MPB 10-K & 10-Q changes, risk factors and insider trading
Mid Penn Bancorp Inc. · Nasdaq · State Commercial Banks · CIK 879635 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “The integration of Mid Penn and 1st Colonial may be more difficult, costly or time consuming than expected and Mid Penn may fail to realize the anticipated benefits of the Merger.”
New heading “Our future results may suffer if we do not effectively manage our expanded operations.”
Removed heading “The discontinuance of LIBOR presents risks to the financial instruments originated, held or serviced by Mid Penn that use LIBOR as a reference rate.”
Removed heading “We are required to make a number of judgments in applying generally accepted accounting standards, and different estimates and assumptions in the application of these accounting standards could result in a decrease in capital and/or other material changes to our reports of financial condition and results of operations.”
Removed heading “Mid Penn is subject to environmental, social and governance ("ESG") risks that could adversely affect our results of operations, reputation, and the market price of our securities.”
Removed heading “Failure to complete the Merger could negatively affect our market price, future business and financial results.”
Removed heading “Regulatory waivers and approvals may not be received or may be received and subsequently expire, be revoked or be amended to impose conditions that are not presently anticipated or cannot be met.”
Removed heading “Combining Mid Penn and William Penn may be more difficult, costly or time consuming than expected, and we may fail to realize the anticipated benefits of the Merger.”
Removed heading “Litigation relating to the Merger could require us to incur significant costs and suffer management distraction, as well as delay and/or enjoin the Merger.”
Removed heading “We will be subject to various uncertainties while the Merger is pending that could adversely affect our financial results or the anticipated benefits of the Merger.”
Removed heading “William Penn may have liabilities that are not known to us.”
Removed heading “The Merger may be completed on different terms from those contained in the Merger Agreement.”
Removed heading “The Merger will not be completed unless important conditions are satisfied or waived, including approval of the Merger Agreement by our shareholders and William Penn’s shareholders.”
Largest changes
Acts of terrorism, natural disasters, global climate change,see in full comparisonpandemics,public health events, global conflicts, and geopolitical tensions(including as a result of the Russia-Ukraine and Israel-Hamas conflicts) or other similar events couldmay have a negative impact on our business and operations.While we have business continuity plans in place, suchSuch events whether occurring domestically orpersisting, such as the COVID-19 or any future pandemic,internationally, could disrupt or delay the normal operations of our business and ourfacilitiesfacilities,(including our communications and technology),resultsystems,incause harm to orcauseimpose travel limitations on our employees, andhaveadverselya similar impact onaffect our clients, suppliers, third-party vendors and counterparties. These events may alsocould impact usnegativelyto the extent that they result in reducedimpact capital markets activity,lowerassetprice levels, or disruptions in generalvalues, economic activity in the United States or abroad, orinfinancial marketsettlement functions.functioning. In addition, these or similar eventsmaycouldimpactslow economicgrowth negatively,growth, which could have an adverse effect on ourbusinessbusiness, financial condition, andoperationsresults of operations, and mayhave other adverse effects onimpact us in ways that we are unable to predict.
Financial services institutions aresee in full comparisoninterrelatedhighlyasinterconnecteda result ofthrough trading, clearing, payment systems, counterparty, or other relationships. As a result, Mid Pennhasisexposureexposed tomanycredit,different industriesliquidity, andcounterparties,operationalandrisksroutinelyarisingexecutes transactions with counterparties infrom the financialservicesconditionindustry,of other institutions, including commercial banks, brokers and dealers, investment banks, andotherinstitutional clients.ManyA default, failure or financial distress oftheseanytransactionssuchexposecounterpartyMidcouldPennresultto credit risk andin lossesin the event of a default by a counterpartyorclient.disruptionsAny such lossesthat could have a material adverse effect on Mid Penn’s financial condition and results of operations.
“Litigation relating to the Merger could require us to incur significant costs and suffer management distraction, as well as delay and/or enjoin the Merger.”see in full comparison
“Financial markets and the broader economy may experience periods of heightened volatility, stress, or disruption due to a variety of factors, including, changes in interest rates, inflation, monetary policy, economic growth, geopolitical events, public health events, or instability in the banking or financial services sector.. Adverse market and economic conditions may exert downward pressure on equity and debt securities prices, reduce liquidity in capital and credit markets, and adversely affect the availability and cost of funding and credit for financial institutions, including Mid Penn.”see in full comparison
“We are required to make a number of judgments in applying generally accepted accounting standards, and different estimates and assumptions in the application of these accounting standards could result in a decrease in capital and/or other material changes to our reports of financial condition and results of operations.”see in full comparison
“Regulatory waivers and approvals may not be received or may be received and subsequently expire, be revoked or be amended to impose conditions that are not presently anticipated or cannot be met.”see in full comparison
Full comparison: every changed paragraph (63)
Mid Penn’s earnings and cash flows are largely dependent upon the Bank’s net interest income. Net interest income is the difference between interest income earned on interest-earning assets such as loans and securities, and interest expense paid on interest-bearing liabilities such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond Mid Penn’s control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Board of Governors of the Federal Reserve System (the "Federal Reserve").Reserve. Changes in monetary policy, including changes in interest rates, could influence not only the interest income the Bank receives on loans and securities and the amount of interest expense it pays on deposits and borrowings, but such changes could also affect (i) the Bank’s ability to originate loans and obtain deposits, (ii) the fair value of financial assets and liabilities, and (iii) the average duration of mortgage-backed securities in the Bank’s investment portfolio. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, Mid Penn’s net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and investments fall more quickly than the interest rates paid on deposits and borrowings. Mid Penn may be subject to agreater greaterinterest rate risk of rising interest rates due toin the current periodenvironment of risingelevated interest rates and high inflation. In 2024,recent years, the Federal Reserve cuthas raised and lowered interest rates three times in response to coolingchanging economic conditions, including inflation trends and a weakening labor market,market after raising interest rates in 2023 and 2022 to curb inflation, which was expected to drive down the prices of income or dividend-paying securities.dynamics. The risk that interest rates may remain volatile is pronounced.
The discontinuance of LIBOR presents risks to the financial instruments originated, held or serviced by Mid Penn that use LIBOR as a reference rate.
The London Interbank Offered Rate ("LIBOR") and certain other "benchmarks" are the subject of recent national, international, and other regulatory guidance and proposals for reform. These reforms may cause such benchmarks to perform differently than in the past or have other consequences, which cannot be predicted. On July 27, 2017, the United Kingdom’s Financial Conduct Authority ("FCA"), which regulates LIBOR, publicly announced that it intended to stop persuading or compelling banks to submit LIBOR rates after 2021. Since then, regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee) have, among other things, published recommended fall-back language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., the Secured Overnight Financing Rate ("SOFR") as the recommended alternative to U.S. Dollar LIBOR), and proposed implementations of the recommended alternatives in floating rate instruments.
The administrator of LIBOR ceased publishing most non-USD LIBOR settings beginning on January 1, 2022, and as of July 1, 2023, the overnight one-month, three-month, six-month, and 12-month USD LIBOR settings were no longer published.
Currently, SOFR is the alternative reference rate replacing LIBOR for most types of transactions. SOFR is viewed as a "riskless rate" as it is derived from rates on overnight U.S. Treasury repurchase transactions, which are essentially overnight loans secured by U.S. Treasury securities and are largely viewed as not presenting credit risk. The BSBY is another alternative reference rate that is in use primarily in the loan market. BSBY is intended to reflect large banks’ marginal wholesale cost of funds and is a credit-sensitive rate with a forward-looking term structure.
The failure to properly transition away from LIBOR may result in increased supervisory scrutiny. In addition, the implementation of LIBOR reform proposals may result in increased compliance costs and operational costs, including costs related to continued participation in LIBOR and the transition to a replacement reference rate or rates, which cannot currently be reasonably estimated.
The discontinuance of LIBOR may result in uncertainty or differences in the calculation of the applicable interest rate or payment amount depending on the terms of the governing documents, may adversely affect the value of Mid Penn’s floating rate obligations, loans, deposits, derivatives, and other financial instruments tied to LIBOR rates and may also increase operational and other risks to Mid Penn and the industry, including reputational and litigation risk.
Acts of terrorism, natural disasters, global climate change, pandemics,public health events, global conflicts, and geopolitical tensions (including as a result of the Russia-Ukraine and Israel-Hamas conflicts) or other similar events couldmay have a negative impact on our business and operations. While we have business continuity plans in place, suchSuch events whether occurring domestically or persisting, such as the COVID-19 or any future pandemic,internationally, could disrupt or delay the normal operations of our business and our facilitiesfacilities, (including our communications and technology), resultsystems, incause harm to or causeimpose travel limitations on our employees, and haveadversely a similar impact onaffect our clients, suppliers, third-party vendors and counterparties. These events may also could impact us negatively to the extent that they result in reducedimpact capital markets activity, lower asset price levels, or disruptions in generalvalues, economic activity in the United States or abroad, or in financial market settlement functions.functioning. In addition, these or similar events maycould impactslow economic growth negatively,growth, which could have an adverse effect on our businessbusiness, financial condition, and operationsresults of operations, and may have other adverse effects onimpact us in ways that we are unable to predict.
In conducting its business, Mid Penn relies heavily on its information systems. Maintaining and protecting those systems and data is difficult and expensive, as is dealing with any failure, interruption, or breach in security of these systems, whether due to acts or omissions by Mid Penn or by a third party, and whether intentional or not. Any such failure, interruption, or breach could result in failures or disruptions in Mid Penn’s customer relationship management, general ledger, deposit, loan, and other systems. A breach of Mid Penn’s information securitysecurity, or those of its third-party service providers may result from fraudulent activity committed against Mid Penn or its clients, resulting in financial loss to Mid Penn or its clients, or privacy breaches against Mid Penn’s clients. Such fraudulent activity may consist of check fraud, electronic fraud, wire fraud, "phishing", social engineering, identity theft, or other deceptive acts. The policies, procedures, and technical safeguards put in place by Mid Penn to prevent or limit the effect of any failure, interruption, or security breach of its information systems and data may be insufficient to prevent or remedy the effects of any such occurrences. The occurrence of any failures, interruptions, or security breaches of Mid Penn’s information systems and data could damage Mid Penn’s reputation, cause Mid Penn to incur additional expenses, result in online services or other businesses becoming inoperable, subject Mid Penn to regulatory sanctions or additional regulatory scrutiny, or expose Mid Penn to civil litigation and possible financial liability, any of which could have a material adverse effect on Mid Penn’s financial condition and results of operations.
We are required to make a number of judgments in applying generally accepted accounting standards, and different estimates and assumptions in the application of these accounting standards could result in a decrease in capital and/or other material changes to our reports of financial condition and results of operations.
Generally accepted accounting principles involve certain estimates and processes that are particularly susceptible to significant change, including those related to the determination of the allowance for credit losses and reserve for unfunded lending commitments, the fair value of and potential impairment of certain financial instruments including investment securities, income tax assets or liabilities (including deferred tax assets and any related valuation allowance), and share-based compensation. While we have identified critical accounting policies and have procedures and processes in place to support making the related judgments and estimates, changes to the processes, assumptions, or models in the application of these generally accepted accounting principles, and the impact to the related judgments and estimates could result in a decrease to net income and, possibly, capital and may have a material adverse effect on our financial condition and results of operations. From time to time, the Financial Accounting Standards Board, and the SEC issues changes to or updated interpretations of the financial accounting and reporting guidance that governs the preparation of Mid Penn’s financial statements. These changes are beyond our control, can be difficult to predict, and could materially impact how we report our financial condition and results of operations. We could be required to apply new or revised guidance retrospectively, which may result in the revision of prior financial statements by material amounts. The implementation of new or revised guidance could also result in material adverse effects to our reported capital.
Unlike larger or regional financial institutions that are more geographically diversified, Mid Penn’s success is dependent to a significant degree on economic conditions in Pennsylvania, especially in the eighteennineteen counties and the specific markets primarily served by Mid Penn. The banking industry is affected by general economic conditions, including the effects of inflation, recession, unemployment, real estate values, trends in national and global economics, and other factors beyond our control. An economic recession or a delayed recovery over a prolonged period of time in Pennsylvania, or more specific to the counties or communities in Pennsylvania served by Mid Penn, could cause an increase in the level of the Bank’s non-performing assets and loan losses, thereby causing operating losses, impairing liquidity, and eroding capital. Mid Penn cannot assure that adverse changes in the local and state economy supporting its market area would not have a material adverse effect on Mid Penn’s consolidated financial condition, results of operations, and cash flows.
Financial services institutions are interrelatedhighly asinterconnected a result ofthrough trading, clearing, payment systems, counterparty, or other relationships. As a result, Mid Penn hasis exposureexposed to manycredit, different industriesliquidity, and counterparties,operational andrisks routinelyarising executes transactions with counterparties infrom the financial servicescondition industry,of other institutions, including commercial banks, brokers and dealers, investment banks, and other institutional clients. ManyA default, failure or financial distress of theseany transactionssuch exposecounterparty Midcould Pennresult to credit risk andin losses in the event of a default by a counterparty or client.disruptions Any such lossesthat could have a material adverse effect on Mid Penn’s financial condition and results of operations.
Periods of stress or instability in the banking system and broader financial markets may reduce confidence in financial institutions, increase market volatility, and adversely affect access to liquidity, funding sources, and capital markets. While Mid Penn did not have any direct exposure to banks that failed or were resolved in an FDIC-assisted transaction in 2023, similar events in the future, whether involving banks, non-bank financial institutions, or market infrastructure participants, could negatively impact our ability to access cash, cash equivalents or investments, or otherwise adversely affect our business and financial condition.
During 2023, five banks either failed or were sold in an FDIC-assisted transaction. Mid Penn did not have any direct exposure to any of the affected banks. However, if other banks or financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition.
Financial markets and the broader economy may experience periods of heightened volatility, stress, or disruption due to a variety of factors, including, changes in interest rates, inflation, monetary policy, economic growth, geopolitical events, public health events, or instability in the banking or financial services sector.. Adverse market and economic conditions may exert downward pressure on equity and debt securities prices, reduce liquidity in capital and credit markets, and adversely affect the availability and cost of funding and credit for financial institutions, including Mid Penn.
The capital and credit markets have recently experienced extreme volatility and economic disruption, most recently due to the takeover by the FDIC of both Silicon Valley Bank ("SVB") and Signature Bank in March 2023, and, prior to that, due to the COVID-19 pandemic. Adverse financial market and economic conditions can exert downward pressure on stock prices, security prices, and credit availability for certain issuers without regard to their underlying financial strength. The volatility resulting from the failures of SVB and Signature Bank has particularly impacted the price of securities issued by financial institutions, including Mid Penn’s.
If such levelsconditions ofpersist financialor market and economic disruption and volatility continue,worsen, there can be no assurance that Mid Penn will not experience adverse effects, which maycould materially affect itsour liquidity, financial condition, results of operations and profitability.
Stress or instability in the banking system may increase the costs of the Deposit Insurance Fund ("DIF") and result in higher FDIC insurance premiums or the imposition of special assessments on insured depository institutions. The FDIC has authority to adjust assessment rates and impose special assessments to maintain the adequacy of the DIF, and Mid Penn generally has limited ability to control the amount of premiums or assessments that its banking subsidiary may be required to pay. Although Mid Penn has not been subject to additional special assessments as of December 31, 2025, any future increases in FDIC insurance premiums or the imposition of special assessments could adversely affect our earnings, financial condition, and results of operations.
Poor economic conditions and the resulting bank failures from the most recent recession stressed the DIF and increased the costs of the Bank’s FDIC insurance assessments. Promptly following the recent failures of SVB and Signature Bank in March 2023, the federal banking regulators announced that the FDIC will use funds from the DIF to ensure that all depositors in SVB and Signature Bank are made whole, at no cost to taxpayers. Mid Penn anticipates that the FDIC will impose additional special assessments on all banks in order to replenish the DIF. Mid Penn generally is unable to control the amount of premiums or special assessments that its banking subsidiary is required to pay for FDIC insurance. As of December 31, 2024, Mid Penn has not been subject to additional special assessments. Any special assessments or future changes in the calculation or assessment of FDIC insurance premiums may have a material adverse effect on the results of Mid Penn’s operations and financial condition.
Mid Penn is subject to environmental, social and governance ("ESG") risks that could adversely affect our results of operations, reputation, and the market price of our securities.
Mid Penn is subject to a variety of risks arising from ESG matters. ESG matters include environmental and climate change activism, diversity activism, and racial and social justice issues. Such matters may involve our personnel, customers, or third parties with whom we do business. Risks arising from ESG matters may adversely affect, among other things, our reputation and the market price of our securities. Further, Mid Penn may be exposed to negative publicity based on the identity and activities of our shareholders, those to whom we lend and with which we otherwise do business, and the public’s view of the approach and requirements of our state or federal regulators, customers, and business partners with respect to ESG matters. Any such negative publicity could arise through traditional media or electronic social media platforms. Mid Penn’s relationships and reputation with our existing and prospective customers and third parties with which we do business could be damaged if we were to become the subject of any such negative publicity. This, in turn, could have an adverse effect on Mid Penn’s ability to attract and retain customers and employees and could have a negative impact on the market price for our securities.
Investor advocacy groups, investment funds and influential investors have begun to consider the steps taken and resources allocated by financial institutions and other commercial organizations with respect to ESG matters when making investment decisions. Certain investors are beginning to incorporate the business risks of ESG regulation and activism and the adequacy of companies’ responses to these into their investment decisions. These shifts in investing priorities may result in adverse effects on the market price of Mid Penn’s securities.
The U.S. Congress, state legislatures and federal and state regulatory agencies, as well as certain stock exchanges, continue to propose numerous initiatives related to ESG matters. The lack of empirical data surrounding the credit and other financial risks posed by ESG regulation and activism render it impossible to predict how specifically ESG matters may impact Mid Penn’s financial condition and results of operations.
Federal and state banking regulators and supervisory authorities, investors and other stakeholders have increasingly viewed financial institutions as a tool to effect ESG activism, both directly and with respect to their customers, which may result in financial institutions coming under increased pressure regarding the disclosure and management of ESG matters. Given that ESG matters could impose systemic risks upon the financial sector, via disruptions in economic activity resulting from activism, Mid Penn faces increasing focus on our resilience to ESG risks. Ongoing legislative or regulatory uncertainties and changes regarding ESG risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs.
Actual or perceived shortcomings with respect to these ESG initiatives and reporting can impact Mid Penn’s ability to hire and retain employees, increase its customer base or attract and retain certain types of investors. In addition, certain organizations that provide corporate governance and other corporate risk information to investors and shareholders have developed scores and ratings to evaluate companies based upon ESG metrics. Collecting, measuring, and reporting ESG information and metrics can be costly, difficult and time consuming, is subject to evolving reporting standards, and can present numerous operational, reputational, financial, legal and other risks, any of which could have a material impact, including on Mid Penn’s reputation and stock price.
On November 1, 2024, Mid Penn announced the signingAs of aDecember definitive31, merger agreement to acquire William Penn Bancorporation and its wholly-owned subsidiary, William Penn Bank.2025, Mid Penn has completed four otherfive whole bank merger acquisitions in recent years (The Scottdale Bank & Trust Company and First Priority Financial Corp. in 2018, Riverview Financial Corporation on November 30, 2021, and Brunswick Bancorp on May 19, 20232023, William Penn on April 30, 2025), as well as twothree nonbank acquisitions. On January 1, 2026 and February 27, 2026, Mid Penn completed the Cumberland Advisors Acquisition and 1st Colonial Acquisition, marking Mid Penn's fourth non-bank acquisition and sixth whole bank merger acquisition.
Generally, Mid Penn must receive federal and state regulatory approval before it can acquire a bank or bank holding company. In determining whether to approve a proposed bank acquisition, bank regulators will consider, among other factors, the effect of the acquisition on competition and future prospects. Regulators also review current and projected capital ratios and levels, the competence, experience and integrity of management and its record of compliance with laws and regulations. We cannot be certain when or if, or on what terms and conditions, any required regulatory approvals will be granted. Growth by acquisition involves substantial risks, as the ultimate success of such acquisitions may depend on, among other things, the ability to realize anticipated cost savings and toeffectively integrate the acquired companies and operation in a manner that does not result in decreased revenues. Excessive acquisition costs, conversion costs and the disruption of existing customer relationships in both the acquired companies and legacy markets may occur. If we are not able to successfully achieve the financial efficiencies or integration and growth objectives of acquisitions, the anticipated benefits of an acquisition may not be realized fully, or at all, or may take longer to realize than planned.
We intend to pursue a growth plan consistent with our prior business strategy, including growth by acquisition, as well as leveraging our existing branch network or adding new branch locations or offices and personnel in current and adjacent markets we choose to serve. Our recent acquisitionsbank and thenonbank pending William Penn acquisitionacquisitions are reflective of our growth strategy.
Risks Related to the 1st Colonial Merger
Failure to complete the Merger could negatively affect our market price, future business and financial results.
Although we anticipate closing the Merger in the second quarter of 2025, we cannot guarantee when, or whether, the Merger will be completed. If the Merger is not completed for any reason, we will be subject to a number of material risks, including the following:
•Costs related to the Merger, such as legal, accounting and financial advisory fees, and, in specific circumstances, additional reimbursement and termination fees, must be paid even if the Merger is not completed.
•Declines in our market price to the extent that the current market price of our common stock already reflects a market assumption that the Merger will be completed.
•The diversion of management’s attention from the day-to-day business operations and the potential disruption to each company’s employees and business relationships during the period before the completion of the Merger may make it difficult to regain financial and market positions if the Merger does not occur.
•Becoming subject to litigation related to any failure to complete the Merger.
Regulatory waivers and approvals may not be received or may be received and subsequently expire, be revoked or be amended to impose conditions that are not presently anticipated or cannot be met.
Before the transactions contemplated in the Merger Agreement, including the Merger, may be completed, various waivers, approvals or consents must be obtained from various bank regulatory and other authorities, including the Board of Governors of the Federal Reserve System, the FDIC, and the Pennsylvania Department of Banking and Securities. In determining whether to grant these approvals, regulatory authorities consider a variety of factors, including the regulatory standing of each party. These approvals could be delayed or not obtained at all, including due to any or all of the following: an adverse development in any party’s regulatory standing or any other factors considered by regulators in granting such approvals; governmental, political, or community group inquiries, investigations or opposition; or changes in legislation or the political or regulatory environment generally, including as a result of changes of the U.S. executive administration, or Congressional leadership and regulatory agency leadership.
Even if the approvals are granted, they may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of the combined company’s business or require changes to the terms of the transactions contemplated by the Merger Agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations, or restrictions or that such conditions, limitations, obligations, or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the Merger Agreement, imposing additional material costs on or materially limiting the revenues of the combined company following the Merger or otherwise reduce the anticipated benefits of the Merger if the Merger were completed successfully within the expected timeframe. In addition, there can be no assurance that any such conditions, limitations, obligations, or restrictions will not result in the delay or abandonment of the Merger. The completion of the Merger is conditioned on the receipt of the requisite regulatory approvals without the imposition of any materially burdensome regulatory condition and the expiration of all statutory waiting periods. Additionally, the completion of the Merger is conditioned on the absence of certain orders, injunctions, or decrees issued by any court or any governmental entity of competent jurisdiction that would prevent, prohibit, or make illegal the completion of the Merger or any of the other transactions contemplated by the Merger Agreement.
Despite the parties’ expected commitment to use their reasonable best efforts to respond to any request for information and resolve any objection that may be asserted by any governmental entity with respect to the Merger Agreement, neither party is required under the terms of the Merger Agreement to take any action, commit to take any action, or agree to any condition or restriction in connection with obtaining these approvals, that would reasonably be expected to have a material adverse effect on the combined company and its subsidiaries, taken as a whole, after giving effect to the proposed Merger.
Further, such approvals are subject to expiration if the transaction is not consummated within the time period provided in the approval.
Combining Mid Penn and William Penn may be more difficult, costly or time consuming than expected, and we may fail to realize the anticipated benefits of the Merger.
The success of the Merger will depend on, among other things, our ability to integrate William Penn into our business in a manner that facilitates growth opportunities and achieves the anticipated benefits of the Merger. If we are not able to successfully achieve these objectives, the anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost and savings and anticipated benefits of the Merger could be less than anticipated, and integration may result in additional unforeseen expenses.
Litigation relating to the Merger could require us to incur significant costs and suffer management distraction, as well as delay and/or enjoin the Merger.
We are not currently able to predict the outcome of any suit arising out of or relating to the proposed Merger that may be filed in the future. If any complaints are filed, absent allegations that are material, We will not necessarily announce such filings.
We could be subject to demands or litigation related to the Merger, whether or not the Merger is consummated. Such actions may create additional uncertainty relating to the Merger, and responding to such demands and defending such actions may be costly and distracting to management. Although there can be no assurance as to the ultimate outcomes of any demand or any subsequent litigation, we do not believe that the resolution of such demands or any subsequent litigation will have a material adverse effect on our financial position, results of operations or cash flow.
We will be subject to various uncertainties while the Merger is pending that could adversely affect our financial results or the anticipated benefits of the Merger.
Uncertainty about the effect of the Merger on counterparties to contracts, employees and other parties may have an adverse effect on us or the anticipated benefits of the Merger. These uncertainties could cause contract counterparties and others who deal with us or William Penn to seek to change existing business relationships with us or William Penn, and may impair our or William Penn’s ability to attract, retain and motivate key personnel until the Merger is completed and for a period of time thereafter. Employee retention and recruitment may be particularly challenging prior to the completion of the Merger, as our employees and prospective employees, and the employees and prospective employees of William Penn, may experience uncertainty about their future roles with us following the Merger.
The pursuit of the Merger and the preparation for the integration of the two companies may place a significant burden on management and internal resources. Any significant diversion of management attention away from ongoing business and any difficulties encountered in the transition and integration process could affect our financial results prior to and/or following the completion of the Merger and could limit us from pursuing attractive business opportunities and making other changes to our business prior to completion of the Merger or termination of the Merger Agreement.
William Penn may have liabilities that are not known to us.
In connection with the Merger, we will assume all of William Penn’s liabilities by operation of law. There may be liabilities that we failed or were unable to discover in the course of performing due diligence investigations into William Penn, or we may not have correctly assessed the significance of certain liabilities of William Penn identified in the course of our due diligence. Any such liabilities, individually or in the aggregate, could have an adverse effect on our business, financial condition, and results of operations.
We expect to continue to incur substantial transaction costs inrelated connection withto the Merger.
We have incurred substantial costs in connection with the Merger and subsequent integration of the processes, policies, procedures, operations, and technologies and systems, including purchasing, accounting and finance, payroll, compliance, treasury management, branch operations, vendor management, risk management, lines of business, pricing and benefits. While we have attempted to accurately forecast these costs, factors that are beyond our control or that we have failed to accurately estimate could result in us incurring future charges in excess of our current estimates. These charges could be material and could materially adversely affect our future earnings.
The integration of Mid Penn and 1st Colonial may be more difficult, costly or time consuming than expected and Mid Penn may fail to realize the anticipated benefits of the Merger.
The success of the Merger will depend, in part, on the ability to realize the anticipated growth opportunities and cost savings from combining the businesses of Mid Penn and 1st Colonial. To realize the anticipated benefits and cost savings from the Merger, we must successfully integrate and combine the businesses of Mid Penn and 1st Colonial in a manner that permits those cost savings to be realized. If we are not able to successfully achieve these objectives, or if we have failed to accurately estimate the anticipated benefits of the merger, the anticipated benefits may not be realized fully or at all, they may take longer to realize than expected, and we may incur additional unforeseen expenses.
The integration process could result in the loss of key employees, diversion of management attention and resources, the disruption of the combined company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors and employees.
Our future results may suffer if we do not effectively manage our expanded operations.
As a result of the merger, the size, scope, and complexity of our business has increased significantly beyond that of either Mid Penn's of 1st Colonial's business prior to the Merger. Our future success will depend, in part, upon our ability to manage and achieve the benefits we have anticipated will be associated with this expanded business, challenges, including challenges related to the management and monitoring of new operations, and the associated increased costs and complexity. There can be no assurances that we will be successful or that we will realize the expected operating efficiencies, cost savings, growth opportunities, revenue enhancements or other benefits currently anticipated.
We expect to incur a significant amount of non-recurring expenses in connection with the Merger, including legal, accounting, consulting, and other expenses. In general, these expenses are payable by us whether or not the Merger is completed. Additional unanticipated costs may be incurred following consummation of the Merger in the course of the integration of our businesses and the business of William Penn. We cannot be certain that the elimination of duplicative costs or the realization of other efficiencies related to the integration of the two businesses will offset the transaction and integration costs in the near term, or at all.
The Merger may be completed on different terms from those contained in the Merger Agreement.
Management's Discussion & Analysis (MD&A)
New heading “Business Combinations”
New heading “Noninterest Expense”
New heading “Credit Quality, Credit Risk, and Allowance for Credit Losses”
Largest changes
“No goodwill impairment has been recorded for 2025. Management will continue to monitor internal metrics and macroeconomic trends to determine if there is likelihood of goodwill impairment.”see in full comparison
Our annual impairment test was conducted during the fourth quarter ofsee in full comparison2024.2025. Goodwill is calculated as a purchase premium using the market participant and peer group control premium approach. Additional factors considered include actual earnings in relation to forecasted earnings, liquidity levels, changes in deposit balances, and credit quality, among others.No goodwill impairment has been recorded for 2024. Management will continue to monitor internal metrics and macroeconomic trends to determine if there is likelihood of goodwill impairment.
“•Noninterest Expense - Noninterest expense totaled $117.6 million, a decrease of $972 thousand, or 0.8%, compared to noninterest expense of $118.6 million for the year ended December 31, 2023. …”see in full comparison
“For the year ended December 31, 2024, noninterest expense totaled $117.6 million, a decrease of $1.0 million, or 0.8%, compared to noninterest expense of $118.6 million for the year ended December 31, 2023. …”see in full comparison
Full comparison: every changed paragraph (102)
•the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, including litigation related to the Merger;
•the ability to obtain regulatory approvals and satisfy other closing conditions to the Merger, including approval by the shareholders of Mid Penn and William Penn;
•the possibility of increased scrutiny by, and/or additional regulatory requirements of, governmental authorities as a result of the Merger;
•potential exposure to unknown or contingent risks and liabilities we have acquired, or may acquire, or target for acquisition, including in connection with the Merger;
This Management’s Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of Mid Penn’s Consolidated Financial Statements from the view of management and should be read in conjunction with the Consolidated Financial Statements of the Corporation and Notes thereto and other detailed information appearing elsewhere in this Annual Report on Form 10-K. The comparability of the results of operations for the years ended 2024 and 2023, compared to 2022, in general, have been materially impacted by the Brunswick Acquisition, which closed on May 19, 2023.
The comparability of the results of operations for the year ended 2025 compared to 2024 and 2023, in general, has been materially impacted by the William Penn Acquisition, which closed on April 30, 2025.
Mid Penn generates the majority of its revenues through net interest income, or the difference between interest earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing the net interest margin, which is fully taxable-equivalent basis ("FTE") net interest income as a percentage of average interest-earning assets. The Corporation also generates revenue through fees earned on the various services and products offered to its customers and through gains on sales of assets, such as loans, investments and properties. Offsetting these revenue sources are provisions for credit losses, non-interestnoninterest expenses and income taxes.
(1) Presented on a FTE basis using a 21% Federal tax rate and statutory interest expense disallowances. See also the "Net Interest Income" On April 30, 2025, Mid Penn completed the William Penn Acquisition, which added total assets of $726.5 million, including $405.3 million of loans and included the acquisition of 12 branches, further expanding Mid Penn's presence in the Philadelphia region and surrounding counties in Pennsylvania and New Jersey. Mid Penn issued 3,506,795 shares of Mid Penn common stock as consideration for the $103.2 million purchase price. The Corporation also granted replacement awards for 538,447 stock options, with a fair value of $3.1 million to continuing employees of William Penn.
(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
During the second quarter of 2023, Mid Penn completed the Brunswick Acquisition, which added total assets of $390.7 million comprised primarily of $324.5 million of loans. This transaction resulted in the addition of 5 branches in central New Jersey. Mid Penn issued 849,510 shares of its common stockstock, as well as a net cash payment to Brunswick shareholders of $27.6 million, for total consideration of $45.7 million for all outstanding stock and the cancellation of options of Brunswick.
•Net Income Per Share - Mid Penn’s net income available to common shareholders ("earnings") for the year ended December 31, 20242025 was $56.2 million or $2.59 per basic and $2.55 per diluted common share, compared to earnings of $49.4 million or $2.90 per common share basic and diluted, compared to earnings of $37.4 million or $2.29 per common share basic and diluted common share for the year ended December 31, 2023.2024. The resultsincrease forin net income was partially offset by a higher weighted-average number of shares outstanding in 2025, which contributed to a lower diluted earnings per share compared to the yearprior ended December 31, 2024 were favorably impacted by loan growth, and interest income growth.year.
◦Net Interest Margin - For the year ended December 31, 2024,2025, Mid Penn’s FTE net interest margin was 3.11%3.56% versus 3.26%3.11% for the year ended December 31, 2023. The Federal Reserve’s Federal Open Market Committee ("FOMC") decreased rates three times during 2024. The yield on interest-earning assets increased 4411 basis point(s) ("bp") for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 and the rate on interest-bearing liabilities increaseddecreased 7042 bp for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024.
◦Loan Growth - Total loans, net of unearned income, as of December 31, 2025 were $4.9 billion compared to $4.4 billion as of December 31, 2024, an increase of $419.8 million, or 9.4%. Loan growth was driven primarily by an increase in residential mortgage loans of $215.9 million, an increase in nonowner occupied commercial real estate of $113.0 million, an increase in owner occupied commercial real estate of $94.9 million, an increase in commercial and industrial loans of $14.6 million, and a $6.4 million increase in multifamily loans, partially offset by a $29.9 million decrease in construction loans. Loans from the William Penn Acquisition contributed $405.3 million to this increase.
◦Deposit Growth - Total deposits increased $524.7 million, or 11.2%, from $4.7 billion as of December 31, 2024, to $5.2 billion as of December 31, 2025. The growth was driven by an increase of $499.1 million in interest-bearing transaction accounts, an increase of $74.8 million in noninterest-bearing accounts, partially offset by a decrease of $49.2 million in time deposits. Deposits from the William Penn Acquisition contributed $619.8 million to this increase.
◦Loan Growth - Total loans, net of unearned income, as of December 31, 2024 were $4.4 billion compared to $4.3 billion as of December 31, 2023, an increase of $190.3 million, or 4.5%. The loan growth occurred primarily within Mid Penn’s commercial real estate loan portfolio. The mix of commercial real estate and commercial portfolios in relation to the total change in the loan portfolio increased 111.1% and 15.9%, respectively from December 31, 2023 to December 31, 2024. Non-owner occupied office commercial real estate exposure represents 28.2% of total loan balances and is primarily limited to suburban offices.
◦Deposit Growth - Total deposits increased $343.7 million, or 7.9%, from $4.3 billion at December 31, 2023, to $4.7 billion at December 31, 2024.
•Asset Quality - ACL atas of December 31, 20242025 was $36.1 million, or 0.74% of total loans, as compared to $35.5 million, or 0.80% of total loans,loans as compared to $34.2 million, or 0.80% of total loans at December 31, 2023.2024.
◦Net Charge-offs/Recoveries - Mid Penn had net loan charge-offs of $817$1.4 thousandmillion and net loan charge-offs of $332$817 thousand for the years ended December 31, 20242025 and 2023,2024, respectively.
◦Non-performing assets - Total non-performing assets were $22.7$30.8 million atas of December 31, 2024,2025, an increase of $8.1 million compared to non-performing assets of $14.5$22.7 million atas of December 31, 2023.2024. The increase during 2025 was partiallyprimarily arelated result ofto the addition of twoone commercialC&I loansrelationship withfor a$4.7 combinedmillion balanceoffset by the sale of $3.0one million, and twoforeclosed commercial real estate property for $1.4 million. Delinquency, measured as loans withpast adue combined30 balancedays ofor $2.3more, millionincluding being placedloans on nonaccrual instatus, thewas fourth quarter0.69% of total loans as of December 31, 2025, compared to 0.52% as of December 31, 2024.
◦Provision/Benefit for credit losses - Loans - The provision for credit losses - loans was $1.6 million for the year ended December 31, 2025 compared to $2.1 million for the year ended December 31, 2024. The decrease for the year ended December 31, 2025 was primarily attributable to reduced expected losses driven by updates to the macroeconomic forecast and lower loan balances as a result of an increase in observed prepayment speeds, partially offset by a $2.3 million reserve on non-PCD loans acquired through the William Penn Acquisition.
•Noninterest Income - Noninterest income totaled $26.8 million for the year ended December 31, 2025, a $4.3 million, or 19.3%, increase compared to the year ended December 31, 2024. The increase in noninterest income is primarily driven by an $838 thousand increase in earnings from the cash surrender value of life insurance, a $618 thousand increase in fiduciary and wealth management income, a $356 thousand increase in mortgage banking income, and a $2.2 million increase in other noninterest income, driven by a $1.1 million increase in insurance commissions, a $910 thousand increase in loan level swap fees, and a $534 thousand increase in recoveries on loans previously acquired in business combinations, which are recognized in noninterest income, rather than a reduction to the allowance for credit losses, consistent with purchase accounting treatment. This increase also includes a $420 thousand gain on the closing of an investment in a reinsurance entity acquired from another institution, a $307 thousand increase in sales tax refunds received, and $362 thousand in swap cancellation gains tied to eliminated brokered deposits, partially offset by a $2.2 million decrease in death benefits received.
•Noninterest Expense - Noninterest expense for the year ended December 31, 2025 totaled $152.3 million, an increase of $34.7 million, or 29.5%, compared to noninterest expense of $117.6 million for the year ended December 31, 2024.
Salaries and benefits increased $13.9 million for the year ended December 31, 2025, compared to the same period in 2024. The increase is attributable to (i) equity-based compensation expense for stock options and restricted stock awards totaling $3.1 million that were recognized in the year ended December 31, 2025; (ii) the retail staff additions at the twelve retail locations added through the William Penn Acquisition; and (iii) the retention of various William Penn team members through the completion of systems integration, which occurred on June 20, 2025.
Merger and acquisition expenses increased $11.0 million for the year ended December 31, 2025, which includes $10.1 million of merger related expenses related to the William Penn Acquisition, $713 thousand related to the 1st Colonial acquisition, $172 thousand related to the Cumberland Advisors Acquisition, and $164 thousand related to the Charis Insurance Group acquisition.
Software licensing and utilization costs increased $3.3 million for the year ended December 31, 2025, compared to the same period in 2024. The increase reflects additional costs to (i) license the additional William Penn branches; and (ii) upgrade internal systems, including network storage, cybersecurity, and data security enhancements in response to the Bank's larger size and increased IT complexity.
Occupancy expenses increased $2.3 million for the year ended December 31, 2025, compared to the same period in 2024. The increase was driven by the facility operating costs of the additional retail locations added through the William Penn acquisition.
◦Provision/Benefit for credit losses - Loans - The provision for credit losses - loans was $2.1 million for the year ended December 31, 2024 compared to $3.3 million for the year ended December 31, 2023. The decrease in provision for the year ended December 31, 2024, is primarily due to a decrease in loss factors across most portfolios. Prior to 2023, ACL and related provision are presented in accordance with the previous accounting guidance using the incurred loss method. The PCL for the year ended December 31, 2023 includes an initial provision for credit losses on non-PCD loans acquired in the Brunswick Acquisition of $2.0 million.
•Noninterest Income - Noninterest income totaled $22.5 million for the year ended December 31, 2024, a $2.5 million, or 12.4%, increase compared to the year ended December 31, 2023. The increase was primarily attributable to a $2.2 million increase in other miscellaneous income, driven by increases in Bank-owned life insurance benefits received, and a $1.1 million increase in mortgage banking income, partially offset by a $379 thousand decrease in fiduciary and wealth management and a $314 thousand decrease in mortgage hedging.
•Noninterest Expense - Noninterest expense totaled $117.6 million, a decrease of $972 thousand, or 0.8%, compared to noninterest expense of $118.6 million for the year ended December 31, 2023. The decrease was primarily driven by a $5.0 million decrease in merger and acquisition expenses and a $3.0 million decrease in post-acquisition restructuring expenses, partially offset by a $4.8 million increase in salaries and benefits expense, driven by year-end employee bonus incentives, increases in employee salaries, and increased costs of employee medical benefits, a $1.4 million increase in legal and professional fees, and a $1.4 million increase in software licensing and utilization expense.
•Borrowings paid downsdown - During 2024,2025, Mid Penn paid off $35.3$318 thousand of long-term debt and redeemed a total of $45.3 million of long-termsubordinated debt.
◦On JulyMay 31,12, 2024,2025, Mid Penn acquired the insurance business and related accounts of aCharis full-serviceInsurance employeeGroup, benefitsInc., firmwhich thatprovides servesbusiness, midhome toand largeauto employersinsurance acrossthroughout central and easternsouthern Pennsylvania, northern Maryland, and northern Virginia, for a cash purchase price of $2.0$4.0 million at closing and an additional $800 thousand potentially payable pursuant to a three year earnout.million.
◦On April 30, 2025, Mid Penn completed its acquisition of William Penn through the merger of William Penn with and into Mid Penn with Mid Penn being the surviving corporation. In connection with this acquisition, William Penn Bank, a wholly owned subsidiary of William Penn, merged with and into Mid Penn Bank, a wholly owned subsidiary of Mid Penn. The merger was an all-stock transaction valued at approximately $103.2 million, based on the Mid Penn common stock closing price of $29.05 on April 30, 2025.
◦On July 31, 2024, Mid Penn acquired the insurance business and related accounts of Commonwealth Benefits Group, a full-service employee benefits firm that serves mid to large employers across central and eastern Pennsylvania, northern Maryland, and northern Virginia, for a purchase price of $2.0 million at closing and an additional $800 thousand potentially payable pursuant to a three-year earnout.
The loan loss estimation process involves procedures to appropriately consider the unique characteristics of Mid Penn’s loan portfolio segments. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Evaluations of the portfolio and individual credits are inherently 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 judgementjudgment by Management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the ACL and credit loss expense.
Mid Penn estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Mid Penn uses a third-party software application to calculate the quantitative portion of the ACL using a methodology and assumptions specific to each loan pool. The qualitative portion of the allowance is based on general economic conditions and other internal and external factors affecting Mid Penn as a whole, as well as specific loans. Factors considered include the following: lending process, concentrations of credit, and credit quality. The quantitative and qualitative portions of the allowance are added together to determine the total ACL, which reflects Management’s expectations of future conditions based on reasonable and supportable forecasts. As such, the calculation of ACL is inherently subjective and requires management to exercise significant judgment. The CECL estimateestimate, including assumptions related to interest rates, unemployment, and economic growth, is highly sensitive to the economic forecasts used to develop the estimate.
While management uses the best information known to it in order to make ACL valuations, adjustments to the ACL may be necessary based on changes in economic and other conditions, changes in the composition of the loan portfolio, or changes in accounting guidance. In times of economic slowdown, either local, regional or national, the risk inherent in the loan portfolio could increase resulting in the need for additional provisions to the ACL in future periods. An increase could also be necessitated by an increase in the size of the loan portfolio or in any of its components even though the credit quality of the overall portfolio may be improving.
For further discussion of the methodology used in the determination of the ACL, refer to "Note 1, Summary of Significant Accounting Policies", "Note 3 - Investment Securities", "Note 4 - Loans and Allowance for Credit Losses - Loans" and "Note 18 - Commitments and Contingencies" to the Consolidated Financial Statements. To the extent actual outcomes differ from management estimates, additional PCLprovision for credit losses may be required that would adversely impact earnings in future periods.
The allowance for credit losses - loans was $36.1 million as of December 31, 2025, an increase of $577 thousand, or 1.6%, compared to $35.5 million as of December 31, 2024. The increase for the year ended December 31, 2025 was primarily attributable to a $2.3 million reserve on non-PCD loans acquired through the William Penn Acquisition, offset by reduced expected losses driven by updates to the macroeconomic forecast and lower loan balances as a result of an increase in observed prepayment speeds.
The allowance for credit losses - Loans was $35.5 million as of December 31, 2024, an increase of $1.3 million, or 3.9%, compared to $34.2 million as of December 31, 2023. The increase was primarily the result of an increase in the reserve for individually analyzed loans during the fourth quarter of 2024.
Mid Penn evaluates goodwill annually for impairment unless events occur which indicate that impairment is possible, a triggering event. AtAs of December 31, 2024,2025, Mid Penn had goodwill of $128.2$136.6 million and Mid Penn's stock continues to trade below book value.
Our annual impairment test was conducted during the fourth quarter of 2024.2025. Goodwill is calculated as a purchase premium using the market participant and peer group control premium approach. Additional factors considered include actual earnings in relation to forecasted earnings, liquidity levels, changes in deposit balances, and credit quality, among others. No goodwill impairment has been recorded for 2024. Management will continue to monitor internal metrics and macroeconomic trends to determine if there is likelihood of goodwill impairment.
No goodwill impairment has been recorded for 2025. Management will continue to monitor internal metrics and macroeconomic trends to determine if there is likelihood of goodwill impairment.
Refer to "Note 1 - Summary of Significant Accounting Policies" and "Note 6 - Goodwill and Intangible Assets" for further details on the Company's goodwill.
Business Combinations
Assets acquired and liabilities assumed in business combinations are measured at fair value as of the acquisition date. In many cases, determining the fair value of the assets acquired and liabilities assumed requires Mid Penn to estimate the timing and amount of cash flows expected to result from these assets and liabilities and to discount these cash flows at appropriate rates of interest, which require the utilization of significant estimates and judgment in accounting for the acquisition.
Refer to "Note 1 - Summary of Significant Accounting Policies" and "Note 2 - Business Combinations" for further details on the Company's business combinations.
Net interest income, Mid Penn's primary source of earnings, represents the difference between interest income received on loans, investments, and overnight funds, and interest expense paid on deposits and short- and long-term borrowings. Net interest income is affected by changes in interest rates and changes in average balances (volume) in the various interest-sensitive assets and liabilities. Interest and average rates in the table below are presented on a fully taxable-equivalent basis ("FTE"). Tax-equivalent adjustments were calculated using a statutory corporate tax rate of 21% for the years ended December 31, 2024,2025, 20232024 and 2022.2023. For purposes of calculating loan yields, average loan balances include non-accrualnonaccrual loans. Loan fees of $4.8$5.5 million, $4.6$4.8 million and $8.4$4.6 million are included with loan interest income in the following table for the years ended December 31, 2025, 2024, and 2023, and 2022, respectively.
(1) Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances.
For the year ended December 31, 2025, Mid Penn’s FTE net interest margin was 3.56% compared to 3.11% for the year ended December 31, 2024 and 3.26% for the year ended December 31, 2023. The increase in net interest margin was primarily a result of a decrease in funding costs, reflecting lower average interest-bearing liabilities, as well as higher yields on interest-earning assets and growth in average interest-earning assets. During 2025, FTE net interest income increased $42.4 million, or 27.1%, compared to 2024. Interest income increased $29.4 million as the result of a $552.4 million, or 10.9%, increase in average interest-earning assets in 2025 compared to 2024, and increased $7.8 million as the result of a 11 bp increase in the yield on interest-earning assets in 2025 compared to 2024.
For the year ended December 31, 2024, Mid Penn’s FTE net interest margin was 3.11% versus 3.26% for the year ended December 31, 2023 and 3.59% for the year ended December 31, 2022. During 2024, FTE net interest income increased $9.7 million, or 6.6%, compared to 2023. Interest income increased $30.3 million as the result of a $538.2 million, or 11.9%, increase in average interest-earning assets in 2024 compared to 2023, and increased $20.0 million as the result of a 44 bp increase in the yield on interest-earning assets in 2024 compared to 2023. The decrease to net interest margin was primarily a result of an increase in funding costs and growth in average interest-bearing liabilities, partially offset by higher yields on interest-earning assets and growth in average interest-earning assets.
Average total loans, net, increased $505.6$335.6 million, or 13.1%,7.7%, contributing $28.6$20.4 million to the increase in interest income. The yield on average total loans, net, increased from 5.65% for 2023 to 6.07% for 2024.2024 Theto increase6.20% infor 2025. Loan yields increased due to higher rate loan production and portfolio mix shifts, partially offset by the yield was primarily the resultimpact of thelower highermarket interest rate environment during 2024.rates.
Total average federal funds sold increased $29.3$135.6 million, contributing $1.5$7.2 million to the increase in FTE interest income, andpartially offset by a 103 bps decrease in the average yield on federal funds soldsold, increased 8 bps, contributing $30 thousand to the increase inreducing FTE interest income.income by $1.8 million.
Interest expense for 2024 increaseddecreased by $40.5$5.2 million or 45.4%4.0% whenfor the year ended December 31, 2025 compared to 2023.2024. The cost of interest-bearing liabilities increaseddecreased to 2.83% in 2025 from 3.25% in 2024 and increased from 2.55% in 2023 and 0.58% in 2022.2023. The rate on total interest-bearing deposits increaseddecreased to 2.81% in 2025 from 3.12% in 2024 and increased from 2.40% in 2023 and 0.48% in 2022.2023. The increasedecrease in the rate from 2024 was primarily a result of depositthe growthBank andlowering a shiftrates in the mix of deposits from noninterest-bearingresponse to higherthe yieldingFederal demand,Reserve moneyinterest marketrate andcuts timein deposits. Mid Penn continued to offer higher rates to both retain and attract deposits.2025. In addition, average short-term borrowings ofdecreased to $8.0 million from $190.9 million werein used2024, towhich help fund loan growth, contributingcontributed to the $3.5$10.2 million increasedecrease in interest expense on short-term borrowings for the year ended December 31, 20242025 as compared to 2023.2024.
The provision for credit losses on loans was $1.6 million for the year ended December 31, 2025, a decrease of $546 thousand or 25.5% compared to a provision for credit losses of $2.1 million for the year ended December 31, 2024, a decrease of $1.2 million or 34.9% compared to a provision for credit losses of $3.3 million for the year ended December 31, 2023.2024. The provision for credit losses on loans for the year ended December 31, 20232024 decreased $1.0$1.2 million, or 23.4%,34.9%, from the $4.3$3.3 million provision for credit losses on loans for the year ended December 31, 2022.2023. The decrease in provision for the year ended December 31, 20242025 was primarily dueattributable to reduced expected losses resulting from updates to the macroeconomic forecast and lower loan balances as a decreaseresult of an increase in lossobserved factorsprepayment acrossspeeds, mostpartially portfolios.offset by a $2.3 million reserve on non-PCD loans acquired through the William Penn acquisition. The benefit for credit losses on off-balance sheet credit exposures was $301 thousand for the year ended December 31, 2025, compared to a benefit of $628 thousand for the year ended December 31, 2024, compared toand a provision of $404 thousand orfor the year ended December 31, 2023. Prior to 2023, ACL and related provision are presented in accordance with the previous accounting guidance using the incurred loss method.
For the year ended December 31, 2025, Mid Penn had net charge-offs of $1.4 million compared to net charge-offs of $817 thousand for the year ended December 31, 2024, Mid Penn had net charge-offs of $817 thousand compared toand net charge-offs of $332 thousand for the year ended December 31, 2023, and net recoveries of $60 thousand for the year ended December 31, 20222023 . A summary of charge-offs and recoveries of loans and the provision for loan losses is shown in the table below.
For the year ended December 31, 2025, noninterest income totaled $26.8 million, an increase of $4.3 million or 19.3%, compared to noninterest income of $22.5 million for the year ended December 31, 2024. The increase in noninterest income was primarily driven by an $838 thousand increase in earnings from the cash surrender value of life insurance, a $618 thousand increase in fiduciary and wealth management, a $356 thousand increase in mortgage banking, and a $2.2 million increase in other noninterest income, driven by a $1.1 million increase in insurance commissions, a $910 thousand increase in loan level swap fees, and a $534 thousand in recoveries on loans previously acquired in business combinations. These recoveries are recognized in noninterest income rather than a reduction to the allowance for credit losses, consistent with purchase accounting treatment, as expected credit losses on acquired loans were reflected in fair value adjustments at the acquisition date. This increase also includes a $420 thousand gain on the closing of an investment of a reinsurance entity acquired from another institution, a $307 thousand increase in sales tax refunds received, and $362 thousand in swap cancellation gains tied to eliminated brokered deposits, partially offset by a $2.2 million decrease in death benefits received.
For the year ended December 31, 2024, noninterest income totaled $22.5 million, an increase of $2.5 million or 12.4%, compared to noninterest income of $20.0 million for the year ended December 31, 2023. Income from mortgage banking, service charges on deposits, earnings from cash surrender value of life insurance, and other income all increased compared to the prior year.
Mortgage banking income increased $1.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. Mortgage loan originations and secondary-market loan sales and gains increased during 2024 as a result of decreases in interest rates. Mortgage hedging income was $10 thousand for the year ended December 31, 2024 compared to $324 thousand for the same period in 2023.
Other income increased $2.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase in noninterest income is primarily driven by a $2.2 million increase in other miscellaneous noninterest income, driven by increases in Bank-owned life insurance benefits received.
What changed in the latest 10-Q
Risk Factors
Largest changes
Geopolitical instability,see in full comparisonincludingarmedconflictsconflicts, andtensionschanges invarioustraderegionspolicy,ofincludingthetariffsworld,and retaliatory measures, may contribute tovolatility infinancialmarketsmarket volatility and broader economic uncertainty. Escalation of such conflicts could disrupt energy and commodity markets, increase inflationary pressures, and affect interest rate conditions.
Full comparison: every changed paragraph (3)
Management has reviewed the risk factors that were previously disclosed in the 2025 Annual Report and subsequent reports filed with the SEC to determine if there were material changes applicable to the threesix months ended MarchJune 31,30, 2026. Aside from the following risk factor, there have been no material changes to the risk factors that were previously disclosed in the 2025 Annual Report.
Geopolitical instability, including armed conflictsconflicts, and tensionschanges in varioustrade regionspolicy, ofincluding thetariffs world,and retaliatory measures, may contribute to volatility in financial marketsmarket volatility and broader economic uncertainty. Escalation of such conflicts could disrupt energy and commodity markets, increase inflationary pressures, and affect interest rate conditions.
In addition, heightened uncertainty may affect assumptions and estimates used in evaluating allowance for credit losses, including qualitative factors, andwhich could contribute to increased provision expense. The extent and duration of these conditions and their impact on our business, financial condition, and results of operations remain uncertain.
Management's Discussion & Analysis (MD&A)
Removed heading “•Net Interest Income”
Largest changes
“•Net Income Per Share - Mid Penn’s net income available to common shareholders ("earnings") for the three months ended June 30, 2026 was $21.7 million, or $0.86 per basic common share and $0.85 per diluted common share, compared to earnings of $4.8 million, or $0.22 per basic and diluted common share for the three months ended June 30, 2025. …”see in full comparison
“For the six months ended June 30, 2026, noninterest expense totaled $99.7 million, an increase of $21.3 million, or 27.1%, compared to noninterest expense of $78.4 million for the six months ended June 30, 2025. The increase was primarily driven by a $13.2 million increase in salaries and benefits, reflecting additional staff from the William Penn, 1st Colonial, and Cumberland Advisors acquisitions. …”see in full comparison
“Noninterest expense totaled $99.7 million for the six months ended June 30, 2026 compared to $78.4 million for the same period of 2025. The increase was primarily driven by a $13.2 million increase in salaries and benefits, reflecting additional staff from the 1st Colonial, Cumberland Advisors, and William Penn acquisitions. Software licensing and utilization costs, occupancy expenses, and legal and professional fees increased $1.9 million, $1.5 million, and $2.0 million, respectively, primarily reflecting Mid Penn's increased size and operational complexity following these acquisitions. …”see in full comparison
“Interest expense decreased $1.0 million during the first six months of 2026 compared to the same period of 2025. The rate on interest-bearing liabilities decreased from 2.91% for the first six months of 2025 to 2.49% for the first six months of 2026. The decrease in the average rate primarily reflected the repricing of interest-bearing deposits and short term borrowings, as well as lower long term debt balances. Mid Penn continued to offer competitive deposit rates to retain and attract customer deposits. …”see in full comparison
“For the six months ended June 30, 2026, net interest income was $120.5 million compared to net interest income of $90.7 million for the six months ended June 30, 2025. FTE net interest income was $121.0 million for the six months ended June 30, 2026, an increase of $29.8 million, or 32.7%, compared to the same period in 2025. …”see in full comparison
Full comparison: every changed paragraph (67)
•risks associated with acquired loan portfolios, including unexpected credit deterioration, valuation adjustments, or higher-than-anticipated credit losses;
•business or economic disruptions arisingdisruption from public health events or other external disruptions;
•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;
•acts of war, terrorism, geopolitical instability, or globalother militaryinternational conflictconflicts;
•supply chain disruption; and
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'sCorporation'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,options and 215,386 restricted stock units, with a fair value of $3.1 millionmillion, to continuing employees of William Penn.
•Net Income Per Share - Mid Penn’s net income available to common shareholders ("earnings") for the three months ended June 30, 2026 was $21.7 million, or $0.86 per basic common share and $0.85 per diluted common share, compared to earnings of $4.8 million, or $0.22 per basic and diluted common share for the three months ended June 30, 2025. The increase in net income per diluted share primarily reflected earnings from the 1st Colonial and Cumberland Advisors acquisitions, and the absence of merger related expenses associated with the William Penn acquisition that were recognized in the prior period. Mid Penn's earnings for the six months ended June 30, 2026 were $30.4 million, or $1.23 per basic common share and $1.22 per diluted common share, compared to earnings of $18.5 million, or $0.90 per basic common share, and $0.89 per diluted common share for the six months ended June 30, 2025.
•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 firstsecond quarter of 2026, Mid Penn’s net interest margin was 3.80%4.06% versus 3.37%3.44% for the same period of 2025. For the six months ended June 30, 2026, net interest margin was 3.94% versus 3.41% for the same period of 2025. The yield on interest-earning assets for the firstthree quartermonths ofended June 30, 2026 increased 1030 basis points from the same period of 2025. The rate on interest-bearing liabilities decreased 4341 basis points from the same period of 2025. The increase, compared to the firstsecond quarter of 2025, was driven by higher loan and investment securities yieldsyields, and a reduction in the cost of funds.
◦Loan Growth - Total loans, net of unearned income, as of MarchJune 31,30, 2026 were $5.5$5.6 billion compared to $4.9 billion as of December 31, 2025, an increase of $647.1$754.3 million, or 13.3%.15.5%. The growthincrease was primarily driven by the 1st Colonial acquisition ofand 1storganic Colonial,growth, which contributed to an increase in residential mortgagesmortgage loans of $341.1$336.2 million, an increase in nonowner occupied commercial real estate loans of $245.7$235.8 million, an increase in constructionowner loansoccupied commercial real estate of $57.7$112.1 million, a $26.9 million increase in multifamily loans, a $22.7 million increase in construction loans, and an increase in commercial and industrial loans of $4.9$8.4 million.
◦Deposit Growth - Total deposits increased $756.3$738.6 million, or 14.5%,14.2%, from $5.2 billion at December 31, 2025, to $6.0 billion at MarchJune 31,30, 2026. The growth was primarily driven by the acquisition of 1st Colonial, which contributed to an increase of $528.3$470.4 million in interest-bearing transaction accounts, an increase of $128.5$139.4 million in noninterest-bearing accounts, and an increase of $128.9 million in time deposits, and a $99.5 million increase in non-interest bearing accounts.deposits.
•Asset Quality - ACL as of MarchJune 31,30, 2026 was $41.1$41.6 million, or 0.75%0.74% of total loans, as compared to $36.1 million, or 0.74% of total loans as of December 31, 2025. ThisThe increase includesprimarily reflects 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$22 millionthousand and net recoveries of $3$811 thousand for the three months ended MarchJune 31,30, 2026 and 2025, respectively. For the six months ended June 30, 2026, net loan charge-offs were $1.1 million compared to $808 thousand for the same period of 2025.
◦Non-performingNonperforming assets - Total non-performingnonperforming assets were $38.1$36.8 million at MarchJune 31,30, 2026, an increase compared to non-performingnonperforming assets of $30.8 million at December 31, 2025. The increase during the firstsecond quarter of 2026 is primarily related to the addition of $7.4 million of nonaccrual loans from the 1st Colonial acquisition.acquisition, partially offset by the payoff of one commercial real estate loan with a balance of $1.3 million. Delinquency, measured as loans past due 30 days or more, as a percentage of total loans was 0.70%0.71% at MarchJune 31,30, 2026, compared to 0.69% and 0.58% as of December 31, 2025.2025 and June 30, 2025, respectively.
◦Provision/Benefit for credit losses - loans - The provision for credit losses - loans was $1.6$557 millionthousand for the three months ended MarchJune 31,30, 2026 compared to a provision of $321$2.2 thousandmillion for the same period of 2025. The benefit for credit losses on off-balance sheet credit exposures was $54$29 thousand for the three months ended MarchJune 31,30, 2026, compared to a benefitprovision of $20$24 thousand for the same period of 2025. The increasedecrease in provision for the three months ended MarchJune 31,30, 2026, was primarily driven by qualitative adjustments to the CRE owner-occupied portfolio,portfolio reflectingand growthimproved withinmacroeconomic that segment,assumptions, offset by decreasesan dueincrease toin higherreserve prepaymenton speedsone andindividually aanalyzed favorableC&I economic forecast.loan.
The provision for credit losses on loans was $2.2 million for the six months ended June 30, 2026, a decrease of $361 thousand compared to the provision for credit losses of $2.6 million for the six months ended June 30, 2025. The decrease for the six months ended June 30, 2026 was primarily attributable to improved macroeconomic assumptions, partially offset by increases from qualitative adjustments to several segments of the portfolio. The benefit for credit losses on off-balance sheet credit exposures was $29 thousand and $83 thousand for the three and six months ended June 30, 2026, respectively.
•Noninterest Income - Noninterest income totaled $9.6$10.6 million for the three months ended MarchJune 31,30, 2026 compared to $5.2$6.1 million for the same period of 2025. The increase is primarily drivendue byto a $2.5 million increase in fiduciary and wealth managementmanagement, income,reflecting the Cumberland Advisors acquisition, a $431$550 thousand increase in earnings from the cash surrender value of life insurance, a $1.3$443 millionthousand increase in mortgage banking, a $211 thousand increase in ATM debit card interchange fees, and a $690 thousand increase in other noninterest income, including a $558 thousand increase in death benefits received, and a $458 thousand increase in insurance commissions.income.
Noninterest income totaled $20.2 million for the six months ended June 30, 2026 compared to $11.4 million for the same period of 2025. The increase in noninterest income was primarily driven by a $5.0 million increase in fiduciary and wealth management income, reflecting the acquisition of Cumberland Advisors, a $981 thousand increase in earnings from the cash surrender value of life insurance, and a $2.0 million increase in other noninterest income, including a $653 thousand increase in insurance commissions, and a $558 thousand increase in death benefits received.
•Noninterest Expense - Noninterest expense totaled $52.0$47.8 million for the three months ended MarchJune 31,30, 2026, ana increasedecrease of $21.3$31 million,thousand, or 69.6%,0.1%, compared to noninterest expense of $30.6$47.8 million for the same period of 2025.
Salaries and employee benefits increased $6.2 million due to the addition of 1st Colonial and Cumberland Advisors, legal and professional fees increased $1.2 million, intangible amortization increased $1.1 million, and software licensing and utilization costs increased $883 thousand, partially offset by a decrease of $10.9 million in merger and acquisition expense related to the William Penn acquisition in 2025.
Noninterest expense totaled $99.7 million for the six months ended June 30, 2026 compared to $78.4 million for the same period of 2025. The increase was primarily driven by a $13.2 million increase in salaries and benefits, reflecting additional staff from the 1st Colonial, Cumberland Advisors, and William Penn acquisitions. Software licensing and utilization costs, occupancy expenses, and legal and professional fees increased $1.9 million, $1.5 million, and $2.0 million, respectively, primarily reflecting Mid Penn's increased size and operational complexity following these acquisitions. Intangible amortization also increased $1.9 million. These increases were partially offset by a $3.5 million decrease in merger and acquisition expenses compared to 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.
•Liquidity - Current liquidity, including cash equivalents and borrowing capacitycapacity, totaled $1.5$1.7 billion,billion compared to $1.7$1.5 billion at DecemberMarch 31, 2025,2026, representing 144.8%142.5% of uninsured and uncollateralized deposits and approximately 25.0%28.6% of total deposits.
Management of the Corporation considers the accounting judgments relating to the allowance for credit losses, business combinations, and goodwill impairment to be the accounting areaareas that requiresrequire 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.
Net interest income, Mid Penn'sPenn’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 and six months ended MarchJune 31,30, 2026 and 2025.
(2)Annualized ratiosratios.
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 MarchJune 31,30, 2026 in comparison to the same period in 2025:
For the three months ended MarchJune 31,30, 2026, net interest income was $55.3$65.3 million compared to net interest income of $42.5$48.2 million for the three months ended MarchJune 31,30, 2025. The tax-equivalent net interest margin for the three months ended MarchJune 31,30, 2026 was 3.80%4.06% compared to 3.37%3.44% for the firstsecond quarter of 2025, representing a 4362 bp increase compared to the same period in 2025.
The yield on interest-earning assets increased to 5.75%5.99% for the quarter ended MarchJune 31,30, 2026,2026 from 5.65%5.69% for the quarter ended MarchJune 31,30, 2025. These increases were primarily due to continued repricing of assets continuing to reprice at higher rates during 2025 and the firstsecond quarter of 2026,2026 compared to the second quarter of 2025, continued discipline on new loan pricing, and an increase in Fed funds sold.
Average investment securities increased $144.2$191.2 million and the yield on those investment securities increased 5655 bps during the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025, increasing interest income due to volume by $1.1$1.5 million, and increasing interest income due to rates by $1.0$1.1 million. Average loans increased $623.6$863.5 million, and the yield on those loans increased 821 bps, contributing $9.3$13.2 million and $958$2.9 thousand,million, respectively, to the increase in interest income.
Interest expense decreased $559$402 thousand during the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. The rate of interest-bearing liabilities decreased from 2.95%2.89% for the firstsecond quarter of 2025 to 2.51%2.48% for the firstsecond quarter of 2026. The decrease in the average rate was primarily aattributable resultto oflower arates decreasepaid on interest-bearing deposits following Federal Reserve rate cuts in short-term2025, lower rates on short term borrowings, a decrease in long term debt, and alower decreaselong-term in time deposits.debt. Mid Penn continued to offer higher rates over the comparable period to both retain and attract deposits.
(1)Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances.
(2)Annualized ratios.
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 six months ended June 30, 2026 in comparison to the same period in 2025:
For the six months ended June 30, 2026, net interest income was $120.5 million compared to net interest income of $90.7 million for the six months ended June 30, 2025. FTE net interest income was $121.0 million for the six months ended June 30, 2026, an increase of $29.8 million, or 32.7%, compared to the same period in 2025. The tax-equivalent net interest margin for the six months ended June 30, 2026 was 3.94% compared to 3.41% for the same period in 2025, representing a 53 bp increase, primarily reflecting lower funding costs from the repricing of interest-bearing deposits and short-term borrowings, as well as lower long-term debt balances.
The higher yields and the growth in interest-earning assets contributed $22.9 million and $6.0 million, respectively, to the increase in interest income. The yield on interest-earning assets increased 21 bps to 5.88% for the six months ended June 30, 2026 compared to 5.67% for the same period of 2025. Average interest-earning assets increased $22.4 million, or 14.8%, during the six months ended June 30, 2026 compared to the same period of 2025.
Average investment securities increased $167.8 million, or 26.0%, and the yield on those investment securities increased 55 bps during the six months ended June 30, 2026, contributing $2.6 million and $2.1 million, respectively, to interest income. Average loans increased $744.2 million, and the yield on those loans increased 15 bps, contributing $22.5 million and $3.8 million, respectively, to the increase in interest income.
Interest expense decreased $1.0 million during the first six months of 2026 compared to the same period of 2025. The rate on interest-bearing liabilities decreased from 2.91% for the first six months of 2025 to 2.49% for the first six months of 2026. The decrease in the average rate primarily reflected the repricing of interest-bearing deposits and short term borrowings, as well as lower long term debt balances. Mid Penn continued to offer competitive deposit rates to retain and attract customer deposits. The average rate paid on interest-bearing deposits decreased 42 bps, during the six months ended June 30, 2026, compared to the same period in 2025, reducing interest expense by $5.6 million.
The provision for credit losses on loans was $557 thousand for the three months ended June 30, 2026 compared to a provision of $2.2 million for the three months ended June 30, 2025. The decrease in provision was primarily driven by the Day 1 allowance on William Penn loans acquired on April 30, 2025. This amount reflects accounting guidance in effect prior to Mid Penn's adoption of ASU 2025-08, under which the allowance for certain purchased loans was recognized through the provision for credit losses.
The provision for credit losses on loans was $1.6$2.2 million for the threesix months ended MarchJune 31,30, 2026 compared to a provision of $321$2.6 thousandmillion for the threesame period in 2025. The decrease for the six months ended MarchJune 31,30, 2025. The increase in provision2026 was primarily attributable to improved macroeconomic assumptions, partially offset by higher qualitative adjustments toacross several segments of the portfolio, offset by reductions due to a favorable economic forecast.portfolio.
For the three months ended MarchJune 31,30, 2026, noninterest income totaled $9.6$10.6 million, aan increase of $4.4 million, or 83.3%,72.3%, compared to noninterest income of $5.2$6.1 million for the three months ended MarchJune 31,30, 2025. The increase wasis largelyprimarily drivendue byto a $2.5 million increase in fiduciary and wealth managementmanagement, income,reflecting the Cumberland Advisors acquisition, a $431$550 thousand increase in earnings from the cash surrender value of life insurance, a $1.3$443 millionthousand increase in mortgage banking, and a $690 thousand increase in other noninterest income, including a $558 thousand increase in death benefits received, and a $458 thousand increase in insurance commissions.income.
For the six months ended June 30, 2026, noninterest income totaled $20.2 million, an increase of $8.8 million, or 77.4%, compared to noninterest income of $11.4 million for the six months ended June 30, 2025. The increase was primarily driven by a $5.0 million increase in fiduciary and wealth management income, reflecting the Cumberland Advisors acquisition, a $981 thousand increase in earnings from the cash surrender value of life insurance, a $2.0 million increase in other noninterest income, including a $653 thousand increase in insurance commissions, and a $558 thousand increase in death benefits received.
For the three months ended MarchJune 31,30, 2026, noninterest expense totaled $52.0$47.8 million, ana increasedecrease of $21.3$31 million,thousand, or 69.6%,0.1%, compared to noninterest expense of $30.6$47.8 million for the same period in 2025. The increasedecrease was primarily driven by a $7.4$10.9 million increasedecrease in merger and acquisition expenses, partially offset by a $7.0$6.2 million increase in salaries and employee benefits, a $1.0$1.2 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$1.1 million increase in otherintangible noninterest expense, primarily driven byamortization, a $1.5$883 millionthousand increase related to a change in methodologysoftware for LIHTC amortization,licensing, and a $665$526 thousand increase in legaloccupancy settlements.expenses.
For the six months ended June 30, 2026, noninterest expense totaled $99.7 million, an increase of $21.3 million, or 27.1%, compared to noninterest expense of $78.4 million for the six months ended June 30, 2025. The increase was primarily driven by a $13.2 million increase in salaries and benefits, reflecting additional staff from the William Penn, 1st Colonial, and Cumberland Advisors acquisitions. Software licensing and utilization costs, occupancy expenses, and legal and professional fees increased $1.9 million, $1.5 million, and $2.0 million, respectively, primarily reflecting Mid Penn's increased size and operational complexity following these acquisitions. Intangible amortization also increased $1.9 million. These increases were partially offset by a $3.5 million decrease in merger and acquisition expenses compared to the same period of 2025.
The provision for income taxes was $2.6$5.9 million for the three months ended MarchJune 31,30, 2026 compared to $3.1a millionbenefit of $480 thousand for the same period in 2025. The provision for income taxes was $8.5 million and $2.6 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The provision for income taxes for the six months ended June 30, 2026 and 2025 reflects a combined Federal and State effective tax rate of 23.0%21.8% forand the12.2%, three months ended March 31, 2026, compared to 18.2%, for the three months ended March 31, 2025.respectively.
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 CompanyCorporation 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 monthsand six month periods ended MarchJune 31,30, 2026.
Mid Penn’s total assets were $7.0$7.1 billion as of MarchJune 31,30, 2026, reflecting an increase of $830.9$929.0 million, or 13.5%,15.1%, 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 Fedinvestment Fundssecurities, Sold.partially offset by a decrease in Federal funds sold.
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 MarchJune 31,30, 2026 werewas $825.1$872.6 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.
The following table presents the expected maturities of the investment portfolio and the weighted-averageweighted average yields (calculated based on historical cost):
Total loans, net of unearned income, as of MarchJune 31,30, 2026 were $5.5$5.6 billion compared to $4.9 billion as of December 31, 2025. The growth of $647.1$754.3 million, or 13.3%,15.5%, 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$387.5 million, an increase in residential mortgages of $336.2 million, an increase in construction loans of $57.7$22.7 million, and an increase in commercial and industrial loans of $4.9$8.4 million.
The following table presents the commercial real estate portfolio by property type along with the weighted-averageweighted average loan to value:
(1) Includes a $3.4 million initial provision related to non-PCD loans from the 1st Colonial acquisition in the second quarter of 2026.
(2) Includes a $2.3 million initial provision related to non-PCD loans from the William Penn acquisition in the second quarter of 2025.
The following table presents the change in nonperforming asset categories as of MarchJune 31,30, 2026, December 31, 2025, and MarchJune 31,30, 2025.
Total nonperforming assets were $38.1$36.8 million at MarchJune 31,30, 2026, an increase compared to nonperforming assets of $30.8 million at December 31, 2025. The increase during the firstsecond quarter of June 30, 2026 iswas primarily drivenrelated byto the addition of $7.4 million of nonaccrual loans fromacquired in the 1st Colonial acquisitionacquisition, partially offset by payoffs and paydowns in the firstsecond quarter of 2026. Delinquency, measured as loans past due 30 days or more, asincluding aloans percentageon nonaccrual status, was 0.71% of total loans was 0.70% at MarchJune 31,30, 2026, compared to 0.69% and 0.50%0.58% as of December 31, 2025 and MarchJune 31,30, 2025.2025, respectively.
MPB insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 14 Form 4 filings (7 insiders, 4 trade dates, 3,284 shares, about $112.1K) and open-market sales in 0 filings. Net open-market shares: 3,284 (purchases minus sales); net value about $112.1K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-30 | Mowery Theodore W |
Open-market purchase | 56 | $35.40 | $2.0K |
| 2026-09-30 | Frank Joel L. |
Open-market purchase | 70 | $35.40 | $2.5K |
| 2026-09-30 | Evans Albert J. |
Open-market purchase | 282 | $35.40 | $10.0K |
| 2026-09-30 | De Soto Matthew G |
Open-market purchase | 283 | $35.40 | $10.0K |
| 2026-09-30 | Brumbaugh Kimberly J |
Open-market purchase | 70 | $35.40 | $2.5K |
| 2026-09-30 | Abel Robert A |
Open-market purchase | 14 | $35.40 | $496 |
| 2026-09-15 | Ritrievi Rory G |
Open-market purchase | 193 | $37.07 | $7.2K |
| 2026-07-01 | Ritrievi Rory G |
Shares withheld for tax | 2,136 | $35.68 | $76.2K |
| 2026-06-30 | Mowery Theodore W |
Open-market purchase | 58 | $34.84 | $2.0K |
| 2026-06-30 | Evans Albert J. |
Open-market purchase | 287 | $34.84 | $10.0K |
| 2026-06-30 | Brumbaugh Kimberly J |
Open-market purchase | 72 | $34.84 | $2.5K |
| 2026-06-30 | De Soto Matthew G |
Open-market purchase | 287 | $34.84 | $10.0K |
| 2026-06-30 | Abel Robert A |
Open-market purchase | 15 | $34.84 | $523 |
| 2026-06-30 | Frank Joel L. |
Open-market purchase | 72 | $34.84 | $2.5K |
| 2026-06-01 | Ritrievi Rory G |
Shares withheld for tax | 356 | $32.11 | $11.4K |
| 2026-06-01 | Ritrievi Rory G |
Shares withheld for tax | 356 | $32.11 | $11.4K |
| 2026-05-15 | Stephon Kenneth John |
Other | 10,769 | — | — |
| 2026-05-15 | Stephon Kenneth John |
Shares withheld for tax | 5,261 | $31.12 | $163.7K |
| 2026-05-04 | De Soto Matthew G |
Open-market purchase | 525 | $32.77 | $17.2K |
| 2026-05-04 | De Soto Matthew G |
Open-market purchase | 500 | $32.72 | $16.4K |
| 2026-05-04 | De Soto Matthew G |
Open-market purchase | 500 | $32.77 | $16.4K |
Well-known investors holding MPB (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 138,792 | $4.8M | 0.0% | Added 347% |
| Two Sigma Investments | 2026-06-30 | 65,652 | $2.3M | 0.0% | Added 52% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 48,337 | $1.7M | 0.0% | Added 78% |
| Millennium Management (Israel Englander) | 2026-06-30 | 47,909 | $1.7M | 0.0% | Added 145% |
| D. E. Shaw & Co. | 2026-06-30 | 25,897 | $902.3K | 0.0% | Reduced 21% |
| Renaissance Technologies | 2026-06-30 | 18,731 | $602.4K | — | Sold out |