Lease Commitments

12 Months Ended

Dec. 31, 2022

On January 1, 2022, the Corporation adopted ASU 2016-02 (Topic 842), “Leases”, as further explained in Note 1, Summary of Significant Accounting Policies. The Corporation’s operating leases consist of various retail branch locations and loan production offices. As of December 31, 2022, the Corporation’s leases have remaining lease terms ranging from 2 months to 12 years, including extension options.

The Corporation’s leases include fixed rental payments, and certain of our leases also include variable rental payments where lease payments may increase at pre-determined dates based on the change in the consumer price index. The Corporation’s lease agreements include gross leases as well as leases in which we make separate payments to the lessor for items such as the property taxes assessed on the property or a portion of the common area maintenance associated with the property. We have elected the practical expedient not to separate lease and non-lease components for all of our building leases. The Corporation also elected to not recognize ROU assets and lease liabilities for short-term leases.

As of December 31, 2022 the Corporation’s ROU assets and related lease liabilities were $9.0 million and $8.9 million, respectively. These amounts are included within other assets and other liabilities, respectively.

The components of lease expense were as follows:


	Year Ended December 31,
(dollars in thousands)	2022
Operating lease expense	$	2,242
Short term lease expense	13

Total lease expense	$	2,255

Supplemental cash flow information related to leases was as follows:


(dollars in thousands)	December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,150
ROU asset obtained in exchange for lease liabilities	10,936

Maturities of operating lease liabilities were as follows for the period indicated:


(dollars in thousands)	December 31, 2022
2023	$	1,919
2024	1,746
2025	1,456
2026	1,436
2027	1,278
Thereafter	1,856
	$	9,691
Less: Present value discount	(827)
Total operating lease liabilities	$	8,864

As of December 31, 2022, the weighted-average remaining lease term for all operating leases, including extension options that the Corporation is reasonably certain will be exercised for retail branch locations, is 6.2 years.

Because we generally do not have access to the rate implicit in the lease, we utilize our incremental borrowing rate as the discount rate. The weighted average discount rate associated with operating leases as of December 31, 2022 is 2.63%.

As of December 31, 2022, the Corporation entered into one additional lease for a branch re-location. This lease will commence upon discontinuance of the previous location.

Total rental expense for the year ended December 31, 2022 was $2.2 million.