Leases

12 Months Ended

Dec. 31, 2021

(9)

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 December 31, 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 $5,138 and $5,913 as of December 31, 2021 and December 31, 2020, respectively. Right-of-use assets are included in Interest receivable and other assets on the Consolidated Balance Sheets. The Company had lease liabilities totaling $5,664 and $6,453 as of December 31, 2021 and December 31, 2020, respectively. Lease liabilities are included in Interest payable and other liabilities on the Consolidated Balance Sheets. The Company recognized lease expenses totaling $1,172 and $1,275 for the years ended December 31, 2021 and December 31, 2020, respectively. Lease expense is included in Occupancy and Equipment expense on the Consolidated Statements of Income.

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

(in thousands)	2021
2022	$	1,178
2023		1,045
2024		889
2025		817
2026		570
2027 and thereafter		1,622
Total lease payments		6,121
Less: interest		(457	)
Present value of lease liabilities	$	5,664

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

(in thousands)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,220	$	1,148
Right-of-use assets obtained in exchange for new operating lease liabilities	$	285	$	221

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

	2021			2020
Weighted-average remaining lease term - operating leases, in years		6.32			7.23
Weighted-average discount rate - operating leases		2.36	%		2.43	%