Overview

Mid Penn Bancorp (Mid Penn) is a bank holding company that operates one wholly-owned banking subsidiary, Mid Penn Bank (the Bank). Mid Penn generates most of its revenue through net interest income, which is the difference between interest earned on loans and investments and interest paid on deposits and borrowings.

Financial Highlights

• Earnings: Net income for Q1 2024 was $12.1 million or $0.73 per share, compared to $11.2 million or $0.70 per share in Q1 2023.
  
• Net Interest Margin: Net interest margin decreased to 2.97% in Q1 2024 from 3.49% in Q1 2023, primarily driven by higher interest rates resulting from inflation.
• Loans: Total loans increased $64.7 million or 1.5% since year-end 2023 to $4.3 billion at March 31, 2024, driven by growth in commercial real estate and construction loans.
• Deposits: Total deposits grew $32.9 million or 0.8% since year-end 2023 to $4.4 billion at March 31, 2024. Growth was primarily in time deposits.
  
• Credit Quality: The allowance for credit losses was $33.5 million or 0.78% of total loans at March 31, 2024. Non-performing assets were 0.36% of total loans.

Income Statement Analysis

Net Interest Income

Net interest income increased slightly by $407 thousand in Q1 2024 compared to Q1 2023:

• The yield on interest-earning assets increased 67 basis points.
• The rate paid on interest-bearing liabilities increased 143 basis points.
• Growth in average interest-earning assets contributed $10.0 million in additional income.
• Higher rates paid on deposits and borrowings increased interest expense by $10.4 million.

The compression in net interest margin was driven by interest-bearing deposit costs increasing at a faster pace than asset yields in the rising rate environment.

Noninterest Income

Noninterest income increased $1.5 million or 35% in Q1 2024 compared to Q1 2023, primarily due to higher other miscellaneous income.

Noninterest Expense

Noninterest expense increased $2.5 million or 9.4% in Q1 2024 compared to Q1 2023, mainly due to:

• $1.6 million increase in salaries and benefits costs from the Brunswick acquisition
• $605 thousand increase in FDIC assessment expense

Balance Sheet Analysis

Loans

Total loans grew $64.7 million or 1.5% since year-end 2023 to $4.3 billion at March 31, 2024. Growth occurred across commercial real estate and commercial & industrial loans.

Deposits

Total deposits increased $32.9 million or 0.8% since year-end 2023 to $4.4 billion at March 31, 2024, primarily driven by growth in time deposits.

Credit Quality

Key credit quality metrics remained stable. The allowance for credit losses decreased slightly to $33.5 million or 0.78% of total loans. Non-performing assets were 0.36% of total loans.

Capital

Capital levels remained strong, with Common Equity Tier 1 capital ratio at 9.78% as of March 31, 2024. Mid Penn has ample capital to support continued growth.

Outlook

Mid Penn is focused on executing its long-term strategic plan centered around organic loan and deposit growth, expanding market share, and ultimately enhancing shareholder value. The current inflationary pressures and rising rate environment present headwinds impacting net interest margin, but Mid Penn remains well-positioned with strong capital levels to continue prudent growth.