Commitments and Contingencies

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Off-Balance-Sheet Credit Risk: In the normal course of business, the Company enters into commitments to extend credit such as loan commitments and standby letters of credits (“SBLC”s). These commitments expose the Company to varying degrees of credit and market risk and are subject to the same credit and market risk limitation reviews as those instruments recorded on the Consolidated Balance Sheet. Loan commitments represent arrangements to lend funds or provide liquidity subject to specified contractual conditions. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These commitments generally have fixed expiration dates or contain termination clauses in the event the customer’s credit quality deteriorates. Since many of the commitments are expected to expire without being drawn upon, the commitment amounts do not necessarily represent future funding requirements.

The Company applies the same credit underwriting criteria to extend loans and commitments to customers. Each customer’s credit worthiness is evaluated on a case-by-case basis. Collateral may be obtained based on management’s assessment of a customer’s credit. Collateral may include securities, accounts receivable, inventory, property, plant and equipment, and income producing commercial or other properties.

The following table shows the distribution of undisbursed credit-related commitments as of September 30, 2021 and December 31, 2020:



($ in thousands)	September 30, 2021		December 31, 2020
Loan commitments	$	147,889	$	75,740
Standby letters of credits	5,514		9,212
Commercial letters of credit	757		1,552
Total undisbursed credit related commitments	$	154,160	$	86,504

The majority of these off-balance sheet commitments have a variable interest rate. Management does not anticipate any material losses as a result of these transactions.

Investments in low-income housing partnership: The Company invests in qualified affordable housing partnerships.

The following table shows the Company’s investments in low-income housing partnerships, net, and related unfunded commitments as of September 30, 2021 and December 31, 2020:



($ in thousands)	September 30, 2021		December 31, 2020
Investments in low-income housing partnerships	$	8,028	$	4,932
Unfunded commitments to fund investments for low-income housing partnerships	$	5,020	$	2,154

These balances are reflected in other assets and other liabilities on the Consolidated Balance Sheets. The Company expects to finish fulfilling these commitments during the year ending 2035.

Under the proportional amortization method, the Company amortizes the initial cost of the investment in proportion to the tax credit and other benefits received and recognizes the amortization in income tax expense on the Consolidated Statements of Income and Comprehensive Income. The Company recognized amortization expense of $151 thousand and $107 thousand for the three months ended September 30, 2021 and 2020, respectively, and $405 thousand and $268 thousand for the nine months ended September 30, 2021 and 2020, respectively. Additionally, the Company recognized tax credits and other benefits received from the investments in low-income housing partnerships of $190 thousand and $83 thousand for the three months ended September 30, 2021 and 2020, and $506 thousand and $230 thousand for the nine months ended September 30, 2021 and 2020, respectively.