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Note 4 - Premises and Equipment, Net | 3 Months Ended
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Mar. 31, 2023
Notes to Financial Statements |
Property, Plant and Equipment Disclosure [Text Block] |
4. | PREMISES AND EQUIPMENT, NET
Premises and equipment are comprised of the following:
|  | March 31, |  |  | December 31, |
|  | 2023 |  |  | 2022 |
Land and improvements |  | $ | 13,050,000 |  |  | $ | 13,532,000 |
Buildings |  |  | 55,527,000 |  |  |  | 53,865,000 |
Furniture and equipment |  |  | 23,064,000 |  |  |  | 22,941,000 |
|  |  | 91,641,000 |  |  |  | 90,338,000 |
Less: accumulated depreciation |  |  | 40,131,000 |  |  |  | 38,862,000 |
Premises and equipment, net |  | $ | 51,510,000 |  |  | $ | 51,476,000 |
Depreciation expense totaled $1.5 million and $1.6 million during the first quarters of 2023 and 2022, respectively. We enter into facility leases in the normal course of business. As of March 31, 2023, we were under lease contracts for eleven of our branch facilities. The leases have maturity dates ranging from February, 2024 through December, 2029, with a weighted average life of 2.7 years as of March 31, 2023. All of our leases have multiple three- to five-year extensions; however, these were not factored in the lease maturities and weighted average lease term as it was not reasonably certain we would exercise the options on the dates we entered into the lease agreements. Leases are classified as either operating or finance leases at the lease commencement date, with all of our current leases determined to be operating leases. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent our right to use an underlying asset for the lease term, while lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date at the estimated present value of lease payments over the lease term. We use our incremental borrowing rate, on a collateralized basis, at lease commencement to calculate the present value of lease payments. The weighted average discount rate for leases was 5.79% as of March 31, 2023. The right-of-use assets, included in premises and equipment, net on our Consolidated Balance Sheets, and the lease liabilities, included in other liabilities on our Consolidated Balance Sheets, totaled $3.9 million and $3.5 million as of March 31, 2023, and December 31, 2022, respectively. As permitted by applicable accounting standards, we have elected not to recognize short-term leases with original terms of twelve months or less on our Consolidated Balance Sheet. Total operating lease expense associated with the leases aggregated $0.3 million during the first three months of 2023 and $1.3 million during the full year 2022. Future lease payments were as follows as of March 31, 2023:
2023 |  | $ | 904,000 |
2024 |  |  | 1,012,000 |
2025 |  |  | 578,000 |
2026 |  |  | 479,000 |
2027 |  |  | 434,000 |
Thereafter |  |  | 1,638,000 |
Total undiscounted lease payments |  |  | 5,045,000 |
Less effect of discounting |  |  | (1,169,000 | )
Present value of future lease payments (lease liability) |  |  | 3,876,000 |

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