Financial Instruments with Off-Balance Sheet Risk

We make commitments to extend credit in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit in the form of loans or through standby letters of credit. 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. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because various commitments will expire without being fully drawn upon, the total commitment amount does not necessarily represent future cash requirements.

We are exposed to credit loss equal to the contractual amount of the commitment in the event of nonperformance by the borrower. We use the same credit underwriting criteria for all credit exposure. The amount of collateral obtained, if deemed necessary by us, is based on Management's credit evaluation of the borrower. Collateral types pledged may include accounts receivable, inventory, other personal property and real property.

The contractual amount of undrawn loan commitments and standby letters of credit not reflected on the consolidated statements of condition are as follows:



(in thousands)	December 31, 2017		December 31, 2016
Commercial lines of credit	$	224,370	$	216,774
Revolving home equity lines	177,678		148,143
Undisbursed construction loans	35,322		44,798
Personal and other lines of credit	11,758		10,635
Standby letters of credit	4,074		1,939
Total commitments and standby letters of credit	$	453,202	$	422,289

We record an allowance for losses on these off-balance sheet commitments based on an estimate of probabilities of these commitments being drawn upon according to the historical utilization experience on different types of commitments and expected loss. We set aside an allowance for losses on off-balance sheet commitments in the amount of $958 thousand and $899 thousand as of December 31, 2017 and 2016, respectively, which is recorded in interest payable and other liabilities on the consolidated statements of condition. Approximately 44% of the commitments expire in 2018, approximately 41% expire between 2019 and 2025 and approximately 15% expire thereafter.