20.                   COMMITMENTS AND CONTINGENCIES

 

The Company leases a number of offices as part of its regular business operations.  Rental expense under such leases aggregated $5.3 million, $5.3 million and $5.2 million for the years ended December 31, 2013, 2012 and 2011, respectively.  At December 31, 2013, the Company was committed under non-cancelable operating lease agreements for minimum rental payments to lessors as follows:

 

(Dollars in thousands)
2014		$		5,675
2015		5,313
2016		4,659
2017		4,288
2018		4,117
Thereafter		37,233
		$	61,285

 

In the normal course of business, there are various outstanding commitments and contingent liabilities, such as commitments to extend credit, which are not reflected in the consolidated financial statements.  The Company has established specific reserves related to loan commitments that are not material to the Company.

 

At December 31, 2013 and 2012, the Company had outstanding commitments to purchase or make loans aggregating approximately $38.2 million and $20.8 million, respectively, and commitments to customers on available lines of credit of $166.2 million and $140.0 million, respectively, at competitive rates.  Commitments are issued in accordance with the same policies and underwriting procedures as settled loans.  The Bank had a reserve for its commitments and contingencies of $765 thousand and $624 thousand at year end December 31, 2013 and 2012, respectively.

 

In the first quarter of 2013, the Company received notice that it was being investigated by the DOJ for potential violations of the Equal Credit Opportunity Act and Fair Housing Act relating to the Company’s home-mortgage lending practices from January 1, 2008 to the present.  Specifically, the DOJ indicated that it was looking for statistical and other indicators of a pattern and practice of persistent disparities with regard to home-mortgage lending practices.

 

In December 2012, the FDIC referred the Company to the DOJ as a result of a regularly scheduled fair housing examination that included a statistical analysis of the Company’s denial rates of both minority and non-minority loan applicants for a five year period.  That statistical analysis showed a higher rejection rate for minority applicants, but only considered limited information related to the Company’s credit standards that are applied to all applicants in the decision making process. It was on the basis of this statistical analysis that the DOJ announced its investigation.

 

In response to the DOJ’s investigation, the Company  hired outside counsel and economists to conduct an internal investigation. At this time, and to the best of its knowledge, the Company is not aware of any wrongdoing.

 

In late January 2014, the Company received correspondence from the DOJ indicating that the DOJ had completed its review and determined that the matter did not require enforcement action by the DOJ and was being referred back to the FDIC.  The Company was not able to determine whether further action will be taken at this point with respect to the ultimate resolution of this matter and the Company is in discussions with the FDIC Staff. Until this matter is resolved, it is unlikely that any regulatory applications will be filed related to strategic expansion or regarding a second step conversion.

 

Periodically, there have been various claims and lawsuits against the Bank, such as claims to enforce liens, condemnation proceedings on properties in which it holds security interests, claims involving the making and servicing of real property loans and other issues incident to its business.  The Bank is not a party to any pending legal proceedings that it believes would have a material adverse effect on its financial condition, results of operations or cash flows.