Premises, Equipment and Leases

12 Months Ended

Dec. 31, 2020

Premises, Equipment and Leases [Abstract]

7. Premises, Equipment and Leases

A summary of premises and equipment follows:

	December 31,
(In thousands)	2020		2019
Land, buildings and improvements	$	125,002	$	121,479
Equipment		55,195		58,431
Premises and equipment before accumulated depreciation	$	180,197	$	179,910
Accumulated depreciation		105,991		104,279
Total premises and equipment	$	74,206	$	75,631

Buildings and improvements are depreciated based on useful lives of five to twenty years. Equipment is depreciated based on useful lives of three to ten years.

Operating leases in which we are the lessee are recorded as operating lease ROU assets and operating lease liabilities, included in other assets and other liabilities, respectively, on the consolidated balance sheets. The Company does not have any significant finance leases in which we are the lessee as of December 31, 2020 and December 31, 2019.

Operating lease ROU assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental borrowing rate at the lease commencement date. ROU assets are further adjusted for lease incentives. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in occupancy expense in the consolidated statements of income.

We have made a policy election to exclude the recognition requirements to all classes of leases with original terms of 12 months or less. Instead, the short-term lease payments are recognized in profit or loss on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes and insurance are not included in the measurement of the lease liability since they are generally able to be segregated.

Our leases relate primarily to office space and bank branches, and some contain options to renew the lease. These options to renew are generally not considered reasonably certain to exercise, and are therefore not included in the lease term until such time that the option to renew is reasonably certain. As of December 31, 2020, operating lease ROU assets and liabilities were $26.4 million and $32.8 million, respectively. As of December 31, 2019 operating lease ROU assets and liabilities were $34.8 million and $37.3 million, respectively.

The table below summarizes our net lease cost:

	December 31,
(In thousands)	2020			2019
Operating lease cost	$	7,382		$	7,239
Variable lease cost		2,141			2,231
Short-term lease cost		453			356
Sublease income		(502	)		(448	)
Total premises and equipment	$	9,474		$	9,378

The table below show future minimum rental commitments related to non-cancelable operating leases for the next five years and thereafter as of December 31, 2020.

(In thousands)
2021	$	7,209
2022		6,339
2023		5,251
2024		4,581
2025		3,411
Thereafter		10,023
Total lease payments	$	36,814
Less: interest		(3,990	)
Present value of lease liabilities	$	32,824

The following table shows the weighted average remaining operating lease term, the weighted average discount rate and supplemental information on the consolidated statements of cash flows for operating leases:

	December 31,
(In thousands except for percent and period data)	2020			2019
Weighted average remaining lease term, in years		7.21			7.69
Weighted average discount rate		3.02	%		3.00	%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,934		$	6,211
ROU assets obtained in exchange for lease liabilities		3,441			41,008

As of December 31, 2020 there are no new significant leases that have not yet commenced.

Rental expense included in occupancy expense amounted to $8.0 million in 2020, $8.0 million in December 31, 2019 and $8.6 million in December 31, 2018.