Financial Instruments with Off-Balance Sheet Risk

12 Months Ended

Dec. 31, 2024

Financial Instruments with Off-Balance Sheet Risk

We make commitments to extend credit in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit in the form of loans or through standby letters of credit. 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. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because various commitments will expire without being fully drawn, the total commitment amount does not necessarily represent future cash requirements.

Our credit loss exposure is equal to the contractual amount of the commitment in the event of nonperformance by the borrower. We use the same credit underwriting criteria for all credit exposure. The amount of collateral obtained, if deemed necessary by us, is based on management's credit evaluation of the borrower. Collateral types pledged may include accounts receivable, inventory, other personal property and real property.

The contractual amount of unfunded loan commitments and standby letters of credit not reflected in the consolidated statements of condition are as follows:


(in thousands)	December 31, 2024		December 31, 2023
Commercial lines of credit	$	233,462	$	259,989
Revolving home equity lines	208,372		218,935
Undisbursed construction loans	8,294		13,943
Personal and other lines of credit	7,781		9,136
Standby letters of credit	2,777		3,147
Total unfunded loan commitments and standby letters of credit	$	460,686	$	505,150

As of December 31, 2024, approximately 38% of the commitments expire in 2025, 52% expire between 2026 and 2032 and 10% expire thereafter.

We record an allowance for credit losses on unfunded loan commitments at the balance sheet date based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience of the different types of commitments and expected loss rates determined for pooled funded loans. The allowance for credit losses on unfunded commitments totaled $894 thousand and $1.1 million as of December 31, 2024 and 2023, respectively, which is included in interest payable and other liabilities in the consolidated statements of condition.

We recorded reversals of the provision for credit losses on unfunded commitments totaling $233 thousand, $342 thousand and $318 thousand in 2024, 2023, and 2022, respectively. The reversals in 2024, 2023, and 2022 were due primarily to decreases in total unfunded loan commitments.