Leases

9 Months Ended

Sep. 30, 2023

The Corporation has operating leases for retail and corporate offices, land, and equipment. The Corporation also has a finance lease for retail and corporate offices.

These leases have original terms of 1 year or longer with remaining maturities up to 39 years, some of which include options to extend the lease term. An analysis of the lease options has been completed and any purchase options or optional periods that the Corporation is reasonably likely to extend have been included in the capitalization.

The discount rate used to capitalize the operating leases is the Corporation's FHLB borrowing rate on the date of lease commencement. When determining the rate to discount specific lease obligations, the repayment period and term are considered.

Operating and finance lease costs and cash flows resulting from these leases are presented below:


	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
($ in thousands)	2023		2022		2023		2022
Operating lease costs	$	1,594	$	1,637	$	4,536	$	5,361
Finance lease costs	23		23		69		96
Operating lease cash flows	1,917		1,880		5,442		6,614
Finance lease cash flows	23		22		69		103

The lease classifications on the consolidated balance sheets were as follows:


($ in thousands)	Consolidated Balance Sheets Category	Sep 30, 2023		Dec 31, 2022
Operating lease right-of-use asset	Premises and equipment	$	23,677	$	25,617
Finance lease right-of-use asset	Other assets	390		455
Operating lease liability	Accrued expenses and other liabilities	26,059		28,357
Finance lease liability	Other long-term funding	405		469

The lease payment obligations, weighted-average remaining lease term, and weighted-average original discount rate were as follows:


	Sep 30, 2023					Dec 31, 2022
($ in thousands)	Lease payments		Weighted-average lease term (in years)	Weighted-average discount rate		Lease payments		Weighted-average lease term (in years)	Weighted-average discount rate
Operating leases
Retail and corporate offices	$	23,662	5.44	2.81	%	$	26,140	5.92	2.62	%
Land	4,255		7.11	3.47	%	4,766		7.59	3.14	%
Equipment	408		2.75	4.62	%	—		0.00	—	%
Total operating leases	$	28,325	5.64	2.93	%	$	30,906	6.17	2.70	%
Finance leases
Retail and corporate offices	$	417	4.50	1.32	%	$	485	5.25	1.32	%

Total finance leases	$	417	4.50	1.32	%	$	485	5.25	1.32	%

Contractual lease payment obligations for each of the next five years and thereafter, in addition to a reconciliation to the Corporation’s lease liability, were as follows:


($ in thousands)	Operating Leases		Finance Leases		Total Leases
Three months ended December 31, 2023	$	1,509	$	23	$	1,532
2024	6,124		93		6,217
2025	5,223		93		5,315
2026	4,672		93		4,765
2027	4,014		93		4,107
Beyond 2027	6,782		23		6,805
Total lease payments	$	28,325	$	417	$	28,742
Less: interest	2,266		12		2,278
Present value of lease payments	$	26,059	$	405	$	26,464

As of September 30, 2023 and December 31, 2022, additional operating leases, primarily retail and corporate offices, that had not yet commenced totaled $4 million and $13 million, respectively. The leases that had not yet commenced as of September 30, 2023 will commence between October 2023 and December 2024 with lease terms of 1 year to 6 years.