Loans

9 Months Ended

Sep. 30, 2026

NOTE 4 LOANS

The Company had $2.5 million in loans held for sale at September 30, 2026 as compared to $3.9 million in loans held for sale at December 31, 2025.

Loan balances as of September 30, 2026 and December 31, 2025 are summarized below:


	(In Thousands)
Loans:	September 30, 2026			December 31, 2025
Consumer Real Estate	$	548,913		$	526,439
Agricultural Real Estate		210,321			217,034
Agricultural		245,639			218,050
Commercial Real Estate		1,321,021			1,355,571
Commercial and Industrial		343,720			314,405
Consumer		47,251			58,838
Other		22,089			23,133
		2,738,954			2,713,470
Less: Net deferred loan fees and costs		(1,635	)		(1,511	)
		2,737,319			2,711,959
Less: Allowance for credit losses		(27,802	)		(27,688	)
Plus: Basis adjustment related to fair value hedges		(159	)		1,719
Loans - Net	$	2,709,358		$	2,685,990

Following are the characteristics and underwriting criteria for each major type 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 refinance of capital assets such as machinery and equipment and livestock. The production of crops and livestock is especially vulnerable to commodity prices and weather.

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 other factors.

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.

Consumer: Funding for individual, family, and household 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.

As of September 30, 2026 and December 31, 2025 one to four family residential mortgage loans amounting to $167.8 million and $175.8 million, respectively, and HELOC loans amounting to $17.9 million and $15.8 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 $212.5 million and $231.8 million as of September 30, 2026 and December 31, 2025, respectively, to the FHLB in addition to eligible multi-family real estate loans which amounted to $19.9 million and $29.1 million as of September 30, 2026 and December 31, 2025, respectively.

The following tables present the contractual aging at amortized cost in past due loans by portfolio segment of loans as of September 30, 2026 and December 31, 2025:


	(In Thousands)
September 30, 2026	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables

Consumer Real Estate	$	4,244	$	466	$	812	$	5,522	$	544,060	$	549,582
Agricultural Real Estate		-		-		3,444		3,444		206,695		210,139
Agricultural		-		-		110		110		245,863		245,973
Commercial Real Estate		-		-		-		-		1,318,393		1,318,393
Commercial and Industrial		133		169		-		302		343,047		343,349
Consumer		153		122		9		284		47,510		47,794
Other		-		-		-		-		22,089		22,089
Total	$	4,530	$	757	$	4,375	$	9,662	$	2,727,657	$	2,737,319


	(In Thousands)
December 31, 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	$	3,536	$	919	$	766	$	5,221	$	521,822	$	527,043
Agricultural Real Estate		516		-		130		646		216,184		216,830
Agricultural		-		1,444		50		1,494		216,851		218,345
Commercial Real Estate		56		-		141		197		1,352,822		1,353,019
Commercial and Industrial		-		-		-		-		314,096		314,096
Consumer		198		35		83		316		59,177		59,493
Other		-		-		-		-		23,133		23,133
Total	$	4,306	$	2,398	$	1,170	$	7,874	$	2,704,085	$	2,711,959

The following tables present nonaccrual loans by portfolio segment as of September 30, 2026 and as of December 31, 2025.


	(In Thousands)
	September 30, 2026
	Nonaccrual				Loans Past
	With No				Due Over
	Allowance				89 Days
	for Credit Loss		Nonaccrual		Still Accruing
Consumer Real Estate	$	2,102	$	2,372	$	-
Agricultural Real Estate		722		3,713		-
Agricultural		110		110		-
Commercial Real Estate		-		-		-
Commercial & Industrial		-		-		-
Consumer		24		24		-
Other		-		-		-
Total	$	2,958	$	6,219	$	-


	(In Thousands)
	December 31, 2025
	Nonaccrual				Loans Past
	With No				Due Over
	Allowance				89 Days
	for Credit Loss		Nonaccrual		Still Accruing
Consumer Real Estate	$	3,339	$	4,050	$	-
Agricultural Real Estate		5,347		5,347		-
Agricultural		1,441		1,441		-
Commercial Real Estate		141		141		-
Commercial & Industrial		-		134		-
Consumer		143		143		-
Total	$	10,411	$	11,256	$	-

Interest income on nonaccrual loans, recognized on a cash basis, was $18 thousand and $112 thousand for the three and nine months ended September 30, 2026 compared to $33 thousand and $85 thousand for the three and nine months ended September 30, 2025.

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.

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

10.

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 September 30, 2026 and December 31, 2025:


	(In Thousands)
	September 30, 2026
															Revolving		Revolving
															Loans		Loans
	Term Loans Amortized Cost Basis by Origination Year												Term		Amortized		Converted		Grand
	2026		2025		2024		2023		2022		Prior		Total		Cost Basis		to Term		Total
Consumer Real Estate
Risk Rating
Pass (1-4)	$	59,556	$	45,272	$	21,542	$	44,064	$	64,311	$	209,642	$	444,387	$	100,719	$	564	$	545,670
Special Mention (5)		-		138		-		90		202		263		693		19		-		712
Substandard (6)		-		133		725		501		108		1,522		2,989		174		37		3,200
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Consumer Real Estate	$	59,556	$	45,543	$	22,267	$	44,655	$	64,621	$	211,427	$	448,069	$	100,912	$	601	$	549,582
Gross charge-offs YTD	$	-	$	-	$	41	$	-	$	-	$	-	$	41	$	-	$	3	$	44

Agricultural Real Estate
Risk Rating
Pass (1-4)	$	28,087	$	21,159	$	18,613	$	18,883	$	26,636	$	88,365	$	201,743	$	81	$	-	$	201,824
Special Mention (5)		311		-		19		1,489		454		201		2,474		-		-		2,474
Substandard (6)		-		240		2,991		-		2,250		360		5,841		-		-		5,841
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Agricultural Real Estate	$	28,398	$	21,399	$	21,623	$	20,372	$	29,340	$	88,926	$	210,058	$	81	$	-	$	210,139
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Risk Rating
Pass (1-4)	$	35,167	$	30,050	$	4,528	$	3,931	$	6,178	$	5,240	$	85,094	$	130,281	$	-	$	215,375
Special Mention (5)		69		173		18		49		277		-		586		1,150		-		1,736
Substandard (6)		2,499		3,123		446		364		320		6		6,758		22,104		-		28,862
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Agricultural	$	37,735	$	33,346	$	4,992	$	4,344	$	6,775	$	5,246	$	92,438	$	153,535	$	-	$	245,973
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-


	(In Thousands)
	September 30, 2026
															Revolving		Revolving
															Loans		Loans
	Term Loans Amortized Cost Basis by Origination Year												Term		Amortized		Converted		Grand
	2026		2025		2024		2023		2022		Prior		Total		Cost Basis		to Term		Total
Commercial Real Estate
Risk Rating
Pass (1-4)	$	196,958	$	211,359	$	104,392	$	153,024	$	303,802	$	268,820	$	1,238,355	$	5,490	$	-	$	1,243,845
Special Mention (5)		225		2,750		-		15,727		5,749		7,590		32,041		-		-		32,041
Substandard (6)		8,053		1,674		9,207		3,283		16,345		3,945		42,507		-		-		42,507
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Commercial Real Estate	$	205,236	$	215,783	$	113,599	$	172,034	$	325,896	$	280,355	$	1,312,903	$	5,490	$	-	$	1,318,393
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial & Industrial
Risk Rating
Pass (1-4)	$	42,953	$	51,109	$	14,613	$	33,001	$	22,555	$	8,472	$	172,703	$	156,149	$	-	$	328,852
Special Mention (5)		-		257		4		2,027		13		-		2,301		640		-		2,941
Substandard (6)		417		261		35		-		43		110		866		10,690		-		11,556
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Commercial & Industrial	$	43,370	$	51,627	$	14,652	$	35,028	$	22,611	$	8,582	$	175,870	$	167,479	$	-	$	343,349
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	39	$	-	$	39	$	-	$	-	$	39

Other
Risk Rating
Pass (1-4)	$	326	$	571	$	-	$	-	$	-	$	18,042	$	18,939	$	-	$	-	$	18,939
Special Mention (5)		-		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		-		-		-		3,150		3,150		-		-		3,150
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Other	$	326	$	571	$	-	$	-	$	-	$	21,192	$	22,089	$	-	$	-	$	22,089
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-


	(In Thousands)
	December 31, 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)	$	52,684	$	28,385	$	52,324	$	71,008	$	82,628	$	150,780	$	437,809	$	83,296	$	462	$	521,567
Special Mention (5)		-		-		-		-		131		47		178		19		-		197
Substandard (6)		259		746		578		492		1,318		1,694		5,087		23		169		5,279
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Consumer Real Estate	$	52,943	$	29,131	$	52,902	$	71,500	$	84,077	$	152,521	$	443,074	$	83,338	$	631	$	527,043
Gross charge-offs YTD	$	-	$	-	$	20	$	-	$	-	$	-	$	20	$	-	$	-	$	20

Agricultural Real Estate
Risk Rating
Pass (1-4)	$	28,079	$	20,758	$	23,792	$	30,919	$	20,242	$	84,889	$	208,679	$	88	$	-	$	208,767
Special Mention (5)		-		-		-		32		-		282		314		-		-		314
Substandard (6)		-		4,890		863		845		1,065		86		7,749		-		-		7,749
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Agricultural Real Estate	$	28,079	$	25,648	$	24,655	$	31,796	$	21,307	$	85,257	$	216,742	$	88	$	-	$	216,830
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Risk Rating
Pass (1-4)	$	40,636	$	7,157	$	6,692	$	8,617	$	3,157	$	4,373	$	70,632	$	126,147	$	419	$	197,198
Special Mention (5)		53		22		-		305		11		-		391		4,417		-		4,808
Substandard (6)		2,293		29		90		44		-		-		2,456		13,883		-		16,339
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Agricultural	$	42,982	$	7,208	$	6,782	$	8,966	$	3,168	$	4,373	$	73,479	$	144,447	$	419	$	218,345
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-


	(In Thousands)
	December 31, 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)	$	244,689	$	132,260	$	157,885	$	362,675	$	175,569	$	160,103	$	1,233,181	$	5,369	$	-	$	1,238,550
Special Mention (5)		4,355		1,211		23,915		12,380		12,381		2,088		56,330		-		-		56,330
Substandard (6)		1,814		55		34,868		13,274		1,357		6,771		58,139		-		-		58,139
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Commercial Real Estate	$	250,858	$	133,526	$	216,668	$	388,329	$	189,307	$	168,962	$	1,347,650	$	5,369	$	-	$	1,353,019
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial & Industrial
Risk Rating
Pass (1-4)	$	58,239	$	20,557	$	38,008	$	28,674	$	10,454	$	6,310	$	162,242	$	135,200	$	45	$	297,487
Special Mention (5)		545		42		2,418		63		165		-		3,233		1,049		-		4,282
Substandard (6)		-		33		259		21		135		-		448		11,745		-		12,193
Doubtful (7)		-		134		-		-		-		-		134		-		-		134
Total Commercial & Industrial	$	58,784	$	20,766	$	40,685	$	28,758	$	10,754	$	6,310	$	166,057	$	147,994	$	45	$	314,096
Gross charge-offs YTD	$	-	$	27	$	147	$	26	$	-	$	50	$	250	$	-	$	-	$	250

Other
Risk Rating
Pass (1-4)	$	600	$	-	$	-	$	-	$	14,870	$	3,997	$	19,467	$	-	$	-	$	19,467
Special Mention (5)		-		-		-		-		-		3,666		3,666		-		-		3,666
Substandard (6)		-		-		-		-		-		-		-		-		-		-
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Other	$	600	$	-	$	-	$	-	$	14,870	$	7,663	$	23,133	$	-	$	-	$	23,133
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

For consumer loans, the Company 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 September 30, 2026 and December 31, 2025 by year of origination.


	(In Thousands)
	September 30, 2026
															Revolving
															Loans
	Term Loans Amortized Cost Basis by Origination Year												Term		Amortized		Grand
	2026		2025		2024		2023		2022		Prior		Total		Cost Basis		Total

Consumer
Payment Performance
Performing	$	9,216	$	17,472	$	5,344	$	4,980	$	8,535	$	1,500	$	47,047	$	722	$	47,769
Nonperforming		-		-		-		-		17		8		25		-		25
Total Consumer	$	9,216	$	17,472	$	5,344	$	4,980	$	8,552	$	1,508	$	47,072	$	722	$	47,794
Gross charge-offs YTD	$	199	$	158	$	44	$	28	$	22	$	8	$	459	$	-	$	459


	(In Thousands)
	December 31, 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	$	24,156	$	8,134	$	7,852	$	15,191	$	2,671	$	816	$	58,820	$	527	$	59,347
Nonperforming		92		1		20		14		15		4		146		-		146
Total Consumer	$	24,248	$	8,135	$	7,872	$	15,205	$	2,686	$	820	$	58,966	$	527	$	59,493
Gross charge-offs YTD	$	339	$	58	$	129	$	169	$	61	$	2	$	758	$	-	$	758

The following tables present collateral-dependent loans grouped by portfolio segment as of September 30, 2026 and December 31, 2025:


	(In Thousands)
	September 30, 2026
	Collateral
	Dependent Loans
Consumer Real Estate	$	2,323
Agricultural Real Estate		3,590
Agricultural		110
Commercial Real Estate		-
Commercial & Industrial		-
Consumer		8
Total	$	6,031


	(In Thousands)
	December 31, 2025
	Collateral
	Dependent Loans
Consumer Real Estate	$	4,016
Agricultural Real Estate		1,433
Agricultural		5,261
Commercial Real Estate		141
Commercial & Industrial		40
Consumer		14
Total	$	10,905

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 is every 12 months for chattels and titled vehicles and every two years for real estate. In this process, third party evaluations are obtained. Until such time that updated appraisals are received, the Bank may discount the collateral value used.

The specific reserve portion of the allowance for credit losses (ACL) for collateral dependent loans was $118 thousand and $145 thousand at September 30, 2026 and December 31, 2025, respectively.

The Company periodically modifies a loan for a borrower experiencing financial difficulty in an effort to enhance the borrowers' performance on the note. Modification programs focused 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 nine months ended September 30, 2026 and 2025, there were no new loan modifications to borrowers experiencing financial difficulty.

For the three and nine months ended September 30, 2026 and 2025, there were no modifications to borrowers experiencing financial difficulty that subsequently defaulted after modification.

As of September 30, 2026, the Company had no foreclosed residential real estate property obtained by physical possession and $720 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 $1.4 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, 2025. As of September 30, 2025, the Company had no foreclosed residential real estate property obtained by physical possession and $944 thousand of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings were in process according to local jurisdictions.

The 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 ACL as determined using the Current Expected Credit Losses (CECL) methodology.

The allowance does not include an accretable yield of $216 thousand as of December 31, 2025, related to the acquisitions of Perpetual Federal Savings Bank in 2021 and Peoples Federal Savings and Loan Bank in 2022, as previously discussed in Note 2. As of June 30, 2026, the remaining accretable yield was accreted into income, has a zero balance, and no further accretion expense was recognized in the three months ended September 30, 2026.

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 nine months ended September 30, 2026 and September 30, 2025 in addition to the activity within the ACL for each portfolio segment and ending balances as of and for the year ended December 31, 2025:


	(In Thousands)
	Consumer Real Estate			Agricultural Real Estate			Agricultural			Commercial Real Estate		Commercial and Industrial			Consumer			Other			Total
Three Months Ended September 30, 2026
ALLOWANCE FOR CREDIT LOSSES
Beginning balance	$	5,053		$	946		$	866		$	15,894	$	3,500		$	1,147		$	535		$	27,941
Provision for (recovery of) credit losses - loans		203			(141	)		(28	)		44		(38	)		(106	)		(38	)		(104	)
Charge-offs		(41	)		-			-			-		-			(94	)		-			(135	)
Recoveries		3			-			-			2		1			94			-			100
Ending Balance	$	5,218		$	805		$	838		$	15,940	$	3,463		$	1,041		$	497		$	27,802


	(In Thousands)
	Consumer Real Estate			Agricultural Real Estate		Agricultural		Commercial Real Estate			Commercial and Industrial			Consumer			Other			Total
Nine Months Ended September 30, 2026
ALLOWANCE FOR CREDIT LOSSES
Beginning balance	$	4,266		$	735	$	474	$	17,428		$	3,286		$	953		$	546		$	27,688
Provision for (recovery of) credit losses - loans		989			70		312		(1,495	)		212			332			(49	)		371
Charge-offs		(44	)		-		-		-			(39	)		(459	)		-			(542	)
Recoveries		7			-		52		7			4			215			-			285
Ending Balance	$	5,218		$	805	$	838	$	15,940		$	3,463		$	1,041		$	497		$	27,802


	(In Thousands)
	Consumer Real Estate		Agricultural Real Estate		Agricultural		Commercial Real Estate			Commercial and Industrial			Consumer			Other			Total
Three Months Ended September 30, 2025
ALLOWANCE FOR CREDIT LOSSES
Beginning balance	$	3,653	$	738	$	334	$	17,354		$	3,376		$	945		$	577		$	26,977
Provision for (recovery of) credit losses - loans		474		18		82		(455	)		366			95			(23	)		557
Charge-offs		-		-		-		-			(1	)		(119	)		-			(120	)
Recoveries		2		-		-		2			9			48			-			61
Ending Balance	$	4,129	$	756	$	416	$	16,901		$	3,750		$	969		$	554		$	27,475


	(In Thousands)
	Consumer Real Estate		Agricultural Real Estate			Agricultural		Commercial Real Estate		Commercial and Industrial			Consumer			Other			Total
Nine Months Ended September 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		582		(139	)		121		320		786			367			(8	)		2,029
Charge-offs		-		-			-		-		(26	)		(561	)		-			(587	)
Recoveries		4		-			10		21		21			151			-			207
Ending Balance	$	4,129	$	756		$	416	$	16,901	$	3,750		$	969		$	554		$	27,475


	(In Thousands)
	Consumer Real Estate			Agricultural Real Estate			Agricultural		Commercial Real Estate		Commercial and Industrial			Consumer			Other			Total
Year Ended December 31, 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		738			(160	)		179		844		533			478			(16	)		2,596
Charge-offs		(20	)		-			-		-		(250	)		(758	)		-			(1,028	)
Recoveries		5			-			10		24		34			221			-			294
Ending Balance	$	4,266		$	735		$	474	$	17,428	$	3,286		$	953		$	546		$	27,688

The following tables present the activity in the AULC for the three and nine months ended September 30, 2026 and September 30, 2025 in addition to the activity in the AULC and ending balances as of and for the year ended December 31, 2025:


	(In Thousands)
	Unfunded Loan Commitment & Letters of Credit
Three Months Ended September 30, 2026
ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
Beginning balance	$	1,189
Provision for credit losses - off balance sheet credit exposures		479
Charge-offs		-
Recoveries		-
Ending Balance	$	1,668


	(In Thousands)
	Unfunded Loan Commitment & Letters of Credit
Nine Months Ended September 30, 2026
ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
Beginning balance	$	1,035
Provision for credit losses - off balance sheet credit exposures		633
Charge-offs		-
Recoveries		-
Ending Balance	$	1,668


	(In Thousands)
	Unfunded Loan Commitment & Letters of Credit
Three Months Ended September 30, 2025
ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
Beginning balance	$	1,308
Recovery of credit losses - off balance sheet credit exposures		(272	)
Charge-offs		-
Recoveries		-
Ending Balance	$	1,036


	(In Thousands)
	Unfunded Loan Commitment & Letters of Credit
Nine Months Ended September 30, 2025
ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
Beginning balance	$	1,541
Recovery of credit losses-off balance sheet credit exposures		(505	)
Charge-offs		-
Recoveries		-
Ending Balance	$	1,036


	(In Thousands)
	Unfunded Loan Commitment & Letters of Credit
Year Ended December 31, 2025
ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
Beginning balance	$	1,541
Recovery of credit losses-off balance sheet credit exposures		(506	)
Charge-offs		-
Recoveries		-
Ending Balance	$	1,035