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Leases

12 Months Ended

Dec. 31, 2024

Note 19—Leases

Our outstanding lease agreements are for real estate properties, including retail branch locations, operations and administration locations and stand-alone ATM locations. We have determined the number and dollar amount of our equipment leases is not material.

As of December 31, 2024 and 2023, we had operating ROU assets of $95.8 million and $100.3 million, respectively, and operating lease liabilities of $103.9 million and $108.3 million, respectively. We maintain operating leases on land and buildings for some of our operating centers, branch facilities and ATM locations. Most leases include one or more options to renew, with renewal terms extending up to 20 years. The exercise of renewal options is based on the sole judgment of management and what they consider to be reasonably certain given the environment today. Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of renewal rate compared to market rates, and the presence of factors that would cause a significant economic penalty to us if the option is not exercised. Leases with an initial term of 12 months or less are not recorded on the balance sheet and instead are recognized in lease expense on a straight-line basis over the lease term.



	Year Ended December 31,
(Dollars in thousands)	2024		2023		2022
Lease Cost Components:
Amortization of ROU assets – finance leases	$	468	$	466	$	466
Interest on lease liabilities – finance leases		33		41		49
Operating lease cost (cost resulting from lease payments)		16,940		17,123		17,782
Short-term lease cost		621		429		820
Variable lease cost (cost excluded from lease payments)		3,242		3,196		2,399
Total lease cost	$	21,304	$	21,255	$	21,516
Supplemental Cash Flow and Other Information Related to Leases:
Finance lease – operating cash flows	$	33	$	41	$	49
Finance lease – financing cash flows		477		449		434
Operating lease – operating cash flows (fixed payments)		17,221		16,710		17,253
Operating lease – operating cash flows (net change asset/liability)		(13,124)		(13,414)		(13,723)
New ROU assets – operating leases		11,134		1,160		12,635
Weighted – average remaining lease term (years) – finance leases		3.44		4.43		5.42
Weighted – average remaining lease term (years) – operating leases		8.46		9.29		10.03
Weighted – average discount rate - finance leases		1.7%		1.7%		1.7%
Weighted – average discount rate - operating leases		3.4%		3.1%		3.0%

Operating lease payments due:
2025	$	16,335
2026		15,824
2027		14,621
2028		13,953
2029		12,576
Thereafter		49,304
Total undiscounted cash flows		122,613
Discount on cash flows		(18,753)
Total operating lease liabilities	$	103,860

As of December 31, 2024, the Company held a small number of finance leases assumed in connection to the CenterState merger completed in 2020. These leases are all real estate leases. Terms and conditions are similar to those real estate operating leases described above. Lease classifications from the acquired institutions were retained. At December 31, 2024, we did not maintain any leases with related parties, and determined that the number and dollar amount of our equipment leases was immaterial. As of December 31, 2024, we had one additional operating leases that has not yet commenced for approximately $28.2 million.

Equipment Lessor

SouthState has an Equipment Finance Group which goes to market through intermediaries. The Equipment Finance Group primarily focuses on serving the construction and utility segments. Lease terms typically range from 24 months to 120 months. At the end of the lease term, the lessee has the option to renew the lease, return the equipment, or purchase the equipment. In the event the equipment is returned, there is a remarketing agreement with the intermediary to sell the equipment. The Equipment Finance Group offers the following lease products: TRAC Leases, Split-TRAC Leases, and FMV Leases. Direct finance equipment leases are included in commercial and industrial loans on the Consolidated Balance Sheets.

The estimated residual values for direct finance leases are established by an approved intermediary who utilizes internally developed analyses, external studies, and/or third-party appraisals to establish a residual position. FMV and Split-TRAC leases have residual risk due to their unguaranteed residual value whereas TRAC leases have a guaranteed residual value. Expected credit losses on direct financing leases and the related estimated residual values are included in the Commercial and Industrial loan segment for the ACL.

The following table summarizes lease receivables and investment in operating leases and their corresponding balance sheet location at December 31, 2024, and December 31, 2023:



	Year Ended December 31,
(Dollars in thousands)	2024		2023
Direct financing leases:
Lease receivables	$	24,584	$	4,839
Guaranteed residual values		1,057		510
Unguaranteed residual values		5,245		501
Initial direct costs		2,640		155
Less: Unearned income		(7,362)		1,165
Total net investment in direct financing leases	$	26,164	$	7,170

The following table summarizes direct financing lease income recorded for the years ended December 31, 2024, and December 31, 2023, and remaining lease payment receivable for each of the next five years:


	Year Ended
	December 31,
	2024		2023
Direct financing lease income
Interest income	$	1,226	$	30

Remaining lease payments receivable:
2025	$	6,109
2026		6,142
2027		6,169
2028		5,140
2029		1,777
Thereafter		304
Total undiscounted lease receivable		25,641
Less: unearned interest income		(7,361)
Net lease receivables	$	18,280

See further discussion in Note 1—Summary of Significant Accounting Policies on page F-21 on accounting for leases.