Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Assets Measured at Fair Value on a Recurring Basis

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

			Fair value measurements at September 30, 2017 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	September 30, 2017		(Level 1)		(Level 2)		(Level 3)
Available-for-sale securities:
U.S. Treasury and U.S. government agencies	$	39,253	$	-	$	39,253	$	-
Mortgage-backed U.S. government agencies		27,046		-		27,046		-
State and political subdivision obligations		27,978		-		27,978		-
Corporate debt securities		1,005				1,005
Equity securities		1,231		1,231		-		-
Total	$	96,513	$	1,231	$	95,282	$	-

			Fair value measurements at December 31, 2016 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2016		(Level 1)		(Level 2)		(Level 3)
Available-for-sale securities:
U.S. Treasury and U.S. government agencies	$	47,012	$	1,864	$	45,148	$	-
Mortgage-backed U.S. government agencies		25,619		-		25,619		-
State and political subdivision obligations		58,838		-		58,838		-
Corporate debt securities		1,100		-		1,100
Equity securities		1,056		1,056		-		-
Total	$	133,625	$	2,920	$	130,705	$	-

Fair Value Measurements, Nonrecurring

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

			Fair value measurements at September 30, 2017 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	September 30, 2017		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	6,186	$	-	$	-	$	6,186
Foreclosed Assets Held for Sale		33		-		-		33
Mortgage Servicing Rights		131		-		-		131

			Fair value measurements at December 31, 2016 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2016		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	2,404	$	-	$	-	$	2,404
Foreclosed Assets Held for Sale		135		-		-		135
Mortgage Servicing Rights		144		-		-		144

Fair Value Inputs, Assets, Quantitative Information

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Mid Penn has utilized Level 3 inputs to determine the fair value.

(Dollars in thousands)

Quantitative Information about Level 3 Fair Value Measurements

September 30, 2017

Fair Value Estimate

Valuation Technique

Unobservable Input

Range

Weighted Average

Impaired Loans

6,186

Appraisal of collateral (a)

Appraisal adjustments (b)

6% - 84%

46%

Foreclosed Assets Held for Sale

Appraisal of collateral (a), (c)

Appraisal adjustments (b)

28% - 28%

28%

Mortgage Servicing Rights

131

Multiple of annual service fee

Estimated prepayment speed based on rate and term

210% - 400%

365%

(Dollars in thousands)

Quantitative Information about Level 3 Fair Value Measurements

December 31, 2016

Fair Value Estimate

Valuation Technique

Unobservable Input

Range

Weighted Average

Impaired Loans

2,404

Appraisal of collateral (a)

Appraisal adjustments (b)

11% - 70%

30%

Foreclosed Assets Held for Sale

135

Appraisal of collateral (a), (c)

Appraisal adjustments (b)

26% - 31%

27%

Mortgage Servicing Rights

144

Multiple of annual service fee

Estimated prepayment speed based on rate and term

210% - 400%

365%

(a)

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

(b)

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

(c)

Includes qualitative adjustments by management and estimated liquidation expenses.

Fair Value, by Balance Sheet Grouping

The following table summarizes the carrying value and fair value of financial instruments at September 30, 2017 and December 31, 2016.

(Dollars in thousands)	September 30, 2017				December 31, 2016
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and cash equivalents	$	56,184	$	56,184	$	45,973	$	45,973
Available-for-sale investment securities		96,513		96,513		133,625		133,625
Held-to-maturity investment securities		82,625		82,716		-		-
Loans held for sale		1,778		1,778		1,959		1,959
Net loans and leases		869,884		886,174		806,741		824,293
Restricted investment in bank stocks		3,735		3,735		2,443		2,443
Accrued interest receivable		4,159		4,159		3,928		3,928
Mortgage servicing rights		131		131		144		144

Financial liabilities:
Deposits	$	1,026,675	$	1,027,081	$	935,373	$	935,075
Short-term borrowings		20,000		20,000		-		-
Long-term debt		13,409		12,894		13,581		13,614
Subordinated debt		7,421		7,405		7,414		7,534
Accrued interest payable		940		940		515		515

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

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

The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of Mid Penn’s financial instruments as of September 30, 2017 and December 31, 2016. Carrying values approximate fair values for cash and cash equivalents, interest-bearing time balances with other financial institutions, loans held for sale, restricted investment in bank stocks, mortgage servicing rights, accrued interest receivable and payable, and short-term borrowings. Other than cash and cash equivalents, which are considered Level 1 Inputs and mortgage servicing rights, which are Level 3 Inputs, these instruments are Level 2 Inputs. These tables exclude financial instruments for which the carrying amount approximates fair value, not previously disclosed.

					Fair Value Measurements
					Quoted Prices
					in Active Markets				Significant
(Dollars in thousands)					for Identical Assets		Significant Other		Unobservable
	Carrying				or Liabilities		Observable Inputs		Inputs
September 30, 2017	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Held-to-maturity investment securities	$	82,625	$	82,716	$	-	$	82,716	$	-
Net loans and leases		869,884		886,174		-		-		886,174

Financial instruments - liabilities
Deposits	$	1,026,675	$	1,027,081	$	-	$	1,027,081	$	-
Short-term borrowings		20,000		20,000				20,000
Long-term debt		13,409		12,894		-		12,894		-
Subordinated debt		7,421		7,405		-		7,405		-

					Fair Value Measurements
					Quoted Prices
					in Active Markets				Significant
(Dollars in thousands)					for Identical Assets		Significant Other		Unobservable
	Carrying				or Liabilities		Observable Inputs		Inputs
December 31, 2016	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Net loans and leases	$	806,741	$	824,293	$	-	$	-	$	824,293

Financial instruments - liabilities
Deposits	$	935,373	$	935,075	$	-	$	935,075	$	-
Long-term debt		13,581		13,614		-		13,614		-
Subordinated debt	$	7,414	$	7,534			$	7,534