Commitments and Contingencies
Off-Balance-Sheet Credit Risk: In the normal course of business, the Company enters into commitments to extend credit such as loan commitments and standby letters of credits. These commitments expose the Company to varying degrees of credit and market risk and are subject to the same credit and market risk limitation reviews as those instruments recorded on the Consolidated Balance Sheets. Loan commitments represent arrangements to lend funds or provide liquidity subject to specified contractual conditions. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These commitments generally have fixed expiration dates or contain termination clauses in the event the customer’s credit quality deteriorates. Since many of the commitments are expected to expire without being drawn upon, the commitment amounts do not necessarily represent future funding requirements.
The Company applies the same credit underwriting criteria to extend loans and commitments to customers. Each customer’s credit worthiness is evaluated on a case-by-case basis. Collateral may be obtained based on management’s
assessment of a customer’s credit. Collateral may include securities, accounts receivable, inventory, property, plant and equipment, and income producing commercial or other properties.
The following table presents the distribution of undisbursed credit-related commitments as of December 31, 2024 and 2023:
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|
| | December 31, |
| ($ in thousands) | | 2024 | | 2023 |
| Loan commitments | | $ | 261,446 | | | $ | 257,626 | |
| Standby letter of credit | | 21,059 | | | 6,707 | |
| Commercial letter of credit | | 49 | | | 22 | |
| Total undisbursed credit related commitments | | $ | 282,554 | | | $ | 264,355 | |
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The majority of these off-balance sheet commitments have a variable interest rate. Management does not anticipate any material losses as a result of these transactions.
Investments in low-income housing partnership: The Company invests in qualified affordable housing partnerships.
The following table shows the balance of the investments in low-income housing partnerships and the total unfunded commitments related to the investments in low-income housing partnerships as of December 31, 2024 and 2023:
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|
| | December 31, |
| ($ in thousands) | | 2024 | | 2023 |
| Investments in low-income housing partnerships | | $ | 15,191 | | | $ | 16,887 | |
Unfunded commitments to fund investments for low-income housing partnerships | | 7,622 | | | 11,905 | |
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These balances are reflected in the other assets and other liabilities lines on the Consolidated Balance Sheets. The Company expects to finish fulfilling these commitments during the year ending 2040.
Under the proportional amortization method, the Company amortizes the initial cost of the investment in proportion to the tax credit and other benefits received and recognizes the amortization in income tax expense on the Consolidated Statements of Income. The Company recognized amortization expense of $1.7 million, $1.3 million and $697 thousand for the years ended December 31, 2024, 2023 and 2022, respectively. Additionally, the Company recognized tax credits and other benefits from the investments in low-income housing partnerships of $2.5 million, $1.7 million and $926 thousand for the years ended December 31, 2024, 2023 and 2022, respectively.