Operating Leases

9 Months Ended

Sep. 30, 2020

On January 1, 2019, the Company adopted ASU 2016-02, “Leases (Topic 842),” and all subsequent ASUs that are related to Topic 842. The Company adopted this ASU using the optional transition method with a cumulative effect adjustment to retained earnings without restating prior financial statements for comparable amounts. As a result, the Company recognized right-of-use assets and liabilities of $9.6 million and $10.6 million, respectively, with a cumulative effect adjustment of $53 thousand to retained earnings at the date of adoption. The Company made an election to include both the lease and non-lease components as a single component and account for it as a lease.

The Company’s operating leases are for its headquarters office spaces, and retail branch and LPO locations. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years. The exercise of lease renewal option is at the Company’s sole discretion. Certain leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expenses for these leases are recognized on a straight-line basis over the lease term. None of the Company’s lease agreements contain any material residual value guarantees or material restrictive covenants. The Company also leases certain equipment, such as copy machines and scanners, but they are determined to be immaterial.

The following table presents operating lease cost and supplemental cash flow information related to leases for the periods indicated:


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2020		2019		2020		2019
Operating lease cost (1)	$	669	$	680	$	1,985	$	1,953
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	680	$	693	2,107		2,012
Right of use assets obtained in exchange for lease obligations	$	51	$	28	105		1,616

(1) Included in Occupancy and Equipment on the Consolidated Statements of Income.

The Company used the incremental borrowing rate based on the information available at lease commencement in determining the present value of lease payments. The following table presents supplemental balance sheet information related to leases as of the dates indicated:


($ in thousands)	September 30, 2020			December 31, 2019
Operating leases:
Operating lease assets	$	7,329		$	8,991
Operating lease liabilities	$	8,204		$	9,990
Weighted-average remaining lease term	4.4 years			5.0 years
Weighted-average discount rate	2.80		%	2.81		%

The following table presets maturities of operating lease liabilities as of September 30, 2020:


($ in thousands)	September 30, 2020
Maturities:
2020	$	641
2021	2,330
2022	2,171
2023	1,828
2024	547
After 2024	1,352
Total lease payment	8,869
Imputed Interest	(665)
Present value of operating lease liabilities	$	8,204