What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-12 compared with 2025-03-13 · 790 added, 688 removed, 1943 unchanged (43% of the section changed)

58 unchanged sentences

The Company estimates the collective ACL on loans utilizing a discounted cash flow (DCF) methodology applied to portfolio segments and their loan pools segregated by similar risk characteristics.

The Company’s DCF methodology adjusts loan level contractual cash flows for probability of default and loss given default and prepayment and curtailment rate assumptions to calculate expected future cash flows.

A correlation between the selected macroeconomic indicators of

national unemployment rate and GDP and historic loss levels, adjusted to include representative peer group loss experience, was developed to predict loss expectations based on current economic conditions and a reasonable and supportable forecast period.

The Company’s DCF methodology adjusts loan level contractual cash flows for probability of default and loss given default and prepayment and curtailment

rate assumptions to calculate expected future cash flows.

A correlation between the selected macroeconomic indicators of national unemployment rate and GDP and historic loss levels, adjusted to include representative peer group loss experience, was developed to predict loss expectations based on current economic conditions and a reasonable and supportable forecast period.

At the end of the reasonable and supportable forecast period, the Company reverts to the long-term mean of the macroeconomic indicator.

For the December 31, 2025 ACL on loans, the Company determined that reasonable and supportable forecasts could be made for a 12-month period and used a reversion period of four quarters reverting to the historical mean on a straight-line basis.

The Company also calculates a qualitative portion of the ACL, which is based on general economic conditions and other internal and external factors affecting Mid Penn’s loan portfolio.

The Company also calculates a qualitative portion of the ACL, which is based on general economic conditions and other internal and external factors affecting the Company’s loan portfolio.

At December 31, 2025, qualitative factors considered for the ACL on loans included concentrations of credit, lending process, and peer group divergence.

16 unchanged sentences

We identified the Company’s annual goodwill impairment test as a critical audit matter due to the complexity of the analysis and certain significant assumptions made by management in estimating the fair value of the Company’s reporting unit such as the determination of a reasonable control premium and the identification of peer public companies.

Auditing management’s assumptions required a high degree of auditor judgement, subjectivity, and increased audit effort, including the use of internal valuation specialists, due to the impact these assumptions could have on the accounting estimate.

Auditing management’s assumptions required a high degree of auditor judgment, subjectivity, and increased audit effort, including the use of internal valuation specialists, due to the impact these assumptions could have on the accounting estimate.

Our audit procedures related to the Company’s annual goodwill impairment test included the following, among others:

5 unchanged sentences

◦ Evaluating the appropriateness of the valuation models used in management’s analysis and comparing management’s selected control premium to publicly available market data.

We have served as the Company's auditor since 2020.

Business Combination – Valuation of the Acquired non-PCD Loan Portfolio

As described in Note 1 and Note 2 to the financial statements, on April 30, 2025, the Company completed its acquisition of William Penn Bancorporation (William Penn).

The Company recorded $6.9 million of goodwill as a result of the acquisition, which represents the excess of the purchase price over the fair value of net assets acquired using the acquisition method of accounting.

As part of the acquisition, the Company acquired $405.3 million in loans.

Acquired loans are initially recorded at their acquisition-date fair values.

The Company prepared loan fair value adjustments that it believed a market participant might employ in estimating the fair value for the acquired loan portfolio.

This analysis was performed for loans with signs of credit deterioration (purchased credit deteriorated (PCD) loans) as well as those without signs of credit deterioration (non-PCD loans).

The acquired non-PCD loan portfolio was recorded at an estimated fair value of $355.5 million at the acquisition date without carryover of William Penn’s previously established ACL on loans.

Fair values are determined using discounted cash flow methodologies and valuation techniques that incorporate projected cash flows, estimated credit losses, prepayment assumptions, market interest rates, and other market-based inputs.

Projected cash flows are developed using contractual terms adjusted for expected prepayments and credit losses and are discounted using rates that reflect current market conditions and the risk characteristics of the assets.

We identified the fair value of acquired non-PCD loans as a critical audit matter, because of the judgments necessary to determine the fair value of the loans, the high degree of auditor judgment involved and the extensive audit effort involved in testing management estimates and assumptions, including the use of valuation specialists.

The fair value determination of acquired non-PCD loans requires a significant amount of judgment by management and involves a high degree of subjectivity.

Our audit procedures related to the valuation of the acquired non-PCD loan portfolio, specifically the market interest rates, expected credit losses, expected repayments and prepayments and discount rates significant assumptions, included the following, among others:

• We obtained an understanding of the relevant controls related to the estimated fair value of non-PCD loans acquired in the current year and tested such controls for design and operating effectiveness, including controls relating to management’s review and approval of significant assumptions including market interest rates, expected credit losses, discount rates and expected payments and prepayments.

• We tested the completeness and accuracy of the data inputs for significant assumptions used in the non-PCD loans estimated fair value calculations by comparing the data to source documents and external information sources.

• We utilized internal valuation specialists who assisted in the following, among others:

◦ Evaluating management’s methodologies and techniques of estimating the loans’ fair value for appropriateness as compared to standard valuation techniques for financial assets and through consideration of the reasonableness of significant assumptions.

◦ Evaluating the completeness and accuracy of the significant assumptions used in management’s valuation of the non-PCD loans by tracing such data to internally or externally generated source documents or comparing to independently sourced information and performing mathematical accuracy checks.

/s/ RSM US LLP

We have served as the Company's auditor since 2020.

Philadelphia, Pennsylvania

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the Company and our report dated March 13, 2025 expressed an unqualified opinion.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes to the consolidated financial statements and our report dated March 12, 2026, expressed an unqualified opinion.

Basis for Opinion

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Consolidated Balance Sheets

(In thousands, except per share data) December 31, 2024 December 31, 2023

(Dollars in thousands, except per share data) December 31, 2025 December 31, 2024

Cash and due from banks $ 46,695 $ 37,002

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40,000,000 shares authorized;

19,796,519 issued at December 31, 2024 and 16,998,929 at December 31, 2023;

19,355,797 outstanding at December 31, 2024 and 16,573,707 at December 31, 2023

23,567,094 issued as of December 31, 2025, and 19,796,519 as of December 31, 2024;

23,047,203 outstanding as of December 31, 2025, and 19,355,797 as of December 31, 2024

23,567 19,797

3 unchanged sentences

Treasury stock, at cost;

440,722 and 425,222 shares at December 31, 2024 and December 31, 2023

519,891 and 440,722 shares as of December 31, 2025 and December 31, 2024

( 12,292 ) ( 10,042 )

4 unchanged sentences

Consolidated Statements of Income

Years Ended December 31,

(In thousands, except per share data) 2024 2023 2022

Year Ended December 31,

(Dollars in thousands, except per share data) 2025 2024 2023

INTEREST INCOME

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Provision for credit losses - loans 1,598 2,144 3,295

(Benefit)/Provision for credit losses - CCL ( 628 ) 404 —

(Benefit)/provision for credit losses - credit commitments ( 301 ) ( 628 ) 404

Net provision for credit losses 1,297 1,516 3,699

Net Interest Income After Provision for Credit Losses 197,798 155,155 143,274

7 unchanged sentences

Earnings from cash surrender value of life insurance 1,979 1,141 1,112

Net gain on sales of investment activities 10 — —

Other 10,047 7,812 5,627

26 unchanged sentences

Consolidated Statements of Comprehensive Income

Year Ended December 31,

(In thousands) 2025 2024 2023

Net income $ 56,248 $ 49,437 $ 37,397

Other comprehensive (loss)/income:

Unrealized (losses)/gains arising during the period on available for sale securities, net of income tax.

Other comprehensive income:

Unrealized gains/(losses) arising during the period on available-for-sale securities, net of income tax.

11,918 ( 1,550 ) 1,988

Unrealized holding gains arising during the period on interest rate derivatives used in cash flow hedges, net of income tax.

Unrealized holding losses/(gains) arising during the period on interest rate derivatives used in cash flow hedges, net of income tax.

( 1,676 ) 665 820

Change in defined benefit plans, net of income tax.

2 unchanged sentences

( 48 ) ( 26 ) ( 17 )

Total other comprehensive (loss)/income ( 188 ) 2,579 ( 19,374 )

Total other comprehensive income/(loss) 10,502 ( 188 ) 2,579

Total comprehensive income $ 66,750 $ 49,249 $ 39,976

(1) The change in defined benefit plans consists primarily of unrecognized actuarial (losses) gains on defined benefit plans during the period.

(1) The change in defined benefit plans consists primarily of unrecognized actuarial gains (losses) on defined benefit plans during the period.

(2) The reclassification adjustment for defined benefit plans includes settlement gains, amortization of prior service costs, and amortization of net gain or loss.

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Shareholders'

(In thousands, except per share data) Shares Amount

(Dollars in thousands, except per share data) Shares Amount

Balance, January 1, 2023 16,094,486 $ 16,094 $ 386,987 $ 133,114 $ ( 19,216 ) $ ( 4,880 ) $ 512,099

Net income — — — 37,397 — — 37,397

Total other comprehensive loss, net of taxes — — — — ( 19,374 ) — ( 19,374 )

Total other comprehensive income, net of taxes — — — — 2,579 — 2,579

Common stock cash dividends declared - $ 0.80 per share

— — — ( 12,981 ) — — ( 12,981 )

Riverview restricted stock (1)

Common stock issued to Brunswick shareholders (1)

849,510 850 17,245 — — — 18,095

Impact of adopting CECL (2)

— — — ( 11,548 ) — — ( 11,548 )

Repurchased stock ( 216,879 shares)

5 unchanged sentences

Net income — $ — $ — $ 49,437 $ — $ — $ 49,437

Total other comprehensive income, net of taxes — — — — 2,579 — 2,579

Total other comprehensive loss, net of taxes — — — — ( 188 ) — ( 188 )

Common stock cash dividends declared - $ 0.80 per share

— — — ( 13,822 ) — — ( 13,822 )

Common stock issued to Brunswick shareholders (2)

849,510 850 17,245 — — — 18,095

Impact of adopting CECL (3)

Common stock issuance (3)

2,731,250 2,731 73,225 — — — 75,956

6 unchanged sentences

Net income — $ — $ — $ 56,248 $ — $ — $ 56,248

Total other comprehensive loss, net of taxes — — — — ( 188 ) — ( 188 )

Total other comprehensive income, net of taxes — — — — 10,502 — 10,502

Common stock cash dividends declared - $ 0.84 per share

— — — ( 18,160 ) — — ( 18,160 )

Common stock issuance (5)

Common stock issued in business combination (5)

3,506,795 3,507 99,699 — — — 103,206

Stock options exercised 147,946 148 6,728 — — — 6,876

Repurchased stock ( 79,169 shares) (4)

4 unchanged sentences

Balance, December 31, 2025 23,567,094 $ 23,567 $ 589,421 $ 219,685 $ ( 6,323 ) $ ( 12,292 ) $ 814,058

(1) Additionally, 2,500 shares of restricted stock were paid out in cash resulting in $ 776 thousand of cash consideration relating to stock awards.

(1) Shares issued as a result of the acquisition of Brunswick Bancorp ("Brunswick").

See "Note 2 - Business Combinations", to the Consolidated Financial Statements for more information.

(2) The Corporation adopted ASC 326, Financial Instruments - Credit Losses, effective January 1, 2023.

See "Note 1 - Summary of Significant Accounting Policies" for further details.

(4) Includes tax effects of repurchased stock.

(3) Shares issued as a result of the underwritten public offering of 2,375,000 shares of common stock at a price of $ 29.50 per share on November 4, 2024.

(4) Includes tax effects of repurchased stock.

(5) Shares issued on April 30, 2025 as a result of the William Penn Acquisition.

See "Note 2 - Business Combinations" to the Consolidated Financial Statements for more information.

The accompanying notes are an integral part of these Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

(In thousands) Year Ended

(In thousands) Year Ended December 31,

2025 2024 2023

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Gain on sale of SBA loans ( 220 ) ( 347 ) ( 571 )

(Loss)/Gain on sale of property, plant, and equipment ( 10 ) — 938

Gain on sale of property, plant, and equipment ( 51 ) ( 10 ) —

Loss/(gain) on sale or write-down of foreclosed assets 646 80 ( 144 )

Write-off of bank premises and equipment held for sale — — 705

Accretion of subordinated debt ( 613 ) ( 587 ) ( 555 )

Discount on subordinated debt ( 461 ) ( 613 ) ( 587 )

Stock compensation expense 1,999 1,047 1,103

Change in deferred income tax cost/(benefit) 1,516 ( 1,551 ) 2,262

Fair value adjustment on equity investments — — 70

Increase accrued interest receivable ( 1,026 ) ( 6,244 ) ( 7,080 )

Change in deferred income taxes 13,891 1,516 ( 1,551 )

Increase in accrued interest receivable ( 523 ) ( 1,026 ) ( 6,244 )

(Increase)/decrease in other assets ( 4,114 ) ( 4,988 ) 9,736

(Decrease)/increase in accrued interest payable ( 2,571 ) ( 773 ) 10,043

Decrease in operating lease liability ( 2,123 ) ( 2,540 ) ( 3,136 )

Increase/(Decrease) in other liabilities 2,264 ( 4,214 ) 2,439

Increase/(decrease) in operating lease liability 3,339 ( 2,123 ) ( 2,540 )

(Decrease)/increase in other liabilities ( 2,336 ) 2,264 ( 4,214 )

Net Cash Provided By Operating Activities 80,035 51,388 52,341

4 unchanged sentences

Proceeds from the maturity or call of held-to-maturity securities 34,943 16,356 10,490

Purchases of held-to-maturity securities — — ( 85,664 )

Stock dividends of FHLB and other bank stock 1,288 864 289

Reduction (Purchases) of restricted investment in bank stock 8,019 ( 9,317 ) 530

Net cash (paid)/received from acquisition ( 2,676 ) 1,068 ( 901 )

Stock dividends received on FHLB and other bank stock 443 1,288 864

(Purchases)/reduction of restricted investment in bank stock ( 558 ) 8,019 ( 9,317 )

Net cash received/(paid) from acquisitions 218,112 ( 2,676 ) 1,068

Net increase in loans ( 25,515 ) ( 190,658 ) ( 424,939 )

3 unchanged sentences

Proceeds from bank-owned life insurance 1,077 6,683 774

Gain on bank-owned life insurance ( 2,566 ) ( 125 ) —

Earnings on bank-owned life insurance — ( 2,566 ) ( 125 )

Net change in investments in tax credits and other partnerships 2,201 162 ( 4,588 )

Net cash paid on branch sale — — ( 18,918 )

Net Cash Used in Investing Activities ( 208,742 ) ( 408,925 ) ( 704,711 )

Net Cash Provided by (Used in) Investing Activities 83,169 ( 208,742 ) ( 408,925 )

Financing Activities:

Net increase/(Decrease) in deposits 343,715 286,498 ( 202,607 )

MID PENN BANCORP, INC.

Consolidated Statements of Cash Flows

Proceeds from long-term debt — 25,000 —

Net (decrease)/increase in deposits ( 95,024 ) 343,715 286,498

Common stock dividends paid ( 18,160 ) ( 13,822 ) ( 12,981 )

2 unchanged sentences

Treasury stock purchased ( 2,250 ) ( 323 ) ( 4,876 )

Riverview restricted stock (1)

MID PENN BANCORP, INC.

Consolidated Statements of Cash Flows

Net change in finance lease liability ( 146 ) ( 134 ) ( 93 )

Net change in short-term borrowings ( 239,532 ) 138,885 102,647

Proceeds from short-term borrowings 243,583 1,305,482 1,731,919

Repayment of short-term borrowings ( 224,750 ) ( 1,545,014 ) ( 1,593,034 )

Long-term debt repayment ( 318 ) ( 35,266 ) ( 30,449 )

Subordinated debt redemption and trust preferred securities — ( 10,000 ) ( 16,778 )

Net Cash Provided by Financing Activities 131,155 392,466 ( 208,151 )

Proceeds from long-term debt — — 25,000

Subordinated debt redemption ( 45,280 ) — ( 10,000 )

Exercise of stock options 6,876 — —

Net Cash (Used in)/Provided by Financing Activities ( 134,850 ) 131,155 392,466

Net increase/(decrease) in cash and cash equivalents 28,354 ( 26,199 ) 35,882

7 unchanged sentences

Recognition of operating lease liabilities 3,974 930 2,100

Obsolete Riverview asset write-off — — 705

Loans transferred to foreclosed assets held-for-sale 10,299 164 1,362

Carrying value of assets sold in branch sale — — 2,159

Liabilities assigned in branch sale — — 21,076

Fair value of assets acquired in business combination, excluding cash (1)

2 unchanged sentences

7,313 1,129 12,800

Liabilities assumed in business combination (2)

Stock issued in business combination (3)

(1) Includes the impact of the Insurance Acquisition on July 31, 2024.

Fair value of liabilities assumed in business combination (1)

630,181 — 345,043

Fair value of shares issued in business combination (2)

103,213 — 18,095

(1) Includes the impact of the William Penn Acquisition on April 30, 2025, the Charis Insurance Group acquisition on May 12, 2025, the Commonwealth Benefits Group acquisition on July 31, 2024, and the Brunswick acquisition on May 19, 2023.

See "Note 2 - Business Combinations" to the Consolidated Financial Statement for additional information.

(2) This disclosure includes the impact of the Brunswick Acquisition on May 19, 2023.

See "Note 2 - Business Combinations" to the Consolidated Financial Statements for more information.

(3) Additionally, 2,500 shares of restricted stock were paid out in cash resulting in $ 776 thousand of cash consideration relating to stock awards.

(2) This disclosure includes the impact of the William Penn Acquisition on April 30, 2025 and the Brunswick acquisition on May 19, 2023.

The accompanying notes are an integral part of these Consolidated Financial Statements.

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Mid Penn also fulfills the insurance needs of both existing and potential customers through MPB Risk Services, LLC, doing business as MPB Insurance and Risk Management.

The financial services are provided to individuals, partnerships, non-profit organizations, and corporations through its retail banking offices located in throughout Pennsylvania and two counties in New Jersey.

The financial services are provided to individuals, partnerships, non-profit organizations, and corporations through its retail banking offices located throughout Pennsylvania, with a minor portion in New Jersey.

Basis of Presentation

For all periods presented, the accompanying Consolidated Financial Statements include the accounts of Mid Penn Bancorp, Inc., its wholly-owned subsidiary, Mid Penn Bank, and five wholly-owned nonbank subsidiaries, MPB Realty, LLC, MPB Financial Services, LLC, which includes MPB Wealth Management, LLC (which ceased operating during the first quarter of 2024) and MPB Risk Services, LLC, and MPB Launchpad Fund I, LLC.

For all periods presented, the accompanying Consolidated Financial Statements include the accounts of Mid Penn Bancorp, Inc., its wholly-owned subsidiary, Mid Penn Bank, and six wholly-owned nonbank subsidiaries, MPB Acquisition Sub I, LLC, which was formed in connection with the acquisition of Cumberland Advisors, LLC.

See "Subsequent Events" for additional information, MPB Realty, LLC, MPB Financial Services, LLC, which includes MPB Wealth Management, LLC (which ceased operating during the first quarter of 2024) and MPB Risk Services, LLC, and MPB Launchpad Fund I, LLC.

As of December 31, 2025, the accounts and activities of these nonbank subsidiaries were not material to warrant separate disclosure or segment reporting.

5 unchanged sentences

All such adjustments are of a normal, recurring nature.

The presentation of short-term borrowings within cash flows from financing activities in the consolidated statements of cash flows has been revised from a net presentation to a gross presentation of proceeds from short-term borrowings and repayments of short-term borrowings.

Prior period amounts have been reclassified to conform to the current period presentation.

This reclassification had no impact on previously reported net cash flows provided by financing activities.

Subsequent Events

Mid Penn has evaluated events and transactions occurring subsequent to the balance sheet date of December 31, 2025 for items that should potentially be recognized or disclosed in these consolidated financial statements.

The evaluation was conducted through the issuance date of these consolidated financial statements.

The accounting and reporting policies of Mid Penn conform with accounting principles generally accepted in the United States ("GAAP") and to general practice within the financial industry.

There were no events or transactions that occurred subsequent to the balance sheet date that would require adjustment to the financial statements.

On January 1, 2026, Mid Penn completed its acquisition of Cumberland Advisors, Inc., a registered investment advisory firm with clients both nationally and internationally.

As a result of the acquisition, Mid Penn paid holders of Cumberland Advisors, Inc.

common stock $ 1.6 million in cash and issued approximately 127,020 shares of Mid Penn common stock.

As of December 31, 2025, Cumberland had approximately $ 3.2 billion in assets under management.

In connection with the acquisition, Cumberland was merged into a newly formed Mid Penn acquisition subsidiary and now operates as Cumberland Advisors, LLC.

MID PENN BANCORP, INC.

On February 27, 2026, Mid Penn completed its acquisition of 1st Colonial.

At the effective time of the Merger, 1st Colonial merged with and into Mid Penn with Mid Penn surviving the Merger.

Promptly following the Merger, 1st Colonial Community Bank, 1st Colonial's wholly owned bank subsidiary, merged with and into the Bank with the Bank surviving.

The accounting and reporting policies of Mid Penn conform with accounting principles generally accepted in the United States ("GAAP") and to general practice within the financial services industry.

Following is a description of the more significant accounting policies.

Use of Estimates - The preparation of financial statements in conformity with U.S.

Use of Estimates

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could materially differ from those estimates.

Significant Group of Concentrations of Credit Risk - Most of the Corporation’s activities are with customers located within Pennsylvania .

Material estimates subject to significant change include the allowance for credit losses, expected cash flows and collateral values associated with individually evaluated loans, the carrying value of other real estate owned ("OREO"), the fair value of financial instruments, business combination fair value computations, the valuation of goodwill and other intangible assets, stock-based compensation and deferred income tax assets.

Business Combinations

Business combinations are accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations.

Under this method, the Company recognizes the identifiable assets acquired and liabilities assumed at their estimated fair values as of the acquisition date.

The determination of the fair values of assets acquired and liabilities assumed requires management to make significant estimates and assumptions.

Fair values are generally determined using discounted cash flow methodologies and other valuation techniques that incorporate projected cash flows, estimated credit losses, prepayment assumptions, market interest rates, and other market-based inputs.

Projected cash flows are developed using contractual terms adjusted for expected prepayments and credit losses, and are discounted using rates that reflect current market conditions and the risk characteristics of the assets or liabilities.

Management may engage independent third-party valuation specialists to assist in determining certain fair values.

The excess of the purchase price over the estimated fair value of the net assets acquired is recorded as goodwill.

If the fair value of the identifiable net assets acquired exceeds the purchase price, the excess is recognized as a bargain purchase gain in earnings on the acquisition date.

Acquisition-related costs, such as legal and advisory fees, are expensed as incurred.

Measurement period adjustments are recorded in the reporting period in which the amounts are determined, if identified within one year of the acquisition date, as permitted by ASC 805.

Significant Group of Concentrations of Credit Risk

Most of the Corporation’s activities are with customers located within Pennsylvania, with a minor portion also occurring in New Jersey .

"Note 3 - In vestment Securities" discusses the types of investment securities in which the Corporation invests.

"Note 4 - L oans and Allowance for Loan Losses" discusses the types of lending that the Corporation engages in as well as loan concentrations.

"Note 4 - L oans and Allowance for Credit Losses - Loans" discusses the types of lending that the Corporation engages in as well as loan concentrations.

The Corporation does not have a significant concentration of credit risk with any one customer.

Fair Value Measurements - The Corporation uses estimates of fair value in applying various accounting standards for its consolidated financial statements on either a recurring or non-recurring basis.

Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants.

The Corporation groups

Fair Value Measurements

The Corporation uses estimates of fair value in applying various accounting standards for its consolidated financial statements on either a recurring or nonrecurring basis.

Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between willing and able market participants.

The Corporation groups its assets and liabilities measured at fair value in three hierarchy levels, based on the observability and transparency of the inputs.

MID PENN BANCORP, INC.

its assets and liabilities measured at fair value in three hierarchy levels, based on the observability and transparency of the inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

4 unchanged sentences

Transfers between levels of fair value hierarchy are recorded at the end of the reporting period.

Cash and Cash Equivalents - For purposes of the Consolidated Statements of Cash Flows, cash and cash equivalents include cash on hand, balances due from banks, and federal funds sold, all of which mature within ninety days.

Restrictions on Cash and Due from Bank Accounts - The Bank is required by banking regulations to maintain certain minimum cash reserves.

Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, cash and cash equivalents include cash on hand, balances due from banks, and federal funds sold, all of which mature within ninety days.

Restrictions on Cash and Due from Bank Accounts

The Bank is required by banking regulations to maintain certain minimum cash reserves.

As of both December 31, 2025 and 2024, there was no cash reserve balances required to be maintained at the Federal Reserve Bank of Philadelphia because the Bank had sufficient vault cash available.

Debt Investment Securities - Mid Penn determines the classification of investment securities at the time of purchase.

Debt Investment Securities

Mid Penn determines the classification of investment securities at the time of purchase.

If Mid Penn has the intent and the ability at the time of purchase to hold debt securities until maturity, they are classified as held-to-maturity ("HTM").

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Available-for-sale securities are a part of Mid Penn’s asset/liability management strategy and may be sold in response to changes in interest rates, prepayment risk or other market factors.

Management has elected to reclassify realized gains and losses from accumulated other comprehensive income when securities are sold on the trade date.

Management has elected to reclassify realized gains and losses out of accumulated other comprehensive income into earnings when securities are sold on the trade date.

Interest income and dividends on securities are recognized in interest income on an accrual basis.

1 unchanged sentence

Realized gains or losses on the sale of securities are determined using the specific identification method.

ASC 326, Financial Instruments-Credit Losses, was adopted by Mid Penn on January 1, 2023.

ASC 326 introduced the CECL methodology for estimating allowances for credit losses.

ASC 326 applies to all financial instruments carried at amortized cost, including HTM securities, and makes targeted improvements to the accounting for credit losses on AFS securities.

In order to comply with ASC 326, Mid Penn conducted a review of its investment portfolio and determined that for certain classes of securities it would be appropriate to assume the expected credit loss to be zero.

Mid Penn estimates its allowance for credit losses in accordance with ASC 326, which requires entities to measure expected credit losses over the contractual life of financial assets carried at amortized cost, including HTM securities, as well as certain off-balance sheet credit exposures.

ASC 326 also provides a targeted impairment model for AFS debt securities.

To comply with ASC 326, Mid Penn conducted a review of its investment portfolio and determined that for certain classes of securities it would be appropriate to assume the expected credit loss to be zero.

This zero-credit loss assumption applies to debt issuances of the U.S.

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• Guaranteed by a sovereign entity

• Widely recognized as "risk-free rate"

• Widely recognized as a "risk-free rate"

• Can print its own currency

• Currency is routinely held by central banks, used in international commerce, and commonly viewed as reserve currency

• Currently under the U.S.

Government conservatorship or receivership

• Issued or supported by entities with explicit or implicit U.S.

government backing

MID PENN BANCORP, INC.

Mid Penn will continuously monitor any changes in economic conditions, credit downgrades, changes to explicit or implicit guarantees granted to certain debt issuers, and any other relevant information that would indicate potential credit deterioration and prompt Mid Penn to reconsider its zero-credit loss assumption.

At the date of adoption, Mid Penn’s estimated allowance for credit losses on AFS and HTM securities under ASC 326 was deemed immaterial due to the composition of these portfolios.

Mid Penn continuously monitors changes in economic conditions, credit ratings, and government guarantees, as well as any other relevant factors that could indicate potential credit deterioration and prompt Mid Penn to reconsider its zero-credit loss assumption.

Mid Penn’s estimated allowance for credit losses on AFS and HTM securities under ASC 326 was deemed immaterial due to the composition of these portfolios.

Both portfolios consist primarily of U.S.

government agency guaranteed mortgage-backed securities for which the risk of loss is minimal.

Therefore, Mid Penn did not recognize a cumulative effect adjustment through retained earnings related to the AFS and HTM securities.

AFS Securities

ASC 326, Financial Instruments-Credit Losses, made targeted improvements to the accounting for credit losses on AFS securities.

The concept of other-than-temporarily impaired has been replaced with the allowance for credit losses.

Unlike HTM securities, AFS securities are evaluated on an individual level and pooling of securities is not allowed.

Quarterly, Mid Penn evaluates if any security has a fair value less than its amortized cost.

Once these securities are identified, in order to determine whether a decline in fair value resulted from a credit loss or other factors, Mid Penn performs further analysis as outlined below:

• Review the extent to which the fair value is less than the amortized cost and observe the security’s lowest credit rating as reported by third-party credit ratings companies.

• The securities that violate the credit loss triggers above would be subjected to additional analysis that may include, but are not limited to:

changes in market interest rates, changes in securities credit ratings, security type, service area economic factors, financial performance of the issuer/or obligor of the underlying issue and third-party guarantee.

• If Mid Penn determines that a credit loss exists, the credit portion of the allowance will be measured using a DCF analysis using the effective interest rate as of the security’s purchase date.

On a quarterly basis, Mid Penn evaluates whether any AFS security has a fair value less than its amortized cost.

Once these securities are identified, to determine whether a decline in fair value resulted from a credit loss or other factors, Mid Penn performs further analysis as outlined below:

• Review the extent to which the fair value is less than the amortized cost and consider the security’s lowest credit rating as reported by third-party credit ratings agencies.

• Securities that exceed the credit loss triggers above are subject to additional analysis, which may include, but is not limited to, changes in market interest rates, changes in credit ratings, security type, service area economic conditions, the financial performance of the issuer and/or obligor, and third-party guarantees.

• If Mid Penn determines that a credit loss exists, the credit loss component of the allowance is measured using a DCF analysis based on the effective interest rate as of the security’s purchase date.

The amount of credit loss Mid Penn records will be limited to the amount by which the amortized cost exceeds the fair value.

The DCF analysis utilizes contractual maturities, as well as third-party credit ratings and cumulative default rates published annually by a reputable third-party.

At December 31, 2024, the results of the analysis did not identify any securities that violate the credit loss triggers;

As of December 31, 2025, the results of the analysis did not identify any securities that violate the credit loss triggers;

therefore, no DCF analysis was performed, and no credit loss was recognized on any of the securities available for sale.

Accrued interest receivable is excluded from the estimate of credit losses for AFS securities.

At December 31, 2024, accrued interest receivable totaled $ 1.2 million for AFS securities and was reported in accrued interest receivable on the accompanying Consolidated Balance Sheet.

As of December 31, 2025, accrued interest receivable totaled $ 1.8 million for AFS securities and was reported in accrued interest receivable on the accompanying Consolidated Balance Sheet.

HTM Securities

ASC 326, Financial Instruments-Credit Losses, requires institutions to measure expected credit losses on financial assets carried at amortized cost on a collective or pool basis when similar risks exist.

Mid Penn uses several levels of segmentation in order to measure expected credit losses:

As discussed above, ASC 326 requires institutions to measure expected credit losses on financial assets carried at amortized cost on a collective or pool basis when similar risks exist.

Mid Penn uses several levels of segmentation to measure expected credit losses:

• The portfolio is segmented into agency and non-agency securities.

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Each individual segment is categorized by third-party credit ratings.

As discussed above, Mid Penn has determined that for certain classes of securities it would be appropriate to assume the expected credit loss to be zero, which include debt issuances of the U.S.

As discussed above, Mid Penn has determined that, for certain classes of securities, it is appropriate to assume expected credit losses of zero, including debt issuances of the U.S.

Treasury and agencies and instrumentalities of the United States government.

This assumption will be reviewed and attested to quarterly.

At December 31, 2024, Mid Penn’s HTM securities totaled $ 382.4 million.

This assumption is reviewed and attested to quarterly.

As of December 31, 2025, Mid Penn’s HTM securities totaled $ 347.3 million.

After applying appropriate probability of default and loss given default assumptions, the total amount of current expected credit losses was deemed immaterial.

Therefore, no reserve was recorded at December 31, 2024.

MID PENN BANCORP, INC.

Accordingly, no allowance for credit losses was recorded on HTM securities as of December 31, 2025.

Accrued interest receivable is excluded from the estimate of credit losses for HTM securities.

At December 31, 2024, accrued interest receivable totaled $ 1.8 million for HTM securities and was reported in accrued interest receivable on the accompanying Consolidated Balance Sheet.

At December 31, 2024, Mid Penn had no HTM securities that were past due 30 days or more as to principal or interest payments.

Mid Penn had no HTM securities classified as nonaccrual at December 31, 2024.

Equity Securities - The Corporation reports its equity securities with readily determinable fair values at fair value on the Consolidated Balance Sheet, with realized and unrealized gains and losses reported in other expense on the Consolidated Statements of Income.

As of December 31, 2024 and 2023, Mid Penn’s equity securities consisted of Community Reinvestment Act funds totaling $ 428 thousand and $ 438 thousand, respectively.

As of December 31, 2025, accrued interest receivable totaled $ 1.5 million for HTM securities and was reported in accrued interest receivable on the accompanying Consolidated Balance Sheet.

MID PENN BANCORP, INC.

As of December 31, 2025, Mid Penn had no HTM securities that were past due 30 days or more as to principal or interest payments.

Mid Penn had no HTM securities classified as nonaccrual as of December 31, 2025.

Equity Securities

The Corporation reports its equity securities with readily determinable fair values at fair value on the Consolidated Balance Sheet, with realized and unrealized gains and losses reported in other expense on the Consolidated Statements of Income.

As of December 31, 2025 and 2024, Mid Penn’s equity securities consisted of Community Reinvestment Act funds totaling $ 5.4 million and $ 428 thousand, respectively.

No equity securities were sold during the years ended December 31, 2025, 2024 and 2023.

Federal Home Loan Bank ("FHLB") and Atlantic Community Bankers' Bank ("ACBB") Stock - The Bank is a member of the FHLB and the ACBB and is required to maintain an investment in the stock of the FHLB and ACBB.

Federal Home Loan Bank ("FHLB") and Atlantic Community Bankers' Bank ("ACBB") Stock

The Bank is a member of the FHLB and the ACBB and is required to maintain an investment in the stock of the FHLB and ACBB.

No market exists for these stocks, and the Bank’s investment can be liquidated only through redemption by the FHLB or ACBB, at the discretion of and subject to conditions imposed by the FHLB and ACBB.

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The Corporation monitors its investment in FHLB and ACBB stock for impairment through review of recent financial results of the FHLB and ACBB including capital adequacy and liquidity position, dividend payment history, redemption history and information from credit agencies.

The Corporation has not identified any indicators of impairment of FHLB or ACBB stock.

During the years ended December 31, 2024, 2023, and 2022 dividends received from the FHLB totaled $ 1.3 million, $ 864 thousand, and $ 289 thousand respectively.

Investment in Limited Partnership - Mid Penn is a limited partner in a partnership that provides low-income housing in Enola, Pennsylvania.

The carrying value of Mid Penn’s investment in the limited partnership was zero at December 31, 2024 and $ 15 thousand at December 31, 2023, net of amortization, using the proportional amortization method and is reported in other assets on the Consolidated Balance Sheets.

Mid Penn’s maximum exposure to loss is limited to the carrying value of its investment.

Mid Penn also owns a limited partnership interest in a low-income housing project to construct thirty-seven apartments and common amenities in Dauphin County, Pennsylvania.

The total investment in this limited partnership, net of amortization, was $ 3.7 million and $ 4.5 million on December 31, 2024 and December 31, 2023, respectively, and was included in the reported balance of other assets on the Consolidated Balance Sheet.

All of the units qualified for Federal Low-Income Housing Tax Credits ("LIHTCs") as provided for in Section 42 of the Internal Revenue Code of 1986, as amended.

Mid Penn’s limited partner capital contribution commitment was $ 7.6 million, and the investment was fully funded within a three-year period beginning in 2020 and ending during the first quarter of 2021.

The investment in the limited partnership is reported in other assets on the Consolidated Balance Sheet and is being amortized over a ten-year period using the proportional amortization method which began upon commencement of operations of the facility in December 2021.

As of December 31, 2025, Management has not identified any indicators of impairment of its FHLB or ACBB stock.

During the years ended December 31, 2025, 2024, and 2023 dividends received from the FHLB totaled $ 443 thousand, $ 1.3 million, and $ 864 thousand, respectively.

Investment in Limited Partnership

Mid Penn owns a limited partnership interest in a low-income housing project to construct thirty-seven apartments and common amenities in Dauphin County, Pennsylvania.

The total investment in this limited partnership, net of amortization, was $ 2.9 million and $ 3.7 million on December 31, 2025 and December 31, 2024, respectively, and is included in other assets on the Consolidated Balance Sheet.

All of the units qualified for Federal Low-Income Housing Tax Credits ("LIHTCs") as provided in Section 42 of the Internal Revenue Code of 1986, as amended.

Mid Penn’s limited partner capital contribution commitment was $ 7.6 million, and the investment was fully funded over a three-year period beginning in 2018 and ending during the first quarter of 2021.

The investment is reported in other assets on the Consolidated Balance Sheet and is being amortized over a ten-year period using the proportional amortization method, which began upon commencement of operations of the facility in December 2021.

The project was formally awarded $ 8.5 million in total LIHTCs by the Pennsylvania Housing Finance Agency, which will be recognized over the ten-year period from December 2021 through November 2031.

Mid Penn received low-income housing tax credits related to this project of $ 2.2 million for the tax year ended December 31, 2024, $ 1.3 million for the tax year ended December 31, 2023, and $ 853 thousand for the tax year ended December 31, 2022.

Mid Penn received low-income housing tax credits related to this project of $ 753 thousand for the tax years ended December 31, 2025, 2024, and 2023, respectively.

Mid Penn’s maximum exposure to loss is limited to the carrying value of its investment.

Mid Penn is a limited partner in a partnership that provides low-income housing in Mechanicsburg, Pennsylvania.

The total investment in this limited partnership, net of amortization, was $ 9.7 million at December 31, 2024 and $ 8.9 million at December 31, 2023, respectively, and was included in other assets on the Consolidated Balance Sheet.

All of the units qualified for Federal Low-Income Housing Tax Credits ("LIHTCs") as provided for in Section 42 of the Internal Revenue Code of 1986, as amended.

The total investment in this limited partnership, net of amortization, was $ 9.0 million and $ 9.7 million as of December 31, 2025 and December 31, 2024, respectively, and is included in other assets on the Consolidated Balance Sheet.

All of the units qualified for LIHTCs as provided in Section 42 of the Internal Revenue Code of 1986, as amended.

The investment in the limited partnership is being amortized over a ten-year period using the proportional amortization method which began upon commencement of operations of the facility in December 2023.

The project was formally awarded $ 12.0 million in total LIHTCs by the Pennsylvania Housing Finance Agency, which will be recognized over the ten-year period from December 2023 through November 2033.

Mid Penn received low-income housing tax credits related to this project of $ 1.1 million for the tax year ended December 31, 2024, and zero for the tax year ended December 31, 2023, Mid Penn’s maximum exposure to loss is limited to the carrying value of its investment.

Mid Penn received low-income housing tax credits related to this project of $ 773 thousand for the tax year ended December 31, 2025, and $ 1.1 million for the tax year ended December 31, 2024, Mid Penn’s maximum exposure to loss is limited to the carrying value of its investment.

Mid Penn owns a limited partnership interest in a low-income housing project to construct/rehabilitate seventeen apartments and two commercial shops in Schuylkill County, Pennsylvania.

The total investment in this limited partnership, net of amortization, was $ 2.7 million and $ 3.1 million on December 31, 2025 and December 31, 2024, respectively, and is included in the other assets on the Consolidated Balance Sheet.

All of the units qualified for LIHTCs as provided in Section 42 of the Internal Revenue Code of 1986, as amended.

Mid Penn’s limited partner capital contribution commitment was $ 4.4 million, and the investment was fully funded over a three-year period beginning in 2020 and ending during the first quarter of 2023.

The investment in the limited partnership is reported in other assets on the Consolidated Balance Sheet and is being amortized over a 10-year period using the proportional amortization method which began upon commencement of

MID PENN BANCORP, INC.

Mid Penn also owns a limited partnership interest in a low-income housing project to construct/rehabilitate seventeen apartments and two commercial shops in Schuylkill County, Pennsylvania.

The total investment in this limited partnership, net of amortization, was $ 3.1 million and $ 3.3 million on December 31, 2024 and December 31, 2023, respectively, and was included in the reported balance of other assets on the Consolidated Balance Sheet.

All of the units qualified for Federal Low-Income Housing Tax Credits ("LIHTCs") as provided for in Section 42 of the Internal Revenue Code of 1986, as amended.

Mid Penn’s limited partner capital contribution commitment was $ 4.4 million, and the investment was fully funded within a three-year period beginning in 2020 and ending during the first quarter of 2023.

operations of the facility in 2023.

The project was formally awarded $ 4.8 million in total LIHTCs by the Pennsylvania Housing Finance Agency, which will be recognized over the ten-year period from December 2023 through November 2033.

Mid Penn received low-income housing tax credits related to this project of $ 484 thousand for the tax years ended December 31, 2024, and 2023, respectively.

Mid Penn received low-income housing tax credits related to this project of $ 442 thousand and $ 484 thousand for the tax years ended December 31, 2025, and 2024, respectively.

Mid Penn’s maximum exposure to loss is limited to the carrying value of its investment.

Loans Held for Sale - During the third quarter of 2021, the Corporation made the election to measure mortgage loans held for sale at fair value.

Loans Held-for-Sale

The Corporation has elected to measure mortgage loans held-for-sale at fair value.

Derivative financial instruments related to mortgage banking activities are also recorded at fair value, as detailed under the heading "Mortgage Banking Derivative Financial Instruments," below.

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Interest income earned on mortgage loans held-for-sale is classified in interest income on the Consolidated Statements of Income.

Loans - Loans that management has the intent and ability to hold for the foreseeable future are reported at their outstanding principal balances, net of an allowance for loan losses, unamortized deferred fees and costs and unamortized premiums or discounts.

Loans that management has the intent and ability to hold for the foreseeable future are reported at their outstanding principal balances, net of an allowance for credit losses, unamortized deferred fees and costs and unamortized premiums or discounts.

The net amount of nonrefundable loan origination fees and certain direct costs associated with the lending process are deferred and amortized to interest income over the contractual lives of the loans using methods which approximate the level yield method.

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Interest income on loans is accrued based on the unpaid principal balance outstanding and the contractual terms of the loan agreements.

A substantial portion of the loan portfolio is comprised of commercial and real estate loans throughout Pennsylvania.

The ability of the Corporation’s debtors to honor their contracts is dependent upon the general economic conditions of this area.

A substantial portion of the loan portfolio is comprised of commercial and real estate loans throughout Pennsylvania with a minor portion in New Jersey.

The ability of the Corporation’s debtors to honor their contracts is dependent upon the general economic conditions of these areas.

The loan portfolio is segmented into commercial real estate loans, commercial and industrial loans, construction loans, residential mortgage loans, and consumer loans.

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Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project.

MID PENN BANCORP, INC.

The Corporation’s non-real estate consumer loans are based on the borrower’s proven earning capacity over the term of the loan.

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To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed, jointly by management and staff.

This activity, coupled with a relatively small volume of consumer loans, minimizes risk.

Acquired Loans - At the purchase or acquisition date, loans are evaluated to determine whether there has been more than insignificant credit deterioration since origination.

Loans that have experienced more than insignificant credit deterioration since origination are referred to as PCD loans.

This activity, coupled with a relatively small volume of consumer loans, helps to mitigate risk.

MID PENN BANCORP, INC.

Acquired Loans

At the purchase or acquisition date, loans are evaluated to determine whether there has been more than insignificant credit deterioration since origination.

Loans that have experienced more than insignificant credit deterioration since origination are referred to as purchased credit deteriorated ("PCD") loans.

In its evaluation of whether a loan has experienced more than insignificant deterioration in credit quality since origination, Mid Penn takes into consideration loan grades, past due and nonaccrual status.

Mid Penn may also consider external credit rating agency ratings for borrowers and for non-commercial loans, FICO score or band, probability of default levels, and number of times past due.

At the purchase or acquisition date, the amortized cost basis of PCD loans is equal to the purchase price and an initial estimate of credit losses.

The initial recognition of expected credit losses on PCD loans has no impact on net income.

When the initial measurement of expected credit losses on PCD loans is calculated on a pooled loan basis, the expected credit losses are allocated to each loan within the pool.

At the purchase or acquisition date, the amortized cost basis of PCD loans equals the purchase price plus and an initial estimate of credit losses.

The initial recognition of expected credit losses on PCD loans does not impact on net income at the acquisition date.

When the initial measurement of expected credit losses on PCD loans is calculated on a pooled loan basis, the expected credit losses are allocated to each loan within the pool based on the relative amortized cost basis.

Any difference between the initial amortized cost basis and the unpaid principal balance of the loan represents a noncredit discount or premium, which is accreted (or amortized) into interest income over the life of the loan.

Subsequent changes to the ACL on PCD loans are recorded through the PCL.

For purchased loans that are not deemed to have experienced more than insignificant credit deterioration since origination and are therefore not deemed PCD, any discounts or premiums included in the purchase price are accreted (or amortized) over the contractual life of the individual loan.

Subsequent changes to the ACL on PCD loans are recorded through the provision for credit losses ("PCL").

Loans acquired that do not meet the criteria for PCD are recorded at fair value at the acquisition date.

These loans are subsequently evaluated for expected credit losses in accordance with the Corporation's allowance for credit losses methodology, with changes recognized through the provision for credit losses.

Any remaining purchase discounts or premiums are accreted (or amortized) over the contractual life of the individual loan.

Loans are charged off against the ACL, with any subsequent recoveries credited back to the ACL account.

Expected recoveries may not exceed the aggregate of amounts previously charged off and expected to be charged off.

There were no loans acquired for the year ended December 31, 2024.

Loans acquired in the Brunswick acquisition, included in the balance of loans, net of unearned interest, on the Consolidated Balance Sheets for December 31, 2023 totaled $ 324.5 million.

Non-accrual Loans - The Corporation classifies loans as past due when the payment of principal or interest is greater than 30 days delinquent based on the contractual next payment due date.

The Corporation’s policies related to when loans are placed on non-accrual status conform to guidelines prescribed by regulatory authorities.

Loans are placed on non-accrual status when it is probable that principal or interest is not fully collectible, or generally when principal or interest becomes 90 days past due, whichever occurs first.

When loans are placed on non-accrual status, interest receivable is reversed against interest income in the current period and amortization of any discount ceases.

Loans acquired in the William Penn Acquisition, included in loans, net of unearned interest, on the Consolidated Balance Sheets as of December 31, 2025 totaled $ 405.3 million.

There were no loan acquisitions for the year ended December 31, 2024.

Nonaccrual Loans

The Corporation classifies loans as past due when the payment of principal or interest is 30 days delinquent or greater, based on the contractual next payment due date.

The Corporation’s policies related to when loans are placed on nonaccrual status conform to guidelines prescribed by regulatory authorities.

Loans are generally placed on nonaccrual status when management determines that principal or interest is not fully collectible, or when principal or interest becomes 90 days past due, whichever occurs first.

When loans are placed on nonaccrual status, interest receivable is reversed against interest income in the current period and amortization of any discount ceases.

Interest payments received thereafter are applied as a reduction to the remaining principal balance unless management believes that the ultimate collection of the principal is likely, in which case payments are recognized in earnings on a cash basis.

Loans are removed from non-accrual status when they become current as to both principal and interest and the collectability of principal and interest is no longer doubtful.

Generally, a non-accrual loan that is restructured remains on non-accrual for a reasonable period of time (generally, at least six consecutive months) to demonstrate the borrower can meet the restructured terms.

Loans are removed from nonaccrual status when they become current as to both principal and interest and the collectability of principal and interest is no longer doubtful.

Generally, a nonaccrual loan that is restructured remains on nonaccrual for a reasonable period of time (generally, at least six consecutive months) to demonstrate the borrower can meet the restructured terms.

However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status after a shorter performance period.

If the borrower’s ability to meet the revised payment schedule is not reasonably assured, the loan remains classified as a non-accrual loan.

Modifications to Borrowers Experiencing Financial Difficulty - From time to time, we may modify certain loans to borrowers who are experiencing financial difficulty.

In some cases, these modifications may result in new loans.

Loan modifications to borrowers experiencing financial difficulty may be in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension, or a combination thereof, among other things.

Allowance for Credit Losses - Mid Penn’s ACL - loans methodology is based upon guidance within FASB ASC Subtopic 326-20, as well as regulatory guidance from the FDIC, its primary federal regulator.

If the borrower’s ability to meet the revised payment schedule is not reasonably assured, the loan remains classified as a nonaccrual loan.

Modifications to Borrowers Experiencing Financial Difficulty

From time to time, the Corporation may modify certain loans to borrowers experiencing financial difficulty.

Such modifications may include principal forgiveness, interest rate reductions, payment deferrals, term extensions, or combinations thereof.

Loan modifications to borrowers experiencing financial difficulty are evaluated in accordance with applicable accounting guidance and may result in the recognition of new loans.

Allowance for Credit Losses

Mid Penn’s ACL - loans methodology is based upon guidance within FASB ASC Subtopic 326-20.

Management also considers regulatory guidance issued by its primary federal regulator.

The ACL - loans 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 -

Credit quality within the loan portfolio is continuously monitored by management and is reflected within the ACL - loans.

MID PENN BANCORP, INC.

The ACL - loans is an estimate of expected losses inherent within Mid Penn’s existing loan portfolio.

The ACL - loans is adjusted through the PCL and reduced by the charge off of loan amounts, net of recoveries.

ACL - loans is an estimate of expected losses inherent within Mid Penn’s existing loan portfolio.

The ACL - loans 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 and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future.

When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on historical loss experience, delinquency trends and other relevant credit risk characteristics, adjusted for current conditions and reasonable and supportable forecasts.

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 ACL and credit loss expense.

Determining the appropriateness of the allowance involves significant judgment by management and requires consideration of factors 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.

Mid Penn estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts.

Mid Penn uses a third-party software application to calculate the quantitative portion of the ACL using a methodology and assumptions specific to each loan pool.

Mid Penn uses a third-party software application to assist in calculating the quantitative portion of the ACL;

however, management is responsible for the selection of methodologies, assumptions, and the resulting allowance estimate.

The qualitative portion of the allowance is based on general economic conditions and other internal and external factors affecting Mid Penn as a whole, as well as specific loans.

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The methodology for estimating the amount of expected credit losses reported in the ACL has two basic components:

a collective, or pooled, component for estimated expected credit losses for pools of loans that share similar risk characteristics, and an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans.

a collective, or pooled, component for loans that share similar risk characteristics, and an asset-specific component involving individual loans that do not share risk characteristics with other loans.

In estimating the ACL for the collective component, loans are segregated into loan pools based on loan purpose codes and similar risk characteristics.

The commercial real estate and residential mortgage loan portfolio segments include loans for both commercial and residential properties that are secured by real estate.

The underwriting process for these loans includes analysis of the financial position and strength of both the borrower and, if applicable, guarantor, experience with similar projects in the past, market demand and prospects for successful completion of the proposed project within the established budget and schedule, values of underlying collateral, availability of permanent financing, maximum loan-to-value ratios, minimum equity requirements, acceptable amortization periods and minimum debt service coverage requirements, based on property type.

The underwriting process for these loans includes analysis of the financial position and strength of both the borrower and, if applicable, guarantor, experience with similar projects, market demand and prospects for successful completion of the proposed project within the established budget and schedule, values of underlying collateral, availability of permanent financing, maximum loan-to-value ratios, minimum equity requirements, acceptable amortization periods and minimum debt service coverage requirements, based on property type.

The borrower’s financial strength and capacity to repay their obligations remain the primary focus of underwriting.

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Loan-to-value and debt-to-income ratios, loan amount and lien position are also considered in assessing whether to originate a loan.

These borrowers are particularly susceptible to downturns in economic trends, such as conditions that negatively affect housing prices and demand and levels of unemployment.

Mid Penn utilizes a DCF method to estimate the quantitative portion of the allowance for credit losses for loan pools.

The DCF is based off of historical losses, including peer data, which is correlated to national unemployment and GDP.

These borrowers may be more susceptible to downturns in economic trends, including declines in housing prices and increases in unemployment.

Mid Penn utilizes a DCF method to estimate the quantitative portion of the allowance for credit losses for its loan pools.

The DCF methodology incorporates historical loss experience, including relevant peer data, adjusted for current conditions and reasonable and supportable forecasts that consider macroeconomic variables such as national unemployment and GDP.

MID PENN BANCORP, INC.

The PD and LGD measures are used in conjunction with prepayment data as inputs into the DCF model to calculate the cash flows at the individual loan level.

Contractual cash flows based on loan terms are adjusted for PD, LGD and prepayments to derive loss cash flows.

These loss cash flows are discounted by the loan’s coupon rate to arrive at the

MID PENN BANCORP, INC.

discounted cash flow based quantitative loss.

These loss cash flows are discounted by the loan’s effective interest rate to arrive at the discounted cash flow based quantitative loss estimate.

The prepayment studies are updated quarterly by a third-party for each applicable pool.

Mid Penn determined that reasonable and supportable forecasts could be made for a twelve-month period for all of its loan pools.

To the extent the lives of the loans in the LHFI portfolio extend beyond this forecast period, Mid Penn uses a reversion period of four quarters and reverts to the historical mean on a straight-line basis over the remaining life of the loans.

Mid Penn determined that reasonable and supportable forecasts could be developed for a twelve-month period for its loans held-for-investment (LHFI) portfolio.

To the extent that the contractual lives of the loans extend beyond this forecast period, Mid Penn applies a reversion period of four quarters and reverts to the historical mean on a straight-line basis over the remaining life of the loans.

Qualitative factors used in the ACL methodology include the following:

• Lending process

• Concentrations of credit

• Peer Group Divergence

The ACL for individual loans, such as non-accrual and PCD, that do not share risk characteristics with other loans is measured as the difference between the discounted value of expected future cash flows, based on the effective interest rate at origination, and the amortized cost basis of the loan, or the net realizable value.

• Changes in lending policies, procedures, and underwriting standards

• Changes in portfolio composition and concentrations of credit

• Peer group trends and divergence

The ACL for individual loans, such as nonaccrual and PCD, that do not share risk characteristics with other loans is measured as the difference between the discounted value of expected future cash flows, based on the effective interest rate at origination, and the amortized cost basis of the loan, or the net realizable value.

The ACL is the difference between the loan’s net realizable value and its amortized cost basis (net of previous charge-offs and deferred loan fees and costs), except for collateral-dependent loans.

A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the sale of the collateral.

The expected credit loss for collateral-dependent loans is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral, adjusted for the estimated cost to sell.

Fair value estimates for collateral-dependent loans are derived from appraised values based on the current market value or the "as-is" value of the collateral, normally from recently received and reviewed appraisals.

Current appraisals are ordered on a regular basis based on the inspection date or more often if market conditions necessitate.

Current appraisals are ordered on a regular basis based on the inspection date or more often if market conditions are necessitated.

Appraisals are obtained from state-certified appraisers and are based on certain assumptions, which may include construction or development status and the highest and best use of the property.

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If the calculated expected credit loss is determined to be permanent or not recoverable, the amount of the expected credit loss is charged off.

Mid Penn may also purchase loans or acquire loans through a business combination.