Fifth Third Bank 2014 Annual Report Download - page 115

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
113 Fifth Third Bancorp
7. BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment at December 31:
($ in millions) Estimated Useful Life 2014 2013
Land and improvements $816 838
Buildings 2 to 30 yrs. 1,810 1,763
Equipment 1 to 30 yrs. 1,682 1,581
Leasehold improvements 5 to 30 yrs. 416 397
Construction in progress 98 118
A
ccumulated depreciation and amortizatio
n
(2,357) (2,166)
Total $2,465 2,531
Depreciation and amortization expense related to bank premises
and equipment was $254 million in 2014, $245 million in 2013 and
$233 million in 2012.
At December 31, 2014 and 2013, land and improvements
included $165 million and $196 million, 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 of its retail transaction 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. In these circumstances, the Bancorp
performs an assessment of the recoverability of these long-lived
assets. Impairment losses associated with such assessments and
lower of cost or market adjustments were $20 million, $6 million
and $21 million for the years ended December 31, 2014, 2013 and
2012, respectively. The recognized impairment losses were recorded
in other noninterest income in the Consolidated Statements of
Income. The Bancorp’s assessment of the recoverability of these
asset groups requires the exercise of judgment in projecting the
extent and nature of their future use and the related cash flows
which may be impacted by unanticipated events or circumstances.
Gross occupancy expense for cancelable and noncancelable
leases, which is included in net occupancy expense in the
Consolidated Statements of Income, was $100 million in 2014, $98
million in 2013 and $99 million in 2012, which was reduced by
rental income from leased premises of $17 million in 2014, $16
million in 2013 and $17 million in 2012. The Bancorp’s subsidiaries
have entered into a number of noncancelable operating and capital
lease agreements with respect to bank premises and equipment.
The following table provides the annual future minimum payments under noncancelable operating leases and capital leases at December 31, 2014:
($ in millions)
Noncancelable
Operating Leases Capital Leases
Y
ear ending December 31,
2015 $92 11
2016 87 9
2017 79 5
2018 76 5
2019 69 5
Thereafter 294 2
Total minimum lease payments $697 37
Less: Amounts representing interest - 9
Present value of net minimum lease payments - 28