Premises and Equipment

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Premises and Equipment

NOTE 9 – PREMISES AND EQUIPMENT

The composition of premises and equipment was as follows at December 31:

(dollars in thousands)	2016			2015
Land	$	71,769		$	41,604
Buildings		322,165			111,982
Furniture, fixtures, and equipment		102,631			94,819
Leasehold improvements		28,555			33,111
Total		525,120			281,516
Accumulated depreciation		(95,498	)		(84,840	)
Premises and equipment, net	$	429,622		$	196,676

During 2016, the Company purchased certain bank properties that it had previously leased, including its executive offices, for an aggregate purchase price of $196.1 million. Also contributing to the increase in premises and equipment at December 31, 2016 were $35.7 million of assets attributable to the Anchor acquisition.

Depreciation expense was $16.6 million in 2016, $14.1 million in 2015, and $12.4 million in 2014.

Operating Leases

Old National rents certain premises and equipment under operating leases, which expire at various dates. Many of these leases require the payment of property taxes, insurance premiums, maintenance, and other costs. In some cases, rentals are subject to increase in relation to a cost-of-living index. The leases have original terms ranging from less than one year to twenty-four years, and Old National has the right, at its option, to extend the terms of certain leases for four additional successive terms of five years. Old National does not have any material sub-lease agreements.

Rent expense was $25.4 million in 2016, $29.1 million in 2015, and $29.0 million in 2014. The following is a summary of future minimum lease commitments as of December 31, 2016:

(dollars in thousands)
2017	$	16,928
2018		15,918
2019		15,262
2020		14,679
2021		14,161
Thereafter		79,881
Total	$	156,829

Old National purchased 23 properties during 2016 that it had previously leased, 20 of which had deferred gains that were accelerated when the associated leases were terminated. These gains were partially offset by the recognition of deferred rent expense, cease-use liabilities, and other expense, resulting in a net gain of $12.0 million.

Old National purchased 14 properties during 2015 that it had previously leased, all of which had deferred gains that were accelerated when the associated leases were terminated. These gains were partially offset by the recognition of deferred rent expense and other expense, resulting in a net gain of $10.8 million.

Old National had deferred gains remaining associated with prior sale leaseback transactions totaling $10.3 million as of December 31, 2016 and $40.7 million as of December 31, 2015. The gains will be recognized over the remaining term of the leases. The leases had original terms ranging from five to twenty-four years.

Capital Leases

Old National leases a branch building and certain equipment under capital leases. See Note 16 to the consolidated financial statements for detail regarding these leases.