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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
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)
Pennsylvania25-1666413
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1.00 par value per shareMPBThe 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    x    No    o


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    x    No    o


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated FilerxEmerging Growth Companyo
Non-accelerated FileroSmaller Reporting Companyo

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.  o


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

As of May 1, 2024, the registrant had 16,689,304 shares of common stock outstanding, par value $1.00 per share.

1

FORM 10-Q
TABLE OF CONTENTS
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.
2


GLOSSARY OF DEFINED ACRONYMS AND TERMS
2014 Plan2014 Restricted Stock Plan
2023 Annual ReportCorporation's Annual Report on Form 10-K for the year ended December 31, 2023
2023 Plan2023 Stock Incentive Plan
ACLAllowance for Credit Losses
AFSAvailable for Sale
AOCIAccumulated Other Comprehensive Income
ASCAccounting Standards Codification
ASUAccounting Standards Update
the BankMid Penn Bank
Bank MergerMerger of Brunswick Bank with and into Mid Penn Bank
BOLIBank Owned Life Insurance
bp or bpsbasis point(s)
BrunswickBrunswick Bancorp
Brunswick AcquisitionMerger acquisition of Brunswick
Brunswick BankBrunswick Bank & Trust Company
CECLCurrent Expected Credit Losses
DCFDiscounted Cash Flow
DIFFDIC’s Deposit Insurance Fund
DRIPDividend Reinvestment Plan
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
FHLBFederal Home Loan Bank of Pittsburgh
FICOthe Financing Corporation
FOMCFederal Open Market Committee
FTEFully taxable-equivalent
HFSHeld for Sale
HTMHeld to Maturity
LGDLoss Given Default
LHFILoans held for investment
LIHTCLow-Income Housing Tax Credits
LoansLoans, net of unearned interest
Management DiscussionManagement's Discussion and Analysis of Financial Condition and Results of Operations
MergerMerger of Brunswick with and into Mid Penn
Merger AgreementAgreement and Plan of Merger between Mid Penn and Brunswick
Mid Penn or the CorporationMid Penn Bancorp, Inc.
N/MNot meaningful - (percentage changes greater than +/- 150% not considered meaningful)
OBSOff-Balance Sheet
OCIOther Comprehensive Income
PCDPurchased Credit Deteriorated
PCL
Provision for Credit Losses
PDProbability of Default
RiverviewRiverview Financial Corporation
Riverview AcquisitionMerger acquisition of Riverview
ROAReturn on Assets
ROEReturn on Equity
SBASmall Business Association
SECSecurities Exchange Commission
SOFRSecured Overnight Financing Rate
3

MID PENN BANCORP, INC.



PART 1 – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except per share data)March 31, 2024December 31, 2023
ASSETS
Cash and due from banks$33,362 $45,435 
Interest-bearing balances with other financial institutions31,801 34,668 
Federal funds sold2,922 16,660 
Total cash and cash equivalents68,085 96,763 
Investment securities:
HTM, at amortized cost (fair value $351,204 and $357,521)
396,998 399,128 
AFS, at fair value217,632 223,555 
Equity securities available for sale, at fair value431 438 
Loans held for sale, at fair value4,581 3,855 
Loans, net of unearned interest4,317,449 4,252,792 
Less: ACL - Loans(33,524)(34,187)
Net loans 4,283,925 4,218,605 
Premises and equipment, net36,068 36,909 
Operating lease right of use asset8,414 8,953 
Finance lease right of use asset2,683 2,727 
Cash surrender value of life insurance52,997 54,497 
Restricted investment in bank stocks17,446 16,768 
Accrued interest receivable26,975 25,820 
Deferred income taxes22,894 24,146 
Goodwill127,031 127,031 
Core deposit and other intangibles, net6,051 6,479 
Foreclosed assets held for sale5,110 293 
Other assets53,058 44,825 
Total Assets$5,330,379 $5,290,792 
LIABILITIES & SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand$807,861 $801,312 
Interest-bearing transaction accounts2,082,846 2,086,450 
Time1,488,398 1,458,450 
Total Deposits4,379,105 4,346,212 
Short-term borrowings271,849 241,532 
Long-term debt23,941 59,003 
Subordinated debt46,201 46,354 
Operating lease liability8,683 9,285 
Accrued interest payable16,330 14,257 
Other liabilities33,302 31,799 
Total Liabilities4,779,411 4,748,442 
Shareholders' Equity:
Common stock, par value $1.00 per share; 40,000,000 shares authorized at March 31, 2024 and December 31, 2023; 17,006,359 issued at March 31, 2024 and 16,998,929 at December 31, 2023; 16,565,637 outstanding at March 31, 2024 and 16,573,707 at December 31, 2023
17,006 16,999 
Additional paid-in capital406,150 405,725 
Retained earnings154,801 145,982 
Accumulated other comprehensive loss(16,947)(16,637)
Treasury stock, at cost; 440,722 shares at March 31, 2024 and 425,222 shares at December 31, 2023
(10,042)(9,719)
Total Shareholders’ Equity550,968 542,350 
Total Liabilities and Shareholders' Equity$5,330,379 $5,290,792 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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MID PENN BANCORP, INC.



CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
March 31,
(In thousands, except per share data)20242023
INTEREST INCOME
Loans, including fees $63,236 $45,865 
Investment securities:  
Taxable4,040 3,874 
Tax-exempt376 389 
Other interest-bearing balances403 53 
Federal funds sold136 45 
Total Interest Income68,191 50,226 
INTEREST EXPENSE  
Deposits26,332 12,001 
Short-term borrowings4,446 1,490 
Long-term and subordinated debt957 686 
Total Interest Expense31,735 14,177 
Net Interest Income36,456 36,049 
  (Benefit)/Provision for credit losses(937)719 
Net Interest Income After (Benefit)/Provision for Credit Losses37,393 35,330 
NONINTEREST INCOME  
Fiduciary and wealth management1,132 1,236 
ATM debit card interchange945 1,056 
Service charges on deposits509 435 
Mortgage banking 424 384 
Mortgage hedging 20 
Net gain on sales of SBA loans107  
Earnings from cash surrender value of life insurance284 254 
Other 2,436 940 
Total Noninterest Income5,837 4,325 
NONINTEREST EXPENSE  
Salaries and employee benefits15,462 13,844 
Software licensing and utilization2,120 1,946 
Occupancy, net1,982 1,886 
Equipment1,222 1,251 
Shares tax997 899 
Legal and professional fees998 800 
ATM/card processing534 493 
Intangible amortization428 344 
FDIC Assessment945 340 
Merger and acquisition  224 
Other 3,832 3,814 
Total Noninterest Expense28,520 25,841 
INCOME BEFORE PROVISION FOR INCOME TAXES14,710 13,814 
Provision for income taxes2,577 2,587 
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS$12,133 $11,227 
PER COMMON SHARE DATA:
Basic Earnings Per Common Share$0.73 $0.71 
Diluted Earnings Per Common Share$0.73 $0.70 
Weighted-average basic shares outstanding16,567,902 15,886,186 
Weighted-average diluted shares outstanding16,613,373 15,931,121 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5

MID PENN BANCORP, INC.



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended March 31,
(In Thousands)20242023
Net income$12,133 $11,227 
Other comprehensive (loss)/income:
Unrealized (losses)/gains arising during the period on available for sale securities, net of income tax benefit/(cost) of $455 and ($526), respectively. (1)
(1,711)1,977 
Unrealized holding gains/(losses) arising during the period on interest rate derivatives used in cash flow hedges, net of income tax (cost)/benefit of ($375) and $34, respectively. (1)
1,410 (128)
Change in defined benefit plans, net of income tax (cost)/benefit of ($2) and $1, respectively (1), (2)
8 5 
Reclassification adjustment for settlement gains and activity related to benefit plans, net of income tax benefit of $5 and $3, respectively (1), (3)
(17)(12)
Total other comprehensive (loss)/income (310)1,842 
Total comprehensive income$11,823 $13,069 
(1)The income tax impacts of the components of other comprehensive income are calculated using a 21% statutory tax rate.
(2)The change in defined benefit plans consists primarily of unrecognized actuarial (losses)/gains on defined benefit plans during the period.
(3)The reclassification adjustment for benefit plans includes settlement gains, amortization of prior service costs, and amortization of net gain or loss. Amounts are included in other income on the Consolidated Statements of Income within total noninterest income.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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MID PENN BANCORP, INC.



CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
Common Stock Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Treasury
Stock
Total
Shareholders'
Equity
(In thousands, except per share data)SharesAmount
Balance, January 1, 202416,998,929 $16,999 $405,725 $145,982 $(16,637)$(9,719)$542,350 
Net income   12,133   12,133 
Total other comprehensive income, net of taxes    (310) (310)
Common stock cash dividends declared - $0.20 per share
   (3,314)  (3,314)
Repurchased stock     (323)(323)
Employee Stock Purchase Plan 5,653 5 107    112 
Director Stock Purchase Plan1,777 2 34    36 
Restricted stock activity  284    284 
Balance, March 31, 202417,006,359 $17,006 $406,150 $154,801 $(16,947)$(10,042)$550,968 

Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
Shareholders'
Equity
(In thousands, except per share data)SharesAmount
Balance, January 1, 202316,094,486 $16,094 $386,987 $133,114 $(19,216)$(4,880)$512,099 
Net income— — — 11,227 — — 11,227 
Total other comprehensive loss, net of taxes— — — — 1,842 — 1,842 
Common stock cash dividends declared, $0.20 per share
— — — (3,176)— — (3,176)
Impact of adopting CECL (1)
— — — (11,548)— — (11,548)
Employee Stock Purchase Plan 2,217 2 55 — — — 57 
Director Stock Purchase Plan1,651 2 41 — — — 43 
Restricted stock activity— — 249 — — — 249 
Balance, March 31, 202316,098,354 $16,098 $387,332 $129,617 $(17,374)$(4,880)$510,793 
(1) The Corporation adopted ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" effective January 1, 2023. See "Note 1 - Summary of Significant Accounting Policies" for further details.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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MID PENN BANCORP, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31,
(In thousands)20242023
Operating Activities:
Net Income$12,133 $11,227 
Adjustments to reconcile net income to net cash provided by operating activities:
(Benefit)/Provision for credit losses(937)719 
Depreciation1,192 1,202 
Amortization of intangibles428 344 
Net amortization of security discounts/premiums102 127 
Noncash operating lease expense539 509 
Amortization of finance lease right of use asset44 45 
Earnings on cash surrender value of life insurance(284)(254)
Mortgage loans originated for sale(16,808)(24,615)
Proceeds from sales of mortgage loans originated for sale16,506 24,797 
Gain on sale of mortgage loans(424)(384)
SBA loans originated for sale(1,553) 
Proceeds from sales of SBA loans originated for sale1,446  
Gain on sale of SBA loans(107) 
Gain on sale of property, plant, and equipment(32)(31)
Accretion of subordinated debt(153)(147)
Stock compensation expense284 249 
Change in deferred income tax benefit1,402 706 
Increase accrued interest receivable(1,155)(800)
Decrease (Increase) in other assets(3,484)775 
Increase (decrease) in accrued interest payable2,073 3,506 
Decrease in operating lease liability (602)(580)
(Decrease) Increase in other liabilities1,799 (4,217)
Net Cash Provided By Operating Activities12,409 13,178 
Investing Activities:
Proceeds from the maturity or call of available-for-sale securities3,741 3,743 
Proceeds from the maturity or call of held-to-maturity securities2,045 2,611 
Stock dividends of FHLB and other bank stock239 110 
(Purchases) reduction of restricted investment in bank stock(917)164 
Net increase in loans (68,987)(97,156)
Purchases of bank premises and equipment(351)(922)
Proceeds from the sale of premises and equipment32 31 
Net change in investments in tax credits and other partnerships(1,548)(2,174)
Net Cash Used in Investing Activities(65,746)(93,593)

8

MID PENN BANCORP, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(CONTINUED)
Financing Activities:
Net increase in deposits32,893 99,750 
Common stock dividends paid(3,314)(3,176)
Proceeds from Employee and Director Stock Purchase Plan stock issuance148 100 
Treasury stock purchased(323) 
Net change in finance lease liability(24)(23)
Net change in short-term borrowings30,317 (14,647)
Long-term debt repayment(35,038)(70)
Net Cash Provided by Financing Activities24,659 81,934 
Net (decrease)/ increase in cash and cash equivalents(28,678)1,519 
Cash and cash equivalents, beginning of period96,763 60,881 
Cash and cash equivalents, end of period$68,085 $62,400 
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest$29,662 $10,671 
Supplemental Noncash Disclosures:
Recognition of operating lease right of use assets$ $125 
Recognition of operating lease liabilities 125 
Loans transferred to foreclosed assets held for sale4,817 205 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
9

MID PENN BANCORP, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Summary of Significant Accounting Policies
Nature of Operations
Mid Penn Bancorp, Inc. ("Mid Penn" or the "Corporation"), through operations conducted by Mid Penn Bank (the "Bank") and its nonbank subsidiaries, engages in a full-service commercial banking and trust business, making available to the community a wide range of financial services, including, but not limited to, mortgage and home equity loans, secured and unsecured commercial and consumer loans, lines of credit, construction financing, farm loans, community development loans, loans to non-profit entities and local government loans, and various types of time and demand deposits including but not limited to, checking accounts, savings accounts, clubs, money market deposit accounts, certificates of deposit, and IRAs. In addition, the Bank provides a full range of trust and wealth management services through its Trust Department. Deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") to the extent provided by law.
Mid Penn also fulfills the insurance needs of both existing and potential customers through MPB Risk Services, LLC, doing business as MPB Insurance and Risk Management.
The financial services are provided to individuals, partnerships, non-profit organizations, and corporations through its retail banking offices located in throughout Pennsylvania and two counties in New Jersey.
Basis of Presentation
For all periods presented, the accompanying consolidated financial statements include the accounts of Mid Penn Bancorp, Inc., its wholly-owned subsidiary, Mid Penn Bank, and four nonbank subsidiaries, MPB Financial Services, LLC, which includes MPB Wealth Management, LLC (which ceased operating during the first quarter of 2024) and MPB Risk Services, LLC, and MPB Launchpad Fund I, LLC. As of March 31, 2024, the accounts and activities of these nonbank subsidiaries 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.
Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. Mid Penn believes the information presented is not misleading, and the disclosures are adequate. For comparative purposes, the March 31, 2023 and December 31, 2023 balances have been reclassified, when necessary, to conform to the 2024 presentation. Such reclassifications had no impact on net income or total shareholders’ equity. In the opinion of management, all adjustments necessary for fair presentation of the periods presented have been reflected in the accompanying consolidated financial statements. All such adjustments are of a normal, recurring nature. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2023 Annual Report.
Mid Penn has evaluated events and transactions occurring subsequent to the balance sheet date of March 31, 2024, 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.
Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
Material estimates subject to significant change include the allowance for credit losses, the expected cash flows and collateral values associated with loans that are individually evaluated for credit losses, the carrying value of other real estate owned ("OREO"), the fair value of financial instruments, business combination fair value computations, the valuation of goodwill and other intangible assets, stock-based compensation and deferred income tax assets.

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MID PENN BANCORP, INC.





Accounting Standards adopted and Updated Significant Accounting Policy
On January 1, 2023, the Corporation adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology, and is referred to as CECL. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, including loans and HTM debt securities. It also applies to OBS credit exposures (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with ASC Topic 842. Prior to 2024, the provision for OBS credit losses was included in Other Expenses on the Statement of Income. As of March 31, 2024, the provision for OBS credit losses is included in Provision for Credit Losses on the Income Statement. Prior periods have been updated for presentation.
All other significant accounting policies used in preparation of the Consolidated Financial Statements are disclosed in the 2023 Annual Report. Those significant accounting policies are unchanged at March 31, 2024.
Accounting Standards Pending Adoption
ASU No. 2023-02: The FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.
The amendments in this update permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. A reporting entity may make an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. The amendments in this update also remove certain guidance for Qualified Affordable Housing Project investments and require the application of the delayed equity contribution guidance to all tax equity investments. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and must be applied on either a modified retrospective or a retrospective basis. Early adoption is permitted in any interim period, however if adopted in an interim period the entity shall adopt the amendments in this update as of the beginning of the fiscal year that includes the interim period. The Corporation does not expect the adoption of ASU No. 2023-02 to have a material impact on its consolidated financial statements.
ASU 2023-06: The FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.
ASU 2023-06 amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 - Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. ASU 2023-06 is not expected to have a significant impact on our financial statements.
ASU 2023-07: The FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
ASU 2023-07 amends the ASC to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. ASU 2023-07 is not expected to have a significant impact on our financial statements.
ASU 2023-09: The FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures

ASU 2023-09 amends the ASC to enhance income tax disclosures by requiring entities to disclose income taxes paid (net of refunds received) disaggregated by federal, state and foreign taxes. Additionally, entities are required to disclose amounts greater than 5% of the total income taxes paid to an individual jurisdiction The amendments are effective for annual periods beginning after December 15, 2025. ASU 2023-09 is not expected to have a significant impact on our financial statements.


11

MID PENN BANCORP, INC.





ASU 2024-01—The FASB issued ASU 2024-01, Compensation - Stock Compensation (Topic 718): Scope application of profits interest and similar awards

The amendments in the ASU apply to all reporting entities that account for profits interest awards as compensation to employees or nonemployees in return for goods or services. The amendments are effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods. ASU 2024-01 is not expected to have a significant impact on our financial statements.

ASU 2024-02: The FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements

This ASU contains amendments to the Codification that remove references to various FASB Concepts Statements. The amendments are effective for fiscal years beginning after Dec. 15, 2025. Early adoption is permitted. ASU 2024-02 is not expected to have a significant impact on our financial statements.

Note 2 - Business Combination
Brunswick Acquisition
On May 19, 2023, Mid Penn completed its acquisition of Brunswick through the merger of Brunswick with and into Mid Penn with Mid Penn being the surviving corporation. In connection with this acquisition, Brunswick Bank, a wholly-owned subsidiary of Brunswick, merged with and into Mid Penn Bank, a wholly-owned subsidiary of Mid Penn.

This transaction included the acquisition of 5 branches and extended Mid Penn’s footprint into Middlesex and Monmouth counties in central New Jersey. Mid Penn issued 849,510 shares of its common stock as well as a net cash payment to Brunswick shareholders of $27.6 million, for total consideration of $45.7 million for all outstanding stock and the cancellation of stock options of Brunswick.
Mid Penn has recognized total goodwill of $12.8 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed compared to the fair market value of identifiable assets acquired. The fair value of the consideration exchanged related to Mid Penn’s common stock was calculated based upon the closing market price of Mid Penn’s common stock as of May 19, 2023. None of the goodwill recognized is expected to be deductible for income tax purposes.

Purchased loans and leases that reflect a more-than-insignificant deterioration of credit from origination are considered PCD. Mid Penn considers various factors in connection with the identification of more-than-insignificant deterioration in credit, including but not limited to nonperforming status, delinquency, risk ratings, FICO scores and other qualitative factors that indicate deterioration in credit quality since origination. For PCD loans and leases, the initial estimate of expected credit losses is recognized in the ACL on the date of acquisition using the same methodology as other loans and leases held-for-investment. As part of the Brunswick Acquisition, Mid Penn acquired PCD loans and leases of $18.7 million. Mid Penn established an ACL at acquisition of $336 thousand with a corresponding gross-up to the amortized cost of the PCD loans and leases. The non-credit discount on the PCD loans and leases was $2.4 million and the Day 1 fair value was $16.3 million. The initial provision expense for non-PCD loans associated with the Brunswick Acquisition was $2.0 million.

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MID PENN BANCORP, INC.





Estimated fair values of the assets acquired and liabilities assumed in the Brunswick Acquisition as of the closing date are as follows:
(In thousands)
Assets acquired:
Cash and cash equivalents$21,029 
Federal funds sold7,604 
Investment securities2,423 
Loans324,471 
Goodwill12,800 
Core deposit intangible999 
Premises and equipment4,568 
Cash surrender value of life insurance3,361 
Deferred income taxes6,393 
Accrued interest receivable1,171 
Other assets5,884 
Total assets acquired390,703 
Liabilities assumed:
Deposits:
Noninterest-bearing demand60,888 
Interest-bearing demand11,767 
Money Market47,362 
Savings14,203 
Time147,163 
Long-term debt60,136 
Accrued interest payable1,911 
Other liabilities1,613 
Total liabilities assumed345,043 
Consideration paid$45,660 
Cash paid$27,565 
Fair value of common stock issued18,095 

Management has completed its evaluation of fair values of all assets and liabilities shown in the table above and all amounts are considered final.




13

MID PENN BANCORP, INC.





Note 3 - Investment Securities
FASB ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," was adopted by Mid Penn on January 1, 2023. ASU 2016-13 introduces the CECL methodology for estimating allowances for credit losses. ASU 2016-13 applies to all financial instruments carried at amortized cost, including HTM securities, and makes targeted improvements to the accounting for credit losses on AFS securities.
In order to comply with ASC 326, Mid Penn conducted a review of its investment portfolio and determined that for certain classes of securities it would be appropriate to assume the expected credit loss to be zero. This zero-credit loss assumption applies to debt issuances of the U.S. Treasury and agencies and instrumentalities of the United States government. The reasons behind the adoption of the zero-credit loss assumption are as follows:
High credit rating
Long history with no credit losses
Guaranteed by a sovereign entity
Widely recognized as "risk-free rate"
Can print its own currency
Currency is routinely held by central banks, used in international commerce, and commonly viewed as reserve currency
Currently under the U.S. Government conservatorship or receivership
Mid Penn will continuously monitor any changes in economic conditions, credit downgrades, changes to explicit or implicit guarantees granted to certain debt issuers, and any other relevant information that would indicate potential credit deterioration and prompt Mid Penn to reconsider its zero-credit loss assumption.
At the date of adoption, Mid Penn’s estimated allowance for credit losses on AFS and HTM securities under ASU 2016-13 was deemed immaterial due to the composition of these portfolios. Both portfolios consist primarily of U.S. government agency guaranteed mortgage-backed securities for which the risk of loss is minimal. Therefore, Mid Penn did not recognize a cumulative effect adjustment through retained earnings related to the AFS and HTM securities.
AFS Securities
ASU 2016-13 makes targeted improvements to the accounting for credit losses on AFS securities. The concept of other-than-temporarily impaired has been replaced with the allowance for credit losses. Unlike HTM securities, AFS securities are evaluated on an individual level and pooling of securities is not allowed.
Quarterly, Mid Penn evaluates if any security has a fair value less than its amortized cost. Once these securities are identified, in order to determine whether a decline in fair value resulted from a credit loss or other factors, Mid Penn performs further analysis as outlined below:
Review the extent to which the fair value is less than the amortized cost and observe the security’s lowest credit rating as reported by third-party credit ratings companies.
The securities that violate the credit loss triggers above would be subjected to additional analysis that may include, but is not limited to: changes in market interest rates, changes in securities credit ratings, security type, service area economic factors, financial performance of the issuer/or obligor of the underlying issue and third-party guarantee.
If Mid Penn determines that a credit loss exists, the credit portion of the allowance will be measured using a DCF analysis using the effective interest rate as of the security’s purchase date. The amount of credit loss Mid Penn records will be limited to the amount by which the amortized cost exceeds the fair value.
The DCF analysis utilizes contractual maturities, as well as third-party credit ratings and cumulative default rates published annually by a reputable third-party.
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At March 31, 2024, the results of the analysis did not identify any securities that violate the credit loss triggers; therefore, no DCF analysis was performed and no credit loss was recognized on any of the securities available for sale.
Accrued interest receivable is excluded from the estimate of credit losses for AFS securities. At March 31, 2024, accrued interest receivable totaled $982 thousand for AFS securities and was reported in accrued interest receivable on the accompanying Consolidated Balance Sheet.
HTM Securities
ASU 2016-13 requires institutions to measure expected credit losses on financial assets carried at amortized cost on a collective or pool basis when similar risks exist. Mid Penn uses several levels of segmentation in order to measure expected credit losses:
The portfolio is segmented into agency and non-agency securities.
The non-agency securities are separated into state and political subdivision obligations and corporate debt securities.
Each individual segment is categorized by third-party credit ratings.
As discussed above, Mid Penn has determined that for certain classes of securities it would be appropriate to assume the expected credit loss to be zero, which include debt issuances of the U.S. Treasury and agencies and instrumentalities of the United States government. This assumption will be reviewed and attested to quarterly.
At March 31, 2024, Mid Penn’s HTM securities totaled $397.0 million. After applying appropriate probability of default and loss given default assumptions, the total amount of current expected credit losses was deemed immaterial. Therefore, no reserve was recorded at March 31, 2024.
Accrued interest receivable is excluded from the estimate of credit losses for HTM securities. At March 31, 2024, accrued interest receivable totaled $2.2 million for HTM securities and was reported in accrued interest receivable on the accompanying Consolidated Balance Sheet.
At March 31, 2024, Mid Penn had no HTM securities that were past due 30 days or more as to principal or interest payments. Mid Penn had no HTM securities classified as nonaccrual at March 31, 2024.
The amortized cost and estimated fair value of investment securities for the periods presented:
March 31, 2024
(In thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross Unrealized
Losses
Estimated
Fair Value
Available-for-sale
U.S. Treasury and U.S. government agencies$36,664 $ $1,174 $35,490 
Mortgage-backed U.S. government agencies165,402  18,637 146,765 
State and political subdivision obligations4,326  693 3,633 
Corporate debt securities35,737  3,993 31,744 
Total available-for-sale debt securities242,129  24,497 217,632 
Held-to-maturity
U.S. Treasury and U.S. government agencies$245,839 $ $30,821 $215,018 
Mortgage-backed U.S. government agencies42,376  5,869 36,507 
State and political subdivision obligations83,318 2 6,958 76,362 
Corporate debt securities25,465  2,148 23,317 
Total held-to-maturity debt securities396,998 2 45,796 351,204 
Total$639,127 $2 $70,293 $568,836 
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December 31, 2023
(In thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross Unrealized
Losses
Estimated
Fair Value
Available-for-sale
U.S. Treasury and U.S. government agencies$36,637 $ $988 $35,649 
Mortgage-backed U.S. government agencies169,184  16,501 152,683 
State and political subdivision obligations4,332  686 3,646 
Corporate debt securities35,733  4,156 31,577 
Total available-for-sale debt securities$245,886 $ $22,331 $223,555 
Held-to-maturity     
U.S. Treasury and U.S. government agencies$245,805 $2 $28,676 $217,131 
Mortgage-backed U.S. government agencies43,818  5,523 38,295 
State and political subdivision obligations84,035 11 6,486 77,560 
Corporate debt securities25,470  935 24,535 
Total held-to-maturity debt securities399,128 13 41,620 357,521 
Total$645,014 $13 $63,951 $581,076 
Estimated fair values of debt securities are based on quoted market prices, where applicable. If quoted market prices are not available, fair values are based on quoted market prices of instruments of a similar type, credit quality and structure, adjusted for differences between the quoted instruments and the instruments being valued. See "Note 8 - Fair Value Measurement," for additional information.
Investment securities having a fair value of $383.9 million at March 31, 2024 and $380.3 million at December 31, 2023 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 FHLB to secure certain public deposits. These FHLB letter of credit commitments totaled $142.9 million as of March 31, 2024 and $153.5 million as of December 31, 2023.
The following tables present gross unrealized losses and fair value of debt investment securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for the periods presented:
(Dollars in thousands)Less Than 12 Months12 Months or MoreTotal
March 31, 2024Number
of
Securities
Estimated
Fair
Value
Gross
Unrealized
Losses
Number
of
Securities
Estimated
Fair
Value
Gross
Unrealized
Losses
Number
of
Securities
Estimated
Fair
Value
Gross
Unrealized
Losses
Available-for-sale debt securities:
U.S. Treasury and U.S. government agencies$ $ 19$35,490 $1,174 19$35,490 $1,174 
Mortgage-backed U.S. government agencies  93146,765 18,637 93146,765 18,637 
State and political subdivision obligations  83,633 693 83,633 693 
Corporate debt securities  1831,744 3,993 1831,744 3,993 
Total available-for-sale debt securities$ $ 138$217,632 $24,497 138$217,632 $24,497 
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies  145215,018 30,821 145215,018 30,821 
Mortgage-backed U.S. government agencies  6436,507 5,869 6436,507 5,869 
State and political subdivision obligations165,846 86 17770,201 6,872 19376,047 6,958 
Corporate debt securities  1523,317 2,148 1523,317 2,148 
Total held-to-maturity debt securities165,846 86 401345,043 45,710 417350,889 45,796 
Total16$5,846 $86 539$562,675 $70,207 555$568,521 $70,293 
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(Dollars in thousands)Less Than 12 Months12 Months or MoreTotal
December 31, 2023Number
of
Securities
Estimated
Fair
Value
Gross
Unrealized
Losses
Number
of
Securities
Estimated
Fair
Value
Gross
Unrealized
Losses
Number
of
Securities
Estimated
Fair
Value
Gross
Unrealized
Losses
Available-for-sale securities:
U.S. Treasury and U.S. government agencies$ $ 19$35,649 $988 19$35,649 $988 
Mortgage-backed U.S. government agencies14,015 26 92148,668 16,475 93152,683 16,501 
State and political subdivision obligations  83,646 686 83,646 686 
Corporate debt securities1410 90 1731,167 4,066 1831,577 4,156 
Total available-for-sale securities24,425 116 136219,130 22,215 138223,555 22,331 
Held-to-maturity securities:
U.S. Treasury and U.S. government agencies1$2,002 $ 144$215,129 $28,676 145$217,131 $28,676 
Mortgage-backed U.S. government agencies  6438,295 5,523 6438,295 5,523 
State and political subdivision obligations258,729 63 17068,831 6,423 19577,560 6,486 
Corporate debt securities1936 57 1423,599 878 1524,535 935 
Total held to maturity securities2711,667 120 392345,854 41,500 419357,521 41,620 
Total29$16,092 $236 528$564,984 $63,715 557$581,076 $63,951 
There were no gross realized gains and losses on sales of available-for-sale debt securities for the three months ended March 31, 2024 and 2023.
The table below illustrates the contractual maturity of debt investment securities at amortized cost and estimated fair value. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay with or without call or prepayment penalties.
(In thousands)Available-for-saleHeld-to-maturity
March 31, 2024Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Due in 1 year or less$12,496 $12,380 $13,047 $12,906 
Due after 1 year but within 5 years34,425 32,819 125,456 116,182 
Due after 5 years but within 10 years27,475 23,743 195,525 168,141 
Due after 10 years2,331 1,925 20,594 17,468 
76,727 70,867 354,622 314,697 
Mortgage-backed securities165,402 146,765 42,376 36,507 
$242,129 $217,632 $396,998 $351,204 
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Note 4 - Loans and Allowance for Credit Losses - Loans
Mid Penn adopted the amendments of FASB ASU 2016-13, on January 1, 2023. The amendments of ASU 2016-13 created FASB ASC Topic 326, "Financial Instruments – Credit Losses," which, among other things, replace much of the guidance and disclosures previously provided in FASB ASC Topic 310, "Receivables." The guidance in FASB ASC Topic 326 replaces the incurred loss methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit losses. In accordance with FASB ASC Subtopic 326-20, "Financial Instruments – Credit Losses – Measured at Amortized Cost," Mid Penn has developed an ACL methodology effective January 1, 2023, which replaces its previous allowance for loan losses methodology. See the section captioned "Allowance for Credit Losses, effective January 1, 2023" within this note for additional information regarding Mid Penn’s ACL.
Loans, net of unearned income, are summarized as follows by portfolio segment:
(In thousands)March 31, 2024December 31, 2023
Commercial real estate
CRE Nonowner Occupied$1,174,774 $1,149,553 
CRE Owner Occupied622,574 629,904 
Multifamily334,952 309,059 
Farmland212,018 212,690 
Total Commercial real estate2,344,318 2,301,206 
Commercial and industrial
671,395 675,079 
Construction
Residential Construction103,861 92,843 
Other Construction383,428 362,624 
Total Construction487,289 455,467