Note 6 – Leases

On January 1, 2019, the Company adopted ASU No. 2016-02 “Leases (Topic 842)” and all subsequent ASUs that modified Topic 842. The Company elected the prospective application approach provided by ASU 2018-11 and did not adjust prior periods for ASC 842. The Company also elected certain practical expedients within the standard and consistent with such elections 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. As stated in the Company’s 2018 Form 10-K, the implementation of the new standard resulted in recognition of right-of-use assets and lease liabilities of $3.0 million at the date of adoption, which is related to the Company’s lease of premises used in operations. The right-of-use assets and lease liabilities are included in other assets and other liabilities, respectively, in the Consolidated Balance Sheets.

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.

The Company leases six of its operating locations under long-term leases (greater than 12 months). Leases for four of these locations are classified as operating leases. One new lease which commenced near the end of the current period was classified as a finance lease upon management’s assessment of the lease. Also near the end of the current period, another lease which was classified as operating upon adoption of ASU 2016-02 was modified, and upon reassessment of the modified lease, was transitioned to the finance lease classification. Certain of these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

Note 6 – Leases (continued)

The following tables present information about the Company’s operating leases:

(Dollars in thousands)	September 30, 2019
Lease liabilities	$1,557
Right-of-use assets	$1,544
Weighted average remaining lease term	14.8 years
Weighted average discount rate	3.39%

The following tables present information about the Company’s finance leases:


(Dollars in thousands)	September 30, 2019
Lease liabilities	$4,492
Right-of-use assets	$4,420
Weighted average remaining lease term	11.3 years
Weighted average discount rate	2.70%


Lease cost (in thousands)	For the Three Months Ended September 30, 2019
Operating lease cost	$147
Finance lease cost:
Amortization of right-of-use assets	138
Interest on lease liabilities	41
Total lease cost	$326


Cash paid for amounts included in the measurement of operating lease liabilities	$240


Cash paid for amounts included in the measurement of finance lease liabilities	$106


Lease cost (in thousands)	For the Nine Months Ended September 30, 2019
Operating lease cost	$433
Finance lease cost:
Amortization of right-of-use assets	138
Interest on lease liabilities	41
Total lease cost	$612


Cash paid for amounts included in the measurement of operating lease liabilities	$518


Cash paid for amounts included in the measurement of finance lease liabilities	$106

Note 6 – Leases (continued)

A maturity analysis of operating and finance lease liabilities and reconciliation of the undiscounted cash flows to the total of lease liabilities is as follows:

	Operating Lease	Finance Lease
	Liabilities	Liabilities
	As of	As of
Lease payments due (in thousands)	September 30, 2019	September 30, 2019
Three months ending December 31, 2019	$45	$101
Twelve months ending December 31, 2020	184	445
Twelve months ending December 31, 2021	111	454
Twelve months ending December 31, 2022	110	454
Twelve months ending December 31, 2023	110	454
Twelve months ending December 31, 2024	110	479
Thereafter	1,352	2,881
Total undiscounted cash flows	$2,022	$5,268
Discount	(465)	(776)
Lease liabilities	$1,557	$4,492