Note 12 - Financial Instruments With Off-balance-sheet Risk

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Financial Instruments Disclosure [Text Block]

NOTE

1

2

– FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

In the normal course of business, the Bank has outstanding commitments to extend credit and standby letters of credit, which are

not

included in the accompanying consolidated financial statements. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making commitments as it does for instruments that are included in the consolidated balance sheets.

Financial instruments whose contract amounts represent off-balance-sheet credit risk are as follows as of

December 31, 2019

and

2018:

	December 31, 2019		December 31, 2018
Commitments to originate and sell mortgage loans	$	-	$	34,268,309
Commitments to extend credit		25,739,246		25,323,822
Unused lines of credit		17,765,580		18,281,453
Totals	$	43,504,826	$	77,873,584

There were

no

commitments to originate and sell mortgage loans at

December 31, 2019

due to the Company exiting mortgage banking operations, see The consolidated financial statements, Note

2

– Discontinued Operations.

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 many of the commitments are expected to expire without being drawn upon, the total commitment amounts do

not

necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation. Collateral held varies by and

may

include accounts receivable, inventory, property and equipment, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a

third

-party. Standby letters of credit generally have fixed expiration dates or other termination clauses and

may

require payment of a fee. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank’s policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit.