XML 86 R24.htm IDEA: XBRL DOCUMENT

Loans and Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2019

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 September 30, 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
September 30, 2019
Pass	$	7,478,442	$	2,983,694	$	2,244,217	$	5,648,775	$	465,607	$	18,820,735
Special Mention	89,057		5,771		2,846		95,743		710		194,127
Substandard ⁽¹⁾	119,155		12,948		4,193		121,160		61		257,517
Substandard-nonaccrual	22,591		23,089		2,047		25,360		176		73,263
Doubtful-nonaccrual	—		—		—		—		—		—
Total loans	$	7,709,245	$	3,025,502	$	2,253,303	$	5,891,038	$	466,554	$	19,345,642



	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 $254.0 million at September 30, 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 purchased credit impaired loans. The following table provides a rollforward of purchased credit impaired loans from December 31, 2018 through September 30, 2019 (in thousands):



	Gross Carrying Value			Accretable Yield			Nonaccretable Yield			Net Carrying Value
December 31, 2018	$	42,837		$	(114	)	$	(17,394	)	$	25,329
Acquisition	1,883			—			—			1,883
Reclassification of yield from nonaccretable to accretable	—			(7,505		)	7,505			—
Year-to-date settlements	(12,020		)	1,451			4,229			(6,340		)
September 30, 2019	$	32,700		$	(6,168	)	$	(5,660	)	$	20,872

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 September 30, 2019 and December 31, 2018 by loan classification (in thousands):



	At September 30, 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	$	13,462	$	13,472	$	1,021	$	14,114	$	14,124	$	724
Consumer real estate – mortgage	19,245		19,368		1,065		19,864		19,991		1,443
Construction and land development	275		271		15		581		579		28
Commercial and industrial	11,591		11,566		1,497		9,252		9,215		1,441



	At September 30, 2019						At December 31, 2018
	Recorded investment		Unpaid principal balances		Related allowance		Recorded investment		Unpaid principal balances		Related allowance
Consumer and other	176		174		10		983		1,005		328
Total	$	44,749	$	44,851	$	3,608	$	44,794	$	44,914	$	3,964

Impaired loans without an allowance:
Commercial real estate – mortgage	$	8,356	$	8,366	$	—	$	14,724	$	14,739	$	—
Consumer real estate – mortgage	4,960		4,958		—		7,247		7,271		—
Construction and land development	20		19		—		1,786		1,786		—
Commercial and industrial	12,897		12,890		—		14,595		14,627		—
Consumer and other	—		—		—		—		—		—
Total	$	26,233	$	26,233	$	—	$	38,352	$	38,423	$	—

Total impaired loans	$	70,982	$	71,084	$	3,608	$	83,146	$	83,337	$	3,964

For the three and nine months ended September 30, 2019, the average balance of impaired loans, was $73.6 million and $81.6 million, respectively, compared to $82.3 million and $73.3 million, respectively, for the same periods 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 no interest income from cash payments received on nonaccrual loans during the three months ended September 30, 2019 and $176,000 in interest income from cash payments received on nonaccrual loans during the nine months ended September 30, 2019, compared to $84,000 and $337,000, respectively, during the three and nine months ended September 30, 2018. Had these nonaccruing loans been on accruing status, interest income would have been higher by $1.3 million and $3.5 million, respectively, for the three and nine months ended September 30, 2019 compared to $1.1 million and $2.8 million higher, respectively, for the three and nine months ended September 30, 2018.

The following table details the average recorded investment and the amount of interest income recognized on a cash basis for the three and nine months ended September 30, 2019 and 2018, respectively, of impaired loans by loan classification (in thousands):



	For the three months ended September 30,								For the nine months ended September 30,
	2019				2018				2019				2018
	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
Impaired loans with an allowance:
Commercial real estate – mortgage	$	13,050	$	—	$	13,474	$	—	$	14,689	$	—	$	9,297	$	—
Consumer real estate – mortgage	19,508		—		14,162		—		20,887		—		11,476		—
Construction and land development	451		—		1,150		—		587		—		1,301		—
Commercial and industrial	11,113		—		7,470		—		10,070		—		9,345		—
Consumer and other	143		—		912		—		400		—		651		—
Total	$	44,265	$	—	$	37,168	$	—	$	46,633	$	—	$	32,070	$	—

Impaired loans without an allowance:
Commercial real estate – mortgage	$	9,344	$	—	$	22,029	$	84	$	12,521	$	176	$	18,702	$	337
Consumer real estate – mortgage	7,922		—		5,699		—		8,381		—		5,034		—
Construction and land development	10		—		1,442		—		452		—		1,382		—
Commercial and industrial	12,108		—		16,008		—		13,625		—		16,096		—
Consumer and other	—		—		—		—		—		—		—		—
Total	$	29,384	$	—	$	45,178	$	84	$	34,979	$	176	$	41,214	$	337

Total impaired loans	$	73,649	$	—	$	82,346	$	84	$	81,612	$	176	$	73,284	$	337

Troubled Debt Restructurings

The following table outlines the amount of each loan category where troubled debt restructurings were made during the three and nine months ended September 30, 2019 and 2018 (dollars in thousands):



	Three Months Ended September 30,					Nine Months Ended September 30,
2019	Number of contracts	Pre Modification Outstanding Recorded Investment		Post Modification Outstanding Recorded Investment, net of related allowance		Number of contracts	Pre Modification Outstanding Recorded Investment		Post Modification Outstanding Recorded Investment, net of related allowance
Commercial real estate – mortgage	1	$	314	$	297	1	$	314	$	297
Consumer real estate – mortgage	—	—		—		1	712		626
Construction and land development	—	—		—		1	21		19
Commercial and industrial	—	—		—		1	1,397		796
Consumer and other	—	—		—		—	—		—
	1	$	314	$	297	4	$	2,444	$	1,738

2018
Commercial real estate – mortgage	—	$	—	$	—	—	$	—	$	—
Consumer real estate – mortgage	1	169		169		2	206		206
Construction and land development	1	348		348		1	348		348
Commercial and industrial	—	—		—		—	—		—
Consumer and other	—	—		—		—	—		—
	2	$	517	$	517	3	$	554	$	554

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 September 30, 2019 with the comparative exposures for December 31, 2018 (in thousands):



	September 30, 2019
	Outstanding Principal Balances		Unfunded Commitments		Total exposure		Total Exposure at December 31, 2018
Lessors of nonresidential buildings	$	3,502,181	$	826,157	$	4,328,338	$	3,932,059
Lessors of residential buildings	1,003,401		549,949		1,553,350		1,484,697
New Housing For-Sale Builders	516,646		580,917		1,097,563		1,100,989
Hotels (except Casino Hotels) and Motels	806,089		167,696		973,785		920,001

Past Due Balances by Loan Classification

The table below presents past due balances by loan classification and segment at September 30, 2019 and December 31, 2018, allocated between accruing and nonaccrual status (in thousands):



	Accruing										Nonaccruing
September 30, 2019	30-89 days past due and accruing		90 days or more past due and accruing		Total past due and accruing		Current and accruing		Purchased credit impaired		Nonaccrual ⁽¹⁾		Nonaccruing purchased credit impaired ⁽¹⁾		Total loans
Commercial real estate:
Owner-occupied	$	6,398	$	—	$	6,398	$	2,574,628	$	2,903	$	11,011	$	897	$	2,595,837
All other	5,896		—		5,896		5,091,660		5,169		10,640		43		5,113,408
Consumer real estate – mortgage	9,051		773		9,824		2,989,373		3,216		19,245		3,844		3,025,502
Construction and land development	2,005		—		2,005		2,247,977		1,274		275		1,772		2,253,303
Commercial and industrial	16,524		1,077		17,601		5,847,752		325		23,931		1,429		5,891,038
Consumer and other	3,266		600		3,866		462,512		—		176		—		466,554
Total	$	43,140	$	2,450	$	45,590	$	19,213,902	$	12,887	$	65,278	$	7,985	$	19,345,642



	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		Purchased credit impaired		Nonaccrual ⁽¹⁾		Nonaccruing purchased credit impaired ⁽¹⁾		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 $33.5 million and $52.5 million of nonaccrual loans as of September 30, 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 changes in the allowance for loan losses for the three and nine months ended September 30, 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 September 30, 2019:
Balance at June 30, 2019	$	30,826		$	8,489		$	11,206		$	37,436		$	2,114		$	182	$	90,253
Charged-off loans	(102		)	(194		)	(14		)	(5,082		)	(1,388		)	—		(6,780		)
Recovery of previously charged-off loans	209			901			97			407			300			—		1,914
Provision for loan losses	1,684			(1,426		)	585			1,814			3,278			2,325		8,260
Balance at September 30, 2019	$	32,617		$	7,770		$	11,874		$	34,575		$	4,304		$	2,507	$	93,647

Three months ended September 30, 2018:
Balance at June 30, 2018	$	24,848		$	5,853		$	10,984		$	28,338		$	5,172		$	475	$	75,670
Charged-off loans	(1,968		)	(262		)	(24		)	(3,336		)	(1,359		)	—		(6,949		)
Recovery of previously charged-off loans	63			987			70			1,037			382			—		2,539
Provision for loan losses	3,574			149			(48		)	4,085			618			347		8,725



	Commercial real estate - mortgage			Consumer real estate - mortgage			Construction and land development			Commercial and industrial			Consumer and other			Unallocated			Total
Balance at September 30, 2018	$	26,517		$	6,727		$	10,982		$	30,124		$	4,813		$	822		$	79,985

Nine months ended September 30, 2019:
Balance at December 31, 2018	$	26,946		$	7,670		$	11,128		$	31,731		$	5,423		$	677		$	83,575
Charged-off loans	(1,701		)	(1,124		)	(18		)	(13,842		)	(4,643		)	—			(21,328		)
Recovery of previously charged-off loans	1,173			1,642			238			4,749			959			—			8,761
Provision for loan losses	6,199			(418		)	526			11,937			2,565			1,830			22,639
Balance at September 30, 2019	$	32,617		$	7,770		$	11,874		$	34,575		$	4,304		$	2,507		$	93,647

Nine months ended September 30, 2018:
Balance at December 31, 2017	$	21,188		$	5,031		$	8,962		$	24,863		$	5,874		$	1,322		$	67,240
Charged-off loans	(2,930		)	(1,533		)	(36		)	(7,600		)	(10,217		)	—			(22,316		)
Recovery of previously charged-off loans	1,517			2,190			1,645			2,492			2,159			—			10,003
Provision for loan losses	6,742			1,039			411			10,369			6,997			(500		)	25,058
Balance at September 30, 2018	$	26,517		$	6,727		$	10,982		$	30,124		$	4,813		$	822		$	79,985

The following table details the allowance for loan losses and recorded investment in loans by loan classification and by impairment evaluation method as of September 30, 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
September 30, 2019
Allowance for Loan Losses:
Collectively evaluated for impairment	$	31,596	$	6,705	$	11,859	$	33,078	$	4,294			$	87,532
Individually evaluated for impairment	1,021		1,065		15		1,497		10				3,608
Loans acquired with deteriorated credit quality⁽¹⁾	—		—		—		—		—				—
Total allowance for loan losses	$	32,617	$	7,770	$	11,874	$	34,575	$	4,304	$	2,507	$	93,647

Loans:
Collectively evaluated for impairment	$	7,678,415	$	2,994,237	$	2,249,962	$	5,864,796	$	466,378			$	19,253,788
Individually evaluated for impairment	21,818		24,205		295		24,488		176				70,982
Loans acquired with deteriorated credit quality	9,012		7,060		3,046		1,754		—				20,872
Total loans	$	7,709,245	$	3,025,502	$	2,253,303	$	5,891,038	$	466,554			$	19,345,642

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.