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Commitments and Contingent Liabilities | 3 Months Ended
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Mar. 31, 2025
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingent Liabilities | Commitments and Contingent Liabilities Financial Instruments with Off-Balance Sheet Risk We make commitments to extend credit in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit in the form of loans or through standby letters of credit. 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. Because various commitments will expire without being fully drawn, the total commitment amount does not necessarily represent future cash requirements. Our credit loss exposure is equal to the contractual amount of the commitment in the event of nonperformance by the borrower. We use the same credit underwriting criteria for all credit exposure. The amount of collateral obtained, if deemed necessary by us, is based on management's credit evaluation of the borrower. Collateral types pledged may include accounts receivable, inventory, other personal property and real property. The contractual amount of unfunded loan commitments and standby letters of credit not reflected in the consolidated statements of condition are as follows:
(in thousands) | March 31, 2025 | December 31, 2024
Commercial lines of credit | $ | 224,633 |  | $ | 233,462 |
Revolving home equity lines | 207,652 |  | 208,372 |
Undisbursed construction loans | 7,447 |  | 8,294 |
Personal and other lines of credit | 8,591 |  | 7,781 |
Standby letters of credit | 2,915 |  | 2,777 |
Total unfunded loan commitments and standby letters of credit | $ | 451,238 |  | $ | 460,686 |
We record an allowance for credit losses on unfunded loan commitments at the balance sheet date based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience of the different types of commitments and expected loss rates determined for pooled funded loans. The allowance for credit losses on unfunded commitments totaled $894 thousand at both March 31, 2025 and December 31, 2024, which is included in interest payable and other liabilities in the consolidated statements of condition. There was no provision for credit losses on unfunded loan commitments in the first quarter of 2025 or in the first quarter of prior year. Leases We lease premises under long-term non-cancelable operating leases with remaining terms of 90 days to 17 years, 2 months, most of which include escalation clauses and one or more options to extend the lease term, and some of which contain lease termination clauses. Lease terms may include certain renewal options that were considered reasonably certain to be exercised. We lease certain equipment under finance leases with initial terms of three years to five years. The equipment finance leases do not contain renewal options, bargain purchase options or residual value guarantees. The following table shows the balances of operating and finance lease right-of-use assets and lease liabilities.
(in thousands) | March 31, 2025 | December 31, 2024
Operating leases: |  |
Operating lease right-of-use assets | $ | 19,076 |  | $ | 19,025 |
Operating lease liabilities | $ | 21,497 |  | $ | 21,509 |
Finance leases: |  |
Finance lease right-of-use assets | $ | 616 |  | $ | 616 |
Accumulated amortization | (504) |  | (467) |
Finance lease right-of-use assets, net 1 | $ | 112 |  | $ | 149 |
Finance lease liabilities 2 | $ | 116 |  | $ | 154 |
1 Included in premises and equipment in the consolidated statements of condition. |
2 Included in borrowings and other obligations in the consolidated statements of condition. |
The following table shows supplemental disclosures of noncash investing and financing activities for the periods presented.
| Three months ended
(in thousands) | March 31, 2025 | March 31, 2024
Right-of-use assets obtained in exchange for operating lease liabilities | $ | 1,090 |  | $ | 2,417 |
Right-of-use assets obtained in exchange for finance lease liabilities | $ | — |  | $ | — |
The following table shows components of operating and finance lease cost.
| Three months ended |  |
(in thousands) | March 31, 2025 | March 31, 2024 |  |  |
Operating lease cost 1 | $ | 1,185 |  | $ | 1,318 |  |  |  |
Finance lease cost: |  |  |  |  |
Amortization of right-of-use assets 2 | $ | 37 |  | $ | 37 |  |  |  |
Interest on finance lease liabilities 3 | 1 |  | 1 |  |  |  |
Total finance lease cost | $ | 38 |  | $ | 38 |  |  |  |
Total lease cost | $ | 1,223 |  | $ | 1,356 |  |  |  |
1 Included in occupancy and equipment expense in the consolidated statements of comprehensive income.
2 Included in depreciation and amortization in the consolidated statements of comprehensive income.
3 Included in interest on borrowings and other obligations in the consolidated statements of comprehensive income.
The following table shows the future minimum lease payments, weighted average remaining lease terms, and weighted average discount rates under operating and finance lease arrangements as of March 31, 2025. The discount rates used to calculate the present value of lease liabilities were based on the collateralized FHLB borrowing rates that were commensurate with lease terms and minimum payments on the lease commencement date.
(in thousands) | March 31, 2025
Year | Operating Leases | Finance Leases
2025 | $ | 3,679 |  | $ | 71 |
2026 | 3,843 |  | 40 |
2027 | 3,556 |  | 7 |
2028 | 3,141 |  | 1 |
2029 | 2,489 |  | — |
Thereafter | 7,719 |  | — |
Total minimum lease payments | 24,427 |  | 119 |
Amounts representing interest (present value discount) | (2,930) |  | (3) |
Present value of net minimum lease payments (lease liability) | $ | 21,497 |  | $ | 116 |
Weighted average remaining term (in years) | 7.46 | 1.43
Weighted average discount rate | 2.95 | % | 3.06 | %
Litigation Matters Bancorp may be party to legal actions that arise from time to time in the normal course of business. Bancorp's management is not aware of any pending legal proceedings to which either it or the Bank may be a party or has recently been a party that will have a material adverse effect on the financial condition or results of operations of Bancorp or the Bank. The Bank is responsible for a proportionate share of certain litigation indemnifications provided to Visa U.S.A. ("Visa") by its member banks in connection with Visa's lawsuits related to anti-trust charges and interchange fees ("Covered Litigation"). We sold our remaining shares on July 13, 2023, however our proportionate share of the litigation indemnification liability does not change or transfer upon the sale of our Class B Visa shares to member banks or, per the terms of the sale, to the recent purchaser of our shares. Visa established an escrow account for the Covered Litigation that it periodically funds, which is expected to cover the settlement payment obligations. Litigation is ongoing and until the court approval process is complete, there is no assurance that Visa will resolve the claims as contemplated by the amended class settlement agreement, and additional lawsuits may arise from individual merchants who opted out of the class settlement. However, until the escrow account is fully depleted and the conversion rate of Class B to Class A common stock is reduced to zero, no future cash settlement payments are required by the member banks, such as us, on the Covered Litigation. Therefore, we are not required to record any contingent liabilities for the indemnification related to the Covered Litigation, as we consider the probability of losses to be remote. In the third quarter of 2024, the Bank recorded a non-recurring accrual for a legal resolution of a Private Attorneys General Act/putative class action lawsuit of $615 thousand, pre-tax, involving alleged violations of wage and hour laws for all non-exempt employees covering any and all claims that were or could have been alleged in the operative complaint through the financial period of December 11, 2019 to October 12, 2024. The Bank shall pay an "all in" Gross Settlement Amount ("GSA") of $615 thousand to settle all of the wage and hour class and PAGA claims, and the named Plaintiff's individual claims. This amount settles all claims that were or could have been asserted based on the facts alleged in the operative complaint, and the as of yet unasserted individual claims by the named plaintiff, and includes attorneys' fees, costs including the cost of administration, and incentive payments. The only amount over and above the GSA which the Bank shall pay is its share of payroll taxes on the amount of the net settlement that is allocated as wages. There has been no finding of wrongdoing and the Bank denies all claims. The settlement agreement still requires final court approval and notice requirements; however, the Bank does not anticipate further significant costs related to this action. We are not aware of any other similar wage and hour claims at this time.

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