FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK

6 Months Ended

Jun. 30, 2024

Investments, All Other Investments [Abstract]

FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK

NOTE 8 – FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK

In the normal course of business, and from time to time, the Bank has had outstanding commitments to extend credit and standby letters of credit which, consistent with U.S. GAAP, are not reflected 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 amounts 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.

Contractual or notional amounts of financial instruments representing off-balance-sheet credit risk are as follows as of the dates indicated (dollars in thousands):

	June 30, 2024				December 31, 2023
	Fixed		Variable		Fixed		Variable
Commitments to extend credit	$	10,477	$	14,039	$	5,327	$	6,966
Unused lines of credit		4,273		48,277		3,962		18,859
Totals	$	14,750	$	62,316	$	9,289	$	25,825

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

	For the three months ended June 30, 2024
Beginning Balance:	$	390,000
(Release) provision for credit losses		(40,000	)
Ending Balance	$	350,000

	For the six months ended June 30, 2024
Beginning Balance:	$	135,000
Impact of merger with CBOA Financial, Inc.		222,000
(Release) provision for credit losses		(7,000	)
Ending Balance	$	350,000

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. The Bank had one standby letter of credit totaling $75,000 at June 30, 2024, and no standby letters of credit at December 31, 2023.