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COMMITMENTS AND CONTINGENCIES

In the normal course of business, there are outstanding commitments, contingent liabilities and other financial instruments that are

not

reflected in the consolidated financial statements. These include commitments to extend credit and standby letters of credit, which are some of the instruments used by the Company to meet the financing needs of its customers. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheet.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual notional 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 is a summary of the commitments at

December 31, 2019

and

2018:

(In thousands)	2019		2018

Loan commitments:
Fixed rate	$	3,250	$	4,946
Adjustable rate		10,996		930

Standby letters of credit		473		1,295
Unused lines of credit on credit cards		6,915		6,641
Undisbursed commercial and personal lines of credit		26,800		26,862
Undisbursed portion of construction loans in process		23,081		26,675
Undisbursed portion of home equity lines of credit		50,010		47,079

	$	121,525	$	114,428

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

violation of any condition established in the contract. Certain commitments 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 Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral or other security obtained, if deemed necessary by the Company upon extension of credit, varies and is based on management’s credit evaluation. Collateral held varies but

may

include deposits held in financial institutions; U.S. Treasury securities; other marketable securities; accounts receivable; inventory; property and equipment; personal residences; income-producing commercial properties and land under development. Personal guarantees are also obtained to provide added security for certain commitments

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a

third

party. Those guarantees are primarily issued to guarantee the installation of real property improvements and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company holds collateral and obtains personal guarantees supporting those commitments for which collateral or other security is deemed necessary