Waterstone Financial, Inc.WSBF

Waterstone Financial, Inc. Leases Disclosure

10-KFiled Feb 28, 20222 min read
20)
Leases

The Company has entered into operating lease agreements for six of its community banking branch locations, all of its mortgage banking office locations, and some of its office equipment.  The leases have fixed terms defined regarding the payments and length.  The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the consolidated statements of financial condition. Some of the leases included options to extend the leases.  These options are reviewed and factored into the length of the lease if the option is expected to be extended.  Leases did not contain an implicit rate; therefore, the Company used the incremental borrowing rates for the discount rate.  There were no sale and leaseback transactions, leveraged leases, or lease transactions with related parties during the twelve months ended December 31, 2021.

At December 31, 2021, the Company had lease liabilities totaling $6.3 million and right-of-use assets totaling $5.8 million related to these leases. Lease liabilities and right-of-use assets are reflected in other liabilities and other assets, respectively, on the consolidated statements of financial condition.

The cost components of our operating leases were as follows for the years ended December 31, 2021 and 2020:

 
Year ended
December 31,
  
   
2021
    
2020
  
   
(In Thousands)
  
Operating lease cost
  
$
3,000
    
$
3,158
  
Variable cost
    
494
      
487
  
Short-term lease cost
    
517
      
737
  
Total
  
$
4,011
    
$
4,382
  
At December 31, 2021, the Company had leases that had not yet commenced, but will create approximately $449,000 of additional lease liabilities and right-of-use assets for the Company in the first quarter of 2022.

The table below summarizes other information related to our operating leases:

 
Year ended
December 31,
  
   
2021
    
2020
  
   
(Dollars in Millions)
        
Cash paid for amounts included in the measurement of lease liabilities
            
Operating cash flows from operating leases
  
$
3.3
      
3.5
  
Initial recognition of right-of-use asset
    
1.5
      
1.0
  
Initial recognition of lease liabilities
    
1.5
      
1.0
  
Weighted average remaining lease term - operating leases, in years
    
2.66
      
3.51
  
Weighted average discount rate - operating leases
    
5.1
%
    
5.5
%
As of December 31, 2021, lease liability information for the Company is summarized in the following table.

Maturity analysis
  
Operating leases
  
   
(In Thousands)
  
One year or less
  
$
2,520
  
More than one year through two years
    
1,987
  
More than two years through three years
    
1,197
  
More than three years through four years
    
579
  
More than four years through five years
    
90
  
More than five years
    
711
  
Total lease payments
    
7,084
  
Present value discount
    
(819
)
Lease Liability
  
$
6,265
  
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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.

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