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 June 30, 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 July 31, 2022, there were 76,417,037 shares of common stock, $1.00 par value per share, issued and outstanding.

Pinnacle Financial Partners, Inc.

Report on Form 10-Q

June 30, 2022

TABLE OF CONTENTS	Page No.
PART I – Financial Information:	5
Item 1. Consolidated Financial Statements (Unaudited)	5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3. Quantitative and Qualitative Disclosures about Market Risk	60
Item 4. Controls and Procedures	60
PART II – Other Information:	60
Item 1. Legal Proceedings	61
Item 1A. Risk Factors	61
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3. Defaults Upon Senior Securities	61
Item 4. Mine Safety Disclosures	61
Item 5. Other Information	61
Item 6. Exhibits	61
Signatures	63

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), including as a result of the negative impact of inflationary pressures 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) 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; (iv) 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; (v) 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; (vi) changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (vii) effectiveness of Pinnacle Financial's asset management activities in improving, resolving or liquidating lower-quality assets; (viii) 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; (ix) 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; (x) further public acceptance of the booster shots 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 that seek to mandate that individuals receive or employers require that their employees receive the vaccine; (xi) those vaccines' efficacy against the virus, including new variants; (xii) the results of regulatory examinations; (xiii) Pinnacle Financial's ability to identify potential candidates for, consummate, and achieve synergies from, potential future acquisitions; (xiv) difficulties and delays in integrating acquired businesses or fully realizing costs savings and other benefits from acquisitions; (xv) BHG's ability to profitably grow its business and successfully execute on its business plans; (xvi) risks of expansion into new geographic or product markets; (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) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, like BHG, including regulatory or legislative developments; (xxvii) fluctuations in the valuations of Pinnacle Financial's equity investments and the ultimate success of such investments; (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, including as a result of Pinnacle Bank's participation in and execution of government programs related to the COVID-19 pandemic; 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 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

3

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.

4

Item 1. Part I. Financial Information

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(dollars in thousands, except per share data)	June 30, 2022		December 31, 2021
ASSETS
Cash and noninterest-bearing due from banks	$	265,507	$	188,287
Restricted cash	29,739		82,505
Interest-bearing due from banks	1,336,667		3,830,747
Federal funds sold and other	—		—
Cash and cash equivalents	1,631,913		4,101,539
Securities purchased with agreement to resell	1,328,876		1,000,000
Securities available-for-sale, at fair value	3,809,338		4,914,194
Securities held-to-maturity (fair value of $2.5 billion and $1.2 billion, net of allowance for credit losses of $1.2 million and $161 at June 30, 2022 and Dec. 31, 2021, respectively)	2,744,555		1,155,958
Consumer loans held-for-sale	67,467		45,806
Commercial loans held-for-sale	25,901		17,685
Loans	26,333,096		23,414,262
Less allowance for credit losses	(272,483)		(263,233)
Loans, net	26,060,613		23,151,029
Premises and equipment, net	302,389		288,182
Equity method investment	403,191		360,833
Accrued interest receivable	116,038		98,813
Goodwill	1,846,466		1,819,811
Core deposits and other intangible assets	37,617		33,819
Other real estate owned	8,237		8,537
Other assets	1,738,691		1,473,193
Total assets	$	40,121,292	$	38,469,399
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing	$	11,058,198	$	10,461,071
Interest-bearing	6,617,324		6,530,015
Savings and money market accounts	12,492,329		12,179,663
Time	2,427,452		2,133,784
Total deposits	32,595,303		31,304,533
Securities sold under agreements to repurchase	199,585		152,559
Federal Home Loan Bank advances	1,289,059		888,681
Subordinated debt and other borrowings	423,614		423,172
Accrued interest payable	13,551		12,504
Other liabilities	284,941		377,343
Total liabilities	34,806,053		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 June 30, 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 June 30, 2022 and Dec. 31, 2021, respectively	76,385		76,143
Additional paid-in capital	3,056,228		3,045,802
Retained earnings	2,096,950		1,864,350
Accumulated other comprehensive income (loss), net of taxes	(131,450)		107,186
Total shareholders' equity	5,315,239		5,310,607
Total liabilities and shareholders' equity	$	40,121,292	$	38,469,399

See accompanying notes to consolidated financial statements (unaudited).

5

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(dollars in thousands, except per share data)	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Interest income:
Loans, including fees	$	252,182	$	232,788	$	479,229	$	460,160
Securities:
Taxable	12,725		8,359		23,773		16,087
Tax-exempt	19,898		16,546		37,344		32,044
Federal funds sold and other	7,571		1,543		10,647		2,862
Total interest income	292,376		259,236		550,993		511,153
Interest expense:
Deposits	18,181		13,861		28,431		31,329
Securities sold under agreements to repurchase	82		56		138		128
Federal Home Loan Bank advances and other borrowings	9,539		12,094		18,375		23,601
Total interest expense	27,802		26,011		46,944		55,058
Net interest income	264,574		233,225		504,049		456,095
Provision for credit losses	12,907		2,834		15,627		10,069
Net interest income after provision for credit losses	251,667		230,391		488,422		446,026
Noninterest income:
Service charges on deposit accounts	11,616		8,906		22,646		17,213
Investment services	13,205		8,997		23,896		17,188
Insurance sales commissions	2,554		2,406		6,590		5,631
Gain on mortgage loans sold, net	2,150		6,700		6,216		20,366
Investment gains (losses) on sales, net	—		366		(61)		366
Trust fees	6,065		5,062		12,038		9,749
Income from equity method investment	49,465		32,071		83,120		61,021
Other noninterest income	40,447		33,699		74,553		59,382
Total noninterest income	125,502		98,207		228,998		190,916
Noninterest expense:
Salaries and employee benefits	126,611		110,824		248,463		213,552
Equipment and occupancy	26,921		23,321		52,457		46,541
Other real estate (income) expense, net	86		(657)		191		(670)
Marketing and other business development	4,759		2,652		8,536		5,001
Postage and supplies	2,320		2,115		4,691		3,921
Amortization of intangibles	2,051		2,167		3,922		4,373
Other noninterest expense	33,290		25,718		60,439		48,118
Total noninterest expense	196,038		166,140		378,699		320,836
Income before income taxes	181,131		162,458		338,721		316,106
Income tax expense	36,004		30,668		64,484		58,888
Net income	145,127		131,790		274,237		257,218
Preferred stock dividends	(3,798)		(3,798)		(7,596)		(7,596)
Net income available to common shareholders	$	141,329	$	127,992	$	266,641	$	249,622
Per share information:
Basic net income per common share	$	1.87	$	1.70	$	3.52	$	3.31
Diluted net income per common share	$	1.86	$	1.69	$	3.51	$	3.30
Weighted average common shares outstanding:
Basic	75,751,296		75,481,198		75,703,407		75,427,340
Diluted	75,940,500		75,809,974		75,934,025		75,735,763

See accompanying notes to consolidated financial statements (unaudited).

6

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(dollars in thousands)	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Net income	$	145,127	$	131,790	$	274,237	$	257,218
Other comprehensive income (loss), net of tax:
Change in fair value on available-for-sale securities, net of tax	(96,191)		28,242		(231,086)		(5,130)
Change in fair value of cash flow hedges, net of tax	—		(631)		—		(18,373)
Accretion of net unrealized gains on securities transferred from available-for-sale to held-to-maturity, net of tax	(1,595)		(2,098)		(2,575)		(3,789)
Net gain on cash flow hedges reclassified from other comprehensive income into net income, net of tax	(2,511)		(2,692)		(5,020)		(2,188)
Net loss (gain) on sale of investment securities reclassified from other comprehensive income into net income, net of tax	—		(270)		45		(270)
Total other comprehensive income (loss), net of tax	(100,297)		22,551		(238,636)		(29,750)
Total comprehensive income	$	44,830	$	154,341	$	35,601	$	227,468

See accompanying notes to consolidated financial statements (unaudited).

7

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	—		86	86		(3,848)				—		(3,762)
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	76,087	$	76,087	$	3,027,311	$	1,515,451	$	123,548	$	4,959,523
Exercise of employee common stock options & related tax benefits	—		5	5		95		—		—		100
Preferred dividends paid ($16.88 per share)	—		—	—		—		(3,798)		—		(3,798)
Common dividends paid ($0.18 per share)	—		—	—		—		(13,863)		—		(13,863)
Issuance of restricted common shares, net of forfeitures	—		3	3		(3)		—		—		—
Restricted shares withheld for taxes & related tax benefits	—		(8)	(8)		(731)		—		—		(739)
Issuance of common stock pursuant to restricted stock unit agreement, net of shares withheld for taxes & related tax benefits	—		1	1		(3)		—		—		(2)
Compensation expense for restricted shares & performance stock units	—		—	—		5,669		—		—		5,669
Net income	—		—	—		—		131,790		—		131,790
Other comprehensive income	—		—	—		—		—		22,551		22,551
Balance at June 30, 2021	217,126		76,088	76,088		3,032,338		1,629,580		146,099		5,101,231

8

	Preferred Stock  Amount		Common Stock							Accumulated Other Comp. Income (Loss), net		Total Shareholders' Equity
			Shares	Amounts		Additional Paid-in Capital		Retained Earnings
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
Exercise of employee common stock options & related tax benefits	—		8	8		185		—		—		193
Preferred dividends paid ($16.88 per share)	—		—	—		—		(3,798)		—		(3,798)
Common dividends paid ($0.22 per share)	—		—	—		—		(17,065)		—		(17,065)
Issuance of restricted common shares, net of forfeitures	—		8	8		(8)		—		—		—
Restricted shares withheld for taxes & related tax benefits	—		(8)	(8)		(623)		—		—		(631)
Compensation expense for restricted shares & performance stock units	—		—	—		10,760		—		—		10,760
Net income	—		—	—		—		145,127		—		145,127
Other comprehensive loss	—							—		(100,297)		(100,297)
Balance at June 30, 2022	$	217,126	76,385	$	76,385	$	3,056,228	$	2,096,950	$	(131,450)	$	5,315,239

See accompanying notes to consolidated financial statements (unaudited).

9

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(dollars in thousands)	Six months ended June 30,
	2022		2021
Operating activities:
Net income	$	274,237	$	257,218
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization/accretion of premium/discount on securities	34,643		25,413
Depreciation, amortization and accretion	29,328		27,057
Provision for credit losses	15,627		10,069
Gain on mortgage loans sold, net	(6,216)		(20,366)
Investment losses (gains) on sales, net	61		(366)
Gain on other equity investments, net	(8,379)		(10,397)
Stock-based compensation expense	20,208		11,068
Deferred tax expense	2,807		4,427
Gains on dispositions of other real estate and other investments	(20)		(806)
Gain on remeasurement of previously held noncontrolling interest	(5,500)		—
Income from equity method investment	(83,120)		(61,021)
Dividends received from equity method investment	40,762		49,409
Excess tax benefit from stock compensation	(2,921)		(1,867)
Gain on commercial loans sold, net	(1,679)		(2,356)
Commercial loans held for sale originated	(274,755)		(288,031)
Commercial loans held for sale sold	268,218		295,743
Consumer loans held for sale originated	(844,206)		(1,117,635)
Consumer loans held for sale sold	828,761		1,168,854
Decrease in other assets	10,524		24,016
Decrease in other liabilities	(98,201)		(83,266)
Net cash provided by operating activities	200,179		287,163
Investing activities:
Activities in securities available-for-sale:
Purchases	(597,249)		(1,075,927)
Sales	2,866		2,240
Maturities, prepayments and calls	240,767		280,795
Activities in securities held-to-maturity:
Purchases	(578,716)		—
Maturities, prepayments and calls	34,324		23,300
Increase in securities purchased under agreements to resell	(328,876)		(500,000)
Increase in loans, net	(2,899,140)		(492,984)
Purchases of software, premises and equipment	(23,065)		(10,451)
Proceeds from sales of software, premises and equipment	292		281
Proceeds from sale of other real estate	320		4,183
Purchase of bank owned life insurance policies	(75,000)		—
Proceeds from bank owned life insurance settlements