Leases

3 Months Ended

Mar. 31, 2020

LEASES

Operating lease assets represent our right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate at the lease commencement date. Operating lease cost, which is comprised of amortization of the operating lease asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in net occupancy expense in the consolidated statements of income.

The Corporation leases certain full-serve branch offices, land and equipment. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Most leases include one or more options to renew and the exercise of the lease renewal options are at the Corporation's sole discretion. The Corporation includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is is reasonably certain the Corporation will exercise the option. Certain lease agreements of the Corporation include rental payments adjusted periodically for changes in the consumer price index.



Leases	Classification	March 31, 2020		December 31, 2019
Assets:
Operating lease assets	Operating lease assets	$	18,360	$	18,422
Finance lease assets	Premises and equipment, net ⁽¹⁾	483		501
Total leased assets		$	18,843	$	18,923

Liabilities:
Operating lease liabilities	Operating lease liabilities	$	19,397	$	19,363
Finance lease liabilities	Accrued interest payable and other liabilities	609		629
Total leased liabilities		$	20,006	$	19,992

(1) Finance lease assets are recorded net of accumulated amortization of $733 as of March 31, 2020 and $715 as of December 31, 2019.

The components of the Corporation's net lease expense for the three months ended March 31, 2020 and 2019, respectively, were as follows:



		Three months ended March 31,
Lease Cost	Classification	2020			2019
Operating lease cost	Net occupancy expense	$	455		$	405
Variable lease cost	Net occupancy expense	24			34
Finance lease cost:
Amortization of leased assets	Net occupancy expense	18			18
Interest on lease liabilities	Interest expense - borrowed funds	7			8
Sublease income ⁽¹⁾	Net occupancy expense	(21		)	(21		)
Net lease cost		$	483		$	444

(1) Sublease income excludes rental income from owned properties.

The following table sets forth future minimum rental payments under noncancelable leases with terms in excess of one year as of March 31, 2020:



Maturity of Lease Liabilities as of March 31, 2020	Operating Leases ⁽¹⁾		Finance Leases		Total
2020	$	1,209	$	79	$	1,288
2021	1,636		105		1,741
2022	1,682		105		1,787
2023	1,572		105		1,677
2024	1,538		105		1,643
After 2024	19,373		210		19,583
Total lease payments	27,010		709		27,719
Less: Interest	7,613		100		7,713
Present value of lease liabilities	$	19,397	$	609	$	20,006

Other information related to the Corporation's lease liabilities as of the three months ended March 31, 2020 and 2019, respectively, were as follows:



Lease Term and Discount Rate	March 31, 2020		March 31, 2019
Weighted-average remaining lease term (years)
Operating leases	18.4		17.3
Finance leases	6.8		7.8

Weighted-average discount rate
Operating leases	3.52	%	3.66	%
Finance leases	4.49	%	4.54	%



Other Information	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	212	$	192