LEASES

3 Months Ended

Mar. 31, 2023

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 one year to 39 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 Statements of Financial Condition. Leases with an initial term of 12 months or less are not recorded on the unaudited Consolidated Statements 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 Statements 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
(Dollars in thousands)	March 31, 2023		March 31, 2022
Operating lease cost (1)	$	4,793	$	5,350
Sublease income	(49)		(86)
Net lease cost	$	4,744	$	5,264

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

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

(Dollars in thousands)	March 31, 2023			December 31, 2022
Right-of-use assets	$	129,642		$	138,182
Lease liabilities	$	150,162		$	158,269
Lease term and discount rate
Weighted average remaining lease term (in years)	17.86			17.91
Weighted average discount rate	4.25		%	4.25		%

Maturities of operating lease liabilities were as follows:

(Dollars in thousands)	March 31, 2023
Remaining in 2022	$	14,571
2023	18,100
2024	18,113
2025	14,597
2026	13,157
After 2026	152,418
Total lease payments	230,956
Less: Interest	(80,794)
Present value of lease liabilities	$	150,162

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

	Three months ended
(Dollars in thousands)	March 31, 2023		March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,060	$	5,651
Right of use assets obtained in exchange for new operating lease liabilities (non-cash)	—		13,707

As of March 31, 2023, the Corporation had not entered into any material leases that have not yet commenced.

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 unaudited Consolidated Statements of Income. The allowance for credit losses on finance leases is included in Provision for credit losses on the unaudited Consolidated Statements of Income.

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

	Three months ended
(Dollars in thousands)	March 31, 2023		March 31, 2022
Direct financing leases:
Interest income on lease receivable	$	12,382	$	9,737
Interest income on deferred fees and costs, net	(1,386)		(544)
Total direct financing lease net interest income	$	10,996	$	9,193

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

(Dollars in thousands)	March 31, 2023		December 31, 2022
Lease receivables	$	665,312	$	642,369
Unearned income	(101,911)		(95,683)
Deferred fees and costs	13,183		12,295
Net investment in direct financing leases	$	576,584	$	558,981

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 one year to 39 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 Statements of Financial Condition. Leases with an initial term of 12 months or less are not recorded on the unaudited Consolidated Statements 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 Statements 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
(Dollars in thousands)	March 31, 2023		March 31, 2022
Operating lease cost (1)	$	4,793	$	5,350
Sublease income	(49)		(86)
Net lease cost	$	4,744	$	5,264

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

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

(Dollars in thousands)	March 31, 2023			December 31, 2022
Right-of-use assets	$	129,642		$	138,182
Lease liabilities	$	150,162		$	158,269
Lease term and discount rate
Weighted average remaining lease term (in years)	17.86			17.91
Weighted average discount rate	4.25		%	4.25		%

Maturities of operating lease liabilities were as follows:

(Dollars in thousands)	March 31, 2023
Remaining in 2022	$	14,571
2023	18,100
2024	18,113
2025	14,597
2026	13,157
After 2026	152,418
Total lease payments	230,956
Less: Interest	(80,794)
Present value of lease liabilities	$	150,162

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

	Three months ended
(Dollars in thousands)	March 31, 2023		March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,060	$	5,651
Right of use assets obtained in exchange for new operating lease liabilities (non-cash)	—		13,707

As of March 31, 2023, the Corporation had not entered into any material leases that have not yet commenced.

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 unaudited Consolidated Statements of Income. The allowance for credit losses on finance leases is included in Provision for credit losses on the unaudited Consolidated Statements of Income.

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

	Three months ended
(Dollars in thousands)	March 31, 2023		March 31, 2022
Direct financing leases:
Interest income on lease receivable	$	12,382	$	9,737
Interest income on deferred fees and costs, net	(1,386)		(544)
Total direct financing lease net interest income	$	10,996	$	9,193

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

(Dollars in thousands)	March 31, 2023		December 31, 2022
Lease receivables	$	665,312	$	642,369
Unearned income	(101,911)		(95,683)
Deferred fees and costs	13,183		12,295
Net investment in direct financing leases	$	576,584	$	558,981