Leases

9 Months Ended

Sep. 30, 2022

Leases [Abstract]

Leases

Note 6 – Leases

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows.  Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease.  Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor.

The Company’s long-term lease agreements are classified as operating leases. Certain leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised.  The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

During 2021, the Company acquired long-term branch leases and equipment due to the acquisition of Severn. These leases were reassessed by management as of the acquisition date of October 31, 2021, which included updating the incremental borrowing rates and remaining lease terms.

The following tables present information about the Company’s leases:

(Dollars in thousands)	September 30, 2022			December 31, 2021
Lease liabilities	$	10,023		$	11,567
Right-of-use assets	$	9,764		$	11,370
Weighted average remaining lease term		12.64	years		13.61	years
Weighted average discount rate		2.49	%		2.48	%

	For the Three Months Ended				For the Nine Months Ended
Lease cost (in thousands)	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Operating lease cost	$	340	$	207	$	1,007	$	601
Short-term lease cost		—		—		—		—
Total lease cost	$	340	$	207	$	1,007	$	601
Cash paid for amounts included in the measurement of lease liabilities	$	318	$	174	$	939	$	505

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities is as follows:

	As of
Lease payments due (in thousands)	September 30, 2022
Three months ending December 31, 2022	$	318
2023		1,178
2024		1,087
2025		881
2026		916
2027		849
Thereafter		6,584
Total undiscounted cash flows	$	11,813
Discount		1,790
Lease liabilities	$	10,023

Total gross rental income was $202 thousand for the three months ended September 30, 2022 and $728 thousand for the nine months ended September 30, 2022.

The following table presents our minimum future annual rental income on such leases as of September 30, 2022.

(In thousands)	September 30, 2022
Three months ending December 31, 2022	$	195
2023		792
2024		685
2025		703
2026		720
2027		402
Thereafter		1,536
Total	$	5,033