Operating Leases

9 Months Ended

Sep. 30, 2020

United’s leases for which it is the lessee consist of operating leases for land, buildings, and equipment. Payments related to these leases consist primarily of base rent and, in the case of building leases, additional operating costs associated with the leased property such as common area maintenance and utilities. In most cases, these operating costs vary over the term of the lease, and therefore are classified as variable lease costs, which are recognized as incurred in the consolidated statement of income. In addition, certain operating leases include costs such as property tax, sales tax, and insurance, which are recognized as incurred in the consolidated statement of income. Many of United’s operating leases contain renewal options, which are included in the measurement of the right-of-use asset and lease liability only to the extent they are reasonably certain to be exercised. United also subleases and leases certain real estate properties to third parties under operating leases. The following table presents the balances of United’s right-of-use asset and operating lease liability for the periods indicated (in thousands).


	Balance Sheet Location	September 30, 2020		December 31, 2019
Right-of-use asset	Other assets	$	32,180	$	19,894
Operating lease liability	Other liabilities	33,968		22,039

During the nine months ended September 30, 2020, United obtained building and office space right-of-use assets resulting in an increase in its operating lease liability of $16.3 million. Leases assumed as part of the Three Shores transaction accounted for $15.1 million of the increase.

The table below presents the operating lease income and expense recognized for the periods indicated (in thousands).


		Three Months Ended September 30,				Nine Months Ended September 30,
	Income Statement Location	2020		2019		2020		2019
Operating lease cost	Occupancy expense	$	1,947	$	1,272	$	4,500	$	3,783
Variable lease cost	Occupancy expense	264		112		493		336
Short-term lease cost	Occupancy expense	27		52		80		92

Total lease cost		$	2,238	$	1,436	$	5,073	$	4,211

Sublease income and rental income from owned properties under operating leases	Other noninterest income	$	263	$	261	$	792	$	886

As of September 30, 2020, the weighted average remaining lease term and weighted average discount rate of operating leases was 5.78 years and 1.84%, respectively. Absent a readily determinable interest rate in the lease agreement, the discount rate applied to each individual lease obligation was United’s incremental borrowing rate for secured borrowings.

As of September 30, 2020, future minimum lease payments under operating leases were as follows (in thousands):


Year
Remainder of 2020	$	1,365
2021	8,057
2022	7,493
2023	6,793
2024	3,295
Thereafter	8,746
Total	35,749
Less discount	(1,781)
Present value of lease liability	$	33,968