LEASES

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

LEASES

9. LEASES

The Company adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019, using the alternative transition method whereby comparative periods were not restated. No cumulative effect adjustment to the opening balance of retained earnings was required. The Company also elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things allowed the Company to carry forward the historical lease classifications. Additionally, the Company elected the hindsight practical expedient to determine the lease term for existing leases.

The Company leases nine locations for administrative offices and branch locations. All leases were classified as operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term. The Company elected to use the practical expedient to not recognize short-term leases on the consolidated balance sheet and instead account for them as executory contracts.

Certain leases include options to renew, with renewal terms that can extend the lease term, typically for five years. Lease assets and liabilities include related options that are reasonably certain of being exercised, however, in the case of those leases that have renewal options, the Company is not including those additional lease terms as the rates are undeterminable and it has been the Company’s historical practice to renegotiate lease terms upon expiration of the original lease terms. The depreciable life of leased assets is limited by the expected lease term.

Adoption of this standard resulted in the Company recognizing a right of use asset and a corresponding lease liability of $3,570,000 on January 1, 2019.

Supplemental lease information at or for the nine months ended September 30, 2020 is as follows:

Balance Sheet
Operating lease asset classified as other assets	$	2,396,000
Operating lease liability classified as other liabilities		2,593,000
Income Statement
Operating lease cost classified as occupancy and equipment expense	$	576,000
Weighted average lease term, in years		5.18
Weighted average discount rate (1)		3.01%
Operating cash flows	$	585,000

(1) The discount rate was developed by using the fixed rate credit advance borrowing rate at the Federal Home Loan Bank of San Francisco for a term correlating to the remaining life of each lease.

A maturity analysis of the Company’s lease liabilities at September 30, 2020 was as follows:

	Balance
October 1, 2020 to December 31, 2020	$	194,000
January 1, 2021 to December 31, 2021		777,000
January 1, 2022 to December 31, 2022		753,000
January 1, 2023 to December 31, 2023		329,000
January 1, 2024 to December 31, 2024		322,000
Thereafter		985,000
Total lease payments		3,360,000
Less: Interest		(767,000	)
Present value of lease liabilities	$	2,593,000