Leases

12 Months Ended

Dec. 31, 2022

15. Leases

CTBI has one finance lease for property but no material sublease or leasing arrangements for which it is the lessor of property or equipment. CTBI has operating leases for banking and ATM locations. These leases have original remaining lease terms of 1 year to 45 years, some of which include options to renew the leases for up to 5 years. We evaluated the original lease terms for each operating lease, some of which include options to extend the leases for up to 5 years, using hindsight. These options, some of which include variable costs related to rent escalations based on recent financial indices, such as the Consumer Price Index, where CTBI estimates future rent increases, are included in the calculation of the lease liability and right-of-use asset when management determines it is reasonably certain the option will be exercised. CTBI determines this on each lease by considering all relevant contract-based, asset-based, market-based, and entity-based economic factors. Right-of-use assets and lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate, on a collateralized basis, over a similar term, at the lease commencement date. Right-of-use assets are further adjusted for prepaid rent, lease incentives, and initial direct costs, if any.

The components of lease expense for the year ended December 31, 2022 were as follows:

(in thousands)	Year Ended December 31, 2022			Year Ended December 31, 2021
Finance lease cost:
Amortization of right-of-use assets – finance leases	$	64		$	52
Interest on lease liabilities – finance leases		70			55
Total finance lease cost		134			107

Short-term lease cost		85			181

Operating lease cost		1,838			1,760

Total lease cost		2,057			2,048

Sublease income		(249	)		(253	)

Net lease cost	$	1,808		$	1,795

Supplemental cash flow information related to CTBI’s operating and finance leases for the year ended December 31, 2022 was as follows:

(in thousands)	Year Ended December 31, 2022			Year Ended December 31, 2021
Finance lease – operating cash flows	$	67		$	53
Finance lease – financing cash flows	$	24		$	19
Operating lease – operating cash flows (fixed payments)	$	1,760		$	1,693
Operating lease – operating cash flows (liability reduction)	$	1,424		$	948
New right-of-use assets – operating leases	$	3,469		$	0
New right-of-use assets – finance leases	$	2,070		$	0

Weighted average lease term – financing leases	27.10 years			24.02 years
Weighted average lease term – operating leases	13.84 years			13.39 years
Weighted average discount rate – financing leases		4.90	%		3.70	%
Weighted average discount rate – operating leases		3.55	%		3.11	%

Maturities of lease liabilities as of December 31, 2022 are as follows:

(in thousands)	Operating Leases			Finance Leases
2023	$	1,878		$	151
2024		1,853			155
2025		1,748			160
2026		1,731			171
2027		1,620			175
Thereafter		9,393			6,362
Total lease payments		18,223			7,174
Less imputed interest		(4,063	)		(3,706	)
Total	$	14,160		$	3,468