FIRST UNITED CORP/MD/ Leases Disclosure
8. Leases
Substantially all of the leases in which the Corporation is the lessee are comprised of real estate property for branches, ATM locations, and office equipment with terms extending through 2030. All of the Corporation’s leases are classified as operating leases. The present value of lease payments is reported as a lease liability and right of use asset on the Corporation’s Consolidated Statement of Financial Condition.
The following table represents the Consolidated Statements of Financial Condition classification of the Corporation’s right-of-use assets and lease liabilities. The Corporation elected not to include short-term leases (i.e., leases with remaining terms of 12 months or less), or equipment leases that were deemed immaterial on the Consolidated Statement of Financial Condition.
(in thousands) |
| December 31, 2023 |
| December 31, 2022 | ||
Lease Right-of Use Assets | ||||||
Operating lease right-of-use assets | $ | 1,367 | $ | 1,898 | ||
Lease Liabilities | ||||||
Operating lease liabilities | $ | 1,556 | $ | 2,373 | ||
In calculating the present value of the lease payments, the Corporation has utilized its incremental borrowing rate based on electing the original lease term to account for each lease component.
The following table presents the weighted-average lease term and discount rate for operating leases at December 31, 2023:
December 31, 2023 | December 31, 2022 | |||
Weighted-average remaining lease term | ||||
Operating leases | ||||
Weighted-average discount rate | ||||
Operating leases | 5.16% | 5.00% |
The Corporation elected, for all classes of underlying assets, to separate lease and non-lease components. Total operating lease expense was $0.6 million and $0.5 million for the years ended December 31, 2023 and December 31, 2022, respectively. Short-term lease expense was approximately $20 thousand for the year ended December 31, 2023 and 2022.
In the fourth quarter of 2023, the Bank announced the closure of four of its branches with an effective closing date of February 29, 2024. In conjunction with the announced branch closures, the Bank recognized accelerated lease expense of approximately $0.1 million in 2023.
Future minimum payments for operating leases with initial or remaining terms of one year or more at December 31, 2023 were as follows:
(in thousands) |
| Amount | |
2024 | $ | 368 | |
2025 | 356 | ||
2026 | 283 | ||
2027 | 285 | ||
2028 | 240 | ||
Thereafter | 270 | ||
Total future minimum lease payments | 1,802 | ||
Amounts representing interest | (246) | ||
Present value of net future minimum lease payments | $ | 1,556 | |
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.