Note 11 - Leases

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

(11) Leases

The Company accounts for its leases in accordance with ASU 2016-02, Leases (Topic 842) and as of September 30, 2021, a $2.6 million right-of-use asset and an offsetting lease payment obligation liability were recorded on the consolidated balance sheet in other assets and other liabilities, respectively.

Operating lease right-of-use assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. Right-of-use 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. Because the Company only has operating leases and the right-of-use asset is offset by a lease payment obligation liability, the lease payments are the only amount that is recorded in occupancy expense in the consolidated statements of comprehensive income.

The Company’s leases relate to office space and bank branches with remaining lease terms between eleven and forty-three months. Certain leases contain extension options which typically range from three to ten years. Because these extension options are not considered reasonably certain of exercise, they are not included in the lease term.

The table below summarizes the Company’s net lease cost for the three and nine months ended September 30, 2021.

(Dollars in thousands)	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Operating lease cost	$	223		672

The table below summarizes other information related to the Company’s operating leases:

	Three Months Ended						Nine Months Ended
(Dollars in thousands)	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	223			224			672			669
Weighted-average remaining lease term – operating leases, in years		3.0			3.9			3.0			3.9
Weighted-average discount rate – operating leases		2.19	%		2.19	%		2.19	%		2.19	%

The table below summarizes the maturities of remaining lease liabilities:

(Dollars in thousands)	September 30, 2021
2021	$	229
2022		932
2023		807
2024		729
2025		15
Total lease payments		2,712
Less: Interest		(92	)
Present value of lease liabilities	$	2,620

Subsequent to the end of the third quarter, on October 8, 2021, the Company executed the purchase option on the corporate office building and terminated the existing agreement to lease the building. The purchase of the building for $7.8 million eliminated approximately $2.3 million of the above right-of-use asset and the offsetting lease payment obligation liability as of the purchase date. Therefore, the reported amounts in future periods for the right-of-use asset and the offsetting lease payment obligation liability are expected to decline substantially from the amounts reported at September 30, 2021.