Note 11. Commitments, Contingencies and Credit Risk

Financial Instruments With Off-Balance-Sheet Risk: In the normal course of business, financial instruments with off-balance-sheet risk may be used to meet the financing needs of customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized on the consolidated statements of financial condition. The contractual amounts of these instruments reflect the extent of involvement in particular classes of financial instruments.

The contractual amounts of commitments to extend credit represent the amounts of potential accounting loss should the contract be fully drawn upon, the customer default, and the value of any existing collateral become worthless. The same credit policies are used in making commitments and contractual obligations as for on-balance-sheet instruments. Financial instruments whose contractual amounts represent credit risk at December 31, 2017 and December 31, 2016 are as follows:

	December 31,
	2017		2016
Commitments to grant mortgage loans	$	54,423	$	33,813
Unfunded commitments under lines of credit		33,641		27,404
Standby letters of credit		6,734		2,487
	$	94,798	$	63,704

Commitments to Grant Mortgage Loans: Commitments to grant mortgage loans are agreements to lend to a customer as long as all terms and conditions are met as established in the contract. Commitments generally have fixed expiration dates or other termination clauses, and may require payment of a fee by the borrower. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer's creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate and income-producing commercial properties. Material losses are not anticipated as a result of these transactions.

Note 11. Commitments, Contingencies and Credit Risk (Continued)

Unfunded Commitments Under Lines of Credit: Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extension of credit to existing customers. These lines of credit are both uncollateralized and usually contain a specified maturity date and, ultimately, may not be drawn upon to the total extent to which the Company is committed.

Standby Letters of Credit: Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Standby letters of credit are largely cash secured.

Concentration by Geographic Location: Loans, commitments to extend credit and standby letters of credit have been granted to customers who are located primarily in New York City. The majority of such loans most often are secured by one-to-four family residential. The loans are expected to be repaid from the borrowers' cash flows.

Lease Commitments: At December 31, 2017, there are noncancelable operating leases for office space that expire on various dates through 2033. One such lease contains an escalation clause providing for increased rental based primarily on increases in real estate taxes. Net rental expenses under operating leases, included in occupancy expense, totaled $1,488 , $1,393, and $1,334 for the years ended December 31, 2017, 2016, and 2015, respectively.

The projected minimum rental payments under the terms of the leases at December 31, 2017 is as follows:

Year Ending December 31,
2018	$	1,200
2019		1,170
2020		1,204
2021		1,240
2022		1,145
Thereafter		7,785
	$	13,744

Legal Matters: The Company is involved in various legal proceedings which have arisen in the normal course of business. Management believes that resolution of these matters will not have a material effect on the Company’s financial condition or results of operations.

Regulatory Agreement: In July 2013, Ponce De Leon Federal Bank, predecessor to Ponce Bank and a subsidiary of the Company, entered into a formal written agreement (the “Supervisory Agreement”) with the OCC which required Ponce De Leon Federal Bank to take certain actions related to its management and operations, including internal controls. Ponce De Leon Federal Bank achieved full compliance with all articles of the formal written agreement. As a result, the OCC terminated its enforcement action with Ponce De Leon Federal Bank as of May 25, 2016.