v3.26.1
COMMITMENTS AND CONTINGENCIES
 6 Months Ended
Jun. 30, 2026
Commitments and Contingencies [Abstract]  
Commitments and Contingencies
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Lending Commitments
.
The Company is a party to financial instruments with off-balance
sheet risks in the normal course of business
to meet the financing needs of its clients.
These financial instruments consist of commitments to extend credit and standby
letters of
credit.
The Company’s maximum exposure
to credit loss under standby letters of credit and commitments to extend credit is represented
by
the contractual amount of those instruments.
The Company uses the same credit policies in establishing commitments
and issuing
letters of credit as it does for on-balance sheet instruments.
The amounts associated with the Company’s
off-balance sheet
obligations were as follows:
June 30, 2026
December 31, 2025
(Dollars in Thousands)
Fixed
Variable
Total
Fixed
Variable
Total
Commitments to Extend Credit
(1)
$
187,192
$
450,348
$
637,540
$
188,834
$
456,328
$
645,162
Standby Letters of Credit
7,298
-
7,298
7,828
-
7,828
Total
$
194,490
$
450,348
$
644,838
$
196,662
$
456,328
$
652,990
(1)
Commitments include unfunded loans, revolving
lines of credit, and off-balance sheet residential
loan commitments.
Commitments to extend credit are agreements to lend to a client so long as there is no violation
of any condition established in the
contract.
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.
Standby letters of credit are conditional commitments issued by
the Company to guarantee the performance of a client to a third
party.
The credit risk involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities. In
general, management does not anticipate any material losses as a result
of participating in these types of transactions.
However, any
potential losses arising from such transactions are reserved for in the
same manner as management reserves for its other credit
facilities.
For both on- and off-balance sheet financial instruments, the Company
requires collateral to support such instruments when it is
deemed necessary.
The Company evaluates each client’s
creditworthiness on a case-by-case basis.
The amount of collateral
obtained upon extension of credit is based on management’s
credit evaluation of the counterparty.
Collateral held varies, but may
include deposits held in financial institutions; U.S. Treasury
securities; other marketable securities; real estate; accounts receivable;
property, plant and
equipment; and inventory.
The allowance for credit losses for off-balance sheet credit commitments
that are not unconditionally cancellable by the bank is
adjusted as a provision for credit loss expense and is recorded in other liabilities.
The following table shows the activity in the
allowance.
Three Months Ended June
30,
Six Months Ended June 30,
(Dollars in Thousands)
2026
2025
2026
2025
Beginning Balance
$
2,189
$
1,832
$
2,107
$
2,155
Provision for Credit Losses
8
(94)
90
(417)
Ending Balance
$
2,197
$
1,738
$
2,197
$
1,738
Other Commitments.
In the normal course of business, the Company enters into lease commitments
which are classified as operating
leases. See Note 6 – Leases for additional information on the maturity of the
Company’s operating lease commitments.
The Company has an outstanding commitment of up to $
1.0
million in a bank tech venture capital fund focused on finding and
funding technology solutions for community banks and a commitment
of up to $
10.0
million in a solar tax credit equity fund.
At June
30, 2026, the amount remaining to be funded for the bank tech venture capital
and solar tax credit equity investment fund
commitments was $
0.2
million and $
10.0
million, respectively.
Contingencies
.
The Company is a party to lawsuits and claims arising out of the normal course of business.
In management's opinion,
there are
no
known pending claims or litigation, the outcome of which would, individually or in
the aggregate, have a material effect
on the consolidated results of operations, financial position, or cash flows
of the Company.
Indemnification Obligation
.
The Company is a member of the Visa U.S.A. network.
Visa U.S.A member banks are
required to
indemnify the Visa U.S.A.
network for potential future settlement of certain litigation (the “Covered Litigation”)
that relates to several
antitrust lawsuits challenging the practices of Visa
and MasterCard International.
In 2008, the Company, as a member
of the Visa
U.S.A. network, obtained Class B shares of Visa,
Inc. upon its initial public offering.
Since its initial public offering, Visa,
Inc. has
funded a litigation reserve for the Covered Litigation resulting in a reduction
in the Class B shares held by the Company.
In 2011, the
Company sold its remaining Class B shares.
Associated with this sale, the Company entered into a swap contract with the purchaser
of the shares that requires a payment to the counterparty in the event that Visa,
Inc. makes subsequent revisions to the conversion
ratio.
Conversion ratio payments and ongoing fixed quarterly charges are reflected
in earnings in the period incurred.
Fixed charges
included in the swap liability are payable quarterly until the litigation reserve
is fully liquidated and at which time the aforementioned
swap contract will be terminated.
Quarterly fixed payments are approximately $
0.1
million.
There was a $
0.1
million counterparty
payment accrued and payable at June 30, 2026
due to a revision to the share conversion rate related to additional funding by VISA of
the merchant litigation reserve.