Leases

3 Months Ended

Mar. 31, 2023

The Company's leases primarily consist of office space and bank branches with remaining lease terms of generally one to ten years. As of March 31, 2023, operating right of use (ROU) assets and liabilities were $1.4 million and $1.5 million, respectively. As of March 31, 2023, the weighted-average remaining lease term on these operating leases was approximately 5.6 years and the weighted-average discount rate used to measure the lease liabilities was approximately 4.0%.

Operating leases in which the Company is the lessee are recorded as operating lease ROU assets and operating lease liabilities. Currently, the Company does not have any finance leases. The ROU assets are included in premises and equipment, net on the consolidated balance sheets.

Operating lease ROU assets represent the Company's right to use an underlying asset during the lease term and operating lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and

operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company's incremental borrowing rate at the lease commencement date.

Operating lease cost, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in net occupancy expense in the consolidated statements of income. The operating lease cost was $93,000 for the three months ended March 31, 2023 compared to $94,000 for the three months ended March 31, 2022.

At adoption of ASU 2016-02 on January 1, 2019, lease and non-lease components of new lease agreements are accounted for separately. Lease components include fixed payments, such as rent, real estate taxes and insurance costs and non-lease components include common-area maintenance costs. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Operating lease expense for these leases was $28,000 for the three months ended March 31, 2023 compared to $24,000 for the three months ended March 31, 2022.

The table below summarizes the maturity of remaining operating lease liabilities:


Lease payments due in:	Operating Lease
(in thousands)
2023 (excluding 3 months ended March 31, 2023)	$	274
2024	258
2025	257
2026	259
2027	262


Thereafter	309
Total lease payments	$	1,619
Less imputed interest	(165)
Total lease liabilities, as reported	$	1,454