Premises and Equipment

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



	2018			2017
Buildings and leasehold improvements	$	39,594		$	37,054
Furniture, fixtures and equipment	37,210			36,053
Land and land improvements	3,069			2,985
Total cost	79,873			76,092
Accumulated depreciation and amortization	(37,378		)	(34,201		)
Net premises and equipment	$	42,495		$	41,891

At December 31, 2018 and 2017, the Company had capitalized software costs of $4.0 million and $3.8 million, respectively, and related accumulated depreciation expense of $3.7 million and $3.5 million, respectively, and was presented within other assets on the consolidated statements of condition.

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



		For The Year Ended December 31,
Fixed Asset Type	Income Statement Line Item	2018		2017		2016
Furniture, equipment and data	Furniture, equipment and data processing	$	1,938	$	1,874	$	1,942
Premises	Net occupancy costs	1,609		1,643		1,757
Software	Furniture, equipment and data processing	218		244		275
Equipment, data and premises	Merger and acquisition costs	—		—		452
Total		$	3,765	$	3,761	$	4,426

The Company did not have any material gains or losses from the sale of premises and equipment for the year ended December 31, 2018, 2017 or 2016.

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 linked 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, $1.5 million and $1.8 million for the year ended December 31, 2018, 2017 and 2016, respectively, associated with its operating lease arrangements.

The Company has two branch leases classified as capital leases. Each is a noncancellable leases arrangement, with one scheduled to mature in 2026 without any extension options and the other scheduled to mature in 2028 with four consecutive five-year extension options. The capital leases have a cost basis of $1.7 million and $855,000 at December 31, 2018 and 2017 and accumulated depreciation of $552,000 and $502,000 at December 31, 2018 and 2017, respectively, and was presented within premises and equipment on the consolidated statements of condition. The associated depreciation expense for the year ended December 31, 2018, 2017 and 2016 was $46,000, $37,000 and $39,000, respectively, and was reported within net occupancy costs on the consolidated statements of income. At December 31, 2018 and 2017, the related capital lease liability was $1.6 million and $791,000, respectively, and was presented within long-term borrowings on the consolidated statements of condition. The associated interest expense for the year ended December 31, 2018, 2017 and 2016 was $40,000, $45,000 and $47,000, respectively, and was presented within interest on borrowings on the consolidated statements of income.

In connection with the SBM acquisition, 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, 2018, under current operating and capital lease contracts, the Company had the following schedule of future minimum lease payments:



	Operating		Capital
2019	$	1,420	$	179
2020	941		179
2021	726		182
2022	539		184
2023	434		184
Thereafter	1,268		1,592
Total minimum lease payments	$	5,328	2,500
Less: amount representing interest⁽¹⁾			920
Present value of net minimum lease payments⁽²⁾			$	1,580


(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 long-term borrowings on the consolidated statements of condition.