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Bank Premises and Equipment
 12 Months Ended
Dec. 31, 2015
Bank Premises and Equipment  
Bank Premises and Equipment

7. BANK PREMISES AND EQUIPMENT

The following table provides a summary of bank premises and equipment as of December 31:
      
($ in millions) Estimated Useful Life 20152014
Land and improvements(a)  $685793
Buildings 2 - 30 yrs. 1,7551,807
Equipment 2 - 30 yrs. 1,6961,682
Leasehold improvements 5 - 30 yrs. 403416
Construction in progress   8598
Bank premises and equipment held for sale:     
Land and improvements   5523
Buildings   203
Equipment   3 -
Leasehold improvements   3 -
Accumulated depreciation and amortization   (2,466)(2,357)
Total bank premises and equipment  $2,2392,465

  • At December 31, 2015 and 2014, land and improvements included $102 and $165, respectively, associated with parcels of undeveloped land intended for future branch expansion.

Depreciation and amortization expense related to bank premises and equipment was $256 million, $254 million and $245 million for the years ended December 31, 2015, 2014 and 2013, respectively.

The Bancorp monitors changing customer preferences associated with the channels it uses for banking transactions to evaluate the efficiency, competitiveness and quality of the customer service experience in its consumer distribution network. As part of this ongoing assessment, the Bancorp may determine that it is no longer fully committed to maintaining full-service branches at certain of its existing banking center locations. Similarly, the Bancorp may also determine that it is no longer fully committed to building banking centers on certain parcels of land which had previously been held for future branch expansion. On June 16, 2015, the Bancorp's Board of Directors authorized management to pursue a plan to further develop its distribution strategy, including a plan to consolidate and/or sell certain operating branch locations and certain parcels of undeveloped land that had been acquired by the Bancorp for future branch expansion (the “Branch Consolidation and Sales Plan”).

On September 3, 2015, the Bancorp announced the decision to enter into an agreement to sell branch banking locations, retail accounts, certain private banking deposits and related loan relationships in the Pittsburgh MSA to First National Bank of Pennsylvania. On September 30, 2015, the Bancorp announced the decision to enter into an agreement to sell its retail operations, including retail accounts, certain private banking deposits and related loan relationships in the St. Louis MSA to Great Southern Bank. Both transactions are part of the Branch Consolidation and Sales Plan and are expected to close in the first half of 2016. As of December 31, 2015, the Bancorp intended to consolidate and/or sell 107 operating branch locations and to sell an additional 32 parcels of undeveloped land that had been acquired by the Bancorp for future branch expansion. For further information on a subsequent event related to the Branch Consolidation and Sales Plan, refer to Note 31.

The Bancorp performs assessments of the recoverability of long-lived assets when events or changes in circumstances indicate that their carrying values may not be recoverable. Impairment losses associated with such assessments and lower of cost or market adjustments were $109 million, $20 million and $6 million for the years ended December 31, 2015, 2014 and 2013, respectively. The recognized impairment losses were recorded in other noninterest income in the Consolidated Statements of Income.

The following table summarizes the assets and liabilities classified as held for sale as a result of the Branch Consolidation and Sales Plan as of:
       
($ in millions)  December 31, 2015(d) 
Assets:    
 Loans held for sale:    
  Commercial and industrial loans $20 
  Commercial mortgage loans  22 
  Residential mortgage loans  188 
  Home equity  35 
  Automobile loans  4 
Total loans held for sale(a) $269 
 Bank premises and equipment held for sale (included in the preceding table):    
  Land and improvements(b)  25 
  Buildings(b)  14 
  Equipment(b)  3 
  Leasehold improvements(b)  3 
Total bank premises and equipment held for sale (included in the preceding table) $45 
Total assets held for sale $314 
Liabilities:    
 Deposits held for sale:    
  Noninterest-bearing deposits $117 
  Interest-bearing deposits  511 
Total deposits held for sale(c) $628 
Total liabilities held for sale $628 

  • Included in loans held for sale in the Consolidated Balance Sheets.
  • Included in bank premises and equipment in the Consolidated Balance Sheets.
  • Included in noninterest-bearing deposits and interest-bearing deposits in the Consolidated Balance Sheets.
  • Included in the Branch Banking, Consumer Lending and Investment Advisors business segments.

Gross occupancy expense for cancelable and noncancelable leases, which is included in net occupancy expense in the Consolidated Statements of Income, was $110 million, $100 million and $98 million for the years ended December 31, 2015, 2014 and 2013, respectively, which was reduced by rental income from leased premises of $18 million, $17 million and $16 million during the years ended December 31, 2015, 2014 and 2013, respectively. The Bancorp's subsidiaries have entered into a number of noncancelable operating and capital lease agreements with respect to bank premises and equipment.

     
The following table provides the annual future minimum payments under noncancelable operating leases and capital leases for the years ending December 31:
     
($ in millions) Noncancelable Operating Leases Capital Leases
2016$91 7
2017 84 6
2018 82 6
2019 74  5
2020 62  1
Thereafter 242  2
Total minimum lease payments$635 27
Less: Amounts representing interest  - 3
Present value of net minimum lease payments  - 24