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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Note 11. Income Taxes Income tax expense attributable to continuing operations for each of the years in the three-year period ended December 31, 2024 is as follows (in thousands):
| 2024 |  | 2023 |  | 2022
Current tax expense : |  |  |  |  |
Federal | $ | 110,464 |  |  | $ | 67,711 |  |  | $ | 104,141 |
State | 15,040 |  |  | 11,775 |  |  | 12,870 |
Total current tax expense | 125,504 |  |  | 79,486 |  |  | 117,011 |
Deferred tax expense (benefit): |  |  |  |  |
Federal | (19,550) |  |  | 67,446 |  |  | 15,082 |
State | 199 |  |  | 4,922 |  |  | 4,658 |
Total deferred tax (benefit) expense | (19,351) |  |  | 72,368 |  |  | 19,740 |
Total income tax expense | $ | 106,153 |  |  | $ | 151,854 |  |  | $ | 136,751 |
Pinnacle Financial's income tax expense differs from the amounts computed by applying the Federal income tax statutory rate of 21% to income before income taxes. A reconciliation of the differences for each of the years in the three-year period ended December 31, 2024 is as follows (in thousands):
| 2024 |  | 2023 |  | 2022
Income tax expense at statutory rate | $ | 122,054 |  |  | $ | 149,941 |  |  | $ | 146,474 |
State excise tax expense, net of federal tax effect | 12,039 |  |  | 13,191 |  |  | 13,847 |
Non-deductible executive compensation | 5,635 |  |  | 5,186 |  |  | 5,481 |
Tax-exempt securities | (22,169) |  |  | (21,663) |  |  | (18,730) |
Federal tax credits | (8,170) |  |  | (5,238) |  |  | (5,019) |
Bank owned life insurance income | (8,780) |  |  | (4,324) |  |  | (4,599) |
Bank owned life insurance surrender | — |  |  | 8,572 |  |  | — |
Non-deductible FDIC assessment | 7,103 |  |  | 5,361 |  |  | 2,331 |
Insurance premiums | — |  |  | — |  |  | (36) |
Excess tax benefits associated with equity compensation | (2,806) |  |  | (208) |  |  | (3,027) |
Other items | 1,247 |  |  | 1,036 |  |  | 29 |
Income tax expense | $ | 106,153 |  |  | $ | 151,854 |  |  | $ | 136,751 |
Pinnacle Financial's effective tax rate differs from the Federal income tax rate primarily due to state excise tax expense, investments in bank-qualified tax-exempt municipal securities, tax benefits from Pinnacle Bank's real estate investment trust and municipal investment subsidiaries, and tax benefits associated with share-based compensation and bank owned life insurance offset in part by the limitation on deductibility of meals and entertainment expense, non-deductible FDIC insurance premiums and non-deductible executive compensation. The decrease in the effective income tax rate in 2024 as compared to 2023, and increase in 2023 compared to 2022, is primarily due to the restructuring of BOLI contracts in 2023 resulting in restructuring charges and surrender penalties totaling $7.2 million and income tax and penalties totaling $9.1 million. The components of deferred income taxes included in other assets in the accompanying consolidated balance sheets at December 31, 2024 and 2023 are as follows (in thousands):
| 2024 |  | 2023
Deferred tax assets: |  |  |
Allowance for credit losses | $ | 99,002 |  |  | $ | 86,911 |
Loans | 4,463 |  |  | 4,659 |
Insurance | 878 |  |  | 784 |
Accrued liability for supplemental retirement agreements | 6,611 |  |  | 7,005 |
Restricted stock and stock options | 8,255 |  |  | 6,251 |
Securities | 44,504 |  |  | 49,331 |
Cash flow hedge | 8,772 |  |  | — |
FHLB related assets | 64 |  |  | — |
Lease liability | 76,426 |  |  | 76,918 |
Other real estate owned | — |  |  | 750 |
Net federal operating loss carryforward and credits | 9,621 |  |  | 1,064 |
Annual incentive compensation | 20,473 |  |  | 11,842 |
Partnership interests | 33,747 |  |  | 13,541 |
Allowance for off balance sheet credit exposures | 3,117 |  |  | 4,367 |
Tax credit investments | 2,601 |  |  | — |
FDIC special assessment | 6,254 |  |  | 7,250 |
Accrued expenses | 1,465 |  |  | 844 |
Other deferred tax assets | 2,426 |  |  | 1,688 |
Total deferred tax assets | 328,679 |  |  | 273,205 |
Deferred tax liabilities: |  |  |
Depreciation and amortization | 20,438 |  |  | 23,140 |
Core deposit and other intangible assets | 5,193 |  |  | 6,087 |
Cash flow hedge | — |  |  | 836 |
REIT dividends | 2,247 |  |  | 2,604 |
Mortgage servicing rights | 2,963 |  |  | — |
FHLB related liabilities | — |  |  | 125 |
Equity method investment | 18 |  |  | 42 |
Right-of-use assets and other leasing transactions | 72,886 |  |  | 74,068 |
Leases | 83,810 |  |  | 67,711 |
Subordinated debt | 1,293 |  |  | 1,412 |
Tax credit investments | — |  |  | 7,614 |
Prepaids | 1,611 |  |  | 273 |
Other deferred tax liabilities | 2,748 |  |  | 2,083 |
Total deferred tax liabilities | 193,207 |  |  | 185,995 |
Net deferred tax assets | $ | 135,472 |  |  | $ | 87,210 |
At December 31, 2024, the Company had federal and state loss carryforwards resulting from acquisitions of approximately $4.3 million that expire at various dates from 2028 to 2034. ASC 740, Income Taxes, defines the threshold for recognizing the benefits of tax return positions in the financial statements as "more-likely-than-not" to be sustained by the taxing authority. This section also provides guidance on the derecognition, measurement and classification of income tax uncertainties, along with any related interest and penalties, and includes guidance concerning accounting for income tax uncertainties in interim periods. A reconciliation of the beginning and ending unrecognized tax benefit related to state uncertain tax positions for each of the years in the three-year period ended December 31, 2024 is as follows (in thousands):
| 2024 |  | 2023 |  | 2022
Balance at January 1, | $ | 8,806 |  |  | $ | 15,752 |  |  | $ | 12,737 |
Increases due to tax positions taken during the current year | 140 |  |  | 642 |  |  | 3,721 |
Increases due to tax positions taken during a prior year | 3,831 |  |  | — |  |  | — |
Decreases due to the lapse of the statute of limitations during the current year | (1,750) |  |  | (1,340) |  |  | (706) |
Decreases due to settlements with the taxing authorities during the current year | (900) |  |  | (6,248) |  |  | — |
Balance at December 31, | $ | 10,127 |  |  | $ | 8,806 |  |  | $ | 15,752 |
Pinnacle Financial's policy is to recognize interest and/or penalties related to income tax matters in income tax expense. Pinnacle Financial recognized $41,000, $80,000, and $264,000 in interest and penalties related to income tax matters for the years ended December 31, 2024, 2023, and 2022, respectively.

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