LEASING ACTIVITIES

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

LEASING ACTIVITIES

NOTE 11 LEASING ACTIVITIES

The Company adopted ASU 2016-02 (Topic 842) effective May 31, 2017, as the Bank entered into sale leaseback transactions for four branch office sites.

In September 2019, the Bank entered into a sale leaseback transaction, with a non-affiliated third party, for its branch office located in Lebanon, Virginia for a total purchase price of $1.34 million. Net proceeds, after sales expenses of $42 thousand totaled $1.30 million and a gain of $803 thousand was recorded. The Bank provided financing to the purchaser, in the amount of $752 thousand, for a term of 5 years. In connection with this sale, the Bank entered into a lease agreement with the purchaser with an initial term of 15 years, with five 5-year renewal options.

As of September 30, 2020, the Bank leases five branch offices and a loan production office. The lease agreements have maturity dates ranging from November 2020 to September 2034. It is assumed that there are currently no circumstances in which the leases would be terminated prior to expiration. The weighted average remaining life of the lease terms at September 30, 2020 was 12.13 years.

The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate that corresponded to the lease term for each transaction. This methodology is expected to be used for any other subsequent lease agreements. The weighted average discount rate for the leases at September 30, 2020 was 3.16%.

For the nine months ended September 30, 2020 and 2019, operating lease expenses were $429 thousand and $361 thousand, respectively.

The Company’s other operating leases were evaluated and determined to be immaterial to the financial statements. At September 30, 2020, future minimum rental commitments under the non-cancellable operating leases discussed above are as follows (dollars are in thousands):

2020	$	132
2021		511
2022		530
2023		544
2024		546
Thereafter		4,528
Total lease payments		6,791
Less imputed interest		1,254
Total	$	5,537