Right-of-Use Assets and Lease Liabilities

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

We determine if a contract is or contains a lease at inception. Leases are classified as either finance or operating leases. We recognize leases on our Consolidated Balance Sheets as ROU assets and related lease liabilities. Finance ROU assets are included in property and equipment and related finance lease liabilities are included in long-term borrowings. Operating lease ROU assets are included in other assets and related operating lease liabilities are included in other liabilities. We estimate lease liabilities and ROU assets using our estimated incremental borrowing rate with similar terms at commencement date. Lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term for operating leases. Interest and amortization expenses are recognized for finance leases over the lease term.

We have 45 lease contracts that we have recognized under the new lease standard, ASC Topic 842. These leases are for our branch, loan production and support services facilities. We have recognized 43 operating leases and two finance leases under the new lease accounting standard. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term in Net Occupancy on our Consolidated Statements of Comprehensive Income.

The following tables present our ROU assets, lease expense, weighted average term, discount rate and maturity analysis of lease liabilities for finance and operating leases as of September 30, 2019 and for the periods presented:

	September 30, 2019
(in thousands, except weighted-averages)	Three Months Ended			Nine Months Ended
Operating lease expense		$	995		$	3,061
Amortization of ROU assets - finance leases		23			68
Interest on lease liabilities - finance leases (1)		18			54
Total Lease Expense		$	1,036		$	3,183
Operating Leases
ROU assets					$	37,534
Operating cash flows					$	931
Finance Leases
ROU assets					$	1,168
Operating cash flows					$	55
Financing cash flows					$	34
Weighted Average Lease Term - Years
Operating leases					19.94
Finance leases					15.16
Weighted Average Discount Rate
Operating leases					6.13		%
Finance leases					5.98		%

⁽¹⁾ Included in borrowings interest expense in our Consolidated Statements of Comprehensive Income. All other lease costs in this table are included in net occupancy expense.

(dollars in thousands)
Maturity Analysis	Finance			Operating				Total
2019	$	125			$	3,726		$	3,851
2020	126				3,681			3,807
2021	127				3,759			3,886
2022	128				3,836			3,964
2023	130				3,872			4,002
Thereafter	1,309				59,170			60,479
Total	$	1,945			$	78,044		$	79,989
Less: Present value discount	(716		)		(35,800		)	(36,516		)
Lease Liabilities	$	1,229			$	42,244		$	43,473

RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

We determine if a contract is or contains a lease at inception. Leases are classified as either finance or operating leases. We recognize leases on our Consolidated Balance Sheets as ROU assets and related lease liabilities. Finance ROU assets are included in property and equipment and related finance lease liabilities are included in long-term borrowings. Operating lease ROU assets are included in other assets and related operating lease liabilities are included in other liabilities. We estimate lease liabilities and ROU assets using our estimated incremental borrowing rate with similar terms at commencement date. Lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term for operating leases. Interest and amortization expenses are recognized for finance leases over the lease term.

We have 45 lease contracts that we have recognized under the new lease standard, ASC Topic 842. These leases are for our branch, loan production and support services facilities. We have recognized 43 operating leases and two finance leases under the new lease accounting standard. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term in Net Occupancy on our Consolidated Statements of Comprehensive Income.

The following tables present our ROU assets, lease expense, weighted average term, discount rate and maturity analysis of lease liabilities for finance and operating leases as of September 30, 2019 and for the periods presented:

	September 30, 2019
(in thousands, except weighted-averages)	Three Months Ended			Nine Months Ended
Operating lease expense		$	995		$	3,061
Amortization of ROU assets - finance leases		23			68
Interest on lease liabilities - finance leases (1)		18			54
Total Lease Expense		$	1,036		$	3,183
Operating Leases
ROU assets					$	37,534
Operating cash flows					$	931
Finance Leases
ROU assets					$	1,168
Operating cash flows					$	55
Financing cash flows					$	34
Weighted Average Lease Term - Years
Operating leases					19.94
Finance leases					15.16
Weighted Average Discount Rate
Operating leases					6.13		%
Finance leases					5.98		%

⁽¹⁾ Included in borrowings interest expense in our Consolidated Statements of Comprehensive Income. All other lease costs in this table are included in net occupancy expense.

(dollars in thousands)
Maturity Analysis	Finance			Operating				Total
2019	$	125			$	3,726		$	3,851
2020	126				3,681			3,807
2021	127				3,759			3,886
2022	128				3,836			3,964
2023	130				3,872			4,002
Thereafter	1,309				59,170			60,479
Total	$	1,945			$	78,044		$	79,989
Less: Present value discount	(716		)		(35,800		)	(36,516		)
Lease Liabilities	$	1,229			$	42,244		$	43,473