Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in this document or in documents incorporated by reference herein, including matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, or Exchange Act. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, and expected operating results, including after giving effect to the Merger, and the assumptions upon which those statements are based. Forward looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” or words or phrases of similar meaning. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements.
The following factors, among others, could cause our financial performance to differ materially from that expressed in such forward-looking statements:
• Mid Penn’s ability to efficiently integrate acquisitions, including the Merger, into its business and operations, which may take longer than anticipated, may be more costly than anticipated and may have unanticipated adverse results relating to Mid Penn’s existing business and operations;
• the possibility that the anticipated benefits of the Merger, including anticipated cost savings and other synergies of the Merger may take longer to be realized or may not be achieved in their entirety, and attrition in key client, partner and other relationships relating to the Merger may be greater than expected;
• the effects of future economic conditions on Mid Penn, the Bank, our nonbank subsidiaries, and our markets and customers;
• governmental monetary and fiscal policies, as well as legislative and regulatory changes;
• 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, 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;
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MID PENN BANCORP, INC. Management’s Discussion and Analysis
• our ability to attract and retain qualified management and personnel;
• results of regulatory examination and supervision processes;
• the failure of assumptions underlying the establishment of reserves for loan 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; and
• the risk factors described in Item 1A of this Annual Report.
All written or oral forward-looking statements attributable to Mid Penn are expressly qualified in their entirety by these cautionary factors.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of Mid Penn’s Consolidated Financial Statements from the view of management and should be read in conjunction with the Consolidated Financial Statements of the Corporation and Notes thereto and other detailed information appearing elsewhere in this Annual Report on Form 10-K.
The comparability of the results of operations for the year ended 2025 compared to 2024 and 2023, in general, has been materially impacted by the William Penn Acquisition, which closed on April 30, 2025.
Mid Penn is not aware of any current trends, events, uncertainties or any current recommendations by the regulatory authorities which, if they were to be implemented, would have a material effect on Mid Penn’s or the Bank’s liquidity, capital resources, or operations.
Executive Overview
Mid Penn is a financial holding company incorporated in August 1991 in the Commonwealth of Pennsylvania.
Mid Penn 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 fully taxable-equivalent basis ("FTE") net interest income as a percentage of average interest-earning assets. The Corporation 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, noninterest expenses and income taxes.
35
MID PENN BANCORP, INC. Management’s Discussion and Analysis
The following table presents a summary of the Corporation's earnings and selected performance ratios:
December 31,
(Dollars in thousands)
2025 2024 2023
Net Income $ 56,248 $ 49,437 $ 37,397
Diluted EPS $ 2.55 $ 2.90 $ 2.29
Dividends Declared $ 0.84 $ 0.80 $ 0.80
Return on average assets 0.93 % 0.91 % 0.77 %
Return on average equity 7.70 % 8.61 % 7.16 %
Net interest margin (1)
3.56 % 3.11 % 3.26 %
Nonperforming assets to total assets 0.50 % 0.41 % 0.27 %
Net charge-off to average loans 0.029 % 0.019 % 0.009 %
(1) Presented on a FTE basis using a 21% Federal tax rate and statutory interest expense disallowances. See also the "Net Interest Income"
On April 30, 2025, Mid Penn completed the William Penn Acquisition, which added total assets of $726.5 million, including $405.3 million of loans and included the acquisition of 12 branches, further expanding Mid Penn's presence in the Philadelphia region and surrounding counties in Pennsylvania and New Jersey. Mid Penn issued 3,506,795 shares of Mid Penn common stock as consideration for the $103.2 million purchase price. The Corporation also granted replacement awards for 538,447 stock options, with a fair value of $3.1 million to continuing employees of William Penn.
During the second quarter of 2023, Mid Penn completed the Brunswick Acquisition, which added total assets of $390.7 million comprised primarily of $324.5 million of loans. This transaction resulted in the addition of 5 branches in central New Jersey. Mid Penn issued 849,510 shares of its common stock, as well as a net cash payment to Brunswick shareholders of $27.6 million, for total consideration of $45.7 million for all outstanding stock and the cancellation of options of Brunswick.
Summary of Financial Results
• Net Income Per Share - Mid Penn’s net income available to common shareholders ("earnings") for the year ended December 31, 2025 was $56.2 million or $2.59 per basic and $2.55 per diluted common share, compared to earnings of $49.4 million or $2.90 per basic and diluted common share for the year ended December 31, 2024. The increase in net income was partially offset by a higher weighted-average number of shares outstanding in 2025, which contributed to a lower diluted earnings per share compared to the prior year.
• Net Interest Income
◦ Net Interest Margin - For the year ended December 31, 2025, Mid Penn’s FTE net interest margin was 3.56% versus 3.11% for the year ended December 31, 2024. The yield on interest-earning assets increased 11 basis point(s) ("bp") for the year ended December 31, 2025 compared to the year ended December 31, 2024 and the rate on interest-bearing liabilities decreased 42 bp for the year ended December 31, 2025 compared to the year ended December 31, 2024.
◦ Loan Growth - Total loans, net of unearned income, as of December 31, 2025 were $4.9 billion compared to $4.4 billion as of December 31, 2024 , an increase of $419.8 million, or 9.4% . Loan growth was driven primarily by an increase in residential mortgage loans of $215.9 million, an increase in nonowner occupied commercial real estate of $113.0 million, an increase in owner occupied commercial real estate of $94.9 million, an increase in commercial and industrial loans of $14.6 million, and a $6.4 million increase in multifamily loans, partially offset by a $29.9 million decrease in construction loans. Loans from the William Penn Acquisition contributed $405.3 million to this increase.
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MID PENN BANCORP, INC. Management’s Discussion and Analysis
◦ Deposit Growth - Total deposits increased $524.7 million, or 11.2%, from $4.7 billion as of December 31, 2024, to $5.2 billion as of December 31, 2025. The growth was driven by an increase of $499.1 million in interest-bearing transaction accounts, an increase of $74.8 million in noninterest-bearing accounts, partially offset by a decrease of $49.2 million in time deposits. Deposits from the William Penn Acquisition contributed $619.8 million to this increase.
• Asset Quality - ACL as of December 31, 2025 was $36.1 million, or 0.74% of total loans, as compared to $35.5 million, or 0.80% of total loans as of December 31, 2024.
◦ Net Charge-offs/Recoveries - Mid Penn had net loan charge-offs of $1.4 million and $817 thousand for the years ended December 31, 2025 and 2024, respectively.
◦ Non-performing assets - Total non-performing assets were $30.8 million as of December 31, 2025, an increase of $8.1 million compared to non-performing assets of $22.7 million as of December 31, 2024. The increase during 2025 was primarily related to the addition of one C&I relationship for $4.7 million offset by the sale of one foreclosed commercial real estate property for $1.4 million. Delinquency, measured as loans past due 30 days or more, including loans on nonaccrual status, was 0.69% of total loans as of December 31, 2025, compared to 0.52% as of December 31, 2024.
◦ Provision/Benefit for credit losses - Loans - The provision for credit losses - loans was $1.6 million for the year ended December 31, 2025 compared to $2.1 million for the year ended December 31, 2024. The decrease for the year ended December 31, 2025 was primarily attributable to reduced expected losses driven by updates to the macroeconomic forecast and lower loan balances as a result of an increase in observed prepayment speeds, partially offset by a $2.3 million reserve on non-PCD loans acquired through the William Penn Acquisition.
• Noninterest Income - Noninterest income totaled $26.8 million for the year ended December 31, 2025, a $4.3 million, or 19.3%, increase compared to the year ended December 31, 2024. The increase in noninterest income is primarily driven by an $838 thousand increase in earnings from the cash surrender value of life insurance, a $618 thousand increase in fiduciary and wealth management income, a $356 thousand increase in mortgage banking income, and a $2.2 million increase in other noninterest income, driven by a $1.1 million increase in insurance commissions, a $910 thousand increase in loan level swap fees, and a $534 thousand increase in recoveries on loans previously acquired in business combinations, which are recognized in noninterest income, rather than a reduction to the allowance for credit losses, consistent with purchase accounting treatment. This increase also includes a $420 thousand gain on the closing of an investment in a reinsurance entity acquired from another institution, a $307 thousand increase in sales tax refunds received, and $362 thousand in swap cancellation gains tied to eliminated brokered deposits, partially offset by a $2.2 million decrease in death benefits received.
• Noninterest Expense - Noninterest expense for the year ended December 31, 2025 totaled $152.3 million, an increase of $34.7 million, or 29.5%, compared to noninterest expense of $117.6 million for the year ended December 31, 2024.
Salaries and benefits increased $13.9 million for the year ended December 31, 2025, compared to the same period in 2024. The increase is attributable to (i) equity-based compensation expense for stock options and restricted stock awards totaling $3.1 million that were recognized in the year ended December 31, 2025; (ii) the retail staff additions at the twelve retail locations added through the William Penn Acquisition; and (iii) the retention of various William Penn team members through the completion of systems integration, which occurred on June 20, 2025.
Merger and acquisition expenses increased $11.0 million for the year ended December 31, 2025, which includes $10.1 million of merger related expenses related to the William Penn Acquisition, $713 thousand related to the 1st Colonial acquisition, $172 thousand related to the Cumberland Advisors Acquisition, and $164 thousand related to the Charis Insurance Group acquisition.
Software licensing and utilization costs increased $3.3 million for the year ended December 31, 2025, compared to the same period in 2024. The increase reflects additional costs to (i) license the additional William Penn branches; and (ii) upgrade internal systems, including network storage, cybersecurity, and data security enhancements in response to the Bank's larger size and increased IT complexity.
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MID PENN BANCORP, INC. Management’s Discussion and Analysis
Occupancy expenses increased $2.3 million for the year ended December 31, 2025, compared to the same period in 2024. The increase was driven by the facility operating costs of the additional retail locations added through the William Penn acquisition.
• Borrowings paid down - During 2025, Mid Penn paid off $318 thousand of long-term debt and redeemed a total of $45.3 million of subordinated debt.
• Share Repurchases - Mid Penn repurchased 79,169 shares during 2025 at an average price per share of $28.50 under its share repurchase program.
• Business Combinations
◦ On May 12, 2025, Mid Penn acquired the insurance business and related accounts of Charis Insurance Group, Inc., which provides business, home and auto insurance throughout central and southern Pennsylvania, for a cash purchase price of $4.0 million.
◦ On April 30, 2025, Mid Penn completed its acquisition of William Penn through the merger of William Penn with and into Mid Penn with Mid Penn being the surviving corporation. In connection with this acquisition, William Penn Bank, a wholly owned subsidiary of William Penn, merged with and into Mid Penn Bank, a wholly owned subsidiary of Mid Penn. The merger was an all-stock transaction valued at approximately $103.2 million, based on the Mid Penn common stock closing price of $29.05 on April 30, 2025.
◦ On July 31, 2024, Mid Penn acquired the insurance business and related accounts of Commonwealth Benefits Group, a full-service employee benefits firm that serves mid to large employers across central and eastern Pennsylvania, northern Maryland, and northern Virginia, for a purchase price of $2.0 million at closing and an additional $800 thousand potentially payable pursuant to a three-year earnout.
◦ On May 19, 2023, Mid Penn completed its acquisition of Brunswick through the merger of Brunswick with and into Mid Penn with Mid Penn being the surviving corporation. In connection with this acquisition, Brunswick Bank, a wholly-owned subsidiary of Brunswick, merged with and into Mid Penn Bank, a wholly-owned subsidiary of Mid Penn.
Critical Accounting Estimates
Mid Penn’s Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and conform to general practices within the banking industry. Application of certain principles involves significant judgments and estimates by management that have a material impact on the carrying value of certain assets and liabilities. The judgments and estimates used in applying these principles are based on historical experiences and other factors which are believed to be reasonable under the circumstances. Because of the nature of the judgments and estimates that have been made, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of assets and liabilities and the reported results of operations.
Management of the Corporation considers the accounting judgments relating to the allowance for credit losses and goodwill impairment to be the accounting area that requires the most subjective and complex judgments.
Allowance for Credit Losses
In accordance with CECL, the ACL, which includes both the ACL - loans and the ACL for OBS credit exposures, is calculated with the objective of maintaining a reserve for current expected credit losses over the remaining expected life of the portfolio. Management's determination of the appropriateness of the reserve is based on continuously monitoring and evaluating the loan portfolio, lending-related commitments, current as well as forecasted economic factors, and other relevant factors. The ACL - loans is an estimate of expected losses inherent within Mid Penn's existing loan portfolio.
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. Evaluations of the portfolio and individual credits are inherently
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MID PENN BANCORP, INC. Management’s Discussion and Analysis
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 judgment 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.
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. 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. Factors considered include the following: lending process, concentrations of credit, and credit quality. The quantitative and qualitative portions of the allowance are added together to determine the total ACL, which reflects Management’s expectations of future conditions based on reasonable and supportable forecasts. As such, the calculation of ACL is inherently subjective and requires management to exercise significant judgment. The CECL estimate, including assumptions related to interest rates, unemployment, and economic growth, is highly sensitive to the economic forecasts used to develop the estimate.
While management uses the best information known to it to make ACL valuations, adjustments to the ACL may be necessary based on changes in economic and other conditions, changes in the composition of the loan portfolio, or changes in accounting guidance. In times of economic slowdown, either local, regional or national, the risk inherent in the loan portfolio could increase resulting in the need for additional provisions to the ACL in future periods. An increase could also be necessitated by an increase in the size of the loan portfolio or in any of its components even though the credit quality of the overall portfolio may be improving.
For further discussion of the methodology used in the determination of the ACL, refer to "Note 1, Summary of Significant Accounting Policies", "Note 3 - Investment Securities", "Note 4 - Loans and Allowance for Credit Losses - Loans" and "Note 18 - Commitments and Contingencies" to the Consolidated Financial Statements. To the extent actual outcomes differ from management estimates, additional provision for credit losses may be required that would adversely impact earnings in future periods.
The allowance for credit losses - loans was $36.1 million as of December 31, 2025, an increase of $577 thousand, or 1.6%, compared to $35.5 million as of December 31, 2024. The increase for the year ended December 31, 2025 was primarily attributable to a $2.3 million reserve on non-PCD loans acquired through the William Penn Acquisition, offset by reduced expected losses driven by updates to the macroeconomic forecast and lower loan balances as a result of an increase in observed prepayment speeds.
Goodwill
Mid Penn evaluates goodwill annually for impairment unless events occur which indicate that impairment is possible, a triggering event. As of December 31, 2025, Mid Penn had goodwill of $136.6 million and Mid Penn's stock continues to trade below book value.
Our annual impairment test was conducted during the fourth quarter of 2025. Goodwill is calculated as a purchase premium using the market participant and peer group control premium approach. Additional factors considered include actual earnings in relation to forecasted earnings, liquidity levels, changes in deposit balances, and credit quality, among others.
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MID PENN BANCORP, INC. Management’s Discussion and Analysis
No goodwill impairment has been recorded for 2025. Management will continue to monitor internal metrics and macroeconomic trends to determine if there is likelihood of goodwill impairment.
Refer to "Note 1 - Summary of Significant Accounting Policies" and "Note 6 - Goodwill and Intangible Assets" for further details on the Company's goodwill.
Business Combinations
Assets acquired and liabilities assumed in business combinations are measured at fair value as of the acquisition date. In many cases, determining the fair value of the assets acquired and liabilities assumed requires Mid Penn to estimate the timing and amount of cash flows expected to result from these assets and liabilities and to discount these cash flows at appropriate rates of interest, which require the utilization of significant estimates and judgment in accounting for the acquisition.
Refer to "Note 1 - Summary of Significant Accounting Policies" and "Note 2 - Business Combinations" for further details on the Company's business combinations.
Results of Operations
Net Interest Income
Net interest income, Mid Penn's primary source of earnings, represents the difference between interest income received on loans, investments, and overnight funds, and interest expense paid on deposits and short- and long-term borrowings. Net interest income is affected by changes in interest rates and changes in average balances (volume) in the various interest-sensitive assets and liabilities. Interest and average rates in the table below are presented on a fully taxable-equivalent basis ("FTE"). Tax-equivalent adjustments were calculated using a statutory corporate tax rate of 21% for the years ended December 31, 2025, 2024 and 2023. For purposes of calculating loan yields, average loan balances include nonaccrual loans. Loan fees of $5.5 million, $4.8 million and $4.6 million are included with loan interest income in the following table for the years ended December 31, 2025, 2024, and 2023, respectively.
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MID PENN BANCORP, INC. Management’s Discussion and Analysis
The following table includes average balances, effective interest differential and interest yields for the years ended December 31:
Average Balances, Income and Interest Rates
2025 2024 2023
(Dollars in thousands) Average Balance Interest Yield/
Rate Average Balance Interest Yield/
Rate Average Balance Interest Yield/
Rate
ASSETS:
Interest Bearing Balances $ 23,164 $ 611 2.64 % $ 30,576 $ 1,127 3.69 % $ 24,270 $ 361 1.49 %
Investment Securities:
Taxable 646,267 21,858 3.38 543,157 15,254 2.81 544,896 15,141 2.78
Tax-exempt 66,462 1,343 2.02 73,834 1,464 1.98 78,163 1,540 2.49
Total Investment Securities 712,729 23,201 3.26 616,991 16,718 2.71 623,059 16,681 2.68
Federal funds sold 172,035 7,331 4.26 36,436 1,928 5.29 7,161 373 5.21
Loans, net of unearned income 4,709,514 292,184 6.20 4,373,922 265,522 6.07 3,868,307 218,060 5.65
Restricted investment in bank stocks 6,990 443 6.34 14,155 1,288 9.10 11,121 864 7.77
Total Interest-earning Assets 5,624,432 323,770 5.76 5,072,080 286,583 5.65 4,533,918 236,339 5.21
Cash and Due from Banks 46,249 39,995 49,503
Other Assets 361,211 300,904 299,666
Total Assets $ 6,031,892 $ 5,412,979 $ 4,883,087
LIABILITIES & SHAREHOLDERS' EQUITY:
Interest-bearing Demand $ 1,179,007 $ 20,917 1.77 % $ 1,001,813 $ 19,001 1.90 % $ 950,326 $ 13,893 1.46 %
Money market 1,176,166 32,783 2.79 913,360 26,580 2.91 925,973 21,424 2.31
Savings 306,431 249 0.08 275,692 244 0.09 312,053 230 0.07
Time 1,674,557 67,857 4.05 1,541,605 70,495 4.57 1,116,613 43,749 3.92
Total Interest-bearing Deposits 4,336,161 121,806 2.81 3,732,470 116,320 3.12 3,304,965 79,296 2.40
Short-term borrowings 8,044 381 4.74 190,885 10,575 5.54 107,323 7,087 6.60
Long-term debt 23,358 1,030 4.41 27,937 1,321 4.73 45,304 975 2.15
Subordinated debt 35,881 1,458 4.06 46,045 1,696 3.68 49,328 2,008 4.07
Total Interest-bearing Liabilities 4,403,444 124,675 2.83 3,997,337 129,912 3.25 3,506,920 89,366 2.55
Noninterest-bearing Demand 816,429 780,538 800,582
Other Liabilities 81,958 62,820 53,530
Shareholders' Equity 730,061 572,284 522,055
Total Liabilities & Shareholders' Equity $ 6,031,892 $ 5,412,979 $ 4,883,087
Net Interest Income $ 199,095 $ 156,671 $ 146,973
Taxable Equivalent Adjustment (1)
975 1,018 811
Net Interest Income (taxable-equivalent basis) $ 200,070 $ 157,689 $ 147,784
Total Yield on Earning Assets 5.76 % 5.65 % 5.21 %
Rate on Supporting Liabilities 2.83 3.25 2.55
Average Interest Spread 2.93 2.40 2.66
Net Interest Margin (1)
3.56 3.11 3.26
(1) Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances.
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MID PENN BANCORP, INC. Management’s Discussion and Analysis
The volume analysis of changes in net interest income as of December 31 are as follows:
Years Ended
December 31, 2025 vs. December 31, 2024 Years ended
December 31, 2024 vs. December 31, 2023
Increase (decrease) Increase (decrease)
(In thousands) Volume Rate (1)
Net Volume Rate (1)
Net
INTEREST INCOME:
Interest Bearing Balances $ (273) $ (243) $ (516) $ 94 $ 672 $ 766
Investment Securities:
Taxable 2,896 3,708 6,604 (48) 161 113
Tax-exempt (146) 25 (121) (108) 32 (76)
Total Investment Securities 2,750 3,733 6,483 (156) 193 37
Federal funds sold 7,175 (1,772) 5,403 1,525 30 1,555
Loans, net of unearned income 20,372 6,290 26,662 28,567 18,895 47,462
Restricted investment in bank stocks (652) (193) (845) 236 188 424
Total Interest Income $ 29,372 $ 7,815 $ 37,187 $ 30,266 $ 19,978 $ 50,244
INTEREST EXPENSE:
Interest-Bearing Deposits:
Interest-bearing demand $ 3,361 $ (1,445) $ 1,916 $ 752 $ 4,356 $ 5,108
Money market 7,648 (1,445) 6,203 (291) 5,447 5,156
Savings 27 (22) 5 (25) 39 14
Time 6,079 (8,717) (2,638) 16,660 10,086 26,746
Total Interest-Bearing Deposits 17,115 (11,629) 5,486 17,096 19,928 37,024
Short-term borrowings (8,660) (1,534) (10,194) 4,629 (1,141) 3,488
Long-term debt (217) (74) (291) (373) 719 346
Subordinated debt (374) 136 (238) (134) (178) (312)
Total Interest Expense 7,864 (13,101) (5,237) 21,218 19,328 40,546
NET INTEREST INCOME $ 21,508 $ 20,916 $ 42,424 $ 9,048 $ 650 $ 9,698
(1) The effect of changing volume and rate, which cannot be segregated, has been allocated entirely to the rate column. Tax-exempt income is shown on a tax equivalent basis using a statutory corporate tax rate of 21% for the years ended December 31, 2025, 2024 and 2023.
For the year ended December 31, 2025, Mid Penn’s FTE net interest margin was 3.56% compared to 3.11% for the year ended December 31, 2024 and 3.26% for the year ended December 31, 2023. The increase in net interest margin was primarily a result of a decrease in funding costs, reflecting lower average interest-bearing liabilities, as well as higher yields on interest-earning assets and growth in average interest-earning assets. During 2025, FTE net interest income increased $42.4 million, or 27.1%, compared to 2024. Interest income increased $29.4 million as the result of a $552.4 million, or 10.9%, increase in average interest-earning assets in 2025 compared to 2024, and increased $7.8 million as the result of a 11 bp increase in the yield on interest-earning assets in 2025 compared to 2024.
Average total loans, net, increased $335.6 million , or 7.7%, contributing $20.4 million to the increase in interest income. The yield on average total loans, net, increased from 6.07% for 2024 to 6.20% for 2025. Loan yields increased due to higher rate loan production and portfolio mix shifts, partially offset by the impact of lower market interest rates.
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MID PENN BANCORP, INC. Management’s Discussion and Analysis
Total average federal funds sold increased $135.6 million , contributing $7.2 million to the increase in FTE interest income, partially offset by a 103 bps decrease in the average yield on federal funds sold, reducing FTE interest income by $1.8 million.
Interest expense decreased by $5.2 million or 4.0% for the year ended December 31, 2025 compared to 2024. The cost of interest-bearing liabilities decreased to 2.83% in 2025 from 3.25% in 2024 and increased from 2.55% in 2023. The rate on total interest-bearing deposits decreased to 2.81% in 2025 from 3.12% in 2024 and increased from 2.40% in 2023. The decrease in the rate from 2024 was primarily a result of the Bank lowering rates in response to the Federal Reserve interest rate cuts in 2025. In addition, average short-term borrowings decreased to $8.0 million from $190.9 million in 2024, which contributed to the $10.2 million decrease in interest expense on short-term borrowings for the year ended December 31, 2025 as compared to 2024.
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 $1.6 million for the year ended December 31, 2025, a decrease of $546 thousand or 25.5% compared to a provision for credit losses of $2.1 million for the year ended December 31, 2024. The provision for credit losses on loans for the year ended December 31, 2024 decreased $1.2 million, or 34.9%, from the $3.3 million provision for credit losses on loans for the year ended December 31, 2023. The decrease in provision for the year ended December 31, 2025 was primarily attributable to reduced expected losses resulting from updates to the macroeconomic forecast and lower loan balances as a result of an increase in observed prepayment speeds, partially offset by a $2.3 million reserve on non-PCD loans acquired through the William Penn acquisition. The benefit for credit losses on off-balance sheet credit exposures was $301 thousand for the year ended December 31, 2025, compared to a benefit of $628 thousand for the year ended December 31, 2024, and a provision of $404 thousand for the year ended December 31, 2023.
For the year ended December 31, 2025, Mid Penn had net charge-offs of $1.4 million compared to net charge-offs of $817 thousand for the year ended December 31, 2024, and net charge-offs of $332 thousand for the year ended December 31, 2023 . A summary of charge-offs and recoveries of loans and the provision for loan losses is shown in the table below.
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MID PENN BANCORP, INC. Management’s Discussion and Analysis
The following table represents the analysis of the allowance for credit losses:
Year ended December 31,
(In thousands) 2025 2024 2023
Balance, beginning of year $ 35,514 $ 34,187 $ 18,957
Loans charged off:
Commercial real estate
CRE Nonowner Occupied 1,085 — —
CRE Owner Occupied 346 — 16
Total Commercial real estate 1,431 — 16
Commercial and industrial 294 819 238
Residential mortgage
1-4 Family 1st Lien — 7 13
1-4 Family Rental — 2 —
HELOC and Junior Liens — 21 —
Total residential mortgage — 30 13
Consumer 98 52 135
Total loans charged off $ 1,823 $ 901 $ 402
Recoveries on loans previously charged off:
Commercial real estate
CRE Nonowner Occupied $ 305 $ 2 $ —
CRE Owner Occupied — 4 —
Total commercial real estate 305 6 —
Commercial and industrial 9 1 —
Residential mortgage
1-4 Family 1st Lien 90 16 7
1-4 Family Rental — 22 31
Total residential mortgage 90 38 38
Consumer 55 39 32
Total loans recovered 459 84 70
Net charge-offs 1,364 817 332
Provision for loan losses 1,598 2,144 3,295
Impact from the adoption of CECL — — 11,931
Purchase Credit Deteriorated loans 343 — 336
Balance, end of year $ 36,091 $ 35,514 $ 34,187
44
MID PENN BANCORP, INC. Management’s Discussion and Analysis
The following table represents the ratio of net charge-offs (recoveries) to total average loans outstanding:
(Dollars in thousands)
Year ended December 31, 2025 Net charge-offs (Recoveries) Average Loans outstanding Ratio of net charge-offs (recoveries) to total average loans outstanding
Commercial real estate
CRE Nonowner Occupied $ 780 $ 1,324,775 0.059 %
CRE Owner Occupied 346 695,493 0.050
Multifamily — 417,003 0.000
Farmland — 226,556 0.000
Total Commercial Real Estate 1,126 2,663,827 0.042
Commercial and industrial
285 723,848 0.039
Construction
Residential Construction — 90,375 0.000
Other Construction — 311,093 0.000
Total Construction — 401,468 0.000
Residential mortgage
1-4 Family 1st Lien (90) 393,022 (0.023)
1-4 Family Rental — 395,063 0.000
HELOC and Junior Liens — 166,393 0.000
Total Residential Mortgage (90) 954,478 (0.009)
Consumer 43 8,389 0.507
Total Loans $ 1,364 $ 4,752,010 0.029 %
Year ended December 31, 2024
Commercial real estate
CRE Nonowner Occupied $ (2) $ 1,204,473 0.000 %
CRE Owner Occupied (4) 624,542 (0.001)
Multifamily — 384,374 0.000
Farmland — 217,667 0.000
Total Commercial Real Estate (6) 2,431,056 0.000
Commercial and industrial
818 695,730 0.118
Construction
Residential Construction — 101,234 0.000
Other Construction — 349,481 0.000
Total Construction — 450,715 0.000
Residential mortgage
1-4 Family 1st Lien (9) 323,524 (0.003)
1-4 Family Rental (20) 344,261 (0.006)
HELOC and Junior Liens 21 136,634 0.015
Total Residential Mortgage (8) 804,419 (0.001)
Consumer 13 7,276 0.179
Total Loans $ 817 $ 4,389,196 0.019 %
45
MID PENN BANCORP, INC. Management’s Discussion and Analysis
(Dollars in thousands)
Year ended December 31, 2023
Commercial real estate
CRE Nonowner Occupied $ — $ 1,111,413 0.000 %
CRE Owner Occupied 16 586,357 0.003
Multifamily — 261,289 0.000
Farmland — 199,452 0.000
Total Commercial Real Estate 16 2,158,511 0.001
Commercial and industrial
238 641,264 0.037
Construction
Residential Construction — 100,851 0.000
Other Construction — 378,962 0.000
Total Construction — 479,813 0.000
Residential mortgage
1-4 Family 1st Lien 6 342,485 0.002
1-4 Family Rental (31) 253,606 (0.012)
HELOC and Junior Liens — 128,912 0.000
Total Residential Mortgage (25) 725,003 (0.003)
Consumer 103 6,486 1.588
Total Loans $ 332 $ 4,011,077 0.008 %
Noninterest Income
Noninterest income and variance analysis as of December 31:
Year Ended December 31,
(Dollars in thousands) 2025 2024 2023 $ Variance 2025 vs. 2024 % Variance 2025 vs. 2024
Income from fiduciary and wealth management activities $ 5,298 $ 4,680 $ 5,059 $ 618 13.2 %
ATM debit card interchange income 3,949 3,851 4,019 98 2.5
Service charges on deposits 2,495 2,176 1,943 319 14.7
Mortgage banking income 2,832 2,476 1,353 356 14.4
Mortgage hedging income 12 10 324 2 20.0
Net gain on sales of SBA loans 220 347 571 (127) (36.6)
Earnings from cash surrender value of life insurance 1,979 1,141 1,112 838 73.4
Net gain on sales of investment activities 10 — — 10 100.0
Other income 10,047 7,812 5,627 2,235 28.6
Total Noninterest Income $ 26,842 $ 22,493 $ 20,008 $ 4,349 19.3 %
For the year ended December 31, 2025, noninterest income totaled $26.8 million, an increase of $4.3 million or 19.3%, compared to noninterest income of $22.5 million for the year ended December 31, 2024. The increase in noninterest income was primarily driven by an $838 thousand increase in earnings from the cash surrender value of life insurance, a $618 thousand increase in fiduciary and wealth management, a $356 thousand increase in mortgage banking, and a $2.2 million increase in other noninterest income, driven by a $1.1 million increase in insurance commissions, a $910 thousand increase in loan level swap fees, and a $534 thousand in recoveries on loans previously acquired in business combinations. These recoveries are recognized in noninterest income rather than a reduction to the allowance for credit losses, consistent with purchase accounting treatment, as expected credit losses on acquired loans were reflected in fair value adjustments at
46
MID PENN BANCORP, INC. Management’s Discussion and Analysis
the acquisition date. This increase also includes a $420 thousand gain on the closing of an investment of a reinsurance entity acquired from another institution, a $307 thousand increase in sales tax refunds received, and $362 thousand in swap cancellation gains tied to eliminated brokered deposits, partially offset by a $2.2 million decrease in death benefits received.
For details on the variances of noninterest income for the year ended December 31, 2024 compared to the year ended December 31, 2023 refer to the "Noninterest Income" section of the MD&A in the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Noninterest Expense
Noninterest expense and variance analysis as of December 31:
Year Ended December 31,
(Dollars in thousands) 2025 2024 2023 $ Variance
2025 vs. 2024 % Variance
2025 vs. 2024
Salaries and employee benefits $ 78,029 $ 64,098 $ 59,345 $ 13,931 21.7 %
Software licensing and utilization 12,562 9,300 7,927 3,262 35.1
Occupancy expense, net 9,905 7,571 7,349 2,334 30.8
Equipment expense 5,025 4,928 5,121 97 2.0
Shares tax 2,776 2,350 2,713 426 18.1
Legal and professional fees 3,881 4,306 2,945 (425) (9.9)
ATM/card processing 2,682 2,284 2,108 398 17.4
Intangible amortization 3,046 1,784 1,780 1,262 70.7
FDIC assessment 3,452 4,170 3,500 (718) (17.2)
Loss/(gain) on sale or write-down of foreclosed assets, net 646 80 (144) 566 707.5
Merger and acquisition expense 11,519 545 5,544 10,974 2013.5
Post-acquisition restructuring expense — — 2,952 — —
Other expenses 18,747 16,200 17,448 2,547 15.7
Total Noninterest Expense $ 152,270 $ 117,616 $ 118,588 $ 34,654 29.5 %
For the year ended December 31, 2025, noninterest expense totaled $152.3 million, an increase of $34.7 million, or 29.5%, compared to noninterest expense of $117.6 million for the year ended December 31, 2024.
Salaries and benefits increased $13.9 million for the year ended December 31, 2025, compared to the same period in 2024. The increase is attributable to (i) equity-based compensation expense for stock options and restricted stock awards totaling $3.1 million that were recognized in the year ended December 31, 2025; (ii) the retail staff additions at the twelve retail locations added through the William Penn acquisition; and (iii) the retention of various William Penn team members through the completion of systems integration, which occurred on June 20, 2025.
Merger and acquisition expenses increased $11.0 million for the year ended December 31, 2025, which includes $10.1 million of merger related expenses related to the William Penn Acquisition, $713 thousand related to the 1st Colonial acquisition, $172 thousand related to the Cumberland Advisors Acquisition, and $164 thousand related to the Charis Insurance Group acquisition.
Software licensing and utilization costs increased $3.3 million for the year ended December 31, 2025, compared to the same period in 2024. The increase reflects additional costs to (i) license the additional William Penn branches; and (ii) upgrade internal systems, including network storage, cybersecurity, and data security enhancements in response to the Bank's larger size and increased IT complexity.
47
MID PENN BANCORP, INC. Management’s Discussion and Analysis
Occupancy expenses increased $2.3 million for the year ended December 31, 2025, compared to the same period in 2024. The increase was driven by the facility operating costs of the additional retail locations added through the William Penn Acquisition.
For details on the variances of noninterest expense for the year ended December 31, 2024 compared to the year ended December 31, 2023 refer to the "Noninterest Expense" section of the MD&A in the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Income Taxes
The provision for income taxes was $16.1 million during the year ended December 31, 2025 , an increase of $5.5 million compared to $10.6 million for the same period in 2024 . The provision for income taxes for the year ended December 31, 2025 reflects an effective combined Federal and state tax rate ("ETR") of 22.3%, com pared to an ETR of 17.6% for the year ended December 31, 2024. The increase in the effective tax rate in 2025 compared to 2024 was primarily driven by items reflected in the effective tax rate reconciliation table, including a higher unfavorable impact of income from life insurance, and an increase in non-deductible merger and acquisition expenses. 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.
On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. These changes did not have a material impact on the Company’s federal income tax expense or liability for the year ended December 31, 2025. The Company is currently evaluating the impact on future periods.
Financial Condition
Mid Penn’s total assets were $6.1 billion as of December 31, 2025, reflecting an increase of $663.0 million, or 12.1%, compared to total assets of $5.5 billion as of December 31, 2024. The increase was primarily driven by an increase in loans as a result of the William Penn Acquisition, an increase in available-for-sale investment securities, and an increase in federal 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. Mid Penn’s investment portfolio includes both held-to-maturity securities and available-for-sale securities.
Mid Penn’s portfolio of held-to-maturity ("HTM") securities, recorded at amortized cost, decreased $35.2 million to $347.3 million as of December 31, 2025, as compared to $382.4 million as of December 31, 2024. Mid Penn’s total available-for-sale ("AFS") securities portfolio increased $155.8 million from $260.5 million as of December 31, 2024 to $416.3 million as of December 31, 2025.
As of December 31, 2025, the unrealized gain on AFS investment securities resulted in a positive impact to shareholders’ equity of $11.9 million (comprised of a gross unrealized gain on securities of $14.1 million, net of deferred income tax). As of December 31, 2024, the unrealized loss on AFS investment securities resulted in a negative impact to shareholders’ equity of $1.6 million (comprised of a gross unrealized loss on securities of $2.0 million, net of deferred income tax). Mid Penn does not have any significant concentrations of non-governmental securities within its investment portfolio.
48
MID PENN BANCORP, INC. Management’s Discussion and Analysis
The following table presents the expected maturities of the investment portfolio and the weighted-average yields (calculated based on historical cost and net of tax) as of December 31, 2025:
Maturing
(Dollars in thousands) One Year
and Less After One Year
thru Five Years After Five Years
Thru Ten Years After Ten
Years Total
As of December 31, 2025 Amount Weighted-Average Yield 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 $ — — % $ 14,693 2.38 % $ 4,373 3.09 % $ — — % $19,066 2.53 %
Mortgage-backed U.S. government agencies — — — — 7,789 3.02 345,608 4.56 353,397 4.45
State and political subdivision obligations — — — — 3,158 2.50 676 2.23 3,834 2.44
Corporate debt securities 2,945 2.25 8,807 6.21 28,265 5.39 — — 40,017 5.01
$ 2,945 2.25 % $ 23,500 3.81 % $ 43,585 4.52 % $ 346,284 4.55 % $416,314 4.41 %
Held-to-maturity securities, at amortized cost:
U.S. Treasury and U.S. government agencies $ 21,497 1.66 % $ 102,727 1.92 % $ 107,756 2.11 % $ — — % $231,980 1.99 %
Mortgage-backed U.S. government agencies 4 3.96 1,698 2.98 3,769 2.73 26,947 1.96 32,418 2.13
State and political subdivision obligations 7,973 2.61 33,620 2.37 14,927 2.40 10,921 2.63 67,441 2.44
Corporate debt securities 2,000 2.25 4,446 4.26 9,000 3.04 — — 15,446 3.77
$ 31,474 1.94 % $ 142,491 2.11 % $ 135,452 2.22 % $ 37,868 2.15 % $347,285 2.20 %
Loans, net of unearned income
Total loans, net of unearned income, as of December 31, 2025 were $4.9 billion compared to $4.4 billion as of December 31, 2024. The growth of $419.8 million, or 9.4%, since December 31, 2024 was primarily the result of the addition of loans from the William Penn Acquisition of $405.3 million.
49
MID PENN BANCORP, INC. Management’s Discussion and Analysis
The following table presents the ending balance of loans outstanding, by type, as of December 31:
2025 2024 Change in Balance
(Dollars in thousands) Balance % of Total Loans Balance % of Total Loans $ %
Commercial real estate
CRE Nonowner Occupied $ 1,364,040 28.1 % $ 1,251,010 28.1 % $ 113,030 9.0 %
CRE Owner Occupied 718,864 14.7 624,007 14.0 94,857 15.2
Multifamily 419,267 8.6 412,900 9.3 6,367 1.5
Farmland 227,816 4.7 224,709 5.1 3,107 1.4
Total Commercial Real Estate 2,729,987 56.1 2,512,626 56.5 217,361 8.7
Commercial and industrial
720,031 14.8 705,392 15.9 14,639 2.1
Construction
Residential Construction 85,299 1.8 99,399 2.2 (14,100) (14.2)
Other Construction 310,390 6.3 326,171 7.3 (15,781) (4.8)
Total Construction 395,689 8.1 425,570 9.5 (29,881) (7.0)
Residential Mortgage
1-4 Family 1st Lien 417,421 8.6 313,592 7.1 103,829 33.1
1-4 Family Rental 410,965 8.5 336,636 7.6 74,329 22.1
HELOC and Junior Liens 178,116 3.7 140,392 3.2 37,724 26.9
Total Residential Mortgage 1,006,502 20.8 790,620 17.9 215,882 27.3
Consumer 10,629 0.2 8,862 0.2 1,767 19.9
$ 4,862,838 100.0 % $ 4,443,070 100.0 % $ 419,768 9.4 %
The majority of the Bank's loan portfolio is to businesses and individuals located within the Bank's primary market area, which consists principally of central and southeastern Pennsylvania, along with select counties in 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 to identify credit portfolio weaknesses as early as possible, so any exposures that are discovered might be mitigated or potential losses reduced. Most of the Bank's loans are secured by real estate, and the value of this collateral is dependent on and subject to change based on real estate market conditions within its market area.
50
MID PENN BANCORP, INC. Management’s Discussion and Analysis
The following table represents the Commercial Real Estate portfolio by property type along with the weighted-average loan to value as of December 31:
(Dollars in thousands) December 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)
$ 718,864 26.3 % N/A $ 624,007 24.8 % N/A
Farmland (1)
227,816 8.3 N/A 224,709 8.9 N/A
Multifamily 419,267 15.5 53.3 412,900 16.4 63.8
Non Owner Occupied
Retail 429,095 15.7 50.4 426,171 17.0 60.3
Office 289,650 10.6 61.4 296,468 11.8 63.2
Industrial 177,822 6.5 48.0 161,683 6.4 53.2
Hospitality 158,667 5.8 47.1 152,060 6.1 51.2
Flex 46,432 1.7 47.2 44,187 1.8 44.2
Mobile Home Park 18,763 0.7 56.4 17,748 0.7 67.7
Health Care 11,870 0.4 52.8 14,511 0.6 55.3
Other Property Types 231,741 8.5 54.7 138,182 5.5 64.1
Total Commercial Real Estate $ 2,729,987 100.0 % 52.9 % $ 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 December 31, 2025 One Year
and Less One to
Five Years Five to
Fifteen Years Over
Fifteen Years Total
Commercial real estate
CRE Nonowner Occupied $ 147,044 $ 433,838 $ 470,697 $ 312,461 $ 1,364,040
CRE Owner Occupied 19,358 120,239 322,590 256,677 718,864
Multifamily 97,982 121,613 96,372 103,300 419,267
Farmland 519 10,124 66,249 150,924 227,816
Total Commercial real estate 264,903 685,814 955,908 823,362 2,729,987
Commercial and industrial 38,299 304,319 130,046 247,367 720,031
Construction
Residential Construction 48,524 18,682 14,372 3,721 85,299
Other Construction 159,847 101,342 33,421 15,780 310,390
Total Construction 208,371 120,024 47,793 19,501 395,689
Residential mortgage
1-4 Family 1st Lien 5,517 29,730 93,305 288,869 417,421
1-4 Family Rental 38,911 29,180 145,216 197,658 410,965
HELOC and Junior Liens 6,118 14,339 38,605 119,054 178,116
Total Residential Mortgage 50,546 73,249 277,126 605,581 1,006,502
Consumer 4,714 1,492 1,411 3,012 10,629
Total loans held in portfolio $ 566,833 $ 1,184,898 $ 1,412,284 $ 1,698,823 $ 4,862,838
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MID PENN BANCORP, INC. Management’s Discussion and Analysis
Fixed interest rates:
Commercial real estate
CRE Nonowner Occupied $ 92,770 $ 192,984 $ 55,778 $ 8,782 $ 350,314
CRE Owner Occupied 11,884 74,306 26,403 3,141 115,734
Multifamily 52,441 50,057 7,638 — 110,136
Farmland 518 7,907 4,748 — 13,173
Total Commercial real estate 157,613 325,254 94,567 11,923 589,357
Commercial and industrial 3,536 183,508 25,660 6,886 219,590
Construction
Residential Construction 8,918 6,285 — 3,200 18,403
Other Construction 16,008 20,013 1,054 1,108 38,183
Total Construction 24,926 26,298 1,054 4,308 56,586
Residential mortgage
1-4 Family 1st Lien 4,246 19,286 70,932 218,716 313,180
1-4 Family Rental 33,300 20,045 14,510 10,052 77,907
HELOC and Junior Liens 1,490 6,914 25,902 3,273 37,579
Total Residential Mortgage 39,036 46,245 111,344 232,041 428,666
Consumer 2,652 1,485 1,266 932 6,335
Total fixed interest rates $ 227,763 $ 582,790 $ 233,891 $ 256,090 $ 1,300,534
Floating interest rates:
Commercial real estate
CRE Nonowner Occupied $ 54,274 $ 240,854 $ 414,919 $ 303,679 $ 1,013,726
CRE Owner Occupied 7,474 45,933 296,187 253,536 603,130
Multifamily 45,541 71,556 88,734 103,300 309,131
Farmland 1 2,217 61,501 150,924 214,643
Total Commercial real estate 107,290 360,560 861,341 811,439 2,140,630
Commercial and industrial 34,763 120,811 104,386 240,481 500,441
Construction
Residential Construction 39,606 12,397 14,372 521 66,896
Other Construction 143,839 81,329 32,367 14,672 272,207
Total Construction 183,445 93,726 46,739 15,193 339,103
Residential mortgage
1-4 Family 1st Lien 1,271 10,444 22,373 70,153 104,241
1-4 Family Rental 5,611 9,135 130,706 187,606 333,058
HELOC and Junior Liens 4,628 7,425 12,703 115,781 140,537
Total Residential Mortgage 11,510 27,004 165,782 373,540 577,836
Consumer 2,062 7 145 2,080 4,294
Total floating interest rates 339,070 602,108 1,178,393 1,442,733 3,562,304
Total fixed and floating interest rates $ 566,833 $ 1,184,898 $ 1,412,284 $ 1,698,823 $ 4,862,838
52
MID PENN BANCORP, INC. Management’s Discussion and Analysis
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 judgment 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.
The following table represents the allowance for credit loss as a percentage of total loans:
(Dollars in thousands)
As of December 31, 2025 Total ACL - Loans Total Loans % of Total Loans Outstanding Allowance as a % of Loan Category
Commercial real estate
CRE Nonowner Occupied $ 9,917 $ 1,364,040 28.0 % 0.7 %
CRE Owner Occupied 6,095 718,864 14.7 0.8
Multifamily 1,443 419,267 8.6 0.3
Farmland 2,118 227,816 4.7 0.9
Total Commercial real estate 19,573 2,729,987 56.0 0.7
Commercial and industrial 9,259 720,031 14.8 1.3
Construction
Residential Construction 477 85,299 1.8 0.6
Other Construction 1,464 310,390 6.4 0.5
Total Construction 1,941 395,689 8.2 0.5
Residential mortgage
1-4 Family 1st Lien 2,434 417,421 8.6 0.6
1-4 Family Rental 2,295 410,965 8.5 0.6
HELOC and Junior Liens 559 178,116 3.7 0.3
Total Residential mortgage 5,288 1,006,502 20.8 0.5
Consumer 30 10,629 0.2 0.3
Total $ 36,091 $ 4,862,838 100.0 % 0.7 %
For more information regarding Mid Penn’s ACL 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 8. – Financial Statements of this Annual Report on Form 10-K..
53
MID PENN BANCORP, INC. Management’s Discussion and Analysis
The following table represents non-performing assets as of:
December 31,
(Dollars in thousands) 2025 2024 2023
Nonperforming Assets:
Total nonaccrual loans $ 22,951 $ 22,610 $ 14,216
Foreclosed real estate 7,806 44 293
Total nonperforming assets 30,757 22,654 14,509
Accruing loans 90 days or more past due — — —
Total risk elements $ 30,757 $ 22,654 $ 14,509
Nonaccrual loans as a percentage of total loans outstanding 0.47 % 0.51 % 0.33 %
Nonperforming assets as a percentage of total loans outstanding and foreclosed real estate 0.63 % 0.51 % 0.34 %
Allowance for credit losses as a percentage of total loans 0.74 % 0.80 % 0.80 %
Ratio of ACL-loans to nonperforming loans 157.25 % 157.07 % 240.48 %
Total nonperforming assets were $30.8 million as of December 31, 2025, an increase compared to nonperforming assets of $22.7 million as of December 31, 2024. The increase during the year ended December 31, 2025 was primarily related to four commercial real estate and two commercial and industrial loans with a combined balance of $9.0 million that were placed on nonaccrual status during 2025. This increase was partially offset by the sale of one foreclosed commercial real estate property of $1.4 million in the fourth quarter of 2025. Delinquency, measured as loans past due 30 days or more, including loans on nonaccrual status, was 0.69% of total loans as of December 31, 2025, compared to 0.52% and 0.49% as of December 31, 2024 and December 31, 2023, respectively.
Deposits and Other Funding Sources
Mid Penn's primary source of funds is retail deposits from businesses, public funds depositors, and consumers in its market area. For the year ended December 31, 2025, deposits totaled $5.2 billion, an increase of $524.7 million, or 11.2%, compared to $4.7 billion as of December 31, 2024.
Average balances and average interest rates applicable to deposits by major classification for the years ended December 31:
2025 2024 Change
(Dollars in thousands) Balance Rate Balance Rate $ %
Noninterest-bearing demand deposits $ 816,429 0.00 % $ 780,538 0.00 % $ 35,891 4.60 %
Interest-bearing demand deposits 1,179,007 1.77 1,001,813 1.90 177,194 17.69
Money market 1,176,166 2.79 913,360 2.91 262,806 28.77
Savings 306,431 0.08 275,692 0.09 30,739 11.15
Time 1,674,557 4.05 1,541,605 4.57 132,952 8.62
$ 5,152,590 2.36 % $ 4,513,008 2.58 % $ 639,582 14.17 %
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MID PENN BANCORP, INC. Management’s Discussion and Analysis
Uninsured deposits represent deposit balances in excess of FDIC insurance limits, based on ownership category. As of December 31, 2025, uninsured deposits were $1.0 billion, or 19.2% of total deposits, compared to $1.4 billion, or 30.1% of total deposits, as of December 31, 2024.
The maturities of the uninsured time deposits as of December 31, 2025 were as follows:
(In thousands) 2025
Three months or less $ 157,634
Over three months to six months 96,752
Over six months to twelve months 108,942
Over twelve months 14,636
$ 377,964
Short-term borrowings as of December 31, 2025 totaled $20.8 million, compared to $2.0 million as of December 31, 2024, and consisted of $20.8 million of FHLB overnight borrowings. As of December 31, 2025, the Bank had long-term debt outstanding in the amount of $23.1 million compared to $23.6 million as of December 31, 2024.
Subordinated debt and trust preferred securities was zero as of December 31, 2025 compared to $45.7 million as of December 31, 2024. In June 2025, Mid Penn redeemed $15 million of subordinated debt issued in March of 2020. In October 2025, Mid Penn redeemed $25 million of subordinated debt issued in November of 2021. In December 2025, Mid Penn redeemed $12.2 million of subordinated debt issued in December of 2020. There were no redemptions of subordinated debt in 2024. See "Note 11 - Subordinated Debt " , within Item 8, Notes to Consolidated Financial Statements.
Shareholders' Equity and Capital
Shareholders' equity, or capital, is evaluated in relation to total assets and the risk associated with those assets. The detailed computation of Mid Penn’s regulatory capital ratios can be found in "Note 17 - Regulatory Matters " , within Item 8, Notes to Consolidated Financial Statements. The greater the Corporation’s capital resources, the more likely it is to meet its cash obligations and absorb unforeseen losses. Capital management practices have been, and will continue to be, of paramount importance to the Corporation in support of both its regulatory capital requirements and its shareholders.
Shareholders’ equity increased $159.0 million, or 24.3%, to $814.1 million as of December 31, 2025 from $655.0 million as of December 31, 2024, primarily as a result of the acquisition of William Penn in April 2025 and net income, partially offset by dividends declared of $18.2 million and share repurchases totaling $2.3 million.
Mid Penn maintained regulatory capital levels, leverage ratios, and risk-based capital ratios as of December 31, 2025 and 2024, as follows:
December 31, 2025 December 31, 2024 Regulatory Minimum for Capital Adequacy
Tier I Leverage Capital (to Average Assets) 11.02 % 9.98 % 4.00 %
Common Equity Tier I (to Risk-Weighted Assets) 13.55 12.09 7.00
Tier I Risk-Based Capital (to Risk-Weighted Assets) 13.55 12.09 8.50
Total Risk-Based Capital (to Risk-Weighted Assets) 14.32 % 13.98 % 10.50 %
As of December 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.
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MID PENN BANCORP, INC. Management’s Discussion and Analysis
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 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 year ended December 31, 2025 provided $80.0 million of cash, mainly due to net income. Cash provided by investing activities during the year ended December 31, 2025 was $83.2 million, mainly the result of net cash received from acquisitions, and proceeds from the maturity or call of investment securities, offset by purchases of available-for-sale securities. Cash used in financing activities during the year ended December 31, 2025 totaled $134.8 million, primarily the result of a decrease in net deposits and the redemption of subordinated debt.
Contractual Obligations
Mid Penn has substantial aggregate contractual obligations to make future cash payments as of December 31, 2025 as outlined below:
Total Payments Due by Period
(In thousands) One Year or
Less One to Three
Years Three to Five
Years More than Five
Years
Operating lease obligations $ 17,149 $ 4,075 $ 6,363 $ 3,916 $ 2,795
Finance lease obligation 3,732 260 520 555 2,397
Certificates of deposit 1,617,593 1,445,142 151,911 15,836 4,704
Long-term debt 20,223 1 20,222 — —
$ 1,658,697 $ 1,449,478 $ 179,016 $ 20,307 $ 9,896
Details on expected maturities of investments, loans and deposits are presented in the above sections of Management's Discussion and Analysis. We are not aware of any other commitments or contingent liabilities which may have a material adverse impact on Mid Penn’s liquidity or capital resources.
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MID PENN BANCORP, INC. Management’s Discussion and Analysis
Effects of Inflation
A bank's asset and liability structure is substantially different from that of an industrial company in that virtually all assets and liabilities of a bank are monetary in nature. Management believes the impact of inflation on its financial results depends principally upon Mid Penn's ability to measure its sensitivity to changes in interest rates and to take appropriate actions, as needed or controllable by the Bank, to mitigate the impacts of inflation on performance. Interest rates do not necessarily move in the same direction or at the same magnitude as the prices of other goods and services. As discussed previously, management seeks to manage the relationship between interest sensitive assets and liabilities to protect against wide interest rate fluctuations, including those resulting from inflation.
Information included elsewhere in this report will assist in the understanding of how Mid Penn is positioned to react to changing interest rates and inflationary trends. In particular, the previously discussed risk factors, the composition of and yields on loans and investments, and the composition and costs of deposits and other interest-bearing liabilities, should be considered.
Off-Balance Sheet Risk
Mid Penn makes contractual commitments to extend credit and extends lines of credit, which are subject to Mid Penn's credit approval and monitoring procedures. As of December 31, 2025, commitments to extend credit amounted to $1.4 billion compared to $1.2 billion as of December 31, 2024.
Mid Penn also issues standby letters of credit to its customers. The risk associated with standby letters of credit is essentially the same as the credit risk involved in loan extensions to customers. Standby letters of credit increased to $66.5 million as of December 31, 2025, from $64.3 million as of December 31, 2024.
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