LEASES

6 Months Ended

Jun. 30, 2021

Leases [Abstract]

LEASES

8. 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 its equipment leasing business.

Lessee

The Company's ongoing leases have remaining lease terms of less than 1 year to 41 years, which includes renewal options that are exercised at its 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 unaudited Consolidated Statement of Financial Condition. 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. The Company accounts for lease components separately from nonlease components. The Company subleases certain real estate to third parties.

The components of operating lease cost were as follows:

	Three months ended				Six months ended
(Dollars in thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Operating lease cost (1)	$	4,789	$	4,950	$	9,443	$	9,500
Sublease income	(90)		(93)		(197)		(186)
Net lease cost	$	4,699	$	4,857	$	9,246	$	9,314

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

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

(Dollars in thousands)	June 30, 2021			December 31, 2020
Right of use assets	$	150,291		$	150,985
Lease liabilities	$	165,057		$	166,451
Lease term and discount rate
Weighted average remaining lease term (in years)	19.16			19.36
Weighted average discount rate	4.26		%	4.26		%

Maturities of operating lease liabilities were as follows:

(Dollars in thousands)	June 30, 2021
Remaining in 2021	$	8,780
2022	17,569
2023	17,692
2024	16,467
2025	16,478
After 2025	183,244
Total lease payments	260,230
Less: Interest	(95,173)
Present value of lease liabilities	$	165,057

Supplemental cash flow information related to operating leases was as follows:

	Six months ended
(Dollars in thousands)	June 30, 2021		June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9,074	$	9,328

Lessor Equipment Leasing

The Company provides equipment and small business lease financing through its leasing subsidiary, NewLane Finance®. 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 allowance for credit losses on finance leases is included in (Recovery of) provision for credit losses on the Consolidated Statements of Income.

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

	Three months ended				Six months ended
(Dollars in thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Direct financing leases:
Interest income on lease receivable	$	5,102	$	3,813	$	9,726	$	7,379
Interest income on deferred fees and costs, net	(438)		93		(756)		188
Total direct financing lease net interest income	$	4,664	$	3,906	$	8,970	$	7,567

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

(Dollars in thousands)	June 30, 2021		December 31, 2020
Lease receivables	$	329,718	$	281,601
Unearned income	(43,808)		(36,669)
Deferred fees and costs	5,747		3,953
Net investment in direct financing leases	$	291,657	$	248,885

Future minimum lease payments to be received for direct financing leases were as follows:

(Dollars in thousands)	June 30, 2021
Remaining in 2021	$	53,731
2022	96,910
2023	78,809
2024	56,668
2025	34,903
After 2025	8,697
Total lease payments	$	329,718

LEASES

8. 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 its equipment leasing business.

Lessee

The Company's ongoing leases have remaining lease terms of less than 1 year to 41 years, which includes renewal options that are exercised at its 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 unaudited Consolidated Statement of Financial Condition. 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. The Company accounts for lease components separately from nonlease components. The Company subleases certain real estate to third parties.

The components of operating lease cost were as follows:

	Three months ended				Six months ended
(Dollars in thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Operating lease cost (1)	$	4,789	$	4,950	$	9,443	$	9,500
Sublease income	(90)		(93)		(197)		(186)
Net lease cost	$	4,699	$	4,857	$	9,246	$	9,314

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

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

(Dollars in thousands)	June 30, 2021			December 31, 2020
Right of use assets	$	150,291		$	150,985
Lease liabilities	$	165,057		$	166,451
Lease term and discount rate
Weighted average remaining lease term (in years)	19.16			19.36
Weighted average discount rate	4.26		%	4.26		%

Maturities of operating lease liabilities were as follows:

(Dollars in thousands)	June 30, 2021
Remaining in 2021	$	8,780
2022	17,569
2023	17,692
2024	16,467
2025	16,478
After 2025	183,244
Total lease payments	260,230
Less: Interest	(95,173)
Present value of lease liabilities	$	165,057

Supplemental cash flow information related to operating leases was as follows:

	Six months ended
(Dollars in thousands)	June 30, 2021		June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9,074	$	9,328

Lessor Equipment Leasing

The Company provides equipment and small business lease financing through its leasing subsidiary, NewLane Finance®. 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 allowance for credit losses on finance leases is included in (Recovery of) provision for credit losses on the Consolidated Statements of Income.

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

	Three months ended				Six months ended
(Dollars in thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Direct financing leases:
Interest income on lease receivable	$	5,102	$	3,813	$	9,726	$	7,379
Interest income on deferred fees and costs, net	(438)		93		(756)		188
Total direct financing lease net interest income	$	4,664	$	3,906	$	8,970	$	7,567

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

(Dollars in thousands)	June 30, 2021		December 31, 2020
Lease receivables	$	329,718	$	281,601
Unearned income	(43,808)		(36,669)
Deferred fees and costs	5,747		3,953
Net investment in direct financing leases	$	291,657	$	248,885

Future minimum lease payments to be received for direct financing leases were as follows:

(Dollars in thousands)	June 30, 2021
Remaining in 2021	$	53,731
2022	96,910
2023	78,809
2024	56,668
2025	34,903
After 2025	8,697
Total lease payments	$	329,718