At present, the banking industry is facing a challenging operating backdrop amid high interest rates and waning loan demand. Despite this, one can consider fundamentally solid lenders like Mid Penn Bancorp, Inc. (MPB Quick QuoteMPB - Free Report) . The company is well-placed to benefit from solid loan and deposit balances, high interest rates and a strong balance sheet.

Over the past month, the Zacks Consensus Estimate for MPB’s earnings has remained unchanged for both 2023 and 2024. The stock presently carries a Zacks Rank #2 (Buy).

Looking at its price performance, over the past six months, shares of Mid Penn Bancorp have lost 18.5% compared with the industry’s 6.6% fall.
 

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Here are some factors that make MPB a viable investment option right now:

Earnings Strength: Over the past three to five years, Mid Penn Bancorp recorded earnings growth of 15.5%, higher than the industry average of 12.3%. While the company’s earnings are projected to decline 30.8% this year, the trend will reverse after that. In 2024, earnings are expected to grow 25.8%.

Revenue Growth: Mid Penn Bancorp’s revenues witnessed a CAGR of 31.7% over the last five years (2017-2022). The uptrend continued in the first six months of 2023. MPB’s top-line improvement is backed by the acquisitions completed during this period, decent loan demand and higher rates.

Revenues are expected to decline 3.2% in 2023 but are likely to grow 9.1% next year.

Steady Capital Distributions: Mid Penn Bancorp’s ability to generate positive cash flows and enhance shareholder value through regular dividend payments and share repurchases is commendable. In 2020, the bank authorized a share repurchase plan worth $15 million. As of Jun 30, 2023, the company had repurchased 0.4 million shares at an average price of $22.92 per share under the program. It had $5.5 million worth of buyback authorization remaining as of the same date.

In addition to share repurchases, MPB pays regular quarterly dividends. Over the last five-year period, the company raised the dividend four times, with an annualized dividend growth rate of 5.3%. Further, its dividend payout ratio is 24% of earnings.

Strong Leverage: Currently, Mid Penn Bancorp has a debt/equity ratio of 0.20. This compares favorably with the industry average of 0.36. Given the relatively low debt/equity ratio than its peers, the company is expected to be financially stable, even in adverse economic conditions.

Favorable Valuation: The Mid Penn Bancorp stock looks undervalued right now compared with the industry. It currently has a price/book ratio of 0.61, lower than the industry average of 0.82. Also, the company’s price/sales ratio of 1.52 is below the industry’s 1.67.

Further, MPB stock has a Value Score of B. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.

Other Stocks Worth Considering

A couple of other top-ranked stocks from the banking space are Northeast Community Bancorp, Inc. (NECB Quick QuoteNECB - Free Report) and Community Bank System, Inc. (CBU Quick QuoteCBU - Free Report) . At present, NECB sports a Zacks Rank #1 and CBU carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Northeast Community Bancorp’s 2023 earnings has remained unchanged over the past 30 days. Over the past six months, NECB’s shares have gained 12.8%.

The Zacks Consensus Estimate for Community Bank System’s 2023 earnings has been revised marginally upward in the past month. CBU’s shares have declined 14.5% in the past six months.