Lease Obligations - Lessee

3 Months Ended

Mar. 31, 2020

10. 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, 2019.

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


($ in millions)	Condensed Consolidated Balance Sheets Caption	March 31, 2020		December 31, 2019
Assets
Operating lease right-of-use assets	Other assets	$	474		473
Finance lease right-of-use assets	Bank premises and equipment		45		34
Total right-of-use assets (a)		$	519		507
Liabilities
Operating lease liabilities	Accrued taxes, interest and expenses	$	553		555
Finance lease liabilities	Long-term debt		46		35
Total lease liabilities		$	599		590

(a)	Operating and finance lease right-of-use assets are recorded net of accumulated amortization of $93 and $28 as of March 31, 2020, respectively and $75 and $27 as of December 31, 2019, respectively.

The following table presents the components of lease costs for the three months ended:


($ in millions)	Condensed Consolidated Statements of Income Caption		March 31, 2020		March 31, 2019
Lease costs:
Amortization of right-of-use assets	Net occupancy and equipment expense	$	1		1
Interest on lease liabilities	Interest on long-term debt		1		-
Total finance lease costs		$	2		1
Operating lease cost	Net occupancy expense	$	24		22
Short-term lease cost	Net occupancy expense		1		-
Variable lease cost	Net occupancy expense		7		8
Sublease income	Net occupancy expense		(1	)	(1	)
Total operating lease costs		$	31		29
Total lease costs		$	33		30

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 $2 million and an immaterial amount of impairment losses and termination charges for the ROU assets related to certain operating leases for the three months ended March 31, 2020 and 2019, 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 2020 through 2025 and thereafter as well as a reconciliation of the undiscounted cash flows to the total lease liabilities as follows:


As of March 31, 2020 ($ in millions)	Operating Leases		Finance Leases		Total
Remainder of 2020	$	67		5		72
2021		82		6		88
2022		78		6		84
2023		69		2		71
2024		61		3		64
2025		54		3		57
Thereafter		236		38		274
Total undiscounted cash flows	$	647		63		710
Less: Difference between undiscounted cash flows and discounted cash flows		94		17		111
Present value of lease liabilities	$	553		46		599

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


	March 31, 2020
Weighted-average remaining lease term (years):
Operating leases		9.46
Finance leases		15.92
Weighted-average discount rate:
Operating leases		3.15	%
Finance leases		4.06

The following table presents information related to lease transactions for the three months ended:


($ in millions)	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities: (a)
Operating cash flows from operating leases	$	24		21
Financing cash flows from finance leases		1		1

(a)	The cash flows relate d 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.