Leasing Activity

6 Months Ended

Jun. 30, 2019

Leases as Lessor and Lessee Disclosure [Text Block]

Note 7: Leasing Activity

The information below provides a summary of our leasing activities as a lessor and lessee.

As a Lessor

Table 7.1 presents the composition of our leasing revenue and Table 7.2 provides the components of our investment in lease financing.

Table 7.1: Leasing Revenue



(in millions)	Quarter ended June 30, 2019		Six months ended June 30, 2019
Interest income on lease financing	$	224	447
Other lease revenues:
Variable revenues on lease financing	26		50
Fixed revenues on operating leases	357		730
Variable revenues on operating leases	14		32
Other lease-related revenues (1)	27		55
Lease income	424		867
Total leasing revenue	$	648	1,314


(1)	Predominantly includes net gains on disposition of assets leased under operating leases or lease financings.

Table 7.2: Investment in Lease Financing



(in millions)	Jun 30, 2019
Lease receivables	$	17,735
Residual asset values	4,244
Unearned income	(2,655		)
Lease financing	$	19,324

Our net investment in financing and sales-type leases includes $2.1 billion of leveraged leases at June 30, 2019.

As shown in Table 9.1, included in Note 9 (Other Assets), we had $8.7 billion in operating lease assets at June 30, 2019, which was net of $3.2 billion of accumulated depreciation. Depreciation expense for the lease assets was $219 million and $448 million in the second quarter and first half of 2019, respectively.

Table 7.3 presents future lease payments owed by our lessees.

Table 7.3: Maturities of Lease Receivables



	June 30, 2019
(in millions)	Direct financing and sales- type leases		Operating leases
Remainder of 2019	$	3,036	535
2020	5,167		880
2021	4,004		591
2022	2,127		407
2023	1,219		269
Thereafter	2,182		605
Total lease receivables	$	17,735	3,287

As a Lessee

Substantially all of our leases are operating leases. Table 7.4 presents balances for our operating leases.

Table 7.4: Operating Lease Right of Use (ROU) Assets and Lease Liabilities



(in millions)	Jun 30, 2019
ROU assets	$	4,776
Lease liabilities	5,302

Table 7.5 provides the composition of our lease costs, which are predominantly included in net occupancy expense.

Table 7.5: Lease Costs



(in millions)	Quarter ended June 30, 2019			Six months ended June 30, 2019
Fixed lease expense - operating leases	$	291		588
Variable lease expense	80			153
Other (1)	(9		)	(17	)
Total lease costs	$	362		724


(1)	Predominantly includes sublease rental income and gains recognized from sale leaseback transactions.

Tables 7.6 and 7.7 provide the future lease payments under operating leases as of December 31, 2018 and June 30, 2019, respectively. Table 7.7 also includes information on the remaining average lease term and discount rate.

Table 7.6: Lease Payments on Operating Leases Prior to Adoption of ASU 2016-02 - Leases



(in millions)	December 31, 2018
2019	$	1,174
2020	1,056
2021	880
2022	713
2023	577
Thereafter	1,654
Total	$	6,054

Table 7.7: Lease Payments on Operating Leases Subsequent to Adoption of ASU 2016-02 - Leases



(in millions, except for weighted averages)	June 30, 2019
Remainder of 2019	$	566
2020	1,127
2021	947
2022	792
2023	654
Thereafter	2,054
Total lease payments	6,140
Less: imputed interest	838
Total operating lease liabilities	$	5,302
Weighted average remaining lease term (in years)	7.3
Weighted average discount rate	3.2		%

Our operating leases predominantly expire within the next 15 years, with the longest lease expiring in 2105. We do not include renewal or termination options in the establishment of the lease term when we are not reasonably certain that we will exercise them. As of June 30, 2019, we had additional operating leases commitments of $72 million, predominantly for real estate, which leases had not yet commenced. These leases will commence by 2020 and have lease terms of 1 year to 11 years.