Allowance for Credit Losses

9 Months Ended

Sep. 30, 2025

Management reviews the appropriateness of the ACL on a regular basis. Management considers the accounting policy relating to the allowance to be a critical accounting policy, given the inherent uncertainty in evaluating the levels of the allowance required to cover credit losses in the portfolio and the material effect that assumptions could have on the Company’s results of operations. The Company has developed a methodology to measure the amount of estimated credit loss exposure inherent in the loan portfolio to assure that an appropriate allowance is maintained. The Company’s methodology is based upon guidance provided in SEC Staff Accounting Bulletin No. 119, Measurement of Credit Losses on Financial Instruments ("CECL"), and Financial Instruments - Credit Losses and ASC Topic 326, Financial Instruments - Credit Losses.

The Company uses a Discounted Cash Flow ("DCF") method to estimate expected credit losses for all loan segments excluding the leasing segment. For each of these loan segments, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, recovery lag, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on internal historical data.

The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers. For all loans utilizing the DCF method, management utilizes forecasts of national unemployment and a one year percentage change in national gross domestic product as loss drivers in the model.

For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over eight quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of economic forecasts, and scenario weightings, are also considered by management when developing the forecast metrics.

Due to the size and characteristics of the leasing portfolio, the Company uses the remaining life method, using the historical loss rate of the commercial and industrial segment, to determine the allowance for credit losses.

The combination of adjustments for credit expectations and timing expectations produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce a net present value of expected cash flows ("NPV"). An ACL is established for the difference between the NPV and amortized cost basis.

Since the methodology is based upon historical experience and trends, current conditions, and reasonable and supportable forecasts, as well as management’s judgment, factors may arise that result in different estimates. While management’s evaluation of the allowance as of September 30, 2025 considers the allowance to be appropriate, under certain conditions or assumptions, the Company would need to increase or decrease the allowance. In addition, various federal and State regulatory agencies, as part of their examination process, review the Company's allowance and may require the Company to recognize additions to the allowance based on their judgments and information available to them at the time of their examinations.

Loan Commitments and Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancellable, through a charge to credit loss expense for off-balance sheet credit exposures included in provision expense in the Company's consolidated statements of income.

The following tables detail activity in the allowance for credit losses on loans for the three and nine months ended September 30, 2025 and 2024. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.


(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Three Months Ended September 30, 2025
Allowance for credit losses:
Beginning balance	$	9,160	$	35,765	$	12,065	$	1,509	$	56	$	58,555
Charge-offs	(738)		0		0		(595)		0		(1,333)
Recoveries	18		0		55		140		0		213
Provision (credit) for credit loss expense	3,092		360		(1,242)		245		(1)		2,454
Ending Balance	$	11,532	$	36,125	$	10,878	$	1,299	$	55	$	59,889
Three Months Ended September 30, 2024
Allowance for credit losses:
Beginning balance	$	7,412	$	32,559	$	11,569	$	1,451	$	68	$	53,059
Charge-offs	(253)		0		0		(796)		0		(1,049)
Recoveries	11		3		5		118		0		137
Provision (credit) for credit loss expense	444		1,302		802		694		(5)		3,237
Ending Balance	$	7,614	$	33,864	$	12,376	$	1,467	$	63	$	55,384


(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Nine Months Ended September 30, 2025
Allowance for credit losses:
Beginning balance	$	7,684	$	35,837	$	11,345	$	1,568	$	62	$	56,496

Charge-offs	(936)		(4,882)		0		(1,892)		0		(7,710)
Recoveries	69		4		90		440		0		603
Provision (credit) for credit loss expense	4,715		5,166		(557)		1,183		(7)		10,500
Ending Balance	$	11,532	$	36,125	$	10,878	$	1,299	$	55	$	59,889
Nine Months Ended September 30, 2024
Allowance for credit losses:
Beginning balance	$	6,667	$	31,581	$	11,700	$	1,557	$	79	$	51,584

Charge-offs	(283)		0		0		(1,867)		0		(2,150)
Recoveries	29		6		130		336		0		501
Provision (credit) for credit loss expense	1,201		2,277		546		1,441		(16)		5,449
Ending Balance	$	7,614	$	33,864	$	12,376	$	1,467	$	63	$	55,384

During the second quarter of 2025, the Company recorded a partial charge-off of $4.7 million related to one commercial real estate relationship totaling $18.1 million. Subsequent to the partial charge-off that decreased the net value of the underlying collateral to fair value, interests in the underlying real property collateral were transferred to a limited liability company in which the Company holds a minority interest. The Company's investment in the limited liability company is accounted for as an equity method investment and included in other assets on the Company's Consolidated Statements of Condition.

The following tables detail activity in the liabilities for off-balance sheet credit exposures for the three and nine months ended September 30, 2025 and 2024:


(In thousands)	2025		2024
Three Months Ended September 30,
Liabilities for off-balance sheet credit exposures at beginning of period	$	1,484	$	3,084
Provision (Credit) for credit loss expense related to off-balance sheet credit exposures	36		(1,063)
Liabilities for off-balance sheet credit exposures at end of period	$	1,520	$	2,021
Nine Months Ended September 30,
Liabilities for off-balance sheet credit exposures at beginning of period	$	1,463	$	2,270

Provision for credit loss expense related to off-balance sheet credit exposures	57		(249)
Liabilities for off-balance sheet credit exposures at end of period	$	1,520	$	2,021

The following tables present the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related allowance for credit losses allocated to these loans, as of September 30, 2025 and December 31, 2024:


(In thousands)	Real Estate		Business Assets		Other		Total		ACL Allocation
September 30, 2025
Commercial and Industrial	$	482	$	0	$	0	$	482	$	250
Commercial Real Estate	29,163		0		0		29,163		2,797


Total Loans and Leases	$	29,645	$	0	$	0	$	29,645	$	3,047
December 31, 2024
Commercial and Industrial	$	610	$	0	$	0	$	610	$	0
Commercial Real Estate	31,051		0		0		31,051		1,712


Total Loans and Leases	$	31,661	$	0	$	0	$	31,661	$	1,712

Loan Modifications to Borrowers Experiencing Financial Difficulty

The Company from time to time modifies loans to borrowers experiencing financial difficulty. The modifications may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.

The following table shows the amortized cost basis as of September 30, 2025 and December 31, 2024 of the modified loans to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted:


(In thousands)	Term Extension		Interest Rate Reduction		Payment Delay and Term Extension		Term Extension and Interest Rate Reduction		Payment Delay		Total		% of Total Class of Loans and Leases
September 30, 2025
Commercial and Industrial

Commercial and industrial other	$	89	$	420	$	0	$	0	$	0	$	509	0.05	%

Subtotal commercial and industrial	89		420		0		0		0		509		0.05	%
Commercial Real Estate


Commercial real estate other	0		2,891		0		0		385		3,276		0.11	%
Subtotal commercial real estate	0		2,891		0		0		385		3,276		0.09	%
Residential
Home equity	0		0		0		50		0		50		0.02	%
Mortgages	0		0		0		109		970		1,079		0.08	%
Subtotal residential	0		0		0		159		970		1,129		0.07	%
Consumer

Consumer and other	23		0		0		0		0		23		0.03	%
Subtotal consumer	23		0		0		0		0		23		0.03	%
Total loans and leases	$	112	$	3,311	$	0	$	159	$	1,355	$	4,937	0.08	%


(In thousands)	Term Extension		Interest Rate Reduction		Payment Delay and Term Extension		Term Extension and Interest Rate Reduction		Payment Delay		Total		% of Total Class of Loans and Leases
December 31, 2024
Commercial and Industrial

Commercial and industrial other	$	10	$	463	$	0	$	110	$	45	$	628	0.07	%
Subtotal commercial and industrial	10		463		0		110		45		628		0.07	%
Commercial Real Estate


Commercial real estate other	0		2,990		0		0		394		3,384		0.12	%
Subtotal commercial real estate	0		2,990		0		0		394		3,384		0.10	%
Residential
Home equity	0		0		0		40		0		40		0.02	%
Mortgages	0		0		0		112		548		660		0.05	%
Subtotal residential	0		0		0		152		548		700		0.04	%
Consumer

Consumer and other	22		0		0		0		0		22		0.02	%
Subtotal consumer	22		0		0		0		0		22		0.02	%
Total loans and leases	$	32	$	3,453	$	0	$	262	$	987	$	4,734	0.08	%

There were no loan modifications made to borrowers experiencing financial difficulty that defaulted during the three and nine months ended September 30, 2025 and December 31, 2024.

The following table shows the aging analysis of loan modifications made to borrowers experiencing financial difficulty as of September 30, 2025 and December 31, 2024:


	Payment Status (Amortized Cost Basis)
(In thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Non-Accrual		Total
September 30, 2025
Commercial and Industrial

Commercial and industrial other	$	505	$	0	$	0	$	0	$	4	$	509
Subtotal commercial and industrial	505		0		0		0		4		509
Commercial Real Estate


Commercial real estate other	3,276		0		0		0		0		3,276
Subtotal commercial real estate	3,276		0		0		0		0		3,276
Residential Real Estate
Home equity	50		0		0		0		0		50
Mortgages	261		0		0		0		818		1,079
Subtotal residential real estate	311		0		0		0		818		1,129
Consumer and Other

Consumer and other	23		0		0		0		0		23
Subtotal consumer and other	23		0		0		0		0		23
Total	$	4,115	$	0	$	0	$	0	$	822	$	4,937


	Payment Status (Amortized Cost Basis)
(In thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Non-Accrual		Total
December 31, 2024
Commercial and Industrial

Commercial and industrial other	$	618	$	0	$	0	$	0	$	10	$	628
Subtotal commercial and industrial	618		0		0		0		10		628
Commercial Real Estate


Commercial real estate other	3,384		0		0		0		0		3,384
Subtotal commercial real estate	3,384		0		0		0		0		3,384
Residential Real Estate
Home equity	0		0		0		0		40		40
Mortgages	154		0		112		0		394		660
Subtotal residential real estate	154		0		112		0		434		700
Consumer and Other

Consumer and other	0		0		0		0		22		22
Subtotal consumer and other	0		0		0		0		22		22
Total	$	4,156	$	0	$	112	$	0	$	466	$	4,734

The following tables present credit quality indicators by total loans on an amortized cost basis by origination year as of September 30, 2025 and December 31, 2024:


September 30, 2025
(In thousands)	2025		2024		2023		2022		2021		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans
Commercial and Industrial - Other:
Pass	$	116,818	$	160,017	$	100,931	$	55,850	$	41,891	$	157,356	$	250,115	$	3,075	$	886,053
Special Mention	130		485		1,301		21,217		57		1,501		23,626		0		48,317
Substandard	0		447		196		0		427		456		2,515		190		4,231
Total Commercial and Industrial - Other	$	116,948	$	160,949	$	102,428	$	77,067	$	42,375	$	159,313	$	276,256	$	3,265	$	938,601
Current-period gross writeoffs	$	138	$	380	$	85	$	66	$	254	$	13	$	0	$	0	$	936
Commercial and Industrial - Agriculture:
Pass	$	9,959	$	11,862	$	24,477	$	8,204	$	1,698	$	6,815	$	38,344	$	383	$	101,742
Special Mention	0		0		0		0		26		0		0		0		26
Substandard	0		0		0		0		0		29		0		0		29
Total Commercial and Industrial - Agriculture	$	9,959	$	11,862	$	24,477	$	8,204	$	1,724	$	6,844	$	38,344	$	383	$	101,797
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Commercial Real Estate
Pass	$	265,343	$	323,283	$	266,662	$	332,272	$	354,721	$	1,251,036	$	66,634	$	30,415	$	2,890,366
Special Mention	6,500		0		0		1,479		580		31,336		0		0		39,895
Substandard	0		399		927		1,149		1,462		29,301		831		0		34,069
Total Commercial Real Estate	$	271,843	$	323,682	$	267,589	$	334,900	$	356,763	$	1,311,673	$	67,465	$	30,415	$	2,964,330
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	2,000	$	2,884	$	0	$	0	$	4,884
Commercial Real Estate - Agriculture:
Pass	$	13,648	$	24,237	$	11,641	$	39,874	$	20,694	$	107,171	$	6,944	$	2,156	$	226,365
Special Mention	0		0		0		0		0		160		0		0		160
Substandard	0		0		0		0		0		131		0		0		131
Total Commercial Real Estate - Agriculture	$	13,648	$	24,237	$	11,641	$	39,874	$	20,694	$	107,462	$	6,944	$	2,156	$	226,656
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Commercial Real Estate - Construction
Pass	$	6,195	$	34,179	$	6,622	$	1,846	$	14,376	$	321	$	297,581	$	3,256	$	364,376
Special Mention	0		0		0		0		0		0		0		0		0
Substandard	0		0		0		0		0		0		17,302		0		17,302
Total Commercial Real Estate - Construction	$	6,195	$	34,179	$	6,622	$	1,846	$	14,376	$	321	$	314,883	$	3,256	$	381,678
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0


(In thousands)	2025		2024		2023		2022		2021		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans
Residential - Home Equity
Performing	$	2,249	$	16,294	$	3,547	$	2,937	$	1,499	$	15,364	$	176,477	$	1,135	$	219,502
Nonperforming	0		0		0		57		0		634		2,009		0		2,700
Total Residential - Home Equity	$	2,249	$	16,294	$	3,547	$	2,994	$	1,499	$	15,998	$	178,486	$	1,135	$	222,202
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Residential - Mortgages
Performing	$	75,438	$	107,485	$	123,351	$	162,612	$	225,756	$	649,101	$	0	$	0	$	1,343,743
Nonperforming	0		188		886		1,055		1,274		10,508		0		0		13,911
Total Residential - Mortgages	$	75,438	$	107,673	$	124,237	$	163,667	$	227,030	$	659,609	$	0	$	0	$	1,357,654
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Consumer - Direct
Performing	$	33,180	$	12,532	$	12,363	$	7,975	$	7,246	$	13,174	$	2,213	$	0	$	88,683
Nonperforming	0		0		20		10		0		58		2		0		90
Total Consumer - Direct	$	33,180	$	12,532	$	12,383	$	7,985	$	7,246	$	13,232	$	2,215	$	0	$	88,773
Current-period gross writeoffs	$	1,789	$	7	$	0	$	17	$	17	$	51	$	0	$	0	$	1,881
Consumer - Indirect
Performing	$	0	$	0	$	0	$	0	$	24	$	62	$	0	$	0	$	86
Nonperforming	0		0		0		0		0		4		0		0		4
Total Consumer - Indirect	$	0	$	0	$	0	$	0	$	24	$	66	$	0	$	0	$	90
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	10	$	0	$	0	$	10


December 31, 2024
(In thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans
Commercial and Industrial - Other:
Pass	$	164,809	$	114,591	$	60,984	$	54,087	$	19,311	$	144,785	$	256,621	$	35,968	$	851,156
Special Mention	334		288		174		808		144		375		157		0		2,280
Substandard	425		0		41		43		4		608		1,011		0		2,132
Total Commercial and Industrial - Other	$	165,568	$	114,879	$	61,199	$	54,938	$	19,459	$	145,768	$	257,789	$	35,968	$	855,568
Current-period gross writeoffs	$	0	$	15	$	30	$	44	$	21	$	432	$	0	$	0	$	542
Commercial and Industrial - Agriculture:
Pass	$	15,686	$	23,823	$	9,893	$	2,233	$	1,660	$	11,304	$	42,438	$	2,895	$	109,932
Special Mention	0		0		0		34		0		0		0		0		34
Substandard	0		0		0		0		41		0		0		0		41
Total Commercial and Industrial - Agriculture	$	15,686	$	23,823	$	9,893	$	2,267	$	1,701	$	11,304	$	42,438	$	2,895	$	110,007
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Commercial Real Estate
Pass	$	331,943	$	242,564	$	324,510	$	355,090	$	277,220	$	1,088,575	$	50,632	$	16,958	$	2,687,492
Special Mention	0		0		1,499		599		15,205		12,637		4,452		0		34,392
Substandard	731		973		1,474		2,561		1,840		45,856		985		0		54,420
Total Commercial Real Estate	$	332,674	$	243,537	$	327,483	$	358,250	$	294,265	$	1,147,068	$	56,069	$	16,958	$	2,776,304
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Commercial Real Estate - Agriculture:
Pass	$	23,754	$	11,594	$	37,398	$	21,510	$	19,853	$	96,967	$	4,169	$	1,950	$	217,195
Special Mention	0		0		0		0		0		217		0		0		217
Substandard	0		0		0		0		0		170		0		0		170
Total Commercial Real Estate - Agriculture	$	23,754	$	11,594	$	37,398	$	21,510	$	19,853	$	97,354	$	4,169	$	1,950	$	217,582
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Commercial Real Estate - Construction
Pass	$	13,160	$	744	$	682	$	5,003	$	1,986	$	802	$	293,479	$	52,675	$	368,531
Special Mention	0		0		0		0		0		0		0		0		0
Substandard	0		0		0		0		0		0		17,400		0		17,400
Total Commercial Real Estate - Construction	$	13,160	$	744	$	682	$	5,003	$	1,986	$	802	$	310,879	$	52,675	$	385,931
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0


(In thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans
Residential - Home Equity
Performing	$	15,181	$	3,106	$	2,383	$	1,053	$	784	$	12,993	$	163,202	$	2,603	$	201,305
Nonperforming	0		0		0		0		0		594		2,295		0		2,889
Total Residential - Home Equity	$	15,181	$	3,106	$	2,383	$	1,053	$	784	$	13,587	$	165,497	$	2,603	$	204,194
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Residential - Mortgages
Performing	$	106,698	$	130,463	$	172,310	$	239,307	$	204,310	$	500,169	$	0	$	0	$	1,353,257
Nonperforming	0		707		612		737		948		10,385		0		0		13,389
Total Residential - Mortgages	$	106,698	$	131,170	$	172,922	$	240,044	$	205,258	$	510,554	$	0	$	0	$	1,366,646
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Consumer - Direct
Performing	$	40,812	$	18,082	$	10,022	$	9,109	$	3,953	$	11,485	$	2,575	$	0	$	96,038
Nonperforming	0		4		24		8		4		77		8		0		125
Total Consumer - Direct	$	40,812	$	18,086	$	10,046	$	9,117	$	3,957	$	11,562	$	2,583	$	0	$	96,163
Current-period gross writeoffs	$	2,272	$	15	$	11	$	32	$	10	$	229	$	0	$	0	$	2,569
Consumer - Indirect
Performing	$	0	$	0	$	0	$	52	$	23	$	141	$	0	$	0	$	216
Nonperforming	0		0		0		0		0		13		0		0		13
Total Consumer - Indirect	$	0	$	0	$	0	$	52	$	23	$	154	$	0	$	0	$	229
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	29	$	0	$	0	$	29