Note 11 - Lease Commitments
The Company is the lessee in various noncancellable operating leases for land, buildings, and equipment. Certain leases contain provisions for variable lease payments that are linked to the consumer price index. Lease cost consists of:
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| | For the Year Ended December 31, |
| (In thousands) | | 2025 | | 2024 | | 2023 |
| Operating lease cost | | $ | 12,311 | | | $ | 10,622 | | | $ | 10,667 | |
| Variable lease cost | | 2,504 | | | 3,023 | | | 2,827 | |
| Short-term lease cost | | 564 | | | 556 | | | 919 | |
| Sublease income | | (703) | | | (574) | | | (639) | |
| Total lease cost | | $ | 14,676 | | | $ | 13,627 | | | $ | 13,774 | |
The following table provides supplemental information related to leases:
| | | | | | | | | | | | | | |
| | As of and For the Year Ended December 31, |
| (In thousands, except for weighted-average data) | | 2025 | | 2024 |
| Operating lease ROUAs | | $ | 57,925 | | $ | 40,935 |
| Operating lease liabilities | | 62,322 | | 44,717 |
| Cash paid during the year for amounts included in the measurement of operating lease liabilities | | 11,764 | | 10,600 |
| ROUAs recorded during the year in exchange for new or renewed operating lease obligations | | 16,540 | | 2,815 |
| ROUAs obtained during the year through bank acquisition | | 9,906 | | — |
| Weighted-average remaining lease term for operating leases | | 7.3 years | | 6.4 years |
| Weighted-average discount rate for operating leases | | 5.17 | % | | 5.10 | % |
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 includes the extended term in the calculation of the lease liability. Maturities of lease liabilities as of December 31, 2025 are as follows:
| | | | | | | | |
| | |
| | |
| (In thousands) | | Payments Due |
| 2026 | | $ | 12,712 | |
| 2027 | | 11,724 | |
| 2028 | | 10,448 | |
| 2029 | | 7,936 | |
| 2030 | | 7,274 | |
| Thereafter | | 17,790 | |
| Total undiscounted cash flows | | 67,884 | |
| Less: Net present value adjustment | | (5,562) | |
| Total | | $ | 62,322 | |
Sale-Leaseback Transaction Accounted for as Financing Obligation
Through the acquisition of VBI, the Company assumed a financing obligation related to branch properties that did not qualify for sale accounting under ASC Topic 842-40, Sale and Leaseback, and recognized the obligation in accordance with ASC 805, Business Combinations. At the date of acquisition, the $17.8 million financing obligation was recorded at fair value, which was $8.3 million higher than the contractual lease amount. The premium is amortized over the 20‑year term, with the resulting accretion recognized within Interest Expense in the Consolidated Statements of Income. At December 31, 2025, the remaining balance, $17.6 million, was reflected within Long-term debt, net on the Consolidated Balance Sheets.
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.