Lease Commitments

6 Months Ended

Jun. 30, 2019

Leases of Lessee Disclosure [Text Block]

13.

Lease Commitments

Due to the adoption of ASU 2016-02,

Leases (Topic 842)

, the Company completed a comprehensive review and analysis of all its property and equipment contracts. As a result of this review, it was determined that the Company leases eight office locations under both operating and financing leases and one copy machine under a short-term lease. Several assumptions and judgments were made when applying the requirements of Topic 842 to the Company’s existing lease commitments, including the allocation of consideration in the contracts between lease and nonlease components, determination of the lease term, and determination of the discount rate used in calculating the present value of the lease payments.

The Company has elected to account for the variable nonlease components, such as common area maintenance charges, utilities, real estate taxes, and insurance, separately from the lease component. Such variable nonlease components are reported in net occupancy expense on the Consolidated Statements of Operations when paid. These variable nonlease components were excluded from the calculation of the present value of the remaining lease payments, therefore, they are not included in the right-of-use assets and lease liabilities reported on the Consolidated Balance Sheets. The following table presents the lease cost associated with both operating and financing leases for the three and six month periods ending June 30, 2019 (in thousands).

Total rent expense recorded during the three and six month periods ended June 30, 2018 was $98,000 and $

215,000

, respectively.

	Three months ended June 30, 2019		Six months ended June 30, 2019
Lease cost
Financing lease cost:
Amortization of right-of-use asset	$	65	$	129
Interest expense		29		59
Operating lease cost		29		58
Total lease cost	$	123	$	246

Certain of the Company’s leases contain options to renew the lease after the initial term. Management considers the Company’s historical pattern of exercising renewal options on leases and the performance of the leased locations, when determining whether it is reasonably certain that the leases will be renewed. If management concludes that there is reasonable certainty about the renewal option, it is included in the calculation of the remaining term of each applicable lease. The discount rate utilized in calculating the present value of the remaining lease payments for each lease was the Federal Home Loan Bank of Pittsburgh advance rate corresponding to the remaining maturity of the lease.

The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at June 30, 2019.

	Operating			Financing
Weighted-average remaining term (years)		12.2			17.4
Weighted-average discount rate		3.44	%		3.59	%

The following table presents the undiscounted cash flows due related to operating and financing leases as of June 30, 2019, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets.

	Operating			Financing
Undiscounted cash flows due:
Within 1 year	$	117		$	299
After 1 year but within 2 years		119			282
After 2 years but within 3 years		117			276
After 3 years but within 4 years		75			278
After 4 years but within 5 years		69			251
After 5 years		624			3,126
Total undiscounted cash flows		1,121			4,512
Discount on cash flows		(214	)		(1,259	)
Total lease liabilities	$	907		$	3,253

Under Topic 842, the lessee can elect to not record on the Consolidated Balance Sheets a lease whose term is twelve months or less and does not include a purchase option that the lessee is reasonably certain to exercise.

As of June 30, 2019, the Company had one short-term equipment lease which it has elected to not record on the Consolidated Balance Sheets.