Leases

12 Months Ended

Dec. 31, 2022

Leases

Leases

NOTE 10 Leases

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Substantially all the leases in which the Company is the lessee are comprised of real estate property for branches, and office equipment rentals with terms extending through 2032. We do not have any material subleased properties. Substantially all of the Company’s leases are classified as operating leases. The Company made a policy election to exclude the recognition requirements of Topic 842 to all leases with original terms of 12 months or less. Instead, the short-term lease payments are recognized in income or expense on a straight-line basis over the lease term.

The following table presents the classification of the Company’s ROU assets and lease liabilities on the consolidated financial statements.

		December 31,		December 31,
(dollars in thousands)		2022		2021
Lease Right-of-Use Assets	Classification
Operating lease right-of-use assets	Operating lease right-of-use assets	$	5,419	$	3,727
Finance lease right-of-use assets	Land, premises and equipment, net		—		87
Total lease right-of-use assets		$	5,419	$	3,814
Lease Liabilities
Operating lease liabilities	Operating lease liabilities	$	5,902	$	4,275
Finance lease liabilities	Long-term debt		—		203
Total lease liabilities		$	5,902	$	4,478

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rates used to calculate the present value of the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever the rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For the Company’s only finance lease, the Company utilized its incremental borrowing rate at lease inception.

	December 31,		December 31,
	2022		2021
Weighted-average remaining lease term, years
Operating leases	5.0		3.4
Finance leases	—		0.8
Weighted-average discount rate
Operating leases	3.1	%	2.5	%
Finance leases	—	%	7.8	%

As the Company elected, for all classes of underlying assets, not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance utilities. Variable lease cost also includes payments for usage or maintenance of those capitalized equipment operating leases.

The following table presents lease costs and other lease information for the years ending December 31, 2022, 2021 and 2020:

	Year ended
	December 31,
(dollars in thousands)	2022		2021		2020
Lease costs
Operating lease cost	$	1,799	$	1,827	$	2,457
Variable lease cost		899		823		1,170
Short-term lease cost		217		181		395
Finance lease cost
Interest on lease liabilities		7		25		42
Amortization of right-of-use assets		87		116		116
Sublease income		(238)		(228)		(228)
Net lease cost	$	2,771	$	2,744	$	3,952
Other information
Cash paid for amounts included in the measurement of lease liabilities operating cash flows from operating leases	$	1,706	$	1,763	$	2,432
Right-of-use assets obtained in exchange for new operating lease liabilities		4,266		267	$	1,555

Future minimum payments for leases with initial or remaining terms of one year or more as of December 31, 2022 are as follows:

	Operating
(dollars in thousands)	Leases
Twelve months ended
2023	$	1,987
2024		1,236
2025		1,118
2026		936
2027		385
Thereafter		854
Total future minimum lease payments	$	6,516
Amounts representing interest		(614)
Total operating lease liabilities	$	5,902