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Note 14 - Leases

9 Months Ended

Sep. 30, 2022

Note 14: Leases

We have operating lease agreements for certain land, buildings, and equipment. In some instances, a lease may contain renewal options to extend the term of the lease. We do not have any short-term leases in the calculation of the right-of-use assets and lease liability obligations. The most significant assumption related to the Company’s lease application of ASC 842 was the discount rate assumption. Since most of the lease agreements do not provide an implicit interest rate, the discount rate used in determining the operating lease liability obligation for each individual lease was the assumed incremental borrowing rate for the Company that corresponded with the remaining lease term.

As of September 30, 2022, the Company had 39 operating lease agreements, which include operating leases for 21 branch locations, six offices that are used for general office space, and twelve operating leases for equipment. Four of the real property operating leases did not include one or more options to extend the lease term. Eight of the operating leases for branch locations are land leases where the Company is responsible for the construction of the building on the property. The 39 operating leases have maturity dates ranging from December 2022 to August 2059. Most of the property leases include options for multiple five and ten year extensions that the Company is reasonably certain to exercise. No operating leases include variable lease payments that are based on an index or rate, such as the CPI. The weighted average remaining operating lease term for these leases is 18.7 years as of September 30, 2022. The weighted average operating lease discount rate was 3.38% as of September 30, 2022.

As of September 30, 2021, the Company had 44 operating lease agreements, which include operating leases for twenty branch locations, seven offices that are used for general office space, and seventeen operating leases for equipment. Two of the real property operating leases did not include one or more options to extend the lease term. Eight of the operating leases for branch locations are land leases where the Company is responsible for the construction of the building on the property. The 44 operating leases have maturity dates ranging from December 2021 to August 2059. Most of the property leases include options for multiple five and ten year extensions that the Company is reasonably certain to exercise. No operating leases include variable lease payments that are based on an index or rate, such as the CPI. The weighted average remaining operating lease term for these leases is 19.07 years as of September 30, 2021. The weighted average operating lease discount rate was 3.35% as of September 30, 2021.

The following table presents operating lease costs net of sublease income for the three and nine months ended September 30, 2022 and 2021.

	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
(dollars in thousands)
Operating lease cost	$	2,157	$	2,142	$	6,526	$	6,416
Sublease income		-		-		-		-
Total lease cost	$	2,157	$	2,142	$	6,526	$	6,416

The following table presents a maturity analysis of total operating lease liability obligations and reconciliation of the undiscounted cash flows to total operating lease liability obligations at September 30, 2022 and 2021.

	September 30, 2022			September 30, 2021
(dollars in thousands)
Operating lease payments due:
Within one year	$	2,135		$	2,102
One to three years		15,717			15,755
Three to five years		14,123			14,960
More than five years		80,240			85,180
Total undiscounted cash flows		112,215			117,997
Discount on cash flows		(32,595	)		(34,614	)
Total operating lease liability obligations	$	79,620		$	83,383

The following table presents cash and non-cash activities for the three and nine months ended September 30 2022 and 2021.

	Three Months Ended				Nine Months Ended
(dollars in thousands)	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,099	$	2,097	$	6,182	$	6,167
Non-cash investing and financing activities
Additions to Operating leases – right of use Asset
New operating lease liability obligation	$	585	$	52	$	3,272	$	8,174