|12 Months Ended
Dec. 31, 2019
Operating leases in which the Company is the lessee are recorded as operating lease right of use (“ROU”) assets and operating liabilities, included in other assets and liabilities, respectively, on its consolidated statement of financial condition.
Operating lease ROU assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental borrowing rate at the lease commencement date. Operating lease expense, which is comprised of amortization of the ROU 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 occupancy expense in the consolidated statement of income.
The Company’s operating leases primarily relate to banking offices with remaining lease terms from one to nine years. The Company’s leases are not complex and do not contain residual value guarantees, variable lease payments, or significant assumptions or judgments made in applying the requirements of Topic 842. Operating leases with an initial term of 12 months or less are not recorded on the consolidated statements of financial condition and the related lease expense is recognized on a straight-line basis over the lease term. At December 31, 2019, the operating lease ROU assets and liabilities were $1.7 million and $2.5 million, respectively. The Company does not have any finance leases or any significant lessor agreements.
The table below summarizes our lease expense and other information related to the Company’s operating leases:
At December 31, 2019, the Company had two additional operating lease obligations for banking offices (to be constructed) that have not yet commenced. The first lease has payments totaling $1.4 million based on the initial contract term of 10 years and the second lease has payments totaling $2.3 million based on the initial contract term of 15 years. Payments for the banking offices are expected to commence after the construction periods end, which are expected to occur during the second quarter of 2020 and fourth quarter of 2020, respectively.
A related party is the lessor in an operating lease with the Company. The Company’s minimum payment is $0.2 million annually through 2024, for an aggregate remaining obligation of $1.0 million at December 31, 2019.