Note

: Leases

January 1, 2019,

the Company adopted ASU

No.

2016

“Leases (Topic

842

)” and all subsequent ASUs that modified Topic

842.

The Company elected the prospective application approach provided by ASU

2018

and did

not

adjust prior periods for ASC

842.

There was

cumulative effect adjustment at adoption. The Company also elected certain practical expedients within the standard and 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. Prior to adoption, all of the Company’s leases were classified as operating leases and remain operating leases at adoption. As stated in to the Company’s

2018

Form

-K, Note

Summary of Significant Accounting Policies, the implementation of the new standard resulted in recognition of a right-of-use asset and offsetting lease liability of

$684

for leases existing at the date of adoption.

Contracts that commence subsequent to adoption are evaluated to determine whether they are or contain a lease in accordance with Topic

842.

The Company has elected the practical expedient provided by Topic

842

not

to allocate consideration in a contract between lease and non-lease components. The Company also elected, as provided by the standard,

not

to recognize right-of-use assets and lease liabilities for short-term leases, defined by the standard as leases with terms of

months or less. Since adoption, the Company entered into new operating leases and recognized right-of-use assets and lease liabilities.

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. 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.

Lease payments

Lease payments for short-term leases are recognized as lease expense on a straight-line basis over the lease term, or for variable lease payments, in the period in which the obligation was incurred. Payments for leases with terms longer than

months are included in the determination of the lease liability. Payments

may

be fixed for the term of the lease or variable. If the lease agreement provides a known escalator, such as a specified percentage increase per year or a stated increase at a specified time, the variable payment is included in the cash flows used to determine the lease liability. If the variable payment is based upon an unknown escalator, such as the consumer price index at a future date, the increase is

not

included in the cash flows used to determine the lease liability. Two of the Company’s leases provide known escalators that are included in the determination of the lease liability. The remaining leases do

not

have variable payments during the term of the lease.

Options to Extend, Residual Value Guarantees, and Restrictions and Covenants

Of the Company’s

six

leases,

three

leases offer the option to extend the lease term. Each of the

three

leases provides

two

options of

five

years each. For

one

of the leases, the Company is reasonably certain it will exercise

one

option of

five

years and has included the additional time and lease payments in the calculation of the lease liability. The lease agreement provides that the lease payment will increase at the exercise date based on the consumer price index-urban (“CPI-U”). Because the CPI-U at the exercise date is unknown, the increase is

not

included in the cash flows determining the lease liability.

None

of the Company’s leases provide for residual value guarantees and

none

provide restrictions or covenants that would impact dividends or require incurring additional financial obligations.

The Company’s lease right of use asset is included in other assets and the lease liability is included in other liabilities. The following tables present information about leases :

	As of December 31, 2019
Lease liability	$	2,286
Right-of-use asset	$	2,277
Weighted average remaining lease term (in years)		6.90
Weighted average discount rate		3.02	%

	For the Years Ended December 31 ,
	2019		2018
Lease Expense
Operating lease expense	$	310	NR
Short-term lease expense		114	NR
Total lease expense	$	424	$	298

Cash paid for amounts included in lease liabilities	$	414	NR
Right-of-use assets obtained in exchange for operating lease liabilities commencing during the period	$	1,837	NR

The following table presents a maturity schedule of undiscounted cash flows that contribute to the lease liability:

Undiscounted Cash Flow for the	As of December 31, 2019
Twelve months ending December 31, 2020	$	354
Twelve months ending December 31, 2021		345
Twelve months ending December 31, 2022		349
Twelve months ending December 31, 2023		351
Twelve months ending December 31, 2024		333
Thereafter		848
Total undiscounted cash flows	$	2,580
Less: discount		(294	)
Lease liability	$	2,286

The contracts in which the Company is lessee are with parties external to the company and

not

related parties. The Company has a small lease relationship with a director in which the Company is lessor.