Leases

3 Months Ended

Mar. 31, 2019

On January 1, 2019, the Company adopted ASU 2016-02, "Leases" (Topic 842) and all subsequent ASU's that modified Topic 842. For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee. The Company elected the modified retrospective transition option effective with the period of adoption, elected not to recast comparative periods presented when transitioning to the new leasing standard and adjustments, if required, are made at the beginning of the period through a cumulative-effect adjustment to opening retained earnings. The Company also elected practical expedients, which allowed the Company to forego a reassessment of (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) the initial direct costs for any existing leases. The adoption of the new standard resulted in the Company recording a right-of-use asset and an additional lease liability of $44.9 million and $46.1 million, respectively, based on the present value of the expected remaining lease payments at January 1, 2019.

Also, on January 1, 2019, the Company had $5.9 million of net deferred gains associated with several sale and leaseback transactions executed prior to the adoption of ASU 2016-02. In accordance with the guidance, these net deferred gains were adjusted, net of tax, as a cumulative-effect adjustment to opening retained earnings.

All of the leases in which the Company is the lessee are classified as operating leases and are primarily comprised of real estate property for branches and administrative offices with terms extending through 2040.

The following table represents the consolidated statements of condition classification of the Company’s right-of use-assets and lease liabilities at March 31, 2019 (in thousands):

Classification

March 31, 2019

Lease Right-of-Use Assets:

Operating lease right-of-use assets

Other assets

43,404

Lease Liabilities:

Operating lease liabilities

Other liabilities

44,452

The calculated amount of the right-of-use assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the right-of-use asset and lease liability. Generally, the Company considers the first renewal option to be reasonably certain and includes it the calculation of the right-of use asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception based upon the term of the lease. For operating leases existing prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019 was applied.

At March 31, 2019, the weighted-average remaining lease term and the weighted-average discount rate for the Company's operating leases were 9.9 years and 3.5%, respectively.

The following table represents lease costs and other lease information for the Company's operating leases. The variable lease cost primarily represents variable payments such as common area maintenance and utilities (in thousands):


(in-thousands)	Three months ended March 31, 2019
Lease Costs
Operating lease cost	$	2,050

Variable lease cost	760

Total Lease Cost	$	2,810


Other Information

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases	$	2,044
Operating lease - operating cash flows - reduction of lease liability	1,598

During the three months ended March 31, 2019, the Company did not enter into any new lease obligations.

Future minimum payments for operating leases with initial or remaining terms of one year or more as of March 31, 2019 were as follows:


(in-thousands)	Operating Leases
Twelve Months Ended:

March 31, 2020	$	7,875
March 31, 2021	7,302
March 31, 2022	5,055
March 31, 2023	4,738
Thereafter	28,440
Total Future Minimum Lease Payments			$	53,410
Amounts Representing Interest	8,958
Present Value of Net Future Minimum Lease Payments			$	44,452

At December 31, 2018, operating lease commitments under lessee arrangements were $8.0 million, $7.6 million, $5.4 million, $3.8 million and $3.4 million for 2019 through 2023, respectively, and $10.7 million in aggregate for all years thereafter.