First Seacoast Bancorp, Inc. Leases Disclosure
The Company is obligated under various lease agreements for one of its branch offices and certain equipment. These agreements are accounted for as operating leases and their terms expire between 2023 and 2027 and, in some instances, contain options to renew for periods up to four years. The Company has no financing leases.
The Company adopted ASU 2016-02 –Leases (Topic 842)– effective January 1, 2022 and began recognizing its operating leases on its consolidated balance sheet by recording a net lease liability, representing the Company’s legal obligation to make these lease payments, and a ROU asset, representing the Company’s legal right to use the leased assets. The Company, by policy, does not include renewal options for leases as part of its ROU asset and lease liabilities unless they are deemed reasonably certain to exercise. The Company does not have any sub-lease agreements.
The following table summarizes information related to the Company’s right-of-use asset and net lease liability:
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At December 31, 2022 |
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Operating Leases |
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Balance Sheet Location |
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(Dollars in thousands) |
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Right-of-use asset |
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$ |
202 |
|
|
|
Net lease liability |
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|
202 |
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The Company determines whether a contract contains a lease based on whether a contract, or a part of a contract, conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The discount rate is either implicit in the lease or, when such a rate cannot be readily determined, the Company’s incremental borrowing rate is used. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term.
The components of operating lease cost and other related information are as follows:
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Year Ended December 31, 2022 |
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(Dollars in thousands) |
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Operating lease cost |
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$ |
54 |
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Short-term lease cost |
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|
— |
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Variable lease cost (Cost excluded from lease payments) |
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|
— |
|
Sublease income |
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|
— |
|
Total operating lease cost |
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|
54 |
|
Other Information: |
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Cash paid for amounts included in the measurement of lease liabilities - operating cash flows from operating leases |
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54 |
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Operating lease - operating cash flows (liability reduction) |
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$ |
— |
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Weighted average lease term - years |
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|
4.37 |
|
Weighted average discount rate |
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|
3.29 |
% |
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|
|
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|
The total minimum lease payments due in future periods for lease agreements in effect at December 31, 2022 were as follows:
As of December 31, 2022 |
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Future Minimum Lease Payments |
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|
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(Dollars in thousands) |
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2023 |
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$ |
52 |
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2024 |
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|
49 |
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2025 |
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|
45 |
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2026 |
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|
43 |
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2027 |
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|
29 |
|
Total minimum lease payments |
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|
218 |
|
Less: interest |
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(16 |
) |
Total lease liability |
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$ |
202 |
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The Company's obligation under the operating lease related to one of its branches expires in August 2027 and has future lease payments of $188,000 as of December 31, 2022. As of December 31, 2021, this lease was scheduled to expire in June 2022 and had future lease payments of $16,000. Total lease expense was $33,000 and $32,000 for the years ended December 31, 2022 and 2021. This lease agreement contains clauses calling for escalation of minimum lease payments contingent on increases in LIBOR, or a similar replacement index, and the consumer price index.
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.