HARRISBURG, Pa., July 27, 2023 (GLOBE NEWSWIRE) -- Mid Penn Bancorp, Inc. (NASDAQ:MPB) ("Mid Penn"), the parent company of Mid Penn Bank (the "Bank") and MPB Financial Services, LLC, today reported net income available to common shareholders ("earnings") for the quarter ended June 30, 2023, of $4.8 million, or $0.29 per diluted common share. Adjusted net income excluding non-recurring expenses⁽¹⁾for the second quarter 2023 was $11.1 million and adjusted earnings per share common share excluding non-recurring expenses was $0.68, which excluded $6.3 million of after-tax merger-related expenses.

Key Highlights of the Second Quarter of 2023

Completed the acquisition of Brunswick Bancorp ("Brunswick"), which added total assets of $391.9 million comprised primarily of $324.8 million of loans.

Organic deposit growth for the quarter was $126.0 million, or 13% (annualized), from the first quarter of 2023.

Organic loan growth for the quarter was $98.3 million, or 10.9% (annualized), from the first quarter of 2023.

Repurchased 204,379 shares of common stock at an average price of $22.41.

Total accumulated other comprehensive loss was 4.5% of tangible shareholders' equity⁽¹⁾ at June 30, 2023.

Book value per common share was $32.05 for the second quarter, compared to $32.15 for the first quarter of 2023. Tangible book value per share⁽¹⁾ was $23.79 at June 30, 2023, compared to $24.52, at March 31, 2023.

"During the second quarter, while completing the acquisition of Brunswick Bancorp, Mid Penn achieved 13% annualized organic deposit growth and 10.9% annualized organic loan growth, demonstrating our resilience in the face of recent turbulence in the banking industry. The Brunswick acquisition added $325 million in quality loans and $283 million in core deposits while giving Mid Penn entry into the dynamic central New Jersey market. We look forward to complementing Brunswick's talented team of bankers with the resources of a $5+ billion balance sheet to help them compete effectively in a market with very attractive demographics," Chair, President, and CEO Rory G. Ritrievi said.

Ritrievi added, "As a result of the interest rate yield curve being inverted throughout the quarter, our net interest margin remained under pressure, as is the case for most community banks that compete in the spread business. Notwithstanding the rate increase announced this week, we feel we are nearing an end of that margin compression with the expectation that we will now begin to build that margin back to the level we saw in FY2021 and 2022. As we do that, we will remain diligent in controlling noninterest expenses so that our final FY2023 operating results will meet the expectations of our shareholders and analysts."

For the second quarter, 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 July 26, 2023, payable on August 28, 2023, to shareholders of record as of August 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 June 30, 2023, net interest income was $36.4 million compared to net interest income of $36.0 million for the three months ended March 31, 2023, and $35.4 million for the three months ended June 30, 2022. The tax-equivalent net interest margin for the three months ended June 30, 2023, was 3.29% compared to 3.49% for the first quarter of 2023, and 3.45% for the second quarter of 2022, a 20 and 16 basis point ("bp") decrease, respectively, compared to the prior quarter and the same period in 2022.

The yield on interest-earning assets increased to 5.10% for the quarter ended June 30, 2023, from 4.86% for the quarter ended March 31, 2023, and 3.73% for the quarter ended June 30, 2022. The increase was due to assets continuing to reprice at higher rates during the quarter. Increased yields on interest-earning assets were more than offset by increases in funding costs for the quarter with overall cost of interest-bearing liabilities increasing to 2.35% during the second quarter of 2023, compared to 1.81% at March 31, 2023, and 0.36% at June 30, 2022.

For the six months ended June 30, 2023, net interest income increased $2.6 million to $72.5 million compared to net interest income of $69.8 million for the same period of 2022.

Both interest-earning assets and interest-bearing liabilities associated with the Brunswick acquisition had substantially similar yields to the corresponding Mid Penn portfolios. We do not anticipate a material change in net interest margin resulting from the acquisition.

Average Balances

Average balances were significantly impacted by the Brunswick acquisition given that the acquisition closed on May 19, 2023. Day one increases in loans, total assets, deposits, borrowings, and total liabilities were $324.8 million, $391.9 million, $282.6 million, $60.1 million, and $346.3 million, respectively.

Average loans increased $253.3 million to $3.8 billion at June 30, 2023, compared to $3.6 billion at March 31, 2023, and $3.1 billion at June 30, 2022. Average deposits were $4.1 billion for the second quarter of 2023, reflecting an increase of $274.6 million, or 7.3%, compared to total average deposits in the first quarter of 2023, and $220.5 million, or 5.8%, compared to total average deposits of $3.8 billion for the second quarter of 2022. The average cost of deposits was 1.77% for the second quarter of 2023, representing a 48 bp and 156 bp increase from the first quarter of 2023 and the second 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 designated as cash flow hedges to hedge the cash flows associated with existing brokered CDs to mitigate the impact of rising deposit costs.

As a result of the Brunswick acquisition and organic movement, the mix of deposits has shifted from the prior quarter. Time deposits represented 22.8% of total deposits at March 31, 2023, and increased to 29.8% at June 30, 2023. Nearly all of this increase corresponds to movement out of interest-bearing transaction accounts. The mix of non-interest bearing deposits remained stable, representing approximately 20% of total deposits for both March 31 and June 30, 2023. The average duration of the non-hedged time deposit portfolio is 12 months at June 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 $1.2 million for the three months ended June 30, 2023, an increase of $667 thousand compared to the provision for credit losses of $490 thousand for the three months ended March 31, 2023. The increase in provision was primarily due to reserving for the loans acquired through the Brunswick acquisition which was $2.0 million for non-PCD loans. The provision for credit losses on loans was $1.6 million for the six months ended June 30, 2023, a decrease of $578 thousand compared to the provision for credit losses of $2.2 million for the six months ended June 30, 2022. The ratio of allowance for credit losses to total loans declined to 0.81% at June 30, 2023, from 0.87% at March 31, 2023, primarily due to improved economic forecasts.

Total nonperforming assets were $16.3 million at June 30, 2023, compared to nonperforming assets of $14.2 million and $8.0 million at March 31, 2023, and June 30, 2022, respectively. The increase during the second quarter primarily related to $3.9 million of non-accrual loans acquired from Brunswick, partially offset by reductions to other non-accrual loans. Delinquency as a percentage of total loans was 0.47% at June 30, 2023.

Capital

Shareholders' equity increased $18.9 million, or 3.68%, from $512.1 million as of December 31, 2022, to $531.0 million as of June 30, 2023. The increase was primarily due to the Brunswick acquisition. 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 June 30, 2023. Additionally, Mid Penn declared $3.2 million in dividends during the second 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. During the six months ended June 30, 2023, Mid Penn repurchased 204,379 shares of common stock at an average price of $22.41. As of June 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 June 30, 2023.

Noninterest Income

For the three months ended June 30, 2023, noninterest income totaled $5.2 million, an increase of $895 thousand, compared to noninterest income of $4.3 million for the first quarter of 2023. The primary driver of the increase was a death benefit claim related to BOLI and increased insurance revenues from the MPB Insurance division, which are included in other income. The Brunswick acquisition provides a market with an attractive demographic in which to create new wealth management and insurance customer relationships, which would help bolster noninterest income.

For the six months ended June 30, 2023, noninterest income totaled $9.5 million, a decrease of $1.4 million, compared to noninterest income of $11.0 million for the six months ended June 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 $35.5 million, an increase of $9.5 million, or 36.3%, for the three months ended June 30, 2023, compared to noninterest expense of $26.1 million for the first quarter of 2023. Noninterest expense for the three months ended June 30, 2023, includes $7.9 million of merger related expenses. Excluding merger related expenses, overall noninterest expense remained relatively flat for the second quarter of 2023. For the six months ended June 30, 2023, noninterest expense totaled $61.6 million, an increase of $11.9 million, or 24.0%, compared to noninterest expense of $49.7 million for the six months ended June 30, 2022. Noninterest expense for the six months ended June 30, 2023, includes $8.2 million of merger-related expenses.

The efficiency ratio⁽¹⁾ was 65.40% in the second quarter of 2023, compared to 63.16% in the first quarter of 2023, and 57.57% in the second quarter of 2022. Mid Penn is currently evaluating levels of noninterest expense for opportunities to reduce operating costs throughout the organization.

Brunswick Acquisition

On May 19, 2023, Mid Penn completed its acquisition of Brunswick through the merger of Brunswick with and into Mid Penn, with Mid Penn being the surviving corporation. In connection with this acquisition, Brunswick Bank and Trust Company, a wholly-owned subsidiary of Brunswick, merged with and into Mid Penn Bank, a wholly-owned subsidiary of Mid Penn.

Pursuant to the terms of the Merger Agreement, each share of Brunswick common stock issued and outstanding as of May 19, 2023, was converted into the right to receive, at the election of the holder, either 0.598 shares of Mid Penn common stock or $18.00 cash, subject to adjustment and proration procedures described in the Merger Agreement requiring that fifty percent (50%) of the outstanding shares of Brunswick common stock be converted into the right to receive cash and the balance converted into the right to receive Mid Penn common stock. Cash was paid to Brunswick shareholders in lieu of any fractional shares. As a result of the merger, Mid Penn paid holders of Brunswick common stock approximately $25.6 million in cash and issued approximately 849,510 shares of Mid Penn common stock.

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)	Jun. 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sep. 30, 2022			Jun. 30, 2022
Ending Balances:
Investment securities	$	634,038		$	633,831		$	637,802		$	644,766		$	618,184
Loans, net of unearned interest		4,001,922			3,580,082			3,495,162			3,303,977			3,163,157
Total assets		5,093,887			4,583,465			4,497,954			4,333,903			4,310,163
Total deposits		4,286,686			3,878,081			3,778,331			3,729,596			3,702,587
Shareholders' equity		530,962			510,793			512,099			499,105			495,835
Average Balances:
Investment securities		630,750			636,151			640,792			626,447			580,406
Loans, net of unearned interest		3,808,717			3,555,375			3,395,308			3,237,587			3,129,334
Total assets		4,827,786			4,520,869			4,381,213			4,339,783			4,465,906
Total deposits		4,057,605			3,782,990			3,727,287			3,726,658			3,837,135
Shareholders' equity		504,535			510,857			505,769			502,082			495,681


	Three Months Ended
Income Statement:	Jun. 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sep. 30, 2022			Jun. 30, 2022
Net interest income	$	36,444		$	36,049		$	38,577		$	39,409		$	35,433
Provision for credit losses		1,157			490			525			1,550			1,725
Noninterest income		5,220			4,325			6,714			5,963			5,230
Noninterest expense		35,529			26,070			25,468			24,715			23,915
Income before provision for income taxes		4,978			13,814			19,298			19,107			15,023
Provision for income taxes		142			2,587			3,579			3,626			2,771
Net income available to shareholders		4,836			11,227			15,719			15,481			12,252
Net income excluding non-recurring expenses ⁽¹⁾		11,112			11,404			15,951			15,481			12,252

Per Share:
Basic earnings per common share	$	0.29		$	0.71		$	0.99		$	0.97		$	0.77
Diluted earnings per common share		0.29			0.70			0.99			0.97			0.77
Cash dividends declared		0.20			0.20			0.20			0.20			0.20
Book value per common share		32.05			32.15			32.24			31.42			31.23
Tangible book value per common share ⁽¹⁾		23.79			24.52			24.59			23.80			23.57

Asset Quality:
Net charge-offs (recoveries) to average loans (annualized)		0.018	%		0.013	%		0.006	%		(0.007	%)		(0.001	%)
Non-performing loans to total loans		0.39			0.38			0.25			0.23			0.25
Non-performing asset to total loans and other real estate		0.40			0.39			0.25			0.23			0.25
Non-performing asset to total assets		0.32			0.31			0.21			0.18			0.19
ACL on loans to total loans		0.81			0.87			0.54			0.56			0.53
ACL on loans to nonperforming loans		205.65			225.71			220.82			242.23			211.66

Profitability:
Return on average assets		0.40	%		1.01	%		1.42	%		1.42	%		1.10	%
Return on average equity		3.84			8.91			12.33			12.23			9.91
Return on average tangible common equity ⁽¹⁾		5.53			11.97			16.61			16.55			13.59
Net interest margin		3.29			3.49			3.80			3.92			3.45
Efficiency ratio ⁽¹⁾		65.40			63.16			54.59			53.46			57.57

Capital Ratios:
Tier 1 Capital (to Average Assets) ⁽²⁾		9.6	%		9.2	%		10.7	%		9.6	%		9.0	%
Common Tier 1 Capital (to Risk Weighted Assets) ⁽²⁾		10.7			10.8			12.5			11.4			11.5
Tier 1 Capital (to Risk Weighted Assets) ⁽²⁾		10.7			10.8			12.5			11.7			11.8
Total Capital (to Risk Weighted Assets) ⁽²⁾		11.5			13.1			14.5			13.8			14.1
^{(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 June 30, 2023 are preliminary and prior periods are actual.}

CONSOLIDATED BALANCE SHEETS (Unaudited):

(In thousands, except share data)	Jun. 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sep. 30, 2022			Jun. 30, 2022
ASSETS
Cash and due from banks	$	75,906		$	51,158		$	53,368		$	76,018		$	64,440
Interest-bearing balances with other financial institutions		13,332			4,996			4,405			4,520			4,909
Federal funds sold		9,711			6,017			3,108			14,140			167,437
Total cash and cash equivalents		98,949			62,171			60,881			94,678			236,786
Investment Securities:
Held to maturity, at amortized cost		404,831			396,784			399,494			402,142			399,032
Available for sale, at fair value		228,774			236,609			237,878			242,195			218,698
Equity securities available for sale, at fair value		433			438			430			428			454
Loans held for sale		7,258			2,677			2,475			5,997			9,574
Loans, net of unearned interest		4,034,510			3,611,347			3,514,119			3,322,457			3,180,033
Less: Allowance for credit losses		(32,588	)		(31,265	)		(18,957	)		(18,480	)		(16,876	)
Net loans		4,001,922			3,580,082			3,495,162			3,303,977			3,163,157

Premises and equipment, net		39,230			34,191			34,471			33,854			33,732
Operating lease right of use asset		9,106			8,414			8,798			8,352			8,326
Finance lease right of use asset		2,817			2,862			2,907			2,952			2,997
Cash surrender value of life insurance		53,931			50,928			50,674			50,419			50,169
Restricted investment in bank stocks		11,646			8,041			8,315			4,595			4,234
Accrued interest receivable		19,626			19,205			18,405			15,861			12,902
Deferred income taxes		24,309			15,548			13,674			16,093			13,780
Goodwill		129,403			114,231			114,231			113,871			113,835
Core deposit and other intangibles, net		7,453			6,916			7,260			7,215			7,729
Foreclosed assets held for sale		489			248			43			49			69
Other assets		53,710			44,120			42,856			31,225			34,689
Total Assets	$	5,093,887		$	4,583,465		$	4,497,954		$	4,333,903		$	4,310,163

LIABILITIES & SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand	$	830,479		$	797,038		$	793,939		$	863,037		$	850,180
Interest-bearing transaction accounts		2,180,312			2,197,216			2,325,847			2,414,272			2,377,260
Time		1,275,895			883,827			658,545			452,287			475,147
Total Deposits		4,286,686			3,878,081			3,778,331			3,729,596			3,702,587

Short-term borrowings		112,442			88,000			102,647			—			—
Long-term debt		58,982			4,316			4,409			4,501			4,592
Subordinated debt and trust preferred securities		45,929			56,794			56,941			66,357			73,995
Operating lease liability		9,894			9,270			9,725			10,261			10,324
Accrued interest payable		11,834			5,809			2,303			1,841			1,542
Other liabilities		37,158			30,402			31,499			22,242			21,288
Total Liabilities		4,562,925			4,072,672			3,985,855			3,834,798			3,814,328

Shareholders' Equity:
Common stock, par value $1.00 per share; 40.0 million shares authorized		16,980			16,098			16,094			16,091			16,081
Additional paid-in capital		409,976			387,332			386,987			386,452			386,128
Retained earnings		131,271			129,617			133,114			120,572			108,265
Accumulated other comprehensive loss		(17,805	)		(17,374	)		(19,216	)		(19,130	)		(9,759	)
Treasury stock		(9,460	)		(4,880	)		(4,880	)		(4,880	)		(4,880	)
Total Shareholders' Equity		530,962			510,793			512,099			499,105			495,835
Total Liabilities and Shareholders' Equity	$	5,093,887		$	4,583,465		$	4,497,954		$	4,333,903		$	4,310,163

CONSOLIDATED STATEMENTS OF INCOME (Unaudited):

	Three Months Ended														Six Months Ended
(Dollars in thousands, except per share data)	Jun. 30, 2023			Mar. 31, 2023		Dec. 31, 2022			Sep. 30, 2022			Jun. 30, 2022			Jun. 30, 2023			Jun. 30, 2022
INTEREST INCOME
Loans, including fees	$	52,094		$	45,865	$	42,492		$	38,484		$	34,264		$	97,959		$	69,280
Investment securities:
Taxable		3,962			3,874		3,784			3,382			2,833			7,836			4,786
Tax-exempt		391			389		390			392			379			780			715
Other interest-bearing balances		83			53		36			12			8			136			21
Federal funds sold		49			45		40			736			736			94			1,050
Total Interest Income		56,579			50,226		46,742			43,006			38,220			106,805			75,852
INTEREST EXPENSE
Deposits		17,927			12,001		6,995			2,836			2,019			29,928			4,313
Short-term borrowings		1,507			1,490		441			—			—			2,997			—
Long-term and subordinated debt		701			686		729			761			768			1,387			1,692
Total Interest Expense		20,135			14,177		8,165			3,597			2,787			34,312			6,005
Net Interest Income		36,444			36,049		38,577			39,409			35,433			72,493			69,847
PROVISION FOR CREDIT LOSSES		1,157			490		525			1,550			1,725			1,647			2,225
Net Interest Income After Provision for Credit Losses		35,287			35,559		38,052			37,859			33,708			70,846			67,622
NONINTEREST INCOME
Fiduciary and wealth management		1,204			1,236		1,085			1,729			1,205			2,440			2,257
ATM debit card interchange		998			1,056		1,099			1,078			1,128			2,054			2,185
Service charges on deposits		514			435		461			483			450			949			1,134
Mortgage banking		287			384		237			536			305			671			834
Mortgage hedging		128			20		150			217			538			148			1,104
Net gain on sales of SBA loans		128			—		—			152			119			128			110
Earnings from cash surrender value of life insurance		292			254		255			250			262			546			508
Other		1,669			940		3,427			1,518			1,223			2,609			2,848
Total Noninterest Income		5,220			4,325		6,714			5,963			5,230			9,545			10,980
NONINTEREST EXPENSE
Salaries and employee benefits		15,027			13,844		13,434			13,583			12,340			28,871			25,584
Software licensing and utilization		2,070			1,946		1,793			1,804			1,821			4,016			3,927
Occupancy, net		1,750			1,886		1,812			1,634			1,655			3,636			3,454
Equipment		1,248			1,251		1,249			1,121			1,112			2,499			2,123
Shares tax		751			899		160			920			480			1,650			1,706
Legal and professional fees		602			800		900			528			694			1,402			1,333
ATM/card processing		532			493		534			518			571			1,025			1,087
Intangible amortization		461			344		496			514			521			805			1,002
FDIC Assessment		684			340		243			254			506			1,024			1,097
(Gain) loss on sale or write-down of foreclosed assets, net		(126	)		—		(45	)		(57	)		(15	)		(126	)		(31	)
Merger and acquisition		4,992			224		294			—			—			5,216			—
Post-acquisition restructuring		2,952			—		—			—			—			2,952			329
Other		4,586			4,043		4,598			3,896			4,230			8,629			8,049
Total Noninterest Expense		35,529			26,070		25,468			24,715			23,915			61,599			49,660
INCOME BEFORE PROVISION FOR INCOME TAXES		4,978			13,814		19,298			19,107			15,023			18,792			28,942
Provision for income taxes		142			2,587		3,579			3,626			2,771			2,729			5,336
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	4,836		$	11,227	$	15,719		$	15,481		$	12,252		$	16,063		$	23,606

PER COMMON SHARE DATA:
Basic Earnings Per Common Share	$	0.29		$	0.71	$	0.99		$	0.97		$	0.77		$	1.00		$	1.48
Diluted Earnings Per Common Share	$	0.29		$	0.70	$	0.99		$	0.97		$	0.77		$	1.00		$	1.48
Cash Dividends Declared	$	0.20		$	0.20	$	0.20		$	0.20		$	0.20		$	0.20		$	0.40

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
	June 30, 2023							March 31, 2023							June 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	$	7,777	$	83		4.28	%	$	5,761	$	53		3.73	%	$	5,920	$	8		0.54	%
Investment Securities:
Taxable		551,832		3,783		2.75			556,901		3,764		2.74			501,631		2,740		2.19
Tax-Exempt		78,918		495		2.52			79,250		493		2.52			78,775		480		2.44
Total Securities		630,750		4,278		2.72			636,151		4,257		2.71			580,406		3,220		2.23

Federal Funds Sold		6,035		49		3.26			3,775		45		4.83			415,405		736		0.71
Loans, Net of Unearned Interest		3,808,717		52,192		5.50			3,555,375		45,961		5.24			3,129,334		34,354		4.40
Restricted Investment in Bank Stocks		10,177		179		7.05			9,542		110		4.68			4,854		94		7.77
Total Earning Assets		4,463,456		56,781		5.10			4,210,604		50,426		4.86			4,135,919		38,412		3.73

Cash and Due from Banks		70,378							51,444							59,822
Other Assets		293,952							258,821							270,165
Total Assets	$	4,827,786						$	4,520,869						$	4,465,906

LIABILITIES & SHAREHOLDERS' EQUITY:
Interest-bearing Demand	$	936,687	$	3,216		1.38	%	$	968,951	$	2,691		1.13	%	$	1,030,237	$	462		0.18	%
Money Market		929,774		5,104		2.20			940,286		4,084		1.76			1,079,900		584		0.22
Savings		319,728		64		0.08			330,773		54		0.07			357,433		43		0.05
Time		1,061,276		9,543		3.61			749,598		5,172		2.80			516,346		930		0.72
Total Interest-bearing Deposits		3,247,465		17,927		2.21			2,989,608		12,001		1.63			2,983,916		2,019		0.27

Short term borrowings		94,067		1,507		6.43			121,898		1,490		4.96			—		—		—
Long-term debt		54,347		194		1.43			4,350		44		4.10			9,238		107		4.65
Subordinated debt and trust preferred securities		47,782		507		4.26			56,875		642		4.58			74,062		661		3.58
Total Interest-bearing Liabilities		3,443,661		20,135		2.35			3,172,731		14,177		1.81			3,067,216		2,787		0.36

Noninterest-bearing Demand		810,140							793,382							853,219
Other Liabilities		69,451							43,899							49,790
Shareholders' Equity		504,535							510,857							495,681
Total Liabilities & Shareholders' Equity	$	4,827,787						$	4,520,869						$	4,465,906

Net Interest Income (taxable equivalent basis)			$	36,646						$	36,249						$	35,625
Taxable Equivalent Adjustment				(202	)						(200	)						(192	)
Net Interest Income			$	36,444						$	36,049						$	35,433

Total Yield on Earning Assets						5.10	%						4.86	%						3.73	%
Rate on Supporting Liabilities						2.35							1.81							0.36
Average Interest Spread						2.76							3.04							3.37
Net Interest Margin						3.29							3.49							3.45
^{(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)	Jun. 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sep. 30, 2022			Jun. 30, 2022
Allowance for Credit Losses on Loans:
Beginning balance	$	31,265		$	18,957		$	18,480		$	16,876		$	15,147

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		(65	)		(19	)		(20	)		(11	)		(9	)
Total loans charged off		(174	)		(150	)		(50	)		(15	)		(9	)
Recoveries of loans previously charged off
Commercial real estate		—			—			—			63			—
Commercial and industrial		—			—			—			—			—
Construction		—			—			—			—			—
Residential mortgage		—			30			—			—			3
Consumer		4			7			2			6			10
Total recoveries		4			37			2			69			13
Balance before provision		31,431			30,775			18,432			16,930			15,151
Provision for credit losses		1,157			490			525			1,550			1,725
Balance, end of quarter	$	32,588		$	31,265		$	18,957		$	18,480		$	16,876

Nonperforming Assets
Total nonperforming loans		15,846			13,909			8,585			7,629			7,973

Foreclosed real estate		489			248			43			49			69
Total nonperforming assets		16,335			14,157			8,628			7,678			8,042

Accruing loans 90 days or more past due		9			7			654			633			—
Total risk elements	$	16,344		$	14,164		$	9,282		$	8,311		$	8,042

PPP Summary

(Dollars in thousands)	Jun. 30, 2023		Mar. 31, 2023		Dec. 31, 2022		Sep. 30, 2022		Jun. 30, 2022

PPP loans, net of deferred fees	$	1,633	$	1,752	$	2,600	$	2,800	$	4,966

PPP Fees recognized	$	3	$	5	$	29	$	99	$	652

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)	Jun. 30, 2023		Mar. 31, 2023		Dec. 31, 2022		Sep. 30, 2022		Jun. 30, 2022

Shareholders' Equity	$	530,962	$	510,793	$	512,099	$	499,105	$	495,835
Less: Goodwill		129,403		114,231		114,231		113,871		113,835
Less: Core Deposit and Other Intangibles		7,453		6,916		7,260		7,215		7,729
Tangible Equity	$	394,106	$	389,646	$	390,608	$	378,019	$	374,271

Common Shares Outstanding		16,567,578		15,890,011		15,886,143		15,882,853		15,878,193

Tangible Book Value per Share	$	23.79	$	24.52	$	24.59	$	23.80	$	23.57

Non-PPP Core Banking Loans

(Dollars in thousands)	Jun. 30, 2023		Mar. 31, 2023		Dec. 31, 2022		Sep. 30, 2022		Jun. 30, 2022

Loans, net of unearned interest	$	4,034,510	$	3,611,347	$	3,514,119	$	3,322,457	$	3,180,033
Less: PPP loans, net of deferred fees		1,633		1,752		2,600		2,800		4,966
Non-PPP core banking loans	$	4,032,877	$	3,609,595	$	3,511,519	$	3,319,657	$	3,175,067

Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses

	Three Months Ended
(Dollars in thousands, except per share data)	Jun. 30, 2023		Mar. 31, 2023		Dec. 31, 2022		Sep. 30, 2022		Jun. 30, 2022

Net Income Available to Common Shareholders	$	4,836	$	11,227	$	15,719	$	15,481	$	12,252
Plus: Merger and Acquisition Expenses		7,944		224		294		—		—
Less: Tax Effect of Merger and Acquisition Expenses		1,668		47		62		—		—
Net Income Excluding Non-Recurring Expenses	$	11,112	$	11,404	$	15,951	$	15,481	$	12,252

Weighted Average Shares Outstanding		16,235,106		15,886,186		15,883,003		15,877,592		15,934,083

Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses	$	0.68	$	0.72	$	0.99	$	0.97	$	0.77

Return on Average Tangible Common Equity

	Three Months Ended
(Dollars in thousands)	Jun. 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sep. 30, 2022			Jun. 30, 2022

Net income available to common shareholders	$	4,836		$	11,227		$	15,719		$	15,481		$	12,252
Plus: Intangible amortization, net of tax		364			272			392			406			412
	$	5,200		$	11,499		$	16,111		$	15,887		$	12,664

Average shareholders' equity	$	504,535		$	510,857		$	505,769		$	502,082		$	495,681
Less: Average goodwill		120,284			114,231			113,879			113,835			113,835
Less: Average core deposit and other intangibles		7,016			7,129			6,966			7,465			7,983
Average tangible shareholders' equity	$	377,235		$	389,497		$	384,924		$	380,782		$	373,863

Return on average tangible common equity		5.53	%		11.97	%		16.61	%		16.55	%		13.59	%

Efficiency Ratio

	Three Months Ended
(Dollars in thousands)	Jun. 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sep. 30, 2022			Jun. 30, 2022

Noninterest expense	$	35,529		$	26,070		$	25,468		$	24,715		$	23,915
Less: Merger and acquisition expenses		7,944			224			294			—			—
Less: Intangible amortization		461			344			496			514			521
Less: (Gain) loss on sale or write-down of foreclosed assets, net		(126	)		—			(45	)		(57	)		(15	)
Efficiency ratio numerator	$	27,250		$	25,502		$	24,723		$	24,258		$	23,409

Net interest income		36,444			36,049			38,577			39,409			35,433
Noninterest income		5,220			4,325			6,714			5,963			5,230
Efficiency ratio denominator	$	41,664		$	40,374		$	45,291		$	45,372		$	40,663

Efficiency ratio		65.40	%		63.16	%		54.59	%		53.46	%		57.57	%

Mid Penn Bancorp, Inc.
2407 Park Drive
Harrisburg, PA 17110
1-866-642-7736

CONTACTS

Rory G. Ritrievi
Chair, President & Chief Executive Officer

Allison S. Johnson
Chief Financial Officer

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