NOTE 9: PREMISES AND EQUIPMENT

Major classifications of premises and equipment, stated at cost, were as follows at the dates indicated:

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Leases. The Company records leases in accordance with ASU 2016-02, Leases (Topic 842). The amount of the right of use asset and corresponding lease liability will fluctuate based on the Company’s lease terminations, new leases and lease modifications and renewals. As of June 30, 2026, the lease right of use asset value was $4.8 million and the corresponding lease liability was $4.9 million. As of December 31, 2025, the lease right of use asset value was $4.2 million and the corresponding lease liability was $4.2 million. At June 30, 2026, expected lease terms ranged from 1.1 years to 8.8 years with a weighted-average lease term of 5.9 years. The weighted-average discount rate at June 30, 2026 was 4.25%.

For the three months ended June 30, 2026 and 2025, total lease expense was $527,000 and $402,000, respectively. For the six months ended June 30, 2026 and 2025, total lease expense was $957,000 and $821,000, respectively. The Company’s short-term leases related to offsite ATMs have both fixed and variable lease payment components, based on the number of transactions at the various ATMs. The variable portion of these lease payments is not material and the lease expense related to ATMs for the three months ended June 30, 2026 and 2025 was $81,000 and $79,000, respectively. The lease expense related to ATMs for the six months ended June 30, 2026 and 2025 was $171,000 and $156,000, respectively.

The Company does not sublease any of its leased facilities; however, it does lease portions of facilities that it owns to other parties. In terms of being the lessor in these circumstances, all of these lease agreements are classified as operating leases. In the three months ended June 30, 2026 and 2025, income recognized from these lease agreements was $371,000 and $358,000, respectively, and was included in occupancy and equipment expense. In the six months ended June 30, 2026 and 2025, income recognized from these lease agreements was $752,000 and $678,000, respectively, and was included in occupancy and equipment expense.

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At June 30, 2026, future expected lease payments for leases with terms exceeding one year were as follows (in thousands):

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