Leases

6 Months Ended

Jun. 30, 2023

10.

Leases

The Company is obligated under various lease agreements for one of its branch offices and certain equipment. These agreements are accounted for as operating leases and their terms expire between 2024 and 2027 and, in some instances, contain options to renew for periods of up to four years. The Company has no financing leases.

The Company adopted ASU 2016-02 – Leases (Topic 842)– on January 1, 2022 and began recognizing its operating leases on its consolidated balance sheet by recording a net lease liability, representing the Company’s legal obligation to make these lease payments, and a Right-Of-Use (“ROU”) asset, representing the Company’s legal right to use the leased assets. The Company, by policy, does not include renewal options for leases as part of its ROU asset and lease liabilities unless they are deemed reasonably certain to exercise. The Company does not have any sub-lease agreements.

The following table summarizes information related to the Company’s right-of-use asset and net lease liability:


	June 30, 2023
	Operating Leases		Balance Sheet Location
	(Dollars in thousands)
Right-of-use asset	$	179	Other Assets
Net lease liability		179	Other Liabilities

	December 31, 2022
	Operating Leases		Balance Sheet Location
	(Dollars in thousands)
Right-of-use asset	$	202	Other Assets
Net lease liability		202	Other Liabilities

The Company determines whether a contract contains a lease based on whether a contract, or a part of a contract, conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The discount rate is either implicit in the lease or, when a rate cannot be readily determined, the Company’s incremental borrowing rate is used. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term.

The components of operating lease cost and other related information are as follows:


	The three months ended June 30,
(Dollars in thousands)	2023			2022
Operating lease cost	$	12		$	19
Short-term lease cost		—			—
Variable lease cost (cost excluded from lease payments)		—			—
Sublease income		—			—
Total operating lease cost		12			19
Other Information:
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows from operating leases		12			19
Operating lease - operating cash flows (liability reduction)	$	—		$	—
Weighted average lease term remaining (in years)		3.94			4.80
Weighted average discount rate		3.31	%		3.28	%
	The six months ended June 30,
(Dollars in thousands)	2023			2022
Operating lease cost	$	23		$	31
Short-term lease cost		—			—
Variable lease cost (cost excluded from lease payments)		—			—
Sublease income		—			—
Total operating lease cost		23			31
Other Information:
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows from operating leases		23			31
Operating lease - operating cash flows (liability reduction)	$	—		$	—
Weighted average lease term remaining (in years)		3.94			4.80
Weighted average discount rate		3.31	%		3.28	%

The total minimum lease payments due in future periods for lease agreements in effect at June 30, 2023 were as follows:


As of June 30, 2023	Future Minimum Lease Payments
	(Dollars in thousands)
Remainder of 2023	$	26
2024		49
2025		45
2026		43
2027		29
Total minimum lease payments		192
Less: interest		(13	)
Total lease liability	$	179

The Company's obligation under the operating lease related to one of its branches expires in August 2027 and has future lease payments of $170,000 as of June 30, 2023. Total lease expense was $9,000 and $8,000 for the three months ended June 30, 2023 and 2022, respectively, and $18,000 and $16,000 for the six months ended June 30, 2023 and 2022, respectively. This lease agreement contains clauses calling for escalation of minimum lease payments contingent on increases in LIBOR, or a similar replacement index, and the consumer price index.