Premises and Equipment

12 Months Ended

Dec. 31, 2020

Note 5. Premises and Equipment

A summary of premises and equipment is as follows:


	Useful	December 31,
	lives	2020		2019
(dollars in thousands)

Land		$	685	$	685
Buildings	5-50 years		6,672		6,555
Equipment and fixtures	5-30 years		8,055		7,596
Construction in progress			99		103
Operating Lease Assets			623		745
			16,134		15,684
Accumulated depreciation			(12,281)		(11,923)

		$	3,853	$	3,761

Depreciation expense totaled $0.3 million for the years ended December 31, 2020 and 2019. Amortization of software totaled $0.1 million for the years ended December 31, 2020 and 2019.

Operating lease Right-of-Use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. The Bank leases its Severna Park and Linthicum branches. Minimum lease obligations under the Severna Park branch are $33,000 per year through September 2021. Minimum lease obligations under the Linthicum branch are $144,424 per year through December 2024, adjusted annually on a pre-determined basis. The Bank is also required to pay all maintenance costs under all these leasing arrangements. Income from rent totaled $65,383 and $45,082 and rent expense totaled $173,593 and $165,459 for the years ended December 31, 2020 and 2019, respectively. The Bank uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities as the Company’s leases generally do not provide an implicit rate. Lease terms may include options to extend or terminate when the Company is reasonably certain that the option will be exercised.

Future minimum payments of the Bank’s operating leases as of December 31, 2020 are as follows:


Year ending December 31,	Amount
	(dollars in thousands)
2021	$	185
2022		153
2023		156
2024		161
2025		3
Thereafter		2
Total	$	660