FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

6 Months Ended

Jun. 30, 2023

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. At June 30, 2023, and December 31, 2022, these financial instruments consisted of the following:


($ in thousands)	June 30, 2023				December 31, 2022
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	74,312	$	53,495	$	43,227	$	15,758
Unused lines of credit	302,087		691,746		243,043		404,025
Standby letters of credit	16,584		11,122		4,260		9,909

Commitments to make loans are generally made for periods of 90 days or less. The fixed rate loan commitments have interest rates ranging from 1.0% to 18.0% and maturities ranging from approximately 1 year to 30 years.

ALLOWANCE FOR CREDIT LOSSES (“ACL”) ON OFF BALANCE SHEET CREDIT (“OBSC”) Exposures

The Company maintains a separate ACL on OBSC exposures, including unfunded commitments and letters of credit, which is included on the accompanying consolidated balance sheet as of June 30, 2023 and December 31, 2022. The ACL on OBSC exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

Changes in the ACL on OBSC exposures were as follows for the presented periods:


($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Balance at beginning of period	$	1,825	$	1,070	$	1,325	$	1,070
Credit loss expense related to OBSC exposures	250		150		750		150
Balance at end of period	$	2,075	$	1,220	$	2,075	$	1,220

Adjustments to the ACL on OBSC exposures are recorded to provision for credit losses related to OBSC exposures. The Company recorded $250 thousand and $150 thousand provision for the three months period ended June 30, 2023 and 2022, respectively. For the six months period ended June 30, 2023 and 2022, the Company recorded $750 thousand and $150 thousand provision to the ACL on OBSC exposures, respectively. The increase in the ACL on OBSC exposures for the six months ended June 30, 2023 compared to the same period in 2022 was due to the day one provision for unfunded commitments related to the HSBI acquisition and an increase in unfunded commitments.

No credit loss estimate is reported for OBSC exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation on the arrangement.