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Note 6 - Premises and Equipment and Premises Held for Sale

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

(6)

Premises and Equipment and Premises Held for Sale

A summary of premises and equipment follows:

December 31, (in thousands)		2022				2021

Land		$	23,011			$	15,981
Buildings and improvements			72,322				61,908
Furniture and equipment			25,367				22,420
Construction in progress			1,660				2,723
Right-of-use operating lease asset			19,694				14,958

Total			142,054				117,990

Accumulated depreciation and amortization			(40,442	)			(41,096	)

Total premises and equipment		$	101,612			$	76,894

Depreciation expense related to premises and equipment was $6.5 million in 2022, $4.8 million in 2021 and $4.4 million in 2020, respectively.

Premises and equipment are presented on the consolidated balance sheets net of related depreciation on the respective assets as well as fair value adjustments associated with purchase accounting. Premises and equipment increased $25 million between December 31, 2021 and December 31, 2022, driven largely by the CB acquisition. As a result of the CB acquisition, 15 branches were acquired, four of which were closed shortly acquisition as a result of overlapping with existing locations of the Bank. By comparison, the 2021 acquisition of KB resulted in the addition of 19 locations. Bancorp’s branch network currently consists of 73 locations throughout Louisville, central, eastern and northern, Kentucky, as well as the Indianapolis, Indiana and Cincinnati, Ohio markets.

In addition to the premises and equipment detailed above, premises held for sale totaling $2.6 million are also recorded on Bancorp’s consolidated balance sheets as of December 31, 2022, which consists of three vacant parcels of land, one branch acquired from CB and one legacy SYB branch.

Bancorp has operating leases for various branch locations with terms ranging from approximately eight months to 17 years, some of which include options to extend the leases in five-year increments. A total of four operating leases were added in 2022 as a result of the CB acquisition. By comparison, a total of seven operating leases were added as a result of the 2021 KB acquisition. Options reasonably expected to be exercised are included in determination of the right-of-use asset. Bancorp elected to use a practical expedient to expense short-term lease obligations associated with leases with original terms of 12 months or less. Bancorp elected not to separate non-lease components from lease components for its operating leases. The right-of-use lease asset and operating lease liability are recorded in premises and equipment and other liabilities on the consolidated balance sheet.

Balance sheet, income statement, and cash flow detail regarding operating leases follows:

December 31, (dollars in thousands)		2022				2021

Balance Sheet
Operating lease right-of-use asset		$	19,694			$	14,958
Operating lease liability			21,008				16,408

Weighted average remaining lease term (years)			9.0				9.4
Weighted average discount rate			2.57	%			3.02	%

Maturities of lease liabilities:
One year or less		$	3,453			$	2,634
Year two			3,293				2,673
Year three			2,739				2,408
Year four			2,339				1,924
Year five			2,245				1,608
Greater than five years			9,559				7,699
Total lease payments		$	23,628			$	18,946
Less imputed interest			2,620				2,538
Total		$	21,008			$	16,408

Years ended December 31, (in thousands)		2022				2021				2020

Income Statement
Components of lease expense:
Operating lease cost		$	3,077			$	2,239			$	1,896
Variable lease cost			237				227				180
Less sublease income			96				95				54
Total lease cost		$	3,218			$	2,371			$	2,022

Years ended December 31, (in thousands)		2022				2021				2020

Cash flow Statement
Supplemental cash flow information:
Operating cash flows from operating leases		$	3,833			$	2,568			$	2,218

As of December 31, 2022 Bancorp had not entered into any lease agreements that had yet to commence.