Leases

9 Months Ended

Sep. 30, 2023

The Company's leases real estate property for branches and office space. At September 30, 2023 and December 31, 2022, all of the Company's leases are classified as operating leases.

The Company determines if an arrangement is a lease at inception. Topic 842 requires lessees to recognize a right-of-use asset and a lease liability, measured at the present value of the future minimum lease payments, at the lease commencement date. The calculated amount of the right-of-use asset and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of minimum lease payments.

At September 30, 2023 and December 31, 2022, the weighted average remaining lease term for operating leases was 6.0 years and 6.5 years, respectively, and the weighted average discount rate used in the measurement of operating lease liabilities was 2.65% and 2.35%, respectively.

The Company accounts for the lease and non-lease components separately since such amounts are readily determinable under the Company's lease contracts. 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. During the three months ended September 30, 2023 and 2022, operating and variable lease expenses totaled approximately $754,000 and $668,000, respectively. During the nine months ended September 30, 2023 and 2022, operating and variable lease expenses totaled approximately $2.1 million and $2.0 million, respectively.

There were no sale and leaseback transactions, leveraged leases or lease transactions with related parties during the three and nine months ended September 30, 2023 and 2022. At September 30, 2023, the Company had not entered into any leases which had not yet commenced.

10. Leases (continued)

The following table summarizes lease payment obligations for each of the next five years and thereafter as follows:


	Lease Payment Obligations at
	September 30, 2023		December 31, 2022
	(In thousands)


One year or less	$	1,116	$	4,290
After one year to two years	4,234		3,745
After two years to three years	3,491		3,075
After three years to four years	3,109		2,773
After four years to five years	2,227		2,000
Thereafter	4,662		4,345
Total undiscounted cash flows	18,839		20,228
Discount on cash flows	(1,454)		(1,613)
Total lease liability	$	17,385	$	18,615