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Leases

12 Months Ended

Dec. 31, 2024

13. Leases

The Company, as lessee, is obligated under a number of noncancelable operating leases primarily for branch premises and related real estate. Terms of such leases extend for periods up to 39 years, many of which provide for periodic adjustment of rent payments based on changes in various economic indicators. Renewal options are included in the Company’s lease liabilities and related right-of-use assets to the extent that the Company is reasonably certain to exercise such options. For all of the Company’s short-term leases (i.e., leases with an initial term of 12 months or less), the Company recognizes lease expense on a straight-line basis over the lease term. Variable lease payments are recognized in the period in which the obligation for those payments is incurred.

The Company’s branch premises leases typically require that the Company is responsible to pay for variable lease expense, primarily maintenance expense, as well as real property taxes, property insurance and sales taxes. Maintenance expense is paid to maintain common areas and covers costs including landscaping, cleaning and general maintenance. Such variable costs are typically re-evaluated by the landlord on an annual basis and are charged to the Company based on the portion of the total building premises that is occupied by the Company.

The Company subleases certain premises and real estate to third parties. The sublease portfolio consists of operating leases for space connected with three of the Company’s branch properties.

The components of the Company’s net lease expense for the years ended December 31, 2024, 2023 and 2022 were as follows:


	Year Ended December 31,
(dollars in thousands)	2024		2023		2022
Operating lease expense	$	8,665	$	8,167	$	8,883
Short-term lease expense		—		26		26
Variable lease expense		2,177		2,112		2,135
Finance lease expense:
Amortization of right-of-use assets		—		—		1
Total finance lease expense		—		—		1
Less: Sublease income		(654)		(649)		(637)
Net lease expense	$	10,188	$	9,656	$	10,408

Other information related to the Company’s lease liabilities as of and for the years ended December 31, 2024, 2023 and 2022 were as follows:


	Year Ended December 31,
(dollars in thousands)	2024			2023			2022
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	8,277		$	7,636		$	8,418
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	5,396		$	4,775		$	4,676
Weighted Average Remaining Lease Term
Operating leases (years)		20.5			21.3			22.2
Weighted Average Discount Rate
Operating leases		3.22	%		3.11	%		2.98	%

Operating lease right-of-use assets were $60.1 million and $61.3 million as of December 31, 2024 and 2023, respectively, and were recorded as a component of other assets. Operating lease liabilities were $63.0 million and $63.8 million as of December 31, 2024 and 2023, respectively, and were recorded as a component of other liabilities.

The most significant assumption related to the Company’s application of Topic 842 was the discount rate assumption. As most of the Company’s lease agreements do not provide for an implicit interest rate, the Company used the collateralized interest rate that the Company would have to pay to borrow over a similar term to estimate the Company’s lease liabilities.

The following table sets forth future minimum rental payments under noncancelable operating leases with terms in excess of one year as of December 31, 2024:


	Net Operating
	Lease
(dollars in thousands)	Payments
Year ending December 31:
2025	$	7,814
2026		6,133
2027		5,126
2028		4,545
2029		4,483
Thereafter		59,712
Total future minimum lease payments		87,813
Less: Imputed interest		(24,793)
Total	$	63,020

The Company did not have any operating leases with related parties. As such, there were no lease payments to related parties for each of the years ended December 31, 2024, 2023 and 2022.

The Company, as lessor, rents office space in its headquarters office building as well as office space located primarily in Hawaii to third party lessees. Terms of such leases, including renewal options, may be extended for up to nine years, many of which provide for periodic adjustment of rent payments based on changes in consumer or other price indices. The Company recognizes lease income on a straight-line basis over the lease term. Non-lease components, primarily consisting of costs incurred by the Company for maintenance and utilities, are recognized as income in the period in which the payments are due.

The Company recognized operating lease income related to lease payments of $6.4 million, $6.2 million and $6.1 million for the years ended December 31, 2024, 2023 and 2022, respectively. In addition, the Company recognized $6.2 million, $6.3 million and $6.5 million of lease income related to variable lease payments for the years ended December 31, 2024, 2023 and 2022, respectively.

Certain of the Company’s leases were with related parties for the use of space at the Company’s headquarters office building. There was no rental income paid by the related parties for the years ended December 31, 2024, 2023 and 2022. There are no future minimum rental income from related parties.

The following table sets forth future minimum rental income under noncancelable operating leases with terms in excess of one year as of December 31, 2024:


	Minimum
	Rental
(dollars in thousands)	Income
Year ending December 31:
2025	$	6,229
2026		5,736
2027		4,031
2028		3,039
2029		2,236
Thereafter		2,969
Total	$	24,240