Mid Penn Bancorp, Inc. (MPB): 5 FORCES Analysis [Nov-2025 Updated]

You're trying to size up Mid Penn Bancorp, Inc. as it pushes hard with M&A to gain scale in a tricky market. Honestly, after two decades watching these regional plays, the real pressure points for Mid Penn Bancorp, Inc. right now are clear: suppliers-depositors-are holding leverage, pushing the cost of funds to 2.48% in Q1 2025, even as customers, facing a 1.2% organic loan decline, show they can easily walk. We'll break down how this dynamic, set against intense rivalry in the Greater Philadelphia Metro and the threat from FinTechs, shapes their competitive future, especially with total assets nearing \$6.4 billion. Keep reading to see the full, unvarnished analysis below.

Mid Penn Bancorp, Inc. (MPB) - Porter's Five Forces: Bargaining power of suppliers

When we look at Mid Penn Bancorp, Inc. (MPB), the primary suppliers are the depositors-the entities providing the bank with its core funding base. You see, in the current rate environment as of late 2025, these suppliers definitely have leverage. This is because of the competitive deposit pricing headwinds the industry faces; even with some Federal Reserve rate cuts, competition for sticky, low-cost deposits remains fierce. Honestly, if you don't pay up, those funds walk to a competitor offering a better yield.

The financial data clearly shows this pressure. For the first quarter of 2025, Mid Penn Bancorp, Inc.'s cost of funds settled at 2.48%. This figure reflects the necessary adjustments made to pay competitive rates to retain and attract balances, even as the bank worked to reprice deposits following earlier Fed cuts. To be fair, the bank managed to bring this down from 2.66% in the fourth quarter of 2024, but the underlying competition is still there.

To gain necessary scale and offset slower internal funding generation, Mid Penn Bancorp, Inc. has relied on strategic moves like mergers. The acquisition of William Penn Bancorporation, which closed on April 30, 2025, was key here, adding approximately $619.8 million in deposits to the consolidated balance sheet as of the third quarter of 2025. This M&A reliance highlights the difficulty in organic funding growth.

Here's the quick math on organic growth: through the third quarter of 2025, organic deposit growth was modest, coming in at an annualized rate of 2.8% when calculated from the end of 2024. This translated to an organic increase of $33.0 million annualized as of September 30, 2025. While total deposits reached $5.3 billion by Q3 2025, largely thanks to the acquisition, the underlying organic pace shows the supplier power dynamic. Management even made a strategic move in Q3 2025, planning an exit of approximately $175 million in brokered certificates of deposit to actively lower funding costs.

Still, access to wholesale funding-those non-deposit sources-remains a viable option for liquidity management, but it is generally a pricier alternative. When deposit costs are under pressure, the market for non-deposit funding becomes more expensive, further cementing the importance of managing the core depositor base effectively. You need a strong core to keep overall funding costs in check.

Here is a look at the key funding metrics around the supplier base:

The bank's focus on efficiency and strategic M&A is a direct response to this supplier dynamic. You see the result in the improved core efficiency ratio, which hit 58.80% in Q3 2025, down from 62.56% in the prior quarter. Finance: draft 13-week cash view by Friday.

Mid Penn Bancorp, Inc. (MPB) - Porter's Five Forces: Bargaining power of customers

You're looking at the bargaining power of customers for Mid Penn Bancorp, Inc. (MPB), and honestly, the data from 2025 suggests commercial borrowers, in particular, are holding some cards. When customers have good alternatives, they vote with their feet-or in this case, their loan payoffs.

The pressure from customers seeking better terms or having other financing options is clearly visible in the loan book trends. While Mid Penn Bancorp, Inc. reported a 4.4% (annualized) organic loan growth rate in the first quarter of 2025, the second quarter showed a definite pullback. Specifically, organic loan balances fell by $89.6 million as demand softened and existing balances were paid off early. This indicates that for commercial borrowers, the cost of capital or the availability of better structures elsewhere is a real factor influencing their decisions to not renew or to prepay. Management noted that borrower sentiment in Q1 2025 was best described as cautious, which is a direct reflection of customers exercising their power to wait or seek better deals.

The ease with which some customers can exit existing commitments is evidenced by loan payoffs. During the first quarter of 2025, the payoff of two commercial loans alone accounted for a $3.0 million reduction in the portfolio, which partially offset new originations. This ability to easily retire debt shows a lack of lock-in effect, giving the customer leverage in rate negotiations or when seeking new credit.

To be fair, Mid Penn Bancorp, Inc. has demonstrated some pricing power, which counters the customer's full leverage. The loan portfolio yield remained quite strong, hitting 6.05% for the quarter ended March 31, 2025. Here's a quick look at how the loan yield stacks up against funding costs for that period:

Still, this pricing power is tested by the retail segment. Retail customers, who are generally more rate-sensitive and less relationship-bound than large commercial clients, can switch banks for better deposit rates or superior digital services with relative ease. This constant threat forces Mid Penn Bancorp, Inc. to remain competitive on the liability side, which in turn affects the margin they can earn on the asset side.

The overall customer power dynamic in 2025 can be summarized by these key pressures:

• Commercial borrowers actively pay down loans, evidenced by a $3.0 million payoff in Q1 2025.
• Organic loan balances dropped by $89.6 million in Q2 2025.
• Loan portfolio yield was 6.05% in Q1 2025, showing some pricing strength.
• Retail customers have low switching costs for better digital offerings.
• Management expects loan growth at the low end of its 2025 target due to softened demand.

Finance: draft a sensitivity analysis on NIM if the average retail deposit rate increases by 25 basis points by year-end.

Mid Penn Bancorp, Inc. (MPB) - Porter's Five Forces: Competitive rivalry

You're looking at Mid Penn Bancorp, Inc.'s position in a market where scale matters, and the rivalry is intense. Honestly, the competition in the Greater Philadelphia Metro market is thick, featuring everyone from the massive national players down to the hyper-local community shops. Mid Penn Bancorp is fighting this with a clear strategy: buy scale.

The company is executing an aggressive M&A strategy to gain scale, which is necessary when facing larger rivals. As of September 30, 2025, Mid Penn Bancorp reported total assets of approximately $6.4 billion.

This drive for size is evident in recent and pending transactions. The William Penn Bancorporation acquisition, which closed on April 30, 2025, brought consolidated assets up to about $6.3 billion post-merger. Now, the pending acquisition of 1st Colonial Bancorp, valued at $101 million, is set to push pro forma total assets to more than $7.2 billion.

Here's a quick look at how these moves are building out the balance sheet to compete:

This constant deal-making, including six whole-bank acquisitions since 2014, is a direct response to the competitive pressure. You have to get bigger to spread fixed costs.

The need to manage costs effectively is clear when you look at operational metrics. The core efficiency ratio improved to 58.80% in Q3 2025, down from 62.56% in Q2 2025 and 64.89% in Q3 2024. This improvement signals that the management team is focused on operational leverage, which is critical when rivalry forces margins down.

The competitive field itself is highly fragmented, meaning Mid Penn Bancorp must win business one customer at a time against diverse players. The competition includes:

• Large national banks with massive funding advantages.
• Smaller community banks like the ones Mid Penn Bancorp targets for acquisition.
• 1st Colonial Bancorp, prior to the deal, held $877 million in total assets as of June 30, 2025.
• William Penn Bancorp, acquired in Q2 2025, was a community bank with 12 branches in the metro area.
• 1st Colonial operates three full-service branch locations in the greater Philadelphia metro area.

The M&A strategy, therefore, isn't just about assets; it's about buying established local market share and branch density to better contest the regional turf. Finance: draft 13-week cash view by Friday.

Mid Penn Bancorp, Inc. (MPB) - Porter's Five Forces: Threat of substitutes

You're looking at how easily a client can move their money or their need for a loan to a non-bank provider. For Mid Penn Bancorp, Inc., the threat of substitutes is quite present, especially as technology makes alternatives more appealing.

Non-bank financial services, often called FinTech (financial technology) firms, are definitely offering specialized lending and payment solutions that bypass traditional banking structures. The sheer size of this sector shows the potential for substitution. For instance, the US digital lending market was estimated to be worth about USD 303.1 billion in 2025. Globally, the Fintech Lending Market size was valued at USD 589.64 billion in 2025, with projections showing a 16% CAGR through 2035. This growth is fueled by the fact that nearly 68% of borrowers globally prefer digital lending platforms for faster approvals.

Money market funds (MMFs) and brokerage accounts serve as direct substitutes for Mid Penn Bancorp, Inc.'s core deposit base. These alternatives compete fiercely for cash holdings by offering competitive yields. In the US, MMF assets reached a substantial $7 trillion in 2025, driven by both retail and institutional investors seeking attractive rates relative to bank alternatives. Historically, data up to May 2025 showed a clear relationship: a one-percentage-point increase in bank deposits was associated with a 0.2-percentage-point decline in MMF assets, indicating active investor reallocation between the two. To be fair, MMFs are often seen as meeting the trifecta of safety, liquidity, and yield better than a single bank deposit, especially for larger cash balances.

Mid Penn Bancorp, Inc. is actively diversifying its revenue streams to counter reliance on traditional banking, as seen in its acquisition strategy. The agreement to acquire Cumberland Advisors is a direct move into this substitute space, adding approximately $3.3 billion in Assets Under Management (AUM). This addition is significant when you consider Mid Penn Bancorp, Inc.'s total assets were around $6 billion before this and the concurrent 1st Colonial acquisition. The acquisition is expected to be immediately earnings-accretive upon closing in late 2025.

Direct online lenders are competing aggressively for both consumer and small business loans, which is a key revenue component for Mid Penn Bancorp, Inc. These platforms leverage technology to streamline the application and approval process, directly challenging the speed and convenience offered by established institutions. The overall US FinTech market, which encompasses these lending platforms, was valued at approximately US$95.2 billion in 2025.

Here's a quick look at the scale of the substitute markets compared to Mid Penn Bancorp, Inc.'s core business as of late 2025:

The competitive pressure manifests in several ways you need to watch:

• - FinTechs offer specialized lending with faster decisions.
• - MMFs attract deposits with potentially higher yields.
• - Brokerage accounts offer integrated cash management solutions.
• - Direct online lenders compete fiercely for loan origination volume.

If onboarding takes 14+ days, churn risk rises because clients expect near-instant digital service. Finance: draft 13-week cash view by Friday.

Mid Penn Bancorp, Inc. (MPB) - Porter's Five Forces: Threat of new entrants

You're looking at the barriers to entry for new competitors trying to set up shop against Mid Penn Bancorp, Inc. in the Pennsylvania and New Jersey markets. Honestly, the traditional banking route is tough to crack. High regulatory hurdles and significant capital requirements create a substantial barrier to entry for full-service banks.

To start a de novo (newly chartered) bank in the U.S., the initial paid-up capital requirement is often cited around $20 million, with the national average for working capital needed for day-to-day operations estimated between $18 million and $22 million. This immediate, massive capital outlay filters out most potential entrants right away. Mid Penn Bancorp, Inc., with total assets of $6.3 billion as of September 30, 2025, already operates with an established infrastructure, including 63 offices. Think about the real estate and operational costs to replicate that footprint today.

Mid Penn Bancorp's regulatory capital levels are in excess of minimums, signaling a robust defense. For context, the Federal Reserve's minimum Common Equity Tier 1 (CET1) requirement for large banks is 4.5%, plus a stress capital buffer of at least 2.5%. As of September 30, 2025, Mid Penn Bank reported a Tier 1 Capital Ratio of 13.53%. This level is explicitly stated to be in excess of both the regulatory minimums and the levels required to be deemed 'well capitalized'.

Still, the landscape isn't entirely closed off. FinTech firms can enter specific, less-regulated niches without needing a full bank charter. These firms often focus on payments, specialized lending, or wealth management technology, bypassing the stringent capital and compliance burdens that Mid Penn Bancorp, Inc. must adhere to. They can target specific customer pain points with lower overhead.

The cost of establishing a branch network in the Pennsylvania/New Jersey market is high. Beyond the chartering capital, the physical presence requires significant investment in real estate, technology, and personnel. Mid Penn Bancorp, Inc. has already absorbed these sunk costs to build its network of 63 offices. A new entrant would face immediate, high fixed costs just to achieve comparable geographic reach.

Here's the quick math on the capital buffer: Mid Penn Bank's 13.53% Tier 1 ratio provides a cushion significantly above the baseline regulatory requirements, which is a clear signal of financial strength against unexpected economic shocks that might deter a new, thinly capitalized competitor. What this estimate hides, though, is the cost of compliance staff needed to maintain that capital level, which is another hidden barrier.

• Regulatory filing fees for a new bank charter are non-refundable, adding to initial outlay.
• Minimum capital for a new bank is often cited near $20 million.
• Mid Penn Bank's Tier 1 Capital Ratio stood at 13.53% as of September 30, 2025.
• The bank reported total assets of $6.3 billion as of September 30, 2025.
• FinTechs target non-chartered niches, avoiding the full regulatory weight.