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FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

12 Months Ended

Dec. 31, 2021

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

NOTE 16 — 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. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company

uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

The following off-balance-sheet financial instruments whose contract amounts represent credit risk, are outstanding (in thousands):


	At December 31, 2021				At December 31, 2020
			Variable				Variable
	Fixed Rate		Rate		Fixed Rate		Rate
Unused commitments	$	39,676	$	346,115	$	19,024	$	266,696
Standby and commercial letters of credit		49,988		—		34,264		—
	$	89,664	$	346,115	$	53,288	$	266,696

A commitment to extend credit is a legally binding agreement to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally expire within two years. As of December 31, 2021 and 2020, the Company’s fixed rate loan commitments are to make loans with interest rates ranging from 3.0% to 5.6%. At December 31, 2021 and 2020 the Company’s variable rate loan commitments had interest rates ranging from 2.0% to 8.3%, respectively, with a maturity of one year or more. The amount of collateral obtained, if any, by the Company upon extension of credit is based on management’s credit evaluation of the borrower. Collateral held varies but may include mortgages on commercial and residential real estate, security interests in business assets, equipment, deposit accounts with the Company or other financial institutions and securities.

The Company’s stand-by letters of credit amounted to $50.0 million and $34.3 million as of December 31, 2021 and 2020, respectively. The Company’s stand-by letters of credit are collateralized by interest-bearing accounts of $29.6 million and $26.9 million as of December 31, 2021 and 2020, respectively.