Stock Options, Stock Appreciation Rights and Restricted Shares (Tables)

9 Months Ended

Sep. 30, 2014

Stock Options, Stock Appreciation Rights and Restricted Shares [Abstract]

Summary of Stock Option and Stock Appreciation Rights Activity

As of September 30, 2014, there were approximately 779,000 stock options and 3,700 stock appreciation rights outstanding to purchase common shares. A summary of the stock option and stock appreciation rights activity within the equity incentive plans during the nine months ended September 30, 2014 and information regarding expected vesting, contractual terms remaining, intrinsic values and other matters is as follows:

	Number			Weighted- Average Exercise Price		Weighted- Average Contractual Remaining Term (in years)		Aggregate Intrinsic Value (000's)
Outstanding at December 31, 2013		1,002,500		$	25.77		2.48	$	7,097	⁽¹⁾
Granted		-
Exercised		(217,499	)
Stock appreciation rights exercised⁽³⁾		(1,586	)
Forfeited		(632	)
Outstanding at September 30, 2014		782,783		$	26.70		2.00	$	7,676	⁽²⁾
Options exercisable at September 30, 2014		782,783		$	26.70		2.00	$	7,676	⁽²⁾

(1)

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted closing price of Pinnacle Financial common stock of $32.53 per common share at December 31, 2013 for the approximately 931,425 options and stock appreciation rights that were in-the-money at December 31, 2013.

(2)

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted closing price of Pinnacle Financial common stock of $36.10 per common share at September 30, 2014 for the approximately 782,783 options and stock appreciation rights that were in-the-money at September 30, 2014.

(3)	1,586 stock appreciation rights were converted into 609 common shares upon exercise.

Summary of Activity for Unvested Restricted Share Awards

A summary of activity for unvested restricted share awards for the nine months ended September 30, 2014 is as follows:

	Number			Grant Date Weighted-Average Cost
Unvested at December 31, 2013		821,695		$	19.18
Shares awarded		122,317			33.16
Conversion of restricted share units to restricted share awards		186,943			31.68
Restrictions lapsed and shares released to associates/directors		(242,136	)		18.23
Shares forfeited⁽¹⁾		(27,844	)		20.75
Unvested at September 30, 2014		860,975		$	24.10

(1)	Represents shares forfeited due to employee termination and/or retirement. No shares were forfeited due to failure to meet performance targets.

Pinnacle Financial grants restricted share awards to associates, executive management and outside directors with a combination of time and, in the case of executive management, performance vesting criteria. The following table outlines restricted stock grants that were made, grouped by similar vesting criteria, during the nine months ended September 30, 2014:

Grant Year	Group⁽¹⁾	Vesting Period in years	Shares awarded	Restrictions Lapsed and shares released to participants	Shares Forfeited by participants⁽⁵⁾	Shares Unvested
Time Based Awards⁽²⁾
2014	Associates	5	110,118	-	2,364	107,754
Performance Based Awards⁽³⁾
2014	Leadership team	5	186,943	-	3,096	183,847
Outside Director Awards⁽⁴⁾
2014	Outside directors	1	12,199	-	-	12,199

(1)

Groups include employees (referred to as associates above), the leadership team which includes our named executive officers and other key senior leadership members, and outside directors. When restricted shares are awarded, a participant receives voting rights and forfeitable dividend rights with respect to the shares, but is not able to transfer the shares until the restrictions have lapsed. Once the restrictions lapse, the participant is taxed on the value of the award and may elect to sell some shares to pay the applicable income taxes associated with the award. For time-based restricted share awards, dividends paid on shares for which the forfeiture restrictions do not lapse are subject to clawback at the time of termination. For performance-based awards, dividends are placed into escrow until the forfeiture restrictions on such shares lapse.

(2)	The forfeiture restrictions on these restricted share awards lapse in equal annual installments on the anniversary date of the grant.

(3)	The forfeiture restrictions on these restricted share awards lapse in separate equal installments should Pinnacle Financial achieve certain earnings and soundness targets over each year of the subsequent vesting period.

(4)

Restricted share awards are issued to the outside members of the board of directors in accordance with their board compensation plan. Restrictions lapse on the one year anniversary date of the award based on each individual board member meeting their attendance goals for the various board and board committee meetings to which each member was scheduled to attend.

(5)	These shares represent forfeitures resulting from recipients for whom employment terminated during the year-to-date period ended September 30, 2014. Any dividends paid on shares for which the forfeiture restrictions do not lapse will be recouped by Pinnacle Financial at the time of termination.