LEASES
We lease certain retail- and full-service branch locations, ATM locations and certain equipment. Short-term leases, leases with an initial term of 12 months or less and do not contain a purchase option that is likely to be exercised, are not recorded on the balance sheet. Operating lease cost, which is comprised of the amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term and is included in net occupancy expense on our consolidated statements of income. We evaluate the lease term by assuming the exercise of options to extend that are reasonably assured and those option periods covered by an option to terminate the lease, if deemed not reasonably certain to be exercised. The lease term is used to determine the straight-line expense and limits the depreciable life of any related leasehold improvements. Certain leases require us to pay real estate taxes, insurance, maintenance and other operating expenses associated with the leased premises. These expenses are classified in net occupancy expense on our consolidated statements of income, consistent with similar costs for owned locations, but is not included in operating lease cost below.
Our leases have remaining lease terms ranging from 2 months to 14.7 years, some of which include options to extend for up to 10 years, and some of which include options to terminate within 90 days. We calculate the lease liability using a discount rate that represents our incremental borrowing rate at the lease commencement date.
Balance sheet information related to leases was as follows (in thousands):
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| | | December 31, 2025 | | December 31, 2024 | | |
| Operating leases: | | | | | | |
| Operating lease ROU assets | | $ | 12,398 | | | $ | 13,860 | | | |
| Operating lease liabilities | | $ | 14,335 | | | $ | 15,779 | | | |
The components of lease cost were as follows (in thousands):
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| | Years Ended December 31, | | |
| | 2025 | | 2024 | | 2023 | | |
| Operating lease cost | | $ | 1,845 | | | $ | 1,858 | | | $ | 1,802 | | | |
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Supplemental cash flow information related to leases was as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | 2025 | | 2024 | | 2023 |
| Cash paid for amounts included in the measurement of the lease liabilities: | | | | | | |
| Operating cash flows for operating leases | | $ | 1,827 | | | $ | 1,799 | | | $ | 1,716 | |
| ROU assets obtained in exchange for new operating lease liabilities | | $ | — | | | $ | 556 | | | $ | 809 | |
Additional information related to leases was as follows:
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| | December 31, 2025 | | December 31, 2024 | | |
| Weighted average remaining lease term (in years) | 11.5 | | 12.1 | | |
| Weighted average discount rate | 3.47 | % | | 3.31 | % | | |
Future minimum rental commitments due under non-cancelable operating leases at December 31, 2025 were as follows (in thousands):
| | | | | |
| Year ending December 31, | |
| 2026 | $ | 1,818 | |
| 2027 | 1,707 | |
| 2028 | 1,676 | |
| 2029 | 1,508 | |
| 2030 | 1,329 | |
| 2031 and thereafter | 9,488 | |
| Total lease payments | 17,526 | |
| Less: Interest | (3,191) | |
| Present value of lease liabilities | $ | 14,335 | |
We also lease certain of our owned facilities or portions thereof to third parties. Our primary leased facility is a 202,000 square-foot office building in Fort Worth, Texas that is used for a branch location and certain bank operations. We occupy approximately 35,000 square feet of the building and lease the remaining space to various tenants. Some of these leases contain options to extend and options to terminate at the discretion of the tenant.
Operating lease income received from tenants who rent our properties is reported as a reduction to occupancy expense on our consolidated statements of income. The underlying assets associated with these operating leases are included in premises and equipment on our consolidated balance sheets.
Gross rental income from these leases were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | 2025 | | 2024 | | 2023 |
| Gross rental income | | $ | 3,061 | | | $ | 3,151 | | | $ | 3,584 | |
At December 31, 2025, non-cancelable operating leases with future minimum lease payments are as follows (in thousands):
| | | | | |
| Year ending December 31, | |
| 2026 | $ | 4,100 | |
| 2027 | 3,421 | |
| 2028 | 2,576 | |
| 2029 | 2,236 | |
| 2030 | 1,864 | |
| 2031 and thereafter | 6,167 | |
| Total lease payments | $ | 20,364 | |