NOTE 11 — Commitments and Contingent Liabilities

Change-In-Control Arrangements

Certain key executive officers have arrangements that provide for the payment of a multiple of base salary, should a change-in control, as defined, occur. These payments are limited under guidelines for deductibility pursuant to the Internal Revenue Code.

Credit Related Commitments

The Company provides off-balance sheet financial products to customers in the form of commitments to extend credit which are agreements to lend to customers in accordance with contractual provisions. These commitments usually have fixed expiration dates or other termination clauses and may require the payment of a fee. Total commitments outstanding do not necessarily represent future cash flow requirements as many commitments expire without being funded.

Each customer’s creditworthiness is evaluated prior to issuing these commitments and may require the customer to pledge certain collateral (i.e., inventory, income-producing property) prior to the extension of credit. Fixed rate commitments are subject to interest rate risk based on changes in prevailing rates during the commitment period. The Company is also subject to credit risk in the event that the commitments are drawn upon and the customer is unable to repay the obligation.

Letters of credit are irrevocable commitments issued at the request of customers. They authorize the beneficiary to draw drafts for payment in accordance with the stated terms and conditions. Letters of credit substitute the Company’s creditworthiness for that of the customer and are issued for a fee commensurate with the risk.

The Company can issue two types of letters of credit: commercial (documentary) letters of credit and standby letters of credit. Commercial letters of credit are commonly issued to finance the purchase of goods and are typically short term in nature. Standby letters of credit are issued to back financial or performance obligations of a Bank customer and are typically issued for periods up to one year. Due to their long-term nature, standby letters of credit require adequate collateral in the form of cash or other liquid assets. In most instances, standby letters of credit expire without being drawn upon.

The credit risk involved in issuing letters of credit is essentially the same as extending credit facilities to comparable customers.


	For the Years Ended December 31,
	2019				2018
		Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Unused lines of credit	$	80	$	22,580	$	692	$	4,287
Standby letters of credit		1,338		—		786		—
Total credit related commitments	$	1,418	$	22,580	$	1,478	$	4,287

The fixed rate loan commitments have interest rates ranging from 5.50% to 18.00% and maturities ranging from 1 month to 2 years.

Lease Commitments

As of December 31, 2019, right of use lease assets and related lease liabilities were $2.7 million and $3.3 million, respectively.

As of December 31, 2019, the Company was obligated under several non-cancelable leases for certain premises and equipment. The minimum annual rental commitments, exclusive of taxes and other charges, under non-cancelable lease agreements for premises at December 31, 2019, are summarized as follows:


		Year ending
		December 31,
2020	$	581
2021		605
2022		620
2023		636
2024		652
Thereafter		1,295
Total operating lease payments	$	4,389
Less: interest		1,063
Present value of operating lease liabilities	$	3,326



	As of and for the year ended
	December 31, 2019
Operating lease cost	$	500
Cash paid for operating lease liability		432
Weighted-average remaining lease term		6.88	years
Weighted-average discount rate		3.11	%

These leases contain periodic escalation clauses and all expiring leases are evaluated for extensions at renewal. Rent expense for the years ended December 31, 2019, 2018, and 2017 amounted to $561, $599 and $501, respectively.

Litigation

The Company and its subsidiary are subject to certain pending and threatened legal actions that arise out of the normal course of business. In the opinion of management at the present time, the resolution of any pending or threatened litigation will not have a material adverse effect on its Consolidated Financial Statements.