Best way to generate smooth contour lines from point cloud data and preserve lakes, holes, rivers etc?

Hi, so I have a point cloud like this:

I would like to generate contour lines but have a smooth edge at rivers and lakes.

Currently I get results like this(where lines are made across the water and weird things) using ContourGenerator with pointcloud as input.

using 

I then clip these lines away but it don't look too great,

I end up with stumps like this sticking out into the river for example.

How could I go about fixing this, like stopping lines to form across such large distances?

Afterwards I also run Generalizer to smooth the lines out.

Tips on this?

edit: owait where did the pictures go let me readd.