10. Financial Instrument Commitments

12 Months Ended

Dec. 31, 2014

Notes

10. Financial Instrument Commitments

10.  FINANCIAL INSTRUMENT COMMITMENTS

The Bank 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.  These financial instruments include commitments to extend credit and letters of credit, which are conditional commitments issued by the Bank to guarantee the performance of an obligation of a customer to a third party.  Both arrangements have credit risk essentially the same as that involved in extending loans and are subject to the Bank’s normal credit policies.  Collateral may be obtained based on management’s assessment of the customer.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments is represented by the contractual amount of those instruments.

A summary of the Bank’s financial instrument commitments is as follows:

	2014	2013
Commitments to extend credit	$8,261,709	$10,278,928
Outstanding letters of credit	1,035,837	1,050,832

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 and unused credit card lines.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.