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Note 18 - Lease Commitments

12 Months Ended

Dec. 31, 2024

Note 18. Lease Commitments

Lease liabilities represent the Company's obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company's incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the Company's right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and, if applicable, prepaid rent, initial direct costs, and any incentives received from the lessor.

Lease payments

Lease payments for short-term leases are recognized as lease expense on a straight-line basis over the lease term, or for variable lease payments, in the period in which the obligation was incurred. Payments for leases with terms longer than twelve months are included in the determination of the lease liability. Payments may be fixed for the term of the lease or variable. If the lease agreement provides a known escalator, such as a specified percentage increase per year or a stated increase at a specified time, the variable payment is included in the cash flows used to determine the lease liability. If the variable payment is based upon an unknown escalator, such as the consumer price index at a future date, the increase is not included in the cash flows used to determine the lease liability. Three of the Company's leases provide known escalators that are included in the determination of the lease liability. The remaining leases do not have variable payments during the term of the lease.

Options to extend, residual value guarantees, and restrictions and covenants

Of the Company's eleven leases, nine leases offer the option to extend the lease. The calculation of the lease liability includes the additional time and lease payments for options which the Company is reasonably certain it will exercise. None of the Company's leases provide for residual value guarantees and none provide restrictions or covenants that would impact dividends or require incurring additional financial obligations.

The following table presents the operating lease right-of-use asset and operating lease liability as of December 31, 2024 and 2023 (in thousands):

	*Classification in the Consolidated Balance Sheets*	*2024*		*2023*
Operating lease right-of-use asset	Other assets	$	2,003	$	328
Operating lease liability	Accrued interest payable and other liabilities		2,021		330

The following table presents the weighted average remaining operating lease term and the weighted average discount rate for operating leases as of December 31, 2024 and 2023:

	*2024*			*2023*
Weighted average remaining lease term, in years		5.2			1.7
Weighted average discount rate		3.75	%		3.69	%

The following table presents the components of operating lease expense and supplemental cash flow information for the years ended December 31, 2024 and 2023 (in thousands):

	*2024*		*2023*
Lease Expense
Operating lease expense	$	385	$	257
Short-term lease expense		35		26
Total lease expense (1)	$	420	$	283

Cash paid for amounts included in lease liability	$	357	$	240
Right of use assets obtained in exchange for operating lease liabilities commencing during the period	$	2,074	$	20

(1)	Included in occupancy expense in the Company's consolidated statements of income.

The following table presents a maturity schedule of undiscounted cash flows that contribute to the operating lease liability as of December 31, 2024 (in thousands):

Twelve months ending December 31, 2025	$	666
Twelve months ending December 31, 2026		546
Twelve months ending December 31, 2027		217
Twelve months ending December 31, 2028		196
Twelve months ending December 31, 2029		185
Thereafter		508
Total undiscounted cash flows	$	2,318
Less: discount		(297	)
Operating lease liability	$	2,021

The contracts in which the Company is lessee are with parties external to the Company and not related parties.