Bank of America Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

9 Months Ended

Sep. 30, 2019

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 September 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 $5.7 billion.

For the three and nine months ended September 30, 2019, total lease income was $425 million and $1.3 billion, consisting of $198 million and $601 million from sales-type and direct financing leases and $227 million and $663 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 $9.8 billion and lease liabilities were $10.1 billion at September 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 September 30, 2019.

The table below provides the components of lease cost and supplemental information for the three and nine months ended September 30, 2019.




Lease Cost and Supplemental Information

(Dollars in millions)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost	$	522	$	1,561
Variable lease cost ⁽¹⁾	124		364
Total lease cost⁽²⁾	$	646	$	1,925

Right-of-use assets obtained in exchange for new operating lease liabilities ⁽³⁾	$	108	$	756
Operating cash flows from operating leases ⁽⁴⁾	507		1,507


⁽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 September 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)	September 30, 2019
Remainder of 2019	$	204	$	1,540	$	503
2020	775		5,810		1,944
2021	672		4,858		1,722
2022	578		3,674		1,464
2023	466		1,654		1,202
Thereafter	1,369		3,432		5,036
Total undiscounted cash flows	$	4,064	$	20,968	$	11,871
Less: Net present value adjustment			1,510		1,741
Total ⁽³⁾			$	19,458	$	10,130


⁽¹⁾	Excludes $1.7 billion in commitments under lessee arrangements that have not yet commenced with lease terms that will begin later in 2019.


⁽²⁾	Includes $15.5 billion in commercial lease financing receivables and $4.0 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

Lessor Arrangements

Lessee Arrangements

The table below provides the components of lease cost and supplemental information for the three and nine months ended September 30, 2019.




Lease Cost and Supplemental Information

(Dollars in millions)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost	$	522	$	1,561
Variable lease cost ⁽¹⁾	124		364
Total lease cost⁽²⁾	$	646	$	1,925

Right-of-use assets obtained in exchange for new operating lease liabilities ⁽³⁾	$	108	$	756
Operating cash flows from operating leases ⁽⁴⁾	507		1,507


⁽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 September 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)	September 30, 2019
Remainder of 2019	$	204	$	1,540	$	503
2020	775		5,810		1,944
2021	672		4,858		1,722
2022	578		3,674		1,464
2023	466		1,654		1,202
Thereafter	1,369		3,432		5,036
Total undiscounted cash flows	$	4,064	$	20,968	$	11,871
Less: Net present value adjustment			1,510		1,741
Total ⁽³⁾			$	19,458	$	10,130


⁽¹⁾	Excludes $1.7 billion in commitments under lessee arrangements that have not yet commenced with lease terms that will begin later in 2019.


⁽²⁾	Includes $15.5 billion in commercial lease financing receivables and $4.0 billion in direct/indirect consumer lease financing receivables.


⁽³⁾	Represents lease receivables for lessor arrangements and lease liabilities for lessee arrangements.

Leases

Lessor Arrangements

Lessee Arrangements

The table below provides the components of lease cost and supplemental information for the three and nine months ended September 30, 2019.




Lease Cost and Supplemental Information

(Dollars in millions)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost	$	522	$	1,561
Variable lease cost ⁽¹⁾	124		364
Total lease cost⁽²⁾	$	646	$	1,925

Right-of-use assets obtained in exchange for new operating lease liabilities ⁽³⁾	$	108	$	756
Operating cash flows from operating leases ⁽⁴⁾	507		1,507


⁽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 September 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)	September 30, 2019
Remainder of 2019	$	204	$	1,540	$	503
2020	775		5,810		1,944
2021	672		4,858		1,722
2022	578		3,674		1,464
2023	466		1,654		1,202
Thereafter	1,369		3,432		5,036
Total undiscounted cash flows	$	4,064	$	20,968	$	11,871
Less: Net present value adjustment			1,510		1,741
Total ⁽³⁾			$	19,458	$	10,130


⁽¹⁾	Excludes $1.7 billion in commitments under lessee arrangements that have not yet commenced with lease terms that will begin later in 2019.


⁽²⁾	Includes $15.5 billion in commercial lease financing receivables and $4.0 billion in direct/indirect consumer lease financing receivables.


⁽³⁾	Represents lease receivables for lessor arrangements and lease liabilities for lessee arrangements.

Leases

Lessor Arrangements

Lessee Arrangements

The table below provides the components of lease cost and supplemental information for the three and nine months ended September 30, 2019.




Lease Cost and Supplemental Information

(Dollars in millions)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost	$	522	$	1,561
Variable lease cost ⁽¹⁾	124		364
Total lease cost⁽²⁾	$	646	$	1,925

Right-of-use assets obtained in exchange for new operating lease liabilities ⁽³⁾	$	108	$	756
Operating cash flows from operating leases ⁽⁴⁾	507		1,507


⁽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 September 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)	September 30, 2019
Remainder of 2019	$	204	$	1,540	$	503
2020	775		5,810		1,944
2021	672		4,858		1,722
2022	578		3,674		1,464
2023	466		1,654		1,202
Thereafter	1,369		3,432		5,036
Total undiscounted cash flows	$	4,064	$	20,968	$	11,871
Less: Net present value adjustment			1,510		1,741
Total ⁽³⁾			$	19,458	$	10,130


⁽¹⁾	Excludes $1.7 billion in commitments under lessee arrangements that have not yet commenced with lease terms that will begin later in 2019.


⁽²⁾	Includes $15.5 billion in commercial lease financing receivables and $4.0 billion in direct/indirect consumer lease financing receivables.


⁽³⁾	Represents lease receivables for lessor arrangements and lease liabilities for lessee arrangements.