Note 13 - Commitments

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Commitments Disclosure [Text Block]

NOTE 13 - COMMITMENTS

In the ordinary course of business, the Company enters into financial commitments to meet the financing needs of its customers. These financial commitments include commitments to extend credit, unused lines of credit, commercial and similar letters of credit and standby letters of credit. Those instruments involve to varying degrees, elements of credit and interest rate risk not recognized in the Company's financial statements.

The Company's exposure to loss in the event of nonperformance on these financial commitments is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for loans reflected in the financial statements.

At September 30, 2023 and December 31, 2022, the Company had the following financial commitments whose contractual amount represents credit risk:

	September 30,		December 31,
(dollars in thousands)	2023		2022
Commitments to make loans	$	85,170	$	129,821
Unused lines of credit		106,670		211,044
Commercial and similar letters of credit		3,852		2,021
Standby letters of credit		2,687		2,638
Total	$	198,379	$	345,524

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. The Company evaluates each client's credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company is based on management's credit evaluation of the customer.

The Company records a liability for lifetime expected losses on off-balance-sheet credit exposure that do not fit the definition of unconditionally cancelable in accordance with ASC 326. The Company uses the loss rate and exposure of default framework to estimate a reserve for unfunded commitments. Loss rates for the expected funded balances are determined based on the associated pooled loan analysis loss rate and the exposure at default is based on an estimated utilization given default. The off-balance sheet commitment allowance was $654,000 and $1.2 million as of September 30, 2023 and December 31, 2022, respectively. The benefit for off-balance sheet commitment expenses was $144,000 and $28,000 for the three months ended September 30, 2023 and 2022, respectively, and $503,000 and $162,000 for the nine months ended September 30, 2023 and 2022.

The Company is involved in various matters of litigation which have arisen in the ordinary course of business and accruals for estimates of potential losses have been provided when necessary and appropriate under GAAP. In the opinion of management, the disposition of such pending litigation will not have a material effect on the Company's financial statements.