Premises and Equipment and Lease Commitments

12 Months Ended

Dec. 31, 2019

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, 2019 and 2018 are summarized as follows (in thousands):

	Range of Useful Lives	2019		2018
Land	Not applicable	$	64,814	$	64,898
Buildings	15 to 30 years	185,340		170,829
Leasehold improvements	15 to 20 years	45,398		43,536
Furniture and equipment	3 to 20 years	109,900		100,946
		405,452		380,209
Less: accumulated depreciation and amortization		131,520		114,649
		$	273,932	$	265,560

Depreciation and amortization expense was approximately $22.1 million, $21.5 million, and $13.7 million for the years ended December 31, 2019, 2018 and 2017, 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. 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, 2019 (in thousands):

Right-of-use assets:
Operating leases	$	79,574
Finance leases	1,996
Total right-of-use assets	$	81,570
Lease liabilities:
Operating leases	$	83,219
Finance leases	3,244
Total lease liabilities	$	86,463

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 year ended December 31, 2019 (in thousands):

Operating lease cost	$	13,992
Short-term lease cost	295
Finance lease cost:
Interest on lease liabilities	243
Amortization of right-of-use asset	226
Sublease income	(1,463)
Net lease cost	$	13,293

The weighted average remaining lease term and weighted average discount rate for operating and finance leases at December 31, 2019 are as follows:

Weighted average remaining lease term
Operating leases	10.75 years
Finance leases	8.84 years
Weighted average discount rate
Operating leases	3.07	%
Finance leases	7.22	%

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

Operating cash flows related to operating leases	$	13,609
Operating cash flows related to finance leases	$	243
Financing cash flows related to finance leases	$	226

Future undiscounted lease payments for operating and finance leases with inital terms of more than 12 months are as follows at December 31, 2019 (in thousands):

	Operating Leases		Finance Leases
2020	$	13,070	$	470
2021	12,439		470
2022	10,632		470
2023	9,779		479
2024	9,667		527
Thereafter	44,507		2,021
Total undiscounted lease payments	100,094		4,437
Less: imputed interest	(16,875)		(1,193)
Net lease liabilities	$	83,219	$	3,244