Effective January 1, 2019, the Company adopted new accounting guidance which increased transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company adopted this new accounting guidance using the optional transition method. Under this method, the Company applied the new leases standard at the adoption date and recognized a cumulative effect adjustment of less than $0.1 million to the opening balance sheet of retained earnings. The Company elected the package of practical expedients permitted under the transition guidance within the new standard. In addition, the Company elected the hindsight practical expedient to determine the lease term for existing leases.

The Company determines if an arrangement is a lease at inception. Leases with a term of 12 months or less are not recorded on the consolidated balance sheets. Lease right-of-use assets (“ROU”) are included in other assets on the consolidated balance sheets and lease liabilities are included in other liabilities on the consolidated balance sheets.

Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The Company’s leases do not provide an implicit rate; therefore, the Company uses its incremental borrowing rate at the commencement date in determining the present value of future payments. The ROU assets are calculated using the initial lease liability amount, plus any lease payments made at or before the commencement date, minus any lease incentives received, plus any initial direct costs incurred.

The Company’s lease agreements may contain both lease and non-lease components which are accounted separately. The Company elected the practical expedient on not separating lease components from non-lease components for its equipment leases.

The Company leases office space and equipment under various operating lease arrangements. The Company’s leases have remaining lease terms ranging from 2 months to 11 years. Some building leases have options to extend, terminate, or retract the leased area. The Company did not factor in term extension, terminations, or space retractions into the lease terms used to calculate the right-of-use assets and lease liabilities since it was uncertain as to whether these options would be executed.

The Company is also party to certain service contracts. These agreements will continue to be accounted for as service contracts and expensed in the period the services have been provided. As contracts are signed, renewed, or renegotiated, they will be evaluated using the criteria set forth in the new lease guidance to determine if these contracts contain a lease and will be accounted for properly depending upon the terms and language in the contract.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

(Dollars in thousands)	Quarter Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease expense	$	819	$	2,460
Short-term lease expense		2		7
Total lease expense	$	821	$	2,467

(Dollars in thousands)	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of liabilities:
Operating leases	$	1,804
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	14,163

The table below presents the lease-related assets and liabilities recorded on the consolidated balance sheets.

(Dollars in thousands)	Classification on the consolidated balance sheets	September 30, 2019
Assets:
Operating lease assets	Other assets	$	23,360

Liabilities:
Operating lease liabilities	Other liabilities	$	24,121

Weighted-average remaining lease term
Operating leases		9.9 years

Weighted-average discount rate
Operating leases (1)			2.7	%

(1)

Represents the Company’s incremental borrowing rate

At September 30, 2019, future minimum lease payments under non-cancelable operating leases were as follows:

(Dollars in thousands)
2019 (1)	$	731
2020		1,942
2021		2,779
2022		2,659
2023		2,702
Thereafter		16,888
Total future minimum lease payments	$	27,701
Less: amount representing interest		3,580
Present value of minimum lease payments	$	24,121

(1)

Excludes the nine months ended September 30, 2019