COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2022

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 12 — COMMITMENTS AND CONTINGENCIES

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. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. The Company’s exposure to credit loss in the event of non-performance by the counterparty to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

The following off-balance-sheet financial instruments, whose contract amounts represent credit risk, are outstanding (in thousands):

	At September 30, 2022				At December 31, 2021
	Fixed		Variable		Fixed		Variable
	Rate		Rate		Rate		Rate
Unused commitments	$	37,125	$	318,904	$	39,676	$	346,115
Standby and commercial letters of credit		55,298		—		49,988		—
	$	92,423	$	318,904	$	89,664	$	346,115

A commitment to extend credit is a legally binding agreement to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally expire within two years. At September 30, 2022, the Company’s fixed rate loan commitments had interest rates ranging from 3.0% to 6.0% and the Company’s variable rate loan commitments had interest rates ranging from 5.3% to 10.3%. At December 31, 2021, the Company’s fixed rate loan commitments had interest rates ranging from 3.0% to 5.6% and the Company’s variable rate loan commitments had interest rates ranging from 2.0% to 8.3%. The amount of collateral obtained, if any, by the Company upon extension of credit is based on management’s credit evaluation of the borrower. Collateral held varies but may include mortgages on commercial and residential real estate, security interests in business assets, equipment, deposit accounts with the Company or other financial institutions and securities.

The Company’s stand-by letters of credit amounted to $55.3 million and $50.0 million as of September 30, 2022 and December 31, 2021, respectively. The Company’s stand-by letters of credit are collateralized by interest-bearing accounts of $29.9 million and $29.6 million as of September 30, 2022 and December 31, 2021, respectively. The stand-by letters of credit mature within one year.

Regulatory Proceedings

There are ongoing investigations by federal and state governmental entities concerning a prepaid debit card product program that was offered by the Company through an independent program manager. These include investigations by the Board of Governors of the Federal Reserve System and the NYSDFS as to which the Company is a subject. During the early stages of the COVID-19 pandemic, third parties used this prepaid debit card product to establish unauthorized accounts and to receive unauthorized government benefits payments, including unemployment insurance benefits payments made pursuant to the CARES Act. The Company ceased accepting new accounts from this program manager in July of 2020 and has exited its relationship with this program manager. The Company is cooperating in these investigations and continues to review this matter. The foregoing could result in enforcement or other actions against the Company including civil money penalties and remedial measures.