LEASES

On January 1, 2019, the Company adopted ASU 2016-02, Leases, as further explained in Note 1, Summary of Significant Accounting Policies. The Company’s primary leasing activities relate to certain real estate leases entered into in support of the Company’s branch operations. Prior to the Mainland acquisition on March 1, 2019, the Company leased only one of its properties, a future branch location expected to be opened in 2020. With the Mainland acquisition, the Company increased its branch network by three branches, of which two are operated under lease agreements. In addition, the Company entered into a lease agreement in the third quarter of 2019 for its second location in the Lafayette, Louisiana market, which opened on October 28, 2019. The Company’s branch locations operated under lease agreements have all been designated as operating leases. The Company does not lease equipment under operating leases, nor does it have leases designated as finance leases.

The Company determines if an arrangement is a lease at inception. Operating leases, with the exception of short-term leases, are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in Bank premises and equipment, net and Accrued taxes and other liabilities, respectively, in the consolidated balance sheets. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease pre-payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease. When it is reasonably certain that the Company will exercise an option to extend a lease, the extension is included in the lease term when calculating the present value of lease payments.

Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which the Company has elected to account for separately, as the non-lease component amounts are readily determinable. No operating lease expense was recorded in the three and nine months ended September 30, 2018 as the Company had no operating leases until December 31, 2018.

Quantitative information regarding the Company’s operating leases is presented below as of and for the nine months ended September 30, 2019 (dollars in thousands).



Total operating lease cost	$	229.0
Weighted-average remaining lease term (in years)	10.7
Weighted-average discount rate	3.1		%

As of September 30, 2019, the Company’s lease ROU assets and related lease liabilities were each $3.4 million, and have remaining terms ranging from 4 to 12 years, including extension options if the Company is reasonably certain they will be exercised.

Future minimum lease payments due under non-cancelable operating leases at September 30, 2019 are presented below (dollars in thousands).



2019	$	90
2020	398
2021	403
2022	408
2023	405
Thereafter	2,352
Total	$	4,056

At September 30, 2019, the Company had not entered into any material leases that have not yet commenced.