PREMISES, FURNITURE, AND EQUIPMENT

The following table summarizes the Company's premises, furniture, and equipment by category.

Premises, Furniture, and Equipment

(Dollar amounts in thousands)



	As of December 31,
	2016			2015
Land	$	18,304		$	43,442
Premises	94,369			152,444
Furniture and equipment	105,859			90,672
Total cost	218,532			286,558
Accumulated depreciation	(140,030		)	(171,708		)
Net book value of premises, furniture, and equipment	78,502			114,850
Assets held-for-sale	4,075			7,428
Premises, furniture, and equipment, net	$	82,577		$	122,278

On September 27, 2016, the Bank completed a sale-leaseback transaction, whereby the Bank sold to a third-party for an aggregate cash purchase price of $150.3 million, 55 properties with book values totaling $58.8 million, owned and operated by the Bank as branches. Upon the sale of the branches the Bank concurrently entered into triple net lease agreements with certain affiliates of the third-party for each of the branches sold. Subject to the right of the Bank to terminate certain of the lease agreements at the end of the eleventh year, the lease agreements have initial terms of 14 years. Each lease agreement provides the Bank with five consecutive renewal options of five years each. The sale-leaseback transaction resulted in a pre-tax gain of $88.0 million, net of transaction related expenses, of which $5.5 million was immediately recognized in earnings. The remaining pre-tax gain of $82.5 million was deferred and will be accreted into income on a straight-line basis over the initial terms of the leases. Accretion related to the deferred gain of $1.5 million was recognized in 2016 and is included in net occupancy and equipment expense in the Consolidated Statement of Income. Aggregate first year rent expense to be paid under the sale-leaseback transaction is approximately $10.5 million with a 1.50% annual rent escalation during the initial term and during the first and second five-year renewal periods.

As of December 31, 2016 and 2015, assets held-for-sale consisted of former branches that are no longer in operation and parcels of land previously purchased for expansion.

Depreciation on premises, furniture, and equipment totaled $12.8 million in 2016, $13.4 million in 2015, and $12.2 million in 2014.

Operating Leases

As of December 31, 2016, the Company was obligated to utilize certain premises and equipment under certain non-cancelable operating leases, which expire at various dates through the year ending December 31, 2033. Many of these leases contain renewal options and certain leases provide options to purchase the leased property during or at the expiration of the lease period at specific prices. Some leases contain escalation clauses calling for rentals to be adjusted for increased real estate taxes and other operating expenses or proportionately adjusted for increases in consumer or other price indices. The following summary reflects the future minimum payments by year required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2016.

Future Minimum Operating Lease Payments

(Dollar amounts in thousands)



	Total
Year Ending December 31,
2017	$	18,229
2018	16,650
2019	16,173
2020	15,580
2021	15,551
2022 and thereafter	145,095
Total minimum lease payments	$	227,278

Deferred pre-tax gains of $82.5 million related to the sale-lease back transaction will be accreted as a reduction to lease expense in other expenses on the Condensed Consolidated Statements of Income on a straight-line basis over the initial terms of the leases.

The Company assumed certain operating leases related to various branches in a 2014 acquisition. On the date of acquisition, an intangible liability of $10.6 million was recorded as the cash flows of the leases exceeded the fair market value. This intangible liability is accreted into income as a reduction to net occupancy and equipment expense using the straight-line method over the initial term of each lease, which expire between 2018 to 2030. The intangible liability is included in accrued interest and other liabilities in the Consolidated Statements of Financial Condition.

The following table presents the remaining scheduled accretion of the intangible liability by year.

Scheduled Accretion of Operating Lease Intangible

(Dollar amounts in thousands)



	Total
Year Ending December 31,
2017	$	1,180
2018	935
2019	685
2020	648
2021	648
2022 and thereafter	3,997
Total accretion	$	8,093

The following table presents net operating lease expense for the years ended December 31, 2016, 2015, and 2014.

Net Operating Lease Expense

(Dollar amounts in thousands)



	Years Ended December 31,
	2016			2015			2014
Lease expense charged to operations	$	11,207		$	6,850		$	4,669
Accretion of operating lease intangible ⁽¹⁾	(1,171		)	(1,144		)	(453		)
Accretion of deferred gain on sale-leaseback transaction ⁽¹⁾	(1,473		)	—			—
Rental income from premises leased to others ⁽¹⁾	(527		)	(606		)	(541		)
Net operating lease expense	$	8,036		$	5,100		$	3,675


⁽¹⁾	Included as reductions to net occupancy and equipment expense in the Consolidated Statements of Income.