LEASES

9 Months Ended

Sep. 30, 2020

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 1 year to 42 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 Statement of Financial Condition. Leases with an initial term of 12 months or less are not recorded on the unaudited Consolidated Statement 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 Statement 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				Nine months ended
(Dollars in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Operating lease cost (1)	$	4,723	$	5,596	$	14,224	$	14,610
Sublease income	(93)		(105)		(279)		(381)
Net lease cost	$	4,630	$	5,491	$	13,945	$	14,229

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

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

(Dollars in thousands)	September 30, 2020			December 31, 2019
Assets
Right of use assets	$	154,007		$	166,221
Total assets	$	154,007		$	166,221
Liabilities
Lease liabilities	$	169,058		$	181,814
Total liabilities	$	169,058		$	181,814
Lease term and discount rate
Weighted average remaining lease term (in years)	19.37			19.06
Weighted average discount rate	4.25		%	4.17		%

Maturities of operating lease liabilities were as follows:

(Dollars in thousands)	September 30, 2020
Remaining in 2020	$	4,359
2021	17,110
2022	17,074
2023	17,192
2024	16,017
After 2024	195,793
Total lease payments	267,545
Less: Interest	(98,487)
Present value of lease liabilities	$	169,058

(Dollars in thousands)	December 31, 2019
2020	$	18,591
2021	18,314
2022	18,315
2023	18,525
2024	17,390
After 2024	197,203
Total lease payments	288,338
Less: Interest	(106,524)
Present value of lease liabilities	$	181,814

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

	Nine months ended
(Dollars in thousands)	September 30, 2020		September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	13,915	$	12,564
Right of use assets obtained in exchange for new operating lease liabilities (non-cash)	—		61,693

Lessor Equipment Leasing

The Company provides equipment and small business lease financing through its leasing subsidiary, NewLane Finance, acquired in the Beneficial acquisition. Interest income from direct financing leases where the Company is a lessor is recognized in Interest and fees on loans and leases on the Consolidated Statements of Income. The allowance for credit losses on finance leases is included in Provision for credit losses on the Consolidated Statements of Income.

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

	Three months ended				Nine months ended
(Dollars in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Direct financing leases:
Interest income on lease receivable	$	3,965	$	2,048	$	11,344	$	5,826
Interest income on deferred fees and costs	117		63		304		326
Total direct financing lease income	$	4,082	$	2,111	$	11,648	$	6,152

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

(Dollars in thousands)	September 30, 2020		December 31, 2019
Lease receivables	$	257,519	$	217,076
Unearned income	(33,430)		(28,446)
Deferred fees and costs	3,450		1,962
Net investment in direct financing leases	$	227,539	$	190,592

Future minimum lease payments to be received for direct financing leases were as follows:

(Dollars in thousands)	September 30, 2020
Remaining in 2020	$	21,770
2021	80,291
2022	64,172
2023	47,661
2024	30,874
After 2024	12,751
Total lease payments	$	257,519

(Dollars in thousands)	December 31, 2019
2020	$	71,067
2021	58,337
2022	42,274
2023	28,628
2024	14,450
After 2024	2,320
Total lease payments	$	217,076

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 1 year to 42 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 Statement of Financial Condition. Leases with an initial term of 12 months or less are not recorded on the unaudited Consolidated Statement 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 Statement 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				Nine months ended
(Dollars in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Operating lease cost (1)	$	4,723	$	5,596	$	14,224	$	14,610
Sublease income	(93)		(105)		(279)		(381)
Net lease cost	$	4,630	$	5,491	$	13,945	$	14,229

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

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

(Dollars in thousands)	September 30, 2020			December 31, 2019
Assets
Right of use assets	$	154,007		$	166,221
Total assets	$	154,007		$	166,221
Liabilities
Lease liabilities	$	169,058		$	181,814
Total liabilities	$	169,058		$	181,814
Lease term and discount rate
Weighted average remaining lease term (in years)	19.37			19.06
Weighted average discount rate	4.25		%	4.17		%

Maturities of operating lease liabilities were as follows:

(Dollars in thousands)	September 30, 2020
Remaining in 2020	$	4,359
2021	17,110
2022	17,074
2023	17,192
2024	16,017
After 2024	195,793
Total lease payments	267,545
Less: Interest	(98,487)
Present value of lease liabilities	$	169,058

(Dollars in thousands)	December 31, 2019
2020	$	18,591
2021	18,314
2022	18,315
2023	18,525
2024	17,390
After 2024	197,203
Total lease payments	288,338
Less: Interest	(106,524)
Present value of lease liabilities	$	181,814

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

	Nine months ended
(Dollars in thousands)	September 30, 2020		September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	13,915	$	12,564
Right of use assets obtained in exchange for new operating lease liabilities (non-cash)	—		61,693

Lessor Equipment Leasing

The Company provides equipment and small business lease financing through its leasing subsidiary, NewLane Finance, acquired in the Beneficial acquisition. Interest income from direct financing leases where the Company is a lessor is recognized in Interest and fees on loans and leases on the Consolidated Statements of Income. The allowance for credit losses on finance leases is included in Provision for credit losses on the Consolidated Statements of Income.

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

	Three months ended				Nine months ended
(Dollars in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Direct financing leases:
Interest income on lease receivable	$	3,965	$	2,048	$	11,344	$	5,826
Interest income on deferred fees and costs	117		63		304		326
Total direct financing lease income	$	4,082	$	2,111	$	11,648	$	6,152

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

(Dollars in thousands)	September 30, 2020		December 31, 2019
Lease receivables	$	257,519	$	217,076
Unearned income	(33,430)		(28,446)
Deferred fees and costs	3,450		1,962
Net investment in direct financing leases	$	227,539	$	190,592

Future minimum lease payments to be received for direct financing leases were as follows:

(Dollars in thousands)	September 30, 2020
Remaining in 2020	$	21,770
2021	80,291
2022	64,172
2023	47,661
2024	30,874
After 2024	12,751
Total lease payments	$	257,519

(Dollars in thousands)	December 31, 2019
2020	$	71,067
2021	58,337
2022	42,274
2023	28,628
2024	14,450
After 2024	2,320
Total lease payments	$	217,076