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RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES
9 Months Ended
Sep. 30, 2021
RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES  
RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

7. RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

The Company records as operating lease liabilities the present value of its required minimum lease payments plus any amounts probable of being owed under a residual value guarantee. Offsetting these operating lease liabilities, the Company records right-of-use assets for the underlying leased property.

As of September 30, 2021, the Company was under 45 separate and distinct operating lease contracts to lease the land and/or buildings for 36 of its offices, with 14 such operating leases contracted with a related party of the Company. As of September 30, 2021, payments on 24 of the Company’s operating leases were considered variable because such payments were adjustable based on periodic changes in the Consumer Price Index.

The Company executed no new operating leases during 2021. The Company renewed a related-party lease on one of its Louisville, Kentucky banking centers during the fourth quarter of 2020 that commenced in January 2021 with a right-of-use asset value of $392,000. During the second quarter of 2021, the Company extended one third-party lease for an additional five years, with the extended term beginning during the third quarter of 2021 and valued at approximately $263,000. During the fourth quarter of 2021, the Company recorded an amendment to one related-party lease to add leased space, with this amendment valued at approximately $819,000.

The following table presents information concerning the Company’s operating lease expense recorded as a noninterest expense within the “Occupancy” category for the three and nine months ended September 30, 2021 and 2020:

 

Three Months Ended

Nine Months Ended

 

September 30, 

September 30, 

(in thousands)

    

2021

2020

        

2021

2020

Operating lease expense:

 

Related Party:

Variable lease expense

$

1,224

 

$

1,235

$

3,662

$

3,706

Fixed lease expense

 

34

23

102

69

Third Party:

Variable lease expense

197

180

590

541

Fixed lease expense

337

371

1,021

1,109

Short-term lease expense

3

7

Total operating lease expense

$

1,792

 

$

1,812

$

5,375

$

5,432

Other information concerning operating leases:

Cash paid for amounts included in the measurement of operating lease liabilities

$

1,793

$

1,817

$

5,390

$

5,448

Short-term lease payments not included in the measurement of lease liabilities

3

7

The following table presents the weighted average remaining term and weighted average discount rate for the Company’s non-short-term operating leases as of September 30, 2021 and December 31, 2020:

(dollars in thousands)

    

September 30, 2021

December 31, 2020

    

Weighted average remaining term in years

7.76

8.37

Weighted average discount rate

 

3.08

%

 

3.10

%

The following table presents a maturity schedule of the Company’s operating lease liabilities based on undiscounted cash flows, and a reconciliation of those undiscounted cash flows to the operating lease liabilities recognized on the Company’s balance sheet as of September 30, 2021:

Year (in thousands)

    

Related Party

    

Third Party

    

Total

 

2021

 

$

1,160

 

$

636

 

$

1,796

2022

 

4,639

 

2,492

 

7,131

2023

 

4,639

 

2,049

 

6,688

2024

 

4,512

 

1,517

 

6,029

2025

 

4,344

 

979

 

5,323

Thereafter

 

15,800

 

2,729

 

18,529

Total undiscounted cash flows

$

35,094

$

10,402

$

45,496

Discount applied to cash flows

(4,065)

(1,280)

(5,345)

Total discounted cash flows reported as operating lease liabilities

$

31,029

$

9,122

$

40,151