Note 15. Commitments and Contingencies

In the normal course of business, various claims and lawsuits are brought by and against the Company. In the opinion of management and the Company's legal counsel, the disposition of all pending or threatened proceedings will not have a material effect on the Company's consolidated financial statements.

Commitments to Extend Credit

In the normal course of business, the Bank enters into financial commitments to meet the financing needs of its customers. These financial commitments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk not recognized in the Company's consolidated financial statements. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Standby letters of credit are conditional commitments to guarantee the performance of a Bank customer to a third party. Since many of the commitments and standby letters of credit are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. Management evaluates each customer's credit worthiness on a case-by-case basis, and determines the amount of collateral deemed adequate to secure the loan, if collateral security is determined to be necessary for the particular loan. The Bank's exposure to loan loss in the event of nonperformance on commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments as it does for loans reflected in the Company's consolidated financial statements.

As of December 31, 2015 and 2014, the Company had the following outstanding financial commitments:

		December 31, 2015		December 31, 2014
			(dollars in thousands)
Commitments to extend credit		$	242,125	$	237,733
Standby letters of credit (1)			12,968		15,542

Total commitments and standby letters of credit		$	255,093	$	253,275



(1)	Includes a standby letter of credit to one customer in the amount of $10.4 million at December 31, 2015 and 2014.

Commitments to extend credit and standby letters of credit are made at both fixed and variable rates of interest. At December 31, 2015, the Company had $25.1 million in fixed rate commitments and $230.0 million in variable rate commitments.

Other Commitments

The following table provides a summary of the future minimum required contractual payments the Bank is expected to make based upon obligations at December 31, 2015:

		Less Than One Year		One to Three Years		Three to Five Years		More than Five Years		December 31, 2015		December 31, 2014
			(dollars in thousands)
Deposits (1)		$	1,465,811	$	64,173	$	30,445	$	4,515	$	1,564,944	$	1,394,764
FHLB Advances and other borrowings			38,500		16,000		21,000		28,000		103,500		95,500
Operating lease obligations			1,418		1,721		1,487		2,457		7,083		8,152
Salary continuation payments			262		524		524		3,280		4,590		4,959
Junior subordinated debentures			-		-		-		13,496		13,496		16,496

Total obligations		$	1,505,991	$	82,418	$	53,456	$	51,748	$	1,693,613	$	1,519,871



(1)	Deposits with no stated maturity of $1.3 billion are included in amounts due less than one year.

The Company has leases that contain options to extend for periods from five to seven years. Options to extend which have been exercised and the related lease commitments are included in the table above. Total rent expense charged for leases during the reporting periods ended December 31, 2015, 2014 and 2013, were approximately $1.6 million, $1.8 million and $1.6 million, respectively.

In connection with the $13.5 million outstanding contractual balance of debt securities issued to Heritage Oaks Capital Trust II, Mission Community Capital Trust I, and Santa Lucia Bancorp (CA) Capital Trust, the Company is the full and unconditional guarantor of distributions of the issuing trusts. There are no Special Purpose Entity ("SPE") trusts, corporations, or other legal entities established by the Company which reside off-balance sheet. There are no other off-balance sheet items other than the aforementioned items related to letter of credit accommodations and undisbursed loan commitments. Management is not aware of any other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, results of operations, liquidity, capital expenditures or capital resources that would be material to investors.