Premises and Equipment

12 Months Ended

Dec. 31, 2017

Note 5 - Premises and Equipment

Premises and equipment are summarized by major classification as follows:

	2017			2016
	(dollars in thousands)
Land	$	1,537		$	1,537
Building		29,500			29,545
Leasehold improvements		2,485			2,202
Furniture, fixtures, and equipment		2,868			2,718
Total, at cost		36,390			36,002
Less: Accumulated depreciation and amortization		(13,251	)		(11,972	)
Net premises and equipment	$	23,139		$	24,030

Depreciation expense was $1.2 million for both years ended December 31, 2017 and 2016.

The Company has five retail branch locations in Anne Arundel County, Maryland, of which it owns three and leases two from third parties. The current terms of the leases expire in July 2020 and February 2026. There is no option to renew the lease for any additional terms on the first lease and an option to renew every three to five years on the second lease for twenty-five years. In addition, the Bank leases office space in Annapolis, Maryland from a third party. The lease expired January 2017 and was renewed for an additional five year term.

The leases generally provide for payment of property taxes, insurance, and maintenance costs by the Company. The total rental expense for all real property leases amounted to approximately $246,000 and $175,000 in 2017 and 2016, respectively.

Our minimum lease payments due for each of the next five years are as follows:

Years Ended December 31,	(in thousands)
2018	$	225
2019		225
2020		185
2021		135
2022		115
Thereafter		417
	$	1,302

Our minimum future annual rental income on leases is as follows:

Years Ended December 31,	(in thousands)
2018	$	1,006
2019		1,006
2020		767
2021		515
2022		244
Thereafter		244
	$	3,782

H.S. West, LLC, a subsidiary of the Bank, leases space to three unrelated companies and to a law firm of which the President of the Company and the Bank is a partner. Total gross rental income included in occupancy expense on the Consolidated Statements of Operations was approximately $994,000 and $1.0 million for the years ended December 31, 2017 and 2016, respectively.