Loan and Lease Financings

6 Months Ended

Jun. 30, 2026

The Company evaluates loans and leases for credit quality at least annually, but more frequently if certain circumstances occur (such as material new information which becomes available and indicates a potential change in credit risk). The Company uses two methods to assess credit risk: loan or lease credit quality grades and credit risk classifications. The purpose of the loan or lease credit quality grade is to document the degree of risk associated with individual credits, as well as inform management of the degree of risk in the portfolio taken as a whole. Credit risk classifications are used to categorize loans by degree of risk and to designate individual or committee approval authorities for higher risk credits at the time of origination. Credit risk classifications include categories for: Acceptable, Marginal, Special Attention, Special Risk, Restricted by Policy, Regulated and Prohibited by Law.

All loans and leases, except residential real estate loans‚ home equity loans, and consumer loans, are assigned credit quality grades on a scale from 1 to 12, with grade 1 representing superior credit quality. The criteria used to assign grades to extensions of credit that exhibit potential problems or well-defined weaknesses are primarily based upon the degree of risk and the likelihood of orderly repayment, and their effect on the Company’s safety and soundness. Loans or leases graded 7 or weaker are considered “special attention” credits and, as such, undergo enhanced monitoring on a quarterly basis. Grade 7 credits are defined as “watch” and contain greater than average credit risk and are monitored to limit the Company’s exposure to increased risk; grade 8 credits are “special mention” and, following regulatory guidelines, are defined as having potential weaknesses that deserve management’s close attention. Credits that exhibit well-defined weaknesses and a distinct possibility of loss are considered “classified” and are graded 9 through 12 corresponding to the regulatory definitions of “substandard” (grades 9 and 10) and the more severe “doubtful” (grade 11) and “loss” (grade 12). For residential real estate and home equity and consumer loans, credit quality is based on the aging status of the loan and by payment activity. Nonperforming loans are those loans which are on nonaccrual status or are 90 days or more past due.

Below is a summary of the Company’s loan and lease portfolio segments and a discussion of the risk characteristics relevant to each portfolio segment.

Commercial and agricultural – loans are to entities within the Company’s local market communities. Loans are for business or agri-business purposes and include working capital lines of credit secured by accounts receivable and inventory that are generally renewable annually and term loans secured by equipment with amortizations based on the expected life of the underlying collateral, generally three to seven years. These loans are typically further supported by personal guarantees. Commercial exposure is to a wide range of industries and services. Risks in this sector are also varied and are most impacted by general economic conditions. Risk mitigants include appropriate underwriting and monitoring and, when appropriate, government guarantees, including Small Business Administration and Farm Service Agency.

Renewable energy – loans are for the purpose of financing primarily solar related projects and may include construction draw notes, operating loans, letters of credit and may entail a tax equity structure. The Company’s core focus is solar financing, but its lending activities may also include a limited amount of battery storage projects or other alternative energy resources. Collateral in a multi-state area includes tangible assets of the borrower, assignment of intangible assets including power purchase agreements, and pledges of permits and licenses. Financing is provided to qualified borrowers throughout the continental United States with an emphasis on the regions east of the Rocky Mountains.

Auto and light truck – loans are secured by vehicles and borrowers are nationwide. The portfolio consists mainly of auto rental and auto leasing. Borrowers in the auto rental segment are primarily independent auto rental entities with on-airport and off-airport locations, and some insurance replacement business. Loan terms are relatively short, generally eighteen months, but up to four years. Auto leasing customers lease to businesses and the Company takes assignment of the lease stream and places its lien on the vehicles. Terms are generally longer than the auto rental sector, three to seven years and match the underlying leases. Risks include economic risks and collateral risks, principally used vehicle values.

Medium and heavy duty truck – loans and full-service truck leases are secured by heavy-duty trucks, commonly Class 8 trucks and trailers, and are generally personally guaranteed. In addition to economic risks, collateral risk is significant. Financing is generally at full cost, plus additional expenditures to get the vehicle operational, such as taxes, insurance and fees. It takes three to four years of debt amortization to reach an equity position in the collateral.

Aircraft – loans are to domestic and foreign borrowers with the domestic segment further divided into two pools: 1) personal and business use, and 2) dealers and operators. The Company’s focus for the foreign sector is Latin America, principally Mexico and Brazil. Loans, all denominated in U.S. dollars, are primarily secured by new and used business jets and helicopters, with appropriate advances, amortizations of ten to fifteen years, and are generally guaranteed by individuals. The most significant risk in the Aircraft portfolio is collateral risk - volatility in underlying values and maintenance concerns. The portfolio is subject to national and global economic risks.

Construction equipment – loans are to borrowers throughout the country secured by specific equipment. The borrowers include highway and road builders, asphalt producers and pavers, suppliers of aggregate products, site developers, frac sand operations, general construction equipment dealers and operators, and crane rental entities. Generally, loans include personal guarantees. The construction equipment industry is heavily dependent on the U.S. economy and the global economy. Market growth is reliant on investments from public and private sectors into urbanization and infrastructure projects.

Commercial real estate – loans are generally to entities within the local market communities served by the Company with advances generally within regulatory guidelines. Historically, the Company’s exposure to commercial real estate has been primarily to the less risky owner-occupied segment, although growth has occurred in the non-owner-occupied segment of this portfolio over the last several years. The non-owner-occupied segment includes hotels, apartment complexes and warehousing facilities. There is generally limited exposure to construction loans although at present, construction exposures are comparably higher than previous periods. Many commercial real estate loans carry personal guarantees. Additional risks in the commercial real estate portfolio include interest rate risk, geographical concentration in northern Indiana and southwest Michigan and general economic conditions.

Residential real estate and home equity – loans predominantly include one-to-four family mortgages to borrowers in the Company’s local market communities and are appropriately underwritten and secured by residential real estate.

Consumer – loans are to individuals in the Company’s local markets and auto loans are generally secured by personal vehicles and appropriately underwritten.

The following table shows the amortized cost of loans and leases, segregated by portfolio segment, credit quality rating and year of origination, as of June 30, 2026, and gross charge-offs for the six months ended June 30, 2026.


	Term Loans and Leases by Origination Year
(Dollars in thousands)	2026		2025		2024		2023		2022		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and agricultural
Grades 1-6	$	77,424	$	139,651	$	81,099	$	58,096	$	40,379	$	28,165	$	389,730	$	—	$	814,544
Grades 7-12	2,228		2,087		862		4,273		1,024		3,114		29,198		—		42,786
Total commercial and agricultural	79,652		141,738		81,961		62,369		41,403		31,279		418,928		—		857,330
Current period gross charge-offs	—		330		73		46		—		—		303		—		752
Renewable energy
Grades 1-6	173,645		282,774		60,179		81,571		22,894		120,101		—		—		741,164
Grades 7-12	—		—		—		—		—		—		—		—		—
Total renewable energy	173,645		282,774		60,179		81,571		22,894		120,101		—		—		741,164
Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Auto and light truck
Grades 1-6	273,392		269,327		128,458		55,689		25,283		8,190		—		—		760,339
Grades 7-12	1,658		14,107		14,416		37,987		194		20		—		—		68,382
Total auto and light truck	275,050		283,434		142,874		93,676		25,477		8,210		—		—		828,721
Current period gross charge-offs	—		161		1,307		2,253		33		13		—		—		3,767
Medium and heavy duty truck
Grades 1-6	48,706		78,185		49,859		39,606		34,225		6,649		—		323		257,553
Grades 7-12	—		1,351		1,256		1,262		4,000		1,297		—		—		9,166
Total medium and heavy duty truck	48,706		79,536		51,115		40,868		38,225		7,946		—		323		266,719
Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Aircraft
Grades 1-6	144,732		312,257		191,026		119,401		161,995		88,582		14,744		—		1,032,737
Grades 7-12	1,537		14,351		4,534		4,706		7,656		1,807		—		—		34,591
Total aircraft	146,269		326,608		195,560		124,107		169,651		90,389		14,744		—		1,067,328
Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Construction equipment
Grades 1-6	316,107		396,566		275,613		140,775		62,657		23,273		41,450		211		1,256,652
Grades 7-12	—		2,315		4,287		2,300		1,225		8,686		—		—		18,813
Total construction equipment	316,107		398,881		279,900		143,075		63,882		31,959		41,450		211		1,275,465
Current period gross charge-offs	—		994		11		36		83		—		—		—		1,124
Commercial real estate
Grades 1-6	122,770		256,483		243,719		239,939		179,710		231,598		59		—		1,274,278
Grades 7-12	1,627		1,537		14,068		13,624		3,473		4,606		—		—		38,935
Total commercial real estate	124,397		258,020		257,787		253,563		183,183		236,204		59		—		1,313,213
Current period gross charge-offs	—		—		354		—		—		—		—		—		354
Residential real estate and home equity
Performing	52,835		95,165		60,206		48,127		74,605		197,896		218,227		7,979		755,040
Nonperforming	—		378		145		559		1,552		967		1,942		73		5,616
Total residential real estate and home equity	52,835		95,543		60,351		48,686		76,157		198,863		220,169		8,052		760,656
Current period gross charge-offs	—		—		—		—		—		72		54		—		126
Consumer
Performing	19,532		28,965		19,516		12,953		9,045		2,716		16,059		—		108,786
Nonperforming	—		73		31		196		175		87		—		—		562
Total consumer	19,532		29,038		19,547		13,149		9,220		2,803		16,059		—		109,348
Current period gross charge-offs	224		108		136		91		35		32		15		—		641

The following table shows the amortized cost of loans and leases, segregated by portfolio segment, credit quality rating and year of origination, as of December 31, 2025 and gross charge-offs for the year ended December 31, 2025.


	Term Loans and Leases by Origination Year
(Dollars in thousands)	2025		2024		2023		2022		2021		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and agricultural
Grades 1-6	$	166,469	$	91,665	$	71,108	$	47,491	$	21,408	$	15,469	$	342,362	$	—	$	755,972
Grades 7-12	2,409		555		4,287		1,583		1,503		2,035		29,248		—		41,620
Total commercial and agricultural	168,878		92,220		75,395		49,074		22,911		17,504		371,610		—		797,592
Current period gross charge-offs	220		32		171		198		9		—		1,790		—		2,420
Renewable energy
Grades 1-6	326,861		94,730		82,739		23,454		57,332		67,683		—		—		652,799
Grades 7-12	—		—		—		—		—		—		—		—		—
Total renewable energy	326,861		94,730		82,739		23,454		57,332		67,683		—		—		652,799
Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Auto and light truck
Grades 1-6	438,559		206,382		96,058		38,777		9,475		5,038		—		—		794,289
Grades 7-12	7,296		35,446		49,032		1,611		5		197		—		—		93,587
Total auto and light truck	445,855		241,828		145,090		40,388		9,480		5,235		—		—		887,876
Current period gross charge-offs	—		2,010		129		226		1		—		—		—		2,366
Medium and heavy duty truck
Grades 1-6	90,318		60,465		47,654		44,315		10,101		3,478		—		481		256,812
Grades 7-12	284		—		4,729		5,495		2,360		69		—		—		12,937
Total medium and heavy duty truck	90,602		60,465		52,383		49,810		12,461		3,547		—		481		269,749
Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Aircraft
Grades 1-6	356,020		211,086		141,743		201,381		112,448		31,204		6,550		—		1,060,432
Grades 7-12	5,063		4,722		4,946		8,141		—		3,517		—		—		26,389
Total aircraft	361,083		215,808		146,689		209,522		112,448		34,721		6,550		—		1,086,821
Current period gross charge-offs	—		—		485		—		—		—		—		—		485
Construction equipment
Grades 1-6	468,572		340,807		203,162		103,306		24,023		14,702		34,925		1,437		1,190,934
Grades 7-12	2,771		5,094		3,734		8,397		912		9,293		—		—		30,201
Total construction equipment	471,343		345,901		206,896		111,703		24,935		23,995		34,925		1,437		1,221,135
Current period gross charge-offs	—		201		1,206		—		—		—		—		—		1,407
Commercial real estate
Grades 1-6	242,722		253,670		275,286		197,066		109,679		157,033		56		—		1,235,512
Grades 7-12	812		13,256		9,897		4,643		3,748		1,897		—		—		34,253
Total commercial real estate	243,534		266,926		285,183		201,709		113,427		158,930		56		—		1,269,765
Current period gross charge-offs	—		5		17		—		—		5		—		—		27
Residential real estate and home equity
Performing	96,957		71,597		54,957		82,427		72,962		141,902		207,536		8,334		736,672
Nonperforming	209		146		549		839		340		72		1,870		80		4,105
Total residential real estate and home equity	97,166		71,743		55,506		83,266		73,302		141,974		209,406		8,414		740,777
Current period gross charge-offs	—		—		—		13		—		5		50		6		74
Consumer
Performing	38,401		26,781		18,328		13,858		3,837		1,142		17,068		—		119,415
Nonperforming	70		34		294		195		106		41		—		—		740
Total consumer	38,471		26,815		18,622		14,053		3,943		1,183		17,068		—		120,155
Current period gross charge-offs	621		287		282		239		52		10		30		—		1,521

The following table shows the amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status.


(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due and Accruing		Total Accruing		Total Nonaccrual		Nonaccrual with No Allowance for Credit Loss		Total Financing Receivables
June 30, 2026
Commercial and agricultural	$	850,838	$	483	$	—	$	—	$	851,321	$	6,009	$	1,608	$	857,330
Renewable energy	741,164		—		—		—		741,164		—		—		741,164
Auto and light truck	785,703		—		—		—		785,703		43,018		31,336		828,721
Medium and heavy duty truck	265,454		—		—		—		265,454		1,265		1,262		266,719
Aircraft	1,057,811		—		—		—		1,057,811		9,517		9,517		1,067,328
Construction equipment	1,271,128		1,123		—		—		1,272,251		3,214		557		1,275,465
Commercial real estate	1,311,013		152		—		—		1,311,165		2,048		467		1,313,213
Residential real estate and home equity	752,909		1,884		818		996		756,607		4,049		—		760,656
Consumer	107,951		686		149		—		108,786		562		—		109,348
Total	$	7,143,971	$	4,328	$	967	$	996	$	7,150,262	$	69,682	$	44,747	$	7,219,944

December 31, 2025
Commercial and agricultural	$	794,559	$	516	$	24	$	—	$	795,099	$	2,493	$	773	$	797,592
Renewable energy	652,799		—		—		—		652,799		—		—		652,799
Auto and light truck	833,507		21		—		—		833,528		54,348		28,411		887,876
Medium and heavy duty truck	268,173		—		—		—		268,173		1,576		—		269,749
Aircraft	1,084,554		2,267		—		—		1,086,821		—		—		1,086,821
Construction equipment	1,205,931		3,863		—		—		1,209,794		11,341		10,797		1,221,135
Commercial real estate	1,267,157		149		—		—		1,267,306		2,459		1,798		1,269,765
Residential real estate and home equity	733,037		2,677		958		460		737,132		3,645		—		740,777
Consumer	118,277		919		219		—		119,415		740		—		120,155
Total	$	6,957,994	$	10,412	$	1,201	$	460	$	6,970,067	$	76,602	$	41,779	$	7,046,669

Accrued interest receivable on loans and leases at June 30, 2026, and December 31, 2025, was $26.15 million and $27.43 million, respectively.

A loan or lease is considered collateral-dependent when the borrower is experiencing financial difficulty and the loan or lease is expected to be repaid substantially through the operation or sale of the collateral. Expected credit losses for collateral-dependent loans and leases are based on the fair value of the collateral, adjusted for selling costs as appropriate. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value.

The following table shows the amortized cost basis of collateral-dependent loans, segregated by portfolio segment, which are individually evaluated to determine credit losses.


(Dollars in thousands)	Real Estate		Equipment		General Business Assets		Total		Allowance on Collateral Dependent Loans and Leases
June 30, 2026
Commercial and agricultural	$	—	$	—	$	4,817	$	4,817	$	695

Auto and light truck	—		42,900		—		42,900		521
Medium and heavy duty truck	—		1,262		—		1,262		—
Aircraft	—		9,517		—		9,517		—
Construction equipment	—		1,810		—		1,810		285
Commercial real estate	1,557		—		—		1,557		96


Total	$	1,557	$	55,489	$	4,817	$	61,863	$	1,597

December 31, 2025
Commercial and agricultural	$	—	$	—	$	1,136	$	1,136	$	19

Auto and light truck	—		53,981		—		53,981		1,080
Medium and heavy duty truck	—		1,507		—		1,507		166

Construction equipment	—		10,797		—		10,797		—
Commercial real estate	1,798		—		—		1,798		—


Total	$	1,798	$	66,285	$	1,136	$	69,219	$	1,265

Loan Modifications to Borrowers Experiencing Financial Difficulty

The following table shows the amortized cost of loans and leases over $250,000 at June 30, 2026, and June 30, 2025, respectively, that were both experiencing financial difficulty and modified during the three months ended June 30, 2026, and June 30, 2025, respectively, segregated by portfolio segment and type of modification. The percentage of the amortized cost of loans and leases that were modified to borrowers in financial distress as compared to the amortized cost of each segment of financial receivable is also presented below.


(Dollars in thousands)	Payment Delay		Term Extension		Interest Rate Reduction		Combination Payment Delay and Term Extension		% of Total Segment Financing Receivables
Three Months Ended June 30, 2026
Commercial and agricultural	$	2,228	$	—	$	—	$	—	0.26	%








Total	$	2,228	$	—	$	—	$	—	0.03	%

Three Months Ended June 30, 2025
Commercial and agricultural	$	—	$	4,026	$	—	$	—	0.48	%








Total	$	—	$	4,026	$	—	$	—	0.06	%

The following table shows the amortized cost of loans and leases over $250,000 at June 30, 2026, and June 30, 2025, respectively, that were both experiencing financial difficulty and modified during the six months ended June 30, 2026, and June 30, 2025, respectively, segregated by portfolio segment and type of modification. The percentage of the amortized cost of loans and leases that were modified to borrowers in financial distress as compared to the amortized cost of each segment of financial receivable is also presented below.



(Dollars in thousands)	Payment Delay		Term Extension		Interest Rate Reduction		Combination Payment Delay and Term Extension		% of Total Segment Financing Receivables
Six months ended June 30, 2026
Commercial and agricultural	$	2,228	$	—	$	—	$	—	0.26	%








Total	$	2,228	$	—	$	—	$	—	0.03	%

Six months ended June 30, 2025
Commercial and agricultural	$	—	$	4,026	$	—	$	—	0.48	%




Construction equipment	—		498		—		—		0.04



Total	$	—	$	4,524	$	—	$	—	0.06	%

There were $0.00 million and $2.80 million in commitments to lend additional amounts to the borrowers included in the previous table at June 30, 2026, and June 30, 2025, respectively.

The Company closely monitors the performance of loans and leases that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table shows the performance of such loans and leases that have been modified during the twelve months ended June 30, 2026, and June 30, 2025, respectively.


(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due
Twelve months ended June 30, 2026
Commercial and agricultural	$	3,789	$	—	$	—	$	—	$	—

Auto and light truck	21,262		—		—		15,957		15,957
Medium and heavy duty truck	1,262		—		—		—		—





Total	$	26,313	$	—	$	—	$	15,957	$	15,957

Twelve months ended June 30, 2025
Commercial and agricultural	$	5,028	$	—	$	—	$	—	$	—

Auto and light truck	—		—		—		7,863		7,863
Medium and heavy duty truck	2,586		—		—		—		—

Construction equipment	498		—		—		—		—
Commercial real estate	981		—		—		—		—


Total	$	9,093	$	—	$	—	$	7,863	$	7,863

The following table shows the financial effect of loan and lease modifications presented above to borrowers experiencing financial difficulty for the twelve months ended June 30, 2026, and June 30, 2025, respectively.


	Weighted- Average Interest Rate Reduction		Weighted- Average Term Extension (in months)	Weighted- Average Payment Delay (in months)	Combination Weighted-Average Payment Delay and Term Extension (in months)
Twelve months ended June 30, 2026
Commercial and agricultural	—	%	0	4	7

Auto and light truck	—		16	3	0
Medium and heavy duty truck	—		0	0	3





Total	—	%	16	3	5

Twelve months ended June 30, 2025
Commercial and agricultural	—	%	12	6	0

Auto and light truck	—		0	0	3
Medium and heavy duty truck	—		0	0	4

Construction equipment	—		5	0	0
Commercial real estate	—		0	6	0


Total	—	%	11	6	3

There were two modified loans to borrowers experiencing financial difficulty which had a payment default within twelve months of modification during the six month period ended June 30, 2026, and one modified loan to a borrower experiencing financial difficulty which had a payment default within twelve months of modification during the six months ended June 30, 2025.

Upon the Company’s determination that a modified loan or lease has subsequently been deemed uncollectible, the loan or lease is written off. Therefore, the amortized cost of the loan is reduced by the uncollectible amount and the allowance for loan and lease losses is adjusted by the same amount.