RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

6 Months Ended

Jun. 30, 2020

RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

7. RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

The Company records as operating lease liabilities the present value of its required minimum lease payments plus any amounts probable of being owed under a residual value guarantee. Offsetting these operating lease liabilities, the Company records right-of-use assets for the underlying leased property.

At June 30, 2020, the Company was under 49 separate and distinct operating lease contracts to lease the land and/or buildings for 38 of its offices, with 15 such operating leases contracted with a related party of the Company. As of June 30, 2020, payments on 26 of the Company’s operating leases were considered variable because such payments were adjustable based on periodic changes in the Consumer Price Index.

Prior to the release of these financial statements, the Company executed a new operating lease for its Corporate Center location that commences in August 2020. The estimated right-of-use asset and lease liability to be recorded for this lease is approximately $19 million.

The following table presents information concerning the Company’s operating lease expense recorded as a noninterest expense within the category “Occupancy and equipment, net” for the three and six months ended June 30, 2020 and 2019:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2020		2019		2020		2019
Operating lease expense:
Related Party:
Variable lease expense	$	1,183	$	1,156	$	2,371	$	2,314
Fixed lease expense		23		10		47		18
Third Party:
Variable lease expense		180		211		361		435
Fixed lease expense		368		384		738		745
Short-term lease expense		—		12		4		26
Total operating lease expense	$	1,754	$	1,773	$	3,521	$	3,538
Other information concerning operating leases:
Cash paid for amounts included in the measurement of operating lease liabilities	$	1,793	$	1,794	$	3,630		3,577
Short-term lease payments not included in the measurement of lease liabilities		—		12		4		26

The following table presents the weighted average remaining term and weighted average discount rate for the Company’s non-short-term operating leases as of June 30, 2020 and December 31, 2019:

	June 30, 2020			December 31, 2019
Weighted average remaining term in years		7.99			8.02
Weighted average discount rate		3.55	%		3.46	%

The following table presents a maturity schedule of the Company’s operating lease liabilities based on undiscounted cash flows, and a reconciliation of those undiscounted cash flows to the operating lease liabilities recognized on the Company’s balance sheet as of June 30, 2020:

Year (in thousands)	Related Party		Third Party		Total
2020	$	2,283	$	1,345	$	3,628
2021		4,194		2,525		6,719
2022		3,332		2,120		5,452
2023		3,332		1,600		4,932
2024		3,205		1,173		4,378
Thereafter		12,718		3,376		16,094
Total undiscounted cash flows	$	29,064	$	12,139	$	41,203
Discount applied to cash flows		(4,103)		(1,529)		(5,632)
Total discounted cash flows reported as operating lease liabilities	$	24,961	$	10,610	$	35,571