Leases

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Leases

Note 11. 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 of the leases in which the Company is the lessee are comprised of real estate for branches and office space with terms extending through 2035. All of our leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated balance sheet. With the adoption of Topic 842, operating lease agreements are required to be recognized on the consolidated balance sheet as a right-of-use (“ROU”) asset and a corresponding lease liability.

The following table represents the consolidated balance sheet classification of the Company’s ROU assets and lease liabilities. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the consolidated balance sheet (in thousands):

		December 31,		December 31,
	Classification	2023		2022
Assets:
Operating lease right-of-use assets	Other assets	$	9,894	$	9,314
Liabilities:
Operating lease liabilities	Other liabilities	$	10,303	$	9,457

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 rate used to present value 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 this 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.

As of December 31, 2023, the weighted average remaining lease term was 9.03 years and the weighted average discount rate was 2.84%.

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. The following table represents lease costs and other lease information for the years ended December 31, (in thousands):

	Year Ended
	December 31,
	2023		2022		2021
Lease costs:
Operating lease costs	$	1,687	$	1,633	$	1,222
Variable lease costs		117		100		97
Total	$	1,804	$	1,733	$	1,319
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,421	$	1,562	$	1,180

Future minimum payments for operating leases with initial or remaining terms of one year or more as of December 31, 2023 were as follows (in thousands):

	Amounts
2024	$	1,488
2025		1,393
2026		1,325
2027		1,140
2028		1,135
Thereafter		5,369
Total future minimum lease payments		11,850
Amounts representing interest		(1,547)
Present value of net future minimum lease payments	$	10,303

Lease expense for the years ended December 31, 2023, 2022, and 2021, was $1.8 million, $1.7 million and $1.3 million, respectively.

The Company entered into two leasing arrangements for branch offices with companies that are wholly owned by a board of director’s immediate family. The Company has determined that these leasing arrangements were considered economically fair and in the best interest of the Company. For the years ended December 31, 2023, 2022, and 2021, the Company paid $157 thousand, $150 thousand and $150 thousand, respectively, for base rent payments.