Quarterly report pursuant to Section 13 or 15(d)

Off-Balance Sheet Commitments

v3.21.1
Off-Balance Sheet Commitments
3 Months Ended
Mar. 31, 2021
Risks And Uncertainties [Abstract]  
Off-Balance Sheet Commitments

Note 12 — Off-Balance Sheet Commitments

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk similar to the risk involved with on-balance sheet items.

The Bank’s exposure to losses in the event of non-performance by the other party to commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for extending loan facilities to customers. 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, was based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, premises and equipment, and income-producing or borrower-occupied properties.

The following table shows the distribution of undisbursed loan commitments as of the dates indicated:

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

 

 

2021

 

 

2020

 

 

 

 

 

(in thousands)

 

Commitments to extend credit

 

 

 

$

463,841

 

 

$

453,900

 

Standby letters of credit

 

 

 

 

48,922

 

 

 

47,169

 

Commercial letters of credit

 

 

 

 

68,098

 

 

 

54,547

 

Total undisbursed loan commitments

 

 

 

$

580,861

 

 

$

555,616

 

 

The allowance for credit losses related to off-balance sheet items is maintained at a level believed to be sufficient to absorb current expected lifetime losses related to these unfunded credit facilities. The determination of the allowance adequacy is based on periodic evaluations of the unfunded credit facilities including an assessment of the probability of commitment usage, credit risk factors for loans outstanding to these same customers, and the terms and expiration dates of the unfunded credit facilities.

Activity in the allowance for credit losses related to off-balance sheet items was as follows for the periods indicated:

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

 

2021

 

 

2020

 

 

 

 

 

(in thousands)

 

Balance at beginning of period

 

 

 

$

2,792

 

 

$

2,397

 

Adjustment related to adoption of ASU 2016-13

 

 

 

 

 

 

 

(335

)

Adjusted balance

 

 

 

 

2,792

 

 

 

2,062

 

Provision expense (income) for credit losses

 

 

 

 

(450

)

 

 

823

 

Balance at end of period

 

 

 

$

2,342

 

 

$

2,885