Commitments, Cont Liab & Fin Inst w/Off-BS Risk

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Commitments, Cont Liab & Fin Inst w/Off-BS Risk

12. COMMITMENTS, CONTINGENT LIABILITIES, AND FINANCIAL INSTRUMENTS WITH

OFF-BALANCE SHEET RISK

In the normal course of business, various claims and lawsuits may arise against the Corporation. Management, after reviewing with counsel all actions and proceedings, considers that the aggregate liability or loss, if any, will not be material.

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own risk exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit in the form of loans or through letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the Consolidated Balance Sheets. The contract or notional amounts of the instruments reflect the extent of involvement the Corporation has in particular classes of financial instruments.

Commitments to extend credit are contractual obligations to lend to a customer as long as all established contractual conditions are satisfied. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by a customer.

Standby letters of credit and financial guarantees are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. Standby letters of credit and financial guarantees are generally terminated through the performance of a specified condition or through the lapse of time.

The Corporation’s exposure to credit loss in the event of nonperformance by the other party to commitments to extend credit and standby letters of credit is represented by the contractual or notional amounts of these instruments. As these off-balance sheet financial instruments have essentially the same credit risk involved in extending loans, the Corporation generally uses the same credit and collateral policies in making these commitments and conditional obligations as it does for on-balance sheet instruments. Since many of the commitments to extend credit and standby letters of credit are expected to expire without being drawn upon, the contractual or notional amounts do not represent future cash requirements.

On July 26, 2011, the Corporation’s subsidiary bank entered into an agreement with Consultant and Builders, Inc. to construct an office building in Valdosta, Georgia for $1,298,000.

The contractual or notional amounts of financial instruments having credit risk in excess of that reported in the Consolidated Balance Sheets are as follows:

		Dec. 31, 2011		Dec. 31, 2010
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	16,733,733	$	10,616,046
Standby letters of credit and financial guarantees	$	45,000	$	10,000

The Corporation’s operating leases are comprised of purchase obligations for data processing services, and a rental agreement for our mortgage servicing office in Valdosta, Georgia. We have no capital lease obligations. The following table shows scheduled future cash payments under those obligations as of December 31, 2011.

	Payments Due by Period
		Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
Operating leases	$	70,885	$	27,352	$	34,905	$	8,628	$	0

Rental expenses were $25,885, $12,000, and $ 28,812 for the years ended December 31, 2011, 2010, and 2009, respectively.