Lake Shore Bancorp, Inc. /MD/ Commitments Disclosure
Note 16 – Commitments to Extend Credit
The Company has commitments to extend credit with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition.
The Company’s exposure to credit loss is represented by the contractual amount of these commitments. There was a $361,000 and $316,000 allowance for credit losses associated with these commitments at December 31, 2025 and December 31, 2024, respectively.
The following commitments to extend credit were outstanding as of the dates specified:
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Commitment Amount |
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December 31, |
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December 31, |
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2025 |
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2024 |
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(Dollars in thousands) |
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Commitments to grant loans |
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$ |
17,644 |
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|
$ |
3,098 |
|
Unfunded commitments to fund loans and lines of credit |
|
|
92,748 |
|
|
|
96,711 |
|
Commercial and Standby letters of credit |
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|
720 |
|
|
|
765 |
|
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. The commitments for lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.
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.