MID PENN BANCORP INC 10-Q

ITEM 1 – FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in thousands, except share data) September 30, 2022 December 31, 2021 ASSETS Cash and due from banks $ 76,018 $ 41,100 Interest-bearing balances with other financial institutions 4,520 146,031 Federal funds sold 14,140 726,621 Total cash and cash equivalents 94,678 913,752 Investment securities held to maturity, at amortized cost (fair value $ 346,625 and $ 330,626 ) 402,142 329,257 Investment securities available for sale, at fair value 242,195 62,862 Equity securities available for sale, at fair value 428 500 Loans held for sale, at fair value 5,997 11,514 Loans and leases, net of unearned interest 3,322,457 3,104,396 Less: Allowance for loan and lease losses ( 18,480 ) ( 14,597 ) Net loans and leases 3,303,977 3,089,799 Bank premises and equipment, net 33,854 33,232 Bank premises and equipment held for sale 2,262 3,907 Operating lease right of use asset 8,352 9,055 Finance lease right of use asset 2,952 3,087 Cash surrender value of life insurance 50,419 49,661 Restricted investment in bank stocks 4,595 9,134 Accrued interest receivable 15,861 11,328 Deferred income taxes 16,093 10,779 Goodwill 113,871 113,835 Core deposit and other intangibles, net 7,215 9,436 Foreclosed assets held for sale 49 — Other assets 28,963 28,287 Total Assets $ 4,333,903 $ 4,689,425 LIABILITIES & SHAREHOLDERS’ EQUITY Deposits: Noninterest-bearing demand $ 863,037 $ 850,438 Interest-bearing demand 1,103,000 1,066,852 Money Market 966,913 1,076,593 Savings 344,359 381,476 Time 452,287 626,657 Total Deposits 3,729,596 4,002,016 Long-term debt 4,501 81,270 Subordinated debt and trust preferred securities 66,357 74,274 Operating lease liability 10,261 11,363 Accrued interest payable 1,841 1,791 Other liabilities 22,242 28,635 Total Liabilities 3,834,798 4,199,349 Shareholders' Equity: Common stock, par value $ 1.00 per share; 20.0 million shares authorized; 16.1 million issued at September 30, 2022 and at December 31, 2021; 15.9 million outstanding at September 30, 2022 and 16.0 million at December 31, 2021 16,091 16,056 Additional paid-in capital 386,452 384,742 Retained earnings 120,572 91,043 Accumulated other comprehensive (loss) income ( 19,130 ) 158 Treasury stock, at cost; 208,343 shares at September 30, 2022 and 98,452 shares at December 31, 2021 ( 4,880 ) ( 1,923 ) Total Shareholders’ Equity 499,105 490,076 Total Liabilities and Shareholders' Equity $ 4,333,903 $ 4,689,425 The accompanying notes are an integral part of these unaudited consolidated financial statements. 3 Table of Contents MID PENN BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars in thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 INTEREST INCOME Interest and fees on loans and leases $ 38,484 $ 29,590 $ 107,764 $ 87,755 Interest and dividends on investment securities: U.S. Treasury and government agencies 2,873 285 6,738 688 State and political subdivision obligations, tax-exempt 392 279 1,107 834 Other securities 509 277 1,430 870 Total Interest and Dividends on Investment Securities 3,774 841 9,275 2,392 Interest on other interest-bearing balances 12 1 33 5 Interest on federal funds sold 736 308 1,786 485 Total Interest Income 43,006 30,740 118,858 90,637 INTEREST EXPENSE Interest on deposits 2,836 2,909 7,149 8,791 Interest on short-term borrowings — 133 — 539 Interest on long-term and subordinated debt 761 704 2,453 2,111 Total Interest Expense 3,597 3,746 9,602 11,441 Net Interest Income 39,409 26,994 109,256 79,196 PROVISION FOR LOAN AND LEASE LOSSES 1,550 425 3,775 2,575 Net Interest Income After Provision for Loan and Lease Losses 37,859 26,569 105,481 76,621 NONINTEREST INCOME Income from fiduciary and wealth management activities 1,729 618 3,986 1,716 ATM debit card interchange income 1,078 630 3,263 1,854 Service charges on deposits 483 223 1,617 552 Mortgage banking income 536 3,162 1,370 8,382 Mortgage hedging income 217 22 1,321 22 Net gain on sales of SBA loans 152 105 262 560 Earnings from cash surrender value of life insurance 250 74 758 223 Net gain on sales of investment activities — 79 — 79 Other income 1,518 596 4,366 2,485 Total Noninterest Income 5,963 5,509 16,943 15,873 NONINTEREST EXPENSE Salaries and employee benefits 13,583 10,342 39,167 29,873 Software licensing and utilization 1,804 1,551 5,731 4,493 Occupancy expense, net 1,634 1,318 5,088 4,115 Equipment expense 1,121 745 3,244 2,237 Shares tax 920 498 2,626 1,022 Legal and professional fees 528 610 1,861 1,591 ATM/card processing 518 249 1,605 696 Intangible amortization 514 266 1,516 823 FDIC Assessment 254 461 1,351 1,364 Charitable contributions qualifying for State tax credits — — 190 635 Mortgage banking profit-sharing expense — 1,140 178 2,005 Gain on sale or write-down of foreclosed assets, net ( 57 ) ( 7 ) ( 88 ) ( 26 ) Merger and acquisition expense — 198 — 720 Post-acquisition restructuring expense — — 329 — Other expenses 3,896 2,648 11,577 7,485 Total Noninterest Expense 24,715 20,019 74,375 57,033 INCOME BEFORE PROVISION FOR INCOME TAXES 19,107 12,059 48,049 35,461 Provision for income taxes 3,626 2,272 8,962 6,749 NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 15,481 $ 9,787 $ 39,087 $ 28,712 PER COMMON SHARE DATA: Basic and Diluted Earnings Per Common Share $ 0.97 $ 0.86 $ 2.45 $ 2.85 Diluted Earnings Per Common Share $ 0.97 $ 0.86 $ 2.45 $ 2.85 Cash Dividends Declared $ 0.20 $ 0.20 $ 0.60 $ 0.59 The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 Table of Contents MID PENN BANCORP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (Dollars in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net income $ 15,481 $ 9,787 $ 39,087 $ 28,712 Other comprehensive (loss) income: Unrealized (loss) income arising during the period on available-for-sale securities, net of income taxes of ($ 2,492 ), $ 8 , ($ 5,162 ) and $ 13 , respectively ( 9,376 ) 29 ( 19,418 ) 51 Reclassification adjustment for net gain on sales of available-for-sale securities included in net income, net of income taxes of $ 0 , ($ 17 ), $ 0 ,and ($ 17 ) respectively. (1) — ( 62 ) — ( 62 ) Change in defined benefit plans, net of income taxes of $ 4 , ($ 10 ), $ 37 and $ 70 , respectively (2) 11 ( 36 ) 138 262 Reclassification adjustment for settlement losses and other activity related to benefit plans, net of income taxes of ($ 2 ), ($ 1 ), ($ 2 ) and ($ 12 ), respectively (3) ( 6 ) ( 3 ) ( 8 ) ( 47 ) Total other comprehensive (loss) income ( 9,371 ) ( 72 ) ( 19,288 ) 204 Total comprehensive income $ 6,110 $ 9,715 $ 19,799 $ 28,916 (1) Amounts are included in net gain on sales of investment securities on the consolidated statements of income as a separate element within total noninterest income. (2) The change in defined benefit plans consists primarily of unrecognized actuarial gains (losses) on defined benefit plans during the period. (3) The reclassification adjustment for benefit plans includes settlement gains, amortization of prior service costs, and amortization of net gain or loss. Amounts are included in other income on the consolidated statements of income within total noninterest income. See "Note 12 – Defined Benefit Plans," for additional information. The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 Table of Contents MID PENN BANCORP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED) (Dollars in thousands) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Shareholders' Equity Balance, January 1, 2022 $ 16,056 $ 384,742 $ 91,043 $ 158 $ ( 1,923 ) $ 490,076 Net income — — 11,354 — — 11,354 Total other comprehensive loss, net of taxes — — — ( 5,104 ) — ( 5,104 ) Common stock cash dividends declared, $ 0.20 per share — — ( 3,191 ) — — ( 3,191 ) Riverview restricted stock adjustment — 776 — — — 776 Employee Stock Purchase Plan ( 1,710 shares) 2 44 — — — 46 Director Stock Purchase Plan ( 1,377 shares) 1 35 — — — 36 Restricted stock activity — 168 — — — 168 Balance, March 31, 2022 $ 16,059 $ 385,765 $ 99,206 $ ( 4,946 ) $ ( 1,923 ) $ 494,161 Net income — — 12,252 — — 12,252 Total other comprehensive loss, net of taxes — — — ( 4,813 ) — ( 4,813 ) Common stock cash dividends declared, $ 0.20 per share — — ( 3,193 ) — — ( 3,193 ) Repurchased stock ( 109,891 shares) — — — — ( 2,957 ) ( 2,957 ) Employee Stock Purchase Plan ( 1,899 shares) 2 49 — — — 51 Director Stock Purchase Plan ( 1,589 shares) 2 41 — — — 43 Restricted stock activity ( 17,200 shares) 18 273 — — — 291 Balance, June 30, 2022 $ 16,081 $ 386,128 $ 108,265 $ ( 9,759 ) $ ( 4,880 ) $ 495,835 Net income — — 15,481 — — 15,481 Total other comprehensive loss, net of taxes — — — ( 9,371 ) — ( 9,371 ) Common stock cash dividends declared, $ 0.20 per share — — ( 3,174 ) — — ( 3,174 ) Employee Stock Purchase Plan ( 1,486 shares) 1 53 — — — 54 Director Stock Purchase Plan ( 1,927 shares) 2 41 — — — 43 Restricted stock activity ( 7,227 shares) 7 230 — — — 237 Balance, September 30, 2022 $ 16,091 $ 386,452 $ 120,572 $ ( 19,130 ) $ ( 4,880 ) $ 499,105 6 Table of Contents MID PENN BANCORP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED) (CONTINUED) (Dollars in thousands) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Shareholders Equity Balance, January 1, 2021 $ 8,512 $ 178,853 $ 70,175 $ ( 57 ) $ ( 1,795 ) $ 255,688 Net income — — 9,312 — — 9,312 Total other comprehensive income, net of taxes — — — 558 — 558 Common stock cash dividends declared, $ 0.19 per share — — ( 1,599 ) — — ( 1,599 ) Repurchased stock ( 5,800 shares) — — — — ( 128 ) ( 128 ) Employee Stock Purchase Plan ( 1,459 shares) 2 38 — — — 40 Director Stock Purchase Plan ( 1,253 shares) 1 32 — — — 33 Restricted stock activity — 132 — — — 132 Balance, March 31, 2021 $ 8,515 $ 179,055 $ 77,888 $ 501 $ ( 1,923 ) $ 264,036 Net income — — 9,613 — — 9,613 Total other comprehensive loss, net of taxes — — — ( 282 ) — ( 282 ) Common stock cash dividends declared, $ 0.20 per share — — ( 2,281 ) — — ( 2,281 ) Common shares issued through follow-on public offering ( 2,990,000 shares), net of underwriting discounts and offering expenses 2,990 67,248 — — — 70,238 Employee Stock Purchase Plan ( 1,388 shares) 1 37 — — — 38 Director Stock Purchase Plan ( 1,229 shares) 1 33 — — — 34 Restricted stock activity — 173 — — — 173 Balance, June 30, 2021 $ 11,507 $ 246,546 $ 85,220 $ 219 $ ( 1,923 ) $ 341,569 Net income — — 9,787 — — 9,787 Total other comprehensive loss, net of taxes — — — ( 72 ) — ( 72 ) Common stock cash dividends declared, $ 0.20 per share — — ( 2,285 ) — — ( 2,285 ) Employee Stock Purchase Plan ( 1,784 shares) 2 47 — — — 49 Director Stock Purchase Plan ( 1,225 shares) 1 32 — — — 33 Restricted stock activity ( 21,833 shares) 22 205 — — — 227 Balance, September 30, 2021 $ 11,532 $ 246,830 $ 92,722 $ 147 $ ( 1,923 ) $ 349,308 The accompanying notes are an integral part of these unaudited consolidated financial statements. 7 Table of Contents MID PENN BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands) Nine Months Ended September 30, 2022 2021 Operating Activities: Net Income $ 39,087 $ 28,712 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan and lease losses 3,775 2,575 Depreciation 3,056 2,463 Amortization of intangibles 1,516 823 Net amortization of security discounts/premiums 530 471 Noncash operating lease expense 1,255 1,279 Amortization of finance lease right of use asset 135 135 Gain on sales of investment securities — ( 79 ) Earnings on cash surrender value of life insurance ( 758 ) ( 223 ) Mortgage loans originated for sale ( 116,966 ) ( 257,133 ) Proceeds from sales of mortgage loans originated for sale 123,853 267,867 Gain on sale of mortgage loans ( 1,370 ) ( 8,382 ) SBA loans originated for sale ( 5,310 ) ( 5,923 ) Proceeds from sales of SBA loans originated for sale 5,571 6,483 Gain on sale of SBA loans ( 262 ) ( 560 ) Gain on disposal or write-down of property, plant, and equipment ( 97 ) ( 52 ) Gain on sale or write-down of foreclosed assets ( 88 ) ( 26 ) Gain on sale of bank premises and equipment held for sale ( 114 ) — Write-off of bank premises and equipment held for sale 705 — Accretion of subordinated debt ( 417 ) — Stock compensation expense 696 532 Deferred income tax benefit ( 23 ) ( 295 ) (Increase) decrease in accrued interest receivable ( 4,533 ) 2,963 (Increase) decrease in other assets ( 712 ) 1,386 Increase (decrease) in accrued interest payable 50 ( 106 ) Net change in operating lease liability ( 1,654 ) ( 1,314 ) Decrease in other liabilities ( 6,321 ) ( 40 ) Net Cash Provided By Operating Activities 41,604 41,556 Investing Activities: Proceeds from the sale of available-for-sale securities — 5,178 Proceeds from the maturity or call of available-for-sale securities 9,910 2,500 Purchases of available-for-sale securities ( 213,974 ) ( 6,893 ) Proceeds from the maturity or call of held-to-maturity securities 12,401 40,014 Purchases of held-to-maturity securities ( 85,664 ) ( 64,972 ) Reduction (purchases) of restricted investment in bank stock 4,539 ( 312 ) Net (increase) decrease in loans and leases ( 218,061 ) 11,835 Purchases of bank premises and equipment ( 3,734 ) ( 3,149 ) Proceeds from the sale of bank premises and equipment 1,912 62 Proceeds from the sale of foreclosed assets 148 202 Net Cash Used In Investing Activities ( 492,523 ) ( 15,535 ) Financing Activities: Net (decrease) increase in deposits ( 272,420 ) 487,301 Net increase in short-term borrowings — ( 125,617 ) Common stock dividends paid ( 9,558 ) ( 6,586 ) Proceeds from Employee Stock Purchase Plan stock issuance 151 127 Proceeds from Director Stock Purchase Plan stock issuance 122 100 Proceeds from follow-on common stock public offering — 70,238 Treasury stock purchased ( 2,957 ) ( 128 ) Riverview restricted stock adjustment 776 — Net change in finance lease liability ( 67 ) ( 65 ) Long-term debt repayment ( 76,702 ) — Subordinated debt redemption ( 7,500 ) ( 173 ) Net Cash (Used In) Provided By Financing Activities ( 368,155 ) 425,197 Net (decrease) increase in cash and cash equivalents ( 819,074 ) 451,218 Cash and cash equivalents, beginning of period 913,752 303,724 Cash and cash equivalents, end of period $ 94,678 $ 754,942 8 Table of Contents MID PENN BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED) (Dollars in thousands) Nine Months Ended September 30, 2022 2021 Supplemental Disclosures of Cash Flow Information: Cash paid for interest $ 9,552 $ 11,547 Cash paid for income taxes 3,500 8,835 Supplemental Noncash Disclosures: Recognition of operating lease right of use assets $ 552 $ 1,064 Recognition of operating lease liabilities 552 1,064 Obsolete Riverview asset writeoff 705 — Loans transferred to foreclosed assets held for sale 109 53 The accompanying notes are an integral part of these unaudited consolidated financial statements. 9 Table of Contents MID PENN BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Basis of Presentation For all periods presented, the accompanying consolidated financial statements include the accounts of Mid Penn Bancorp, Inc. (“Mid Penn” or the “Corporation”), its wholly-owned subsidiary, Mid Penn Bank (the “Bank”), and three nonbank subsidiaries which were established during 2020, including MPB Financial Services, LLC, under which two additional nonbank subsidiaries have been established: (i) MPB Wealth Management, LLC, created to expand the wealth management services and capabilities of the Corporation, and (ii) MPB Risk Services, LLC, created to fulfill the insurance needs of both existing and potential customers of the Corporation. As of September 30, 2022, the accounts and activities of these nonbank subsidiaries established in 2020 were not material to warrant separate disclosure or segment reporting. As a result, Mid Penn has only one reportable segment for financial reporting purposes. All material intercompany accounts and transactions have been eliminated in consolidation. On November 30, 2021, Mid Penn completed its acquisition of Riverview Financial Corporation (“Riverview”), pursuant to the previously announced Agreement and Plan of Merger dated as of June 30, 2021. On November 30, 2021, Riverview was merged with and into Mid Penn, with Mid Penn being the surviving corporation. See "Note 3 - Acquisition of Riverview Financial Corporation ," as well as the Company’s Current Report on Form 8-K filed on December 1, 2021, for additional information. The comparability of Mid Penn’s results of operations for the period ended September 30, 2022, compared to the periods ended September 30, 2021 and the year ended December 31, 2021, in general, has been materially impacted by this acquisition, as further described in Note 3. For comparative purposes, the September 30, 2021 and December 31, 2021 balances have been reclassified, when necessary, to conform to the 2022 presentation. Such reclassifications had no impact on net income or total shareholders’ equity. In the opinion of management, all adjustments necessary for fair presentation of the periods presented have been reflected in the accompanying consolidated financial statements. All such adjustments are of a normal, recurring nature. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021. Mid Penn has evaluated events and transactions occurring subsequent to the balance sheet date of September 30, 2022, for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the issuance date of these consolidated financial statements. Note 2 - Summary of Significant Accounting Policies The significant accounting policies used in preparation of the Consolidated Financial Statements are disclosed in the Corporation’s 2021 Annual Report on Form 10-K. Those significant accounting policies are unchanged at September 30, 2022. Accounting Standards Pending Adoption ASU 2016-13 : The FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as further amended . The ASU requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss ("CECL") model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument. The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities. The allowance for purchased financial assets with a more-than insignificant amount of credit deterioration since origination ("PCD assets") should be determined in a similar manner to other financial assets measured on an amortized cost basis. However, upon initial recognition, the allowance is added to the purchase price ("gross up approach") to determine the initial amortized cost basis. The subsequent accounting for PCD assets is the same expected loss model described above. Further, the ASU made certain targeted amendments to the existing impairment model for available-for-sale debt securities. For an AFS debt security for which there is neither the intent nor a more-likely-than-not requirement to sell, an entity will record credit losses as an allowance rather than a write-down of the amortized cost basis. Certain incremental disclosures are required. Subsequently, the FASB issued ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11, and ASU 2020-02 to clarify, improve, or defer the adoption of ASU 2016-13. 10 Table of Contents MID PENN BANCORP, INC. In October 2019, the FASB issued ASU 2019-10 which deferred the implementation date of ASU 2016-13 for smaller reporting companies (SRCs) until January 1, 2023. Mid Penn qualified as an SRC as of the most recent measurement date of September 30, 2019; therefore, Mid Penn has chosen to delay the adoption of ASU 2016-13 until January 1, 2023. Mid Penn intends to adopt this ASU effective January 1, 2023. Mid Penn expects that it is probable that total credit loss reserves will increase at the adoption date and that the magnitude of the increase will depend on the composition, characteristics and quality of its loan and lease portfolio and the allowance for debt securities, as well as economic conditions and forecasts at the time of adoption. Mid Penn is conducting parallel runs of its new processes and controls and had begun its model validation process. Mid Penn will continue to make refinements to its credit loss model in advance of the January 1, 2023 adoption date. ASU No. 2022-02: The FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the TDR recognition and measurement guidance and, instead, requires that an entity evaluate (consistent with the accounting for other loan modifications) whether a modification represents a new loan or a continuation of an existing loan. In addition, this ASU enhances existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. For public business entities, this ASU requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 326-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. For entities that have adopted the amendments in update 2016-13, the amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For entities that have not yet adopted the amendments in update 2016-13, the effective dates for the amendments in this update are the same as the effective dates in Update 2016-13. The Corporation has not yet adopted this accounting standard as ASU 2016-13 has not been adopted. Management continues to evaluate the impact of its future adoption of this guidance on the Company’s financial statements. Note 3 - Acquisition of Riverview Financial Corporation On November 30, 2021, Mid Penn completed its acquisition of Riverview ("Riverview Acquisition") through the merger of Riverview with and into Mid Penn. In connection with this acquisition, Riverview Bank, Riverview’s wholly-owned bank subsidiary, merged with and into Mid Penn Bank. Pursuant to the merger agreement, shareholders of Riverview common stock received, for each share of Riverview common stock held at the effective time of the merger, 0.4833 shares of Mid Penn common stock as merger consideration with an acquisition date fair value of $ 142.2 million based on the closing stock price of Mid Penn’s common stock on November 30, 2021 of $ 31.46 . This exchange ratio did not change as a result of changes in the Mid Penn share price. Additionally, outstanding options at the time of the merger were converted into the right to receive an amount in cash equal to the product obtained by multiplying the aggregate number of shares of Riverview common stock that were issuable upon exercise of each option outstanding, and the closing sale price of Mid Penn’s common stock on the fifth (5th) business day prior to the merger closing date multiplied by the exchange ratio, less the per share exercise price of each option outstanding, without interest. There were 172,964 options outstanding to purchase Riverview common stock and the closing price of Mid Penn common stock was at $ 30.76 per share on the fifth business day prior to the merger closing date. Additionally, 2,500 shares of restricted stock were paid out in cash, resulting in $ 776 thousand of cash consideration relating to stock awards. Including $ 16 thousand of cash paid in lieu of fractional shares, the total fair value of consideration paid was $ 143.0 million. The assets and liabilities of Riverview were recorded on the consolidated balance sheets of Mid Penn at their estimated fair value as of November 30, 2021, and their results of operations have been included in the consolidated income statement of the Corporation since such date. Riverview has been fully integrated into Mid Penn; therefore, the amount of revenue and earnings of Riverview included in the consolidated income statement since the acquisition date is impracticable to provide. The acquisition of Riverview resulted in the recognition and recording of intangible assets including $ 51.0 million of goodwill, a core deposit intangible of $ 4.1 million, and a customer list intangible of $ 2.2 million. The core deposit intangible and customer list intangible will be amortized over a ten-year period using a sum of the years’ digits basis. The goodwill will not be amortized, but will be measured annually for impairment, or more frequently if circumstances require. 11 Table of Contents MID PENN BANCORP, INC. The allocation of the purchase price is as follows: (Dollars in thousands) Assets acquired: Cash and cash equivalents $ 316,079 Investment securities 226 Restricted stock 2,209 Loans 837,505 Goodwill 51,031 Core deposit intangible 4,096 Customer list intangible 2,160 Bank owned life insurance 32,120 Premises and equipment 11,819 Deferred income taxes 7,116 Accrued interest receivable 1,919 Other assets 6,641 Total assets acquired 1,272,921 Liabilities assumed: Deposits: Noninterest-bearing demand 182,291 Interest-bearing demand 371,283 Money Market 152,365 Savings 176,294 Time 199,414 Long-term debt 6,500 Subordinated debt and trust preferred securities 36,308 Accrued interest payable 439 Other liabilities 5,043 Total liabilities assumed 1,129,937 Consideration paid $ 142,984 Cash paid $ 792 Fair value of common stock issued 142,192 Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, allows for adjustments to goodwill up to one year after the merger date for information that becomes available during this post-merger period that reflects circumstances at the date of merger. During the third quarter of 2022 the Company increased its goodwill $ 36 thousand to account for changes to the deferred income tax asset and current income tax receivable upon the completion of the Riverview final tax return. 12 Table of Contents MID PENN BANCORP, INC. The following table summarizes the estimated fair value of the assets acquired and liabilities and equity assumed in the Riverview Acquisition that management believes are final: (Dollars in thousands) Total purchase price (consideration paid) $ 142,984 Net assets acquired: Cash and cash equivalents 316,079 Investment securities 226 Restricted stock 2,209 Loans 837,505 Core deposit intangible 4,096 Customer list intangible 2,160 Bank owned life insurance 32,120 Premises and equipment 11,819 Deferred income taxes 7,116 Accrued interest receivable 1,919 Other assets 6,641 Deposits: Noninterest-bearing demand ( 182,291 ) Interest-bearing demand ( 371,283 ) Money Market ( 152,365 ) Savings ( 176,294 ) Time ( 199,414 ) Long-term debt ( 6,500 ) Subordinated debt and trust preferred securities ( 36,308 ) Accrued interest payable ( 439 ) Other liabilities ( 5,043 ) Net assets acquired 91,953 Goodwill $ 51,031 In general, factors contributing to goodwill recognized as a result of the Riverview Acquisition include expected cost savings from combined operations, opportunities to expand into several new markets, and growth and profitability potential from the repositioning of short-term investments into higher-yielding loans. The goodwill acquired as a result of the Riverview Acquisition is not tax deductible. The fair value of the financial assets acquired included loans receivable with a net amortized cost basis of $ 837.5 million. The table below illustrates the fair value adjustments made to the amortized cost basis in order to present a fair value of the loans acquired. (Dollars in thousands) Gross amortized cost basis at November 30, 2021 $ 850,920 Market rate adjustment 529 Credit fair value adjustment on pools of homogeneous loans ( 13,117 ) Credit fair value adjustment on impaired loans ( 827 ) Fair value of purchased loans at November 30, 2021 $ 837,505 The market rate adjustment represents the movement in market interest rates, irrespective of credit adjustments, compared to the contractual rates of the acquired loans. The credit adjustment made on pools of homogeneous loans represents the changes in credit quality of the underlying borrowers from loan inception to the acquisition date. The credit adjustment on impaired 13 Table of Contents MID PENN BANCORP, INC. loans is derived in accordance with ASC 310-30-30 and represents the portion of the loan balance that has been deemed uncollectible based on our expectations of future cash flows for each respective loan. The information about the acquired Riverview impaired loan portfolio as of November 30, 2021 is as follows: (Dollars in thousands) Contractually required principal and interest at acquisition $ 5,591 Contractual cash flows not expected to be collected (nonaccretable discount) ( 1,739 ) Expected cash flows at acquisition 3,852 Interest component of expected cash flows (accretable discount) ( 541 ) Fair value of acquired loans $ 3,311 The following table presents pro forma information as if the merger between Mid Penn and Riverview had been completed on January 1, 2021. The pro forma information does not necessarily reflect the results of operations that would have occurred had Mid Penn merged with Riverview at the beginning of 2021. The pro forma financial information does not include the impact of possible business model changes, nor does it consider any potential impacts of current market conditions or revenues, expense efficiencies, or other factors. (Dollars in thousands, except per share data) Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021 Net interest income after loan loss provision $ 36,894 $ 108,307 Noninterest income 7,597 24,179 Noninterest expense 31,391 92,099 Net income 13,100 40,387 Net income per common share 0.62 2.08 Note 4 - Investment Securities The majority of the investment portfolio is comprised of securities issued by U.S. Treasury and government agencies, mortgage-backed U.S. government agencies, and state and political subdivision obligations. The amortized cost, fair value, and unrealized gains and losses on investment securities at September 30, 2022 and December 31, 2021 are as follows: (Dollars in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value September 30, 2022 Available-for-sale debt securities: U.S. Treasury and U.S. government agencies $ 39,511 $ — $ 1,927 $ 37,584 Mortgage-backed U.S. government agencies 187,757 — 19,553 168,204 State and political subdivision obligations 4,360 — 986 3,374 Corporate debt securities 35,468 — 2,435 33,033 Total available-for-sale debt securities 267,096 — 24,901 242,195 Held-to-maturity debt securities: U.S. Treasury and U.S. government agencies $ 245,638 $ 3 $ 36,102 $ 209,539 Mortgage-backed U.S. government agencies 52,788 — 7,325 45,463 State and political subdivision obligations 87,724 — 10,951 76,773 Corporate debt securities 15,992 — 1,142 14,850 Total held-to-maturity debt securities 402,142 3 55,520 346,625 Total $ 669,238 $ 3 $ 80,421 $ 588,820 14 Table of Contents MID PENN BANCORP, INC. (Dollars in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value December 31, 2021 Available-for-sale debt securities: Mortgage-backed U.S. government agencies $ 49,760 $ 3 $ 283 $ 49,480 State and political subdivision obligations 3,899 26 11 3,914 Corporate debt securities 9,525 — 57 9,468 Total available-for-sale debt securities 63,184 29 351 62,862 Held-to-maturity debt securities: U.S. Treasury and U.S. government agencies $ 178,136 $ 26 $ 1,165 $ 176,997 Mortgage-backed U.S. government agencies 61,157 440 272 61,325 State and political subdivision obligations 75,958 2,305 27 78,236 Corporate debt securities 14,006 133 71 14,068 Total held-to-maturity debt securities 329,257 2,904 1,535 330,626 Total $ 392,441 $ 2,933 $ 1,886 $ 393,488 Estimated fair values of debt securities are based on quoted market prices, where applicable. If quoted market prices are not available, fair values are based on quoted market prices of instruments of a similar type, credit quality and structure, adjusted for differences between the quoted instruments and the instruments being valued. See "Note 8 - Fair Value Measurement," for additional information. Investment securities having a fair value of $ 392.3 million at September 30, 2022 and $ 244.8 million at December 31, 2021 were pledged to secure public deposits, some Trust department deposit accounts, and certain other borrowings. In accordance with legal provisions for alternatives other than pledging of investments, Mid Penn also obtains letters of credit from the Federal Home Loan Bank of Pittsburgh ("FHLB") to secure certain public deposits. These FHLB letter of credit commitments totaled $ 265.3 million as of September 30, 2022 and $ 450.9 million as of December 31, 2021. 15 Table of Contents 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 September 30, 2022 and December 31, 2021. (Dollars in thousands) Less Than 12 Months 12 Months or More Total September 30, 2022 Number of Securities Fair Value Unrealized Losses Number of Securities Fair Value Unrealized Losses Number of Securities Fair Value Unrealized Losses Available-for-sale debt securities: U.S. Treasury and U.S. government agencies — $ — $ — 20 $ 37,584 $ 1,927 20 $ 37,584 $ 1,927 Mortgage-backed U.S. government agencies — — — 91 164,216 19,553 91 164,216 19,553 State and political subdivision obligations — — — 8 3,374 986 8 3,374 986 Corporate debt securities 3 2,523 477 14 27,260 1,958 17 29,783 2,435 Total temporarily impaired available-for-sale debt securities 3 $ 2,523 $ 477 133 $ 232,434 $ 24,424 136 $ 234,957 $ 24,901 Held-to-maturity debt securities: U.S. Treasury and U.S. government agencies 25 $ 30,523 $ 7,405 119 $ 177,014 $ 28,697 144 $ 207,537 $ 36,102 Mortgage-backed U.S. government agencies 1 316 43 63 45,147 7,282 64 45,463 7,325 State and political subdivision obligations 12 2,338 535 194 74,435 10,416 206 76,773 10,951 Corporate debt securities 5 5,156 844 3 4,753 298 8 9,909 1,142 Total temporarily impaired held-to-maturity debt securities 43 38,333 8,827 379 301,349 46,693 422 339,682 55,520 Total 46 $ 40,856 $ 9,304 512 $ 533,783 $ 71,117 558 $ 574,639 $ 80,421 (Dollars in thousands) Less Than 12 Months 12 Months or More Total December 31, 2021 Number of Securities Fair Value Unrealized Losses Number of Securities Fair Value Unrealized Losses Number of Securities Fair Value Unrealized Losses Available-for-sale securities: U.S. government agencies 24 $ 45,476 $ 283 — $ — $ — 24 $ 45,476 $ 283 State and political subdivision obligations 2 1,168 11 — — — 2 1,168 11 Corporate debt securities 4 4,943 57 — — — 4 4,943 57 Total temporarily impaired available-for-sale securities 30 $ 51,587 $ 351 — $ — $ — 30 $ 51,587 $ 351 Held-to-maturity securities: U.S. Treasury and U.S. government agencies 91 $ 149,425 $ 1,165 — $ — $ — 91 $ 149,425 $ 1,165 Mortgage-backed U.S. government agencies 24 39,995 272 — — — 24 39,995 272 State and political subdivision obligations 17 5,302 25 1 255 2 18 5,557 27 Corporate debt securities 6 6,928 71 — — — 6 6,928 71 Total temporarily impaired held to maturity securities 138 201,650 1,533 1 255 2 139 201,905 1,535 Total 168 $ 253,237 $ 1,884 1 $ 255 $ 2 169 $ 253,492 $ 1,886 Management evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such additional evaluation. Consideration is given to the length of time and the extent to 16 Table of Contents MID PENN BANCORP, INC. which the fair value of the security has been less than amortized cost, as well as the overall financial condition of the issuer. In addition, for debt securities, Mid Penn considers (i) whether management has the intent to sell the security, (ii) whether it is more likely than not that management will be required to sell the security prior to its anticipated recovery, and (iii) whether management expects to recover the entire amortized cost basis. Mid Penn had no securities considered by management to be other-than-temporarily impaired as of September 30, 2022, December 31, 2021, or September 30, 2021, and did not record any securities impairment charges in the respective periods ended on these dates. Mid Penn does not consider the securities with unrealized losses on the respective dates to be other-than-temporarily impaired as the unrealized losses were deemed to be temporary changes in value related to market movements in interest yields at various periods similar to the maturity dates of holdings in the investment portfolio, and not reflective of an erosion of credit quality. There were no gross realized gains and losses on sales of available-for-sale debt securities for the three and nine months ended September 30, 2022. For the three and nine months ended September 30, 2021 there were realized gains of $ 79 thousand. The table below illustrates the maturity distribution of investment securities at amortized cost and fair value as of September 30, 2022. (Dollars in thousands) Available-for-sale Held-to-maturity September 30, 2022 Amortized Cost Fair Value Amortized Cost Fair Value Due in 1 year or less $ 250 $ 250 $ — $ — Due after 1 year but within 5 years 40,013 38,602 73,579 69,250 Due after 5 years but within 10 years 35,017 32,006 232,023 197,794 Due after 10 years 4,059 3,133 43,752 34,118 79,339 73,991 349,354 301,162 Mortgage-backed securities 187,757 168,204 52,788 45,463 $ 267,096 $ 242,195 $ 402,142 $ 346,625 17 Table of Contents MID PENN BANCORP, INC. Note 5 - Loans and Allowance for Loan and Lease Losses As of September 30, 2022 and December 31, 2021, the types of loans in Mid Penn’s portfolio, summarized using Mid Penn’s internal risk rating system between those rated "pass" (net of deferred fees and costs of $ 4.0 million as of September 30, 2022 and $ 6.3 million as of December 31, 2021), which comprise the vast majority of the portfolio, and those classified as "special mention" and "substandard", are as follows: (Dollars in thousands) Pass Special Mention Substandard Total September 30, 2022 Commercial and industrial $ 544,077 $ 10,265 $ 2,454 $ 556,796 Commercial real estate 1,907,103 16,126 21,573 1,944,802 Commercial real estate - construction 398,966 — 1,222 400,188 Residential mortgage 290,952 2,529 3,429 296,910 Home equity 114,848 — 760 115,608 Consumer 8,153 — — 8,153 $ 3,264,099 $ 28,920 $ 29,438 $ 3,322,457 (Dollars in thousands) Pass Special Mention Substandard Total December 31, 2021 Commercial and industrial $ 606,484 $ 10,321 $ 2,757 $ 619,562 Commercial real estate 1,601,196 35,508 31,438 1,668,142 Commercial real estate - construction 371,337 — 1,397 372,734 Residential mortgage 319,862 294 3,067 323,223 Home equity 106,853 534 2,919 110,306 Consumer 10,429 — — 10,429 $ 3,016,161 $ 46,657 $ 41,578 $ 3,104,396 Mid Penn had $ 2.8 million and $ 111.3 million of PPP loans outstanding, net of deferred fees, as of September 30, 2022 and December 31, 2021, respectively. All PPP loans are included in commercial and industrial loans and are fully guaranteed by the Small Business Administration ("SBA"); therefore, all PPP loans outstanding (net of the related deferred PPP fees) are classified as "pass" within Mid Penn’s internal risk rating system as of September 30, 2022. Mid Penn had no loans classified as "doubtful" as of September 30, 2022 and December 31, 2021. 18 Table of Contents MID PENN BANCORP, INC. Impaired loans by loan portfolio class as of September 30, 2022 and December 31, 2021 are summarized as follows: September 30, 2022 December 31, 2021 (Dollars in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance With no related allowance recorded: Commercial and industrial $ — $ 18 $ — $ — $ 31 $ — Commercial real estate 601 1,022 — 854 1,243 — Commercial real estate - construction — 4 — 22 27 — Residential mortgage 1,296 1,369 — 1,259 1,295 — Home equity 31 31 — 2,377 2,377 — With no related allowance recorded and acquired with credit deterioration: Commercial real estate $ 1,364 $ 2,101 $ — $ 2,231 $ 2,909 $ — Commercial real estate - construction 1,222 1,461 — 1,196 1,469 — Residential mortgage 1,149 1,708 — 1,362 1,847 — Home equity 83 104 — 86 111 — With an allowance recorded: Commercial and industrial $ 1,309 $ 1,781 $ 831 $ 308 $ 339 $ 67 Commercial real estate 112 112 28 287 359 121 Residential mortgage 96 96 6 — — — Home equity 252 252 45 — — — Total Impaired Loans: Commercial and industrial $ 1,309 $ 1,799 $ 831 $ 308 $ 370 $ 67 Commercial real estate 2,077 3,235 28 3,372 4,511 121 Commercial real estate - construction 1,222 1,465 — 1,218 1,496 — Residential mortgage 2,541 3,173 6 2,621 3,142 — Home equity 366 387 45 2,463 2,488 — 19 Table of Contents MID PENN BANCORP, INC. The average recorded investment of impaired loans and related interest income recognized for the three and nine months ended September 30, 2022 and 2021 are summarized as follows: Three Months Ended Nine Months Ended September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 (Dollars in thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related allowance recorded: Commercial and industrial $ — $ — $ 5 $ — $ 75 $ — $ 379 $ — Commercial real estate 619 — 938 — 920 — 2,671 1 Commercial real estate - construction — — 23 — 148 — 27 — Residential mortgage 1,305 6 1,018 6 1,766 17 902 20 Home equity 15 1 2,379 — 769 184 2,364 — With no related allowance recorded and acquired with credit deterioration: Commercial real estate 1,384 — 1,368 — 1,777 — 1,383 — Commercial real estate - construction 1,226 — — — 1,217 — — — Residential mortgage 1,172 — 281 — 1,253 — 291 — Home equity 83 — — — 84 — — — With an allowance recorded: Commercial and industrial $ 1,333 $ — $ 217 $ — $ 1,158 $ — $ 187 $ — Commercial real estate 112 — 1,503 — 112 — 1,192 — Residential mortgage 96 — — — 70 — — — Home equity 252 — — — 172 — — — Total Impaired Loans: Commercial and industrial $ 1,333 $ — $ 222 $ — $ 1,233 $ — $ 566 $ — Commercial real estate 2,115 — 3,809 — 2,809 — 5,246 1 Commercial real estate - construction 1,226 — 23 — 1,365 — 27 — Residential mortgage 2,573 6 1,299 6 3,089 17 1,193 20 Home equity 350 1 2,379 — 1,025 184 2,364 — Nonaccrual loans by loan portfolio class, including loans acquired with credit deterioration, as of September 30, 2022 and December 31, 2021 are summarized as follows: (Dollars in thousands) September 30, 2022 December 31, 2021 Commercial and industrial $ 1,309 $ 308 Commercial real estate 2,063 3,372 Commercial real estate - construction 1,222 1,218 Residential mortgage 2,228 2,186 Home equity 411 2,463 $ 7,233 $ 9,547 20 Table of Contents MID PENN BANCORP, INC. The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The classes of the loan portfolio summarized by the past due status as of September 30, 2022 and December 31, 2021 are summarized as follows: (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Total Past Due Current Total Loans Loans Receivable > 90 Days and Accruing September 30, 2022 Commercial and industrial $ 136 $ 756 $ 1,121 $ 2,013 $ 554,783 $ 556,796 $ 633 Commercial real estate 1,274 1,530 258 3,062 1,940,376 1,943,438 — Commercial real estate - construction 321 — — 321 398,645 398,966 — Residential mortgage 355 150 434 939 294,822 295,761 — Home equity 70 — 252 322 115,203 115,525 — Consumer 12 — — 12 8,141 8,153 — Loans acquired with credit deterioration: Commercial real estate — — 850 850 514 1,364 — Commercial real estate - construction — — — — 1,222 1,222 — Residential mortgage 73 229 304 606 543 1,149 — Home equity — — 32 32 51 83 — Total $ 2,241 $ 2,665 $ 3,251 $ 8,157 $ 3,314,300 $ 3,322,457 $ 633 (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Total Past Due Current Total Loans Loans Receivable > 90 Days and Accruing December 31, 2021 Commercial and industrial $ 1,378 $ 62 $ 404 $ 1,844 $ 617,718 $ 619,562 $ 96 Commercial real estate 32 55 769 856 1,665,055 1,665,911 — Commercial real estate - construction — — 205 205 371,333 371,538 205 Residential mortgage 1,246 205 1,002 2,453 319,408 321,861 212 Home equity 403 — 2,377 2,780 107,440 110,220 — Consumer 6 2 2 10 10,419 10,429 2 Loans acquired with credit deterioration: Commercial real estate — 3 1,628 1,631 600 2,231 — Commercial real estate - construction — — — — 1,196 1,196 — Residential mortgage 54 — 818 872 490 1,362 — Home equity — — — — 86 86 — Total $ 3,119 $ 327 $ 7,205 $ 10,651 $ 3,093,745 $ 3,104,396 $ 515 The allowance for loan and lease losses and the related loan loss provision for the periods presented reflect Mid Penn’s continued application of the incurred loss method for estimating credit losses, as Mid Penn is not required to adopt the CECL accounting standard until January 1, 2023, and Mid Penn has not elected to early adopt CECL. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan and lease losses is adequate. 21 Table of Contents MID PENN BANCORP, INC. The following tables summarize the allowance and recorded investments in loans receivable. (Dollars in thousands) As of, and for the three months ended, September 30, 2022 Commercial and industrial Commercial real estate Commercial real estate - construction Residential mortgage Home equity Consumer Unallocated Total Allowance for loan and lease losses: Beginning balance, July 1, 2022 $ 3,671 $ 11,991 $ 46 $ 502 $ 641 $ 2 $ 23 $ 16,876 Charge-offs ( 1 ) — — ( 2 ) ( 1 ) ( 11 ) — ( 15 ) Recoveries — 63 — — — 6 — 69 Provisions 879 468 5 73 89 5 31 1,550 Ending balance, September 30, 2022 $ 4,549 $ 12,522 $ 51 $ 573 $ 729 $ 2 $ 54 $ 18,480 (Dollars in thousands) As of, and for the nine months ended, September 30, 2022 Commercial and industrial Commercial real estate Commercial real estate - construction Residential mortgage Home equity Consumer Unallocated Total Allowance for loan and lease losses: Beginning balance, January 1, 2022 $ 3,439 $ 9,415 $ 38 $ 459 $ 560 $ 2 $ 684 $ 14,597 Charge-offs ( 1 ) — — ( 2 ) ( 1 ) ( 77 ) — ( 81 ) Recoveries 13 128 24 2 2 20 — 189 Provisions (credits) 1,098 2,979 ( 11 ) 114 168 57 ( 630 ) 3,775 Ending balance, September 30, 2022 4,549 12,522 51 573 729 2 54 18,480 Individually evaluated for impairment 831 28 — 6 45 — — 910 Ending balance: Collectively evaluated for impairment $ 3,718 $ 12,494 $ 51 $ 567 $ 684 $ 2 $ 54 $ 17,570 Loans receivables: Ending balance $ 556,796 $ 1,944,802 $ 400,188 $ 296,910 $ 115,608 $ 8,153 $ — $ 3,322,457 Ending balance: individually evaluated for impairment 1,309 713 — 1,392 283 — — 3,697 Ending balance: acquired with credit deterioration — 1,364 1,222 1,149 83 — — 3,818 Ending balance: collectively evaluated for impairment $ 555,487 $ 1,942,725 $ 398,966 $ 294,369 $ 115,242 $ 8,153 $ — $ 3,314,942 22 Table of Contents 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 23 Table of Contents MID PENN BANCORP, INC. (Dollars in thousands) As of, and for the three months ended, September 30, 2021 Commercial and industrial Commercial real estate Commercial real estate - construction Residential mortgage Home equity Consumer Unallocated Total Allowance for loan and lease losses: Beginning balance, July 1, 2021 $ 3,165 $ 9,977 $ 130 $ 499 $ 588 $ 2 $ 355 $ 14,716 Charge-offs — ( 1,043 ) — ( 3 ) — ( 11 ) — ( 1,057 ) Recoveries 1 140 — 2 — 6 — 149 Provisions (credits) 204 ( 112 ) 3 ( 8 ) 15 5 318 425 Ending balance, September 30, 2021 $ 3,370 $ 8,962 $ 133 $ 490 $ 603 $ 2 $ 673 $ 14,233 (Dollars in thousands) As of, and for the nine months ended, September 30, 2021 Commercial and industrial Commercial real estate Commercial real estate - construction Residential mortgage Home equity Consumer Unallocated Total Allowance for loan and lease losses: Beginning balance, January 1, 2021 3,066 8,655 134 429 507 1 590 $ 13,382 Charge-offs ( 859 ) ( 1,043 ) ( 23 ) ( 13 ) — ( 23 ) — ( 1,961 ) Recoveries 2 206 — 13 — 16 — 237 Provisions (credits) 1,161 1,144 22 61 96 8 83 2,575 Ending balance, September 30, 2021 3,370 8,962 133 490 603 2 673 14,233 Individually evaluated for impairment 69 129 — — — — — 198 Ending balance: collectively evaluated for impairment $ 3,301 $ 8,833 $ 133 $ 490 $ 603 $ 2 $ 673 $ 14,035 Loans receivables: Ending balance $ 632,680 $ 1,141,345 $ 314,457 $ 195,636 $ 78,012 $ 8,299 $ — $ 2,370,429 Ending balance: individually evaluated for impairment 221 1,214 22 1,276 2,420 — — 5,153 Ending balance: acquired with credit deterioration — 1,355 — 273 — — — 1,628 Ending balance: collectively evaluated for impairment $ 632,459 $ 1,138,776 $ 314,435 $ 194,087 $ 75,592 $ 8,299 $ — $ 2,363,648 Mid Penn entered into forbearance or modification agreements on loans currently classified as troubled debt restructures, and these agreements have resulted in additional principal repayment. The terms of these forbearance agreements vary and generally involve modifications from the original loan agreements, including either a reduction in the amount of principal payments for certain or extended periods, interest rate reductions, and/or the intent for the loan to be repaid as collateral is sold. Mid Penn’s troubled debt restructured loans at September 30, 2022 totaled $ 543 thousand and included: (i) one accruing impaired residential mortgage loan to a borrower in compliance with the terms of the modifications totaling $ 396 thousand, and (ii) $ 148 thousand of troubled debt restructurings attributable to five loans among three relationships which were classified as nonaccrual impaired based upon a collateral evaluation in accordance with the guidance on impaired loans. The balance of these nonaccrual impaired troubled debt restructured loans as of September 30, 2022 was comprised of $ 120 thousand in commercial real estate loans related to one borrower and two residential mortgage loans for $ 27 thousand. As of September 30, 2022, there were no defaulted troubled debt restructured loans, as all troubled debt restructured loans were current with respect to their associated forbearance agreements. In addition to contractual paydowns, the decrease in Mid Penn’s troubled debt restructured loan balance since December 31, 2021 reflects the successful workout of two nonaccrual impaired loans. Mid Penn’s troubled debt restructured loans at December 31, 2021 totaled $ 819 thousand, and included (i) two accruing impaired residential mortgage loans to unrelated borrowers in compliance with the terms of the modifications totaling $ 435 thousand, and (ii) $ 384 thousand of troubled debt restructurings attributable to eight loans among six relationships which were classified as nonaccrual 24 Table of Contents MID PENN BANCORP, INC. impaired based upon a collateral evaluation in accordance with the guidance on impaired loans. The balance of these nonaccrual impaired troubled debt restructured loans as of December 31, 2021 was comprised of $ 320 thousand in commercial real estate loans amongst two borrowers, one commercial real estate construction loan for $ 22 thousand, two residential mortgage loans for $ 37 thousand, and one commercial and industrial loan for $ 5 thousand. As of December 31, 2021, there were no defaulted troubled debt restructured loans, as all troubled debt restructured loans were current with respect to their associated forbearance agreements. There were also no defaults on troubled debt restructured loans within twelve months of restructure during 2021. The recorded investments in troubled debt restructured loans at September 30, 2022 and December 31, 2021 are as follows: (Dollars in thousands) Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Recorded Investment September 30, 2022 Commercial real estate $ 851 $ 815 $ 120 Residential mortgage 590 590 423 $ 1,441 $ 1,405 $ 543 (Dollars in thousands) Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Recorded Investment December 31, 2021 Commercial and industrial $ 8 $ 8 $ 5 Commercial real estate 1,214 1,115 320 Commercial real estate - construction 40 40 22 Residential mortgage 647 645 472 $ 1,909 $ 1,808 $ 819 The following tables provide activity for the accretable yield of acquired impaired loans from the Phoenix (March 2015), Scottdale (January 2018), First Priority (July 2018), and Riverview (November 2021) acquisitions for the three and nine months ended September 30, 2022 and 2021. (Dollars in thousands) Three Months Ended September 30, 2022 2021 Accretable yield, beginning of period $ 471 $ 40 Accretable yield amortized to interest income ( 64 ) — Accretable yield, end of period $ 407 $ 40 Nine Months Ended September 30, (Dollars in thousands) 2022 2021 Accretable yield, beginning of period $ 580 $ 40 Accretable yield amortized to interest income ( 173 ) — Accretable yield, end of period $ 407 $ 40 25 Table of Contents MID PENN BANCORP, INC. Note 6 - Derivative Financial Instruments As of September 30, 2022 and December 31, 2021, Mid Penn did not designate any derivative financial instruments as formal hedging relationships. Mid Penn’s free-standing derivative financial instruments are required to be carried at their fair value on consolidated balance sheets. Mortgage Banking Derivative Financial Instruments In connection with its mortgage banking activities, Mid Penn enters into commitments to originate certain fixed-rate residential mortgage loans for customers, also referred to as interest rate locks. In addition, Mid Penn enters into forward commitments for the future sales or purchases of mortgage-backed securities to or from third-party counterparties to hedge the effect of changes in interest rates on the values of both the interest rate locks and mortgage loans held for sale. Forward sales commitments may also be in the form of commitments to sell individual mortgage loans at a fixed price at a future date. The amount necessary to settle each interest rate lock is based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured. The notional amount and fair value of Mid Penn’s mortgage banking derivative financial instruments as of September 30, 2022 and December 31, 2021 are presented below. September 30, 2022 December 31, 2021 (Dollars in thousands) Notional Amount Fair Value Notional Amount Fair Value Interest Rate Lock Commitments $ 6,101 $ ( 141 ) $ 16,107 $ 56 Forward Commitments 6,145 ( 195 ) 20,521 32 The following table presents Mid Penn’s mortgage banking derivative financial instruments, their fair values, and their location in the consolidated balance sheets as of September 30, 2022 and December 31, 2021. September 30, 2022 December 31, 2021 (Dollars in thousands) Asset Derivatives Liability Derivatives Asset Derivatives Liability Derivatives Interest Rate Lock Commitments $ 3 $ 144 $ 56 $ — Forward Commitments 3 198 32 — Total $ 6 $ 342 $ 88 $ — The following table presents Mid Penn’s mortgage banking derivative financial instruments and the amount of the net gains or losses recognized within other noninterest income on the consolidated statement of income for the three and nine months ended September 30, 2022 and 2021. Three months ended Nine months ended (Dollars in thousands) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Interest Rate Lock Commitments $ ( 224 ) $ 134 $ ( 197 ) $ 134 Forward Commitments 441 ( 113 ) 1,518 ( 113 ) Total $ 217 $ 21 $ 1,321 $ 21 Loan-level Interest Rate Swaps Mid Penn enters into loan-level interest rate swaps with certain qualifying, creditworthy commercial loan customers to provide a loan pricing structure that meets both Mid Penn’s and the customer’s interest rate risk management needs. Mid Penn simultaneously enters into parallel interest rate swaps with a dealer counterparty, with identical notional amounts and terms. The net result of the offsetting customer and dealer counterparty swap agreements is that the customer pays a fixed rate of interest and Mid Penn receives a floating rate. Mid Penn’s loan-level interest rate swaps are considered derivatives but are not accounted for using hedge accounting. 26 Table of Contents MID PENN BANCORP, INC. The fair value, notional amount, and collateral posted related to loan-level interest rate swaps are presented below. (Dollars in thousands) September 30, 2022 December 31, 2021 Interest Rate Swap Contracts - Commercial Loans: Fair Value (1) $ 12,825 $ 102 Notional Amount 109,610 109,577 Cash Collateral Posted (2) 1,600 1,600 (1) Represents the total of the equal and offsetting fair value assets and liabilities related to the loan level interest rate swaps (2) Included in cash and due from banks on the consolidated balance sheet The gross amounts of commercial loan swap derivatives, the amounts offset and the carrying values in the consolidated balance sheets, and the collateral pledged to support such agreements are presented below. (Dollars in thousands) September 30, 2022 December 31, 2021 Interest Rate Swap Contracts - Commercial Loans: Gross amounts recognized $ 12,825 $ 102 Gross amounts offset 12,825 102 Net Amounts Presented in the Consolidated Balance Sheets — — Gross amounts not offset: Financial instruments — — Cash collateral 1,600 1,600 Net Amounts $ 1,600 $ 1,600 27 Table of Contents MID PENN BANCORP, INC. Note 7 - Comprehensive Income Comprehensive Income Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes changes in unrealized gains and losses on securities available for sale arising during the period and reclassification adjustments for realized gains and losses on securities available for sale included in net income. Mid Penn also recognizes other comprehensive income (loss) from an unfunded noncontributory defined benefit plan for directors and other postretirement benefit plans covering full-time employees. These plans utilize assumptions and methods to calculate the fair value of plan assets and Mid Penn recognizes the overfunded and underfunded status of the plans on its consolidated balance sheet. Gains and losses, prior service costs and credits are recognized in other comprehensive income (loss), net of tax, until they are amortized, or immediately upon curtailment. The components of accumulated other comprehensive (loss) income, net of taxes, are as follows: (Dollars in thousands) Unrealized Loss on Securities Defined Benefit Plans Accumulated Other Comprehensive (Loss) Income Balance - September 30, 2022 $ ( 19,673 ) $ 543 $ ( 19,130 ) Balance - December 31, 2021 $ ( 255 ) $ 413 $ 158 28 Table of Contents MID PENN BANCORP, INC. Note 8 - Fair Value Measurement Fair value measurement and disclosure guidance defines fair value as the price that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. This guidance provides additional information on determining when the volume and level of activity for the asset or liability has significantly decreased. Information on identifying circumstances when a transaction may not be considered orderly is also included within the guidance. Fair value measurement and disclosure guidance provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with the fair value measurement and disclosure guidance. This guidance clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly. In those situations, the entity must evaluate the weight of the evidence to determine whether the transaction is orderly. The guidance provides a list of circumstances that may indicate that a transaction is not orderly. A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value. Inputs to valuation techniques refer to the assumptions that market participants would use in measuring the fair value of an asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own belief about the assumptions market participants would use in pricing the asset or liability based upon the best information available in the circumstances. Fair value measurement and disclosure guidance establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. An asset’s or liability’s placement in the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement or disclosure. The fair value hierarchy is as follows: Level 1 - Inputs that represent quoted prices for identical instruments in active markets. Level 2 - Inputs that represent quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability. Level 3 - Inputs that are largely unobservable, as little or no market data exists for the instrument being valued. A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. There were no transfers of assets between fair value Level 1 and Level 2 during the three and nine months ended September 30, 2022 and 2021. 29 Table of Contents MID PENN BANCORP, INC. The following tables illustrate the assets measured at fair value on a recurring basis segregated by hierarchy fair value levels. (Dollars in thousands) Total carrying value at Fair value measurements at September 30, 2022 using: Assets: September 30, 2022 Level 1 Level 2 Level 3 Loans held for sale $ 5,997 $ 5,997 $ — Available-for-sale securities: U.S. Treasury and U.S. government agencies 37,584 — 37,584 — Mortgage-backed U.S. government agencies 168,204 — 168,204 — State and political subdivision obligations 3,374 — 3,374 — Corporate debt securities 33,033 — 33,033 — Other assets: Equity securities 428 428 — — Interest rate swap agreements 12,825 — 12,825 — Mortgage banking derivative assets 3 — 3 — Total $ 261,448 $ 428 $ 261,020 $ — (Dollars in thousands) Total carrying value at Fair value measurements at December 31, 2021 using: Assets: December 31, 2021 Level 1 Level 2 Level 3 Loans held for sale $ 11,514 $ — $ 11,514 $ — Available-for-sale securities: Mortgage-backed U.S. government agencies 49,480 — 49,480 — State and political subdivision obligations 3,914 — 3,914 — Corporate debt securities 9,468 — 9,468 — Other assets: Equity securities 500 500 — — Interest rate swap agreements 629 — 629 — Mortgage banking derivative assets 88 — 88 — Total $ 75,593 $ 500 $ 75,093 $ — Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following tables illustrate the assets measured at fair value on a nonrecurring basis segregated by hierarchy fair value levels. (Dollars in thousands) Total carrying value at Fair value measurements at September 30, 2022 using: Assets: September 30, 2022 Level 1 Level 2 Level 3 Impaired Loans $ 936 $ — $ — $ 936 Foreclosed assets held for sale 49 — — 49 (Dollars in thousands) Total carrying value at Fair value measurements at December 31, 2021 using: Assets: December 31, 2021 Level 1 Level 2 Level 3 Impaired Loans $ 508 $ — $ — $ 508 30 Table of Contents 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) September 30, 2022 Fair Value Estimate Valuation Technique Unobservable Input Range Weighted Average Impaired Loans $ 936 Appraisal of collateral (1), (2) Appraisal adjustments (2) 22 % - 77 % 52 % (Dollars in thousands) December 31, 2021 Fair Value Estimate Valuation Technique Unobservable Input Range Weighted Average Impaired Loans $ 508 Appraisal of collateral (1), (2) Appraisal adjustments (2) 21 % - 69 % 30 % (1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally includes various Level 3 inputs which are not observable. (2) Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal. Higher downward adjustments are caused by negative changes to the collateral or conditions in the real estate market, actual offers or sales contracts received, or age of the appraisal. There were no changes in unrealized gains and losses included in other comprehensive income during the nine months ended September 30, 2022 or 2021 related to Level 3 recurring fair value measurements, as Mid Penn has no assets measured at fair value on a Level 3 recurring basis. Mid Penn uses the following methodologies and assumptions to estimate the fair value of certain assets and liabilities. Securities The fair value of equity securities and debt securities classified as available for sale is determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather, relying on the securities’ relationship to other benchmark quoted prices. Mortgage Banking Derivative Assets Mortgage banking derivative assets represent the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors and the fair value of interest rate swaps. The fair values of the Bank’s interest rate locks, forward commitments and interest rate swaps represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date. These characteristics classify interest rate swap agreements as Level 2. See "Note 6 - Derivative Financial Instruments ," for additional information. Interest Rate Swap Agreements Interest rate swap agreements are measured by alternative pricing sources with reasonable levels of price transparency in markets that are not active. Based on the complex nature of interest rate swap agreements, the markets these instruments trade in are not as efficient and are less liquid than that of the more mature Level 1 markets. These markets do however have comparable, observable inputs in which an alternative pricing source values these assets in order to arrive at a fair market value. These characteristics classify interest rate swap agreements as Level 2. Impaired Loans (included in "Net Loans and Leases" in the following tables) All performing troubled debt restructured loans and loans classified as nonaccrual are deemed to be impaired, and all of these loans are considered collateral dependent; therefore, all of Mid Penn’s impaired loans, whether reporting a specific allowance allocation or not, are considered collateral dependent. It is Mid Penn’s policy to obtain updated third-party collateral valuations on all impaired loans secured by real estate as soon as practically possible following the credit being classified as substandard nonaccrual. Prior to receipt of the updated real estate valuation, Mid Penn will use existing real estate valuations to determine any potential allowance for loan and lease loss issues and will update the allowance impact calculation upon receipt of the updated real estate valuation. 31 Table of Contents MID PENN BANCORP, INC. In some instances, Mid Penn is not holding real estate as collateral and is relying on business assets (personal property) for repayment. In these circumstances a collateral inspection is performed by Mid Penn personnel to determine an estimated value. The value is based on net book value, as provided by the financial statements, and discounted accordingly based on determinations made by management. Occasionally, Mid Penn will employ an outside service to provide a fair estimate of value based on auction sales or private sales. Management reviews the estimates of these third parties and discounts them accordingly based on management’s judgment, if deemed necessary. Mid Penn considers the estimates used in its impairment analysis to be Level 3 inputs. Mid Penn actively monitors the values of collateral on impaired loans. This monitoring may require the modification of collateral values, either in a positive or negative way, due to the passage of time or some other change in one or more valuation inputs. Collateral values for impaired loans will be reassessed by management at least every 12 months for possible revaluation by an independent third party. Foreclosed Assets Held for Sale Certain assets included in foreclosed assets held for sale are carried at fair value and accordingly is presented as measured on a non-recurring basis. Values are estimated using Level 3 inputs, based on appraisals that consider the sales prices of property in the proximate vicinity. The following table summarizes the carrying value and fair value of financial instruments: (Dollars in thousands) September 30, 2022 December 31, 2021 Carrying Value Fair Value Carrying Value Fair Value Financial assets: Cash and cash equivalents $ 94,678 $ 94,678 $ 913,752 $ 913,752 Available-for-sale investment securities 242,195 242,195 62,862 62,862 Held-to-maturity investment securities 402,142 346,625 329,257 330,626 Equity securities 428 428 500 500 Loans held for sale 5,997 5,997 11,514 11,787 Net loans and leases 3,303,977 3,252,277 3,089,799 3,118,416 Restricted investment in bank stocks 4,595 4,595 9,134 9,134 Accrued interest receivable 15,861 15,861 10,779 10,779 Interest rate swap agreements 12,825 12,825 629 629 Mortgage banking derivative assets 6 6 88 88 Financial liabilities: Deposits $ 3,729,596 $ 3,716,190 $ 4,002,016 $ 4,046,217 Long-term debt (1) 1,188 1,148 77,890 77,455 Subordinated debt 66,357 63,895 74,274 74,553 Accrued interest payable 1,841 1,841 1,791 1,791 Mortgage banking derivative liabilities 342 342 — — (1) Long-term debt excludes finance lease obligations. The Bank’s outstanding and unfunded credit commitments and financial standby letters of credit were deemed to have no significant fair value as of September 30, 2022 and December 31, 2021. The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of Mid Penn’s financial instruments as of September 30, 2022 and December 31, 2021. Carrying values approximate fair values for cash and cash equivalents, restricted investment in bank stocks, accrued interest receivable and payable, and short-term borrowings. Other than cash and cash equivalents, which are considered Level 1 Inputs, and mortgage servicing rights, which are Level 3 Inputs, 32 Table of Contents MID PENN BANCORP, INC. these instruments are Level 2 Inputs. These tables exclude financial instruments for which the carrying amount approximates fair value, not previously disclosed. (Dollars in thousands) Fair Value Measurements September 30, 2022 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial instruments - assets Held-to-maturity investment securities $ 402,142 $ 346,625 $ — $ 346,625 $ — Net loans and leases 3,303,977 3,252,277 — — 3,252,277 Financial instruments - liabilities Deposits $ 3,729,596 $ 3,716,190 $ — $ 3,716,190 $ — Long-term debt (1) 1,188 1,148 — 1,148 — Subordinated debt 66,357 63,895 — 63,895 — (1) Long-term debt excludes finance lease obligations. (Dollars in thousands) Fair Value Measurements December 31, 2021 Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial instruments - assets Held-to-maturity investment securities $ 329,257 $ 330,626 $ — $ 330,626 $ — Net loans and leases 3,089,799 3,118,416 — — 3,118,416 Financial instruments - liabilities Deposits $ 4,002,016 $ 4,046,217 $ — $ 4,046,217 $ — Long-term debt (1) 77,890 77,455 — 77,455 — Subordinated debt 74,274 74,553 — 74,553 — (1) Long-term debt excludes finance lease obligations. Note 9 - Guarantees, Commitments, and Contingencies Guarantees In the normal course of business, Mid Penn makes various commitments and incurs certain contingent liabilities which are not reflected in the accompanying consolidated financial statements. The commitments include various guarantees and commitments to extend credit. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Mid Penn evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation of the customer. Standby letters of credit and financial guarantees written are conditional commitments to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Mid Penn had $ 51.7 million and $ 55.6 million of standby letters of credit outstanding as of September 30, 2022 and December 31, 2021, respectively. Mid Penn does not anticipate any losses because of these transactions. The amount of the liability as of September 30, 2022 and December 31, 2021 for payment under standby letters of credit issued was not considered material. Commitments The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheet. The reserve for unfunded lending commitments was $ 85 thousand at September 30, 2022 and $ 72 thousand at December 31, 2021. During the second quarter of 2020, Mid Penn’s Board of Directors had approved Mid Penn Bank to enter into a commitment to purchase a limited partnership interest in a low-income housing project to construct thirty-nine apartments and common amenities in Cumberland County, Pennsylvania. All of the units are expected to qualify for Federal Low-Income Housing Tax Credits ("LIHTC") as provided for in Section 42 of the Internal Revenue Code of 1986, as amended. Mid Penn’s limited partner capital contribution commitment is expected to be $ 10.8 million, which will be paid in installments over the course of 33 Table of Contents MID PENN BANCORP, INC. construction of the low-income housing facilities. The investment in the limited partnership will be reported in other assets on the balance sheet and amortized over a ten-year period. The project has been conditionally awarded $ 1.2 million in annual LIHTCs by the Pennsylvania Housing Finance Agency, with a total anticipated LIHTC amount of $ 12.0 million to be received by Mid Penn over the ten-year amortization period. Mid Penn’s commitment to purchase the limited partnership interest is conditional upon (i) the review and approval of all closing documents, (ii) an opinion letter for tax counsel to the Partnership that the project qualifies for the LIHTCs, and (iii) review and approval by Mid Penn of other documents it may deem necessary. As a result of the Riverview Acquisition on November 30, 2021, Mid Penn assumed a commitment to purchase a limited partnership interest in a low-income housing project to preserve and rehabilitate three buildings consisting of seventeen apartments and two commercial shops in Schuylkill County, Pennsylvania. All the units are expected to qualify for LIHTCs. Mid Penn’s limited partner capital contribution commitment is expected to be $ 4.4 million, which will be paid in installments over the course of construction of the low-income housing facilities. The investment in the limited partnership will be reported in other assets on the balance sheet and amortized over a ten-year period. Additionally, the agreement commits Mid Penn to a construction loan in the maximum principal amount of $ 3.5 million, which will bear interest at 5.5 % annum with a term of twenty-four months . The project has been conditionally awarded $ 484 thousand in annual LIHTCs by the Pennsylvania Housing Finance Agency, with a total anticipated LIHTC amount of $ 4.8 million to be received by Mid Penn over the ten-year amortization period. Mid Penn’s commitment to purchase the limited partnership interest is conditional upon (i) the review and approval of all closing documents, (ii) an opinion letter for tax counsel to the Partnership that the project qualifies for the LIHTCs, and (iii) review and approval by Mid Penn of other documents it may deem necessary. Contingencies As of September 30, 2022, Mid Penn had received $ 42.6 million of nonrefundable loan processing fees related to the loans disbursed as a result of Mid Penn’s participation in the SBA’s PPP, consisting of (i) $ 20.9 million of loan processing fees received during the year ended December 31, 2020, (ii) $ 18.0 million of loan processing fees received during the year ended December 31, 2021, and (iii) $ 3.7 million during the nine months ended September 30, 2022. These PPP loan processing fees, and any offsetting loan origination costs, were deferred in accordance with FASB ASC 310-20, Receivables—Nonrefundable Fees and Other Costs , and have been, and will continue to be, amortized to interest and fees on loans and leases on the consolidated statement of income over the life of the respective loans. The processing fees received from the SBA for administering the application for, and disbursing of, the PPP loans may be subject to clawback (or if the SBA has not yet paid the fee, the fee may not be paid), after full disbursement of a PPP loan if (i) the PPP loan is cancelled or voluntarily terminated and repaid after disbursement but before the borrower certification safe harbor date, (ii) the PPP loan is cancelled, terminated, or repaid after disbursement (and after the borrower certification safe harbor date) because the SBA conducted a loan review and determined that the borrower was ineligible for a PPP loan, or (iii) the lender has not fulfilled its obligations under the PPP regulations. As of September 30, 2022, Mid Penn is not aware of any PPP loans outstanding, for which fees have been received from the SBA, that have been cancelled, terminated, or repaid due to a borrower being determined to be ineligible for a PPP loan. Litigation Mid Penn is subject to lawsuits and claims arising out of its normal conduct of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material adverse effect on the consolidated financial condition of Mid Penn. Note 10 - Debt Short-term FHLB and Correspondent Bank Borrowings Short-term borrowings generally consist of federal funds purchased and advances from the FHLB with an original maturity of less than a year. Federal funds purchased from correspondent banks mature in one business day and reprice daily based on the Federal Funds rate. Advances from the FHLB are collateralized by the Bank’s investment in the common stock of the FHLB and by a blanket lien on selected loan receivables comprised principally of real estate secured loans within the Bank’s portfolio totaling $ 2.1 billion at September 30, 2022. The Bank had a short-term borrowing capacity from the FHLB as of September 30, 2022 up to the Bank’s unused borrowing capacity of $ 1.2 billion (equal to $ 1.5 billion of maximum borrowing capacity, less the aggregate amount of FHLB letter of credits securing public funds deposits, and other FHLB advances and obligations outstanding) upon satisfaction of any stock purchase requirements of the FHLB. No draws were outstanding on short-term FHLB or correspondent bank borrowings as of September 30, 2022 and December 31, 2021. The Bank also has unused overnight lines of credit with other correspondent banks amounting to $ 35.0 million at September 30, 2022. No draws have been made on these lines of credit and accordingly the balance was zero on both September 30, 2022 and December 31, 2021. 34 Table of Contents MID PENN BANCORP, INC. Short-term PPPLF Borrowings As of September 30, 2022 and December 31, 2021, the Bank paid all funding obtained from the Federal Reserve through the Paycheck Protection Program Liquidity Facility (“PPPLF”). The PPPLF allowed banks to pledge PPP loans as collateral to borrow funds for up to a term of five years (to match the term of the respective PPP loans) at an interest rate of 0.35 %. Long-term Debt As of September 30, 2022, and December 31, 2021, the Bank had long-term debt outstanding in the amount of $ 4.5 million and $ 81.3 million, respectively, consisting primarily of FHLB fixed rate instruments, as well as one finance lease obligation. As a member of the FHLB, the Bank can access a number of credit products which are utilized to provide liquidity. The FHLB fixed rate instruments obtained by the Bank are secured under the terms of a blanket collateral agreement with the FHLB consisting of FHLB stock and qualifying Bank loan receivables, principally real estate secured loans. The Bank also obtains letters of credit from the FHLB to secure certain public fund deposits of municipality and school district customers who agree to use of the FHLB letters of credit as a legally allowable alternative to investment pledging. These FHLB letter of credit commitments totaled $ 265.3 million as of September 30, 2022 and $ 450.9 million as of December 31, 2021. The following table presents a summary of long-term debt as of September 30, 2022 and December 31, 2021. (Dollars in thousands) September 30, 2022 December 31, 2021 FHLB fixed rate instruments: Due April 2022, 0.86343 % $ — $ 70,000 Due March 2023, 0.7514 % — 6,500 Due August 2026, 4.80 % 1,156 1,353 Due February 2027, 6.71 % 32 37 Total FHLB fixed rate instruments 1,188 77,890 Lease obligations included in long-term debt 3,313 3,380 Total long-term debt $ 4,501 $ 81,270 Note 11 - Subordinated Debt and Trust Preferred Securities Subordinated Debt Issued December 2015 On December 9, 2015, Mid Penn sold $ 7.5 million of subordinating notes (the "2015 Notes") due in 2025. The 2015 Notes paid interest at a rate of 5.15 % per year for the first five years outstanding, including the three months ended March 31, 2020. Beginning January 1, 2021, the 2015 Notes bore interest at a floating rate based on the Wall Street Journal’s Prime Rate plus 0.50 %, provided that the interest rate applicable to the outstanding principal balance was at no time less than 4.00 %. Interest was payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year, beginning on January 1, 2016. The 2015 Notes were redeemable in whole or in part, without premium or penalty, at any time on or after December 9, 2020, and prior to December 9, 2025. On August 8, 2022, Mid Penn redeemed all of the 2015 Notes. Subordinated Debt Assumed November 2021 with the Riverview Acquisition On November 30, 2021, Mid Penn completed its acquisition of Riverview and assumed $ 25.0 million of subordinated notes (the “Riverview Notes”). In accordance with purchase accounting principles, the Riverview Notes were assigned a fair value premium of $ 2.3 million. The notes are treated as Tier 2 capital for regulatory reporting purposes. The Riverview Notes were entered into by Riverview on October 6, 2020 with certain qualified institutional buyers and accredited institutional investors. The Riverview Notes have a maturity date of October 15, 2030 and initially bear interest, payable semi-annually, at a fixed annual rate of 5.75 % per annum until October 15, 2025. Commencing on that date, the interest rate applicable to the outstanding principal amount due will be reset quarterly to an interest rate per annum equal to the then current three-month secured overnight financing rate ("SOFR") plus 563 basis points, payable quarterly until maturity. Mid Penn may redeem the Riverview Notes at par, in whole or in part, at its option, anytime beginning on October 15, 2025. Trust Preferred Securities Assumed November 2021 with the Riverview Acquisition As a result of the merger with Riverview, Mid Penn assumed the subordinated debentures that Riverview had assumed in its acquisition of CBT Financial Corp. ("CBT") on October 1, 2017 (the “CBT 2017 Notes”). In 2003, a trust formed by CBT issued $ 5.2 million of floating rate trust preferred securities as part of a pooled offering of such securities, which are adjusted quarterly to the three-month LIBOR rate plus 2.95 %. CBT issued subordinated debentures to the trust in exchange for 35 Table of Contents MID PENN BANCORP, INC. ownership of all of the common securities of the trust and the proceeds of the offering; the debentures represent the sole asset of the trust. CBT became eligible to redeem the subordinated debentures, in whole but not in part, beginning in 2008 at a price of 100 % of face value. The subordinated debentures must be redeemed no later than 2033. Similarly, in 2005, a trust formed by CBT issued $ 4.1 million of fixed rate trust preferred securities as part of a pooled offering of such securities (the “CBT 2015 Notes”). CBT issued subordinated debentures to the trust in exchange for ownership of all of the common securities of the trust and the proceeds of the offering; the debentures represent the sole asset of the trust. CBT became eligible to redeem the subordinated debentures, in whole but not in part, beginning in 2010 at a price of 100 % of face value. Interest payments on the debentures may be deferred at any time at the election of Mid Penn for up to 20 consecutive quarterly periods. Interest on the debentures will accrue during the extension period, and all accrued principal and interest must be paid at the end of the extension period. During an extension period, Mid Penn may not declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to any of Mid Penn’s capital stock. In accordance with purchase accounting principles, the CBT 2017 Notes and CBT 2015 Notes assumed from Riverview were assigned a fair value premium of $ 6 thousand. The subordinated debentures are treated as Tier 1 capital for regulatory reporting purposes. Subordinated Debt Issued December 2020 On December 22, 2020, Mid Penn entered into agreements for and sold, at 100% of their principal amount, an aggregate of $ 12.2 million of its subordinated notes due December 2030 (the “December 2020 Notes”) on a private placement basis to accredited investors. The December 2020 Notes are treated as Tier 2 capital for regulatory capital purposes. The December 2020 Notes bear interest at a rate of 4.5 % per year for the first five years and then float at the Wall Street Journal’s Prime Rate, provided that the interest rate applicable to the outstanding principal balance during the period the December 2020 Notes are floating will at no time be less than 4.5 %. Interest is payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, beginning on March 31, 2021. The December 2020 Notes will mature on December 31, 2030 and are redeemable, in whole or in part, without premium or penalty, on any interest payment date on or after December 31, 2025 and prior to December 31, 2030, subject to any required regulatory approvals. Additionally, if (i) all or any portion of the December 2020 Notes cease to be deemed Tier 2 Capital, (ii) interest on the December 2020 Notes fails to be deductible for United States federal income tax purposes, or (iii) Mid Penn will be considered an “investment company,” Mid Penn may redeem the December 2020 Notes, in whole but not in part, by giving 10 days’ notice to the holders of the December 2020 Notes. In the event of a redemption described in the previous sentence, Mid Penn will redeem the December 2020 Notes at 100% of the principal amount of the December 2020 Notes, plus accrued and unpaid interest thereon to but excluding the date of redemption. Holders of the December 2020 Notes may not accelerate the maturity of the December 2020 Notes, except upon the bankruptcy, insolvency, liquidation, receivership or similar event of Mid Penn or the Bank. Related parties held $ 750 thousand of the December 2020 Notes as of September 30, 2022 and December 31, 2021. Subordinated Debt Issued March 2020 On March 20, 2020, Mid Penn entered into agreements with accredited investors who purchased $ 15.0 million aggregate principal amount of its subordinated notes due March 2030 (the “March 2020 Notes”). As a result of Mid Penn’s merger with Riverview on November 30, 2021, $ 6.9 million of the March 2020 Notes balance was redeemed as Riverview was a holder of the March 2020 Notes. The balance of March 2020 Notes outstanding as of September 30, 2022 was $ 8.1 million. The March 2020 Notes are intended to be treated as Tier 2 capital for regulatory capital purposes. The March 2020 Notes bear interest at a rate of 4.0 % per year for the first five years and then float at the Wall Street Journal’s Prime Rate, provided that the interest rate applicable to the outstanding principal balance during the period the March 2020 Notes are floating will at no time be less than 4.25 %. Interest is payable semi-annually in arrears on June 30 and December 30 of each year, beginning on June 30, 2020, for the first five years after issuance and will be payable quarterly in arrears thereafter on March 30, June 30, September 30 and December 30. The March 2020 Notes will mature on March 30, 2030 and are redeemable in whole or in part, without premium or penalty, at any time on or after March 30, 2025 and prior to March 30, 2030. Additionally, if all or any portion of the March 2020 Notes cease to be deemed Tier 2 Capital, Mid Penn may redeem, on any interest payment date, all or part of the 2020 Notes. In the event of a redemption described in the previous sentence, Mid Penn will redeem the March 2020 Notes at 100% of the principal amount of the March 2020 Notes, plus accrued and unpaid interest thereon to but excluding the date of redemption. Holders of the March 2020 Notes may not accelerate the maturity of the March 2020 Notes, except upon the bankruptcy, insolvency, liquidation, receivership or similar event of Mid Penn or the Bank. Related parties held $ 1.7 million of the March 2020 Notes as of September 30, 2022 and December 31, 2021. 36 Table of Contents MID PENN BANCORP, INC. Subordinated Debt Issued December 2017 On December 19, 2017, Mid Penn entered into agreements with investors to purchase $ 10.0 million aggregate principal amount of its subordinated notes due 2028 (the “2017 Notes”). The 2017 Notes are intended to be treated as Tier 2 capital for regulatory capital purposes. The 2017 Notes bear interest at a rate of 5.25 % per year for the first five years and then float at the Wall Street Journal’s Prime Rate plus 0.50 %, provided that the interest rate applicable to the outstanding principal balance will at no time be less than 5.0 %. Interest is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2018, for the first five years after issuance and will be payable quarterly in arrears thereafter on January 15, April 15, July 15, and October 15. The 2017 Notes will mature on January 1, 2028 and are redeemable in whole or in part, without premium or penalty, at any time on or after December 21, 2022, and prior to January 1, 2028. Additionally, Mid Penn may redeem the 2017 Notes in whole at any time, or in part from time to time, upon at least 30 days’ notice if: (i) a change or prospective change in law occurs that could prevent Mid Penn from deducting interest payable on the 2017 Notes for U.S. federal income tax purposes; (ii) an event occurs that precludes the 2017 Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) Mid Penn becomes required to register as an investment company under the Investment Company Act of 1940, as amended. In the event of a redemption described in the previous sentence, Mid Penn will redeem the 2017 Notes at 100% of the principal amount of the 2017 Notes, plus accrued and unpaid interest thereon to but excluding the date of redemption. Holders of the 2017 Notes may not accelerate the maturity of the 2017 Notes, except upon the bankruptcy, insolvency, liquidation, receivership or similar event of Mid Penn or the Bank. Related parties held $ 1.5 million of the 2017 Notes as of September 30, 2022 and December 31, 2021. ASC Subtopic 835-30, Simplifying the Presentation of Debt Issuance Costs , requires that debt issuance costs be reported in the balance sheet as a direct deduction from the face amount of the related liability. The unamortized debt issuance costs associated with the 2017 Notes were $ 25 thousand at September 30, 2022 and the 2015 Notes and the 2017 Notes were collectively $ 44 thousand at December 31, 2021. Note 12 - Defined Benefit Plans Mid Penn has an unfunded noncontributory defined benefit retirement plan for directors. The plan provides defined benefits based on years of service. Mid Penn also sponsors a defined benefit healthcare plan that provides post-retirement medical benefits and life insurance to qualifying full-time employees. These healthcare and life insurance plans are noncontributory and each plan uses a December 31 measurement date. As a result of the acquisition of Scottdale on January 8, 2018, Mid Penn assumed a noncontributory defined benefit pension plan covering certain former employees of Scottdale. Mid Penn does not expect any necessary contributions to this defined benefit plan during the year ended 2022. A December 31 measurement date for the plan is used. 37 Table of Contents MID PENN BANCORP, INC. The components of net periodic benefit costs from these defined benefit plans are as follows: Three Months Ended September 30, (Dollars in thousands) Pension Benefits Other Benefits 2022 2021 2022 2021 Service cost $ 36 $ 33 $ 1 $ 1 Interest cost 43 40 9 3 Expected return on plan assets ( 59 ) ( 57 ) — — Accretion of prior service cost — — ( 5 ) ( 5 ) Amortization of net (gain) loss ( 2 ) — 1 1 Net periodic benefit expense $ 18 $ 16 $ 6 $ — Nine Months Ended September 30, (Dollars in thousands) Pension Benefits Other Benefits 2022 2021 2022 2021 Service cost $ 108 $ 98 $ 11 $ 2 Interest cost 130 120 27 7 Expected return on plan assets ( 177 ) ( 170 ) — — Accretion of prior service cost — — ( 15 ) ( 15 ) Amortization of net (gain) loss ( 5 ) — 6 5 Settlement gain — ( 49 ) — — Net periodic benefit expense (income) $ 55 $ ( 1 ) $ 29 $ ( 1 ) Service costs are reported as a component of salaries and employee benefits on the consolidated statement of income, while interest costs, expected return on plan assets and amortization (accretion) of prior service cost are reported as a component of other income. Note 13 - Common Stock and Earnings Per Share Treasury Stock Repurchase Program Mid Penn adopted a treasury stock repurchase program ("Program") initially effective March 19, 2020, and the program remains available as it was extended through March 19, 2023 by Mid Penn’s Board of Directors on March 23, 2022. The Program authorizes the repurchase of up to $ 15.0 million of Mid Penn’s outstanding common stock, which represented approximately 3.5 % of the issued shares based on Mid Penn’s closing stock price and shares issued as of March 31, 2022. Under the Program, Mid Penn may conduct repurchases of its common stock through open market transactions (which may be by means of a trading plan adopted under SEC Rule 10b5-1) or in privately negotiated transactions. Repurchases under the Program are made at the discretion of management and are subject to market conditions and other factors. There is no guarantee as to the exact number of shares that Mid Penn may repurchase. The Program may be modified, suspended or terminated at any time, in Mid Penn’s discretion, based upon a number of factors, including liquidity, market conditions, the availability of alternative investment opportunities and other factors Mid Penn deems appropriate. The Program does not obligate Mid Penn to repurchase any shares. During the nine months ended September 30, 2022 and 2021 Mid Penn repurchased 109,891 and 5,800 shares of common stock, respectively. As of September 30, 2022, Mid Penn had repurchased 208,343 shares of common stock at an average price of $ 23.42 per share under the Program. The Program has $ 10.1 million remaining available for repurchase as of September 30, 2022. Shares Converted Pursuant to Riverview Merger As announced on a Form 8-K on December 1, 2021, pursuant to the terms of the merger agreement, each share of Riverview common stock issued and outstanding as of November 30, 2021 was converted into the right to receive 0.4833 shares of Mid Penn common stock. Cash was paid to Riverview shareholders in lieu of any fractional shares. As a result of the merger, Mid Penn issued 4,519,776 shares of Mid Penn common stock. The additional shares issued on November 30, 2021 significantly impacted the weighted average number of shares outstanding used for the earnings per share calculation for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021. 38 Table of Contents MID PENN BANCORP, INC. Underwritten Public Follow-On Common Stock Offering As previously announced on a Form 8-K on May 4, 2021, Mid Penn completed an underwritten public offering of 3.0 million shares of common stock at a price of $ 25.00 per share, with the aggregate gross proceeds of the offering totaling $ 74.8 million before underwriting discounts and offering expenses. The net proceeds of the offering, after deducting $ 4.5 million of combined underwriting discounts and other offering expenses, were $ 70.2 million. The additional shares issued on May 4, 2021 significantly impacted the weighted average number of shares outstanding used for the earnings per share calculation for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Dividend Reinvestment Plan Under Mid Penn’s amended and restated dividend reinvestment plan ("DRIP"), 330,750 shares of Mid Penn’s authorized but unissued common stock are reserved for issuance. The DRIP also allows for voluntary cash payments, within specified limits, to be used for the purchase of additional shares. Restricted Stock Plan Under Mid Penn’s 2014 Restricted Stock Plan, which was amended in 2020, Mid Penn may grant awards not exceeding, in the aggregate, 200,000 shares of common stock. The Plan was established for employees and directors of Mid Penn and the Bank, selected by the Compensation Committee of the Board of Directors, to align the interest of plan participants with those of Mid Penn’s shareholders. The plan provides those persons who have a responsibility for its growth with additional incentives by allowing them to acquire an ownership interest in Mid Penn and thereby encouraging them to contribute to the success of the company. As of September 30, 2022, a total of 164,537 restricted shares were granted under the Plan, of which 5,073 shares were forfeited and available for reissuance, 90,798 shares were vested, and the remaining 68,666 shares were unvested. The Plan shares granted and vested resulted in $ 237 thousand and $ 694 thousand in share-based compensation expense for the three and nine months ended September 30, 2022, respectively, and $ 227 thousand and $ 533 thousand of share-based compensation expense was recorded for the three and nine months ended September 30, 2021, respectively. Share-based compensation expense relating to restricted stock is calculated using grant date fair value and is recognized on a straight-line basis over the vesting periods of the awards. Restricted shares granted to employees vest in equal amounts on the anniversary of the grant date over the vesting period and the expense is a component of salaries and benefits expense on the consolidated statement of income. The employee grant vesting period is determined by the terms of each respective grant, with vesting periods generally between one and four years . Restricted shares granted to directors have a twelve-month vesting period, and the expense is a component of directors’ fees and benefits within the other expense line item on the consolidated statement of income. Earnings Per Common Share Basic earnings per common share are computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during each of the periods presented. Diluted earnings per common share are calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding plus common shares that would have been outstanding if dilutive potential common shares, consisting of unvested restricted stock, had been issued. The effect of dilutive unvested restricted stock was not material and did not result in a difference, when rounded to the whole cent, between the basic earnings per share compared to the diluted earnings per share for any of the periods presented. As previously announced on a Form 8-K on May 4, 2021, Mid Penn completed an underwritten public offering of 3.0 million shares of common stock at a price of $ 25.00 per share, with the aggregate gross proceeds of the offering totaling $ 74.8 million before underwriting discounts and offering expenses. The net proceeds of the offering after deducting the underwriting discount and other offering expenses were $ 70.2 million. Additionally, as previously announced on a Form 8-K on December 1, 2021, Mid Penn issued 4,519,776 shares of common stock as a result of the merger with Riverview on November 30, 2021. The additional shares issued on May 4, 2021 and November 30, 2021 significantly impacted the weighted average number of shares outstanding used for the three and nine months ended September 30, 2022 earnings per share calculations compared to the three and nine months ended September 30, 2021. 39 Table of Contents MID PENN BANCORP, INC. The following data shows the amounts used in computing basic and diluted earnings per common share. Three Months Ended September 30, Nine Months Ended September 30, (Dollars in thousands, except per share data) 2022 2021 2022 2021 Net income $ 15,481 $ 9,787 $ 39,087 $ 28,712 Weighted average common shares outstanding (basic) 15,877,592 11,423,487 15,922,945 10,064,655 Effect of dilutive unvested restricted stock grants 10,279 8,605 22,329 12,753 Weighted average common shares outstanding (diluted) 15,887,871 11,432,092 15,945,274 10,077,408 Basic earnings per common share $ 0.97 $ 0.86 $ 2.45 $ 2.85 Diluted earnings per common share 0.97 0.86 2.45 2.85 There were no antidilutive instruments at September 30, 2022 and 2021. 40 Table of Contents MID PENN BANCORP, INC.