Leases

9 Months Ended

Sep. 30, 2020

LEASES

Operating lease assets represent our right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate at the lease commencement date. Operating lease cost, which is comprised of amortization of the operating lease 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 net occupancy expense in the consolidated statements of income.

The Corporation leases certain full-serve branch offices, land and equipment. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Most leases include one or more options to renew and the exercise of the lease renewal options are at the Corporation's sole discretion. The Corporation includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Corporation will exercise the option. Certain lease agreements of the Corporation include rental payments adjusted periodically for changes in the consumer price index.


Leases	Classification	September 30, 2020		December 31, 2019
Assets:
Operating lease assets	Operating lease assets	$	17,475	$	18,422
Finance lease assets	Premises and equipment, net (1)	447		501
Total leased assets		$	17,922	$	18,923

Liabilities:
Operating lease liabilities	Operating lease liabilities	$	18,469	$	19,363
Finance lease liabilities	Accrued interest payable and other liabilities	570		629
Total leased liabilities		$	19,039	$	19,992

(1) Finance lease assets are recorded net of accumulated amortization of $769 as of September 30, 2020 and $715 as of December 31, 2019.

The components of the Corporation's net lease expense for the three and nine months ended September 30, 2020 and 2019 were as follows:


		Three months ended September 30,				Nine months ended September 30,
Lease Cost	Classification	2020		2019		2020		2019
Operating lease cost	Net occupancy expense	$	435	$	423	$	1,349	$	1,228
Variable lease cost	Net occupancy expense	26		33		67		82
Finance lease cost:
Amortization of leased assets	Net occupancy expense	18		18		54		54
Interest on lease liabilities	Interest expense - borrowed funds	6		7		20		23
Sublease income (1)	Net occupancy expense	(25)		(21)		(67)		(62)
Net lease cost		$	460	$	460	$	1,423	$	1,325

(1) Sublease income excludes rental income from owned properties.

The following table sets forth future minimum rental payments under noncancelable leases with terms in excess of one year as of September 30, 2020:


Maturity of Lease Liabilities as of September 30, 2020	Operating Leases		Finance Leases		Total
2020	$	388	$	26	$	414
2021	1,555		105		1,660
2022	1,601		105		1,706
2023	1,490		105		1,595
2024	1,455		105		1,560
After 2024	19,171		210		19,381
Total lease payments	25,660		656		26,316
Less: Interest	7,191		86		7,277
Present value of lease liabilities	$	18,469	$	570	$	19,039

Lease terms and discount rates related to the Corporation's lease liabilities as of September 30, 2020 and December 31, 2019 were as follows:


Lease Term and Discount Rate	September 30, 2020		December 31, 2019
Weighted-average remaining lease term (years)
Operating leases	18.4		18.7
Finance leases	6.3		7.0

Weighted-average discount rate
Operating leases	3.52	%	3.52	%
Finance leases	4.49	%	4.49	%

Other information related to the Corporation's lease liabilities as of June 30, 2020 and 2019 was as follows:


Other Information	September 30, 2020		September 30, 2019

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	695	$	557