Lease Commitments

9 Months Ended

Sep. 30, 2022

Lease Commitments

Lease Commitments

Note 5. Lease Commitments

The Company accounts for leases in accordance with Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASC 2016-02”). The Company leases nineteen locations for administrative and loan production offices and branch locations. Seventeen leases were classified as operating leases and two leases were classified as finance leases. Leases with an initial term of 12 months or less as well as leases with a discounted present value of future cash flows below $25 thousand are not recorded on the balance sheet and the related lease expense is recognized over the lease term. The Company elected to use the practical expedient to not recognize short-term leases on the consolidated balance sheet and instead account for them as executory contracts.

Certain leases include options to renew, with renewal terms that can extend the lease term, typically for five years. Lease assets and liabilities include related options that are reasonably certain of being exercised. The Company has determined that it will place a limit on exercises of available lease renewal options that would extend the lease term up to a maximum of fifteen years, including the initial term. The depreciable life of leased assets are limited by the expected lease term.

The following tables present information about the Company’s leases for the periods ended:

Dollars in Thousands	September 30, 2022			December 31, 2021
Balance Sheet
Operating Lease Amounts
Right-of-use asset	$	5,290		$	6,009
Lease liability		5,688			6,372
Finance Lease Amounts
Right-of-use asset	$	1,584		$	1,687
Lease liability		2,036			2,125
Supplemental balance sheet information
Weighted average lease term - Operating Leases (Yrs.)		7.46			7.99
Weighted average lease term - Finance Leases (Yrs.)		11.30			12.09
Weighted average discount rate - Operating Leases (1)		2.29	%		2.24	%
Weighted average discount rate - Finance Leases (1)		2.84	%		2.84	%
Income Statement
Three Months Ended	September 30, 2022			September 30, 2021
Operating lease cost classified as premises and equipment	$	286		$	252
Finance lease cost classified as interest on borrowings		15			15
Nine Months Ended
Operating lease cost classified as premises and equipment	$	858		$	691
Finance lease cost classified as interest on borrowings		44			47
Operating outgoing cash flows from operating leases	$	787		$	643
Operating outgoing cash flows from finance leases	$	134		$	134

(1) The discount rate was developed by using the fixed rate credit advance borrowing rate at the FHLB of Atlanta for a term correlating to the remaining life of each lease. Management believes this rate closely mirrors its incremental borrowing rate for similar terms.

Minimum lease payments at September 30, 2022, for the next five years and thereafter, assuming renewal options are exercised, are approximately as follows:

	Dollars in Thousands
Operating Leases:
One year or less	$	966
One to three years		1,470
Three to five years		1,060
Over 5 years		2,905
Total undiscounted cash flows		6,401
Less: Discount		(713)
Lease Liabilities	$	5,688
Finance Leases:
One year or less	$	185
One to three years		393
Three to five years		407
Over 5 years		1,417
Total undiscounted cash flows		2,402
Less: Discount		(366)
Lease Liabilities	$	2,036