Note 12. Commitments and Contingencies

Standby letters of credit:

Standby letters of credit are irrevocable conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Financial standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. Performance standby letters of credit are issued to guarantee performance of certain customers under nonfinancial contractual obligations. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers. Should the Company be obligated to perform under the standby letters of credit, the Company may seek recourse from the customer for reimbursement of amounts paid.

The Company had total outstanding standby letters of credit amounting to approximately $25,102,000 and $24,502,000 on March 31, 2026 and December 31, 2025, respectively, with terms ranging from 30 days to five years. On both March 31, 2026 and December 31, 2025, the Company’s deferred revenue under standby letter of credit agreements was $0. 

Lines of credit:

Lines of credit are agreements to lend to a customer as long as there is no violation of any conditions established in the contract. Lines of credit generally have fixed expiration dates. Because a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property and equipment, commercial real estate and residential real estate. Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.

On March 31, 2026, the Company had granted unused lines of credit to borrowers aggregating approximately $267,775,000 for commercial lines and open-end consumer lines. On December 31, 2025, unused lines of credit to borrowers aggregated approximately $274,407,000 for commercial lines and open-end consumer lines.

Contingencies:

From time to time, the Company is party to litigation and other legal matters incidental to the conduct of its business. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. The Company accrues liabilities for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. As of March 31, 2026, the Company was not involved in any such matters which, individually or in the aggregate, management believes would have a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows.