Mid Penn Bancorp, Inc. Reports Third Quarter 2019 Earnings and Declares Quarterly Dividend


MILLERSBURG, Pa., Oct. 25, 2019 (GLOBE NEWSWIRE) — Mid Penn Bancorp, Inc. (“Mid Penn”) (MPB), the parent company of Mid Penn Bank (the “Bank”), today reported net income to common shareholders (earnings) for the quarter ended September 30, 2019 of $4,813,000 or $0.57 per common share basic and diluted, compared to earnings of $2,126,000 or $0.28 per common share basic and diluted for the quarter ended September 30, 2018.  The results for the three months ended September 30, 2018 included merger and acquisition expenses resulting from Mid Penn’s acquisition of First Priority Financial Corp. (“First Priority”) on July 31, 2018.

Earnings for the nine months ended September 30, 2019 were $13,293,000 or $1.57 per common share basic and diluted, compared to earnings of $5,909,000 or $0.89 per common share basic and diluted for the nine months ended September 30, 2018.  The results for the nine months ended September 30, 2018 included merger and acquisition expenses resulting from both (i) Mid Penn’s acquisition of First Priority on July 31, 2018, and (ii) Mid Penn’s acquisition of The Scottdale Bank & Trust Company (“Scottdale”) on January 8, 2018.  No merger and acquisition expenses were recorded during the nine months ended September 30, 2019.  Adjusted earnings for the nine months ended September 30, 2018, when excluding the after-tax impact of merger and acquisition expenses (with such adjusted earnings being a non-GAAP measure), were $10,017,000 or $1.52 per share basic and diluted.  Please refer to the section included herein under the heading “Reconciliation of Non-GAAP Measures (Unaudited)” for a discussion of our use of non-GAAP adjusted financial information, which includes tables reconciling GAAP and non-GAAP adjusted financial measures for the quarters ended September 30, 2019 and 2018 and certain other periods. 

Tangible book value per common share, a non-GAAP measure that is regularly reported in the banking industry and the most directly comparable non-GAAP measure to book value per share, favorably increased to $19.54 as of September 30, 2019, compared to $18.10 as of December 31, 2018, and $17.50 as of September 30, 2018.  Mid Penn’s GAAP book value per share increased to $27.67 at September 30, 2019, compared to $26.38 as of December 31, 2018, and $25.83 at September 30, 2018.   

Mid Penn also reported continued growth in total assets to $2,248,899,000 as of September 30, 2019, reflecting an increase of $170,918,000 or 8 percent compared to total assets of $2,077,981,000 as of December 31, 2018, and an increase of $204,619,000 or 10 percent compared to total assets of $2,044,280,000 as of September 30, 2018.  Asset growth during the first nine months of 2019 was primarily attributable to net organic loan growth, an increase in liquid assets from demand deposit growth, and the recording of operating and finance lease right of use assets as a result of Mid Penn’s adoption of Accounting Standard Codification (ASC) 842 – Leases effective January 1, 2019.

In general, the results of operations and the financial condition as of and for the periods ended September 30, 2019, as compared to prior periods and certain period-end dates in 2018, have been materially impacted by Mid Penn’s 2018 acquisitions of First Priority and Scottdale.

Mid Penn also reported that its Board of Directors, at a meeting held on October 23, 2019, declared a quarterly dividend per common share of $0.18 payable on November 25, 2019, to shareholders of record as of November 6, 2019. 

We are pleased to announce our third quarter results of operations and our quarterly dividend. The three months ended September 30, 2019 were demonstrative of our continued strong organic growth in our legacy markets of Dauphin, Cumberland, Schuylkill and Lancaster counties, as well as the success of our 2018 acquisitions of Scottdale and First Priority.  Our performance reflects strong increases in net interest income; a sound net interest margin even in the face of an inverted yield curve; significant increases in noninterest income sources including mortgage banking, fiduciary, SBA and interchange revenues; a decrease in noninterest expenses; and very favorable asset quality measures.  It is that last item of which I am most proud.  We are a community bank and we derive the bulk of our revenues and income from our loan portfolio. To end the quarter with a 0.36% nonperforming asset ratio is indicative of the strength of our designed business development culture, our commitment to pristine underwriting, our commitment to best in class documentation and portfolio management that is the best I have seen. With all of the success in revenue growth and expense control, we delivered a strong quarter in net income available to common shareholders, earnings per share and tangible book value appreciation. With that, we are sharing the wealth with the announcement of a $0.18 per share common stock dividend.

OPERATING RESULTS

Net Interest Income and Net Interest Margin

Net interest income was $17,767,000 for the three months ended September 30, 2019, an increase of $1,856,000 or 12 percent compared to net interest income of $15,911,000 for the three months ended September 30, 2018.  Through the first nine months of 2019, net interest income was $52,843,000, an increase of $14,640,000 or 38 percent compared to net interest income of $38,203,000 for the same period in 2018.  The primary source of the net interest income growth for both the three and nine month periods was an increase in interest and fees on loans, as total loans increased $143,148,000 or 9 percent since September 30, 2018. 

For the nine months ended September 30, 2019, Mid Penn’s tax-equivalent net interest margin was 3.64% versus 3.62% for the nine months ended September 30, 2018. Year-over-year increases in yields on interest-earning assets and growth in noninterest-bearing deposits more than offset the impact of both (i) the rising cost of both deposit and borrowed funds as a result of the FOMC rate increases in 2018, and (ii) the higher volume of wholesale funding sources, including brokered time deposits and subordinated debt assumed in the First Priority acquisition, and other short-term borrowings added since September 30, 2018 to support liquidity and interest rate management while also partially funding loan growth.

For the three months ended September 30, 2019, Mid Penn’s tax-equivalent net interest margin was 3.53% compared to 3.69% for the three months ended June 30, 2019.  This decrease in net interest margin was driven by successful growth in deposits in both the third quarter and full-year 2019, as Mid Penn had a higher average balance of demand deposits and liquid assets which were temporarily invested in overnight federal funds sold in anticipation of redeployment of some of this excess funding for future loan growth, repayment of maturing wholesale borrowings, and near-term redemptions of brokered CDs. The net interest margin was also impacted by an increase in the cost of deposits, particularly money market accounts and time deposits.

Noninterest Income

During the three months ended September 30, 2019, noninterest income totaled $3,003,000, an increase of $832,000 or 38 percent, compared to noninterest income of $2,171,000 for the three months ended September 30, 2018.  For the nine months ended September 30, 2019, noninterest income totaled $7,926,000, an increase of $2,485,000 or 46 percent, compared to noninterest income of $5,441,000 for the same period in 2018.

Mortgage banking income was $2,605,000 for the nine months ended September 30, 2019, an increase of $2,047,000 or over 350 percent compared to mortgage banking income of $558,000 for the nine months ended September 30, 2018.  Longer-term mortgage interest rates have declined significantly in the first nine months of 2019, resulting in a higher level of mortgage originations and secondary-market loan sales during the first nine months of 2019 when compared to the same period in 2018.  Additionally, Mid Penn expanded its team of residential mortgage originators in southeastern Pennsylvania during the first quarter of 2019, contributing to the larger volume of mortgage loans originated and sold in the nine months ended September 30, 2019.

Income from fiduciary activities was $1,092,000 for the nine months ended September 30, 2019, an increase of $241,000 or 28 percent, compared to fiduciary income of $851,000 for the nine months ended September 30, 2018. These additional revenues were attributed to continued growth in trust assets under management, and increased sales of retail investment products, as a result of successful business development efforts by Mid Penn’s trust and wealth management team.

ATM debit card interchange income was $1,148,000 for the nine months ended September 30, 2019, an increase of $240,000 or 26 percent compared to interchange income of $908,000 for the nine months ended September 30, 2018. The increase resulted from increasing card-transaction usage across our customer base, as well as the added volume from demand deposit accounts assumed in the First Priority acquisition.

Net gains on sales of SBA loans were $710,000 for the nine months ended September 30, 2019, an increase of $233,000 or 49 percent compared to net gains on sales of SBA loans of $477,000 during the same period in 2018.  The increase reflects a higher volume of loans settling in 2019 despite less favorable SBA loan rates year-over-year.

For the nine months ended September 30, 2019, merchant services income totaled $304,000, an increase of $43,000 or 16 percent, compared $261,000 for the nine months ended September 30, 2018, reflecting an increase in the volume of business customers utilizing merchant services to process their debit card transactions, cash advances, and other related products.

Other income was $1,096,000 for the nine months ended September 30, 2019, a decrease of $286,000 compared to other income of $1,382,000 for the nine months ended September 30, 2018.  Although wire transfer, letter of credit, and other fees increased in 2019, these were more than offset by a decline in pension settlement gain income year over year. During the first three quarters of 2018, Mid Penn recognized $497,000 of defined benefit pension plan settlement gains from certain plan participants receiving lump sum benefit payouts (the plan and related liabilities were assumed as a result of the Scottdale acquisition).  During the first three quarters of 2019, a lower amount of pension plan lump sum payouts occurred, with related settlement gains totaling $37,000.  Pension settlement gains are not expected to be a recurring item on a going-forward basis.

Net gains on sales of securities were $70,000 for the nine months ended September 30, 2019, a decrease of $62,000 compared to net gains on sales of securities of $132,000 for the nine months ended September 30, 2018. During the first three quarters of 2018, some investment securities acquired from Scottdale were subsequently sold at gains to ensure that the overall portfolio was in alignment with Mid Penn’s investment management objectives.  The volume of investment sales, and realized gains, were less during the first nine months of 2019, with such sales related primarily in support of interest rate risk and liquidity management.

Noninterest Expense

Noninterest expense for the three months ended September 30, 2019 totaled $14,683,000, a decrease of $587,000 or 4 percent compared to noninterest expenses of $15,270,000 for the three months ended September 30, 2018.  For the nine months ended September 30, 2019, noninterest expense totaled $43,782,000, an increase of $7,523,000 or 21 percent, compared to noninterest expense of $36,259,000 for the same period in 2018.  The increase in noninterest expense for the nine-month period was driven by both (i) the impact of the staff, facilities, and technology licensing costs added as a result of the acquisition of First Priority in July 2018, and (ii) the 2019 expansion of Mid Penn’s mortgage banking division in the southeastern Pennsylvania market.

Salaries and employee benefits expenses were $23,970,000 during the nine months ended September 30, 2019, an increase of $7,684,000 or 47 percent, versus the same period in 2018, with the increase primarily attributable to (i) the full-year impact of the compensation and benefit costs of the staff additions at the eight office locations added through the First Priority acquisition, effective July 31, 2018, and (ii) the back-office and loan originator staff additions as a result of the expansion of the mortgage banking division.

Occupancy expenses increased $1,247,000 or 46 percent during the first nine months of 2019 compared to the same period in 2018.  Similarly, equipment expense increased $425,000 or 28 percent during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018.  These increases related to (i) the incremental facilities operating costs, including rent, utilities, and depreciation expense for the buildings and equipment associated with the acquisition of the First Priority retail offices, and (ii) an investment in a corporate administrative facility to promote long-term operational and processing efficiencies by centralizing several back-office functions supporting the broader franchise. 

Pennsylvania bank shares tax expense was $740,000 for the nine months ended September 30, 2019, an increase of $267,000 or 56 percent compared to $473,000 for the nine months ended September 30, 2018.  The increase in assessment expense generally reflects the larger total shareholder equity balance (from both acquisition and organic growth activity) upon which the tax is based. 

FDIC assessment expense was $542,000 for the nine months ended September 30, 2019, an increase of $34,000 or 7 percent compared to $508,000 for the nine months ended September 30, 2018.  The third quarter of 2019 reflects the receipt of $492,000 of FDIC small bank assessment credits which were applied to FDIC assessment expense.  Mid Penn received notification from the FDIC that the FDIC’s Deposit Insurance Fund reserve ratio met a threshold resulting in the FDIC providing the Bank with the credit, which was applied to assessment liability accruals for both the second and third quarters of 2019.

Legal and professional fees for the nine months ended September 30, 2019 increased by $452,000 or 60 percent compared to the same period in 2018 due to increased use and costs of third-party providers for information technology support, human resources services, external audit, and loan review services.

Software licensing and utilization costs were $3,282,000 during the nine months ended September 30, 2019, an increase of $648,000 or 25 percent compared to $2,634,000 for the nine months ended September 30, 2018. The increase is a result of additional transaction volume based costs and licensing fees related to the addition of the locations, staff  and accounts for the First Priority offices acquired in July 2018, the Pillow branch added in September 2018, and the expanded mortgage banking division added during the first quarter of 2019.  Additionally, Mid Penn continued to invest in upgrades to internal systems to enhance data management and storage capabilities given the larger company profile.

Intangible amortization increased from $837,000 during the nine months ended September 30, 2018 to $1,078,000 during the same period in 2019 due to the full nine-month impact of the core deposit intangible asset added from the First Priority acquisition on July 31, 2018.

Other expenses were $5,947,000 during the nine months ended September 30, 2019, an increase of $1,615,000 or 37 percent compared to other expense of $4,332,000 for the same period in 2018.  As the First Priority acquisition and organic growth have increased the organization’s geographic profile and employee base, several categories within other expense experienced increases, including insurance costs, charitable donations, stationary and supplies, printing, loan collection costs, and directors’ fees.

No merger expenses were recorded during the nine months ended September 30, 2019.  During the first nine months of 2018, merger and acquisition expenses totaling $4,955,000 were recorded including investment banking fees, merger-related legal and professional fees, severance costs, and information technology conversion/termination costs incurred for the 2018 acquisitions of First Priority and Scottdale.

The provision for income taxes was $2,539,000 during the nine months ended September 30, 2019, an increase of $1,326,000 or 109 percent compared to $1,213,000 for the same period in 2018.  The third quarter of 2019 reflects a favorable adjustment to income tax expense of $277,000 for certain permanent nonrecurring tax benefits recorded within the current quarter.

FINANCIAL CONDITION

Loans

Total loans at September 30, 2019 were $1,710,434,000 compared to $1,624,067,000 at December 31, 2018, an increase of $86,367,000 or 5 percent since year-end 2018.  The majority of the growth was commercial and industrial financing, and commercial real estate credits.

Deposits

Total deposits increased $164,067,000 or 10 percent, from $1,726,026,000 at December 31, 2018, to $1,890,093,000 at September 30, 2019.  The increase was attributed to both new and expanded cash management and commercial deposit account relationships, and some volume from the third quarter cyclical growth due to real estate tax collections by our public fund depositors.

Investments

Mid Penn’s portfolio of held-to-maturity securities increased $2,102,000 to $170,472,000 as of September 30, 2019, as compared to $168,370,000 as of December 31, 2018 (held-to-maturity investments are recorded at amortized cost).  Mid Penn’s total available-for-sale securities portfolio decreased $59,504,000 or 53 percent, from $111,923,000 at December 31, 2018 to $52,419,000 at September 30, 2019 due to both mortgage-backed securities repayments, and from investment sales related to portfolio strategies in support of both liquidity and interest rate risk management.

Capital

Shareholders’ equity increased by $11,403,000 or 5 percent from $223,209,000 as of December 31, 2018 to $234,612,000 as of September 30, 2019. The increase in shareholders’ equity reflects both (i) the growth in retained earnings through year-to-date net income, net of dividends paid, through the first nine months of 2019, and (ii) the year-to-date accumulated other comprehensive income from the after-tax appreciation in the market value of the available-for-sale investment portfolio.  Regulatory capital ratios for both Mid Penn and its banking subsidiary exceeded regulatory “well-capitalized” levels at both September 30, 2019 and 2018.

ASSET QUALITY

Total nonperforming assets were $5,553,000 at September 30, 2019, a significant decrease compared to nonperforming assets of $12,283,000 at December 31, 2018, and $11,978,000 at September 30, 2018. Nonperforming assets were 0.32% of the total of loans plus other real estate assets as of September 30, 2019, compared to 0.76% for the same measure as of both December 31, 2018 and September 30, 2018.  The decrease was primarily due to the successful workout of one nonaccrual commercial credit relationship totaling $4,302,000 and one nonaccrual residential mortgage relationship totaling $701,000 during the first nine months of 2019.

The allowance for loan and lease losses as a percentage of total loans was 0.54% at September 30, 2019, compared to 0.52% at December 31, 2018 and 0.53% at September 30, 2018.  Mid Penn had net loan charge-offs of $236,000 for the nine months ended September 30, 2019 compared to net recoveries of ($398,000) during the same period in 2018.  The net charge-off position in 2019 was primarily due to a $205,000 charge-off taken on one relationship during the second quarter of 2019.  The favorable net recovery position during the first nine months of 2018 was driven by the recovery of $777,000 of principal from the successful workout of a commercial real estate relationship that originally had a large partial charge-off in 2009.

Loan loss reserves as a percentage of nonperforming loans were 172% at September 30, 2019, compared to 75% at December 31, 2018, and 76% at September 30, 2018.  The increase in the loan loss reserves as a percentage of nonperforming loans at September 30, 2019 as compared to both the prior year-end and September 30, 2018 was a result of both an increase in the allowance balance related to general allocations provided for loan growth, and the year-over-year decrease in nonperforming loans.

Based upon management’s evaluation of the adequacy of the loan and lease loss allowance, a loan loss provision of $1,155,000 was recorded for the nine months ended September 30, 2019 compared to $225,000 recorded during the same period of 2018.  The increase in the provision amount year-over-year was warranted to support both (i) the adequacy of the ALLL given the organic loan portfolio growth during the first nine months of 2019, and (ii) the impact of historical loss factor changes due to charge-offs taken during the first half of 2019.  Management believes, based on information currently available, that the allowance for loan and lease losses of $9,316,000 is adequate as of September 30, 2019, to cover probable and estimated loan losses in the portfolio.

FINANCIAL HIGHLIGHTS (Unaudited)

(Dollars in thousands, except   Sept. 30,     June 30,     Mar. 31,     Dec. 31,     Sept. 30,  
 per share data)   2019     2019     2019     2018     2018  
Cash and cash equivalents   $ 160,879     $ 48,145     $ 86,968     $ 40,065     $ 62,085  
Investment securities     222,891       243,586       264,323       280,293       282,048  
Loans     1,710,434       1,688,173       1,646,686       1,624,067       1,567,286  
Allowance for loan and lease losses     (9,316 )     (8,771 )     (8,502 )     (8,397 )     (8,229 )
Net loans     1,701,118       1,679,402       1,638,184       1,615,670       1,559,057  
Goodwill and other intangibles     68,949       69,304       69,665       70,061       70,475  
Other assets     95,062       95,685       88,677       71,892       70,615  
Total assets   $ 2,248,899     $ 2,136,122     $ 2,147,817     $ 2,077,981     $ 2,044,280  
                                         
Noninterest-bearing deposits   $ 298,885     $ 287,183     $ 290,902     $ 269,870     $ 271,142  
Interest-bearing deposits     1,591,208       1,491,218       1,493,278       1,456,156       1,491,323  
Total deposits     1,890,093       1,778,401       1,784,180       1,726,026       1,762,465  
Borrowings and subordinated debt     102,038       105,105       113,661       118,206       46,923  
Other liabilities     22,156       21,354       22,539       10,540       13,057  
Shareholders’ equity     234,612       231,262       227,437       223,209       221,835  
Total liabilities and shareholders’ equity   $ 2,248,899     $ 2,136,122     $ 2,147,817     $ 2,077,981     $ 2,044,280  
                                         
Book Value per Common Share   $ 27.67     $ 27.32     $ 26.88     $ 26.38     $ 25.83  
Tangible Book Value per Common Share *   $ 19.54     $ 19.13     $ 18.64     $ 18.10     $ 17.50  

* Non-GAAP measure; see Reconciliation of Non-GAAP Measures

OPERATING HIGHLIGHTS (Unaudited):

    Three Months Ended     Nine Months
Ended
 
(Dollars in thousands, except   Sept. 30,     June 30,     Mar. 31,     Dec. 31,     Sept. 30,     Sept. 30,  
per share data)   2019     2019     2019     2018     2018     2019     2018  
                                                         
Interest income   $ 24,513     $ 23,998     $ 22,866     $ 22,371     $ 19,583     $ 71,377     $ 46,283  
Interest expense     6,746       6,228       5,560       4,640       3,672       18,534       8,080  
Net Interest Income     17,767       17,770       17,306       17,731       15,911       52,843       38,203  
Provision for loan and lease losses     565       465       125       275       100       1,155       225  
Noninterest income     3,003       2,874       2,049       2,091       2,171       7,926       5,441  
Noninterest expense     14,683       14,796       14,303       13,982       15,270       43,782       36,259  
Income before provision for income taxes     5,522       5,383       4,927       5,565       2,712       15,832       7,160  
Provision for income taxes     709       980       850       916       548       2,539       1,213  
Net income     4,813       4,403       4,077       4,649       2,164       13,293       5,947  
Preferred stock dividends                       64       38             38  
Net income available to common shareholders   $ 4,813     $ 4,403     $ 4,077     $ 4,585     $ 2,126     $ 13,293     $ 5,909  
                                                         
Basic Earnings per Common Share   $ 0.57     $ 0.52     $ 0.48     $ 0.54     $ 0.28     $ 1.57     $ 0.89  
Return on Average Equity     8.34 %     7.71 %     7.35 %     8.19 %     4.26 %     7.54 %     4.94 %
    Sept. 30,     June 30,     Mar. 31,     Dec. 31,     Sept. 30,  
    2019     2019     2019     2018     2018  
Tier 1 Capital (to Average Assets)   7.7%     7.8%     7.8%     8.0%     7.7%  
Common Tier 1 Capital (to Risk Weighted Assets)   9.9%     9.8%     9.9%     10.0%     10.1%  
Tier 1 Capital (to Risk Weighted Assets)   9.9%     9.8%     9.9%     10.0%     10.1%  
Total Capital (to Risk Weighted Assets)   12.1%     12.0%     12.2%     12.3%     12.4%  


RECONCILIATION OF NON-GAAP MEASURES (Unaudited:)

This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). 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.   We believe earnings per share excluding the after-tax impact of merger-related expenses provides important supplemental information in evaluating Mid Penn’s operating results because these charges are not incurred as a result of ongoing operations.  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. 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.

RECONCILIATION OF NON-GAAP MEASURES, CONTINUED (Unaudited:)

Tangible Book Value Per Share

(Dollars in thousands, except   Sept. 30,     June 30,     Mar. 31,     Dec. 31,     Sept. 30,  
per share data)   2019     2019     2019     2018     2018  
                                         
Shareholder’s Equity   $ 234,612     $ 231,262     $ 227,437     $ 223,209     $ 221,835  
Less: Preferred Stock                             3,404  
Less: Goodwill     62,840       62,840       62,840       62,840       62,767  
Less: Core Deposit and Other Intangibles     6,109       6,464       6,825       7,221       7,708  
Tangible Equity   $ 165,663     $ 161,958     $ 157,772     $ 153,148     $ 147,956  
                                         
Common Shares Issued and Outstanding     8,478,461       8,465,178       8,462,431       8,459,918       8,457,023  
                                         
Tangible Book Value per Share   $ 19.54     $ 19.13     $ 18.64     $ 18.10     $ 17.50  

Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses

(Dollar bill in thousands, except   Three Months Ended     Nine Months Ended  
per share data)   Sept. 30,     June 30,     Mar. 31,     Dec. 31,     Sept. 30,     Sept. 30,  
    2019     2019     2019     2018     2018     2019     2018  
Net Income Available to Common Shareholders   $ 4,813     $ 4,403     $ 4,077     $ 4,585     $ 2,126     $ 13,293     $ 5,909  
Plus: Merger and Acquisition Expenses                       (164 )     3,038             4,955  
Less: Tax Effect of Merger and Acquisition Expenses                       (35 )     576             847  
Net Income Excluding Non-Recurring Expenses   $ 4,813     $ 4,403     $ 4,077     $ 4,456     $ 4,588     $ 13,293     $ 10,017  
                                                         
Weighted Average Shares Outstanding – denominator     8,473,080       8,462,522       8,460,002       8,457,054       7,695,469       8,465,249       6,604,027  
                                                         
Adjusted Earnings Per Common Share Excluding Non-Recurring Expenses   $ 0.57     $ 0.52     $ 0.48     $ 0.53     $ 0.60     $ 1.57     $ 1.52  

CONSOLIDATED BALANCE SHEETS (Unaudited):

(Dollars in thousands, except share data)   September 30, 2019     Dec. 31, 2018     September 30, 2018  
ASSETS                        
Cash and due from banks   $ 54,756     $ 24,600     $ 31,110  
Interest-bearing balances with other financial institutions     4,393       4,572       5,241  
Federal funds sold     101,730       10,893       25,734  
Total cash and cash equivalents     160,879       40,065       62,085  
                         
Investment securities available for sale, at fair value     52,419       111,923       110,527  
Investment securities held to maturity, at amortized cost                        
(fair value $173,722, $166,582, and $169,382)     170,472       168,370       171,521  
Loans held for sale     7,115       1,702       3,181  
Loans and leases, net of unearned interest     1,710,434       1,624,067       1,567,286  
Less:  Allowance for loan and lease losses     (9,316 )     (8,397 )     (8,229 )
Net loans and leases     1,701,118       1,615,670       1,559,057  
                         
Bank premises and equipment, net     23,357       25,303       25,467  
Bank premises and equipment held for sale     1,274              
Operating lease right of use asset     10,416              
Finance lease right of use asset     3,492              
Cash surrender value of life insurance     16,804       16,691       16,610  
Restricted investment in bank stocks     6,105       6,646       3,373  
Accrued interest receivable     8,414       8,244       7,491  
Deferred income taxes     3,922       4,696       4,432  
Goodwill     62,840       62,840       62,767  
Core deposit and other intangibles, net     6,109       7,221       7,708  
Foreclosed assets held for sale     130       1,017       1,101  
Other assets     14,033       7,593       8,960  
Total Assets   $ 2,248,899     $ 2,077,981     $ 2,044,280  
LIABILITIES & SHAREHOLDERS’ EQUITY                        
Deposits:                        
Noninterest-bearing demand   $ 298,885     $ 269,870     $ 271,142  
Interest-bearing demand     465,745       384,834       438,928  
Money Market     486,131       375,648       356,729  
Savings     180,927       209,345       224,746  
Time     458,405       486,329       470,920  
Total Deposits     1,890,093       1,726,026       1,762,465  
                         
Short-term borrowings     12,000       43,100       1,771  
Long-term debt     62,971       48,024       18,064  
Subordinated debt     27,067       27,082       27,088  
Operating lease liability     11,534              
Accrued interest payable     2,823       2,262       2,262  
Other liabilities     7,799       8,278       10,795  
Total Liabilities     2,014,287       1,854,772       1,822,445  
                         
Shareholders’ Equity:                        
Series D preferred stock, par value $1.00; liquidation value $1,000; authorized 3,404 shares; 9% cumulative dividend; 0 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively, and 3,404 shares issued and outstanding at September 30, 2018                 3,404  
Common stock, par value $1.00 per share; 20,000,000 shares authorized at September 30, 2019; 8,478,461 shares issued and outstanding at September 30, 2019; 10,000,000 shares authorized at December 31, 2018 and September 30, 2018, respectively; 8,459,918 and 8,457,023 shares issued and outstanding at December 31, 2018 and September 30, 2018, respectively     8,478       8,460       8,457  
Additional paid-in capital     177,994       177,565       177,421  
Retained earnings     48,009       39,562       36,244  
Accumulated other comprehensive income (loss)     131       (2,378 )     (3,691 )
Total Shareholders’ Equity     234,612       223,209       221,835  
Total Liabilities and Shareholders’ Equity   $ 2,248,899     $ 2,077,981     $ 2,044,280  

CONSOLIDATED STATEMENTS OF INCOME (Unaudited):

null

                                 
(Dollars in thousands, except per share data)   Three Months Ended September 30,     Nine Months Ended September 30,  
      2019       2018       2019       2018  
INTEREST INCOME                                
Interest and fees on loans and leases   $ 22,573     $ 17,715     $ 65,865     $ 41,125  
Interest on interest-bearing balances     23       26       80       52  
Interest on federal funds sold     506       78       704       399  
Interest and dividends on investment securities:                                
U.S. Treasury and government agencies     701       965       2,433       2,601  
State and political subdivision obligations, tax-exempt     495       636       1,698       1,695  
Other securities     215       163       597       411  
Total Interest Income     24,513       19,583       71,377       46,283  
INTEREST EXPENSE                                
Interest on deposits     5,830       3,183       15,692       6,960  
Interest on short-term borrowings     69       38       458       50  
Interest on long-term and subordinated debt     847       451       2,384       1,070  
Total Interest Expense  



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