Loan Commitments and Other Related Activities

9 Months Ended

Mar. 31, 2015

Loan Commitments and Other Related Activities

Loan Commitments and Other Related Activities

Note 14.Loan Commitments and Other Related Activities

The Company is party to various financial instruments with off-balance-sheet risk. The Company uses these financial instruments in the normal course of business to meet the financing needs of customers and to effectively manage exposure to interest rate risk. These financial instruments include commitments to extend credit, standby letters of credit, and unused lines of credit. When viewed in terms of the maximum exposure, these instruments may involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. Credit risk is the possibility that a counterparty to a financial instrument will be unable to perform its contractual obligations. Interest rate risk is the possibility that, due to changes in economic conditions, the Company’s net interest income will be adversely affected.

The following is a summary of the contractual or notional amount of each significant class of off-balance-sheet financial instruments outstanding. The Company’s exposure to credit loss in the event of nonperformance by the counterparty for commitments to extend credit, standby letters of credit, and unused lines of credit is represented by the contractual or notional amount of these instruments.

The contractual or notional amounts are as follows:

	March 31, 2015		June 30, 2014
Financial instruments wherein contractual amounts represent credit risk:
Commitments to extend credit	$	11,709,000	$	11,022,000
Standby letters of credit		310,000		310,000
Unused lines of credit		23,775,000		19,131,000

At March 31, 2015, fixed-rate commitments were approximately $13,860,000.

Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts 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 it is deemed necessary, by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. The collateral held varies but primarily consists of single-family residential real estate.

In April 2006, the Company entered into an operating lease for a branch facility, with expiration in June 2012. The lease had a renewal option to extend the lease for five years (through June 2017) which was exercised during the prior period by the Company. Future commitments under the operating lease approximate the following:

Rental expense, included in occupancy and equipment expense in the consolidated statements of income, totaled approximately $16,000 and $31,000 for the three months ended March 31, 2015 and 2014, respectively, and approximately $79,000 and $94,000 for the nine months ended March 31, 2015 and 2014, respectively.

Year Ending June 30,