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Loans, net and allowance for credit losses

3 Months Ended

Mar. 31, 2025

Loans, net and allowance for credit losses

Loans, net and allowance for credit losses

7. Loans, net and allowance for credit losses:

The major classifications of loans outstanding, net of deferred loan origination fees and costs and unearned income at March 31, 2025 and December 31, 2024 are summarized as follows. The Company had net deferred loan origination costs of $2.0 million and $1.7 million at March 31, 2025 and December 31, 2024, respectively. Unearned income was $1.4 million at March 31, 2025 and $1.3 million at December 31, 2024.


(Dollars in thousands)		March 31, 2025			December 31, 2024
Commercial
Commercial and Industrial		$	658,858		$	648,102
Municipal			194,139			187,918
Total			852,997			836,020
Real estate
Commercial			2,275,241			2,294,113
Residential			560,067			551,383
Total			2,835,308			2,845,496
Consumer
Indirect Auto			108,819			117,914
Consumer Other			14,209			14,955
Total			123,028			132,869
Equipment Financing			180,206			179,120
Total		$	3,991,539		$	3,993,505

Allowance for Credit Losses

The ACL represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and held to maturity securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through a provision for credit losses that is charged against income. The methodology for determining the ACL for loans is considered a critical accounting estimate by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded ACL. The ACL related to loans receivable and held to maturity debt securities is reported separately as a contra-asset on the consolidated balance sheets. The expected credit loss for unfunded lending commitments and unfunded loan commitments is reported on the consolidated balance sheets in other liabilities while the provision for

credit losses related to unfunded commitments is reported in other noninterest expense in the consolidated statements of income and comprehensive income.

The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of loans, available for sale securities, and held to maturity securities. Accrued interest receivable on loans is reported as a component of accrued interest receivable on the Consolidated Balance Sheets, totaled $14.1 million and $13.2 million at March 31, 2025 and December 31, 2024 and is excluded from the estimate of credit losses. Accrued interest receivable on available for sale securities and held to maturity securities, also a component of accrued interest receivable on the Consolidated Balance Sheets, and totaled $2.1 million and $170 thousand, respectively, at March 31, 2025 and is excluded from the estimate of credit losses, as the Company has a policy to charge off accrued interest deemed uncollectible in a timely manner. At December 31, 2024, accrued interest receivable on available for sale securities and held to maturity securities was $2.2 million and $179 thousand, respectively.

The following tables present the changes in and period end balance of the allowance for credit losses at and for the three months ended March 31, 2025 and 2024.


		March 31, 2025
								Real estate									Equipment
(Dollars in thousands)		Commercial			Municipal			Commercial			Residential			Consumer			Financing			Total
Allowance for credit losses:
Beginning Balance January 1, 2025		$	6,004		$	1,072		$	21,804		$	4,924		$	2,540		$	5,432		$	41,776
Charge-offs			(157)									(92)			(387)			(597)			(1,233)
Recoveries			13									1			173			124			311
(Credits) provisions			562			177			(943)			236			(45)			213			200
Ending balance		$	6,422		$	1,249		$	20,861		$	5,069		$	2,281		$	5,172		$	41,054



		March 31, 2024
								Real estate									Equipment
(Dollars in thousands)		Commercial			Municipal			Commercial			Residential			Consumer			Financing			Total
Allowance for credit losses:
Beginning Balance January 1, 2024		$	2,272		$	788		$	14,153		$	3,782		$	900		$			$	21,895
Charge-offs			(5)												(103)						(108)
Recoveries			55									2			45						102
(Credits) provisions			(35)			(90)			317			474			42						708
Ending balance		$	2,287		$	698		$	14,470		$	4,258		$	884		$			$	22,597

The following table represents the allowance for credit losses by major classification of loan and whether the loans were individually or collectively evaluated and collateral dependent by class of loans at March 31, 2025 and December 31, 2024.


		March 31, 2025
								Real estate									Equipment
(Dollars in thousands)		Commercial			Municipal			Commercial			Residential			Consumer			Financing			Total
Allowance for credit losses:
Ending balance		$	6,422		$	1,249		$	20,861		$	5,069		$	2,281		$	5,172		$	41,054
Ending balance: individually evaluated			581						192									538			1,311
Ending balance: collectively evaluated			5,841			1,249			20,669			5,069			2,281			4,634			39,743
Loans receivable:
Ending balance		$	658,858		$	194,139		$	2,275,241		$	560,067		$	123,028		$	180,206		$	3,991,539
Individually evaluated - collateral dependent - real estate			1,035						16,068			3,047									20,150
Individually evaluated - collateral dependent - non-real estate			904						284									1,510			2,698
Collectively evaluated			656,919			194,139			2,258,889			557,020			123,028			178,696			3,968,691


		December 31, 2024
								Real estate									Equipment
(Dollars in thousands)		Commercial			Municipal			Commercial			Residential			Consumer			Financing			Total
Allowance for loan losses:
Ending balance		$	6,004		$	1,072		$	21,804		$	4,924		$	2,540		$	5,432		$	41,776
Ending balance: individually evaluated for impairment			325						190									434			949
Ending balance: collectively evaluated for impairment			5,679			1,072			21,614			4,924			2,540			4,998			40,827
Loans receivable:
Ending balance		$	648,102		$	187,918		$	2,294,113		$	551,383		$	132,869		$	179,120		$	3,993,505
Individually evaluated - collateral dependent - real estate			906						15,326			3,212									19,444
Individually evaluated - collateral dependent - non-real estate			1,007						284									1,429			2,720
Collectively evaluated			646,189			187,918			2,278,503			548,171			132,869			177,691			3,971,341

Nonaccrual Loans

The following table presents the Company’s nonaccrual loans, including non-PCD nonaccrual loans, at March 31, 2025 and December 31, 2024.



			March 31, 2025
			Total			Nonaccrual with			Nonaccrual with
			Nonaccrual			an Allowance for			no Allowance for
(Dollars in thousands)			Loans			Credit Losses			Credit Losses
Commercial		$	1,759		$	557		$	1,202
Municipal
Real estate:
Commercial			16,263			2,428			13,835
Residential			2,658						2,658
Consumer			835						835
Equipment Financing			1,487			1,026			461
Total		$	23,002		$	4,011		$	18,991



			December 31, 2024
			Total			Nonaccrual with			Nonaccrual with
			Nonaccrual			an Allowance for			no Allowance for
(Dollars in thousands)			Loans			Credit Losses			Credit Losses
Commercial		$	1,907		$	343		$	1,564
Municipal
Real estate:
Commercial			15,609			2,574			13,035
Residential			2,809						2,809
Consumer			744						744
Equipment Financing			1,430			819			611
Total		$	22,499		$	3,736		$	18,763

Interest income recorded on nonaccrual loans was $52 thousand and $31 thousand for the three months ended March 31, 2025 and March 31, 2024, respectively.

The Company segments loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Loans are individually analyzed for credit risk by classifying them within the Company’s internal risk rating system. The Company’s risk rating classifications are defined as follows:

●

Pass- A loan to borrowers with acceptable credit quality and risk that is not adversely classified as Substandard, Doubtful, Loss nor designated as Special Mention.

●

Special Mention- A loan that has potential weaknesses that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Special Mention loans are not adversely classified since they do not expose the Company to sufficient risk to warrant adverse classification

●

Substandard- A loan that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that Peoples Bank will sustain some loss if the deficiencies are not corrected.

●

Doubtful – A loan classified as Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make the collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

●

Loss- A loan classified as Loss is considered uncollectible and of such little value that its continuance as bankable loan is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

The following table presents the amortized cost of loans and gross charge-offs by year of origination and by major classification of loans summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system at March 31, 2025 and December 31, 2024:


		As of March 31, 2025
(Dollars in thousands)			2025			2024			2023			2022			2021			Prior			Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term			Total
Commercial
Pass		$	20,438		$	59,201		$	64,264		$	76,757		$	60,353		$	122,994		$	216,836		$	33		$	620,876
Special Mention						1,243			1,125			629			5,787			3,087			16,263						28,134
Substandard									503			721			869			544			7,211						9,848
Total Commercial			20,438			60,444			65,892			78,107			67,009			126,625			240,310			33			658,858

Municipal
Pass			3,609			9,903			5,828			49,590			98,208			25,381			1,620						194,139
Special Mention
Substandard
Total Municipal			3,609			9,903			5,828			49,590			98,208			25,381			1,620						194,139

Commercial real estate
Pass			38,674			165,661			191,904			634,715			509,062			672,720						545			2,213,281
Special Mention									44			1,206			4,100			26,774									32,124
Substandard						1,231			3,412			9,159			2,532			13,502									29,836
Total Commercial real estate			38,674			166,892			195,360			645,080			515,694			712,996						545			2,275,241

Residential real estate
Pass			14,649			38,875			43,739			72,524			111,481			165,829			111,511						558,608
Special Mention
Substandard															124			1,257			78						1,459
Total Residential real estate			14,649			38,875			43,739			72,524			111,605			167,086			111,589						560,067

Consumer
Pass			4,925			26,991			34,101			33,662			15,906			5,537			1,030						122,152
Special Mention
Substandard						78			140			285			176			87			110						876
Total Consumer			4,925			27,069			34,241			33,947			16,082			5,624			1,140						123,028

Equipment Financing
Pass			16,806			64,659			60,968			33,982			1,523												177,938
Special Mention									152			107															259
Substandard						163			1,000			846															2,009
Total Equipment Financing			16,806			64,822			62,120			34,935			1,523												180,206

Total Loans		$	99,101		$	368,005		$	407,180		$	914,183		$	810,121		$	1,037,712		$	354,659		$	578		$	3,991,539

Gross charge-offs
Commercial		$			$			$			$	24		$	48		$	85		$			$			$	157
Municipal
Commercial real estate
Residential real estate												92															92
Consumer						83			76			172			39			17									387
Equipment Financing									363			234															597
Total Gross charge-offs		$			$	83		$	439		$	522		$	87		$	102		$			$			$	1,233



		December 31, 2024
(Dollars in thousands)			2024			2023			2022			2021			2020			Prior			Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term			Total
Commercial
Pass		$	61,657		$	69,329		$	83,123		$	64,488		$	29,950		$	91,906		$	199,737		$	68		$	600,258
Special Mention			1,273			1,131			686			13,475			2,043			1,261			16,840						36,709
Substandard						300			854			904			85			597			8,395						11,135
Total Commercial			62,930			70,760			84,663			78,867			32,078			93,764			224,972			68			648,102

Municipal
Pass			5,072			6,254			50,886			99,064			9,932			13,816			2,894						187,918
Special Mention
Substandard
Total Municipal			5,072			6,254			50,886			99,064			9,932			13,816			2,894						187,918

Commercial real estate
Pass			161,186			196,779			651,254			525,233			156,970			538,905									2,230,327
Special Mention			1,231			46			2,724			4,361			1,635			24,951									34,948
Substandard						3,276			8,883			1,106			1,704			13,869									28,838
Total Commercial real estate			162,417			200,101			662,861			530,700			160,309			577,725									2,294,113

Residential real estate
Pass			39,488			45,172			77,862			123,154			50,831			106,877			105,867			67			549,318
Special Mention
Substandard												126			296			1,565			78						2,065
Total Residential real estate			39,488			45,172			77,862			123,280			51,127			108,442			105,945			67			551,383

Consumer
Pass			28,872			38,223			38,668			18,963			4,132			2,495			853						132,206
Special Mention
Substandard			65			156			209			124			43			64			2						663
Total Consumer			28,937			38,379			38,877			19,087			4,175			2,559			855						132,869

Equipment Financing
Pass			67,100			66,341			39,323			4,259															177,023
Special Mention						261			125																		386
Substandard						697			1,014																		1,711
Total Equipment Financing			67,100			67,299			40,462			4,259															179,120

Total Loans		$	365,944		$	427,965		$	955,611		$	855,257		$	257,621		$	796,306		$	334,666		$	135		$	3,993,505

Gross charge-offs
Commercial		$			$	41		$			$	2		$			$	8		$			$			$	51
Municipal
Commercial real estate																		282									282
Residential real estate
Consumer			90			245			255			183			32			87									892
Equipment Financing						551			109																		660
Total Gross charge-offs		$	90		$	837		$	364		$	185		$	32		$	377		$			$			$	1,885

The major classifications of loans by past due status are summarized as follows:


		March 31, 2025
								Greater												Loans > 90
		30-59 Days			60-89 Days			than 90			Total Past									Days and
(Dollars in thousands)		Past Due			Past Due			Days			Due			Current			Total Loans			Accruing
Commercial		$	1,126		$	863		$	1,601		$	3,590		$	655,268		$	658,858		$	174
Municipal															194,139			194,139
Real estate:
Commercial			2,748			257			7,954			10,959			2,264,282			2,275,241			89
Residential			3,269			75			1,901			5,245			554,822			560,067			389
Consumer			2,077			540			495			3,112			119,916			123,028			3
Equipment Financing			1,580			124			726			2,430			177,776			180,206
Total		$	10,800		$	1,859		$	12,677		$	25,336		$	3,966,203		$	3,991,539		$	655


		December 31, 2024
								Greater												Loans > 90
		30-59 Days			60-89 Days			than 90			Total Past									Days and
(Dollars in thousands)		Past Due			Past Due			Days			Due			Current			Total Loans			Accruing
Commercial		$	2,740		$	157		$	838		$	3,735		$	644,367		$	648,102		$
Municipal															187,918			187,918
Real estate:
Commercial			2,800			141			11,164			14,105			2,280,008			2,294,113
Residential			2,390			997			2,477			5,864			545,519			551,383			403
Consumer			2,393			539			492			3,424			129,445			132,869			55
Equipment Financing			639			1,259			815			2,713			176,407			179,120
Total		$	10,962		$	3,093		$	15,786		$	29,841		$	3,963,664		$	3,993,505		$	458

The amount of residential loans in the formal process of foreclosure totaled $0.3 million at March 31, 2025 and $0.2 million at December 31, 2024.

Allowance for Credit Losses on Off Balance Sheet Commitments

The following table presents the activity in the ACL on off balance sheet commitments, which include commitments to extend credit, unused portions of lines of credit and standby letters of credit, for the three months ended March 31, 2025 and 2024:


(Dollars in thousands)			March 31, 2025			March 31, 2024
Beginning balance		$	880		$	43
Charge-off			(1)
(Credit to) provision for credit losses recorded in noninterest expense			(202)			487
Total allowance for credit losses on off balance sheet commitments		$	677		$	530

The contractual amounts of off-balance sheet commitments at March 31, 2025 and December 31, 2024 are as follows:


(Dollars in thousands)		Mar 31 2025			Dec 31 2024
Commitments to extend credit		$	554,055		$	589,725
Unused portions of lines of credit			156,574			150,840
Standby letters of credit			70,159			60,353
		$	780,788		$	800,918

Modifications to Borrowers Experiencing Financial Difficulty

The following table presents, by class of loans, information regarding nonaccrual modified loans to borrowers experiencing financial difficulty during the three months ended March 31, 2025 and 2024.

Other-Than-Insignificant Payment Delay

For the three months ended March 31, 2025 and March 31, 2024

2025

2024

Number
of

Amortized Cost

% of Total Class of Financing

Related

Number
of

Amortized Cost

% of Total Class of Financing

Related

(Dollars in thousands)

Loans

Basis

Receivable

Reserve

Loans

Basis

Receivable

Reserve

Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:

Commercial and industrial

1

$

245

0.04%

$

$

$

Total

1

$

245

$

$

$

There were no modifications of accruing loans in 2025 or 2024.

The following table presents, by class of loans, information regarding the financial effect on nonaccrual modified loans to borrowers experiencing financial difficulty during the three months ended March 31, 2025 and 2024.


		Other-Than-Insignificant Payment Delay
(Dollars in thousands)		No. of Loans		Financial Effect
For the Three Months Ended March 31, 2025
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Commercial and Industrial		1		Modified principal and interest payment to interest only for 4 months
Total		1
For the Three Months Ended March 31, 2024
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Commercial and Industrial
Total

The following tables present, by class of loans, the amortized cost and performance status of nonaccrual modified loans to borrowers experiencing financial difficulty that have been modified in the three months ended March 31, 2025 and 2024.

At March 31, 2025

(Dollars in thousands)

Current

30-89 Days Past Due

90 Days or More Past Due

Total

Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:

Commercial and Industrial

$

$

245

$

$

245

Total

$

$

245

$

$

245

At March 31, 2024

(Dollars in thousands)

Current

30-89 Days Past Due

90 Days or More Past Due

Total

Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:

Commercial and Industrial

$

$

$

$

Total

$

$

$

$