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Operating lease commitments and contingencies

12 Months Ended

Dec. 31, 2024

Operating lease commitments and contingencies

Operating lease commitments and contingencies

8. Operating lease commitments and contingencies:

The Company is obligated under non-cancellable operating leases for certain branch locations. We determine if an arrangement is a lease at inception by assessing whether a contract contains a right to control an identified asset for a period of time in exchange for consideration. For all leases, we recognize a right-of-use asset and lease liability at the effective date of the lease. Operating leases right-of-use assets are included in premises and equipment, and lease liabilities are included in other liabilities in the consolidated balance sheet. We have no finance leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

Certain leases include options to renew, with renewal terms generally containing one or more five-year renewal options. At December 31, 2024, the Company’s leases have remaining renewal terms that can extend the lease terms from five years to twenty years that are reasonably certain of being exercised. The weighted average remaining lease term at December 31, 2024 is 15.8 years. At December 31, 2023, the weighted average remaining lease term was 19.4 years. The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded with the remaining lease term. The discount rate used for leases added subsequently was the annual percentage increase outlined in the terms of each lease. Fourteen new leases were acquired as part of the merger with FNCB in 2024, ten of which have since expired or were not renewed. There were two new leases added in 2023. At December 31, 2024 and December 31, 2023, discount rates ranged from 1.60 percent to 5.25 percent and from 1.60 percent to 5.25 percent with an average discount rate of 3.57 percent and 3.61 percent respectively.

At December 31, 2024, right-of-use assets of $12.3 million were included in premises and equipment, and the related lease liability totaling $12.7 million was included in other liabilities in the consolidated balance sheet. Right-of-use assets and the related lease liability were $10.6 million and $11.0 million, respectively, at December 31, 2023. Rent expense for the years ended December 31, 2024, 2023 and 2022 amounted to $1.2 million, $1.0 million, and $1.0 million, respectively, and is included in occupancy expenses.

Future minimum lease payments under operating leases are summarized as follows:


(Dollars in thousands)
2025	$	1,130
2026		1,136
2027		1,063
2028		1,062
2029		1,007
Thereafter		12,401
Total future minimum lease payments		17,799
Less amount representing interest		(5,083)
Present value of future minimum lease payments	$	12,716