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Leases

9 Months Ended

Sep. 30, 2024

Note 11. Leases

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company follows the guidance of ASU Topic 842.

Substantially all of the leases in which the Company is the lessee are comprised of real estate for branches and office space with terms extending through 2044. All of our leases are classified as operating leases. Operating lease agreements are required to be recognized on the consolidated balance sheet as a right-of-use (“ROU”) asset and a corresponding lease liability.

The following table represents the consolidated balance sheet classification of the Company’s ROU assets and lease liabilities. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the consolidated balance sheet (in thousands):


		September 30,		December 31,
	Classification	2024		2023
Assets:
Operating lease right-of-use assets	Other assets	$	11,741	$	9,894
Liabilities:
Operating lease liabilities	Other liabilities	$	12,240	$	10,303

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value of the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If, at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.

As of September 30, 2024, the weighted average remaining lease term was 10.57 years and the weighted average discount rate was 3.48%.

The following table represents lease costs and other lease information. As the Company elected, for all classes of underlying assets, not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Lease costs:
Operating lease costs	$	492	$	438	$	1,411	$	1,247
Variable lease costs		16		30		72		87
Total	$	508	$	468	$	1,483	$	1,334
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	462	$	393	$	1,322	$	1,142

Future minimum payments for operating leases with initial or remaining terms of one year or more as of September 30, 2024, were as follows (in thousands):


	Amounts
Remainder of 2024	$	452
2025		1,714
2026		1,599
2027		1,392
2028		1,388
Thereafter		8,562
Total future minimum lease payments		15,107
Amounts representing interest		(2,867)
Present value of net future minimum lease payments	$	12,240