Note

Premises and Equipment and Premises and Equipment Held For Sale

A summary of premises and equipment, excluding premises and equipment held for sale, and the related depreciation and amortization as of

March

31,

is as follows:

	Estimated Useful
	Life (in years)				2017			2016

Land					$	1,064,044		$	1,064,046
Office buildings and improvements		3	-	39		3,800,195			3,535,769
Furniture and equipment		3	-	7		2,602,749			2,147,000
Automobiles			5			43,505			41,015
Assets not in service						30,900			11,640
						7,541,393			6,799,470
Accumulated depreciation and amortization						(3,867,113	)		(3,243,996	)
Net premises and equipment					$	3,674,280		$	3,555,474

Depreciation and amortization expense					$	334,210		$	278,865

The Bank closed its Towson branch in fiscal

2016

and relocated it to the administrative office, which is also located in Towson. A branch presence was needed at the administrative office to assist the lending area in servicing borrowers. This was also a means to reduce costs and make more efficient use of the Bank’s premises. The building and land was sold in

June 2015

for

$500,000

and the Bank recognized a gain of

$407,188

on the sale.

In the acquisition of Fairmount, the Company acquired

three

lots and an unoccupied branch building that was

not

in operation at the time of acquisition. The Company sold the unoccupied branch building in fiscal

2017

with a book balance of

$405,000

for

$425,000

with net proceeds of

$393,000,

excluding closing costs.

In the acquisition of Fraternity, the Company acquired

two

branches and the main office located in Baltimore City that included both the administrative offices of Fraternity and a full-service branch. The main office was owned by the bank and the other

two

branches were under a lease agreement at the time of acquisition. One of the leased branches was in close proximity and serviced the same geographic area as

one

of Hamilton’s existing branches that was also leased. The acquired branch was in a better location, smaller in size, and less expensive to lease. As a result, management decided to close our existing branch in

May 2016

and move our current customers to the newly acquired location. In closing the existing branch, we were unable to get out of the existing lease agreement. Consequently, in accordance with accounting guidelines, we immediately recognized the present value of the remaining lease payments under that lease, which amounted to

$495,000.

We are currently performing an analysis with respect to selling the main office location acquired in the Fraternity acquisition. The building includes the former administrative offices of Fraternity as well as an operating branch. The administrative office space is

not

being utilized and we feel there can be additional cost savings by relocating the branch to a smaller space in the same geographic area. Based upon these circumstances, we are reporting the building and land on the balance sheet as “premises and equipment held for sale” at

$547,884,

the lower of cost or fair value.

March 31, 2017,

the Bank had

four

operating leases that include

two

branches acquired from Fraternity, the closed branch discussed in the preceding paragraph, and the administrative office lease in Baltimore County. The administrative office lease was renewed under a

five

year option in

December 2016.

Each of the lease agreements have options to renew at the end of the lease term. Rental expense under the

four

leases for the years ended

March 31, 2017

and

2016

was

$1,002,477

and

$394,694,

respectively. The minimum future rental commitment under the lease agreements is as follows:

Year ending March 31,	Payments
2018		525,455
2019		528,111
2020		559,497
2021		468,471
2022		338,631
Thereafter		86,596

	$	2,506,761