Leasing

9 Months Ended

Sep. 30, 2019

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” and subsequent amendments, which replaced existing lease guidance in GAAP and requires lessees to recognize right-of-use (ROU) assets and lease liabilities on the Consolidated Statement of Condition for leases greater than twelve months and disclose key information about leasing arrangements. We adopted the standard on January 1, 2019 using the modified retrospective method and used the effective date as our date of initial application. Financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. There were no adjustments to “Retained earnings” on adoption. The new standard provides a number of optional practical expedients for transition. We elected the package of practical expedients under the transition guidance which permitted us not to reassess under the new standard our prior conclusions for lease identification and lease classification on expired or existing contracts and whether initial direct costs previously capitalized would qualify for capitalization under FASB Accounting Standards Codification (ASC) 842. We did not elect the hindsight practical expedient to determine the reasonably certain lease term for existing leases.

The new standard also provides practical expedients and recognition exemptions for an entity’s ongoing accounting policy elections. We are committed under short and long-term lease agreements for branch and ATM locations. Some of these agreements contain variable payment provisions that depend on an index or rate, initially measured using the index or rate at the lease commencement date, and are therefore not included in our future minimum lease payments. These variable lease agreements include usage-based payments for utilities, taxes, janitorial services and building maintenance. Our long-term lease agreements do not contain any material restrictive covenants.

Our property leases have remaining terms of less than 1 to 23 years. Some of these leases may include options to extend the leases for up to 29 years, and some may include options to terminate the leases within 30 days. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability.

Operating lease amounts included in the Consolidated Statement of Condition are as follows:



(In thousands)		September 30, 2019
Assets	Classification
ROU assets	Other assets	$	33,755

Liabilities
Current lease liabilities	Other liabilities	3,319
Non-current lease liabilities	Other liabilities	32,873
Total lease liabilities		$	36,192

The components of operating lease expense, primarily included in “Net occupancy expense of premises,” were as follows:



(In thousands)	Three Months Ended September 30, 2019
Lease Costs
Operating lease cost	$	1,207
Variable lease cost	144
Short-term lease cost	0
Sublease income	(9		)
Total lease cost	$	1,342



(In thousands)	Nine Months Ended September 30, 2019
Lease Costs
Operating lease cost	$	3,522
Variable lease cost	334
Short-term lease cost	1
Sublease income	(26		)
Total lease cost	$	3,831

At September 30, 2019, we did not have any material finance lease assets or liabilities.

Other information related to operating leases was as follows:



(In thousands)	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$3,501
Weighted-average remaining lease term on operating leases	14.04
Weighted-average discount rates on operating leases	3.53	%
ROU assets obtained in exchange for lease liabilities	$38,925

Future minimum lease payments under operating leases were as follows:



(In thousands)	Operating Leases
Three Months 2019	$	1,169
2020	4,365
2021	4,014
2022	3,971
2023	3,724
2024 and subsequent years	30,001
Total lease payments	$	47,244
Less: Interest	(11,052		)
Present value of lease liabilities	$	36,192

At December 31, 2018, operating lease commitments under lessee arrangements were $4.8 million, $4.0 million, $3.6 million, $3.4 million, and $3.4 million for 2019 through 2023, respectively, and $13.0 million in aggregate for all years thereafter. These amounts include lease options to renew ranging from 5 to 20 years.