NOTE 9: PREMISES AND EQUIPMENT

Major classifications of premises and equipment, stated at cost, were as follows:

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Leases. In 2019, the Company adopted ASU 2016-02, Leases (Topic 842). Adoption of this ASU resulted in the Company initially recognizing a right of use asset and corresponding lease liability of $9.5 million. The amount of the right of use asset and corresponding lease liability will fluctuate based on the Company’s lease terminations, new leases and lease modifications and renewals. As of March 31, 2025, the lease right of use asset value was $6.1 million and the corresponding lease liability was $6.4 million. As of December 31, 2024, the lease right of use asset value was $6.4 million and the corresponding lease liability was $6.6 million. At March 31, 2025, expected lease terms ranged from 2.3 years to 13.7 years with a weighted-average lease term of 6.7 years. The weighted-average discount rate at March 31, 2025 was 4.03%.

For the three months ended March 31, 2025 and 2024, lease expense was $419,000 and $483,000, respectively. The Company’s short-term leases related to offsite ATMs have both fixed and variable lease payment components, based on the number of transactions at the various ATMs. The variable portion of these lease payments is not material and the total lease expense related to ATMs for the three months ended March 31, 2025 and 2024 was $76,000 and $81,000, respectively.

The Company does not sublease any of its leased facilities; however, it does lease to other parties portions of facilities that it owns. In terms of being the lessor in these circumstances, all of these lease agreements are classified as operating leases. In the three months ended March 31, 2025 and 2024, income recognized from these lease agreements was $321,000 and $341,000, respectively, and was included in occupancy and equipment expense.

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At March 31, 2025, future expected lease payments for leases with terms exceeding one year were as follows (in thousands):

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