The Company has financial instruments with off-balance sheet risk established in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk extending beyond amounts recognized in the financial statements.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is essentially the same as that involved with extending loans to customers. The Company uses the same credit underwriting policies in making commitments and conditional obligations as for on-balance sheet instruments.

Off-balance sheet commitments consist of the following (in thousands):


	September 30, 2022		December 31, 2021
Commitments to extend credit	$	1,192,819	$	936,298
Standby letters of credit		15,421		24,913

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses which may require payment of a fee. Commitments may expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if any, is based on management’s credit evaluation of the borrower. Standby letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a third party. These standby letters of credit are primarily issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers.

At September 30, 2022 and December 31, 2021, the allowance for credit losses for unfunded commitments totaled $2.7 million and $1.8 million, respectively, and was included in other liabilities on the Company's consolidated statements of financial condition. The credit loss expense (benefit) for unfunded commitments was as follows (in thousands):


	Three months ended September 30,					Nine months ended September 30,
	2022		2021			2022		2021
Credit loss expense (benefit) for unfunded commitments	$	507	$	(206	)	$	867	$	(1,246	)

In the ordinary course of business, there are various threatened and pending legal proceedings against the Company. Management believes that the aggregate liability, if any, arising from such litigation, except for the matter described below, would not have a material adverse effect on the Company’s consolidated financial statements.

As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on March 10, 2022 and as disclosed in Part II, Item 1 of this Quarterly Report on Form 10-Q, the Company is party to an action filed against it on May 16, 2017 by Matthew L. Chipego, Charlene Mowry, Constance C. Churchill and Joseph W. Ewing in the Court of Common Pleas in Philadelphia, Pennsylvania. Plaintiffs sought class certification to represent classes of consumers in New York and Pennsylvania along with statutory damages, interest and declaratory relief. The plaintiffs sought to represent a putative class of consumers who are alleged to have obtained direct or indirect financing from the Company for the purchase of vehicles that the Company later repossessed. The plaintiffs specifically claim that the notices the Bank sent to defaulting consumers after their vehicles were repossessed did not comply with the relevant portions of the Uniform Commercial Code in New York and Pennsylvania. The Company disputes and believes it has meritorious defenses against these claims and plans to vigorously defend itself.

On September 30, 2021, the Court granted plaintiffs’ motion for class certification and certified four different classes (two classes of New York consumers and two classes of Pennsylvania consumers). There are approximately 5,200 members in the New York classes and 300 members in the Pennsylvania classes. On December 20, 2021, the Company filed a request for an interlocutory appeal of the denial of its motion to dismiss the case for lack of standing. On February 8, 2022, plaintiffs filed a motion for partial summary judgement for most of the relief they seek. The Company filed a cross motion for partial summary judgement seeking the dismissal of a portion of the class and sought an offset in the form of recoupment which reduces any liability that may be imposed against the Company by the amounts that the borrowers owe to the Bank for failing to repay their motor vehicle loans. In addition, on April 25, 2022, the Pennsylvania Supreme Court declared unconstitutional a statute on which the Court may have based jurisdiction in this case. Therefore, on June 27, 2022, the Company filed a motion for reconsideration of the Court's June 5, 2018 decision overruling the Company's preliminary objections based on lack of personal jurisdiction as to the New York plaintiffs. Plaintiffs have responded to that motion claiming an alternative basis for jurisdiction.

On September 26, 2022, the lower Court denied both plaintiffs’ and defendants’ motions for partial summary judgment. In declining to grant Plaintiffs’ motion, the Court found that there were questions of fact as to whether the members of the class had purchased the subject vehicles for “consumer use” within the meaning of the relevant statutes. Defendants’ motion for summary judgment on the recoupment was denied because the Court determined that it could not enter a judgment on recoupment – which is a set off from liability – without first determining whether there was liability.

On October 4, 2022, the Parties agreed to a sixty (60) day stay of all deadlines in the case in order to pursue mediation. On October 7, 2022, the Superior Court of Pennsylvania granted the Company’s December 20, 2021 Request for an Interlocutory Appeal. As such, the case is now stayed until the appeal is briefed and decided by the Superior Court. No briefing schedule has yet been established for the appeal. In addition to the pending appeal, the parties are in the process of exploring non-binding mediation to potentially resolve some or all of the issues in the matter.

The Company has not accrued a contingent liability for this matter at this time because, given its defenses, it is unable to conclude whether a liability is probable to occur nor is it able to currently reasonably estimate the amount of potential loss.

If the Company settles these claims or the action is not resolved in its favor, the Company may suffer reputational damage and incur legal costs, settlements or judgments that exceed the amounts covered by its insurer. The Company can provide no assurances that its insurer will cover the full legal costs, settlements or judgments it incurs. If the Company is unsuccessful in defending itself from these claims or if its insurer does not cover the full amount of legal costs it incurs, the result may materially adversely affect the Company's business, results of operations and financial condition.