Loan and Lease Financings

9 Months Ended

Sep. 30, 2025

The Company evaluates loans and leases for credit quality at least annually, but more frequently if certain circumstances occur (such as material new information which becomes available and indicates a potential change in credit risk). The Company uses two methods to assess credit risk: loan or lease credit quality grades and credit risk classifications. The purpose of the loan or lease credit quality grade is to document the degree of risk associated with individual credits, as well as inform management of the degree of risk in the portfolio taken as a whole. Credit risk classifications are used to categorize loans by degree of risk and to designate individual or committee approval authorities for higher risk credits at the time of origination. Credit risk classifications include categories for: Acceptable, Marginal, Special Attention, Special Risk, Restricted by Policy, Regulated and Prohibited by Law.

All loans and leases, except residential real estate loans‚ home equity loans, and consumer loans, are assigned credit quality grades on a scale from 1 to 12, with grade 1 representing superior credit quality. The criteria used to assign grades to extensions of credit that exhibit potential problems or well-defined weaknesses are primarily based upon the degree of risk and the likelihood of orderly repayment, and their effect on the Company’s safety and soundness. Loans or leases graded 7 or weaker are considered “special attention” credits and, as such, relationships in excess of $250,000 are reviewed quarterly as part of management’s evaluation of the appropriateness of the allowance for loan and lease losses. Grade 7 credits are defined as “watch” and contain greater than average credit risk and are monitored to limit the exposure to increased risk; grade 8 credits are “special mention” and, following regulatory guidelines, are defined as having potential weaknesses that deserve management’s close attention. Credits that exhibit well-defined weaknesses and a distinct possibility of loss are considered “classified” and are graded 9 through 12 corresponding to the regulatory definitions of “substandard” (grades 9 and 10) and the more severe “doubtful” (grade 11) and “loss” (grade 12). For residential real estate and home equity and consumer loans, credit quality is based on the aging status of the loan and by payment activity. Nonperforming loans are those loans which are on nonaccrual status or are 90 days or more past due.

Below is a summary of the Company’s loan and lease portfolio segments and a discussion of the risk characteristics relevant to each portfolio segment.

Commercial and agricultural – loans are to entities within the Company’s local market communities. Loans are for business or agri-business purposes and include working capital lines of credit secured by accounts receivable and inventory that are generally renewable annually and term loans secured by equipment with amortizations based on the expected life of the underlying collateral, generally three to seven years. These loans are typically further supported by personal guarantees. Commercial exposure is to a wide range of industries and services. Risks in this sector are also varied and are most impacted by general economic conditions. Risk mitigants include appropriate underwriting and monitoring and, when appropriate, government guarantees, including Small Business Administration and Farm Service Agency.

Renewable energy – loans are for the purpose of financing primarily solar related projects and may include construction draw notes, operating loans, letters of credit and may entail a tax equity structure. Collateral in a multi-state area includes tangible assets of the borrower, assignment of intangible assets including power purchase agreements, and pledges of permits and licenses. Financing is provided to qualified borrowers throughout the continental United States with an emphasis on the regions east of the Rocky Mountains.

Auto and light truck – loans are secured by vehicles and borrowers are nationwide. The portfolio consists of multiple industries: auto rental, auto leasing and a small specialty vehicle segment which the Company is largely exiting. Borrowers in the auto rental segment are primarily independent auto rental entities with on-airport and off-airport locations, and some insurance replacement business. Loan terms are relatively short, generally eighteen months, but up to four years. Auto leasing customers lease to businesses and the Company takes assignment of the lease stream and places its lien on the vehicles. Terms are generally longer than the auto rental sector, three to seven years and match the underlying leases. Risks include economic risks and collateral risks, principally used vehicle values.

Medium and heavy duty truck – loans and full-service truck leases are secured by heavy-duty trucks, commonly Class 8 trucks, and are generally personally guaranteed. In addition to economic risks, collateral risk is significant. Financing is generally at full cost, plus additional expenditures to get the vehicle operational, such as taxes, insurance and fees. It takes three to four years of debt amortization to reach an equity position in the collateral.

Aircraft – loans are to domestic and foreign borrowers with the domestic segment further divided into two pools: 1) personal and business use, and 2) dealers and operators. The Company’s focus for the foreign sector is Latin America, principally Mexico and Brazil. Loans are primarily secured by new and used business jets and helicopters, with appropriate advances, amortizations of ten to fifteen years, and are generally guaranteed by individuals. The most significant risk in the Aircraft portfolio is collateral risk - volatility in underlying values and maintenance concerns. The portfolio is subject to national and global economic risks.

Construction equipment – loans are to borrowers throughout the country secured by specific equipment. The borrowers include highway and road builders, asphalt producers and pavers, suppliers of aggregate products, site developers, frac sand operations, general construction equipment dealers and operators, and crane rental entities. Generally, loans include personal guarantees. The construction equipment industry is heavily dependent on the U.S. economy and the global economy. Market growth is reliant on investments from public and private sectors into urbanization and infrastructure projects.

Commercial real estate – loans are generally to entities within the local market communities served by the Company with advances generally within regulatory guidelines. Historically, the Company’s exposure to commercial real estate had been primarily to the less risky owner-occupied segment although growth in the non-owner-occupied segment of this portfolio has increased over the last several years. The non-owner-occupied segment includes hotels, apartment complexes and warehousing facilities. There is generally limited exposure to construction loans although at present, construction exposures are comparably higher than previous periods. Many commercial real estate loans carry personal guarantees. Additional risks in the commercial real estate portfolio include interest rate risk, geographical concentration in northern Indiana and southwest Michigan and general economic conditions.

Residential real estate and home equity – loans predominantly include one-to-four family mortgages to borrowers in the Company’s local market communities and are appropriately underwritten and secured by residential real estate.

Consumer – loans are to individuals in the Company’s local markets and auto loans are generally secured by personal vehicles and appropriately underwritten.

The following table shows the amortized cost of loans and leases, segregated by portfolio segment, credit quality rating and year of origination, as of September 30, 2025, and gross charge-offs for the nine months ended September 30, 2025.


	Term Loans and Leases by Origination Year
(Dollars in thousands)	2025		2024		2023		2022		2021		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and agricultural
Grades 1-6	$	131,344	$	99,053	$	77,309	$	52,156	$	24,416	$	19,348	$	311,409	$	—	$	715,035
Grades 7-12	2,221		316		4,626		1,596		1,671		2,130		31,572		—		44,132
Total commercial and agricultural	133,565		99,369		81,935		53,752		26,087		21,478		342,981		—		759,167
Current period gross charge-offs	199		32		159		146		9		—		1,578		—		2,123
Renewable energy
Grades 1-6	224,680		129,668		83,192		23,561		58,227		84,387		—		—		603,715
Grades 7-12	—		—		—		—		—		—		—		—		—
Total renewable energy	224,680		129,668		83,192		23,561		58,227		84,387		—		—		603,715
Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Auto and light truck
Grades 1-6	368,029		255,366		125,228		51,242		12,657		6,711		—		—		819,233
Grades 7-12	8,313		45,084		49,536		2,357		28		441		—		—		105,759
Total auto and light truck	376,342		300,450		174,764		53,599		12,685		7,152		—		—		924,992
Current period gross charge-offs	—		2,010		129		226		1		—		—		—		2,366
Medium and heavy duty truck
Grades 1-6	79,273		64,743		55,907		50,483		13,822		5,801		—		561		270,590
Grades 7-12	348		—		1,606		5,797		1,961		—		—		—		9,712
Total medium and heavy duty truck	79,621		64,743		57,513		56,280		15,783		5,801		—		561		280,302
Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Aircraft
Grades 1-6	237,695		261,866		155,190		238,892		118,048		54,786		6,607		—		1,073,084
Grades 7-12	2,567		4,818		5,061		6,768		—		3,125		—		—		22,339
Total aircraft	240,262		266,684		160,251		245,660		118,048		57,911		6,607		—		1,095,423
Current period gross charge-offs	—		—		485		—		—		—		—		—		485
Construction equipment
Grades 1-6	351,017		377,138		234,545		128,319		33,987		18,081		29,008		1,578		1,173,673
Grades 7-12	2,883		5,405		5,243		9,265		1,150		9,827		—		—		33,773
Total construction equipment	353,900		382,543		239,788		137,584		35,137		27,908		29,008		1,578		1,207,446
Current period gross charge-offs	—		201		1,206		—		—		—		—		—		1,407
Commercial real estate
Grades 1-6	169,586		263,313		284,164		202,080		117,440		187,005		56		—		1,223,644
Grades 7-12	90		480		9,621		3,974		4,055		2,442		—		—		20,662
Total commercial real estate	169,676		263,793		293,785		206,054		121,495		189,447		56		—		1,244,306
Current period gross charge-offs	—		5		—		—		—		5		—		—		10
Residential real estate and home equity
Performing	74,705		79,851		59,204		85,563		74,906		146,195		195,015		7,648		723,087
Nonperforming	—		—		466		612		214		735		1,381		90		3,498
Total residential real estate and home equity	74,705		79,851		59,670		86,175		75,120		146,930		196,396		7,738		726,585
Current period gross charge-offs	—		—		—		12		—		5		30		2		49
Consumer
Performing	31,357		30,609		21,534		16,872		5,010		1,429		14,930		—		121,741
Nonperforming	28		26		333		257		84		49		—		—		777
Total consumer	31,385		30,635		21,867		17,129		5,094		1,478		14,930		—		122,518
Current period gross charge-offs	$	434	$	216	$	131	$	177	$	44	$	6	$	21	$	—	$	1,029

The following table shows the amortized cost of loans and leases, segregated by portfolio segment, credit quality rating and year of origination, as of December 31, 2024 and gross charge-offs for the year ended December 31, 2024.


	Term Loans and Leases by Origination Year
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and agricultural
Grades 1-6	$	136,888	$	115,508	$	66,696	$	36,315	$	19,677	$	18,369	$	331,282	$	—	$	724,735
Grades 7-12	438		4,079		7,769		2,426		194		2,325		31,008		—		48,239
Total commercial and agricultural	137,326		119,587		74,465		38,741		19,871		20,694		362,290		—		772,974
Current period gross charge-offs	—		276		117		550		—		—		8,882		—		9,825
Renewable energy
Grades 1-6	150,951		145,126		22,110		70,606		22,329		76,144		—		—		487,266
Grades 7-12	—		—		—		—		—		—		—		—		—
Total renewable energy	150,951		145,126		22,110		70,606		22,329		76,144		—		—		487,266
Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Auto and light truck
Grades 1-6	443,033		276,295		106,199		25,535		10,018		6,677		—		—		867,757
Grades 7-12	26,131		48,319		4,754		99		1,210		165		—		—		80,678
Total auto and light truck	469,164		324,614		110,953		25,634		11,228		6,842		—		—		948,435
Current period gross charge-offs	—		165		448		6		—		111		—		—		730
Medium and heavy duty truck
Grades 1-6	88,395		72,816		81,238		25,726		11,298		5,493		—		—		284,966
Grades 7-12	—		1,524		1,623		690		—		13		—		807		4,657
Total medium and heavy duty truck	88,395		74,340		82,861		26,416		11,298		5,506		—		807		289,623
Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Aircraft
Grades 1-6	347,099		190,776		285,677		151,194		82,208		32,326		7,773		—		1,097,053
Grades 7-12	2,882		7,704		10,920		1,846		3,392		—		—		—		26,744
Total aircraft	349,981		198,480		296,597		153,040		85,600		32,326		7,773		—		1,123,797
Current period gross charge-offs	—		—		—		15		—		53		—		—		68
Construction equipment
Grades 1-6	488,870		325,443		208,114		70,258		33,095		10,890		25,916		1,966		1,164,552
Grades 7-12	2,716		10,650		11,686		1,679		12,629		—		—		—		39,360
Total construction equipment	491,586		336,093		219,800		71,937		45,724		10,890		25,916		1,966		1,203,912
Current period gross charge-offs	46		989		390		267		—		—		—		—		1,692
Commercial real estate
Grades 1-6	258,988		303,717		237,103		126,129		82,249		177,798		264		—		1,186,248
Grades 7-12	145		14,580		5,846		6,386		27		2,033		—		—		29,017
Total commercial real estate	259,133		318,297		242,949		132,515		82,276		179,831		264		—		1,215,265
Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Residential real estate and home equity
Performing	87,045		69,439		94,441		81,345		79,575		85,333		173,876		6,210		677,264
Nonperforming	—		171		624		346		103		340		1,138		85		2,807
Total residential real estate and home equity	87,045		69,610		95,065		81,691		79,678		85,673		175,014		6,295		680,071
Current period gross charge-offs	—		3		—		32		—		—		30		1		66
Consumer
Performing	43,692		33,063		28,594		10,092		2,398		983		13,823		—		132,645
Nonperforming	22		352		336		57		33		20		—		—		820
Total consumer	43,714		33,415		28,930		10,149		2,431		1,003		13,823		—		133,465
Current period gross charge-offs	$	565	$	230	$	276	$	118	$	16	$	22	$	122	$	—	$	1,349

The following table shows the amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status.


(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due and Accruing		Total Accruing		Total Nonaccrual		Nonaccrual with No Allowance for Credit Loss		Total
September 30, 2025
Commercial and agricultural	$	752,157	$	1,025	$	3,637	$	—	$	756,819	$	2,348	$	1,320	$	759,167
Renewable energy	603,715		—		—		—		603,715		—		—		603,715
Auto and light truck	845,587		39,755		—		—		885,342		39,650		11,022		924,992
Medium and heavy duty truck	278,611		85		—		—		278,696		1,606		—		280,302
Aircraft	1,094,311		1,112		—		—		1,095,423		—		—		1,095,423
Construction equipment	1,193,473		535		—		—		1,194,008		13,438		12,870		1,207,446
Commercial real estate	1,240,260		944		1,837		—		1,243,041		1,265		714		1,244,306
Residential real estate and home equity	720,088		1,937		1,063		305		723,393		3,192		—		726,585
Consumer	120,735		917		89		12		121,753		765		—		122,518
Total	$	6,848,937	$	46,310	$	6,626	$	317	$	6,902,190	$	62,264	$	25,926	$	6,964,454

December 31, 2024
Commercial and agricultural	$	767,942	$	275	$	42	$	—	$	768,259	$	4,715	$	3,167	$	772,974
Renewable energy	487,266		—		—		—		487,266		—		—		487,266
Auto and light truck	943,403		2,226		—		—		945,629		2,806		939		948,435
Medium and heavy duty truck	289,623		—		—		—		289,623		—		—		289,623
Aircraft	1,123,797		—		—		—		1,123,797		—		—		1,123,797
Construction equipment	1,185,936		—		—		—		1,185,936		17,976		17,404		1,203,912
Commercial real estate	1,203,967		9,703		—		—		1,213,670		1,595		1,055		1,215,265
Residential real estate and home equity	675,669		1,010		585		96		677,360		2,711		—		680,071
Consumer	131,585		852		208		10		132,655		810		—		133,465
Total	$	6,809,188	$	14,066	$	835	$	106	$	6,824,195	$	30,613	$	22,565	$	6,854,808

Accrued interest receivable on loans and leases at September 30, 2025, and December 31, 2024, was $26.49 million and $28.02 million, respectively.

A loan or lease is considered collateral-dependent when the borrower is experiencing financial difficulty and the loan or lease is expected to be repaid substantially through the operation or sale of the collateral. Expected credit losses for collateral-dependent loan and leases is based on the fair value of the collateral, adjusted for selling costs as appropriate. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value.

The following table shows the amortized cost basis of collateral-dependent loans, segregated by portfolio segment, which are individually evaluated to determine credit losses.


(Dollars in thousands)	Real Estate		Equipment		General Business Assets		Total		Allowance on Collateral Dependent Loans and Leases
September 30, 2025
Commercial and agricultural	$	—	$	—	$	1,320	$	1,320	$	—

Auto and light truck	—		39,073		—		39,073		823
Medium and heavy duty truck	—		1,606		—		1,606		296

Construction equipment	—		13,152		—		13,152		39
Commercial real estate	714		—		—		714		—


Total	$	714	$	53,831	$	1,320	$	55,865	$	1,158

December 31, 2024
Commercial and agricultural	$	—	$	—	$	4,102	$	4,102	$	209

Auto and light truck	—		939		—		939		—


Construction equipment	—		17,404		—		17,404		—
Commercial real estate	1,055		—		—		1,055		—


Total	$	1,055	$	18,343	$	4,102	$	23,500	$	209

Loan Modifications to Borrowers Experiencing Financial Difficulty

The following table shows the amortized cost of loans and leases over $250,000 at September 30, 2025, and September 30, 2024, respectively, that were both experiencing financial difficulty and modified during the three months ended September 30, 2025, and September 30, 2024, respectively, segregated by portfolio segment and type of modification. The percentage of the amortized cost of loans and leases that were modified to borrowers in financial distress as compared to the amortized cost of each segment of financial receivable is also presented below.


(Dollars in thousands)	Payment Delay		Term Extension		Interest Rate Reduction		Combination Payment Delay and Term Extension		% of Total Segment Financing Receivables
Three Months Ended September 30, 2025
Commercial and agricultural	$	—	$	—	$	—	$	300	0.04	%








Total	$	—	$	—	$	—	$	300	—	%

Three Months Ended September 30, 2024
Commercial and agricultural	$	1,052	$	10	$	—	$	—	0.15	%





Commercial real estate	988		—		—		—		0.09


Total	$	2,040	$	10	$	—	$	—	0.03	%

The following table shows the amortized cost of loans and leases over $250,000 at September 30, 2025, and September 30, 2024, respectively, that were both experiencing financial difficulty and modified during the nine months ended September 30, 2025, and September 30, 2024, respectively, segregated by portfolio segment and type of modification. The percentage of the amortized cost of loans and leases that were modified to borrowers in financial distress as compared to the amortized cost of each segment of financial receivable is also presented below.



(Dollars in thousands)	Payment Delay		Term Extension		Interest Rate Reduction		Combination Payment Delay and Term Extension		% of Total Segment Financing Receivables
Nine months ended September 30, 2025
Commercial and agricultural	$	—	$	2,191	$	—	$	300	0.33	%




Construction equipment	—		463		—		—		0.04



Total	$	—	$	2,654	$	—	$	300	0.04	%

Nine months ended September 30, 2024
Commercial and agricultural	$	1,052	$	118	$	—	$	—	0.16	%

Auto and light truck	—		—		—		28,847		3.04



Commercial real estate	988		—		—		—		0.09


Total	$	2,040	$	118	$	—	$	28,847	0.47	%

There were $4.45 million and $0.00 million in commitments to lend additional amounts to the borrowers included in the previous table at September 30, 2025, and September 30, 2024, respectively.

The Company closely monitors the performance of loans and leases that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table shows the performance of such loans and leases that have been modified during the twelve months ended September 30, 2025, and September 30, 2024, respectively.


(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due
Twelve months ended September 30, 2025
Commercial and agricultural	$	2,384	$	107	$	—	$	—	$	107

Auto and light truck	—		—		—		4,928		4,928
Medium and heavy duty truck	2,369		—		—		—		—

Construction equipment	51		412		—		—		412



Total	$	4,804	$	519	$	—	$	4,928	$	5,447

Twelve months ended September 30, 2024
Commercial and agricultural	$	1,170	$	—	$	—	$	—	$	—

Auto and light truck	28,847		—		—		—		—
Medium and heavy duty truck	8,645		—		—		—		—


Commercial real estate	988		—		—		—		—


Total	$	39,650	$	—	$	—	$	—	$	—

The following table shows the financial effect of loan and lease modifications presented above to borrowers experiencing financial difficulty for the twelve months ended September 30, 2025, and September 30, 2024, respectively.


	Weighted- Average Interest Rate Reduction		Weighted- Average Term Extension (in months)	Weighted- Average Payment Delay (in months)	Combination Weighted-Average Payment Delay and Term Extension (in months)
Twelve months ended September 30, 2025
Commercial and agricultural	—	%	11	6	8

Auto and light truck	—		0	0	3
Medium and heavy duty truck	—		0	0	4

Construction equipment	—		5	0	0
Commercial real estate	—		0	6	0


Total	—	%	11	6	4

Twelve months ended September 30, 2024
Commercial and agricultural	—	%	10	6	3

Auto and light truck	—		0	0	3
Medium and heavy duty truck	—		0	0	6


Commercial real estate	—		0	6	0


Total	—	%	10	6	4

There was one modified loan to a borrower experiencing financial difficulty which had a payment default within twelve months of modification during the nine month period ended September 30, 2025, and one modified loan to a borrower experiencing financial difficulty which had a payment default within twelve months of modification during the nine months ended September 30, 2024.

Upon the Company’s determination that a modified loan or lease has subsequently been deemed uncollectible, the loan or lease is written off. Therefore, the amortized cost of the loan is reduced by the uncollectible amount and the allowance for loan and lease losses is adjusted by the same amount.