Premises and Equipment

Details of premises and equipment, at cost, at December 31, were as follows:



	2016			2015
Land and land improvements	$	3,012		$	3,102
Buildings and leasehold improvements	36,958			37,926
Furniture, fixtures and equipment	34,043			35,083
Total cost	74,013			76,111
Accumulated depreciation and amortization	(31,140		)	(30,152		)
Net premises and equipment	$	42,873		$	45,959

Depreciation and amortization expense for the Company for periods indicated were as follows:



		For The Year Ended December 31,
Fixed Asset Type	Income Statement Line Item	2016		2015		2014
Equipment and data	Furniture, equipment and data processing	$	1,942	$	1,620	$	1,713
Premises	Net occupancy costs	1,757		1,140		1,003
Software	Furniture, equipment and data processing	275		337		335
Equipment, data and premises	Merger and acquisition costs	452		517		—
Total		$	4,426	$	3,614	$	3,051

At December 31, 2016 and 2015, the Company has capitalized software costs of $3.6 million and $3.8 million, respectively, and related accumulated depreciation expense of $3.2 million and $3.3 million, respectively, and was presented within other assets on the consolidated statements of condition.

Included in merger and acquisition costs on the consolidated statements of income for the year ended December 31, 2015 was $1.1 million of fixed asset disposal costs incurred as a result of the Merger.

The Company did not have any material gains or losses from the sale of premises and equipment for the year ended December 31, 2016, 2015 or 2014.

The Company enters into noncancellable lease arrangements primarily for its office buildings and branch facilities. Certain lease arrangements contain clauses requiring increasing rental payments over the lease term, which may be indexed to an index (commonly the Consumer Price Index) or the increases may be contractually stipulated. Furthermore, many of these lease arrangements provide the Company with the option to renew the lease arrangement after the initial lease term. The Company incurred expenses of $1.8 million, $1.7 million and $1.2 million for the year ended December 31, 2016, 2015 and 2014, respectively, associated with its operating lease arrangements.

The Company has one capital lease for a branch facility with payments that extend until 2026 at an interest rate of 9.75% per year. The capital lease, recorded in premises and equipment, has a cost basis of $855,000 at December 31, 2016 and 2015 and accumulated depreciation of $459,000 and $416,000 at December 31, 2016 and 2015, respectively. The associated depreciation expense was reported within net occupancy costs on the consolidated statements of income.

In connection with the Merger, the Company assumed a lease arrangement between SBM's wholly-owned subsidiary, The Bank of Maine, and two of its employees. The lease is for a period of five years with an expiration date of December 1, 2019 with two consecutive five year extension periods available at the option of the Company. The lease arrangement contains certain termination clauses whereby the Company has the right to terminate the lease arrangement should the employees be terminated and/or certain mortgage loan production metrics not be met over a consecutive 12 month period.

At December 31, 2016, under current operating and capital lease contracts, the Company had the following schedule of future minimum lease payments:



	Operating		Capital
2017	$	1,427	$	126
2018	1,186		126
2019	1,144		126
2020	644		126
2021	447		130
Thereafter	1,783		555
Total minimum lease payments	$	6,631	1,189
Less: amount representing interest⁽¹⁾			331
Present value of net minimum lease payments⁽²⁾			$	858


(1)	Amount necessary to reduce net minimum lease payments to present value calculated at the Company's incremental borrowing rate at lease inception.


(2)	Reflects the liability reported within short- and long-term borrowings on the consolidated statements of condition. At December 31, 2016 and 2015, the capital lease liability was $858,000 and $922,000, respectively.