This excerpt taken from the WTNY 10-K filed Mar 2, 2009.
OFF-BALANCE SHEET ARRANGEMENTS
As a normal part of its business, the Company enters into arrangements that create financial obligations that are not recognized, wholly or in part, in the consolidated financial statements. Certain of these arrangements, such as noncancelable operating leases, are reflected in Table 12 above. The most significant off-balance sheet obligations are the Banks commitments under traditional credit-related financial instruments. Table 13 schedules these commitments as of December 31, 2008 by the periods in which they expire. Commitments under credit card and personal credit lines generally have no stated maturity.
Revolving loan commitments are issued primarily to support commercial activities. The availability of funds under revolving loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has not violated other contractual conditions. A number of such commitments are used only partially or, in some cases, not at all before they expire. Credit card and personal credit lines are generally subject to cancellation if the borrowers credit quality deteriorates, and many lines remain partly or wholly unused. Unfunded balances on revolving loan commitments and credit lines should not be used to project actual future liquidity requirements. Nonrevolving loan commitments are issued mainly to provide financing for the acquisition and development or construction of real property, both commercial and residential, although many are not expected to lead to permanent financing by the Bank. Expectations about the level of draws under all credit-related commitments, including the prospect of
temporarily increased levels of draws on back-up commercial facilities during this period of disruption in the credit markets, are incorporated into the Companys liquidity and asset/liability management models.
Substantially all of the letters of credit are standby agreements that obligate the Bank to fulfill a customers financial commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit enhancement to its customers other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors. Historically, the Bank has had minimal calls to perform under standby agreements. Certain public financing arrangements supported by letters of credit from the Bank are structured as variable-rate demand notes that are periodically remarketed to reset the interest rate. The recent disruption in credit markets has led to unsuccessful remarketing efforts for some of these public financings. To assist its customers, the Bank has purchased the underlying instruments until credit market conditions improve sufficiently to restart remarketing efforts or the instruments are refinanced under new arrangements. Such purchases totaled approximately $33 million as of December 31, 2008, and outstanding letters of credit supporting variable-rate demand notes totaled approximately $98 million.