LEASES

12 Months Ended

Dec. 31, 2021

Leases

LEASES

7. LEASES

As of December 31, 2021 and 2020, the Company had operating right of use (“ROU”) assets of $14.0 million and $12.7 million, respectively, and operating lease liabilities of $14.0 million and $12.7 million, respectively. The Company maintains operating leases on land, branch facilities, and parking. Operating leases generally contain initial fixed payment terms that adjust in future years based on the consumer price index or similar measure. Most of the leases include one or more options to renew, with renewal terms extending up to 20 years. Leases with an initial term of 12 months or less are not recorded on the balance sheet and are recognized in lease expense.

As of December 31, 2021, the weighted average remaining lease term is 16.56 years and the weighted average incremental borrowing rate is 4.08%.

The exercise of renewal options is based on the sole judgement of management and what they consider to be reasonably certain. Based on the market areas, past practices, and contract terms of all leases, the Bank assumed all renewal options will be exercised. Minimum rental commitments for these leases as of December 31, 2021 are presented in the table below.

2022	$	1,175,080
2023		1,175,080
2024		1,175,080
2025		1,175,080
2026 and thereafter		13,403,850
Total undisclosed lease payments	$	18,104,170
Less: effect of discounting		(4,062,327	)
Present value of estimated lease payments	$	14,041,843

The table below shows lease expense components for the year ended December 31, 2021 and 2020.

	December 31,
Lease Expense Components:	2021		2020
Operating lease expense	$	1,139,393	$	972,815
Short-term lease expense		—		—
Total lease expense	$	1,139,393	$	972,815

Total rental expense was $1,139,393, $972,815 and $623,998, a during the year ended December 31, 2021, 2020 and 2019, respectively.

As of December 31, 2021, we did not maintain any finance leases and we determined that the number and dollar amount of equipment leases was immaterial. As of December 31, 2021, we have no additional operating leases that have not yet commenced.

We rented office space at 1071 Morrison Drive, Charleston, South Carolina, from a related party, to house our Mortgage Department during the year ended December 31, 2019. Rent expense for this lease was $46,538 for the year ended December 31, 2019. This lease ended in September 2019.