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 $43,135 and $50,298 as of June 30, 2015 and 2014, respectively. Of the June 30, 2015 commitments, $36,502 carried variable rates of interest ranging from 2.00% to 7.25% and $6,633 carried fixed rates of interest ranging from 2.25% to 6.00%. 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%. Financial standby letters of credit were $890 as of June 30, 2015 and 2014, respectively. In addition, commitments to extend credit of $7,676 and $7,685 as of June 30, 2015 and 2014, 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.