Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.19.2
Leases
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Leases  Leases
The Corporation enters into both lessor and lessee arrangements. For more information on lease accounting, see Note 1 – Summary of Significant Accounting Principles and on lease financing receivables, see Note 5 – Outstanding Loans and Leases.
Lessor Arrangements
The Corporation’s lessor arrangements primarily consist of operating, sales-type and direct financing leases for equipment. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.
At June 30, 2019, the total net investment in sales-type and direct financing leases was $22.0 billion, comprised of $19.5 billion in lease receivables and $2.5 billion in unguaranteed residuals. In certain cases, the Corporation obtains third-party residual value insurance to reduce its residual asset risk. The carrying value of residual assets with third-party residual value insurance for at least a portion of the asset value was $5.4 billion.
For the three and six months ended June 30, 2019, total lease income was $413 million and $839 million, consisting of $198 million and $403 million from sales-type and direct financing leases and $215 million and $436 million from operating leases.
Lessee Arrangements
The Corporation’s lessee arrangements predominantly consist of operating leases for premises and equipment; the Corporation’s financing leases are not significant. Right-of-use assets were $9.9 billion and lease liabilities were $10.2 billion at June 30, 2019. The weighted-average discount rate used to calculate the present value of future minimum lease payments was four percent.
Lease terms may contain renewal and extension options and early termination features. Generally, these options do not impact the lease term because the Corporation is not reasonably certain that it will exercise the options. The weighted-average lease term was 8.2 years at June 30, 2019.
The table below provides the components of lease cost and supplemental information for the three and six months ended June 30, 2019.
 
 
 
 
Lease Cost and Supplemental Information
 
 
 
 
 
 
(Dollars in millions)
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
Operating lease cost
$
520

 
$
1,039

Variable lease cost (1)
113

 
240

Total lease cost (2)
$
633


$
1,279

 
 
 
 
Right-of-use assets obtained in exchange for new operating lease liabilities (3)
$
263

 
$
648

Operating cash flows from operating leases (4)
499

 
1,000

(1) 
Primarily consists of payments for common area maintenance and property taxes.
(2) 
Amounts are recorded in occupancy and equipment expense in the Consolidated Statement of Income.
(3) 
Represents non-cash activity and, accordingly, is not reflected in the Consolidated Statement of Cash Flows.
(4) 
Represents cash paid for amounts included in the measurement of lease liabilities.
Maturity Analysis
The maturities of lessor and lessee arrangements outstanding at June 30, 2019 are presented in the table below based on undiscounted cash flows.
 
 
 
 
 
 
Maturities of Lessor and Lessee Arrangements
 
 
 
 
 
 
 
Lessor
 
Lessee (1)
 
Operating
Leases
 
Sales-type and
Direct Financing
Leases (2)
 
Operating
Leases
(Dollars in millions)
June 30, 2019
Remainder of 2019
$
402

 
$
3,172

 
$
1,002

2020
725

 
5,816

 
1,907

2021
612

 
4,766

 
1,686

2022
516

 
3,100

 
1,426

2023
411

 
1,598

 
1,167

Thereafter
1,217

 
2,784

 
4,896

Total undiscounted
cash flows
$
3,883

 
$
21,236

 
$
12,084

Less: Net present
value adjustment
 
 
1,694

 
1,845

Total (3)



$
19,542


$
10,239

(1) 
Excludes $1.6 billion in commitments under lessee arrangements that have not yet commenced with lease terms that will begin later in 2019.
(2) 
Includes $15.8 billion in commercial lease financing receivables and $3.7 billion in direct/indirect consumer lease financing receivables.
(3) 
Represents lease receivables for lessor arrangements and lease liabilities for lessee arrangements.
At December 31, 2018, operating lease commitments under lessee arrangements were $2.4 billion, $2.2 billion, $2.0 billion, $1.7 billion and $1.3 billion for 2019 through 2023, respectively, and $6.2 billion in the aggregate for all years thereafter. These amounts include variable lease payments and commitments under leases that have not yet commenced, both of which are excluded from the lessee maturity analysis presented in the table above.
Leases Leases
The Corporation enters into both lessor and lessee arrangements. For more information on lease accounting, see Note 1 – Summary of Significant Accounting Principles and on lease financing receivables, see Note 5 – Outstanding Loans and Leases.
Lessor Arrangements
The Corporation’s lessor arrangements primarily consist of operating, sales-type and direct financing leases for equipment. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.
At June 30, 2019, the total net investment in sales-type and direct financing leases was $22.0 billion, comprised of $19.5 billion in lease receivables and $2.5 billion in unguaranteed residuals. In certain cases, the Corporation obtains third-party residual value insurance to reduce its residual asset risk. The carrying value of residual assets with third-party residual value insurance for at least a portion of the asset value was $5.4 billion.
For the three and six months ended June 30, 2019, total lease income was $413 million and $839 million, consisting of $198 million and $403 million from sales-type and direct financing leases and $215 million and $436 million from operating leases.
Lessee Arrangements
The Corporation’s lessee arrangements predominantly consist of operating leases for premises and equipment; the Corporation’s financing leases are not significant. Right-of-use assets were $9.9 billion and lease liabilities were $10.2 billion at June 30, 2019. The weighted-average discount rate used to calculate the present value of future minimum lease payments was four percent.
Lease terms may contain renewal and extension options and early termination features. Generally, these options do not impact the lease term because the Corporation is not reasonably certain that it will exercise the options. The weighted-average lease term was 8.2 years at June 30, 2019.
The table below provides the components of lease cost and supplemental information for the three and six months ended June 30, 2019.
 
 
 
 
Lease Cost and Supplemental Information
 
 
 
 
 
 
(Dollars in millions)
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
Operating lease cost
$
520

 
$
1,039

Variable lease cost (1)
113

 
240

Total lease cost (2)
$
633


$
1,279

 
 
 
 
Right-of-use assets obtained in exchange for new operating lease liabilities (3)
$
263

 
$
648

Operating cash flows from operating leases (4)
499

 
1,000

(1) 
Primarily consists of payments for common area maintenance and property taxes.
(2) 
Amounts are recorded in occupancy and equipment expense in the Consolidated Statement of Income.
(3) 
Represents non-cash activity and, accordingly, is not reflected in the Consolidated Statement of Cash Flows.
(4) 
Represents cash paid for amounts included in the measurement of lease liabilities.
Maturity Analysis
The maturities of lessor and lessee arrangements outstanding at June 30, 2019 are presented in the table below based on undiscounted cash flows.
 
 
 
 
 
 
Maturities of Lessor and Lessee Arrangements
 
 
 
 
 
 
 
Lessor
 
Lessee (1)
 
Operating
Leases
 
Sales-type and
Direct Financing
Leases (2)
 
Operating
Leases
(Dollars in millions)
June 30, 2019
Remainder of 2019
$
402

 
$
3,172

 
$
1,002

2020
725

 
5,816

 
1,907

2021
612

 
4,766

 
1,686

2022
516

 
3,100

 
1,426

2023
411

 
1,598

 
1,167

Thereafter
1,217

 
2,784

 
4,896

Total undiscounted
cash flows
$
3,883

 
$
21,236

 
$
12,084

Less: Net present
value adjustment
 
 
1,694

 
1,845

Total (3)



$
19,542


$
10,239

(1) 
Excludes $1.6 billion in commitments under lessee arrangements that have not yet commenced with lease terms that will begin later in 2019.
(2) 
Includes $15.8 billion in commercial lease financing receivables and $3.7 billion in direct/indirect consumer lease financing receivables.
(3) 
Represents lease receivables for lessor arrangements and lease liabilities for lessee arrangements.
At December 31, 2018, operating lease commitments under lessee arrangements were $2.4 billion, $2.2 billion, $2.0 billion, $1.7 billion and $1.3 billion for 2019 through 2023, respectively, and $6.2 billion in the aggregate for all years thereafter. These amounts include variable lease payments and commitments under leases that have not yet commenced, both of which are excluded from the lessee maturity analysis presented in the table above.
Leases Leases
The Corporation enters into both lessor and lessee arrangements. For more information on lease accounting, see Note 1 – Summary of Significant Accounting Principles and on lease financing receivables, see Note 5 – Outstanding Loans and Leases.
Lessor Arrangements
The Corporation’s lessor arrangements primarily consist of operating, sales-type and direct financing leases for equipment. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.
At June 30, 2019, the total net investment in sales-type and direct financing leases was $22.0 billion, comprised of $19.5 billion in lease receivables and $2.5 billion in unguaranteed residuals. In certain cases, the Corporation obtains third-party residual value insurance to reduce its residual asset risk. The carrying value of residual assets with third-party residual value insurance for at least a portion of the asset value was $5.4 billion.
For the three and six months ended June 30, 2019, total lease income was $413 million and $839 million, consisting of $198 million and $403 million from sales-type and direct financing leases and $215 million and $436 million from operating leases.
Lessee Arrangements
The Corporation’s lessee arrangements predominantly consist of operating leases for premises and equipment; the Corporation’s financing leases are not significant. Right-of-use assets were $9.9 billion and lease liabilities were $10.2 billion at June 30, 2019. The weighted-average discount rate used to calculate the present value of future minimum lease payments was four percent.
Lease terms may contain renewal and extension options and early termination features. Generally, these options do not impact the lease term because the Corporation is not reasonably certain that it will exercise the options. The weighted-average lease term was 8.2 years at June 30, 2019.
The table below provides the components of lease cost and supplemental information for the three and six months ended June 30, 2019.
 
 
 
 
Lease Cost and Supplemental Information
 
 
 
 
 
 
(Dollars in millions)
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
Operating lease cost
$
520

 
$
1,039

Variable lease cost (1)
113

 
240

Total lease cost (2)
$
633


$
1,279

 
 
 
 
Right-of-use assets obtained in exchange for new operating lease liabilities (3)
$
263

 
$
648

Operating cash flows from operating leases (4)
499

 
1,000

(1) 
Primarily consists of payments for common area maintenance and property taxes.
(2) 
Amounts are recorded in occupancy and equipment expense in the Consolidated Statement of Income.
(3) 
Represents non-cash activity and, accordingly, is not reflected in the Consolidated Statement of Cash Flows.
(4) 
Represents cash paid for amounts included in the measurement of lease liabilities.
Maturity Analysis
The maturities of lessor and lessee arrangements outstanding at June 30, 2019 are presented in the table below based on undiscounted cash flows.
 
 
 
 
 
 
Maturities of Lessor and Lessee Arrangements
 
 
 
 
 
 
 
Lessor
 
Lessee (1)
 
Operating
Leases
 
Sales-type and
Direct Financing
Leases (2)
 
Operating
Leases
(Dollars in millions)
June 30, 2019
Remainder of 2019
$
402

 
$
3,172

 
$
1,002

2020
725

 
5,816

 
1,907

2021
612

 
4,766

 
1,686

2022
516

 
3,100

 
1,426

2023
411

 
1,598

 
1,167

Thereafter
1,217

 
2,784

 
4,896

Total undiscounted
cash flows
$
3,883

 
$
21,236

 
$
12,084

Less: Net present
value adjustment
 
 
1,694

 
1,845

Total (3)



$
19,542


$
10,239

(1) 
Excludes $1.6 billion in commitments under lessee arrangements that have not yet commenced with lease terms that will begin later in 2019.
(2) 
Includes $15.8 billion in commercial lease financing receivables and $3.7 billion in direct/indirect consumer lease financing receivables.
(3) 
Represents lease receivables for lessor arrangements and lease liabilities for lessee arrangements.
At December 31, 2018, operating lease commitments under lessee arrangements were $2.4 billion, $2.2 billion, $2.0 billion, $1.7 billion and $1.3 billion for 2019 through 2023, respectively, and $6.2 billion in the aggregate for all years thereafter. These amounts include variable lease payments and commitments under leases that have not yet commenced, both of which are excluded from the lessee maturity analysis presented in the table above.
Leases Leases
The Corporation enters into both lessor and lessee arrangements. For more information on lease accounting, see Note 1 – Summary of Significant Accounting Principles and on lease financing receivables, see Note 5 – Outstanding Loans and Leases.
Lessor Arrangements
The Corporation’s lessor arrangements primarily consist of operating, sales-type and direct financing leases for equipment. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.
At June 30, 2019, the total net investment in sales-type and direct financing leases was $22.0 billion, comprised of $19.5 billion in lease receivables and $2.5 billion in unguaranteed residuals. In certain cases, the Corporation obtains third-party residual value insurance to reduce its residual asset risk. The carrying value of residual assets with third-party residual value insurance for at least a portion of the asset value was $5.4 billion.
For the three and six months ended June 30, 2019, total lease income was $413 million and $839 million, consisting of $198 million and $403 million from sales-type and direct financing leases and $215 million and $436 million from operating leases.
Lessee Arrangements
The Corporation’s lessee arrangements predominantly consist of operating leases for premises and equipment; the Corporation’s financing leases are not significant. Right-of-use assets were $9.9 billion and lease liabilities were $10.2 billion at June 30, 2019. The weighted-average discount rate used to calculate the present value of future minimum lease payments was four percent.
Lease terms may contain renewal and extension options and early termination features. Generally, these options do not impact the lease term because the Corporation is not reasonably certain that it will exercise the options. The weighted-average lease term was 8.2 years at June 30, 2019.
The table below provides the components of lease cost and supplemental information for the three and six months ended June 30, 2019.
 
 
 
 
Lease Cost and Supplemental Information
 
 
 
 
 
 
(Dollars in millions)
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
Operating lease cost
$
520

 
$
1,039

Variable lease cost (1)
113

 
240

Total lease cost (2)
$
633


$
1,279

 
 
 
 
Right-of-use assets obtained in exchange for new operating lease liabilities (3)
$
263

 
$
648

Operating cash flows from operating leases (4)
499

 
1,000

(1) 
Primarily consists of payments for common area maintenance and property taxes.
(2) 
Amounts are recorded in occupancy and equipment expense in the Consolidated Statement of Income.
(3) 
Represents non-cash activity and, accordingly, is not reflected in the Consolidated Statement of Cash Flows.
(4) 
Represents cash paid for amounts included in the measurement of lease liabilities.
Maturity Analysis
The maturities of lessor and lessee arrangements outstanding at June 30, 2019 are presented in the table below based on undiscounted cash flows.
 
 
 
 
 
 
Maturities of Lessor and Lessee Arrangements
 
 
 
 
 
 
 
Lessor
 
Lessee (1)
 
Operating
Leases
 
Sales-type and
Direct Financing
Leases (2)
 
Operating
Leases
(Dollars in millions)
June 30, 2019
Remainder of 2019
$
402

 
$
3,172

 
$
1,002

2020
725

 
5,816

 
1,907

2021
612

 
4,766

 
1,686

2022
516

 
3,100

 
1,426

2023
411

 
1,598

 
1,167

Thereafter
1,217

 
2,784

 
4,896

Total undiscounted
cash flows
$
3,883

 
$
21,236

 
$
12,084

Less: Net present
value adjustment
 
 
1,694

 
1,845

Total (3)



$
19,542


$
10,239

(1) 
Excludes $1.6 billion in commitments under lessee arrangements that have not yet commenced with lease terms that will begin later in 2019.
(2) 
Includes $15.8 billion in commercial lease financing receivables and $3.7 billion in direct/indirect consumer lease financing receivables.
(3) 
Represents lease receivables for lessor arrangements and lease liabilities for lessee arrangements.
At December 31, 2018, operating lease commitments under lessee arrangements were $2.4 billion, $2.2 billion, $2.0 billion, $1.7 billion and $1.3 billion for 2019 through 2023, respectively, and $6.2 billion in the aggregate for all years thereafter. These amounts include variable lease payments and commitments under leases that have not yet commenced, both of which are excluded from the lessee maturity analysis presented in the table above.