Leases
Leases are classified as operating or finance leases at the lease commencement date. The Company's leases primarily consist of office space, bank branches and bank equipment with original lease terms of generally 1 to 10 years. Lease right-of-use ("ROU") assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's 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 the Company's incremental borrowing rate at the lease commencement date.
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 net occupancy expense in the Consolidated Statements of Income.
The components of lease expense for the years ending December 31, 2025, 2024 and 2023 are shown in the table below. There was no expense recorded related to the Company's finance lease due to the timing of its commencement date.
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| For the year ended December 31, |
| (dollars in thousands) | 2025 | | 2024 | | 2023 |
| Operating lease expense | $ | 626 | | | $ | 316 | | | $ | 405 | |
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ROU assets and lease liabilities by lease type, and the associated balance sheet classifications are shown in table below as of December 31, 2025 and 2024.
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| | | December 31, |
| (dollars in thousands) | Balance Sheet Classification | | 2025 | | 2024 |
| ROU assets | | | | | |
| ROU assets-operating leases | Premises and equipment, net | | $ | 2,476 | | | $ | 1,635 | |
| ROU assets-finance leases | Premises and equipment, net | | 1,205 | | | — | |
| Total ROU assets | | | $ | 3,681 | | | $ | 1,635 | |
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| Lease liabilities | | | | | |
| Operating lease liabilities | Operating lease liabilities | | $ | 2,682 | | | $ | 1,678 | |
| Finance lease liabilities | Finance lease liabilities | | 1,205 | | | — | |
| Total lease liabilities | | | $ | 3,887 | | | $ | 1,678 | |
Contractual lease payment obligations for each of the next five years and thereafter, in addition to a reconciliation to the Company's lease liabilities were as follows:
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| (dollars in thousands) | Operating Leases | | Finance Leases | | Total |
| 2026 | $ | 550 | | $ | 201 | | $ | 751 |
| 2027 | 621 | | 201 | | 822 |
| 2028 | 631 | | 201 | | 832 |
| 2029 | 420 | | 201 | | 621 |
| 2030 | 387 | | 201 | | 588 |
| Thereafter | 415 | | 400 | | 815 |
| Total lease payments | 3,024 | | 1,405 | | 4,429 |
| Less imputed interest | (342) | | | (200) | | | (542) |
| Total lease liabilities, as reported | $ | 2,682 | | $ | 1,205 | | $ | 3,887 |
The following table presents the weighted average remaining lease term, in years, and the weighted average discount rate by lease type as of December 31, 2025 and 2024.
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| December 31, |
| 2025 | | 2024 |
| Operating lease weighted average remaining lease term (in years) | 5.4 | | 5.7 |
| Operating lease weighted average discount rate | 4.38 | % | | 4.10 | % |
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| Finance lease weighted average remaining lease term (in years) | 7 | | 0 |
| Finance lease weighted average discount rate | 4.55 | % | | — | % |
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.