Leases

Effective January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842). As of December 31, 2019, the Company had operating real estate leases for three branch locations, one loan production office, land upon which a new branch location was constructed and two ATM locations. During 2019 interim reporting periods, the lease related to the land upon which a new branch location was constructed had been classified as a finance lease based on information available at the time the lease was recorded. An analysis of this lease at December 31, 2019, resulted in a methodology change to classify the lease as an operating lease. The lease agreements have maturity dates ranging from July 2020 to September 2047. As of December 31, 2019, the weighted average remaining life of the lease term for the operating leases was 23.03 years.

The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate as of January 2019 that corresponded to the remaining lease term for each of these leases at adoption of the ASU. As of December 31, 2019, the weighted average discount rate for operating leases was 3.84%.

The operating lease right-of-use assets, included in Other assets on the consolidated balance sheet, were $1.86 million, and the operating lease liabilities, included in Accrued interest and other liabilities on the consolidated balance sheet, were $1.89 million as of December 31, 2019. Operating lease costs, included in Occupancy expenses, net on the consolidated statements of income were $215 thousand for the year ended December 31, 2019.

Total estimated rental commitments for operating leases were as follows as of December 31, 2019:



	(Dollars in thousands)
2020	$	183
2021	171
2022	125
2023	114
2024	110
Thereafter	2,332
Total	$	3,035

A reconciliation of the operating lease undiscounted cash flows in the maturity analysis above and the operating lease liability recognized in the consolidated balance sheet is shown below:



	December 31, 2019
	(Dollars in thousands)
Undiscounted cash flows	$	3,035
Discount effect of cash flows	(1,141		)
Lease liabilities	$	1,894

Rent expense for year ended December 31, 2018 was $180 thousand. Occupancy expense is shown in the consolidated statements of income, net of rental income of $232 thousand and $225 thousand for the years ended December 31, 2019 and 2018, respectively.