UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2007
Commission file number 001-13677
Mid Penn Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1666413
(State or other jurisdiction of (IRS Employer ID No)
Incorporation or Organization)
349 Union Street, Millersburg, PA 17061
(Address of principal executive offices) (Zip Code)
(717) 692-2133
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange Act)
[ ] Large accelerated [X] Accelerated [ ] Non-accelerated
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act)
[ ] Yes [X] No
Indicate the number of shares outstanding of each of the classes of common
stock, as of the latest practical date.
3,494,377 shares of Common Stock, $1.00 par value per share, were outstanding as
of August 3, 2007.
PART I
MID PENN BANCORP, INC.
ITEM I: FINANCIAL INFORMATION
MID PENN BANCORP, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
June 30, Dec. 31,
2007 2006
----------- ---------
(Unaudited) (Audited)
ASSETS:
Cash and due from banks $ 6,962 $ 9,498
Interest-bearing balances 46,351 46,921
Available-for-sale securities 53,442 57,261
Federal funds sold 0 0
Loans and leases 364,150 358,573
Less,
Allowance for loan and lease losses 4,260 4,187
--------- ---------
Net loans and leases 359,890 354,386
--------- ---------
Bank premises and equip't, net 10,795 9,562
Foreclosed assets held for sale 68 146
Accrued interest receivable 2,761 2,822
Goodwill 1,016 1,016
Core deposit intangible, net 395 428
Cash surrender value of life insurance 7,289 7,154
Deferred income taxes 1,822 1,610
Other assets 1,369 890
--------- ---------
Total Assets 492,160 491,694
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY:
Deposits:
Demand 41,518 44,097
NOW 33,904 32,978
Money Market 64,676 59,640
Savings 26,774 25,397
Time 206,489 202,114
--------- ---------
Total deposits 373,361 364,226
--------- ---------
Short-term borrowings 19,750 24,275
Accrued interest payable 2,731 1,912
Other liabilities 2,671 2,483
Long-term debt 54,648 59,713
--------- ---------
Total Liabilities 453,161 452,609
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share;
authorized 10,000,000 shares; issued
3,533,340 and 3,367,119 shares at
June 30, 2007 and December 31, 2006, resp 3,533 3,367
Additional paid-in capital 31,107 27,452
Retained earnings 5,651 8,583
Accumulated other comprehensive inc(loss) (273) 317
Treasury Stock at cost
(38,898 and 19,086 shs. resp.) (1,019) (634)
--------- ---------
Total Stockholders' Equity 38,999 39,085
--------- ---------
Total Liabilities & Equity 492,160 491,694
========= =========
The accompanying notes are an integral part
of these consolidated financial statements.
2
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited; dollars in thousands)
Three Months Six Moths
Ended June 30, Ended June 30,
------------------------- -------------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
INTEREST INCOME:
Interest & fees on loans and leases $ 6,521 $ 5,834 $ 12,936 $ 11,296
Int.-bearing balances 631 506 1,257 1,042
Treas. & Agency securities 239 232 498 469
Municipal securities 332 332 660 627
Other securities 49 46 101 96
Fed funds sold and repos 8 12 33 12
---------- ---------- ---------- ----------
Total Int. Income 7,780 6,962 15,485 13,542
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Deposits 2,893 2,094 5,692 4,016
Short-term borrowings 145 160 344 305
Long-term borrowings 728 817 1,457 1,557
---------- ---------- ---------- ----------
Total Int. Expense 3,766 3,071 7,493 5,878
---------- ---------- ---------- ----------
Net Int. Income 4,014 3,891 7,992 7,664
PROVISION FOR LOAN AND LEASE LOSSES 125 225 200 360
---------- ---------- ---------- ----------
Net Int. Inc. after Prov 3,889 3,666 7,792 7,304
---------- ---------- ---------- ----------
NON-INTEREST INCOME:
Trust dept 75 65 156 131
Service chgs. on deposits 365 349 732 678
Gain on Sale of Loans 21 0 21 0
Investment securities
Gains(losses), net 0 0 0 0
Income on life insurance 66 52 135 108
Income on sale of other real estate -- -- 0 152
Other 330 275 650 497
---------- ---------- ---------- ----------
Total Non-Interest Income 857 741 1,694 1,566
---------- ---------- ---------- ----------
NON-INTEREST EXPENSE:
Salaries and benefits 1,601 1,562 3,324 3,147
Occupancy, net 222 152 438 311
Equipment 246 210 511 417
PA Bank Shares tax 82 71 163 142
ATM/Debit card expenses 30 31 74 65
Professional fees 128 94 240 209
Director fees and benefits 90 67 170 120
Advertising Expense 142 42 226 119
Computer software licensing 39 52 138 101
Stationery and supplies 55 45 117 97
Early withdrawal fee on
int-bearing bals 0 99 0 191
Other 555 470 1,080 889
---------- ---------- ---------- ----------
Tot. Non-int. Exp 3,190 2,895 6,481 5,808
---------- ---------- ---------- ----------
Income before income tax provision 1,556 1,512 3,005 3,062
INCOME TAX PROVISION 377 395 742 789
---------- ---------- ---------- ----------
NET INCOME $ 1,179 $ 1,117 $ 2,263 $ 2,273
========== ========== ========== ==========
NET INCOME PER SHARE $ 0.34 $ 0.32 $ 0.65 $ 0.65
========== ========== ========== ==========
DIVIDENDS PER SHARE $ 0.20 $ 0.20 $ 0.40 $ 0.40
========== ========== ========== ==========
Weighted Average No. of
Shares Outstanding 3,496,680 3,515,466 3,502,667 3,515,466
Earnings per share has been adjusted to reflect
the 5% stock dividend paid in May of 2007.
The accompanying notes are an integral part of these
consolidated financial statements.
3
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; Dollars in thousands)
For the Six Months
Ended June 30,
----------------------
2007 2006
-------- --------
Operating Activities:
Net Income $ 2,263 $ 2,273
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan and lease losses 200 360
Depreciation 387 316
Incr. in cash-surr. value of life insurance (135) (108)
Investment securities gains, net 0 0
Amortization 66 18
Loss (gain) on sale of loans (21) 0
Loss (gain) on sale/disposal of bank
premises and equipment 0 (9)
Loss (gain) on the sale of foreclosed
assets 21 (131)
Deferred income taxes 93 (216)
Change in accrued interest receivable 61 (91)
Change in other assets (512) (231)
Change in accrued interest payable 819 451
Change in other liabilities (123) 343
-------- --------
Net cash provided by
operating activities 3,119 2,975
-------- --------
Investing Activities:
Net decr in int-bearing balances 570 13,764
Incr. in federal funds sold 0 (5,000)
Proceeds from sale of securities 0 0
Proceeds from the maturity of secs 5,306 2,533
Purchases of investment securities (2,071) (11,525)
Net increase in loans and leases (5,763) (16,616)
Purchases of bank premises & equip't (1,620) (230)
Proceeds from sale of foreclosed assets 137 205
Proceeds from Sale of Bank Premises & Equip't 0 9
Capitalized additions - ORE 0 0
-------- --------
Net cash used in
investing activities (3,441) (16,860)
-------- --------
Financing Activities:
Net incr. in demand and savings 4,760 6,584
Net incr. in time deposits 4,375 10,056
Net decrease in federal funds sold 0 0
Net decrease in short-term borrowings (4,525) (4,338)
Long-term debt repayments (5,065) (5,062)
Increase in long-term borrowings 0 10,000
Cash dividend paid (1,374) (1,314)
Purchase of treasury stock (385) 0
-------- --------
Net cash (used in) provided by
financing activities (2,214) 15,926
-------- --------
Net (decr)incr in cash & due from banks (2,536) 2,041
Cash & due from banks, beg of period 9,498 6,350
-------- --------
Cash & due from banks, end of period 6,962 8,391
======== ========
Supplemental Disclosures of
Cash Flow Information:
Interest paid 6,674 5,427
Income taxes paid 880 775
Supplemental Noncash Disclosures:
Loan charge-offs, net 127 119
Transfers to other real estate 80 184
4
Mid Penn Bancorp, Inc.
Notes to Consolidated Financial Statements
1. The consolidated interim financial statements, with the exception of the
consolidated balance sheet dated December 31, 2006, are unaudited and have been
prepared according to the rules and regulations of the Securities and Exchange
Commission with respect to Form 10-Q. The financial information reflects all
adjustments (consisting only of normal recurring adjustments), which are, in our
opinion, necessary for a fair statement of results for the periods covered.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted according to
these rules and regulations. We believe, however, that the disclosures are
adequate so that the information is not misleading. You should read these
interim financial statements along with the financial statements including the
notes included in the Corporation's most recent Form 10-K.
2. Interim statements are subject to possible adjustments in connection with the
annual audit of the Corporation's accounts for the full fiscal year. In our
opinion, all necessary adjustments have been included so that the interim
financial statements are not misleading.
3. The results of operations for the interim periods presented are not
necessarily an indicator of the results expected for the full year.
4. Management considers the allowance for loan and lease losses to be adequate
at this time.
5. Short-term borrowings as of June 30, 2007, and December 31, 2006, consisted
of:
(Dollars in thousands)
6/30/07 12/31/06
------- --------
Repurchase agreements $ 8,235 $ 9,175
Treasury, tax and loan note 615 600
Federal funds purchased 10,900 14,500
------- --------
$19,750 $24,275
======= =======
5
Federal funds purchased represent overnight funds. Securities sold under
repurchase agreements generally mature between one day and one year. Treasury,
tax and loan notes are open-ended interest bearing notes payable to the U.S.
Treasury upon call. All tax deposits accepted by the Bank are placed in the
Treasury note option account.
6. During the second quarter, Mid Penn Bank ("MPB") did not enter into any
long-term borrowings.
7. MPB has an unfunded noncontributory defined benefit retirement plan for
directors. The plan provides defined benefits based on years of service. MPB
also has other postretirement benefit plans covering full-time employees. These
health care and life insurance plans are noncontributory. MPB uses a December 31
measurement date for its plans.
The components of net periodic benefit costs from these benefit plans are as
follows:
Six months ended June 30:
(Dollars in thousands)
(Dollars in thousands)
Pension Benefits Other Benefits
---------------- --------------
2007 2006 2007 2007
---- ---- ---- ----
Service cost $ 20 $ 20 $ 12 $ 10
Interest cost $ 16 $ 14 $ 30 $ 18
Expected return on plan assets $ -- $ -- $ -- $ --
Amortization of transition obligation $ 8 $ 8 $ -- $ --
Amortization of prior service cost $ -- $ -- $ 14 $ --
Amortization of net (gain) loss $ (4) $ (2) $ -- $ --
---- ---- ---- ----
Net periodic benefit cost $ 40 $ 40 $ 56 $ 28
---- ---- ---- ----
8. Earnings per share is computed by dividing net income by the weighted average
number of common shares outstanding during each of the periods presented, giving
retroactive effect to stock dividends. The basic and diluted earnings per share
are the same since there are no dilutive shares of securities outstanding.
6
9. The purpose of reporting comprehensive income (loss) is to report a measure
of all changes in the Corporation's equity resulting from economic events other
than transactions with stockholders in their capacity as stockholders. For the
Corporation, "comprehensive income(loss)" includes traditional income statement
amounts as well as unrealized gains and losses on certain investments in debt
and equity securities (i.e. available for sale securities). Because unrealized
gains and losses are part of comprehensive income (loss), comprehensive income
(loss) may vary substantially between reporting periods due to fluctuations in
the market prices of securities held. Other comprehensive income will annually
include a pension component in accordance with Financial Accounting Standards
Board No. 158.
(In thousands) Three Months Six Months
Ended June 30: Ended June 30:
-------------------- --------------------
2007 2006 2007 2006
------- ------- ------- -------
Net Income $ 1,179 $ 1,117 $ 2,263 $ 2,273
------- ------- ------- -------
Other comprehensive income(loss):
Unrealized holding gains (losses)
on securities arising during the
period (562) (546) (583) (634)
Less: reclassification
adjs for losses(gains) included
in net income 0 0 0 0
------- ------- ------- -------
Other comprehensive income(loss)
before income tax (provision)
benefit (562) (546) (583) (634)
Other comprehensive income related to SFAS 158 0 0 (311) 0
Income tax (provision) benefit
related to other comp.income (loss) 191 186 304 216
------- ------- ------- -------
Other comprehensive inc(loss) (371) (360) (590) (418)
------- ------- ------- -------
Comprehensive Income (Loss) 808 757 1,673 1,855
======= ======= ======= =======
7
Mid Penn Bancorp, Inc.
Millersburg, Pennsylvania
ITEM 2: Management's Discussion of Consolidated Financial Condition
Special Cautionary Notice Regarding Forward-looking Statements
Certain of the matters discussed in this document and in documents incorporated
by reference herein, including matters discussed under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations," may
constitute forward-looking statements for purposes of the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended, and as
such may involve known and unknown risks, uncertainties and other factors which
may cause the actual results, performance or achievements of MPB to be
materially different from future results, performance or achievements expressed
or implied by such forward-looking statements. The words "expect," "anticipate,"
"intend," "plan," "believe," "estimate," and similar expressions are intended to
identify such forward-looking statements.
MPB's actual results may differ materially from the results anticipated in these
forward-looking statements due to a variety of factors, including, without
limitation:
o The effects of future economic conditions on MPB and the Bank's
customers;
o The costs and effects of litigation and of unexpected or adverse
outcomes in such litigation;
o Governmental monetary and fiscal policies, as well ass legislative and
regulatory changes;
o The effect of changes in accounting policies and practices, as may be
adopted by the regulatory agencies, as well as the Financial Accounting
Standards Board and other accounting standard setters;
o The risks of changes in interest rates on the level and composition of
deposits, loan demand, and the values of loan collateral, securities
and interest rate protection agreements, as well as interest rate
risks;
8
o The effects of competition from other commercial banks, thrifts,
mortgage banking firms, consumer finance companies, credit unions,
securities brokerage firms, insurance companies, money market and other
mutual funds and other financial institutions operating in MPB's market
area and elsewhere, including institutions operating locally,
regionally, nationally and internationally, together with such
competitors offering banking products and services by mail, telephone,
computer and the Internet;
o Technological changes;
o Acquisitions and integration of acquired businesses;
o The failure of assumptions underlying the establishment of reserves for
loan and lease losses and estimations of values of collateral and
various financial assets and liabilities; and
o Acts of war or terrorism
Management's Discussion of Consolidated Financial Condition as of June 30, 2007,
compared to year-end 2006 and the Results of Operations for the second quarter
and the first six months of 2007 compared to the same periods in 2006.
CONSOLIDATED FINANCIAL CONDITION
Total assets as of June 30, 2007, were $492,160,000 compared to $491,694,000 as
of December 31, 2006.
Asset growth was hindered during the first half of 2007 primarily by weakened
loan demand coupled with a highly competitive lending environment. In addition,
MPB experienced the payoff of two large commercial loans during the first
quarter. Consequently, assets remained flat at June 30, 2007 compared with
December 31, 2006.
Total deposits balances were boosted by net growth in money market deposit
accounts of approximately $5 million as well as the execution of a $10 million
brokered certificate of deposit issue. These increases in deposit balances were
used to pay down borrowings.
9
As of June 30, 2007, the Bank's capital ratios are well in excess of the minimum
and well-capitalized guidelines, and the Corporation's capital ratios are in
excess of the Bank's capital ratios. The changes in MPB's additional paid in
capital account resulted from the 5% stock dividend paid to shareholders in May
of 2007. In September of 2005, Mid Penn Bancorp's Board of Directors approved a
Stock Repurchase Program under which the Corporation could buy back up to
250,000 shares of Mid Penn Bancorp common stock. As of June 30, 2007, 19,842
shares have been repurchased at an average price of $24.31 per share. During the
second quarter of 2007, 3,605 shares were repurchased at an average price of
$23.76.
RESULTS OF OPERATIONS
Net income for the first six months of 2007 was relatively flat at $2,263,000,
compared with $2,273,000 earned in the same period of 2006. Net income per share
was $.65 for both periods. Net income as a percentage of average stockholders'
equity, also known as return on equity, (ROE), was 11.6% on an annualized basis
for the first half of 2007 and 12.3% for the same period of 2006.
Net income for the second quarter of 2007 was $1,179,000, compared with
$1,117,000 earned in the same quarter of 2006, an increase of 5.6%. Net income
per share for the second quarters of 2007 and 2006 was $.34 and $.32,
respectively. The increase in net income was due largely to year-over-year
increases in earning assets.
Net interest income of $4,014,000 for the quarter ended June 30, 2007, increased
by 3% over the $3,891,000 earned in the same quarter of 2006. Despite the growth
in earning assets over the past twelve months, net interest income was
restricted to a degree by the flat yield curve and the competition for
interest-yielding assets during the past two quarters.
During the second quarter of 2007, MPB analyzed interest rate risk using the
Profitstar Asset-Liability Management Model. Using the computerized model,
Management reviews interest rate risk on a periodic basis. This analysis
includes an earnings scenario whereby interest rates are increased by 200 basis
points (2 percentage points) and another whereby they are decreased by 200 basis
points. At June 30, 2007, these scenarios were within the policy limits of +/-
15% in net interest income for the next twelve
10
months; however, actual results could vary significantly from the calculations
prepared by management.
Based on Management's analysis of the loan portfolio, the Bank recorded a
$125,000 provision for possible loan and lease losses during the second quarter
of 2007, compared to a provision of $225,000 made during the second quarter of
2006. The provision was lower in 2007 due to slower growth in the loan portfolio
compared with the same quarter of 2006. On a quarterly basis, senior management
reviews potentially unsound loans taking into consideration judgments regarding
risk of loss, economic conditions, trends and other factors in determining a
reasonable allowance for the period. A portion of the allowance for loan and
lease losses is based on applying historical loss ratios to the existing loan
portfolio.
Non-interest income amounted to $857,000 for the second quarter of 2007 compared
to $741,000 earned during the same quarter of 2006. One significant contributor
to non-interest income is insufficient fund (NSF) fee income. NSF fee income
contributed approximately $287,000 of income during the second quarter of 2007
compared to the $277,000 earned during the same quarter of 2006. Non-interest
income during the second quarter was also bolstered by the $21,000 gain on the
sale of an SBA loan, and $62,000 in fees earned through the third-party sale of
non-deposit investment products.
Non-interest expense amounted to $3,190,000 for the second quarter of 2007
compared to $2,895,000 incurred during the same quarter of 2006. A major
increase in non- interest expense during the second quarter of 2007 as compared
to the same period in 2006, was caused by the $39,000 increase in salary and
benefits expense, which is largely attributable to the addition of fifteen
full-time equivalent personnel during the last year including those at our two
newest offices in Middletown and Steelton, which were acquired in December of
2006. Expenses related to property, plant and equipment increased by
approximately $106,000 compared to the second quarter of 2006. This increase
reflects higher depreciation, tax and utility costs as well as the addition of
the two new offices mentioned previously and the relocation of our Lykens Valley
Office to a newly constructed building at a site adjoining a new Walmart
Superstore in Elizabethville, PA, as well as the purchase of a property in Camp
Hill, PA, which was purchased as a future office site. Advertising expense also
increased by approximately $100,000 as the Bank is in the midst of a marketing
campaign to further develop brand recognition and
11
market penetration in conjunction with the recent announcement of the sale of
one of the Bank's major competitors.
The income tax provision for the second quarter of 2007 was slightly lower than
that of the same period of 2006 despite slightly higher earnings in the period
due to a higher percentage of tax-free income in 2007 from increased BOLI (Bank
Owned Life Insurance) and municipal lease balances. Management uses a consistent
formula for determining the income tax provision each quarter.
LIQUIDITY
The Bank's objective is to maintain adequate liquidity while minimizing interest
rate risk. Adequate liquidity provides resources for credit needs of borrowers,
for depositor withdrawals, and for funding Corporate operations. Sources of
liquidity include interest-bearing balances, maturing investment securities,
borrowings, payments received on loans, and increases in deposit liabilities.
Funds generated from operations were a significant source of funds for the first
half of 2007. Another significant source of funds came from a $10M five-year,
brokered CD issue at a rate of 5.15%. These funds were used to pay down
borrowings, which decreased by approximately $9.5M during the period.
The net increase in loans and leases of approximately $5.5M during the period
was funded largely by the proceeds from the maturity of securities and
interest-bearing balances.
CREDIT RISK AND ALLOWANCE FOR LOAN AND LEASE LOSSES
Total non-performing assets were $3,260,000, representing 0.66% of total assets
at June 30, 2007, compared to $2,434,000, or 0.50% of total assets, at December
31, 2006. Most non-performing assets are supported by collateral value that
appears to be adequate at June 30, 2007.
The allowance for loan losses at June 30, 2007, was $4,260,000 or 1.17% of
loans, net of unearned interest, as compared to $4,187,000 or 1.17% of loans,
net of unearned interest, at December 31, 2006.
Based upon the ongoing analysis of MPB's loan portfolio by the loan review
department, the latest quarterly analysis of potentially unsound loans and
non-performing assets,
12
Management considers the Allowance for Loan and Lease Losses to be adequate to
absorb any reasonably foreseeable loan and lease losses.
NEW ACCOUNTING PRONOUNCEMENT
In February 2007, The Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 159, "The Fair Value Option for
Financial Assets and Liabilities," including an amendment of FASB Statement No.
115 ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial
instruments and certain other items at fair value that are not currently
required to be measured at fair value. It also establishes presentation and
disclosure requirements designed to facilitate comparisons between entities that
choose different measurement attributes for similar types of assets and
liabilities. SFAS 159 is effective as of the beginning of an entity's first
fiscal year that begins after November 15, 2007. The Corporation is currently
evaluating the impact of the adoption of this pronouncement on its consolidated
financial statements.
13
MID PENN BANCORP, INC.
Six
Months Year
Ended Ended
-------- --------
June 30, Dec. 31,
2007 2006
-------- --------
Non-Performing Assets:
Non-accrual loans 1,975 1,293
Past due 90 days or more 1,285 995
Restructured loans 0 0
-- ----- -----
Total non-performing loans 3,260 2,288
Other real estate 0 146
-- ----- -----
Total 3,260 2,434
-- ===== =====
Percentage of total loans outstanding 0.90% 0.68%
Percentage of total assets 0.66% 0.50%
Analysis of the Allowance for Loan and Lease Losses:
Balance beginning of period 4,187 3,704
Loans charged off:
Commercial real estate, construction
and land development 0 17
Commercial, industrial and agricultural 12 158
Real estate - residential mortgage 0 0
Consumer 68 134
Leases 84 0
----- -----
Total loans charged off 164 309
----- -----
Recoveries of loans previously charged off:
Commercial real estate, construction
and land development 0 0
Commercial, industrial and agricultural 1 3
Real estate - residential mortgage 0 0
Consumer 36 54
----- -----
Total recoveries 37 57
----- -----
Net (charge-offs) recoveries (127) (252)
----- -----
Current period provision for
loan losses 200 735
----- -----
Balance end of period 4,260 4,187
===== =====
14
Item 3: Quantitative and Qualitative Disclosure about Market Risk
In the normal course of conducting business activities, the Corporation is
exposed to market risk, principally interest risk. Interest risk arises from
market driven fluctuations in interest rates that affect cash flows, income,
expense and values of financial instruments. The Asset/Liability Committee,
using policies approved by the Board of Directors, is responsible for managing
the rate sensitivity position.
No material changes in the market risk strategy occurred during the current
period. No material changes have been noted in the Corporation's equity value at
risk. A detailed discussion of market risk is provided in the Form 10-K for the
year ended December 31, 2006.
Item 4: Controls and Procedures:
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Corporation updated its
evaluation, under the supervision and with the participation of the
Corporation's management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
corporation's disclosure controls and procedures pursuant to the Securities
Exchange Act of 1934 ("Exchange Act") Rule 13a-15e. Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that the
Corporation's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Corporation (including its
consolidated subsidiaries) required to be included in our periodic SEC filings.
Changes in Internal Controls Over Financial Reporting
There was no change in the Corporation's internal controls or, to its knowledge,
in other factors that have materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
15
Mid Penn Bancorp, Inc.
PART II - OTHER INFORMATION:
Item 1. Legal Proceedings - Management is not aware of any litigation that would
have a material adverse effect on the consolidated financial position of the
Corporation. There are no proceedings pending other than ordinary routine
litigation incident to the business of the Corporation. In addition, management
does not know of any material proceedings contemplated by governmental
authorities against the Corporation or any of its properties.
Item 1A. Risk Factors - There are no material changes from the risk factors as
previously disclosed in the Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds - In
September of 2005, Mid Penn Bancorp's Board of Directors approved a Stock
Repurchase Program under which the Corporation could buy back up to 250,000
shares of Mid Penn Bancorp common stock. Through June 30, 2007, 19,842 shares
have been repurchased at an average price of $24.31 per share. During the second
quarter of 2007, 3,605 shares were repurchased at an average price of $23.76.
Issuer Purchases of Equity Securities During the Quarter:
------------------------------------------------------------------------------------------
Total Number Total Number of Maximum Number of
of Shares Average Price Shares Purchased Shares that May Yet Be
Period Purchased Paid per Sare as Part of Plan Purchased Under Plan
------------------------------------------------------------------------------------------
Apr-07 0 N/A 16,237 233,763
------------------------------------------------------------------------------------------
May-07 2,592 $23.44 18,829 231,171
------------------------------------------------------------------------------------------
June-07 1,013 $24.59 19,842 230,158
------------------------------------------------------------------------------------------
Total 3,605 $23.76 19,842 230,158
------------------------------------------------------------------------------------------
Item 3. Defaults Upon Senior Securities - Nothing to report
Item 4. Submission of Matters to a Vote of Security Holders - At the Annual
Meeting of Shareholders held on April 24, 2007, a vote was held for the election
of Class C directors: A. James Durica, Theodore W. Mowery, Donald E. Sauve and
Willaim A. Specht, III, to serve for a three-year term. A. James Durica received
3,012,081 votes for and 3,842 votes withheld. Theodore W. Mowery received
3,000,103 votes for and 15,820 votes withheld. Donald E. Sauve received
2,918,704 votes for and 97,218 withheld. William A. Specht, III, received
3,012,081 votes for and 3,842 withheld.
Other directors include:
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Name: Term Expiration:
Jere M. Coxon 2009
Alan W. Dakey 2009
Robert C. Grubic 2008
Gregory M. Kerwin 2008
Edwin D. Schlegel 2008
Guy J. Snyder, Jr. 2009
Item 5. Other Information - The Bank has purchased a future branch facility,
formerly operated as a banking office, located at 21st and Market Streets in
Camp Hill, Cumberland County, PA. A fall opening is anticipated; regulatory
approval was received in July of 2007.
Item 6. Exhibits -
3(i) The Registrant's Articles of Incorporation. (Incorporated by
reference to Registrant's Annual Report on Form 10-K filed with
the SEC on March 29, 2002.)
3(ii) The Registrant's By-laws. (Incorporated by reference to
Registrant's Annual Report on Form 10-K filed with the SEC on
March 29, 2002.)
10.1 Mid Penn Bank's Profit Sharing Retirement Plan. (Incorporated by
reference to Registrant's Annual Report on Form 10-K filed with
the SEC on March 29, 2002.)
10.2 Mid Penn Bank's Employee Stock Ownership Plan. (Incorporated by
reference to Registrant's Annual Report on Form 10-K filed with
the SEC on March 29, 2002.)
10.3 The Registrant's Dividend Reinvestment Plan, as amended and
restated. (Incorporated by reference to Registrant's Registration
Statement on Form S-3, filed with the SEC on October 12, 2005.)
10.4 Salary Continuation Agreement between Mid Penn Bank and Alan W.
Dakey. (Incorporated by reference to Registrant's Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
March 28, 2003.)
10.5 Split Dollar Agreement between Mid Penn Bank and Eugene F. Shaffer
(Incorporated by reference to Registrant's Annual Report on Form
10-K filed with the Securities and Exchange Commission on March
14, 2005)
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10.6 Death Benefit Plan and Agreement between Mid Penn Bank and the
Trustee of the Eugene F. Shaffer Irrevocable Trust (Incorporated
by reference to Registrant's Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 14, 2005)
11.1 Statement regarding the computation of Per Share Earnings
(Included in body of 10-Q)
31.1 Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive
Officer.
31.2 Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial
Officer.
32.1 Chief Executive Officer'sss.1350 Certification.
32.2 Chief Financial Officer's ss.1350 Certification
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Mid Penn Bancorp, Inc.
Registrant
/s/ Alan W. Dakey /s/ Kevin W. Laudenslager
----------------- -------------------------
By: Alan W. Dakey By: Kevin W. Laudenslager
President & CEO Treasurer
Date: August 3, 2007 Date: August 3, 2007
18