Premises and Equipment and Lease Commitments

12 Months Ended

Dec. 31, 2024

Premises and Equipment and Lease Commitments [Abstract]

Premises and Equipment and Lease Commitments

Note 7. Premises and Equipment and Lease Commitments

Premises and equipment at December 31, 2024 and 2023 are summarized as follows (in thousands):


	Range of Useful Lives			2024		2023
Land	Not applicable			$	41,315	$	36,505
Buildings	15 years	-	40 years	116,349		100,862
Leasehold improvements	14 years	-	35 years	80,212		69,506
Furniture and equipment	3 years	-	20 years	186,436		178,913
Construction in process				57,261		13,186
				481,573		398,972
Less: accumulated depreciation and amortization				170,296		142,095
				$	311,277	$	256,877

Depreciation and amortization expense was approximately $35.1 million, $30.2 million, and $25.9 million for the years ended December 31, 2024, 2023 and 2022, 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.

During the year ended December 31, 2023, Pinnacle Bank consummated a sale-leaseback transaction pursuant to which it sold a combined 49 properties to two unaffiliated entities for an aggregate cash purchase price of $198.2 million and concurrently agreed to separately lease each of those properties for an initial term of 14.5 years, with two five (5) year renewal options that Pinnacle Bank may exercise to extend the term of any of the leases.

Right-of-use assets and lease liabilities relating to Pinnacle Financial's operating and finance leases are as follows at December 31, 2024 and 2023 (in thousands):


	December 31, 2024		December 31, 2023
Right-of-use assets:
Operating leases	$	291,543	$	296,272
Finance leases	866		1,092
Total right-of-use assets	$	292,409	$	297,364
Lease liabilities:
Operating leases	$	303,243	$	304,944
Finance leases	1,761		2,146
Total lease liabilities	$	305,004	$	307,090

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, 2024, 2023 and 2022 (in thousands):


	For the years ended December 31,
	2024		2023		2022
Operating lease cost	$	41,248	$	30,913	$	18,292
Short-term lease cost	415		349		401
Finance lease cost:
Interest on lease liabilities	143		167		189
Amortization of right-of-use asset	226		226		226
Sublease income	(1,479)		(1,365)		(1,357)
Net lease cost	$	40,553	$	30,290	$	17,751

The weighted average remaining lease term and weighted average discount rate for operating and finance leases at December 31, 2024 and 2023 are as follows:


	December 31, 2024		December 31, 2023
Weighted average remaining lease term
Operating leases	11.18 years		12.00 years
Finance leases	3.84 years		4.84 years
Weighted average discount rate
Operating leases	4.39	%	4.29	%
Finance leases	7.22	%	7.22	%

Cash flows related to operating and finance leases during the years ended December 31, 2024, 2023 and 2022 were as follows (in thousands):


	For the years ended December 31,
	2024		2023		2022
Operating cash flows related to operating leases	$	38,382	$	28,614	$	16,956
Operating cash flows related to finance leases	$	143	$	167	$	189
Financing cash flows related to finance leases	$	384	$	311	$	281

Future undiscounted lease payments for operating and finance leases with initial terms of more than 12 months are as follows at December 31, 2024 (in thousands):


	Operating Leases		Finance Leases
2025	$	38,089	$	527
2026	36,081		527
2027	34,913		527
2028	34,241		440
2029	33,203		—
Thereafter	213,150		—
Total undiscounted lease payments	389,677		2,021
Less: imputed interest	(86,434)		(260)
Net lease liabilities	$	303,243	$	1,761

In January 2025, Pinnacle Financial's lease in connection with its previously announced headquarters relocation commenced. The lease has an initial term of 15 years, with two ten (10) year renewal options that Pinnacle Financial may exercise to extend the term of the lease. Fixed assets totaling $39.9 million included in construction in process assets as noted above have been reclassified to the leasehold improvements and furniture and equipment assets based on the placed-in-service date of the lease. Upon commencement, Pinnacle Financial recognized approximately $82.0 million in right-of-use assets and $82.1 million in net lease liabilities. The future undiscounted lease payments and net lease liabilities for operating leases with initial terms of more than 12 months, inclusive of the headquarters' lease commencement, are set forth in the following table as if the lease had commenced on December 31, 2024 (in thousands):


	Operating Leases
2025	$	44,279
2026	42,811
2027	41,845
2028	41,381
2029	40,557
Thereafter	299,987
Total undiscounted lease payments	510,860
Less: imputed interest	(125,500)
Net lease liabilities	$	385,360