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LEASES

12 Months Ended

Dec. 31, 2019

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On January 1, 2019, the Company adopted ASU No. 2016-02, “Leases (Topic 842)” and all subsequent ASUs that modified Topic 842. For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee. See Note 1 - Summary of Significant Accounting Policies to the Consolidated Financial Statements regarding transition guidance related to the new standard.

Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches, ATM locations, and office space. Most of the Company’s leases are classified as operating leases, and therefore, were previously not recognized on the Company’s Consolidated Balance Sheets. With the adoption of Topic 842, operating lease agreements are required to be recognized on the Consolidated Balance Sheets as a right-of-use (“ROU”) asset and a corresponding lease liability. The Company’s finance leases (previously referred to as a capital lease) was previously required to be recorded on the Company’s Consolidated Balance Sheets. As these leases were previously required to be recorded on the Company’s Consolidated Balance Sheets, Topic 842 did not materially impact the accounting for the leases.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company utilized the implicit lease rate when readily determinable. As most of the Company’s leases do not provide an implicit rate, the Company used our incremental borrowing rate based on the information available at commencement date. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. The weighted average discount rate used to discount operating lease liabilities and finance lease liabilities at December 31, 2019 was 3.36% and 5.00%, respectively.

The Company made a policy election to exclude the recognition requirements of Topic 842 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. At December 31, 2019 lease expiration dates ranged from 1 month to 21 years. The weighted average remaining lease term for operating and finance leases at December 31, 2019 was 10.3 years and 14.8 years, respectively.

The following table represents the Consolidated Balance Sheets classification of the Company’s ROU assets and lease liabilities:



(In thousands)		December 31, 2019
Lease Right-of-Use Assets	Classification
Operating lease right-of-use assets (1)	Other assets	$	76,332
Finance lease right-of-use assets	Premises and equipment, net	7,720
Total Lease Right-of-Use Assets		$	84,052

Lease Liabilities
Operating lease liabilities (1)	Other liabilities	$	80,734
Finance lease liabilities	Other liabilities	10,883
Total Lease Liabilities		$	91,617

(1) Includes $3.5 million of operating lease right-of-use assets and $3.5 million of operating lease liabilities classified as discontinued operations.

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.

The Company does not have any material sub-lease agreements.

Lease expense for operating leases for the year ended December 31, 2019 was $14.4 million, of which $2.8 million was related to FCLS and is reported as discontinued operations. Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

Supplemental cash flow information related to leases was as follows:



	Year Ended
(In thousands)	December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (1)	$	14,731
Operating cash flows from finance leases	553
Financing cash flows from finance leases	435

Right-of-use assets obtained in exchange for lease obligations:
Operating leases (1)	88,079
Finance leases	—

(1) Includes operating cash flows from operating leases of $2.8 million related to discontinued operations.

The following table presents a maturity analysis of the Company’s lease liability by lease classification at December 31, 2019:



(In thousands)	Operating Leases			Finance Leases
2020	$	13,763		$	1,031
2021	12,515			1,031
2022	11,295			1,031
2023	9,331			1,037
2024	7,873			1,037
Thereafter	40,924			10,260
Total undiscounted lease payments (1)	95,701			15,427
Less amounts representing interest (1)	(14,967		)	(4,544		)
Lease liability (1)	$	80,734		$	10,883

(1) Includes $3.5 million of discontinued operations.

LEASES