Premises and Equipment

12 Months Ended

Dec. 31, 2020

Property, Plant and Equipment [Abstract]

Premises, Equipment and Lease Commitments

Premises and Equipment

Premises and equipment are described as follows:


	Estimated Useful Life	2022		2021
	(dollars in thousands)
Land	Indefinite	$	13,860	$	14,621
Buildings and improvements	10-50 years	70,844		75,149
Operating lease right of use asset	1-25 years	51,499		47,938
Leasehold improvements	5-40 years	37,398		35,909
Furniture and equipment	3-7 years	76,879		73,976
Software	3-7 years	44,439		43,511
Subtotal		294,919		291,104
Less accumulated depreciation and amortization		179,813		170,329
Total premises and equipment, net		$	115,106	$	120,775

Depreciation related to premises and equipment included in noninterest expense for the years ended December 31, 2022, 2021 and 2020 amounted to $9.1 million, $9.9 million and $10.9 million, respectively. Amortization of lease right-of-use assets totaled $3.4 million in 2022, $1.4 million in 2021 and $2.6 million in 2020.

At December 31, 2022, there were no premise and equipment assets considered available for sale. At December 31, 2021, $1.9 million 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.


	2022			2021
	(dollars in thousands)
Balance sheet:
Operating lease asset classified as premises and equipment	$	40,747		$	40,550
Operating lease liability classified as other liabilities	45,149			44,801
Income statement:
Operating lease cost classified as occupancy and equipment expense	$	4,990		$	4,806

Weighted average lease term, in years	13.95			14.11
Weighted average discount rate	3.29		%	3.24		%
Operating cash flows	$	4,838		$	4,753

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, 2022 (dollars in thousands):



For the twelve months ended December 31,
2023	$	4,952
2024	4,807
2025	4,593
2026	4,201
2027	3,956
Thereafter	35,244
Total future minimum lease payments	57,753
Less remaining imputed interest	12,604
Operating lease liability	$	45,149

Rent expense, net of rental income, for all operating leases totaled $4.7 million in 2022, $4.5 million in 2021 and $6.7 million in 2020. 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.