Commitments and Contingencies

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Commitments

In the normal course of business, the Company is a party to both on- and off-balance sheet financial instruments involving, to varying degrees, elements of credit risk and interest rate risk in addition to the amounts recognized in the consolidated statements of condition.

The following is a summary of the Company's contractual off-balance sheet commitments for the dates indicated:

	December 31,
(In thousands)	2020		2019
Commitments to extend credit	$	723,986	$	734,649
Standby letters of credit	4,735		5,211
Total	$	728,721	$	739,860

The Company’s commitments to extend credit from its lending activities do not necessarily represent future cash requirements since certain of these instruments may expire without being funded and others may not be fully drawn upon. These commitments are subject to the Company’s credit approval process, including an evaluation of the customer’s creditworthiness and related collateral requirements. Commitments generally have fixed expiration dates or other termination clauses.

Standby letters of credit are conditional commitments issued to guarantee the performance of a borrower to a third party. In the event of nonperformance by the borrower, the Company would be required to fund the commitment and would be entitled to the underlying collateral, if applicable, which generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, plant and equipment, and/or real estate. The maximum potential future payments are limited to the contractual amount of the commitment.

The Company establishes an ACL on off-balance sheet credit exposures on its contractual off-balance sheet commitments, except those that are unconditionally cancellable by the Company, of $2.6 million and $21,000 as of December 31, 2020 and 2019, respectively. At December 31, 2020, the ACL on off-balance sheet credit exposures was accounted for and reported using the CECL accounting methodology, and at December 31, 2019, it was accounted for and reported under using the incurred loss accounting methodology. The ACL on off-balance sheet credit exposures was presented within accrued interest and other liabilities on the consolidated statements of condition.

For the year ended December 31, 2020, 2019 and 2018, the provision (credit) for credit losses on off-balance sheet credit exposures was ($797,000), ($1,000) and $2,000, respectively.

Refer to Note 1 of the consolidated financial statements for further discussion of the Company's accounting policy for the ACL on off-balance sheet credit exposures, including the impact upon adoption of CECL.

Legal Contingencies

In the normal course of business, the Company and its subsidiaries are subject to pending and threatened litigation, claims investigations and legal and administrative cases and proceedings. Although the Company is not able to predict the outcome of such actions, after reviewing pending and threatened actions with counsel, management believes that, based on the information currently available, the outcome of such actions, individually or in the aggregate, will not have a material adverse effect on the Company’s consolidated financial statements.

Reserves are established for legal claims only when losses associated with the claims are judged to be probable, and the loss can be reasonably estimated. Assessments of litigation exposure are difficult because they involve inherently

unpredictable factors including, but not limited to: whether the proceeding is in the early stages; whether damages are

unspecified, unsupported, or uncertain; whether there is a potential for punitive or other pecuniary damages; whether the matter

involves legal uncertainties, including novel issues of law; whether the matter involves multiple parties and/or jurisdictions;

whether discovery has begun or is not complete; whether meaningful settlement discussions have commenced; and whether the

lawsuit involves class allegations. In many lawsuits and arbitrations, it is not possible to determine whether a liability has been

incurred or to estimate the ultimate or minimum amount of that liability until the case is close to resolution, in which case a

reserve will not be recognized until that time. Assessments of class action litigation, which is generally more complex than

other types of litigation, are particularly difficult, especially in the early stages of the proceeding when it is not known whether

a class will be certified or how a potential class, if certified, will be defined. As a result, the Company may be unable to estimate reasonably possible losses with respect to every litigation matter it faces.

For the year ended December 31, 2020, the Company settled a lawsuit for $1.2 million to avoid the burden and expense of litigation, and the expense was recorded within other expenses on the consolidated statements of income.

The Company did not have any material loss contingencies that were provided for and/or that are required to be disclosed as of December 31, 2020 and 2019.