Commitments and Contingencies

(a) Lease Commitments

The Bank leases certain premises and equipment under operating leases. Rental expense of leased premises and equipment was $6.1 million, $3.8 million and $4.4 million for the years ended December 31, 2018, 2017 and 2016, respectively, which is included in occupancy and equipment expense on the Company's Consolidated Statements of Income.

The estimated future minimum annual rental commitments under noncancelable leases having an original or remaining term of more than one year are as follows:



	Year Ending December 31,
	(In thousands)
2019	$	4,766
2020	4,251
2021	2,477
2022	1,704
2023	1,568
Thereafter	1,788
	$	16,554

The leases contain various provisions for increases in rental rates, based either on changes in the published Consumer Price Index or a predetermined escalation schedule. Substantially all of the leases provide the Company with the option to extend the lease term one or more times following expiration of the initial term.

(b) Commitments to Extend Credit

In the ordinary course of business, the Company may enter into various types of transactions that include commitments to extend credit that are not included in the Consolidated Financial Statements. The Company applies the same credit standards to these commitments as it uses in all its lending activities and has included these commitments in its lending risk evaluations. The majority of the commitments presented below are variable rate. The Company’s exposure to credit and market risk under commitments to extend credit is represented by the amount of these commitments.

The following table presents outstanding commitments to extend credit, including letters of credit, at the dates indicated:



	December 31, 2018		December 31, 2017
	(In thousands)
Commercial business:
Commercial and industrial	$	568,215	$	363,272
Owner-occupied commercial real estate	13,065		6,815
Non-owner occupied commercial real estate	13,621		13,543
Total commercial business	594,901		383,630
One-to-four family residential	—		—
Real estate construction and land development:
One-to-four family residential	59,772		38,160
Five or more family residential and commercial properties	95,535		86,787
Total real estate construction and land development	155,307		124,947
Consumer	239,822		204,625
Total outstanding commitments	$	990,030	$	713,202

The Company has two equity investments in Low-Income Housing Tax Credit partnerships ("LIHTCs") which are indirect federal subsidies that finance low-income housing projects. The Company reported the investments in the unconsolidated LIHTCs as prepaid expenses and other assets on the Company’s Statements of Financial Condition with carrying values of $50.9 million and $54.0 million as of December 31, 2018 and 2017, respectively. As a limited liability investor in these partnerships, the Company receives tax benefits in the form of tax deductions from partnership operating losses and federal income tax credits. The federal income tax credits are earned over a 10-year period as a result of the investment properties meeting certain criteria and are subject to recapture for noncompliance with such criteria over a 15-year period. The Company accounts for the LIHTCs under the proportional amortization method and amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance on the Company's Consolidated Statements of Income as a component of income tax expense. During the years ended December 31, 2018, 2017, and 2016 the Company recognized tax benefits of $2.4 million, $2.9 million and $640,000, respectively. See Note (21) Income Taxes for further information on tax benefits.

The maximum exposure to loss in the LIHTCs is the amount of equity invested and credit extended by the Company. Loans to these entities are underwritten in substantially the same manner as are other loans and are generally secured. The Company has evaluated the variable interests held by the Company in each LIHTC investment and determined that the Company does not have controlling financial interests in such investments, and is not the primary beneficiary.

Total unfunded contingent commitments related to the Company’s LIHTC investments totaled $31.5 million and $39.8 million at December 31, 2018 and 2017, respectively, and is reported as accrued expenses and other liabilities on the Company's Statements of Financial Condition. The Company expects to fund LIHTC commitments of $26.4 million during the year ended December 31, 2019 and $523,000 during the year ended December 31, 2020, with the remaining commitments of $4.5 million paid by December 31, 2034. There were no impairment losses on the Company’s LIHTC investments during the years ended December 31, 2018, 2017 or 2016.

The Company also made a total of $25.0 million of Qualified Equity Investments ("QEIs") into three Certified Development Entities (“CDEs”) in May 2014 and is eligible to receive New Markets Tax Credits (“NMTC”) on the QEIs. The NMTC program provides federal tax incentives to investors to make investments in distressed communities and promotes economic improvements through the development of successful businesses in these communities. The NMTC is available to investors over a seven-year period and is subject to recapture if certain events occur during such period. Gross tax credits related to the Company's CDEs totaling $9.8 million are available through 2020. The Company is required to fund 85 percent of a tranche to claim the entire tax credit, and it had until May 15, 2015 to complete the funding. The tranche was funded in 2015 before the deadline.

The Company accounts for its NMTC on the equity method and reported the investment balance as prepaid expenses and other assets on the Company’s Statements of Financial Condition with carrying value of $25.7 million and $25.8 million at December 31, 2018 and December 31, 2017, respectively. The Company recorded investment income of $708,000, $735,000 and $740,000 during the years ended December 31, 2018, 2017 and 2016, respectively, in other income on the Company's Statements of Income.