Leases

9 Months Ended

Sep. 30, 2022

Leases

Leases

NOTE 13. Leases

Operating leases in which the Bank is the lessee and the term is greater than 12 months, are recorded as right of use (“ROU”) assets and lease liabilities and are included in Prepaid expenses and other assets and Accrued expenses and other liabilities, respectively, on the Consolidated Balance Sheets. The Bank does not currently have any finance leases in which it is the lessee.

Operating lease ROU assets represent the Bank’s right to use an underlying asset during the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate. The borrowing rate for each lease is unique based on the lease term. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in Occupancy expense in the Consolidated Statements of Income.

The Bank’s leases relate primarily to bank branches, office space and equipment with remaining lease terms of generally 1 to 10 years. Certain lease arrangements contain extension options which typically range from 1 to 5 years at the then fair market rental rates. As these extension options are not generally considered reasonably certain of exercise, they are not included in the lease term.

Certain real estate leases have lease payments that adjust based on annual changes in the Consumer Price Index ("CPI"). The leases that are dependent upon CPI are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability.

The table below summarizes our net lease cost:

	For the three months ended September 30,				For the nine months ended September 30,
(In thousands)	2022		2021		2022		2021
Operating lease cost	$	177	$	155	$	554	$	452
Net lease cost	$	177	$	155	$	554	$	452

The table below summarizes the cash and non-cash activities associated with our leases:

	For the three months ended September 30,				For the nine months ended September 30,
(In thousands)	2022		2021		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	183	$	152	$	547	$	442

The table below summarizes other information related to our operating leases:

(In thousands, except percentages and years)	September 30, 2022			December 31, 2021
Weighted average remaining lease term in years		11.15			11.40
Weighted average discount rate		2.84	%		3.20	%
Operating lease right-of-use assets	$	4,554		$	5,249

The table below summarizes the maturity of remaining lease liabilities:

(In thousands)	September 30, 2022
2022	$	168
2023		606
2024		559
2025		557
2026		558
2027 and thereafter		2,765
Total lease payments	$	5,213
Less: Interest		(582)
Present value of lease liabilities	$	4,631

As of September 30, 2022, the Company had not entered into any material leases that have not yet commenced.