Premises and Equipment

Details of premises and equipment, at cost, for the periods indicated, were as follows:



	2017			2016
Land and land improvements	$	2,985		$	3,012
Buildings and leasehold improvements	37,054			36,958
Furniture, fixtures and equipment	36,053			34,043
Total cost	76,092			74,013
Accumulated depreciation and amortization	(34,201		)	(31,140		)
Net premises and equipment	$	41,891		$	42,873

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



		For The Year Ended December 31,
Fixed Asset Type	Income Statement Line Item	2017		2016		2015
Equipment and data	Furniture, equipment and data processing	$	1,874	$	1,942	$	1,620
Premises	Net occupancy costs	1,643		1,757		1,140
Software	Furniture, equipment and data processing	244		275		337
Equipment, data and premises	Merger and acquisition costs	—		452		517
Total		$	3,761	$	4,426	$	3,614

At December 31, 2017 and 2016, the Company has capitalized software costs of $3.8 million and $3.6 million, respectively, and related accumulated depreciation expense of $3.5 million and $3.2 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 acquisition of SBM.

The Company did not have any material gains or losses from the sale of premises and equipment for the year ended December 31, 2017, 2016 or 2015.

The Company enters into noncancellable lease arrangements primarily for its office buildings and branches. 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 $1.5 million, $1.8 million and $1.7 million for the year ended December 31, 2017, 2016 and 2015, respectively, associated with its operating lease arrangements.

The Company has one capital lease for a branch 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, 2017 and 2016 and accumulated depreciation of $502,000 and $459,000 at December 31, 2017 and 2016, respectively. The associated depreciation expense was reported within net occupancy costs on the consolidated statements of income.

In connection with the SBM acquisition, the Company assumed a lease arrangement between SBM 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, 2017, under current operating and capital lease contracts, the Company had the following schedule of future minimum lease payments:



	Operating		Capital
2018	$	1,429	$	126
2019	1,394		126
2020	888		126
2021	671		130
2022	484		131
Thereafter	1,531		425
Total minimum lease payments	$	6,397	1,064
Less: amount representing interest⁽¹⁾			273
Present value of net minimum lease payments⁽²⁾			$	791


(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, 2017 and 2016, the capital lease liability was $791,000 and $858,000, respectively.