12.

Leases

ASU

2016

requires lessees to recognize most leases on the balance sheet. As stated above in Note

Summary of Significant Accounting Policies

–

Recently Adopted Accounting Pronouncements

, the Company has elected certain practical expedients available at adoption. The Company elected the package of practical expedients upon transition

not

to reassess whether expired or existing contracts contain leases under the new definition of a lease;

not

to reassess the lease classification for expired or existing leases; and

not

to reassess whether previously capitalized initial direct costs would qualify for capitalization under ASU

2016

02.

In evaluating certain equipment rental arrangements such as cable, internet and security service contracts, the Company considered the practical expedient that allows lessors to elect, by class of underlying asset, to

not

separate non-lease components from the associated lease components if the non-lease components otherwise would be accounted for in accordance with the new revenue recognition standard. The Company elected this practical expedient as the following

two

criteria are met; the lease component and the associated non-lease components have the same timing and pattern of transfer; and the lease component, if accounted for separately, would be classified as an operating lease. The Company elected to adopt the new standard using the transition method provided by ASU

2018

11;

therefore, prior periods will

not

be restated. The Company has determined that the impact of adoption is limited to real property leases and is consistent with industry practices. This ASU was effective

January 1, 2019,

the Company recognized an aggregate of

$1,073,919

in lease liabilities and corresponding ROU assets and

impact on the opening retained earnings balances.

In consideration of whether an agreement contains a lease as defined under ASU

2016

02,

the Company answered these

three

questions; has an asset been identified, is the asset physically distinct, and does the customer have the right to control the asset. The Company determined based on the

three

-step questions above, the arrangements pertaining to real property building and office facilities in Alabama, Maine and Massachusetts are within the scope of ASU

2016

02.

In calculating the lease liability, the Company considered the lease term in which the Company would include any periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option. The Company evaluated factors that might create an economic incentive to exercise options to extend, including contract, asset, entity and market-based factors. The Company determined that there would be

significant relocation and interruption costs associated with moving to alternative space that would disincentivize a move at renewal; therefore, renewals to extend the lease term are

not

included in the ROU asset and lease liabilities.

A lessee

may

recognize the lease payments in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred. The accounting policy election for short-term leases shall be made by class of underlying asset to which the right of use relates. A short-term lease is defined as a lease that, at the commencement date, has a lease term of

months or less and does

not

include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. The Company elected to exclude short-term leases from the recognition requirements.

In discounting the liability, ASU

2016

indicates that the incremental rate used must be comparable to a rate attributable to a similar amount, for a similar term, and with similar collateral as the assets in the lease. The Company observed that published commercial borrowing rates were generally between

5.0%

7.0%

for loans collateralized by the real estate for terms ranging from

years.

Maturities of lease liabilities as of

December 31, 2020

are as follows (in thousands):

	Leased Real Property and
	Office Facilities
2021	$	460
2022		302
2023		285
2024		153
2025		130
Thereafter		562
Total lease payments	$	1,892
Less: Interest		(353	)
Present value of lease liabilities	$	1,539

Supplemental cash flow information related to operating leases was as follows (in thousands, except years and percentages):

	Year Ended
	December 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases	$	(488	)
Weighted-average remaining lease term – operating leases (in years)		6.4
Weighted average discount rate – operating leases		6.5	%

	Year Ended
	December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases	$	(445	)
Weighted-average remaining lease term – operating leases (in years)		5.4
Weighted average discount rate – operating leases		6.5	%