The Corporation leases various assets in the course of its operations that are subject to recognition on the balance sheet. The Corporation considers all of its leases to be operating leases and it has no finance leases. The leased assets may include equipment, and buildings and land (collectively real estate). The equipment leases are shorter-term than the real estate leases, and generally have a fixed payment over a defined term without renewal options. Certain equipment leases have purchase options and it was determined the option was not reasonably certain to be exercised. The real estate leases are longer-term and may contain renewal options after the initial term, but none of the real estate leases contain a purchase option. The renewal options on real estate leases were reviewed and if it was determined the option was reasonably certain to be renewed, the option term was considered in the determination of the lease liability. There is only one real estate lease with a variable payment based on an index included in the lease liability. None of the leases contain any restrictive covenants and there are no significant leases that have not yet commenced. The discount rate used to determine the lease liability is

based on the Bank’s fully secured borrowing rate from the Federal Home Loan Bank for a term similar to the lease term. Operating lease expense is included in net occupancy expense in the consolidated statements of income.



	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
(Dollars in thousands)	2023		2022		2023		2022
Operating lease cost	$	212	$	200	$	429	$	373
Short-term lease cost		4		126		8		252
Variable lease cost		37		28		74		53
Total lease cost	$	253	$	354	$	511	$	678



	Six Months Ended ‎June 30,
(Dollars in thousands)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	413	$	359

Weighted-average remaining lease term (years)		11.9		10.2
Weighted-average discount rate		3.37%		3.29%

Future undiscounted lease payments for operating leases with initial terms of one year or more as of June 30, 2023 are as follows:



(Dollars in thousands)

2023	$	374
2024		717
2025		666
2026		564
2027		421
2028 and beyond		3,598
Undiscounted cash flow		6,340
Imputed Interest		(1,236)
Total lease liability	$	5,104

A lease termination expense of $525 thousand was recorded in the second quarter of 2023. The lease termination was a long-term real estate lease held for a new community banking office that will not be constructed. Due to the lease termination, the right of use asset decreased $507 thousand and the lease liability decreased $537 thousand.