Leases

12 Months Ended

Dec. 31, 2022

Note 23 – Leases

The Company’s leases are recorded under ASC Topic 842 “Leases.” The right-of-use assets and lease liabilities are included in other assets and other liabilities, respectively, in the Consolidated Balance Sheets.”

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor.

The Company currently leases four of its operating locations under long-term leases (greater than 12 months). Leases for two of these locations are classified as operating leases and two are classified as financing leases. Certain of these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

The Bank leases its principal Lynchburg, Virginia, location from Jamesview Investments, LLC, a legal entity which is wholly-owned by William C. Bryant III, a member of the Board of Directors of both Financial and the Bank. This lease is classified as a finance lease and the related lease liability totaled $2.7 million at December 31, 2022.

The following table represents information about the Company's operating leases:


	December 31,
(Dollars in thousands)	2022		2021
Lease liabilities	$	1,260	$	1,325
Right-of-use assets	$	1,204	$	1,282
Weighted average remaining lease term		12.7 years		13.7 years
Weighted average discount rate		3.44%		3.44%

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Note 23 – Leases (continued)

The following table represents information about the Company's finance leases:


	December 31,
(Dollars in thousands)	2022		2021
Lease liabilities	$	3,389	$	3,746
Right-of-use assets	$	3,074	$	3,488
Weighted average remaining lease term		8.2 years		9.2 years
Weighted average discount rate		2.70%		2.70%


	For the Year Ended December 31,
Lease cost (in thousands)	2022		2021
Operating lease cost	$	121	$	125
Finance lease cost:
Amortization of right-of-use assets		414		414
Interest on lease liabilities		96		106
Total lease cost	$	631	$	645

Cash paid for amounts included in measurement
of operating lease liabilities	$	112	$	112

Cash paid for amounts included in measurement
of finance lease liabilities	$	453	$	453

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Note 23 – Leases (continued)

A maturity analysis of operating and finance lease liabilities and reconciliation of the undiscounted cash flows to the total of lease liabilities is as follows:


	Operating Lease		Finance Lease
	Liabilities		Liabilities
	As of		As of
Lease payments due (in thousands)	December 31, 2022		December 31, 2022
Twelve months ending December 31, 2023	$	110	$	454
Twelve months ending December 31, 2024		111		479
Twelve months ending December 31, 2025		112		515
Twelve months ending December 31, 2026		116		515
Twelve months ending December 31, 2027		125		517
Thereafter		1,000		1,333
Total undiscounted cash flows	$	1,574	$	3,813
Discount		(314)		(424)
Lease liabilities	$	1,260	$	3,389