Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Off-Balance Sheet Financial Instruments

The Company is party to off-balance sheet financial instruments in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include loan commitments, standby and commercial letters of credits, and loan level derivatives. According to GAAP, these financial instruments are not recorded in the financial statements until they are funded or related fees are incurred or received.

The contract amounts reflect the extent of the involvement the Company has in particular classes of these instruments. Such commitments involve, to varying degrees, elements of credit risk and interest-rate risk in excess of the amount recognized in the consolidated balance sheets. The Company's exposure to credit loss in the event of non-performance by the counterparty is represented by the fair value of the instruments. The Company uses the same policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Financial instruments with off-balance-sheet risk at the dates indicated follow:



	At December 31,
	2019		2018
	(In Thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to originate loans and leases:
Commercial real estate	$	50,034	$	76,642
Commercial	78,058		75,713
Residential mortgage	25,998		16,363
Unadvanced portion of loans and leases	808,681		707,997
Unused lines of credit:
Home equity	528,251		487,476
Other consumer	25,374		50,404
Other commercial	380		347
Unused letters of credit:
Financial standby letters of credit	10,166		11,491
Performance standby letters of credit	4,652		3,075
Commercial and similar letters of credit	3,823		4,573
Loan level derivatives:
Receive fixed, pay variable	1,101,193		714,500
Pay fixed, receive variable	1,101,193		714,500
Risk participation-out agreements	235,693		100,531
Risk participation-in agreements	55,281		35,838
Foreign exchange contracts:
Buys foreign currency, sells U.S. currency	1,125		6,573
Sells foreign currency, buys U.S. currency	1,230		6,582

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 the payment of a fee by the customer. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if any, is based on management's credit evaluation of the borrower.

Standby and commercial letters of credits are conditional commitments issued by the Company to guarantee performance of a customer to a third party. These standby and commercial letters of credit are primarily issued to support the financing needs of the Company's commercial customers. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

The liability for unfunded credit commitments, which is included in other liabilities, was $1.9 million and $1.9 million as of December 31, 2019 and December 31, 2018, respectively.

From time to time, the Company enters into loan level derivatives, risk participation agreements or foreign exchange contracts with commercial customers and third-party financial institutions. These derivatives allow the Company to offer long-term fixed-rate commercial loans while mitigating the interest-rate or foreign exchange risk of holding those loans. In a loan level derivative transaction, the Company lends to a commercial customer on a floating-rate basis and then enters into an loan level derivative with that customer. Concurrently, the Company enters into offsetting swaps with a third-party financial institution, effectively minimizing its net interest-rate risk exposure resulting from such transactions.

The fair value of derivative assets and liabilities was $60.6 million and $59.7 million, respectively, as of December 31, 2019. The fair value of derivative assets and liabilities was $22.5 million and $22.2 million, respectively, as of December 31, 2018.

Lease Commitments

The Company leases certain office space under various noncancellable operating leases. These leases have original terms ranging from 3 years to over 25 years. Certain leases contain renewal options and escalation clauses which can increase rental expenses based principally on the consumer price index and fair market rental value provisions.

The Company considered the following criteria when determining whether a contract contains a lease, the existence of an identifiable asset and the right to obtain substantially all of the economic benefits from use of the asset through the period. The Company used the FHLB classic advance rates as of December 31, 2019 as the discount rate to determine the net present value of the remaining lease payments.



	At December 31, 2019
	(In Thousands)
The components of lease expense were as follow:
Operating lease cost	$	6,461

Supplemental cash flow information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	6,515
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	66

Supplemental balance sheet information related to leases was as follows:
Operating Leases
Operating lease right-of-use assets	$	24,876
Operating lease liabilities	24,876

Weighted Average Remaining Lease Term
Operating leases	7.47

Weighted Average Discount Rate
Operating leases	3.2		%

A summary of future minimum rental payments under such leases at the dates indicated follows:



Year ended December 31,	Minimum Rental Payments
	(In Thousands)
2020	$	5,886
2021	5,267
2022	4,577
2023	3,672
2024	2,305
Thereafter	6,163
Total	$	27,870
Less imputed interest	(2,994		)
	$	24,876

Certain leases contain escalation clauses for real estate taxes and other expenditures, which are not included above. Total rental expense was $6.2 million in 2019. This compares to total rent expense of $5.8 million in 2018. In 2017, total rent expense was $5.5 million. The increase in expense was due to the addition of two banking offices in Wakefield and Braintree, Massachusetts, and a rent increase for the Eastern Funding main office.

A portion of the Company's headquarters was rented to third-party tenants which generated rental income of $0.4 million in 2019, 2018 and 2017 respectively. Rental income was reported in non-interest income in the Company's consolidated statements of income.

Legal Proceedings

In the normal course of business, there are various outstanding legal proceedings. In the opinion of management, after consulting with legal counsel, the consolidated financial position and results of operations of the Company are not expected to be affected materially by the outcome of such proceedings.