Allowance for Credit Losses

6 Months Ended

Jun. 30, 2025

Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]

Allowance for Loan and Lease Losses

The allowance for credit losses is established for current expected credit losses on the Company’s loan and lease portfolios utilizing guidance in Accounting Standards Codification (ASC) Topic 326. The determination of the allowance requires significant judgment to estimate credit losses measured on a collective pool basis when similar risk characteristics exist, and for loans evaluated individually. In determining the allowance, the Company estimates expected future losses for the loan’s entire contractual term adjusted for expected payments when appropriate. The allowance estimate considers relevant available information, from internal and external sources, relating to the historical loss experience, current conditions, and reasonable and supportable forecasts for the Company’s outstanding loan and lease balances. The allowance is an estimation that reflects management’s evaluation of expected losses related to the Company’s financial assets measured at amortized cost. To ensure the allowance is maintained at an adequate level, a detailed analysis is performed on a quarterly basis and an appropriate provision is made to adjust the allowance.

The Company categorizes its loan portfolios into nine segments based on similar risk characteristics. Loans within each segment are collectively evaluated using either: 1) a cohort cumulative loss rate methodology (“cohort”) or, 2) the probability of default (“PD”)/loss given default (“LGD”) methodology (PD/LGD).

The following table shows the changes in the allowance for loan and lease losses, segregated by portfolio segment, for the three months ended June 30, 2025 and 2024.



(Dollars in thousands)	Commercial and agricultural		Renewable energy		Auto and light truck		Medium and heavy duty truck		Aircraft		Construction equipment		Commercial real estate		Residential real estate and home equity		Consumer		Total
June 30, 2025
Balance, beginning of period	$	21,912	$	8,865	$	18,657	$	6,884	$	36,832	$	28,721	$	24,973	$	8,438	$	2,188	$	157,470
Charge-offs	439		—		1,500		—		485		335		1		29		276		3,065
Recoveries	519		—		364		—		206		16		18		2		70		1,195
Net charge-offs (recoveries)	(80)		—		1,136		—		279		319		(17)		27		206		1,870
Provision (recovery of provision)	2,347		1,179		3,344		(362)		153		673		12		355		183		7,884
Balance, end of period	$	24,339	$	10,044	$	20,865	$	6,522	$	36,706	$	29,075	$	25,002	$	8,766	$	2,165	$	163,484

June 30, 2024
Balance, beginning of period	$	17,263	$	6,858	$	17,584	$	8,788	$	36,924	$	26,804	$	23,844	$	7,808	$	2,151	$	148,024
Charge-offs	43		—		15		—		—		306		—		—		383		747
Recoveries	53		—		909		—		481		1,207		3		14		67		2,734
Net charge-offs (recoveries)	(10)		—		(894)		—		(481)		(901)		(3)		(14)		316		(1,987)
Provision (recovery of provision)	1,364		795		(752)		433		(2,239)		(761)		1,000		(30)		246		56
Balance, end of period	$	18,637	$	7,653	$	17,726	$	9,221	$	35,166	$	26,944	$	24,847	$	7,792	$	2,081	$	150,067

The following table shows the changes in the allowance for loan and lease losses, segregated by portfolio segment, for the six months ended June 30, 2025, and 2024.


(Dollars in thousands)	Commercial and agricultural		Renewable energy		Auto and light truck		Medium and heavy duty truck		Aircraft		Construction equipment		Commercial real estate		Residential real estate and home equity		Consumer		Total
June 30, 2025
Balance, beginning of period	$	21,316	$	8,562	$	18,437	$	7,292	$	36,663	$	28,258	$	24,821	$	7,976	$	2,215	$	155,540
Charge-offs	854		—		1,840		—		485		1,017		6		35		752		4,989
Recoveries	801		—		1,254		—		415		297		21		18		131		2,937
Net charge-offs (recoveries)	53		—		586		—		70		720		(15)		17		621		2,052
Provision (recovery of provision)	3,076		1,482		3,014		(770)		113		1,537		166		807		571		9,996
Balance, end of period	$	24,339	$	10,044	$	20,865	$	6,522	$	36,706	$	29,075	$	25,002	$	8,766	$	2,165	$	163,484

June 30, 2024
Balance, beginning of period	$	17,385	$	6,610	$	16,858	$	8,965	$	37,653	$	26,510	$	23,690	$	7,698	$	2,183	$	147,552
Charge-offs	7,111		—		16		—		68		598		—		13		612		8,418
Recoveries	139		—		1,562		—		849		1,406		184		22		120		4,282
Net charge-offs (recoveries)	6,972		—		(1,546)		—		(781)		(808)		(184)		(9)		492		4,136
Provision (recovery of provision)	8,224		1,043		(678)		256		(3,268)		(374)		973		85		390		6,651
Balance, end of period	$	18,637	$	7,653	$	17,726	$	9,221	$	35,166	$	26,944	$	24,847	$	7,792	$	2,081	$	150,067

The higher allowance for credit losses during the current quarter reflects an increase in loan balances along with an increase in historical loss rates in the auto and light truck portfolio due to charge-off activity during the period. The Company also added modest qualitative adjustments in the auto and light truck portfolio due to increased delinquency, nonperforming activity, and elevated special attention concerns. The previous forecast assumption as of March 31, 2025, was maintained as the underlying assumptions remain pertinent and continue to be applicable to economic conditions expected during the forecast period. The forecast reflects weakness in growth expectations during the two-year forecast time horizon and continued uncertainty in the macro environment stemming from a lack of predictability of domestic trade policies. Wide-ranging tariffs targeting steel, aluminum, automobile manufacturing, and a host of other goods and materials which directly impact the Company’s loan portfolios have been implemented or proposed. The Company remains cautious on the forward outlook. Ongoing risks include heightened geopolitical instability, trade policy uncertainty, tightened credit conditions, increasing consumer stressors and falling consumer confidence, some softening in labor markets, and still elevated inflation and interest rates. Credit quality metrics reflect higher special attention outstandings during the current quarter, with increased levels of nonperforming and delinquency activity, largely centered in the auto and light truck portfolio. Net credit losses were modest during the period, with losses in the auto and light truck, construction equipment and aircraft portfolios, partially offset by net recoveries in the commercial and agricultural and aircraft portfolios.

Commercial and agricultural – the increase in the allowance in the current quarter was principally due to loan growth. The commercial and agricultural portfolio also reported increased special attention loans during the period, which are reserved at higher rates.

Renewable energy – the allowance increased due to loan growth. Credit quality remains stable.

Auto and light truck – the allowance increased during the current quarter due to modest loan growth, an increase in historical loss rates due to charge-off activity during the period, and the accretive impact of qualitative adjustments to address higher special attention, delinquency, and nonperforming rates in the segment. The industry is currently challenged by higher vehicle capital costs and weaker rental rates.

Medium and heavy duty truck – the allowance decreased due to a decline in loan balances. The industry continues to work through difficulties brought on by overcapacity. The forward outlook for freight demand remains uncertain.

Aircraft – the allowance was little changed during the current quarter as modest loan growth was offset by a slight decline in historical loss rates due to ongoing recovery activity in the foreign portion of this segment. The Company has historically carried a higher allowance in this portfolio due to risk volatility.

Construction equipment – the allowance increased due to higher loan balances, partially offset by a modest reduction in qualitative factors to account for lower delinquency rates within the portfolio year-to-date.

Commercial real estate – the allowance increased slightly due to higher loan balances offset by slightly lower historical loss rates. Higher interest rates and shifting demand dynamics have impacted commercial real estate markets, but the Company’s real estate portfolios have exhibited minimal problem loan activity, and it has experienced no material losses in recent quarters. The majority of the Company’s real estate exposure is owner-occupied, and exposure to non-owner-occupied office property is minimal.

Residential real estate and home equity – the allowance increased due to loan growth.

Consumer – the allowance decreased slightly due to lower loan balances.

Economic Outlook

As of June 30, 2025, the most significant economic factors impacting the Company’s loan portfolios are a uncertain domestic growth outlook, impacted trade policies, elevated inflation and interest rates, along with ongoing foreign conflicts and increasing geopolitical instability. The labor market has shown limited signs of softening and questions surrounding the timing and velocity of future interest rate cuts persist. The Company is concerned about the breadth of tariff proposals, uncertainty surrounding their implementation, their impact on the Company’s markets, and the corresponding increase in downside economic risks. Consumer stressors are increasing and consumer confidence is falling. The Company remains concerned about small businesses’ ability to manage expenses in an environment of broader macro instability, higher interest rates, and higher cost of capital. Asset valuations, particularly in the auto and light truck, construction equipment, and medium and heavy duty portfolios, are softening. Restrictive trade policies increase the potential for volatility in asset prices which collateralize the Company’s loans. Tightened lending conditions and the higher-rate environment are impacting commercial real estate activity. The forecast considers global and domestic economic impacts from these factors, as well as other key economic factors, such as changes in gross domestic product and unemployment which may impact the Company’s clients. The Company’s assumptions in the prior quarter’s forecast analysis remain pertinent and continue to be applicable to the forward outlook. The forecast reflects uncertain economic growth expectations and a continued weighting towards downside risks during the forecast period over the next two years with inflation slowly moving back towards the 2% Federal Reserve target rate resulting in an adverse impact on the loan and lease portfolio.

Although the Company’s current loss estimates consider geopolitical and economic risk, due to the level of uncertainty associated with these and other risk factors, the complexity of the current environment, and the potential for future changes in the forecast, the Company’s future loss estimates may vary considerably from the June 30, 2025, assumptions.

Liability for Credit Losses on Unfunded Loan Commitments

The liability for credit losses inherent in unfunded loan commitments is included in Accrued Expenses and Other Liabilities on the Consolidated Statements of Financial Condition. The following table shows the changes in the liability for credit losses on unfunded loan commitments.


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2025		2024		2025		2024
Balance, beginning of period	$	8,138	$	9,064	$	6,985	$	8,182


(Recovery of provision) provision	(194)		(370)		959		512
Balance, end of period	$	7,944	$	8,694	$	7,944	$	8,694