Premises and Equipment and Lease Commitments

12 Months Ended

Dec. 31, 2021

Premises and Equipment and Lease Commitments [Abstract]

Premises and Equipment and Lease Commitments

Note 6. Premises and Equipment and Lease Commitments

Premises and equipment at December 31, 2021 and 2020 are summarized as follows (in thousands):


	Range of Useful Lives			2021		2020
Land	Not applicable			$	70,240	$	70,140
Buildings	15 years	-	30 years	202,255		194,432
Leasehold improvements	15 years	-	20 years	54,922		50,867
Furniture and equipment	3 years	-	20 years	138,766		126,678
				466,183		442,117
Less: accumulated depreciation and amortization				178,001		152,116
				$	288,182	$	290,001

Depreciation and amortization expense was approximately $22.2 million, $22.8 million, and $22.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Pinnacle Financial has entered into various operating leases, primarily for office space and branch facilities. The leases are classified as operating or finance leases at commencement. Right-of-use assets representing the right to use the underlying asset and lease liabilities representing the obligation to make future lease payments are recognized on the balance sheet within other assets and other liabilities. These assets and liabilities are estimated based on the present value of future lease payments discounted using Pinnacle Financial's incremental secured borrowing rates as of the commencement date of the lease. Certain lease agreements contain renewal options which are considered in the determination of the lease term if they are deemed reasonably certain to be exercised. Pinnacle Financial has elected not to recognize leases with an original term of less than 12 months on the balance sheet.

Right-of-use assets and lease liabilities relating to Pinnacle Financial's operating and finance leases are as follows at December 31, 2021 and 2020 (in thousands):


	December 31, 2021		December 31, 2020
Right-of-use assets:
Operating leases	$	92,819	$	83,647
Finance leases	1,544		1,770
Total right-of-use assets	$	94,363	$	85,417
Lease liabilities:
Operating leases	$	97,925	$	87,737
Finance leases	2,739		3,001
Total lease liabilities	$	100,664	$	90,738

The total lease cost related to operating leases and short term leases is recognized on a straight-line basis over the lease term. For finance leases, right-of-use assets are amortized on a straight-line basis over the lease term and interest imputed on the lease liability is recognized using the effective interest method. The components of Pinnacle Financial's total lease cost were as follows for the years ended December 31, 2021, 2020 and 2019 (in thousands):


	For the years ended December 31,
	2021		2020		2019
Operating lease cost	$	15,696	$	13,963	$	13,992
Short-term lease cost	297		354		295
Finance lease cost:
Interest on lease liabilities	208		227		243
Amortization of right-of-use asset	226		226		226
Sublease income	(1,309)		(1,324)		(1,463)
Net lease cost	$	15,118	$	13,446	$	13,293

The weighted average remaining lease term and weighted average discount rate for operating and finance leases at December 31, 2021 and 2020 are as follows:


	December 31, 2021		December 31, 2020
Weighted average remaining lease term
Operating leases	10.00 years		10.37 years
Finance leases	6.84 years		7.84 years
Weighted average discount rate
Operating leases	2.71	%	2.91	%
Finance leases	7.22	%	7.22	%

Cash flows related to operating and finance leases during the years ended December 31, 2021, 2020 and 2019 were as follows (in thousands):


	For the years ended December 31,
	2021		2020		2019
Operating cash flows related to operating leases	$	14,712	$	13,494	$	13,609
Operating cash flows related to finance leases	$	208	$	227	$	243
Financing cash flows related to finance leases	$	261	$	243	$	226

Future undiscounted lease payments for operating and finance leases with initial terms of more than 12 months are as follows at December 31, 2021 (in thousands):


	Operating Leases		Finance Leases
2022	$	14,557	$	470
2023	13,879		479
2024	13,908		527
2025	11,717		527
2026	9,580		527
Thereafter	50,498		967
Total undiscounted lease payments	114,139		3,497
Less: imputed interest	(16,214)		(758)
Net lease liabilities	$	97,925	$	2,739