Note 9 – Leases

On January 1, 2019, the Corporation adopted Accounting Standards Update (“ASU”) 2016-02, “Leases” (Topic 842) and all subsequent ASUs that modified Topic 842. The adoption of Topic 842 affected the accounting treatment for operating lease agreements in which the Corporation is the lessee.

Lessee Accounting

Substantially all of the leases in which the Corporation is the lessee are comprised of real estate property for branches, ATM locations, and office equipment with terms extending through 2030. All of the Corporation’s leases are now classified as operating leases and, therefore, were previously not recognized on the Corporation’s Consolidated Statement of Financial Condition. With the adoption of Topic 842, operating lease agreements are required to be recognized on the Consolidated Statement of Financial Condition as a right-of-use (“ROU”) asset and a corresponding lease liability.

The following table represents the Consolidated Statement of Financial Condition classification of the Corporation’s ROU assets and lease liabilities. The Corporation elected not to include short-term leases (i.e., leases with remaining terms of 12 months or less), or equipment leases that were deemed immaterial on the Consolidated Statement of Financial Condition.



(in thousands)	September 30, 2019
Lease Right-of Use Assets
Operating lease right-of-use assets	$	2,731
Lease Liabilities
Operating lease liabilities	$	3,312

In calculating the present value of the lease payments, the Corporation has utilized its incremental borrowing rate based on electing the original lease term to account for each lease component.

The following table presents the weighted-average lease term and discount rate for operating leases at September 30, 2019:



	September 30, 2019
Weighted-average remaining lease term
Operating leases		8.86 years
Weighted-average discount rate
Operating leases		5.08%

The Corporation elected, for all classes of underlying assets, to separate lease and non-lease components. Total operating lease expense for the nine months ended September 30, 2019 was $.4 million. Short-term lease expense was $42 thousand for the nine months ended September 30, 2019. Total operating lease expense for the third quarter of 2019 was $.1 million. Short-term lease expense was $5 thousand for the third quarter of 2019.

Future minimum payments for operating leases with initial or remaining terms of one year or more at September 30, 2019 were as follows:



(in thousands)	Operating Leases
2019 (remainder of year)	$	115
2020		467
2021		485
2022		492
2023		426
Thereafter		2,176
Total future minimum lease payments		4,161
Amounts representing interest		(849)
Present value of net future minimum lease payments	$	3,312