Leases

3 Months Ended

Mar. 31, 2021

The Company enters into leases in the normal course of business. As of March 31, 2021, the Company leased seven branch offices for which the land and buildings are leased and eight branch offices for which the land is leased but the building is owned. The Company also leases office space for several operational departments. All of the Company’s leases are operating leases under applicable accounting standards and the lease agreements have maturity dates ranging from May 2021 through May 2076, some of which include options for multiple five- and ten-year extensions. The weighted average remaining life of the lease term for these leases was 18.2 years as of March 31, 2021. The Company includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Company will exercise the option. As permitted by applicable accounting standards, the Company has elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on the Company's Consolidated Balance Sheets.

Leases are classified as either operating or finance leases at the lease commencement date, and as previously noted, all of the Company's leases have been determined to be operating leases. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

The Company uses its incremental borrowing rate, on a collateralized basis, at lease commencement to calculate the present value of lease payments when the rate implicit in the lease is not known. The weighted average discount rate for leases was 3.01% as of March 31, 2021.

Total operating lease expense was $0.7 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively. The right-of-use assets and lease liabilities were $16.9 million and $17.4 million as of March 31, 2021, respectively, and were $17.5 million and $17.9 million as of December 31, 2020, respectively.

Future undiscounted lease payments for operating leases with initial terms of one year or more as of March 31, 2021 are as follows.


($ in thousands)
April 1, 2021 to December 31, 2021	$	1,492
2022	1,742
2023	1,640
2024	1,503
2025	1,318
Thereafter	18,380
Total undiscounted lease payments	26,075
Less effect of discounting	(8,721)
Present value of estimated lease payments (lease liability)	$	17,354