Leases

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

LEASES

NOTE 5. LEASES

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows.  Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease.  Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor.

The Company’s long-term lease agreements are classified as operating leases.  Certain of these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised.  The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

During 2021, the Company acquired long-term branch leases and equipment due to the acquisition of Severn. These leases were reassessed by management as of the acquisition date of October 31, 2021, which included updating the incremental borrowing rates and remaining lease terms.

The following tables present information about the Company’s leases as of and for the years ended December 31.

(Dollars in thousands)	December 31, 2021			December 31, 2020
Lease liabilities	$	11,567		$	4,874
Right-of-use assets	$	11,370		$	4,795
Weighted average remaining lease term		13.61	years		10.49	years
Weighted average discount rate		2.48	%		2.89	%

	For the Year Ended
Lease cost (in thousands)	December 31, 2021		December 31, 2020
Operating lease cost	$	902	$	712
Short-term lease cost		—		—
Total lease cost	$	902	$	712
Cash paid for amounts included in the measurement of lease liabilities	$	777	$	666

The following table presents a maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities at December 31.

	As of
Lease payments due (in thousands)	December 31, 2021
Twelve months ending December 31, 2022	$	1,224
Twelve months ending December 31, 2023		1,207
Twelve months ending December 31, 2024		1,121
Twelve months ending December 31, 2025		981
Twelve months ending December 31, 2026		1,018
Thereafter		7,980
Total undiscounted cash flows	$	13,531
Discount		1,964
Lease liabilities	$	11,567

H.S. West, LLC, a subsidiary of the Bank, leases space to five unrelated companies and to a law firm of which the Chairman of the Board of the Company and Bank is a partner. Total gross rental income was $180 thousand for the year ended December 31, 2021.

The following table presents our minimum future annual rental income on such leases at December 31.

(In thousands)	December 31, 2021
2022	$	914
2023		792
2024		685
2025		703
2026		720
Thereafter		1,938
Total	$	5,752