6.BANK PREMISES AND EQUIPMENT

Components of bank premises and equipment are summarized as follows:


		As of December 31,
(dollars in thousands)	2018		2017

Land	$	2,865	$	2,865
Bank premises		13,902		13,981
Furniture, fixtures and equipment		11,075		10,413
Leasehold improvements		7,263		5,187

Total		35,105		32,446

Less accumulated depreciation and amortization		(16,816)		(15,870)

Bank premises and equipment, net	$	18,289	$	16,576

Depreciation expense, which includes amortization of leasehold improvements, was $1.3 million, $1.3 million and $1.4 million for the years ended December 31, 2018, 2017 and 2016. The estimated useful life was 40 years for bank premises, 3 to 7 years for furniture and fixtures and for leasehold improvements was the term of the lease.

The Company has one lease of several copiers that was classified as a capital lease in 2018. The following is an analysis of the leased property under a capital lease:


		Asset Balance at
		December 31,
(dollars in thousands)	2018		2017

Copiers	$	375	$	-

Less accumulated depreciation and amortization		(42)		-

Leased property under capital leases, net	$	333	$	-

The following is a schedule of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2018:


(dollars in thousands)	Amount

2019	$	77
2020		77
2021		77
2022		77
2023		52
2024 and thereafter		-

Total minimum lease payments (a)		360

Less amount representing interest (b)		(24)

Present value of net minimum lease payments	$	336

(a)

The future minimum lease payments have not been reduced by estimated executory costs (such as taxes and maintenance) since this amount was deemed immaterial by management.

(b)

Amount necessary to reduce net minimum lease payments to present value calculated at the Company’s incremental borrowing rate upon lease inception.

During 2018, the Company recognized $42 thousand of amortization expense and $6 thousand of interest expense related to leased assets. The total expense of $48 thousand is included in premises and equipment expense on the consolidated statements of income.

In 2018, the Company leased its Green Ridge, Pittston, Peckville, Back Mountain and Clarks Summit branches under the terms of operating leases. In April 2018, the Company entered into an agreement to lease a branch in Mountaintop, PA expected to open in August 2019. The Company also leases three standalone ATMs under operating leases. Rental expense for the branches and equipment under operating leases was $0.4 million, $0.4 million and $0.3 million in 2018, 2017 and 2016. The future minimum lease payments for the Company’s branch network and equipment under operating leases that have lease terms in excess of one year as of December 31, 2018 are as follows:


(dollars in thousands)	Amount

2019	$	354
2020		403
2021		408
2022		414
2023		417
2024 and thereafter		8,486

Total	$	10,482

During the first quarter of 2014, the Company received through foreclosure the deed that secured the collateral for a non-owner occupied commercial real estate loan that was on non-accrual status. The loan, in the amount $1.0 million, was transferred from loans to foreclosed assets held-for-sale and then to bank premises. Currently the building has a tenant under a lease agreement expiring in 2021, but the Company expects to use the property for future facility expansion.