Note 6 - Premises and Equipment and Premises Held for Sale

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

(6) Premises & Equipment and Premises Held for Sale

A summary of premises and equipment follows:

December 31, (in thousands)	2023			2022
Land	$	22,517		$	23,011
Buildings and improvements		71,695			72,322
Furniture and equipment		24,602			25,367
Construction in progress		2,782			1,660
Right-of-use operating lease asset		21,007			19,694
Total		142,603			142,054
Accumulated depreciation and amortization		(41,429	)		(40,442	)
Total premises and equipment	$	101,174		$	101,612

Depreciation expense related to premises and equipment was $7.7 million in 2023, $6.5 million in 2022 and $4.8 million in 2021, 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. As of December 31, 2023, Bancorp’s branch network consists of 71 locations throughout Louisville, central, eastern and northern, Kentucky, as well as the Indianapolis, Indiana and Cincinnati, Ohio markets. As a result of the prior year CB acquisition, 15 branches were acquired, four of which were closed shortly acquisition as a result of overlapping with existing locations of the Bank.

In addition to the premises and equipment detailed above, premises held for sale totaling $2.5 million was also recorded on Bancorp’s consolidated balance sheets as of December 31, 2023, which consists of three vacant parcels of land, an acquired administrative building and two former branch locations.

Bancorp has operating leases for various locations with terms ranging from approximately three months to 17 years, several of which include options to extend the leases in five-year increments. A total of four operating leases were added as a result of the CB acquisition in 2022. 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)	2023			2022
Balance Sheet
Operating lease right-of-use asset	$	21,007		$	19,694
Operating lease liability		22,487			21,008
Weighted average remaining lease term (years)		9.8			9.0
Weighted average discount rate		2.84	%		2.57	%
Maturities of lease liabilities:
One year or less	$	3,365		$	3,453
Year two		2,864			3,293
Year three		2,543			2,739
Year four		2,536			2,339
Year five		2,547			2,245
Greater than five years		12,059			9,559
Total lease payments	$	25,914		$	23,628
Less imputed interest		3,427			2,620
Total	$	22,487		$	21,008

Years ended December 31, (in thousands)	2023		2022		2021
Income Statement
Components of lease expense:
Operating lease cost	$	3,338	$	3,077	$	2,239
Variable lease cost		313		237		227
Less sublease income		101		96		95
Total lease cost	$	3,550	$	3,218	$	2,371

Years ended December 31, (in thousands)	2023		2022		2021
Cash flow Statement
Supplemental cash flow information:
Operating cash flows from operating leases	$	4,063	$	3,833	$	2,568

As of December 31, 2023, Bancorp had entered into one lease agreement that had yet to commence.