Premises and Equipment

6 Months Ended

Dec. 31, 2020

Premises and Equipment

Premises and Equipment

Note 5:  Premises and Equipment

Following is a summary of premises and equipment:

(dollars in thousands)	December 31, 2020		June 30, 2020
Land	$	12,480	$	12,585
Buildings and improvements		56,789		56,039
Construction in progress		248		435
Furniture, fixtures, equipment and software		18,471		18,109
Automobiles		120		120
Operating leases ROU asset		1,926		1,965
		90,034		89,253
Less accumulated depreciation		26,064		24,147
	$	63,970	$	65,106

Leases. The Company adopted ASU 2016-02, Leases (Topic 842), on July 1, 2019, using the modified retrospective transition approach whereby comparative periods were not restated. The Company also elected certain relief options under the ASU, including the option not to recognize right of use asset and lease liabilities that arise from short-term leases (leases with terms of twelve months or less). The Company has five leased properties and numerous office equipment lease agreements in which it is the lessee, with lease terms exceeding twelve months.

All of the leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated balance sheets. With the adoption of ASU 2016-02, these operating leases are now included as a ROU asset in the premises and equipment line item on the Company’s consolidated balance sheets. The corresponding lease liability is included in the accounts payable and other liabilities line item on the Company’s consolidated balance sheets. Because these leases are classified as operating leases, the adoption of the new standard did not have a material effect on lease expense on the Company’s consolidated statements of income.

ASU 2016-02 also requires certain other accounting elections. The Company elected the short-term lease recognition exemption for all leases that qualify, meaning those with terms under twelve months. ROU assets or lease liabilities are not to be recognized for short-term leases. The calculated amount of the ROU assets and lease liabilities in the table below are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, the ASU requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely

determinable, the Company utilizes its incremental borrowing rate at lease inception over a similar term. The discount rate utilized was 5%. The expected lease terms range from 18 months to 20 years.

	December 31, 2020		June 30, 2020
Consolidated Balance Sheet
Operating leases right of use asset	$	1,926	$	1,965
Operating leases liability	$	1,926	$	1,965

	Three Months Ended December 31,				Six Months Ended December 31,
	2020		2019		2020		2019
Consolidated Statement of Income
Operating lease costs classified as occupancy and equipment expense	$	63	$	52	$	135	$	109
(includes short-term lease costs)
Supplemental disclosures of cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	58	$	39	$	126	$	78
ROU assets obtained in exchange for operating lease obligations:	$	—	$	—	$	—	$	2,004

At December 31, 2020, future expected lease payments for leases with terms exceeding one year were as follows:

(dollars in thousands)
2021	$	134
2022		243
2023		243
2024		243
2025		242
Thereafter		2,229
Future lease payments expected	$	3,334

The Company leases facilities it owns or portions of facilities it owns to other third parties. The Company has determined that all of these lease agreements, in terms of being the lessor, are classified as operating leases. For the three- and six- month periods ended December 31, 2020, income recognized from these lessor agreements was $81,000 and $156,000, respectively. For the three- and six- month periods ended December 31, 2019, income recognized from these lessor agreements was $80,000 and $162,000, respectively. Income from lessor agreements was included in net occupancy and equipment expense.