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. 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. They involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized on the balance sheet.

The Bank had undisbursed loans in process at March 31, 2026 and December 31, 2025 of $433,699 and $771,227, respectively. Unfunded commitments under lines of credit were approximately $8,000,000 and $9,991,000 at March 31, 2026 and December 31, 2025, respectively. The decrease in unfunded commitments during 2026 was primarily attributable to the expiration and utilization of previously outstanding lines of credit. Of these commitments to lend, substantially all were prime-based loans and signature guarantee lines of credit to high quality borrowers. In the opinion of management, all loan commitments equaled or exceeded prevailing market interest rates as of March 31, 2026 and December 31, 2025. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. Expected credit losses related to unfunded commitments are included in the allowance for credit losses on off-balance-sheet credit exposures. See Note 3 – Loans for additional information.

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 of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property and equipment, income-producing commercial properties, and residential real estate.

At March 31, 2026 and December 31, 2025, the Bank has standby letters of credit with FHLB totaling $5,302,948, to serve as collateral for a certain municipality’s public fund deposits. Standby letters of credit represent irrevocable obligations of the Bank to guarantee payment to the beneficiary in the event a customer fails to perform in accordance with contractual terms. The Bank considers the likelihood of draws on standby letters of credit to be remote. These letters of credit expire between June 2026 and December 2026. At March 31, 2026, no amounts have been drawn on these letters of credit.

The Bank is not a party to any material legal proceedings and is not aware of any pending or threatened litigation that would have a material adverse effect on its financial position or results of operations.