Leases

9 Months Ended

Sep. 30, 2024

LEASES

The Corporation has operating leases for certain financial centers, corporate offices and land.

On May 10, 2024, the Bank and Fulton Financial Realty Company, a wholly owned subsidiary of the Corporation, entered into a sale-leaseback agreement for 40 financial center office locations for an aggregate cash purchase price of $55.4 million. The Bank entered into a lease for each of the locations sold in the Sale-Leaseback Transaction for an initial term of 15 years, with the option to extend the term of each for up to three successive terms of up to five years each. During the initial 12 months of the lease terms, the aggregate base rental amount for the properties will be approximately $4.4 million. During the initial lease terms, the base rental amount will increase annually at a rate of 2.25%. The Corporation recorded a pre-tax gain, after deduction of transaction-related expenses, of approximately $20.3 million in connection with the Sale-Leaseback Transaction. The properties are located in Pennsylvania, New Jersey, Delaware and Maryland.

The following table presents the components of lease expense, which is included in net occupancy expense on the consolidated statements of income:


	Three months ended September 30				Nine months ended September 30
	2024		2023		2024		2023
	(dollars in thousands)
Operating lease expense	$	8,822	$	4,755	$	21,519	$	14,347
Variable lease expense	826		887		2,306		2,444
Sublease income	(300)		(289)		(883)		(829)
Total lease expense	$	9,348	$	5,353	$	22,942	$	15,962

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


Operating Leases	Balance Sheet Classification	September 30, 2024			December 31, 2023
		(dollars in thousands)
ROU assets	Other assets	$	135,747		$	88,188
Lease liabilities	Other liabilities	$	145,349		$	95,230
Weighted average remaining lease term		9.21 years			6.5 years
Weighted average discount rate		5.34		%	3.34		%

The discount rate used in determining the lease liability for each individual lease is the Bank's incremental borrowing rate which corresponds with the remaining lease term.

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


	Three months ended September 30				Nine months ended September 30
	2024		2023		2024		2023
	(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities	$	6,153	$	6,354	$	17,425	$	16,124
ROU assets obtained in exchange for lease obligations	11,891		10,447		64,884		19,465

Lease payment obligations for each of the next five years and thereafter, with a reconciliation to the Corporation's lease liabilities were as follows as of September 30, 2024 (dollars in thousands):


Year	Operating Leases
Remaining in 2024	$	6,845
2025	25,113
2026	23,833
2027	21,568
2028	18,344
Thereafter	95,341
Total lease payments	191,044
Less: imputed interest	(45,695)
Present value of lease liabilities	$	145,349

As of September 30, 2024, the Corporation had not entered into any significant leases that have not yet commenced.