LEASES

9 Months Ended

Sep. 30, 2019

Operating Leases

The Corporation leases certain branch properties under long-term, operating lease agreements. The leases expire at various dates through 2033 and generally include renewal options. As of September 30, 2019, the weighted average remaining lease term was 11.4 years with a weighted average discount rate of 3.39%. Rent expense was $0.2 million for the three months ended September 30, 2019. Rent expense was $0.5 million for the nine months ended September 30, 2019. Certain leases provide for increases in future minimum annual rent payments as defined in the lease agreements. The Corporation’s operating lease agreements contain both lease and non-lease components, which are generally accounted for separately. The Corporation’s lease agreements do not contain any residual value guarantees.

Leased branch properties at September 30, 2019 and December 31, 2018 consist of the following (in thousands):



	September 30, 2019			December 31, 2018
Operating lease right-of-use asset	$	8,592		$	—
Less: accumulated amortization	(541		)	—
Operating lease right-of-use-assets, net	$	8,051		$	—

The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding CAM charges, as of September 30, 2019 (in thousands):



Year	Amount
2019	$	231
2020	932
2021	899
2022	831
2023	851
2024 and thereafter	6,091
Total minimum lease payments	9,835
Less: amount representing interest	(1,710		)
Present value of net minimum lease payments	$	8,125

As of September 30, 2019, the Corporation had no operating leases that were signed, but had not yet commenced.

Finance Leases

The Corporation leases certain buildings under finance leases. The lease arrangements require monthly payments through 2036. As of September 30, 2019, the weighted average remaining lease term was 13.2 years with a weighted average discount rate of 3.34%. The Corporation has included these leases in premises and equipment as of September 30, 2019 and December 31, 2018 as follows (in thousands):



	September 30, 2019			December 31, 2018
Buildings	$	5,572		$	5,572
Less: accumulated depreciation	(1,458		)	(1,208		)
Net book value	$	4,114		$	4,364

The following is a schedule by year of future minimum lease payments under the capitalized lease, together with the present value of net minimum lease payments as of September 30, 2019 (in thousands):



Year	Amount
2019	$	92
2020	376
2021	388
2022	391
2023	391
2024 and thereafter	3,639
Total minimum lease payments	5,277
Less: amount representing interest	(1,137		)
Present value of net minimum lease payments	$	4,140

As of September 30, 2019, the Corporation had no finance leases that were signed, but had not yet commenced.

Related Party Transactions

The Bank leases its branch located at 1365 New Scotland Road, Slingerlands, New York, under a lease agreement through July, 2020 from a member of the Corporation's Board of Directors with monthly rent expense totaling $4 thousand per month. Rent paid to this Board of Directors member totaled $12 thousand and $12 thousand for the three month periods ended September 30, 2019 and 2018, respectively. Rent paid to this Board of Directors member totaled $40 thousand and $36 thousand for the nine month periods ended September 30, 2019 and 2018, respectively.

The Bank leases its branch located at 2 Rush Street, Schenectady, New York, under a lease agreement through February 2033 from a member of the Corporation's Board of Directors with monthly rent expense totaling $8 thousand per month. Rent paid to this Board of Directors member totaled $24 thousand and $24 thousand for the three month periods ended September 30, 2019 and 2018, respectively. Rent paid to this Board of Directors member totaled $69 thousand and $60 thousand for the nine month periods ended September 30, 2019 and 2018, respectively.

LEASES