MID PENN BANCORP INCMPB
MID PENN BANCORP INC Fair Value Disclosure
Fair Value Measurement
Mid Penn uses estimates of fair value in applying various accounting standards to its consolidated financial statements on either a recurring or nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. Mid Penn groups its assets and liabilities measured at fair value in three hierarchy levels, based on the observability and transparency of the inputs. The fair value hierarchy is as follows:
Level 1 - Inputs that represent quoted prices for identical instruments in active markets.
Level 2 - Inputs that represent quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 - Inputs that are largely unobservable, as little or no market data exists for the instrument being valued.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.
There were no transfers of assets between fair value Level 1 and Level 2 of the fair value hierarchy during the years ended December 31, 2025 and 2024.
The following tables illustrate the assets and liabilities measured at fair value on a recurring basis and reported on the Consolidated Balance Sheets:
| December 31, 2025 | ||||||||||||||||||||||||||
| (In thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Available-for-sale securities: | ||||||||||||||||||||||||||
| U.S. Treasury and U.S. government agencies | $ | — | $ | 19,066 | $ | — | $ | 19,066 | ||||||||||||||||||
| Mortgage-backed U.S. government agencies | — | 353,397 | — | 353,397 | ||||||||||||||||||||||
| State and political subdivision obligations | — | 3,834 | — | 3,834 | ||||||||||||||||||||||
| Corporate debt securities | — | 40,017 | — | 40,017 | ||||||||||||||||||||||
| Equity securities | 5,446 | — | — | 5,446 | ||||||||||||||||||||||
| Loans held-for-sale | — | 3,668 | — | 3,668 | ||||||||||||||||||||||
| Other assets: | ||||||||||||||||||||||||||
| — | 9,007 | — | 9,007 | |||||||||||||||||||||||
| Other liabilities: | ||||||||||||||||||||||||||
| — | 8,796 | — | 8,796 | |||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| (In thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Available-for-sale securities: | ||||||||||||||||||||||||||
| U.S. Treasury and U.S. government agencies | $ | — | $ | 21,507 | $ | — | $ | 21,507 | ||||||||||||||||||
| Mortgage-backed U.S. government agencies | — | 202,944 | — | 202,944 | ||||||||||||||||||||||
| State and political subdivision obligations | — | 3,596 | — | 3,596 | ||||||||||||||||||||||
| Corporate debt securities | — | 32,430 | — | 32,430 | ||||||||||||||||||||||
| Equity securities | 428 | — | — | 428 | ||||||||||||||||||||||
| Loans held-for-sale | — | 7,064 | — | 7,064 | ||||||||||||||||||||||
| Other assets: | ||||||||||||||||||||||||||
| — | 13,708 | — | 13,708 | |||||||||||||||||||||||
| Other liabilities: | ||||||||||||||||||||||||||
| — | 11,118 | — | 11,118 | |||||||||||||||||||||||
The valuation methodologies and assumptions used to estimate the fair value for the items in the preceding tables are as follows:
Available-for-sale investment securities - The fair value of equity and debt securities classified as available-for-sale is determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1) or matrix pricing (Level 2). Matrix pricing is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather, relying on the securities’ relationship to other benchmark quoted prices.
Equity securities - The fair value of equity securities with readily determinable fair values is recorded on the Consolidated Balance Sheet, with realized and unrealized gains and losses reported in other expense on the Consolidated Statements of Income.
Loans held-for-sale - This category includes mortgage loans held-for-sale that are measured at fair value on a recurring basis. Fair values as of December 31, 2025 were measured as the price that secondary market investors were offering for loans with similar characteristics.
Derivative instruments - Interest rate swaps are measured by alternative pricing sources with reasonable levels of price transparency in markets that are not active. Based on the complex nature of interest rate swap agreements, the markets these instruments trade in are not as active or liquid as those for more mature Level 1 markets. These markets do, however, have comparable, observable inputs in which an alternative pricing source values these assets to arrive at a fair market value. These characteristics classify interest rate swap agreements as Level 2.
Mortgage banking derivatives - represent the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors and the fair value of interest rate swaps. The fair values of Mid Penn's interest rate locks, forward commitments and interest rate swaps represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date. These characteristics classify mortgage banking derivatives as Level 2. See "Note 12 - Derivative Financial Instruments," for additional information.
Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis. These instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (for example, upon acquisition or when there is evidence of impairment).
The following table illustrates financial instruments measured at fair value on a nonrecurring basis:
| December 31, 2025 | ||||||||||||||||||||||||||
| (In thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Individually evaluated loans, net of ACL | $ | — | $ | — | $ | 20,903 | $ | 20,903 | ||||||||||||||||||
| Foreclosed assets held-for-sale | — | — | 7,806 | 7,806 | ||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| (In thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Individually evaluated loans, net of ACL | $ | — | $ | — | $ | 21,171 | $ | 21,171 | ||||||||||||||||||
| Foreclosed assets held-for-sale | — | — | 44 | 44 | ||||||||||||||||||||||
Net loans - This category consists of loans that were individually evaluated for credit losses, net of the related ACL, and have been classified as Level 3 assets. All of Mid Penn’s individually evaluated loans for 2025 and 2024, whether reporting a specific allowance allocation or not, are considered collateral-dependent. Mid Penn utilized Level 3 inputs such as independent appraisals of the underlying collateral, which generally includes Level 3 inputs which are not observable. Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated liquidation expenses.
Foreclosed assets held-for-sale - Values are based on appraisals that consider the sales prices of property in the proximate vicinity.
The following table presents additional information about the valuation techniques for level 3 assets measured at fair value on a nonrecurring basis:
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| (In thousands) | Fair Value | Valuation Technique | Significant Unobservable Input | Range of Inputs | Weighted Average | |||||||||||||||||||||||||||||||||
| Individually evaluated loans, net of ACL | $ | 20,903 | Appraisal of collateral | Appraisal adjustments | 8% | - | 100% | 44.9% | ||||||||||||||||||||||||||||||
| Foreclosed assets held-for-sale | 7,806 | Appraisal of collateral | Appraisal adjustments | 23% | - | 100% | 39.8% | |||||||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| (In thousands) | Fair Value | Valuation Technique | Significant Unobservable Input | Range of Inputs | Weighted Average | |||||||||||||||||||||||||||||||||
| Individually evaluated loans, net of ACL | $ | 21,171 | Appraisal of collateral | Appraisal adjustments | 0% | - | 100% | 5.6% | ||||||||||||||||||||||||||||||
| Foreclosed assets held-for-sale | 44 | Appraisal of collateral | Appraisal adjustments | 26% | - | 26% | 26.0% | |||||||||||||||||||||||||||||||
The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of Mid Penn’s financial instruments:
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Estimated Fair Value | ||||||||||||||||||||||||||||||||
| (In thousands) | Carrying Amount | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||
| Financial instruments - assets | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 98,918 | $ | 98,918 | $ | — | $ | — | $ | 98,918 | ||||||||||||||||||||||
| Available-for-sale securities | 416,314 | — | 416,314 | — | 416,314 | |||||||||||||||||||||||||||
| Held-to-maturity securities | 347,285 | — | 321,702 | — | 321,702 | |||||||||||||||||||||||||||
| Equity securities | 5,446 | 5,446 | — | — | 5,446 | |||||||||||||||||||||||||||
| Loans held-for-sale | 3,668 | — | 3,668 | — | 3,668 | |||||||||||||||||||||||||||
| Net loans | 4,826,747 | — | — | 4,866,731 | 4,866,731 | |||||||||||||||||||||||||||
| Restricted investment in bank stocks | 7,576 | 7,576 | — | 7,576 | ||||||||||||||||||||||||||||
| Accrued interest receivable | 29,640 | 29,640 | — | — | 29,640 | |||||||||||||||||||||||||||
| Derivative assets | 9,007 | — | 9,007 | — | 9,007 | |||||||||||||||||||||||||||
| Financial instruments - liabilities | ||||||||||||||||||||||||||||||||
| Deposits | $ | 5,214,663 | $ | — | $ | 5,218,656 | $ | — | $ | 5,218,656 | ||||||||||||||||||||||
| Short-term borrowings | 20,833 | — | 20,833 | — | 20,833 | |||||||||||||||||||||||||||
Long-term debt (1) | 20,222 | — | 20,223 | — | 20,223 | |||||||||||||||||||||||||||
| Accrued interest payable | 10,942 | 10,942 | — | — | 10,942 | |||||||||||||||||||||||||||
| Derivative liabilities | 8,796 | — | 8,796 | — | 8,796 | |||||||||||||||||||||||||||
(1) Long-term debt excludes finance lease obligations.
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Estimated Fair Value | ||||||||||||||||||||||||||||||||
| (In thousands) | Carrying Amount | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||
| Financial instruments - assets | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 70,564 | $ | 70,564 | $ | — | $ | — | $ | 70,564 | ||||||||||||||||||||||
| Available-for-sale securities | 260,477 | — | 260,477 | — | 260,477 | |||||||||||||||||||||||||||
| Held-to-maturity securities | 382,447 | — | 340,648 | — | 340,648 | |||||||||||||||||||||||||||
| Equity securities | 428 | 428 | — | — | 428 | |||||||||||||||||||||||||||
| Loans held-for-sale | 7,064 | — | 7,064 | — | 7,064 | |||||||||||||||||||||||||||
| Net loans | 4,407,556 | — | — | 4,430,623 | 4,430,623 | |||||||||||||||||||||||||||
| Restricted investment in bank stocks | 7,461 | 7,461 | — | 7,461 | ||||||||||||||||||||||||||||
| Accrued interest receivable | 26,846 | 26,846 | — | — | 26,846 | |||||||||||||||||||||||||||
| Derivative assets | 13,708 | — | 13,708 | — | 13,708 | |||||||||||||||||||||||||||
| Financial instruments - liabilities | ||||||||||||||||||||||||||||||||
| Deposits | $ | 4,689,927 | $ | — | $ | 4,684,548 | $ | — | $ | 4,684,548 | ||||||||||||||||||||||
| Short-term borrowings | 2,000 | — | 2,000 | — | 2,000 | |||||||||||||||||||||||||||
Long-term debt (1) | 20,540 | — | 19,120 | — | 19,120 | |||||||||||||||||||||||||||
| Subordinated debt | 45,741 | — | 42,811 | — | 42,811 | |||||||||||||||||||||||||||
| Accrued interest payable | 13,484 | 13,484 | — | — | 13,484 | |||||||||||||||||||||||||||
| Derivative liabilities | 11,118 | — | 11,118 | — | 11,118 | |||||||||||||||||||||||||||
(1) Long-term debt excludes finance lease obligations
The Bank’s outstanding and unfunded credit commitments and financial standby letters of credit were deemed to have no significant fair value as of December 31, 2025 and 2024.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
| 2023 | Mar 28, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 15, 2022 | |
| 2020 | Mar 15, 2021 | |
| 2019 | Mar 13, 2020 | |
| 2018 | Mar 19, 2019 | |
| 2017 | Mar 13, 2018 | |
| 2016 | Mar 23, 2017 | |
| 2015 | Mar 17, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.