Annual report pursuant to Section 13 and 15(d)

COMMITMENTS AND CONTINGENCIES

v3.20.4
COMMITMENTS AND CONTINGENCIES
12 Months Ended
Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES
Note 21
COMMITMENTS AND CONTINGENCIES
 
 
Lending Commitments
.
 
The Company is a party to financial instruments with off
 
-balance sheet risks in the normal course of
business to meet the financing needs of its clients.
 
These financial instruments consist of commitments to extend
 
credit and
standby letters of credit.
 
The Company’s maximum
 
exposure to credit loss under standby letters of credit and
 
commitments to extend credit is
represented by the contractual amount of those instruments.
 
The Company uses the same credit policies in establishing
commitments and issuing letters of credit as it does for
 
on-balance sheet instruments.
 
At December 31, the amounts associated
with the Company’s off-balance
 
sheet obligations were as follows:
2020
2019
(Dollars in Thousands)
Fixed
Variable
Total
Fixed
Variable
Total
Commitments to Extend Credit
(1)
$
160,372
$
596,572
$
756,944
$
114,903
$
404,345
$
519,248
Standby Letters of Credit
6,550
-
6,550
5,783
-
5,783
Total
$
166,922
$
596,572
$
763,494
$
120,686
$
404,345
$
525,031
(1)
 
Includes unfunded loans, revolving lines of credit, and other unused commitments at CCB and the CCHL residential
 
loan pipeline.
Commitments to extend credit are agreements to lend
 
to a client so long as there is no 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.
Since many of the commitments are expected to expire
 
without being drawn upon, the total commitment amounts do
 
not
necessarily represent future cash requirements.
 
Standby letters of credit are conditional commitments
 
issued by the Company to guarantee the performance
 
of a client to a third
party.
 
The credit risk involved in issuing letters of credit is essentially the
 
same as that involved in extending loan facilities. In
general, management does not anticipate any material
 
losses as a result of participating in these types of transactions.
 
However,
any potential losses arising from such transactions are
 
reserved for in the same manner as management reserves for
 
its other
credit facilities.
 
For both on-
 
and off-balance sheet financial instruments, the Company
 
requires collateral to support such instruments when it is
deemed necessary.
 
The Company evaluates each client’s
 
creditworthiness on a case-by-case basis.
 
The amount of collateral
obtained upon extension of credit is based on management’s
 
credit evaluation of the counterparty.
 
Collateral held varies, but
may include deposits held in financial institutions; U.S. Treasury
 
securities; other marketable securities; real estate; accounts
receivable; property,
 
plant and equipment; and inventory.
 
Other Commitments
.
 
In the normal course of business, the Company
 
enters into lease commitments which are classified as
operating leases.
 
See Note 7 – Leases for additional information on the maturity
 
of the Company’s operating
 
lease commitments.
 
Contingencies
.
 
The Company is a party to lawsuits and claims arising out of
 
the normal course of business.
 
In management's
opinion, there are no known pending claims or litigation,
 
the outcome of which would, individually or in the aggregate,
 
have a
material effect on the consolidated results of
 
operations, financial position, or cash flows of the Company.
 
Indemnification Obligation
.
 
The Company is a member of the Visa
 
U.S.A. network.
 
Visa U.S.A believes that its member
 
banks
are required to indemnify it for potential future settlement
 
of certain litigation (the “Covered Litigation”) that relates to several
antitrust lawsuits challenging the practices of Visa
 
and MasterCard International.
 
In 2008, the Company,
 
as a member of the Visa
U.S.A. network, obtained Class B shares of Visa,
 
Inc. upon its initial public
 
offering.
 
Since its initial public offering, Visa,
 
Inc.
has funded a litigation reserve for the Covered Litigation
 
resulting in a reduction in the Class B shares held by the Company.
 
During the first quarter of 2011,
 
the Company sold its remaining Class B shares.
 
Associated with this sale, the Company entered
into a swap contract with the purchaser of the shares
 
that requires a payment to the counterparty in the event that Visa,
 
Inc. makes
subsequent revisions to the conversion ratio for its Class B shares.
 
Fixed charges included in the swap liability are payable
quarterly until the litigation reserve is fully liquidated and
 
at which time the aforementioned swap contract will be terminated.
 
Payments during 2020 totaled $
711,000
.
 
Conversion ratio payments and ongoing fixed quarterly charges
 
are reflected in earnings
in the period incurred.