Commitments and Contingencies

6 Months Ended

Jun. 30, 2016

Note 10. Commitments and Contingencies

In the normal course of business, various claims and lawsuits are brought by and against the Company. In the opinion of management and the Company’s legal counsel, the disposition of all pending or threatened proceedings will not have a material effect on the Company’s condensed consolidated financial statements.

Commitments to Extend Credit

In the normal course of business, the Bank enters into financial commitments to meet the financing needs of its customers. These financial commitments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk not recognized in the Company’s condensed consolidated financial statements. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Standby letters of credit are conditional commitments to guarantee the performance of a Bank customer to a third party. Since many of the commitments and standby letters of credit are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. Management evaluates each customer’s credit worthiness on a case-by-case basis, and determines the amount of collateral deemed adequate to secure the loan, if collateral security is determined to be necessary for the particular loan. The Bank’s exposure to loan loss in the event of nonperformance on commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments as it does for loans reflected in the Company’s condensed consolidated financial statements.

As of June 30, 2016 and December 31, 2015, the Company had the following outstanding financial commitments:

	June 30,		December 31,
	2016		2015
	(dollars in thousands)
Commitments to extend credit	$	265,074	$	242,125
Standby letters of credit (1)	12,392		12,968
Total commitments and standby letters of credit	$	277,466	$	255,093

(1)

Includes a standby letter of credit to one customer in the amount of $10.2 million and $10.4 million at June 30, 2016

and December 31, 2015, respectively.

Commitments to extend credit and standby letters of credit are made at both fixed and variable rates of interest. At June 30, 2016, the Company had $26.8 million in fixed rate commitments and $250.7 million in variable rate commitments.