LEASES

6 Months Ended

Jun. 30, 2020

11.

LEASES

The Bank leases ten branch and administrative locations under operating leases expiring on various dates through 2030. Leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expense is recognized on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, the Bank combines lease and nonlease components. The Bank had no financing leases as of June 30, 2020.

Most leases include options to renew, with renewal terms that can extend the lease term from 3 to 10 years. The exercise of lease renewal options is at the Bank’s sole discretion. Most leases are currently in the extension period. For the remaining leases with options to renew, the Bank has not included the extended lease terms in the calculation of lease liabilities as the options are not reasonably certain of being exercised. Certain lease agreements include rental payments that are adjusted periodically for inflation. The Bank's lease agreements do not contain any residual value guarantees or restrictive covenants.

The Bank uses its FHLB advance fixed rates, which are the Bank’s incremental borrowing rates for secured borrowings, as the discount rates to calculate lease liabilities.

The Company had right-of-use assets totaling $6,672,000 and $6,962,000 as of June 30, 2020 and December 31, 2019, respectively. The Company had lease liabilities totaling $7,248,000 and $7,483,000 as of June 30, 2020 and December 31, 2019, respectively. The Company recognized lease expenses totaling $311,000 and $224,000 for the three month periods ended June 30, 2020 and 2019, respectively, and $620,000 and $447,000 for the six month periods ended June 30, 2020 and 2019, respectively. Lease expenses include expenses related to short-term leases and recognition of deferred gain on sale-leaseback. Lease expense is included in Occupancy and equipment expense on the Income Statement.

The table below summarizes the maturity of remaining lease liabilities at June 30, 2020:

(in thousands)	June 30, 2020
2020	$	604
2021		1,229
2022		1,140
2023		1,006
2024		899
2025 and thereafter		3,080
Total lease payments		7,958
Less: interest		(710	)
Present value of lease liabilities	$	7,248

The following table presents supplemental cash flow information related to leases for the three and six months ended June 30, 2020:

(in thousands)	Three Months Ended June 30, 2020		Three Months Ended June 30, 2019		Six Months Ended June 30, 2020		Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	300	$	217	$	549	$	434
Right-of-use assets obtained in exchange for new operating lease liabilities		221		—		221		4,417

The following table presents the weighted average operating lease term and discount rate at June 30, 2020 and December 31, 2019:

	June 30, 2020			December 31, 2019

Weighted-average remaining lease term – operating leases, in years	$	7.51		$	8.01
Weighted-average discount rate – operating leases	$	2.45	%	$	2.52	%