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Off-Balance-Sheet Financial Instruments and Concentrations of Credit Risk
 12 Months Ended
Dec. 31, 2012
Off-Balance-Sheet Financial Instruments and Concentrations of Credit Risk [Abstract]  
Off-Balance-Sheet Financial Instruments and Concentrations of Credit Risk
Note 18. Off-Balance-Sheet Financial Instruments and Concentrations of Credit Risk

The Bank is 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 originate loans, commitments for unused lines of credit, and standby letters of credit. The instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments.
Commitments for unused lines are agreements to lend to a customer provided 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. 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 Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on Management's credit evaluation of the borrower. The Bank did not incur any losses on its commitments in 2012, 2011 or 2010.
Standby letters of credit are conditional commitments issued by the Bank to guarantee a customer's performance to a third party, with the customer being obligated to repay (with interest) any amounts paid out by the Bank under the letter of credit. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.
The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments.
The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
        At December 31, 2012 and 2011, the Bank had the following off-balance-sheet financial instruments, whose contract amounts represent credit risk:

As of December 31,
 
2012
  
2011
 
Unused lines, collateralized by residential real estate
 
$
56,420,000
  
$
59,427,000
 
Other unused commitments
  
45,747,000
   
39,313,000
 
Standby letters of credit
  
2,700,000
   
2,177,000
 
Commitments to extend credit
  
6,245,000
   
12,551,000
 
Total
 
$
111,112,000
  
$
113,468,000
 

The Bank grants residential, commercial and consumer loans to customers principally located in the Mid-Coast and Down East regions of Maine. Collateral on these loans typically consists of residential or commercial real estate, or personal property. Although the loan portfolio is diversified, a substantial portion of borrowers' ability to honor their contracts is dependent on the economic conditions in the area, especially in the real estate sector.