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Equity method investment | 12 Months Ended
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Dec. 31, 2021
Equity Method Investments and Joint Ventures [Abstract] |
Equity Method Investment | Note 2. Equity Method Investment On February 1, 2015, Pinnacle Bank acquired a 30% interest in Bankers Healthcare Group, LLC (BHG) for $75 million in cash. On March 1, 2016, Pinnacle Bank and Pinnacle Financial increased their investment in BHG by a combined 19%, for a total investment in BHG of 49%. The additional 19% interest was acquired pursuant to a purchase agreement whereby both Pinnacle Financial and Pinnacle Bank acquired 8.55% and an additional 10.45%, respectively, of the outstanding membership interests in BHG in exchange for $74.1 million in cash and 860,470 shares of Pinnacle Financial common stock valued at $39.9 million. On March 1, 2016, Pinnacle Financial, Pinnacle Bank and the other members of BHG entered into an Amended and Restated Limited Liability Company Agreement of BHG and have subsequently entered into a Second Amended and Restated Limited Liability Company Agreement on February 2, 2021. The Second Amended and Restated Limited Liability Company Agreement, provides for, among other things, the following terms: •co-sale rights for Pinnacle Financial and Pinnacle Bank in the event the other members of BHG decide to sell all or a portion of their ownership interests and are permitted to do so pursuant to the Limited Liability Company Agreement; and •a right of first refusal for BHG and the other members of BHG in the event that Pinnacle Financial and/or Pinnacle Bank decide to sell all or a portion of their ownership interests and are permitted to do so pursuant to the Limited Liability Company Agreement, except in connection with a transfer of their ownership interests to an affiliate or in connection with the acquisition of Pinnacle Financial or Pinnacle Bank or a merger in which Pinnacle Financial or Pinnacle Bank is not the surviving entity. Pinnacle Financial accounts for this investment pursuant to the equity method for unconsolidated subsidiaries and will recognize its interest in BHG's profits and losses in noninterest income with corresponding adjustments to the BHG investment account. Because BHG has been determined to be a voting interest entity of which Pinnacle Financial and Pinnacle Bank together control less than a majority of the board seats, this investment does not require consolidation and is accounted for pursuant to the equity method of accounting. Additionally, Pinnacle Financial did not recognize any goodwill or other intangible assets associated with these transactions as of the respective purchase dates, however, it will recognize accretion income and amortization expense associated with the fair value adjustments to the net assets acquired including the fair value of certain of BHG's liabilities which are recorded as a component of income from equity method investment, pursuant to the equity method of accounting. At December 31, 2021, Pinnacle Financial has recorded technology, trade name and customer relationship intangibles, net of related amortization, of $6.8 million compared to $7.6 million as of December 31, 2020. Amortization expense of $752,000 was included in Pinnacle Financial's results for the year ended December 31, 2021 compared to $1.2 million for 2020 and $1.9 million for 2019. Accretion income of $1.5 million was included in Pinnacle Financial's results for the year ended December 31, 2021, while $2.1 million of accretion income was recorded in 2020 and $2.6 million was recorded in 2019. Additionally, at December 31, 2021, Pinnacle Financial had recorded accretable discounts associated with certain liabilities of BHG of $1.2 million compared to $2.7 million as of December 31, 2020. During the year ended December 31, 2021, Pinnacle Financial and Pinnacle Bank received dividends from BHG of $70.0 million in the aggregate, compared to $53.0 million during the year ended December 31, 2020 and $51.3 million during the year ended December 31, 2019. Earnings from BHG are included in Pinnacle Financial's consolidated tax return. Profits from intercompany transactions are eliminated. Pinnacle Bank has a participating interest in a $525.0 million revolving line of credit for the benefit of BHG in the amount of $100.0 million. At December 31, 2021, there was a $47.2 million outstanding balance on the line related to Pinnacle Bank's interest in the line. The line accrues interest at SOFR plus 200 basis points and is secured by all assets of BHG. The credit agreement contains covenants requiring BHG to maintain certain financial ratios and satisfy certain other affirmative and negative covenants. At December 31, 2021, neither BHG nor the originating bank had represented to Pinnacle Bank that BHG was not in compliance, in all material respects, with these covenants. BHG partners with third party lenders, including Pinnacle Bank, to facilitate loan originations as part of BHG’s alternative financing portfolio, whereby BHG acts as the marketing firm and refers loans to the third party lenders for funding. The third party lenders receive a fee for each loan funded and subsequently sold to BHG. These loans are ultimately sold through BHG's network of clients, which includes Pinnacle Bank. During the years ended December 31, 2021, 2020 and 2019, respectively, BHG purchased $646.6 million, $453.8 million and $337.8 million of loans originated by Pinnacle Bank, respectively. During the years ended December 31, 2021 and 2020, Pinnacle Bank purchased $276.7 million and $100.0 million, respectively, of loans from BHG at par pursuant to BHG's joint venture loan program whereby BHG and Pinnacle Bank share proportionately in the credit risk of the acquired loans based on the rate on the loan and the rate of the purchase. The yield on this portfolio to Pinnacle Bank is anticipated to be between 4.75% and 5.00% per annum. Pinnacle Bank purchased no loans from BHG during the year ended December 31, 2019. At December 31, 2021 and 2020, there were $319.1 million and $95.8 million, respectively, of BHG joint venture program loans held by Pinnacle Bank. The following summary of BHG's financial position and results of operations as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019 are presented as unaudited due to BHG's fiscal year end being September 30 (in thousands):
Banker's Healthcare Group | December 31, 2021 |  | December 31, 2020
Assets | $ | 2,724,542 |  |  | $ | 1,330,317 |
Liabilities | $ | 2,355,256 |  |  | $ | 1,088,135 |
Equity interests | 369,286 |  |  | 242,182 |
Total liabilities and equity | $ | 2,724,542 |  |  | $ | 1,330,317 |
| For the year ended December 31,
| 2021 |  | 2020 |  | 2019
Revenues | $ | 735,506 |  |  | $ | 457,928 |  |  | $ | 366,500 |
Net income, pre-tax | $ | 241,051 |  |  | $ | 171,964 |  |  | $ | 182,462 |

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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