LEASES

6 Months Ended

Jun. 30, 2024

Leases [Abstract]

LEASES

LEASES

Operating lease assets represent the Corporation's right to use an underlying asset during the lease term and operating lease liabilities represent the Corporation's obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Corporation's incremental borrowing rate at the lease commencement date. Operating lease cost, which is comprised of amortization of the operating lease 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 net occupancy expense in the condensed consolidated statements of income.

The Corporation leases certain full-service branch offices, land, and equipment. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Most leases include one or more options to renew and the exercise of the lease renewal options are at the Corporation's sole discretion. The Corporation includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Corporation will exercise the option. Certain lease agreements of the Corporation include rental payments adjusted periodically for changes in the consumer price index.

Leases	Classification	June 30, 2024		December 31, 2023
Assets:
Operating lease assets	Operating lease assets	$	35,066	$	35,699
Finance lease assets	Premises and equipment, net (1)	179		215
Total leased assets		$	35,245	$	35,914
Liabilities:
Operating lease liabilities	Operating lease liabilities	$	37,194	$	37,650
Finance lease liabilities	Accrued interest payable and other liabilities	247		294
Total leased liabilities		$	37,441	$	37,944

(1) Finance lease assets are recorded net of accumulated amortization of $1.0 million as of June 30, 2024 and $1.0 million as of December 31, 2023.

The components of the Corporation's net lease expense for the three and six months ended June 30, 2024 and 2023, respectively, were as follows:

		Three Months Ended June 30,				Six Months Ended June 30,
Lease Cost	Classification	2024		2023		2024		2023
Operating lease cost	Net occupancy expense	$	736	$	782	$	1,478	$	1,479
Variable lease cost	Net occupancy expense	29		22		56		44
Finance lease cost:
Amortization of leased assets	Net occupancy expense	18		18		36		36
Interest on lease liabilities	Interest expense - borrowed funds	3		4		6		8
Sublease income (1)	Net occupancy expense	(24)		(23)		(48)		(46)
Net lease cost		$	762	$	803	$	1,528	$	1,521

(1) Sublease income excludes rental income from owned properties.

The following table sets forth future minimum rental payments under noncancellable leases with initial terms in excess of one year as of June 30, 2024:

Maturity of Lease Liabilities as of June 30, 2024	Operating Leases (1)		Finance Leases		Total
2024	$	1,238	$	52	$	1,290
2025	2,543		105		2,648
2026	2,533		105		2,638
2027	2,526		—		2,526
2028	2,582		—		2,582
After 2028	47,938		—		47,938
Total lease payments	59,360		262		59,622
Less: Interest	22,166		15		22,181
Present value of lease liabilities	$	37,194	$	247	$	37,441

(1) Operating lease payments include payments related to options to extend lease terms that are reasonably certain of being exercised and exclude $14.9 million of legally binding minimum lease payments for leases signed, but not yet commenced.

Lease terms and discount rates related to the Corporation's lease liabilities as of June 30, 2024 and December 31, 2023 were as follows:

Lease Term and Discount Rate	June 30, 2024		December 31, 2023
Weighted-average remaining lease term (years)
Operating leases	22.6		23.0
Finance leases	2.5		3.0
Weighted-average discount rate
Operating leases	4.06	%	4.05	%
Finance leases	4.49	%	4.49	%

Other information related to the Corporation's lease liabilities as of June 30, 2024 and 2023, respectively, was as follows:

Other Information	June 30, 2024		June 30, 2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	535	$	603

LEASES

LEASES

Operating lease assets represent the Corporation's right to use an underlying asset during the lease term and operating lease liabilities represent the Corporation's obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Corporation's incremental borrowing rate at the lease commencement date. Operating lease cost, which is comprised of amortization of the operating lease 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 net occupancy expense in the condensed consolidated statements of income.

The Corporation leases certain full-service branch offices, land, and equipment. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Most leases include one or more options to renew and the exercise of the lease renewal options are at the Corporation's sole discretion. The Corporation includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Corporation will exercise the option. Certain lease agreements of the Corporation include rental payments adjusted periodically for changes in the consumer price index.

Leases	Classification	June 30, 2024		December 31, 2023
Assets:
Operating lease assets	Operating lease assets	$	35,066	$	35,699
Finance lease assets	Premises and equipment, net (1)	179		215
Total leased assets		$	35,245	$	35,914
Liabilities:
Operating lease liabilities	Operating lease liabilities	$	37,194	$	37,650
Finance lease liabilities	Accrued interest payable and other liabilities	247		294
Total leased liabilities		$	37,441	$	37,944

(1) Finance lease assets are recorded net of accumulated amortization of $1.0 million as of June 30, 2024 and $1.0 million as of December 31, 2023.

The components of the Corporation's net lease expense for the three and six months ended June 30, 2024 and 2023, respectively, were as follows:

		Three Months Ended June 30,				Six Months Ended June 30,
Lease Cost	Classification	2024		2023		2024		2023
Operating lease cost	Net occupancy expense	$	736	$	782	$	1,478	$	1,479
Variable lease cost	Net occupancy expense	29		22		56		44
Finance lease cost:
Amortization of leased assets	Net occupancy expense	18		18		36		36
Interest on lease liabilities	Interest expense - borrowed funds	3		4		6		8
Sublease income (1)	Net occupancy expense	(24)		(23)		(48)		(46)
Net lease cost		$	762	$	803	$	1,528	$	1,521

(1) Sublease income excludes rental income from owned properties.

The following table sets forth future minimum rental payments under noncancellable leases with initial terms in excess of one year as of June 30, 2024:

Maturity of Lease Liabilities as of June 30, 2024	Operating Leases (1)		Finance Leases		Total
2024	$	1,238	$	52	$	1,290
2025	2,543		105		2,648
2026	2,533		105		2,638
2027	2,526		—		2,526
2028	2,582		—		2,582
After 2028	47,938		—		47,938
Total lease payments	59,360		262		59,622
Less: Interest	22,166		15		22,181
Present value of lease liabilities	$	37,194	$	247	$	37,441

(1) Operating lease payments include payments related to options to extend lease terms that are reasonably certain of being exercised and exclude $14.9 million of legally binding minimum lease payments for leases signed, but not yet commenced.

Lease terms and discount rates related to the Corporation's lease liabilities as of June 30, 2024 and December 31, 2023 were as follows:

Lease Term and Discount Rate	June 30, 2024		December 31, 2023
Weighted-average remaining lease term (years)
Operating leases	22.6		23.0
Finance leases	2.5		3.0
Weighted-average discount rate
Operating leases	4.06	%	4.05	%
Finance leases	4.49	%	4.49	%

Other information related to the Corporation's lease liabilities as of June 30, 2024 and 2023, respectively, was as follows:

Other Information	June 30, 2024		June 30, 2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	535	$	603