XML 35 R23.htm IDEA: XBRL DOCUMENT v3.24.3
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK 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 clients. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the unaudited condensed consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.
The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit and financial guarantees written 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 table presents these contractual, or notional, amounts at September 30, 2024 and December 31, 2023.
Contractual or Notional Amount
September 30, 2024December 31, 2023
Commitments to fund:
Home equity lines of credit$536,884 $337,460 
1-4 family residential construction loans87,112 40,330 
Commercial real estate, construction and land development loans238,597 132,607 
Commercial, industrial and other loans516,783 357,099 
Letters of credit48,629 24,529 
Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each client’s credit-worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the client. Collateral varies but may include accounts receivable, inventory, equipment, residential real estate, and income-producing commercial properties.
Standby letters of credit and financial guarantees written are conditional commitments issued by the Company to guarantee the performance of a client to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to clients. The Company holds collateral supporting those commitments when deemed necessary by management. The liability at September 30, 2024 and December 31, 2023 for guarantees under standby letters of credit issued was not considered to be material.
The Company maintains a reserve on its off-balance sheet credit exposures, which totaled approximately $2.8 million and $1.7 million at September 30, 2024 and December 31, 2023, respectively, and is recorded in other liabilities on the unaudited condensed consolidated balance sheets. The reserve is based on management's estimate of expected losses in its off-balance sheet credit exposures. The reserve specific to unfunded loan commitments is determined by applying utilization assumptions based on historical experience and applying the expected loss rates by loan class. The change in the reserve for off-balance sheet credit exposures is recorded as a provision or reduction to expense through the provision for credit losses in the unaudited condensed consolidated statements of operations. The Company recorded a reversal in the provision for credit losses of $434 thousand and $557 thousand for off-balance sheet credit exposures for the three and nine months ended September 30, 2024. For the three and nine months ended September 30, 2023, the Company recorded expense of zero to other operating expenses in the unaudited condensed consolidated statements of operations associated with its reserve for off-balance sheet credit exposures.