Leases

9 Months Ended

Sep. 30, 2024

The Company accounts for leases in accordance with ASC Topic 842. A lease is defined as 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. Substantially all of the leases in which the Company is the lessee comprise real estate for branch offices, ATM locations, and corporate office space. Substantially all of our leases are classified as operating leases and are included in operating lease right-of-use ("ROU") assets and operating lease liabilities on the Consolidated Balance Sheets.

As of September 30, 2024 and December 31, 2023, the Company had $15.2 million and $19.1 million of operating lease ROU assets, respectively, and $18.8 million and $23.2 million of operating lease liabilities, respectively, on the Company's Consolidated Balance Sheets. The Company elects not to recognize ROU assets and lease liabilities arising from short-term leases, leases with initial terms of twelve months or less, or equipment leases (deemed immaterial) on the Consolidated Balance Sheets.

The leases contain options to extend or terminate the lease, which are recognized as part of the ROU assets and lease liabilities when an economic benefit to exercise the option exists and there is a 90% probability that the Company will exercise the option. If these criteria are not met, the options are not included in ROU assets and lease liabilities.

As of September 30, 2024, the Company's leases do not contain material residual value guarantees or impose restrictions or covenants related to dividends or its ability to incur additional financial obligations. During the nine months ended September 30, 2024, the Company did not enter into new leases nor renew any leases. However, during the same period, the Company did extend two existing leases, one each in Maryland and District of Columbia, and two additional leases expired.

The following table presents lease costs and other lease information.


	Three Months Ended								Nine Months Ended
(dollars in thousands)	September 30, 2024				September 30, 2023					September 30, 2024		September 30, 2023
Lease cost
Operating lease cost (cost resulting from lease payments)	$	1,525			$	1,604				$	4,691	$	4,987
Variable lease cost (cost excluded from lease payments)	231				245					709		754
Sublease income	—				(30)					(40)		(89)
Net lease cost	$	1,756			$	1,819				$	5,360	$	5,652

Operating lease - operating cash flows (fixed payments)	$	1,703			$	1,760				$	5,212	$	5,433

(dollars in thousands)	September 30, 2024				December 31, 2023
Right-of-use assets - operating leases	$	15,167			$	19,129
Operating lease liabilities	$	18,755			$	23,238
Weighted average lease term - operating leases	4.57			yrs	4.93			yrs
Weighted average discount rate - operating leases	2.63		%		2.78		%

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


(dollars in thousands)
Twelve months ended:
September 30, 2025	$	6,821
September 30, 2026	3,580
September 30, 2027	2,753
September 30, 2028	2,207
September 30, 2029	1,857
Thereafter	2,413
Total future minimum lease payments	19,631
Amounts representing interest	(876)
Present value of net future minimum lease payments	$	18,755