Leases (Notes)

3 Months Ended

Mar. 31, 2020

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 March 31, 2020, 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 ASC 842. 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 Unaudited Consolidated Statements of Operations:


	Three Months Ended
(Dollars in thousands)	March 31, 2020		March 31, 2019
Operating lease expense	$	334	$	307
Short-term lease expense	76		30
Total lease expense	$	410	$	337

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 right-of-use asset, the lease liability and other information related to Peoples' operating leases:


(Dollars in thousands)	March 31, 2020			December 31, 2019
Right-of-use asset:
Other assets	$	7,364		$	7,606
Lease liability:
Accrued expenses and other liabilities	$	7,582		$	7,813
Other information:
Weighted-average remaining lease term	12.4 years			12.4 years
Weighted-average discount rate	3.15		%	3.16		%

During the first three months of 2020 and 2019, Peoples paid cash of $321,000 and $296,000, respectively, for operating leases.

The following table summarizes the maturity of remaining lease liabilities:


(Dollars in thousands)	Balance
Nine months ending December 31, 2020	$	1,031
Year ending December 31, 2021	1,146
Year ending December 31, 2022	1,077
Year ending December 31, 2023	883
Year ending December 31, 2024	629
Thereafter	4,750
Total undiscounted lease payments	$	9,516
Imputed interest	$	(1,934)
Total lease liability	$	7,582