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Note 4 - Premises and Equipment, Net

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

4. PREMISES AND EQUIPMENT, NET

Premises and equipment are comprised of the following:

		September 30,				December 31,
(Dollars in thousands)		2024				2023

Land and improvements		$	13,984			$	12,782
Buildings			62,469				56,778
Furniture and equipment			26,075				25,157
			102,528				94,717
Less: accumulated depreciation			48,298				43,789

Premises and equipment, net		$	54,230			$	50,928

Depreciation expense totaled $1.5 million during the third quarters of both 2024 and 2023. Depreciation expense totaled $4.6 million during the first nine months of 2024, compared to $4.4 million during the first nine months of 2023.

We enter into facility leases in the normal course of business. As of September 30, 2024, we were under lease contracts for eleven of our banking facilities. The leases have maturity dates ranging from February, 2025 through May, 2048, with a weighted average life of 9.1 years as of September 30, 2024. 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 6.7% as of September 30, 2024.

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 $4.7 million and $3.7 million as of September 30, 2024, and December 31, 2023, 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 Sheets. Total operating lease expense associated with the leases aggregated $0.4 million during the third quarter of 2024 and $0.5 million during the third quarter 2023, respectively, and $1.2 million and $1.3 million during the nine months ended September 30, 2024 and 2023, respectively.

Future lease payments were as follows as of September 30, 2024:

(Dollars in thousands)
2024		$	300
2025			1,134
2026			1,079
2027			1,010
2028			833
Thereafter			1,674
Total undiscounted lease payments			6,030
Less effect of discounting			(1,366	)
Present value of future lease payments (lease liability)		$	4,664