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Leases

3 Months Ended

Mar. 31, 2019

9. Leases

As a lessee, we enter into leases of land, buildings and equipment. Our real estate leases primarily relate to bank branches and office space. The leases of equipment principally relate to technology assets for data processing and data storage. As a lessor, we primarily provide financing through our equipment leasing business.

Lessee

Our leases are classified as either operating or financing and have remaining terms ranging from 1 to 20 years with the exception of certain ground leases that have terms over 30 years. Leases with an initial term of less than 1 year are not recorded on the balance sheet. The related expense is recognized on a straight-line basis over the lease term. For leases with initial terms greater than one year, right-of-use assets are reported on the balance sheet.

Certain leases contain options to extend the lease term for up to five years. Most leases also give us the option to terminate at our discretion. Leases with variable payments are primarily based on adjustments for inflation over the term of the lease based on a contractually defined index. Certain ATM leases include variable payments based on volume of transactions.

Operating lease expense is recognized in "net occupancy" and "equipment" on the statement of income. The components of lease expense are summarized as follows:



Three months ended March 31,
in millions	2019 ^{(a), (b)}
Operating lease cost	$	34
Variable lease cost	5
Total lease cost	$	39


(a)	The amortization of right-of-use assets and interest on lease liabilities for finance leases were each less than $1 million for the three months ended March 31, 2019.


(b)	Short-term lease cost was less than less than $1 million for the three months ended March 31, 2019.

Cash flows related to leases are summarized as follows:



Three months ended March 31,
in millions	2019 ^{(a), (b)}
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	36
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	28


(a)	Operating and financing cash flows from finance leases were each less than $1 million for the three months ended March 31, 2019.


(b)	There were no right-of-use assets obtained in exchange for finance lease obligations for the three months ended March 31, 2019.

Additional balance sheet information related to leases is summarized as follows:



March 31,
in millions	Balance sheet classification	2019
Operating lease assets	Accrued income and other assets	$	694
Operating lease liabilities	Accrued expense and other liabilities	787
Finance leases:
Property and equipment, gross	Premises and equipment	28
Accumulated depreciation	Premises and equipment	(16		)
Property and equipment, net		12

Finance lease liabilities	Long-term debt	15

Information pertaining to the lease term and weighted-average discount rate is summarized as follows:




March 31,	2019
Weighted-average remaining lease term:
Operating leases	7.9 years
Finance leases	7.6 years
Weighted-average discount rate:
Operating leases	3.28	%
Finance leases	4.12	%

Maturities of lease liabilities are summarized as follows:



in millions	Operating Leases		Finance Leases		Total
2019	$	108	$	2	$	110
2020	139		3		142
2021	123		3		126
2022	108		3		111
2023	93		2		95
Thereafter	332		5		337
Total lease payments	903		18		921
Less imputed interest	116		3		119
Total	$	787	$	15	$	802

Lessor Equipment Leasing

Leases may have fixed or floating rate terms. Variable payments are based on an index or other specified rate and are included in rental payments. Certain leases contain an option to extend the lease term or the option to terminate at the discretion of the lessee. Under certain conditions, lease agreements may also contain the option for a lessee to purchase the underlying asset.

Interest income from sales-type and direct financing leases is recognized in "interest income — loans" on the statement of income. Income related to operating leases is recognized in “operating lease income and other leasing gains” on the statement of income. The components of equipment leasing income are summarized in the table below:



Three months ended March 31,
in millions	2019
Sales-type and direct financing leases
Interest income on lease receivable	$	30
Interest income related to accretion of unguaranteed residual asset	3
Interest income on deferred fees and costs	—
Total sales-type and direct financing lease income	33
Operating leases
Operating lease income related to lease payments	33
Other operating leasing gains	4
Total operating lease income and other leasing gains	37
Total lease income	$	70

Equipment leasing receivables relate to sales-type and direct financing leases. The composition of the net investment in sales-type and direct financing leases is as follows:



in millions	March 31, 2019
Lease receivables	$	3,597
Unearned income	(346		)
Unguaranteed residual value	428
Deferred fees and costs	17
Net investment in sales-type and direct financing leases	$	3,696

The residual value component of a lease represents the fair value of the leased asset at the end of the lease term. We rely on industry data, historical experience, independent appraisals and the experience of the equipment leasing asset management team to value lease residuals. Relationships with a number of equipment vendors give the asset management team insight into the life cycle of the leased equipment, pending product upgrades and competing products. The carrying amount of residual assets covered by residual value guarantees was $269 million at March 31, 2019.

At March 31, 2019, minimum future lease payments to be received for sales-type and direct financing leases are as follows:



in millions	Sales-type and direct financing lease payments
2019	$	843
2020	928
2021	659
2022	435
2023	269
Thereafter	463
Total lease payments	3,597

At March 31, 2019, minimum future lease payments to be received for operating leases are as follows:



in millions	Operating lease payments
2019	$	97
2020	121
2021	103
2022	87
2023	73
Thereafter	217
Total lease payments	$	698

The carrying amount of operating lease assets at March 31, 2019, was $961 million.

Leases

9. Leases

Lessee

Operating lease expense is recognized in "net occupancy" and "equipment" on the statement of income. The components of lease expense are summarized as follows:



Three months ended March 31,
in millions	2019 ^{(a), (b)}
Operating lease cost	$	34
Variable lease cost	5
Total lease cost	$	39


(a)	The amortization of right-of-use assets and interest on lease liabilities for finance leases were each less than $1 million for the three months ended March 31, 2019.


(b)	Short-term lease cost was less than less than $1 million for the three months ended March 31, 2019.

Cash flows related to leases are summarized as follows:



Three months ended March 31,
in millions	2019 ^{(a), (b)}
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	36
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	28


(a)	Operating and financing cash flows from finance leases were each less than $1 million for the three months ended March 31, 2019.


(b)	There were no right-of-use assets obtained in exchange for finance lease obligations for the three months ended March 31, 2019.

Additional balance sheet information related to leases is summarized as follows:



March 31,
in millions	Balance sheet classification	2019
Operating lease assets	Accrued income and other assets	$	694
Operating lease liabilities	Accrued expense and other liabilities	787
Finance leases:
Property and equipment, gross	Premises and equipment	28
Accumulated depreciation	Premises and equipment	(16		)
Property and equipment, net		12

Finance lease liabilities	Long-term debt	15

Information pertaining to the lease term and weighted-average discount rate is summarized as follows:




March 31,	2019
Weighted-average remaining lease term:
Operating leases	7.9 years
Finance leases	7.6 years
Weighted-average discount rate:
Operating leases	3.28	%
Finance leases	4.12	%

Maturities of lease liabilities are summarized as follows:



in millions	Operating Leases		Finance Leases		Total
2019	$	108	$	2	$	110
2020	139		3		142
2021	123		3		126
2022	108		3		111
2023	93		2		95
Thereafter	332		5		337
Total lease payments	903		18		921
Less imputed interest	116		3		119
Total	$	787	$	15	$	802

Lessor Equipment Leasing



Three months ended March 31,
in millions	2019
Sales-type and direct financing leases
Interest income on lease receivable	$	30
Interest income related to accretion of unguaranteed residual asset	3
Interest income on deferred fees and costs	—
Total sales-type and direct financing lease income	33
Operating leases
Operating lease income related to lease payments	33
Other operating leasing gains	4
Total operating lease income and other leasing gains	37
Total lease income	$	70

Equipment leasing receivables relate to sales-type and direct financing leases. The composition of the net investment in sales-type and direct financing leases is as follows:



in millions	March 31, 2019
Lease receivables	$	3,597
Unearned income	(346		)
Unguaranteed residual value	428
Deferred fees and costs	17
Net investment in sales-type and direct financing leases	$	3,696

At March 31, 2019, minimum future lease payments to be received for sales-type and direct financing leases are as follows:



in millions	Sales-type and direct financing lease payments
2019	$	843
2020	928
2021	659
2022	435
2023	269
Thereafter	463
Total lease payments	3,597

At March 31, 2019, minimum future lease payments to be received for operating leases are as follows:



in millions	Operating lease payments
2019	$	97
2020	121
2021	103
2022	87
2023	73
Thereafter	217
Total lease payments	$	698

The carrying amount of operating lease assets at March 31, 2019, was $961 million.

Leases

9. Leases

Lessee

Operating lease expense is recognized in "net occupancy" and "equipment" on the statement of income. The components of lease expense are summarized as follows:



Three months ended March 31,
in millions	2019 ^{(a), (b)}
Operating lease cost	$	34
Variable lease cost	5
Total lease cost	$	39


(a)	The amortization of right-of-use assets and interest on lease liabilities for finance leases were each less than $1 million for the three months ended March 31, 2019.


(b)	Short-term lease cost was less than less than $1 million for the three months ended March 31, 2019.

Cash flows related to leases are summarized as follows:



Three months ended March 31,
in millions	2019 ^{(a), (b)}
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	36
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	28


(a)	Operating and financing cash flows from finance leases were each less than $1 million for the three months ended March 31, 2019.


(b)	There were no right-of-use assets obtained in exchange for finance lease obligations for the three months ended March 31, 2019.

Additional balance sheet information related to leases is summarized as follows:



March 31,
in millions	Balance sheet classification	2019
Operating lease assets	Accrued income and other assets	$	694
Operating lease liabilities	Accrued expense and other liabilities	787
Finance leases:
Property and equipment, gross	Premises and equipment	28
Accumulated depreciation	Premises and equipment	(16		)
Property and equipment, net		12

Finance lease liabilities	Long-term debt	15

Information pertaining to the lease term and weighted-average discount rate is summarized as follows:




March 31,	2019
Weighted-average remaining lease term:
Operating leases	7.9 years
Finance leases	7.6 years
Weighted-average discount rate:
Operating leases	3.28	%
Finance leases	4.12	%

Maturities of lease liabilities are summarized as follows:



in millions	Operating Leases		Finance Leases		Total
2019	$	108	$	2	$	110
2020	139		3		142
2021	123		3		126
2022	108		3		111
2023	93		2		95
Thereafter	332		5		337
Total lease payments	903		18		921
Less imputed interest	116		3		119
Total	$	787	$	15	$	802

Lessor Equipment Leasing



Three months ended March 31,
in millions	2019
Sales-type and direct financing leases
Interest income on lease receivable	$	30
Interest income related to accretion of unguaranteed residual asset	3
Interest income on deferred fees and costs	—
Total sales-type and direct financing lease income	33
Operating leases
Operating lease income related to lease payments	33
Other operating leasing gains	4
Total operating lease income and other leasing gains	37
Total lease income	$	70

Equipment leasing receivables relate to sales-type and direct financing leases. The composition of the net investment in sales-type and direct financing leases is as follows:



in millions	March 31, 2019
Lease receivables	$	3,597
Unearned income	(346		)
Unguaranteed residual value	428
Deferred fees and costs	17
Net investment in sales-type and direct financing leases	$	3,696

At March 31, 2019, minimum future lease payments to be received for sales-type and direct financing leases are as follows:



in millions	Sales-type and direct financing lease payments
2019	$	843
2020	928
2021	659
2022	435
2023	269
Thereafter	463
Total lease payments	3,597

At March 31, 2019, minimum future lease payments to be received for operating leases are as follows:



in millions	Operating lease payments
2019	$	97
2020	121
2021	103
2022	87
2023	73
Thereafter	217
Total lease payments	$	698

The carrying amount of operating lease assets at March 31, 2019, was $961 million.

Leases

9. Leases

Lessee

Operating lease expense is recognized in "net occupancy" and "equipment" on the statement of income. The components of lease expense are summarized as follows:



Three months ended March 31,
in millions	2019 ^{(a), (b)}
Operating lease cost	$	34
Variable lease cost	5
Total lease cost	$	39


(a)	The amortization of right-of-use assets and interest on lease liabilities for finance leases were each less than $1 million for the three months ended March 31, 2019.


(b)	Short-term lease cost was less than less than $1 million for the three months ended March 31, 2019.

Cash flows related to leases are summarized as follows:



Three months ended March 31,
in millions	2019 ^{(a), (b)}
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	36
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	28


(a)	Operating and financing cash flows from finance leases were each less than $1 million for the three months ended March 31, 2019.


(b)	There were no right-of-use assets obtained in exchange for finance lease obligations for the three months ended March 31, 2019.

Additional balance sheet information related to leases is summarized as follows:



March 31,
in millions	Balance sheet classification	2019
Operating lease assets	Accrued income and other assets	$	694
Operating lease liabilities	Accrued expense and other liabilities	787
Finance leases:
Property and equipment, gross	Premises and equipment	28
Accumulated depreciation	Premises and equipment	(16		)
Property and equipment, net		12

Finance lease liabilities	Long-term debt	15

Information pertaining to the lease term and weighted-average discount rate is summarized as follows:




March 31,	2019
Weighted-average remaining lease term:
Operating leases	7.9 years
Finance leases	7.6 years
Weighted-average discount rate:
Operating leases	3.28	%
Finance leases	4.12	%

Maturities of lease liabilities are summarized as follows:



in millions	Operating Leases		Finance Leases		Total
2019	$	108	$	2	$	110
2020	139		3		142
2021	123		3		126
2022	108		3		111
2023	93		2		95
Thereafter	332		5		337
Total lease payments	903		18		921
Less imputed interest	116		3		119
Total	$	787	$	15	$	802

Lessor Equipment Leasing



Three months ended March 31,
in millions	2019
Sales-type and direct financing leases
Interest income on lease receivable	$	30
Interest income related to accretion of unguaranteed residual asset	3
Interest income on deferred fees and costs	—
Total sales-type and direct financing lease income	33
Operating leases
Operating lease income related to lease payments	33
Other operating leasing gains	4
Total operating lease income and other leasing gains	37
Total lease income	$	70

Equipment leasing receivables relate to sales-type and direct financing leases. The composition of the net investment in sales-type and direct financing leases is as follows:



in millions	March 31, 2019
Lease receivables	$	3,597
Unearned income	(346		)
Unguaranteed residual value	428
Deferred fees and costs	17
Net investment in sales-type and direct financing leases	$	3,696

At March 31, 2019, minimum future lease payments to be received for sales-type and direct financing leases are as follows:



in millions	Sales-type and direct financing lease payments
2019	$	843
2020	928
2021	659
2022	435
2023	269
Thereafter	463
Total lease payments	3,597

At March 31, 2019, minimum future lease payments to be received for operating leases are as follows:



in millions	Operating lease payments
2019	$	97
2020	121
2021	103
2022	87
2023	73
Thereafter	217
Total lease payments	$	698

The carrying amount of operating lease assets at March 31, 2019, was $961 million.

Leases

9. Leases

Lessee

Operating lease expense is recognized in "net occupancy" and "equipment" on the statement of income. The components of lease expense are summarized as follows:



Three months ended March 31,
in millions	2019 ^{(a), (b)}
Operating lease cost	$	34
Variable lease cost	5
Total lease cost	$	39


(a)	The amortization of right-of-use assets and interest on lease liabilities for finance leases were each less than $1 million for the three months ended March 31, 2019.


(b)	Short-term lease cost was less than less than $1 million for the three months ended March 31, 2019.

Cash flows related to leases are summarized as follows:



Three months ended March 31,
in millions	2019 ^{(a), (b)}
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	36
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	28


(a)	Operating and financing cash flows from finance leases were each less than $1 million for the three months ended March 31, 2019.


(b)	There were no right-of-use assets obtained in exchange for finance lease obligations for the three months ended March 31, 2019.

Additional balance sheet information related to leases is summarized as follows:



March 31,
in millions	Balance sheet classification	2019
Operating lease assets	Accrued income and other assets	$	694
Operating lease liabilities	Accrued expense and other liabilities	787
Finance leases:
Property and equipment, gross	Premises and equipment	28
Accumulated depreciation	Premises and equipment	(16		)
Property and equipment, net		12

Finance lease liabilities	Long-term debt	15

Information pertaining to the lease term and weighted-average discount rate is summarized as follows:




March 31,	2019
Weighted-average remaining lease term:
Operating leases	7.9 years
Finance leases	7.6 years
Weighted-average discount rate:
Operating leases	3.28	%
Finance leases	4.12	%

Maturities of lease liabilities are summarized as follows:



in millions	Operating Leases		Finance Leases		Total
2019	$	108	$	2	$	110
2020	139		3		142
2021	123		3		126
2022	108		3		111
2023	93		2		95
Thereafter	332		5		337
Total lease payments	903		18		921
Less imputed interest	116		3		119
Total	$	787	$	15	$	802

Lessor Equipment Leasing



Three months ended March 31,
in millions	2019
Sales-type and direct financing leases
Interest income on lease receivable	$	30
Interest income related to accretion of unguaranteed residual asset	3
Interest income on deferred fees and costs	—
Total sales-type and direct financing lease income	33
Operating leases
Operating lease income related to lease payments	33
Other operating leasing gains	4
Total operating lease income and other leasing gains	37
Total lease income	$	70

Equipment leasing receivables relate to sales-type and direct financing leases. The composition of the net investment in sales-type and direct financing leases is as follows:



in millions	March 31, 2019
Lease receivables	$	3,597
Unearned income	(346		)
Unguaranteed residual value	428
Deferred fees and costs	17
Net investment in sales-type and direct financing leases	$	3,696

At March 31, 2019, minimum future lease payments to be received for sales-type and direct financing leases are as follows:



in millions	Sales-type and direct financing lease payments
2019	$	843
2020	928
2021	659
2022	435
2023	269
Thereafter	463
Total lease payments	3,597

At March 31, 2019, minimum future lease payments to be received for operating leases are as follows:



in millions	Operating lease payments
2019	$	97
2020	121
2021	103
2022	87
2023	73
Thereafter	217
Total lease payments	$	698

The carrying amount of operating lease assets at March 31, 2019, was $961 million.