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LEASES
 6 Months Ended
Jun. 30, 2024
Leases [Abstract]  
LEASES LEASES
Lessee
Customers has operating leases for its branches, certain LPOs, and administrative offices, with remaining lease terms ranging between six months and nine years. These operating leases comprise substantially all of Customers’ obligations in which Customers is the lessee. These lease agreements typically consist of initial lease terms ranging between one and ten years, with options to renew the leases or extend the term up to ten years at Customers’ sole discretion. Some operating leases include variable lease payments that are based on an index or rate, such as the CPI. Variable lease payments are not included in the liability or ROU asset and are recognized in the period in which the obligation for those payments are incurred. Customers’ operating lease agreements do not contain any material residual value guarantees or material restrictive covenants. Pursuant to these agreements, Customers does not have any commitments that would meet the definition of a finance lease.
As most of Customers’ operating leases do not provide an implicit rate, Customers utilized its incremental borrowing rate when determining the present value of lease payments.
The following table summarizes operating lease ROU assets and operating lease liabilities and their corresponding balance sheet location:
(amounts in thousands)ClassificationJune 30, 2024December 31, 2023
ASSETS
Operating lease ROU assetsOther assets$17,317 $15,644 
LIABILITIES
Operating lease liabilitiesOther liabilities$19,052 $18,048 
The following table summarizes operating lease cost and its corresponding income statement location for the periods presented:
Three Months Ended June 30,Six Months Ended June 30,
(amounts in thousands)Classification2024202320242023
Operating lease cost (1)
Occupancy expenses$1,300 $1,296 $2,485 $2,515 
(1) There were no variable lease costs for the three and six months ended June 30, 2024 and 2023, and sublease income for operating leases was immaterial.
Maturities of non-cancelable operating lease liabilities were as follows at June 30, 2024:
(amounts in thousands)June 30, 2024
2024$2,885 
20254,863 
20263,673 
20273,174 
20282,714 
Thereafter3,762 
Total minimum payments21,071 
Less: interest2,019 
Present value of lease liabilities$19,052 
Customers does not have leases where it is involved with the construction or design of an underlying asset. Cash paid pursuant to the operating lease liabilities was $1.3 million and $2.7 million for the three and six months ended June 30, 2024, respectively. Cash paid pursuant to the operating lease liabilities was $1.4 million and $3.1 million for the three and six months ended June 30, 2023, respectively. These payments were reported as cash flows used in operating activities in the statement of cash flows.
The following table summarizes the weighted average remaining lease term and discount rate for Customers’ operating leases at June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
Weighted average remaining lease term (years)
Operating leases5.1 years
5.6 years
Weighted average discount rate
Operating leases3.67 %3.28 %
Equipment Lessor
Customers’ commercial equipment financing group goes to market through the following origination platforms: vendors, intermediaries, direct and capital markets. The commercial equipment financing group is primarily focused on serving the following industries: transportation, construction (includes crane and utility), marine, franchise, general manufacturing (includes machine tool), helicopter/fixed wing, solar, packaging, plastics and food processing. Lease terms typically range from 24 months to 120 months. The commercial equipment financing group offers the following products: Loans, Capital Lease, PUT, TRAC, Split-TRAC, and FMV. Direct finance equipment leases are included in commercial and industrial loans and leases receivable.
The estimated residual values for direct finance and operating leases are established by utilizing internally developed analyses, external studies, and/or third-party appraisals to establish a residual position. For the direct finance leases, only Customers’ Split-TRAC leases have residual risk and the unguaranteed portions are typically nominal. Expected credit losses on direct financing leases and the related estimated residual values are included in the ACL on loans and leases.
Leased assets under operating leases are reported at amortized cost net of accumulated depreciation, and any impairment charges and are presented in other assets. The depreciation expense of the leased assets is recognized on a straight-line basis over the contractual term of the leases up to the expected residual value. The expected residual value and, accordingly, the monthly depreciation expense, may change throughout the term of the lease. Operating lease rental income for leased assets is recognized in commercial lease income on a straight-line basis over the lease term. Customers periodically reviews its operating leased assets for impairment. An impairment loss is recognized if the carrying amount of the operating leased asset exceeds its fair value and is not recoverable. The carrying amount of operating leased assets is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the lease payments and the estimated residual value upon the eventual disposition of the equipment.
The following table summarizes lease receivables and investment in operating leases and their corresponding balance sheet location at June 30, 2024 and December 31, 2023:
(amounts in thousands)ClassificationJune 30, 2024December 31, 2023
ASSETS
Direct financing leases
Lease receivablesLoans and leases receivable$207,996 $190,559 
Guaranteed residual assetsLoans and leases receivable19,475 15,783 
Unguaranteed residual assetsLoans and leases receivable10,335 10,010 
Deferred initial direct costsLoans and leases receivable1,374 1,213 
Unearned incomeLoans and leases receivable(16,974)(11,891)
Net investment in direct financing leases$222,206 $205,674 
Operating leases
Investment in operating leasesOther assets$278,527 $282,208 
Accumulated depreciationOther assets(81,417)(77,672)
Deferred initial direct costsOther assets1,038 1,192 
Net investment in operating leases198,148 205,728 
Total lease assets$420,354 $411,402 
Maturities of operating and direct financing lease receivables were as follows at June 30, 2024:
(amounts in thousands)Operating leasesDirect financing leases
2024$21,925 $27,880 
202539,817 49,116 
202645,492 41,915 
202732,308 36,872 
202855,224 27,313 
Thereafter30,125 25,244 
Total minimum payments$224,891 208,340 
Less: interest344 
Present value of lease receivables$207,996 
LEASES LEASES
Lessee
Customers has operating leases for its branches, certain LPOs, and administrative offices, with remaining lease terms ranging between six months and nine years. These operating leases comprise substantially all of Customers’ obligations in which Customers is the lessee. These lease agreements typically consist of initial lease terms ranging between one and ten years, with options to renew the leases or extend the term up to ten years at Customers’ sole discretion. Some operating leases include variable lease payments that are based on an index or rate, such as the CPI. Variable lease payments are not included in the liability or ROU asset and are recognized in the period in which the obligation for those payments are incurred. Customers’ operating lease agreements do not contain any material residual value guarantees or material restrictive covenants. Pursuant to these agreements, Customers does not have any commitments that would meet the definition of a finance lease.
As most of Customers’ operating leases do not provide an implicit rate, Customers utilized its incremental borrowing rate when determining the present value of lease payments.
The following table summarizes operating lease ROU assets and operating lease liabilities and their corresponding balance sheet location:
(amounts in thousands)ClassificationJune 30, 2024December 31, 2023
ASSETS
Operating lease ROU assetsOther assets$17,317 $15,644 
LIABILITIES
Operating lease liabilitiesOther liabilities$19,052 $18,048 
The following table summarizes operating lease cost and its corresponding income statement location for the periods presented:
Three Months Ended June 30,Six Months Ended June 30,
(amounts in thousands)Classification2024202320242023
Operating lease cost (1)
Occupancy expenses$1,300 $1,296 $2,485 $2,515 
(1) There were no variable lease costs for the three and six months ended June 30, 2024 and 2023, and sublease income for operating leases was immaterial.
Maturities of non-cancelable operating lease liabilities were as follows at June 30, 2024:
(amounts in thousands)June 30, 2024
2024$2,885 
20254,863 
20263,673 
20273,174 
20282,714 
Thereafter3,762 
Total minimum payments21,071 
Less: interest2,019 
Present value of lease liabilities$19,052 
Customers does not have leases where it is involved with the construction or design of an underlying asset. Cash paid pursuant to the operating lease liabilities was $1.3 million and $2.7 million for the three and six months ended June 30, 2024, respectively. Cash paid pursuant to the operating lease liabilities was $1.4 million and $3.1 million for the three and six months ended June 30, 2023, respectively. These payments were reported as cash flows used in operating activities in the statement of cash flows.
The following table summarizes the weighted average remaining lease term and discount rate for Customers’ operating leases at June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
Weighted average remaining lease term (years)
Operating leases5.1 years
5.6 years
Weighted average discount rate
Operating leases3.67 %3.28 %
Equipment Lessor
Customers’ commercial equipment financing group goes to market through the following origination platforms: vendors, intermediaries, direct and capital markets. The commercial equipment financing group is primarily focused on serving the following industries: transportation, construction (includes crane and utility), marine, franchise, general manufacturing (includes machine tool), helicopter/fixed wing, solar, packaging, plastics and food processing. Lease terms typically range from 24 months to 120 months. The commercial equipment financing group offers the following products: Loans, Capital Lease, PUT, TRAC, Split-TRAC, and FMV. Direct finance equipment leases are included in commercial and industrial loans and leases receivable.
The estimated residual values for direct finance and operating leases are established by utilizing internally developed analyses, external studies, and/or third-party appraisals to establish a residual position. For the direct finance leases, only Customers’ Split-TRAC leases have residual risk and the unguaranteed portions are typically nominal. Expected credit losses on direct financing leases and the related estimated residual values are included in the ACL on loans and leases.
Leased assets under operating leases are reported at amortized cost net of accumulated depreciation, and any impairment charges and are presented in other assets. The depreciation expense of the leased assets is recognized on a straight-line basis over the contractual term of the leases up to the expected residual value. The expected residual value and, accordingly, the monthly depreciation expense, may change throughout the term of the lease. Operating lease rental income for leased assets is recognized in commercial lease income on a straight-line basis over the lease term. Customers periodically reviews its operating leased assets for impairment. An impairment loss is recognized if the carrying amount of the operating leased asset exceeds its fair value and is not recoverable. The carrying amount of operating leased assets is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the lease payments and the estimated residual value upon the eventual disposition of the equipment.
The following table summarizes lease receivables and investment in operating leases and their corresponding balance sheet location at June 30, 2024 and December 31, 2023:
(amounts in thousands)ClassificationJune 30, 2024December 31, 2023
ASSETS
Direct financing leases
Lease receivablesLoans and leases receivable$207,996 $190,559 
Guaranteed residual assetsLoans and leases receivable19,475 15,783 
Unguaranteed residual assetsLoans and leases receivable10,335 10,010 
Deferred initial direct costsLoans and leases receivable1,374 1,213 
Unearned incomeLoans and leases receivable(16,974)(11,891)
Net investment in direct financing leases$222,206 $205,674 
Operating leases
Investment in operating leasesOther assets$278,527 $282,208 
Accumulated depreciationOther assets(81,417)(77,672)
Deferred initial direct costsOther assets1,038 1,192 
Net investment in operating leases198,148 205,728 
Total lease assets$420,354 $411,402 
Maturities of operating and direct financing lease receivables were as follows at June 30, 2024:
(amounts in thousands)Operating leasesDirect financing leases
2024$21,925 $27,880 
202539,817 49,116 
202645,492 41,915 
202732,308 36,872 
202855,224 27,313 
Thereafter30,125 25,244 
Total minimum payments$224,891 208,340 
Less: interest344 
Present value of lease receivables$207,996 
LEASES LEASES
Lessee
Customers has operating leases for its branches, certain LPOs, and administrative offices, with remaining lease terms ranging between six months and nine years. These operating leases comprise substantially all of Customers’ obligations in which Customers is the lessee. These lease agreements typically consist of initial lease terms ranging between one and ten years, with options to renew the leases or extend the term up to ten years at Customers’ sole discretion. Some operating leases include variable lease payments that are based on an index or rate, such as the CPI. Variable lease payments are not included in the liability or ROU asset and are recognized in the period in which the obligation for those payments are incurred. Customers’ operating lease agreements do not contain any material residual value guarantees or material restrictive covenants. Pursuant to these agreements, Customers does not have any commitments that would meet the definition of a finance lease.
As most of Customers’ operating leases do not provide an implicit rate, Customers utilized its incremental borrowing rate when determining the present value of lease payments.
The following table summarizes operating lease ROU assets and operating lease liabilities and their corresponding balance sheet location:
(amounts in thousands)ClassificationJune 30, 2024December 31, 2023
ASSETS
Operating lease ROU assetsOther assets$17,317 $15,644 
LIABILITIES
Operating lease liabilitiesOther liabilities$19,052 $18,048 
The following table summarizes operating lease cost and its corresponding income statement location for the periods presented:
Three Months Ended June 30,Six Months Ended June 30,
(amounts in thousands)Classification2024202320242023
Operating lease cost (1)
Occupancy expenses$1,300 $1,296 $2,485 $2,515 
(1) There were no variable lease costs for the three and six months ended June 30, 2024 and 2023, and sublease income for operating leases was immaterial.
Maturities of non-cancelable operating lease liabilities were as follows at June 30, 2024:
(amounts in thousands)June 30, 2024
2024$2,885 
20254,863 
20263,673 
20273,174 
20282,714 
Thereafter3,762 
Total minimum payments21,071 
Less: interest2,019 
Present value of lease liabilities$19,052 
Customers does not have leases where it is involved with the construction or design of an underlying asset. Cash paid pursuant to the operating lease liabilities was $1.3 million and $2.7 million for the three and six months ended June 30, 2024, respectively. Cash paid pursuant to the operating lease liabilities was $1.4 million and $3.1 million for the three and six months ended June 30, 2023, respectively. These payments were reported as cash flows used in operating activities in the statement of cash flows.
The following table summarizes the weighted average remaining lease term and discount rate for Customers’ operating leases at June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
Weighted average remaining lease term (years)
Operating leases5.1 years
5.6 years
Weighted average discount rate
Operating leases3.67 %3.28 %
Equipment Lessor
Customers’ commercial equipment financing group goes to market through the following origination platforms: vendors, intermediaries, direct and capital markets. The commercial equipment financing group is primarily focused on serving the following industries: transportation, construction (includes crane and utility), marine, franchise, general manufacturing (includes machine tool), helicopter/fixed wing, solar, packaging, plastics and food processing. Lease terms typically range from 24 months to 120 months. The commercial equipment financing group offers the following products: Loans, Capital Lease, PUT, TRAC, Split-TRAC, and FMV. Direct finance equipment leases are included in commercial and industrial loans and leases receivable.
The estimated residual values for direct finance and operating leases are established by utilizing internally developed analyses, external studies, and/or third-party appraisals to establish a residual position. For the direct finance leases, only Customers’ Split-TRAC leases have residual risk and the unguaranteed portions are typically nominal. Expected credit losses on direct financing leases and the related estimated residual values are included in the ACL on loans and leases.
Leased assets under operating leases are reported at amortized cost net of accumulated depreciation, and any impairment charges and are presented in other assets. The depreciation expense of the leased assets is recognized on a straight-line basis over the contractual term of the leases up to the expected residual value. The expected residual value and, accordingly, the monthly depreciation expense, may change throughout the term of the lease. Operating lease rental income for leased assets is recognized in commercial lease income on a straight-line basis over the lease term. Customers periodically reviews its operating leased assets for impairment. An impairment loss is recognized if the carrying amount of the operating leased asset exceeds its fair value and is not recoverable. The carrying amount of operating leased assets is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the lease payments and the estimated residual value upon the eventual disposition of the equipment.
The following table summarizes lease receivables and investment in operating leases and their corresponding balance sheet location at June 30, 2024 and December 31, 2023:
(amounts in thousands)ClassificationJune 30, 2024December 31, 2023
ASSETS
Direct financing leases
Lease receivablesLoans and leases receivable$207,996 $190,559 
Guaranteed residual assetsLoans and leases receivable19,475 15,783 
Unguaranteed residual assetsLoans and leases receivable10,335 10,010 
Deferred initial direct costsLoans and leases receivable1,374 1,213 
Unearned incomeLoans and leases receivable(16,974)(11,891)
Net investment in direct financing leases$222,206 $205,674 
Operating leases
Investment in operating leasesOther assets$278,527 $282,208 
Accumulated depreciationOther assets(81,417)(77,672)
Deferred initial direct costsOther assets1,038 1,192 
Net investment in operating leases198,148 205,728 
Total lease assets$420,354 $411,402 
Maturities of operating and direct financing lease receivables were as follows at June 30, 2024:
(amounts in thousands)Operating leasesDirect financing leases
2024$21,925 $27,880 
202539,817 49,116 
202645,492 41,915 
202732,308 36,872 
202855,224 27,313 
Thereafter30,125 25,244 
Total minimum payments$224,891 208,340 
Less: interest344 
Present value of lease receivables$207,996