PREMISES AND EQUIPMENT AND LEASE COMMITMENTS

A summary of the cost and accumulated depreciation of premises and equipment at December 31, 2019 and 2018 follows:



(dollars in thousands)	December 31,
(dollars in thousands)	2019		2018
Land	$	4,406	$	4,358
Building and improvements	25,001		25,198
Furniture and equipment	10,149		9,715
Automobiles	256		303
Total cost	39,812		39,574
Less accumulated depreciation	18,150		16,652
Premises and equipment, net	$	21,662	$	22,922

Operating Leases

Certain Bank facilities are leased under various operating leases. A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On January 1, 2019, the Company adopted ASU No. 2016-02 “Leases” (Topic 842) and all subsequent ASUs that modified Topic 842. For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee. All of the leases in which the Company is the lessee are for branches and office space. All of these leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated balance sheet. With the adoption of Topic 842, operating lease agreements are required to be recognized on the consolidated balance sheet as a right-of-use-asset with a corresponding lease liability.

At December 31, 2019, the Company had lease liabilities totaling $8.5 million and right of use assets totaling $8.4 million related to these leases. Remaining lease terms range from 2 months to 25 years. The right of use assets and lease liabilities are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company's lease agreements often include one or more options to renew at the Company's discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the right of use asset and lease liability. Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception over a similar term. For operating leases existing prior to January 1, 2019, the FHLB fixed advance rate which corresponded with the remaining lease term as of January 1, 2019 was used.

For the year ended December 31, 2019, the weighted average remaining lease term for operating leases was 18.8 years and the weighted average discount rate used in the measurement of operating leases was 3.50%. Operating lease cost for the year ended December 31, 2019 was $854,000 and cash paid for amounts included in the measurement of lease liabilities was $740,000.

The Company elected to apply certain practical expedients provided under ASU 2016-02 whereby management did not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. The Company accounted for lease and non-lease components separately because such amounts are readily determinable under the lease contracts. ASC 842 allows a lessee to make an accounting policy election whereby short-term leases are not recognized on the balance sheet. However, the Company did not have any short-term leases upon adoption or during the year.

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liability is as follows:



(dollars in thousands)
Lease payments due:
Within one year	$	697
After one but within two years	670
After two but within three years	602
After three but within four years	612
After four but within five years	620
After five years	8,773
Total undiscounted cash flows	$	11,974
Discount on cash flows	3,479
Total lease liability	$	8,495

Certain Bank facilities are leased under various operating leases. Rent expense was $854,000, $974,000 and $761,000 for the years ended December 31, 2019, 2018 and 2017, respectively. Future minimum rental commitments under non-cancellable operating leases are as follows at December 31, 2019:



(dollar in thousands)
2020	$	697
2021	670
2022	602
2023	612
2024	620
Thereafter	8,773
Total	$	11,974

As of December 31, 2019, the Company had a small office condo held for sale with a fair value of $430,000 that was recorded as a non-recurring Level 3 asset. The Company recorded an impairment of $1,000 based on fair value of the of the property during the fourth quarter of 2019. During 2017, the Company sold property for net proceeds of $392,000 with a gain on sale of $47,000.