OPERATING LEASES

9 Months Ended

Sep. 30, 2023

Leases [Abstract]

LEASES

12. OPERATING LEASES

We lease certain land and buildings for our bank branches and ATMs. In some instances, a lease may contain renewal options to extend the term of the lease. Renewal options that are likely to be exercised have been recognized as part of our right-of-use assets and lease liabilities in accordance with ASC 842, "Leases". Certain leases also contain variable payments that are primarily determined based on common area maintenance costs and Hawaii state tax rates. All leases are operating leases and we do not include any short term leases in the calculation of the right-of-use assets and lease liabilities. The most significant assumption related to the Company’s application of ASC 842 was the discount rate assumption. As most of the Company’s lease agreements do not provide for an implicit interest rate, the Company uses the collateralized interest rate that the Company would have to pay to borrow over a similar term to estimate the Company’s lease liabilities.

The following table presents total lease cost, cash flow information, weighted-average remaining lease term and weighted-average discount rate for the periods presented:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2023			2022			2023			2022
Lease cost:
Operating lease cost	$	1,285		$	1,368		$	3,937		$	4,144
Variable lease cost	918			769			2,740			2,433
Less: Sublease income	—			(12)			(34)			(36)
Total lease cost	$	2,203		$	2,125		$	6,643		$	6,541
Other information:
Operating cash flows from operating leases	$	(1,258)		$	(1,464)		$	(3,950)		$	(4,485)
Weighted-average remaining lease term - operating leases	10.85 years			11.32 years			10.85 years			11.32 years
Weighted-average discount rate - operating leases	3.96		%	3.94		%	3.96		%	3.94		%

The following table presents a schedule of annual undiscounted cash flows for our operating leases and a reconciliation of those cash flows to the operating lease liabilities as of September 30, 2023, for the remainder of fiscal year 2023, the next five succeeding fiscal years and all years thereafter:

(dollars in thousands)	Undiscounted Cash Flows		Lease Liability Discount on Cash Flows		Lease Liability
Year Ending December 31,
2023 (remainder)	$	1,176	$	324	$	852
2024	4,467		1,210		3,257
2025	4,181		1,085		3,096
2026	4,118		965		3,153
2027	4,108		840		3,268
2028	3,509		723		2,786
Thereafter	19,682		2,908		16,774
Total	$	41,241	$	8,055	$	33,186

In addition, the Company, as lessor, leases certain properties that it owns. All of these leases are operating leases. The following table presents lease income related to these leases that was recognized for the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	2023		2022		2023		2022
Total rental income recognized	$	497	$	398	$	1,622	$	1,727

The following table presents estimated lease payments, based on the Company's leases as lessor as of September 30, 2023, for the remainder of fiscal year 2023, the next five succeeding fiscal years, and all years thereafter:

(dollars in thousands)
Year Ending December 31,
2023 (remainder)	$	358
2024	1,234
2025	1,114
2026	968
2027	913
2028	561
Thereafter	1,839
Total	$	6,987

LEASES

12. OPERATING LEASES

We lease certain land and buildings for our bank branches and ATMs. In some instances, a lease may contain renewal options to extend the term of the lease. Renewal options that are likely to be exercised have been recognized as part of our right-of-use assets and lease liabilities in accordance with ASC 842, "Leases". Certain leases also contain variable payments that are primarily determined based on common area maintenance costs and Hawaii state tax rates. All leases are operating leases and we do not include any short term leases in the calculation of the right-of-use assets and lease liabilities. The most significant assumption related to the Company’s application of ASC 842 was the discount rate assumption. As most of the Company’s lease agreements do not provide for an implicit interest rate, the Company uses the collateralized interest rate that the Company would have to pay to borrow over a similar term to estimate the Company’s lease liabilities.

The following table presents total lease cost, cash flow information, weighted-average remaining lease term and weighted-average discount rate for the periods presented:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2023			2022			2023			2022
Lease cost:
Operating lease cost	$	1,285		$	1,368		$	3,937		$	4,144
Variable lease cost	918			769			2,740			2,433
Less: Sublease income	—			(12)			(34)			(36)
Total lease cost	$	2,203		$	2,125		$	6,643		$	6,541
Other information:
Operating cash flows from operating leases	$	(1,258)		$	(1,464)		$	(3,950)		$	(4,485)
Weighted-average remaining lease term - operating leases	10.85 years			11.32 years			10.85 years			11.32 years
Weighted-average discount rate - operating leases	3.96		%	3.94		%	3.96		%	3.94		%

The following table presents a schedule of annual undiscounted cash flows for our operating leases and a reconciliation of those cash flows to the operating lease liabilities as of September 30, 2023, for the remainder of fiscal year 2023, the next five succeeding fiscal years and all years thereafter:

(dollars in thousands)	Undiscounted Cash Flows		Lease Liability Discount on Cash Flows		Lease Liability
Year Ending December 31,
2023 (remainder)	$	1,176	$	324	$	852
2024	4,467		1,210		3,257
2025	4,181		1,085		3,096
2026	4,118		965		3,153
2027	4,108		840		3,268
2028	3,509		723		2,786
Thereafter	19,682		2,908		16,774
Total	$	41,241	$	8,055	$	33,186

In addition, the Company, as lessor, leases certain properties that it owns. All of these leases are operating leases. The following table presents lease income related to these leases that was recognized for the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	2023		2022		2023		2022
Total rental income recognized	$	497	$	398	$	1,622	$	1,727

The following table presents estimated lease payments, based on the Company's leases as lessor as of September 30, 2023, for the remainder of fiscal year 2023, the next five succeeding fiscal years, and all years thereafter:

(dollars in thousands)
Year Ending December 31,
2023 (remainder)	$	358
2024	1,234
2025	1,114
2026	968
2027	913
2028	561
Thereafter	1,839
Total	$	6,987