As of September 30, 2021 and December 31, 2020, 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 $10,676,000 as of September 30, 2021 and $9,084,000 as of December 31, 2020), which comprise the vast majority of the portfolio, and those classified as “special mention” and “substandard”, are as follows:

All PPP loans, whether disbursed in 2020 or 2021, are included in commercial and industrial loans and are fully guaranteed by the SBA; therefore, all PPP loans outstanding (net of the related deferred PPP fees) are classified as “pass” within Mid Penn’s internal risk rating system as of September 30, 2021.

Mid Penn had no loans classified as “doubtful” as of September 30, 2021 and December 31, 2020.

Impaired loans by loan portfolio class as of September 30, 2021 and December 31, 2020 are summarized as follows:

	September 30, 2021						December 31, 2020
(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	$	5	$	36	$	—	$	899	$	931	$	—
Commercial real estate		920		1,309		—		8,215		8,574		—
Commercial real estate - construction		22		27		—		31		34		—
Residential mortgage		1,276		1,309		—		818		842		—
Home equity		2,420		2,423		—		2,365		2,395		—
Consumer		—		—		—		—		—		—

With no related allowance recorded and acquired with credit deterioration:
Commercial and industrial	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate		1,355		1,590		—		1,419		1,693		—
Commercial real estate - construction		—		—		—		—		—		—
Residential mortgage		273		620		—		323		568		—
Home equity		—		11		—		—		13		—
Consumer		—		—		—		—		—		—

With an allowance recorded:
Commercial and industrial	$	216	$	247	$	69	$	553	$	574	$	533
Commercial real estate		294		363		129		887		994		274
Commercial real estate - construction		—		—		—		—		—		—
Residential mortgage		—		—		—		—		—		—
Home equity		—		—		—		—		—		—
Consumer		—		—		—		—		—		—

Total Impaired Loans:
Commercial and industrial	$	221	$	283	$	69	$	1,452	$	1,505	$	533
Commercial real estate		2,569		3,262		129		10,521		11,261		274
Commercial real estate - construction		22		27		—		31		34		—
Residential mortgage		1,549		1,929		—		1,141		1,410		—
Home equity		2,420		2,434		—		2,365		2,408		—
Consumer		—		—		—		—		—		—

The average recorded investment of impaired loans and related interest income recognized for the three and nine months ended September 30, 2021 and 2020 are summarized as follows:

	Three Months Ended
	September 30, 2021				September 30, 2020
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	5	$	—	$	932	$	—
Commercial real estate		938		—		7,171		5
Commercial real estate - construction		23		—		32		—
Residential mortgage		1,018		6		805		6
Home equity		2,379		—		2,396		—
Consumer		—		—		—		—

With no related allowance recorded and acquired with credit deterioration:
Commercial and industrial	$	—	$	—	$	—	$	—
Commercial real estate		1,368		—		1,428		—
Commercial real estate - construction		—		—		—		—
Residential mortgage		281		—		347		—
Home equity		—		—		—		—
Consumer		—		—		—		—

With an allowance recorded:
Commercial and industrial	$	217	$	—	$	130	$	—
Commercial real estate		1,503		—		560		—
Commercial real estate - construction		—		—		—		—
Residential mortgage		—		—		—		—
Home equity		—		—		—		—
Consumer		—		—		—		—

Total Impaired Loans:
Commercial and industrial	$	222	$	—	$	1,062	$	—
Commercial real estate		3,809		—		9,159		5
Commercial real estate - construction		23		—		32		—
Residential mortgage		1,299		6		1,152		6
Home equity		2,379		—		2,396		—
Consumer		—		—		—		—

	Nine Months Ended
	September 30, 2021				September 30, 2020
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	379	$	—	$	911	$	—
Commercial real estate		2,671		1		7,325		5
Commercial real estate - construction		27		—		36		—
Residential mortgage		902		20		794		19
Home equity		2,364		—		1,210		—
Consumer		—		—		—		—

With no related allowance recorded and acquired with credit deterioration:
Commercial and industrial	$	—	$	—	$	1	$	—
Commercial real estate		1,383		—		1,423		—
Commercial real estate - construction		—		—		—		—
Residential mortgage		291		—		361		—
Home equity		—		—		1		—
Consumer		—		—		—		—

With an allowance recorded:
Commercial and industrial	$	187	$	—	$	67	$	—
Commercial real estate		1,192		—		530		—
Commercial real estate - construction		—		—		—		—
Residential mortgage		—		—		—		—
Home equity		—		—		—		—
Consumer		—		—		—		—

Total Impaired Loans:
Commercial and industrial	$	566	$	—	$	979	$	—
Commercial real estate		5,246		1		9,278		5
Commercial real estate - construction		27		—		36		—
Residential mortgage		1,193		20		1,155		19
Home equity		2,364		—		1,211		—
Consumer		—		—		—		—

Nonaccrual loans by loan portfolio class, including loans acquired with credit deterioration, as of September 30, 2021 and December 31, 2020 are summarized as follows:

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, 2021 and December 31, 2020 are summarized as follows:

													Loans
(Dollars in thousands)	30-59		60-89		Greater								Receivable >
	Days Past		Days Past		than 90		Total Past						90 Days and
September 30, 2021	Due		Due		Days		Due		Current		Total Loans		Accruing
Commercial and industrial	$	360	$	25	$	196	$	581	$	632,099	$	632,680	$	—
Commercial real estate		79		32		779		890		1,139,100		1,139,990		—
Commercial real estate - construction		—		—		—		—		314,457		314,457		—
Residential mortgage		64		3		799		866		194,497		195,363		—
Home equity		—		—		2,321		2,321		75,691		78,012		—
Consumer		—		—		—		—		8,299		8,299		—
Loans acquired with credit deterioration:
Commercial and industrial		—		—		—		—		—		—		—
Commercial real estate		—		—		1,349		1,349		6		1,355		—
Commercial real estate - construction		—		—		—		—		—		—		—
Residential mortgage		—		—		135		135		138		273		—
Home equity		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—
Total	$	503	$	60	$	5,579	$	6,142	$	2,364,287	$	2,370,429	$	—

													Loans
(Dollars in thousands)	30-59		60-89		Greater								Receivable >
	Days Past		Days Past		than 90		Total Past						90 Days and
December 31, 2020	Due		Due		Days		Due		Current		Total Loans		Accruing
Commercial and industrial	$	365	$	1,017	$	1,377	$	2,759	$	749,595	$	752,354	$	—
Commercial real estate		1,096		—		7,668		8,764		1,089,473		1,098,237		—
Commercial real estate - construction		—		—		—		—		248,913		248,913		—
Residential mortgage		126		—		282		408		201,110		201,518		—
Home equity		71		22		2,343		2,436		71,788		74,224		—
Consumer		—		6		—		6		7,047		7,053		—
Loans acquired with credit deterioration:
Commercial and industrial		—		—		—		—		—		—		—
Commercial real estate		9		—		1,402		1,411		8		1,419		—
Commercial real estate - construction		—		—		—		—		—		—		—
Residential mortgage		—		—		168		168		155		323		—
Home equity		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—
Total	$	1,667	$	1,045	$	13,240	$	15,952	$	2,368,089	$	2,384,041	$	—

The allowance for loan losses and the related loan loss provision for the periods presented reflect Mid Penn’s continued application of the incurred loss method for estimating credit losses, as Mid Penn is not required to adopt the current expected credit loss (“CECL”) accounting standard until January 1, 2023, and Mid Penn has not elected to early adopt CECL. PPP loans, both those disbursed in 2020 and those disbursed in 2021, are included in the commercial and industrial classification and, as the PPP loans are fully guaranteed by the Small Business Administration, no allowance for loan losses was recorded against the $229,679,000 balance of PPP loans outstanding (net of related deferred PPP fees) as of September 30, 2021.

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, 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		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

(Dollars in thousands)
December 31, 2020	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	$	3,066	$	8,655	$	134	$	429	$	507	$	1	$	590	$	13,382
Ending balance: individually evaluated for impairment		533		274		—		—		—		—		—		807
Ending balance: collectively evaluated for impairment	$	2,533	$	8,381	$	134	$	429	$	507	$	1	$	590	$	12,575

Loans receivable:
Ending balance	$	752,354	$	1,099,656	$	248,913	$	201,841	$	74,224	$	7,053	$	—	$	2,384,041
Ending balance: individually evaluated for impairment		1,452		9,102		31		818		2,365		—		—		13,768
Ending balance: acquired with credit deterioration		—		1,419		—		323		—		—		—		1,742
Ending balance: collectively evaluated for impairment	$	750,902	$	1,089,135	$	248,882	$	200,700	$	71,859	$	7,053	$	—	$	2,368,531

(Dollars in thousands)
As of, and for the three months ended, September 30, 2020	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, 2020	$	2,786		$	7,241	$	65		$	427		$	517	$	2		$	29	$	11,067
Charge-offs		—			—		—			(4	)		—		(4	)		—		(8	)
Recoveries		—			—		—			—			—		11			—		11
Provisions (credits)		138			529		(4	)		47			14		(7	)		383		1,100
Ending balance,
September 30, 2020	$	2,924		$	7,770	$	61		$	470		$	531	$	2		$	412	$	12,170

(Dollars in thousands)
As of, and for the nine months ended, September 30, 2020	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, 2020		2,341			6,259		51			417			442		2			3	$	9,515
Charge-offs		(45	)		—		(7	)		(4	)		—		(22	)		—		(78	)
Recoveries		2			1		2			3			1		24			—		33
Provisions (credits)		626			1,510		15			54			88		(2	)		409		2,700
Ending balance,
September 30, 2020		2,924			7,770		61			470			531		2			412		12,170
Individually evaluated for impairment		41			141		—			—			—		—			—		182
Ending balance:
collectively evaluated for impairment	$	2,883		$	7,629	$	61		$	470		$	531	$	2		$	412	$	11,988

Loans receivables:
Ending balance	$	968,875		$	1,021,418	$	238,208		$	215,589		$	70,400	$	7,337		$	—	$	2,521,827
Ending balance: individually evaluated for impairment		912			7,434		32			834			2,386		—			—		11,598
Ending balance: acquired with credit deterioration		—			1,426		—			342			—		—			—		1,768
Ending balance: collectively evaluated for impairment	$	967,963		$	1,012,558	$	238,176		$	214,413		$	68,014	$	7,337		$	—	$	2,508,461

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, 2021 totaled $847,000 and included: (i) two accruing impaired residential mortgage loans to unrelated borrowers in compliance with the terms of the modifications totaling $442,000, and (ii) $405,000 of troubled debt restructurings attributable to eight loans among six relationships which were classified as nonaccrual impaired based upon a collateral evaluation in accordance with the guidance on impaired loans. The balance of these nonaccrual impaired troubled debt restructured loans as of September 30, 2021 was comprised of $339,000 in commercial real estate loans amongst two borrowers; one commercial real estate construction loan for $22,000, two residential mortgage loans for $39,000, and one commercial and industrial loan for $5,000. As of September 30, 2021, 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, 2020 reflects the successful workout of one nonaccrual impaired loan and the payoff of one accruing impaired loan during the third quarter of 2021.

Mid Penn’s troubled debt restructured loans at December 31, 2020 totaled $1,480,000, and included: (i) three accruing impaired residential mortgage loans to unrelated borrowers in compliance with the terms of the modifications totaling $463,000, and (ii) $1,017,000 of troubled debt restructurings attributable to nine loans among seven relationships which were classified as nonaccrual impaired based upon a collateral evaluation in accordance with the guidance on impaired loans. One large commercial real estate relationship accounted for $535,000 of the total $1,017,000 in nonaccrual impaired troubled debt restructured loans, with the remainder consisting of (i) four commercial real estate loans totaling $398,000 among two relationships, (ii) one commercial real estate – construction loan totaling $31,000, (iii) one commercial and industrial loan totaling $6,000, and (iv) two unrelated residential mortgage loans totaling $47,000. As of December 31, 2020, 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 2020.

The recorded investments in troubled debt restructured loans at September 30, 2021 and December 31, 2020 are as follows:

The CARES Act, along with a joint agency statement issued by banking agencies, provides that short-term modifications made in response to COVID-19 do not need to be accounted for as troubled debt restructurings. Depending upon the specific needs and circumstances affecting each borrower, the majority of these modifications ranged from deferrals of both principal and interest payments, with some borrowers reverting to interest-only payments. The majority of the deferrals granted by Mid Penn were for a period of three months, but some as long as six months, depending upon management’s specific evaluation of each borrower’s circumstances. Interest does continue to accrue on loans modified under the CARES Act during the deferral period. As of September 30, 2021, the principal balance of loans remaining in a CARES Act qualifying deferment status totaled $3,571,000, or less than 1 percent of the total loan portfolio, a reduction compared to December 31, 2020, when $11,681,000 of loans, also representing less than 1 percent of the total loan portfolio, were in this deferment status. Most borrowers who were granted a CARES Act deferral have returned to regular payment status. Mid Penn remains in communication with each of the borrowers still in deferral status to assess the ongoing credit standing of the borrowers, and may make further adjustments to a borrower’s relationship at some future time if warranted for the specific situation.

The following tables provide activity for the accretable yield of acquired impaired loans from the Phoenix (March 2015), Scottdale (January 2018), and First Priority (July 2018) acquisitions for the three and nine months ended September 30, 2021 and 2020.