13.    OPERATING LEASE COMMITMENTS AND CONTINGENCIES

The Company leases one office location under operating leases. This operating lease was assumed with the acquisition of NUBC.  The Company has elected to account for the variable nonlease components, such as common area maintenance charges, utilities, real estate taxes, and insurance, separately from the lease component. Such variable nonlease components are reported in net occupancy expense on the Consolidated Statements of Income when paid. These variable nonlease components were excluded from the calculation of the present value of the remaining lease payments, therefore, they are not included in the right-of-use assets and lease liabilities reported on the Consolidated Balance Sheets.

As of December 31, 2025 the Company had recorded right-of-use assets in other assets for operating leases of $1.06 million and related lease liabilities totaling $1.06 million, in other liabilities in its Consolidated Balance Sheets.

The Company’s lease contains an option to renew the lease after the initial term. Management considers the Company’s historical pattern of exercising renewal options on leases and the positive performance of the leased locations, when determining whether it is reasonably certain that the leases will be renewed. If management concludes that there is reasonable certainty about the renewal option, it is included in the calculation of the remaining term of each applicable lease. The discount rate utilized in calculating the present value of the remaining lease payments for each lease was the Federal Home Loan Bank of Pittsburgh advance rate corresponding to the remaining maturity of the lease as of August 1, 2025. The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at December 31, 2025.

The following table presents the undiscounted cash flows due related to operating leases as of December 31, 2025, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets:

Undiscounted cash flows due (In thousands):

Under Topic 842, the lessee can elect to not record on the Consolidated Balance Sheets a lease whose term is twelve months or less and does not include a purchase option that the lessee is reasonably certain to exercise. As of December 31, 2025, the Company had no leases that had a term of twelve months or less.

Rental expense under operating leases totaled approximately $33 thousand in 2025 and $2 thousand in 2024. 

In the normal course of business, the Company is subject to pending and threatened litigation in which claims for monetary damages are asserted. In management’s opinion, the Company’s financial position and results of operations would not be materially affected by the outcome of these legal proceedings.