NOTE 13. 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 six months ended June 30, 2026 and 2025 (dollars in thousands).

At  June 30, 2026 and  December 31, 2025, the Company’s operating lease ROU assets were $2.6 million and $1.8 million, respectively, and the Company’s related operating lease liabilities were $2.7 million and $1.9 million, respectively. The Company’s operating leases have remaining terms ranging from approximately one to five years, including extension options if the Company is reasonably certain they will be exercised.

Future obligations due under non-cancelable operating leases at June 30, 2026 are presented below (dollars in thousands).

At June 30, 2026, 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 $0.1 million and $0.2 million for the three and six month periods ended June 30, 2026 and 2025, respectively.