Leases

6 Months Ended

Jun. 30, 2022

The Company’s primary leasing activities relate to certain real estate leases entered into in support of the Company’s branch operations and back office operations. The Company leases four of its full service branches and four other locations for corporate/administration activities, operations, and loan production. All property leases under lease agreements have been been designated as operating leases. The Company does not have leases designated as finance leases.

The Company determines if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets are included in premises and equipment, and operating lease liabilities are included as other liabilities in the consolidated balance sheets. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The weighted average discount rate used was 2.05% at June 30, 2022 and December 31, 2021. The operating lease ROU asset also includes any lease pre-payments. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which the Company has elected to account for separately as the non-lease component amounts are readily determinable under most leases.

As of June 30, 2022, the Company’s net lease ROU assets and related lease liabilities were $2.7 million and $2.9 million, respectively, compared to December 31, 2021 balances of $2.5 million of ROU assets and $2.7 million of lease liabilities, and have remaining terms ranging from 1 - 6 years, including extension options that the Company is reasonably certain will be exercised. As of June 30, 2022, the Company had not entered into any material leases that have not yet commenced. The Company’s lease information is summarized as follows:


Leases
(in thousands)	June 30, 2022		December 31, 2021
Lease Right of Use Asset:
Lease asset	$	5,240	$	5,364
Less: Accumulated amortization	(2,581)		(2,898)
Net lease asset	$	2,659	$	2,466



Lease Liability:
Lease liability	$	5,396	5,535
Less: Accumulated amortization	(2,485)		(2,800)
Lease liability	$	2,911	$	2,735

Future minimum payments for operating leases with initial or remaining terms of one year or more are as follows:


Lease Payment Obligations
(in thousands)	June 30, 2022
Amounts due in:

2022	538
2023	1,091
2024	721
2025	259
2026 and thereafter	392
Total future lease payments	3,001
Discount of cash flows	(90)
Present value of net future lease payments	$	2,911