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

    Source: Nasdaq GlobeNewswire / 25 Jan 2023 13:29:15   America/New_York

    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%

    CONTACTS

Rory G. Ritrievi
President & Chief Executive Officer

Allison S. Johnson
Chief Financial Officer

1-866-642-7736

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