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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
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)
Pennsylvania25-1666413
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification Number)
2407 Park Drive
Harrisburg, Pennsylvania
17110
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code 1.866.642.7736

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1.00 par value per shareMPBThe NASDAQ Stock Market LLC

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    x    No    o


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes    x    No    o


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated FilerxEmerging Growth Companyo
Non-accelerated FileroSmaller Reporting Companyo

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o


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

As of May 1, 2024, the registrant had 16,689,304 shares of common stock outstanding, par value $1.00 per share.

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FORM 10-Q
TABLE OF CONTENTS
Unless the context otherwise requires, the terms "Mid Penn", "Corporation" "we", "us", and "our" refer to Mid Penn Bancorp, Inc. and its consolidated wholly-owned banking subsidiary and nonbank subsidiaries.
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GLOSSARY OF DEFINED ACRONYMS AND TERMS
2014 Plan2014 Restricted Stock Plan
2023 Annual ReportCorporation's Annual Report on Form 10-K for the year ended December 31, 2023
2023 Plan2023 Stock Incentive Plan
ACLAllowance for Credit Losses
AFSAvailable for Sale
AOCIAccumulated Other Comprehensive Income
ASCAccounting Standards Codification
ASUAccounting Standards Update
the BankMid Penn Bank
Bank MergerMerger of Brunswick Bank with and into Mid Penn Bank
BOLIBank Owned Life Insurance
bp or bpsbasis point(s)
BrunswickBrunswick Bancorp
Brunswick AcquisitionMerger acquisition of Brunswick
Brunswick BankBrunswick Bank & Trust Company
CECLCurrent Expected Credit Losses
DCFDiscounted Cash Flow
DIFFDIC’s Deposit Insurance Fund
DRIPDividend Reinvestment Plan
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
FHLBFederal Home Loan Bank of Pittsburgh
FICOthe Financing Corporation
FOMCFederal Open Market Committee
FTEFully taxable-equivalent
HFSHeld for Sale
HTMHeld to Maturity
LGDLoss Given Default
LHFILoans held for investment
LIHTCLow-Income Housing Tax Credits
LoansLoans, net of unearned interest
Management DiscussionManagement's Discussion and Analysis of Financial Condition and Results of Operations
MergerMerger of Brunswick with and into Mid Penn
Merger AgreementAgreement and Plan of Merger between Mid Penn and Brunswick
Mid Penn or the CorporationMid Penn Bancorp, Inc.
N/MNot meaningful - (percentage changes greater than +/- 150% not considered meaningful)
OBSOff-Balance Sheet
OCIOther Comprehensive Income
PCDPurchased Credit Deteriorated
PCL
Provision for Credit Losses
PDProbability of Default
RiverviewRiverview Financial Corporation
Riverview AcquisitionMerger acquisition of Riverview
ROAReturn on Assets
ROEReturn on Equity
SBASmall Business Association
SECSecurities Exchange Commission
SOFRSecured Overnight Financing Rate
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MID PENN BANCORP, INC.



PART 1 – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except per share data)March 31, 2024December 31, 2023
ASSETS
Cash and due from banks$33,362 $45,435 
Interest-bearing balances with other financial institutions31,801 34,668 
Federal funds sold2,922 16,660 
Total cash and cash equivalents68,085 96,763 
Investment securities:
HTM, at amortized cost (fair value $351,204 and $357,521)
396,998 399,128 
AFS, at fair value217,632 223,555 
Equity securities available for sale, at fair value431 438 
Loans held for sale, at fair value4,581 3,855 
Loans, net of unearned interest4,317,449 4,252,792 
Less: ACL - Loans(33,524)(34,187)
Net loans 4,283,925 4,218,605 
Premises and equipment, net36,068 36,909 
Operating lease right of use asset8,414 8,953 
Finance lease right of use asset2,683 2,727 
Cash surrender value of life insurance52,997 54,497 
Restricted investment in bank stocks17,446 16,768 
Accrued interest receivable26,975 25,820 
Deferred income taxes22,894 24,146 
Goodwill127,031 127,031 
Core deposit and other intangibles, net6,051 6,479 
Foreclosed assets held for sale5,110 293 
Other assets53,058 44,825 
Total Assets$5,330,379 $5,290,792 
LIABILITIES & SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand$807,861 $801,312 
Interest-bearing transaction accounts2,082,846 2,086,450 
Time1,488,398 1,458,450 
Total Deposits4,379,105 4,346,212 
Short-term borrowings271,849 241,532 
Long-term debt23,941 59,003 
Subordinated debt46,201 46,354 
Operating lease liability8,683 9,285 
Accrued interest payable16,330 14,257 
Other liabilities33,302 31,799 
Total Liabilities4,779,411 4,748,442 
Shareholders' Equity:
Common stock, par value $1.00 per share; 40,000,000 shares authorized at March 31, 2024 and December 31, 2023; 17,006,359 issued at March 31, 2024 and 16,998,929 at December 31, 2023; 16,565,637 outstanding at March 31, 2024 and 16,573,707 at December 31, 2023
17,006 16,999 
Additional paid-in capital406,150 405,725 
Retained earnings154,801 145,982 
Accumulated other comprehensive loss(16,947)(16,637)
Treasury stock, at cost; 440,722 shares at March 31, 2024 and 425,222 shares at December 31, 2023
(10,042)(9,719)
Total Shareholders’ Equity550,968 542,350 
Total Liabilities and Shareholders' Equity$5,330,379 $5,290,792 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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MID PENN BANCORP, INC.



CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
March 31,
(In thousands, except per share data)20242023
INTEREST INCOME
Loans, including fees $63,236 $45,865 
Investment securities:  
Taxable4,040 3,874 
Tax-exempt376 389 
Other interest-bearing balances403 53 
Federal funds sold136 45 
Total Interest Income68,191 50,226 
INTEREST EXPENSE  
Deposits26,332 12,001 
Short-term borrowings4,446 1,490 
Long-term and subordinated debt957 686 
Total Interest Expense31,735 14,177 
Net Interest Income36,456 36,049 
  (Benefit)/Provision for credit losses(937)719 
Net Interest Income After (Benefit)/Provision for Credit Losses37,393 35,330 
NONINTEREST INCOME  
Fiduciary and wealth management1,132 1,236 
ATM debit card interchange945 1,056 
Service charges on deposits509 435 
Mortgage banking 424 384 
Mortgage hedging— 20 
Net gain on sales of SBA loans107 — 
Earnings from cash surrender value of life insurance284 254 
Other 2,436 940 
Total Noninterest Income5,837 4,325 
NONINTEREST EXPENSE  
Salaries and employee benefits15,462 13,844 
Software licensing and utilization2,120 1,946 
Occupancy, net1,982 1,886 
Equipment1,222 1,251 
Shares tax997 899 
Legal and professional fees998 800 
ATM/card processing534 493 
Intangible amortization428 344 
FDIC Assessment945 340 
Merger and acquisition — 224 
Other 3,832 3,814 
Total Noninterest Expense28,520 25,841 
INCOME BEFORE PROVISION FOR INCOME TAXES14,710 13,814 
Provision for income taxes2,577 2,587 
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS$12,133 $11,227 
PER COMMON SHARE DATA:
Basic Earnings Per Common Share$0.73 $0.71 
Diluted Earnings Per Common Share$0.73 $0.70 
Weighted-average basic shares outstanding16,567,902 15,886,186 
Weighted-average diluted shares outstanding16,613,373 15,931,121 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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MID PENN BANCORP, INC.



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended March 31,
(In Thousands)20242023
Net income$12,133 $11,227 
Other comprehensive (loss)/income:
Unrealized (losses)/gains arising during the period on available for sale securities, net of income tax benefit/(cost) of $455 and ($526), respectively. (1)
(1,711)1,977 
Unrealized holding gains/(losses) arising during the period on interest rate derivatives used in cash flow hedges, net of income tax (cost)/benefit of ($375) and $34, respectively. (1)
1,410 (128)
Change in defined benefit plans, net of income tax (cost)/benefit of ($2) and $1, respectively (1), (2)
8 5 
Reclassification adjustment for settlement gains and activity related to benefit plans, net of income tax benefit of $5 and $3, respectively (1), (3)
(17)(12)
Total other comprehensive (loss)/income (310)1,842 
Total comprehensive income$11,823 $13,069 
(1)The income tax impacts of the components of other comprehensive income are calculated using a 21% statutory tax rate.
(2)The change in defined benefit plans consists primarily of unrecognized actuarial (losses)/gains on defined benefit plans during the period.
(3)The reclassification adjustment for benefit plans includes settlement gains, amortization of prior service costs, and amortization of net gain or loss. Amounts are included in other income on the Consolidated Statements of Income within total noninterest income.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
Common Stock Additional
Paid-in
Capital		Retained
Earnings 		Accumulated
Other
Comprehensive
(Loss) Income		Treasury
Stock 		Total
Shareholders'
Equity
(In thousands, except per share data)SharesAmount
Balance, January 1, 202416,998,929 $16,999 $405,725 $145,982 $(16,637)$(9,719)$542,350 
Net income— — — 12,133 — — 12,133 
Total other comprehensive income, net of taxes— — — — (310)— (310)
Common stock cash dividends declared - $0.20 per share
— — — (3,314)— — (3,314)
Repurchased stock— — — — — (323)(323)
Employee Stock Purchase Plan 5,653 5 107 — — — 112 
Director Stock Purchase Plan1,777 2 34 — — — 36 
Restricted stock activity— — 284 — — — 284 
Balance, March 31, 202417,006,359 $17,006 $406,150 $154,801 $(16,947)$(10,042)$550,968 

Common StockAdditional
Paid-in
Capital		Retained
Earnings 		Accumulated
Other
Comprehensive
Income (Loss) 		Treasury
Stock 		Total
Shareholders'
Equity
(In thousands, except per share data)SharesAmount
Balance, January 1, 202316,094,486 $16,094 $386,987 $133,114 $(19,216)$(4,880)$512,099 
Net income— — — 11,227 — — 11,227 
Total other comprehensive loss, net of taxes— — — — 1,842 — 1,842 
Common stock cash dividends declared, $0.20 per share
— — — (3,176)— — (3,176)
Impact of adopting CECL (1)
— — — (11,548)— — (11,548)
Employee Stock Purchase Plan 2,217 2 55 — — — 57 
Director Stock Purchase Plan1,651 2 41 — — — 43 
Restricted stock activity— — 249 — — — 249 
Balance, March 31, 202316,098,354 $16,098 $387,332 $129,617 $(17,374)$(4,880)$510,793 
(1) The Corporation adopted ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" effective January 1, 2023. See "Note 1 - Summary of Significant Accounting Policies" for further details.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31,
(In thousands)20242023
Operating Activities:
Net Income$12,133 $11,227 
Adjustments to reconcile net income to net cash provided by operating activities:
(Benefit)/Provision for credit losses(937)719 
Depreciation1,192 1,202 
Amortization of intangibles428 344 
Net amortization of security discounts/premiums102 127 
Noncash operating lease expense539 509 
Amortization of finance lease right of use asset44 45 
Earnings on cash surrender value of life insurance(284)(254)
Mortgage loans originated for sale(16,808)(24,615)
Proceeds from sales of mortgage loans originated for sale16,506 24,797 
Gain on sale of mortgage loans(424)(384)
SBA loans originated for sale(1,553)— 
Proceeds from sales of SBA loans originated for sale1,446 — 
Gain on sale of SBA loans(107)— 
Gain on sale of property, plant, and equipment(32)(31)
Accretion of subordinated debt(153)(147)
Stock compensation expense284 249 
Change in deferred income tax benefit1,402 706 
Increase accrued interest receivable(1,155)(800)
Decrease (Increase) in other assets(3,484)775 
Increase (decrease) in accrued interest payable2,073 3,506 
Decrease in operating lease liability (602)(580)
(Decrease) Increase in other liabilities1,799 (4,217)
Net Cash Provided By Operating Activities12,409 13,178 
Investing Activities:
Proceeds from the maturity or call of available-for-sale securities3,741 3,743 
Proceeds from the maturity or call of held-to-maturity securities2,045 2,611 
Stock dividends of FHLB and other bank stock239 110 
(Purchases) reduction of restricted investment in bank stock(917)164 
Net increase in loans (68,987)(97,156)
Purchases of bank premises and equipment(351)(922)
Proceeds from the sale of premises and equipment32 31 
Net change in investments in tax credits and other partnerships(1,548)(2,174)
Net Cash Used in Investing Activities(65,746)(93,593)

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(CONTINUED)
Financing Activities:
Net increase in deposits32,893 99,750 
Common stock dividends paid(3,314)(3,176)
Proceeds from Employee and Director Stock Purchase Plan stock issuance148 100 
Treasury stock purchased(323)— 
Net change in finance lease liability(24)(23)
Net change in short-term borrowings30,317 (14,647)
Long-term debt repayment(35,038)(70)
Net Cash Provided by Financing Activities24,659 81,934 
Net (decrease)/ increase in cash and cash equivalents(28,678)1,519 
Cash and cash equivalents, beginning of period96,763 60,881 
Cash and cash equivalents, end of period$68,085 $62,400 
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest$29,662 $10,671 
Supplemental Noncash Disclosures:
Recognition of operating lease right of use assets$— $125 
Recognition of operating lease liabilities— 125 
Loans transferred to foreclosed assets held for sale4,817 205 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Summary of Significant Accounting Policies
Nature of Operations
Mid Penn Bancorp, Inc. ("Mid Penn" or the "Corporation"), through operations conducted by Mid Penn Bank (the "Bank") and its nonbank subsidiaries, engages in a full-service commercial banking and trust business, making available to the community a wide range of financial services, including, but not limited to, mortgage and home equity loans, secured and unsecured commercial and consumer loans, lines of credit, construction financing, farm loans, community development loans, loans to non-profit entities and local government loans, and various types of time and demand deposits including but not limited to, checking accounts, savings accounts, clubs, money market deposit accounts, certificates of deposit, and IRAs. In addition, the Bank provides a full range of trust and wealth management services through its Trust Department. Deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") to the extent provided by law.
Mid Penn also fulfills the insurance needs of both existing and potential customers through MPB Risk Services, LLC, doing business as MPB Insurance and Risk Management.
The financial services are provided to individuals, partnerships, non-profit organizations, and corporations through its retail banking offices located in throughout Pennsylvania and two counties in New Jersey.
Basis of Presentation
For all periods presented, the accompanying consolidated financial statements include the accounts of Mid Penn Bancorp, Inc., its wholly-owned subsidiary, Mid Penn Bank, and four nonbank subsidiaries, MPB Financial Services, LLC, which includes MPB Wealth Management, LLC (which ceased operating during the first quarter of 2024) and MPB Risk Services, LLC, and MPB Launchpad Fund I, LLC. As of March 31, 2024, the accounts and activities of these nonbank subsidiaries were not material to warrant separate disclosure or segment reporting. As a result, Mid Penn has only one reportable segment for financial reporting purposes. All material intercompany accounts and transactions have been eliminated in consolidation.
Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. Mid Penn believes the information presented is not misleading, and the disclosures are adequate. For comparative purposes, the March 31, 2023 and December 31, 2023 balances have been reclassified, when necessary, to conform to the 2024 presentation. Such reclassifications had no impact on net income or total shareholders’ equity. In the opinion of management, all adjustments necessary for fair presentation of the periods presented have been reflected in the accompanying consolidated financial statements. All such adjustments are of a normal, recurring nature. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2023 Annual Report.
Mid Penn has evaluated events and transactions occurring subsequent to the balance sheet date of March 31, 2024, for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the issuance date of these consolidated financial statements.
Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
Material estimates subject to significant change include the allowance for credit losses, the expected cash flows and collateral values associated with loans that are individually evaluated for credit losses, the carrying value of other real estate owned ("OREO"), the fair value of financial instruments, business combination fair value computations, the valuation of goodwill and other intangible assets, stock-based compensation and deferred income tax assets.

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Accounting Standards adopted and Updated Significant Accounting Policy
On January 1, 2023, the Corporation adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology, and is referred to as CECL. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, including loans and HTM debt securities. It also applies to OBS credit exposures (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with ASC Topic 842. Prior to 2024, the provision for OBS credit losses was included in Other Expenses on the Statement of Income. As of March 31, 2024, the provision for OBS credit losses is included in Provision for Credit Losses on the Income Statement. Prior periods have been updated for presentation.
All other significant accounting policies used in preparation of the Consolidated Financial Statements are disclosed in the 2023 Annual Report. Those significant accounting policies are unchanged at March 31, 2024.
Accounting Standards Pending Adoption
ASU No. 2023-02: The FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.
The amendments in this update permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. A reporting entity may make an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. The amendments in this update also remove certain guidance for Qualified Affordable Housing Project investments and require the application of the delayed equity contribution guidance to all tax equity investments. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and must be applied on either a modified retrospective or a retrospective basis. Early adoption is permitted in any interim period, however if adopted in an interim period the entity shall adopt the amendments in this update as of the beginning of the fiscal year that includes the interim period. The Corporation does not expect the adoption of ASU No. 2023-02 to have a material impact on its consolidated financial statements.
ASU 2023-06: The FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.
ASU 2023-06 amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 - Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. ASU 2023-06 is not expected to have a significant impact on our financial statements.
ASU 2023-07: The FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
ASU 2023-07 amends the ASC to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. ASU 2023-07 is not expected to have a significant impact on our financial statements.
ASU 2023-09: The FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures

ASU 2023-09 amends the ASC to enhance income tax disclosures by requiring entities to disclose income taxes paid (net of refunds received) disaggregated by federal, state and foreign taxes. Additionally, entities are required to disclose amounts greater than 5% of the total income taxes paid to an individual jurisdiction The amendments are effective for annual periods beginning after December 15, 2025. ASU 2023-09 is not expected to have a significant impact on our financial statements.


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ASU 2024-01—The FASB issued ASU 2024-01, Compensation - Stock Compensation (Topic 718): Scope application of profits interest and similar awards

The amendments in the ASU apply to all reporting entities that account for profits interest awards as compensation to employees or nonemployees in return for goods or services. The amendments are effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods. ASU 2024-01 is not expected to have a significant impact on our financial statements.

ASU 2024-02: The FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements

This ASU contains amendments to the Codification that remove references to various FASB Concepts Statements. The amendments are effective for fiscal years beginning after Dec. 15, 2025. Early adoption is permitted. ASU 2024-02 is not expected to have a significant impact on our financial statements.

Note 2 - Business Combination
Brunswick Acquisition
On May 19, 2023, Mid Penn completed its acquisition of Brunswick through the merger of Brunswick with and into Mid Penn with Mid Penn being the surviving corporation. In connection with this acquisition, Brunswick Bank, a wholly-owned subsidiary of Brunswick, merged with and into Mid Penn Bank, a wholly-owned subsidiary of Mid Penn.

This transaction included the acquisition of 5 branches and extended Mid Penn’s footprint into Middlesex and Monmouth counties in central New Jersey. Mid Penn issued 849,510 shares of its common stock as well as a net cash payment to Brunswick shareholders of $27.6 million, for total consideration of $45.7 million for all outstanding stock and the cancellation of stock options of Brunswick.
Mid Penn has recognized total goodwill of $12.8 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed compared to the fair market value of identifiable assets acquired. The fair value of the consideration exchanged related to Mid Penn’s common stock was calculated based upon the closing market price of Mid Penn’s common stock as of May 19, 2023. None of the goodwill recognized is expected to be deductible for income tax purposes.

Purchased loans and leases that reflect a more-than-insignificant deterioration of credit from origination are considered PCD. Mid Penn considers various factors in connection with the identification of more-than-insignificant deterioration in credit, including but not limited to nonperforming status, delinquency, risk ratings, FICO scores and other qualitative factors that indicate deterioration in credit quality since origination. For PCD loans and leases, the initial estimate of expected credit losses is recognized in the ACL on the date of acquisition using the same methodology as other loans and leases held-for-investment. As part of the Brunswick Acquisition, Mid Penn acquired PCD loans and leases of $18.7 million. Mid Penn established an ACL at acquisition of $336 thousand with a corresponding gross-up to the amortized cost of the PCD loans and leases. The non-credit discount on the PCD loans and leases was $2.4 million and the Day 1 fair value was $16.3 million. The initial provision expense for non-PCD loans associated with the Brunswick Acquisition was $2.0 million.

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Estimated fair values of the assets acquired and liabilities assumed in the Brunswick Acquisition as of the closing date are as follows:
(In thousands)
Assets acquired:
Cash and cash equivalents$21,029 
Federal funds sold7,604 
Investment securities2,423 
Loans324,471 
Goodwill12,800 
Core deposit intangible999 
Premises and equipment4,568 
Cash surrender value of life insurance3,361 
Deferred income taxes6,393 
Accrued interest receivable1,171 
Other assets5,884 
Total assets acquired390,703 
Liabilities assumed:
Deposits:
Noninterest-bearing demand60,888 
Interest-bearing demand11,767 
Money Market47,362 
Savings14,203 
Time147,163 
Long-term debt60,136 
Accrued interest payable1,911 
Other liabilities1,613 
Total liabilities assumed345,043 
Consideration paid$45,660 
Cash paid$27,565 
Fair value of common stock issued18,095 

Management has completed its evaluation of fair values of all assets and liabilities shown in the table above and all amounts are considered final.




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Note 3 - Investment Securities
FASB ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," was adopted by Mid Penn on January 1, 2023. ASU 2016-13 introduces the CECL methodology for estimating allowances for credit losses. ASU 2016-13 applies to all financial instruments carried at amortized cost, including HTM securities, and makes targeted improvements to the accounting for credit losses on AFS securities.
In order to comply with ASC 326, Mid Penn conducted a review of its investment portfolio and determined that for certain classes of securities it would be appropriate to assume the expected credit loss to be zero. This zero-credit loss assumption applies to debt issuances of the U.S. Treasury and agencies and instrumentalities of the United States government. The reasons behind the adoption of the zero-credit loss assumption are as follows:
•High credit rating
•Long history with no credit losses
•Guaranteed by a sovereign entity
•Widely recognized as "risk-free rate"
•Can print its own currency
•Currency is routinely held by central banks, used in international commerce, and commonly viewed as reserve currency
•Currently under the U.S. Government conservatorship or receivership
Mid Penn will continuously monitor any changes in economic conditions, credit downgrades, changes to explicit or implicit guarantees granted to certain debt issuers, and any other relevant information that would indicate potential credit deterioration and prompt Mid Penn to reconsider its zero-credit loss assumption.
At the date of adoption, Mid Penn’s estimated allowance for credit losses on AFS and HTM securities under ASU 2016-13 was deemed immaterial due to the composition of these portfolios. Both portfolios consist primarily of U.S. government agency guaranteed mortgage-backed securities for which the risk of loss is minimal. Therefore, Mid Penn did not recognize a cumulative effect adjustment through retained earnings related to the AFS and HTM securities.
AFS Securities
ASU 2016-13 makes targeted improvements to the accounting for credit losses on AFS securities. The concept of other-than-temporarily impaired has been replaced with the allowance for credit losses. Unlike HTM securities, AFS securities are evaluated on an individual level and pooling of securities is not allowed.
Quarterly, Mid Penn evaluates if any security has a fair value less than its amortized cost. Once these securities are identified, in order to determine whether a decline in fair value resulted from a credit loss or other factors, Mid Penn performs further analysis as outlined below:
•Review the extent to which the fair value is less than the amortized cost and observe the security’s lowest credit rating as reported by third-party credit ratings companies.
•The securities that violate the credit loss triggers above would be subjected to additional analysis that may include, but is not limited to: changes in market interest rates, changes in securities credit ratings, security type, service area economic factors, financial performance of the issuer/or obligor of the underlying issue and third-party guarantee.
•If Mid Penn determines that a credit loss exists, the credit portion of the allowance will be measured using a DCF analysis using the effective interest rate as of the security’s purchase date. The amount of credit loss Mid Penn records will be limited to the amount by which the amortized cost exceeds the fair value.
The DCF analysis utilizes contractual maturities, as well as third-party credit ratings and cumulative default rates published annually by a reputable third-party.
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At March 31, 2024, the results of the analysis did not identify any securities that violate the credit loss triggers; therefore, no DCF analysis was performed and no credit loss was recognized on any of the securities available for sale.
Accrued interest receivable is excluded from the estimate of credit losses for AFS securities. At March 31, 2024, accrued interest receivable totaled $982 thousand for AFS securities and was reported in accrued interest receivable on the accompanying Consolidated Balance Sheet.
HTM Securities
ASU 2016-13 requires institutions to measure expected credit losses on financial assets carried at amortized cost on a collective or pool basis when similar risks exist. Mid Penn uses several levels of segmentation in order to measure expected credit losses:
•The portfolio is segmented into agency and non-agency securities.
•The non-agency securities are separated into state and political subdivision obligations and corporate debt securities.
Each individual segment is categorized by third-party credit ratings.
As discussed above, Mid Penn has determined that for certain classes of securities it would be appropriate to assume the expected credit loss to be zero, which include debt issuances of the U.S. Treasury and agencies and instrumentalities of the United States government. This assumption will be reviewed and attested to quarterly.
At March 31, 2024, Mid Penn’s HTM securities totaled $397.0 million. After applying appropriate probability of default and loss given default assumptions, the total amount of current expected credit losses was deemed immaterial. Therefore, no reserve was recorded at March 31, 2024.
Accrued interest receivable is excluded from the estimate of credit losses for HTM securities. At March 31, 2024, accrued interest receivable totaled $2.2 million for HTM securities and was reported in accrued interest receivable on the accompanying Consolidated Balance Sheet.
At March 31, 2024, Mid Penn had no HTM securities that were past due 30 days or more as to principal or interest payments. Mid Penn had no HTM securities classified as nonaccrual at March 31, 2024.
The amortized cost and estimated fair value of investment securities for the periods presented:
March 31, 2024
(In thousands)Amortized
Cost		Gross
Unrealized
Gains		Gross Unrealized
Losses		Estimated
Fair Value
Available-for-sale
U.S. Treasury and U.S. government agencies$36,664 $— $1,174 $35,490 
Mortgage-backed U.S. government agencies165,402 — 18,637 146,765 
State and political subdivision obligations4,326 — 693 3,633 
Corporate debt securities35,737 — 3,993 31,744 
Total available-for-sale debt securities242,129 — 24,497 217,632 
Held-to-maturity
U.S. Treasury and U.S. government agencies$245,839 $— $30,821 $215,018 
Mortgage-backed U.S. government agencies42,376 — 5,869 36,507 
State and political subdivision obligations83,318 2 6,958 76,362 
Corporate debt securities25,465 — 2,148 23,317 
Total held-to-maturity debt securities396,998 2 45,796 351,204 
Total$639,127 $2 $70,293 $568,836 
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December 31, 2023
(In thousands)Amortized
Cost		Gross
Unrealized
Gains		Gross Unrealized
Losses		Estimated
Fair Value
Available-for-sale
U.S. Treasury and U.S. government agencies$36,637 $— $988 $35,649 
Mortgage-backed U.S. government agencies169,184 — 16,501 152,683 
State and political subdivision obligations4,332 — 686 3,646 
Corporate debt securities35,733 — 4,156 31,577 
Total available-for-sale debt securities$245,886 $— $22,331 $223,555 
Held-to-maturity     
U.S. Treasury and U.S. government agencies$245,805 $2 $28,676 $217,131 
Mortgage-backed U.S. government agencies43,818 — 5,523 38,295 
State and political subdivision obligations84,035 11 6,486 77,560 
Corporate debt securities25,470 — 935 24,535 
Total held-to-maturity debt securities399,128 13 41,620 357,521 
Total$645,014 $13 $63,951 $581,076 
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 instruments of a similar type, credit quality and structure, adjusted for differences between the quoted instruments and the instruments being valued. See "Note 8 - Fair Value Measurement," for additional information.
Investment securities having a fair value of $383.9 million at March 31, 2024 and $380.3 million at December 31, 2023 were pledged to secure public deposits, some Trust department deposit accounts, and certain other borrowings. In accordance with legal provisions for alternatives other than pledging of investments, Mid Penn also obtains letters of credit from the FHLB to secure certain public deposits. These FHLB letter of credit commitments totaled $142.9 million as of March 31, 2024 and $153.5 million as of December 31, 2023.
The following tables present gross unrealized losses and fair value of debt investment securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for the periods presented:
(Dollars in thousands)Less Than 12 Months12 Months or MoreTotal
March 31, 2024Number
of
Securities		Estimated
Fair
Value		Gross
Unrealized
Losses		Number
of
Securities		Estimated
Fair
Value		Gross
Unrealized
Losses		Number
of
Securities		Estimated
Fair
Value		Gross
Unrealized
Losses
Available-for-sale debt securities:
U.S. Treasury and U.S. government agencies—$— $— 19$35,490 $1,174 19$35,490 $1,174 
Mortgage-backed U.S. government agencies—— — 93146,765 18,637 93146,765 18,637 
State and political subdivision obligations—— — 83,633 693 83,633 693 
Corporate debt securities—— — 1831,744 3,993 1831,744 3,993 
Total available-for-sale debt securities—$— $— 138$217,632 $24,497 138$217,632 $24,497 
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies—— — 145215,018 30,821 145215,018 30,821 
Mortgage-backed U.S. government agencies—— — 6436,507 5,869 6436,507 5,869 
State and political subdivision obligations165,846 86 17770,201 6,872 19376,047 6,958 
Corporate debt securities—— — 1523,317 2,148 1523,317 2,148 
Total held-to-maturity debt securities165,846 86 401345,043 45,710 417350,889 45,796 
Total16$5,846 $86 539$562,675 $70,207 555$568,521 $70,293 
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(Dollars in thousands)Less Than 12 Months12 Months or MoreTotal
December 31, 2023Number
of
Securities		Estimated
Fair
Value		Gross
Unrealized
Losses		Number
of
Securities		Estimated
Fair
Value		Gross
Unrealized
Losses		Number
of
Securities		Estimated
Fair
Value		Gross
Unrealized
Losses
Available-for-sale securities:
U.S. Treasury and U.S. government agencies—$— $— 19$35,649 $988 19$35,649 $988 
Mortgage-backed U.S. government agencies14,015 26 92148,668 16,475 93152,683 16,501 
State and political subdivision obligations—— — 83,646 686 83,646 686 
Corporate debt securities1410 90 1731,167 4,066 1831,577 4,156 
Total available-for-sale securities24,425 116 136219,130 22,215 138223,555 22,331 
Held-to-maturity securities:
U.S. Treasury and U.S. government agencies1$2,002 $— 144$215,129 $28,676 145$217,131 $28,676 
Mortgage-backed U.S. government agencies—— — 6438,295 5,523 6438,295 5,523 
State and political subdivision obligations258,729 63 17068,831 6,423 19577,560 6,486 
Corporate debt securities1936 57 1423,599 878 1524,535 935 
Total held to maturity securities2711,667 120 392345,854 41,500 419357,521 41,620 
Total29$16,092 $236 528$564,984 $63,715 557$581,076 $63,951 
There were no gross realized gains and losses on sales of available-for-sale debt securities for the three months ended March 31, 2024 and 2023.
The table below illustrates the contractual maturity of debt investment securities at amortized cost and estimated fair value. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay with or without call or prepayment penalties.
(In thousands)Available-for-saleHeld-to-maturity
March 31, 2024Amortized
Cost		Fair
Value		Amortized
Cost		Fair
Value
Due in 1 year or less$12,496 $12,380 $13,047 $12,906 
Due after 1 year but within 5 years34,425 32,819 125,456 116,182 
Due after 5 years but within 10 years27,475 23,743 195,525 168,141 
Due after 10 years2,331 1,925 20,594 17,468 
76,727 70,867 354,622 314,697 
Mortgage-backed securities165,402 146,765 42,376 36,507 
$242,129 $217,632 $396,998 $351,204 
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Note 4 - Loans and Allowance for Credit Losses - Loans
Mid Penn adopted the amendments of FASB ASU 2016-13, on January 1, 2023. The amendments of ASU 2016-13 created FASB ASC Topic 326, "Financial Instruments – Credit Losses," which, among other things, replace much of the guidance and disclosures previously provided in FASB ASC Topic 310, "Receivables." The guidance in FASB ASC Topic 326 replaces the incurred loss methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit losses. In accordance with FASB ASC Subtopic 326-20, "Financial Instruments – Credit Losses – Measured at Amortized Cost," Mid Penn has developed an ACL methodology effective January 1, 2023, which replaces its previous allowance for loan losses methodology. See the section captioned "Allowance for Credit Losses, effective January 1, 2023" within this note for additional information regarding Mid Penn’s ACL.
Loans, net of unearned income, are summarized as follows by portfolio segment:
(In thousands)March 31, 2024December 31, 2023
Commercial real estate
CRE Nonowner Occupied$1,174,774 $1,149,553 
CRE Owner Occupied622,574 629,904 
Multifamily334,952 309,059 
Farmland212,018 212,690 
Total Commercial real estate2,344,318 2,301,206 
Commercial and industrial
671,395 675,079 
Construction
Residential Construction103,861 92,843 
Other Construction383,428 362,624 
Total Construction487,289 455,467 
Residential mortgage
1-4 Family 1st Lien334,557 339,142 
1-4 Family Rental340,052 341,937 
HELOC and Junior Liens132,703 132,795 
Total Residential Mortgage807,312 813,874 
Consumer7,135 7,166 
Total loans$4,317,449 $4,252,792 

Total loans are stated at the amount of unpaid principal, adjusted for net deferred fees and costs. Net deferred loan fees of $4.0 million and $4.2 million reduced the carrying value of loans as of March 31, 2024 and December 31, 2023, respectively.
Accrued interest receivable is not included in the amortized cost basis of Mid Penn's loans. At March 31, 2024, accrued interest receivable for loans totaled $23.2 million with no related ACL and was reported in other assets on the accompanying Consolidated Balance Sheet.
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Past Due and Nonaccrual Loans
The performance and credit quality of the loan portfolio is also monitored by 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 March 31, 2024 and December 31, 2023, are summarized as follows:
(In thousands)30-59
Days Past
Due		60-89
Days Past
Due		Greater
than 90
Days		Total Past
Due		CurrentTotal LoansLoans
Receivable
> 90 Days and
Accruing
March 31, 2024
Commercial real estate$9,647 $— $778 $10,425 $2,333,893 $2,344,318 $— 
Commercial and industrial— 87 1,771 1,858 669,537 671,395 — 
Construction— — — — 487,289 487,289 — 
Residential mortgage1,328 387 2,201 3,916 803,396 807,312 — 
Consumer18 — 25 43 7,092 7,135 25 
Total$10,993 $474 $4,775 $16,242 $4,301,207 $4,317,449 $25 
(In thousands)30-59
Days Past
Due		60-89
Days Past
Due		Greater
than 90
Days		Total Past
Due		CurrentTotal LoansLoans
Receivable
> 90 Days and
Accruing
December 31, 2023
Commercial real estate$5,073 $682 $2,974 $8,729 $2,292,477 $2,301,206 $— 
Commercial and industrial638 24 1,270 1,932 673,147 675,079 — 
Construction— 270 2,559 2,829 452,638 455,467 — 
Residential mortgage4,648 267 2,518 7,433 806,441 813,874 — 
Consumer41 31 — 72 7,094 7,166 — 
Total$10,400 $1,274 $9,321 $20,995 $4,231,797 $4,252,792 $— 
Loans are placed on nonaccrual status when management determines that the full repayment of principal and collection of interest according to contractual terms is no longer likely, generally when the loan becomes 90 days or more past due. Nonaccrual loans by loan portfolio class, including loans acquired with credit deterioration, as of March 31, 2024 and December 31, 2023 are summarized as follows:
March 31, 2024December 31, 2023
(In thousands)With a Related AllowanceWithout a Related AllowanceTotalWith a Related AllowanceWithout a Related AllowanceTotal
Commercial real estate$449 $4,139 $4,588 $454 $6,133 $6,587 
Commercial and industrial1,202 1,156 2,358 1,222 64 1,286 
Construction— — — — 2,559 2,559 
Residential mortgage41 3,402 3,443 2 3,782 3,784 
Consumer— — — — — — 
$1,692 $8,697 $10,389 $1,678 $12,538 $14,216 
The amount of interest income recognized on nonaccrual loans was approximately $159 thousand and $182 thousand during the three months ended March 31, 2024 and 2023, respectively.

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Credit Quality Indicators
Mid Penn categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. On a minimum of a quarterly basis, Mid Penn analyzes loans individually to classify the loans as to their credit risk. The following table presents risk ratings by loan portfolio segment and origination year, which is the year of origination or renewal.
PASS - This type of classification consists of 6 subcategories:    
Nominal Risk / Pass - This loan classification is a credit extension of the highest quality.
Moderate Risk / Pass - This type of classification has strong financial ratios, substantial debt capacity, and low leverage with a very favorable comparison to industry peers or better than average improving trends are necessary to be in this classification.
Good Acceptable Risk / Pass - The Borrower in this rating classification is a reasonable credit risk having financial ratios on par with its peers and demonstrates slightly improving trends over time; they list good quality assets and fairly low leverage plus ample debt capacity.
Average Acceptable Risk / Pass - This type of classification has financial ratios and assets are of above average quality, the leverage is worse than average compared to industry standards; the Borrower should have a good repayment history and possess consistent earnings with some growth.
Marginally Acceptable Risk / Pass - This type of classification has financial ratios consistent with industry averages, assets of average quality with ascertainable values, acceptable leverage, moderate capital assets and an acceptable reliance on trade debt; the Borrower demonstrates marginally adequate earnings, cash flow and debt service plus positive trends.
Weak/Monitor Risk (Watch list) / Pass - This type of classification has financial ratios are slightly below standard industry averages and assets are below average quality with unstable values; fixed assets could be near or at the end of their useful life plus liabilities may not match the asset structure.

SPECIAL MENTION - These credits have developing weaknesses deserving extra attention from the lender and lending management. They are currently protected, but potentially weak. The weakness may be, cash flow, leverage, liquidity, management, industry or other factors which may, if not checked or corrected, weaken the asset or inadequately protect the Bank’s credit position at some future date.

SUBSTANDARD - These credit extensions also have well defined weaknesses, which are inadequately protected by the current worth and debt service capacity of the Borrowers, or the collateral pledged, if any. The repayment of principal and interest as originally intended can be jeopardized by defined weaknesses related to adverse financial, managerial, economic, market or political conditions.

DOUBTFUL - These credits have definite weaknesses inherent in Substandard loans with added characteristics that are severe enough to make further collection in full highly questionable and improbable based on the current trends.

LOSS. These loans are considered uncollectible and no longer a viable asset of the Bank. They lack an identifiable source of repayment based on an inability to generate sufficient cash flow to service their debt. All trends are negative and the damage to the financial condition of the Borrower can’t be reversed now or in the near future.

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March 31, 2024
Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized
Cost Basis
(In thousands)20242023202220212020PriorTotal
Commercial real estate
Pass$49,466 $289,970 $568,000 $372,639 $293,680 $688,117 $43,525 $2,305,397 
Special mention— 188 434 — — 16,407 191 17,220 
Substandard or lower— — 2,990 206 3,146 15,313 46 21,701 
Total commercial real estate49,466 290,158 571,424 372,845 296,826 719,837 43,762 2,344,318 
Commercial and industrial
Pass33,909 147,232 97,313 62,551 28,200 104,941 189,231 663,377 
Special mention— 79 61 282 — 2,280 2,272 4,974 
Substandard or lower— — — 591 — 1,938 515 3,044 
Total commercial and industrial33,909 147,311 97,374 63,424 28,200 109,159 192,018 671,395 
Construction
Pass13,362 164,703 185,710 56,475 20,419 16,024 28,785 485,478 
Special mention— — — — 1,811 — — 1,811 
Substandard or lower— — — — — — — — 
Total construction13,362 164,703 185,710 56,475 22,230 16,024 28,785 487,289 
Residential mortgage
Performing25,512 145,753 148,963 109,236 87,274 197,768 84,656 799,162 
Non-performing— 178 — 79 1,666 6,129 98 8,150 
Total residential mortgage25,512 145,931 148,963 109,315 88,940 203,897 84,754 807,312 
Gross charge offs— — (21)— — (7)— (28)
Net charge offs— — (21)— — (7)— (28)
Consumer
Performing1,550 1,251 622 591 221 281 2,619 7,135 
Non-performing— — — — — — — — 
Total consumer1,550 1,251 622 591 221 281 2,619 7,135 
Gross charge offs(16)— (2)— — (4)— (22)
Current period recoveries5 — — — — 1.00 — 6 
Net charge offs(11)— (2)— — (3)— (16)
Total
Pass$96,737 $601,905 $851,023 $491,665 $342,299 $809,082 $261,541 $3,454,252 
Special mention— 267 495 282 1,811 18,687 2,463 24,005 
Substandard or lower— — 2,990 797 3,146 17,251 561 24,745 
Performing27,062 147,004 149,585 109,827 87,495 198,049 87,275 806,297 
Nonperforming— 178 — 79 1,666 6,129 98 8,150 
Total$123,799 $749,354 $1,004,093 $602,650 $436,417 $1,049,198 $351,938 $4,317,449 



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December 31, 2023
Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized
Cost Basis
(In thousands)20232022202120202019PriorTotal
Commercial real estate
Pass$271,655 $556,801 $386,911 $297,746 $178,434 $528,326 $38,261 $2,258,134 
Special mention194 — — — 6,009 10,482 186 16,871 
Substandard or lower— 5,209 208 3,162 229 17,345 48 26,201 
Total commercial real estate271,849 562,010 387,119 300,908 184,672 556,153 38,495 2,301,206 
Gross charge offs— — — — — (16)— (16)
Net charge offs— — — — — (16)— (16)
Commercial and industrial
Pass158,824 106,714 68,448 29,961 50,206 57,892 188,714 660,759 
Special mention— 89 2,224 — 227 2,200 4,391 9,131 
Substandard or lower— — 662 — — 1,978 2,549 5,189 
Total commercial and industrial158,824 106,803 71,334 29,961 50,433 62,070 195,654 675,079 
Gross charge offs— (100)— (111)— (27)— (238)
Net charge offs— (100)— (111)— (27)— (238)
Construction
Pass153,596 181,214 54,658 22,357 10,247 5,856 23,262 451,190 
Special mention— — — 1,447 — — — 1,447 
Substandard or lower— 573 — — — 2,257 — 2,830 
Total construction153,596 181,787 54,658 23,804 10,247 8,113 23,262 455,467 
Residential mortgage
Performing158,634 153,203 111,610 90,382 27,863 178,898 87,723 808,313 
Non-performing— — 93 1,470 — 3,998 — 5,561 
Total residential mortgage158,634 153,203 111,703 91,852 27,863 182,896 87,723 813,874 
Gross charge offs— — — — — (13)— (13)
Current period recoveries— — — — — 38 — 38 
Net recoveries— — — — — 25 — 25 
Consumer
Performing2,361 754 649 273 223 103 2,803 7,166 
Total consumer2,361 754 649 273 223 103 2,803 7,166 
Gross charge offs(86)— (10)(9)— (30)— (135)
Current period recoveries26 — — 1 — 5 — 32 
Net charge offs(60)— (10)(8)— (25)— (103)
Total
Pass$584,075 $844,729 $510,017 $350,064 $238,887 $592,074 $250,237 $3,370,083 
Special mention194 89 2,224 1,447 6,236 12,682 4,577 27,449 
Substandard or lower— 5,782 870 3,162 229 21,580 2,597 34,220 
Performing160,995 153,957 112,259 90,655 28,086 179,001 90,526 815,479 
Nonperforming— — 93 1,470 — 3,998 — 5,561 
Total$745,264 $1,004,557 $625,463 $446,798 $273,438 $809,335 $347,937 $4,252,792 
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Mid Penn had no loans classified as "doubtful" as of March 31, 2024 and December 31, 2023. There was $892 thousand and $121 thousand in loans for which formal foreclosure proceedings were in process at March 31, 2024 and December 31, 2023.
Collateral-Dependent Loans
A financial asset is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of financial assets deemed collateral-dependent, Mid Penn elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, Mid Penn records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral supporting collateral-dependent financial assets consists of various types of real estate, including residential properties; commercial properties such as retail centers, office buildings, and lodging; agriculture land; and vacant land.
Allowance for Credit Losses, effective January 1, 2023

Mid Penn’s ACL - loans methodology is based upon guidance within FASB ASC Subtopic 326-20, as well as regulatory guidance from the FDIC, its primary federal regulator. The ACL - loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Credit quality within the loan portfolio is continuously monitored by management and is reflected within the ACL - loans. The ACL - loans is an estimate of expected losses inherent within Mid Penn’s existing loan portfolio. The ACL - loans is adjusted through the PCL and reduced by the charge off of loan amounts, net of recoveries.
The loan loss estimation process involves procedures to appropriately consider the unique characteristics of Mid Penn’s loan portfolio segments. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Evaluations of the portfolio and individual credits are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations. Determining the appropriateness of the allowance is complex and requires judgement by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the ACL and credit loss expense.
Mid Penn estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Mid Penn uses a third-party software application to calculate the quantitative portion of the ACL using a methodology and assumptions specific to each loan pool. The qualitative portion of the allowance is based on general economic conditions and other internal and external factors affecting Mid Penn as a whole, as well as specific loans. Factors considered include the following: lending process, concentrations of credit, and credit quality. The quantitative and qualitative portions of the allowance are added together to determine the total ACL, which reflects management’s expectations of future conditions based on reasonable and supportable forecasts.
The methodology for estimating the amount of expected credit losses reported in the ACL has two basic components: a collective, or pooled, component for estimated expected credit losses for pools of loans that share similar risk characteristics, and an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans. In estimating the ACL for the collective component, loans are segregated into loan pools based on loan purpose codes and similar risk characteristics.
The commercial real estate and residential mortgage loan portfolio segments include loans for both commercial and residential properties that are secured by real estate. The underwriting process for these loans includes analysis of the financial position and strength of both the borrower and, if applicable, guarantor, experience with similar projects in the past, market demand and prospects for successful completion of the proposed project within the established budget and schedule, values of underlying collateral, availability of permanent financing, maximum loan-to-value ratios, minimum equity requirements, acceptable amortization periods and minimum debt service coverage requirements, based on property type. The borrower’s financial strength and capacity to repay their obligations remain the primary focus of underwriting. Financial strength is evaluated based upon analytical tools that consider historical and projected cash flows and performance, in addition to analysis of the proposed project for income-producing properties. Additional support offered by guarantors is also considered when applicable. Ultimate repayment of these loans is sensitive to interest rate changes, general economic conditions, liquidity and availability of long-term financing.
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The commercial and industrial loan portfolio segment includes commercial loans made to many types of businesses for various purposes, such as short-term working capital loans that are usually secured by accounts receivable and inventory, equipment and fixed asset purchases that are secured by those assets, and term financing for those within Mid Penn’s geographic markets. Mid Penn’s credit underwriting process for commercial and industrial loans includes analysis of historical and projected cash flows and performance, evaluation of financial strength of both borrowers and guarantors as reflected in current and detailed financial information, and evaluation of underlying collateral to support the credit.
The consumer loan portfolio segment is comprised of loans which are underwritten after evaluating a borrower’s capacity, credit and collateral. Several factors are considered when assessing a borrower’s capacity, including the borrower’s employment, income, current debt, assets and level of equity in the property. Credit is assessed using a credit report that provides credit scores and the borrower’s current and past information about their credit history. Loan-to-value and debt-to-income ratios, loan amount and lien position are also considered in assessing whether to originate a loan. These borrowers are particularly susceptible to downturns in economic trends, such as conditions that negatively affect housing prices and demand and levels of unemployment.
Mid Penn utilizes a DCF method to estimate the quantitative portion of the allowance for credit losses for loan pools. The DCF is based off of historical losses, including peer data, which is correlated to national unemployment and GDP.
The PD and LGD measures are used in conjunction with prepayment data as inputs into the DCF model to calculate the cash flows at the individual loan level. Contractual cash flows based on loan terms are adjusted for PD, LGD and prepayments to derive loss cash flows. These loss cash flows are discounted by the loan’s coupon rate to arrive at the discounted cash flow based quantitative loss. The prepayment studies are updated quarterly by a third-party for each applicable pool.
Mid Penn determined that reasonable and supportable forecasts could be made for a twelve-month period for all of its loan pools. To the extent the lives of the loans in the LHFI portfolio extend beyond this forecast period, Mid Penn uses a reversion period of four quarters and reverts to the historical mean on a straight-line basis over the remaining life of the loans.
Qualitative factors used in the ACL methodology include the following:
•Lending process
•Concentrations of credit
•Peer Group Divergence
The ACL for individual loans, such as non-accrual and PCD, that do not share risk characteristics with other loans is measured as the difference between the discounted value of expected future cash flows, based on the effective interest rate at origination, and the amortized cost basis of the loan, or the net realizable value. The ACL is the difference between the loan’s net realizable value and its amortized cost basis (net of previous charge-offs and deferred loan fees and costs), except for collateral-dependent loans. A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the sale of the collateral. The expected credit loss for collateral-dependent loans is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral, adjusted for the estimated cost to sell. Fair value estimates for collateral-dependent loans are derived from appraised values based on the current market value or the "as is" value of the collateral, normally from recently received and reviewed appraisals. Current appraisals are ordered on a regular basis based on the inspection date or more often if market conditions necessitate. Appraisals are obtained from state-certified appraisers and are based on certain assumptions, which may include construction or development status and the highest and best use of the property. These appraisals are reviewed by Mid Penn’s Real Estate Administration Group to ensure they are acceptable, and values are adjusted down for costs associated with asset disposal. If the calculated expected credit loss is determined to be permanent or not recoverable, the amount of the expected credit loss is charged off.
Mid Penn may also purchase loans or acquire loans through a business combination. At the purchase or acquisition date, loans are evaluated to determine whether there has been more than insignificant credit deterioration since origination. Loans that have experienced more than insignificant credit deterioration since origination are referred to as PCD loans. In its evaluation of whether a loan has experienced more than insignificant deterioration in credit quality since origination, Mid Penn takes into consideration loan grades, past due and nonaccrual status. Mid Penn may also consider external credit rating agency ratings for borrowers and for non-commercial loans, FICO score or band, probability of default levels, and number of times past due. At the purchase or acquisition date, the amortized cost basis of PCD loans is equal to the
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purchase price and an initial estimate of credit losses. The initial recognition of expected credit losses on PCD loans has no impact on net income. When the initial measurement of expected credit losses on PCD loans is calculated on a pooled loan basis, the expected credit losses are allocated to each loan within the pool. Any difference between the initial amortized cost basis and the unpaid principal balance of the loan represents a noncredit discount or premium, which is accreted (or amortized) into interest income over the life of the loan. Subsequent changes to the ACL on PCD loans are recorded through the PCL. For purchased loans that are not deemed to have experienced more than insignificant credit deterioration since origination and are therefore not deemed PCD, any discounts or premiums included in the purchase price are accreted (or amortized) over the contractual life of the individual loan.
Loans are charged off against the ACL, with any subsequent recoveries credited back to the ACL account. Expected recoveries may not exceed the aggregate of amounts previously charged off and expected to be charged off.
The following tables present the activity in the ACL - loans by portfolio segment for the three months ended March 31, 2024 and three months ended March 31, 2023:
(In thousands)
As of March 31, 2024Balance at
December 31, 2023		Charge offsRecoveriesNet loans (charged off) recovered
(Benefit)/Provision for credit losses
Balance at
March 31, 2024
Commercial Real Estate
CRE Nonowner Occupied10,267 — — — 150 10,417 
CRE Owner Occupied5,646 — — — (44)5,602 
Multifamily2,202 — — — 168 2,370 
Farmland2,064 — — — (62)2,002 
Commercial and industrial7,131 — — — (631)6,500 
Construction
Residential Construction1,256 — — — (80)1,176 
Other Construction2,146 — — — 25 2,171 
Residential Mortgage
1-4 Family 1st Lien1,207 (7)— (7)71 1,271 
1-4 Family Rental1,859 (21)— (21)(299)1,539 
HELOC and Junior Liens389 — — — 68 457 
Consumer20 (22)6 (16)15 19 
Total34,187 (50)6 (44)(619)33,524 
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(In thousands)Balance at
December 31, 2022		CECL ImpactCharge offsRecoveriesNet loans (charged off) recovered
Provision/(Benefit) for credit losses
Balance at
March 31, 2023
Commercial Real Estate
CRE Nonowner Occupied$8,284 $259 $— $— $— $(368)$8,175 
CRE Owner Occupied2,916 91 (16)— (16)88 3,079 
Multifamily1,111 35 — — — 13 1,159 
Farmland831 26 — — — 42 899 
Commercial and industrial4,593 6,601 (111)— (111)186 11,269 
Construction
Residential Construction— 1,270 — — — 153 1,423 
Other Construction— 1,931 — — — 277 2,208 
Residential Mortgage
1-4 Family 1st Lien370 1,307 (4)— (4)(317)1,356 
1-4 Family Rental288 731 — 30 30 17 1,066 
HELOC and Junior Liens661 (230)— — — 21 452 
Consumer29 154 (19)7 (12)8 179 
Unallocated(126)(244)— — — 370 — 
Total$18,957 $11,931 $(150)$37 $(113)$490 $31,265 
The following table presents the ACL for loans and the amortized cost basis of the loans by the measurement methodology used as of March 31, 2024 and December 31, 2023:
(In thousands)ACL - LoansLoans
March 31, 2024Collectively Evaluated for Credit LossIndividually Evaluated for Credit LossTotal ACL - LoansCollectively Evaluated for Credit LossIndividually Evaluated for Credit LossTotal Loans
Commercial real estate
CRE Nonowner Occupied$10,061 $356 $10,417 $1,172,396 $2,378 $1,174,774 
CRE Owner Occupied5,602 — 5,602 620,534 2,040 622,574 
Multifamily2,351 19 2,370 334,781 171 334,952 
Farmland2,002 — 2,002 212,018 — 212,018 
Commercial and industrial5,761 739 6,500 669,037 2,358 671,395 
Construction
Residential Construction1,176 — 1,176 103,861 — 103,861 
Other Construction2,171 — 2,171 383,428 — 383,428 
Residential mortgage
1-4 Family 1st Lien1,271 — 1,271 332,822 1,735 334,557 
1-4 Family Rental1,535 4 1,539 339,696 356 340,052 
HELOC and Junior Liens457 — 457 131,351 1,352 132,703 
Consumer19 — 19 7,135 — 7,135 
Total$32,406 $1,118 $33,524 $4,307,059 $10,390 $4,317,449 
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(In thousands)ACL - LoansLoans
December 31, 2023Collectively Evaluated for Credit LossIndividually Evaluated for Credit LossTotal ACL - LoansCollectively Evaluated for Credit LossIndividually Evaluated for Credit LossTotal Loans
Commercial real estate
CRE Nonowner Occupied$9,906 $361 $10,267 $1,145,048 $4,505 $1,149,553 
CRE Owner Occupied5,646 — 5,646 627,995 1,909 629,904 
Multifamily2,190 12 2,202 308,886 173 309,059 
Farmland2,064 — 2,064 212,690 — 212,690 
Commercial and industrial6,419 712 7,131 673,793 1,286 675,079 
Construction
Residential Construction1,256 — 1,256 92,270 573 92,843 
Other Construction2,146 — 2,146 360,368 2,256 362,624 
Residential mortgage
1-4 Family 1st Lien1,207 — 1,207 337,267 1,875 339,142 
1-4 Family Rental1,857 2 1,859 341,236 701 341,937 
HELOC and Junior Liens389 — 389 131,587 1,208 132,795 
Consumer20 — 20 7,166 — 7,166 
Total$33,100 $1,087 $34,187 $4,238,306 $14,486 $4,252,792 
Modifications to Borrowers Experiencing Financial Difficulty
From time to time, we may modify certain loans to borrowers who are experiencing financial difficulty. In some cases, these modifications may result in new loans. Loan modifications to borrowers experiencing financial difficulty may be in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension, or a combination thereof, among other things.

There was one new modification for the quarter ending March 31, 2024. Information related to loans modified (by type of modification), whereby the borrower was experiencing financial difficulty at the time of modification, is set forth in the following table:

(In thousands)Interest Only
Term Extension		Combination:
Interest Only and
Term Extension		Total% of Total Class of Financing Receivable
Three months ended March 31, 2024
Residential Mortgage$— $— $92 $92 0.01 %
  Total$— $— $92 $92 0.01 %

(In thousands)Interest OnlyTerm ExtensionCombination:
Interest Only and
Term Extension		Total% of Total Class of Financing Receivable
Three months ended March 31, 2023
Commercial real estate$51 $— $180 $231 0.04 %
Total$51 $— $180 $231 0.04 %

The financial effects of the interest-only loan modifications reduced the monthly payment amounts for the borrower and the term extensions in the table above added a weighted-average of 2.0 years to the life of the loans, which also reduced the monthly payment amounts for the borrowers.
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Note 5 - Deposits
Deposits consisted of the following as of March 31, 2024 and December 31, 2023:
(Dollars in thousands)March 31, 2024% of Total DepositsDecember 31, 2023% of Total Deposits
Noninterest-bearing demand deposits$807,861 18.4 %$801,312 18.4 %
Interest-bearing demand deposits923,120 21.1 %947,372 21.8 %
Money market874,833 20.0 %850,674 19.6 %
Savings284,893 6.5 %288,404 6.6 %
Total demand and savings 2,890,707 66.0 %2,887,762 66.4 %
Time1,488,398 34.0 %1,458,450 33.6 %
Total deposits$4,379,105 100.0 %$4,346,212 100.0 %
Overdrafts$558 0.01 %$315 0.01 %
The scheduled maturities of time deposits at March 31, 2024 were as follows:
Time Deposits
(In thousands)Less than $250,000$250,000 or more
Maturing in 2024$827,090 $279,833 
Maturing in 2025238,921 66,846 
Maturing in 202638,245 3,463 
Maturing in 202717,642 1,194 
Maturing in 202811,241 572 
Maturing thereafter3,059 292 
$1,136,198 $352,200 
Mid Penn had $244.8 million in brokered certificates of deposits as of March 31, 2024 and December 31, 2023. As of March 31, 2024 and December 31, 2023, Mid Penn had $91.1 million and $96.7 million of CDAR deposits, respectively.

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Note 6 - Derivative Financial Instruments
Mid Penn manages its exposure to certain interest rate risks through the use of derivatives; however, none are entered into for speculative purposes. In 2023, Mid Penn entered into outstanding derivative contracts designated as hedges. Mid Penn’s free-standing derivative financial instruments are required to be carried at their fair value on the Consolidated Balance Sheets.
Loan-level Interest Rate Swaps
Mid Penn enters into loan-level interest rate swaps with certain qualifying, creditworthy commercial loan customers to meet their interest rate risk management needs. Mid Penn simultaneously enters into parallel interest rate swaps with dealer counterparties, with identical notional amounts and terms. The net result of the offsetting customer and dealer counterparty swap agreements is that the customer pays a fixed rate of interest and Mid Penn receives a floating rate. Mid Penn’s loan-level interest rate swaps are considered derivatives but are not accounted for using hedge accounting.
Information related to loan level swaps is set forth in the following table:
March 31, 2024December 31, 2023
(Dollars in thousands)
 Interest rate swaps on loans with customers
      Notional amount $201,405 $187,192 
      Weighted average remaining term (years) 5.926.24
      Receive fixed rate (weighted average) 4.56 %4.59 %
      Pay variable rate (weighted average)7.48 %7.50 %
      Estimated fair value (1)
$11,315 $10,484 
March 31, 2024December 31, 2023
(Dollars in thousands)
 Interest rate swaps on loans with correspondents
      Notional amount $201,405 $187,192 
      Weighted average remaining term (years) 5.926.24
      Receive variable rate (weighted average) 4.56 %7.50 %
      Pay fixed rate (weighted average)7.48 %4.59 %
      Estimated fair value $11,315 $10,484 
(1) The net amount of the estimated fair value is disclosed in Other Liabilities on the Consolidated Balance Sheet.
Cash Flow Hedges of Interest Rate Risk

Mid Penn’s objectives in using interest rate derivatives are to reduce volatility in net interest income and to manage its exposure to interest rate movements. To accomplish this objective, Mid Penn primarily uses interest rate swaps as part of its interest rate risk management strategy.

Information related to cash flow hedges is set forth in the following table:
March 31, 2024December 31, 2023
(Dollars in thousands)
 Cash flow hedges
      Notional amount $190,000 $190,000 
      Weighted average remaining term (years) 1.972.22
      Pay fixed rate (weighted average) 3.74 %3.74 %
      Receive variable rate (weighted average)4.07 %4.07 %
      Estimated fair value $3,228 $1,460 
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For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest income in the same period during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are made on Mid Penn’s variable-rate liabilities. During the next twelve months, Mid Penn estimates that an additional $2.2 million will be reclassified as a decrease to interest expense.

Note 7 - Accumulated Other Comprehensive (Loss) Income
The changes in each component of accumulated other comprehensive loss, net of taxes, are as follows:
(In thousands)
Unrealized Loss on
Securities		Unrealized
Holding Losses on
Interest Rate
Derivatives used in
Cash Flow Hedges		Defined Benefit
Plans		Total
Balance at December 31, 2023$(17,339)$820 $(118)$(16,637)
OCI before reclassifications(1,711)1,410 8 (293)
Amounts reclassified from AOCI— — (17)(17)
Balance at March 31, 2024$(19,050)$2,230 $(127)(16,947)
Balance at December 31, 2022$(19,327)$— $111 $(19,216)
OCI before reclassifications1,977 (128)5 1,854 
Amounts reclassified from AOCI— — (12)(12)
Balance at March 31, 2023$(17,350)$(128)$104 $(17,374)
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Note 8 - Fair Value Measurement
The Corporation uses estimates of fair value in applying various accounting standards for its consolidated financial statements on either a recurring or non-recurring basis. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. Mid Penn groups its assets and liabilities measured at fair value in three hierarchy levels, based on the observability and transparency of the inputs. The fair value hierarchy is as follows:
Level 1 - Inputs that represent quoted prices for identical instruments in active markets.
Level 2 - Inputs that represent quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 - Inputs that are largely unobservable, as little or no market data exists for the instrument being valued.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.
There were no transfers of assets between fair value Level 1 and Level 2 during the three months ended March 31, 2024 or the year ended December 31, 2023.
The following tables illustrate the assets measured at fair value on a recurring basis and reported on the Consolidated Balance Sheets.
March 31, 2024
(In thousands)Level 1Level 2Level 3Total
Available-for-sale securities:
U.S. Treasury and U.S. government agencies$— $35,490 $— $35,490 
Mortgage-backed U.S. government agencies— 146,765 — 146,765 
State and political subdivision obligations— 3,633 — 3,633 
Corporate debt securities— 31,744 — 31,744 
Equity securities431 — — 431 
Loans held for sale— 4,581 — 4,581 
Other assets:
Derivative assets— 14,543 — 14,543 
Total$431 $236,756 $— $237,187 
December 31, 2023
(In thousands)Level 1Level 2Level 3Total
Available-for-sale securities:
U.S. Treasury and U.S. government agencies$— $35,649 $— $35,649 
Mortgage-backed U.S. government agencies— 152,683 — 152,683 
State and political subdivision obligations— 3,646 — 3,646 
Corporate debt securities— 31,577 — 31,577 
Equity securities438 — — 438 
Loans held for sale— 3,855 — 3,855 
Other assets:
Derivative assets— 11,944 — 11,944 
Total$438 $239,354 $— $239,792 
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The valuation methodologies and assumptions used to estimate the fair value for the items in the preceding tables are as follows:
Available for sale investment securities - The fair value of equity and debt 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.
Equity securities - The fair value of equity securities with readily determinable fair values is recorded on the Consolidated Balance Sheet, with realized and unrealized gains and losses reported in other expense on the Consolidated Statements of Income.
Loans held for sale - This category includes mortgage loans held for sale that are measured at fair value. Fair values as of March 31, 2024 were measured as the price that secondary market investors were offering for loans with similar characteristics.
Derivative assets - Interest rate swaps are measured by alternative pricing sources with reasonable levels of price transparency in markets that are not active. Based on the complex nature of interest rate swap agreements, the markets these instruments trade in are not as efficient and are less liquid than that of the more mature Level 1 markets. These markets do, however, have comparable, observable inputs in which an alternative pricing source values these assets in order to arrive at a fair market value. These characteristics classify interest rate swap agreements as Level 2.
Mortgage banking derivatives represent the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors and the fair value of interest rate swaps. The fair values of Mid Penn’s interest rate locks, forward commitments and interest rate swaps represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date. These characteristics classify interest rate swap agreements as Level 2. See "Note 5 - Derivative Financial Instruments," for additional information.
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. The following table illustrates Level 3 financial instruments measured at fair value on a nonrecurring basis:
(In thousands)March 31, 2024December 31, 2023
Individually evaluated loans, net of ACL$9,272 $13,399 
Foreclosed assets held for sale5,110 293 
Net loans - This category consists of loans that were individually evaluated for credit losses, net of the related ACL, and have been classified as Level 3 assets. For 2023, the amount shown is the balance of individually evaluated loans reporting a specific allocation or that have been partially charged-off. All of these loans are considered collateral-dependent; therefore, all of Mid Penn’s impaired loans, whether reporting a specific allowance allocation or not, are considered collateral- dependent. Mid Penn utilized Level 3 inputs such as independent appraisals of the underlying collateral, which generally includes various Level 3 inputs which are not observable. Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated liquidation expenses.
Foreclosed assets held for sale - Values are based on appraisals that consider the sales prices of property in the proximate vicinity.
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The following tables summarize the carrying amount, fair value, and placement in the fair value hierarchy of Mid Penn's financial instruments as of the periods presented:
March 31, 2024
Carrying
Amount		Estimated Fair Value
(In thousands)Level 1Level 2Level 3Total
Financial instruments - assets
 Cash and cash equivalents $68,085 $68,085 $— $— $68,085 
 Available-for-sale investment securities217,632 — 217,632 — 217,632 
Held-to-maturity investment securities396,998 — 351,204 — 351,204 
 Equity securities431 431 — — 431 
 Loans held for sale4,581 — 4,581 — 4,581 
Net loans 4,283,925 — — 4,285,266 4,285,266 
  Restricted investment in bank stocks17,446 17,446 — — 17,446 
  Accrued interest receivable26,975 26,975 — — 26,975 
  Derivative assets 14,543 — 14,543 — 14,543 
Financial instruments - liabilities
Deposits$4,379,105 $— $4,368,088 $— $4,368,088 
Short-term borrowings271,849 — 271,849 — 271,849 
Long-term debt (1)
20,768 — 20,768 — 20,768 
Subordinated debt46,201 — 40,332 — 40,332 
 Accrued interest payable16,330 16,330 — — 16,330 
 Derivative liabilities11,315 — 11,315 — 11,315 
(1)Long-term debt excludes finance lease obligations.
December 31, 2023
Estimated Fair Value
(In thousands)Carrying
Amount		Level 1Level 2Level 3Total
Financial instruments - assets
Cash and cash equivalents$96,763 $96,763 $— $— $96,763 
Available-for-sale investment securities223,555 — 223,555 — 223,555 
 Held-to-maturity investment securities399,128 — 357,521 — 357,521 
   Equity securities438 438 — — 438 
 Loans held for sale3,855 — 3,855 — 3,855 
Net loans 4,218,605 — — 4,221,926 4,221,926 
 Restricted investment in bank stocks16,768 16,768 — — 16,768 
 Accrued interest receivable25,820 25,820 — — 25,820 
 Derivative assets11,944 — 11,944 — 11,944 
Financial instruments - liabilities
Deposits$4,346,212 $— $4,337,723 $— $4,337,723 
Short-term debt241,532 — 241,532 — 241,532 
Long-term debt (1)
55,806 — 55,081 — 55,081 
Subordinated debt46,354 — 39,515 — 39,515 
 Accrued interest payable14,257 14,257 — — 14,257 
 Derivative liabilities10,484 — 10,484 — 10,484 
(1)Long-term debt excludes finance lease obligations.
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The Bank’s outstanding and unfunded credit commitments and financial standby letters of credit were deemed to have no significant fair value as of March 31, 2024 and December 31, 2023.
Note 9 - Commitments and Contingencies
Guarantees and commitments to extend credit
Mid Penn is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. 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 creditworthiness 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 $61.4 million and $62.2 million of standby letters of credit outstanding as of March 31, 2024 and December 31, 2023, respectively. Mid Penn does not anticipate any losses because of these transactions. The amount of the liability as of March 31, 2024 and December 31, 2023 for payment under standby letters of credit issued was not considered material.
Mid Penn adopted FASB ASC Topic 326, effective January 1, 2023, which requires Mid Penn to estimate expected credit losses for OBS credit exposures which are not unconditionally cancellable. Mid Penn maintains a separate ACL on OBS credit exposures, including unfunded loan commitments and letters of credit, which is included in other liabilities on the accompanying Consolidated Balance Sheets.
The ACL - OBS is adjusted as a provision for OBS commitments in provision for credit losses. The estimate includes consideration of the likelihood that funding will occur, an estimate of exposure at default that is derived from utilization rate assumptions using a non-modeled approach, and PD and LGD estimates that are derived from the same models and approaches for Mid Penn's other loan portfolio segments described in "Note 4 - Loans and Allowance for Credit Losses - Loans" above, as these unfunded commitments share similar risk characteristics with these loan portfolio segments.
The ACL - OBS at March 31, 2024 was $3.2 million compared to $3.6 million at December 31, 2023. On January 1, 2023 in conjunction with adopting ASC 326, Mid Penn recorded an additional $3.1 million of provision for OBS which was included in the adoption cumulative effect adjustment. A benefit for OBS credit losses of $318 thousand was recorded for the three months ended March 31, 2024.
Litigation
Mid Penn is subject to lawsuits and claims arising out of its normal conduct of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material adverse effect on the consolidated financial condition of Mid Penn.
Note 10 - Debt
Short-term FHLB and Correspondent Bank Borrowings
Total short-term borrowings were $271.8 million and $241.5 million as of March 31, 2024 and December 31, 2023, respectively. Short-term borrowings generally consist of federal funds purchased and advances from the FHLB with an original maturity of less than a year. Federal funds purchased from correspondent banks mature in one business day and reprice daily based on the Federal Funds rate. Advances from the FHLB are collateralized by the Bank’s investment in the common stock of the FHLB and by a blanket lien on selected loan receivables comprised principally of real estate secured loans within the Bank’s portfolio totaling $3.0 billion at March 31, 2024. The Bank had a short-term borrowing capacity from the FHLB as of March 31, 2024 up to the Bank’s unused borrowing capacity of $1.7 billion (equal to $2.1 billion of maximum borrowing capacity, less the aggregate amount of FHLB letter of credits securing public funds deposits, and other FHLB advances and obligations outstanding) upon satisfaction of any stock purchase requirements of the FHLB.
The Bank also has unused overnight lines of credit with other correspondent banks amounting to $35.0 million at March 31, 2024. No draws were made on these lines as of March 31, 2024 and December 31, 2023.
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Long-term Debt
The following table presents a summary of long-term debt as of March 31, 2024 and December 31, 2023.
(Dollars in thousands)March 31, 2024December 31, 2023
FHLB fixed rate instruments:
Due January 2024, 1.10%
$— $10,000 
Due March 2024, 5.60%
— 25,000 
Due February 2026, 4.51%
20,000 20,000 
Due August 2026, 4.80%
746 782 
Due February 2027, 6.71%
22 24 
Total FHLB fixed rate instruments20,768 55,806 
Lease obligations included in long-term debt3,173 3,197 
Total long-term debt$23,941 $59,003 
As a member of the FHLB, the Bank can access a number of credit products which are utilized to provide liquidity. The FHLB fixed rate instruments obtained by the Bank are secured under the terms of a blanket collateral agreement with the FHLB consisting of FHLB stock and qualifying Bank loan receivables, principally real estate secured loans. The Bank also obtains letters of credit from the FHLB to secure certain public fund deposits of municipality and school district customers who agree to use of the FHLB letters of credit as a legally allowable alternative to investment pledging. These FHLB letter of credit commitments totaled $142.9 million and $153.5 million as of March 31, 2024 and December 31, 2023, respectively.
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Note 11 - Subordinated Debt and Trust Preferred Securities
Subordinated Debt Assumed November 2021 with the Riverview Acquisition
On November 30, 2021, Mid Penn completed its acquisition of Riverview and assumed $25.0 million of subordinated notes (the "Riverview Notes"). In accordance with purchase accounting principles, the Riverview Notes were assigned a fair value premium of $2.3 million. The notes are treated as Tier 2 capital for regulatory reporting purposes.
The Riverview Notes were entered into by Riverview on October 6, 2020 with certain qualified institutional buyers and accredited institutional investors. The Riverview Notes have a maturity date of October 15, 2030 and initially bear interest, payable semi-annually, at a fixed annual rate of 5.75% per annum until October 15, 2025. Commencing on that date, the interest rate applicable to the outstanding principal amount due will be reset quarterly to an interest rate per annum equal to the then current three-month SOFR plus 563 bps, payable quarterly until maturity. Mid Penn may redeem the Riverview Notes at par, in whole or in part, at its option, anytime beginning on October 15, 2025.
Subordinated Debt Issued December 2020
On December 22, 2020, Mid Penn entered into agreements for and sold, at 100% of their principal amount, an aggregate of $12.2 million of its subordinated notes due December 2030 (the "December 2020 Notes") on a private placement basis to accredited investors. The December 2020 Notes are treated as Tier 2 capital for regulatory capital purposes.
The December 2020 Notes bear interest at a rate of 4.5% per year for the first five years and then float at the Wall Street Journal’s Prime Rate, provided that the interest rate applicable to the outstanding principal balance during the period the December 2020 Notes are floating will at no time be less than 4.5%. Interest is payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, beginning on March 31, 2021. The December 2020 Notes will mature on December 31, 2030 and are redeemable, in whole or in part, without premium or penalty, on any interest payment date on or after December 31, 2025 and prior to December 31, 2030, subject to any required regulatory approvals. Additionally, if (i) all or any portion of the December 2020 Notes cease to be deemed Tier 2 Capital, (ii) interest on the December 2020 Notes fails to be deductible for United States federal income tax purposes, or (iii) Mid Penn will be considered an "investment company," Mid Penn may redeem the December 2020 Notes, in whole but not in part, by giving 10 days’ notice to the holders of the December 2020 Notes. In the event of a redemption described in the previous sentence, Mid Penn will redeem the December 2020 Notes at 100% of the principal amount of the December 2020 Notes, plus accrued and unpaid interest thereon to but excluding the date of redemption.
Holders of the December 2020 Notes may not accelerate the maturity of the December 2020 Notes, except upon the bankruptcy, insolvency, liquidation, receivership or similar event of Mid Penn or Mid Penn Bank, its principal banking subsidiary. Related parties held $750 thousand of the December 2020 Notes as of March 31, 2024 and December 31, 2023.
Subordinated Debt Issued March 2020
On March 20, 2020, Mid Penn entered into agreements with accredited investors who purchased $15.0 million aggregate principal amount of its subordinated notes due March 2030 (the "March 2020 Notes"). As a result of Mid Penn’s merger with Riverview on November 30, 2021, $6.9 million of the March 2020 Notes balance was redeemed as Riverview was a holder of the March 2020 Notes. The balance of March 2020 Notes outstanding as of March 31, 2024 was $8.1 million. The March 2020 Notes are intended to be treated as Tier 2 capital for regulatory capital purposes.
The March 2020 Notes bear interest at a rate of 4.0% per year for the first five years and then float at the Wall Street Journal’s Prime Rate, provided that the interest rate applicable to the outstanding principal balance during the period the March 2020 Notes are floating will at no time be less than 4.25%. Interest is payable semi-annually in arrears on June 30 and December 30 of each year, beginning on June 30, 2020, for the first five years after issuance and will be payable quarterly in arrears thereafter on March 30, June 30, September 30 and December 30. The March 2020 Notes will mature on March 30, 2030 and are redeemable in whole or in part, without premium or penalty, at any time on or after March 30, 2025 and prior to March 30, 2030. Additionally, if all or any portion of the March 2020 Notes cease to be deemed Tier 2 Capital, Mid Penn may redeem, on any interest payment date, all or part of the 2020 Notes. In the event of a redemption described in the previous sentence, Mid Penn will redeem the March 2020 Notes at 100% of the principal amount of the March 2020 Notes, plus accrued and unpaid interest thereon to but excluding the date of redemption.
Holders of the March 2020 Notes may not accelerate the maturity of the March 2020 Notes, except upon the bankruptcy, insolvency, liquidation, receivership or similar event of Mid Penn or Mid Penn Bank, its principal banking subsidiary. Related parties held $1.7 million of the March 2020 Notes as of March 31, 2024 and December 31, 2023.
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Note 12 - Common Stock and Earnings Per Share
Treasury Stock Repurchase Program
Mid Penn adopted a treasury stock repurchase program ("Program") initially effective March 19, 2020, and renewed through April 24, 2025 by Mid Penn’s Board of Directors on April 24, 2024. The Program authorizes the repurchase of up to $15.0 million of Mid Penn’s outstanding common stock. Under the Program, Mid Penn conducts repurchases of its common stock through open market transactions (which may be by means of a trading plan adopted under SEC Rule 10b5-1) or in privately negotiated transactions. Repurchases under the Program are made at the discretion of management and are subject to market conditions and other factors. There is no guarantee as to the exact number of shares that Mid Penn may repurchase. The Program is able to be modified, suspended or terminated at any time, at Mid Penn’s discretion, based upon a number of factors, including liquidity, market conditions, the availability of alternative investment opportunities and other factors Mid Penn deems appropriate. The Program does not obligate Mid Penn to repurchase any shares.
During the three months ended March 31, 2024, Mid Penn repurchased 15,500 shares of common stock at an average price of $20.81. As of March 31, 2024, Mid Penn had repurchased 440,722 shares of common stock at an average price of $22.78 per share under the Program. The Program had approximately $5.0 million remaining available for repurchase as of March 31, 2024.
Dividend Reinvestment Plan
Under Mid Penn’s amended and restated DRIP, 300,000 shares of Mid Penn’s authorized but unissued common stock are reserved for issuance. The DRIP also allows for voluntary cash payments, within specified limits, to be used for the purchase of additional shares.
Equity Incentive Plans
On May 9, 2023, shareholders approved the 2023 Stock Incentive Plan, which authorizes Mid Penn to grant incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, deferred stock units and performance shares. The 2023 Plan was established for employees and directors of Mid Penn and the Bank, selected by the Compensation Committee of the Board of Directors, to incentivize the further success of the Company, and replaces the 2014 Restricted Stock Plan. The aggregate number of shares of common stock of the Company available for issuance under the Plan is 350,000 shares.
As of March 31, 2024, a total of 217,514 restricted shares were granted under the 2014 Plan, of which 83,107 shares were unvested. The 2014 Plan shares granted and vested resulted in $302 thousand and $249 thousand in share-based compensation expense for the three months ended March 31, 2024 and 2023, respectively.
Share-based compensation expense relating to restricted stock is calculated using grant date fair value and is recognized on a straight-line basis over the vesting periods of the awards. Restricted shares granted to employees vest in equal amounts on the anniversary of the grant date over the vesting period and the expense is a component of salaries and benefits expense on the Consolidated Statement of Income. The employee grant vesting period is determined by the terms of each respective grant, with vesting periods generally between one and four years. Restricted shares granted to directors have a twelve-month vesting period, and the expense is a component of directors’ fees and benefits within the other expense line item on the Consolidated Statement of Income.
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The following data shows the amounts used in computing basic and diluted earnings per common share:
Three Months Ended March 31,
(In thousands, except per share data)20242023
Net income$12,133 $11,227 
Weighted average common shares outstanding (basic)16,567,90215,886,186
Effect of dilutive unvested restricted stock grants45,47144,935
Weighted average common shares outstanding (diluted)16,613,37315,931,121
Basic earnings per common share$0.73 $0.71 
Diluted earnings per common share0.73 0.70 
There were no antidilutive instruments at March 31, 2024 and 2023.
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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management Discussion relates to the Corporation, a financial holding company incorporated in the Commonwealth of Pennsylvania, and its wholly owned subsidiaries. Management's Discussion should be read in conjunction with the consolidated financial statements and other financial information presented in this report.
Caution About Forward-Looking Statements
Forward-looking statements involve risks, uncertainties and assumptions. Although Mid Penn generally does not make forward-looking statements unless Mid Penn’s management believes its management has a reasonable basis for doing so, Mid Penn cannot guarantee the accuracy of any forward-looking statements. Actual results may differ materially from those expressed in any forward-looking statements due to a number of uncertainties and risks, including the risks described in this Quarterly Report on Form 10-Q, the 2023 Annual Report, and other unforeseen risks. You should not put undue reliance on any forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q, even if subsequently made available by us on Mid Penn’s website or otherwise, and Mid Penn undertakes no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.
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 or the Bank 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 future economic conditions on Mid Penn, its bank and nonbank subsidiaries, and their markets and customers;
•governmental monetary and fiscal policies, as well as legislative and regulatory changes;
•future actions or inactions of the United States government, including a failure to increase the government debt limit or a prolonged shutdown of the federal government;
•business or economic disruption from national or global epidemic or pandemic events;
•the risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, the value of investment securities, and interest rate protection agreements;
•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;
•an increase in the Pennsylvania Bank Shares Tax to which Mid Penn Bank’s capital stock is currently subject, or imposition of any additional taxes on the capital stock of Mid Penn or Mid Penn Bank;
•impacts of the capital and liquidity requirements imposed by bank regulatory agencies;
•the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, Financial Accounting Standards Board, the SEC, and other accounting and reporting standard setters;
•the costs and effects of litigation and of unexpected or adverse outcomes in such litigation;
•technological changes;
•our ability to successfully implement business strategies, including our acquisition strategy;
•our ability to successfully expand our franchise, including acquisitions or establishing new offices at favorable prices;
•our ability to successfully integrate any banks, companies, offices, assets, liabilities, customers, systems and management personnel we acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames;
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•potential goodwill impairment charges, or future impairment charges and fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames;
•our ability to attract and retain qualified management and personnel;
•results of regulatory examination and supervision processes;
•the failure of assumptions underlying the establishment of reserves for loan losses, the assessment of potential impairment of investment securities, and estimations of values of collateral and various financial assets and liabilities;
•our ability to maintain compliance with the listing rules of NASDAQ;
•our ability to maintain the value and image of our brand and protect our intellectual property rights;
•volatility in the securities markets;
•disruptions due to flooding, severe weather, or other natural disasters or Acts of God;
•acts of war, terrorism, or global military conflict;
•supply chain disruption; and
•the factors described in Item 1A of the Corporation's 2023 Annual Report and subsequent filings with the SEC.
The above list of factors that may affect future performance is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with this understanding of inherent uncertainty. Additional information regarding these as well as other factors that could affect future financial results can be found in the sections entitled "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the Corporation's 2023 Annual Report. The results of operations for interim periods are not necessarily indicative of operating results expected for the full year.
Overview
Mid Penn is a financial holding company, which generates the majority of its revenues through net interest income, or the difference between interest earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing the net interest margin, which is FTE net interest income as a percentage of average interest-earning assets. Mid Penn also generates revenue through fees earned on the various services and products offered to its customers and through gains on sales of assets, such as loans, investments and properties. Offsetting these revenue sources are provisions for credit losses, non-interest expenses and income taxes.
The following table presents a summary of Mid Penn's earnings and selected performance ratios:
Three Months Ended March 31,
20242023
Net Income$12,133 $11,227 
Diluted EPS$0.73 $0.70 
Dividends Declared$0.20 $0.20 
Return on average assets0.92 %1.01 %
Return on average equity8.94 %8.91 %
Net interest margin (1)
2.97 %3.49 %
Non-performing assets to total assets0.29 %0.31 %
Net charge-off (recoveries) to average loans (annualized)0.004 %0.013 %
(1) Presented on a FTE basis using a 21% Federal tax rate and statutory interest expense disallowances. See also the "Net Interest Income" section.

During the second quarter of 2023, Mid Penn completed the Brunswick Acquisition, which added total assets of $390.7 million comprised primarily of $324.5 million of loans. This transaction resulted in the addition of 5 branches in central New Jersey. Mid Penn issued 849,510 shares of its common stock as well as a net cash payment to Brunswick shareholders
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of $27.6 million, for total consideration of $45.7 million for all outstanding stock and the cancellation of options of Brunswick.
Summary of Financial Results
•Net Income Per Share - Mid Penn’s net income available to common shareholders ("earnings") for the three months ended March 31, 2024 was $12.1 million, or $0.73 per both common share basic and diluted, compared to earnings of $11.2 million, or $0.71 per both common share basic and diluted for the three months ended March 31, 2023.
◦Net Interest Margin - For the first quarter of 2024, Mid Penn’s net interest margin was 2.97% versus 3.49% for the same period of 2023. The decrease is primarily driven by higher interest rates resulting from persistent inflation. The yield on interest-earning assets for the first quarter of 2024 increased 67 basis points from the same period of 2023. The rate on interest-bearing liabilities increased 143 basis points from the same period of 2023.
◦Loan Growth - Total loans, net of unearned income, as of March 31, 2024 were $4.3 billion compared to $4.3 billion as of December 31, 2023, an increase of $64.7 million, or 1.5%. The growth was primarily driven by an increase in commercial real estate of $43.1 million. and an increase in construction loans of $31.8 million, offset by a decrease in residential mortgage loans of $6.6 million.
◦Deposit Growth - Total deposits increased $32.9 million, or 0.8%, from $4.3 billion at December 31, 2023, to $4.4 billion at March 31, 2024. The growth was primarily driven by an increase of $29.9 million in time deposits, and a $6.5 million increase in non-interest bearing accounts, partially offset by a decrease in interest-bearing transaction accounts.
•Asset Quality - Mid Penn adopted CECL on January 1, 2023. Its ACL at March 31, 2024 was $33.5 million, or 0.78% of total loans, as compared to $34.2 million, or 0.80% of total loans at December 31, 2023.
◦Net Charge-offs/Recoveries - Mid Penn had net charge-offs of $44 thousand and $113 thousand for the three months ended March 31, 2024 and 2023, respectively.
◦Non-performing assets - Total non-performing assets were $15.5 million at March 31, 2024, an increase compared to non-performing assets of $14.5 million at December 31, 2023. The increase is primarily related to loans totaling $1.1 million attributable to one relationship placed on non-accrual. Delinquency as a percentage of total loans was 0.38% at March 31, 2024.
◦Benefit/Provision for credit losses - loans - The benefit for credit losses - loans was $619 thousand for the three months ended March 31, 2024 compared to $490 thousand for the same period of 2023. The decrease in provision for the three months ended March 31, 2024, is primarily due to a decrease in loss factors across all portfolios. The benefit for credit losses on off-balance sheet credit exposures was $318 thousand for the three months ended March 31, 2024.
•Noninterest Income - Noninterest income totaled $5.8 million for the three months ended March 31, 2024 compared to $4.3 million for the three months ended March 31, 2023. The increase in noninterest income is primarily due to a $1.5 million increase in other miscellaneous noninterest income.
•Noninterest Expense - Noninterest expense totaled $28.5 million for the first quarter of 2024, an increase of $2.5 million, or 9.4%, compared to noninterest expense of $26.1 million for the same period of 2023. The increase was primarily the result of a $1.6 million increase in salaries and benefits expense, driven by the Brunswick acquisition, and a $605 thousand increase in FDIC charges due to increased assessment rates.
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•Liquidity - Current liquidity, including borrowing capacity, enhanced to nearly $1.69 billion or 142.7% of uninsured and uncollateralized deposits, or approximately 38.5% of total deposits.
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Critical Accounting Estimates
The 2023 Annual Report includes a summary of critical accounting estimates that Mid Penn considers to be most important to the presentation of its financial condition and results of operations, because they require management’s most difficult judgments as a result of the need to make estimates about the effects of matters that are inherently uncertain.

The following discussion is regarding the critical accounting estimates related to the application of CECL and business combinations.
Allowance for Credit Losses
In accordance with CECL, the ACL, which includes both the ACL - loans and the ACL for OBS credit exposures, is calculated with the objective of maintaining a reserve for current expected credit losses over the remaining expected life of the portfolio. Management's determination of the appropriateness of the reserve is based on continuously monitoring and evaluating the loan portfolio, lending-related commitments, current as well as forecasted economic factors, and other relevant factors. The ACL - loans is an estimate of expected losses inherent within Mid Penn's existing loan portfolio.
The loan loss estimation process involves procedures to appropriately consider the unique characteristics of Mid Penn’s loan portfolio segments. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Evaluations of the portfolio and individual credits are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations. Determining the appropriateness of the allowance is complex and requires judgement by Management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the ACL and credit loss expense.
Mid Penn estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Mid Penn uses a third-party software application to calculate the quantitative portion of the ACL using a methodology and assumptions specific to each loan pool. The qualitative portion of the allowance is based on general economic conditions and other internal and external factors affecting Mid Penn as a whole as well as specific loans. Factors considered include the following: lending process, concentrations of credit, and credit quality. The quantitative and qualitative portions of the allowance are added together to determine the total ACL, which reflects Management’s expectations of future conditions based on reasonable and supportable forecasts. As such, the calculation of ACL is inherently subjective and requires management to exercise significant judgment. The CECL estimate is highly sensitive to the economic forecasts used to develop the estimate.
While management uses the best information known to it in order to make ACL valuations, adjustments to the ACL may be necessary based on changes in economic and other conditions, changes in the composition of the loan portfolio, or changes in accounting guidance. In times of economic slowdown, either local, regional or national, the risk inherent in the loan portfolio could increase resulting in the need for additional provisions to the ACL in future periods. An increase could also be necessitated by an increase in the size of the loan portfolio or in any of its components even though the credit quality of the overall portfolio may be improving.
For further discussion of the methodology used in the determination of the ACL, refer to "Note 1 - Summary of Significant Accounting Policies", "Note 3 - Investment Securities", "Note 4 - Loans and Allowance for Credit Losses - Loans" and "Note 9 - Commitments and Contingencies" to the Consolidated Financial Statements. To the extent actual outcomes differ from management estimates, additional PCL may be required that would adversely impact earnings in future periods.
Goodwill

Mid Penn evaluates goodwill annually for impairment unless events occur which indicate that impairment is possible, a triggering event. At March 31, 2024, Mid Penn had goodwill of $127.0 million and Mid Penn's stock continues to trade below book value.

Our annual impairment test was conducted during the fourth quarter of 2023. Factors considered include actual earnings in relation to forecasted earnings, liquidity levels, changes in deposit balances, and credit quality, among others. No
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goodwill impairment has been recorded for 2023. Management will continue to monitor internal metrics and macroeconomic trends to determine if there is likelihood of goodwill impairment.
Business Combinations
Assets acquired and liabilities assumed in business combinations are measured at fair value as of the acquisition date. In many cases, determining the fair value of the assets acquired and liabilities assumed requires Mid Penn to estimate the timing and amount of cash flows expected to result from these assets and liabilities and to discount these cash flows at appropriate rates of interest, which require the utilization of significant estimates and judgment in accounting for the acquisition.

Results of Operations

Net Interest Income
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 is also shown on a taxable-equivalent basis in total. 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 21% for the periods presented.
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The following table includes average balances, amounts, and yields of interest income and rates of expense, interest rate spread, and net interest margin for the periods presented:
Average Balances, Income and Interest Rates
For the Three Months Ended
March 31, 2024March 31, 2023
(Dollars in thousands)Average BalanceInterestYield/
Rate		Average BalanceInterestYield/
Rate
ASSETS:
Interest Bearing Balances$39,999 $403 4.05 %$5,761 $53 3.73 %
Investment Securities:
Taxable539,674 3,800 2.83 %556,901 3,764 2.74 %
Tax-Exempt76,013 376 1.99 %79,250 389 2.52 %
Total Investment Securities615,687 4,176 2.73 %636,151 4,153 2.71 %
Federal Funds Sold10,373 136 5.27 %3,775 45 4.83 %
Loans4,293,828 63,236 5.92 %3,555,375 45,865 5.24 %
Restricted Investment in Bank Stocks19,439 240 4.97 %9,542 110 4.68 %
Total Interest-earning Assets4,979,326 68,191 5.51 %4,210,604 50,226 4.86 %
Cash and Due from Banks38,264 51,444 
Other Assets302,090 258,821 
Total Assets$5,319,680 $4,520,869 
LIABILITIES & SHAREHOLDERS' EQUITY:
Interest-bearing Demand$898,340 $3,884 1.74 %$968,951 $2,691 1.13 %
Money Market876,242 5,968 2.74 %940,286 4,084 1.76 %
Savings287,765 72 0.10 %330,773 54 0.07 %
Time1,468,611 16,408 4.49 %749,598 5,172 2.80 %
Total Interest-bearing Deposits3,530,958 26,332 3.00 %2,989,608 12,001 1.63 %
Short-term borrowings316,025 4,446 5.66 %121,898 1,490 4.96 %
Long-term debt40,571 533 5.28 %4,350 44 4.10 %
Subordinated debt and trust preferred securities46,275 424 3.69 %56,875 642 4.58 %
Total Interest-bearing Liabilities3,933,829 31,735 3.24 %3,172,731 14,177 1.81 %
Noninterest-bearing Demand781,136 793,382 
Other Liabilities58,714 43,899 
Shareholders' Equity546,001 510,857 
Total Liabilities & Shareholders' Equity$5,319,680 $4,520,869 
Net Interest Income$36,456 $36,049 
Taxable Equivalent Adjustment (1)
260 200 
Net Interest Income (taxable-equivalent basis)$36,716 $36,249 
Total Yield on Earning Assets5.51 %4.86 %
Rate on Supporting Liabilities3.24 %1.81 %
Average Interest Spread2.27 %3.05 %
Net Interest Margin (1)
2.97 %3.49 %
(1)Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances.
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The following table summarizes the changes in interest income and interest expense resulting from changes in average balances, volume, and changes in rates for the three months ended March 31, 2024 in comparison to the same period in 2023:
Three months ended
March 31, 2024 vs. March 31, 2023
Increase (decrease)
(Dollars in thousands)Volume Rate Net
INTEREST INCOME:
Interest Bearing Balances$318 $32 $350 
Investment Securities:
Taxable(117)153 36 
Tax-Exempt(20)7 (13)
Total Investment Securities(137)160 23 
Federal Funds Sold79 12 91 
Loans9,621 7,750 17,371 
Restricted Investment Bank Stocks115 15 130 
Total Interest Income9,996 7,969 17,965 
INTEREST EXPENSE:
Interest Bearing Deposits:
Interest Bearing Demand(198)1,391 1,193 
Money Market(280)2,164 1,884 
Savings(7)25 18 
Time5,006 6,230 11,236 
Total Interest-Bearing Deposits4,521 9,810 14,331 
Short-term Borrowings2,394 562 2,956 
Long-term Debt369 120 489 
Subordinated Debt(121)(97)(218)
Total Interest Expense7,163 10,395 17,558 
NET INTEREST INCOME$2,833 $(2,426)$407 
For the three months ended March 31, 2024, net interest income was $36.5 million compared to net interest income of $36.0 million for the three months ended March 31, 2023. The tax-equivalent net interest margin for the three months ended March 31, 2024 was 2.97% compared to 3.49% for the first quarter of 2023, representing a 53 bp decrease compared to the same period in 2023, primarily driven by higher interest rates resulting from persistent inflation.
The yield on interest-earning assets increased to 5.51% for the quarter ended March 31, 2024, from 4.84% for the quarter ended March 31, 2023. These increases were due to assets continuing to reprice at higher rates during the first quarter of 2024. Increased yields on interest-earning assets were more than offset by increases in funding costs for the first quarter of 2024, with the overall cost of interest-bearing liabilities increasing to 3.24% during the first quarter of 2024, compared to 3.02% for the three months ended December 31, 2023, and 1.81% for the three months ended March 31, 2023.
Average investment securities decreased $20.5 million and the yield on those investment securities increased 2 bps during the first quarter of 2024 compared to the first quarter of 2023, reducing interest income due to volume by $137 thousand offset by increased rates contributing $160 thousand to interest income. Average loans increased $738.5 million, and the yield on those loans increased 68 bps, contributing $9.6 million and $7.8 million, respectively, to the increase in interest income.
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Interest expense increased $17.6 million during the first quarter of 2024 compared to the first quarter of 2023. The rate of interest-bearing liabilities increased from 1.81% for the first quarter of 2023 to 3.24% for the first quarter of 2024. The increase in the rate was primarily a result of a shift in the mix of deposits from demand, money market and savings to higher yielding time deposits. Mid Penn continued to offer higher rates over the comparable period to both retain and attract deposits. In addition, average short-term borrowings of $316.0 million were used to help fund loan growth, contributing $3.0 million to interest expense during the first quarter of 2024.
Although the effective interest rate impact on interest-earning assets and funding sources can be reasonably estimated at current interest rate levels, the interest-bearing product and pricing 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 Mid Penn’s asset and liability management and related interest rate risk simulation models. In addition, our net interest income may be impacted by further interest rate actions of the Federal Reserve’s FOMC.
Provision for Credit Losses - Loans
On January 1, 2023, Mid Penn adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology, and is referred to as CECL. The benefit for credit losses on loans was $619 thousand for the three months ended March 31, 2024 compared to a provision of $490 thousand for the three months ended March 31, 2023. The decrease is primarily due to a decrease in loss factors across all portfolios.
Noninterest Income
Noninterest income for the three months ended March 31, 2024 was $5.8 million and $4.3 million for the three months ended March 31, 2023. The following table and explanations that follow provide additional analysis of noninterest income.
Noninterest income and variance analysis:
Three Months Ended March 31,
(Dollars in Thousands)20242023$ Variance% Variance
Fiduciary and wealth management $1,132 $1,236 $(104)(8.4 %)
ATM debit card interchange945 1,056 (111)(10.5)
Service charges on deposits509 435 74 17.0 
Mortgage banking424 384 40 10.4 
Mortgage hedging— 20 (20)(100.0)
Net gain on sales of SBA loans107 — 107 100.0 
Earnings from cash surrender value of life insurance284 254 30 11.8 
Other2,436 940 1,496 159.1 
Total$5,837 $4,325 $1,512 35.0 %

For the three months ended March 31, 2024, noninterest income totaled $5.8 million, an increase of $1.5 million, or 34.96%, compared to noninterest income of $4.3 million for the three months ended March 31, 2023. The increase in noninterest income is primarily due to a $1.5 million increase in other miscellaneous noninterest income.
Noninterest Expense
For the three months ended March 31, 2024, noninterest expense totaled $28.5 million, an increase of $2.5 million, or 9.4%, compared to noninterest expense of $26.1 million for the same period in 2023. The following table and explanations that follow provide additional analysis of noninterest expense:
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Three Months Ended March 31,
(Dollars in Thousands)20242023$ Variance% Variance
Salaries and employee benefits$15,462 $13,844 $1,618 11.7 %
Software licensing and utilization2,120 1,946 174 8.9 
Occupancy expense, net1,982 1,886 96 5.1 
Equipment expense1,222 1,251 (29)(2.3)
Shares tax997 899 98 10.9 
Legal and professional fees998 800 198 24.8 
ATM/card processing534 493 41 8.3 
Intangible amortization428 344 84 24.4 
FDIC Assessment945 340 605 177.9 
Gain on sale of foreclosed assets, net— — — N/M
Merger and acquisition expense— 224 (224)N/M
Post-acquisition restructuring expense— — — N/M
Other expenses3,832 4,043 (211)(5.2)
Total Noninterest Expense$28,520 $26,070 $2,450 9.4 %

For the three months ended March 31, 2024, noninterest expense totaled $28.5 million, an increase of $2.7 million, or 10.4%, compared to noninterest expense of $25.8 million for the three months ended March 31, 2023. The increase was primarily the result of a $1.6 million increase in salaries and benefits expense, driven by the Brunswick acquisition, and a $605 thousand increase in FDIC charges due to increased assessment rates.

Income Taxes
The provision for income taxes was $2.6 million for the three months ended March 31, 2024 compared to $2.6 million for the same period in 2023. The provision for income taxes for the three months ended March 31, 2024 reflects a combined Federal and State effective tax rate of 17.5% and 18.7%, for the three months ended March 31, 2024 and March 31, 2023, respectively. Generally, Mid Penn’s effective tax rate is below the federal statutory rate due to earnings on tax-exempt loans, investments, and earnings from the cash surrender value of life insurance, as well as the impact of federal income tax credits, including those awarded from Mid Penn’s low-income housing investments. The realization of Mid Penn’s deferred tax assets is dependent on future earnings. Mid Penn currently anticipates that future earnings will be adequate to fully realize the currently recorded deferred tax assets.
Financial Condition
Mid Penn’s total assets were $5.3 billion as of March 31, 2024, reflecting an increase of $39.6 million, or 0.7%, compared to total assets of $5.3 billion as of December 31, 2023. The increase was primarily driven by organic loan growth, offset by a reduction in cash and cash equivalents.
Investment Securities
Mid Penn’s investment portfolio is utilized primarily to support overall liquidity and interest rate risk management, to provide collateral supporting pledging requirements for public funds on deposit, and to generate additional interest income within reasonable risk parameters. Total investment securities as of March 31, 2024 were $614.6 million compared to $622.7 million as of December 31, 2023. Mid Penn does not intend to grow the investment portfolio beyond levels necessary to support pledging requirements.

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The following table presents the expected maturities of the investment portfolio and the weighted average yields (calculated based on historical cost):
Maturing
(In Thousands)One Year
and Less		After One Year
thru Five Years		After Five Years
Thru Ten Years		After Ten
Years
As of March 31, 2024
AmountWeighted Average YieldAmountWeighted Average YieldAmountWeighted Average YieldAmountWeighted Average Yield
Available for sale securities, at fair value:
U.S. Treasury and U.S. government agencies$12,380 3.21 %$21,304 2.82 %$1,806 3.30 %$— — %
Mortgage-backed U.S. government agencies— — — — 5,421 2.53 141,344 3.01 
State and political subdivision obligations— — — — 1,708 2.17 1,925 2.66 
Corporate debt securities— — 11,515 4.68 20,229 4.41 — — 
$12,380 3.21 %$32,819 3.48 %$29,164 3.87 %$143,269 3.01 %
Held to maturity securities, at amortized cost:
U.S. Treasury and U.S. government agencies$6,000 3.68 %$84,981 1.91 %$153,358 2.10 %$1,500 2.45 %
Mortgage-backed U.S. government agencies— — 2,408 2.87 6,320 2.84 33,648 2.02 
State and political subdivision obligations7,047 2.44 34,461 2.50 22,716 2.20 19,094 2.59 
Corporate debt securities— — 6,015 3.42 19,450 4.19 — — 
$13,047 3.01 %$127,865 2.16 %$201,844 2.34 %$54,242 2.23 %

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Loans, net of unearned interest
Total loans, net of unearned interest, as of March 31, 2024 were $4.3 billion compared to $4.3 billion as of December 31, 2023. The growth of $64.7 million, or 1.5%, since December 31, 2023 was the result of organic loan growth. Organic growth occurred primarily across the commercial real estate and commercial and industrial portfolios, offset by a decrease in residential mortgage loan portfolios.
March 31, 2024December 31, 2023Change in Balance
(Dollars in thousands)Balance% of Total LoansBalance% of Total Loans$%
Commercial real estate
CRE Nonowner Occupied$1,174,774 27.2 %$1,149,553 27.0 %$25,221 2.2 %
CRE Owner Occupied622,574 14.4 629,904 14.8 (7,330)(1.2)
Multifamily334,952 7.8 309,059 7.3 25,893 8.4 
Farmland212,018 4.9 212,690 5.0 (672)(0.3)
Total Commercial Real Estate2,344,318 54.3 2,301,206 54.1 43,112 1.9 
Commercial and industrial
671,395 15.6 675,079 15.9 (3,684)(0.5)
Construction
Residential Construction103,861 2.4 92,843 2.2 11,018 11.9 
Other Construction383,428 8.9 362,624 8.5 20,804 5.7 
Total Construction487,289 11.3 455,467 10.7 31,822 7.0 
Residential mortgage
1-4 Family 1st Lien334,557 7.7 339,142 8.0 (4,585)(1.4)
1-4 Family Rental340,052 7.9 341,937 8.0 (1,885)(0.6)
HELOC and Junior Liens132,703 3.1 132,795 3.1 (92)(0.1)
Total Residential Mortgage807,312 18.7 813,874 19.1 (6,562)(0.8)
Consumer7,135 0.2 7,166 0.2 (31)(0.4)
$4,317,449 100.0 %$4,252,792 100.0 %$64,657 1.5 %

The majority of the Bank's loan portfolio is to businesses and individuals located within the Bank's primary market area of the Pennsylvania counties of Berks, Blair, Bucks, Centre, Chester, Clearfield, Cumberland, Dauphin, Fayette, Huntingdon, Lancaster, Lehigh, Luzerne, Montgomery, Perry, Schuylkill and Westmoreland, along with Middlesex and Monmouth counties of New Jersey. Commercial real estate, construction, and land development loans are collateralized mainly by mortgages on the income-producing real estate or land involved. Commercial, industrial, and agricultural loans are primarily made to business entities and may be secured by business assets, including commercial real estate, or may be unsecured. Residential real estate loans are secured by liens on the residential property. Consumer loans include installment loans, lines of credit and home equity loans. The Bank has no significant concentration of credit to any one borrower. The Bank’s highest concentration of credit by loan type is in commercial real estate.
Credit risk is managed through portfolio diversification, underwriting policies and procedures, and loan monitoring practices. Lenders are provided with detailed underwriting policies for all types of credit risks accepted by the Bank and must obtain appropriate internal approvals for credit extensions. The Bank also maintains strict documentation requirements and robust credit quality assurance practices in order to identify credit portfolio weaknesses as early as possible, so any exposures that are discovered might be mitigated or potential losses reduced. The Bank generally secures its loans with real estate, with such collateral values dependent and subject to change based on real estate market conditions within its market area.


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The following table presents the commercial real estate portfolio by property type along with the weighted average loan to value:
(Dollars in thousands)March 31, 2024December 31, 2023
Commercial Real EstateBalance % of portfolio
Weighted Average LTV (2)
Balance% of portfolio
Weighted Average LTV (2)
Owner Occupied (1)$622,574 26.5 %N/A$627,995 27.4 %N/A
Farmland (1)212,018 9.0 N/A212,690 9.2 N/A
Multifamily334,952 14.3 63.5 308,886 13.4 58.9 
Non Owner Occupied
Retail 360,350 15.4 53.7 414,485 18.0 51.0 
Office 275,693 11.8 63.9 301,810 13.1 64.4 
Industrial 150,852 6.4 58.0 156,075 6.8 49.3 
Hospitality 132,986 5.7 48.8 137,718 6.0 49.4 
Flex 37,202 1.6 54.5 39,374 1.7 56.0 
Mobile Home Park 20,260 0.9 66.7 21,298 0.9 68.4 
Health Care 9,933 0.4 54.0 15,618 0.7 54.6 
Other Property Types187,498 8.0 55.5 65,257 2.8 43.2 
Total Commercial Real Estate$2,344,318 100.0 %58.2 %$2,301,206 2301206000000100.0 %55.4 %
(1) LTV not available for Owner Occupied and Farmland properties.
(2) Weighted average Loan to Value is calculated based on estimated current market values of the properties.

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Maturity distribution by contractual maturity date and rate sensitivity information related to the loan portfolio is reflected in the table below:

(In Thousands)
As of March 31, 2024One Year
and Less		One to
Five Years		Five to
Fifteen Years		Over
Fifteen Years		Total
Commercial real estate$80,175 $541,173 $920,317 $802,653 $2,344,318 
Commercial and industrial22,428 317,609 104,257 227,101 671,395 
Construction92,221 270,288 75,307 49,473 487,289 
Residential mortgage31,051 97,611 230,221 448,429 807,312 
Consumer1,390 1,840 1,449 2,456 7,135 
Total loans held in portfolio227,265 1,228,521 1,331,551 1,530,112 4,317,449 
Predetermined (fixed) interest rates:
Commercial real estate55,973 348,819 121,859 11,767 538,418 
Commercial and industrial18,864 220,699 36,589 11,691 287,843 
Construction44,332 71,170 26,889 831 143,222 
Residential mortgage18,876 80,929 91,209 139,783 330,797 
Consumer754 1,770 1,449 334 4,307 
Total predetermined (fixed) interest rates138,799 723,387 277,995 164,406 1,304,587 
Floating interest rates:
Commercial real estate24,201 192,354 798,458 790,886 1,805,899 
Commercial and industrial3,564 96,910 67,668 215,410 383,552 
Construction47,889 199,118 48,418 48,642 344,067 
Residential mortgage12,176 16,682 139,012 308,646 476,516 
Consumer636 70 — 2,122 2,828 
Total floating interest rates88,466 505,134 1,053,556 1,365,706 3,012,862 
Total fixed and floating interest rates$227,265 $1,228,521 $1,331,551 $1,530,112 $4,317,449 

Credit Quality, Credit Risk, and Allowance for Credit Losses
Mid Penn adopted FASB ASC Topic 326, in accordance with the amendments of FASB ASU 2016-13, effective January 1, 2023. The guidance in FASB ASC 326 replaces Mid Penn’s previous incurred loss methodology with a methodology that reflects the current expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit losses. Mid Penn’s ACL methodology for loans is based upon guidance within FASB ASC Subtopic 326-20, "Financial Instruments – Credit Losses – Measured at Amortized Cost," as well as regulatory guidance from the FDIC, the Bank's primary federal regulator. The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Credit quality within the loan portfolio is continuously monitored by management and is reflected within the ACL for loans. The ACL is an estimate of expected losses inherent within Mid Penn’s existing loan portfolio. The ACL is adjusted through the provision for credit losses and reduced by the charge off of loan amounts, net of recoveries.
The loan loss estimation process involves procedures to appropriately consider the unique characteristics of Mid Penn’s loan portfolio segments. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Evaluations of the portfolio and individual credits are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations. Determining the appropriateness of the allowance is complex and requires judgement by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense.
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For a complete description of Mid Penn’s ACL methodology and the quantitative and qualitative factors included in the calculation, please see "Note 4 – Loans and Allowance for Credit Losses – Loans" included in Part I. Item 1. – Financial Statements of this report.

Upon the adoption of FASB ASC Topic 326 on January 1, 2023, Mid Penn recorded an overall increase of $15.0 million to the ACL on January 1, 2023 as a result of the adoption of CECL. Retained earnings decreased $11.5 million and deferred tax assets increased by $3.1 million.

Changes in the ACL are summarized as follows:
Three Months Ended
March 31,
(Dollars in thousands)20242023
Balance, beginning of period$34,187 $18,957 
Impact of adopting CECL— 11,931 
Loans charged off during period(50)(150)
Recoveries of loans previously charged off6 37 
Net (charge-offs) recoveries (44)(113)
(Benefit)/Provision for credit losses(619)490 
Balance, end of period$33,524 $31,265 
Ratio of net charge-offs (recoveries) to average loans outstanding (annualized)0.004 %0.013 %
Ratio of ACL - loans to net loans at end of period0.78 %0.87 %
.


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The following table presents the change in nonperforming asset categories as of March 31, 2024, December 31, 2023, and March 31, 2023.
(Dollars in thousands)March 31, 2024December 31, 2023March 31, 2023
Non-performing Assets:
Total non-performing loans$10,389 $14,216 $13,909 
Foreclosed real estate5,110 293 248 
Total non-performing assets15,499 14,509 14,157 
Accruing loans 90 days or more past due25 — 7 
Total risk elements$15,524 $14,509 $14,164 
Non-performing loans as a percentage of total loans outstanding0.24 %0.33 %0.39 %
Non-performing assets as a percentage of total loans outstanding and foreclosed real estate0.36 %0.34 %0.39 %
Ratio of ACL to non-performing loans322.69 %240.48 %224.78 %
Total nonperforming assets were $15.5 million at March 31, 2024, an increase compared to nonperforming assets of $14.5 million at December 31, 2023. The increase during the first quarter of 2024 primarily related to loans totaling $1.1 million attributable to one relationship placed on non-accrual. Delinquency as a percentage of total loans was 0.38% at March 31, 2024.

Goodwill

Mid Penn evaluates goodwill annually for impairment unless events occur which indicate that impairment is possible, a triggering event. At March 31, 2024, Mid Penn had goodwill of $127.0 million and Mid Penn's stock continues to trade below book value. Management has not noted any factors either internally or externally which would indicate that a triggering event has occurred during the first quarter of 2024 warranting an additional impairment test. Factors considered include actual earnings in relation to forecasted earnings, liquidity levels, changes in deposit balances, and credit quality, among others. Management will continue to monitor internal metrics and macroeconomic trends to determine if there is likelihood of Goodwill impairment. Additionally, our annual impairment test will be conducted as of October 31, 2024.
Deposits
Total deposits increased $32.9 million, or 0.8%, from $4.3 billion on December 31, 2023, to $4.4 billion at March 31, 2024. The growth was primarily due to an increase of $29.9 million, or 2.1%, in time deposits, and a $6.5 million, or 0.8%, in non-interest bearing accounts, partially offset by decreases in interest-bearing transaction accounts.

As of March 31, 2024, uninsured deposits were approximately $1.2 billion compared to $1.2 billion as of December 31, 2023. The maturities of the uninsured time deposits as of March 31, 2024 were as follows:
(In thousands)3/31/2024
Three months or less$157,317 
Over three months to six months53,268 
Over six months to twelve months110,342 
Over twelve months30,576 
$351,503 
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Borrowings

Total short-term borrowings increased $30.3 million, or 12.6%, from December 31, 2023 in order to fund loan growth. Short term FHLB borrowings increased $125.0 million offset by a decrease in FHLB overnight borrowings of $94.7 million. Total long-term borrowings were $23.9 million at March 31, 2024, a decrease of $35.1 million from December 31, 2023.
Liquidity
Mid Penn’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;
•payments received on loans and mortgage-backed securities;
•overnight correspondent bank borrowings on various credit lines; and
•borrowing capacity available from the FHLB and the Federal Reserve Discount Window available to Mid Penn.
Mid Penn believes its core deposits are generally stable even in periods of changing interest rates. Liquidity is measured and monitored daily, allowing management to better understand and react to balance sheet trends. 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, and the uncertain impact of the current inflationary environment, 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.
On at least a quarterly basis, a comprehensive liquidity analysis is reviewed by the Asset Liability Committee and Board of Directors. The analysis provides a summary of the current liquidity measurements, projections, and future liquidity positions given various levels of liquidity stress. Management also maintains a detailed Contingency Funding Plan designed to respond to overall stress in the financial condition of the banking industry or a prospective liquidity problem specific to Mid Penn.
The Consolidated Statements of Cash Flows provide additional information. Mid Penn’s operating activities during the three months ended March 31, 2024 provided $12.4 million of cash, mainly due to net income. Cash used in investing activities during the three months ended March 31, 2024 was $65.7 million, mainly the result of the net increase in loans. Cash provided by financing activities during the three months ended March 31, 2024 totaled $24.7 million, primarily the result of an increase in net deposits.
Regulatory Capital
Mid Penn and the Bank are subject to regulatory capital requirements administered by banking regulators. Failure to meet minimum capital requirements can trigger certain mandatory, and possibly additional discretionary, actions by the regulators that if, undertaken, could have a direct material effect on Mid Penn's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory account practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Minimum regulatory capital requirements established by Basel III rules require Mid Penn and the Bank to:
•Meet a minimum Common Equity Tier I capital ratio of 4.5% of risk-weighted assets;
•Meet a minimum Tier I capital ratio of 6.0% of risk-weighted assets;
•Meet a minimum Total capital ratio of 8.0% of risk-weighted assets;
•Meet a minimum Tier I leverage capital ratio of 4.0% of average assets;
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•Maintain a "capital conservation buffer" of 2.5% above the minimum risk-based capital requirements, which must be maintained to avoid restrictions on capital distributions and certain discretionary bonuses; and
•Comply with the definition of capital to improve the ability of regulatory capital instruments to absorb losses.
The Basel III Rules use a standardized approach for risk weightings that expands the risk-weighting for assets and off-balance sheet exposures from the previous 0%, 20%, 50% and 100% categories to a much larger and more risk-sensitive number of categories, depending on the nature of the assets and off-balance sheet exposures and resulting in higher risk weightings for a variety of asset categories.
Banks are evaluated for capital adequacy by regulatory supervisory agencies based on the ratio of capital to risk-weighted assets and total assets. The minimum capital to risk-weighted assets requirements, including the capital conservation buffers, which became effective for Mid Penn and the Bank on January 1, 2016, are illustrated below. At March 31, 2024, regulatory capital ratios for both Mid Penn and the Bank met the definition of a "well-capitalized" institution under the regulatory framework for prompt corrective action, and exceeded the minimum capital requirements under Basel III.
Mid Penn maintained the following regulatory capital ratios in comparison to regulatory requirements:
March 31, 2024December 31, 2023Regulatory Minimum for Capital AdequacyFully Phased-In, with Capital Conversation Buffers
Total Risk-Based Capital (to Risk-Weighted Assets)11.66 %11.69 %10.50 %4.00 %
Tier I Risk-Based Capital (to Risk-Weighted Assets)9.78 9.78 8.50 7.00 
Common Equity Tier I (to Risk-Weighted Assets)9.78 9.78 7.00 8.50 
Tier I Leverage Capital (to Average Assets)8.31 8.32 4.00 10.50 
As of March 31, 2024 and December 31, 2023, Mid Penn and the Bank met all capital adequacy requirements and the Bank was considered "well-capitalized". However, future changes in regulations could increase capital requirements and may have an adverse effect on capital resources.
Shareholders' Equity
Shareholders' equity, or capital, is evaluated in relation to total assets and the risk associated with those assets, and the desire to collectively maintain and enhance shareholders’ value, and satisfactorily address regulatory capital requirements. Accordingly, capital management has been, and will continue to be, of paramount importance to Mid Penn.
Shareholders’ equity increased by $8.6 million, or 1.6%, from $542.4 million as of December 31, 2023 to $551.0 million as of March 31, 2024, primarily due to earnings of $12.1 million, partially offset by dividends declared of $3.3 million and stock repurchases of $323 thousand.


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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a financial institution, Mid Penn’s primary source of market risk is interest rate risk. Interest rate risk is the exposure to fluctuations in Mid Penn’s future earnings, earnings at risk, resulting from changes in interest rates. This exposure or sensitivity is a function of the repricing characteristics of Mid Penn's portfolio of assets and liabilities. Each asset and liability reprices either at maturity or during the life of the instrument. Interest rate sensitivity is measured as the difference between the volume of assets and liabilities that are subject to repricing in a future period of time.
The principal purpose of asset-liability management is to maximize current and future net interest income within acceptable levels of interest rate risk while satisfying liquidity and capital requirements. Net interest income is increased by increasing the net interest margin and by volume growth. Thus, the goal of interest rate risk management is to maintain a balance between risk and reward such that net interest income is maximized while risk is maintained at an acceptable level.
Mid Penn utilizes an asset-liability management model to measure the impact of interest rate movements on its interest rate sensitivity position. Mid Penn’s management also reviews the traditional maturity gap analysis regularly. Mid Penn does not always attempt to achieve an exact match between interest sensitive assets and liabilities because it believes that an actively managed amount of interest rate risk is inherent and appropriate in the management of Mid Penn’s profitability.
Modeling techniques and simulation analysis involve assumptions and estimates that inherently cannot be measured with complete precision. Key assumptions in the analyses include maturity and repricing characteristics of assets and liabilities, prepayments on amortizing assets, non-maturing deposit sensitivity, and loan and deposit pricing. These assumptions are inherently uncertain due to the timing, magnitude and frequency of rate changes and changes in market conditions and management strategies, among other factors. However, the analyses are useful in quantifying risk and provide a relative gauge of Mid Penn’s interest rate risk position over time.
Management reviews interest rate risk on a quarterly basis. This analysis includes earnings scenarios whereby interest rates are increased or decreased by 100, 200, 300 and 400 bps. These scenarios, detailed in the table below, indicate that Mid Penn would experience enhanced net interest income over a one-year time frame due to downward interest rate changes, while an increase in interest rates rates would result in a decline in net interest income over a one-year time frame; however, actual results could vary significantly from the calculations prepared by management. At March 31, 2024, all interest rate risk levels according to the model were within the tolerance limits of the Board-approved policy.
Change in
Basis Points		% Change in
Net Interest Income		Policy
Risk Limit
400(2.50)%≥ -25%
300(1.90)%≥ -20%
200(1.30)%≥ -15%
100(0.60)%≥ -10%
(100)0.90%≥ -10%
(200)1.40%≥ -15%
(300)1.50%≥ -20%
(400)2.20%≥ -25%
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 March 31, 2024, Mid Penn’s management, with the participation of the Principal Executive Officer and Principal Financial Officer, concluded that the disclosure controls and procedures were effective as of such date.
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Changes in Internal Controls
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 during the three months ended March 31, 2024.
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PART II – OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
Based on information currently available, management is not aware of any litigation that would reasonably be expected to 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 2023 Annual Report and subsequent reports filed with the SEC to determine if there were material changes applicable to the three months ended March 31, 2024. There have been no material changes to such risk factors.


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ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(1)None.
(2)None.

Mid Penn adopted a treasury stock repurchase program ("Program") initially effective March 19, 2020, and renewed through April 24, 2025 by Mid Penn’s Board of Directors on April 24, 2024. The Program authorizes the repurchase of up to $15.0 million of Mid Penn’s outstanding common stock. Under the Program, Mid Penn conducts repurchases of its common stock through open market transactions (which may be by means of a trading plan adopted under SEC Rule 10b5-1) or in privately negotiated transactions. Repurchases under the Program are made at the discretion of management and are subject to market conditions and other factors. There is no guarantee as to the exact number of shares that Mid Penn may repurchase. The Program is able to be modified, suspended or terminated at any time, at Mid Penn’s discretion, based upon a number of factors, including liquidity, market conditions, the availability of alternative investment opportunities and other factors Mid Penn deems appropriate. The Program does not obligate Mid Penn to repurchase any shares. During the three months ended March 31, 2024, Mid Penn repurchased 15,500 shares of common stock at an average price of $20.81. As of March 31, 2024, Mid Penn repurchased 440,722 shares of common stock under the program.
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ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 – MINE SAFETY DISCLOSURES
Not Applicable
ITEM 5 – OTHER INFORMATION
None
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ITEM 6 – EXHIBITS

3.1
The Registrant’s Articles of Incorporation. (Incorporated by reference to Exhibit 3.1 to Registrant's Quarterly Report on form 10-Q with the SEC on May 9, 2023.)
3.2
The Registrant’s By-laws. (Incorporated by reference to Exhibit 3.1 to Registrant’s Annual Report on Form 10-K filed with the SEC on March 28, 2024.)
10.1
10.2
10.3
31.1
31.2
32
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted in inline XBRL and contained in Exhibit 101).
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SIGNATURES
Pursuant to the requirements 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:
May 8, 2024
By:
/s/ Justin T. Webb
Justin T. Webb
Chief Financial Officer
(Principal Financial Officer)
Date:
May 8, 2024
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