MID PENN BANCORP INCMPB
MID PENN BANCORP INC Income Taxes Disclosure
Income Taxes
Mid Penn accounts for income taxes in accordance with ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to the differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases.
In 2025, Mid Penn adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The adoption impacted the Corporation's income tax disclosures but did not have a material impact on its consolidated financial position, results of operations, or cash flows.
Significant components of the Corporation’s net deferred tax asset as of December 31, 2025 and 2024 are shown below.
| (In thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Allowance for loan losses | $ | 8,031 | $ | 7,878 | |||||||
| Loan fees | 811 | 769 | |||||||||
| Deferred compensation | 1,899 | 1,317 | |||||||||
| Benefit plans | 46 | 50 | |||||||||
| Unrealized loss on securities | 2,373 | 5,389 | |||||||||
| Lease adjustments | 53 | 87 | |||||||||
| Business combination adjustments | 7,057 | 4,659 | |||||||||
| Acquired NOL, Section 1231, and charitable contribution carryforwards | 3,198 | 3,153 | |||||||||
| Rabbi trust | 442 | 521 | |||||||||
| Riverview AMT credits | 547 | 621 | |||||||||
| Equity compensation | 776 | 249 | |||||||||
| Riverview subordinated debt fair value adjustment | — | 139 | |||||||||
| Software renewal costs | 194 | 222 | |||||||||
| Unfunded commitments and loan basis adjustments | 609 | 491 | |||||||||
| Investments in flow-through entities | 203 | 517 | |||||||||
| Other | 276 | 482 | |||||||||
| Total deferred tax assets | $ | 26,515 | $ | 26,544 | |||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation | $ | (2,134) | $ | (1,160) | |||||||
| Bond accretion | (401) | (269) | |||||||||
| Goodwill and intangibles | (226) | (505) | |||||||||
| Prepaid expenses | (818) | (74) | |||||||||
| Benefit plans | (1,520) | (1,368) | |||||||||
| Interest rate swaps | — | (421) | |||||||||
| Total deferred tax liabilities | (5,099) | (3,797) | |||||||||
| Deferred tax asset, net | $ | 21,416 | $ | 22,747 | |||||||
In assessing the Corporation’s ability to realize deferred federal tax assets, management considers whether it is more likely than not some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and prudent, feasible and permissible as well as available tax planning strategies in making this assessment. As of December 31, 2025, based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that Mid Penn will realize the benefits of these deferred tax assets and has no valuation allowances recorded against any components of its
deferred tax asset, including the carryforward balances related to net operating losses ("NOL"), Section 1231 losses, and charitable contribution carryforwards.
As of December 31, 2025, Mid Penn had NOL carryforwards of $3.2 million, which were acquired in prior business combinations and are set to expire in 2032. Utilization of these NOLs is subject to limitations under the Tax Cuts and Jobs Act ("TCJA"), which generally limits the deduction to 80% of taxable income computed without regard to the NOL deduction, as well as limitations under Internal Revenue Code Section 382.
Mid Penn had no charitable contribution carryforwards as of December 31, 2025 and December 31, 2024. During the years ended December 31, 2025, 2024 and 2023, Mid Penn generated sufficient taxable income to utilize all charitable contribution carryforwards. Mid Penn expects to generate sufficient taxable income to utilize all charitable contribution carryforwards in the future.
The annual usage of acquired NOL, charitable contribution carryforwards, and Section 1231 losses is limited by Internal Revenue Service ("IRS") Section 382 regulations. These limitations are calculated separately for each acquisition as the federal long-term tax-exempt rate at the date of acquisition multiplied by the valuation of the selling company as calculated in accordance with GAAP. As a result, the usage of acquired NOLs, charitable contribution carryforwards, AMT carryforwards, and Section 1231 losses to offset taxable income related to the Riverview Acquisition is limited to $2.0 million per year.
Mid Penn and its subsidiaries are subject to U.S. federal income tax and income tax for the states of Pennsylvania, New Jersey, Florida, and Maryland. These jurisdictions represent the primary states comprising the majority of the Company's state and local income tax expense. With limited exceptions, Mid Penn is no longer subject to examination by taxing authorities for years before 2017.
The provision for income taxes consists of the following:
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current tax provision | |||||||||||||||||
| Federal | $ | 2,199 | $ | 7,118 | $ | 7,570 | |||||||||||
| State | 108 | 864 | 1,033 | ||||||||||||||
| Total current tax provision | $ | 2,307 | $ | 7,982 | $ | 8,603 | |||||||||||
| Deferred tax expense (benefit) | |||||||||||||||||
| Federal | $ | 12,910 | $ | 1,998 | $ | (525) | |||||||||||
| State | 905 | 615 | (781) | ||||||||||||||
| Total deferred tax expense (benefit) | 13,815 | 2,613 | (1,306) | ||||||||||||||
| Total provision for income taxes | $ | 16,122 | $ | 10,595 | $ | 7,297 | |||||||||||
A reconciliation of the federal income tax provision at the statutory rate of 21% to Mid Penn's actual federal income tax provision at its effective rate is as follows:
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Provision at the expected statutory rate | $ | 15,198 | 21.0 | % | $ | 12,607 | 21.0 | % | $ | 9,388 | 21.0 | % | |||||||||||||||||||||||
| Low income housing partnership tax credits | (614) | (0.8) | (2,163) | (3.6) | (1,337) | (3.0) | |||||||||||||||||||||||||||||
| Effect of tax-exempt income | (770) | (1.1) | (804) | (1.3) | (641) | (1.4) | |||||||||||||||||||||||||||||
| Effect of investment in life insurance | (485) | (0.7) | (770) | (1.3) | (252) | (0.6) | |||||||||||||||||||||||||||||
| Nondeductible merger and acquisition expense | 704 | 1.0 | 48 | 0.1 | 207 | 0.5 | |||||||||||||||||||||||||||||
| State income taxes, net of federal tax benefit | 800 | 1.1 | 1,169 | 1.9 | 199 | 0.4 | |||||||||||||||||||||||||||||
| Nondeductible interest | 128 | 0.2 | 150 | 0.2 | 108 | 0.2 | |||||||||||||||||||||||||||||
| Executive compensation | 581 | 0.8 | — | — | — | — | |||||||||||||||||||||||||||||
| Equity compensation | 242 | 0.3 | — | — | — | — | |||||||||||||||||||||||||||||
| Other items | 338 | 0.5 | 358 | 0.6 | (375) | (0.8) | |||||||||||||||||||||||||||||
| Provision for income taxes | $ | 16,122 | 22.3 | % | $ | 10,595 | 17.6 | % | $ | 7,297 | 16.3 | % | |||||||||||||||||||||||
Mid Penn has no unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate. Mid Penn does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months.
No amounts for interest and penalties were recorded in income tax expense in the Consolidated Statement of Income for the years ended December 31, 2025, 2024, or 2023. There were no amounts accrued for interest and penalties as of December 31, 2025 or 2024.
Mid Penn paid the following income taxes, net of refunds, during the year ended December 31, 2025:
| (In thousands) | 2025 | |||||||
| Federal | $ | 5,350 | ||||||
| State | ||||||||
| New Jersey | 395 | |||||||
| Other states | 7 | |||||||
| Total state | 402 | |||||||
| Total Income Taxes Paid | $ | 5,752 | ||||||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
| 2023 | Mar 28, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 15, 2022 | |
| 2020 | Mar 15, 2021 | |
| 2019 | Mar 13, 2020 | |
| 2018 | Mar 19, 2019 | |
| 2017 | Mar 13, 2018 | |
| 2016 | Mar 23, 2017 | |
| 2015 | Mar 17, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.