Note 8 – Lease Commitments And Contingencies

Operating Leases

The Company determines if an arrangement is a lease at inception. All of the Company’s leases are currently classified as operating leases and are included in other assets and other liabilities on the Company’s Consolidated Balance Sheets. Periodic operating lease costs are recorded in occupancy expenses of premises on the Company's Consolidated Statements of Income.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease arrangements. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of the expected future lease payments over the remaining lease term. In determining the present value of future lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date. The operating ROU assets are adjusted for any lease payments made at or before the lease commencement date, initial direct costs, any lease incentives received and, for acquired leases, any favorable or unfavorable fair value adjustments. The present value of the lease liability may include the impact of options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options provided in the lease terms. Lease expense is recognized on a straight-line basis over the expected lease term. Lease agreements that include lease and non-lease components, such as common area maintenance charges, are accounted for separately.

The table below details the right of use asset (net of accumulated amortization), lease liability and other information related to the Company's operating leases:


	Consolidated Balance
(dollars in thousands)	Sheet Classification	June 30, 2025			December 31, 2024

Operating lease right of use asset	Other assets	$	820		$	926
Operating lease liabilities	Other liabilities	$	862		$	967

Other information related to leases:
Weighted average remaining lease term of operating leases		4.5 years			4.7 years
Weighted average discount rate of operating leases			4.48	%		4.40	%

The table below details the Company's lease cost, which is included in occupancy expense in the Consolidated Statements of Income.


	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)	2025		2024		2025		2024

Operating lease cost	$	74	$	75	$	145	$	147

Cash paid for lease liability	$	59	$	57	$	118	$	114

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liability is as follows:


(dollars in thousands)	As of June 30, 2025
Lease payments due:
Within one year	$	255
After one but within two years		187
After two but within three years		90
After three but within four years		75
After four but within five years		74
After five years		230
Total undiscounted lease payments		911
Less: imputed interest		49
Present value of operating lease liabilities	$	862

BV Financial, Inc. 10-Q