Leases
The Company leases land and premises for its branch banking offices, administration facilities, and ITMs. The initial terms of these leases expire at various dates through 2044. Under the provisions of most of these leases, the Company has the option to extend the leases beyond their original terms at rental rates adjusted for changes reported in certain economic indices or as reflected by market conditions. Lease terms may include options to extend or terminate the lease when it is reasonably certain the Company will exercise that option. As of December 31, 2024, the Company had 14 operating leases and no financing leases.
Upon adoption of ASC Topic 842, Leases, the Bank chose to apply the incremental borrowing rate in its determination of the lease liability. The incremental borrowing rate approximates the Bank’s current rates for fully secured loans where the amount and terms applied are similar to the amount and terms of the lease.
Operating lease expenses for the years ended December 31, 2024 and 2023, totaled $762,000 and $711,000, respectively.
Supplemental balance sheet information related to leases is as follows:
| | | | | | | | | | | | | | |
| (In thousands) | | December 31, 2024 | | December 31, 2023 |
| Operating cash flows used in operating leases | | $ | 766 | | | $ | 720 | |
| Right-of-use assets obtained in exchange for new operating lease liabilities | | 2,374 | | | — | |
| Weighted-average remaining lease terms in years for operating leases | | 8.65 | | 4.23 |
| Weighted-average discount rate for operating leases | | 5.06 | % | | 5.09 | % |
Maturities of lease liabilities are as follows as of December 31, 2024 (in thousands):
| | | | | | | | | | |
| Years Ending December 31, | | | | Lease Liabilities |
| 2025 | | | | $ | 718 | |
| 2026 | | | | 499 | |
| 2027 | | | | 428 | |
| 2028 | | | | 424 | |
| 2029 | | | | 339 | |
| Thereafter | | | | 1,558 | |
| Total undiscounted cash flows | | | | 3,966 | |
| Less: present value discount | | | | (805) | |
| Present value of net future minimum lease payments | | | | $ | 3,161 | |
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.