13. LEASES

The Company’s leases, consisting of property leases for certain of our bank branches and insurance agency offices, are classified as operating leases. Operating lease Right of Use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets were $3.6 million and $3.7 million as of March 31, 2020 and December 31, 2019, respectively. Lease liabilities were $4.0 million and $4.2 million as of March 31, 2020 and December 31, 2019, respectively. As these leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of lease payments. Our lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Lease expense is recognized on a straight-line basis over the lease term. Operating lease expenses were $0.2 million during the three-month periods ended March 31, 2020 and 2019 and are included in other non-interest expense on the consolidated statement of income. Cash paid for amounts included in the measurement of lease liabilities were $0.2 million during the three-month periods ended March 31, 2020 and 2019 and are included in cash flows from operating activities on the consolidated statement of cash flows. The weighted average discount rate related to the Company’s leases was 3.5% as of March 31, 2020. The weighted average remaining lease term related to the Company’s leases was 8.4 years as of March 31, 2020. Future minimum lease payments under non-cancellable leases as of March 31, 2020 were as follows:



		Year Ending December 31,
2020 (excluding the three months ended March 31, 2020)	$	562
2021		682
2022		694
2023		589
2024		452
Thereafter		1,640
Total future minimum lease payments		4,619
Less imputed interest		617
Total	$	4,002