Leases

12 Months Ended

Dec. 31, 2023

(9)

Leases

The Company leases eleven branch and administrative locations under operating leases expiring on various dates through 2031. 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, 2023.

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 $4,073 and $4,905 as of December 31, 2023 and December 31, 2022, respectively. Right-of-use assets are included in Interest receivable and other assets on the Consolidated Balance Sheets. The Company had lease liabilities totaling $4,585 and $5,422 as of December 31, 2023 and December 31, 2022, respectively. Lease liabilities are included in Interest payable and other liabilities on the Consolidated Balance Sheets. The Company recognized lease expenses totaling $1,217 and $1,154 for the years ended December 31, 2023 and December 31, 2022, 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)	2023
2024	$	1,040
2025		1,052
2026		672
2027		610
2028		625
2029 and thereafter		895
Total lease payments		4,894
Less: interest		(309	)
Present value of lease liabilities	$	4,585

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

(in thousands)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,207	$	1,251
Right-of-use assets obtained in exchange for new operating lease liabilities	$	245	$	869

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

	2023			2022
Weighted-average remaining lease term - operating leases, in years		5.43			6.14
Weighted-average discount rate - operating leases		2.42	%		2.37	%