MID PENN BANCORP INC (MPB)

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management Discussion relates to the Corporation, a financial holding company incorporated in the Commonwealth of Pennsylvania, and its wholly-owned subsidiaries, and should be read in conjunction with the consolidated financial statements and other financial information presented in this report and our Annual Report on Form 10-K for the year ended December 31, 2025.

Caution About Forward-Looking Statements

Forward-looking statements involve risks, uncertainties and assumptions. Although Mid Penn generally does not make forward-looking statements unless Mid Penn’s management believes its management has a reasonable basis for doing so, Mid Penn cannot guarantee the accuracy of any forward-looking statements. Actual results may differ materially from those expressed in any forward-looking statements due to a number of uncertainties and risks, including the risks described in this Quarterly Report on Form 10-Q, the 2025 Annual Report, and other unforeseen risks. You should not put undue reliance on any forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q, even if subsequently made available by us on Mid Penn’s website or otherwise, and Mid Penn undertakes no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

Certain of the matters discussed in this document or in documents incorporated by reference herein, including matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, or Exchange Act. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results, and the assumptions upon which those statements are based. Forward looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” or words or phrases of similar meaning. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements.

The following factors, among others, could cause our financial performance to differ materially from that expressed in such forward-looking statements:

•Mid Penn’s ability to efficiently integrate recent acquisitions into its business and operations, which may take longer than anticipated or be more costly than anticipated or result in unanticipated disruptions to existing operations;

•the possibility that anticipated benefits of recent acquisitions, including cost savings and other synergies, may take longer to be realized or may not fully be achieved, and that attrition in client, partner or other relationships may be greater than expected;

•the effects of future economic conditions on Mid Penn, the Bank, our nonbank subsidiaries, and our markets and customers;

•governmental monetary and fiscal policies, as well as legislative and regulatory changes;

•future actions or inactions of the United States government, including a failure to increase the government debt limit or a prolonged shutdown of the federal government;

•business or economic disruptions arising from public health events or other external disruptions;

•the risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, the value of investment securities, and interest rate protection agreements;

•the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market area and elsewhere, including institutions operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the internet;

•an increase in the Pennsylvania Bank Shares Tax to which the Bank’s capital stock is currently subject, or imposition of any additional taxes on the capital stock of Mid Penn or the Bank;

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•impacts of the capital and liquidity requirements imposed by bank regulatory agencies;

•the effect of changes in accounting policies and practices, including the adoption or interpretation of new accounting standards, as may be adopted by regulatory agencies, the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, the SEC, and other accounting and reporting rule making authorities;

•the costs and effects of litigation and of unexpected or adverse outcomes in such litigation;

•changes in technology;

•our ability to successfully expand our franchise, including through acquisitions or establishing new offices at favorable prices;

•potential goodwill impairment charges, or future impairment charges and fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames;

•our ability to attract and retain qualified management and personnel;

•results of regulatory examination and supervision processes;

•the failure of assumptions underlying the establishment of reserves for loan and lease losses, the assessment of potential impairment of investment securities, and estimations of values of collateral and various financial assets and liabilities;

•our ability to maintain compliance with the listing rules of The NASDAQ Stock Market;

•our ability to maintain the value and image of our brand and protect our intellectual property rights;

•volatility in the securities markets;

•disruptions due to flooding, severe weather, or other natural disasters or acts of God;

•acts of war, terrorism, or global military conflict;

•supply chain disruption;

•the risk factors described in Item 1A of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2025 and subsequent filings with the SEC.

The above list of factors that may affect future performance is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with this understanding of inherent uncertainty.

Overview

Mid Penn is a financial holding company incorporated in August 1991 in the Commonwealth of Pennsylvania.

Mid Penn generates the majority of its revenues through net interest income, or the difference between interest earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing the net interest margin, which is calculated on a fully taxable-equivalent basis ("FTE") as net interest income as a percentage of average interest-earning assets. Mid Penn also generates revenue through fees earned on the various services and products offered to its customers and through gains on sales of assets, such as loans, investments and properties. Offsetting these revenue sources are provisions for credit losses, non-interest expenses and income taxes.

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The following table presents a summary of Mid Penn's earnings and selected performance ratios:

(1) Presented on a FTE basis using a 21% Federal tax rate and statutory interest expense disallowances. See also the "Net Interest Income" section.

(2) Annualized ratios

On February 27, 2026, Mid Penn completed the acquisition of 1st Colonial Bancorp, Inc. ("1st Colonial"), which added total assets of $842.5 million, comprised primarily of $597.5 million of loans. Additionally, on January 1, 2026, Mid Penn completed the acquisition of Cumberland Advisors, Inc. ("Cumberland Advisors"), a registered investment advisory firm, which had approximately $3.2 billion in assets under management, further expanding the Company's wealth management capabilities and fee-based revenue.

On April 30, 2025, Mid Penn completed the William Penn acquisition, which added total assets of $726.5 million, including $405.3 million of loans. This transaction included the acquisition of 12 branches, further expanding Mid Penn's presence in the Philadelphia region and surrounding counties in Pennsylvania and New Jersey. Mid Penn issued 3,506,795 shares of Mid Penn common stock as consideration for the $103.2 million purchase price. The Corporation also granted replacement awards for 538,447 stock options, with a fair value of $3.1 million to continuing employees of William Penn.

Summary of Financial Results

•Net Income Per Share - Mid Penn’s net income available to common shareholders ("earnings") for the three months ended March 31, 2026 was $8.7 million, or $0.36 per basic and diluted common share, compared to earnings of $13.7 million, or $0.71 per both basic and diluted common share for the three months ended March 31, 2025.

•Net Interest Income

◦Net Interest Margin - For the first quarter of 2026, Mid Penn’s net interest margin was 3.80% versus 3.37% for the same period of 2025. The yield on interest-earning assets for the first quarter of 2026 increased 10 basis points from the same period of 2025. The rate on interest-bearing liabilities decreased 43 basis points from the same period of 2025. The increase, compared to the first quarter of 2025, was driven by higher loan and investment securities yields and a reduction in the cost of funds.

◦Loan Growth - Total loans, net of unearned income, as of March 31, 2026 were $5.5 billion compared to $4.9 billion as of December 31, 2025, an increase of $647.1 million, or 13.3%. The growth was primarily driven by the acquisition of 1st Colonial, which contributed to an increase in residential mortgages of $341.1 million, an increase in commercial real estate loans of $245.7 million, an increase in construction loans of $57.7 million, and an increase in commercial and industrial loans of $4.9 million.

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◦Deposit Growth - Total deposits increased $756.3 million, or 14.5%, from $5.2 billion at December 31, 2025, to $6.0 billion at March 31, 2026. The growth was primarily driven by the acquisition of 1st Colonial, which contributed to an increase of $528.3 million in interest-bearing transaction accounts, an increase of $128.5 million in time deposits, and a $99.5 million increase in non-interest bearing accounts.

•Asset Quality - ACL as of March 31, 2026 was $41.1 million, or 0.75

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Certain of the matters discussed in this document or in documents incorporated by reference herein, including matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, or Exchange Act. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, and expected operating results, including after giving effect to the Merger, and the assumptions upon which those statements are based. Forward looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” or words or phrases of similar meaning. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements.

The following factors, among others, could cause our financial performance to differ materially from that expressed in such forward-looking statements:

•Mid Penn’s ability to efficiently integrate acquisitions, including the Merger, into its business and operations, which may take longer than anticipated, may be more costly than anticipated and may have unanticipated adverse results relating to Mid Penn’s existing business and operations;

•the possibility that the anticipated benefits of the Merger, including anticipated cost savings and other synergies of the Merger may take longer to be realized or may not be achieved in their entirety, and attrition in key client, partner and other relationships relating to the Merger may be greater than expected;

•the effects of future economic conditions on Mid Penn, the Bank, our nonbank subsidiaries, and our markets and customers;

•governmental monetary and fiscal policies, as well as legislative and regulatory changes;

•future actions or inactions of the United States government, including a failure to increase the government debt limit or a prolonged shutdown of the federal government;

•business or economic disruption from national or global epidemic or pandemic events;

•the risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, the value of investment securities, and interest rate protection agreements;

•the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market area and elsewhere, including institutions operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the internet;

•an increase in the Pennsylvania Bank Shares Tax to which the Bank’s capital stock is currently subject, or imposition of any additional taxes on the capital stock of Mid Penn or the Bank;

•impacts of the capital and liquidity requirements imposed by bank regulatory agencies;

•the effect of changes in accounting policies and practices, as may be adopted by regulatory agencies, as well as the Public Company Accounting Oversight Board, Financial Accounting Standards Board, the SEC, and other accounting and reporting rule making authorities;

•the costs and effects of litigation and of unexpected or adverse outcomes in such litigation;

•changes in technology;

•our ability to implement business strategies, including our acquisition strategy;

•our ability to successfully expand our franchise, including through acquisitions or establishing new offices at favorable prices;

•our ability to successfully integrate any banks, companies, offices, assets, liabilities, customers, systems and management personnel we acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames;

•potential goodwill impairment charges, or future impairment charges and fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames;

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•our ability to attract and retain qualified management and personnel;

•results of regulatory examination and supervision processes;

•the failure of assumptions underlying the establishment of reserves for loan and lease losses, the assessment of potential impairment of investment securities, and estimations of values of collateral and various financial assets and liabilities;

•our ability to maintain compliance with the listing rules of The NASDAQ Stock Market;

•our ability to maintain the value and image of our brand and protect our intellectual property rights;

•volatility in the securities markets;

•disruptions due to flooding, severe weather, or other natural disasters or acts of God;

•acts of war, terrorism, or global military conflict;

•supply chain disruption; and

•the risk factors described in Item 1A of this Annual Report.

All written or oral forward-looking statements attributable to Mid Penn are expressly qualified in their entirety by these cautionary factors.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of Mid Penn’s Consolidated Financial Statements from the view of management and should be read in conjunction with the Consolidated Financial Statements of the Corporation and Notes thereto and other detailed information appearing elsewhere in this Annual Report on Form 10-K.

The comparability of the results of operations for the year ended 2025 compared to 2024 and 2023, in general, has been materially impacted by the William Penn Acquisition, which closed on April 30, 2025.

Mid Penn is not aware of any current trends, events, uncertainties or any current recommendations by the regulatory authorities which, if they were to be implemented, would have a material effect on Mid Penn’s or the Bank’s liquidity, capital resources, or operations.

Executive Overview

Mid Penn is a financial holding company incorporated in August 1991 in the Commonwealth of Pennsylvania.

Mid Penn generates the majority of its revenues through net interest income, or the difference between interest earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing the net interest margin, which is fully taxable-equivalent basis ("FTE") net interest income as a percentage of average interest-earning assets. The Corporation also generates revenue through fees earned on the various services and products offered to its customers and through gains on sales of assets, such as loans, investments and properties. Offsetting these revenue sources are provisions for credit losses, noninterest expenses and income taxes.

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The following table presents a summary of the Corporation's earnings and selected performance ratios:

(1)    Presented on a FTE basis using a 21% Federal tax rate and statutory interest expense disallowances. See also the "Net Interest Income"

On April 30, 2025, Mid Penn completed the William Penn Acquisition, which added total assets of $726.5 million, including $405.3 million of loans and included the acquisition of 12 branches, further expanding Mid Penn's presence in the Philadelphia region and surrounding counties in Pennsylvania and New Jersey. Mid Penn issued 3,506,795 shares of Mid Penn common stock as consideration for the $103.2 million purchase price. The Corporation also granted replacement awards for 538,447 stock options, with a fair value of $3.1 million to continuing employees of William Penn.

During the second quarter of 2023, Mid Penn completed the Brunswick Acquisition, which added total assets of $390.7 million comprised primarily of $324.5 million of loans. This transaction resulted in the addition of 5 branches in central New Jersey. Mid Penn issued 849,510 shares of its common stock, as well as a net cash payment to Brunswick shareholders of $27.6 million, for total consideration of $45.7 million for all outstanding stock and the cancellation of options of Brunswick.

Summary of Financial Results

•Net Income Per Share - Mid Penn’s net income available to common shareholders ("earnings") for the year ended December 31, 2025 was $56.2 million or $2.59 per basic and $2.55 per diluted common share, compared to earnings of $49.4 million or $2.90 per basic and diluted common share for the year ended December 31, 2024. The increase in net income was partially offset by a higher weighted-average number of shares outstanding in 2025, which contributed to a lower diluted earnings per share compared to the prior year.

•Net Interest Income

◦Net Interest Margin - For the year ended December 31, 2025, Mid Penn’s FTE net interest margin was 3.56% versus 3.11% for the year ended December 31, 2024. The yield on interest-earning assets increased 11 basis point(s) ("bp") for the year ended December 31, 2025 compared to the year ended December 31, 2024 and the rate on interest-bearing liabilities decreased 42 bp for the year ended December 31, 2025 compared to the year ended December 31, 2024.

◦Loan Growth - Total loans, net of unearned income, as of December 31, 2025 were $4.9 billion compared to $4.4 billion as of December 31, 2024, an increase of $419.8 million, or 9.4%. Loan growth was driven primarily by an increase in residential mortgage loans of $215.9 million, an increase in nonowner occupied commercial real estate of $113.0 million, an increase in owner occupied commercial real estate of $94.9 million, an increase in commercial and industrial loans of $14.6 million, and a $6.4 million increase in multifamily loans, partially offset by a $29.9 million decrease in construction loans. Loans from the William Penn Acquisition contributed $405.3 million to this increase.

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◦Deposit Growth - Total deposits increased $524.7 million, or 11.2%, from $4.7 billion as of December 31, 2024, to $5.2 billion as of December 31, 2025. The growth was driven by an increase of $499.1 million in interest-bearing transaction accounts, an increase of $74.8 million in noninterest-bearing accounts, partially offset by a decrease of $49.2 million in time deposits. Deposits from the William Penn Acquisition contributed $619.8 million to this increase.

•Asset Quality - ACL as of December 31, 2025 was $36.1 million, or 0.74% of total loans, as compared to $35.5 million, or 0.80% of total loans as of December 31, 2024.

◦Net Charge-offs/Recoveries - Mid Penn had net loan charge-offs of $1.4 million and $817 thousand for the years ended December 31, 2025 and 2024, respectively.

◦Non-performing assets - Total non-performing assets were $30.8 million as of December 31, 2025, an increase of $8.1 million compared to non-performing assets of $22.7 million as of December 31, 2024. The increase during 2025 was primarily related to the addition of one C&I relationship for $4.7 million offset by the sale of one foreclosed commercial real estate property for $1.4 million. Delinquency, measured as loans past due 30 days or more, including loans on nonaccrual status, was 0.69% of total loans as of December 31, 2025, compared to 0.52% as of December 31, 2024.

◦Provision/Benefit for credit losses - Loans - The provision for credit losses - loans was $1.6 million for the year ended December 31, 2025 compared to $2.1 million for the year ended December 31, 2024. The decrease for the year ended December 31, 2025 was primarily attributable to reduced expected losses driven by updates to the macroeconomic forecast and lower loan balances as a result of an increase in observed prepayment speeds, partially offset by a $2.3 million reserve on non-PCD loans acquired through the William Penn Acquisition.

•Noninterest Income - Noninterest income totaled $26.8 million for the year ended December 31, 2025, a $4.3 million, or 19.3%, increase compared to the year ended December 31, 2024. The increase in noninterest income is primarily driven by an $838 thousand increase in earnings from the cash surrender value of life insurance, a $618 thousand increase in fiduciary and wealth management income, a $356 thousand increase in mortgage banking income, and a $2.2 million increase in other noninterest income, driven by a $1.1 million increase in insurance commissions, a $910 thousand increase in loan level swap fees, and a $534 thousand increase in recoveries on loans previously acquired in business combinations, which are recognized in noninterest income, rather than a reduction to the allowance for credit losses, consistent with purchase accounting treatment. This increase also includes a $420 thousand gain on the closing of an investment in a reinsurance entity acquired from another institution, a $307 thousand increase in sales tax refunds received, and $362 thousand in swap cancellation gains tied to eliminated brokered deposits, partially offset by a $2.2 million decrease in death benefits received.

•Noninterest Expense - Noninterest expense for the year ended December 31, 2025 totaled $152.3 million, an increase of $34.7 million, or 29.5%, compared to noninterest expense of $117.6 million for the year ended December 31, 2024.

Salaries and benefits increased $13.9 million for the year ended December 31, 2025, compared to the same period in 2024. The increase is attributable to (i) equity-based compensation expense for stock options and restricted stock awards totaling $3.1 million that were recognized in the year ended December 31, 2025; (ii) the retail staff additions at the twelve retail locations added through the William Penn Acquisition; and (iii) the retention of various William Penn team members through the completion of systems integration, which occurred on June 20, 2025.

Merger and acquisition expenses increased $11.0 million for the year ended December 31, 2025, which includes $10.1 million of merger related expenses related to the William Penn Acquisition, $713 thousand related to the 1st Colonial acquisition, $172 thousand related to the Cumberland Advisors Acquisition, and $164 thousand related to the Charis Insurance Group acquisition.

Software licensing and utilization costs increased $3.3 million for the year ended December 31, 2025, compared to the same period in 2024. The increase reflects additional costs to (i) license the additional William Penn branches; and (ii) upgrade internal systems, including network storage, cybersecurity, and data security enhancements in response to the Bank's larger size and increased IT complexity.

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Occupancy expenses increased $2.3 million for the year ended December 31, 2025, compared to the same period in 2024. The increase was driven by the facility operating costs of the additional retail locations added through the William Penn acquisition.

•Borrowings paid down - During 2025, Mid Penn paid off $318 thousand of long-term debt and redeemed a total of $45.3 million of subordinated debt.

•Share Repurchases - Mid Penn repurchased 79,169 shares during 2025 at an average price per share of $28.50 under its share repurchase program.

•Business Combinations

◦On May 12, 2025, Mid Penn acquired the insurance business and related accounts of Charis Insurance Group, Inc., which provides business, home and auto insurance throughout central and southern Pennsylvania, for a cash purchase price of $4.0 million.

◦On April 30, 2025, Mid Penn completed its acquisition of William Penn through the merger of William Penn with and into Mid Penn with Mid Penn being the surviving corporation. In connection with this acquisition, William Penn Bank, a wholly owned subsidiary of William Penn, merged with and into Mid Penn Bank, a wholly owned subsidiary of Mid Penn. The merger was an all-stock transaction valued at approximately $103.2 million, based on the Mid Penn common stock closing price of $29.05 on April 30, 2025.

◦On July 31, 2024, Mid Penn acquired the insurance business and related accounts of Commonwealth Benefits Group, a full-service employee benefits firm that serves mid to large employers across central and eastern Pennsylvania, northern Maryland, and northern Virginia, for a purchase price of $2.0 million at closing and an additional $800 thousand potentially payable pursuant to a three-year earnout.

◦On May 19, 2023, Mid Penn completed its acquisition of Brunswick through the merger of Brunswick with and into Mid Penn with Mid Penn being the surviving corporation. In connection with this acquisition, Brunswick Bank, a wholly-owned subsidiary of Brunswick, merged with and into Mid Penn Bank, a wholly-owned subsidiary of Mid Penn.

Critical Accounting Estimates

Mid Penn’s Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and conform to general practices within the banking industry. Application of certain principles involves significant judgments and estimates by management that have a material impact on the carrying value of certain assets and liabilities. The judgments and estimates used in applying these principles are based on historical experiences and other factors which are believed to be reasonable under the circumstances. Because of the nature of the judgments and estimates that have been made, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of assets and liabilities and the reported results of operations.

Management of the Corporation considers the accounting judgments relating to the allowance for credit losses and goodwill impairment to be the accounting area that requires the most subjective and complex judgments.

Allowance for Credit Losses

In accordance with CECL, the ACL, which includes both the ACL - loans and the ACL for OBS credit exposures, is calculated with the objective of maintaining a reserve for current expected credit losses over the remaining expected life of the portfolio. Management's determination of the appropriateness of the reserve is based on continuously monitoring and evaluating the loan portfolio, lending-related commitments, current as well as forecasted economic factors, and other relevant factors. The ACL - loans is an estimate of expected losses inherent within Mid Penn's existing loan portfolio.

The loan loss estimation process involves procedures to appropriately consider the unique characteristics of Mid Penn’s loan portfolio segments. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Evaluations of the portfolio and individual credits are inherently

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subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations. Determining the appropriateness of the allowance is complex and requires judgment by Management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the ACL and credit loss expense.

Mid Penn estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Mid Penn uses a third-party software application to calculate the quantitative portion of the ACL using a methodology and assumptions specific to each loan pool. The qualitative portion of the allowance is based on general economic conditions and other internal and external factors affecting Mid Penn as a whole, as well as specific loans. Factors considered include the following: lending process, concentrations of credit, and credit quality. The quantitative and qualitative portions of the allowance are added together to determine the total ACL, which reflects Management’s expectations of future conditions based on reasonable and supportable forecasts. As such, the calculation of ACL is inherently subjective and requires management to exercise significant judgment. The CECL estimate, including assumptions related to interest rates, unemployment, and economic growth, is highly sensitive to the economic forecasts used to develop the estimate.

While management uses the best information known to it to make ACL valuations, adjustments to the ACL may be necessary based on changes in economic and other conditions, changes in the composition of the loan portfolio, or changes in accounting guidance. In times of economic slowdown, either local, regional or national, the risk inherent in the loan portfolio could increase resulting in the need for additional provisions to the ACL in future periods. An increase could also be necessitated by an increase in the size of the loan portfolio or in any of its components even though the credit quality of the overall portfolio may be improving.

For further discussion of the methodology used in the determination of the ACL, refer to "Note 1, Summary of Significant Accounting Policies", "Note 3 - Investment Securities", "Note 4 - Loans and Allowance for Credit Losses - Loans" and "Note 18 - Commitments and Contingencies" to the Consolidated Financial Statements. To the extent actual outcomes differ from management estimates, additional provision for credit losses may be required that would adversely impact earnings in future periods.

The allowance for credit losses - loans was $36.1 million as of December 31, 2025, an increase of $577 thousand, or 1.6%, compared to $35.5 million as of December 31, 2024. The increase for the year ended December 31, 2025 was primarily attributable to a $2.3 million reserve on non-PCD loans acquired through the William Penn Acquisition, offset by reduced expected losses driven by updates to the macroeconomic forecast and lower loan balances as a result of an increase in observed prepayment speeds.

Goodwill

Mid Penn evaluates goodwill annually for impairment unless events occur which indicate that impairment is possible, a triggering event. As of December 31, 2025, Mid Penn had goodwill of $136.6 million and Mid Penn's stock continues to trade below book value.

Our annual impairment test was conducted during the fourth quarter of 2025. Goodwill is calculated as a purchase premium using the market participant and peer group control premium approach. Additional factors considered include actual earnings in relation to forecasted earnings, liquidity levels, changes in deposit balances, and credit quality, among others.

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No goodwill impairment has been recorded for 2025. Management will continue to monitor internal metrics and macroeconomic trends to determine if there is likelihood of goodwill impairment.

Refer to "Note 1 - Summary of Significant Accounting Policies" and "Note 6 - Goodwill and Intangible Assets" for further details on the Company's goodwill.

Business Combinations

Assets acquired and liabilities assumed in business combinations are measured at fair value as of the acquisition date. In many cases, determining the fair value of the assets acquired and liabilities assumed requires Mid Penn to estimate the timing and amount of cash flows expected to result from these assets and liabilities and to discount these cash flows at appropriate rates of interest, which require the utilization of significant estimates and judgment in accounting for the acquisition.

Refer to "Note 1 - Summary of Significant Accounting Policies" and "Note 2 - Business Combinations" for further details on the Company's business combinations.

Results of Operations

Net Interest Income

Net interest income, Mid Penn's primary source of earnings, represents the difference between interest income received on loans, investments, and overnight funds, and interest expense paid on deposits and short- and long-term borrowings. Net interest income is affected by changes in interest rates and changes in average balances (volume) in the various interest-sensitive assets and liabilities. Interest and average rates in the table below are presented on a fully taxable-equivalent basis ("FTE"). Tax-equivalent adjustments were calculated using a statutory corporate tax rate of 21% for the years ended December 31, 2025, 2024 and 2023. For purposes of calculating loan yields, average loan balances include nonaccrual loans. Loan fees of $5.5 million, $4.8 million and $4.6 million are included with loan interest income in the following table for the years ended December 31, 2025, 2024, and 2023, respectively.

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The following table includes average balances, effective interest differential and interest yields for the years ended December 31:

(1)    Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances.

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The volume analysis of changes in net interest income as of December 31 are as follows:

(1)    The effect of changing volume and rate, which cannot be segregated, has been allocated entirely to the rate column. Tax-exempt income is shown on a tax equivalent basis using a statutory corporate tax rate of 21% for the years ended December 31, 2025, 2024 and 2023.

For the year ended December 31, 2025, Mid Penn’s FTE net interest margin was 3.56% compared to 3.11% for the year ended December 31, 2024 and 3.26% for the year ended December 31, 2023. The increase in net interest margin was primarily a result of a decrease in funding costs, reflecting lower average interest-bearing liabilities, as well as higher yields on interest-earning assets and growth in average interest-earning assets. During 2025, FTE net interest income increased $42.4 million, or 27.1%, compared to 2024. Interest income increased $29.4 million as the result of a $552.4 million, or 10.9%, increase in average interest-earning assets in 2025 compared to 2024, and increased $7.8 million as the result of a 11 bp increase in the yield on interest-earning assets in 2025 compared to 2024.

Average total loans, net, increased $335.6 million, or 7.7%, contributing $20.4 million to the increase in interest income. The yield on average total loans, net, increased from 6.07% for 2024 to 6.20% for 2025. Loan yields increased due to higher rate loan production and portfolio mix shifts, partially offset by the impact of lower market interest rates.

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Total average federal funds sold increased $135.6 million, contributing $7.2 million to the increase in FTE interest income, partially offset by a 103 bps decrease in the average yield on federal funds sold, reducing FTE interest income by $1.8 million.

Interest expense decreased by $5.2 million or 4.0% for the year ended December 31, 2025 compared to 2024. The cost of interest-bearing liabilities decreased to 2.83% in 2025 from 3.25% in 2024 and increased from 2.55% in 2023. The rate on total interest-bearing deposits decreased to 2.81% in 2025 from 3.12% in 2024 and increased from 2.40% in 2023. The decrease in the rate from 2024 was primarily a result of the Bank lowering rates in response to the Federal Reserve interest rate cuts in 2025. In addition, average short-term borrowings decreased to $8.0 million from $190.9 million in 2024, which contributed to the $10.2 million decrease in interest expense on short-term borrowings for the year ended December 31, 2025 as compared to 2024.

Although the effective interest rate impact on interest-earning assets and funding sources can be reasonably estimated at current interest rate levels, the interest-bearing product and pricing options selected by customers, and the future mix of the loan, investment, and deposit products in the Bank's portfolios, may significantly change the estimates used in Mid Penn’s asset and liability management and related interest rate risk simulation models. In addition, our net interest income may be impacted by further interest rate actions of the Federal Reserve’s FOMC.

Provision for Credit Losses - Loans

The provision for credit losses on loans was $1.6 million for the year ended December 31, 2025, a decrease of $546 thousand or 25.5% compared to a provision for credit losses of $2.1 million for the year ended December 31, 2024. The provision for credit losses on loans for the year ended December 31, 2024 decreased $1.2 million, or 34.9%, from the $3.3 million provision for credit losses on loans for the year ended December 31, 2023. The decrease in provision for the year ended December 31, 2025 was primarily attributable to reduced expected losses resulting from updates to the macroeconomic forecast and lower loan balances as a result of an increase in observed prepayment speeds, partially offset by a $2.3 million reserve on non-PCD loans acquired through the William Penn acquisition. The benefit for credit losses on off-balance sheet credit exposures was $301 thousand for the year ended December 31, 2025, compared to a benefit of $628 thousand for the year ended December 31, 2024, and a provision of $404 thousand for the year ended December 31, 2023.

For the year ended December 31, 2025, Mid Penn had net charge-offs of $1.4 million compared to net charge-offs of $817 thousand for the year ended December 31, 2024, and net charge-offs of $332 thousand for the year ended December 31, 2023 . A summary of charge-offs and recoveries of loans and the provision for loan losses is shown in the table below.

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The following table represents the analysis of the allowance for credit losses:

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The following table represents the ratio of net charge-offs (recoveries) to total average loans outstanding:

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Noninterest Income

Noninterest income and variance analysis as of December 31:

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

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the acquisition date. This increase also includes a $420 thousand gain on the closing of an investment of a reinsurance entity acquired from another institution, a $307 thousand increase in sales tax refunds received, and $362 thousand in swap cancellation gains tied to eliminated brokered deposits, partially offset by a $2.2 million decrease in death benefits received.

For details on the variances of noninterest income for the year ended December 31, 2024 compared to the year ended December 31, 2023 refer to the "Noninterest Income" section of the MD&A in the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Noninterest Expense

Noninterest expense and variance analysis as of December 31:

For the year ended December 31, 2025, noninterest expense totaled $152.3 million, an increase of $34.7 million, or 29.5%, compared to noninterest expense of $117.6 million for the year ended December 31, 2024.

Salaries and benefits increased $13.9 million for the year ended December 31, 2025, compared to the same period in 2024. The increase is attributable to (i) equity-based compensation expense for stock options and restricted stock awards totaling $3.1 million that were recognized in the year ended December 31, 2025; (ii) the retail staff additions at the twelve retail locations added through the William Penn acquisition; and (iii) the retention of various William Penn team members through the completion of systems integration, which occurred on June 20, 2025.

Merger and acquisition expenses increased $11.0 million for the year ended December 31, 2025, which includes $10.1 million of merger related expenses related to the William Penn Acquisition, $713 thousand related to the 1st Colonial acquisition, $172 thousand related to the Cumberland Advisors Acquisition, and $164 thousand related to the Charis Insurance Group acquisition.

Software licensing and utilization costs increased $3.3 million for the year ended December 31, 2025, compared to the same period in 2024. The increase reflects additional costs to (i) license the additional William Penn branches; and (ii) upgrade internal systems, including network storage, cybersecurity, and data security enhancements in response to the Bank's larger size and increased IT complexity.

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Occupancy expenses increased $2.3 million for the year ended December 31, 2025, compared to the same period in 2024. The increase was driven by the facility operating costs of the additional retail locations added through the William Penn Acquisition.

For details on the variances of noninterest expense for the year ended December 31, 2024 compared to the year ended December 31, 2023 refer to the "Noninterest Expense" section of the MD&A in the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Income Taxes

The provision for income taxes was $16.1 million during the year ended December 31, 2025, an increase of $5.5 million compared to $10.6 million for the same period in 2024. The provision for income taxes for the year ended December 31, 2025 reflects an effective combined Federal and state tax rate ("ETR") of 22.3%, compared to an ETR of 17.6% for the year ended December 31, 2024. The increase in the effective tax rate in 2025 compared to 2024 was primarily driven by items reflected in the effective tax rate reconciliation table, including a higher unfavorable impact of income from life insurance, and an increase in non-deductible merger and acquisition expenses. Generally, Mid Penn’s effective tax rate is below the federal statutory rate due to earnings on tax-exempt loans, investments, and earnings from the cash surrender value of life insurance, as well as the impact of federal income tax credits, including those awarded from Mid Penn’s low-income housing investments. The realization of Mid Penn’s deferred tax assets is dependent on future earnings. Mid Penn currently anticipates that future earnings will be adequate to fully realize the currently recorded deferred tax assets.

On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. These changes did not have a material impact on the Company’s federal income tax expense or liability for the year ended December 31, 2025. The Company is currently evaluating the impact on future periods.

Financial Condition

Mid Penn’s total assets were $6.1 billion as of December 31, 2025, reflecting an increase of $663.0 million, or 12.1%, compared to total assets of $5.5 billion as of December 31, 2024. The increase was primarily driven by an increase in loans as a result of the William Penn Acquisition, an increase in available-for-sale investment securities, and an increase in federal funds sold.

Investment Securities

Mid Penn’s investment portfolio is utilized primarily to support overall liquidity and interest rate risk management, to provide collateral supporting pledging requirements for public funds on deposit, and to generate additional interest income within reasonable risk parameters. Mid Penn’s investment portfolio includes both held-to-maturity securities and available-for-sale securities.

Mid Penn’s portfolio of held-to-maturity ("HTM") securities, recorded at amortized cost, decreased $35.2 million to $347.3 million as of December 31, 2025, as compared to $382.4 million as of December 31, 2024. Mid Penn’s total available-for-sale ("AFS") securities portfolio increased $155.8 million from $260.5 million as of December 31, 2024 to $416.3 million as of December 31, 2025.

As of December 31, 2025, the unrealized gain on AFS investment securities resulted in a positive impact to shareholders’ equity of $11.9 million (comprised of a gross unrealized gain on securities of $14.1 million, net of deferred income tax). As of December 31, 2024, the unrealized loss on AFS investment securities resulted in a negative impact to shareholders’ equity of $1.6 million (comprised of a gross unrealized loss on securities of $2.0 million, net of deferred income tax). Mid Penn does not have any significant concentrations of non-governmental securities within its investment portfolio.

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The following table presents the expected maturities of the investment portfolio and the weighted-average yields (calculated based on historical cost and net of tax) as of December 31, 2025:

Loans, net of unearned income

Total loans, net of unearned income, as of December 31, 2025 were $4.9 billion compared to $4.4 billion as of December 31, 2024. The growth of $419.8 million, or 9.4%, since December 31, 2024 was primarily the result of the addition of loans from the William Penn Acquisition of $405.3 million.

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The following table presents the ending balance of loans outstanding, by type, as of December 31:

The majority of the Bank's loan portfolio is to businesses and individuals located within the Bank's primary market area, which consists principally of central and southeastern Pennsylvania, along with select counties in New Jersey. Commercial real estate, construction, and land development loans are collateralized mainly by mortgages on the income-producing real estate or land involved. Commercial, industrial, and agricultural loans are primarily made to business entities and may be secured by business assets, including commercial real estate, or may be unsecured. Residential real estate loans are secured by liens on the residential property. Consumer loans include installment loans, lines of credit and home equity loans. The Bank has no significant concentration of credit to any one borrower. The Bank’s highest concentration of credit by loan type is in commercial real estate.

Credit risk is managed through portfolio diversification, underwriting policies and procedures, and loan monitoring practices. Lenders are provided with detailed underwriting policies for all types of credit risks accepted by the Bank and must obtain appropriate internal approvals for credit extensions. The Bank also maintains strict documentation requirements and robust credit quality assurance practices to identify credit portfolio weaknesses as early as possible, so any exposures that are discovered might be mitigated or potential losses reduced. Most of the Bank's loans are secured by real estate, and the value of this collateral is dependent on and subject to change based on real estate market conditions within its market area.

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The following table represents the Commercial Real Estate portfolio by property type along with the weighted-average loan to value as of December 31:

(1)    LTV not available for Owner Occupied and Farmland properties

(2)    Weighted-average Loan to Value is calculated based on estimated current market values of the properties

Maturity distribution by contractual maturity date and rate sensitivity information related to the loan portfolio is reflected in the table below:

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Credit Quality, Credit Risk, and Allowance for Credit Losses

Mid Penn’s ACL methodology for loans is based upon guidance within FASB ASC Subtopic 326-20, "Financial Instruments – Credit Losses – Measured at Amortized Cost," as well as regulatory guidance from the FDIC, the Bank's primary federal regulator. The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Credit quality within the loan portfolio is continuously monitored by management and is reflected within the ACL for loans. The ACL is an estimate of expected losses inherent within Mid Penn’s existing loan portfolio. The ACL is adjusted through the provision for credit losses and reduced by the charge off of loan amounts, net of recoveries.

The loan loss estimation process involves procedures to appropriately consider the unique characteristics of Mid Penn’s loan portfolio segments. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Evaluations of the portfolio and individual credits are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense.

The following table represents the allowance for credit loss as a percentage of total loans: