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Leases Leases

12 Months Ended

Dec. 31, 2020

LEASES

Effective January 1, 2019, the Company adopted the new lease accounting standard, ASU 2016-02, using the modified retrospective method. As such, for reporting periods beginning on or after January 1, 2019, leases are recognized, presented and disclosed in accordance with ASU 2016-02, while periods prior to the adoption date were not adjusted and are reported in accordance with ASC 840, Leases ("ASC 840"). Refer to Note 1 for further details.

The Company enters into noncancellable lease arrangements primarily for its office buildings and branches. Certain lease arrangements contain clauses requiring increasing rental payments over the lease term, which may be linked to an index (commonly the Consumer Price Index) or contractually stipulated. Many of these lease arrangements provide the Company with the option to renew the lease arrangement after the initial lease term. These options are included in determining the lease term used to establish the right-of-use assets and lease liabilities, when it is reasonably certain the Company will exercise its renewal option. As most of the Company's leases do not have a readily determinable implicit rate, the incremental borrowing rate is primarily used to determine the discount rate for purposes of measuring the right-of-use assets and lease liabilities. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company entered into a lease arrangement with two of its employees as landlords. The lease was renewed for a period of five years, expiring in 2024, at which time a five-year extension period is available at the option of the Company. The lease arrangement contains certain termination clauses whereby the Company has the right to terminate the lease arrangement, as well as a right to terminate the lease after two years with the required notice without penalty.

The Company entered into a lease agreement in 2019 to rent office space as a sub-tenant from another company in which a Company Director serves as the Chairman and Chief Executive Officer of the other company. The term of the lease is through 2022.

The following right-of-use assets and lease liabilities have been reported within other assets and other liabilities on the consolidated statements of condition as of the dates indicated:


		December 31,
		2020						2019
(In thousands)	Consolidated Statements of Condition Line Item	Operating Leases		Finance Leases		Total		Operating Leases		Finance Leases		Total
Right-of-use assets	Other Assets	$	13,608	$	4,951	$	18,559	$	13,002	$	1,502	$	14,504
Lease liabilities	Other Liabilities	11,845		4,928		16,773		13,059		1,665		14,724

In accordance with ASC 842, the components of lease expense for the periods indicated were as follows:


	For the Year Ended December 31,
(In thousands)	2020		2019
Lease Cost:
Operating lease cost(1)	$	1,663	$	1,480
Finance lease cost:
Amortization of right-of-use assets	223		110
Interest on lease liabilities(2)	151		68
Total finance lease cost	374		178
Total lease cost(3)	$	2,037	$	1,658

(1) Includes immaterial short-term and variable lease costs, but excludes common area maintenance costs.

(2) Includes immaterial variable lease costs.

(3) Reported within net occupancy costs on the consolidated statements of income.

For the year ended December 31, 2018, rent expense, excluding common area maintenance expense, was $1.3 million.

Supplemental cash flow information and non-cash activity related to leases was as follows for the periods indicated:


	For the Year Ended December 31,
(In thousands)	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,434	$	1,394
Operating cash flows from finance leases	151		68
Financing cash flows from finance leases	142		106
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases(1)	$	2,002	$	14,030
Finance leases(1)	3,668		1,612

(1) For the year ended December 31, 2019, includes $10.5 million of operating leases and $1.6 million of finance leases recorded upon adoption of ASU 2016-02.

Supplemental information related to leases was as follows as of the dates indicated:


	December 31,
	2020		2019
Weighted average remaining lease term (years):
Operating leases	15.4 years		15.2 years
Finance leases	27.0 years		22.4 years
Weighted average discount rate:
Operating leases	3.40	%	3.39	%
Finance leases	3.44	%	4.00	%

The following summarizes the remaining scheduled future minimum lease payments for operating and finance leases as of December 31, 2020:


(In thousands)	Operating Leases		Finance Leases
2021	$	1,329	$	306
2022	1,310		309
2023	1,192		312
2024	1,151		314
2025	926		317
Thereafter	9,374		6,179
Total minimum lease payments	15,282		7,737
Less: amount representing interest(1)	3,437		2,809
Present value of net minimum lease payments(2)	$	11,845	$	4,928

(1) Amount necessary to reduce net minimum lease payments to present value calculated at the Company's incremental borrowing rate.

(2) Reflects the liability reported within other liabilities on the consolidated statements of condition.

The following summarizes expected future minimum lease payments, in accordance with ASC 840, as of December 31, 2018:


(In thousands)	Operating		Capital
2019	$	1,420	$	179
2020	941		179
2021	726		182
2022	539		184
2023	434		184
Thereafter	1,268		1,592
Total minimum lease payments	$	5,328	2,500
Less: amount representing interest(1)			920
Present value of net minimum lease payments(2)			$	1,580

(1) Amount necessary to reduce net minimum lease payments to present value calculated at the Company's incremental borrowing rate at lease inception.

(2) Reflects the liability reported within long-term borrowings on the consolidated statements of condition at December 31, 2018.

Lessee, Finance Leases [Text Block]