OFF-BALANCE SHEET LOAN COMMITMENTS
From time to time, the Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments.
The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet financial instruments.
The contractual amounts of financial instruments with off-balance sheet risk were as follows:
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| December 31, 2025 | | December 31, 2024 |
| (Dollars in thousands) | Fixed Rate | | Variable Rate | | Total | | Fixed Rate | | Variable Rate | | Total |
| Unused lines of credit | $ | 92,223 | | | $ | 440,289 | | | $ | 532,512 | | | $ | 103,784 | | | $ | 486,414 | | | $ | 590,198 | |
| Standby letters of credit | $ | 7,090 | | | $ | 2,951 | | | $ | 10,041 | | | $ | 16,630 | | | $ | 7,320 | | | $ | 23,950 | |
| Commitments to purchase loans | $ | — | | | $ | 702,409 | | | $ | 702,409 | | | $ | — | | | $ | 9,500 | | | $ | 9,500 | |
| Mortgage warehouse commitments | $ | — | | | $ | 575 | | | $ | 575 | | | $ | — | | | $ | 810,913 | | | $ | 810,913 | |
Commitments to extend credit are agreements to lend to a customer as 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 fully drawn upon, the total commitment amounts disclosed above do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by the Company, upon extension of credit, is based on management’s credit evaluation of the customer.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party. In the event of nonperformance by the customer, the Company has rights to the underlying collateral, which can include commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities. The credit risk to the Company in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to its customers.
Commitments to purchase loans represent loans purchased by the Company that have not yet settled.
Mortgage warehouse commitments are unconditionally cancellable and represent the unused capacity on mortgage warehouse facilities the Company has approved. The Company reserves the right to refuse to buy any mortgage loans offered for sale by a customer, for any reason, at the Company’s sole and absolute discretion.
The Company records an allowance for credit losses on off-balance sheet credit exposures through a charge to credit loss expense on the Company’s consolidated statements of income. At December 31, 2025 and 2024, the allowance for credit losses on off balance sheet credit exposures totaled $2,342,000 and $2,701,000, respectively, and was included in other liabilities on the Company’s consolidated balance sheets. The following table presents credit loss expense for off balance sheet credit exposures:
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| Year Ended December 31, |
| (Dollars in thousands) | 2025 | | 2024 | | 2023 |
| Credit loss expense (benefit) | $ | (359) | | | $ | (137) | | | $ | (769) | |