Premises and Equipment

12 Months Ended

Jun. 30, 2022

Premises and Equipment

Premises and Equipment

NOTE 4: Premises and Equipment

Following is a summary of premises and equipment:

	June 30,
(dollars in thousands)	2022		2021
Land	$	13,532	$	12,452
Buildings and improvements		64,730		56,422
Construction in progress		142		1,158
Furniture, fixtures, equipment and software		20,838		18,985
Automobiles		120		120
Operating leases ROU asset		3,849		2,770
		103,211		91,907
Less accumulated depreciation		31,864		27,830
	$	71,347	$	64,077

Leases. The Company elected certain relief options under ASU 2016-02, Leases (Topic 842), 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.

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 years ended June 30, 2022 and 2021, income recognized from these lessor agreements was $279,000 and $307,000, respectively. Income from lessor agreements was included in net occupancy and equipment expense. The 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.

In the February 2022 acquisition of Fortune, the Company assumed a ground lease with an entity that is controlled by a Company insider. This property is in St. Louis County, MO and is in its third year of a twenty year term.

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.

	At or For the		At or For the
	Twelve Months Ended		Twelve Months Ended
	June 30, 2022		June 30, 2021
Consolidated Balance Sheet
Operating leases right of use asset	$	3,849	$	2,770
Operating leases liability	$	3,849	$	2,770
Consolidated Statement of Income
Operating lease costs classified as occupancy and equipment expense	$	451	$	340
(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	$	382	$	282
ROU assets obtained in exchange for operating lease obligations:	$	—	$	804

For the years ended June 30, 2022 and 2021, lease expense was $451,000 and $340,000, respectively. At June 30, 2022, future expected lease payments for leases with terms exceeding one year were as follows:

(dollars in thousands)
2023	$	442
2024		443
2025		439
2026		434
2027		418
Thereafter		4,074
Future lease payments expected	$	6,250