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LEASES

12 Months Ended

Dec. 31, 2024

7. LEASES

Lessor Arrangements

The Company’s lessor arrangements consist of sales-type and direct financing leases for equipment, including vehicles and machinery, with terms ranging from 5 months to 122 months. At December 31, 2024 and 2023, the carrying value of residual assets covered by residual value guarantees and residual value insurance was $102.6 million and $84.1 million, respectively.

Total net investment in sales-type and direct financing leases consists of the following as of December 31, (dollars in thousands):


	2024		2023
Sales-type and direct financing leases:
Lease receivables, net of unearned income and deferred selling profit	$	529,657	$	409,264
Unguaranteed residual values, net of unearned income and deferred selling profit		34,546		21,484
Total net investment in sales-type and direct financing leases	$	564,203	$	430,748

Lessee Arrangements

The Company’s lessee arrangements consist of operating and finance leases; however, the majority of the leases have been classified as non-cancellable operating leases and are primarily for real estate leases with remaining lease terms of up to 21 years.

In the third quarter of 2023, the Bank entered into and closed on an agreement for the purchase and sale of 27 properties, which included 25 branches and a drive thru and parking lot, each adjacent to a sold branch, to a single purchaser, for an aggregate purchase price of $45.8 million. The Bank also executed a sale-leaseback transaction in the fourth quarter of 2023 involving the sale of one branch location to a single purchaser, for an aggregate purchase price of $3.6 million. Concurrently with each sale-leaseback transaction, the Bank entered into absolute net lease agreements with the purchaser under which the Bank will lease the properties for an initial term of 17 years with specified renewal options. Each lease agreement includes a 1.5% annual rent escalation during the initial term and 2.0% rent escalation during the renewal terms, if exercised. The sale-leaseback transactions executed in 2023 resulted in pre-tax gains of $29.6 million for the year ended December 31, 2023, included in Other Operating Income in the accompanying Consolidated Statements of Income. As a result of these transactions, the Company recorded operating lease ROU assets and corresponding operating lease liabilities during 2023 of $41.3 million and $41.2 million, respectively.

The tables below provide information about the Company’s lessee lease portfolio and other supplemental lease information as of and for the years ended December 31, (dollars in thousands):


	2024						2023
	Operating			Finance			Operating			Finance
ROU assets	$	74,782		$	3,751		$	71,788		$	4,669
Lease liabilities		79,642			5,769			78,043			7,052
Lease Term and Discount Rate of Operating leases:
Weighted-average remaining lease term (years)		10.96			4.08			11.75			5.08
Weighted-average discount rate ⁽¹⁾		6.24	%		1.17	%		6.21	%		1.17	%

⁽¹⁾ A lease implicit rate or an incremental borrowing rate is used based on information available at commencement date of lease or at remeasurement date.


	2024		2023
Cash paid for amounts included in measurement of lease liabilities:
Operating Cash Flows from Finance Leases	$	74	$	89
Operating Cash Flows from Operating Leases		14,529		12,457
Financing Cash Flows from Finance Leases		1,283		1,236
ROU assets obtained in exchange for lease obligations:
Operating leases	$	5,548	$	43,357


		2024		2023
Net Operating Lease Cost	$	13,473	$	10,344
Finance Lease Cost:
Amortization of right-of-use assets		919		919
Interest on lease liabilities		74		89
Total Lease Cost	$	14,466	$	11,352

The maturities of lessor and lessee arrangements outstanding as of December 31, 2024 are presented in the table below for the years ending, (dollars in thousands):


	Lessor		Lessee
		Sales-type and Direct Financing	Operating		Finance
2025		131,121		14,663		1,392
2026		120,552		12,168		1,427
2027		121,061		10,810		1,462
2028		94,345		9,740		1,499
2029		68,214		8,179		127
Thereafter		86,018		59,882		—
Total undiscounted cash flows		621,311		115,442		5,907
Less: Adjustments ⁽¹⁾		91,654		35,800		138
Total ⁽²⁾	$	529,657	$	79,642	$	5,769

⁽¹⁾ Lessor – unearned income and unearned guaranteed residual value; Lessee – imputed interest.

⁽²⁾ Represents lease receivables for lessor arrangements and lease liabilities for lessee arrangements.