OFF-BALANCE-SHEET ARRANGEMENTS, COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2011

Off-Balance-Sheet Arrangements, Commitments and Contingencies [Abstract]

OFF-BALANCE-SHEET ARRANGEMENTS, COMMITMENTS AND CONTINGENCIES

18.  OFF-BALANCE-SHEET ARRANGEMENTS, COMMITMENTS AND CONTINGENCIES

Financial Instruments with Off-Balance-Sheet Risk. In the normal course of business, we are a party to certain financial instruments, with off-balance-sheet risk, to meet the financing needs of our customers.  These off-balance-sheet instruments include commitments to extend credit and standby letters of credit.  These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount reflected in the financial statements.  The contract or notional amounts of these instruments reflect the extent of involvement and exposure to credit loss that we have in these particular classes of financial instruments.

Commitments to extend credit are agreements to lend to a customer provided that the terms established in the contract are met.  Commitments generally have fixed expiration dates and may require payment of fees.  Since some commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party.  These guarantees are primarily issued to support public and private borrowing arrangements.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers.

We had outstanding unused commitments to extend credit of $116.0 million and $113.3 million at December 31, 2011 and 2010, respectively.  Each commitment has a maturity date and the commitment expires on that date with the exception of credit card and ready reserve commitments, which have no stated maturity date.  Unused commitments for credit card and ready reserve at December 31, 2011 and 2010 were $12.7 million and $11.5 million, respectively, and are reflected in the due after one year category.  We had outstanding standby letters of credit of $6.5 million and $5.0 million at December 31, 2011 and 2010, respectively.

The scheduled maturities of unused commitments as of December 31, 2011 and 2010 were as follows (in thousands):

	December 31,
	2011		2010
Unused commitments:
Due in one year or less	$	85,737	$	64,984
Due after one year		30,291		48,267
Total	$	116,028	$	113,251

We apply the same credit policies in making commitments and standby letters of credit as we do for on-balance-sheet instruments.  We evaluate each customer's creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary, upon extension of credit is based on management's credit evaluation of the borrower.  Collateral held varies but may include cash or cash equivalents, negotiable instruments, real estate, accounts receivable, inventory, oil, gas and mineral interests, property, plant, and equipment.

Lease Commitments. We lease certain branch facilities and office equipment under operating leases.  Rent expense for branch facilities was $1.1 million for each of the years ended December 31, 2011, 2010 and 2009, respectively.  Rent expense for leased equipment was $259,000, $228,000 and $222,000 for the years ended December 31, 2011, 2010 and 2009, respectively.

Future minimum rental commitments due under non-cancelable operating leases at December 31, 2011 were as follows (in thousands):

2012	$	1,166
2013		942
2014		554
2015		402
2016		211
Thereafter		–
	$	3,275

It is expected that certain leases will be renewed, or equipment replaced with new leased equipment, as these leases expire.

Securities. In the normal course of business we buy and sell securities.  There were no unsettled trades to sell securities at December 31, 2011 and 2010.  There were $1.2 million of unsettled trades to purchase securities at December 31, 2011.  There were $145,000 of unsettled trades to purchase securities at December 31, 2010.

Deposits. There were no unsettled issuances of brokered CDs at December 31, 2011.  There were $5.0 million of unsettled issuances of brokered CDs at December 31, 2010.

Litigation. We are involved with various litigation in the normal course of business.  Management, after consulting with our legal counsel, believes that any liability resulting from litigation will not have a material effect on the financial position and results of operations and our liquidity.