Leases

3 Months Ended

Mar. 31, 2024

Leases [Abstract]

Leases

Leases

Peoples has elected certain practical expedients, in accordance with ASC 842 - Leases ("ASC 842"). As a lessor, Peoples has made an accounting policy election to exclude from the consideration in the contract, and from variable payments not included in the consideration in the contract, all sales and other similar taxes assessed. Peoples has also made an accounting policy election to account for each separate lease component of a contract and its associated non-lease components as a single lease component for all leases subject to ASC 842.

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 in 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, a lease is 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 originates sales-type leases through its NSL division, as these leases are structured as dollar buy-out, whereby the lessee pays one dollar at maturity of the lease to purchase the equipment. These leases do not typically contain residual value guarantees; however, if a lease contains a residual value guarantee, Peoples reduces its residual asset risk by obtaining a security deposit from the lessee. Peoples also originates leases through its Vantage subsidiary, which are classified as either sales-type or direct financing leases based primarily on whether they included a dollar buy-out or a fair market value buy-out, respectively. As a lessor, Peoples originates commercial equipment leases either directly to the customer or indirectly through vendor programs. Equipment leases relate to automotive, construction, health care, manufacturing, office, restaurant, information technology and other equipment. Finance leases include an estimated residual value, which is assessed for impairment as part of the allowance for credit losses. Lease (loss) income noted in the table below includes (i) gains on the early termination of leases, (ii) fees received for referrals, (iii) gains and losses recognized on the sales of residual assets and (iv) syndication income. Additional information regarding Peoples' leases can be found in "Note 4 Loans and Leases."

The table below details Peoples' lease income:

	Three Months Ended
(Dollars in thousands)	March 31, 2024		March 31, 2023
Interest and fees on leases (a)	$	12,067	$	9,643
Lease income	1,236		1,077
Other non-interest income	785		—
Total lease income	$	14,088	$	10,720

(a)Included in "Interest and fees on loans and leases" in the Unaudited Consolidated Statements of Operations. For additional information, see "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

The following table summarizes the net investment in leases, which is included in "Loans and leases, net of deferred fees and costs" on the Unaudited Consolidated Balance Sheets:

(Dollars in thousands)	March 31, 2024		December 31, 2023
Lease payments receivable, at amortized cost	$	473,987	$	463,742
Estimated residual values	34,157		33,448
Initial direct costs	7,334		7,114
Deferred revenue	(92,784)		(90,244)
Net investment in leases	422,694		414,060
Allowance for credit losses - leases	(12,889)		(10,850)
Net investment in leases, after allowance for credit losses	$	409,805	$	403,210

The following table summarizes the contractual maturities of leases:

(Dollars in thousands)	Balance
Remaining nine months ending December 31, 2024	$	103,408
Year ending December 31, 2025	109,429
Year ending December 31, 2026	100,493
Year ending December 31, 2027	82,587
Year ending December 31, 2028	55,038
Thereafter	23,032
Lease payments receivable, at amortized cost	$	473,987

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. At March 31, 2024, Peoples did not have any leases that met the criteria for finance leases. 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 lease liabilities are recognized at the commencement or the 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. 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 and do not have an ROU asset or lease liability.

The table below details Peoples' lease expense, which is included in "Net occupancy and equipment expense" in the Unaudited Consolidated Statements of Operations:

	Three Months Ended
(Dollars in thousands)	March 31, 2024		March 31, 2023
Operating lease expense	735		695
Short-term lease expense	305		95
Total lease expense	$	1,040	$	790

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 assets, the lease liabilities and other information related to Peoples' operating leases at the dates shown:

(Dollars in thousands)	March 31, 2024			December 31, 2023
ROU assets:
Other assets	$	11,682		$	11,689
Lease liabilities:
Accrued expenses and other liabilities	$	12,062		$	12,080
Other information:
Weighted-average remaining lease term	9.2 years			9.5 years
Weighted-average discount rate	3.92		%	3.34		%
Additions for ROU assets obtained during the year	$	509		$	4,428

During both the three months ended March 31, 2024 and 2023, Peoples paid cash of $0.7 million for operating leases.

The following table summarizes the maturity of remaining lease liabilities:

(Dollars in thousands)	Balance
Remaining nine months ending December 31, 2024	$	2,280
Year ending December 31, 2025	2,210
Year ending December 31, 2026	1,950
Year ending December 31, 2027	1,762
Year ending December 31, 2028	1,338
Thereafter	5,412
Total undiscounted lease payments	$	14,952
Imputed interest	$	(2,890)
Total lease liabilities	$	12,062

Leases

Leases

Peoples has elected certain practical expedients, in accordance with ASC 842 - Leases ("ASC 842"). As a lessor, Peoples has made an accounting policy election to exclude from the consideration in the contract, and from variable payments not included in the consideration in the contract, all sales and other similar taxes assessed. Peoples has also made an accounting policy election to account for each separate lease component of a contract and its associated non-lease components as a single lease component for all leases subject to ASC 842.

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 in 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, a lease is 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 originates sales-type leases through its NSL division, as these leases are structured as dollar buy-out, whereby the lessee pays one dollar at maturity of the lease to purchase the equipment. These leases do not typically contain residual value guarantees; however, if a lease contains a residual value guarantee, Peoples reduces its residual asset risk by obtaining a security deposit from the lessee. Peoples also originates leases through its Vantage subsidiary, which are classified as either sales-type or direct financing leases based primarily on whether they included a dollar buy-out or a fair market value buy-out, respectively. As a lessor, Peoples originates commercial equipment leases either directly to the customer or indirectly through vendor programs. Equipment leases relate to automotive, construction, health care, manufacturing, office, restaurant, information technology and other equipment. Finance leases include an estimated residual value, which is assessed for impairment as part of the allowance for credit losses. Lease (loss) income noted in the table below includes (i) gains on the early termination of leases, (ii) fees received for referrals, (iii) gains and losses recognized on the sales of residual assets and (iv) syndication income. Additional information regarding Peoples' leases can be found in "Note 4 Loans and Leases."

The table below details Peoples' lease income:

	Three Months Ended
(Dollars in thousands)	March 31, 2024		March 31, 2023
Interest and fees on leases (a)	$	12,067	$	9,643
Lease income	1,236		1,077
Other non-interest income	785		—
Total lease income	$	14,088	$	10,720

(a)Included in "Interest and fees on loans and leases" in the Unaudited Consolidated Statements of Operations. For additional information, see "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

The following table summarizes the net investment in leases, which is included in "Loans and leases, net of deferred fees and costs" on the Unaudited Consolidated Balance Sheets:

(Dollars in thousands)	March 31, 2024		December 31, 2023
Lease payments receivable, at amortized cost	$	473,987	$	463,742
Estimated residual values	34,157		33,448
Initial direct costs	7,334		7,114
Deferred revenue	(92,784)		(90,244)
Net investment in leases	422,694		414,060
Allowance for credit losses - leases	(12,889)		(10,850)
Net investment in leases, after allowance for credit losses	$	409,805	$	403,210

The following table summarizes the contractual maturities of leases:

(Dollars in thousands)	Balance
Remaining nine months ending December 31, 2024	$	103,408
Year ending December 31, 2025	109,429
Year ending December 31, 2026	100,493
Year ending December 31, 2027	82,587
Year ending December 31, 2028	55,038
Thereafter	23,032
Lease payments receivable, at amortized cost	$	473,987

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. At March 31, 2024, Peoples did not have any leases that met the criteria for finance leases. 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 lease liabilities are recognized at the commencement or the 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. 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 and do not have an ROU asset or lease liability.

The table below details Peoples' lease expense, which is included in "Net occupancy and equipment expense" in the Unaudited Consolidated Statements of Operations:

	Three Months Ended
(Dollars in thousands)	March 31, 2024		March 31, 2023
Operating lease expense	735		695
Short-term lease expense	305		95
Total lease expense	$	1,040	$	790

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 assets, the lease liabilities and other information related to Peoples' operating leases at the dates shown:

(Dollars in thousands)	March 31, 2024			December 31, 2023
ROU assets:
Other assets	$	11,682		$	11,689
Lease liabilities:
Accrued expenses and other liabilities	$	12,062		$	12,080
Other information:
Weighted-average remaining lease term	9.2 years			9.5 years
Weighted-average discount rate	3.92		%	3.34		%
Additions for ROU assets obtained during the year	$	509		$	4,428

During both the three months ended March 31, 2024 and 2023, Peoples paid cash of $0.7 million for operating leases.

The following table summarizes the maturity of remaining lease liabilities:

(Dollars in thousands)	Balance
Remaining nine months ending December 31, 2024	$	2,280
Year ending December 31, 2025	2,210
Year ending December 31, 2026	1,950
Year ending December 31, 2027	1,762
Year ending December 31, 2028	1,338
Thereafter	5,412
Total undiscounted lease payments	$	14,952
Imputed interest	$	(2,890)
Total lease liabilities	$	12,062