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Loans and Allowance for Loan Losses (Tables) | 3 Months Ended
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Mar. 31, 2019
Receivables [Abstract] |
Loan Classification Categorized by Risk Rating Category | The following table outlines the amount of each loan classification categorized into each risk rating category as of March 31, 2019 and December 31, 2018 (in thousands):
| Commercial real estate - mortgage | Consumer real estate - mortgage | Construction and land development | Commercial and industrial | Consumer and other | Total
March 31, 2019 |  |  |  |  |  |
Pass | $ | 7,252,503 |  | $ | 2,830,701 |  | $ | 2,083,602 |  | $ | 5,259,503 |  | $ | 349,945 |  | $ | 17,776,254 |
Special Mention | 51,552 |  | 6,916 |  | 7,843 |  | 41,980 |  | 710 |  | 109,001 |
Substandard (1) | 76,171 |  | 17,880 |  | 3,350 |  | 96,049 |  | 57 |  | 193,507 |
Substandard-nonaccrual | 38,920 |  | 32,131 |  | 2,775 |  | 21,988 |  | 330 |  | 96,144 |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |
Total loans | $ | 7,419,146 |  | $ | 2,887,628 |  | $ | 2,097,570 |  | $ | 5,419,520 |  | $ | 351,042 |  | $ | 18,174,906 |
| Commercial real estate - mortgage | Consumer real estate - mortgage | Construction and land development | Commercial and industrial | Consumer and other | Total
December 31, 2018 |  |  |  |  |  |
Pass | $ | 6,998,485 |  | $ | 2,787,570 |  | $ | 2,059,376 |  | $ | 5,148,726 |  | $ | 352,516 |  | $ | 17,346,673 |
Special Mention | 55,932 |  | 7,902 |  | 4,334 |  | 24,284 |  | 711 |  | 93,163 |
Substandard (1) | 78,202 |  | 20,906 |  | 5,358 |  | 75,351 |  | 62 |  | 179,879 |
Substandard-nonaccrual | 32,335 |  | 28,069 |  | 3,387 |  | 23,060 |  | 983 |  | 87,834 |
Doubtful-nonaccrual | — |  | — |  | — |  | — |  | — |  | — |
Total loans | $ | 7,164,954 |  | $ | 2,844,447 |  | $ | 2,072,455 |  | $ | 5,271,421 |  | $ | 354,272 |  | $ | 17,707,549 |
(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 troubled debt restructurings. Potential problem loans, which are not included in nonaccrual loans, amounted to approximately $190.3 million at March 31, 2019, compared to $176.3 million at December 31, 2018.
Purchase Credit Impaired Loans | Loans acquired with deteriorated credit quality are recorded pursuant to the provisions of ASC 310-30, and are referred to as purchase credit impaired loans. The following table provides a rollforward of purchase credit impaired loans from December 31, 2018 through March 31, 2019 (in thousands):
| Gross Carrying Value | Accretable Yield | Nonaccretable Yield | Net Carrying Value
December 31, 2018 | $ | 42,837 |  | $ | (114 | ) | $ | (17,394 | ) | $ | 25,329 |
Acquisition | — |  | — |  | — |  | — |
Year-to-date settlements | (2,951 | ) | 12 |  | 1,312 |  | (1,627 | )
March 31, 2019 | $ | 39,886 |  | $ | (102 | ) | $ | (16,082 | ) | $ | 23,702 |
Summary of Recorded Investment, Unpaid Principal Balance and Related Allowance and Average Recorded Investment of Impaired Loans | Impaired loans include nonaccrual loans, troubled debt restructurings, and other loans deemed to be impaired but that continue to accrue interest. The following tables detail the recorded investment, unpaid principal balance and related allowance of Pinnacle Financial's impaired loans at March 31, 2019 and December 31, 2018 by loan classification (in thousands):
| At March 31, 2019 |  | At December 31, 2018
| Recorded investment | Unpaid principal balances | Related allowance |  | Recorded investment | Unpaid principal balances | Related allowance
Impaired loans with an allowance: |  |  |  |  |  |
Commercial real estate – mortgage | $ | 18,539 |  | $ | 18,543 |  | $ | 1,521 |  |  | $ | 14,114 |  | $ | 14,124 |  | $ | 724 |
Consumer real estate – mortgage | 24,668 |  | 24,784 |  | 2,381 |  |  | 19,864 |  | 19,991 |  | 1,443 |
Construction and land development | 868 |  | 864 |  | 55 |  |  | 581 |  | 579 |  | 28 |
Commercial and industrial | 8,802 |  | 8,773 |  | 1,461 |  |  | 9,252 |  | 9,215 |  | 1,441 |
Consumer and other | 331 |  | 352 |  | 100 |  |  | 983 |  | 1,005 |  | 328 |
Total | $ | 53,208 |  | $ | 53,316 |  | $ | 5,518 |  |  | $ | 44,794 |  | $ | 44,914 |  | $ | 3,964 |
Impaired loans without an allowance: |  |  |  |  |  |  |  |  |  |  |
Commercial real estate – mortgage | $ | 16,674 |  | $ | 16,678 |  | $ | — |  |  | $ | 14,724 |  | $ | 14,739 |  | $ | — |
Consumer real estate – mortgage | 10,431 |  | 10,466 |  | — |  |  | 7,247 |  | 7,271 |  | — |
Construction and land development | — |  | — |  | — |  |  | 1,786 |  | 1,786 |  | — |
Commercial and industrial | 15,691 |  | 15,712 |  | — |  |  | 14,595 |  | 14,627 |  | — |
Consumer and other | — |  | — |  | — |  |  | — |  | — |  | — |
Total | $ | 42,796 |  | $ | 42,856 |  | $ | — |  |  | $ | 38,352 |  | $ | 38,423 |  | $ | — |
Total impaired loans | $ | 96,004 |  | $ | 96,172 |  | $ | 5,518 |  |  | $ | 83,146 |  | $ | 83,337 |  | $ | 3,964 |
For the three months ended March 31, 2019, the average balance of impaired loans, was $89.6 million, compared to $64.2 million for the same period in 2018. Pinnacle Financial's policy is that 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 that 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. As detailed in the following table, Pinnacle Financial recognized $87,000 in interest income from cash payments received on nonaccrual loans during the three months ended March 31, 2019 compared to $101,000 during the three months ended March 31, 2018. Had these nonaccruing loans been on accruing status, interest income would have been $1.6 million higher for the three months ended March 31, 2019 compared to $1.4 million higher for the three months ended March 31, 2018. The following table details the average recorded investment and the amount of interest income recognized on a cash basis for the three months ended March 31, 2019 and 2018, respectively, of impaired loans by loan classification (in thousands):
| For the three months ended March 31,
| 2019 |  | 2018
| Average recorded investment | Interest income recognized |  | Average recorded investment | Interest income recognized
Impaired loans with an allowance: |  |  |  |  |
Commercial real estate – mortgage | $ | 16,327 |  | $ | — |  |  | $ | 5,119 |  | $ | — |
Consumer real estate – mortgage | 22,266 |  | — |  |  | 8,792 |  | — |
Construction and land development | 724 |  | — |  |  | 1,451 |  | — |
Commercial and industrial | 9,027 |  | — |  |  | 11,220 |  | — |
Consumer and other | 657 |  | — |  |  | 390 |  | — |
Total | $ | 49,001 |  | $ | — |  |  | $ | 26,972 |  | $ | — |
Impaired loans without an allowance: |  |  |  |  |  |  |  |  |
Commercial real estate – mortgage | $ | 15,699 |  | $ | 87 |  |  | $ | 15,375 |  | $ | 101 |
Consumer real estate – mortgage | 8,839 |  | — |  |  | 4,369 |  | — |
Construction and land development | 893 |  | — |  |  | 1,322 |  | — |
Commercial and industrial | 15,143 |  | — |  |  | 16,185 |  | — |
Consumer and other | — |  | — |  |  | — |  | — |
Total | $ | 40,574 |  | $ | 87 |  |  | $ | 37,251 |  | $ | 101 |
Total impaired loans | $ | 89,575 |  | $ | 87 |  |  | $ | 64,223 |  | $ | 101 |
Summary of Loan Portfolio Credit Risk Exposure | 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, 2019 with the comparative exposures for December 31, 2018 (in thousands):
| March 31, 2019 |  |
| Outstanding Principal Balances |  | Unfunded Commitments |  | Total exposure |  | Total Exposure at December 31, 2018
Lessors of nonresidential buildings | $ | 3,208,737 |  |  | $ | 894,936 |  |  | $ | 4,103,673 |  |  | $ | 3,932,059 |
Lessors of residential buildings | 1,038,462 |  |  | 335,860 |  |  | 1,374,322 |  |  | 1,484,697 |
New Housing For-Sale Builders | 509,750 |  |  | 586,983 |  |  | 1,096,733 |  |  | 1,100,989 |
Hotels (except Casino Hotels) and Motels | 825,627 |  |  | 137,885 |  |  | 963,512 |  |  | 920,001 |
Past Due Balances by Loan Classification | The table below presents past due balances by loan classification and segment at March 31, 2019 and December 31, 2018, allocated between accruing and nonaccrual status (in thousands):
| Accruing |  | Nonaccruing |  |
March 31, 2019 | 30-89 days past due and accruing | 90 days or more past due and accruing | Total past due and accruing | Current and accruing | Purchase credit impaired |  | Nonaccrual (1) | Nonaccruing purchase credit impaired |  | Total loans
Commercial real estate: |  |  |  |  |  |  |  |  |  |
Owner-occupied | $ | 8,302 |  | $ | — |  | $ | 8,302 |  | $ | 2,583,109 |  | $ | 2,577 |  |  | $ | 22,436 |  | $ | 1,117 |  |  | $ | 2,617,541 |
All other | 6,569 |  | — |  | 6,569 |  | 4,774,555 |  | 5,119 |  |  | 12,601 |  | 2,761 |  |  | 4,801,605 |
Consumer real estate – mortgage | 10,982 |  | 39 |  | 11,021 |  | 2,840,793 |  | 3,683 |  |  | 27,336 |  | 4,795 |  |  | 2,887,628 |
Construction and land development | 795 |  | — |  | 795 |  | 2,092,563 |  | 1,437 |  |  | 868 |  | 1,907 |  |  | 2,097,570 |
Commercial and industrial | 9,068 |  | 1,323 |  | 10,391 |  | 5,386,830 |  | 306 |  |  | 21,993 |  | — |  |  | 5,419,520 |
Consumer and other | 2,736 |  | 620 |  | 3,356 |  | 347,356 |  | — |  |  | 330 |  | — |  |  | 351,042 |
Total | $ | 38,452 |  | $ | 1,982 |  | $ | 40,434 |  | $ | 18,025,206 |  | $ | 13,122 |  |  | $ | 85,564 |  | $ | 10,580 |  |  | $ | 18,174,906 |
| Accruing |  | Nonaccruing |  |
December 31, 2018 | 30-89 days past due and accruing | 90 days or more past due and accruing | Total past due and accruing | Current and accruing | Purchase credit impaired |  | Nonaccrual (1) | Nonaccruing purchase credit impaired |  | Total loans
Commercial real estate: |  |  |  |  |  |  |  |  |  |
Owner-occupied | $ | 10,170 |  | $ | — |  | $ | 10,170 |  | $ | 2,623,700 |  | $ | 2,664 |  |  | $ | 16,025 |  | $ | 874 |  |  | $ | 2,653,433 |
All other | 1,586 |  | — |  | 1,586 |  | 4,488,840 |  | 5,659 |  |  | 12,634 |  | 2,802 |  |  | 4,511,521 |
Consumer real estate – mortgage | 18,059 |  | — |  | 18,059 |  | 2,794,630 |  | 3,689 |  |  | 22,564 |  | 5,505 |  |  | 2,844,447 |
Construction and land development | 3,759 |  | — |  | 3,759 |  | 2,063,201 |  | 2,108 |  |  | 2,020 |  | 1,367 |  |  | 2,072,455 |
Commercial and industrial | 21,451 |  | 1,082 |  | 22,533 |  | 5,225,205 |  | 623 |  |  | 23,022 |  | 38 |  |  | 5,271,421 |
Consumer and other | 3,276 |  | 476 |  | 3,752 |  | 349,537 |  | — |  |  | 983 |  | — |  |  | 354,272 |
Total | $ | 58,301 |  | $ | 1,558 |  | $ | 59,859 |  | $ | 17,545,113 |  | $ | 14,743 |  |  | $ | 77,248 |  | $ | 10,586 |  |  | $ | 17,707,549 |
(1) | Approximately $47.4 million and $52.5 million of nonaccrual loans as of March 31, 2019 and December 31, 2018, respectively, were performing pursuant to their contractual terms at those dates.
Details of Changes in the Allowance for Loan Losses | The following table details the allowance for loan losses and recorded investment in loans by loan classification and by impairment evaluation method as of March 31, 2019 and December 31, 2018, respectively (in thousands):
| Commercial real estate - mortgage | Consumer real estate - mortgage | Construction and land development | Commercial and industrial | Consumer and other | Unallocated | Total
March 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for Loan Losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collectively evaluated for impairment | $ | 28,646 |  | $ | 5,988 |  | $ | 10,860 |  | $ | 31,238 |  | $ | 4,703 |  |  |  | $ | 81,435 |
Individually evaluated for impairment | 1,521 |  | 2,381 |  | 55 |  | 1,461 |  | 100 |  |  |  | 5,518 |
Loans acquired with deteriorated credit quality(1) | — |  | — |  | — |  | — |  | — |  |  |  | — |
Total allowance for loan losses | $ | 30,167 |  | $ | 8,369 |  | $ | 10,915 |  | $ | 32,699 |  | $ | 4,803 |  | $ | 241 |  | $ | 87,194 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collectively evaluated for impairment | $ | 7,372,359 |  | $ | 2,844,051 |  | $ | 2,093,358 |  | $ | 5,394,721 |  | $ | 350,711 |  |  |  | $ | 18,055,200 |
Individually evaluated for impairment | 35,213 |  | 35,099 |  | 868 |  | 24,493 |  | 331 |  |  |  | 96,004 |
Loans acquired with deteriorated credit quality | 11,574 |  | 8,478 |  | 3,344 |  | 306 |  | — |  |  |  | 23,702 |
Total loans | $ | 7,419,146 |  | $ | 2,887,628 |  | $ | 2,097,570 |  | $ | 5,419,520 |  | $ | 351,042 |  |  |  | $ | 18,174,906 |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for Loan Losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collectively evaluated for impairment | $ | 26,222 |  | $ | 6,227 |  | $ | 11,100 |  | $ | 30,290 |  | $ | 5,095 |  |  |  | $ | 78,934 |
Individually evaluated for impairment | 724 |  | 1,443 |  | 28 |  | 1,441 |  | 328 |  |  |  | 3,964 |
Loans acquired with deteriorated credit quality(1) | — |  | — |  | — |  | — |  | — |  |  |  | — |
Total allowance for loan losses | $ | 26,946 |  | $ | 7,670 |  | $ | 11,128 |  | $ | 31,731 |  | $ | 5,423 |  | $ | 677 |  | $ | 83,575 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collectively evaluated for impairment | $ | 7,124,117 |  | $ | 2,808,142 |  | $ | 2,066,613 |  | $ | 5,246,913 |  | $ | 353,289 |  |  |  | $ | 17,599,074 |
Individually evaluated for impairment | 28,838 |  | 27,111 |  | 2,367 |  | 23,847 |  | 983 |  |  |  | 83,146 |
Loans acquired with deteriorated credit quality | 11,999 |  | 9,194 |  | 3,475 |  | 661 |  | — |  |  |  | 25,329 |
Total loans | $ | 7,164,954 |  | $ | 2,844,447 |  | $ | 2,072,455 |  | $ | 5,271,421 |  | $ | 354,272 |  |  |  | $ | 17,707,549 |
(1) Loans acquired with deteriorated credit quality are recorded at fair value at the time of acquisition. An allowance for loan losses is recorded only in the event of subsequent credit deterioration. The following table details the changes in the allowance for loan losses for the three months ended March 31, 2019 and 2018, respectively, by loan classification (in thousands):
| Commercial real estate - mortgage | Consumer real estate - mortgage | Construction and land development | Commercial and industrial | Consumer and other | Unallocated | Total
Three months ended March 31, 2019: |  |  |  |  |  |  |
Balance at December 31, 2018 | $ | 26,946 |  | $ | 7,670 |  | $ | 11,128 |  | $ | 31,731 |  | $ | 5,423 |  | $ | 677 |  | $ | 83,575 |
Charged-off loans | (534 | ) | (350 | ) | — |  | (3,352 | ) | (1,832 | ) | — |  | (6,068 | )
Recovery of previously charged-off loans | 72 |  | 369 |  | 122 |  | 1,598 |  | 342 |  | — |  | 2,503 |
Provision for loan losses | 3,683 |  | 680 |  | (335 | ) | 2,722 |  | 870 |  | (436 | ) | 7,184 |
Balance at March 31, 2019 | $ | 30,167 |  | $ | 8,369 |  | $ | 10,915 |  | $ | 32,699 |  | $ | 4,803 |  | $ | 241 |  | $ | 87,194 |
Three months ended March 31, 2018: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at December 31, 2017 | $ | 21,188 |  | $ | 5,031 |  | $ | 8,962 |  | $ | 24,863 |  | $ | 5,874 |  | $ | 1,322 |  | $ | 67,240 |
Charged-off loans | (728 | ) | (336 | ) | (2 | ) | (2,540 | ) | (5,063 | ) | — |  | (8,669 | )
Recovery of previously charged-off loans | 1,396 |  | 666 |  | 565 |  | 888 |  | 1,187 |  | — |  | 4,702 |
Provision for loan losses | 832 |  | (261 | ) | 591 |  | 3,437 |  | 3,478 |  | (1,146 | ) | 6,931 |
Balance at March 31, 2018 | $ | 22,688 |  | $ | 5,100 |  | $ | 10,116 |  | $ | 26,648 |  | $ | 5,476 |  | $ | 176 |  | $ | 70,204 |

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