10. COMMITMENTS AND CONTINGENCIES

Litigation Matters
In the ordinary course of its operations, the Company and its subsidiaries are subject to loss contingencies related to legal and regulatory proceedings. The Company establishes accruals for those matters when a loss contingency is considered probable and the related amount is reasonably estimable. When applicable, the Company estimates loss contingencies and whether there is an accruable probable loss. When the Company is able to estimate such losses and when it is reasonably possible that the Company could incur losses in excess of the amounts accrued, the Company discloses the aggregate estimation of such possible losses.

As previously disclosed, on February 9, 2022, pursuant to the Consumer Financial Protection Bureau’s (“CFPB’s”) Notice and Opportunity to Respond and Advise process, the CFPB Office of Enforcement notified the Bank that it was considering recommending that the CFPB take legal action against the Bank in connection with alleged violations of Regulation E, 12 C.F.R. § 1005.17, and the Consumer Financial Protection Act, 12 U.S.C. §§ 5531 and 5536, in connection with the Bank’s overdraft practices and policies. In March 2023, the CFPB commenced settlement discussions with the Company to resolve the matter, and on December 7, 2023, the Bank entered into a Consent Order with the CFPB to resolve the matter.

As of December 31, 2024, the Company has recorded a probable and estimable liability in connection with this matter.

Financial Instruments with Off-Balance Sheet Risk
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 and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit and letters of credit. The Company also records an indemnification reserve based on historical statistics and loss rates related to mortgage loans previously sold, included in “Other Liabilities” on the Company’s Consolidated Balance Sheets. At December 31, 2024 and 2023, the Company’s reserve for unfunded commitments and indemnification reserve totaled $15.3 million and $16.5 million, respectively.

The following table presents the balances of commitments and contingencies as of December 31, (dollars in thousands):

⁽¹⁾ Includes unfunded overdraft protection.

​

As of December 31, 2024, the Company had approximately $184.6 million in deposits in other financial institutions of which $134.7 million served as collateral for cash flow, fair value and loan swap derivatives. As of December 31, 2023, the Company had approximately $218.5 million in deposits in other financial institutions of which $154.4 million served as collateral for cash flow, fair value and loan swap derivatives. The Company had approximately $47.2 million and $60.8 million in deposits in other financial institutions that were uninsured at December 31, 2024 and 2023, respectively. At least annually, the Company’s management evaluates the loss risk of its uninsured deposits held at financial counterparties.

​

For asset/liability management purposes, the Company uses interest rate contracts to hedge various exposures or to modify the interest rate characteristics of various balance sheet accounts. For the over-the-counter derivatives cleared with the central clearinghouses, the variation margin is treated as a settlement of the related derivatives fair values. See Note 11 “Derivatives” in this Form 10-K for additional information.

As part of the Company’s liquidity management strategy, the Company pledges collateral to secure various financing and other activities that occur during the normal course of business. The Company has improved its borrowing capacity at the FHLB and FRB since secured borrowing facilities provide the most reliable sources of funding, especially during times of market turbulence and financial distress. In 2024, the Company added Commercial and Industrial, Construction, lot/land, and other consumer loans to the population of loans pledged to the FRB. At the FHLB, the Company expanded the population of loans pledged, primarily CRE loans and securities. The following tables present the types of collateral pledged as of December 31, (dollars in thousands):

⁽¹⁾ Balance represents market value.

⁽²⁾ Balance represents book value.

​

⁽¹⁾ Balance represents market value.

⁽²⁾ Balance represents book value.

⁽³⁾ Includes AFS and HTM securities pledged under the Bank Term Funding Program.

​