Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

Assets Measured at Fair Value on a Recurring Basis

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



(Dollars in thousands)			Fair value measurements at September 30, 2014 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	September 30, 2014		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and U.S. government agencies	$	26,865	$	-	$	26,865	$	-
Mortgage-backed U.S. government agencies		40,679		-		40,679		-
State and political subdivision obligations		78,990		-		78,990		-
Equity securities		1,600		558		1,042		-
	$	148,134	$	558	$	147,576	$	-



(Dollars in thousands)			Fair value measurements at December 31, 2013 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2013		(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and U.S. government agencies	$	12,834	$	-	$	12,834	$	-
Mortgage-backed U.S. government agencies		39,392		-		39,392		-
State and political subdivision obligations		69,038		-		69,038		-
Equity securities		1,539		519		1,020		-
	$	122,803	$	519	$	122,284	$	-

Fair Value Measurements, Nonrecurring



(Dollars in thousands)			Fair value measurements at September 30, 2014 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	September 30, 2014		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	7,002	$	-	$	-	$	7,002
Foreclosed Assets Held for Sale		503		-		-		503
Mortgage Servicing Rights		198		-		-		198



(Dollars in thousands)			Fair value measurements at December 31, 2013 using:
	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2013		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	6,535	$	-	$	-	$	6,535
Foreclosed Assets Held for Sale		465		-		-		465
Mortgage Servicing Rights		223		-		-		223

Fair Value Inputs, Assets, Quantitative Information

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Mid Penn has utilized Level 3 inputs to determine the fair value as of September 30, 2014 and December 31, 2013.



(Dollars in thousands)	Quantitative Information about Level 3 Fair Value Measurements
September 30, 2014	Fair Value Estimate		Valuation Technique	Unobservable Input	Range	Weighted Average
Impaired Loans	$	7,002	Appraisal of collateral (1)	Appraisal adjustments (2)	10% - 95%	28%
Foreclosed Assets Held for Sale		503	Appraisal of collateral (1), (3)	Appraisal adjustments (2)	15% - 40%	24%
Mortgage Servicing Rights		198	Multiple of annual service fee	Estimated prepayment speed based on rate and term	280% - 400%	357%


(Dollars in thousands)	Quantitative Information about Level 3 Fair Value Measurements
December 31, 2013	Fair Value Estimate		Valuation Technique	Unobservable Input	Range	Weighted Average
Impaired Loans	$	6,535	Appraisal of collateral (1)	Appraisal adjustments (2)	10% - 95%	25%
Foreclosed Assets Held for Sale		465	Appraisal of collateral (1), (3)	Appraisal adjustments (2)	15% - 40%	24%
Mortgage Servicing Rights		223	Multiple of annual service fee	Estimated prepayment speed based on rate and term	240% - 400%	349%

(1)

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

(2)

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

(3)

Includes qualitative adjustments by management and estimated liquidation expenses.

Fair Value, by Balance Sheet Grouping



(Dollars in thousands)	September 30, 2014				December 31, 2013
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and cash equivalents	$	15,247	$	15,247	$	8,623	$	8,623
Interest-bearing time balances with other financial institutions		5,772		5,772		7,513		7,513
Investment securities		148,134		148,134		122,803		122,803
Net loans and leases		561,750		564,735		540,145		548,923
Restricted investment in bank stocks		3,395		3,395		2,969		2,969
Accrued interest receivable		3,000		3,000		2,704		2,704
Mortgage servicing rights		198		198		223		223

Financial liabilities:
Deposits	$	645,997	$	647,481	$	608,130	$	610,419
Short-term borrowings		21,854		21,854		23,833		23,833
Long-term debt		33,008		32,931		23,145		22,988
Accrued interest payable		646		646		393		393

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

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

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of Mid Penn’s financial instruments as of September 30, 2014 and December 31, 2013 not previously disclosed. Carrying values approximate fair values for cash and cash equivalents, interest-bearing time balances with other financial institutions, restricted investment in bank stocks, mortgage servicing rights, accrued interest receivable and payable, and short-term borrowings. Other than cash and cash equivalents, which are considered Level 1 Inputs and mortgage servicing rights, which are Level 3 inputs, these instruments are Level 2 Inputs. These tables exclude financial instruments for which the carrying amount approximates fair value.



					Fair Value Measurements
					Quoted Prices
					in Active Markets				Significant
(Dollars in thousands)					for Identical Assets		Significant Other		Unobservable
	Carrying				or Liabilities		Observable Inputs		Inputs
September 30, 2014	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Net loans and leases	$	561,750	$	564,735	$	-	$	-	$	564,735

Financial instruments - liabilities
Deposits	$	645,997	$	647,481	$	-	$	647,481	$	-
Long-term debt		33,008		32,931		-		32,931		-


					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, 2013	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Net loans and leases	$	540,145	$	548,923	$	-	$	-	$	548,923

Financial instruments - liabilities
Deposits	$	608,130	$	610,419	$	-	$	610,419	$	-
Long-term debt		23,145		22,988		-		22,988		-

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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