Note 7 - Leases

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

Note 7. Leases

On January 1, 2019, the Company adopted ASU No. 2016-02 “Leases (Topic 842)” and all subsequent ASUs that modified Topic 842. We adopted the guidance using the modified retrospective method and practical expedients for transition. The practical expedients allow us to largely account for our existing leases consistent with current guidance except for the incremental balance sheet recognition for lessees. We have performed an evaluation of our leasing contracts and activities. We have developed our methodology to estimate the right-of use assets and lease liabilities, which is based on the present value of lease payments. Prior to adoption, all of the Company’s leases were classified as operating leases and remain operating leases at adoption.

Contracts that commence subsequent to adoption are evaluated to determine whether they are or contain a lease in accordance with Topic 842. The Company has elected the practical expedient provided by Topic 842 not to allocate consideration in a contract between lease and non-lease components. The Company also elected, as provided by the standard, not to recognize right-of-use assets and lease liabilities for short-term leases, defined by the standard as leases with terms of 12 months or less. During 2021, the Company renewed an operating lease and recognized right-of-use assets and lease liabilities.

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. For our incremental borrowing rate, we used the Federal Home Loan Bank rate available at the time of lease inception. The right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor. The contracts in which the Company is lessee are with parties external to the Company and not related parties. The Company’s lease right-of-use assets are included in other assets and the lease liabilities are included in other liabilities. The following tables present information about leases:

	September 30,			December 31,
(dollars in thousands)	2021			2020
Lease liabilities	$	588		$	680
Right-of-use assets	$	588		$	680
Weighted average remaining lease term (years)		6.76			7.10
Weighted average discount rate		2.44	%		2.45	%

	Nine Months Ended September 30,
(dollars in thousands)	2021		2020
Lease Expense
Operating lease expense	$	115	$	108
Short-term lease expense		22		25
Total lease expense	$	137	$	133
Cash paid for amounts included in lease liabilities	$	115	$	108

The following table presents a maturity schedule of undiscounted cash flows that contribute to the lease liabilities:

(dollars in thousands)
Three months ending December 31, 2021	$	38
Twelve months ending December 31, 2022		123
Twelve months ending December 31, 2023		83
Twelve months ending December 31, 2024		69
Twelve months ending December 31, 2025		72
Thereafter		258
Total undiscounted cash flows	$	643
Less discount		(55	)
Lease liabilities	$	588