Note

15.

Commitments and Unfunded Credits

The Company, through its banking subsidiary, is a party to credit related financial instruments with risk

not

reflected in the consolidated financial statements in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit, and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Bank’s exposure to credit loss is represented by the contractual amount of these commitments. The Bank follows the same credit policies in making commitments as it does for on-balance-sheet instruments.

December 31, 2019

and

2018

, the following financial instruments were outstanding whose contract amounts represent credit risk (in thousands):

	2019		2018
Commitments to extend credit and unfunded commitments under lines of credit	$	92,528	$	91,109
Stand-by letters of credit		10,950		9,947

Commitments to extend credit are agreements to lend to a customer as long as there is

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. The commitments for lines of credit

may

expire without being drawn upon. Therefore, the total commitment amounts do

not

necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Bank, is based on management’s credit evaluation of the customer.

Unfunded commitments under commercial lines of credit, revolving credit lines, and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit are collateralized as deemed necessary and

may

not

be drawn upon to the total extent to which the Bank is committed.

Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a

third

party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration dates within

one

year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank generally holds collateral supporting those commitments if deemed necessary.

December 31, 2019

, the Bank

had

$2.2

milli

on in locked-rate commitments to originate mortgage loans and

$167

thousand in loans held for sale. Risks arise from the possible inability of counterparties to meet the terms of their contracts. The Bank does

not

expect any counterparty to fail to meet its obligations.

The Bank has cash accounts in other commercial banks. The amount on deposit at these banks at

December 31, 2019

exceeded the insurance limits of the Federal Deposit Insurance Corporation by

$22

thousand.