Leases

12 Months Ended

Dec. 31, 2020

(9)

Leases

The Bank leases ten branch and administrative locations under operating leases expiring on various dates through 2030. Leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expense is recognized on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, the Bank combines lease and nonlease components. The Bank had no financing leases as of December 31, 2020.

Most leases include options to renew, with renewal terms that can extend the lease term from 3 to 10 years. The exercise of lease renewal options is at the Bank’s sole discretion. Most leases are currently in the extension period. For the remaining leases with options to renew, the Bank has not included the extended lease terms in the calculation of lease liabilities as the options are not reasonably certain of being exercised. Certain lease agreements include rental payments that are adjusted periodically for inflation. The Bank's lease agreements do not contain any residual value guarantees or restrictive covenants.

The Bank uses its FHLB advance fixed rates, which are the Bank’s incremental borrowing rates for secured borrowings, as the discount rates to calculate lease liabilities.

The Company had right-of-use assets totaling $5,913 and $6,962 as of December 31, 2020 and December 31, 2019, respectively. The Company had lease liabilities totaling $6,453 and $7,483 as of December 31, 2020 and December 31, 2019, respectively. The Company recognized lease expenses totaling $1,275 and $1,049 for the years ended December 31, 2020 and December 31, 2019, respectively. Lease expenses include expenses related to short-term leases and recognition of deferred gain on sale-leaseback. Lease expense is included in Occupancy and equipment expense on the Income Statement.

The table below summarizes the maturity of remaining lease liabilities at December 31:

(in thousands)	2020
2021	$	1,174
2022		1,083
2023		948
2024		840
2025		817
2026 and thereafter		2,192
Total lease payments		7,054
Less: interest		(601	)
Present value of lease liabilities	$	6,453

The following table presents supplemental cash flow information related to leases for the year ended December 31:

(in thousands)	2020		2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,148	$	882
Right-of-use assets obtained in exchange for new operating lease liabilities	$	221	$	7,827

The following table presents the weighted average operating lease term and discount rate at December 31:

	2020			2019
Weighted-average remaining lease term - operating leases, in years		7.23			8.01
Weighted-average discount rate - operating leases		2.43	%		2.52	%