Note 8 - Leases

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

NOTE 8. LEASES

We lease eight locations 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 no 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. We have recorded a liability in Other Liabilities in our Consolidated Balance Sheets representing the present value of the remaining minimum lease payments and we have recorded an offsetting right-of-use asset in Other Assets in our Consolidated Balance Sheets. The present value calculation uses a discount rate, which is based on our incremental borrowing rate. The right-of-use asset was also reduced for amounts recognized under the previous accounting requirements. The table below presents information regarding our leases as of September 30, 2020.

(Dollars in thousands)	September 30, 2020
Leases:
Right-of-use lease asset	$	2,691
Lease liability	$	3,014
Weighted Average Remaining Lease Term		4.48
Weighted Average Discount Rate		2.96	%

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)	2020		2019		2020		2019
Leases:
Operating lease expense	$	212	$	212	$	641	$	611
Cash paid for operating leases	$	234	$	229	$	714	$	661

The following table sets forth, as of September 30, 2020, 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)	Amount
Due in:
2020	$	234
2021		953
2022		863
2023		327
2024		280
Thereafter		576
Total undiscounted future minimum lease cash payments		3,233
Present value adjustment		(219	)
Lease liability	$	3,014

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 judgments made in applying the requirements in ASC Topic 842 are the determination of the incremental borrowing rate for the lease and determination of the length of the lease beyond non-cancellable periods. We used the borrowing rates available under our existing line of credit with the Federal Home Loan Bank of San Francisco for terms similar to the lease terms as our incremental borrowing rate. We recognize renewal periods beyond the non-cancellable term of the lease for periods when we are reasonably certain to exercise our option to extend the term of the lease.