UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~

2022

☐
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to

________

Commission file number 1-13677

MID PENN BANCORP, INC.

(Exact Name of Registrant as Specified in its Charter)

~~Pennsylvania~~	~~25-1666413~~
Pennsylvania		25-1666413
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

~~349 Union Street~~ ~~Millersburg,~~ 2407 Park Drive Harrisburg, Pennsylvania		~~17061~~ 17110
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code ~~1.866.642.7736~~

1.866.642.7736

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 par value per share

MPB

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, ~~or a~~ smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check One).~~

Large accelerated filer ☐

Accelerated filer ☐

☒

Non-accelerated filer ☐

Smaller reporting company ☒

☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

~~Indicated~~

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of ~~November 8, 2017,~~October 28, 2022, the registrant had ~~4,240,754~~15,882,853 shares of common stock outstanding.

~~MID PENN BANCORP, INC.~~

Table of Contents

FORM 10-Q

TABLE OF CONTENTS


PART 1 – FINANCIAL INFORMATION	2

	Item 1 – Financial Statements		2 3

		Consolidated Balance Sheets as of September 30, ~~2017~~2022 and December 31, ~~2016~~2021 (Unaudited)	2 3

		Consolidated Statements of Income for the Three and Nine Months Ended September 30, ~~2017~~2022 and ~~September 30, 2016~~2021 (Unaudited)	3 4

		Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, ~~2017~~2022 and ~~September 30, 2016~~2021 (Unaudited)	4 5

		Consolidated Statements of Changes in Shareholders’ Equity for the ~~Nine~~Three Months Ended ~~September~~March 3 1 , June 30, ~~2017~~ and September 30, ~~2016~~2022 and 2021 (Unaudited)	5 6

		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2022 and ~~September 30, 2016~~2021 (Unaudited)	6 8

		Notes to Consolidated Financial Statements (Unaudited)	8 10

	Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		36 41

	Item 3 – Quantitative and Qualitative Disclosures about Market Risk		50 60

	Item 4 – Controls and Procedures		50 61

PART II – OTHER INFORMATION	51 62

	Item 1 – Legal Proceedings		51 62

	Item 1A – Risk Factors		51 62

	Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		51 62

	Item 3 – Defaults upon Senior Securities		51 62

	Item 4 – Mine Safety Disclosures		51 62

	Item 5 – Other Information		51 62

	Item 6 – Exhibits		51 63

	Signatures		52 64

Unless the context otherwise requires, the terms “Mid Penn”, “Corporation” “we”, “us”, and “our” refer to Mid Penn Bancorp, Inc. and its consolidated wholly-owned banking subsidiary and nonbank subsidiaries.

~~MID PENN BANCORP, INC.~~

Table of Contents

MID PENN BANCORP, INC.

PART 1 – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(Dollars in thousands, except share data)	September 30, 2017			December 31, 2016			(Dollars in thousands, except share data)	September 30, 2022		December 31, 2021
ASSETS							ASSETS
Cash and due from banks	$	25,122		$	13,493		Cash and due from banks	$	76,018	$	41,100
Interest-bearing balances with other financial institutions		2,490			2,003		Interest-bearing balances with other financial institutions	4,520		146,031
Federal funds sold		28,572			30,477		Federal funds sold	14,140		726,621
Total cash and cash equivalents		56,184			45,973		Total cash and cash equivalents	94,678		913,752

Investment securities held to maturity, at amortized cost (fair value $346,625 and $330,626)							Investment securities held to maturity, at amortized cost (fair value $346,625 and $330,626)	402,142		329,257
Investment securities available for sale, at fair value		96,513			133,625		Investment securities available for sale, at fair value	242,195		62,862
Investment securities held to maturity, at amortized cost (fair value $82,716 and $0)		82,625			—
Loans held for sale		1,778			1,959
Equity securities available for sale, at fair value							Equity securities available for sale, at fair value	428		500
Loans held for sale, at fair value							Loans held for sale, at fair value	5,997		11,514
Loans and leases, net of unearned interest		877,386			813,924		Loans and leases, net of unearned interest	3,322,457		3,104,396
Less: Allowance for loan and lease losses		(7,502	)		(7,183	)	Less: Allowance for loan and lease losses	(18,480)		(14,597)
Net loans and leases		869,884			806,741		Net loans and leases	3,303,977		3,089,799

Bank premises and equipment, net		14,260			11,074		Bank premises and equipment, net	33,854		33,232
Bank premises and equipment held for sale		—			1,894		Bank premises and equipment held for sale	2,262		3,907
Operating lease right of use asset							Operating lease right of use asset	8,352		9,055
Finance lease right of use asset							Finance lease right of use asset	2,952		3,087
Cash surrender value of life insurance		12,977			12,780		Cash surrender value of life insurance	50,419		49,661
Restricted investment in bank stocks		3,735			2,443		Restricted investment in bank stocks	4,595		9,134
Foreclosed assets held for sale		33			224
Accrued interest receivable		4,159			3,928		Accrued interest receivable	15,861		11,328
Deferred income taxes		2,321			4,286		Deferred income taxes	16,093		10,779
Goodwill		3,918			3,918		Goodwill	113,871		113,835
Core deposit and other intangibles, net		460			539		Core deposit and other intangibles, net	7,215		9,436
Foreclosed assets held for sale							Foreclosed assets held for sale	49		—
Other assets		4,526			3,215		Other assets	28,963		28,287
Total Assets	$	1,153,373		$	1,032,599		Total Assets	$	4,333,903	$	4,689,425

LIABILITIES & SHAREHOLDERS’ EQUITY							LIABILITIES & SHAREHOLDERS’ EQUITY
Deposits:							Deposits:
Noninterest-bearing demand	$	155,574		$	122,811		Noninterest-bearing demand	$	863,037	$	850,438
Interest-bearing demand		359,236			317,533		Interest-bearing demand	1,103,000		1,066,852
Money Market		242,077			252,271		Money Market	966,913		1,076,593
Savings		62,258			60,163		Savings	344,359		381,476
Time		207,530			182,595		Time	452,287		626,657
Total Deposits		1,026,675			935,373		Total Deposits	3,729,596		4,002,016

Short-term borrowings		20,000			—
Long-term debt		13,409			13,581		Long-term debt	4,501		81,270
Subordinated debt		7,421			7,414
Subordinated debt and trust preferred securities							Subordinated debt and trust preferred securities	66,357		74,274
Operating lease liability							Operating lease liability	10,261		11,363
Accrued interest payable		940			515		Accrued interest payable	1,841		1,791
Other liabilities		7,537			5,249		Other liabilities	22,242		28,635
Total Liabilities		1,075,982			962,132		Total Liabilities	3,834,798		4,199,349

Shareholders' Equity:							Shareholders' Equity:
Common stock, par value $1.00; authorized 10,000,000 shares;
4,240,754 and 4,233,297 shares issued and outstanding at
September 30, 2017, and at December 31, 2016, respectively		4,241			4,233
Common stock, par value $1.00 per share; 20.0 million shares authorized; 16.1 million issued at September 30, 2022 and at December 31, 2021; 15.9 million outstanding at September 30, 2022 and 16.0 million at December 31, 2021							Common stock, par value $1.00 per share; 20.0 million shares authorized; 16.1 million issued at September 30, 2022 and at December 31, 2021; 15.9 million outstanding at September 30, 2022 and 16.0 million at December 31, 2021	16,091		16,056
Additional paid-in capital		40,846			40,688		Additional paid-in capital	386,452		384,742
Retained earnings		33,334			28,399		Retained earnings	120,572		91,043
Accumulated other comprehensive loss		(1,030	)		(2,853	)
Accumulated other comprehensive (loss) income							Accumulated other comprehensive (loss) income	(19,130)		158
Treasury stock, at cost; 208,343 shares at September 30, 2022 and 98,452 shares at December 31, 2021							Treasury stock, at cost; 208,343 shares at September 30, 2022 and 98,452 shares at December 31, 2021	(4,880)		(1,923)
Total Shareholders’ Equity		77,391			70,467		Total Shareholders’ Equity	499,105		490,076
Total Liabilities and Shareholders' Equity	$	1,153,373		$	1,032,599		Total Liabilities and Shareholders' Equity	$	4,333,903	$	4,689,425

The accompanying notes are an integral part of these unaudited consolidated financial statements.



~~MID PENN BANCORP, INC.~~

Table of Contents

MID PENN BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


(Dollars in thousands, except per share data)	Three Months Ended September 30,				Nine Months Ended September 30,					(Dollars in thousands, except per share data)	Three Months Ended September 30,				Nine Months Ended September 30,
		2017		2016		2017			2016		2022		2021		2022		2021
INTEREST INCOME										INTEREST INCOME
Interest and fees on loans and leases	$	10,213	$	9,134	$	29,864		$	26,846	Interest and fees on loans and leases	$	38,484	$	29,590	$	107,764	$	87,755
Interest on interest-bearing balances		5		2		12			11
Interest on federal funds sold		23		36		97			54
Interest and dividends on investment securities:										Interest and dividends on investment securities:
U.S. Treasury and government agencies		617		339		1,636			972	U.S. Treasury and government agencies	2,873		285		6,738		688
State and political subdivision obligations, tax-exempt		240		550		820			1,562	State and political subdivision obligations, tax-exempt	392		279		1,107		834
Other securities		52		64		159			236	Other securities	509		277		1,430		870
Total Interest and Dividends on Investment Securities										Total Interest and Dividends on Investment Securities	3,774		841		9,275		2,392

Interest on other interest-bearing balances										Interest on other interest-bearing balances	12		1		33		5
Interest on federal funds sold										Interest on federal funds sold	736		308		1,786		485
Total Interest Income		11,150		10,125		32,588			29,681	Total Interest Income	43,006		30,740		118,858		90,637
INTEREST EXPENSE										INTEREST EXPENSE
Interest on deposits		1,425		1,162		3,906			3,293	Interest on deposits	2,836		2,909		7,149		8,791
Interest on short-term borrowings		30		—		43			15	Interest on short-term borrowings	—		133		—		539
Interest on long-term and subordinated debt		179		205		538			657	Interest on long-term and subordinated debt	761		704		2,453		2,111
Total Interest Expense		1,634		1,367		4,487			3,965	Total Interest Expense	3,597		3,746		9,602		11,441
Net Interest Income		9,516		8,758		28,101			25,716	Net Interest Income	39,409		26,994		109,256		79,196
PROVISION FOR LOAN AND LEASE LOSSES		—		585		225			1,320	PROVISION FOR LOAN AND LEASE LOSSES	1,550		425		3,775		2,575
Net Interest Income After Provision for Loan and Lease Losses		9,516		8,173		27,876			24,396	Net Interest Income After Provision for Loan and Lease Losses	37,859		26,569		105,481		76,621
NONINTEREST INCOME										NONINTEREST INCOME
Income from fiduciary activities		217		104		613			349
Income from fiduciary and wealth management activities										Income from fiduciary and wealth management activities	1,729		618		3,986		1,716
ATM debit card interchange income										ATM debit card interchange income	1,078		630		3,263		1,854
Service charges on deposits		175		171		554			484	Service charges on deposits	483		223		1,617		552
Net gain on sales of investment securities		22		200		42			413
Mortgage banking income										Mortgage banking income	536		3,162		1,370		8,382
Mortgage hedging income										Mortgage hedging income	217		22		1,321		22
Net gain on sales of SBA loans										Net gain on sales of SBA loans	152		105		262		560
Earnings from cash surrender value of life insurance		65		65		196			200	Earnings from cash surrender value of life insurance	250		74		758		223
Mortgage banking income		230		266		646			698
ATM debit card interchange income		233		214		689			623
Merchant services income		84		89		250			241
Net gain on sales of SBA loans		262		89		703			354
Net gain on sales of investment activities										Net gain on sales of investment activities	—		79		—		79
Other income		276		221		669			687	Other income	1,518		596		4,366		2,485
Total Noninterest Income		1,564		1,419		4,362			4,049	Total Noninterest Income	5,963		5,509		16,943		15,873
NONINTEREST EXPENSE										NONINTEREST EXPENSE
Salaries and employee benefits		4,277		3,982		12,666			11,428	Salaries and employee benefits	13,583		10,342		39,167		29,873
Software licensing and utilization										Software licensing and utilization	1,804		1,551		5,731		4,493
Occupancy expense, net		631		496		1,872			1,542	Occupancy expense, net	1,634		1,318		5,088		4,115
Equipment expense		398		412		1,149			1,258	Equipment expense	1,121		745		3,244		2,237
Pennsylvania bank shares tax expense		170		197		500			606
Shares tax										Shares tax	920		498		2,626		1,022
Legal and professional fees										Legal and professional fees	528		610		1,861		1,591
ATM/card processing										ATM/card processing	518		249		1,605		696
Intangible amortization										Intangible amortization	514		266		1,516		823
FDIC Assessment		197		134		585			434	FDIC Assessment	254		461		1,351		1,364
Legal and professional fees		218		130		584			515
Marketing and advertising expense		139		146		377			369
Software licensing		397		350		1,096			1,015
Telephone expense		120		135		379			420
Loss on sale or write-down of foreclosed assets		—		26		88			158
Intangible amortization		25		31		78			102
Charitable contributions qualifying for State tax credits										Charitable contributions qualifying for State tax credits	—		—		190		635
Mortgage banking profit-sharing expense										Mortgage banking profit-sharing expense	—		1,140		178		2,005
Gain on sale or write-down of foreclosed assets, net										Gain on sale or write-down of foreclosed assets, net	(57)		(7)		(88)		(26)
Merger and acquisition expense		243		—		467			—	Merger and acquisition expense	—		198		—		720
Post-acquisition restructuring expense										Post-acquisition restructuring expense	—		—		329		—
Other expenses		1,145		1,126		3,479			3,231	Other expenses	3,896		2,648		11,577		7,485
Total Noninterest Expense		7,960		7,165		23,320			21,078	Total Noninterest Expense	24,715		20,019		74,375		57,033
INCOME BEFORE PROVISION FOR INCOME TAXES		3,120		2,427		8,918			7,367	INCOME BEFORE PROVISION FOR INCOME TAXES	19,107		12,059		48,049		35,461
Provision for income taxes		871		526		2,330			1,639	Provision for income taxes	3,626		2,272		8,962		6,749
NET INCOME	$	2,249	$	1,901	$	6,588		$	5,728
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS										NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	15,481	$	9,787	$	39,087	$	28,712
							��
PER COMMON SHARE DATA:										PER COMMON SHARE DATA:
Basic and Diluted Earnings Per Common Share	$	0.53	$	0.45	$	1.56		$	1.35	Basic and Diluted Earnings Per Common Share	$	0.97	$	0.86	$	2.45	$	2.85
Cash Dividends Paid	$	0.13	$	0.12	$	0.49		$	0.46
Diluted Earnings Per Common Share										Diluted Earnings Per Common Share	$	0.97	$	0.86	$	2.45	$	2.85
Cash Dividends Declared										Cash Dividends Declared	$	0.20	$	0.20	$	0.60	$	0.59

The accompanying notes are an integral part of these unaudited consolidated financial statements.



~~MID PENN BANCORP, INC.~~

Table of Contents

MID PENN BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(Dollars in thousands)

Three Months Ended September 30,

2017

2016

Net income

$
2,249

$
1,901

Other comprehensive loss:

Unrealized losses arising during the period on available-for-sale

securities, net of income taxes of ($1) and ($349), respectively

(1
)

(677
)

Reclassification adjustment for net gain on sales of available-for-sale securities

included in net income, net of income taxes of ($7) and ($68), respectively (a)

(15
)

(132
)

Change in defined benefit plans, net of income taxes of ($2) and ($6), respectively (b)

(3
)

(11
)

Total other comprehensive loss

(19
)

(820
)

Total comprehensive income

$
2,230

$
1,081

(Dollars in thousands)

Nine Months Ended September 30,

2017

2016

Net income

$
6,588

$
5,728

Other comprehensive income (loss):

Unrealized gains arising during the period on available-for-sale

securities, net of income taxes of $956 and $795, respectively

1,858

1,543

Reclassification adjustment for net gain on sales of available-for-sale securities

included in net income, net of income taxes of ($14) and ($141), respectively (a)

(28
)

(272
)

Change in defined benefit plans, net of income taxes of ($2) and ($66), respectively (b)

(7
)

(127
)

Total other comprehensive income

1,823

1,144

Total comprehensive income

$
8,411

$
6,872

~~(a)~~

~~Amounts are included in net gain on sales of investment securities on the Consolidated Statements of Income as a separate element within total noninterest income.~~

~~(b)~~

Amounts are included in the computation of net periodic benefit cost and are included in salaries and employee benefits on the Consolidated Statements of Income as a separate element within total noninterest expense.


(Dollars in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Net income	$	15,481	$	9,787	$	39,087	$	28,712

Other comprehensive (loss) income:

Unrealized (loss) income arising during the period on available-for-sale securities, net of income taxes of ($2,492), $8, ($5,162) and $13, respectively	(9,376)		29		(19,418)		51

Reclassification adjustment for net gain on sales of available-for-sale securities included in net income, net of income taxes of $0, ($17), $0,and ($17) respectively. (1)	—		(62)		—		(62)

Change in defined benefit plans, net of income taxes of $4, ($10), $37 and $70, respectively (2)	11		(36)		138		262

Reclassification adjustment for settlement losses and other activity related to benefit plans, net of income taxes of ($2), ($1), ($2) and ($12), respectively (3)	(6)		(3)		(8)		(47)

Total other comprehensive (loss) income	(9,371)		(72)		(19,288)		204

Total comprehensive income	$	6,110	$	9,715	$	19,799	$	28,916

(1)Amounts are included in net gain on sales of investment securities on the consolidated statements of income as a separate element within total noninterest income.

(2)The change in defined benefit plans consists primarily of unrecognized actuarial gains (losses) on defined benefit plans during the period.

(3)The reclassification adjustment for benefit plans includes settlement gains, amortization of prior service costs, and amortization of net gain or loss. Amounts are included in other income on the consolidated statements of income within total noninterest income. See "Note 12 – Defined Benefit Plans," for additional information.

The accompanying notes are an integral part of these unaudited consolidated financial statements.


~~MID PENN BANCORP, INC.~~

Table of Contents

MID PENN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

~~For the Nine Months Ended September 30, 2017 and 2016~~

(Dollars in thousands)

Accumulated

Additional

Other

Total

Common

Paid-in

Retained

Comprehensive

Shareholders'

Stock

Capital

Earnings

(Loss) Income

Equity

Balance, January 1, 2017

$
4,233

$
40,688

$
28,399

$
(2,853
)

$
70,467

Net income

—

—

6,588

—

6,588

Total other comprehensive income, net of taxes

—

—

—

1,823

1,823

Employee Stock Purchase Plan (2,747 shares)

3

73

—

—

76

Director Stock Purchase Plan (714 shares)

1

20

—

—

21

Common stock dividends

—

—

(1,653
)

—

(1,653
)
Restricted stock activity (3,996 shares)

4

65

—

—

69

Balance, September 30, 2017

$
4,241

$
40,846

$
33,334

$
(1,030
)

$
77,391

Balance, January 1, 2016

$
4,227

$
40,559

$
23,470

$
1,812

$
70,068

Net income

—

—

5,728

—

5,728

Total other comprehensive income, net of taxes

—

—

—

1,144

1,144

Employee Stock Purchase Plan (3,334 shares)

3

53

—

—

56

Common stock dividends

—

—

(1,945
)

—

(1,945
)
Restricted stock activity (2,115 shares)

2

32

—

—

34

Balance, September 30, 2016

$
4,232

$
40,644

$
27,253

$
2,956

$
75,085


(Dollars in thousands)
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Shareholders' Equity
Balance, January 1, 2022	$	16,056	$	384,742	$	91,043	$	158	$	(1,923)	$	490,076
Net income	—		—		11,354		—		—		11,354
Total other comprehensive loss, net of taxes	—		—		—		(5,104)		—		(5,104)
Common stock cash dividends declared, $0.20 per share	—		—		(3,191)		—		—		(3,191)
Riverview restricted stock adjustment	—		776		—		—		—		776
Employee Stock Purchase Plan (1,710 shares)	2		44		—		—		—		46
Director Stock Purchase Plan (1,377 shares)	1		35		—		—		—		36
Restricted stock activity	—		168		—		—		—		168
Balance, March 31, 2022	$	16,059	$	385,765	$	99,206	$	(4,946)	$	(1,923)	$	494,161

Net income	—		—		12,252		—		—		12,252
Total other comprehensive loss, net of taxes	—		—		—		(4,813)		—		(4,813)
Common stock cash dividends declared, $0.20 per share	—		—		(3,193)		—		—		(3,193)
Repurchased stock (109,891 shares)	—		—		—		—		(2,957)		(2,957)
Employee Stock Purchase Plan (1,899 shares)	2		49		—		—		—		51
Director Stock Purchase Plan (1,589 shares)	2		41		—		—		—		43
Restricted stock activity (17,200 shares)	18		273		—		—		—		291
Balance, June 30, 2022	$	16,081	$	386,128	$	108,265	$	(9,759)	$	(4,880)	$	495,835

Net income	—		—		15,481		—		—		15,481
Total other comprehensive loss, net of taxes	—		—		—		(9,371)		—		(9,371)
Common stock cash dividends declared, $0.20 per share	—		—		(3,174)		—		—		(3,174)

Employee Stock Purchase Plan (1,486 shares)	1		53		—		—		—		54
Director Stock Purchase Plan (1,927 shares)	2		41		—		—		—		43
Restricted stock activity (7,227 shares)	7		230		—		—		—		237
Balance, September 30, 2022	$	16,091	$	386,452	$	120,572	$	(19,130)	$	(4,880)	$	499,105

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MID PENN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED) (CONTINUED)


(Dollars in thousands)
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Shareholders Equity
Balance, January 1, 2021	$	8,512	$	178,853	$	70,175	$	(57)	$	(1,795)	$	255,688
Net income	—		—		9,312		—		—		9,312
Total other comprehensive income, net of taxes	—		—		—		558		—		558
Common stock cash dividends declared, $0.19 per share	—		—		(1,599)		—		—		(1,599)
Repurchased stock (5,800 shares)	—		—		—		—		(128)		(128)
Employee Stock Purchase Plan (1,459 shares)	2		38		—		—		—		40
Director Stock Purchase Plan (1,253 shares)	1		32		—		—		—		33
Restricted stock activity	—		132		—		—		—		132
Balance, March 31, 2021	$	8,515	$	179,055	$	77,888	$	501	$	(1,923)	$	264,036

Net income	—		—		9,613		—		—		9,613
Total other comprehensive loss, net of taxes	—		—		—		(282)		—		(282)
Common stock cash dividends declared, $0.20 per share	—		—		(2,281)		—		—		(2,281)
Common shares issued through follow-on public offering (2,990,000 shares), net of underwriting discounts and offering expenses	2,990		67,248		—		—		—		70,238
Employee Stock Purchase Plan (1,388 shares)	1		37		—		—		—		38
Director Stock Purchase Plan (1,229 shares)	1		33		—		—		—		34
Restricted stock activity	—		173		—		—		—		173
Balance, June 30, 2021	$	11,507	$	246,546	$	85,220	$	219	$	(1,923)	$	341,569

Net income	—		—		9,787		—		—		9,787
Total other comprehensive loss, net of taxes	—		—		—		(72)		—		(72)
Common stock cash dividends declared, $0.20 per share	—		—		(2,285)		—		—		(2,285)
Employee Stock Purchase Plan (1,784 shares)	2		47		—		—		—		49
Director Stock Purchase Plan (1,225 shares)	1		32		—		—		—		33
Restricted stock activity (21,833 shares)	22		205		—		—		—		227
Balance, September 30, 2021	$	11,532	$	246,830	$	92,722	$	147	$	(1,923)	$	349,308

The accompanying notes are an integral part of these unaudited consolidated financial statements.

~~MID PENN BANCORP, INC.~~

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MID PENN BANCORP, INC.

CONSOLIDATED ~~STATEMENTS~~STATEMENTS OF CASH FLOWS (UNAUDITED)


(Dollars in thousands)	Nine Months Ended September 30,						(Dollars in thousands)	Nine Months Ended September 30,
		2017			2016			2022		2021
Operating Activities:							Operating Activities:
Net Income	$	6,588		$	5,728		Net Income	$	39,087	$	28,712
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses		225			1,320		Provision for loan and lease losses	3,775		2,575
Depreciation		1,075			1,238		Depreciation	3,056		2,463
Amortization of intangibles		78			103		Amortization of intangibles	1,516		823
Net (accretion) amortization of security discounts/premiums		(770	)		8,429
Net amortization of security discounts/premiums							Net amortization of security discounts/premiums	530		471
Noncash operating lease expense							Noncash operating lease expense	1,255		1,279
Amortization of finance lease right of use asset							Amortization of finance lease right of use asset	135		135
Gain on sales of investment securities		(42	)		(413	)	Gain on sales of investment securities	—		(79)
Earnings on cash surrender value of life insurance		(196	)		(200	)	Earnings on cash surrender value of life insurance	(758)		(223)
Mortgage loans originated for sale		(33,500	)		(58,766	)	Mortgage loans originated for sale	(116,966)		(257,133)
Proceeds from sales of mortgage loans originated for sale		34,327			59,464		Proceeds from sales of mortgage loans originated for sale	123,853		267,867
Gain on sale of mortgage loans		(646	)		(698	)	Gain on sale of mortgage loans	(1,370)		(8,382)
SBA loans originated for sale		(8,902	)		(4,436	)	SBA loans originated for sale	(5,310)		(5,923)
Proceeds from sales of SBA loans originated for sale		9,604			4,790		Proceeds from sales of SBA loans originated for sale	5,571		6,483
Gain on sale of SBA loans		(703	)		(354	)	Gain on sale of SBA loans	(262)		(560)
Gain on disposal of property, plant, and equipment		(10	)		—
Loss on sale or write-down of foreclosed assets		88			158
Gain on disposal or write-down of property, plant, and equipment							Gain on disposal or write-down of property, plant, and equipment	(97)		(52)
Gain on sale or write-down of foreclosed assets							Gain on sale or write-down of foreclosed assets	(88)		(26)
Gain on sale of bank premises and equipment held for sale							Gain on sale of bank premises and equipment held for sale	(114)		—
Write-off of bank premises and equipment held for sale							Write-off of bank premises and equipment held for sale	705		—
Accretion of subordinated debt							Accretion of subordinated debt	(417)		—
Stock compensation expense		69			34		Stock compensation expense	696		532
Deferred income tax expense (benefit)		1,016			(37	)
Increase in accrued interest receivable		(231	)		(219	)
Deferred income tax benefit							Deferred income tax benefit	(23)		(295)
(Increase) decrease in accrued interest receivable							(Increase) decrease in accrued interest receivable	(4,533)		2,963
(Increase) decrease in other assets		(1,311	)		483		(Increase) decrease in other assets	(712)		1,386
Increase in accrued interest payable		425			358
Increase in other liabilities		2,288			2,766
Increase (decrease) in accrued interest payable							Increase (decrease) in accrued interest payable	50		(106)
Net change in operating lease liability							Net change in operating lease liability	(1,654)		(1,314)
Decrease in other liabilities							Decrease in other liabilities	(6,321)		(40)
Net Cash Provided By Operating Activities		9,472			19,748		Net Cash Provided By Operating Activities	41,604		41,556

Investing Activities:							Investing Activities:
Net decrease in interest-bearing time deposits with other financial institutions		—			4,317
Proceeds from the sale of available-for-sale securities		52,314			14,983		Proceeds from the sale of available-for-sale securities	—		5,178
Proceeds from the maturity or call of available-for-sale securities		7,046			49,635		Proceeds from the maturity or call of available-for-sale securities	9,910		2,500
Purchases of available-for-sale securities		(15,196	)		(108,431	)	Purchases of available-for-sale securities	(213,974)		(6,893)
Proceeds from the maturity or call of held-to-maturity securities							Proceeds from the maturity or call of held-to-maturity securities	12,401		40,014
Purchases of held-to-maturity securities		(86,092	)		—		Purchases of held-to-maturity securities	(85,664)		(64,972)
(Purchases) redemptions of restricted investment in bank stock		(1,292	)		1,557
Net increase in loans and leases		(63,400	)		(52,517	)
Proceeds from the sale of bank premises and equipment held for sale		2,201			—
Reduction (purchases) of restricted investment in bank stock							Reduction (purchases) of restricted investment in bank stock	4,539		(312)
Net (increase) decrease in loans and leases							Net (increase) decrease in loans and leases	(218,061)		11,835
Purchases of bank premises and equipment		(4,558	)		(570	)	Purchases of bank premises and equipment	(3,734)		(3,149)
Proceeds from the sale of bank premises and equipment							Proceeds from the sale of bank premises and equipment	1,912		62
Proceeds from the sale of foreclosed assets		136			744		Proceeds from the sale of foreclosed assets	148		202
Net Cash Used In Investing Activities		(108,841	)		(90,282	)	Net Cash Used In Investing Activities	(492,523)		(15,535)

Financing Activities:							Financing Activities:
Net increase in deposits		91,302			161,174
Net increase (decrease) in short-term borrowings		20,000			(31,596	)
Net (decrease) increase in deposits							Net (decrease) increase in deposits	(272,420)		487,301
Net increase in short-term borrowings							Net increase in short-term borrowings	—		(125,617)
Common stock dividends paid		(1,653	)		(1,945	)	Common stock dividends paid	(9,558)		(6,586)
Employee Stock Purchase Plan		76			56
Director Stock Purchase Plan		21			—
Proceeds from Employee Stock Purchase Plan stock issuance							Proceeds from Employee Stock Purchase Plan stock issuance	151		127
Proceeds from Director Stock Purchase Plan stock issuance							Proceeds from Director Stock Purchase Plan stock issuance	122		100
Proceeds from follow-on common stock public offering							Proceeds from follow-on common stock public offering	—		70,238
Treasury stock purchased							Treasury stock purchased	(2,957)		(128)
Riverview restricted stock adjustment							Riverview restricted stock adjustment	776		—
Net change in finance lease liability							Net change in finance lease liability	(67)		(65)
Long-term debt repayment		(166	)		(26,670	)	Long-term debt repayment	(76,702)		—
Net Cash Provided By Financing Activities		109,580			101,019
Subordinated debt redemption							Subordinated debt redemption	(7,500)		(173)
Net Cash (Used In) Provided By Financing Activities							Net Cash (Used In) Provided By Financing Activities	(368,155)		425,197

Net increase in cash and cash equivalents		10,211			30,485
Net (decrease) increase in cash and cash equivalents							Net (decrease) increase in cash and cash equivalents	(819,074)		451,218
Cash and cash equivalents, beginning of period		45,973			13,284		Cash and cash equivalents, beginning of period	913,752		303,724
Cash and cash equivalents, end of period	$	56,184		$	43,769		Cash and cash equivalents, end of period	$	94,678	$	754,942

~~MID PENN BANCORP, INC.~~

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MID PENN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ~~(continued)~~

(CONTINUED)


(Dollars in thousands)	Nine Months Ended September 30,				(Dollars in thousands)	Nine Months Ended September 30,
		2017		2016		2022		2021
Supplemental Disclosures of Cash Flow Information:					Supplemental Disclosures of Cash Flow Information:
Interest paid	$	4,062	$	3,607
Income taxes paid	$	3,165	$	990
Cash paid for interest					Cash paid for interest	$	9,552	$	11,547
Cash paid for income taxes					Cash paid for income taxes	3,500		8,835

Supplemental Noncash Disclosures:					Supplemental Noncash Disclosures:
Loan transfers to foreclosed assets held for sale	$	33	$	218
Recognition of operating lease right of use assets					Recognition of operating lease right of use assets	$	552	$	1,064
Recognition of operating lease liabilities					Recognition of operating lease liabilities	552		1,064
Obsolete Riverview asset writeoff					Obsolete Riverview asset writeoff	705		—
Loans transferred to foreclosed assets held for sale					Loans transferred to foreclosed assets held for sale	109		53

The accompanying notes are an integral part of these unaudited consolidated financial statements.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

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~~(1)~~

B~~asis of Presentation~~

MID PENN BANCORP, INC.

~~The~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 - Basis of Presentation

For all periods presented, the accompanying consolidated financial statements include the accounts of Mid Penn Bancorp, Inc. ~~(the “Company”~~(“Mid Penn” or the “Corporation”) ~~and~~, its wholly-owned ~~subsidiaries,~~subsidiary, Mid Penn Bank (the “Bank”), and three nonbank subsidiaries which were established during 2020, including MPB Financial Services, LLC, under which two additional nonbank subsidiaries have been established: (i) MPB Wealth Management, LLC, created to expand the ~~Bank’s former wholly-owned subsidiary,~~wealth management services and capabilities of the Corporation, and (ii) MPB Risk Services, LLC, created to fulfill the insurance needs of both existing and potential customers of the Corporation. As of September 30, 2022, the accounts and activities of these nonbank subsidiaries established in 2020 were not material to warrant separate disclosure or segment reporting. As a result, Mid Penn ~~Insurance Services, LLC (collectively, “Mid Penn”).~~has only one reportable segment for financial reporting purposes. All material intercompany accounts and transactions have been eliminated in consolidation.

~~Effective March 1, 2016,~~

On November 30, 2021, Mid Penn ~~Insurance Services, LLC, an immaterial subsidiary~~completed its acquisition of ~~the Bank, was liquidated.~~

~~Certain information and disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America~~Riverview Financial Corporation (“~~GAAP”~~Riverview”) ~~have been condensed or omitted~~, pursuant to the ~~rules~~previously announced Agreement and ~~regulations~~Plan of ~~the Securities~~Merger dated as of June 30, 2021. On November 30, 2021, Riverview was merged with and ~~Exchange Commission (“SEC”).~~into Mid Penn, ~~believes~~with Mid Penn being the ~~information presented is not misleading~~surviving corporation. See "Note 3 - Acquisition of Riverview Financial Corporation," as well as the Company’s Current Report on Form 8-K filed on December 1, 2021, for additional information.

The comparability of Mid Penn’s results of operations for the period ended September 30, 2022, compared to the periods ended September 30, 2021 and the ~~disclosures are adequate.~~year ended December 31, 2021, in general, has been materially impacted by this acquisition, as further described in Note 3. For comparative purposes, the September 30, ~~2016~~2021 and December 31, ~~2016~~2021 balances have been reclassified, when ~~and if~~ necessary, to conform to the ~~2017~~2022 presentation. Such reclassifications had no impact on net ~~income. The results~~income or total shareholders’ equity. In the opinion of ~~operations~~management, all adjustments necessary for ~~interim~~fair presentation of the periods presented have been reflected in the accompanying consolidated financial statements. All such adjustments are ~~not necessarily indicative~~ of ~~operating results expected for the full year.~~a normal, recurring nature. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the ~~Company’s~~Corporation’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

On March 29, 2017, Mid Penn announced the signing of a definitive merger agreement with The Scottdale Bank and Trust Company (“Scottdale”). Under the merger agreement, Scottdale will merge with and into Mid Penn Bank, with Mid Penn Bank as the surviving bank. Before the merger is completed, the shareholders of Mid Penn and Scottdale must approve and adopt the merger agreement, and customary regulatory approvals must be received. Refer to Note 12, ~~Agreement and Plan of Merger, as well as Form 8-K filed on March 30, 2017, for more information.~~

2021.

Mid Penn has evaluated events and transactions occurring subsequent to the balance sheet date of September 30, ~~2017,~~2022, for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the issuance date of these consolidated financial ~~statements were issued.~~

statements.

~~(2)~~

~~Investment Securities~~

~~Securities~~

Note 2 - Summary of Significant Accounting Policies

The significant accounting policies used in preparation of the Consolidated Financial Statements are disclosed in the Corporation’s 2021 Annual Report on Form 10-K. Those significant accounting policies are unchanged at September 30, 2022.

Accounting Standards Pending Adoption

ASU 2016-13: The FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as further amended.

The ASU requires credit losses on most financial assets measured at amortized cost and certain other instruments to be ~~held for indefinite periods,~~measured using an expected credit loss model (referred to as the current expected credit loss ("CECL") model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not ~~intended~~expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument.

The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities. The allowance for purchased financial assets with a more-than insignificant amount of credit deterioration since origination ("PCD assets") should be determined in a similar manner to ~~be held~~other financial assets measured on an amortized cost basis. However, upon initial recognition, the allowance is added to ~~maturity,~~the purchase price ("gross up approach") to determine the initial amortized cost basis. The subsequent accounting for PCD assets is the same expected loss model described above.

Further, the ASU made certain targeted amendments to the existing impairment model for available-for-sale debt securities. For an AFS debt security for which there is neither the intent nor a more-likely-than-not requirement to sell, an entity will record credit losses as an allowance rather than a write-down of the amortized cost basis. Certain incremental disclosures are ~~classified~~required.

Subsequently, the FASB issued ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11, and ASU 2020-02 to clarify, improve, or defer the adoption of ASU 2016-13.

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MID PENN BANCORP, INC.

In October 2019, the FASB issued ASU 2019-10 which deferred the implementation date of ASU 2016-13 for smaller reporting companies (SRCs) until January 1, 2023. Mid Penn qualified as ~~available-for-sale and carried at fair value. Securities held for indefinite periods include securities that management~~an SRC as of the most recent measurement date of September 30, 2019; therefore, Mid Penn has chosen to delay the adoption of ASU 2016-13 until January 1, 2023.

Mid Penn intends to ~~use as part~~adopt this ASU effective January 1, 2023. Mid Penn expects that it is probable that total credit loss reserves will increase at the adoption date and that the magnitude of the increase will depend on the composition, characteristics and quality of its ~~asset~~loan and ~~liability management strategy~~lease portfolio and the allowance for debt securities, as well as economic conditions and forecasts at the time of adoption. Mid Penn is conducting parallel runs of its new processes and controls and had begun its model validation process. Mid Penn will continue to make refinements to its credit loss model in advance of the January 1, 2023 adoption date.

ASU No. 2022-02: The FASB issued ASU 2022-02,Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.

This ASU eliminates the TDR recognition and measurement guidance and, instead, requires that ~~may be sold in response to liquidity needs, changes in interest rates, resultant prepayment risk, pledging~~an entity evaluate (consistent with the accounting for other loan modifications) whether a modification represents a new loan or a continuation of an existing loan. In addition, this ASU enhances existing disclosure requirements and ~~other factors~~introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

For public business entities, this ASU requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 326-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination.

For entities that have adopted the amendments in update 2016-13, the amendments in this update are effective ~~portfolio management. Securities~~for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For entities that have not yet adopted the amendments in update 2016-13, the effective dates for the amendments in this update are the same as the effective dates in Update 2016-13. The Corporation has not yet adopted this accounting standard as ASU 2016-13 has not been adopted. Management continues to beevaluate the impact of its future adoption of this guidance on the Company’s financial statements.

Note 3 - Acquisition of Riverview Financial Corporation

On November 30, 2021, Mid Penn completed its acquisition of Riverview ("Riverview Acquisition") through the merger of Riverview with and into Mid Penn. In connection with this acquisition, Riverview Bank, Riverview’s wholly-owned bank subsidiary, merged with and into Mid Penn Bank.

Pursuant to the merger agreement, shareholders of Riverview common stock received, for each share of Riverview common stock held ~~to maturity are carried~~ at ~~amortized cost.~~

~~Realized gains and losses on dispositions are~~the effective time of the merger, 0.4833 shares of Mid Penn common stock as merger consideration with an acquisition date fair value of $142.2 million based on the closing stock price of Mid Penn’s common stock on November 30, 2021 of $31.46. This exchange ratio did not change as a result of changes in the Mid Penn share price. Additionally, outstanding options at the time of the merger were converted into the right to receive an amount in cash equal to the product obtained by multiplying the aggregate number of shares of Riverview common stock that were issuable upon exercise of each option outstanding, and the closing sale price of Mid Penn’s common stock on the fifth (5th) business day prior to the merger closing date multiplied by the exchange ratio, less the per share exercise price of each option outstanding, without interest. There were 172,964 options outstanding to purchase Riverview common stock and the closing price of Mid Penn common stock was at $30.76 per share on the fifth business day prior to the merger closing date. Additionally, 2,500 shares of restricted stock were paid out in cash, resulting in $776 thousand of cash consideration relating to stock awards. Including $16 thousand of cash paid in lieu of fractional shares, the total fair value of consideration paid was $143.0 million.

The assets and liabilities of Riverview were recorded on the consolidated balance sheets of Mid Penn at their estimated fair value as of November 30, 2021, and their results of operations have been included in the consolidated income statement of the Corporation since such date. Riverview has been fully integrated into Mid Penn; therefore, the amount of revenue and earnings of Riverview included in the consolidated income statement since the acquisition date is impracticable to provide.

The acquisition of Riverview resulted in the recognition and recording of intangible assets including $51.0 million of goodwill, a core deposit intangible of $4.1 million, and a customer list intangible of $2.2 million. The core deposit intangible and customer list intangible will be amortized over a ten-year period using a sum of the years’ digits basis. The goodwill will not be amortized, but will be measured annually for impairment, or more frequently if circumstances require.

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MID PENN BANCORP, INC.

The allocation of the purchase price is as follows:


(Dollars in thousands)

Assets acquired:
Cash and cash equivalents	$	316,079
Investment securities	226
Restricted stock	2,209
Loans	837,505
Goodwill	51,031
Core deposit intangible	4,096
Customer list intangible	2,160
Bank owned life insurance	32,120
Premises and equipment	11,819
Deferred income taxes	7,116
Accrued interest receivable	1,919
Other assets	6,641
Total assets acquired	1,272,921
Liabilities assumed:
Deposits:
Noninterest-bearing demand	182,291
Interest-bearing demand	371,283
Money Market	152,365
Savings	176,294
Time	199,414
Long-term debt	6,500
Subordinated debt and trust preferred securities	36,308
Accrued interest payable	439
Other liabilities	5,043
Total liabilities assumed	1,129,937

Consideration paid	$	142,984

Cash paid	$	792
Fair value of common stock issued	142,192

Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, allows for adjustments to goodwill up to one year after the merger date for information that becomes available during this post-merger period that reflects circumstances at the date of merger. During the third quarter of 2022 the Company increased its goodwill $36 thousand to account for changes to the deferred income tax asset and current income tax receivable upon the completion of the Riverview final tax return.

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MID PENN BANCORP, INC.

The following table summarizes the estimated fair value of the assets acquired and liabilities and equity assumed in the Riverview Acquisition that management believes are final:


(Dollars in thousands)

Total purchase price (consideration paid)	$	142,984

Net assets acquired:
Cash and cash equivalents	316,079
Investment securities	226
Restricted stock	2,209
Loans	837,505
Core deposit intangible	4,096
Customer list intangible	2,160
Bank owned life insurance	32,120
Premises and equipment	11,819
Deferred income taxes	7,116
Accrued interest receivable	1,919
Other assets	6,641
Deposits:
Noninterest-bearing demand	(182,291)
Interest-bearing demand	(371,283)
Money Market	(152,365)
Savings	(176,294)
Time	(199,414)
Long-term debt	(6,500)
Subordinated debt and trust preferred securities	(36,308)
Accrued interest payable	(439)
Other liabilities	(5,043)
Net assets acquired	91,953
Goodwill	$	51,031

In general, factors contributing to goodwill recognized as a result of the Riverview Acquisition include expected cost savings from combined operations, opportunities to expand into several new markets, and growth and profitability potential from the repositioning of short-term investments into higher-yielding loans. The goodwill acquired as a result of the Riverview Acquisition is not tax deductible.

The fair value of the financial assets acquired included loans receivable with a net ~~proceeds and~~amortized cost basis of $837.5 million. The table below illustrates the fair value adjustments made to the amortized cost basis in order to present a fair value of the loans acquired.


(Dollars in thousands)

Gross amortized cost basis at November 30, 2021	$	850,920
Market rate adjustment	529
Credit fair value adjustment on pools of homogeneous loans	(13,117)
Credit fair value adjustment on impaired loans	(827)
Fair value of purchased loans at November 30, 2021	$	837,505

The market rate adjustment represents the movement in market interest rates, irrespective of credit adjustments, compared to the contractual rates of the acquired loans. The credit adjustment made on pools of homogeneous loans represents the changes in credit quality of the underlying borrowers from loan inception to the acquisition date. The credit adjustment on impaired

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MID PENN BANCORP, INC.

loans is derived in accordance with ASC 310-30-30 and represents the portion of the loan balance that has been deemed uncollectible based on our expectations of future cash flows for each respective loan.

The information about the acquired Riverview impaired loan portfolio as of November 30, 2021 is as follows:


(Dollars in thousands)

Contractually required principal and interest at acquisition	$	5,591
Contractual cash flows not expected to be collected (nonaccretable discount)	(1,739)
Expected cash flows at acquisition	3,852
Interest component of expected cash flows (accretable discount)	(541)
Fair value of acquired loans	$	3,311

The following table presents pro forma information as if the merger between Mid Penn and Riverview had been completed on January 1, 2021. The pro forma information does not necessarily reflect the results of operations that would have occurred had Mid Penn merged with Riverview at the beginning of 2021. The pro forma financial information does not include the impact of possible business model changes, nor does it consider any potential impacts of current market conditions or revenues, expense efficiencies, or other factors.


(Dollars in thousands, except per share data)
	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Net interest income after loan loss provision	$	36,894	$	108,307
Noninterest income	7,597		24,179
Noninterest expense	31,391		92,099
Net income	13,100		40,387
Net income per common share	0.62		2.08

Note 4 - Investment Securities

The majority of the investment portfolio is comprised of securities ~~sold, using the specific identification method. Unrealized~~issued by U.S. Treasury and government agencies, mortgage-backed U.S. government agencies, and state and political subdivision obligations. The amortized cost, fair value, and unrealized gains and losses on investment securities at September 30, 2022 and December 31, 2021 are as follows:


(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
September 30, 2022
Available-for-sale debt securities:
U.S. Treasury and U.S. government agencies	$	39,511	$	—	$	1,927	$	37,584
Mortgage-backed U.S. government agencies	187,757		—		19,553		168,204
State and political subdivision obligations	4,360		—		986		3,374
Corporate debt securities	35,468		—		2,435		33,033
Total available-for-sale debt securities	267,096		—		24,901		242,195
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	$	245,638	$	3	$	36,102	$	209,539
Mortgage-backed U.S. government agencies	52,788		—		7,325		45,463
State and political subdivision obligations	87,724		—		10,951		76,773
Corporate debt securities	15,992		—		1,142		14,850
Total held-to-maturity debt securities	402,142		3		55,520		346,625
Total	$	669,238	$	3	$	80,421	$	588,820

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MID PENN BANCORP, INC.


(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
December 31, 2021
Available-for-sale debt securities:
Mortgage-backed U.S. government agencies	$	49,760	$	3	$	283	$	49,480
State and political subdivision obligations	3,899		26		11		3,914
Corporate debt securities	9,525		—		57		9,468
Total available-for-sale debt securities	63,184		29		351		62,862
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	$	178,136	$	26	$	1,165	$	176,997
Mortgage-backed U.S. government agencies	61,157		440		272		61,325
State and political subdivision obligations	75,958		2,305		27		78,236
Corporate debt securities	14,006		133		71		14,068
Total held-to-maturity debt securities	329,257		2,904		1,535		330,626
Total	$	392,441	$	2,933	$	1,886	$	393,488

Estimated fair values of debt securities are based on ~~the difference~~quoted market prices, where applicable. If quoted market prices are not available, fair values are based on quoted market prices of instruments of a similar type, credit quality and structure, adjusted for differences between the ~~amortized cost~~quoted instruments and the instruments being valued. See "Note 8 - Fair Value Measurement," for additional information.

Investment securities having a fair value of $392.3 million at September 30, 2022 and $244.8 million at December 31, 2021 were pledged to secure public deposits, some Trust department deposit accounts, and certain other borrowings. In accordance with legal provisions for alternatives other than pledging of investments, Mid Penn also obtains letters of credit from the Federal Home Loan Bank of Pittsburgh ("FHLB") to secure certain public deposits. These FHLB letter of credit commitments totaled $265.3 million as of September 30, 2022 and $450.9 million as of December 31, 2021.

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MID PENN BANCORP, INC.

The following tables present gross unrealized losses and fair value of ~~each~~debt security asinvestments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2022 and December 31, 2021.


(Dollars in thousands)	Less Than 12 Months					12 Months or More					Total
September 30, 2022	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
Available-for-sale debt securities:
U.S. Treasury and U.S. government agencies	—	$	—	$	—	20	$	37,584	$	1,927	20	$	37,584	$	1,927
Mortgage-backed U.S. government agencies	—	—		—		91	164,216		19,553		91	164,216		19,553
State and political subdivision obligations	—	—		—		8	3,374		986		8	3,374		986
Corporate debt securities	3	2,523		477		14	27,260		1,958		17	29,783		2,435
Total temporarily impaired available-for-sale debt securities	3	$	2,523	$	477	133	$	232,434	$	24,424	136	$	234,957	$	24,901

Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	25	$	30,523	$	7,405	119	$	177,014	$	28,697	144	$	207,537	$	36,102
Mortgage-backed U.S. government agencies	1	316		43		63	45,147		7,282		64	45,463		7,325
State and political subdivision obligations	12	2,338		535		194	74,435		10,416		206	76,773		10,951
Corporate debt securities	5	5,156		844		3	4,753		298		8	9,909		1,142
Total temporarily impaired held-to-maturity debt securities	43	38,333		8,827		379	301,349		46,693		422	339,682		55,520
Total	46	$	40,856	$	9,304	512	$	533,783	$	71,117	558	$	574,639	$	80,421


(Dollars in thousands)	Less Than 12 Months					12 Months or More					Total
December 31, 2021	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
Available-for-sale securities:
U.S. government agencies	24	$	45,476	$	283	—	$	—	$	—	24	$	45,476	$	283
State and political subdivision obligations	2	1,168		11		—	—		—		2	1,168		11
Corporate debt securities	4	4,943		57		—	—		—		4	4,943		57
Total temporarily impaired available-for-sale securities	30	$	51,587	$	351	—	$	—	$	—	30	$	51,587	$	351

Held-to-maturity securities:
U.S. Treasury and U.S. government agencies	91	$	149,425	$	1,165	—	$	—	$	—	91	$	149,425	$	1,165
Mortgage-backed U.S. government agencies	24	39,995		272		—	—		—		24	39,995		272
State and political subdivision obligations	17	5,302		25		1	255		2		18	5,557		27
Corporate debt securities	6	6,928		71		—	—		—		6	6,928		71
Total temporarily impaired held to maturity securities	138	201,650		1,533		1	255		2		139	201,905		1,535
Total	168	$	253,237	$	1,884	1	$	255	$	2	169	$	253,492	$	1,886

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MID PENN BANCORP, INC.

which the fair value of the respective reporting date. Unrealized gains and losses are credited or charged to other comprehensive income, whereas realized gains and losses flow through Mid Penn’s consolidated statements of income forsecurity has been less than amortized cost, as well as the ~~respective period.~~

~~ASC Topic 320,~~ ~~Investments – Debt and Equity Securities~~, clarifies the interaction of the factors that should be considered when determining whether a debt security is other-than-temporarily impaired. For debt securities, management must assess, in addition to the creditoverall financial condition of the ~~underlying issuer,~~issuer. In addition, for debt securities, Mid Penn considers (i) whether ~~(a) it~~management has the intent to sell the security, ~~and (b)~~(ii) whether it is more likely than not that itmanagement will be required to sell the security prior to its anticipated ~~recovery. These steps are done before assessing~~recovery, and (iii) whether ~~the entity will~~management expects to recover the entire amortized cost ~~basis of the investment.~~

In instances when a determination is made that other-than-temporary impairment exists but the investor does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt security prior to its anticipated recovery, this guidance changes the presentation and amount of the other-than-temporary impairment recognized in the income statement. The other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income.

basis.

Mid Penn had no securities considered by management to be other-than-temporarily impaired as of September 30, ~~2017,~~2022, December 31, ~~2016,~~2021, or September 30, ~~2016,~~2021, and did not record any securities impairment charges in the respective periods ended on these dates. Mid Penn does not consider the securities with unrealized losses on the respective dates to be other-than-temporarily impaired as the unrealized losses were deemed to ~~relate to~~be temporary changes in value related to market movements in interest ~~rates,~~yields at various periods similar to the maturity dates of holdings in the investment portfolio, and not reflective of an erosion of credit quality.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~The amortized cost, fair value, and unrealized gains and losses on investment securities at September 30, 2017 and December 31, 2016 are as follows:~~

(Dollars in thousands)

Amortized

Unrealized

Unrealized

Fair

Cost

Gains

Losses

Value

September 30, 2017

Available-for-sale securities:

U.S. Treasury and U.S. government agencies

$
40,133

$
-

$
880

$
39,253

Mortgage-backed U.S. government agencies

27,370

11

335

27,046

State and political subdivision obligations

28,393

35

450

27,978

Corporate debt securities

1,000

5

-

1,005

Equity securities

1,268

2

39

1,231

Total available-for-sale securities

98,164

53

1,704

96,513

Held-to-maturity securities:

U.S. Treasury and U.S. government agencies

10,984

21

7

10,998

Mortgage-backed U.S. government agencies

51,326

96

102

51,320

State and political subdivision obligations

20,315

124

41

20,398

Corporate debt securities

-

-

-

-

Equity securities

-

-

-

-

Total held-to-maturity securities

82,625

241

150

82,716

Total

$
180,789

$
294

$
1,854

$
179,229

(Dollars in thousands)

Amortized

Unrealized

Unrealized

Fair

Cost

Gains

Losses

Value

December 31, 2016

Available-for-sale securities:

U.S. Treasury and U.S. government agencies

$
48,520

$
34

$
1,542

$
47,012

Mortgage-backed U.S. government agencies

26,181

17

579

25,619

State and political subdivision obligations

61,079

91

2,332

58,838

Corporate debt securities

1,100

-

-

1,100

Equity securities

1,168

-

112

1,056

Total available-for-sale securities

$
138,048

$
142

$
4,565

$
133,625

There were no ~~held-to-maturity securities as of December 31, 2016.~~

Estimated fair values of debt securities are based on quoted market prices, where applicable. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments, adjusted for differences between the quoted instruments and the instruments being valued. Please refer to ~~Note (4) – Fair Value Measurement~~ ~~for more information on the fair value of investment securities.~~

~~Investment securities having a fair value of $154,448,000 at September 30, 2017 and $131,469,000 at December 31, 2016, were pledged to secure public deposits and certain other borrowings.~~

~~Gross~~gross realized gains and losses on sales of available-for-sale debt securities for the three and nine months ended September 30, ~~2017~~2022. For the three and ~~2016 are shown in the table below.~~

(Dollars in thousands)
Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Realized gains
$
46

$
203

$
246

$
652

Realized losses

(24
)

(3
)

(204
)

(239
)
Net gains
$
22

$
200

$
42

$
413

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

The following tables present gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position atnine months ended September 30, ~~2017 and December 31, 2016.~~

(Dollars in thousands)

Less Than 12 Months

12 Months or More

Total

Number

Number

Number

of

Fair

Unrealized

of

Fair

Unrealized

of

Fair

Unrealized

September 30, 2017

Securities

Value

Losses

Securities

Value

Losses

Securities

Value

Losses

Available-for-sale securities:

U.S. Treasury and U.S. government agencies

7

$
15,790

$
237

14

$
23,462

$
643

21

$
39,252

$
880

Mortgage-backed U.S. government agencies

11

18,279

141

9

9,718

194

20

27,997

335

State and political subdivision obligations

12

6,855

41

35

16,428

409

47

23,283

450

Equity securities

0

-

-

1

511

39

1

511

39

Total temporarily impaired available-for-sale securities

30

40,924

419

59

50,119

1,285

89

91,043

1,704

Held-to-maturity securities:

U.S. Treasury and U.S. government agencies

2

4,989

7

0

-

-

2

4,989

7

Mortgage-backed U.S. government agencies

11

18,676

102

0

-

-

11

18,676

102

State and political subdivision obligations

20

7,555

41

0

-

-

20

7,555

41

Total temporarily impaired held-to-maturity securities

33

31,220

150

0

-

-

33

31,220

150

Total

63

$
72,144

$
569

59

$
50,119

$
1,285

122

$
122,263

$
1,854

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

(Dollars in thousands)

Less Than 12 Months

12 Months or More

Total

Number

Number

Number

of

Fair

Unrealized

of

Fair

Unrealized

of

Fair

Unrealized

December 31, 2016

Securities

Value

Losses

Securities

Value

Losses

Securities

Value

Losses

Available-for-sale securities:

U.S. Treasury and U.S. government agencies

23

$
43,698

$
1,542

0

$
-

$
-

23

$
43,698

$
1,542

Mortgage-backed U.S. government agencies

18

24,321

579

0

-

-

18

24,321

579

State and political subdivision obligations

108

50,582

2,332

0

-

-

108

50,582

2,332

Equity securities

0

-

-

2

1,056

112

2

1,056

112

Total temporarily impaired available-for-sale securities

149

$
118,601

$
4,453

2

$
1,056

$
112

151

$
119,657

$
4,565

~~There~~2021 there were ~~no held-to-maturity securities as~~realized gains of ~~December 31, 2016.~~

Management evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such additional evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than amortized cost and the financial condition and near term prospects of the issuer. In addition, for debt securities, Mid Penn considers (a) whether management has the intent to sell the security, (b) it is more likely than not that management will be required to sell the security prior to its anticipated recovery, and (c) whether management expects to recover the entire amortized cost basis. For equity securities, management considers the intent and ability to hold securities until recovery of unrealized losses.

The majority of the investment portfolio is comprised of securities issued by U.S. government agencies and state and political subdivision obligations. For the investment securities with an unrealized loss, Mid Penn has concluded, based on its analysis, that the unrealized losses were primarily caused by the movement of interest rates and not due to an erosion of credit quality of the underlying issuers.

At September 30, 2017, the majority of the unrealized losses on available-for-sale securities in an unrealized loss position were attributed to obligations of state and political subdivisions and U.S. Treasury and government agencies, while the majority of the unrealized losses on held-to-maturity securities in an unrealized loss position were attributed to mortgage-backed U.S. government agencies. At December 31, 2016, the majority of the unrealized losses on securities in an unrealized loss position were attributed to state and political subdivision obligations and U.S. Treasury and government agencies.

$79 thousand.

The table below illustrates the maturity distribution of investment securities at amortized cost and fair value as of September 30, ~~2017.~~

2022.


(Dollars in thousands)	Available-for-sale				Held-to-maturity				(Dollars in thousands)	Available-for-sale				Held-to-maturity
	Amortized		Fair		Amortized		Fair
September 30, 2017	Cost		Value		Cost		Value
September 30, 2022									September 30, 2022	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in 1 year or less	$	596	$	596	$	-	$	-	Due in 1 year or less	$	250	$	250	$	—	$	—
Due after 1 year but within 5 years		12,542		12,446		19,332		19,421	Due after 1 year but within 5 years	40,013		38,602		73,579		69,250
Due after 5 years but within 10 years		46,306		45,375		11,967		11,975	Due after 5 years but within 10 years	35,017		32,006		232,023		197,794
Due after 10 years		10,082		9,819		-		-	Due after 10 years	4,059		3,133		43,752		34,118
		69,526		68,236		31,299		31,396		79,339		73,991		349,354		301,162

Mortgage-backed securities		27,370		27,046		51,326		51,320	Mortgage-backed securities	187,757		168,204		52,788		45,463
Equity securities		1,268		1,231		-		-
	$	98,164	$	96,513	$	82,625	$	82,716		$	267,096	$	242,195	$	402,142	$	346,625

~~(3)~~

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MID PENN BANCORP, INC.

Note 5 - Loans and ~~Allowance for Loan and Lease Losses~~

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield (interest income) of the related loans, generally being amortized over the contractual life of the loan. Premiums and discounts on purchased loans are amortized as adjustments to interest income using the effective yield method.

The loan portfolio is segmented into commercial and consumer loans. Commercial loans consist of the following classes: commercial and industrial, commercial real estate, commercial real estate-construction and lease financing. Consumer loans consist of the following classes: residential mortgage loans, home equity loans and other consumer loans.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

For all classes of loans, the accrual of interest generally is discontinued when the contractual payment of principal or interest has become 90 days or more past due, or management has serious doubts about further collectability of principal or interest even though the loan is currently performing. A loan past due 90 days or more may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest is credited to income. Interest received on nonaccrual loans, including impaired loans, is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Nonaccrual loans may be restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally, at least nine consecutive months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments.

~~Commercial and industrial~~

Mid Penn originates commercial and industrial loans. Most of the Bank’s commercial and industrial loans have been extended to finance local and regional businesses and include short-term loans to finance machinery and equipment purchases, inventory, and accounts receivable. Commercial loans also involve the extension of revolving credit for a combination of equipment acquisitions and working capital in expanding companies.

The maximum term for loans extended on machinery and equipment is based on the projected useful life of such machinery and equipment. Generally, the maximum term on non-mortgage lines of credit is one year. The loan-to-value ratio on such loans and lines of credit generally may not exceed 80 percent of the value of the collateral securing the loan. The Bank’s commercial business lending policy includes credit file documentation and analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral, as well as an evaluation of conditions affecting the borrower. Analysis of the borrower’s past, present, and future cash flows is also an important aspect of the Bank’s current credit analysis. Nonetheless, such loans are believed to carry higher credit risk than other extensions of credit.

Commercial and industrial loans typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself, which, in turn, is likely to be dependent upon the general economic environment. Mid Penn’s commercial and industrial loans are usually, but not always, secured by business assets and personal guarantees. However, the collateral securing the loans may depreciate over time, may be difficult to appraise, and may fluctuate in value based on the success of the business.

~~Commercial real estate and commercial real estate - construction~~

Commercial real estate and commercial real estate construction loans generally present a higher level of risk than loans secured by one-to-four family residences. This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income producing properties, and the increased difficulty of evaluating and monitoring these types of loans. In addition, the repayment of loans secured by commercial real estate is typically dependent upon the successful operation of the related real estate project. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

~~Residential mortgage~~

Mid Penn offers a wide array of residential mortgage loans for both permanent structures and those under construction. The Bank’s residential mortgage originations are secured primarily by properties located in its primary market and surrounding areas. Residential mortgage loans have terms up to a maximum of 30 years and with loan-to-value ratios up to 100 percent of the lesser of the appraised value of the security property or the contract price. Private mortgage insurance is generally required in an amount sufficient to reduce the Bank’s exposure to at or below the 85 percent loan to value level. Residential mortgage loans generally do not include prepayment penalties.

In underwriting residential mortgage loans, the Bank evaluates both the borrower’s ability to make monthly payments and the value of the property securing the loan. Most properties securing real estate loans made by Mid Penn are appraised by independent fee appraisers. The Bank generally requires borrowers to obtain title insurance and fire and property insurance (including flood insurance, if necessary) in an amount not less than the amount of the loan. Real estate loans originated by the Bank generally contain a “due on sale” clause allowing the Bank to declare the unpaid principal balance due and payable upon the sale of the security property.

The Bank underwrites residential mortgage loans to the standards established by the secondary mortgage market, i.e., Fannie Mae, Ginnie Mae, Freddie Mac, or Pennsylvania Housing Finance Agency standards, with the intention of selling the majority of residential mortgages originated into the secondary market. In the event that the facts and circumstances surrounding a residential mortgage application do not meet all underwriting conditions of the secondary mortgage market, the Bank will evaluate the failed conditions and evaluate the potential risk of holding the residential mortgage in the Bank’s portfolio rather than rejecting the loan request. In the event that the loan is held in the Bank’s portfolio, the interest rate on the residential mortgage would be increased to compensate for the added portfolio risk.

~~Consumer, including home equity~~

Mid Penn offers a variety of secured consumer loans, including home equity, automobile, and deposit secured loans. In addition, the Bank offers other secured and unsecured consumer loans. Most consumer loans are originated in Mid Penn’s primary market and surrounding areas.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

The largest component of Mid Penn’s consumer loan portfolio consists of fixed rate home equity loans and variable rate home equity lines of credit. Substantially all home equity loans and lines of credit are secured by junior lien mortgages on principal residences. The Bank will lend amounts, which, together with all prior liens, typically may be up to 85 percent of the appraised value of the property securing the loan. Home equity term loans may have maximum terms up to 20 years, while home equity lines of credit generally have maximum terms of five years.

Consumer loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower. The underwriting standards employed by the Bank for consumer loans include an application, a determination of the applicant’s payment history on other debts, and an assessment of ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, in relation to the proposed loan amount.

Consumer loans may entail greater credit risk than do residential mortgage loans, particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or recreational equipment. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

Junior liens inherently have more credit risk by virtue of the fact that another financial institution may have a higher security position in the case of foreclosure liquidation of collateral to extinguish the debt. Generally, foreclosure actions could become more prevalent if the real estate market weakens and property values deteriorate.

Allowance for Loan and Lease Losses

~~The allowance for credit losses (“allowance”) consists~~

As of (i) the allowance for loan and lease losses, and (ii) the reserve for unfunded lending commitments. The allowance for loan and lease losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheet. The reserve for unfunded lending commitments was $127,000 at September 30, ~~2017~~2022 and ~~$120,000 at~~ December 31, ~~2016. The allowance is increased by~~2021, the ~~provision for loan and lease losses, and decreased by charge-offs, net~~types of ~~recoveries. Loans deemed to be uncollectible are charged against the allowance, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of~~ loans are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Non-residential consumer loans are generally charged off no later than 120 days past due on a contractual basis, earlier in the event of bankruptcy, or if there is an amount deemed uncollectible. Because all identified losses are immediately charged off, no portion of the allowance is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

The allowance is maintained at a level considered by management to be adequate to provide for losses that can be reasonably anticipated. Management performs a monthly evaluation of the adequacy of the allowance. The allowance is based on Mid Penn’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions, and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows, collateral value, or observable market price of the impaired loan is lower than the carrying value of that loan.

The general component covers pools of loans by loan class including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate, home equity and other consumer loans. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk factors include changes in economic conditions, fluctuations in loan quality measures, changes in collateral values, changes in the experience of the lending staff and loan review systems, changes in lending policies and procedures (including underwriting standards), changes in the mix and volume of loans originated, the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing loan portfolio, shifting industry or portfolio concentrations, and other relevant factors.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

The unallocated component of the allowance for loan and lease losses covers several considerations that are not specifically measureable through either the specific and general components. For example, we believe that we could face increasing credit risks and uncertainties, not yet reflected in recent historical losses or qualitative factor assessments, associated with unpredictable changes in economic growth or business conditions in our markets or for certain industries in which we have commercial loan borrowers, or unanticipated stresses to the values of real estate held as collateral. Any or all of these additional issues can adversely affect our borrowers’ ability to timely repay their loans. Additionally, we have experienced continued strong commercial loan growth, including growth in newer markets where we have less of a loss history. Also, the unallocated component allocation recognizes the inherent imprecision in our allowance for loan and lease loss methodology, or any alternative methodology, for estimating specific and general loan losses, including the unpredictable timing and amounts of charge-offs, the fact that historical loss averages don’t necessarily correlate to future loss trends, and unexpected changes to specific-credit or general portfolio future cash flows and collateral values which could negatively impact unimpaired portfolio loss factors.

Mid Penn generally considers a commercial loan (consisting of commercial and industrial, commercial real estate, commercial real estate-construction, and lease financing loan classes) to be impaired when it becomes 90 days or more past due and not in the process of collection or sooner when it is probable that Mid Penn will be unable to collect all contractual principal and interest due. This methodology assumes the borrower cannot or will not continue to make additional payments. At that time the loan would generally be considered collateral dependent as the discounted cash flow method would generally indicate no operating income available for evaluating the collateral position; therefore, most impaired loans are deemed to be collateral dependent.

In addition, Mid Penn’s rating system assumes any loans classified as nonaccrual, included in the substandard rating, to be impaired, and most of these loans are considered collateral dependent; therefore, most of Mid Penn’s impaired loans, whether reporting a specific allocation or not, are considered collateral dependent.

Mid Penn evaluates loans for charge-off on a monthly basis. Policies that govern the recommendation for charge-off are unique to the type of loan being considered. Commercial loans rated as substandard nonaccrual or lower will first have a collateral evaluation completed in accordance with the guidance on impaired loans. Once the collateral evaluation has been completed, a specific allocation of allowance is made based upon the results of the evaluation. The remaining balance remains a nonperforming loan with the original terms and interest rate intact (not restructured). In the event the loan is unsecured, the loan would have been charged-off at the recognition of impairment. Commercial real estate loans rated as impaired will also have an initial collateral evaluation completed in accordance with the guidance on impaired loans. An updated real estate valuation is ordered and the collateral evaluation is modified to reflect any variations in value. A specific allocation of allowance is made for any anticipated collateral shortfall. The remaining balance remains a nonperforming loan with the original terms and interest rate intact (not restructured). The process of charging off a residential mortgage loan begins when a loan becomes delinquent for 90 days and is not in the process of collection. The existing appraisal is reviewed and a lien search is obtained to determine lien position and any instances of intervening liens. A new appraisal of the property will be ordered if deemed necessary by management and a collateral evaluation is completed. The loan will then be charged down to the value indicated in the evaluation. Consumer loans (including home equity loans and other consumer loans) are recommended for charge-off after reaching delinquency of 90 days and the loan is not well-secured or otherwise not probable for collection. The collateral shortfall of the consumer loan is recommended for charge-off at this point.

As noted above, Mid Penn assesses a specific allocation for commercial loans and commercial real estate loans. The remaining balance remains a nonperforming loan with the original terms and interest rate intact (not restructured). In addition, Mid Penn takes a preemptive step when any commercial loan becomes classified under its internal classification system. A preliminary collateral evaluation, in accordance with the guidance on impaired loans, is prepared using the existing collateral information in the loan file. This process allows Mid Penn to review both the credit and documentation files to determine the status of the information needed to make a collateral evaluation. This collateral evaluation is preliminary but allows Mid Penn to determine if any potential collateral shortfalls exist.

It is Mid Penn’s policy to obtain updated third party valuations on all impaired loans collateralized by real estate as soon as practically possible following the credit being classified as substandard nonaccrual. Prior to receipt of the updated real estate valuation, Mid Penn will use any existing real estate valuation to determine any potential allowance issues; however, no allowance recommendation will be made until such time Mid Penn is in receipt of the updated valuation. The Asset Recovery department employs an electronic tracking system to monitor the receipt of and need for updated appraisals. To date, there have been no material time lapses noted with the above processes.

In some instances Mid Penn is not holding real estate as collateral and is relying on business assets (personal property) for repayment. In these circumstances a collateral inspection is performed by Mid Penn personnel to determine an estimated value. The value is based on net book value, as provided by the financial statements, and discounted accordingly based on determinations made by management. Occasionally, Mid Penn will employ an outside service to provide a fair estimate of value based on auction sales or private sales. Management reviews the estimates of these third parties and discounts them accordingly based on management’s judgment, if deemed necessary.

For impaired loans with no valuation allowance required, Mid Penn’s practice of obtaining independent third party market valuations on the subject property as soon as practically possible following the credit being placed on nonaccrual status sometimes indicates that the loan to value ratio is sufficient to obviate the need for a specific allocation in spite of significant deterioration in real estate values in Mid Penn’s ~~primary market area. These circumstances are determined on a case by case analysis of the impaired loans.~~

portfolio, summarized using Mid Penn actively monitors the values of collateral on impaired loans. This monitoring may require the modification of collateral values over time or changing circumstances by some factor, either positive or negative, from the original values. All collateral values will be assessed by management at least every 12 months for possible revaluation by an independent third party.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, Mid Penn does not separately identify individual residential mortgage loans, home equity loans and other consumer loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.

Loans whose terms are modified are classified as troubled debt restructurings if the borrowers have been granted concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity date. Nonaccrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for nine consecutive months after modification. Loans classified as troubled debt restructurings are designated as impaired.

~~The allowance calculation methodology includes further segregation of loan classes into~~Penn’s internal risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors, and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful, and loss. Loans criticized as special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Any loans not classified as noted above aresystem between those rated ~~pass.~~

In addition, Federal and State regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance and may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.

~~Acquired Loans~~

Loans that Mid Penn acquires in connection with business combinations are recorded at fair value with no carryover of the existing related allowance for loan losses. Fair value of the loans involves estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest.

The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized into interest income over the remaining life of the loan. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable discount. These loans are accounted for under the ASC 310-30, ~~Loans and Debt Securities Acquired with Deteriorated Credit Quality.~~ The nonaccretable discount includes estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows will require Mid Penn to evaluate the need for an additional allowance. Subsequent improvement in expected cash flows will result in the reversal of a corresponding amount of the nonaccretable discount which Mid Penn will then reclassify as accretable discount that will be recognized into interest income over the remaining life of the loan.

Loans acquired through business combinations that meet the specific criteria of ASC 310-30 are individually evaluated each period to analyze expected cash flows. To the extent that the expected cash flows of a loan have decreased due to credit deterioration, Mid Penn establishes an allowance.

Loans acquired through business combinations that do not meet the specific criteria of ASC 310-30 are accounted for under ASC 310-20. These loans are initially recorded at fair value, and include credit and interest rate marks associated with acquisition accounting adjustments. Purchase premiums or discounts are subsequently amortized as an adjustment to yield over the estimated contractual lives of the loans. There is no allowance for loan losses established at the acquisition date for acquired performing loans. An allowance for loan losses is recorded for any credit deterioration in these loans subsequent to acquisition.

Acquired loans that met the criteria for impaired or nonaccrual of interest prior to the acquisition may be considered performing upon acquisition, regardless of whether the customer is contractually delinquent if Mid Penn expects to fully collect the new carrying value (i.e. fair value) of the loans. As such, Mid Penn may no longer consider the loan to be nonaccrual or nonperforming and may accrue interest on these loans, including the impact of any accretable discount. In addition, charge-offs on such loans would be first applied to the nonaccretable difference portion of the fair value adjustment.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~The classes of the loan portfolio, summarized by the pass rating~~"pass" (net of deferred fees and costs of ~~$430,000~~$4.0 million as of September 30, ~~2017~~2022 and ~~$196,000~~$6.3 million as of December 31, ~~2016)~~2021), which comprise the vast majority of the portfolio, and those classified as "special mention" and "substandard", are as follows:


(Dollars in thousands)	Pass		Special Mention		Substandard		Total
September 30, 2022
Commercial and industrial	$	544,077	$	10,265	$	2,454	$	556,796
Commercial real estate	1,907,103		16,126		21,573		1,944,802
Commercial real estate - construction	398,966		—		1,222		400,188
Residential mortgage	290,952		2,529		3,429		296,910
Home equity	114,848		—		760		115,608
Consumer	8,153		—		—		8,153
	$	3,264,099	$	28,920	$	29,438	$	3,322,457


(Dollars in thousands)	Pass		Special Mention		Substandard		Total
December 31, 2021
Commercial and industrial	$	606,484	$	10,321	$	2,757	$	619,562
Commercial real estate	1,601,196		35,508		31,438		1,668,142
Commercial real estate - construction	371,337		—		1,397		372,734
Residential mortgage	319,862		294		3,067		323,223
Home equity	106,853		534		2,919		110,306
Consumer	10,429		—		—		10,429
	$	3,016,161	$	46,657	$	41,578	$	3,104,396

Mid Penn had $2.8 million and $111.3 million of PPP loans outstanding, net of deferred fees, as of September 30, 2022 and December 31, 2021, respectively. All PPP loans are included in commercial and industrial loans and are fully guaranteed by the Small Business Administration ("SBA"); therefore, all PPP loans outstanding (net of the related deferred PPP fees) are classified ~~ratings of special mention, substandard, and doubtful~~as "pass" within Mid Penn’s internal risk rating system as of September 30, ~~2017~~2022.

Mid Penn had no loans classified as "doubtful" as of September 30, 2022 and December 31, ~~2016, are as follows:~~

2021.

(Dollars in thousands)

Special

September 30, 2017

Pass

Mention

Substandard

Doubtful

Total

Commercial and industrial

$
176,801

$
489

$
5,567

$
-

$
182,857

Commercial real estate

480,258

1,745

8,600

-

490,603

Commercial real estate - construction

57,400

187

487

-

58,074

Lease financing

259

-

-

-

259

Residential mortgage

99,746

99

1,228

-

101,073

Home equity

39,919

114

317

-

40,350

Consumer

4,170

-

-

-

4,170

$
858,553

$
2,634

$
16,199

$
-

$
877,386

(Dollars in thousands)

Special

December 31, 2016

Pass

Mention

Substandard

Doubtful

Total

Commercial and industrial

$
170,780

$
937

$
801

$
-

$
172,518

Commercial real estate

437,592

1,683

7,249

-

446,524

Commercial real estate - construction

52,888

202

1,286

-

54,376

Lease financing

425

-

-

-

425

Residential mortgage

97,994

107

1,356

-

99,457

Home equity

37,242

142

224

-

37,608

Consumer

3,016

-

-

-

3,016

$
799,937

$
3,071

$
10,916

$
-

$
813,924

Table of Contents

MID PENN BANCORP, INC.

Impaired loans by loan portfolio class as of September 30, ~~2017~~2022 and December 31, ~~2016~~2021 are summarized as follows:


	September 30, 2017						December 31, 2016							September 30, 2022						December 31, 2021
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance		(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:													With no related allowance recorded:
Commercial and industrial	$	-	$	15	$	-	$	4	$	9	$	-
Commercial real estate:
Commercial real estate		603		1,288		-		726		1,792		-
Acquired with credit deterioration		569		569		-		842		842		-
Commercial real estate - construction		-		-				618		618
Residential mortgage:
Residential mortgage		790		826		-		848		882		-
Acquired with credit deterioration		315		315		-		389		389		-
Home equity		261		296		-		111		129		-

With an allowance recorded:
Commercial and industrial	$	4,460	$	4,460	$	150	$	56	$	62	$	6	Commercial and industrial	$	—	$	18	$	—	$	—	$	31	$	—
Commercial real estate		1,545		1,691		375		2,520		2,646		711	Commercial real estate	601		1,022		—		854		1,243		—
Commercial real estate - construction		487		492		100		242		242		72	Commercial real estate - construction	—		4		—		22		27		—
Residential mortgage		66		68		66		68		68		68	Residential mortgage	1,296		1,369		—		1,259		1,295		—
Home equity		-		-		-		29		49		1	Home equity	31		31		—		2,377		2,377		—

With no related allowance recorded and acquired with credit deterioration:													With no related allowance recorded and acquired with credit deterioration:

Commercial real estate													Commercial real estate	$	1,364	$	2,101	$	—	$	2,231	$	2,909	$	—
Commercial real estate - construction													Commercial real estate - construction	1,222		1,461		—		1,196		1,469		—
Residential mortgage													Residential mortgage	1,149		1,708		—		1,362		1,847		—
Home equity													Home equity	83		104		—		86		111		—


With an allowance recorded:													With an allowance recorded:
Commercial and industrial													Commercial and industrial	$	1,309	$	1,781	$	831	$	308	$	339	$	67
Commercial real estate													Commercial real estate	112		112		28		287		359		121

Residential mortgage													Residential mortgage	96		96		6		—		—		—
Home equity													Home equity	252		252		45		—		—		—


Total Impaired Loans:													Total Impaired Loans:
Commercial and industrial	$	4,460	$	4,475	$	150	$	60	$	71	$	6	Commercial and industrial	$	1,309	$	1,799	$	831	$	308	$	370	$	67
Commercial real estate		2,717		3,548		375		4,088		5,280		711	Commercial real estate	2,077		3,235		28		3,372		4,511		121
Commercial real estate - construction		487		492		100		860		860		72	Commercial real estate - construction	1,222		1,465		—		1,218		1,496		—
Residential mortgage		1,171		1,209		66		1,305		1,339		68	Residential mortgage	2,541		3,173		6		2,621		3,142		—
Home equity		261		296		-		140		178		1	Home equity	366		387		45		2,463		2,488		—

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Table of Contents

MID PENN BANCORP, INC.

The average recorded investment of impaired loans and related interest income recognized for the three and nine months ended September 30, ~~2017~~2022 and ~~2016~~2021 are summarized as follows:


	Three Months Ended									Three Months Ended								Nine Months Ended
	September 30, 2017				September 30, 2016					September 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:									With no related allowance recorded:
Commercial and industrial	$	-	$	-	$	8	$	-	Commercial and industrial	$	—	$	—	$	5	$	—	$	75	$	—	$	379	$	—
Commercial real estate:
Commercial real estate		751		-		797		-	Commercial real estate	619		—		938		—		920		—		2,671		1
Acquired with credit deterioration		-		-		965		-
Commercial real estate - construction		42		-		-		-	Commercial real estate - construction	—		—		23		—		148		—		27		—
Lease financing		-
Residential mortgage:
Residential mortgage		847		-		834		6	Residential mortgage	1,305		6		1,018		6		1,766		17		902		20
Acquired with credit deterioration		-		-		376
Home equity:
Home equity		294		3		62		-	Home equity	15		1		2,379		—		769		184		2,364		—
Acquired with credit deterioration		-		-		-		-
Consumer		-		-		-		-

With no related allowance recorded and acquired with credit deterioration:									With no related allowance recorded and acquired with credit deterioration:

Commercial real estate									Commercial real estate	1,384		—		1,368		—		1,777		—		1,383		—
Commercial real estate - construction									Commercial real estate - construction	1,226		—		—		—		1,217		—		—		—
Residential mortgage									Residential mortgage	1,172		—		281		—		1,253		—		291		—
Home equity									Home equity	83		—		—		—		84		—		—		—


With an allowance recorded:									With an allowance recorded:
Commercial and industrial	$	2,230	$	-	$	469	$	-	Commercial and industrial	$	1,333	$	—	$	217	$	—	$	1,158	$	—	$	187	$	—
Commercial real estate		2,148		-		2,643		-	Commercial real estate	112		—		1,503		—		112		—		1,192		—
Commercial real estate - construction		487		-		-		-
Lease financing		-		-		-		-

Residential mortgage		66		-		-		-	Residential mortgage	96		—		—		—		70		—		—		—
Home equity		-		-		31		-	Home equity	252		—		—		—		172		—		—		—
Consumer		-		-		-		-


Total Impaired Loans:									Total Impaired Loans:
Commercial and industrial	$	2,230	$	-	$	477	$	-	Commercial and industrial	$	1,333	$	—	$	222	$	—	$	1,233	$	—	$	566	$	—
Commercial real estate		2,899		-		4,405		-	Commercial real estate	2,115		—		3,809		—		2,809		—		5,246		1
Commercial real estate - construction		529		-		-		-	Commercial real estate - construction	1,226		—		23		—		1,365		—		27		—
Lease financing		-		-		-		-
Residential mortgage		913		-		1,210		6	Residential mortgage	2,573		6		1,299		6		3,089		17		1,193		20
Home equity		294		3		93		-	Home equity	350		1		2,379		—		1,025		184		2,364		—

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Nine Months Ended

September 30, 2017

September 30, 2016

(Dollars in thousands)

Average Recorded Investment

Interest Income Recognized

Average Recorded Investment

Interest Income Recognized

With no related allowance recorded:

Commercial and industrial

$
16

$
-

$
12

$
-

Commercial real estate:

Commercial real estate

551

279

865

-

Acquired with credit deterioration

-

110

944

-

Commercial real estate - construction

164

-

-

-

Lease financing

-

-

-

-

Residential mortgage:

Residential mortgage

852

18

802

15

Acquired with credit deterioration

-

-

375

4

Home equity

184

5

59

-

Consumer

-

With an allowance recorded:

Commercial and industrial

$
892

$
-

$
224

$
-

Commercial real estate

2,446

-

2,036

-

Commercial real estate - construction

390

-

-

-

Lease financing

-

-

-

-

Residential mortgage

53

-

-

-

Home equity

-

-

33

-

Consumer

-

-

-

-

Total Impaired Loans:

Commercial and industrial

$
908

$
-

$
236

$
-

Commercial real estate

2,997

389

3,845

-

Commercial real estate - construction

554

-

-

-

Lease financing

-

-

-

-

Residential mortgage

905

18

1,177

19

Home equity

184

5

92

-

Nonaccrual loans by loan portfolio class, including loans acquired with credit deterioration, as of September 30, ~~2017~~2022 and December 31, ~~2016~~2021 are summarized as follows:


(Dollars in thousands)	September 30, 2017		December 31, 2016		(Dollars in thousands)	September 30, 2022		December 31, 2021
Commercial and industrial	$	4,460	$	4	Commercial and industrial	$	1,309	$	308
Commercial real estate		2,148		2,939	Commercial real estate	2,063		3,372
Commercial real estate - construction		487		860	Commercial real estate - construction	1,222		1,218
Residential mortgage		583		715	Residential mortgage	2,228		2,186
Home equity		261		140	Home equity	411		2,463
	$	7,939	$	4,658		$	7,233	$	9,547

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Table of Contents

MID PENN BANCORP, INC.

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The classes of the loan portfolio summarized by the past due status as of September 30, ~~2017~~2022 and December 31, ~~2016~~2021 are summarized as follows:

													Loans
(Dollars in thousands)	30-59		60-89		Greater								Receivable >		(Dollars in thousands)	30-59 Days Past Due			60-89 Days Past Due			Greater than 90 Days			Total Past Due			Current			Total Loans			Loans Receivable > 90 Days and Accruing
	Days Past		Days Past		than 90		Total Past						90 Days and												Total Past Due			Current			Total Loans			Loans Receivable > 90 Days and Accruing
September 30, 2017	Due		Due		Days		Due		Current		Total Loans		Accruing
September 30, 2022															September 30, 2022	30-59 Days Past Due		30-59 Days Past Due	60-89 Days Past Due			Greater than 90 Days		60-89 Days Past Due			Greater than 90 Days			Total Past Due			Current			Total Loans		Loans Receivable > 90 Days and Accruing
Commercial and industrial	$	8	$	-	$	-	$	8	$	182,849	$	182,857	$	-	Commercial and industrial												Greater than 90 Days			Total Past Due			Current			Total Loans		Loans Receivable > 90 Days and Accruing
Commercial real estate:
Commercial real estate		117		28		902		1,047		488,987		490,034		-	Commercial real estate	1,274		30-59 Days Past Due			1,530			60-89 Days Past Due	258			3,062			1,940,376			1,943,438			—
Acquired with credit deterioration		-		-		56		56		513		569		56
Commercial real estate - construction		-		-		487		487		57,587		58,074		-	Commercial real estate - construction	321			—			—			321			398,645			398,966			—
Lease financing		-		-		-		-		259		259		-
Residential mortgage:
Residential mortgage		7		67		197		271		100,487		100,758		-	Residential mortgage	355			150			434			939			294,822			295,761			—
Acquired with credit deterioration		22		10		193		225		90		315		-
Home equity		-		-		250		250		40,100		40,350		-	Home equity	70			—			252			322			115,203			115,525			—
Consumer		-		-		-		-		4,170		4,170		-	Consumer	12			—			—			12			8,141			8,153			—
Loans acquired with credit deterioration:															Loans acquired with credit deterioration:

Commercial real estate															Commercial real estate	—			—			850			850			514			1,364			—
Commercial real estate - construction															Commercial real estate - construction	—			—			—			—			1,222			1,222			—
Residential mortgage															Residential mortgage	73			229			304			606			543			1,149			—
Home equity															Home equity	—			—			32			32			51			83			—

Total	$	154	$	105	$	2,085	$	2,344	$	875,042	$	877,386	$	56	Total	$	2,241		$	2,665		$	3,251		$	8,157		$	3,314,300		$	3,322,457		$	633

													Loans
(Dollars in thousands)	30-59		60-89		Greater								Receivable >		(Dollars in thousands)	30-59 Days Past Due			60-89 Days Past Due			Greater than 90 Days			Total Past Due			Current			Total Loans			Loans Receivable > 90 Days and Accruing
	Days Past		Days Past		than 90		Total Past						90 Days and												Total Past Due			Current			Total Loans			Loans Receivable > 90 Days and Accruing
December 31, 2016	Due		Due		Days		Due		Current		Total Loans		Accruing
December 31, 2021															December 31, 2021	30-59 Days Past Due		30-59 Days Past Due	60-89 Days Past Due			Greater than 90 Days		60-89 Days Past Due			Greater than 90 Days			Total Past Due			Current			Total Loans		Loans Receivable > 90 Days and Accruing
Commercial and industrial	$	164	$	12	$	4	$	180	$	172,338	$	172,518	$	-	Commercial and industrial												Greater than 90 Days			Total Past Due			Current			Total Loans		Loans Receivable > 90 Days and Accruing
Commercial real estate:
Commercial real estate		475		-		1,004		1,479		444,203		445,682		-	Commercial real estate	32		30-59 Days Past Due			55			60-89 Days Past Due	769			856			1,665,055			1,665,911			—
Acquired with credit deterioration		-		-		59		59		783		842		59
Commercial real estate - construction		-		404		84		488		53,888		54,376		-	Commercial real estate - construction	—			—			205			205			371,333			371,538			205
Lease financing		-		-		-		-		425		425		-
Residential mortgage:
Residential mortgage		548		124		237		909		98,159		99,068		-	Residential mortgage	1,246			205			1,002			2,453			319,408			321,861			212
Acquired with credit deterioration		-		-		238		238		151		389		-
Home equity		33		13		125		171		37,437		37,608		-	Home equity	403			—			2,377			2,780			107,440			110,220			—
Consumer		-		-		-		-		3,016		3,016		-	Consumer	6			2			2			10			10,419			10,429			2
Loans acquired with credit deterioration:															Loans acquired with credit deterioration:

Commercial real estate															Commercial real estate	—			3			1,628			1,631			600			2,231			—
Commercial real estate - construction															Commercial real estate - construction	—			—			—			—			1,196			1,196			—
Residential mortgage															Residential mortgage	54			—			818			872			490			1,362			—
Home equity															Home equity	—			—			—			—			86			86			—

Total	$	1,220	$	553	$	1,751	$	3,524	$	810,400	$	813,924	$	59	Total	$	3,119		$	327		$	7,205		$	10,651		$	3,093,745		$	3,104,396		$	515

The allowance for loan and lease losses and the related loan loss provision for the periods presented reflect Mid Penn’s continued application of the incurred loss method for estimating credit losses, as Mid Penn is not required to adopt the CECL accounting standard until January 1, 2023, and Mid Penn has not elected to early adopt CECL. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan and lease losses is adequate.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Table of Contents

MID PENN BANCORP, INC.

The following tables summarize the allowance and recorded investments in loans receivable.


(Dollars in thousands)																									(Dollars in thousands)
As of, and for the three months ended, September 30, 2017	Commercial and industrial		Commercial real estate			Commercial real estate - construction		Lease financing			Residential mortgage			Home equity			Consumer			Unallocated		Total
As of, and for the three months ended, September 30, 2022																									As of, and for the three months ended, September 30, 2022	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Residential mortgage		Home equity		Consumer		Unallocated		Total
Allowance for loan and lease losses:																									Allowance for loan and lease losses:
Beginning balance,																									Beginning balance,
July 1, 2017	$	1,628	$	4,981		$	140	$	1		$	539		$	404		$	4		$	16	$	7,713
July 1, 2022																									July 1, 2022	$	3,671	$	11,991	$	46	$	502	$	641	$	2	$	23	$	16,876
Charge-offs		-		(207	)		-		-			(7	)		(20	)		(5	)		-		(239	)	Charge-offs	(1)		—		—		(2)		(1)		(11)		—		(15)
Recoveries		5		22			-		-			-			-			1			-		28		Recoveries	—		63		—		—		—		6		—		69
Provisions		166		(326	)		36		(1	)		7			53			5			60		-		Provisions	879		468		5		73		89		5		31		1,550
Ending balance,																									Ending balance,
September 30, 2017	$	1,799	$	4,470		$	176	$	-		$	539		$	437		$	5		$	76	$	7,502
September 30, 2022																									September 30, 2022	$	4,549	$	12,522	$	51	$	573	$	729	$	2	$	54	$	18,480

(Dollars in thousands)																									(Dollars in thousands)
As of, and for the nine months ended, September 30, 2022																									As of, and for the nine months ended, September 30, 2022	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Residential mortgage		Home equity		Consumer		Unallocated		Total
Allowance for loan and lease losses:																									Allowance for loan and lease losses:
Beginning balance,																									Beginning balance,
January 1, 2022																									January 1, 2022	$	3,439	$	9,415	$	38	$	459	$	560	$	2	$	684	$	14,597
Charge-offs																									Charge-offs	(1)		—		—		(2)		(1)		(77)		—		(81)
Recoveries																									Recoveries	13		128		24		2		2		20		—		189
Provisions (credits)																									Provisions (credits)	1,098		2,979		(11)		114		168		57		(630)		3,775
Ending balance,																									Ending balance,
September 30, 2022																									September 30, 2022	4,549		12,522		51		573		729		2		54		18,480
Individually evaluated for impairment																									Individually evaluated for impairment	831		28		—		6		45		—		—		910
Ending balance:																									Ending balance:
Collectively evaluated for impairment																									Collectively evaluated for impairment	$	3,718	$	12,494	$	51	$	567	$	684	$	2	$	54	$	17,570

Loans receivables:																									Loans receivables:
Ending balance																									Ending balance	$	556,796	$	1,944,802	$	400,188	$	296,910	$	115,608	$	8,153	$	—	$	3,322,457
Ending balance: individually evaluated for impairment																									Ending balance: individually evaluated for impairment	1,309		713		—		1,392		283		—		—		3,697
Ending balance: acquired with credit deterioration																									Ending balance: acquired with credit deterioration	—		1,364		1,222		1,149		83		—		—		3,818
Ending balance: collectively evaluated for impairment																									Ending balance: collectively evaluated for impairment	$	555,487	$	1,942,725	$	398,966	$	294,369	$	115,242	$	8,153	$	—	$	3,314,942

(Dollars in thousands)

As of, and for the
nine months ended,
September 30, 2017

Commercial
and
industrial

Commercial real estate

Commercial real estate - construction

Lease financing

Residential mortgage

Home equity

Consumer

Unallocated

Total

Allowance for loan and lease losses:

Beginning balance,

January 1, 2017

$
1,580

$
4,323

$
144

$
1

$
541

$
379

$
3

$
212

$
7,183

Charge-offs

(12
)

(237
)

-

-

(25
)

(20
)

(21
)

-

(315
)
Recoveries

11

383

-

-

4

5

6

-

409

Provisions

220

1

32

(1
)

19

73

17

(136
)

225

Ending balance,

September 30, 2017

1,799

4,470

176

-

539

437

5

76

7,502

Ending balance:

individually evaluated for impairment

150

375

100

-

66

-

-

-

691

Ending balance:

collectively evaluated for impairment

$
1,649

$
4,095

$
76

$
-

$
473

$
437

$
5

$
76

$
6,811

Loans receivables:

Ending balance

$
182,857

$
490,603

$
58,074

$
259

$
101,073

$
40,350

$
4,170

$
-

$
877,386

Ending balance:

individually evaluated for impairment

4,460

2,148

487

-

856

261

-

-

8,212

Ending balance:

acquired with credit deterioration

-

569

-

-

315

-

-

-

884

Ending balance:

collectively evaluated for impairment

$
178,397

$
487,886

$
57,587

$
259

$
99,902

$
40,089

$
4,170

$
-

$
868,290

(Dollars in thousands)

As of, and for the
three months ended,
September 30, 2016

Commercial and industrial

Commercial real estate

Commercial real estate - construction

Lease financing

Residential mortgage

Home equity

Consumer

Unallocated

Total

Allowance for loan and lease losses:

Beginning balance,

July 1, 2016

$
1,372

$
4,241

$
120

$
1

$
521

$
325

$
9

$
323

$
6,912

Charge-offs

-

(43
)

-

-

(4
)

-

(2
)

-

(49
)
Recoveries

1

29

-

-

-

-

4

-

34

Provisions

759

108

-

-

15

27

(1
)

(323
)

585

Ending balance,

September 30, 2016

$
2,132

$
4,335

$
120

$
1

$
532

$
352

$
10

$
-

$
7,482

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Table of Contents

(Dollars in thousands)

As of, and for the
nine months ended,
September 30, 2016

Commercial
and industrial

Commercial real estate

Commercial real estate - construction

Lease financing

Residential mortgage

Home equity

Consumer

Unallocated

Total

Allowance for loan and lease losses:

Beginning balance,

January 1, 2016

$
1,393

$
3,552

$
153

$
1

$
534

$
317

$
12

$
206

$
6,168

Charge-offs

-

(193
)

-

-

(4
)

(25
)

(12
)

-

(234
)
Recoveries

3

190

-

-

25

-

10

-

228

Provisions

736

786

(33
)

-

(23
)

60

-

(206
)

1,320

Ending balance,

September 30, 2016

2,132

4,335

120

1

532

352

10

-

7,482

Ending balance:

individually evaluated for impairment

828

764

-

-

-

2

-

-

1,594

Ending balance:

collectively evaluated for impairment

$
1,304

$
3,571

$
120

$
1

$
532

$
350

$
10

$
-

$
5,888

Loans receivables:

Ending balance

$
168,075

$
421,452

$
57,319

$
506

$
104,483

$
36,451

$
3,198

$
-

$
791,484

Ending balance:

individually evaluated for impairment

885

3,398

-

-

847

90

-

-

5,220

Ending balance:

acquired with credit deterioration

-

972

-

-

380

-

-

-

1,352

Ending balance:

collectively evaluated for impairment

$
167,190

$
417,082

$
57,319

$
506

$
103,256

$
36,361

$
3,198

$
-

$
784,912

MID PENN BANCORP, INC.

(Dollars in thousands)

December 31, 2016

Commercial
and
industrial

Commercial real estate

Commercial real estate - construction

Lease financing

Residential mortgage

Home equity

Consumer

Unallocated

Total

Allowance for loan and lease losses:

Ending balance

$
1,580

$
4,323

$
144

$
1

$
541

$
379

$
3

$
212

$
7,183

Ending balance:

individually evaluated for impairment

6

711

72

-

68

1

-

-

858

Ending balance:

collectively evaluated for impairment

$
1,574

$
3,612

$
72

$
1

$
473

$
378

$
3

$
212

$
6,325

Loans receivable:

Ending balance

$
172,518

$
446,524

$
54,376

$
425

$
99,457

$
37,608

$
3,016

$
-

$
813,924

Ending balance:

individually evaluated
for impairment

60

3,246

860

-

916

140

-

-

5,222

Ending balance:

acquired with credit deterioration

-

842

-

-

389

-

-

-

1,231

Ending balance:

collectively evaluated
for impairment

$
172,458

$
442,436

$
53,516

$
425

$
98,152

$
37,468

$
3,016

$
-

$
807,471


(Dollars in thousands)
December 31, 2021	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Residential mortgage		Home equity		Consumer		Unallocated		Total
Allowance for loan and lease losses:
Ending balance	$	3,439	$	9,415	$	38	$	459	$	560	$	2	$	684	$	14,597
Ending balance: individually evaluated for impairment	67		121		—		—		—		—		—		188
Ending balance: collectively evaluated for impairment	$	3,372	$	9,294	$	38	$	459	$	560	$	2	$	684	$	14,409

Loans receivable:
Ending balance	$	619,562	$	1,668,142	$	372,734	$	323,223	$	110,306	$	10,429	$	—	$	3,104,396
Ending balance: individually evaluated for impairment	308		1,141		22		1,259		2,377		—		—		5,107
Ending balance: acquired with credit deterioration	—		2,231		1,196		1,362		86		—		—		4,875
Ending balance: collectively evaluated for impairment	$	619,254	$	1,664,770	$	371,516	$	320,602	$	107,843	$	10,429	$	—	$	3,094,414

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Table of Contents

~~The recorded investments in troubled debt restructured loans at September 30, 2017 and December 31, 2016 are as follows:~~

(Dollars in thousands)
Pre-Modification

Post-Modification

September 30, 2017
Outstanding Recorded Investment

Outstanding Recorded Investment

Recorded Investment

Commercial and industrial
$
4,110

$
4,460

$
4,460

Commercial real estate
$
2,885

$
2,731

$
1,792

Residential mortgage

759

757

616

$
7,754

$
7,948

$
6,868

MID PENN BANCORP, INC.

(Dollars in thousands)
Pre-Modification

Post-Modification

December 31, 2016
Outstanding Recorded Investment

Outstanding Recorded Investment

Recorded Investment

Commercial and industrial
$
40

$
35

$
5

Commercial real estate

4,569

4,031

2,871

Residential mortgage

759

757

639

$
5,368

$
4,823

$
3,515


(Dollars in thousands)
As of, and for the three months ended, September 30, 2021	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Residential mortgage		Home equity		Consumer		Unallocated		Total
Allowance for loan and lease losses:
Beginning balance,
July 1, 2021	$	3,165	$	9,977	$	130	$	499	$	588	$	2	$	355	$	14,716
Charge-offs	—		(1,043)		—		(3)		—		(11)		—		(1,057)
Recoveries	1		140		—		2		—		6		—		149
Provisions (credits)	204		(112)		3		(8)		15		5		318		425
Ending balance,
September 30, 2021	$	3,370	$	8,962	$	133	$	490	$	603	$	2	$	673	$	14,233

(Dollars in thousands)
As of, and for the nine months ended, September 30, 2021	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Residential mortgage		Home equity		Consumer		Unallocated		Total
Allowance for loan and lease losses:
Beginning balance,
January 1, 2021	3,066		8,655		134		429		507		1		590		$	13,382
Charge-offs	(859)		(1,043)		(23)		(13)		—		(23)		—		(1,961)
Recoveries	2		206		—		13		—		16		—		237
Provisions (credits)	1,161		1,144		22		61		96		8		83		2,575
Ending balance,
September 30, 2021	3,370		8,962		133		490		603		2		673		14,233
Individually evaluated for impairment	69		129		—		—		—		—		—		198
Ending balance:
collectively evaluated for impairment	$	3,301	$	8,833	$	133	$	490	$	603	$	2	$	673	$	14,035

Loans receivables:
Ending balance	$	632,680	$	1,141,345	$	314,457	$	195,636	$	78,012	$	8,299	$	—	$	2,370,429
Ending balance: individually evaluated for impairment	221		1,214		22		1,276		2,420		—		—		5,153
Ending balance: acquired with credit deterioration	—		1,355		—		273		—		—		—		1,628
Ending balance: collectively evaluated for impairment	$	632,459	$	1,138,776	$	314,435	$	194,087	$	75,592	$	8,299	$	—	$	2,363,648

Mid Penn entered into forbearance or modification agreements on ~~all~~ loans currently classified as troubled debt restructures, and ~~all of~~ these agreements have resulted in additional principal repayment. The terms of these forbearance agreements vary ~~whereby~~and generally involve modifications from the original loan agreements, including either a reduction in the amount of principal payments ~~have been decreased,~~for certain or extended periods, interest ~~rates have been reduced~~rate reductions, and/or the intent for the loan ~~will~~to be repaid as collateral is sold.

Mid ~~Penn had~~Penn’s troubled debt restructured loans at September 30, ~~2017 totaling $6,868,000. Four loans totaling $551,000 represented~~2022 totaled $543 thousand and included: (i) one accruing impaired residential ~~loans~~mortgage loan to ~~unrelated borrowers~~a borrower in compliance with the terms of the ~~modification, with one loan comprising $499,000~~modifications totaling $396 thousand, and (ii) $148 thousand of ~~this total. The remaining $6,317,000 representing eight~~troubled debt restructurings attributable to five loans among ~~five~~three relationships ~~are~~which were classified as nonaccrual impaired ~~loans~~ based upon a collateral evaluation in accordance with the guidance on impaired loans. ~~Four large relationships accounted for $6,252,000~~The balance of ~~the total $6,317,000 in~~these nonaccrual impaired troubled debt restructured ~~loans.~~

Atloans as of September 30, 2022 was comprised of $120 thousand in commercial real estate loans related to one borrower and two residential mortgage loans for $27 thousand. As of September 30, 2022, there were no defaulted troubled debt restructured loans, as all troubled debt restructured loans were current with respect to their associated forbearance agreements. In addition to contractual paydowns, the decrease in Mid Penn’s troubled debt restructured loan balance since December 31, ~~2016,~~ 2021 reflects the successful workout of two nonaccrual impaired loans.

Mid Penn’s troubled debt restructured loans at December 31, 2021 totaled ~~$3,515,000, of which five loans totaling $877,000 represented~~$819 thousand, and included (i) two accruing impaired residential mortgage loans to unrelated borrowers in compliance with the terms of the ~~modification. Of the $877,000, four are accruing impaired residential mortgages~~modifications totaling $435 thousand, and (ii) $384 thousand of troubled debt restructurings attributable to ~~unrelated borrowers totaling $571,000 and the other one is an accruing impaired commercial real estate loan for $306,000. The remaining $2,638,000 representing ten~~eight loans among ~~four~~six relationships ~~are~~which were classified as nonaccrual

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MID PENN BANCORP, INC.

impaired ~~loans~~ based upon a collateral evaluation in accordance with the guidance on impaired loans. ~~Two large relationships account for $2,170,000~~The balance of ~~the $2,638,000~~these nonaccrual impaired troubled debt restructured ~~loan total.~~

~~As a result~~loans as of ~~management evaluations at September 30, 2017, September 30, 2016, and~~ December 31, ~~2016, any specific allocations~~2021 was comprised of $320 thousand in commercial real estate loans amongst two borrowers, one commercial real estate construction loan for $22 thousand, two residential mortgage loans for $37 thousand, and ~~charge-offs have been taken as appropriate. During the three~~one commercial and ~~nine months ended September 30, 2017~~industrial loan for $5 thousand. As of December 31, 2021, there were ~~charge-offs of $139,000 associated with one troubled debt restructured loan relationship, which was paid off during the third quarter of 2017. There were~~ no ~~charge-offs associated with existing troubled debt restructured loan relationships for the three and nine months ended September 30, 2016. There were no~~defaulted troubled debt restructured loans, ~~that defaulted~~as all troubled debt restructured loans were current with respect to their associated forbearance agreements. There were also no defaults on troubled debt restructured loans within twelve months of restructure during ~~the three and nine months ended September 30, 2017 and 2016.~~

~~Two~~2021.

The recorded investments in troubled debt restructured loans ~~were added during the three and nine months ended~~at September 30, ~~2017. One nonaccrual impaired commercial~~2022 and industrial troubled debt restructured loan was added as a result of the consolidation of four existing Mid Penn Bank loans with a pre-modification outstanding recorded investment of $4,110,000 as well as other obligations of $350,000 with the same borrower. This loan had a post-modification recorded investment of $4,460,000, and a September 30, 2017 recorded investment amount of $4,460,000. No charge-offs were taken at the time of modification. One nonaccrual impaired commercial real estate loan was added with a pre-modification outstanding recorded investment of $362,000, a post-modification recorded investment of $300,000, and a September 30, 2017 recorded investment amount of $299,000. This modification consolidated two existing Mid Penn Bank loans. A charge-off of $62,000 was taken at the time of modification. No troubled debt restructured loans were added during the three and nine months ended September 30, 2016.

As of September 30, 2017, Mid Penn had $33,000 of residential real estate held in other real estate owned. There were four consumer mortgage loans secured by residential real estate properties totaling $546,000 for which formal foreclosure proceedings were in process. As of December 31, ~~2016, Mid Penn had $57,000 of residential real estate held in other real estate owned, and no loans for which formal foreclosure proceedings were in process.~~

2021 are as follows:

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~


(Dollars in thousands)	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
September 30, 2022
Commercial real estate	$	851	$	815	$	120
Residential mortgage	590		590		423
	$	1,441	$	1,405	$	543


(Dollars in thousands)	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
December 31, 2021
Commercial and industrial	$	8	$	8	$	5
Commercial real estate	1,214		1,115		320
Commercial real estate - construction	40		40		22
Residential mortgage	647		645		472
	$	1,909	$	1,808	$	819

The following tables provide activity for the accretable yield of acquired impaired loans from the Phoenix (March 2015), Scottdale (January 2018), First Priority (July 2018), and Riverview (November 2021) acquisitions for the three and nine months ended September 30, ~~2017.~~

2022 and 2021.

(Dollars in thousands)

Accretable yield, July 1, 2017

$
68

Accretable yield amortized to interest income

(3
)
Reclassification from nonaccretable difference (a)

-

Accretable yield, September 30, 2017

$
65



(Dollars in thousands)	Three Months Ended September 30,
	2022		2021
Accretable yield, beginning of period	$	471	$	40
Accretable yield amortized to interest income	(64)		—
Accretable yield, end of period	$	407	$	40

(Dollars in thousands)

Accretable yield, January 1, 2017

$
67

Accretable yield amortized to interest income

(25
)
Reclassification from nonaccretable difference (a)

23

Accretable yield, September 30, 2017

$
65


	Nine Months Ended September 30,
(Dollars in thousands)	2022		2021

Accretable yield, beginning of period	$	580	$	40
Accretable yield amortized to interest income	(173)		—
Accretable yield, end of period	$	407	$	40

~~(a)~~

~~Reclassification from non-accretable difference represents an increase to the estimated cash flows to be collected on the underlying portfolio.~~

~~(4)~~

~~Fair Value Measurement~~

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MID PENN BANCORP, INC.

Note 6 - 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, 2022				December 31, 2021
(Dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Interest Rate Lock Commitments	$	6,101	$	(141)	$	16,107	$	56
Forward Commitments	6,145		(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, 2022				December 31, 2021
(Dollars in thousands)	Asset Derivatives		Liability Derivatives		Asset Derivatives		Liability Derivatives
Interest Rate Lock Commitments	$	3	$	144	$	56	$	—
Forward Commitments	3		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 ended				Nine months ended
(Dollars in thousands)	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Interest Rate Lock Commitments	$	(224)	$	134	$	(197)	$	134
Forward Commitments	441		(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.

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MID PENN BANCORP, INC.

The fair value, notional amount, and collateral posted related to loan-level interest rate swaps are presented below.


(Dollars in thousands)	September 30, 2022		December 31, 2021
Interest Rate Swap Contracts - Commercial Loans:
Fair Value (1)	$	12,825	$	102
Notional Amount	109,610		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, 2022		December 31, 2021
Interest Rate Swap Contracts - Commercial Loans:
Gross amounts recognized	$	12,825	$	102
Gross amounts offset	12,825		102
Net Amounts Presented in the Consolidated Balance Sheets	—		—
Gross amounts not offset:
Financial instruments	—		—
Cash collateral	1,600		1,600
Net Amounts	$	1,600	$	1,600

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MID PENN BANCORP, INC.

Note 7 - Comprehensive Income

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes changes in unrealized gains and losses on securities available for sale arising during the period and reclassification adjustments for realized gains and losses on securities available for sale included in net income. Mid Penn also recognizes other comprehensive income (loss) from an unfunded noncontributory defined benefit plan for directors and other postretirement benefit plans covering full-time employees. These plans utilize assumptions and methods to calculate the fair value of plan assets and Mid Penn recognizes the overfunded and underfunded status of the plans on its consolidated balance sheet. Gains and losses, prior service costs and credits are recognized in other comprehensive income (loss), net of tax, until they are amortized, or immediately upon curtailment.

The components of accumulated other comprehensive (loss) income, net of taxes, are as follows:


(Dollars in thousands)	Unrealized Loss on Securities		Defined Benefit Plans		Accumulated Other Comprehensive (Loss) Income
Balance - September 30, 2022	$	(19,673)	$	543	$	(19,130)

Balance - December 31, 2021	$	(255)	$	413	$	158

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MID PENN BANCORP, INC.

Note 8 - Fair Value Measurement

Fair value measurement and disclosure guidance defines fair value as the price that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. This guidance provides additional information on determining when the volume and level of activity for the asset or liability has significantly decreased. ~~The guidance also includes information~~Information on identifying circumstances when a transaction may not be considered ~~orderly.~~

orderly is also included within the guidance.

Fair value measurement and disclosure guidance provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with the fair value measurement and disclosure guidance.

This guidance clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly. In those situations, the entity must evaluate the weight of the evidence to determine whether the transaction is orderly. The guidance provides a list of circumstances that may indicate that a transaction is not orderly. A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value.

Inputs to valuation techniques refer to the assumptions that market participants would use in measuring the fair value of an asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own belief about the assumptions market participants would use in pricing the asset or liability based upon the best information available in the circumstances. Fair value measurement and disclosure guidance establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. An asset’s or liability’s placement in the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement or disclosure. The fair value hierarchy is as follows:

Level 1 ~~Inputs~~- ~~Unadjusted~~Inputs that represent quoted prices for identical instruments in active ~~markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;~~

markets.

Level 2 ~~Inputs~~- ~~Quoted~~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;~~

liability.

Level 3 ~~Inputs~~- ~~Prices or valuation techniques that require inputs~~Inputs that are ~~both significant to the fair value measurement and~~largely unobservable, ~~(i.e., supported by~~as little or no market ~~activity).~~

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 ~~for~~during the three and nine months ended September 30, ~~2017~~2022 and ~~2016.~~

2021.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

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MID PENN BANCORP, INC.

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		(Dollars in thousands)	Total carrying value at		Fair value measurements at September 30, 2022 using:
Assets:	September 30, 2017		(Level 1)		(Level 2)		(Level 3)		Assets:	September 30, 2022		Level 1		Level 2		Level 3
Loans held for sale									Loans held for sale	$	5,997			$	5,997	$	—
Available-for-sale securities:									Available-for-sale securities:
U.S. Treasury and U.S. government agencies	$	39,253	$	-	$	39,253	$	-	U.S. Treasury and U.S. government agencies	37,584		—		37,584		—
Mortgage-backed U.S. government agencies		27,046		-		27,046		-	Mortgage-backed U.S. government agencies	168,204		—		168,204		—
State and political subdivision obligations		27,978		-		27,978		-	State and political subdivision obligations	3,374		—		3,374		—
Corporate debt securities		1,005				1,005			Corporate debt securities	33,033		—		33,033		—
Other assets:									Other assets:
Equity securities		1,231		1,231		-		-	Equity securities	428		428		—		—
Interest rate swap agreements									Interest rate swap agreements	12,825		—		12,825		—
Mortgage banking derivative assets									Mortgage banking derivative assets	3		—		3		—
Total	$	96,513	$	1,231	$	95,282	$	-	Total	$	261,448	$	428	$	261,020	$	—


			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		(Dollars in thousands)	Total carrying value at		Fair value measurements at December 31, 2021 using:
Assets:	December 31, 2016		(Level 1)		(Level 2)		(Level 3)		Assets:	December 31, 2021		Level 1		Level 2		Level 3
Loans held for sale									Loans held for sale	$	11,514	$	—	$	11,514	$	—
Available-for-sale securities:									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		-	Mortgage-backed U.S. government agencies	49,480		—		49,480		—
State and political subdivision obligations		58,838		-		58,838		-	State and political subdivision obligations	3,914		—		3,914		—
Corporate debt securities		1,100		-		1,100			Corporate debt securities	9,468		—		9,468		—
Other assets:									Other assets:
Equity securities		1,056		1,056		-		-	Equity securities	500		500		—		—
Interest rate swap agreements									Interest rate swap agreements	629		—		629		—
Mortgage banking derivative assets									Mortgage banking derivative assets	88		—		88		—
Total	$	133,625	$	2,920	$	130,705	$	-	Total	$	75,593	$	500	$	75,093	$	—

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, when there is evidence of impairment).

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



(Dollars in thousands)	Total carrying value at		Fair value measurements at September 30, 2022 using:
Assets:	September 30, 2022		Level 1		Level 2		Level 3
Impaired Loans	$	936	$	—	$	—	$	936
Foreclosed assets held for sale	49		—		—		49

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



(Dollars in thousands)	Total carrying value at		Fair value measurements at December 31, 2021 using:
Assets:	December 31, 2021		Level 1		Level 2		Level 3
Impaired Loans	$	508	$	—	$	—	$	508

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

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MID PENN BANCORP, INC.

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

33

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)~~

(Dollars in thousands)
September 30, 2022 Fair Value Estimate Valuation Technique Unobservable Input Range Weighted Average
Impaired Loans $ 936
Appraisal of collateral (1), (2)
Appraisal adjustments (2)
22% - 77% 52%
(Dollars in thousands)
December 31, 2021 Fair Value Estimate Valuation Technique Unobservable Input Range Weighted Average
Impaired Loans $ 508
Appraisal of collateral (1), (2)
Appraisal adjustments (2)
21% - 69% 30%

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

(2)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.

There were no changes in unrealized gains and losses included in other comprehensive income during the nine months ended September 30, 2022 or 2021 related to Level 3 recurring fair value measurements, as Mid Penn has no assets measured at fair value on a Level 3 recurring basis.

Mid Penn uses 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.~~

~~The~~ following methodologies and assumptions ~~were used~~ to estimate the fair value of ~~Mid Penn’s financial instruments:~~

~~Cash~~certain assets and ~~Cash Equivalents:~~

~~The carrying value of cash and cash equivalents is considered to be a reasonable estimate of fair value.~~

~~Interest-bearing Balances with other Financial Institutions:~~

~~The estimate of fair value was determined by comparing the present value of quoted interest rates on like deposits with the weighted average yield and weighted average maturity of the balances.~~

liabilities.

Securities ~~Available for Sale:~~

The fair value of equity securities and debt securities classified as ~~available-for-sale~~available for sale is determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing ~~(level~~(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.

~~Held-to-Maturity Securities:~~

Mortgage Banking Derivative Assets

Mortgage banking derivative assets 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 ~~held-to-maturity securities~~the Bank’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 6 - Derivative Financial Instruments," for additional information.

Interest Rate Swap Agreements

Interest rate swap agreements are ~~based~~measured by alternative pricing sources with reasonable levels of price transparency in markets that are not active. Based on ~~a market approach using~~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 ~~such~~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 ~~benchmark yields and securities, reported trades, issuer spreads, current bids and offers, monthly payment information and collateral performance.~~

~~Loans Held for Sale:~~

~~The fair values of mortgage loans originated and intended for sale in the secondary market are carried at fair value, as determined by outstanding commitments from investors.~~

Level 2.

Impaired Loans (included in ~~“Net~~"Net Loans and ~~Leases”~~Leases" in the following tables):

~~Mid Penn’s rating system assumes any~~

All performing troubled debt restructured loans and loans classified as ~~substandard and~~ nonaccrual 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 BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

It is Mid Penn’s policy to obtain updated ~~third party~~third-party collateral valuations on all impaired loans ~~collateralized~~secured by real estate ~~within 30 days of~~as soon as practically possible following the credit being classified as substandard nonaccrual. Prior to receipt of the updated real estate valuation, Mid Penn will use ~~any~~ existing real estate ~~valuation~~valuations to determine any potential allowance for loan and lease loss ~~issues; however, no~~issues and will update the allowance ~~recommendation will be made until Mid Penn is in~~impact calculation upon receipt of the updated real estate valuation.

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MID PENN BANCORP, INC.

In some instances, Mid Penn is not holding real estate as collateral and is relying on business assets (personal property) for repayment. In these circumstances a collateral inspection is performed by Mid Penn personnel to determine an estimated value. The value is based on net book value, as provided by the financial statements, and discounted accordingly based on determinations made by management. Occasionally, Mid Penn will employ an outside service to provide a fair estimate of value based on auction sales or private sales. Management reviews the estimates of these third parties and discounts them accordingly based on management’s judgment, if deemed necessary. Mid Penn considers the estimates used in its impairment analysis to be Level 3 inputs.

Mid Penn actively monitors the values of collateral on impaired loans. This monitoring may require the modification of collateral values, either in a positive or negative way, due to the passage of time or some other change in one or more valuation inputs. Collateral values for impaired loans will be reassessed by management at least every 12 months for possible revaluation by an independent third party.

~~Loans:~~

For variable rate loans that reprice frequently and which entail no significant changes in credit risk, carrying values approximated fair value. The fair value of other loans are estimated by calculating the present value of the cash flow difference between the current rate and the market rate, for the average maturity, discounted quarterly at the market rate.

Foreclosed Assets Held for ~~Sale:~~

Sale

Certain assets included in foreclosed assets held for sale are carried at fair value and accordingly is presented as measured on a non-recurring basis. Values are estimated using Level 3 inputs, based on appraisals that consider the sales prices of property in the proximate vicinity.

~~Accrued Interest Receivable and Payable:~~

~~The carrying amount of accrued interest receivable and payable approximates their fair values.~~

~~Restricted Investment in Bank Stocks:~~

~~The carrying amount of required and restricted investment in correspondent bank stock approximates fair value, and considers the limited marketability of such securities.~~

~~Mortgage Servicing Rights:~~

~~The fair value of servicing rights is based on the present value of estimated future cash flows on pools of mortgages stratified by rate and maturity date.~~

~~Deposits:~~

The fair value for demand deposits (e.g., interest and noninterest checking, savings, and money market deposit accounts) is, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair value for fixed-rate certificates of deposit was estimated using a discounted cash flow calculation by combining all fixed-rate certificates into a pool with a weighted average yield and a weighted average maturity for the pool and comparing the pool with interest rates currently being offered on a similar maturity.

~~Short-term Borrowings:~~

~~Because of time to maturity, the estimated fair value of short-term borrowings approximates the book value.~~

~~Long-term and Subordinated Debt:~~

The estimated fair values of long-term and subordinated debt were determined using discounted cash flow analysis, based on currently available borrowing rates for similar types of borrowing arrangements.

~~Commitments to Extend Credit and Letters of Credit:~~

The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account market interest rates, the remaining terms and present creditworthiness of the counterparties. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

The following table summarizes the carrying value and fair value of financial ~~instruments at~~instruments:


(Dollars in thousands)	September 30, 2022				December 31, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Cash and cash equivalents	$	94,678	$	94,678	$	913,752	$	913,752
Available-for-sale investment securities	242,195		242,195		62,862		62,862
Held-to-maturity investment securities	402,142		346,625		329,257		330,626
Equity securities	428		428		500		500
Loans held for sale	5,997		5,997		11,514		11,787
Net loans and leases	3,303,977		3,252,277		3,089,799		3,118,416
Restricted investment in bank stocks	4,595		4,595		9,134		9,134
Accrued interest receivable	15,861		15,861		10,779		10,779
Interest rate swap agreements	12,825		12,825		629		629
Mortgage banking derivative assets	6		6		88		88

Financial liabilities:
Deposits	$	3,729,596	$	3,716,190	$	4,002,016	$	4,046,217
Long-term debt (1)	1,188		1,148		77,890		77,455
Subordinated debt	66,357		63,895		74,274		74,553
Accrued interest payable	1,841		1,841		1,791		1,791
Mortgage banking derivative liabilities	342		342		—		—

(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, ~~2017~~2022 and December 31, ~~2016.~~

2021.

(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

-

-

-

-

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~~2022 and December 31, ~~2016.~~2021. 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,

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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		(Dollars in thousands)					Fair Value Measurements
	Carrying				or Liabilities		Observable Inputs		Inputs
September 30, 2017	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2022											September 30, 2022	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial instruments - assets											Financial instruments - assets
Held-to-maturity investment securities	$	82,625	$	82,716	$	-	$	82,716	$	-	Held-to-maturity investment securities	$	402,142	$	346,625	$	—	$	346,625	$	—
Net loans and leases		869,884		886,174		-		-		886,174	Net loans and leases	3,303,977		3,252,277		—		—		3,252,277

Financial instruments - liabilities											Financial instruments - liabilities
Deposits	$	1,026,675	$	1,027,081	$	-	$	1,027,081	$	-	Deposits	$	3,729,596	$	3,716,190	$	—	$	3,716,190	$	—
Short-term borrowings		20,000		20,000				20,000
Long-term debt		13,409		12,894		-		12,894		-
Long-term debt (1)											Long-term debt (1)	1,188		1,148		—		1,148		—
Subordinated debt		7,421		7,405		-		7,405		-	Subordinated debt	66,357		63,895		—		63,895		—

(1)Long-term debt excludes finance lease obligations.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~


(Dollars in thousands)					Fair Value Measurements
December 31, 2021	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial instruments - assets
Held-to-maturity investment securities	$	329,257	$	330,626	$	—	$	330,626	$	—
Net loans and leases	3,089,799		3,118,416		—		—		3,118,416

Financial instruments - liabilities
Deposits	$	4,002,016	$	4,046,217	$	—	$	4,046,217	$	—
Long-term debt (1)	77,890		77,455		—		77,455		—
Subordinated debt	74,274		74,553		—		74,553		—

(1)Long-term debt excludes finance lease obligations.

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

~~(5)~~

~~Guarantees and Commitments~~

Note 9 - Guarantees, Commitments, and Contingencies

Guarantees

In the normal course of business, Mid Penn makes various commitments and incurs certain contingent liabilities which are not reflected in the accompanying consolidated financial statements. The commitments include various guarantees and commitments to extend credit. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Mid Penn evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation of the customer. Standby letters of credit and financial guarantees written are conditional commitments to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Mid Penn had ~~$20,904,000~~$51.7 million and ~~$14,000,000~~$55.6 million of standby letters of credit outstanding as of September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively. Mid Penn does not anticipate any losses because of these transactions. The amount of the liability as of September 30, ~~2017~~2022 and December 31, ~~2016~~2021 for payment under standby letters of credit issued was not considered material.

~~(6)~~

~~Subordinated Debt~~

Commitments

The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheet. The reserve for unfunded lending commitments was $85 thousand at September 30, 2022 and $72 thousand at December 31, 2021.

During the second quarter of 2020, Mid Penn’s Board of Directors had approved Mid Penn Bank to enter into a commitment to purchase a limited partnership interest in a low-income housing project to construct thirty-nine apartments and common amenities in Cumberland County, Pennsylvania. All of the units are expected to qualify for Federal Low-Income Housing Tax Credits ("LIHTC") as provided for in Section 42 of the Internal Revenue Code of 1986, as amended. Mid Penn’s limited partner capital contribution commitment is expected to be $10.8 million, which will be paid in installments over the course of

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construction of the low-income housing facilities. The investment in the limited partnership will be reported in other assets on the balance sheet and amortized over a ten-year period. The project has been conditionally awarded $1.2 million in annual LIHTCs by the Pennsylvania Housing Finance Agency, with a total anticipated LIHTC amount of $12.0 million to be received by Mid Penn over the ten-year amortization period. Mid Penn’s commitment to purchase the limited partnership interest is conditional upon (i) the review and approval of all closing documents, (ii) an opinion letter for tax counsel to the Partnership that the project qualifies for the LIHTCs, and (iii) review and approval by Mid Penn of other documents it may deem necessary.

As a result of the Riverview Acquisition on November 30, 2021, Mid Penn assumed a commitment to purchase a limited partnership interest in a low-income housing project to preserve and rehabilitate three buildings consisting of seventeen apartments and two commercial shops in Schuylkill County, Pennsylvania. All the units are expected to qualify for LIHTCs. Mid Penn’s limited partner capital contribution commitment is expected to be $4.4 million, which will be paid in installments over the course of construction of the low-income housing facilities. The investment in the limited partnership will be reported in other assets on the balance sheet and amortized over a ten-year period. Additionally, the agreement commits Mid Penn to a construction loan in the maximum principal amount of $3.5 million, which will bear interest at 5.5% annum with a term of twenty-four months. The project has been conditionally awarded $484 thousand in annual LIHTCs by the Pennsylvania Housing Finance Agency, with a total anticipated LIHTC amount of $4.8 million to be received by Mid Penn over the ten-year amortization period. Mid Penn’s commitment to purchase the limited partnership interest is conditional upon (i) the review and approval of all closing documents, (ii) an opinion letter for tax counsel to the Partnership that the project qualifies for the LIHTCs, and (iii) review and approval by Mid Penn of other documents it may deem necessary.

Contingencies

As of September 30, 2022, Mid Penn had received $42.6 million of nonrefundable loan processing fees related to the loans disbursed as a result of Mid Penn’s participation in the SBA’s PPP, consisting of (i) $20.9 million of loan processing fees received during the year ended December 31, 2020, (ii) $18.0 million of loan processing fees received during the year ended December 31, 2021, and (iii) $3.7 million during the nine months ended September 30, 2022. These PPP loan processing fees, and any offsetting loan origination costs, were deferred in accordance with FASB ASC 310-20, Receivables—Nonrefundable Fees and Other Costs, and have been, and will continue to be, amortized to interest and fees on loans and leases on the consolidated statement of income over the life of the respective loans.

The processing fees received from the SBA for administering the application for, and disbursing of, the PPP loans may be subject to clawback (or if the SBA has not yet paid the fee, the fee may not be paid), after full disbursement of a PPP loan if (i) the PPP loan is cancelled or voluntarily terminated and repaid after disbursement but before the borrower certification safe harbor date, (ii) the PPP loan is cancelled, terminated, or repaid after disbursement (and after the borrower certification safe harbor date) because the SBA conducted a loan review and determined that the borrower was ineligible for a PPP loan, or (iii) the lender has not fulfilled its obligations under the PPP regulations.

As of September 30, 2022, Mid Penn is not aware of any PPP loans outstanding, for which fees have been received from the SBA, that have been cancelled, terminated, or repaid due to a borrower being determined to be ineligible for a PPP loan.

Litigation

Mid Penn is subject to lawsuits and claims arising out of its normal conduct of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material adverse effect on the consolidated financial condition of Mid Penn.

Note 10 - Debt

Short-term FHLB and Correspondent Bank Borrowings

Short-term borrowings generally consist of federal funds purchased and advances from the FHLB with an original maturity of less than a year. Federal funds purchased from correspondent banks mature in one business day and reprice daily based on the Federal Funds rate. Advances from the FHLB are collateralized by the Bank’s investment in the common stock of the FHLB and by a blanket lien on selected loan receivables comprised principally of real estate secured loans within the Bank’s portfolio totaling $2.1 billion at September 30, 2022. The Bank had a short-term borrowing capacity from the FHLB as of September 30, 2022 up to the Bank’s unused borrowing capacity of $1.2 billion (equal to $1.5 billion of maximum borrowing capacity, less the aggregate amount of FHLB letter of credits securing public funds deposits, and other FHLB advances and obligations outstanding) upon satisfaction of any stock purchase requirements of the FHLB. No draws were outstanding on short-term FHLB or correspondent bank borrowings as of September 30, 2022 and December 31, 2021.

The Bank also has unused overnight lines of credit with other correspondent banks amounting to $35.0 million at September 30, 2022. No draws have been made on these lines of credit and accordingly the balance was zero on both September 30, 2022 and December 31, 2021.

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Short-term PPPLF Borrowings

As of September 30, 2022 and December 31, 2021, the Bank paid all funding obtained from the Federal Reserve through the Paycheck Protection Program Liquidity Facility (“PPPLF”). The PPPLF allowed banks to pledge PPP loans as collateral to borrow funds for up to a term of five years (to match the term of the respective PPP loans) at an interest rate of 0.35%.

Long-term Debt

As of September 30, 2022, and December 31, 2021, the Bank had long-term debt outstanding in the amount of $4.5 million and $81.3 million, respectively, consisting primarily of FHLB fixed rate instruments, as well as one finance lease obligation.

As a member of the FHLB, the Bank can access a number of credit products which are utilized to provide liquidity. The FHLB fixed rate instruments obtained by the Bank are secured under the terms of a blanket collateral agreement with the FHLB consisting of FHLB stock and qualifying Bank loan receivables, principally real estate secured loans. The Bank also obtains letters of credit from the FHLB to secure certain public fund deposits of municipality and school district customers who agree to use of the FHLB letters of credit as a legally allowable alternative to investment pledging. These FHLB letter of credit commitments totaled $265.3 million as of September 30, 2022 and $450.9 million as of December 31, 2021.

The following table presents a summary of long-term debt as of September 30, 2022 and December 31, 2021.


(Dollars in thousands)	September 30, 2022		December 31, 2021
FHLB fixed rate instruments:
Due April 2022, 0.86343%	$	—	$	70,000
Due March 2023, 0.7514%	—		6,500
Due August 2026, 4.80%	1,156		1,353
Due February 2027, 6.71%	32		37
Total FHLB fixed rate instruments	1,188		77,890
Lease obligations included in long-term debt	3,313		3,380
Total long-term debt	$	4,501	$	81,270

Note 11 - Subordinated Debt and Trust Preferred Securities

Subordinated Debt Issued December 2015

On December 9, 2015, Mid Penn sold ~~$7,500,000 aggregate~~$7.5 million of subordinating notes (the "2015 Notes") due in 2025.

The 2015 Notes paid interest at a rate of 5.15% per year for the first five years outstanding, including the three months ended March 31, 2020. Beginning January 1, 2021, the 2015 Notes bore interest at a floating rate based on the Wall Street Journal’s Prime Rate plus 0.50%, provided that the interest rate applicable to the outstanding principal balance was at no time less than 4.00%. Interest was payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year, beginning on January 1, 2016. The 2015 Notes were redeemable in whole or in part, without premium or penalty, at any time on or after December 9, 2020, and prior to December 9, 2025. On August 8, 2022, Mid Penn redeemed all of the 2015 Notes.

Subordinated Debt Assumed November 2021 with the Riverview Acquisition

On November 30, 2021, Mid Penn completed its acquisition of Riverview and assumed $25.0 million of subordinated notes (the “Riverview Notes”). In accordance with purchase accounting principles, the Riverview Notes were assigned a fair value premium of $2.3 million. The notes are treated as Tier 2 capital for regulatory reporting purposes.

The Riverview Notes were entered into by Riverview on October 6, 2020 with certain qualified institutional buyers and accredited institutional investors. The Riverview Notes have a maturity date of October 15, 2030 and initially bear interest, payable semi-annually, at a fixed annual rate of 5.75% per annum until October 15, 2025. Commencing on that date, the interest rate applicable to the outstanding principal amount due will be reset quarterly to an interest rate per annum equal to the then current three-month secured overnight financing rate ("SOFR") plus 563 basis points, payable quarterly until maturity. Mid Penn may redeem the Riverview Notes at par, in whole or in part, at its option, anytime beginning on October 15, 2025.

Trust Preferred Securities Assumed November 2021 with the Riverview Acquisition

As a result of the merger with Riverview, Mid Penn assumed the subordinated debentures that Riverview had assumed in its acquisition of CBT Financial Corp. ("CBT") on October 1, 2017 (the “CBT 2017 Notes”). In 2003, a trust formed by CBT issued $5.2 million of floating rate trust preferred securities as part of a pooled offering of such securities, which are adjusted quarterly to the three-month LIBOR rate plus 2.95%. CBT issued subordinated debentures to the trust in exchange for

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ownership of all of the common securities of the trust and the proceeds of the offering; the debentures represent the sole asset of the trust. CBT became eligible to redeem the subordinated debentures, in whole but not in part, beginning in 2008 at a price of 100% of face value. The subordinated debentures must be redeemed no later than 2033.

Similarly, in 2005, a trust formed by CBT issued $4.1 million of fixed rate trust preferred securities as part of a pooled offering of such securities (the “CBT 2015 Notes”). CBT issued subordinated debentures to the trust in exchange for ownership of all of the common securities of the trust and the proceeds of the offering; the debentures represent the sole asset of the trust. CBT became eligible to redeem the subordinated debentures, in whole but not in part, beginning in 2010 at a price of 100% of face value. Interest payments on the debentures may be deferred at any time at the election of Mid Penn for up to 20 consecutive quarterly periods. Interest on the debentures will accrue during the extension period, and all accrued principal and interest must be paid at the end of the extension period. During an extension period, Mid Penn may not declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to any of Mid Penn’s capital stock.

In accordance with purchase accounting principles, the CBT 2017 Notes and CBT 2015 Notes assumed from Riverview were assigned a fair value premium of $6 thousand. The subordinated debentures are treated as Tier 1 capital for regulatory reporting purposes.

Subordinated Debt (“Issued December 2020

On December 22, 2020, Mid Penn entered into agreements for and sold, at 100% of their principal amount, an aggregate of $12.2 million of its subordinated notes due December 2030 (the “December 2020 Notes”) ~~due 2025.~~on a private placement basis to accredited investors. The December 2020 Notes are treated as Tier 2 capital for regulatory capital purposes.

The December 2020 Notes bear interest at a rate of ~~5.15%~~4.5% per year for the first five years and then float at the Wall Street Journal’s Prime Rate, provided that the interest rate applicable to the outstanding principal balance during the period the December 2020 Notes are floating will at no time be less than 4.5%. Interest is payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, beginning on March 31, 2021. The December 2020 Notes will mature on December 31, 2030 and are redeemable, in whole or in part, without premium or penalty, on any interest payment date on or after December 31, 2025 and prior to December 31, 2030, subject to any required regulatory approvals. Additionally, if (i) all or any portion of the December 2020 Notes cease to be deemed Tier 2 Capital, (ii) interest on the December 2020 Notes fails to be deductible for United States federal income tax purposes, or (iii) Mid Penn will be considered an “investment company,” Mid Penn may redeem the December 2020 Notes, in whole but not in part, by giving 10 days’ notice to the holders of the December 2020 Notes. In the event of a redemption described in the previous sentence, Mid Penn will redeem the December 2020 Notes at 100% of the principal amount of the December 2020 Notes, plus accrued and unpaid interest thereon to but excluding the date of redemption.

Holders of the December 2020 Notes may not accelerate the maturity of the December 2020 Notes, except upon the bankruptcy, insolvency, liquidation, receivership or similar event of Mid Penn or the Bank. Related parties held $750 thousand of the December 2020 Notes as of September 30, 2022 and December 31, 2021.

Subordinated Debt Issued March 2020

On March 20, 2020, Mid Penn entered into agreements with accredited investors who purchased $15.0 million aggregate principal amount of its subordinated notes due March 2030 (the “March 2020 Notes”). As a result of Mid Penn’s merger with Riverview on November 30, 2021, $6.9 million of the March 2020 Notes balance was redeemed as Riverview was a holder of the March 2020 Notes.The balance of March 2020 Notes outstanding as of September 30, 2022 was $8.1 million. The March 2020 Notes are intended to be treated as Tier 2 capital for regulatory capital purposes.

The March 2020 Notes bear interest at a rate of 4.0% per year for the first five years and then float at the Wall Street Journal’s Prime Rate, provided that the interest rate applicable to the outstanding principal balance during the period the March 2020 Notes are floating will at no time be less than 4.25%. Interest is payable semi-annually in arrears on June 30 and December 30 of each year, beginning on June 30, 2020, for the first five years after issuance and will be payable quarterly in arrears thereafter on March 30, June 30, September 30 and December 30. The March 2020 Notes will mature on March 30, 2030 and are redeemable in whole or in part, without premium or penalty, at any time on or after March 30, 2025 and prior to March 30, 2030. Additionally, if all or any portion of the March 2020 Notes cease to be deemed Tier 2 Capital, Mid Penn may redeem, on any interest payment date, all or part of the 2020 Notes. In the event of a redemption described in the previous sentence, Mid Penn will redeem the March 2020 Notes at 100% of the principal amount of the March 2020 Notes, plus accrued and unpaid interest thereon to but excluding the date of redemption.

Holders of the March 2020 Notes may not accelerate the maturity of the March 2020 Notes, except upon the bankruptcy, insolvency, liquidation, receivership or similar event of Mid Penn or the Bank. Related parties held $1.7 million of the March 2020 Notes as of September 30, 2022 and December 31, 2021.

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Subordinated Debt Issued December 2017

On December 19, 2017, Mid Penn entered into agreements with investors to purchase $10.0 million aggregate principal amount of its subordinated notes due 2028 (the “2017 Notes”). The 2017 Notes are intended to be treated as Tier 2 capital for regulatory capital purposes.

The 2017 Notes bear interest at a rate of 5.25% per year for the first five years and then float at the Wall Street Journal’s Prime Rate plus 0.50%, provided that the interest rate applicable to the outstanding principal balance will at no time be less than ~~4.0%~~5.0%. Interest is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2018, for the first five years after issuance and will be payable quarterly in arrears thereafter on January 1,15, April 1,15, July 115, and October ~~1 of each year, beginning on January 1, 2016.~~15. The 2017 Notes will mature on ~~December 9, 2025~~January 1, 2028 and are redeemable in whole or in part, without premium or penalty, at any time on or after December ~~9, 2020,~~21, 2022, and prior to ~~December 9, 2025.~~January 1, 2028. Additionally, Mid Penn may redeem the 2017 Notes in whole at any time, or in part from time to time, upon at least 30 days’ notice if: (i) a change or prospective change in law occurs that could prevent Mid Penn from deducting interest payable on the 2017 Notes for U.S. federal income tax purposes; (ii) an event occurs that precludes the 2017 Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) Mid Penn becomes required to register as an investment company under the Investment Company Act of 1940, as ~~amended,~~amended. In the event of a redemption described in ~~each case~~the previous sentence, Mid Penn will redeem the 2017 Notes at 100% of the principal amount of the ~~subordinated notes,~~2017 Notes, plus accrued and unpaid interest thereon to but excluding the date of redemption.

Holders of the 2017 Notes may not accelerate the maturity of the 2017 Notes, except upon ~~Mid Penn’s or Mid Penn Bank’s~~the bankruptcy, insolvency, liquidation, receivership or similar ~~event.~~

event of Mid Penn or the Bank. Related parties held $1.5 million of the 2017 Notes as of September 30, 2022 and December 31, 2021.

ASC Subtopic 835-30, Simplifying the Presentation of Debt Issuance Costs, requires that debt issuance costs be reported in the balance sheet as a direct deduction from the face amount of the related liability. The unamortized debt issuance costs associated with the 2017 Notes were ~~$79,000~~$25 thousand at September 30, 2022 and the 2015 Notes and the 2017 ~~and $86,000~~Notes were collectively $44 thousand at December 31, ~~2016.~~

2021.

~~(7)~~

~~Defined Benefit Plans~~

Note 12 - Defined Benefit Plans

Mid Penn has an unfunded noncontributory defined benefit retirement plan for directors. The plan provides defined benefits based on years of service. ~~In addition,~~ Mid Penn also sponsors a defined benefit ~~health care~~healthcare plan that provides post-retirement medical benefits and life insurance to qualifying full-time employees. These ~~health care~~healthcare and life insurance plans are ~~noncontributory.~~noncontributory and each plan uses a December 31 measurement date.

As a result of the acquisition of Scottdale on January 8, 2018, Mid Penn assumed a noncontributory defined benefit pension plan covering certain former employees of Scottdale. Mid Penn does not expect any necessary contributions to this defined benefit plan during the year ended 2022. A December 31 measurement date for the ~~plans~~plan is used.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

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The components of net periodic benefit costs from these defined benefit plans are as follows:


	Three Months Ended September 30,										Three Months Ended September 30,
(Dollars in thousands)	Pension Benefits				Other Benefits					(Dollars in thousands)	Pension Benefits				Other Benefits
	2017		2016		2017			2016			2022		2021		2022		2021
Service cost	$	9	$	9	$	1		$	1	Service cost	$	36	$	33	$	1	$	1
Interest cost		11		12		5			5	Interest cost	43		40		9		3
Amortization (accretion) of prior service cost		4		8		(6	)		3
Net periodic benefit cost	$	24	$	29	$	-		$	9
Expected return on plan assets										Expected return on plan assets	(59)		(57)		—		—
Accretion of prior service cost										Accretion of prior service cost	—		—		(5)		(5)
Amortization of net (gain) loss										Amortization of net (gain) loss	(2)		—		1		1
Net periodic benefit expense										Net periodic benefit expense	$	18	$	16	$	6	$	—

											Nine Months Ended September 30,
(Dollars in thousands)										(Dollars in thousands)	Pension Benefits				Other Benefits
											2022		2021		2022		2021
Service cost										Service cost	$	108	$	98	$	11	$	2
Interest cost										Interest cost	130		120		27		7
Expected return on plan assets										Expected return on plan assets	(177)		(170)		—		—
Accretion of prior service cost										Accretion of prior service cost	—		—		(15)		(15)
Amortization of net (gain) loss										Amortization of net (gain) loss	(5)		—		6		5
Settlement gain										Settlement gain	—		(49)		—		—
Net periodic benefit expense (income)										Net periodic benefit expense (income)	$	55	$	(1)	$	29	$	(1)

Nine Months Ended September 30,

(Dollars in thousands)
Pension Benefits

Other Benefits

2017

2016

2017

2016

Service cost
$
26

$
26

$
3

$
3

Interest cost

32

35

15

17

Amortization (accretion) of prior service cost

11

33

(17
)

94

Net periodic benefit cost
$
69

$
94

$
1

$
114

Service costs are reported as a component of salaries and employee benefits on the consolidated statement of income, while interest costs, expected return on plan assets and amortization (accretion) of prior service cost are reported as a component of other income.

~~(8)~~

~~Accumulated Other Comprehensive Loss~~

Note 13 - Common Stock and Earnings Per Share

Treasury Stock Repurchase Program

Mid Penn adopted a treasury stock repurchase program ("Program") initially effective March 19, 2020, and the program remains available as it was extended through March 19, 2023 by Mid Penn’s Board of Directors on March 23, 2022. The ~~components~~Program authorizes the repurchase of ~~accumulated~~up to $15.0 million of Mid Penn’s outstanding common stock, which represented approximately 3.5% of the issued shares based on Mid Penn’s closing stock price and shares issued as of March 31, 2022. Under the Program, Mid Penn may conduct repurchases of its common stock through open market transactions (which may be by means of a trading plan adopted under SEC Rule 10b5-1) or in privately negotiated transactions. Repurchases under the Program are made at the discretion of management and are subject to market conditions and other ~~comprehensive loss,~~factors. There is no guarantee as to the exact number of shares that Mid Penn may repurchase.

The Program may be modified, suspended or terminated at any time, in Mid Penn’s discretion, based upon a number of factors, including liquidity, market conditions, the availability of alternative investment opportunities and other factors Mid Penn deems appropriate. The Program does not obligate Mid Penn to repurchase any shares.

During the nine months ended September 30, 2022 and 2021 Mid Penn repurchased 109,891 and 5,800 shares of common stock, respectively. As of September 30, 2022, Mid Penn had repurchased 208,343 shares of common stock at an average price of $23.42 per share under the Program. The Program has $10.1 million remaining available for repurchase as of September 30, 2022.

Shares Converted Pursuant to Riverview Merger

As announced on a Form 8-K on December 1, 2021, pursuant to the terms of the merger agreement, each share of Riverview common stock issued and outstanding as of November 30, 2021 was converted into the right to receive 0.4833 shares of Mid Penn common stock. Cash was paid to Riverview shareholders in lieu of any fractional shares. As a result of the merger, Mid Penn issued 4,519,776 shares of Mid Penn common stock. The additional shares issued on November 30, 2021 significantly impacted the weighted average number of shares outstanding used for the earnings per share calculation for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021.

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MID PENN BANCORP, INC.

Underwritten Public Follow-On Common Stock Offering

As previously announced on a Form 8-K on May 4, 2021, Mid Penn completed an underwritten public offering of 3.0 million shares of common stock at a price of $25.00 per share, with the aggregate gross proceeds of the offering totaling $74.8 million before underwriting discounts and offering expenses. The net proceeds of ~~taxes,~~the offering, after deducting $4.5 million of combined underwriting discounts and other offering expenses, were $70.2 million. The additional shares issued on May 4, 2021 significantly impacted the weighted average number of shares outstanding used for the earnings per share calculation for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

Dividend Reinvestment Plan

Under Mid Penn’s amended and restated dividend reinvestment plan ("DRIP"), 330,750 shares of Mid Penn’s authorized but unissued common stock are ~~as follows:~~

reserved for issuance. The DRIP also allows for voluntary cash payments, within specified limits, to be used for the purchase of additional shares.

(Dollars in thousands)

Unrealized Loss
on Securities

Defined Benefit
Plans

Accumulated Other
Comprehensive
Loss

Balance - September 30, 2017

$
(1,089
)

$
59

$
(1,030
)

Balance - December 31, 2016

$
(2,919
)

$
66

$
(2,853
)
Restricted Stock Plan

~~(9)~~

~~Restricted Common Stock~~

~~On June 25, 2014, the~~Under Mid Penn’s 2014 Restricted Stock Plan, ~~(the “Plan”) provides~~which was amended in 2020, Mid Penn may grant awards ~~that shall~~ not ~~exceed,~~exceeding, in the aggregate, ~~100,000~~200,000 shares of common stock. ~~Awards under the~~The Plan ~~are limited to~~was established for employees and directors of ~~the Company~~Mid Penn and the Bank, selected by the Compensation Committee of the Board of Directors, to ~~advance~~align the ~~best~~ interest of plan participants with those of Mid Penn’s shareholders. The plan provides those persons who have a responsibility for its growth with additional incentives by allowing them to acquire an ownership interest in Mid Penn and ~~its shareholders.~~

thereby encouraging them to contribute to the success of the company.

As of September 30, 2022, a total of 164,537 restricted shares were granted under the Plan, of which 5,073 shares were forfeited and available for reissuance, 90,798 shares were vested, and the remaining 68,666 shares were unvested. The Plan shares granted and vested resulted in $237 thousand and $694 thousand in share-based compensation expense for the three and nine months ended September 30, 2022, respectively, and $227 thousand and $533 thousand of share-based compensation expense was recorded for the three and nine months ended September 30, 2021, respectively.

Share-based compensation expense relating to restricted stock is calculated using grant date fair value and is recognized on a straight-line basis over the vesting periods of the ~~awards~~awards. Restricted shares granted to employees vest in equal amounts on the anniversary of the grant date over the vesting period and the expense is a component of salaries and benefits ~~expense. As~~expense on the consolidated statement of ~~September 30, 2017,~~income. The employee grant vesting period is determined by the terms of each respective grant, with vesting periods generally between one and four years. Restricted shares granted to directors have a ~~total~~twelve-month vesting period, and the expense is a component of ~~26,485 restricted shares were granted under~~directors’ fees and benefits within the ~~plan, with 6,986~~other expense line item on the consolidated statement of the granted shares being vested, while the remaining 19,499 granted shares remain unvested. The Plan grants and vestings resulted in $30,000 in compensation expense for the three months ended September 30, 2017, while $17,000 expense was recorded for the three months ended September 30, 2016. Compensation expense related to the Plan was $69,000 for the nine months ended September 30, 2017, while it was $34,000 for the same period in 2016.

income.

~~(10)~~

~~Earnings per Common Share~~

Earnings Per Common Share

Basic earnings per common share are computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during each of the ~~years~~periods presented. Diluted earnings per common share are calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding plus common shares that would have been outstanding if dilutive potential common shares, consisting of unvested restricted stock, had been issued. The effect of dilutive unvested restricted stock was not material and did not result in a difference, when rounded to the whole cent, between the basic earnings per share compared to the diluted earnings per share for any of the periods presented.

As previously announced on a Form 8-K on May 4, 2021, Mid Penn completed an underwritten public offering of 3.0 million shares of common stock at a price of $25.00 per share, with the aggregate gross proceeds of the offering totaling $74.8 million before underwriting discounts and offering expenses. The net proceeds of the offering after deducting the underwriting discount and other offering expenses were $70.2 million. Additionally, as previously announced on a Form 8-K on December 1, 2021, Mid Penn issued 4,519,776 shares of common stock as a result of the merger with Riverview on November 30, 2021. The additional shares issued on May 4, 2021 and November 30, 2021 significantly impacted the weighted average number of shares outstanding used for the three and nine months ended September 30, 2022 earnings per share calculations compared to the three and nine months ended September 30, 2021.

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MID PENN BANCORP, INC.

The following data ~~show~~shows the amounts used in computing basic and diluted earnings per common share.

~~The computations of basic earnings per common share follow:~~


											Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands, except per share data)	Three Months Ended September 30,				Nine Months Ended September 30,					(Dollars in thousands, except per share data)	2022		2021		2022		2021
	2017			2016	2017				2016
Net income	$	2,249	$	1,901	$	$	6,588	$	5,728	Net income	$	15,481	$	9,787	$	39,087	$	28,712

Weighted average common shares outstanding		4,237,965		4,230,181			4,236,604		4,228,308
Weighted average common shares outstanding (basic)										Weighted average common shares outstanding (basic)	15,877,592		11,423,487		15,922,945		10,064,655
Effect of dilutive unvested restricted stock grants										Effect of dilutive unvested restricted stock grants	10,279		8,605		22,329		12,753
Weighted average common shares outstanding (diluted)										Weighted average common shares outstanding (diluted)	15,887,871		11,432,092		15,945,274		10,077,408

Basic earnings per common share	$	0.53	$	0.45	$	$	1.56	$	1.35	Basic earnings per common share	$	0.97	$	0.86	$	2.45	$	2.85
Diluted earnings per common share										Diluted earnings per common share	0.97		0.86		2.45		2.85

~~Mid Penn had~~

There were no ~~dilutive~~antidilutive instruments ~~outstanding during the periods ended~~at September 30, ~~2017~~2022 and ~~2016.~~

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

2021.

~~(11)~~

~~Recent Accounting Pronouncements~~

~~ASU 2017-08: The Financial Accounting Standards Board (“FASB”) issued ASU 2017-08,~~ ~~Premium Amortization on Purchased Callable Debt Securities.~~

The ASU shortens the amortization period for premiums on purchased callable debt securities to the earliest call date (i.e., yield-to-earliest call amortization), rather than amortizing over the full contractual term, but does not change the accounting for securities held at a discount.

The ASU applies to callable debt securities with explicit, non-contingent call features that are callable at fixed prices and on preset dates. If a security may be prepaid based upon prepayments of the underlying loans, not because the issuer exercised a date specific call option, it is excluded from the scope of the new standard. However, for instruments with contingent call features, once the contingency is resolved and the security is callable at a fixed price and preset date, the security is within the scope of the amendments. Further, it applies to all premiums on callable debt securities, regardless of how they were generated.

The ASU requires companies to reset the effective yield using the payment terms of the debt security if the call option is not exercised on the earliest call date. If the security has additional future call dates, any excess of the amortized cost basis over the amount repayable by the issuer at the next call date should be amortized to the next call date.

It is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those years. For all other entities, the amendments are effective for annual periods beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

Mid Penn has early adopted this standard, and the financial statements as of and for the three and nine month periods ended September 30, 2017, reflect the impact of premium amortization on callable debt securities to the earliest call date. The adoption of this ASU did not have a material impact on Mid Penn’s consolidated financial statements.

~~ASU 2017-07: The FASB issued ASU 2017-07,~~ ~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.~~

The ASU requires that an employer disaggregate the service cost component from the other components of net benefit cost. Service cost must be presented in the same line item(s) as other employee compensation costs. These costs are generally included within income from continuing operations, but in some cases may be eligible for capitalization, if certain criteria are met. All other components of net benefit cost must be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. These generally include interest cost, actual return on plan assets, amortization of prior service cost included in accumulated other comprehensive income, and gains or losses from changes in the value of the projected benefit obligation or plan assets. If a separate line item is used to present the other components of net benefit cost, it must be appropriately described. If a separate line item is not used, an entity must disclose the line item(s) in the income statement that includes the other components of net benefit cost. The ASU clarifies that these costs are not eligible for capitalization.

The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those years. For other entities, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted as of the beginning of an annual period.

~~As disclosed in Note 7,~~ ~~Defined Benefit Plans~~, Mid Penn does disclose the service cost component of net benefit cost, but the related amounts are not material. Accordingly, when this ASU is implemented as required, the impact to reported salaries and employee benefits expense for interim and annual periods is expected to be immaterial.

~~ASU 2017-05: The FASB issued ASU 2017-05,~~ ~~Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.~~

The ASU was issued to clarify the scope of Subtopic 610-20 and to add guidance for partial sales of nonfinancial assets, including partial sales of real estate. Historically, U.S. GAAP contained several different accounting models to evaluate whether the transfer of certain assets qualified for sale treatment. Moving forward, the new standard reduces the number of potential accounting models that might apply and clarifies which model does apply in various circumstances. Specifically, it clarifies the scope of Subtopic 610-20 by defining the term “in substance nonfinancial asset”. If substantially all of the fair value of the assets (recognized and unrecognized) promised to a counterparty in a contract is concentrated in nonfinancial assets, a financial asset in the same arrangement would still be considered part of an in substance nonfinancial asset. Also, nonfinancial assets may include nonfinancial assets contained within a legal entity that is transferred to a counterparty (e.g., through transfer of ownership interest). It clarifies also that derecognition of a business is not within the scope of Subtopic 610-20, but rather, is governed by Topic 810.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

In addition, the ASU indicates an entity should identify each distinct nonfinancial asset (e.g., real estate and inventory) or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it.

Finally, the ASU adds guidance on accounting for partial sales of nonfinancial assets. It requires an entity to derecognize a distinct nonfinancial asset or distinct in substance nonfinancial asset in a partial sale transaction when two criteria are met: 1) the entity does not have (or ceases to have) a controlling financial interest in the legal entity that holds the asset in accordance with Topic 810, and 2) the entity transfers control of the asset in accordance with Topic 606.

The effective date and transition requirements for the ASU are the same as the effective date and transition requirements of Topic 606, and must be applied at the same date that Topic 606 is initially applied. That is, the amendments are effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods within those periods, and for nonpublic entities for annual reporting periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019. Consistent with Topic 606, early adoption is permitted but no earlier than annual reporting periods beginning after December 15, 2016 for all entities.

Mid Penn has evaluated this ASU and does not anticipate the adoption to have a material impact on its consolidated financial statements since Mid Penn typically does not engage in partial sale transactions.

~~ASU 2017-04: The FASB issued ASU 2017-04,~~ ~~Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.~~

The amendments in this ASU are required for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. To simplify the subsequent measurement of goodwill, the Update eliminates Step 2 from the goodwill impairment test. An entity should now perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

The ASU eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment, and if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

An entity should apply the amendments in this Update on a prospective basis. A public business entity should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

Mid Penn plans to early adopt this ASU for its annual goodwill impairment test as of year-end 2017 by comparing its fair value to its carrying value at that time. The adoption of this ASU is not expected to have a material impact on Mid Penn’s consolidated financial statements.

~~ASU 2016-15: The FASB issued ASU 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments.~~

~~The ASU clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments are intended to reduce diversity in practice.~~

~~Cash payments for debt prepayment or extinguishment costs will be classified in financing activities.~~

~~Upon settlement~~

Table of zero-coupon bonds and bonds with insignificant cash coupons, the portion of the payment attributable to imputed interest will be classified as an operating activity, while the portion of the payment attributable to principal will be classified as a financing activity.

Contents

MID PENN BANCORP, INC.

Cash paid by an acquirer that isn’t soon after a business combination for the settlement of a contingent consideration liability will be separated between financing activities and operating activities. Cash payments up to the amount of the contingent consideration liability recognized at the acquisition date will be classified in financing activities; any excess will be classified in operating activities. Cash paid soon after the business combination will be classified in investing activities.

Cash proceeds received from the settlement of insurance claims will be classified on the basis of the related insurance coverage (that is, the nature of the loss). Cash proceeds from lump-sum settlements will be classified based on the nature of each loss included in the settlement.

Cash proceeds received from the settlement of corporate-owned life insurance (“COLI”) and BOLI policies will be classified as cash inflows from investing activities. Cash payments for premiums on COLI and BOLI may be classified as cash outflows for investing, operating, or a combination of both.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

A transferor’s beneficial interest obtained in a securitization of financial assets will be disclosed as a noncash activity, and cash received from beneficial interests will be classified in investing activities.

~~Distributions received from equity method investees will be classified using either a cumulative earnings approach or a look- through approach as an accounting policy election.~~

The ASU contains additional guidance clarifying when an entity should separate cash receipts and cash payments and classify them into more than one class of cash flows (including when reasonable judgment is required to estimate and allocate cash flows) versus when an entity should classify the aggregate amount into one class of cash flows on the basis of predominance.

The amendments are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period.

Mid Penn is currently evaluating this ASU, particularly related to cash payments for debt prepayment costs and cash proceeds received from the settlement of BOLI policies as these areas might affect Mid Penn in the future. This ASU, however, is not expected to have a material impact on Mid Penn’s operating results and consolidated financial statements because the guidance only affects the classification within the statement of cash flows.

~~ASU 2016-13: The FASB issued ASU 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.~~

The ASU requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (“CECL”) model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument.

The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities. The allowance for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”) should be determined in a similar manner to other financial assets measured on an amortized cost basis. However, upon initial recognition, the allowance is added to the purchase price (“gross up approach”) to determine the initial amortized cost basis. The subsequent accounting for PCD financial assets is the same expected loss model described above.

The Update has tiered effective dates, with early adoption permitted for all entities as of the fiscal year beginning after December 15, 2018. For public business entities that are SEC filers, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. For all other entities, including not-for-profit entities and employee benefit plans within the scope of Topics 960 through 965 on plan accounting, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021.

Mid Penn is currently evaluating the details of this ASU and the impact the guidance will have on Mid Penn’s consolidated financial statements. Mid Penn expects that it is possible that the ASU may result in an increase in the allowance for credit losses resulting from the change to expected losses for the estimated life of the financial asset, including an allowance for debt securities. The amount of the change in the allowance for credit losses, if any, resulting from the new guidance will be impacted by the portfolio composition and asset quality at the adoption date, as well as economic conditions and forecasts at the time of adoption.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~ASU 2016-09:~~ ~~The FASB issued ASU 2016-09,~~ ~~Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.~~

The ASU introduces targeted amendments intended to simplify the accounting for stock compensation. Specifically, the ASU requires all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) to be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits, and assess the need for a valuation allowance, regardless of whether the benefit reduces taxes payable in the current period. That is, off balance sheet accounting for net operating losses stemming from excess tax benefits would no longer be required and instead such net operating losses would be recognized when they arise. Existing net operating losses that are currently tracked off balance sheet would be recognized, net of a valuation allowance if required, through an adjustment to opening retained earnings in the period of adoption. Entities will no longer need to maintain and track an “APIC pool.” The ASU also requires excess tax benefits to be classified along with other income tax cash flows as an operating activity in the statement of cash flows.

In addition, the ASU elevates the statutory tax withholding threshold to qualify for equity classification up to the maximum statutory tax rates in the applicable jurisdiction(s). The ASU also clarifies that cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity. The ASU provides an optional accounting policy election (with limited exceptions), to be applied on an entity-wide basis, to either estimate the number of awards that are expected to vest (consistent with existing U.S. GAAP) or account for forfeitures when they occur.

~~The amendments are effective for public business entities for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted.~~

~~As disclosed in Note 9,~~ ~~Common Stock~~, Mid Penn currently provides share-based stock compensation to employees and directors of the Company and the Bank selected by the Compensation Committee of the Board of Directors, to advance the best interest of Mid Penn and its shareholders. Mid Penn adopted this ASU in the first quarter of 2017 and the adoption had no material impact on Mid Penn’s consolidated financial statements.

~~ASU 2016-02:~~ ~~The FASB issued ASU 2016-02,~~ ~~Leases.~~

The new leases standard applies a right-of-use (“ROU”) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the statement of cash flows, differs depending on the lease classification.

The new leases standard requires a lessor to classify leases as either sales-type, direct financing or operating, similar to existing U.S. GAAP. Classification depends on the same five criteria used by lessees plus certain additional factors. The subsequent accounting treatment for all three lease types is substantially equivalent to existing U.S. GAAP for sales-type leases, direct financing leases, and operating leases. However, the new standard updates certain aspects of the lessor accounting model to align it with the new lessee accounting model, as well as with the new revenue standard under Topic 606.

Lessees and lessors are required to provide certain qualitative and quantitative disclosures to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The new leases standard addresses other considerations including identification of a lease, separating lease and non-lease components of a contract, sale and leaseback transactions, modifications, combining contracts, reassessment of the lease term, and re-measurement of lease payments. It also contains comprehensive implementation guidance with practical examples.

The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Specific transition requirements apply.

Mid Penn occupies certain offices under non-cancelable operating lease agreements, which currently are not reflected in its consolidated statement of condition. Mid Penn expects to recognize lease liabilities and ROU assets associated with these lease agreements as required by the ASU; however, the extent of the prospective impact on Mid Penn’s consolidated financial statements and the materiality will be dependent upon the extent and type of lease arrangements involving Mid Penn at the time of the adoption of this standard.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~ASU 2016-01:~~ ~~The FASB issued ASU 2016-01,~~ ~~Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~.

This ASU requires equity investments to be measured at fair value with changes in fair value recognized in net income, excluding equity investments that are consolidated or accounted for under the equity method of accounting. The ASU allows equity investments without readily determinable fair values to be measured at cost minus impairment, with a qualitative assessment required to identify impairment. The ASU also requires public companies to use exit prices to measure the fair value of financial instruments, eliminates the disclosure requirements related to measurement assumptions for the fair value of instruments measured at amortized cost, and requires separate presentation of financial assets and liabilities based on form and measurement category. In addition, for liabilities measured at fair value under the fair value option, the changes in fair value due to changes in instrument-specific credit risk should be recognized in OCI.

~~This ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years.~~

As of September 30, 2017, Mid Penn held $1,231,000 of equity investments (excluding restricted investments in bank stocks). Mid Penn does not expect to make significant increases in the volume of its equity investments; therefore, the adoption of this ASU is not expected to be material to Mid Penn’s consolidated financial statements.

~~ASU 2014-09: The FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606).~~

The amendments in this Update establish a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

~~In August 2015, the FASB issued ASU 2015-14,~~ ~~Revenue from contracts with Customers (Topic 606): Deferral of the Effective Date. This ASU defers the effective date of ASU 2014-09 for all entities by one year.~~

~~In March 2016, the FASB issued ASU 2016-08,~~ ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)~~, as an amendment to ASU 2014-09 to improve Topic 606, by reducing: (i) the potential for diversity in practice arising from inconsistent and application of the principal versus agent guidance, and (ii) the cost and complexity of applying Topic 606 both at transition and on an ongoing basis.

~~In April 2016, the FASB issued ASU 2016-10,~~ ~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, as an amendment to ASU 2014-09 to improve Topic 606~~, ~~by reducing: (i) the potential for diversity in practice at initial applications, and (ii) the cost and complexity of applying Topic 606 both at transition and on an ongoing basis.~~

~~In May 2016, the FASB issued ASU 2016-12,~~ ~~Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients~~. The amendments in this ASU do not change the core principles of Topic 606. These amendments affect only the narrow aspects of Topic 606: (i) Collectability Criterion, (ii) Presentation of Sales Taxes and Other Similar Taxes Collected from Customers, (iii) Noncash Consideration, (iv) Contract Modifications at Transition, and (v) Completed Contracts at Transition.

ASU 2014-09, including transition requirements for all amendments, is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. Early adoption is permitted as of the original effective date for interim and annual reporting periods in fiscal years beginning after December 15, 2016.

Mid Penn’s implementation efforts include the identification of revenue within the scope of the guidance, and our preliminary assessment indicates that certain non-interest income financial statement line items fall within the scope of this ASU. We expect to adopt this standard in the first quarter of 2018 using the modified retrospective approach, which requires a cumulative-effect adjustment to opening retained earnings in the period of adoption. Mid Penn does not expect the adoption of this accounting guidance to have a significant impact on our results of operation; however, we are still in the process of performing the quantitative analysis, including the review of certain contracts associated with in scope revenue streams. We expect the adoption will require additional qualitative and quantitative disclosure requirements related to revenue recognition within our quarterly and annual reports. Mid Penn’s review is ongoing, and it will continue to evaluate any prospective impact as additional guidance is issued and as its internal assessment progresses.

~~MID PENN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~(12)~~

~~Agreement and Plan of Merger~~

~~On March 29, 2017, Mid Penn entered into an Agreement and Plan of Merger (the “Merger Agreement”) with The Scottdale Bank and Trust Company.~~ ~~The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Scottdale will merge with and into Mid Penn Bank, with Mid Penn Bank as the surviving bank (the “Merger”).~~

If the merger is completed, Scottdale shareholders will have the right to receive for each share of Scottdale common stock they own, at their election, (i) $1,166 in cash or (ii) a fraction of a share (the “exchange ratio”) of Mid Penn common stock determined by dividing (y) $1,166 by (z) the 10 trading day per share volume-weighted average price for Mid Penn common stock ending on the date that is five business days prior to the closing of the merger (the “~~Average Price~~”), provided that in no event may the exchange ratio be less than 38.88 or greater than 44.86, respectively. Scottdale shareholders may also elect to receive a combination of cash and Mid Penn common stock. The Merger Agreement provides that not less than 90% of the outstanding shares of Scottdale common stock will be converted into the right to receive shares of Mid Penn common stock and the remainder of the outstanding shares of Scottdale common stock will be converted into the right to receive cash. However, the percentage of Scottdale common stock converted to the right to receive Mid Penn common stock could be adjusted down to 85% in the event that shareholders perfecting their dissenters’ rights reach 15% of the outstanding shares of Scottdale common stock.

Completion of the Merger is subject to a number of customary conditions, including, among others, (i) the approval of the Merger Agreement by the shareholders of both Scottdale and Mid Penn, (ii) the effectiveness of the registration statement to be filed by Mid Penn with the SEC relating to the Mid Penn common stock to be issued in the Merger, (iii) approval of the listing on The Nasdaq Stock Market of the shares of Mid Penn common stock to be issued in the Merger, (iv) the absence of any order or other legal restriction prohibiting the closing of the Merger, (v) receipt of required regulatory approvals without the imposition of any condition or requirement, excluding standard conditions that are normally imposed by the regulatory authorities in bank merger transactions, that would, in the good faith reasonable judgment of the Board of Directors of either Mid Penn or Scottdale, materially and adversely affect the business, operations, financial condition, property or assets of the combined enterprise or materially impair the value of Scottdale to Mid Penn or the value of Mid Penn to Scottdale, and (vi) Lawrence J Kiefer and Mid Penn Bank entering into a mutually acceptable employment agreement effective as of the closing. Each party’s obligations to complete the Merger is also subject to certain additional customary conditions, including: (a) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (b) performance in all material respects by the other party of its obligations under the Merger Agreement, (c) not more than 15% of the outstanding shares of Scottdale common stock have properly effected their dissenters rights, (d) the absence of any material adverse effect (as such term is defined in the Merger Agreement) with respect to the other party, and (e) the receipt by each party of an opinion from its counsel to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

Mid Penn and Scottdale have been working to obtain the required regulatory and shareholder approvals to move forward with the transaction and integration activities contemplated by the merger agreement. Both banks are holding special shareholder meetings on November 17, 2017, to vote to adopt the merger agreement. The meeting of Mid Penn shareholders will be held beginning at 9:00 a.m., local time, at the Halifax Area Ambulance and Rescue Association, Inc., 31 Bunker Hill Road, Halifax, Pennsylvania. The meeting of Scottdale shareholders will be held at 2:00 p.m., local time, at the Pleasant Valley Country Club, 440 Pleasant Valley Road, Connellsville, Pennsylvania.

~~MID PENN BANCORP, INC.~~

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is Management’s Discussion and Analysis of Consolidated Financial Condition as of September 30, ~~2017,~~2022, compared to year-end ~~2016,~~2021, and the Results of Operations for the three and nine months ended September 30, ~~2017,~~2022, compared to the same periods in ~~2016.~~2021. For comparative purposes, the September 30, ~~2016~~2021 and December 31, ~~2016~~2021 balances have been reclassified when, and if necessary, to conform to the ~~2017~~2022 presentation. Such reclassifications had no impact on net ~~income.~~income or shareholders’ equity. This discussion should be read in conjunction with the financial tables, statistics, and the audited financial statements and notes thereto included in the ~~Company’s~~Corporation’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2021 (the ~~“2016~~"2021 Annual ~~Report”~~Report"). The results of operations for interim periods are not necessarily indicative of operating results expected for the full year.

Caution About Forward-Looking Statements

Forward-looking statements involve risks, uncertainties and assumptions. Although Mid Penn generally does not make forward-looking statements unless Mid Penn’s management believes its management has a reasonable basis for doing so, Mid Penn cannot guarantee the accuracy of any forward-looking statements. Actual results may differ materially from those expressed in any forward-looking statements due to a number of uncertainties and risks, including the risks described in this Quarterly Report on Form 10-Q, the ~~2016~~2021 Annual Report, and other unforeseen risks. You should not put undue reliance on any forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q, even if subsequently made available by us on Mid Penn’s website or otherwise, and Mid Penn undertakes no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

Certain of the matters discussed in this document and in documents incorporated by reference herein, including matters discussed under the caption ~~“Management’s~~"Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations", may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Mid Penn to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. The words ~~“expect”~~"expect", ~~“anticipates”~~"anticipates", ~~“intend”~~"intend", ~~“plan”~~"plan", ~~“believe”~~"believe", ~~“estimate”~~"estimate", and similar expressions are intended to identify such forward-looking statements.

Mid Penn’s actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation:

•the effects of potentially slowing or volatile future economic conditions on Mid Penn and its customers;

•governmental monetary and fiscal policies, as well as legislative and regulatory changes;

•future actions or inactions of the ~~United States government,~~federal or state governments, including a failure to increase the government debt limit or a prolonged shutdown of the federal ~~government;~~

government, or a federal or state government-mandated shutdown of significant segments of the economy;

•business or economic disruptions from national or global epidemic or pandemic events, including those from the COVID-19 pandemic;

•the risks associated with our acquisition of Riverview, including we may fail to realize the anticipated benefits of the merger, and the future results of the combined company may suffer if the expanded operations are not effectively managed;

•an increase in the Pennsylvania Bank Shares Tax to which Mid Penn Bank’s capital stock is currently subject, or imposition of any additional taxes on Mid Penn or Mid Penn Bank;

•changes in the capitalization of the Corporation, including the impacts of ~~the~~any capital and liquidity requirements imposed by ~~the Basel III standards and other~~ regulatory pronouncements and rules;

•the effect of changes in accounting policies and practices, as may be adopted by the supervisory agencies, as well as the Public Company Accounting Oversight Board, Financial Accounting Standards Board, and other accounting standard setters;

•the risks of changes in interest rates and the yield curve on the level and composition of deposits and other funding sources, loan demand and yields, values of loan collateral, securities and yields, and interest rate protection agreements;

•the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in Mid Penn’s market area and elsewhere, including institutions operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the internet;

•the costs and effects of litigation and of unexpected or adverse outcomes in such litigation;

•technological ~~changes;~~

changes and changes to data security systems including those with third-party information technology providers;

•our ability to implement business strategies, including our ~~proposed~~ acquisition ~~of The Scottdale Bank and Trust Co. (Scottdale), and other business acquisition activities and~~strategy;

•our ability to implement organic branch, product and service expansion strategies;

•our current and future acquisition strategies may not be successful in locating or acquiring advantageous targets at favorable prices;

•our ability to successfully integrate any banks, companies, assets, liabilities, customers, systems and management personnel we acquire into our operations ~~including those related to our proposed acquisition of Scottdale,~~ and our ability to realize related revenue synergies and cost savings within expected time frames;

•potential goodwill impairment charges, future impairment charges and fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames;

•our ability to attract and retain qualified management and personnel;

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MID PENN BANCORP, INC.

•our ability to maintain the value and image of our brand and protect our intellectual property rights;

•results of regulatory examination and supervision processes;

•our ability to maintain compliance with the exchange rules of The NASDAQ Stock Market LLC;

•the failure of assumptions underlying the establishment of reserves for loan and lease losses and estimations of values of collateral and various financial assets and liabilities;

•acts of war or ~~terrorism;~~

terrorism, disruptions due to flooding, severe weather, or other natural disasters or Acts of God; ~~and~~

~~volatilities~~•volatility in the securities ~~markets.~~

markets; and

•other risks and uncertainties, including those detailed in our Annual Report on Form 10-K for the year ended December 31, 2021, under the sections “Risk Factors” and “Management Discussion and Analysis of Financial Condition and Results of Operations” and in subsequent filings with the SEC.

The above list of factors that may affect future performance is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with this understanding of inherent uncertainty.

~~MID PENN BANCORP, INC.~~

~~Important Additional Information and Where to Find It~~

~~In connection with the Merger,~~

Riverview Acquisition

On November 30, 2021, Mid Penn ~~has filed with~~announced the ~~SEC a Registration Statement on Form S-4 (SEC File No. 333-220020) that includes a Joint Proxy Statement~~successful completion of ~~Mid Penn and Scottdale and a Prospectus~~the merger acquisition of ~~Mid Penn (the “Joint Proxy Statement/Prospectus”~~Riverview Financial Corporation ("Riverview Acquisition"). The acquisition of Riverview impacted periods presented within this report. Refer to "Note 3 - Acquisition of Riverview Financial Corporation" in the Notes to Consolidated Financial Statements, as well as other relevant documents concerning the proposed transaction. The S-4 has been declared effective and the Joint Proxy Statement/Prospectus has been mailed to shareholders of Mid Penn and Scottdale. SHAREHOLDERS OF MID PENN AND SCOTTDALE ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION.

A free copy of the Joint Proxy Statement/Prospectus, as well as other filings containing information about Mid Penn, may be obtained at the SEC’s Internet site (http://www.sec.gov). You may also obtain these documents, free of charge, from Mid Penn at www.midpennbank.com under the heading “Investors” and then under the heading “SEC Filings”. Copies of the Joint Proxy Statement/Prospectus can also be obtained, free of charge, by directing a request to Mid Penn Bank, 349 Union Street, Millersburg, Pennsylvania 17061, Attention: Chief Financial Officer, Telephone: (866)-642-7736, or to The Scottdale Bank & Trust Company, 150 Pittsburgh Street, Scottdale, Pennsylvania 15683, Attention: Corporate Secretary, Telephone: (724) 887-8330.

Mid Penn and certain of its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Mid Penn and Scottdale in connection with the proposed merger. Information about the directors and executive officers of Mid Penn and their ownership of Mid Penn common stock is set forth in the Joint Proxy Statement/Prospectus. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Joint Proxy Statement/Prospectus regarding the Merger. Free copies of this document may be obtained as described in the preceding paragraph.

~~Critical Accounting Estimates~~

Mid Penn’s consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and conform to general practices within the banking industry. Application of these principles involves significant judgments and estimates by management that have a material impact on the carrying value of certain assets and liabilities. The judgments and estimates that we used are also based on historical experiences and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and estimates that we have made, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of assets and liabilities and the results of our operations. Management of the Company considers the accounting judgments relating to the allowance, the evaluation of the Company’s ~~investment securities~~Current Report on Form 8-K filed on December 1, 2021, for other-than-temporary impairment, the valuation of the Company’s goodwill for impairment, and the valuation of assets acquired and liabilities assumed in business combinations, to be the accounting areas that require the most subjective and complex judgments.

The allowance represents management’s estimate of probable incurred credit losses inherent in the loan and lease portfolio. Determining the amount of the allowance is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. The loan and lease portfolio also represents the largest asset type on the consolidated balance sheet. Throughout the remainder of this report, the terms “loan” or “loans” refers to both loans and leases.

Valuations for the investment portfolio are determined using quoted market prices, where available. If quoted market prices are not available, investment valuation is based on pricing models, quotes for similar investment securities, and observable yield curves and spreads. In addition to securities valuation, management must assess whether there are any declines in value below the carrying value of the investments that should be considered other than temporary or otherwise require an adjustment in carrying value and recognition of the loss in the consolidated statement of income.

Goodwill recorded in connection with acquisitions is tested annually for impairment. If certain events occur, which indicate goodwill might be impaired between annual tests, goodwill must be tested when such events occur. In making this assessment, Mid Penn considers a number of factors including operating results, business plans, economic projections, anticipated future cash flows, current market data, stock price, etc. There are inherent uncertainties related to these factors and Mid Penn’s judgment in applying them to the analysis of goodwill impairment. Changes in economic and operating conditions could result in goodwill impairment in future periods.

more information.

~~MID PENN BANCORP, INC.~~

Valuations of assets acquired and liabilities assumed in business combinations are measured at fair value as of the acquisition date. In many cases, determining the fair value of the assets acquired and liabilities assumed requires Mid Penn to estimate cash flows expected to result from these assets and liabilities and to discount these cash flows at appropriate rates of interest, which require the utilization of significant estimates and judgment in accounting for the acquisition.

Results of Operations

Overview

Net income available to common shareholders was ~~$2,249,000~~$15.5 million or ~~$0.53~~$0.97 per common share basic and diluted for the quarter ended September 30, ~~2017,~~2022, compared to net income of ~~$1,901,000~~$9.8 million or ~~$0.45~~$0.86 per common share basic and diluted for the quarter ended September 30, ~~2016.~~2021. During the nine months ended September 30, ~~2017,~~2022, net income available to common shareholders was ~~$6,588,000~~$39.1 million or ~~$1.56~~$2.45 per common share ~~versus $5,728,000~~basic and diluted compared to net income of $28.7 million or ~~$1.35~~$2.85 per common share basic and diluted for the nine months ended September 30, ~~2016.~~

2021.

Net income as a ~~percent~~percentage of ~~(i)~~ average assets (return on average assets, or ~~“ROA”~~"ROA") and ~~(ii)~~net income as a percentage of shareholders' equity (return on average equity, or ~~“ROE”~~"ROE") were as follows (calculated and reported on an annualized basis):


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
	2017			2016			2017			2016				2022		2021		2022		2021
Return on average assets		0.81	%		0.73	%		0.81	%		0.77	%	Return on average assets	1.42	%	1.11	%	1.16	%	1.14	%
Return on average equity		11.75	%		10.12	%		11.94	%		10.54	%	Return on average equity	12.23	%	11.23	%	10.52	%	12.55	%

Net Interest ~~Income/Funding Sources~~

Income

Net interest income, Mid Penn’s primary source of revenue, is the amount by which interest income on loans and investments exceeds interest incurred on deposits and borrowings. The amount of net interest income is affected by changes in interest rates and changes in the volume and mix of interest-sensitive assets and liabilities. Net interest income and corresponding yields are presented in the analysis below on a taxable-equivalent ~~basis.~~basis ("TE"). Income from tax-exempt assets, primarily loans to or securities issued by state and local governments, is adjusted by an amount equivalent to the federal income taxes which would have been paid if the income received on these assets was taxable at the statutory rate of ~~34%.~~

21% for the periods presented.

~~MID PENN BANCORP, INC.~~

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MID PENN BANCORP, INC.

The following ~~tables include~~table includes average balances, amounts, and ~~rates~~yields of interest income and rates of expense, interest rate spread, and net interest margin for the three ~~and nine~~ months ended September 30, ~~2017~~2022 and ~~2016.~~

Average Balances, Income and Interest Rates on a Taxable Equivalent Basis

For the Three Months Ended

(Dollars in thousands)

September 30, 2017

September 30, 2016

Average

Average

Average

Average

Balance

Interest

Rates

Balance

Interest

Rates

ASSETS:

Interest Bearing Balances

$

2,751

$

5

0.72
%

$

1,813

$

2

0.44
%
Investment Securities:

Taxable

132,926

639

1.91
%

77,960

379

1.93
%
Tax-Exempt

46,903

363

(a)

3.07
%

89,582

834

(a)

3.70
%
Total Securities

179,829

1,002

2.21
%

167,542

1,213

2.88
%

Federal Funds Sold

7,998

23

1.14
%

27,064

36

0.53
%
Loans and Leases, Net

866,972

10,314

(b)

4.72
%

784,669

9,277

(b)

4.70
%
Restricted Investment in Bank Stocks

3,173

31

3.88
%

2,648

24

3.61
%
Total Earning Assets

1,060,723

11,375

4.25
%

983,736

10,552

4.27
%

Cash and Due from Banks

24,227

13,472

Other Assets

35,241

31,861

Total Assets

$

1,120,191

$

1,029,069

LIABILITIES & SHAREHOLDERS' EQUITY:

Interest-bearing Demand

$

337,379

370

0.44
%

$

305,490

262

0.34
%
Money Market

242,485

364

0.60
%

240,913

338

0.56
%
Savings

63,159

9

0.06
%

60,922

9

0.06
%
Time

206,483

682

1.31
%

175,849

553

1.25
%
Total Interest-bearing Deposits

849,506

1,425

0.67
%

783,174

1,162

0.59
%

Short-term Borrowings

9,378

30

1.27
%

-

-

-

Long-term Debt

13,439

80

2.36
%

24,607

106

1.71
%
Subordinated Debt

7,420

99

5.29
%

7,410

99

5.32
%
Total Interest-bearing Liabilities

879,743

1,634

0.74
%

815,191

1,367

0.67
%

Noninterest-bearing Demand

156,274

131,217

Other Liabilities

7,348

7,950

Shareholders' Equity

76,826

74,711

Total Liabilities & Shareholders' Equity

$

1,120,191

$

1,029,069

Net Interest Income (taxable equivalent basis)

$

9,741

$

9,185

Taxable Equivalent Adjustment

(225
)

(427
)

Net Interest Income

$

9,516

$

8,758

Total Yield on Earning Assets

4.25
%

4.27
%
Rate on Supporting Liabilities

0.74
%

0.67
%
Average Interest Spread

3.51
%

3.60
%
Net Interest Margin

3.64
%

3.71
%

~~(a)~~

~~Includes tax-equivalent adjustments on interest from tax-free municipal securities of $124,000 and $283,000 for the three months ended September 30, 2017 and 2016, respectively.~~

2021.

~~(b)~~

~~Includes tax-equivalent adjustments on interest from tax-free municipal loans of $101,000 and $144,000 for the three months ended September 30, 2017 and 2016, respectively.~~


	Average Balances, Income and Interest Rates on a Taxable-Equivalent Basis
	For the Three Months Ended
	September 30, 2022						September 30, 2021
(Dollars in thousands)	Average Balance		Interest (1)		Yield/ Rate		Average Balance		Interest (1)		Yield/ Rate
ASSETS:
Interest Bearing Balances	$	5,583	$	12	0.85	%	$	2,491	$	1	0.16	%
Investment Securities:
Taxable	546,439		3,369		2.45	%	102,259		504		1.96	%
Tax-Exempt	80,008		496		2.46	%	56,037		353		2.50	%
Total Investment Securities	626,447		3,865		2.45	%	158,296		857		2.15	%

Federal Funds Sold	131,089		736		2.23	%	715,365		308		0.17	%
Loans and Leases, Net	3,237,587		38,573		4.73	%	2,422,378		29,660		4.86	%
Restricted Investment in Bank Stocks	4,322		13		1.19	%	7,148		58		3.22	%
Total Interest-earning Assets	4,005,028		43,199		4.28	%	3,305,678		30,884		3.71	%

Cash and Due from Banks	69,751						39,852
Other Assets	265,004						163,227
Total Assets	$	4,339,783					$	3,508,757

LIABILITIES & SHAREHOLDERS' EQUITY:
Interest-bearing Demand	$	1,072,496	$	873	0.32	%	$	681,171	$	625	0.36	%
Money Market	994,446		1,097		0.44	%	854,065		864		0.40	%
Savings	352,024		43		0.05	%	208,163		60		0.11	%
Time	464,273		823		0.70	%	446,256		1,360		1.21	%
Total Interest-bearing Deposits	2,883,239		2,836		0.39	%	2,189,655		2,909		0.53	%

Short-term Borrowings	—		—		0.00	%	149,505		133		0.35	%
Long-term Debt	4,537		150		13.12	%	74,888		205		1.09	%
Subordinated Debt	69,523		611		3.49	%	44,596		499		4.44	%
Total Interest-bearing Liabilities	2,957,299		3,597		0.48	%	2,458,644		3,746		0.60	%

Noninterest-bearing Demand	843,419						681,230
Other Liabilities	36,983						23,067
Shareholders' Equity	502,082						345,816
Total Liabilities & Shareholders' Equity	$	4,339,783					$	3,508,757

Net Interest Income (taxable-equivalent basis)			$	39,602					$	27,138
Taxable Equivalent Adjustment			(193)						(144)
Net Interest Income			$	39,409					$	26,994

Total Yield on Earning Assets					4.28	%					3.71	%
Rate on Supporting Liabilities					0.48	%					0.60	%
Average Interest Spread					3.80	%					3.10	%
Net Interest Margin					3.92	%					3.26	%

(1)Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances.

~~MID PENN BANCORP, INC.~~

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Average Balances, Income and Interest Rates on a Taxable Equivalent Basis

For the Nine Months Ended

(Dollars in thousands)

September 30, 2017

September 30, 2016

Average

Average

Average

Average

Balance

Interest

Rates

Balance

Interest

Rates

ASSETS:

Interest Bearing Balances

$

2,559

$

12

0.63
%

$

2,873

$

11

0.51
%
Investment Securities:

Taxable

117,507

1,709

1.94
%

77,822

1,103

1.89
%
Tax-Exempt

50,621

1,242

(a)

3.28
%

80,289

2,367

(a)

3.94
%
Total Securities

168,128

2,951

2.35
%

158,111

3,470

2.93
%

Federal Funds Sold

13,288

97

0.98
%

14,450

54

0.50
%
Loans and Leases, Net

846,903

30,199

(b)

4.77
%

762,796

27,277

(b)

4.78
%
Restricted Investment in Bank Stocks

2,738

87

4.25
%

2,893

105

4.85
%
Total Earning Assets

1,033,616

33,346

4.31
%

941,123

30,917

4.39
%

Cash and Due from Banks

20,528

12,548

Other Assets

34,596

33,770

Total Assets

$

1,088,740

$

987,441

LIABILITIES & SHAREHOLDERS' EQUITY:

Interest-bearing Demand

$

332,233

940

0.38
%

$

285,701

730

0.34
%
Money Market

247,730

1,069

0.58
%

230,642

961

0.56
%
Savings

62,693

27

0.06
%

59,701

26

0.06
%
Time

194,884

1,870

1.28
%

169,514

1,576

1.24
%
Total Interest-bearing Deposits

837,540

3,906

0.62
%

745,558

3,293

0.59
%

Short-term Borrowings

4,656

43

1.23
%

3,166

15

0.63
%
Long-term Debt

13,496

241

2.39
%

33,465

360

1.44
%
Subordinated Debt

7,417

297

5.35
%

7,438

297

5.33
%
Total Interest-bearing Liabilities

863,109

4,487

0.70
%

789,627

3,965

0.67
%

Noninterest-bearing Demand

141,506

116,782

Other Liabilities

10,095

8,441

Shareholders' Equity

74,030

72,591

Total Liabilities & Shareholders' Equity

$

1,088,740

$

987,441

Net Interest Income (taxable equivalent basis)

$

28,859

$

26,952

Taxable Equivalent Adjustment

(758
)

(1,236
)

Net Interest Income

$

28,101

$

25,716

Total Yield on Earning Assets

4.31
%

4.39
%
Rate on Supporting Liabilities

0.70
%

0.67
%
Average Interest Spread

3.61
%

3.72
%
Net Interest Margin

3.73
%

3.83
%
MID PENN BANCORP, INC.

~~(a)~~

~~Includes tax-equivalent adjustments on interest from tax-free municipal securities of $423,000 and $805,000 for the nine months ended September 30, 2017 and 2016, respectively.~~

~~(b)~~

~~Includes tax-equivalent adjustments on interest from tax-free municipal loans of $335,000 and $431,000 for the nine months ended September 30, 2017 and 2016, respectively.~~

~~MID PENN BANCORP, INC.~~

~~Taxable-equivalent net~~The following table summarizes the changes in TE interest income ~~was $9,741,000~~and interest expense resulting from changes in average balances, volume, and changes in rates for the three months ended September 30, ~~2017,~~2022 in comparison to the same period in 2021:


	Three months ended September 30, 2022 vs. September 30, 2021
(Dollars in thousands on a Taxable-Equivalent Basis)	Increase (decrease)
	Volume		Rate		Net
INTEREST INCOME:
Interest Bearing Balances	$	1	$	10	$	11
Investment Securities:
Taxable	2,189		676		2,865
Tax-Exempt	151		(8)		143
Total Investment Securities	2,340		668		3,008

Federal Funds Sold	(252)		680		428
Loans and Leases, Net	9,982		(1,069)		8,913
Restricted Investment Bank Stocks	(23)		(22)		(45)
Total Interest Income	12,049		266		12,315

INTEREST EXPENSE:
Interest Bearing Deposits:
Interest Bearing Demand	359		(111)		248
Money Market	142		91		233
Savings	41		(58)		(17)
Time	55		(592)		(537)
Total Interest-Bearing Deposits	597		(670)		(73)

Short-term Borrowings	(133)		—		(133)
Long-term Debt	(193)		138		(55)
Subordinated Debt	279		(167)		112
Total Interest Expense	551		(700)		(149)

NET INTEREST INCOME	$	11,498	$	966	$	12,464

Mid Penn’s TE net interest margin for the three months ended September 30, 2022 was 3.92% compared to 3.26% for the three months ended September 30, 2021. TE net interest income was $39.6 million for the three months ended September 30, 2022, an increase of ~~$556,000~~$12.5 million, or ~~6 percent~~45.9%, compared to the three months ended September 30, ~~2016. During~~2021. Average interest earning assets increased $699.4 million, or 21.16%, compared to the ~~nine months ended September 30, 2017, taxable-equivalent~~third quarter of 2021, primarily as a result of the Riverview Acquisition. This growth contributed $12.0 million to the increase in TE net interest income and higher yields on interest-earning assets contributed $266 thousand. The yield on interest earning assets increased ~~$1,907,000 or 7 percent~~57 basis points ("bp") to ~~$28,859,000 as~~4.28%, for the third quarter of 2022 compared to ~~$26,952,000~~3.71% for the third quarter of 2021. The increase in the yield on interest-earning assets was the result of a combination of excess cash being re-deployed into higher yielding loans and investment securities and the increases in the federal fund rates during 2022. The Federal Reserve’s Federal Open Market Committee ("FOMC") has increased rates five times during the first nine months of 2022. Average investment securities increased $468.2 million and the yield on those investment securities increased 30 bp, contributing $2.3 million and $668 thousand, respectively, to the increase in interest income. Average loans and leases, net, increased $815.2 million, contributing $10.0 million to the increase in interest income, partially offset by a 13 bp decrease in the yield, or a $1.1 million decrease to interest income. The growth in the average loans and leases, net, balances was primarily due to the Riverview Acquisition. The lower yields on loans and leases, net, were the result of a decrease of $6.1 million in the recognition of Paycheck Protection Program ("PPP") loan processing fees generated as a result of Mid Penn’s participation in the PPP in the third quarter of 2022 compared to the same period of 2021. These PPP fees are recognized into interest income over the term of the respective loan, or sooner if the loans are forgiven by the Small Business Administration ("SBA"), or the borrowers otherwise pay down principal prior to a loan’s stated maturity.

Interest expense decreased $149 thousand during the third quarter of 2022 compared to the third quarter of 2021. The rate of interest-bearing liabilities decreased from 0.60% for the third quarter of 2021 to 0.48% for the third quarter of 2022. The decrease in rate was primarily a result of a lag in the repricing of deposits, as well as the strategic decision to allow higher cost time deposits obtained through the Riverview Acquisition to run-off, partially offset by an increase of $551 thousand in interest expense due to the $498.7 million, or 20.3%, increase in interest-bearing liabilities compared to the same period of 2021.

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MID PENN BANCORP, INC.

The following table includes average balances, amounts, and yields of interest income and rates of expense, interest rate spread, and net interest margin for the nine months ended September 30, ~~2016. Net~~2022 and 2021:


	Average Balances, Income and Interest Rates on a Taxable-Equivalent Basis
	For the Nine Months Ended
	September 30, 2022						September 30, 2021
(Dollars in thousands)	Average Balance		Interest (1)		Yield/ Rate		Average Balance		Interest (1)		Yield/ Rate
ASSETS:
Interest Bearing Balances	$	34,034	$	33	0.13	%	$	1,729	$	5	0.39	%
Investment Securities:
Taxable	479,611		7,930		2.21	%	91,379		1,319		1.93	%
Tax-Exempt	77,489		1,401		2.42	%	55,599		1,056		2.54	%
Total Investment Securities	557,100		9,331		2.24	%	146,978		2,375		2.16	%

Federal Funds Sold	415,528		1,786		0.57	%	503,652		485		0.13	%
Loans and Leases, Net	3,157,288		108,050		4.58	%	2,520,965		87,974		4.67	%
Restricted Investment in Bank Stocks	5,826		238		5.46	%	7,022		239		4.55	%
Total Interest-earning Assets	4,169,776		119,438		3.83	%	3,180,346		91,078		3.83	%

Cash and Due from Banks	62,369						36,213
Other Assets	267,309						162,189
Total Assets	$	4,499,454					$	3,378,748

LIABILITIES & SHAREHOLDERS' EQUITY:
Interest-bearing Demand	$	1,049,569	$	1,796	0.23	%	$	632,830	$	1,782	0.38	%
Money Market	1,066,001		2,281		0.29	%	796,922		2,461		0.41	%
Savings	361,733		144		0.05	%	203,206		182		0.12	%
Time	524,013		2,928		0.75	%	431,009		4,366		1.35	%
Total Interest-bearing Deposits	3,001,316		7,149		0.32	%	2,063,967		8,791		0.57	%

Short-term Borrowings	—		—		0.00	%	205,697		539		0.35	%
Long-term Debt	29,715		541		2.43	%	74,975		613		1.09	%
Subordinated Debt	72,574		1,912		3.52	%	44,589		1,498		4.49	%
Total Interest-bearing Liabilities	3,103,605		9,602		0.41	%	2,389,228		11,441		0.64	%

Noninterest-bearing Demand	851,975						659,554
Other Liabilities	46,960						24,037
Shareholders' Equity	496,914						305,929
Total Liabilities & Shareholders' Equity	$	4,499,454					$	3,378,748

Net Interest Income (taxable-equivalent basis)			$	109,836					$	79,637
Taxable Equivalent Adjustment			(580)						(441)
Net Interest Income			$	109,256					$	79,196

Total Yield on Earning Assets					3.83	%					3.83	%
Rate on Supporting Liabilities					0.41	%					0.64	%
Average Interest Spread					3.42	%					3.19	%
Net Interest Margin					3.52	%					3.35	%

(1)Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances.

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MID PENN BANCORP, INC.

The following table summarizes the changes in TE interest income and interest expense resulting from changes in the first nine months of 2017 was positively impacted by core loan growth funded by lower-cost deposits, as well as the recognition of $279,000 of loan income from the successful workout of a loan relationship that included a previous charge-offaverage balances, volume, and changes in ~~2010.~~

For the three months ended September 30, 2017, Mid Penn’s tax-equivalent net interest margin was 3.64% compared to 3.71% for the three months ended September 30, 2016. For the nine months ended September 30, 2017, Mid Penn’s tax-equivalent net interest margin was 3.73% versus 3.83%rates for the nine months ended September 30, ~~2016. The decrease~~2022 in comparison to the same period in 2021:


	Nine months ended September 30, 2022 vs. September 30, 2021
(Dollars in thousands on a Taxable-Equivalent Basis)	Increase (decrease)
	Volume		Rate		Net
INTEREST INCOME:
Interest Bearing Balances	$	93	$	(65)	$	28
Investment Securities:
Taxable	5,604		1,007		6,611
Tax-Exempt	416		(71)		345
Total Investment Securities	6,020		936		6,956

Federal Funds Sold	(85)		1,386		1,301
Loans and Leases, Net	22,206		(2,130)		20,076
Restricted Investment Bank Stocks	(41)		40		(1)
Total Interest Income	28,193		167		28,360

INTEREST EXPENSE:
Interest Bearing Deposits:
Interest Bearing Demand	1,174		(1,160)		14
Money Market	831		(1,011)		(180)
Savings	142		(180)		(38)
Time	942		(2,380)		(1,438)
Total Interest-Bearing Deposits	3,089		(4,731)		(1,642)

Short-term Borrowings	(539)		—		(539)
Long-term Debt	(370)		298		(72)
Subordinated Debt	940		(526)		414
Total Interest Expense	3,120		(4,959)		(1,839)

NET INTEREST INCOME	$	25,074	$	5,125	$	30,199

Mid Penn’s TE net interest margin ~~year over year~~for the nine months ended September 30, 2022 was ~~primarily attributed~~3.52% and compared to 3.35% for the ~~lower yield earned on~~nine months ended September 30, 2021. TE net interest income was $109.8 million for the ~~investment portfolio. For~~nine months ended September 30, 2022, an increase of $30.2 million, or 37.9%, compared to $79.6 million of TE net interest income for the nine months ended September 30, 2021. Average interest earning assets increased $989.4 million, or 31.1%, compared to the first nine months of ~~2017,~~2021, primarily as a result of the ~~overall investment portfolio~~Riverview Acquisition. This growth contributed $28.2 million to the increase in TE net interest income and higher yields on interest-earning assets contributed $167 thousand. The 3.83% yield on interest earning assets was ~~2.35%,~~consistent for the first nine months of 2022 compared to ~~an investment portfolio yield of 2.93% for~~ the same period of 2021. Average investment securities increased $410.1 million and the yield on those investment securities increased 8 bp, contributing $6.0 million and $936 thousand, respectively, to the increase in ~~2016. The reduction was attributed~~interest income. Average loans and leases, net, increased $636.3 million, contributing $22.2 million to ~~Mid Penn establishing an $82,625,000 held-to-maturity investment portfolio including lower-risk and lower-yielding U.S. Treasury notes and U.S. agency mortgage-backed securities~~the increase in interest income, partially offset by a 9 bp decrease in the ~~first quarter of 2017.~~yield, or a $2.1 million decrease to interest income. The ~~held-to-maturity portfolio was established to support the Bank’s~~ growth in ~~public fund deposit pledging requirements.~~

the average loans and leases, net, balances was primarily due to the Riverview Acquisition. The lower yields on loans and leases, net, were the result of a decrease of $11.6 million in the recognition of PPP loan processing fees generated as a result of Mid Penn’s participation in the PPP for the first nine months of 2022 compared to the same period of 2021.

Interest expense decreased $1.8 million during the first nine months of 2022 compared to the same period of 2021. The rate of interest-bearing liabilities decreased to 0.41% for the first nine months of 2022 from 0.64% for the first nine months of 2021. The decrease in rate was primarily a result of a lag in the repricing of deposits, as well as the strategic decision to allow higher cost time deposits obtained through the Riverview Acquisition to run-off, partially offset by an increase of $3.1 million in interest expense due to the $714.4 million, or 29.9%, increase in interest-bearing liabilities during the first nine months of 2022 compared to the same period of 2021.

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MID PENN BANCORP, INC.

Although the effective interest rate impact on ~~earning~~interest-earning assets and funding sources can be reasonably estimated at current interest rate levels, the interest-bearing product and pricing options selected by customers, and the future mix of the loan, investment, and deposit products in the Bank's portfolios, may significantly change the estimates used in Mid Penn’s asset and liability management and related interest rate risk simulation models. In addition, our net interest income may be impacted by further interest rate actions of the ~~Board of Governors of the~~ Federal ~~Reserve System.~~

Reserve’s FOMC.

Provision for Loan Losses

The provision for loan and lease losses is the expense necessary to maintain the allowance at a level adequate to absorb management’s estimate of probable losses in the loan and lease portfolio. Mid Penn’s provision for loan and lease losses is based upon management’s monthly review of the loan portfolio. The purpose of the review is to assess loan quality, identify impaired loans and leases, analyze delinquencies, ascertain loan and lease growth, evaluate potential charge-offs and recoveries, and assess general economic conditions in the markets Mid Penn serves.

Mid Penn has maintained the allowance in accordance with Mid Penn’s assessment process, which takes into consideration, among other relevant factors, the risk characteristics of the loan portfolio, the growth in the loan portfolio during the first nine months of ~~2017,~~2022, economic and external factor changes, and shifting collateral values from December 31, ~~2016~~2021 to September 30, ~~2017.~~

2022.

Management ~~performs~~performed a ~~monthly~~current evaluation of the adequacy of the loan and lease loss allowance and, based on this evaluation, noa loan and lease loss provision of $1.6 million and $425 thousand was recorded for the three months ended September 30, ~~2017,~~2022 and 2021, respectively. During the nine months ended September 30, 2022, the provision for the loan and lease losses was $3.8 million compared to a$2.6 million for the nine months ended September 30, 2021. The allowance for loan and lease losses and the related provision reflect Mid Penn’s continued application of the incurred loss ~~provision~~method for estimating credit losses as Mid Penn is not yet required to adopt the current expected credit loss ("CECL") accounting standard. The increase in the allowance for loan and lease loss from $14.6 million at December 31, 2021 to $18.5 million at September 30, 2022 was primarily the result of ~~$585,000~~providing for core loan growth, as well as the result of one legacy commercial relationship being downgraded from substandard accrual to substandard non-accrual during the nine months ended September 30, 2022.

Noninterest Income

For the three months ended September 30, ~~2016.~~2022, noninterest income totaled $6.0 million, an increase of $454 thousand or 8.2%, compared to noninterest income of $5.5 million for the same period in 2021. For the nine months ended September 30, 2017, the recorded loan loss provision was $225,000 compared to a loan loss provision of $1,320,000 for the nine months ended September 30, 2016. The significant net principal recoveries during the nine months ended September 30, 2017 added $94,000 to the allowance for loan loss balance. Additionally, during the nine months ended September 30, 2017, Mid Penn had favorable workouts of certain impaired credits which reduced the amount of required specific allocations in the allowance. The allowance for loan and lease losses as a percentage of total loans was 0.86% at September 30, 2017, compared to 0.88% at December 31, 2016, and 0.95% at September 30, 2016. For further discussion of factors affecting the provision for loan and lease losses please see ~~Credit Quality, Credit Risk, and Allowance for Loan and Lease Losses~~ ~~in the Financial Condition section of this Management’s Discussion and Analysis.~~

~~Noninterest Income~~

~~During the three months ended September 30, 2017,~~2022, noninterest income ~~was $1,564,000 reflecting~~totaled $16.9 million, an increase of ~~$145,000~~$1.1 million or ~~10 percent~~6.74%, compared to noninterest income of $1,419,000 for the three months ended September 30, 2016. For the nine months ended September 30, 2017, noninterest income totaled $4,362,000, an increase of $313,000 or 8 percent, compared to noninterest income of $4,049,000$15.9 million for the same period in ~~2016.~~

2021. Several components of noninterest income increased as a result of higher account and transaction volume due to both the Riverview Acquisition and organic growth.

The following components of noninterest income showed significant ~~changes:~~

(Dollars in Thousands)
Three Months Ended September 30,

2017

2016

$ Variance

% Variance

Income from fiduciary activities
$
217

$
104

$
113

109
%
Service charges on deposits

175

171

4

2
%
Net gain on sales of investment securities

22

200

(178
)

-89
%
Mortgage banking income

230

266

(36
)

-14
%
ATM debit card interchange income

233

214

19

9
%
Net gain on sales of SBA loans

262

89

173

194
%
Other income

276

221

55

25
%

~~MID PENN BANCORP, INC.~~

(Dollars in Thousands)
Nine Months Ended September 30,

2017

2016

$ Variance

% Variance

Income from fiduciary activities
$
613

$
349

$
264

76
%
Service charges on deposits

554

484

70

14
%
Net gain on sales of investment securities

42

413

(371
)

-90
%
Mortgage banking income

646

698

(52
)

-7
%
ATM debit card interchange income

689

623

66

11
%
Net gain on sales of SBA loans

703

354

349

99
%
Other income

669

687

(18
)

-3
%

~~Mid Penn increased its origination and sales activities related to Small Business Administration (“SBA”) loans, resulting in gains of $703,000 from related loan sales during~~changes for the ~~first nine~~three months ~~of 2017, an increase of $349,000 or 99 percent~~ended September 30, 2022 as compared to ~~SBA loan sales gains of $354,000 for the first nine months of 2016. More qualified small business borrowers continue to take advantage of Mid Penn’s Preferred Lender status with the SBA.~~

~~Income from fiduciary activities was $613,000 for the first nine months of 2017, an increase of $264,000 or 76 percent compared to fiduciary income of $349,000 during~~ the same period in ~~2016. These~~2021:


	Three Months Ended September 30,
(Dollars in Thousands)	2022		2021		$ Variance		% Variance
Income from fiduciary and wealth management activities	$	1,729	$	618	$	1,111	179.8	%
ATM debit card interchange income	1,078		630		448		71.1
Service charges on deposits	483		223		260		116.6
Mortgage banking income	536		3,162		(2,626)		(83.0)
Mortgage hedging income	217		22		195		N/M
Net gain on sales of SBA loans	152		105		47		44.8
Earnings from cash surrender value of life insurance	250		74		176		N/M
Net gain on sales of investment activities	—		79		(79)		(100.0)
Other income	1,518		596		922		154.7
Total	$	5,963	$	5,509	$	454	8.2	%

N/M - Not Meaningful

Income from fiduciary and wealth management activities was $1.7 million for the three months ended September 30, 2022, an increase of $1.1 million compared to the three months ended September 30, 2021. The additional ~~revenues were attributed~~revenue was attributable to favorable growth in trust assets under management ~~significantly increasing over~~and increased sales of retail investments products, as well as the ~~past twelve months as a result successful business development efforts by Mid Penn’s expanded team of trust and retail investment officers.~~

For the nine months ended September 30, 2017, service charges on deposits were $554,000, an increase of $70,000 or 14 percent, compared to service charges of $484,000 for the nine months ended September 30, 2016. This upturn was driven by an increase in the volume of transactional deposit accounts, and by an increase in charges collected, including overdraft fees.

Riverview Acquisition.

ATM debit card interchange income was ~~$689,000~~$1.1 million for the ~~nine~~three months ended September 30, ~~2017,~~2022, an increase of ~~$66,000 or 11 percent~~$448 thousand compared to ~~interchange income of $623,000 for~~ the ~~same period in 2016.~~three months ended September 30, 2021. The additional income is a result of an increased volume of ~~transactional~~ checking accounts

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MID PENN BANCORP, INC.

and an increase in Mid Penn ~~Bank~~ ATM and debit card ~~transactions across our market area.~~

~~Other noninterest income increased $55,000~~activity, which included an increase in transaction volume resulting from the accounts assumed in the Riverview Acquisition.

Service charges on deposits were $483 thousand for the three months ended September 30, ~~2017~~2022, an increase of $260 thousand, compared to the three months ended September 30, 2016, primarily due to the recognition of certain incentive fees for check book purchases, which vary in timing and amount each year, and from gains on sales of fixed assets.

~~Net gains on sales of securities were $42,000 for the first nine months of 2017, a decrease of $371,000 or 90 percent compared to net gains on sales of securities of $413,000 during the~~ same period ~~ended September 30, 2016. During the first nine months of 2016, Mid Penn took advantage of favorable fixed income investment market conditions and increased fair values~~in 2021. This increase was driven by an increase in collected charges on ~~several securities to reposition some of its investment portfolio, including selling~~ a ~~large~~higher volume of ~~longer-term and rate-sensitive CMOs, as well as certain municipal bonds and agency notes.~~

~~Noninterest Expense~~

~~During~~transactional deposit accounts, including deposit accounts assumed in the ~~three months ended September 30, 2017, noninterest expenses totaled $7,960,000, an increase of $795,000 or 11 percent compared to noninterest expenses of $7,165,000~~Riverview Acquisition.

Mortgage banking income decreased $2.6 million for the three months ended September 30, ~~2016.~~2022 to $536 thousand compared to the same period in 2021. Mortgage loan originations and secondary-market loan sales and gains slowed during the first nine months of 2022 as a result of increases in interest rates. As a result of the corresponding mortgage rate increases and an increase in property values driven by supply shortfalls and high liquidity levels among buyers, the mortgage loan refinancing market has slowed and purchase money mortgage originations have slowed relative to the lending volumes experienced during the first nine months of 2021.

Mortgage hedging income was $217 thousand for the three months ended September 30, 2022 compared to $22 thousand for the same period in 2021. The increase was the result of a hedging program related to mortgage derivative activities that Mid Penn did not participate in during the third quarter of 2021.

The following components of noninterest income showed significant changes for the nine months ended September 30, 2022 as compared to the same period in 2021:


	Nine Months Ended September 30,
(Dollars in Thousands)	2022		2021		$ Variance		% Variance
Income from fiduciary and wealth management activities	$	3,986	$	1,716	$	2,270	132.3	%
ATM debit card interchange income	3,263		1,854		1,409		76.0
Service charges on deposits	1,617		552		1,065		192.9
Mortgage banking income	1,370		8,382		(7,012)		(83.7)
Mortgage hedging income	1,321		22		1,299		N/M
Net gain on sales of SBA loans	262		560		(298)		(53.2)
Earnings from cash surrender value of life insurance	758		223		535		N/M
Net gain on sales of investment activities	—		79		(79)		(100.0)
Other income	4,366		2,485		1,881		75.7
Total	$	16,943	$	15,873	$	1,070	6.7	%

N/M - Not Meaningful

Income from fiduciary and wealth management activities was $4.0 million for the nine months ended September 30, 2022, an increase of $2.3 million compared to $1.7 million during the nine months ended September 30, 2021. The additional revenue was attributable to favorable growth in trust assets under management and increased sales of retail investments products, as well as the Riverview Acquisition.

ATM debit card interchange income was $3.3 million for the nine months ended September 30, 2022, an increase of $1.4 million compared to the the nine months ended September 30, 2021. The additional income is a result of an increase in Mid Penn ATM and debit card activity, which included an increase in transaction volume resulting from the accounts assumed in the Riverview Acquisition.

Service charges on deposits were $1.6 million for the nine months ended September 30, 2022, an increase of $1.1 million, compared to $552 thousand for the same period in 2021. This increase was driven by an increase in collected charges on a higher volume of transactional deposit accounts, including deposit accounts assumed in the Riverview Acquisition.

Mortgage banking income was $1.4 million for the nine months ended September 30, 2022, a decrease of $7.0 million, compared to the $8.4 million of mortgage banking income for the nine months ended September 30, 2021. Mortgage loan originations and secondary-market loan sales and gains slowed during the first nine months of 2022 as a result of increases in interest rates. As a result of mortgage rate increases and an increase in property values driven by supply shortfalls and high liquidity levels among buyers, the mortgage loan refinancing market has slowed and purchase money mortgage originations have slowed relative to the lending volumes experienced during the first nine months of 2021.

Mortgage hedging income was $1.3 million for the nine months ended September 30, 2022 compared to $22 thousand for the same period in 2021. The increase was the result of a hedging program related to mortgage derivative activities that Mid Penn did not participate in during the first nine months of 2021.

Earnings from cash surrender value of life insurance was $758 thousand for the nine months ended September 30, 2022, an increase of $535 thousand, compared to $223 thousand for the same period of 2021. The increase is a result of additional policies assumed in the Riverview Acquisition.

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MID PENN BANCORP, INC.

Other income was $4.4 million for the nine months ended September 30, 2022, an increase of $1.9 million, compared to $2.5 million during the same period of 2021. Mid Penn experienced increases in other miscellaneous income amounts as a result of the Riverview Acquisition.

Noninterest Expense

For the three months ended September 30, 2022, noninterest expense totaled $24.7 million, an increase of $4.7 million, or 23.46%, compared to noninterest expense of $20.0 million for the same period in 2021. For the nine months ended September 30, ~~2017,~~2022, noninterest ~~expenses~~expense totaled ~~$23,320,000,~~$74.4 million, an increase of ~~$2,242,000~~$17.3 million, or ~~11 percent~~30.41%, compared to noninterest ~~expenses~~expense of ~~$21,078,000~~$57.0 million for the ~~first nine months~~same period in ~~2016.~~

2021. Several components of noninterest expense increased as a result of higher fixed and variable expenses due to the Riverview Acquisition and organic growth.

The changes were primarily a result of the following components of noninterest expense, which had ~~notable~~significant variances when comparing results for periods ending in ~~2017~~2022 versus the ~~similar periods~~corresponding period in ~~2016:~~

2021.:

(Dollars in Thousands)
Three Months Ended September 30,

2017

2016

$ Variance

% Variance

Salaries and employee benefits
$
4,277

$
3,982

$
295

7
%
Occupancy expense, net

631

496

135

27
%
Pennsylvania bank shares tax expense

170

197

(27
)

-14
%
FDIC Assessment

197

134

63

47
%
Legal and professional fees

218

130

88

68
%
Software licensing

397

350

47

13
%
Telephone expense

120

135

(15
)

-11
%


	Three Months Ended September 30,
(Dollars in Thousands)	2022		2021		$ Variance		% Variance
Salaries and employee benefits	$	13,583	$	10,342	$	3,241	31.3	%
Software licensing and utilization	1,804		1,551		253		16.3
Occupancy expense, net	1,634		1,318		316		24.0
Equipment expense	1,121		745		376		50.5
Shares tax	920		498		422		84.8
ATM/card processing	518		249		269		108.0
Intangible amortization	514		266		248		93.2
Mortgage banking profit-sharing expense	—		1,140		(1,140)		(100.0)
Merger and acquisition expense	—		198		(198)		(100.0)

Other expenses	3,896		2,648		1,248		47.1

~~MID PENN BANCORP, INC.~~

(Dollars in Thousands)
Nine Months Ended September 30,

2017

2016

$ Variance

% Variance

Salaries and employee benefits
$
12,666

$
11,428

$
1,238

11
%
Occupancy expense, net

1,872

1,542

330

21
%
Pennsylvania bank shares tax expense

500

606

(106
)

-17
%
FDIC Assessment

585

434

151

35
%
Legal and professional fees

584

515

69

13
%
Software licensing

1,096

1,015

81

8
%
Telephone expense

379

420

(41
)

-10
%

Salaries and employee benefits ~~expense increased $1,238,000 or 11 percent during~~were $13.6 million for the ~~first nine~~three months ended September 30, 2022, an increase of ~~2017~~$3.2 million versus the same period in ~~2016,~~2021, with the increase attributable to ~~(i)~~the retail staff additions at the seven retail locations added through the Riverview Acquisition and the addition of wealth management professionals, commercial lending ~~personnel, credit support~~professionals, and other staff ~~and executive management~~additions in alignment with Mid Penn’s core banking and non-banking growth ~~(ii) added retail staff for three new branch offices at Oregon Pike, New Holland,~~initiatives.

Software licensing and ~~Orwigsburg, all of which opened after September 30, 2016, and (iii) increased healthcare~~utilization costs ~~from Mid Penn’s self-funded medical plan during the first nine months of 2017.~~

~~Occupancy expenses~~were $1.8 million for the ~~nine~~three months ended September 30, ~~2017 increased $330,000 or 21 percent~~2022, an increase of $253 thousand compared to $1.6 million for the ~~same period in 2016. In the twelve months since September 30, 2016, Mid Penn added facility operating costs associated with opening the above-noted~~ three ~~new branch offices, as well as loan production offices in Lancaster and Franklin Counties in Pennsylvania.~~

~~Mid Penn’s FDIC assessment increased by $151,000 or 35 percent from $434,000 during the nine~~ months ended September 30, ~~2016, to $585,000 during the nine months ended September 30, 2017, due to the Company’s growing deposits and assets, which increased the base amount used to determine the FDIC insurance assessment.~~

Legal and professional fees for the nine months ended September 30, 2017 increased by $69,000 or 13 percent compared to the same period in 2016 due to increased legal and professional fees for wealth management, audit, and public relations activities.

~~Software licensing fees increased by $81,000 or 8 percent from $1,015,000 during the nine months ended September 30, 2016, to $1,096,000 during the nine months ended September 30, 2017.~~2021. The increase is a result of additional costs to ~~upgrade internal systems to better serve our customers, as well as~~license the additional Riverview branches and increases in ~~per-transaction and per-account data~~certain core processing fees as our customer base and transaction volume continue to grow.

~~Pennsylvania bank shares~~

Occupancy expenses increased $316 thousand during the three months ended September 30, 2022 compared to the same period in 2021. Similarly, equipment expense increased $376 thousand during the three months ended September 30, 2022, compared to the three months ended September 30, 2021. These increases were driven by the facility operating costs and increased depreciation expense for building, furniture, and equipment associated with the Riverview Acquisition.

Shares tax totaled $920 thousand for the three months ended September 30, 2022, a $422 thousand increase compared to the same period in 2021 due to the increase in shareholders' equity, primarily a result of the Riverview Acquisition.

ATM/card processing increased from $249 thousand during the three months ended September 30, 2021 to $518 thousand during the three months ended September 30, 2022 as a result of an increase in transaction volume resulting from the accounts assumed in the Riverview Acquisition.

Intangible amortization increased to $514 thousand during the three months ended September 30, 2022 from $266 thousand during the same period of 2021 as a result of the customer list and core deposit intangible assets added from the Riverview Acquisition.

Mortgage banking profit-sharing was $1.1 million during the three months ended September 30, 2021 compared to zero in the current period and is reflective of the decrease in mortgage banking income between the two periods.

Merger and acquisition expenses were $198 thousand during the three months ended September 30, 2021 and consisted of legal and professional fees associated withe the Riverview Acquisition.

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MID PENN BANCORP, INC.

Other expenses increased $1.2 million from $2.6 million during the three months ended September 30, 2021, to $3.9 million for the same period in 2022. Several categories within other expense ~~decreased $106,000 or 17 percent~~experienced increases as a result of the Riverview Acquisition and organic growth, including marketing, telephone, postage, courier, payroll processing, employee travel costs, and director fees.


	Nine Months Ended September 30,
(Dollars in Thousands)	2022		2021		$ Variance		% Variance
Salaries and employee benefits	$	39,167	$	29,873	$	9,294	31.1	%
Software licensing and utilization	5,731		4,493		1,238		27.6
Occupancy expense, net	5,088		4,115		973		23.6
Equipment expense	3,244		2,237		1,007		45.0
Shares tax	2,626		1,022		1,604		156.9
ATM/card processing	1,605		696		909		130.6
Intangible amortization	1,516		823		693		84.2
Mortgage banking profit-sharing expense	178		2,005		(1,827)		(91.1)
Merger and acquisition expense	—		720		(720)		(100.0)
Post-acquisition restructuring expense	329		—		329		—
Other expenses	11,577		7,485		4,092		54.7

Salaries and employee benefits were $39.2 million for the nine months ended September 30, 2022, an increase of $9.3 million versus the same period in 2021, with the increase attributable to the retail staff additions at the seven retail locations added through the Riverview Acquisition, the retention of various Riverview team members through the completion of the systems integration, which occurred on March 4, 2022, and the addition of wealth management professionals, commercial lending professionals, and other staff additions in alignment with Mid Penn’s core banking and non-banking growth initiatives.

Software licensing and utilization costs were $5.7 million for the nine months ended September 30, 2022, an increase of $1.2 million compared to $4.5 million for the nine months ended September 30, 2021. The increase is a result of additional costs to license the additional Riverview branches, upgrades to internal systems, networks, storage capabilities, cybersecurity management, and data security mechanisms to enhance data management and security capabilities responsive to both the larger company profile and the increasing complexity of information technology management, and increases in certain core processing fees as our customer base and transaction volume continue to grow.

Occupancy expenses increased $1.0 million during the first nine months of 2022 compared to the same period in 2021. Similarly, equipment expense increased $1.0 million during the nine months ended September 30, ~~2017 versus~~2022, compared to the nine months ended September 30, 2021. These increases were driven by the facility operating costs and increased depreciation expense for building, furniture, and equipment associated with the Riverview Acquisition.

Shares tax totaled $2.6 million for nine months ended September 30, 2022, a $1.6 million increase compared to the same period in ~~2016,~~2021 due to the ~~additional Pennsylvania-eligible tax credits generated from Mid Penn’s donations to support education~~increase in shareholders' equity, primarily a result of a stock offering completed in 2021 and ~~economic development throughout~~ the ~~markets it serves.~~

~~Telephone expense was $379,000~~Riverview Acquisition.

ATM/card processing expenses were $1.6 million for the nine months ended September 30, ~~2017,~~2022, an increase of $909 thousand as a ~~$41,000 decrease~~result of an increase in transaction volume resulting from the ~~$420,000 recognized~~accounts assumed in the Riverview Acquisition.

Intangible amortization increased from $823 thousand during the first nine months of 2021 to $1.5 million during the same period of 2022 as a result of the customer list and core deposit intangible assets added from the Riverview Acquisition.

Merger and acquisition expenses were $720 thousand during the first nine months of 2021 prior to the completion of the Riverview Acquisition. During the first nine months of 2022, post-acquisition restructuring expenses were $329 thousand and primarily consisted of contract termination fees related to the Riverview Acquisition.

Other expenses increased $4.1 million from $7.5 million during the nine months ended September 30, ~~2016. This decrease is attributable~~2021, to ~~modifications to~~$11.6 million for the ~~company-wide~~same period in 2022. Several categories within other expense experienced increases as a result of the Riverview Acquisition and organic growth, including marketing, telephone, ~~system intended to reduce costs.~~

postage, courier, payroll processing, employee travel costs, and director fees. In addition, the nine months ended September 30, 2022 contained an impaired asset write-off of $664 thousand, representing the disposal of certain fixed assets and leasehold improvements from Riverview offices not being retained.

Income Taxes

The provision for income taxes was ~~$871,000~~$3.6 million for the three months ended September 30, ~~2017~~2022, compared to ~~$526,000~~$2.3 million of income tax provision recorded for the ~~three~~same period in 2021. The provision for income taxes was $9.0 million during the nine months ended

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MID PENN BANCORP, INC.

September 30, ~~2016. The effective~~2022, compared to $6.7 million of income tax ~~rate~~provision recorded for the ~~three months ended September 30, 2017 was 27.9% compared to 21.7% for the three months ended September 30, 2016.~~same period in 2021. The provision for income taxes for the three and nine months ended September 30, ~~2017 was $2,330,000 compared to $1,639,000 during the same period in 2016. The~~2022, reflects a combined Federal and State effective tax rate of 19.0% and 18.7%, respectively, compared to 18.8% and 19.0% for the three and nine months ended September 30, ~~2017 was 26.1% compared to 22.2% for~~2021, respectively. The change in the ~~nine months ended September 30, 2016. In addition to the increased pre-tax income in 2017, the higher~~ effective tax rates ~~for 2017 were impacted by a relatively lower volume~~reflect the mix of tax-exempt ~~income~~interest recognized due to an increase in tax-exempt securities being held in the investment security portfolio when compared to the prior year, and the favorable treatment of the increase in cash surrender value on ~~municipal loans and investments, and from a portion of Mid Penn’s merger-related expenses of $467,000 being nondeductible~~bank owned life insurance policies, which are nontaxable for federal ~~income~~ tax purposes.

Generally, Mid Penn’s effective tax rate is below the federal statutory rate due to earnings on tax-exempt loans, investments, and ~~BOLI,~~earnings from the cash surrender value of life insurance, as well as the impact of federal income tax ~~credits.~~credits, including those awarded from Mid Penn’s low-income housing investments. The realization of Mid Penn’s deferred tax assets is dependent on future earnings. Mid Penn currently anticipates that future earnings will be adequate to fully realize the currently recorded deferred tax assets.

Financial Condition

Overview

Mid Penn’s total assets were ~~$1,153,373,000~~$4.3 billion as of September 30, ~~2017, an increase~~2022, reflecting a decrease of ~~$120,774,000~~$355.5 million, or ~~12 percent~~7.58%, compared to total assets of ~~$1,032,599,000~~$4.7 billion as of December 31, ~~2016. In the first nine months~~2021. Included in total assets as of ~~2017,~~September 30, 2022 are $2.8 million of PPP loans, net of deferred fees. Comparatively, as of December 31, 2021, Mid Penn ~~realized favorable loan growth, primarily in commercial relationships,~~had $111.3 million of ~~$63,462,000~~PPP loans outstanding, net of deferred fees.

Total loans and leases, net of unearned interest, totaled $3.3 billion as of September 30, 2022, an increase of $218.1 million, or ~~8 percent~~7.0% since December 31, ~~2016. This asset~~2021. The growth occurred primarily within the commercial real estate loan portfolio. Core banking loans (a non-GAAP measure calculated as loans and ~~loan growth was principally funded by~~leases, net of unearned interest, less PPP loans outstanding) totaled $3.3 billion as of September 30, 2022, an increase of $326.5 million, or 10.9% since December 31, 2021. The growth in core banking loans occurred primarily within the commercial real estate loan portfolio. Please refer to the section included herein under the heading "Reconciliation of Non-GAAP Measures (Unaudited)" for a discussion of our use of non-GAAP adjusted financial information, which includes a table reconciling GAAP and non-GAAP adjusted financial measures for these and certain other periods ended from September 30, 2021 through September 30, 2022.

Total deposits ~~of $91,302,000~~decreased $272.4 million or ~~10 percent since year-end 2016.~~

~~MID PENN BANCORP, INC.~~

~~Loans~~

~~Total loans~~6.81%, from $4.0 billion on December 31, 2021, to $3.7 billion at September 30, ~~2017~~2022. The decrease in total deposits since December 31, 2021 was primarily attributable to the maturity of certificates of deposit, which have renewed into lower rates, migrated to other retail investment products, or exited the Bank.

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MID PENN BANCORP, INC.

Investment Securities

Total investment securities as of September 30, 2022 were ~~$877,386,000~~$644.3 million compared to ~~$813,924,000 at~~$392.1 million as of December 31, ~~2016, an~~2021.


	September 30, 2022		December 31, 2022		$ Variance		% Variance
(Dollars in thousands)
Available-for-sale debt securities:
U.S. Treasury and U.S. government agencies	$	37,584	$	—	$	37,584	N/M
Mortgage-backed U.S. government agencies	168,204		49,480		118,724		239.9	%
State and political subdivision obligations	3,374		3,914		(540)		(13.8)	%
Corporate debt securities	33,033		9,468		23,565		248.9	%
Total available-for-sale debt securities	242,195		62,862		179,333		125,724
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	$	245,638	$	178,136	$	67,502	37.9	%
Mortgage-backed U.S. government agencies	52,788		61,157		(8,369)		(13.7)	%
State and political subdivision obligations	87,724		75,958		11,766		15.5	%
Corporate debt securities	15,992		14,006		1,986		14.2	%
Total held-to-maturity debt securities	402,142		329,257		72,885		22.1	%
Total	$	644,337	$	392,119	$	252,218	64.3	%

N/M - Not Meaningful

The $252.2 million increase in the investment securities portfolio is the result of ~~$63,462,000 or 8 percent (or 10 percent on an annualized basis). The main driver~~excess cash being re-deployed into higher yielding loans and investment securities during the nine months ended September 30, 2022.

Loans and Leases, net of ~~Mid Penn’s~~unearned interest

Total loans and leases, net of unearned interest, as of September 30, 2022 were $3.3 billion compared to $3.1 billion as of December 31, 2021. This increase was driven by organic loan growth ~~continues to be commercial loans, including both commercial and industrial financing, and~~within Mid Penn’s commercial real estate ~~credits.~~

portfolio, net of PPP loan forgiveness.


												September 30, 2022				December 31, 2021
(Dollars in thousands)	September 30, 2017					December 31, 2016					(Dollars in thousands)	Amount		%		Amount		%
	Amount		%			Amount		%
Commercial and industrial	$	182,857		20.8	%	$	172,518		21.2	%	Commercial and industrial	$	556,796	16.8	%	$	619,562	20.0	%
Commercial real estate		490,603		55.9	%		446,524		54.9	%	Commercial real estate	1,944,802		58.6	%	1,668,142		53.5	%
Commercial real estate - construction		58,074		6.6	%		54,376		6.7	%	Commercial real estate - construction	400,188		12.0	%	372,734		12.0	%
Lease financing		259		0.0	%		425		0.1	%
Residential mortgage		101,073		11.5	%		99,457		12.2	%	Residential mortgage	296,910		8.9	%	323,223		10.4	%
Home equity		40,350		4.6	%		37,608		4.6	%	Home equity	115,608		3.5	%	110,306		3.6	%
Consumer		4,170		0.5	%		3,016		0.3	%	Consumer	8,153		0.2	%	10,429		0.5	%
	$	877,386		100.0	%	$	813,924		100.0	%		$	3,322,457	100.0	%	$	3,104,396	100.0	%

Credit Quality, Credit Risk, and Allowance for Loan and Lease Losses

~~For~~

The allowance for loan and lease losses and the related loan and lease loss provision for the periods presented reflect Mid Penn’s continued application of the incurred loss method for estimating credit losses, as Mid Penn is not required to adopt CECL until January 1, 2023, and Mid Penn has not elected to early adopt CECL. PPP loans are included in the commercial and industrial classification and, as the PPP loans are fully guaranteed by the SBA, no allowance for loan and lease losses was recorded against the $2.8 million balance of PPP loans outstanding, net of deferred fees, as of September 30, 2022.

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MID PENN BANCORP, INC.

Changes in the allowance for the three and nine months ended September 30, ~~2017,~~2022 and 2021 are summarized as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2022			2021			2022			2021
Balance, beginning of period	$	16,876		$	14,716		$	14,597		$	13,382

Loans charged off during period	(15)			(1,057)			(81)			(1,961)
Recoveries of loans previously charged off	69			149			189			237
Net recoveries (charge-offs)	54			(908)			108			(1,724)

Provision for loan and lease losses	1,550			425			3,775			2,575
Balance, end of period	$	18,480		$	14,233		$	18,480		$	14,233

Ratio of net loan (recoveries) charge-offs to average loans outstanding (annualized)	-0.007		%	0.149		%	-0.005		%	0.091		%

Ratio of allowance for loan losses to net loans at end of period	0.56		%	0.60		%	0.56		%	0.60		%

For the three and nine months ended September 30, 2022, Mid Penn had net recoveries of ~~$94,000~~$54 thousand and $108 thousand, respectively, compared to net ~~losses~~loan charge-offs of ~~$6,000~~$908 thousand and $1.7 million, respectively during the same ~~period of 2016. The primary reason for this favorable net recoveries amount was that, during the first half of 2017, Mid Penn recovered $318,000 of principal, as well as collected $279,000~~periods in interest income, from the successful workout of a commercial real estate relationship that was partially charged-off in 2010. Similar recoveries were not recognized during the nine months ended September 30, 2016.

Loans charged off during the first nine months of 2017 totaled $315,000 and included two residential mortgage loans from two relationships for $25,000, one commercial and industrial loan for $12,000, four commercial real estate loan relationships for $237,000, one home equity loan for $20,000, and $21,000 in deposit account charge-offs.2021. Mid Penn may need to make future adjustments to the allowance and the provision for loan and lease losses if economic conditions or loan credit quality differs substantially from the assumptions used in making Mid Penn’s evaluation of the level of the allowance for loan and lease losses as compared to the balance of outstanding loans.

~~Changes in the allowance for the nine months ended September 30, 2017 and 2016 are summarized as follows:~~

(Dollars in thousands)
Nine Months Ended September 30,

2017

2016

Balance, beginning of period
$
7,183

$
6,168

Loans charged off during period

(315
)

(234
)
Recoveries of loans previously charged off

409

228

Net recoveries

94

(6
)

Provision for loan and lease losses

225

1,320

Balance, end of period
$
7,502

$
7,482

Ratio of net loans (recovered)/charged off to average loans outstanding, annualized

-0.01
%

0.00
%

Ratio of allowance for loan losses to net loans at end of period

0.86
%

0.95
%

Other than as described herein, Mid Penn does not believe there are any trends or events at this time that are reasonably expected to have a material impact on future results of operations, liquidity, or capital resources. ~~Further, based~~Based on known information, Mid Penn believes that the effects of current and past economic conditions and other unfavorable business conditions may ~~influence certain~~eventually impact some borrowers’ abilities to comply with their repayment terms. Accordingly, Mid Penn has adjusted its qualitative factors for economic and external conditions as part of its general component determination, primarily in response to the current economic conditions. Mid Penn continues to closely monitor ~~closely~~ the financial strength of ~~these borrowers.~~ borrowers and the economic conditions impacting them.

Mid Penn does not ordinarily engage in practices which may be used to artificially shield certain borrowers from the negative economic or business cycle effects that may compromise their ability to repay. Mid Penn does not normally structure construction loans with interest reserve components. Mid Penn has not in the past performed any commercial real estate or other type of loan workouts whereby an existing loan was restructured into multiple new loans. Also, Mid Penn does not extend loans at maturity solely due to the existence of guarantees, without recognizing the credit as impaired. While the existence of a guarantee may be a mitigating factor in determining the proper level of allowance once impairment has been identified, the guarantee does not affect the impairment analysis.

~~MID PENN BANCORP, INC.~~

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MID PENN BANCORP, INC.

The following table presents the change in nonperforming asset categories as of September 30, ~~2017,~~2022, December 31, ~~2016,~~2021, and September 30, ~~2016.~~

2021.


(Dollars in thousands)										(Dollars in thousands)	September 30, 2022			December 31, 2021			September 30, 2021
	September 30, 2017			December 31, 2016			September 30, 2016
Nonperforming Assets:										Nonperforming Assets:
Nonaccrual loans	$	7,939		$	4,658		$	4,621		Nonaccrual loans	$	7,233		$	9,547		$	6,339
Accruing troubled debt restructured loans		551			877			904		Accruing troubled debt restructured loans	396			435			442
Total nonperforming loans		8,490			5,535			5,525		Total nonperforming loans	7,629			9,982			6,781

Foreclosed real estate		33			224			501		Foreclosed real estate	49			—			11
Total non-performing assets		8,523			5,759			6,026		Total non-performing assets	7,678			9,982			6,792

Accruing loans 90 days or more past due		56			59			557		Accruing loans 90 days or more past due	633			515			—
Total risk elements	$	8,579		$	5,818		$	6,583		Total risk elements	$	8,311		$	10,497		$	6,792

Nonperforming loans as a % of total										Nonperforming loans as a % of total
loans outstanding		0.97	%		0.68	%		0.70	%	loans outstanding	0.23		%	0.32		%	0.29		%

Nonperforming assets as a % of total										Nonperforming assets as a % of total
loans outstanding and other real estate		0.97	%		0.71	%		0.76	%	loans outstanding and other real estate	0.23		%	0.32		%	0.29		%

Ratio of allowance for loan losses										Ratio of allowance for loan losses
to nonperforming loans		88.36	%		129.78	%		135.42	%	to nonperforming loans	242.23		%	146.23		%	209.90		%

In the table above, troubled debt restructured loans that are no longer accruing interest are included in nonaccrual loans.

Total nonperforming assets were $7.7 million at September 30, 2022, a decrease compared to nonperforming assets of $10.0 million at December 31, 2021. The ~~increase~~decrease in nonperforming assets since December 31, 2021 was primarily the result of the successful workout of two nonaccrual home equity loans amongst one relationship totaling $2.3 million during the first quarter of 2022. The nonperforming assets included acquired impaired loans assumed in the Riverview Acquisition of $3.3 million as of December 31, 2021. One nonaccrual relationship that was resolved during the first quarter is ~~primarily due~~discussed in detail below.

During the first quarter of 2022, an unrelated party acquired the real estate collateral for an amount sufficient to ~~one larger~~completely payoff the contractual outstanding principal balance of a nonaccrual loan relationship, comprised of two home equity loans acquired in 2018, totaling ~~$4.5 million,~~$2.3 million. As of September 30, 2022, the outstanding principal, any interest due, and all fees were paid off entirely, with ~~a $150,000 specific allowance allocation, being placed on~~no charge-off related to this loan relationship. These loans were transferred from accrual to nonaccrual status during the ~~third~~second quarter of ~~2017.~~

2020.

Given this credit, nonperforming assets were 0.23% of the total of loans plus other real estate assets as of September 30, 2022, a favorable reduction compared to 0.32% and 0.29% at December 31, 2021 and September 30, 2021, respectively. Loan loss reserves as a percentage of nonperforming loans increased to 242.23% at September 30, 2022, compared to 146.23% and 209.90% at December 31, 2021 and September 30, 2021, respectively.

The contractual outstanding principal balance of one commercial real estate-construction loan relationship accounts for $1.2 million of the nonperforming loan balance as of September 30, 2022. This loan was acquired in the Riverview Acquisition in November 2021 while in nonaccrual status. This loan is collateralized primarily by commercial real estate, and given that the fair value of the remaining collateral exceeds the outstanding principal balance, no specific allowance allocation has currently been assigned to this relationship. Management expects to recover the remaining outstanding balance through the sale of real estate collateral pledged in support of the loan.

Mid Penn assesses a specific allocation for both commercial loans and commercial real estate loans prior to ~~charging~~writing down or charging off the loan. Once the ~~charge down~~write-down is taken, the remaining balance remains a nonperforming loan with the original terms and interest rate intact and is not treated as a restructured credit.

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MID PENN BANCORP, INC.

The following table provides additional analysis of partially charged-off loans.

(Dollars in thousands)

September 30, 2017

December 31, 2016

Period ending total loans outstanding
$
877,386

$
813,924

Allowance for loan and lease losses

7,502

7,183

Total Nonperforming loans

8,490

5,535

Nonperforming and impaired loans with partial charge-offs

1,782

1,604

Ratio of nonperforming loans with partial charge-offs

to total loans

0.20
%

0.20
%

Ratio of nonperforming loans with partial charge-offs

to total nonperforming loans

20.99
%

28.97
%

Coverage ratio net of nonperforming loans with

partial charge-offs

111.84
%

182.71
%

Ratio of total allowance to total loans less

nonperforming loans with partial charge-offs

0.86
%

0.88
%


(Dollars in thousands)	September 30, 2022			December 31, 2021
Period ending total loans outstanding	$	3,322,457		$	3,104,396
Allowance for loan and lease losses	18,480			14,597
Total nonperforming loans	7,629			9,982
Nonperforming and impaired loans with partial charge-offs	102			107

Ratio of nonperforming loans with partial charge-offs to total loans	0.003		%	0.003		%

Ratio of nonperforming loans with partial charge-offs to total nonperforming loans	1.34		%	1.07		%

Coverage ratio net of nonperforming loans with partial charge-offs	245.52		%	147.82		%

Ratio of total allowance to total loans less nonperforming loans with partial charge-offs	0.56		%	0.47		%

Mid Penn considers a commercial loan or commercial real estate loan to be impaired when it becomes 90 days or more past due and not well-secured or otherwise not probable for collection. This methodology assumes the borrower cannot or will not continue to make additional payments. At that time the loan would be considered collateral dependent as the discounted cash flow method indicates no operating income is available for evaluating the collateral position; therefore, most impaired loans are deemed to be collateral dependent.

~~MID PENN BANCORP, INC.~~

Mid Penn evaluates loans for charge-off on a monthly basis. Policies that govern the recommendation for charge-off are unique to the type of loan being considered. Commercial loans rated as nonaccrual or lower will first have a collateral evaluation completed in accordance with the guidance on impaired loans. Once the collateral evaluation has been completed, a specific allocation of allowance is made based upon the results of the evaluation. The balance remains a nonperforming loan with the original terms and interest rate intact (not restructured). In the event the loan is unsecured, the loan would have been charged-off at the recognition of impairment. Commercial real estate loans rated as impaired will also have an initial collateral evaluation completed in accordance with the guidance on impaired loans. An updated real estate valuation is ordered, and the collateral evaluation is modified to reflect any variation in value. A specific allocation of allowance is made for any anticipated collateral shortfall. The balance remains a nonperforming loan with the original terms and interest rate intact (not restructured). The process of charge-off for residential mortgage loans begins upon a loan becoming delinquent for 90 days and not in the process of collection. The existing appraisal is reviewed, and a lien search is obtained to determine lien position and any instances of intervening liens. A new appraisal of the property will be ordered if deemed necessary by management and a collateral evaluation is completed. The loan will then be charged down to the value indicated in the evaluation. Consumer loans are recommended for charge-off after reaching delinquency of 90 days and the loan is not well-secured or otherwise not probable for collection. The collateral shortfall of the consumer loan is recommended for charge-off at this point.

As noted above, Mid Penn assesses a specific allocation for both commercial loans and commercial real estate loans. The balance remains a nonperforming loan with the original terms and interest rate intact (not restructured). In addition, Mid Penn takes a preemptive step when any commercial loan or commercial real estate loan becomes classified under its internal classification system. A preliminary collateral evaluation in accordance with the guidance on impaired loans is prepared using the existing collateral information in the loan file. This process allows Mid Penn to review both the credit and documentation files to determine the status of the information needed to make a collateral evaluation. This collateral evaluation is preliminary but allows Mid Penn to determine if any potential collateral shortfalls exist.

Larger groups of small-balance loans, such as residential mortgages and consumer installment loans, are collectively evaluated for impairment. Accordingly, individual consumer and residential loans are not separately identified for impairment disclosures unless such loans are the subject of a restructuring agreement.

Mid Penn’s rating system assumes any loans classified as substandard nonaccrual to be impaired, and most of these loans are considered collateral dependent; therefore, most of Mid Penn’s impaired loans, whether reporting a specific allocation or not, are considered collateral dependent.

It is Mid Penn’s policy to obtain updated ~~third party~~third-party valuations on all impaired loans collateralized by real estate as soon as practically possible offollowing the credit being classified as substandard nonaccrual. Prior to receipt of the updated real estate valuation Mid Penn will use any existing real estate valuation to determine any potential allowance issues; however, no allowance recommendation will be made until such time Mid Penn is in receipt of the updated valuation. The Asset Recovery department employs an electronic tracking system to monitor the receipt of and need for updated appraisals. To date, there have been no material time lapses noted with the above processes.

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MID PENN BANCORP, INC.

In some instances, Mid Penn is not holding real estate as collateral and is relying on business assets (personal property) for repayment. In these circumstances a collateral inspection is performed by Mid Penn personnel to determine an estimated value. The value is based on net book value, as provided by the financial statements, and discounted accordingly based on determinations made by management. Occasionally, Mid Penn will employ an outside service to provide a fair estimate of value based on auction or private sales. Management reviews the estimates of these third parties and discounts them accordingly based on management’s judgment, if deemed necessary.

For impaired loans with no valuation allowance required, Mid Penn’s practice of obtaining independent ~~third party~~third-party market valuations on the subject property as soon as practically possible of being placed on nonaccrual status sometimes indicates that the loan to value ratio is sufficient to obviate the need for a specific allocation in spite of significant deterioration in real estate values in Mid Penn’s primary market area. These circumstances are determined on a ~~case by case~~case-by-case analysis of the impaired loans.

Mid Penn actively monitors the values of collateral on impaired loans. This monitoring may require the modification of collateral values over time or changing circumstances by some factor, either positive or negative, from the original values. All collateral values will be assessed by management at least every 12 months for possible revaluation by an independent third party.

Mid Penn had ~~$9,096,000~~ loans with an aggregate balance of $7.5 million which were deemed by management to be impaired at September 30, ~~2017. Excluding $884,000~~2022, including $3.8 million in loans acquired with credit deterioration ~~from~~in connection with the closing of the Phoenix ~~Bancorp, Inc. (“Phoenix”)~~ acquisition Mid Penn had several loan relationships deemed impaired with an aggregate carrying balance of $8,212,000. This pool of loans was further broken down into a group of loans with an aggregate carrying balance of $6,558,000 for which specific allocations totaling $691,000 were included withinin 2015, the ~~loan loss reserve for these loans. The remaining $1,654,000 of loans required no specific allocation within~~Scottdale and First Priority acquisitions in 2018, and the ~~loan loss reserve.~~Riverview Acquisition in 2021. Of the ~~$8,212,000~~$3.7 million of impaired loan relationships excluding the loans acquired with credit deterioration, ~~from the Phoenix acquisition, $4,460,000~~$1.3 million were commercial and industrial relationships, ~~$2,148,000~~$713 thousand were commercial real estate relationships, ~~$856,000~~$1.4 million were residential relationships ~~$487,000 were commercial real estate – construction relationships,~~ and ~~$261,000~~$283 thousand were home equity relationships. There were specific loan loss reserve allocations of ~~$150,000~~$831 thousand against ~~the~~$1.3 million of commercial and industrial loan relationships ~~$375,000~~and $28 thousand against ~~the~~$112 thousand of commercial real estate ~~relationships, $66,000 against the residential real estate relationships, and $100,000 against the commercial real estate – construction~~loan relationships. Management currently believes that the specific reserves are adequate to cover probable future losses related to these relationships.

~~MID PENN BANCORP, INC.~~

The allowance is a reserve established in the form of a provision expense for loan and lease losses and is reduced by loan charge-offs net of recoveries. In conjunction with an internal loan review function that operates independently of the lending function, management monitors the loan portfolio to identify risk on a monthly basis so that an appropriate allowance is maintained. Based on an evaluation of the loan portfolio, management presents a monthly review of the allowance to the Board of Directors, indicating any changes in the allowance since the last review. In making the evaluation, management considers the results of recent regulatory examinations, which typically include a review of the allowance as an integral part of the examination process. As part of the examination process, federal or state regulatory agencies may require Mid Penn to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management.

In establishing the allowance, management evaluates on a quantitative basis individual classified loans and nonaccrual loans and determines an aggregate reserve for those loans based on that review. In addition, an allowance for the remainder of the loan and lease portfolio is determined based on historical loss experience within certain components of the portfolio. These allocations may be modified if current conditions indicate that loan and lease losses may differ from historical experience.

In addition, a portion of the allowance is established for losses inherent in the loan and lease portfolio which have not been identified by the quantitative processes described above. This determination inherently involves a higher degree of subjectivity and considers risk factors that may not have yet manifested themselves in historical loss experience. These factors include:

•changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market ~~segments;~~

segments (and the potential adverse impacts on the economy from the COVID-19 pandemic);

•changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans;

•changes in the value of underlying collateral for collateral-dependent loans;

•changes in the experience, ability, and depth of lending management and other relevant staff;

•changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses;

•changes in the quality of the institution's loan review system;

•changes in the nature and volume of the portfolio and in the terms of loans;

•the effect of other external factors such as competition, ~~and~~ legal and regulatory requirements, ongovernmental restrictions impacting business activity as a result of the COVID-19 pandemic, and other factors beyond the control of Mid Penn which could affect the level of estimated credit losses in the institution's existing portfolio; and

•the existence and effect of any concentrations of credit and changes in the level of such concentrations.

While the allowance is maintained at a level believed to be adequate by management to provide for probable losses inherent in the loan and lease portfolio, determination of the allowance is inherently subjective, as it requires estimates, all of which may be susceptible to significant change. The unallocated component of the allowance for loan and lease losses covers several considerations that are not specifically measurable through either the specific ~~and~~or general components. For example, we believe that we could face increasing credit risks and uncertainties, not yet reflected in recent historical losses or qualitative factor assessments and underlying data and evaluations, associated with unpredictable changes in economic growth or business conditions in our markets or for certain industries in which we have commercial loan borrowers, or unanticipated stresses to the values of real estate held as ~~collateral.~~collateral, including the prospective

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MID PENN BANCORP, INC.

unknown impacts of the persisting COVID-19 pandemic and inflationary environment. Any or all of these additional issues can adversely affect our borrowers’ ability to timely repay their loans. Additionally, we have experienced continued strong commercial loan growth, including growth in newer markets where we have less of a loss history. Also, the unallocated component allocation recognizes the inherent imprecision in our allowance for loan and lease loss methodology, or any alternative methodology, for estimating specific and general loan losses, including the unpredictable timing and amounts of charge-offs, the fact that historical loss averages ~~don’t~~may not necessarily correlate to future loss trends, and unexpected changes to specific-credit or general portfolio future cash flows and collateral values which could negatively impact unimpaired portfolio loss factors. Changes from these various other uncertainties and considerations may impact the provisions charged to expense in future periods.

Management believes, based on information currently available, that the allowance for loan and lease losses of ~~$7,502,000~~$18.5 million is adequate as of September 30, ~~2017~~2022 to cover specifically identifiable loan losses, as well as estimated losses inherent in our portfolio for which certain losses are probable but not specifically identifiable.

Liquidity

Mid Penn’s objective is to maintain adequate liquidity to meet funding needs at a reasonable cost and to provide contingency plans to meet unanticipated funding needs or a loss of funding sources, while minimizing interest rate risk. Adequate liquidity provides resources for credit needs of borrowers, for depositor withdrawals, and for funding corporate operations. Sources of liquidity are as follows:

•a growing core deposit base;

•proceeds from the sale or maturity of investment securities;

~~proceeds from interest-bearing time deposits with other financial institutions;~~

•payments received on loans and mortgage-backed securities;

•overnight correspondent bank borrowings on various credit lines; and

•borrowing capacity available from the FHLB and the Federal Reserve Discount Window ~~and other lines of credit currently~~ available to Mid Penn.

~~MID PENN BANCORP, INC.~~

The major sources of cash received in the first nine months of 2017 came from the $91,302,000 net increase in deposits and $52,314,000 in proceeds from the sales of available-for-sale investment securities.

~~Major uses of cash in the first nine months of 2017 were $101,288,000 for investment purchases and $63,400,000 for funding the increase in net loans and leases.~~

Mid Penn believes its core deposits are generally stable even in periods of changing interest rates. Liquidity is measured and monitored daily, allowing management to better understand and react to balance sheet trends. These measurements indicate that liquidity generally remains stable and exceeds our minimum defined levels of adequacy. Other than the trends of continued competitive pressures and volatile interest rates, and the uncertain impact of the current inflationary environment, there are no known demands, commitments, events, or uncertainties that will result in, or that are reasonably likely to result in, liquidity increasing or decreasing in any material way.

On at least a quarterly basis, a comprehensive liquidity analysis is reviewed by the Asset Liability Committee and Board of Directors. The analysis provides a summary of the current liquidity measurements, projections, and future liquidity positions given various levels of liquidity stress. Management also maintains a detailed Contingency Funding Plan designed to respond to an overall ~~decline~~stress in the financial condition of the banking industry or a prospective liquidity problem specific to Mid Penn.

The consolidated statements of cash flows provide additional information. Mid Penn’s operating activities during the first nine months ended September 30, 2022 provided $41.6 million of cash, mainly due to net income. Cash used in investing activities during the first nine months ended September 30, 2022 was $492.5 million, mainly the result of purchases of investment securities and the net increase in loans and leases. Cash used in financing activities during the first nine months ended September 30, 2022 totaled $368.2 million, primarily the result of a decrease in net deposits and long-term debt repayment and subordinated debt redemption.

Subordinated Debt

Redemption

On ~~November 9, 2015,~~August 8, 2022, Mid Penn ~~entered into agreements with investors to purchase $7,500,000~~redeemed the $7.5 million aggregate principal amount of ~~its~~subordinated notes (the "2015 Notes") that were due in 2025. Given that the 2015 Notes ~~due 2025. The Notes are~~were in the seventh year since issuance, only sixty percent of the principal balance of the notes would have been treated as Tier 2 capital for regulatory capital ~~purposes. The offering closed in December 2015.~~

~~The Notes bear interest at a rate~~purposes as of 5.15% per year for the first five years and then float at the Wall Street Journal’s Prime Rate plus 0.50%, provided that the interest rate applicable to the outstanding principal balance will at no time be less than 4.0%. Interest is paid quarterly in arrears on January 1, April 1, July 1 and October 1 of each year, beginning on January 1, 2016. The Notes will mature on December 9, 2025 and are redeemable in whole or in part, without premium or penalty, at any time on or after December 9, 2020, and prior to December 9, 2025. Additionally, Mid Penn may redeem the Notes in whole at any time, or in part from time to time, upon at least 30 days’ notice if: (i) a change or prospective change in law occurs that could prevent Mid Penn from deducting interest payable on the Notes for U.S. federal income tax purposes; (ii) an event occurs that precludes the Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) Mid Penn becomes required to register as an investment company under the Investment Company Act of 1940, as amended, in each case at 100% of the principal amount of the subordinated notes, plus accrued and unpaid interest thereon to but excluding the date of redemption. ~~The unamortized debt issuance costs associated with~~See "Note 11 - Subordinated Debt and Trust Preferred Securities," in the Notes ~~were $79,000 at September 30, 2017 and $86,000 at December 31, 2016.~~

~~Holders of the Notes may not accelerate the maturity of the Notes, except upon Mid Penn’s or Mid Penn Bank’s bankruptcy, insolvency, liquidation, receivership, or similar event.~~

to Consolidated Financial Statementsfor additional information.

Regulatory Capital Changes

In July 2013, the federal banking agencies issued final rules to implement the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act. ~~The phase-in period for community banking organizations began January 1, 2016.~~ The final rules implemented higher minimum capital requirements, added a new common equity Tier 1 capital requirement, and established criteria that instruments must meet to be considered common equity Tier 1 capital, additional Tier 1 capital or Tier 2 capital. Under the new rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer comprised of common equity Tier 1 capital above its minimum risk-based capital requirements, which amount ~~(when fully phased in)~~ must be greater than 2.5% of total risk-weighted ~~assets at January 1, 2019. The phase-in period for the capital conservation and countercyclical capital buffers for all banking organizations began on January 1, 2016 at the initial rate~~assets.

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MID PENN BANCORP, INC.

A summary of the payout restrictions based on the capital conservation buffer is as follows:


Capital Conservation Buffer (as a % of risk-weighted assets)	Maximum Payout (as a % of eligible retained income)
> 2.5%	No payout limitation applies
≤2.5% and >1.875%		60%
≤1.875% and >1.25%		40%
≤1.25% and >0.625%		20%
≤0.625%		0%

~~MID PENN BANCORP, INC.~~

Implementation of the deductions and other adjustments to common equity Tier 1 capital began on January 1, 2016 and will be phased-in over a three-year period. The final rules called for the following minimum capital requirements to be considered “well-capitalized” (which include the impact of the capital conservation buffer that was effective January 1, 2016):

As of January 1,

2016

2017

2018

2019

Minimum common equity Tier 1 capital ratio

4.5
%

4.5
%

4.5
%

4.5
%
Common equity Tier 1 capital conservation buffer

0.625
%

1.25
%

1.875
%

2.5
%
Minimum common equity Tier 1 capital ratio plus capital conservation buffer

5.125
%

5.75
%

6.375
%

7.0
%
Phase-in of most deductions from common equity Tier 1 capital

60
%

80
%

100
%

100
%
Minimum Tier 1 capital ratio

6.0
%

6.0
%

6.0
%

6.0
%
Minimum Tier 1 capital ratio plus capital conservation buffer

6.625
%

7.25
%

7.875
%

8.5
%
Minimum total capital ratio

8.0
%

8.0
%

8.0
%

8.0
%
Minimum total capital ratio plus capital conservation buffer

8.625
%

9.25
%

9.875
%

10.5
%

The final rules allowed community banks to make a one-time election not to include the additional components of accumulated other comprehensive income ~~(“AOCI”~~("AOCI") in regulatory capital and instead use the existing treatment under the general risk-based capital rules that excludes most AOCI components from regulatory capital. Mid Penn made the election not to include the additional components of AOCI in regulatory capital.

The final rules permanently grandfathered non-qualifying capital instruments (such as trust preferred securities and cumulative perpetual preferred stock) issued before May 19, 2010 for inclusion in the Tier 1 capital of banking organizations with total consolidated assets less than $15 billion as of December 31, 2009 and banking organizations that were mutual holding companies as of May 19, 2010.

Consistent with the Dodd-Frank Act, ~~the new~~these rules replaced the ratings-based approach to securitization exposures, which is based on external credit ratings, with the simplified supervisory formula approach in order to determine the appropriate risk weights for these exposures. Alternatively, banking organizations may use the existing gross-ups approach to assign securitization exposures to a risk weight category or choose to assign such exposures a 1,250% risk weight.

Under ~~the new~~these rules, mortgage servicing assets ~~(“MSAs”)~~ and certain deferred tax assets ~~(“DTAs”)~~ are subject to stricter limitations than those applicable under the current general risk-based capital rule. The new rules also increase the risk weights for past-due loans, certain risk weights and credit conversion factors.

Mid Penn has implemented these changes in determining and reporting the regulatory ratios of Mid Penn and the Bank, and has concluded that the new rules did not have a material adverse effect on Mid Penn’s financial condition.

Capital Resources

Shareholders' equity, or capital, is evaluated in relation to total assets and the risk associated with those ~~assets. The greater a corporation’s~~assets, and the desire to collectively maintain and enhance shareholders’ value, and satisfactorily address regulatory capital resources, the more likely it is to meet its cash obligations and absorb unforeseen losses. Too much capital, however, indicates that not enough of the corporation’s earnings have been invested in the continued growth of the business or paid to shareholders. An excess capital position may make it difficult for a corporation to offer a competitive return on the shareholders’ capital going forward. For these reasons capital adequacy andrequirements. Accordingly, capital management ~~have~~has been, and will continue to be, of paramount ~~importance.~~

importance to Mid Penn.

Shareholders’ equity increased by ~~$6,924,000~~$9.0 million, or ~~10 percent,~~1.8%, from ~~$70,467,000 at~~$490.1 million as of December 31, ~~2016~~2021 to ~~$77,391,000 at~~$499.1 million as of September 30, ~~2017. The increase during the first nine months of 2017 was attributed to both (i) growth in retained earnings through an increase in year-to-date net income and (ii) other comprehensive income,~~2022, primarily due to ~~the after-tax unrealized appreciation~~earnings of $39.1 million partially offset by a decrease in the carrying value of the available-for-sale investment portfolio ~~since December 31, 2016. Regulatory capital ratios for both~~of $19.3 million, dividends declared of $9.6 million and stock repurchases of $3.0 million. As previously announced, Mid Penn completed a public offering of 2,990,000 shares of common stock at a price of $25.00 per share in May 2021, with the aggregate gross proceeds of the offering totaling $74,750,000. The net proceeds of the offering after deducting the underwriting discount and offering expenses were $70,238,000. The additional shares issued on May 4, 2021 significantly impacted the ~~Bank exceeded regulatory “well-capitalized” levels at both~~weighted average number of shares outstanding used for the earnings per share calculation for the nine months ended September 30, ~~2017 and December 31, 2016.~~

2022 compared to the nine months ended September 30, 2021.

Banks are evaluated for capital adequacy by regulatory supervisory agencies based on the ratio of capital to risk-weighted assets and total assets. The minimum capital to risk-weighted assets requirements, including the capital conservation buffers, which became effective for Mid Penn and the Bank on January 1, 2016, are illustrated below. At September 30, ~~2017,~~2022, regulatory capital ratios for both Mid Penn and the Bank met the definition of a ~~“well-capitalized”~~"well-capitalized" institution under the regulatory framework for prompt corrective action, and exceeded the minimum capital requirements under Basel III.

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MID PENN BANCORP, INC.

Mid Penn and Mid Penn Bank maintained the following regulatory capital levels, leverage ratios, and risk-based capital ratios as of September 30, ~~2017~~2022 and December 31, ~~2016:~~

2021:


	Capital Adequacy
(Dollars in thousands)	Actual				Minimum for Basel III Capital Adequacy (1)				To Be Well-Capitalized Under Prompt Corrective Action Provisions

	Amount		Ratio		Amount		Ratio		Amount		Ratio
Mid Penn Bancorp, Inc.
As of September 30, 2022
Tier 1 Capital (to Average Assets)	$	406,114	9.6	%	$	169,240	4.0	%	N/A		N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)	396,835		11.4	%	243,964		7.0	%	N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)	406,114		11.7	%	296,242		8.5	%	N/A		N/A
Total Capital (to Risk Weighted Assets)	481,748		13.8	%	365,946		10.5	%	N/A		N/A

Mid Penn Bank
As of September 30, 2022
Tier 1 Capital (to Average Assets)	$	444,871	10.5	%	$	169,095	4.0	%	$	211,369	5.0	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)	444,871		13.3	%	234,361		7.0	%	217,621		6.5	%
Tier 1 Capital (to Risk Weighted Assets)	444,871		13.3	%	284,581		8.5	%	267,841		8.0	%
Total Capital (to Risk Weighted Assets)	463,427		13.8	%	351,542		10.5	%	334,802		10.0	%

Mid Penn Bancorp, Inc.
As of December 31, 2021
Tier 1 Capital (to Average Assets)	$	374,368	8.1	%	$	185,764	4.0	%	N/A		N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)	365,084		11.7	%	217,579		7.0	%	N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)	374,368		12.0	%	264,203		8.5	%	N/A		N/A
Total Capital (to Risk Weighted Assets)	452,527		14.6	%	326,369		10.5	%	N/A		N/A

Mid Penn Bank
As of December 31, 2021
Tier 1 Capital (to Average Assets)	$	398,773	8.6	%	$	185,721	4.0	%	$	232,151	5.0	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)	398,773		12.8	%	217,446		7.0	%	201,914		6.5	%
Tier 1 Capital (to Risk Weighted Assets)	398,773		12.8	%	264,041		8.5	%	248,510		8.0	%
Total Capital (to Risk Weighted Assets)	413,442		13.3	%	326,169		10.5	%	310,637		10.0	%

(1)Minimum amounts and ratios include the full phase in of the capital conservation buffer of 2.5% required by the Basel III framework.

RECONCILIATION OF NON-GAAP MEASURES (Unaudited):

This Form 10-Q contains financial information determined by methods other than in accordance with GAAP. Mid Penn believes that reporting core banking loans is useful to investors as they reflect portfolio loans and related growth from traditional bank activities and excludes short-term or nonrecurring loans from special programs like the PPP. The ratio of the allowance for loan and lease losses to core banking loans is useful to investors as it highlights the true coverage ratio of the allowance excluding those loans that are 100%

~~MID PENN BANCORP, INC.~~

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Capital Adequacy

To Be Well-Capitalized

(Dollars in thousands)

Under Prompt

Minimum Capital

Corrective

Actual:

Required:

Action Provisions:

Amount

Ratio

Amount

Ratio

Amount

Ratio

Corporation

As of  September 30, 2017:

Tier 1 Capital (to Average Assets)
$
75,637

6.8
%

$
44,760

4.0
%

N/A

N/A

Common Equity Tier 1 Capital (to Risk Weighted Assets)

75,637

8.9
%

48,755

5.75
%

N/A

N/A

Tier 1 Capital (to Risk Weighted Assets)

75,637

8.9
%

61,474

7.25
%

N/A

N/A

Total Capital (to Risk Weighted Assets)

90,687

10.7
%

78,432

9.25
%

N/A

N/A

Bank

As of  September 30, 2017:

Tier 1 Capital (to Average Assets)
$
82,353

7.4
%

$
44,732

4.0
%

$
55,915

5.0
%
Common Equity Tier 1 Capital (to Risk Weighted Assets)

82,353

9.7
%

48,715

5.75
%

55,069

6.5
%
Tier 1 Capital (to Risk Weighted Assets)

82,353

9.7
%

61,423

7.25
%

67,777

8.0
%
Total Capital (to Risk Weighted Assets)

89,982

10.6
%

78,367

9.25
%

84,722

10.0
%

Corporation

As of  December 31, 2016:

Tier 1 Capital (to Average Assets)
$
70,431

6.8
%

$
41,595

4.0
%

N/A

N/A

Common Equity Tier 1 Capital (to Risk Weighted Assets)

70,431

9.1
%

34,807

4.5
%

N/A

N/A

Tier 1 Capital (to Risk Weighted Assets)

70,431

9.1
%

46,409

6.0
%

N/A

N/A

Total Capital (to Risk Weighted Assets)

85,148

11.0
%

61,879

8.0
%

N/A

N/A

Bank

As of  December 31, 2016:

Tier 1 Capital (to Average Assets)
$
77,026

7.4
%

$
41,568

4.0
%

$
51,960

5.0
%
Common Equity Tier 1 Capital (to Risk Weighted Assets)

77,026

10.0
%

34,781

4.5
%

50,239

6.5
%
Tier 1 Capital (to Risk Weighted Assets)

77,026

10.0
%

46,374

6.0
%

61,832

8.0
%
Total Capital (to Risk Weighted Assets)

84,329

10.9
%

61,832

8.0
%

77,291

10.0
%
MID PENN BANCORP, INC.

guaranteed by the SBA through the PPP and, therefore, do not require an allowance assessment. These non-GAAP disclosures have limitations as an analytical tool, should not be viewed as a substitute for financial measures determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of Mid Penn’s results and financial condition as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. Management believes that this non-GAAP supplemental information will be helpful in understanding Mid Penn’s ongoing operating results. This supplemental presentation should not be construed as an inference that Mid Penn’s future results will be unaffected by similar adjustments to be determined in accordance with GAAP.


Core Banking Loans
(Dollars in thousands)	September 30, 2022			December 31, 2021			September 30, 2021
Loans and leases, net of unearned interest	$	3,322,457		$	3,104,396		$	2,370,429
Less: PPP loans, net of deferred fees	2,800			111,286			229,679
Core banking loans	$	3,319,657		$	2,993,110		$	2,140,750

Allowance for loan and lease losses	$	18,480		$	14,597		$	14,233

Ratio of allowance for loan and lease losses to net loans at end of period	0.56		%	0.47		%	0.60		%

Ratio of allowance for loan and lease losses to non-PPP core banking loans at end of period	0.56		%	0.49		%	0.66		%

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~There has been no material change in~~

As a financial institution, Mid Penn’s primary source of market risk ~~since December 31, 2016, as reported~~is interest rate risk. Interest rate risk is the exposure to fluctuations in Mid Penn’s ~~Form 10-K filed~~future earnings, earnings at risk, resulting from changes in interest rates. This exposure or sensitivity is a function of the repricing characteristics of Mid Penn's portfolio of assets and liabilities. Each asset and liability reprices either at maturity or during the life of the instrument. Interest rate sensitivity is measured as the difference between the volume of assets and liabilities that are subject to repricing in a future period of time.

The principal purpose of asset-liability management is to maximize current and future net interest income within acceptable levels of interest rate risk while satisfying liquidity and capital requirements. Net interest income is increased by increasing the net interest margin and by volume growth. Thus, the goal of interest rate risk management is to maintain a balance between risk and reward such that net interest income is maximized while risk is maintained at an acceptable level.

Mid Penn utilizes an asset-liability management model to measure the impact of interest rate movements on its interest rate sensitivity position. Mid Penn’s management also reviews the traditional maturity gap analysis regularly. Mid Penn does not always attempt to achieve an exact match between interest sensitive assets and liabilities because it believes that an actively managed amount of interest rate risk is inherent and appropriate in the management of Mid Penn’s profitability.

Modeling techniques and simulation analysis involve assumptions and estimates that inherently cannot be measured with complete precision. Key assumptions in the ~~SEC~~analyses include maturity and repricing characteristics of assets and liabilities, prepayments on ~~March 23, 2017.~~

amortizing assets, non-maturing deposit sensitivity, and loan and deposit pricing. These assumptions are inherently uncertain due to the timing, magnitude and frequency of rate changes and changes in market conditions and management strategies, among other factors. However, the analyses are useful in quantifying risk and provide a relative gauge of Mid Penn’s interest rate risk position over time.

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MID PENN BANCORP, INC.

Management reviews interest rate risk on a quarterly basis. This analysis includes earnings scenarios whereby interest rates are increased by 100, 200, 300 and 400 basis points and decreased by 100 basis points. These scenarios, detailed in the table below, indicate that Mid Penn would experience enhanced net interest income over a one-year time frame due to upward interest rate changes, while a reduction in interest rates would result in a decline in net interest income over a one-year time frame; however, actual results could vary significantly from the calculations prepared by management. At September 30, 2022, all interest rate risk levels according to the model were within the tolerance limits of the Board-approved policy.


Change in Basis Points	% Change in Net Interest Income	Policy Risk Limit
400	9.74%	≥ -25%
300	7.33%	≥ -20%
200	4.92%	≥ -15%
100	2.49%	≥ -10%
(100)	-0.88%	≥ -10%

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Mid Penn maintains controls and procedures designed to ensure that information required to be disclosed in the reports that Mid Penn files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures as of September 30, ~~2017,~~2022, Mid Penn’s management, with the participation of the Principal Executive Officer and Principal Financial Officer, concluded that the disclosure controls and procedures were effective as of such date.

Changes in Internal Controls

~~During the three and nine months ended September 30, 2017, there~~

There were no changes in Mid Penn’s internal control over financial reporting that have materially affected, or are reasonable likely to materially affect, Mid Penn’s internal control over financial ~~reporting.~~

reporting during the nine months ended September 30, 2022.

~~MID PENN BANCORP, INC.~~

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MID PENN BANCORP, INC.

PART II – ~~OTHE~~ROTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

~~Management~~

Based on information currently available, management is not aware of any litigation that would reasonably be expected to have a material adverse effect on the consolidated financial position of Mid Penn or its subsidiaries taken as a whole. There are no proceedings pending other than ordinary routine litigation occurring in the normal course of business. In addition, management does not know of any material proceedings contemplated by governmental authorities against Mid Penn or any of its properties.

ITEM 1A – RISK FACTORS

Management has reviewed the risk factors that were previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2021, to determine if there were material changes applicable to the ~~three and~~ nine months ended September 30, ~~2017.~~2022. There are no material changes ~~from the~~to such risk ~~factors as previously disclosed in the Annual Report on Form 10-K.~~

factors.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~None~~

(1)None.

(2)None.

(3)Mid Penn adopted a treasury stock repurchase program initially effective March 19, 2020, and the program remains available as it was extended through March 19, 2023 by Mid Penn’s Board of Directors on March 23, 2022. The treasury stock repurchase program authorizes the repurchase of up to $15,000,000 of Mid Penn’s outstanding common stock, which represented approximately 3.5% of the issued shares based on Mid Penn’s closing stock price and shares issued as of March 31, 2022. Under the program, Mid Penn may conduct repurchases of its common stock through open market transactions (which may be by means of a trading plan adopted under SEC Rule 10b5-1) or in privately negotiated transactions. Repurchases under the program are made at the discretion of management and are subject to market conditions and other factors. There is no guarantee as to the exact number of shares that Mid Penn may repurchase. As of September 30, 2022 Mid Penn repurchased 208,343 shares under the program.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 – MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5 – OTHER INFORMATION

None

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MID PENN BANCORP, INC.

ITEM 6 – EXHIBITS

•

Exhibit 2.1 – Agreement and Plan of Merger, dated as of March 29, 2017, by and among Mid Penn Bancorp, Inc., Mid Penn Bank, and The Scottdale Bank and Trust Company (Incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K (File No. 001-13677) filed with the SEC on March 30, 2017.)

•

Exhibit 3(i) – The Registrant’s amended Articles of Incorporation (Incorporated by reference to Exhibit 3(i) to Registrant’s Registration Statement on Form S-4 (File No. 333-199740) filed with the SEC on October 31, 2014.)

•Exhibit 3.1 – The Registrant’s Articles of Incorporation. (Incorporated by reference to Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q filed for the quarterly period ended June 30, 2019).

•

~~Exhibit 3(ii) – The Registrant’s By-laws (Incorporated by reference to Exhibit 3(ii) to Registrant’s Current Report on Form 8-K filed with the SEC on August 30, 2010.)~~

•Exhibit 3.2 – The Registrant’s By-laws. (Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed with the SEC on February 24, 2022.)

•

~~Exhibit 11 – Statement re: Computation of Per Share Earnings. (Incorporated by reference to Part I Item 1 of this Quarterly Report on Form 10-Q.)~~

•Exhibit 10 .1 - Amended and Restated Employment Agreement among Mid Penn Bancorp , Inc., Mid Penn Bank and Rory G. Ritrievi dated September 6, 2022. (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•

~~Exhibit 31.1 – Certification of Principal Executive Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a) as added by Section 302 of the Sarbanes-Oxley Act of 2002.~~

•Exhibit 10.2 - Employment Agreement among Mid Penn Bancorp, Inc., Mid Penn Bank and Allison Jo hnson dated September 6, 2022 . (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•

~~Exhibit 31.2 - Certification of Principal Financial Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a) as added by Section 302 of the Sarbanes-Oxley Act of 2002.~~

•Exhibit 10.3 - Employment Agreement among Mid Penn Bancorp, Inc., Mid Penn Bank and Scott Micklewright dated September 6, 2022 . (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•

~~Exhibit 32 – Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as added by Section 906 of the Sarbanes-Oxley Act of 2002.~~

•Exhibit 10.4 - Employment Agreement among Mid Penn Bancorp, Inc., Mid Penn Bank and Justin T. Webb dated September 6, 2022 . (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•Exhibit ~~101.INS~~10.5 - Employment Agreement among Mid Penn Bancorp, Inc., Mid Penn Bank and Joan Dickinson dated September 6, 2022. (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•Exhibit 10.6 - Amended and Restated Change in Control Agreement am ong Mid Penn Bancorp, Inc., Mid Penn Bank and Rory G. Ritrievi dated September 6, 2022 . (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•Exhibit 10.7 - Change in Control Agreement among Mid Penn Bancorp, Inc., Mid Penn Bank and Allison Johnson dated September 6, 2022. (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•Exhibit 10.8 - Amended and Restated Change in Control Agreement among Mid Penn Bancorp, Inc., Mid Penn Bank and Scott Micklewright dated September 6, 2022. (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•Exhibit 10.9 - Amended and Restated Change in Control Agreement among Mid Penn Bancorp, Inc., Mid Penn Bank and Justin T. Webb dated September 6, 2022. (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•Exhibit 10.10 - Amended and Restated Change in Control Agreement among Mid Penn Bancorp, Inc., Mid Penn Bank and Joan Dickinson dated September 6, 2022. (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•Exhibit 10.11 - Amended and Restated Supplemental Executive Retirement Plan Agreement between Mid Penn Bank and Rory G. Ritrievi dated September 6, 2022. (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•Exhibit 10.1 2 - Supplemental Executive Retirement Plan Agreement between Mid Penn Bank and Allison Johnson dated September 6, 2022. (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•Exhibit 10.1 3 - Amended and Restated Supplemental Executive Retirement Plan Agreement between Mid Penn Bank and Scott Micklewri ght dated September 6, 2022. (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•Exhibit 10.1 4 - Amended and Restated Supplemental Executive Retirement Plan Agreement between Mid Penn Bank and Justin T. Webb dated September 6, 2022. (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•Exhibit 10.1 5 - Amended and Restated Supplemental Executive Retirement Plan Agreement between Mid Penn Bank and Joan Dickinson dated September 6, 2022. (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the SEC on September 9, 2022.)

•Exhibit 31.1 – ~~XBRL Instance Document~~

Certification of Principal Executive Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a) as added by Section 302 of the Sarbanes-Oxley Act of 2002.

•Exhibit 31.2 - Certification of Principal Financial Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a) as added by Section 302 of the Sarbanes-Oxley Act of 2002.

•Exhibit 32 – Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as added by Section 906 of the Sarbanes-Oxley Act of 2002.

•Exhibit 101.SCH – Inline XBRL Taxonomy Extension Schema

Document.

•Exhibit 101.CAL – Inline XBRL Taxonomy Extension Calculation Linkbase

Document.

•Exhibit 101.DEF – Inline XBRL Taxonomy Extension Definition Linkbase

Document.

•Exhibit 101.LAB – Inline XBRL Taxonomy Extension Label Linkbase

Document.

•Exhibit 101.PRE – Inline XBRL Taxonomy Extension Presentation Linkbase

Document.

•Exhibit 104 – Cover Page Interactive Data File (formatted in inline XBRL and contained in Exhibit 101).

~~MID PENN BANCORP, INC.~~

Table of Contents

~~SIGNATURES~~

MID PENN BANCORP, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Mid Penn Bancorp, Inc. (Registrant)

By:			/s/ Rory G. Ritrievi
			Rory G. Ritrievi
	President and CEO
	(Principal Executive Officer)

Date:		November 4, 2022	~~November 8, 2017~~

By:			/s/ ~~Michael D. Peduzzi, CPA~~ Allison S. Johnson
			~~Michael D. Peduzzi, CPA~~
	Allison S. Johnson Chief Financial Officer (Principal Financial Officer)

Date:		November 4, 2022	~~November 8, 2017~~

(Dollars in thousands)								Accumulated
			Additional					Other			Total
	Common		Paid-in		Retained			Comprehensive			Shareholders'
	Stock		Capital		Earnings			(Loss) Income			Equity
Balance, January 1, 2017	$	4,233	$	40,688	$	28,399		$	(2,853	)	$	70,467
Net income		—		—		6,588			—			6,588
Total other comprehensive income, net of taxes		—		—		—			1,823			1,823
Employee Stock Purchase Plan (2,747 shares)		3		73		—			—			76
Director Stock Purchase Plan (714 shares)		1		20		—			—			21
Common stock dividends		—		—		(1,653	)		—			(1,653	)
Restricted stock activity (3,996 shares)		4		65		—			—			69
Balance, September 30, 2017	$	4,241	$	40,846	$	33,334		$	(1,030	)	$	77,391

Balance, January 1, 2016	$	4,227	$	40,559	$	23,470		$	1,812		$	70,068
Net income		—		—		5,728			—			5,728
Total other comprehensive income, net of taxes		—		—		—			1,144			1,144
Employee Stock Purchase Plan (3,334 shares)		3		53		—			—			56
Common stock dividends		—		—		(1,945	)		—			(1,945	)
Restricted stock activity (2,115 shares)		2		32		—			—			34
Balance, September 30, 2016	$	4,232	$	40,644	$	27,253		$	2,956		$	75,085

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
September 30, 2017
Available-for-sale securities:
U.S. Treasury and U.S. government agencies	$	40,133	$	-	$	880	$	39,253
Mortgage-backed U.S. government agencies		27,370		11		335		27,046
State and political subdivision obligations		28,393		35		450		27,978
Corporate debt securities		1,000		5		-		1,005
Equity securities		1,268		2		39		1,231
Total available-for-sale securities		98,164		53		1,704		96,513
Held-to-maturity securities:
U.S. Treasury and U.S. government agencies		10,984		21		7		10,998
Mortgage-backed U.S. government agencies		51,326		96		102		51,320
State and political subdivision obligations		20,315		124		41		20,398
Corporate debt securities		-		-		-		-
Equity securities		-		-		-		-
Total held-to-maturity securities		82,625		241		150		82,716
Total	$	180,789	$	294	$	1,854	$	179,229

(Dollars in thousands)			Special
September 30, 2017	Pass		Mention		Substandard		Doubtful		Total
Commercial and industrial	$	176,801	$	489	$	5,567	$	-	$	182,857
Commercial real estate		480,258		1,745		8,600		-		490,603
Commercial real estate - construction		57,400		187		487		-		58,074
Lease financing		259		-		-		-		259
Residential mortgage		99,746		99		1,228		-		101,073
Home equity		39,919		114		317		-		40,350
Consumer		4,170		-		-		-		4,170
	$	858,553	$	2,634	$	16,199	$	-	$	877,386

(Dollars in thousands)
As of, and for the nine months ended, September 30, 2016	Commercial and industrial		Commercial real estate			Commercial real estate - construction			Lease financing		Residential mortgage			Home equity			Consumer			Unallocated			Total
Allowance for loan and lease losses:
Beginning balance,
January 1, 2016	$	1,393	$	3,552		$	153		$	1	$	534		$	317		$	12		$	206		$	6,168
Charge-offs		-		(193	)		-			-		(4	)		(25	)		(12	)		-			(234	)
Recoveries		3		190			-			-		25			-			10			-			228
Provisions		736		786			(33	)		-		(23	)		60			-			(206	)		1,320
Ending balance,
September 30, 2016		2,132		4,335			120			1		532			352			10			-			7,482
Ending balance:
individually evaluated for impairment		828		764			-			-		-			2			-			-			1,594
Ending balance:
collectively evaluated for impairment	$	1,304	$	3,571		$	120		$	1	$	532		$	350		$	10		$	-		$	5,888

Loans receivables:
Ending balance	$	168,075	$	421,452		$	57,319		$	506	$	104,483		$	36,451		$	3,198		$	-		$	791,484
Ending balance:
individually evaluated for impairment		885		3,398			-			-		847			90			-			-			5,220
Ending balance:
acquired with credit deterioration		-		972			-			-		380			-			-			-			1,352
Ending balance:
collectively evaluated for impairment	$	167,190	$	417,082		$	57,319		$	506	$	103,256		$	36,361		$	3,198		$	-		$	784,912

(Dollars in thousands)	Pre-Modification		Post-Modification
September 30, 2017	Outstanding Recorded Investment		Outstanding Recorded Investment		Recorded Investment
Commercial and industrial	$	4,110	$	4,460	$	4,460
Commercial real estate	$	2,885	$	2,731	$	1,792
Residential mortgage		759		757		616
	$	7,754	$	7,948	$	6,868

(Dollars in thousands)
Accretable yield, July 1, 2017	$	68
Accretable yield amortized to interest income		(3	)
Reclassification from nonaccretable difference (a)		-
Accretable yield, September 30, 2017	$	65

(Dollars in thousands)

Accretable yield, January 1, 2017	$	67
Accretable yield amortized to interest income		(25	)
Reclassification from nonaccretable difference (a)		23
Accretable yield, September 30, 2017	$	65

	As of January 1,
		2016			2017			2018			2019
Minimum common equity Tier 1 capital ratio			4.5	%		4.5	%		4.5	%		4.5	%
Common equity Tier 1 capital conservation buffer			0.625	%		1.25	%		1.875	%		2.5	%
Minimum common equity Tier 1 capital ratio plus capital conservation buffer			5.125	%		5.75	%		6.375	%		7.0	%
Phase-in of most deductions from common equity Tier 1 capital			60	%		80	%		100	%		100	%
Minimum Tier 1 capital ratio			6.0	%		6.0	%		6.0	%		6.0	%
Minimum Tier 1 capital ratio plus capital conservation buffer			6.625	%		7.25	%		7.875	%		8.5	%
Minimum total capital ratio			8.0	%		8.0	%		8.0	%		8.0	%
Minimum total capital ratio plus capital conservation buffer			8.625	%		9.25	%		9.875	%		10.5	%

	Capital Adequacy
											To Be Well-Capitalized
(Dollars in thousands)											Under Prompt
						Minimum Capital					Corrective
	Actual:					Required:					Action Provisions:
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Corporation
As of September 30, 2017:
Tier 1 Capital (to Average Assets)	$	75,637		6.8	%	$	44,760		4.0	%	N/A		N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)		75,637		8.9	%		48,755		5.75	%	N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)		75,637		8.9	%		61,474		7.25	%	N/A		N/A
Total Capital (to Risk Weighted Assets)		90,687		10.7	%		78,432		9.25	%	N/A		N/A

Bank
As of September 30, 2017:
Tier 1 Capital (to Average Assets)	$	82,353		7.4	%	$	44,732		4.0	%	$	55,915		5.0	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		82,353		9.7	%		48,715		5.75	%		55,069		6.5	%
Tier 1 Capital (to Risk Weighted Assets)		82,353		9.7	%		61,423		7.25	%		67,777		8.0	%
Total Capital (to Risk Weighted Assets)		89,982		10.6	%		78,367		9.25	%		84,722		10.0	%

Corporation
As of December 31, 2016:
Tier 1 Capital (to Average Assets)	$	70,431		6.8	%	$	41,595		4.0	%	N/A		N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)		70,431		9.1	%		34,807		4.5	%	N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)		70,431		9.1	%		46,409		6.0	%	N/A		N/A
Total Capital (to Risk Weighted Assets)		85,148		11.0	%		61,879		8.0	%	N/A		N/A

Bank
As of December 31, 2016:
Tier 1 Capital (to Average Assets)	$	77,026		7.4	%	$	41,568		4.0	%	$	51,960		5.0	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		77,026		10.0	%		34,781		4.5	%		50,239		6.5	%
Tier 1 Capital (to Risk Weighted Assets)		77,026		10.0	%		46,374		6.0	%		61,832		8.0	%
Total Capital (to Risk Weighted Assets)		84,329		10.9	%		61,832		8.0	%		77,291		10.0	%