LEASES
A lease provides the lessee the right to control the use of an identified asset for a period of time in exchange for consideration. The Company has primarily entered into operating leases for branches and office space. Most of the Company's leases contain renewal options, which the Company is reasonably certain to exercise. Including renewal options, the Company's leases range from 3 to 28. Operating and finance lease right-of-use assets are included in other assets, operating lease liabilities are included in other liabilities and the finance lease liability is included in other borrowings on the Company's consolidated balance sheets.
The Company uses its incremental borrowing rate to determine the present value of the lease payments, as the rate implicit in the Company's leases is not readily determinable. Lease agreements that contain non-lease components are generally accounted for as a single lease component, while variable costs, such as common area maintenance expenses and property taxes, are expensed as incurred.
Pursuant to the Merger, the Company acquired operating lease assets and operating lease liabilities both with a fair value of $5.1 million. The Company also acquired a finance lease asset and liability with a fair value of $392 thousand. At July 1, 2024, the Company recorded negative fair value adjustments of $1.1 million and $133 thousand to operating lease assets and finance lease assets, respectively, which are amortized over the remaining lease terms. The weighted average remaining lease term for the acquired operating leases is 14.2 years at December 31, 2024.
The following table summarizes the Company's right-of-use assets and related lease liabilities at December 31, 2024 and 2023: | | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| Operating lease ROU assets | $ | 13,438 | | | $ | 10,824 | |
| Operating lease ROU liabilities | 14,270 | | | 11,614 | |
| Weighted-average remaining lease term (in years) | 15.6 | | 15.1 |
| Weighted-average discount rate | 4.8 | % | | 4.4 | % |
The following table summarizes the Company's finance lease at December 31, 2024 and 2023:
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| Financing lease assets | $ | 362 | | | n/a |
| Weighted-average remaining lease term (in years) | 5.2 | | 0.0 |
| Weighted-average discount rate | 5.0 | % | | n/a |
The following table presents information related to the Company's operating and finance leases for the years ended December 31, 2024 and 2023: | | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| Cash paid for operating lease liabilities | $ | 1,533 | | | $ | 1,224 | |
| Cash paid for finance lease liabilities | 38 | | | — | |
| Operating lease expense | 1,127 | | | 1,305 | |
The following table presents expected future maturities of the Company's operating lease liabilities at December 31, 2024: | | | | | |
| 2025 | $ | 1,583 | |
| 2026 | 1,614 | |
| 2027 | 1,650 | |
| 2028 | 1,385 | |
| 2029 | 1,306 | |
| Thereafter | 13,662 | |
| 21,200 | |
| Less: imputed interest | 6,930 | |
| Total lease liabilities | $ | 14,270 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.