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Mid Penn Bancorp : Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Mid Penn Bancorp : Quarterly Report for Quarter Ending March 31, 2026 (Form
About this update from Mid Penn Bancorp
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 une arned 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.