Leases

6 Months Ended

Jun. 30, 2023

The Company’s operating leases are real estate leases of bank branch locations, loan production offices, and office spaces with remaining lease terms ranging from 0 to 10 years at June 30, 2023. Certain lease arrangements contain extension options, which are typically around 5 years. As these extension options are not generally considered reasonably certain of exercise, they are not included in the lease term.

At June 30, 2023, ROU assets and related liabilities were $53.7 million and $58.0 million, respectively. At December 31, 2022, ROU assets and related liabilities were $55.0 million and $59.1 million, respectively. At June 30, 2023, the short term operating lease liability totaled $14.4 million and the long-term operating lease liability totaled $43.6 million. The Company defines short-term operating lease liabilities as liabilities due in twelve months or less, and long term lease liabilities are due in more than twelve months at the end of each reporting period. The Company did not have any finance leases at June 30, 2023 and December 31, 2022. During the six months ended June 30, 2023, the Company extended eight leases and there was one new lease contract. Lease extension terms ranged from two to five years and the Company reassessed the ROU assets and lease liabilities related to these leases.

The Company uses its incremental borrowing rate to present value lease payments in order to recognize a ROU asset and the related lease liability. The Company calculates its incremental borrowing rate by adding a spread to the FHLB borrowing interest rate at a given period.

The table below summarizes the Company’s net operating lease cost:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(Dollars in thousands)
Operating lease cost	$	3,825	$	3,820	$	7,666	$	7,827
Short-term lease cost	—		—		—		—
Variable lease cost	820		806		1,603		1,579
Sublease income	(50)		(105)		(92)		(208)
Net lease cost	$	4,595	$	4,521	$	9,177	$	9,198

Rent expense for the three and six months ended June 30, 2023, was $4.3 million and $9.2 million, respectively. Rent expense for the three and six months ended June 30, 2022, was $4.7 million and $9.3 million, respectively.

During the three and six months ended June 30, 2023, the Company wrote off $0 and $93 thousand, respectively, in operating lease ROU assets resulting from the branch consolidation of one location. There was no impairment on operating ROU assets during the same periods of 2022.

The table below summarizes other information related to the Company’s operating leases:


	At or for the Six Months Ended June 30,
	2023			2022
	(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows for operating leases	$	8,013		$	7,953
ROU assets obtained in exchange for lease liabilities, net	6,113			13,438
Weighted-average remaining lease term - operating leases	4.4 years			4.9 years
Weighted-average discount rate - operating leases	2.68		%	2.30		%

The table below summarizes the maturity of remaining lease liabilities:


	June 30, 2023
	(Dollars in thousands)
2023	$	7,866
2024	15,302
2025	13,542
2026	12,835
2027	7,319
2028 and thereafter	4,815
Total lease payments	61,679
Less: imputed interest	3,728
Total lease obligations	$	57,951

At June 30, 2023, the Company had one operating lease commitment that had not yet commenced, totaling $668 thousand in lease payments over a term of five years.