Loans, net and allowance for credit losses

3 Months Ended

Mar. 31, 2026

Loans, net and allowance for credit losses

Loans, net and allowance for credit losses

5. Loans, net and allowance for credit losses:

The major classifications of loans outstanding, net of deferred loan origination fees and costs, unearned income and net unaccreted discounts on acquired loans, at March 31, 2026, and December 31, 2025 are summarized as follows. The Company had net deferred loan origination costs of $2.1 million and $1.9 million at March 31, 2026 and December 31, 2025, respectively. Unearned income was $1.5 million at March 31, 2026, and $1.5 million at December 31, 2025. The balance of net unaccreted discounts on acquired loans was $39.6 million and $42.7 million at March 31, 2026 and December 31, 2025, respectively.


(Dollars in thousands)		March 31, 2026			December 31, 2025
Commercial and industrial		$	675,446		$	667,948
Municipal			212,586			202,303
Real estate
Commercial			2,423,027			2,314,110
Residential			618,156			602,309
Total			3,041,183			2,916,419
Consumer
Indirect auto			85,726			93,742
Consumer other			15,592			17,496
Total			101,318			111,238
Equipment financing			159,669			168,988
Total		$	4,190,202		$	4,066,896

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 excludes 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, totaling $15.2 million and $14.7 million at March 31, 2026 and December 31, 2025, respectively and is excluded from the estimate of credit losses, as the Company has a policy to reverse accrued interest when a loan is placed on nonaccrual status. 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, totaled $2.8 million and $3.0 million, respectively, at March 31, 2026 and December 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.

For a further discussion of our methodology related to the ACL, refer to Note 1 entitled, “Summary of significant accounting policies,” in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

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, 2026 and 2025.


		March 31, 2026
								Real estate									Equipment
(Dollars in thousands)		Commercial			Municipal			Commercial			Residential			Consumer			Financing			Total
Allowance for credit losses:
Beginning Balance January 1, 2026		$	6,036		$	1,413		$	19,998		$	4,963		$	1,759		$	4,838		$	39,007
Charge-offs															(594)			(382)			(976)
Recoveries			21						3			9			101			34			168
(Credits) provisions			(72)			77			2,170			99			444			(1,331)			1,387
Ending balance		$	5,985		$	1,490		$	22,171		$	5,071		$	1,710		$	3,159		$	39,586

		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

The following table represents the allowance for credit losses by major classification of loans and whether the loans were individually or collectively evaluated and collateral dependent by class of loans at March 31, 2026 and December 31, 2025.


		March 31, 2026
								Real estate									Equipment
(Dollars in thousands)		Commercial			Municipal			Commercial			Residential			Consumer			Financing			Total
Allowance for credit losses:
Ending balance		$	5,985		$	1,490		$	22,171		$	5,071		$	1,710		$	3,159		$	39,586
Ending balance: individually evaluated for impairment			478						598									187			1,263
Ending balance: collectively evaluated for impairment			5,507			1,490			21,573			5,071			1,710			2,972			38,323
Loans receivable:
Ending balance		$	675,446		$	212,586		$	2,423,027		$	618,156		$	101,318		$	159,669		$	4,190,202
Individually evaluated - collateral dependent - real estate			322						7,498			1,687									9,507
Individually evaluated - collateral dependent - non-real estate			1,327															989			2,316
Collectively evaluated			673,797			212,586			2,415,529			616,469			101,318			158,680			4,178,379


		December 31, 2025
								Real estate									Equipment
(Dollars in thousands)		Commercial			Municipal			Commercial			Residential			Consumer			Financing			Total
Allowance for loan losses:
Ending balance		$	6,036		$	1,413		$	19,998		$	4,963		$	1,759		$	4,838		$	39,007
Ending balance: individually evaluated for impairment			404						451			78						399			1,332
Ending balance: collectively evaluated for impairment		$	5,632		$	1,413		$	19,547		$	4,885		$	1,759		$	4,439		$	37,675
Loans receivable:
Ending balance		$	667,948		$	202,303		$	2,314,110		$	602,309		$	111,238		$	168,988		$	4,066,896
Individually evaluated - collateral dependent - real estate			1,470						4,056			3,039									8,565
Individually evaluated - collateral dependent - non-real estate			485															1,153			1,638
Collectively evaluated			665,993			202,303			2,310,054			599,270			111,238			167,835			4,056,693

Nonaccrual Loans

The following table presents the Company’s nonaccrual loans, including non-PCD nonaccrual loans, at March 31, 2026 and December 31, 2025.



			March 31, 2026
			Total			Nonaccrual with			Nonaccrual with
			Nonaccrual			an Allowance for			no Allowance for
(Dollars in thousands)			Loans			Credit Losses			Credit Losses
Commercial and industrial		$	2,031		$	1,099		$	932
Municipal
Real estate:
Commercial			5,550			4,169			1,381
Residential			2,360						2,360
Consumer			548						548
Equipment financing			948			526			422
Total		$	11,437		$	5,794		$	5,643



			December 31, 2025
			Total			Nonaccrual with			Nonaccrual with
			Nonaccrual			an Allowance for			no Allowance for
(Dollars in thousands)			Loans			Credit Losses			Credit Losses
Commercial and industrial		$	1,955		$	1,016		$	939
Municipal
Real estate:
Commercial			4,152			1,178			2,974
Residential			2,511			67			2,444
Consumer			1,048						1,048
Equipment financing			1,130			828			302
Total		$	10,796		$	3,089		$	7,707

Interest income recorded on nonaccrual loans was $49 thousand and $52 thousand for the three months ended March 31, 2026, and March 31, 2025, 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 a borrower 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 the 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 realized 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, 2026 and December 31, 2025:


		As of March 31, 2026
(Dollars in thousands)			2026			2025			2024			2023			2022			Prior			Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term			Total
Commercial and industrial
Pass		$	25,400		$	77,843		$	68,176		$	41,562		$	51,048		$	130,260		$	262,840		$	97		$	657,226
Special mention															323			28			2,134						2,485
Substandard			30						662			387			2,240			779			11,637						15,735
Total commercial			25,430			77,843			68,838			41,949			53,611			131,067			276,611			97			675,446

Municipal
Pass			10,835			19,850			4,305			1,275			45,089			129,271			1,961						212,586
Special mention
Substandard
Total municipal			10,835			19,850			4,305			1,275			45,089			129,271			1,961						212,586

Commercial real estate
Pass			142,110			382,338			145,846			168,925			554,023			988,644						488			2,382,374
Special mention						567						111			1,255			11,047									12,980
Substandard			79			1,144			1,159			1,262			8,081			15,948									27,673
Total commercial real estate			142,189			384,049			147,005			170,298			563,359			1,015,639						488			2,423,027

Residential real estate
Pass			13,330			55,364			37,775			39,653			65,554			246,611			158,533						616,820
Special mention
Substandard																		1,141			195						1,336
Total residential real estate			13,330			55,364			37,775			39,653			65,554			247,752			158,728						618,156

Consumer
Pass			4,031			23,391			17,681			21,093			18,524			9,705			6,353						100,778
Special mention
Substandard						16			52			171			239			61			1						540
Total consumer			4,031			23,407			17,733			21,264			18,763			9,766			6,354						101,318

Equipment financing
Pass			8,309			48,545			46,086			37,338			16,393			492									157,163
Special mention												118			36												154
Substandard						420			725			811			396												2,352
Total equipment financing			8,309			48,965			46,811			38,267			16,825			492									159,669

Total Loans		$	204,124		$	609,478		$	322,467		$	312,706		$	763,201		$	1,533,987		$	443,654		$	585		$	4,190,202

Gross charge-offs
Commercial and industrial		$			$			$			$			$			$			$			$			$
Municipal
Commercial real estate
Residential real estate
Consumer						147			199			72			97			79									594
Equipment financing									163			38			181												382
Total Gross charge-offs		$			$	147		$	362		$	110		$	278		$	79		$			$			$	976


		As of December 31, 2025
(Dollars in thousands)			2025			2024			2023			2022			2021			Prior			Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term			Total
Commercial and industrial
Pass		$	81,246		$	69,710		$	57,789		$	53,915		$	38,907		$	94,729		$	251,834		$	100		$	648,230
Special mention			300			572						2,725			36			9			8,718						12,360
Substandard						111			400			579			664			30			5,574						7,358
Total commercial			81,546			70,393			58,189			57,219			39,607			94,768			266,126			100			667,948

Municipal
Pass			23,125			4,324			1,354			45,369			88,165			38,331			1,635						202,303
Special mention
Substandard
Total municipal			23,125			4,324			1,354			45,369			88,165			38,331			1,635						202,303

Commercial real estate
Pass			359,323			146,483			175,145			566,480			441,660			586,189						71			2,275,351
Special mention			573									1,508			2,174			9,149									13,404
Substandard			542			508			1,217			7,841			6,870			8,377									25,355
Total commercial real estate			360,438			146,991			176,362			575,829			450,704			603,715						71			2,314,110

Residential real estate
Pass			56,021			38,109			40,913			66,927			104,534			148,121			146,380						601,005
Special mention
Substandard															258			869			177						1,304
Total residential real estate			56,021			38,109			40,913			66,927			104,792			148,990			146,557						602,309

Consumer
Pass			25,443			19,746			24,017			21,716			9,574			3,153			6,493						110,142
Special mention
Substandard			158			161			137			338			177			113			12						1,096
Total consumer			25,601			19,907			24,154			22,054			9,751			3,266			6,505						111,238

Equipment financing
Pass			50,357			51,024			43,364			21,050			724												166,519
Special mention									129			12															141
Substandard			287			664			691			686															2,328
Total equipment financing			50,644			51,688			44,184			21,748			724												168,988

Total Loans		$	597,375		$	331,412		$	345,156		$	789,146		$	693,743		$	889,070		$	420,823		$	171		$	4,066,896

Gross charge-offs
Commercial and industrial		$			$	300		$			$	24		$	57		$	493		$			$			$	874
Municipal
Commercial real estate												853						95									948
Residential real estate												92															92
Consumer						195			361			342			116			55									1,069
Equipment Financing			210			201			778			661															1,850
Total gross charge-offs		$	210		$	696		$	1,139		$	1,972		$	173		$	643		$			$			$	4,833

The major classifications of loans by past due status are summarized as follows at March 31, 2026 and December 31, 2025:


		March 31, 2026
								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 and industrial		$	1,200		$	274		$	1,936		$	3,410		$	671,906		$	675,446		$	130
Municipal															212,586			212,586
Real estate:
Commercial			2,190			1,415			4,902			8,507			2,414,520			2,423,027
Residential			3,427			946			1,191			5,564			612,592			618,156			1
Consumer			2,107			475			267			2,849			98,469			101,318			29
Equipment financing			874			203			573			1,650			158,019			159,669
Total		$	9,798		$	3,313		$	8,869		$	21,980		$	4,168,092		$	4,190,202		$	160


		December 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 and industrial		$	1,090		$	147		$	1,827		$	3,064		$	664,884		$	667,948		$
Municipal															202,303			202,303
Real estate:
Commercial			3,943			1,459			3,550			8,952			2,305,158			2,314,110
Residential			2,948			1,413			1,748			6,109			596,200			602,309			524
Consumer			2,527			500			776			3,803			107,435			111,238
Equipment financing			733			747			495			1,975			167,013			168,988
Total		$	11,241		$	4,266		$	8,396		$	23,903		$	4,042,993		$	4,066,896		$	524

There were no residential loans in the formal process of foreclosure at March 31, 2026. Residential real estate loans in the formal process of foreclosure were $0.6 million at December 31, 2025.

Allowance for Credit Losses on Off Balance Sheet Commitments

Off balance sheet commitments include commitments to extend credit, unused portions of lines of credit and standby letters of credit. The Company establishes an ACL for off-balance sheet commitments, which is included in other liabilities on the consolidated balance sheets, to provide probable losses that may be incurred related to these instruments. The following table presents the activity in the ACL related to off balance sheet commitments, for the three months ended March 31, 2026 and 2025:


(Dollars in thousands)			March 31, 2026			March 31, 2025
Beginning balance		$	1,305		$	880
Charge-off						(1)
Reversal of credit losses recorded in noninterest expense			(224)			(202)
Total allowance for credit losses on off balance sheet commitments		$	1,081		$	677

The contractual amounts of off-balance sheet commitments at March 31, 2026 and December 31, 2025 are as follows:


(Dollars in thousands)		March 31, 2026			December 31, 2025
Commitments to extend credit		$	652,570		$	660,353
Unused portions of lines of credit			189,645			178,689
Standby letters of credit			62,670			54,970
		$	904,885		$	894,012

Modifications to Borrowers Experiencing Financial Difficulty

The following table presents, by class of loans, information regarding modified loans to borrowers experiencing financial difficulty during the three months ended March 31, 2026 and 2025.

Other-Than-Insignificant Payment Delay

For the three months ended March 31,

2026

2025

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

Modified Loans to Borrowers Experiencing Financial Difficulty:

Commercial and industrial

$

0.00%

$

1

$

245

0.04%

$

Total

$

$

1

$

245

$

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


		Other-Than-Insignificant Payment Delay
(Dollars in thousands)		No. of Loans			Balance	Financial Effect
For the Three Months Ended March 31, 2025
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Commercial and Industrial		1		$	245	Modified principal and interest payment to interest only for 4 months
Total		1		$	245

There were no modifications made to loans to borrowers experiencing financial difficulties during the three months ended March 31, 2026.