Lease Obligations - Lessee

9 Months Ended

Sep. 30, 2021

Leases [Abstract]

Lease Obligations - Lessee

Lease Obligations – Lessee

The Bancorp leases certain banking centers, ATM sites, land for owned buildings and equipment. The Bancorp’s lease agreements typically do not contain any residual value guarantees or any material restrictive covenants. For more information on the accounting for lease obligations, refer to Note 1 of the Notes to Consolidated Financial Statements included in the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2020.

The following table provides a summary of lease assets and lease liabilities as of:

($ in millions)	Condensed Consolidated Balance Sheets Caption	September 30, 2021		December 31, 2020
Assets
Operating lease right-of-use assets	Other assets	$	436	423
Finance lease right-of-use assets	Bank premises and equipment	144		129
Total right-of-use assets(a)		$	580	552
Liabilities
Operating lease liabilities	Accrued taxes, interest and expenses	$	531	527
Finance lease liabilities	Long-term debt	147		130
Total lease liabilities		$	678	657

(a)    Operating and finance lease right-of-use assets are recorded net of accumulated amortization of $182 and $42, respectively, as of September 30, 2021, and $152 and $29, respectively, as of December 31, 2020.

The following table presents the components of lease costs:

($ in millions)	Condensed Consolidated Statements of Income Caption	For the three months ended September 30,			For the nine months ended September 30,
		2021		2020	2021	2020
Lease costs:
Amortization of ROU assets	Net occupancy and equipment expense	$	5	4	14	7
Interest on lease liabilities	Interest on long-term debt	1		1	3	2
Total finance lease costs		$	6	5	17	9
Operating lease cost	Net occupancy expense	$	20	29	59	76
Short-term lease cost	Net occupancy expense	—		—	1	1
Variable lease cost	Net occupancy expense	8		7	24	21
Sublease income	Net occupancy expense	(1)		(1)	(2)	(2)
Total operating lease costs		$	27	35	82	96
Total lease costs		$	33	40	99	105

The Bancorp performs impairment assessments for ROU assets when events or changes in circumstances indicate that their carrying values may not be recoverable. In addition to the lease costs disclosed in the table above, the Bancorp recognized $1 million of impairment losses and termination charges for the ROU assets related to certain operating leases during both the three months ended September 30, 2021 and 2020, and $3 million and $6 million during the nine months ended September 30, 2021 and 2020, respectively. The recognized losses were recorded in net occupancy expense in the Condensed Consolidated Statements of Income.

The following table presents undiscounted cash flows payable for both operating leases and finance leases for the remainder of 2021 through 2026 and thereafter as well as a reconciliation of the undiscounted cash flows to the total lease liabilities:

As of September 30, 2021 ($ in millions)	Operating Leases		Finance Leases	Total
Remainder of 2021	$	22	5	27
2022	85		21	106
2023	79		18	97
2024	71		18	89
2025	63		12	75
2026	54		6	60
Thereafter	236		104	340
Total undiscounted cash flows	$	610	184	794
Less: Difference between undiscounted cash flows and discounted cash flows	79		37	116
Present value of lease liabilities	$	531	147	678

The following table presents the weighted-average remaining lease term and weighted-average discount rate as of:

	September 30, 2021		December 31, 2020
Weighted-average remaining lease term (years):
Operating leases	9.07		9.06
Finance leases	14.53		12.93
Weighted-average discount rate:
Operating leases	2.90	%	3.05
Finance leases	2.61		2.39

The following table presents information related to lease transactions for the nine months ended September 30:

($ in millions)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:(a)
Operating cash flows from operating leases	$	66	69
Operating cash flows from finance leases	3		2
Financing cash flows from finance leases	12		8
Gains on sale-leaseback transactions	2		—

(a)    The cash flows related to the short-term and variable lease payments are not included in the amounts in the table as they were not included in the measurement of lease liabilities.

Lease Obligations - Lessee

Lease Obligations – Lessee

The Bancorp leases certain banking centers, ATM sites, land for owned buildings and equipment. The Bancorp’s lease agreements typically do not contain any residual value guarantees or any material restrictive covenants. For more information on the accounting for lease obligations, refer to Note 1 of the Notes to Consolidated Financial Statements included in the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2020.

The following table provides a summary of lease assets and lease liabilities as of:

($ in millions)	Condensed Consolidated Balance Sheets Caption	September 30, 2021		December 31, 2020
Assets
Operating lease right-of-use assets	Other assets	$	436	423
Finance lease right-of-use assets	Bank premises and equipment	144		129
Total right-of-use assets(a)		$	580	552
Liabilities
Operating lease liabilities	Accrued taxes, interest and expenses	$	531	527
Finance lease liabilities	Long-term debt	147		130
Total lease liabilities		$	678	657

(a)    Operating and finance lease right-of-use assets are recorded net of accumulated amortization of $182 and $42, respectively, as of September 30, 2021, and $152 and $29, respectively, as of December 31, 2020.

The following table presents the components of lease costs:

($ in millions)	Condensed Consolidated Statements of Income Caption	For the three months ended September 30,			For the nine months ended September 30,
		2021		2020	2021	2020
Lease costs:
Amortization of ROU assets	Net occupancy and equipment expense	$	5	4	14	7
Interest on lease liabilities	Interest on long-term debt	1		1	3	2
Total finance lease costs		$	6	5	17	9
Operating lease cost	Net occupancy expense	$	20	29	59	76
Short-term lease cost	Net occupancy expense	—		—	1	1
Variable lease cost	Net occupancy expense	8		7	24	21
Sublease income	Net occupancy expense	(1)		(1)	(2)	(2)
Total operating lease costs		$	27	35	82	96
Total lease costs		$	33	40	99	105

The Bancorp performs impairment assessments for ROU assets when events or changes in circumstances indicate that their carrying values may not be recoverable. In addition to the lease costs disclosed in the table above, the Bancorp recognized $1 million of impairment losses and termination charges for the ROU assets related to certain operating leases during both the three months ended September 30, 2021 and 2020, and $3 million and $6 million during the nine months ended September 30, 2021 and 2020, respectively. The recognized losses were recorded in net occupancy expense in the Condensed Consolidated Statements of Income.

The following table presents undiscounted cash flows payable for both operating leases and finance leases for the remainder of 2021 through 2026 and thereafter as well as a reconciliation of the undiscounted cash flows to the total lease liabilities:

As of September 30, 2021 ($ in millions)	Operating Leases		Finance Leases	Total
Remainder of 2021	$	22	5	27
2022	85		21	106
2023	79		18	97
2024	71		18	89
2025	63		12	75
2026	54		6	60
Thereafter	236		104	340
Total undiscounted cash flows	$	610	184	794
Less: Difference between undiscounted cash flows and discounted cash flows	79		37	116
Present value of lease liabilities	$	531	147	678

The following table presents the weighted-average remaining lease term and weighted-average discount rate as of:

	September 30, 2021		December 31, 2020
Weighted-average remaining lease term (years):
Operating leases	9.07		9.06
Finance leases	14.53		12.93
Weighted-average discount rate:
Operating leases	2.90	%	3.05
Finance leases	2.61		2.39

The following table presents information related to lease transactions for the nine months ended September 30:

($ in millions)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:(a)
Operating cash flows from operating leases	$	66	69
Operating cash flows from finance leases	3		2
Financing cash flows from finance leases	12		8
Gains on sale-leaseback transactions	2		—

(a)    The cash flows related to the short-term and variable lease payments are not included in the amounts in the table as they were not included in the measurement of lease liabilities.