Leases

3 Months Ended

Mar. 31, 2019

NOTE 2—LEASES

Leases

In the first quarter of 2019, we adopted ASU No. 2016-02, Leases (Topic 842). See “Note 1—Summary of Significant Accounting Policies” for the impacts upon adoption. Our primary involvement with leases is in the capacity as a lessee where we lease premises to support our business. A majority of our leases are operating leases of office space, retail bank branches and Cafés. For these leases, we have elected to account for the lease and non-lease components together as a single lease component. Our operating leases expire at various dates through 2071 without taking into consideration available renewal options, and many of them require variable lease payments by us, of property taxes, insurance premiums, common area maintenance and other costs. Certain of these leases also have extension or termination options, and we assess the likelihood of exercising such options. If it is reasonably certain that we will exercise the options, we include the impact in the measurement of our right-of-use assets and lease liabilities.

Our right-of-use assets and lease liabilities for operating leases are included in other assets and other liabilities on our consolidated balance sheet. As most of our operating leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of lease payments. Our operating lease expense is included in occupancy and equipment within non-interest expense in our consolidated statements of income. Total operating lease expense consists of operating lease cost, which is recognized on a straight-line basis over the lease term, and variable lease cost, which is recognized based on actual amounts incurred. We also sublease certain premises and sublease income is included in other non-interest income.

The following tables present our operating lease portfolio and related lease costs as of and for the three months ended March 31, 2019.

Table 2.1 Operating Lease Portfolio



(Dollars in millions)	March 31, 2019
Right-of-use assets	$	1,547
Lease liabilities	1,836
Weighted average remaining lease term	9.2 years
Weighted average discount rate	3.3		%

Table 2.2 Total Operating Lease Expense and Other Information



(Dollars in millions)	Three Months Ended March 31, 2019
Operating lease cost	$	65
Variable lease cost	11
Total lease cost	76
Sublease income	(6		)
Net lease cost	$	70
Cash paid for amounts included in the measurement of lease liabilities	$	82
Right-of-use assets obtained in exchange for lease liabilities	15
Right-of-use assets recognized upon adoption of new lease standard	1,601

The following table presents a maturity analysis of our operating leases and a reconciliation of the undiscounted cash flows to our lease liabilities as of March 31, 2019.

Table 2.3 Maturities of Operating Leases and Reconciliation to Lease Liabilities



(Dollars in millions)	March 31, 2019
2019	$	230
2020	296
2021	266
2022	240
2023	211
Thereafter	928
Total undiscounted lease payments	2,171
Less: Imputed interest	(335		)
Total lease liabilities	$	1,836

As of March 31, 2019, we had approximately $79 million and $83 million of right-of-use assets and lease liabilities, respectively, for finance leases with a weighted average remaining lease term of 6.6 years. These right-of-use assets and lease liabilities are included in premises and equipment, net and other borrowings on our consolidated balance sheets. We recognized $5 million of total finance lease expense for the three months ended March 31, 2019.