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Leases | 9 Months Ended
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Sep. 30, 2023
Leases [Abstract] |
Leases | Leases Peoples has elected certain practical expedients, in accordance with ASC 842 - Leases ("ASC 842"). As a lessor, Peoples has made an accounting policy election to exclude from the consideration in the contract, and from variable payments not included in the consideration in the contract, all sales and other similar taxes assessed. Peoples has also made an accounting policy election to account for each separate lease component of a contract and its associated non-lease components as a single lease component for all leases subject to ASC 842. Lessor Arrangements Leases originated by Peoples, that Peoples has the positive intent and ability to hold for the foreseeable future or to maturity or payoff, are reported at the net investment in the lease, net of initial direct costs, charge-offs and an allowance for credit losses. Peoples considers leases past due if any required principal or interest payments have not been received as of the date such payments were required to be made under the terms of the lease agreement. Upon detection of the reduced ability of a lessee to meet cash flow obligations, a lease is typically charged down to the net realizable value, with the residual balance placed on nonaccrual status. Leases deemed to be uncollectable are charged against the allowance for credit losses, while recoveries of previously charged-off amounts are credited to the allowance for credit losses. Peoples began originating leases with the acquisition of leases from NSL in the second quarter of 2021, and expanded its lease portfolio with the acquisition of Vantage in the first quarter of 2022. The leases acquired from NSL were determined to be sales-type leases, as these leases are structured as dollar buy-out, whereby the lessee pays one dollar at maturity of the lease to purchase the equipment. Originated leases continue to be classified as sales-type leases. These leases do not typically contain residual value guarantees; however, if a lease contains a residual value guarantee, Peoples reduces its residual asset risk by obtaining a security deposit from the lessee. The leases acquired through Vantage were determined to be either sales-type or direct financing leases based primarily on whether they included a dollar buy-out or a fair market value buy-out, respectively. As a lessor, Peoples originates commercial equipment leases either directly to the customer or indirectly through vendor programs. Equipment leases relate to automotive, construction, health care, manufacturing, office, restaurant, information technology and other equipment. These leases include an estimated residual value, which is assessed for impairment as part of the allowance for credit losses. Lease (loss) income noted in the table below includes (i) gains on the early termination of leases, (ii) fees received for referrals, (iii) gains and losses recognized on the sales of residual assets and (iv) syndication income. Additional information regarding Peoples' leases can be found in "Note 4 Loans and Leases." The table below details Peoples' lease income:
| Three Months Ended |  | Nine Months Ended
(Dollars in thousands) | September 30, 2023 |  | September 30, 2022 |  | September 30, 2023 |  | September 30, 2022
Interest and fees on leases (a) | $ | 11,508 |  |  | $ | 9,628 |  |  | $ | 31,426 |  |  | $ | 26,271 |
Lease (loss) income | (66) |  |  | 1,725 |  |  | 2,730 |  |  | 2,931 |
Total lease income | $ | 11,442 |  |  | $ | 11,353 |  |  | $ | 34,156 |  |  | $ | 29,202 |
(a)Included in "Interest and fees on loans and leases" in the Unaudited Consolidated Statements of Operations. For additional information, see "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements. The following table summarizes the net investment in leases, which is included in "Loans and leases, net of deferred fees and costs" on the Unaudited Consolidated Balance Sheets:
(Dollars in thousands) | September 30, 2023 | December 31, 2022
Lease payments receivable, at amortized cost | $ | 444,270 |  | $ | 367,681 |
Estimated residual values | 36,425 |  | 35,045 |
Initial direct costs | 6,173 |  | 4,233 |
Deferred revenue | (84,233) |  | (61,828) |
Net investment in leases | 402,635 |  | 345,131 |
Allowance for credit losses - leases | (11,692) |  | (8,495) |
Net investment in leases, after allowance for credit losses | $ | 390,943 |  | $ | 336,636 |
The following table summarizes the contractual maturities of leases:
(Dollars in thousands) | Balance
Remaining three months ending December 31, 2023 | $ | 28,442 |
Year ending December 31, 2024 | 106,588 |
Year ending December 31, 2025 | 105,727 |
Year ending December 31, 2026 | 82,368 |
Year ending December 31, 2027 | 66,925 |
Thereafter | 54,220 |
Lease payments receivable, at amortized cost | $ | 444,270 |
Lessee Arrangements Peoples leases certain banking facilities and equipment under various agreements with original terms providing for fixed monthly payments over periods generally ranging from two to thirty years. Certain leases may include options to extend or terminate the lease. Only those renewal and termination options which Peoples is reasonably certain of exercising are included in the calculation of the lease liability. Certain leases contain rent escalation clauses calling for rent increases over the term of the lease, which are included in the calculation of the lease liability. At September 30, 2023, Peoples did not have any leases that met the criteria for finance leases. Right of Use ("ROU") assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at the commencement or the remeasurement date of a lease based on the present value of lease payments over the remaining lease term. Operating lease ROU assets include lease payments made at or before the commencement date and initial indirect costs. Operating lease ROU assets exclude lease incentives. Short-term leases of certain facilities and equipment, with lease terms of 12 months or less, are recognized on a straight-line basis over the lease term and do not have an ROU asset or lease liability. The table below details Peoples' lease expense, which is included in "Net occupancy and equipment expense" in the Unaudited Consolidated Statements of Operations:
| Three Months Ended |  | Nine Months Ended
(Dollars in thousands) | September 30, 2023 |  | September 30, 2022 |  | September 30, 2023 |  | September 30, 2022
Operating lease expense | $ | 474 |  |  | $ | 630 |  |  | 2,262 |  |  | 1,893 |
Short-term lease expense | 84 |  |  | 208 |  |  | 174 |  |  | 555 |
Total lease expense | $ | 558 |  |  | $ | 838 |  |  | $ | 2,436 |  |  | $ | 2,448 |
Peoples utilizes an incremental borrowing rate to determine the present value of lease payments for each lease, as the lease agreements do not provide an implicit rate. The estimated incremental borrowing rate reflects a secured rate and is based on the term of the lease and the interest rate environment at the lease commencement or remeasurement date. The following table details the ROU assets, the lease liabilities and other information related to Peoples' operating leases at the dates shown:
(Dollars in thousands) | September 30, 2023 | December 31, 2022
ROU assets: |  |
Other assets | $ | 12,102 |  | $ | 6,825 |
Lease liabilities: |  |
Accrued expenses and other liabilities | $ | 12,490 |  | $ | 7,551 |
Other information: |  |
Weighted-average remaining lease term | 9.3 years | 8.8 years
Weighted-average discount rate | 3.32 | % | 2.70 | %
During the three months ended September 30, 2023 and 2022, Peoples paid cash of $0.8 million and $0.7 million, respectively, for operating leases. During the nine months ended September 30, 2023 and 2022, Peoples paid cash of $2.2 million and $1.9 million, respectively, for operating leases. The following table summarizes the maturity of remaining lease liabilities:
(Dollars in thousands) | Balance
Remaining three months ending December 31, 2023 | $ | 909 |
Year ending December 31, 2024 | 2,551 |
Year ending December 31, 2025 | 1,983 |
Year ending December 31, 2026 | 1,710 |
Year ending December 31, 2027 | 1,555 |
Thereafter | 6,601 |
Total undiscounted lease payments | $ | 15,309 |
Imputed interest | $ | (2,819) |
Total lease liabilities | $ | 12,490 |
Leases | Leases Peoples has elected certain practical expedients, in accordance with ASC 842 - Leases ("ASC 842"). As a lessor, Peoples has made an accounting policy election to exclude from the consideration in the contract, and from variable payments not included in the consideration in the contract, all sales and other similar taxes assessed. Peoples has also made an accounting policy election to account for each separate lease component of a contract and its associated non-lease components as a single lease component for all leases subject to ASC 842. Lessor Arrangements Leases originated by Peoples, that Peoples has the positive intent and ability to hold for the foreseeable future or to maturity or payoff, are reported at the net investment in the lease, net of initial direct costs, charge-offs and an allowance for credit losses. Peoples considers leases past due if any required principal or interest payments have not been received as of the date such payments were required to be made under the terms of the lease agreement. Upon detection of the reduced ability of a lessee to meet cash flow obligations, a lease is typically charged down to the net realizable value, with the residual balance placed on nonaccrual status. Leases deemed to be uncollectable are charged against the allowance for credit losses, while recoveries of previously charged-off amounts are credited to the allowance for credit losses. Peoples began originating leases with the acquisition of leases from NSL in the second quarter of 2021, and expanded its lease portfolio with the acquisition of Vantage in the first quarter of 2022. The leases acquired from NSL were determined to be sales-type leases, as these leases are structured as dollar buy-out, whereby the lessee pays one dollar at maturity of the lease to purchase the equipment. Originated leases continue to be classified as sales-type leases. These leases do not typically contain residual value guarantees; however, if a lease contains a residual value guarantee, Peoples reduces its residual asset risk by obtaining a security deposit from the lessee. The leases acquired through Vantage were determined to be either sales-type or direct financing leases based primarily on whether they included a dollar buy-out or a fair market value buy-out, respectively. As a lessor, Peoples originates commercial equipment leases either directly to the customer or indirectly through vendor programs. Equipment leases relate to automotive, construction, health care, manufacturing, office, restaurant, information technology and other equipment. These leases include an estimated residual value, which is assessed for impairment as part of the allowance for credit losses. Lease (loss) income noted in the table below includes (i) gains on the early termination of leases, (ii) fees received for referrals, (iii) gains and losses recognized on the sales of residual assets and (iv) syndication income. Additional information regarding Peoples' leases can be found in "Note 4 Loans and Leases." The table below details Peoples' lease income:
| Three Months Ended |  | Nine Months Ended
(Dollars in thousands) | September 30, 2023 |  | September 30, 2022 |  | September 30, 2023 |  | September 30, 2022
Interest and fees on leases (a) | $ | 11,508 |  |  | $ | 9,628 |  |  | $ | 31,426 |  |  | $ | 26,271 |
Lease (loss) income | (66) |  |  | 1,725 |  |  | 2,730 |  |  | 2,931 |
Total lease income | $ | 11,442 |  |  | $ | 11,353 |  |  | $ | 34,156 |  |  | $ | 29,202 |
(a)Included in "Interest and fees on loans and leases" in the Unaudited Consolidated Statements of Operations. For additional information, see "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements. The following table summarizes the net investment in leases, which is included in "Loans and leases, net of deferred fees and costs" on the Unaudited Consolidated Balance Sheets:
(Dollars in thousands) | September 30, 2023 | December 31, 2022
Lease payments receivable, at amortized cost | $ | 444,270 |  | $ | 367,681 |
Estimated residual values | 36,425 |  | 35,045 |
Initial direct costs | 6,173 |  | 4,233 |
Deferred revenue | (84,233) |  | (61,828) |
Net investment in leases | 402,635 |  | 345,131 |
Allowance for credit losses - leases | (11,692) |  | (8,495) |
Net investment in leases, after allowance for credit losses | $ | 390,943 |  | $ | 336,636 |
The following table summarizes the contractual maturities of leases:
(Dollars in thousands) | Balance
Remaining three months ending December 31, 2023 | $ | 28,442 |
Year ending December 31, 2024 | 106,588 |
Year ending December 31, 2025 | 105,727 |
Year ending December 31, 2026 | 82,368 |
Year ending December 31, 2027 | 66,925 |
Thereafter | 54,220 |
Lease payments receivable, at amortized cost | $ | 444,270 |
Lessee Arrangements Peoples leases certain banking facilities and equipment under various agreements with original terms providing for fixed monthly payments over periods generally ranging from two to thirty years. Certain leases may include options to extend or terminate the lease. Only those renewal and termination options which Peoples is reasonably certain of exercising are included in the calculation of the lease liability. Certain leases contain rent escalation clauses calling for rent increases over the term of the lease, which are included in the calculation of the lease liability. At September 30, 2023, Peoples did not have any leases that met the criteria for finance leases. Right of Use ("ROU") assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at the commencement or the remeasurement date of a lease based on the present value of lease payments over the remaining lease term. Operating lease ROU assets include lease payments made at or before the commencement date and initial indirect costs. Operating lease ROU assets exclude lease incentives. Short-term leases of certain facilities and equipment, with lease terms of 12 months or less, are recognized on a straight-line basis over the lease term and do not have an ROU asset or lease liability. The table below details Peoples' lease expense, which is included in "Net occupancy and equipment expense" in the Unaudited Consolidated Statements of Operations:
| Three Months Ended |  | Nine Months Ended
(Dollars in thousands) | September 30, 2023 |  | September 30, 2022 |  | September 30, 2023 |  | September 30, 2022
Operating lease expense | $ | 474 |  |  | $ | 630 |  |  | 2,262 |  |  | 1,893 |
Short-term lease expense | 84 |  |  | 208 |  |  | 174 |  |  | 555 |
Total lease expense | $ | 558 |  |  | $ | 838 |  |  | $ | 2,436 |  |  | $ | 2,448 |
Peoples utilizes an incremental borrowing rate to determine the present value of lease payments for each lease, as the lease agreements do not provide an implicit rate. The estimated incremental borrowing rate reflects a secured rate and is based on the term of the lease and the interest rate environment at the lease commencement or remeasurement date. The following table details the ROU assets, the lease liabilities and other information related to Peoples' operating leases at the dates shown:
(Dollars in thousands) | September 30, 2023 | December 31, 2022
ROU assets: |  |
Other assets | $ | 12,102 |  | $ | 6,825 |
Lease liabilities: |  |
Accrued expenses and other liabilities | $ | 12,490 |  | $ | 7,551 |
Other information: |  |
Weighted-average remaining lease term | 9.3 years | 8.8 years
Weighted-average discount rate | 3.32 | % | 2.70 | %
During the three months ended September 30, 2023 and 2022, Peoples paid cash of $0.8 million and $0.7 million, respectively, for operating leases. During the nine months ended September 30, 2023 and 2022, Peoples paid cash of $2.2 million and $1.9 million, respectively, for operating leases. The following table summarizes the maturity of remaining lease liabilities:
(Dollars in thousands) | Balance
Remaining three months ending December 31, 2023 | $ | 909 |
Year ending December 31, 2024 | 2,551 |
Year ending December 31, 2025 | 1,983 |
Year ending December 31, 2026 | 1,710 |
Year ending December 31, 2027 | 1,555 |
Thereafter | 6,601 |
Total undiscounted lease payments | $ | 15,309 |
Imputed interest | $ | (2,819) |
Total lease liabilities | $ | 12,490 |

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-20/tableOfContent + Details
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