OPERATING LEASES

9 Months Ended

Sep. 30, 2019

We have operating leases primarily for certain branches, office space, land, and office equipment. Our operating leases expire at various dates through the year 2046 and generally include one or more options to renew. The exercise of lease renewal options is at our sole discretion. As of September 30, 2019, we had operating lease right-of-use assets and operating lease liabilities of $124.1 million and $130.5 million, respectively.

Certain of our lease agreements include rental payments based on a percentage of transactions and others include rental payments that periodically adjust to rates and charges stated in the agreements. Our operating lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As of September 30, 2019, we have certain operating lease agreements, primarily for administrative office space, that have not yet commenced. At commencement, it is expected that these leases will add approximately $28 million in right-of-use assets and other liabilities. These operating leases will commence between 2019 and 2020 with lease terms of 10 years to 15 years.

The components of lease expense were as follows:

TABLE 7.1



	Three Months Ended September 30,		Nine Months Ended September 30,
(dollars in millions)	2019		2019
Operating lease cost	$	6	$	20
Short-term lease cost	1		1
Variable lease cost	1		3
Sublease income	—		—
Total lease cost	$	8	$	24

Other information related to leases is as follows:

TABLE 7.2



	Nine Months Ended September 30,
(dollars in millions)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	19
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	22
Weighted average remaining lease term (years):
Operating leases	9.78
Weighted average discount rate:
Operating leases	3.0		%

Maturities of operating lease liabilities were as follows:

TABLE 7.3



(in millions)	September 30, 2019
2019	$	6
2020	24
2021	22
2022	17
2023	13
Later years	72
Total lease payments	154
Less: Interest	(24		)
Present value of lease liabilities	$	130

As a lessor we offer commercial leasing services to customers in need of new or used equipment primarily within our market areas of Pennsylvania, Ohio, Maryland, North Carolina, South Carolina and West Virginia. Additional information relating to commercial leasing is provided in Note 4, “Loans and Leases” in the Notes to Consolidated Financial Statements.