Hoyne Bancorp, Inc. Commitments Disclosure
9.Commitments and Contingencies
Concentration of credit risk — Most of the Bank’s loans and off-balance-sheet commitments have been granted to borrowers in the bank’s market area. The concentrations of credit by type are set forth in Note 5. The Bank’s exposure to credit risk is significantly affected by economic changes in the Bank’s market area.
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. 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 payment of a fee. Since some of the commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Bank evaluates each customer’s credit- worthiness on a case by case basis. The amount of collateral obtained by the Bank upon extension of credit is based on management’s credit evaluation of the potential borrower.
At December 31, 2025, the Bank had made commitments to potential borrowers and other third parties to lend approximately $48,657,000 ($33,183,000 in 2024). Applicable interest rates on loan commitments will be based on market rates at the corresponding closing date. As of December 31, 2025, the Bank had outstanding commitments for unused lines of credit totaling $22,612,000 ($9,716,000 in 2024).
9.Commitments and Contingencies (continued)
FHLB Master Contract Agreement — The Bank has a master contract agreement with the FHLB that provides for borrowing up to the maximum of 76% of the book value of the Bank's qualifying one-to-four-family residential real estate loans. The FHLB provides both fixed and floating rate advances. Floating rates are based on, but not directly tied to, short-term market rates of interest, such as Secured Overnight Financing Rate (SOFR), federal funds, or treasury bill rates. Advances with call provisions permit the FHLB to request payment beginning on the call date and quarterly thereafter. FHLB advances are subject to a prepayment penalty if they are repaid prior to maturity. FHLB advances are also secured by $1,165,700 of FHLB stock owned by the Bank on December 31, 2025 and December 31, 2024. At December 31, 2025, the Bank’s available and unused portion of the borrowing agreement totaled approximately $66,146,000 based on loans pledged of $87,432,000.
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.