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Leases
 12 Months Ended
Dec. 31, 2022
Leases [Abstract]  
Leases Leases
Lessor Arrangements
Leases originated by Peoples, that Peoples has the positive intent and ability to hold for the foreseeable future or to maturity or payoff, are reported at the net investment of the lease, net of initial direct costs, charge-offs and an allowance for credit losses. Peoples considers leases past due if any required principal or interest payments have not been received as of the date such payments were required to be made under the terms of the lease agreement. Upon detection of the reduced ability of a lessee to meet cash flow obligations, leases are typically charged down to the net realizable value, with the residual balance placed on nonaccrual status. Leases deemed to be uncollectable are charged against the allowance for credit losses, while recoveries of previously charged-off amounts are credited to the allowance for credit losses.
Peoples began originating leases with the acquisition of leases from NSL and increased its portfolio with the acquisition of Vantage. The leases acquired from NSL were determined to be sales-type leases, as the premise for the leases is dollar buy-out, whereby the lessee pays one dollar at maturity of the lease to purchase the equipment. The leases acquired from Vantage were determined to be sales-type leases, as the payment structure and term triggered that accounting treatment, whereby either (i) the lease is structured as a fair market value buyout, whereby the lessee has the option to purchase the leased equipment at its fair market value at maturity of the lease, or (ii) the lessee purchases the leased equipment for one dollar at maturity of the lease. Originated leases continue to be classified as sales-type leases. As a lessor, Peoples originates commercial equipment leases either directly to the customer or indirectly through vendor programs. Equipment leases consist of automotive, construction, healthcare, manufacturing, office, restaurant, and other equipment. These sales-type leases do not typically contain residual value guarantees; however, the risk associated with residuals is mitigated by obtaining security deposits from lessees. Other non-interest income noted in the table below includes gains on the early termination of leases, referral fee income, and other fee income. Lease income also includes gains and losses on residual assets. Additional information regarding Peoples' sales-type leases can be found in "Note 4 Loans and Leases".
The table below details Peoples' lease income for the years ended December 31, 2022 and 2021:
(Dollars in thousands)20222021
Interest and fees on leases (a)$34,720 $13,572 
Other non-interest income4,267 1,293 
Total lease income$38,987 $14,865 
(a)Included in "Interest and fees on loans" on the Consolidated Statements of Income. For additional
information, see "Note 4 Loans and Leases.".

The following table summarizes the net investments in sales-type leases, which are included in "Loans and leases, net of deferred costs" on the Consolidated Balance Sheets at December 31:
(Dollars in thousands)20222021
Lease payments receivable, at amortized cost$367,681 $152,202 
Estimated residual values35,045 129 
Initial direct costs4,233 1,427 
Deferred revenue(61,828)(31,250)
Total leases, at amortized cost345,131 122,508 
Allowance for credit losses - leases(8,495)(4,797)
Net investment in sales-type leases$336,636 $117,711 
The following table summarizes the contractual maturities of leases:
(Dollars in thousands)Balance
2023$82,543 
202484,642 
202592,966 
202661,351 
202737,310 
Thereafter8,869 
Lease payments receivable, at amortized cost$367,681 
Lessee Arrangements
Peoples leases certain banking facilities and equipment under various agreements with original terms providing for fixed monthly payments over periods generally ranging from two to thirty years. Certain leases may include options to extend or terminate the lease. Only those renewal and termination options which Peoples is reasonably certain of exercising are included in the calculation of the lease liability. Certain leases contain rent escalation clauses calling for rent increases over the term of the lease, which are included in the calculation of the lease liability.  Short-term leases of certain facilities and equipment, with lease terms of 12 months or less, are recognized on a straight-line basis over the lease term. At December 31, 2022, Peoples did not have any finance leases or any significant lessor agreements. Right of Use ("ROU") assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement or remeasurement date of a lease based on the present value of lease payments over the remaining lease term. Operating lease ROU assets include lease payments made at or before the commencement date and initial indirect costs. Operating lease ROU assets exclude lease incentives and nonlease components.
The table below details Peoples' lease expense, which is included in "Net occupancy and equipment expense" in the Consolidated Statements of Income for the years ended December 31:
(Dollars in thousands)20222021
Operating lease expense$2,568 $1,632 
Short-term lease expense745 411 
Total lease expense$3,313 $2,043 
Peoples utilizes an incremental borrowing rate to determine the present value of lease payments for each lease, as the lease agreements do not provide an implicit rate. The estimated incremental borrowing rate reflects a secured rate and is based on the term of the lease and the interest rate environment at the lease commencement or remeasurement date.
The following table details the ROU asset, the lease liability and other information related to Peoples' operating leases on the Consolidated Balance Sheet at December 31:
(Dollars in thousands)20222021
Right-of-use asset:
Other assets$6,825 $7,911 
Lease liability:
Accrued expenses and other liabilities$7,551 $8,674 
Other information:
Weighted-average remaining lease term8.8 years9.5 years
Weighted-average discount rate2.70 %2.36 %
Cash paid during the year for operating leases$2,560 $1,585 
Additions for right-of-use assets obtained during the year$880 $2,482 
The following table summarizes the future lease payments of operating leases:
(Dollars in thousands)Payments
2023
$2,245 
2024
1,487 
2025
1,002 
2026
839 
2027
702 
Thereafter3,005 
Total undiscounted lease payments$9,280 
Imputed interest(1,729)
Total lease liability$7,551 
Leases Leases
Lessor Arrangements
Leases originated by Peoples, that Peoples has the positive intent and ability to hold for the foreseeable future or to maturity or payoff, are reported at the net investment of the lease, net of initial direct costs, charge-offs and an allowance for credit losses. Peoples considers leases past due if any required principal or interest payments have not been received as of the date such payments were required to be made under the terms of the lease agreement. Upon detection of the reduced ability of a lessee to meet cash flow obligations, leases are typically charged down to the net realizable value, with the residual balance placed on nonaccrual status. Leases deemed to be uncollectable are charged against the allowance for credit losses, while recoveries of previously charged-off amounts are credited to the allowance for credit losses.
Peoples began originating leases with the acquisition of leases from NSL and increased its portfolio with the acquisition of Vantage. The leases acquired from NSL were determined to be sales-type leases, as the premise for the leases is dollar buy-out, whereby the lessee pays one dollar at maturity of the lease to purchase the equipment. The leases acquired from Vantage were determined to be sales-type leases, as the payment structure and term triggered that accounting treatment, whereby either (i) the lease is structured as a fair market value buyout, whereby the lessee has the option to purchase the leased equipment at its fair market value at maturity of the lease, or (ii) the lessee purchases the leased equipment for one dollar at maturity of the lease. Originated leases continue to be classified as sales-type leases. As a lessor, Peoples originates commercial equipment leases either directly to the customer or indirectly through vendor programs. Equipment leases consist of automotive, construction, healthcare, manufacturing, office, restaurant, and other equipment. These sales-type leases do not typically contain residual value guarantees; however, the risk associated with residuals is mitigated by obtaining security deposits from lessees. Other non-interest income noted in the table below includes gains on the early termination of leases, referral fee income, and other fee income. Lease income also includes gains and losses on residual assets. Additional information regarding Peoples' sales-type leases can be found in "Note 4 Loans and Leases".
The table below details Peoples' lease income for the years ended December 31, 2022 and 2021:
(Dollars in thousands)20222021
Interest and fees on leases (a)$34,720 $13,572 
Other non-interest income4,267 1,293 
Total lease income$38,987 $14,865 
(a)Included in "Interest and fees on loans" on the Consolidated Statements of Income. For additional
information, see "Note 4 Loans and Leases.".

The following table summarizes the net investments in sales-type leases, which are included in "Loans and leases, net of deferred costs" on the Consolidated Balance Sheets at December 31:
(Dollars in thousands)20222021
Lease payments receivable, at amortized cost$367,681 $152,202 
Estimated residual values35,045 129 
Initial direct costs4,233 1,427 
Deferred revenue(61,828)(31,250)
Total leases, at amortized cost345,131 122,508 
Allowance for credit losses - leases(8,495)(4,797)
Net investment in sales-type leases$336,636 $117,711 
The following table summarizes the contractual maturities of leases:
(Dollars in thousands)Balance
2023$82,543 
202484,642 
202592,966 
202661,351 
202737,310 
Thereafter8,869 
Lease payments receivable, at amortized cost$367,681 
Lessee Arrangements
Peoples leases certain banking facilities and equipment under various agreements with original terms providing for fixed monthly payments over periods generally ranging from two to thirty years. Certain leases may include options to extend or terminate the lease. Only those renewal and termination options which Peoples is reasonably certain of exercising are included in the calculation of the lease liability. Certain leases contain rent escalation clauses calling for rent increases over the term of the lease, which are included in the calculation of the lease liability.  Short-term leases of certain facilities and equipment, with lease terms of 12 months or less, are recognized on a straight-line basis over the lease term. At December 31, 2022, Peoples did not have any finance leases or any significant lessor agreements. Right of Use ("ROU") assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement or remeasurement date of a lease based on the present value of lease payments over the remaining lease term. Operating lease ROU assets include lease payments made at or before the commencement date and initial indirect costs. Operating lease ROU assets exclude lease incentives and nonlease components.
The table below details Peoples' lease expense, which is included in "Net occupancy and equipment expense" in the Consolidated Statements of Income for the years ended December 31:
(Dollars in thousands)20222021
Operating lease expense$2,568 $1,632 
Short-term lease expense745 411 
Total lease expense$3,313 $2,043 
Peoples utilizes an incremental borrowing rate to determine the present value of lease payments for each lease, as the lease agreements do not provide an implicit rate. The estimated incremental borrowing rate reflects a secured rate and is based on the term of the lease and the interest rate environment at the lease commencement or remeasurement date.
The following table details the ROU asset, the lease liability and other information related to Peoples' operating leases on the Consolidated Balance Sheet at December 31:
(Dollars in thousands)20222021
Right-of-use asset:
Other assets$6,825 $7,911 
Lease liability:
Accrued expenses and other liabilities$7,551 $8,674 
Other information:
Weighted-average remaining lease term8.8 years9.5 years
Weighted-average discount rate2.70 %2.36 %
Cash paid during the year for operating leases$2,560 $1,585 
Additions for right-of-use assets obtained during the year$880 $2,482 
The following table summarizes the future lease payments of operating leases:
(Dollars in thousands)Payments
2023
$2,245 
2024
1,487 
2025
1,002 
2026
839 
2027
702 
Thereafter3,005 
Total undiscounted lease payments$9,280 
Imputed interest(1,729)
Total lease liability$7,551