NOTE 14 — COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS

Credit Extensions — In the normal course of business, the Company has various outstanding commitments to extend credit that are not reflected in the accompanying Consolidated Financial Statements. While the Company does not anticipate losses as a result of these transactions, commitments to extend credit are included in determining the appropriate level of the allowance for unfunded commitments and unissued SBLCs. The following table summarizes the Company’s credit-related commitments as of December 31:




($ in thousands)	2015		2014
Loan commitments	$	3,370,271	$	2,973,577
Commercial and standby letters of credit (“SBLCs”)	$	1,293,547	$	1,253,066

Loan commitments are agreements to lend to a customer provided there is no violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses and may require maintenance of compensatory balances. Of the $3.37 billion unfunded loan commitments as of December 31, 2015, approximately $1.84 billion are expected to expire in 2016. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements.

Commercial letters of credit are issued to facilitate domestic and foreign trade transactions while SBLCs generally are contingent upon the failure of the customers to perform according to the terms of the underlying contract with the third party. As a result, the total contractual amounts do not necessarily represent future funding requirements. The Company’s historical experience is that SBLCs typically expire without being funded. Additionally, in many cases, the Company holds collateral in various forms against these SBLCs. As part of its risk management activities, the Company monitors the creditworthiness of customers in conjunction with its SBLC exposure. The customer is obligated to reimburse the Company for any payment made on the customer’s behalf. If the customer fails to pay, the Company would, as applicable, liquidate the collateral and/or offset accounts. Total letters of credit of $1.29 billion consisted of commercial letters of credit of $64.9 million and SBLCs of $1.23 billion as of December 31, 2015. Approximately $420.8 million of these letters of credit will expire in 2016.

The Company uses the same credit underwriting criteria in extending loans, commitments, and conditional obligations to customers. Each customer’s creditworthiness is evaluated on a case-by-case basis. Collateral may be obtained based on management’s assessment of the customer’s credit. Collateral may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

Estimated exposure to loss from these commitments is included in the allowance for unfunded credit reserves and amounted to $19.8 million and $10.5 million as of December 31, 2015 and 2014, respectively. These amounts are included in accrued expenses and other liabilities in the accompanying Consolidated Balance Sheets.

Guarantees — The Company has sold or securitized loans with recourse in the ordinary course of business. The recourse component in the loans sold or securitized with recourse is considered a guarantee. As the guarantor, the Company is obligated to make payments when the loans default. As of December 31, 2015, the maximum potential future payment, which is generally the unpaid principal balance of total loans sold or securitized with recourse amounted to $191.3 million and was comprised of $29.8 million in single-family loans with full recourse and $161.5 million in multifamily loans with limited recourse. In comparison, total loans sold or securitized with recourse amounted to $249.8 million as of December 31, 2014, and was comprised of $35.5 million in single-family loans with full recourse and $214.3 million in multifamily loans with limited recourse. The recourse provision on multifamily loans varies by loan sale and is limited to 4% of the top loss on the underlying loans. The Company’s recourse reserve related to these guarantees is included in the allowance for unfunded credit reserves and totaled $630 thousand and $2.2 million as of December 31, 2015 and 2014, respectively. The allowance for unfunded credit reserves were included in accrued expenses and other liabilities in the accompanying Consolidated Balance Sheets. The Company continues to experience minimal losses from the single-family and multifamily loan portfolios sold or securitized with recourse.

Lease Commitments — The Company conducts a portion of its operations utilizing leased premises and equipment under operating leases. Rental expense amounted to $24.6 million, $26.2 million and $26.2 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Future minimum rental payments under non-cancellable operating leases are estimated as follows:




Years Ending December 31,	Amount
	($ in thousands)
2016	$	28,042
2017	24,902
2018	21,263
2019	18,112
2020	14,708
Thereafter	53,320
Total	$	160,347

Related Party Transactions — In the ordinary course of business, the Company may enter into transactions with various related parties. The Company’s related party transactions were not material for the years ended December 31, 2015 and 2014.

Litigation — The Company is a party to various legal actions arising in the normal course of business. In accordance with ASC 450, Contingencies, the Company accrues reserves for currently outstanding lawsuits, claims, and proceedings when a loss contingency is probable and can be reasonably estimated. The outcome of such legal actions is inherently difficult to predict and it is possible that one or more of the currently pending or threatened legal or regulatory matters could have material adverse effect on the Company’s liquidity, consolidated financial position, and/or results of operations. Based on the information currently available, advice of counsel and established reserves, the Company believes that the eventual outcome of pending legal matters will not individually or in the aggregate have a material adverse effect on the Company’s consolidated financial position. On September 8, 2014, a jury in the case titled “F&F, LLC and 618 Investment, Inc. v. East West Bank,” Superior Court of the State of California for the County of Los Angeles, Case No. BC462714, delivered a verdict in favor of plaintiff F&F, LLC. The case is being appealed. The litigation accrual was $35.4 million and $31.6 million as of December 31, 2015 and 2014, respectively.

Other Commitments — The Company has commitments to invest in qualified affordable housing partnerships and other tax credit investments qualifying for community reinvestment tax credits or other types of tax credits. These commitments are payable on demand. As of December 31, 2015 and 2014, these commitments were $174.7 million and $114.7 million, respectively. These commitments are included in accrued expenses and other liabilities on the Consolidated Balance Sheets.