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Note 14 - Litigation, Commitments, and Contingencies

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note 14. Litigation, Commitments, and Contingencies

Litigation

On June 24, 2022, the Bank was sued in a putative class action lawsuit filed by two customers of the Bank in the United States District Court for the Northern District of West Virginia. (The lawsuit was subsequently transferred to the District Court for the Southern District of West Virginia.) The plaintiffs, individually and as putative class representatives, allege that the Bank breached its deposit account agreements and was unjustly enriched by collecting overdraft fees with respect to certain debit card transactions and the assessment of multiple nonsufficient funds fees as to items presented for payment against nonsufficient funds more than one time. No class has been certified and discovery is ongoing. The Bank disputes the allegations and has actively defended itself, but it is exploring settlement opportunities. We cannot provide assurance whether a settlement will be reached, the final terms or timing of any such settlement, or the negotiated amount of any settlement with respect to this matter. Because settlement negotiations have not yet started, the Bank cannot reasonably estimate the amount of any possible settlement. If the Bank cannot reach a settlement or if the court rejects any settlement proposed by the Bank and plaintiffs’ counsel, the Bank may need to litigate the matter in court. If the Bank must litigate, it will defend itself vigorously. Management, after consultation with legal counsel, believes it is currently not possible to predict the ultimate resolution or potential financial liability with respect to this litigation.

We are currently a defendant in other legal actions and asserted claims in the normal course of business. Although we are unable to assess the ultimate outcome of each matter with certainty, we believe that the resolution of these actions should not have a material adverse effect on our financial position, results of operations, or cash flows

Commitments and Contingencies

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 customers. These financial instruments include commitments to extend credit, standby letters of credit, and financial guarantees. These instruments involve, to varying degrees, elements of credit and interest rate risk beyond the amount recognized in the consolidated balance sheets. The contractual amounts of these instruments reflect the extent of involvement the Company has in particular classes of financial instruments. If the other party to a financial instrument does not perform, the Company’s credit loss exposure is the same as the contractual amount of the instrument. The Company uses the same credit policies in making commitments and conditional obligations as it does for on balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments are expected to expire without being drawn on, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of each customer on a case-by-case basis. Collateral may include accounts receivable, inventory, property, plant and equipment, and income producing commercial properties. The Company maintains a reserve for the risk inherent in unfunded lending commitments, which is included in other liabilities in the consolidated balance sheets.

Standby letters of credit and financial guarantees are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending credit to customers. The amount of collateral obtained, if deemed necessary, to secure the customer’s performance under certain letters of credit is based on management’s credit evaluation of the customer.

The following table presents the off-balance sheet financial instruments as of the dates indicated:

		*September 30, 2023*				*December 31, 2022*
(Amounts in thousands)
Commitments to extend credit		$	289,934			$	278,926
Standby letters of credit and financial guarantees⁽¹⁾			128,286				119,681
Total off-balance sheet risk		$	418,220			$	398,607

(1)	Includes FHLB letters of credit