COMMITMENTS AND OFF BALANCE-SHEET RISK |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||
| COMMITMENTS AND OFF BALANCE-SHEET RISK [Abstract] | |||||||||||||||||||||||||||||||||||||
| COMMITMENTS AND OFF BALANCE-SHEET RISK |
NOTE 10 – 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. 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. 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. At March 31, 2023, the reserve for
unfunded commitments was $61,000 and was included in other liabilities in the Company’s consolidated balance sheet.
A summary of the contractual amounts of financial
instruments with off‑balance‑sheet risk was as follows at period-end (dollars in thousands):
The notional amount of commitments to fund
mortgage loans to be sold into the secondary market was approximately $82,000 and $0 at March 31, 2023 and December 31, 2022, respectively.
The Bank enters into commitments to sell mortgage backed securities, which it later buys back in order to hedge its exposure to interest rate risk in its
mortgage pipeline. These commitments were approximately $1.1 million and $0 at March 31, 2023 and December 31, 2022, respectively.
At March 31, 2023, approximately 67.2% 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 were at variable rates tied to prime or one month term SOFR and generally expire within 30 days. The majority of the unused lines of credit were at variable rates tied to prime or SOFR.
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