Leases

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

Leases

LEASES

PNC enters into both lessor and lessee arrangements. For more information on lease accounting, see Note 1 Accounting Policies and for additional details on our equipment lease financing receivables see Note 4 Loans and Related Allowance for Credit Losses.

Lessor Arrangements

PNC’s lessor arrangements primarily consist of direct financing, sales-type and operating leases for equipment. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.

The following table provides details on our income from lessor arrangements:

Table 64: Lease Income

Year ended December 31
In millions	2020		2019
Sales-type and direct financing leases (a)	$	269	$	295
Operating leases (b)	95		117
Lease income	$	364	$	412

(a)Included in Loan interest income on the Consolidated Income Statement.

(b)Included in Corporate services on the Consolidated Income Statement.

The following table provides the components of our equipment lease financing assets:

Table 65: Sales-Type and Direct Financing Leases

	December 31
In millions	2020		2019
Lease receivables (a)	$	6,246	$	7,353
Unguaranteed residual asset values	957		741
Unearned income	(789)		(939)
Equipment lease financing	$	6,414	$	7,155

(a)In certain cases, PNC obtains third-party residual value insurance to reduce its residual risk. The carrying value of residual assets with third-party residual value insurance for at least a portion of the asset value was $0.4 billion and $0.3 billion for 2020 and 2019, respectively.

Operating lease assets were $1.0 billion and accumulated depreciation was $0.2 billion at December 31, 2020 compared to operating lease assets of $1.1 billion and accumulated depreciation of $0.3 billion at December 31, 2019. We had no lease transactions with related parties or deferred selling profits at December 31, 2020 and 2019.

The future minimum lease payments based on maturity of our lessor arrangements at December 31, 2020 were as follows:

Table 66: Future Minimum Lease Payments of Lessor Arrangements

In millions	Operating Leases		Sales-type and Direct Financing Leases
2021	$	95	$	1,467
2022	75		1,315
2023	42		948
2024	35		806
2025	24		473
2026 and thereafter	42		1,237
Total future minimum lease payments	$	313	$	6,246

Lessee Arrangements

We lease retail branches, datacenters, office space, land and equipment under operating and finance leases. Our leases have remaining lease terms of one year to 47 years, some of which may include options to renew the leases for up to 99 years, and some of which may include options to terminate the leases prior to the end date. Certain leases also include options to purchase the leased asset. The exercise of lease renewal, termination and purchase options is at our sole discretion.

We recognize on the balance sheet all leases with lease terms greater than twelve months as a lease liability with a corresponding right-of-use asset. At adoption of ASU 2016-02 on January 1, 2019, we elected the practical expedient to account for the lease and nonlease components of existing real estate leases and leases of advertising assets, such as signage, as a single lease component. Effective January 1, 2019, lease and nonlease components of new lease agreements are accounted for separately. Lease components consist of fixed payments including rent, real estate taxes and insurance costs and nonlease components consist of common-area maintenance costs. In addition, we elected the practical expedient to not apply the recognition requirements under the standard to short-term leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet, as we recognize lease expense for these leases on a straight-line basis over the lease term. Generally, we have elected to use the Overnight Indexed Swap rate corresponding to the term of the lease at the lease measurement date as our incremental borrowing rate to measure the right-of-use asset and lease liability.

Certain of our lease agreements include rental payments based on a percentage of revenue and others include rental payments if certain bank deposit levels are met. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Subleases to third parties were not material at December 31, 2020 and 2019.

The following tables provide details on our operating leases:

Table 67: Operating Lease Costs and Cash Flows

Year ended December 31
In millions	2020		2019
Operating lease cost (a)	$	358	$	360
Operating cash flows	$	360	$	353

(a)Included in Occupancy, Equipment and Marketing expense on the Consolidated Income Statement.

Table 68: Operating Lease Assets and Liabilities

	December 31
In millions	2020		2019
Operating lease assets (a)	$	1,876	$	1,982
Operating lease liabilities (b)	$	2,097	$	2,170

(a)Included in Other assets on the Consolidated Balance Sheet.

(b)Included in Accrued expenses and other liabilities on the Consolidated Balance Sheet.

Finance lease assets and liabilities, income and cash flows at December 31, 2020 and 2019 were not material.

Operating lease term and discount rates of our lessee arrangements at December 31, 2020 and 2019 were as follows:

Table 69: Operating Lease Term and Discount Rates of Lessee Arrangements

	December 31
	2020		2019
Weighted-average remaining lease term (years)	8		9
Weighted-average discount rate	2.21	%	2.42	%

Future undiscounted cash flows on our lessee arrangements at December 31, 2020 are as follows:

Table 70: Future Lease Payments of Operating Lease Liabilities

In millions	December 31, 2020
2021	$	364
2022	340
2023	309
2024	260
2025	217
2026 and thereafter	822
Total future lease payments	$	2,312
Less: Interest	215
Present value of operating lease liabilities	$	2,097

Leases

LEASES

PNC enters into both lessor and lessee arrangements. For more information on lease accounting, see Note 1 Accounting Policies and for additional details on our equipment lease financing receivables see Note 4 Loans and Related Allowance for Credit Losses.

Lessor Arrangements

PNC’s lessor arrangements primarily consist of direct financing, sales-type and operating leases for equipment. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.

The following table provides details on our income from lessor arrangements:

Table 64: Lease Income

Year ended December 31
In millions	2020		2019
Sales-type and direct financing leases (a)	$	269	$	295
Operating leases (b)	95		117
Lease income	$	364	$	412

(a)Included in Loan interest income on the Consolidated Income Statement.

(b)Included in Corporate services on the Consolidated Income Statement.

The following table provides the components of our equipment lease financing assets:

Table 65: Sales-Type and Direct Financing Leases

	December 31
In millions	2020		2019
Lease receivables (a)	$	6,246	$	7,353
Unguaranteed residual asset values	957		741
Unearned income	(789)		(939)
Equipment lease financing	$	6,414	$	7,155

(a)In certain cases, PNC obtains third-party residual value insurance to reduce its residual risk. The carrying value of residual assets with third-party residual value insurance for at least a portion of the asset value was $0.4 billion and $0.3 billion for 2020 and 2019, respectively.

Operating lease assets were $1.0 billion and accumulated depreciation was $0.2 billion at December 31, 2020 compared to operating lease assets of $1.1 billion and accumulated depreciation of $0.3 billion at December 31, 2019. We had no lease transactions with related parties or deferred selling profits at December 31, 2020 and 2019.

The future minimum lease payments based on maturity of our lessor arrangements at December 31, 2020 were as follows:

Table 66: Future Minimum Lease Payments of Lessor Arrangements

In millions	Operating Leases		Sales-type and Direct Financing Leases
2021	$	95	$	1,467
2022	75		1,315
2023	42		948
2024	35		806
2025	24		473
2026 and thereafter	42		1,237
Total future minimum lease payments	$	313	$	6,246

Lessee Arrangements

We lease retail branches, datacenters, office space, land and equipment under operating and finance leases. Our leases have remaining lease terms of one year to 47 years, some of which may include options to renew the leases for up to 99 years, and some of which may include options to terminate the leases prior to the end date. Certain leases also include options to purchase the leased asset. The exercise of lease renewal, termination and purchase options is at our sole discretion.

We recognize on the balance sheet all leases with lease terms greater than twelve months as a lease liability with a corresponding right-of-use asset. At adoption of ASU 2016-02 on January 1, 2019, we elected the practical expedient to account for the lease and nonlease components of existing real estate leases and leases of advertising assets, such as signage, as a single lease component. Effective January 1, 2019, lease and nonlease components of new lease agreements are accounted for separately. Lease components consist of fixed payments including rent, real estate taxes and insurance costs and nonlease components consist of common-area maintenance costs. In addition, we elected the practical expedient to not apply the recognition requirements under the standard to short-term leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet, as we recognize lease expense for these leases on a straight-line basis over the lease term. Generally, we have elected to use the Overnight Indexed Swap rate corresponding to the term of the lease at the lease measurement date as our incremental borrowing rate to measure the right-of-use asset and lease liability.

Certain of our lease agreements include rental payments based on a percentage of revenue and others include rental payments if certain bank deposit levels are met. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Subleases to third parties were not material at December 31, 2020 and 2019.

The following tables provide details on our operating leases:

Table 67: Operating Lease Costs and Cash Flows

Year ended December 31
In millions	2020		2019
Operating lease cost (a)	$	358	$	360
Operating cash flows	$	360	$	353

(a)Included in Occupancy, Equipment and Marketing expense on the Consolidated Income Statement.

Table 68: Operating Lease Assets and Liabilities

	December 31
In millions	2020		2019
Operating lease assets (a)	$	1,876	$	1,982
Operating lease liabilities (b)	$	2,097	$	2,170

(a)Included in Other assets on the Consolidated Balance Sheet.

(b)Included in Accrued expenses and other liabilities on the Consolidated Balance Sheet.

Finance lease assets and liabilities, income and cash flows at December 31, 2020 and 2019 were not material.

Operating lease term and discount rates of our lessee arrangements at December 31, 2020 and 2019 were as follows:

Table 69: Operating Lease Term and Discount Rates of Lessee Arrangements

	December 31
	2020		2019
Weighted-average remaining lease term (years)	8		9
Weighted-average discount rate	2.21	%	2.42	%

Future undiscounted cash flows on our lessee arrangements at December 31, 2020 are as follows:

Table 70: Future Lease Payments of Operating Lease Liabilities

In millions	December 31, 2020
2021	$	364
2022	340
2023	309
2024	260
2025	217
2026 and thereafter	822
Total future lease payments	$	2,312
Less: Interest	215
Present value of operating lease liabilities	$	2,097