Leases

9 Months Ended

Sep. 30, 2023

The Company records a ROUA on the consolidated balance sheets for those leases that convey rights to control use of identified assets for a period of time in exchange for consideration. The Company also records a lease liability on the consolidated balance sheets for the present value of future payment commitments. All of the Company’s leases are comprised of operating leases in which the Company is lessee of real estate property for branches, ATM locations, and general administration and operations. The Company has elected not to include short-term leases (i.e. leases with initial terms of 12 month or less) within the ROUA and lease liability. Known or determinable adjustments to the required minimum future lease payments were included in the calculation of the Company’s ROUA and lease liability. Adjustments to the required minimum future lease payments that are variable and will not be determinable until a future period, such as changes in the consumer price index, are included as variable lease costs. Additionally, expected variable payments for common area maintenance, taxes and insurance were unknown and not determinable at lease commencement and therefore, were not included in the determination of the Company’s ROUA or lease liability.

The value of the ROUA and lease liability is impacted by the amount of the periodic payment required, length of the lease term, and the discount rate used to calculate the 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. 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. The lease liability is reduced based on the discounted present value of remaining payments as of each reporting period. The ROUA value is measured using the amount of lease liability and adjusted for prepaid or accrued lease payments, remaining lease incentives, unamortized direct costs (if any), and impairment (if

any).

The following table presents the components of lease expense for the periods ended:


	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Operating lease cost	$	1,451	$	1,415	$	4,553	$	4,203
Short-term lease cost	43		76		279		210
Variable lease cost	9		9		29		18
Sublease income	—		—		—		—
Total lease cost	$	1,503	$	1,500	$	4,861	$	4,431

The following table presents supplemental cash flow information related to leases for the periods ended:


	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	1,576	$	1,536	$	4,840	$	4,351
ROUA obtained in exchange for operating lease liabilities	$	(544)	$	—	$	4,311	$	4,609

The following table presents the weighted average operating lease term and discount rate as of the period ended:


	September 30,
	2023		2022
Weighted-average remaining lease term (years)	8.1		8.3
Weighted-average discount rate	3.31	%	2.91	%

At September 30, 2023, future expected operating lease payments are as follows:


(in thousands)
Periods ending December 31,
2023	$	1,510
2024	5,757
2025	5,186
2026	4,642
2027	3,951
Thereafter	12,995
	34,041
Discount for present value of expected cash flows	(4,514)
Lease liability at September 30, 2023	$	29,527