Leases

9 Months Ended

Sep. 30, 2023

The Company accounts for leases in accordance with ASC Topic 842. A lease is defined as a contract that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Substantially all of the leases in which the Company is the lessee comprise real estate property for branch offices, ATM locations, and corporate office space. Substantially all of our leases are classified as operating leases. With the adoption of ASC Topic 842, operating lease agreements were required to be recognized on the Consolidated Balance Sheets as a right-of-use ("ROU") asset and a corresponding lease liability.

As of September 30, 2023 and December 31, 2022, the Company had $20.2 million and $24.5 million of operating lease ROU assets, respectively, and $24.4 million and $29.3 million of operating lease liabilities, respectively, on the Company's Consolidated Balance Sheets. The Company elects not to recognize ROU assets and lease liabilities arising from short-term leases, leases with initial terms of twelve months or less, or equipment leases (deemed immaterial) on the Consolidated Balance Sheets.

The leases contain terms and conditions of options to extend or terminate the lease which are recognized as part of the ROU assets and lease liabilities when an economic benefit to exercise the option exists and there is a 90% probability that the Company will exercise the option. If these criteria are not met, the options are not included in ROU assets and lease liabilities.

As of September 30, 2023, our leases do not contain material residual value guarantees or impose restrictions or covenants related to dividends or the Company's ability to incur additional financial obligations. During the nine months ended September 30, 2023, the Company did not enter into new leases or renew or extend any leases. The Company had three leases expire during that period.

The following table presents lease costs and other lease information.


	Three Months Ended								Nine Months Ended
(dollars in thousands)	September 30, 2023				September 30, 2022				September 30, 2023		September 30, 2022
Lease cost
Operating lease cost (cost resulting from lease payments)	$	1,604			$	1,757			$	4,987	$	5,418
Variable lease cost (cost excluded from lease payments)	245				270				754		781
Sublease income	(30)				(30)				(89)		(212)
Net lease cost	$	1,819			$	1,997			$	5,652	$	5,987

Operating lease - operating cash flows (fixed payments)	$	1,760			$	1,809			$	5,433	$	5,551

(dollars in thousands)	September 30, 2023				December 31, 2022
Operating lease right-of-use assets	$	20,151			$	24,544
Operating lease liabilities	$	24,422			$	29,267
Weighted average lease term - operating leases	5.04			yrs	5.50			yrs
Weighted average discount rate - operating leases	2.79		%		2.91		%

Future minimum payments for operating leases with initial or remaining terms of more than one year as of September 30, 2023 were as follows:


(dollars in thousands)
Twelve months ended:
September 30, 2024	$	1,765
September 30, 2025	6,880
September 30, 2026	5,987
September 30, 2027	2,894
September 30, 2028	2,502
Thereafter	5,776
Total future minimum lease payments	25,804
Amounts representing interest	(1,382)
Present value of net future minimum lease payments	$	24,422