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Commitments and Contingencies
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Financial Instruments with Off-Balance Sheet Risk
The Corporation 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 and to manage the Corporation’s exposure to fluctuations in interest rates.  These financial instruments include commitments to extend credit, standby letters of credit, forward loan commitments, loan related derivative contracts and interest rate risk management contracts.  These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Corporation’s Unaudited Consolidated Balance Sheets.  The contract or notional amounts of these instruments reflect the extent of involvement the Corporation has in particular classes of financial instruments.  The Corporation’s credit policies with respect to interest rate swap agreements with commercial borrowers, commitments to extend credit and financial guarantees are similar to those used for loans.  The interest rate swaps with other counterparties are generally subject to bilateral collateralization terms.

The following table presents the contractual and notional amounts of financial instruments with off-balance sheet risk:
(Dollars in thousands)
Jun 30,
2018
 
Dec 31,
2017
Financial instruments whose contract amounts represent credit risk:
 
 
 
Commitments to extend credit:
 
 
 
Commercial loans

$526,999

 

$537,310

Home equity lines
262,825

 
254,855

Other loans
43,774

 
48,819

Standby letters of credit
8,056

 
6,666

Financial instruments whose notional amounts exceed the amount of credit risk:
 
 
 
Forward loan commitments:
 
 
 
Interest rate lock commitments
99,535

 
45,139

Forward sale commitments
54,266

 
71,539

Loan related derivative contracts:
 
 
 
Interest rate swaps with customers
567,013

 
545,049

Mirror swaps with counterparties
567,013

 
545,049

Risk participation-in agreements
33,967

 
34,052

Foreign exchange contracts
2,924

 
3,005

Interest rate risk management contracts:
 
 
 
Interest rate swaps
60,000

 
60,000



See Note 9 for additional disclosure pertaining to derivative financial instruments.

Commitments to Extend Credit
Commitments to extend credit are agreements to lend to a customer as long as there are no violations 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 are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements.  Each borrower’s creditworthiness is evaluated on a case-by-case basis.  The amount of collateral obtained is based on management’s credit evaluation of the borrower.

Standby Letters of Credit
Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These standby letters of credit are primarily issued to support the financing needs of the Bank’s commercial customers. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers. The collateral supporting those commitments is essentially the same as for other commitments. Most standby letters of credit extend for one year. The maximum potential amount of undiscounted future payments, not reduced by amounts that may be recovered totaled $8.1 million and $6.7 million, as of June 30, 2018 and December 31, 2017, respectfully. At June 30, 2018 and December 31, 2017, there were no liabilities to beneficiaries resulting from standby letters of credit.  Fee income on standby letters of credit was insignificant for the three and six months ended June 30, 2018 and 2017.

Forward Loan Commitments
Interest rate lock commitments are extended to borrowers and relate to the origination of residential real estate mortgage loans held for sale. To mitigate the interest rate risk and pricing risk associated with these rate locks and residential real estate mortgage loans held for sale, the Corporation enters into forward sale commitments.  Both interest rate lock commitments and forward sale commitments are derivative financial instruments.

Leases
At June 30, 2018, the Corporation was committed to rent premises used in business operations under non-cancelable operating leases. Rental expense under the operating leases amounted to $1.1 million and $2.1 million, respectively, for the three and six months ended June 30, 2018, compared to $1.0 million and $2.1 million, respectively, for the same periods in 2017. The following table presents the minimum annual lease payments under the terms of these leases, exclusive of renewal provisions:
 
 
(Dollars in thousands)
 
July 1, 2018 to December 31, 2018

$1,755

2019
3,557

2020
2,806

2021
2,463

2022
2,082

2023 and thereafter
24,610

Total minimum lease payments

$37,273



Lease expiration dates range from 3 months to 23 years, with additional renewal options on certain leases ranging from 1 to 5 years.