NOTE 11—COMMITMENTS WITH OFF-BALANCE SHEET RISK

The Bank is a party to commitments to extend credit in the normal course of business to meet the financing needs of its customers. Commitments are agreements to lend to customers providing there are no violations of any condition established in the contract. Commitments to extend credit have a fixed expiration date or other termination clause. These instruments involve elements of credit and interest rate risk more than the amount recognized in the statements of financial position. The Bank uses the same credit policies in making commitments to extend credit as it does for on-balance sheet instruments.

The Bank evaluates each customer’s credit on a case by case basis. The amount of collateral obtained is based on management’s credit evaluation of the customer. The amount of commitments to extend credit and the exposure to credit loss for non-performance by the customer was $50,298 and $35,776 as of June 30, 2014 and 2013, respectively. Of the June 30, 2014 commitments, $41,450 carried variable rates of interest ranging from 2.00% to 7.25% and $8,848 carried fixed rates of interest ranging from 2.25% to 6.50%. Of the June 30, 2013 commitments, $27,913 carried variable rates of interest ranging from 1.25% to 8.25% and $7,863 carried fixed rates of interest ranging from 1.52% to 17.25%. Financial standby letters of credit were $890 and $485 as of June 30, 2014 and 2013, respectively. In addition, commitments to extend credit of $7,685 and $8,351 as of June 30, 2014 and 2013, respectively, were available to checking account customers related to the overdraft protection program. Since some loan commitments expire without being used, the amount does not necessarily represent future cash commitments.