UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2005

Commission File No: 000-31225

Pinnacle Financial Partners, Inc.

(Exact name of registrant as specified in its charter)

Tennessee	62-1812853
(State or jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

The Commerce Center, 211 Commerce Street, Suite 300, Nashville, Tennessee 37201
(Address of principal executive offices)

(615) 744-3700
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address
and former fiscal year,
if changed 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 þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act).
Yes þ No o

As of August 2, 2005, there were 8,406,691 shares of common stock, $1.00 par value per share, issued and outstanding.

Pinnacle Financial Partners, Inc.
Report on Form 10-Q
June 30, 2005

TABLE OF CONTENTS

	Page No.
PART I:
Item 1. Consolidated Financial Statements (Unaudited)		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3. Quantitative and Qualitative Disclosures about Market Risk		41
Item 4. Controls and Procedures		41
PART II:
Item 1. Legal Proceedings.		42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		42
Item 3. Defaults Upon Senior Securities.		42
Item 4. Submission of Matters to a Vote of Security Holders.		42
Item 5. Other Information.		43
Item 6. Exhibits		43
Signatures		44
Ex-31.1 Section 302 Certification of the CEO
Ex-31.2 Section 302 Certification of the CFO
Ex-32.1 Section 906 Certification of the CEO
Ex-32.2 Section 906 Certification of the CFO

FORWARD-LOOKING STATEMENTS

Pinnacle Financial Partners, Inc. (“Pinnacle Financial”) may from time to time make written or oral statements, including statements contained in this report which may constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). The words “expect”, “anticipate”, “intend”, “consider”, “plan”, “believe”, “seek”, “should”, “estimate”, and similar expressions are intended to identify such forward-looking statements, but other statements may constitute forward-looking statements. These statements should be considered subject to various risks and uncertainties. Such forward-looking statements are made based upon management’s belief as well as assumptions made by, and information currently available to, management pursuant to “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Pinnacle Financial’s actual results may differ materially from the results anticipated in forward-looking statements due to a variety of factors. Such factors are described below and in addition to those set out in Pinnacle Financial’s Form 10-K include, without limitation, (i) unanticipated deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses, (ii) increased competition with other financial institutions, (iii) lack of sustained growth in the economy in the Nashville, Tennessee area, (iv) rapid fluctuations or unanticipated changes in interest rates, (v) the inability of our bank subsidiary, Pinnacle National Bank to satisfy regulatory requirements for its expansion plans, and (vi) changes in the legislative and regulatory environment, including compliance with the various provisions of the Sarbanes Oxley Act of 2002. Many of such factors are beyond Pinnacle Financial’s ability to control or predict, and readers are cautioned not to put undue reliance on such forward-looking statements. Pinnacle Financial does not intend to update or reissue any forward-looking statements contained in this report as a result of new information or other circumstances that may become known to Pinnacle Financial.

Page 2

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Unaudited)

	June 30,			December 31,
	2005			2004
ASSETS
Cash and noninterest-bearing due from banks	$	26,539,893		$	15,243,796
Interest-bearing due from banks		856,279			379,047
Federal funds sold		31,759,292			11,122,944
Cash and cash equivalents		59,155,464			26,745,787
Securities available-for-sale, at fair value		200,570,147			180,573,820
Securities held-to-maturity (fair value of $26,962,307 and $27,134,913 at June 30, 2005 and December 31, 2004, respectively)		27,368,065			27,596,159
Mortgage loans held-for-sale		6,179,783			1,634,900
Loans		556,786,300			472,362,219
Less allowance for loan losses		(6,658,995	)		(5,650,014	)
Loans, net		550,127,305			466,712,205
Premises and equipment, net		12,658,540			11,130,671
Investments in unconsolidated subsidiaries and other entities		4,787,396			3,907,807
Accrued interest receivable		3,613,145			2,639,548
Other assets		7,615,947			6,198,553
Total assets	$	872,075,792		$	727,139,450
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand	$	142,794,083		$	114,318,024
Interest-bearing demand		55,451,332			51,751,320
Savings and money market accounts		222,589,579			199,058,240
Time		269,084,294			205,599,425
Total deposits		689,919,288			570,727,009
Securities sold under agreements to repurchase		57,676,971			31,927,860
Federal Home Loan Bank advances		49,500,000			53,500,000
Subordinated debt		10,310,000			10,310,000
Accrued interest payable		1,421,570			769,300
Other liabilities		1,747,159			2,025,106
Total liabilities		810,574,988			669,259,275
Stockholders’ equity:
Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, par value $1.00; 40,000,000 shares authorized; 8,405,891 issued and outstanding at June 30, 2005 and 8,389,232 issued and outstanding at December 31, 2004		8,405,891			8,389,232
Additional paid-in capital		44,484,410			44,376,307
Unearned compensation		(22,250	)		(37,250	)
Retained earnings		8,858,134			5,127,023
Accumulated other comprehensive (loss) income, net		(225,381	)		24,863
Total stockholders’ equity		61,500,804			57,880,175
Total liabilities and stockholders’ equity	$	872,075,792		$	727,139,450

See accompanying notes to consolidated financial statements.

Page 3

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
	2005		2004		2005		2004
Interest income:
Loans, including fees	$	8,002,502	$	4,505,938	$	14,956,867	$	8,452,510
Securities:
Taxable		2,134,735		1,555,145		4,156,518		3,106,004
Tax-exempt		238,914		99,010		440,338		184,985
Federal funds sold and other		167,664		65,364		256,970		148,081
Total interest income		10,543,815		6,225,457		19,810,692		11,891,580
Interest expense:
Deposits		2,877,229		1,328,050		5,031,190		2,499,238
Securities sold under agreements to repurchase		253,121		11,380		403,383		20,673
Federal funds purchased and other borrowings		618,274		350,212		1,080,812		683,562
Total interest expense		3,748,624		1,689,642		6,515,385		3,203,473
Net interest income		6,795,191		4,535,815		13,295,307		8,688,107
Provision for loan losses		482,690		448,474		1,083,940		802,322
Net interest income after provision for loan losses		6,312,501		4,087,341		12,211,367		7,885,785
Noninterest income:
Service charges on deposit accounts		241,436		231,208		503,136		395,053
Investment services		491,453		404,516		928,877		794,095
Gain on loans and loan participations sold		390,261		266,462		550,816		427,017
Gain on sale of investment securities, net		—		—		114,410		248,353
Other noninterest income		289,915		164,796		496,481		274,838
Total noninterest income		1,413,065		1,066,982		2,593,720		2,139,356
Noninterest expense:
Compensation and employee benefits		3,110,718		2,203,862		6,081,276		4,318,222
Equipment and occupancy		893,938		535,053		1,677,963		1,040,743
Marketing and other business development		179,715		155,791		292,883		304,949
Postage and supplies		158,396		124,125		293,934		223,264
Other noninterest expense		620,452		479,127		1,198,036		870,584
Total noninterest expense		4,963,219		3,497,958		9,544,092		6,757,762
Income before income taxes		2,762,347		1,656,365		5,260,995		3,267,379
Income tax expense		803,178		487,890		1,522,073		1,027,882
Net income	$	1,959,169	$	1,168,475	$	3,738,922	$	2,239,497
Per share information:
Basic net income per common share	$	0.23	$	0.16	$	0.45	$	0.30
Diluted net income per common share	$	0.21	$	0.14	$	0.40	$	0.27
Weighted average shares outstanding:
Basic		8,401,198		7,397,920		8,395,260		7,391,013
Diluted		9,434,260		8,279,114		9,435,754		8,246,422

See accompanying notes to consolidated financial statements.

Page 4

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
(Unaudited)

For the six months ended June 30, 2005 and 2004

										Retained			Accumulated
					Additional					Earnings			Other			Total
	Common Stock				Paid-in		Unearned			(Accumulated			Comprehensive			Stockholders’
	Shares		Amount		Capital		Compensation			Deficit)			Income (Loss)			Equity
Balances, December 31, 2003		7,384,106	$	7,384,106	$	26,990,894	$	—		$	(189,155	)	$	150,536		$	34,336,381
Exercise of employee incentive common stock options		20,480		20,480		80,196		—			—			—			100,676
Comprehensive income:
Net income		—		—		—		—			2,239,497			—			2,239,497
Net unrealized holding losses on available-for-sale securities, net of deferred tax benefit of $858,628		—		—		—		—			—			(1,551,457	)		(1,551,457	)
Total comprehensive income																	688,040
Balances, June 30, 2004		7,404,586	$	7,404,586	$	27,071,090	$	—		$	2,050,342		$	(1,400,921	)	$	35,125,097
Balances, December 31, 2004		8,389,232	$	8,389,232	$	44,376,307	$	(37,250	)	$	5,127,023		$	24,863		$	57,880,175
Exercise of employee incentive common stock options		16,659		16,659		108,103		—			—			—			124,762
Amortization of unearned compensation associated with restricted shares		—		—		—		15,000			—			—			15,000
Dividends paid to minority interest shareholders of PNFP Properties, Inc.		—		—		—		—			(7,811	)		—			(7,811	)
Comprehensive income:
Net income		—		—		—		—			3,738,922			—			3,738,922
Net unrealized holding losses on available-for-sale securities, net of deferred tax benefit of $153,376		—		—		—		—			—			(250,244	)		(250,244	)
Total comprehensive income																	3,488,678
Balances, June 30, 2005		8,405,891	$	8,405,891	$	44,484,410	$	(22,250	)	$	8,858,134		$	(225,381	)	$	61,500,804

See accompanying notes to consolidated financial statements.

Page 5

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS
(Unaudited)

	Six months ended
	June 30,
	2005			2004
Operating activities:
Net income	$	3,738,922		$	2,239,497
Adjustments to reconcile net income to net cash used in operating activities:
Net amortization of securities		528,943			539,066
Depreciation and amortization		789,844			544,310
Provision for loan losses		1,083,940			802,322
Gain on sale of investment securities, net		(114,410	)		(248,353	)
Gains on loan participations sold		(136,694	)		(238,078	)
Deferred tax benefit		(505,845	)		(433,932	)
Mortgage loans held for sale:
Loans originated		(48,598,700	)		(26,905,608	)
Loans sold		44,053,817			24,634,390
Increase in other assets		(1,549,278	)		(303,556	)
Increase (decrease) in other liabilities		374,323			(1,370,642	)
Net cash used in operating activities		(335,138	)		(740,584	)
Investing activities:
Activities in securities available-for-sale:
Purchases		(40,986,522	)		(69,273,714	)
Sales		6,791,867			21,876,953
Maturities, prepayments and calls		13,608,270			19,019,714
		(20,586,385	)		(28,377,047	)
Net increase in loans		(84,499,040	)		(58,318,202	)
Purchases of premises and equipment and software		(2,430,251	)		(1,105,555	)
Purchases of other assets		(797,850	)		(709,950	)
Net cash used in investing activities		(108,313,526	)		(88,510,754	)
Financing activities:
Net increase in deposits		119,192,279			76,752,040
Net increase in securities sold under agreements to repurchase		25,749,111			8,722,372
Advances from Federal Home Loan Bank:
Issuances		27,000,000			14,000,000
Payments		(31,000,000	)		(11,000,000	)
Dividends paid to preferred shareholders of PNFP Properties, Inc.		(7,811	)		—
Exercise of common stock options		124,762			100,676
Net cash provided by financing activities		141,058,341			88,575,088
Net increase (decrease) in cash and cash equivalents		32,409,677			(676,250	)
Cash and cash equivalents, beginning of period		26,745,787			47,184,050
Cash and cash equivalents, end of period	$	59,155,464		$	46,507,800

See accompanying notes to consolidated financial statements.

Page 6

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

     Nature of Business — Pinnacle Financial Partners, Inc. (Pinnacle Financial) was formed on February 28, 2000 (inception) and is a bank holding company whose primary business is conducted by its wholly-owned subsidiary, Pinnacle National Bank (Pinnacle National). Pinnacle National is a commercial bank located in Nashville, Tennessee. Pinnacle National provides a full range of banking services in its primary market area of Davidson County and the surrounding counties. Pinnacle National commenced its banking operations on October 27, 2000. PFP Title Company is a wholly-owned subsidiary of Pinnacle National. PFP Title Company sells title insurance policies to Pinnacle National customers and others. PNFP Holdings, Inc. is a wholly-owned subsidiary of PFP Title Company and is the parent of PNFP Properties, Inc., which was established as a Real Estate Investment Trust pursuant to Internal Revenue Service regulations. Pinnacle Community Development, Inc. is a wholly-owned subsidiary of Pinnacle National and is certified as a Community Development Entity by the Community Development Financial Institutions Fund of the United States Department of the Treasury. PNFP Statutory Trust I, a wholly-owned subsidiary of Pinnacle Financial, was created for the exclusive purpose of issuing capital trust preferred securities. Pinnacle Advisory Services, Inc. was established as a registered investment advisor pursuant to regulations promulgated by the Board of Governors of the Federal Reserve System. Pinnacle Credit Enhancement Holdings, Inc. was established as a holding company to own a 24.5% membership interest in Collateral Plus, LLC. Collateral Plus, LLC serves as an intermediary between investors and borrowers in certain financial transactions whereby the borrowers require enhanced collateral in the form of letters of credit issued by the investors for the benefit of banks and other financial institutions.

     Basis of Presentation — These consolidated financial statements include the accounts of Pinnacle Financial and its subsidiaries. Significant intercompany transactions and accounts are eliminated in consolidation, other than the accounts of PNFP Statutory Trust I and Collateral Plus, LLC which are included in these consolidated financial statements pursuant to the equity method of accounting.

     The accompanying unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by United States generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. For further information, refer to the consolidated financial statements and footnotes thereto included in Pinnacle Financial’s Form 10-K for the fiscal year ended December 31, 2004 as filed with the Securities and Exchange Commission.

     Use of Estimates — The preparation of financial statements in conformity with United States generally accepted accounting principles 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 relate to the determination of the allowance for loan losses.

     Cash and Cash Flows — Cash on hand, cash items in process of collection, amounts due from banks, Federal funds sold and securities purchased under agreements to resell, with original maturities within ninety days, are included in cash and cash equivalents. The following supplemental cash flow information addresses certain cash payments and noncash transactions for the six months ended June 30, 2005 and 2004 as follows:

Page 7

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	For the six months ended June 30,
	2005		2004
Cash Payments:
Interest	$	5,863,115	$	3,219,730
Income taxes		1,770,000		1,521,817
Noncash Transactions:
Transfers of available-for-sale securities to held-to-maturity		—		27,655,669
Loans charged-off to the allowance for loan losses		95,148		64,949
Loans foreclosed upon with repossessions transferred to other assets		34,750		—

     Income Per Common Share — Basic earnings per share (“EPS”) is computed by dividing net income 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 shares outstanding was attributable to common stock options and warrants.

     As of June 30, 2005 and 2004, there were common stock options outstanding to purchase up to 1,224,093 and 1,039,000 common shares, respectively. Substantially all of these shares have exercise prices, which when considered in relation to the average market price of Pinnacle Financial’s common stock for the respective reporting period, are considered dilutive and are considered in Pinnacle Financial’s diluted income per share calculation for the three and six months ended June 30, 2005 and 2004. Additionally, as of June 30, 2005, Pinnacle Financial had dilutive warrants outstanding to purchase 406,000 common shares which have also been considered in the calculation of Pinnacle Financial’s diluted income per share for the three and six months ended June 30, 2005 and 2004.

     The following is a summary of the basic and diluted earnings per share calculation for the three and six months ended June 30, 2005 and 2004:

	Three months ended				Six months ended
	June 30,				June 30,
	2005		2004		2005		2004
Basic earnings per share calculation:
Numerator - Net income	$	1,959,169	$	1,168,475	$	3,738,922	$	2,239,497
Denominator - Average common shares outstanding		8,401,198		7,397,920		8,395,260		7,391,013
Basic net income per share	$	0.23	$	0.16	$	0.45	$	0.30
Diluted earnings per share calculation:
Numerator - Net income	$	1,959,169	$	1,168,475	$	3,738,922	$	2,239,497
Denominator - Average common shares outstanding		8,401,198		7,397,920		8,395,260		7,391,013
Dilutive shares contingently issuable		1,033,062		881,194		1,040,494		855,409
Average dilutive common shares outstanding		9,434,260		8,279,114		9,435,754		8,246,422
Diluted net income per share	$	0.21	$	0.14	$	0.40	$	0.27

     Stock-Based Compensation — Pinnacle Financial applies APB Opinion 25 and related interpretations in accounting for the equity incentive plans. All option grants carry exercise prices equal to or above the fair value of the common stock on the date of grant. Accordingly, no compensation cost has been recognized. Had compensation cost for Pinnacle Financial’s equity incentive plans been determined based on the fair value at the grant dates for awards under the plans consistent with the method prescribed in SFAS No. 123, “Accounting for Stock-Based Compensation,” Pinnacle Financial’s net income per share would have been adjusted to the pro forma amounts indicated below for the three and six months ended June 30, 2005 and 2004:

Page 8

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

		Three months ended						Six months ended
		June 30,						June 30,
		2005			2004			2005			2004
Net income, as reported		$	1,959,169		$	1,168,475		$	3,738,922		$	2,239,497
Deduct: Total stock-based compensation expense determined under the fair value based method for all awards, net of related tax effects			(120,156	)		(73,305	)		(231,228	)		(139,925	)
Pro forma net income		$	1,839,013		$	1,095,170		$	3,507,694		$	2,099,572
Per share information:
Basic net income	As reported	$	0.23		$	0.16		$	0.45		$	0.30
	Pro forma	$	0.22		$	0.15		$	0.42		$	0.28
Diluted net income	As reported	$	0.21		$	0.14		$	0.40		$	0.27
	Pro forma	$	0.20		$	0.13		$	0.37		$	0.25

     For purposes of these calculations, the fair value of options granted for the six months ended June 30, 2005 and 2004 was estimated using the Black-Scholes option pricing model and the following assumptions:

	2005			2004
Risk free interest rate		2.37	%		1.00	%
Expected life of the options	5.0 years			5.0 years
Expected dividend yield		0.00	%		0.00	%
Expected volatility		39.6	%		28.5	%
Weighted average fair value	$	8.98		$	3.56

     Recent Accounting Pronouncements — In March 2004, the Financial Accounting Standards Board’s (“FASB”) Emerging Issues Task Force reached a consensus on EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF 03-1 provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary, and measurement of an impairment loss. An investment is considered impaired if the fair value of the investment is less than its cost. Generally, an impairment is considered other-than-temporary unless: (i) the investor has the ability and intent to hold an investment for a reasonable period of time sufficient for an anticipated recovery of fair value up to (or beyond) the cost of the investment; and (ii) evidence indicating that the cost of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. If impairment is determined to be other-than-temporary, then an impairment loss should be recognized equal to the difference between the investment’s cost and its fair value. Certain disclosure requirements of EITF 03-1 were adopted in 2003 and Pinnacle Financial began presenting the new disclosure requirements in its consolidated financial statements for the year ended December 31, 2003. The recognition and measurement provisions were initially effective for other-than-temporary impairment evaluations in reporting periods beginning after June 15, 2004. However, in September 2004, the effective date of these provisions was delayed until the finalization of a FASB Staff Position (FSP) to provide additional implementation guidance. Due to the recognition and measurement provisions being suspended and the final rule delayed, Pinnacle Financial is not able to determine whether the adoption of these new provisions will have a material impact on our consolidated financial position or results of income.

     In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 123R (revised 2004), Share-Based Payment (“SFAS No. 123R”), which revised SFAS No. 123, “Accounting for Stock-Based Compensation. This statement supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” The revised statement addresses the accounting for share-based payment transactions with employees and other third parties, eliminates the ability to account for share-based compensation transactions using APB 25 and requires that the compensation costs relating to such transactions be recognized in the consolidated statement of income. On April 14, 2005, the Securities and Exchange Commission deferred implementation of SFAS No. 123R for registrants until the next fiscal year following June 15, 2005. Pinnacle Financial is currently evaluating the provisions of SFAS No. 123R and will adopt it on January 1, 2006 as required.

Page 9

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Business Segments — Pinnacle Financial operates in one business segment, commercial banking, and has no individually significant business segments.

     Comprehensive Income (Loss) — Other comprehensive income refers to revenues, expenses, gains and losses that under United States generally accepted accounting principles are included in comprehensive income but excluded from net income. Currently, Pinnacle Financial’s other comprehensive income (loss) consists of unrealized gains and losses, net of deferred income taxes, on available-for-sale securities.

     Reclassifications - Certain prior period amounts have been reclassified to conform to the 2005 presentation. Such reclassifications had no impact on net income or loss during any period. In the statements of income for the three and six months ended June 30, 2005 and 2004, Pinnacle Financial has reclassified noninterest income previously reported as “Fees from the origination of mortgage loans” to “Gain on loans and loan participations sold”. Additionally, sales commission expenses associated with mortgage loan originations previously included in “Compensation and employee benefits” have been reclassified to offset mortgage origination fees included in noninterest income as “Gain on loans and loan participations sold”.

Note 2. Securities

     The amortized cost and fair value of securities at June 30, 2005 and December 31, 2004 are summarized as follows:

	June 30, 2005
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Securities available-for-sale:
U.S. Treasury securities	$	—	$	—	$	—	$	—
U.S. government agency securities		25,911,286		77,229		42,219		25,946,296
Mortgage-backed securities		151,768,635		336,213		895,252		151,209,596
State and municipal securities		21,202,072		79,960		108,285		21,173,747
Corporate notes		2,307,694		—		67,186		2,240,508
	$	201,189,687	$	493,402	$	1,112,942	$	200,570,147
Securities held-to-maturity:
U.S. government agency securities	$	17,746,634	$	4,083	$	171,875	$	17,578,842
State and municipal securities		9,621,431		—		237,966		9,383,465
	$	27,368,065	$	4,083	$	409,841	$	26,962,307

	December 31, 2004
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Securities available-for-sale:
U.S. Treasury securities	$	—	$	—	$	—	$	—
U.S. government agency securities		27,164,683		129,219		19,727		27,274,175
Mortgage-backed securities		138,851,236		348,187		672,189		138,527,234
State and municipal securities		12,486,440		71,726		55,481		12,502,685
Corporate notes		2,314,831		—		45,105		2,269,726
	$	180,817,190	$	549,132	$	792,502	$	180,573,820
Securities held-to-maturity:
U.S. government agency securities	$	17,746,555	$	600	$	298,605	$	17,448,550
State and municipal securities		9,849,604		—		163,241		9,686,363
	$	27,596,159	$	600	$	461,846	$	27,134,913

     On March 31, 2004, Pinnacle National transferred approximately $27,656,000 of available-for-sale securities to held-to-maturity at fair value. The transfer consisted of substantially all of Pinnacle National’s holdings of Tennessee municipal securities and several of its longer-term agency securities. The net unrealized gain on such securities as of the date of transfer was approximately $325,000. This amount is reflected in the accumulated other comprehensive income, net of tax, and is being amortized over the remaining lives of the respective held-to-maturity securities. At June 30, 2005, the unamortized amount approximated $256,000.

Page 10

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Pinnacle Financial realized approximately $114,000 in net gains from the sale of $6,792,000 of available-for-sale securities during the six months ended June 30, 2005 and $248,000 in net gains on the sale of $21,877,000 of available-for-sale securities during the six months ended June 30, 2004. Gross realized gains amounted to $114,000 on the sale of $6.8 million of available-for-sale securities during the six months ended June 30, 2005. There were no losses on the sale of securities during the six months ended June 30, 2005. Gross realized gains amounted to $312,000 on the sale of $10.9 million of available-for-sale securities while gross realized losses amounted to $64,000 on the sale of $11.0 million of available-for-sale securities during the six months ended June 30, 2004.

     At June 30, 2005, approximately $155,377,000 of Pinnacle Financial’s securities portfolio was pledged to secure public fund deposits, Federal Home Loan Bank advances and securities sold under agreements to repurchase.

     At June 30, 2005, included in securities were the following investments with unrealized losses. The information below classifies these investments according to the term of the unrealized loss of less than twelve months or twelve months or longer:

	Investments With an					Investments With an					Total Investments at
	Unrealized Loss of					Unrealized Loss of					June 30, 2005 With
	Less than 12 months					12 months or longer					an Unrealized Loss
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
U.S. government agency securities	$	7,931,500	$	(49,219	)	$	15,585,925	$	(164,875	)	$	23,517,425	$	(214,094	)
Mortgage-backed securities		67,233,382		(395,124	)		33,479,541		(500,128	)		100,712,923		(895,252	)
State and municipal securities		8,456,487		(89,532	)		8,797,001		(256,719	)		17,253,488		(346,251	)
Corporate notes		817,600		(9,948	)		1,422,908		(57,238	)		2,240,508		(67,186	)
Total temporarily-impaired securities	$	84,438,969	$	(543,823	)	$	59,285,375	$	(978,960	)	$	143,724,344	$	(1,522,783	)

     Management evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of Pinnacle Financial to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. At June 30, 2005, Pinnacle Financial had several issuances that had been in an unrealized loss position for more than twelve months. At June 30, 2005, the amortized cost of these securities was approximately $60,264,000 compared to a fair value of $59,285,000. Because the declines in fair value noted above were attributable to increases in interest rates and not attributable to credit quality and because Pinnacle Financial has the ability and intent to hold all of these investments until a market price recovery or maturity, these investments were not considered other-than-temporarily impaired.

Page 11

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 3. Loans and Allowance for Loan Losses

     The composition of loans at June 30, 2005 and December 31, 2004 is summarized as follows:

	2005			2004
Commercial real estate — Mortgage	$	126,435,523		$	117,122,607
Commercial real estate — Construction		29,953,844			8,427,763
Commercial — Other		214,209,378			189,456,385
Total Commercial		370,598,745			315,006,755
Consumer real estate — Mortgage		157,819,550			126,907,581
Consumer real estate — Construction		9,217,983			14,990,739
Consumer — Other		19,150,022			15,457,144
Total Consumer		186,187,555			157,355,464
Total Loans		556,786,300			472,362,219
Allowance for loan losses		(6,658,995	)		(5,650,014	)
Loans, net	$	550,127,305		$	466,712,205

     Pinnacle Financial periodically analyzes its commercial loan portfolio to determine if a concentration of credit risk exists to any one or more industries. Pinnacle Financial utilizes broadly accepted industry classification systems in order to classify borrowers into various industry classifications. During the second quarter of 2005, Pinnacle Financial changed from using the Standard Industry Code classification system to the North American Industry Classification System. Pinnacle Financial has a meaningful credit exposure (loans outstanding plus unfunded lines of credit) to borrowers in the following industries at June 30, 2005 and December 31, 2004:

	2005		2004
Trucking industry	$	46,851,823	$	43,106,825
Operators of nonresidential buildings		40,147,245		27,509,859
Operators of residential buildings and dwellings		19,452,405		16,413,550

     Changes in the allowance for loan losses for the six months ended June 30, 2005 and for the year ended December 31, 2004 are as follows:

	2005			2004
Balance at beginning of period	$	5,650,014		$	3,718,598
Charged-off loans		(95,148	)		(1,032,378	)
Recovery of previously charged-off loans		20,189			15,371
Provision for loan losses		1,083,940			2,948,423
Balance at end of period	$	6,658,995		$	5,650,014

     At June 30, 2005, Pinnacle Financial had granted loans and other extensions of credit amounting to approximately $14,074,000 to certain directors, executive officers, and their related entities of which $7,469,000 had been drawn upon. At December 31, 2004, Pinnacle Financial had granted loans and other extensions of credit amounting to approximately $6,565,000 to certain directors, executive officers, and their related entities, of which $4,437,000 had been drawn upon. The terms of these loans and extensions are on substantially the same terms customary for other persons for the type of loan involved.

     At June 30, 2005 and 2004, Pinnacle Financial had certain impaired loans on nonaccruing interest status. The principal balance of these nonaccrual loans amounted to $561,000 and $1,339,000 at June 30, 2005 and 2004, respectively. In each case, at the date such loans were placed on nonaccrual, Pinnacle Financial reversed all previously accrued interest income against current year earnings. Had these loans been on accruing status, interest income would have been higher by $29,000 and $7,000 for the six months ended June 30, 2005 and 2004, respectively.

Page 12

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 4. Income Taxes

     Income tax expense for the three and six months ended June 30, 2005 and 2004 consists of the following:

	Three months ended						Six months ended
	June 30,						June 30,
	2005			2004			2005			2004
Current tax expense:
Federal	$	945,422		$	480,075		$	1,935,269		$	1,230,930
State		32,107			121,109			92,649			230,884
Total current tax expense		977,529			601,184			2,027,918			1,461,814
Deferred tax benefit:
Federal		(144,933	)		(94,062	)		(420,494	)		(359,687	)
State		(29,418	)		(19,232	)		(85,351	)		(74,245	)
Total deferred tax benefit		(174,351	)		(113,294	)		(505,845	)		(433,932	)
	$	803,178		$	487,890		$	1,522,073		$	1,027,882

     Pinnacle Financial’s income tax expense differs from the amounts computed by applying the Federal income tax statutory rates of 34% in 2005 and 2004 to income before income taxes. A reconciliation of the differences for the six months ended June 30, 2005 and 2004 is as follows:

	2005			2004
Income taxes at statutory rate	$	1,788,737		$	1,110,908
State tax expense, net of federal tax effect		23,395			107,200
Federal tax credits		(150,000	)		(108,000	)
Tax-exempt municipal securities		(115,977	)		(42,548	)
Other items		(24,082	)		(39,678	)
Income tax expense	$	1,522,073		$	1,027,882

     The effective tax rate for Pinnacle Financial is impacted by Federal tax credits related to the New Markets Tax Credit program whereby a subsidiary of Pinnacle National has been awarded approximately $2.3 million in future Federal tax credits to be realized over the next seven years. Tax benefits related to these credits will be recognized for financial reporting purposes in the same periods that the credits are recognized in the Company’s income tax returns. The credit that is available for the years ended December 31, 2005 and 2004 is $300,000 in each year. Pinnacle Financial believes that it and its subsidiary will continue to comply with the various regulatory provisions of the New Markets Tax Credit program such that it will be able to claim the credit in its Federal income tax return in 2005 and 2004. Also, during 2004, Pinnacle National formed a real estate investment trust which provides Pinnacle Financial with an alternative vehicle for raising capital. Additionally, the ownership structure of this real estate investment trust provides certain income tax benefits to Pinnacle National and Pinnacle Financial.

     In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that Pinnacle Financial will realize the benefit of these deductible differences.

Page 13

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

     The components of deferred income taxes included in other assets in the accompanying consolidated balance sheets at June 30, 2005 and December 31, 2004 are as follows:

	2005		2004
Deferred tax assets:
Allowance for loan losses	$	2,551,847	$	2,162,332
Investment securities		138,136		—
Other assets		180,730		136,790
		2,870,713		2,299,122
Deferred tax liabilities:
Investment securities		—		15,240
Other liabilities		165,384		237,774
		165,384		253,014
Net deferred tax assets	$	2,705,329	$	2,046,108

Note 5. Commitments and Contingent Liabilities

     In the normal course of business, Pinnacle Financial has entered into off-balance sheet financial instruments which include commitments to extend credit (i.e., including unfunded lines of credit) and standby letters of credit. Commitments to extend credit are usually the result of lines of credit granted to existing borrowers under agreements that the total outstanding indebtedness will not exceed a specific amount during the term of the indebtedness. Typical borrowers are commercial concerns that use lines of credit to supplement their treasury management functions, thus their total outstanding indebtedness may fluctuate during any time period based on the seasonality of their business and the resultant timing of their cash flows. Other typical lines of credit are related to home equity loans granted to consumers. Commitments to extend credit generally have fixed expiration dates or other termination clauses and may require payment of a fee.

     Standby letters of credit are generally issued on behalf of an applicant (our customer) to a specifically named beneficiary and are the result of a particular business arrangement that exists between the applicant and the beneficiary. Standby letters of credit have fixed expiration dates and are usually for terms of two years or less unless terminated beforehand due to criteria specified in the standby letter of credit. A typical arrangement involves the applicant routinely being indebted to the beneficiary for such items as inventory purchases, insurance, utilities, lease guarantees or other third party commercial transactions. The standby letter of credit would permit the beneficiary to obtain payment from Pinnacle Financial under certain prescribed circumstances. Subsequently, Pinnacle Financial would then seek reimbursement from the applicant pursuant to the terms of the standby letter of credit.

     Pinnacle Financial follows the same credit policies and underwriting practices when making these commitments as it does for on-balance sheet instruments. Each customer’s creditworthiness is evaluated on a case-by-case basis and the amount of collateral obtained, if any, is based on management’s credit evaluation of the customer. Collateral held varies but may include cash, real estate and improvements, marketable securities, accounts receivable, inventory, equipment, and personal property.

     The contractual amounts of these commitments are not reflected in the consolidated financial statements and would only be reflected if drawn upon. Since many of the commitments are expected to expire without being drawn upon, the contractual amounts do not necessarily represent future cash requirements. However, should the commitments be drawn upon and should our customers default on their resulting obligation to us, Pinnacle Financial’s maximum exposure to credit loss, without consideration of collateral, is represented by the contractual amount of those instruments.

Page 14

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

     A summary of Pinnacle Financial’s total contractual amount for all off-balance sheet commitments at June 30, 2005 is as follows:

Commitments to extend credit	$	212,331,000
Standby letters of credit		60,292,000

     At June 30, 2005, the fair value of Pinnacle Financial’s standby letters of credit was $242,000. This amount represents the unamortized fee associated with these standby letters of credit and is included in the consolidated balance sheet of Pinnacle Financial. This fair value will decrease over time as the existing standby letters of credit approach their expiration dates.

     Various legal claims may arise from time to time in the normal course of business. In the opinion of management, any claims outstanding at June 30, 2005 have no material effect on Pinnacle Financial’s consolidated financial statements.

Note 6. Stock Option Plans and Restricted Shares

     Pinnacle Financial has two stock option plans under which it has granted options to its employees to purchase common stock at or above the fair market value on the date of grant. All of the options are intended to be incentive stock options qualifying under Section 422 of the Internal Revenue Code for favorable tax treatment. To date, options under the plans vest in 20% increments each year over a five year period beginning one year after the date of the grant and are exercisable over a period of ten years from the date of grant.

     A summary of the plan changes during the six months ended June 30, 2005 is as follows:

				Weighted-
				Average
				Exercise
	Number			Price
Outstanding at December 31, 2004		1,068,350		$	7.03
Granted		182,082			23.54
Exercised		(16,659	)		5.92
Forfeited		(9,680	)		12.67
Outstanding at June 30, 2005		1,224,093		$	9.45

     The following table summarizes information about Pinnacle Financial’s stock option plan at June 30, 2005:

		Number of		Remaining		Weighted-
		Remaining		Weighted-Average		Average		Number of
Grant date		Shares		Contractual		Exercise		Shares
by year		Outstanding		Life in Years		Price		Exercisable
	2000		355,040		5.5	$	5.00		284,032
	2001		90,820		5.7		3.82		72,236
	2002		240,385		6.6		5.01		142,311
	2003		176,100		7.9		7.55		61,280
	2004		181,506		8.7		14.73		29,281
	2005		180,242		9.6		23.54		—
			1,224,093		7.2	$	9.45		589,140

     Additionally, Pinnacle Financial’s 2004 equity incentive plan provides for the granting of restricted share awards and other performance-based awards, such as stock appreciation rights. During 2004, Pinnacle Financial awarded 3,846 shares of restricted common stock to certain executives of Pinnacle Financial. The forfeiture restrictions on the restricted shares lapse in three separate tranches should Pinnacle Financial achieve certain earnings and soundness targets for the 2004, 2005 and 2006 fiscal years or earnings and soundness targets for the three year period ended December 31, 2006. Compensation expense associated with the restricted share awards is recognized over the time period that the restrictions associated with the awards lapse. As a result, at each financial reporting date, the restricted shares are marked to fair value and compensation expense is measured based on the anticipated number of shares that will ultimately vest and the timing of the vesting period. Earnings and soundness targets for the 2004 fiscal year were achieved and the restrictions related to 1,282 shares were released. For the six month period ended June 30, 2005, Pinnacle Financial recognized approximately $15,000 in compensation costs attributable to these awards.

Page 15

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 7. Regulatory Matters

     Pinnacle National is subject to restrictions on the payment of dividends to Pinnacle Financial under federal banking laws and the regulations of the Office of the Comptroller of the Currency. Pinnacle Financial is also subject to limits on payment of dividends to its shareholders by the rules, regulations and policies of federal banking authorities. Pinnacle Financial has not paid any dividends to date, nor does it anticipate paying dividends to its shareholders for the foreseeable future. Future dividend policy will depend on Pinnacle National’s earnings, capital position, financial condition and other factors.

     Pinnacle Financial and Pinnacle National are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Pinnacle Financial and Pinnacle National must meet specific capital guidelines that involve quantitative measures of the assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Pinnacle Financial’s and Pinnacle National’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

     Quantitative measures established by regulation to ensure capital adequacy require Pinnacle Financial and Pinnacle National to maintain minimum amounts and ratios of Total and Tier I capital to risk-weighted assets and of Tier I capital to average assets. Management believes, as of June 30, 2005 and December 31, 2004, Pinnacle Financial and Pinnacle National met all capital adequacy requirements to which they are subject. To be categorized as well-capitalized, Pinnacle National must maintain minimum Total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the following table. Pinnacle Financial and Pinnacle National’s actual capital amounts and ratios are presented in the following table (dollars in thousands):

											Minimum
											To Be Well-Capitalized
						Minimum					Under Prompt
						Capital					Corrective
	Actual					Requirement					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
At June 30, 2005
Total capital to risk weighted assets:
Pinnacle Financial	$	78,695		10.9	%	$	57,651		8.0	%	not applicable
Pinnacle National	$	74,188		10.4	%	$	57,097		8.0	%	$	71,371		10.0	%
Tier I capital to risk weighted assets:
Pinnacle Financial	$	72,036		10.0	%	$	28,826		4.0	%	not applicable
Pinnacle National	$	67,519		9.5	%	$	28,549		4.0	%	$	42,823		6.0	%
Tier I capital to average assets (*):
Pinnacle Financial	$	72,036		8.8	%	$	32,927		4.0	%	not applicable
Pinnacle National	$	67,519		8.2	%	$	32,894		4.0	%	$	41,117		5.0	%
At December 31, 2004
Total capital to risk weighted assets:
Pinnacle Financial	$	73,540		12.7	%	$	46,410		8.0	%	not applicable
Pinnacle National	$	63,775		11.0	%	$	46,373		8.0	%	$	57,967		10.0	%
Tier I capital to risk weighted assets:
Pinnacle Financial	$	67,880		11.7	%	$	23,205		4.0	%	not applicable
Pinnacle National	$	58,115		10.0	%	$	23,187		4.0	%	$	34,780		6.0	%
Tier I capital to average assets (*):
Pinnacle Financial	$	67,880		9.7	%	$	28,134		4.0	%	not applicable
Pinnacle National	$	58,115		8.3	%	$	28,116		4.0	%	$	35,145		5.0	%

(*) Average assets for the above calculations were averages for the most recent quarter for each period noted.

Page 16

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 8. Investments in Affiliated Companies

     Investments in affiliated companies accounted for under the equity method consist of 100% of the common stock of PNFP Statutory Trust I (“Trust”), a wholly-owned statutory business trust. The Trust was formed on December 30, 2003. Summary financial information for the Trust follows (dollars in thousands):

Summary Balance Sheet

	At June 30,		At Dec. 31,
	2005		2004
Asset — Investment in subordinated debentures issued by Pinnacle Financial	$	10,310	$	10,310
Liabilities	$	—	$	—
Stockholder’s equity — Trust preferred securities		10,000		10,000
Common stock (100% owned by Pinnacle Financial)		310		310
Total stockholder’s equity		10,310		10,310
Total liabilities and stockholder’s equity	$	10,310	$	10,310

Summary Income Statement

	Six months ended
	June 30,
	2005		2004
Income — Interest income from subordinated debentures issued by Pinnacle Financial	$	289		102
Net Income	$	289		102

Summary Statement of Stockholder’s Equity

	Trust							Total
	Preferred		Common		Retained			Stockholder's
	Securities		Stock		Earnings			Equity
Beginning balances, December 31, 2004	$	10,000	$	310	$	—		$	10,310
Net income		—		—		289			289
Dividends:
Trust preferred securities		—		—		(280	)		(280	)
Common paid to Pinnacle Financial		—		—		(9	)		(9	)
Ending balances, June 30, 2005	$	10,000	$	310	$	—		$	10,310

Page 17

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of our financial condition at June 30, 2005 and December 31, 2004 and our results of operations for the three and six months ended June 30, 2005 and 2004. The purpose of this discussion is to focus on information about our financial condition and results of operations which is not otherwise apparent from the consolidated financial statements. You should read the following discussion and analysis along with our consolidated financial statements and the related notes included elsewhere herein.

Overview

General. Pinnacle Financial’s rapid growth from its inception through the second quarter of 2005 continues to have a material impact on Pinnacle Financial’s financial condition and results of operations. This rapid growth resulted in net income for the three months ended June 30, 2005 of $0.21 per diluted share as compared to $0.14 per diluted share for the three months ended June 30, 2004 and net income for the six months ended June 30, 2005 of $0.40 per diluted share as compared to $0.27 per diluted share for the six months ended June 30, 2004. At June 30, 2005, loans totaled $556 million, as compared to $472 million at December 31, 2004, while total deposits were $690 million at June 30, 2005 compared to $571 million at December 31, 2004.

Results of Operations. Pinnacle Financial’s net interest income increased to $6.8 million in the second quarter of 2005 from $4.5 million in 2004. Also, Pinnacle Financial’s net interest income increased to $13.3 million for the six months ended June 30, 2005 from $8.7 million for the same period in 2004. The net interest margin (the ratio of net interest income to average earning assets for the period) was 3.57% for the three months ended June 30, 2005 compared to 3.51% for the same period in 2004. The net interest margin was 3.67% for the six months ended June 30, 2005 compared to 3.51% for the same period in 2004.

Pinnacle Financial’s provision for loan losses for the three months ended June 30, 2005 increased $34,000 when compared to the same period in 2004 and increased $282,000 for the six months ended June 30, 2005 when compared to the same period in 2004. The increase in loan volumes for both the three and six months ended June 30, 2005 was the primary cause for the increases in Pinnacle Financial’s provision for loan losses. As Pinnacle Financial’s loan portfolio continues to grow, Pinnacle Financial expects that the growth will be considered in establishing the allowance for loan losses.

Noninterest income for the first three and six months of 2005 compared to the same time periods in 2004 increased by $346,000, or 32% and $454,000, or 21%, respectively. The increase between 2005 and 2004 was due to Pinnacle Financial’s increased revenues from its mortgage origination unit, increases in investment services revenues, increases in deposit service charges and increases in gains on the sale of loans and loan participations sold partially offset by decreases in gains on the sale investment securities.

Pinnacle Financial’s growth for the first three and six months of 2005 when compared to the same time periods in 2004 resulted in increases in noninterest expenses of approximately $1.5 million, or 42%, and $2.8 million or 41%, respectively. The growth in noninterest expense was related to increases in salaries and employee benefits, equipment and occupancy expenses and other operating expenses. As Pinnacle Financial increased its number of full-time equivalent employees from 101.5 at June 30, 2004 to 146.5 at June 30, 2005, Pinnacle Financial experienced an approximately $907,000 increase in compensation and employee benefit expense for the three months ended June 30, 2005 and $1.8 million for the six months ended June 30, 2005 when compared to the same periods in 2004. Pinnacle Financial expects to add additional employees throughout 2005 which will cause Pinnacle Financial’s compensation and employee benefit expense to increase in future periods. Pinnacle Financial’s branch expansion efforts in 2004 and 2005 also resulted in increased noninterest expense for the first three and six months of 2005. The increased operational expenses for the branches opened during 2004 and the Hendersonville office which was opened late in the second quarter of 2005 as well as the anticipated opening of an additional facility late in 2005 will continue to result in increased noninterest expense in future periods. Although Pinnacle Financial’s expenses increased in 2005 when compared to 2004, Pinnacle Financial’s efficiency ratio, the ratio of noninterest expense to the sum of net interest income and noninterest income, decreased from 62.4% for the three months ended

Page 18

June 30, 2004 to 60.4% for the three months ended June 30, 2005 and from 62.4% for the six months ended June 30, 2004 to 60.1% for the six months ended June 30, 2005.

We continue to believe that a rising short-term interest rate environment is more likely than a falling rate environment over the next two quarters and that this should result in increased net interest income for us, in contrast to a falling or stagnant rate environment, primarily due to the fact that approximately 55.9% of our loan volumes are floating rate loans that reprice with adjustments to our prime lending rate or other similarly published over night interest rate indices. We also believe that we will continue to grow our balance sheet with continued emphasis on floating rate lending. However, due to increased competition for deposits in Nashville, we do not believe we will experience any meaningful margin expansion for the remainder of 2005.

Conversely, a falling rate environment could serve to have the opposite effect on our net interest income. In a falling rate environment, we may not be able to reduce our deposit funding costs by any meaningful amount due to market pressures, while our interest income could decrease at a more rapid pace.

Financial Condition. The $40 million increase in loans during the second quarter of 2005 contributed to the increase in Pinnacle Financial’s net income for the three months ended June 30, 2005 when compared to an increase of $32 million for the similar period in 2004. As Pinnacle Financial seeks to increase its loan portfolio it must also continue to monitor the risks inherent in its lending operations. If Pinnacle Financial’s allowance for loan losses is not sufficient to cover loan losses in Pinnacle Financial’s loan portfolio, increases to the allowance for loan losses would be required through additional provision for loan losses which would decrease Pinnacle Financial’s earnings.

Pinnacle Financial has successfully grown its total deposits to $690 million at June 30, 2005 compared to $571 million at December 31, 2004, an increase of 21%.

We continue to believe there is broad acceptance of our business model within the Nashville area and in our target markets of small businesses and affluent clients. As a result, and due to our sales pipelines remaining strong at the current time, we believe we will continue to increase our loan and deposit balances for the remainder of 2005 at amounts comparable to prior periods.

Capital and Liquidity. At June 30, 2005, Pinnacle Financial’s capital ratios, including Pinnacle National’s capital ratios, met regulatory minimum capital requirements and all requirements Pinnacle Financial has committed to regulators to maintain. Additionally, at June 30, 2005, Pinnacle National would be considered to be “well-capitalized” pursuant to banking regulations.

In the past, we have been successful in procuring additional capital from the capital markets (via public and private offerings). This additional capital was required to support our growth. We expect continued strong growth in the future and, as a result, we are considering issuing additional trust preferred securities before the end of 2005. Trust preferred securities are classified as subordinated indebtedness on our balance sheet, but for regulatory purposes are treated as capital subject to certain limitations.

Critical Accounting Estimates

The accounting principles we follow and our methods of applying these principles conform with United States generally accepted accounting principles and with general practices within the banking industry. In connection with the application of those principles, we have made judgments and estimates which, in the case of the determination of our allowance for loan losses (ALL), have been critical to the determination of our financial position and results of operations.

Allowance for Loan Losses (ALL). Our management assesses the adequacy of the ALL prior to the end of each calendar quarter. This assessment includes procedures to estimate the allowance and test the adequacy and appropriateness of the resulting balance. The ALL consists of two portions (1) an allocated amount representative of specifically identified credit exposure and exposures readily predictable by historical or comparative experience; and (2) an unallocated amount representative of inherent loss which is not readily identifiable. Even though the ALL is composed of two components, the entire ALL is available to absorb any credit losses.

Page 19

We establish the allocated amount separately for two different risk groups (1) unique loans (commercial loans, including those loans considered impaired); and (2) homogeneous loans (generally consumer loans). We base the allocation for unique loans primarily on risk rating grades assigned to each of these loans as a result of our loan management and review processes. We then assign each risk-rating grade a loss ratio, which is determined based on the experience of management, discussions with banking regulators and our independent loan review process. We estimate losses on impaired loans based on estimated cash flows discounted at the loan’s original effective interest rate or based on the underlying collateral value. Based on management’s experience, we also assign loss ratios to our consumer portfolio. These loss ratios are assigned to the various homogenous categories of the consumer portfolio (e.g., automobile, residential mortgage, home equity).

The unallocated amount is particularly subjective and does not lend itself to exact mathematical calculation. The unallocated amount represents estimated inherent credit losses which may exist, but have not yet been identified, as of the balance sheet date. In estimating the unallocated amount, we consider such matters as changes in the local or national economy, the depth or experience in the lending staff, any concentrations of credit in any particular industry group, and new banking laws or regulations. After we assess applicable factors, we evaluate the aggregate unallocated amount based on our management’s experience.

We then test the resulting ALL balance by comparing the balance in the ALL to historical trends and peer information. Our management then evaluates the result of the procedures performed, including the result of our testing, and concludes on the appropriateness of the balance of the ALL in its entirety. The audit committee of our board of directors reviews the assessment prior to the filing of quarterly and annual financial information.

In assessing the adequacy of the ALL, we also rely on an ongoing independent loan review process. We undertake this process both to ascertain whether there are loans in the portfolio whose credit quality has weakened over time and to assist in our overall evaluation of the risk characteristics of the entire loan portfolio. Our loan review process includes the judgment of management, the input from our independent loan reviewer, who is not an employee of Pinnacle National, and reviews that may have been conducted by bank regulatory agencies as part of their usual examination process.

Results of Operations

Our results were highlighted by the continued growth in loans and other earning assets and deposits, which resulted in increased revenues and expenses. Our net income for the three months ended June 30, 2005 and 2004 was $1,959,000 and $1,168,000, respectively, and was $3,739,000 and $2,239,000 for the six months ended June 30, 2005 and 2004, respectively, as follows (dollars in thousands):

	Three Months							Six Months
	Ended June 30,				Percent			Ended June 30,				Percent
	2005		2004		Increase			2005		2004		Increase
Interest income	$	10,544	$	6,225		69	%	$	19,811	$	11,891		67	%
Interest expense		3,749		1,689		122			6,516		3,203		103
Net interest income		6,795		4,536		50			13,295		8,688		53
Provision for loan losses		483		449		8			1,084		803		35
Net interest income after provision for loan losses		6,312		4,087		54			12,211		7,885		55
Noninterest income		1,413		1,067		32			2,594		2,139		21
Noninterest expense		4,963		3,498		42			9,544		6,757		41
Net income before taxes		2,762		1,656		67			5,261		3,267		61
Income tax expense		803		488		65			1,522		1,028		48
Net income	$	1,959	$	1,168		68	%	$	3,739	$	2,239		67	%

Net Interest Income. Net interest income represents the amount by which interest earned on various earning assets exceeds interest paid on deposits and other interest bearing liabilities and is the most significant component of our earnings. For the three months ended June 30, 2005, we recorded net interest income of $6,795,000, which resulted in a net interest margin of 3.57% for the period. For the three months ended June 30, 2004, we recorded net interest

Page 20

income of $4,536,000, which resulted in a net interest margin of 3.51% for the period. For the six months ended June 30, 2005, we recorded net interest income of $13,295,000, which resulted in a net interest margin of 3.67% for the period. For the six months ended June 30, 2004, we recorded net interest income of $8,688,000, which resulted in a net interest margin of 3.51% for the period.

The following tables set forth the amount of our average balances, interest income or interest expense for each category of interest-earning assets and interest-bearing liabilities and the average interest rate for total interest-earning assets and total interest-bearing liabilities, net interest spread and net yield on average interest-earning assets for the three and six months ended June 30, 2005 and 2004 (dollars in thousands):

	Three months ended							Three months ended
	June 30, 2005							June 30, 2004
	Average				Yield/			Average				Yield/
	Balances		Interest		Rate(1)			Balances		Interest		Rate(1)
Interest-earning assets:
Loans	$	537,313	$	8,002		5.98	%	$	343,974	$	4,506		5.27	%
Securities:
Taxable		194,840		2,135		4.39			157,547		1,555		3.97
Tax-exempt		27,332		239		4.62			11,645		99		4.39
Federal funds sold		14,879		111		2.99			11,055		25		0.91
Other		3,730		57		7.08			2,849		40		6.40
Total interest-earning assets		778,094		10,544		5.48			527,070		6,225		4.78
Non-earning assets		44,250							28,367
Total assets	$	822,344						$	555,437
Interest-bearing liabilities:
Interest-bearing deposits:
Interest checking	$	57,652		90		0.62		$	37,755		44		0.47
Savings and money market		218,685		906		1.66			155,214		297		0.77
Certificates of deposit		252,402		1,882		2.99			174,183		987		2.28
Total interest-bearing deposits		528,739		2,878		2.18			367,152		1,328		1.45
Securities sold under agreements to repurchase		49,883		253		2.04			17,523		11		0.26
Federal funds purchased		4,775		40		3.38			4,467		14		1.28
Federal Home Loan Bank advances		54,951		424		3.10			45,736		245		2.16
Subordinated debt		10,310		154		5.98			10,310		91		3.54
Total interest-bearing liabilities		648,658		3,749		2.32			445,188		1,689		1.53
Non-interest bearing demand deposits		111,937		—		—			72,812		—		—
Total deposits and interest-bearing liabilities		760,595		3,749		1.98			518,000		1,689		1.31
Other liabilities		2,180							1,895
Stockholders’ equity		59,569							35,542
Total liabilities and stockholders’ equity	$	822,344						$	555,437
Net interest income			$	6,795						$	4,536
Net interest spread (2)						3.16	%						3.25	%
Net interest margin (3)						3.57	%						3.51	%

(1)	Yields computed on tax-exempt instruments on a tax equivalent basis.
(2)	Yields realized on interest-earning assets less the rates paid on interest-bearing liabilities.
(3)	Net interest margin is the result of annualized net interest income divided by average interest-earning assets for the period.

Page 21

	Six months ended							Six months ended
	June 30, 2005							June 30, 2004
	Average				Yield/			Average				Yield/
	Balances		Interest		Rate(1)			Balances		Interest		Rate(1)
Interest-earning assets:
Loans	$	512,813	$	14,957		5.88	%	$	326,159	$	8,452		5.22	%
Securities:
Taxable		189,883		4,157		4.41			148,777		3,106		4.20
Tax-exempt		25,329		440		4.62			10,720		185		4.47
Federal funds sold		11,864		157		2.66			16,539		75		0.91
Other		3,503		100		6.85			2,625		73		6.30
Total interest-earning assets		743,392		19,811		5.42			504,820		11,891		4.77
Non-earning assets		46,222							27,028
Total assets	$	789,614						$	531,848
Interest-bearing liabilities:
Interest-bearing deposits:
Interest checking	$	57,695		162		0.57		$	35,307		85		0.49
Savings and money market		220,382		1,604		1.47			150,973		583		0.78
Certificates of deposit		234,507		3,266		2.81			167,870		1,831		2.19
Total interest-bearing deposits		512,584		5,032		1.98			354,150		2,499		1.42
Securities sold under agreements to repurchase		44,016		403		1.85			16,195		21		0.26
Federal funds purchased		2,694		44		3.33			2,234		14		1.28
Federal Home Loan Bank advances		52,592		748		2.87			44,058		476		2.17
Subordinated debt		10,310		289		5.65			10,310		193		3.76
Total interest-bearing liabilities		622,196		6,516		2.11			426,947		3,203		1.51
Non-interest bearing demand deposits		106,433		—		—			67,133		—		—
Total deposits and interest-bearing liabilities		728,629		6,516		1.80			494,080		3,203		1.30
Other liabilities		1,990							2,144
Stockholders’ equity		58,995							35,624
Total liabilities and stockholders’ equity	$	789,614						$	531,848
Net interest income			$	13,295						$	8,688
Net interest spread (2)						3.31	%						3.26	%
Net interest margin (3)						3.67	%						3.51	%

(1)	Yields computed on tax-exempt instruments on a tax equivalent basis.
(2)	Yields realized on interest-earning assets less the rates paid on interest-bearing liabilities.
(3)	Net interest margin is the result of annualized net interest income divided by average interest-earning assets for the period.

As noted above, the net interest margin for the second quarter of 2005 was 3.57% compared to a net interest margin of 3.51% for the same period in 2004, an increase of 0.06%. Additionally, the net interest margin for the first six months of 2005 was 3.67% compared to a net interest margin of 3.51% for the same period in 2004, an increase of 0.16%. Other matters related to the changes in net interest income, net interest yields and rates, and net interest margin are presented below:

• Our loan yields increased 0.71% between the second quarter of 2005 and 2004 and 0.66% between the first six months of 2005 when compared to the same period in 2004. Approximately 55.9% of our loans are floating rate loans at June 30, 2005 compared to 56.0% at December 31, 2004 and 52.5% at June 30, 2004. The interest rates charged these borrowers are tied, in substantially all cases, to our prime rate which is usually less than fixed rate loan yields. Our weighted average prime rate for the first six months of 2005 was 5.67% compared to 4.00% for the same period in 2004. The rates for 2005 were higher due primarily to periodic increases in our prime lending rate.

• We have been able to grow our funding base significantly. For asset/liability management purposes in 2005, we elected to allocate a greater proportion of such funds to our loan portfolio versus our securities and shorter-term investment portfolio than in 2004. For the six months ended June 30, 2005, average loan balances were 69.0% of total interest earning assets compared to 65.3% for the six months ended June 30,

Page 22

	2004. Loans generally have higher yields than do securities and other shorter-term investments. This change in allocation contributed to the increase in the overall total interest earning asset yields of 0.70% for the first three months of 2005 compared to the same period in 2004 and 0.65% for the first six months of 2005 compared to the same period in 2004.
•	During 2005, overall deposit rates were higher than those rates for the comparable period in 2004. Changes in interest rates paid on such products as interest checking, savings and money market accounts, securities sold under agreements to repurchase and Federal funds purchased will generally increase or decrease in a manner that is consistent with changes in the short-term rate environment. During 2005, and as was the case with our prime lending rate, short-term rates were higher than in 2004. We also monitor the pricing of similar products by our primary competitors. The changes in the short-term rate environment and the pricing of our primary competitors required us to increase these rates in 2005 compared to the same period in 2004 which resulted in increased pressure on our net interest margin.
•	During the first six months of 2005, the average balances of noninterest bearing deposit balances, interest bearing transaction accounts, savings and money market accounts and securities sold under agreements to repurchase amounted to 58.8% of our total funding compared to 54.6% in 2004. These funding sources generally have lower rates than do other funding sources, such as certificates of deposit and other borrowings. As a result, the average rates on fundings for the first six months of 2005 were lower than they would have been otherwise due to this change in funding mix.
•	Similarly, the short- and long-term rate environment impacts rates paid on certificates of deposit and advances from the FHLB; however, these items are also impacted by our decisions to alter the mix of maturities of the underlying accounts within these items. Furthermore, the timing of the initial sale of the certificate of deposit or the funding of the FHLB advance also impacts the rates paid on these items. Our results were impacted by certificates of deposit and advances from the FHLB that had been acquired during periods of lower interest rates. Such items matured during the interim period between the three and six months ended June 30, 2005 and 2004, and were replaced by certificates of deposit and advances from the FHLB which had higher interest rates. These matters contributed to the increase in the rates paid on certificates of deposit and advances from the FHLB between the two periods.
•	Also impacting the net interest margin during the first three and six months of 2005 compared to 2004 was pricing of our subordinated indebtedness. The interest rate charged on this indebtedness is generally higher than other funding sources. The rate charged on this indebtedness is determined in relation to the three-month LIBOR index and reprices quarterly. During 2005, the short-term interest rate environment was higher than during the three and six months ended June 30, 2004, and, as a result, the pricing for this funding source was higher in 2005 than in 2004.

Rate and Volume Analysis. As noted above, net interest income increased by $4,607,000 in the six months ended June 30, 2005 compared to the six months ended June 30, 2004. The following is an analysis of the changes in our net interest income comparing the changes attributable to rates and those attributable to volumes for the six months ended June 30, 2005 compared to the six months ended June 30, 2004 (dollars in thousands):

Page 23

	Increase (decrease) due to						Total increase
Dollar change in interest income and expense	Volume			Rate			(decrease)
Interest-earning assets:
Loans	$	5,313		$	1,192		$	6,505
Securities:
Taxable		886			165			1,051
Tax-exempt		249			6			255
Federal funds sold and securities purchased under agreements to resell		(64	)		146			82
Other		22			5			27
		6,406			1,514			7,920
Interest-bearing liabilities:
Interest checking	$	61		$	16		$	77
Savings and money market accounts		348			673			1,021
Certificates of deposit		840			595			1,435
Total interest-bearing deposits		1,249			1,284			2,533
Securities sold under agreements to repurchase		83			299			382
Federal funds purchased		3			27			30
Federal Home Loan Bank advances		103			169			272
Subordinated debt		66			30			96
		1,504			1,809			3,313
Increase in net interest income	$	4,902		$	(295	)	$	4,607

(1)

The above amounts are presented on a fully tax equivalent basis.

(2)

Changes in net interest income are attributed to either changes in average balances (volume change) or changes in average rates (rate change) for earning assets and sources of funds on which interest is received or paid. Volume change is calculated as change in volume times the previous rate while rate change is calculated as a change in rate times the previous volume. The change attributed to rates and volumes (change in rate times change in volume) is allocated between volume change and rate change at the ratio of how much each component bears to the absolute value of their total.

Provision for Loan Losses. The provision for loan losses represents a charge to earnings necessary to establish an allowance for loan losses that, in our management’s evaluation, should be adequate to provide coverage for the inherent losses on outstanding loans. The provision for loan losses amounted to $483,000 and $449,000 for the three months ended June 30, 2005 and 2004, respectively, and $1,084,000 and $802,000 for the six months ended June 30, 2005 and 2004, respectively.

Based upon our management’s evaluation of the loan portfolio, we believe the allowance for loan losses to be adequate to absorb our estimate of probable losses existing in the loan portfolio at the balance sheet date. The increase in the provision for loan losses for the three and six months ended June 30, 2005 when compared to the same period in 2004 was primarily due to the increase in loan volumes for the three and six months ended June 30, 2005 when compared to 2004. Based upon management’s assessment of the loan portfolio, we adjust our allowance for loan losses to an amount deemed appropriate to adequately cover inherent risks in the loan portfolio. While our policies and procedures used to estimate the allowance for loan losses, as well as the resultant provision for loan losses charged to operations, are considered adequate by our management and are reviewed from time to time by Pinnacle National’s regulators, they are necessarily approximate and imprecise. There exist factors beyond our control, such as general economic conditions both locally and nationally, which may negatively impact, materially, the adequacy of our allowance for loan losses and, thus, the resulting provision for loan losses.

Noninterest Income. Our noninterest income is composed of several components, some of which vary significantly between quarterly periods. Service charges on deposit accounts and other noninterest income generally reflect our growth, while investment services and fees from the origination of mortgage loans will often reflect market conditions and fluctuate from period to period. The opportunities for recognition of gains on loans and loan participations sold and gain on sales of investment securities may also vary widely from quarter to quarter and year to year.

Page 24

The following is the makeup of our noninterest income for the three and six months ended June 30, 2005 and 2004 (dollars in thousands):

	Three months ended							Six months ended
	June 30,				Percent			June 30,				Percent
	2005		2004		Change			2005		2004		Change
Noninterest income:
Service charges on deposit accounts	$	242	$	231		5	%	$	503	$	395		27	%
Investment services		491		405		21			929		794		17
Gains on sales of loans and loan participations, net:
Fees from the origination and sale of mortgage loans, net of sales commissions		239		150		59			414		189		119
Gain on loan participations sold, net		151		116		30			137		238		(42	)
Gain on sale of investment securities, net		—		—		—			114		248		(54	)
Other noninterest income		290		165		76			497		275		81
Total noninterest income	$	1,413	$	1,067		32	%	$	2,594	$	2,139		21	%

As shown, the largest component of noninterest income is commissions and fees from our financial advisory unit, Pinnacle Asset Management, a division of Pinnacle National. At June 30, 2005, Pinnacle Asset Management was receiving commissions and fees in connection with approximately $419 million in brokerage assets held with Raymond James Financial Services, Inc. compared to $344 million at June 30, 2004.

Service charge income for the first three and six months of 2005 increased over that of the first three months of 2004 due to an increase in the number of deposit accounts subject to service charges which was partially offset by increases in earnings credit which is used by customers to reduce the service charges on certain commercial noninterest bearing deposit accounts. Additionally, mortgage related fees also provided for a significant portion of the increase in noninterest income between 2005 and 2004 due to increased volumes of originations and increased number of mortgage originators. These mortgage fees are for loans originated by Pinnacle National and subsequently sold to third-party investors. All loans are sold whereby servicing rights transfer to the buyer. Generally, mortgage origination fees increase in lower interest rate environments and decrease in rising interest rate environments. As a result, mortgage origination fees may fluctuate greatly in response to a changing rate environment. Direct sales commissions paid to mortgage originators have been reclassified and offset against the fees from the origination of mortgage loans.

Another noninterest income item for the three months ended June 30, 2005 was related to our sale of certain loan participations to our correspondent banks that were primarily related to new lending transactions in excess of internal loan limits. At June 30, 2005 and pursuant to participation agreements with these correspondents, we had participated approximately $64 million of originated loans to these other banks compared to $59 million at June 30, 2004. These participation agreements have various provisions regarding collateral position, pricing and other matters. Many of these agreements provide that we pay the correspondent less than the loan’s contracted interest rate. Pursuant to Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities — a replacement of FASB Statement No. 125", we recorded a net gain of $151,000 for the three months ended June 30, 2005 compared to $116,000 in net gains during the three months ended June 30, 2004. At June 30, 2005, the remaining unamortized asset associated with the cumulative gains approximated $544,000. We intend to maintain relationships with our correspondents in order to sell participations in future loans to these correspondents in a similar manner. However, the timing of participations may cause the level of gains, if any, to vary significantly.

Also included in noninterest income for the three and six months ended June 30, 2005, were net gains of approximately $114,000 realized from the sale of approximately $6.8 million of available-for-sale securities. This compares to $248,000 in gains on the sale of approximately $21.9 million of investment securities for the same period in the prior year.

Noninterest Expense. Noninterest expense consists of salaries and employee benefits, equipment and occupancy expenses, and other operating expenses. The following is the makeup of our noninterest expense for the three and six months ended June 30, 2005 and 2004 (dollars in thousands):

Page 25

	Three months ended							Six months ended
	June 30,				Percent			June 30,				Percent
	2005		2004		Change			2005		2004		Change
Compensation and employee benefits:
Salaries	$	1,998	$	1,366		46	%	$	3,845	$	2,760		39	%
Commissions		183		154		19			353		290		22
Other, primarily incentives		483		413		17			1,039		767		35
Employee benefits		447		271		65			844		501		68
Total compensation and benefits		3,111		2,204		41			6,081		4,318		41
Equipment and occupancy		894		535		67			1,678		1,041		61
Marketing and other business development		180		156		15			293		305		(4	)
Postage and supplies		158		124		27			294		223		32
Other noninterest expense:
Accounting and auditing		90		75		20			180		119		51
Consultants, including loan review		32		17		88			63		53		19
Legal, including borrower related charges		36		60		(40	)		63		61		3
Regulatory fees		42		31		35			84		62		35
Directors’ fees		34		42		(19	)		99		73		36
Insurance, including FDIC premiums		72		57		26			152		102		49
Other		314		197		59			557		401		39
Total other noninterest expense		620		479		29			1,198		871		38
Total noninterest expense	$	4,963	$	3,498		42	%	$	9,544	$	6,758		41	%

Expenses have generally increased between the above periods due to personnel additions occurring throughout each period, the continued development of our branch network and other expenses which increase in relation to our growth rate. We anticipate continued increases in our expenses during 2005 when compared to 2004 for such items as additional personnel, the opening of additional branches, legal and audit expenses and other expenses which tend to increase in relation to our growth.

At June 30, 2005, we employed 146.5 full time equivalent employees compared to 101.5 at June 30, 2004. We intend to continue to add employees to our work force during 2005, which will cause our salary costs to increase in future periods.

We believe that variable pay incentives are a valuable tool in motivating an employee base that is focused on providing our clients effective financial advice and increasing shareholder value. As a result, and unlike many other financial institutions, substantially all of our employees are eligible to participate in an annual cash incentive plan. Included in the salary and employee benefits amounts for the six months ended June 30, 2005 and 2004, are $926,000 and $650,000 in accruals related to these variable pay awards. The accruals will fluctuate from quarter to quarter based on the estimation of achievement of performance targets and the increase in the number of associates eligible to receive the award. For 2004, the actual award paid equaled approximately 80% of the targeted award. The incentive plan for 2005 is structured similarly to prior year plans in that the award is based on the achievement of performance and other objectives. As of June 30, 2005, the current year accrual has been estimated at a payout percentage of approximately 100% of target. Because of the relative experience of our associates, our compensation costs are and we expect will continue to be higher on a per associate basis than other financial institutions; however, we believe the experience and engagement of our associates also allows us to employ fewer people than most financial institutions our size.

Also, during 2004 we opened a new branch office in the West End area of Nashville and in January of 2005 opened an office in Franklin, Tennessee and late in the second quarter of 2005 we opened an office in Hendersonville, Tennessee. These branch additions contributed to the increase in our equipment and occupancy expenses in 2005 over that of 2004.

Marketing and other business development expenses are lower in the first six months of 2005 compared to the first six months of 2004 due to decreased customer entertainment and community relations expenses. Other noninterest expenses are significantly higher in 2005 over the same periods in 2004. For the three and six month periods ended June 30, 2005 compared to the same periods in 2004, other noninterest expenses were

Page 26

higher by $141,000 and $327,000, respectively. Most of these increases are attributable to increased audit and accounting fees, and insurance expenses. Of particular note is that audit and accounting fees are higher in 2005 due to increased expenses associated with Sarbanes Oxley Section 404 compliance and other matters.

Our efficiency ratio (ratio of noninterest expense to the sum of net interest income and noninterest income) was 60.4% in the second quarter of 2005 compared to 62.4% in the second quarter of 2004. The efficiency ratio measures the amount of expense that is incurred to generate a dollar of revenue. Our efficiency ratio will fluctuate due to many factors. Concerning expenses, each period’s efficiency ratio will be impacted by the number of new associates added and any new offices.

Income Taxes. The effective income tax expense rate for the first three and six months of 2005 was approximately 29.1% and 28.9%, respectively, compared to an effective income tax expense rate for the three and six months ended June 30, 2004 of approximately 29.5% and 31.5%, respectively. The reduction in the effective tax rate between the first six months of 2005 and for the same period in 2004 was primarily due to additional investments in tax-exempt investment securities and the formation of a real estate investment trust during the fourth quarter of 2004 which provides us with an alternative vehicle for raising capital should we so desire. Additionally, the ownership structure of this real estate investment trust provides certain income tax benefits to us.

Page 27

Quarterly Information. The following is a summary of quarterly balance sheet and results of operations information for the last six quarters (dollars in thousands, except per share data).

	June			March			December			September			June			March
	2005			2005			2004			2004			2004			2004
Balance sheet data, at quarter end:
Total assets	$	872,076			787,436			727,139			685,408			586,313			541,052
Total loans		556,786			516,733			472,362			434,909			355,267			323,416
Allowance for loan losses		(6,659	)		(6,198	)		(5,650	)		(5,434	)		(4,466	)		(4,042	)
Securities		227,938			202,223			208,170			191,323			165,528			162,315
Total deposits		689,919			619,021			570,727			541,859			467,321			437,601
Securities sold under agreements to repurchase		57,677			46,388			31,928			22,958			23,772			14,699
Advances from FHLB		49,500			51,500			53,500			51,500			47,500			40,500
Subordinated debt		10,310			10,310			10,310			10,310			10,310			10,310
Total stockholders’ equity		61,501			57,657			57,880			56,668			35,125			36,266
Balance sheet data, quarterly averages:
Total assets	$	822,344			756,884			707,131			618,694			555,437			508,260
Total loans		537,313			488,313			448,611			392,220			343,974			306,549
Securities		222,172			208,253			203,728			183,721			169,192			149,802
Total earning assets		778,094			708,690			670,839			589,554			527,070			482,572
Total deposits		640,676			597,358			562,936			485,300			439,964			402,603
Securities sold under agreements to repurchase		49,883			38,149			23,520			25,953			17,523			14,868
Advances from FHLB		54,951			50,233			48,022			49,000			45,736			42,379
Subordinated debt		10,310			10,310			10,310			10,310			10,310			10,310
Total stockholders’ equity		59,569			58,420			57,721			43,868			35,542			35,705
Statement of operations data, for the three months ended:
Interest income	$	10,544			9,266			8,574			7,214			6,225			5,666
Interest expense		3,749			2,766			2,296			1,915			1,689			1,514
Net interest income		6,795			6,500			6,278			5,299			4,536			4,152
Provision for loan losses		483			601			1,134			1,012			449			354
Net interest income after provision for loan losses		6,312			5,899			5,144			4,287			4,087			3,798
Noninterest income		1,413			1,181			1,246			1,534			1,067			1,072
Noninterest expense		4,963			4,581			4,127			3,860			3,498			3,259
Income before taxes		2,762			2,499			2,263			1,961			1,656			1,611
Income tax expense		803			719			574			570			488			540
Net income	$	1,959			1,780			1,689			1,391			1,168			1,071
Per share data:
Earnings — basic	$	0.23			0.21			0.20			0.18			0.16			0.15
Earnings — diluted	$	0.21			0.19			0.18			0.16			0.14			0.13
Book value at quarter end (1)	$	7.32			6.87			6.90			6.75			4.74			4.91
Weighted avg. shares — basic		8,401,198			8,389,256			8,389,232			7,832,512			7,397,920			7,384,106
Weighted avg. shares — diluted		9,434,260			9,437,183			9,448,696			8,857,015			8,279,114			8,213,730
Common shares outstanding		8,405,891			8,391,371			8,389,232			8,389,232			7,404,586			7,384,106

(1) Book value per share computed by dividing total stockholders’ equity by common shares outstanding

Page 28

Financial Condition

Our consolidated balance sheet at June 30, 2005 reflects significant growth since December 31, 2004. Total assets grew to $872 million as of June 30, 2005 up 40% on an annualized basis from the $727 million reported at December 31, 2004. Loans as of June 30, 2005 were $556 million compared to $472 million at December 31, 2004. Total deposits increased to $690 million at June 30, 2005, compared to $571 million at December 31, 2004.

Loans. The composition of loans at June 30, 2005 and December 31, 2004 and the percentage (%) of each classification to total loans are summarized as follows (dollars in thousands):

	2005					2004
	Amount		%			Amount		%
Commercial real estate — Mortgage	$	126,436		22.7	%	$	117,123		24.8	%
Commercial real estate — Construction		29,954		5.4			8,428		1.8
Commercial — Other		214,209		38.5			189,456		40.1
Total commercial		370,599		66.6			315,007		66.7
Consumer real estate — Mortgage		157,819		28.3			126,907		26.9
Consumer real estate — Construction		9,218		1.7			14,991		3.2
Consumer — Other		19,150		3.4			15,457		3.3
Total consumer		186,187		33.4			157,355		33.3
Total loans	$	556,786		100.0	%	$	472,362		100.0	%

The following table classifies our fixed and variable rate loans at June 30, 2005 according to contractual maturities of (1) one year or less, (2) after one year through five years, and (3) after five years along with percentage comparisons to December 31, 2004. The table also classifies our variable rate loans pursuant to the contractual repricing dates of the underlying loans (dollars in thousands):

	Amounts at June 30, 2005						Percentages to total loans
	Fixed		Variable				at June 30,			at Dec. 31,
	Rates		Rates		Total		2005			2004
Based on contractual maturities:
Due within one year	$	9,657	$	178,853	$	188,510		33.9	%		31.4	%
Due in one year through five years		117,396		96,215		213,611		38.4			40.8
Due after five years		34,400		120,265		154,665		27.7			27.8
	$	161,453	$	395,333	$	556,786		100.0	%		100.0	%
Based on contractual repricing dates:
Floating rate	$	—	$	310,982	$	310,982		55.9	%		56.0	%
Reprice within one year		9,657		38,479		48,136		8.6			9.1
Reprice in one year through five years		117,396		42,266		159,662		28.7			28.8
Reprice after five years		34,400		3,606		38,006		6.8			6.1
	$	161,453	$	395,333	$	556,786		100.0	%		100.0	%

The above information does not consider the impact of scheduled principal payments. Daily floating rate loans are tied to Pinnacle National’s prime lending rate or a national interest rate index with the underlying loan rates changing in relation to changes in these indexes.

Non-Performing Assets. The specific economic and credit risks associated with our loan portfolio, include, but are not limited to, a general downturn in the economy which could affect employment rates in our market area, general real estate market deterioration, interest rate fluctuations, deteriorated or non-existent collateral, title defects, inaccurate appraisals, financial deterioration of borrowers, fraud, and any violation of banking laws and regulations.

We attempt to reduce these economic and credit risks by adherence to loan to value guidelines for collateralized loans, by investigating the creditworthiness of the borrower and by monitoring the borrower’s financial position. Also, we establish and periodically review our lending policies and procedures. Banking regulations limit our exposure by prohibiting loan relationships that exceed 15% of Pinnacle National’s statutory capital in the case of loans that are not fully secured by readily marketable or other permissible types of collateral.

Page 29

We discontinue the accrual of interest income when (1) there is a significant deterioration in the financial condition of the borrower and full repayment of principal and interest is not expected or (2) the principal or interest is more than 90 days past due, unless the loan is both well-secured and in the process of collection. At June 30, 2005, we had two loans for $561,000 on nonaccruing status which were the same two loans at December 31, 2004. An estimate of the loss related to these nonaccrual loans has been incorporated into our ALL methodology.

There were approximately $66,000 in loans at June 30, 2005 which were 90 days past due and still accruing interest. At June 30, 2005 and December 31, 2004, no loans were deemed to be a restructured loan. Additionally, during the six months ended June 30, 2005, we foreclosed on a single piece of property collateralizing one consumer loan. The foreclosed property was placed in Pinnacle National’s other real estate owned. We had no repossessed real estate properties classified as other real estate owned at December 31, 2004. The following table is a summary of our nonperforming assets at June 30, 2005 and December 31, 2004 (dollars in thousands):

	2005			2004
Nonaccrual loans (1)	$	561		$	561
Restructured loans		—			—
Other real estate owned		35			—
Total nonperforming assets		596			561
Accruing loans past due 90 days or more		66			146
Total nonperforming assets and accruing loans past due 90 days or more	$	662		$	707
Total loans outstanding	$	556,786		$	472,362
Ratio of total nonperforming assets and accruing loans past due 90 days or more to total loans outstanding at end of period		0.12	%		0.15	%
Ratio of total nonperforming assets and accruing loans past due 90 days or more to total allowance for loan losses at end of period		9.9	%		12.5	%

(1) Interest income that would have been recorded during the first six months of 2005 related to nonaccrual loans was $29,000 compared to $41,000 for the year ended December 31, 2004, none of which is included in interest income or net income for the applicable periods.

Potential problem assets, which are not included in nonperforming assets, amounted to $1,020,000 at June 30, 2005 or 0.08% of total loans compared to $24,000 or 0.01% at December 31, 2004. Potential problem assets represent those assets with a well-defined weakness and where information about possible credit problems of borrowers has caused management to have serious doubts about the borrower’s ability to comply with present repayment terms. This definition is believed to be substantially consistent with the standards established by Pinnacle National’s primary regulator for loans classified as substandard.

Allowance for Loan Losses (ALL). We maintain the ALL at a level that our management deems appropriate to adequately cover the inherent risks in the loan portfolio. As of June 30, 2005 and December 31, 2004, our allowance for loan losses was $6,659,000 and $5,650,000, respectively. Our management deemed these amounts to be adequate. The judgments and estimates associated with our ALL determination are described under “Critical Accounting Estimates” above.

Approximately 66.6% of our loan portfolio at June 30, 2005 and 66.7% at December 31, 2004 consisted of commercial loans. Using standard industry codes, we periodically analyze our loan position with respect to our borrowers’ industries to determine if a concentration of credit risk exists to any one or more industries. We do have a significant credit exposure of loans outstanding plus unfunded lines and letters of credit to borrowers in the following industries as of June 30, 2005 and December 31, 2004 (dollars in thousands):

	2005		2004
Trucking industry	$	46,852	$	43,107
Operators of nonresidential buildings		40,147		27,510
Operators of residential buildings and dwellings		19,452		16,414

Page 30

We evaluate our exposure level to these industry groups periodically in order to determine if additional allowance allocations are warranted. At June 30, 2005 and December 31, 2004, we determined that we did not have any excessive exposure to any single industry which would warrant additional allowance allocations.

The following table sets forth, based on management’s best estimate, the allocation of the ALL to types of loans as well as the unallocated portion as of June 30, 2005 and December 31, 2004 and the percentage (%) of loans in each category to the total loans (dollars in thousands):

	2005					2004
	Amount		%			Amount		%
Commercial real estate — Mortgage	$	1,290		22.7	%	$	1,205		24.8	%
Commercial real estate — Construction		282		5.4			188		1.8
Commercial — Other		1,904		38.5			1,711		40.1
Total commercial		3,476		66.6			3,104		66.7
Consumer real estate — Mortgage		1,134		28.3			869		26.9
Consumer real estate — Construction		68		1.7			39		3.2
Consumer — Other		514		3.4			396		3.3
Total consumer		1,716		33.4			1,304		33.3
Unallocated		1,467	NA				1,242	NA
Total loans	$	6,659		100.0	%	$	5,650		100.0	%

The following is a summary of changes in the allowance for loan losses for the six months ended June 30, 2005 and the year ended December 31, 2004 and the ratio of the allowance for loan losses to total loans as of the end of each period (dollars in thousands):

	2005			2004
Balance at beginning of period	$	5,650		$	3,719
Provision for loan losses		1,084			2,948
Charged-off loans:
Commercial real estate — Mortgage		—			—
Commercial real estate — Construction		—			—
Commercial — Other		—			—
Consumer real estate — Mortgage		(38	)		(884	)
Consumer real estate — Construction		—			—
Consumer — Other		(57	)		(148	)
Total charged-off loans		(95	)		(1,032	)
Recoveries of previously charged-off loans:
Commercial real estate — Mortgage		—			—
Commercial real estate — Construction		—			2
Commercial — Other		2			—
Consumer real estate — Mortgage		—			—
Consumer real estate — Construction		—			—
Consumer — Other		18			13
Recoveries of previously charged-off loans		20			15
Balance at end of period	$	6,659		$	5,650
Ratio of the allowance for loan losses to total loans outstanding at end of period		1.20	%		1.20	%
Ratio of net charge-offs to average loans outstanding for the period (1)		0.04	%		0.27	%

(1) The ratio of net charge-off’s to average loans outstanding for the six months ended June 30, 2005 was computed by annualizing the net charge-off amount to a twelve-month period.

During the first six months of 2005, we charged-off $95,000 related to several consumer loans. As a relatively new institution, we do not have loss experience comparable to more mature financial institutions; however, as our loan portfolio matures, we will have additional charge-offs, and we will consider the amount and nature of our charge-offs and other factors in determining the adequacy of our allowance for loan losses.

Page 31

Investments. The following table summarizes the amortized cost and fair value of our securities at June 30, 2005 and December 31, 2004 (dollars in thousands):

	June 30, 2005
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Securities available-for-sale:
U.S. Treasury securities	$	—	$	—	$	—	$	—
U.S. government agency securities		25,911		77		42		25,946
Mortgage-backed securities		151,769		336		896		151,209
State and municipal securities		21,202		80		108		21,174
Corporate notes		2,308		—		67		2,241
	$	201,190	$	493	$	1,113	$	200,570
Securities held-to-maturity:
U.S. government agency securities	$	17,747	$	4	$	172	$	17,579
State and municipal securities		9,621		—		238		9,383
	$	27,368	$	4	$	410	$	26,962

	December 31, 2004
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Securities available-for-sale:
U.S. Treasury securities	$	—	$	—	$	—	$	—
U.S. government agency securities		27,165		129		20		27,274
Mortgage-backed securities		138,851		348		672		138,527
State and municipal securities		12,486		72		55		12,503
Corporate notes		2,315		—		45		2,270
	$	180,817	$	549	$	792	$	180,574
Securities held-to-maturity:
U.S. government agency securities	$	17,746	$	1	$	299	$	17,448
State and municipal securities		9,850		—		163		9,687
	$	27,596	$	1	$	462	$	27,135

On March 31, 2004, Pinnacle National transferred $27.7 million of available-for-sale securities to held-to-maturity at fair value. The transfer consisted of substantially all of Pinnacle National’s holdings of Tennessee municipal securities and several of its longer-term agency securities. These securities were selected for the held-to-maturity classification because we have the ability and intent to hold such securities until their maturity. The unrealized gain on such securities as of the date of transfer was $325,000. This amount is reflected in the accumulated other comprehensive income, net of tax, and will be amortized over the remaining lives of the respective held-to-maturity securities. As of June 30, 2005, the remaining unamortized unrealized gain of the respective held-to-maturity securities was $256,000.

We realized approximately $114,000 in net gains from the sale of $6,792,000 of available-for-sale securities during the six months ended June 30, 2005 and $248,000 in net gains on the sale of $21,877,000 of available-for-sale securities during the six months ended June 30, 2004. Gross realized gains amounted to $114,000 on the sale of $6.8 million of available-for-sale securities during the six months ended June 30, 2005. Gross realized gains amounted to $312,000 on the sale of $10.9 million of available-for-sale securities while gross realized losses amounted to $64,000 on the sale of $11.0 million of available-for-sale securities during the six months ended June 30, 2004.

Page 32

The following table shows the carrying value of investment securities according to contractual maturity classifications of (1) one year or less, (2) after one year through five years, (3) after five years through ten years, and (4) after ten years. Actual maturities may differ from contractual maturities of mortgage-backed securities because the mortgages underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories noted below as of June 30, 2005 and December 31, 2004 (dollars in thousands):

						U.S. government					State and
	U.S. Treasury					agency					municipal					Corporate
	securities					securities					securities					securities					Totals
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
June 30, 2005:
Securities available-for-sale:
Due in one year or less	$	—		—	%	$	—		—	%	$	—		—	%	$	—		—	%	$	—		—	%
Due in one year to five years		—		—			9,146		4.0	%		2,427		4.5	%		2,241		3.4	%		13,814		4.0	%
Due in five years to ten years		—		—			16,800		4.8	%		14,278		5.2	%		—		—			31,078		5.0	%
Due after ten years		—		—			—		—	%		4,469		5.5	%		—		—			4,469		5.5	%
	$	—		—	%	$	25,946		4.5	%	$	21,174		5.2	%	$	2,241		3.4	%	$	49,361		4.8	%
Securities held-to-maturity:
Due in one year or less	$	—		—	%	$	—		—	%	$	—		—	%	$	—		—	%	$	—		4.1	%
Due in one year to five years		—		—			15,750		4.2	%		3,310		4.9	%		—		—			19,060		4.3	%
Due in five years to ten years		—		—			1,996		4.8	%		6,312		5.0	%		—		—			8,308		5.0	%
Due after ten years		—		—			—		—	%		—		—	%		—		—			—		—	%
	$	—		—	%	$	17,746		4.3	%	$	9,622		5.0	%	$	—		—	%	$	27,368		4.5	%
December 31, 2004:
Securities available-for-sale:
Due in one year or less	$	—		—	%	$	—		—	%	$	—		—	%	$	—		—	%	$	—		—	%
Due in one year to five years		—		—			2,982		3.5	%		—		—			2,270		3.4	%		5,252		3.5	%
Due in five years to ten years		—		—			23,001		4.7	%		7,408		5.0	%		—		—			30,410		4.7	%
Due after ten years		—		—			1,291		5.5	%		5,094		5.4	%		—		—			6,385		5.4	%
	$	—		—	%	$	27,274		4.6	%	$	12,503		5.2	%	$	2,270		3.4	%	$	42,047		4.5	%
Securities held-to-maturity:
Due in one year or less	$	—		—	%	$	—		—	%	$	—		—	%	$	—		—	%	$	—		—	%
Due in one year to five years		—		—			3,250		4.1	%		844		4.3	%		—		—			4,094		4.2	%
Due in five years to ten years		—		—			14,546		4.3	%		7,953		5.0	%		—		—			22,450		4.6	%
Due after ten years		—		—			—		—	%		1,053		5.3	%		—		—			1,052		5.3	%
	$	—		—	%	$	17,746		4.3	%	$	9,850		5.0	%	$	—		—	%	$	27,596		4.5	%

(1) We computed yields using coupon interest, adding discount accretion or subtracting premium amortization, as appropriate, on a ratable basis over the life of each security. We computed the weighted average yield for each maturity range using the acquisition price of each security in that range.

Page 33

At June 30, 2005, the fair value of our mortgage-backed securities portfolio approximated $151.2 million compared to $138.5 million at December 31, 2004. All of these securities were included in our securities available-for-sale portfolio. A statistical comparison of our mortgage-backed portfolio at June 30, 2005 and December 31, 2004 follows:

	June 30, 2005			December 31, 2004
Weighted average life		4.94 years			5.01 years
Weighted average coupon		5.23	%		5.18	%
Tax equivalent yield		4.51	%		4.46	%
Modified duration (*)		3.66	%		3.63	%

(*) Modified duration represents an approximation of the change in value of a security for every 100 basis point increase or decrease in market interest rates.

At June 30, 2005, included in securities were the following investments with unrealized losses. The information below classifies these investments according to the term of the unrealized loss of less than twelve months or twelve months or longer (dollars in thousands):

	Investments With an					Investments With an					Total Investments at
	Unrealized Loss of					Unrealized Loss of					June 30, 2005 With
	Less than 12 months					12 months or longer					an Unrealized Loss
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
U.S. government agency securities	$	7,931	$	(49	)	$	15,586	$	(165	)	$	23,517	$	(214	)
Mortgage-backed securities		67,233		(396	)		33,480		(500	)		100,713		(896	)
State and municipal securities		8,456		(89	)		8,797		(257	)		17,253		(346	)
Corporate notes		819		(10	)		1,422		(57	)		2,241		(67	)
Total temporarily-impaired securities	$	84,439	$	(544	)	$	59,285	$	(979	)	$	143,724	$	(1,523	)

Management evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) our intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. At June 30, 2005, we had several issuances that had been in an unrealized loss position for more than twelve months. At June 30, 2005, the amortized cost of these securities was approximately $59,285,000 compared to a fair value of $60,264,000. Because the declines in fair value noted above were attributable to increases in interest rates and not attributable to credit quality and because Pinnacle Financial has the ability and intent to hold all of these investments until a market price recovery or maturity, these investments were not considered other-than-temporarily impaired.

Deposits and Other Borrowings. We had approximately $690 million of deposits at June 30, 2005 compared to $571 million at December 31, 2004. Our deposits consist of noninterest and interest-bearing demand accounts, savings accounts, money market accounts and time deposits. Additionally, we entered into agreements with certain customers to sell certain of our securities under agreements to repurchase the security the following day. These agreements (which provide customers with short-term returns for their excess funds) amounted to $57.7 million at June 30, 2005 compared to $31.9 million at December 31, 2004. Additionally, at June 30, 2005, we had borrowed $49.5 million in advances from the Federal Home Loan Bank of Cincinnati compared to $53.5 million at December 31, 2004.

Generally, banks classify their funding base as either core funding or non-core funding. Core funding consists of all deposits other than time deposits issued in denominations of $100,000 or greater while all other funding is deemed to be non-core. The following table represents the balances of our deposits and other fundings and the percentage of each type to the total at June 30, 2005 and December 31, 2004 (dollars in thousands):

Page 34

	June 30, 2005					December 31, 2004
	Amount		Percentage			Amount		Percentage
Core funding:
Noninterest-bearing demand deposits	$	142,794		17.7	%	$	114,318		17.2	%
Interest-bearing demand deposits		55,451		6.9			51,752		7.8
Savings and money market deposits		222,590		27.6			199,058		29.9
Time deposits less than $100,000		38,635		4.7			39,805		5.9
Total core funding		459,470		56.9			404,933		60.8
Non-core funding:
Time deposits greater than $100,000:
Public funds		83,769		10.4			61,377		9.2
Brokered deposits		60,286		7.5			43,431		6.5
Other time deposits greater than $100,000		86,394		10.7			60,986		9.2
Securities sold under agreements to repurchase		57,677		7.1			31,928		4.8
Federal Home Loan Bank advances		49,500		6.1			53,500		8.0
Subordinated debt		10,310		1.3			10,310		1.5
Total non-core funding		347,936		43.1			261,532		39.2
Total deposits and other funding	$	807,406		100.0	%	$	666,465		100.0	%

The amount of time deposits issued in amounts of $100,000 or more as of June 30, 2005 and December 31, 2004 amounted to $230.4 million and $165.8 million, respectively. The following table shows our time deposits over $100,000 by category at June 30, 2005 and December 31, 2004, based on time remaining until maturity of (1) three months or less, (2) over three but less than six months, (3) over six but less than twelve months and (4) over twelve months (dollars in thousands):

	June 30, 2005		December 31, 2004
Three months or less	$	73,747	$	54,274
Over three but less than six months		56,796		35,824
Over six but less than twelve months		37,001		27,627
Over twelve months		62,905		48,069
Total time deposits greater than $100,000	$	230,449	$	165,794

Subordinated debt. In 2003, we established PNFP Statutory Trust I (“Trust”), a wholly-owned statutory business trust. Pinnacle Financial is the sole sponsor of the trust and owns $310,000 of the Trust’s common securities. The Trust was created for the exclusive purpose of issuing 30-year capital trust preferred securities (“Trust Preferred Securities”) in the aggregate amount of $10,000,000 and using the proceeds from the issuance of the common and preferred securities to purchase $10,310,000 of junior subordinated debentures (“Subordinated Debentures”) issued by Pinnacle Financial. The sole assets of the Trust are the Subordinated Debentures. Pinnacle Financial’s $310,000 investment in the Trust is included in other assets and the $10,310,000 obligation of Pinnacle Financial is included in subordinated debt.

The Trust Preferred Securities bear a floating interest rate based on a spread over 3-month LIBOR which is set each quarter and matures on December 30, 2033. Distributions are payable quarterly. The Trust Preferred Securities are subject to mandatory redemption upon repayment of the Subordinated Debentures at their stated maturity date or their earlier redemption in an amount equal to their liquidation amount plus accumulated and unpaid distributions to the date of redemption. Pinnacle Financial guarantees the payment of distributions and payments for redemption or liquidation of the Trust Preferred Securities to the extent of funds held by the Trust. Pinnacle Financial’s obligations under the Subordinated Debentures together with the guarantee and other back-up obligations, in the aggregate, constitute a full and unconditional guarantee by Pinnacle Financial of the obligations of the Trust under the Trust Preferred Securities.

The Subordinated Debentures are unsecured, bear an interest rate based on a spread over 3-month LIBOR (equal to the spread paid by the Trust on the Trust Preferred Securities) which is set each quarter and matures on December 30, 2033. Interest is payable quarterly. Pinnacle Financial may defer the payment of interest at any time for a period not exceeding 20 consecutive quarters provided that the deferral period does not extend past the stated maturity. During any such deferral period, distributions on the Trust Preferred Securities will also be deferred and Pinnacle Financial’s ability to pay dividends on our common shares will be restricted.

Page 35

The Trust Preferred Securities may be redeemed prior to maturity at our option on or after September 17, 2008. The Trust Preferred Securities may also be redeemed at any time in whole (but not in part) in the event of unfavorable changes in laws or regulations that result in (1) the Trust becoming subject to federal income tax on income received on the Subordinated Debentures, (2) interest payable by the parent company on the Subordinated Debentures becoming non-deductible for federal tax purposes, (3) the requirement for the Trust to register under the Investment Company Act of 1940, as amended, or (4) loss of the ability to treat the Trust Preferred Securities as “Tier I capital” under the Federal Reserve capital adequacy guidelines.

Capital Resources. At June 30, 2005 and December 31, 2004, our stockholders’ equity amounted to $61.5 million and $57.9 million, respectively. The change in stockholders’ equity between December 31, 2004 and June 30, 2005 was attributable to our net income for the six months ended June 30, 2005 of $3.7 million and the net decrease in comprehensive loss of $300,000 attributable to the decrease in the unrealized fair value of our available-for-sale securities portfolio. Additionally, during the first six months of 2005, we received approximately $125,000 in proceeds from our associates through the exercise of incentive stock options granted to them previously.

Generally, banking laws and regulations require banks and bank holding companies to maintain certain minimum capital ratios in order to engage in certain activities or be eligible for certain types of regulatory relief. At June 30, 2005 and December 31, 2004, our capital ratios, including Pinnacle National’s capital ratios, met regulatory minimum capital requirements. At June 30, 2005 and December 31, 2004, Pinnacle National was categorized as “well-capitalized”. To be categorized as “well-capitalized”, Pinnacle National must maintain minimum Total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the following table. Additionally, Pinnacle Financial and Pinnacle National must maintain certain minimum capital ratios for regulatory purposes. The following table presents actual, minimum and “well-capitalized” capital amounts and ratios at June 30, 2005 and December 31, 2004:

											Minimum
											To Be “Well-Capitalized”
						Minimum					Under Prompt
						Capital					Corrective
	Actual					Requirement					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount			Ratio
At June 30, 2005
Total capital to risk weighted assets:
Pinnacle Financial	$	78,695		10.9	%	$	57,651		8.0	%	not applicable
Pinnacle National	$	74,188		10.4	%	$	57,097		8.0	%	$	71,371			10.0	%
Tier I capital to risk weighted assets:
Pinnacle Financial	$	72,036		10.0	%	$	28,826		4.0	%	not applicable
Pinnacle National	$	67,519		9.5	%	$	28,549		4.0	%	$	42,823			6.0	%
Tier I capital to average assets (*):
Pinnacle Financial	$	72,036		8.8	%	$	32,927		4.0	%	not applicable
Pinnacle National	$	67,519		8.2	%	$	32,894		4.0	%	$	41,117			5.0	%
At December 31, 2004
Total capital to risk weighted assets:
Pinnacle Financial	$	73,540		12.7	%	$	46,410		8.0	%	not applicable
Pinnacle National	$	63,775		11.0	%	$	46,373		8.0	%	$	57,967	%		10.0	%
Tier I capital to risk weighted assets:
Pinnacle Financial	$	67,880		11.7	%	$	23,205		4.0	%	not applicable
Pinnacle National	$	58,115		10.0	%	$	23,187		4.0	%	$	34,780			6.0	%
Tier I capital to average assets (*):
Pinnacle Financial	$	67,880		9.7	%	$	28,134		4.0	%	not applicable
Pinnacle National	$	58,115		8.3	%	$	28,116		4.0	%	$	35,145			5.0	%

(*) Average assets for the above calculations were as of the most recent quarter for each period noted.

Dividends. Pinnacle National is subject to restrictions on the payment of dividends to Pinnacle Financial under federal banking laws and the regulations of the Office of the Comptroller of the Currency, or the “OCC”. We, in turn, are also subject to limits on payment of dividends to our shareholders by the rules, regulations and policies of federal banking authorities. We have not paid any dividends to date, nor do we anticipate paying dividends to our shareholders for the

Page 36

foreseeable future. Future dividend policy will depend on Pinnacle National’s earnings, capital position, financial condition and other factors.

Return on Assets and Stockholders’ Equity. The following table shows return on average assets (annualized net income divided by average total assets), return on average equity (annualized net income divided by average stockholders’ equity), dividend payout ratio (dividends declared per share divided by net income per share) and stockholders’ equity to asset ratio (average stockholders’ equity divided by average total assets) for the six month period ended June 30, 2005 compared to the year ended December 31, 2004.

	2005			2004
Return on average assets		0.96	%		0.89	%
Return on average equity		12.68	%		12.31	%
Dividend payout ratio		—	%		—	%
Average equity to average assets ratio		7.47	%		7.23	%

(1) The return on average assets and return on average equity for the six months ended June 30, 2005 was computed by annualizing the numerator to a twelve-month period.

Market and Liquidity Risk Management

Our objective is to manage assets and liabilities to provide a satisfactory, consistent level of profitability within the framework of established liquidity, loan, investment, borrowing, and capital policies. Our Asset Liability Management Committee (“ALCO”) is charged with the responsibility of monitoring these policies, which are designed to ensure acceptable composition of asset/liability mix. Two critical areas of focus for ALCO are interest rate sensitivity and liquidity risk management.

     Interest Rate Sensitivity. In the normal course of business, we are exposed to market risk arising from fluctuations in interest rates. ALCO measures and evaluates the interest rate risk so that we can meet customer demands for various types of loans and deposits. ALCO determines the most appropriate amounts of on-balance sheet and off-balance sheet items. Measurements which we use to help us manage interest rate sensitivity include an earnings simulation model, an economic value of equity model, and gap analysis computations. These measurements are used in conjunction with competitive pricing analysis.

Earnings simulation model. We believe that interest rate risk is best measured by our earnings simulation modeling. Forecasted levels of earning assets, interest-bearing liabilities, and off-balance sheet financial instruments are combined with ALCO forecasts of interest rates for the next 12 months and are combined with other factors in order to produce various earnings simulations. To limit interest rate risk, we have guidelines for our earnings at risk which seek to limit the variance of net income to less than 10 percent for a 200 basis point change up or down in rates from management’s flat interest rate forecast over the next twelve months. The results of our current simulation model would indicate that our net interest income should increase with a gradual rise in interest rates over the next twelve months and decrease should interest rates fall over the same period.

Economic value of equity. Our economic value of equity model measures the extent that estimated economic values of our assets, liabilities and off-balance sheet items will change as a result of interest rate changes. Economic values are determined by discounting expected cash flows from assets, liabilities and off-balance sheet items, which establishes a base case economic value of equity. To help limit interest rate risk, we have a guideline stating that for an instantaneous 200 basis point change in interest rates up or down, the economic value of equity will not change by more than 20 percent from the base case.

Gap analysis. An asset or liability is considered to be interest rate-sensitive if it will reprice or mature within the time period analyzed; for example, within three months or one year. The interest rate-sensitivity gap is the difference between the interest-earning assets and interest-bearing liabilities scheduled to mature or reprice within such time period. A gap is considered positive when the amount of interest rate-sensitive assets exceeds the amount of interest rate-sensitive liabilities (i.e., “asset sensitive”). A gap is considered negative when the amount of interest rate-sensitive liabilities exceeds the interest rate-sensitive assets (i.e., “liability sensitive). During a period of rising interest rates, a negative gap would tend to adversely affect net interest

Page 37

income, while a positive gap would tend to result in an increase in net interest income. Conversely, during a period of falling interest rates, a negative gap would tend to result in an increase in net interest income, while a positive gap would tend to adversely affect net interest income. If our assets and liabilities were equally flexible and moved concurrently, the impact of any increase or decrease in interest rates on net interest income would be minimal. To assist us in managing our interest rate sensitivity, we have established a cumulative twelve-month interest rate-sensitivity gap ratio of earning assets to interest bearing liabilities of 85% to 100% in this time horizon.

Each of the above analyses may not, on their own, be an accurate indicator of how our net interest income will be affected by changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by changes in interest rates. In addition, the magnitude and duration of changes in interest rates may have a significant impact on net interest income. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates. Interest rates on certain types of assets and liabilities fluctuate in advance of changes in general market rates, while interest rates on other types may lag behind changes in general market rates. In addition, certain assets, such as adjustable rate mortgage loans, have features (generally referred to as “interest rate caps and floors”) which limit changes in interest rates. Prepayment and early withdrawal levels also could deviate significantly from those assumed in calculating the maturity of certain instruments. The ability of many borrowers to service their debts also may decrease during periods of rising interest rates. ALCO reviews each of the above interest rate sensitivity analyses along with several different interest rate scenarios as part of its responsibility to provide a satisfactory, consistent level of profitability within the framework of established liquidity, loan, investment, borrowing, and capital policies.

We may also use derivative financial instruments to improve the balance between interest-sensitive assets and interest-sensitive liabilities and as one tool to manage our interest rate sensitivity while continuing to meet the credit and deposit needs of our customers. At June 30, 2005 and December 31, 2004, we had not entered into any derivative contracts to assist managing our interest rate sensitivity.

Liquidity Risk Management. The purpose of liquidity risk management is to ensure that there are sufficient cash flows to satisfy loan demand, deposit withdrawals, and our other needs. Traditional sources of liquidity for a bank include asset maturities and growth in core deposits. A bank may achieve its desired liquidity objectives from the management of its assets and liabilities and by internally generated funding through its operations. Funds invested in marketable instruments that can be readily sold and the continuous maturing of other earning assets are sources of liquidity from an asset perspective. The liability base provides sources of liquidity through attraction of increased deposits and borrowing funds from various other institutions.

Changes in interest rates also affect our liquidity position. We currently price deposits in response to market rates and our management intends to continue this practice. If deposits are not priced in response to market rates, a loss of deposits could occur which would negatively affect our liquidity position.

Scheduled loan payments are a relatively stable source of funds, but loan payoffs and deposit flows fluctuate significantly, being influenced by interest rates, general economic conditions and competition. Additionally, debt security investments are subject to prepayment and call provisions that could accelerate their payoff prior to stated maturity. We attempt to price our deposit products to meet our asset/liability objectives consistent with local market conditions. Our ALCO is responsible for monitoring our ongoing liquidity needs. Our regulators also monitor our liquidity and capital resources on a periodic basis.

In addition, Pinnacle National is a member of the Federal Home Loan Bank of Cincinnati. As a result, Pinnacle National receives advances from the Federal Home Loan Bank of Cincinnati, pursuant to the terms of various borrowing agreements, which assist it in the funding of its home mortgage and commercial real estate loan portfolios. Pinnacle National has pledged under the borrowing agreements with the Federal Home Loan Bank of Cincinnati certain qualifying residential mortgage loans and, pursuant to a blanket lien, all qualifying commercial mortgage loans as collateral. At June 30, 2005, Pinnacle National had received advances from the Federal Home Loan Bank of Cincinnati totaling $49.5 million at the following rates and maturities (dollars in thousands):

Page 38

	Amount		Interest Rate
October 14, 2005	$	3,000		3.10	%
December 30, 2005		3,000		2.40
January 27, 2006		2,000		2.79
March 10, 2006		3,000		1.97
March 31, 2006		4,000		2.10
April 17, 2006		2,000		2.64
April 28, 2006		1,500		2.52
May 19, 2006		10,000		3.01
September 29, 2006		4,000		2.39
January 26, 2006		2,000		3.24
May 2, 2008		15,000		4.31
	$	49,500
Weighted average interest rate				3.20	%

At June 30, 2005, brokered certificates of deposit approximated $60.3 million which represented 7.5% of total fundings compared to $43.4 million and 6.5% at December 31, 2004. We issue these brokered certificates through several different brokerage houses based on competitive bid. Typically, these funds are for varying maturities from six months to two years and are issued at rates which are competitive to rates we would be required to pay to attract similar deposits from the local market as well as rates for Federal Home Loan Bank of Cincinnati advances of similar maturities. We consider these deposits to be a ready source of liquidity under current market conditions.

At June 30, 2005, we had no significant commitments for capital expenditures. However, we are in the process of developing our branch network in the Nashville MSA. As a result, we anticipate that we will enter into contracts to buy property or construct branch facilities and/or lease agreements to lease facilities in the Nashville MSA.

The following table presents additional information about our contractual obligations as of June 30, 2005, which by their terms have contractual maturity and termination dates subsequent to June 30, 2005 (dollars in thousands):

	Next 12		13-36		37-60		More than
	Months		Months		Months		60 Months		Totals
Contractual obligations:
Certificates of deposit	$	196,127	$	65,179	$	7,778	$	—	$	269,084
Securities sold under agreements to repurchase		57,677		—		—		—		57,677
Federal Home Loan Bank advances		28,500		21,000		—		—		49,500
Subordinated debt		—		—		—		10,310		10,310
Minimum operating lease commitments		805		1,670		1,730		8,269		12,474
Totals	$	283,109	$	87,849	$	9,508	$	18,579	$	399,045

Our management believes that we have adequate liquidity to meet all known contractual obligations and unfunded commitments, including loan commitments and reasonable borrower, depositor, and creditor requirements over the next twelve months.

Page 39

Off-Balance Sheet Arrangements. At June 30, 2005, we had outstanding standby letters of credit of $60.3 million and unfunded loan commitments outstanding of $212.3 million. Because these commitments generally have fixed expiration dates and many will expire without being drawn upon, the total commitment level does not necessarily represent future cash requirements. If needed to fund these outstanding commitments, Pinnacle National has the ability to liquidate Federal funds sold or securities available-for-sale, or on a short-term basis to borrow and purchase Federal funds from other financial institutions. At June 30, 2005, Pinnacle National had accommodations with upstream correspondent banks for unsecured short-term advances. These accommodations have various covenants related to their term and availability, and in most cases must be repaid within less than a month. The following table presents additional information about our unfunded commitments as of June 30, 2005, which by their terms have contractual maturity dates subsequent to June 30, 2005 (dollars in thousands):

	Next 12		13-36		37-60		More than
	Months		Months		Months		60 Months		Totals
Unfunded commitments:
Letters of credit	$	52,426	$	7,866	$	—	$	—	$	60,292
Lines of credit		112,477		38,952		11,791		49,111		212,331
Totals	$	164,903	$	46,818	$	11,791	$	49,111	$	272,623

Impact of Inflation

The consolidated financial statements and related consolidated financial data presented herein have been prepared in accordance with United States generally accepted accounting principles and practices within the banking industry which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance than the effects of general levels of inflation.

Recent Accounting Pronouncements

In March 2004, the Financial Accounting Standards Board’s (“FASB”) Emerging Issues Task Force reached a consensus on EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF 03-1 provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary, and measurement of an impairment loss. An investment is considered impaired if the fair value of the investment is less than its cost. Generally, an impairment is considered other-than-temporary unless: (i) the investor has the ability and intent to hold an investment for a reasonable period of time sufficient for an anticipated recovery of fair value up to (or beyond) the cost of the investment; and (ii) evidence indicating that the cost of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. If impairment is determined to be other-than-temporary, then an impairment loss should be recognized equal to the difference between the investment’s cost and its fair value. Certain disclosure requirements of EITF 03-1 were adopted in 2003 and Pinnacle Financial began presenting the new disclosure requirements in its consolidated financial statements for the year ended December 31, 2003. The recognition and measurement provisions were initially effective for other-than-temporary impairment evaluations in reporting periods beginning after June 15, 2004. However, in September 2004, the effective date of these provisions was delayed until the finalization of a FASB Staff Position (FSP) to provide additional implementation guidance. Due to the recognition and measurement provisions being suspended and the final rule delayed, we are not able to determine whether the adoption of these new provisions will have a material impact on our consolidated financial position or results of income.

In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123R”), which revised SFAS No. 123, “Accounting for Stock-Based Compensation. This statement supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” The revised statement addresses the accounting for share-based payment transactions with employees and other third parties, eliminates the ability to account for share-based compensation transactions using APB 25 and requires that the compensation costs relating to such transactions be recognized in the consolidated statement of income. On April 14, 2005, the Securities and Exchange Commission deferred implementation of SFAS No. 123R for registrants until the next fiscal year following June 15, 2005. We are currently evaluating the provisions of SFAS No. 123R and will adopt it on January 1, 2006 as required.

Page 40

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this Item 3 is included on pages 37 through 40 of Item 2 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Pinnacle Financial maintains disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by it in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to Pinnacle Financial’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Pinnacle Financial carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that Pinnacle Financial’s disclosure controls and procedures were effective.

Changes in Internal Controls

There were no changes in Pinnacle Financial’s internal control over financial reporting during Pinnacle Financial’s fiscal quarter ended June 30, 2005 that have materially affected, or are reasonably likely to materially affect, Pinnacle Financial’s internal control over financial reporting.

Page 41

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Company is a party or of which any of their property is the subject.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)	Not applicable
(b)	Not applicable
(c)	The Company did not repurchase any shares of the Company’s common stock during the quarter ended June 30, 2005

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)	The annual meeting of the shareholders of the Company was held on April 19, 2005.
(b)	The following directors were elected at the meeting to serve until the annual meeting of shareholders in the year 2008:

	Votes		Votes		Broker
	For		Withheld		Non-votes
Dr. John E. Maupin, Jr.		7,599,060		274,675		—
Robert A. McCabe, Jr.		7,658,810		214,925		—
Linda E. Rebrovick		7,648,384		225,351		—

In addition, the following directors continue in office until the annual meeting of shareholders in the year indicated:

Dale W. Polley	2006	M. Terry Turner	2006
James L. Shaub, II	2006	Reese L. Smith, III	2006
Sue G. Atkinson	2007	Colleen Conway-Welch	2007
Gregory L. Burns	2007	Clay T. Jackson	2007

(c)	Other matters voted upon and the results of the voting were as follows:
	At the annual meeting of shareholders, the shareholders of Pinnacle Financial approved an increase in the number of authorized shares of capital stock from 30,000,000 shares to 50,000,000 shares. With the increase, the number of authorized shares of common stock was increased from 20,000,000 shares to 40,000,000 shares and the number of authorized shares of preferred stock remained at 10,000,000 shares. The shareholders voted 7,118,944 in the affirmative and 747,391 against the proposal with 7,400 abstentions.
	At the annual meeting of shareholders, the shareholders also approved an amendment to the 2004 Equity Incentive Plan which would set aside for issuance an additional 250,000 shares of Pinnacle Financial common stock. The shareholders voted 3,152,459 in the affirmative and 1,390,300 against the proposal with 15,440 abstentions and 3,315,536 broker non-votes.

Page 42

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

31.1	Certification pursuant to Rule 13a-14(a)/15d-14(a)
31.2	Certification pursuant to Rule 13a-14(a)/15d-14(a)
32.1	Certification pursuant to 18 USC Section 1350 — Sarbanes-Oxley Act of 2002
32.2	Certification pursuant to 18 USC Section 1350 — Sarbanes-Oxley Act of 2002

Page 43

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PINNACLE FINANCIAL PARTNERS, INC.
 

/s/ M. Terry Turner  

M. Terry Turner 

President and Chief Executive Officer 

August 4, 2005

/s/ Harold R. Carpenter  

Harold R. Carpenter 

Chief Financial Officer 

August 4, 2005

Page 44