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Fair Value Measurement
 12 Months Ended
Dec. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value Measurement Fair Value Measurement
The following tables illustrate the assets measured at fair value on a recurring basis and reported on the Consolidated Balance Sheets:
2022
(In thousands)Level 1Level 2Level 3Total
Available-for-sale securities:
U.S. Treasury and U.S. government agencies$— $34,914 $— $34,914 
Mortgage-backed U.S. government agencies— 166,915 — 166,915 
State and political subdivision obligations— 3,539 — 3,539 
Corporate debt securities— 32,510 — 32,510 
Equity securities430 — — 430 
Loans held for sale— 2,475 — 2,475 
Other assets:
Interest rate swap agreements— 11,697 — 11,697 
Mortgage banking derivative assets, net— 6 — 6 
Total$430 $252,056 $— $252,486 
2021
(In thousands)Level 1Level 2Level 3Total
Available-for-sale securities:
Mortgage-backed U.S. government agencies$— $49,480 $— $49,480 
State and political subdivision obligations— 3,914 — 3,914 
Corporate debt securities— 9,468 — 9,468 
Equity securities500 — — 500 
Loans held for sale— 11,514 — 11,514 
Other assets:
Interest rate swap agreements— 102 — 102 
Mortgage banking derivative assets, net— 53 — 53 
Total$500 $74,531 $— $75,031 
See "Note 1 - Summary of Significant Accounting Policies," for additional details on the fair value hierarchy.
There were no transfers of assets between fair value Level 1 and Level 2 for the years ended December 31, 2022 or 2021.
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 December 31, 2022 were measured as the price that secondary market investors were offering for loans with similar characteristics.
Loan-level 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 sources 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 the Corporation’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 12 - 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 (for example, upon their acquisition or when there is evidence of impairment). The following table illustrates Level 3 financial instruments measured at fair value on a nonrecurring basis as of December 31:
(In thousands)20222021
Impaired loans (1)
$938 $508 
Foreclosed assets held for sale43 — 
(1) Includes impaired loans reporting a specific allocation or that have been partially charged-off.
Impaired loans - All performing troubled debt restructured loans and loans classified as non-accrual are deemed to be impaired, and 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. 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. As of December 31, 2022 and 2021, the
range of the discount of the appraisals was 22% - 84% and 21% - 69%, respectively. The weighted average of the discount was 55% and 30%, as of December 31, 2022 and 2021, respectively.
Foreclosed assets held for sale - Values are based on appraisals that consider the sales prices of property in the proximate vicinity.
The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of Mid Penn’s financial instruments as of December 31:
2022
Estimated Fair Value
(In thousands)Carrying
Amount		Level 1Level 2Level 3Total
Financial instruments - assets
 Cash and cash equivalents $60,881 $60,881 $— $— $60,881 
 Available-for-sale investment securities237,878 — 237,878 — 237,878 
Held-to-maturity investment securities399,494 — 348,505 — 348,505 
 Equity securities430 430 — — 430 
 Loans held for sale2,475 — 2,475 — 2,475 
Net loans 3,495,162 — — 3,439,948 3,439,948 
  Restricted investment in bank stocks8,315 8,315 — — 8,315 
  Accrued interest receivable18,405 18,405 — — 18,405 
  Interest rate swap agreements11,697 — 11,697 — 11,697 
  Mortgage banking derivative assets46 — 46 — 46 
Financial instruments - liabilities
Deposits$3,778,331 $— $3,761,260 $— $3,761,260 
Short-term debt102,647 — 102,647 — 102,647 
Long-term debt (1)
1,119 — 1,069 — 1,069 
Subordinated debt56,941 — 55,917 — 55,917 
 Accrued interest payable2,303 2,303 — — 2,303 
 Interest rate swap agreements11,697 — 11,697 — 11,697 
 Mortgage banking derivative liabilities40 — 40 — 40 
2021
Estimated Fair Value
(In thousands)Carrying
Amount		Level 1Level 2Level 3Total
Financial instruments - assets
Cash and cash equivalents$913,752 $913,752 $— $— $913,752 
Available-for-sale investment securities62,862 — 62,862 — 62,862 
 Held-to-maturity investment securities329,257 — 330,626 — 330,626 
   Equity securities500 500 — — 500 
 Loans held for sale11,514 — 11,514 — 11,514 
Net loans 3,089,799 — — 3,118,416 3,118,416 
 Restricted investment in bank stocks9,134 9,134 — — 9,134 
 Accrued interest receivable10,779 10,779 — — 10,779 
 Interest rate swap agreements1,808 — 1,808 — 1,808 
 Mortgage banking derivative assets75 — 75 — 75 
Financial instruments - liabilities
Deposits$4,002,016 $— $4,046,217 $— $4,046,217 
Long-term debt (1)
77,890 — 77,455 — 77,455 
Subordinated debt74,274 — 74,553 — 74,553 
 Accrued interest payable1,791 1,791 — — 1,791 
 Interest rate swap agreements1,808 — 1,808 — 1,808 
 Mortgage banking derivative liabilities22 — 22 — 22 
(1)Long-term debt excludes finance lease obligations
The Bank’s outstanding and unfunded credit commitments and financial standby letters of credit were deemed to have no significant fair value as of December 31, 2022 and 2021.