BV Financial, Inc.

Previous wording

Summary of Financial Condition and Operating Results. At December 31, 2023, we had $885.3 million in consolidated assets, an increase of $40.3 million, or 4.8%, from $845.0 million at December 31, 2022. The increase was due primarily to a $37.1 million increase in net loans receivable to $696.2 million at December 31, 2023, a $5.1 million increase in cash and cash equivalents and a $1.7 million increase in available-for-sale securities, partially offset by a decrease of $1.8 million in foreclosed real estate. Total liabilities decreased $61.0 million, or 8.2%, from $747.2 million at December 31, 2022 to $686.2 million at December 31, 2023. The decrease was primarily due to a decrease in total deposits of $50.5 million, and a decrease in borrowings of $12.0 million slightly offset by a $1.3 million increase in other liabilities.

Current wording

Summary of Financial Condition and Operating Results. At December 31, 2024, we had $911.8 million in consolidated assets, an increase of $26.6 million, or 3.0%, from $885.3 million at December 31, 2023. The increase was due primarily to a $33.0 million increase in net loans receivable to $729.2 million at December 31, 2024, and a $2.5 million increase in available for-for-sale securities, partially offset by a decrease of $3.2 million in cash and cash equivalents and a $4.2 million decrease in held to maturity securities. Total liabilities increased $30.1 million, or 4.4%, from $686.2 million at December 31, 2023 to $716.3 million at December 31, 2024. The increase was primarily due to an increase in total deposits of $17.4 million, and an increase in borrowings of $12.6 million.

Previous wording

Net income increased $3.2 million, or 30.3%, to $13.7 million for the year ended December 31, 2023, compared to $10.5 million for the year ended December 31, 2022. The increase was due primarily to a $4.3 million increase in net interest income, and a $1.0 million decrease in the provision for credit losses partially offset by a decrease of $1.9 million in noninterest income.

Current wording

Net income decreased $2.0 million, or 14.5%, to $11.7 million for the year ended December 31, 2024, compared to $13.7 million for the year ended December 31, 2023. The decrease was due primarily to an increase of $2.1 million in noninterest expense and a $1.2 million decrease in noninterest income, partially offset by a $1.0 million increase in net interest income.

Previous wording

Grow our loan portfolio with an emphasis on commercial real estate and residential mortgage lending. While we intend to continue to focus on the origination of commercial real estate loans, we intend to remain a residential mortgage lender in our market area and maintain a balance between the commercial real estate and residential mortgage portfolios. We originated $106.9 million of commercial real estate and $6.4 million of residential mortgages loans during the year ended December 31, 2023. At December 31, 2023, $389.7 million, or 55.3%, of our total loan portfolio consisted of commercial real estate loans and $238.1 million, or 33.8%, of our total loan portfolio consisted of residential mortgages.

Current wording

Grow our loan portfolio with an emphasis on commercial real estate and residential mortgage lending. While we intend to continue to focus on the origination of commercial real estate loans, we intend to remain a residential mortgage lender in our market area and maintain a balance between the commercial real estate and residential mortgage portfolios. We originated $77.5 million of commercial real estate and $14.2 million of residential mortgages loans during the year ended December 31, 2024. At December 31, 2024, $411.3 million, or 55.8%, of our total loan portfolio consisted of commercial real estate loans and $241.7 million, or 32.8%, of our total loan portfolio consisted of residential mortgages. Additionally, the Bank purchased a package of $14.0 million of one-to-four family owner occupied residential mortgages.

Previous wording

Manage credit risk to maintain a low level of non-performing assets. We believe that maintaining strong asset quality is paramount to our long-term success. We follow conservative underwriting guidelines with sound loan administration, and focus on originating loans secured by real estate. This includes enhanced loan monitoring of higher risk portfolio segments, higher risk individual loans and larger relationships within the portfolio, and frequent loan grade review. Our non-performing assets totaled $ 10.7 million, or 1.21% of total assets, at December 31, 2023. Our total non-performing loans to total loans ratio was 1.50% at December 31, 2023.

Current wording

Manage credit risk to maintain a low level of non-performing assets. We believe that maintaining strong asset quality is paramount to our long-term success. We follow conservative underwriting guidelines with sound loan administration, and focus on originating loans secured by real estate. This includes enhanced loan monitoring of higher risk portfolio segments, higher risk individual loans and larger relationships within the portfolio, and frequent loan grade review. In 2024, our largest loan on non-accrual, a $3.8 million investor commercial real estate loan paid off. Our non-performing assets totaled $4.2 million, or 0.46% of total assets, at December 31, 2024. Our total non-performing loans to total loans ratio was 0.54% at December 31, 2024.

Previous wording

Increase core deposits with an emphasis on non-interest-bearing deposits. Deposits are our primary source of funds for lending and investment. Core deposits (which we define as all deposits except for time deposits) were 72.6% of total deposits at December 31, 2023. In particular, non-interest-bearing demand deposits were 22.4% of our total deposits at December 31, 2023. We continue to focus on expanding core deposits by leveraging our business development officers and commercial lending and retail relationships.

Current wording

Increase core deposits with an emphasis on non-interest-bearing deposits. Deposits are our primary source of funds for lending and investment. Core deposits (which we define as all deposits except for time deposits) were 70.8% of total deposits at December 31, 2024. In particular, non-interest-bearing demand deposits were 19.9% of our total deposits at December 31, 2024. We continue to focus on expanding core deposits by leveraging our business development officers and commercial lending and retail relationships.

Previous wording

Deferred Income Taxes. At December 31, 2023, we had a net deferred tax asset totaling $9.0 million. In accordance with Accounting Standards Codification (“ASC”) Topic 740 “Income Taxes,” we use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If currently available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established if it is not more likely than not realizable. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting deferred tax assets and liabilities. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets are inherently subjective and are reviewed on a regular basis as regulatory or business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance that results in additional income tax expense in the period in which it is recognized would negatively affect income. Management believes, based upon current facts, that it is more likely than not that there will be sufficient taxable income in future years to realize its federal and state deferred tax asset.

Current wording

Deferred Income Taxes. At December 31, 2024, we had a net deferred tax asset totaling $8.9 million. In accordance with Accounting Standards Codification (“ASC”) Topic 740 “Income Taxes,” we use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If currently available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established if it is not more likely than not realizable. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting deferred tax assets and liabilities. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets are inherently subjective and are reviewed on a regular basis as regulatory or business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance that results in additional income tax expense in the period in which it is recognized would negatively affect income. Management believes, based upon current facts, that it is more likely than not that there will be sufficient taxable income in future years to realize its federal and state deferred tax asset.

Previous wording

Total assets were $885.3 million at December 31, 2023, an increase of $40.3 million, or 4.8%, from $845.0 million at December 31, 2022. The increase was due primarily to a $37.1 million increase in net loans receivable to $696.2 million at December 31, 2023, a $5.1 million increase in cash and cash equivalents and a $1.7 million increase in available-for-sale securities, partially offset by a decrease of $1.8 million in foreclosed real estate.

Current wording

Total assets were $911.8 million at December 31, 2024, an increase of $26.5 million, or 3.0%, from $885.3 million at December 31, 2023. The increase was due primarily to a $33.0 million increase in net loans receivable to $729.2 million at December 31, 2024, and a $2.5 million increase in securities available for sale partially offset by a $4.2 million decrease in securities held to maturity, a $3.2 million decrease in cash and cash equivalents and decreases in premises and equipment and other assets.

Previous wording

Gross unrealized losses on AFS securities at December 31, 2023 and 2022 were $2.7 million and $3.2 million, respectively. The unrealized losses are the result of changes in interest rates since the securities were issued. The Company intends to, and has the ability to, hold investment securities with unrealized losses until they mature, at which time the Company will receive pay-offs in full for the security.

Current wording

Gross unrealized losses on AFS securities at December 31, 2024 and 2023 were $2.3 million and $2.7 million, respectively. The unrealized losses are the result of changes in interest rates since the securities were issued. The Company intends to, and has the ability to, hold investment securities with unrealized losses until they mature, at which time the Company will receive pay-offs in full for the security.

Previous wording

The AFS portfolio holds 95%, or $35.8 million of its portfolio in securities issued by Government Sponsored Enterprises ("GSE") backed by the full faith and credit of the United States Government. The remainder of the portfolio consists of bonds issued by bank holding companies.

Current wording

The AFS portfolio holds 96%, or $35.7 million of its portfolio in securities issued by Government Sponsored Enterprises ("GSE") backed by the full faith and credit of the United States Government. The remainder of the portfolio consists of bonds issued by bank holding companies.

Previous wording

The held-to-maturity ("HTM") portfolio consists of $7.0 million in securities issued by GSEs and $1.7 million in securities issued by bank holding companies. At December 31, 2023 and 2022, the securities in the HTM portfolio not issued by a GSE has an allowance for credit loss of $6,000 and $0, respectively.

Current wording

The held-to-maturity ("HTM") portfolio consists of $2.8 million in securities issued by GSEs and $3.2 million in securities issued by bank holding companies. At December 31, 2024 and 2023, the securities in the HTM portfolio not issued by a GSE has an allowance for credit loss of $4,000 and $6,000, respectively.

Previous wording

Net loans receivable increased $37.1 million, or 5.6%, to $696.2 million at December 31, 2023 from $659.1 million at December 31, 2022. The increases were due to increases of $60.3 million in investor commercial real estate, $10.7 million in owner occupied commercial real estate, $3.9 million in construction loans and $1.1 million farm loans offset by decreases of $24.7 million in owner and non-owner occupied one- to four-family loans and $9.8 million in commercial loans. The decreases in one- to four-family loans and commercial loans were due primarily to payoffs and paydowns exceeding originations during the year ended December 31, 2023.

Current wording

Net loans receivable increased $33.0 million, or 4.74%, to $729.2 million at December 31, 2024 from $696.2 million at December 31, 2023. Increases in investor commercial real estate, 1-4 family owner occupied, construction loans and commercial loans offset decreases in owner occupied commercial real estate loans, non-owner occupied 1-4 family loans, farm loans, consumer loans and loans guaranteed by the U.S. Government.

Previous wording

Foreclosed real estate decreased by $1.8 million or 91.4% as the largest foreclosed real estate asset, that consisted of two vacant buildings in Baltimore City, Maryland, were sold, generating a gain of $709,000. These buildings were assumed in the acquisition of Delmarva Bancshares and its subsidiary, 1880 Bank in 2020.

Current wording

Foreclosed real estate decreased by $11,000 or 6.5%.

Previous wording

The Company had no Federal Home Loan Bank borrowings at December 31, 2023 compared to $12.0 million in Federal Home Loan Bank borrowings at December 31, 2022. In the quarter ended December 31, 2023, the Company paid off all of the $37.5 million in borrowings that were outstanding.

Current wording

The Company had $15.0 million of Federal Home Loan Bank borrowings at December 31, 2024 compared to $0 million in Federal Home Loan Bank borrowings at December 31, 2023.

Previous wording

The following tables set forth average balance sheets, average yields and costs, and certain other information for the years indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Net deferred loan fees totaled $1.8 million and $1.5 million for the years ended December 31, 2023 and 2022, respectively.

Current wording

The following tables set forth average balance sheets, average yields and costs, and certain other information for the years indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Net deferred loan fees totaled $2.2 million and $1.8 million for the years ended December 31, 2024 and 2023, respectively.

Previous wording

The Company reported net income of $13.7 million or $1.47 per diluted share compared to net income of $10.5 million or $1.32 per diluted share for the year ended December 31, 2022.

Current wording

The Company reported net income of $11.7 million or $1.09 per diluted share for the year ended December 31, 2024 compared to net income of $13.7 million or $1.47 per diluted share for the year ended December 31, 2023.

Previous wording

Total interest income increased 30.2 % for the year ended December 31, 2023 when compared to the year ended December 31, 2022. Interest income on loans increased by $6.5 million or 20.7%. Higher yields on loans contributed $3.8 million to the increase while an increase in the average balance outstanding contributed $2.7 million to the increase.

Current wording

Total interest income increased 7.52 % for the year ended December 31, 2024 when compared to the year ended December 31, 2023. Interest income on loans increased by $3.3 million or 8.6%. Higher yields on loans contributed $2.6 million to the increase while an increase in the average balance outstanding contributed $673,000 to the increase.

Previous wording

Interest income on investment securities available-for-sale increased by $546,000 or 89.5% as the increase in yields on the adjustable-rate portion of the portfolio offset a decline in the average balance of AFS investments.

Current wording

Interest income on investment securities available-for-sale increased by $163,000 or 14.1% as the increase in yields on new purchases and the adjustable-rate portion of the portfolio offset a decline in the average balance of AFS investments.

Previous wording

Interest income on investment securities held-to-maturity increased $122,000 or 49.8%, primarily due to higher average balances in these securities.

Current wording

Interest income on investment securities held-to-maturity decreased $53,000 or 14.4%, primarily due to lower average balances in these securities.

Previous wording

Other interest income primarily consists of interest earned on overnight cash investments. Interest income in this category increased by $2.9 million, or 236.1%, due to the impact of higher rates offsetting lower average balances.

Current wording

Other interest income primarily consists of interest earned on overnight cash investments. Interest income in this category decreased by $108,000, or 2.6%, primarily due to lower average balances.

Previous wording

Total interest expense increased by $5.8 million or 167.9% to $9.2 million for the year ended December 31, 2023 from $3.4 million for the year ended December 31, 2022. The increase in the cost of interest-bearing deposits and the increase in the average balance of FHLB borrowings were the primary drivers in the increase in total interest expense.

Current wording

Total interest expense increased by $2.3 million or 25.1% to $11.5 million for the year ended December 31, 2024 from $9.2 million for the year ended December 31, 2023. The increase in the cost of interest-bearing deposits was the primary driver in the increase in total interest expense.

Previous wording

Interest paid on interest-bearing deposits increased by $4.3 million or 313.7% for the year ended December 31, 2023 compared to the year ended December 31, 2022. The impact of higher rates paid offset a lower average balance on these deposits. Higher rates paid on deposits were influenced by, among other factors, the Federal Reserve rate increases during the year, intense competition for deposits in the Bank's market area, and a greater percentage of deposits consisting of higher-yielding certificates of deposit. Non-interest bearing deposits decreased in the year as customers took advantage of higher market interest rates to redeploy their excess cash into interest-bearing products.

Current wording

Interest paid on interest-bearing deposits increased by $3.4 million or 61.1% for the year ended December 31, 2024 compared to the year ended December 31, 2023. The impact of higher rates paid offset a lower average balance on these deposits. Higher rates paid on deposits were influenced by, among other factors, the Federal Reserve rate increases during the year, intense competition for deposits in the Bank's market area, and a greater percentage of deposits consisting of higher-yielding certificates of deposit. Non-interest bearing deposits decreased in the year as customers took advantage of higher market interest rates to redeploy their excess cash into interest-bearing products.

Previous wording

Interest expense on advances from the FHLB increased by $1.4 million in the year from a de minimus amount in the previous year as the Bank had advances outstanding for the majority of the year. However, the $37.5 million in outstanding FHLB advances were repaid in October 2023.

Current wording

Interest expense on advances from the FHLB decreased by $1.4 million for the year ended December 31, 2024 as the Bank had a no advances outstanding for the majority of the year.

Previous wording

The provision for credit losses for the year ended December 31, 2023 was a credit of $45,000 compared to an expense of $1.0 million for the year ended December 31, 2022. The Company adopted ASC 326 (CECL) as of January 1, 2023. Note 4 of the consolidated financial statements detail the impacts of the adoption of the new standard.

Current wording

The provision for credit losses for the year ended December 31, 2024 was a credit of $203,000 compared to a credit of $45,000 for the year ended December 31, 2023. Note 4 of the consolidated financial statements detail the impacts of the adoption of the standard.

Previous wording

The $45,000 credit to the provision for credit losses consisted of a $42,000 addition to the allowance for credit losses - loans offset by decreases of $5,000 and $82,000 in the allowances for credit losses for HTM securities and off balance sheet commitments, respectively. In the year ended December 31, 2023, net recoveries of previously charged-off loans totaled $467,000. These recoveries directly reduced the required increase in the allowance for credit losses-loans.

Current wording

The $203,000 credit to the provision for credit losses consisted of a $347,000 credit to the allowance for credit losses - loans and a $2,000 credit to the allowance for credit losses - HTM securities offset by an allowance of $146,000 in the allowances for credit losses for off balance sheet commitments. In the year ended December 31, 2023, net recoveries of previously charged-off loans totaled $314,000. These recoveries directly reduced the required increase in the allowance for credit losses-loans.

Previous wording

Income tax expense for the year ended December 31, 2023 was $4.9 million resulting in an effective tax rate of 26.4%. Income tax expense for the year ended December 31, 2022 was $4.0 million resulting in an effective tax rate of 27.7%. The primary reason for the increase in the respective effective tax rates was a lower amount of tax exempt income, primarily income from life insurance.

Current wording

Income tax expense for the year ended December 31, 2024 was $4.7 million resulting in an effective tax rate of 28.5%. Income tax expense for the year ended December 31, 2023 was $4.9 million resulting in an effective tax rate of 26.4%.

Previous wording

The tables above indicate that at December 31, 2023, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 4.17% increase in net interest income.

Current wording

The tables above indicate that at December 31, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 3.27% increase in net interest income. In the event of an instantaneous parallel 200 basis point decrease in interest rates, we would experience a 5.31% decrease in net interest income.

Previous wording

Our non-maturing deposits remain at historical low rates and with the level of rate decreases presented, the rates paid on these deposits could not be lowered very much.

Current wording

Our non-maturing deposits remain at historical low rates and with the level of rate decreases presented, the rates paid on these deposits could not be lowered by a similar amount.

Previous wording

The table above indicates that at December 31, 2023, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 5.58% increase in EVE, and in the event of an instantaneous 100 basis point decrease in interest rates, we would experience an 5.00% decrease in EVE. As indicated in the table above, our EVE falls considerably in the instantaneous down scenarios due to the value of the low or zero rate non-maturing deposit portfolio declining as the theoretical spread between the cost of these deposits and new assets declines. In the up scenarios, the value of these instruments increases less as the model assumes a significant lag before these rates increase.

Current wording

The table above indicates that at December 31, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 2.36% increase in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience an 6.55% decrease in EVE. As indicated in the table above, our EVE falls considerably in the instantaneous down scenarios due to the value of the low or zero rate non-maturing deposit portfolio declining as the theoretical spread between the cost of these deposits and new assets declines. In the up scenarios, the value of these instruments increases less as the model assumes a significant lag before these rates increase.

Previous wording

Liquidity. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Atlanta. At December 31, 2023 and December 31, 2022, we had $150.0 million and $96.8 million available under a line of credit with the Federal Home Loan Bank of Atlanta, and had no and $12.0 million outstanding as of December 31, 2023 and December 31, 2022, respectively, with the Federal Home Loan Bank of Atlanta. In addition, at December 31, 2023 and December 31, 2022, the Bank had $25.0 million and $40.0 million in unfunded letters of credit used to secure municipal deposits outstanding against the line of credit with the Federal Home Loan Bank of Atlanta.

Current wording

Liquidity. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Atlanta. At December 31, 2024 and December 31, 2023, we had $157.5 million and $150.0 million available under a line of credit with the Federal Home Loan Bank of Atlanta, and had $15.0 million and $0 million outstanding as of December 31, 2024 and December 31, 2023, respectively, with the Federal Home Loan Bank of Atlanta. In addition, at December 31, 2024 and December 31, 2023, the Bank had $23.0 million and $25.0 million in unfunded letters of credit used to secure municipal deposits outstanding against the line of credit with the Federal Home Loan Bank of Atlanta.

Previous wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $15.2 million and $9.7 million for the years ended December 31, 2023 and 2022, respectively. Net cash (used in) provided by investing activities, which consists primarily of investments in loans and securities, was $(35.2) million and $(27.8) million for the years ended December 31, 2023 and 2022, respectively. Net cash provided by (used in) financing activities, consisting primarily of changes in deposits and advances and the repayment of advances to the Federal Home Loan Bank, was $25.1 million and $(24.5) million for the years ended December 31, 2023 and 2022, respectively.

Current wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $16.1 million and $15.2 million for the years ended December 31, 2024 and 2023, respectively. Net cash (used in) provided by investing activities, which consists primarily of investments in loans and securities, was $(32.5) million and $(35.2) million for the years ended December 31, 2024 and 2023, respectively. Net cash provided by (used in) financing activities, consisting primarily of changes in deposits and advances and the repayment of advances to the Federal Home Loan Bank, was $13.2 million and $25.1 million for the years ended December 31, 2024 and 2023, respectively.

Previous wording

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Time deposits that are scheduled to mature in less than one year from December 31, 2023 totaled $111.4 million. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Current wording

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Time deposits that are scheduled to mature in less than one year from December 31, 2024 totaled $107.5 million. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Previous wording

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At December 31, 2023, we had outstanding commitments to extend credit of $49.4 million and $935,000 of letters of credit. See Note 4 to the consolidated financial statements for further information.

Current wording

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At December 31, 2024, we had outstanding commitments to extend credit of $51.3 million and $592,000 of letters of credit. See Note 4 to the consolidated financial statements for further information.