Annual report pursuant to Section 13 and 15(d)

COMMITMENTS AND CONTINGENCIES

v3.22.0.1
COMMITMENTS AND CONTINGENCIES
12 Months Ended
Dec. 31, 2021
Commitments and Contingencies [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:
2021
2020
(Dollars in Thousands)
Fixed
Variable
Total
Fixed
Variable
Total
Commitments to Extend Credit
(1)
$
217,531
$
505,897
$
723,428
$
160,372
$
596,572
$
756,944
Standby Letters of Credit
5,205
-
5,205
6,550
-
6,550
Total
$
222,736
$
505,897
$
728,633
$
166,922
$
596,572
$
763,494
(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.
The allowance for credit losses for off-balance sheet credit commitments
 
that are not unconditionally cancellable by the bank is
adjusted as a provision for credit loss expense and is recorded in other liabilities.
 
The following table shows the activity in the
allowance.
(Dollars in Thousands)
2021
2020
2019
Beginning Balance
$
1,644
$
157
$
160
Impact of Adoption of ASC 326
-
876
-
Provision for Credit Losses
1,253
611
(3)
Ending Balance
$
2,897
$
1,644
$
157
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.
 
Conversion ratio payments and ongoing fixed quarterly charges
 
are reflected in earnings in the period incurred.
 
Payments during
2021 totaled $
0.8
 
million.
 
Payments totaled $
0.7
 
million and $
0.6
 
million for the years 2020 and 2019, respectively.