6.RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

Upon adoption of ASU 2016-02 on January 1, 2019, the Company was under 50 separate and distinct operating lease contracts to lease the land and/or buildings for 38 of its offices, with 15 such operating leases contracted with a related party of the Company. As of January 1, 2019, the Company recorded total operating lease liabilities of $42 million and total right-of-use assets of $40 million, primarily reflecting the present value of its expected remaining lease payments plus any residual guarantees under its operating lease contracts. In order to discount these remaining lease payments and guarantees, the Company made assumptions concerning the expected remaining lease term and the discount rate.

The Company’s assumption regarding the expected remaining lease term included the fixed noncancelable term, plus all periods for which failure to renew the lease imposed a penalty on the Company, plus all periods for which the Company was reasonably certain to exercise a lease renewal option, plus all periods for which the Company was reasonably certain not to exercise a lease termination option. In determining whether it was reasonably certain to exercise a lease renewal or termination option, the Company considered its overall strategic plan and all economic and environmental circumstances connected to the leased property. Expected remaining lease terms upon adoption of ASU 2016-02 ranged from 0.75 to 18.51 years, with a weighted average remaining term of 8.60 years.

The Company employed the interest rate curve published by the FHLB of Cincinnati for the FHLB’s collateralized term borrowings as of January 1, 2019 to discount its operating lease payments and guarantees, matching expected lease term to borrowing term. Discount rates employed upon adoption of ASU 2016-02 ranged from 2.94% to 3.70%, with a weighted average rate of 3.48%.

As of December 31, 2019, payments on 25 of the Company’s operating leases were considered variable because such payments were adjustable based on periodic changes in the Consumer Price Index.

Prior to the release of these financial statements, the Company had executed two lease contracts that had not commenced for two of its banking centers. The estimated operating lease liabilities and offsetting right-of-use assets to be recorded for these leases totaled approximately $623,000 .

The following table presents information concerning the Company’s operating lease expense recorded as a noninterest expense within the category “Occupancy and equipment, net” for the year ended December 31, 2019:


Year Ended December 31, (in thousands)	2019

Operating lease expense:
Related Party:
Variable lease expense	$	4,690
Fixed lease expense		37
Third Party:
Variable lease expense		883
Fixed lease expense		1,505
Short-term lease expense		62
Total operating lease expense	$	7,177

Other information concerning operating leases:
Cash paid for amounts included in the measurement of operating lease liabilities	$	7,175
Short-term lease payments not included in the measurement of lease liabilities		62

The following table presents the weighted average remaining term and weighted average discount rate for the Company’s non-short-term operating leases as of December 31, 2019:


	December 31, 2019

Weighted average remaining term in years		8.02
Weighted average discount rate		3.46	%

The following table presents a maturity schedule of the Company’s operating lease liabilities based on undiscounted cash flows, and a reconciliation of those undiscounted cash flows to the operating lease liabilities recognized on the Company’s balance sheet as of December 31, 2019:


Year (in thousands)	Related Party		Third Party		Total

2020	$	4,608	$	2,590	$	7,198
2021		4,194		2,371		6,565
2022		3,332		1,966		5,298
2023		3,332		1,441		4,773
2024		3,205		1,017		4,222
Thereafter		12,718		1,950		14,668
Total undiscounted cash flows	$	31,389	$	11,335	$	42,724
Discount applied to cash flows		(4,554)		(1,640)		(6,194)
Total discounted cash flows reported as operating lease liabilities	$	26,835	$	9,695	$	36,530