NOTE I – LEASE OBLIGATIONS

The Company enters into leases in the normal course of business primarily for financial centers, back office operations locations and business development offices. The Company’s leases have remaining terms ranging from 1 to 8 years. The Company does not currently have any significant finance leases in which we are the lessee.

The Company includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Company will exercise the option. In addition, the Company has elected to account for any non-lease components in its real estate leases as part of the associated lease component. The Company has also elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on the Company’s balance sheet.

Leases are classified as operating or finance leases at the lease commencement date. Operating leases in which we are the lessee are recorded as operating lease right-of-use assets and operating lease liabilities, which are included in premises and equipment and other liabilities, respectively, on our consolidated balance sheets. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term, and is recorded in net occupancy and equipment expense in the consolidated statements of income and other comprehensive income. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date and based on the estimated present value of lease payments over the lease term.

The Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease payments when the rate implicit in a lease is not known. The Company’s incremental borrowing rate is based on the FHLB amortizing advance rate, adjusted for the lease term and other factors.

As of December 31, 2019, operating lease right-of-use assets and liabilities were $6.5 million and $6.5 million, respectively.

The components of total lease cost were as follows for the period ending:


($ in thousands)	December 31, 2019
Operating lease costs	$	898

Cash paid for amounts included in the measurement of lease liability Operating cash flows from operating leases	$	898

Future lease payments for operating leases with initial terms of one year or more as of December 31, 2019 are as follows:


($ in thousands)
2020	$	1,643
2021		1,527
2022		1,359
2023		844
2024		631
Thereafter		981
Total lease payments	$	6,985
Less: Interest		(467)
Present value of lease liabilities	$	6,518

The table below summarizes other information related to our operating leases:


Weighted-average remaining lease term	5.0	years
Weighted-average discount rate	2.5	%

As a result of the adoption of ASC 842, The Company did not restate the prior period audited consolidated financial statements and all prior period amounts and disclosures are presented under ASC 840. At December 31, 2018, minimum future lease payments were as follows ($ in thousands):


	Operating		Capital
	Leases		Leases
2019	$	784	$	275
2020		463		191
2021		347		175
2022		256		—
2023		229		—
Thereafter		197		—
Total minimum lease payments	$	2,276	$	641
Less: Amount representing interest				(25)
Present value of minimum lease payments			$	616