LEASES

6 Months Ended

Jun. 30, 2024

11.

LEASES

The Company leases eleven branch and administrative locations under operating leases expiring on various dates through 2031. Leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expense is recognized on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of ASU 2016-02, Leases (Topic 842), the Company combines lease and nonlease components. The Company had no financing leases as of June 30, 2024.

Most leases include options to renew, with renewal terms that can extend the lease term from 3 to 10 years. The exercise of lease renewal options is at the Company’s sole discretion. Most leases are currently in the extension period. For the remaining leases with options to renew, the Company has not included the extended lease terms in the calculation of lease liabilities as the options are not reasonably certain of being exercised. Certain lease agreements include rental payments that are adjusted periodically for inflation. The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants.

The Company uses its FHLB advance fixed rates, which are its incremental borrowing rates for secured borrowings, as the discount rates to calculate lease liabilities.

The Company had right-of-use assets totaling $3,563,000 and $4,073,000 as of June 30, 2024 and December 31, 2023, respectively. The Company had lease liabilities totaling $4,079,000 and $4,585,000 as of June 30, 2024 and December 31, 2023, respectively. The Company recognized lease expense totaling $304,000 and $293,000 for the three-month periods ended June 30, 2024 and 2023, respectively, and $605,000 and $601,000 for the six-month periods ended June 30, 2024 and 2023, respectively. Lease expense includes operating lease costs, short-term lease costs and variable lease costs. Lease expense is included in occupancy and equipment expense on the condensed consolidated statements of income.

The table below summarizes the maturity of remaining lease liabilities at June 30, 2024:

(in thousands)	June 30, 2024
2024 (remaining 6 months)	$	482
2025		1,051
2026		672
2027		611
2028		625
2029 and thereafter		895
Total lease payments		4,336
Less: interest		(257	)
Present value of lease liabilities	$	4,079

The following table presents supplemental cash flow information related to leases for the three and six months ended June 30, 2024:

	Three months ended June 30,				Six months ended June 30,
(in thousands)	2024		2023		2024		2023

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	296	$	301	$	595	$	614
Right-of-use assets obtained in exchange for new operating lease liabilities		—		—		—		245

The following table presents the weighted average operating lease term and discount rate as of June 30, 2024 and December 31, 2023:

	June 30, 2024			December 31, 2023

Weighted-average remaining lease term – operating leases, in years		5.18			5.43
Weighted-average discount rate – operating leases		2.40	%		2.42	%