OFF-BALANCE-SHEET ARRANGEMENTS, COMMITMENTS AND CONTINGENCIES

Financial Instruments with Off-Balance-Sheet Risk. In the normal course of business, we are a party to certain financial instruments with off-balance-sheet risk to meet the financing needs of our customers. These off-balance-sheet instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount reflected in the financial statements. The contract or notional amounts of these instruments reflect the extent of involvement and exposure to credit loss that we have in these particular classes of financial instruments.

Commitments to extend credit are agreements to lend to a customer provided that the terms established in the contract are met. Commitments generally have fixed expiration dates and may require the payment of fees. Since some commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. 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 commitments to customers and similarly do not necessarily represent future cash obligations.

Financial instruments with off-balance-sheet risk were as follows (in thousands):



	December 31, 2018		December 31, 2017
Unused commitments:
Commitments to extend credit	$	874,557	$	804,715
Standby letters of credit	27,438		14,890
Total	$	901,995	$	819,605

We apply the same credit policies in making commitments and standby letters of credit as we do for on-balance-sheet instruments. We evaluate each customer’s creditworthiness 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 borrower. Collateral held varies but may include cash or cash equivalents, negotiable instruments, real estate, accounts receivable, inventory, oil, gas and mineral interests, property, plant and equipment.

Lease Commitments. We lease certain branch facilities and office equipment under operating leases. It is expected that certain leases will be renewed, or equipment replaced with new leased equipment, as these leases expire.

Future minimum rental commitments due under non-cancelable operating leases at December 31, 2018 were as follows (in thousands):



2019	$	1,265
2020	1,158
2021	906
2022	742
2023	560
2024 and thereafter	1,352
	$	5,983

Rent expense for branch facilities was $1.8 million, $1.7 million and $3.9 million for the years ended December 31, 2018, 2017 and 2016, respectively. Rent expense for leased equipment was $160,000, $178,000 and $261,000 for the years ended December 31, 2018, 2017 and 2016, respectively.

It is expected that certain leases will be renewed, or equipment replaced with new leased equipment, as these leases expire.

With the adoption of ASU 2016-02, “Leases (Topic 842),” we recognized a lease liability of $10.1 million and a related right-of-use asset of $9.8 million on our balance sheet as of January 1, 2019. See “Note 1 – Summary of Significant Accounting and Reporting Policies” for further information.

We acquired a 202,000 square-foot office building in Fort Worth, Texas upon completion of the Omni acquisition that is used for a branch location and certain bank operations. We occupy approximately 41,000 square feet of the building and lease the remaining space to various tenants. Gross rental income from these leases was $3.0 million for the year ended December 31, 2018 and $3.1 million for both years ended December 31, 2017 and 2016. At December 31, 2018, non-cancelable operating leases for the building with future minimum lease payments are as follows (in thousands):



2019	$	2,574
2020	2,427
2021	1,374
2022	1,352
2023	1,119
2024 and thereafter	3,996
	$	12,842

Securities. In the normal course of business we buy and sell securities. At December 31, 2018, there were $6.4 million of unsettled trades to purchase securities and no unsettled trades to sell securities. As of December 31, 2017, there were no unsettled trades to purchase securities and no unsettled trades to sell securities.

Deposits. There were $15.2 million of unsettled issuances of brokered CDs at December 31, 2018. There were no unsettled issuances of brokered CDs at December 31, 2017.

Litigation. We are involved with various litigation in the normal course of business. Management, after consulting with our legal counsel, believes that any liability resulting from litigation will not have a material effect on our financial position, results of operations or liquidity.