Note 6 - Leases

12 Months Ended

Dec. 31, 2025

NOTE 6. LEASES

The Company’s primary leasing activities relate to certain real estate leases entered into in support of the Company’s branch operations. The Company’s lease agreements under which its branch locations are operated have all been designated as operating leases. The Company does not lease equipment under operating leases, nor does it have leases designated as finance leases.

Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which the Company has elected to account for separately, as the non-lease component amounts are readily determinable.

Quantitative information regarding the Company’s operating leases is presented below as of and for the years ended December 31, 2025 and 2024 (dollars in thousands).

	*December 31,*
	*2025*			*2024*
Total operating lease cost⁽¹⁾	$	449		$	449
Weighted average remaining lease term (in years)		4.7			5.8
Weighted average discount rate		3.4	%		3.3	%

⁽¹⁾	Short-term lease cost was immaterial for the periods presented.

At December 31, 2025 and 2024, the Company’s operating lease ROU assets were $1.8 million and $2.0 million, respectively, and the Company’s related operating lease liabilities were $1.9 million and $2.1 million, respectively. The Company’s operating leases have remaining terms ranging from approximately two to six years, including extension options if the Company is reasonably certain they will be exercised.

Future obligations due under non-cancelable operating leases at December 31, 2025 are presented below (dollars in thousands).

2026	$	459
2027		459
2028		405
2029		337
2030		223
Thereafter		127
Total lease payments		2,010
Less: imputed interest		(154	)
Total lease obligations	$	1,856

At December 31, 2025, the Company had not entered into any material leases that have not yet commenced.

The Bank owns its corporate headquarters building, the first floor of which is occupied by multiple tenants. The Bank, as lessor, also leases a portion of one of its branch locations. All tenant leases are operating leases. The Bank, as lessor, recognized lease income of $0.4 million in “Other operating income” in the accompanying consolidated statements of income for each of the years ended December 31, 2025, 2024 and 2023.

On January 27, 2023, the Bank completed the sale of certain assets, deposits and other liabilities associated with the Alice and Victoria, Texas branch locations to First Community Bank. Upon the completion of the sale, the Bank recorded $0.3 million of occupancy expense to terminate the remaining contractually obligated lease payments due under non-cancelable operating leases.