Leases

12 Months Ended

Dec. 31, 2022

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, 2022			December 31, 2021
Lease liabilities	$	9,908		$	11,567
Right-of-use assets	$	9,629		$	11,370
Weighted average remaining lease term		12.55	years		13.61	years
Weighted average discount rate		2.50	%		2.48	%

	For the Year Ended
Lease cost (in thousands)	December 31, 2022		December 31, 2021
Operating lease cost	$	1,355	$	902
Short-term lease cost		—		—
Total lease cost	$	1,355	$	902
Cash paid for amounts included in the measurement of lease liabilities	$	1,268	$	777

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, 2022
2023	$	1,231
2024		1,141
2025		917
2026		916
2027		849
Thereafter		6,584
Total undiscounted cash flows	$	11,638
Discount		1,730
Lease liabilities	$	9,908

Total gross rental income was $1.3 million and $180 thousand for the years ended December 31, 2022 and December 31, 2021, respectively. The following table presents our minimum future annual rental income on such leases at December 31.

	As of
(In thousands)	December 31, 2022
2023	$	918
2024		701
2025		719
2026		737
2027		418
Thereafter		1,554
Total	$	5,047