Leases

12 Months Ended

Dec. 31, 2023

NOTE 9. LEASES

We determine if an arrangement is a lease at inception by assessing whether there is an identified asset, and whether the contract conveys the right to control the use of the identified asset for a period of time in exchange for consideration. ASC Topic 842 also requires a lessee to classify a lease as either finance or operating.

ROU assets represent a lessee's right to use an underlying asset for the lease term and lease liabilities represent a lessee's obligation to make lease payments arising from the lease. We amortize the operating lease ROU assets and record interest expense on the operating lease liabilities over the lease terms.

Operating leases with a term of more than one year are included in operating lease ROU assets and operating lease liabilities, which are reported in "Other assets" and "Accrued interest payable and other liabilities" on the Company's consolidated balance sheets. Short-term leases (initial term of less than 12 months) are not recorded on the balance sheet and lease expense is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are accounted for as a single lease component. Most leases include one or more options to renew, with renewal terms that can extend the lease from one to ten years. The exercise of lease renewal options is at our sole discretion. Some of our leases also include termination options. We have determined that we do not meet the reasonably certain threshold to exercise any renewal or termination options, therefore our lease terms do not reflect any optional periods. We rent or sublease certain office space to third parties. Our subleases consist of operating leases for offices that we have fully or partially vacated.

Certain of our lease agreements also include rental payments that adjust periodically based on changes in the CPI. We initially measured our lease payments using the index at the lease commencement date. Subsequent increases in the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred. The ROU assets and lease liabilities are not re-measured as a result of changes in the CPI. Our lease agreements do not contain any purchase options, residual value guarantees, or restrictive covenants.

Operating Leases as a Lessee

Our lease expense is a component of "Occupancy expense" on our consolidated statements of earnings (loss). The following table presents the components of lease expense for the years indicated:


	Year Ended December 31,
	2023		2022		2021
	(In thousands)
Operating lease expense:
Fixed costs	$	33,672	$	33,323	$	34,541
Variable costs	217		129		59
Short-term lease costs	831		1,466		1,347
Sublease income	(2,081)		(4,048)		(4,474)
Net lease expense	$	32,639	$	30,870	$	31,473

The following table presents supplemental cash flow information related to leases for the years indicated:


	Year Ended December 31,
	2023		2022		2021
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	37,064	$	35,677	$	36,212
ROU assets obtained in exchange for lease obligations:
Operating leases	$	39,985	$	39,661	$	35,820

The following table presents supplemental balance sheet and other information related to operating leases as of the date indicated:


	December 31,
	2023			2022
	(Dollars in thousands)
Operating leases:
Operating lease right-of-use assets, net	$	133,126		$	126,255
Operating lease liabilities	$	161,308		$	148,401

Weighted average remaining lease term (in years)	6.1			6.6
Weighted average discount rate	3.40		%	2.64		%

The following table presents the maturities of operating lease liabilities as of the date indicated:


	December 31, 2023
	(In thousands)
Year Ending December 31,
2024	$	39,802
2025	34,961
2026	28,165
2027	20,309
2028	16,073
Thereafter	41,120
Total operating lease liabilities	180,430
Less: Imputed interest	(19,122)
Present value of operating lease liabilities	$	161,308

Operating Leases as a Lessor

We provide equipment financing to our customers through operating leases where we facilitate the purchase of equipment leased to our customers. The equipment is shown on our consolidated balance sheets as "Equipment leased to others under operating leases" and is depreciated to its estimated residual value at the end of the lease term, shown as "Leased equipment depreciation" in the consolidated statements of earnings (loss), according to our fixed asset accounting policy. We receive periodic rental income payments under the leases, which are recorded as "Leased equipment income" in the consolidated statements of earnings (loss). The equipment is tested periodically for impairment. No impairment was recorded on "Equipment leased to others under operating leases" for the years ended December 31, 2023 and 2022.

The following table presents the contractual rental payments to be received on operating leases as of the date indicated:


	December 31, 2023
	(In thousands)
Year Ending December 31,
2024	$	45,509
2025	39,458
2026	34,763
2027	27,792
2028	23,666
Thereafter	62,016
Total undiscounted cash flows	$	233,204