Note 23 – 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. Implementation of the standard resulted in recognition of right-of-use assets and lease liabilities of $3.0 million at the date of adoption, which were 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 currently leases five of its operating locations under long-term leases (greater than 12 months). Leases for three of these locations are classified as operating leases and two are classified as financing leases. 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.

The Bank leases its principal Lynchburg, Virginia, location from Jamesview Investments, LLC, a legal entity which is wholly-owned by William C. Bryant III, a member of the Board of Directors of both Financial and the Bank. This lease is classified as a finance lease and the related lease liability totaled $3.4 million at December 31, 2020.

Note 23 – Leases (continued)

The following table represents information about the Company's operating leases:

	December 31,
(Dollars in thousands)	2020	2019
Lease liabilities	$ 1,390	$ 1,524
Right-of-use assets	$ 1,360	$ 1,508
Weighted average remaining lease term	14.7 years	14.9 years
Weighted average discount rate	3.44%	3.39%

The following table represents information about the Company's finance leases:

	December 31,
(Dollars in thousands)	2020	2019
Lease liabilities	$ 4,093	$ 4,422
Right-of-use assets	$ 3,902	$ 4,316
Weighted average remaining lease term	10.2 years	11.2 years
Weighted average discount rate	2.70%	2.70%

	For the Year Ended December 31,
Lease cost (in thousands)	2020	2019
Operating lease cost	$ 197	$ 365
Finance lease cost:
Amortization of right-of-use assets	414	242
Interest on lease liabilities	115	71
Total lease cost	$ 726	$ 678

Cash paid for amounts included in measurement
of operating lease liabilities	$ 183	$ 348

Cash paid for amounts included in measurement
of finance lease liabilities	$ 444	$ 206

Note 23 – 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:

e
	Operating Lease	Finance Lease
	Liabilities	Liabilities
	As of	As of
Lease payments due (in thousands)	December 31, 2020	December 31, 2020
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
Twelve months ending December 31, 2025	110	515
Thereafter	1,242	2,366
Total undiscounted cash flows	$1,793	$4,722
Discount	(403)	(629)
Lease liabilities	$1,390	$4,093