Leases

12 Months Ended

Dec. 31, 2025

The Company's leasing activities include leasing certain real estate and equipment, providing lease financing to commercial customers, and leasing office space to third parties. The Company uses the FHLB fixed-advance rate at lease commencement or at any subsequent remeasurement event date based on the remaining lease term to calculate the liability for each lease.

Lessee

The Company's operating leases are primarily for branches, office space, ATM locations, and certain equipment. As of December 31, 2025, the right-of-use asset for operating leases, reported within premises and equipment, net, and lease liability,

reported within other liabilities, recognized on the Company's consolidated balance sheets totaled $30.6 million and $31.5 million, respectively, compared to right-of-use assets of $30.7 million and lease liability of $31.2 million at December 31, 2024. Total lease cost for the year ended December 31, 2025 was $8.6 million, compared to $8.5 million for the year ended December 31, 2024. For leases with a term of 12 months or less, an election was made not to recognize lease assets and lease liabilities for all asset classes, and to recognize lease expense for these leases on a straight-line basis over the lease term. The Company's leases have remaining terms of 2 months to 26 years, most of which contain renewal options. However, the renewal options are generally not included in the leased asset or liability because the option exercises are uncertain.

The maturities of operating leases at December 31, 2025 are included in the table below.


(in thousands)	Operating Leases(1)
2026	$	6,730
2027	6,468
2028	5,952
2029	4,385
2030	3,268
After 2030	12,091
Total lease payments	$	38,894
Less: Interest	7,437
Present value of lease liabilities	$	31,457

(1) Excludes $2.8 million of legally binding minimum lease payments for operating leases signed but not yet commenced.

The following table presents the average lease term and discount rate of operating leases.


	December 31, 2025		December 31, 2024
Weighted-average remaining lease term	8.7 years		9.2 years
Weighted-average discount rate	4.38	%	4.32	%

Supplemental cash flow information related to operating leases is included in the table below.


	For the Year Ended December 31
(in thousands)	2025		2024
Operating cash paid toward lease liabilities	$	6,575	6,553
Leased assets obtained in exchange for new lease liabilities	$	7,695	9,128

Lessor

The Company has net investments in direct financing and sales-type leases to commercial, industrial, and tax-exempt entities. These leases are included within business loans on the Company's consolidated balance sheets. The Company primarily leases various types of equipment, trucks and trailers, and office furniture and fixtures. Lease agreements may include options for the lessee to renew or purchase the leased equipment at the end of the lease term. The Company has elected to adopt the lease component expedient in which the lease and nonlease components are combined into the total lease receivable. The Company also leases office space to third parties, and these leases are classified as operating leases. The leases may include options to renew or to expand the leased space, and currently the leases have remaining terms of 1 month to 13 years.

The following table provides the components of lease income.


	For the Year Ended December 31
(in thousands)	2025		2024
Direct financing and sales-type leases	39,771		37,168
Operating leases(1)	18,464		16,816
Total lease income	$	58,235	$	53,984

(1) Includes rent from Tower Properties, a related party, of $0 and $78 thousand for the years ended December 31, 2025 and 2024, respectively. Tower Properties Company was no longer a lessee of the Company as of January 1, 2025.

The following table presents the components of the net investments in direct financing and sales-type leases.


(in thousands)	December 31, 2025		December 31, 2024
Lease payment receivable	$	780,925	$	792,863
Unguaranteed residual assets	81,818		84,063

Total net investments in direct financing and sales-type leases	$	862,743	$	876,926
Deferred origination cost	2,145		2,715
Total net investment included within business loans	$	864,888	$	879,641

The maturities of lease receivables at December 31, 2025 are included in the table below.


(in thousands)	Direct Financing and Sale-Type Leases		Operating Leases		Total
2026	$	247,926	$	16,344	$	264,270
2027	214,284		15,089		229,373
2028	174,483		14,698		189,181
2029	105,257		11,033		116,290
2030	69,465		10,696		80,161
After 2030	55,100		60,255		115,355
Total lease receipts	866,515		$	128,115	$	994,630
Less: Net present value adjustment	85,590
Present value of lease receipts	$	780,925