RIGHT-OF-USE (“ROU”) ASSETS AND LEASE LIABILITIES
The Company has 13 lease contracts, including seven finance leases and six operating leases at December 31, 2025. These leases are for eight of our branches, three loan production facilities, one commercial banking office and one additional office housing various Bank functions. There were four new lease agreements entered into in 2025.
The following table presents our lease expense for finance and operating leases for the periods presented:
| | | | | | | | | | | | | | | | | | | | |
| | December 31, |
| (Dollars in Thousands) | | 2025 | | 2024 | | 2023 |
| Operating Lease Expense | | $ | 252 | | | $ | 124 | | | $ | 48 | |
| Amortization of ROU Assets - finance leases | | 608 | | | 490 | | | 365 | |
| Interest on lease liabilities - finance leases | | 570 | | | 462 | | | 292 | |
| Total Lease Expense | | $ | 1,430 | | | $ | 1,076 | | | $ | 706 | |
ROU assets are included in other assets in the Consolidated Balance Sheets. The following table presents our ROU assets, cash flows, weighted average lease terms, discount rates for finance and operating leases and ROU assets obtained in exchange for lease liabilities for the periods presented:
| | | | | | | | | | | | | | |
| | December 31, |
| (Dollars in Thousands) | | 2025 | | 2024 |
| Operating Leases | | | | |
| ROU assets | | $ | 1,083 | | | $ | 294 | |
| Operating cash flows | | $ | 334 | | | $ | 167 | |
| Finance Leases | | | | |
| ROU assets | | $ | 8,952 | | | $ | 9,560 | |
| Operating cash flows | | $ | 570 | | | $ | 462 | |
| Financing cash flows | | $ | 232 | | | $ | 179 | |
| Weighted Average Lease Term - Years | | | | |
| Operating leases | | 2.9 years | | 2.8 years |
| Finance leases | | 15.2 years | | 16.2 years |
| Weighted Average Discount Rate | | | | |
| Operating leases | | 6.40 | % | | 6.60 | % |
| Finance leases | | 5.70 | % | | 5.70 | % |
| ROU Assets obtained in exchange for Lease Liabilities | | | | |
| Operating leases | | $ | 1,041 | | | $ | — | |
| Finance leases | | $ | — | | | $ | 2,995 | |
Lease liabilities are included in other liabilities in the Consolidated Balance Sheets. The following table presents the maturity analysis of lease liabilities for finance and operating leases as of December 31, 2025:
| | | | | | | | | | | | | | | | | | | | |
| (Dollars in Thousands) | | Finance | | Operating | | Total |
| Maturity Analysis | | | | | | |
| 2026 | | $ | 862 | | | $ | 444 | | | $ | 1,306 | |
| 2027 | | 884 | | | 384 | | | 1,268 | |
| 2028 | | 903 | | | 235 | | | 1,138 | |
| 2029 | | 923 | | | 98 | | | 1,021 | |
| 2030 | | 943 | | | — | | | 943 | |
| Thereafter | | 10,514 | | | — | | | 10,514 | |
| Total | | 15,029 | | | 1,161 | | | 16,190 | |
| Less: Present value discount | | (5,158) | | | (105) | | | (5,263) | |
| Lease Liabilities | | $ | 9,871 | | | $ | 1,056 | | | $ | 10,927 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.