Commitments and contigent liabilities

12 Months Ended

Dec. 31, 2011

Commitments and contingencies disclosure abstract

Commitments And Contingencies Disclosure Text Block

NOTE 16: COMMITMENTS AND CONTINGENT LIABILITIES

Credit-Related Financial Instruments

The Company is party to credit related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Company's exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments.

At December 31,2011and 2010, the following financial instruments were outstanding whose contract amount represents credit risk:

		December 31
(Dollars in thousands)	2011		2010
Commitments to extend credit	$	45,882	$	41,747
Standby letters of credit		8,212		7,785
Commitments to fund affordable housing investments		—		4,378

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for lines of credit may expire without being drawn upon. Therefore, total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management's credit evaluation of the customer.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company holds various assets as collateral supporting those commitments for which collateral is deemed necessary. The Company has recorded a liability for the estimated fair value of these standby letters of credit in the amount of $69 thousand and $54 thousand at December 31, 2011 and 2010, respectively.

Periodically, the Company may invest in various limited partnerships that sponsor affordable housing projects in its primary markets and surrounding areas as a means of supporting local communities. When commitments to fund affordable housing investments are contingent upon a future event, a liability must be recognized when that contingent event becomes probable. At December 31, 2011, the Company had no commitments related to affordable housing investments. At December 31, 2010, the Company had $4.4 million in total unfunded commitments outstanding related to affordable housing, of which $1.9 million was included in other liabilities. For further discussion of the Company's involvement with affordable housing investments, see Note 3, Variable Interest Entities.

Other Commitments

Minimum lease payments under leases classified as operating leases due in each of the five years subsequent to December 31, 2011, are as follows: 2012, $252 thousand; 2013, $154 thousand; 2014, $53 thousand; 2015, $37 thousand; 2016, none.       

Contingent Liabilities

The Company and the Bank are involved in various legal proceedings, arising in connection with their business. In the opinion of management, based upon consultation with legal counsel, the ultimate resolution of these proceeding will not have a material adverse affect upon the consolidated financial condition or results of operations of the Company and the Bank.