LEASES

9 Months Ended

Sep. 30, 2021

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. On January 1, 2019, the Company adopted ASU No. 2016-02 “Leases” and all subsequent ASUs modifying ASC 842. Substantially all of the leases pursuant to which the Company is the lessee are comprised of real estate property for branches, ATM locations, and office space with terms extending through 2040. All leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated balance sheets. With the adoption of ASC 842, operating lease agreements are required to be recognized on the consolidated balance sheets as a right-of-use (ROU) asset with a corresponding lease liability using the modified retrospective approach.

The Company elected the following practical expedients in conjunction with implementation of ASC 842 as follows:

● Package of practical expedients:

o Lease classification as an operating lease under the prior standards is grandfathered.

o Re-evaluation of embedded leases evaluated under the prior standards is not required.

o No re-assessment of previously recorded initial direct lease costs.

● Election to exclude short-term leases (i.e., leases with initial terms of twelve months or less), from capitalization on the consolidated balance sheets.

The following table presents the consolidated statements of condition classification of the Company’s ROU assets and lease liabilities:

(in thousands)	Classification	September 30, 2021		December 31, 2020
Lease Right-of-Use Assets
Operating lease right-of-use assets	Other assets	$	9,488	$	10,338
Lease Liabilities
Operating lease liabilities	Other liabilities		9,841		10,627

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 for the present value of 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. If there are multiple renewals typically only the next lease renewal is considered. Regarding the discount rate, ASC 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.

The following table presents the weighted average lease term and discount rate of the Company’s leases:

	September 30, 2021		December 31, 2020
Weighted-average remaining lease term (in years)
Operating leases	8.57		9.26
Weighted-average discount rate
Operating leases	3.15	%	3.15	%

The following table represents lease costs, which includes prepaids and expenses and other lease information. As 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 real estate taxes, common area maintenance and utilities.

	Three Months Ended				Nine Months Ended
(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Lease Costs
Operating lease cost	$	324	$	344	$	966	$	988
Variable lease cost		43		59		179		177
Total lease cost	$	367	$	403	$	1,145	$	1,165

Future minimum payments for operating leases with initial or remaining terms of one year or more as of September 30, 2021 are, as follows:

(in thousands)	Payments
Twelve Months Ended:
September 30, 2022	$	1,314
September 30, 2023		1,318
September 30, 2024		1,319
September 30, 2025		1,125
September 30, 2026		1,032
Thereafter		4,301
Total future minimum lease payments		10,409
Amounts representing interest		(568)
Present value of net future minimum lease payments	$	9,841