COMMITMENTS AND CONTINGENCIES

Financial Instruments With Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments represent commitments to originate fixed and variable rate loans and loans in process, and involve, to varying degrees, credit risk and interest rate risk in excess of the amount recognized in the Company’s consolidated statements of financial condition. The Company’s exposure to credit loss in the event of nonperformance by the other party for commitments to extend credit and lines of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments to originate loans as it does for on-balance sheet instruments. As it relates to interest rate risk, the Company's exposure is generally limited to increases in interest rates that may result during the short period of time between the commitment and funding of fixed rate credit facilities and adjustable rate credit facilities with initial fixed rate periods. The limited timing risk associated with these credit facilities are considered within the Company's asset liability management process.

Commitments to fund loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have expiration dates or other termination clauses. In addition, external market forces may impact the probability of commitments being exercised; therefore, total commitments outstanding do not necessarily represent future cash requirements.

At March 31, 2020 and December 31, 2019, the Company had outstanding commitments of approximately $123.5 million and $103.2 million, respectively, for loans. Unfunded loan commitment reserves totaled $95 thousand and $89 thousand at March 31, 2020 and December 31, 2019, respectively.

Operating Leases

The Company leases various office premises under long-term operating lease agreements. These leases expire between 2020 and 2030, with certain leases containing either three, five or ten year renewal options. At March 31, 2020, minimum commitments under these non-cancellable leases before considering renewal options are (dollars in thousands):



April 1 - December 31, 2020	$	3,316
2021	4,419
2022	3,492
2023	2,253
2024	1,278
Thereafter	2,601
Total	$	17,359

Rent expense under operating leases was $1.1 million for the three months ended March 31, 2020, compared with $1.3 million for the three months ended March 31, 2019. Sublease income earned was $191 thousand for the three months ended March 31, 2020, compared with $177 thousand for the three months ended March 31, 2019.

Contingencies

At present, there are no pending or threatened proceedings against the Company which, if determined adversely, would have a material effect on the Company’s business, financial position, results of operations, cash flows or stock price. In the ordinary course of operations, the Company may be party to various legal proceedings.

Correspondent Banking Agreements

The Company maintains funds on deposit with other federally insured financial institutions under correspondent banking agreements. At March 31, 2020 and December 31, 2019, the Company had $25.9 million and $25.7 million, respectively, in uninsured available cash balances. Additionally, the Company had $18.2 million and $2.8 million in restricted cash as collateral for its interest rate swap agreements at a correspondent bank as of March 31, 2020 and December 31, 2019, respectively. The Company periodically monitors the financial condition of these correspondent banks.