Commitments and Contingencies

Commitments

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, standby letters of credit, and commitments to fund investments. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized on the consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Financial instruments with contract amounts which represent credit risk are as follows:

	December 31, 2018		June 30, 2018
	(Dollars in thousands)
Commitments to grant loans	$	6,128	$	20,431
Unfunded commitments under lines of credit		23,829		29,478
Standby letters of credit		3,183		3,183

Commitments to extend credit are agreements to lend to a customer as long as there is

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 Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counter party. Collateral held varies but

may

include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties. The Company has recorded an allowance for possible losses on commitments and unfunded loans totaling

$52

thousand recorded in other liabilities at both

December 31, 2018

and

June 30, 2018.

Contingencies

The Company and its subsidiary are parties to litigation and claims arising in the normal course of business. Management believes that the liabilities, if any, arising from such litigation and claims will

not

be material to the Company’s consolidated financial position or results of operations.