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 Condensed 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 following table summarizes the amount and balance sheet line item for our operating lease right-of-use asset and liability as of the periods indicated:


	Balance Sheet Line Item	March 31, 2024		December 31, 2023
Operating lease right-of-use asset	Accrued interest receivable and other assets	$	10,352	$	12,474
Operating lease liability	Accrued interest payable and other liabilities		12,205		14,268

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 Federal Home Loan Bank regular advance rate, adjusted for the lease term and other factors. At March 31, 2024, the weighted average discount rate of operating leases was 2.75% and the weighted average remaining life of operating leases was 5.0 years, compared to 2.90% and 6.1 years as of December 31, 2023.

The following table presents components of total lease costs included as a component of occupancy expense on the Condensed Consolidated Statements of Operations for the following periods:


	Three Months Ended March 31,
	2024			2023
Operating lease cost	$	727		$	623
Short-term lease cost		87			69
Variable lease cost		423			412
Less: Sublease income		(130	)		(156	)
Total lease cost, net	$	1,107		$	948

Operating cash flows paid for operating lease amounts included in the measure of lease liabilities were $953,000 and $855,000 for the three months ended March 31, 2024 and 2023, respectively.

The Company recorded $422,000 and $313,000 of right-of-use lease assets in exchange for operating lease liabilities for the three months ended March 31, 2024 and 2023, respectively.

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

The future minimum lease payments for operating leases, subsequent to March 31, 2024, as recorded on the Condensed Consolidated Statements of Financial Condition, are summarized as follows:


	Operating Lease Commitments
2024	$	2,906
2025		3,266
2026		2,359
2027		1,313
2028		986
Thereafter		2,529
Total undiscounted lease payments		13,359
Less: Imputed interest		(1,154	)
Net lease liabilities	$	12,205

The total amount of minimum rentals to be received in the future on these subleases is approximately $1.0 million, and the leases have contractual lives extending through 2028. In addition to the above required lease payments, the Company has contractual obligations related primarily to information technology contracts and other maintenance contracts.