16. Commitments and Contingencies

Lease Commitments — The Company has various operating lease agreements for office space. Generally, leases are subject to rent escalation provisions in subsequent years and have renewal options at the end of the initial lease terms. Leasehold improvements are amortized over the useful life of the improvements or the lease term if shorter. Rent expense (excluding ancillary charges for common area expense, maintenance, etc.) for the years ended December 31, 2016, 2015 and 2014, was $5.8 million, $4.9 million and $5.1 million, respectively. The Company entered into sublease agreements for two leased locations and at December 31, 2016, future minimum sublease payments to be received are $1.1 million.

A director holds interests in a bank location currently leased by the Company and interests in the building where the Company leased its former corporate offices. Rent payments under the related party leases were $2.1 million for the years ended December 31, 2016, 2015 and 2014, and the Company was current on these lease obligations at all times. Future contractual obligations of $0.2 million will be paid to entities controlled by the director and are included in the table below of future minimum lease payments under all non-cancelable operating leases.


Year ending December 31,
(in thousands)	Amount
2017	$	5,123
2018		5,021
2019		3,730
2020		3,190
2021		2,193
Thereafter		14,094
Total	$	33,351

In January 2016, the Company entered into a new lease for facilities at 1401 Lawrence Street, Denver, Colorado. The leased space became the primary executive offices for the Company and includes approximately 44,000 square feet space of office space and 4,000 square feet of ground level retail space for a banking facility. The Company took possession of the space on June 1, 2016 and commenced operations from that location in November 2016. The lease term is for 12 years with first year base rent of $1.5 million escalating 2% annually. The lease is cancelable after nine years subject to a termination fee of up to $1.6 million.

Financial Instruments With Off-Balance Sheet Risk — In the normal course of business the Company has entered into financial instruments which are not reflected in the accompanying consolidated financial statements:


	At December 31,
(in thousands)	2016		2015
Commitments to originate commercial or real estate construction loans and unused lines of credit granted to customers	$	887,627	$	855,484

Commitments to originate consumer loans — personal lines of credit and equity lines	$	41,376	$	35,446

Overdraft protection plans	$	22,919	$	17,127

Letters of credit	$	26,631	$	30,313

Unfunded commitments for unconsolidated investments	$	6,664	$	6,351

Company guarantees	$	3,127	$	2,950

Commitments to Originate — The Company makes contractual commitments to extend credit and provide standby letters of credit which are binding agreements to lend money to its customers at predetermined interest rates for a specific period of time. These commitments are not held for sale. The credit risk involved in issuing these financial instruments is essentially the same as that involved in granting on-balance sheet financial instruments. As such, the Company’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument is represented by the contractual amounts of those instruments. However, the Company applies the same credit policies, standards, and ongoing reassessments in making commitments and conditional obligations as it does for loans. In addition, the amount and type of collateral obtained, if deemed necessary upon extension of a loan commitment or standby letter of credit, is essentially the same as the collateral requirements provided for loans. Additional risk associated with providing these commitments arises when they are drawn upon, such as the demands on liquidity the Company would experience if a significant portion were drawn down at the same time. However, this is considered unlikely, as many commitments expire without being drawn upon and therefore do not necessarily represent future cash requirements.

Overdraft Protection Plans — The Company provides personal credit lines on customer accounts to advance funds to cover overdrafts.

Letters of Credit — The Company provides standby and commercial letters of credit during the normal course of business. Standby letters of credit guarantee performance of a customer to a third party while commercial letters of credit guarantee payments on behalf of our customers.

Unfunded Commitments for Unconsolidated Investments — The Company has committed to purchase up to $11.5 million in limited partnership interests of four entities, of which $6.7 million was unfunded at December 31, 2016. Certain shareholders and directors also have interests in some of these entities.

Company Guarantees — The Company guarantees, to the issuing merchant banks, the credit card debt transactions for certain customers. The Company also provides guarantees to the FHLB for certain forgivable loans used to support affordable housing in our market areas.

Federal Reserve Bank Stock — The fair value of the Federal Reserve Bank stock approximates its carrying value, which is based on the redemption provisions of the Federal Reserve Bank. At December 31, 2016, the Company held 81,924 shares of Federal Reserve Bank stock with a fair value of $4.1 million(subscription value of $50). This investment represents 50% of the par value due to the Federal Reserve Bank to become a member bank and the stock cannot be sold, traded, or pledged as collateral for loans. Although the probability is remote, the remaining 50% or $4.1 million due to the Federal Reserve Bank may be callable at its discretion.

Employment Contracts — Certain officers of the Company have entered into employment agreements providing for salaries and fringe benefits. In addition, severance is provided in the event of termination for other than cause, and under certain changes in control, a payment is required.

Indemnification Agreements — The Company is subject to certain indemnification obligations in conjunction with agreements signed with officers and directors of the Company. The indemnification agreements require the Company to indemnify against judgments, fines, penalties and amounts paid in settlements incurred in connection with civil or criminal action or proceedings, as it relates to their services to the Company. To the extent the Company maintains an insurance policy or policies providing directors’ and officers’ liability insurance, the Indemnitee will be covered to the maximum extent of the coverage available for any director or officer of the Company. However, certain indemnification payments may not be covered under the Company’s directors’ and officers’ insurance coverage. The rights of the Indemnitee under the indemnification agreement are in addition to any rights the Indemnitee may have under the Company’s articles of incorporation or bylaws. While the likelihood is remote, payments under these indemnification agreements could materially affect net income in a particular quarter or annual period.

Other Matters — The Company is involved in various lawsuits which have arisen in the normal course of business. It is management’s opinion, based upon advice of legal counsel, that the ultimate outcome of these lawsuits will not have a material impact upon the financial condition, cash flow or results of operations of the Company.