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, 2022		December 31, 2021
Commercial lines of credit	$	283,731	$	330,234
Revolving home equity lines	216,632		210,938
Undisbursed construction loans	47,795		78,381
Personal and other lines of credit	11,556		11,001
Standby letters of credit	1,978		3,657
Total commitments and standby letters of credit	$	561,692	$	634,211

We record an allowance for credit losses on unfunded loan commitments at the balance sheet date based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience of the different types of commitments and expected loss rates determined for pooled funded loans. The allowance

for credit losses on unfunded commitments totaled $1.5 million and $1.8 million as of September 30, 2022 and December 31, 2021, respectively, which is included in interest payable and other liabilities in the consolidated statements of condition. We recorded no provision for credit losses on unfunded commitments for the third quarters of 2022 and 2021. This compares to reversals of $318 thousand and $1.2 million for the nine months ended September 30, 2022 and 2021, respectively, due to improved economic forecasts at the time.

We lease premises under long-term non-cancelable operating leases with remaining terms of 3 months to 20 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, 2022		December 31, 2021
Operating leases:
Operating lease right-of-use assets	$	25,006	$	23,604
Operating lease liabilities	$	26,744	$	25,429
Finance leases:
Finance lease right-of-use assets	$	512	$	499
Accumulated amortization	(158)		(93)
Finance lease right-of-use assets, net1	$	354	$	406
Finance lease liabilities2	$	365	$	419
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.

The following table shows supplemental disclosures of noncash investing and financing activities for the periods presented.


	Nine months ended
(in thousands)	September 30, 2022		September 30, 2021
Right-of-use assets obtained in exchange for operating lease liabilities	$	4,989	$	2,376
Right-of-use assets obtained in exchange for finance lease liabilities	$	41	$	444


	Three months ended				Nine months ended
(in thousands)	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Operating lease cost	$	1,328	$	1,216	$	3,907	$	3,543
Variable lease cost	—		—		—		—
Total operating lease cost1	$	1,328	$	1,216	$	3,907	$	3,543
Finance lease cost:
Amortization of right-of-use assets2	$	31	$	31	$	93	$	65
Interest on finance lease liabilities3	1		1		2		1
Total finance lease cost	$	32	$	32	$	95	$	66
Total lease cost	$	1,360	$	1,248	$	4,002	$	3,609
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, 2022. The discount rates used to calculate the present value of lease liabilities were based on the collateralized FHLB


(in thousands)	September 30, 2022
Year	Operating Leases			Finance Leases
2022	$	1,369		$	32
2023	5,236			125
2024	4,412			123
2025	3,676			76
2026	2,888			10
Thereafter	11,938			5
Total minimum lease payments	29,519			371
Amounts representing interest (present value discount)	(2,775)			(6)
Present value of net minimum lease payments (lease liability)	$	26,744		$	365
Weighted average remaining term (in years)	7.8			3.1
Weighted average discount rate	2.13		%	0.94		%

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 reached a $4.0 billion interchange multidistrict litigation class settlement agreement with plaintiffs representing a class of U.S. retailers. For the fiscal year ended September 30, 2022, Visa deposited an additional $600 million into the litigation escrow account to address claims of certain merchants who opted out of the Amended Settlement Agreement for a balance of $1.5 billion. Combined with funds previously deposited with the court, these funds 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 is subject to 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.