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Leases | 12 Months Ended
--- | ---
Dec. 31, 2023
Leases [Abstract] |
Leases | 10. Leases As a lessee, we enter into leases of land, buildings, and equipment. Our real estate leases primarily relate to bank branches and office space. The leases of equipment principally relate to technology assets for data processing and data storage. As a lessor, we primarily provide financing through our equipment leasing business. Lessee Our leases are classified as either operating or financing and have remaining terms ranging from 1 to 20 years with the exception of certain ground leases that have terms over 30 years. For leases with initial terms greater than one year, a lease liability, measured as the present value of unpaid lease payments, and a corresponding right-of-use asset for the right to use the leased properties are reported on the balance sheet. Lease payments are discounted using Key’s incremental borrowing rate, consistent with what Key would pay to borrow on a collateralized basis over a term similar to each lease. Leases with an initial term of less than one year are not recorded on the balance sheet. The related expense is recognized on a straight-line basis over the lease term. Certain leases contain options to extend the lease term for up to five years. Some leases give us the option to terminate, for a penalty or at the lessor's discretion. Leases with variable payments are primarily based on adjustments for inflation over the term of the lease based on a contractually defined index. Certain ATM leases include variable payments based on volume of transactions. Operating lease expense is recognized in "net occupancy" and "equipment" on the income statement. The components of lease expense are summarized as follows:
Dollars in millions |  | December 31, 2023 | December 31, 2022
Operating lease cost |  | $ | 122 |  | $ | 128 |
Finance lease cost: |  |  |
Amortization of right-of-use assets |  | 1 |  | 1 |
Interest on lease liabilities |  | — |  | — |
Variable lease cost |  | 19 |  | 24 |
Total lease cost (a) |  | $ | 142 |  | $ | 153 |
(a)Short-term lease cost was le ss than $1 million for both the twelve months ended December 31, 2023, and December 31, 2022 Cash flows related to leases are summarized as follows:
Dollars in millions |  | December 31, 2023 | December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Operating cash flows from operating leases |  | $ | 135 |  | $ | 139 |
Financing cash flows from finance leases |  | 1 |  | 1 |
Right-of-use assets obtained in exchange for lease obligations: (a) |  |  |
Operating leases |  | $ | 65 |  | $ | 46 |
(a)There were no right-of-use assets obtained in exchange for finance lease obligations for either the twelve months ended December 31, 2023 or December 31, 2022. Additional balance sheet information related to leases is summarized as follows:
Dollars in millions | Balance sheet classification | December 31, 2023 | December 31, 2022
Operating lease assets | Accrued income and other assets | $ | 479 |  | $ | 525 |
Operating lease liabilities | Accrued expense and other liabilities | 548 |  | 601 |
Finance leases: |  |  |
Property and equipment, gross | Premises and equipment | $ | 18 |  | $ | 18 |
Accumulated depreciation | Premises and equipment | (15) |  | (14) |
Property and equipment, net |  | 3 |  | 4 |
Finance lease liabilities | Long-term debt | 5 |  | 6 |
Information pertaining to the lease term and weighted-average discount rate is summarized as follows:
| December 31, 2023 | December 31, 2022
Weighted-average remaining lease term: |  |
Operating leases | 5.69 | 6.10
Finance leases | 3.53 | 4.53
Weighted-average discount rate: |  |
Operating leases | 3.09 | % | 2.78 | %
Finance leases | 4.54 | % | 4.54 | %
Maturities of lease liabilities are summarized as follows:
Dollars in millions | Operating Leases | Finance Leases | Total
2024 | $ | 133 |  | $ | 2 |  | $ | 135 |
2025 | 118 |  | 1 |  | 119 |
2026 | 102 |  | — |  | 102 |
2027 | 84 |  | — |  | 84 |
2028 | 64 |  | — |  | 64 |
Thereafter | 103 |  | 3 |  | 106 |
Total lease payments | $ | 604 |  | $ | 6 |  | $ | 610 |
Less imputed interest | 56 |  | 1 |  | 57 |
Total | $ | 548 |  | $ | 5 |  | $ | 553 |
Lessor Equipment Leasing Leases may have fixed or floating rate terms. Variable payments are based on an index or other specified rate and are included in rental payments. Certain leases contain an option to extend the lease term or the option to terminate at the discretion of the lessee. Under certain conditions, lease agreements may also contain the option for a lessee to purchase the underlying asset. Interest income from sales-type and direct financing leases is recognized in "interest income — loans" on the statement of income. Income related to operating leases is recognized in “operating lease income and other leasing gains” on the income statement. The components of equipment leasing income are summarized in the table below:
Dollars in millions |  | December 31, 2023 | December 31, 2022 |
Sales-type and direct financing leases |  |  |  |
Interest income on lease receivable |  | $ | 78 |  | $ | 64 |  |
Interest income related to accretion of unguaranteed residual asset |  | 13 |  | 15 |  |
Interest income on deferred fees and costs |  | 4 |  | — |  |
Total sales-type and direct financing lease income |  | 95 |  | 79 |  |
Operating leases |  |  |  |
Operating lease income related to lease payments |  | 84 |  | 105 |  |
Other operating leasing gains and (losses) |  | 8 |  | (2) |  |
Total operating lease income and other leasing gains |  | 92 |  | 103 |  |
Total lease income |  | $ | 187 |  | $ | 182 |  |
Equipment leasing receivables relate to sales-type and direct financing leases. The composition of the net investment in sales-type and direct financing leases is as follows:
Dollars in millions | December 31, 2023 | December 31, 2022 |
Lease receivables | $ | 2,896 |  | $ | 3,170 |  |
Unearned income | (286) |  | (253) |  |
Unguaranteed residual value | 468 |  | 472 |  |
Deferred fees and costs | 2 |  | 5 |  |
Net investment in sales-type and direct financing leases | $ | 3,080 |  | $ | 3,394 |  |
The residual value component of a lease represents the fair value of the leased asset at the end of the lease term. We rely on industry data, historical experience, independent appraisals and the experience of the equipment leasing asset management team to value lease residuals. Relationships with a number of equipment vendors give the asset management team insight into the life cycle of the leased equipment, pending product upgrades and competing products. Key assesses net investments in leases, including residual values, for impairment and recognizes any impairment losses in accordance with the impairment guidanc e for financial instruments. The carrying amount of residual assets covered by residual value guarantees at December 31, 2023, and December 31, 2022, was $258 million and $270 million, respectively. At December 31, 2023, minimum future lease payments to be received for sales-type and direct financing leases are as follows:
Dollars in millions | Sales-type and direct financing lease payments
2024 | $ | 823 |
2025 | 615 |
2026 | 485 |
2027 | 316 |
2028 | 192 |
Thereafter | 445 |
Total lease payments | $ | 2,876 |
At December 31, 2023, minimum future lease payments to be received for operating leases are as follows:
Dollars in millions | Operating lease payments
2024 | $ | 63 |
2025 | 52 |
2026 | 36 |
2027 | 24 |
2028 | 14 |
Thereafter | 32 |
Total lease payments | $ | 220 |
The carrying amount of operating lease assets at December 31, 2023 and December 31, 2022, was $372 million and $505 million, respectively.
Leases | 10. Leases As a lessee, we enter into leases of land, buildings, and equipment. Our real estate leases primarily relate to bank branches and office space. The leases of equipment principally relate to technology assets for data processing and data storage. As a lessor, we primarily provide financing through our equipment leasing business. Lessee Our leases are classified as either operating or financing and have remaining terms ranging from 1 to 20 years with the exception of certain ground leases that have terms over 30 years. For leases with initial terms greater than one year, a lease liability, measured as the present value of unpaid lease payments, and a corresponding right-of-use asset for the right to use the leased properties are reported on the balance sheet. Lease payments are discounted using Key’s incremental borrowing rate, consistent with what Key would pay to borrow on a collateralized basis over a term similar to each lease. Leases with an initial term of less than one year are not recorded on the balance sheet. The related expense is recognized on a straight-line basis over the lease term. Certain leases contain options to extend the lease term for up to five years. Some leases give us the option to terminate, for a penalty or at the lessor's discretion. Leases with variable payments are primarily based on adjustments for inflation over the term of the lease based on a contractually defined index. Certain ATM leases include variable payments based on volume of transactions. Operating lease expense is recognized in "net occupancy" and "equipment" on the income statement. The components of lease expense are summarized as follows:
Dollars in millions |  | December 31, 2023 | December 31, 2022
Operating lease cost |  | $ | 122 |  | $ | 128 |
Finance lease cost: |  |  |
Amortization of right-of-use assets |  | 1 |  | 1 |
Interest on lease liabilities |  | — |  | — |
Variable lease cost |  | 19 |  | 24 |
Total lease cost (a) |  | $ | 142 |  | $ | 153 |
(a)Short-term lease cost was le ss than $1 million for both the twelve months ended December 31, 2023, and December 31, 2022 Cash flows related to leases are summarized as follows:
Dollars in millions |  | December 31, 2023 | December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Operating cash flows from operating leases |  | $ | 135 |  | $ | 139 |
Financing cash flows from finance leases |  | 1 |  | 1 |
Right-of-use assets obtained in exchange for lease obligations: (a) |  |  |
Operating leases |  | $ | 65 |  | $ | 46 |
(a)There were no right-of-use assets obtained in exchange for finance lease obligations for either the twelve months ended December 31, 2023 or December 31, 2022. Additional balance sheet information related to leases is summarized as follows:
Dollars in millions | Balance sheet classification | December 31, 2023 | December 31, 2022
Operating lease assets | Accrued income and other assets | $ | 479 |  | $ | 525 |
Operating lease liabilities | Accrued expense and other liabilities | 548 |  | 601 |
Finance leases: |  |  |
Property and equipment, gross | Premises and equipment | $ | 18 |  | $ | 18 |
Accumulated depreciation | Premises and equipment | (15) |  | (14) |
Property and equipment, net |  | 3 |  | 4 |
Finance lease liabilities | Long-term debt | 5 |  | 6 |
Information pertaining to the lease term and weighted-average discount rate is summarized as follows:
| December 31, 2023 | December 31, 2022
Weighted-average remaining lease term: |  |
Operating leases | 5.69 | 6.10
Finance leases | 3.53 | 4.53
Weighted-average discount rate: |  |
Operating leases | 3.09 | % | 2.78 | %
Finance leases | 4.54 | % | 4.54 | %
Maturities of lease liabilities are summarized as follows:
Dollars in millions | Operating Leases | Finance Leases | Total
2024 | $ | 133 |  | $ | 2 |  | $ | 135 |
2025 | 118 |  | 1 |  | 119 |
2026 | 102 |  | — |  | 102 |
2027 | 84 |  | — |  | 84 |
2028 | 64 |  | — |  | 64 |
Thereafter | 103 |  | 3 |  | 106 |
Total lease payments | $ | 604 |  | $ | 6 |  | $ | 610 |
Less imputed interest | 56 |  | 1 |  | 57 |
Total | $ | 548 |  | $ | 5 |  | $ | 553 |
Lessor Equipment Leasing Leases may have fixed or floating rate terms. Variable payments are based on an index or other specified rate and are included in rental payments. Certain leases contain an option to extend the lease term or the option to terminate at the discretion of the lessee. Under certain conditions, lease agreements may also contain the option for a lessee to purchase the underlying asset. Interest income from sales-type and direct financing leases is recognized in "interest income — loans" on the statement of income. Income related to operating leases is recognized in “operating lease income and other leasing gains” on the income statement. The components of equipment leasing income are summarized in the table below:
Dollars in millions |  | December 31, 2023 | December 31, 2022 |
Sales-type and direct financing leases |  |  |  |
Interest income on lease receivable |  | $ | 78 |  | $ | 64 |  |
Interest income related to accretion of unguaranteed residual asset |  | 13 |  | 15 |  |
Interest income on deferred fees and costs |  | 4 |  | — |  |
Total sales-type and direct financing lease income |  | 95 |  | 79 |  |
Operating leases |  |  |  |
Operating lease income related to lease payments |  | 84 |  | 105 |  |
Other operating leasing gains and (losses) |  | 8 |  | (2) |  |
Total operating lease income and other leasing gains |  | 92 |  | 103 |  |
Total lease income |  | $ | 187 |  | $ | 182 |  |
Equipment leasing receivables relate to sales-type and direct financing leases. The composition of the net investment in sales-type and direct financing leases is as follows:
Dollars in millions | December 31, 2023 | December 31, 2022 |
Lease receivables | $ | 2,896 |  | $ | 3,170 |  |
Unearned income | (286) |  | (253) |  |
Unguaranteed residual value | 468 |  | 472 |  |
Deferred fees and costs | 2 |  | 5 |  |
Net investment in sales-type and direct financing leases | $ | 3,080 |  | $ | 3,394 |  |
The residual value component of a lease represents the fair value of the leased asset at the end of the lease term. We rely on industry data, historical experience, independent appraisals and the experience of the equipment leasing asset management team to value lease residuals. Relationships with a number of equipment vendors give the asset management team insight into the life cycle of the leased equipment, pending product upgrades and competing products. Key assesses net investments in leases, including residual values, for impairment and recognizes any impairment losses in accordance with the impairment guidanc e for financial instruments. The carrying amount of residual assets covered by residual value guarantees at December 31, 2023, and December 31, 2022, was $258 million and $270 million, respectively. At December 31, 2023, minimum future lease payments to be received for sales-type and direct financing leases are as follows:
Dollars in millions | Sales-type and direct financing lease payments
2024 | $ | 823 |
2025 | 615 |
2026 | 485 |
2027 | 316 |
2028 | 192 |
Thereafter | 445 |
Total lease payments | $ | 2,876 |
At December 31, 2023, minimum future lease payments to be received for operating leases are as follows:
Dollars in millions | Operating lease payments
2024 | $ | 63 |
2025 | 52 |
2026 | 36 |
2027 | 24 |
2028 | 14 |
Thereafter | 32 |
Total lease payments | $ | 220 |
The carrying amount of operating lease assets at December 31, 2023 and December 31, 2022, was $372 million and $505 million, respectively.
Leases | 10. Leases As a lessee, we enter into leases of land, buildings, and equipment. Our real estate leases primarily relate to bank branches and office space. The leases of equipment principally relate to technology assets for data processing and data storage. As a lessor, we primarily provide financing through our equipment leasing business. Lessee Our leases are classified as either operating or financing and have remaining terms ranging from 1 to 20 years with the exception of certain ground leases that have terms over 30 years. For leases with initial terms greater than one year, a lease liability, measured as the present value of unpaid lease payments, and a corresponding right-of-use asset for the right to use the leased properties are reported on the balance sheet. Lease payments are discounted using Key’s incremental borrowing rate, consistent with what Key would pay to borrow on a collateralized basis over a term similar to each lease. Leases with an initial term of less than one year are not recorded on the balance sheet. The related expense is recognized on a straight-line basis over the lease term. Certain leases contain options to extend the lease term for up to five years. Some leases give us the option to terminate, for a penalty or at the lessor's discretion. Leases with variable payments are primarily based on adjustments for inflation over the term of the lease based on a contractually defined index. Certain ATM leases include variable payments based on volume of transactions. Operating lease expense is recognized in "net occupancy" and "equipment" on the income statement. The components of lease expense are summarized as follows:
Dollars in millions |  | December 31, 2023 | December 31, 2022
Operating lease cost |  | $ | 122 |  | $ | 128 |
Finance lease cost: |  |  |
Amortization of right-of-use assets |  | 1 |  | 1 |
Interest on lease liabilities |  | — |  | — |
Variable lease cost |  | 19 |  | 24 |
Total lease cost (a) |  | $ | 142 |  | $ | 153 |
(a)Short-term lease cost was le ss than $1 million for both the twelve months ended December 31, 2023, and December 31, 2022 Cash flows related to leases are summarized as follows:
Dollars in millions |  | December 31, 2023 | December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Operating cash flows from operating leases |  | $ | 135 |  | $ | 139 |
Financing cash flows from finance leases |  | 1 |  | 1 |
Right-of-use assets obtained in exchange for lease obligations: (a) |  |  |
Operating leases |  | $ | 65 |  | $ | 46 |
(a)There were no right-of-use assets obtained in exchange for finance lease obligations for either the twelve months ended December 31, 2023 or December 31, 2022. Additional balance sheet information related to leases is summarized as follows:
Dollars in millions | Balance sheet classification | December 31, 2023 | December 31, 2022
Operating lease assets | Accrued income and other assets | $ | 479 |  | $ | 525 |
Operating lease liabilities | Accrued expense and other liabilities | 548 |  | 601 |
Finance leases: |  |  |
Property and equipment, gross | Premises and equipment | $ | 18 |  | $ | 18 |
Accumulated depreciation | Premises and equipment | (15) |  | (14) |
Property and equipment, net |  | 3 |  | 4 |
Finance lease liabilities | Long-term debt | 5 |  | 6 |
Information pertaining to the lease term and weighted-average discount rate is summarized as follows:
| December 31, 2023 | December 31, 2022
Weighted-average remaining lease term: |  |
Operating leases | 5.69 | 6.10
Finance leases | 3.53 | 4.53
Weighted-average discount rate: |  |
Operating leases | 3.09 | % | 2.78 | %
Finance leases | 4.54 | % | 4.54 | %
Maturities of lease liabilities are summarized as follows:
Dollars in millions | Operating Leases | Finance Leases | Total
2024 | $ | 133 |  | $ | 2 |  | $ | 135 |
2025 | 118 |  | 1 |  | 119 |
2026 | 102 |  | — |  | 102 |
2027 | 84 |  | — |  | 84 |
2028 | 64 |  | — |  | 64 |
Thereafter | 103 |  | 3 |  | 106 |
Total lease payments | $ | 604 |  | $ | 6 |  | $ | 610 |
Less imputed interest | 56 |  | 1 |  | 57 |
Total | $ | 548 |  | $ | 5 |  | $ | 553 |
Lessor Equipment Leasing Leases may have fixed or floating rate terms. Variable payments are based on an index or other specified rate and are included in rental payments. Certain leases contain an option to extend the lease term or the option to terminate at the discretion of the lessee. Under certain conditions, lease agreements may also contain the option for a lessee to purchase the underlying asset. Interest income from sales-type and direct financing leases is recognized in "interest income — loans" on the statement of income. Income related to operating leases is recognized in “operating lease income and other leasing gains” on the income statement. The components of equipment leasing income are summarized in the table below:
Dollars in millions |  | December 31, 2023 | December 31, 2022 |
Sales-type and direct financing leases |  |  |  |
Interest income on lease receivable |  | $ | 78 |  | $ | 64 |  |
Interest income related to accretion of unguaranteed residual asset |  | 13 |  | 15 |  |
Interest income on deferred fees and costs |  | 4 |  | — |  |
Total sales-type and direct financing lease income |  | 95 |  | 79 |  |
Operating leases |  |  |  |
Operating lease income related to lease payments |  | 84 |  | 105 |  |
Other operating leasing gains and (losses) |  | 8 |  | (2) |  |
Total operating lease income and other leasing gains |  | 92 |  | 103 |  |
Total lease income |  | $ | 187 |  | $ | 182 |  |
Equipment leasing receivables relate to sales-type and direct financing leases. The composition of the net investment in sales-type and direct financing leases is as follows:
Dollars in millions | December 31, 2023 | December 31, 2022 |
Lease receivables | $ | 2,896 |  | $ | 3,170 |  |
Unearned income | (286) |  | (253) |  |
Unguaranteed residual value | 468 |  | 472 |  |
Deferred fees and costs | 2 |  | 5 |  |
Net investment in sales-type and direct financing leases | $ | 3,080 |  | $ | 3,394 |  |
The residual value component of a lease represents the fair value of the leased asset at the end of the lease term. We rely on industry data, historical experience, independent appraisals and the experience of the equipment leasing asset management team to value lease residuals. Relationships with a number of equipment vendors give the asset management team insight into the life cycle of the leased equipment, pending product upgrades and competing products. Key assesses net investments in leases, including residual values, for impairment and recognizes any impairment losses in accordance with the impairment guidanc e for financial instruments. The carrying amount of residual assets covered by residual value guarantees at December 31, 2023, and December 31, 2022, was $258 million and $270 million, respectively. At December 31, 2023, minimum future lease payments to be received for sales-type and direct financing leases are as follows:
Dollars in millions | Sales-type and direct financing lease payments
2024 | $ | 823 |
2025 | 615 |
2026 | 485 |
2027 | 316 |
2028 | 192 |
Thereafter | 445 |
Total lease payments | $ | 2,876 |
At December 31, 2023, minimum future lease payments to be received for operating leases are as follows:
Dollars in millions | Operating lease payments
2024 | $ | 63 |
2025 | 52 |
2026 | 36 |
2027 | 24 |
2028 | 14 |
Thereafter | 32 |
Total lease payments | $ | 220 |
The carrying amount of operating lease assets at December 31, 2023 and December 31, 2022, was $372 million and $505 million, respectively.
Leases | 10. Leases As a lessee, we enter into leases of land, buildings, and equipment. Our real estate leases primarily relate to bank branches and office space. The leases of equipment principally relate to technology assets for data processing and data storage. As a lessor, we primarily provide financing through our equipment leasing business. Lessee Our leases are classified as either operating or financing and have remaining terms ranging from 1 to 20 years with the exception of certain ground leases that have terms over 30 years. For leases with initial terms greater than one year, a lease liability, measured as the present value of unpaid lease payments, and a corresponding right-of-use asset for the right to use the leased properties are reported on the balance sheet. Lease payments are discounted using Key’s incremental borrowing rate, consistent with what Key would pay to borrow on a collateralized basis over a term similar to each lease. Leases with an initial term of less than one year are not recorded on the balance sheet. The related expense is recognized on a straight-line basis over the lease term. Certain leases contain options to extend the lease term for up to five years. Some leases give us the option to terminate, for a penalty or at the lessor's discretion. Leases with variable payments are primarily based on adjustments for inflation over the term of the lease based on a contractually defined index. Certain ATM leases include variable payments based on volume of transactions. Operating lease expense is recognized in "net occupancy" and "equipment" on the income statement. The components of lease expense are summarized as follows:
Dollars in millions |  | December 31, 2023 | December 31, 2022
Operating lease cost |  | $ | 122 |  | $ | 128 |
Finance lease cost: |  |  |
Amortization of right-of-use assets |  | 1 |  | 1 |
Interest on lease liabilities |  | — |  | — |
Variable lease cost |  | 19 |  | 24 |
Total lease cost (a) |  | $ | 142 |  | $ | 153 |
(a)Short-term lease cost was le ss than $1 million for both the twelve months ended December 31, 2023, and December 31, 2022 Cash flows related to leases are summarized as follows:
Dollars in millions |  | December 31, 2023 | December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Operating cash flows from operating leases |  | $ | 135 |  | $ | 139 |
Financing cash flows from finance leases |  | 1 |  | 1 |
Right-of-use assets obtained in exchange for lease obligations: (a) |  |  |
Operating leases |  | $ | 65 |  | $ | 46 |
(a)There were no right-of-use assets obtained in exchange for finance lease obligations for either the twelve months ended December 31, 2023 or December 31, 2022. Additional balance sheet information related to leases is summarized as follows:
Dollars in millions | Balance sheet classification | December 31, 2023 | December 31, 2022
Operating lease assets | Accrued income and other assets | $ | 479 |  | $ | 525 |
Operating lease liabilities | Accrued expense and other liabilities | 548 |  | 601 |
Finance leases: |  |  |
Property and equipment, gross | Premises and equipment | $ | 18 |  | $ | 18 |
Accumulated depreciation | Premises and equipment | (15) |  | (14) |
Property and equipment, net |  | 3 |  | 4 |
Finance lease liabilities | Long-term debt | 5 |  | 6 |
Information pertaining to the lease term and weighted-average discount rate is summarized as follows:
| December 31, 2023 | December 31, 2022
Weighted-average remaining lease term: |  |
Operating leases | 5.69 | 6.10
Finance leases | 3.53 | 4.53
Weighted-average discount rate: |  |
Operating leases | 3.09 | % | 2.78 | %
Finance leases | 4.54 | % | 4.54 | %
Maturities of lease liabilities are summarized as follows:
Dollars in millions | Operating Leases | Finance Leases | Total
2024 | $ | 133 |  | $ | 2 |  | $ | 135 |
2025 | 118 |  | 1 |  | 119 |
2026 | 102 |  | — |  | 102 |
2027 | 84 |  | — |  | 84 |
2028 | 64 |  | — |  | 64 |
Thereafter | 103 |  | 3 |  | 106 |
Total lease payments | $ | 604 |  | $ | 6 |  | $ | 610 |
Less imputed interest | 56 |  | 1 |  | 57 |
Total | $ | 548 |  | $ | 5 |  | $ | 553 |
Lessor Equipment Leasing Leases may have fixed or floating rate terms. Variable payments are based on an index or other specified rate and are included in rental payments. Certain leases contain an option to extend the lease term or the option to terminate at the discretion of the lessee. Under certain conditions, lease agreements may also contain the option for a lessee to purchase the underlying asset. Interest income from sales-type and direct financing leases is recognized in "interest income — loans" on the statement of income. Income related to operating leases is recognized in “operating lease income and other leasing gains” on the income statement. The components of equipment leasing income are summarized in the table below:
Dollars in millions |  | December 31, 2023 | December 31, 2022 |
Sales-type and direct financing leases |  |  |  |
Interest income on lease receivable |  | $ | 78 |  | $ | 64 |  |
Interest income related to accretion of unguaranteed residual asset |  | 13 |  | 15 |  |
Interest income on deferred fees and costs |  | 4 |  | — |  |
Total sales-type and direct financing lease income |  | 95 |  | 79 |  |
Operating leases |  |  |  |
Operating lease income related to lease payments |  | 84 |  | 105 |  |
Other operating leasing gains and (losses) |  | 8 |  | (2) |  |
Total operating lease income and other leasing gains |  | 92 |  | 103 |  |
Total lease income |  | $ | 187 |  | $ | 182 |  |
Equipment leasing receivables relate to sales-type and direct financing leases. The composition of the net investment in sales-type and direct financing leases is as follows:
Dollars in millions | December 31, 2023 | December 31, 2022 |
Lease receivables | $ | 2,896 |  | $ | 3,170 |  |
Unearned income | (286) |  | (253) |  |
Unguaranteed residual value | 468 |  | 472 |  |
Deferred fees and costs | 2 |  | 5 |  |
Net investment in sales-type and direct financing leases | $ | 3,080 |  | $ | 3,394 |  |
The residual value component of a lease represents the fair value of the leased asset at the end of the lease term. We rely on industry data, historical experience, independent appraisals and the experience of the equipment leasing asset management team to value lease residuals. Relationships with a number of equipment vendors give the asset management team insight into the life cycle of the leased equipment, pending product upgrades and competing products. Key assesses net investments in leases, including residual values, for impairment and recognizes any impairment losses in accordance with the impairment guidanc e for financial instruments. The carrying amount of residual assets covered by residual value guarantees at December 31, 2023, and December 31, 2022, was $258 million and $270 million, respectively. At December 31, 2023, minimum future lease payments to be received for sales-type and direct financing leases are as follows:
Dollars in millions | Sales-type and direct financing lease payments
2024 | $ | 823 |
2025 | 615 |
2026 | 485 |
2027 | 316 |
2028 | 192 |
Thereafter | 445 |
Total lease payments | $ | 2,876 |
At December 31, 2023, minimum future lease payments to be received for operating leases are as follows:
Dollars in millions | Operating lease payments
2024 | $ | 63 |
2025 | 52 |
2026 | 36 |
2027 | 24 |
2028 | 14 |
Thereafter | 32 |
Total lease payments | $ | 220 |
The carrying amount of operating lease assets at December 31, 2023 and December 31, 2022, was $372 million and $505 million, respectively.
Leases | 10. Leases As a lessee, we enter into leases of land, buildings, and equipment. Our real estate leases primarily relate to bank branches and office space. The leases of equipment principally relate to technology assets for data processing and data storage. As a lessor, we primarily provide financing through our equipment leasing business. Lessee Our leases are classified as either operating or financing and have remaining terms ranging from 1 to 20 years with the exception of certain ground leases that have terms over 30 years. For leases with initial terms greater than one year, a lease liability, measured as the present value of unpaid lease payments, and a corresponding right-of-use asset for the right to use the leased properties are reported on the balance sheet. Lease payments are discounted using Key’s incremental borrowing rate, consistent with what Key would pay to borrow on a collateralized basis over a term similar to each lease. Leases with an initial term of less than one year are not recorded on the balance sheet. The related expense is recognized on a straight-line basis over the lease term. Certain leases contain options to extend the lease term for up to five years. Some leases give us the option to terminate, for a penalty or at the lessor's discretion. Leases with variable payments are primarily based on adjustments for inflation over the term of the lease based on a contractually defined index. Certain ATM leases include variable payments based on volume of transactions. Operating lease expense is recognized in "net occupancy" and "equipment" on the income statement. The components of lease expense are summarized as follows:
Dollars in millions |  | December 31, 2023 | December 31, 2022
Operating lease cost |  | $ | 122 |  | $ | 128 |
Finance lease cost: |  |  |
Amortization of right-of-use assets |  | 1 |  | 1 |
Interest on lease liabilities |  | — |  | — |
Variable lease cost |  | 19 |  | 24 |
Total lease cost (a) |  | $ | 142 |  | $ | 153 |
(a)Short-term lease cost was le ss than $1 million for both the twelve months ended December 31, 2023, and December 31, 2022 Cash flows related to leases are summarized as follows:
Dollars in millions |  | December 31, 2023 | December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Operating cash flows from operating leases |  | $ | 135 |  | $ | 139 |
Financing cash flows from finance leases |  | 1 |  | 1 |
Right-of-use assets obtained in exchange for lease obligations: (a) |  |  |
Operating leases |  | $ | 65 |  | $ | 46 |
(a)There were no right-of-use assets obtained in exchange for finance lease obligations for either the twelve months ended December 31, 2023 or December 31, 2022. Additional balance sheet information related to leases is summarized as follows:
Dollars in millions | Balance sheet classification | December 31, 2023 | December 31, 2022
Operating lease assets | Accrued income and other assets | $ | 479 |  | $ | 525 |
Operating lease liabilities | Accrued expense and other liabilities | 548 |  | 601 |
Finance leases: |  |  |
Property and equipment, gross | Premises and equipment | $ | 18 |  | $ | 18 |
Accumulated depreciation | Premises and equipment | (15) |  | (14) |
Property and equipment, net |  | 3 |  | 4 |
Finance lease liabilities | Long-term debt | 5 |  | 6 |
Information pertaining to the lease term and weighted-average discount rate is summarized as follows:
| December 31, 2023 | December 31, 2022
Weighted-average remaining lease term: |  |
Operating leases | 5.69 | 6.10
Finance leases | 3.53 | 4.53
Weighted-average discount rate: |  |
Operating leases | 3.09 | % | 2.78 | %
Finance leases | 4.54 | % | 4.54 | %
Maturities of lease liabilities are summarized as follows:
Dollars in millions | Operating Leases | Finance Leases | Total
2024 | $ | 133 |  | $ | 2 |  | $ | 135 |
2025 | 118 |  | 1 |  | 119 |
2026 | 102 |  | — |  | 102 |
2027 | 84 |  | — |  | 84 |
2028 | 64 |  | — |  | 64 |
Thereafter | 103 |  | 3 |  | 106 |
Total lease payments | $ | 604 |  | $ | 6 |  | $ | 610 |
Less imputed interest | 56 |  | 1 |  | 57 |
Total | $ | 548 |  | $ | 5 |  | $ | 553 |
Lessor Equipment Leasing Leases may have fixed or floating rate terms. Variable payments are based on an index or other specified rate and are included in rental payments. Certain leases contain an option to extend the lease term or the option to terminate at the discretion of the lessee. Under certain conditions, lease agreements may also contain the option for a lessee to purchase the underlying asset. Interest income from sales-type and direct financing leases is recognized in "interest income — loans" on the statement of income. Income related to operating leases is recognized in “operating lease income and other leasing gains” on the income statement. The components of equipment leasing income are summarized in the table below:
Dollars in millions |  | December 31, 2023 | December 31, 2022 |
Sales-type and direct financing leases |  |  |  |
Interest income on lease receivable |  | $ | 78 |  | $ | 64 |  |
Interest income related to accretion of unguaranteed residual asset |  | 13 |  | 15 |  |
Interest income on deferred fees and costs |  | 4 |  | — |  |
Total sales-type and direct financing lease income |  | 95 |  | 79 |  |
Operating leases |  |  |  |
Operating lease income related to lease payments |  | 84 |  | 105 |  |
Other operating leasing gains and (losses) |  | 8 |  | (2) |  |
Total operating lease income and other leasing gains |  | 92 |  | 103 |  |
Total lease income |  | $ | 187 |  | $ | 182 |  |
Equipment leasing receivables relate to sales-type and direct financing leases. The composition of the net investment in sales-type and direct financing leases is as follows:
Dollars in millions | December 31, 2023 | December 31, 2022 |
Lease receivables | $ | 2,896 |  | $ | 3,170 |  |
Unearned income | (286) |  | (253) |  |
Unguaranteed residual value | 468 |  | 472 |  |
Deferred fees and costs | 2 |  | 5 |  |
Net investment in sales-type and direct financing leases | $ | 3,080 |  | $ | 3,394 |  |
The residual value component of a lease represents the fair value of the leased asset at the end of the lease term. We rely on industry data, historical experience, independent appraisals and the experience of the equipment leasing asset management team to value lease residuals. Relationships with a number of equipment vendors give the asset management team insight into the life cycle of the leased equipment, pending product upgrades and competing products. Key assesses net investments in leases, including residual values, for impairment and recognizes any impairment losses in accordance with the impairment guidanc e for financial instruments. The carrying amount of residual assets covered by residual value guarantees at December 31, 2023, and December 31, 2022, was $258 million and $270 million, respectively. At December 31, 2023, minimum future lease payments to be received for sales-type and direct financing leases are as follows:
Dollars in millions | Sales-type and direct financing lease payments
2024 | $ | 823 |
2025 | 615 |
2026 | 485 |
2027 | 316 |
2028 | 192 |
Thereafter | 445 |
Total lease payments | $ | 2,876 |
At December 31, 2023, minimum future lease payments to be received for operating leases are as follows:
Dollars in millions | Operating lease payments
2024 | $ | 63 |
2025 | 52 |
2026 | 36 |
2027 | 24 |
2028 | 14 |
Thereafter | 32 |
Total lease payments | $ | 220 |
The carrying amount of operating lease assets at December 31, 2023 and December 31, 2022, was $372 million and $505 million, respectively.

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