LEASES

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

LEASES

NOTE 4 – LEASES

On January 1, 2019, the Bank adopted ASU 2016-02, “Leases (Topic 842) and all subsequent ASUs that modified Topic 842. 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 leases for two Bank facilities were accounted for as finance leases (previously referred to as capital leases) at September 30, 2019. In September 2019, the bank completed the purchase of its Newburgh, New York branch, which had previously been treated as a finance lease. The remaining leases were classified as operating leases, and therefore, were previously not recognized on the Bank's Consolidated Balance Sheet. Effective January 1, 2019, the Bank recorded approximately $1.6 million of right-of-use assets and corresponding lease liability related to these operating leases. The Bank does not have any leases with related parties and equipment leases are material to Salisbury's consolidated financial statements.

The following table provides the assets and liabilities as well as the costs of operating and finance leases that are included in the Bank's consolidated balance sheet as of September 30, 2019 and consolidated income statements for the nine months and three months ended September 30, 2019.

($ in thousands, except lease term and discount rate)	Classification				September 30, 2019
Assets
Operating	Other assets			$	1,408
Finance	Bank premises and equipment 1				1,529
Total Leased Assets				$	2,937
Liabilities
Operating	Other liabilities			$	1,408
Finance	Finance lease				1,729
Total lease liabilities				$	3,137
1 Net of accumulated depreciation of $269 thousand.
Lease cost	Classification		Nine months ended September 30, 2019		Three months ended September 30, 2019
Operating leases	Premises and equipment	$	193	$	70
Finance leases:
Amortization of leased assets	Premises and equipment		174		54
Interest on finance leases	Interest expense		135		43
Total lease cost		$	502	$	167
Weighted Average Remaining Lease Term
Operating leases					8.4 years
Financing leases					16.0 years
Weighted Average Discount Rate 1
Operating leases					3.70%
Financing leases					8.41%
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 September 30, 2019.

Future minimum lease payments (in thousands)		Operating Leases			Finance Leases
2019	$	61		$	47
2020		246			186
2021		228			192
2022		199			195
2023		134			197
Thereafter		783			2,174
Total future minimum lease payments		1,651			2,991
Less amount representing interest		(243	)		(1,262	)
Total present value of net future minimum lease payments	$	1,408		$	1,729