Leases

3 Months Ended

Mar. 31, 2020

Effective January 1, 2019, the Company adopted ASU No. 2016-02, Leases (“Topic 842”) and all subsequent ASU's that modified Topic 842, as further explained in Note 12, Recent Accounting Pronouncements. The Company’s leases primarily relate to real estate property for branches and office space with terms extending from six months up to 35.25 years. At March 31, 2020, all of the Company's leases are classified as operating leases.

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets and operating lease liabilities in the consolidated balance sheets. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recorded at the present value of lease payments over the lease term. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate in determining the present value of lease payments. Certain leases include options to renew, with one or more renewal terms ranging from five to ten years. As these extension options are not generally considered reasonably certain of renewal, they are not included in the lease term.

At March 31, 2020, the Company’s operating lease right-of-use assets and operating lease liabilities included in the consolidated balance sheet were $41.5 and $45.9 respectively. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are recognized as incurred. Variable lease payments include common area maintenance charges, real estate taxes, repairs and maintenance costs and utilities. Operating and variable lease expenses are recorded in occupancy expense in the consolidated statements of income.

Supplemental lease information at or for the three months ended March 31, 2020, and March 31, 2019 is as follows (in thousands):



	Three Months Ended March 31,
	2020			2019

Operating lease cost	$	1,439		$	1,466
Variable lease cost	544			778
Net lease cost	$	1,983		$	2,244
Cash paid for amounts included in measurement of operating lease liabilities	$	1,545		$	1,327
Right-of-use assets obtained in exchange for new operating lease liabilities	$	3,028		$	1,013
Weighted average remaining lease term	12.71 years			13.05 years
Weighted average discount rate	3.59		%	3.60		%

The following table summarizes lease payment obligations for each of the next five years and thereafter in addition to a reconcilement to the Company's current lease liability (dollars in thousands):



Year	Amount
2020	$	4,719
2021	5,919
2022	5,311
2023	5,272
2024	4,935
Thereafter	33,230
Total lease payments	59,386
Less: imputed interest	13,454
Present value of lease liabilities	$	45,932

As of March 31, 2020, the Company had not entered into any leases that have not yet commenced.