Commitments, Contingencies, and Concentrations of Credit Risk

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments, Contingencies, and Concentrations of Credit Risk

See Note 10 with respect to future obligations under operating leases.

In the normal course of business, there are various outstanding commitments to extend credit that are not reflected in the financial statements. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment. Commitments may expire without being used. The following table presents the Company’s outstanding loan commitments at December 31, 2020 and December 31, 2019.


($ in thousands)	December 31, 2020				December 31, 2019
Type of Commitment	Fixed Rate		Variable Rate	Total	Fixed Rate	Variable Rate	Total
Loan commitments	$	238,745	94,218	332,963	263,775	123,169	386,944
Unused lines of credit	188,014		900,046	1,088,060	169,278	766,450	935,728
Total	$	426,759	994,264	1,421,023	433,053	889,619	1,322,672

At December 31, 2020 and 2019, the Company had $14.1 million and $12.0 million, respectively, in standby letters of credit outstanding. The Company has no carrying amount for these standby letters of credit at either of those dates. The nature of the standby letters of credit is a stand-alone obligation made on behalf of the Company’s customers to suppliers of the customers to guarantee payments owed to the supplier by the customer. The standby letters of credit are generally for terms for one year, at which time they may be renewed for another year if both parties agree. The payment of the guarantees would generally be triggered by a continued nonpayment of an obligation owed by the customer to the supplier. The maximum potential amount of future payments (undiscounted) the Company could be required to make under the guarantees in the event of nonperformance by the parties to whom credit or financial guarantees have been extended is represented by the contractual amount of the standby letter of credit. In the event that the Company is required to honor a standby letter of credit, a note, already executed with the customer, is triggered which provides repayment terms and any collateral. Over the past two years, the Company has only had to honor a minimal amount of standby letters of credit, which have been or are being repaid by the borrower without any loss to the Company. Management expects any draws under existing commitments to be funded through normal operations.

The Company is not involved in any legal proceedings which, in management’s opinion, could have a material effect on the consolidated financial position of the Company.

The Bank grants primarily commercial and installment loans to customers throughout its market area, which consists of branch locations in 36 counties across all regions of North Carolina and three counties in northeastern South Carolina. The real estate loan portfolio can be affected by the condition of the local real estate market. The commercial and installment loan portfolios can be affected by local economic conditions.

The Company’s loan portfolio is not concentrated in loans to any single borrower or to a relatively small number of borrowers. Additionally, management is not aware of any concentrations of loans to classes of borrowers or industries that would be similarly affected by economic conditions.

In addition to monitoring potential concentrations of loans to particular borrowers or groups of borrowers, industries and geographic regions, the Company monitors exposure to credit risk that could arise from potential concentrations of lending products and practices such as loans that subject borrowers to substantial payment increases (e.g. principal deferral periods, loans with initial interest-only periods, etc.), and loans with high loan-to-value ratios. Additionally, there are industry practices that could subject the Company to increased credit risk should economic conditions change over the course of a loan’s life. For example, the Bank makes variable rate loans and fixed rate principal-amortizing loans with maturities prior to the loan being fully paid (i.e. balloon payment loans). These loans are underwritten and monitored to manage the associated risks. The Company has determined that there is no concentration of credit risk associated with its lending policies or practices.

The Company’s investment portfolio consists principally of obligations of government-sponsored enterprises, mortgage-backed securities guaranteed by government-sponsored enterprises, corporate bonds, and general obligation municipal securities. The Company also holds stock with the Federal Reserve Bank and the Federal Home Loan Bank as a requirement for membership in the system. The following are the fair values at December 31, 2020 of securities to any one issuer/guarantor that exceed $5.0 million, with such amounts representing the maximum amount of credit risk that the Company would incur if the issuer did not repay the obligation.


($ in thousands) Issuer	Amortized Cost		Fair Value
Fannie Mae – mortgage-backed securities	$	571,245	585,035
Freddie Mac – mortgage-backed securities	549,811		552,830
Ginnie Mae – mortgage-backed securities	234,780		237,159
Federal Farm Credit Bank – bonds	40,015		40,356
Federal Home Loan Bank system - bonds	30,000		29,850
Small Business Administration securities	22,150		22,436
Federal Reserve Bank - common stock	17,671		17,671
First Citizens Bank – corporate bonds	11,000		10,999
Bank of America corporate bonds	7,000		7,409
Citigroup, Inc. corporate bonds	6,014		6,346
Federal Home Loan Bank of Atlanta - common stock	5,855		5,855
Loudoun County, Virginia - municipal bond	5,599		5,735
Goldman Sachs Group Inc. corporate bond	5,037		5,319
JP Morgan Chase corporate bond	5,009		5,294

The Company also periodically invests in limited partnerships, limited liability companies (“LLCs”), and other privately held companies. As of December 31, 2020, the Company had a remaining funding commitments of $6.3 million related to these investments.

The Company primarily places its deposits and correspondent accounts with the Federal Home Loan Bank of Atlanta, the Federal Reserve Bank, and Pacific Coast Bankers Bank (“PCBB”). At December 31, 2020, the Company had deposits in the Federal Home Loan Bank of Atlanta totaling $42.6 million, deposits of $230.7 million in the Federal Reserve Bank, and deposits of $2.8 million in PCBB. None of the deposits held at the Federal Home Loan Bank of Atlanta or the Federal Reserve Bank are FDIC-insured, however the Federal Reserve Bank is a government entity and therefore risk of loss is minimal. The deposits held at PCBB are FDIC-insured up to $250,000.