NOTE 11 — 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 of the Corporation.

The Corporation currently leases two branch banking facilities and one parcel of land under operating leases. At December 31, 2025, right-of-use assets and lease liabilities were recorded related to these operating leases totaling $1,326,000 and $1,862,000, respectively, in the consolidated balance sheets. At December 31, 2024, right-of-use assets and liabilities stood at $1,400,000 and $1,920,000, respectively, in the consolidated balance sheets.

The Corporation recognized total operating lease costs for the years ended December 31, 2025 and 2024 of $204,000 and $213,000, respectively. Cash payments totaled $188,000 and $198,000 for the years ended December 31, 2025 and 2024, respectively. Operating lease costs are reflected in occupancy expenses in the consolidated statements of income.

The Corporation has one finance lease for equipment. At December 31, 2025, right-of-use assets and lease liabilities were recorded related to this finance lease totaling $29,000 and $33,000, respectively. At December 31, 2024, right-of-use assets and lease liabilities stood at $0. Amounts recognized as right-of-use assets related to finance leases are included in premises and equipment, net in the accompanying consolidated balance sheets.

Total finance lease costs that were recognized by the Corporation for the year ended December 31, 2025 and 2024 were immaterial. Cash payments totaled $6,000 and $0 for the years ended December 31, 2025 and 2024, respectively.

Options to extend or terminate a lease may be included in the Corporation’s lease agreements. When it is reasonably certain that the Corporation 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 Corporation’s incremental borrowing rate was used for each of the leases.

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

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

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