Leases
At the inception of a contract, an entity should determine whether the contract contains a lease. Topic 842 defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Control over the use of an identified asset means that the customer has both (1) the right to obtain substantially all of the economic benefits from the use of the asset and (2) the right to direct the use of the asset.
The Bank has finance leases for branch offices as well as operating leases for branch offices, ATM locations and certain office equipment. The right-of-use asset is included in the ‘Premises, Furniture and Equipment, Net’ line of the Consolidated Balance Sheet. The lease liability is included in the ‘Accrued Interest Payable and Other Liabilities’ line of the Consolidated Balance Sheet.
The Company used the implicit lease rate when determining the present value of lease payments for finance leases. The present value of lease payments for operating leases was determined using the incremental borrowing rate as of the date the Company adopted this standard.
The components of lease expense were as follows:
| | | | | | | | | | | | | | |
| | December 31, 2025 | | December 31, 2024 |
| Finance Lease Cost: | | | | |
| Amortization of Right-of-Use Assets | | $ | 210 | | | $ | 210 | |
| Interest on Lease Liabilities | | 252 | | | 280 | |
| Operating Lease Cost | | 1,701 | | | 1,319 | |
| Short-term Lease Cost | | — | | | — | |
| Total Lease Cost | | $ | 2,163 | | | $ | 1,809 | |
The weighted average lease term and discount rates were as follows:
| | | | | | | | | | | | | | |
| | December 31, 2025 | | December 31, 2024 |
| Weighted Average Remaining Lease Term: | | | | |
| Finance Leases | | 6 years | | 7 years |
| Operating Leases | | 5 years | | 6 years |
| | | | |
| Weighted Average Discount Rate: | | | | |
| Finance Leases | | 11.30 | % | | 11.34 | % |
| Operating Leases | | 3.27 | % | | 3.10 | % |
Supplemental balance sheet information related to leases were as follows:
| | | | | | | | | | | | | | |
| | December 31, 2025 | | December 31, 2024 |
| | | | |
| Finance Leases |
| Premises, Furniture and Equipment, Net | | $ | 1,228 | | | $ | 1,438 | |
| Other Borrowings | | $ | 2,137 | | | $ | 2,403 | |
| | | | |
| Operating Leases |
| Operating Lease Right-of-Use Assets | | $ | 5,584 | | | $ | 4,315 | |
| Operating Lease Liabilities | | $ | 5,764 | | | $ | 4,484 | |
Supplemental cash flow information related to leases were as follows:
| | | | | | | | | | | | | | |
| | December 31, 2025 | | December 31, 2024 |
| Cash Paid for Amounts in the Measurement of Lease Liabilities: | | | | |
| Operating Cash Flows from Finance Leases | | $ | 252 | | | $ | 280 | |
| Operating Cash Flows from Operating Leases | | 1,687 | | | 1,307 | |
| Financing Cash Flows from Finance Leases | | 289 | | | 261 | |
The following table presents a maturity analysis of Finance and Operating Lease Liabilities:
| | | | | | | | | | | | | | |
| | December 31, 2025 |
| | Finance Leases | | Operating Leases |
| | | | |
| Year 1 | | $ | 519 | | | $ | 1,546 | |
| Year 2 | | 486 | | | 1,279 | |
| Year 3 | | 438 | | | 871 | |
| Year 4 | | 438 | | | 663 | |
| Year 5 | | 438 | | | 426 | |
| Thereafter | | 633 | | | 1,634 | |
| Total Lease Payments | | 2,952 | | | 6,419 | |
| Less Imputed Interest | | (815) | | | (655) | |
| Total | | $ | 2,137 | | | $ | 5,764 | |
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.