NOTE 8 — COMMITMENTS AND CONTINGENCIES

In the normal course of business, there are various pending legal actions and proceedings that are not reflected in the consolidated financial statements. Management does not believe the outcome of these actions and proceedings will have a material effect on the consolidated financial position or results of operations of the Company.

The Company currently leases two branch banking facilities and one parcel of land under operating leases. At June 30, 2025, right-of-use assets and lease liabilities were recorded related to these operating leases totaling $1,380,000 and $1,908,000, respectively. At December 31, 2024, right-of-use assets and lease liabilities stood at $1,400,000 and $1,920,000, respectively, in the consolidated balance sheets.

The Company recognized total operating lease costs for the six months ended June 30, 2025 and 2024 of $97,000 and $107,000, respectively. Operating lease costs are included in occupancy, net in the accompanying statements of income. Cash payments totaled $89,000 and $99,000, respectively, for the six months ended June 30, 2025 and 2024.

The Company currently has one finance lease for equipment. At June 30, 2025, right-of-use assets and lease liabilities were recorded related to the finance lease totaling $44,000 and $37,000, respectively. At December 31, 2024, right-of-use assets and lease liabilities stood at $0. Amounts recognized as right-of-use assets and lease liabilities related to finance leases are included in premises and equipment, net and other liabilities, respectively, in the accompanying balance sheet.

Total finance lease costs that were recognized by the Company for the six months ended June 30, 2025 and 2024 were immaterial. Cash payments totaled $2,000 and $0 for the six months ended June 30, 2025 and 2024, respectively.

Options to extend or terminate a lease may be included in the Company’s lease agreements. When it is reasonably certain that the Company will exercise those options, the right-of-use asset and lease liability will reflect the renewal or termination option. No significant assumptions or judgements were made in determining whether a contract contained a lease or in the consideration of lease versus non-lease components. None of the leases contained an implicit rate; therefore, the Company’s incremental borrowing rate was used for each of the leases.

The following table displays the weighted-average term and discount rates for operating and finance leases outstanding as of June 30, 2025 and December 31, 2024.

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A maturity analysis of operating and finance lease liabilities and reconciliation of the undiscounted cash flows to the total operating or finance lease liability is as follows:

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