LEASES
The Corporation enters into noncancellable lease arrangements primarily for some of its community banking offices. Certain lease arrangements contain clauses requiring increasing rental payments over the lease term, which are generally contractually stipulated. Many of these lease arrangements provide the Corporation with the option to renew the lease arrangement after the initial lease term. These options are included in determining the lease term used to establish the right-of-use assets and lease liabilities, when it is reasonably certain the Corporation will exercise its renewal option. As most of the Corporation’s leases do
not have a readily determinable implicit rate, the incremental borrowing rate is primarily used to determine the discount rate for purposes of measuring the right-of-use assets and lease liabilities. The Corporation’s lease arrangements do not contain any material residual value guarantees or material restrictive covenants. The increases in ROU assets and lease liabilities are due to assumed leases as a result of the Acquisition.
The following ROU assets and lease liabilities are reported within the Consolidated Statements of Condition as follows:
| | | | | | | | | | | |
| (Dollars in thousands) | December 31, 2025 | | December 31, 2024 |
| Operating Leases: | | | |
| ROU assets | $ | 4,155 | | | $ | 2,663 | |
| Lease liabilities | 4,451 | | | 2,764 | |
| Weighted average remaining lease term | 5.8 years | | 5.7 years |
| Weighted average discount rate | 3.09 | % | | 2.63 | % |
Supplemental cash flow information related to operating leases for the years ended December 31:
| | | | | | | | | | | | | | | | | |
| (In thousands) | 2025 | | 2024 | | 2023 |
| Operating cash flows from operating leases | $ | 1,353 | | | $ | 917 | | | $ | 924 | |
As of December 31, 2025, the Corporation did not have any significant additional operating or finance leases that had not yet commenced.
The following summarizes the remaining scheduled future minimum lease payments for operating leases as of December 31, 2025:
| | | | | |
| Year | (In thousands) |
| 2026 | $ | 1,050 | |
| 2027 | 860 | |
| 2028 | 829 | |
| 2029 | 701 | |
| 2030 | 496 | |
| Thereafter | 962 | |
| Total minimum lease payments | 4,898 | |
Less: amount representing interest 1 | 447 | |
| Present value of net minimum lease payments | $ | 4,451 | |
__________________________________________________1Amount necessary to reduce net minimum lease payments to present value calculated at the Corporation’s incremental borrowing rate.
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.