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Lease Commitments

12 Months Ended

Dec. 31, 2020

Note 22—Lease Commitments

On January 1, 2019, we adopted the requirements of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The purpose of the update was to increase transparency and comparability between organizations that enter into lease agreements. The key difference between the previous guidance and the update is the recognition of a right-of-use asset (ROU) and lease liability on the statement of financial position for those leases previously classified as operating leases under the old guidance. Accounting Standards Codification (“ASC”). Our lease agreements in which ASC Topic 842 has been applied are primarily for real estate properties, including retail branch locations, operations and administration locations and stand-alone ATM locations. We performed an analysis on equipment leases for the implementation of ASC Topic 842 and determined the number and dollar amount of our equipment leases was not material.

A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. We chose the transition method of adoption where we initially apply the new lease standard at the effective date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption if applicable. Therefore, we applied this standard to all existing leases as of the adoption date of January 1, 2019, recording a ROU asset and a lease liability in an equal amount. We recorded a ROU asset and lease liability of $82.2 million at the commencement date of January 1, 2019. We did not have a cumulative-effect adjustment to the opening balance of retained earnings at commencement and the adoption of ASC Topic 842 did not have a material impact on our consolidated income statement.

As of December 31, 2020 and 2019, we had operating ROU assets of $113.4 million and $87.4 million, respectively, and operating lease liabilities of $118.3 million and $88.8 million, respectively. We maintain operating leases on land and buildings for our operating centers, branch facilities and ATM locations. Most leases include one or more options to renew, with renewal terms extending up to 25 years. The exercise of renewal options is based on the sole judgment of management and what they consider to be reasonably certain given the environment today. Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of renewal rate compared to market rates, and the presence of factors that would cause a significant economic penalty to us if the option is not exercised. Leases with an initial term of 12 months or less are not recorded on the balance sheet and instead are recognized in lease expense on a straight-line basis over the lease term. We do not sublease any portion of these locations to third parties.



(Dollars in thousands)	Year Ended December 31,
	2020		2019
Lease Cost Components:
Amortization of ROU assets - finance leases	$	289	$	—
Interest on lease liabilities - finance leases		44		—
Operating lease cost (cost resulting from lease payments)		14,266		8,804
Short-term lease cost		404		494
Variable lease cost (cost excluded from lease payments)		1,081		430
Total lease cost	$	16,084	$	9,728
Supplemental Cash Flow and Other Information Related to Leases:
Finance lease - operating cash flows	$	42	$	—
Finance lease - financing cash flows		255		—
Operating lease - operating cash flows (fixed payments)		12,876		7,725
Operating lease - operating cash flows (net change asset/liability)		(9,123)		1,457
New ROU assets - operating leases		43,583		10,239
New ROU assets - finance leases		5,374
Weighted - average remaining lease term (years) - finance leases		7.40
Weighted - average remaining lease term (years) - operating leases		11.51		14.14
Weighted - average discount rate - finance leases		1.7%
Weighted - average discount rate - operating leases		3.3%		3.9%

Operating lease payments due:
2021	$	15,753
2022		14,508
2023		13,482
2024		12,212
2025		10,747
Thereafter		78,711
Total undiscounted cash flows		145,413
Discount on cash flows		(27,092)
Total operating lease liabilities	$	118,321

As of December 31, 2020, the Company also holds a small number of finance leases assumed in connection to the CSFL merger. These leases are all real estate leases. Terms and conditions are similar to those real estate operating leases described above. Lease classifications from the acquired institutions were retained. At December 31, 2020, we do not maintain any leases with related parties, and we determined that the number and dollar amount of our equipment leases was immaterial. As of December 31, 2020, we have an additional operating lease that has not yet commenced of $3.5 million. This operating lease will commence in fiscal year 2021 with a lease term of 10 years.

See further discussion in Note 1—Summary of Significant Accounting Policies on page F-21 on accounting for leases.