Leases

9 Months Ended

Sep. 30, 2022

Leases [Abstract]

Leases

Leases

Lessor Arrangements

The Company has lessor arrangements which consist of sales-type leases for equipment (Equipment Finance). Such arrangements may include options to renew or to purchase the leased equipment at the end of the lease term. For the third quarter and first nine months of 2022, interest earned on Equipment Finance was $2.5 million and $7.7 million, respectively, and is included in “Interest and fees on loans and leases held for investment” on the Income Statement. For the third quarter and first nine months of 2021, interest earned on Equipment Finance was $2.9 million and $8.1 million, respectively.

The components of Equipment Finance assets are as follows:

	September 30, 2022		December 31, 2021
Lease receivables	$	144,433	$	122,927
Unguaranteed residual asset values	40,375		36,837
Unearned income	(18,253)		(10,989)
Deferred fees	892		380
Total	$	167,447	$	149,155

Future minimum lease payments based on maturity of the Company’s lessor arrangements as of September 30, 2022 were as follows:

2022	$	12,639
2023	47,231
2024	39,093
2025	26,387
2026	15,988
Thereafter	12,412
Total lease payments	$	153,750
Discount effect	(9,317)
Present value of future minimum lease payments	$	144,433

Lessee Arrangements

The Company has operating leases for its headquarters in San Francisco, California, as well as additional office space in the Salt Lake City, Utah, and Boston, Massachusetts areas. As of September 30, 2022, the lease agreements have remaining lease terms ranging from approximately one year to nine years. Some of the lease agreements include options to extend the lease term for up to an additional fifteen years. The Company was the sublessor of a portion of its office space in San Francisco for which lease terms have expired as of June 30, 2022. As of September 30, 2022, the Company pledged $0.4 million of cash and $3.9 million in letters of credit as security deposits in connection with its lease agreements.

Balance sheet information related to leases was as follows:

ROU Assets and Lease Liabilities	Balance Sheet Classification	September 30, 2022		December 31, 2021
Operating lease assets	Other assets	$	69,936	$	77,316
Operating lease liabilities (1)	Other liabilities	$	83,561	$	91,588

(1)    The difference between operating lease assets and operating lease liabilities is the unamortized balance of deferred rent.

Components of net lease costs were as follows:

		Three Months Ended September 30,				Nine Months Ended September 30,
Net Lease Costs	Income Statement Classification	2022		2021		2022		2021
Operating lease costs (1)	Occupancy	$	(3,195)	$	(4,561)	$	(12,041)	$	(14,315)
Sublease revenue	Other non-interest income	—		1,538		2,847		4,612
Net lease costs		$	(3,195)	$	(3,023)	$	(9,194)	$	(9,703)

(1)    Includes variable lease costs of $0.2 million and $0.4 million for the third quarters of 2022 and 2021, respectively. Includes variable lease costs of $0.9 million for both the first nine months of 2022 and 2021.

Supplemental cash flow information related to the Company’s operating leases was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Non-cash operating activity:
Leased assets obtained in exchange for new and amended operating lease liabilities (1)	$	—	$	—	$	—	$	12,914

(1)    Represents non-cash activity and, accordingly, is not reflected in the Condensed Consolidated Statements of Cash Flows. Amount includes noncash remeasurements of the operating lease ROU asset.

The Company’s future minimum undiscounted lease payments under operating leases as of September 30, 2022 were as follows:

	Operating Lease Payments
2022	$	3,143
2023	12,798
2024	13,054
2025	13,184
2026	13,375
Thereafter	48,974
Total lease payments	$	104,528
Discount effect	(20,967)
Present value of future minimum lease payments	$	83,561

The weighted-average remaining lease term and discount rate used in the calculation of the Company’s operating lease assets and liabilities were as follows:

Lease Term and Discount Rate	September 30, 2022
Weighted-average remaining lease term (in years)	7.93
Weighted-average discount rate	5.42	%

Leases

Leases

Lessor Arrangements

The Company has lessor arrangements which consist of sales-type leases for equipment (Equipment Finance). Such arrangements may include options to renew or to purchase the leased equipment at the end of the lease term. For the third quarter and first nine months of 2022, interest earned on Equipment Finance was $2.5 million and $7.7 million, respectively, and is included in “Interest and fees on loans and leases held for investment” on the Income Statement. For the third quarter and first nine months of 2021, interest earned on Equipment Finance was $2.9 million and $8.1 million, respectively.

The components of Equipment Finance assets are as follows:

	September 30, 2022		December 31, 2021
Lease receivables	$	144,433	$	122,927
Unguaranteed residual asset values	40,375		36,837
Unearned income	(18,253)		(10,989)
Deferred fees	892		380
Total	$	167,447	$	149,155

Future minimum lease payments based on maturity of the Company’s lessor arrangements as of September 30, 2022 were as follows:

2022	$	12,639
2023	47,231
2024	39,093
2025	26,387
2026	15,988
Thereafter	12,412
Total lease payments	$	153,750
Discount effect	(9,317)
Present value of future minimum lease payments	$	144,433

Lessee Arrangements

The Company has operating leases for its headquarters in San Francisco, California, as well as additional office space in the Salt Lake City, Utah, and Boston, Massachusetts areas. As of September 30, 2022, the lease agreements have remaining lease terms ranging from approximately one year to nine years. Some of the lease agreements include options to extend the lease term for up to an additional fifteen years. The Company was the sublessor of a portion of its office space in San Francisco for which lease terms have expired as of June 30, 2022. As of September 30, 2022, the Company pledged $0.4 million of cash and $3.9 million in letters of credit as security deposits in connection with its lease agreements.

Balance sheet information related to leases was as follows:

ROU Assets and Lease Liabilities	Balance Sheet Classification	September 30, 2022		December 31, 2021
Operating lease assets	Other assets	$	69,936	$	77,316
Operating lease liabilities (1)	Other liabilities	$	83,561	$	91,588

(1)    The difference between operating lease assets and operating lease liabilities is the unamortized balance of deferred rent.

Components of net lease costs were as follows:

		Three Months Ended September 30,				Nine Months Ended September 30,
Net Lease Costs	Income Statement Classification	2022		2021		2022		2021
Operating lease costs (1)	Occupancy	$	(3,195)	$	(4,561)	$	(12,041)	$	(14,315)
Sublease revenue	Other non-interest income	—		1,538		2,847		4,612
Net lease costs		$	(3,195)	$	(3,023)	$	(9,194)	$	(9,703)

(1)    Includes variable lease costs of $0.2 million and $0.4 million for the third quarters of 2022 and 2021, respectively. Includes variable lease costs of $0.9 million for both the first nine months of 2022 and 2021.

Supplemental cash flow information related to the Company’s operating leases was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Non-cash operating activity:
Leased assets obtained in exchange for new and amended operating lease liabilities (1)	$	—	$	—	$	—	$	12,914

(1)    Represents non-cash activity and, accordingly, is not reflected in the Condensed Consolidated Statements of Cash Flows. Amount includes noncash remeasurements of the operating lease ROU asset.

The Company’s future minimum undiscounted lease payments under operating leases as of September 30, 2022 were as follows:

	Operating Lease Payments
2022	$	3,143
2023	12,798
2024	13,054
2025	13,184
2026	13,375
Thereafter	48,974
Total lease payments	$	104,528
Discount effect	(20,967)
Present value of future minimum lease payments	$	83,561

The weighted-average remaining lease term and discount rate used in the calculation of the Company’s operating lease assets and liabilities were as follows:

Lease Term and Discount Rate	September 30, 2022
Weighted-average remaining lease term (in years)	7.93
Weighted-average discount rate	5.42	%