Lease Accounting

6 Months Ended

Jun. 30, 2019

On January 1, 2019, the Company adopted ASU 2016-02. As stated in Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 1: Basis of Presentation and Summary of Significant Accounting Policies”, the implementation of the new standard had a material effect on the financial statements. The most significant effects relate to the recognition of new operating ROU assets and operating lease liabilities on the balance sheet for real estate operating leases, providing significant new disclosures about leasing activities, and the impact of additional assets on certain financial measures, such as capital ratios and return on average asset ratios. On adoption, the Company recognized approximately $124 million of lease liabilities and $108 million of ROU assets on the face of the balance sheet. ROU assets obtained in exchange for lease liabilities are net of tenant improvement allowances and deferred rent. There was no impact to the Company’s consolidated statement of cash flows upon adoption, since the net impact of all adjustments recorded upon transition represents non-cash activity.

The Company, as lessee, has 42 real estate leases for office and ATM locations classified as operating leases. The Company determines if an arrangement is a lease or contains a lease at inception. The terms of the real estate leases generally have annual increases in payments based off of a fixed or variable rate, such as the Consumer Price Index rate, that is outlined within the respective contracts. Generally, the initial terms of the leases for our leased properties range from five to fifteen years. Most of the leases also include options to renew for periods of five to ten years at contractually agreed upon rates or at market rates at the time of the extension. On a quarterly basis, the Company evaluates whether the renewal of each lease is reasonably certain. If the lease doesn’t provide the implicit interest rate, the Bank uses its incremental borrowing rate at the commencement date of the lease in determining the present value of lease payments. No other significant judgments or assumptions were made in applying the requirements of ASU 2016-02.

The following table presents information about the Company's leases as of the dates indicated.



	Three months ended June 30,			Six months ended June 30,
	2019			2019
	(In thousands)
Lease cost
Operating lease cost	$	4,841		$	9,526
Short-term lease cost/ (refunds)	(3		)	29
Variable lease cost	2			4
Less: Sublease income	(28		)	(46		)
Total operating lease cost	$	4,812		$	9,513



	Six months ended June 30,
	(In thousands, except years and percentages)
Other information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	10,002
ROU assets obtained in exchange for new operating lease liabilities	$	10,510
Weighted-average remaining lease term for operating leases	8.3 years
Weighted-average discount rate for operating leases	3.4		%

The Company is obligated for minimum payments under non-cancelable operating leases. In accordance with the

terms of these leases, the Company is currently committed to minimum annual payments as follows as of June 30, 2019:



	June 30, 2019
	(In thousands)
Remainder of 2019	$	10,095
2020	20,224
2021	20,406
2022	20,360
2023	19,575
Thereafter	57,005
Total future minimum lease payments	147,665
Less: Amounts representing interest	(20,925		)
Present value of net future minimum lease payments	$	126,740

Prior to the adoption of ASC 842, the Company’s operating leases were not recognized on the balance sheet. The following table presents the undiscounted future minimum lease payments under the Company’s operating leases as of December 31, 2018:



	December 31, 2018
	(In thousands)
2019	$	20,053
2020	19,344
2021	19,064
2022	18,802
2023	16,552
Thereafter	41,412
Total	$	135,227

Rent expense for the three and six months ended June 30, 2018, prior to the adoption of ASU 2016-02, was $5.4 million and $10.8 million, respectively.