LEASES

3 Months Ended

Mar. 31, 2019

9. LEASES

As a lessee, the Company enters into leases for its bank branches, corporate offices, and certain equipment. As a lessor, the Company primarily provides financing through our equipment leasing business.

Lessee

Our leases have remaining lease terms of less than 1 year to 43 years, which includes renewal options that are exercised at our discretion. The Company's lease terms to calculate the lease liability and right of use asset include options to extend the lease when it is reasonably certain that the Company will exercise the option. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized on a straight-line basis over the lease term. We account for lease components separately from nonlease components. We sublease certain real estate to third parties.

The components of operating lease cost were as follows:



		Three months ended
(Dollars in thousands)	Classification	March 31, 2019
Operating lease cost ⁽¹⁾	Occupancy expense	$	5,724
Sublease income		(101		)
Net lease cost		$	5,623


⁽¹⁾	Includes variable lease cost and short-term lease cost.

Supplemental balance sheet information related to operating leases was as follows:



(Dollars in thousands)	Classification	March 31, 2019
Assets
Operating right of use assets	Other assets	$	180,274
Total assets		180,274

Liabilities
Operating lease liabilities	Other liabilities	$	187,847
Total liabilities		187,847

Lease term and discount rate
		March 31, 2019
Weighted average remaining lease term (in years)
Operating leases		19.88
Weighted average discount rate
Operating leases		4.26		%

Maturities of operating lease liabilities were as follows:



(Dollars in thousands)	Operating leases
2019	$	18,427
2020	16,684
2021	16,355
2022	16,335
2023	16,495
After 2023	212,539
Total lease payments	296,835
Less: Interest	(108,988		)
Present value of lease liabilities	187,847

Supplemental cash flow information related to leases was as follows:



	March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,387
Right of use assets obtained in exchange for new operating lease liabilities	$	61,693

Lessor Equipment Leasing

WSFS provides equipment and small business lease financing through our two leasing subsidiaries, Beneficial Equipment Finance Corp and NewLane Finance Company. Interest income from direct financing leases where the Company is a lessor is recognized in Interest and Fees on Loans and Leases on the Consolidated Statements of Income.

The components of direct finance lease income are summarized in the table below:



	March 31, 2019
Direct financing leases:
Interest income on lease receivable	$	669
Interest income on deferred fees and costs	57
Total direct financing lease income	$	726

Equipment leasing receivables relate to direct financing leases. The composition of the net investment in direct financing leases was as follows:



	March 31, 2019
Lease receivables	$	160,594
Unearned income	(15,921		)
Deferred fees and costs	(15		)
Net investment in direct financing leases	$	144,658

At March 31, 2019, future minimum lease payments to be received for direct financing leases were as follows:



(Dollars in thousands)	Direct financing leases
2019	$	43,390
2020	47,122
2021	34,519
2022	21,458
2023	11,396
After 2023	2,709
Total lease payments	$	160,594

LEASES