Note

Commitments and Contingent Liabilities

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business primarily to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby and performance letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Statement of Financial Condition. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

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 and performance letters of credit written 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.

Commitments and conditional obligations are evaluated the same as on-balance-sheet instruments but do

not

have a corresponding reserve recorded. The Company’s opinion on

not

implementing a corresponding reserve for off-balance-sheet instruments is supported by historical factors of

losses recorded due to these items. The Company is continually evaluating these items for credit quality and any future need for the corresponding reserve.

The following table presents the unused and available credit balances of financial instruments whose contracts represent credit risk at the dates indicated.

	March 31,		December 31,
	2020		2019
(Dollars in thousands)

Standby Letters of Credit	$	40,906	$	42,041
Performance Letters of Credit		2,667		2,521
Construction Mortgages		77,672		59,689
Personal Lines of Credit		6,561		6,456
Overdraft Protection Lines		6,474		6,415
Home Equity Lines of Credit		20,459		20,560
Commercial Lines of Credit		77,470		102,422
Total Commitments	$	232,209	$	240,104

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. Because 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 counterparty. Collateral held varies, but

may

include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

Performance letters of credit represent conditional commitments issued by the Company to guarantee the performance of a customer to a

third

party. These instruments are issued primarily to support bid or performance-related contracts. The coverage period for these instruments is typically a

one

-year period with an annual renewal option subject to prior approval by management. Fees earned from the issuance of these letters are recognized upon expiration of the letter. For secured letters of credit, the collateral is typically Company deposit instruments or customer business assets.