Leases

3 Months Ended

Mar. 31, 2023

LEASES

Old National has operating and finance leases for land, office space, banking centers, and equipment. These leases are generally for periods of 5 to 20 years with various renewal options. We include certain renewal options in the measurement of our right-of-use assets and lease liabilities if they are reasonably certain to be exercised. Variable lease payments that are dependent on an index or a rate are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability. Variable lease payments that are not dependent on an index or a rate are excluded from the measurement of the lease liability and are recognized in profit and loss when incurred. Variable lease payments are defined as payments made for the right to use an asset that vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.

Old National has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes, and insurance are not included in the measurement of the lease liability since they are generally able to be segregated. For certain equipment leases, Old National accounts for the lease and non-lease components as a single lease component using the practical expedient available for that class of assets.

Old National does not have any material sub-lease agreements.

The components of lease expense were as follows:


	Affected Line Item in the Statement of Income	Three Months Ended March 31,
(dollars in thousands)		2023		2022
Operating lease cost	Occupancy/Equipment expense	$	8,638	$	5,108
Finance lease cost:
Amortization of right-of-use assets	Occupancy expense	691		675
Interest on lease liabilities	Interest expense	169		107

Sub-lease income	Occupancy expense	(60)		(128)
Total		$	9,438	$	5,762

Supplemental balance sheet information related to leases was as follows:


(dollars in thousands)	March 31, 2023			December 31, 2022
Operating Leases
Operating lease right-of-use assets	$	183,687		$	189,714
Operating lease liabilities	205,249			211,964

Finance Leases
Premises and equipment, net	21,173			10,799
Other borrowings	21,983			13,469

Weighted-Average Remaining Lease Term (in Years)
Operating leases	8.9			9.1
Finance leases	10.6			7.2

Weighted-Average Discount Rate
Operating leases	2.90		%	2.88		%
Finance leases	3.82		%	3.30		%

Supplemental cash flow information related to leases was as follows:


	Three Months Ended March 31,
(dollars in thousands)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,932	$	5,341
Operating cash flows from finance leases	169		107
Financing cash flows from finance leases	628		616

The following table presents a maturity analysis of the Company’s lease liability by lease classification at March 31, 2023:


(dollars in thousands)	Operating Leases		Finance Leases
2023	$	22,933	$	2,432
2024	29,819		3,278
2025	28,513		3,301
2026	27,600		2,075
2027	26,668		2,078
Thereafter	98,709		13,964
Total undiscounted lease payments	234,242		27,128
Amounts representing interest	(28,993)		(5,145)
Lease liability	$	205,249	$	21,983

Leases