The Company has three operating leases for its branches in Raleigh, North Carolina, Virginia Beach, Virginia and Columbia, South Carolina with remaining terms from 8 to 14 years. Most lease agreements consist of initial terms ranging between 10 - 15 years with options to extend the lease by at least 5 years. First Carolina Bank operating lease agreements do not contain any material residual value guarantees or material restrictive covenants. Pursuant to these agreements, First Carolina Bank does not have any commitments that would meet the definition of a finance lease.

As most of First Carolina Bank’s operating leases do not provide an implicit rate, First Carolina Bank utilized its incremental borrowing rate based on the information available at either the adoption of ASC 842, Leases (“ASC 842”) or the commencement date of the lease, whichever was later, when determining the present value of lease payments. There were no new leases entered into during the year ended December 31, 2025 and six months ended June 30, 2026.

The following table summarizes operating lease ROU assets and operating lease liabilities and their corresponding balance sheet location:


(Dollars in thousands)

	Classification	June 30, 2026		December 31, 2025
Assets
Operating lease ROU assets	Prepaid expenses and other assets	$	6,393	$	6,966

Liabilities
Operating lease liabilities	Accrued expenses and other liabilities	$	6,814	$	7,385

The following table summarizes operating lease cost and its corresponding income statement location for the periods presented:

(Dollars in thousands)

Classification

Three Months Ended
June 30, 2026

Three Months Ended
June 30, 2025

Noninterest expense

Operating lease cost

Occupancy and equipment

347

316

(Dollars in thousands)

Classification

Six Months Ended
June 30, 2026

Six Months Ended
June 30, 2025

Noninterest expense

Operating lease cost

Occupancy and equipment

693

615

Maturities of non-cancellable operating lease liabilities, included in accrued expenses and other liabilities on the statement of financial conditions were as follows at June 30, 2026:


(Dollars in thousands)
Maturity Analysis	Operating
2026	$	1,402
2027	1,442
2028	1,476
2029	1,511
2030	857
Thereafter	735
Total undiscounted cash flows	7,423
Less: present value discount	(609)
Total lease liabilities	$	6,814

Cash paid pursuant to operating lease liabilities was $691 thousand and $565 thousand for the six months ended June 30, 2026 and 2025, respectively, and reported as cash flows used in operating activities in the consolidated statement of cash flows.

The following table summarizes the weighted average remaining lease term and discount rate for First Carolina Bank's operating leases at June 30, 2026 and December 31, 2025:


	June 30, 2026		December 31, 2025
Operating Leases weighted average remaining lease term (years)	5.6		6.1
Operating Leases weighted average discount rate	3.42	%	3.44	%