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Fair Value Measurement
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurement Fair Value Measurement
Mid Penn uses estimates of fair value in applying various accounting standards for its consolidated financial statements on either a recurring or non-recurring basis. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. Mid Penn groups its assets and liabilities measured at fair value in three hierarchy levels, based on the observability and transparency of the inputs. The fair value hierarchy is as follows:
Level 1 - Inputs that represent quoted prices for identical instruments in active markets.
Level 2 - Inputs that represent quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 - Inputs that are largely unobservable, as little or no market data exists for the instrument being valued.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.
There were no transfers of assets between fair value Level 1 and Level 2 during the three and nine months ended September 30, 2024 or the year ended December 31, 2023.
The following tables illustrate the assets and liabilities measured at fair value on a recurring basis and reported on the Consolidated Balance Sheets.
September 30, 2024
(In thousands)Level 1Level 2Level 3Total
Available-for-sale securities:
U.S. Treasury and U.S. government agencies$— $27,236 $— $27,236 
Mortgage-backed U.S. government agencies— 192,162 — 192,162 
State and political subdivision obligations— 3,761 — 3,761 
Corporate debt securities— 32,068 — 32,068 
Equity securities446 — — 446 
Loans held for sale— 7,919 — 7,919 
Other assets:
Derivative assets— 8,987 — 8,987 
Other liabilities:
Derivative liabilities— 8,778 8,778 
December 31, 2023
(In thousands)Level 1Level 2Level 3Total
Available-for-sale securities:
U.S. Treasury and U.S. government agencies$— $35,649 $— $35,649 
Mortgage-backed U.S. government agencies— 152,683 — 152,683 
State and political subdivision obligations— 3,646 — 3,646 
Corporate debt securities— 31,577 — 31,577 
Equity securities438 — — 438 
Loans held for sale— 3,855 — 3,855 
Other assets:
Derivative assets— 11,944 — 11,944 
Other liabilities:
Derivative Liabilities— 10,484 — 10,484 
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 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 September 30, 2024 were measured as the price that secondary market investors were offering for loans with similar characteristics.
Derivative instruments - 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 source 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 Mid Penn’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 Mortgage banking derivatives as Level 2. As of September 30, 2024, Mortgage banking derivatives are not considered material.
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. The following table illustrates Level 3 financial instruments measured at fair value on a nonrecurring basis:
(In thousands)September 30, 2024December 31, 2023
Individually evaluated loans, net of ACL$16,923 $13,399 
Foreclosed assets held for sale281 293 
Net loans - This category consists of loans that were individually evaluated for credit losses, net of the related ACL, and have been classified as Level 3 assets. For 2023, the amount shown is the balance of individually evaluated loans reporting a specific allocation or that have been partially charged-off. 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.
Foreclosed assets held for sale - Values are based on appraisals that consider the sales prices of property in the proximate vicinity.
The following tables summarize the carrying amount, fair value, and placement in the fair value hierarchy of Mid Penn's financial instruments as of the periods presented:
September 30, 2024
Carrying
Amount		Estimated Fair Value
(In thousands)Level 1Level 2Level 3Total
Financial instruments - assets
 Cash and cash equivalents $144,395 $144,395 $— $— $144,395 
 Available-for-sale securities255,227 — 255,227 — 255,227 
Held-to-maturity securities386,618 — 354,365 — 354,365 
 Equity securities446 446 — — 446 
 Loans held for sale7,919 — 7,919 — 7,919 
Net loans 4,396,142 — — 4,426,090 4,426,090 
  Restricted investment in bank stocks10,589 10,589 — — 10,589 
  Accrued interest receivable27,286 27,286 — — 27,286 
  Derivative assets 8,987 — 8,987 — 8,987 
Financial instruments - liabilities
Deposits$4,706,764 $— $4,710,933 $— $4,710,933 
Short-term borrowings114,097 — 114,097 — 114,097 
Long-term debt (1)
20,617 — 20,617 — 20,617 
Subordinated debt45,894 — — — — 
 Accrued interest payable18,995 18,995 — — 18,995 
 Derivative liabilities8,778 — 8,778 — 8,778 
(1)Long-term debt excludes finance lease obligations.
December 31, 2023
Estimated Fair Value
(In thousands)Carrying
Amount		Level 1Level 2Level 3Total
Financial instruments - assets
Cash and cash equivalents$96,763 $96,763 $— $— $96,763 
Available-for-sale securities223,555 — 223,555 — 223,555 
 Held-to-maturity securities399,128 — 357,521 — 357,521 
   Equity securities438 438 — — 438 
 Loans held for sale3,855 — 3,855 — 3,855 
Net loans 4,218,605 — — 4,221,926 4,221,926 
 Restricted investment in bank stocks16,768 16,768 — — 16,768 
 Accrued interest receivable25,820 25,820 — — 25,820 
 Derivative assets11,944 — 11,944 — 11,944 
Financial instruments - liabilities
Deposits$4,346,212 $— $4,337,723 $— $4,337,723 
Short-term debt241,532 — 241,532 — 241,532 
Long-term debt (1)
55,806 — 55,081 — 55,081 
Subordinated debt46,354 — 39,515 — 39,515 
 Accrued interest payable14,257 14,257 — — 14,257 
 Derivative liabilities10,484 — 10,484 — 10,484 
(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 September 30, 2024 and December 31, 2023.