NOTE 5 – OPERATING LEASES

The Company has entered into various operating leases for certain branch locations with terms extending through July 2028. Generally, these leases have initial lease terms of ten years or less. Many of the leases have one or more renewal options which typically are for five years at the then fair market rental rates. We assessed these renewal options using a threshold of reasonably certain. For leases where we were reasonably certain to renew, those option periods were included within the lease term, and therefore, the measurement of the right-of-use (ROU) asset and lease liability. None of our leases included options to terminate the lease and none had initial terms of 12 months or less (i.e. short-term leases). Operating leases in which the Company is the lessee are recorded as operating lease ROU assets and operating lease liabilities on the Consolidated Balance Sheets. The Company currently does not have any finance leases.

Operating lease ROU assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental collateralized borrowing rate provided by the FHLB at the lease commencement date. ROU assets are further adjusted for lease incentives, if any. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in occupancy expense in the Consolidated Statements of Income.

The components of lease cost for the year ended December 31, 2019 were as follows:


	Year Ended
(Dollars in thousands)	December 31, 2019
Operating lease cost	$	2,169
Variable lease cost		190
Short-term lease cost		—
Sublease income		—
Total net lease cost	$	2,359

Future maturities of the Company’s operating lease liabilities are summarized as follows:


(Dollars in thousands)
Year Ended :	Lease Liability
December 31, 2020	$	2,030
December 31, 2021		1,875
December 31, 2022		1,899
December 31, 2023		1,900
December 31, 2024		1,789
After December 31, 2024		4,517
Total lease payments		14,010
Less: interest discount		(1,534)
Present value of lease liabilities	$	12,476


(Dollars in thousands)
Supplemental Lease Information	December 31, 2019
Weighted-average remaining lease term (years)	7.3
Weighted-average discount rate	3.14	%


	Year Ended
	December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (cash payments)	$	1,964
Operating cash flows from operating leases (lease liability reduction)	$	1,555
Operating lease right-of-use assets obtained in exchange for leases entered into during the period	$	13,610

The Company signed an agreement to lease space in Norcross, Georgia with an entity in which the Chairman of the Company serves as a managing member. The lease is a ten year non-cancellable lease which expires in October 2023. During the years ended December 31, 2019, 2018 and 2017, $140,000, $142,000 and $137,000, respectively, in rents were paid under this lease. Management believes the terms of this lease are no less favorable to the Company than would have been achieved with an unaffiliated third party.