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LEASES

9 Months Ended

Sep. 30, 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 ongoing 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. The lease liability and right of use asset is included in Other liabilities and Other assets, respectively, in the unaudited Consolidated Statement of Financial Condition. 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. Operating lease expense is included in Occupancy expense in the unaudited Consolidated Statement of Income. 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		Nine months ended
(Dollars in thousands)	September 30, 2019		September 30, 2019
Operating lease cost ⁽¹⁾	$	5,596	$	14,610
Sublease income	(105)		(381)
Net lease cost	$	5,491	$	14,229

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

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


(Dollars in thousands)	September 30, 2019
Assets
Right of use assets	$	165,979
Total assets	$	165,979

Liabilities
Lease liabilities	$	180,973
Total liabilities	$	180,973


Lease term and discount rate
Weighted average remaining lease term (in years)
Operating leases	19.66
Weighted average discount rate
Operating leases	4.27		%

Maturities of operating lease liabilities under ASC 842, Leases (as adopted on January 1, 2019) were as follows:


(Dollars in thousands)	September 30, 2019
2019	$	8,681
2020	16,853
2021	16,511
2022	16,463
2023	16,660
After 2023	210,453
Total lease payments	285,621
Less: Interest	(104,648)
Present value of lease liabilities	$	180,973

The minimum cash payments for operating leases under ASC 840, Leases were as follows:


(Dollars in thousands)	December 31, 2018
2019	$	11,562
2020	11,411
2021	11,132
2022	11,078
2023	11,141
After 2023	169,929
Total minimum lease payments	$	226,253

Supplemental cash flow information related to leases was as follows:

Nine months ended

(Dollars in thousands)

September 30, 2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

12,564

Right of use assets obtained in exchange for new operating lease liabilities (non-cash)

61,693

Lessor Equipment Leasing

WSFS provides equipment and small business lease financing through our two leasing subsidiaries, BEFC and NewLane Finance, acquired from our Beneficial acquisition. 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:


	Three months ended		Nine months ended
(Dollars in thousands)	September 30, 2019		September 30, 2019
Direct financing leases:
Interest income on lease receivable	$	2,048	$	5,826
Interest income on deferred fees and costs	63		326
Total direct financing lease income	$	2,111	$	6,152

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


(Dollars in thousands)	September 30, 2019
Lease receivables	$	194,124
Unearned income	(24,427)
Deferred fees and costs	1,303
Net investment in direct financing leases	$	171,000

At September 30, 2019, future minimum lease payments to be received for direct financing leases were as follows:


(Dollars in thousands)	Direct financing leases
2019	$	17,006
2020	62,258
2021	48,874
2022	34,025
2023	21,713
After 2023	10,248
Total lease payments	$	194,124

LEASES