Premises and Equipment and Lease Commitments

12 Months Ended

Dec. 31, 2020

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, 2020 and 2019 are summarized as follows (in thousands):

	Range of Useful Lives			2020		2019
Land	Not applicable			$	70,140	$	64,814
Buildings	15 years	-	30 years	194,432		185,340
Leasehold improvements	15 years	-	20 years	50,867		45,398
Furniture and equipment	3 years	-	20 years	126,678		109,900
				442,117		405,452
Less: accumulated depreciation and amortization				152,116		131,520
				$	290,001	$	273,932

Depreciation and amortization expense was approximately $22.8 million, $22.1 million, and $21.5 million for the years ended December 31, 2020, 2019 and 2018, 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, 2020 and 2019 (in thousands):

	December 31, 2020		December 31, 2019
Right-of-use assets:
Operating leases	$	83,647	$	79,574
Finance leases	1,770		1,996
Total right-of-use assets	$	85,417	$	81,570
Lease liabilities:
Operating leases	$	87,737	$	83,219
Finance leases	3,001		3,244
Total lease liabilities	$	90,738	$	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 years ended December 31, 2020 and 2019 (in thousands):

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

The weighted average remaining lease term and weighted average discount rate for operating and finance leases at December 31, 2020 and 2019 are as follows:

	December 31, 2020		December 31, 2019
Weighted average remaining lease term
Operating leases	10.37 years		10.75 years
Finance leases	7.84 years		8.84 years
Weighted average discount rate
Operating leases	2.91	%	3.07	%
Finance leases	7.22	%	7.22	%

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

	For the years ended December 31,
	2020		2019
Operating cash flows related to operating leases	$	13,494	$	13,609
Operating cash flows related to finance leases	$	227	$	243
Financing cash flows related to finance leases	$	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, 2020 (in thousands):

	Operating Leases		Finance Leases
2021	$	13,607	$	470
2022	12,413		470
2023	11,582		479
2024	11,506		527
2025	9,247		527
Thereafter	45,701		1,494
Total undiscounted lease payments	104,056		3,967
Less: imputed interest	(16,319)		(966)
Net lease liabilities	$	87,737	$	3,001