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Loans and Allowance for Credit Losses - Loans
 9 Months Ended
Sep. 30, 2024
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]  
Loans and Allowance for Credit Losses - Loans Loans and Allowance for Credit Losses - Loans
Mid Penn adopted the amendments of FASB ASU 2016-13 on January 1, 2023. The amendments of ASU 2016-13 created FASB ASC Topic 326, "Financial Instruments – Credit Losses," which, among other things, replace much of the guidance and disclosures previously provided in FASB ASC Topic 310, "Receivables." The guidance in FASB ASC Topic 326 replaces the incurred loss methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit losses. In accordance with FASB ASC Subtopic 326-20, "Financial Instruments – Credit Losses – Measured at Amortized Cost," Mid Penn has developed an ACL methodology effective January 1, 2023, which replaced its previous allowance for loan losses methodology. See the section captioned "Allowance for Credit Losses, effective January 1, 2023" within this note for additional information regarding Mid Penn’s ACL.
Loans, net of unearned income, are summarized as follows by portfolio segment:
(In thousands)September 30, 2024December 31, 2023
Commercial real estate
CRE Nonowner Occupied$1,205,058 $1,149,553 
CRE Owner Occupied627,831 629,904 
Multifamily415,467 309,059 
Farmland220,939 212,690 
Total Commercial real estate2,469,295 2,301,206 
Commercial and industrial
713,429 675,079 
Construction
Residential Construction96,000 92,843 
Other Construction340,037 362,624 
Total Construction436,037 455,467 
Residential mortgage
1-4 Family 1st Lien318,646 339,142 
1-4 Family Rental348,803 341,937 
HELOC and Junior Liens138,756 132,795 
Total Residential Mortgage806,205 813,874 
Consumer6,738 7,166 
Total loans$4,431,704 $4,252,792 

Total loans are stated at the amount of unpaid principal, adjusted for net deferred fees and costs. Net deferred loan fees of $4.0 million and $4.2 million reduced the carrying value of loans as of September 30, 2024 and December 31, 2023, respectively.
Accrued interest receivable is not included in the amortized cost basis of Mid Penn's loans. Accrued interest receivable for loans totaled $23.3 million and $22.1 million as of September 30, 2024 and December 31, 2023, respectively, with no related ACL and was reported in other assets on the accompanying Consolidated Balance Sheet.
Past Due and Nonaccrual Loans
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, 2024 and December 31, 2023, are summarized as follows:
(In thousands)30-59
Days Past
Due		60-89
Days Past
Due		Greater
than 90
Days		Total Past
Due		CurrentTotal LoansLoans
Receivable
> 90 Days and
Accruing
September 30, 2024
Commercial real estate
CRE Nonowner Occupied$1,871 $1,868 $10,303 $14,042 $1,191,016 $1,205,058 $— 
CRE Owner Occupied— 307 457 764 627,067 627,831 — 
Multifamily— — — — 415,467 415,467 — 
Farmland— — — — 220,939 220,939 — 
Total Commercial real estate1,871 2,175 10,760 14,806 2,454,489 2,469,295 — 
Commercial and industrial269 374 917 1,560 711,869 713,429 1 
Construction
Residential Construction184 — — 184 95,816 96,000 — 
Other Construction— — — — 340,037 340,037 — 
Total Construction184 — — 184 435,853 436,037 — 
Residential mortgage
1-4 Family 1st Lien3,649 4 726 4,379 314,267 318,646 — 
1-4 Family Rental73 1,307 137 1,517 347,286 348,803 — 
HELOC and Junior Liens2,055 371 2,191 4,617 134,139 138,756 — 
Total Residential Mortgage5,777 1,682 3,054 10,513 795,692 806,205 — 
Consumer117 — — 117 6,621 6,738 — 
Total$8,218 $4,231 $14,731 $27,180 $4,404,524 $4,431,704 $1 
(In thousands)30-59
Days Past
Due		60-89
Days Past
Due		Greater
than 90
Days		Total Past
Due		CurrentTotal LoansLoans
Receivable
> 90 Days and
Accruing
December 31, 2023
Commercial real estate
CRE Nonowner Occupied$3,339 $682 $2,115 $6,136 $1,143,417 $1,149,553 $— 
CRE Owner Occupied1,734 — 859 2,593 627,311 629,904 — 
Multifamily— — — — 309,059 309,059 — 
Farmland— — — — 212,690 212,690 — 
Total Commercial real estate5,073 682 2,974 8,729 2,292,477 2,301,206 — 
Commercial and industrial638 24 1,270 1,932 673,147 675,079 — 
Construction
Residential Construction— 270 303 573 92,270 92,843 — 
Other Construction— — 2,256 2,256 360,368 362,624 — 
Total Construction— 270 2,559 2,829 452,638 455,467 — 
Residential mortgage
1-4 Family 1st Lien1,554 217 847 2,618 336,524 339,142 — 
1-4 Family Rental2,520 — 644 3,164 338,773 341,937 — 
HELOC and Junior Liens574 50 1,027 1,651 131,144 132,795 — 
Total Residential Mortgage4,648 267 2,518 7,433 806,441 813,874 — 
Consumer41 31 — 72 7,094 7,166 — 
Total$10,400 $1,274 $9,321 $20,995 $4,231,797 $4,252,792 $— 

Loans are placed on nonaccrual status when management determines that the full repayment of principal and collection of interest according to contractual terms is no longer likely, generally when the loan becomes 90 days or more past due.
Nonaccrual loans by loan portfolio class, including loans acquired with credit deterioration, as of September 30, 2024 and December 31, 2023 are summarized as follows:
September 30, 2024December 31, 2023
(In thousands)With a Related AllowanceWithout a Related AllowanceTotalWith a Related AllowanceWithout a Related AllowanceTotal
Commercial real estate
CRE Nonowner Occupied505 9,943 10,448 361 4,144 4,505 
CRE Owner Occupied— 1,099 1,099 — 1,909 1,909 
Multifamily— 158 158 93 80 173 
Total Commercial real estate505 11,200 11,705 454 6,133 6,587 
Commercial and industrial762 1,132 1,894 1,222 64 1,286 
Construction
Residential Construction— — — — 303 303 
Other Construction— — — — 2,256 2,256 
Total Construction— — — — 2,559 2,559 
Residential mortgage
1-4 Family 1st Lien— 1,315 1,315 — 1,875 1,875 
1-4 Family Rental— 180 180 2 699 701 
HELOC and Junior Liens— 2,286 2,286 — 1,208 1,208 
Total Residential Mortgage$— $3,781 $3,781 $2 $3,782 $3,784 
Consumer— — — — — — 
Total loans$1,267 $16,113 $17,380 $1,678 $12,538 $14,216 
The amount of interest income recognized on nonaccrual loans was approximately $165 thousand and $551 thousand during the three months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024 and 2023, the amount of interest income recognized on nonaccrual loans was approximately $456 thousand and $1.0 million, respectively.
Credit Quality Indicators
Mid Penn categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. On a minimum of a quarterly basis, Mid Penn analyzes loans individually to classify the loans as to their credit risk. The following table presents risk ratings by loan portfolio segment and origination year, which is the year of origination or renewal.
PASS - This type of classification consists of 6 subcategories:    
Nominal Risk / Pass - This loan classification is a credit extension of the highest quality.
Moderate Risk / Pass - This type of classification has strong financial ratios, substantial debt capacity, and low leverage with a very favorable comparison to industry peers or better than average improving trends.
Good Acceptable Risk / Pass - This type of classification is a reasonable credit risk having financial ratios on par with its peers and demonstrates slightly improving trends over time; the Borrower lists good quality assets with relatively low leverage and ample debt capacity.
Average Acceptable Risk / Pass - This type of classification has financial ratios and assets that are of above average quality; however, the leverage is worse than average compared to industry standards; the Borrower should have a good repayment history and possess consistent earnings with some growth.
Marginally Acceptable Risk / Pass - This type of classification has financial ratios consistent with industry averages, assets of average quality with ascertainable values, acceptable leverage, moderate capital assets and an acceptable reliance on trade debt; however, the Borrower demonstrates marginally adequate earnings, cash flow and debt service plus positive trends.
Weak/Monitor Risk (Watch list) / Pass - This type of classification has financial ratios that are slightly below standard industry averages and assets are below average quality with unstable values; fixed assets could be near or at the end of their useful life and liabilities may not match the asset structure.

SPECIAL MENTION - These credits have developing weaknesses deserving extra attention from the lender and lending management. They are currently protected, but potentially weak. The weakness may be cash flow, leverage, liquidity, management, industry or other factors which may, if not checked or corrected, weaken the asset or inadequately protect the Bank’s credit position at some future date.

SUBSTANDARD - These credit extensions also have well-defined weaknesses, which are inadequately protected by the current worth and debt service capacity of the Borrower, or the collateral pledged, if any. The repayment of principal and interest as originally intended can be jeopardized by defined weaknesses related to adverse financial, managerial, economic, market or political conditions.

DOUBTFUL - These credits have definite weaknesses inherent in Substandard loans with added characteristics that are severe enough to make further collection in full highly questionable and improbable based on the current trends.

LOSS. These loans are considered uncollectible and no longer a viable asset of the Bank. They lack an identifiable source of repayment based on an inability to generate sufficient cash flow to service the debt. All trends are negative and the damage to the financial condition of the Borrower cannot be reversed now or in the near future.
September 30, 2024
Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized
Cost Basis
(In thousands)20242023202220212020PriorTotal
CRE Nonowner Occupied
Pass$65,245 $128,241 $348,380 $154,184 $135,683 $330,778 $10,125 $1,172,636 
Special mention$— $1,517 $1,260 $— $— $9,227 $— $12,004 
Substandard or lower$— $— $— $— $3,238 $17,180 $— $20,418 
Total CRE Nonowner Occupied$65,245 $129,758 $349,640 $154,184 $138,921 $357,185 $10,125 $1,205,058 
Gross charge offs$— $— $— $— $— $— $— $— 
Current period recoveries$— $— $— $— $— $— $— $— 
Net charge offs$— $— $— $— $— $— $— $— 
CRE Owner Occupied
Pass$32,163 $100,464 $112,097 $67,431 $82,067 $210,599 $12,958 $617,779 
Special mention$— $220 $5,069 $179 $— $1,740 $— $7,208 
Substandard or lower$— $— $— $198 $— $2,646 $— $2,844 
Total CRE Owner Occupied$32,163 $100,684 $117,166 $67,808 $82,067 $214,985 $12,958 $627,831 
Gross charge offs$— $— $— $— $— $— $— $— 
Current period recoveries$— $— $— $— $— $4 $— $4 
Net recoveries$— $— $— $— $— $4 $— $4 
Multifamily
Pass$2,689 $48,356 $116,566 $123,668 $40,988 $80,132 $2,854 $415,253 
Special mention$— $— $— $— $— $56 $— $56 
Substandard or lower$— $— $— $— $— $158 $— $158 
Total Multifamily$2,689 $48,356 $116,566 $123,668 $40,988 $80,346 $2,854 $415,467 
Gross charge offs$— $— $— $— $— $— $— $— 
Current period recoveries$— $— $— $— $— $— $— $— 
Net charge offs$— $— $— $— $— $— $— $— 
Farmland
Pass$20,269 $31,606 $56,933 $43,239 $26,510 $25,428 $14,435 $218,420 
Special mention$— $129 $— $— $— $2,197 $193 $2,519 
Substandard or lower$— $— $— $— $— $— $— $— 
Total Farmland$20,269 $31,735 $56,933 $43,239 $26,510 $27,625 $14,628 $220,939 
Gross charge offs$— $— $— $— $— $— $— $— 
Current period recoveries$— $— $— $— $— $— $— $— 
Net charge offs$— $— $— $— $— $— $— $— 
Commercial and industrial
Pass$80,578 $131,799 $87,408 $59,214 $24,454 $96,114 $221,231 $700,798 
Special mention$— $68 $505 $31 $— $4,031 $4,498 $9,133 
Substandard or lower$— $— $— $1,017 $— $1,835 $646 $3,498 
Total commercial and industrial$80,578 $131,867 $87,913 $60,262 $24,454 $101,980 $226,375 $713,429 
Gross charge offs$— $— $— $— $— $(412)$— $(412)
Current period recoveries$— $— $— $— $— $— $— $— 
Net charge offs$— $— $— $— $— $(412)$— $(412)
Residential Construction
Pass$23,937 $40,748 $17,162 $728 $— $2,006 $11,235 $95,816 
Special mention$— $— $— $— $184 $— $— $184 
Substandard or lower— — — — — — — — 
Total Residential Construction23,937 40,748 17,162 728 184 2,006 11,235 96,000 
Gross charge offs— — — — — — — — 
Current period recoveries— — — — — — — — 
Net recoveries— — — — — — — — 
Other Construction
Pass34,856 142,413 100,095 13,163 13,755 13,325 21,962 339,569 
Special mention— — — — 468 — — 468 
Substandard or lower— — — — — — — — 
Total Other Construction34,856 142,413 100,095 13,163 14,223 13,325 21,962 340,037 
Gross charge offs— — — — — — — — 
Current period recoveries— — — — — — — — 
Net recoveries— — — — — — — — 
1-4 Family 1st Lien
Performing23,657 61,907 47,589 35,294 43,586 102,943 2,355 317,331 
Non-performing— — — — 215 1,100 — 1,315 
Total 1-4 Family 1st Lien23,657 61,907 47,589 35,294 43,801 104,043 2,355 318,646 
Gross charge offs— — — — — (7)— (7)
Current period recoveries— — — — — 9 — 9 
Net recoveries— — — — — 2 — 2 
1-4 Family Rental
Performing23,563 60,438 89,962 61,131 36,022 73,484 2,055 346,655 
Non-performing— 148 — — 1,426 574 — 2,148 
Total 1-4 Family Rental23,563 60,586 89,962 61,131 37,448 74,058 2,055 348,803 
Gross charge offs— — — — — (2)— (2)
Current period recoveries— — — — — 22 — 22 
Net recoveries— — — — — 20 — 20 
HELOC and Junior Liens
Performing4,618 16,783 10,274 5,006 2,297 10,854 86,638 136,470 
Non-performing— 24 — — — 1,261 1,001 2,286 
Total HELOC and Junior Liens4,618 16,807 10,274 5,006 2,297 12,115 87,639 138,756 
Gross charge offs— — (21)— — — — (21)
Current period recoveries— — — — — — — — 
Net charge offs— — (21)— — — — (21)
Consumer
Performing1,884 1,075 407 426 141 251 2,554 6,738 
Non-performing— — — — — — — — 
Total consumer1,884 1,075 407 426 141 251 2,554 6,738 
Gross charge offs— — (2)— — (32)— (34)
Current period recoveries— — 1 — — 31 — 32 
Net charge offs— — (1)— — (1)— (2)
Total
Pass259,737 623,627 838,641 461,627 323,457 758,382 294,800 3,560,271 
Special mention— 1,934 6,834 210 652 17,251 4,691 31,572 
Substandard or lower— — — 1,215 3,238 21,819 646 26,918 
Performing53,722 140,203 148,232 101,857 82,046 187,532 93,602 807,194 
Nonperforming— 172 — — 1,641 2,935 1,001 5,749 
Total$313,459 $765,936 $993,707 $564,909 $411,034 $987,919 $394,740 $4,431,704 
December 31, 2023
Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized
Cost Basis
(In thousands)20232022202120202019PriorTotal
CRE Nonowner Occupied
Pass$119,793 $329,715 $160,583 $140,083 $86,629 $267,210 $10,030 $1,114,043 
Special mention$— $— $— $— $6,009 $7,926 $— $13,935 
Substandard or lower$— $5,209 $— $3,162 $229 $12,975 $— $21,575 
Total CRE Nonowner Occupied$119,793 $334,924 $160,583 $143,245 $92,867 $288,111 $10,030 $1,149,553 
Gross charge offs$— $— $— $— $— $— $— $— 
Current period recoveries$— $— $— $— $— $— $— $— 
Net charge offs$— $— $— $— $— $— $— $— 
CRE Owner Occupied
Pass$92,561 $121,231 $75,711 $86,322 $60,761 $174,680 $14,388 $625,654 
Special mention$— $— $— $— $— $190 $— $190 
Substandard or lower$— $— $208 $— $— $3,852 $— $4,060 
Total CRE Owner Occupied$92,561 $121,231 $75,919 $86,322 $60,761 $178,722 $14,388 $629,904 
Gross charge offs$— $— $— $— $— $(16)$— $(16)
Current period recoveries$— $— $— $— $— $— $— $— 
Net charge offs$— $— $— $— $— $(16)$— $(16)
Multifamily
Pass$26,776 $44,450 $105,406 $41,713 $23,118 $65,480 $1,881 $308,824 
Special mention$— $— $— $— $— $62 $— $62 
Substandard or lower$— $— $— $— $— $173 $— $173 
Total Multifamily$26,776 $44,450 $105,406 $41,713 $23,118 $65,715 $1,881 $309,059 
Gross charge offs$— $— $— $— $— $— $— $— 
Current period recoveries$— $— $— $— $— $— $— $— 
Net charge offs$— $— $— $— $— $— $— $— 
Farmland
Pass$32,525 $61,405 $45,211 $29,628 $7,926 $20,956 $11,962 $209,613 
Special mention$194 $— $— $— $— $2,304 $186 $2,684 
Substandard or lower$— $— $— $— $— $345 $48 $393 
Total Farmland$32,719 $61,405 $45,211 $29,628 $7,926 $23,605 $12,196 $212,690 
Gross charge offs$— $— $— $— $— $— $— $— 
Current period recoveries$— $— $— $— $— $— $— $— 
Net charge offs$— $— $— $— $— $— $— $— 
Commercial and industrial
Pass$158,824 $106,714 $68,448 $29,961 $50,206 $57,892 $188,714 $660,759 
Special mention$— $89 $2,224 $— $227 $2,200 $4,391 $9,131 
Substandard or lower$— $— $662 $— $— $1,978 $2,549 $5,189 
Total commercial and industrial$158,824 $106,803 $71,334 $29,961 $50,433 $62,070 $195,654 $675,079 
Gross charge offs$— $(100)$— $(111)$— $(27)$— $(238)
Current period recoveries$— $— $— $— $— $— $— $— 
Net charge offs$— $(100)$— $(111)$— $(27)$— $(238)
Residential construction
Pass$43,043 $25,159 $6,444 $979 $— $— $16,645 $92,270 
Special mention$— $— $— $— $— $— $— $— 
Substandard or lower— 573 — — — — — 573 
Total Residential construction43,043 25,732 6,444 979 — — 16,645 92,843 
Gross charge offs— — — — — — — — 
Current period recoveries— — — — — — — — 
Net recoveries— — — — — — — — 
Other construction
Pass110,553 156,055 48,214 21,378 10,247 5,856 6,617 358,920 
Special mention— — — 1,447 — — — 1,447 
Substandard or lower— — — — — 2,257 — 2,257 
Total Other construction110,553 156,055 48,214 22,825 10,247 8,113 6,617 362,624 
Gross charge offs— — — — — — — — 
Current period recoveries— — — — — — — — 
Net recoveries— — — — — — — — 
1-4 Family 1st Lien
Performing77,801 51,651 41,133 48,748 9,348 106,353 2,240 337,274 
Non-performing— — 37 218 — 1,613 — 1,868 
Total 1-4 Family 1st Lien77,801 51,651 41,170 48,966 9,348 107,966 2,240 339,142 
Gross charge offs— — — — — (13)— (13)
Current period recoveries— — — — — 8 — 8 
Net recoveries— — — — — (5)— (5)
1-4 Family Rental
Performing62,897 90,092 64,766 38,672 16,831 64,309 1,885 339,452 
Non-performing— — 56 1,252 — 1,177 — 2,485 
Total 1-4 Family Rental62,897 90,092 64,822 39,924 16,831 65,486 1,885 341,937 
Gross charge offs— — — — — — — — 
Current period recoveries— — — — — 30 — 30 
Net recoveries— — — — — 30 — 30 
HELOC and Junior Liens
Performing17,936 11,460 5,711 2,962 1,684 8,236 83,598 131,587 
Non-performing— — — — — 1,208 — 1,208 
Total HELOC and Junior Liens17,936 11,460 5,711 2,962 1,684 9,444 83,598 132,795 
Gross charge offs— — — — — — — — 
Current period recoveries— — — — — — — — 
Net recoveries— — — — — — — — 
Consumer
Performing2,361 754 649 273 223 103 2,803 7,166 
Non-performing— — — — — — — — 
Total consumer2,361 754 649 273 223 103 2,803 7,166 
Gross charge offs(86)— (10)(9)— (30)— (135)
Current period recoveries26 — — 1 — 5 — 32 
Net charge offs(60)— (10)(8)— (25)— (103)
Total
Pass584,075 844,729 510,017 350,064 238,887 592,074 250,237 3,370,083 
Special mention194 89 2,224 1,447 6,236 12,682 4,577 27,449 
Substandard or lower— 5,782 870 3,162 229 21,580 2,597 34,220 
Performing160,995 153,957 112,259 90,655 28,086 179,001 90,526 815,479 
Nonperforming— — 93 1,470 — 3,998 — 5,561 
Total745,264 1,004,557 625,463 446,798 273,438 809,335 347,937 4,252,792 
Mid Penn had no loans classified as "doubtful" as of September 30, 2024 and December 31, 2023. There was $892 thousand and $121 thousand in loans for which formal foreclosure proceedings were in process at September 30, 2024 and December 31, 2023, respectively.
Collateral-Dependent Loans
A financial asset is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of financial assets deemed collateral-dependent, Mid Penn elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, Mid Penn records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral supporting collateral-dependent financial assets consists of various types of real estate, including residential properties; commercial properties such as retail centers, office buildings, and lodging; agriculture land; and vacant land.
Allowance for Credit Losses

Mid Penn’s ACL - loans methodology is based upon guidance within FASB ASC Subtopic 326-20, as well as regulatory guidance from the FDIC, its primary federal regulator. The ACL - loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Credit quality within the loan portfolio is continuously monitored by management and is reflected within the ACL - loans. The ACL - loans is an estimate of expected losses inherent within Mid Penn’s existing loan portfolio. The ACL - loans is adjusted through the PCL and reduced by the charge off of loan amounts, net of recoveries.
The loan loss estimation process involves procedures to appropriately consider the unique characteristics of Mid Penn’s loan portfolio segments. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Evaluations of the portfolio and individual credits are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations. Determining the appropriateness of the allowance is complex and requires judgement by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the ACL and credit loss expense.
Mid Penn estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Mid Penn uses a third-party software application to calculate the quantitative portion of the ACL using a methodology and assumptions specific to each loan pool. The qualitative portion of the allowance is based on general economic conditions and other internal and external factors affecting Mid Penn as a whole, as well as specific loans. Factors considered include the following: lending process, concentrations of credit, and credit quality. The quantitative and qualitative portions of the allowance are added together to determine the total ACL, which reflects management’s expectations of future conditions based on reasonable and supportable forecasts.
The methodology for estimating the amount of expected credit losses reported in the ACL has two basic components: a collective, or pooled, component for estimated expected credit losses for pools of loans that share similar risk characteristics, and an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans. In estimating the ACL for the collective component, loans are segregated into loan pools based on loan purpose codes and similar risk characteristics.
The commercial real estate and residential mortgage loan portfolio segments include loans for both commercial and residential properties that are secured by real estate. The underwriting process for these loans includes analysis of the financial position and strength of both the borrower and, if applicable, guarantor, experience with similar projects in the past, market demand and prospects for successful completion of the proposed project within the established budget and schedule, values of underlying collateral, availability of permanent financing, maximum loan-to-value ratios, minimum equity requirements, acceptable amortization periods and minimum debt service coverage requirements, based on property type. The borrower’s financial strength and capacity to repay their obligations remain the primary focus of underwriting. Financial strength is evaluated based upon analytical tools that consider historical and projected cash flows and performance, in addition to analysis of the proposed project for income-producing properties. Additional support offered by guarantors is also considered when applicable. Ultimate repayment of these loans is sensitive to interest rate changes, general economic conditions, liquidity and availability of long-term financing.
The commercial and industrial loan portfolio segment includes commercial loans made to many types of businesses for various purposes, such as short-term working capital loans that are usually secured by accounts receivable and inventory, equipment and fixed asset purchases that are secured by those assets, and term financing for those within Mid Penn’s geographic markets. Mid Penn’s credit underwriting process for commercial and industrial loans includes analysis of historical and projected cash flows and performance, evaluation of financial strength of both borrowers and guarantors as reflected in current and detailed financial information, and evaluation of underlying collateral to support the credit.
The consumer loan portfolio segment is comprised of loans which are underwritten after evaluating a borrower’s capacity, credit and collateral. Several factors are considered when assessing a borrower’s capacity, including the borrower’s employment, income, current debt, assets and level of equity in the property. Credit is assessed using a credit report that provides credit scores and the borrower’s current and past information about their credit history. Loan-to-value and debt-to-income ratios, loan amount and lien position are also considered in assessing whether to originate a loan. These borrowers are particularly susceptible to downturns in economic trends, such as conditions that negatively affect housing prices and demand and levels of unemployment.
Mid Penn utilizes a DCF method to estimate the quantitative portion of the allowance for credit losses for loan pools. The DCF is based off of historical losses, including peer data, which is correlated to national unemployment and GDP.
The PD and LGD measures are used in conjunction with prepayment data as inputs into the DCF model to calculate the cash flows at the individual loan level. Contractual cash flows based on loan terms are adjusted for PD, LGD and prepayments to derive loss cash flows. These loss cash flows are discounted by the loan’s coupon rate to arrive at the discounted cash flow based quantitative loss. The prepayment studies are updated quarterly by a third-party for each applicable pool.
Mid Penn determined that reasonable and supportable forecasts could be made for a twelve-month period for all of its loan pools. To the extent the lives of the loans in the LHFI portfolio extend beyond this forecast period, Mid Penn uses a reversion period of four quarters and reverts to the historical mean on a straight-line basis over the remaining life of the loans.
Qualitative factors used in the ACL methodology include the following:
•Lending process
•Concentrations of credit
•Peer Group Divergence
The ACL for individual loans, such as non-accrual and PCD, that do not share risk characteristics with other loans is measured as the difference between the discounted value of expected future cash flows, based on the effective interest rate at origination, and the amortized cost basis of the loan, or the net realizable value. The ACL is the difference between the loan’s net realizable value and its amortized cost basis (net of previous charge-offs and deferred loan fees and costs), except for collateral-dependent loans. A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the sale of the collateral. The expected credit loss for collateral-dependent loans is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral, adjusted for the estimated cost to sell. Fair value estimates for collateral-dependent loans are derived from appraised values based on the current market value or the "as is" value of the collateral, normally from recently received and reviewed appraisals. Current appraisals are ordered on a regular basis based on the inspection date or more often if market conditions necessitate. Appraisals are obtained from state-certified appraisers and are based on certain assumptions, which may include construction or development status and the highest and best use of the property. These appraisals are reviewed by Mid Penn’s Real Estate Administration Group to ensure they are acceptable, and values are adjusted down for costs associated with asset disposal. If the calculated expected credit loss is determined to be permanent or not recoverable, the amount of the expected credit loss is charged off.
Mid Penn may also purchase loans or acquire loans through a business combination. At the purchase or acquisition date, loans are evaluated to determine whether there has been more than insignificant credit deterioration since origination. Loans that have experienced more than insignificant credit deterioration since origination are referred to as PCD loans. In its evaluation of whether a loan has experienced more than insignificant deterioration in credit quality since origination, Mid Penn takes into consideration loan grades, past due and nonaccrual status. Mid Penn may also consider external credit rating agency ratings for borrowers and for non-commercial loans, FICO score or band, probability of default levels, and number of times past due. At the purchase or acquisition date, the amortized cost basis of PCD loans is equal to the
purchase price and an initial estimate of credit losses. The initial recognition of expected credit losses on PCD loans has no impact on net income. When the initial measurement of expected credit losses on PCD loans is calculated on a pooled loan basis, the expected credit losses are allocated to each loan within the pool. Any difference between the initial amortized cost basis and the unpaid principal balance of the loan represents a noncredit discount or premium, which is accreted (or amortized) into interest income over the life of the loan. Subsequent changes to the ACL on PCD loans are recorded through the PCL. For purchased loans that are not deemed to have experienced more than insignificant credit deterioration since origination and are therefore not deemed PCD, any discounts or premiums included in the purchase price are accreted (or amortized) over the contractual life of the individual loan.
Loans are charged off against the ACL, with any subsequent recoveries credited back to the ACL account. Expected recoveries may not exceed the aggregate of amounts previously charged off and expected to be charged off.
The following tables present the activity in the ACL - loans by portfolio segment for the three and nine months ended September 30, 2024 and the three and nine months ended September 30, 2023:
(In thousands)Balance at
June 30, 2024		Charge offsRecoveriesNet loans (charged off) recovered
(Benefit)/Provision for credit losses
Three Months Ended
September 30, 2024
Commercial Real Estate
CRE Nonowner Occupied10,647 — — — 387 11,034 
CRE Owner Occupied5,830 — — — (607)5,223 
Multifamily3,209 — — — 349 3,558 
Farmland2,059 — — — (294)1,765 
Commercial and industrial6,934 (356)— (356)253 6,831 
Construction
Residential Construction1,129 — — — (102)1,027 
Other Construction2,013 — — — 426 2,439 
Residential Mortgage
1-4 Family 1st Lien1,349 — 2 2 156 1,507 
1-4 Family Rental1,704 — — — 68 1,772 
HELOC and Junior Liens397 — — — (9)388 
Consumer17 (8)15 7 (6)18 
Total35,288 (364)17 (347)621 35,562 
(In thousands)Balance at
December 31, 2023		Charge offsRecoveriesNet loans (charged off) recovered
(Benefit)/Provision for credit losses
Nine Months Ended
September 30, 2024
Commercial Real Estate
CRE Nonowner Occupied10,267 — — — 767 11,034 
CRE Owner Occupied5,646 — 4 4 (427)5,223 
Multifamily2,202 — — — 1,356 3,558 
Farmland2,064 — — — (299)1,765 
Commercial and industrial7,131 (412)— (412)112 6,831 
Construction
Residential Construction1,256 — — — (229)1,027 
Other Construction2,146 — — — 293 2,439 
Residential Mortgage
1-4 Family 1st Lien1,207 (7)9 2 298 1,507 
1-4 Family Rental1,859 (2)22 20 (107)1,772 
HELOC and Junior Liens389 (21)— (21)20 388 
Consumer20 (34)32 (2)— 18 
Total34,187 (476)67 (409)1,784 35,562 
(In thousands)Balance at
June 30, 2023		Charge offsRecoveriesNet loans (charged off) recovered
Provision/(Benefit) for credit losses
Three Months Ended
September 30, 2023
Commercial Real Estate
CRE Nonowner Occupied$7,872 $— $— $— $2,283 $10,155 
CRE Owner Occupied4,141 — — — 513 4,654 
Multifamily1,244 — — — 989 2,233 
Farmland940 — — — 697 1,637 
Commercial and industrial11,403 — — — (4,072)7,331 
Construction
Residential Construction1,729 — — — (1)1,728 
Other Construction1,938 — — — 2,212 4,150 
Residential Mortgage
1-4 Family 1st Lien1,628 — 7 7 (762)873 
1-4 Family Rental1,047 — — — (188)859 
HELOC and Junior Liens470 — — — (107)363 
Consumer176 (33)15 (18)(137)21 
Unallocated— — — — — — 
Total$32,588 $(33)$22 $(11)$1,427 $34,004 
(In thousands)Balance at
December 31, 2022		CECL ImpactPCD LoansCharge offsRecoveriesNet loans (charged off) recovered
Provision/(Benefit) for credit losses
Nine Months Ended
September 30, 2023
Commercial Real Estate
CRE Nonowner Occupied$8,284 $259 $312 $— $— $— $1,300 $10,155 
CRE Owner Occupied2,916 91 2 (16)— (16)1,661 4,654 
Multifamily1,111 35 — — — 1,087 2,233 
Farmland831 26 — — — 780 1,637 
Commercial and industrial4,593 6,601 5 (220)— (220)(3,648)7,331 
Construction
Residential Construction— 1,270 12 — — — 446 1,728 
Other Construction— 1,931 1 — — — 2,218 4,150 
Residential Mortgage
1-4 Family 1st Lien370 1,307 4 (4)7 3 (811)873 
1-4 Family Rental288 731 — 30 30 (190)859 
HELOC and Junior Liens661 (230)— — — (68)363 
Consumer29 154 (117)26 (91)(71)21 
Unallocated(126)(244)— — — 370 — 
Total$18,957 $11,931 $336 $(357)$63 $(294)$3,074 $34,004 
The following table presents the ACL for loans and the amortized cost basis of the loans by the measurement methodology used as of September 30, 2024 and December 31, 2023:

(In thousands)ACL - LoansLoans
September 30, 2024Collectively Evaluated for Credit LossIndividually Evaluated for Credit LossTotal ACL - LoansCollectively Evaluated for Credit LossIndividually Evaluated for Credit LossTotal Loans
Commercial real estate
CRE Nonowner Occupied$10,918 $116 $11,034 $1,194,610 $10,448 $1,205,058 
CRE Owner Occupied5,223 — 5,223 626,732 1,099 627,831 
Multifamily3,558 — 3,558 415,309 158 415,467 
Farmland1,765 — 1,765 220,939 — 220,939 
Commercial and industrial6,490 341 6,831 711,535 1,894 713,429 
Construction
Residential Construction1,027 — 1,027 96,000 — 96,000 
Other Construction2,439 — 2,439 340,037 — 340,037 
Residential mortgage
1-4 Family 1st Lien1,507 — 1,507 317,331 1,315 318,646 
1-4 Family Rental1,772 — 1,772 348,623 180 348,803 
HELOC and Junior Liens388 — 388 136,470 2,286 138,756 
Consumer18 — 18 6,738 — 6,738 
Total$35,105 $457 $35,562 $4,414,324 $17,380 $4,431,704 

(In thousands)ACL - LoansLoans
December 31, 2023Collectively Evaluated for Credit LossIndividually Evaluated for Credit LossTotal ACL - LoansCollectively Evaluated for Credit LossIndividually Evaluated for Credit LossTotal Loans
Commercial real estate
CRE Nonowner Occupied$9,906 $361 $10,267 $1,145,048 $4,505 $1,149,553 
CRE Owner Occupied5,646 — 5,646 627,995 1,909 629,904 
Multifamily2,190 12 2,202 308,886 173 309,059 
Farmland2,064 — 2,064 212,690 — 212,690 
Commercial and industrial6,419 712 7,131 673,793 1,286 675,079 
Construction
Residential Construction1,256 — 1,256 92,270 573 92,843 
Other Construction2,146 — 2,146 360,368 2,256 362,624 
Residential mortgage
1-4 Family 1st Lien1,207 — 1,207 337,267 1,875 339,142 
1-4 Family Rental1,857 2 1,859 341,236 701 341,937 
HELOC and Junior Liens389 — 389 131,587 1,208 132,795 
Consumer20 — 20 7,166 — 7,166 
Total$33,100 $1,087 $34,187 $4,238,306 $14,486 $4,252,792 
Modifications to Borrowers Experiencing Financial Difficulty
From time to time, we may modify certain loans to borrowers who are experiencing financial difficulty. In some cases, these modifications may result in new loans. Loan modifications to borrowers experiencing financial difficulty may be in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension, or a combination thereof, among other things.

Information related to loans modified (by type of modification), whereby the borrower was experiencing financial difficulty at the time of modification, is set forth in the following table:

(In thousands)Interest Only
Term Extension		Combination:
Interest Only and
Term Extension		Total% of Total Class of Financing Receivable
Three months ended September 30, 2024
Commercial and industrial— — 287 287 0.04 %
Total$— $— $287 $287 

(In thousands)Interest Only
Term Extension		Combination:
Interest Only and
Term Extension		Total% of Total Class of Financing Receivable
Nine months ended September 30, 2024
Commercial and industrial— — 287 287 0.04 %
HELOC and Junior Liens— — 92 92 0.07 %
Total Residential Mortgage— — 92 92 0.01 %
Consumer— — — — — %
Total$— $— $379 $379 

(In thousands)Interest OnlyTerm ExtensionCombination:
Interest Only and
Term Extension		Total% of Total Class of Financing Receivable
Three months ended September 30, 2023
Commercial and industrial— 150 — 150 — 
Total— 150 — 150 

(In thousands)Interest OnlyTerm ExtensionCombination:
Interest Only and
Term Extension		Total% of Total Class of Financing Receivable
Nine months ended September 30, 2023
Commercial real estate
CRE Owner Occupied$51 $— $180 $231 0.04 %
Total Commercial real estate$51 $— $180 $231 0.02 %
Commercial and industrial$— $150 $— $150 0.02 %
Total loans$51 $150 $180 $381 

The financial effects of the interest-only loan modifications reduced the monthly payment amounts for the borrower and the term extensions in the table above added a weighted-average of 2.0 years to the life of the loans, which also reduced the monthly payment amounts for the borrowers.