Commitments and Contingencies

3 Months Ended

Mar. 31, 2025

Commitments and Contingencies [Abstract]

Note 11—Commitments and Contingencies

In the normal course of business, the Company enters into financial instruments with off balance sheet risk in order to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These instruments include commitments to extend credit, letters of credit, and other types of financial guarantees. The Company had the following off balance sheet commitments as of the dates indicated.

(Dollars in thousands)	March 31, 2025		December 31, 2024

Commitments to extend credit, including unsecured commitments of $20,601 and $20,535 as of March 31, 2025 and December 31, 2024, respectively	$	1,108,393	$	1,006,649
Standby letters of credit, including unsecured commitments of $4,367 and $4,490 as of March 31, 2025 and December 31, 2024, respectively		15,285		15,411

The Company’s exposure to credit loss in the event of nonperformance by the other party with regard to standby letters of credit, undisbursed loan commitments, and financial guarantees is represented by the contractual notional amount of those 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. The Company uses the same credit policies in making commitments and conditional obligations as it does for recorded balance sheet items. The Company may or may not require collateral or other security to support financial instruments with credit risk. Evaluations of each customer’s creditworthiness are performed on a case-by-case basis. The estimated exposure to loss from these commitments is included in the allowance for credit losses for unfunded loan commitments, which amounted to $2.7 million at March 31, 2025 and December 31, 2024.

Standby letters of credit are conditional commitments issued by the Company to guarantee performance of or payment for a customer to a third-party. Outstanding standby letters of credit at March 31, 2025 had maturity dates ranging from 1 to 43 months with a final expiration in some cases up to October 2028. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

The Company has commitments to fund investments in low income housing tax credit investments (“LIHTC”) partnerships and limited liability companies. The Company invests in LIHTC partnerships and solar tax funds that are designed to generate a return primarily through the realization of federal tax credits. The Company accounts for these investments by amortizing the cost of tax credit investments over the life of the investment using a proportional amortization method, and tax credit investment amortization expense is a component of the provision for income taxes. At March 31, 2025 and December 31, 2024, the balance of the investments in LIHTC was $42.5 million and $43.8 million, respectively. These balances are reflected in the other assets line on the consolidated balance sheets. Total unfunded commitments related to the investments in LIHTC totaled $17.3 million and $18.9 million at March 31, 2025 and December 31, 2024, respectively. These balances are reflected in the interest payables and other liabilities line on the consolidated balance sheets. The Company expects to fulfill these commitments through 2040. Additionally, during the three months ended March 31, 2025 and the year ended December 31, 2024, the Company recognized tax credits from its investments in LIHTC of $1.3 million and $4.4 million, respectively.

In the ordinary course of business, the Company becomes involved in litigation arising out of its normal business activities. Management, after consultation with legal counsel, believes that the ultimate liability, if any, resulting from the disposition of such claims would not be material in relation to the financial position of the Company.

The Company may be required to maintain average reserves on deposit with the FRB primarily based on deposits outstanding. Reserve requirements are offset by the Company’s vault cash and deposit balances maintained with the FRB.