Leases

3 Months Ended

Mar. 31, 2019

On January 1, 2019, the Corporation adopted ASU 2016-02-Leases (Topic 842) and all subsequent ASUs that modified Topic 842. Refer to Note 1, Basis of Presentation and Significant Accounting Policies, for further details regarding the adoption.

Lessee Leases

Operating leases in which the Corporation is the lessee are recorded as operating lease right-of-use ("ROU") assets and operating lease liabilities, included in "Interest receivable and other assets" and "Interest payable and other liabilities," respectively, in the Consolidated Statements of Financial Position.

Operating lease ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the future minimum lease payments over the lease term. The Corporation has lease agreements with lease and non-lease components, which are accounted for separately. Where an implicit rate is not provided or determinable in the lease, the Corporation uses its incremental borrowing rate as a discount rate, on a collateralized basis, over a similar term. The lease term considers options to extend or terminate the lease when it is reasonably certain that the Corporation will exercise that option.

The Corporation's leases relate primarily to real estate property consisting of branches, office space, storage and operation centers with remaining lease terms of generally 1 to 16 years. Certain lease arrangements contain extension options which typically range from 3 to 5 years. During the three months ended March 31, 2019, the Corporation obtained $5.6 million of ROU assets in exchange for new lease liabilities. As of March 31, 2019, operating lease ROU assets and liabilities were $41.2 million and $42.2 million, respectively.

The following table presents balances and assumptions utilized in determining the right to use asset and lease liability for operating leases as of March 31, 2019:



	March 31, 2019
(Dollars in thousands)
Weighted-average remaining lease terms (in years)	8.1
Weighted-average discount rate	3.1	%

The components of net operating lease cost were as follows:



	Three Months Ended March 31,
(Dollars in thousands)	2019
Operating lease cost	$	1,914
Variable lease cost⁽¹⁾	206
Sublease income	(55		)
Total lease cost⁽²⁾	$	2,065


⁽¹⁾	Represents non-lease components such as common area maintenance, taxes, insurance and utilities.


⁽²⁾	Included within "Occupancy" expense in the Consolidated Statements of Income.

Maturities of operating lease liability due under these lease arrangements as of March 31, 2019 are as follows:



(Dollars in thousands)	Operating Leases
Remainder of 2019	$	5,905
2020	7,132
2021	6,744
2022	6,071
2023	5,017
Thereafter	17,041
Total	$	47,910
Less: Present value discount	5,744
Lease liability	$	42,166

As of March 31, 2019, the Corporation has approximately $15.8 million in additional operating leases for real property that have not yet commenced and are excluded from the lessee maturity table above.

At December 31, 2018, operating lease commitments under lessee arrangements were $7.3 million, $6.2 million, $5.1 million, $4.8 million and $4.4 million for 2019 through 2023, respectively, and $12.1 million in aggregate for all years thereafter. These amounts include variable lease payments under leases that have not yet commenced, which are excluded from the lessee maturity analysis presented in the table above.

Lessor Leases

The Corporation is the lessor in certain arrangements, primarily for the use of real estate property. Lease agreements may include options to renew, but do not offer the right to purchase the underlying asset at the end of the lease term. Of the $122.5 million of net premises and equipment, $15.3 million represents underlying assets under operating leases.

The components of operating lease income were as follows:



	Three Months Ended March 31,
(Dollars in thousands)	2019
Total lease income⁽¹⁾	$	194


⁽¹⁾	Included within "Other" noninterest income in the Consolidated Statements of Income.

Leases