Leases (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of ROU Assets and Lease Liabilities

The table below presents Heartland's ROU assets and lease liabilities as of December 31, 2019, in thousands:


	Classification	December 31, 2019
Operating lease right-of-use assets	Other assets	$	23,200
Operating lease liabilities	Accrued expenses and other liabilities	$	24,617

Schedule of Lease Costs and Supplemental Information

The table below presents the lease costs and supplemental information as of December 31, 2019, in thousands:


Lease Cost	Income Statement Category	For the Year Ended December 31, 2019
Operating lease cost	Occupancy expense	$	6,031
Variable lease cost	Occupancy expense	145

Total lease cost		$	6,176
Supplemental Information
Noncash reduction of ROU assets arising from lease modifications	Occupancy expense	$	1,771
Noncash reduction lease liabilities arising from lease modifications	Occupancy expense	$	1,789

Supplemental balance sheet information		As of December 31, 2019
Weighted-average remaining operating lease term (in years)					6.61

Weighted-average discount rate for operating leases		3.00		%

Schedule of Maturity Analysis of Operating Lease Liabilities and Reconciliation of the Undiscounted Cash Flows to the Total of Operating Lease Liabilities

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities as of December 31, 2019 is as follows, in thousands:


Year ending December 31,
2020	$	5,661
2021	5,408
2022	4,076
2023	2,723
2024	2,015
Thereafter	7,300
Total lease payments	$	27,183
Less interest	(2,566)
Present value of lease liabilities	$	24,617

As defined by Topic 840, Heartland's minimum future rental commitments at December 31, 2018, for all non-cancelable leases were as follows, in thousands:


2019	$	5,776
2020	5,493
2021	5,102
2022	3,241
2023	2,297
Thereafter	12,419
	$	34,328

Schedule of Future Minimum Rental Payments for Operating Leases

LEASES

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On January 1, 2019, Heartland adopted ASU 2016-02 "Leases" (Topic 842) and all subsequent ASUs that modified Topic 842. For Heartland, Topic 842 primarily affected the accounting treatment for operating lease agreements in which Heartland is the lessee.

Lessee Accounting

Substantially all of the leases in which Heartland is the lessee are comprised of real estate property for branches, ATM locations, and office space with terms extending through 2031. All of Heartland's leases are classified as operating leases, and therefore, were previously not recognized on the consolidated balance sheets. With the adoption of Topic 842, operating lease agreements are required to be recognized on the consolidated balance sheets as a right-of-use ("ROU") asset and a corresponding lease liability.

Heartland elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the consolidated balance sheets. The table below presents Heartland's ROU assets and lease liabilities as of December 31, 2019, in thousands:


	Classification	December 31, 2019
Operating lease right-of-use assets	Other assets	$	23,200
Operating lease liabilities	Accrued expenses and other liabilities	$	24,617

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. Heartland’s lease agreements often include one or more options to renew at Heartland’s discretion. If at lease inception, Heartland considers the exercising of a renewal option to be reasonably certain, Heartland will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, Heartland utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For operating leases existing prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019, was used. The variable lease cost primarily represents variable payments such as common area maintenance and utilities. The table below presents the lease costs and supplemental information as of December 31, 2019, in thousands:


Lease Cost	Income Statement Category	For the Year Ended December 31, 2019
Operating lease cost	Occupancy expense	$	6,031
Variable lease cost	Occupancy expense	145

Total lease cost		$	6,176
Supplemental Information
Noncash reduction of ROU assets arising from lease modifications	Occupancy expense	$	1,771
Noncash reduction lease liabilities arising from lease modifications	Occupancy expense	$	1,789

Supplemental balance sheet information		As of December 31, 2019
Weighted-average remaining operating lease term (in years)					6.61

Weighted-average discount rate for operating leases		3.00		%

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities as of December 31, 2019 is as follows, in thousands:


Year ending December 31,
2020	$	5,661
2021	5,408
2022	4,076
2023	2,723
2024	2,015
Thereafter	7,300
Total lease payments	$	27,183
Less interest	(2,566)
Present value of lease liabilities	$	24,617

As defined by Topic 840, Heartland's minimum future rental commitments at December 31, 2018, for all non-cancelable leases were as follows, in thousands:


2019	$	5,776
2020	5,493
2021	5,102
2022	3,241
2023	2,297
Thereafter	12,419
	$	34,328