NOTE 7. Leases

On January 1, 2019, the Company adopted ASU No. 2016-02 “Leases (Topic 842)” and all subsequent ASUs that modified Topic 842. The Company elected the optional transition method provided by ASU 2018-11 and did not adjust prior periods for ASC 842. The Company also elected certain practical expedients within the standard and consistent with such elections did not reassess whether any expired or existing contracts are or contain leases, did not reassess the lease classification for any expired or existing leases, and did not reassess any initial direct costs for existing leases. As stated in the Company’s 2019 Form 10-K, the implementation of the new standard resulted in recognition of a right-of-use asset and lease liability of $751 thousand at the date of adoption, which is related to the Company’s lease of premises used in operations. The right-of-use asset and lease liability are included in other assets and other liabilities, respectively, in the consolidated balance sheets. During 2020, the Company executed three new leases and extend two existing leases resulting in recognition of additional right-of-use asset and lease liability of $1.3 million.

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease if the rate implicit in the lease is unattainable. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor.

The Company’s long-term lease agreements are classified as operating leases. Certain of these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably assured of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

The following tables present information about the Company’s leases:

(dollars in thousands)	December 31, 2020
Lease liabilities	$	1,378
Right-of-use assets	$	1,364
Weighted average remaining lease term	4.59 years
Weighted average discount rate		1.76	%

	Years Ended December 31,
Lease cost (in thousands)	2020		2019
Operating lease cost	$	380	$	336
Total lease cost	$	380	$	336

Cash paid for amounts included in the measurement of lease liabilities	$	377	$	331

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

	As of
Lease payments due (in thousands)	December 31, 2020
Twelve months ending December 31, 2021	$	352
Twelve months ending December 31, 2022		339
Twelve months ending December 31, 2023		248
Thereafter		549
Total undiscounted cash flows	$	1,488
Discount		(110	)
Lease liabilities	$	1,378

The aggregate rental expense of premises and equipment was $415 thousand and $361 thousand for years ended December 31, 2020 and 2019, respectively.