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Loans and Allowance for Credit Losses | 3 Months Ended
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Mar. 31, 2025
Receivables [Abstract] |
Loans and Allowance for Credit Losses | Note 4. Loans and Allowance for Credit Losses For financial reporting purposes, Pinnacle Financial classifies its loan portfolio based on the underlying collateral utilized to secure each loan. This classification is consistent with those utilized in the Quarterly Report of Condition and Income filed by Pinnacle Bank with the Federal Deposit Insurance Corporation (FDIC). Pinnacle Financial uses the following loan categories for presentation of loan balances and the related allowance for credit losses on loans: •Owner occupied commercial real estate mortgage loans - Owner occupied commercial real estate mortgage loans are secured by commercial office buildings, industrial buildings, warehouses or retail buildings where the owner of the building occupies the property. For such loans, repayment is largely dependent upon the operation of the borrower's business. •Non-owner occupied commercial real estate loans - These loans represent investment real estate loans secured by office buildings, industrial buildings, warehouses, retail buildings, and multifamily residential housing. Repayment is primarily dependent on lease income generated from the underlying collateral. •Consumer real estate mortgage loans - Consumer real estate mortgage consists primarily of loans secured by 1-4 family residential properties, including home equity lines of credit. Repayment is primarily dependent on the personal cash flow of the borrower. •Construction and land development loans - Construction and land development loans include loans where the repayment is dependent on the successful completion and eventual sale, refinance or operation of the related real estate project. Construction and land development loans include 1-4 family construction projects and commercial construction endeavors such as warehouses, apartments, office and retail space and land acquisition and development. •Commercial and industrial loans - Commercial and industrial loans include loans to business enterprises issued for commercial, industrial and/or other professional purposes. These loans are generally secured by equipment, inventory, and accounts receivable of the borrower and repayment is primarily dependent on business cash flows. •Consumer and other loans - Consumer and other loans include all loans issued to individuals not included in the consumer real estate mortgage classification. Examples of consumer and other loans are automobile loans, consumer credit cards and loans to finance education, among others. Many consumer loans are unsecured. Repayment is primarily dependent on the personal cash flow of the borrower. Loans at March 31, 2025 and December 31, 2024 were as follows (in thousands):
|  | March 31, 2025 |  | December 31, 2024
Commercial real estate: |  |  |  |
Owner occupied |  | $ | 4,594,376 |  |  | $ | 4,388,531
Non-owner occupied |  | 8,338,098 |  |  | 8,130,118
Consumer real estate – mortgage |  | 4,977,358 |  |  | 4,914,482
Construction and land development |  | 3,525,860 |  |  | 3,699,321
Commercial and industrial |  | 14,131,312 |  |  | 13,815,817
Consumer and other |  | 569,742 |  |  | 537,507
Subtotal |  | $ | 36,136,746 |  |  | $ | 35,485,776 |
Allowance for credit losses |  | (417,462) |  |  | (414,494) |
Loans, net |  | $ | 35,719,284 |  |  | $ | 35,071,282 |
Commercial loans receive risk ratings assigned by a financial advisor subject to validation by Pinnacle Financial's independent loan review department. Risk ratings are categorized as pass, special mention, substandard, substandard-nonaccrual or doubtful-nonaccrual. Each of the risk rating categories is further described below. Pass rated loans include multiple ratings categories representing varying degrees of risk attributes that are less than those of the other defined risk categories further described below. Pinnacle Financial believes its categories follow those used by Pinnacle Bank's primary regulators. At March 31, 2025, approximately 80.3% of Pinnacle Financial's loan portfolio was analyzed as a commercial loan type with a specifically assigned risk rating. Consumer loans and small business loans are generally not assigned an individual risk rating but are evaluated as either accrual or nonaccrual based on the performance of the individual loans. However, certain consumer real estate-mortgage loans and certain consumer and other loans receive a specific risk rating due to the loan proceeds being used for commercial purposes even though the collateral may be of a consumer loan nature. Consumer loans that have been placed on nonaccrual but have not otherwise been assigned a risk rating are believed by management to share risk characteristics with loans rated substandard-nonaccrual and have been presented as such in Pinnacle Financial's risk rating disclosures. Risk ratings are subject to continual review by a financial advisor and a senior credit officer. At least annually, Pinnacle Financial's credit procedures require that every risk rated loan of $1.5 million or more be subject to a formal credit risk review process. Each loan's risk rating is also subject to review by Pinnacle Financial's independent loan review department, which reviews a substantial portion of Pinnacle Financial's risk rated portfolio annually. Included in the coverage are independent reviews of loans in targeted higher-risk portfolio segments such as certain commercial and industrial loans, land loans and/or loan types in certain geographies. Following are the definitions of the risk rating categories used by Pinnacle Financial. Pass rated loans include all credits other than those included within these categories: •Special mention loans have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in Pinnacle Financial's credit position at some future date. •Substandard loans are inadequately protected by the current net worth and financial capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize collection of the debt. Substandard loans are characterized by the distinct possibility that Pinnacle Financial could sustain some loss if the deficiencies are not corrected. •Substandard-nonaccrual loans are substandard loans that have been placed on nonaccrual status. •Doubtful-nonaccrual loans have all the characteristics of substandard-nonaccrual loans with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The following tables present loan balances classified within each risk rating category by primary loan type and year of origination or most recent renewal as of March 31, 2025 and December 31, 2024, as well as the gross loan charge-offs by primary loan type and year of origination or most recent renewal for the three months ended March 31, 2025 (in thousands):
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving Loans | Total |
March 31, 2025 |  |  |  |  |  |  |  |  |
Commercial real estate - owner occupied |  |  |  |  |  |  |  |  |
Pass | $ | 270,827 |  | $ | 778,636 |  | $ | 770,986 |  | $ | 1,043,020 |  | $ | 762,808 |  | $ | 812,956 |  | $ | 70,635 |  | $ | 4,509,868 |  |
Special Mention | — |  | 10,256 |  | 12,279 |  | 22,041 |  | 4,193 |  | 16,044 |  | — |  | 64,813 |  |
Substandard (1) | — |  | — |  | 3,953 |  | 897 |  | 160 |  | 197 |  | — |  | 5,207 |  |
Substandard-nonaccrual | — |  | 3,951 |  | 4,956 |  | 575 |  | 1,151 |  | 3,855 |  | — |  | 14,488 |  |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Total Commercial real estate - owner occupied | $ | 270,827 |  | $ | 792,843 |  | $ | 792,174 |  | $ | 1,066,533 |  | $ | 768,312 |  | $ | 833,052 |  | $ | 70,635 |  | $ | 4,594,376 |  |
Current period gross charge-offs | $ | — |  | (111) |  | — |  | — |  | — |  | (62) |  | — |  | $ | (173) |  |
Commercial real estate - non-owner occupied |  |  |  |  |  |  |  |  |
Pass | $ | 445,318 |  | $ | 1,149,465 |  | $ | 838,286 |  | $ | 3,163,570 |  | $ | 1,579,816 |  | $ | 803,024 |  | $ | 128,755 |  | $ | 8,108,234 |  |
Special Mention | — |  | 5,912 |  | 1,610 |  | 73,967 |  | 65,573 |  | 12,818 |  | — |  | 159,880 |  |
Substandard (1) | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Substandard-nonaccrual | — |  | — |  | 4,090 |  | 34,466 |  | 29,874 |  | 1,120 |  | 434 |  | 69,984 |  |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Total Commercial real estate - non-owner occupied | $ | 445,318 |  | $ | 1,155,377 |  | $ | 843,986 |  | $ | 3,272,003 |  | $ | 1,675,263 |  | $ | 816,962 |  | $ | 129,189 |  | $ | 8,338,098 |  |
Current period gross charge-offs | $ | — |  | — |  | — |  | — |  | — |  | — |  | — |  | $ | — |  |
Consumer real estate – mortgage |  |  |  |  |  |  |  |  |
Pass | $ | 173,764 |  | $ | 364,988 |  | $ | 473,240 |  | $ | 860,568 |  | $ | 943,317 |  | $ | 791,731 |  | $ | 1,322,635 |  | $ | 4,930,243 |  |
Special Mention | — |  | — |  | — |  | 2,697 |  | 10,458 |  | — |  | — |  | 13,155 |  |
Substandard (1) | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Substandard-nonaccrual | 110 |  | 692 |  | 6,820 |  | 6,221 |  | 4,787 |  | 14,097 |  | 1,233 |  | 33,960 |  |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Total Consumer real estate – mortgage | $ | 173,874 |  | $ | 365,680 |  | $ | 480,060 |  | $ | 869,486 |  | $ | 958,562 |  | $ | 805,828 |  | $ | 1,323,868 |  | $ | 4,977,358 |  |
Current period gross charge-offs | $ | — |  | — |  | (50) |  | (29) |  | (25) |  | (40) |  | (306) |  | $ | (450) |  |
Construction and land development |  |  |  |  |  |  |  |  |
Pass | $ | 269,220 |  | $ | 923,846 |  | $ | 559,236 |  | $ | 1,333,106 |  | $ | 262,128 |  | $ | 13,963 |  | $ | 82,436 |  | $ | 3,443,935 |  |
Special Mention | 8,395 |  | 2,229 |  | 858 |  | — |  | 68,185 |  | — |  | 6 |  | 79,673 |  |
Substandard (1) | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Substandard-nonaccrual | — |  | 471 |  | 1,781 |  | — |  | — |  | — |  | — |  | 2,252 |  |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Total Construction and land development | $ | 277,615 |  | $ | 926,546 |  | $ | 561,875 |  | $ | 1,333,106 |  | $ | 330,313 |  | $ | 13,963 |  | $ | 82,442 |  | $ | 3,525,860 |  |
Current period gross charge-offs | $ | — |  | — |  | — |  | — |  | — |  | — |  | — |  | $ | — |  |
Commercial and industrial |  |  |  |  |  |  |  |  |
Pass | $ | 1,518,057 |  | $ | 3,610,503 |  | $ | 1,667,177 |  | $ | 1,409,099 |  | $ | 626,476 |  | $ | 408,601 |  | $ | 4,548,322 |  | $ | 13,788,235 |  |
Special Mention | 14,990 |  | 46,746 |  | 65,882 |  | 25,625 |  | 13,876 |  | 879 |  | 71,267 |  | 239,265 |  |
Substandard (1) | 4,354 |  | 1,099 |  | 17,082 |  | 18,043 |  | 77 |  | 8,840 |  | 4,190 |  | 53,685 |  |
Substandard-nonaccrual | 335 |  | 2,418 |  | 14,806 |  | 11,420 |  | 18,118 |  | 1,600 |  | 1,430 |  | 50,127 |  |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Total Commercial and industrial | $ | 1,537,736 |  | $ | 3,660,766 |  | $ | 1,764,947 |  | $ | 1,464,187 |  | $ | 658,547 |  | $ | 419,920 |  | $ | 4,625,209 |  | $ | 14,131,312 |  |
Current period gross charge-offs | $ | — |  | (1,818) |  | (3,140) |  | (3,290) |  | (856) |  | (346) |  | (5,074) |  | $ | (14,524) |  |
Consumer and other |  |  |  |  |  |  |  |  |
Pass | $ | 83,960 |  | $ | 38,088 |  | $ | 21,966 |  | $ | 24,181 |  | $ | 38,707 |  | $ | 21,929 |  | $ | 340,152 |  | $ | 568,983 |  |
Special Mention | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Substandard (1) | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Substandard-nonaccrual | 513 |  | 40 |  | 184 |  | 22 |  | — |  | — |  | — |  | 759 |  |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Total Consumer and other | $ | 84,473 |  | $ | 38,128 |  | $ | 22,150 |  | $ | 24,203 |  | $ | 38,707 |  | $ | 21,929 |  | $ | 340,152 |  | $ | 569,742 |  |
Current period gross charge-offs | $ | — |  | (55) |  | (57) |  | — |  | (1,040) |  | (316) |  | (1,357) |  | $ | (2,825) |  |
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving Loans | Total |
Total loans |  |  |  |  |  |  |  |  |
Pass | $ | 2,761,146 |  | $ | 6,865,526 |  | $ | 4,330,891 |  | $ | 7,833,544 |  | $ | 4,213,252 |  | $ | 2,852,204 |  | $ | 6,492,935 |  | $ | 35,349,498 |  |
Special Mention | 23,385 |  | 65,143 |  | 80,629 |  | 124,330 |  | 162,285 |  | 29,741 |  | 71,273 |  | 556,786 |  |
Substandard (1) | 4,354 |  | 1,099 |  | 21,035 |  | 18,940 |  | 237 |  | 9,037 |  | 4,190 |  | 58,892 |  |
Substandard-nonaccrual | 958 |  | 7,572 |  | 32,637 |  | 52,704 |  | 53,930 |  | 20,672 |  | 3,097 |  | 171,570 |  |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Total loans | $ | 2,789,843 |  | $ | 6,939,340 |  | $ | 4,465,192 |  | $ | 8,029,518 |  | $ | 4,429,704 |  | $ | 2,911,654 |  | $ | 6,571,495 |  | $ | 36,136,746 |  |
Current period gross charge-offs | $ | — |  | (1,984) |  | (3,247) |  | (3,319) |  | (1,921) |  | (764) |  | (6,737) |  | $ | (17,972) |  |
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Revolving Loans | Total |
December 31, 2024 |  |  |  |  |  |  |  |  |
Commercial real estate - owner occupied |  |  |  |  |  |  |  |  |
Pass | $ | 759,519 |  | $ | 771,996 |  | $ | 1,064,314 |  | $ | 784,688 |  | $ | 432,886 |  | $ | 439,607 |  | $ | 67,023 |  | $ | 4,320,033 |  |
Special Mention | 16,638 |  | — |  | 14,231 |  | 3,192 |  | 9,582 |  | 5,032 |  | — |  | 48,675 |  |
Substandard (1) | 599 |  | 3,983 |  | 900 |  | 337 |  | 59 |  | 198 |  | — |  | 6,076 |  |
Substandard-nonaccrual | 3,944 |  | 5,393 |  | — |  | 1,003 |  | 1,780 |  | 1,627 |  | — |  | 13,747 |  |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Total Commercial real estate - owner occupied | $ | 780,700 |  | $ | 781,372 |  | $ | 1,079,445 |  | $ | 789,220 |  | $ | 444,307 |  | $ | 446,464 |  | $ | 67,023 |  | $ | 4,388,531 |  |
Commercial real estate - non-owner occupied |  |  |  |  |  |  |  |  |
Pass | $ | 1,273,096 |  | $ | 862,747 |  | $ | 3,040,361 |  | $ | 1,789,729 |  | $ | 474,094 |  | $ | 449,924 |  | $ | 124,971 |  | $ | 8,014,922 |  |
Special Mention | 5,970 |  | — |  | 31,783 |  | 29,828 |  | 1,525 |  | 1,827 |  | — |  | 70,933 |  |
Substandard (1) | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Substandard-nonaccrual | — |  | 4,627 |  | 114 |  | 38,456 |  | — |  | 1,066 |  | — |  | 44,263 |  |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Total Commercial real estate - non-owner occupied | $ | 1,279,066 |  | $ | 867,374 |  | $ | 3,072,258 |  | $ | 1,858,013 |  | $ | 475,619 |  | $ | 452,817 |  | $ | 124,971 |  | $ | 8,130,118 |  |
Consumer real estate – mortgage |  |  |  |  |  |  |  |  |
Pass | $ | 397,681 |  | $ | 487,027 |  | $ | 879,118 |  | $ | 972,489 |  | $ | 397,775 |  | $ | 428,832 |  | $ | 1,312,971 |  | $ | 4,875,893 |  |
Special Mention | — |  | — |  | — |  | 367 |  | — |  | — |  | — |  | 367 |  |
Substandard (1) | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Substandard-nonaccrual | 395 |  | 6,146 |  | 6,918 |  | 6,588 |  | 1,810 |  | 14,720 |  | 1,645 |  | 38,222 |  |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Total Consumer real estate – mortgage | $ | 398,076 |  | $ | 493,173 |  | $ | 886,036 |  | $ | 979,444 |  | $ | 399,585 |  | $ | 443,552 |  | $ | 1,314,616 |  | $ | 4,914,482 |  |
Construction and land development |  |  |  |  |  |  |  |  |
Pass | $ | 1,052,892 |  | $ | 586,930 |  | $ | 1,589,567 |  | $ | 347,539 |  | $ | 7,415 |  | $ | 7,992 |  | $ | 77,014 |  | $ | 3,669,349 |  |
Special Mention | 2,464 |  | — |  | — |  | 25,121 |  | — |  | — |  | — |  | 27,585 |  |
Substandard (1) | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Substandard-nonaccrual | 475 |  | 1,912 |  | — |  | — |  | — |  | — |  | — |  | 2,387 |  |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Total Construction and land development | $ | 1,055,831 |  | $ | 588,842 |  | $ | 1,589,567 |  | $ | 372,660 |  | $ | 7,415 |  | $ | 7,992 |  | $ | 77,014 |  | $ | 3,699,321 |  |
Commercial and industrial |  |  |  |  |  |  |  |  |
Pass | $ | 4,334,110 |  | $ | 1,877,507 |  | $ | 1,553,642 |  | $ | 782,366 |  | $ | 223,143 |  | $ | 232,580 |  | $ | 4,441,222 |  | $ | 13,444,570 |  |
Special Mention | 60,125 |  | 99,687 |  | 44,986 |  | 2,519 |  | 714 |  | 677 |  | 73,126 |  | 281,834 |  |
Substandard (1) | 5,998 |  | 2,624 |  | 18,843 |  | 5 |  | 17 |  | 8,693 |  | 4,658 |  | 40,838 |  |
Substandard-nonaccrual | 2,838 |  | 11,226 |  | 12,311 |  | 19,228 |  | 554 |  | 767 |  | 1,651 |  | 48,575 |  |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Total Commercial and industrial | $ | 4,403,071 |  | $ | 1,991,044 |  | $ | 1,629,782 |  | $ | 804,118 |  | $ | 224,428 |  | $ | 242,717 |  | $ | 4,520,657 |  | $ | 13,815,817 |  |
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Revolving Loans | Total |
Consumer and other |  |  |  |  |  |  |  |  |
Pass | $ | 109,143 |  | $ | 26,333 |  | $ | 27,121 |  | $ | 43,271 |  | $ | 24,089 |  | $ | 663 |  | $ | 306,256 |  | $ | 536,876 |  |
Special Mention | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Substandard (1) | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Substandard-nonaccrual | 541 |  | — |  | 25 |  | 39 |  | — |  | — |  | 26 |  | 631 |  |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Total Consumer and other | $ | 109,684 |  | $ | 26,333 |  | $ | 27,146 |  | $ | 43,310 |  | $ | 24,089 |  | $ | 663 |  | $ | 306,282 |  | $ | 537,507 |  |
Total loans |  |  |  |  |  |  |  |  |
Pass | $ | 7,926,441 |  | $ | 4,612,540 |  | $ | 8,154,123 |  | $ | 4,720,082 |  | $ | 1,559,402 |  | $ | 1,559,598 |  | $ | 6,329,457 |  | $ | 34,861,643 |  |
Special Mention | 85,197 |  | 99,687 |  | 91,000 |  | 61,027 |  | 11,821 |  | 7,536 |  | 73,126 |  | 429,394 |  |
Substandard (1) | 6,597 |  | 6,607 |  | 19,743 |  | 342 |  | 76 |  | 8,891 |  | 4,658 |  | 46,914 |  |
Substandard-nonaccrual | 8,193 |  | 29,304 |  | 19,368 |  | 65,314 |  | 4,144 |  | 18,180 |  | 3,322 |  | 147,825 |  |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |
Total loans | $ | 8,026,428 |  | $ | 4,748,138 |  | $ | 8,284,234 |  | $ | 4,846,765 |  | $ | 1,575,443 |  | $ | 1,594,205 |  | $ | 6,410,563 |  | $ | 35,485,776 |  |
(1) Potential problem loans represent those loans with a well-defined weakness and where information about possible credit problems of borrowers has caused management to have doubts about the borrower's ability to comply with present repayment terms. This definition is believed to be substantially consistent with the standards established by Pinnacle Bank's primary regulators for loans classified as substandard, excluding loan modifications made to borrowers experiencing financial difficulty. Potential problem loans, which are not included in nonaccrual loans, amounted to approximately $54.3 million at March 31, 2025, compared to $46.9 million at December 31, 2024. The table below presents the aging of past due balances by loan segment at March 31, 2025 and December 31, 2024 (in thousands):
March 31, 2025 | 30-59 days past due |  | 60-89 days past due |  | 90 days or more past due |  | Total past due |  | Current |  | Total loans
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |
Owner occupied | $ | 3,385 |  |  | $ | 1,011 |  |  | $ | 13,455 |  |  | $ | 17,851 |  |  | $ | 4,576,525 |  |  | $ | 4,594,376 |
Non-owner occupied | 86 |  |  | 86 |  |  | 30,669 |  |  | 30,841 |  |  | 8,307,257 |  |  | 8,338,098 |
Consumer real estate – mortgage | 13,891 |  |  | 4,577 |  |  | 15,907 |  |  | 34,375 |  |  | 4,942,983 |  |  | 4,977,358 |
Construction and land development | — |  |  | 249 |  |  | 1,747 |  |  | 1,996 |  |  | 3,523,864 |  |  | 3,525,860 |
Commercial and industrial | 18,099 |  |  | 8,220 |  |  | 33,066 |  |  | 59,385 |  |  | 14,071,927 |  |  | 14,131,312 |
Consumer and other | 3,335 |  |  | 2,324 |  |  | 1,417 |  |  | 7,076 |  |  | 562,666 |  |  | 569,742 |
Total | $ | 38,796 |  |  | $ | 16,467 |  |  | $ | 96,261 |  |  | $ | 151,524 |  |  | $ | 35,985,222 |  |  | $ | 36,136,746 |
December 31, 2024 |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |
Owner occupied | $ | 7,857 |  |  | $ | 2,726 |  |  | $ | 10,089 |  |  | $ | 20,672 |  |  | $ | 4,367,859 |  |  | $ | 4,388,531 |
Non-owner occupied | 1,217 |  |  | — |  |  | 39,469 |  |  | 40,686 |  |  | 8,089,432 |  |  | 8,130,118 |
Consumer real estate – mortgage | 19,986 |  |  | 1,621 |  |  | 20,615 |  |  | 42,222 |  |  | 4,872,260 |  |  | 4,914,482 |
Construction and land development | 125 |  |  | — |  |  | 1,541 |  |  | 1,666 |  |  | 3,697,655 |  |  | 3,699,321 |
Commercial and industrial | 15,992 |  |  | 8,515 |  |  | 31,077 |  |  | 55,584 |  |  | 13,760,233 |  |  | 13,815,817 |
Consumer and other | 2,592 |  |  | 1,500 |  |  | 1,160 |  |  | 5,252 |  |  | 532,255 |  |  | 537,507 |
Total | $ | 47,769 |  |  | $ | 14,362 |  |  | $ | 103,951 |  |  | $ | 166,082 |  |  | $ | 35,319,694 |  |  | $ | 35,485,776 |
The following table details the changes in the allowance for credit losses for the three months ended March 31, 2025 and 2024, respectively, by loan classification (in thousands):
| Commercial real estate - owner occupied | Commercial real estate - non-owner occupied | Consumer real estate - mortgage | Construction and land development | Commercial and industrial | Consumer and other |  | Total
Three months ended March 31, 2025: |  |  |  |  |  |  |  |
Balance at December 31, 2024 | $ | 36,997 |  | $ | 80,654 |  | $ | 80,042 |  | $ | 33,620 |  | $ | 174,799 |  | $ | 8,382 |  |  | $ | 414,494 |
Charged-off loans | (173) |  | — |  | (450) |  | — |  | (14,524) |  | (2,825) |  |  | (17,972) |
Recovery of previously charged-off loans | 13 |  | 10 |  | 223 |  | 2 |  | 2,267 |  | 1,465 |  |  | 3,980 |
Provision for credit losses on loans | 2,265 |  | (10,838) |  | 6,632 |  | (3,161) |  | 20,663 |  | 1,399 |  |  | 16,960 |
Balance at March 31, 2025 | $ | 39,102 |  | $ | 69,826 |  | $ | 86,447 |  | $ | 30,461 |  | $ | 183,205 |  | $ | 8,421 |  |  | $ | 417,462 |
Three months ended March 31, 2024: |  |  |  |  |  |  |  |
Balance at December 31, 2023 | $ | 28,690 |  | $ | 57,687 |  | $ | 71,354 |  | $ | 39,142 |  | $ | 148,212 |  | $ | 7,970 |  |  | $ | 353,055 |
Charged-off loans | (94) |  | (2,000) |  | (623) |  | — |  | (14,808) |  | (3,307) |  |  | (20,832) |
Recovery of previously charged-off loans | 17 |  | 14 |  | 244 |  | 7 |  | 2,822 |  | 1,513 |  |  | 4,617 |
Provision for credit losses on loans | 1,077 |  | 16,880 |  | 4,839 |  | (5,415) |  | 14,946 |  | 2,170 |  |  | 34,497 |
Balance at March 31, 2024 | $ | 29,690 |  | $ | 72,581 |  | $ | 75,814 |  | $ | 33,734 |  | $ | 151,172 |  | $ | 8,346 |  |  | $ | 371,337 |
The adequacy of the allowance for credit losses is reviewed by Pinnacle Financial's management on a quarterly basis. This assessment includes procedures to estimate the allowance and test the adequacy and appropriateness of the resulting balance. The level of the allowance is based upon management's evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers' ability to repay the loan (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations. The level of the allowance for credit losses maintained by management is believed to be adequate to absorb all expected future losses inherent in the loan portfolio at the balance sheet date. The allowance is increased by provisions charged to expense and decreased by charge-offs, net of recoveries of amounts previously charged-off. The current expected credit losses (CECL) methodology requires the allowance for credit losses to be measured on a collective basis for pools of loans with similar risk characteristics, and for loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. For commercial real estate, consumer real estate, construction and land development, and commercial and industrial loans, Pinnacle Financial primarily utilizes a probability of default and loss given default modeling approach. These models utilize historical correlations between default and loss experience, loan level attributes, and certain macroeconomic factors as determined through a statistical regression analysis. Segments using this approach incorporate various economic drivers. Commercial and industrial loans consider gross domestic product (GDP), the consumer credit index and the national unemployment rate, commercial construction loans and commercial real estate loans including nonowner occupied and owner occupied commercial real estate loans consider the national unemployment rate and the commercial property and commercial real estate price indices, construction and land development loans consider the commercial property, consumer credit and home price indices dependent upon their use as residential versus commercial, consumer real estate loans consider the home price index and household debt ratio and other consumer loans consider the national unemployment rate and the household financial obligations ratio. A third-party provides management with quarterly macroeconomic scenarios, which management evaluates to determine the best estimate of the expected losses. For the consumer and other loan segment, a non-statistical approach based on historical charge off rates is utilized. Losses are predicted over a period of time determined by management to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. The reasonable and supportable period and reversion period are re-evaluated each quarter by Pinnacle Financial and are dependent on the current economic environment among other factors. A reasonable and supportable period of fifteen months was utilized for all loan segments at March 31, 2025 and December 31, 2024, followed by a twelve month straight line reversion to long term averages at each measurement date. The estimated loan losses for all loan segments are adjusted for changes in qualitative factors not inherently considered in the quantitative analyses. These adjustments are based upon quarterly trend assessments in portfolio concentrations, policy exceptions, associate retention, independent loan review results, competition and peer group credit quality trends. The qualitative allowance allocation, as determined by the processes noted above, is increased or decreased for each loan segment based on the assessment of these various qualitative factors. Loans that do not share similar risk characteristics with the collectively evaluated pools are evaluated on an individual basis and are excluded from the collectively evaluated pools. Individual evaluations are generally performed for loans greater than $1.0 million which have experienced significant credit deterioration. Such loans are evaluated for credit losses based on either discounted cash flows or the fair value of collateral. The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, as of March 31, 2025 and December 31, 2024 (in thousands):
| Real Estate | Business Assets | Other | Total
March 31, 2025 |  |  |  |
Commercial real estate: |  |  |  |
Owner occupied | $ | 17,358 |  | $ | — |  | $ | — |  | $ | 17,358 |
Non-owner occupied | 72,438 |  | — |  | — |  | 72,438 |
Consumer real estate – mortgage | 36,418 |  | — |  | — |  | 36,418 |
Construction and land development | 2,304 |  | — |  | — |  | 2,304 |
Commercial and industrial | — |  | 48,797 |  | 709 |  | 49,506 |
Consumer and other | — |  | — |  | 205 |  | 205 |
Total | $ | 128,518 |  | $ | 48,797 |  | $ | 914 |  | $ | 178,229 |
December 31, 2024 |  |  |  |
Commercial real estate: |  |  |  |
Owner occupied | $ | 17,486 |  | $ | — |  | $ | — |  | $ | 17,486 |
Non-owner occupied | 46,745 |  | — |  | — |  | 46,745 |
Consumer real estate – mortgage | 40,795 |  | — |  | — |  | 40,795 |
Construction and land development | 2,441 |  | — |  | — |  | 2,441 |
Commercial and industrial | — |  | 63,626 |  | 752 |  | 64,378 |
Consumer and other | — |  | — |  | 23 |  | 23 |
Total | $ | 107,467 |  | $ | 63,626 |  | $ | 775 |  | $ | 171,868 |
The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. Pinnacle Financial uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, a loan modification will be granted by providing principal forgiveness on certain loans. When principal forgiveness is provided, the amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is charged-off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses. In some cases, a loan restructuring will result in providing multiple types of modifications. Typically, one type of modification, such as a payment delay or term extension, is granted initially. If the borrower continues to experience financial difficulty, another modification, such as principal forgiveness or an interest rate reduction, may be granted. Additionally, multiple types of modifications may be made on the same loan within the current reporting period. Such a combination is at least two of the following: a payment delay, term extension, principal forgiveness, or interest rate reduction. Upon determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. The following table shows the amortized cost basis of the loans modified to borrowers experiencing financial difficulty during the three months ended March 31, 2025 and 2024, disaggregated by class of loans and type of modification granted and describes the financial effect of the modifications made to borrowers experiencing financial difficulty (in thousands):
| Three months ended March 31, 2025
| Term Extension
| Amortized Cost Basis | % of Total Loan Type | Financial Effect
Commercial real estate: |  |  |
Owner occupied | $ | — |  | — | % |
Non-owner occupied | — |  | — | % |
Consumer real estate – mortgage | — |  | — | % |
Construction and land development | — |  | — | % |
Commercial and industrial | 4,567 |  | 0.03 | % | Added a weighted average 0.46 years to the term of the modified loans
Consumer and other | — |  | — | % |
Total | $ | 4,567 |  |  |
| Three months ended March 31, 2024
| Term Extension
| Amortized Cost Basis | % of Total Loan Type | Financial Effect
Commercial real estate: |  |  |
Owner occupied | $ | — |  | — | % |
Non-owner occupied | — |  | — | % |
Consumer real estate – mortgage | — |  | — | % |
Construction and land development | — |  | — | % |
Commercial and industrial | 19,208 |  | 0.16 | % | Added a weighted average 0.41 years to the term of the modified loans
Consumer and other | — |  | — | % |
Total | $ | 19,208 |  |  |
No loans that were previously modified and subsequently defaulted were charged off during the three months ended March 31, 2025 and 2024. During the three months ended March 31, 2025, no loans experienced a payment default subsequent to being granted a modification in the prior twelve months. The following table shows loans that experienced a payment default during the three months ended March 31, 2024, subsequent to being granted a modification in the prior twelve months:
| Three months ended March 31, 2024 |
| Payment Delay | Term Extension |  | Total
Commercial real estate: |  |  |  |  |
Owner occupied | $ | — |  | $ | 5,529 |  |  | $ | 5,529 |  |
Non-owner occupied | 13,298 |  | — |  |  | 13,298 |  |
Consumer real estate – mortgage | — |  | — |  |  | — |  |
Construction and land development | — |  | — |  |  | — |  |
Commercial and industrial | — |  | — |  |  | — |  |
Consumer and other | — |  | — |  |  | — |  |
Total | $ | 13,298 |  | $ | 5,529 |  |  | $ | 18,827 |  |
The table below presents the aging of past due balances as of March 31, 2025 and March 31, 2024 of loans made to borrowers experiencing financial difficulty that were modified in the previous twelve months:
March 31, 2025 | 30-59 days past due | 60-89 days past due | 90 days or more past due | Current | Total modified loans
Commercial real estate: |  |  |  |  |
Owner occupied | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |
Non-owner occupied | — |  | — |  | — |  | — |  | — |
Consumer real estate – mortgage | — |  | — |  | — |  | — |  | — |
Construction and land development | — |  | — |  | — |  | — |  | — |
Commercial and industrial | — |  | — |  | — |  | 19,119 |  | 19,119 |
Consumer and other | — |  | — |  | — |  | — |  | — |
Total | $ | — |  | $ | — |  | $ | — |  | $ | 19,119 |  | $ | 19,119 |
March 31, 2024 |  |  |  |  |
Commercial real estate: |  |  |  |  |
Owner occupied | $ | — |  | $ | 5,529 |  | $ | — |  | $ | — |  | $ | 5,529 |
Non-owner occupied | — |  | — |  | — |  | 26,780 |  | 26,780 |
Consumer real estate – mortgage | — |  | — |  | — |  | — |  | — |
Construction and land development | — |  | — |  | — |  | — |  | — |
Commercial and industrial | — |  | — |  | 3,226 |  | 19,209 |  | 22,435 |
Consumer and other | — |  | — |  | — |  | — |  | — |
Total | $ | — |  | $ | 5,529 |  | $ | 3,226 |  | $ | 45,989 |  | $ | 54,744 |
The table below presents the amortized cost basis of loans on nonaccrual status and loans past due 90 or more days and still accruing interest at March 31, 2025 and December 31, 2024. Also presented is the balance of loans on nonaccrual status at March 31, 2025 and December 31, 2024 for which there was no related allowance for credit losses recorded (in thousands):
| March 31, 2025 |  | December 31, 2024
| Total nonaccrual loans |  | Nonaccrual loans with no allowance for credit losses |  | Loans past due 90 or more days and still accruing |  | Total nonaccrual loans |  | Nonaccrual loans with no allowance for credit losses |  | Loans past due 90 or more days and still accruing
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |
Owner occupied | $ | 14,488 |  |  | $ | 5,417 |  |  | $ | 177 |  |  | $ | 13,747 |  |  | $ | 6,614 |  |  | $ | — |
Non-owner occupied | 69,984 |  |  | 4,090 |  |  | — |  |  | 44,263 |  |  | 4,152 |  |  | — |
Consumer real estate – mortgage | 33,960 |  |  | 1,386 |  |  | 476 |  |  | 38,222 |  |  | 1,376 |  |  | 23 |
Construction and land development | 2,252 |  |  | 319 |  |  | — |  |  | 2,387 |  |  | 319 |  |  | — |
Commercial and industrial | 50,127 |  |  | 1,525 |  |  | 2,964 |  |  | 48,575 |  |  | 19,715 |  |  | 2,873 |
Consumer and other | 759 |  |  | — |  |  | 720 |  |  | 631 |  |  | — |  |  | 619 |
Total | $ | 171,570 |  |  | $ | 12,737 |  |  | $ | 4,337 |  |  | $ | 147,825 |  |  | $ | 32,176 |  |  | $ | 3,515 |
Pinnacle Financial's policy is the accrual of interest income will be discontinued when (1) there is a significant deterioration in the financial condition of the borrower and full repayment of principal and interest is not expected or (2) the principal or interest is more than 90 days past due, unless the loan is both well secured and in the process of collection. As such, at the date loans are placed on nonaccrual status, Pinnacle Financial reverses all previously accrued interest income against current year earnings. Pinnacle Financial's policy is once a loan is placed on nonaccrual status each subsequent payment is reviewed on a case-by-case basis to determine if the payment should be applied to interest or principal pursuant to regulatory guidelines. Pinnacle Financial recognized no interest income from cash payments received on nonaccrual loans during the three months ended March 31, 2025 and 2024. Had these loans been on accruing status, an additional $3.3 million and $2.6 million of interest income would have been recognized for the three months ended March 31, 2025 and 2024, respectively. Approximately $72.3 million and $36.3 million of nonaccrual loans were performing pursuant to their contractual terms as of March 31, 2025 and December 31, 2024, respectively. Pinnacle Financial analyzes its commercial loan portfolio to determine if a concentration of credit risk exists to any industries. Pinnacle Financial utilizes broadly accepted industry classification systems in order to classify borrowers into various industry classifications. Pinnacle Financial has a credit exposure (loans outstanding plus unfunded lines of credit) exceeding 25% of Pinnacle Bank's total risk-based capital to borrowers in the following industries at March 31, 2025 with the comparative exposures for December 31, 2024 (in thousands):
| March 31, 2025 |  |
| Outstanding Principal Balances |  | Unfunded Commitments |  | Total exposure |  | Total Exposure at December 31, 2024
Lessors of nonresidential buildings | $ | 4,675,803 |  |  | $ | 936,311 |  |  | $ | 5,612,114 |  |  | $ | 5,439,776 |
Lessors of residential buildings | 2,366,436 |  |  | 429,337 |  |  | 2,795,773 |  |  | 2,871,227 |
New Housing For-Sale Builders | 580,278 |  |  | 862,720 |  |  | 1,442,998 |  |  | 1,394,494 |
Music Publishers | 903,837 |  |  | 431,925 |  |  | 1,335,762 |  |  | 1,114,105 |
Among other data, Pinnacle Financial monitors two ratios regarding construction and commercial real estate lending as part of its concentration management processes. Both ratios are calculated by dividing certain types of loan balances for each of the two categories by Pinnacle Bank’s total risk-based capital. At March 31, 2025 and December 31, 2024, Pinnacle Bank’s construction and land development loans as a percentage of total risk-based capital were 65.6% and 70.5%, respectively. Non-owner occupied commercial real estate and multifamily loans (including construction and land development loans) as a percentage of total risk-based capital were 236.4% and 242.2% as of March 31, 2025 and December 31, 2024, respectively. Banking regulations have established guidelines for the construction ratio of less than 100% of total risk-based capital and for the non-owner occupied ratio of less than 300% of total risk-based capital. When a bank’s ratios are in excess of one or both of these guidelines, banking regulations generally require an increased level of monitoring in these lending areas by bank management. At March 31, 2025, Pinnacle Bank was within the 100% and 300% guidelines and has established what it believes to be appropriate monitoring of its lending in these areas as it aims to keep the level of these loans below the 100% and 300% thresholds within the applicable guidelines. At March 31, 2025, Pinnacle Bank had granted loans and other extensions of credit amounting to approximately $40.0 million to current directors, executive officers, and their related interests, of which $37.7 million had been drawn upon. At December 31, 2024, Pinnacle Bank had granted loans and other extensions of credit amounting to approximately $39.4 million to directors, executive officers, and their related interests, of which approximately $37.4 million had been drawn upon. All loans to directors, executive officers, and their related interests were performing in accordance with contractual terms at March 31, 2025 and December 31, 2024. Loans Held for Sale At March 31, 2025, Pinnacle Financial had approximately $12.1 million in commercial loans held for sale compared to $19.7 million at December 31, 2024. These include commercial real estate and apartment loans originated for sale to a third-party as part of a multi-family loan program. Such loans are closed under a pass-through commitment structure wherein Pinnacle Bank's loan commitment to the borrower is the same as the third party's take-out commitment to Pinnacle Bank and the third party purchase typically occurs within thirty days of Pinnacle Bank closing with the borrowers. Also included are commercial loans originated for sale to BHG as part of BHG's alternative financing portfolio. At March 31, 2025, Pinnacle Financial had approximately $123.8 million in consumer loans held for sale, excluding mortgage loans, compared to $160.2 million at December 31, 2024. These include consumer loans originated for sale to BHG as part of BHG's alternative financing portfolio. At March 31, 2025, Pinnacle Financial had approximately $19.5 million of mortgage loans held-for-sale compared to approximately $15.4 million at December 31, 2024. Total mortgage loan volumes sold during the three months ended March 31, 2025 were approximately $145.6 million compared to approximately $148.6 million for the three months ended March 31, 2024. During the three months ended March 31, 2025, Pinnacle Financial recognized $2.5 million in gains on the sale of these loans, net of commissions paid, compared to $2.9 million during the three months ended March 31, 2024. These residential mortgage loans held-for-sale are originated internally and are primarily to borrowers in Pinnacle Bank's geographic markets. These sales are typically on a mandatory basis to investors that follow conventional government sponsored entities and the Department of Housing and Urban Development/U.S. Department of Veterans Affairs guidelines. Each purchaser of a residential mortgage loan held-for-sale has specific guidelines and criteria for sellers of loans and the risk of credit loss with regard to the principal amount of the loans sold is generally transferred to the purchasers upon sale. While the loans are sold without recourse, the purchase agreements require Pinnacle Bank to make certain representations and warranties regarding the existence and sufficiency of file documentation and the absence of fraud by borrowers or other third parties such as appraisers in connection with obtaining the loan. If it is determined that the loans sold were in breach of these representations or warranties, Pinnacle Bank has obligations to either repurchase the loan for the unpaid principal balance and related investor fees or make the purchaser whole for the economic benefits of the loan. To date, Pinnacle Bank's liability due to the breach of these representations and warranties has been insignificant.

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