MID PENN BANCORP INC - Quarter Report: 2022 September (Form 10-Q)

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, 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
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification Number)

2407 Park Drive Harrisburg, Pennsylvania						17110
(Address of Principal Executive Offices)						(Zip Code)

Registrant’s telephone number, including area code 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 every Interactive Data File required to be submitted 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 such files) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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. ☐

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

As of October 28, 2022, the registrant had 15,882,853 shares of common stock outstanding.

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FORM 10-Q

TABLE OF CONTENTS


PART 1 – FINANCIAL INFORMATION

Item 1 – Financial Statements			3

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

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

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

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

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

Notes to Consolidated Financial Statements (Unaudited)			10

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

Item 3 – Quantitative and Qualitative Disclosures about Market Risk			60

Item 4 – Controls and Procedures			61

PART II – OTHER INFORMATION			62

Item 1 – Legal Proceedings			62

Item 1A – Risk Factors			62

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

Item 3 – Defaults upon Senior Securities			62

Item 4 – Mine Safety Disclosures			62

Item 5 – Other Information			62

Item 6 – Exhibits			63

Signatures			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.

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MID PENN BANCORP, INC.

PART 1 – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(Dollars in thousands, except share data)	September 30, 2022		December 31, 2021
ASSETS
Cash and due from banks	$	76,018	$	41,100
Interest-bearing balances with other financial institutions	4,520		146,031
Federal funds sold	14,140		726,621
Total cash and cash equivalents	94,678		913,752

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	242,195		62,862
Equity securities available for sale, at fair value	428		500
Loans held for sale, at fair value	5,997		11,514
Loans and leases, net of unearned interest	3,322,457		3,104,396
Less: Allowance for loan and lease losses	(18,480)		(14,597)
Net loans and leases	3,303,977		3,089,799

Bank premises and equipment, net	33,854		33,232
Bank premises and equipment held for sale	2,262		3,907
Operating lease right of use asset	8,352		9,055
Finance lease right of use asset	2,952		3,087
Cash surrender value of life insurance	50,419		49,661
Restricted investment in bank stocks	4,595		9,134
Accrued interest receivable	15,861		11,328
Deferred income taxes	16,093		10,779
Goodwill	113,871		113,835
Core deposit and other intangibles, net	7,215		9,436
Foreclosed assets held for sale	49		—
Other assets	28,963		28,287
Total Assets	$	4,333,903	$	4,689,425

LIABILITIES & SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand	$	863,037	$	850,438
Interest-bearing demand	1,103,000		1,066,852
Money Market	966,913		1,076,593
Savings	344,359		381,476
Time	452,287		626,657
Total Deposits	3,729,596		4,002,016

Long-term debt	4,501		81,270
Subordinated debt and trust preferred securities	66,357		74,274
Operating lease liability	10,261		11,363
Accrued interest payable	1,841		1,791
Other liabilities	22,242		28,635
Total Liabilities	3,834,798		4,199,349

Shareholders' Equity:
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	386,452		384,742
Retained earnings	120,572		91,043
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	(4,880)		(1,923)
Total Shareholders’ Equity	499,105		490,076
Total Liabilities and Shareholders' Equity	$	4,333,903	$	4,689,425

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

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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,
	2022		2021		2022		2021
INTEREST INCOME
Interest and fees on loans and leases	$	38,484	$	29,590	$	107,764	$	87,755
Interest and dividends on investment securities:
U.S. Treasury and government agencies	2,873		285		6,738		688
State and political subdivision obligations, tax-exempt	392		279		1,107		834
Other securities	509		277		1,430		870
Total Interest and Dividends on Investment Securities	3,774		841		9,275		2,392

Interest on other interest-bearing balances	12		1		33		5
Interest on federal funds sold	736		308		1,786		485
Total Interest Income	43,006		30,740		118,858		90,637
INTEREST EXPENSE
Interest on deposits	2,836		2,909		7,149		8,791
Interest on short-term borrowings	—		133		—		539
Interest on long-term and subordinated debt	761		704		2,453		2,111
Total Interest Expense	3,597		3,746		9,602		11,441
Net Interest Income	39,409		26,994		109,256		79,196
PROVISION FOR LOAN AND LEASE LOSSES	1,550		425		3,775		2,575
Net Interest Income After Provision for Loan and Lease Losses	37,859		26,569		105,481		76,621
NONINTEREST INCOME
Income from fiduciary and wealth management activities	1,729		618		3,986		1,716
ATM debit card interchange income	1,078		630		3,263		1,854
Service charges on deposits	483		223		1,617		552
Mortgage banking income	536		3,162		1,370		8,382
Mortgage hedging income	217		22		1,321		22
Net gain on sales of SBA loans	152		105		262		560
Earnings from cash surrender value of life insurance	250		74		758		223
Net gain on sales of investment activities	—		79		—		79
Other income	1,518		596		4,366		2,485
Total Noninterest Income	5,963		5,509		16,943		15,873
NONINTEREST EXPENSE
Salaries and employee benefits	13,583		10,342		39,167		29,873
Software licensing and utilization	1,804		1,551		5,731		4,493
Occupancy expense, net	1,634		1,318		5,088		4,115
Equipment expense	1,121		745		3,244		2,237
Shares tax	920		498		2,626		1,022
Legal and professional fees	528		610		1,861		1,591
ATM/card processing	518		249		1,605		696
Intangible amortization	514		266		1,516		823
FDIC Assessment	254		461		1,351		1,364
Charitable contributions qualifying for State tax credits	—		—		190		635
Mortgage banking profit-sharing expense	—		1,140		178		2,005
Gain on sale or write-down of foreclosed assets, net	(57)		(7)		(88)		(26)
Merger and acquisition expense	—		198		—		720
Post-acquisition restructuring expense	—		—		329		—
Other expenses	3,896		2,648		11,577		7,485
Total Noninterest Expense	24,715		20,019		74,375		57,033
INCOME BEFORE PROVISION FOR INCOME TAXES	19,107		12,059		48,049		35,461
Provision for income taxes	3,626		2,272		8,962		6,749
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	15,481	$	9,787	$	39,087	$	28,712

PER COMMON SHARE DATA:
Basic and Diluted Earnings Per Common Share	$	0.97	$	0.86	$	2.45	$	2.85
Diluted Earnings Per Common Share	$	0.97	$	0.86	$	2.45	$	2.85
Cash Dividends Declared	$	0.20	$	0.20	$	0.60	$	0.59

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

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MID PENN BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)


(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.

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MID PENN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)


(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.

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MID PENN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


(Dollars in thousands)	Nine Months Ended September 30,
	2022		2021
Operating Activities:
Net Income	$	39,087	$	28,712
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses	3,775		2,575
Depreciation	3,056		2,463
Amortization of intangibles	1,516		823
Net amortization of security discounts/premiums	530		471
Noncash operating lease expense	1,255		1,279
Amortization of finance lease right of use asset	135		135
Gain on sales of investment securities	—		(79)
Earnings on cash surrender value of life insurance	(758)		(223)
Mortgage loans originated for sale	(116,966)		(257,133)
Proceeds from sales of mortgage loans originated for sale	123,853		267,867
Gain on sale of mortgage loans	(1,370)		(8,382)
SBA loans originated for sale	(5,310)		(5,923)
Proceeds from sales of SBA loans originated for sale	5,571		6,483
Gain on sale of SBA loans	(262)		(560)
Gain on disposal or write-down of property, plant, and equipment	(97)		(52)
Gain on sale or write-down of foreclosed assets	(88)		(26)
Gain on sale of bank premises and equipment held for sale	(114)		—
Write-off of bank premises and equipment held for sale	705		—
Accretion of subordinated debt	(417)		—
Stock compensation expense	696		532
Deferred income tax benefit	(23)		(295)
(Increase) decrease in accrued interest receivable	(4,533)		2,963
(Increase) decrease in other assets	(712)		1,386
Increase (decrease) in accrued interest payable	50		(106)
Net change in operating lease liability	(1,654)		(1,314)
Decrease in other liabilities	(6,321)		(40)
Net Cash Provided By Operating Activities	41,604		41,556

Investing Activities:
Proceeds from the sale of available-for-sale securities	—		5,178
Proceeds from the maturity or call of available-for-sale securities	9,910		2,500
Purchases of available-for-sale securities	(213,974)		(6,893)
Proceeds from the maturity or call of held-to-maturity securities	12,401		40,014
Purchases of held-to-maturity securities	(85,664)		(64,972)
Reduction (purchases) of restricted investment in bank stock	4,539		(312)
Net (increase) decrease in loans and leases	(218,061)		11,835
Purchases of bank premises and equipment	(3,734)		(3,149)
Proceeds from the sale of bank premises and equipment	1,912		62
Proceeds from the sale of foreclosed assets	148		202
Net Cash Used In Investing Activities	(492,523)		(15,535)

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

Net (decrease) increase in cash and cash equivalents	(819,074)		451,218
Cash and cash equivalents, beginning of period	913,752		303,724
Cash and cash equivalents, end of period	$	94,678	$	754,942

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MID PENN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)


(Dollars in thousands)	Nine Months Ended September 30,
	2022		2021
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	9,552	$	11,547
Cash paid for income taxes	3,500		8,835

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

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

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MID PENN BANCORP, INC.

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. (“Mid Penn” or the “Corporation”), its wholly-owned 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 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 has only one reportable segment for financial reporting purposes. All material intercompany accounts and transactions have been eliminated in consolidation.

On November 30, 2021, Mid Penn completed its acquisition of Riverview Financial Corporation (“Riverview”), pursuant to the previously announced Agreement and Plan of Merger dated as of June 30, 2021. On November 30, 2021, Riverview was merged with and into Mid Penn, with Mid Penn being the 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 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, 2021 and December 31, 2021 balances have been reclassified, when necessary, to conform to the 2022 presentation. Such reclassifications had no impact on net income or total shareholders’ equity. In the opinion of management, all adjustments necessary for fair presentation of the periods presented have been reflected in the accompanying consolidated financial statements. All such adjustments are of 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 Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021.

Mid Penn has evaluated events and transactions occurring subsequent to the balance sheet date of September 30, 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.

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 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 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 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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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 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 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 loan and 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 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 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 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 evaluate 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 at 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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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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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 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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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 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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(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 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 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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The following tables present gross unrealized losses and fair value of debt security investments 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

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

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which the fair value of the security has been less than amortized cost, as well as the overall financial condition of the issuer. In addition, for debt securities, Mid Penn considers (i) whether management has the intent to sell the security, (ii) whether it is more likely than not that management will be required to sell the security prior to its anticipated recovery, and (iii) whether management expects to recover the entire amortized cost basis.

Mid Penn had no securities considered by management to be other-than-temporarily impaired as of September 30, 2022, December 31, 2021, or September 30, 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 be temporary changes in value related to market movements in interest yields at various periods similar to the maturity dates of holdings in the investment portfolio, and not reflective of an erosion of credit quality.

There were no gross realized gains and losses on sales of available-for-sale debt securities for the three and nine months ended September 30, 2022. For the three and nine months ended September 30, 2021 there were realized gains of $79 thousand.

The table below illustrates the maturity distribution of investment securities at amortized cost and fair value as of September 30, 2022.


(Dollars in thousands)	Available-for-sale				Held-to-maturity
September 30, 2022	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in 1 year or less	$	250	$	250	$	—	$	—
Due after 1 year but within 5 years	40,013		38,602		73,579		69,250
Due after 5 years but within 10 years	35,017		32,006		232,023		197,794
Due after 10 years	4,059		3,133		43,752		34,118
	79,339		73,991		349,354		301,162

Mortgage-backed securities	187,757		168,204		52,788		45,463
	$	267,096	$	242,195	$	402,142	$	346,625

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Note 5 - Loans and Allowance for Loan and Lease Losses

As of September 30, 2022 and December 31, 2021, the types of loans in Mid Penn’s portfolio, summarized using Mid Penn’s internal risk rating system between those rated "pass" (net of deferred fees and costs of $4.0 million as of September 30, 2022 and $6.3 million as of December 31, 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 as "pass" within Mid Penn’s internal risk rating system as of September 30, 2022.

Mid Penn had no loans classified as "doubtful" as of September 30, 2022 and December 31, 2021.

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


	September 30, 2022						December 31, 2021
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial and industrial	$	—	$	18	$	—	$	—	$	31	$	—
Commercial real estate	601		1,022		—		854		1,243		—
Commercial real estate - construction	—		4		—		22		27		—
Residential mortgage	1,296		1,369		—		1,259		1,295		—
Home equity	31		31		—		2,377		2,377		—


With no related allowance recorded and acquired with credit deterioration:

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


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

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


Total Impaired Loans:
Commercial and industrial	$	1,309	$	1,799	$	831	$	308	$	370	$	67
Commercial real estate	2,077		3,235		28		3,372		4,511		121
Commercial real estate - construction	1,222		1,465		—		1,218		1,496		—
Residential mortgage	2,541		3,173		6		2,621		3,142		—
Home equity	366		387		45		2,463		2,488		—

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


	Three Months Ended								Nine Months Ended
	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		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	—	$	—	$	5	$	—	$	75	$	—	$	379	$	—
Commercial real estate	619		—		938		—		920		—		2,671		1
Commercial real estate - construction	—		—		23		—		148		—		27		—
Residential mortgage	1,305		6		1,018		6		1,766		17		902		20
Home equity	15		1		2,379		—		769		184		2,364		—


With no related allowance recorded and acquired with credit deterioration:

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


With an allowance recorded:
Commercial and industrial	$	1,333	$	—	$	217	$	—	$	1,158	$	—	$	187	$	—
Commercial real estate	112		—		1,503		—		112		—		1,192		—

Residential mortgage	96		—		—		—		70		—		—		—
Home equity	252		—		—		—		172		—		—		—


Total Impaired Loans:
Commercial and industrial	$	1,333	$	—	$	222	$	—	$	1,233	$	—	$	566	$	—
Commercial real estate	2,115		—		3,809		—		2,809		—		5,246		1
Commercial real estate - construction	1,226		—		23		—		1,365		—		27		—
Residential mortgage	2,573		6		1,299		6		3,089		17		1,193		20
Home equity	350		1		2,379		—		1,025		184		2,364		—

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


(Dollars in thousands)	September 30, 2022		December 31, 2021
Commercial and industrial	$	1,309	$	308
Commercial real estate	2,063		3,372
Commercial real estate - construction	1,222		1,218
Residential mortgage	2,228		2,186
Home equity	411		2,463
	$	7,233	$	9,547

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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, 2022 and December 31, 2021 are summarized as follows:


(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
September 30, 2022
Commercial and industrial	$	136	$	756	$	1,121	$	2,013	$	554,783	$	556,796	$	633
Commercial real estate	1,274		1,530		258		3,062		1,940,376		1,943,438		—
Commercial real estate - construction	321		—		—		321		398,645		398,966		—
Residential mortgage	355		150		434		939		294,822		295,761		—
Home equity	70		—		252		322		115,203		115,525		—
Consumer	12		—		—		12		8,141		8,153		—
Loans acquired with credit deterioration:

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

Total	$	2,241	$	2,665	$	3,251	$	8,157	$	3,314,300	$	3,322,457	$	633


(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
December 31, 2021
Commercial and industrial	$	1,378	$	62	$	404	$	1,844	$	617,718	$	619,562	$	96
Commercial real estate	32		55		769		856		1,665,055		1,665,911		—
Commercial real estate - construction	—		—		205		205		371,333		371,538		205
Residential mortgage	1,246		205		1,002		2,453		319,408		321,861		212
Home equity	403		—		2,377		2,780		107,440		110,220		—
Consumer	6		2		2		10		10,419		10,429		2
Loans acquired with credit deterioration:

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

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.

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


(Dollars in thousands)
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:
Beginning balance,
July 1, 2022	$	3,671	$	11,991	$	46	$	502	$	641	$	2	$	23	$	16,876
Charge-offs	(1)		—		—		(2)		(1)		(11)		—		(15)
Recoveries	—		63		—		—		—		6		—		69
Provisions	879		468		5		73		89		5		31		1,550
Ending balance,
September 30, 2022	$	4,549	$	12,522	$	51	$	573	$	729	$	2	$	54	$	18,480

(Dollars in thousands)
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:
Beginning balance,
January 1, 2022	$	3,439	$	9,415	$	38	$	459	$	560	$	2	$	684	$	14,597
Charge-offs	(1)		—		—		(2)		(1)		(77)		—		(81)
Recoveries	13		128		24		2		2		20		—		189
Provisions (credits)	1,098		2,979		(11)		114		168		57		(630)		3,775
Ending balance,
September 30, 2022	4,549		12,522		51		573		729		2		54		18,480
Individually evaluated for impairment	831		28		—		6		45		—		—		910
Ending balance:
Collectively evaluated for impairment	$	3,718	$	12,494	$	51	$	567	$	684	$	2	$	54	$	17,570

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

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(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

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(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 loans currently classified as troubled debt restructures, and these agreements have resulted in additional principal repayment. The terms of these forbearance agreements vary and generally involve modifications from the original loan agreements, including either a reduction in the amount of principal payments for certain or extended periods, interest rate reductions, and/or the intent for the loan to be repaid as collateral is sold.

Mid Penn’s troubled debt restructured loans at September 30, 2022 totaled $543 thousand and included: (i) one accruing impaired residential mortgage loan to a borrower in compliance with the terms of the modifications totaling $396 thousand, and (ii) $148 thousand of troubled debt restructurings attributable to five loans among three relationships which were classified as nonaccrual impaired based upon a collateral evaluation in accordance with the guidance on impaired loans. The balance of these nonaccrual impaired troubled debt restructured loans 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, 2021 reflects the successful workout of two nonaccrual impaired loans.

Mid Penn’s troubled debt restructured loans at December 31, 2021 totaled $819 thousand, and included (i) two accruing impaired residential mortgage loans to unrelated borrowers in compliance with the terms of the modifications totaling $435 thousand, and (ii) $384 thousand of troubled debt restructurings attributable to eight loans among six relationships which were classified as nonaccrual

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impaired based upon a collateral evaluation in accordance with the guidance on impaired loans. The balance of these nonaccrual impaired troubled debt restructured loans as of December 31, 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 one commercial and industrial loan for $5 thousand. As of December 31, 2021, there were no defaulted troubled debt restructured loans, 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 2021.

The recorded investments in troubled debt restructured loans at September 30, 2022 and December 31, 2021 are as follows:


(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, 2022 and 2021.



(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


	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

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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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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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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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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. Information on identifying circumstances when a transaction may not be considered 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 that represent quoted prices for identical instruments in active markets.

Level 2 - Inputs that represent quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 - Inputs that are largely unobservable, as little or no market data exists for the instrument being valued.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

There were no transfers of assets between fair value Level 1 and Level 2 during the three and nine months ended September 30, 2022 and 2021.

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The following tables illustrate the assets measured at fair value on a recurring basis segregated by hierarchy fair value levels.


(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
Loans held for sale	$	5,997			$	5,997	$	—
Available-for-sale securities:
U.S. Treasury and U.S. government agencies	37,584		—		37,584		—
Mortgage-backed U.S. government agencies	168,204		—		168,204		—
State and political subdivision obligations	3,374		—		3,374		—
Corporate debt securities	33,033		—		33,033		—
Other assets:
Equity securities	428		428		—		—
Interest rate swap agreements	12,825		—		12,825		—
Mortgage banking derivative assets	3		—		3		—
Total	$	261,448	$	428	$	261,020	$	—



(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
Loans held for sale	$	11,514	$	—	$	11,514	$	—
Available-for-sale securities:
Mortgage-backed U.S. government agencies	49,480		—		49,480		—
State and political subdivision obligations	3,914		—		3,914		—
Corporate debt securities	9,468		—		9,468		—
Other assets:
Equity securities	500		500		—		—
Interest rate swap agreements	629		—		629		—
Mortgage banking derivative assets	88		—		88		—
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.



(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



(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

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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)

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 following methodologies and assumptions to estimate the fair value of certain assets and liabilities.

Securities

The fair value of equity securities and debt securities classified as available for sale is determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather, relying on the securities’ relationship to other benchmark quoted prices.

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 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 measured by alternative pricing sources with reasonable levels of price transparency in markets that are not active. Based on the complex nature of interest rate swap agreements, the markets these instruments trade in are not as efficient and are less liquid than that of the more mature Level 1 markets. These markets do however have comparable, observable inputs in which an alternative pricing source values these assets in order to arrive at a fair market value. These characteristics classify interest rate swap agreements as Level 2.

Impaired Loans (included in "Net Loans and Leases" in the following tables)

All performing troubled debt restructured loans and loans classified as 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.

It is Mid Penn’s policy to obtain updated third-party collateral valuations on all impaired loans secured 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 existing real estate valuations to determine any potential allowance for loan and lease loss issues and will update the allowance impact calculation upon receipt of the updated real estate valuation.

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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.

Foreclosed Assets Held for 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.

The following table summarizes the carrying value and fair value of financial 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, 2022 and December 31, 2021.

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, 2022 and December 31, 2021. Carrying values approximate fair values for cash and cash equivalents, restricted investment in bank stocks, 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.


(Dollars in thousands)					Fair Value Measurements
September 30, 2022	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial instruments - assets
Held-to-maturity investment securities	$	402,142	$	346,625	$	—	$	346,625	$	—
Net loans and leases	3,303,977		3,252,277		—		—		3,252,277

Financial instruments - liabilities
Deposits	$	3,729,596	$	3,716,190	$	—	$	3,716,190	$	—
Long-term debt (1)	1,188		1,148		—		1,148		—
Subordinated debt	66,357		63,895		—		63,895		—

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


(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.

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 $51.7 million and $55.6 million of standby letters of credit outstanding as of September 30, 2022 and December 31, 2021, respectively. Mid Penn does not anticipate any losses because of these transactions. The amount of the liability as of September 30, 2022 and December 31, 2021 for payment under standby letters of credit issued was not considered material.

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 $7.5 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”) 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 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 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 15, April 15, July 15, and October 15. The 2017 Notes will mature on January 1, 2028 and are redeemable in whole or in part, without premium or penalty, at any time on or after December 21, 2022, and prior to 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. In the event of a redemption described in the previous sentence, Mid Penn will redeem the 2017 Notes at 100% of the principal amount of the 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 the bankruptcy, insolvency, liquidation, receivership or similar 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 $25 thousand at September 30, 2022 and the 2015 Notes and the 2017 Notes were collectively $44 thousand at December 31, 2021.

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. Mid Penn also sponsors a defined benefit healthcare plan that provides post-retirement medical benefits and life insurance to qualifying full-time employees. These healthcare and life insurance plans are 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 plan is used.

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


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



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

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.

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

Restricted Stock Plan

Under Mid Penn’s 2014 Restricted Stock Plan, which was amended in 2020, Mid Penn may grant awards not exceeding, in the aggregate, 200,000 shares of common stock. The Plan was established for employees and directors of Mid Penn and the Bank, selected by the Compensation Committee of the Board of Directors, to align the 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 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. 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 on the consolidated statement of 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 twelve-month vesting period, and the expense is a component of directors’ fees and benefits within the other expense line item on the consolidated statement of income.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands, except per share data)	2022		2021		2022		2021
Net income	$	15,481	$	9,787	$	39,087	$	28,712

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	10,279		8,605		22,329		12,753
Weighted average common shares outstanding (diluted)	15,887,871		11,432,092		15,945,274		10,077,408

Basic earnings per common share	$	0.97	$	0.86	$	2.45	$	2.85
Diluted earnings per common share	0.97		0.86		2.45		2.85

There were no antidilutive instruments at September 30, 2022 and 2021.

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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, 2022, compared to year-end 2021, and the Results of Operations for the three and nine months ended September 30, 2022, compared to the same periods in 2021. For comparative purposes, the September 30, 2021 and December 31, 2021 balances have been reclassified when, and if necessary, to conform to the 2022 presentation. Such reclassifications had no impact on net 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 Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Annual 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 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 Discussion and Analysis of Financial Condition and Results of 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", "anticipates", "intend", "plan", "believe", "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 federal or state governments, including a failure to increase the government debt limit or a prolonged shutdown of the federal 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 any capital and liquidity requirements imposed by 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 and changes to data security systems including those with third-party information technology providers;

•our ability to implement business strategies, including our acquisition 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 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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•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, disruptions due to flooding, severe weather, or other natural disasters or Acts of God;

•volatility in the securities 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.

Riverview Acquisition

On November 30, 2021, Mid Penn announced the successful completion of the merger acquisition of 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 the Company’s Current Report on Form 8-K filed on December 1, 2021, for more information.

Results of Operations

Overview

Net income available to common shareholders was $15.5 million or $0.97 per common share basic and diluted for the quarter ended September 30, 2022, compared to net income of $9.8 million or $0.86 per common share basic and diluted for the quarter ended September 30, 2021. During the nine months ended September 30, 2022, net income available to common shareholders was $39.1 million or $2.45 per common share basic and diluted compared to net income of $28.7 million or $2.85 per common share basic and diluted for the nine months ended September 30, 2021.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Return on average assets	1.42	%	1.11	%	1.16	%	1.14	%
Return on average equity	12.23	%	11.23	%	10.52	%	12.55	%

Net Interest 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 ("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 21% for the periods presented.

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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 three months ended September 30, 2022 and 2021.


	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.

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The following table summarizes the changes in TE interest income and interest expense resulting from changes in average balances, volume, and changes in rates for the three months ended September 30, 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 $12.5 million, or 45.9%, compared to the three months ended September 30, 2021. Average interest earning assets increased $699.4 million, or 21.16%, compared to the 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 57 basis points ("bp") to 4.28%, for the third quarter of 2022 compared to 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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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, 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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The following table summarizes the changes in TE interest income and interest expense resulting from changes in average balances, volume, and changes in rates for the nine months ended September 30, 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 for the nine months ended September 30, 2022 was 3.52% and compared to 3.35% for the nine months ended September 30, 2021. TE net interest income was $109.8 million for the 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 2021, primarily as a result of the 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 consistent for the first nine months of 2022 compared to 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 interest income. Average loans and leases, net, increased $636.3 million, contributing $22.2 million to the increase in interest income, partially offset by a 9 bp decrease in the yield, or a $2.1 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 $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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Although the effective interest rate impact on 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 Federal 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 2022, economic and external factor changes, and shifting collateral values from December 31, 2021 to September 30, 2022.

Management performed a current evaluation of the adequacy of the loan and lease loss allowance and, based on this evaluation, a loan and lease loss provision of $1.6 million and $425 thousand was recorded for the three months ended September 30, 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 $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 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 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, 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, 2022, noninterest income totaled $16.9 million, an increase of $1.1 million or 6.74%, compared to noninterest income of $15.9 million for the same period in 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 for the three months ended September 30, 2022 as compared to the same period in 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 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 $1.1 million for the three months ended September 30, 2022, an increase of $448 thousand compared to the three months ended September 30, 2021. The additional income is a result of an increased volume of checking accounts

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and 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 $483 thousand for the three months ended September 30, 2022, an increase of $260 thousand, compared to 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 decreased $2.6 million for the three months ended September 30, 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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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, 2022, noninterest expense totaled $74.4 million, an increase of $17.3 million, or 30.41%, compared to noninterest expense of $57.0 million for the same period in 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 significant variances when comparing results for periods ending in 2022 versus the corresponding period in 2021.:


	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

Salaries and employee benefits were $13.6 million for the three months ended September 30, 2022, an increase of $3.2 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 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 $1.8 million for the three months ended September 30, 2022, an increase of $253 thousand compared to $1.6 million for the three months ended September 30, 2021. The increase is a result of additional costs to license the additional Riverview branches and increases in certain core processing fees as our customer base and transaction volume continue to grow.

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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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 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, 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 2021 due to the increase in shareholders' equity, primarily a result of a stock offering completed in 2021 and the Riverview Acquisition.

ATM/card processing expenses were $1.6 million for the nine months ended September 30, 2022, an increase of $909 thousand as a result of an increase in transaction volume resulting from the 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, 2021, to $11.6 million for the same period in 2022. Several categories within other expense 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. 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 $3.6 million for the three months ended September 30, 2022, compared to $2.3 million of income tax provision recorded for the same period in 2021. The provision for income taxes was $9.0 million during the nine months ended

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September 30, 2022, compared to $6.7 million of income tax provision recorded for the same period in 2021. The provision for income taxes for the three and nine months ended September 30, 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, 2021, respectively. The change in the effective tax rates reflect the mix of tax-exempt 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 bank owned life insurance policies, which are nontaxable for federal tax purposes. Generally, Mid Penn’s effective tax rate is below the federal statutory rate due to earnings on tax-exempt loans, investments, and earnings from the cash surrender value of life insurance, as well as the impact of federal income tax 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 $4.3 billion as of September 30, 2022, reflecting a decrease of $355.5 million, or 7.58%, compared to total assets of $4.7 billion as of December 31, 2021. Included in total assets as of September 30, 2022 are $2.8 million of PPP loans, net of deferred fees. Comparatively, as of December 31, 2021, Mid Penn had $111.3 million of 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 7.0% since December 31, 2021. The growth occurred primarily within the commercial real estate loan portfolio. Core banking loans (a non-GAAP measure calculated as loans and 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 decreased $272.4 million or 6.81%, from $4.0 billion on December 31, 2021, to $3.7 billion at September 30, 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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Investment Securities

Total investment securities as of September 30, 2022 were $644.3 million compared to $392.1 million as of December 31, 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 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 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 within Mid Penn’s commercial real estate portfolio, net of PPP loan forgiveness.


	September 30, 2022				December 31, 2021
(Dollars in thousands)	Amount		%		Amount		%
Commercial and industrial	$	556,796	16.8	%	$	619,562	20.0	%
Commercial real estate	1,944,802		58.6	%	1,668,142		53.5	%
Commercial real estate - construction	400,188		12.0	%	372,734		12.0	%
Residential mortgage	296,910		8.9	%	323,223		10.4	%
Home equity	115,608		3.5	%	110,306		3.6	%
Consumer	8,153		0.2	%	10,429		0.5	%
	$	3,322,457	100.0	%	$	3,104,396	100.0	%

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

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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Changes in the allowance for the three and nine months ended September 30, 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 $54 thousand and $108 thousand, respectively, compared to net loan charge-offs of $908 thousand and $1.7 million, respectively during the same periods in 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.

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. Based on known information, Mid Penn believes that the effects of current and past economic conditions and other unfavorable business conditions may 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 the financial strength of 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.

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


(Dollars in thousands)	September 30, 2022			December 31, 2021			September 30, 2021
Nonperforming Assets:
Nonaccrual loans	$	7,233		$	9,547		$	6,339
Accruing troubled debt restructured loans	396			435			442
Total nonperforming loans	7,629			9,982			6,781

Foreclosed real estate	49			—			11
Total non-performing assets	7,678			9,982			6,792

Accruing loans 90 days or more past due	633			515			—
Total risk elements	$	8,311		$	10,497		$	6,792

Nonperforming loans as a % of total
loans outstanding	0.23		%	0.32		%	0.29		%

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

Ratio of allowance for loan losses
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 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 discussed in detail below.

During the first quarter of 2022, an unrelated party acquired the real estate collateral for an amount sufficient to completely payoff the contractual outstanding principal balance of a nonaccrual loan relationship, comprised of two home equity loans acquired in 2018, totaling $2.3 million. As of September 30, 2022, the outstanding principal, any interest due, and all fees were paid off entirely, with no charge-off related to this loan relationship. These loans were transferred from accrual to nonaccrual status during the second quarter of 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 writing down or charging off the loan. Once the 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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The following table provides additional analysis of partially charged-off loans.


(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 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 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.

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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 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 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 loans with an aggregate balance of $7.5 million which were deemed by management to be impaired at September 30, 2022, including $3.8 million in loans acquired with credit deterioration in connection with the closing of the Phoenix acquisition in 2015, the Scottdale and First Priority acquisitions in 2018, and the Riverview Acquisition in 2021. Of the $3.7 million of impaired loan relationships excluding the loans acquired with credit deterioration, $1.3 million were commercial and industrial relationships, $713 thousand were commercial real estate relationships, $1.4 million were residential relationships and $283 thousand were home equity relationships. There were specific loan loss reserve allocations of $831 thousand against $1.3 million of commercial and industrial loan relationships and $28 thousand against $112 thousand of commercial real estate loan relationships. Management currently believes that the specific reserves are adequate to cover probable future losses related to these relationships.

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 (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, legal and regulatory requirements, governmental 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 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, including the prospective

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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 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 $18.5 million is adequate as of September 30, 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;

•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 available to Mid Penn.

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 overall 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 August 8, 2022, Mid Penn redeemed the $7.5 million aggregate principal amount of subordinated notes (the "2015 Notes") that were due in 2025. Given that the 2015 Notes 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 as of the date of redemption. See "Note 11 - Subordinated Debt and Trust Preferred Securities," in the Notes to Consolidated Financial Statements for 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 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 must be greater than 2.5% of total risk-weighted assets.

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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%

The final rules allowed community banks to make a one-time election not to include the additional components of accumulated other comprehensive income ("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.

Consistent with the Dodd-Frank Act, 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 these rules, mortgage servicing assets and certain deferred tax assets 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.

Capital Resources

Shareholders' equity, or capital, is evaluated in relation to total assets and the risk associated with those assets, and the desire to collectively maintain and enhance shareholders’ value, and satisfactorily address regulatory capital requirements. Accordingly, capital management has been, and will continue to be, of paramount importance to Mid Penn.

Shareholders’ equity increased by $9.0 million, or 1.8%, from $490.1 million as of December 31, 2021 to $499.1 million as of September 30, 2022, primarily due to earnings of $39.1 million partially offset by a decrease in the carrying value of the available-for-sale investment portfolio 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 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.

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, 2022, regulatory capital ratios for both Mid Penn and the Bank met the definition of a "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 and Mid Penn Bank maintained the following regulatory capital levels, leverage ratios, and risk-based capital ratios as of September 30, 2022 and December 31, 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%

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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

As a financial institution, Mid Penn’s primary source of market risk is interest rate risk. Interest rate risk is the exposure to fluctuations in Mid Penn’s 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 analyses include maturity and repricing characteristics of assets and liabilities, prepayments on 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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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, 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

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 during the nine months ended September 30, 2022.

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PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

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, 2021, to determine if there were material changes applicable to the nine months ended September 30, 2022. There are no material changes to such risk factors.

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

(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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ITEM 6 – EXHIBITS

•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 3.2 – 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 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 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 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 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 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 – 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).

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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

By:			/s/ Allison S. Johnson
			Allison S. Johnson Chief Financial Officer (Principal Financial Officer)

Date:			November 4, 2022