Loans and Allowance for Loan and Lease Losses (Tables)

9 Months Ended

Sep. 30, 2018

Accounts Notes Loans And Financing Receivable Gross Allowance And Net [Abstract]

Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating

The classes of the loan portfolio, summarized by the pass rating (net of deferred fees and costs of $443,000 as of September 30, 2018 and $464,000 as of December 31, 2017), and the classified ratings of special mention and substandard within Mid Penn’s internal risk rating system as of September 30, 2018 and December 31, 2017, are as follows:

(Dollars in thousands)			Special
September 30, 2018	Pass		Mention		Substandard		Total
Commercial and industrial	$	259,870	$	2,106	$	7,174	$	269,150
Commercial real estate		801,897		1,917		9,008		812,822
Commercial real estate - construction		145,001		—		367		145,368
Lease financing		132		—		—		132
Residential mortgage		252,997		148		2,241		255,386
Home equity		73,753		—		96		73,849
Consumer		10,579		—		—		10,579
	$	1,544,229	$	4,171	$	18,886	$	1,567,286

(Dollars in thousands)			Special
December 31, 2017	Pass		Mention		Substandard		Total
Commercial and industrial	$	182,168	$	453	$	5,412	$	188,033
Commercial real estate		505,397		1,435		8,180		515,012
Commercial real estate - construction		61,667		182		487		62,336
Lease financing		229		—		—		229
Residential mortgage		97,814		157		1,062		99,033
Home equity		41,479		105		309		41,893
Consumer		3,868		—		—		3,868
	$	892,622	$	2,332	$	15,450	$	910,404

Impaired Loans by Loan Portfolio Class

Impaired loans by loan portfolio class as of September 30, 2018 and December 31, 2017 are summarized as follows:

	September 30, 2018						December 31, 2017
(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	$	—	$	—	$	—	$	—	$	13	$	—
Commercial real estate		2,033		2,553		—		3,424		4,056		—
Commercial real estate - construction		—		—		—		—		—		—
Lease financing		—		—		—		—		—		—
Residential mortgage		832		940		—		760		877		—
Home equity		25		126		—		260		295		—
Consumer		—		—		—		—		—		—

With no related allowance recorded and acquired with credit deterioration:
Commercial and industrial	$	28	$	28	$	—	$	—	$	—	$	—
Commercial real estate		1,456		1,456		—		555		555		—
Commercial real estate - construction		—		—		—		—		—		—
Lease financing		—		—		—		—		—		—
Residential mortgage		1,264		1,264		—		306		306		—
Home equity		4		4		—		—		—		—
Consumer		—		—		—		—		—		—

With an allowance recorded:
Commercial and industrial	$	4,527	$	4,635	$	489	$	4,434	$	4,460	$	136
Commercial real estate		857		872		243		1,423		1,589		293
Commercial real estate - construction		367		370		38		487		492		100
Lease financing		—		—		—		—		—		—
Residential mortgage		—		—		—		—		—		—
Home equity		—		—		—		—		—		—
Consumer		—		—		—		—		—		—

Total Impaired Loans:
Commercial and industrial	$	4,555	$	4,663	$	489	$	4,434	$	4,473	$	136
Commercial real estate		4,346		4,881		243		5,402		6,200		293
Commercial real estate - construction		367		370		38		487		492		100
Lease financing		—		—		—		—		—		—
Residential mortgage		2,096		2,204		—		1,066		1,183		—
Home equity		29		130		—		260		295		—
Consumer		—		—		—		—		—		—

Average Recorded Investment Of Impaired Loans And Related Interest Income By Loan Portfolio Class

The average recorded investment of impaired loans and related interest income recognized for the three and nine months ended September 30, 2018 and 2017 are summarized as follows:

	Three Months Ended
	September 30, 2018				September 30, 2017
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	—	$	—	$	—	$	—
Commercial real estate		1,872		—		751		—
Commercial real estate - construction		—		—		42		—
Lease financing		—		—		—		—
Residential mortgage		780		11		847		—
Home equity		17		—		294		3
Consumer		—		—		—		—

With no related allowance recorded and acquired with credit deterioration:
Commercial and industrial	$	24	$	—	$	—	$	—
Commercial real estate		1,470		7		570		—
Commercial real estate - construction		—		—		—		—
Lease financing		—		—		—		—
Residential mortgage		677		—		318		—
Home equity		1		—		—		—
Consumer		—		—		—		—

With an allowance recorded:
Commercial and industrial	$	4,425	$	—	$	2,230	$	—
Commercial real estate		703		—		2,148		—
Commercial real estate - construction		367		—		487		—
Lease financing		—		—		—		—
Residential mortgage		—		—		66		—
Home equity		—		—		—		—
Consumer		—		—		—		—

Total Impaired Loans:
Commercial and industrial	$	4,449	$	—	$	2,230	$	—
Commercial real estate		4,045		7		3,469		—
Commercial real estate - construction		367		—		529		—
Lease financing		—		—		—		—
Residential mortgage		1,457		11		1,231		—
Home equity		18		—		294		3
Consumer		—		—		—		—

	Nine Months Ended
	September 30, 2018				September 30, 2017
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	—	$	—	$	16	$	—
Commercial real estate		3,040		3		551		279
Commercial real estate - construction		—		—		164		—
Lease financing		—		—		—		—
Residential mortgage		769		27		852		18
Home equity		148		—		184		5
Consumer		—		—		—		—

With no related allowance recorded and acquired with credit deterioration:
Commercial and industrial	$	21	$	—	$	—	$	—
Commercial real estate		1,365		23		682		110
Commercial real estate - construction		—		—		—		—
Lease financing		—		—		—		—
Residential mortgage		726		—		339		—
Home equity		—		—		—		—
Consumer		—		—		—		—

With an allowance recorded:
Commercial and industrial	$	4,424	$	—	$	892	$	—
Commercial real estate		456		—		2,446		—
Commercial real estate - construction		367		—		390		—
Lease financing		—		—		—		—
Residential mortgage		—		—		53		—
Home equity		—		—		—		—
Consumer		—		—		—		—

Total Impaired Loans:
Commercial and industrial	$	4,445	$	—	$	908	$	—
Commercial real estate		4,861		26		3,679		389
Commercial real estate - construction		367		—		554		—
Lease financing		—		—		—		—
Residential mortgage		1,495		27		1,244		18
Home equity		148		—		184		5
Consumer		—		—		—		—

Non-accrual Loans by Classes of the Loan Portfolio

Nonaccrual loans by loan portfolio class as of September 30, 2018 and December 31, 2017 are summarized as follows:

(Dollars in thousands)	September 30, 2018		December 31, 2017
Commercial and industrial	$	4,555	$	4,434
Commercial real estate		3,910		4,902
Commercial real estate - construction		367		487
Residential mortgage		1,490		492
Home equity		29		260
	$	10,351	$	10,575

Loan Portfolio Summarized by the Past Due Status

The classes of the loan portfolio summarized by the past due status as of September 30, 2018 and December 31, 2017 are summarized as follows:


(Dollars in thousands)	30-59		60-89		Greater
	Days Past		Days Past		than 90		Total Past
September 30, 2018	Due		Due		Days		Due		Current		Total Loans
Commercial and industrial	$	-	$	4	$	4,302	$	4,306	$	264,816	$	269,122
Commercial real estate		710		—		273		983		810,383		811,366
Commercial real estate - construction		—		—		367		367		145,001		145,368
Lease financing		—		—		—		—		132		132
Residential mortgage		409		—		290		699		253,423		254,122
Home equity		24		25		19		68		73,777		73,845
Consumer		—		18		—		18		10,561		10,579
Loans acquired with credit deterioration:
Commercial and industrial		—		23		—		23		5		28
Commercial real estate		—		—		991		991		465		1,456
Commercial real estate - construction		—		—		—		—		-		-
Lease financing		—		—		—		—		-		-
Residential mortgage		—		—		237		237		1,027		1,264
Home equity		—		—		4		4		-		4
Consumer		—		—		—		—		-		-
Total	$	1,143	$	70	$	6,483	$	7,696	$	1,559,590	$	1,567,286


(Dollars in thousands)	30-59		60-89		Greater
	Days Past		Days Past		than 90		Total Past
December 31, 2017	Due		Due		Days		Due		Current		Total Loans
Commercial and industrial	$	4,439	$	16	$	-	$	4,455	$	183,578	$	188,033
Commercial real estate		-		-		3,669		3,669		510,788		514,457
Commercial real estate - construction		-		-		487		487		61,849		62,336
Lease financing		-		-		-		-		229		229
Residential mortgage		310		467		177		954		97,773		98,727
Home equity		54		98		250		402		41,491		41,893
Consumer		3		-		-		3		3,865		3,868
Loans acquired with credit deterioration:
Commercial and industrial		-		-		-		-		-		-
Commercial real estate		500		-		55		555		-		555
Commercial real estate - construction		-		-		-		-		-		-
Lease financing		-		-		-		-		-		-
Residential mortgage		-		31		193		224		82		306
Home equity		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Total	$	5,306	$	612	$	4,831	$	10,749	$	899,655	$	910,404

Allowance and Recorded Investment in Financing Receivables

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, 2018	Commercial and industrial			Commercial real estate			Commercial real estate - construction			Lease financing		Residential mortgage			Home equity			Consumer			Unallocated			Total
Allowance for loan and lease losses:
Beginning balance,
July 1, 2018	$	2,120		$	4,723		$	146		$	-	$	441		$	420		$	4		$	335		$	8,189
Charge-offs		(12	)		(34	)		-			-		(10	)		-			(11	)		-			(67	)
Recoveries		-			2			-			-		-			-			5			-			7
Provisions		232			130			(12	)		-		38			16			7			(311	)		100
Ending balance,
September 30, 2018	$	2,340		$	4,821		$	134		$	-	$	469		$	436		$	5		$	24		$	8,229

(Dollars in thousands)
As of, and for the nine months ended, September 30, 2018	Commercial and industrial			Commercial real estate			Commercial real estate - construction			Lease financing		Residential mortgage			Home equity			Consumer			Unallocated			Total
Allowance for loan and lease losses:
Beginning balance,
January 1, 2018	$	1,795		$	4,435		$	178		$	-	$	428		$	423		$	3		$	344		$	7,606
Charge-offs		(142	)		(34	)		(40	)		-		(14	)		(167	)		(21	)		-			(418	)
Recoveries		1			807			-			-		-			-			8			-			816
Provisions		686			(387	)		(4	)		-		55			180			15			(320	)		225
Ending balance,
September 30, 2018		2,340			4,821			134			-		469			436			5			24			8,229
Individually evaluated for impairment		489			243			38			-		-			-			-			-			770
Ending balance:
collectively evaluated for impairment	$	1,851		$	4,578		$	96		$	-	$	469		$	436		$	5		$	24		$	7,459

Loans receivables:
Ending balance	$	269,150		$	812,822		$	145,368		$	132	$	255,386		$	73,849		$	10,579		$	-		$	1,567,286
Ending balance: individually evaluated for impairment		4,527			2,890			367			-		832			25			-			-			8,641
Ending balance: acquired with credit deterioration		28			1,456			-			-		1,264			4			-			-			2,752
Ending balance: collectively evaluated for impairment	$	264,595		$	808,476		$	145,001		$	132	$	253,290		$	73,820		$	10,579		$	-		$	1,555,893

(Dollars in thousands)
December 31, 2017	Commercial and industrial		Commercial real estate		Commercial real estate - construction		Lease financing		Residential mortgage		Home equity		Consumer		Unallocated		Total
Allowance for loan and lease losses:
Beginning balance,
January 1, 2017	$	1,795	$	4,435	$	178	$	-	$	428	$	423	$	3	$	344	$	7,606
individually evaluated for impairment		136		293		100		-		-		-		-		-		529
Ending balance:
collectively evaluated for impairment	$	1,659	$	4,142	$	78	$	-	$	428	$	423	$	3	$	344	$	7,077

Loans receivable:
Beginning balance,
January 1, 2017	$	188,033	$	515,012	$	62,336	$	229	$	99,033	$	41,893	$	3,868	$	-	$	910,404
Individually evaluated for impairment		4,434		4,847		487		-		760		260		-		-		10,788
Acquired with credit deterioration		-		555		-		-		306		-		-		-		861
Ending balance:
collectively evaluated for impairment	$	183,599	$	509,610	$	61,849	$	229	$	97,967	$	41,633	$	3,868	$	-	$	898,755

(Dollars in thousands)
As of, and for the three months ended, September 30, 2017	Commercial and industrial			Commercial real estate			Commercial real estate - construction		Lease financing			Residential mortgage			Home equity			Consumer			Unallocated			Total
Allowance for loan and lease losses:
Beginning balance,
July 1, 2017	$	1,628		$	4,981		$	140	$	1		$	539		$	404		$	4		$	16		$	7,713
Charge-offs		-			(207	)		-		-			(7	)		(20	)		(5	)		-			(239	)
Recoveries		5			22			-		-			-			-			1			-			28
Provisions		166			(326	)		36		(1	)		7			53			5			60			-
Ending balance,
September 30, 2017	$	1,799		$	4,470		$	176	$	-		$	539		$	437		$	5		$	76		$	7,502

(Dollars in thousands)
As of, and for the nine months ended, September 30, 2017	Commercial and industrial			Commercial real estate			Commercial real estate - construction		Lease financing			Residential mortgage			Home equity			Consumer			Unallocated			Total
Allowance for loan and lease losses:
Beginning balance,
January 1, 2017	$	1,580		$	4,323		$	144	$	1		$	541		$	379		$	3		$	212		$	7,183
Charge-offs		(12	)		(237	)		-		-			(25	)		(20	)		(21	)		-			(315	)
Recoveries		11			383			-		-			4			5			6			-			409
Provisions		220			1			32		(1	)		19			73			17			(136	)		225
Ending balance,
September 30, 2017		1,799			4,470			176		-			539			437			5			76			7,502
Individually evaluated for impairment		150			375			100		-			66			-			-			-			691
Ending balance:
collectively evaluated for impairment	$	1,649		$	4,095		$	76	$	-		$	473		$	437		$	5		$	76		$	6,811

Loans receivables:
Ending balance	$	182,857		$	490,603		$	58,074	$	259		$	101,073		$	40,350		$	4,170		$	-		$	877,386
Ending balance: individually evaluated for impairment		4,460			2,148			487		-			856			261			-			-			8,212
Ending balance: acquired with credit deterioration		-			569			-		-			315			-			-			-			884
Ending balance: collectively evaluated for impairment	$	178,397		$	487,886		$	57,587	$	259		$	99,902		$	40,089		$	4,170		$	-		$	868,290

Troubled Debt Restructurings

The recorded investments in troubled debt restructured loans at September 30, 2018 and December 31, 2017 are as follows:

(Dollars in thousands)	Pre-Modification		Post-Modification
September 30, 2018	Outstanding Recorded Investment		Outstanding Recorded Investment		Recorded Investment
Commercial and industrial	$	4,110	$	4,460	$	4,303
Commercial real estate		2,940		2,841		2,229
Residential mortgage		677		675		522
Home equity		14		14		2
	$	7,741	$	7,990	$	7,056

(Dollars in thousands)	Pre-Modification		Post-Modification
December 31, 2017	Outstanding Recorded Investment		Outstanding Recorded Investment		Recorded Investment
Commercial and industrial	$	4,110	$	4,460	$	4,434
Commercial real estate		5,735		5,581		4,593
Residential mortgage		677		675		540
Home equity		14		14		4
	$	10,536	$	10,730	$	9,571

Schedule of Accretion of Purchased Impaired Loan

The following tables provide activity for the accretable yield of acquired impaired loans from the Phoenix Bancorp, Inc. (2015), Scottdale (January 2018), and First Priority (July 2018) acquisitions for the three and nine months ended September 30, 2018.

(Dollars in thousands)

Accretable yield, July 1, 2018	$	300
Acquisition of impaired loans		125
Accretable yield amortized to interest income		(61	)
Reclassification from nonaccretable difference (a)		-
Accretable yield, September 30, 2018	$	364

(Dollars in thousands)

Accretable yield, January 1, 2018	$	67
Acquisition of impaired loans	$	430
Accretable yield amortized to interest income		(133	)
Reclassification from nonaccretable difference (a)		-
Accretable yield, September 30, 2018	$	364

(a)

Reclassification from non-accretable difference represents an increase to the estimated cash flows to be collected on the underlying portfolio.