Leases

9 Months Ended

Sep. 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 42 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 September 30, 2023 and 2022, respectively, and $1.7 million and $1.3 million during the nine months ended September 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 $1.1 million and $1.6 million in the nine months ended September 30, 2023 and 2022, respectively. ROU asset impairment charges in the first nine months 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 nine months 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 nine month periods ended September 30, 2023 and 2022 were as follows:


(in thousands)	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Lease cost
Operating lease cost	$	5,248	$	4,278	$	13,866	$	13,008
Short-term lease cost	24		18		24		62
Variable lease cost	588		414		1,675		1,304
Sublease income (1)	(857)		(527)		(2,582)		(2,164)
Total lease cost, net	$	5,003	$	4,183	$	12,983	$	12,210

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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 September 30, 2023 and December 31, 2022, the Company had an ROU asset of $116.8 million and $140.0 million and total operating lease liability of $124.1 million and $145.3 million, respectively. As of September 30, 2023 and December 31, 2022, the Company had a short-term lease liability of $3.4 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 nine month periods ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended Ended September 30,
	2023		2022		2023		2022
(in thousands, except weighted average data)
Cash paid for amounts included in the measurement of operating lease liabilities	4,267		3,499		11,908		10,811
Weighted average remaining lease term for operating leases	17.0 years		18.3 years		17.0 years		18.3 years
Weighted average discount rate for operating leases	9.66	%	5.94	%	9.66	%	5.94	%

The following table presents a maturity analysis and reconciliation of the undiscounted cash flows to the total operating lease liabilities as of September 30, 2023 for the remaining 3 months of 2023 and thereafter:


(in thousands)
For the remaining three months of 2023	$	3,585
2024	14,579
2025	14,659
2026	14,905
2027	15,216
Thereafter	199,817
Total minimum payments required	262,761
Less: implied interest	(138,689)
Total lease obligations	$	124,072

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 September 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 September 30, 2023, there were $3.1 million in operating leases included as part of premises and equipment, net of accumulated depreciation, in the Company’s consolidated balance sheet.