cAoM Cobafq bApq | OMNM ANNrAi obmloq
meet their obligations and the collateral or other security is of no valueK qhe amount of collateral obtainedI if deemed necessary upon extension of creditI is based on management’s credit evaluation of the borrowerK oeserves related to unfunded commitments to extend credit are included in the calculation of the allowance for loan lossesK
lther mroperty lwned lther property owned is generally classified as ievel PK qhe process for measuring the fair value of the other property owned involves the use of appraisals or other marketJbased informationK Costs to sell represent transaction costs and are not included as a component of the asset’s fair valueK As a resultI these fair value measurements fall within ievel P of the hierarchyK oural fnvestmentsI iiC cor these investmentsI the fair value is based upon the underlying loans contained in the investmentK qhe fair value measurement process uses independent appraisals and other marketJbased informationI but in many cases it also requires significant input based on management’s knowledge of and judgment about current market conditionsI specific issues relating to the collateral and other mattersK As a resultI these fair value measurements fall within ievel P of the hierarchyK then the value of the collateral is less than the principal balance of the investment a loss is realizedK klqb NO – Commitments and Contingencies qhe Association has various commitments outstanding and contingent liabilitiesK qhe Association may participate in financial instruments with offJbalanceJsheet risk to satisfy the financing needs of its borrowers and to manage their exposure to interestJrate riskK qhese financial instruments include commitments to extend credit and commercial letters of creditK qhe instruments involveI to varying degreesI elements of credit risk in excess of the amount recognized in the financial statementsK Commitments to extend credit are agreements to lend to a borrower as long as there is not a violation of any condition established in the contractK Commercial letters of credit are agreements to pay a beneficiary under conditions specified in the letter of creditK Commitments and letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a feeK At aecember PNI OMNMI ANIORVIMMR of commitments to extend creditI AOQIRSS of commercial letters of credit and ANPITMP of standby letters of credit were outstandingK pince many of these commitments are expected to expire without being drawn uponI the total commitments do not necessarily represent future cash requirementsK eoweverI these creditJrelated financial instruments have offJbalanceJ sheet credit risk because their amounts are not reflected on the Balance pheet until funded or drawn uponK qhe credit risk associated with issuing commitments and letters of credit is substantially the same as that involved in extending loans to borrowers and management applies the same credit policies to these commitmentsK rpon fully funding a commitmentI the credit risk amounts are equal to the contract amountsI assuming that borrowers fail completely to
QN
fn additionI actions are pending against the Association in which claims for monetary damages are assertedK Based on current informationI management and legal council are of the opinion that the ultimate liabilityI if anyI resulting there fromI would not be material in relation to the financial position of the AssociationK klqb NP – aisclosures about cair salue of cinancial fnstruments qhe following table presents the carrying amounts and fair values of the Association’s financial instruments at aecember PNI OMNMI OMMVI and OMMUK nuoted market prices are generally not available for certain pystem financial instrumentsI as described belowK AccordinglyI fair values are based on judgments regarding future expected loss experienceI current economic conditionsI risk characteristics of various financial instrumentsI and other factorsK qhese estimates involve uncertainties and matters of judgmentI and thereforeI cannot be determined with precisionK Changes in assumptions could significantly affect the estimatesK