Note 8 - Commitments and Off-balance Sheet Risk

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Commitments Contingencies and Guarantees [Text Block]

8.     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 no 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 no liability balance for these instruments as of September 30, 2021 and December 31, 2020.

A summary of the contractual amounts of our financial instruments with off-balance sheet risk at September 30, 2021 and December 31, 2020 follows:

	September 30, 2021		December 31, 2020
Commercial unused lines of credit	$	1,080,801,000	$	1,019,496,000
Unused lines of credit secured by 1 – 4 family residential properties		60,859,000		59,396,000
Credit card unused lines of credit		88,013,000		72,495,000
Other consumer unused lines of credit		61,047,000		30,707,000
Commitments to make loans		253,124,000		227,558,000
Standby letters of credit		29,375,000		20,543,000
	$	1,573,219,000	$	1,430,195,000