Note 6 - Premises and Equipment

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

(6) Premises and Equipment

A summary of premises and equipment follows:

December 31, (in thousands)	2019			2018
Land	$	10,241		$	9,664
Buildings and improvements		50,809			47,726
Furniture and equipment		22,032			21,793
Construction in progress		623			1,051
Right-of-use operating lease asset		12,737			-
		96,442			80,234
Accumulated depreciation and amortization		(37,824	)		(35,470	)
Total premises and equipment	$	58,618		$	44,764

Depreciation expense related to premises and equipment was $4.2 million in 2019, $3.7 million in 2018 and $3.5 million in 2017.

Bancorp acquired five banking centers in its May 1, 2019 KSB acquisition. Based upon the proximity to existing branch locations, Bancorp closed and ultimately sold three of these locations in 2019, while retaining the associated customer relationships. Goodwill was recast based upon these sales.

The right-of-use lease asset and operating lease liability were recorded in premises and equipment and other liabilities on the consolidated balance sheet upon the adoption of ASU 2016-02, Leases in the first quarter of 2019.

Bancorp has operating leases for various branch locations with terms remaining from three months to 14 years, some of which include options to extend the leases in five year increments. Options reasonably expected to be exercised are included in determination of the right of use asset. Bancorp elected the practical expedient to expense short-term lease expense associated with leases with original terms 12 months or less. Bancorp elected not to separate non-lease components from lease components for its operating leases.

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

(dollars in thousands)	December 31, 2019
Balance Sheet
Operating lease right-of-use asset	$	12,737
Operating lease liability		14,369
Weighted average remaining lease term		9.38
Weighted average discount rate		2.46	%
Maturities of lease liabilities:
One year or less	$	1,964
Year 2		1,915
Year 3		1,930
Year 4		1,972
Year 5		1,781
Greater than 5 years		6,619
Total lease payments	$	16,181
Less imputed interest		1,812
Total	$	14,369

	Year Ended
(In thousands)	December 31, 2019
Income Statement
Components of lease expense:
Operating lease cost	$	1,870
Variable lease cost		152
Less sublease income		54
Total lease cost	$	1,968
(In thousands)
Cash flow Statement
Supplemental cash flow information:
Operating cash flows from operating leases	$	1,656

As of December 31, 2019 Bancorp had not entered into any lease agreements that had yet to commence.