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Leases

9 Months Ended

Sep. 30, 2020

Note 28 – Leases

The Corporation enters in the ordinary course of business into operating and finance leases for land, buildings and equipment. These contracts generally do not include purchase options or residual value guarantees. The remaining lease terms of 0.1 to 33.3years considers options to extend the leases for up to 20.0 years. The Corporation identifies leases when it has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.

The Corporation recognizes right-of-use assets (“ROU assets”) and lease liabilities related to operating and finance leases in its Consolidated Statements of Financial Condition under the caption of other assets and other liabilities, respectively. Refer to Note 13 and Note 17, respectively, for information on the balances of these lease assets and liabilities.

The Corporation uses the incremental borrowing rate for purposes of discounting lease payments for operating and finance leases, since it does not have enough information to determine the rates implicit in the leases. The discount rates are based on fixed-rate and fully amortizing borrowing facilities of its banking subsidiaries that are collateralized. For leases held by non-banking subsidiaries, a credit spread is added to this rate based on financing transactions with a similar credit risk profile.

The following table presents the undiscounted cash flows of operating and finance leases for each of the following periods:

September 30, 2020
(In thousands)		Remaining 2020		2021		2022		2023		2024		Later Years		Total Lease Payments		Less: Imputed Interest		Total
Operating Leases	$	7,334	$	31,544	$	27,430	$	25,095	$	23,986	$	74,358	$	189,747	$	(24,789)	$	164,958
Finance Leases		872		3,535		3,629		3,725		3,830		13,163		28,754		(4,785)		23,969

December 31, 2019
(In thousands)		2020		2021		2022		2023		2024		Later Years		Total Lease Payments		Less: Imputed Interest		Total
Operating Leases	$	29,872	$	27,445	$	23,540	$	21,257	$	20,176	$	70,842	$	193,132	$	(27,993)	$	165,139
Finance Leases		3,068		3,159		3,252		3,349		3,448		8,220		24,496		(4,686)		19,810

The following table presents the lease cost recognized by the Corporation in the Consolidated Statements of Operations as follows:

		Quarters ended September 30,				Nine months ended September 30,
(In thousands)		2020		2019		2020		2019
Finance lease cost:
	Amortization of ROU assets	$	525	$	422	$	1,512	$	1,265
	Interest on lease liabilities		299		296		900		901
Operating lease cost			8,361		7,233		24,189		23,156
Short-term lease cost			38		97		172		172
Variable lease cost			12		3		37		5
Sublease income			(23)		(29)		(83)		(84)
Net gain recognized from sale and leaseback transaction^[1]			-		-		(5,550)		-
Total lease cost^[2]		$	9,212	$	8,022	$	21,177	$	25,415
[1]	During the quarter ended June 30, 2020, the Corporation recognized the transfer of the Caparra Center as a sale. Since the sale and partial leaseback was considered to be at fair value, no portion of the gain on sale was deferred.
[2]	Total lease cost is recognized as part of net occupancy expense, except for the net gain recognized from the sale and leaseback transaction which was included as part of other operating income.

The following table presents supplemental cash flow information and other related information related to operating and finance leases.

			Nine months ended
(Dollars in thousands)			September 30, 2020			September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
	Operating cash flows from operating leases	$	24,115		$	22,527
	Operating cash flows from finance leases		900			906
	Financing cash flows from finance leases		1,608			1,269
ROU assets obtained in exchange for new lease obligations:
	Operating leases^[1]	$	13,085		$	7,882
	Finance leases		4,510			-
Weighted-average remaining lease term:
	Operating leases		8.1	years		8.6	years
	Finance leases		9.2	years		7.5	years
Weighted-average discount rate:
	Operating leases		3.2	%		3.6	%
	Finance leases		5.0	%		6.0	%
[1]	During the quarter ended June 30, 2020, the Corporation recognized a lease liability of $11.1 million and a corresponding ROU asset for the same amount as a result of the partial leaseback of the Caparra Center.

As of September 30, 2020, the Corporation has additional operating leases contracts that have not yet commenced with an undiscounted contract amount of $4.5 million, which will have lease terms ranging from 10 to 20 years.