Note 12. Commitments and Contingencies

Unfunded Commitments

The Company is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include undisbursed loans, un-advanced lines of credit, and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet.

The contractual amount of these commitments represents the Company’s exposure to credit loss. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

The table below shows the outstanding financial instruments whose contract amounts represent credit risk (dollars in thousands):

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Undisbursed loans are commitments for possible future extensions of credit to existing customers. These loans are sometimes unsecured and the borrower may not necessarily draw upon the line the total amount of the commitment. Commitments to extend credit are generally at variable rates.

Operating Leases

On December 31, 2023, the Company’s lease agreement with Imperial Mariner to lease facilities in Brea expired. In February 2024, the Company reached an agreement with Olen Pointe Brea Corp. to lease new office space in Brea. The lease agreement began on March 15, 2024. The agreement expires on July 31, 2029. The agreement provides for rent payments beginning at $6,790 per month with annual increases, as well as provisions for proportional share of operating costs. The agreement also includes one option to extend the lease for an additional five-year term.

The Company also leases office space in Fresno, California, where its wholly-owned subsidiary, MP Securities, maintains a branch office. In June 2025, the Company reached an agreement to extend its lease of office space in Fresno, California, for 38 months, terminating in July 2028. The Company recorded $82 thousand in right-of-use assets and lease liabilities related to this agreement. The agreement provides for rent payments beginning at $2,526 per month with an increase in January 2027, as well as provisions for proportional share of operating costs.

The Company has determined that these leases are operating leases.

The table below presents information regarding our existing operating leases (dollars in thousands):

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Future minimum lease payments and lease costs for the twelve months ending December 31 are as follows (dollars in thousands):

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