Mid Penn Margin Reverses After Second-Quarter Expansion

The Tip Desk · November 8, 2026 · 4 min read

Net interest margin fell 14 bps to 3.92% as loan growth slowed and net interest income slipped to $64.6 million.

Mid Penn Bancorp (MPB), the Harrisburg-based parent of Mid Penn Bank, reported net interest margin of 3.92% for the quarter ended September 30, 2026, a 14 bps compression from 4.06% in the second quarter that reversed the 26 bps expansion recorded in the prior period.

Net interest income was $64.6 million, down from $65.3 million in the three months ended June 30, 2026, after a $10.0 million sequential increase in the second quarter. The bank said about 8 bps of the margin decline came from lower purchase-accounting accretion on acquired loans and the remainder from higher funding costs, partly offset by higher investment-securities yields. Yield on interest-earning assets fell to 5.89% from 5.99%. Average cost of deposits rose 4 bps to 2.11% and cost of funds rose to 2.14% from 2.09%, primarily on higher costs on interest-bearing deposits.

Loan growth slowed. Ending loans rose $19.3 million, or 1.4% annualized, to $5.6 billion, after a $107.2 million, or 7.8% annualized, increase in the second quarter. Average loans increased $35.9 million to $5.6 billion. Interest income included $3.1 million of loan accretion.

Deposits moved the other way. Total deposits increased $141.8 million, or 9.4% annualized, reversing a $17.7 million, or 1.2% annualized, decline in the second quarter. The gain came from a $251.8 million rise in interest-bearing transaction accounts, offset by a $59.9 million drop in time deposits and a $50.1 million drop in noninterest-bearing deposits. Average deposits rose $84.3 million, or 1.4%, to $6.0 billion.

The credit-loss line flipped to a $1.6 million benefit from a $528 thousand provision. Mid Penn said improved unemployment and GDP assumptions and faster loan prepayments more than offset higher reserves on three individually analyzed C&I loans. Net charge-offs were $78 thousand, or about 0.001% of average loans. The allowance for credit losses on loans declined to 0.71% of loans from 0.74%.

Nonperforming assets rose to $47.0 million from $36.8 million, including an $8.2 million increase in nonaccrual loans, of which $7.0 million was commercial real estate, and a $1.9 million increase in foreclosed owner-occupied commercial real estate. Nonperforming loans were 0.65% of total loans versus 0.51%. Delinquency of 30 days or more was 0.73% of loans.

Noninterest income declined $548 thousand, or 5.2%, to $10.0 million, on lower life-insurance cash-surrender earnings and other noninterest income including a $406 thousand drop in loan-level swap fees, partly offset by a $415 thousand contingent-liability release and $332 thousand of acquisition-related lease adjustments. Noninterest expense rose $823 thousand, or 1.7%, to $48.6 million, driven by a $436 thousand OREO write-down and $809 thousand of other expense including $687 thousand of branch-optimization costs, partly offset by a $446 thousand decline in salaries and employee benefits. The core efficiency ratio edged to 60.57% from 59.82%. Mid Penn closed certain financial centers, with an anticipated earnback of less than one year.

Net income available to common shareholders was $21.6 million, or $0.85 a share basic and $0.84 diluted, compared with $18.3 million, or $0.80 basic and $0.79 diluted, a year earlier. Adjusted earnings excluding non-recurring items were $0.88 a share. Book value per common share was unchanged at $35.62. The preliminary Common Tier 1 capital ratio was 13.1% at September 30, 2026, versus an actual ratio of 12.8% at June 30, 2026. No shares were repurchased in the third quarter after 76,000 shares in the second quarter; the board had authorized an additional $50.0 million of buybacks through April 30, 2027. The quarterly cash dividend remained $0.23 a share.

Chair, President and CEO Rory G. Ritrievi said the quarter was solid, with strong deposit growth partly offset by softer-than-expected loan growth and noninterest income, and that the company remains confident loan growth and noninterest income will improve as it enters the fourth quarter.