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 by 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 establish a capital conservation buffer of 2.5% (to be phased in over three years) above the regulatory minimum risk-based capital ratios. The phase-in of the capital conservation buffer requirement commenced in January 2016 at 0.625% of risk-weighted assets and increases each year by a like percentage until fully implemented in January 2019. The net unrealized gain or loss on available-for-sale securities is not included in computing regulatory capital. Management believes, as of December 31, 2017, 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 ratios are presented in the following table (in thousands):



	Actual				Minimum Capital Requirement				Minimum To Be Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2017
Total capital to risk weighted assets:
Pinnacle Financial	$	2,266,161	12.0	%	$	1,509,496	8.0	%	N/A		N/A
Pinnacle Bank	$	2,134,344	11.3	%	$	1,504,765	8.0	%	$	1,880,956	10.0	%
Tier 1 capital to risk weighted assets:
Pinnacle Financial	$	1,725,323	9.1	%	$	1,132,122	6.0	%	N/A		N/A
Pinnacle Bank	$	1,936,313	10.3	%	$	1,128,574	6.0	%	$	1,504,765	8.0	%
Common equity Tier 1 capital:
Pinnacle Financial	$	1,725,219	9.1	%	$	849,092	4.5	%	N/A		N/A
Pinnacle Bank	$	1,936,209	10.3	%	$	846,430	4.5	%	$	1,222,621	6.5	%
Tier 1 capital to average assets (*):
Pinnacle Financial	$	1,725,323	8.6	%	$	797,861	4.0	%	N/A		N/A
Pinnacle Bank	$	1,936,313	9.7	%	$	796,235	4.0	%	$	995,294	5.0	%

December 31, 2016
Total capital to risk weighted assets:
Pinnacle Financial	$	1,211,105	11.9	%	$	816,857	8.0	%	N/A		N/A
Pinnacle Bank	$	1,136,782	11.2	%	$	814,254	8.0	%	$	1,017,817	10.0	%
Tier 1 capital to risk weighted assets:
Pinnacle Financial	$	882,654	8.6	%	$	612,643	6.0	%	N/A		N/A
Pinnacle Bank	$	949,193	9.3	%	$	610,690	6.0	%	$	814,254	8.0	%
Common equity Tier 1 capital:
Pinnacle Financial	$	802,532	7.9	%	$	459,482	4.5	%	N/A		N/A
Pinnacle Bank	$	949,070	9.3	%	$	458,018	4.5	%	$	661,581	6.5	%
Tier 1 capital to average assets (*):
Pinnacle Financial	$	882,654	8.6	%	$	412,902	4.0	%	N/A		N/A
Pinnacle Bank	$	949,193	9.2	%	$	412,124	4.0	%	$	515,155	5.0	%

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

Following the Merger with BNC, Pinnacle Financial's total assets exceeded $15.0 billion as a result of the acquisition of BNC, which caused the subordinated debentures Pinnacle Financial and BNC previously issued in connection with the trust preferred securities of their affiliates to cease to qualify as Tier 1 capital under applicable banking regulations. Though these securities no longer qualify as Tier 1 capital, Pinnacle Financial believes these subordinated debentures continue to qualify as Tier 2 capital.