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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from ____ to ____
Commission File Number: 001-39309
Pinnacle Financial Partners Inc.
pnfplogoa25.jpg, Inc.
(Exact name of registrant as specified in its charter)
Tennessee 62-1812853
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
150 Third Avenue South, Suite 900Nashville,TN 37201
(Address of principal executive offices) (Zip Code)
(615) 744-3700
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changes since last report)


Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each ClassTrading SymbolName of Exchange on which Registered
Common Stock, par value $1.00PNFPThe Nasdaq Stock Market LLC
Depositary Shares (each representing 1/40th interest in a share of 6.75% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series B)PNFPPThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No     

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for shorter period that the registrant was required to submit such files).  Yes      No     

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.  (Check one):

Large Accelerated Filer                            Accelerated Filer     
Non-accelerated Filer                              Smaller reporting company
(do not check if you are a smaller reporting company)                Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes      No     

As of April 30, 2024 there were 77,221,891 shares of common stock, $1.00 par value per share, issued and outstanding.


Pinnacle Financial Partners, Inc.
Report on Form 10-Q
March 31, 2024

2

FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical fact, included in this report, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words "expect," "anticipate," "intend," "may," "should," "plan," "believe," "seek," "estimate" and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the statements, including, but not limited to: (i) deterioration in the financial condition of borrowers of Pinnacle Bank and its subsidiaries or BHG, including as a result of the negative impact of inflationary pressures and challenging economic conditions on our and BHG's customers and their businesses, resulting in significant increases in loan losses and provisions for those losses and, in the case of BHG, substitutions; (ii) fluctuations or differences in interest rates on loans or deposits from those that Pinnacle Financial is modeling or anticipating, including as a result of Pinnacle Bank's inability to better match deposit rates with the changes in the short-term rate environment, or that affect the yield curve; (iii) the sale of investment securities in a loss position before their value recovers, including as a result of asset liability management strategies or in response to liquidity needs; (iv) adverse conditions in the national or local economies including in Pinnacle Financial's markets throughout Tennessee, North Carolina, South Carolina, Georgia, Alabama, Virginia and Kentucky, particularly in commercial and residential real estate markets; (v) the inability of Pinnacle Financial, or entities in which it has significant investments, like BHG, to maintain the long-term historical growth rate of its, or such entities', loan portfolio; (vi) the ability to grow and retain low-cost core deposits and retain large, uninsured deposits, including during times when Pinnacle Bank is seeking to limit the rates it pays on deposits or uncertainty exists in the financial services sector; (vii) changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (viii) effectiveness of Pinnacle Financial's asset management activities in improving, resolving or liquidating lower-quality assets; (ix) the impact of competition with other financial institutions, including pricing pressures and the resulting impact on Pinnacle Financial’s results, including as a result of the negative impact to net interest margin from rising deposit and other funding costs; (x) the results of regulatory examinations of Pinnacle Financial, Pinnacle Bank or BHG, or companies with whom they do business; (xi) BHG's ability to profitably grow its business and successfully execute on its business plans; (xii) risks of expansion into new geographic or product markets; (xiii) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including goodwill or other intangible assets; (xiv) the ineffectiveness of Pinnacle Bank's hedging strategies, or the unexpected counterparty failure or hedge failure of the underlying hedges; (xv) reduced ability to attract additional financial advisors (or failure of such advisors to cause their clients to switch to Pinnacle Bank), to retain financial advisors (including as a result of the competitive environment for associates) or otherwise to attract customers from other financial institutions; (xvi) deterioration in the valuation of other real estate owned and increased expenses associated therewith; (xvii) inability to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies, required capital maintenance levels or regulatory requests or directives, particularly if Pinnacle Bank's level of applicable commercial real estate loans were to exceed percentage levels of total capital in guidelines recommended by its regulators; (xviii) approval of the declaration of any dividend by Pinnacle Financial's board of directors; (xix) the vulnerability of Pinnacle Bank's network and online banking portals, and the systems of parties with whom Pinnacle Bank contracts, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches; (xx) the possibility of increased compliance and operational costs as a result of increased regulatory oversight (including by the Consumer Financial Protection Bureau), including oversight of companies in which Pinnacle Financial or Pinnacle Bank have significant investments, like BHG, and the development of additional banking products for Pinnacle Bank's corporate and consumer clients; (xxi) Pinnacle Financial's ability to identify potential candidates for, consummate, and achieve synergies from, potential future acquisitions; (xxii) difficulties and delays in integrating acquired businesses or fully realizing costs savings and other benefits from acquisitions; (xxiii) the risks associated with Pinnacle Bank being a minority investor in BHG, including the risk that the owners of a majority of the equity interests in BHG decide to sell the company or all or a portion of their ownership interests in BHG (triggering a similar sale by Pinnacle Bank); (xxiv) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, like BHG, including regulatory or legislative developments; (xxv) fluctuations in the valuations of Pinnacle Financial's equity investments and the ultimate success of such investments; (xxvi) the availability of and access to capital; (xxvii) adverse results (including costs, fines, reputational harm, inability to obtain necessary approvals and/or other negative effects) from current or future litigation, regulatory examinations or other legal and/or regulatory actions involving Pinnacle Financial, Pinnacle Bank or BHG; and (xxviii) general competitive, economic, political and market conditions. Additional factors which could affect the forward looking statements can be found in Pinnacle Financial's Annual Report on Form 10-K for the year ended December 31, 2023, subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC and available on the SEC's website at http://www.sec.gov. Pinnacle Financial disclaims any obligation to update or revise any forward-looking statements contained in this report, which speak only as of the date hereof, whether as a result of new information, future events or otherwise.
3

Item 1.Part I. Financial Information

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands, except per share data)March 31, 2024December 31, 2023
ASSETS  
Cash and noninterest-bearing due from banks$175,826 $228,620 
Restricted cash 58,285 86,873 
Interest-bearing due from banks2,472,250 1,914,856 
Cash and cash equivalents2,706,361 2,230,349 
Securities purchased with agreement to resell554,022 558,009 
Securities available-for-sale, at fair value4,378,718 4,317,530 
Securities held-to-maturity (fair value of $2.7 billion and $2.8 billion, net of allowance for credit losses of $1.7 million and $1.7 million at March 31, 2024 and Dec. 31, 2023, respectively)2,993,129 3,006,357 
Consumer loans held-for-sale104,586 104,217 
Commercial loans held-for-sale6,068 9,280 
Loans33,162,873 32,676,091 
Less allowance for credit losses(371,337)(353,055)
Loans, net32,791,536 32,323,036 
Premises and equipment, net265,579 256,877 
Equity method investment457,657 445,223 
Accrued interest receivable219,887 217,491 
Goodwill1,846,973 1,846,973 
Core deposits and other intangible assets25,881 27,465 
Other real estate owned2,766 3,937 
Other assets2,541,033 2,613,139 
Total assets$48,894,196 $47,959,883 
LIABILITIES AND SHAREHOLDERS' EQUITY  
Deposits:  
Noninterest-bearing$7,958,739 $7,906,502 
Interest-bearing12,178,471 11,365,349 
Savings and money market accounts14,761,573 14,427,206 
Time4,503,242 4,840,753 
Total deposits39,402,025 38,539,810 
Securities sold under agreements to repurchase201,418 209,489 
Federal Home Loan Bank advances2,116,417 2,138,169 
Subordinated debt and other borrowings425,159 424,938 
Accrued interest payable58,069 66,967 
Other liabilities587,257 544,722 
Total liabilities42,790,345 41,924,095 
Shareholders' equity:  
Preferred stock, no par value, 10.0 million shares authorized; 225,000 shares non-cumulative perpetual preferred stock, Series B, liquidation preference $225.0 million, issued and outstanding at March 31, 2024 and Dec. 31, 2023, respectively217,126 217,126 
Common stock, par value $1.00; 180.0 million shares authorized; 77.2 million and 76.8 million shares issued and outstanding at March 31, 2024 and Dec. 31, 2023, respectively77,219 76,767 
Additional paid-in capital3,100,817 3,109,493 
Retained earnings2,887,804 2,784,927 
Accumulated other comprehensive loss, net of taxes(179,115)(152,525)
Total shareholders' equity6,103,851 6,035,788 
Total liabilities and shareholders' equity$48,894,196 $47,959,883 
See accompanying notes to consolidated financial statements (unaudited).
4

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(dollars in thousands, except per share data)Three months ended
March 31,
 20242023
Interest income:
Loans, including fees$541,199 $431,902 
Securities:
Taxable44,470 29,358 
Tax-exempt24,600 23,802 
Federal funds sold and other40,214 20,977 
Total interest income650,483 506,039 
Interest expense:
Deposits300,968 176,589 
Securities sold under agreements to repurchase1,399 595 
Federal Home Loan Bank advances and other borrowings30,082 16,624 
Total interest expense332,449 193,808 
Net interest income318,034 312,231 
Provision for credit losses34,497 18,767 
Net interest income after provision for credit losses283,537 293,464 
Noninterest income:
Service charges on deposit accounts13,439 11,718 
Investment services14,751 11,595 
Insurance sales commissions3,852 4,464 
Gain on mortgage loans sold, net2,879 2,053 
Trust fees7,415 6,429 
Income from equity method investment16,035 19,079 
Gain on sale of fixed assets58 135 
Other noninterest income51,674 34,056 
Total noninterest income110,103 89,529 
Noninterest expense:
Salaries and employee benefits146,010 135,708 
Equipment and occupancy39,646 30,353 
Other real estate expense, net84 99 
Marketing and other business development6,125 5,942 
Postage and supplies2,771 2,819 
Amortization of intangibles1,584 1,794 
Other noninterest expense46,145 35,012 
Total noninterest expense242,365 211,727 
Income before income taxes151,275 171,266 
Income tax expense27,331 33,995 
Net income123,944 137,271 
Preferred stock dividends(3,798)(3,798)
Net income available to common shareholders$120,146 $133,473 
Per share information:
Basic net income per common share$1.58 $1.76 
Diluted net income per common share$1.57 $1.76 
Weighted average common shares outstanding:
Basic76,278,453 75,921,282 
Diluted76,428,885 76,042,328 

See accompanying notes to consolidated financial statements (unaudited).
5

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

(dollars in thousands)Three months ended
March 31,
 20242023
Net income$123,944 $137,271 
Other comprehensive gain (loss), net of tax:
Change in fair value on available-for-sale securities, net of tax(3,103)37,446 
Change in fair value of cash flow hedges, net of tax(19,646)11,978 
Accretion of net unrealized gains on securities transferred from available-for-sale to held-to-maturity, net of tax(1,369)(2,950)
Net gain on cash flow hedges reclassified from other comprehensive income into net income, net of tax(2,472)(2,476)
Total other comprehensive gain (loss), net of tax(26,590)43,998 
Total comprehensive income$97,354 $181,269 

See accompanying notes to consolidated financial statements (unaudited).
6

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(dollars and shares in thousands)Preferred
Stock
 Amount
Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comp. Income (Loss), netTotal Shareholders' Equity
 SharesAmounts
Balance at December 31, 2022$217,126 76,454 $76,454 $3,074,867 $2,341,706 $(190,761)$5,519,392 
Exercise of employee common stock options & related tax benefits— 40 40 920 — — 960 
Preferred dividends paid ($16.88 per share)— — — — (3,798)— (3,798)
Common dividends paid ($0.22 per share)— — — — (17,173)— (17,173)
Issuance of restricted common shares, net of forfeitures— 193 193 (193)— —  
Restricted shares withheld for taxes & related tax benefits— (41)(41)(3,035)— — (3,076)
Issuance of common stock pursuant to restricted stock unit (RSU) and performance stock unit (PSU) agreements, net of shares withheld for taxes & related tax benefits— 93 93 (3,738)— — (3,645)
Compensation expense for restricted share awards, RSUs and PSUs — — — 10,199 — — 10,199 
Net income— — — — 137,271 — 137,271 
Other comprehensive income— — — — — 43,998 43,998 
Balance at March 31, 2023$217,126 76,739 $76,739 $3,079,020 $2,458,006 $(146,763)$5,684,128 

 Preferred Stock
 Amount
Common Stock Accumulated Other Comp. Income (Loss), netTotal Shareholders' Equity
 SharesAmountsAdditional Paid-in CapitalRetained Earnings
Balance at December 31, 2023$217,126 76,767 $76,767 $3,109,493 $2,784,927 $(152,525)$6,035,788 
Preferred dividends paid ($16.88 per share) — — — — (3,798)— (3,798)
Common dividends paid ($0.22 per share)— — — — (17,269)— (17,269)
Issuance of restricted common shares, net of forfeitures— 190 190 (190)— —  
Restricted shares withheld for taxes & related tax benefits— (49)(49)(4,088)— — (4,137)
Issuance of common stock pursuant to RSU and PSU agreements, net of shares withheld for taxes & related tax benefits— 311 311 (14,738)— — (14,427)
Compensation expense for restricted share awards, RSUs and PSUs— — — 10,340 — — 10,340 
Net income— — — — 123,944 — 123,944 
Other comprehensive loss— — — — — (26,590)(26,590)
Balance at March 31, 2024$217,126 77,219 $77,219 $3,100,817 $2,887,804 $(179,115)$6,103,851 

See accompanying notes to consolidated financial statements (unaudited).
7

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)Three months ended
March 31,
 20242023
Operating activities:  
Net income$123,944 $137,271 
Adjustments to reconcile net income to net cash provided by operating activities:  
Net amortization/accretion of premium/discount on securities14,030 15,110 
Depreciation, amortization and accretion23,096 20,429 
Provision for credit losses34,497 18,767 
Gain on mortgage loans sold, net(2,879)(2,053)
Gain on other equity investments, net(2,882)(2,360)
Stock-based compensation expense10,340 10,199 
Deferred tax expense10,209 20,690 
Losses on dispositions of other real estate and other investments56 47 
Income from equity method investment(16,035)(19,079)
  Dividends received from equity method investment3,601 23,961 
Excess tax benefit from stock compensation(2,414)(277)
Gain on commercial loans sold, net(186)(53)
Commercial loans held for sale originated(51,031)(106,007)
Commercial loans held for sale sold54,429 104,066 
Consumer loans held for sale originated(466,061)(299,238)
Consumer loans held for sale sold468,570 284,770 
Decrease (increase) in other assets(34,471)44,525 
Increase in other liabilities30,470 109,102 
Net cash provided by operating activities197,283 359,870 
Investing activities:  
Activities in securities available-for-sale:  
Purchases(165,236)(223,495)
Maturities, prepayments and calls39,236 29,216 
Activities in securities held-to-maturity:  
Maturities, prepayments and calls5,917 17,883 
Net decrease in securities purchased under agreements to resell3,987 3,404 
Increase in loans, net(505,746)(1,266,114)
Purchases of software, premises and equipment(17,316)(35,513)
Proceeds from sales of software, premises and equipment129 418 
Proceeds from sale of other real estate1,549 253 
Proceeds from bank owned life insurance settlements1,622  
Proceeds from bank owned life insurance surrender141,308  
Purchase of FHLB stock, net(11,420)(37,065)
Increase in other investments, net(29,730)(52,148)
Net cash used in investing activities(535,700)(1,563,161)
Financing activities:  
Net increase in deposits862,224 1,217,323 
Net decrease in securities sold under agreements to repurchase(8,071)(45,133)
Federal Home Loan Bank: Advances450,000 2,175,000 
Federal Home Loan Bank: Repayments/maturities(450,000)(475,000)
Principal payments of finance lease obligation(93)(73)
Issuance of common stock pursuant to RSA, RSU and PSU agreements, net of shares withheld for taxes(14,427)(3,645)
Exercise of common stock options, net of shares surrendered for taxes(4,137)(2,116)
Common stock dividends paid(17,269)(17,173)
Preferred stock dividends paid(3,798)(3,798)
Net cash provided by financing activities814,429 2,845,385 
Net increase in cash, cash equivalents, and restricted cash476,012 1,642,094 
Cash, cash equivalents, and restricted cash, beginning of period2,230,349 1,177,382 
Cash, cash equivalents, and restricted cash, end of period$2,706,361 $2,819,476 
See accompanying notes to consolidated financial statements (unaudited).
8

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Summary of Significant Accounting Policies

Nature of Business — Pinnacle Financial Partners, Inc. (Pinnacle Financial) is a financial holding company whose primary business is conducted by its wholly-owned subsidiary, Pinnacle Bank. Pinnacle Bank is a commercial bank headquartered in Nashville, Tennessee. Pinnacle Financial completed its acquisitions of CapitalMark Bank & Trust (CapitalMark), Magna Bank (Magna), Avenue Financial Holdings, Inc. (Avenue) and BNC Bancorp (BNC) on July 31, 2015, September 1, 2015, July 1, 2016 and June 16, 2017, respectively. Pinnacle Bank completed its acquisitions of Advocate Capital, Inc. (Advocate Capital) and JB&B Capital, LLC (JB&B) on July 2, 2019 and March 1, 2022, respectively. Pinnacle Bank also holds a 49% interest in Bankers Healthcare Group, LLC (BHG), a company that primarily serves as a full-service commercial loan provider to healthcare providers and other skilled professionals for business purposes but also makes consumer loans for various purposes. Pinnacle Bank provides a full range of banking services, including investment, mortgage, insurance, and comprehensive wealth management services, in several primarily urban markets and their surrounding communities.

Basis of Presentation — The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles (U.S. GAAP). All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods covered by the report have been included. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes appearing in Pinnacle Financial's Annual Report on Form 10-K for the year ended December 31, 2023 (2023 10-K).

These unaudited consolidated financial statements include the accounts of Pinnacle Financial and its wholly-owned subsidiaries. Certain statutory trust affiliates of Pinnacle Financial, as noted in Note 11. Other Borrowings, are included in these unaudited consolidated financial statements pursuant to the equity method of accounting. Significant intercompany transactions and accounts are eliminated in consolidation.

Use of Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term include the determination of the allowance for credit losses and determination of any impairment of goodwill or intangible assets. It is reasonably possible Pinnacle Financial's estimate of the allowance for credit losses and determination of impairment of intangible assets could change as a result of the uncertainty in current macroeconomic conditions. The resulting change in these estimates could be material to Pinnacle Financial's consolidated financial statements.

Mortgage Servicing Rights On March 31, 2024, Pinnacle Financial recognized a mortgage servicing asset totaling $11.8 million related to a commercial mortgage loan portfolio. Upon the sale of these commercial loans, the rights to service loans (MSRs) are capitalized and represent the fair value of future net servicing fees from servicing activities associated with these commercial mortgage loans. Pinnacle Financial has elected to account for this class of MSRs under the fair value measurement method. Under this method, capitalized MSRs will be recorded in other assets in the accompanying consolidated balance sheet with changes in the fair value of the MSRs for each period presented recorded in other noninterest income in the accompanying consolidated statement of income.

MSRs are recorded at fair value utilizing a number of assumptions, including prepayment speeds, interest rates, discount rates and other economic factors. Changes in the underlying assumptions could materially affect the fair value of MSRs. The value of servicing rights is initially measured using a discounted cash flow model. All servicing rights capitalized have involved the retention of servicing rights only; Pinnacle Financial does not retain residual interest, "first loss" obligations, or other similar on-going financial interests in the loans it sells to third parties, nor has Pinnacle Financial participated in any securitizations with any special purpose entities with respect to these MSRs.

Except for recovery of amounts invested in acquiring servicing rights, servicing mortgage loans for others does not generally impose significant financial risks to the servicer. There are, however, certain investors for whom servicing does involve some risk of loss. For example, servicing Federal Housing Administration insured or Veterans Administration guaranteed loans can result in the
9

servicer advancing principal and interest payments for delinquent borrowers, or incurring a shortfall in the total amount of principal collected under certain foreclosure circumstances.

Cash Flow Information — Supplemental cash flow information addressing certain cash and noncash transactions for the three months ended March 31, 2024 and 2023 was as follows (in thousands):
 For the three months ended
March 31,
 20242023
Cash Transactions:  
Interest paid$341,042 $181,254 
Income taxes paid, net1,216 5,121 
Operating lease payments9,142 4,700
Noncash Transactions:  
Loans charged-off to the allowance for credit losses20,832 14,022 
Loans foreclosed upon and transferred to other real estate owned435 150 
Right-of-use asset recognized during the period in exchange for lease obligations5,673 3,603 

Income Per Common Share — Basic net income per common share (EPS) is computed by dividing net income available to common shareholders by the weighted average common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted. The difference between basic and diluted weighted average common shares outstanding is attributable to common stock options, restricted share awards, and restricted share unit awards, including those with performance-based vesting provisions. The dilutive effect of outstanding options, restricted share awards, and restricted share unit awards is reflected in diluted EPS by application of the treasury stock method.

The following is a summary of the basic and diluted net income per common share calculations for the three months ended March 31, 2024 and 2023 (in thousands, except per share data):
 Three months ended
March 31,
 20242023
Basic net income per common share calculation:
Numerator - Net income available to common shareholders
$120,146 $133,473 
Denominator - Weighted average common shares outstanding
76,278 75,921 
Basic net income per common share$1.58 $1.76 
Diluted net income per common share calculation:
Numerator - Net income available to common shareholders
$120,146 $133,473 
Denominator - Weighted average common shares outstanding
76,278 75,921 
Dilutive common shares contingently issuable151 121 
Weighted average diluted common shares outstanding76,429 76,042 
Diluted net income per common share$1.57 $1.76 


10

Recently Adopted Accounting Pronouncements  In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and has issued subsequent amendments thereto, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance was initially effective for all entities as of March 12, 2020 through December 31, 2022. In December 2022, the FASB issued an update to Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting with Accounting Standards Update 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which updated the effective date to be March 12, 2020 through December 31, 2024. Pinnacle Financial implemented a transition plan to identify and convert its loans and other financial instruments, including certain indebtedness, with attributes that are either directly or indirectly influenced by LIBOR. Pinnacle Financial has moved the substantially all of its LIBOR-based loans to its preferred replacement index, a Secured Overnight Financing Rate (SOFR) based index as of March 31, 2024. For Pinnacle Financial's currently outstanding LIBOR-based loans, the timing and manner in which each customer's interest rate transitions to a replacement index will vary on a case-by-case basis and should occur at the next repricing date for these loans.

In June 2022, the FASB issued Accounting Standards Update 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies the guidance in ASC 820 when measuring the fair value of equity securities subject to contractual restrictions that prohibit the sale of an equity security. This update also requires specific disclosures related to these types of securities. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. Pinnacle Financial adopted ASU 2022-03 on January 1, 2024 and it did not have a material impact on Pinnacle Financial's accounting or disclosures.

In March 2023, the FASB issued Accounting Standards Update 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, which permits the use of the proportional amortization method of accounting for tax equity investments if certain conditions are met. A reporting entity makes the accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity or individual investment level. The amendments require specific disclosures that must be applied to all investments that generate tax credits and other income tax benefits from a tax credit program for which the entity has elected to apply the proportional amortization method. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. Pinnacle Financial adopted ASU 2023-02 on January 1, 2024 and it did not have a material impact on Pinnacle Financial's accounting or disclosures.

Newly Issued Not Yet Effective Accounting Standards — In December 2023, the FASB issued Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which amends the guidance for income tax disclosures to include certain required disclosures related to tax rate reconciliations, including certain categories of expense requiring disclosure, income taxes paid, including disclosure of taxes paid disaggregated by nation, state, and foreign taxes, and other disclosures for disaggregation of income before income tax expense (or benefit) and income tax expense (or benefit) by domestic and foreign allocation. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024. Early adoption is permitted. An entity should apply ASU 2023-09 on a prospective basis once adopted with retrospective application permitted. Pinnacle Financial is assessing ASU 2023-09 and its potential impact on its accounting and disclosures.

Other than those pronouncements discussed above and those which have been recently adopted, Pinnacle Financial does not believe there were any other recently issued accounting pronouncements that may materially impact its consolidated financial statements.

Subsequent Events — ASC Topic 855, Subsequent Events, establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. Pinnacle Financial evaluated all events or transactions that occurred after March 31, 2024 through the date of the issued financial statements with no subsequent events being noted as of the date of this filing.



11

Note 2. Equity method investment

A summary of BHG's financial position as of March 31, 2024 and December 31, 2023 and results of operations as of and for the three months ended March 31, 2024 and 2023, were as follows (in thousands):
 As of
 March 31, 2024December 31, 2023
Assets$3,948,225 $4,304,835 
Liabilities3,369,034 3,749,821 
Equity interests579,191 555,014 
Total liabilities and equity$3,948,225 $4,304,835 
 For the three months ended
March 31,
 20242023
Revenues$277,260 $301,951 
Net income$32,803 $46,643 

At March 31, 2024, technology, trade name and customer relationship intangibles associated with Pinnacle Bank's investment in BHG, net of related amortization, totaled $5.9 million compared to $6.0 million as of December 31, 2023. Amortization expense of $59,000 was included for the three months ended March 31, 2024 compared to $87,000 for the same period in the prior year. Accretion income of $39,000 was included in the three months ended March 31, 2024 compared to $95,000 for the same period in the prior year.

During the three months ended March 31, 2024, Pinnacle Bank received dividends of $3.6 million from BHG compared to $24.0 million received during the three months ended March 31, 2023. Earnings from BHG are included in Pinnacle Financial's consolidated tax return. Profits from intercompany transactions are eliminated. During the three months ended March 31, 2024 and 2023, Pinnacle Bank purchased no loans from BHG. At March 31, 2024 and December 31, 2023, there were $245.8 million and $263.0 million, respectively, of BHG joint venture program loans held by Pinnacle Bank. These loans were purchased from BHG by Pinnacle Bank at par whereby BHG and Pinnacle Bank share proportionately in the credit risk of the acquired loans based on the rate on the loan and the rate of the purchase. The yield on this portfolio to Pinnacle Bank is anticipated to be between 4.50% and 6.00% per annum.

Note 3.  Securities

The amortized cost and fair value of securities available-for-sale and held-to-maturity at March 31, 2024 and December 31, 2023 are summarized as follows (in thousands):
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
March 31, 2024:    
Securities available-for-sale:    
U.S. Treasury securities$877,149 $21 $4,379 $872,791 
U.S. Government agency securities316,289 20 27,476 288,833 
Mortgage-backed securities1,095,839 544 126,171 970,212 
State and municipal securities1,620,208 26,568 53,993 1,592,783 
Asset-backed securities230,109 452 8,893 221,668 
Corporate notes and other474,229 52 41,850 432,431 
 $4,613,823 $27,657 $262,762 $4,378,718 
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 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
March 31, 2024:    
Securities held-to-maturity:    
U.S. Treasury securities$90,199 $ $3,415 $86,784 
U.S. Government agency securities364,898  20,355 344,543 
Mortgage-backed securities378,228 175 39,134 339,269 
State and municipal securities1,878,776 2,783 180,516 1,701,043 
Asset-backed securities197,511 49 12,429 185,131 
Corporate notes and other85,225  8,936 76,289 
 $2,994,837 $3,007 $264,785 $2,733,059 
Allowance for credit losses - securities held-to-maturity(1,708)
Securities held-to-maturity, net of allowance for credit losses$2,993,129 
December 31, 2023:    
Securities available-for-sale:    
U.S. Treasury securities$907,990 $2 $14,580 $893,412 
U.S. Government agency securities284,607  21,877 262,730 
Mortgage-backed securities1,071,963 444 125,017 947,390 
State and municipal securities1,604,874 26,129 45,108 1,585,895 
Asset-backed securities201,577 338 10,280 191,635 
Corporate notes and other477,761 69 41,362 436,468 
 $4,548,772 $26,982 258,224 $4,317,530 
Securities held-to-maturity:    
U.S Treasury securities$90,309 $ $3,840 $86,469 
U.S. Government agency securities364,769  19,187 345,582 
Mortgage-backed securities382,100 637 34,900 347,837 
State and municipal securities1,886,459 6,079 159,027 1,733,511 
Asset-backed securities198,418  14,228 184,190 
Corporate notes86,009  8,414 77,595 
$3,008,064 $6,716 $239,596 $2,775,184 
Allowance for credit losses - securities held-to-maturity(1,707)
Securities held-to-maturity, net of allowance for credit losses$3,006,357 
 
During the quarters ended March 31, 2022, March 31, 2020 and September 30, 2018, Pinnacle Financial transferred, at fair value, $1.1 billion, $873.6 million and $179.8 million, respectively, of securities from the available-for-sale portfolio to the held-to-maturity portfolio. The related net unrealized after tax losses of $1.5 million, net unrealized after tax gains of $69.0 million and net unrealized after tax losses of $2.2 million, respectively, on these transferred securities remained in accumulated other comprehensive income (loss) and are being amortized over the remaining life of the transferred securities, offsetting the related amortization of discount or premium on the transferred securities. No gains or losses were recognized at the time of the transfer. At March 31, 2024, approximately $2.0 billion of securities within Pinnacle Financial's investment portfolio were pledged to secure either public funds and other deposits or securities sold under agreements to repurchase. At March 31, 2024, repurchase agreements comprised of secured borrowings totaled $201.4 million and were secured by $201.4 million of pledged U.S. government agency securities, mortgage-backed securities, municipal securities, asset-backed securities and corporate notes. As the fair value of securities pledged to secure repurchase agreements may decline, Pinnacle Financial regularly evaluates its need to pledge additional securities to the customers with whom it has entered into the repurchase agreements for the customers to remain adequately secured.


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The amortized cost and fair value of debt securities as of March 31, 2024 by contractual maturity is shown below. Actual maturities may differ from contractual maturities of mortgage- and asset-backed securities since the mortgages and assets underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories in the following summary (in thousands):
 Available-for-saleHeld-to-maturity
March 31, 2024:Amortized
Cost
Fair
Value
Amortized
 Cost
Fair
Value
Due in one year or less$27,863 $29,143 $95,418 $92,840 
Due in one year to five years241,765 236,003 372,318 347,867 
Due in five years to ten years506,600 462,247 91,872 84,791 
Due after ten years2,511,647 2,459,445 1,859,490 1,683,161 
Mortgage-backed securities1,095,839 970,212 378,228 339,269 
Asset-backed securities230,109 221,668 197,511 185,131 
 $4,613,823 $4,378,718 $2,994,837 $2,733,059 

At March 31, 2024 and December 31, 2023, the following available-for-sale securities had unrealized losses. The table below classifies these investments according to the term of the unrealized losses of less than twelve months or twelve months or longer (in thousands):
 Investments with an Unrealized Loss of
less than 12 months
Investments with an Unrealized Loss of
12 months or longer
Total Investments with an
Unrealized Loss
 Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized
Losses
At March 31, 2024      
U.S. Treasury securities$669,265 $3,780 $130,101 $599 $799,366 $4,379 
U.S. Government agency securities1,428 13 286,532 27,463 287,960 27,476 
Mortgage-backed securities43,474 615 799,688 125,556 843,162 126,171 
State and municipal securities254,269 2,053 500,627 51,940 754,896 53,993 
Asset-backed securities39,732 91 120,109 8,802 159,841 8,893 
Corporate notes26,183 1,099 375,259 40,751 401,442 41,850 
Total temporarily-impaired securities$1,034,351 $7,651 $2,212,316 $255,111 $3,246,667 $262,762 
At December 31, 2023      
U.S. Treasury securities$693,621 $11,651 $192,500 $2,929 $886,121 $14,580 
U.S. Government agency securities14,989 11 247,648 21,866 262,637 21,877 
Mortgage-backed securities72,907 1,518 828,251 123,499 901,158 125,017 
State and municipal securities185,108 908 449,212 44,200 634,320 45,108 
Asset-backed securities42,207 254 122,469 10,026 164,676 10,280 
Corporate notes12,679 7 403,882 41,355 416,561 41,362 
Total temporarily-impaired securities$1,021,511 $14,349 $2,243,962 $243,875 $3,265,473 $258,224 

The applicable dates for determining when available-for-sale securities were in an unrealized loss position were March 31, 2024 and December 31, 2023. As such, it is possible that an available-for-sale security had a market value less than its amortized cost on other days during the twelve-month periods ended March 31, 2024 and December 31, 2023, but is not in the "Investments with an Unrealized Loss of less than 12 months" category above.

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As shown in the tables above, at March 31, 2024, Pinnacle Financial had approximately $262.8 million in unrealized losses on approximately $3.2 billion of available-for-sale securities. For any securities classified as available-for-sale that are in an unrealized loss position at the balance sheet date, Pinnacle Financial assesses whether or not it intends to sell the security, or more likely than not will be required to sell the security, before recovery of its amortized cost basis which would require a write-down to fair value through net income. Because Pinnacle Financial currently does not intend to sell those available-for-sale securities that have an unrealized loss at March 31, 2024, and it is not more-likely-than-not that Pinnacle Financial will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, Pinnacle Financial has determined that no write-down is necessary. In addition, Pinnacle Financial evaluates whether any portion of the decline in fair value of available-for-sale securities is the result of credit deterioration, which would require the recognition of an allowance for credit losses. Such evaluations consider the extent to which the amortized cost of the security exceeds its fair value, changes in credit ratings and any other known adverse conditions related to the specific security. The unrealized losses associated with available-for-sale securities at March 31, 2024 are driven by changes in interest rates and are not due to the credit quality of the securities, and accordingly, no allowance for credit losses is considered necessary related to available-for-sale securities at March 31, 2024. These securities will continue to be monitored as a part of Pinnacle Financial's ongoing evaluation of credit quality. Management evaluates the financial performance of the issuers on a quarterly basis to determine if it is probable that the issuers can make all contractual principal and interest payments.

The allowance for credit losses on held-to-maturity securities is measured on a collective basis by major security type. Pinnacle Financial has a zero loss expectation for U.S. treasury securities in addition to U.S. Government agency securities and mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, and accordingly, no allowance for credit losses is estimated for these securities. Credit losses on held-to-maturity state and municipal securities and corporate notes and other securities are estimated using third-party probability of default and loss given default models driven primarily by macroeconomic factors over a reasonable and supportable period of twenty-four months with an eight month reversion to average loss factors. At both March 31, 2024 and December 31, 2023, the estimated allowance for credit losses on these held-to-maturity securities was $1.7 million.

Pinnacle Financial utilizes bond credit ratings assigned by third party ratings agencies to monitor the credit quality of debt securities held-to-maturity. At March 31, 2024, all debt securities classified as held-to-maturity were rated A or higher by the ratings agencies. Updated credit ratings are obtained as they become available from the ratings agencies.

Periodically, available-for-sale securities may be sold or the composition of the portfolio realigned to improve yields, quality or marketability, or to implement changes in investment or asset/liability strategy, including maintaining collateral requirements and raising funds for liquidity purposes or preparing for anticipated changes in market interest rates. Additionally, if an available-for-sale security loses its investment grade or tax-exempt status, the underlying credit support is terminated or collection otherwise becomes uncertain based on factors known to management, Pinnacle Financial will consider selling the security, but will review each security on a case-by-case basis as these factors become known. During the three months ended March 31, 2024 and 2023, no available-for-sale securities were sold.

Pinnacle Financial has entered into various fair value hedging transactions to mitigate the impact of changing interest rates on the fair values of available-for-sale securities. See Note 8. Derivative Instruments for disclosure of the gains and losses recognized on derivative instruments and the cumulative fair value hedging adjustments to the carrying amount of the hedged securities.

Note 4. Loans and Allowance for Credit Losses

For financial reporting purposes, Pinnacle Financial classifies its loan portfolio based on the underlying collateral utilized to secure each loan. This classification is consistent with those utilized in the Quarterly Report of Condition and Income filed by Pinnacle Bank with the Federal Deposit Insurance Corporation (FDIC).

Pinnacle Financial uses the following loan categories for presentation of loan balances and the related allowance for credit losses on loans:
Owner occupied commercial real estate mortgage loans - Owner occupied commercial real estate mortgage loans are secured by commercial office buildings, industrial buildings, warehouses or retail buildings where the owner of the building occupies the property. For such loans, repayment is largely dependent upon the operation of the borrower's business.
Non-owner occupied commercial real estate loans - These loans represent investment real estate loans secured by office buildings, industrial buildings, warehouses, retail buildings, and multifamily residential housing. Repayment is primarily dependent on lease income generated from the underlying collateral.
Consumer real estate mortgage loans - Consumer real estate mortgage consists primarily of loans secured by 1-4 family residential properties, including home equity lines of credit. Repayment is primarily dependent on the personal cash flow of the borrower.
15

Construction and land development loans - Construction and land development loans include loans where the repayment is dependent on the successful completion and eventual sale, refinance or operation of the related real estate project. Construction and land development loans include 1-4 family construction projects and commercial construction endeavors such as warehouses, apartments, office and retail space and land acquisition and development.
Commercial and industrial loans - Commercial and industrial loans include loans to business enterprises issued for commercial, industrial and/or other professional purposes. These loans are generally secured by equipment, inventory, and accounts receivable of the borrower and repayment is primarily dependent on business cash flows.
Consumer and other loans - Consumer and other loans include all loans issued to individuals not included in the consumer real estate mortgage classification. Examples of consumer and other loans are automobile loans, consumer credit cards and loans to finance education, among others. Many consumer loans are unsecured. Repayment is primarily dependent on the personal cash flow of the borrower.

Loans at March 31, 2024 and December 31, 2023 were as follows (in thousands):
March 31, 2024December 31, 2023
Commercial real estate:
Owner occupied$4,044,973 $4,044,896
Non-owner occupied8,063,642 7,535,494
Consumer real estate – mortgage4,828,416 4,851,531
Construction and land development3,818,334 4,041,081
Commercial and industrial11,893,198 11,666,691
Consumer and other514,310 536,398
Subtotal$33,162,873 $32,676,091 
Allowance for credit losses(371,337)(353,055)
Loans, net$32,791,536 $32,323,036 

Commercial loans receive risk ratings assigned by a financial advisor subject to validation by Pinnacle Financial's independent loan review department. Risk ratings are categorized as pass, special mention, substandard, substandard-nonaccrual or doubtful-nonaccrual. Pass rated loans include multiple ratings categories representing varying degrees of risk attributes that are less than those of the other defined risk categories further described below. Pinnacle Financial believes its categories follow those used by Pinnacle Bank's primary regulators. At March 31, 2024, approximately 79.6% of Pinnacle Financial's loan portfolio was analyzed as a commercial loan type with a specifically assigned risk rating. Consumer loans and small business loans are generally not assigned an individual risk rating but are evaluated as either accrual or nonaccrual based on the performance of the individual loans. However, certain consumer real estate-mortgage loans and certain consumer and other loans receive a specific risk rating due to the loan proceeds being used for commercial purposes even though the collateral may be of a consumer loan nature. Consumer loans that have been placed on nonaccrual but have not otherwise been assigned a risk rating are believed by management to share risk characteristics with loans rated substandard-nonaccrual and have been presented as such in Pinnacle Financial's risk rating disclosures.
 
Risk ratings are subject to continual review by a financial advisor and a senior credit officer. At least annually, Pinnacle Financial's credit procedures require that every risk rated loan of $1.5 million or more be subject to a formal credit risk review process. Each loan's risk rating is also subject to review by Pinnacle Financial's independent loan review department, which reviews a substantial portion of Pinnacle Financial's risk rated portfolio annually. Included in the coverage are independent reviews of loans in targeted higher-risk portfolio segments such as certain commercial and industrial loans, land loans and/or loan types in certain geographies.

Following are the definitions of the risk rating categories used by Pinnacle Financial. Pass rated loans include all credits other than those included within these categories:

Special mention loans have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in Pinnacle Financial's credit position at some future date.
Substandard loans are inadequately protected by the current net worth and financial capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize collection of the debt. Substandard loans are characterized by the distinct possibility that Pinnacle Financial could sustain some loss if the deficiencies are not corrected.
Substandard-nonaccrual loans are substandard loans that have been placed on nonaccrual status.
16

Doubtful-nonaccrual loans have all the characteristics of substandard-nonaccrual loans with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

The following tables present loan balances classified within each risk rating category by primary loan type and year of origination or most recent renewal as of March 31, 2024 and December 31, 2023, as well as the gross loan charge-offs by primary loan type and year of origination or most recent renewal for the three months ended March 31, 2024 (in thousands):
20242023202220212020PriorRevolving LoansTotal
March 31, 2024
Commercial real estate - owner occupied
Pass$125,532 $777,221 $1,095,086 $836,473 $475,646 $570,092 $61,145 $3,941,195 
Special Mention10,785 1,534 28,271 7,954 17,863 13,292  79,699 
Substandard (1)
  9,275 3,244 83 770  13,372 
Substandard-nonaccrual 6,331 553 1,833 1,083 907  10,707 
Doubtful-nonaccrual        
Total Commercial real estate - owner occupied$136,317