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Leases

9 Months Ended

Sep. 30, 2020

8. Leases

The Company has 22 operating leases for branches (including headquarters) and office spaces, nine operating leases for vehicles, and one operating lease for equipment. Our leases have remaining lease terms ranging from two months to 15 years, none of which has a renewal option reasonably certain of exercise, which has been reflected in the Company’s calculation of lease term.

During the third quarter of 2020, the Company entered into one new branch lease, which is expected to open in the fourth quarter of 2020. Additionally, the Company executed an extension for one of its current branches and reduced office space at another location.

The Company has elected the short-term lease recognition exemption such that the Company will not recognize Right-Of-Use (“ROU”) assets or lease liabilities for leases with a term of less than 12 months from the commencement date. The Company’s operating lease expense totaled $1.9 million and was recorded in Occupancy and equipment on the Consolidated Statements of Income for each of the three month periods ended September 30, 2020 and 2019. The Company’s operating lease expense totaled $5.7 million and was recorded in Occupancy and equipment on the Consolidated Statements of Income for each of the nine month periods ended September 30, 2020 and 2019.

The Company has one agreement that qualifies as a short-term lease with expense totaling approximately $34,000 for each of the three month periods ended September 30, 2020 and 2019 and approximately $102,000 for each of the nine month periods ended September 30, 2020 and 2019, included in Professional services on the Consolidated Statements of Income. The Company has $0.3 million and $0.2 million in variable lease payments, which include insurance and real estate tax expenses and was recorded in Occupancy and equipment on the Consolidated Statements of Income, for the three months ended September 30, 2020 and 2019, respectively. The Company has $0.8 million and $0.6 million in variable lease payments, which include insurance and real estate tax expenses and was recorded in Occupancy and equipment on the Consolidated Statements of Income, for the nine months ended September 30, 2020 and 2019, respectively. At September 30, 2020, the weighted-average remaining lease term for our operating leases is approximately eight years and the weighted average discount rate is 3.6%. At September 30, 2020, the Company is evaluating the lease portfolio to assess present and future contracts, including but not limited to, real estate, vehicles and equipment.

Certain leases have escalation clauses for operating expenses and real estate taxes. The Company’s non-cancelable operating lease agreements expire through 2036.

Supplemental balance sheet information related to leases was as follows:




(Dollars in thousands)	September 30, 2020			December 31, 2019

Operating lease ROU assets	$	42,326		$	41,254

Operating lease liabilities	$	49,737		$	49,367

Weighted-average remaining lease term-operating leases		8.2 years			8.0 years
Weighted average discount rate-operating leases		3.6	%		3.8	%

The components of lease expense and cash flow information related to leases were as follows:


	For the three months ended
(Dollars in thousands)	September 30, 2020		September 30, 2019

Lease Cost
Operating lease cost	$	1,895	$	1,891
Short-term lease cost		34		34
Variable lease cost		281		267
Total lease cost	$	2,210	$	2,192

Other information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,101	$	2,002
Right-of-use assets obtained in exchange for new operating lease liabilities	$	6,772	$	1,253


	For the nine months ended
(Dollars in thousands)	September 30, 2020		September 30, 2019

Lease Cost
Operating lease cost	$	5,676	$	5,676
Short-term lease cost		102		102
Variable lease cost		832		757
Total lease cost	$	6,610	$	6,535

Other information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	6,283	$	6,052
Right-of-use assets obtained in exchange for new operating lease liabilities	$	6,822	$	1,295

The Company’s minimum annual rental payments for Bank facilities due under non-cancelable leases are as follows as of September 30, 2020:


	Minimum Rental
	(In thousands)
Years ended December 31:
2020	$	1,715
2021		7,739
2022		7,491
2023		7,612
2024		7,650
Thereafter		24,935
Total minimum payments required		57,142
Less: Implied interest		7,405
Total lease obligations	$	49,737