MID PENN BANCORP INC

Previous wording

•Net Income Per Share - Mid Penn’s net income available to common shareholders ("earnings") for the three months ended March 31, 2024 was $12.1 million, or $0.73 per both common share basic and diluted, compared to earnings of $11.2 million, or $0.71 per both common share basic and diluted for the three months ended March 31, 2023.

Current wording

•Net Income Per Share - Mid Penn’s net income available to common shareholders ("earnings") for the three months ended June 30, 2024 was $11.8 million, or $0.71 per both common share basic and diluted, compared to earnings of $4.8 million, or $0.29 per both common share basic and diluted for the three months ended June 30, 2023. Mid Penn's earnings for the six months ended June 30, 2024 was $23.9 million, or $1.44 per both common share basic and diluted, compared to earnings of $16.1 million, or $1.00 per both common share basic and diluted for the six months ended June 30, 2023.

Previous wording

◦Net Interest Margin - For the first quarter of 2024, Mid Penn’s net interest margin was 2.97% versus 3.49% for the same period of 2023. The decrease is primarily driven by higher interest rates resulting from persistent inflation. The yield on interest-earning assets for the first quarter of 2024 increased 67 basis points from the same period of 2023. The rate on interest-bearing liabilities increased 143 basis points from the same period of 2023.

Current wording

◦Net Interest Margin - For the second quarter of 2024, Mid Penn’s net interest margin was 3.12% versus 3.29% for the same period of 2023. For the six months ended June 30, 2024, net interest margin was 3.04% versus 3.39% for the same period of 2023. The decrease is primarily driven by higher interest rates resulting from persistent inflation. The yield on interest-earning assets for the second quarter of 2024 increased 61 basis points from the same period of 2023. The rate on interest-bearing liabilities increased 93 basis points from the same period of 2023.

Previous wording

◦Loan Growth - Total loans, net of unearned income, as of March 31, 2024 were $4.3 billion compared to $4.3 billion as of December 31, 2023, an increase of $64.7 million, or 1.5%. The growth was primarily driven by an increase in commercial real estate of $43.1 million. and an increase in construction loans of $31.8 million, offset by a decrease in residential mortgage loans of $6.6 million.

Current wording

◦Loan Growth - Total loans, net of unearned income, as of June 30, 2024 were $4.4 billion compared to $4.3 billion as of December 31, 2023, an increase of $111.8 million, or 2.6%. The growth was primarily driven by an increase in multifamily of$65.1 million, an increase in nonowner occupied commercial real estate of$37.5 million, and an increase in commercial and industrial loans of$17.6 million.

Previous wording

◦Deposit Growth - Total deposits increased $32.9 million, or 0.8%, from $4.3 billion at December 31, 2023, to $4.4 billion at March 31, 2024. The growth was primarily driven by an increase of $29.9 million in time deposits, and a $6.5 million increase in non-interest bearing accounts, partially offset by a decrease in interest-bearing transaction accounts.

Current wording

◦Deposit Growth - Total deposits increased $150.8 million, or 3.5%, from $4.3 billion at December 31, 2023, to $4.5 billion at June 30, 2024. The growth was driven by an increase of $108.5 million in interest-bearing transaction accounts, and an increase of $77.6 million in time deposits, offset by a $35.3 million decrease in non-interest bearing accounts.

Previous wording

•Asset Quality - Mid Penn adopted CECL on January 1, 2023. Its ACL at March 31, 2024 was $33.5 million, or 0.78% of total loans, as compared to $34.2 million, or 0.80% of total loans at December 31, 2023.

Current wording

•Asset Quality - ACL at June 30, 2024 was $35.3 million, or 0.81% of total loans, as compared to $34.2 million, or 0.80% of total loans at December 31, 2023.

Previous wording

◦Net Charge-offs/Recoveries - Mid Penn had net charge-offs of $44 thousand and $113 thousand for the three months ended March 31, 2024 and 2023, respectively.

Current wording

◦Net Charge-offs/Recoveries - Mid Penn had net charge-offs of $18 thousand and $170 thousand for the three months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, net charge-offs were $62 thousand compared to $283 thousand for the same period of 2023.

Previous wording

◦Non-performing assets - Total non-performing assets were $15.5 million at March 31, 2024, an increase compared to non-performing assets of $14.5 million at December 31, 2023. The increase is primarily related to loans totaling $1.1 million attributable to one relationship placed on non-accrual. Delinquency as a percentage of total loans was 0.38% at March 31, 2024.

Current wording

◦Non-performing assets - Total non-performing assets were $10.4 million at June 30, 2024, a decrease compared to non-performing assets of $14.5 million at December 31, 2023. The decrease is primarily related to the sale of one foreclosed property, which resulted in a loss on sale of approximately $26 thousand. Delinquency as a percentage of total loans was 0.57% at June 30, 2024.

Previous wording

◦Benefit/Provision for credit losses - loans - The benefit for credit losses - loans was $619 thousand for the three months ended March 31, 2024 compared to $490 thousand for the same period of 2023. The decrease in provision for the three months ended March 31, 2024, is primarily due to a decrease in loss factors across all portfolios. The benefit for credit losses on off-balance sheet credit exposures was $318 thousand for the three months ended March 31, 2024.

Current wording

◦Provision/Benefit for credit losses - loans - The provision for credit losses - loans was $1.8 million for the three months ended June 30, 2024 compared to $1.2 million for the same period of 2023. The benefit for credit losses on off-balance sheet credit exposures was $178 thousand for the three months ended June 30, 2024, compared to a benefit of $496 thousand for the same period of 2023. The provision for credit losses - loans was $1.2 million for the six months ended June 30, 2024 compared to $1.6 million for the same period of 2023. The decrease in provision for the six months ended June 30, 2024, is primarily due to a decrease in loss factors across all portfolios.

Previous wording

•Noninterest Income - Noninterest income totaled $5.8 million for the three months ended March 31, 2024 compared to $4.3 million for the three months ended March 31, 2023. The increase in noninterest income is primarily due to a $1.5 million increase in other miscellaneous noninterest income.

Current wording

•Noninterest Income - Noninterest income totaled $5.3 million for the three months ended June 30, 2024 compared to $5.2 million for the same period of 2023. The increase in noninterest income is primarily due to a $1.5 million increase in other miscellaneous income, partially offset by a $381 thousand decrease in mortgage banking. Noninterest income totaled $11.2 million for the six months ended June 30, 2024 compared to $9.5 million for the same period of 2023.

Previous wording

•Noninterest Expense - Noninterest expense totaled $28.5 million for the first quarter of 2024, an increase of $2.5 million, or 9.4%, compared to noninterest expense of $26.1 million for the same period of 2023. The increase was primarily the result of a $1.6 million increase in salaries and benefits expense, driven by the Brunswick acquisition, and a $605 thousand increase in FDIC charges due to increased assessment rates.

Current wording

•Noninterest Expense - Noninterest expense totaled $28.2 million for the three months ended June 30, 2024, a decrease of $6.9 million, or 19.7%, compared to noninterest expense of $35.1 million for the same period of 2023. The decrease was primarily due to $7.9 million of Brunswick acquisition costs in 2023, partially offset by a $506 thousand increase in salaries and benefits expense, also driven by the Brunswick acquisition, and a $548 thousand increase in FDIC charges due to increased assessment rates. Noninterest expense totaled $56.7 million for the six months ended June 30, 2024, a decrease of $4.2 million, or 6.93%, compared to noninterest expense of $61.0 million for the same period of 2023.

Previous wording

•Liquidity - Current liquidity, including borrowing capacity, enhanced to nearly $1.69 billion or 142.7% of uninsured and uncollateralized deposits, or approximately 38.5% of total deposits.

Current wording

•Liquidity - Current liquidity, including borrowing capacity, enhanced to nearly $1.79 billion or 140.4% of uninsured and uncollateralized deposits, or approximately 39.8% of total deposits.

Previous wording

While management uses the best information known to it in order to make ACL valuations, adjustments to the ACL may be necessary based on changes in economic and other conditions, changes in the composition of the loan portfolio, or changes in accounting guidance. In times of economic slowdown, either local, regional or national, the risk inherent in the loan portfolio could increase resulting in the need for additional provisions to the ACL in future periods. An increase could also be necessitated by an increase in the size of the loan portfolio or in any of its components even though the credit quality of the overall portfolio may be improving.

Current wording

While management endeavors to use the best information known to it in order to make ACL valuations, adjustments to the ACL may be necessary based on changes in economic and other conditions, changes in the composition of the loan portfolio, or changes in accounting guidance. In times of economic slowdown, either local, regional or national, the risk inherent in the loan portfolio could increase resulting in the need for additional provisions to the ACL in future periods. An increase could also be necessitated by an increase in the size of the loan portfolio or in any of its components even though the credit quality of the overall portfolio may be improving.

Previous wording

For the three months ended March 31, 2024, net interest income was $36.5 million compared to net interest income of $36.0 million for the three months ended March 31, 2023. The tax-equivalent net interest margin for the three months ended March 31, 2024 was 2.97% compared to 3.49% for the first quarter of 2023, representing a 53 bp decrease compared to the same period in 2023, primarily driven by higher interest rates resulting from persistent inflation.

Current wording

For the three months ended June 30, 2024, net interest income was $38.8 million compared to net interest income of $36.4 million for the three months ended June 30, 2023. The tax-equivalent net interest margin for the three months ended June 30, 2024 was 3.12% compared to 3.31% for the second quarter of 2023, representing a 17 bp decrease compared to the same period in 2023.

Previous wording

The yield on interest-earning assets increased to 5.51% for the quarter ended March 31, 2024, from 4.84% for the quarter ended March 31, 2023. These increases were due to assets continuing to reprice at higher rates during the first quarter of 2024. Increased yields on interest-earning assets were more than offset by increases in funding costs for the first quarter of 2024, with the overall cost of interest-bearing liabilities increasing to 3.24% during the first quarter of 2024, compared to 3.02% for the three months ended December 31, 2023, and 1.81% for the three months ended March 31, 2023.

Current wording

The yield on interest-earning assets increased to 5.69% for the quarter ended June 30, 2024, from 5.08% for the quarter ended June 30, 2023. These increases were due to assets continuing to reprice at higher rates during the second quarter of 2024, continued discipline on new loan pricing, and increase in Fed funds sold. Increased yields on interest-earning assets were offset by increases in funding costs for the second quarter of 2024, with the overall cost of interest-bearing liabilities increasing to 3.28% during the second quarter of 2024, compared to 2.35% for the three months ended June 30, 2023.

Previous wording

Average investment securities decreased $20.5 million and the yield on those investment securities increased 2 bps during the first quarter of 2024 compared to the first quarter of 2023, reducing interest income due to volume by $137 thousand offset by increased rates contributing $160 thousand to interest income. Average loans increased $738.5 million, and the yield on those loans increased 68 bps, contributing $9.6 million and $7.8 million, respectively, to the increase in interest income.

Current wording

Average investment securities decreased $22.6 million and the yield on those investment securities decreased 4 bps during the second quarter of 2024 compared to the second quarter of 2023, reducing interest income due to volume by $146 thousand, and reducing interest income due to rates by $44 thousand. Average loans increased $544.6 million, and the yield on those loans increased 62 bps, contributing $7.4 million and $6.6 million, respectively, to the increase in interest income.

Previous wording

Interest expense increased $17.6 million during the first quarter of 2024 compared to the first quarter of 2023. The rate of interest-bearing liabilities increased from 1.81% for the first quarter of 2023 to 3.24% for the first quarter of 2024. The increase in the rate was primarily a result of a shift in the mix of deposits from demand, money market and savings to higher yielding time deposits. Mid Penn continued to offer higher rates over the comparable period to both retain and attract deposits. In addition, average short-term borrowings of $316.0 million were used to help fund loan growth, contributing $3.0 million to interest expense during the first quarter of 2024.

Current wording

Interest expense increased $12.3 million during the second quarter of 2024 compared to the second quarter of 2023. The rate of interest-bearing liabilities increased from 2.35% for the second quarter of 2023 to 3.28% for the second quarter of 2024. The increase in the rate was primarily a result of a shift in the mix of deposits from demand, money market and savings to higher yielding time deposits. Mid Penn continued to offer higher rates over the comparable period to both retain and attract deposits. In addition, average short-term borrowings of $241.7 million were used to help fund loan growth, contributing $1.8 million to interest expense during the second quarter of 2024.

Previous wording

On January 1, 2023, Mid Penn adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology, and is referred to as CECL. The benefit for credit losses on loans was $619 thousand for the three months ended March 31, 2024 compared to a provision of $490 thousand for the three months ended March 31, 2023. The decrease is primarily due to a decrease in loss factors across all portfolios.

Current wording

On January 1, 2023, Mid Penn adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology, and is referred to as CECL. The provision for credit losses on loans was $1.8 million for the three months ended June 30, 2024 compared to a provision of $1.2 million for the three months ended June 30, 2023. The increase in provision was driven by an increase in loss factors across the commercial and commercial real estate portfolios. The provision for credit losses on loans was $1.2 million for the six months ended June 30, 2024 compared to a provision of $1.6 million for the six months ended June 30, 2023. The decrease is primarily due to a decrease in loss factors across all portfolios.

Previous wording

Noninterest income for the three months ended March 31, 2024 was $5.8 million and $4.3 million for the three months ended March 31, 2023. The following table and explanations that follow provide additional analysis of noninterest income.

Current wording

Noninterest income for the three months ended June 30, 2024 was $5.3 million and $5.2 million for the three months ended June 30, 2023. The following table and explanations that follow provide additional analysis of noninterest income.

Previous wording

For the three months ended March 31, 2024, noninterest income totaled $5.8 million, an increase of $1.5 million, or 34.96%, compared to noninterest income of $4.3 million for the three months ended March 31, 2023. The increase in noninterest income is primarily due to a $1.5 million increase in other miscellaneous noninterest income.

Current wording

For the six months ended June 30, 2024, noninterest income totaled $11.2 million, an increase of $1.6 million, or 16.98%, compared to noninterest income of $9.5 million for the six months ended June 30, 2023. The increase in noninterest income is primarily due to a $1.5 million increase in other miscellaneous noninterest income, driven by a $1.5 million death benefit from Bank owned life insurance.

Previous wording

For the three months ended March 31, 2024, noninterest expense totaled $28.5 million, an increase of $2.5 million, or 9.4%, compared to noninterest expense of $26.1 million for the same period in 2023. The following table and explanations that follow provide additional analysis of noninterest expense:

Current wording

For the three months ended June 30, 2024, noninterest expense totaled $28.2 million, a decrease of $6.9 million, or 19.7%, compared to noninterest expense of $35.1 million for the same period in 2023. The following table and explanations that follow provide additional analysis of noninterest expense:

Previous wording

For the three months ended March 31, 2024, noninterest expense totaled $28.5 million, an increase of $2.7 million, or 10.4%, compared to noninterest expense of $25.8 million for the three months ended March 31, 2023. The increase was primarily the result of a $1.6 million increase in salaries and benefits expense, driven by the Brunswick acquisition, and a $605 thousand increase in FDIC charges due to increased assessment rates.

Current wording

For the six months ended June 30, 2024, noninterest expense totaled $56.7 million, a decrease of $4.2 million, or 6.9%, compared to noninterest expense of $61.0 million for the six months ended June 30, 2023. The decrease was primarily the result of a $8.2 million decrease in merger and acquisition costs related to the Brunswick Acquisition, partially offset by an increase of $2.1 million in salaries and benefits also related to the Brunswick Acquisition, and a $1.2 million increase in FDIC charges due to increased assessment rates.

Previous wording

The provision for income taxes was $2.6 million for the three months ended March 31, 2024 compared to $2.6 million for the same period in 2023. The provision for income taxes for the three months ended March 31, 2024 reflects a combined Federal and State effective tax rate of 17.5% and 18.7%, for the three months ended March 31, 2024 and March 31, 2023, respectively. Generally, Mid Penn’s effective tax rate is below the federal statutory rate due to earnings on tax-exempt loans, investments, and earnings from the cash surrender value of life insurance, as well as the impact of federal income tax credits, including those awarded from Mid Penn’s low-income housing investments. The realization of Mid Penn’s deferred tax assets is dependent on future earnings. Mid Penn currently anticipates that future earnings will be adequate to fully realize the currently recorded deferred tax assets.

Current wording

The provision for income taxes was $2.5 million for the three months ended June 30, 2024 compared to $142 thousand for the same period in 2023. The provision for income taxes for the six months ended June 30, 2024 reflects a combined Federal and State effective tax rate of 17.5% and 2.9%, for the six months ended June 30, 2024 and June 30, 2023, respectively. Generally, Mid Penn’s effective tax rate is below the federal statutory rate due to earnings on tax-exempt loans, investments, and earnings from the cash surrender value of life insurance, as well as the impact of federal income tax credits, including those awarded from Mid Penn’s low-income housing investments. The realization of Mid Penn’s deferred tax assets is dependent on future earnings. Mid Penn currently anticipates that future earnings will be adequate to fully realize the currently recorded deferred tax assets.

Previous wording

Mid Penn’s total assets were $5.3 billion as of March 31, 2024, reflecting an increase of $39.6 million, or 0.7%, compared to total assets of $5.3 billion as of December 31, 2023. The increase was primarily driven by organic loan growth, offset by a reduction in cash and cash equivalents.

Current wording

Mid Penn’s total assets were $5.4 billion as of June 30, 2024, reflecting an increase of $101.0 million, or 1.9%, compared to total assets of $5.3 billion as of December 31, 2023. The increase was primarily driven by organic loan growth, offset by a reduction in investment securities.

Previous wording

Mid Penn’s investment portfolio is utilized primarily to support overall liquidity and interest rate risk management, to provide collateral supporting pledging requirements for public funds on deposit, and to generate additional interest income within reasonable risk parameters. Total investment securities as of March 31, 2024 were $614.6 million compared to $622.7 million as of December 31, 2023. Mid Penn does not intend to grow the investment portfolio beyond levels necessary to support pledging requirements.

Current wording

Mid Penn’s investment portfolio is utilized primarily to support overall liquidity and interest rate risk management, to provide collateral supporting pledging requirements for public funds on deposit, and to generate additional interest income within reasonable risk parameters. Total investment securities as of June 30, 2024 were $601.3 million compared to $622.7 million as of December 31, 2023. Mid Penn does not intend to grow the investment portfolio beyond levels necessary to support pledging requirements.

Previous wording

Total loans, net of unearned interest, as of March 31, 2024 were $4.3 billion compared to $4.3 billion as of December 31, 2023. The growth of $64.7 million, or 1.5%, since December 31, 2023 was the result of organic loan growth. Organic growth occurred primarily across the commercial real estate and commercial and industrial portfolios, offset by a decrease in residential mortgage loan portfolios.

Current wording

Total loans, net of unearned interest, as of June 30, 2024 were $4.4 billion compared to $4.3 billion as of December 31, 2023. The growth of $111.8 million, or 2.6%, since December 31, 2023 was primarily the result of organic loan growth across the commercial real estate and commercial and industrial portfolios, offset by decreases in residential mortgage loan portfolios.

Previous wording

Total nonperforming assets were $15.5 million at March 31, 2024, an increase compared to nonperforming assets of $14.5 million at December 31, 2023. The increase during the first quarter of 2024 primarily related to loans totaling $1.1 million attributable to one relationship placed on non-accrual. Delinquency as a percentage of total loans was 0.38% at March 31, 2024.

Current wording

Total nonperforming assets were $10.4 million at June 30, 2024, a decrease compared to nonperforming assets of $14.5 million at December 31, 2023. The decrease during the second quarter of 2024 primarily related to the sale of one foreclosed property, which resulted in a loss on sale of approximately $26 thousand. Delinquency as a percentage of total loans was 0.57% at June 30, 2024.

Previous wording

Mid Penn evaluates goodwill annually for impairment unless events occur which indicate that impairment is possible, a triggering event. At March 31, 2024, Mid Penn had goodwill of $127.0 million and Mid Penn's stock continues to trade below book value. Management has not noted any factors either internally or externally which would indicate that a triggering event has occurred during the first quarter of 2024 warranting an additional impairment test. Factors considered include actual earnings in relation to forecasted earnings, liquidity levels, changes in deposit balances, and credit quality, among others. Management will continue to monitor internal metrics and macroeconomic trends to determine if there is likelihood of Goodwill impairment. Additionally, our annual impairment test will be conducted as of October 31, 2024.

Current wording

Mid Penn evaluates goodwill annually for impairment unless events occur which indicate that impairment is possible, a triggering event. At June 30, 2024, Mid Penn had goodwill of $127.0 million and Mid Penn's stock continues to trade below book value. Management has not noted any factors either internally or externally which would indicate that a triggering event has occurred during the second quarter of 2024 warranting an additional impairment test. Factors considered include actual earnings in relation to forecasted earnings, liquidity levels, changes in deposit balances, and credit quality, among others. Management will continue to monitor internal metrics and macroeconomic trends to determine if there is likelihood of goodwill impairment. Mid Penn's annual impairment test is scheduled to be conducted as of October 31, 2024.

Previous wording

Total deposits increased $32.9 million, or 0.8%, from $4.3 billion on December 31, 2023, to $4.4 billion at March 31, 2024. The growth was primarily due to an increase of $29.9 million, or 2.1%, in time deposits, and a $6.5 million, or 0.8%, in non-interest bearing accounts, partially offset by decreases in interest-bearing transaction accounts.

Current wording

Total deposits increased $150.8 million, or 3.5%, from $4.3 billion on December 31, 2023, to $4.5 billion at June 30, 2024. The growth was driven by a $108.5 million increase in interest bearing accounts, and a $77.6 million increase in time deposits, offset by a $35.3 million decrease in noninterest bearing accounts.

Previous wording

Total short-term borrowings increased $30.3 million, or 12.6%, from December 31, 2023 in order to fund loan growth. Short term FHLB borrowings increased $125.0 million offset by a decrease in FHLB overnight borrowings of $94.7 million. Total long-term borrowings were $23.9 million at March 31, 2024, a decrease of $35.1 million from December 31, 2023.

Current wording

Total short-term borrowings decreased $41.5 million, or 17.2%, from December 31, 2023. FHLB overnight borrowings decreased $166.5 million, offset by an increase of $125.0 million in short term FHLB borrowings. Total long-term borrowings were $23.8 million at June 30, 2024, a decrease of $35.2 million from December 31, 2023.

Previous wording

The Consolidated Statements of Cash Flows provide additional information. Mid Penn’s operating activities during the three months ended March 31, 2024 provided $12.4 million of cash, mainly due to net income. Cash used in investing activities during the three months ended March 31, 2024 was $65.7 million, mainly the result of the net increase in loans. Cash provided by financing activities during the three months ended March 31, 2024 totaled $24.7 million, primarily the result of an increase in net deposits.

Current wording

The Consolidated Statements of Cash Flows provide additional information. Mid Penn’s operating activities during the six months ended June 30, 2024 provided $30.4 million of cash, mainly due to net income. Cash used in investing activities during the six months ended June 30, 2024 was $88.9 million, mainly the result of the net increase in loans. Cash provided by financing activities during the six months ended June 30, 2024 totaled $67.4 million, primarily the result of an increase in net deposits.

Previous wording

Shareholders’ equity increased by $8.6 million, or 1.6%, from $542.4 million as of December 31, 2023 to $551.0 million as of March 31, 2024, primarily due to earnings of $12.1 million, partially offset by dividends declared of $3.3 million and stock repurchases of $323 thousand.

Current wording

Shareholders’ equity increased by $17.3 million, or 3.2%, from $542.4 million as of December 31, 2023 to $559.7 million as of June 30, 2024, primarily due to earnings of $23.9 million, partially offset by dividends declared of $6.6 million and stock repurchases of $323 thousand.