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Note 13 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Commitments Disclosure [Text Block]

NOTE 13 - COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, we enter into financial commitments to meet the financing needs of our customers. These financial commitments include commitments to extend credit, unused lines of credit, commercial and similar letters of credit and standby letters of credit. Those instruments involve varying degrees of credit and interest rate risk not recognized in our financial statements.

Our exposure to loss in the event of nonperformance on these financial commitments is represented by the contractual amount of those instruments. We use the same credit policies in making commitments as we do for loans reflected in the financial statements.

At December 31, 2024 and 2023, we had the following financial commitments whose contractual amount represents credit risk:

		*2024*								*2023*
		*Fixed*				*Variable*				*Fixed*				*Variable*
		*Rate*				*Rate*				*Rate*				*Rate*
		*(dollars in thousands)*
Commitments to make loans		$	13,973			$	70,268			$	614			$	77,230
Unused lines of credit			883				84,697				10,629				95,686
Commercial and similar letters of credit			168				2,225				90				3,814
Standby letters of credit			1,232				2,061				1,626				1,061
Total		$	16,256			$	159,251			$	12,959			$	177,791

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. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. We evaluate each client's creditworthiness on a case-by-case basis.

We record a liability for lifetime expected losses on off-balance-sheet credit exposure that does not fit the definition of unconditionally cancelable in accordance with ASC 326. We use the loss rate and exposure at default framework to estimate a reserve for unfunded commitments. Loss rates for the expected funded balances are determined based on the associated pooled loan analysis loss rate and the exposure at default is based on an estimated utilization given default. The reserve for off-balance sheet commitments was $729,000 and $640,000 as of December 31, 2024 and December 31, 2023. We recorded a provision for unfunded loan commitments of $89,000 for the year ended December 31, 2024, and a reversal of provision for unfunded loan commitments of $516,000 for the year ended December 31, 2023.

In addition, we invest in various affordable housing partnerships and Small Business Investment Company funds. Pursuant to these investments, we commit to an investment amount to be fulfilled in future periods. Such unfunded commitments totaled $5.7 million as of December 31, 2024 and $3.3 million as of December 31, 2023.

We are involved in various matters of litigation which have arisen in the ordinary course of business and accruals for estimates of potential losses have been provided when necessary and appropriate under GAAP. In the opinion of management, the disposition of such pending litigation will not have a material effect on the Company's consolidated financial statements.