Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

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 June 30, 2018 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	June 30, 2018		(Level 1)		(Level 2)		(Level 3)
Available-for-sale securities:
U.S. Treasury and U.S. government agencies	$	38,340	$	-	$	38,340	$	-
Mortgage-backed U.S. government agencies		42,426		-		42,426		-
State and political subdivision obligations		29,574		-		29,574		-
Corporate debt securities		1,351		-		1,351		-
Other assets:
Equity securities		492		492		-		-
Loans held for sale		1,185		1,185		-		-
Total	$	113,368	$	1,677	$	111,691	$	-

			Fair value measurements at December 31, 2017 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2017		(Level 1)		(Level 2)		(Level 3)
Available-for-sale securities:
U.S. Treasury and U.S. government agencies	$	38,730	$	-	$	38,730	$	-
Mortgage-backed U.S. government agencies		25,831		-		25,831		-
State and political subdivision obligations		27,043		-		27,043		-
Corporate debt securities		1,355		-		1,355		-
Other assets:
Equity securities		506		506		-		-
Loans held for sale		1,040		1,040		-		-
Total	$	94,505	$	1,546	$	92,959	$	-

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 June 30, 2018 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	June 30, 2018		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	4,689	$	-	$	-	$	4,689
Foreclosed Assets Held for Sale		29		-		-		29
Mortgage Servicing Rights		111		-		-		111

			Fair value measurements at December 31, 2017 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2017		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	6,090	$	-	$	-	$	6,090
Foreclosed Assets Held for Sale		-		-		-		-
Mortgage Servicing Rights		126		-		-		126

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)

Quantitative Information about Level 3 Fair Value Measurements

June 30, 2018

Fair Value Estimate

Valuation Technique

Unobservable Input

Range

Weighted Average

Impaired Loans

4,689

Appraisal of collateral (a)

Appraisal adjustments (b)

16% - 63%

27%

Foreclosed Assets Held for Sale

Appraisal of collateral (a), (c)

Appraisal adjustments (b)

29% - 29%

29%

Mortgage Servicing Rights

111

Multiple of annual service fee

Estimated prepayment speed based on rate and term

70% - 100%

99%

(Dollars in thousands)

Quantitative Information about Level 3 Fair Value Measurements

December 31, 2017

Fair Value Estimate

Valuation Technique

Unobservable Input

Range

Weighted Average

Impaired Loans

6,090

Appraisal of collateral (a)

Appraisal adjustments (b)

6% - 51%

28%

Foreclosed Assets Held for Sale

Appraisal of collateral (a), (c)

Appraisal adjustments (b)

0% - 0%

Mortgage Servicing Rights

126

Multiple of annual service fee

Estimated prepayment speed based on rate and term

70% - 100%

98%

(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 June 30, 2018 and December 31, 2017.

(Dollars in thousands)	June 30, 2018				December 31, 2017
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and cash equivalents	$	39,407	$	39,407	$	23,514	$	23,514
Available-for-sale investment securities		111,691		111,691		93,465		93,465
Held-to-maturity investment securities		153,321		150,016		101,356		100,483
Loans held for sale		1,185		1,185		1,040		1,040
Net loans and leases		1,028,290		1,034,131		902,798		917,081
Restricted investment in bank stocks		2,765		2,765		4,384		4,384
Accrued interest receivable		5,372		5,372		4,564		4,564
Mortgage servicing rights		111		111		126		126

Financial liabilities:
Deposits	$	1,236,518	$	1,236,604	$	1,023,568	$	1,026,830
Short-term borrowings		-		-		34,611		34,611
Long-term debt		12,241		11,978		12,352		11,692
Subordinated debt		17,342		17,245		17,338		17,358
Accrued interest payable		1,186		1,186		645		645

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 June 30, 2018 and December 31, 2017. Carrying values approximate fair values for cash and cash equivalents, interest-bearing time balances with other financial institutions, loans held for sale, 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
June 30, 2018	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Held-to-maturity investment securities	$	153,321	$	150,016	$	-	$	150,016	$	-
Net loans and leases		1,028,290		1,034,131		-		-		1,034,131

Financial instruments - liabilities
Deposits	$	1,236,518	$	1,236,604	$	-	$	1,236,604	$	-
Long-term debt		12,241		11,978		-		11,978		-
Subordinated debt		17,342		17,245		-		17,245		-

					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, 2017	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Held-to-maturity investment securities	$	101,356	$	100,483	$	-	$	100,483	$	-
Net loans and leases		902,798		917,081		-		-		917,081

Financial instruments - liabilities
Deposits	$	1,023,568	$	1,026,830	$	-	$	1,026,830	$	-
Long-term debt		12,352		11,692		-		11,692		-
Subordinated debt		17,338		17,358				17,358