Annual report pursuant to Section 13 and 15(d)

COMMITMENTS AND OFF-BALANCE-SHEET RISK

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COMMITMENTS AND OFF-BALANCE-SHEET RISK
 12 Months Ended
Dec. 31, 2011
COMMITMENTS AND OFF-BALANCE-SHEET RISK [Abstract]  
COMMITMENTS AND OFF-BALANCE-SHEET RISK
NOTE 15 - COMMITMENTS AND OFF-BALANCE-SHEET RISK

Some financial instruments are used to meet customer financing needs and to reduce exposure to interest rate changes.  These financial instruments include commitments to extend credit and standby letters of credit.  These involve, to varying degrees, credit and interest rate risk in excess of the amount reported in the financial statements.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment, and generally have fixed expiration dates.  Standby letters of credit are conditional commitments to guarantee a customer's performance to a third party.  Exposure to credit loss if the other party does not perform is represented by the contractual amount for commitments to extend credit and standby letters of credit.  Collateral or other security is normally not obtained for these financial instruments prior to their use, and many of the commitments are expected to expire without being used.

A summary of the contractual amounts of financial instruments with off-balance-sheet risk was as follows at year-end (dollars in thousands):

   
2011
    
2010
  
Commitments to make loans
   $ 60,890     $ 50,377  
Letters of credit
     3,245       4,873  
Unused lines of credit
     230,674       242,448  

The notional amount of commitments to fund mortgage loans to be sold into the secondary market was approximately $13.2 million and $12.1 million at December 31, 2011 and 2010, respectively.

At year-end 2011, approximately 22% of the Bank's commitments to make loans were at fixed rates, offered at current market rates.  The remainder of the commitments to make loans was at variable rates tied to prime and generally expire within 30 days.  The majority of the unused lines of credit were at variable rates tied to prime.