Bank Premises and Equipment

12 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

Bank Premises and Equipment

Bank Premises and Equipment

The major categories of bank premises and equipment, net of accumulated depreciation, at December 31 are summarized as follows:

(Dollars in thousands)	2019		2018
Land	$	15,317	$	13,776
Building and premises	73,097		68,245
Furniture, fixtures and equipment	30,268		28,523
Total bank premises and equipment	118,682		110,544
Accumulated depreciation	(56,836)		(54,002)
Net book value	$	61,846	$	56,542

Peoples depreciates its building and premises, and furniture, fixtures and equipment over estimated useful lives generally ranging from five to forty years and two to ten years, respectively.  Depreciation expense was $5.7 million in 2019 and $4.9 million in each of 2018 and 2017.

Leases

Peoples leases certain banking facilities and equipment under various agreements with original terms providing for fixed monthly payments over periods generally ranging from two to thirty years.  Certain leases may include options to extend or terminate the lease. Only those renewal and termination options which Peoples is reasonably certain of exercising are included in the calculation of the lease liability. Certain leases contain rent escalation clauses calling for rent increases over the term of the lease, which are included in the calculation of the lease liability.  Short-term leases of certain facilities and equipment, with lease terms of 12 months or less, are recognized on a straight-line basis over the lease term. At December 31, 2019, Peoples did not have any finance leases or any significant lessor agreements. Right of Use ("ROU") assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement or remeasurement date of a lease based on the present value of lease payments over the remaining lease term. Operating lease ROU assets include lease payments made at or before the commencement date and initial indirect costs. Operating lease ROU assets exclude lease incentives.

Peoples elected certain practical expedients, in accordance with the adoption of ASC 842. Peoples elected to recognize a cumulative-effect adjustment to the opening balance of retained earnings on January 1, 2019 for the implementation of ASU 2016-02. Peoples also made an accounting policy election to account for each separate lease component of a contract and its associated non-lease components as a single lease component for all leases subject to ASC 842.

The table below details Peoples' lease expense, which is included in net occupancy and equipment expense in the Consolidated Statements of Income:

(Dollars in thousands)	2019
Operating lease expense	$	1,227
Short-term lease expense	137
Total lease expense	$	1,364

Peoples utilizes an incremental borrowing rate to determine the present value of lease payments for each lease, as the lease agreements do not provide an implicit rate. The estimated incremental borrowing rate reflects a secured rate and is based on the term of the lease and the interest rate environment at the lease commencement or remeasurement date.

The following table details the ROU asset, the lease liability and other information related to Peoples' operating leases:

(Dollars in thousands)	December 31, 2019
Right-of-use asset:
Other assets	$	7,606
Lease liability:
Accrued expenses and other liabilities	$	7,813
Other information:
Weighted-average remaining lease term	12.4 years
Weighted-average discount rate	3.16		%
Cash paid during the year for operating leases	$	1,172
Additions for right-of-use assets obtained during the year ended	$	3,701

The following table summarizes the future lease payments of operating leases:

(Dollars in thousands)	Payments
Year ending December 31, 2020	$	1,237
Year ending December 31, 2021	1,137
Year ending December 31, 2022	1,067
Year ending December 31, 2023	882
Year ending December 31, 2024	629
Thereafter	4,750
Total undiscounted lease payments	$	9,702
Imputed Interest	(1,889)
Total lease liability	$	7,813