Leases

9 Months Ended

Sep. 30, 2022

Leases [Abstract]

Leases

Leases:

As of September 30, 2022, the Company was the lessee in 59 operating leases and 1 finance lease of certain branch, mortgage and operations locations, of which 45 operating leases and 1 finance lease currently have remaining terms varying from greater than one year to 33 years. Leases with initial terms of less than one year and equipment leases are not included on the consolidated balance sheets as these are insignificant.

Many leases include one or more options to renew, with renewal terms that can extend the lease up to an additional 20 years or more. Certain lease agreements contain provisions to periodically adjust rental payments for inflation. Renewal options that management is reasonably certain to renew and fixed rent escalations are included in the right-of-use asset and lease liability.

As previously disclosed, during the year ended December 31, 2020, the Company entered into an operating lease for a new corporate headquarters building located in downtown Nashville. During the three months ended September 30, 2022, construction of the exterior of the building was completed and the Company took possession of the leased space and began the build-out of the interior space. On August 1, 2022, the Company recorded an ROU asset and operating lease liability of $22,082 and $26,100, respectively, in connection with the initial term of this lease.

Information related to the Company's leases is presented below as of September 30, 2022 and December 31, 2021:

		September 30,			December 31,
	Classification	2022			2021
Right-of-use assets:
Operating leases	Operating lease right-of-use assets	$	61,444		$	41,686
Finance leases	Premises and equipment, net	1,394			1,487
Total right-of-use assets		$	62,838		$	43,173
Lease liabilities:
Operating leases	Operating lease liabilities	$	70,610		$	46,367
Finance leases	Borrowings	1,443			1,518
Total lease liabilities		$	72,053		$	47,885
Weighted average remaining lease term (in years) -     operating		12.2			12.4
Weighted average remaining lease term (in years) -     finance		12.6			13.4
Weighted average discount rate - operating		3.05		%	2.73		%
Weighted average discount rate - finance		1.76		%	1.76		%

The components of total lease expense included in the consolidated statements of income were as follows:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
	Classification	2022		2021		2022		2021
Operating lease costs:
Amortization of right-of-use asset	Occupancy and equipment	$	2,269	$	1,838	$	5,830	$	5,948
Short-term lease cost	Occupancy and equipment	132		107		387		296
Variable lease cost	Occupancy and equipment	215		284		764		760
Lease impairment	Mortgage restructuring expense	—		—		364		—
Gain on lease modifications and     terminations	Occupancy and equipment	—		(14)		(18)		(801)
Finance lease costs:
Interest on lease liabilities	Interest expense on borrowings	7		7		22		21
Amortization of right-of-use asset	Occupancy and equipment	27		28		92		83
Total lease cost		$	2,650	$	2,250	$	7,441	$	6,307

During the nine months ended September 30, 2022, the Company recorded $364 of lease impairment related to vacating two locations associated with the Mortgage restructuring and recorded gains of $18 related to early lease terminations and modifications on other vacated locations. During the three and nine months ended September 30, 2021, the Company recorded $14 and $801, respectively, in gains on lease modifications and terminations on certain vacated locations that were consolidated as a result of previous acquisitions.

The Company does not separate lease and non-lease components and instead elects to account for them as a single lease component. Variable lease cost primarily represents variable payments such as common area maintenance, utilities, and property taxes.

A maturity analysis of operating and finance lease liabilities and a reconciliation of undiscounted cash flows to the total lease liability as of September 30, 2022 is as follows:

	Operating		Finance
	Leases		Lease
Lease payments due:
September 30, 2023	$	7,508	$	29
September 30, 2024	8,257		118
September 30, 2025	7,797		120
September 30, 2026	7,650		121
September 30, 2027	7,449		123
Thereafter	48,089		1,102
Total undiscounted future minimum lease payments	86,750		1,613
Less: imputed interest	(16,140)		(170)
Lease liability	$	70,610	$	1,443

Leases

Leases:

As of September 30, 2022, the Company was the lessee in 59 operating leases and 1 finance lease of certain branch, mortgage and operations locations, of which 45 operating leases and 1 finance lease currently have remaining terms varying from greater than one year to 33 years. Leases with initial terms of less than one year and equipment leases are not included on the consolidated balance sheets as these are insignificant.

Many leases include one or more options to renew, with renewal terms that can extend the lease up to an additional 20 years or more. Certain lease agreements contain provisions to periodically adjust rental payments for inflation. Renewal options that management is reasonably certain to renew and fixed rent escalations are included in the right-of-use asset and lease liability.

As previously disclosed, during the year ended December 31, 2020, the Company entered into an operating lease for a new corporate headquarters building located in downtown Nashville. During the three months ended September 30, 2022, construction of the exterior of the building was completed and the Company took possession of the leased space and began the build-out of the interior space. On August 1, 2022, the Company recorded an ROU asset and operating lease liability of $22,082 and $26,100, respectively, in connection with the initial term of this lease.

Information related to the Company's leases is presented below as of September 30, 2022 and December 31, 2021:

		September 30,			December 31,
	Classification	2022			2021
Right-of-use assets:
Operating leases	Operating lease right-of-use assets	$	61,444		$	41,686
Finance leases	Premises and equipment, net	1,394			1,487
Total right-of-use assets		$	62,838		$	43,173
Lease liabilities:
Operating leases	Operating lease liabilities	$	70,610		$	46,367
Finance leases	Borrowings	1,443			1,518
Total lease liabilities		$	72,053		$	47,885
Weighted average remaining lease term (in years) -     operating		12.2			12.4
Weighted average remaining lease term (in years) -     finance		12.6			13.4
Weighted average discount rate - operating		3.05		%	2.73		%
Weighted average discount rate - finance		1.76		%	1.76		%

The components of total lease expense included in the consolidated statements of income were as follows:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
	Classification	2022		2021		2022		2021
Operating lease costs:
Amortization of right-of-use asset	Occupancy and equipment	$	2,269	$	1,838	$	5,830	$	5,948
Short-term lease cost	Occupancy and equipment	132		107		387		296
Variable lease cost	Occupancy and equipment	215		284		764		760
Lease impairment	Mortgage restructuring expense	—		—		364		—
Gain on lease modifications and     terminations	Occupancy and equipment	—		(14)		(18)		(801)
Finance lease costs:
Interest on lease liabilities	Interest expense on borrowings	7		7		22		21
Amortization of right-of-use asset	Occupancy and equipment	27		28		92		83
Total lease cost		$	2,650	$	2,250	$	7,441	$	6,307

During the nine months ended September 30, 2022, the Company recorded $364 of lease impairment related to vacating two locations associated with the Mortgage restructuring and recorded gains of $18 related to early lease terminations and modifications on other vacated locations. During the three and nine months ended September 30, 2021, the Company recorded $14 and $801, respectively, in gains on lease modifications and terminations on certain vacated locations that were consolidated as a result of previous acquisitions.

The Company does not separate lease and non-lease components and instead elects to account for them as a single lease component. Variable lease cost primarily represents variable payments such as common area maintenance, utilities, and property taxes.

A maturity analysis of operating and finance lease liabilities and a reconciliation of undiscounted cash flows to the total lease liability as of September 30, 2022 is as follows:

	Operating		Finance
	Leases		Lease
Lease payments due:
September 30, 2023	$	7,508	$	29
September 30, 2024	8,257		118
September 30, 2025	7,797		120
September 30, 2026	7,650		121
September 30, 2027	7,449		123
Thereafter	48,089		1,102
Total undiscounted future minimum lease payments	86,750		1,613
Less: imputed interest	(16,140)		(170)
Lease liability	$	70,610	$	1,443