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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

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 June 30, 2019 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	June 30, 2019		(Level 1)		(Level 2)		(Level 3)
Available-for-sale securities:
U.S. Treasury and U.S. government agencies	$	44,526	$	—	$	44,526	$	—
Mortgage-backed U.S. government agencies		21,358		—		21,358		—
State and political subdivision obligations		14,186		—		14,186		—
Corporate debt securities		3,334		—		3,334		—
Other assets:
Equity securities		506		506		—		—
Total	$	83,910	$	506	$	83,404	$	—

			Fair value measurements at December 31, 2018 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2018		(Level 1)		(Level 2)		(Level 3)
Available-for-sale securities:
U.S. Treasury and U.S. government agencies	$	41,572	$	—	$	41,572	$	—
Mortgage-backed U.S. government agencies		38,849		—		38,849		—
State and political subdivision obligations		29,256		—		29,256		—
Corporate debt securities		2,246		—		2,246		—
Other assets:
Equity securities		492		492		—		—
Total	$	112,415	$	492	$	111,923	$	—

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 June 30, 2019 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	June 30, 2019		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	928	$	—	$	—	$	928
Foreclosed Assets Held for Sale		44		—		—		44

			Fair value measurements at December 31, 2018 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2018		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	4,935	$	—	$	—	$	4,935
Foreclosed Assets Held for Sale		581		—		—		581

Fair Value Measurement Inputs and Valuation Techniques

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

June 30, 2019

Fair Value Estimate

Valuation Technique

Unobservable Input

Range

Weighted Average

Impaired Loans

928

Appraisal of collateral (a), (b)

Appraisal adjustments (b)

25% - 100%

37%

Foreclosed Assets Held for Sale

Appraisal of collateral (a), (b)

Appraisal adjustments (b)

27% - 27%

27%

(Dollars in thousands)

Quantitative Information about Level 3 Fair Value Measurements

December 31, 2018

Fair Value Estimate

Valuation Technique

Unobservable Input

Range

Weighted Average

Impaired Loans

4,935

Appraisal of collateral (a), (b)

Appraisal adjustments (b)

26% - 100%

40%

Foreclosed Assets Held for Sale

581

Appraisal of collateral (a), (b)

Appraisal adjustments (b)

17% - 17%

17%

(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.

Fair Value, by Balance Sheet Grouping

The following table summarizes the carrying value and fair value of financial instruments at June 30, 2019 and December 31, 2018.

(Dollars in thousands)	June 30, 2019				December 31, 2018
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and cash equivalents	$	48,145	$	48,145	$	40,065	$	40,065
Available-for-sale investment securities		83,404		83,404		111,923		111,923
Held-to-maturity investment securities		160,182		162,863		168,370		166,582
Equity securities		506		506		492		492
Loans held for sale		8,139		8,139		1,702		1,702
Net loans and leases		1,679,402		1,703,362		1,615,670		1,622,287
Restricted investment in bank stocks		6,480		6,480		6,646		6,646
Accrued interest receivable		8,883		8,883		8,244		8,244
Mortgage servicing rights		92		92		101		101

Financial liabilities:
Deposits	$	1,778,401		1,780,014	$	1,726,026	$	1,725,674
Short-term borrowings		13,000		13,000		43,100		43,100
Long-term debt (a)		61,444		62,542		48,024		44,585
Subordinated debt		27,070		25,450		27,082		24,881
Accrued interest payable		2,696		2,696		2,262		2,262

(a)

Long-term debt excludes finance lease obligations.

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 June 30, 2019 and December 31, 2018. 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
June 30, 2019	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Held-to-maturity investment securities	$	160,182	$	162,863	$	—	$	162,863	$	—
Net loans and leases		1,679,402		1,703,362		—		—		1,703,362

Financial instruments - liabilities
Deposits	$	1,778,401	$	1,780,014	$	—	$	1,780,014	$	—
Long-term debt (a)		61,444		62,542		—		62,542		—
Subordinated debt		27,070		25,450		—		25,450		—

					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, 2018	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Held-to-maturity investment securities	$	168,370	$	166,582	$	—	$	166,582	$	—
Net loans and leases		1,615,670		1,622,287		—		—		1,622,287

Financial instruments - liabilities
Deposits	$	1,726,026	$	1,725,674	$	—	$	1,725,674	$	—
Long-term debt		48,024		44,585		—		44,585		—
Subordinated debt		27,082		24,881		—		24,881		—

(a)

Long-term debt excludes finance lease obligations.