(14)    Leases

The Company has committed to rent premises used in business operations under non-cancelable operating leases and determines if an arrangement meets the definition of a lease upon inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the Company’s balance sheet.

During the second quarter of 2025, the Bank executed on a sale and leaseback transaction for its main office building located in Amesbury, Massachusetts. This transaction resulted in a $745,000 gain related to the sale of the building, reported as other income on the Consolidated Statements of Operations, and a $2.1 million ROU asset and operating lease liability on the Company’s balance sheet.

Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For the leases that do not provide an implicit rate, the Company used its incremental collateralized borrowing rates commensurate with the underlying lease terms to determine present value of operating lease liabilities. The Company’s lease terms  may include lease extension and termination options when it is reasonably certain that the Company will exercise the option. The Company recognized ROU assets totaling $5.5 million and $3.4 million at  June 30, 2025 and  December 31, 2024, respectively, and operating lease liabilities totaling $5.9 million and $3.9 million at  June 30, 2025 and  December 31, 2024, respectively. The lease liabilities recognized by the Company represent three leased branch locations and one loan production office.

Lease expense for lease payments is recognized on a straight-line basis over the lease term. Variable lease components, such as fair market value adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For the three months ended  June 30, 2025 and 2024, rent expense, including variable lease components, for the operating leases totaled $95,000 and $86,000, respectively. For the six months ended  June 30, 2025 and 2024, rent expense, including variable lease components, for the operating leases totaled $191,000 and $173,000, respectively.

The following table presents information regarding the Company’s operating leases:

The following table presents the undiscounted annual lease payments under the terms of the Company’s operating leases at June 30, 2025 and December 31, 2024, including a reconciliation to the present value of operating lease liabilities recognized in the Consolidated Balance Sheets:

The lease liabilities recognized include certain lease extensions as it is expected that the Company will use substantially all lease renewal options.