,840       62,767       23,107       22,528  
Less: Core Deposit and Other Intangibles     6,825       7,221       7,708       4,879       5,126  
Tangible Equity   $ 157,772     $ 153,148     $ 147,956     $ 113,789     $ 111,470  
                                         
Common Shares Issued and Outstanding     8,462,431       8,459,918       8,457,023       6,124,517       6,122,717  
                                         
Tangible Book Value per Share   $ 18.64     $ 18.10     $ 17.50     $ 18.58     $ 18.21  
 
 

Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses

(Dollars in thousands, except   Three Months Ended  
per share data)   Mar. 31,     Dec. 31,     Sept. 30,     June 30,     March 31,  
    2019     2018     2018     2018     2018  
Net Income Available to Common Shareholders   $ 4,077     $ 4,585     $ 2,126     $ 2,779     $ 1,004  
Plus: Merger and Acquisition Expenses           (164 )     3,038       222       1,694  
Less: Tax Effect of Merger and Acquisition Expenses           (35 )     576       (3 )     274  
Net Income Excluding Non-Recurring Expenses   $ 4,077     $ 4,456     $ 4,588     $ 3,004     $ 2,424  
                                         
Weighted Average Shares Outstanding - denominator     8,460,002       8,457,054       7,695,469       6,122,757       5,974,949  
                                         
Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses   $ 0.48     $ 0.53     $ 0.60     $ 0.49     $ 0.41  
   
   

CONSOLIDATED BALANCE SHEETS (Unaudited):

(Dollars in thousands, except share data)   March 31, 2019     December 31,
2018
    March 31, 2018  
ASSETS                        
Cash and due from banks   $ 35,573     $ 24,600     $ 20,866  
Interest-bearing balances with other financial institutions     5,049       4,572       5,346  
Federal funds sold     46,346       10,893       32,963  
Total cash and cash equivalents     86,968       40,065       59,175  
                         
Investment securities available for sale, at fair value     101,532       111,923       122,342  
Investment securities held to maturity, at amortized cost                        
(fair value $163,723, $166,582, and $128,352)     162,791       168,370       131,293  
Loans held for sale     4,050       1,702       1,348  
Loans and leases, net of unearned interest     1,646,686       1,624,067       1,007,138  
Less:  Allowance for loan and lease losses     (8,502 )     (8,397 )     (7,666 )
Net loans and leases     1,638,184       1,615,670       999,472  
                         
Bank premises and equipment, net     23,881       25,303       20,015  
Bank premises and equipment held for sale     1,274              
Operating lease right of use asset     11,249              
Finance lease right of use asset     3,582              
Cash surrender value of life insurance     16,769       16,691       13,106  
Restricted investment in bank stocks     5,933       6,646       2,759  
Foreclosed assets held for sale     350       1,017       745  
Accrued interest receivable     8,527       8,244       5,079  
Deferred income taxes     4,018       4,696       3,821  
Goodwill     62,840       62,840       22,528  
Core deposit and other intangibles, net     6,825       7,221       5,126  
Other assets     9,044       7,593       4,408  
Total Assets   $ 2,147,817     $ 2,077,981     $ 1,391,217  
LIABILITIES & SHAREHOLDERS’ EQUITY                        
Deposits:                        
Noninterest-bearing demand   $ 290,902     $ 269,870     $ 195,330  
Interest-bearing demand     397,959       384,834       355,939  
Money Market     414,503       375,648       270,489  
Savings     195,226       209,345       174,920  
Time     485,590       486,329       215,745  
Total Deposits     1,784,180       1,726,026       1,212,423  
                         
Short-term borrowings     35,000       43,100        
Long-term debt     51,585       48,024       12,297  
Subordinated debt     27,076       27,082       17,335  
Operating lease liability     12,428              
Accrued interest payable     2,921       2,262       922  
Other liabilities     7,190       8,278       9,116  
Total Liabilities     1,920,380       1,854,772       1,252,093  
                         
Shareholders' Equity:                        
Common stock, par value $1.00; authorized 10,000,000 shares;                        
8,462,431, 8,459,918, and 6,122,717 shares issued and outstanding at                        
March 31, 2019, December 31, 2018 and March 31, 2018, respectively     8,462       8,460       6,123  
Additional paid-in capital     177,704       177,565       103,382  
Retained earnings     41,842       39,562       33,525  
Accumulated other comprehensive loss     (571 )     (2,378 )     (3,906 )
Total Shareholders’ Equity     227,437       223,209       139,124  
Total Liabilities and Shareholders' Equity   $ 2,147,817     $ 2,077,981     $ 1,391,217  


                 
                 
CONSOLIDATED STATEMENTS OF INCOME (Unaudited):                
                 
(Dollars in thousands, except per share data)   Three Months Ended March 31,  
      2019       2018  
INTEREST INCOME                
Interest and fees on loans and leases   $ 21,078     $ 11,337  
Interest on interest-bearing balances     30       9  
Interest on federal funds sold     68       168  
Interest and dividends on investment securities:                
U.S. Treasury and government agencies     893       752  
State and political subdivision obligations, tax-exempt     619       542  
Other securities     178       172  
Total Interest Income     22,866       12,980  
INTEREST EXPENSE                
Interest on deposits     4,586       1,780  
Interest on short-term borrowings     232       12  
Interest on long-term and subordinated debt     742       310  
Total Interest Expense     5,560       2,102  
Net Interest Income     17,306       10,878  
PROVISION FOR LOAN AND LEASE LOSSES     125       125  
Net Interest Income After Provision for Loan and Lease Losses     17,181       10,753  
NONINTEREST INCOME                
Income from fiduciary activities     359       240  
Service charges on deposits     217       203  
Net gain on sales of investment securities     7       98  
Earnings from cash surrender value of life insurance     78       64  
Mortgage banking income     437       156  
ATM debit card interchange income     334       265  
Merchant services income     85       78  
Net gain on sales of SBA loans     202       257  
Other income     330       286  
Total Noninterest Income     2,049       1,647  
NONINTEREST EXPENSE                
Salaries and employee benefits     7,759       5,064  
Occupancy expense, net     1,401       797  
Equipment expense     627       408  
Pennsylvania bank shares tax expense     136       171  
FDIC Assessment     359       228  
Legal and professional fees     422       224  
Marketing and advertising expense     179       189  
Software licensing and utilization     848       685  
Telephone expense     154       147  
(Gain) loss on sale or write-down of foreclosed assets     (4 )     2  
Intangible amortization     363       248  
Merger and acquisition expense           1,694  
Other expenses     2,059       1,326  
Total Noninterest Expense     14,303       11,183  
INCOME BEFORE PROVISION FOR INCOME TAXES     4,927       1,217  
Provision for income taxes     850       213  
NET INCOME   $ 4,077     $ 1,004  
                 
PER COMMON SHARE DATA:                
Basic and Diluted Earnings Per Common Share   $ 0.48     $ 0.17  
Cash Dividends Paid   $ 0.25     $ 0.25  
                 
                 

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, 2019     March 31, 2018  
    Average           Average     Average           Average  
    Balance     Interest     Rates     Balance     Interest     Rates  
ASSETS:                                                        
Interest Bearing Balances   $   6,162     $   30       1.97 %   $   3,792     $   9       0.96 %
Investment Securities:                                                        
Taxable       165,461         989       2.42 %       153,515         838       2.21 %
Tax-Exempt       107,718         784    (a)   2.95 %       95,419         687    (a)   2.92 %
Total Securities       273,179         1,773       2.63 %       248,934         1,525       2.48 %
                                                         
Federal Funds Sold       11,294         68       2.44 %       44,430         168       1.53 %
Loans and Leases, Net       1,629,480         21,162    (b)   5.27 %       977,832         11,397    (b)   4.73 %
Restricted Investment in Bank Stocks       5,987         82       5.55 %       2,924         86       11.93 %
Total Earning Assets       1,926,102         23,115       4.87 %       1,277,912         13,185       4.18 %
                                                         
Cash and Due from Banks       28,178                           34,721                    
Other Assets       138,249                           66,605                    
Total Assets   $   2,092,529                       $   1,379,238                    
                                                         
LIABILITIES & SHAREHOLDERS' EQUITY:                                                        
Interest-bearing Demand   $   382,478         853       0.90 %   $   363,345         493       0.55 %
Money Market       387,525         1,463       1.53 %       255,095         494       0.79 %
Savings       200,714         176       0.36 %       168,363         75       0.18 %
Time       487,567         2,094       1.74 %       207,558         718       1.40 %
Total Interest-bearing Deposits       1,458,284         4,586       1.28 %       994,361         1,780       0.73 %
                                                         
Short-term Borrowings       34,491         232       2.73 %       3,039         12       1.60 %
Long-term Debt       48,125         354       2.98 %       12,324         75       2.47 %
Subordinated Debt       27,079         388       5.81 %       17,334         235       5.50 %
Total Interest-bearing Liabilities       1,567,979         5,560       1.44 %       1,027,058         2,102       0.83 %
                                                         
Noninterest-bearing Demand       276,673                           191,964                    
Other Liabilities       22,970                           13,887                    
Shareholders' Equity       224,907                           146,329                    
Total Liabilities & Shareholders' Equity   $   2,092,529                       $   1,379,238                    
                                                         
Net Interest Income (taxable equivalent basis)             $   17,555                       $   11,083          
Taxable Equivalent Adjustment                 (249 )                         (205 )        
Net Interest Income             $   17,306                       $   10,878          
                                                         
Total Yield on Earning Assets                         4.87 %                         4.18 %
Rate on Supporting Liabilities                         1.44 %                         0.83 %
Average Interest Spread                         3.43 %                         3.35 %
Net Interest Margin                         3.70 %                         3.52 %

(a)  Includes tax-equivalent adjustments on interest from tax-free municipal securities of $165,000 and $145,000 for the three months ended March 31, 2019 and 2018, respectively. Tax-equivalent adjustments were calculated using statutory tax rate of 21% at March 31, 2019 and 2018.

(b)  Includes tax-equivalent adjustments on interest from tax-free municipal loans of $84,000 and $60,000 for the three months ended March 31, 2019 and 2018, respectively. Tax-equivalent adjustments were calculated using statutory tax rate of 21% at March 31, 2019 and 2018.

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 Bancorp, Inc. 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; 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; legislation affecting the financial services industry as a whole, and Mid Penn and Mid Penn Bank individually or collectively, including tax legislation; regulatory supervision and oversight, including 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; financial resources in the amounts, at the times and on the terms required to support Mid Penn and Mid Penn Bank’s future businesses; and 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.  For a list of other factors which would affect our results, 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, 2018. 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

Michael D. Peduzzi, CPA
Chief Financial Officer