COMMITMENTS AND OFF-BALANCE SHEET RISK

Our bank 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. These financial instruments include commitments to extend credit and standby letters of credit. Loan commitments to extend credit are agreements to lend to a customer as long as there is

violation of any condition established in the contract. Standby letters of credit are conditional commitments issued by our bank to guarantee the performance of a customer to a

third

party. Commitments generally have fixed expiration dates or other termination clauses and

may

require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do

not

necessarily represent future cash requirements.

These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized, if any, in the balance sheet. Our bank’s maximum exposure to loan 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 represented by the contractual notional amount of those instruments. Our bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Collateral, such as accounts receivable, securities, inventory, and property and equipment, is generally obtained based on our credit assessment of the borrower. If required, estimated loss exposure resulting from these instruments is expensed and recorded as a liability. There was

liability balance for these instruments as of

June 30, 2019

and

December 31, 2018.

A summary of the contractual amounts of our financial instruments with off-balance sheet risk at

June 30, 2019

and

December 31, 2018

follows:

	June 30, 2019		December 31, 2018

Commercial unused lines of credit	$	773,984,000	$	784,895,000
Unused lines of credit secured by 1 – 4 family residential properties		58,910,000		57,378,000
Credit card unused lines of credit		53,475,000		47,432,000
Other consumer unused lines of credit		19,178,000		20,231,000
Commitments to make loans		91,263,000		101,517,000
Standby letters of credit		22,515,000		25,322,000
	$	1,019,325,000	$	1,036,775,000