OPERATING LEASE COMMITMENTS

AND CONTINGENCIES

The Corporation leases certain branch locations, office space and equipment. All leases are classified as operating leases. Leases with an initial term of

months or less are

not

recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

Certain leases include options to renew, with renewal terms that can extend the lease term from

one

eight

years that are reasonably certain of being exercised. The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded with the remaining lease term as of

January 1, 2019

for leases that existed at adoption and as of the lease commencement date for leases subsequently entered into after

January 1, 2019.

December 31, 2019,

discount rates ranged from

2.77%

3.50%

with a weighted-average discount rate of

3.23%.

December 31, 2019,

right-of-use assets of

$1,637,000

were included in other assets, and the related liabilities totaling the same amount were included in accrued interest and other liabilities, in the unaudited consolidated balance sheets. In

2019,

right-of-use assets obtained in exchange for lease liabilities totaled

$745,000.

2019,

operating lease expenses totaling

$214,000

are included in occupancy expense, net, and

$37,000

are included in furniture and equipment expense.

A maturity analysis of the Corporation’s lease liabilities at

December 31, 2019

is as follows:

(In Thousands)

Lease Payments Due
2020	$	265
2021		265
2022		241
2023		229
2024		239
Thereafter		625
Total lease payments		1,864
Discount on cash flows		(227	)
Total lease liabilities	$	1,637

In the normal course of business, the Corporation is subject to pending and threatened litigation in which claims for monetary damages are asserted. In management’s opinion, the Corporation’s financial position and results of operations would

not

be materially affected by the outcome of these legal proceedings.