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

Rhea-AI Summary

Mid Penn Bancorp reports Q3 2023 earnings of $9.2 million, with organic loan and deposit growth. Net interest income decreases, noninterest expense decreases.

Positive

• Organic loan growth for Q3 2023 was $111.1 million, or 10.9% (annualized), from Q2 2023. Organic deposit growth for Q3 2023 was $94.9 million, or 8.8% (annualized), from Q2 2023. Noninterest expense decreased by $5.6 million, or 15.8%, in Q3 2023 compared to Q2 2023.

Negative

• Net interest income decreased to $37.5 million in Q3 2023 compared to $36.4 million in Q2 2023. Noninterest income decreased by $2.0 million for the nine months ended September 30, 2023, compared to the same period in 2022.

HARRISBURG, Pa., Oct. 25, 2023 (GLOBE NEWSWIRE) -- October 25, 2023 – Harrisburg, PA – 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 September 30, 2023, of $9.2 million, or $0.56 per diluted common share.

Key Highlights of the Third Quarter of 2023

• Organic loan growth for the third quarter of 2023 was $111.1 million, or 10.9% (annualized), from the second quarter of 2023.

• Organic deposit growth for the quarter ended September 30, 2023 was $94.9 million, or 8.8% (annualized), from the second quarter of 2023.

• Credit quality strengthened during the third quarter of 2023 with nonperforming assets declining $1.6 million from June 30, 2023.

“The third quarter of 2023 was a challenging one for Mid Penn, mostly due to external forces beyond our control. Chief among them was an inverted yield curve throughout the quarter that had our base borrowing rate, the effective funds rate, higher than our base lending rate, the 5-year Treasury. As a consequence, maintaining a respectable net interest margin was extremely difficult, as evidenced by additional compression in that metric,” Chair, President, and CEO Rory G. Ritrievi said.

Ritrievi added, “The residential mortgage business, a significant portion of our noninterest revenues, continues to be impacted by elevated rates, which have dampened productivity across the country. Our ongoing response to these pressures is to find expense cuts throughout the company that will help us preserve net income for not only the fourth quarter of 2023 but also fiscal year 2024. We take these measures while also focusing on the positive aspects of the third quarter, which were: significant organic growth on both sides of the balance sheet, a continuous improvement in our asset quality metrics, and continued growth in shareholder equity.”

For the third quarter of 2023, the Board is pleased to announce a quarterly cash dividend of $0.20 per share of common stock, which was declared at its meeting on October 25, 2023, payable on November 27, 2023, to shareholders of record as of November 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

For the three months ended September 30, 2023, net interest income was $37.5 million compared to net interest income of $36.4 million for the three months ended June 30, 2023, and $39.4 million for the three months ended September 30, 2022. The tax-equivalent net interest margin for the three months ended September 30, 2023, was 3.16% compared to 3.29% for the second quarter of 2023, and 3.92% for the third quarter of 2022, a 13 and 76 basis point ("bp") decrease, respectively, compared to the prior quarter and the same period in 2022.

The yield on interest-earning assets increased to 5.35% for the quarter ended September 30, 2023, from 5.10% for the quarter ended June 30, 2023, and 4.28% for the quarter ended September 30, 2022. These increases were due to assets continuing to reprice at higher rates during the third quarter of 2023. Increased yields on interest-earning assets were more than offset by increases in funding costs for the third quarter of 2023 with overall cost of interest-bearing liabilities increasing to 2.79% during the third quarter of 2023, compared to 2.35% at June 30, 2023, and 0.48% at September 30, 2022.

For the nine months ended September 30, 2023, net interest income increased $700 thousand to $110.0 million compared to net interest income of $109.3 million for the same period of 2022.

Average Balances

Average loans increased $244.8 million to $4.1 billion at September 30, 2023, compared to $3.8 billion at June 30, 2023, and $3.2 billion at September 30, 2022. Average deposits were $4.4 billion for the third quarter of 2023, reflecting an increase of $303.5 million, or 7.5%, compared to total average deposits in the second quarter of 2023, and $634.4 million, or 17.0%, compared to total average deposits of $3.7 billion for the third quarter of 2022. The average cost of deposits was 2.14% for the third quarter of 2023, representing a 37 bp and 184 bp increase from the second quarter of 2023 and the third quarter of 2022, respectively. We continue to face headwinds with respect to deposit pricing as customers in many product types have become increasingly rate sensitive. Our primary focus with respect to deposit strategy is stability, ensuring that our rates are competitive and our product mix satisfies the needs of our customers. Additionally, Mid Penn also maintains interest rate swaps to hedge the cash flows associated with existing brokered CDs to mitigate the impact of rising deposit costs.

The mix of deposits continues to shift as customers move funds from non-interest-bearing accounts to time deposits given prevailing thought that current rates are at highs. Time deposits represented 22.8% of total deposits at March 31, 2023, and increased to 31.0% at September 30, 2023. The mix of non-interest-bearing deposits declined during the quarter, representing approximately 18.4% of total deposits at September 30, 2023 compared to 19.4% at June 30, 2023 and 20.6% at both March 31, 2023. The average duration of the non-hedged time deposit portfolio is 12 months at September 30, 2023. We believe this positions us well to reprice the portfolio at lower rates in the future.

Asset Quality

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. Results for reporting periods beginning after January 1, 2023, are presented under CECL, while prior period results are reported in accordance with the previously applicable incurred loss methodology.

The provision for credit losses on loans was $1.4 million for the three months ended September 30, 2023, an increase of $270 thousand compared to the provision for credit losses of $1.2 million for the three months ended June 30, 2023. The provision for credit losses on loans was $3.1 million for the nine months ended September 30, 2023, a decrease of $701 thousand compared to the provision for credit losses of $3.8 million for the nine months ended September 30, 2022. The ratio of allowance for credit losses to total loans increased to 0.82% at September 30, 2023, from 0.81% at June 30, 2023, primarily due to lower nonperforming individually-evaluated loans.

Total nonperforming assets were $14.7 million at September 30, 2023, compared to nonperforming assets of $16.3 million and $7.7 million at June 30, 2023, and September 30, 2022, respectively. The decrease during the third quarter of 2023 primarily related to payoffs on nonaccrual loans. Delinquency as a percentage of total loans was 0.30% at September 30, 2023.

Capital

Shareholders’ equity increased $16.6 million, or 3.24%, from $512.1 million as of December 31, 2022, to $528.7 million as of September 30, 2023. The increase was primarily due to the acquisition of Brunswick Bancorp in the second quarter of 2023. Regulatory capital ratios for both Mid Penn and its banking subsidiary indicate regulatory capital levels in excess of both the regulatory minimums and the levels necessary for the Bank to be considered "well capitalized" at September 30, 2023. Additionally, Mid Penn declared $3.2 million in dividends during the third quarter of 2023.

On May 11, 2023, Mid Penn’s Board of Directors reauthorized its treasury stock repurchase program ("Program") effective through May 11, 2024. The Program authorizes the repurchase of up to $15.0 million of Mid Penn’s outstanding common stock. There were no share repurchases during the three months ended September 30, 2023. During the nine months ended September 30, 2023, Mid Penn repurchased 204,379 shares of common stock at an average price of $22.41. As of September 30, 2023, Mid Penn repurchased 412,722 shares of common stock at an average price of $22.92 per share under the Program. The Program had $5.5 million remaining available for repurchase as of September 30, 2023.

Noninterest Income

For the three months ended September 30, 2023, noninterest income totaled $5.3 million, which was consistent with noninterest income of $5.2 million for the second quarter of 2023.

For the nine months ended September 30, 2023, noninterest income totaled $14.9 million, a decrease of $2.0 million, compared to noninterest income of $16.9 million for the nine months ended September 30, 2022. The decrease in noninterest income is primarily due to mortgage banking hedging activities. Given the rising interest rate environment and lower demand for mortgages, hedging the mortgage pipeline becomes more difficult and adds volatility to earnings.

Noninterest Expense

Noninterest expense totaled $29.9 million, a decrease of $5.6 million, or 15.8%, for the three months ended September 30, 2023, compared to noninterest expense of $35.5 million for the second quarter of 2023. Noninterest expense for the three months ended June 30, 2023, included $7.9 million of merger-related expenses, which is the primary driver of the decrease. Excluding merger related expenses, overall noninterest expense remained relatively flat for the third quarter of 2023 compared to the second quarter of 2023. For the nine months ended September 30, 2023, noninterest expense totaled $91.5 million, an increase of $17.1 million, or 23.0%, compared to noninterest expense of $74.4 million for the nine months ended September 30, 2022. Noninterest expense for the nine months ended September 30, 2023, includes $8.5 million of merger-related expenses.

The efficiency ratio⁽¹⁾ was 67.9% in the third quarter of 2023, compared to 65.4% in the second quarter of 2023, and 53.5% in the third quarter of 2022. Mid Penn is currently evaluating levels of noninterest expense for opportunities to reduce operating costs throughout the organization.

Subsequent Events

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; fair value of and number of stock-based compensation awards to be issued in future periods; the impact of changes in market values on securities held in Mid Penn’s portfolio; legislation affecting the financial services industry as a whole, and Mid Penn and Mid Penn Bank individually or collectively, including tax legislation; 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 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 legacy Mid Penn and Brunswick markets; 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 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.

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, 2022 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)	Sep. 30, 2023				Jun. 30, 2023				Mar. 31, 2023				Dec. 31, 2022				Sep. 30, 2022
Ending Balances:
Investment securities	$	620,038			$	634,038			$	633,831			$	637,802			$	644,765
Loans, net of unearned interest		4,111,653				4,001,922				3,580,082				3,495,162				3,303,977
Total assets		5,215,963				5,088,813				4,583,465				4,497,954				4,333,903
Total deposits		4,381,616				4,286,686				3,878,081				3,778,331				3,729,596
Shareholders' equity		528,711				525,888				510,793				512,099				499,105
Average Balances:
Investment securities		619,071				630,750				636,151				640,792				626,447
Loans, net of unearned interest		4,053,514				3,808,717				3,555,375				3,395,308				3,237,587
Total assets		5,106,103				4,827,786				4,520,869				4,381,213				4,339,783
Total deposits		4,361,067				4,057,605				3,782,990				3,727,287				3,726,658
Shareholders' equity		529,067				504,535				510,857				505,769				502,082
	Three Months Ended
Income Statement:	Sep. 30, 2023				Jun. 30, 2023				Mar. 31, 2023				Dec. 31, 2022				Sep. 30, 2022
Net interest income	$	37,480			$	36,444			$	36,049			$	38,577			$	39,409
Provision for credit losses		1,427				1,157				490				525				1,550
Noninterest income		5,346				5,220				4,325				6,714				5,963
Noninterest expense		29,889				35,529				26,070				25,468				24,715
Income before provision for income taxes		11,510				4,978				13,814				19,298				19,107
Provision for income taxes		2,274				142				2,587				3,579				3,626
Net income available to shareholders		9,236				4,836				11,227				15,719				15,481
Net income excluding non-recurring expenses(1)		9,514				11,112				11,404				15,951				15,481
Per Share:
Basic earnings per common share	$	0.56			$	0.29			$	0.71			$	0.99			$	0.97
Diluted earnings per common share		0.56				0.29				0.70				0.99				0.97
Cash dividends declared		0.20				0.20				0.20				0.20				0.20
Book value per common share		31.89				31.74				32.15				32.24				31.42
Tangible book value per common share(1)		23.63				23.48				24.52				24.59				23.80
Asset Quality:
Net charge-offs (recoveries) to average loans (annualized)		0.001	%			0.018	%			0.013	%			0.006	%			(0.007	%)
Non-performing loans to total loans		0.33				0.39				0.38				0.25				0.23
Non-performing asset to total loans and other real estate		0.36				0.40				0.39				0.25				0.23
Non-performing asset to total assets		0.28				0.32				0.31				0.21				0.18
ACL on loans to total loans		0.82				0.81				0.87				0.54				0.56
ACL on loans to nonperforming loans		245.91				205.65				225.71				220.82				242.23
Profitability:
Return on average assets		0.72	%			0.40	%			1.01	%			1.42	%			1.42	%
Return on average equity		6.93				3.84				8.91				12.33				12.23
Return on average tangible common equity(1)		9.72				5.53				11.97				16.61				16.55
Net interest margin		3.16				3.29				3.49				3.80				3.92
Efficiency ratio(1)		67.88				65.40				63.16				54.59				53.46
Capital Ratios:
Tier 1 Capital (to Average Assets)(2)		8.4	%			9.6	%			9.2	%			10.7	%			9.6	%
Common Tier 1 Capital (to Risk Weighted Assets)(2)		9.7				10.7				10.8				12.5				11.4
Tier 1 Capital (to Risk Weighted Assets)(2)		9.7				10.7				10.8				12.5				11.7
Total Capital (to Risk Weighted Assets)(2)		11.7				11.5				13.1				14.5				13.8

⁽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 September 30, 2023 are preliminary and prior periods are actual.

CONSOLIDATED BALANCE SHEETS (Unaudited):

(In thousands, except share data)	Sep. 30, 2023				Jun. 30, 2023				Mar. 31, 2023				Dec. 31, 2022				Sep. 30, 2022
ASSETS
Cash and due from banks	$	52,509			$	70,832			$	51,158			$	53,368			$	76,018
Interest-bearing balances with other financial institutions		12,739				13,332				4,996				4,405				4,520
Federal funds sold		52,851				9,711				6,017				3,108				14,140
Total cash and cash equivalents		118,099				93,875				62,171				60,881				94,678
Investment Securities:
Held to maturity, at amortized cost		401,561				404,831				396,784				399,494				402,142
Available for sale, at fair value		218,064				228,774				236,609				237,878				242,195
Equity securities available for sale, at fair value		413				433				438				430				428
Loans held for sale		4,270				7,258				2,677				2,475				5,997
Loans, net of unearned interest		4,145,657				4,034,510				3,611,347				3,514,119				3,322,457
Less: Allowance for credit losses		(34,004	)			(32,588	)			(31,265	)			(18,957	)			(18,480	)
Net loans		4,111,653				4,001,922				3,580,082				3,495,162				3,303,977
Premises and equipment, net		38,849				39,230				34,191				34,471				33,854
Operating lease right of use asset		8,693				9,106				8,414				8,798				8,352
Finance lease right of use asset		2,773				2,817				2,862				2,907				2,952
Cash surrender value of life insurance		54,209				53,931				50,928				50,674				50,419
Restricted investment in bank stocks		13,554				11,646				8,041				8,315				4,595
Accrued interest receivable		24,230				19,626				19,205				18,405				15,861
Deferred income taxes		25,509				24,309				15,548				13,674				16,093
Goodwill		129,897				129,403				114,231				114,231				113,871
Core deposit and other intangibles, net		6,970				7,453				6,916				7,260				7,215
Foreclosed assets held for sale		905				489				248				43				49
Other assets		56,314				53,710				44,120				42,856				31,225
Total Assets	$	5,215,963			$	5,088,813			$	4,583,465			$	4,497,954			$	4,333,903
LIABILITIES & SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand	$	804,785			$	830,479			$	797,038			$	793,939			$	863,037
Interest-bearing transaction accounts		2,217,885				2,180,312				2,197,216				2,325,847				2,414,272
Time		1,358,946				1,275,895				883,827				658,545				452,287
Total Deposits		4,381,616				4,286,686				3,878,081				3,778,331				3,729,596
Short-term borrowings		139,000				112,442				88,000				102,647				—
Long-term debt		58,992				58,982				4,316				4,409				4,501
Subordinated debt and trust preferred securities		46,501				46,648				56,794				56,941				66,357
Operating lease liability		9,097				9,894				9,270				9,725				10,261
Accrued interest payable		14,657				11,115				5,809				2,303				1,841
Other liabilities		37,389				37,158				30,402				31,499				22,242
Total Liabilities		4,687,252				4,562,925				4,072,672				3,985,855				3,834,798
Shareholders' Equity:
Common stock, par value $1.00 per share; 40.0 million shares authorized		16,993				16,980				16,098				16,094				16,091
Additional paid-in capital		405,341				404,902				387,332				386,987				386,452
Retained earnings		137,199				131,271				129,617				133,114				120,572
Accumulated other comprehensive loss		(21,362	)			(17,805	)			(17,374	)			(19,216	)			(19,130	)
Treasury stock		(9,460	)			(9,460	)			(4,880	)			(4,880	)			(4,880	)
Total Shareholders’ Equity		528,711				525,888				510,793				512,099				499,105
Total Liabilities and Shareholders' Equity	$	5,215,963			$	5,088,813			$	4,583,465			$	4,497,954			$	4,333,903

CONSOLIDATED STATEMENTS OF INCOME (Unaudited):

	Three Months Ended																			Nine Months Ended
(Dollars in thousands, except per share data)	Sep. 30, 2023				Jun. 30, 2023				Mar. 31, 2023			Dec. 31, 2022				Sep. 30, 2022				Sep. 30, 2023				Sep. 30, 2022
INTEREST INCOME
Loans, including fees	$	58,792			$	52,094			$	45,865		$	42,492			$	38,484			$	156,751			$	107,764
Investment securities:
Taxable		4,106				3,962				3,874			3,784				3,382				11,942				8,168
Tax-exempt		382				391				389			390				392				1,162				1,107
Other interest-bearing balances		86				83				53			36				12				222				33
Federal funds sold		51				49				45			40				736				145				1,786
Total Interest Income		63,417				56,579				50,226			46,742				43,006				170,222				118,858
INTEREST EXPENSE
Deposits		23,559				17,927				12,001			6,995				2,836				53,487				7,149
Short-term borrowings		1,584				1,507				1,490			441				—				4,581				—
Long-term and subordinated debt		794				701				686			729				761				2,181				2,453
Total Interest Expense		25,937				20,135				14,177			8,165				3,597				60,249				9,602
Net Interest Income		37,480				36,444				36,049			38,577				39,409				109,973				109,256
PROVISION FOR CREDIT LOSSES		1,427				1,157				490			525				1,550				3,074				3,775
Net Interest Income After Provision for Credit Losses		36,053				35,287				35,559			38,052				37,859				106,899				105,481
NONINTEREST INCOME
Fiduciary and wealth management		1,296				1,204				1,236			1,085				1,729				3,736				3,986
ATM debit card interchange		986				998				1,056			1,099				1,078				3,040				3,263
Service charges on deposits		509				514				435			461				483				1,458				1,617
Mortgage banking		382				287				384			237				536				1,053				1,370
Mortgage hedging		67				128				20			150				217				215				1,321
Net gain on sales of SBA loans		85				128				—			—				152				213				262
Earnings from cash surrender value of life insurance		278				292				254			255				250				824				758
Other		1,743				1,669				940			3,427				1,518				4,352				4,366
Total Noninterest Income		5,346				5,220				4,325			6,714				5,963				14,891				16,943
NONINTEREST EXPENSE
Salaries and employee benefits		15,259				15,027				13,844			13,434				13,583				44,130				39,167
Software licensing and utilization		2,085				2,070				1,946			1,793				1,804				6,101				5,731
Occupancy, net		1,761				1,750				1,886			1,812				1,634				5,397				5,088
Equipment		1,292				1,248				1,251			1,249				1,121				3,791				3,244
Shares tax		808				751				899			160				920				2,458				2,626
Legal and professional fees		890				602				800			900				528				2,292				1,861
ATM/card processing		641				532				493			534				518				1,666				1,605
Intangible amortization		484				461				344			496				514				1,289				1,516
FDIC Assessment		1,746				684				340			243				254				2,770				1,351
(Gain) loss on sale or write-down of foreclosed assets, net		(18	)			(126	)			—			(45	)			(57	)			(144	)			(88	)
Merger and acquisition		352				4,992				224			294				—				5,568				—
Post-acquisition restructuring		—				2,952				—			—				—				2,952				329
Other		4,589				4,586				4,043			4,598				3,896				13,218				11,945
Total Noninterest Expense		29,889				35,529				26,070			25,468				24,715				91,488				74,375
INCOME BEFORE PROVISION FOR INCOME TAXES		11,510				4,978				13,814			19,298				19,107				30,302				48,049
Provision for income taxes		2,274				142				2,587			3,579				3,626				5,003				8,962
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	9,236			$	4,836			$	11,227		$	15,719			$	15,481			$	25,299			$	39,087
PER COMMON SHARE DATA:
Basic Earnings Per Common Share	$	0.56			$	0.29			$	0.71		$	0.99			$	0.97			$	1.56			$	2.45
Diluted Earnings Per Common Share	$	0.56			$	0.29			$	0.70		$	0.99			$	0.97			$	1.56			$	2.45
Cash Dividends Declared	$	0.20			$	0.20			$	0.20		$	0.20			$	0.20			$	0.60			$	0.60

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
	September 30, 2023									June 30, 2023										September 30, 2022
(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	$	12,804		$	86		2.66	%		$	7,777		$	83			4.28	%		$	5,583		$	12			0.85	%
Investment Securities:
Taxable		541,403			3,846		2.82				551,832			3,783			2.75				546,439			3,369			2.45
Tax-Exempt		77,668			382		1.95				78,918			495			2.52				80,008			496			2.46
Total Securities		619,071			4,228		2.71				630,750			4,278			2.72				626,447			3,865			2.45
Federal Funds Sold		8,260			51		2.45				6,035			49			3.26				131,089			736			2.23
Loans, Net of Unearned Interest		4,053,514			58,792		5.75				3,808,717			52,192			5.50				3,237,587			38,573			4.73
Restricted Investment in Bank Stocks		10,968			260		9.40				10,177			179			7.05				4,322			13			1.19
Total Earning Assets		4,704,617			63,417		5.35				4,463,456			56,781			5.10				4,005,028			43,199			4.28
Cash and Due from Banks		77,122									70,378										69,751
Other Assets		324,364									293,953										265,004
Total Assets	$	5,106,103								$	4,827,787									$	4,339,783
LIABILITIES & SHAREHOLDERS' EQUITY:
Interest-bearing Demand	$	960,052		$	3,899		1.61	%		$	936,687		$	3,216			1.38	%		$	1,072,496		$	873			0.32	%
Money Market		929,036			5,969		2.55				929,774			5,104			2.20				994,446			1,097			0.44
Savings		308,732			60		0.08				319,728			64			0.08				352,024			43			0.05
Time		1,308,945			13,631		4.13				1,061,276			9,543			3.61				464,273			823			0.70
Total Interest-bearing Deposits		3,506,765			23,559		2.67				3,247,465			17,927			2.21				2,883,239			2,836			0.39
Short term borrowings		64,282			1,585		9.78				94,067			1,507			6.43				—			—			—
Long-term debt		76,515			332		1.72				54,347			194			1.43				4,537			150			13.12
Subordinated debt and trust preferred securities		46,377			461		3.94				47,782			507			4.26				69,523			611			3.49
Total Interest-bearing Liabilities		3,693,939			25,937		2.79				3,443,661			20,135			2.35				2,957,299			3,597			0.48
Noninterest-bearing Demand		854,302									810,140										843,419
Other Liabilities		28,795									69,451										36,983
Shareholders' Equity		529,067									504,535										502,082
Total Liabilities & Shareholders' Equity	$	5,106,103								$	4,827,787									$	4,339,783
Net Interest Income (taxable equivalent basis)				$	37,480								$	36,646									$	39,602
Taxable Equivalent Adjustment					80									(202	)									(193	)
Net Interest Income				$	37,560								$	36,444									$	39,409
Total Yield on Earning Assets							5.35	%									5.10	%									4.28	%
Rate on Supporting Liabilities							2.79										2.35										0.48
Average Interest Spread							2.56										2.76										3.80
Net Interest Margin							3.16										3.29										3.92

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

ALLOWANCE FOR CREDIT LOSSES AND ASSET QUALITY (Unaudited):

(Dollars in thousands)	Sep. 30, 2023				Jun. 30, 2023				Mar. 31, 2023				Dec. 31, 2022				Sep. 30, 2022
Allowance for Credit Losses on Loans:
Beginning balance	$	32,588			$	31,265			$	18,957			$	18,480			$	16,876
Impact of adopting CECL		—				—				11,931				—				—
Purchase credit deteriorated loans		—				336				—				—				—
Loans Charged off
Commercial real estate		—				—				(16	)			(7	)			—
Commercial and industrial		—				(109	)			(111	)			—				(1	)
Construction		—				—				—				—				—
Residential mortgage		—				—				(4	)			(23	)			(3	)
Consumer		(32	)			(65	)			(19	)			(20	)			(11	)
Total loans charged off		(32	)			(174	)			(150	)			(50	)			(15	)
Recoveries of loans previously charged off
Commercial real estate		—				—				—				—				63
Commercial and industrial		—				—				—				—				—
Construction		—				—				—				—				—
Residential mortgage		7				—				30				—				—
Consumer		14				4				7				2				6
Total recoveries		21				4				37				2				69
Balance before provision		32,577				31,431				30,775				18,432				16,930
Provision for credit losses		1,427				1,157				490				525				1,550
Balance, end of quarter	$	34,004			$	32,588			$	31,265			$	18,957			$	18,480
Nonperforming Assets
Total nonperforming loans		13,828				15,846				13,909				8,585				7,629
Foreclosed real estate		905				489				248				43				49
Total nonperforming assets		14,733				16,335				14,157				8,628				7,678
Accruing loans 90 days or more past due		12				9				7				654				633
Total risk elements	$	14,745			$	16,344			$	14,164			$	9,282			$	8,311

PPP Summary

(Dollars in thousands)	Sep. 30, 2023			Jun. 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sep. 30, 2022
PPP loans, net of deferred fees	$	1,547		$	1,633		$	1,752		$	2,600		$	2,800
PPP Fees recognized	$	3		$	3		$	5		$	29		$	99

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. Adjusted 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)	Sep. 30, 2023			Jun. 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sep. 30, 2022
Shareholders' Equity	$	528,711		$	525,888		$	510,793		$	512,099		$	499,105
Less: Goodwill		129,897			129,403			114,231			114,231			113,871
Less: Core Deposit and Other Intangibles		6,970			7,453			6,916			7,260			7,215
Tangible Equity	$	391,844		$	389,032		$	389,646		$	390,608		$	378,019
Common Shares Outstanding		16,580,347			16,567,578			15,890,011			15,886,143			15,882,853
Tangible Book Value per Share	$	23.63		$	23.48		$	24.52		$	24.59		$	23.80

Non-PPP Core Banking Loans

(Dollars in thousands)	Sep. 30, 2023			Jun. 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sep. 30, 2022
Loans, net of unearned interest	$	4,145,657		$	4,034,510		$	3,611,347		$	3,514,119		$	3,322,457
Less: PPP loans, net of deferred fees		1,547			1,633			1,752			2,600			2,800
Non-PPP core banking loans	$	4,144,110		$	4,032,877		$	3,609,595		$	3,511,519		$	3,319,657

Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses

	Three Months Ended
(Dollars in thousands, except per share data)	Sep. 30, 2023			Jun. 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sep. 30, 2022
Net Income Available to Common Shareholders	$	9,236		$	4,836		$	11,227		$	15,719		$	15,481
Plus: Merger and Acquisition Expenses		352			7,944			224			294			—
Less: Tax Effect of Merger and Acquisition Expenses		74			1,668			47			62			—
Net Income Excluding Non-Recurring Expenses	$	9,514		$	11,112		$	11,404		$	15,951		$	15,481
Weighted Average Shares Outstanding		16,571,825			16,235,106			15,886,186			15,883,003			15,877,592
Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses	$	0.57		$	0.68		$	0.72		$	0.99		$	0.97

Return on Average Tangible Common Equity

	Three Months Ended
(Dollars in thousands)	Sep. 30, 2023				Jun. 30, 2023				Mar. 31, 2023				Dec. 31, 2022				Sep. 30, 2022
Net income available to common shareholders	$	9,236			$	4,836			$	11,227			$	15,719			$	15,481
Plus: Intangible amortization, net of tax		382				364				272				392				406
	$	9,618			$	5,200			$	11,499			$	16,111			$	15,887
Average shareholders' equity	$	529,067			$	504,535			$	510,857			$	505,769			$	502,082
Less: Average goodwill		129,428				120,284				114,231				113,879				113,835
Less: Average core deposit and other intangibles		7,210				7,016				7,129				6,966				7,465
Average tangible shareholders' equity	$	392,429			$	377,235			$	389,497			$	384,924			$	380,782
Return on average tangible common equity		9.72	%			5.53	%			11.97	%			16.61	%			16.55	%

Efficiency Ratio

	Three Months Ended
(Dollars in thousands)	Sep. 30, 2023				Jun. 30, 2023				Mar. 31, 2023				Dec. 31, 2022				Sep. 30, 2022
Noninterest expense	$	29,889			$	35,529			$	26,070			$	25,468			$	24,715
Less: Merger and acquisition expenses		352				7,944				224				294				—
Less: Intangible amortization		484				461				344				496				514
Less: (Gain) loss on sale or write-down of foreclosed assets, net		(18	)			(126	)			—				(45	)			(57	)
Efficiency ratio numerator	$	29,071			$	27,250			$	25,502			$	24,723			$	24,258
Net interest income		37,480				36,444				36,049				38,577				39,409
Noninterest income		5,346				5,220				4,325				6,714				5,963
Efficiency ratio denominator	$	42,826			$	41,664			$	40,374			$	45,291			$	45,372
Efficiency ratio		67.88	%			65.40	%			63.16	%			54.59	%			53.46	%

FAQ

What was the organic loan growth in Q3 2023?

Organic loan growth for Q3 2023 was $111.1 million, or 10.9% (annualized), from Q2 2023.

What was the organic deposit growth in Q3 2023?

Organic deposit growth for Q3 2023 was $94.9 million, or 8.8% (annualized), from Q2 2023.

How did net interest income change in Q3 2023?

Net interest income decreased to $37.5 million in Q3 2023 compared to $36.4 million in Q2 2023.

How did noninterest expense change in Q3 2023?

Noninterest expense decreased by $5.6 million, or 15.8%, in Q3 2023 compared to Q2 2023.