Bank Premises and Equipment

9 Months Ended

Sep. 30, 2016

7. Bank Premises and Equipment

The following table provides a summary of bank premises and equipment as of:

($ in millions)		September 30, 2016	December 31, 2015
Land and improvements^(a)	$	663	685
Buildings		1,658	1,755
Equipment		1,725	1,696
Leasehold improvements		394	403
Construction in progress		110	85
Bank premises and equipment held for sale:
Land and improvements		34	55
Buildings		10	20
Equipment		1	3
Leasehold improvements		-	3
Accumulated depreciation and amortization		(2,511)	(2,466)
Total bank premises and equipment	$	2,084	2,239

(a) At September 30, 2016 and December 31, 2015, land and improvements included $94 and $102, respectively, associated with parcels of undeveloped land intended for future branch expansion.

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”). In addition, the Bancorp announced on September 13, 2016 that it had identified an additional 44 branch locations and 5 parcels of undeveloped land that it planned to consolidate or sell.

On January 29, 2016, the Bancorp closed the previously announced sale in the St. Louis MSA to Great Southern Bank and recorded a gain on the sale of $8 million which was recorded in other noninterest income in the Condensed Consolidated Statements of Income. Additionally, on April 22, 2016, the Bancorp closed the previously announced sale in the Pittsburgh MSA to First National Bank of Pennsylvania and recorded a gain on the sale of $11 million which was recorded in other noninterest income in the Condensed Consolidated Statements of Income. Both transactions were part of the Branch Consolidation and Sales Plan.

As of September 30, 2016, the Bancorp had 72 branch locations and 37 parcels of undeveloped land that had been acquired for future branch expansion that it intended to consolidate or sell. These branch locations and parcels of undeveloped land, which include unsold properties from the Branch Consolidation and Sales Plan as well as properties included in the September 13, 2016 announcement, represent $45 million, $17 million and $2 million of land and improvements, buildings and equipment, respectively, included in bank premises and equipment in the Condensed Consolidated Balance Sheets as of September 30, 2016, of which $34 million, $10 million and $1 million, respectively, were classified as held for sale.

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 $28 million and $31 million for the three and nine months ended September 30, 2016, respectively, and $2 million and $104 million for the three and nine months ended September 30, 2015, respectively. The recognized impairment losses were recorded in other noninterest income in the Condensed Consolidated Statements of Income.

On September 29, 2016, the Bancorp closed on the sale of an office complex. The sale also included all of the Bancorp’s rights, title and interest as a landlord under existing leases in the complex. Under the terms of the transaction, the Bancorp received proceeds of approximately $31 million and entered into a lease agreement whereby the Bancorp leased-back approximately 25% of the office complex. In conjunction with the transaction, which qualified as a sale-leaseback under U.S. GAAP, the Bancorp retired assets with a net book value of approximately $10 million, recognized a deferred gain of $10 million, which will be amortized as a reduction of rent expense over the 15 year lease term, and recorded a gain on the transaction of $11 million which was recorded in other noninterest income in the Condensed Consolidated Statements of Income.