The Company enters into leases in the normal course of business, primarily for its banking facilities and branches. The Company’s operating leases have varying maturity dates through year end 2036, some of which include renewal or termination options to extend the lease. In addition, the Company leases or subleases real estate to third parties. 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. In addition, the Company has elected to account for any non-lease components in its real estate leases as part of the associated lease component. The Company has also elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on the Company’s Consolidated Statements of Financial Condition.

Leases are classified at the lease commencement date. 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 our right to use an underlying asset for the lease term and lease liabilities represent our 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 at lease commencement to calculate the present value of lease payments when the rate implicit in a lease is not known. The Company's incremental borrowing rate is based on the FHLB regular advance rate, adjusted for the lease term and other factors. At December 31, 2024, the weighted average discount borrowing rate was 3.19% and the weighted average remaining life of operating leases was 5.0 years compared to 2.90% and 6.1 years for December 31, 2023.

The following table presents certain information related to the lease costs for operating leases included as a component of occupancy expense on the Consolidated Statements of Operations for the years ended December 31, 2024, 2023, and 2022:


	2024			2023			2022
Operating lease cost	$	2,743		$	2,738		$	2,760
Short-term lease cost		491			434			214
Variable lease cost		1,627			1,675			1,585
Less: Sublease income		(520	)		(630	)		(572	)
Total lease cost, net	$	4,341		$	4,217		$	3,987

Operating cash flows paid for operating lease amounts included in the measure of lease liabilities were $4.0 million and $4.1 million for each of the year ended December 31, 2024 and 2023, respectively. For the year ended December 31, 2024, operating cash flows paid included early termination payment of $228,000 for one of the Company’s previously closed branch facilities, resulting in a gain of $67,000. For the year ended December 31, 2023, operating cash flows paid included early termination payments of $471,000 for two of the Company’s previously closed branch facilities, resulting in a gain of $838,000.

The Company recorded $2.3 million, $4.8 million, and $3.0 million of right-of-use lease assets in exchange for operating lease liabilities for the years ended December 31, 2024, 2023, and 2022, respectively. In 2023, the additions recorded to right-of-use assets and operating lease liabilities included $3.8 million related to the acquisition of Inland.

During the year ended December 31, 2024, the Company recorded $194,000 of impairment related to two branch facilities that were closed in 2024. Impairments were recognized on operating lease right-of-use assets and are reflected in other non-interest expense.

During the year ended December 31, 2023, the Company recorded $395,000 of impairment related to an acquired non-branch facility lease. There were no impairments on leased assets during 2022.

The future minimum lease payments for finance leases and operating leases, subsequent to December 31, 2024, as recorded on the balance sheet, are summarized as follows:


	Operating Lease Commitments
2025	$	3,490
2026		2,587
2027		1,682
2028		1,363
2029		1,131
Thereafter		1,904
Total	$	12,157
Imputed interest		(1,208	)
Present value of future minimum lease payments	$	10,949

The total amount of minimum rentals to be received in the future on these subleases is approximately $1.4 million, and the leases have contractual lives extending through 2030. In addition to the above required lease payments, the Company has contractual obligations related primarily to information technology contracts and other maintenance contracts.