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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2025

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 12 — COMMITMENTS AND CONTINGENCIES

Financial instruments with off-balance-sheet risk

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its clients. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. The Company’s exposure to credit loss in the event of non-performance by the counterparty to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

The following off-balance-sheet financial instruments, whose contract amounts represent credit risk, are outstanding (in thousands):


		At September 30, 2025						At December 31, 2024
		Fixed			Variable			Fixed			Variable
		Rate			Rate			Rate			Rate
Unused loan commitments		$	91,151		$	603,174		$	108,561		$	586,821
Standby and commercial letters of credit			27,145			—			31,920			—
		$	118,296		$	603,174		$	140,481		$	586,821

A commitment to extend credit is a legally binding agreement to lend to a client as long as there is no violation of any condition established in the contract. These commitments do not necessarily represent future cash requirements and generally expire within two years. At September 30, 2025, the Company’s fixed rate loan commitments had interest rates ranging from 3.0% to 9.3% and the Company’s variable rate loan commitments had interest rates ranging from 5.3% to 9.5%. At December 31, 2024, the Company’s fixed rate loan commitments had interest rates ranging from 3.0% to 9.3% and the Company’s variable rate loan commitments had interest rates ranging from 6.3% to 11.5%. The amount of collateral obtained, if any, by the Company upon extension of credit is based on management’s credit evaluation of the borrower. Collateral held varies but may include mortgages on commercial and residential real estate, security interests in business assets, equipment, deposit accounts with the Company or other financial institutions and securities.

The Company’s stand-by letters of credit amounted to $27.1 million and $31.9 million as of September 30, 2025 and December 31, 2024, respectively. The Company’s stand-by letters of credit are collateralized by interest-bearing accounts of $22.4 million and $24.1 million as of September 30, 2025 and December 31, 2024, respectively.

Legal and Regulatory Proceedings

There have been investigations by governmental entities concerning a prepaid debit card product program that was offered by the GPG Banking-as-a-Service (“BaaS) business. These include investigations involving the Company and the Bank by the Board of Governors of the FRB and certain state authorities, including the NYSDFS. During the early stages of the COVID-19 pandemic, third parties used this prepaid debit card product to establish unauthorized accounts and to receive unauthorized government benefits payments, including unemployment insurance benefits payments made pursuant to the Coronavirus Aid, Relief, and Economic Security Act from many states. The Company ceased accepting new accounts from this program manager in July 2020 and exited its relationship with this program manager in August 2020. The Company has cooperated in these investigations. In 2023, the Bank entered into separate consensual resolutions with each of the FRB and the NYSDFS with respect to their investigations, each of which investigations is now closed as a result of such orders. In the fourth quarter of 2024, the Company also resolved an investigation by the Attorney General of the State of Washington related to this program.

In addition to the matters described above, the Company is subject to various other pending and threatened legal actions relating to the conduct of its business activities, as well as inquiries and investigations from regulators. While the future outcome of litigation or regulatory matters cannot be determined at this time, in the opinion of management, as of

September 30, 2025, the aggregate liability, if any, arising out of any such other pending or threatened matters are not expected to be material to the Company’s financial condition, results of operations, and liquidity.