Guarantees and Commitments

9 Months Ended

Sep. 30, 2017

Commitments And Contingencies Disclosure [Abstract]

Guarantees and Commitments

(5) Guarantees and Commitments

In the normal course of business, Mid Penn makes various commitments and incurs certain contingent liabilities which are not reflected in the accompanying consolidated financial statements.  The commitments include various guarantees and commitments to extend credit.  Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Mid Penn evaluates each customer’s 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 $20,904,000 and $14,000,000 standby letters of credit outstanding as of September 30, 2017 and December 31, 2016, respectively.  Mid Penn does not anticipate any losses because of these transactions.  The amount of the liability as of September 30, 2017 and December 31, 2016 for payment under standby letters of credit issued was not material.