Note 9: Lease Commitments

The Company and its subsidiaries are obligated under leases for certain office premises, land, and equipment. In determining whether a contract contains a lease, the Company examines the contract to ensure an asset was specifically identified and that the Company has control of use over the asset. To determine whether a lease is classified as operating or financing, the Company performs an economic life test. The Company has recognized sixteen operating leases.

At lease inception, the Company determines the lease term by adding together the minimum lease term and all optional renewal periods that it is reasonably certain to renew. Our leases primarily have initial lease terms of generally 1 to 7 years with various lease renewal options at the Company’s sole discretion. We include certain renewal options in the measurement of our right-of-use assets and lease liabilities if they are reasonably certain to be exercised.

We have made a policy election to exclude the recognition requirements of Topic 842 to all classes of leases with original terms of 12 months or less. Instead, lease obligations with an initial term of 12 months or less are expensed.

The Company also elected not to separate lease components from non-lease components.

The discount rate used in determining the lease liability and related right of use asset is based upon what would be obtained by the Company for similar loans at an incremental rate as of the date of origination or renewal.

The following table shows lease right of use assets and lease liabilities as of September 30, 2019.


	Statement of Financial Condition classification	September 30, 2019
Operating lease right of use asset	Other Assets	$	2,799

Operating lease liabilities	Other Liabilities	$	2,816

The following table shows the components of operating leases expense for the three and nine months ended September 30, 2019.


		Three Months Ended		Nine Months Ended
	Statement of Income classification	September 30, 2019		September 30, 2019
Operating lease cost	Net occupancy expenses and equipment expenses	$	154	$	459
Short-term lease cost	Net occupancy expenses and equipment expenses		13		66
Variable lease cost	Net occupancy expenses		50		135
Total operating lease cost		$	217	$	660

Operating lease costs are included in net occupancy expenses and equipment expenses. Gross rental expense for the operating leases in net occupancy expenses for the three and nine months ended September 30, 2019 were $186,000 and $548,000, respectively. Gross rental expense for the operating leases in equipment expenses for the three and nine months ended September 30, 2019 were $34,000 and $119,000, respectively.

The following table shows future minimum rental commitments for all noncancelable operating leases for the next five years and thereafter.


Remaining 2019	$	203
2020		753
2021		619
2022		530
2023		333
Thereafter		1,215
Total lease payments	$	3,653
Less: present value discount		837
Present value of lease liabilities	$	2,816

The following table shows the weighted average remaining lease term, the weighted average discount rate and supplemental Consolidated Statement of Cash Flows information for operating leases at September 30, 2019.


	September 30, 2019
Weighted average remaining lease term		10.80	years
Weighted average discount rate		3.73	%
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from leases	$	594

There are no new significant leases that have not yet commenced as of September 30, 2019.