OPERATING LEASES

12 Months Ended

Dec. 31, 2019

19. OPERATING LEASES

As discussed in Note 1 - Summary of Significant Accounting Policies, we adopted ASU 2016-02 effective January 1, 2019 using the modified retrospective approach and recorded a right-of-use ("ROU") lease asset and corresponding lease liability on the Company's consolidated balance sheet of $55.9 million for operating leases where we are a lessee. We lease certain property and equipment with lease terms expiring through 2045. In some instances, a lease may contain renewal options for periods ranging from five to 15 years. All renewal options are likely to be exercised and therefore have been recognized as part of our right-of-use assets and lease liabilities in accordance with ASC 842, "Leases". Certain leases also contain variable payments that are primarily determined based on common area maintenance costs and Hawaii state tax rates. All leases are operating leases and we do not include any short-term leases in the calculation of the right-of-use assets and lease liabilities. The most significant assumption related to the Company’s application of ASC 842 was the discount rate assumption. As most of the Company’s lease agreements do not provide for an implicit interest rate, the Company uses the collateralized interest rate that the Company would have to pay to borrow over a similar term to estimate the Company’s lease liability.

Total lease cost, cash flow information, weighted-average remaining lease term and weighted-average discount rate is summarized below for the period indicated:



	Year Ended December 31,
(dollars in thousands)	2019
Lease cost:
Operating lease cost	$	6,514
Variable lease cost	2,637
Less: sublease income	(44		)
Total lease cost	$	9,107

Other information:
Operating cash flows from operating leases	$	(6,230	)
Weighted-average remaining lease term - operating leases	13.51 years
Weighted-average discount rate - operating leases	3.92		%

The following is a schedule of annual undiscounted cash flows for our operating leases and a reconciliation of those cash flows to the operating lease liabilities for the next five succeeding fiscal years and all years thereafter (dollars in thousands):



Year Ending December 31,	Undiscounted Cash Flows		Lease Liability Expense		Lease Liability Reduction
2020	$	6,216	$	1,965	$	4,251
2021	5,907		1,808		4,099
2022	5,472		1,659		3,813
2023	5,175		1,519		3,656
2024	4,947		1,385		3,562
Thereafter	40,920		7,669		33,251
Total	$	68,637	$	16,005	$	52,632

In addition, the Company, as lessor, leases certain properties that it owns. All of these leases are operating leases. The following represents lease income related to these leases that was recognized for the period indicated:



	Year Ended December 31,
(dollars in thousands)	2019
Total rental income recognized	$	2,098

Based on the Company's leases as lessor as of December 31, 2019, estimated lease payments for the next five succeeding fiscal years and all years thereafter are as follows (dollars in thousands):



Year Ending December 31,
2020	$	2,133
2021	2,137
2022	1,614
2023	641
2024	165
Thereafter	262
Total	$	6,952

Net rent expense for all operating leases for the years ended December 31, 2018 and 2017 is summarized as follows:



	Year Ended December 31,
(dollars in thousands)	2018			2017
Rent expense charged to net occupancy	$	8,578		$	8,318
Less: sublease income	(41		)	(43		)
Net rent expense charged to net occupancy	8,537			8,275
Add: rent expense charged to equipment expense	12			15
Total net rent expense	$	8,549		$	8,290