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Leases | 9 Months Ended
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Sep. 30, 2021
Leases [Abstract] |
Leases | Leases 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. The Company’s leases are comprised of real estate property for branches, automated teller machine locations and office space with terms extending through 2050. The Company has one existing finance lease, which has a lease term through 2029. The following table represents the classification of the Company’s right-of-use (“ROU”) assets and lease liabilities on the consolidated statements of financial condition (in thousands):
|  |  |  | September 30, |  | December 31,
|  |  |  | 2021 |  | 2020
Lease ROU Assets |  | Classification |  |  |  |
Operating lease ROU assets |  | Other assets |  | $ | 21,117 |  |  | $ | 22,555 |
Finance lease ROU asset |  | Premises and equipment, net |  | 1,545 |  |  | 1,694 |
Total lease ROU assets |  |  |  | $ | 22,662 |  |  | $ | 24,249 |
Lease Liabilities |  |  |  |  |  |
Operating lease liabilities (1) |  | Other liabilities |  | $ | 21,713 |  |  | $ | 22,990 |
Finance lease liability |  | Other borrowings |  | 1,954 |  |  | 2,100 |
Total lease liabilities |  |  |  | $ | 23,667 |  |  | $ | 25,090 |
(1) Operating lease liabilities excludes liabilities for future rent and lease termination payments related to closed branches of $5.3 million and $7.4 million as of September 30, 2021 and December 31, 2020, respectively. The calculated amount of the ROU assets and lease liabilities are impacted by the lease term and the discount rate used to calculate the present value of the minimum lease payments. Lease agreements often include one or more options to renew the lease at the Company’s discretion. If the exercise of a renewal option is considered to be reasonably certain, the Company includes the extended term in the calculation of the ROU asset and lease liability. For the discount rate, Leases (Topic 842) requires the Company to use the rate implicit in the lease, provided the rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate, at lease inception, over a similar term. For operating leases existing prior to January 1, 2019, the Company used the incremental borrowing rate for the remaining lease term as of January 1, 2019. For the finance lease, the Company utilized its incremental borrowing rate at lease inception.
|  | September 30, |  | December 31,
|  | 2021 |  | 2020
Weighted-Average Remaining Lease Term |  |  |  |
Operating leases |  | 7.98 years |  | 7.77 years
Finance lease |  | 7.85 years |  | 8.59 years
Weighted-Average Discount Rate |  |  |  |
Operating leases |  | 2.94 | % |  | 3.01 | %
Finance lease |  | 5.63 |  |  | 5.63 |
The following table represents lease expenses and other lease information (in thousands):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
Lease Expense |  |  |  |  |  |  |  |
Operating lease expense |  | $ | 1,498 |  |  | $ | 1,585 |  |  | $ | 4,459 |  |  | $ | 4,898 |
Finance lease expense: |  |  |  |  |  |  |  |
Amortization of ROU assets |  | 50 |  |  | 43 |  |  | 149 |  |  | 124 |
Interest on lease liabilities(1) |  | 28 |  |  | 27 |  |  | 85 |  |  | 80 |
Total |  | $ | 1,576 |  |  | $ | 1,655 |  |  | $ | 4,693 |  |  | $ | 5,102 |
Other Information |  |  |  |  |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 1,322 |  |  | $ | 1,756 |  |  | $ | 4,119 |  |  | $ | 4,808 |
Operating cash flows from finance leases |  | 28 |  |  | 27 |  |  | 85 |  |  | 80 |
Financing cash flows from finance leases |  | 50 |  |  | 47 |  |  | 146 |  |  | 141 |
(1)Included in borrowed funds interest expense on the consolidated statements of income. All other costs are included in occupancy expense. The Company previously announced plans to sell two branches, including owned premises and equipment, all deposits associated with the branches and selected performing loans to First Bank which is expected to take place in early December 2021. The Company also announced plans to consolidate 20 deposit gathering locations in late 2021 and early 2022. These plans have resulted in a shortened estimated useful life for premises and equipment and accelerated recognition of lease expenses associated with these branches. The effect on income for the three and nine months ended September 30, 2021 is included in branch consolidation expenses and totaled $3.8 million, which are excluded above. Future minimum payments for the finance lease and operating leases with initial or remaining terms of one year or more as of September 30, 2021 were as follows (in thousands):
|  | Finance Lease |  | Operating Leases
For the Twelve Months Ending September 30, |  |  |  |
2022 |  | $ | 307 |  |  | $ | 5,382 |
2023 |  | 307 |  |  | 3,782 |
2024 |  | 307 |  |  | 3,231 |
2025 |  | 307 |  |  | 2,927 |
2026 |  | 307 |  |  | 2,162 |
Thereafter |  | 875 |  |  | 7,423 |
Total |  | 2,410 |  |  | 24,907 |
Less: Imputed interest |  | (456) |  |  | (3,194) |
Total lease liabilities |  | $ | 1,954 |  |  | $ | 21,713 |
Leases | Leases 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. The Company’s leases are comprised of real estate property for branches, automated teller machine locations and office space with terms extending through 2050. The Company has one existing finance lease, which has a lease term through 2029. The following table represents the classification of the Company’s right-of-use (“ROU”) assets and lease liabilities on the consolidated statements of financial condition (in thousands):
|  |  |  | September 30, |  | December 31,
|  |  |  | 2021 |  | 2020
Lease ROU Assets |  | Classification |  |  |  |
Operating lease ROU assets |  | Other assets |  | $ | 21,117 |  |  | $ | 22,555 |
Finance lease ROU asset |  | Premises and equipment, net |  | 1,545 |  |  | 1,694 |
Total lease ROU assets |  |  |  | $ | 22,662 |  |  | $ | 24,249 |
Lease Liabilities |  |  |  |  |  |
Operating lease liabilities (1) |  | Other liabilities |  | $ | 21,713 |  |  | $ | 22,990 |
Finance lease liability |  | Other borrowings |  | 1,954 |  |  | 2,100 |
Total lease liabilities |  |  |  | $ | 23,667 |  |  | $ | 25,090 |
(1) Operating lease liabilities excludes liabilities for future rent and lease termination payments related to closed branches of $5.3 million and $7.4 million as of September 30, 2021 and December 31, 2020, respectively. The calculated amount of the ROU assets and lease liabilities are impacted by the lease term and the discount rate used to calculate the present value of the minimum lease payments. Lease agreements often include one or more options to renew the lease at the Company’s discretion. If the exercise of a renewal option is considered to be reasonably certain, the Company includes the extended term in the calculation of the ROU asset and lease liability. For the discount rate, Leases (Topic 842) requires the Company to use the rate implicit in the lease, provided the rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate, at lease inception, over a similar term. For operating leases existing prior to January 1, 2019, the Company used the incremental borrowing rate for the remaining lease term as of January 1, 2019. For the finance lease, the Company utilized its incremental borrowing rate at lease inception.
|  | September 30, |  | December 31,
|  | 2021 |  | 2020
Weighted-Average Remaining Lease Term |  |  |  |
Operating leases |  | 7.98 years |  | 7.77 years
Finance lease |  | 7.85 years |  | 8.59 years
Weighted-Average Discount Rate |  |  |  |
Operating leases |  | 2.94 | % |  | 3.01 | %
Finance lease |  | 5.63 |  |  | 5.63 |
The following table represents lease expenses and other lease information (in thousands):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
Lease Expense |  |  |  |  |  |  |  |
Operating lease expense |  | $ | 1,498 |  |  | $ | 1,585 |  |  | $ | 4,459 |  |  | $ | 4,898 |
Finance lease expense: |  |  |  |  |  |  |  |
Amortization of ROU assets |  | 50 |  |  | 43 |  |  | 149 |  |  | 124 |
Interest on lease liabilities(1) |  | 28 |  |  | 27 |  |  | 85 |  |  | 80 |
Total |  | $ | 1,576 |  |  | $ | 1,655 |  |  | $ | 4,693 |  |  | $ | 5,102 |
Other Information |  |  |  |  |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 1,322 |  |  | $ | 1,756 |  |  | $ | 4,119 |  |  | $ | 4,808 |
Operating cash flows from finance leases |  | 28 |  |  | 27 |  |  | 85 |  |  | 80 |
Financing cash flows from finance leases |  | 50 |  |  | 47 |  |  | 146 |  |  | 141 |
(1)Included in borrowed funds interest expense on the consolidated statements of income. All other costs are included in occupancy expense. The Company previously announced plans to sell two branches, including owned premises and equipment, all deposits associated with the branches and selected performing loans to First Bank which is expected to take place in early December 2021. The Company also announced plans to consolidate 20 deposit gathering locations in late 2021 and early 2022. These plans have resulted in a shortened estimated useful life for premises and equipment and accelerated recognition of lease expenses associated with these branches. The effect on income for the three and nine months ended September 30, 2021 is included in branch consolidation expenses and totaled $3.8 million, which are excluded above. Future minimum payments for the finance lease and operating leases with initial or remaining terms of one year or more as of September 30, 2021 were as follows (in thousands):
|  | Finance Lease |  | Operating Leases
For the Twelve Months Ending September 30, |  |  |  |
2022 |  | $ | 307 |  |  | $ | 5,382 |
2023 |  | 307 |  |  | 3,782 |
2024 |  | 307 |  |  | 3,231 |
2025 |  | 307 |  |  | 2,927 |
2026 |  | 307 |  |  | 2,162 |
Thereafter |  | 875 |  |  | 7,423 |
Total |  | 2,410 |  |  | 24,907 |
Less: Imputed interest |  | (456) |  |  | (3,194) |
Total lease liabilities |  | $ | 1,954 |  |  | $ | 21,713 |

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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