On July 17, 2020, the Bank announced management’s decision to adapt to a full-service branch model to streamline retail branches to better align with shifting customer needs and preferences. The transformation resulted in six branch closures and a reduction in staffing. The announcement was the result of a nine-month comprehensive assessment of all lines of business and functional areas, conducted in partnership with a leading process improvement organization. The data-driven analysis identified, among other things, overlapping service areas, automation opportunities and streamlining of processes and operations that would enhance customer experiences and facilitate the long-term sustainability of current and future branches. The announced consolidations represented about ten percent of the branch network and impacted approximately six percent of the total Company workforce. Where possible, those impacted were offered alternative roles or the opportunity to apply for open positions in other areas of the Company. Separated associates received a comprehensive severance package based on tenure. The Company expects to complete a substantial majority of these actions by December 31, 2020.

The Company incurred total pre-tax expense related to the branch closures of approximately $1.6 million, including approximately $0.2 million in employee severance, $0.5 million in lease termination costs and $0.9 million in valuation adjustments on branch facilities. The Company expects $0.7 million of total costs will result in future cash expenditures. The Company recognized all of these expenses during the third quarter of 2020. The Company anticipates annual expense savings of approximately $2.6 million as a result of these branch closures.

The following table represents the consolidated statements of income classification of the Company’s restructuring charges (in thousands):

		Three months ended September 30,				Nine months ended September 30,
	Income Statement Location	2020		2019		2020		2019

Severance costs	Salaries and employee benefits	$	224	$	—	$	224	$	—
Lease termination costs	Restructuring charges		454		—		454		—
Valuation adjustments	Restructuring charges		908		—		908		—
Total		$	1,586	$	—	$	1,586	$	—

The following table represents the changes in the restructuring reserve (in thousands):

	Three months ended September 30,					Nine months ended September 30,
	2020			2019		2020			2019

Beginning balance	$	—		$	—	$	—		$	—
Restructuring charges		1,586			—		1,586			—
Cash payments		(249	)		—		(249	)		—
Ending balance	$	1,337		$	—	$	1,337		$	—