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 as of December 31 consist of the following (in thousands):


	2024		2023
Commitments to extend credit	$	1,273,648	$	1,200,617
Standby letters of credit		14,559		13,498

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 December 31, 2024 and December 31, 2023, the allowance for credit losses for unfunded commitments totaled $4.1 million and $3.6 million, respectively, and was included in other liabilities on the Company’s consolidated statements of financial condition. For the years ended December 31, 2024 and 2022, credit loss (benefit) expense for unfunded commitments was of a benefit of $507 thousand and $2.3 million, respectively, and for the year ended December 31, 2023 was a credit loss expense of $531 thousand, and was included in provision (benefit) for credit losses on the Company’s consolidated statements of operations.

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

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 and were granted class certification to represent classes of consumers in New York and Pennsylvania seeking to recover statutory damages, interest and declaratory relief. 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.

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 6,000 members in the New York classes and 400 members in the Pennsylvania classes.

During the July 11, 2024 pretrial conference, the Court instructed the parties to engage in further settlement of non-binding mediation discussions and set a September 11, 2024 deadline to file motions in limine and a bench trial to commence on May 5, 2025.

All depositions and document productions have been completed. Plaintiff did not file a Motion in Limine by September 11, 2024. Plaintiffs, however, filed a motion for partial judgment on October 8, 2024 asserting that the recoupment claims were barred because they were too distinct from the underlying claims. The Company filed an opposition against the motion for partial summary judgment with the Court by the November 7, 2024 deadline.

In response to the Court’s instruction that the parties explore further settlement or mediation discussions, in early February of 2025, the parties engaged a retired Pennsylvania Superior Court judge to conduct non-binding mediation and facilitate settlement discussions, and scheduled the mediation for February 28, 2025.

As a result of extensive mediation and settlement related discussions that occurred on February 28, 2025, the Company reached an oral agreement to settle this case for a cash payment of $29.5 million, release of the debt that the class members owe to the Bank and removal of adverse credit reporting for class members, subject to approval by the Company’s Board of Directors. The Company’s Board of Directors unanimously approved the settlement and on March 7, 2025, the Settlement Agreement was executed which must be approved by the Court.

The Company determined that this event meets the definition of a recognized subsequent event in accordance with FASB’s ASC Topic 855, Subsequent Events, and has therefore accrued a $23.0 million contingent litigation liability, which reflects the agreed upon settlement payment of $29.5 million less approximately $6.5 million in available related insurance proceeds, in the Company’s December 31, 2024 consolidated financial statements.