Allowance for Credit Losses

6 Months Ended

Jun. 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 June 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 six months ended June 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.


Three Months Ended June 30, 2025
(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Allowance for credit losses:
Beginning balance	$	8,618	$	39,308	$	11,542	$	1,497	$	58	$	61,023
Charge-offs	(13)		(4,882)		0		(518)		0		(5,413)
Recoveries	9		2		8		140		0		159
Provision (credit) for credit loss expense	546		1,337		515		390		(2)		2,786
Ending Balance	$	9,160	$	35,765	$	12,065	$	1,509	$	56	$	58,555


Three Months Ended June 30, 2024
(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Allowance for credit losses:
Beginning balance	$	7,586	$	31,467	$	11,181	$	1,396	$	74	$	51,704
Charge-offs	(30)		0		0		(626)		0		(656)
Recoveries	11		1		5		130		0		147
Provision (credit) for credit loss expense	(155)		1,091		383		551		(6)		1,864
Ending Balance	$	7,412	$	32,559	$	11,569	$	1,451	$	68	$	53,059


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

Charge-offs	(198)		(4,882)		0		(1,297)		0		(6,377)
Recoveries	51		4		35		300		0		390
Provision (credit) for credit loss expense	1,623		4,806		685		938		(6)		8,046
Ending Balance	$	9,160	$	35,765	$	12,065	$	1,509	$	56	$	58,555


Six Months Ended June 30, 2024
(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Allowance for credit losses:
Beginning balance	$	6,667	$	31,581	$	11,700	$	1,557	$	79	$	51,584

Charge-offs	(30)		0		0		(1,071)		0		(1,101)
Recoveries	18		3		125		218		0		364
Provision (credit) for credit loss expense	757		975		(256)		747		(11)		2,212
Ending Balance	$	7,412	$	32,559	$	11,569	$	1,451	$	68	$	53,059

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, for which there was a specific reserve of $4.2 million. The specific reserve was added in the first quarter of 2025 and reflected the estimated decrease in fair value of the collateral based on a new appraisal received at the end of that quarter. 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. At June 30, 2025, the property was majority occupied by commercial tenants, and was generating positive cash flow. 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 six months ended June 30, 2025 and 2024:


Three Months Ended June 30,
(In thousands)	2025		2024
Liabilities for off-balance sheet credit exposures at beginning of period	$	1,490	$	2,776
(Credit) provision for credit loss expense related to off-balance sheet credit exposures	(6)		308
Liabilities for off-balance sheet credit exposures at end of period	$	1,484	$	3,084


Six Months Ended June 30,
(In thousands)	2025		2024
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	21		814
Liabilities for off-balance sheet credit exposures at end of period	$	1,484	$	3,084

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 June 30, 2025 and December 31, 2024:


(In thousands)	Real Estate		Business Assets		Other		Total		ACL Allocation
June 30, 2025
Commercial and Industrial	$	482	$	0	$	0	$	482	$	250
Commercial Real Estate	30,812		0		0		30,812		1,857


Total Loans and Leases	$	31,294	$	0	$	0	$	31,294	$	2,107


(In thousands)	Real Estate		Business Assets		Other		Total		ACL Allocation
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 June 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:


June 30, 2025
(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
Commercial and Industrial

Commercial and industrial other	$	118	$	427	$	0	$	78	$	0	$	623	0.07	%

Subtotal commercial and industrial	118		427		0		78		0		623		0.06	%
Commercial Real Estate


Commercial real estate other	0		2,924		0		0		388		3,312		0.11	%
Subtotal commercial real estate	0		2,924		0		0		388		3,312		0.09	%
Residential
Home equity	0		0		0		37		0		37		0.02	%
Mortgages	0		0		0		110		620		730		0.05	%
Subtotal residential	0		0		0		147		620		767		0.05	%
Consumer

Consumer and other	21		0		0		0		0		21		0.02	%
Subtotal consumer	21		0		0		0		0		21		0.02	%
Total loans and leases	$	139	$	3,351	$	0	$	225	$	1,008	$	4,723	0.08	%


December 31, 2024
(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
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 six months ended June 30, 2025 and December 31, 2024.

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


June 30, 2025	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
Commercial and Industrial

Commercial and industrial other	$	617	$	0	$	0	$	0	$	6	$	623
Subtotal commercial and industrial	617		0		0		0		6		623
Commercial Real Estate


Commercial real estate other	3,312		0		0		0		0		3,312
Subtotal commercial real estate	3,312		0		0		0		0		3,312
Residential Real Estate
Home equity	0		0		0		0		37		37
Mortgages	263		0		0		0		467		730
Subtotal residential real estate	263		0		0		0		504		767
Consumer and Other

Consumer and other	0		0		0		0		21		21
Subtotal consumer and other	0		0		0		0		21		21
Total	$	4,192	$	0	$	0	$	0	$	531	$	4,723


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
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 June 30, 2025 and December 31, 2024:


June 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	$	80,826	$	139,160	$	107,918	$	81,974	$	44,540	$	165,706	$	276,817	$	3,174	$	900,115
Special Mention	0		517		1,554		123		96		1,500		3,107		0		6,897
Substandard	0		390		19		28		711		558		1,045		191		2,942
Total Commercial and Industrial - Other	$	80,826	$	140,067	$	109,491	$	82,125	$	45,347	$	167,764	$	280,969	$	3,365	$	909,954
Current-period gross writeoffs	$	0	$	80	$	67	$	38	$	0	$	13	$	0	$	0	$	198
Commercial and Industrial - Agriculture:
Pass	$	5,230	$	13,514	$	25,210	$	8,939	$	1,947	$	7,321	$	34,521	$	390	$	97,072
Special Mention	0		0		0		0		28		0		0		0		28
Substandard	0		0		0		0		0		33		0		0		33
Total Commercial and Industrial - Agriculture	$	5,230	$	13,514	$	25,210	$	8,939	$	1,975	$	7,354	$	34,521	$	390	$	97,133
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Commercial Real Estate
Pass	$	174,864	$	330,483	$	271,164	$	353,475	$	349,728	$	1,292,557	$	62,761	$	25,446	$	2,860,478
Special Mention	0		0		0		1,488		586		30,870		0		0		32,944
Substandard	0		399		927		1,150		1,463		31,509		877		0		36,325
Total Commercial Real Estate	$	174,864	$	330,882	$	272,091	$	356,113	$	351,777	$	1,354,936	$	63,638	$	25,446	$	2,929,747
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	2,000	$	2,882	$	0	$	0	$	4,882
Commercial Real Estate - Agriculture:
Pass	$	9,672	$	24,380	$	11,797	$	40,696	$	20,802	$	110,414	$	6,895	$	445	$	225,101
Special Mention	0		0		0		0		0		179		0		0		179
Substandard	0		0		0		0		0		138		0		0		138
Total Commercial Real Estate - Agriculture	$	9,672	$	24,380	$	11,797	$	40,696	$	20,802	$	110,731	$	6,895	$	445	$	225,418
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Commercial Real Estate - Construction
Pass	$	2,535	$	28,917	$	8,257	$	2,357	$	23,134	$	321	$	259,325	$	3,268	$	328,114
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	$	2,535	$	28,917	$	8,257	$	2,357	$	23,134	$	321	$	276,627	$	3,268	$	345,416
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	$	950	$	15,848	$	3,346	$	3,701	$	1,260	$	15,867	$	168,807	$	928	$	210,707
Nonperforming	0		0		0		0		0		648		2,224		0		2,872
Total Residential - Home Equity	$	950	$	15,848	$	3,346	$	3,701	$	1,260	$	16,515	$	171,031	$	928	$	213,579
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Residential - Mortgages
Performing	$	41,124	$	109,694	$	126,284	$	166,241	$	230,435	$	669,131	$	0	$	0	$	1,342,909
Nonperforming	0		0		1,028		848		945		11,257		0		0		14,078
Total Residential - Mortgages	$	41,124	$	109,694	$	127,312	$	167,089	$	231,380	$	680,388	$	0	$	0	$	1,356,987
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Consumer - Direct
Performing	$	27,749	$	13,708	$	13,884	$	8,530	$	8,017	$	13,666	$	2,048	$	0	$	87,602
Nonperforming	13		0		3		0		0		102		3		0		121
Total Consumer - Direct	$	27,762	$	13,708	$	13,887	$	8,530	$	8,017	$	13,768	$	2,051	$	0	$	87,723
Current-period gross writeoffs	$	1,219	$	3	$	0	$	17	$	17	$	36	$	0	$	0	$	1,292
Consumer - Indirect
Performing	$	0	$	0	$	0	$	0	$	31	$	76	$	0	$	0	$	107
Nonperforming	0		0		0		0		0		6		0		0		6
Total Consumer - Indirect	$	0	$	0	$	0	$	0	$	31	$	82	$	0	$	0	$	113
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	5	$	0	$	0	$	5


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