Note 10. Commitments and Contingencies

Lending 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, standby letters of credit, and commitments to purchase equipment being acquired for lease to others. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the condensed consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The following table presents a summary of the financial instruments described above as of the dates indicated:



	June 30, 2014		December 31, 2013
	(In thousands)
Loan commitments to extend credit	$	1,813,963	$	1,001,740
Standby letters of credit	86,055		39,200
Commitments to purchase equipment being acquired for lease to others	5,679		8,475
	$	1,905,697	$	1,049,415

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 many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. We provide standby letters of credit in conjunction with several of our lending arrangements and property lease obligations. Most guarantees expire within one year from the date of issuance, however, some expire at various dates over the next six years. If a borrower defaults on its commitments subject to any letter of credit issued under these arrangements, we would be required to meet the borrower's financial obligation but would seek repayment of that financial obligation from the borrower. In some cases, borrowers have pledged cash and investment securities as collateral with us under these arrangements.

In addition, the Company has investments in low income housing project partnerships, which provide the Company income tax credits, and in a few small business investment companies. The investments call for capital contributions up to an amount specified in the partnership agreements. As of June 30, 2014 and December 31, 2013, the Company had commitments to contribute capital to these entities totaling $15.0 million and $11.0 million, respectively. In connection with equity investments added from the CapitalSource Inc. merger, we have committed to contribute up to an additional $2.8 million to 13 private equity funds.

Legal Matters

In the ordinary course of our business, we are party to various legal actions, which we believe are incidental to the operation of our business. The outcome of such legal actions and the timing of ultimate resolution are inherently difficult to predict. In the opinion of management, based upon information currently available to us, any resulting liability, in addition to amounts already accrued, would not have a material adverse effect on the Company’s financial statements or operations.

FCAL-Related Litigation

The fourteen lawsuits filed in the Superior Court of the State of California, County of Los Angeles against FCB, among others, by various former clients of political campaign and non-profit organization treasurer Kinde Durkee were settled in court, on July 15, 2014, prior to the hearing on the Bank's motion for summary judgment. The parties informed the court that they had agreed to terms of settlement with respect to all claims, with the exception of the remaining claims in the Bank's interpleader which will direct payment of the funds which remained on deposit on the day that Durkee was arrested. The settlement in the case in chief will be memorialized in writing. The terms of settlement, once performed, will result in a complete settlement and release of all claims which potentially exposed the Bank to liability. The settlement has no material effect on results of operations or liquidity.