Lease Obligations - Lessee

6 Months Ended

Jun. 30, 2023

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, 2022.

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

($ in millions)	Condensed Consolidated Balance Sheets Caption	June 30, 2023		December 31, 2022
Assets
Operating lease right-of-use assets	Other assets	$	506	508
Finance lease right-of-use assets	Bank premises and equipment	140		150
Total right-of-use assets(a)		$	646	658
Liabilities
Operating lease liabilities	Accrued taxes, interest and expenses	$	597	599
Finance lease liabilities	Long-term debt	147		156
Total lease liabilities		$	744	755

(a)    Operating and finance lease right-of-use assets are recorded net of accumulated amortization of $273 and $68, respectively, as of June 30, 2023, and $255 and $66, respectively, as of December 31, 2022.

The following table presents the components of lease costs:

($ in millions)	Condensed Consolidated Statements of Income Caption	For the three months ended June 30,			For the six months ended June 30,
		2023		2022	2023	2022
Lease costs:
Amortization of ROU assets	Net occupancy and equipment expense	$	5	5	10	9
Interest on lease liabilities	Interest on long-term debt	1		1	2	2
Total finance lease costs		$	6	6	12	11
Operating lease cost	Net occupancy expense	$	22	21	44	40
Short-term lease cost	Net occupancy expense	1		—	1	1
Variable lease cost	Net occupancy expense	7		7	14	14
Sublease income	Net occupancy expense	(1)		(1)	(1)	(1)
Total operating lease costs		$	29	27	58	54
Total lease costs		$	35	33	70	65

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 June 30, 2023 and 2022, respectively, and $1 million and $2 million during the six months ended June 30, 2023 and 2022, 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 2023 through 2028 and thereafter as well as a reconciliation of the undiscounted cash flows to the total lease liabilities:

As of June 30, 2023 ($ in millions)	Operating Leases		Finance Leases	Total
Remainder of 2023	$	45	10	55
2024	89		21	110
2025	81		14	95
2026	73		9	82
2027	65		8	73
2028	57		8	65
Thereafter	329		119	448
Total undiscounted cash flows	$	739	189	928
Less: Difference between undiscounted cash flows and discounted cash flows	142		42	184
Present value of lease liabilities	$	597	147	744

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

	June 30, 2023		December 31, 2022
Weighted-average remaining lease term (years):
Operating leases	10.90		10.80
Finance leases	15.28		15.31
Weighted-average discount rate:
Operating leases	3.54	%	3.35
Finance leases	3.02		2.94

The following table presents information related to lease transactions for the six months ended June 30:

($ in millions)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:(a)
Operating cash flows from operating leases	$	46	44
Operating cash flows from finance leases	2		2
Financing cash flows from finance leases	8		10
Gains on sale-leaseback transactions	1		4

(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, 2022.

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

($ in millions)	Condensed Consolidated Balance Sheets Caption	June 30, 2023		December 31, 2022
Assets
Operating lease right-of-use assets	Other assets	$	506	508
Finance lease right-of-use assets	Bank premises and equipment	140		150
Total right-of-use assets(a)		$	646	658
Liabilities
Operating lease liabilities	Accrued taxes, interest and expenses	$	597	599
Finance lease liabilities	Long-term debt	147		156
Total lease liabilities		$	744	755

(a)    Operating and finance lease right-of-use assets are recorded net of accumulated amortization of $273 and $68, respectively, as of June 30, 2023, and $255 and $66, respectively, as of December 31, 2022.

The following table presents the components of lease costs:

($ in millions)	Condensed Consolidated Statements of Income Caption	For the three months ended June 30,			For the six months ended June 30,
		2023		2022	2023	2022
Lease costs:
Amortization of ROU assets	Net occupancy and equipment expense	$	5	5	10	9
Interest on lease liabilities	Interest on long-term debt	1		1	2	2
Total finance lease costs		$	6	6	12	11
Operating lease cost	Net occupancy expense	$	22	21	44	40
Short-term lease cost	Net occupancy expense	1		—	1	1
Variable lease cost	Net occupancy expense	7		7	14	14
Sublease income	Net occupancy expense	(1)		(1)	(1)	(1)
Total operating lease costs		$	29	27	58	54
Total lease costs		$	35	33	70	65

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 June 30, 2023 and 2022, respectively, and $1 million and $2 million during the six months ended June 30, 2023 and 2022, 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 2023 through 2028 and thereafter as well as a reconciliation of the undiscounted cash flows to the total lease liabilities:

As of June 30, 2023 ($ in millions)	Operating Leases		Finance Leases	Total
Remainder of 2023	$	45	10	55
2024	89		21	110
2025	81		14	95
2026	73		9	82
2027	65		8	73
2028	57		8	65
Thereafter	329		119	448
Total undiscounted cash flows	$	739	189	928
Less: Difference between undiscounted cash flows and discounted cash flows	142		42	184
Present value of lease liabilities	$	597	147	744

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

	June 30, 2023		December 31, 2022
Weighted-average remaining lease term (years):
Operating leases	10.90		10.80
Finance leases	15.28		15.31
Weighted-average discount rate:
Operating leases	3.54	%	3.35
Finance leases	3.02		2.94

The following table presents information related to lease transactions for the six months ended June 30:

($ in millions)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:(a)
Operating cash flows from operating leases	$	46	44
Operating cash flows from finance leases	2		2
Financing cash flows from finance leases	8		10
Gains on sale-leaseback transactions	1		4

(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.