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, 2022

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: 000-31225

Pinnacle Financial Partners Inc.

, 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 900	Nashville,	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)

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 ☒    

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class	Trading Symbol	Name of Exchange on which Registered
Common Stock, par value $1.00	PNFP	The 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)	PNFPP	The Nasdaq Stock Market LLC

As of April 30, 2022 there were 76,385,427 shares of common stock, $1.00 par value per share, issued and outstanding.

Pinnacle Financial Partners, Inc.

Report on Form 10-Q

March 31, 2022

TABLE OF CONTENTS	Page No.
PART I – Financial Information:	4
Item 1. Consolidated Financial Statements (Unaudited)	4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3. Quantitative and Qualitative Disclosures about Market Risk	56
Item 4. Controls and Procedures	56
PART II – Other Information:	56
Item 1. Legal Proceedings	57
Item 1A. Risk Factors	57
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3. Defaults Upon Senior Securities	57
Item 4. Mine Safety Disclosures	57
Item 5. Other Information	57
Item 6. Exhibits	57
Signatures	59

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 Bankers Healthcare Group, LLC (BHG) 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 effects of new outbreaks of COVID-19, including actions taken by governmental officials to curb the spread of the virus, and the resulting impact on general economic and financial market conditions and on Pinnacle Financial's and its customers' business, results of operations, asset quality and financial condition; (iv) further public acceptance of the vaccines that were developed against the virus as well as the decisions of governmental agencies with respect to vaccines including recommendations related to booster shots and requirements (including those of state, federal and local governments that may conflict with one another) that seek to mandate or in some cases prohibit mandates that individuals receive or employers require that their employees receive the vaccine; (v) those vaccines' efficacy against the virus, including new variants; (vi) 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; (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 compression to net interest margin; (x) adverse conditions in the national or local economies including in Pinnacle Financial's markets throughout Tennessee, North Carolina, South Carolina, Georgia, Alabama and Virginia, particularly in commercial and residential real estate markets, including the negative impact of inflationary pressures on our customers and their businesses; (xi) the results of regulatory examinations; (xii) Pinnacle Financial's ability to identify potential candidates for, consummate, and achieve synergies from, potential future acquisitions; (xiii) difficulties and delays in integrating acquired businesses or fully realizing costs savings and other benefits from acquisitions; (xiv) BHG's ability to profitably grow its business and successfully execute on its business plans; (xv) risks of expansion into new geographic or product markets; (xvi) the ability to grow and retain low-cost core deposits and retain large, uninsured deposits, including during times when Pinnacle Bank is seeking to lower rates it pays on deposits; (xvii) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including goodwill or other intangible assets; (xviii) the ineffectiveness of Pinnacle Bank's hedging strategies, or the unexpected counterparty failure or hedge failure of the underlying hedges; (xix) 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; (xx) deterioration in the valuation of other real estate owned and increased expenses associated therewith; (xxi) 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; (xxii) approval of the declaration of any dividend by Pinnacle Financial's board of directors; (xxiii) 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; (xxiv) 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; (xxv) the risks associated with Pinnacle Financial and 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 Financial and Pinnacle Bank) if not prohibited from doing so by Pinnacle Financial or Pinnacle Bank; (xxvi) the possibility of increased personal or corporate tax rates and the resulting reduction in our and our customers' businesses as a result of any such increases; (xxvii) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, like BHG, including regulatory or legislative developments; (xxviii) the availability of and access to capital; (xxix) 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; and (xxx) 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, 2021 and subsequently filed 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, 2022		December 31, 2021
ASSETS
Cash and noninterest-bearing due from banks	$	187,093	$	188,287
Restricted cash	29,680		82,505
Interest-bearing due from banks	3,103,008		3,830,747
Federal funds sold and other	—		—
Cash and cash equivalents	3,319,781		4,101,539
Securities purchased with agreement to resell	1,332,753		1,000,000
Securities available-for-sale, at fair value	3,569,723		4,914,194
Securities held-to-maturity (fair value of $2.4 billion and $1.2 billion, net of allowance for credit losses of $1.1 million and $161 at March 31, 2022 and Dec. 31, 2021, respectively)	2,566,386		1,155,958
Consumer loans held-for-sale	67,224		45,806
Commercial loans held-for-sale	35,383		17,685
Loans	24,499,022		23,414,262
Less allowance for credit losses	(261,618)		(263,233)
Loans, net	24,237,404		23,151,029
Premises and equipment, net	296,779		288,182
Equity method investment	382,256		360,833
Accrued interest receivable	95,147		98,813
Goodwill	1,850,951		1,819,811
Core deposits and other intangible assets	31,997		33,819
Other real estate owned	8,237		8,537
Other assets	1,606,357		1,473,193
Total assets	$	39,400,378	$	38,469,399
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing	$	10,986,194	$	10,461,071
Interest-bearing	6,838,659		6,530,015
Savings and money market accounts	12,416,101		12,179,663
Time	2,054,860		2,133,784
Total deposits	32,295,814		31,304,533
Securities sold under agreements to repurchase	219,530		152,559
Federal Home Loan Bank advances	888,870		888,681
Subordinated debt and other borrowings	423,319		423,172
Accrued interest payable	8,575		12,504
Other liabilities	283,320		377,343
Total liabilities	34,119,428		33,158,792
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, 2022 and Dec. 31, 2021, respectively	217,126		217,126
Common stock, par value $1.00; 180.0 million shares authorized; 76.4 million and 76.1 million shares issued and outstanding at March 31, 2022 and Dec. 31, 2021, respectively	76,377		76,143
Additional paid-in capital	3,045,914		3,045,802
Retained earnings	1,972,686		1,864,350
Accumulated other comprehensive income (loss), net of taxes	(31,153)		107,186
Total shareholders' equity	5,280,950		5,310,607
Total liabilities and shareholders' equity	$	39,400,378	$	38,469,399

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,
	2022		2021
Interest income:
Loans, including fees	$	227,047	$	227,372
Securities:
Taxable	11,048		7,728
Tax-exempt	17,446		15,498
Federal funds sold and other	3,076		1,319
Total interest income	258,617		251,917
Interest expense:
Deposits	10,250		17,468
Securities sold under agreements to repurchase	56		72
Federal Home Loan Bank advances and other borrowings	8,836		11,507
Total interest expense	19,142		29,047
Net interest income	239,475		222,870
Provision for credit losses	2,720		7,235
Net interest income after provision for credit losses	236,755		215,635
Noninterest income:
Service charges on deposit accounts	11,030		8,307
Investment services	10,691		8,191
Insurance sales commissions	4,036		3,225
Gain on mortgage loans sold, net	4,066		13,666
Investment losses on sales, net	(61)		—
Trust fees	5,973		4,687
Income from equity method investment	33,655		28,950
Other noninterest income	34,106		25,683
Total noninterest income	103,496		92,709
Noninterest expense:
Salaries and employee benefits	121,852		102,728
Equipment and occupancy	25,536		23,220
Other real estate (income) expense, net	105		(13)
Marketing and other business development	3,777		2,349
Postage and supplies	2,371		1,806
Amortization of intangibles	1,871		2,206
Other noninterest expense	27,149		22,400
Total noninterest expense	182,661		154,696
Income before income taxes	157,590		153,648
Income tax expense	28,480		28,220
Net income	129,110		125,428
Preferred stock dividends	(3,798)		(3,798)
Net income available to common shareholders	$	125,312	$	121,630
Per share information:
Basic net income per common share	$	1.66	$	1.61
Diluted net income per common share	$	1.65	$	1.61
Weighted average common shares outstanding:
Basic	75,654,986		75,372,883
Diluted	75,930,372		75,657,149

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,
	2022		2021
Net income	$	129,110	$	125,428
Other comprehensive income (loss), net of tax:
Change in fair value on available-for-sale securities, net of tax	(134,895)		(33,372)
Change in fair value of cash flow hedges, net of tax	—		(17,742)
Accretion of net unrealized gains on securities transferred from available-for-sale to held-to-maturity, net of tax	(980)		(1,691)
Net (gain) loss on cash flow hedges reclassified from other comprehensive income into net income, net of tax	(2,509)		504
Net loss on sale of investment securities reclassified from other comprehensive income into net income, net of tax	45		—
Total other comprehensive loss, net of tax	(138,339)		(52,301)
Total comprehensive income (loss)	$	(9,229)	$	73,127

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 Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comp. Income (Loss), net		Total Shareholders' Equity
			Shares	Amounts
Balance at December 31, 2020	$	217,126	75,850	$	75,850	$	3,028,063	$	1,407,723	$	175,849	$	4,904,611
Exercise of employee common stock options & related tax benefits	—		13	13		291		—		—		304
Preferred dividends paid ($16.88 per share)	—		—	—		—		(3,798)		—		(3,798)
Common dividends paid ($0.18 per share)	—		—	—		—		(13,902)		—		(13,902)
Issuance of restricted common shares, net of forfeitures	—		172	172		(172)		—		—		—
Restricted shares withheld for taxes & related tax benefits	—		(34)	(34)		(2,422)		—		—		(2,456)
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	—		87	87		(3,848)				—		(3,761)
Compensation expense for restricted shares & performance stock units	—		—	—		5,399		—		—		5,399
Net income	—		—	—		—		125,428		—		125,428
Other comprehensive loss	—		—	—		—		—		(52,301)		(52,301)
Balance at March 31, 2021	$	217,126	76,088	$	76,088	$	3,027,311	$	1,515,451	$	123,548	$	4,959,524

Balance at December 31, 2021	$	217,126	76,143	$	76,143	$	3,045,802	$	1,864,350	$	107,186	$	5,310,607
Exercise of employee common stock options & related tax benefits	—		6	6		124		—		—		130
Preferred dividends paid ($16.88 per share)	—		—	—		—		(3,798)		—		(3,798)
Common dividends paid ($0.22 per share)	—		—	—		—		(16,976)		—		(16,976)
Issuance of restricted common shares, net of forfeitures	—		158	158		(158)		—		—		—
Restricted shares withheld for taxes & related tax benefits	—		(35)	(35)		(3,736)		—		—		(3,771)
Issuance of common stock pursuant to RSU and PSU agreements, net of shares withheld for taxes & related tax benefits	—		105	105		(5,566)		—		—		(5,461)
Compensation expense for restricted shares & performance stock units	—		—	—		9,448		—		—		9,448
Net income	—		—	—		—		129,110		—		129,110
Other comprehensive loss	—		—	—		—		—		(138,339)		(138,339)
Balance at March 31, 2022	$	217,126	76,377	$	76,377	$	3,045,914	$	1,972,686	$	(31,153)	$	5,280,950

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,
	2022		2021
Operating activities:
Net income	$	129,110	$	125,428
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization/accretion of premium/discount on securities	16,048		12,195
Depreciation, amortization and accretion	14,367		14,049
Provision for credit losses	2,720		7,235
Gain on mortgage loans sold, net	(4,066)		(13,666)
Investment losses on sales, net	61		—
Gain on other equity investments, net	(1,710)		(3,440)
Stock-based compensation expense	9,448		5,399
Deferred tax expense	15,680		7,537
Gains on dispositions of other real estate and other investments	(20)		(132)
Gain on remeasurement of previously held noncontrolling interest	(5,500)		—
Income from equity method investment	(33,655)		(28,950)
Dividends received from equity method investment	12,232		9,993
Excess tax benefit from stock compensation	(2,639)		(1,565)
Gain on commercial loans sold, net	(488)		(1,184)
Commercial loans held for sale originated	(111,411)		(115,154)
Commercial loans held for sale sold	94,201		134,997
Consumer loans held for sale originated	(417,668)		(640,024)
Consumer loans held for sale sold	400,316		655,743
Decrease in other assets	33,554		70,174
Decrease in other liabilities	(98,465)		(118,902)
Net cash provided by operating activities	52,115		119,733
Investing activities:
Activities in securities available-for-sale:
Purchases	(45,579)		(302,867)
Sales	2,866		—
Maturities, prepayments and calls	93,330		126,841
Activities in securities held-to-maturity:
Purchases	(374,043)		—
Maturities, prepayments and calls	15,391		9,653
Increase in securities purchased under agreements to resell	(332,753)		(450,000)
Increase in loans, net	(1,062,733)		(672,239)
Purchases of software, premises and equipment	(10,072)		(5,704)
Proceeds from sales of software, premises and equipment	172		—
Proceeds from sale of other real estate	319		1,980
Purchase of bank owned life insurance policies	(75,000)		—
Proceeds from sale of FHLB stock	—		7,883
Acquisition, net of cash acquired	(30,415)		—
Increase in other investments	(18,777)		(17,016)
Net cash used in investing activities	(1,837,294)		(1,301,469)
Financing activities:
Net increase in deposits	995,940		587,418
Net increase in securities sold under agreements to repurchase	66,971		43,954
Federal Home Loan Bank: Repayments/maturities	—		(200,000)
Repayments of other borrowings	(29,547)		—
Principal payments of finance lease obligation	(67)		(64)
Issuance of common stock pursuant to RSU and PSU agreements, net of shares withheld for taxes	(5,461)		(3,761)
Exercise of common stock options, net of shares surrendered for taxes	(3,641)		(2,152)
Common stock dividends paid	(16,976)		(13,902)
Preferred stock dividends paid	(3,798)		(3,798)
Net cash provided by financing activities	1,003,421		407,695
Net decrease in cash, cash equivalents, and restricted cash	(781,758)		(774,041)
Cash, cash equivalents, and restricted cash, beginning of period	4,101,539		3,961,449
Cash, cash equivalents, and restricted cash, end of period	$	3,319,781	$	3,187,408

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), BNC Bancorp (BNC) and Advocate Capital, Inc. (Advocate Capital) on July 31, 2015, September 1, 2015, July 1, 2016, June 16, 2017 and July 2, 2019, respectively. Pinnacle Financial and Pinnacle Bank also collectively hold a 49% interest in Bankers Healthcare Group, LLC (BHG), a company that primarily serves as a full-service commercial loan provider to healthcare and other professional practices 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 its 15 primarily urban markets across the Southeast.

On March 1, 2022, Pinnacle Bank acquired the remaining 80% of the outstanding membership interests of JB&B Capital, LLC (JB&B) for a cash price of $32.0 million. JB&B is a commercial equipment leasing business headquartered in Knoxville, TN. Pinnacle Bank had previously acquired 20% of JB&B in 2017. Pinnacle Financial accounted for the acquisition of JB&B under the acquisition method in accordance with ASC Topic 805. Accordingly, the purchase price is allocated to the fair value of the assets acquired and liabilities assumed as of the date of the acquisition. Determining the fair value of assets and liabilities, particularly illiquid assets and liabilities, is a complicated process involving significant judgment regarding estimates and assumptions used to calculate estimated fair value. Fair value adjustments based on updated estimates could materially affect the goodwill recorded on the JB&B acquisition. At the acquisition date, JB&B's net assets were initially recorded at a fair value of $8.3 million, consisting mainly of leases receivable. JB&B's $29.5 million of indebtedness was also paid off in connection with consummation of the acquisition. The preexisting noncontrolling interest of JB&B held by Pinnacle Bank was remeasured at a fair value of $8.0 million on the acquisition date resulting in a gain on remeasurement of $5.5 million that was recorded in other noninterest income during the three months ended March 31, 2022. The purchase price allocations for the acquisition of JB&B are preliminary and will be finalized upon the receipt of final valuations on certain assets and liabilities.

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, 2021 (2021 10-K).

These 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 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. There have been no significant changes to Pinnacle Financial's significant accounting policies as disclosed in the 2021 10-K.

9

Cash Flow Information — Supplemental cash flow information addressing certain cash and noncash transactions for the three months ended March 31, 2022 and 2021 was as follows (in thousands):

	For the three months ended March 31,
	2022		2021
Cash Transactions:
Interest paid	$	22,772	$	38,362
Income taxes paid, net	625		433
Operating lease payments	3,819		3,516
Noncash Transactions:
Loans charged-off to the allowance for credit losses	6,512		14,274
Loans foreclosed upon and transferred to other real estate owned	—		139
Available-for-sale securities transferred to held-to-maturity portfolio	1,059,737		—
Right-of-use asset recognized during the period in exchange for lease obligations	1,528		531

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, 2022 and 2021 (in thousands, except per share data):

	Three months ended March 31,
	2022		2021
Basic net income per common share calculation:
Numerator - Net income available to common shareholders	$	125,312	$	121,630
Denominator - Weighted average common shares outstanding	75,655		75,373
Basic net income per common share	$	1.66	$	1.61
Diluted net income per common share calculation:
Numerator - Net income available to common shareholders	$	125,312	$	121,630
Denominator - Weighted average common shares outstanding	75,655		75,373
Dilutive common shares contingently issuable	275		284
Weighted average diluted common shares outstanding	75,930		75,657
Diluted net income per common share	$	1.65	$	1.61

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 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 is effective for all entities as of March 12, 2020 through December 31, 2022. Pinnacle Financial is implementing a transition plan to identify and modify its loans and other financial instruments, including certain indebtedness, with attributes that are either directly or indirectly influenced by LIBOR. Pinnacle Financial intends to discontinue originating LIBOR-based loans during 2022 and have begun negotiating loans primarily using our preferred replacement index, the Secured Overnight Financing Rate ("SOFR"). For the Company's currently outstanding LIBOR-based loans, the timing and manner in which each customer's contract transitions to SOFR will vary on a case-by-case basis. Pinnacle Financial expects to complete all loan transitions by June 30, 2023.

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Newly Issued Not Yet Effective Accounting Standards — In March 2022, the FASB issued Accounting Standards Update 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method, which allows multiple hedged layers to be designated for a single closed portfolio of financial assets resulting in a greater portion of the interest rate risk in the closed portfolio being eligible to be hedged. The amendments allow the flexibility to use different types of derivatives or combinations of derivatives to better align with risk management strategies. Furthermore, among other things, the amendments clarify that basis adjustments of hedged items in the closed portfolio should be allocated at the portfolio level and not the individual assets within the portfolio. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted, including early adoption in an interim period. An entity should apply ASU 2022-01 prospectively. If an entity elects to early adopt ASU 2022-01 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. Pinnacle Financial is assessing ASU 2022-01 and its impact on its accounting and disclosures.

In March 2022, the FASB issued Accounting Standards Update 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which removes the accounting guidance for troubled debt restructurings and requires entities to evaluate whether a modification provided to a borrower results in a new loan or continuation of an existing loan. The amendments enhance existing disclosures and require new disclosures for receivables when there has been a modification in contractual cash flows due to a borrower experiencing financial difficulties. Additionally, the amendments require public business entities to disclose gross charge-off information by year of origination in the vintage disclosures. The guidance is effective for entities that have adopted ASU 2016-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted, including early adoption in an interim period. An entity should apply ASU 2022-02 prospectively. If an entity elects to early adopt ASU 2022-02 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. Pinnacle Financial is assessing ASU 2022-02 and its 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, 2022 through the date of the issued financial statements. In April 2022, Pinnacle Financial

terminated certain fair value hedging relationships related to available-for-sale securities and entered into certain new fair value hedging relationships as more fully disclosed in Note 8. Derivative Instruments. Other than these hedging transactions, no other subsequent events were noted.

Note 2. Equity method investment

A summary of BHG's financial position as of March 31, 2022 and December 31, 2021 and results of operations as of and for the three months ended March 31, 2022 and 2021, were as follows (in thousands):

	As of
	March 31, 2022		December 31, 2021
Assets	$	3,106,382	$	2,724,542
Liabilities	2,706,875		2,355,256
Equity interests	399,507		369,286
Total liabilities and equity	$	3,106,382	$	2,724,542

	For the three months ended March 31,
	2022		2021
Revenues	$	238,612	$	157,623
Net income	$	69,826	$	58,562

At March 31, 2022, technology, trade name and customer relationship intangibles, net of related amortization, totaled $6.7 million compared to $6.8 million as of December 31, 2021. Amortization expense of $128,000 was included for the three months ended March 31, 2022 compared to $188,000 for the same period in the prior year. Accretion income of $243,000 was included in the three months ended March 31, 2022 compared to $452,000 for the same period in the prior year.

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During the three months ended March 31, 2022, Pinnacle Financial and Pinnacle Bank received dividends of $12.2 million from BHG in the aggregate compared to $10.0 million during the three months ended March 31, 2021. 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, 2022, Pinnacle Bank purchased no loans from BHG. Pinnacle Bank purchased $74.6 million of loans from BHG during the three months ended March 31, 2021. These loans were purchased at par pursuant to BHG's joint venture loan program 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 approximately 4.75% per annum. At March 31, 2022 and December 31, 2021, there were $297.6 million and $319.1 million, respectively, of BHG joint venture program loans held by Pinnacle Bank.

Note 3.  Securities

The amortized cost and fair value of securities available-for-sale and held-to-maturity at March 31, 2022 and December 31, 2021 are summarized as follows (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2022:
Securities available-for-sale:
U.S. Treasury securities	$	81,314	$	—	$	150	$	81,164
U.S. Government agency securities	444,161		2,018		16,231		429,948
Mortgage-backed securities	1,611,929		2,574		83,939		1,530,564
State and municipal securities	1,257,130		16,644		26,609		1,247,165
Asset-backed securities	176,367		—		9,988		166,379
Corporate notes and other	117,294		1,239		4,030		114,503
	$	3,688,195	$	22,475	$	140,947	$	3,569,723
Securities held-to-maturity:
U.S. Treasury securities	$	93,039	$	—	$	3,778	$	89,261
U.S. Government agency securities	213,854		—		10,753		203,101
Mortgage-backed securities	374,692		121		20,933		353,880
State and municipal securities	1,726,629		5,682		97,222		1,635,089
Asset-backed securities	150,076		—		7,622		142,454
Corporate notes and other	9,202		—		333		8,869
	$	2,567,492	$	5,803	$	140,641	$	2,432,654
Allowance for credit losses - securities held-to-maturity	(1,106)
Securities held-to-maturity, net of allowance for credit losses	$	2,566,386

December 31, 2021:
Securities available-for-sale:
U.S. Treasury securities	$	194,490	$