Premises and Equipment

12 Months Ended

Dec. 31, 2022

Premises and Equipment

Premises and Equipment

Note 5. Premises and Equipment

A summary of premises and equipment is as follows:

	Useful	December 31,
	lives	2022		2021
(dollars in thousands)
Land		$	685	$	685
Buildings	5-50 years		6,781		6,723
Equipment and fixtures	5-30 years		8,515		8,354
Construction in progress			71		36
Operating Lease Assets			366		478
			16,418		16,276
Accumulated depreciation			(13,141)		(12,712)
		$	3,277	$	3,564

Depreciation expense totaled $0.3 million for the years ended December 31, 2022 and 2021. Amortization of software totaled $0.1 million for the years ended December 31, 2022 and 2021.

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 $25,000 per year through September 2023. Minimum lease obligations under the Linthicum branch are $153,219 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 $74,898 and $69,312 and rent expense totaled $182,081 and $177,845 for the years ended December 31, 2022 and 2021, 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, 2022 are as follows:

Year ending December 31,	Amount
	(dollars in thousands)
2023	$	188
2024		167
2025		10
2026		8
2027		4
Thereafter		—
Total	$	377