Leases

February 2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2016

02,

“Leases (Topic

842

)” (“ASU

2016

02”

). The FASB issued this ASU to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet by lessees for those leases classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. The new standard was adopted by the Company on

January 1, 2019.

ASU

2016

provides for a modified retrospective transition approach requiring lessees to recognize and measure leases on the balance sheet at the beginning of either the earliest period presented or as of the beginning of the period of adoption. The Company elected to apply ASU

2016

as of the beginning of the period of adoption (

January 1, 2019)

and will

not

restate comparative periods. Adoption of ASU

2016

resulted in the recognition of total operating lease liability obligations totaling

$35.1

million and the recognition of operating lease right-of-use assets totaling

$34.2

million at the date of adoption. The initial balance sheet gross up upon adoption was related to operating leases on land and buildings for

twenty-three

lease agreements. The Company has

finance leases or material subleases for which it is the lessor of property. The Company has elected to apply the package of practical expedients allowed by the new standard under which the Company need

not

reassess whether any expired or existing contracts are leases or contain leases, the Company need

not

reassess the lease classification for any expired or existing lease, and the Company need

not

reassess initial direct costs for any existing leases.

January 1, 2019,

the Company had

thirty-four

operating leases for real property, which includes operating leases for

fifteen

branch locations,

eight

offices that are used for general office space, and

eleven

operating leases for equipment. All of the real property operating leases include

one

or more options to extend the lease term. Five of the operating leases for branch locations are land leases where the Company is responsible for the construction of the building on the property.

December 31, 2019,

the Company had

thirty-seven

operating lease agreements, which include operating leases for

seventeen

branch locations,

seven

offices that are used for general office space, and

thirteen

operating leases for equipment. Two of the real property operating leases did

not

include

one

or more options to extend the lease term. Five of the operating leases for branch locations are land leases where the Company is responsible for the construction of the building on the property. The

thirty-seven

operating leases have maturity dates ranging from

January 2020

December 2058

most of which include options for multiple

five

and

ten

year extensions which the Company is reasonably certain to exercise.

operating leases include variable lease payments that are based on an index or rate, such as the CPI. The weighted average remaining operating lease term for these leases is

19.75

years as of

December 31, 2019.

The discount rate used in determining the operating lease liability obligation for each individual lease was the assumed incremental borrowing rate for the Company that corresponded with the remaining lease term as of

January 1, 2019

for leases that existed at adoption and as of the lease commencement date for leases subsequently entered in to. The weighted average operating lease discount rate was

3.58%

as of

December 31, 2019.

The following table presents operating lease costs net of sublease income for the

twelve

months ended

December 31, 2019.

	Twelve Months Ended December 3 1 , 2019
(dollars in thousands)
Operating lease cost	$	6,817
Sublease income		(302	)
Total lease cost	$	6,515

Rent expense was approximately

$4.4

million and

$4.0

million for the years ended

December 31, 2018

and

2017,

respectively.

The following table presents a maturity analysis of total operating lease liability obligations and reconciliation of the undiscounted cash flows to total operating lease liability obligations at

December 31, 2019.

	December 3 1 , 2019
(dollars in thousands)
Operating lease payments due:
Within one year	$	7,221
One to three years		11,385
Three to five years		10,028
More than five years		70,721
Total undiscounted cash flows		99,355
Discount on cash flows		(30,499	)
Total operating lease liability obligations	$	68,856

The following table presents cash and non-cash activities for the

twelve

months ended

December 31, 2019.

	Twelve Months Ended December 3 1 , 2019
(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	5,387

Non-cash investing and financing activities
Additions to Operating leases – right of use asset
New operating lease liability obligation	$	72,648