Note 15 - Commitments and Contingent Liabilities

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

( 15 ) Commitments and Contingent Liabilities

As of

September 30, 2017,

Bancorp had various commitments outstanding that arose in the normal course of business, including standby letters of credit and commitments to extend credit, which are properly

not

reflected in the consolidated financial statements. In management’s opinion, at

September 30, 2017

commitments to extend credit of

$709.7

million, including standby letters of credit of

$17.6

million, represent normal banking transactions. Commitments to extend credit were

$628.3

million, including letters of credit of

$15.6

million, as of

December 31, 2016.

Commitments to extend credit are an agreement to lend to a customer as long as collateral is available and there is

no

violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Commitments to extend credit are mainly comprised of commercial lines of credit, construction and home equity credit lines and credit cards issued to commercial customers. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do

not

necessarily represent future cash requirements. Bancorp uses the same credit and collateral policies in making commitments and conditional guarantees as for on-balance sheet instruments. Bancorp evaluates each customer’s creditworthiness on a case by case basis. The amount of collateral obtained, if any, is based on management’s credit evaluation of the customer. Collateral held varies but

may

include accounts receivable, inventory, equipment, and real estate. However, should the commitments be drawn upon and should our customers default on their resulting obligation to us, our maximum exposure to credit loss, without consideration of collateral, is represented by the contractual amount of those instruments. At

September 30, 2017,

Bancorp had accrued

$350

thousand in other liabilities for inherent risks related to unfunded credit commitments.

Standby letters of credit and financial guarantees written are conditional commitments issued by Bancorp to guarantee the performance of a customer to a

first

party. Those guarantees are primarily issued to support

customer commercial transactions. Standby letters of credit generally have maturities of

one

to

two

years.

As part of the normal course of business Bancorp entered into an agreement to purchase

29

automatic teller machines (ATMs) over the next

three

years at a total price of

$1.2

million. Management was able to secure favorable pricing by contractually committing to purchase the machines.

Also, as of

September 30, 2017,

in the normal course of business, there were pending legal actions and administrative proceedings in which claims for damages are asserted and/or losses could be incurred. We record a liability for these matters if an unfavorable outcome is probable and the amount of loss can be reasonably estimated, including expected insurance coverage. For proceedings where the reasonable estimate of loss is a range, we record a best estimate of loss within the range. At

September 30, 2017

we have recorded a liability of

$266

thousand for such matters.