Winchester Bancorp, Inc./MD/ Commitments Disclosure
In the normal course of business, there are outstanding commitments and contingencies which are not reflected in the accompanying consolidated balance sheets.
Loan 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, which involve elements of credit and interest rate risk in excess of the amount recognized in the accompanying consolidated balance sheets. The contract amount of these instruments reflects the extent of involvement the Bank has in these particular classes of financial instruments.
The Bank’s exposure to credit loss is represented by the contractual amount of the instruments. The Bank uses the same credit policies in making commitments as it does for on-balance sheet instruments.At June 30, 2025 and 2024, off-balance sheet financial instruments whose contract amounts represent credit risk consisted of:
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June 30, |
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June 30, |
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2025 |
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2024 |
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(In thousands) |
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Commitments to originate loans |
|
$ |
28,256 |
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|
$ |
7,608 |
|
Unused lines of credit |
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|
64,971 |
|
|
|
94,322 |
|
Unadvanced funds on construction loans |
|
|
51,337 |
|
|
|
53,200 |
|
Letters of credit |
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|
167 |
|
|
|
— |
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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. Unadvanced funds on lines-of-credit have fixed expiration dates and may expire without being drawn upon. Therefore, the total commitment amount does not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. Except for commercial lines-of-credit amounting to $2,614,000 at June 30, 2025 and commercial lines of credit and overdraft lines of credit amounting to $8,297,000 at June 30, 2024, these financial instruments are secured by mortgage liens on real estate. Commercial lines-of-credit are generally secured by business assets while overdraft lines-of-credit are generally unsecured.
Loans sold with recourse obligations
The Bank sells certain loans on a servicing-retained basis to the FHLB pursuant to contracts which include limited recourse provisions in the event a loss is incurred on the loan. At June 30, 2025 and 2024, the maximum contingent liability associated with loans sold with recourse to the FHLB was $784,000 and $948,000, respectively, which is not recorded in the consolidated financial statements.
Operating lease commitments
Pursuant to the terms of noncancelable lease agreements in effect at June 30, 2025, pertaining to premises, future minimum rent commitments were as follows:
Year Ending |
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Rental |
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June 30, |
|
Expense |
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|
|
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(In thousands) |
|
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2026 |
|
|
274 |
|
2027 |
|
|
271 |
|
2028 |
|
|
267 |
|
2029 |
|
|
263 |
|
2030 |
|
|
215 |
|
Thereafter |
|
|
413 |
|
Total lease commitments |
|
|
1,703 |
|
Less imputed interest |
|
|
(194 |
) |
|
$ |
1,509 |
|
|
The leases contain options to extend for periods from to five years. The cost of such rentals is not included above. Total rent expense for the years ended June 30, 2025 and 2024 amounted to $228,000 and $234,000, respectively. No rental income was recorded for the years ended June 30, 2025 and 2024.
Legal contingencies
Various legal claims may arise from time to time and, in the opinion of management, these claims will have no material effect on the Bank’s consolidated financial statements.
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.