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Leases | 9 Months Ended
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Sep. 30, 2019
Leases [Abstract] |
Leases | LEASES BancShares leases certain branch locations, administrative offices and equipment. Operating lease ROU assets are included in other assets and the associated lease obligations are included in other liabilities on the Consolidated Balance Sheets. Finance leases are included in premises and equipment and other borrowings on the Consolidated Balance Sheets. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets; we instead recognize lease expense for these leases on a straight-line basis over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our corresponding obligation to make lease payments arising from the lease. Operating and finance lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The operating and finance lease ROU asset also includes initial direct costs and pre-paid lease payments made, excluding lease incentives. As most of our leases do not provide an implicit rate, BancShares uses its incremental borrowing rate, based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is determined using secured rates for new FHLB advances under similar terms as the lease at inception. We utilize the implicit or incremental borrowing rate at the effective date of a modification not accounted for as a separate contract or a change in the lease terms to determine the present value of lease payments. BancShares used the incremental borrowing rate on January 1, 2019, for operating leases that commenced prior to that date. Most leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 25 years. The exercise of lease renewal options is at our sole discretion. When it is reasonably certain that we will exercise our option to renew or extend the lease term, that option is included in calculating the value of the ROU and lease liability. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. We determine if an arrangement is a lease at inception and our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We have no related party lease agreements. As of September 30, 2019, there were no leases that have not yet commenced that would have a material impact on our Consolidated Financial Statements. The following table presents lease assets and liabilities as of September 30, 2019:
(Dollars in thousands) | Classification | September 30, 2019
Assets: |  |
Operating | Other assets | $ | 79,857 |
Finance | Premises and equipment | 9,402 |
Total leased assets |  | $ | 89,259 |
Liabilities: |  |
Operating | Other liabilities | $ | 79,234 |
Finance | Other borrowings | 8,610 |
Total lease liabilities |  | $ | 87,844 |
The following table presents lease costs for the three and nine months ended September 30, 2019. Variable lease cost primarily represents variable payments such as common area maintenance and utilities that are recognized in the period in which the expense was incurred. Certain of our lease agreements also include rental payments that are adjusted periodically for inflation. While lease liabilities are not remeasured as a result of these changes, these adjustments are treated as variable lease costs and recognized in the period in which the expense is incurred.
(Dollars in thousands) | Classification | Three months ended September 30, 2019 |  | Nine months ended September 30, 2019
Lease cost: |  |  |  |
Operating lease cost (1) | Occupancy expense | $ | 5,273 |  |  | $ | 12,059 |
Finance lease cost: |  |  |  |
Amortization of leased assets | Equipment expense | 541 |  |  | 1,434 |
Interest on lease liabilities | Interest expense - Other borrowings | 93 |  |  | 220 |
Variable lease cost | Occupancy expense | 527 |  |  | 1,779 |
Sublease income | Occupancy expense | (86 | ) |  | (303 | )
Net lease cost |  | $ | 6,348 |  |  | $ | 15,189 |
(1) Operating lease cost includes short-term lease cost, which is immaterial. |  |
The following table presents lease liability maturities in the next five years and thereafter:
(Dollars in thousands) | Operating Leases |  | Finance Leases |  | Total
2019 (1) | $ | 3,617 |  |  | $ | 435 |  |  | $ | 4,052 |
2020 | 14,052 |  |  | 2,142 |  |  | 16,194 |
2021 | 12,546 |  |  | 2,159 |  |  | 14,705 |
2022 | 11,142 |  |  | 1,876 |  |  | 13,018 |
2023 | 9,258 |  |  | 993 |  |  | 10,251 |
Thereafter | 43,841 |  |  | 1,683 |  |  | 45,524 |
Total lease payments | $ | 94,456 |  |  | $ | 9,288 |  |  | $ | 103,744 |
Less: Interest | 15,222 |  |  | 678 |  |  | 15,900 |
Present value of lease liabilities | $ | 79,234 |  |  | $ | 8,610 |  |  | $ | 87,844 |
(1) Represents the lease liability payments that will be made for the period October 1, 2019 through December 31, 2019.
The following table presents the remaining weighted average lease terms and discount rates as of September 30, 2019:
Weighted average remaining lease term (years): | September 30, 2019
Operating | 10.3 |
Finance | 4.9 |
Weighted average discount rate: |
Operating | 3.22 | %
Finance | 3.07 |
The following table presents supplemental cash flow information related to leases for the nine months ended September 30, 2019:
(Dollars in thousands) | September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities: |
Operating cash flows from operating leases | $ | 9,579 |
Operating cash flows from finance leases | 220 |
Financing cash flows from finance leases | 1,111 |
Right-of-use assets obtained in exchange for new operating lease liabilities | 17,762 |
Right-of-use assets obtained in exchange for new finance lease liabilities | 1,886 |
Leases | LEASES BancShares leases certain branch locations, administrative offices and equipment. Operating lease ROU assets are included in other assets and the associated lease obligations are included in other liabilities on the Consolidated Balance Sheets. Finance leases are included in premises and equipment and other borrowings on the Consolidated Balance Sheets. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets; we instead recognize lease expense for these leases on a straight-line basis over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our corresponding obligation to make lease payments arising from the lease. Operating and finance lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The operating and finance lease ROU asset also includes initial direct costs and pre-paid lease payments made, excluding lease incentives. As most of our leases do not provide an implicit rate, BancShares uses its incremental borrowing rate, based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is determined using secured rates for new FHLB advances under similar terms as the lease at inception. We utilize the implicit or incremental borrowing rate at the effective date of a modification not accounted for as a separate contract or a change in the lease terms to determine the present value of lease payments. BancShares used the incremental borrowing rate on January 1, 2019, for operating leases that commenced prior to that date. Most leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 25 years. The exercise of lease renewal options is at our sole discretion. When it is reasonably certain that we will exercise our option to renew or extend the lease term, that option is included in calculating the value of the ROU and lease liability. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. We determine if an arrangement is a lease at inception and our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We have no related party lease agreements. As of September 30, 2019, there were no leases that have not yet commenced that would have a material impact on our Consolidated Financial Statements. The following table presents lease assets and liabilities as of September 30, 2019:
(Dollars in thousands) | Classification | September 30, 2019
Assets: |  |
Operating | Other assets | $ | 79,857 |
Finance | Premises and equipment | 9,402 |
Total leased assets |  | $ | 89,259 |
Liabilities: |  |
Operating | Other liabilities | $ | 79,234 |
Finance | Other borrowings | 8,610 |
Total lease liabilities |  | $ | 87,844 |
The following table presents lease costs for the three and nine months ended September 30, 2019. Variable lease cost primarily represents variable payments such as common area maintenance and utilities that are recognized in the period in which the expense was incurred. Certain of our lease agreements also include rental payments that are adjusted periodically for inflation. While lease liabilities are not remeasured as a result of these changes, these adjustments are treated as variable lease costs and recognized in the period in which the expense is incurred.
(Dollars in thousands) | Classification | Three months ended September 30, 2019 |  | Nine months ended September 30, 2019
Lease cost: |  |  |  |
Operating lease cost (1) | Occupancy expense | $ | 5,273 |  |  | $ | 12,059 |
Finance lease cost: |  |  |  |
Amortization of leased assets | Equipment expense | 541 |  |  | 1,434 |
Interest on lease liabilities | Interest expense - Other borrowings | 93 |  |  | 220 |
Variable lease cost | Occupancy expense | 527 |  |  | 1,779 |
Sublease income | Occupancy expense | (86 | ) |  | (303 | )
Net lease cost |  | $ | 6,348 |  |  | $ | 15,189 |
(1) Operating lease cost includes short-term lease cost, which is immaterial. |  |
The following table presents lease liability maturities in the next five years and thereafter:
(Dollars in thousands) | Operating Leases |  | Finance Leases |  | Total
2019 (1) | $ | 3,617 |  |  | $ | 435 |  |  | $ | 4,052 |
2020 | 14,052 |  |  | 2,142 |  |  | 16,194 |
2021 | 12,546 |  |  | 2,159 |  |  | 14,705 |
2022 | 11,142 |  |  | 1,876 |  |  | 13,018 |
2023 | 9,258 |  |  | 993 |  |  | 10,251 |
Thereafter | 43,841 |  |  | 1,683 |  |  | 45,524 |
Total lease payments | $ | 94,456 |  |  | $ | 9,288 |  |  | $ | 103,744 |
Less: Interest | 15,222 |  |  | 678 |  |  | 15,900 |
Present value of lease liabilities | $ | 79,234 |  |  | $ | 8,610 |  |  | $ | 87,844 |
(1) Represents the lease liability payments that will be made for the period October 1, 2019 through December 31, 2019.
The following table presents the remaining weighted average lease terms and discount rates as of September 30, 2019:
Weighted average remaining lease term (years): | September 30, 2019
Operating | 10.3 |
Finance | 4.9 |
Weighted average discount rate: |
Operating | 3.22 | %
Finance | 3.07 |
The following table presents supplemental cash flow information related to leases for the nine months ended September 30, 2019:
(Dollars in thousands) | September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities: |
Operating cash flows from operating leases | $ | 9,579 |
Operating cash flows from finance leases | 220 |
Financing cash flows from finance leases | 1,111 |
Right-of-use assets obtained in exchange for new operating lease liabilities | 17,762 |
Right-of-use assets obtained in exchange for new finance lease liabilities | 1,886 |

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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