Leases, Premises and Equipment

3 Months Ended

Mar. 31, 2025

Lessor Arrangements

The Company provides equipment leases through a subsidiary, mainly to large, investment-grade corporate clients. These qualify as direct financing leases which are recorded based upon the lease payments, estimated residual values and direct costs, excluding unearned income and uses the implicit interest rate to determine the value. Lease terms typically range from 24 to 120 months. The Company bases residual value estimates on asset life, market value, and lessee behavior using industry data and third-party appraisals. At the end of the lease term, the lessee can return, renew, or purchase the equipment at its fair market value. Impairment of residual values occurs if the fair value is less than the carrying amount. The Company reviews its direct financing leases for impairment annually. We utilize residual value insurance for certain of our direct finance leases. As of March 31, 2025 and December 31, 2024, we had residual value insurance in place on $259 million and $262 million of our leased assets, respectively.

Interest income on lease financing is recorded over the lease term and recorded in Loans and leases interest income on the Condensed Consolidated Statements of (Loss) Income. Interest income from direct finance leases was $24 million and $38 million for the three months ended March 31, 2025 and March 31, 2024, respectively.

Lessee Arrangements

The Company has operating leases for offices, branches, equipment and other items, generally with terms of 20 years or less. Many of our leases contain options to extend or terminate early and we consider these options when evaluating the lease term to determine if they are reasonably certain to be exercised based on all relevant economic and financial factors.

At lease inception, lease liabilities are recognized in other liabilities based on the present value of remaining lease payments, discounted using the Company's incremental borrowing rate if no implicit rate in the lease is available. Right-of-use assets, recognized in other assets, represent the Company’s right to use an underlying asset for the lease term and are initially equal to the lease liability, adjusted for any payments made prior to lease commencement and any lease incentives.

Variable costs such as the proportionate share of actual costs for utilities, common area maintenance, property taxes and insurance are not included in the lease liability and are recognized in the period in which they are incurred. Operating lease costs were $23 million and $18 million for the three months ended March 31, 2025 and March 31, 2024, respectively.

Supplemental balance sheet information related to the Company’s operating lease arrangements is presented below:


	March 31, 2025			December 31, 2024
Operating Leases:
Operating lease right-of-use assets	$	413		$	416
Operating lease liabilities	$	465		$	463
Weighted average remaining lease term	10.5 years			10.7 years
Weighted average discount rate %	4.78		%	4.77		%

Supplemental cash flow information related to the leases:


	Three Months Ended March 31,
	2025		2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	18	$	18

Premises and Equipment

The table below presents the Company’s Premises and equipment:


	March 31, 2025		December 31, 2024
Premises and equipment	$	1,014	$	1,131
Less: Accumulated depreciation	(528)		(569)
Premises and equipment, net	$	486	$	562

Depreciation is included in Occupancy and equipment in the Condensed Consolidated Statements of (Loss) Income and amounted to $11 million and $11 million in the three months ended March 31, 2025 and March 31, 2024 respectively.

Leases, Premises and Equipment