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Commitments, Contingencies and Guarantees
 6 Months Ended
Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments, Contingencies and Guarantees Commitments, Contingencies and Guarantees

Commitments

In the normal course of business, the Corporation offers a variety of financial instruments containing credit risk that are not required to be reflected in the Consolidated Statements of Financial Position. These financial instruments include outstanding commitments to extend credit, approved but undisbursed loans (undisbursed loan commitments), credit lines, commercial letters of credit and standby letters of credit. The Corporation has risk management policies to identify, monitor and limit exposure to credit risk. To mitigate credit risk for these financial guarantees, the Corporation generally determines the need for specific covenant, guarantee and collateral requirements on a case-by-case basis, depending on the nature of the financial instrument and the customer's creditworthiness.

At June 30, 2019 and December 31, 2018, the Corporation had $123.7 million and $119.0 million, respectively, of outstanding financial and performance standby letters of credit. The majority of these standby letters of credit are collateralized. At June 30, 2019, the Corporation had determined that there was $329 thousand of potential losses from standby letters of credit at June 30, 2019, compared to no potential losses at December 31, 2018.

Commitments to extend credit are agreements to lend to a customer provided there is no violation of any condition established in the commitment. Commitments generally have fixed expiration dates or other termination clauses and may not require payment of a fee. Since many commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer's creditworthiness on an individual basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management's credit evaluation of the counterparty. The collateral held varies, but may include securities, real estate, accounts receivable,
inventory, plant or equipment. Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are included in commitments to extend credit. These lines of credit are generally not collateralized, usually do not contain a specified maturity date and may be drawn upon only to the total extent to which the Corporation is committed. At June 30, 2019 and December 31, 2018, the Corporation had $3.82 billion and $3.55 billion, respectively, of commitments to extend credit. The Corporation had undisbursed loan commitments of $537.6 million and $493.3 million at June 30, 2019 and December 31, 2018, respectively. Undisbursed loan commitments are not included in loans on the Consolidated Statements of Financial Position. The majority of undisbursed loan commitments will be funded and convert to a portfolio loan within a one year period.

The allowance for credit losses on lending-related commitments included $1.9 million and $1.7 million at June 30, 2019 and December 31, 2018, respectively, for probable credit losses inherent in the Corporation's unused commitments and was recorded in "Interest payable and other liabilities" in the Consolidated Statements of Financial Position.

Contingencies and Guarantees

The Corporation has originated and sold certain loans, and additionally acquired the potential liability for those historical originated and sold loans by merged or acquired entities, for which the buyer has limited recourse to us in the event the loans do not perform as specified in the agreements. These loans had an outstanding balance of $12.8 million and $11.6 million at June 30, 2019 and December 31, 2018, respectively. The maximum potential amount of undiscounted future payments that the Corporation could be required to make in the event of nonperformance by the borrower totaled $12.6 million and $11.4 million at June 30, 2019 and December 31, 2018, respectively. In the event of nonperformance, the Corporation has rights to the underlying collateral securing the loans. At both June 30, 2019 and December 31, 2018, the Corporation had recorded a liability of $100 thousand, in connection with the recourse agreements, recorded in "Interest payable and other liabilities" in the Consolidated Statements of Financial Position.

In addition, the Corporation acquired certain SBA guaranteed notes in which the guaranteed portion had been sold to a third party investor prior to the Corporation's acquisition. In the event these loans default and the SBA guaranty is no longer intact (i.e. an issue found to have occurred during the origination or the liquidation of the loans) the Corporation would be liable to make the loan whole to the third party investor. The maximum potential amount of undiscounted future payments that the Corporation could be required to make in the event of default by the borrower totaled $17.9 million and $19.1 million at June 30, 2019 and December 31, 2018, respectively. In the event of default, the Corporation has rights to the underlying collateral securing the loans. At June 30, 2019 and December 31, 2018, the Corporation had recorded a liability of $891 thousand and $1.2 million, respectively.

Representations and Warranties

In connection with the Corporation's mortgage banking loan sales, and the historical sales of merged or acquired entities, the Corporation makes certain representations and warranties that the loans meet certain criteria, such as collateral type and underwriting standards. The Corporation may be required to repurchase individual loans and/or indemnify the purchaser against losses if the loan fails to meet established criteria. At June 30, 2019 and December 31, 2018, the liability recorded in connection with these representations and warranties totaled $3.2 million and $4.1 million, respectively.

A summary of the reserve for representations and warranties of the Corporation is as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(Dollars in thousands)
2019
 
2018
 
2019
 
2018
Reserve balance at beginning of period
$
3,983

 
$
5,105

 
$
4,084

 
$
5,349

Reserve reduction
(807
)
 
(243
)
 
(908
)
 
(487
)
Charge-offs
—

 
(2
)
 
—

 
(2
)
Ending reserve balance
$
3,176

 
$
4,860

 
$
3,176

 
$
4,860

(Dollars in thousands)
June 30, 2019
 
December 31, 2018
Reserve balance
 
 
 
Liability for specific claims
$
454

 
$
398

General allowance
2,722

 
3,686

Total reserve balance
$
3,176

 
$
4,084