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Operating Leases

12 Months Ended

Dec. 31, 2020

NOTE 27— OPERATING LEASES

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

	Year Ended December 31,
	2020		2019		Statement of Operations Classification
	(In thousands)
Lease costs	$	13,233	$	6,571	Occupancy and equipment
Variable lease costs		2,133		2,324	Occupancy and equipment
Short-term lease cost		800		180	Occupancy and equipment
Lease income		(499)		(554)	Occupancy and equipment
Total lease cost	$	15,667	$	8,521

Rent expense for the year ended December 31, 2018, prior to adoption of ASU 2016-02 (Topic 842), was $9.0 million included in the occupancy and equipment caption in the consolidated statements of operations. Operating Lease Assets and Liabilities

		December 31,
		2020	2019		Statement of Financial Condition Classification
	(In thousands)
Right-of-use assets	$	31,383	$	39,112	Operating lease right-of-use assets
Lease Liabilities	$	32,566	$	39,840	Operating leases liabilities

	December 31, 2020
	December 31, 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 December 31, 2020 were as follows:

	Minimum Rent
Year Ending December 31,	(In thousands)
2021	$	8,534
2022		7,388
2023		6,578
2024		4,518
2025		3,459
Thereafter		10,161
Total lease payments	$	40,638
Less imputed interest		8,072
Present value of lease liabilities	$	32,566

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 December 31, 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 December 31, 2020, Oriental has not requested any lease concessions.

During the year ended December 31, 2020, Oriental decided to consolidate several branches as a result of the Scotiabank PR & USVI Acquisition and modified certain lease contracts. These contracts were evaluated under Topic 842 lease modification guidance and removed from books, as they were considered short-term at December 31, 2020.