MID PENN BANCORP INC - Quarter Report: 2022 June (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 June 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 July 29, 2022, the registrant had 15,878,193 shares of common stock outstanding.

FORM 10-Q

TABLE OF CONTENTS

PART 1 – FINANCIAL INFORMATION

	Item 1 – Financial Statements		3

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

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

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

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

		Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and June 30, 2021 (Unaudited)	7

		Notes to Consolidated Financial Statements (Unaudited)	9

	Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		47

	Item 3 – Quantitative and Qualitative Disclosures about Market Risk		66

	Item 4 – Controls and Procedures		66

PART II – OTHER INFORMATION

	Item 1 – Legal Proceedings		67

	Item 1A – Risk Factors		67

	Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		67

	Item 3 – Defaults upon Senior Securities		67

	Item 4 – Mine Safety Disclosures		67

	Item 5 – Other Information		67

	Item 6 – Exhibits		68

	Signatures		69

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

MID PENN BANCORP, INC.

PART 1 – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands, except share data)	June 30, 2022			December 31, 2021
ASSETS
Cash and due from banks	$	64,440		$	41,100
Interest-bearing balances with other financial institutions		4,909			146,031
Federal funds sold		167,437			726,621
Total cash and cash equivalents		236,786			913,752

Investment securities held to maturity, at amortized cost (fair value $365,288 and $330,626)		399,032			329,257
Investment securities available for sale, at fair value		218,698			62,862
Equity securities available for sale, at fair value		454			500
Loans held for sale, at fair value		9,574			11,514
Loans and leases, net of unearned interest		3,180,033			3,104,396
Less: Allowance for loan and lease losses		(16,876	)		(14,597	)
Net loans and leases		3,163,157			3,089,799

Bank premises and equipment, net		33,732			33,232
Bank premises and equipment held for sale		2,574			3,907
Operating lease right of use asset		8,326			9,055
Finance lease right of use asset		2,997			3,087
Cash surrender value of life insurance		50,169			49,661
Restricted investment in bank stocks		4,234			9,134
Accrued interest receivable		12,902			11,328
Deferred income taxes		13,780			10,779
Goodwill		113,835			113,835
Core deposit and other intangibles, net		7,729			9,436
Foreclosed assets held for sale		69			—
Other assets		32,115			28,287
Total Assets	$	4,310,163		$	4,689,425

LIABILITIES & SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand	$	850,180		$	850,438
Interest-bearing demand		1,023,027			1,066,852
Money Market		999,556			1,076,593
Savings		354,677			381,476
Time		475,147			626,657
Total Deposits		3,702,587			4,002,016

Long-term debt		4,592			81,270
Subordinated debt and trust preferred securities		73,995			74,274
Operating lease liability		10,324			11,363
Accrued interest payable		1,542			1,791
Other liabilities		21,288			28,635
Total Liabilities		3,814,328			4,199,349

Shareholders' Equity:
Common stock, par value $1.00 per share; 20.0 million shares authorized; 16.1 million issued at June 30, 2022 and at December 31, 2021; 15.9 million outstanding at June 30, 2022 and 16.0 million at December 31, 2021		16,081			16,056
Additional paid-in capital		386,128			384,742
Retained earnings		108,265			91,043
Accumulated other comprehensive (loss) income		(9,759	)		158
Treasury stock, at cost; 202,364 shares at June 30, 2022 and 98,452 shares at December 31, 2021		(4,880	)		(1,923	)
Total Shareholders’ Equity		495,835			490,076
Total Liabilities and Shareholders' Equity	$	4,310,163		$	4,689,425

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


MID PENN BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


(Dollars in thousands, except per share data)	Three Months Ended June 30,						Six Months Ended June 30,
		2022			2021			2022			2021
INTEREST INCOME
Interest and fees on loans and leases	$	34,264		$	29,835		$	69,280		$	58,165
Interest and dividends on investment securities:
U.S. Treasury and government agencies		2,329			225			3,865			403
State and political subdivision obligations, tax-exempt		379			278			715			555
Other securities		504			291			921			593
Total Interest and Dividends on Investment Securities		3,212			794			5,501			1,551

Interest on other interest-bearing balances		8			2			21			4
Interest on federal funds sold		736			98			1,050			177
Total Interest Income		38,220			30,729			75,852			59,897
INTEREST EXPENSE
Interest on deposits		2,019			2,916			4,313			5,882
Interest on short-term borrowings		—			232			—			406
Interest on long-term and subordinated debt		768			704			1,692			1,407
Total Interest Expense		2,787			3,852			6,005			7,695
Net Interest Income		35,433			26,877			69,847			52,202
PROVISION FOR LOAN AND LEASE LOSSES		1,725			1,150			2,225			2,150
Net Interest Income After Provision for Loan and Lease Losses		33,708			25,727			67,622			50,052
NONINTEREST INCOME
Mortgage banking income		305			2,841			834			5,220
Income from fiduciary and wealth management activities		1,205			542			2,257			1,098
Service charges on deposits		450			177			1,134			329
ATM debit card interchange income		1,128			656			2,185			1,224
Net gain on sales of SBA loans		119			355			110			455
Merchant services income		87			209			160			301
Earnings from cash surrender value of life insurance		262			75			508			149
Other income		1,674			797			3,792			1,588
Total Noninterest Income		5,230			5,652			10,980			10,364
NONINTEREST EXPENSE
Salaries and employee benefits		12,340			9,933			25,584			19,531
Occupancy expense, net		1,655			1,317			3,454			2,797
Equipment expense		1,112			741			2,123			1,492
Software licensing and utilization		1,821			1,497			3,927			2,942
FDIC Assessment		506			433			1,097			903
Legal and professional fees		694			555			1,333			981
Charitable contributions qualifying for State tax credits		125			365			190			635
Mortgage banking profit-sharing expense		33			745			178			865
Gain on sale or write-down of foreclosed assets, net		(15	)		(19	)		(31	)		(19	)
Intangible amortization		521			276			1,002			557
Merger and acquisition expense		—			522			—			522
Post-acquisition restructuring expense		—			—			329			—
Other expenses		5,123			3,091			10,474			5,808
Total Noninterest Expense		23,915			19,456			49,660			37,014
INCOME BEFORE PROVISION FOR INCOME TAXES		15,023			11,923			28,942			23,402
Provision for income taxes		2,771			2,310			5,336			4,477
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	12,252		$	9,613		$	23,606		$	18,925

PER COMMON SHARE DATA:
Basic and Diluted Earnings Per Common Share	$	0.77		$	0.93		$	1.48		$	2.02
Diluted Earnings Per Common Share	$	0.77		$	0.93		$	1.48		$	2.02
Cash Dividends Declared	$	0.20		$	0.20		$	0.40		$	0.39

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


MID PENN BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

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

Net income	$	12,252		$	9,613

Other comprehensive loss:

Unrealized (loss) income arising during the period on available-for-sale
securities, net of income taxes of ($1,279) and ($6), respectively		(4,812	)		21

Change in defined benefit plans, net of income taxes of $0 and ($80), respectively (a)		—			(302	)

Reclassification adjustment for settlement losses and other activity related to benefit
plans, net of income taxes of $0 and $0, respectively (b)		(1	)		(1	)

Total other comprehensive loss		(4,813	)		(282	)

Total comprehensive income	$	7,439		$	9,331

(Dollars in thousands)	Six Months Ended June 30,
	2022			2021

Net income	$	23,606		$	18,925

Other comprehensive (loss) income:

Unrealized (loss) income arising during the period on available-for-sale
securities, net of income taxes of ($2,669) and ($6), respectively		(10,042	)		22

Change in defined benefit plans, net of income tax impact of $33 and $79, respectively (b)		127			298

Reclassification adjustment for settlement losses and other activity related to benefit
plans, net of income taxes of $0 and ($12), respectively (c)		(2	)		(44	)



Total other comprehensive (loss) income		(9,917	)		276

Total comprehensive income	$	13,689		$	19,201

(a)

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

(b)

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. Please reference Note 11 – Defined Benefit Plans, for more information.

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

MID PENN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

(Dollars in thousands)								Accumulated
			Additional					Other						Total
	Common		Paid-in		Retained			Comprehensive			Treasury			Shareholders'
	Stock		Capital		Earnings			Income (Loss)			Stock			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 (103,912 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

(Dollars in thousands)								Accumulated
			Additional					Other						Total
	Common		Paid-in		Retained			Comprehensive			Treasury			Shareholders'
	Stock		Capital		Earnings			Income (Loss)			Stock			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 (1,647 shares)		2		38		—			—			—			40
Director Stock Purchase Plan (1,743 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 (2,365 shares)		1		37		—			—			—			38
Director Stock Purchase Plan (2,231 shares)		1		33		—			—			—			34
Restricted stock activity		—		173		—			—			—			173
Balance, June 30, 2021	$	11,507	$	246,546	$	85,220		$	219		$	(1,923	)	$	341,569

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

MID PENN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)	Six Months Ended June 30,
		2022			2021
Operating Activities:
Net Income	$	23,606		$	18,925
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses		2,225			2,150
Depreciation		1,993			1,639
Amortization of intangibles		1,002			557
Net amortization of security discounts/premiums		384			326
Amortization of operating lease right of use assets		844			857
Amortization of finance lease right of use asset		90			90
Earnings on cash surrender value of life insurance		(508	)		(149	)
Mortgage loans originated for sale		(82,142	)		(178,492	)
Proceeds from sales of mortgage loans originated for sale		84,916			185,016
Gain on sale of mortgage loans		(834	)		(5,220	)
SBA loans originated for sale		(2,636	)		(4,894	)
Proceeds from sales of SBA loans originated for sale		2,807			5,349
Gain on sale of SBA loans		(110	)		(455	)
Gain on disposal or write-down of property, plant, and equipment		(71	)		(25	)
Gain on sale or write-down of foreclosed assets		(31	)		(19	)
Loss on sale of bank premises and equipment held for sale		1,333			—
Write-off of bank premises and equipment held for sale		705			—
Accretion of subordinated debt		(279	)		—
Stock compensation expense		459			305
Deferred income tax benefit		(206	)		(1,597	)
(Increase) decrease in accrued interest receivable		(1,574	)		2,333
(Increase) decrease in other assets		(3,828	)		3,633
(Decrease) increase in accrued interest payable		(249	)		115
Net change in operating lease liability		(1,154	)		(877	)
Decrease in other liabilities		(7,301	)		(1,570	)
Net Cash Provided By Operating Activities		19,441			27,997

Investing Activities:
Proceeds from the maturity or call of available-for-sale securities		5,439			2,500
Purchases of available-for-sale securities		(174,102	)		(4,892	)
Proceeds from the maturity or call of held-to-maturity securities		9,620			22,757
Purchases of held-to-maturity securities		(79,664	)		(47,818	)
Reduction of restricted investment in bank stock		4,900			778
Net increase in loans and leases		(75,753	)		(111,987	)
Purchases of bank premises and equipment		(2,549	)		(1,515	)
Proceeds from the sale of bank premises and equipment		127			29
Proceeds from the sale of foreclosed assets		71			162
Net Cash Used In Investing Activities		(311,911	)		(139,986	)

Financing Activities:
Net (decrease) increase in deposits		(299,429	)		307,544
Net increase in short-term borrowings		—			71,272
Common stock dividends paid		(6,384	)		(4,301	)
Proceeds from Employee Stock Purchase Plan stock issuance		97			78
Proceeds from Director Stock Purchase Plan stock issuance		79			67
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		(44	)		(43	)
Long-term debt repayment		(76,634	)		(115	)
Net Cash (Used In) Provided By Financing Activities		(384,496	)		444,612

Net (decrease) increase in cash and cash equivalents		(676,966	)		332,623
Cash and cash equivalents, beginning of period		913,752			303,724
Cash and cash equivalents, end of period	$	236,786		$	636,347

MID PENN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)

(Dollars in thousands)	Six Months Ended June 30,
		2022		2021
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	3,467	$	7,580
Cash paid for income taxes		3,500		5,820

Supplemental Noncash Disclosures:
Recognition of operating lease right of use assets	$	115	$	1,064
Recognition of operating lease liabilities		115		1,064
Obsolete Riverview asset writeoff		705		—
Loans transferred to foreclosed assets held for sale		109		20
Held-to-maturity securities purchased, not settled		524		—

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

MID PENN BANCORP, INC.

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 June 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. Refer to 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 more information.

The comparability of Mid Penn’s results of operations for the period ended June 30, 2022, compared to the periods ended June 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 June 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 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 June 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 accounting and reporting policies of Mid Penn conform with accounting principles as required under GAAP and general practices within the financial industry. The following is a description of the more significant accounting policies.

Investment Securities

Securities to be held for indefinite periods, but not intended to be held to maturity, are classified as available for sale and carried at fair value. Securities held for indefinite periods include securities that management intends to use as part of its asset and liability management strategy and pledging requirements, and that may be sold in response to liquidity needs, changes in interest rates, resultant prepayment risk, reductions in pledging levels, and other factors related to effective portfolio management. Securities to be held to maturity are carried at amortized cost.

For available-for-sale debt securities, realized gains and losses on dispositions are based on the difference between net proceeds and the amortized cost of the securities sold, using the specific identification method. Unrealized gains and losses on debt securities are based on the difference between the amortized cost and fair value of each security as of the respective reporting date. Unrealized gains and losses are credited or charged to other comprehensive income on an after-tax basis, whereas realized gains and losses flow through Mid Penn’s consolidated statement of income for the respective period.

ASC Topic 320, Investments – Debt and Equity Securities, clarifies the interaction of the factors that should be considered when determining whether a debt security is other-than-temporarily impaired. For debt securities, management must assess, in addition to the credit condition of the underlying issuer, whether (a) it has the intent to sell the security and (b) it is more likely than not that it will be required to sell the security prior to its anticipated recovery. These steps are done before assessing whether the Corporation will recover the cost basis of the investment.

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

MID PENN BANCORP, INC.

Equity Securities

In accordance with ASC Topic 825, Financial Instruments, Mid Penn reports its equity securities with readily determinable fair values at fair value on the consolidated balance sheets, with realized and unrealized gains and losses reported in other expense on the consolidated statements of income. Mid Penn’s equity securities consisted of Community Reinvestment Act (“CRA”) funds with a fair value totaling $454,000 and $500,000 as of June 30, 2022 and December 31, 2021, respectively. No equity securities were sold during the three months or six months ended June 30, 2022 or June 30, 2021.

Loans

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

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

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

Commercial and Industrial Loans

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

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

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

Commercial Real Estate and Commercial Real Estate – Construction Loans

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

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Residential Mortgage Loans

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

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

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

Consumer Loans, Including Home Equity Credits

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

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

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

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

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

Payroll Protection Program (“PPP”) Loans

Included in total loans as of June 30, 2022, within the commercial and industrial loan portfolio classification, are $4,966,000 of PPP loans, net of deferred fees, which, as of June 30, 2022, were still outstanding as the remaining borrowers and the Small Business Administration (“SBA”) had not yet completed the loan forgiveness and repayment process. Comparatively, as of December 31, 2021, Mid Penn had $111,286,000 of PPP loans outstanding, net of deferred fees. Mid Penn has been a significant participating lender under the PPP, which was originally created when the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law on March 27, 2020, and extended by the signing of the Consolidated Appropriations Act, 2021 into law on December 27, 2020, and further extended to May 31, 2021 by the PPP Extension Act of 2021. The PPP loans, which are 100% guaranteed by the SBA, have up to a five-year term to maturity and carry a low interest rate of 1% throughout the loan term.

The SBA also provided a processing fee per loan to financial institutions who participated in the PPP, with the amount of such fee generally ranging from 1% to 5% as pre-determined by the SBA dependent upon the size of each respective credit. As of June 30, 2022, Mid Penn had received $42,520,000 of nonrefundable loan processing fees related to the loans disbursed as a result of Mid Penn’s participation in the PPP initiative, consisting of (i) $20,883,000 of loan processing fees received related to PPP loans funded during the

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year ended December 31, 2020, (ii) $17,997,000 of loan processing fees received related to PPP loans funded during the year ended December 31, 2021, and (iii) $3,640,000 during the six months ended June 30, 2022. In addition to receiving and deferring the processing fees, Mid Penn recorded and deferred related loan origination costs, and in accordance with ASC 310-20, Receivables—Nonrefundable Fees and Other Costs, the processing fees and loan origination costs are being amortized to interest and fees on loans and leases on the consolidated statements of income over the life of each respective loan. As of June 30, 2022, Mid Penn had $171,000 of PPP deferred loan processing fees not yet realized as income. Comparatively, as of December 31, 2021, Mid Penn had PPP deferred loan processing fees not yet realized as income totaling $3,811,000. Mid Penn recognized $3,640,000 of PPP processing fees during the quarter ended June 30, 2022, compared to $6,244,000 of PPP processing fees for the same period of 2021. PPP processing fees are reflected within interest and fees on loans and leases on the consolidated statements of income.

Allowance for Loan and Lease Losses

The allowance for loan and lease losses (“allowance”) and the related provision reflect Mid Penn’s continued application of the incurred loss method for estimating credit losses as Mid Penn is not required to adopt the current expected credit loss (“CECL”) accounting standard until January 1, 2023, and Mid Penn has not elected to early adopt CECL. The allowance consists of (i) the allowance for loan and lease losses, and (ii) the reserve for unfunded lending commitments. The allowance for loan and lease losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheet. The reserve for unfunded lending commitments was $74,000 at June 30, 2022 and $72,000 at December 31, 2021.

The allowance is increased by the provision for loan and lease losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Non-residential consumer loans are generally charged off no later than 120 days past due on a contractual basis, or earlier in the event of either bankruptcy or if there is an amount deemed uncollectible. Because all identified losses are immediately charged off, no portion of the allowance is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

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

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

The general component covers pools of loans by loan class, including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate, home equity and other consumer loans. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk factors include changes in economic conditions, fluctuations in loan quality measures, changes in collateral values, changes in the experience of the lending staff and loan review systems, changes in lending policies and procedures (including underwriting standards), changes in the mix and volume of loans originated, the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing loan portfolio, shifting industry or portfolio concentrations, and other relevant factors. Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in relevant analyses and a narrative accompanying the allowance for loan and lease loss calculation.

The unallocated component of the allowance for loan and lease losses covers several considerations that are not specifically measurable through the specific and general components. For example, at times Mid Penn could face increasing credit risks and uncertainties, not yet reflected in recent historical losses or qualitative factor assessments, associated with unpredictable changes in economic growth or business conditions in our markets or for certain industries in which we have commercial loan borrowers, or unanticipated stresses to the values of real estate held as collateral, or unforeseeable effects on the portfolio from other influences, inducing the long-term impact of the pandemic. 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. This includes, but is not limited to, (i) the unpredictable timing and amounts of charge-offs, (ii) the fact that historical loss averages don’t necessarily correlate to future loss trends, (iii) data and trends supporting qualitative factor judgements may not be indicative of the true nature of future period risks, and (iv) unexpected changes to specific-credit or general portfolio future cash flows and collateral values which could negatively impact unimpaired portfolio loss factors.

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

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

Mid Penn evaluates loans for charge-off on a monthly basis. Policies that govern the recommendation for charge-off are unique to the type of loan being considered. Commercial loans classified as substandard nonaccrual, doubtful or having probable loss will first have a collateral evaluation completed in accordance with the guidance on impaired loans. Once the collateral evaluation has been completed, a specific allocation of allowance is made based upon the results of the evaluation. The remaining balance remains a nonperforming loan with the original terms and interest rate intact (not restructured). In the event the loan is unsecured, the loan would have been charged-off at the recognition of impairment. Commercial real estate loans determined to be impaired will also have an initial collateral evaluation completed in accordance with the guidance on impaired loans. An updated real estate valuation is ordered, and the collateral evaluation is modified to reflect any variations in value. A specific allocation of allowance is made for any anticipated collateral shortfall. The remaining balance remains a nonperforming loan with the original terms and interest rate intact (not restructured). The process of charging off a residential mortgage loan begins when a loan becomes delinquent for 90 days and is not in the process of collection. The existing appraisal is reviewed, and a lien search is obtained to determine lien position and any instances of intervening liens. A new appraisal of the property will be ordered if deemed necessary by management and a collateral evaluation is completed. The loan will then be charged down to the value indicated in the evaluation. Non-residential consumer loans are generally charged off no later than 120 days past due on a contractual basis, or earlier in the event of either bankruptcy or if there is an amount deemed uncollectible. The collateral shortfall of the consumer loan is recommended for charge-off at this point.

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

It is Mid Penn’s policy to obtain updated third-party 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 any existing real estate valuation to determine any potential allowance issues; however, no allowance recommendation will be made until such time Mid Penn is in receipt of the updated valuation. The Asset Recovery department employs an electronic tracking system to monitor the receipt of and need for updated appraisals. To date, there have been no material time lapses noted with the above processes.

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

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

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.

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

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

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

In addition, federal and state regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance and may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. No such additions were required from any recent examinations.

Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan and lease losses is adequate.

Mid Penn had $4,966,000 and $111,286,000 of PPP loans outstanding, net of deferred fees, as of June 30, 2022 and December 31, 2021, respectively, which though they are classified as commercial and industrial credits, are guaranteed by the Small Business Administration and, thus, have no loss reserve allocated to them.

Acquired Loans

Loans that Mid Penn acquires in connection with business combinations are recorded at fair value with no carryover of the acquired entity’s related allowance for loan and lease losses. Loans acquired at fair value and included in the balance of loans and leases, net of unearned interest, on the consolidated balance sheets totaled $895,855,000 and $1,010,039,000 as of June 30, 2022 and December 31, 2021, respectively. The fair value of the acquired loans involves estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest.

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

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

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

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

Mortgage Banking Derivative Financial Instruments

During the third quarter of 2021, Mid Penn began using mortgage banking derivative financial instruments as part of our overall strategy to manage exposure to market risk within our mortgage banking operations, primarily due to fluctuations in interest rates, and to reduce the risk of price volatility of loans in the commitment phase.

In connection with its mortgage banking activities, Mid Penn enters into interest rate lock commitments (IRLCs) to extend credit to a mortgage applicant within a specified period of time, provided certain specified terms and conditions are met, and with both the interest rate and the maximum loan amount set prior to funding. This loan commitment binds Mid Penn (subject to approval of the loan) to fund the loan at the specified rate, regardless of whether interest rates have changed between the commitment date and the loan funding date.

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Outstanding IRLCs may expose Mid Penn to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. As such, outstanding IRLCs are subject to interest rate risk and related price risk during the period from the date of the commitment through the loan funding date or expiration date. The IRLC does not contractually obligate the borrower to close the loan, regardless of whether Mid Penn approves the loan.

Mid Penn originates all mortgage loans with the intention that the loans will be held for sale in the secondary market. Mid Penn enters into forward mortgage loan sales commitments shortly after extending an IRLC to the borrower to mitigate interest rate risk related to the IRLC for mortgage loans originated for sale. Mid Penn enters into mortgage loan sales commitments as either (i) a mandatory commitment, meaning that the loan must be delivered at an agreed-upon price within a specified timeframe, or (ii) a best-effort commitment, meaning that the loan will be delivered if and when it closes, with a price that is typically less favorable than a mandatory commitment and often with a large markup. If a mandatory commitment is not delivered within the agreed-upon timeframe or price point, Mid Penn would likely be required to “pair out” of the commitment and may be subject to a pair-off fee. 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.

Mandatory forward loan sales commitments are accounted for as freestanding derivative instruments and are carried at fair value equal to the amount required to settle the commitment as of the reporting date based on the underlying mortgage loans and the probability of commitments being exercised. Gross derivative assets and liabilities are recorded within other assets and other liabilities on the consolidated balance sheet, with changes in fair value during the period recorded in other noninterest income in the consolidated statements of income.

Best effort forward sales commitments are financial instruments which are carried at fair value under ASC 825 – Financial Instruments. Fair value is estimated as the amount required to settle the commitment as of the reporting date, which is based on the underlying mortgage loans and the probability of commitments being exercised. Gross derivative assets and liabilities are recorded within other assets and other liabilities on the consolidated balance sheet, with changes in fair value during the period in other noninterest income in the consolidated statements of income.

Loan-Level Interest Rate Swaps

Mid Penn enters into loan-level interest rate swaps (“swaps”) to facilitate certain customer transactions and meet their financing needs. These swaps qualify as derivatives but are not designated as hedging instruments. A loan-level interest rate swap is a contract in which the series of interest rate flows (fixed and variable) are exchanged over the term of a loan with certain qualifying commercial loan customers, and Mid Penn simultaneously enters into an interest rate swap with a dealer counterparty with identical notional amounts and terms. The net result of these swaps is that the customer pays a fixed interest rate and Mid Penn receives a floating interest rate. The swap positions with customers are equally offset with the dealer counterparties to minimize the potential impact on Mid Penn’s financial statements.

Pursuant to our agreements with the dealer counterparties, we may receive collateral or may be required to post collateral based upon mark-to-market positions. Beyond unsecured threshold levels, collateral in the form of cash or securities may be made available to counterparties of interest rate swap transactions. Based upon our current positions and related future collateral requirements relating to them, we believe any effect on our cash flow or liquidity position to be immaterial.

Derivatives contain an element of credit risk, including the possibility that we will incur a loss because a party to the agreements, which may be a dealer counterparty or a customer, fails to meet its contractual obligations. Derivative contracts may only be executed with dealer counterparties as approved by our Board of Directors. Similarly, derivatives with customers may only be executed with customers within credit exposure limits as approved by our Board of Directors. Loan-level interest rate swaps are considered derivatives but are not accounted for using hedge accounting.

Bank Premises and Equipment Held for Sale

Bank premises and equipment designated as held for sale are carried at the lower of cost or market value, and at June 30, 2022 and December 31, 2021, totaled $2,574,000 and $3,907,000, respectively. These balances are related to the December 7, 2021 announcement of a Retail Network Optimization Plan under which the Bank announced its intention to close certain retail locations throughout its expanded footprint. The branch closures occurred on March 4, 2022. Adjustments to record these held for sale assets at the lower of cost or fair value related to the held for sale properties were included in post-acquisition restructuring expenses and totaled $874,000 for the year ended December 31, 2021. During the six months ended June 30, 2022, Mid Penn had a write-off expense of obsolete bank premises and equipment held for sale of $705,000, as a result of branch closures during the first quarter of 2022, as previously announced on a Form 8-K dated December 7, 2021. There were no impairment charges recorded during the six months ended June 30, 2022 or 2021.

Foreclosed Assets Held for Sale

Foreclosed assets held for sale consist primarily of real estate acquired through, or in lieu of, foreclosure in settlement of debt, and are recorded at fair value less the selling costs at the date of transfer, establishing a new cost basis. Any valuation adjustments required at the date of transfer are charged to the allowance for loan and lease losses. Subsequent to acquisition, foreclosed assets are carried at fair value less estimated costs of disposal, based upon periodic evaluations that consider changes in market conditions and development and disposal

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costs. Operating results from assets acquired in satisfaction of debt, including rental income less operating costs and gains or losses on the sale of, or the periodic evaluation of foreclosed assets, are recorded in noninterest expense.

As of June 30, 2022, Mid Penn had no residential real estate held in other real estate owned and $752,000 loans for which formal foreclosure proceedings were in process. As of December 31, 2021, Mid Penn had no residential real estate held in other real estate owned and no loans for which formal foreclosure proceedings were in process.

Leases

Mid Penn leases certain premises and equipment and adopted Accounting Standards Update 2016-02, Leases (Topic 842). In accordance with Accounting Standards Update (“ASU”) 2016-02, Mid Penn recognizes a right-of-use asset and a related lease liability for each distinct lease agreement. The lease right-of-use asset consists of the amount of the initial measurement of the lease liability, adjusted for (i) any lease payments made to the lessor at or before the commencement date, minus any lease incentives received, and (ii) any initial direct costs incurred by the lessee (defined as costs of a lease that would not have been incurred had the lease not been executed). The related lease liability is equal to the present value of the future lease payments, discounted using the rate implicit in the lease (or if that rate cannot be readily determined, the lessee’s incremental borrowing rate). Given that the rate implicit in the lease is rarely available, all lease liability amounts were calculated using Mid Penn’s incremental borrowing rate at lease inception, on a collateralized basis, for a similar term.

Operating lease expense, recognized as a component of occupancy expense on the consolidated statements of income, consists of a single lease cost calculated so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis. Operating lease expense also includes variable lease payments not included in the lease liability, and any impairment of the right-of-use asset. Finance lease expense consists of the amortization of the right-of-use asset, recognized as a component of occupancy expense on the consolidated statements of income, and interest expense on the lease liability, which is recorded as a component of other interest expense on the consolidated statements of income.

In assessing whether a contract contains a lease, Mid Penn reviews third-party agreements to determine if the contract conveys the right to control the use of identified property, plant, or equipment (defined as an identified asset by Topic 842) for a period of time in exchange for consideration, and grants Mid Penn the right to both (i) obtain substantially all of the economic benefits from the identified asset’s use, and (ii) direct the use of the identified asset throughout the term of the agreement.

Upon identification that a lease agreement exists, Mid Penn performs an assessment of the consideration to be paid related to the identified asset and quantifies both the (i) lease components, consisting of consideration paid to transfer a good or service to Mid Penn, and (ii) non-lease components, consisting of consideration paid for distinct elements of the contract that are not related to securing the use of the leased asset, such as property taxes, common area maintenance, utilities, and insurance.

Many of Mid Penn’s lease agreements include options to extend or renew contracts subsequent to the expiration of the initial lease term. These renewal and extension options were not included in the calculation of the right-of-use assets and lease liabilities as Mid Penn is not reasonably certain that these renewals and extensions will be utilized. Additionally, for leases that contain escalation clauses related to consumer or other price indices, Mid Penn includes the known lease payment amount as of the commencement date in the calculation of right-of-use assets and related lease liabilities. Subsequent increases in rental payments over the known amount at the commencement date due to increase in the indices will be expensed as incurred.

None of Mid Penn’s lease agreements include residual value guarantees or material variable lease payments. Mid Penn does not have material restrictions or covenants imposed by leases that would impact Mid Penn’s ability to pay dividends or cause Mid Penn to incur additional financial obligations.

Investments in Limited Partnerships

Mid Penn is a limited partner in a partnership that provides low-income housing in Enola, Pennsylvania. The carrying value of Mid Penn’s investment in the limited partnership was $80,000 at June 30, 2022, and $102,000 at December 31, 2021, net of amortization, using the straight-line method. The investment in this limited partnership is reported in other assets on the consolidated balance sheets, and Mid Penn’s maximum exposure to loss is limited to the carrying value of the investment.

Mid Penn owns a limited partnership interest in a low-income housing project with thirty-seven apartments and common amenities in Dauphin County, Pennsylvania. The total investment in this limited partnership, net of amortization to date, was $5,585,000 and $5,962,000 on June 30, 2022 and December 31, 2021, respectively, and was included in the reported balance of other assets on the consolidated balance sheet. All of the units qualified for Federal Low-Income Housing Tax Credits (“LIHTCs”) as provided for in Section 42 of the Internal Revenue Code of 1986, as amended. Mid Penn’s limited partner capital contribution totaled $7,506,000 and the investment was fully funded within a three-year period beginning in 2018 and ending during the first quarter of 2021. The investment in the limited partnership is reported in other assets on the consolidated balance sheet and is being amortized over a ten-year period using the cost amortization method which began upon commencement of operations of the facility in December 2019. The project was formally awarded $8,530,000 in total LIHTCs by the Pennsylvania Housing Finance Agency, which will be recognized over the ten-year period from December 2019 through November 2029, with an annual LIHTC amount of $853,000 to be awarded to Mid Penn for the year-ended December 31, 2021.

MID PENN BANCORP, INC.

Core Deposit Intangible

Core deposit intangible is a measure of the value of consumer demand and savings deposits acquired in business combinations accounted for as purchases. The carrying amount of core deposit intangible was $5,780,000 and $7,282,000 at June 30, 2022 and December 31, 2021, respectively. The core deposit intangible is being amortized over a ten-year period starting at each respective acquisition date and using the sum-of-the-year’s digits amortization method. The current balance of the core deposit intangible includes unamortized assets from (i) the Phoenix Bancorp, Inc. acquisition (“Phoenix”) in March 2015, (ii) The Scottdale Bank and Trust Company acquisition (“Scottdale”) in January 2018, (iii) the First Priority Financial Corp. acquisition (“First Priority) in July 2018, and (iv) the Riverview acquisition in November 2021. Core deposit amortization expense is reflected in the consolidated statements of income in intangible amortization and was $797,000 and $543,000 for the six months ended June 30, 2022 and 2021, respectively. Core deposit intangible assets are subject to impairment testing whenever events or changes in circumstances indicate the need for such evaluation. For much of the year ended December 31, 2021, and through the six months ended June 30, 2022, the novel coronavirus (“COVID-19”) global pandemic continued to impact the United States including the State of Pennsylvania and Mid Penn’s market area and communities and customers. Accordingly, Mid Penn management evaluated whether this ongoing COVID-19 pandemic resulted in any impairment to Mid Penn’s business and the value of its acquired consumer demand and savings deposit base. Management’s determination was that there was no impairment to its core deposit intangible to date as a result of the pandemic or related factors. Supporting this assertion, and as reflected in the consolidated balance sheets as of June 30, 2022 and December 31, 2021, Mid Penn has recognized a total core deposit increase, which excludes time deposits, of $711,680,000 or 28% during the first six months of 2022. Subsequent to June 30, 2022, and through the date of this filing, these increased deposit levels were sustained and continued to reflect no evidence of core deposit intangible impairment.

Goodwill

Goodwill is the excess of the purchase price over the fair value of assets acquired in connection with past business acquisitions. The goodwill balance was $113,835,000 at both June 30, 2022 and December 31, 2021 and was comprised of (i) $50,995,000 related to the November 30, 2021 Riverview acquisition, (ii) $39,744,000 related to the July 31, 2018 First Priority acquisition, (iii) $19,178,000 related to the January 8, 2018 Scottdale acquisition, and (iv) $3,918,000 recorded as a result of the Phoenix acquisition in 2015. Goodwill is evaluated annually for impairment; however, if certain events occur which indicate goodwill might be impaired between annual tests, goodwill would be tested for impairment when such events occur. In making a potential impairment assessment of goodwill, Mid Penn considers a number of factors including operating results, business plans, economic projections, anticipated future cash flows, current market data, stock price, etc. There are inherent uncertainties related to these factors and Mid Penn’s judgment in applying them to the analysis of goodwill impairment. Mid Penn did not identify any impairment on its outstanding goodwill from its most recent comprehensive impairment evaluation, which was performed as of October 31, 2021 and has been evaluated regularly for impairment given the ongoing pandemic.

Rabbi Trust

As a result of the November 30, 2021 acquisition of Riverview, Mid Penn assumed certain benefit plan liabilities related to compensation arrangements totaling $6,680,000 and $7,708,000 as of June 30, 2022 and December 31, 2021, respectively, within other liabilities on the consolidated balance sheets, including certain executive non-qualified retirement benefits, deferred compensation plans, and executive employment and separation agreements associated with Riverview. The obligations are fully funded through a Rabbi Trust having a cash balance of $6,706,000 and $7,708,000 within other assets on the consolidated balance sheets as of June 30, 2022 and December 31, 2021, respectively, to provide a source of funds in satisfying the obligations under the respective compensation arrangements.

Revenue from Contracts with Customers

Mid Penn recognizes revenues when earned based upon (i) contractual terms as transactions occur, or (ii) as related services are provided and collectability is reasonably assured. The largest source of revenue for Mid Penn is interest income, which is primarily recognized on an accrual basis according to a written contract, such as loan and lease agreements or investment securities contracts. Mid Penn earns noninterest income through a variety of financial and transactional services such as trust and wealth management services, deposit account transaction fees, ATM debit card fees, and mortgage banking fees. Revenue is recorded for noninterest income based on the contractual terms for the service or transaction performed. In certain circumstances, noninterest income is reported net of associated expenses.

Mid Penn adopted FASB Topic 606, Revenue from Contracts with Customers. This ASU establishes principles for reporting information about the nature, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods and services to customers. Topic 606 applies primarily to transactional-based non-interest income revenue streams and excludes mortgage banking income, earnings from cash surrender value of life insurance, and gains on SBA loans.

Mid Penn’s non-interest income revenue streams of income from fiduciary activities, service charges on deposits, ATM debit card interchange income, merchant service fees and certain components of other income are within the scope of Topic 606 and are discussed in greater detail below.

MID PENN BANCORP, INC.

Income from Fiduciary and Wealth Management Activities

Income from fiduciary and wealth management activities consist of trust, wealth management, and investment management fee income, brokerage transaction fee income, and estate fee income. Trust, wealth management, and investment management fee income consists of advisory fees that are typically based on market values of clients’ managed portfolios and transaction fees for fiduciary services performed, both of which are recognized as earned. Brokerage transaction fee income includes advisory fees, which are recognized as earned on a monthly basis and transaction fees that are recognized when transactions occur. Payment is typically received in the following month. Estate fee income is recognized as services are performed over the service period, generally eighteen months.

Service Charges on Deposits

Service charges on deposits consist of cash management, overdraft, non-sufficient fund fees and other service charges on deposit accounts. Revenue is primarily transactional and recognized when earned, which is at the time the respective initiating transaction occurs and the related service charge is subsequently processed. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to the customers’ accounts.

ATM Debit Card Interchange Income

ATM debit card interchange income consists of interchange fees earned when Mid Penn’s debit cards are processed through card payments networks. The interchange fee is calculated as a percentage of the total electronic funds transfer (EFT) transaction plus a per-transaction fee, which varies based on the type of card used, the method used to process the EFT transaction, and the type of business at which the transaction was processed. Revenue is recognized daily as transactions occur and interchange fees are subsequently processed. Payment for most interchange activity is received daily, while some fees are aggregated, and payment is received in the following month.

Merchant Services Income

Merchant services income is processed through third party providers with whom Mid Penn has partnered to provide merchant services to its business customers. Fees are charged to merchants to process their debit card transactions, cash advance services, and other related products. Mid Penn receives a percentage of the revenue generated from each joint customer relationship after the respective third-party provider has collected the fee income from the merchant. Payment is primarily received in the following month.

Other Income

Certain aspects of other income, such as credit card royalties, check orders, and letter of credit fees, are within the scope of Topic 606. These fees are primarily transactional, and revenue is recognized when transactions occur, and the related services are subsequently processed. Payment is primarily received immediately or in the following month.

Mid Penn does not exercise significant judgements in the recognition of income, as typically income is not recognized until the performance obligation has been satisfied. Mid Penn has not recognized any assets from the costs to obtain or fulfill a contract with customers for revenue streams that fall within the guidance of Topic 606.

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 - June 30, 2022	$	(10,297	)	$	538	$	(9,759	)

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

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

MID PENN BANCORP, INC.

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 2,990,000 shares of common stock at a price of $25.00 per share, with the aggregate gross proceeds of the offering totaling $74,750,000 before underwriting discounts and offering expenses. The net proceeds of the offering after deducting the underwriting discount and other offering expenses were $70,238,000. 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 six months ended June 30, 2022 earnings per share calculations compared to the three and six months ended June 30, 2021.

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

(Dollars in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2022			2021	2022				2021
Net income	$	12,252	$	9,613		$	23,606	$	18,925

Weighted average common shares outstanding (basic)		15,935,003		10,321,838			15,946,459		9,373,978
Effect of dilutive unvested restricted stock grants		36,415		15,942			17,286		6,479
Weighted average common shares outstanding (diluted)		15,971,418		10,337,780			15,963,745		9,380,457

Basic earnings per common share	$	0.77	$	0.93		$	1.48	$	2.02
Diluted earnings per common share	$	0.77	$	0.93		$	1.48	$	2.02

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

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.

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 in the early stages of conducting parallel runs of its new processes and controls and is beginning 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.

MID PENN BANCORP, INC.

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 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 $142,192,000 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 $776,000 of cash consideration relating to stock awards. Including $16,000 of cash paid in lieu of fractional shares, the total fair value of consideration paid was $142,984,000.

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 $50,995,000 of goodwill, a core deposit intangible of $4,096,000, and a customer list intangible of $2,160,000. 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.

MID PENN BANCORP, INC.

The allocation of the purchase price is as follows:

(Dollars in thousands)

Assets acquired:
Cash and cash equivalents	$	316,079
Investment securities		226
Restricted stock		2,209
Loans		837,505
Goodwill		50,995
Core deposit intangible		4,096
Customer list intangible		2,160
Bank owned life insurance		32,120
Premises and equipment		11,819
Deferred income taxes		7,110
Accrued interest receivable		1,919
Other assets		6,683
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

MID PENN BANCORP, INC.

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. The following table summarizes the estimated fair value of the assets acquired and liabilities and equity assumed in the Riverview transaction that management believes are final; however, these values could be adjusted under ASC 805 until November 30, 2022.

(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		7,110
Accrued interest receivable		1,919
Other assets		6,683
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		91,989
Goodwill	$	50,995

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 $837,505,000. 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 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.

MID PENN BANCORP, INC.

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		Six Months Ended
	June 30, 2021		June 30, 2021
Net interest income after loan loss provision	$	37,478	$	71,413
Noninterest income		9,347		16,582
Noninterest expense		31,910		60,708
Net income		14,915		27,287
Net income per common share		0.76		1.46

MID PENN BANCORP, INC.

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 June 30, 2022 and December 31, 2021 are as follows:

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
June 30, 2022
Available-for-sale debt securities:
U.S. Treasury and U.S. government agencies	$	34,475	$	76	$	525	$	34,026
Mortgage-backed U.S. government agencies		166,321		40		10,928		155,433
State and political subdivision obligations		4,366		—		697		3,669
Corporate debt securities		26,570		—		1,000		25,570
Total available-for-sale debt securities		231,732		116		13,150		218,698
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	$	239,605	$	28	$	21,516	$	218,117
Mortgage-backed U.S. government agencies		55,180		1		4,857		50,324
State and political subdivision obligations		88,250		68		6,673		81,645
Corporate debt securities		15,997		1		796		15,202
Total held-to-maturity debt securities		399,032		98		33,842		365,288
Total	$	630,764	$	214	$	46,992	$	583,986

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		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. Please refer to Note 7, Fair Value Measurement, for more information on the fair value of investment securities.

Investment securities having a fair value of $380,649,000 at June 30, 2022 and $244,763,000 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 $205,100,000 as of June 30, 2022 and $450,850,000 as of December 31, 2021.

MID PENN BANCORP, INC.

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 June 30, 2022 and December 31, 2021.

(Dollars in thousands)	Less Than 12 Months					12 Months or More					Total
	Number					Number					Number
	of	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized
June 30, 2022	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Available-for-sale debt securities:
U.S. Treasury and U.S. government agencies	11	$	18,476	$	525	0	$	—	$	—	11	$	18,476	$	525
Mortgage-backed U.S. government agencies	83		146,413		10,928	0		—		—	83		146,413		10,928
State and political subdivision obligations	8		3,669		697	0		—		—	8		3,669		697
Corporate debt securities	13		21,319		1,000	0		—		—	13		21,319		1,000
Total temporarily impaired available-for-sale debt securities	115	$	189,877	$	13,150	0	$	—	$	—	115	$	189,877	$	13,150

Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	134	$	205,184	$	20,366	5	$	7,345	$	1,150	139	$	212,529	$	21,516
Mortgage-backed U.S. government agencies	64		50,323		4,857	0		—		—	64		50,323		4,857
State and political subdivision obligations	168		68,551		6,548	4		815		125	172		69,366		6,673
Corporate debt securities	3		4,784		272	4		4,475		524	7		9,259		796
Total temporarily impaired held-to-maturity debt securities	369		328,842		32,043	13		12,635		1,799	382		341,477		33,842
Total	484	$	518,719	$	45,193	13	$	12,635	$	1,799	497	$	531,354	$	46,992

MID PENN BANCORP, INC.

(Dollars in thousands)	Less Than 12 Months					12 Months or More						Total
	Number					Number						Number
	of	Fair		Unrealized		of	Fair		Unrealized			of	Fair		Unrealized
December 31, 2021	Securities	Value		Losses		Securities	Value		Losses			Securities	Value		Losses
Available-for-sale securities:
U.S. government agencies	24	$	45,476	$	283	0	$	—		$	—	24	$	45,476	$	283
State and political subdivision obligations	2		1,168		11	0		—			—	2		1,168		11
Corporate debt securities	4		4,943		57	0		—			—	4		4,943		57
Total temporarily impaired available-for-sale securities	30		51,587		351	0		—			—	30		51,587		351

Held-to-maturity securities:
U.S. Treasury and U.S. government agencies	91	$	149,425	$	1,165	0	$	—		$	—	91	$	149,425	$	1,165
Mortgage-backed U.S. government agencies	24		39,995		272	0		—			—	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	0		—			—	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 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. At June 30, 2022, the majority of securities in an unrealized loss position were U.S. government agency securities and mortgage-backed U.S. government agency securities. At December 31, 2021, the majority of securities in an unrealized loss position were attributable to mortgage-backed U.S. government agency securities.

Mid Penn had no securities considered by management to be other-than-temporarily impaired as of June 30, 2022, December 31, 2021, or June 30, 2021, and did not record any securities impairment charges in the respective periods ended on these dates. This determination reflects management’s assessment that no securities in its portfolio were impaired as a result of any COVID-19 pandemic impacts, to date, to the repayment ability of the underlying issuers of securities. 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 six months ended June 30, 2022 and 2021.

MID PENN BANCORP, INC.

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

(Dollars in thousands)	Available-for-sale				Held-to-maturity
	Amortized		Fair		Amortized		Fair
June 30, 2022	Cost		Value		Cost		Value
Due in 1 year or less	$	250	$	250	$	450	$	451
Due after 1 year but within 5 years		32,976		32,649		69,605		67,815
Due after 5 years but within 10 years		28,121		26,955		230,019		209,494
Due after 10 years		4,064		3,411		43,778		37,204
		65,411		63,265		343,852		314,964

Mortgage-backed securities		166,321		155,433		55,180		50,324
	$	231,732	$	218,698	$	399,032	$	365,288

Note 5 - Loans and Allowance for Loan and Lease Losses

As of June 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 $3,146,000 as of June 30, 2022 and $6,264,000 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)			Special
June 30, 2022	Pass		Mention		Substandard		Total
Commercial and industrial	$	536,391	$	11,014	$	2,476	$	549,881
Commercial real estate		1,781,062		16,849		28,033		1,825,944
Commercial real estate - construction		374,888		—		1,229		376,117
Residential mortgage		296,636		204		3,496		300,336
Home equity		117,106		507		866		118,479
Consumer		9,276		—		—		9,276
	$	3,115,359	$	28,574	$	36,100	$	3,180,033

(Dollars in thousands)			Special
December 31, 2021	Pass		Mention		Substandard		Total
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

All PPP loans, whether disbursed in 2020 or 2021, are included in commercial and industrial loans and are fully guaranteed by the 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 June 30, 2022.

Mid Penn had no loans classified as “doubtful” as of June 30, 2022 and December 31, 2021.

MID PENN BANCORP, INC.

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

	June 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	$	—	$	—	$	—	$	—	$	31	$	—
Commercial real estate		637		1,038		—		854		1,243		—
Commercial real estate - construction		—		5		—		22		27		—
Residential mortgage		1,314		1,355		—		1,259		1,295		—
Home equity		99		99		—		2,377		2,377		—
Consumer		—		—		—		—		—		—

With no related allowance recorded and acquired with credit deterioration:
Commercial and industrial	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate		2,109		2,123		—		2,231		2,909		—
Commercial real estate - construction		1,221		1,467		—		1,196		1,469		—
Residential mortgage		1,285		1,771		—		1,362		1,847		—
Home equity		85		105		—		86		111		—
Consumer		—		—		—		—		—		—

With an allowance recorded:
Commercial and industrial	$	507	$	538	$	118	$	308	$	339	$	67
Commercial real estate		1,469		688		892		287		359		121
Commercial real estate - construction		—		—		—		—		—		—
Residential mortgage		—		—		—		—		—		—
Home equity		—		—		—		—		—		—
Consumer		—		—		—		—		—		—

Total Impaired Loans:
Commercial and industrial	$	507	$	538	$	118	$	308	$	370	$	67
Commercial real estate		4,215		3,849		892		3,372		4,511		121
Commercial real estate - construction		1,221		1,472		—		1,218		1,496		—
Residential mortgage		2,599		3,126		—		2,621		3,142		—
Home equity		184		204		—		2,463		2,488		—
Consumer		—		—		—		—		—		—

MID PENN BANCORP, INC.

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

	Three Months Ended
	June 30, 2022				June 30, 2021
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	—	$	—	$	72	$	—
Commercial real estate		604		—		778		1
Commercial real estate - construction		211		—		26		—
Residential mortgage		1,392		6		759		6
Home equity		99		100		2,336		—
Consumer		—		—		—		—

With no related allowance recorded and acquired with credit deterioration:
Commercial and industrial	$	—	$	—	$	—	$	—
Commercial real estate		2,147		—		1,398		—
Commercial real estate - construction		1,205		—		—		—
Residential mortgage		1,335		—		300		—
Home equity		85		—		—		—
Consumer		—		—		—		—

With an allowance recorded:
Commercial and industrial	$	503	$	—	$	221	$	—
Commercial real estate		735		—		1,793		—
Commercial real estate - construction		—		—		—		—
Residential mortgage		—		—		—		—
Home equity		—		—		—		—
Consumer		—		—		—		—

Total Impaired Loans:
Commercial and industrial	$	503	$	—	$	293	$	—
Commercial real estate		3,486		—		3,969		1
Commercial real estate - construction		1,416		—		26		—
Residential mortgage		2,727		6		1,059		6
Home equity		184		100		2,336		—
Consumer		—		—		—		—

MID PENN BANCORP, INC.

	Six Months Ended
	June 30, 2022				June 30, 2021
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	—	$	—	$	502	$	—
Commercial real estate		719		—		3,257		1
Commercial real estate - construction		148		—		28		—
Residential mortgage		1,379		12		778		14
Home equity		858		184		2,346		—
Consumer		—		—		—		—

With no related allowance recorded and acquired with credit deterioration:
Commercial and industrial	$	—	$	—	$	—	$	—
Commercial real estate		1,948		—		1,406		—
Commercial real estate - construction		1,214		—		—		—
Residential mortgage		1,294		—		309		—
Home equity		84		—		—		—
Consumer		—		—		—		—

With an allowance recorded:
Commercial and industrial	$	513	$	—	$	177	$	—
Commercial real estate		596		—		1,491		—
Commercial real estate - construction		—		—		—		—
Residential mortgage		—		—		—		—
Home equity		—		—		—		—
Consumer		—		—		—		—

Total Impaired Loans:
Commercial and industrial	$	513	$	—	$	679	$	—
Commercial real estate		3,263		—		6,154		1
Commercial real estate - construction		1,362		—		28		—
Residential mortgage		2,673		12		1,087		14
Home equity		942		184		2,346		—
Consumer		—		—		—		—

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

(Dollars in thousands)	June 30, 2022		December 31, 2021
Commercial and industrial	$	1,357	$	308
Commercial real estate		2,297		3,372
Commercial real estate - construction		1,229		1,218
Residential mortgage		2,164		2,186
Home equity		504		2,463
	$	7,551	$	9,547

MID PENN BANCORP, INC.

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

													Loans
(Dollars in thousands)	30-59		60-89		Greater								Receivable >
	Days Past		Days Past		than 90		Total Past						90 Days and
June 30, 2022	Due		Due		Days		Due		Current		Total Loans		Accruing
Commercial and industrial	$	3,265	$	694	$	507	$	4,466	$	545,415	$	549,881	$	—
Commercial real estate		75		—		512		587		1,823,248		1,823,835		—
Commercial real estate - construction		226		—		—		226		374,670		374,896		—
Residential mortgage		484		99		917		1,500		297,551		299,051		—
Home equity		76		167		351		594		117,800		118,394		—
Consumer		2		—		—		2		9,274		9,276		—
Loans acquired with credit deterioration:
Commercial and industrial		—		—		—		—		—		—		—
Commercial real estate		—		16		851		867		1,242		2,109		—
Commercial real estate - construction		1,221		—		—		1,221		—		1,221		—
Residential mortgage		106		52		327		485		800		1,285		—
Home equity		—		—		57		57		28		85		—
Consumer		—		—		—		—		—		—		—
Total	$	5,455	$	1,028	$	3,522	$	10,005	$	3,170,028	$	3,180,033	$	—

													Loans
(Dollars in thousands)	30-59		60-89		Greater								Receivable >
	Days Past		Days Past		than 90		Total Past						90 Days and
December 31, 2021	Due		Due		Days		Due		Current		Total Loans		Accruing
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 and industrial		—		—		—		—		—		—		—
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		—
Consumer		—		—		—		—		—		—		—
Total	$	3,119	$	327	$	7,205	$	10,651	$	3,093,745	$	3,104,396	$	515

MID PENN BANCORP, INC.

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 current expected credit loss (“CECL”) accounting standard until January 1, 2023, and Mid Penn has not elected to early adopt CECL. PPP loans, both those disbursed in 2020 and those disbursed in 2021, are included in the commercial and industrial classification and, as the PPP loans are fully guaranteed by the Small Business Administration, no allowance for loan and lease losses was recorded against the $4,966,000 balance of PPP loans outstanding (net of related deferred PPP fees) as of June 30, 2022.

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

(Dollars in thousands)
As of, and for the three months ended, June 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,
April 1, 2022	$	3,811		$	9,991	$	41		$	483	$	562	$	2		$	257		$	15,147
Charge-offs		—			—		—			—		—		(9	)		—			(9	)
Recoveries		—			—		—			2		1		10			—			13
Provisions (credits)		(140	)		2,000		5			17		78		(1	)		(234	)		1,725
Ending balance,
June 30, 2022	$	3,671		$	11,991	$	46		$	502	$	641	$	2		$	23		$	16,876

(Dollars in thousands)
As of, and for the six months ended, June 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		—			—		—			—		—		(66	)		—			(66	)
Recoveries		13			65		24			2		2		14			—			120
Provisions		219			2,511		(16	)		41		79		52			(661	)		2,225
Ending balance,
June 30, 2022		3,671			11,991		46			502		641		2			23			16,876
Individually evaluated for impairment		118			892		—			—		—		—			—			1,010
Ending balance:
Collectively evaluated for impairment	$	3,553		$	11,099	$	46		$	502	$	641	$	2		$	23		$	15,866

Loans receivables:
Ending balance	$	549,881		$	1,825,944	$	376,117		$	300,336	$	118,479	$	9,276		$	—		$	3,180,033
Ending balance: individually evaluated for impairment		507			2,106		—			1,314		99		—			—			4,026
Ending balance: acquired with credit deterioration		—			2,109		1,221			1,285		85		—			—			4,700
Ending balance: collectively evaluated for impairment	$	549,374		$	1,821,729	$	374,896		$	297,737	$	118,295	$	9,276		$	—		$	3,171,307

MID PENN BANCORP, INC.

(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

(Dollars in thousands)
As of, and for the three months ended, June 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,
April 1, 2021	$	2,988		$	8,944	$	122		$	438		$	528	$	1		$	570		$	13,591
Charge-offs		—			—		(23	)		(7	)		—		(9	)		—			(39	)
Recoveries		1			10		—			1			—		2			—			14
Provisions (credits)		176			1,023		31			67			60		8			(215	)		1,150
Ending balance,
June 30, 2021	$	3,165		$	9,977	$	130		$	499		$	588	$	2		$	355		$	14,716

(Dollars in thousands)
As of, and for the six months ended, June 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	)		—		(23	)		(11	)		—		(12	)		—			(905	)
Recoveries		1			66		—			11			—		11			—			89
Provisions (credits)		957			1,256		19			70			81		2			(235	)		2,150
Ending balance,
June 30, 2021		3,165			9,977		130			499			588		2			355			14,716
Individually evaluated for impairment		62			1,332		—			—			—		—			—			1,394
Ending balance:
collectively evaluated for impairment	$	3,103		$	8,645	$	130		$	499		$	588	$	2		$	355		$	13,322

Loans receivables:
Ending balance	$	783,106		$	1,147,089	$	282,776		$	196,691		$	77,272	$	8,258		$	—		$	2,495,192
Ending balance: individually evaluated for impairment		218			3,673		23			759			2,339		—			—			7,012
Ending balance: acquired with credit deterioration		—			1,381		—			289			—		—			—			1,670
Ending balance: collectively evaluated for impairment	$	782,888		$	1,142,035	$	282,753		$	195,643		$	74,933	$	8,258		$	—		$	2,486,510

MID PENN BANCORP, INC.

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 June 30, 2022 totaled $742,000 and included: (i) two accruing impaired residential mortgage loans to unrelated borrowers in compliance with the terms of the modifications totaling $422,000, and (ii) $320,000 of troubled debt restructurings attributable to six loans among four 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 June 30, 2022 was comprised of $292,000 in commercial real estate loans amongst two borrowers and two residential mortgage loans for $28,000. As of June 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 $819,000, and included (i) two accruing impaired residential mortgage loans to unrelated borrowers in compliance with the terms of the modifications totaling $435,000, and (ii) $384,000 of troubled debt restructurings attributable to eight loans among six 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 December 31, 2021 was comprised of $320,000 in commercial real estate loans amongst two borrowers, one commercial real estate construction loan for $22,000, two residential mortgage loans for $37,000, and one commercial and industrial loan for $5,000. 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 June 30, 2022 and December 31, 2021 are as follows:

(Dollars in thousands)	Pre-Modification		Post-Modification
June 30, 2022	Outstanding Recorded Investment		Outstanding Recorded Investment		Recorded Investment
Commercial real estate	$	1,213	$	1,115	$	292
Residential mortgage		647		645		450
	$	1,860	$	1,760	$	742

(Dollars in thousands)	Pre-Modification		Post-Modification
December 31, 2021	Outstanding Recorded Investment		Outstanding Recorded Investment		Recorded Investment
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 six months ended June 30, 2022 and 2021.

(Dollars in thousands)
	Three Months Ended June 30,
	2022			2021
Accretable yield, beginning of period	$	499		$	40
Accretable yield amortized to interest income		(28	)		—
Accretable yield, end of period	$	471		$	40

(Dollars in thousands)	Six Months Ended June 30,
	2022			2021

Accretable yield, beginning of period	$	580		$	40
Accretable yield amortized to interest income		(109	)		-
Accretable yield, end of period	$	471		$	40

MID PENN BANCORP, INC.

Note 6 - Derivative Financial Instruments

As of June 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 June 30, 2022 and December 31, 2021 are presented below.


	June 30, 2022					December 31, 2021
(Dollars in thousands)	Notional Amount		Fair Value			Notional Amount		Fair Value
Interest Rate Lock Commitments	$	9,742	$	83		$	16,107	$	56
Forward Commitments		16,193		(124	)		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 June 30, 2022 and December 31, 2021.


	June 30, 2022				December 31, 2021
(Dollars in thousands)	Asset Derivatives		Liability Derivatives		Asset Derivatives		Liability Derivatives
Interest Rate Lock Commitments	$	83	$	—	$	56	$	—
Forward Commitments		—		124		32		—
Total	$	83	$	124	$	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 six months ended June 30, 2022 and 2021.


	Three months ended				Six months ended
(Dollars in thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Interest Rate Lock Commitments	$	214	$	—	$	27	$	—
Forward Commitments		324		—		1,077		—
Total	$	538	$	—	$	1,104	$	—

Loan-level Interest Rate Swaps

Mid Penn enters into loan-level interest rate swaps with certain qualifying, creditworthy commercial loan customers to provide a loan pricing structure that meets both Mid Penn’s and the customer’s interest rate risk management needs. Mid Penn simultaneously enters into parallel interest rate swaps with a dealer counterparty, with identical notional amounts and terms. The net result of the offsetting customer and dealer counterparty swap agreements is that the customer pays a fixed rate of interest and Mid Penn receives a floating rate. Mid Penn’s loan-level interest rate swaps are considered derivatives but are not accounted for using hedge accounting.

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


(Dollars in thousands)	June 30, 2022		December 31, 2021
Interest Rate Swap Contracts - Commercial Loans:
Fair Value (a)	$	8,487	$	102
Notional Amount		112,389		109,577
Cash Collateral Posted (b)		1,600		1,600

(a)

Represents the total of the equal and offsetting fair value assets and liabilities related to the loan level interest rate swaps

(b)

Included in cash and due from banks on the consolidated balance sheet

MID PENN BANCORP, INC.

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)	June 30, 2022		December 31, 2021
Interest Rate Swap Contracts - Commercial Loans:
Gross amounts recognized	$	8,487	$	102
Gross amounts offset		8,487		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

Note 7 - 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 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 Inputs - 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 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

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 six months ended June 30, 2022 and 2021.

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

MID PENN BANCORP, INC.

			Fair value measurements at June 30, 2022 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	June 30, 2022		(Level 1)		(Level 2)		(Level 3)
Loans held for sale	$	9,574			$	9,574	$	—
Available-for-sale securities:
U.S. Treasury and U.S. government agencies		34,026		—		34,026		—
Mortgage-backed U.S. government agencies		155,433		—		155,433		—
State and political subdivision obligations		3,669		—		3,669		—
Corporate debt securities		25,570		—		25,570		—
Other assets:
Equity securities		454		454		—		—
Interest rate swap agreements		8,487		—		8,487
Mortgage banking derivative assets		83		—		83		—
Total	$	237,296	$	454	$	236,842	$	—

			Fair value measurements at December 31, 2021 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
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.

			Fair value measurements at June 30, 2022 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	June 30, 2022		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	1,043	$	—	$	—	$	1,043

			Fair value measurements at December 31, 2021 using:
(Dollars in thousands)	Total carrying value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
Assets:	December 31, 2021		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	508	$	—	$	—	$	508

MID PENN BANCORP, INC.

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Mid Penn has utilized Level 3 inputs to determine the fair value.

(Dollars in thousands)

June 30, 2022

Fair Value Estimate

Valuation Technique

Unobservable Input

Range

Weighted Average

Impaired Loans

1,043

Appraisal of collateral (a), (b)

Appraisal adjustments (b)

22% - 77%

49%

(Dollars in thousands)

December 31, 2021

Fair Value Estimate

Valuation Technique

Unobservable Input

Range

Weighted Average

Impaired Loans

508

Appraisal of collateral (a), (b)

Appraisal adjustments (b)

21% - 69%

30%

(a)

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

(b)

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 six months ended June 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.

MID PENN BANCORP, INC.

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.

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 at June 30, 2022 and December 31, 2021.

(Dollars in thousands)	June 30, 2022				December 31, 2021
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and cash equivalents	$	236,786	$	236,786	$	913,572	$	913,572
Available-for-sale investment securities		218,698		218,698		62,862		62,862
Held-to-maturity investment securities		399,032		365,288		329,257		330,626
Equity securities		454		454		500		500
Loans held for sale		9,574		9,574		11,514		11,787
Net loans and leases		3,163,157		3,130,912		3,089,799		3,118,416
Restricted investment in bank stocks		4,234		4,234		9,134		9,134
Accrued interest receivable		12,902		12,902		10,779		10,779
Interest rate swap agreements		8,487		8,487		629		629
Mortgage banking derivative assets		83		83		88		88

Financial liabilities:
Deposits	$	3,702,587	$	3,692,662	$	4,002,016	$	4,046,217
Long-term debt (a)		1,256		317		77,890		77,455
Subordinated debt		73,995		70,684		74,274		74,553
Accrued interest payable		1,542		1,542		1,791		1,791
Mortgage banking derivative liabilities		124		124		—		—

(a)

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 June 30, 2022 and December 31, 2021.

MID PENN BANCORP, INC.

The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of Mid Penn’s financial instruments as of June 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, these instruments are Level 2 Inputs. These tables exclude financial instruments for which the carrying amount approximates fair value, not previously disclosed.

					Fair Value Measurements
					Quoted Prices
					in Active Markets				Significant
(Dollars in thousands)					for Identical Assets		Significant Other		Unobservable
	Carrying				or Liabilities		Observable Inputs		Inputs
June 30, 2022	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial instruments - assets
Held-to-maturity investment securities	$	399,032	$	365,288	$	—	$	365,288	$	—
Net loans and leases		3,163,157		3,130,912		—		—		3,130,912

Financial instruments - liabilities
Deposits	$	3,702,587	$	3,692,662	$	—	$	3,692,662	$	—
Long-term debt (a)		1,256		317		—		317		—
Subordinated debt		73,995		70,684		—		70,684		—

					Fair Value Measurements
					Quoted Prices
					in Active Markets				Significant
(Dollars in thousands)					for Identical Assets		Significant Other		Unobservable
	Carrying				or Liabilities		Observable Inputs		Inputs
December 31, 2021	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 (a)		77,890		77,455		—		77,455		—
Subordinated debt		74,274		74,553		—		74,553		—

(a)

Long-term debt excludes finance lease obligations.

Note 8 - 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 $54,179,000 and $55,609,000 of standby letters of credit outstanding as of June 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 June 30, 2022 and December 31, 2021 for payment under standby letters of credit issued was not considered material.

MID PENN BANCORP, INC.

Commitments

As of June 30, 2021, 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 (“LIHTCs”) 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 $10,805,000, 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. The project has been conditionally awarded $1,205,000 in annual LIHTCs by the Pennsylvania Housing Finance Agency, with a total anticipated LIHTC amount of $12,046,000 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 $4,356,000, 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 $3,500,000 which will bear interest at 5.5% annum with a term of twenty-four months. The project has been conditionally awarded $484,000 in annual LIHTCs by the Pennsylvania Housing Finance Agency, with a total anticipated LIHTC amount of $4,840,000 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 June 30, 2022, Mid Penn had received $42,520,000 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) $20,883,000 of loan processing fees received during the year ended December 31, 2020, (ii) $17,997,000 of loan processing fees received during the year ended December 31, 2021, and (iii) $3,640,000 during the six months ended June 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 June 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 9 - 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 $2,024,652,000 at June 30, 2022. The Bank had a short-term borrowing capacity from the FHLB as of June 30, 2022 up to the Bank’s unused borrowing capacity of $1,206,604,000 (equal to $1,414,751,000 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 June 30, 2022 and December 31, 2021.

MID PENN BANCORP, INC.

The Bank also has unused overnight lines of credit with other correspondent banks amounting to $35,000,000 at June 30, 2022. No draws have been made on these lines of credit and accordingly the balance was zero on both June 30, 2022 and December 31, 2021.

Short-term PPPLF Borrowings

As of June 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 June 30, 2022, and December 31, 2021, the Bank had long-term debt outstanding in the amount of $4,592,000 and $81,270,000, 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 $205,100,000 as of June 30, 2022 and $450,850,000 as of December 31, 2021.

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


(Dollars in thousands)	June 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%		1,222		1,353
Due February 2027, 6.71%		34		37
Total FHLB fixed rate instruments		1,256		77,890
Lease obligations included in long-term debt		3,336		3,380
Total long-term debt	$	4,592	$	81,270

Note 10 - Subordinated Debt and Trust Preferred Securities

Subordinated Debt Assumed November 2021 with the Riverview Acquisition

On November 30, 2021, Mid Penn completed its acquisition of Riverview and assumed $25,000,000 of Subordinated Notes (the “Riverview Notes”). In accordance with purchase accounting principles, the Riverview Notes were assigned a fair value premium of $2,302,000. 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 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 $5,155,000 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 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.

MID PENN BANCORP, INC.

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 $6,000. 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 $12,150,000 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 Mid Penn Bank, its principal banking subsidiary. Related parties held $750,000 of the December 2020 Notes as of June 30, 2022 and December 31, 2021.

Subordinated Debt Issued March 2020

On March 20, 2020, Mid Penn Bancorp, Inc. entered into agreements with accredited investors who purchased $15,000,000 aggregate principal amount of Mid Penn Subordinated Notes due March 2030 (the “March 2020 Notes”). As a result of Mid Penn’s merger with Riverview on November 30, 2021, $6,870,000 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 June 30, 2022 was $8,130,000. 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 Mid Penn Bank, its principal banking subsidiary. Related parties held $1,700,000 of the March 2020 Notes as of June 30, 2022 and December 31, 2021.

Subordinated Debt Issued December 2017

On December 19, 2017, Mid Penn Bancorp, Inc. entered into agreements with investors to purchase $10,000,000 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 offering closed in December 2017.

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.

MID PENN BANCORP, INC.

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 Mid Penn Bank, its principal banking subsidiary. Related parties held $1,450,000 of the 2017 Notes as of June 30, 2022 and December 31, 2021.

Subordinated Debt Issued December 2015

On December 9, 2015, Mid Penn Bancorp, Inc. sold $7,500,000 aggregate principal amount of Subordinated Debt (the “2015 Notes”) due in 2025. Given that the 2015 Notes are in the sixth year since issuance, eighty percent of the principal balance of the notes is treated as Tier 2 capital for regulatory capital purposes as of June 30, 2022.

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 bear 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 will at no time be less than 4.0%. Interest is 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 will mature on December 9, 2025 and are redeemable in whole or in part, without premium or penalty, at any time on or after December 9, 2020, and prior to December 9, 2025. Additionally, Mid Penn may redeem the 2015 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 2015 Notes for U.S. federal income tax purposes; (ii) an event occurs that precludes the 2015 Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) Mid Penn becomes required to register as an investment company under the Investment Company Act of 1940, as amended, in each case at 100% of the principal amount of the 2015 Notes, plus accrued and unpaid interest thereon to but excluding the date of redemption.

Holders of the 2015 Notes may not accelerate the maturity of the 2015 Notes, except upon Mid Penn’s or Mid Penn Bank’s bankruptcy, insolvency, liquidation, receivership or similar event. Related parties held $1,930,000 of the 2015 Notes as of June 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 2015 Notes and the 2017 Notes were collectively $31,000 at June 30, 2022 and $44,000 at December 31, 2021.

Note 11 - 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.

MID PENN BANCORP, INC.

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

	Three Months Ended June 30,
(Dollars in thousands)	Pension Benefits						Other Benefits
	2022			2021			2022			2021
Service cost	$	30		$	33		$	6		$	—
Interest cost		41			40			1			2
Expected return on plan assets		(59	)		(57	)		—			—
Accretion of prior service cost		—			—			(5	)		(5	)
Amortization of net (gain) loss		(2	)		—			1			4
Net periodic benefit expense	$	10		$	16		$	3		$	1



	Six Months Ended June 30,
(Dollars in thousands)	Pension Benefits						Other Benefits
	2022			2021			2022			2021
Service cost	$	72		$	65		$	10		$	1
Interest cost		87			80			18			4
Expected return on plan assets		(118	)		(113	)		—			—
Accretion of prior service cost		—			—			(10	)		(10	)
Amortization of net (gain) loss		(4	)		—			5			4
Settlement gain		—			(49	)		—			—
Net periodic benefit expense (income)	$	37		$	(17	)	$	23		$	(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 12 - Common Stock

Treasury Stock Repurchase Program

Mid Penn adopted a treasury stock repurchase program (“Program”) initially effective March 19, 2020, and the buyback remains available as it was extended through March 19, 2023 by Mid Penn’s Board of Directors on March 23, 2022. The Program authorized 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.

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 second quarter of 2022, Mid Penn repurchased 103,912 shares of outstanding common stock at an average price of $26.88 under the Program. As of June 30, 2022, Mid Penn had repurchased 202,364 shares of common stock at an average price of $23.31 per share under the Program. The Program has $10,284,000 remaining available for repurchase.

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 six months ended June 30, 2022 compared to the three and six months ended June 30, 2021.

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 2,990,000 shares of common stock at a price of $25.00 per share, with the aggregate gross proceeds of the offering totaling $74,750,000 before underwriting discounts and offering expenses. The net proceeds of the offering, after deducting $4,512,000 of combined underwriting discounts and other 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 three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021.

MID PENN BANCORP, INC.

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 June 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, 83,574 shares were vested, and the remaining 75,890 shares were unvested. The Plan shares granted and vested resulted in $289,000 and $457,000 in share-based compensation expense for the three and six months ended June 30, 2022, respectively, and $173,000 and $305,000 of share-based compensation expense was recorded for the three and six months ended June 30, 2022, 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.

MID PENN BANCORP, INC.

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

The following is Management’s Discussion and Analysis of Consolidated Financial Condition as of June 30, 2022, compared to year-end 2021, and the Results of Operations for the three and six months ended June 30, 2022, compared to the same periods in 2021. For comparative purposes, the June 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;

•

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;

MID PENN BANCORP, INC.

•

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.

Critical Accounting Estimates

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

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

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

Certain intangible assets generated in connection with acquisitions are periodically assessed for impairment. Goodwill is tested annually for impairment, and if certain events occur which indicate goodwill might be impaired between annual tests, goodwill must be tested when such events occur. In making this assessment, Mid Penn considers a number of factors including operating results, business plans, economic projections, anticipated future cash flows, current market data, stock price, etc. Similarly, the amortized basis of the core deposit intangible asset is periodically assessed for impairment. There are inherent uncertainties related to these factors and Mid Penn’s judgment in applying them to the analysis of core deposit intangible, trade name intangible, and goodwill impairment. Changes in economic and operating conditions could result in goodwill, core deposit intangible, customer list intangible, or trade name intangible impairment in future periods.

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

See “Note 2 - Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements for additional information.

Riverview Acquisition

On November 30, 2021, Mid Penn announced the successful completion of the merger acquisition of Riverview Financial Corporation. 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.

COVID-19 Pandemic

The COVID-19 pandemic has caused substantial disruption in economic and social activity, both in the United States and abroad. While the overt impacts from the pandemic have diminished, there remains uncertainty concerning the breadth and duration of the disruptions and their impact on the U.S. economy. For example, the adverse economic effects of the pandemic may lead to an increase in credit risk on the Corporation’s commercial and residential loan portfolios. Additionally, management continues to monitor the fluctuations in the markets as it pertains to interest rates and the fair value of our investments and is actively monitoring the global situation on the Corporation’s financial condition, liquidity, capital position, operations, industry, and workforce. If the pandemic continues to cause significant negative impacts to economic conditions, Mid Penn’s results of operations, financial condition, capital position, or liquidity for fiscal year 2022 may be adversely impacted.

MID PENN BANCORP, INC.

Coronavirus Aid, Relief, and Economic Security Act

Mid Penn has been a significant participating lender under the Paycheck Protection Program (“PPP”), which was created when the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law on March 27, 2020 and concluded August 8, 2020. The PPP program was reinstated under the Consolidated Appropriations Act, 2021, which was signed into law on December 27, 2020 and concluded on May 31, 2021.

Results of Operations

Overview

Net income available to common shareholders was $12,252,000 or $0.77 per common share basic and diluted for the quarter ended June 30, 2022, compared to net income of $9,313,000 or $0.93 per common share basic and diluted for the quarter ended June 30, 2021. During the six months ended June 30, 2022, net income available to common shareholders was $23,606,000 or $1.48 per common share basic and diluted compared to net income of $18,925,000 or $2.02 per common share basic and diluted for the six months ended June 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 June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Return on average assets		1.10	%		1.12	%		1.04	%		1.15	%
Return on average equity		9.91	%		12.36	%		9.62	%		13.36	%

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.

MID PENN BANCORP, INC.

The following table includes average balances, amounts, and yields of interest income and rates of expense, interest rate spread, and net interest margin for the three months ended June 30, 2022 and 2021.


	Average Balances, Income and Interest Rates on a Taxable-Equivalent Basis
	For the Three Months Ended
(Dollars in thousands)	June 30, 2022									June 30, 2021
	Average						Yield/			Average						Yield/
	Balance		Interest				Rate			Balance		Interest				Rate
ASSETS:
Interest Bearing Balances	$	5,920	$	8				0.54	%	$	1,284	$	2				0.62	%
Investment Securities:
Taxable		501,631		2,740				2.19	%		93,161		430				1.85	%
Tax-Exempt		78,775		480		(a)		2.44	%		55,811		352		(a)		2.53	%
Total Securities		580,406		3,220				2.23	%		148,972		782				2.11	%

Federal Funds Sold		415,405		736				0.71	%		477,001		98				0.08	%
Loans and Leases, Net		3,129,334		34,354		(b)		4.40	%		2,609,803		29,908		(b)		4.60	%
Restricted Investment in Bank Stocks		4,854		94				7.77	%		6,865		86				5.02	%
Total Interest-earning Assets		4,135,919		38,412				3.73	%		3,243,925		30,876				3.82	%

Cash and Due from Banks		59,822									34,683
Other Assets		270,165									159,084
Total Assets	$	4,465,906								$	3,437,692

LIABILITIES & SHAREHOLDERS' EQUITY:
Interest-bearing Demand	$	1,030,237	$	462				0.18	%	$	614,435	$	579				0.38	%
Money Market		1,079,900		584				0.22	%		791,498		819				0.42	%
Savings		357,433		43				0.05	%		203,468		58				0.11	%
Time		516,346		930				0.72	%		432,739		1,460				1.35	%
Total Interest-bearing Deposits		2,983,916		2,019				0.27	%		2,042,140		2,916				0.57	%

Short-term Borrowings		—		—				0.00	%		264,661		232				0.35	%
Long-term Debt		9,238		107				4.65	%		74,976		204				1.09	%
Subordinated Debt		74,062		661				3.58	%		44,589		500				4.50	%
Total Interest-bearing Liabilities		3,067,216		2,787				0.36	%		2,426,366		3,852				0.64	%

Noninterest-bearing Demand		853,219									673,735
Other Liabilities		49,790									25,585
Shareholders' Equity		495,681									312,006
Total Liabilities & Shareholders' Equity	$	4,465,906								$	3,437,692

Net Interest Income (taxable-equivalent basis)			$	35,625								$	27,024
Taxable Equivalent Adjustment				(192	)								(147	)
Net Interest Income			$	35,433								$	26,877

Total Yield on Earning Assets								3.73	%								3.82	%
Rate on Supporting Liabilities								0.36	%								0.64	%
Average Interest Spread								3.36	%								3.18	%
Net Interest Margin								3.45	%								3.34	%

(a)

Includes TE adjustments (calculated using statutory rates of 21%) of $101,000 and $74,000 for the three months ended June 30, 2022 and 2021, respectively, resulting from tax-free municipal securities in the investment portfolio.

(b)

Includes TE adjustments (calculated using statutory rates of 21%) of $91,000 and $73,000 for the three months ended June 30, 2022 and 2021, respectively, resulting from tax-free municipal loans in the commercial loan portfolio.

MID PENN BANCORP, INC.

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 June 30, 2022 in comparison to the same period in 2021:

	Three months ended
	June 30, 2022 vs. June 30, 2021
(Dollars in thousands on a Taxable-Equivalent Basis)	Increase (decrease)
	Volume			Rate			Net
INTEREST INCOME:
Interest Bearing Balances	$	7		$	(1	)	$	6
Investment Securities:
Taxable		1,885			425			2,310
Tax-Exempt		145			(17	)		128
Total Securities		2,030			408			2,438

Federal Funds Sold		(13	)		651			638
Loans and Leases, Net		5,954			(1,508	)		4,446
Restricted Investment Bank Stocks		(25	)		33			8
Total Interest Income		7,953			(417	)		7,536

INTEREST EXPENSE:
Interest Bearing Deposits:
Interest Bearing Demand		392			(509	)		(117	)
Money Market		298			(533	)		(235	)
Savings		44			(59	)		(15	)
Time		282			(812	)		(530	)
Total Interest-Bearing Deposits		1,016			(1,913	)		(897	)

Short-term Borrowings		(232	)		—			(232	)
Long-term Debt		(179	)		82			(97	)
Subordinated Debt		330			(169	)		161
Total Interest Expense		935			(2,000	)		(1,065	)

NET INTEREST INCOME	$	7,018		$	1,583		$	8,601

Mid Penn’s TE net interest margin for the three months ended June 30, 2022 was 3.45% and compared to 3.34% for the three months ended June 30, 2021. TE net interest income was $35,625,000 for the three months ended June 30, 2022, an increase of $8,601,000, or 31.2%, compared to the three months ended June 30, 2021. Average interest earning assets increased $891,994,000, or 27.5%, compared to the second quarter of 2021, primarily as a result of the Riverview acquisition. This growth contributed $7,953,000 to the increase in TE net interest income and was partially offset by the lower yield on interest-earning assets, which decreased from 3.82% for the second quarter of 2021 to 3.73% for the second quarter of 2022. The lower yields on loans and leases, net were the result of a decrease of $3,457,000 in the recognition of PPP loan processing fees generated as a result of Mid Penn’s participation in the PPP compared to the second quarter 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. Mid Penn systematically added to its investment portfolio during the second quarter of 2022 to better utilize excess funds held in lower yielding accounts with the Federal Reserve, contributing to the growth in TE net interest income.

Interest expense decreased $1,065,000 during the second quarter of 2022 compared to the second quarter of 2021. The rate of interest-bearing liabilities decreased from 0.64% for the second quarter of 2021 to 0.36% for the second 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 $935,000 in interest expense due to the $640,850,000, or 26.4%, increase in interest-bearing liabilities compared to the same period of 2021.

MID PENN BANCORP, INC.

The following table includes average balances, amounts, and yields of interest income and rates of expense, interest rate spread, and net interest margin for the six months ended June 30, 2022 and 2021:


	Average Balances, Income and Interest Rates on a Taxable-Equivalent Basis
	For the Six Months Ended
(Dollars in thousands)	June 30, 2022									June 30, 2021
	Average						Yield/			Average						Yield/
	Balance		Interest				Rate			Balance		Interest				Rate
ASSETS:
Interest Bearing Balances	$	48,495	$	21				0.09	%	$	1,342	$	4				0.60	%
Investment Securities:
Taxable		445,644		4,561				2.06	%		85,849		815				1.91	%
Tax-Exempt		76,208		905		(a)		2.39	%		55,377		702		(a)		2.56	%
Total Securities		521,852		5,466				2.11	%		141,226		1,517				2.17	%

Federal Funds Sold		560,105		1,050				0.38	%		396,041		177				0.09	%
Loans and Leases, Net		3,116,473		69,477		(b)		4.50	%		2,571,075		58,314		(b)		4.57	%
Restricted Investment in Bank Stocks		6,590		225				6.89	%		6,958		181				5.25	%
Total Interest-earning Assets		4,253,515		76,239				3.61	%		3,116,642		60,193				3.89	%

Cash and Due from Banks		54,177									34,363
Other Assets		272,922									161,661
Total Assets	$	4,580,614								$	3,312,666

LIABILITIES & SHAREHOLDERS' EQUITY:
Interest-bearing Demand	$	1,037,915	$	923				0.18	%	$	608,259	$	1,157				0.38	%
Money Market		1,102,372		1,184				0.22	%		767,877		1,597				0.42	%
Savings		366,668		101				0.06	%		200,686		122				0.12	%
Time		554,378		2,105				0.77	%		423,259		3,006				1.43	%
Total Interest-bearing Deposits		3,061,333		4,313				0.28	%		2,000,081		5,882				0.59	%

Short-term Borrowings		-		-				0.00	%		234,258		406				0.35	%
Long-term Debt		42,513		391				1.85	%		75,019		408				1.10	%
Subordinated Debt		74,126		1,301				3.54	%		44,586		999				4.52	%
Total Interest-bearing Liabilities		3,177,972		6,005				0.38	%		2,353,944		7,695				0.66	%

Noninterest-bearing Demand		856,324									648,537
Other Liabilities		51,612									24,529
Shareholders' Equity		494,706									285,656
Total Liabilities & Shareholders' Equity	$	4,580,614								$	3,312,666

Net Interest Income (taxable-equivalent basis)			$	70,234								$	52,498
Taxable Equivalent Adjustment				(387	)								(296	)
Net Interest Income			$	69,847								$	52,202

Total Yield on Earning Assets								3.61	%								3.89	%
Rate on Supporting Liabilities								0.38	%								0.66	%
Average Interest Spread								3.23	%								3.24	%
Net Interest Margin								3.33	%								3.40	%

(a)

Includes TE adjustments (calculated using statutory rates of 21%) of $190,000 and $147,000 for the six months ended June 30, 2022 and 2021, respectively, resulting from tax-free municipal securities in the investment portfolio.

(b)

Includes TE adjustments (calculated using statutory rates of 21%) of $197,000 and $149,000 for the six months ended June 30, 2022 and 2021, respectively, resulting from tax-free municipal loans in the commercial loan portfolio.

MID PENN BANCORP, INC.

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 six months ended June 30, 2022 in comparison to the same period in 2021:

	Three months ended
	June 30, 2022 vs. June 30, 2021
(Dollars in thousands on a Taxable-Equivalent Basis)	Increase (decrease)
	Volume			Rate			Net
INTEREST INCOME:
Interest Bearing Balances	$	141		$	(124	)	$	17
Investment Securities:
Taxable		3,416			330			3,746
Tax-Exempt		264			(61	)		203
Total Securities		3,680			269			3,949

Federal Funds Sold		73			800			873
Loans and Leases, Net		12,370			(1,207	)		11,163
Restricted Investment Bank Stocks		(10	)		54			44
Total Interest Income		16,254			(208	)		16,046

INTEREST EXPENSE:
Interest Bearing Deposits:
Interest Bearing Demand		817			(1,051	)		(234	)
Money Market		696			(1,109	)		(413	)
Savings		101			(122	)		(21	)
Time		931			(1,832	)		(901	)
Total Interest-Bearing Deposits		2,545			(4,114	)		(1,569	)

Short-term Borrowings		(406	)		-			(406	)
Long-term Debt		(177	)		160			(17	)
Subordinated Debt		662			(360	)		302
Total Interest Expense		2,624			(4,314	)		(1,690	)

NET INTEREST INCOME	$	13,630		$	4,106		$	17,736

Mid Penn’s TE net interest margin for the six months ended June 30, 2022 was 3.33% and compared to 3.40% for the six months ended June 30, 2021. TE net interest income was $70,234,000 for the six months ended June 30, 2022, an increase of $17,736,000, or 33.8%, compared to $52,202,000 of TE net interest income for the six months ended June 30, 2021. Average interest-earning assets increased $1,136,873,000, or 36.5%, compared to the first half of 2021, primarily as a result of the Riverview acquisition. This growth contributed $16,254,000 to the increase in TE net interest income and was partially offset by the lower yield on interest-earning assets, which decreased from 3.89% for the first half of 2021 to 3.61% for the first half of 2022. The lower yields on loans and leases, net were the result of a decrease of $7,650,000 in the recognition of PPP loan processing fees generated as a result of Mid Penn’s participation in PPP compared to the first six months of 2021. Mid Penn systematically added to its investment portfolio during the first half of 2022 to better utilize excess funds held in lower yielding accounts with the Federal Reserve, contributing to the growth in TE net interest income.

Interest expense decreased $1,690,000 during the first six months of 2022 compared to the same period of 2021. The rate of interest-bearing liabilities decreased from 0.66% for the first six months of 2021 to 0.38% for the first six months 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. The decrease in interest expense as a result of the lower rate of interest-bearing liabilities was partially offset by an increase of $2,624,000 in interest expense as a result of a $640,850,000, or 26.4%, increase in interest-bearing liabilities compared to the same period of 2021.

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 Federal Open Market Committee (“FOMC”).

MID PENN BANCORP, INC.

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 six months of 2022, economic and external factor changes, and shifting collateral values from December 31, 2021 to June 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 $1,725,000 and $1,150,000 was recorded for the three months ended June 30, 2022 and 2021, respectively. During the six months ended June 30, 2022, the provision for the loan and lease losses was $2,225,000 compared to $2,150,000 for the six months ended June 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 $14,597,000 at December 31, 2021 to $16,876,000 at June 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 six months ended June 30, 2022.

Noninterest Income

For the three months ended June 30, 2022, noninterest income totaled $5,230,000, a decrease of $422,000 or 7.5%, compared to noninterest income of $5,652,000 for the same period in 2021. For the six months ended June 30, 2022, noninterest income totaled $10,980,000, an increase of $616,000 or 5.9%, compared to noninterest income of $10,364,000 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:

(Dollars in Thousands)	Three Months Ended June 30,
	2022		2021		$ Variance			% Variance
Mortgage banking income	$	305	$	2,841	$	(2,536	)		-89	%
Income from fiduciary and wealth management activities		1,205		542		663			122	%
Service charges on deposits		450		177		273			154	%
ATM debit card interchange income		1,128		656		472			72	%
Earnings from cash surrender value of life insurance		262		75		187			249	%
Other income		1,674		797		877			110	%

(Dollars in Thousands)	Six Months Ended June 30,
	2022		2021		$ Variance			% Variance
Mortgage banking income	$	834	$	5,220	$	(4,386	)		-84	%
Income from fiduciary and wealth management activities		2,257		1,098		1,159			106	%
Service charges on deposits		1,134		329		805			245	%
ATM debit card interchange income		2,185		1,224		961			79	%
Earnings from cash surrender value of life insurance		508		149		359			241	%
Net gain on sales of SBA loans		110		455		(345	)		-76	%
Other income		3,792		1,588		2,204			139	%

Mortgage banking income was $834,000 for the six months ended June 30, 2022, a decrease of $4,386,000, compared to the $5,220,000 of mortgage banking income for the six months ended June 30, 2021. Mortgage loan originations and secondary-market loan sales and gains slowed during the first half of 2022 as a result of increases in interest rates. During the first half of 2022, the FOMC announced three rate increases, and anticipates several additional increases throughout the remainder of 2022. 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 half of 2021.

Income from fiduciary and wealth management activities was $2,257,000 for the six months ended June 30, 2022, an increase of $1,159,000 compared to $1,098,000 during the six months ended June 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.

Service charges on deposits were $1,134,000 for the six months ended June 30, 2022, an increase of $805,000, compared to $329,000 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.

MID PENN BANCORP, INC.

ATM debit card interchange income was $2,185,000 for the six months ended June 30, 2022, an increase of $961,000 compared to the six months ended June 30, 2021. The additional income is a result of an increased volume of checking accounts 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.

Earnings from cash surrender value of life insurance was $508,000 for the six months ended June 30, 2022, an increase of $359,000, compared to $149,000 for the same period of 2021. The increase is a result of additional policies assumed in the Riverview acquisition.

Other income was $3,792,000 for the six months ended June 30, 2022, an increase of $2,204,000, compared to $1,588,000 during the six months ended June 30, 2021. A mortgage hedging program was established in the latter half of 2021, generating $1,134,000 in mortgage hedging gains for the six months ended June 30, 2022, while no similar gains were recognized during the same six months of the prior year. Mid Penn also reflected increases in other miscellaneous income amounts as a result of the Riverview acquisition.

Noninterest Expense

For the three months ended June 30, 2022, noninterest expense totaled $23,915,000, an increase of $4,459,000, or 22.9%, compared to noninterest expense of $19,456,000 for the same period in 2021. For the six months ended June 30, 2022, noninterest expense totaled $49,660,000, an increase of $12,646,000, or 34.2%, compared to noninterest expense of $37,014,000 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:

(Dollars in Thousands)	Three Months Ended June 30,
	2022		2021		$ Variance			% Variance
Salaries and employee benefits	$	12,340	$	9,933	$	2,407			24	%
Occupancy expense, net		1,655		1,317		338			26	%
Equipment expense		1,112		741		371			50	%
Software licensing and utilization		1,821		1,497		324			22	%
FDIC Assessment		506		433		73			17	%
Legal and professional fees		694		555		139			25	%
Charitable contributions qualifying for State tax credits		125		365		(240	)		-66	%
Mortgage banking profit-sharing expense		33		745		(712	)		-96	%
Intangible amortization		521		276		245			89	%
Merger and acquisition expense		—		522		(522	)		-100	%
Other expenses		5,123		3,091		2,032			66	%

(Dollars in Thousands)	Six Months Ended June 30,
	2022		2021		$ Variance			% Variance
Salaries and employee benefits	$	25,584	$	19,531	$	6,053			31	%
Occupancy expense, net		3,454		2,797		657			23	%
Equipment expense		2,123		1,492		631			42	%
Software licensing and utilization		3,927		2,942		985			33	%
FDIC Assessment		1,097		903		194			21	%
Legal and professional fees		1,333		981		352			36	%
Charitable contributions qualifying for State tax credits		190		635		(445	)		-70	%
Mortgage banking profit-sharing expense		178		865		(687	)		-79	%
Intangible amortization		1,002		557		445			80	%
Merger and acquisition expense		—		522		(522	)		-100	%
Post-acquisition restructuring expenses		329		—		329			100	%
Other expenses		10,474		5,808		4,666			80	%

Salaries and employee benefits were $25,584,000 for the six months ended June 30, 2022, an increase of $6,053,000 versus the same period in 2021, with the increase attributable to (i) the retail staff additions at the seven retail locations added through the Riverview acquisition; (ii) the retention of various Riverview team members through the completion of the systems integration, which occurred on March 4, 2022; and (iii) the addition of wealth management professionals, commercial lending professionals, and other staff additions in alignment with Mid Penn’s core banking and nonbanking growth initiatives.

Occupancy expenses increased $657,000 during the first six months of 2022 compared to the same period in 2021. Similarly, equipment expense increased $631,000 during the six months ended June 30, 2022, compared to the six months ended June 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.

MID PENN BANCORP, INC.

Software licensing and utilization costs were $3,927,000 for the six months ended June 30, 2022, an increase of $985,000 compared to $2,942,000 for the six months ended June 30, 2021. The increase is a result of additional costs to license (i) the additional Riverview branches, (ii) 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 (iii) increases in certain core processing fees as our customer base and transaction volume continue to grow.

FDIC assessment expense was $1,097,000 for the six months ended June 30, 2022, an increase of $194,000 compared to $903,000 for the six months ended June 30, 2021. As a result of the Riverview acquisition and organic growth, the increased FDIC assessment aligns with the year-over-year growth of the average assets of the Bank on which the assessment is based.

Legal and professional fees were $1,333,000 for the six months ended June 30, 2022, an increase of $352,000 compared to $981,000 for the six months ended June 30, 2021, with this increase being attributable to consulting expenses related to personnel arrangements facilitating the assimilation of Riverview. Additionally, fees were incurred for expanded loan review coverage and software consulting services in the compliance area.

Charitable contributions qualifying for state tax credits were $190,000 for the six months ended June 30, 2022, compared to $635,000 for the same six-month period during 2021. Mid Penn continues to maximize the amount of contributions qualifying for state credits that can be made during 2022 and makes qualifying contributions, as allowable.

Intangible amortization increased from $557,000 during the first half of 2021 to $1,002,000 during the first half of 2022 as a result of the customer list and core deposit intangible assets added from the Riverview acquisition.

Merger and acquisition expenses were $522,000 during the first half of 2021 prior to the completion of the Riverview acquisition. During the first six months of 2022, post-acquisition restructuring expenses were $329,000 and primarily consisted of contract termination fees related to the Riverview acquisition.

Other expenses increased $4,666,000 from $5,808,000 during the six months ended June 30, 2021, to $10,474,000 for the same period in 2022. Several categories within other expense experienced increases as a result of the Riverview acquisition and organic growth, including Pennsylvania Bank Shares taxes, marketing, telephone, postage, courier, ATM and card processing, payroll processing, employee travel costs, and director fees. In addition, the six months ended June 30, 2022, contained an impaired asset write-off of $664,000, representing the disposal of certain fixed assets and leasehold improvements from Riverview offices not being retained.

Income Taxes

The provision for income taxes was $5,336,000 during the six months ended June 30, 2022, compared to $4,477,000 of income tax provision recorded for the same period in 2021. The provision for income taxes for the six months ended June 30, 2022, reflects a combined Federal and State effective tax rate of 18.4% compared to 19.1% for the six months ended June 30, 2021. The decrease in the effective tax rate reflects (i) higher 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 (ii) 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 $4,310,163,000 as of June 30, 2022, reflecting a decrease of $379,262,000, or 8.1%, compared to total assets of $4,689,425,000 as of December 31, 2021. Included in total assets as of June 30, 2022 are $4,966,000 of PPP loans, net of deferred fees. Comparatively, as of December 31, 2021, Mid Penn had $111,286,000 of PPP loans outstanding, net of deferred fees.

Total loans and leases, net of unearned interest totaled $3,180,033,000 as of June 30, 2022, an increase of $75,637,000, or 2.4% 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 $3,175,067,000 as of June 30, 2022, an increase of $181,957,000, or 6.1% 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 June 30, 2021 through June 30, 2022.

Total deposits decreased $299,429,000 or 7.5%, from $4,002,016,000 on December 31, 2021, to $3,702,587,000 at June 30, 2022. The decrease in total deposits since December 31, 2021 was attributable to the maturity of certificates of deposit, which have renewed into lower rates, migrated to other deposit or retail investment products, or exited the Bank.

MID PENN BANCORP, INC.

Loans and Leases, net of unearned interest

Total loans and leases, net of unearned interest as of June 30, 2022 were $3,180,033,000 compared to $3,104,396,000 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.

(Dollars in thousands)	June 30, 2022					December 31, 2021
	Amount		%			Amount		%
Commercial and industrial	$	549,881		17.3	%	$	619,562		20.0	%
Commercial real estate		1,825,944		57.5	%		1,668,142		53.7	%
Commercial real estate - construction		376,117		11.8	%		372,734		12.0	%
Residential mortgage		300,336		9.4	%		323,223		10.4	%
Home equity		118,479		3.7	%		110,306		3.6	%
Consumer		9,276		0.3	%		10,429		0.5	%
	$	3,180,033		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, both those disbursed in 2020 and those disbursed in 2021, 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 $4,966,000 balance of PPP loans outstanding, net of deferred fees as of June 30, 2022.

For the six months ended June 30, 2022, Mid Penn had net recoveries of $54,000 compared to net loan charge-offs of $816,000 during the same period 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.

Changes in the allowance for the three and six months ended June 30, 2022 and 2021 are summarized as follows:

(Dollars in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Balance, beginning of period	$	15,147		$	13,591		$	14,597		$	13,382

Loans charged off during period		(9	)		(39	)		(66	)		(905	)
Recoveries of loans previously charged off		13			14			120			89
Net recoveries (charge-offs)		4			(25	)		54			(816	)

Provision for loan and lease losses		1,725			1,150			2,225			2,150
Balance, end of period	$	16,876		$	14,716		$	16,876		$	14,716

Ratio of net loan (recoveries) charge-offs to average loans outstanding (annualized)		-0.001	%		0.004	%		-0.003	%		0.060	%

Ratio of allowance for loan losses to net loans at end of period		0.53	%		0.59	%		0.53	%		0.59	%

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 monitor closely 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.

MID PENN BANCORP, INC.

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

(Dollars in thousands)
	June 30, 2022			December 31, 2021			June 30, 2021
Nonperforming Assets:
Nonaccrual loans	$	7,551		$	9,547		$	8,233
Accruing troubled debt restructured loans		422			435			449
Total nonperforming loans		7,973			9,982			8,682

Foreclosed real estate		69			-			11
Total non-performing assets		8,042			9,982			8,693

Accruing loans 90 days or more past due		—			515			—
Total risk elements	$	8,042		$	10,497		$	8,693

Nonperforming loans as a % of total
loans outstanding		0.25	%		0.32	%		0.35	%

Nonperforming assets as a % of total
loans outstanding and other real estate		0.25	%		0.32	%		0.35	%

Ratio of allowance for loan losses
to nonperforming loans		211.66	%		146.23	%		169.50	%

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

Total nonperforming assets were $8,042,000 at June 30, 2022, a decrease compared to nonperforming assets of $10,497,000 and $8,693,000 at December 31, 2021 and at June 30, 2021, respectively. 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 $2,278,000 during the first quarter of 2022. The nonperforming assets included acquired impaired loans assumed in the Riverview transaction of $3,289,000 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 $2,278,000. As of June 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 0.25% of the total of loans plus other real estate assets as of June 30, 2022, a favorable reduction compared to 0.32% and 0.35% at December 31, 2021 and June 30, 2021, respectively. Loan loss reserves as a percentage of nonperforming loans increased to 211.66% at June 30, 2022, compared to 146.23% and 169.5% at December 31, 2021 and June 30, 2021, respectively.

The contractual outstanding principal balance of one commercial real estate-construction loan relationship accounts for $1,221,000 of the nonperforming loan balance as of June 30, 2022. This loan was acquired in the Riverview transaction 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 been currently 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.

MID PENN BANCORP, INC.

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

(Dollars in thousands)
	June 30, 2022			December 31, 2021
Period ending total loans outstanding	$	3,180,033		$	3,104,396
Allowance for loan and lease losses		16,876			14,597
Total nonperforming loans		7,973			9,982
Nonperforming and impaired loans with partial charge-offs		129			107

Ratio of nonperforming loans with partial charge-offs
to total loans		0.004	%		0.000	%

Ratio of nonperforming loans with partial charge-offs
to total nonperforming loans		1.62	%		1.07	%

Coverage ratio net of nonperforming loans with
partial charge-offs		215.15	%		147.82	%

Ratio of total allowance to total loans less
nonperforming loans with partial charge-offs		0.53	%		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.

MID PENN BANCORP, INC.

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

For impaired loans with no valuation allowance required, Mid Penn’s practice of obtaining independent third-party 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 had loans with an aggregate balance of $8,726,000 which were deemed by management to be impaired at June 30, 2022, including $4,700,000 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 $4,026,000 of impaired loan relationships excluding the loans acquired with credit deterioration, $507,000 were commercial and industrial relationships, $2,106,000 were commercial real estate relationships, $99,000 were home equity relationships, and $1,314,000 were residential relationships. There were specific loan loss reserve allocations of $892,000 against $1,469,000 of commercial real estate loan relationships and $118,000 of specific loan loss reserve allocations against $507,000 of commercial and industrial 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 unknown impacts of the persisting COVID-19 pandemic and inflationary environment. Any or

MID PENN BANCORP, INC.

all of these additional issues can adversely affect our borrowers’ ability to timely repay their loans. Additionally, we have experienced continued strong commercial loan growth, including growth in newer markets where we have less of a loss history. Also, the unallocated component allocation recognizes the inherent imprecision in our allowance for loan and lease loss methodology, or any alternative methodology, for estimating specific and general loan losses, including the unpredictable timing and amounts of charge-offs, the fact that historical loss averages don’t necessarily correlate to future loss trends, and unexpected changes to specific-credit or general portfolio future cash flows and collateral values which could negatively impact unimpaired portfolio loss factors. 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 $16,876,000 is adequate as of June 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 six months of 2022 provided $19,441,000 of cash mainly due to net income, partially offset by other operating activities. Cash used in investing activities during the first six months of 2022 was $311,911,000, mainly the result of purchases of investment securities and the net increase in loans and leases. Cash used in financing activities during the first six months of 2022 totaled $384,496,000 primarily the result of a decrease in net deposits and long-term debt repayment.

Subordinated Debt

Subordinated Debt Assumed November 2021 with the Riverview Acquisition

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 $5,155,000 of floating rate trust preferred securities as part of a pooled offering of such securities. The interest rate prior to Riverview entering into a fixed interest rate swap in 2020 adjusted quarterly to the three-month LIBOR rate plus 2.95%. 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 2008 at a price of 100% of face value. The subordinated debentures must be redeemed no later than 2033.

MID PENN BANCORP, INC.

Similarly, in 2005, a trust formed by CBT issued $4,124,000 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.

Subordinated Debt Issued December 2020

On December 22, 2020, Mid Penn Bancorp, Inc. entered into agreements for and sold, at 100% of their principal amount, an aggregate of $12,150,000 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.

Subordinated Debt Issued March 2020

Subordinated Debt Issued December 2017

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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.

Subordinated Debt Issued December 2015

The 2015 Notes paid interest at a rate of 5.15% per year for the first five years outstanding, including the three months ended June 30, 2020. Beginning January 1, 2021, the 2015 Notes bear 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 will at no time be less than 4.0%. Interest is 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 will mature on December 9, 2025 and are redeemable in whole or in part, without premium or penalty, at any time on or after December 9, 2020, and prior to December 9, 2025. Additionally, Mid Penn may redeem the 2015 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 2015 Notes for U.S. federal income tax purposes; (ii) an event occurs that precludes the 2015 Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) Mid Penn becomes required to register as an investment company under the Investment Company Act of 1940, as amended, in each case at 100% of the principal amount of the 2015 Notes, plus accrued and unpaid interest thereon to but excluding the date of redemption.

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.

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

Under the new 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.

MID PENN BANCORP, INC.

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

Capital Resources

Shareholders' equity, or capital, is evaluated in relation to total assets and the risk associated with those assets, 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 $5,759,000, or 1.2%, from $490,076,000 as of December 31, 2021 to $495,832,000 as of June 30, 2022, primarily due to earnings of $23,606,000 partially offset by a decrease in the carrying value of the available-for-sale investment portfolio of $9,917,000, dividends declared of $6,384,000 and stock repurchases of $2,181,000. 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 three and six months ended June 30, 2022 compared to the three and six months ended June 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 June 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.

Mid Penn and Mid Penn Bank maintained the following regulatory capital levels, leverage ratios, and risk-based capital ratios as of June 30, 2022 and December 31, 2021:

	Capital Adequacy
											To Be Well-Capitalized
(Dollars in thousands)						Minimum for					Under Prompt
						Basel III Capital					Corrective
	Actual					Adequacy (a)					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Mid Penn Bancorp, Inc.
As of June 30, 2022:
Tier 1 Capital (to Average Assets)	$	392,961		9.0	%	$	174,184		4.0	%	N/A		N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)		383,682		11.5	%		233,414		7.0	%	N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)		392,961		11.8	%		283,431		8.5	%	N/A		N/A
Total Capital (to Risk Weighted Assets)		471,627		14.1	%		350,121		10.5	%	N/A		N/A

Mid Penn Bank
As of June 30, 2022:
Tier 1 Capital (to Average Assets)	$	427,342		9.8	%	$	174,048		4.0	%	$	217,560		5.0	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		427,342		12.8	%		233,130		7.0	%		216,478		6.5	%
Tier 1 Capital (to Risk Weighted Assets)		427,342		12.8	%		283,086		8.5	%		266,434		8.0	%
Total Capital (to Risk Weighted Assets)		444,292		13.3	%		349,695		10.5	%		333,043		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	%

(a)

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

MID PENN BANCORP, INC.

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% 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)	June 30,			December 31,			June 30,
	2022			2021			2021
Loans and leases, net of unearned interest	$	3,180,033		$	3,104,396		$	2,495,192
Less: PPP loans, net of deferred fees		4,966			111,286			391,826
Core banking loans	$	3,175,067		$	2,993,110		$	2,103,366

Allowance for loan and lease losses	$	16,876		$	14,597		$	14,716

Ratio of allowance for loan and lease losses to net loans at end of period		0.53	%		0.47	%		0.59	%

Ratio of allowance for loan and lease losses to non-PPP core banking loans at end of period		0.53	%		0.49	%		0.70	%

MID PENN BANCORP, INC.

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.

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 June 30, 2022, all interest rate risk levels according to the model were within the tolerance limits of the Board-approved policy.

	% Change in
Change in	Net Interest	Policy
Basis Points	Income	Risk Limit
400	19.63%	≥ -30%
300	15.96%	≥ -25%
200	11.14%	≥ -20%
100	5.57%	≥ -15%
(100)	-5.96%	≥ -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 June 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 six months ended June 30, 2022.

MID PENN BANCORP, INC.

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 six months ended June 30, 2022. There are no material changes to such risk factors.

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

(a)

None.

(b)

None.

							Approximate Dollar
					Total Number of Shares		Value of Shares That
	Total Number		Average		Purchased as Part of		May Yet Be
	of Shares		Price		Publicly Announced		Purchased Under
Period	Purchased		Per Share		Plans or Programs		the Plans or Programs
April 1 - April 30, 2022		—	$	—		—	$	13,077,211
May 1 - May 31, 2022		40,600	$	26.39		40,600	$	12,005,777
June 1 - June 30, 2022		63,312	$	27.20		63,312	$	10,283,691

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.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 – MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5 – OTHER INFORMATION

None

MID PENN BANCORP, INC.

ITEM 6 – EXHIBITS

•

Exhibit 3(i) – The Registrant’s amended Articles of Incorporation (Incorporated by reference to Exhibit 3(i) to Registrant’s Quarterly Report on Form 10-Q filed for the quarterly period ended June 30, 2019).

•

Exhibit 3(ii) – The Registrant’s By-laws (Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed with the SEC on February 24, 2020.)

•

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)

MID PENN BANCORP, INC.

SIGNATURES

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

		Mid Penn Bancorp, Inc. (Registrant)

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

Date:		August 5, 2022



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

Date:		August 5, 2022