Regulatory Matters

3 Months Ended

Mar. 31, 2019

Regulatory Capital Requirements [Abstract]

Regulatory Matters

Regulatory Matters

Pursuant to Tennessee banking law, Pinnacle Bank may not, without the prior consent of the Commissioner of the Tennessee Department of Financial Institutions (TDFI), pay any dividends to Pinnacle Financial in a calendar year in excess of the total of Pinnacle Bank's retained net income for that year plus the retained net income for the preceding two years. Under Tennessee corporate law, Pinnacle Financial is not permitted to pay dividends if, after giving effect to such payment, it would not be able to pay its debts as they become due in the usual course of business or its total assets would be less than the sum of its total liabilities plus any amounts needed to satisfy any preferential rights if it were dissolving. In addition, in deciding whether or not to declare a dividend of any particular size, Pinnacle Financial's board of directors must consider its and Pinnacle Bank's current and prospective capital, liquidity, and other needs. In addition to state law limitations on Pinnacle Financial's ability to pay dividends, the Federal Reserve imposes limitations on Pinnacle Financial's ability to pay dividends. Federal Reserve regulations limit dividends, stock repurchases and discretionary bonuses to executive officers if Pinnacle Financial's regulatory capital is below the level of regulatory minimums plus the applicable capital conservation buffer. During the three months ended March 31, 2019, Pinnacle Bank paid $39.1 million in dividends to Pinnacle Financial. As of March 31, 2019, Pinnacle Bank could pay approximately $637.4 million of additional dividends to Pinnacle Financial without prior approval of the Commissioner of the TDFI. Since the fourth quarter of 2018, Pinnacle Financial has paid a quarterly common stock dividend of $0.16 per share. The amount and timing of all future dividend payments by Pinnacle Financial, if any, is subject to discretion of Pinnacle Financial's board of directors and will depend on Pinnacle Financial's earnings, capital position, financial condition and other factors, including new regulatory capital requirements, as they become known to Pinnacle Financial.

Pinnacle Financial and Pinnacle Bank 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 Bank 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 Bank'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 its banking subsidiary to maintain minimum amounts and ratios of common equity Tier 1 capital to risk-weighted assets, Tier 1 capital to risk-weighted assets, total risk-based capital to risk-weighted assets and Tier 1 capital to average assets.

The final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (Basel III rules) became effective for Pinnacle Financial on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in on January 1, 2019. The minimum capital level requirements applicable to bank holding companies and banks subject to the rules are: (i) a common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6%; (iii) a total risk-based capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4% for all institutions. The Basel III rules also established a capital conservation buffer of 2.5% (which was phased in over three years) above the regulatory minimum risk-based capital ratios. The capital conservation buffer was phased in beginning in January 2016 at 0.625% and increased each year by a like percentage until fully implemented in January 2019. Upon full implementation in January 2019, minimum risk-based capital ratios including the capital conservation buffer are: i) a common equity Tier 1 capital ratio of 7%, ii) a Tier 1 risk-based capital ratio of 8.5%, and iii) a total risk-based capital ratio of 10.5%. The net unrealized gain or loss on available-for-sale securities is not included in computing regulatory capital. Management believes, as of March 31, 2019, that Pinnacle Financial and Pinnacle Bank met all capital adequacy requirements to which they are subject. To be categorized as well-capitalized under applicable banking regulations, Pinnacle Financial and Pinnacle Bank must maintain certain total risk-based, Tier 1 risk-based, common equity Tier 1 and Tier 1 leverage ratios as set forth in the following table and not be subject to a written agreement, order or directive to maintain a higher capital level. The capital conservation buffer is not included in the required ratios of the table presented below. Pinnacle Financial's and Pinnacle Bank's actual capital amounts and resulting ratios, not including the capital conservation buffer, are presented in the following table (in thousands):

	Actual				Minimum Capital Requirement				Minimum To Be Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
At March 31, 2019
Total capital to risk weighted assets:
Pinnacle Financial	$	2,635,562	12.0	%	$	1,760,157	8.0	%	NA		NA
Pinnacle Bank	$	2,495,127	11.4	%	$	1,756,333	8.0	%	$	2,195,416	10.0	%
Tier 1 capital to risk weighted assets:
Pinnacle Financial	$	2,078,454	9.4	%	$	1,320,118	6.0	%	NA		NA
Pinnacle Bank	$	2,277,027	10.4	%	$	1,317,250	6.0	%	$	1,756,333	8.0	%
Common equity Tier 1 capital to risk weighted assets
Pinnacle Financial	$	2,078,331	9.4	%	$	990,088	4.5	%	NA		NA
Pinnacle Bank	$	2,276,904	10.4	%	$	987,937	4.5	%	$	1,427,020	6.5	%
Tier 1 capital to average assets (*):
Pinnacle Financial	$	2,078,454	9.0	%	$	924,540	4.0	%	NA		NA
Pinnacle Bank	$	2,277,027	9.9	%	$	922,810	4.0	%	$	1,153,512	5.0	%

	Actual				Minimum Capital Requirement				Minimum To Be Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
At December 31, 2018
Total capital to risk weighted assets:
Pinnacle Financial	$	2,580,143	12.2	%	$	1,691,017	8.0	%	NA		NA
Pinnacle Bank	$	2,432,419	11.5	%	$	1,686,046	8.0	%	$	2,107,558	10.0	%
Tier 1 capital to risk weighted assets:
Pinnacle Financial	$	2,024,193	9.6	%	$	1,268,263	6.0	%	NA		NA
Pinnacle Bank	$	2,218,003	10.5	%	$	1,264,535	6.0	%	$	1,686,046	8.0	%
Common equity Tier 1 capital to risk weighted assets
Pinnacle Financial	$	2,024,070	9.6	%	$	951,197	4.5	%	NA		NA
Pinnacle Bank	$	2,217,880	10.5	%	$	948,401	4.5	%	$	1,369,912	6.5	%
Tier 1 capital to average assets (*):
Pinnacle Financial	$	2,024,193	8.9	%	$	909,102	4.0	%	NA		NA
Pinnacle Bank	$	2,218,003	9.8	%	$	906,185	4.0	%	$	1,132,731	5.0	%

(*) Average assets for the above calculations were based on the most recent quarter.