Leases

6 Months Ended

Jun. 30, 2019

5. Leases

Operating leases in which we are the lessee are recorded as operating lease right of use (“ROU”) assets and operating lease liabilities, included in other assets and other liabilities, respectively, on the unaudited interim consolidated balance sheets. The Company does not have any significant finance leases in which we are the lessee as of June 30, 2019 and December 31, 2018.

Operating lease ROU assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental borrowing rate at the lease commencement date. ROU assets are further adjusted for lease incentives. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in occupancy expense in the unaudited interim consolidated statements of income.

We have made a policy election to exclude the recognition requirements to all classes of leases with original terms of 12 months or less. Instead, the short-term lease payments are recognized in profit or loss on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes and insurance are not included in the measurement of the lease liability since they are generally able to be segregated.

Our leases relate primarily to office space and bank branches, and some contain options to renew the lease. These options to renew are generally not considered reasonably certain to exercise, and are therefore not included in the lease term until such time that the option to renew is reasonably certain. As of June 30, 2019, operating lease ROU assets and liabilities were $34.6 million and $37.1 million, respectively.

The table below summarizes our net lease cost:

(In thousands)	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Operating lease cost	$	1,791		$	3,590
Variable lease cost		581			1,258
Short-term lease cost		87			177
Sublease income		(112	)		(213	)
Total operating lease cost	$	2,347		$	4,812

(In thousands)
2019	$	3,663
2020		7,032
2021		6,184
2022		5,345
2023		4,523
Thereafter		15,432
Total lease payments	$	42,179
Less: interest		(5,044	)
Present value of lease liabilities	$	37,135

The following table shows the weighted average remaining operating lease term, the weighted average discount rate and supplemental information on the unaudited interim consolidated statements of cash flows for operating leases:

(In thousands except for percent and period data)	June 30, 2019
Weighted average remaining lease term, in years		8.09
Weighted average discount rate		3.03	%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,070
ROU assets obtained in exchange for lease liabilities		37,749

As of June 30, 2019 there are no new significant leases that have not yet commenced.

The following table shows the future minimum rental payments related to non-cancelable operating leases with original terms of one year or more as of December 31, 2018.

(In thousands)
2019	$	6,890
2020		6,467
2021		5,613
2022		4,773
2023		3,972
Thereafter		13,869
Total	$	41,584