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, the total commitment amount does not necessarily represent future cash requirements.

Our credit loss exposure is 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.


(in thousands)	September 30, 2020		December 31, 2019
Commercial lines of credit	$	301,107	$	287,533
Revolving home equity lines	193,364		189,035
Undisbursed construction loans	59,548		41,033
Personal and other lines of credit	10,923		9,567
Standby letters of credit	2,572		1,964
Total commitments and standby letters of credit	$	567,514	$	529,132

We record an allowance for losses on these off-balance sheet commitments based on an estimate of probabilities of the utilization of these commitments according to our historical experience on different types of commitments and expected loss. The allowance for losses on off-balance sheet commitments totaled $1.7 million and $1.1 million as of September 30, 2020 and December 31, 2019, respectively, which is recorded in interest payable and other liabilities in the consolidated statements of condition.

We lease premises under long-term non-cancelable operating leases with remaining terms of 1 year to 12 years, most of which include escalation clauses and one or more options to extend the lease term, and some of which contain lease termination clauses. Lease terms may include certain renewal options that were considered reasonably certain to be exercised.


(in thousands)	September 30, 2020		December 31, 2019
Operating leases:
Operating lease right-of-use assets	$	26,041	$	11,002
Operating lease liabilities	$	27,527	$	12,615
Finance leases:
Finance lease right-of-use assets	$	365	$	379
Accumulated amortization	(267)		(170)
Finance lease right-of-use assets, net1	$	98	$	209
Finance lease liabilities2	$	99	$	212
1 Included in premises and equipment in the consolidated statements of condition.
2 Included in borrowings and other obligations in the consolidated statements of condition.


	Nine months ended
(in thousands)	September 30, 2020		September 30, 2019
Right-of-use assets obtained in exchange for operating lease liabilities	$	18,021	$	1,661
Right-of-use assets obtained in exchange for finance lease liabilities	$	18	$	31
Reclassification of deferred rent and unamortized lease incentives from other liabilities to operating lease right-of-use assets upon adoption of ASC 842	$	—	$	1,967


	Three months ended				Nine months ended
(in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Operating lease cost	$	1,165	$	1,051	$	3,334	$	3,123
Variable lease cost	1		—		4		—
Total operating lease cost1	$	1,166	$	1,051	$	3,338	$	3,123
Finance lease cost:
Amortization of right-of-use assets2	$	41	$	43	$	129	$	128
Interest on finance lease liabilities3	1		2		3		$	7
Total finance lease cost	42		45		$	132	$	135
Total lease cost	$	1,208	$	1,096	$	3,470	$	3,258
1 Included in occupancy and equipment expense in the consolidated statements of comprehensive income.
2 Included in depreciation and amortization in the consolidated statements of comprehensive income.
3 Included in interest on borrowings and other obligations in the consolidated statements of comprehensive income.

The following table shows the future minimum lease payments, weighted average remaining lease terms, and weighted average discount rates under operating and finance lease arrangements as of September 30, 2020. The discount rates used to calculate the present value of lease liabilities were based on the collateralized FHLB borrowing rates that were commensurate with lease terms and minimum payments on the later of the date we adopted the new lease accounting standards or lease commencement date.


(in thousands)	September 30, 2020
Year	Operating Leases			Finance Leases
2020	$	1,199		$	41
2021	4,592			42
2022	4,318			13
2023	3,893			4
2024	3,187			—
Thereafter	12,475			—
Total minimum lease payments	29,664			100
Amounts representing interest (present value discount)	(2,137)			(1)
Present value of net minimum lease payments (lease liability)	$	27,527		$	99

Weighted average remaining term (in years)	8.0			1.2
Weighted average discount rate	1.84		%	2.55		%

Bancorp may be party to legal actions that arise from time to time in the normal course of business. Bancorp's Management is not aware of any pending legal proceedings to which either it or the Bank may be a party or has recently been a party that will have a material adverse effect on the financial condition or results of operations of Bancorp or the Bank.

The Bank is responsible for a proportionate share of certain litigation indemnifications provided to Visa U.S.A. ("Visa") by its member banks in connection with Visa's lawsuits related to anti-trust charges and interchange fees ("Covered Litigation"). Our proportionate share of the litigation indemnification liability does not change or transfer upon the sale of our Class B Visa shares to member banks. Visa established an escrow account to pay for settlements or judgments in the Covered Litigation. Under the terms of the U.S. retrospective responsibility plan, when Visa funds the litigation escrow account, it triggers a conversion rate reduction of the Class B common stock to shares of Class A common stock, effectively reducing the aggregate value of the Class B common stock held by Visa's member banks like us.

In 2012, Visa had reached a $4.0 billion interchange multidistrict litigation class settlement agreement with plaintiffs representing a class of U.S. retailers. On September 17, 2018, Visa signed an amended settlement agreement with

the putative class action plaintiffs of the U.S. interchange multidistrict litigation that superseded the 2012 settlement agreement. Visa's share of the settlement amount under the amended class settlement agreement increased to $4.1 billion. On September 27, 2019, Visa deposited an additional $300 million into the litigation escrow account. Certain merchants chose to opt out of the class settlement agreement and on December 13, 2019, the court entered the final judgment order approving the amended settlement agreement. On December 27, 2019, Visa received a takedown payment of approximately $467 million, which was deposited into the litigation escrow account with a corresponding increase in accrued litigation to address opt-out claims. The escrow balance of $1.1 billion as of June 30, 2020 (most recent information available), combined with funds previously deposited with the court, are expected to cover the settlement payment obligations.

The outcome of the Covered Litigation affects the conversion rate of Visa Class B common stock held by us to Visa Class A common stock, as discussed above and in Note 4, Investment Securities. The final conversion rate might change depending on the final settlement payments, and the full effect on member banks is still uncertain. Litigation is ongoing and until the court approval process is complete, there is no assurance that Visa will resolve the claims as contemplated by the amended class settlement agreement, and additional lawsuits may arise from individual merchants who opted out of the class settlement. However, until the escrow account is fully depleted and the conversion rate of Class B to Class A common stock is reduced to zero, no future cash settlement payments are required by the member banks, such as us, on the Covered Litigation. Therefore, we are not required to record any contingent liabilities for the indemnification related to the Covered Litigation, as we consider the probability of losses to be remote.