LEASES

12 Months Ended

Dec. 31, 2024

The Company's operations are carried on in locations which are occupied under operating lease agreements. These lease agreements are recorded as operating lease right-of-use (“ROU”) assets and operating lease liabilities. Total operating lease expense was $11.0 million, $10.1 million, and $9.2 million for the years ended December 31, 2024, 2023 and 2022, respectively. The Company’s minimum aggregate future lease commitments at December 31, 2024 and 2023 are presented in the tables that follow.

ROU assets represent the Company’s right to use an underlying asset during the lease term and the operating lease liabilities represent the Company’s obligations for lease payments in accordance with the lease. Recognition of ROU assets and liabilities are recognized at the lease commitment based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental borrowing rate at the lease commitment date or adoption. Operating lease expense, which is comprised of 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 recorded in occupancy expense in the consolidated statement of income.

Remaining lease terms range from 1 to 10 years and typically include extension options. The Company’s leases are not complex and do not contain residual value guarantees, variable lease payments, or significant assumptions or judgments made in applying the requirements of Topic 842. Operating leases with a term of 12 months or less are not recorded on the statement of financial condition and the related lease expense is recognized on a straight-line basis over the lease term.

The tables below summarize our lease expense and other information related to the Company’s operating leases (dollars in thousands):


	Twelve Months Ended Dec 31, 2024

Operating lease expense	$	9,241
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	9,124
Weighted-average remaining lease term – operating leases (in years)	6.64
Weighted-average discount rate – operating leases	5.84		%

Lease Maturity Schedule as of December 31, 2024:	Amount
2024	9,201
2025	8,530
2026	7,641
2027	6,721
2028	5,306
2028 and beyond	13,463
Total	50,862
Less: Discount	(8,835)
Present Value of Lease Liability	$	42,027

Present Value of Lease Asset	$	40,737


	Twelve Months Ended Dec 31, 2023

Operating lease expense	$	8,038
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	7,890
Weighted-average remaining lease term – operating leases (in years)	7.01
Weighted-average discount rate – operating leases	5.45		%

Lease Maturity Schedule as of December 31, 2023:	Amount
2023	8,612
2024	8,227
2025	7,677
2026	6,801
2027	5,849
2027 and beyond	14,768
Total	51,933
Less: Discount	(8,898)
Present Value of Lease Liability	$	43,035

Present Value of Lease Asset	$	41,938

1st FRANKLIN FINANCIAL CORP 10-K