NOTE 9—PREMISES AND EQUIPMENT

The composition of premises and equipment at September 30, 2017 and December 31, 2016 was as follows:


	September 30,			December 31,
(dollars in thousands)	2017			2016
Land	$	66,806		$	71,769
Buildings		319,371			322,165
Furniture, fixtures, and equipment		100,756			102,631
Leasehold improvements		29,270			28,555

Total		516,203			525,120
Accumulated depreciation		(103,715	)		(95,498	)

Premises and equipment, net	$	412,488		$	429,622

Depreciation expense was $5.8 million for the three months ended September 30, 2017 and $16.2 million for the nine months ended September 30, 2017, compared to $3.9 million for the three months ended September 30, 2016 and $11.4 million for the nine months ended September 30, 2016.

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 $3.9 million for the three months ended September 30, 2017 and $11.6 million for the nine months ended September 30, 2017, compared to $6.4 million for the three months ended September 30, 2016 and $20.1 million for the nine months ended September 30, 2016.

Old National had deferred gains remaining associated with prior sale leaseback transactions totaling $8.6 million at September 30, 2017 and $10.3 million at December 31, 2016. 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 15 to the consolidated financial statements for detail regarding these leases.