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Item 7. Management’s Discussion and Analysis

2025-03-13 compared with 2024-03-28 · 226 added, 162 removed, 496 unchanged (44% of the section changed)

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SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Certain of the matters discussed in this document may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Mid Penn or the Bank to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

The words "expect," "anticipate," "intend," "plan," "believe," "estimate," and similar expressions are intended to identify such forward-looking statements.

Mid Penn’s actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation:

• the effects of future economic conditions on Mid Penn, the Bank, its nonbank subsidiaries, and their markets and customers;

Certain of the matters discussed in this document or in documents incorporated by reference herein, including matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, or Exchange Act.

These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, and expected operating results, including after giving effect to the Merger, and the assumptions upon which those statements are based.

Forward looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” or words or phrases of similar meaning.

We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control.

Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements.

The following factors, among others, could cause our financial performance to differ materially from that expressed in such forward-looking statements:

• Mid Penn’s ability to efficiently integrate acquisitions, including the Merger, into its business and operations, which may take longer than anticipated, may be more costly than anticipated and may have unanticipated adverse results relating to Mid Penn’s existing business and operations;

• the possibility that the anticipated benefits of the Merger, including anticipated cost savings and other synergies of the Merger may take longer to be realized or may not be achieved in their entirety, and attrition in key client, partner and other relationships relating to the Merger may be greater than expected;

• the effects of future economic conditions on Mid Penn, the Bank, our nonbank subsidiaries, and our markets and customers;

• governmental monetary and fiscal policies, as well as legislative and regulatory changes;

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• the risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, the value of investment securities, and interest rate protection agreements;

• the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in Mid Penn’s market area and elsewhere, including institutions operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the internet;

• an increase in the Pennsylvania Bank Shares Tax to which Mid Penn Bank’s capital stock is currently subject, or imposition of any additional taxes on the capital stock of Mid Penn or Mid Penn Bank;

• the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market area and elsewhere, including institutions operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the internet;

• an increase in the Pennsylvania Bank Shares Tax to which the Bank’s capital stock is currently subject, or imposition of any additional taxes on the capital stock of Mid Penn or the Bank;

• impacts of the capital and liquidity requirements imposed by bank regulatory agencies;

• the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, Financial Accounting Standards Board, the SEC, and other accounting and reporting standard setters;

• the costs and effects of litigation and of unexpected or adverse outcomes in such litigation;

• technological changes;

• the effect of changes in accounting policies and practices, as may be adopted by regulatory agencies, as well as the Public Company Accounting Oversight Board, Financial Accounting Standards Board, the SEC, and other accounting and reporting rule making authorities;

• the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, including litigation related to the Merger;

• changes in technology;

• our ability to implement business strategies, including our acquisition strategy;

• our ability to successfully expand our franchise, including acquisitions or establishing new offices at favorable prices;

• our ability to successfully expand our franchise, including through acquisitions or establishing new offices at favorable prices;

• our ability to successfully integrate any banks, companies, offices, assets, liabilities, customers, systems and management personnel we acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames;

• potential goodwill impairment charges, or future impairment charges and fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames;

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

• our ability to attract and retain qualified management and personnel;

• results of regulatory examination and supervision processes;

• the failure of assumptions underlying the establishment of reserves for loan losses, the assessment of potential impairment of investment securities, and estimations of values of collateral and various financial assets and liabilities;

• our ability to maintain compliance with the listing rules of NASDAQ;

• the ability to obtain regulatory approvals and satisfy other closing conditions to the Merger, including approval by the shareholders of Mid Penn and William Penn;

• the possibility of increased scrutiny by, and/or additional regulatory requirements of, governmental authorities as a result of the Merger;

• potential exposure to unknown or contingent risks and liabilities we have acquired, or may acquire, or target for acquisition, including in connection with the Merger;

• the failure of assumptions underlying the establishment of reserves for loan and lease losses, the assessment of potential impairment of investment securities, and estimations of values of collateral and various financial assets and liabilities;

• our ability to maintain compliance with the listing rules of The NASDAQ Stock Market;

• our ability to maintain the value and image of our brand and protect our intellectual property rights;

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• supply chain disruption;

• the factors described in Item 1A of this Annual Report.

• the risk factors described in Item 1A of this Annual Report.

All written or oral forward-looking statements attributable to Mid Penn are expressly qualified in their entirety by these cautionary factors.

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

This Management’s Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of Mid Penn’s Consolidated Financial Statements from the view of management and should be read in conjunction with the Consolidated Financial Statements of the Corporation and Notes thereto and other detailed information appearing elsewhere in this Annual Report on Form 10-K.

The comparability of the results of operations for the year ended 2023, compared to 2022 and 2021, in general, have been materially impacted by the Brunswick Acquisition, which closed on May 19, 2023.

The comparability of the results of operations for the years ended 2024 and 2023, compared to 2022, in general, have been materially impacted by the Brunswick Acquisition, which closed on May 19, 2023.

Mid Penn is not aware of any current trends, events, uncertainties or any current recommendations by the regulatory authorities which, if they were to be implemented, would have a material effect on Mid Penn’s or the Bank’s liquidity, capital resources, or operations.

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Offsetting these revenue sources are provisions for credit losses, non-interest expenses and income taxes.

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

The following table presents a summary of the Corporation's earnings and selected performance ratios:

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Return on average assets (2)

0.91 % 0.77 % 1.22 %

Return on average equity (2)

8.61 % 7.16 % 10.98 %

Net interest margin (1)

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See also the "Net Interest Income" section.

(2) Annualized ratios

During the second quarter of 2023, Mid Penn completed the Brunswick Acquisition, which added total assets of $390.7 million comprised primarily of $324.5 million of loans.

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• Net Income Per Share - Mid Penn’s net income available to common shareholders ("earnings") for the year ended December 31, 2024 was $49.4 million or $2.90 per common share basic and diluted, compared to earnings of $37.4 million or $2.29 per common share basic and diluted for the year ended December 31, 2023.

The results for the year ended December 31, 2023 were favorably impacted by loan growth, interest income growth and the Brunswick Acquisition.

The year ended December 31, 2023 included the recognition of $15 thousand of Paycheck Protection Program ("PPP") loan processing fees generated as a result of Mid Penn’s participation in the PPP compared to $3.8 million for the year ended December 31, 2022.

These PPP fees are recognized into interest income over the term of the respective loan, or sooner if the loans are forgiven by the Small Business Administration or the borrowers otherwise pay down principal prior to a loan’s stated maturity.

The year ended

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

December 31, 2023 also include merger and acquisition expenses of $5.5 million and post-acquisition restructuring expenses totaling $3.0 million resulting from the Brunswick Acquisition, which was announced on December 20, 2022 and legally closed on May 19, 2023.

The results for the year ended December 31, 2024 were favorably impacted by loan growth, and interest income growth.

• Net Interest Income

◦ Net Interest Margin - For the year ended December 31, 2024, Mid Penn’s FTE net interest margin was 3.11% versus 3.26% for the year ended December 31, 2023.

The Federal Reserve’s Federal Open Market Committee ("FOMC") increased rates four times during 2023.

The yield on interest-earning assets increased 121 basis point(s) ("bp") in 2023 compared to 2022 and the rate on interest-bearing liabilities increased 197 bp in 2023 compared to 2022.

The Federal Reserve’s Federal Open Market Committee ("FOMC") decreased rates three times during 2024.

The yield on interest-earning assets increased 44 basis point(s) ("bp") for the year ended December 31, 2024 compared to the year ended December 31, 2023 and the rate on interest-bearing liabilities increased 70 bp for the year ended December 31, 2024 compared to the year ended December 31, 2023.

◦ Loan Growth - Total loans, net of unearned income, as of December 31, 2024 were $4.4 billion compared to $4.3 billion as of December 31, 2023 , an increase of $190.3 million, or 4.5%.

The loan growth occurred primarily within Mid Penn’s commercial real estate loan portfolio.

As mentioned above, $324.5 million, or 43.9%, of that growth was a result of the Brunswick Acquisition.

The mix of commercial real estate and construction portfolios in relation to the total portfolio increased 33.61% and 1.93%, respectively from December 31, 2022 to December 31, 2023.

The mix of commercial real estate and commercial portfolios in relation to the total change in the loan portfolio increased 111.1% and 15.9%, respectively from December 31, 2023 to December 31, 2024.

Non-owner occupied office commercial real estate exposure represents 28.2% of total loan balances and is primarily limited to suburban offices.

◦ Deposit Growth - Total deposits increased $343.7 million, or 7.9%, from $4.3 billion at December 31, 2023, to $4.7 billion at December 31, 2024.

T he Brunswick Acquisition contributed $282.6 million of additional deposits on the acquisition date.

• Asset Quality - Mid Penn adopted CECL on January 1, 2023.

ACL at December 31, 2023 was $34.2 million, or 0.80% of total loans, as compared to $19.0 million, or 0.54% of total loans at December 31, 2022.

◦ Net Recoveries/Charge-offs - Mid Penn had net loan charge-offs of $332 thousand and net loan recoveries of $60 thousand for the years ended December 31, 2023 and 2022, respectively.

• Asset Quality - ACL at December 31, 2024 was $35.5 million, or 0.80% of total loans, as compared to $34.2 million, or 0.80% of total loans at December 31, 2023.

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

◦ Net Charge-offs/Recoveries - Mid Penn had net loan charge-offs of $817 thousand and net loan charge-offs of $332 thousand for the years ended December 31, 2024 and 2023, respectively.

◦ Non-performing assets - Total non-performing assets were $22.7 million at December 31, 2024, an increase compared to non-performing assets of $14.5 million at December 31, 2023.

The increase was partially a result of $3.9 million of non-accrual loans acquired from Brunswick.

◦ Provision for credit losses - Loans - The PCL - loans was $3.3 million for the year ended December 31, 2023 compared to $4.3 million for the year ended December 31, 2022.

The decrease in provision for the twelve months ended December 31, 2023, is primarily due to improved performance in Commercial and Industrial loans partially offset by increased delinquencies in the Commercial Real Estate portfolio.

The increase was partially a result of the addition of two commercial loans with a combined balance of $3.0 million, and two commercial real estate loans with a combined balance of $2.3 million being placed on nonaccrual in the fourth quarter of 2024.

◦ Provision/Benefit for credit losses - Loans - The provision for credit losses - loans was $2.1 million for the year ended December 31, 2024 compared to $3.3 million for the year ended December 31, 2023.

The decrease in provision for the year ended December 31, 2024, is primarily due to a decrease in loss factors across most portfolios.

Prior to 2023, ACL and related provision are presented in accordance with the previous accounting guidance using the incurred loss method.

The PCL for the year ended December 31, 2023 includes an initial provision for credit losses on non-PCD loans acquired in the Brunswick Acquisition of $2.0 million.

• Noninterest Income - Noninterest income totaled $20.0 million for the year ended December 31, 2023, a $3.6 million, or 15.4%, decrease compared to the year ended December 31, 2022.

The decrease was primarily attributable to a $1.2 million decrease in mortgage hedging, and a $1.8 million decrease in other miscellaneous income.

• Noninterest Expense - Noninterest expense totaled $119.0 million, an increase of $19.1 million, or 19.2%, compared to noninterest expense of $99.8 million for the year ended December 31, 2022.

The increase in noninterest expense is driven by $8.5 million of merger-related expenses, a $6.7 million increase in salaries and benefits expense, and a $1.9 million increase in FDIC charges.

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

• Borrowings paid downs - During 2023, Mid Penn paid off $30.4 million of long-term debt and redeemed a total of $10.0 million of subordinated debt and trust preferred securities.

• Noninterest Income - Noninterest income totaled $22.5 million for the year ended December 31, 2024, a $2.5 million, or 12.4%, increase compared to the year ended December 31, 2023.

The increase was primarily attributable to a $2.2 million increase in other miscellaneous income, driven by increases in Bank-owned life insurance benefits received, and a $1.1 million increase in mortgage banking income, partially offset by a $379 thousand decrease in fiduciary and wealth management and a $314 thousand decrease in mortgage hedging.

• Noninterest Expense - Noninterest expense totaled $117.6 million, a decrease of $972 thousand, or 0.8%, compared to noninterest expense of $118.6 million for the year ended December 31, 2023.

The decrease was primarily driven by a $5.0 million decrease in merger and acquisition expenses and a $3.0 million decrease in post-acquisition restructuring expenses, partially offset by a $4.8 million increase in salaries and benefits expense, driven by year-end employee bonus incentives, increases in employee salaries, and increased costs of employee medical benefits, a $1.4 million increase in legal and professional fees, and a $1.4 million increase in software licensing and utilization expense.

• Borrowings paid downs - During 2024, Mid Penn paid off $35.3 million of long-term debt.

• Share Repurchases - Mid Penn repurchased 15,500 shares during 2024 at an average price per share of $20.81 under its share repurchase program.

• Business Combinations

◦ As announced on Form 8-K filed on December 20, 2022, Mid Penn entered into an Agreement and Plan of Merger with Brunswick Bancorp, pursuant to which Brunswick merged with and into Mid Penn, with Mid Penn being the surviving corporation in the Merger.

This transaction legally closed on May 19, 2023.

◦ On December 30, 2022, Mid Penn purchased the assets, in a business combination, of Managing Partners, Inc., an independent insurance agency that serviced the Central Pennsylvania area.

◦ On July 31, 2024, Mid Penn acquired the insurance business and related accounts of a full-service employee benefits firm that serves mid to large employers across central and eastern Pennsylvania, northern Maryland, and northern Virginia, for a purchase price of $2.0 million at closing and an additional $800 thousand potentially payable pursuant to a three year earnout.

◦ 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, a wholly-owned subsidiary of Brunswick, merged with and into Mid Penn Bank, a wholly-owned subsidiary of Mid Penn.

Critical Accounting Estimates

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Application of certain principles involves significant judgments and estimates by management that have a material impact on the carrying value of certain assets and liabilities.

The judgments and estimates used in applying these principles are based on historical experiences and other factors which are believed to be reasonable under the circumstances.

The judgments and estimates used in applying these principles are based on historical experiences and

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

other factors which are believed to be reasonable under the circumstances.

Because of the nature of the judgments and estimates that have been made, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of assets and liabilities and the reported results of operations.

Management of the Corporation considers the accounting judgments relating to the allowance for credit losses to be the accounting area that requires the most subjective and complex judgments.

Management of the Corporation considers the accounting judgments relating to the allowance for credit losses and goodwill impairment to be the accounting area that requires the most subjective and complex judgments.

Allowance for Credit Losses

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The CECL estimate is highly sensitive to the economic forecasts used to develop the estimate.

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

While management uses the best information known to it in order to make ACL valuations, adjustments to the ACL may be necessary based on changes in economic and other conditions, changes in the composition of the loan portfolio, or changes in accounting guidance.

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The allowance for credit losses - Loans was $35.5 million as of December 31, 2024, an increase of $1.3 million, or 3.9%, compared to $34.2 million as of December 31, 2023.

The increase was primarily the result of the CECL implementation in 2023.

The increase was primarily the result of an increase in the reserve for individually analyzed loans during the fourth quarter of 2024.

Mid Penn evaluates goodwill annually for impairment unless events occur which indicate that impairment is possible, a triggering event.

In response to bank failures during the late first and early second quarters of 2023, Management performed a Step 1 Goodwill analysis as of May 31, 2023, given that the decline in the price of Mid Penn's stock below its book value following these events was deemed a triggering event.

At December 31, 2024, Mid Penn had goodwill of $128.2 million and Mid Penn's stock continues to trade below book value.

Our annual impairment test was conducted during the fourth quarter of 2024.

Factors considered include actual earnings in relation to forecasted earnings, liquidity levels, changes in deposit balances, and credit quality, among others.

Goodwill is calculated as a purchase premium using the market participant and peer group control premium approach.

Additional factors considered include actual earnings in relation to forecasted earnings, liquidity levels, changes in deposit balances, and credit quality, among

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

No goodwill impairment has been recorded for 2024.

Management will continue to monitor internal metrics and macroeconomic trends to determine if there is likelihood of goodwill impairment.

Refer to Note 6 - Goodwill and Intangible Assets for further details on the Company's goodwill.

Business Combinations

Assets acquired and liabilities assumed in business combinations are measured at fair value as of the acquisition date.

In many cases, determining the fair value of the assets acquired and liabilities assumed requires Mid Penn to estimate the timing and amount of cash flows expected to result from these assets and liabilities and to discount these cash flows at appropriate rates of interest, which require the utilization of significant estimates and judgment in accounting for the acquisition.

Refer to Note 2 - Business Combinations for further details.

Refer to Note 1 - Summary of Significant Accounting Policies and Note 6 - Goodwill and Intangible Assets for further details on the Company's goodwill.

Results of Operations

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Loan fees of $4.8 million, $4.6 million and $8.4 million are included with loan interest income in the following table for the years ended December 31, 2024, 2023, and 2022, respectively.

During the years ended December 31, 2023, 2022, and 2021, Mid Penn recognized $15 thousand, $3.8 million and $22.0 million of PPP fees, respectively, which are included in loan fees.

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

Average balances, effective interest differential and interest yields for the years ended December 31:

The following table includes average balances, effective interest differential and interest yields for the years ended December 31:

Average Balances, Income and Interest Rates

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Federal Funds Sold 36,436 1,928 5.29 7,161 373 5.21 311,989 1,826 0.59

Loans, Net 3,868,307 218,462 5.65 3,217,282 150,636 4.68 2,539,074 119,082 4.69

Loans, net of unearned income 4,373,922 265,522 6.07 3,868,307 218,060 5.65 3,217,282 150,256 4.68

Restricted Investment in Bank Stocks 14,155 1,288 9.10 11,121 864 7.77 6,045 289 4.78

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Total Liabilities & Shareholders' Equity $ 5,412,979 $ 4,883,087 $ 4,476,174

Net Interest Income (taxable-equivalent basis) $ 147,784 $ 148,611 $ 109,172

Taxable Equivalent Adjustment (1) (811) (778) (604)

Net Interest Income $ 156,671 $ 146,973 $ 147,833

Taxable Equivalent Adjustment (1)

1,018 811 778

Net Interest Income (taxable-equivalent basis) $ 157,689 $ 147,784 $ 148,611

Total Yield on Earning Assets 5.65 % 5.21 % 4.02 %

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Net Interest Margin (1)

3.11 3.26 3.59

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

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Increase (decrease) Increase (decrease)

(Dollars in thousands) Volume Rate (1)

Net Volume Rate (1)

(Dollars in thousands) Volume Rate Net Volume Rate Net

INTEREST INCOME:

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Federal Funds Sold 1,525 30 1,555 (1,798) 345 (1,453)

Loans, Net 30,468 37,358 67,826 31,808 (254) 31,554

Loans, net of unearned income 28,567 18,895 47,462 30,468 37,336 67,804

Restricted Investment Bank Stocks 236 188 424 243 332 575

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For the year ended December 31, 2024, Mid Penn’s FTE net interest margin was 3.11% versus 3.26% for the year ended December 31, 2023 and 3.59% for the year ended December 31, 2022.

During 2023, FTE net interest income decreased $827 thousand, or 0.6%, compared to 2022.

During 2024, FTE net interest income increased $9.7 million, or 6.6%, compared to 2023.

Interest income increased $30.3 million as the result of a $538.2 million, or 11.9%, increase in average interest-earning assets in 2024 compared to 2023, and increased $20.0 million as the result of a 44 bp increase in the yield on interest-earning assets in 2024 compared to 2023.

The decrease to net interest margin was primarily a result of an increase in funding costs and growth in average interest-bearing liabilities, partially offset by higher yields on interest-earning assets and growth in average interest-earning assets.

As previously noted, the FOMC has increased rates four times during 2023.

The growth in both average interest-earning assets and average interest-bearing liabilities was largely the result of the Brunswick Acquisition.

Both interest-earning assets and interest-bearing liabilities associated with the Brunswick Acquisition had substantially similar yields to the corresponding Mid Penn portfolios.

Average total loans, net, increased $505.6 million , or 13.1%, contributing $28.6 million to the increase in interest income.

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The increase in the yield was primarily the result of the higher interest rate environment during 2024.

Total average federal funds sold increased $29.3 million , contributing $1.5 million to the increase in FTE interest income, and the average yield on federal funds sold increased 8 bps, contributing $30 thousand to the increase in FTE interest income.

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

Total average investment securities increased $44.9 million , contributing $1.0 million to the increase in FTE interest income, and the average yield investment securities increased 40 bps, contributing $2.5 million to the increase in FTE interest income.

Interest expense for 2024 increased by $40.5 million or 45.4% when compared to 2023.

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The rate on total interest-bearing deposits increased to 3.12% in 2024 from 2.40% in 2023 and 0.48% in 2022.

The increase in the rate was primarily a result of a shift in the mix of deposits from demand, money market and savings to higher yielding time deposits.

The increase in the rate was primarily a result of deposit growth and a shift in the mix of deposits from noninterest-bearing to higher yielding demand, money market and time deposits.

Mid Penn continued to offer higher rates to both retain and attract deposits.

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Provision for Credit Losses - Loans

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.

For the year ended December 31, 2023, the provision for credit losses was $3.3 million, a decrease of 23.4% compared to a provision for credit losses of $4.3 million for the year ended December 31, 2022.

The provision for credit losses for the year ended December 31, 2022 was $1.4 million, or 46.0%, lower than the $2.9 million provision for credit losses for the year ended December 31, 2021.

The provision for credit losses on loans was $2.1 million for the year ended December 31, 2024, a decrease of $1.2 million or 34.9% compared to a provision for credit losses of $3.3 million for the year ended December 31, 2023.

The provision for credit losses on loans for the year ended December 31, 2023 decreased $1.0 million, or 23.4%, from the $4.3 million provision for credit losses on loans for the year ended December 31, 2022.

The decrease in provision for the year ended December 31, 2024 was primarily due to a decrease in loss factors across most portfolios.

The benefit for credit losses on off-balance sheet credit exposures was $628 thousand for the year ended December 31, 2024, compared to a provision of $404 thousand or the year ended December 31, 2023.

Prior to 2023, ACL and related provision are presented in accordance with the previous accounting guidance using the incurred loss method.

The PCL for year ended December 31, 2023 includes an initial provision for credit losses on non-PCD loans acquired in the Brunswick Acquisition of $2.0 million.

For the year ended December 31, 2023, Mid Penn had net charge-offs of $332 thousand compared to net recoveries of $60 thousand and net charge-offs of $1.7 million for the years ended December 31, 2022 and 2021, respectively.

For the year ended December 31, 2024, Mid Penn had net charge-offs of $817 thousand compared to net charge-offs of $332 thousand for the year ended December 31, 2023, and net recoveries of $60 thousand for the year ended December 31, 2022 .

A summary of charge-offs and recoveries of loans and the provision for loan losses is shown in the table below.

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

The following table represents the analysis of the allowance for credit losses:

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Commercial real estate

CRE Nonowner Occupied — — 7

CRE Owner Occupied — 16 —

Total Commercial real estate — 16 7

Commercial and industrial 819 238 1

Construction — — 23

Residential mortgage

1-4 Family 1st Lien 7 13 25

1-4 Family Rental 2 — —

HELOC and Junior Liens 21 — 1

Total residential mortgage 30 13 26

Consumer 52 135 97

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Commercial real estate

CRE Nonowner Occupied 2 — —

CRE Owner Occupied 4 — 128

Total commercial real estate 6 — 128

Commercial and industrial 1 — 13

Construction — 24 8

Other Construction — — 24

Total construction — — 24

Residential mortgage

1-4 Family 1st Lien 16 7 2

1-4 Family Rental 22 31 —

HELOC and Junior Liens — — 2

Total residential mortgage 38 38 4

Consumer 39 32 22

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(In thousands)

Year Ended December 31, 2023 Net charge-offs (Recoveries) Average Loans outstanding Ratio of net charge-offs (recoveries) to total average loans outstanding

As of December 31, 2024 Net charge-offs (Recoveries) Average Loans outstanding Ratio of net charge-offs (recoveries) to total average loans outstanding

Commercial real estate

CRE Nonowner Occupied $ (2) $ 1,204,473 0.000 %

CRE Owner Occupied (4) 624,542 (0.001)

Multifamily — 384,374 0.000

Farmland — 217,667 0.000

Total Commercial Real Estate (6) 2,431,056 0.000

Commercial and industrial

Construction — 479,813 —

818 695,730 0.118

Residential Construction — 101,234 0.000

Other Construction — 349,481 0.000

Total Construction — 450,715 0.000

Residential mortgage

1-4 Family 1st Lien (9) 323,524 (0.003)

1-4 Family Rental (20) 344,261 (0.006)

HELOC and Junior Liens 21 136,634 0.015

Total Residential Mortgage (8) 804,419 (0.001)

Consumer 13 7,276 0.179

Total Loans $ 817 $ 4,389,196 0.019 %

Year Ended December 31, 2022

As of December 31, 2023

Commercial real estate

CRE Nonowner Occupied $ — $ 1,111,413 0.000 %

CRE Owner Occupied 16 586,357 0.003

Multifamily — 261,289 0.000

Farmland — 199,452 0.000

Total Commercial Real Estate 16 2,158,511 0.001

Commercial and industrial

Construction (24) 399,921 (0.006)

238 641,264 0.037

Residential Construction — 100,851 0.000

Other Construction — 378,962 0.000

Total Construction — 479,813 0.000

Residential mortgage

1-4 Family 1st Lien 6 342,485 0.002

1-4 Family Rental (31) 253,606 (0.012)

HELOC and Junior Liens — 128,912 0.000

Total Residential Mortgage (25) 725,003 (0.003)

Consumer 103 6,486 1.588

Total Loans $ 332 $ 4,011,077 0.008 %

Year Ended December 31, 2021

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

As of December 31, 2022

Commercial real estate

CRE Nonowner Occupied $ 7 $ 961,766 0.001 %

CRE Owner Occupied (128) 479,599 (0.027)

Multifamily — 188,040 0.000

Farmland — 158,844 0.000

Total Commercial Real Estate (121) 1,788,249 (0.007)

Commercial and industrial

Construction 15 308,728 0.005

(12) 572,291 (0.002)

Residential Construction — 59,170 0.000

Other Construction (24) 340,751 (0.007)

Total Construction (24) 399,921 (0.006)

Residential mortgage

1-4 Family 1st Lien 23 285,331 0.008

1-4 Family Rental — 114,992 0.000

HELOC and Junior Liens (1) 114,610 (0.001)

Total Residential Mortgage 22 514,933 0.004

Consumer 75 9,141 0.821

Total Loans $ (60) $ 3,284,535 (0.002) %

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

Noninterest Income

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Earnings from cash surrender value of life insurance 1,141 1,112 1,013 29 2.6

Net gain on sales of investment activities — — 79 — N/M

Other income 7,812 5,627 7,793 2,185 38.8

Total Noninterest Income $ 22,493 $ 20,008 $ 23,657 $ 2,485 12.4 %

N/M - Not Meaningful

For the year ended December 31, 2023, noninterest income totaled $20.0 million, a decrease of $3.6 million or 15.4%, compared to noninterest income of $23.7 million for the year ended December 31, 2022.

Income from fiduciary and wealth management activities, ATM debit card interchange income, service charges on deposits, mortgage banking, and mortgage hedging, and Other income all decreased compared to the prior year.

Mortgage banking income decreased $254 thousand for the year ended December 31, 2023 compared to the year ended December 31, 2022 .

Mortgage loan originations and secondary-market loan sales and gains slowed during 2023 as a result of increases in interest rates.

As mortgage rates have risen, demand for mortgages has slowed significantly.

As such, it is more difficult to properly hedge lower volumes within the mortgage pipeline.

Mortgage hedging income was $324 thousand for the year ended December 31, 2023 compared to $1.5 million for the same period in 2022.

Other income decreased $2.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.

The decrease in other income was primarily driven by a $1.8 million decrease in other miscellaneous income and a $438 thousand decrease in insurance commissions.

For details on the variances of noninterest income for the year ended December 31, 2022 compared to the year ended December 31, 2021 refer to the "Noninterest Income" section of the Management's Discussion and Analysis in the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

For the year ended December 31, 2024, noninterest income totaled $22.5 million, an increase of $2.5 million or 12.4%, compared to noninterest income of $20.0 million for the year ended December 31, 2023.

Income from mortgage banking, service charges on deposits, earnings from cash surrender value of life insurance, and other income all increased compared to the prior year.

Mortgage banking income increase d $1.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 .

Mortgage loan originations and secondary-market loan sales and gains increased during 2024 as a result of decreases in interest rates.

Mortgage hedging income was $10 thousand for the year ended December 31, 2024 compared to $324 thousand for the same period in 2023.

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

Other income increased $2.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.

The increase in noninterest income is primarily driven by a $2.2 million increase in other miscellaneous noninterest income, driven by increases in Bank-owned life insurance benefits received.

For details on the variances of noninterest income for the year ended December 31, 2023 compared to the year ended December 31, 2022 refer to the "Noninterest Income" section of the Management's Discussion and Analysis in the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Noninterest expense and variance analysis as of December 31:

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FDIC assessment 4,170 3,500 1,594 670 19.1

(Gain) loss on sale or write-down of foreclosed assets, net (144) (133) (25) (11) 8.3

(Gain) loss on sale or write-down of foreclosed assets, net 80 (144) (133) 224 N/M

Merger and acquisition expense 545 5,544 294 (4,999) (90.2)

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N/M - Not Meaningful

For the year ended December 31, 2023, noninterest expense totaled $119.0 million, an increase of $19.1 million, or 19.2%, compared to noninterest expense of $99.8 million for the year ended December 31, 2022.

The increase in noninterest expense is primarily driven by the Brunswick Acquisition as discussed in further detail below.

Salaries and employee benefits were $59.3 million for the year ended December 31, 2023, an increase of $6.7 million, or 12.8%, compared to the year ended December 31, 2022.

The increase was attributable to the retail staff additions at the five retail locations added through the Brunswick Acquisition and the retention of various Brunswick team members through the completion of the systems integration, which occurred on May 19, 2023.

Software licensing and utilization costs were $7.9 million for the year ended December 31, 2023, an increase of $403 thousand, or 5.4%, compared to $7.5 million for the year ended December 31, 2022.

The increase is a result of additional costs to license the additional Brunswick branches, upgrades to internal systems, networks, storage capabilities, cybersecurity management, and data security mechanisms to enhance data management and security capabilities responsive to both the larger company profile and the increasing complexity of information technology management, and increases in certain core processing fees as our customer base and transaction volume continue to grow.

Occupancy increased $449 thousand and equipment expenses increased $628 thousand, or 6.5% and 14.0%, respectively, for the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increases were driven by the facility operating costs and increased depreciation expense for building, furniture, and equipment, respectively, associated with the Brunswick Acquisition.

FDIC assessment expenses increased $1.9 million to $3.5 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase in FDIC charges was due primarily to a change in the assessment base from the Brunswick Acquisition and increased assessment rates from the bank failures in 2023.

For the year ended December 31, 2023, merger and acquisition expenses were $5.5 million and included investment banking fees, merger-related legal expenses, and other professional fees for advisory, valuation, and consulting services associated with the Brunswick.

For additional information on recent acquisitions, see "Note 2 - Business Combinations " , within Item 8, Notes to Consolidated Financial Statements.

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

Post-acquisition and restructuring expenses were $3.0 million for the year ended December 31, 2023 compared to $329 thousand for the year ended December 31, 2022.

This increase was primarily driven by the Brunswick Acquisition.

Other expenses increased $1.3 million from $16.5 million for the year ended December 31, 2022, to $17.9 million for the year ended December 31, 2023.

Several categories within other expense increased, primarily as a result of the Brunswick Acquisition and organic growth, including marketing, telephone, postage, courier, payroll processing, employee travel costs, and director fees.

For the year ended December 31, 2024, noninterest expense totaled $117.6 million, a decrease of $1.0 million, or 0.8%, compared to noninterest expense of $118.6 million for the year ended December 31, 2023.

The decrease was primarily driven by a $5.0 million decrease in merger and acquisition expenses, and a $3.0 million decrease in post-acquisition restructuring, partially offset by a $4.8 million increase in salaries and benefits expense, driven by year-end employee bonus incentives, increases in employee salaries, and increased costs of employee medical benefits, a $1.4 million increase in legal and professional fees, and a $1.4 million increase in software licensing and utilization.

For details on the variances of noninterest expense for the year ended December 31, 2023 compared to the year ended December 31, 2022 refer to the "Noninterest Expense" section of the Management's Discussion and Analysis in the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

The provision for income taxes was $7.3 million during the year ended December 31, 2023 , a decrease of $5.2 million compared to $12.5 million for the same period in 2022.

The provision for income taxes was $10.6 million during the year ended December 31, 2024 , an increase of $3.3 million compared to $7.3 million for the same period in 2023 .

The provision for income taxes for the year ended December 31, 2024 reflects an effective combined Federal and state tax rate ("ETR") of 17.6%, compared to an ETR of 16.3% for the year ended December 31, 2023 .

The decrease in the effective tax rates in 2023 compared to 2022 was a result of recalculating Mid Penn's deferred tax assets as a result of now doing business in New Jersey due to the Brunswick Acquisition and receiving a benefit in state tax expense.

Generally, Mid Penn’s effective tax rate is below the federal statutory rate due to earnings on tax-exempt loans, investments, and earnings from the cash surrender value of life insurance, as well as the impact of federal income tax credits, including those awarded from Mid Penn’s low-income housing investments.

The increase in the effective tax rates in 2024 compared to 2023 was a result of higher state taxes, driven by a prior year's benefit from the Brunswick acquisition.

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

income housing investments.

The realization of Mid Penn’s deferred tax assets is dependent on future earnings.

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Mid Penn’s total assets were $5.5 billion as of December 31, 2024, reflecting an increase of $180.1 million, or 3.4%, compared to total assets of $5.3 billion as of December 31, 2023.

Included in total assets as of December 31, 2023 are $1.4 million of PPP loans, net of deferred fees.

Comparatively, as of December 31, 2022, Mid Penn had $2.6 million of PPP loans outstanding, net of deferred fees.

The increase was primarily driven by organic loan growth, increases in investment securities, and an increase in Fed Funds Sold.

Investment Securities

Mid Penn’s portfolio of held-to-maturity ("HTM") securities, recorded at amortized cost, decreased $366 thousand to $399.1 million as of December 31, 2023, as compared to $399.5 million as of December 31, 2022.

Mid Penn’s total available-for-sale ("AFS") securities portfolio decreased $14.3 million from $237.9 million at December 31, 2022 to $223.6 million at December 31, 2023.

At December 31, 2023, the unrealized loss on AFS investment securities resulted in a positive impact to shareholders’ equity of $2.0 million (comprised of a gross unrealized gain on securities of $2.1 million net of a deferred income tax cost of $144 thousand).

At December 31, 2022, the unrealized loss on AFS investment securities resulted in a negative impact to shareholders’ equity of $19.1 million (comprised of a gross unrealized loss on securities of $24.1 million and net of a deferred income tax benefit of $5.1 million).

Mid Penn’s portfolio of held-to-maturity ("HTM") securities, recorded at amortized cost, decreased $16.7 million to $382.4 million as of December 31, 2024, as compared to $399.1 million as of December 31, 2023.

Mid Penn’s total available-for-sale ("AFS") securities portfolio increased $36.9 million from $223.6 million at December 31, 2023 to $260.5 million at December 31, 2024.

At December 31, 2024, the unrealized loss on AFS investment securities resulted in a negative impact to shareholders’ equity of $1.6 million (comprised of a gross unrealized loss on securities of $2.0 million, net of deferred income tax).

At December 31, 2023, the unrealized gain on AFS investment securities resulted in a positive impact to shareholders’ equity of $2.0 million (comprised of a gross unrealized gain on securities of $2.1 million, net of deferred income tax).

Mid Penn does not have any significant concentrations of non-governmental securities within its investment portfolio.

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Management’s Discussion and Analysis

The following table presents the expected maturities of the investment portfolio and the weighted average yields (calculated based on historical cost and tax-equivalent basis assuming a 21% tax rate) as of December 31, 2023:

The following table presents the expected maturities of the investment portfolio and the weighted average yields (calculated based on historical cost and net of tax) as of December 31, 2024:

(In Thousands) One Year

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Thru Ten Years After Ten

As of December 31, 2023

Amount Weighted Average Yield Amount Weighted Average Yield Amount Weighted Average Yield Amount Weighted Average Yield

As of December 31, 2024 Amount Weighted Average Yield Amount Weighted Average Yield Amount Weighted Average Yield Amount Weighted Average Yield

Available for sale securities, at fair value:

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Management’s Discussion and Analysis

Loans, net of unearned income

The following table presents the ending balance of loans outstanding, by type, as of December 31:

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Total loans, net of unearned income, as of December 31, 2024 were $4.4 billion compared to $4.3 billion as of December 31, 2023, an increase of $190.3 million.

Organic loan growth for the year ended December 31, 2023, was $423.6 million, or 10.8% (excluding Brunswick Acquisition loans of $324.5 million).

Organic growth occurred primarily across the commercial and industrial and residential mortgage loan portfolios.

The majority of the Bank's loan portfolio is to businesses and individuals located within the Bank's primary market area of the Pennsylvania counties of Berks, Blair, Bucks, Centre, Chester, Clearfield, Cumberland, Dauphin, Fayette, Huntingdon, Lancaster, Lehigh, Luzerne, Montgomery, Perry, Schuylkill and Westmoreland and New Jersey.

The majority of the Bank's loan portfolio is to businesses and individuals located within the Bank's primary market area of the Pennsylvania counties of Berks, Blair, Bucks, Chester, Clearfield, Cumberland, Dauphin, Fayette, Huntingdon, Lancaster, Lehigh, Luzerne, Montgomery, Perry, Schuylkill and Westmoreland, along with Middlesex and Monmouth counties of New Jersey.

Commercial real estate, construction, and land development loans are collateralized mainly by mortgages on the income-producing real estate or land involved.

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Management’s Discussion and Analysis

The following table represents the Commercial Real Estate portfolio by property type as of December 31, 2023:

(Dollars in thousands) December 31, 2023

The following table represents the Commercial Real Estate portfolio by property type along with the weighted average loan to value as of December 31, 2024:

(Dollars in thousands) December 31, 2024 December 31, 2023

Commercial Real Estate Balance % of portfolio Weighted Average LTV (2)

Balance % of portfolio Weighted Average LTV (2)

Owner Occupied (1)

$ 627,995 27.4 % N/A

212,690 9.2 N/A

$ 624,007 24.8 % N/A $ 629,904 27.5 % N/A

224,709 8.9 N/A 212,690 9.2 N/A

Multifamily 412,900 16.4 63.8 309,059 13.4 58.9

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(2) Weighted average Loan to Value is calculated based on estimated current market values of the properties.

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

Maturity distribution by contractual maturity date and rate sensitivity information related to the loan portfolio is reflected in the table below:

6 unchanged sentences

Commercial real estate

CRE Nonowner Occupied $ 59,218 $ 402,110 $ 499,042 $ 290,640 $ 1,251,010

CRE Owner Occupied 24,643 66,949 258,018 274,397 624,007

Multifamily 43,742 157,530 107,420 104,208 412,900

Farmland 648 8,603 61,388 154,070 224,709

Total Commercial real estate 128,251 635,192 925,868 823,315 2,512,626

Commercial and industrial 28,535 335,077 105,795 235,985 705,392

Construction 112,651 248,191 74,819 19,806 455,467

Residential Construction 61,942 24,436 11,742 1,279 99,399

Other Construction 148,374 138,126 17,267 22,404 326,171

Total Construction 210,316 162,562 29,009 23,683 425,570

Residential mortgage

1-4 Family 1st Lien 4,749 26,252 80,764 201,827 313,592

1-4 Family Rental 10,733 54,091 99,131 172,681 336,636

HELOC and Junior Liens 8,956 14,778 34,165 82,493 140,392

Total Residential Mortgage 24,438 95,121 214,060 457,001 790,620

Consumer 2,698 1,805 1,404 2,955 8,862

Total loans held in portfolio $ 394,238 $ 1,229,757 $ 1,276,136 $ 1,542,939 $ 4,443,070

Predetermined (fixed) interest rates:

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

Fixed interest rates:

Commercial real estate

CRE Nonowner Occupied $ 48,354 $ 206,561 $ 73,775 $ 9,349 $ 338,039

CRE Owner Occupied 17,627 46,818 21,985 2,054 88,484

Multifamily 37,898 84,222 6,755 — 128,875

Farmland 483 7,422 6,620 56 14,581

Total Commercial real estate 104,362 345,023 109,135 11,459 569,979

Commercial and industrial 15,481 203,308 20,008 11,207 250,004

Construction 45,177 72,209 10,329 616 128,331

Residential Construction 25,215 7,324 315 — 32,854

Other Construction 24,555 37,269 1,094 808 63,726

Total Construction 49,770 44,593 1,409 808 96,580

Residential mortgage

1-4 Family 1st Lien 4,713 21,152 50,657 132,028 208,550

1-4 Family Rental 7,395 49,140 4,893 8,532 69,960

HELOC and Junior Liens 454 6,665 23,972 2,400 33,491

Total Residential Mortgage 12,562 76,957 79,522 142,960 312,001

Consumer 1,409 1,782 1,404 503 5,098

Total predetermined (fixed) interest rates 131,673 805,159 243,753 123,430 1,304,015

Total fixed interest rates $ 183,584 $ 671,663 $ 211,478 $ 166,937 $ 1,233,662

Floating interest rates:

Commercial real estate

CRE Nonowner Occupied $ 10,864 $ 195,549 $ 425,267 $ 281,291 $ 912,971

CRE Owner Occupied 7,016 20,131 236,033 272,343 535,523

Multifamily 5,843 73,309 100,665 104,208 284,025

Farmland 165 1,180 54,769 154,014 210,128

Total Commercial real estate 23,888 290,169 816,734 811,856 1,942,647

Commercial and industrial 13,054 131,768 85,787 224,779 455,388

Construction 67,473 175,982 64,490 19,191 327,136

Residential Construction 36,727 17,113 11,426 1,279 66,545

Other Construction 123,819 100,856 16,173 21,597 262,445

Total Construction 160,546 117,969 27,599 22,876 328,990

Residential mortgage

1-4 Family 1st Lien 36 5,100 30,107 69,799 105,042

1-4 Family Rental 3,338 4,951 94,238 164,149 266,676

HELOC and Junior Liens 8,502 8,114 10,193 80,092 106,901

Total Residential Mortgage 11,876 18,165 134,538 314,040 478,619

Consumer 1,290 23 — 2,451 3,764

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Credit Quality, Credit Risk, and Allowance for Credit Losses

Mid Penn adopted FASB ASC Topic 326, in accordance with the amendments of FASB ASU 2016-13, effective January 1, 2023.

The guidance in FASB ASC 326 replaces Mid Penn’s previous incurred loss methodology with a methodology that reflects the current expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit losses.

Mid Penn adopted FASB ASC 326, in accordance with the amendments of FASB ASU 2016-13, effective January 1, 2023.

The guidance in FASB ASC 326 replaced Mid Penn’s previous incurred loss methodology with a methodology that reflects the current expected credit losses and requires consideration of a broader range of reasonable and supportable information

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

to determine credit losses.

Mid Penn’s ACL methodology for loans is based upon guidance within FASB ASC Subtopic 326-20, "Financial Instruments – Credit Losses – Measured at Amortized Cost," as well as regulatory guidance from the FDIC, the Bank's primary federal regulator.

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In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense.

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

The following table represents the allowance for credit loss as a percentage of total loans:

6 unchanged sentences

Farmland 1,932 224,709 5.1 0.9

Total Commercial real estate 21,654 2,512,626 56.5 0.9

Commercial and industrial 7,122 705,392 15.9 1.0

1 unchanged sentence

Other Construction 2,131 326,171 7.3 0.7

Total Construction 3,062 425,570 9.5 0.7

Residential mortgage

2 unchanged sentences

HELOC and Junior Liens 392 140,392 3.2 0.3

Total Residential mortgage 3,651 790,620 17.9 0.5

Consumer 25 8,862 0.2 0.3

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– Financial Statements of this report.

Upon the adoption of FASB ASC Topic 326 on January 1, 2023, Mid Penn recorded an overall increase of $15.0 million to the ACL on January 1, 2023 as a result of the adoption of CECL.

Upon the adoption of FASB ASC 326 on January 1, 2023, Mid Penn recorded an overall increase of $15.0 million to the ACL on January 1, 2023 as a result of the adoption of CECL.

Retained earnings decreased $11.5 million and deferred tax assets increased by $3.1 million.

Included in the $15.0 million increase to the ACL was $3.1 million for certain OBS credit exposures that were previously recognized in other liabilities before the adoption of CECL.

The ACL and the related PCL for the year ended December 31, 2022 and 2021 reflect Mid Penn’s application of the incurred loss method for estimating credit losses.

The ACL and the related PCL for the year ended December 31, 2022 reflects Mid Penn’s application of the incurred loss method for estimating credit losses.

MID PENN BANCORP, INC.

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Non-performing Assets:

Total non-performing loans $ 14,216 $ 8,585 $ 9,982

Total non-accrual loans $ 22,610 $ 14,216 $ 8,585

Foreclosed real estate 44 293 43

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Total risk elements $ 22,654 $ 14,509 $ 9,282

Non-performing loans as a percentage of total loans outstanding 0.33 % 0.24 % 0.32 %

Non-accrual loans as a percentage of total loans outstanding 0.51 % 0.33 % 0.24 %

Non-performing assets as a percentage of total loans outstanding and foreclosed real estate 0.51 % 0.34 % 0.25 %

Non-accrual loans as a percentage of total loans 0.33 % 0.23 % 0.31 %

Allowance for credit losses as a percentage of total loans 0.80 % 0.80 % 0.54 %

Allowance for credit losses as a percentage of non-accrual loans 240.48 % 231.33 % 152.90 %

Ratio of ACL to non-performing loans 157.07 % 240.48 % 220.82 %

Total nonperforming assets were $22.7 million at December 31, 2024, an increase compared to nonperforming assets of $14.5 million at December 31, 2023.

The increase since December 31, 2022 was primarily the result of the addition of $3.9 million of non-accrual loans from the Brunswick Acquisition and the migration of one relationship to non-accrual during the first quarter of 2023, which is collateralized in excess of the outstanding loan balances based on a current appraisal of the collateral.

The increase since December 31, 2023 was primarily the result of the addition of two commercial loans with a combined balance of $3.0 million, and two commercial real estate loans with a combined balance of $2.3 million being placed on nonaccrual in the fourth quarter of 2024.

Deposits and Other Funding Sources

Mid Penn's primary source of funds are retail deposits from businesses, public funds depositors, and consumers in its market area.

For the year ended December 31, 2023, deposits totaled $4.3 billion, an increase of $567.9 million, or 15.0%.

The Brunswick Acquisition contributed $281.4 million to the deposit growth, the remaining being attributed to organic deposit growth.

For the year ended December 31, 2024, deposits totaled $4.7 billion, an increase of $343.7 million, or 7.9%, compared to $4.3 billion as of December 31, 2023.

Average balances and average interest rates applicable to deposits by major classification for the years ended December 31:

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Over twelve months 15,552

Short-term borrowings as of December 31, 2023 totaled $241.5 million, compared to $102.6 million as of December 31, 2022 and consisted of $166.5 million of FHLB overnight borrowings and $75.0 million of other FHLB Short Term borrowings.

Short-term borrowings as of December 31, 2024 totaled $2.0 million, compared to $241.5 million as of December 31, 2023, and consisted of $2.0 million of FHLB overnight borrowings.

As of December 31, 2024, the Bank had long-term debt outstanding in the amount of $23.6 million compared to $59.0 million as of December 31, 2023.

This increase consisted of $30.0 million from the Brunswick Acquisition and $25.0 million related to an additional borrowing entered into by Mid Penn.

Subordinated debt and trust preferred securities totaled $45.7 million as of December 31, 2024 compared to $46.4 million as of December 31, 2023.

There were no redemptions of subordinated debt in 2024.

In April 2023, Mid Penn redeemed $10.0 million subordinated debt issued in December of 2017.

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Capital management practices have been, and will continue to be, of paramount importance to the Corporation in support of both its regulatory capital requirements and its shareholders.

Shareholders’ equity increased $30.3 million, or 5.9%, to $542.4 million as of December 31, 2023 from $512.1 million as of December 31, 2022, primarily as result of net income, common stock issued to Brunswick shareholders, and restricted stock activity partially offset by a decrease in retained earnings due to the impact of adopting CECL totaling $11.5 million, dividends declared of $13.0 million and share repurchases totaling $4.9 million.

Shareholders’ equity increased $112.7 million, or 20.8%, to $655.0 million as of December 31, 2024 from $542.4 million as of December 31, 2023, primarily as result of completion of the underwritten public offering of 2,375,000 shares of common stock in November 2024, and net income, partially offset by dividends declared of $13.8 million and share repurchases totaling $323 thousand.

Mid Penn maintained regulatory capital levels, leverage ratios, and risk-based capital ratios as of December 31, 2024 and 2023, as follows:

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Cash provided by financing activities during the year ended December 31, 2024 totaled $131.2 million, primarily the result of an increase in net deposits.

The net cash received from the Brunswick Acquisition totaled $1.1 million.

Contractual Obligations

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Interest rates do not necessarily move in the same direction or at the same magnitude as the prices of other goods and services.

As discussed previously, management seeks to manage the relationship between interest sensitive assets and liabilities in order to protect against wide interest rate fluctuations, including those resulting from inflation.

MID PENN BANCORP, INC.

Management’s Discussion and Analysis

previously, management seeks to manage the relationship between interest sensitive assets and liabilities in order to protect against wide interest rate fluctuations, including those resulting from inflation.

Information included elsewhere in this report will assist in the understanding of how Mid Penn is positioned to react to changing interest rates and inflationary trends.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis