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Note 11 - Leases

12 Months Ended

Dec. 31, 2020

(11) LEASES

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified premises and equipment for a period of time in exchange for consideration. The Company is a lessee in certain leasing agreements, such as for branch office space. During 2020, the Bank extended a noncancelable lease agreement for branch office space which expires in March 2025 with annual lease payments of $19,000. The Bank’s subsidiary companies headquartered in Nevada lease office space under sublease agreements that automatically renew for one year periods each October.

On January 1, 2019, the Company adopted FASB ASC 842 and all subsequent updates that modified FASB ASC 842. For the Company, this update primarily affected the accounting treatment for operating lease agreements. With the adoption of FASB ASC 842, operating lease agreements are required to be recognized on the consolidated balance sheet as a right-of-use (“ROU”) asset and a corresponding lease liability. All of the Company’s leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated balance sheet. The Company has elected all applicable practical expedients permitted under the standard, including the option to expense short-term leases with a term of one year or less.

The Company’s right to use an asset over the life of a lease is recorded as an ROU asset included in other assets on the consolidated balance sheet and was $77,000 at December 31, 2020. Certain adjustments to the ROU asset may be required for items such as initial direct costs paid or incentives received. The Company recorded a lease liability in other liabilities on the consolidated balance sheet, which had a balance of $77,000 at December 31, 2020. No ROU assets or lease liabilities were recorded at December 31, 2019.

The calculated amount of the ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of minimum lease payments. Regarding the discount rate, FASB ASC 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.

Leases with an initial term of 12 months or less are not recorded on the balance sheet and the Company recognizes lease expense for these leases on a straight-line basis over the term of the lease. Certain leases may include one or more options to renew, with renewal terms that can extend the lease term from one to 20 years or more. The exercise of renewal options on operating leases is at the Company’s sole discretion, and certain leases may include options to purchase the leased property. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. The Company does not enter into lease agreements which contain material residual value guarantees or material restrictive covenants. At December 31, 2020, the Company had not entered into any leases that had yet to commence that conveyed the right to control the use of the property to the Company.

Lease expense for the years ended December 31, 2020, 2019 and 2018 was $30,000, $58,000 and $93,000, respectively. The components of lease expense for the years ended December 31, 2020, 2019 and 2018 were as follows:

(In thousands)	2020		2019		2018

Operating lease cost	$	14	$	-	$	-
Short-term lease cost		16		58		93

Totals	$	30	$	58	$	93

Future minimum commitments due under operating lease agreements as of December 31, 2020 are as follows, including renewal options that are reasonably certain to be exercised:

		(In thousands)
Year ending December 31:
2021	$	19
2022		19
2023		19
2024		19
2025		5
Total lease payments		81
Less imputed interest		(4	)

Total	$	77

The lease term and discount rate at December 31, 2020 were as follows:

Weighted-average remaining lease term (years)		4.25
Weighted-average discount rate		1.34	%

Supplemental cash flow information for the year ended December 31, 2020 related to leases was as follows:

	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	14

ROU assets obtained in exchange for lease obligations:
Operating leases		90