Leases

9 Months Ended

Sep. 30, 2024

The Company enters into leases in the normal course of business. As of September 30, 2024, the Company leased 14 bank branch offices for which the land and buildings are leased and ten branch offices for which the land is leased but the buildings are owned. The Company also leases office space for several operational departments. The lease agreements have maturity dates ranging from November 2024 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 21.1 years as of September 30, 2024. Certain of the Company's lease agreements include variable lease payments based on changes in inflation, with the impact of that factor being insignificant to the Company's total lease expense. As permitted by applicable accounting standards, the Company has elected not to recognize leases with original lease terms of twelve months or less (short-term leases) on the Company's consolidated balance sheets. The short-term lease cost for each period presented was insignificant.

Leases are classified as either operating or finance leases at the lease commencement date and 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 applicable 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 rates for leases were 3.32% and 3.19% as of September 30, 2024 and December 31, 2023, respectively.

The right-of-use assets, included in "Other assets" on the Company's consolidated balance sheet, and lease liabilities, included in "Other liabilities" on the Company's consolidated balance sheet, were $14.1 million and $14.9 million as of September 30, 2024, respectively, and were $17.1 million and $17.8 million as of December 31, 2023, respectively.

Total operating lease expenses, included in "Other operating expenses" in the Company's consolidated statement of income, were $0.6 million and $0.8 million for the three months ended September 30, 2024 and 2023, respectively, and $1.8 million and $2.3 million for the nine months ended September 30, 2024 and 2023, respectively.

Future undiscounted lease payments for operating leases with initial terms of greater than one year as of September 30, 2024 are as follows:


($ in thousands)
October 1, 2024 to December 31, 2024	$	550
2025	1,800
2026	1,517
2027	1,236
2028	1,145
Thereafter	16,120
Total undiscounted lease payments	22,368
Less effect of discounting	(7,436)
Present value of estimated lease payments (lease liability)	$	14,932