Leases

6 Months Ended

Jun. 30, 2023

The Company leases certain premises and equipment under operating leases. The leases have remaining lease terms ranging from less than one year to 43 years, some of which have renewal options reasonably certain to be exercised and, therefore, have been reflected in the total lease term and used for the calculation of minimum payments required. The Company had variable lease payments of $0.6 million and $0.4 million during the three months ended June 30, 2023 and 2022, respectively, and $1.1 million and $0.9 million during the six months ended June 30, 2023 and 2022, respectively, which include mostly common area maintenance and taxes, included in occupancy and equipment on the consolidated statements of income. In addition, the Company recorded right of use (“ROU”) asset impairment charges of $0.6 million and $1.6 million in the three months ended June 30, 2023 and 2022, respectively, and $1.1 million and $1.6 million in the six months ended June 30, 2023 and 2022, respectively. ROU asset impairment charges in the first half of 2023 were in connection with the closure of a branch in Houston, Texas in 2023, and with the decision to close another branch in Miami, Florida in 2023 (First half of 2022 - in connection with the closure of a branch in Pembroke Pines, Florida in 2022). These impairments were recorded as occupancy and equipment expense on the consolidated statements of operations and comprehensive (loss) income.

Lease costs for the three and six month periods ended June 30, 2023 and 2022 were as follows:


(in thousands)	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Lease cost
Operating lease cost	$	4,112	$	4,368	$	8,618	$	8,730
Short-term lease cost	—		22		—		44
Variable lease cost	555		443		1,087		890
Sublease income (1)	(860)		(866)		(1,725)		(1,637)
Total lease cost, net	$	3,807	$	3,967	$	7,980	$	8,027

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(1)Primarily in connection with the subleasing of portions of the Company’s headquarters building and, to a lesser extent, the sublease of the New York office space.

As of June 30, 2023 and December 31, 2022, the Company had an ROU asset of $116.2 million and $140.0 million and total operating lease liability of $123.3 million and $145.3 million, respectively. As of June 30, 2023 and December 31, 2022, the Company had a short-term lease liability of $3.3 million and $5.2 million, respectively, included as part of other liabilities in the consolidated balance sheet.

The following table provides supplemental information to leases as of and for the three and six month periods ended June 30, 2023 and 2022:


	Three Months Ended June 30,				Six Months Ended Ended June 30,
	2023		2022		2023		2022
(in thousands, except weighted average data)
Cash paid for amounts included in the measurement of operating lease liabilities	3,564		3,672		7,641		7,312
Weighted average remaining lease term for operating leases	17.4 years		18.7 years		17.4 years		18.7 years
Weighted average discount rate for operating leases	9.78	%	5.92	%	9.78	%	5.92	%

The following table presents a maturity analysis and reconciliation of the undiscounted cash flows to the total operating lease liabilities as of June 30, 2023 for the remaining 6 months of 2023 and thereafter:


(in thousands)
For the remaining six months of 2023	$	7,026
2024	14,219
2025	14,285
2026	14,515
2027	14,814
Thereafter	198,287
Total minimum payments required	263,146
Less: implied interest	(139,885)
Total lease obligations	$	123,261

The Company provides equipment financing through a variety of loan and lease structures, including direct or sale type finance leases and operating leases. As of June 30, 2023 and December 31, 2022, there were $2.5 million and $13.6 million, respectively, in direct or sale type finance leases included as part of loans held for investment, gross in the Company’s consolidated balance sheet, and included as part of commercial loans in our loan portfolio held for investment. As of June 30, 2023, there were $3.6 million in operating leases included as part of premises and equipment, net of accumulated depreciation, in the Company’s consolidated balance sheet.