COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2022

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 8 — COMMITMENTS AND CONTINGENCIES

In the normal course of business, there are various pending legal actions and proceedings that are not reflected in the consolidated financial statements. Management does not believe the outcome of these actions and proceedings will have a material effect on the consolidated financial position or results of operations of the Company.

The Company currently leases four branch banking facilities and one parcel of land under operating leases. At September 30, 2022, right-of-use assets and lease liabilities were recorded related to these operating leases totaling $999,000 and $1,484,000, respectively. At December 31, 2021, right-of-use assets and lease liabilities stood at $1,025,000 and $1,499,000, respectively. Further options to extend or terminate the lease are not applicable for any of the five leases. No significant assumptions or judgements were made in determining whether a contract contained a lease or in the consideration of lease versus non-lease components. None of the leases contained an implicit rate; therefore, our incremental borrowing rate was used for each of the leases.

The Company recognized total operating lease costs for the nine months ended September 30, 2022 and 2021 of $135,000 and $133,000, respectively. Operating lease costs are included in occupancy, net in the accompanying statements of income. Cash payments totaled $125,000 and $116,000, respectively, for the nine months ended September 30, 2022 and 2021.

The Company currently has one finance lease for equipment. At September 30, 2022, right-of-use assets and lease liabilities were recorded related to the finance lease totaling $34,000 and $9,000, respectively. At December 31, 2021, right-of-use assets and lease liabilities stood at $34,000 and $16,000, respectively. Amounts recognized as right-of-use assets and lease liabilities related to finance leases are included in premises and equipment, net and other liabilities, respectively, in the accompanying balance sheet. Further options to extend or terminate the lease are not applicable for the lease. No significant assumptions or judgements were made in determining whether a contract contained a lease or in the consideration of lease versus non-lease components. The lease did not contain an implicit rate; therefore, our incremental borrowing rate was used.

Total finance lease costs that were recognized by the Company for the nine months ended September 30, 2022 and 2021 were immaterial. Cash payments totaled $7,000 for the nine months ended September 30, 2022 and 2021.

The following table displays the weighted-average term and discount rates for operating and finance leases outstanding as of September 30, 2022 and December 31, 2021.

	September 30,	December 31,	September 30,	December 31,
	2022	2021	2022	2021
	Operating	Operating	Finance	Finance
Weighted-average term (years)	24.13	24.51	0.92	1.67
Weighted-average discount rate	3.93%	3.89%	0.68%	0.68%

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

(Dollars in thousands)	September 30,		December 31,		September 30,		December 31,
	2022		2021		2022		2021
Minimum Lease Payments due:	Operating		Operating		Finance		Finance
Within one year	$	80	$	120	$	9	$	10
After one but within two years		68		68		—		7
After two but within three years		68		68		—		—
After three but within four years		68		68		—		—
After four but within five years		78		68		—		—
After five years		2,129		2,190		—		—
Total undiscounted cash flows		2,491		2,582		9		17
Discount on cash flows		(1,007)		(1,083)		—		(1)
Total lease liability	$	1,484	$	1,499	$	9	$	16