XML 40 R29.htm IDEA: XBRL DOCUMENT

Operating Leases

9 Months Ended

Sep. 30, 2020

NOTE 22— OPERATING LEASES

Lessee Accounting

Right of use assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate. Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised. The right-of-use asset is measured at the amount of the lease liability adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of the right-of-use-asset.

Operating lease expense consists of a single lease cost calculated so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis, and any impairment of the right-of-use asset. Variable lease payments are generally expensed as incurred and include certain nonlease components, such as maintenance and other services provided by the lessor, and other charges included in the lease. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases and for operating leases is recognized on a straight-line basis over the lease term.

Substantially all leases in which Oriental is the lessee are comprised of real estate property for branches, ATM locations, and office space with terms extending through 2032. Oriental’s leases do not contain residual value guarantees or material variable lease payments. All leases are classified as operating leases and are included on the consolidated statements of financial condition as a right-of-use asset and a corresponding lease liability. Oriental leases to others certain space in its principal offices for terms extending through 2023; all are operating leases.

Operating Lease Cost

	Quarter Ended September 30,				Nine-Month Period Ended September 30,
	2020		2019		2020		2019		Statement of Operations Classification
	(In thousands)				(In thousands)
Lease costs	$	3,260	$	1,608	$	10,148	$	4,949	Occupancy and equipment
Variable lease costs		459		350		1,630		1,699	Occupancy and equipment
Short-term lease cost (benefit)		358		81		386		104	Occupancy and equipment
Lease income		(125)		(135)		(374)		(431)	Occupancy and equipment
Total lease cost	$	3,952	$	1,904	$	11,790	$	6,321

Operating Lease Assets and Liabilities

		September 30,	December 31,
		2020	2019		Statement of Financial Condition Classification
	(In thousands)
Right-of-use assets	$	35,900	$	39,112	Operating lease right-of-use assets
Lease Liabilities	$	37,029	$	39,840	Operating leases liabilities

	September 30, 2020
	September 30, 2020
	(In thousands)
Weighted-average remaining lease term		6.2 years
Weighted-average discount rate		6.8%

Future minimum payments for operating leases with initial or remaining terms of one year or more as of September 30, 2020 were as follows:

	Minimum Rent
Year Ending December 31,	(In thousands)
2020	$	2,751
2021		9,519
2022		8,158
2023		6,947
2024		4,732
Thereafter		13,924
Total lease payments	$	46,031
Less imputed interest		9,002
Present value of lease liabilities	$	37,029

In April 2020, the FASB staff issued a Q&A document on accounting for lease concessions related to the effects of the COVID-19 pandemic. The FASB staff noted that entities may elect to not evaluate whether certain concessions provided by lessors to mitigate the effects of COVID-19 on lessees are lease modifications. This option is intended to reduce the operational challenges of individually assessing every COVID-19 related lease concession to determine whether it results in having to apply Topic 842 lease modification guidance. This election is available only for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in either the rights of the lessor or the obligations of the lessee. For entities that choose this election, they may account for the concession as if no changes to the lease contract were made. Under that accounting, a lessor would continue to recognize income. Oriental has elected to apply the relief provided by the FASB not to evaluate individual contracts. Oriental also elected not to apply the lease modification framework for concessions granted.

Oriental, as lessor, leases and subleases real property to lessee tenants under operating leases. As of September 30, 2020, no material lease concessions have been granted to lessees. Oriental, as lessee, also leases real estate property for branch locations, ATM locations, and office space. As of September 30, 2020, Oriental has not requested any lease concessions.