8. COMMITMENTS AND CONTINGENCIES AND DERIVATIVES In the normal course of business, there are outstanding commitments and contingencies which are not reflected in the accompanying consolidated financial statements. Loan Commitments The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the accompanying consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Companys exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for loan commitments is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments. A summary of outstanding loan commitments whose contract amounts represent credit risk is as follows: March 31, December 31, 2020 2019 (In thousands) Unadvanced portion of existing loans: Construction $ 529,102 $ 402,393 Home equity lines of credit 81,870 82,362 Other lines and letters of credit 343,950 363,955 Commitments to originate: One- to four-family 43,604 26,246 Commercial real estate 42,635 63,344 Construction 140,335 333,870 Commercial and industrial 9,517 16,655 Other loans 409 100 Total loan commitments outstanding $ 1,191,422 $ 1,288,925 Commitments to originate loans are agreements to lend to a customer provided 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. Since a portion of the commitments are expected to expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. The Company evaluates each customers credit worthiness on a case by case basis. The amount of collateral obtained, if deemed necessary by the Company for the extension of credit, is based upon managements credit evaluation of the borrower. Collateral held includes, but is not limited to, residential real estate and deposit accounts. Unfunded commitments under lines of credit are commitments for possible future extensions of credit to existing customers. These lines of credit are collateralized if deemed necessary and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed. Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Interest Rate Swaps The Company is a party to interest rate derivatives that are not designated as hedging instruments. These derivatives relate to interest rate swaps that the Company enters into with commercial business customers to synthetically convert their loans from a variable rate to a fixed rate. The Company pays interest to the customer at a floating rate on the notional amount and receives interest from the customer at a fixed rate for the same notional amount. Concurrently, the Company enters into an offsetting interest rate swap with a third party financial institution. In the offsetting swap, the Company pays the other financial institution interest at the same fixed rate on the same notional amount as the swap entered into with the customer, and receives interest from the financial institution for the same floating rate on the same notional amount. The changes in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined by taking into consideration the risk rating and probability of default. At March 31, 2020, the Company had $13.3 million in cash pledged for collateral on its interest rate swaps with the third-party financial institution. At December 31, 2019, the Company had $5.4 million in cash pledged for collateral on its interest rate swaps with the third-party financial institution. Summary information regarding these derivatives is presented below: March 31, 2020 December 31, 2019 Maturity Interest Rate Paid Interest Rate Received Notional Amount Fair Value Asset (Liability) Notional Amount Fair Value Asset (Liability) (Dollars in thousands) Customer interest rate swap 06/07/32 1 Mo. Libor + 200bp Fixed (4.40%) $ 62,017 $ 10,588 $ 62,425 $ 3,625 Third-party interest rate swap 06/07/32 Fixed (4.40%) 1 Mo. Libor + 200bp 62,017 (10,588 ) 62,425 (3,625 ) Customer interest rate swap 10/17/33 1 Mo. Libor + 175bp Fixed (4.1052%) $ 10,084 $ 1,607 $ 10,166 $ 918 Third-party interest rate swap 10/17/33 Fixed (4.1052%) 1 Mo. Libor + 175bp 10,084 (1,607 ) 10,166 (918 ) Customer interest rate swap 12/13/26 1 Mo. Libor + 205bp Fixed (3.82%) $ 2,519 $ 168 $ 2,561 $ 18 Third-party interest rate swap 12/13/26 Fixed (3.82%) 1 Mo. Libor + 205bp 2,519 (168 ) 2,561 (18 ) Other Commitments As of March 31, 2020, the Company has an outstanding commitment of $7.6 million with its core data processing provider through December 2021. Employment and Change in Control Agreements The Company has entered into employment agreements with certain senior executives which provide for a minimum annual salary, subject to increase at the discretion of the Board of Directors, and other benefits, including a severance payment in the event employment is terminated in conjunction with a defined change in control. The agreements may be terminated for cause by the Company without further liability on the part of the Company, or by the executives with prior written notice to the Board of Directors. The Company also has change in control agreements with several officers which provide a severance payment in the event employment is terminated in conjunction with a defined change in control. Legal Claims Various legal claims may arise from time to time in the normal course of business, but in the opinion of management, these claims are not expected to have a material effect on the Companys consolidated financial statements. Cold Spring Green, LLC and Hisham Ashkouri v. East Boston Savings Bank and Meridian Interstate Bancorp, Inc. The Bank is a defendant in a lawsuit that was filed in 2015 in Middlesex Superior Court in Massachusetts. The plaintiffs seek damages related to the foreclosure of a loan that was originated in 2007 by Mt. Washington Bank, which the Bank acquired in 2010. A similar suit by the same plaintiffs was filed in 2013 but subsequently dismissed. Following a trial in October 2019, the jury returned a verdict that rejected each of the plaintiffs claims for breach of contract, fraudulent inducement and unjust enrichment. However, the jury found, in an advisory verdict, that the Bank intentionally acted unfairly and deceptively in violation of Massachusetts General Laws Chapter 93A (G.L. c. 93A), which states: "Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful." The jury found that the Bank caused the plaintiffs damages in the amount of $1.0 million. On November 25, 2019, the trial judge issued an opinion on the G.L. c. 93A count, adopting the jurys advisory verdict and awarding the plaintiffs $1.0 million, which was then doubled as provided for in the statute for what was deemed to be a knowing and willing act on the part of the Bank. The trial judge also awarded the plaintiffs their reasonable attorneys fees and costs, resulting in a total award of $2.1 million plus attorneys fees, costs and interest. If the judgment is upheld in full, the Company has estimated that the award, which includes attorney's fees, costs and interest, could be as high as $3 million. However, the Company believes there are strong grounds for appeal based on significant appellate case law and the intentions to vigorously defend its interests in this matter, including arguing for complete reversal on appeal, a Notice of Appeal was filed on March 9, 2020. Although the Company believes there is a strong basis to vacate the award, there remains a reasonable possibility that the judgment will be affirmed in whole or in part, with the possible range of loss from $0 to $3 million. The Company does not believe that the loss is probable at this time, as that term is used in assessing loss contingencies. Accordingly, in accordance with the authoritative guidance in the evaluation of contingencies, the Company has not recorded an accrual related to this matter.