Off-Balance Sheet Commitments and Contingencies

12 Months Ended

Dec. 31, 2022

Off-Balance Sheet Commitments and Contingencies

Financial Instruments with Off-Balance Sheet Risk

Loan commitments are made to accommodate the financial needs of the Corporation’s customers commitments that result in market risk. Standby letters of credit commit the Corporation to make payments on behalf of customers when certain specified future events occur. They are primarily issued to facilitate customers’ trade transactions.

Both arrangements have credit risk, essentially the same as that involved in extending loans to customers, and are subject to the Corporation’s normal credit policies. Collateral is obtained based on a credit assessment of the customer.

The Corporation's maximum obligation to extend credit for loan commitments (unfunded loans and unused lines of credit) and standby letters of credit outstanding as of December 31, 2022 and 2021 were as follows:


	December 31, 2022				December 31, 2021
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	126,594	$	441,008	$	94,924	$	323,013
Unused lines of credit	7,444		725,277		13,265		663,903
Standby letters of credit	16,124		1,603		15,063		1,623

Commitments to make loans are generally made for periods of 60 days or less.

Other Off-Balance Sheet Commitments

The Corporation makes investments in limited partnerships, including certain small business investment corporations and low income housing partnerships. Capital contributions for investments in small business companies ("SBICs") and other limited partnerships, reported in FHLB and other restricted stock holdings and investments on the consolidated balance sheet, as of December 31, 2022 and 2021 were $17.0 million and $14.5 million, respectively. Unfunded capital commitments in investments in SBICs and other limited partnerships totaled $5.5 million and $8.0 million as of December 31, 2022 and 2021, respectively. These investments are accounted for either under the equity method of accounting.

Qualified Affordable Housing Project Investments

The carrying value of investments in the low income housing partnerships, reported in FHLB and other restricted stock holdings and investments on the consolidated balance sheet, as of December 31, 2022 and 2021 were $4.5 million and $5.3 million, respectively. The related amortization for the twelve months ended December 31, 2022, 2021 and 2020 were $803 thousand, $691 thousand and $634 thousand, respectively. Unfunded commitments, reported in accrued interest payable and other liabilities on the consolidated balance sheet, as of December 31, 2022 and 2021 were $1.0 million and $2.1 million, respectively.

Allowance for Credit Losses on Unfunded Loan Commitments

The Corporation maintains an allowance for credit losses on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the allowance for credit losses for loans receivable, modified to take into account the probability of a draw-down on the commitment. The provision for credit losses on unfunded loan commitments is included in the provision for credit losses on the Corporation's consolidated statements of income. The allowance for unfunded commitments is included in other liabilities in the consolidated balance sheets. Note 4, "Loans Receivable and Allowance for Credit Losses," in the consolidated financial statements provides more detail concerning the provision for credit losses related to the loan portfolio of the Corporation.

The following table presents activity in the allowance for credit losses on unfunded loan commitments for the years ended December 31, 2022 and 2021, respectively:


	Year ended December 31,

		2022		2021		2020
Beginning balance		$	—	$	—	$	—
Provision for credit losses on unfunded loan commitments (1)		603		—		—
Ending balance		$	603	$	—	$	—

(1) Excludes provision for credit losses related to the loan portfolio.

Litigation

The Corporation is subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Corporation.