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Leases

6 Months Ended

Jun. 30, 2019

Effective January 1, 2019, the Corporation adopted ASC Update 2016-02, "Leases (Topic 842)," using the modified retrospective method of applying the new standard at the adoption date. In addition, the Corporation elected the package of practical expedients permitted under the transition guidance within the new standard as the lessee. This permitted the carry forward of the conclusions on lease identification, lease classification and initial direct costs. The Corporation also elected not to separate lease and non-lease components. Financial results for reporting periods beginning on or after January 1, 2019 are presented under the new guidance (Topic 842), while prior period amounts are not adjusted and continue to be reported in accordance with previous guidance (Topic 840).

As a lessee, the majority of the operating lease portfolio consists of real estate leases for the Corporation's branches, land and office space. The operating leases have remaining lease terms of 1 year to 20 years, some of which include options to extend the leases for 5 years or more. ROU assets and lease liabilities are not recognized for leases with an initial term of 12 months or less. The Corporation does not have any finance leases as the lessee.

Certain real estate leases have lease payments that adjust based on annual changes in the Consumer Price Index ("CPI"). The leases that are dependent upon CPI are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability.

Operating lease expense primarily represents fixed lease payments for operating leases recognized on a straight-line basis over the applicable lease term. Variable lease expense represents the payment of real estate taxes, insurance and common area maintenance based on the Corporation's pro-rata share.

In addition, the Corporation rents or subleases certain real estate to third parties. The rental and sublease portfolio consists mostly of operating leases for space within the Corporation's offices and branches.

The following table presents the components of the Corporation’s lease costs for operating leases as the lessee, which is included in net occupancy expense on the consolidated statements of income (in thousands):



	Three months ended			Six months ended
	June 30, 2019			June 30, 2019
Operating lease expense	$	4,796		$	9,486
Variable lease expense	761			1,370
Sublease income	(168		)	(371		)
Total lease expense	$	5,389		$	10,485

Supplemental balance sheet information related to leases was as follows (in thousands, except for weighted-averages):



Operating Leases	Classification	June 30, 2019
ROU assets	Other assets	$	104,046
Lease liabilities	Other liabilities	$	110,987
Weighted-average remaining lease term		8.4 years
Weighted-average discount rate		3.06		%

The discount rate used in determining the lease liability for each individual lease was the Federal Home Loan Bank ("FHLB") fixed advance rate which corresponded with the remaining lease term as of January 1, 2019 for leases that existed at adoption and as of the lease commencement or modification date for leases subsequently entered into.

Supplemental cash flow information related to operating leases was as follows (in thousands):



	Six months ended
	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities	$	9,269
ROU assets obtained in exchange for lease obligations	$	111,995

Lease payment obligations for each of the next five years and thereafter with a reconciliation to the Corporation's lease liability were as follows (in thousands):



Year	Operating Leases
For the six months ending December 31, 2019	$	9,390
2020	18,607
2021	17,400
2022	16,052
2023	13,804
Thereafter	52,664
Total lease payments	127,917
Less: imputed interest	(16,930		)
Present value of lease liabilities	$	110,987

As of June 30, 2019, the Corporation had not entered into any material leases that have not yet commenced.

As previously disclosed in the Corporation's 2018 Annual Report on Form 10-K and under Topic 840, future minimum lease payments for operating leases having initial or remaining noncancellable lease terms in excess of one year as of December 31, 2018 were $18.0 million, $17.3 million, $15.7 million, $13.7 million, $11.4 million for years 2019 through 2023, respectively, and $43.3 million in the aggregate for all years thereafter.

Leases



	Three months ended			Six months ended
	June 30, 2019			June 30, 2019
Operating lease expense	$	4,796		$	9,486
Variable lease expense	761			1,370
Sublease income	(168		)	(371		)
Total lease expense	$	5,389		$	10,485

Supplemental balance sheet information related to leases was as follows (in thousands, except for weighted-averages):



Operating Leases	Classification	June 30, 2019
ROU assets	Other assets	$	104,046
Lease liabilities	Other liabilities	$	110,987
Weighted-average remaining lease term		8.4 years
Weighted-average discount rate		3.06		%

Supplemental cash flow information related to operating leases was as follows (in thousands):



	Six months ended
	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities	$	9,269
ROU assets obtained in exchange for lease obligations	$	111,995

Lease payment obligations for each of the next five years and thereafter with a reconciliation to the Corporation's lease liability were as follows (in thousands):



Year	Operating Leases
For the six months ending December 31, 2019	$	9,390
2020	18,607
2021	17,400
2022	16,052
2023	13,804
Thereafter	52,664
Total lease payments	127,917
Less: imputed interest	(16,930		)
Present value of lease liabilities	$	110,987

As of June 30, 2019, the Corporation had not entered into any material leases that have not yet commenced.