RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

9 Months Ended

Sep. 30, 2022

RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

7. RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

The Company records as operating lease liabilities the present value of its required minimum lease payments plus any amounts probable of being owed under a residual value guarantee. Offsetting these operating lease liabilities, the Company records right-of-use assets for the underlying leased property.

As of September 30, 2022, the Company was under 45 separate and distinct operating lease contracts to lease the land and/or buildings for 37 of its offices, with 12 such operating leases contracted with a related party of the Company. As of September 30, 2022, payments on 22 of the Company’s operating leases were considered variable because such payments were adjustable based on periodic changes in the Consumer Price Index.

The Company recorded two new third-party office leases, renewed one of its existing related-party leases, and extended six of its third-party leases during the first nine months of 2022, with a related total right-of-use asset value of $6 million connected to this 2022 activity.

The following table presents information concerning the Company’s operating lease expense recorded as a noninterest expense within the “Occupancy” category for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2022		2021		2022		2021
Operating lease expense:
Related Party:
Variable lease expense	$	1,101	$	1,224	$	3,635	$	3,662
Fixed lease expense		57		34		149		102
Third Party:
Variable lease expense		222		197		639		590
Fixed lease expense		346		337		1,040		1,021
Total operating lease expense	$	1,726	$	1,792	$	5,463	$	5,375
Other information concerning operating leases:
Cash paid for amounts included in the measurement of operating lease liabilities	$	1,709	$	1,793	$	5,121	$	5,390
Cash paid for variable rent payments not included in measurement of operating lease liabilities		151		—		453		—
Short-term lease payments not included in the measurement of lease liabilities		—		—		—		—

The following table presents the weighted average remaining term and weighted average discount rate for the Company’s non-short-term operating leases as of September 30, 2022 and December 31, 2021:

	September 30, 2022			December 31, 2021
Weighted average remaining term in years		8.28			7.57
Weighted average discount rate		2.66	%		3.05	%

The following table presents a maturity schedule of the Company’s operating lease liabilities based on undiscounted cash flows, and a reconciliation of those undiscounted cash flows to the operating lease liabilities recognized on the Company’s balance sheet as of September 30, 2022:

Year (dollars in thousands)	Related Party		Third Party		Total
2022	$	1,062	$	664	$	1,726
2023		4,274		2,522		6,796
2024		4,189		2,143		6,332
2025		4,053		1,609		5,662
2026		4,124		1,310		5,434
Thereafter		16,375		4,593		20,968
Total undiscounted cash flows	$	34,077	$	12,841	$	46,918
Discount applied to cash flows		(3,216)		(1,593)		(4,809)
Total discounted cash flows reported as operating lease liabilities	$	30,861	$	11,248	$	42,109