Lease Commitments

12 Months Ended

Dec. 31, 2019

Lease Commitments

Lease Commitments

Note 20—Lease Commitments

On January 1, 2019, we adopted the requirements of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The purpose of the update was to increase transparency and comparability between organizations that enter into lease agreements. The key difference between the previous guidance and the update is the recognition of a right-of-use asset (ROU) and lease liability on the statement of financial position for those leases previously classified as operating leases under the old guidance. Accounting Standards Codification (“ASC”). Our lease agreements in which ASC Topic 842 has been applied are primarily for real estate properties, including retail branch locations, operations and administration locations and stand-alone ATM locations. We performed an analysis on equipment leases for the implementation of ASC Topic 842 and determined the number and dollar amount of our equipment leases was not material.

A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. We chose the transition method of adoption where we initially apply the new lease standard at the effective date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption if applicable. Therefore, we applied this standard to all existing leases as of the adoption date of January 1, 2019, recording a ROU asset and a lease liability in an equal amount. We recorded a ROU asset and lease liability of $82.2 million at the commencement date of January 1, 2019. We did not have a cumulative-effect adjustment to the opening balance of retained earnings at commencement and the adoption of ASC Topic 842 did not have a material impact on our consolidated income statement. With this transition method, we do not have to restate comparative prior periods presented in the financial statements related to ASC Topic 842, but will present comparative prior periods disclosures using the previous accounting guidance for leases. Disclosures for prior periods under the previous accounting guidance were on an annual basis only.

As of December 31, 2019, we had operating ROU assets of $87.4 million and operating lease liabilities of $88.8 million. We maintain operating leases on land and buildings for our operating centers, branch facilities and ATM locations. Most leases include one or more options to renew, with renewal terms extending up to 25 years. The exercise of renewal options is based on the sole judgment of management and what they consider to be reasonably certain given the environment today. Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of renewal rate compared to market rates, and the presence of factors that would cause a significant economic penalty to us if the option is not exercised. Leases with an initial term of 12 months or less are not recorded on the balance sheet and instead are recognized in lease expense on a straight-line basis over the lease term. We do not sublease any portion of these locations to third parties.

	Year Ended
(Dollars in thousands)	December 31,
	2019
Lease Expense Components:
Operating lease expense	$	8,804
Short-term lease expense		494
Variable lease expense		430
Total lease expense	$	9,728
Supplemental Cash Flow and Other Information Related to Leases:
Cash paid for amounts included in the measurement of lease liabilities - operating leases	$	7,725
Initial ROU assets recorded in exchange for new lease liabilities - operating leases	$	10,239
Weighted - average remaining lease term (years) - operating leases		14.14
Weighted - average discount rate - operating leases		3.9%
	December 31,
	2019
Supplemental Balance Sheet Information Related to Leases
Operating lease ROU assets (premises and equipment)	$	87,389
Operating lease liabilities (other liabilities)	$	88,846
Maturity Analysis of Lease Liabilities:
Year Ending December 31,
2020	$	8,077
2021		8,226
2022		8,341
2023		8,414
2024		7,974
Thereafter		76,222
Total		117,254
Less: Imputed Interest		(28,408)
Lease Liability	$	88,846

As of December 31, 2019, we did not maintain any finance leases, leases with related parties, and we determined that the number and dollar amount of our equipment leases was immaterial. As of December 31, 2019, we have additional operating leases that have not yet commenced of $5.2 million. These operating leases will commence in fiscal year 2020 with lease terms of 5 to 10 years.

See further discussion in Note 1 – Summary of Significant Accounting Policies page F-17 on accounting for leases.

Lease Commitments Disclosure at December 31, 2018 Prior to Adoption of ASU 2016-02

The Company’s subsidiary was obligated at December 31, 2018, under certain noncancelable operating leases extending to the year 2038 pertaining to banking premises and equipment. Some of the leases provide for the payment of property taxes and insurance and contain various renewal options. The exercise of renewal options is, of course, dependent upon future events. Accordingly, the following summary does not reflect possible additional payments due if renewal options are exercised.

Future minimum lease payments as of December 31, 2018, by year and in the aggregate, under noncancelable operating leases with initial or remaining terms in excess of one year are as follows:

(Dollars in thousands)
Year Ended December 31,
2019	$	7,497
2020		7,580
2021		7,423
2022		6,823
2023		6,123
Thereafter		16,510
	$	51,956

Total lease expense for the years ended December 31, 2018 and 2017 was $7.9 million and $6.2 million, respectively.