10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

 (Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-13677

MID PENN BANCORP, INC.

(Exact Name of Registrant as Specified in its Charter)

Pennsylvania	25-1666413
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)
349 Union Street Millersburg, Pennsylvania	17061
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code 1.866.642.7736

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   þ    No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One).

Large accelerated filer   ¨     Accelerated Filer   ¨     Non-accelerated Filer  ¨      Smaller Reporting Company  þ

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ¨     No   þ

As of August 14, 2013, the registrant had 3,492,214 shares of common stock outstanding.

MID PENN BANCORP, INC.

FORM 10-Q

TABLE OF CONTENTS

PART 1 – FINANCIAL INFORMATION			2
	Item 1 – Financial Statements		2
		Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012 (Unaudited)	2
		Consolidated Statements of Income for the Three and Six Months Ended June 30, 2013 and June 30, 2012 (Unaudited)	3
		Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months EndedJune 30, 2013 and June 30, 2012 (Unaudited)	4
		Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2013 and June 30, 2012 (Unaudited)	5
		Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and June 30, 2012 (Unaudited)	6
		Notes to Consolidated Financial Statements (Unaudited)	7
	Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
	Item 3 – Quantitative and Qualitative Disclosures about Market Risk		39
	Item 4 – Controls and Procedures		39
PART II – OTHER INFORMATION			40
	Item 1 – Legal Proceedings		40
	Item 1A – Risk Factors		40
	Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		40
	Item 3 – Defaults upon Senior Securities		40
	Item 4 – Mine Safety Disclosures		40
	Item 5 – Other Information		40
	Item 6 – Exhibits		40
	Signatures		41

Unless the context otherwise requires, the terms “Mid Penn”, “we”, “us”, and “our” refer to Mid Penn Bancorp, Inc. and its consolidated subsidiaries

1

MID PENN BANCORP, INC.Consolidated Balance Sheets (Unaudited)

PART 1 – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share data)	June 30, 2013		December 31, 2012
ASSETS
Cash and due from banks	$	9,713	$	11,200
Interest-bearing balances with other financial institutions		682		1,273
Federal funds sold		-		3,000
Total cash and cash equivalents		10,395		15,473
Interest-bearing time deposits with other financial institutions		13,433		23,563
Available for sale investment securities		133,956		154,295
Loans and leases, net of unearned interest		518,658		484,220
Less:  Allowance for loan and lease losses		(6,267)		(5,509)
Net loans and leases		512,391		478,711
Bank premises and equipment, net		13,024		13,123
Restricted investment in bank stocks		3,253		2,503
Foreclosed assets held for sale		1,030		843
Accrued interest receivable		2,843		2,893
Deferred income taxes		3,699		1,789
Goodwill		1,016		1,016
Core deposit and other intangibles, net		252		288
Cash surrender value of life insurance		8,259		8,143
Other assets		2,098		2,560
Total Assets	$	705,649	$	705,200
LIABILITIES & SHAREHOLDERS’ EQUITY
Deposits:
Noninterest bearing demand	$	52,488	$	57,977
Interest bearing demand		176,805		164,837
Money Market		200,494		210,588
Savings		29,345		28,406
Time		150,841		163,653
Total Deposits		609,973		625,461
Short-term borrowings		27,512		-
Long-term debt		11,734		22,510
Accrued interest payable		777		620
Other liabilities		4,559		4,389
Total Liabilities		654,555		652,980
Shareholders' Equity:
Series B Preferred stock, par value $1.00; liquidation value $1,000; authorized
5,000 shares; 7% non-cumulative dividend; 5,000 shares issued and outstanding at
June 30, 2013 and 4,880 shares issued and outstanding at December 31, 2012		5,000		4,880
Common stock, par value $1.00; authorized 10,000,000 shares; 3,492,214 shares
issued and outstanding at June 30, 2013 and 3,489,684 shares issued and
outstanding at December 31, 2012		3,492		3,490
Additional paid-in capital		29,828		29,816
Retained earnings		13,426		11,741
Accumulated other comprehensive (loss) income		(652)		2,293
Total Shareholders’ Equity		51,094		52,220
Total Liabilities and Shareholders' Equity	$	705,649	$	705,200

The accompanying notes are an integral part of these consolidated financial statements.

2

MID PENN BANCORP, INC.Consolidated Statements of Income (Unaudited)

(Dollars in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
INTEREST INCOME
Interest & fees on loans and leases	$	6,494	$	7,085	$	12,755	$	13,876
Interest on interest-bearing balances		29		60		76		125
Interest and dividends on investment securities:
U.S. Treasury and government agencies		123		329		223		765
State and political subdivision obligations, tax-exempt		493		404		976		813
Other securities		8		5		14		10
Interest on federal funds sold and securities purchased
under agreements to resell		6		2		11		6
Total Interest Income		7,153		7,885		14,055		15,595
INTEREST EXPENSE
Interest on deposits		1,130		1,618		2,335		3,407
Interest on short-term borrowings		7		1		7		1
Interest on long-term debt		169		243		407		487
Total Interest Expense		1,306		1,862		2,749		3,895
Net Interest Income		5,847		6,023		11,306		11,700
PROVISION FOR LOAN AND LEASE LOSSES		415		225		910		525
Net Interest Income After Provision for Loan and Lease Losses		5,432		5,798		10,396		11,175
NONINTEREST INCOME
Income from fiduciary activities		110		189		249		301
Service charges on deposits		146		136		280		265
Net gain on sales of investment securities		112		10		112		26
Earnings from cash surrender value of life insurance		58		62		116		124
Mortgage banking income		115		137		225		259
ATM debit card interchange income		127		119		246		239
Other income		170		278		460		455
Total Noninterest Income		838		931		1,688		1,669
NONINTEREST EXPENSE
Salaries and employee benefits		2,685		2,619		5,542		5,215
Occupancy expense, net		269		257		579		535
Equipment expense		345		286		661		580
Pennsylvania Bank Shares tax expense		133		128		261		259
FDIC Assessment		131		302		333		603
Legal and professional fees		166		138		320		245
Director fees and benefits expense		77		88		157		135
Marketing and advertising expense		62		128		105		197
Computer expense		246		161		427		323
Telephone expense		104		103		202		210
(Gain) loss on sale/write-down of foreclosed assets		(303)		50		(322)		58
Intangible amortization		7		15		14		31
Loan collection costs		76		39		146		148
Other expenses		614		633		1,224		1,146
Total Noninterest Expense		4,612		4,947		9,649		9,685
INCOME BEFORE PROVISION FOR INCOME TAXES		1,658		1,782		2,435		3,159
Provision for income taxes		292		422		384		665
NET INCOME		1,366		1,360		2,051		2,494
Series A preferred stock dividends and discount accretion		-		129		14		257
Series B preferred stock dividends		87		-		134		-
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	1,279	$	1,231	$	1,903	$	2,237
PER COMMON SHARE DATA:
Basic Earnings Per Common Share	$	0.37	$	0.35	$	0.55	$	0.64
Diluted Earnings Per Common Share		0.37		0.35		0.55		0.64
Cash Dividends		0.05		0.05		0.05		0.10

The accompanying notes are an integral part of these consolidated financial statements.

3

MID PENN BANCORP, INC.                 Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

(Dollars in thousands)	Three Months Ended June 30,
	2013		2012
Net income	$	1,366	$	1,360
Other comprehensive (loss) income:
Unrealized (losses) gains arising during the period on available for sale
securities, net of income taxes of $(1,311) and $149, respectively		(2,547)		289
Reclassification adjustment for net gain on sales of available for sale securities
included in net income, net of income taxes of $(38) and $(4), respectively   (1) (3)		(74)		(6)
Change in defined benefit plans, net of income taxes of $40 and $10, respectively   (2) (3)		78		20
Total other comprehensive (loss) income		(2,543)		303
Total comprehensive (loss) income	$	(1,177)	$	1,663

(Dollars in thousands)	Six Months Ended June 30,
	2013		2012
Net income	$	2,051	$	2,494
Other comprehensive (loss) income:
Unrealized (losses) gains arising during the period on available for sale
securities, net of income taxes of $(1,520) and $196, respectively		(2,952)		381
Reclassification adjustment for net gain on sales of available for sale securities
included in net income, net of income taxes of $(38) and $(9), respectively   (1) (3)		(74)		(17)
Change in defined benefit plans, net of income taxes of $42 and $(1), respectively   (2) (3)		81		(2)
Total other comprehensive (loss) income		(2,945)		362
Total comprehensive (loss) income	$	(894)	$	2,856

(1) Amounts are included in net gain on sales of investment securities on the Consolidated Statements of Income as a separate element within total noninterest income

(2) Amounts are included in the computation of net periodic benefit cost and are included in salaries and employee benefits on the Consolidated Statements of Income as a separate element within total noninterest expense

(3) Income tax amounts are included in the provision for income taxes in the Consolidated Statements of Income

The accompanying notes are an integral part of these consolidated financial statements.

4

MID PENN BANCORP, INC.Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012

(Dollars in thousands, except share data)									Accumulated
					Additional				Other		Total
	Preferred		Common		Paid-in		Retained		Comprehensive		Shareholders'
	Stock		Stock		Capital		Earnings		Income		Equity
Balance, December 31, 2012	$	4,880	$	3,490	$	29,816	$	11,741	$	2,293	$	52,220
Net income		-		-		-		2,051		-		2,051
Total other comprehensive loss, net of taxes		-		-		-		-		(2,945)		(2,945)
Common stock dividends		-		-		-		(174)		-		(174)
Employee Stock Purchase Plan		-		2		26		-		-		28
Series B Preferred stock issuance		120		-		-		-		-		120
Series B Preferred stock dividends		-		-		-		(134)		-		(134)
Amortization of warrant cost		-		-		(14)		-		-		(14)
Warrant repurchase		-		-		-		(58)		-		(58)
Balance, June 30, 2013	$	5,000	$	3,492	$	29,828	$	13,426	$	(652)	$	51,094
Balance, December 31, 2011	$	10,000	$	3,484	$	29,830	$	8,222	$	1,916	$	53,452
Net income		-		-		-		2,494		-		2,494
Total other comprehensive income, net of taxes		-		-		-		-		362		362
Common stock dividends		-		-		-		(348)		-		(348)
Employee Stock Purchase Plan		-		3		25		-		-		28
Series A Preferred stock dividends		-		-		-		(250)		-		(250)
Amortization of warrant cost		-		-		(7)		-		-		(7)
Balance, June 30, 2012	$	10,000	$	3,487	$	29,848	$	10,118	$	2,278	$	55,731

The accompanying notes are an integral part of these consolidated financial statements.

5

MID PENN BANCORP, INC.Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)	Six Months Ended June 30,
	2013		2012
Operating Activities:
Net Income	$	2,051	$	2,494
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan and lease losses		910		525
Depreciation		618		546
Amortization of intangibles		36		5
Net amortization of security premiums		1,718		175
Gain on sales of investment securities		(112)		(26)
Earnings on cash surrender value of life insurance		(116)		(124)
(Gain) loss on disposal of property, plant, and equipment		(8)		1
(Gain) loss on sale / write-down of foreclosed assets		(322)		58
Deferred income tax (benefit) expense		(967)		171
Decrease in accrued interest receivable		50		87
Decrease in other assets		1,032		516
Increase in accrued interest payable		157		38
Increase (decrease) in other liabilities		170		(475)
Net Cash Provided By Operating Activities		5,217		3,991
Investing Activities:
Net decrease in interest-bearing balances		10,130		2,629
Proceeds from the maturity of investment securities		24,690		16,587
Proceeds from the sale of investment securities		3,286		7,717
Purchases of investment securities		(13,715)		(12,940)
(Purchases) redemptions of restricted investment in bank stock		(750)		303
Net increase in loans and leases		(35,852)		(5,842)
Purchases of bank premises and equipment		(511)		(452)
Proceeds from sale of bank premises and equipment		-		42
Proceeds from sale of foreclosed assets		1,397		1,201
Net Cash (Used In) Provided By Investing Activities		(11,325)		9,245
Financing Activities:
Net decrease in demand deposits and savings accounts		(2,676)		(551)
Net decrease in time deposits		(12,812)		(23,090)
Net increase in short-term borrowings		27,512		3,445
Series A preferred stock dividend paid		-		(250)
Series B preferred stock dividend paid		(134)		-
Common stock dividend paid		(174)		(348)
Series B preferred stock issuance		120		-
Employee Stock Purchase Plan		28		28
Warrant repurchase		(58)		-
Long-term debt repayment		(10,776)		(95)
Net Cash Provided By (Used In) Financing Activities		1,030		(20,861)
Net decrease in cash and cash equivalents		(5,078)		(7,625)
Cash and cash equivalents, beginning of year		15,473		17,841
Cash and cash equivalents, end of year	$	10,395	$	10,216

Supplemental Disclosures of Cash Flow Information:
Interest paid	$	2,592	$	3,857
Income taxes paid	$	100	$	1,085
Supplemental Noncash Disclosures:
Loan transfers to foreclosed assets held for sale	$	1,262	$	1,865

The accompanying notes are an integral part of these consolidated financial statements.

6

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

(1)          Basis of Presentation

The accompanying consolidated financial statements include the accounts of Mid Penn Bancorp, Inc. and its wholly-owned subsidiaries, Mid Penn Bank (“Bank”), and the Bank’s wholly-owned subsidiary Mid Penn Insurance Services, LLC (collectively, “Mid Penn”).  All material intercompany accounts and transactions have been eliminated in consolidation.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  We believe the information presented is not misleading and the disclosures are adequate.  For comparative purposes, the June 30, 2012 and December 31, 2012 balances have been reclassified to conform to the 2013 presentation.  Such reclassifications had no impact on net income. The results of operations for interim periods are not necessarily indicative of operating results expected for the full year.  These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Mid Penn’s Annual Report on Form 10-K for the year ended December 31, 2012.

Mid Penn has evaluated events and transactions occurring subsequent to the balance sheet date of June 30, 2013, for items that should potentially be recognized or disclosed in these consolidated financial statements.  The evaluation was conducted through the date these consolidated financial statements were issued.

(2)           Investment Securities

Securities to be held for indefinite periods, but not intended to be held to maturity, are classified as available for sale and carried at fair value.  Securities held for indefinite periods include securities that management intends to use as part of its asset and liability management strategy and that may be sold in response to liquidity needs, changes in interest rates, resultant prepayment risk, and other factors related to interest rate and resultant prepayment risk changes.

Realized gains and losses on dispositions are based on the net proceeds and the adjusted book value of the securities sold, using the specific identification method.  Unrealized gains and losses on investment securities available for sale are based on the difference between book value and fair value of each security.  These gains and losses are credited or charged to other comprehensive income, whereas realized gains and losses flow through the Corporation’s results of consolidated statements of income.

Accounting Standards Codification (“ASC”) Topic 320, Investments – Debt and Equity Securities, clarifies the interaction of the factors that should be considered when determining whether a debt security is other-than-temporarily impaired.  For debt securities, management must assess whether (a) it has the intent to sell the security and (b) it is more likely than not that it will be required to sell the security prior to its anticipated recovery.  These steps are done before assessing whether the entity will recover the cost basis of the investment. Previously, this assessment required management to assert it has both the intent and the ability to hold a security for a period of time sufficient to allow for an anticipated recovery in fair value to avoid recognizing other-than-temporary impairment.  This change does not affect the need to forecast recovery of the value of the security through either cash flows or market price.

In instances when a determination is made that other-than-temporary impairment exists but the investor does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt security prior to its anticipated recovery, this guidance changes the presentation and amount of the other-than-temporary impairment recognized in the income statement. The other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors.  The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings.  The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income.

7

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

At June 30, 2013 and December 31, 2012, amortized cost, fair value, and unrealized gains and losses on investment securities are as follows:

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
June 30, 2013
Available for sale securities:
U.S. Treasury and U.S. government agencies	$	13,189	$	882	$	-	$	14,071
Mortgage-backed U.S. government agencies		52,582		273		758		52,097
State and political subdivision obligations		68,572		995		2,152		67,415
Equity securities		400		-		27		373
	$	134,743	$	2,150	$	2,937	$	133,956

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
December 31, 2012
Available for sale securities:
U.S. Treasury and U.S. government agencies	$	16,394	$	1,346	$	-	$	17,740
Mortgage-backed U.S. government agencies		66,783		393		490		66,686
State and political subdivision obligations		67,033		2,542		96		69,479
Equity securities		400		-		10		390
	$	150,610	$	4,281	$	596	$	154,295

Estimated fair values of debt securities are based on quoted market prices, where applicable.  If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments, adjusted for differences between the quoted instruments and the instruments being valued.

Included in equity securities is an investment in Access Capital Strategies, an equity fund that invests in low to moderate income financing projects. This initial investment was purchased in 2004 to help fulfill the Bank’s regulatory requirement of the Community Reinvestment Act and an additional investment was purchased in 2011.  At June 30, 2013 and December 31, 2012, the investment is reported at fair value.

Investment securities having a fair value of $96,026,000 at June 30, 2013 and $96,124,000  at December 31, 2012, were pledged to secure public deposits and other borrowings.

Mid Penn realized gross gains of $112,000 on sales of securities available for sale during the three and six month periods ended June 30, 2013.  Mid Penn realized gross gains of $10,000 and $26,000 on sales of securities available for sale during the three and six months ended June 30, 2012.  Mid Penn realized gross losses on the sale of securities available for sale of $0 during the three and six month periods ended June 30, 2013and June 30, 2012.

8

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

The following table presents gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2013  and December 31, 2012.

(Dollars in thousands)	Less Than 12 Months				12 Months or More				Total
June 30, 2013	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Available for sale securities:
Mortgage-backed U.S. government agencies	$	24,426	$	643	$	7,151	$	115	$	31,577	$	758
State and political subdivision obligations		34,667		2,089		1,207		63		35,874		2,152
Equity securities		-		-		400		27		400		27
Total temporarily impaired
available for sale securities	$	59,093	$	2,732	$	8,758	$	205	$	67,851	$	2,937

(Dollars in thousands)	Less Than 12 Months				12 Months or More				Total
December 31, 2012	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Available for sale securities:
Mortgage-backed U.S. government agencies	$	30,345	$	270	$	15,839	$	220	$	46,184	$	490
State and political subdivision obligations		9,389		66		1,231		30		10,620		96
Equity securities		-		-		390		10		390		10
Total temporarily impaired
available for sale securities	$	39,734	$	336	$	17,460	$	260	$	57,194	$	596

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis; and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, and the financial condition and near term prospects of the issuer.  In addition, for debt securities, the Corporation considers (a) whether management has the intent to sell the security, (b) it is more likely than not that management will be required to sell the security prior to its anticipated recovery, and (c) whether management expects to recover the entire amortized cost basis.  For equity securities, management considers the intent and ability to hold securities until recovery of unrealized losses.

At June 30, 2013, 115 debt securities with unrealized losses depreciated 4.31% from their amortized cost basis.  At December 31, 2012, 73 debt securities with unrealized losses depreciated 1.03% from their amortized cost basis.  These securities are issued by either the U.S. Government or other governmental agencies. The unrealized losses were determined principally by reference to current interest rates for similar types of securities. In analyzing an issuer's financial condition, management considers whether the U.S. Government or its agencies issued the securities, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer's financial condition. Based on the above conditions management has determined that no declines are deemed to be other-than-temporary.

The table below is the maturity distribution of investment securities at amortized cost and fair value.

(Dollars in thousands)	June 30, 2013
	Amortized		Fair
	Cost		Value
Due in 1 year or less	$	-	$	-
Due after 1 year but within 5 years		17,149		18,222
Due after 5 years but within 10 years		27,685		27,787
Due after 10 years		36,927		35,477
		81,761		81,486
Mortgage-backed securities		52,582		52,097
Equity securities		400		373
	$	134,743	$	133,956

Mortgage-backed securities at June 30, 2013, had an average life of 3.2 years.

9

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

(3)           Loans and Allowance for Loan and Lease Losses

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield (interest income) of the related loans. These amounts are generally being amortized over the contractual life of the loan.  Premiums and discounts on purchased loans are amortized as adjustments to interest income using the effective yield method.

The loan portfolio is segmented into commercial and consumer loans.  Commercial loans consist of the following classes: commercial and industrial, commercial real estate, commercial real estate-construction and lease financing.  Consumer loans consist of the following classes: residential mortgage loans, home equity loans and other consumer loans.

For all classes of loans, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days or more past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan and lease losses. Interest received on nonaccrual loans, including impaired loans, generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt.  The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments.

Commercial and industrial

Mid Penn originates commercial and industrial loans.  Most of the Bank’s commercial and industrial loans have been extended to finance local and regional businesses and include short-term loans to finance machinery and equipment purchases, inventory, and accounts receivable.  Commercial loans also involve the extension of revolving credit for a combination of equipment acquisitions and working capital in expanding companies.

The maximum term for loans extended on machinery and equipment is based on the projected useful life of such machinery and equipment.  Generally, the maximum term on non-mortgage lines of credit is one year.  The loan-to-value ratio on such loans and lines of credit generally may not exceed 80% of the value of the collateral securing the loan.  The Bank’s commercial business lending policy includes credit file documentation and analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral as well as an evaluation of conditions affecting the borrower.  Analysis of the borrower’s past, present, and future cash flows is also an important aspect of the Bank’s current credit analysis.  Nonetheless, such loans are believed to carry higher credit risk than more traditional investments.

Commercial and industrial loans typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business.  As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself, which, in turn, is likely to be dependent upon the general economic environment.  Mid Penn’s commercial and industrial loans are usually, but not always, secured by business assets and personal guarantees.  However, the collateral securing the loans may depreciate over time, may be difficult to appraise, and may fluctuate in value based on the success of the business.

Commercial real estate and commercial real estate - construction

Commercial real estate and commercial real estate construction loans generally present a higher level of risk than loans secured by one to four family residences.  This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income producing properties, and the increased difficulty of evaluating and monitoring these types of loans.  In addition, the repayment of loans secured by commercial real estate is typically dependent upon the successful operation of the related real estate project.  If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

Lease financing

Mid Penn originates leases for select commercial and state and municipal government lessees.  The nature of the leased asset is often subject to rapid depreciation in salvage value over a relatively short time frame or may be of an industry specific nature, making appraisal or liquidation of the asset difficult.  These factors have led the Bank to severely curtail the origination of new leases to state or municipal government agencies where default risk is extremely limited and to only the most credit-worthy commercial customers.  These commercial customers are primarily leasing fleet vehicles for use in their primary line of business, mitigating some of the asset

10

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

value concerns within the portfolio.  Leasing has been a declining percentage of the Mid Penn’s portfolio since 2006, representing 0.31% of the portfolio at June 30, 2013.

Residential mortgage

Mid Penn offers a wide array of residential mortgage loans for both permanent structures and those under construction.  The Bank’s residential mortgage originations are secured primarily by properties located in its primary market and surrounding areas.  Residential mortgage loans have terms up to a maximum of 30 years and with loan to value ratios up to 100% of the lesser of the appraised value of the security property or the contract price.  Private mortgage insurance is generally required in an amount sufficient to reduce the Bank’s exposure to at or below the 85% loan to value level.  Residential mortgage loans generally do not include prepayment penalties.

In underwriting residential mortgage loans, the Bank evaluates both the borrower’s ability to make monthly payments and the value of the property securing the loan.  Most properties securing real estate loans made by Mid Penn are appraised by independent fee appraisers.  The Bank generally requires borrowers to obtain an attorney’s title opinion or title insurance and fire and property insurance (including flood insurance, if necessary) in an amount not less than the amount of the loan.  Real estate loans originated by the Bank generally contain a “due on sale” clause allowing the Bank to declare the unpaid principal balance due and payable upon the sale of the security property.

The Bank underwrites residential mortgage loans to the standards established by the secondary mortgage market, i.e., Fannie Mae, Ginnie Mae, Freddie Mac, or Pennsylvania Housing Finance Agency standards, with the intention of selling the majority of residential mortgages originated into the secondary market.  In the event that the facts and circumstances surrounding a residential mortgage application do not meet all underwriting conditions of the secondary mortgage market, the Bank will evaluate the failed conditions and the potential risk of holding the residential mortgage in the Bank’s portfolio rather than rejecting the loan request.  In the event that the loan is held in the Bank’s portfolio, the interest rate on the residential mortgage would be increased to compensate for the added portfolio risk.

Consumer, including home equity

Mid Penn offers a variety of secured consumer loans, including home equity, automobile, and deposit secured loans.  In addition, the Bank offers other secured and unsecured consumer loans.  Most consumer loans are originated in Mid Penn’s primary market and surrounding areas. 

The largest component of Mid Penn’s consumer loan portfolio consists of fixed rate home equity loans and variable rate home equity lines of credit.  Substantially all home equity loans and lines of credit are secured by second mortgages on principal residences.  The Bank will lend amounts, which, together with all prior liens, typically may be up to 85% of the appraised value of the property securing the loan.  Home equity term loans may have maximum terms up to 20 years while home equity lines of credit generally have maximum terms of five years.

Consumer loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower.  The underwriting standards employed by the Bank for consumer loans include an application, a determination of the applicant’s payment history on other debts and an assessment of ability to meet existing obligations and payments on the proposed loan.  Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, in relation to the proposed loan amount.

Consumer loans may entail greater credit risk than do residential mortgage loans, particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or recreational equipment.  In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance.  In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances.  Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

The allowance for credit losses consists of the allowance for loan and lease losses and the reserve for unfunded lending commitments. The allowance for loan and lease losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheet.  The allowance for loan and lease losses is increased by the provision for loan and lease losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan and lease losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely.  Non-residential consumer loans are generally charged off no later than 120 days past due on a contractual basis, earlier in the event of bankruptcy, or if there is an amount deemed

11

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

uncollectible.  Because all identified losses are immediately charged off, no portion of the allowance for loan and lease losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

The allowance for credit losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a monthly evaluation of the adequacy of the allowance.  The allowance is based on Mid Penn’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows, collateral value, or observable market price of the impaired loan is lower than the carrying value of that loan. The general component covers pools of loans by loan class including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate, home equity and other consumer loans.  These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors.  These qualitative risk factors include changes in economic conditions, fluctuations in loan quality measures, changes in the experience of the lending staff and loan review systems, growth or changes in the mix of loans originated, and shifting industry or portfolio concentrations.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

Mid Penn considers a commercial loan (consisting of commercial and industrial, commercial real estate, commercial real estate-construction, and lease financing loan classes) to be impaired when it becomes 90 days or more past due and not in the process of collection.  This methodology assumes the borrower cannot or will not continue to make additional payments.  At that time the loan would be considered collateral dependent as the discounted cash flow (“DCF”) method indicates no operating income is available for evaluating the collateral position; therefore, all impaired loans are deemed to be collateral dependent.

In addition, Mid Penn’s rating system assumes any loans classified as sub-standard non-accrual to be impaired, and all of these loans are considered collateral dependent; therefore, all of Mid Penn’s impaired loans, whether reporting a specific allocation or not, are considered collateral dependent.

Mid Penn evaluates loans for charge-off on a monthly basis.  Policies that govern the recommendation for charge-off are unique to the type of loan being considered.  Commercial loans rated as nonaccrual or lower will first have a collateral evaluation completed in accordance with the guidance on impaired loans.  Once the collateral evaluation has been completed, a specific allocation of allowance is made based upon the results of the evaluation.  In the event the loan is unsecured, the loan would have been charged-off at the recognition of impairment.  If the loan is secured, it will undergo a 90 day waiting period to ensure the collateral shortfall identified in the evaluation is accurate and then charged down by the specific allocation. Once the charge down is taken, the remaining balance remains a nonperforming loan with the original terms and interest rate intact (not restructured).  Commercial loans secured by real estate rated as impaired will also have an initial collateral evaluation completed in accordance with the guidance on impaired loans.  An updated real estate valuation is ordered and the collateral evaluation is modified to reflect any variations in value.  A specific allocation of allowance is made for any anticipated collateral shortfall and a 90 day waiting period begins to ensure the accuracy of the collateral shortfall.  The loan is then charged down by the specific allocation.  Once the charge down is taken, the remaining balance remains a nonperforming loan with the original terms and interest rate intact (not restructured).  The process of charge-off for residential mortgage loans begins upon a loan becoming delinquent for 90 days and not in the process of collection.  The existing appraisal is reviewed and a lien search is obtained to determine lien position and any instances of intervening liens.  A new appraisal of the property will be ordered if deemed necessary by management and a collateral evaluation is completed. The loan will then be charged down to the value indicated in the evaluation.  Consumer loans (including home equity loans and other consumer loans) are recommended for charge-off after reaching delinquency of 90 days and the loan is not in the process of collection.  The entire balance of the consumer loan is recommended for charge-off at this point.

As noted above, Mid Penn assesses a specific allocation for commercial loans prior to charging down or charging off the loan.  Once the charge down is taken, the remaining balance remains a nonperforming loan with the original terms and interest rate intact (not restructured).  In addition, Mid Penn takes a preemptive step when any commercial loan becomes classified under its internal classification system.  A preliminary collateral evaluation in accordance with the guidance on impaired loans is prepared using the existing collateral information in the loan file.  This process allows Mid Penn to review both the credit and documentation files to determine the status of the information needed to make a collateral evaluation.  This collateral evaluation is preliminary but allows Mid Penn to determine if any potential collateral shortfalls exist.

It is Mid Penn’s policy to obtain updated third party valuations on all impaired loans collateralized by real estate within 30 days of the credit being classified as sub-standard non-accrual.  Prior to receipt of the updated real estate valuation Mid Penn will use any existing

12

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

real estate valuation to determine any potential allowance issues; however no allowance recommendation will be made until which time Mid Penn is in receipt of the updated valuation.  The credit department employs an electronic tracking system to monitor the receipt of and need for updated appraisals.  To date, there have been no significant time lapses noted with the above processes. 

In some instances Mid Penn is not holding real estate as collateral and is relying on business assets (personal property) for repayment.  In these circumstances a collateral inspection is performed by Mid Penn personnel to determine an estimated value.  The value is based on net book value, as provided by the financial statements, and discounted accordingly based on determinations made by management.  Occasionally, Mid Penn will employ an outside service to provide a fair estimate of value based on auction sales or private sales.  Management reviews the estimates of these third parties and discounts them accordingly based on management’s judgment, if deemed necessary.

For impaired loans with no valuation allowance required, Mid Penn’s practice of obtaining independent third party market valuations on the subject property within 30 days of being placed on non-accrual status sometimes indicates that the loan to value ratio is sufficient to obviate the need for a specific allocation in spite of significant deterioration in real estate values in Mid Penn’s primary market area.  These circumstances are determined on a case by case analysis of the impaired loans.

Mid Penn actively monitors the values of collateral on impaired loans.  This monitoring may require the modification of collateral values over time or changing circumstances by some factor, either positive or negative, from the original values.  All collateral values will be assessed by management at least every 18 months for possible revaluation by an independent third party.

Mid Penn does not currently, or plan in the future to, use automated valuation methodologies as a method of valuing real estate collateral.

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, Mid Penn does not separately identify individual residential mortgage loans, home equity loans and other consumer loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.

Loans whose terms are modified are classified as troubled debt restructurings if the borrowers have been granted concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity date. Non-accrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification.   Loans classified as troubled debt restructurings are designated as impaired.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors, and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments.  Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful, and loss.  Loans criticized as special mention have potential weaknesses that deserve management’s close attention.  If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects.  Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable.   Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses.  Any loans not classified as noted above are rated pass.

In addition, Federal and State regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan and lease losses and may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.

13

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

The classes of the loan portfolio, summarized by the aggregate pass rating and the classified ratings of special mention, substandard, and doubtful within Mid Penn’s internal risk rating system as of June 30, 2013and December 31, 2012 are as follows:

(Dollars in thousands)                            June 30, 2013	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and industrial	$	82,398	$	1,422	$	1,753	$	-	$	85,573
Commercial real estate		277,520		4,789		16,720		-		299,029
Commercial real estate - construction		38,384		402		54		-		38,840
Lease financing		1,596		-		-		-		1,596
Residential mortgage		63,192		-		148		-		63,340
Home equity		23,800		176		362		-		24,338
Consumer		5,942		-		-		-		5,942
	$	492,832	$	6,789	$	19,037	$	-	$	518,658

(Dollars in thousands)                         December 31, 2012	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and industrial	$	74,763	$	1,651	$	1,469	$	-	$	77,883
Commercial real estate		260,941		5,375		18,551		-		284,867
Commercial real estate - construction		32,767		410		54		-		33,231
Lease financing		1,305		-		-		-		1,305
Residential mortgage		57,455		-		-		-		57,455
Home equity		22,336		188		396		-		22,920
Consumer		6,267		292		-		-		6,559
	$	455,834	$	7,916	$	20,470	$	-	$	484,220

Impaired loans by loan portfolio class as of June 30, 2013 and December 31, 2012 are summarized as follows:

	June 30, 2013						December 31, 2012
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial and industrial	$	34	$	70	$	-	$	192	$	870	$	-
Commercial real estate		4,795		7,818		-		6,570		10,773		-
Home equity		121		260		-		124		261		-
Consumer		-		-		-		-		578		-
With an allowance recorded:
Commercial and industrial	$	204	$	331	$	82	$	223	$	351	$	111
Commercial real estate		9,111		9,313		1,871		2,514		2,672		1,200
Commercial real estate - construction		54		54		28		54		54		54
Residential mortgage		84		84		29		-		-		-
Home equity		54		54		10		67		71		18
Total:
Commercial and industrial	$	238	$	401	$	82	$	415	$	1,221	$	111
Commercial real estate		13,906		17,131		1,871		9,084		13,445		1,200
Commercial real estate - construction		54		54		28		54		54		54
Residential mortgage		84		84		29		-		-		-
Home equity		175		314		10		191		332		18
Consumer		-		-		-		-		578		-

14

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

Average recorded investment of impaired loans and related interest income recognized for the three and six months ended June 30, 2013 and June 30, 2012 are summarized as follows:

	Three Months Ended
	June 30, 2013				June 30, 2012
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	35	$	-	$	99	$	-
Commercial real estate		4,891		47		5,755		-
Commercial real estate - construction		-		-		129		-
Home equity		122		-		249		-
With an allowance recorded:
Commercial and industrial	$	205	$	-	$	1,189	$	-
Commercial real estate		9,136		-		2,797		-
Commercial real estate - construction		54		-		-		-
Residential mortgage		84		-		17		-
Home equity		55		-		89		-
Consumer		-		-		585		-
Total:
Commercial and industrial	$	240	$	-	$	1,288	$	-
Commercial real estate		14,027		47		8,552		-
Commercial real estate - construction		54		-		129		-
Residential mortgage		84		-		17		-
Home equity		177		-		338		-
Consumer		-		-		585		-

15

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

	Six Months Ended
	June 30, 2013				June 30, 2012
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	35	$	-	$	99	$	-
Commercial real estate		4,930		64		5,755		-
Commercial real estate - construction		-		-		129		-
Home equity		122		-		249		-
With an allowance recorded:
Commercial and industrial	$	205	$	-	$	1,189	$	-
Commercial real estate		9,150		-		2,797		-
Commercial real estate - construction		54		-		-		-
Residential mortgage		111		-		17		-
Home equity		55		-		89		-
Consumer		-		-		585		-
Total:
Commercial and industrial	$	240	$	-	$	1,288	$	-
Commercial real estate		14,080		64		8,552		-
Commercial real estate - construction		54		-		129		-
Residential mortgage		111		-		17		-
Home equity		177		-		338		-
Consumer		-		-		585		-

Non-accrual loans by loan portfolio class as ofJune 30, 2013 and December 31, 2012 are summarized as follows:

(Dollars in thousands)	June 30, 2013		December 31, 2012
Commercial and industrial	$	238	$	264
Commercial real estate		13,906		10,785
Commercial real estate - construction		54		54
Residential mortgage		988		537
Home equity		175		191
	$	15,361	$	11,831

16

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

The performance and credit quality of the loan portfolio is also monitored by the analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due.  The classes of the loan portfolio summarized by the past due status as of June 30, 2013 and December 31, 2012 are summarized as follows:

(Dollars in thousands)        June 30, 2013	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Loans Receivable > 90 Days and Accruing
Commercial and industrial	$	363	$			209	$	572	$	85,001	$	85,573	$	-
Commercial real estate		1,552		984		12,526		15,062		283,967		299,029		-
Commercial real estate - construction		-		-		54		54		38,786		38,840		-
Lease financing		-		-		-		-		1,596		1,596		-
Residential mortgage		160		-		924		1,084		62,256		63,340		-
Home equity		-		-		145		145		24,193		24,338		-
Consumer		7		7		-		14		5,928		5,942		-
Total	$	2,082	$	991	$	13,858	$	16,931	$	501,727	$	518,658	$	-

(Dollars in thousands)  December 31, 2012	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Loans Receivable > 90 Days and Accruing
Commercial and industrial	$	123	$	361	$	234	$	718	$	77,165	$	77,883	$	-
Commercial real estate		1,785		5,618		8,248		15,651		269,216		284,867		-
Commercial real estate - construction		-		-		54		54		33,177		33,231		-
Lease financing		1				-		1		1,304		1,305		-
Residential mortgage		495		35		531		1,061		56,394		57,455		-
Home equity		96		-		147		243		22,677		22,920		-
Consumer		1		2		-		3		6,556		6,559		-
Total	$	2,501	$	6,016	$	9,214	$	17,731	$	466,489	$	484,220	$	-

17

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

The following tables summarize the allowance for loan and lease losses and recorded investments in loans receivable.

(Dollars in thousands)
As of, and for the period ended, June 30, 2013	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Allowance for loan and lease losses:
Beginning balance,   April 1, 2013	$	1,281	$	3,543	$	39	$	1	$	603	$	349	$	105	$	(51)	$	5,870
Charge-offs		-		(93)		-		-		(22)		-		(10)		-		(125)
Recoveries		9		2		8		-		23		2		63		-		107
Provisions		(41)		367		(11)		-		56		58		(67)		53		415
Ending balance,          June 30, 2013	$	1,249	$	3,819	$	36	$	1	$	660	$	409	$	91	$	2	$	6,267

	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Beginning balance, January 1, 2013	$	1,298	$	3,112	$	64	$	1	$	581	$	343	$	101	$	9	$	5,509
Charge-offs		(21)		(118)		-		-		(126)		-		(15)		-		(280)
Recoveries		16		5		8		-		23		5		71		-		128
Provisions		(44)		820		(36)		-		182		61		(66)		(7)		910
Ending balance,  June 30, 2013	$	1,249	$	3,819	$	36	$	1	$	660	$	409	$	91	$	2	$	6,267
Ending balance: individually evaluated for impairment	$	82	$	1,871	$	28	$	-	$	29	$	10	$	-	$	-	$	2,020
Ending balance: collectively evaluated for impairment	$	1,167	$	1,948	$	8	$	1	$	631	$	399	$	91	$	2	$	4,247
Loans receivables:
Ending balance	$	85,573	$	299,029	$	38,840	$	1,596	$	63,340	$	24,338	$	5,942	$	-	$	518,658
Ending balance: individually evaluated  for impairment	$	238	$	13,906	$	54	$	-	$	84	$	175	$	-	$	-	$	14,457
Ending balance: collectively evaluated for impairment	$	85,335	$	285,123	$	38,786	$	1,596	$	63,256	$	24,163	$	5,942	$	-	$	504,201

(Dollars in thousands)
As of, and for the period ended, June 30, 2012	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Beginning balance,    April 1, 2012	$	1,755	$	3,362	$	27	$	2	$	454	$	323	$	524	$	130	$	6,577
Charge-offs		(12)		(149)		(5)		-		(59)		-		(5)		-		(230)
Recoveries		4		2		-		-		-		1		6		-		13
Provisions		(164)		225		5		-		80		17		5		57		225
Ending balance,       June 30, 2012	$	1,583	$	3,440	$	27	$	2	$	475	$	341	$	530	$	187	$	6,585

18

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Beginning balance, January 1, 2012	$	2,274	$	3,544	$	23	$	2	$	362	$	337	$	87	$	143	$	6,772
Charge-offs		(216)		(455)		(5)		-		(69)		-		(7)		-		(752)
Recoveries		8		5		2		-		-		9		16		-		40
Provisions		(483)		346		7		-		182		(5)		434		44		525
Ending balance,     June 30, 2012	$	1,583	$	3,440	$	27	$	2	$	475	$	341	$	530	$	187	$	6,585
Ending balance: individually evaluated for impairment	$	320	$	975	$	-	$	-	$	2	$	15	$	445	$	-	$	1,757
Ending balance: collectively evaluated for impairment	$	1,263	$	2,465	$	27	$	2	$	473	$	326	$	85	$	187	$	4,828
Loans receivables:
Ending balance	$	77,481	$	297,373	$	30,304	$	1,724	$	49,778	$	24,115	$	7,895	$	-	$	488,670
Ending balance: individually evaluated  for impairment	$	1,374	$	8,470	$	115	$	-	$	17		335	$	585	$	-	$	10,896
Ending balance: collectively evaluated for impairment	$	76,107	$	288,903	$	30,189	$	1,724	$	49,761	$	23,780	$	7,310	$	-	$	477,774

(Dollars in thousands)
As of        December 31, 2012	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Allowance for loan and lease losses:
Ending balance	$	1,298	$	3,112	$	64	$	1	$	581	$	343	$	101	$	9	$	5,509
Ending balance: individually evaluated for impairment	$	111	$	1,200	$	54	$	-	$	-	$	18	$	-	$	-	$	1,383
Ending balance: collectively evaluated for impairment	$	1,187	$	1,912	$	10	$	1	$	581	$	325	$	101	$	9	$	4,126
Loans receivables:
Ending balance	$	77,883	$	284,867	$	33,231	$	1,305	$	57,455	$	22,920	$	6,559	$	-	$	484,220
Ending balance: individually evaluated  for impairment	$	415	$	9,084	$	54	$	-	$	-	$	191	$	-	$	-	$	9,744
Ending balance: collectively evaluated for impairment	$	77,468	$	275,783	$	33,177	$	1,305	$	57,455	$	22,729	$	6,559	$	-	$	474,476

19

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

The recorded investments in troubled debt restructured loans at June 30, 2013 and December 31, 2012 are as follows:

(Dollars in thousands)          June 30, 2013	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
Commercial and industrial	$	40	$	35	$	30
Commercial real estate		13,346		9,336		8,386
Residential mortgage		601		595		461
	$	13,987	$	9,966	$	8,877

(Dollars in thousands)              December 31, 2012	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
Commercial and industrial	$	40	$	35	$	30
Commercial real estate		7,326		3,748		2,916
Residential mortgage		558		552		448
	$	7,924	$	4,335	$	3,394

Mid Penn entered into forbearance agreements on all loans currently classified as troubled debt restructures and all of these agreements have resulted in additional principal repayment.  The terms of these forbearance agreements vary whereby principal payments have been decreased, interest rates have been reduced and/or the loan will be repaid as collateral is sold.

Mid Penn’s troubled debt restructured loans at June 30, 2013 totaled $8,877,000, of which, $882,000 represented five accruing loans to unrelated borrowers.  One is a large commercial real estate loan for $642,000,  while the remaining four loans are residential mortgages, all in compliance with the terms of the modification.  The remaining $7,995,000, representing 15 loans, are nonaccrual impaired loans, and resulted in a collateral evaluation in accordance with the guidance on impaired loans.  Of these 15 loans, one business relationship accounted for five loans totaling $612,000, a large commercial participation totaling $1,566,000 accounted for three loans, and the remaining seven loans to unrelated borrowers totaled $5,817,000.   Included in the $5,817,000 are two large commercial real estate loans with balances of $1,671,000 and $3,275,000.

At December 31, 2012, troubled debt restricted loans totaled $3,394,000, of which, $426,000, representing seven loans to unrelated borrowers, are accruing residential mortgages in compliance with the terms of the modification.  The remaining $2,968,000, representing 10 loans, are nonaccrual impaired loans, and resulted in a collateral evaluation in accordance with the guidance on impaired loans. Of these 10 loans, one business relationship accounted for five loans totaling $634,000, a large commercial participation totaling $1,663,000 accounted for three loans, and the remaining two unrelated loans totaled $671,000.

As a result of the evaluations at June 30, 2013 and December 31, 2012, a specific allocation and, subsequently, charge-offs have been taken as appropriate.  As of June 30, 2013 and December 31, 2012, charge-offs associated with troubled debt restructured loans while under forbearance agreement totaled $0 and there were no defaulted troubled debt restructured loans as all troubled debt restructured loans were current with respect to their associated forbearance agreements.  As of June 30, 2013, one forbearance agreement was negotiated during 2008, 11 forbearance agreements were negotiated during 2009, three forbearance agreements were negotiated in 2010, and five forbearance agreement was negotiated in 2013.

20

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

The following table summarizes loans whose terms have been modified resulting in troubled debt restructurings during the three and six months ended June 30, 2013:

	Three Months Ended, June 30, 2013
(Dollars in thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
Commercial real estate	3	$	6,091	$	5,588	$	5,588
Residential mortgage	1		14		14		14
	4	$	6,105	$	5,602	$	5,602

	Six Months Ended, June 30, 2013
(Dollars in thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
Commercial real estate	3	$	6,091	$	5,588	$	5,588
Residential mortgage	2		74		74		74
	5	$	6,165	$	5,662	$	5,662

(4)        Fair Value Measurement

Fair value measurement and disclosure guidance defines fair value as the price that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions.  This guidance provides additional information on determining when the volume and level of activity for the asset or liability has significantly decreased.  The guidance also includes information on identifying circumstances when a transaction may not be considered orderly.

Fair value measurement and disclosure guidance provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability.  When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with the fair value measurement and disclosure guidance.

This guidance clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly.  In those situations, the entity must evaluate the weight of the evidence to determine whether the transaction is orderly.  The guidance provides a list of circumstances that may indicate that a transaction is not orderly.  A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability.  Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own belief about the assumptions market participants would use in pricing the asset or liability based upon the best information available in the circumstances.  Fair value measurement and disclosure guidance establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  The fair value hierarchy is as follows:

Level 1 Inputs - Unadjusted quoted prices in active markets that are accessible at the measurement date for

 identical, unrestricted assets or liabilities;

Level 2 Inputs - Quoted prices in markets that are not active, or inputs that are observable either directly or

 indirectly, for substantially the full term of the asset or liability;

Level 3 Inputs - Prices or valuation techniques that require inputs that are both significant to the fair value

 measurement and unobservable (i.e., supported by little or no market activity).

21

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

There were no transfers of assets between fair value Level 1 and Level 2 for the six months ended June 30, 2013. The following table illustrates the assets measured at fair value on a recurring basis segregated by hierarchy fair value levels.

(Dollars in thousands)			Fair value measurements at June 30, 2013 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	June 30, 2013		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and U.S. government agencies	$	14,071	$	-	$	14,071	$	-
Mortgage-backed U.S. government agencies		52,097		-		52,097		-
State and political subdivision obligations		67,415		-		67,415		-
Equity securities		373		373		-		-
	$	133,956	$	373	$	133,583	$	-

(Dollars in thousands)			Fair value measurements at December 31, 2012 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2012		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and U.S. government agencies	$	17,740	$	-	$	17,740	$	-
Mortgage-backed U.S. government agencies		66,686		-		66,686		-
State and political subdivision obligations		69,479		-		69,479		-
Equity securities		390		390		-		-
	$	154,295	$	390	$	153,905	$	-

22

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

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

(Dollars in thousands)			Fair value measurements at June 30, 2013 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	June 30, 2013		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	7,487	$	-	$	-	$	7,487
Foreclosed Assets Held for Sale		404		-		-		404

(Dollars in thousands)			Fair value measurements at December 31, 2012 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2012		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	1,475	$	-	$	-	$	1,475
Foreclosed Assets Held for Sale		105		-		-		105

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 as of June 30, 2013 and December 31, 2012.

(Dollars in thousands)	Quantitative Information about Level 3 Fair Value Measurements
June 30, 2013	Fair Value Estimate		Valuation Technique	Unobservable Input	Range                     Weighted Average
Impaired Loans	$	7,487	Appraisal of collateral (1)	Appraisal adjustments (2)	10% - 95% (28%)
Foreclosed Assets Held for Sale	$	404	Appraisal of collateral (1), (3)	Appraisal adjustments (2)	15% - 40% (24%)

(Dollars in thousands)	Quantitative Information about Level 3 Fair Value Measurements
December 31, 2012	Fair Value Estimate		Valuation Technique	Unobservable Input	Range                     Weighted Average
Impaired Loans	$	1,475	Appraisal of collateral (1)	Appraisal adjustments (2)	10% - 95% (28%)
Foreclosed Assets Held for Sale	$	105	Appraisal of collateral (1), (3)	Appraisal adjustments (2)	15% - 40% (24%)

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

(2) Appraisals may be adjusted 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.

(3) Includes qualitative adjustments by management and estimated liquidation expenses.

23

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

The following methodologies and assumptions were used to estimate the fair value of Mid Penn’s financial instruments:

Cash and Cash Equivalents:

The carrying value of cash and cash equivalents is considered to be a reasonable estimate of fair value.

Interest-bearing Balances with other Financial Institutions:

The estimate of fair value was determined by comparing the present value of quoted interest rates on like deposits with the weighted average yield and weighted average maturity of the balances.

Securities Available for Sale:

The fair value of securities classified as available for sale is determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather relying on the securities’ relationship to other benchmark quoted prices. 

Impaired Loans:

Mid Penn’s rating system assumes any loans classified as sub-standard non-accrual to be impaired, and all of these loans are considered collateral dependent; therefore, all of Mid Penn’s impaired loans, whether reporting a specific allocation or not, are considered collateral dependent.

It is Mid Penn’s policy to obtain updated third party valuations on all impaired loans collateralized by real estate within 30 days of the credit being classified as sub-standard non-accrual.  Prior to receipt of the updated real estate valuation Mid Penn will use any existing real estate valuation to determine any potential allowance issues; however no allowance recommendation will be made until which time Mid Penn is in receipt of the updated valuation.

In some instances Mid Penn is not holding real estate as collateral and is relying on business assets (personal property) for repayment.  In these circumstances a collateral inspection is performed by Mid Penn personnel to determine an estimated value.  The value is based on net book value, as provided by the financial statements, and discounted accordingly based on determinations made by management.  Occasionally, Mid Penn will employ an outside service to provide a fair estimate of value based on auction sales or private sales.  Management reviews the estimates of these third parties and discounts them accordingly based on management’s judgment, if deemed necessary.   Mid Penn considers the estimates used in its impairment analysis to be Level 3 inputs.

Mid Penn actively monitors the values of collateral on impaired loans.  This monitoring may require the modification of collateral values over time or changing circumstances by some factor, either positive or negative, from the original values.  All collateral values will be assessed by management at least every 18 months for possible revaluation by an independent third party.

Mid Penn does not currently, or plan to in the future, use automated valuation methodologies as a method of valuing real estate collateral.

Loans:

For variable-rate loans that reprice frequently and which entail no significant changes in credit risk, carrying values approximated fair value.  The fair value of other loans are estimated by calculating the present value of the cash flow difference between the current rate and the market rate, for the average maturity, discounted quarterly at the market rate.

Foreclosed Assets Held for Sale:

Assets included in foreclosed assets held for sale are carried at fair value and accordingly is presented as measured on a non-recurring basis.  Values are estimated using Level 3 inputs, based on appraisals that consider the sales prices of property in the proximate vicinity.

Accrued Interest Receivable and Payable:

The carrying amount of accrued interest receivable and payable approximates their fair values.

Restricted Investment in Bank Stocks:

The carrying amount of required and restricted investment in correspondent bank stock approximates fair value, and considers the limited marketability of such securities.

Mortgage Servicing Rights:

The fair value of servicing rights is based on the present value of estimated future cash flows on pools of mortgages stratified by rate and maturity date.

24

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

Deposits: 

The fair value for demand deposits (e.g., interest and noninterest checking, savings, and money market deposit accounts) is by definition, equal to the amount payable on demand at the reporting date (i.e. their carrying amounts).  Fair value for fixed-rate certificates of deposit was estimated using a discounted cash flow calculation by combining all fixed-rate certificates into a pool with a weighted average yield and a weighted average maturity for the pool and comparing the pool with interest rates currently being offered on a similar maturity.

Long-term Debt:

The estimated fair values of long-term debt were determined using discounted cash flow analysis, based on currently available borrowing rates for similar types of borrowing arrangements.

Commitments to Extend Credit and Letters of Credit:

The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account market interest rates, the remaining terms and present credit worthiness of the counterparties.  The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements.

The following table summarizes the carrying value and fair value of financial instruments at June 30, 2013 and December 31, 2012.

(Dollars in thousands)	June 30, 2013				December 31, 2012
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and cash equivalents	$	10,395	$	10,395	$	15,473	$	15,473
Interest-bearing time balances with other financial institutions		13,433		13,433		23,563		23,563
Investment securities		133,956		133,956		154,295		154,295
Net loans and leases		512,391		522,136		478,711		495,181
Restricted investment in bank stocks		3,253		3,253		2,503		2,503
Accrued interest receivable		2,843		2,843		2,893		2,893
Mortgage servicing rights		211		211		233		233
Financial liabilities:
Deposits	$	609,973	$	612,727	$	625,461	$	629,096
Long-term debt		11,734		12,208		22,510		23,240
Accrued interest payable		777		777		620		620
Off-balance sheet financial instruments:
Commitments to extend credit	$	-	$	-	$	-	$	-
Financial standby letters of credit		-		-		-		-

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of Mid Penn’s financial instruments as of June 30, 2013 and December 31, 2012.  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, and accrued interest receivable and payable.  Other than cash and cash equivalents, which are considered Level 1 Inputs, these instruments are Level 2 Inputs.  These tables exclude financial instruments for which the carrying amount approximates fair value.

					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, 2013	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Net loans and leases	$	512,391	$	522,136	$	-	$	-	$	522,136
Financial instruments - liabilities
Deposits	$	609,973	$	612,727	$	-	$	612,727	$	-
Long-term debt		11,734		12,208		-		12,208		-

25

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

					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, 2012	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Net loans and leases	$	478,711	$	495,181	$	-	$	-	$	495,181
Financial instruments - liabilities
Deposits	$	625,461	$	629,096	$	-	$	629,096	$	-
Long-term debt		22,510		23,240		-		23,240		-

(5)         Guarantees

In the normal course of business, Mid Penn makes various commitments and incurs certain contingent liabilities, which are not reflected in the accompanying consolidated financial statements.  The commitments include various guarantees and commitments to extend credit.  Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Mid Penn evaluates each customer’s credit-worthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation of the customer.  Standby letters of credit and financial guarantees written are conditional commitments to guarantee the performance of a customer to a third party.  Those guarantees are primarily issued to support public and private borrowing arrangements.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.  Mid Penn had $8,871,000 and $10,417,000 standby letters of credit outstanding as of June 30, 2013 and December 31, 2012, respectively.  Mid Penn does not anticipate any losses because of these transactions.  The current amount of the liability as of June 30, 2013 for payment under standby letters of credit issued was not material.

(6)        Defined Benefit Plans

Mid Penn has an unfunded noncontributory defined benefit retirement plan for directors.  The plan provides defined benefits based on years of service.  In addition, Mid Penn sponsors a defined benefit health care plan that provides post-retirement medical benefits and life insurance to qualifying full-time employees.  These health care and life insurance plans are noncontributory.  A December 31 measurement date for our plans is used.

The components of net periodic benefit costs from these benefit plans are as follows:

	Three Months Ended June 30,
(Dollars in thousands)	Pension Benefits				Other Benefits
	2013		2012		2013		2012
Service cost	$	8	$	5	$	5	$	5
Interest cost		11		11		8		9
Amortization of prior service cost		6		6		1		1
Net periodic benefit cost	$	25	$	22	$	14	$	15

	Six Months Ended June 30,
(Dollars in thousands)	Pension Benefits				Other Benefits
	2013		2012		2013		2012
Service cost	$	16	$	11	$	9	$	10
Interest cost		22		23		17		18
Amortization of prior service cost		11		11		1		1
Net periodic benefit cost	$	49	$	45	$	27	$	29

26

MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

(7)           Accumulated Other Comprehensive (Loss) Income

The components of accumulated other comprehensive (loss) income, net of taxes, are as follows:

(Dollars in thousands)	Unrealized (Loss) Gain on Securities		Defined Benefit Plan Liability		Accumulated Other Comprehensive (Loss) Income
Balance - June 30, 2013	$	(520)	$	(132)	$	(652)
Balance - December 31, 2012	$	2,433	$	(140)	$	2,293

(8)         Preferred Stock

On December 19, 2008, Mid Penn entered into and closed a letter agreement with the United States Department of the Treasury (the “Treasury”) pursuant to which the Treasury invested $10,000,000 in the Mid Penn Bank under the Treasury’s Capital Purchase Program (the “CPP”).  Under the letter agreement, the Treasury received (1) 10,000 shares of Series A Fixed Rate Cumulative Perpetual Preferred Stock, $1,000 liquidation preference (“Series A Preferred Stock”), and (2) warrants to purchase up to 73,099 shares of Mid Penn common stock at an exercise price of $20.52 per share (the “Warrants”).

On December 28, 2012, Mid Penn entered into a letter agreement with the Treasury pursuant to which Mid Penn repurchased from the Treasury all 10,000 shares of the Series A Preferred Stock issued to the Treasury which constitutes all of the issued and outstanding shares of Series A Preferred Stock.  Mid Penn repurchased the Series A Preferred Stock for a purchase price equal to the aggregate liquidation amount of the Preferred Stock of $10,000,000, plus accrued but unpaid dividends of $59,722.  All 10,000 shares of Series A Preferred Stock have subsequently been cancelled.

On January 23, 2013, Mid Penn entered into a letter agreement with the Treasury pursuant to which Mid Penn repurchased from the Treasury on that date the Warrants for $58,479.  The Warrants have subsequently been cancelled.

As of the date hereof, Mid Penn has no further financial obligations under the Series A Preferred Stock, the Warrants or the Treasury’s CPP.

(9)         Stock Issued Under Private Placement Offering

On September 26, 2012, Mid Penn filed with the Pennsylvania Department of State a Statement with Respect to Shares which, effective upon filing, designated a series of preferred stock as “7% Non-Cumulative Non-Voting Non-Convertible Perpetual Preferred Stock, Series B” (“Series B Preferred Stock”), and set forth the voting and other powers, designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions of the Series B Preferred Stock.

Sales of Preferred Stock

Mid Penn sold shares of its Series B Preferred Stock, in transactions exempt from registration under the Securities Act of 1933, pursuant to Section 4(a)(2) thereof.

Between September 26, 2012, and December 31, 2012, Mid Penn sold 4,880 shares of its Series B Preferred Stock for total gross proceeds of $4,880,000, which have been offset by issuance costs of $50,000.  On January 3, 2013, 120 additional shares were sold resulting in total gross proceeds of $5,000,000 for the Series B Preferred Stock offering.

The following table summarizes the Series B Preferred Stock shares sold and the gross proceeds received through the private placement offering as of June 30, 2013:

(Dollars in thousands)
Period	Shares	Gross Proceeds
September 26, 2012 - September 30, 2012	345	$	345,000
October 1, 2012 - December 31, 2012	4,535		4,535,000
January 1, 2013 - June 30, 2013	120		120,000
Total	5,000	$	5,000,000

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MID PENN BANCORP, INC.Notes to Consolidated Financial Statements (Unaudited)

Terms of the Series B Preferred Stock

The annual dividend rate for the Series B Preferred Stock is 7% per annum of the liquidation preference of the Series B Preferred Stock or $70.00 per annum for each share of Series B Preferred Stock.  The Board of Directors must approve each dividend payment from legally available funds.  Dividends are payable to holders of record of the Series B Preferred Stock as they appear on our books on the record dates fixed by our Board of Directors.  Dividends on any of Series B Preferred Stock are non-cumulative and we currently expect them to be declared quarterly for payment on February 15, May 15, August 15, and November 15 of each year.  If a dividend payment date is not a business day, the dividend will be paid on the immediately preceding business day but no additional dividend payment will be prorated from the date of purchase to the first dividend payment date over a quarterly dividend period of 90 days.

Mid Penn may redeem shares of its Series B Preferred Stock at its option, in whole or in part, at any time subject to prior approval of the Federal Reserve Board, if then required, at a redemption price of $1,020 per share of Series B Preferred Stock plus an amount equal to any declared but unpaid dividends and in accordance with the terms and conditions set forth in a Certificate of Designations for the Series B Preferred Stock as filed with the Pennsylvania Department of State.

(10)Earnings per Common Share

Earnings per share are computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during each of the years presented.  The following data show the amounts used in computing basic and diluted earnings per share.  As shown in the table that follows, diluted earnings per share is computed using weighted average common shares outstanding, plus weighted average common shares available from the exercise of all dilutive stock warrants issued to the U.S. Treasury under the provisions of the Capital Purchase Program, based on the average share price of Mid Penn’s common stock during the period.

The computations of basic earnings per common share follow:

(Dollars in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Net Income	$	1,366	$	1,360	$	2,051	$	2,494
Less:  Dividends on Series A preferred stock		-		(125)		-		(250)
Accretion of Series A preferred stock discount		-		(4)		(14)		(7)
Dividends on Series B preferred stock		(87)		-		(134)		-
Net income available to common shareholders	$	1,279	$	1,231	$	1,903	$	2,237
Weighted average common shares outstanding		3,491,069		3,485,867		3,490,403		3,485,203
Basic earnings per common share	$	0.37	$	0.35	$	0.55	$	0.64

The computations of diluted earnings per common share follow:

(Dollars in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Net income available to common stockholders	$	1,279	$	1,231	$	1,903	$	2,237
Weighted average number of common shares outstanding		3,491,069		3,485,867		3,490,403		3,485,203
Dilutive effect of potential common stock arising from stock warrants:
Exercise of outstanding stock warrants issued to U.S. Treasury
under the Capital Repurchase Program		-		-		-		-
Adjusted weighted-average common shares outstanding		3,491,069		3,485,867		3,490,403		3,485,203
Diluted earnings per common share	$	0.37	$	0.35	$	0.55	$	0.64

As of June 30, 2013 Mid Penn no longer had any warrants outstanding.  As of June 30, 2012, Mid Penn had 73,099warrants outstanding that were anti-dilutive because the fair value of the common stock was below the $20.52 exercise price of these warrants.

(11)          Recent Accounting Pronouncements

There were no new accounting pronouncements affecting Mid Penn during the period that were not already incorporated into the disclosures.

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MID PENN BANCORP, INC.

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is Management’s Discussion of Consolidated Financial Condition as of June 30, 2013, compared to year-end 2012, and the Results of Operations for the three and six months ended June 30, 2013, compared to the same period in 2012.

This discussion should be read in conjunction with the financial tables, statistics, and the audited financial statements and notes thereto included in Mid Penn’s Annual Report on Form 10-K for the year ended December 31, 2012.  The results of operations for interim periods are not necessarily indicative of operating results expected for the full year.

Certain of the matters discussed in this document and in documents incorporated by reference herein, including matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Mid Penn to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.  The words “expect”, “anticipates”, “intend”, “plan”, “believe”, “estimate”, and similar expressions are intended to identify such forward-looking statements.

Mid Penn’s actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation:

· The effects of economic deterioration and the prolonged economic malaise on current customers, specifically the effect of the economy on loan customers’ ability to repay loans;

· Governmental monetary and fiscal policies, as well as legislative and regulatory changes, including the effects of the Dodd-Frank Wall Street Reform and Consumer Protection Act;

· Impacts of the new capital and liquidity requirements of the Basel III standards and other regulatory pronouncements, regulations and rules;

· The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Financial Accounting Standards Board and other accounting standard setters;

· The risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, securities and interest rate protection agreements, as well as interest rate risks;

· The effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in Mid Penn’s market area and elsewhere, including institutions operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the internet;

· The costs and effects of litigation and of unexpected or adverse outcomes in such litigation;

· Technological changes;

· Acquisitions and integration of acquired businesses;

· The failure of assumptions underlying the establishment of reserves for loan and lease losses and estimations of values of collateral and various financial assets and liabilities;

· Acts of war or terrorism;

· Volatilities in the securities markets; and

· Slow economic conditions.

Mid Penn undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this report.  Readers should carefully review the risk factors described in the documents that we periodically file with the SEC, including Mid Penn’s Annual Report on Form 10-K for the year ended December 31, 2012.

Critical Accounting Estimates

Mid Penn’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and conform to general practices within the banking industry.  Application of these principles involves significant judgments and estimates by management that have a material impact on the carrying value of certain assets and liabilities.  The judgments and estimates that we used are based on historical experiences and other factors, which are believed to be reasonable under the circumstances.  Because of the nature of the judgments and estimates that we have made, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of assets and liabilities and the results of our operations.

Management of Mid Penn considers the accounting judgments relating to the allowance for loan and lease losses, the evaluation of the Corporation’s investment securities for other-than-temporary impairment, the assessment of goodwill for impairment, and the valuation of deferred tax assets to be the accounting areas that require the most subjective and complex judgments.

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MID PENN BANCORP, INC.

The allowance for loan and lease losses represents management’s estimate of probable incurred credit losses inherent in the loan and lease portfolio. Determining the amount of the allowance for loan and lease losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change.  The loan and lease portfolio also represents the largest asset type on the consolidated balance sheet.  Throughout the remainder of this report, the terms “loan” or “loans” refers to both loans and leases.

Valuations for the investment portfolio are determined using quoted market prices, where available.  If quoted market prices are not available, investment valuation is based on pricing models, quotes for similar investment securities, and observable yield curves and spreads.  In addition to valuation, management must assess whether there are any declines in value below the carrying value of the investments that should be considered other than temporary or otherwise require an adjustment in carrying value and recognition of the loss in the consolidated statement of income.

Accounting Standards Codification (“ASC”) Topic 350, Intangibles-Goodwill and Other, requires that goodwill is not amortized to expense, but rather that it be tested for impairment at least annually.  Impairment write-downs are charged to results of operations in the period in which the impairment is determined.  The Corporation did not identify any impairment on its outstanding goodwill from its most recent testing, which was performed as of December 31, 2012.  If certain events occur which might indicate goodwill has been impaired, the goodwill is tested when such events occur.

Mid Penn recognizes deferred tax assets and liabilities for the future effects of temporary differences and tax credits.  Enacted tax rates are applied to cumulative temporary differences based on expected taxable income in the periods in which the deferred tax asset or liability is anticipated to be realized.  Future tax rate changes could occur that would require the recognition of income or expense in the consolidated statements of income in the period in which they are enacted.  Deferred tax assets must be reduced by a valuation allowance if in management’s judgment, it is “more likely than not” that some portion of the asset will not be realized.  Management may need to modify their judgment in this regard from one period to another should a material change occur in the business environment, tax legislation, or in any other business factor that could impair Mid Penn’s ability to benefit from the asset in the future.

Results of Operations

Overview

Net income available to common shareholders was $1,279,000, $0.37 per common share, for the quarter ended June 30, 2013, as compared to net income available to common shareholders of $1,231,000, or $0.35 per common share, for the quarter ended June 30, 2012, a 3.9% increase.  During the six months ended June 30, 2013, net income available to common shareholders was $1,903,000, or $0.55 per common share, versus $2,237,000, or $0.64 per common share for the same period in 2012, a 14.9% decrease.

Net interest income declined $176,000, or 2.9%, to $5,847,000 for the quarter ended June 30, 2013 from $6,023,000 during the quarter ended June 30, 2012.  Through the first six months of 2013, net interest income decreased $394,000, or 3.4% to $11,306,000 from $11,700,000 during the same period in 2012.  This decline is a result of lower yields on our earning assets.

The provision for loan and lease losses in the second quarter of 2013 was $415,000, compared to $225,000 in the second quarter of 2012.  During the six months ended June 30, 2013, the provision for loan and lease losses was $910,000 compared to $525,000 for the six months ended June 30, 2012.

Net income as a percent of average assets (return on average assets or “ROA”) and shareholders' equity (return on average equity or “ROE”) were as follows on an annualized basis:

	Three Months Ended June 30,		Six Months Ended June 30,
	2013	2012	2013	2012
Return on average assets	0.39%	0.78%	0.59%	0.71%
Return on average equity	5.19%	9.96%	7.81%	9.22%

While total assets increased a modest $449,000 to $705,649,000 at June 30, 2013, from $705,200,000 at December 31, 2012, there has been a shift in the composition of our assets.  There was notable growth in net loans, increasing $33,680,000 from $478,711,000 at December 31, 2012 to $512,391,000 at June 30, 2013, while interest-bearing time deposits with other financial institutions declined $10,130,000 from $23,563,000 at December 31, 2012 to $13,433,000 at June 30, 2013 and available for sale investment securities declinedby $20,339,000 from $154,295,000 at December 31, 2012 to $133,956,000 at June 30, 2013.We have been allowing the maturing interest-bearing time deposits with other financial institutions run off to fund loan growth and  the available for sale securities balance has declined mainly due to the rapid amortization of the MBS and CMO portfolios.  Total deposits decreased $15,488,000 from $625,461,000 at December 31, 2012 to $609,973,000 at June 30, 2013.  The money market balance decreased $10,094,000 from $210,588,000 at December 31, 2012 due to a rate reduction in the second quarter.  Total noninterest-bearing deposits declined $5,489,000 from $57,977,000 at December 31, 2012,primarily in cash management accounts that tend to have a cyclical nature.

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MID PENN BANCORP, INC.

Net Interest Income/Funding Sources

Net interest income, Mid Penn’s primary source of revenue, is the amount by which interest income on loans and investments exceeds interest incurred on deposits and borrowings.  The amount of net interest income is affected by changes in interest rates and changes in the volume and mix of interest-sensitive assets and liabilities.  Net interest income and corresponding yields are presented in the analysis below on a taxable-equivalent basis.  Income from tax-exempt assets, primarily loans to or securities issued by state and local governments, is adjusted by an amount equivalent to the federal income taxes which would have been paid if the income received on these assets was taxable at the statutory rate of 34%.

For the three months ended June 30, 2013, Mid Penn’s taxable-equivalent net interest margin decreased to 3.73%, from 3.81%, for the three months ended June 30, 2012.  Net interest income, on a taxable-equivalent basis, in the three months ended June 30, 2013, decreased to $6,184,000from $6,328,000 during the same three months of 2012.  This decline is primarily attributable to the decline in loan yield, which is a result of the current rate environment and competitive market.  While our average loan balance increased, new loans arebeing added at lower rates than those that are paying down, which decreased our average loan yield to 5.29% for the three months ended June 30, 2013 from 5.95%. for the three months ended June 30, 2012.

For the six months ended June 30, 2013, Mid Penn’s taxable-equivalent net interest margin decreased slightly to 3.63% from 3.67% for the six months ended June 30, 2012, driven primarily by the reduction in the average earning assets coupled with a decline in the yield on those earning assets, which decreased to 4.47% at June 30, 2013 from 4.83% during the same period in 2012.  Net interest income, on a taxable equivalent basis, in the first six months of 2013 decreased to $11,969,000 from $12,308,000 in the first six months of 2012.

Although the effective interest rate impact on earning assets and funding sources can be reasonably estimated at current interest rate levels, the options selected by customers, and the future mix of the loan, investment, and deposit products in the Bank's portfolios, may significantly change the estimates used in the simulation models.  In addition, our net interest income may be impacted by further interest rate actions of the Federal Reserve Bank.

Provision for Loan Losses

The provision for loan and lease losses is the expense necessary to maintain the allowance for loan and lease losses at a level adequate to absorb management’s estimate of probable losses in the loan and lease portfolio.  Mid Penn’s provision for loan and lease losses is based upon management’s monthly review of the loan portfolio.  The purpose of the review is to assess loan quality, identify impaired loans and leases, analyze delinquencies, ascertain loan and lease growth, evaluate potential charge-offs and recoveries, and assess general economic conditions in the markets we serve.

During the first six months of 2013, Mid Penn continued to experience a challenging economic and operating environment both on a national and local level.  Given the economic pressures that impact some borrowers, Mid Penn has maintained the allowance for loan and lease losses in accordance with Mid Penn’s assessment process, which took into consideration the risk characteristics of the loan and lease portfolio, the growth in the loan and lease portfolio during the first six months of 2013, and shifting collateral values from December 31, 2012 to June 30, 2013.

Following its model for loan and lease loss allowance adequacy, management recorded a $415,000 provision for the three months ended June 30, 2013, as compared to a provision of $225,000 for the three months ended June 30, 2012.  During the six months ended June 30, 2013, the provision for loans and lease losses was $910,000, as compared to $525,000 for the six months ended June 2012.  The allowance for loan and lease losses as a percentage of total loans was 1.21% at June 30, 2013, compared to 1.14% at December 31, 2012.  For further discussion of factors affecting the provision for loan and lease losses please see Credit Quality, Credit Risk, and Allowance for Loan and Lease Losses in the Financial Condition section of this Management’s Discussion and Analysis.

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MID PENN BANCORP, INC.

Noninterest Income

Noninterest income decreased $176,000, or 2.9%, during the second quarter of 2013 versus the second quarter of 2012.  During the six months ended June 30, 2013, noninterest income increased $19,000, or 1.1% versus the same period in 2012.  The following components of noninterest income showed significant changes:

(Dollars in Thousands)	Three Months Ended June 30,
	2013		2012		$ Variance		% Variance
Income from fiduciary activities	$	110	$	189	$	(79)	-41.8%
Net gain on sales of investment securities		112		10		102	1,020.0%
Mortgage banking income		115		137		(22)	-16.1%
Other income		170		278		(108)	-38.8%

(Dollars in Thousands)	Six Months Ended June 30,
		2013		2012		$ Variance	% Variance
Income from fiduciary activities	$	249	$	301	$	(52)	-17.3%
Service charges on deposits		280		265		15	5.7%
Net gain on sales of investment securities		112		26		86	330.8%
Mortgage banking income		225		259		(34)	-13.1%

Income from fiduciary activities decreased during the three and six months ended June 30, 2013 versus the same periods in 2012.  This variance is the result of lower sales of third party mutual funds during 2013 versus 2012. 

Mid Penn recognized increased investment security gains in the three and six months ended June 30, 2013 versus the same periods in 2012.  Mortgage banking income was off slightly during the three and six months ended June 30, 2013.  Refinancing activity has begun to subside while purchase activity has increased, but is still weak versus pre-recession levels.  Other income decreased during the three and six months ended June 30, 2013 versus the same periods in 2012.  This variance is due to the 2012 periods containing a gain from the sale of a rental property owned by the Bank and a recovery of sales taxes previously paid and recovered as a result of a sales tax review.

Noninterest Expenses

Noninterest expenses decreased $335,000 or 6.8% during the second quarter of 2013, versus the same period in 2012.  During the six months ended June 30, 2013, noninterest expenses decreased $36,000, or 0.4%, versus the same period in 2012.  The changes were primarily a result of the following components of noninterest expense:

(Dollars in Thousands)	Three Months Ended June 30,
	2013		2012		$ Variance		% Variance
Salaries and employee benefits	$	2,685	$	2,619	$	66	2.5%
Equipment expense		345		286		59	20.6%
FDIC Assessment		131		302		(171)	-56.6%
Marketing and advertising expense		62		128		(66)	-51.6%
Computer expense		246		161		85	52.8%
Loss (gain) on sale/write-down of foreclosed assets		(303)		50		(353)	-706.0%

(Dollars in Thousands)	Six Months Ended June 30,
	2013		2012		$ Variance		% Variance
Salaries and employee benefits	$	5,542	$	5,215	$	327	6.3%
Equipment expense		661		580		81	14.0%
FDIC Assessment		333		603		(270)	-44.8%
Legal and professional fees		320		245		75	30.6%
Marketing and advertising expense		105		197		(92)	-46.7%
Computer expense		427		323		104	32.2%
Loss (gain) on sale/write-down of foreclosed assets		(322)		58		(380)	-655.2%

Salaries and employee benefits increased during the three and six months ended June 30, 2013, primarily due to the increase in actual medical claims experienced from Mid Penn’s self-funded medical insurance plan.  Also contributing to the increase were the merit increases for existing team members and the hiring of new, experienced team members to add depth to the sales and support areas.  Equipment expense increased for the three and six months ended June 30, 2013 versus the same periods in 2012 due to ongoing upgrades to Mid Penn’s network infrastructure in

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MID PENN BANCORP, INC.

preparation for the transition to a hosted environment.  We believe that this transition will result in long-term operational savings and enhanced capabilities to bring new products and services to customers.  FDIC assessments consist of premiums paid by FDIC-insured institutions.  The assessments are based on statutory and risk classification factors.  FDIC assessments decreased during the three and six months ended June 30, 2013 mainly due to a reduction in the Bank’s risk rating over that period.  Legal and professional fees increased during the six months ended June 30, 2013, comprised primarily of increased fees associated with a change in the firm used for outsourced internal audit and supplemental audits conducted on regulatory information in preparation for Mid Penn’s FDIC Compliance Exam.  Marketing and advertising expense declined for the three and six months ended June 30, 2013 as a result of a continuing focus on reducing discretionary expenses.  Computer expense increased during the three and six months ended June 30, 2013 primarily due to the addition of software required by regulatory bodies and to enhance the customer’s mobile banking experience.  Gain on sale/write-down of foreclosed assets improved during the three and six months ended June 30, 2013 versus the same periods in 2012 primarily due to the sale of a property at auction for a significantly higher figure than originally appraised.  The transaction closed during the second quarter of 2013.

Income Taxes

The provision for income taxes was $292,000 for the three months ended June 30, 2013, as compared to the provision for income taxes of $422,000 in the same period last year.  The effective tax rate for the three months ended June 30, 2013, was 17.6% compared to 23.6% for the three months ended June 30, 2012.  The provision for income taxes for the six months ended June 30, 2013 was $384,000, as compared to $665,000 during the same period in 2012.  The effective tax rate for the six months ended June 30, 2013 was 15.8% compared to 21.0% for the six months ended June 30, 2012.  This decline was the result of lower taxable income in the first quarter of 2013 versus the same period in 2012.  Generally, our effective tax rate is below the statutory rate due to earnings on tax-exempt loans, investments, and bank-owned life insurance, as well as the impact of tax credits.  The realization of deferred tax assets is dependent on future earnings.  We currently anticipate that future earnings will be adequate to fully utilize deferred tax assets.

Financial Condition

Loans

During the first six months of 2013, Mid Penn experienced an increase in loans outstanding of $34,438,000, or 7.1%.  Commercial real estate, as well as commercial, industrial, and agricultural, and residential mortgage balances showed moderategrowth as requests from creditworthy borrowers increased, while balances in the consumer portfolio eroded due to contractual payments exceeding new volume.

(Dollars in thousands)	June 30, 2013			December 31, 2012
	Amount		%	Amount		%
Commercial real estate, construction and land development	$	272,276	52.5%	$	255,231	52.7%
Commercial, industrial and agricultural		88,239	17.0%		79,228	16.4%
Residential mortgage		153,272	29.6%		143,243	29.6%
Consumer		4,871	0.9%		6,518	1.3%
	$	518,658	100.0%	$	484,220	100.0%

Most of Mid Penn’s lending activities are with customers located within the trading area of Dauphin County, lower Northumberland County, western Schuylkill County and eastern Cumberland County, Pennsylvania.  This region currently, and historically, has lower unemployment than the U.S. as a whole.  This is due in part to a diversified manufacturing and services base and the presence of state government offices which help shield the local area from national trends.  At June 30, 2013, the unadjusted unemployment rate for the Harrisburg/Carlisle area was 6.7% versus the seasonally adjusted national unemployment rate of 7.6%.

Credit Quality, Credit Risk, and Allowance for Loan and Lease Losses

During the first six months of 2013, Mid Penn had net charge-offs of $152,000 compared to net charge-offs of $712,000 during the same period of 2012.  Loans charged off during the first six months of 2013 were comprised of six residential real estate loans totaling $126,000, four commercial real estate loans totaling $118,000, threecommercial and industrial loans totaling $21,000, and threeconsumer loans totaling $11,000.  The remaining $4,000 was comprised of deposit account charge-offs.  All loans charged off during the first quarter were to unrelated borrowers.  Mid Penn may need to make future adjustments to the allowance and the provision for loan and lease losses if economic conditions or loan credit quality differs substantially from the assumptions used in making Mid Penn’s evaluation of the level of the allowance for loan losses as compared to the balance of outstanding loans.

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MID PENN BANCORP, INC.

Changes in the allowance for loan and lease losses for the six months ended June 30, 2013 and 2012 are summarized as follows:

(Dollars in thousands)	Six Months Ended June 30,
	2013		2012
Average total loans outstanding (net of unearned income)	$	489,282	$	484,966
Period ending total loans outstanding (net of unearned income)		518,658		485,982
Balance, beginning of period		5,509		6,772
Loans charged off during period		(280)		(752)
Recoveries of loans previously charged off		128		40
Net chargeoffs		(152)		(712)
Provision for loan and lease losses		910		525
Balance, end of period	$	6,267	$	6,585
Ratio of net loans charged off to average loans outstanding (annualized)		0.06%		0.29%
Ratio of allowance for loan losses to net loans at end of period		1.21%		1.35%

Other than as described herein, we do not believe there are any trends, events or uncertainties that are reasonably expected to have a material impact on future results of operations, liquidity, or capital resources.  Further, based on known information, we believe that the effects of current and past economic conditions and other unfavorable business conditions may influence certain borrowers’ abilities to comply with their repayment terms.  Mid Penn continues to monitor closely the financial strength of these borrowers.  Mid Penn does not engage in practices which may be used to artificially shield certain borrowers from the negative economic or business cycle effects that may compromise their ability to repay.  Mid Penn does not normally structure construction loans with interest reserve components.  Mid Penn has not in the past performed any commercial real estate or other type loan workouts whereby an existing loan was restructured into multiple new loans.  Also, Mid Penn does not extend loans at maturity solely due to the existence of guarantees, without recognizing the credit as impaired.  While the existence of a guarantee may be a mitigating factor in determining the proper level of allowance once impairment has been identified, the guarantee does not affect the impairment analysis.

At June 30, 2013, total nonperforming loans amounted to $16,885,000, or 3.26% of loans and leases net of unearned income, as compared to levels of $12,257,000, or 2.53%, at December 31, 2012 and $12,294,000, or 2.53%, at June 30, 2012.

(Dollars in thousands)
	June 30, 2013		December 31, 2012		June 30, 2012
Nonperforming Assets:
Nonaccrual loans	$	16,003	$	11,831	$	11,862
Loans renegotiated with borrowers		882		426		432
Total nonperforming loans		16,885		12,257		12,294
Foreclosed real estate		1,030		843		1,537
Total non-performing assets		17,915		13,100		13,831
Accruing loans 90 days or more past due		-		-		-
Total risk elements	$	17,915	$	13,100	$	13,831
Nonperforming loans as a % of total
loans outstanding		3.26%		2.53%		2.53%
Nonperforming assets as a % of total
loans outstanding and other real estate		3.45%		2.71%		2.84%
Ratio of allowance for loan losses
to nonperforming loans		41.60%		44.95%		53.56%

In the above table, loans renegotiated with borrowers represent Mid Penn’s accruing troubled debt restructured loans.  Troubled debt restructured loans that are no longer accruing interest are included in nonaccrual loans.

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MID PENN BANCORP, INC.

Mid Penn assesses a specific allocation for both commercial loans and commercial real estate loans prior to charging down or charging off the loan.  Once the charge down is taken, the remaining balance remains a nonperforming loan with the original terms and interest rate intact and is not treated as a restructured credit.  The following table provides additional analysis of partially charged-off loans.

(Dollars in thousands)
	June 30, 2013		December 31, 2012
Period ending total loans outstanding (net of unearned income)	$	518,358	$	484,220
Allowance for loan and lease losses		6,267		5,509
Total Nonperforming loans		16,885		12,257
Nonperforming and impaired loans with partial charge-offs		3,212		3,744
Ratio of nonperforming loans with partial charge-offs
to total loans		0.62%		0.77%
Ratio of nonperforming loans with partial charge-offs
to total nonperforming loans		19.02%		30.55%
Coverage ratio net of nonperforming loans with
partial charge-offs		45.83%		64.71%
Ratio of total allowance to total loans less
nonperforming loans with partial charge-offs		1.22%		1.15%

Mid Penn has not experienced any additional charge-offs on loans for which a partial charge-off had originally been taken.

Mid Penn considers a commercial loan or commercial real estate loan to be impaired when it becomes 90 days or more past due and not in the process of collection.  This methodology assumes the borrower cannot or will not continue to make additional payments.  At that time the loan would be considered collateral dependent as the discounted cash flow (“DCF”) method indicates no operating income is available for evaluating the collateral position; therefore, all impaired loans are deemed to be collateral dependent. 

Mid Penn evaluates loans for charge-off on a monthly basis.  Policies that govern the recommendation for charge-off are unique to the type of loan being considered.  Commercial loans rated as nonaccrual or lower will first have a collateral evaluation completed in accordance with the guidance on impaired loans.  Once the collateral evaluation has been completed, a specific allocation of allowance is made based upon the results of the evaluation.  In the event the loan is unsecured, the loan would have been charged-off at the recognition of impairment.  If the loan is secured, it will undergo a 90 day waiting period to ensure the collateral shortfall identified in the evaluation is accurate and then charged down by the specific allocation. Once the charge down is taken, the remaining balance remains a nonperforming loan with the original terms and interest rate intact (not restructured).  Commercial real estate loans rated as impaired will also have an initial collateral evaluation completed in accordance with the guidance on impaired loans.  An updated real estate valuation is ordered and the collateral evaluation is modified to reflect any variations in value.  A specific allocation of allowance is made for any anticipated collateral shortfall and a 90-day waiting period begins to ensure the accuracy of the collateral shortfall.  The loan is then charged down by the specific allocation.  Once the charge down is taken, the remaining balance remains a nonperforming loan with the original terms and interest rate intact (not restructured).  The process of charge-off for residential mortgage loans begins upon a loan becoming delinquent for 90 days and not in the process of collection.  The existing appraisal is reviewed and a lien search is obtained to determine lien position and any instances of intervening liens.  A new appraisal of the property will be ordered if deemed necessary by management and a collateral evaluation is completed. The loan will then be charged down to the value indicated in the evaluation.  Consumer loans are recommended for charge-off after reaching delinquency of 90 days and the loan is not in the process of collection.  The entire balance of the consumer loan is recommended for charge-off at this point.

As noted above, Mid Penn assesses a specific allocation for both commercial loans and commercial real estate loans prior to charging down or charging off the loan.  Once the charge down is taken, the remaining balance remains a nonperforming loan with the original terms and interest rate intact (not restructured).  In addition, Mid Penn takes a preemptive step when any commercial loan or commercial real estate loan becomes classified under its internal classification system.  A preliminary collateral evaluation in accordance with the guidance on impaired loans is prepared using the existing collateral information in the loan file.  This process allows Mid Penn to review both the credit and documentation files to determine the status of the information needed to make a collateral evaluation.  This collateral evaluation is preliminary but allows Mid Penn to determine if any potential collateral shortfalls exist.

Larger groups of small-balance loans, such as residential mortgages and consumer installment loans are collectively evaluated for impairment.  Accordingly, individual consumer and residential loans are not separately identified for impairment disclosures unless such loans are the subject of a restructuring agreement.

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MID PENN BANCORP, INC.

Mid Penn’s rating system assumes any loans classified as sub-standard non-accrual to be impaired, and all of these loans are considered collateral dependent; therefore, all of Mid Penn’s impaired loans, whether reporting a specific allocation or not, are considered collateral dependent.

It is Mid Penn’s policy to obtain updated third party valuations on all impaired loans collateralized by real estate within 30 days of the credit being classified as sub-standard non-accrual.  Prior to receipt of the updated real estate valuation Mid Penn will use any existing real estate valuation to determine any potential allowance issues; however no allowance recommendation will be made until which time Mid Penn is in receipt of the updated valuation.  The credit department employs an electronic tracking system to monitor the receipt of and need for updated appraisals.  To date, there have been no significant time lapses noted with the above processes. 

In some instances Mid Penn is not holding real estate as collateral and is relying on business assets (personal property) for repayment.  In these circumstances a collateral inspection is performed by Mid Penn personnel to determine an estimated value.  The value is based on net book value, as provided by the financial statements, and discounted accordingly based on determinations made by management.  Occasionally, Mid Penn will employ an outside service to provide a fair estimate of value based on auction sales or private sales.  Management reviews the estimates of these third parties and discounts them accordingly based on management’s judgment, if deemed necessary.  

For impaired loans with no valuation allowance required, Mid Penn’s practice of obtaining independent third party market valuations on the subject property within 30 days of being placed on non-accrual status sometimes indicates that the loan to value ratio is sufficient to obviate the need for a specific allocation in spite of significant deterioration in real estate values in Mid Penn’s primary market area.  These circumstances are determined on a case by case analysis of the impaired loans.

Mid Penn actively monitors the values of collateral on impaired loans.  This monitoring may require the modification of collateral values over time or changing circumstances by some factor, either positive or negative, from the original values.  All collateral values will be assessed by management at least every 12 months for possible revaluation by an independent third party. 

Mid Penn does not currently, or plan in the future to, use automated valuation methodologies as a method of valuing real estate collateral.

As of June 30, 2013, Mid Penn had several loan relationships, with an aggregate carrying balance of $14,457,000, deemed impaired.  This pool of loans is further broken down into a group of loans with an aggregate carrying balance of $9,507,000 for which specific allocations totaling $2,020,000 have been included within the loan loss reserve for these loans.  The remaining $4,950,000 of loans requires no specific allocation within the loan loss reserve.  The $14,457,000 pool of impaired loan relationships is comprised of $12,563,000 in real estate secured commercial relationships and $1,894,000 in business relationships.  There are specific allocations against the real estate secured pool totaling $1,268,000, spread among 22 loans and 11 relationships.  Three of the relationships have four loans each, accounting for $846,000 of the total; the remaining loans are to unrelated borrowers.  The group of impaired business relationships with specific allocations is made up of five relationships and a specific allocation of $752,000 has been set aside against these credits.  Four small business relationships account for $110,000 of the specific allocations due to the negative effects of the economy on their businesses.  One additional large commercial participation loan in this pool has shown exceptional collateral devaluation and is responsible for a specific allocation of $642,000 of the total pool attributable to this segment.  Management currently believes that the specific reserves are adequate to cover probable future losses related to these relationships.

The allowance for loan losses is a reserve established in the form of a provision expense for loan and lease losses and is reduced by loan charge-offs net of recoveries.  In conjunction with an internal loan review function that operates independently of the lending function, management monitors the loan portfolio to identify risk on a monthly basis so that an appropriate allowance is maintained.  Based on an evaluation of the loan portfolio, management presents a monthly review of the allowance for loan and lease losses to the Board of Directors, indicating any changes in the allowance since the last review.  In making the evaluation, management considers the results of recent regulatory examinations, which typically include a review of the allowance for loan and lease losses an integral part of the examination process.  

In establishing the allowance, management evaluates on a quantitative basis individual classified loans and nonaccrual loans, and determines an aggregate reserve for those loans based on that review.  In addition, an allowance for the remainder of the loan and lease portfolio is determined based on historical loss experience within certain components of the portfolio.  These allocations may be modified if current conditions indicate that loan and lease losses may differ from historical experience.

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MID PENN BANCORP, INC.

In addition, a portion of the allowance is established for losses inherent in the loan and lease portfolio which have not been identified by the quantitative processes described above.  This determination inherently involves a higher degree of subjectivity, and considers risk factors that may not have yet manifested themselves in historical loss experience.  These factors include:

· Changes in local, regional, and national economic and business conditions affecting the collectability of the portfolio, the values of underlying collateral, and the condition of various market segments.

· Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified loans.

· Changes in the experience, ability, and depth of lending management and other relevant staff as well as the quality of the institution’s loan review system.

· Changes in the nature and volume of the portfolio and the terms of loans generally offered.

· The existence and effect of any concentrations of credit and changes in the level of such concentrations.

While the allowance for loan and lease losses is maintained at a level believed to be adequate by management for covering estimated losses in the loan and lease portfolio, determination of the allowance is inherently subjective, as it requires estimates, all of which may be susceptible to significant change.  Changes in these estimates may impact the provisions charged to expense in future periods. 

Management believes, based on information currently available, that the allowance for loan and lease losses of $6,267,000 is adequate as of June 30, 2013.

Liquidity

Mid Penn Bank’s objective is to maintain adequate liquidity to meet funding needs at a reasonable cost and to provide contingency plans to meet unanticipated funding needs or a loss of funding sources, while minimizing interest rate risk.  Adequate liquidity provides resources for credit needs of borrowers, for depositor withdrawals and for funding corporate operations.  Sources of liquidity are as follows:

· A growing core deposit base;

· Proceeds from the sale or maturity of investment securities;

· Proceeds from interest-bearing time deposits with other financial institutions;

· Payments received on loans and mortgage-backed securities; and,

· Overnight correspondent bank borrowings on various credit lines; and,

· Borrowing capacity available from the FHLB.

We believe that our core deposits are stable even in periods of changing interest rates.  Liquidity and funds management are governed by policies and are measured on a monthly basis.  These measurements indicate that liquidity generally remains stable and exceeds our minimum defined levels of adequacy.  Other than the trends of continued competitive pressures and volatile interest rates, there are no known demands, commitments, events, or uncertainties that will result in, or that are reasonably likely to result in, liquidity increasing or decreasing in any material way.

Capital Resources

Shareholders' equity, or capital, is evaluated in relation to total assets and the risk associated with those assets.  The greater a corporation’s capital resources, the more likely it is to meet its cash obligations and absorb unforeseen losses.  Too much capital, however, indicates that not enough of the corporation’s earnings have been invested in the continued growth of the business or paid to shareholders.  The buildup makes it difficult for a corporation to offer a competitive return on the shareholders’ capital going forward.  For these reasons capital adequacy has been, and will continue to be, of paramount importance.

Shareholders’ equity decreased during the six months ended June 30, 2013 by $1,126,000, or 2.2%, from December 31, 2012.   Capital has been positively impacted in 2013 by positive earnings available to common shareholders of $1,903,000 and the issuance of the remaining 120 shares of Series B preferred stock, offset by a $2,945,000 decline in other comprehensive income and $58,000 used to repurchase the warrants associated with the CPP.

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MID PENN BANCORP, INC.

Mid Penn maintained the following regulatory capital levels, leverage ratios, and risk-based capital ratios as of June 30, 2013 and December 31, 2012.

(Dollars in thousands)	Capital Adequacy
							To Be Well-Capitalized
							Under Prompt
				Minimum Capital			Corrective
	Actual:			Required:			Action Provisions:
	Amount		Ratio	Amount		Ratio	Amount		Ratio
Corporation
As of June 30, 2013:
Tier 1 Capital (to Average Assets)	$	50,641	7.3%	$	27,905	4.0%	$	N/A	N/A
Tier 1 Capital (to Risk Weighted Assets)		50,641	9.8%		20,624	4.0%		N/A	N/A
Total Capital (to Risk Weighted Assets)		56,998	11.1%		41,248	8.0%		N/A	N/A
Bank
As of June 30, 2013:
Tier 1 Capital (to Average Assets)	$	50,536	7.2%	$	27,905	4.0%	$	34,881	5.0%
Tier 1 Capital (to Risk Weighted Assets)		50,536	9.8%		20,624	4.0%		30,936	6.0%
Total Capital (to Risk Weighted Assets)		56,893	11.0%		41,248	8.0%		51,560	10.0%
Corporation
As of December 31, 2012:
Tier 1 Capital (to Average Assets)	$	48,822	6.8%	$	28,530	4.0%	$	N/A	N/A
Tier 1 Capital (to Risk Weighted Assets)		48,822	10.0%		19,593	4.0%		N/A	N/A
Total Capital (to Risk Weighted Assets)		54,421	11.1%		39,185	8.0%		N/A	N/A
Bank
As of December 31, 2012:
Tier 1 Capital (to Average Assets)	$	48,764	6.9%	$	28,111	4.0%	$	35,138	5.0%
Tier 1 Capital (to Risk Weighted Assets)		48,764	10.0%		19,593	4.0%		29,389	6.0%
Total Capital (to Risk Weighted Assets)		54,363	11.1%		39,185	8.0%		48,981	10.0%

Regulatory Capital Changes

In July 2013, the federal banking agencies issued final rules to implement the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act. The phase-in period for community banking organizations begins January 1, 2015, while larger institutions (generally those with assets of $250 billion or more) must begin compliance on January 1, 2014. The final rules call for the following capital requirements:

· A minimum ratio of common tier 1 capital to risk-weighted assets of 4.5%.

· A minimum ratio of tier 1 capital to risk-weighted assets of 6%.

· A minimum leverage ratio of 4%.

In addition, the final rules establishes a common equity tier 1 capital conservation buffer of 2.5% of risk-weighted assets applicable to all banking organizations. If a banking organization fails to hold capital above the minimum capital ratios and the capital conservation buffer, it will be subject to certain restrictions on capital distributions and discretionary bonus payments. The phase-in period for the capital conservation and countercyclical capital buffers for all banking organizations will begin on January 1, 2016.

Under the proposed rules, accumulated other comprehensive income (AOCI) would have been included in a banking organization’s common equity tier 1 capital. The final rules allow community banks to make a one-time election not to include these additional components of AOCI in regulatory capital and instead use the existing treatment under the general risk-based capital rules that excludes most AOCI components from regulatory capital. The opt-out election must be made in the first call report or FR Y-9 series report that is filed after the financial institution becomes subject to the final rule.

The final rules permanently grandfather non-qualifying capital instruments (such as trust preferred securities and cumulative perpetual preferred stock) issued before May 19, 2010 for inclusion in the tier 1 capital of banking organizations with total consolidated assets less than $15 billion as of December 31, 2009 and banking organizations that were mutual holding companies as of May 19, 2010.

The proposed rules would have modified the risk-weight framework applicable to residential mortgage exposures to require banking organizations to divide residential mortgage exposures into two categories in order to determine the applicable risk weight. In response to

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MID PENN BANCORP, INC.

commenter concerns about the burden of calculating the risk weights and the potential negative effect on credit availability, the final rules do not adopt the proposed risk weights but retain the current risk weights for mortgage exposures under the general risk-based capital rules.

Mid Penn is in the process of assessing the impact of these changes on the regulatory ratios of Mid Penn and Mid Penn Bank on the capital, operations, liquidity and earnings of Mid Penn and Mid Penn Bank.

Capital Purchase Program Participation

On December 19, 2008, Mid Penn entered into and closed a letter agreement with the United States Department of the Treasury (the “Treasury”) pursuant to which the Treasury invested $10,000,000 in Mid Penn under the Treasury’s Capital Purchase Program (the “CPP”).  Under the letter agreement, the Treasury received (1) 10,000 shares of Series A Fixed Rate Cumulative Perpetual Preferred Stock, $1,000 liquidation preference (“Series A Preferred Stock”), and (2) warrants to purchase up to 73,099 shares of the Mid Penn common stock at an exercise price of $20.52 per share (the “Warrants”).

On December 28, 2012, Mid Penn entered into a letter agreement with the Treasury pursuant to which Mid Penn repurchased from the Treasury all 10,000 shares of the Series A Preferred Stock issued to the Treasury, which constitutes all of the issued and outstanding shares of Series A Preferred Stock.  Mid Penn repurchased the Series A Preferred Stock for a purchase price equal to the aggregate liquidation amount of the Preferred Stock of $10,000,000, plus accrued but unpaid dividends of $59,722.  All 10,000 shares of Series A Preferred Stock have subsequently been cancelled.

On January 23, 2013, Mid Penn entered into a letter agreement with the Treasury pursuant to which Mid Penn repurchased from the Treasury on that date the Warrants for $58,479.  The Warrants have subsequently been cancelled.

As of the date hereof, Mid Penn has no further financial obligations under the Series A Preferred Stock, the Warrants, or the Treasury’s CPP.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material change in market risk since December 31, 2012, as reported in Mid Penn’s Form 10-K filed with the SEC on March 25, 2013.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Mid Penn maintains controls and procedures designed to ensure that information required to be disclosed in the reports that Mid Penn files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.  Based upon their evaluation of those controls and procedures as of June 30, 2013, Mid Penn’s management, with the participation of the Principal Executive Officer and Principal Financial and Accounting Officer, concluded that the disclosure controls and procedures were effective as of such date.

Changes in Internal Controls

During the three months ended June 30, 2013, there were no changes in Mid Penn’s internal control over financial reporting, that have materially affected, or are reasonable likely to materially affect, Mid Penn’s internal control over financial reporting.

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MID PENN BANCORP, INC.

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEDINGS

Management is not aware of any litigation that would have a material adverse effect on the consolidated financial position of Mid Penn or its subsidiaries taken as a whole.  There are no proceedings pending other than ordinary routine litigation occurring in the normal course of business. In addition, management does not know of any material proceedings contemplated by governmental authorities against Mid Penn or any of its properties.

ITEM 1A–RISK FACTORS

Management has reviewed the risk factors that were previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2012.  There are no material changes from the risk factors as previously disclosed in the Form 10-K.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 - MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5 – OTHER INFORMATION

None

ITEM 6 – EXHIBITS

· Exhibit 3(i) – The Registrant’s amended Articles of Incorporation (Incorporated by reference to Exhibit 3(i) to Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 11, 2009.)

· Exhibit 3(ii) – Statement with Respect to Shares for Series B Preferred Stock.  (Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on September 28, 2012.)

· Exhibit 3(iii) – The Registrant’s By-laws (Incorporated by reference to Exhibit 3(ii) to Registrant’s Current Report on form 8-K filed with the Securities and Exchange Commission on August 30, 2010.) 

· Exhibit 11 – Statement re:  Computation of Per Share Earnings.  (Incorporated by reference to Part I Item 1 of this Quarterly Report on Form 10-Q.)

· Exhibit 31.1 – Certification of Principal Executive Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a) as added by Section 302 of the Sarbanes-Oxley Act of 2002.

· Exhibit 31.2 - Certification of Principal Financial Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a) as added by Section 302 of the Sarbanes-Oxley Act of 2002.

· Exhibit 32 – Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as added by Section 906 of the Sarbanes-Oxley Act of 2002.

· Exhibit 101.LAB – XBRL Taxonomy Extension Label Linkbase

· Exhibit 101.PRE – XBRL Taxonomy Extension Presentation Linkbase

· Exhibit 101.INS – XBRL Instance Document

· Exhibit 101.SCH – XBRL Taxonomy Extension Schema

· Exhibit 101.CAL – XBRL Taxonomy Extension Calculation Linkbase

· Exhibit 101.DEF – XBRL Taxonomy Extension Definition Linkbase

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MID PENN BANCORP, INC.

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Mid Penn Bancorp, Inc. (Registrant)
By:	/s/ Rory G. Ritrievi
	Rory G. Ritrievi
	President and CEO
	(Principal Executive Officer)
Date:	August 14, 2013
By:	/s/ Kevin W. Laudenslager
	Kevin W. Laudenslager
	Treasurer
	(Principal Financial and Principal Accounting Officer)
Date:	August 14, 2013

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MID PENN BANCORP, INC.

42

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO EXCHANGE ACT RULES

13A-14(A)/15D-14(A) AS ADDED BY SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Rory G. Ritrievi, certify that:

1.I have reviewed this report on Form 10-Q of Mid Penn Bancorp, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Ugust 14
By:	/s/ Rory G. Ritrievi
	President and CEO
Date:	August 14, 2013

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO EXCHANGE ACT RULES

13A-14(A)/15D-14(A) AS ADDED BY SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Kevin W. Laudenslager, certify that:

1.I have reviewed this report on Form 10-Q of Mid Penn Bancorp, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

By:	/s/ Kevin W. Laudenslager
	Vice President and Treasurer
Date:	August 14, 2013

EX-32

Exhibit 32

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADDED BY SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Mid Penn Bancorp, Inc. (the “Corporation”) on Form 10-Q for the period ending June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Rory G. Ritrievi, President and CEO, and I, Kevin W. Laudenslager, Treasurer, certify, pursuant to 18 U.S.C. Section 1350, as added pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

2. To my knowledge, the information contained in the Report fairly presents, in all material respects the financial condition and results of operations of Mid Penn Bancorp, Inc. as of the dates and for the periods expressed in the Report. 

By:	/s/ Rory G. Ritrievi
	President and CEO
Date:	August 14, 2013

By:	/s/ Kevin W. Laudenslager
	Vice President and Treasurer
Date:	August 14, 2013

XML

Stock Issued Under Private Placement Offering

6 Months Ended

Jun. 30, 2013

Stock Issued Under Private Placement Offering

(8)         Preferred Stock

On December 19, 2008, Mid Penn entered into and closed a letter agreement with the United States Department of the Treasury (the “Treasury”) pursuant to which the Treasury invested $10,000,000 in the Mid Penn Bank under the Treasury’s Capital Purchase Program (the “CPP”).  Under the letter agreement, the Treasury received (1) 10,000 shares of Series A Fixed Rate Cumulative Perpetual Preferred Stock, $1,000 liquidation preference (“Series A Preferred Stock”), and (2) warrants to purchase up to 73,099 shares of Mid Penn common stock at an exercise price of $20.52 per share (the “Warrants”).

On December 28, 2012, Mid Penn entered into a letter agreement with the Treasury pursuant to which Mid Penn repurchased from the Treasury all 10,000 shares of the Series A Preferred Stock issued to the Treasury which constitutes all of the issued and outstanding shares of Series A Preferred Stock.  Mid Penn repurchased the Series A Preferred Stock for a purchase price equal to the aggregate liquidation amount of the Preferred Stock of $10,000,000, plus accrued but unpaid dividends of $59,722.  All 10,000 shares of Series A Preferred Stock have subsequently been cancelled.

On January 23, 2013, Mid Penn entered into a letter agreement with the Treasury pursuant to which Mid Penn repurchased from the Treasury on that date the Warrants for $58,479.  The Warrants have subsequently been cancelled. 

As of the date hereof, Mid Penn has no further financial obligations under the Series A Preferred Stock, the Warrants or the Treasury’s CPP.

Preferred Class B [Member]

Stock Issued Under Private Placement Offering

(9)         Stock Issued Under Private Placement Offering

On September 26, 2012, Mid Penn filed with the Pennsylvania Department of State a Statement with Respect to Shares which, effective upon filing, designated a series of preferred stock as “7% Non-Cumulative Non-Voting Non-Convertible Perpetual Preferred Stock, Series B” (“Series B Preferred Stock”), and set forth the voting and other powers, designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions of the Series B Preferred Stock.

Sales of Preferred Stock

Mid Penn sold shares of its Series B Preferred Stock, in transactions exempt from registration under the Securities Act of 1933, pursuant to Section 4(a)(2) thereof.

Between September 26, 2012, and December 31, 2012, Mid Penn sold 4,880 shares of its Series B Preferred Stock for total gross proceeds of $4,880,000, which have been offset by issuance costs of $50,000.  On January 3, 2013, 120 additional shares were sold resulting in total gross proceeds of $5,000,000 for the Series B Preferred Stock offering.

The following table summarizes the Series B Preferred Stock shares sold and the gross proceeds received through the private placement offering as of June 30, 2013:

(Dollars in thousands)
Period	Shares	Gross Proceeds
September 26, 2012 - September 30, 2012	345	$	345,000
October 1, 2012 - December 31, 2012	4,535		4,535,000
January 1, 2013 - June 30, 2013	120		120,000
Total	5,000	$	5,000,000

Terms of the Series B Preferred Stock

The annual dividend rate for the Series B Preferred Stock is 7% per annum of the liquidation preference of the Series B Preferred Stock or $70.00 per annum for each share of Series B Preferred Stock.  The Board of Directors must approve each dividend payment from legally available funds.  Dividends are payable to holders of record of the Series B Preferred Stock as they appear on our books on the record dates fixed by our Board of Directors.  Dividends on any of Series B Preferred Stock are non-cumulative and we currently expect them to be declared quarterly for payment on February 15, May 15, August 15, and November 15 of each year.  If a dividend payment date is not a business day, the dividend will be paid on the immediately preceding business day but no additional dividend payment will be prorated from the date of purchase to the first dividend payment date over a quarterly dividend period of 90 days.

Mid Penn may redeem shares of its Series B Preferred Stock at its option, in whole or in part, at any time subject to prior approval of the Federal Reserve Board, if then required, at a redemption price of $1,020 per share of Series B Preferred Stock plus an amount equal to any declared but unpaid dividends and in accordance with the terms and conditions set forth in a Certificate of Designations for the Series B Preferred Stock as filed with the Pennsylvania Department of State.

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Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
INTEREST INCOME
Interest & fees on loans and leases	$ 6,494	$ 7,085	$ 12,755	$ 13,876
Interest on interest-bearing balances	29	60	76	125
Interest and dividends on investment securities:
U.S. Treasury and government agencies	123	329	223	765
State and political subdivision obligations, tax exempt	493	404	976	813
Other securities	8	5	14	10
Interest on federal funds sold and securities purchased under agreements to resell	6	2	11	6
Total Interest Income	7,153	7,885	14,055	15,595
INTEREST EXPENSE
Interest on deposits	1,130	1,618	2,335	3,407
Interest on short-term borrowings	7	1	7	1
Interest on long-term debt	169	243	407	487
Total Interest Expense	1,306	1,862	2,749	3,895
Net Interest Income	5,847	6,023	11,306	11,700
PROVISION FOR LOAN AND LEASE LOSSES	415	225	910	525
Net Interest Income After Provision for Loan and Lease Losses	5,432	5,798	10,396	11,175
NONINTEREST INCOME
Income from fiduciary activities	110	189	249	301
Service charges on deposits	146	136	280	265
Net gain on sales of investment securities	112	10	112	26
Earnings from cash surrender value of life insurance	58	62	116	124
Mortgage banking income	115	137	225	259
ATM debit card interchange income	127	119	246	239
Other income	170	278	460	455
Total Noninterest Income	838	931	1,688	1,669
NONINTEREST EXPENSE
Salaries and employee benefits	2,685	2,619	5,542	5,215
Occupancy expense, net	269	257	579	535
Equipment expense	345	286	661	580
Pennsylvania Bank Shares tax expense	133	128	261	259
FDIC Assessment	131	302	333	603
Legal and professional fees	166	138	320	245
Director fees and benefits expense	77	88	157	135
Marketing and advertising expense	62	128	105	197
Computer expense	246	161	427	323
Telephone expense	104	103	202	210
(Gain) loss on sale/write-down of foreclosed assets	(303)	50	(322)	58
Intangible amortization	7	15	14	31
Loan collection costs	76	39	146	148
Other expenses	614	633	1,224	1,146
Total Noninterest Expense	4,612	4,947	9,649	9,685
INCOME BEFORE PROVISION FOR INCOME TAXES	1,658	1,782	2,435	3,159
Provision for income taxes	292	422	384	665
NET INCOME	1,366	1,360	2,051	2,494
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	1,279	1,231	1,903	2,237
PER COMMON SHARE DATA:
Basic Earnings Per Common Share	$ 0.37	$ 0.35	$ 0.55	$ 0.64
Diluted Earnings Per Common Share	$ 0.37	$ 0.35	$ 0.55	$ 0.64
Cash Dividends	$ 0.05	$ 0.05	$ 0.05	$ 0.10
Series A Preferred Stock [Member]
NONINTEREST EXPENSE
Preferred stock dividends and discount accretion		129	14	257
Series B Preferred Stock [Member]
NONINTEREST EXPENSE
Preferred stock dividends and discount accretion	$ 87		$ 134

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Investment Securities

6 Months Ended

Jun. 30, 2013

Investment Securities [Abstract]

Investment Securities

(2)           Investment Securities

Securities to be held for indefinite periods, but not intended to be held to maturity, are classified as available for sale and carried at fair value.  Securities held for indefinite periods include securities that management intends to use as part of its asset and liability management strategy and that may be sold in response to liquidity needs, changes in interest rates, resultant prepayment risk, and other factors related to interest rate and resultant prepayment risk changes.

Realized gains and losses on dispositions are based on the net proceeds and the adjusted book value of the securities sold, using the specific identification method.  Unrealized gains and losses on investment securities available for sale are based on the difference between book value and fair value of each security.  These gains and losses are credited or charged to other comprehensive income, whereas realized gains and losses flow through the Corporation’s results of consolidated statements of income.

Accounting Standards Codification (“ASC”) Topic 320, Investments – Debt and Equity Securities, clarifies the interaction of the factors that should be considered when determining whether a debt security is other-than-temporarily impaired.  For debt securities, management must assess whether (a) it has the intent to sell the security and (b) it is more likely than not that it will be required to sell the security prior to its anticipated recovery.  These steps are done before assessing whether the entity will recover the cost basis of the investment. Previously, this assessment required management to assert it has both the intent and the ability to hold a security for a period of time sufficient to allow for an anticipated recovery in fair value to avoid recognizing other-than-temporary impairment.  This change does not affect the need to forecast recovery of the value of the security through either cash flows or market price.

In instances when a determination is made that other-than-temporary impairment exists but the investor does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt security prior to its anticipated recovery, this guidance changes the presentation and amount of the other-than-temporary impairment recognized in the income statement. The other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors.  The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings.  The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income.

At June 30, 2013 and December 31, 2012, amortized cost, fair value, and unrealized gains and losses on investment securities are as follows:

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
June 30, 2013
Available for sale securities:
U.S. Treasury and U.S. government agencies	$	13,189	$	882	$	-	$	14,071
Mortgage-backed U.S. government agencies		52,582		273		758		52,097
State and political subdivision obligations		68,572		995		2,152		67,415
Equity securities		400		-		27		373
	$	134,743	$	2,150	$	2,937	$	133,956

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
December 31, 2012
Available for sale securities:
U.S. Treasury and U.S. government agencies	$	16,394	$	1,346	$	-	$	17,740
Mortgage-backed U.S. government agencies		66,783		393		490		66,686
State and political subdivision obligations		67,033		2,542		96		69,479
Equity securities		400		-		10		390
	$	150,610	$	4,281	$	596	$	154,295

Estimated fair values of debt securities are based on quoted market prices, where applicable.  If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments, adjusted for differences between the quoted instruments and the instruments being valued.

Included in equity securities is an investment in Access Capital Strategies, an equity fund that invests in low to moderate income financing projects. This initial investment was purchased in 2004 to help fulfill the Bank’s regulatory requirement of the Community Reinvestment Act and an additional investment was purchased in 2011.  At June 30, 2013 and December 31, 2012, the investment is reported at fair value.

Investment securities having a fair value of $96,026,000 at June 30, 2013 and $96,124,000 at December 31, 2012, were pledged to secure public deposits and other borrowings.

Mid Penn realized gross gains of $112,000 on sales of securities available for sale during the three and six month periods ended June 30, 2013.  Mid Penn realized gross gains of $10,000 and $26,000 on sales of securities available for sale during the three and six months ended June 30, 2012.  Mid Penn realized gross losses on the sale of securities available for sale of $0 during the three and six month periods ended June 30, 2013 and June 30, 2012.

The following table presents gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2013 and December 31, 2012.

(Dollars in thousands)	Less Than 12 Months				12 Months or More				Total
June 30, 2013	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Available for sale securities:
Mortgage-backed U.S. government agencies	$	24,426	$	643	$	7,151	$	115	$	31,577	$	758
State and political subdivision obligations		34,667		2,089		1,207		63		35,874		2,152
Equity securities		-		-		400		27		400		27
Total temporarily impaired
available for sale securities	$	59,093	$	2,732	$	8,758	$	205	$	67,851	$	2,937

(Dollars in thousands)	Less Than 12 Months				12 Months or More				Total
December 31, 2012	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Available for sale securities:
Mortgage-backed U.S. government agencies	$	30,345	$	270	$	15,839	$	220	$	46,184	$	490
State and political subdivision obligations		9,389		66		1,231		30		10,620		96
Equity securities		-		-		390		10		390		10
Total temporarily impaired
available for sale securities	$	39,734	$	336	$	17,460	$	260	$	57,194	$	596

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis; and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, and the financial condition and near term prospects of the issuer.  In addition, for debt securities, the Corporation considers (a) whether management has the intent to sell the security, (b) it is more likely than not that management will be required to sell the security prior to its anticipated recovery, and (c) whether management expects to recover the entire amortized cost basis.  For equity securities, management considers the intent and ability to hold securities until recovery of unrealized losses.

At June 30, 2013, 115 debt securities with unrealized losses depreciated4.31% from their amortized cost basis.  At December 31, 2012, 73 debt securities with unrealized losses depreciated 1.03% from their amortized cost basis.  These securities are issued by either the U.S. Government or other governmental agencies. The unrealized losses were determined principally by reference to current interest rates for similar types of securities. In analyzing an issuer's financial condition, management considers whether the U.S. Government or its agencies issued the securities, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer's financial condition. Based on the above conditions management has determined that no declines are deemed to be other-than-temporary.

The table below is the maturity distribution of investment securities at amortized cost and fair value.

(Dollars in thousands)	June 30, 2013
	Amortized		Fair
	Cost		Value
Due in 1 year or less	$	-	$	-
Due after 1 year but within 5 years		17,149		18,222
Due after 5 years but within 10 years		27,685		27,787
Due after 10 years		36,927		35,477
		81,761		81,486
Mortgage-backed securities		52,582		52,097
Equity securities		400		373
	$	134,743	$	133,956

Mortgage-backed securities at June 30, 2013, had an average life of 3.2 years.

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Postretirement Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2013

Defined Benefit Plans [Abstract]

Schedule of Net Periodic Benefit Costs [Table Text Block]

	Three Months Ended June 30,
(Dollars in thousands)	Pension Benefits				Other Benefits
	2013		2012		2013		2012
Service cost	$	8	$	5	$	5	$	5
Interest cost		11		11		8		9
Amortization of prior service cost		6		6		1		1
Net periodic benefit cost	$	25	$	22	$	14	$	15

	Six Months Ended June 30,
(Dollars in thousands)	Pension Benefits				Other Benefits
	2013		2012		2013		2012
Service cost	$	16	$	11	$	9	$	10
Interest cost		22		23		17		18
Amortization of prior service cost		11		11		1		1
Net periodic benefit cost	$	49	$	45	$	27	$	29

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Earnings Per Common Share

6 Months Ended

Jun. 30, 2013

Earnings per Common Share [Abstract]

Earnings per Common Share

(10)         Earnings per Common Share

Earnings per share are computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during each of the years presented.  The following data show the amounts used in computing basic and diluted earnings per share.  As shown in the table that follows, diluted earnings per share is computed using weighted average common shares outstanding, plus weighted average common shares available from the exercise of all dilutive stock warrants issued to the U.S. Treasury under the provisions of the Capital Purchase Program, based on the average share price of Mid Penn’s common stock during the period.

The computations of basic earnings per common share follow:

(Dollars in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Net Income	$	1,366	$	1,360	$	2,051	$	2,494
Less:  Dividends on Series A preferred stock		-		(125)		-		(250)
Accretion of Series A preferred stock discount		-		(4)		(14)		(7)
Dividends on Series B preferred stock		(87)		-		(134)		-
Net income available to common shareholders	$	1,279	$	1,231	$	1,903	$	2,237
Weighted average common shares outstanding		3,491,069		3,485,867		3,490,403		3,485,203
Basic earnings per common share	$	0.37	$	0.35	$	0.55	$	0.64

The computations of diluted earnings per common share follow:

(Dollars in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Net income available to common stockholders	$	1,279	$	1,231	$	1,903	$	2,237
Weighted average number of common shares outstanding		3,491,069		3,485,867		3,490,403		3,485,203
Dilutive effect of potential common stock arising from stock warrants:
Exercise of outstanding stock warrants issued to U.S. Treasury
under the Capital Repurchase Program		-		-		-		-
Adjusted weighted-average common shares outstanding		3,491,069		3,485,867		3,490,403		3,485,203
Diluted earnings per common share	$	0.37	$	0.35	$	0.55	$	0.64

As of June 30, 2013 Mid Penn no longer had any warrants outstanding.  As of June 30, 2012, Mid Penn had 73,099warrants outstanding that were anti-dilutive because the fair value of the common stock was below the $20.52 exercise price of these warrants.

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Stock Issued Under Private Placement Offering (Narrative) (Details) (Preferred Class B [Member], USD $)	0 Months Ended		3 Months Ended			6 Months Ended	9 Months Ended
	Jan. 03, 2013	Sep. 30, 2012	Dec. 31, 2012	Dec. 31, 2012	Jan. 03, 2013	Jun. 30, 2013	Jun. 30, 2013
Preferred Class B [Member]
Development Stage Entities, Stock Issued, Shares, Issued for Cash	120	345	4,535	4,880		120	5,000
Proceeds from Issuance of Private Placement		$ 345,000	$ 4,535,000	$ 4,880,000	$ 5,000,000	$ 120,000	$ 5,000,000
Payments of Stock Issuance Costs				$ 50,000
Preferred Stock, Dividend Rate, Percentage						7.00%
Preferred Stock, Dividend Rate, Per Share Amount						$ 70.00
Preferred Stock, Dividend Payment Terms						Dividends on any of Series B Preferred Stock are non-cumulative and we currently expect them to be declared quarterly for payment on February 15, May 15, August 15, and November 15 of each year
Preferred Stock, Redemption Price Per Share						$ 1,020	$ 1,020

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Loans and Allowance for Loan and Lease Losses (Allowance For Loan Losses And Recorded Investment In Financing Receivables) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended									3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012	Jun. 30, 2013 Commercial and industrial [Member]	Jun. 30, 2012 Commercial and industrial [Member]	Jun. 30, 2013 Commercial and industrial [Member]	Jun. 30, 2012 Commercial and industrial [Member]	Dec. 31, 2012 Commercial and industrial [Member]	Jun. 30, 2013 Commercial real estate [Member]	Jun. 30, 2012 Commercial real estate [Member]	Jun. 30, 2013 Commercial real estate [Member]	Jun. 30, 2012 Commercial real estate [Member]	Dec. 31, 2012 Commercial real estate [Member]	Jun. 30, 2013 Commercial real estate - construction [Member]	Jun. 30, 2012 Commercial real estate - construction [Member]	Jun. 30, 2013 Commercial real estate - construction [Member]	Jun. 30, 2012 Commercial real estate - construction [Member]	Dec. 31, 2012 Commercial real estate - construction [Member]	Jun. 30, 2013 Lease financing [Member]	Mar. 31, 2013 Lease financing [Member]	Dec. 31, 2012 Lease financing [Member]	Jun. 30, 2012 Lease financing [Member]	Mar. 31, 2012 Lease financing [Member]	Dec. 31, 2011 Lease financing [Member]	Jun. 30, 2013 Residential mortgage [Member]	Jun. 30, 2012 Residential mortgage [Member]	Jun. 30, 2013 Residential mortgage [Member]	Jun. 30, 2012 Residential mortgage [Member]	Dec. 31, 2012 Residential mortgage [Member]	Jun. 30, 2013 Home equity [Member]	Jun. 30, 2012 Home equity [Member]	Jun. 30, 2013 Home equity [Member]	Jun. 30, 2012 Home equity [Member]	Dec. 31, 2012 Home equity [Member]	Jun. 30, 2013 Consumer [Member]	Jun. 30, 2012 Consumer [Member]	Jun. 30, 2013 Consumer [Member]	Jun. 30, 2012 Consumer [Member]	Dec. 31, 2012 Consumer [Member]	Jun. 30, 2013 Unallocated [Member]	Jun. 30, 2012 Unallocated [Member]	Jun. 30, 2013 Unallocated [Member]	Jun. 30, 2012 Unallocated [Member]	Dec. 31, 2012 Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan and lease losses, Beginning Balance	$ 5,870	$ 6,577	$ 5,509	$ 6,772		$ 1,281	$ 1,755	$ 1,298	$ 2,274		$ 3,543	$ 3,362	$ 3,112	$ 3,544		$ 39	$ 27	$ 64	$ 23		$ 1	$ 1	$ 1	$ 2	$ 2	$ 2	$ 603	$ 454	$ 581	$ 362		$ 349	$ 323	$ 343	$ 337		$ 105	$ 524	$ 101	$ 87		$ (51)	$ 130	$ 9	$ 143
Charge-offs	(125)	(230)	(280)	(752)			(12)	(21)	(216)		(93)	(149)	(118)	(455)			(5)		(5)								(22)	(59)	(126)	(69)							(10)	(5)	(15)	(7)
Recoveries	107	13	128	40		9	4	16	8		2	2	5	5		8		8	2								23		23			2	1	5	9		63	6	71	16
Provision for loan and lease losses	415	225	910	525		(41)	(164)	(44)	(483)		367	225	820	346		(11)	5	(36)	7								56	80	182	182		58	17	61	(5)		(67)	5	(66)	434		53	57	(7)	44
Allowance for Loan Losses, Ending Balance	6,267	6,585	6,267	6,585		1,249	1,583	1,249	1,583		3,819	3,440	3,819	3,440		36	27	36	27		1	1	1	2	2	2	660	475	660	475		409	341	409	341		91	530	91	530		2	187	2	187
Allowance for loan losses: Ending balance: individually evaluated for impairment	2,020	1,757	2,020	1,757	1,383	82	320	82	320	111	1,871	975	1,871	975	1,200	28		28		54							29	2	29	2		10	15	10	15	18		445		445
Allowance for loan losses: Ending balance: collectively evaluated for impairment	4,247	4,828	4,247	4,828	4,126	1,167	1,263	1,167	1,263	1,187	1,948	2,465	1,948	2,465	1,912	8	27	8	27	10	1		1	2			631	473	631	473	581	399	326	399	326	325	91	85	91	85	101	2	187	2	187	9
Loans receivables, Ending Balance	518,658	488,670	518,658	488,670	484,220	85,573	77,481	85,573	77,481	77,883	299,029	297,373	299,029	297,373	284,867	38,840	30,304	38,840	30,304	33,231	1,596		1,305	1,724			63,340	49,778	63,340	49,778	57,455	24,338	24,115	24,338	24,115	22,920	5,942	7,895	5,942	7,895	6,559
Loans receivables: Ending balance: individually evaluated for impairment	14,457	10,896	14,457	10,896	9,744	238	1,374	238	1,374	415	13,906	8,470	13,906	8,470	9,084	54	115	54	115	54							84	17	84	17		175	335	175	335	191		585		585
Loans Receivable: Ending balance: collectively evaluated for impairment	$ 504,201	$ 477,774	$ 504,201	$ 477,774	$ 474,476	$ 85,335	$ 76,107	$ 85,335	$ 76,107	$ 77,468	$ 285,123	$ 288,903	$ 285,123	$ 288,903	$ 275,783	$ 38,786	$ 30,189	$ 38,786	$ 30,189	$ 33,177	$ 1,596		$ 1,305	$ 1,724			$ 63,256	$ 49,761	$ 63,256	$ 49,761	$ 57,455	$ 24,163	$ 23,780	$ 24,163	$ 23,780	$ 22,729	$ 5,942	$ 7,310	$ 5,942	$ 7,310	$ 6,559

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Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2013

Earnings per Common Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The computations of basic earnings per common share follow:

(Dollars in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Net Income	$	1,366	$	1,360	$	2,051	$	2,494
Less:  Dividends on Series A preferred stock		-		(125)		-		(250)
Accretion of Series A preferred stock discount		-		(4)		(14)		(7)
Dividends on Series B preferred stock		(87)		-		(134)		-
Net income available to common shareholders	$	1,279	$	1,231	$	1,903	$	2,237
Weighted average common shares outstanding		3,491,069		3,485,867		3,490,403		3,485,203
Basic earnings per common share	$	0.37	$	0.35	$	0.55	$	0.64

The computations of diluted earnings per common share follow:

(Dollars in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Net income available to common stockholders	$	1,279	$	1,231	$	1,903	$	2,237
Weighted average number of common shares outstanding		3,491,069		3,485,867		3,490,403		3,485,203
Dilutive effect of potential common stock arising from stock warrants:
Exercise of outstanding stock warrants issued to U.S. Treasury
under the Capital Repurchase Program		-		-		-		-
Adjusted weighted-average common shares outstanding		3,491,069		3,485,867		3,490,403		3,485,203
Diluted earnings per common share	$	0.37	$	0.35	$	0.55	$	0.64

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Stock Issued Under Private Placement Offering (Tables)

6 Months Ended

Jun. 30, 2013

Stock Issued Under Private Placement Offering [Abstract]

Proceeds From Private Placement [Table Text Block]

(Dollars in thousands)
Period	Shares	Gross Proceeds
September 26, 2012 - September 30, 2012	345	$	345,000
October 1, 2012 - December 31, 2012	4,535		4,535,000
January 1, 2013 - June 30, 2013	120		120,000
Total	5,000	$	5,000,000

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Accumulated Other Comprehensive Income (Accumulated Other Comprehensive Income, Net of Taxes) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Accumulated Other Comprehensive Income, Net of Taxes [Abstract]
Unrealized Gains on Securities	$ (520)	$ 2,433
Defined Benefit Plan Liability	(132)	(140)
Accumulated Other Comprehensive Income	$ (652)	$ 2,293

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Loans and Allowance for Loan and Lease Losses (Impaired Loans by Loan Portfolio Class) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Commercial and industrial [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Recorded Investment	$ 34	$ 192
Impaired Loans with No Allowance: Unpaid Principal Balance	70	870
Impaired Loans with Allowance: Recorded Investment	204	223
Impaired Loans with Allowance: Unpaid Principal Balance	331	351
Impaired Loans with Allowance: Related Allowance	82	111
Impaired Loans: Total Recorded Investment	238	415
Impaired Loans: Total Unpaid Principal Balance	401	1,221
Commercial real estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Recorded Investment	4,795	6,570
Impaired Loans with No Allowance: Unpaid Principal Balance	7,818	10,773
Impaired Loans with Allowance: Recorded Investment	9,111	2,514
Impaired Loans with Allowance: Unpaid Principal Balance	9,313	2,672
Impaired Loans with Allowance: Related Allowance	1,871	1,200
Impaired Loans: Total Recorded Investment	13,906	9,084
Impaired Loans: Total Unpaid Principal Balance	17,131	13,445
Commercial real estate - construction [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Allowance: Recorded Investment	54	54
Impaired Loans with Allowance: Unpaid Principal Balance	54	54
Impaired Loans with Allowance: Related Allowance	28	54
Impaired Loans: Total Recorded Investment	54	54
Impaired Loans: Total Unpaid Principal Balance	54	54
Residential mortgage [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Allowance: Recorded Investment	84
Impaired Loans with Allowance: Unpaid Principal Balance	84
Impaired Loans with Allowance: Related Allowance	29
Home equity [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Recorded Investment	121	124
Impaired Loans with No Allowance: Unpaid Principal Balance	260	261
Impaired Loans with Allowance: Recorded Investment	54	67
Impaired Loans with Allowance: Unpaid Principal Balance	54	71
Impaired Loans with Allowance: Related Allowance	10	18
Impaired Loans: Total Recorded Investment	175	191
Impaired Loans: Total Unpaid Principal Balance	314	332
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Unpaid Principal Balance		578
Impaired Loans: Total Recorded Investment		$ 578

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Fair Value Measurements (Assets Measured at Fair Value on Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	$ 133,956	$ 154,295
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	373	390
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	133,583	153,905
U.S. Treasury and U.S. government agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	14,071	17,740
U.S. Treasury and U.S. government agencies [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	14,071	17,740
Mortgage-backed U.S. government agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	52,097	66,686
Mortgage-backed U.S. government agencies [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	52,097	66,686
State and political subdivision obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	67,415	69,479
State and political subdivision obligations [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	67,415	69,479
Equity securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	373	390
Equity securities [Member] | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	$ 373	$ 390

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Stock Issued Under Private Placement Offering (Proceeds from Private Placement) (Details) (Preferred Class B [Member], USD $)	0 Months Ended		3 Months Ended			6 Months Ended	9 Months Ended
	Jan. 03, 2013	Sep. 30, 2012	Dec. 31, 2012	Dec. 31, 2012	Jan. 03, 2013	Jun. 30, 2013	Jun. 30, 2013
Preferred Class B [Member]
Development Stage Entities, Stock Issued, Shares, Issued for Cash	120	345	4,535	4,880		120	5,000
Proceeds from Issuance of Private Placement		$ 345,000	$ 4,535,000	$ 4,880,000	$ 5,000,000	$ 120,000	$ 5,000,000

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Investment Securities (Investments Classified by Contractual Maturity Date) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Schedule of Investments [Line Items]
Available for sale Securities, Amortized Cost, Due after 1 year but within 5 years	$ 17,149
Available for sale Securities, Amortized Cost, Due after 5 years but within 10 years	27,685
Available for sale Securities, Amortized Cost, Due after 10 years	36,927
Available-for-sale Securities, Debt Maturities, Single Maturity Date, Amortized Cost Basis, Total	81,761
Equity Securities, Amortized Cost	400
Available-for-sale Securities, Amortized Cost Basis	134,743	150,610
Available for sale Securities, Fair Value, Due after 1 year but within 5 years	18,222
Available for sale Securities, Fair Value, Due after 5 years but within 10 years	27,787
Available for sale Securities, Fair Value, Due after 10 years	35,477
Available-for-sale Securities, Debt Maturities, Single Maturity Date, Fair Value, Total	81,486
Equity Securities, Fair Value	373
Available for sale Securities, Fair Value	133,956	154,295
Mortgage-backed securities [Member]
Schedule of Investments [Line Items]
Available for sale Securities without a Single Maturity Date, Amortized Cost	52,582
Available for sale securities without a Single Maturity Date, Fair Value	$ 52,097

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Fair Value Measurements (Fair Value, by Balance Sheet Grouping) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets: Cash and cash equivalents	$ 10,395	$ 15,473
Financial Assets: Interest-bearing time balances with other financial institutions	13,433	23,563
Financial Assets: Net loans and leases	522,136	495,181
Financial Assets: Restricted investment in bank stocks	3,253	2,503
Financial Assets: Accrued interest receivable	2,843	2,893
Financial Assets: Mortgage servicing rights	211	233
Financial Liabilities: Deposits	612,727	629,096
Financial Liabilities: Long-term debt	12,208	23,240
Financial Liabilities: Accrued interest payable	777	620
Financial Assets: Cash and cash equivalents, Carrying Value	10,395	15,473
Available-for-sale Securities	133,956	154,295
Financial Assets: Interest bearing time balances with other financial institutions, Carrying Value	13,433	23,563
Financial Assets: Net loans and leases, Carrying Value	512,391	478,711
Financial Assets: Restricted investment in bank stocks, Carrying Value	3,253	2,503
Financial Assets: Acrued interest receivable, Carrying Value	2,843	2,893
Financial Assets: Mortgage Servicing Rights, Carrying Value	211	233
Financial Liabilities: Deposits, Carrying Value	609,973	625,461
Financial Liabilities: Long-term debt, Carrying Value	11,734	22,510
Financial Liabilities: Accrued interest payable, Carrying Value	777	620
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	373	390
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Liabilities: Deposits	612,727
Financial Liabilities: Long-term debt	12,208
Available-for-sale Securities	133,583	153,905
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets: Net loans and leases	522,136
Commitments to Extend Credit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Off-balance sheet financial instruments	0	0
Off-balance sheet financial instruments, Carrying Value	0	0
Standby Letters Of Credit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Off-balance sheet financial instruments	0	0
Off-balance sheet financial instruments, Carrying Value	$ 0	$ 0

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Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2013

Accumulated Other Comprehensive Income, Net of Taxes [Abstract]

Accumulated Other Comprehensive Income, Net of Taxes [Table Text Block]

(Dollars in thousands)	Unrealized (Loss) Gain on Securities		Defined Benefit Plan Liability		Accumulated Other Comprehensive (Loss) Income
Balance - June 30, 2013	$	(520)	$	(132)	$	(652)
Balance - December 31, 2012	$	2,433	$	(140)	$	2,293

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Consolidated Statements of Comprehensive Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Consolidated Statements of Comprehensive Income (Parenthetical) [Abstract]
Unrealized gains arising during the period on available for sale securities, tax	$ (1,311)	$ 149	$ (1,520)	$ 196
Reclassification adjustment for net gain on sales of available for sale securities included in net income, tax	(38)	(4)	(38)	(9)
Change in defined benefit plans, tax	$ 40	$ 10	$ 42	$ (1)

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Operating Activities:
Net Income	$ 2,051	$ 2,494
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan and lease losses	910	525
Depreciation	618	546
Amortization of intangibles	36	5
Net amortization of securities premiums	1,718	175
Gain on sales of investment securities	(112)	(26)
Earnings on cash surrender value of life insurance	(116)	(124)
(Gain) loss on disposal of property, plant, and equipment	(8)	1
(Gain) loss on sale/write-down of foreclosed assets	(322)	58
Deferred income tax (benefit) expense	(967)	171
Decrease in accrued interest receivable	50	87
Decrease in other assets	1,032	516
Increase in accrued interest payable	157	38
Increase (decrease) in other liabilities	170	(475)
Net Cash Provided by Operating Activities	5,217	3,991
Investing Activities:
Net decrease in interest-bearing balances	10,130	2,629
Proceeds from the maturity of investment securities	24,690	16,587
Proceeds from the sale of investment securities	3,286	7,717
Purchases of investment securities	(13,715)	(12,940)
(Purchases) redemptions of restricted investment in bank stock	(750)	303
Net increase in loans and leases	(35,852)	(5,842)
Purchases of bank premises and equipment	(511)	(452)
Proceeds from the sale of bank premises and equipment		42
Proceeds from sale of foreclosed assets	1,397	1,201
Net Cash (Used In) Provided by Investing Activities	(11,325)	9,245
Financing Activities:
Net decrease in demand deposits and savings accounts	(2,676)	(551)
Net decrease in time deposits	(12,812)	(23,090)
Net increase in short-term borrowings	27,512	3,445
Common stock dividend paid	(174)	(348)
Employee Stock Purchase Plan	28	28
Warrant repurchase	(58)
Long-term debt repayment	(10,776)	(95)
Net Cash Provided By (Used In) Financing Activities	1,030	(20,861)
Net decrease in cash and cash equivalents	(5,078)	(7,625)
Cash and cash equivalents, beginning of period	15,473	17,841
Cash and cash equivalents, end of period	10,395	10,216
Supplemental Disclosures of Cash Flow Information:
Interest paid	2,592	3,857
Income taxes paid	100	1,085
Supplemental Noncash Disclosures:
Loan transfers to foreclosed assets held for sale	1,262	1,865
Series A Preferred Stock [Member]
Financing Activities:
Preferred stock dividend paid		(250)
Series B Preferred Stock [Member]
Financing Activities:
Preferred stock dividend paid	(134)
Preferred Stock issuance	$ 120

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Loans and Allowance for Loan and Lease Losses

6 Months Ended

Jun. 30, 2013

Loans and Allowance for Loan and Lease Losses [Abstract]

Loans and Allowance for Loan and Lease Losses

(3)           Loans and Allowance for Loan and Lease Losses

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield (interest income) of the related loans. These amounts are generally being amortized over the contractual life of the loan.  Premiums and discounts on purchased loans are amortized as adjustments to interest income using the effective yield method.

The loan portfolio is segmented into commercial and consumer loans.  Commercial loans consist of the following classes: commercial and industrial, commercial real estate, commercial real estate-construction and lease financing.  Consumer loans consist of the following classes: residential mortgage loans, home equity loans and other consumer loans.

For all classes of loans, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days or more past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan and lease losses. Interest received on nonaccrual loans, including impaired loans, generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt.  The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments.

Commercial and industrial

Mid Penn originates commercial and industrial loans.  Most of the Bank’s commercial and industrial loans have been extended to finance local and regional businesses and include short-term loans to finance machinery and equipment purchases, inventory, and accounts receivable.  Commercial loans also involve the extension of revolving credit for a combination of equipment acquisitions and working capital in expanding companies.

The maximum term for loans extended on machinery and equipment is based on the projected useful life of such machinery and equipment.  Generally, the maximum term on non-mortgage lines of credit is one year.  The loan-to-value ratio on such loans and lines of credit generally may not exceed 80% of the value of the collateral securing the loan.  The Bank’s commercial business lending policy includes credit file documentation and analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral as well as an evaluation of conditions affecting the borrower.  Analysis of the borrower’s past, present, and future cash flows is also an important aspect of the Bank’s current credit analysis.  Nonetheless, such loans are believed to carry higher credit risk than more traditional investments.

Commercial and industrial loans typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business.  As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself, which, in turn, is likely to be dependent upon the general economic environment.  Mid Penn’s commercial and industrial loans are usually, but not always, secured by business assets and personal guarantees.  However, the collateral securing the loans may depreciate over time, may be difficult to appraise, and may fluctuate in value based on the success of the business.

Commercial real estate and commercial real estate - construction

Commercial real estate and commercial real estate construction loans generally present a higher level of risk than loans secured by one to four family residences.  This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income producing properties, and the increased difficulty of evaluating and monitoring these types of loans.  In addition, the repayment of loans secured by commercial real estate is typically dependent upon the successful operation of the related real estate project.  If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

Lease financing

Mid Penn originates leases for select commercial and state and municipal government lessees.  The nature of the leased asset is often subject to rapid depreciation in salvage value over a relatively short time frame or may be of an industry specific nature, making appraisal or liquidation of the asset difficult.  These factors have led the Bank to severely curtail the origination of new leases to state or municipal government agencies where default risk is extremely limited and to only the most credit-worthy commercial customers.  These commercial customers are primarily leasing fleet vehicles for use in their primary line of business, mitigating some of the asset value concerns within the portfolio.  Leasing has been a declining percentage of the Mid Penn’s portfolio since 2006, representing 0.31% of the portfolio at June 30, 2013.

Residential mortgage

Mid Penn offers a wide array of residential mortgage loans for both permanent structures and those under construction.  The Bank’s residential mortgage originations are secured primarily by properties located in its primary market and surrounding areas.  Residential mortgage loans have terms up to a maximum of 30 years and with loan to value ratios up to 100% of the lesser of the appraised value of the security property or the contract price.  Private mortgage insurance is generally required in an amount sufficient to reduce the Bank’s exposure to at or below the 85% loan to value level.  Residential mortgage loans generally do not include prepayment penalties.

In underwriting residential mortgage loans, the Bank evaluates both the borrower’s ability to make monthly payments and the value of the property securing the loan.  Most properties securing real estate loans made by Mid Penn are appraised by independent fee appraisers.  The Bank generally requires borrowers to obtain an attorney’s title opinion or title insurance and fire and property insurance (including flood insurance, if necessary) in an amount not less than the amount of the loan.  Real estate loans originated by the Bank generally contain a “due on sale” clause allowing the Bank to declare the unpaid principal balance due and payable upon the sale of the security property.

The Bank underwrites residential mortgage loans to the standards established by the secondary mortgage market, i.e., Fannie Mae, Ginnie Mae, Freddie Mac, or Pennsylvania Housing Finance Agency standards, with the intention of selling the majority of residential mortgages originated into the secondary market.  In the event that the facts and circumstances surrounding a residential mortgage application do not meet all underwriting conditions of the secondary mortgage market, the Bank will evaluate the failed conditions and the potential risk of holding the residential mortgage in the Bank’s portfolio rather than rejecting the loan request.  In the event that the loan is held in the Bank’s portfolio, the interest rate on the residential mortgage would be increased to compensate for the added portfolio risk.

Consumer, including home equity

Mid Penn offers a variety of secured consumer loans, including home equity, automobile, and deposit secured loans.  In addition, the Bank offers other secured and unsecured consumer loans.  Most consumer loans are originated in Mid Penn’s primary market and surrounding areas. 

The largest component of Mid Penn’s consumer loan portfolio consists of fixed rate home equity loans and variable rate home equity lines of credit.  Substantially all home equity loans and lines of credit are secured by second mortgages on principal residences.  The Bank will lend amounts, which, together with all prior liens, typically may be up to 85% of the appraised value of the property securing the loan.  Home equity term loans may have maximum terms up to 20 years while home equity lines of credit generally have maximum terms of five years.

Consumer loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower.  The underwriting standards employed by the Bank for consumer loans include an application, a determination of the applicant’s payment history on other debts and an assessment of ability to meet existing obligations and payments on the proposed loan.  Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, in relation to the proposed loan amount.

Consumer loans may entail greater credit risk than do residential mortgage loans, particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or recreational equipment.  In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance.  In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances.  Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

The allowance for credit losses consists of the allowance for loan and lease losses and the reserve for unfunded lending commitments. The allowance for loan and lease losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheet.  The allowance for loan and lease losses is increased by the provision for loan and lease losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan and lease losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely.  Non-residential consumer loans are generally charged off no later than 120 days past due on a contractual basis, earlier in the event of bankruptcy, or if there is an amount deemed uncollectible.  Because all identified losses are immediately charged off, no portion of the allowance for loan and lease losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

The allowance for credit losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a monthly evaluation of the adequacy of the allowance.  The allowance is based on Mid Penn’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows, collateral value, or observable market price of the impaired loan is lower than the carrying value of that loan. The general component covers pools of loans by loan class including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate, home equity and other consumer loans.  These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors.  These qualitative risk factors include changes in economic conditions, fluctuations in loan quality measures, changes in the experience of the lending staff and loan review systems, growth or changes in the mix of loans originated, and shifting industry or portfolio concentrations.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

Mid Penn considers a commercial loan (consisting of commercial and industrial, commercial real estate, commercial real estate-construction, and lease financing loan classes) to be impaired when it becomes 90 days or more past due and not in the process of collection.  This methodology assumes the borrower cannot or will not continue to make additional payments.  At that time the loan would be considered collateral dependent as the discounted cash flow (“DCF”) method indicates no operating income is available for evaluating the collateral position; therefore, all impaired loans are deemed to be collateral dependent.

In addition, Mid Penn’s rating system assumes any loans classified as sub-standard non-accrual to be impaired, and all of these loans are considered collateral dependent; therefore, all of Mid Penn’s impaired loans, whether reporting a specific allocation or not, are considered collateral dependent.

Mid Penn evaluates loans for charge-off on a monthly basis.  Policies that govern the recommendation for charge-off are unique to the type of loan being considered.  Commercial loans rated as nonaccrual or lower will first have a collateral evaluation completed in accordance with the guidance on impaired loans.  Once the collateral evaluation has been completed, a specific allocation of allowance is made based upon the results of the evaluation.  In the event the loan is unsecured, the loan would have been charged-off at the recognition of impairment.  If the loan is secured, it will undergo a 90 day waiting period to ensure the collateral shortfall identified in the evaluation is accurate and then charged down by the specific allocation. Once the charge down is taken, the remaining balance remains a nonperforming loan with the original terms and interest rate intact (not restructured).  Commercial loans secured by real estate rated as impaired will also have an initial collateral evaluation completed in accordance with the guidance on impaired loans.  An updated real estate valuation is ordered and the collateral evaluation is modified to reflect any variations in value.  A specific allocation of allowance is made for any anticipated collateral shortfall and a 90 day waiting period begins to ensure the accuracy of the collateral shortfall.  The loan is then charged down by the specific allocation.  Once the charge down is taken, the remaining balance remains a nonperforming loan with the original terms and interest rate intact (not restructured).  The process of charge-off for residential mortgage loans begins upon a loan becoming delinquent for 90 days and not in the process of collection.  The existing appraisal is reviewed and a lien search is obtained to determine lien position and any instances of intervening liens.  A new appraisal of the property will be ordered if deemed necessary by management and a collateral evaluation is completed. The loan will then be charged down to the value indicated in the evaluation.  Consumer loans (including home equity loans and other consumer loans) are recommended for charge-off after reaching delinquency of 90 days and the loan is not in the process of collection.  The entire balance of the consumer loan is recommended for charge-off at this point.

As noted above, Mid Penn assesses a specific allocation for commercial loans prior to charging down or charging off the loan.  Once the charge down is taken, the remaining balance remains a nonperforming loan with the original terms and interest rate intact (not restructured).  In addition, Mid Penn takes a preemptive step when any commercial loan becomes classified under its internal classification system.  A preliminary collateral evaluation in accordance with the guidance on impaired loans is prepared using the existing collateral information in the loan file.  This process allows Mid Penn to review both the credit and documentation files to determine the status of the information needed to make a collateral evaluation.  This collateral evaluation is preliminary but allows Mid Penn to determine if any potential collateral shortfalls exist.

It is Mid Penn’s policy to obtain updated third party valuations on all impaired loans collateralized by real estate within 30 days of the credit being classified as sub-standard non-accrual.  Prior to receipt of the updated real estate valuation Mid Penn will use any existing real estate valuation to determine any potential allowance issues; however no allowance recommendation will be made until which time Mid Penn is in receipt of the updated valuation.  The credit department employs an electronic tracking system to monitor the receipt of and need for updated appraisals.  To date, there have been no significant time lapses noted with the above processes. 

In some instances Mid Penn is not holding real estate as collateral and is relying on business assets (personal property) for repayment.  In these circumstances a collateral inspection is performed by Mid Penn personnel to determine an estimated value.  The value is based on net book value, as provided by the financial statements, and discounted accordingly based on determinations made by management.  Occasionally, Mid Penn will employ an outside service to provide a fair estimate of value based on auction sales or private sales.  Management reviews the estimates of these third parties and discounts them accordingly based on management’s judgment, if deemed necessary.

For impaired loans with no valuation allowance required, Mid Penn’s practice of obtaining independent third party market valuations on the subject property within 30 days of being placed on non-accrual status sometimes indicates that the loan to value ratio is sufficient to obviate the need for a specific allocation in spite of significant deterioration in real estate values in Mid Penn’s primary market area.  These circumstances are determined on a case by case analysis of the impaired loans.

Mid Penn actively monitors the values of collateral on impaired loans.  This monitoring may require the modification of collateral values over time or changing circumstances by some factor, either positive or negative, from the original values.  All collateral values will be assessed by management at least every 18 months for possible revaluation by an independent third party.

Mid Penn does not currently, or plan in the future to, use automated valuation methodologies as a method of valuing real estate collateral.

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, Mid Penn does not separately identify individual residential mortgage loans, home equity loans and other consumer loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.

Loans whose terms are modified are classified as troubled debt restructurings if the borrowers have been granted concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity date. Non-accrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification.   Loans classified as troubled debt restructurings are designated as impaired.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors, and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments.  Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful, and loss.  Loans criticized as special mention have potential weaknesses that deserve management’s close attention.  If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects.  Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable.   Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses.  Any loans not classified as noted above are rated pass.

In addition, Federal and State regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan and lease losses and may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.

The classes of the loan portfolio, summarized by the aggregate pass rating and the classified ratings of special mention, substandard, and doubtful within Mid Penn’s internal risk rating system as of June 30, 2013 and December 31, 2012 are as follows:

(Dollars in thousands)                            June 30, 2013	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and industrial	$	82,398	$	1,422	$	1,753	$	-	$	85,573
Commercial real estate		277,520		4,789		16,720		-		299,029
Commercial real estate - construction		38,384		402		54		-		38,840
Lease financing		1,596		-		-		-		1,596
Residential mortgage		63,192		-		148		-		63,340
Home equity		23,800		176		362		-		24,338
Consumer		5,942		-		-		-		5,942
	$	492,832	$	6,789	$	19,037	$	-	$	518,658

(Dollars in thousands)                         December 31, 2012	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and industrial	$	74,763	$	1,651	$	1,469	$	-	$	77,883
Commercial real estate		260,941		5,375		18,551		-		284,867
Commercial real estate - construction		32,767		410		54		-		33,231
Lease financing		1,305		-		-		-		1,305
Residential mortgage		57,455		-		-		-		57,455
Home equity		22,336		188		396		-		22,920
Consumer		6,267		292		-		-		6,559
	$	455,834	$	7,916	$	20,470	$	-	$	484,220

Impaired loans by loan portfolio class as of June 30, 2013 and December 31, 2012 are summarized as follows:

	June 30, 2013						December 31, 2012
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial and industrial	$	34	$	70	$	-	$	192	$	870	$	-
Commercial real estate		4,795		7,818		-		6,570		10,773		-
Home equity		121		260		-		124		261		-
Consumer		-		-		-		-		578		-
With an allowance recorded:
Commercial and industrial	$	204	$	331	$	82	$	223	$	351	$	111
Commercial real estate		9,111		9,313		1,871		2,514		2,672		1,200
Commercial real estate - construction		54		54		28		54		54		54
Residential mortgage		84		84		29		-		-		-
Home equity		54		54		10		67		71		18
Total:
Commercial and industrial	$	238	$	401	$	82	$	415	$	1,221	$	111
Commercial real estate		13,906		17,131		1,871		9,084		13,445		1,200
Commercial real estate - construction		54		54		28		54		54		54
Residential mortgage		84		84		29		-		-		-
Home equity		175		314		10		191		332		18
Consumer		-		-		-		-		578		-

Average recorded investment of impaired loans and related interest income recognized for the three and six months ended June 30, 2013 and June 30, 2012 are summarized as follows:

	Three Months Ended
	June 30, 2013				June 30, 2012
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	35	$	-	$	99	$	-
Commercial real estate		4,891		47		5,755		-
Commercial real estate - construction		-		-		129		-
Home equity		122		-		249		-
With an allowance recorded:
Commercial and industrial	$	205	$	-	$	1,189	$	-
Commercial real estate		9,136		-		2,797		-
Commercial real estate - construction		54		-		-		-
Residential mortgage		84		-		17		-
Home equity		55		-		89		-
Consumer		-		-		585		-
Total:
Commercial and industrial	$	240	$	-	$	1,288	$	-
Commercial real estate		14,027		47		8,552		-
Commercial real estate - construction		54		-		129		-
Residential mortgage		84		-		17		-
Home equity		177		-		338		-
Consumer		-		-		585		-

	Six Months Ended
	June 30, 2013				June 30, 2012
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	35	$	-	$	99	$	-
Commercial real estate		4,930		64		5,755		-
Commercial real estate - construction		-		-		129		-
Home equity		122		-		249		-
With an allowance recorded:
Commercial and industrial	$	205	$	-	$	1,189	$	-
Commercial real estate		9,150		-		2,797		-
Commercial real estate - construction		54		-		-		-
Residential mortgage		111		-		17		-
Home equity		55		-		89		-
Consumer		-		-		585		-
Total:
Commercial and industrial	$	240	$	-	$	1,288	$	-
Commercial real estate		14,080		64		8,552		-
Commercial real estate - construction		54		-		129		-
Residential mortgage		111		-		17		-
Home equity		177		-		338		-
Consumer		-		-		585		-

Non-accrual loans by loan portfolio class as of June 30, 2013 and December 31, 2012 are summarized as follows:

(Dollars in thousands)	June 30, 2013		December 31, 2012
Commercial and industrial	$	238	$	264
Commercial real estate		13,906		10,785
Commercial real estate - construction		54		54
Residential mortgage		988		537
Home equity		175		191
	$	15,361	$	11,831

The performance and credit quality of the loan portfolio is also monitored by the analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due.  The classes of the loan portfolio summarized by the past due status as of June 30, 2013 and December 31, 2012 are summarized as follows:

(Dollars in thousands)        June 30, 2013	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Loans Receivable > 90 Days and Accruing
Commercial and industrial	$	363	$			209	$	572	$	85,001	$	85,573	$	-
Commercial real estate		1,552		984		12,526		15,062		283,967		299,029		-
Commercial real estate - construction		-		-		54		54		38,786		38,840		-
Lease financing		-		-		-		-		1,596		1,596		-
Residential mortgage		160		-		924		1,084		62,256		63,340		-
Home equity		-		-		145		145		24,193		24,338		-
Consumer		7		7		-		14		5,928		5,942		-
Total	$	2,082	$	991	$	13,858	$	16,931	$	501,727	$	518,658	$	-

(Dollars in thousands)  December 31, 2012	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Loans Receivable > 90 Days and Accruing
Commercial and industrial	$	123	$	361	$	234	$	718	$	77,165	$	77,883	$	-
Commercial real estate		1,785		5,618		8,248		15,651		269,216		284,867		-
Commercial real estate - construction		-		-		54		54		33,177		33,231		-
Lease financing		1				-		1		1,304		1,305		-
Residential mortgage		495		35		531		1,061		56,394		57,455		-
Home equity		96		-		147		243		22,677		22,920		-
Consumer		1		2		-		3		6,556		6,559		-
Total	$	2,501	$	6,016	$	9,214	$	17,731	$	466,489	$	484,220	$	-

The following tables summarize the allowance for loan and lease losses and recorded investments in loans receivable.

(Dollars in thousands)
As of, and for the period ended, June 30, 2013	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Allowance for loan and lease losses:
Beginning balance,   April 1, 2013	$	1,281	$	3,543	$	39	$	1	$	603	$	349	$	105	$	(51)	$	5,870
Charge-offs		-		(93)		-		-		(22)		-		(10)		-		(125)
Recoveries		9		2		8		-		23		2		63		-		107
Provisions		(41)		367		(11)		-		56		58		(67)		53		415
Ending balance,          June 30, 2013	$	1,249	$	3,819	$	36	$	1	$	660	$	409	$	91	$	2	$	6,267

	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Beginning balance, January 1, 2013	$	1,298	$	3,112	$	64	$	1	$	581	$	343	$	101	$	9	$	5,509
Charge-offs		(21)		(118)		-		-		(126)		-		(15)		-		(280)
Recoveries		16		5		8		-		23		5		71		-		128
Provisions		(44)		820		(36)		-		182		61		(66)		(7)		910
Ending balance,  June 30, 2013	$	1,249	$	3,819	$	36	$	1	$	660	$	409	$	91	$	2	$	6,267
Ending balance: individually evaluated for impairment	$	82	$	1,871	$	28	$	-	$	29	$	10	$	-	$	-	$	2,020
Ending balance: collectively evaluated for impairment	$	1,167	$	1,948	$	8	$	1	$	631	$	399	$	91	$	2	$	4,247
Loans receivables:
Ending balance	$	85,573	$	299,029	$	38,840	$	1,596	$	63,340	$	24,338	$	5,942	$	-	$	518,658
Ending balance: individually evaluated  for impairment	$	238	$	13,906	$	54	$	-	$	84	$	175	$	-	$	-	$	14,457
Ending balance: collectively evaluated for impairment	$	85,335	$	285,123	$	38,786	$	1,596	$	63,256	$	24,163	$	5,942	$	-	$	504,201

(Dollars in thousands)
As of, and for the period ended, June 30, 2012	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Beginning balance,    April 1, 2012	$	1,755	$	3,362	$	27	$	2	$	454	$	323	$	524	$	130	$	6,577
Charge-offs		(12)		(149)		(5)		-		(59)		-		(5)		-		(230)
Recoveries		4		2		-		-		-		1		6		-		13
Provisions		(164)		225		5		-		80		17		5		57		225
Ending balance,       June 30, 2012	$	1,583	$	3,440	$	27	$	2	$	475	$	341	$	530	$	187	$	6,585

	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Beginning balance, January 1, 2012	$	2,274	$	3,544	$	23	$	2	$	362	$	337	$	87	$	143	$	6,772
Charge-offs		(216)		(455)		(5)		-		(69)		-		(7)		-		(752)
Recoveries		8		5		2		-		-		9		16		-		40
Provisions		(483)		346		7		-		182		(5)		434		44		525
Ending balance,     June 30, 2012	$	1,583	$	3,440	$	27	$	2	$	475	$	341	$	530	$	187	$	6,585
Ending balance: individually evaluated for impairment	$	320	$	975	$	-	$	-	$	2	$	15	$	445	$	-	$	1,757
Ending balance: collectively evaluated for impairment	$	1,263	$	2,465	$	27	$	2	$	473	$	326	$	85	$	187	$	4,828
Loans receivables:
Ending balance	$	77,481	$	297,373	$	30,304	$	1,724	$	49,778	$	24,115	$	7,895	$	-	$	488,670
Ending balance: individually evaluated  for impairment	$	1,374	$	8,470	$	115	$	-	$	17		335	$	585	$	-	$	10,896
Ending balance: collectively evaluated for impairment	$	76,107	$	288,903	$	30,189	$	1,724	$	49,761	$	23,780	$	7,310	$	-	$	477,774

(Dollars in thousands)
As of                  December 31, 2012	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Allowance for loan and lease losses:
Ending balance	$	1,298	$	3,112	$	64	$	1	$	581	$	343	$	101	$	9	$	5,509
Ending balance: individually evaluated for impairment	$	111	$	1,200	$	54	$	-	$	-	$	18	$	-	$	-	$	1,383
Ending balance: collectively evaluated for impairment	$	1,187	$	1,912	$	10	$	1	$	581	$	325	$	101	$	9	$	4,126
Loans receivables:
Ending balance	$	77,883	$	284,867	$	33,231	$	1,305	$	57,455	$	22,920	$	6,559	$	-	$	484,220
Ending balance: individually evaluated  for impairment	$	415	$	9,084	$	54	$	-	$	-	$	191	$	-	$	-	$	9,744
Ending balance: collectively evaluated for impairment	$	77,468	$	275,783	$	33,177	$	1,305	$	57,455	$	22,729	$	6,559	$	-	$	474,476

The recorded investments in troubled debt restructured loans at June 30, 2013 and December 31, 2012 are as follows:

(Dollars in thousands)                      June 30, 2013	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
Commercial and industrial	$	40	$	35	$	30
Commercial real estate		13,346		9,336		8,386
Residential mortgage		601		595		461
	$	13,987	$	9,966	$	8,877

(Dollars in thousands)                  December 31, 2012	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
Commercial and industrial	$	40	$	35	$	30
Commercial real estate		7,326		3,748		2,916
Residential mortgage		558		552		448
	$	7,924	$	4,335	$	3,394

Mid Penn entered into forbearance agreements on all loans currently classified as troubled debt restructures and all of these agreements have resulted in additional principal repayment.  The terms of these forbearance agreements vary whereby principal payments have been decreased, interest rates have been reduced and/or the loan will be repaid as collateral is sold.

Mid Penn’s troubled debt restructured loans at June 30, 2013 totaled $8,877,000, of which, $882,000 represented five accruing loans to unrelated borrowers.  One is a large commercial real estate loan for $642,000, while the remaining four loans are residential mortgages, all in compliance with the terms of the modification.  The remaining $7,995,000, representing 15 loans, are nonaccrual impaired loans, and resulted in a collateral evaluation in accordance with the guidance on impaired loans.  Of these 15 loans, one business relationship accounted for five loans totaling $612,000, a large commercial participation totaling $1,566,000 accounted for three loans, and the remaining seven loans to unrelated borrowers totaled $5,817,000.  Included in the $5,817,000 are two large commercial real estate loans with balances of $1,671,000 and $3,275,000.  

At December 31, 2012, troubled debt restricted loans totaled $3,394,000, of which, $426,000, representing seven loans to unrelated borrowers, are accruing residential mortgages in compliance with the terms of the modification.  The remaining $2,968,000, representing 10 loans, are nonaccrual impaired loans, and resulted in a collateral evaluation in accordance with the guidance on impaired loans.  Of these 10 loans, one business relationship accounted for five loans totaling $634,000, a large commercial participation totaling $1,663,000 accounted for three loans, and the remaining two unrelated loans totaled $671,000.  

As a result of the evaluations at June 30, 2013 and December 31, 2012, a specific allocation and, subsequently, charge-offs have been taken as appropriate.  As of June 30, 2013 and December 31, 2012, charge-offs associated with troubled debt restructured loans while under forbearance agreement totaled $0 and there were no defaulted troubled debt restructured loans as all troubled debt restructured loans were current with respect to their associated forbearance agreements.  As of June 30, 2013, one forbearance agreement was negotiated during 2008, 11 forbearance agreements were negotiated during 2009, three forbearance agreements were negotiated in 2010, and five forbearance agreement was negotiated in 2013.

The following table summarizes loans whose terms have been modified resulting in troubled debt restructurings during the three and six months ended June 30, 2013:

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Basis of Presentation

6 Months Ended

Jun. 30, 2013

Basis of Presentation [Abstract]

Basis of Presentation

(1)          Basis of Presentation

The accompanying consolidated financial statements include the accounts of Mid Penn Bancorp, Inc. and its wholly-owned subsidiaries, Mid Penn Bank (“Bank”), and the Bank’s wholly-owned subsidiary Mid Penn Insurance Services, LLC (collectively, “Mid Penn”).  All material intercompany accounts and transactions have been eliminated in consolidation.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  We believe the information presented is not misleading and the disclosures are adequate.  For comparative purposes, the June 30, 2012 and December 31, 2012 balances have been reclassified to conform to the 2013 presentation.  Such reclassifications had no impact on net income. The results of operations for interim periods are not necessarily indicative of operating results expected for the full year.  These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Mid Penn’s Annual Report on Form 10-K for the year ended December 31, 2012.

Mid Penn has evaluated events and transactions occurring subsequent to the balance sheet date of June 30, 2013, for items that should potentially be recognized or disclosed in these consolidated financial statements.  The evaluation was conducted through the date these consolidated financial statements were issued.

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Fair Value Measurements (Fair Value Measurements, Nonrecurring) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Impaired Loan [Member] | Total Carrying Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 7,487	$ 1,475
Foreclosed Assets Held for Sale [Member] | Total Carrying Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	404	105
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member] | Impaired Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member] | Foreclosed Assets Held for Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring
Significant Other Observable Inputs (Level 2) [Member] | Impaired Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring
Significant Other Observable Inputs (Level 2) [Member] | Foreclosed Assets Held for Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring
Significant Unobservable Inputs (Level 3) [Member] | Impaired Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	7,487	1,475
Significant Unobservable Inputs (Level 3) [Member] | Foreclosed Assets Held for Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 404	$ 105

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Investment Securities (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013 security	Jun. 30, 2012	Jun. 30, 2013 security	Jun. 30, 2012	Dec. 31, 2012 security
Investment Securities [Abstract]
Available-for-sale Securities Pledged as Collateral	$ 96,026		$ 96,026		$ 96,124
Available-for-sale Securities, Gross Realized Gains	112	10	112	26
Available-for-sale Securities, Gross Realized Losses			$ 0	$ 0
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	115		115		73
Available-for-sale, Securities in Unrealized Loss Positions, Depreciation Percentage			4.31%		1.03%
Average Life of Mortgage-backed Securities	3 years 2 months 12 days		3 years 2 months 12 days

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Loans and Allowance for Loan and Lease Losses (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2013 loan	Jun. 30, 2013 loan	Dec. 31, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Modifications, Number of Contracts	4	5
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down			$ 0
Financing Receivable, Modifications, Recorded Investment1		8,877	3,394
Residential mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loan Terms		30 years
Loan To Value Ratio	100.00%	100.00%
Loan To Value Ratio, Exposure After Private Mortgage Insurance		85.00%
Financing Receivable, Modifications, Number of Contracts	1	2
Financing Receivable, Modifications, Recorded Investment1		461	448
Commercial and industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loan Terms		1 year
Loan To Value Ratio	80.00%	80.00%
Financing Receivable, Modifications, Recorded Investment1		30	30
Home equity [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loan Terms		20 years
Loan To Value Ratio	85.00%	85.00%
Lease financing [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Portfolio Percentage	0.31%	0.31%
Home Equity Lines Of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loan Terms		5 years
Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Modifications, Number of Contracts	3	3
Impaired Financing Receivable, Interest Income, Cash Basis Method	47	64
Financing Receivable, Modifications, Recorded Investment1		8,386	2,916
Nonaccruing [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Modifications, Number of Contracts		15	10
Financing Receivable, Modifications, Recorded Investment1		7,995	2,968
Nonaccruing [Member] | Customer Three [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Modifications, Number of Contracts			5
Financing Receivable, Modifications, Recorded Investment1			634
Accruing [Member] | Residential mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Modifications, Number of Contracts		4
Troubled Debt Restructurings - Prior Year Singular Business Relationship 1 [Member] | Nonaccruing [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Modifications, Number of Contracts		5
Financing Receivable, Modifications, Recorded Investment1		612
Commercial Participation Loans [Member] | Nonaccruing [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Modifications, Number of Contracts		3	3
Financing Receivable, Modifications, Recorded Investment1		1,566	1,663
Unrelated Nonparticipation Loans [Member] | Nonaccruing [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Modifications, Number of Contracts		7	2
Financing Receivable, Modifications, Recorded Investment1		5,817	671
Unrelated Nonparticipation Loans [Member] | Nonaccruing [Member] | Residential mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Modifications, Number of Contracts			7
Unrelated Nonparticipation Loans [Member] | Nonaccruing [Member] | Commercial real estate [Member] | Customer One [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Modifications, Recorded Investment1		1,671
Unrelated Nonparticipation Loans [Member] | Nonaccruing [Member] | Commercial real estate [Member] | Customer Two [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Modifications, Recorded Investment1		3,275
Unrelated Nonparticipation Loans [Member] | Accruing [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Modifications, Recorded Investment1		882
Unrelated Nonparticipation Loans [Member] | Accruing [Member] | Residential mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Modifications, Recorded Investment1			426
Unrelated Nonparticipation Loans [Member] | Accruing [Member] | Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Modifications, Number of Contracts		1
Financing Receivable, Modifications, Recorded Investment1		$ 642

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Loans and Allowance for Loan and Lease Losses (Loan Portfolio Summarized By The Past Due Status) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	$ 2,082	$ 2,501
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	991	6,016
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	13,858	9,214
Total Past Due	16,931	17,731
Financing Receivable, Recorded Investment, Current	501,727	466,489
Total Loans	518,658	484,220	488,670
Commercial and industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	363	123
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due		361
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	209	234
Total Past Due	572	718
Financing Receivable, Recorded Investment, Current	85,001	77,165
Total Loans	85,573	77,883	77,481
Commercial real estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	1,552	1,785
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	984	5,618
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	12,526	8,248
Total Past Due	15,062	15,651
Financing Receivable, Recorded Investment, Current	283,967	269,216
Total Loans	299,029	284,867	297,373
Commercial real estate - construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	54	54
Total Past Due	54	54
Financing Receivable, Recorded Investment, Current	38,786	33,177
Total Loans	38,840	33,231	30,304
Lease financing [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due		1
Total Past Due		1
Financing Receivable, Recorded Investment, Current	1,596	1,304
Total Loans	1,596	1,305	1,724
Residential mortgage [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	160	495
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due		35
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	924	531
Total Past Due	1,084	1,061
Financing Receivable, Recorded Investment, Current	62,256	56,394
Total Loans	63,340	57,455	49,778
Home equity [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due		96
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	145	147
Total Past Due	145	243
Financing Receivable, Recorded Investment, Current	24,193	22,677
Total Loans	24,338	22,920	24,115
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	7	1
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	7	2
Total Past Due	14	3
Financing Receivable, Recorded Investment, Current	5,928	6,556
Total Loans	$ 5,942	$ 6,559	$ 7,895

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Earnings Per Common Share (Basic and Diluted Earnings Per Share Computation) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 19, 2008
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		73,099		73,099
Class of Warrant or Right, Exercise Price of Warrants or Rights		20.52		20.52	20.52
Net income	$ 1,366	$ 1,360	$ 2,051	$ 2,494
Net income available to common shareholders	1,279	1,231	1,903	2,237
Weighted average common shares outstanding	3,491,069	3,485,867	3,490,403	3,485,203
Basic earnings per common share	$ 0.37	$ 0.35	$ 0.55	$ 0.64
Adjusted weighted-average common shares outstanding	3,491,069	3,485,867	3,490,403	3,485,203
Diluted earnings per common share	$ 0.37	$ 0.35	$ 0.55	$ 0.64
Series A Preferred Stock [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Less: Dividends on preferred stock		(125)		(250)
Less: Accretion of preferred stock discount		(4)	(14)	(7)
Series B Preferred Stock [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Less: Dividends on preferred stock	$ (87)		$ (134)

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Defined Benefit Plans (Net Periodic Benefit Costs) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Pension Benefits [Member]
Defined Benefit Plan Disclosure [Line Items]
Service Cost	$ 8	$ 5	$ 16	$ 11
Interest Cost	11	11	22	23
Amortization of prior service cost	6	6	11	11
Net periodic postretirement benefit cost	25	22	49	45
Other Benefits [Member]
Defined Benefit Plan Disclosure [Line Items]
Service Cost	5	5	9	10
Interest Cost	8	9	17	18
Amortization of prior service cost	1	1	1	1
Net periodic postretirement benefit cost	$ 14	$ 15	$ 27	$ 29

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Consolidated Balance Sheets (Parenthetical) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Common Stock, Par or Stated Value Per Share	$ 1.00	$ 1.00
Common Stock, Shares Authorized	10,000,000	10,000,000
Common Stock, Shares, Issued	3,492,214	3,489,684
Common Stock, Shares, Outstanding	3,492,214	3,489,684
Series B Preferred Stock [Member]
Preferred stock, par value	$ 1.00	$ 1.00
Preferred Stock, Shares Authorized	5,000	5,000
Preferred Stock, Dividend Rate, Percentage or Per-Dollar-Amount	7.00%	7.00%
Preferred Stock, Shares Issued	5,000	4,880
Preferred Stock, Shares Outstanding	5,000	4,880
Preferred Stock, Liquidation Preference Per Share	$ 1,000	$ 1,000

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Defined Benefit Plans

6 Months Ended

Jun. 30, 2013

Defined Benefit Plans [Abstract]

Defined Benefit Plans

(6)        Defined Benefit Plans

Mid Penn has an unfunded noncontributory defined benefit retirement plan for directors.  The plan provides defined benefits based on years of service.  In addition, Mid Penn sponsors a defined benefit health care plan that provides post-retirement medical benefits and life insurance to qualifying full-time employees.  These health care and life insurance plans are noncontributory.  A December 31 measurement date for our plans is used.

The components of net periodic benefit costs from these benefit plans are as follows:

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013		Jun. 30, 2012
Consolidated Statements of Comprehensive Income [Abstract]
Net income	$ 1,366		$ 1,360		$ 2,051		$ 2,494
Other comprehensive income:
Unrealized (losses) gains arising during the period on available for sale securities, net of income taxes of $(1,311), $149, $(1,520) and $196, respectively	(2,547)		289		(2,952)		381
Reclassification adjustment for net gain on sales of available for sale securities included in net income, net of income taxes of $(38), $(4), $(38) and $(9), respectively	(74)	[1],[2]	(6)	[1],[2]	(74)	[1],[2]	(17)	[1],[2]
Change in defined benefit plans, net of income taxes of $40, $10, $42 and $(1), respectively	78	[2],[3]	20	[2],[3]	81	[2],[3]	(2)	[2],[3]
Total other comprehensive (loss) income	(2,543)		303		(2,945)		362
Total comprehensive (loss) income	$ (1,177)		$ 1,663		$ (894)		$ 2,856

[1] Amounts are included in net gain on sales of investment securities on the Consolidated Statements of Income as a separate element within total noninterest income

[2] Income tax amounts are included in the provision for income taxes in the Consolidated Statements of Income

[3] Amounts are included in the computation of net periodic benefit cost and are included in salaries and employee benefits on the Consolidated Statements of Income as a separate element within total noninterest expense

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
ASSETS
Cash and due from banks	$ 9,713	$ 11,200
Interest-bearing balances with other financial institutions	682	1,273
Federal funds sold		3,000
Total cash and cash equivalents	10,395	15,473
Interest-bearing time deposits with other financial institutions	13,433	23,563
Available for sale investment securities	133,956	154,295
Loans and leases, net of unearned interest	518,658	484,220
Less: Allowance for loan and lease losses	(6,267)	(5,509)
Net loans and leases	512,391	478,711
Bank premises and equipment, net	13,024	13,123
Restricted investment in bank stocks	3,253	2,503
Foreclosed assets held for sale	1,030	843
Accrued interest receivable	2,843	2,893
Deferred income taxes	3,699	1,789
Goodwill	1,016	1,016
Core deposit and other intangibles, net	252	288
Cash surrender value of life insurance	8,259	8,143
Other assets	2,098	2,560
Total Assets	705,649	705,200
LIABILITIES & SHAREHOLDERS' EQUITY
Deposits: Noninterest bearing demand	52,488	57,977
Deposits: Interest bearing demand	176,805	164,837
Deposits: Money Market	200,494	210,588
Deposits: Savings	29,345	28,406
Deposits: Time	150,841	163,653
Total Deposits	609,973	625,461
Short-term borrowings	27,512
Long-term debt	11,734	22,510
Accrued interest payable	777	620
Other liabilities	4,559	4,389
Total Liabilities	654,555	652,980
Shareholders' Equity:
Common stock, par value $1 per share; 10,000,000 shares authorized; 3,492,214 shares issued and outstanding at June 30, 2013 and 3,489,684 shares issued and outstanding at December 31, 2012	3,492	3,490
Additional paid-in capital	29,828	29,816
Retained earnings	13,426	11,741
Accumulated other comprehensive (loss) income	(652)	2,293
Total Shareholders' Equity	51,094	52,220
Total Liabilities and Shareholders' Equity	705,649	705,200
Series B Preferred Stock [Member]
Shareholders' Equity:
Series B Preferred stock, par value $1.00; liquidation value $1,000; authorized 5,000 shares; 7% non-cumulative dividend; 5,000 shares issued and outstanding at June 30, 2013 and 4,880 shares issued and outstanding at December 31, 2012	$ 5,000	$ 4,880

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Investment Securities (Unrealized Gain (Loss) on Investments) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Schedule of Investments [Line Items]
Amortized Cost	$ 134,743	$ 150,610
Unrealized Gains	2,150	4,281
Unrealized Losses	2,937	596
Available for sale Securities, Fair Value	133,956	154,295
U.S. Treasury and U.S. government agencies [Member]
Schedule of Investments [Line Items]
Amortized Cost	13,189	16,394
Unrealized Gains	882	1,346
Available for sale Securities, Fair Value	14,071	17,740
Mortgage-backed U.S. government agencies [Member]
Schedule of Investments [Line Items]
Amortized Cost	52,582	66,783
Unrealized Gains	273	393
Unrealized Losses	758	490
Available for sale Securities, Fair Value	52,097	66,686
State and political subdivision obligations [Member]
Schedule of Investments [Line Items]
Amortized Cost	68,572	67,033
Unrealized Gains	995	2,542
Unrealized Losses	2,152	96
Available for sale Securities, Fair Value	67,415	69,479
Equity securities [Member]
Schedule of Investments [Line Items]
Amortized Cost	400	400
Unrealized Losses	27	10
Available for sale Securities, Fair Value	$ 373	$ 390

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value Measurements [Abstract]

Assets Measured at Fair Value on a Recurring Basis [Table Text Block]

(Dollars in thousands)			Fair value measurements at June 30, 2013 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	June 30, 2013		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and U.S. government agencies	$	14,071	$	-	$	14,071	$	-
Mortgage-backed U.S. government agencies		52,097		-		52,097		-
State and political subdivision obligations		67,415		-		67,415		-
Equity securities		373		373		-		-
	$	133,956	$	373	$	133,583	$	-

(Dollars in thousands)			Fair value measurements at December 31, 2012 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2012		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and U.S. government agencies	$	17,740	$	-	$	17,740	$	-
Mortgage-backed U.S. government agencies		66,686		-		66,686		-
State and political subdivision obligations		69,479		-		69,479		-
Equity securities		390		390		-		-
	$	154,295	$	390	$	153,905	$	-

Fair Value Measurements, Nonrecurring [Table Text Block]

(Dollars in thousands)			Fair value measurements at June 30, 2013 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	June 30, 2013		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	7,487	$	-	$	-	$	7,487
Foreclosed Assets Held for Sale		404		-		-		404

(Dollars in thousands)			Fair value measurements at December 31, 2012 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2012		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	1,475	$	-	$	-	$	1,475
Foreclosed Assets Held for Sale		105		-		-		105

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

(Dollars in thousands)	Quantitative Information about Level 3 Fair Value Measurements
June 30, 2013	Fair Value Estimate		Valuation Technique	Unobservable Input	Range                     Weighted Average
Impaired Loans	$	7,487	Appraisal of collateral (1)	Appraisal adjustments (2)	10% - 95%(28%)
Foreclosed Assets Held for Sale	$	404	Appraisal of collateral (1), (3)	Appraisal adjustments (2)	15% - 40%(24%)

(Dollars in thousands)	Quantitative Information about Level 3 Fair Value Measurements
December 31, 2012	Fair Value Estimate		Valuation Technique	Unobservable Input	Range                     Weighted Average
Impaired Loans	$	1,475	Appraisal of collateral (1)	Appraisal adjustments (2)	10% - 95%(28%)
Foreclosed Assets Held for Sale	$	105	Appraisal of collateral (1), (3)	Appraisal adjustments (2)	15% - 40%(24%)

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

(2) Appraisals may be adjusted 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.

(3) Includes qualitative adjustments by management and estimated liquidation expenses.

Fair Value, by Balance Sheet Grouping [Table Text Block]

(Dollars in thousands)	June 30, 2013				December 31, 2012
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and cash equivalents	$	10,395	$	10,395	$	15,473	$	15,473
Interest-bearing time balances with other financial institutions		13,433		13,433		23,563		23,563
Investment securities		133,956		133,956		154,295		154,295
Net loans and leases		512,391		522,136		478,711		495,181
Restricted investment in bank stocks		3,253		3,253		2,503		2,503
Accrued interest receivable		2,843		2,843		2,893		2,893
Mortgage servicing rights		211		211		233		233
Financial liabilities:
Deposits	$	609,973	$	612,727	$	625,461	$	629,096
Long-term debt		11,734		12,208		22,510		23,240
Accrued interest payable		777		777		620		620
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 [Table Text Block]

					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, 2013	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Net loans and leases	$	512,391	$	522,136	$	-	$	-	$	522,136
Financial instruments - liabilities
Deposits	$	609,973	$	612,727	$	-	$	612,727	$	-
Long-term debt		11,734		12,208		-		12,208		-

					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, 2012	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Net loans and leases	$	478,711	$	495,181	$	-	$	-	$	495,181
Financial instruments - liabilities
Deposits	$	625,461	$	629,096	$	-	$	629,096	$	-
Long-term debt		22,510		23,240		-		23,240		-

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Guarantees (Narrative) (Details) (Standby Letters Of Credit [Member], USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Standby Letters Of Credit [Member]
Guarantor Obligations [Line Items]
Concentration Risk, Credit Risk, Financial Instrument, Maximum Exposure	$ 8,871	$ 10,417

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Loans and Allowance for Loan and Lease Losses (Troubled Debt Restructurings) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2013 loan	Jun. 30, 2013 loan	Dec. 31, 2012
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Number of Contracts	4	5
Financing Receivable, Modifications, Pre-Modification Recorded Investment		$ 13,987	$ 7,924
Financing Receivable, Modifications, Post-Modification Recorded Investment		9,966	4,335
Financing Receivable, Modifications, Recorded Investment		8,877	3,394
Troubled Debt Restructurings Occurring During The Current Reporting Period [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Pre-Modification Recorded Investment	6,105	6,165
Financing Receivable, Modifications, Post-Modification Recorded Investment	5,602	5,662
Financing Receivable, Modifications, Recorded Investment	5,602	5,662
Commercial and industrial [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Pre-Modification Recorded Investment		40	40
Financing Receivable, Modifications, Post-Modification Recorded Investment		35	35
Financing Receivable, Modifications, Recorded Investment		30	30
Commercial real estate [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Number of Contracts	3	3
Financing Receivable, Modifications, Pre-Modification Recorded Investment		13,346	7,326
Financing Receivable, Modifications, Post-Modification Recorded Investment		9,336	3,748
Financing Receivable, Modifications, Recorded Investment		8,386	2,916
Commercial real estate [Member] | Troubled Debt Restructurings Occurring During The Current Reporting Period [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Pre-Modification Recorded Investment	6,091	6,091
Financing Receivable, Modifications, Post-Modification Recorded Investment	5,588	5,588
Financing Receivable, Modifications, Recorded Investment	5,588	5,588
Residential mortgage [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Number of Contracts	1	2
Financing Receivable, Modifications, Pre-Modification Recorded Investment		601	558
Financing Receivable, Modifications, Post-Modification Recorded Investment		595	552
Financing Receivable, Modifications, Recorded Investment		461	448
Residential mortgage [Member] | Troubled Debt Restructurings Occurring During The Current Reporting Period [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Pre-Modification Recorded Investment	14	74
Financing Receivable, Modifications, Post-Modification Recorded Investment	14	74
Financing Receivable, Modifications, Recorded Investment	$ 14	$ 74

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Loans and Allowance for Loan and Lease Losses (Average Recorded Investment Of Impaired Loans And Related Interest Income By Loan Portfolio Class) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Commercial and industrial [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Average Recorded Investment	$ 35	$ 99	$ 35	$ 99
Impaired Loans with Allowance: Average Recorded Investment	205	1,189	205	1,189
Impaired Financing Receivable, Average Recorded Investment, Total	240	1,288	240	1,288
Commercial real estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Average Recorded Investment	4,891	5,755	4,930	5,755
Impaired Loans with No Allowance: Interest Income Recognized	47		64
Impaired Loans with Allowance: Average Recorded Investment	9,136	2,797	9,150	2,797
Impaired Financing Receivable, Average Recorded Investment, Total	14,027	8,552	14,080	8,552
Impaired Financing Receivable, Interest Income Recognized, Total	47		64
Commercial real estate - construction [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Average Recorded Investment		129		129
Impaired Loans with Allowance: Average Recorded Investment	54		54
Impaired Financing Receivable, Average Recorded Investment, Total	54	129	54	129
Residential mortgage [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Allowance: Average Recorded Investment	84	17	111	17
Impaired Financing Receivable, Average Recorded Investment, Total	84	17	111	17
Home equity [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Average Recorded Investment	122	249	122	249
Impaired Loans with Allowance: Average Recorded Investment	55	89	55	89
Impaired Financing Receivable, Average Recorded Investment, Total	177	338	177	338
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Allowance: Average Recorded Investment		585		585
Impaired Financing Receivable, Average Recorded Investment, Total		$ 585		$ 585

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Loans and Allowance for Loan and Lease Losses (Nonaccrual Loans By Classes Of The Loan Portfolio) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status	$ 15,361	$ 11,831
Commercial and industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status	238	264
Commercial real estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status	13,906	10,785
Commercial real estate - construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status	54	54
Residential mortgage [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status	988	537
Home equity [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status	$ 175	$ 191

XML

Guarantees

6 Months Ended

Jun. 30, 2013

Guarantees [Abstract]

Guarantees

(5)         Guarantees

In the normal course of business, Mid Penn makes various commitments and incurs certain contingent liabilities, which are not reflected in the accompanying consolidated financial statements.  The commitments include various guarantees and commitments to extend credit.  Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Mid Penn evaluates each customer’s credit-worthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation of the customer.  Standby letters of credit and financial guarantees written are conditional commitments to guarantee the performance of a customer to a third party.  Those guarantees are primarily issued to support public and private borrowing arrangements.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.  Mid Penn had $8,871,000 and $10,417,000 standby letters of credit outstanding as of June 30, 2013 and December 31, 2012, respectively.  Mid Penn does not anticipate any losses because of these transactions.  The current amount of the liability as of June 30, 2013 for payment under standby letters of credit issued was not material.

XML

Investment Securities (Schedule of Fair Value and Unrealized Loss on Investments in a Continuous Unrealized Loss Position) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value	$ 59,093	$ 39,734
Less than 12 Months: Unrealized Losses	2,732	336
12 Months or More: Fair Value	8,758	17,460
12 Months or More: Unrealized Losses	205	260
Total: Fair Value	67,851	57,194
Total: Unrealized Losses	2,937	596
Mortgage-backed U.S. government agencies [Member]
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value	24,426	30,345
Less than 12 Months: Unrealized Losses	643	270
12 Months or More: Fair Value	7,151	15,839
12 Months or More: Unrealized Losses	115	220
Total: Fair Value	31,577	46,184
Total: Unrealized Losses	758	490
State and political subdivision obligations [Member]
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value	34,667	9,389
Less than 12 Months: Unrealized Losses	2,089	66
12 Months or More: Fair Value	1,207	1,231
12 Months or More: Unrealized Losses	63	30
Total: Fair Value	35,874	10,620
Total: Unrealized Losses	2,152	96
Equity securities [Member]
Schedule of Investments [Line Items]
12 Months or More: Fair Value	400	390
12 Months or More: Unrealized Losses	27	10
Total: Fair Value	400	390
Total: Unrealized Losses	$ 27	$ 10

XML

Fair Value Measurements (Fair Value Inputs, Assets, Quantitative Information) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended		12 Months Ended
	Jun. 30, 2013		Dec. 31, 2012
Impaired Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Measurements, Valuation Techniques	Appraisal of collateral (1)	[1]	Appraisal of collateral (1)	[1]
Foreclosed Assets Held for Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Measurements, Valuation Techniques	Appraisal of collateral (1), (3)	[1],[2]	Appraisal of collateral (1), (3)	[1],[2]
Significant Unobservable Inputs (Level 3) [Member] | Impaired Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 7,487		$ 1,475
Significant Unobservable Inputs (Level 3) [Member] | Foreclosed Assets Held for Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 404		$ 105
Significant Unobservable Inputs (Level 3) [Member] | Minimum [Member] | Impaired Loan [Member] | Unobservable Input Appraisal Adjustments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	10.00%		10.00%
Significant Unobservable Inputs (Level 3) [Member] | Minimum [Member] | Foreclosed Assets Held for Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	15.00%
Significant Unobservable Inputs (Level 3) [Member] | Minimum [Member] | Foreclosed Assets Held for Sale [Member] | Unobservable Input Appraisal Adjustments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate			15.00%
Significant Unobservable Inputs (Level 3) [Member] | Maximum [Member] | Impaired Loan [Member] | Unobservable Input Appraisal Adjustments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	95.00%		95.00%
Significant Unobservable Inputs (Level 3) [Member] | Maximum [Member] | Foreclosed Assets Held for Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	40.00%
Significant Unobservable Inputs (Level 3) [Member] | Maximum [Member] | Foreclosed Assets Held for Sale [Member] | Unobservable Input Appraisal Adjustments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate			40.00%
Significant Unobservable Inputs (Level 3) [Member] | Weighted Average [Member] | Impaired Loan [Member] | Unobservable Input Appraisal Adjustments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	28.00%		28.00%
Significant Unobservable Inputs (Level 3) [Member] | Weighted Average [Member] | Foreclosed Assets Held for Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	24.00%
Significant Unobservable Inputs (Level 3) [Member] | Weighted Average [Member] | Foreclosed Assets Held for Sale [Member] | Unobservable Input Appraisal Adjustments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate			24.00%

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

[2] Includes qualitative adjustments by management and estimated liquidation expenses.

XML

Preferred Stock

6 Months Ended

Jun. 30, 2013

Preferred Stock [Abstract]

Preferred Stock

(8)         Preferred Stock

On December 19, 2008, Mid Penn entered into and closed a letter agreement with the United States Department of the Treasury (the “Treasury”) pursuant to which the Treasury invested $10,000,000 in the Mid Penn Bank under the Treasury’s Capital Purchase Program (the “CPP”).  Under the letter agreement, the Treasury received (1) 10,000 shares of Series A Fixed Rate Cumulative Perpetual Preferred Stock, $1,000 liquidation preference (“Series A Preferred Stock”), and (2) warrants to purchase up to 73,099 shares of Mid Penn common stock at an exercise price of $20.52 per share (the “Warrants”).

On December 28, 2012, Mid Penn entered into a letter agreement with the Treasury pursuant to which Mid Penn repurchased from the Treasury all 10,000 shares of the Series A Preferred Stock issued to the Treasury which constitutes all of the issued and outstanding shares of Series A Preferred Stock.  Mid Penn repurchased the Series A Preferred Stock for a purchase price equal to the aggregate liquidation amount of the Preferred Stock of $10,000,000, plus accrued but unpaid dividends of $59,722.  All 10,000 shares of Series A Preferred Stock have subsequently been cancelled.

On January 23, 2013, Mid Penn entered into a letter agreement with the Treasury pursuant to which Mid Penn repurchased from the Treasury on that date the Warrants for $58,479.  The Warrants have subsequently been cancelled. 

As of the date hereof, Mid Penn has no further financial obligations under the Series A Preferred Stock, the Warrants or the Treasury’s CPP.

XML

Fair Value Measurement

6 Months Ended

Jun. 30, 2013

Fair Value Measurement [Abstract]

Fair Value Measurement

(4)        Fair Value Measurement

Fair value measurement and disclosure guidance defines fair value as the price that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions.  This guidance provides additional information on determining when the volume and level of activity for the asset or liability has significantly decreased.  The guidance also includes information on identifying circumstances when a transaction may not be considered orderly.

Fair value measurement and disclosure guidance provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability.  When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with the fair value measurement and disclosure guidance.

This guidance clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly.  In those situations, the entity must evaluate the weight of the evidence to determine whether the transaction is orderly.  The guidance provides a list of circumstances that may indicate that a transaction is not orderly.  A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability.  Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own belief about the assumptions market participants would use in pricing the asset or liability based upon the best information available in the circumstances.  Fair value measurement and disclosure guidance establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  The fair value hierarchy is as follows:

Level 1 Inputs - Unadjusted quoted prices in active markets that are accessible at the measurement date for

 identical, unrestricted assets or liabilities;

Level 2 Inputs - Quoted prices in markets that are not active, or inputs that are observable either directly or

 indirectly, for substantially the full term of the asset or liability;

Level 3 Inputs - Prices or valuation techniques that require inputs that are both significant to the fair value

 measurement and unobservable (i.e., supported by little or no market activity).

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

There were no transfers of assets between fair value Level 1 and Level 2 for the six months ended June 30, 2013. The following table illustrates the assets measured at fair value on a recurring basis segregated by hierarchy fair value levels.

(Dollars in thousands)			Fair value measurements at June 30, 2013 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	June 30, 2013		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and U.S. government agencies	$	14,071	$	-	$	14,071	$	-
Mortgage-backed U.S. government agencies		52,097		-		52,097		-
State and political subdivision obligations		67,415		-		67,415		-
Equity securities		373		373		-		-
	$	133,956	$	373	$	133,583	$	-

(Dollars in thousands)			Fair value measurements at December 31, 2012 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2012		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and U.S. government agencies	$	17,740	$	-	$	17,740	$	-
Mortgage-backed U.S. government agencies		66,686		-		66,686		-
State and political subdivision obligations		69,479		-		69,479		-
Equity securities		390		390		-		-
	$	154,295	$	390	$	153,905	$	-

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

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

(Dollars in thousands)			Fair value measurements at June 30, 2013 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	June 30, 2013		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	7,487	$	-	$	-	$	7,487
Foreclosed Assets Held for Sale		404		-		-		404

(Dollars in thousands)			Fair value measurements at December 31, 2012 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2012		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	1,475	$	-	$	-	$	1,475
Foreclosed Assets Held for Sale		105		-		-		105

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 as of June 30, 2013 and December 31, 2012.

(Dollars in thousands)	Quantitative Information about Level 3 Fair Value Measurements
June 30, 2013	Fair Value Estimate		Valuation Technique	Unobservable Input	Range                     Weighted Average
Impaired Loans	$	7,487	Appraisal of collateral (1)	Appraisal adjustments (2)	10% - 95%(28%)
Foreclosed Assets Held for Sale	$	404	Appraisal of collateral (1), (3)	Appraisal adjustments (2)	15% - 40%(24%)

(Dollars in thousands)	Quantitative Information about Level 3 Fair Value Measurements
December 31, 2012	Fair Value Estimate		Valuation Technique	Unobservable Input	Range                     Weighted Average
Impaired Loans	$	1,475	Appraisal of collateral (1)	Appraisal adjustments (2)	10% - 95%(28%)
Foreclosed Assets Held for Sale	$	105	Appraisal of collateral (1), (3)	Appraisal adjustments (2)	15% - 40%(24%)

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

(2) Appraisals may be adjusted 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.

(3) Includes qualitative adjustments by management and estimated liquidation expenses.

The following methodologies and assumptions were used to estimate the fair value of Mid Penn’s financial instruments:

Cash and Cash Equivalents:

The carrying value of cash and cash equivalents is considered to be a reasonable estimate of fair value.

Interest-bearing Balances with other Financial Institutions:

The estimate of fair value was determined by comparing the present value of quoted interest rates on like deposits with the weighted average yield and weighted average maturity of the balances.

Securities Available for Sale:

The fair value of securities classified as available for sale is determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather relying on the securities’ relationship to other benchmark quoted prices. 

Impaired Loans:

Mid Penn’s rating system assumes any loans classified as sub-standard non-accrual to be impaired, and all of these loans are considered collateral dependent; therefore, all of Mid Penn’s impaired loans, whether reporting a specific allocation or not, are considered collateral dependent.

It is Mid Penn’s policy to obtain updated third party valuations on all impaired loans collateralized by real estate within 30 days of the credit being classified as sub-standard non-accrual.  Prior to receipt of the updated real estate valuation Mid Penn will use any existing real estate valuation to determine any potential allowance issues; however no allowance recommendation will be made until which time Mid Penn is in receipt of the updated valuation.

In some instances Mid Penn is not holding real estate as collateral and is relying on business assets (personal property) for repayment.  In these circumstances a collateral inspection is performed by Mid Penn personnel to determine an estimated value.  The value is based on net book value, as provided by the financial statements, and discounted accordingly based on determinations made by management.  Occasionally, Mid Penn will employ an outside service to provide a fair estimate of value based on auction sales or private sales.  Management reviews the estimates of these third parties and discounts them accordingly based on management’s judgment, if deemed necessary.   Mid Penn considers the estimates used in its impairment analysis to be Level 3 inputs.

Mid Penn actively monitors the values of collateral on impaired loans.  This monitoring may require the modification of collateral values over time or changing circumstances by some factor, either positive or negative, from the original values.  All collateral values will be assessed by management at least every 18 months for possible revaluation by an independent third party.

Mid Penn does not currently, or plan to in the future, use automated valuation methodologies as a method of valuing real estate collateral.

Loans:

For variable-rate loans that reprice frequently and which entail no significant changes in credit risk, carrying values approximated fair value.  The fair value of other loans are estimated by calculating the present value of the cash flow difference between the current rate and the market rate, for the average maturity, discounted quarterly at the market rate.

Foreclosed Assets Held for Sale:

Assets included in foreclosed assets held for sale are carried at fair value and accordingly is presented as measured on a non-recurring basis.  Values are estimated using Level 3 inputs, based on appraisals that consider the sales prices of property in the proximate vicinity.

Accrued Interest Receivable and Payable:

The carrying amount of accrued interest receivable and payable approximates their fair values.

Restricted Investment in Bank Stocks:

The carrying amount of required and restricted investment in correspondent bank stock approximates fair value, and considers the limited marketability of such securities.

Mortgage Servicing Rights:

The fair value of servicing rights is based on the present value of estimated future cash flows on pools of mortgages stratified by rate and maturity date.

Deposits: 

The fair value for demand deposits (e.g., interest and noninterest checking, savings, and money market deposit accounts) is by definition, equal to the amount payable on demand at the reporting date (i.e. their carrying amounts).  Fair value for fixed-rate certificates of deposit was estimated using a discounted cash flow calculation by combining all fixed-rate certificates into a pool with a weighted average yield and a weighted average maturity for the pool and comparing the pool with interest rates currently being offered on a similar maturity.

Long-term Debt:

The estimated fair values of long-term debt were determined using discounted cash flow analysis, based on currently available borrowing rates for similar types of borrowing arrangements.

Commitments to Extend Credit and Letters of Credit:

The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account market interest rates, the remaining terms and present credit worthiness of the counterparties.  The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements.

The following table summarizes the carrying value and fair value of financial instruments at June 30, 2013 and December 31, 2012.

(Dollars in thousands)	June 30, 2013				December 31, 2012
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and cash equivalents	$	10,395	$	10,395	$	15,473	$	15,473
Interest-bearing time balances with other financial institutions		13,433		13,433		23,563		23,563
Investment securities		133,956		133,956		154,295		154,295
Net loans and leases		512,391		522,136		478,711		495,181
Restricted investment in bank stocks		3,253		3,253		2,503		2,503
Accrued interest receivable		2,843		2,843		2,893		2,893
Mortgage servicing rights		211		211		233		233
Financial liabilities:
Deposits	$	609,973	$	612,727	$	625,461	$	629,096
Long-term debt		11,734		12,208		22,510		23,240
Accrued interest payable		777		777		620		620
Off-balance sheet financial instruments:
Commitments to extend credit	$	-	$	-	$	-	$	-
Financial standby letters of credit		-		-		-		-

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of Mid Penn’s financial instruments as of June 30, 2013 and December 31, 2012.  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, and accrued interest receivable and payable.  Other than cash and cash equivalents, which are considered Level 1 Inputs, these instruments are Level 2 Inputs.  These tables exclude financial instruments for which the carrying amount approximates fair value.

					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, 2013	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Net loans and leases	$	512,391	$	522,136	$	-	$	-	$	522,136
Financial instruments - liabilities
Deposits	$	609,973	$	612,727	$	-	$	612,727	$	-
Long-term debt		11,734		12,208		-		12,208		-

					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, 2012	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Net loans and leases	$	478,711	$	495,181	$	-	$	-	$	495,181
Financial instruments - liabilities
Deposits	$	625,461	$	629,096	$	-	$	629,096	$	-
Long-term debt		22,510		23,240		-		23,240		-

XML

Consolidated Statement of Changes In Shareholder's Equity (USD $) In Thousands	Series A Preferred Stock [Member] Retained Earnings [Member]	Series A Preferred Stock [Member]	Series B Preferred Stock [Member] Preferred Stock [Member]	Series B Preferred Stock [Member] Retained Earnings [Member]	Series B Preferred Stock [Member]	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]	Total
Balance at Dec. 31, 2011						$ 10,000	$ 3,484	$ 29,830	$ 8,222	$ 1,916	$ 53,452
Net income									2,494		2,494
Total other comprehensive income (loss), net of taxes										362	362
Cash dividends									(348)		(348)
Employee Stock Purchase Plan							3	25			28
Preferred stock dividends	(250)	(250)
Amortization of warrant cost								(7)			(7)
Balance at Jun. 30, 2012						10,000	3,487	29,848	10,118	2,278	55,731
Balance at Dec. 31, 2012						4,880	3,490	29,816	11,741	2,293	52,220
Net income									2,051		2,051
Total other comprehensive income (loss), net of taxes										(2,945)	(2,945)
Cash dividends									(174)		(174)
Employee Stock Purchase Plan							2	26			28
Preferred stock issuance			120		120
Preferred stock dividends				(134)	(134)
Amortization of warrant cost								(14)			(14)
Warrant repurchase									(58)		(58)
Balance at Jun. 30, 2013						$ 5,000	$ 3,492	$ 29,828	$ 13,426	$ (652)	$ 51,094

XML

Preferred Stock (Narrative) (Details) (USD $)	0 Months Ended			0 Months Ended
	Jan. 23, 2013	Jun. 30, 2012	Dec. 19, 2008	Dec. 28, 2012 Preferred Class A [Member]	Dec. 19, 2008 Preferred Class A [Member]
Class of Stock [Line Items]
US Department of the Treasury Investment under the Treasury's Capital Purchase Program					$ 10,000,000
Preferred Stock, Shares Issued					10,000
Preferred Stock, Liquidation Preference, Value					1,000
Warrants and Rights Outstanding			73,099
Class of Warrant or Right, Exercise Price of Warrants or Rights		20.52	20.52
Stock Repurchased and Retired During Period, Shares				10,000
Stock Repurchased and Retired During Period, Value				10,000,000
Dividends, Preferred Stock, Cash				59,722
Stock Warrants Repurchased and Retired During Period, Purchase Price	$ 58,479

XML

Loans and Allowance for Loan and Lease Losses (Classes Of The Loan Portfolio Summarized By The Aggregate Risk Rating) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 518,658	$ 484,220	$ 488,670
Commercial and industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	85,573	77,883	77,481
Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	299,029	284,867	297,373
Commercial real estate - construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	38,840	33,231	30,304
Lease financing [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	1,596	1,305	1,724
Residential mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	63,340	57,455	49,778
Home equity [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	24,338	22,920	24,115
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	5,942	6,559	7,895
Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	492,832	455,834
Pass [Member] | Commercial and industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	82,398	74,763
Pass [Member] | Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	277,520	260,941
Pass [Member] | Commercial real estate - construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	38,384	32,767
Pass [Member] | Lease financing [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	1,596	1,305
Pass [Member] | Residential mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	63,192	57,455
Pass [Member] | Home equity [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	23,800	22,336
Pass [Member] | Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	5,942	6,267
Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	6,789	7,916
Special Mention [Member] | Commercial and industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	1,422	1,651
Special Mention [Member] | Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	4,789	5,375
Special Mention [Member] | Commercial real estate - construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	402	410
Special Mention [Member] | Home equity [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	176	188
Special Mention [Member] | Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount		292
Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	19,037	20,470
Substandard [Member] | Commercial and industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	1,753	1,469
Substandard [Member] | Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	16,720	18,551
Substandard [Member] | Commercial real estate - construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	54	54
Substandard [Member] | Residential mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	148
Substandard [Member] | Home equity [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	362	396
Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount		0
Doubtful [Member] | Commercial and industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount		0
Doubtful [Member] | Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount		0
Doubtful [Member] | Commercial real estate - construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount		0
Doubtful [Member] | Lease financing [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount		0
Doubtful [Member] | Residential mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount		0
Doubtful [Member] | Home equity [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount		0
Doubtful [Member] | Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount		$ 0

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2013

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

(11)          Recent Accounting Pronouncements

There were no new accounting pronouncements affecting Mid Penn during the period that were not already incorporated into the disclosures.

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Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2013

Accumulated Other Comprehensive Income [Abstract]

Accumulated Other Comprehensive Income

(7)           Accumulated Other Comprehensive (Loss) Income

The components of accumulated other comprehensive (loss) income, net of taxes, are as follows:

(Dollars in thousands)	Unrealized (Loss) Gain on Securities		Defined Benefit Plan Liability		Accumulated Other Comprehensive (Loss) Income
Balance - June 30, 2013	$	(520)	$	(132)	$	(652)
Balance - December 31, 2012	$	2,433	$	(140)	$	2,293

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Loans and Allowance for Loan and Lease Losses (Tables)

6 Months Ended

Jun. 30, 2013

Loans and Allowance for Loan and Lease Losses [Abstract]

Classes Of The Loan Portfolio Summarized By The Aggregate Risk Rating [Table Text Block]

(Dollars in thousands)                            June 30, 2013	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and industrial	$	82,398	$	1,422	$	1,753	$	-	$	85,573
Commercial real estate		277,520		4,789		16,720		-		299,029
Commercial real estate - construction		38,384		402		54		-		38,840
Lease financing		1,596		-		-		-		1,596
Residential mortgage		63,192		-		148		-		63,340
Home equity		23,800		176		362		-		24,338
Consumer		5,942		-		-		-		5,942
	$	492,832	$	6,789	$	19,037	$	-	$	518,658

(Dollars in thousands)                         December 31, 2012	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and industrial	$	74,763	$	1,651	$	1,469	$	-	$	77,883
Commercial real estate		260,941		5,375		18,551		-		284,867
Commercial real estate - construction		32,767		410		54		-		33,231
Lease financing		1,305		-		-		-		1,305
Residential mortgage		57,455		-		-		-		57,455
Home equity		22,336		188		396		-		22,920
Consumer		6,267		292		-		-		6,559
	$	455,834	$	7,916	$	20,470	$	-	$	484,220

Impaired Loans By Loan Portfolio Class [Table Text Block]

Impaired loans by loan portfolio class as of June 30, 2013 and December 31, 2012 are summarized as follows:

	June 30, 2013						December 31, 2012
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial and industrial	$	34	$	70	$	-	$	192	$	870	$	-
Commercial real estate		4,795		7,818		-		6,570		10,773		-
Home equity		121		260		-		124		261		-
Consumer		-		-		-		-		578		-
With an allowance recorded:
Commercial and industrial	$	204	$	331	$	82	$	223	$	351	$	111
Commercial real estate		9,111		9,313		1,871		2,514		2,672		1,200
Commercial real estate - construction		54		54		28		54		54		54
Residential mortgage		84		84		29		-		-		-
Home equity		54		54		10		67		71		18
Total:
Commercial and industrial	$	238	$	401	$	82	$	415	$	1,221	$	111
Commercial real estate		13,906		17,131		1,871		9,084		13,445		1,200
Commercial real estate - construction		54		54		28		54		54		54
Residential mortgage		84		84		29		-		-		-
Home equity		175		314		10		191		332		18
Consumer		-		-		-		-		578		-

Average recorded investment of impaired loans and related interest income recognized for the three and six months ended June 30, 2013 and June 30, 2012 are summarized as follows:

	Three Months Ended
	June 30, 2013				June 30, 2012
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	35	$	-	$	99	$	-
Commercial real estate		4,891		47		5,755		-
Commercial real estate - construction		-		-		129		-
Home equity		122		-		249		-
With an allowance recorded:
Commercial and industrial	$	205	$	-	$	1,189	$	-
Commercial real estate		9,136		-		2,797		-
Commercial real estate - construction		54		-		-		-
Residential mortgage		84		-		17		-
Home equity		55		-		89		-
Consumer		-		-		585		-
Total:
Commercial and industrial	$	240	$	-	$	1,288	$	-
Commercial real estate		14,027		47		8,552		-
Commercial real estate - construction		54		-		129		-
Residential mortgage		84		-		17		-
Home equity		177		-		338		-
Consumer		-		-		585		-

	Six Months Ended
	June 30, 2013				June 30, 2012
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	35	$	-	$	99	$	-
Commercial real estate		4,930		64		5,755		-
Commercial real estate - construction		-		-		129		-
Home equity		122		-		249		-
With an allowance recorded:
Commercial and industrial	$	205	$	-	$	1,189	$	-
Commercial real estate		9,150		-		2,797		-
Commercial real estate - construction		54		-		-		-
Residential mortgage		111		-		17		-
Home equity		55		-		89		-
Consumer		-		-		585		-
Total:
Commercial and industrial	$	240	$	-	$	1,288	$	-
Commercial real estate		14,080		64		8,552		-
Commercial real estate - construction		54		-		129		-
Residential mortgage		111		-		17		-
Home equity		177		-		338		-
Consumer		-		-		585		-

Nonaccrual Loans By Classes Of The Loan Portfolio [Table Text Block]

(Dollars in thousands)	June 30, 2013		December 31, 2012
Commercial and industrial	$	238	$	264
Commercial real estate		13,906		10,785
Commercial real estate - construction		54		54
Residential mortgage		988		537
Home equity		175		191
	$	15,361	$	11,831

Loan Portfolio Summarized By The Past Due Status [Table Text Block]

(Dollars in thousands)        June 30, 2013	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Loans Receivable > 90 Days and Accruing
Commercial and industrial	$	363	$			209	$	572	$	85,001	$	85,573	$	-
Commercial real estate		1,552		984		12,526		15,062		283,967		299,029		-
Commercial real estate - construction		-		-		54		54		38,786		38,840		-
Lease financing		-		-		-		-		1,596		1,596		-
Residential mortgage		160		-		924		1,084		62,256		63,340		-
Home equity		-		-		145		145		24,193		24,338		-
Consumer		7		7		-		14		5,928		5,942		-
Total	$	2,082	$	991	$	13,858	$	16,931	$	501,727	$	518,658	$	-

(Dollars in thousands)  December 31, 2012	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Loans Receivable > 90 Days and Accruing
Commercial and industrial	$	123	$	361	$	234	$	718	$	77,165	$	77,883	$	-
Commercial real estate		1,785		5,618		8,248		15,651		269,216		284,867		-
Commercial real estate - construction		-		-		54		54		33,177		33,231		-
Lease financing		1				-		1		1,304		1,305		-
Residential mortgage		495		35		531		1,061		56,394		57,455		-
Home equity		96		-		147		243		22,677		22,920		-
Consumer		1		2		-		3		6,556		6,559		-
Total	$	2,501	$	6,016	$	9,214	$	17,731	$	466,489	$	484,220	$	-

Allowance For Loan Losses And Recorded Investment In Financing Receivables [Table Text Block]

The following tables summarize the allowance for loan and lease losses and recorded investments in loans receivable.

(Dollars in thousands)
As of, and for the period ended, June 30, 2013	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Allowance for loan and lease losses:
Beginning balance,   April 1, 2013	$	1,281	$	3,543	$	39	$	1	$	603	$	349	$	105	$	(51)	$	5,870
Charge-offs		-		(93)		-		-		(22)		-		(10)		-		(125)
Recoveries		9		2		8		-		23		2		63		-		107
Provisions		(41)		367		(11)		-		56		58		(67)		53		415
Ending balance,          June 30, 2013	$	1,249	$	3,819	$	36	$	1	$	660	$	409	$	91	$	2	$	6,267

	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Beginning balance, January 1, 2013	$	1,298	$	3,112	$	64	$	1	$	581	$	343	$	101	$	9	$	5,509
Charge-offs		(21)		(118)		-		-		(126)		-		(15)		-		(280)
Recoveries		16		5		8		-		23		5		71		-		128
Provisions		(44)		820		(36)		-		182		61		(66)		(7)		910
Ending balance,  June 30, 2013	$	1,249	$	3,819	$	36	$	1	$	660	$	409	$	91	$	2	$	6,267
Ending balance: individually evaluated for impairment	$	82	$	1,871	$	28	$	-	$	29	$	10	$	-	$	-	$	2,020
Ending balance: collectively evaluated for impairment	$	1,167	$	1,948	$	8	$	1	$	631	$	399	$	91	$	2	$	4,247
Loans receivables:
Ending balance	$	85,573	$	299,029	$	38,840	$	1,596	$	63,340	$	24,338	$	5,942	$	-	$	518,658
Ending balance: individually evaluated  for impairment	$	238	$	13,906	$	54	$	-	$	84	$	175	$	-	$	-	$	14,457
Ending balance: collectively evaluated for impairment	$	85,335	$	285,123	$	38,786	$	1,596	$	63,256	$	24,163	$	5,942	$	-	$	504,201

(Dollars in thousands)
As of, and for the period ended, June 30, 2012	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Beginning balance,    April 1, 2012	$	1,755	$	3,362	$	27	$	2	$	454	$	323	$	524	$	130	$	6,577
Charge-offs		(12)		(149)		(5)		-		(59)		-		(5)		-		(230)
Recoveries		4		2		-		-		-		1		6		-		13
Provisions		(164)		225		5		-		80		17		5		57		225
Ending balance,       June 30, 2012	$	1,583	$	3,440	$	27	$	2	$	475	$	341	$	530	$	187	$	6,585

	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Beginning balance, January 1, 2012	$	2,274	$	3,544	$	23	$	2	$	362	$	337	$	87	$	143	$	6,772
Charge-offs		(216)		(455)		(5)		-		(69)		-		(7)		-		(752)
Recoveries		8		5		2		-		-		9		16		-		40
Provisions		(483)		346		7		-		182		(5)		434		44		525
Ending balance,     June 30, 2012	$	1,583	$	3,440	$	27	$	2	$	475	$	341	$	530	$	187	$	6,585
Ending balance: individually evaluated for impairment	$	320	$	975	$	-	$	-	$	2	$	15	$	445	$	-	$	1,757
Ending balance: collectively evaluated for impairment	$	1,263	$	2,465	$	27	$	2	$	473	$	326	$	85	$	187	$	4,828
Loans receivables:
Ending balance	$	77,481	$	297,373	$	30,304	$	1,724	$	49,778	$	24,115	$	7,895	$	-	$	488,670
Ending balance: individually evaluated  for impairment	$	1,374	$	8,470	$	115	$	-	$	17		335	$	585	$	-	$	10,896
Ending balance: collectively evaluated for impairment	$	76,107	$	288,903	$	30,189	$	1,724	$	49,761	$	23,780	$	7,310	$	-	$	477,774

(Dollars in thousands)
As of                  December 31, 2012	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Allowance for loan and lease losses:
Ending balance	$	1,298	$	3,112	$	64	$	1	$	581	$	343	$	101	$	9	$	5,509
Ending balance: individually evaluated for impairment	$	111	$	1,200	$	54	$	-	$	-	$	18	$	-	$	-	$	1,383
Ending balance: collectively evaluated for impairment	$	1,187	$	1,912	$	10	$	1	$	581	$	325	$	101	$	9	$	4,126
Loans receivables:
Ending balance	$	77,883	$	284,867	$	33,231	$	1,305	$	57,455	$	22,920	$	6,559	$	-	$	484,220
Ending balance: individually evaluated  for impairment	$	415	$	9,084	$	54	$	-	$	-	$	191	$	-	$	-	$	9,744
Ending balance: collectively evaluated for impairment	$	77,468	$	275,783	$	33,177	$	1,305	$	57,455	$	22,729	$	6,559	$	-	$	474,476

Troubled Debt Restructurings [Table Text Block]

(Dollars in thousands)                            June 30, 2013	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
Commercial and industrial	$	40	$	35	$	30
Commercial real estate		13,346		9,336		8,386
Residential mortgage		601		595		461
	$	13,987	$	9,966	$	8,877

(Dollars in thousands)                   December 31, 2012	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
Commercial and industrial	$	40	$	35	$	30
Commercial real estate		7,326		3,748		2,916
Residential mortgage		558		552		448
	$	7,924	$	4,335	$	3,394

	Three Months Ended, June 30, 2013
(Dollars in thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
Commercial real estate	3	$	6,091	$	5,588	$	5,588
Residential mortgage	1		14		14		14
	4	$	6,105	$	5,602	$	5,602

	Six Months Ended, June 30, 2013
(Dollars in thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
Commercial real estate	3	$	6,091	$	5,588	$	5,588
Residential mortgage	2		74		74		74
	5	$	6,165	$	5,662	$	5,662

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Fair Value Measurements (Policy)

6 Months Ended

Jun. 30, 2013

Fair Value Measurements [Abstract]

Fair Value Measurement [Policy Text Block]

The following methodologies and assumptions were used to estimate the fair value of Mid Penn’s financial instruments:

Cash and Cash Equivalents:

The carrying value of cash and cash equivalents is considered to be a reasonable estimate of fair value.

Interest-bearing Balances with other Financial Institutions:

The estimate of fair value was determined by comparing the present value of quoted interest rates on like deposits with the weighted average yield and weighted average maturity of the balances.

Securities Available for Sale:

The fair value of securities classified as available for sale is determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather relying on the securities’ relationship to other benchmark quoted prices. 

Impaired Loans:

Mid Penn’s rating system assumes any loans classified as sub-standard non-accrual to be impaired, and all of these loans are considered collateral dependent; therefore, all of Mid Penn’s impaired loans, whether reporting a specific allocation or not, are considered collateral dependent.

It is Mid Penn’s policy to obtain updated third party valuations on all impaired loans collateralized by real estate within 30 days of the credit being classified as sub-standard non-accrual.  Prior to receipt of the updated real estate valuation Mid Penn will use any existing real estate valuation to determine any potential allowance issues; however no allowance recommendation will be made until which time Mid Penn is in receipt of the updated valuation.

In some instances Mid Penn is not holding real estate as collateral and is relying on business assets (personal property) for repayment.  In these circumstances a collateral inspection is performed by Mid Penn personnel to determine an estimated value.  The value is based on net book value, as provided by the financial statements, and discounted accordingly based on determinations made by management.  Occasionally, Mid Penn will employ an outside service to provide a fair estimate of value based on auction sales or private sales.  Management reviews the estimates of these third parties and discounts them accordingly based on management’s judgment, if deemed necessary.   Mid Penn considers the estimates used in its impairment analysis to be Level 3 inputs.

Mid Penn actively monitors the values of collateral on impaired loans.  This monitoring may require the modification of collateral values over time or changing circumstances by some factor, either positive or negative, from the original values.  All collateral values will be assessed by management at least every 18 months for possible revaluation by an independent third party.

Mid Penn does not currently, or plan to in the future, use automated valuation methodologies as a method of valuing real estate collateral.

Loans:

For variable-rate loans that reprice frequently and which entail no significant changes in credit risk, carrying values approximated fair value.  The fair value of other loans are estimated by calculating the present value of the cash flow difference between the current rate and the market rate, for the average maturity, discounted quarterly at the market rate.

Foreclosed Assets Held for Sale:

Assets included in foreclosed assets held for sale are carried at fair value and accordingly is presented as measured on a non-recurring basis.  Values are estimated using Level 3 inputs, based on appraisals that consider the sales prices of property in the proximate vicinity.

Accrued Interest Receivable and Payable:

The carrying amount of accrued interest receivable and payable approximates their fair values.

Restricted Investment in Bank Stocks:

The carrying amount of required and restricted investment in correspondent bank stock approximates fair value, and considers the limited marketability of such securities.

Mortgage Servicing Rights:

The fair value of servicing rights is based on the present value of estimated future cash flows on pools of mortgages stratified by rate and maturity date.

Deposits: 

The fair value for demand deposits (e.g., interest and noninterest checking, savings, and money market deposit accounts) is by definition, equal to the amount payable on demand at the reporting date (i.e. their carrying amounts).  Fair value for fixed-rate certificates of deposit was estimated using a discounted cash flow calculation by combining all fixed-rate certificates into a pool with a weighted average yield and a weighted average maturity for the pool and comparing the pool with interest rates currently being offered on a similar maturity.

Long-term Debt:

The estimated fair values of long-term debt were determined using discounted cash flow analysis, based on currently available borrowing rates for similar types of borrowing arrangements.

Commitments to Extend Credit and Letters of Credit:

The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account market interest rates, the remaining terms and present credit worthiness of the counterparties.  The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 14, 2013
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2013
Entity Registrant Name	MID PENN BANCORP INC
Entity Central Index Key	0000879635
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		3,492,214
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No

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Investment Securities (Tables)

6 Months Ended

Jun. 30, 2013

Investment Securities [Abstract]

Unrealized Gain (Loss) on Investments [Table Text Block]

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
June 30, 2013
Available for sale securities:
U.S. Treasury and U.S. government agencies	$	13,189	$	882	$	-	$	14,071
Mortgage-backed U.S. government agencies		52,582		273		758		52,097
State and political subdivision obligations		68,572		995		2,152		67,415
Equity securities		400		-		27		373
	$	134,743	$	2,150	$	2,937	$	133,956

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
December 31, 2012
Available for sale securities:
U.S. Treasury and U.S. government agencies	$	16,394	$	1,346	$	-	$	17,740
Mortgage-backed U.S. government agencies		66,783		393		490		66,686
State and political subdivision obligations		67,033		2,542		96		69,479
Equity securities		400		-		10		390
	$	150,610	$	4,281	$	596	$	154,295

Schedule of Fair Value and Unrealized Loss on Investments in a Continuous Unrealized Loss Position [Table Text Block]

(Dollars in thousands)	Less Than 12 Months				12 Months or More				Total
June 30, 2013	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Available for sale securities:
Mortgage-backed U.S. government agencies	$	24,426	$	643	$	7,151	$	115	$	31,577	$	758
State and political subdivision obligations		34,667		2,089		1,207		63		35,874		2,152
Equity securities		-		-		400		27		400		27
Total temporarily impaired
available for sale securities	$	59,093	$	2,732	$	8,758	$	205	$	67,851	$	2,937

(Dollars in thousands)	Less Than 12 Months				12 Months or More				Total
December 31, 2012	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Available for sale securities:
Mortgage-backed U.S. government agencies	$	30,345	$	270	$	15,839	$	220	$	46,184	$	490
State and political subdivision obligations		9,389		66		1,231		30		10,620		96
Equity securities		-		-		390		10		390		10
Total temporarily impaired
available for sale securities	$	39,734	$	336	$	17,460	$	260	$	57,194	$	596

Investments Classified by Contractual Maturity Date [Table Text Block]

(Dollars in thousands)	June 30, 2013
	Amortized		Fair
	Cost		Value
Due in 1 year or less	$	-	$	-
Due after 1 year but within 5 years		17,149		18,222
Due after 5 years but within 10 years		27,685		27,787
Due after 10 years		36,927		35,477
		81,761		81,486
Mortgage-backed securities		52,582		52,097
Equity securities		400		373
	$	134,743	$	133,956