Lease Obligations - Lessee

9 Months Ended

Sep. 30, 2022

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, 2021.

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

($ in millions)	Condensed Consolidated Balance Sheets Caption	September 30, 2022		December 31, 2021
Assets
Operating lease right-of-use assets	Other assets	$	479	427
Finance lease right-of-use assets	Bank premises and equipment	158		145
Total right-of-use assets(a)		$	637	572
Liabilities
Operating lease liabilities	Accrued taxes, interest and expenses	$	568	520
Finance lease liabilities	Long-term debt	163		149
Total lease liabilities		$	731	669

(a)    Operating and finance lease right-of-use assets are recorded net of accumulated amortization of $239 and $61, respectively, as of September 30, 2022, and $198 and $47, respectively, as of December 31, 2021.

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,
		2022		2021	2022	2021
Lease costs:
Amortization of ROU assets	Net occupancy and equipment expense	$	5	5	14	14
Interest on lease liabilities	Interest on long-term debt	1		1	4	3
Total finance lease costs		$	6	6	18	17
Operating lease cost	Net occupancy expense	$	21	20	62	59
Short-term lease cost	Net occupancy expense	—		—	1	1
Variable lease cost	Net occupancy expense	8		8	21	24
Sublease income	Net occupancy expense	(1)		(1)	(2)	(2)
Total operating lease costs		$	28	27	82	82
Total lease costs		$	34	33	100	99

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 an immaterial amount and $1 million of impairment losses and termination charges for the ROU assets related to certain operating leases during the three months ended September 30, 2022 and 2021, respectively, and $2 million and $3 million during the nine months ended September 30, 2022 and 2021, respectively. The recognized losses were recorded in net occupancy expense in the Condensed Consolidated Statements of Income.

The following table presents undiscounted cash flows for both operating leases and finance leases for the remainder of 2022 through 2027 and thereafter as well as a reconciliation of the undiscounted cash flows to the total lease liabilities:

As of September 30, 2022 ($ in millions)	Operating Leases		Finance Leases	Total
Remainder of 2022	$	23	6	29
2023	87		21	108
2024	80		21	101
2025	73		14	87
2026	64		9	73
2027	56		8	64
Thereafter	287		131	418
Total undiscounted cash flows	$	670	210	880
Less: Difference between undiscounted cash flows and discounted cash flows	102		47	149
Present value of lease liabilities	$	568	163	731

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

	September 30, 2022		December 31, 2021
Weighted-average remaining lease term (years):
Operating leases	10.14		8.92
Finance leases	15.36		14.70
Weighted-average discount rate:
Operating leases	3.02	%	2.88
Finance leases	2.90		2.74

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

($ in millions)	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:(a)
Operating cash flows from operating leases	$	67	66
Operating cash flows from finance leases	4		3
Financing cash flows from finance leases	13		12
Gains on sale-leaseback transactions	4		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, 2021.

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

($ in millions)	Condensed Consolidated Balance Sheets Caption	September 30, 2022		December 31, 2021
Assets
Operating lease right-of-use assets	Other assets	$	479	427
Finance lease right-of-use assets	Bank premises and equipment	158		145
Total right-of-use assets(a)		$	637	572
Liabilities
Operating lease liabilities	Accrued taxes, interest and expenses	$	568	520
Finance lease liabilities	Long-term debt	163		149
Total lease liabilities		$	731	669

(a)    Operating and finance lease right-of-use assets are recorded net of accumulated amortization of $239 and $61, respectively, as of September 30, 2022, and $198 and $47, respectively, as of December 31, 2021.

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,
		2022		2021	2022	2021
Lease costs:
Amortization of ROU assets	Net occupancy and equipment expense	$	5	5	14	14
Interest on lease liabilities	Interest on long-term debt	1		1	4	3
Total finance lease costs		$	6	6	18	17
Operating lease cost	Net occupancy expense	$	21	20	62	59
Short-term lease cost	Net occupancy expense	—		—	1	1
Variable lease cost	Net occupancy expense	8		8	21	24
Sublease income	Net occupancy expense	(1)		(1)	(2)	(2)
Total operating lease costs		$	28	27	82	82
Total lease costs		$	34	33	100	99

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 an immaterial amount and $1 million of impairment losses and termination charges for the ROU assets related to certain operating leases during the three months ended September 30, 2022 and 2021, respectively, and $2 million and $3 million during the nine months ended September 30, 2022 and 2021, respectively. The recognized losses were recorded in net occupancy expense in the Condensed Consolidated Statements of Income.

The following table presents undiscounted cash flows for both operating leases and finance leases for the remainder of 2022 through 2027 and thereafter as well as a reconciliation of the undiscounted cash flows to the total lease liabilities:

As of September 30, 2022 ($ in millions)	Operating Leases		Finance Leases	Total
Remainder of 2022	$	23	6	29
2023	87		21	108
2024	80		21	101
2025	73		14	87
2026	64		9	73
2027	56		8	64
Thereafter	287		131	418
Total undiscounted cash flows	$	670	210	880
Less: Difference between undiscounted cash flows and discounted cash flows	102		47	149
Present value of lease liabilities	$	568	163	731

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

	September 30, 2022		December 31, 2021
Weighted-average remaining lease term (years):
Operating leases	10.14		8.92
Finance leases	15.36		14.70
Weighted-average discount rate:
Operating leases	3.02	%	2.88
Finance leases	2.90		2.74

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

($ in millions)	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:(a)
Operating cash flows from operating leases	$	67	66
Operating cash flows from finance leases	4		3
Financing cash flows from finance leases	13		12
Gains on sale-leaseback transactions	4		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.