NOTE

LEASES

We lease

nine

sites under non-cancelable operating leases. The leases contain various provisions for increases in rental rates based on predetermined escalation schedules. Substantially all of the leases include the option to extend or terminate the lease term

one

or more times following expiration of the initial term at a rental rate established in the lease. For leases where we are reasonably certain that we will exercise the option to renew the lease, we have recognized those options in our right-of-use lease asset and liability. We had

other (financing, short-term or variable) lease arrangements during the current period or the prior year.

We have applied ASC Topic

842

as of

January 1, 2019

and elected the practical expedients package for all of our leases. In accordance with the practical expedients package we were

not

required to reassess whether any expired or existing contracts are leases or contain leases. We were also

not

required to reassess the lease classification for existing or expired leases between operating and finance leases. On

January 1, 2019,

we recorded

4.4

million in

Other Liabilities

representing the present value of the remaining minimum lease payments and we recorded an offsetting right-of-use asset in

Other Assets

. The present value calculation uses a discount rate, which is based on our incremental borrowing rate. The right-of-use asset was also reduced by

$458

thousand on

January 1, 2019

for amounts recognized under the previous accounting requirements. During the

third

quarter of

2019,

we recorded

267

thousand in

Other Liabilities

and an offsetting right-of-use asset in

Other Asset

for additional office space leased during the quarter. The table below presents information regarding our leases as of

September 30, 2019.

(Amounts in thousands)	September 30, 2019
Right-of-use lease asset	$	3,654
Lease liability	$	4,062
Weighted Average Remaining Lease Term		5.72
Weighted Average Discount Rate		2.95	%

Lease expenses are recorded on a straight-line basis over the life of each lease. Lease expense and cash paid on leases are presented in the table below for the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
(Amounts in thousands)	2019		2018		2019		2018
Operating lease expense	$	212	$	189	$	611	$	568
Cash paid for operating leases	$	229	$	213	$	661	$	632

The following table sets forth, as of

September 30, 2019,

the future minimum lease cash payments under non-cancelable operating leases and a reconciliation of the undiscounted cash flows to the operating lease liability.

(Amounts in thousands)
Amounts due in:
2019	$	236
2020		961
2021		979
2022		888
2023		342
Thereafter		1,032
Total undiscounted future minimum lease cash payments		4,438
Present value adjustment		(376	)
Lease liability	$	4,062

Our election to utilize the practical expedients package did

not

result in the recognition of any additional leases, changes in lease terms, changes in classification or in the assessment of initial direct costs. ASC

842

was applied as a change in accounting principle and did

not

result in any adjustment to equity. The significant judgment made in applying the requirements in ASC Topic

842

is the determination of the incremental borrowing rate for the lease. We used the borrowing rates for terms similar to the lease terms available under our existing line of credit with the Federal Home Loan Bank of San Francisco as our incremental borrowing rate.