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Financial Instruments with Off-Balance Sheet Risk

3 Months Ended

Mar. 31, 2024

Financial Instruments with Off-Balance Sheet Risk

Financial Instruments with Off-Balance Sheet Risk

Note 7.

Financial Instruments with Off-Balance Sheet Risk

In the normal course of business, the Bank is a party to financial instruments with off-balance sheet risk to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amounts recognized in the Bank’s balance sheets.

The contract amounts of those instruments reflect the extent of the involvement the Bank has in particular classes of financial instruments. As of March 31, 2024 and December 31, 2023, the Bank had made various commitments to extend credit totaling approximately $23,000,000 and $24,000,000, respectively. Of these commitments, approximately $7,160,000 and $9,368,000 are at variable rates as of March 31, 2024 and December 31, 2023, respectively.

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 some of the commitments are expected to expire without being fully drawn upon, the total commitment amount disclosed above does not necessarily represent future cash requirements. The Bank evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the customer.