Leases

6 Months Ended

Jun. 30, 2020

LEASES

Old National has operating and finance leases for land, office space, banking centers, and equipment. These leases are generally for periods of 10 to 20 years with various renewal options. We include certain renewal options in the measurement of our right-of-use assets and lease liabilities if they are reasonably certain to be exercised. Variable lease payments that are dependent on an index or a rate are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability. Variable lease payments that are not dependent on an index or a rate are excluded from the measurement of the lease liability and are recognized in profit and loss when incurred. Variable lease payments are defined as payments made for the right to use an asset that vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.

Old National has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes, and insurance are not included in the measurement of the lease liability since they are generally able to be segregated. For certain equipment leases, Old National accounts for the lease and non-lease components as a single lease component using the practical expedient available for that class of assets.

Old National does not have any material sub-lease agreements.

The components of lease expense were as follows:


	Affected Line Item in the	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in thousands)	Statement of Income	2020		2019		2020		2019
Operating lease cost	occupancy/equipment expense	$	6,646	$	4,291	$	15,827	$	8,693
Finance lease cost:
Amortization of right-of-use assets	occupancy expense	256		160		423		318
Interest on lease liabilities	interest expense	91		80		169		161
Short-term lease cost	occupancy expense	1		1		1		2
Sub-lease income	occupancy expense	(121)		(181)		(249)		(360)
Total		$	6,873	$	4,351	$	16,171	$	8,814

Supplemental balance sheet information related to leases was as follows:


(dollars in thousands)	June 30, 2020			December 31, 2019
Operating Leases
Operating lease right-of-use assets	$	80,400		$	95,477
Operating lease liabilities	91,845			99,500

Finance Leases
Premises and equipment, net	11,973			7,170
Other borrowings	12,310			7,406

Weighted-Average Remaining Lease Term (in Years)
Operating leases	10.6			10.6
Finance leases	10.7			11.3

Weighted-Average Discount Rate
Operating leases	3.42		%	3.45		%
Finance leases	3.44		%	4.43		%

Supplemental cash flow information related to leases was as follows:


	Six Months Ended June 30,
(dollars in thousands)	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	8,283	$	8,843
Operating cash flows from finance leases	169		161
Financing cash flows from finance leases	322		224

The following table presents a maturity analysis of the Company’s lease liability by lease classification at June 30, 2020:


(dollars in thousands)	Operating Leases		Finance Leases
2020	$	7,849	$	692
2021	14,916		1,394
2022	13,712		1,412
2023	9,093		1,438
2024	7,917		1,444
Thereafter	56,991		8,443
Total undiscounted lease payments	110,478		14,823
Amounts representing interest	(18,633)		(2,513)
Lease liability	$	91,845	$	12,310

Old National leases certain office space and buildings to unrelated parties in exchange for consideration. All of these tenant leases are classified as operating leases. The following table presents a maturity analysis of the Company’s tenant leases at June 30, 2020:


(dollars in thousands)	Tenant Leases
2020	$	1,248
2021	2,354
2022	1,952
2023	1,536
2024	1,409
Thereafter	2,520
Total undiscounted lease payments	$	11,019

Leases