MID PENN BANCORP INC 10-Q

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management Discussion relates to the Corporation, a financial holding company incorporated in the Commonwealth of Pennsylvania, and its wholly-owned subsidiaries, and should be read in conjunction with the consolidated financial statements and other financial information presented in this report. Caution About Forward-Looking Statements Forward-looking statements involve risks, uncertainties and assumptions. Although Mid Penn generally does not make forward-looking statements unless Mid Penn’s management believes its management has a reasonable basis for doing so, Mid Penn cannot guarantee the accuracy of any forward-looking statements. Actual results may differ materially from those expressed in any forward-looking statements due to a number of uncertainties and risks, including the risks described in this Quarterly Report on Form 10-Q, the 2024 Annual Report, and other unforeseen risks. You should not put undue reliance on any forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q, even if subsequently made available by us on Mid Penn’s website or otherwise, and Mid Penn undertakes no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q. 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, 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. These forward-looking statements include the expectations of Mid Penn relating to the anticipated opportunities and financial and other benefits of the Merger, and the projections of, or guidance on, Mid Penn’s or the combined company’s future financial performance, asset quality, liquidity, capital levels, expected levels of future expenses, including future credit losses, anticipated growth strategies, descriptions of new business initiatives and anticipated trends in Mid Penn’s business or financial results. 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 as a result of 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; • future actions or inactions of the United States government, including a failure to increase the government debt limit or a prolonged shutdown of the federal government; • business or economic disruption from national or global epidemic or pandemic events; • 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 our market area and elsewhere, including institutions operating locally, 45 Table of Contents MID PENN BANCORP, INC. 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 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; • changes in technology; • our ability to implement business strategies, including our acquisition strategy; • 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; • our ability to attract and retain qualified management and personnel; • results of regulatory examination and supervision processes; • 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; • volatility in the securities markets; • disruptions due to flooding, severe weather, or other natural disasters or acts of God; • acts of war, terrorism, or global military conflict; • supply chain disruption; • the risk factors described in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 and subsequent filings with the SEC; and • other risks and uncertainties contained in this prospectus supplement or incorporated by reference into this prospectus supplement from the other reports and filings with the SEC. 46 Table of Contents MID PENN BANCORP, INC. Overview Mid Penn is a financial holding company, which generates the majority of its revenues through net interest income, or the difference between interest earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing the net interest margin, which is FTE net interest income as a percentage of average interest-earning assets. Mid Penn also generates revenue through fees earned on the various services and products offered to its customers and through gains on sales of assets, such as loans, investments and properties. Offsetting these revenue sources are provisions for credit losses, non-interest expenses and income taxes. The following table presents a summary of Mid Penn's earnings and selected performance ratios: Three Months Ended March 31, 2025 2024 Net Income $ 13,742 $ 12,133 Diluted EPS $ 0.71 $ 0.73 Dividends Declared $ 0.20 $ 0.20 Return on average assets (2) 1.01 % 0.92 % Return on average equity (2) 8.43 % 8.94 % Net interest margin (1) 3.37 % 2.97 % Non-performing assets to total assets 0.46 % 0.29 % Net (recoveries)/charge-offs to average loans (annualized) (0.0003) % 0.004 % (1) Presented on a FTE basis using a 21% Federal tax rate and statutory interest expense disallowances. See also the "Net Interest Income" section. (2) Annualized ratios Summary of Financial Results • Net Income Per Share - Mid Penn’s net income available to common shareholders ("earnings") for the three months ended March 31, 2025 was $13.7 million, or $0.71 per both common share basic and diluted, compared to earnings of $12.1 million, or $0.73 per both common share basic and diluted for the three months ended March 31, 2024. ◦ Net Interest Margin - For the first quarter of 2025, Mid Penn’s net interest margin was 3.37% versus 2.97% for the same period of 2024. The yield on interest-earning assets for the first quarter of 2025 increased 14 basis points from the same period of 2024. The rate on interest-bearing liabilities decreased 30 basis points from the same period of 2024. ◦ Loan Growth - Total loans, net of une arned income, as of March 31, 2025 were $4.5 billion compared to $4.4 billion as of December 31, 2024, an increase of $48.1 million, or 1.1%. The growth was primarily driven by an increase in owner occupied commercial real estate of $30.3 million, an increase in nonowner occupied commercial real estate of $21.1 million , and an increase in commercial and industrial loans of $15.3 million, partially offset by an $11.2 million decrease in residential construction loans. ◦ Deposit Growth - Total deposits increased $42.3 million, or 0.9%, from $4.7 billion at December 31, 2024, to $4.7 billion at March 31, 2025. The growth was driven by an increase of $55.5 million in interest-bearing transaction accounts, a $29.1 million increase in non-interest bearing accounts, offset by a decrease of $42.3 million in time deposits. • Asset Quality - ACL-loans at March 31, 2025 was $35.8 million, or 0.80% of total loans, as compared to $35.5 million, or 0.80% of total loans at December 31, 2024. 47 Table of Contents MID PENN BANCORP, INC. ◦ Net Charge-offs/Recoveries - Mid Penn had net recoveries of $3 thousand and net charge-offs of $44 thousand for the three months ended March 31, 2025 and 2024, respectively. ◦ Non-performing assets - Total non-performing assets were $25.4 million at March 31, 2025, an increase compared to non-performing assets of $22.7 million at December 31, 2024. The increase during the first quarter of 2025 is primarily related to the addition of three commercial loans with a combined balance of $7.0 million, partially offset by the payoff of two commercial loans with a combined balance of $3.0 million. Delinquency, measured as loans past due 30 days or more, as a percentage of total loans was 0.50% at March 31, 2025, compared to 0.52% as of December 31, 2024. ◦ Provision/Benefit for credit losses - loans - The provision for credit losses - loans was $321 thousand for the three months ended March 31, 2025 compared to a benefit of $619 thousand for the same period of 2024. The benefit for credit losses on off-balance sheet credit exposures was $20 thousand for the three months ended March 31, 2025, compared to a benefit of $318 thousand for the same period of 2024. The increase in provision for the three months ended March 31, 2025, is primarily due to an increase in loss factors across certain portfolios. • Noninterest Income - Noninterest income totaled $5.2 million for the three months ended March 31, 2025 compared to $5.8 million for the same period of 2024. The decrease is primarily due to a $731 thousand decrease in other miscellaneous noninterest income, driven by a $1.4 million decrease in Bank-owned life insurance benefits received, partially offset by a $357 thousand increase in loan level swap fees, a $113 thousand increase in other letter of credit income, and a $167 thousand increase in Mortgage Banking income. • Noninterest Expense - Noninterest expense totaled $30.6 million for the three months ended March 31, 2025, an increase of $2.1 million, or 7.4%, compared to noninterest expense of $28.5 million for the same period of 2024. The increase was primarily driven by a $847 thousand increase in salaries and employee benefits, a $454 thousand increase in software licensing, a $314 thousand increase in merger and acquisition expenses, and a $292 thousand increase in occupancy expenses, partially offset by a $172 thousand decrease in legal and professional fees. • Liquidity - Current liquidity, including borrowing capacity, decreased to $1.6 billion or 104.2% of uninsured and uncollateralized deposits, or approximately 33.0% of total deposits. 48 Table of Contents MID PENN BANCORP, INC. Critical Accounting Estimates The 2024 Annual Report on Form 10-K includes a summary of critical accounting estimates that Mid Penn considers to be most important to the presentation of its financial condition and results of operations. These estimates require management’s most difficult judgments as a result of the need to make estimates about the effects of matters that are inherently uncertain. 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. There have been no material changes to Mid Penn's critical accounting estimates as disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024. Results of Operations Net Interest Income Net interest income, Mid Penn’s primary source of revenue, is the amount by which interest income on loans and investments exceeds interest incurred on deposits and borrowings. The amount of net interest income is affected by changes in interest rates and changes in the volume and mix of interest-sensitive assets and liabilities. Net interest income is also shown on a taxable-equivalent basis in total. Income from tax-exempt assets, primarily loans to or securities issued by state and local governments, is adjusted by an amount equivalent to the federal income taxes which would have been paid if the income received on these assets was taxable at the statutory rate of 21% for the periods presented. 49 Table of Contents MID PENN BANCORP, INC. The following table includes average balances, amounts, and yields of interest income and rates of expense, interest rate spread, and net interest margin for the periods presented: Average Balances, Income and Interest Rates For the Three Months Ended March 31, 2025 March 31, 2024 (Dollars in thousands) Average Balance Interest Yield/ Rate (2) Average Balance Interest Yield/ Rate (2) ASSETS: Interest Bearing Balances $ 20,794 $ 138 2.69 % $ 39,999 $ 403 4.05 % Investment Securities: Taxable 569,800 4,309 3.07 % 539,674 3,800 2.83 % Tax-Exempt 69,780 348 2.02 % 76,013 376 1.99 % Total Investment Securities 639,580 4,657 2.95 % 615,687 4,176 2.73 % Federal Funds Sold 23,754 261 4.46 % 10,373 136 5.27 % Loans, net of unearned income 4,459,679 66,537 6.05 % 4,293,828 63,236 5.92 % Restricted Investment in Bank Stocks 7,101 151 8.62 % 19,439 240 4.97 % Total Interest-earning Assets 5,150,908 71,744 5.65 % 4,979,326 68,191 5.51 % Cash and Due from Banks 39,916 38,264 Other Assets 300,939 302,090 Total Assets $ 5,491,763 $ 5,319,680 LIABILITIES & SHAREHOLDERS' EQUITY: Interest-bearing Demand $ 1,051,325 $ 4,681 1.81 % $ 898,340 $ 3,884 1.74 % Money Market 1,024,669 6,941 2.75 % 876,242 5,968 2.74 % Savings 260,965 54 0.08 % 287,765 72 0.10 % Time 1,591,769 16,588 4.23 % 1,468,611 16,408 4.49 % Total Interest-bearing Deposits 3,928,728 28,264 2.92 % 3,530,958 26,332 3.00 % Short-term borrowings 24,892 290 4.72 % 316,025 4,446 5.66 % Long-term debt 23,533 257 4.43 % 40,571 533 5.28 % Subordinated debt and trust preferred securities 45,662 424 3.77 % 46,275 424 3.69 % Total Interest-bearing Liabilities 4,022,815 29,235 2.95 % 3,933,829 31,735 3.24 % Noninterest-bearing Demand 752,980 781,136 Other Liabilities 55,004 58,714 Shareholders' Equity 660,964 546,001 Total Liabilities & Shareholders' Equity $ 5,491,763 $ 5,319,680 Net Interest Income $ 42,509 $ 36,456 Taxable Equivalent Adjustment (1) 242 260 Net Interest Income (taxable-equivalent basis) $ 42,751 $ 36,716 Total Yield on Earning Assets 5.65 % 5.51 % Rate on Supporting Liabilities 2.95 % 3.24 % Average Interest Spread 2.70 % 2.27 % Net Interest Margin (1) 3.37 % 2.97 % (1) Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances. (2) Annualized ratios 50 Table of Contents MID PENN BANCORP, INC. The following table summarizes the changes in interest income and interest expense resulting from changes in average balances, volume, and changes in rates for the three months ended March 31, 2025 in comparison to the same period in 2024: Three months ended March 31, 2025 vs. March 31, 2024 Increase (decrease) (Dollars in thousands) Volume Rate Net INTEREST INCOME: Interest Bearing Balances $ (192) $ (73) $ (265) Investment Securities: Taxable 210 299 509 Tax-Exempt (31) 3 (28) Total Investment Securities 179 302 481 Federal Funds Sold 174 (49) 125 Loans 2,422 879 3,301 Restricted Investment Bank Stocks (151) 62 (89) Total Interest Income 2,432 1,121 3,553 INTEREST EXPENSE: Interest Bearing Deposits: Interest Bearing Demand 656 141 797 Money Market 1,003 (30) 973 Savings (7) (11) (18) Time 1,365 (1,185) 180 Total Interest-Bearing Deposits 3,017 (1,085) 1,932 Short-term Borrowings (4,062) (94) (4,156) Long-term Debt (222) (54) (276) Subordinated Debt (6) 6 — Total Interest Expense (1,273) (1,227) (2,500) NET INTEREST INCOME $ 3,705 $ 2,348 $ 6,053 For the three months ended March 31, 2025, net interest income was $42.5 million compared to net interest income of $36.5 million for the three months ended March 31, 2024. The tax-equivalent net interest margin for the three months ended March 31, 2025 was 3.37% compared to 2.97% for the first quarter of 2024, representing a 40 bp increase compared to the same period in 2024. The yield on interest-earning assets increased to 5.65% for the quarter ended March 31, 2025, from 5.51% for the quarter ended March 31, 2024. These increases were due to assets continuing to reprice at higher rates during 2024 and the first quarter of 2025, continued discipline on new loan pricing, and an increase in Fed Funds Sold. Average investment securities increased $23.9 million and the yield on those investment securities increased 23 bps during the first quarter of 2025 compared to the first quarter of 2024, increasing interest income due to volume by $179 thousand, and increasing interest income due to rates by $302 thousand. Average loans increased $165.9 million, and the yield on those loans increased 13 bps, contributing $2.4 million and $879 thousand, respectively, to the increase in interest income. Interest expense decreased $2.5 million during the first quarter of 2025 compared to the first quarter of 2024. The rate of interest-bearing liabilities decreased from 3.24% for the first quarter of 2024 to 2.95% for the first quarter of 2025. The decrease in the rate was primarily a result of a decrease in short-term borrowings, a decrease in long term debt, and a 51 Table of Contents MID PENN BANCORP, INC. decrease in time deposits. Mid Penn continued to offer higher rates over the comparable period to both retain and attract deposits. Although the effective interest rate impact on interest-earning assets and funding sources can be reasonably estimated at current interest rate levels, the interest-bearing product and pricing options selected by customers, and the future mix of the loan, investment, and deposit products in the Bank's portfolios, may significantly change the estimates used in Mid Penn’s asset and liability management and related interest rate risk simulation models. In addition, our net interest income may be impacted by further interest rate actions of the Federal Reserve’s FOMC. Provision for Credit Losses - Loans The provision for credit losses on loans was $321 thousand for the three months ended March 31, 2025 compared to a benefit of $619 thousand for the three months ended March 31, 2024. The increase in provision was driven by an increase in loss factors across certain portfolios. Noninterest Income For the three months ended March 31, 2025, noninterest income totaled $5.2 million, a decrease of $598 thousand, or 10.2%, compared to noninterest income of $5.8 million for the three months ended March 31, 2024. The decrease is primarily due to a $731 thousand decrease in other miscellaneous noninterest income, driven by a $1.4 million decrease in Bank-owned life insurance benefits received, partially offset by a $357 thousand increase in loan level swap fees, a $113 thousand increase in other letter of credit income, and a $167 thousand increase in Mortgage Banking income. The following table and explanations that follow provide additional analysis of noninterest income: Three Months Ended March 31, (Dollars in Thousands) 2025 2024 $ Variance % Variance Fiduciary and wealth management $ 1,140 $ 1,132 $ 8 0.7 % ATM debit card interchange 919 945 (26) (2.8) Service charges on deposits 562 509 53 10.4 Mortgage banking 591 424 167 39.4 Mortgage hedging (9) — (9) 100.0 Net gain on sales of SBA loans 57 107 (50) (46.7) Earnings from cash surrender value of life insurance 274 284 (10) (3.5) Other 1,705 2,436 (731) (30.0) Total $ 5,239 $ 5,837 $ (598) (10.2 %) Noninterest Expense For the three months ended March 31, 2025, noninterest expense totaled $30.6 million, an increase of $2.1 million, or 7.4%, compared to noninterest expense of $28.5 million for the same period in 2024. The increase was primarily driven by a $847 thousand increase in salaries and employee benefits, a $454 thousand increase in software licensing, a $314 thousand increase in merger and acquisition expenses, and a $292 thousand increase in occupancy expenses, partially offset by a $172 thousand decrease in legal and professional fees. 52 Table of Contents MID PENN BANCORP, INC. The following table and explanations that follow provide additional analysis of noninterest expense: Three Months Ended March 31, (Dollars in Thousands) 2025 2024 $ Variance % Variance Salaries and employee benefits $ 16,309 $ 15,462 $ 847 5.5 % Software licensing and utilization 2,574 2,120 454 21.4 Occupancy expense, net 2,274 1,982 292 14.7 Equipment expense 1,094 1,222 (128) (10.5) Shares tax 919 997 (78) (7.8) Legal and professional fees 826 998 (172) (17.2) ATM/card processing 733 534 199 37.3 Intangible amortization 428 428 — — FDIC Assessment 990 945 45 4.8 Gain on sale of foreclosed assets, net (28) — (28) 100.0 Merger and acquisition expense 314 — 314 100.0 Other expenses 4,209 3,832 377 9.8 Total Noninterest Expense $ 30,642 $ 28,520 $ 2,122 7.4 % Income Taxes The provision for income taxes was $3.1 million for the three months ended March 31, 2025 compared to $2.6 million for the same period in 2024. The provision for income taxes for the three months ended March 31, 2025 reflects a combined Federal and State effective tax rate of 18.2% and 17.5%, for the three months ended March 31, 2025 and March 31, 2024, respectively. 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 realization of Mid Penn’s deferred tax assets is dependent on future earnings. Mid Penn currently anticipates that future earnings will be adequate to fully realize the currently recorded deferred tax assets. Financial Condition Mid Penn’s total assets were $5.5 billion as of March 31, 2025, reflecting an increase of $75.1 million, or 1.4%, compared to total assets of $5.5 billion as of December 31, 2024. The increase was primarily driven by organic loan growth, and an increase in Fed Funds Sold. Investment Securities Mid Penn’s investment portfolio is utilized primarily to support overall liquidity and interest rate risk management, to provide collateral supporting pledging requirements for public funds on deposit, and to generate additional interest income within reasonable risk parameters. The carrying value of total investment securities as of March 31, 2025 were $633.6 million compared to $642.9 million as of December 31, 2024. Mid Penn does not intend to grow the investment portfolio beyond levels necessary to support pledging requirements. 53 Table of Contents MID PENN BANCORP, INC. The following table presents the expected maturities of the investment portfolio and the weighted average yields (calculated based on historical cost): Maturing (In Thousands) One Year and Less After One Year thru Five Years After Five Years Thru Ten Years After Ten Years As of March 31, 2025 Amount Weighted Average Yield Amount Weighted Average Yield Amount Weighted Average Yield Amount Weighted Average Yield Available for sale securities, at fair value: U.S. Treasury and U.S. government agencies $ 5,489 3.49 % $ 14,408 2.39 % $ 1,860 3.30 % $ — — % Mortgage-backed U.S. government agencies — — — — 5,147 2.52 194,960 3.71 State and political subdivision obligations — — — — 2,967 2.49 628 2.23 Corporate debt securities 4,997 5.15 7,326 4.31 20,711 4.42 — — $ 10,486 4.28 % $ 21,734 3.05 % $ 30,685 3.84 % $ 195,588 3.71 % Held to maturity securities, at amortized cost: U.S. Treasury and U.S. government agencies $ 6,100 3.10 % $ 100,618 1.84 % $ 131,258 2.09 % $ — — % Mortgage-backed U.S. government agencies 25 3.98 2,528 2.96 3,682 2.76 30,040 2.00 State and political subdivision obligations 11,637 2.44 33,748 2.41 15,717 2.36 14,316 2.54 Corporate debt securities 2,001 3.90 5,996 3.92 17,449 3.96 — — $ 19,763 2.79 % $ 142,890 2.08 % $ 168,106 2.33 % $ 44,356 2.18 % Loans, net of unearned income Total loans, net of unearned income, as of March 31, 2025 were $4.5 billion compared to $4.4 billion as of December 31, 2024. The growth of $48.1 million, or 1.1%, since December 31, 2024 was primarily the result of organic loan growth across the commercial real estate and commercial and industrial portfolios, offset by decreases in residential and other construction loan portfolios. 54 Table of Contents MID PENN BANCORP, INC. March 31, 2025 December 31, 2024 Change in Balance (Dollars in thousands) Balance % of Total Loans Balance % of Total Loans $ % Commercial real estate CRE Nonowner Occupied $ 1,272,153 28.3 % $ 1,251,010 28.1 % $ 21,143 1.7 % CRE Owner Occupied 654,305 14.6 624,007 14.0 30,298 4.9 Multifamily 410,531 9.1 412,900 9.3 (2,369) (0.6) Farmland 226,033 5.0 224,709 5.1 1,324 0.6 Total Commercial Real Estate 2,563,022 57.0 2,512,626 56.5 50,396 2.0 Commercial and industrial 720,695 16.0 705,392 15.9 15,303 2.2 Construction Residential Construction 88,196 2.0 99,399 2.2 (11,203) (11.3) Other Construction 321,015 7.1 326,171 7.3 (5,156) (1.6) Total Construction 409,211 9.1 425,570 9.5 (16,359) (3.8) Residential mortgage 1-4 Family 1st Lien 312,162 7.0 313,592 7.1 (1,430) (0.5) 1-4 Family Rental 339,880 7.6 336,636 7.6 3,244 1.0 HELOC and Junior Liens 139,380 3.1 140,392 3.2 (1,012) (0.7) Total Residential Mortgage 791,422 17.7 790,620 17.9 802 0.1 Consumer 6,817 0.2 8,862 0.2 (2,045) (23.1) $ 4,491,167 100.0 % $ 4,443,070 100.0 % $ 48,097 1.1 % 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, Delaware, Fayette, Huntingdon, Lancaster, Lehigh, Luzerne, Montgomery, Perry, Schuylkill and Westmoreland, along with Camden, 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. Commercial, industrial, and agricultural loans are primarily made to business entities and may be secured by business assets, including commercial real estate, or may be unsecured. Residential real estate loans are secured by liens on the residential property. Consumer loans include installment loans, lines of credit and home equity loans. The Bank has no significant concentration of credit to any one borrower. The Bank’s highest concentration of credit by loan type is in commercial real estate. Credit risk is managed through portfolio diversification, underwriting policies and procedures, and loan monitoring practices. Lenders are provided with detailed underwriting policies for all types of credit risks accepted by the Bank and must obtain appropriate internal approvals for credit extensions. The Bank also maintains strict documentation requirements and robust credit quality assurance practices in order to identify credit portfolio weaknesses as early as possible, so any exposures that are discovered might be mitigated or potential losses reduced. The Bank generally secures its loans with real estate, with such collateral values dependent and subject to change based on real estate market conditions within its market area. 55 Table of Contents MID PENN BANCORP, INC. The following table presents the commercial real estate portfolio by property type along with the weighted average loan to value: (Dollars in thousands) March 31, 2025 December 31, 2024 Commercial Real Estate Balance % of portfolio Weighted Average LTV (2) Balance % of portfolio Weighted Average LTV (2) Owner Occupied (1) $ 654,305 25.5 % N/A $ 624,007 24.8 % N/A Farmland (1) 226,033 8.8 N/A 224,709 8.9 N/A Multifamily 410,531 16.0 60.2 412,900 16.4 63.8 Non Owner Occupied Retail 420,606 16.4 54.5 426,171 17.0 60.3 Office 276,439 10.8 60.7 296,468 11.8 63.2 Industrial 184,762 7.2 49.0 161,683 6.4 53.2 Hospitality 156,631 6.1 45.0 152,060 6.1 51.2 Flex 43,526 1.7 37.1 44,187 1.8 44.2 Mobile Home Park 17,153 0.7 59.7 17,748 0.7 67.7 Health Care 14,367 0.6 54.5 14,511 0.6 55.3 Other Property Types 158,669 6.2 58.1 138,182 5.5 64.1 Total Commercial Real Estate $ 2,563,022 100.0 % 55.2 % $ 2,512,626 100.0 % 59.9 % (1) LTV not available for Owner Occupied and Farmland properties. (2) Weighted average Loan to Value is calculated based on estimated current market values of the properties. Maturity distribution by contractual maturity date and rate sensitivity information related to the loan portfolio is reflected in the table below: (In Thousands) As of March 31, 2025 One Year and Less One to Five Years Five to Fifteen Years Over Fifteen Years Total Commercial real estate CRE Nonowner Occupied $ 65,453 $ 458,592 $ 475,462 $ 272,646 $ 1,272,153 CRE Owner Occupied 25,530 80,210 275,625 272,940 654,305 Multifamily 61,225 137,624 109,196 102,486 410,531 Farmland 325 8,478 63,804 153,426 226,033 Total Commercial real estate 152,533 684,904 924,087 801,498 2,563,022 Commercial and industrial 23,186 336,976 132,787 227,746 720,695 Construction Residential Construction 51,031 27,533 8,024 1,608 88,196 Other Construction 180,187 113,230 19,898 7,700 321,015 Total Construction 231,218 140,763 27,922 9,308 409,211 Residential mortgage 1-4 Family 1st Lien 7,688 29,310 72,280 202,884 312,162 1-4 Family Rental 37,206 24,066 108,657 169,951 339,880 HELOC and Junior Liens 10,061 12,914 33,138 83,267 139,380 Total Residential Mortgage 54,955 66,290 214,075 456,102 791,422 Consumer 910 1,722 1,434 2,751 6,817 Total loans held in portfolio $ 462,802 $ 1,230,655 $ 1,300,305 $ 1,497,405 $ 4,491,167 56 Table of Contents MID PENN BANCORP, INC. Fixed interest rates: Commercial real estate CRE Nonowner Occupied $ 50,487 $ 219,764 $ 55,288 $ 9,248 $ 334,787 CRE Owner Occupied 17,280 56,550 30,304 2,027 106,161 Multifamily 40,518 81,526 7,507 — 129,551 Farmland 320 7,445 6,404 56 14,225 Total Commercial real estate 108,605 365,285 99,503 11,331 584,724 Commercial and industrial 6,475 198,490 31,858 7,783 244,606 Construction Residential Construction 20,338 8,518 — 194 29,050 Other Construction 17,375 41,634 4,779 800 64,588 Total Construction 37,713 50,152 4,779 994 93,638 Residential mortgage 1-4 Family 1st Lien 7,493 18,323 49,259 140,908 215,983 1-4 Family Rental 33,397 17,838 5,061 8,823 65,119 HELOC and Junior Liens 1,010 5,768 22,339 2,522 31,639 Total Residential Mortgage 41,900 41,929 76,659 152,253 312,741 Consumer 464 1,708 1,434 873 4,479 Total fixed interest rates $ 195,157 $ 657,564 $ 214,233 $ 173,234 $ 1,240,188 Floating interest rates: Commercial real estate CRE Nonowner Occupied $ 14,965 $ 238,829 $ 420,174 $ 263,398 $ 937,366 CRE Owner Occupied 8,250 23,660 245,321 270,913 548,144 Multifamily 20,707 56,097 101,689 102,487 280,980 Farmland 5 1,033 57,400 153,370 211,808 Total Commercial real estate 43,927 319,619 824,584 790,168 1,978,298 Commercial and industrial 16,711 138,486 100,929 219,963 476,089 Construction Residential Construction 30,693 19,015 8,024 1,414 59,146 Other Construction 162,813 71,596 15,119 6,899 256,427 Total Construction 193,506 90,611 23,143 8,313 315,573 Residential mortgage 1-4 Family 1st Lien 196 10,987 23,021 61,975 96,179 1-4 Family Rental 3,809 6,228 103,596 161,128 274,761 HELOC and Junior Liens 9,050 7,146 10,799 80,746 107,741 Total Residential Mortgage 13,055 24,361 137,416 303,849 478,681 Consumer 446 14 — 1,878 2,338 Total floating interest rates 267,645 573,091 1,086,072 1,324,171 3,250,979 Total fixed and floating interest rates $ 462,802 $ 1,230,655 $ 1,300,305 $ 1,497,405 $ 4,491,167 57 Table of Contents MID PENN BANCORP, INC. Credit Quality, Credit Risk, and Allowance for 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. The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Credit quality within the loan portfolio is continuously monitored by management and is reflected within the ACL for loans. The ACL is an estimate of expected losses inherent within Mid Penn’s existing loan portfolio. The ACL is adjusted through the provision for credit losses and reduced by the charge off of loan amounts, net of recoveries. The loan loss estimation process involves procedures to appropriately consider the unique characteristics of Mid Penn’s loan portfolio segments. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Evaluations of the portfolio and individual credits are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations. Determining the appropriateness of the allowance is complex and requires judgement by management about the effect of matters that are inherently uncertain. 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. For a complete description of Mid Penn’s ACL-loans methodology and the quantitative and qualitative factors included in the calculation, please see "Note 4 – Loans and Allowance for Credit Losses – Loans" included in Part I. Item 1. – Financial Statements of this report. Changes in the ACL-loans are summarized as follows: Three Months Ended March 31, (Dollars in thousands) 2025 2024 Balance, beginning of period $ 35,514 $ 34,187 Loans charged off during period (15) (50) Recoveries of loans previously charged off 18 6 Net recoveries/(charge-offs) 3 (44) Provision/(benefit) for credit losses - loans 321 (619) Balance, end of period $ 35,838 $ 33,524 Ratio of net (recoveries)/charge-offs to average loans outstanding (annualized) (0.0003) % 0.004 % Ratio of ACL - loans to net loans at end of period 0.80 % 0.78 % 58 Table of Contents MID PENN BANCORP, INC. The following table presents the change in nonperforming asset categories as of March 31, 2025, December 31, 2024, and March 31, 2024. (Dollars in thousands) March 31, 2025 December 31, 2024 March 31, 2024 Non-performing Assets: Total non-accrual loans $ 24,045 $ 22,610 $ 10,389 Foreclosed real estate 1,402 44 5,110 Total non-performing assets 25,447 22,654 15,499 Accruing loans 90 days or more past due 3 — 25 Total risk elements $ 25,450 $ 22,654 $ 15,524 Non-accrual loans as a percentage of total loans outstanding 0.54 % 0.51 % 0.24 % Non-performing assets as a percentage of total loans outstanding and foreclosed real estate 0.57 % 0.51 % 0.36 % Ratio of ACL-loans to non-performing loans 149.05 % 157.07 % 322.69 % Total nonperforming assets were $25.4 million at March 31, 2025, an increase compared to nonperforming assets of $22.7 million at December 31, 2024. The increase during the first quarter of 2025 is primarily related to the addition of three commercial loans with a combined balance of $7.0 million being placed on nonaccrual in the first quarter of 2025, offset by the payoff of two commercial loans with a combined balance of $3.0 million in the first quarter of 2025. Delinquency, measured as loans past due 30 days or more, as a percentage of total loans was 0.50% at March 31, 2025, compared to 0.52% and 0.38% as of December 31, 2024 and March 31, 2024. Goodwill Mid Penn evaluates goodwill annually for impairment unless events occur which indicate that impairment is possible: a triggering event. At March 31, 2025, Mid Penn had goodwill of $128.2 million and Mid Penn's stock continues to trade below book value, warranting additional analysis. Management has reviewed actual earnings in relation to forecasted earnings, liquidity levels, changes in deposit balances, and credit quality, among others. Management has not noted any factors which would indicate that an additional impairment test is necessary. Management will continue to monitor internal metrics and macroeconomic trends to determine if there is likelihood of goodwill impairment. Mid Penn's annual impairment test is scheduled to be conducted as of October 31, 2025. Deposits Total deposits increased $42.3 million, or 0.9%, from $4.7 billion on December 31, 2024, to $4.7 billion at March 31, 2025. The growth was driven by a $55.5 million increase in interest bearing accounts, and a $29.1 million increase in noninterest bearing accounts, offset by a $42.3 million decrease in time deposits. 59 Table of Contents MID PENN BANCORP, INC. Average balances and average interest rates applicable to deposits by major classification: March 31, 2025 December 31, 2024 Change (Dollars in thousands) Balance Rate Balance Rate $ % Noninterest-bearing demand deposits $ 752,980 0.00 % $ 780,538 0.00 % $ (27,558) (3.53) % Interest-bearing demand deposits 1,051,325 1.81 1,001,813 1.90 49,512 4.94 Money market 1,024,669 2.75 913,311 2.91 111,358 12.19 Savings 260,965 0.08 275,692 0.09 (14,727) (5.34) Time 1,591,769 4.23 1,541,654 4.57 50,115 3.25 $ 4,681,708 2.45 % $ 4,513,008 2.58 % $ 168,700 3.74 % As of March 31, 2025, uninsured deposits were approximately $1.5 billion compared to $1.4 billion as of December 31, 2024. The maturities of the uninsured time deposits as of March 31, 2025 were as follows: (In thousands) 2025 Three months or less $ 153,186 Over three months to six months 73,385 Over six months to twelve months 102,159 Over twelve months 16,484 $ 345,214 Borrowings Total short-term borrowings increased $23.0 million, or 1150.0%, from December 31, 2024. The increase in short-term borrowings was driven by our objective to maintain a strong unencumbered liquid assets ratio, ensuring the availability of high-quality liquidity to meet potential near-term obligations. Short term FHLB borrowings increased $25.0 million, offset by a decrease of $2.0 million in FHLB overnight borrowings. Total long-term borrowings were $23.5 million at March 31, 2025, a decrease of $114 thousand from December 31, 2024. Liquidity Mid Penn’s objective is to maintain adequate liquidity to meet funding needs at a reasonable cost and to provide contingency plans to meet unanticipated funding needs or a loss of funding sources, while minimizing interest rate risk. Adequate liquidity provides resources for credit needs of borrowers, for depositor withdrawals, and for funding corporate operations. Sources of liquidity are as follows: • a growing core deposit base; • proceeds from the sale or maturity of investment securities; • payments received on loans and mortgage-backed securities; • overnight correspondent bank borrowings on various credit lines; and • borrowing capacity available from the FHLB and the Federal Reserve Discount Window available to Mid Penn. Mid Penn believes its core deposits are generally stable even in periods of changing interest rates. Liquidity is measured and monitored daily, allowing management to better understand and react to balance sheet trends. These measurements indicate that liquidity generally remains stable and exceeds our minimum defined levels of adequacy. Other than the trends of continued competitive pressures and volatile interest rates, and the uncertain impact of the current inflationary environment, there are no known demands, commitments, events, or uncertainties that will result in, or that are reasonably likely to result in, liquidity increasing or decreasing in any material way. On at least a quarterly basis, a comprehensive liquidity analysis is reviewed by the Asset Liability Committee and Board of Directors. The analysis provides a summary of the current liquidity measurements, projections, and future liquidity positions given various levels of liquidity stress. Management also maintains a detailed Contingency Funding Plan 60 Table of Contents MID PENN BANCORP, INC. designed to respond to overall stress in the financial condition of the banking industry or a prospective liquidity problem specific to Mid Penn. The Consolidated Statements of Cash Flows provide additional information. Mid Penn’s operating activities during the three months ended March 31, 2025 provided $11.5 million of cash, mainly due to net income. Cash used in investing activities during the three months ended March 31, 2025 was $36.3 million, mainly the result of the net increase in loans. Cash provided by financing activities during the three months ended March 31, 2025 totaled $61.5 million, primarily the result of an increase in net deposits. Regulatory Capital Mid Penn and the Bank are subject to regulatory capital requirements administered by banking regulators. Failure to meet minimum capital requirements can trigger certain mandatory, and possibly additional discretionary, actions by the regulators that if, undertaken, could have a direct material effect on Mid Penn's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory account practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Minimum regulatory capital requirements established by Basel III rules require Mid Penn and the Bank to: • Meet a minimum Common Equity Tier I capital ratio of 4.5% of risk-weighted assets; • Meet a minimum Tier I capital ratio of 6.0% of risk-weighted assets; • Meet a minimum Total capital ratio of 8.0% of risk-weighted assets; • Meet a minimum Tier I leverage capital ratio of 4.0% of average assets; • Maintain a "capital conservation buffer" of 2.5% above the minimum risk-based capital requirements, which must be maintained to avoid restrictions on capital distributions and certain discretionary bonuses; and • Comply with the definition of capital to improve the ability of regulatory capital instruments to absorb losses. The Basel III Rules use a standardized approach for risk weightings that expands the risk-weighting for assets and off-balance sheet exposures from the previous 0%, 20%, 50% and 100% categories to a much larger and more risk-sensitive number of categories, depending on the nature of the assets and off-balance sheet exposures and resulting in higher risk weightings for a variety of asset categories. Banks are evaluated for capital adequacy by regulatory supervisory agencies based on the ratio of capital to risk-weighted assets and total assets. The minimum capital to risk-weighted assets requirements, including the capital conservation buffers, which became effective for Mid Penn and the Bank on January 1, 2016, are illustrated below. At March 31, 2025, regulatory capital ratios for both Mid Penn and the Bank met the definition of a "well-capitalized" institution under the regulatory framework for prompt corrective action and exceeded the minimum capital requirements under Basel III. Mid Penn maintained the following regulatory capital ratios in comparison to regulatory requirements: March 31, 2025 December 31, 2024 Regulatory Minimum for Capital Adequacy Fully Phased-In, with Capital Conversation Buffers Total Risk-Based Capital (to Risk-Weighted Assets) 13.85 % 13.98 % 10.50 % 4.00 % Tier I Risk-Based Capital (to Risk-Weighted Assets) 12.04 12.09 8.50 7.00 Common Equity Tier I (to Risk-Weighted Assets) 12.04 12.09 7.00 8.50 Tier I Leverage Capital (to Average Assets) 10.16 9.98 4.00 10.50 As of March 31, 2025 and December 31, 2024, Mid Penn and the Bank met all capital adequacy requirements and the Bank was considered "well-capitalized". However, future changes in regulations could increase capital requirements and may have an adverse effect on capital resources. 61 Table of Contents MID PENN BANCORP, INC. Shareholders' Equity Shareholders' equity, or capital, is evaluated in relation to total assets and the risk associated with those assets, and the desire to collectively maintain and enhance shareholders’ value, and satisfactorily address regulatory capital requirements. Accordingly, capital management practices have been, and will continue to be, of paramount importance to Mid Penn. Shareholders’ equity increased by $12.9 million, or 2.0%, from $655.0 million as of December 31, 2024 to $667.9 million as of March 31, 2025, primarily due to earnings of $13.7 million. 62 Table of Contents MID PENN BANCORP, INC.