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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2022

Assets Measured at Fair Value on a Recurring Basis

The following tables illustrate the assets measured at fair value on a recurring basis segregated by hierarchy fair value levels.


(Dollars in thousands)	Total carrying value at		Fair value measurements at September 30, 2022 using:
Assets:	September 30, 2022		Level 1		Level 2		Level 3
Loans held for sale	$	5,997			$	5,997	$	—
Available-for-sale securities:
U.S. Treasury and U.S. government agencies	37,584		—		37,584		—
Mortgage-backed U.S. government agencies	168,204		—		168,204		—
State and political subdivision obligations	3,374		—		3,374		—
Corporate debt securities	33,033		—		33,033		—
Other assets:
Equity securities	428		428		—		—
Interest rate swap agreements	12,825		—		12,825		—
Mortgage banking derivative assets	3		—		3		—
Total	$	261,448	$	428	$	261,020	$	—



(Dollars in thousands)	Total carrying value at		Fair value measurements at December 31, 2021 using:
Assets:	December 31, 2021		Level 1		Level 2		Level 3
Loans held for sale	$	11,514	$	—	$	11,514	$	—
Available-for-sale securities:
Mortgage-backed U.S. government agencies	49,480		—		49,480		—
State and political subdivision obligations	3,914		—		3,914		—
Corporate debt securities	9,468		—		9,468		—
Other assets:
Equity securities	500		500		—		—
Interest rate swap agreements	629		—		629		—
Mortgage banking derivative assets	88		—		88		—
Total	$	75,593	$	500	$	75,093	$	—

Fair Value Measurements, Nonrecurring

The following tables illustrate the assets measured at fair value on a nonrecurring basis segregated by hierarchy fair value levels.



(Dollars in thousands)	Total carrying value at		Fair value measurements at September 30, 2022 using:
Assets:	September 30, 2022		Level 1		Level 2		Level 3
Impaired Loans	$	936	$	—	$	—	$	936
Foreclosed assets held for sale	49		—		—		49



(Dollars in thousands)	Total carrying value at		Fair value measurements at December 31, 2021 using:
Assets:	December 31, 2021		Level 1		Level 2		Level 3
Impaired Loans	$	508	$	—	$	—	$	508

Fair Value Measurement Inputs and Valuation Techniques

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Mid Penn has utilized Level 3 inputs to determine the fair value.

(Dollars in thousands)

September 30, 2022

Fair Value Estimate

Valuation Technique

Unobservable Input

Range

Weighted Average

Impaired Loans

936

Appraisal of collateral (1), (2)

Appraisal adjustments (2)

22% - 77%

52%

(Dollars in thousands)

December 31, 2021

Fair Value Estimate

Valuation Technique

Unobservable Input

Range

Weighted Average

Impaired Loans

508

Appraisal of collateral (1), (2)

Appraisal adjustments (2)

21% - 69%

30%

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which generally includes various Level 3 inputs which are not observable.

(2)Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal. Higher downward adjustments are caused by negative changes to the collateral or conditions in the real estate market, actual offers or sales contracts received, or age of the appraisal.

Fair Value, by Balance Sheet Grouping

The following table summarizes the carrying value and fair value of financial instruments:


(Dollars in thousands)	September 30, 2022				December 31, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Cash and cash equivalents	$	94,678	$	94,678	$	913,752	$	913,752
Available-for-sale investment securities	242,195		242,195		62,862		62,862
Held-to-maturity investment securities	402,142		346,625		329,257		330,626
Equity securities	428		428		500		500
Loans held for sale	5,997		5,997		11,514		11,787
Net loans and leases	3,303,977		3,252,277		3,089,799		3,118,416
Restricted investment in bank stocks	4,595		4,595		9,134		9,134
Accrued interest receivable	15,861		15,861		10,779		10,779
Interest rate swap agreements	12,825		12,825		629		629
Mortgage banking derivative assets	6		6		88		88

Financial liabilities:
Deposits	$	3,729,596	$	3,716,190	$	4,002,016	$	4,046,217
Long-term debt (1)	1,188		1,148		77,890		77,455
Subordinated debt	66,357		63,895		74,274		74,553
Accrued interest payable	1,841		1,841		1,791		1,791
Mortgage banking derivative liabilities	342		342		—		—

(1)Long-term debt excludes finance lease obligations.

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of Mid Penn’s financial instruments as of September 30, 2022 and December 31, 2021. Carrying values approximate fair values for cash and cash equivalents, restricted investment in bank stocks, accrued interest receivable and payable, and short-term borrowings. Other than cash and cash equivalents, which are considered Level 1 Inputs, and mortgage servicing rights, which are Level 3 Inputs,

these instruments are Level 2 Inputs. These tables exclude financial instruments for which the carrying amount approximates fair value, not previously disclosed.


(Dollars in thousands)					Fair Value Measurements
September 30, 2022	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial instruments - assets
Held-to-maturity investment securities	$	402,142	$	346,625	$	—	$	346,625	$	—
Net loans and leases	3,303,977		3,252,277		—		—		3,252,277

Financial instruments - liabilities
Deposits	$	3,729,596	$	3,716,190	$	—	$	3,716,190	$	—
Long-term debt (1)	1,188		1,148		—		1,148		—
Subordinated debt	66,357		63,895		—		63,895		—

(1) Long-term debt excludes finance lease obligations.


(Dollars in thousands)					Fair Value Measurements
December 31, 2021	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial instruments - assets
Held-to-maturity investment securities	$	329,257	$	330,626	$	—	$	330,626	$	—
Net loans and leases	3,089,799		3,118,416		—		—		3,118,416

Financial instruments - liabilities
Deposits	$	4,002,016	$	4,046,217	$	—	$	4,046,217	$	—
Long-term debt (1)	77,890		77,455		—		77,455		—
Subordinated debt	74,274		74,553		—		74,553		—

(1) Long-term debt excludes finance lease obligations.