Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2016

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.

			Fair value measurements at September 30, 2016 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	September 30, 2016		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and U.S. government agencies	$	51,131	$	-	$	51,131	$	-
Mortgage-backed U.S. government agencies		25,787		-		25,787		-
State and political subdivision obligations		93,294		-		93,294		-
Equity securities		3,232		1,059		2,173		-
	$	173,444	$	1,059	$	172,385	$	-

			Fair value measurements at December 31, 2015 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2015		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and U.S. government agencies	$	26,990	$	-	$	26,990	$	-
Mortgage-backed U.S. government agencies		38,804		-		38,804		-
State and political subdivision obligations		66,617		-		66,617		-
Equity securities		3,310		1,240		2,070		-
	$	135,721	$	1,240	$	134,481	$	-

Fair Value Measurements, Nonrecurring

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

			Fair value measurements at September 30, 2016 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	September 30, 2016		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	2,314	$	-	$	-	$	2,314
Foreclosed Assets Held for Sale		318		-		-		318
Mortgage Servicing Rights		144		-		-		144

			Fair value measurements at December 31, 2015 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2015		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	2,088	$	-	$	-	$	2,088
Foreclosed Assets Held for Sale		453		-		-		453
Mortgage Servicing Rights		174		-		-		174

Fair Value Inputs, Assets, Quantitative Information

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)

Quantitative Information about Level 3 Fair Value Measurements

September 30, 2016

Fair Value Estimate

Valuation Technique

Unobservable Input

Range

Weighted Average

Impaired Loans

2,314

Appraisal of collateral (a)

Appraisal adjustments (b)

11% - 53%

28%

Foreclosed Assets Held for Sale

318

Appraisal of collateral (a), (c)

Appraisal adjustments (b)

17% - 31%

26%

Mortgage Servicing Rights

144

Multiple of annual service fee

Estimated prepayment speed based on rate and term

210% - 400%

360%

(Dollars in thousands)

Quantitative Information about Level 3 Fair Value Measurements

December 31, 2015

Fair Value Estimate

Valuation Technique

Unobservable Input

Range

Weighted Average

Impaired Loans

2,088

Appraisal of collateral (a)

Appraisal adjustments (b)

11% - 60%

30%

Foreclosed Assets Held for Sale

453

Appraisal of collateral (a), (c)

Appraisal adjustments (b)

17% - 27%

26%

Mortgage Servicing Rights

174

Multiple of annual service fee

Estimated prepayment speed based on rate and term

210% - 400%

360%

(a)

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

(b)

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.

(c)

Includes qualitative adjustments by management and estimated liquidation expenses.

Fair Value, by Balance Sheet Grouping

The following table summarizes the carrying value and fair value of financial instruments at September 30, 2016 and December 31, 2015.

(Dollars in thousands)	September 30, 2016				December 31, 2015
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and cash equivalents	$	43,769	$	43,769	$	13,284	$	13,284
Interest-bearing time balances with other financial institutions		-		-		4,317		4,317
Investment securities		173,444		173,444		135,721		135,721
Net loans and leases		784,002		809,356		733,023		738,773
Restricted investment in bank stocks		2,709		2,709		4,266		4,266
Accrued interest receivable		4,032		4,032		3,813		3,813
Mortgage servicing rights		144		144		174		174

Financial liabilities:
Deposits	$	938,217	$	939,690	$	777,043	$	777,320
Short-term borrowings		-		-		31,596		31,596
Long-term debt		13,638		13,637		40,305		39,626
Subordinated debt		7,411		7,411		7,414		7,414
Accrued interest payable		748		748		390		390

Off-balance sheet financial instruments:
Commitments to extend credit	$	-	$	-	$	-	$	-
Financial standby letters of credit		-		-		-		-

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, 2016 and December 31, 2015. Carrying values approximate fair values for cash and cash equivalents, interest-bearing time balances with other financial institutions, restricted investment in bank stocks, mortgage servicing rights, 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.

					Fair Value Measurements
					Quoted Prices
					in Active Markets				Significant
(Dollars in thousands)					for Identical Assets		Significant Other		Unobservable
	Carrying				or Liabilities		Observable Inputs		Inputs
September 30, 2016	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Net loans and leases	$	784,002	$	809,356	$	-	$	-	$	809,356

Financial instruments - liabilities
Deposits	$	938,217	$	939,690	$	-	$	939,690	$	-
Long-term debt		13,638		13,637		-		13,637		-

					Fair Value Measurements
					Quoted Prices
					in Active Markets				Significant
(Dollars in thousands)					for Identical Assets		Significant Other		Unobservable
	Carrying				or Liabilities		Observable Inputs		Inputs
December 31, 2015	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Net loans and leases	$	733,023	$	738,773	$	-	$	-	$	738,773

Financial instruments - liabilities
Deposits	$	777,043	$	777,320	$	-	$	777,320	$	-
Long-term debt		40,305		39,626		-		39,626		-