Premises and Equipment

9 Months Ended

Mar. 31, 2023

Premises and Equipment

Premises and Equipment

Note 5:  Premises and Equipment

Following is a summary of premises and equipment:

(dollars in thousands)	March 31, 2023		June 30, 2022
Land	$	15,403	$	13,532
Buildings and improvements		78,831		64,730
Construction in progress		1,266		142
Furniture, fixtures, equipment and software		24,953		20,838
Automobiles		122		120
Operating leases ROU asset		6,259		3,849
		126,834		103,211
Less accumulated depreciation		34,491		31,864
	$	92,343	$	71,347

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 11 leased properties, which includes banking facilities, administrative offices and ground leases, and numerous office equipment lease agreements in which it is the lessee, with lease terms exceeding twelve months.

All of the Company’s leases are classified as operating leases. 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.

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 fourth 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.

	March 31, 2023		June 30, 2022
Consolidated Balance Sheet
Operating leases ROU asset	$	6,259	$	3,849
Operating leases liability	$	6,259	$	3,849

	For the three-month periods ended				For the nine-month periods ended
	March 31,				March 31,
(dollars in thousands)	2023		2022		2023		2022
Consolidated Statement of Income
Operating lease costs classified as occupancy and equipment expense	$	189	$	117	$	467	$	315
(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	$	148	$	92	$	354	$	261
ROU assets obtained in exchange for operating lease obligations:	$	—	$	—	$	—	$	—

At March 31, 2023, future expected lease payments for leases with terms exceeding one year were as follows:

(dollars in thousands)
2023	$	236
2024		712
2025		656
2026		604
2027		587
Thereafter		7,579
Future lease payments expected	$	10,374

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 nine- month periods ended March 31, 2023, income recognized from these lessor agreements was $39,000 and $171,000, respectively. For the three- and nine- month periods ended March 31, 2022, income recognized from these lessor agreements was $64,000 and $208,000, respectively. Income from lessor agreements was included in net occupancy and equipment expense.