Premises and Equipment

12 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

Premises, Equipment and Lease Commitments

Premises and Equipment

Premises and equipment are described as follows:


	Estimated Useful Life	2021		2020
	(dollars in thousands)
Land	Indefinite	$	14,621	$	15,441
Buildings and improvements	10-50 years	75,149		77,003
Operating lease right of use asset	1-25 years	47,938		48,642
Leasehold improvements	5-40 years	35,909		35,347
Furniture and equipment	3-7 years	73,976		73,150
Software	3-7 years	43,511		41,681
Subtotal		291,104		291,264
Less accumulated depreciation and amortization		170,329		165,747
Total premises and equipment, net		$	120,775	$	125,517

Depreciation related to premises and equipment included in noninterest expense for the years ended December 31, 2021, 2020 and 2019 amounted to $9.9 million, $10.9 million and $10.5 million, respectively. Amortization of lease right-of-use assets totaled $1.4 million in 2021 and $2.6 million in 2020.

At December 31, 2021 and December 31, 2020, $1.9 million and $2.6 million, respectively, in premise and equipment assets were considered available for sale as a result of the 2020 branch consolidation initiative.

Lease Commitments

First Commonwealth has elected to apply certain practical expedients under ASU 2016-02 "Leases" (Topic 842), including (i) to not apply the requirements in the new standard to short-term leases (ii) to not reassess the lease classification for any expired or existing lease (iii) to account for lease and non-lease components separately (iv) to not reassess initial direct costs for any existing leases. The impact of this standard primarily relates to operating leases of certain real estate properties, primarily certain branch and ATM locations and office space. First Commonwealth has no material leasing arrangements for which it is the lessor of property or equipment.

The following table represents the lease costs and other lease information for the years ended December 31.


	2021			2020
	(dollars in thousands)
Balance sheet:
Operating lease asset classified as premises and equipment	$	40,550		$	42,617
Operating lease liability classified as other liabilities	44,801			46,819
Income statement:
Operating lease cost classified as occupancy and equipment expense	$	4,806		$	5,930

Weighted average lease term, in years	14.11			14.83
Weighted average discount rate	3.24		%	3.42		%
Operating cash flows	$	4,753		$	5,979

The ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. First Commonwealth's lease agreements often include one or more options to renew at the Company's discretion. If we consider the renewal option to be reasonably certain, we include the extended term in the calculation of the ROU asset and lease liability.

First Commonwealth uses incremental borrowing rates when calculating the lease liability because the rate implicit in the lease is not readily determinable. The incremental borrowing rate used by First Commonwealth is an amortizing loan rate obtained from the Federal Home Loan Bank ("FHLB") of Pittsburgh. This rate is consistent with a collateralized borrowing rate and is available for terms similar to the lease payment schedules.

The following table reconciles future minimum lease payments due under non-cancelable operating leases (those amounts subject to recognition) to the lease liability as of December 31, 2021 (dollars in thousands):



For the twelve months ended December 31,
2022	$	4,667
2023	4,622
2024	4,481
2025	4,261
2026	3,844
Thereafter	35,207
Total future minimum lease payments	57,082
Less remaining imputed interest	12,281
Operating lease liability	$	44,801

Rent expense, net of rental income, for all operating leases totaled $4.5 million in 2021, $6.7 million in 2020 and $4.9 million in 2019. Rent expense includes amounts related to items that are not included in the determination of lease right-of-use assets including expenses related to short-term leases and non-lease components such as taxes, insurance, and common area maintenance costs.