NOTE 8 – LEASES

The Company enters into leases in the normal course of business.  As of December 31, 2023, the Company operated four offices for which the land and buildings are leased.  All of the Company’s leases are operating leases under applicable accounting standards and the lease agreements have maturity dates ranging from March 2024 through January 2026, some of which include extension options.   As permitted by applicable accounting standards, the Company has elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on the Company’s Consolidated Balance Sheets.

Leases are classified as either operating or finance leases at the lease commencement date, and as previously noted, all of the Company’s leases have been determined to be operating leases.  Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term.  Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

As most of the Company's leases do not provide an implicit interest rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for fully collateralized and fully amortizing borrowings over a similar term of the lease payments at commencement date to determine the present value of lease payments.  When readily available, the Company uses the implicit rate.  The weighted average discount rate for leases was 1.87% as of December 31, 2023 and 0.58% as of December 31, 2022.  The weighted average remaining lease term at December 31, 2023 was 2.6 years and was 2.2 years at December 31, 2022.  Extension options were not considered in computing the right-of-use asset and lease liabilities.

The right-of-use assets and lease liabilities were $775,000 and $797,000, respectively, as of December 31, 2023, and were $625,000 and $627,000, respectively at December 31, 2022. Right-of-use assets are included in other assets and lease liabilities are included in accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets.

Total operating lease expense charged to operations under all operating lease agreements was $478,000 in 2023 and $451,000 in 2022.  This expense was reported in Occupancy of premises and Furniture and equipment expense in the Company's Consolidated Statements of Income.

Future undiscounted lease payments for operating leases with initial terms of one year or more as of December 31, 2023 are as follows (dollars in thousands):