LEASES

9 Months Ended

Sep. 30, 2021

11.

LEASES

The Company leases eleven 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 Company combines lease and nonlease components. The Bank had no financing leases as of September 30, 2021.

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 Company’s sole discretion. Most leases are currently in the extension period. For the remaining leases with options to renew, the Company 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 Company's lease agreements do not contain any residual value guarantees or restrictive covenants.

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

The Company had right-of-use assets totaling $5,417,000 and $5,913,000 as of September 30, 2021 and December 31, 2020, respectively. The Company had lease liabilities totaling $5,949,000 and $6,453,000 as of September 30, 2021 and December 31, 2020, respectively. The Company recognized lease expenses totaling $293,000 and $312,000 for the three-month periods ended September 30, 2021 and 2020, respectively, and $878,000 and $932,000 for the nine-month periods ended September 30, 2021 and 2020, respectively. Lease expense is included in Occupancy and equipment expense on the Condensed Consolidated Statements of Income.

The table below summarizes the maturity of remaining lease liabilities at September 30, 2021:

(in thousands)	September 30, 2021
2021	$	319
2022		1,178
2023		1,046
2024		889
2025		817
2026 and thereafter		2,192
Total lease payments		6,441
Less: interest		(492	)
Present value of lease liabilities	$	5,949

The following table presents supplemental cash flow information related to leases for the three and nine months ended September 30, 2021:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2021		2020		2021		2020

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	318	$	302	$	901	$	851
Right-of-use assets obtained in exchange for new operating lease liabilities		285		—		285		221

The following table presents the weighted average operating lease term and discount rate as of September 30, 2021 and December 31, 2020:

	September 30, 2021			December 31, 2020

Weighted-average remaining lease term – operating leases, in years		6.44			7.23
Weighted-average discount rate – operating leases		2.36	%		2.43	%