Note 14 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

14.         Commitments and Contingencies

Legal Proceedings.  The Company is involved in various claims and legal proceedings that arise in the course of conducting the Company’s business. The outcome of such claims and legal proceedings are inherently difficult to predict. Management, after consultation with legal counsel and based upon its assessment of information currently available to the Company, believes that any liability resulting from the resolution of any claims and proceedings currently pending against the Company will not have a material effect upon the Company’s consolidated financial condition, results of operations, or liquidity taken as a whole. 

In accordance with ASC 450, “Contingencies,” the Company accrues reserves for outstanding lawsuits, claims and proceedings when a loss contingency is probable and can be reasonably estimated. The Company estimates the amount of loss contingencies using current available information from legal proceedings, advice from legal counsel, and available insurance coverage. Due to the inherent subjectivity of the assessments and unpredictability of the outcomes of the legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s exposure and ultimate losses may be higher, and possibly significantly more than the amounts accrued.

Lending.  In the normal course of business, the Company becomes a party to financial instruments with off-balance sheet risk to meet the financing needs of its clients. These financial instruments include commitments to extend credit in the form of loans or through commercial or standby letters of credit and financial guarantees. Those instruments represent varying degrees of exposure to risk in excess of the amounts included in the accompanying Consolidated Balance Sheets. The contractual or notional amount of these instruments indicates a level of activity associated with a particular class of financial instrument and is not a reflection of the level of expected losses, if any.

The Company’s exposure to credit loss in the event of non-performance by the other party 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. Unless noted otherwise, the Company does not require collateral or other security to support financial instruments with credit risk.

Financial instruments for which contract amounts represent the amount of credit risk include the following:

	As of December 31,
	2023		2022
	(In thousands)
Commitments to extend credit	$	3,808,619	$	3,630,304
Standby letters of credit		368,618		315,821
Commercial letters of credit		11,308		29,416
Total	$	4,188,545	$	3,975,541

Commitments to extend credit are agreements to lend to a client provided there is no violation of any condition established in the commitment agreement. These commitments generally have fixed expiration dates and are expected to expire without being drawn upon. The total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each client’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based on management’s credit evaluation of the borrowers.

As of December 31, 2023, the Company does not have fixed-rate or variable-rate commitments with characteristics similar to options, which provide the holder, for a premium paid at inception to the Company, the benefits of favorable movements in the price of an underlying asset or index with limited or no exposure to losses from unfavorable price movements. 

As of December 31, 2023, commitments to extend credit of $3.81 billion include commitments to fund fixed rate loans of $130.3 million and adjustable-rate loans of $3.69 billion. As of December 31, 2022 commitments to extend credit of $3.63 billion and included commitments to fund fixed rate loans of $93.1 million and adjustable-rate loans of $3.54 billion.

Commercial letters of credit and bill of lading guarantees are issued to facilitate domestic and foreign trade transactions while standby letters of credit are issued to make payments on behalf of clients if certain specified future events occur.  The credit risk involved in issuing letters of credit and bill of lading guarantees is essentially the same as that involved in making loans to clients.