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Occupancy Expense and Information Systems and Communications Expense
 12 Months Ended
Dec. 31, 2023
Leases [Abstract]  
Occupancy Expense and Information Systems and Communications Expense Occupancy Expense and Information Systems and Communications Expense
Occupancy expense and information systems and communications expense include depreciation of buildings, leasehold improvements, computer hardware and software, equipment, furniture and fixtures, and amortization of lease right-of-use assets. Total depreciation and amortization expense in 2023, 2022 and 2021 was $829 million, $842 million and $859 million, respectively.
In the fourth quarter of 2022, we completed a sale leaseback transaction of two owned properties in the United States. Under the transaction, land, buildings and building improvements were sold for net proceeds of $27 million. We recognized a gain of $11 million on the sale which is presented within Occupancy expense. The initial term of the subsequent leases is 3 years and they are recognized as operating leases.
We use our incremental borrowing rate to determine the present value of the lease payments for finance and operating leases described below. Additionally, we do not separate nonlease components such as real estate taxes and common area maintenance from base lease payments.
As of December 31, 2023, we had finance leases for information technology equipment of $119 million recorded in premises and equipment, with the related liability of $130 million recorded in long-term debt, in our consolidated statement of condition. As of December 31, 2022, we had finance leases related to information technology equipment of an aggregate net book value of $167 million recorded in equipment, and the related liability of $176 million recorded in long-term debt, in our consolidated statement of condition. In December 2022, modifications were made to our One Lincoln Street Boston lease preparing for its expiration in 2023, resulting in reclassification from a finance lease to an operating lease.
Finance lease right-of-use asset amortization is recorded in occupancy expense on a straight-line basis in our consolidated statement of income over the respective lease term. As of December 31, 2023, accumulated amortization of the finance lease right-of-use asset was $88 million. Lease payments are recorded as a reduction of the liability, with a portion recorded as imputed interest expense. In 2023 and 2022, interest expense related to the finance lease obligation reflected in NII was $5 million and $6 million, respectively.
As of December 31, 2023, an aggregate net book value of $805 million for the operating lease right-of-use assets is recorded in other assets, with the related lease liability of $832 million recorded in accrued expenses and other liabilities in our consolidated statement of condition.
We have entered into non-cancellable operating leases for premises and equipment. Nearly all of these leases include renewal options, and only those reasonably certain of being exercised are included in the term of the lease. Costs for operating leases are recorded on a straight-line basis which includes both interest expense and right-of-use asset amortization. Operating lease costs for office space are recorded in occupancy expense. Costs related to operating leases for equipment are recorded in information systems and communications expense.
As of December 31, 2023, we have additional operating and finance leases, primarily for office space and equipment, that have not yet commenced with approximately $145 million of undiscounted future minimum lease payments. These leases will commence in fiscal year 2024 with lease terms ranging from 6 to 12 years.
None of our leases contain residual value guarantees.
The following table presents lease costs, sublease rental income, cash flows and new leases arising from lease transactions for 2023:
Years Ended December 31,
(In millions)20232022
Finance lease:
Amortization of right-of-use assets$48 $50 
Interest on lease liabilities5 6 
Total finance lease expense53 56 
Sublease income — (10)
Net finance lease expense53 46 
Operating lease:
Operating lease expense163 130 
Sublease income (23)(16)
Net operating lease expense140 114 
Net lease expense$193 $160 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases$5 $6 
Operating cash flows from operating leases197 161 
Financing cash flows from finance leases45 58 
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases$461 $88 
Finance leases— 99 
The following table presents future minimum lease payments under non-cancellable leases as of December 31, 2023:
(In millions)Operating LeasesFinance LeasesTotal
2024$172 $52 $224 
2025150 52 202 
2026124 31 155 
2027108 — 108 
202893 — 93 
Thereafter357 — 357 
Total future minimum lease payments1,004 135 1,139 
Less imputed interest(172)(5)(177)
     Total$832 $130 $962 
The following table presents details related to remaining lease terms and discount rate as of December 31, 2023 and 2022:
December 31, 2023December 31, 2022
Weighted-average remaining lease term (in years):
     Finance leases2.53.5
     Operating leases8.55.0
Weighted-average discount rate:
     Finance leases3 %3 %
     Operating leases4 %3 %
Occupancy Expense and Information Systems and Communications Expense Occupancy Expense and Information Systems and Communications Expense
Occupancy expense and information systems and communications expense include depreciation of buildings, leasehold improvements, computer hardware and software, equipment, furniture and fixtures, and amortization of lease right-of-use assets. Total depreciation and amortization expense in 2023, 2022 and 2021 was $829 million, $842 million and $859 million, respectively.
In the fourth quarter of 2022, we completed a sale leaseback transaction of two owned properties in the United States. Under the transaction, land, buildings and building improvements were sold for net proceeds of $27 million. We recognized a gain of $11 million on the sale which is presented within Occupancy expense. The initial term of the subsequent leases is 3 years and they are recognized as operating leases.
We use our incremental borrowing rate to determine the present value of the lease payments for finance and operating leases described below. Additionally, we do not separate nonlease components such as real estate taxes and common area maintenance from base lease payments.
As of December 31, 2023, we had finance leases for information technology equipment of $119 million recorded in premises and equipment, with the related liability of $130 million recorded in long-term debt, in our consolidated statement of condition. As of December 31, 2022, we had finance leases related to information technology equipment of an aggregate net book value of $167 million recorded in equipment, and the related liability of $176 million recorded in long-term debt, in our consolidated statement of condition. In December 2022, modifications were made to our One Lincoln Street Boston lease preparing for its expiration in 2023, resulting in reclassification from a finance lease to an operating lease.
Finance lease right-of-use asset amortization is recorded in occupancy expense on a straight-line basis in our consolidated statement of income over the respective lease term. As of December 31, 2023, accumulated amortization of the finance lease right-of-use asset was $88 million. Lease payments are recorded as a reduction of the liability, with a portion recorded as imputed interest expense. In 2023 and 2022, interest expense related to the finance lease obligation reflected in NII was $5 million and $6 million, respectively.
As of December 31, 2023, an aggregate net book value of $805 million for the operating lease right-of-use assets is recorded in other assets, with the related lease liability of $832 million recorded in accrued expenses and other liabilities in our consolidated statement of condition.
We have entered into non-cancellable operating leases for premises and equipment. Nearly all of these leases include renewal options, and only those reasonably certain of being exercised are included in the term of the lease. Costs for operating leases are recorded on a straight-line basis which includes both interest expense and right-of-use asset amortization. Operating lease costs for office space are recorded in occupancy expense. Costs related to operating leases for equipment are recorded in information systems and communications expense.
As of December 31, 2023, we have additional operating and finance leases, primarily for office space and equipment, that have not yet commenced with approximately $145 million of undiscounted future minimum lease payments. These leases will commence in fiscal year 2024 with lease terms ranging from 6 to 12 years.
None of our leases contain residual value guarantees.
The following table presents lease costs, sublease rental income, cash flows and new leases arising from lease transactions for 2023:
Years Ended December 31,
(In millions)20232022
Finance lease:
Amortization of right-of-use assets$48 $50 
Interest on lease liabilities5 6 
Total finance lease expense53 56 
Sublease income — (10)
Net finance lease expense53 46 
Operating lease:
Operating lease expense163 130 
Sublease income (23)(16)
Net operating lease expense140 114 
Net lease expense$193 $160 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases$5 $6 
Operating cash flows from operating leases197 161 
Financing cash flows from finance leases45 58 
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases$461 $88 
Finance leases— 99 
The following table presents future minimum lease payments under non-cancellable leases as of December 31, 2023:
(In millions)Operating LeasesFinance LeasesTotal
2024$172 $52 $224 
2025150 52 202 
2026124 31 155 
2027108 — 108 
202893 — 93 
Thereafter357 — 357 
Total future minimum lease payments1,004 135 1,139 
Less imputed interest(172)(5)(177)
     Total$832 $130 $962 
The following table presents details related to remaining lease terms and discount rate as of December 31, 2023 and 2022:
December 31, 2023December 31, 2022
Weighted-average remaining lease term (in years):
     Finance leases2.53.5
     Operating leases8.55.0
Weighted-average discount rate:
     Finance leases3 %3 %
     Operating leases4 %3 %