Loans

6 Months Ended

Jun. 30, 2025

NOTE 4 LOANS

Loan balances as of June 30, 2025 and December 31, 2024 are summarized below:


	(In Thousands)
Loans:	June 30, 2025			December 31, 2024
Consumer Real Estate	$	523,781		$	520,114
Agricultural Real Estate		221,004			216,401
Agricultural		157,870			152,080
Commercial Real Estate		1,345,953			1,310,811
Commercial and Industrial		293,826			275,152
Consumer		59,348			63,009
Other		24,653			24,978
		2,626,435			2,562,545
Less: Net deferred loan fees and costs		(1,488	)		(1,750	)
		2,624,947			2,560,795
Less: Allowance for credit losses		(26,977	)		(25,826	)
Plus: Basis adjustment related to fair value hedges		1,947			1,074
Loans - Net	$	2,599,917		$	2,536,043

The break out of fixed rate loans and variable rate loans by portfolio segment is as follows as of June 30, 2025 and December 31, 2024:


	(In Thousands)
	June 30, 2025				December 31, 2024
	Fixed		Variable		Fixed		Variable
Consumer Real Estate	$	281,802	$	241,979	$	305,062	$	215,052
Agricultural Real Estate		111,837		109,167		118,808		97,593
Agricultural		47,253		110,617		54,099		97,981
Commercial Real Estate		873,725		472,228		934,197		376,614
Commercial and Industrial		122,192		171,634		148,542		126,610
Consumer		59,319		29		62,977		32
Other		15,098		9,555		15,270		9,708

Variable rate loans that have reached ceiling or floor limits are reported as fixed rate loans until such time as their rates adjust away from those limits.

As of June 30, 2025 and December 31, 2024 one to four family residential mortgage loans amounting to $183.5 million and $190.1 million, respectively, and HELOC loans amounting to $13.1 million and $11.9 million, respectively, have been pledged as security for future loans and existing loans the Bank has received from the Federal Home Loan Bank "FHLB". The Bank has also pledged eligible commercial real estate loans of $236.5 million and $369.5 million as of June 30, 2025 and December 31, 2024, respectively, to the FHLB. During the second quarter of 2024, the Bank began pledging eligible multi-family real estate loans to the FHLB which amounted to $38.1 million and $47.7 million as of June 30, 2025 and December 31, 2024, respectively.

The following table represents the contractual aging at amortized cost in past due loans by portfolio segment as of June 30, 2025 and December 31, 2024:


	(In Thousands)
June 30, 2025	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables

Consumer Real Estate	$	2,487	$	449	$	656	$	3,592	$	520,614	$	524,206
Agricultural Real Estate		251		6		125		382		220,378		220,760
Agricultural		60		-		50		110		158,131		158,241
Commercial Real Estate		-		-		141		141		1,343,429		1,343,570
Commercial and Industrial		50		144		-		194		293,350		293,544
Consumer		109		18		31		158		59,815		59,973
Other		-		-		-		-		24,653		24,653
Total	$	2,957	$	617	$	1,003	$	4,577	$	2,620,370	$	2,624,947


	(In Thousands)
December 31, 2024	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables

Consumer Real Estate	$	2,533	$	547	$	559	$	3,639	$	516,753	$	520,392
Agricultural Real Estate		651		-		-		651		215,486		216,137
Agricultural		44		-		79		123		152,258		152,381
Commercial Real Estate		54		141		360		555		1,307,906		1,308,461
Commercial and Industrial		122		5		57		184		274,635		274,819
Consumer		365		19		62		446		63,181		63,627
Other		-		-		-		-		24,978		24,978
Total	$	3,769	$	712	$	1,117	$	5,598	$	2,555,197	$	2,560,795

The following tables present the amortized cost of nonaccrual loans by portfolio segment as of June 30, 2025 and as of December 31, 2024:


	(In Thousands)
	June 30, 2025
	Nonaccrual				Loans Past
	With No				Due Over
	Allowance				89 Days
	for Credit Loss		Nonaccrual		Still Accruing
Consumer Real Estate	$	2,556	$	3,049	$	-
Agricultural Real Estate		461		461		-
Agricultural		60		60		-
Commercial Real Estate		141		141		-
Commercial & Industrial		-		-		-
Consumer		34		34		-
Total	$	3,252	$	3,745	$	-


	(In Thousands)
	December 31, 2024
	Nonaccrual				Loans Past
	With No				Due Over
	Allowance				89 Days
	for Credit Loss		Nonaccrual		Still Accruing
Consumer Real Estate	$	1,637	$	2,369	$	-
Agricultural Real Estate		130		130		-
Agricultural		90		90		-
Commercial Real Estate		360		360		-
Commercial & Industrial		57		57		-
Consumer		118		118		-
Total	$	2,392	$	3,124	$	-

The Company recognized interest income of $31 thousand and $52 thousand for the three and six months ended June 30, 2025 on nonaccrual loans. The Company recognized interest income of $19 thousand and $41 thousand on nonaccrual loans for the three and six months ending June 30, 2024.

Loans are placed on nonaccrual status in the event that the loan is in past due status for more than 90 days or payment in full of principal and interest is not expected.

Following are the characteristics and underwriting criteria for each portfolio segment of loan the Bank offers:

Consumer Real Estate: Purchase, refinance, or equity financing of one to four family owner occupied dwelling. Success in repayment is subject to borrower’s income, debt level, character in fulfilling payment obligations, employment, and other factors.

Agricultural Real Estate: Purchase of farm real estate or for permanent improvements to the farm real estate. Cash flow from the farm operation is the repayment source and is therefore subject to the financial success of the farm operation.

Agricultural: Loans for the production and housing of crops, fruits, vegetables, and livestock or to fund the purchase or re-finance of capital assets such as machinery and equipment and livestock. The production of crops and livestock is especially vulnerable to commodity prices and weather. The vulnerability to commodity prices is offset by the farmer’s ability to hedge their position by the use of the future contracts. The risk related to weather is often mitigated by requiring crop insurance.

Commercial Real Estate: Construction, purchase, and refinance of business purpose real estate. Risks include potential construction delays and overruns, vacancies, collateral value subject to market value fluctuations, interest rate, market demands, borrower’s ability to repay in orderly fashion, and others. The Bank does employ stress testing on higher balance loans to mitigate risk by ensuring the customer’s ability to repay in a changing rate environment before granting loan approval.

Commercial and Industrial: Loans to proprietorships, partnerships, or corporations to provide temporary working capital and seasonal loans as well as long term loans for capital asset acquisition. Risks include adequacy of cash flow, reasonableness of projections, financial leverage, economic trends, management ability and estimated capital expenditures during the fiscal year. The Bank does employ stress testing on higher balance loans to mitigate risk by ensuring the customer's ability to repay in a changing rate environment before granting loan approval.

Consumer: Funding for individual and family purposes. Success in repayment is subject to borrower’s income, debt level, character in fulfilling payment obligations, employment, and other factors.

Other: Primarily funds public improvements in the Bank’s service area. Repayment ability is based on the continuance of the taxation revenue as the source of repayment.

The Bank uses a nine tier risk rating system to grade its loans. The grade of a loan may change during the life of the loan.

The risk ratings are described as follows.

Zero (0) Unclassified. Any loan which has not been assigned a classification.

One (1) Excellent. Credit to premier customers having the highest credit rating based on an extremely strong financial condition, which compares favorably with industry standards (upper quartile of RMA ratios). Financial statements indicate a sound earnings and financial ratio trend for several years with satisfactory profit margins and excellent liquidity exhibited. Prime credits may also be borrowers with loans fully secured by highly liquid collateral such as traded stocks, bonds, certificates of deposit, savings account, etc. No credit or collateral exceptions exist, and the loan adheres to The Bank's loan policy in every respect. Financing alternatives would be readily available and would qualify for unsecured credit. This rate is summarized by high liquidity, minimum risk, strong ratios, and low handling costs.

Two (2) Good. Desirable loans of somewhat less stature than rate 1, but with strong financial statements. Loan supported by financial statements containing strong balance sheets and a history of profitability. Probability of serious financial deterioration is unlikely. Possessing a sound repayment source (and a secondary source), which would allow repayment in a reasonable period of time. Individual loans backed by liquid personal assets, established history and unquestionable character.

Three (3) Satisfactory. Satisfactory loans of average or slightly above average risk – having some deficiency or vulnerability to changing economic conditions, but still fully collectible. Projects should normally demonstrate acceptable debt service coverage. There may be some weakness but with offsetting features of other support readily available. Loans that are meeting the terms of repayment.

Loans may be rated 3 when there is no recent information on which to base a current risk evaluation and the following conditions apply:

At inception, the loan was properly underwritten and did not possess an unwarranted level of credit risk;

At inception, the loan was secured with collateral possessing a loan-to-value adequate to protect The Bank from loss;

The loan exhibited two or more years of satisfactory repayment with a reasonable reduction of the principal balance;

During the period that the loan has been outstanding, there has been no evidence of any credit weakness. Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan covenants, or the business is in an industry which is known to be experiencing problems. If any of these credit weaknesses is observed, a lower risk rating is warranted.

Four (4) Satisfactory / Monitored. A “4” (Satisfactory/Monitored) risk rating may be established for a loan considered satisfactory but which is of average credit risk due to financial weakness or uncertainty. The loans warrant a higher than average level of monitoring to ensure that weaknesses do not advance. The level of risk in Satisfactory/Monitored classification is considered acceptable and within normal underwriting guidelines, so long as the loan is given management supervision.

Five (5) Special Mention. Loans that possess some credit deficiency or potential weakness which deserve close attention, but which do not yet warrant substandard classification. Such loans pose unwarranted financial risk that, if not corrected, could weaken the loan and increase risk in the future. The key distinctions of a 5 (Special Mention) classification are that (1) it is indicative of an unwarranted level of risk, and (2)

weaknesses are considered “potential” versus “defined” impairments to the primary source of loan repayment and collateral.

Six (6) Substandard. One or more of the following characteristics may be exhibited in loans classified substandard:

Loans which possess a defined credit weakness and the likelihood that a loan will be paid from the primary source are uncertain. Financial deterioration is underway and very close attention is warranted to ensure that the loan is collected without loss.

Loans are inadequately protected by the current net worth and paying capacity of the borrower.

The primary source of repayment is weakened, and The Bank is forced to rely on a secondary source of repayment such as collateral liquidation or guarantees.

Loans are characterized by the distinct possibility that The Bank will sustain some loss if deficiencies are not corrected.

Unusual courses of action are needed to maintain a high probability of repayment.

The borrower is not generating enough cash flow to repay loan principal; however, continues to make interest payments.

The lender is forced into a subordinate position or unsecured collateral position due to flaws in documentation.

Loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms.

The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan.

There is significant deterioration in the market conditions and the borrower is highly vulnerable to these conditions.

Seven (7) Doubtful. One or more of the following characteristics may be exhibited in loans classified Doubtful:

Loans have all of the weaknesses of those classified as Substandard. Additionally, however, these weaknesses make collection or liquidation in full based on existing conditions improbable.

The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.

The possibility of loss is high, but, because of certain important pending factors which may strengthen the loan, loss classification is deferred until its exact status is known. A Doubtful classification is established deferring the realization of the loss.

Eight (8) Loss. Loans are considered uncollectable and of such little value that continuing to carry them as assets on the institution’s financial statements is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

The following table represents the risk category of loans at amortized cost, by portfolio segment and year of origination, based on the most recent analysis performed as of June 30, 2025 and December 31, 2024:


	(In Thousands)
	June 30, 2025
															Revolving		Revolving
															Loans		Loans
	Term Loans Amortized Cost Basis by Origination Year												Term		Amortized		Converted		Grand
	2025		2024		2023		2022		2021		Prior		Total		Cost Basis		to Term		Total
Consumer Real Estate
Risk Rating
Pass (1-4)	$	28,019	$	35,476	$	56,179	$	74,924	$	86,557	$	166,676	$	447,831	$	71,216	$	499	$	519,546
Special Mention (5)		-		-		-		35		133		115		283		19		-		302
Substandard (6)		-		143		534		582		1,184		1,762		4,205		147		6		4,358
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Consumer Real Estate	$	28,019	$	35,619	$	56,713	$	75,541	$	87,874	$	168,553	$	452,319	$	71,382	$	505	$	524,206
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural Real Estate
Risk Rating
Pass (1-4)	$	16,486	$	22,099	$	26,433	$	32,788	$	21,107	$	94,504	$	213,417	$	88	$	-	$	213,505
Special Mention (5)		-		-		-		32		-		12		44		-		-		44
Substandard (6)		-		5,668		-		371		1,082		90		7,211		-		-		7,211
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Agricultural Real Estate	$	16,486	$	27,767	$	26,433	$	33,191	$	22,189	$	94,606	$	220,672	$	88	$	-	$	220,760
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Risk Rating
Pass (1-4)	$	12,542	$	10,268	$	8,193	$	10,336	$	4,296	$	5,860	$	51,495	$	104,031	$	-	$	155,526
Special Mention (5)		57		-		-		305		23		-		385		336		-		721
Substandard (6)		243		-		110		-		-		-		353		1,641		-		1,994
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Agricultural	$	12,842	$	10,268	$	8,303	$	10,641	$	4,319	$	5,860	$	52,233	$	106,008	$	-	$	158,241
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-


	(In Thousands)
	June 30, 2025
															Revolving		Revolving
															Loans		Loans
	Term Loans Amortized Cost Basis by Origination Year												Term		Amortized		Converted		Grand
	2025		2024		2023		2022		2021		Prior		Total		Cost Basis		to Term		Total
Commercial Real Estate
Risk Rating
Pass (1-4)	$	103,232	$	145,106	$	190,276	$	392,326	$	208,429	$	225,400	$	1,264,769	$	-	$	-	$	1,264,769
Special Mention (5)		1,350		-		15,380		18,306		3,835		1,924		40,795		-		-		40,795
Substandard (6)		1,744		-		34,089		-		-		2,173		38,006		-		-		38,006
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Commercial Real Estate	$	106,326	$	145,106	$	239,745	$	410,632	$	212,264	$	229,497	$	1,343,570	$	-	$	-	$	1,343,570
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial & Industrial
Risk Rating
Pass (1-4)	$	22,324	$	27,351	$	44,450	$	33,460	$	12,801	$	9,655	$	150,041	$	138,301	$	78	$	288,420
Special Mention (5)		-		-		117		-		177		362		656		550		-		1,206
Substandard (6)		-		36		304		-		32		-		372		3,546		-		3,918
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Commercial & Industrial	$	22,324	$	27,387	$	44,871	$	33,460	$	13,010	$	10,017	$	151,069	$	142,397	$	78	$	293,544
Gross charge-offs YTD	$	-	$	-	$	-	$	25	$	-	$	-	$	25	$	-	$	-	$	25

Other
Risk Rating
Pass (1-4)	$	600	$	-	$	-	$	-	$	15,666	$	8,387	$	24,653	$	-	$	-	$	24,653
Special Mention (5)		-		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		-		-		-		-		-		-		-		-
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Other	$	600	$	-	$	-	$	-	$	15,666	$	8,387	$	24,653	$	-	$	-	$	24,653
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-


	(In Thousands)
	December 31, 2024
															Revolving		Revolving
															Loans		Loans
	Term Loans Amortized Cost Basis by Origination Year												Term		Amortized		Converted		Grand
	2024		2023		2022		2021		2020		Prior		Total		Cost Basis		to Term		Total
Consumer Real Estate
Risk Rating
Pass (1-4)	$	40,257	$	64,316	$	79,503	$	89,800	$	74,996	$	106,007	$	454,879	$	61,097	$	237	$	516,213
Special Mention (5)		-		-		37		551		-		119		707		19		-		726
Substandard (6)		143		239		529		786		465		1,040		3,202		236		15		3,453
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Consumer Real Estate	$	40,400	$	64,555	$	80,069	$	91,137	$	75,461	$	107,166	$	458,788	$	61,352	$	252	$	520,392
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	13	$	13	$	-	$	-	$	13

Agricultural Real Estate
Risk Rating
Pass (1-4)	$	23,817	$	28,088	$	34,469	$	22,983	$	23,639	$	76,964	$	209,960	$	92	$	-	$	210,052
Special Mention (5)		-		-		-		-		-		13		13		-		-		13
Substandard (6)		5,696		-		371		-		-		5		6,072		-		-		6,072
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Agricultural Real Estate	$	29,513	$	28,088	$	34,840	$	22,983	$	23,639	$	76,982	$	216,045	$	92	$	-	$	216,137
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Risk Rating
Pass (1-4)	$	14,915	$	10,500	$	14,381	$	5,616	$	3,204	$	3,911	$	52,527	$	98,283	$	-	$	150,810
Special Mention (5)		-		13		-		8		-		-		21		30		-		51
Substandard (6)		-		21		-		-		29		-		50		1,470		-		1,520
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Agricultural	$	14,915	$	10,534	$	14,381	$	5,624	$	3,233	$	3,911	$	52,598	$	99,783	$	-	$	152,381
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-


	(In Thousands)
	December 31, 2024
															Revolving		Revolving
															Loans		Loans
	Term Loans Amortized Cost Basis by Origination Year												Term		Amortized		Converted		Grand
	2024		2023		2022		2021		2020		Prior		Total		Cost Basis		to Term		Total
Commercial Real Estate
Risk Rating
Pass (1-4)	$	128,608	$	200,192	$	413,106	$	218,309	$	110,435	$	188,239	$	1,258,889	$	-	$	-	$	1,258,889
Special Mention (5)		-		-		12,590		-		1,352		753		14,695		-		-		14,695
Substandard (6)		-		34,299		-		-		-		578		34,877		-		-		34,877
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Commercial Real Estate	$	128,608	$	234,491	$	425,696	$	218,309	$	111,787	$	189,570	$	1,308,461	$	-	$	-	$	1,308,461
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	15	$	15	$	-	$	-	$	15

Commercial & Industrial
Risk Rating
Pass (1-4)	$	31,933	$	54,581	$	39,665	$	15,047	$	13,480	$	1,294	$	156,000	$	113,446	$	222	$	269,668
Special Mention (5)		-		137		-		188		26		416		767		459		-		1,226
Substandard (6)		39		348		29		-		-		28		444		3,481		-		3,925
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Commercial & Industrial	$	31,972	$	55,066	$	39,694	$	15,235	$	13,506	$	1,738	$	157,211	$	117,386	$	222	$	274,819
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	101	$	-	$	101	$	-	$	5	$	106

Other
Risk Rating
Pass (1-4)	$	-	$	-	$	-	$	15,829	$	5,068	$	4,081	$	24,978	$	-	$	-	$	24,978
Special Mention (5)		-		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		-		-		-		-		-		-		-		-
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Other	$	-	$	-	$	-	$	15,829	$	5,068	$	4,081	$	24,978	$	-	$	-	$	24,978
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

For consumer, the Company also evaluates credit quality based on the aging status of the loan, as was previously stated, and by payment performance. Consumer loans are placed on nonperforming status in the event that the loan is in past due status for more than 90 days or payment in full of principal and interest is not expected. The following tables present the amortized cost based on payment performance as of June 30, 2025 and December 31, 2024 by year of origination.


	(In Thousands)
	June 30, 2025
															Revolving
															Loans
	Term Loans Amortized Cost Basis by Origination Year												Term		Amortized		Grand
	2025		2024		2023		2022		2021		Prior		Total		Cost Basis		Total

Consumer
Payment Performance
Performing	$	12,148	$	10,836	$	10,385	$	20,640	$	4,077	$	1,586	$	59,672	$	266	$	59,938
Nonperforming		-		-		5		19		8		3		35		-		35
Total Consumer	$	12,148	$	10,836	$	10,390	$	20,659	$	4,085	$	1,589	$	59,707	$	266	$	59,973
Gross charge-offs YTD	$	88	$	45	$	95	$	162	$	52	$	-	$	442	$	-	$	442


	(In Thousands)
	December 31, 2024
															Revolving
															Loans
	Term Loans Amortized Cost Basis by Origination Year												Term		Amortized		Grand
	2024		2023		2022		2021		2020		Prior		Total		Cost Basis		Total

Consumer
Payment Performance
Performing	$	13,437	$	13,521	$	27,264	$	5,917	$	2,310	$	582	$	63,031	$	477	$	63,508
Nonperforming		40		-		40		35		4		-		119		-		119
Total Consumer	$	13,477	$	13,521	$	27,304	$	5,952	$	2,314	$	582	$	63,150	$	477	$	63,627
Gross charge-offs YTD	$	201	$	69	$	62	$	14	$	-	$	-	$	346	$	-	$	346

The following tables present collateral-dependent loans grouped by collateral as of June 30, 2025 and December 31, 2024:


	(In Thousands)
	June 30, 2025
	Collateral
	Dependent Loans
Consumer Real Estate	$	3,018
Agricultural Real Estate		371
Agricultural		50
Commercial Real Estate		140
Commercial & Industrial		-
Consumer		18
Total	$	3,597


	(In Thousands)
	December 31, 2024
	Collateral
	Dependent Loans
Consumer Real Estate	$	2,384
Agricultural Real Estate		125
Agricultural		50
Commercial Real Estate		360
Commercial & Industrial		28
Consumer		41
Total	$	2,988

Modification programs focus on payment pattern changes and/or modified maturity dates with most receiving a combination of the two concessions. The modifications normally do not result in the contractual forgiveness of principal. During the three and six months ended June 30, 2025 and 2024, there were no new loan modifications to borrowers experiencing financial difficulty.

For the three and six months ended June 30, 2025 and 2024, there were no modifications to borrowers experiencing financial difficulty that subsequently defaulted after modification.

The Bank periodically evaluates collateral asset values for collateral dependent loans to determine fair value and to measure any anticipated shortfall. Maximum time of re-evaluation was every 12 months for chattels and titled vehicles and every two years for real estate. In this process, third party evaluations were obtained. Until such time that updated appraisals were received, the Bank may have discounted the collateral value used.

The Bank used the following guidelines as stated in policy to determine when to realize a charge-off, whether a partial or full loan balance. A charge-off in whole or in part was realized when unsecured consumer loans and overdraft lines of credit reached 90 days delinquency. At 90 days delinquent, secured consumer loans were charged down to the value of the collateral, if repossession of the collateral was assured and/or in the process of repossession. Consumer mortgage loan deficiencies were charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency. A broker’s price opinion or appraisal was completed on all home loans in litigation and any deficiency was charged off before reaching 150 days delinquent. Commercial and agricultural credits were charged down/allocated at 120 days delinquency, unless an established and approved work-out plan was in place or litigation of the credit was likely to result in recovery of the loan balance. Upon notification of bankruptcy, unsecured debt was charged off. Additional charge-off was realized as further unsecured positions were recognized.

As of June 30, 2025, the Company had no foreclosed residential real estate property obtained by physical possession and $925 thousand of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process according to local jurisdictions. This compares to the Company having no foreclosed residential real estate property obtained by physical possession and $1.3 million of consumer mortgage loans secured by residential real estate properties for

which foreclosure proceeding were in process according to local jurisdictions as of December 31, 2024. As of June 30, 2024, the Company had no foreclosed residential real estate property obtained by physical possession and $795 thousand of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings were in process according to local jurisdictions.

The Company accounts for the allowance for credit losses in accordance with Accounting Standards Update ("ASU") No. 2016-13 - "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and uses the current expected credit losses accounting standard. As a result, in 2023, the Company recorded a one-time adjustment from equity into the allowance for credit losses on loans and unfunded commitments in the amount of $4.5 million, or $3.4 million, net of tax.

The allowance for credit losses (ACL) has a direct impact on the provision expense. An increase in the ACL is funded through recoveries and provision expense.

The Company segregates its allowance into two reserves: The ACL and the Allowance for Unfunded Loan Commitments and Letters of Credit (AULC). When combined, these reserves constitute the total Current Expected Credit Losses (CECL).

The allowance does not include an accretable yield of $1.0 million and $1.9 million as of June 30, 2025 and December 31, 2024, respectively, related to the acquisitions of Ossian State Bank and Perpetual Federal Savings Bank in 2021 and Peoples Federal Savings and Loan Bank in 2022 as previously discussed in Note 2.

The AULC is reported within other liabilities while the ACL portion associated with loans is netted within the loans, net asset line on the condensed consolidated balance sheets.

The following tables present the activity within the ACL for each portfolio segment and shows the contribution provided by both the recoveries and the provision along with the reduction of the allowance caused by charge-offs for the three and six months ended June 30, 2025 and June 30, 2024 in addition to the activity within the ACL for each portfolio segment and ending balances as of and for the year ended December 31, 2024:


	(In Thousands)
	Consumer Real Estate			Agricultural Real Estate			Agricultural		Commercial Real Estate		Commercial and Industrial		Consumer			Other		Total
Three Months Ended June 30, 2025
ALLOWANCE FOR CREDIT LOSSES
Beginning balance	$	3,683		$	771		$	306	$	16,907	$	3,165	$	952		$	568	$	26,352
Provision for (recovery of) credit losses - loans		(31	)		(33	)		27		431		205		53			9		661
Charge-offs		-			-			-		-		-		(132	)		-		(132	)
Recoveries		1			-			1		16		6		72			-		96
Ending Balance	$	3,653		$	738		$	334	$	17,354	$	3,376	$	945		$	577	$	26,977


	(In Thousands)
	Consumer Real Estate		Agricultural Real Estate			Agricultural		Commercial Real Estate		Commercial and Industrial			Consumer			Other		Total
Six Months Ended June 30, 2025
ALLOWANCE FOR CREDIT LOSSES
Beginning balance	$	3,543	$	895		$	285	$	16,560	$	2,969		$	1,012		$	562	$	25,826
Provision for (recovery of) credit losses-loans		108		(157	)		39		775		420			272			15		1,472
Charge-offs		-		-			-		-		(25	)		(442	)		-		(467	)
Recoveries		2		-			10		19		12			103			-		146
Ending Balance	$	3,653	$	738		$	334	$	17,354	$	3,376		$	945		$	577	$	26,977


	(In Thousands)
	Consumer Real Estate			Agricultural Real Estate			Agricultural			Commercial Real Estate		Commercial and Industrial		Consumer			Other		Total
Three Months Ended June 30, 2024
ALLOWANCE FOR CREDIT LOSSES
Beginning balance	$	3,285		$	1,171		$	377		$	15,953	$	2,248	$	1,162		$	484	$	24,680
Provision for (recovery of) credit losses - loans		(82	)		(245	)		(92	)		365		514		63			82		605
Charge-offs		(3	)		-			-			-		-		(82	)		-		(85	)
Recoveries		1			-			-			1		39		29			-		70
Ending Balance	$	3,201		$	926		$	285		$	16,319	$	2,801	$	1,172		$	566	$	25,270


	(In Thousands)
	Consumer Real Estate			Agricultural Real Estate		Agricultural			Commercial Real Estate			Commercial and Industrial			Consumer			Other		Total
Six Months Ended June 30, 2024
ALLOWANCE FOR CREDIT LOSSES
Beginning balance	$	3,581		$	312	$	336		$	17,400		$	1,766		$	1,302		$	327	$	25,024
Provision for (recovery of) credit losses - loans		(372	)		614		(51	)		(1,085	)		1,031			(60	)		239		316
Charge-offs		(13	)		-		-			-			(101	)		(163	)		-		(277	)
Recoveries		5			-		-			4			105			93			-		207
Ending Balance	$	3,201		$	926	$	285		$	16,319		$	2,801		$	1,172		$	566	$	25,270


	(In Thousands)
	Consumer Real Estate			Agricultural Real Estate		Agricultural			Commercial Real Estate			Commercial and Industrial			Consumer			Other		Total
Year Ended December 31, 2024
ALLOWANCE FOR CREDIT LOSSES
Beginning balance	$	3,581		$	312	$	336		$	17,400		$	1,766		$	1,302		$	327	$	25,024
Provision for (recovery of) credit losses - loans		(31	)		583		(52	)		(834	)		1,176			(133	)		235		944
Charge-offs		(13	)		-		-			(15	)		(106	)		(346	)		-		(480	)
Recoveries		6			-		1			9			133			189			-		338
Ending Balance	$	3,543		$	895	$	285		$	16,560		$	2,969		$	1,012		$	562	$	25,826

The following tables present the activity in the AULC for the three and six months ended June 30, 2025 and June 30, 2024 in addition to the activity in the AULC and ending balances as of and for the year ended December 31, 2024:


	(In Thousands)
	Unfunded Loan Commitment & Letters of Credit
Three Months Ended June 30, 2025
ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
Beginning balance	$	1,281
Provision for credit losses - off balance sheet credit exposures		27
Charge-offs		-
Recoveries		-
Ending Balance	$	1,308


	(In Thousands)
	Unfunded Loan Commitment & Letters of Credit
Six Months Ended June 30, 2025
ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
Beginning balance	$	1,541
Recovery of credit losses-off balance sheet credit exposures		(233	)
Charge-offs		-
Recoveries		-
Ending Balance	$	1,308


	(In Thousands)
	Unfunded Loan Commitment & Letters of Credit
Three Months Ended June 30, 2024
ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
Beginning balance	$	1,946
Recovery of credit losses - off balance sheet credit exposures		(18	)
Charge-offs		-
Recoveries		-
Ending Balance	$	1,928


	(In Thousands)
	Unfunded Loan Commitment & Letters of Credit
Six Months Ended June 30, 2024
ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
Beginning balance	$	2,212
Recovery of credit losses-off balance sheet credit exposures		(284	)
Charge-offs		-
Recoveries		-
Ending Balance	$	1,928


	(In Thousands)
	Unfunded Loan Commitment & Letters of Credit
Year Ended December 31, 2024
ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
Beginning balance	$	2,212
Recovery of credit losses-off balance sheet credit exposures		(671	)
Charge-offs		-
Recoveries		-
Ending Balance	$	1,541