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NOTE 4 - LEASES

6 Months Ended

Jun. 30, 2021

NOTE 4 - LEASES

The Bank leases facilities and equipment with various expiration dates through 2036. The facilities leases have varying renewal options, generally require fixed annual rent, and provide that real estate taxes, insurance, and maintenance are to be paid by Salisbury. The Bank does not have any leases with related parties and equipment leases are not material to Salisbury's consolidated financial statements. In second quarter 2021, Salisbury executed a purchase and sale agreement to sell its office building in Poughkeepsie, New York. Salisbury will also relocate its Poughkeepsie, New York branch to leased space nearby. As a result of the sale, which is expected to close in late third quarter or early fourth quarter 2021, Salisbury will recognize a pre-tax loss of approximately $147 thousand.

The following table provides information on the operating and finance leases that are included in the Bank's consolidated balance sheet as of June 30, 2021 and December 31, 2020, and consolidated income statements for the six months and three months ended June 30, 2021 and 2020.

($ in thousands, except lease term and discount rate)	Classification		June 30, 2021		December 31, 2020
Assets
Operating	Other assets	$	1,074	$	1,182
Finance	Bank premises and equipment ¹		1,352		1,402
Total Leased Assets		$	2,426	$	2,584
Liabilities
Operating	Other liabilities	$	1,074	$	1,182
Finance	Finance lease		1,646		1,673
Total lease liabilities		$	2,720	$	2,855
¹ Net of accumulated depreciation of $446 thousand and $396 thousand, respectively.

Lease cost	Classification		Six months ended June 30, 2021		Three months ended June 30, 2021
Operating leases	Premises and equipment	$	147	$	68
Finance leases:
Amortization of leased assets	Premises and equipment		51		25
Interest on finance leases	Interest expense		69		36
Total lease cost		$	267	$	129

Lease cost	Classification		Six months ended June 30, 2020		Three months ended June 30, 2020
Operating leases	Premises and equipment	$	123	$	61
Finance leases:
Amortization of leased assets	Premises and equipment		51		25
Interest on finance leases	Interest expense		71		36
Total lease cost		$	245	$	122

Weighted Average Remaining Lease Term	June 30, 2021	December 31, 2020
Operating leases	7.4 years	7.6 years
Financing leases	13.9 years	14.2 years
Weighted Average Discount Rate ¹
Operating leases	3.8%	3.7%
Financing leases	8.3%	8.4%
¹ Salisbury uses the FHLBB five-year Advance rate as the discount rate, as its leases do not provide an implicit rate.

The following is a schedule by years of the present value of the net minimum lease payments as of June 30, 2021.

Future minimum lease payments (in thousands)		Operating Leases			Finance Leases
2021	$	121		$	96
2022		199			195
2023		146			197
2024		130			200
2025		137			203
Thereafter		436			1,777
Total future minimum lease payments		1,169			2,668
Less amount representing interest		(95	)		(1,022	)
Total present value of net future minimum lease payments	$	1,074		$	1,646