Note 14.

Off-Balance Sheet Activities

Credit Related Financial Instruments

The Bank is a party to credit related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist primarily of commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Bank’s exposure to credit loss in the event of non-performance by the other party to loan commitments is represented by the contractual amount of the commitment. The Bank follows the same credit policies in making commitments as it does for on-balance sheet instruments.

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 a payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount and type of collateral obtained, if deemed necessary by the Bank upon extension of credit, varies and is based on management’s credit evaluation of the counterparty.

No material gains or losses are anticipated as a result of these transactions.

At June 30, 2020 and 2019, the following financial instruments were outstanding:

	Contract Amount
	2020		2019
	(In Thousands)
Commitments to Grant Loans	$	53,070	$	40,582
Unfunded Commitments Under Lines of Credit		8,536		8,981
	$	61,606	$	49,563

Fixed Rate Loans (2.625% - 3.50% in 2020; 3.75% - 5.50 % in 2019)	$	61,606	$	49,563
Variable Rate Loans (--% in 2020 and 2019)		--		--
	$	61,606	$	49,563

Cash Deposits

The Company periodically maintains cash balances in financial institutions that are in excess of insured amounts. The Company has not experienced any losses and does not believe that significant credit risk exists as a result of this practice. At June 30, 2020, we had $31.9 million in cash deposits over the insured limit of $250,000.

Regional Credit Concentration

A substantial portion of the Bank’s lending activity is with customers located within a 100 mile radius of the Shreveport, Louisiana metropolitan area, which includes areas of northwest Louisiana, northeast Texas and southwest Arkansas. Although concentrated within the region, the Bank has a diversified loan portfolio, which should preclude the Bank from being dependent upon the well-being of any particular economic sector to ensure collectibility of any significant portion of its debtors’ loan contracts.

Other Credit Concentrations

The Bank has purchased, with recourse from the seller, loans from third-party mortgage originators. These loans are serviced by these entities. At June 30, 2020 and 2019, the balance of the loans outstanding being serviced by these entities was $2.9 million and $4.8 million, respectively.

Interest Rate Floors and Caps

The Bank writes interest rate floors and caps into its variable rate mortgage loan contracts and loan servicing agreements in an attempt to manage its interest rate exposure. Such floors and caps enable customers to transfer, modify, or reduce their interest rate risk, which, in turn, creates an off-balance sheet market risk to the Bank. At June 30, 2020, the Bank’s loan portfolio contained approximately $34.3 million of loans in which the loan contracts or servicing agreements possessed interest rate floors and caps. Of this amount, $2.9 million consisted of purchased loans, which were originated by third-party mortgage originators.