Lease Obligations - Lessee

9 Months Ended

Sep. 30, 2024

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.

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

($ in millions)	Condensed Consolidated Balance Sheets Caption	September 30, 2024		December 31, 2023
Assets:
Operating lease ROU assets	Other assets	$	525	511
Finance lease ROU assets	Bank premises and equipment	153		126
Total ROU assets(a)		$	678	637
Liabilities:
Operating lease liabilities	Accrued taxes, interest and expenses	$	609	601
Finance lease liabilities	Long-term debt	166		134
Total lease liabilities		$	775	735

(a)    Operating and finance lease ROU assets are recorded net of accumulated amortization of $328 and $58, respectively, as of September 30, 2024, and $292 and $77, respectively, as of December 31, 2023.

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,
		2024		2023	2024	2023
Lease costs:
Amortization of ROU assets	Net occupancy and equipment expense	$	5	5	16	15
Interest on lease liabilities	Interest on long-term debt	2		1	4	3
Total finance lease costs		$	7	6	20	18
Operating lease cost	Net occupancy expense	$	23	22	66	65
Short-term lease cost	Net occupancy expense	—		1	1	2
Variable lease cost	Net occupancy expense	7		7	21	22
Sublease income	Net occupancy expense	(1)		(1)	(2)	(2)
Total operating lease costs		$	29	29	86	87
Total lease costs		$	36	35	106	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 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, 2024 and 2023, respectively, and an immaterial amount and $2 million during the nine months ended September 30, 2024 and 2023, 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 2024 through 2029 and thereafter as well as a reconciliation of the undiscounted cash flows to the total lease liabilities:

As of September 30, 2024 ($ in millions)	Operating Leases		Finance Leases	Total
Remainder of 2024	$	32	6	38
2025	93		23	116
2026	84		22	106
2027	76		21	97
2028	68		21	89
2029	58		11	69
Thereafter	381		104	485
Total undiscounted cash flows	$	792	208	1,000
Less: Difference between undiscounted cash flows and discounted cash flows	183		42	225
Present value of lease liabilities	$	609	166	775

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

	September 30, 2024		December 31, 2023
Weighted-average remaining lease term (years):
Operating leases	11.47		11.07
Finance leases	12.69		15.21
Weighted-average discount rate:
Operating leases	4.05	%	3.72
Finance leases	3.78		3.02

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

($ in millions)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:(a)
Operating cash flows from operating leases	$	71	68
Operating cash flows from finance leases	4		3
Financing cash flows from finance leases	14		12
Gains on sale-leaseback transactions	—		1

(a)    The cash flows related to short-term and variable lease payments are not included in the amounts presented 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.

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

($ in millions)	Condensed Consolidated Balance Sheets Caption	September 30, 2024		December 31, 2023
Assets:
Operating lease ROU assets	Other assets	$	525	511
Finance lease ROU assets	Bank premises and equipment	153		126
Total ROU assets(a)		$	678	637
Liabilities:
Operating lease liabilities	Accrued taxes, interest and expenses	$	609	601
Finance lease liabilities	Long-term debt	166		134
Total lease liabilities		$	775	735

(a)    Operating and finance lease ROU assets are recorded net of accumulated amortization of $328 and $58, respectively, as of September 30, 2024, and $292 and $77, respectively, as of December 31, 2023.

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,
		2024		2023	2024	2023
Lease costs:
Amortization of ROU assets	Net occupancy and equipment expense	$	5	5	16	15
Interest on lease liabilities	Interest on long-term debt	2		1	4	3
Total finance lease costs		$	7	6	20	18
Operating lease cost	Net occupancy expense	$	23	22	66	65
Short-term lease cost	Net occupancy expense	—		1	1	2
Variable lease cost	Net occupancy expense	7		7	21	22
Sublease income	Net occupancy expense	(1)		(1)	(2)	(2)
Total operating lease costs		$	29	29	86	87
Total lease costs		$	36	35	106	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 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, 2024 and 2023, respectively, and an immaterial amount and $2 million during the nine months ended September 30, 2024 and 2023, 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 2024 through 2029 and thereafter as well as a reconciliation of the undiscounted cash flows to the total lease liabilities:

As of September 30, 2024 ($ in millions)	Operating Leases		Finance Leases	Total
Remainder of 2024	$	32	6	38
2025	93		23	116
2026	84		22	106
2027	76		21	97
2028	68		21	89
2029	58		11	69
Thereafter	381		104	485
Total undiscounted cash flows	$	792	208	1,000
Less: Difference between undiscounted cash flows and discounted cash flows	183		42	225
Present value of lease liabilities	$	609	166	775

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

	September 30, 2024		December 31, 2023
Weighted-average remaining lease term (years):
Operating leases	11.47		11.07
Finance leases	12.69		15.21
Weighted-average discount rate:
Operating leases	4.05	%	3.72
Finance leases	3.78		3.02

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

($ in millions)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:(a)
Operating cash flows from operating leases	$	71	68
Operating cash flows from finance leases	4		3
Financing cash flows from finance leases	14		12
Gains on sale-leaseback transactions	—		1

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