Financial instruments with off-balance-sheet risk

12 Months Ended

Dec. 31, 2023

Investments, All Other Investments [Abstract]

Financial instruments with off-balance-sheet risk

Note 7 – Financial instruments with off-balance-sheet risk

In the normal course of business, and from time to time, the Bank has had outstanding commitments to extend credit and standby letters of credit which, consistent with U.S. GAAP, are not reflected in the accompanying consolidated financial statements. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amounts of those instruments. The Bank uses the same credit policies in making commitments as it does for instruments that are included in the consolidated balance sheets.

Contractual or notional amounts of financial instruments representing off-balance-sheet credit risk are as follows as of December 31 (dollars in thousands):

	2023				2022
	Fixed		Variable		Fixed		Variable
Commitments to extend credit	$	5,327	$	6,966	$	7,112	$	16,090
Unused lines of credit		3,962		18,859		4,544		14,162
Totals	$	9,289	$	25,825	$	11,656	$	30,252

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

	For the year ended December 31, 2023
Beginning Balance	$	—
Impact of Adopting ASU 2016-13		165,000
(Release) provision for credit losses		(30,000	)
Ending Balance	$	135,000

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. 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 Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation Collateral held varies by and may include accounts receivable, inventory, property and equipment, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third-party. Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank’s policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit. There are no standby letters of credit at December 31, 2023, or December 31, 2022.