LEASE OBLIGATIONS

12 Months Ended

Dec. 31, 2020

LEASE OBLIGATIONS

LEASE OBLIGATIONS

NOTE I – LEASE OBLIGATIONS

The Company enters into leases in the normal course of business primarily for financial centers, back office operations locations and business development offices.  The Company’s leases have remaining terms ranging from 1 to 11 years.

The Company includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Company will exercise the option.  In addition, the Company has elected to account for any non-lease components in its real estate leases as part of the associated lease component.  The Company has also elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on the Company’s balance sheet.

Leases are classified as operating or finance leases at the lease commencement date.  Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term, and is recorded in net occupancy and equipment expense in the consolidated statements of income and other comprehensive income.  Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.  Right-of-use assets and lease liabilities are recognized at the lease commencement date and based on the estimated present value of lease payments over the lease term.

The Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease payments when the rate implicit in a lease is not known.  The Company’s incremental borrowing rate is based on the FHLB amortizing advance rate, adjusted for the lease term and other factors.

The following table details balance sheet information, as well as weighted-average lease terms and discount rates, related to leases at December 31, 2020 and 2019 ($ in thousands):

	December 31,			December 31,
	2020			2019
Right-of-use assets:
Operating leases	$	5,969		$	6,518
Finance leases, net of accumulated depreciation		2,658			—
Total right-of-use assets	$	8,627		$	6,518
Lease liabilities:
Operating lease	$	6,031		$	6,518
Finance lease		2,281			—
Total lease liabilities	$	8,312		$	6,518
Weighted average remaining lease term
Operating leases		4.4 years			5.0 years
Finance leases		11.2 years			—
Weighted average discount rate
Operating leases		2.3	%		2.5	%
Finance leases		2.0	%		—	%

The table below summarizes our net lease costs ($ in thousands):

	December 31,
	2020		2019
Operating lease cost	$	1,763	$	898
Finance lease cost:
Interest on lease liabilities		7		—
Amortization of right-of-use		183		—
Net lease cost	$	1,953	$	898

The table below summarizes the maturity of remaining lease liabilities at December 31, 2020 and 2019 ($ in thousands):

	December 31, 2020
	Operating Leases		Finance Leases
2021	$	1,741	$	193
2022		1,574		220
2023		1,058		220
2024		846		220
2025		666		220
Thereafter		480		1,460
Total lease payments		6,365		2,533
Less: Interest		(334)		(252)
Present value of lease liabilities	$	6,031	$	2,281

	December 31, 2019
	Operating Leases		Finance Leases
2020	$	1,643		—
2021		1,527		—
2022		1,359		—
2023		844		—
2024		631		—
Thereafter		981		—
Total lease payments	$	6,985		—
Less: Interest		(467)		—
Present value of lease liabilities	$	6,518		—