Allowance for Credit Losses

9 Months Ended

Sep. 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 September 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
September 30, 2025
Balance, beginning of period	$	24,339	$	10,044	$	20,865	$	6,522	$	36,706	$	29,075	$	25,002	$	8,766	$	2,165	$	163,484
Charge-offs	1,269		—		526		—		—		390		4		14		277		2,480
Recoveries	92		—		253		—		150		10		38		1		61		605
Net charge-offs (recoveries)	1,177		—		273		—		(150)		380		(34)		13		216		1,875
Provision (recovery of provision)	(1,730)		583		404		180		(619)		681		(174)		175		321		(179)
Balance, end of period	$	21,432	$	10,627	$	20,996	$	6,702	$	36,237	$	29,376	$	24,862	$	8,928	$	2,270	$	161,430

September 30, 2024
Balance, beginning of period	$	18,637	$	7,653	$	17,726	$	9,221	$	35,166	$	26,944	$	24,847	$	7,792	$	2,081	$	150,067
Charge-offs	2,004		—		302		—		—		—		—		—		323		2,629
Recoveries	217		—		719		—		214		28		538		2		60		1,778
Net charge-offs (recoveries)	1,787		—		(417)		—		(214)		(28)		(538)		(2)		263		851
Provision (recovery of provision)	2,812		304		(188)		(559)		332		1,051		(1,118)		43		431		3,108
Balance, end of period	$	19,662	$	7,957	$	17,955	$	8,662	$	35,712	$	28,023	$	24,267	$	7,837	$	2,249	$	152,324

The following table shows the changes in the allowance for loan and lease losses, segregated by portfolio segment, for the nine months ended September 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
September 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	2,123		—		2,366		—		485		1,407		10		49		1,029		7,469
Recoveries	893		—		1,507		—		565		307		59		19		192		3,542
Net charge-offs (recoveries)	1,230		—		859		—		(80)		1,100		(49)		30		837		3,927
Provision (recovery of provision)	1,346		2,065		3,418		(590)		(506)		2,218		(8)		982		892		9,817
Balance, end of period	$	21,432	$	10,627	$	20,996	$	6,702	$	36,237	$	29,376	$	24,862	$	8,928	$	2,270	$	161,430

September 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	9,115		—		318		—		68		598		—		13		935		11,047
Recoveries	356		—		2,281		—		1,063		1,434		722		24		180		6,060
Net charge-offs (recoveries)	8,759		—		(1,963)		—		(995)		(836)		(722)		(11)		755		4,987
Provision (recovery of provision)	11,036		1,347		(866)		(303)		(2,936)		677		(145)		128		821		9,759
Balance, end of period	$	19,662	$	7,957	$	17,955	$	8,662	$	35,712	$	28,023	$	24,267	$	7,837	$	2,249	$	152,324

The decline in allowance for credit losses as compared to the previous quarter reflects a decrease in loan balances and lower special attention loans in the Company’s commercial and agricultural portfolio which are reserved at higher rates, partially offset by an increase in historical loss rates in the auto and light truck portfolio due to higher special attention balances during the period. The Company also added modest qualitative adjustments in the auto and light truck, medium and heavy duty truck and consumer portfolios due to a combination of ongoing delinquency and elevated special attention concerns. The previous forecast assumption as of June 30, 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. The Company remains cautious on the forward outlook. Ongoing risks include global geopolitical instability, trade policy uncertainty, softening labor markets, increasing consumer stressors, weakened consumer confidence, and still elevated inflation and interest rates. A federal government shutdown is pending as of quarter end, adding to overall uncertainty.

Overall credit quality metrics remained generally stable during the quarter in most portfolios. Special attention balances, which carry higher reserve rates, fell slightly. Special attention balances increased in the auto and light truck portfolio but were offset by declines in the commercial and agricultural portfolio and ongoing amortization. Nonperforming balances declined due to defleeting activity in the auto and light truck portfolio along with payoffs in the commercial and agricultural portfolio. Delinquency activity remains elevated in the auto and light truck and consumer portfolios. Net credit losses were modest during the period, with losses in the commercial and agricultural, auto and light truck, and construction equipment portfolios, partially offset by net recovery activity across multiple portfolios.

Commercial and agricultural – the decrease in the allowance in the current quarter was principally due to lower loan balances and lower special attention balances which carry higher reserves.

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 an increase in historical loss rates stemming from higher special attention balances and modest charge-off activity during the period, along with the accretive impact of qualitative adjustments to address ongoing weakness in the auto rental portion. The industry is currently challenged by overcapacity, higher vehicle capital costs and lower rental rates.

Medium and heavy duty truck – the allowance increased due to the accretive impact of a qualitative adjustment to address elevated special attention concerns stemming from prolonged industry weakness. Loan balances fell slightly. The industry continues to work through difficulties brought on by overcapacity and ongoing softness in freight demand.

Aircraft – the allowance fell due to lower loan balances in the domestic aircraft segment of the portfolio. Credit quality remains stable, although 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 and a slight increase in historical loss rates due to modest charge-off activity.

Commercial real estate – the allowance fell slightly due to lower loan balances. The Company’s real estate portfolios have exhibited minimal problem loan activity, and have 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 increased despite a slight decline in loan balances due to the accretive impact of a qualitative adjustment to address increasing delinquency rates in the portfolio.

Economic Outlook

As of September 30, 2025, the most significant economic factors impacting the Company’s loan portfolios are a lack of clarity in the domestic growth outlook, trade policy uncertainty, elevated inflation and interest rates, along with ongoing foreign conflicts and geopolitical instability. The labor market is showing signs of deterioration and job growth has lacked breadth for multiple quarters. The Company is concerned about tariff policy, uncertainty surrounding policy implementation, the impact on the Company’s markets, and the corresponding increase in downside economic risks. The impact of tariffs has largely been absorbed within the supply chain thus far and has not yet fully impacted the consumer. Consumer stressors are elevated and consumer confidence is weakening. The Company remains concerned about small businesses’ ability to manage expenses in an environment of broad instability, elevated interest rates, and higher cost of capital. Restrictive trade policies increase the potential for volatility in asset prices which collateralize the Company’s loans. 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 September 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 September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2025		2024		2025		2024
Balance, beginning of period	$	7,944	$	8,694	$	6,985	$	8,182


Provision (recovery of provision)	1,075		(1,385)		2,034		(873)
Balance, end of period	$	9,019	$	7,309	$	9,019	$	7,309