16.CONTINGENT LIABILITIES AND COMMITMENTS

The Company’s consolidated financial statements do not reflect various commitments and contingent liabilities which arise in the normal course of business and which involve elements of credit risk, interest rate risk and liquidity risk. These commitments and contingent liabilities are commitments to extend credit and standby letters of credit. A summary of the Bank’s commitments and contingent liabilities at December 31, 2014 and 2013 is as follows:




	December 31,		December 31,
	2014		2013
	(in thousands)

Commitments to extend credit	$	212,193	$	176,964

Standby letters of credit		2,430		2,664

Total	$	214,623	$	179,628

Commitments to extend credit and standby letters of credit all include exposure to some credit loss in the event of non-performance of the customer. The Bank’s credit policies and procedures for credit commitments and financial guarantees are the same as those for extensions of credit that are recorded on the Consolidated Balance Sheets. Because these instruments have fixed maturity dates, and because they may expire without being drawn upon, they do not necessarily represent cash requirements to the Bank. The Bank has not incurred any losses on its commitments during the past three years and has not recorded a reserve for its commitments.

The Company has entered into contracts with third parties, some of which include indemnification clauses. Examples of such contracts include contracts with third party service providers, brokers and dealers, correspondent banks, and purchasers of residential mortgages. Additionally, the Company has bylaws, policies and agreements under which it agrees to indemnify its officers and directors from liability for certain events or occurrences while the directors or officers are, or were, serving at the Company’s request in such capacities. The Company indemnifies its officers and directors to the fullest extent allowed by law. The maximum potential amount of future payments that the Company could be required to make under these indemnification provisions is unlimited, but would be affected by all relevant defenses to such claims, as well as directors’ and officers’ liability insurance maintained by the Company. Due to the nature of these indemnification provisions, it is not possible to quantify the aggregate exposure to the Company resulting from them.

The Company is subject to possible litigation proceedings in the normal course of business. As noted in Item 3 of Part I of the Annual Report on Form 10-K of which these Consolidated Financial Statements form a part, on September 2, 2014 the Office of the Attorney General for the State of New York (“NYAG”) filed a formal complaint against the Company and the Bank regarding residential lending practices. The Company accrued an estimated liability relating to the NYAG investigation totaling $1.0 million during 2014. At December 31, 2014, a range of loss could not be determined, and management believes the $1.0 million accrual is the best estimate of probable loss.

The Company leases certain offices, land and equipment under long-term operating leases. The aggregate minimum annual rental commitments under these leases total approximately $519 thousand in 2015; $523 thousand in 2016; $435 thousand in 2017; $453 thousand in 2018; $465 thousand in 2019, and $3.8 million thereafter. The rental expense under operating leases contained in the Company’s Consolidated Statements of Income included $644 thousand, $684 thousand, and $632 thousand, in 2014, 2013, and 2012, respectively.