Note 19. Commitments and Contingencies

In the ordinary course of operations, the Company offers various financial products to its customers to meet their credit and liquidity needs. These instruments involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and stand-by letters of credit written is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments and conditional commitments as it does for on-balance sheet commitments.

Subject to its normal credit standards and risk monitoring procedures, the Company makes contractual commitments to extend credit. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments may expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements. As of December 31, 2025 and 2024, the Company had outstanding loan commitments of $247.2 million and $283.2 million, respectively. Of the December 31, 2025 and 2024 amounts, $35.2 million and $32.9 million, respectively, were unconditionally cancelable at the sole discretion of the Company as of the same respective dates.

Conditional commitments are issued by the Company in the form of financial stand-by letters of credit, which guarantee payment to the underlying beneficiary (i.e., third party) if the customer fails to meet its designated financial obligation. As of December 31, 2025 and 2024, commitments under outstanding financial stand-by letters of credit totaled $6.3 million and $12.5 million, respectively. The credit risk of issuing stand-by letters of credit can be greater than the risk involved in extending loans to customers.

As of December 31, 2025 and 2024, the Company recorded a recovery of credit losses for unfunded commitments of $0.1 million and $2.2 million, respectively, which was primarily attributable to lower balances of such commitments. As of December 31, 2025, the reserve for unfunded commitments to borrowers was $0.8 million compared to $0.9 million as of December 31, 2024. The unfunded commitments reserve is included in other liabilities on the Company's consolidated balance sheets.

As part of the sale of substantially all of its MSRs during 2024, the Company recorded a reserve for estimated putbacks, transition costs, and unearned sales proceeds. The putbacks related to industry-standard items, including prepayments or early delinquencies of the underlying mortgages, all of which were subject to term limits per the respective sales agreements. As of December 31, 2025, all such term limits have been substantially completed. The reserve for unearned sales proceeds related to the Company providing certain documentation to the buyers. In the year ended December 31, 2025, the Company received $1.4 million of previously unearned sale proceeds, which resulted in a corresponding release of the reserve, and were reported as income on sale of MSRs on the consolidated statements of operations. As of December 31, 2025 and 2024, the recourse reserve was $0.2 million and $1.8 million, respectively, and was included in other liabilities on the Company's consolidated balance sheets.

The Company has investments in various partnerships and limited liability companies. Pursuant to these investments, the Company commits to an investment amount that may be fulfilled in future periods. At December 31, 2025 and 2024, the Company had future commitments outstanding totaling $4.9 million and $7.1 million, respectively, related to these investments.