Leases

3 Months Ended

Mar. 31, 2021

The Company accounts for its leases in accordance with ASC 842 and requires the Company to record liabilities for future lease obligations as well as assets representing the right to use the underlying leased asset. The Company’s leases primarily represent future obligations to make payments for the use of buildings or space for its operations. Liabilities to make future lease payments are recorded in accrued expenses and other liabilities, while right-of-use assets are recorded in other assets in the Company’s consolidated statements of financial condition. At March 31, 2021, all of the Company’s leases were classified as operating leases or short-term leases.

Liabilities to make future lease payments and right-of-use assets are recorded for the Company’s operating leases and not short-term leases. These liabilities and right-of-use assets are determined based on the total contractual base rents for each lease, which include options to extend or renew each lease, where applicable, and where the Company believes it has an economic incentive to extend or renew the lease. Future contractual base rents are discounted using the rate implicit in the lease or using the Company’s estimated incremental borrowing rate if the rate implicit in the lease is not readily determinable. For leases that contain variable lease payments, the Company assumes future lease payment escalations based on a lease payment escalation rate specified in the lease or the specified index rate observed at the time of lease commencement. Liabilities to make future lease payments are accounted for using the interest method, being reduced by periodic contractual lease payments net of periodic interest accretion. Right-of-use assets for operating leases are amortized over the term of the associated lease by amounts that represent the difference between periodic straight-line lease expense and periodic interest accretion in the related liability to make future lease payments. Short-term leases are leases that have a term of 12 months or less at commencement. The Company recognizes expense for both operating leases and short-term leases on a straight-line basis.

The Company’s lease expense is recorded in premises and occupancy expense in the consolidated statements of income. The following table presents the components of lease expense for the periods indicated:


	Three Months Ended
	March 31, 2021		December 31, 2020		March 31, 2020
	(Dollars in thousands)
Operating lease	$	5,012	$	5,375	3,164
Short-term lease	507		607		527
Total lease expense	$	5,519	$	5,982	$	3,691

The Company assumed operating leases in the acquisition of Opus on June 1, 2020. The liabilities and related right-of-use assets recorded for the assumption of these leases was approximately $43.3 million and $42.4 million, respectively. Right-of-use assets related to the Opus acquisition reflect unfavorable lease liability adjustments of approximately $900,000. Lease liabilities for leases assumed from Opus were measured based on the net present value of remaining future lease payments, with consideration given for options to extend or renew each lease. Remaining future lease payments were discounted at the Company’s estimated incremental borrowing rate on the date of acquisition.

The following table presents supplemental information related to operating leases as of and for three months ended:


	March 31, 2021		December 31, 2020
	(Dollars in thousands)
Balance Sheet:
Operating lease right of use assets	$	70,417	$	76,090
Operating lease liabilities	79,441		85,556

	Three Months Ended
	March 31, 2021		March 31, 2020
	(Dollars in thousands)
Cash Flows:
Operating cash flows from operating leases	$	2,000	$	2,257

The following table provides information related to minimum contractual lease payments and other information associated with the Company’s leases as of the dates indicated:


	2021		2022		2023		2024		2025		Thereafter		Total
	(Dollars in thousands)
As of March 31, 2021

Operating leases	$	14,778	$	18,682	$	18,051	$	16,076	$	11,014	$	13,039	$	91,640
Short-term leases	180		7		—		—		—		—		187
Total contractual base rents (1)	$	14,958	$	18,689	$	18,051	$	16,076	$	11,014	$	13,039	$	91,827

Total liability to make lease payments													$	79,441
Difference in undiscounted and discounted future lease payments													$	12,386
Weighted average discount rate													5.70		%
Weighted average remaining lease term (years)													5.3

______________________________

(1) Contractual base rents reflect options to extend and renewals, and do not include property taxes and other operating expenses due under respective lease agreements.

The Company from time to time leases portions of space it owns to other parties. Income received from these transactions is recorded on a straight-line basis over the term of the sublease. For the three months ended March 31, 2021, December 31, 2020, and March 31, 2020, rental income totaled $175,000, $178,000, and $25,000, respectively.