Quarterly report pursuant to Section 13 or 15(d)

LEASES

v3.23.3
LEASES
9 Months Ended
Sep. 30, 2023
Leases [Abstract]  
LEASES

5. 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 1 month to 122 months. At lease inception the Company estimates the expected residual value of the leased property at the end of the lease term by considering both internal and third-party appraisals. In certain cases, the Company obtains lessee-provided residual value guarantees and third-party residual value insurance to reduce its residual asset risk. At September 30, 2023 and December 31, 2022, the carrying value of residual assets covered by residual value guarantees and residual value insurance was $62.0 million and $44.3 million, respectively. For more information on the Company’s lessor arrangements, refer to Note 1 “Summary of Significant Accounting Policies” in the Company’s 2022 Form 10-K.

​

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

​

​

​

​

​

​

​

​

​

​

    

September 30, 2023

​

​

December 31, 2022

Sales-type and direct financing leases:

​

​

​

​

​

​

​

Lease receivables, net of unearned income and deferred selling profit

​

$

325,556

​

​

$

266,380

Unguaranteed residual values, net of unearned income and deferred selling profit

​

​

16,711

​

​

​

15,159

Total net investment in sales-type and direct financing leases

 

$

342,267

​

​

$

281,539

​

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 23 years. For more information on the Company’s lessee arrangements, refer to Note 1 “Summary of Significant Accounting Policies” in the Company’s 2022 Form 10-K.

​

On September 20, 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. Concurrently, the Bank entered into absolute net lease agreements with the purchaser under which the Bank will lease each property for an initial term of 17 years with specified renewal options. The sale-leaseback transaction resulted in a pre-tax gain for the quarter ended September 30, 2023 of approximately $27.7 million, after transaction-related expenses, included in Other Operating Income in the accompanying Consolidated Statements of Income. 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 Company recorded operating lease ROU assets and corresponding operating lease liabilities of $38.3 million and $38.1 million, respectively, which primarily drove the increases in operating ROU assets and operating lease liabilities at September 30, 2023, compared to December 31, 2022.

​

The tables below provide information about the Company’s lessee lease portfolio and other supplemental lease information (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

September 30, 2023

​

​

​

December 31, 2022

​

​

​

Operating

​

​

Finance

​

​

​

Operating

​

​

Finance

​

ROU assets

​

$

68,807

​

​

$

4,899

​

​

​

$

35,729

​

​

$

5,588

​

Lease liabilities

​

​

75,502

​

​

​

7,369

​

​

​

​

47,696

​

​

​

8,288

​

Lease Term and Discount Rate of Operating leases:

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Weighted-average remaining lease term (years)

 

​

11.66

​

​

​

5.33

​

​

​

​

6.80

​

​

​

6.08

​

Weighted-average discount rate (1)

 

​

6.06

%

​

​

1.17

%

​

​

​

2.91

%

​

​

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.

​

​

​

​

​

​

​

​

​

​

Nine months ended September 30, 

​

 

2023

​

2022

Cash paid for amounts included in measurement of lease liabilities:

​

​

​

​

​

​

Operating Cash Flows from Finance Leases

​

$

68

​

$

79

Operating Cash Flows from Operating Leases

​

​

8,902

​

​

8,514

Financing Cash Flows from Finance Leases

​

​

919

​

​

885

ROU assets obtained in exchange for lease obligations:

​

​

​

​

​

​

Operating leases

​

$

38,318

​

$

1,268

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three months ended September 30, 

​

Nine months ended September 30, 

​

​

​

2023

​

​

2022

​

​

2023

​

​

2022

Net Operating Lease Cost

​

$

2,381

​

$

2,117

 

$

7,291

​

$

6,658

Finance Lease Cost:

​

​

​

​

​

​

​

​

​

​

​

​

Amortization of right-of-use assets

​

​

230

​

​

230

​

​

689

​

​

689

Interest on lease liabilities

​

​

22

​

​

25

​

 

68

​

​

79

Total Lease Cost

​

$

2,633

​

$

2,372

​

$

8,048

​

$

7,426

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The maturities of lessor and lessee arrangements outstanding are presented in the table below (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2023

​

​

Lessor

​

Lessee

​

​

​

Sales-type and Direct Financing

​

Operating

​

Finance

For the remaining three months of 2023

    

$

20,314

​

$

3,536

​

$

337

2024

​

​

84,391

​

​

13,666

​

​

1,358

2025

​

 

73,581

​

​

11,603

​

​

1,392

2026

​

 

62,743

​

​

9,146

​

​

1,427

2027

​

 

50,928

​

​

7,759

​

​

1,462

Thereafter

​

 

76,765

​

​

66,137

​

​

1,627

Total undiscounted cash flows

​

 

368,722

​

​

111,847

​

​

7,603

Less: Adjustments (1)

​

 

43,166

​

​

36,345

​

​

234

Total (2)

​

$

325,556

​

$

75,502

​

$

7,369

​

​

​

​

​

​

​

​

​

​

(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.