Note

17.

Commitments and Contingencies

Litigation

In the normal course of business, the Company becomes involved in litigation arising from the banking, financial and other activities it conducts. Management, after consultation with legal counsel, does

not

anticipate that the ultimate liability, if any, arising from these matters will have a material effect on the Company’s financial condition, operating results or liquidity.

Credit Related Financial Instruments

The Company is party to credit related 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 and standby letters of credit. These instruments involve, to varying degrees, credit risk in excess of the amount recognized in the consolidated balance sheet.

The Company’s exposure to credit loss, in the event of nonperformance by the other party to the financial instrument, for commitments to extend credit and standby letters of 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.

A summary of the Company’s commitments at

December 31, 2018

and

2017

is as follows (dollars in thousands):

(Dollars In Thousands)	2018		2017

Commitments to extend credit	$	123,995	$	109,285

Standby letters of credit		7,543		6,711

Commitments to extend credit are agreements to lend to a customer as long as there is

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. The Company evaluates each customer’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 party. Collateral held varies, but

may

include accounts receivable, inventory, property and equipment, residential real estate and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a

third

party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral held varies as specified above and is required in instances which the Company deems necessary.

The Company is required to maintain certain required reserve balances with the Federal Reserve Bank. At

December 31, 2018

and

2017,

these reserve balances amounted to

$9.7

million and

$9.6

million, respectively.

The Company from time to time

may

have cash and cash equivalents on deposit with financial institutions that exceed federally insured limits. Balances in excess of FDIC insured amounts totaled

$10.7

million and

$5.9

million at

December 31, 2018

and

2017,

respectively.

Purchase Obligation

November 1, 2015,

the Company entered into a

three

-year marketing agreement involving naming, advertising, and sponsorship rights. This agreement was replaced with a new agreement effective

July 1, 2016.

The new term was for

three

years, with options for a

fourth

and

fifth

year, and expanded the exclusivity of marketing rights and increased signage. In relation to these agreements, the Company expensed

$65

thousand and

$55

thousand in

2018

and

2017,

respectively. The agreement obligates the Company to pay

$33

thousand for the

first

half of

2019

for these rights.