Leases

Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (“Topic 842”) and all subsequent ASU's that modified Topic 842, as further explained in Note 12, Recent Accounting Pronouncements. The Company’s leases primarily relate to real estate property for branches and office space with terms extending from 18 months up to 36 years. At March 31, 2019, all of the Company's leases are classified as operating leases.

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets and operating lease liabilities in the consolidated balance sheets. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recorded at the present value of lease payments over the lease term. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate in determining the present value of lease payments. Certain leases include options to renew, with one or more renewal terms ranging from five to ten years. As these extension options are not generally considered reasonably certain of renewal, they are not included in the lease term.

At March 31, 2019, the Company’s operating lease right-of-use assets and related lease liabilities included in the consolidated balance sheet were $43.5 million and $47.4 million, respectively. During the three months ended March 31, 2019, right-of-use assets obtained in exchange for new lease obligations were $1.0 million. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are recognized as incurred. Variable lease payments include common area maintenance charges, real estate taxes, repairs and maintenance costs and utilities. Operating and variable lease expenses are recorded in occupancy expense in the consolidated statements of income.

Supplemental lease information at or for the three months ended March 31, 2019 is as follows (dollars in thousands):



Operating lease cost	$	1,466
Variable lease cost	778
Net lease cost	$	2,244
Cash paid for amounts included in measurement of operating lease liabilities	$	1,327
Weighted average remaining lease term	13.05 years
Weighted average discount rate	3.60		%

The following table summarizes lease payment obligations for each of the next five years and thereafter in addition to a reconcilement to the Company's current lease liability (dollars in thousands):



Year	Amount
2019	$	4,574
2020	6,156
2021	5,730
2022	5,068
2023	4,975
Thereafter	35,287
Total lease payments	$	61,790
Less: imputed interest	(14,376		)
Present value of lease liabilities	$	47,414

As of March 31, 2019, the Company had not entered into any leases that have not yet commenced.

The following table summarizes projected minimum annual rental payments for operating leases under FASB ASC 840 “Leases” as of December 31, 2018 (dollars in thousands):



	Rental Payments Operating Leases
Year ending December 31:
2019	$	5,735
2020	5,949
2021	5,512
2022	4,844
2023	4,744
Thereafter	35,260
Total minimum lease payments	$	62,044

Net rental expense included in occupancy expense under FASB ASC 840 was $1.4 million for the quarter ended March 31, 2018.