Operating Leases

As of January 1, 2019, the Company adopted ASU 2016-02 (Topic 842) on a prospective basis using the effective date method. The adoption of the new standard did not have a material impact on Nicolet's financial statements; however, additional disclosures have been added in accordance with the ASU. See Note 1 for additional information on this new accounting standard.

The operating lease ROU asset represents the right to use an underlying asset during the lease term, while the operating lease liability represents the obligation to make lease payments arising from the lease. The ROU asset and lease liability are recognized at lease commencement based on the present value of the remaining lease payments, considering a discount rate that represents Nicolet's incremental borrowing rate. Operating lease expense is recognized on a straight-line basis over the lease term and is recognized in occupancy, equipment, and office on the consolidated statements of income.

Nicolet leases space under non-cancelable operating lease agreements for certain bank and nonbank branch facilities with remaining lease terms of 2 to 7 years. Certain lease arrangements contain extension options which typically range from 5 to 10 years at the then fair market rental rates. The lease asset and liability considers renewal options when they are reasonably certain of being exercised.

A summary of net lease cost and selected other information related to operating leases was as follows.



	Nine Months Ended
($ in thousands)	September 30, 2019
Net lease cost:
Operating lease cost	$	737
Variable lease cost	179
Net lease cost	$	916
Selected other operating lease information:
Weighted average remaining lease term (years)	5
Weighted average discount rate	2.5		%

The following table summarizes the maturity of remaining lease liabilities.



(in thousands)
Year ending December 31,
2019 (remaining three months)	$	951
2020	1,037
2021	911
2022	851
2023	607
2024	499
Thereafter	16
Total future minimum lease payments	4,872
Less: amount representing interest	(122		)
Present value of net future minimum lease payments	$	4,750