LEASES

12 Months Ended

Dec. 31, 2024

NOTE 9 - LEASES

Citizens as Lessee

The Company determines if an arrangement is a lease at inception and records a right-of-use asset and a corresponding lease liability. A right-of-use asset represents the value of the Company’s contractual right to use an underlying leased asset and a lease liability represents the Company’s contractual obligation to make payments on the same asset. Operating and finance lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of the lease payments over the non-cancelable lease term. In instances where the lease does not specify an implicit rate, the Company utilizes an incremental borrowing rate based on information available at the lease commencement date to determine the present value of the lease payments. The Company evaluates right-of-use assets for impairment when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

The Company leases both equipment and real estate, including office and branch space, in the normal course of business. Lease terms predominantly range from one year to fifteen years and may include options to extend the lease, terminate the lease, or purchase the underlying asset at the end of the lease. Certain lease agreements include rental payments based on an index or are adjusted periodically for inflation. Lease components are accounted for as a single lease component when lease agreements contain lease and non-lease components and for certain real estate leases.

Leases with an initial term of 12 months or less are not recorded in the Company’s Consolidated Balance Sheets and are recognized in occupancy expense in the Company’s Consolidated Statements of Operations on a straight-line basis over the lease term. The Company may also enter into subleases with third parties for certain leased real estate properties that are no longer occupied.

The components of operating lease cost are presented below.


	Year Ended December 31,
(dollars in millions)	2024	2023	2022
Operating lease cost	$220	$221	$216
Short-term lease cost	3	2	2
Variable lease cost	5	5	7
Sublease income	(5)	(1)	(1)
Total	$223	$227	$224

Operating lease cost is recognized on a straight-line basis over the lease term and is recorded in occupancy and equipment and software in the Consolidated Statements of Operations.

Supplemental information related to the Company’s operating lease arrangements is presented in the tables below:


(dollars in millions)	December 31, 2024		December 31, 2023		Affected Line Item in Consolidated Balance Sheets
Operating lease right-of-use assets	$869		$885		Other assets
Operating lease liabilities	956		977		Other liabilities
Weighted average remaining lease term (years)	7		7		—
Weighted average discount rate	3.51	%	3.10	%	—


	Year Ended December 31,
(dollars in millions)	2024	2023	2022
Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases	$233	$232	$219
Supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets:
Right-of-use assets in exchange for new operating lease liabilities	84	64	408

Lease liabilities maturing under non-cancelable operating leases are presented below as of December 31, 2024.


Year			(dollars in millions)
2025			$204
2026			193
2027			171
2028			140
2029			108
Thereafter			267
Total lease payments			1,083
Less: Interest			127
Present value of lease liabilities			$956

Citizens as Lessor

Operating lease assets where Citizens was the lessor totaled $165 million and $254 million as of December 31, 2024 and 2023, respectively. Operating lease rental income associated with these assets is recognized in other income in the Consolidated Statements of Operations on a straight-line basis over the lease term.

Depreciation expense associated with operating lease assets is recorded on a straight-line basis over their estimated useful life and is included in other operating expense in the Consolidated Statements of Operations. Operating lease assets are reviewed for impairment on a periodic basis, with an impairment loss recognized in other operating expense if the carrying amount of the leased asset exceeds its fair value and is not recoverable. The carrying amount of a leased asset is not recoverable if its carrying value exceeds the sum of the undiscounted cash flows expected to result from the lease payments and the estimated residual value of the asset.

For more information on direct finance and sales-type leases where Citizens is the lessor, see Note 5.