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Derivative Financial Instruments
 9 Months Ended
Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
As of September 30, 2022 and December 31, 2021, Mid Penn did not designate any derivative financial instruments as formal hedging relationships. Mid Penn’s free-standing derivative financial instruments are required to be carried at their fair value on consolidated balance sheets.
Mortgage Banking Derivative Financial Instruments
In connection with its mortgage banking activities, Mid Penn enters into commitments to originate certain fixed-rate residential mortgage loans for customers, also referred to as interest rate locks. In addition, Mid Penn enters into forward commitments for the future sales or purchases of mortgage-backed securities to or from third-party counterparties to hedge the effect of changes in interest rates on the values of both the interest rate locks and mortgage loans held for sale. Forward sales commitments may also be in the form of commitments to sell individual mortgage loans at a fixed price at a future date. The amount necessary to settle each interest rate lock is based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured.
The notional amount and fair value of Mid Penn’s mortgage banking derivative financial instruments as of September 30, 2022 and December 31, 2021 are presented below.
September 30, 2022December 31, 2021
(Dollars in thousands)Notional AmountFair Value Notional AmountFair Value
Interest Rate Lock Commitments$6,101 $(141)$16,107 $56 
Forward Commitments6,145 (195)20,521 32 
The following table presents Mid Penn’s mortgage banking derivative financial instruments, their fair values, and their location in the consolidated balance sheets as of September 30, 2022 and December 31, 2021.
September 30, 2022December 31, 2021
(Dollars in thousands)Asset DerivativesLiability DerivativesAsset DerivativesLiability Derivatives
Interest Rate Lock Commitments$3 $144 $56 $— 
Forward Commitments3 198 32 — 
Total$6 $342 $88 $— 
The following table presents Mid Penn’s mortgage banking derivative financial instruments and the amount of the net gains or losses recognized within other noninterest income on the consolidated statement of income for the three and nine months ended September 30, 2022 and 2021.
Three months endedNine months ended
(Dollars in thousands)September 30, 2022September 30, 2021September 30, 2022September 30, 2021
Interest Rate Lock Commitments$(224)$134 $(197)$134 
Forward Commitments441 (113)1,518 (113)
Total$217 $21 $1,321 $21 
Loan-level Interest Rate Swaps
Mid Penn enters into loan-level interest rate swaps with certain qualifying, creditworthy commercial loan customers to provide a loan pricing structure that meets both Mid Penn’s and the customer’s interest rate risk management needs. Mid Penn simultaneously enters into parallel interest rate swaps with a dealer counterparty, 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.
The fair value, notional amount, and collateral posted related to loan-level interest rate swaps are presented below.
(Dollars in thousands)September 30, 2022December 31, 2021
Interest Rate Swap Contracts - Commercial Loans:
Fair Value (1)
$12,825 $102 
Notional Amount109,610 109,577 
Cash Collateral Posted (2)
1,600 1,600 
(1)Represents the total of the equal and offsetting fair value assets and liabilities related to the loan level interest rate swaps
(2)Included in cash and due from banks on the consolidated balance sheet
The gross amounts of commercial loan swap derivatives, the amounts offset and the carrying values in the consolidated balance sheets, and the collateral pledged to support such agreements are presented below.
(Dollars in thousands)September 30, 2022December 31, 2021
Interest Rate Swap Contracts - Commercial Loans:
Gross amounts recognized$12,825 $102 
Gross amounts offset12,825 102 
Net Amounts Presented in the Consolidated Balance Sheets— — 
Gross amounts not offset:
Financial instruments— — 
Cash collateral1,600 1,600 
Net Amounts$1,600 $1,600