Leases

3 Months Ended

Mar. 31, 2020

LEASES

Old National has operating and finance leases for land, office space, banking centers, and equipment. These leases are generally for periods of 10 to 20 years with various renewal options. We include certain renewal options in the measurement of our right-of-use assets and lease liabilities if they are reasonably certain to be exercised. Variable lease payments that are dependent on an index or a rate are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability. Variable lease payments that are not dependent on an index or a rate are excluded from the measurement of the lease liability and are recognized in profit and loss when incurred. Variable lease payments are defined as payments made for the right to use an asset that vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.

Old National has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes, and insurance are not included in the measurement of the lease liability since they are generally able to be segregated. For certain equipment leases, Old National accounts for the lease and non-lease components as a single lease component using the practical expedient available for that class of assets.

Old National does not have any material sub-lease agreements.

The components of lease expense were as follows:


	Affected Line Item in the	Three Months Ended March 31,
(dollars in thousands)	Statement of Income	2020		2019
Operating lease cost	occupancy/equipment expense	$	9,181	$	4,402
Finance lease cost:
Amortization of right-of-use assets	occupancy expense	166		158
Interest on lease liabilities	interest expense	78		81
Short-term lease cost	occupancy expense	1		1
Sub-lease income	occupancy expense	(128)		(179)
Total		$	9,298	$	4,463

Supplemental balance sheet information related to leases was as follows:


(dollars in thousands)	March 31, 2020			December 31, 2019
Operating Leases
Operating lease right-of-use assets	$	86,819		$	95,477
Operating lease liabilities	95,830			99,500

Finance Leases
Premises and equipment, net	7,004			7,170
Other borrowings	7,284			7,406

Weighted-Average Remaining Lease Term (in Years)
Operating leases	10.5			10.6
Finance leases	11.0			11.3

Weighted-Average Discount Rate
Operating leases	3.43		%	3.45		%
Finance leases	4.44		%	4.43		%

Supplemental cash flow information related to leases was as follows:


	Three Months Ended March 31,
(dollars in thousands)	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,193	$	4,436
Operating cash flows from finance leases	78		$	81
Financing cash flows from finance leases	122		$	111

The following table presents a maturity analysis of the Company’s lease liability by lease classification at March 31, 2020:


(dollars in thousands)	Operating Leases		Finance Leases
2020	$	12,306	$	603
2021	15,492		809
2022	13,695		815
2023	9,078		830
2024	7,840		858
Thereafter	56,858		5,374
Total undiscounted lease payments	115,269		9,289
Amounts representing interest	(19,439)		(2,005)
Lease liability	$	95,830	$	7,284

Old National leases certain office space and buildings to unrelated parties in exchange for consideration. All of these tenant leases are classified as operating leases. The following table presents a maturity analysis of the Company’s tenant leases at March 31, 2020:


(dollars in thousands)	Tenant Leases
2020	$	1,832
2021	2,295
2022	1,941
2023	1,536
2024	1,409
Thereafter	2,520
Total undiscounted lease payments	$	11,533

Leases