Leases

6 Months Ended

Jun. 30, 2021

The Company’s operating leases are real estate leases which are comprised of bank branch locations, loan production offices, and office spaces with remaining lease terms ranging from 1 to 10 years as of June 30, 2021. Certain lease arrangements contain extension options which are typically around 5 years. As these extension options are not generally considered reasonably certain of exercise, they are not included in the lease term.

At June 30, 2021, ROU assets and related liabilities were $47.8 million and $52.2 million, respectively. At December 31, 2020, ROU assets and related liabilities were $47.7 million and $52.0 million, respectively. At June 30, 2021, the short term operating lease liability totaled $12.7 million and the long-term operating lease liability totaled $39.5 million. The Company defines short-term operating lease liabilities as liabilities due in twelve months or less and long term lease liabilities are defined as liabilities that are due in more than twelve months at the end of each reporting period. The Company did not have any finance leases at June 30, 2021. During the six months ended June 30, 2021, the Company extended nine leases and entered into no new lease contracts. Lease extension terms ranged from three to five years and the Company reassessed the ROU assets and lease liabilities related to these leases.

Operating lease ROU assets represent the Company’s right to use the underlying asset during the lease term and operating lease liabilities represent the Company’s 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 the Company’s incremental borrowing rate at the lease commencement date. 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. The Company’s occupancy expense also includes variable lease costs which is comprised of the Company's share of actual costs for utilities, common area maintenance, property taxes, and insurance that are not included in lease liabilities and are expensed as incurred. Variable lease costs can also include rent escalations based on changes to indices, such as the Consumer Price Index, where the Company estimates future rent increases and records the actual difference to variable costs.

The Company uses its incremental borrowing rate to present value lease payments in order to recognize a ROU asset and the related lease liability. The Company calculates its incremental borrowing rate by adding a spread to the FHLB borrowing interest rate at a given period.

The table below summarizes the Company’s net lease cost:


	Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
	(Dollars in thousands)
Operating lease cost	$	3,891	$	3,879	$	7,720	$	7,824
Short term lease cost	—		—		—		—
Variable lease cost	747		772		1,501		3,397
Sublease income	(99)		(214)		(252)		(426)
Net lease cost	$	4,539	$	4,437	$	8,969	$	10,795

Rent expense for the three and six months ended June 30, 2021 was $4.5 million and $9.0 million, respectively. Rent expense for the three and six months ended June 30, 2020 was $4.5 million and $9.1 million, respectively.

The table below summarizes other information related to the Company’s operating leases:


	At or for the Six Months Ended June 30, 2021			At or for the Six Months Ended June 30, 2020
	(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows for operating leases	$	7,428		$	7,392
Right-of-use assets obtained in exchange for lease liabilities, net	—			1,541
Weighted-average remaining lease term - operating leases	5.2 years			5.5 years
Weighted-average discount rate - operating leases	2.69		%	3.01		%

The table below summarizes the maturity of remaining lease liabilities:


	June 30, 2021
	(Dollars in thousands)
2021	$	7,277
2022	11,312
2023	9,613
2024	8,684
2025	7,319
2026 and thereafter	11,971
Total lease payments	56,176
Less: imputed interest	3,999
Total lease obligations	$	52,177

As of June 30, 2021, the Company did not have any additional operating lease commitments that have not yet commenced.