Pinnacle Financial Partners, Inc.PNFP
Pinnacle Financial Partners, Inc. Income Taxes Disclosure
Note 11. Income Taxes
Income tax expense attributable to continuing operations for each of the years in the three-year period ended December 31, 2025 is as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Current tax expense : | |||||||||||||||||
| Federal | $ | 201,782 | $ | 110,464 | $ | 67,711 | |||||||||||
| State | 11,661 | 15,040 | 11,775 | ||||||||||||||
| Total current tax expense | 213,443 | 125,504 | 79,486 | ||||||||||||||
| Deferred tax expense (benefit): | |||||||||||||||||
| Federal | (71,811) | (19,550) | 67,446 | ||||||||||||||
| State | (3,619) | 199 | 4,922 | ||||||||||||||
| Total deferred tax (benefit) expense | (75,430) | (19,351) | 72,368 | ||||||||||||||
| Total income tax expense | $ | 138,013 | $ | 106,153 | $ | 151,854 | |||||||||||
Pinnacle Financial did not have pretax income from continuing foreign operations or foreign tax expense for any of the years in the three-year period ended December 31, 2025.
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, 2025 is as follows (in thousands):
| 2025 | % | 2024 | % | 2023 | % | ||||||||||||||||||||||||||||||
| Income tax expense at statutory rate | $ | 163,775 | 21.00 | % | $ | 122,054 | 21.00 | % | $ | 149,941 | 21.00 | % | |||||||||||||||||||||||
State excise tax expense, net of federal tax effect (1) (2) (3) | 5,215 | 0.67 | % | 8,000 | 1.38 | % | 11,847 | 1.66 | % | ||||||||||||||||||||||||||
| Tax credits | |||||||||||||||||||||||||||||||||||
| Low-income housing tax credits, net of amortization and other income tax benefits | (10,251) | (1.31) | % | (7,219) | (1.24) | % | (4,369) | (0.61) | % | ||||||||||||||||||||||||||
| Other, net of amortization and other tax benefits | (773) | (0.10) | % | (49) | (0.01) | % | (360) | (0.05) | % | ||||||||||||||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
| Non-deductible executive compensation | 5,965 | 0.76 | % | 5,635 | 0.97 | % | 5,186 | 0.73 | % | ||||||||||||||||||||||||||
| Tax-exempt securities | (24,714) | (3.17) | % | (22,169) | (3.81) | % | (21,663) | (3.03) | % | ||||||||||||||||||||||||||
| Bank owned life insurance income | (9,941) | (1.27) | % | (8,780) | (1.51) | % | (4,324) | (0.61) | % | ||||||||||||||||||||||||||
| Bank owned life insurance surrender | — | — | % | — | — | % | 8,572 | 1.20 | % | ||||||||||||||||||||||||||
| Non-deductible FDIC assessment | 7,432 | 0.95 | % | 7,103 | 1.22 | % | 5,361 | 0.75 | % | ||||||||||||||||||||||||||
| Excess tax benefits associated with equity compensation | (3,839) | (0.49) | % | (2,806) | (0.48) | % | (208) | (0.03) | % | ||||||||||||||||||||||||||
| Change in uncertain tax positions | — | — | % | 3,137 | 0.54 | % | 475 | 0.07 | % | ||||||||||||||||||||||||||
| Other | 5,377 | 0.69 | % | 1,422 | 0.24 | % | 1,233 | 0.17 | % | ||||||||||||||||||||||||||
| Other adjustments | |||||||||||||||||||||||||||||||||||
| Other items | (233) | (0.03) | % | (175) | (0.04) | % | 163 | 0.02 | % | ||||||||||||||||||||||||||
| Income tax expense | $ | 138,013 | 17.70 | % | $ | 106,153 | 18.26 | % | $ | 151,854 | 21.27 | % | |||||||||||||||||||||||
(1) At least 50% of the state and local income tax category relates to Tennessee, New York, Florida and California for the year ended December 31, 2025.
(2) At least 50% of the state and local income tax category relates to New York, Florida, New York City, California, North Carolina and Illinois for the year ended December 31, 2024.
(3) At least 50% of the state and local income tax category relates to New York, Florida, California, North Carolina, Wisconsin, New York City and Illinois for the year ended December 31, 2023.
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.
Income taxes paid, net of refunds for the years ended December 31, 2025, 2024 and 2023 were as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Income taxes paid, net of refunds: | |||||||||||||||||
| Federal | $ | 52,140 | $ | (43,106) | $ | 56,000 | |||||||||||
| State and local | |||||||||||||||||
| New York | * | 2,051 | * | ||||||||||||||
| Florida | * | 1,980 | * | ||||||||||||||
| New York City | * | 1,958 | * | ||||||||||||||
| Tennessee | * | (6,000) | 14,017 | ||||||||||||||
| Wisconsin | * | * | 5,516 | ||||||||||||||
| Other states | 24,989 | 12,569 | 24,248 | ||||||||||||||
| Total income taxes paid, net of refunds | $ | 77,129 | $ | (30,548) | $ | 99,781 | |||||||||||
* Jurisdiction below the 5% threshold for total taxes paid, net of refunds for the period presented.
The components of deferred income taxes included in other assets in the accompanying consolidated balance sheets at December 31, 2025 and 2024 are as follows (in thousands):
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Allowance for credit losses | $ | 105,913 | $ | 99,002 | |||||||
| Loans | 5,415 | 4,463 | |||||||||
| Insurance | 818 | 878 | |||||||||
| Accrued liability for supplemental retirement agreements | 6,228 | 6,611 | |||||||||
| Restricted stock and stock options | 8,424 | 8,255 | |||||||||
| Securities | 28,356 | 44,504 | |||||||||
| Cash flow hedges | 9,920 | 8,772 | |||||||||
| FHLB related assets | 143 | 64 | |||||||||
| Lease liability | 94,685 | 76,426 | |||||||||
| Other real estate owned | 26 | — | |||||||||
| Net federal operating loss carryforward and credits | 36,019 | 9,621 | |||||||||
| Annual incentive compensation | 28,757 | 20,473 | |||||||||
| Partnership interests | 106,952 | 33,747 | |||||||||
| Allowance for off balance sheet credit exposures | 4,035 | 3,117 | |||||||||
| Tax credit investments | 6,154 | 2,601 | |||||||||
| FDIC special assessment | 800 | 6,254 | |||||||||
| Accrued expenses | 2,132 | 1,465 | |||||||||
| Other deferred tax assets | 2,444 | 2,426 | |||||||||
| Total deferred tax assets | 447,221 | 328,679 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation and amortization | 18,546 | 20,438 | |||||||||
| Core deposit and other intangible assets | 4,510 | 5,193 | |||||||||
| REIT dividends | 2,305 | 2,247 | |||||||||
| Mortgage servicing rights | 2,610 | 2,963 | |||||||||
| Equity method investment | — | 18 | |||||||||
| Right-of-use assets and other leasing transactions | 91,777 | 72,886 | |||||||||
| Leases | 111,232 | 83,810 | |||||||||
| Subordinated debt | 1,174 | 1,293 | |||||||||
| Prepaids | 1,867 | 1,611 | |||||||||
| Other deferred tax liabilities | 2,122 | 2,748 | |||||||||
| Total deferred tax liabilities | 236,143 | 193,207 | |||||||||
| Net deferred tax assets | $ | 211,078 | $ | 135,472 | |||||||
At December 31, 2025, the Company had federal and state loss carryforwards resulting from acquisitions of approximately $3.8 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, 2025 is as follows (in thousands):
Pinnacle Financial's policy is to recognize interest and/or penalties related to income tax matters in income tax expense. For the year ended December 31, 2025, Pinnacle Financial recognized no interest and penalties related to income tax matters. Pinnacle Financial recognized $41,000, and $80,000 in interest and penalties related to income tax matters for the years ended December 31, 2024 and 2023, respectively.| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at January 1, | $ | 10,127 | $ | 8,806 | $ | 15,752 | |||||||||||
| Increases due to tax positions taken during the current year | — | 140 | 642 | ||||||||||||||
| Increases due to tax positions taken during a prior year | 101 | 3,831 | — | ||||||||||||||
| Decreases due to the lapse of the statute of limitations during the current year | (68) | (1,750) | (1,340) | ||||||||||||||
| Decreases due to settlements with the taxing authorities during the current year | (2,334) | (900) | (6,248) | ||||||||||||||
| Balance at December 31, | $ | 7,826 | $ | 10,127 | $ | 8,806 | |||||||||||
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.