13. LEASES

The Company accounts for its lease obligations under Topic 842. It has four operating leases, one of which is with a related party, comprised of real estate property for branch and office space with terms extending through 2029. Operating leases were previously not recognized on the Company’s consolidated statements of condition, but with the adoption of Topic 842 on January 1, 2019, operating lease agreements are recognized on the consolidated statements of condition as a right-of-use (“ROU”) asset and a corresponding lease liability. As of March 31, 2020, the Company had operating lease ROU assets totaling $440,000 included in other assets and operating lease liabilities totaling $446,000 included in other liabilities.

The calculated amount of the ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of 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 ROU asset and lease liability.

Topic 842 requires the use of the rate implicit in the lease as the discount rate if that rate is readily determinable. As this rate is rarely determinable, the Company utilized its incremental borrowing rate at lease inception, which is the rate the Company would have incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. Because the four operating leases existed prior to the adoption of Topic 842 on January 1, 2019, the incremental borrowing rate for the remaining lease term at January 1, 2019 was used.

As of March 31, 2020, the weighted-average remaining operating lease term was 6.4 years and the weighted-average discount rate was 4.69%. As of December 31, 2019, the weighted-average remaining operating lease term was 6.8 years and the weighted-average discount rate was 4.95%.

The Company elected, for the real estate class of underlying assets which is currently its only class, not to separate lease and nonlease components and to account for them as a single lease component. The Company has one operating lease agreement containing a monthly ATM surcharge, which is combined with the property rental payment as a result of electing the practical expedient. The Company’s total operating lease cost for the three months ended March 31, 2020 was $29,000. Total operating lease payments made to a related party totaled $6,000 during both the three months ended March 31, 2020 and the three months ended March 31, 2019.

The future minimum payments for operating leases with initial or remaining terms of one year or more as of March 31, 2020 were as follows:


(Dollars in thousands)

Twelve Months Ended:
March 31, 2021	$	114
March 31, 2022		97
March 31, 2023		46
March 31, 2024		46
March 31, 2025		47
Thereafter		194
Total Future Minimum Lease Payments		544
Amounts Representing Interest		(98)
Present Value of Net Future Minimum Lease Payments	$	446