Leases
A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. On January 1, 2019, the Company adopted ASU 2016-02 - Leases (Topic 842) and elected the optional transition method, which allows the Company to not separate non-lease components from the associated lease component if certain conditions are met. In addition, the Company elected not to adjust prior comparative periods. Refer to Note 22 for further information regarding transition guidance related to the new standard.
The Company has three operating leases that are used for general office operations with remaining lease terms of two to three years. With the adoption of ASU 2016-02, operating lease agreements are required to be recognized on the consolidated balance sheets as a right-of-use asset and a corresponding lease liability.
The following table shows the components of lease expense.
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| (in thousands) | | | | Twelve Months Ended |
| | | | | | | December 31, 2020 | | December 31, 2019 | | December 31, 2018 | | |
| Operating lease cost | | | | | | $ | 913 | | | $ | 758 | | | $ | 724 | | | |
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The following table shows supplemental cash flow information related to leases.
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| (in thousands) | | Twelve Months Ended |
| | | December 31, 2020 | December 31, 2019 | | |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | | |
| Operating cash flows from operating leases | | 982 | | 814 | | | |
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The following table shows the operating leases’ impact on the consolidated balance sheets. The Company elected not to include short-term leases (leases with original terms of 12 months or less) or equipment leases, as those amounts are insignificant. The Company’s leases do not provide an implicit rate. The discount rate utilized to determine the present value of lease payments is the Company’s incremental borrowing rate based on the information available at the lease inception date. The incremental borrowing rate is the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment.
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| (dollars in thousands) | | | |
| | | December 31, 2020 | December 31, 2019 | | | |
| Operating lease right-of-use assets | | $ | 819 | | $ | 1,602 | | | | |
| Operating lease liabilities | | 819 | | 1,602 | | | | |
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| Weighted-average remaining lease term (years) | | | | | | |
| Operating leases | | 2 | 2.4 | | | |
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| Weighted-average discount rate | | | | | | |
| Operating leases | | 2.0 | % | 2.0 | % | | | |
The following table shows the future minimum payments of operating leases with initial or remaining terms of one year or more as of December 31, 2020.
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| (in thousands) | | | |
| Twelve months ended December 31, 2020 | | | | | |
| 2021 | | $ | 423 | | | | |
| 2022 | | 238 | | | | |
| 2023 | | 116 | | | | |
| 2024 | | — | | | | |
| 2025 | | — | | | | |
| Thereafter | | — | | | | |
| Total lease payments | | 777 | | | | |
| Less imputed interest | | (17) | | | | |
| Total | | $ | 760 | | | | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.