|9 Months Ended|
Sep. 30, 2020
NOTE 6 – LEASES
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 statements of income.
The Company’s operating leases primarily relate to banking offices with remaining lease terms from 1 to 29 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 balance sheet and the related lease expense is recognized on a straight-line basis over the lease term. At September 30, 2020, the operating lease ROU assets and liabilities were $6.4 million and $7.2 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 September 30, 2020, the Company had additional operating lease payments for three banking offices that have not yet commenced totaling $7.1 million based on the initial contract term of 15 years. Payments for the banking offices are expected to commence after the construction period ends, which is expected to occur during the fourth quarter of 2020, the fourth quarter of 2021, and the first quarter of 2022.
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 $0.8 million at September 30, 2020.
The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef