MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management Discussion relates to the Corporation, a financial holding company incorporated in the Commonwealth of Pennsylvania, and its wholly-owned subsidiaries, and should be read in conjunction with the consolidated financial statements and other financial information presented in this report and our Annual Report on Form 10-K for the year ended December 31, 2025.
Caution About Forward-Looking Statements
Forward-looking statements involve risks, uncertainties and assumptions. Although Mid Penn generally does not make forward-looking statements unless Mid Penn's management believes its management has a reasonable basis for doing so, Mid Penn cannot guarantee the accuracy of any forward-looking statements. Actual results may differ materially from those expressed in any forward-looking statements due to a number of uncertainties and risks, including the risks described in this Quarterly Report on Form 10-Q, the 2025 Annual Report, and other unforeseen risks. You should not put undue reliance on any forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q, even if subsequently made available by us on Mid Penn's website or otherwise, and Mid Penn undertakes no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.
Certain of the matters discussed in this document or in documents incorporated by reference herein, including matters discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, or Exchange Act. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results, 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 recent acquisitions into its business and operations, which may take longer than anticipated or be more costly than anticipated or result in unanticipated disruptions to existing operations;
•the possibility that anticipated benefits of recent acquisitions, including cost savings and other synergies, may take longer to be realized or may not fully be achieved, and that attrition in client, partner or other relationships 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 disruptions arising from public health events or other external disruptions;
•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;
MID PENN BANCORP, INC.
•impacts of the capital and liquidity requirements imposed by bank regulatory agencies;
•the effect of changes in accounting policies and practices, including the adoption or interpretation of new accounting standards, as may be adopted by regulatory agencies, the Public Company Accounting Oversight Board, the 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 successfully expand our franchise, including through acquisitions or establishing new offices at favorable prices;
•potential goodwill impairment charges, or future impairment charges and fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames;
•our ability to attract and retain qualified management and personnel;
•results of regulatory examination and supervision processes;
•the failure of assumptions underlying the establishment of reserves for loan and lease losses, the assessment of potential impairment of investment securities, and estimations of values of collateral and various financial assets and liabilities;
•our ability to maintain compliance with the listing rules of The NASDAQ Stock Market;
•our ability to maintain the value and image of our brand and protect our intellectual property rights;
•volatility in the securities markets;
•disruptions due to flooding, severe weather, or other natural disasters or acts of God;
•acts of war, terrorism, or global military conflict;
•supply chain disruption;
•the risk factors described in Item 1A of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2025 and subsequent filings with the SEC.
The above list of factors that may affect future performance is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with this understanding of inherent uncertainty.
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 calculated on a fully taxable-equivalent basis ("FTE") as net interest income as a percentage of average interest-earning assets. Mid Penn also generates revenue through fees earned on the various services and products offered to its customers and through gains on sales of assets, such as loans, investments and properties. Offsetting these revenue sources are provisions for credit losses, non-interest expenses and income taxes.
MID PENN BANCORP, INC.
The following table presents a summary of Mid Penn's earnings and selected performance ratios:
| Three Months Ended March 31, | |||||||||||
(Dollars in thousands) | 2026 | 2025 | |||||||||
| Net Income | $ | 8,706 | $ | 13,742 | |||||||
| Diluted EPS | $ | 0.36 | $ | 0.71 | |||||||
| Dividends declared | $ | 0.22 | $ | 0.20 | |||||||
Return on average assets (2) | 0.55 | % | 1.01 | % | |||||||
Return on average equity (2) | 4.18 | % | 8.43 | % | |||||||
Net interest margin (1)(2) | 3.80 | % | 3.37 | % | |||||||
| Nonperforming assets to total assets | 0.55 | % | 0.46 | % | |||||||
| Net charge-offs/(recoveries) to average loans (annualized) | 0.084 | % | (0.0003) | % | |||||||
(1) Presented on a FTE basis using a 21% Federal tax rate and statutory interest expense disallowances. See also the "Net Interest Income" section.
(2) Annualized ratios
On February 27, 2026, Mid Penn completed the acquisition of 1st Colonial Bancorp, Inc. ("1st Colonial"), which added total assets of $842.5 million, comprised primarily of $597.5 million of loans. Additionally, on January 1, 2026, Mid Penn completed the acquisition of Cumberland Advisors, Inc. ("Cumberland Advisors"), a registered investment advisory firm, which had approximately $3.2 billion in assets under management, further expanding the Company's wealth management capabilities and fee-based revenue.
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. This transaction 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.
Summary of Financial Results
•Net Income Per Share - Mid Penn's net income available to common shareholders ("earnings") for the three months ended March 31, 2026 was $8.7 million, or $0.36 per basic and diluted common share, compared to earnings of $13.7 million, or $0.71 per both basic and diluted common share for the three months ended March 31, 2025.
•Net Interest Income
◦Net Interest Margin - For the first quarter of 2026, Mid Penn's net interest margin was 3.80% versus 3.37% for the same period of 2025. The yield on interest-earning assets for the first quarter of 2026 increased 10 basis points from the same period of 2025. The rate on interest-bearing liabilities decreased 43 basis points from the same period of 2025. The increase, compared to the first quarter of 2025, was driven by higher loan and investment securities yields and a reduction in the cost of funds.
◦Loan Growth - Total loans, net of unearned income, as of March 31, 2026 were $5.5 billion compared to $4.9 billion as of December 31, 2025, an increase of $647.1 million, or 13.3%. The growth was primarily driven by the acquisition of 1st Colonial, which contributed to an increase in residential mortgages of $341.1 million, an increase in commercial real estate loans of $245.7 million, an increase in construction loans of $57.7 million, and an increase in commercial and industrial loans of $4.9 million.
MID PENN BANCORP, INC.
◦Deposit Growth - Total deposits increased $756.3 million, or 14.5%, from $5.2 billion at December 31, 2025, to $6.0 billion at March 31, 2026. The growth was primarily driven by the acquisition of 1st Colonial, which contributed to an increase of $528.3 million in interest-bearing transaction accounts, an increase of $128.5 million in time deposits, and a $99.5 million increase in non-interest bearing accounts.
•Asset Quality - ACL as of March 31, 2026 was $41.1 million, or 0.75% of total loans, as compared to $36.1 million, or 0.74% of total loans as of December 31, 2025. This increase includes the initial allowance recorded for 1st Colonial loans of $4.4 million.
◦Net Charge-offs/Recoveries - Mid Penn had net loan charge-offs of $1.0 million and net recoveries of $3 thousand for the three months ended March 31, 2026 and 2025, respectively.
◦Non-performing assets - Total non-performing assets were $38.1 million at March 31, 2026, an increase compared to non-performing assets of $30.8 million at December 31, 2025. The increase during the first quarter of 2026 is primarily related to the addition of $7.4 million of nonaccrual loans from the 1st Colonial acquisition. Delinquency, measured as loans past due 30 days or more, as a percentage of total loans was 0.70% at March 31, 2026, compared to 0.69% as of December 31, 2025.
◦Provision/Benefit for credit losses - loans - The provision for credit losses - loans was $1.6 million for the three months ended March 31, 2026 compared to a provision of $321 thousand for the same period of 2025. The benefit for credit losses on off-balance sheet credit exposures was $54 thousand for the three months ended March 31, 2026, compared to a benefit of $20 thousand for the same period of 2025. The increase in provision for the three months ended March 31, 2026, was primarily driven by qualitative adjustments to the CRE owner-occupied portfolio, reflecting growth within that segment, offset by decreases due to higher prepayment speeds and a favorable economic forecast.
•Noninterest Income - Noninterest income totaled $9.6 million for the three months ended March 31, 2026 compared to $5.2 million for the same period of 2025. The increase is primarily driven by a $2.5 million increase in fiduciary and wealth management income, a $431 thousand increase in earnings from the cash surrender value of life insurance, a $1.3 million increase in other noninterest income, including a $558 thousand increase in death benefits received, and a $458 thousand increase in insurance commissions.
•Noninterest Expense - Noninterest expense totaled $52.0 million for the three months ended March 31, 2026, an increase of $21.3 million, or 69.6%, compared to noninterest expense of $30.6 million for the same period of 2025.
Merger and acquisition expenses increased $7.4 million to $7.7 million for the three months ended March 31, 2026, driven by $7.2 million related to the 1st Colonial acquisition, $544 thousand related to the Cumberland Advisors acquisition, compared to $314 thousand in the same period of 2025.
Salaries and benefits increased $7.0 million for the three months ended March 31, 2026, compared to the same period in 2025. The increase is attributable to (i) the retail staff additions at the twelve retail locations added through the William Penn acquisition and three retail locations added through the 1st Colonial acquisition; (ii) the retention of various William Penn and 1st Colonial team members through the completion of systems integrations; and (iii) the addition of staff members from the Cumberland Advisors acquisition.
Software licensing and utilization costs increased $1.0 million for the three months ended March 31, 2026, compared to the same period in 2025. The increase reflects additional costs to (i) license the additional William Penn and 1st Colonial 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.
Occupancy expenses increased $979 thousand for the three months ended March 31, 2026, compared to the same period in 2025. The increase was driven by the facility operating costs of the additional retail locations added through the William Penn, 1st Colonial, and Cumberland Advisors acquisitions.
MID PENN BANCORP, INC.
•Liquidity - Current liquidity, including cash equivalents and borrowing capacity totaled $1.5 billion, compared to $1.7 billion at December 31, 2025, representing 144.8% of uninsured and uncollateralized deposits and approximately 25.0% of total deposits.
MID PENN BANCORP, INC.
Critical Accounting Estimates
The 2025 Annual Report on Form 10-K includes a summary of critical accounting estimates that Mid Penn considers to be most important to the presentation of its financial condition and results of operations. These estimates require management's most difficult judgments as a result of the need to make estimates about the effects of matters that are inherently uncertain.
Management of the Corporation considers the accounting judgments relating to the allowance for credit losses, business combinations, and goodwill impairment to be the accounting area that requires the most subjective and complex judgments. Changes in key assumptions, including economic conditions and other inputs used in these estimates, could have a material impact on the Corporation's results of operations and financial condition.
There have been no material changes to Mid Penn's critical accounting estimates as disclosed in the Annual Report on Form 10-K for the year ended December 31, 2025.
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 three months ended March 31, 2026 and 2025.
MID PENN BANCORP, INC.
The following table includes average balances, amounts, and yields of interest income and rates of expense, interest rate spread, and net interest margin for the periods presented:
| Average Balances, Income and Interest Rates | |||||||||||||||||||||||||||||||||||
| For the Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 31, 2026 | March 31, 2025 | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest | Yield/
Rate (2) | Average Balance | Interest | Yield/
Rate (2) | |||||||||||||||||||||||||||||
| ASSETS: | |||||||||||||||||||||||||||||||||||
| Interest Bearing Balances | $ | 19,647 | $ | 110 | 2.27 | % | $ | 20,794 | $ | 138 | 2.69 | % | |||||||||||||||||||||||
| Investment Securities: | |||||||||||||||||||||||||||||||||||
| Taxable | 715,209 | 6,486 | 3.68 | % | 569,800 | 4,309 | 3.07 | % | |||||||||||||||||||||||||||
| Tax-exempt | 68,559 | 297 | 1.76 | % | 69,780 | 348 | 2.02 | % | |||||||||||||||||||||||||||
| Total Investment Securities | 783,768 | 6,783 | 3.51 | % | 639,580 | 4,657 | 2.95 | % | |||||||||||||||||||||||||||
| Federal funds sold | 16,994 | 220 | 5.25 | % | 23,754 | 261 | 4.46 | % | |||||||||||||||||||||||||||
| Loans, net of unearned income | 5,083,240 | 76,798 | 6.13 | % | 4,459,679 | 66,537 | 6.05 | % | |||||||||||||||||||||||||||
| Restricted investment in bank stocks | 10,864 | 15 | 0.56 | % | 7,101 | 151 | 8.62 | % | |||||||||||||||||||||||||||
| Total Interest-earning Assets | 5,914,513 | 83,926 | 5.75 | % | 5,150,908 | 71,744 | 5.65 | % | |||||||||||||||||||||||||||
| Cash and Due from Banks | 55,545 | 39,916 | |||||||||||||||||||||||||||||||||
| Other Assets | 422,953 | 300,939 | |||||||||||||||||||||||||||||||||
| Total Assets | $ | 6,393,011 | $ | 5,491,763 | |||||||||||||||||||||||||||||||
| LIABILITIES & SHAREHOLDERS' EQUITY: | |||||||||||||||||||||||||||||||||||
| Interest-bearing Demand | $ | 1,382,567 | $ | 5,417 | 1.59 | % | $ | 1,051,325 | $ | 4,681 | 1.81 | % | |||||||||||||||||||||||
| Money market | 1,216,581 | 7,470 | 2.49 | % | 1,027,355 | 6,941 | 2.74 | % | |||||||||||||||||||||||||||
| Savings | 363,593 | 300 | 0.33 | % | 260,965 | 54 | 0.08 | % | |||||||||||||||||||||||||||
| Time | 1,579,915 | 14,661 | 3.76 | % | 1,589,083 | 16,588 | 4.23 | % | |||||||||||||||||||||||||||
| Total Interest-bearing Deposits | 4,542,656 | 27,848 | 2.49 | % | 3,928,728 | 28,264 | 2.92 | % | |||||||||||||||||||||||||||
| Short-term borrowings | 71,111 | 702 | 4.00 | % | 24,892 | 290 | 4.72 | % | |||||||||||||||||||||||||||
| Long-term debt | 11,733 | 126 | 4.36 | % | 23,533 | 257 | 4.43 | % | |||||||||||||||||||||||||||
| Subordinated debt | - | - | - | % | 45,662 | 424 | 3.77 | % | |||||||||||||||||||||||||||
| Total Interest-bearing Liabilities | 4,625,500 | 28,676 | 2.51 | % | 4,022,815 | 29,235 | 2.95 | % | |||||||||||||||||||||||||||
| Noninterest-bearing Demand | 850,936 | 752,980 | |||||||||||||||||||||||||||||||||
| Other Liabilities | 71,022 | 55,004 | |||||||||||||||||||||||||||||||||
| Shareholders' Equity | 845,553 | 660,964 | |||||||||||||||||||||||||||||||||
| Total Liabilities & Shareholders' Equity | $ | 6,393,011 | $ | 5,491,763 | |||||||||||||||||||||||||||||||
| Net Interest Income | $ | 55,250 | $ | 42,509 | |||||||||||||||||||||||||||||||
Taxable Equivalent Adjustment (1) | 236 | 242 | |||||||||||||||||||||||||||||||||
| Net Interest Income (taxable-equivalent basis) | $ | 55,486 | $ | 42,751 | |||||||||||||||||||||||||||||||
| Total Yield on Earning Assets | 5.75 | % | 5.65 | % | |||||||||||||||||||||||||||||||
| Rate on Supporting Liabilities | 2.51 | % | 2.95 | % | |||||||||||||||||||||||||||||||
| Average Interest Spread | 3.24 | % | 2.70 | % | |||||||||||||||||||||||||||||||
Net Interest Margin (1) | 3.80 | % | 3.37 | % | |||||||||||||||||||||||||||||||
(1)Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances.
(2)Annualized ratios
MID PENN BANCORP, INC.
The following table summarizes the changes in interest income and interest expense resulting from changes in average balances, volume, and changes in rates for the three months ended March 31, 2026 in comparison to the same period in 2025:
| Three months ended March 31, 2026 vs. March 31, 2025 | |||||||||||||||||
| Increase (decrease) | |||||||||||||||||
| (In thousands) | Volume | Rate | Net | ||||||||||||||
| INTEREST INCOME: | |||||||||||||||||
| Interest Bearing Balances | $ | (8) | $ | (20) | $ | (28) | |||||||||||
| Investment Securities: | |||||||||||||||||
| Taxable | 1,100 | 1,077 | 2,177 | ||||||||||||||
| Tax-exempt | (6) | (45) | (51) | ||||||||||||||
| Total Investment Securities | 1,094 | 1,032 | 2,126 | ||||||||||||||
| Federal funds sold | (74) | 33 | (41) | ||||||||||||||
| Loans | 9,303 | 958 | 10,261 | ||||||||||||||
| Restricted investment in bank stocks | 80 | (216) | (136) | ||||||||||||||
| Total Interest Income | 10,395 | 1,787 | 12,182 | ||||||||||||||
| INTEREST EXPENSE: | |||||||||||||||||
| Interest-Bearing Deposits: | |||||||||||||||||
| Interest-bearing demand | 1,475 | (739) | 736 | ||||||||||||||
| Money market | 1,278 | (749) | 529 | ||||||||||||||
| Savings | 21 | 225 | 246 | ||||||||||||||
| Time | (96) | (1,831) | (1,927) | ||||||||||||||
| Total Interest-Bearing Deposits | 2,678 | (3,094) | (416) | ||||||||||||||
| Short-term borrowings | 538 | (126) | 412 | ||||||||||||||
| Long-term debt | (129) | (2) | (131) | ||||||||||||||
| Subordinated debt | (424) | - | (424) | ||||||||||||||
| Total Interest Expense | 2,663 | (3,222) | (559) | ||||||||||||||
| NET INTEREST INCOME | $ | 7,732 | $ | 5,009 | $ | 12,741 | |||||||||||
For the three months ended March 31, 2026, net interest income was $55.3 million compared to net interest income of $42.5 million for the three months ended March 31, 2025. The tax-equivalent net interest margin for the three months ended March 31, 2026 was 3.80% compared to 3.37% for the first quarter of 2025, representing a 43 bp increase compared to the same period in 2025.
The yield on interest-earning assets increased to 5.75% for the quarter ended March 31, 2026, from 5.65% for the quarter ended March 31, 2025. These increases were due to assets continuing to reprice at higher rates during 2025 and the first quarter of 2026, continued discipline on new loan pricing, and an increase in Fed funds sold.
Average investment securities increased $144.2 million and the yield on those investment securities increased 56 bps during the first quarter of 2026 compared to the first quarter of 2025, increasing interest income due to volume by $1.1 million, and increasing interest income due to rates by $1.0 million. Average loans increased $623.6 million, and the yield on those loans increased 8 bps, contributing $9.3 million and $958 thousand, respectively, to the increase in interest income.
Interest expense decreased $559 thousand during the first quarter of 2026 compared to the first quarter of 2025. The rate of interest-bearing liabilities decreased from 2.95% for the first quarter of 2025 to 2.51% for the first quarter of 2026. The
MID PENN BANCORP, INC.
decrease in the rate was primarily a result of a decrease in short-term borrowings, a decrease in long term debt, and a decrease in time deposits. Mid Penn continued to offer higher rates over the comparable period to both retain and attract deposits.
Although the effective interest rate impact on interest-earning assets and funding sources can be reasonably estimated at current interest rate levels, the interest-bearing product and pricing options selected by customers, and the future mix of the loan, investment, and deposit products in the Bank's portfolios, may significantly change the estimates used in Mid Penn's asset and liability management and related interest rate risk simulation models. In addition, our net interest income may be impacted by further interest rate actions of the Federal Reserve's FOMC.
Provision for Credit Losses - Loans
The provision for credit losses on loans was $1.6 million for the three months ended March 31, 2026 compared to a provision of $321 thousand for the three months ended March 31, 2025. The increase in provision was primarily attributable to qualitative adjustments to several segments of the portfolio, offset by reductions due to a favorable economic forecast.
Noninterest Income
For the three months ended March 31, 2026, noninterest income totaled $9.6 million, a increase of $4.4 million, or 83.3%, compared to noninterest income of $5.2 million for the three months ended March 31, 2025. The increase was largely driven by a $2.5 million increase in fiduciary and wealth management income, a $431 thousand increase in earnings from the cash surrender value of life insurance, a $1.3 million increase in other noninterest income, including a $558 thousand increase in death benefits received, and a $458 thousand increase in insurance commissions.
The following table and explanations that follow provide additional analysis of noninterest income:
| Three Months Ended March 31, | |||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | $ Variance | % Variance | |||||||||||||||||||
| Fiduciary and wealth management | $ | 3,661 | $ | 1,140 | $ | 2,521 | 221.1 | % | |||||||||||||||
| ATM debit card interchange | 1,035 | 919 | 116 | 12.6 | |||||||||||||||||||
| Service charges on deposits | 636 | 562 | 74 | 13.2 | |||||||||||||||||||
| Mortgage banking | 314 | 591 | (277) | (46.9) | |||||||||||||||||||
| Mortgage hedging | 81 | (9) | 90 | N/M | |||||||||||||||||||
| Net gain on sales of SBA loans | 163 | 57 | 106 | 186.0 | |||||||||||||||||||
| Earnings from cash surrender value of life insurance | 705 | 274 | 431 | 157.3 | |||||||||||||||||||
| Other | 3,009 | 1,705 | 1,304 | 76.5 | |||||||||||||||||||
| Total | $ | 9,604 | $ | 5,239 | $ | 4,365 | 83.3 | % | |||||||||||||||
Noninterest Expense
For the three months ended March 31, 2026, noninterest expense totaled $52.0 million, an increase of $21.3 million, or 69.6%, compared to noninterest expense of $30.6 million for the same period in 2025. The increase was primarily driven by a $7.4 million increase in merger and acquisition expenses, a $7.0 million increase in salaries and employee benefits, a $1.0 million increase in software licensing, a $979 thousand increase in occupancy expenses, an $872 thousand increase in intangible amortization, an $862 thousand increase in legal and professional fees, and a $2.3 million increase in other noninterest expense, primarily driven by a $1.5 million increase related to a change in methodology for LIHTC amortization, and a $665 thousand in legal settlements.
MID PENN BANCORP, INC.
The following table and explanations that follow provide additional analysis of noninterest expense:
| Three Months Ended March 31, | |||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | $ Variance | % Variance | |||||||||||||||||||
| Salaries and employee benefits | $ | 23,346 | $ | 16,309 | $ | 7,037 | 43.1 | % | |||||||||||||||
| Software licensing and utilization | 3,598 | 2,574 | 1,024 | 39.8 | |||||||||||||||||||
| Occupancy expense, net | 3,253 | 2,274 | 979 | 43.1 | |||||||||||||||||||
| Equipment expense | 1,553 | 1,094 | 459 | 42.0 | |||||||||||||||||||
| Shares tax | 964 | 919 | 45 | 4.9 | |||||||||||||||||||
| Legal and professional fees | 1,688 | 826 | 862 | 104.4 | |||||||||||||||||||
| ATM/card processing | 757 | 733 | 24 | 3.3 | |||||||||||||||||||
| Intangible amortization | 1,300 | 428 | 872 | 203.7 | |||||||||||||||||||
| FDIC Assessment | 800 | 990 | (190) | (19.2) | |||||||||||||||||||
| Loss/(gain) on sale of foreclosed assets, net | 491 | (28) | 519 | N/M | |||||||||||||||||||
| Merger and acquisition expense | 7,723 | 314 | 7,409 | 2359.6 | |||||||||||||||||||
| Other expenses | 6,486 | 4,209 | 2,277 | 54.1 | |||||||||||||||||||
| Total Noninterest Expense | $ | 51,959 | $ | 30,642 | $ | 21,317 | 69.6 | % | |||||||||||||||
Income Taxes
The provision for income taxes was $2.6 million for the three months ended March 31, 2026 compared to $3.1 million for the same period in 2025. The provision for income taxes for the three months ended March 31, 2026 reflects a combined Federal and State effective tax rate of 23.0% for the three months ended March 31, 2026, compared to 18.2%, for the three months ended March 31, 2025.
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 effective tax rate for the current period was higher than the federal statutory rate primarily due to the impact of state income taxes. This increase was driven by changes in the Corporation's state apportionment resulting from the acquisition of 1st Colonial, resulting in a higher proportion of income subject to higher state tax rates. 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 may affect the Company in future periods, including provisions related to business deductions and tax depreciation. These changes did not have a material impact on the Corporation's federal income tax expense or liability for the three months ended March 31, 2026.
Financial Condition
Mid Penn's total assets were $7.0 billion as of March 31, 2026, reflecting an increase of $830.9 million, or 13.5%, compared to total assets of $6.1 billion as of December 31, 2025. The increase was primarily driven by an increase in loans as a result of the 1st Colonial acquisition, an increase in available for sale investment securities, and an increase in Fed Funds Sold.
Investment Securities
Mid Penn's investment portfolio is utilized primarily to support overall liquidity and interest rate risk management, to provide collateral supporting pledging requirements for public funds on deposit, and to generate additional interest income within reasonable risk parameters. The carrying value of total investment securities as of March 31, 2026 were $825.1 million compared to $763.6 million as of December 31, 2025. Mid Penn does not anticipate growth in the investment portfolio beyond levels necessary to support pledging requirements.
MID PENN BANCORP, INC.
The following table presents the expected maturities of the investment portfolio and the weighted-average yields (calculated based on historical cost):
| Maturing | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (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 March 31, 2026 | 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 | $ | 7,338 | 1.62 | % | $ | 5,369 | 2.89 | % | $ | 4,155 | 3.10 | % | $ | - | - | % | $ | 16,862 | 2.40 | % | ||||||||||||||||||||||||||||||||||||
| Mortgage-backed U.S. government agencies | - | - | - | - | 7,653 | 3.03 | 368,568 | 4.60 | 376,221 | 4.57 | ||||||||||||||||||||||||||||||||||||||||||||||
| State and political subdivision obligations | - | - | - | - | 50,196 | 2.50 | 658 | 2.23 | 50,854 | 2.45 | ||||||||||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | 2,930 | 2.25 | 8,831 | 7.12 | 28,432 | 5.39 | - | - | 40,193 | 5.54 | ||||||||||||||||||||||||||||||||||||||||||||||
| $ | 10,268 | 1.80 | % | $ | 14,200 | 5.50 | % | $ | 90,436 | 4.54 | % | $ | 369,226 | 4.59 | % | $ | 484,130 | 4.55 | % | |||||||||||||||||||||||||||||||||||||
| Held-to-maturity securities, at amortized cost: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury and U.S. government agencies | $ | 21,498 | 1.66 | % | $ | 117,477 | 1.86 | % | $ | 92,040 | 2.20 | % | $ | - | - | % | $ | 231,015 | 1.98 | % | ||||||||||||||||||||||||||||||||||||
| Mortgage-backed U.S. government agencies | 63 | 3.00 | 1,671 | 2.90 | 3,220 | 2.75 | 26,260 | 1.95 | 31,214 | 2.09 | ||||||||||||||||||||||||||||||||||||||||||||||
| State and political subdivision obligations | 5,335 | 3.39 | 34,211 | 2.30 | 14,583 | 2.37 | 9,152 | 2.75 | 63,281 | 2.87 | ||||||||||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | 2,000 | 2.25 | 5,447 | 3.60 | 8,000 | 3.40 | - | - | 15,447 | 3.32 | ||||||||||||||||||||||||||||||||||||||||||||||
| $ | 28,896 | 2.87 | % | $ | 158,806 | 2.02 | % | $ | 117,843 | 2.32 | % | $ | 35,412 | 2.16 | % | $ | 340,957 | 2.29 | % | |||||||||||||||||||||||||||||||||||||
Loans, net of unearned income
Total loans, net of unearned income, as of March 31, 2026 were $5.5 billion compared to $4.9 billion as of December 31, 2025. The growth of $647.1 million, or 13.3%, since December 31, 2025 was primarily driven by the acquisition of 1st Colonial, which contributed to an increase in residential mortgages of $341.1 million, an increase in commercial real estate loans of $245.7 million, an increase in construction loans of $57.7 million, and an increase in commercial and industrial loans of $4.9 million.
MID PENN BANCORP, INC.
| March 31, 2026 | December 31, 2025 | Change in Balance | |||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Balance | % of Total Loans | Balance | % of Total Loans | $ | % | |||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||
| CRE Nonowner Occupied | $ | 1,448,637 | 26.3 | % | $ | 1,364,040 | 28.1 | % | $ | 84,597 | 6.2 | % | |||||||||||||||||||||||
| CRE Owner Occupied | 839,938 | 15.2 | 718,864 | 14.7 | 121,074 | 16.8 | |||||||||||||||||||||||||||||
| Multifamily | 449,417 | 8.2 | 419,267 | 8.6 | 30,150 | 7.2 | |||||||||||||||||||||||||||||
| Farmland | 237,735 | 4.3 | 227,816 | 4.7 | 9,919 | 4.4 | |||||||||||||||||||||||||||||
| Total Commercial Real Estate | 2,975,727 | 54.0 | 2,729,987 | 56.1 | 245,740 | 9.0 | |||||||||||||||||||||||||||||
Commercial and industrial | 724,927 | 13.2 | 720,031 | 14.8 | 4,896 | 0.7 | |||||||||||||||||||||||||||||
| Construction | |||||||||||||||||||||||||||||||||||
| Residential Construction | 87,910 | 1.6 | 85,299 | 1.8 | 2,611 | 3.1 | |||||||||||||||||||||||||||||
| Other Construction | 365,429 | 6.6 | 310,390 | 6.3 | 55,039 | 17.7 | |||||||||||||||||||||||||||||
| Total Construction | 453,339 | 8.2 | 395,689 | 8.1 | 57,650 | 14.6 | |||||||||||||||||||||||||||||
| Residential Mortgage | |||||||||||||||||||||||||||||||||||
| 1-4 Family 1st Lien | 591,385 | 10.7 | 417,421 | 8.6 | 173,964 | 41.7 | |||||||||||||||||||||||||||||
| 1-4 Family Rental | 465,317 | 8.4 | 410,965 | 8.5 | 54,352 | 13.2 | |||||||||||||||||||||||||||||
| HELOC and Junior Liens | 290,858 | 5.3 | 178,116 | 3.7 | 112,742 | 63.3 | |||||||||||||||||||||||||||||
| Total Residential Mortgage | 1,347,560 | 24.4 | 1,006,502 | 20.8 | 341,058 | 33.9 | |||||||||||||||||||||||||||||
| Consumer | 8,387 | 0.2 | 10,629 | 0.2 | (2,242) | (21.1) | |||||||||||||||||||||||||||||
| $ | 5,509,940 | 100.0 | % | $ | 4,862,838 | 100.0 | % | $ | 647,102 | 13.3 | % | ||||||||||||||||||||||||
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.
MID PENN BANCORP, INC.
The following table presents the commercial real estate portfolio by property type along with the weighted-average loan to value:
| (Dollars in thousands) | March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||||
| Commercial Real Estate | Balance | % of portfolio | Weighted-Average LTV (2) | Balance | % of portfolio | Weighted-Average LTV (2) | ||||||||||||||||||||||||||||||||
Owner Occupied (1) | $ | 839,938 | 28.2 | % | N/A | $ | 718,864 | 26.3 | % | N/A | ||||||||||||||||||||||||||||
Farmland (1) | 237,735 | 8.0 | N/A | 227,816 | 8.3 | N/A | ||||||||||||||||||||||||||||||||
| Multifamily | 449,417 | 15.2 | 58.4 | 419,267 | 15.5 | 53.3 | ||||||||||||||||||||||||||||||||
| Non Owner Occupied | ||||||||||||||||||||||||||||||||||||||
| Retail | 425,231 | 14.3 | 50.7 | 429,095 | 15.7 | 50.4 | ||||||||||||||||||||||||||||||||
| Office | 322,368 | 10.8 | 62.0 | 289,650 | 10.6 | 61.4 | ||||||||||||||||||||||||||||||||
| Industrial | 190,389 | 6.4 | 47.2 | 177,822 | 6.5 | 48.0 | ||||||||||||||||||||||||||||||||
| Hospitality | 168,278 | 5.7 | 47.1 | 158,667 | 5.8 | 47.1 | ||||||||||||||||||||||||||||||||
| Flex | 54,200 | 1.8 | 44.4 | 46,432 | 1.7 | 47.2 | ||||||||||||||||||||||||||||||||
| Mobile Home Park | 19,213 | 0.6 | 54.4 | 18,763 | 0.7 | 56.4 | ||||||||||||||||||||||||||||||||
| Health Care | 12,473 | 0.4 | 52.8 | 11,870 | 0.4 | 52.8 | ||||||||||||||||||||||||||||||||
| Other Property Types | 256,485 | 8.6 | 55.9 | 231,741 | 8.5 | 54.7 | ||||||||||||||||||||||||||||||||
| Total Commercial Real Estate | $ | 2,975,727 | 100.0 | % | 54.2 | % | $ | 2,729,987 | 100.0 | % | 52.9 | % | ||||||||||||||||||||||||||
(1) LTV not available for Owner Occupied and Farmland properties.
(2) Weighted average Loan to Value is calculated based on estimated current market values of the properties.
Maturity distribution by contractual maturity date and rate sensitivity information related to the loan portfolio is reflected in the table below:
| (In thousands) | |||||||||||||||||||||||||||||
| As of March 31, 2026 |
One Year and Less |
One to Five Years |
Five to Fifteen Years |
Over Fifteen Years | Total | ||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||
| CRE Nonowner Occupied | $ | 179,506 | $ | 475,303 | $ | 469,179 | $ | 324,649 | $ | 1,448,637 | |||||||||||||||||||
| CRE Owner Occupied | 35,739 | 163,881 | 343,347 | 296,971 | 839,938 | ||||||||||||||||||||||||
| Multifamily | 88,244 | 140,070 | 114,139 | 106,964 | 449,417 | ||||||||||||||||||||||||
| Farmland | 1,285 | 10,975 | 67,559 | 157,916 | 237,735 | ||||||||||||||||||||||||
| Total Commercial real estate | 304,774 | 790,229 | 994,224 | 886,500 | 2,975,727 | ||||||||||||||||||||||||
| Commercial and industrial | 42,587 | 277,261 | 162,264 | 242,815 | 724,927 | ||||||||||||||||||||||||
| Construction | |||||||||||||||||||||||||||||
| Residential Construction | 52,755 | 31,219 | 1,856 | 2,080 | 87,910 | ||||||||||||||||||||||||
| Other Construction | 153,960 | 145,264 | 49,191 | 17,014 | 365,429 | ||||||||||||||||||||||||
| Total Construction | 206,715 | 176,483 | 51,047 | 19,094 | 453,339 | ||||||||||||||||||||||||
| Residential mortgage | |||||||||||||||||||||||||||||
| 1-4 Family 1st Lien | 9,844 | 28,061 | 104,219 | 449,261 | 591,385 | ||||||||||||||||||||||||
| 1-4 Family Rental | 55,213 | 52,167 | 158,208 | 199,729 | 465,317 | ||||||||||||||||||||||||
| HELOC and Junior Liens | 6,899 | 17,027 | 47,442 | 219,490 | 290,858 | ||||||||||||||||||||||||
| Total Residential Mortgage | 71,956 | 97,255 | 309,869 | 868,480 | 1,347,560 | ||||||||||||||||||||||||
| Consumer | 1,920 | 1,565 | 1,939 | 2,963 | 8,387 | ||||||||||||||||||||||||
| Total loans held in portfolio | $ | 627,952 | $ | 1,342,793 | $ | 1,519,343 | $ | 2,019,852 | $ | 5,509,940 | |||||||||||||||||||
MID PENN BANCORP, INC.
| Fixed interest rates: | |||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||
| CRE Nonowner Occupied | $ | 130,870 | $ | 187,723 | $ | 56,556 | $ | 11,677 | $ | 386,826 | |||||||||||||||||||
| CRE Owner Occupied | 27,623 | 109,875 | 25,697 | 3,115 | 166,310 | ||||||||||||||||||||||||
| Multifamily | 44,738 | 65,465 | 7,644 | - | 117,847 | ||||||||||||||||||||||||
| Farmland | 389 | 8,070 | 5,043 | - | 13,502 | ||||||||||||||||||||||||
| Total Commercial real estate | 203,620 | 371,133 | 94,940 | 14,792 | 684,485 | ||||||||||||||||||||||||
| Commercial and industrial | 21,681 | 172,561 | 24,498 | 9,384 | 228,124 | ||||||||||||||||||||||||
| Construction | |||||||||||||||||||||||||||||
| Residential Construction | 3,577 | 11,340 | 583 | 2,006 | 17,506 | ||||||||||||||||||||||||
| Other Construction | 14,117 | 20,745 | 512 | 1,757 | 37,131 | ||||||||||||||||||||||||
| Total Construction | 17,694 | 32,085 | 1,095 | 3,763 | 54,637 | ||||||||||||||||||||||||
| Residential mortgage | |||||||||||||||||||||||||||||
| 1-4 Family 1st Lien | 7,436 | 17,936 | 80,299 | 326,523 | 432,194 | ||||||||||||||||||||||||
| 1-4 Family Rental | 21,412 | 38,376 | 16,231 | 10,686 | 86,705 | ||||||||||||||||||||||||
| HELOC and Junior Liens | 1,089 | 9,178 | 35,660 | 2,614 | 48,541 | ||||||||||||||||||||||||
| Total Residential Mortgage | 29,937 | 65,490 | 132,190 | 339,823 | 567,440 | ||||||||||||||||||||||||
| Consumer | 1,274 | 1,517 | 1,807 | 952 | 5,550 | ||||||||||||||||||||||||
| Total fixed interest rates | $ | 274,206 | $ | 642,786 | $ | 254,530 | $ | 368,714 | $ | 1,540,236 | |||||||||||||||||||
| Floating interest rates: | |||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||
| CRE Nonowner Occupied | $ | 48,636 | $ | 287,580 | $ | 412,623 | $ | 312,972 | $ | 1,061,811 | |||||||||||||||||||
| CRE Owner Occupied | 8,116 | 54,006 | 317,650 | 293,856 | 673,628 | ||||||||||||||||||||||||
| Multifamily | 43,506 | 74,605 | 106,495 | 106,964 | 331,570 | ||||||||||||||||||||||||
| Farmland | 896 | 2,905 | 62,516 | 157,916 | 224,233 | ||||||||||||||||||||||||
| Total Commercial real estate | 101,154 | 419,096 | 899,284 | 871,708 | 2,291,242 | ||||||||||||||||||||||||
| Commercial and industrial | 20,906 | 104,700 | 137,766 | 233,431 | 496,803 | ||||||||||||||||||||||||
| Construction | |||||||||||||||||||||||||||||
| Residential Construction | 49,178 | 19,879 | 1,273 | 74 | 70,404 | ||||||||||||||||||||||||
| Other Construction | 139,843 | 124,519 | 48,679 | 15,257 | 328,298 | ||||||||||||||||||||||||
| Total Construction | 189,021 | 144,398 | 49,952 | 15,331 | 398,702 | ||||||||||||||||||||||||
| Residential mortgage | |||||||||||||||||||||||||||||
| 1-4 Family 1st Lien | 2,408 | 10,125 | 23,920 | 122,738 | 159,191 | ||||||||||||||||||||||||
| 1-4 Family Rental | 33,801 | 13,791 | 141,977 | 189,043 | 378,612 | ||||||||||||||||||||||||
| HELOC and Junior Liens | 5,810 | 7,849 | 11,782 | 216,876 | 242,317 | ||||||||||||||||||||||||
| Total Residential Mortgage | 42,019 | 31,765 | 177,679 | 528,657 | 780,120 | ||||||||||||||||||||||||
| Consumer | 646 | 48 | 132 | 2,011 | 2,837 | ||||||||||||||||||||||||
| Total floating interest rates | 353,746 | 700,007 | 1,264,813 | 1,651,138 | 3,969,704 | ||||||||||||||||||||||||
| Total fixed and floating interest rates | $ | 627,952 | $ | 1,342,793 | $ | 1,519,343 | $ | 2,019,852 | $ | 5,509,940 | |||||||||||||||||||
MID PENN BANCORP, INC.
Credit Quality, Credit Risk, and Allowance for Credit Losses
Mid Penn's ACL methodology for loans is based upon guidance within FASB ASC Subtopic 326-20, "Financial Instruments - Credit Losses - Measured at Amortized Cost," as well as regulatory guidance from the FDIC, the Bank's primary federal regulator. The ACL is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Credit quality within the loan portfolio is continuously monitored by management and is reflected within the ACL for loans. The ACL is an estimate of expected losses inherent within Mid Penn's existing loan portfolio. The ACL is adjusted through the provision for credit losses and reduced by the charge off of loan amounts, net of recoveries.
The loan loss estimation process involves procedures to appropriately consider the unique characteristics of Mid Penn's loan portfolio segments. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Evaluations of the portfolio and individual credits are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations. Determining the appropriateness of the allowance is complex and requires 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.
For a complete description of Mid Penn's ACL-loans methodology and the quantitative and qualitative factors included in the calculation, please see "Note 4 - Loans and Allowance for Credit Losses - Loans" included in Part I. Item 1. - Financial Statements of this report.
Changes in the ACL-loans are summarized as follows:
| Three Months Ended March 31, | |||||||||||
| (Dollars in thousands) | 2026 | 2025 | |||||||||
| Balance, beginning of period | $ | 36,091 | $ | 35,514 | |||||||
| Purchased credit deteriorated loans | 977 | - | |||||||||
| Purchased seasoned loans | 3,438 | - | |||||||||
| Loans charged off during period | (1,153) | (15) | |||||||||
| Recoveries of loans previously charged off | 104 | 18 | |||||||||
| Net (charge-offs)/recoveries | (1,049) | 3 | |||||||||
(Benefit)/provision for credit losses - loans (1) | 1,648 | 321 | |||||||||
| Balance, end of period | $ | 41,105 | $ | 35,838 | |||||||
| Ratio of net charge-offs/(recoveries) to average loans outstanding (annualized) | 0.084 | % | (0.0003) | % | |||||||
| Ratio of ACL - loans to net loans at end of period | 0.75 | % | 0.80 | % | |||||||
MID PENN BANCORP, INC.
The following table presents the change in nonperforming asset categories as of March 31, 2026, December 31, 2025, and March 31, 2025.
| (Dollars in thousands) | March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||
| Nonperforming Assets: | |||||||||||||||||
| Total nonaccrual loans | $ | 29,641 | $ | 22,951 | $ | 24,045 | |||||||||||
| Foreclosed real estate | 8,420 | 7,806 | 1,402 | ||||||||||||||
| Total nonperforming assets | 38,061 | 30,757 | 25,447 | ||||||||||||||
| Accruing loans 90 days or more past due | - | - | 3 | ||||||||||||||
| Total risk elements | $ | 38,061 | $ | 30,757 | $ | 25,450 | |||||||||||
| Nonaccrual loans as a percentage of total loans outstanding | 0.54 | % | 0.47 | % | 0.54 | % | |||||||||||
| Nonperforming assets as a percentage of total loans outstanding and foreclosed real estate | 0.69 | % | 0.63 | % | 0.57 | % | |||||||||||
| Ratio of ACL-loans to nonperforming loans | 138.68 | % | 157.25 | % | 149.05 | % | |||||||||||
Total nonperforming assets were $38.1 million at March 31, 2026, an increase compared to nonperforming assets of $30.8 million at December 31, 2025. The increase during the first quarter of 2026 is primarily driven by the addition of $7.4 million of nonaccrual loans from the 1st Colonial acquisition in the first quarter of 2026. Delinquency, measured as loans past due 30 days or more, as a percentage of total loans was 0.70% at March 31, 2026, compared to 0.69% and 0.50% as of December 31, 2025 and March 31, 2025.
Goodwill
Mid Penn evaluates goodwill for impairment annually, or more frequently if events or changes in circumstances indicate that impairment may be present. Significant negative industry or economic trends, as well as changes in the Corporation's stock price, could represent potential indicators of impairment. Management considered relevant factors, including overall market conditions, and trends in the Corporation's stock price, and concluded that no triggering events had occurred as of March 31, 2026. Management will continue to monitor these factors in future periods. Mid Penn's annual impairment test is scheduled to be conducted as of October 31, 2026.
Deposits
Total deposits increased $756.3 million, or 14.5%, from $5.2 billion on December 31, 2025, to $6.0 billion at March 31, 2026. The growth was primarily driven by the acquisition of 1st Colonial deposits of $747.1 million. These deposits contributed to a $528.3 million increase in interest bearing accounts, $128.5 million increase in time deposits, and a $99.5 million increase in noninterest bearing accounts.
MID PENN BANCORP, INC.
Average balances and average interest rates applicable to deposits by major classification:
| March 31, 2026 | December 31, 2025 | Change | |||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Balance | Rate | Balance | Rate | $ | % | |||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 850,936 | 0.00 | % | $ | 816,429 | 0.00 | % | $ | 34,507 | 4.23 | % | |||||||||||||||||||||||
| Interest-bearing demand deposits | 1,382,567 | 1.59 | 1,179,007 | 1.77 | 203,560 | 17.27 | |||||||||||||||||||||||||||||
| Money market | 1,216,581 | 2.49 | 1,176,166 | 2.79 | 40,415 | 3.44 | |||||||||||||||||||||||||||||
| Savings | 363,593 | 0.33 | 306,431 | 0.08 | 57,162 | 18.65 | |||||||||||||||||||||||||||||
| Time | 1,579,915 | 3.76 | 1,674,557 | 4.05 | (94,642) | (5.65) | |||||||||||||||||||||||||||||
| $ | 5,393,592 | 2.09 | % | $ | 5,152,590 | 2.36 | % | $ | 241,002 | 4.68 | % | ||||||||||||||||||||||||
As of March 31, 2026, uninsured deposits were approximately $1.0 billion, or 17.3% of total deposits, compared to $1.0 billion, or 19.2% of total deposits, as of December 31, 2025. The maturities of the uninsured time deposits as of March 31, 2026 were as follows:
| (In thousands) | 2026 | ||||
| Three months or less | $ | 163,843 | |||
| Over three months to six months | 137,142 | ||||
| Over six months to twelve months | 98,231 | ||||
| Over twelve months | 16,216 | ||||
| $ | 415,432 | ||||
Borrowings
Total short-term borrowings increased $10.7 million, or 51.2%, from December 31, 2025 to March 31, 2026. The increase in short-term borrowings was driven by our objective to maintain a strong level of unencumbered liquid assets, ensuring the availability of high-quality liquidity to meet potential near-term obligations. Total long-term borrowings were $3.0 million at March 31, 2026, a decrease of $20.1 million from December 31, 2025.
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
MID PENN BANCORP, INC.
designed to respond to overall stress in the financial condition of the banking industry or a prospective liquidity problem specific to Mid Penn.
The Consolidated Statements of Cash Flows provide additional information. Mid Penn's operating activities during the three months ended March 31, 2026 provided $14.5 million of cash, mainly due to net income. Cash provided in investing activities during the three months ended March 31, 2026 was $33.9 million, mainly the result of the Cumberland Advisors and 1st Colonial acquisitions. Cash used by financing activities during the three months ended March 31, 2026 totaled $6.1 million, primarily the result of the repayment of long-term borrowings.
Regulatory Capital
Mid Penn and the Bank are subject to regulatory capital requirements administered by banking regulators. Failure to meet minimum capital requirements can trigger certain mandatory, and possibly additional discretionary, actions by the regulators that if, undertaken, could have a direct material effect on Mid Penn's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory account practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Minimum regulatory capital requirements established by Basel III rules require Mid Penn and the Bank to:
•Meet a minimum Common Equity Tier I capital ratio of 4.5% of risk-weighted assets;
•Meet a minimum Tier I capital ratio of 6.0% of risk-weighted assets;
•Meet a minimum Total capital ratio of 8.0% of risk-weighted assets;
•Meet a minimum Tier I leverage capital ratio of 4.0% of average assets;
•Maintain a "capital conservation buffer" of 2.5% above the minimum risk-based capital requirements, which must be maintained to avoid restrictions on capital distributions and certain discretionary bonuses; and
•Comply with the definition of capital to improve the ability of regulatory capital instruments to absorb losses.
The Basel III Rules use a standardized approach for risk weightings that expands the risk-weighting for assets and off-balance sheet exposures from the previous 0%, 20%, 50% and 100% categories to a much larger and more risk-sensitive number of categories, depending on the nature of the assets and off-balance sheet exposures and resulting in higher risk weightings for a variety of asset categories.
Banks are evaluated for capital adequacy by regulatory supervisory agencies based on the ratio of capital to risk-weighted assets and total assets. The minimum capital to risk-weighted assets requirements, including the capital conservation buffers, which became effective for Mid Penn and the Bank on January 1, 2016, are illustrated below.
Mid Penn maintained the following regulatory capital ratios in comparison to regulatory requirements:
| March 31, 2026 | December 31, 2025 | Regulatory Minimum for Capital Adequacy | ||||||||||||||||||
| Total Risk-Based Capital (to Risk-Weighted Assets) | 13.58 | % | 14.32 | % | 10.50 | % | ||||||||||||||
| Tier I Risk-Based Capital (to Risk-Weighted Assets) | 12.82 | 13.55 | 8.50 | |||||||||||||||||
| Common Equity Tier I (to Risk-Weighted Assets) | 12.82 | 13.55 | 7.00 | |||||||||||||||||
| Tier I Leverage Capital (to Average Assets) | 11.40 | 11.02 | 4.00 | |||||||||||||||||
As of March 31, 2026 and December 31, 2025, regulatory capital ratios for both Mid Penn and the Bank met the definition of a "well-capitalized" institution under the regulatory framework for prompt corrective action and exceeded the minimum capital requirements under Basel III. However, future changes in regulations could increase capital requirements and may have an adverse effect on capital resources.
MID PENN BANCORP, INC.
Shareholders' Equity
Shareholders' equity is evaluated in relation to total assets and the risk associated with those assets, and the desire to collectively maintain and enhance shareholders' value, and satisfactorily address regulatory capital requirements. Accordingly, capital management practices have been, and will continue to be, of paramount importance to Mid Penn.
Shareholders' equity increased by $73.3 million, or 9.0%, from $814.1 million as of December 31, 2025 to $887.4 million as of March 31, 2026, reflecting common stock issued in connection with the 1st Colonial and Cumberland Advisors acquisitions totaling $69.6 million and earnings of $8.7 million, partially offset by dividends paid of $6.2 million.
MID PENN BANCORP, INC.