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Securities | 6 Months Ended
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Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract] |
Securities | Note 3. Securities The amortized cost and fair value of securities available-for-sale and held-to-maturity at June 30, 2020 and December 31, 2019 are summarized as follows (in thousands):
| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
June 30, 2020: |  |  |  |  |  |  |
Securities available-for-sale: |  |  |  |  |  |  |
U.S. Treasury securities | $ | 72,482 |  |  | $ | 130 |  |  | $ | — |  |  | $ | 72,612 |
U.S. government agency securities | 74,939 |  |  | 1,404 |  |  | 32 |  |  | 76,311 |
Mortgage-backed securities | 1,661,910 |  |  | 77,923 |  |  | 1,387 |  |  | 1,738,446 |
State and municipal securities | 1,182,925 |  |  | 28,447 |  |  | 31,643 |  |  | 1,179,729 |
Asset-backed securities | 142,504 |  |  | 521 |  |  | 2,610 |  |  | 140,415 |
Corporate notes and other | 106,923 |  |  | 499 |  |  | 4,657 |  |  | 102,765 |
| $ | 3,241,683 |  |  | $ | 108,924 |  |  | $ | 40,329 |  |  | $ | 3,310,278 |
Securities held-to-maturity: |  |  |  |  |  |  |
State and municipal securities | $ | 1,048,223 |  |  | $ | 19,387 |  |  | $ | 6,377 |  |  | $ | 1,061,233 |
| $ | 1,048,223 |  |  | $ | 19,387 |  |  | $ | 6,377 |  |  | $ | 1,061,233 |
Allowance for credit losses - securities held-to-maturity | (188) |  |  |  |  |  |  |
Securities held-to-maturity, net of allowance for credit losses | $ | 1,048,035 |  |  |  |  |  |  |
December 31, 2019: |  |  |  |  |  |  |
Securities available-for-sale: |  |  |  |  |  |  |
U.S. Treasury securities | $ | 72,862 |  |  | $ | 19 |  |  | $ | 14 |  |  | $ | 72,867 |
U.S. government agency securities | 80,096 |  |  | 306 |  |  | 710 |  |  | 79,692 |
Mortgage-backed securities | 1,458,894 |  |  | 12,789 |  |  | 7,776 |  |  | 1,463,907 |
State and municipal securities | 1,669,606 |  |  | 52,096 |  |  | 7,249 |  |  | 1,714,453 |
Asset-backed securities | 153,963 |  |  | 302 |  |  | 1,293 |  |  | 152,972 |
Corporate notes and other | 56,212 |  |  | 635 |  |  | 743 |  |  | 56,104 |
| $ | 3,491,633 |  |  | $ | 66,147 |  |  | 17,785 |  |  | $ | 3,539,995 |
Securities held-to-maturity: |  |  |  |  |  |  |
State and municipal securities | $ | 188,996 |  |  | $ | 12,221 |  |  | $ | — |  |  | $ | 201,217 |
| $ | 188,996 |  |  | $ | 12,221 |  |  | $ | — |  |  | $ | 201,217 |
During the first quarter of 2020, Pinnacle Financial transferred, at fair value, $873.6 million of municipal securities from the available-for-sale portfolio to the held-to-maturity portfolio. The related unrealized after tax gains of $69.0 million remained in accumulated other comprehensive income (loss) and will be amortized over the remaining life of the securities, offsetting the related amortization of discount on the transferred securities. No gains or losses were recognized at the time of transfer. At June 30, 2020, approximately $1.3 billion of securities within Pinnacle Financial's investment portfolio were pledged to secure either public funds and other deposits or securities sold under agreements to repurchase. At June 30, 2020, repurchase agreements comprised of secured borrowings totaled $194.6 million and were secured by $194.6 million of pledged U.S. government agency securities, municipal securities, asset-backed securities, and corporate debentures. As the fair value of securities pledged to secure repurchase agreements may decline, Pinnacle Financial regularly evaluates its need to pledge additional securities to remain adequately secured. The amortized cost and fair value of debt securities as of June 30, 2020 by contractual maturity are shown below. Actual maturities may differ from contractual maturities of mortgage- and asset-backed securities since the mortgages and assets underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories in the following summary (in thousands):
| Available-for-sale |  |  |  | Held-to-maturity |  |
June 30, 2020: | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
Due in one year or less | $ | 73,636 |  |  | $ | 73,774 |  |  | $ | — |  |  | $ | — |
Due in one year to five years | 9,378 |  |  | 9,640 |  |  | 1,000 |  |  | 1,047 |
Due in five years to ten years | 173,763 |  |  | 174,310 |  |  | 2,905 |  |  | 2,979 |
Due after ten years | 1,180,492 |  |  | 1,173,693 |  |  | 1,044,318 |  |  | 1,057,207 |
Mortgage-backed securities | 1,661,910 |  |  | 1,738,446 |  |  | — |  |  | — |
Asset-backed securities | 142,504 |  |  | 140,415 |  |  | — |  |  | — |
| $ | 3,241,683 |  |  | $ | 3,310,278 |  |  | $ | 1,048,223 |  |  | $ | 1,061,233 |
At June 30, 2020 and December 31, 2019, the following investments had unrealized losses. The table below classifies these investments according to the term of the unrealized losses of less than twelve months or twelve months or longer (in thousands):
| Investments with an Unrealized Loss of less than 12 months |  |  |  | Investments with an Unrealized Loss of 12 months or longer |  |  |  | Total Investments with an Unrealized Loss |  |
| Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
At June 30, 2020 |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
U.S. government agency securities | — |  |  | — |  |  | 6,507 |  |  | 32 |  |  | 6,507 |  |  | 32 |
Mortgage-backed securities | 59,233 |  |  | 614 |  |  | 43,978 |  |  | 773 |  |  | 103,211 |  |  | 1,387 |
State and municipal securities | 182,186 |  |  | 3,557 |  |  | 496,371 |  |  | 28,448 |  |  | 678,557 |  |  | 32,005 |
Asset-backed securities | 59,994 |  |  | 1,260 |  |  | 54,376 |  |  | 1,350 |  |  | 114,370 |  |  | 2,610 |
Corporate notes | 43,808 |  |  | 1,548 |  |  | 18,650 |  |  | 3,109 |  |  | 62,458 |  |  | 4,657 |
Total temporarily-impaired securities | $ | 345,221 |  |  | $ | 6,979 |  |  | $ | 619,882 |  |  | $ | 33,712 |  |  | $ | 965,103 |  |  | $ | 40,691 |
At December 31, 2019 |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities | $ | 40,505 |  |  | $ | 14 |  |  | $ | — |  |  | $ | — |  |  | $ | 40,505 |  |  | $ | 14 |
U.S. government agency securities | 1,222 |  |  | 1 |  |  | 30,892 |  |  | 709 |  |  | 32,114 |  |  | 710 |
Mortgage-backed securities | 458,881 |  |  | 5,102 |  |  | 163,767 |  |  | 2,674 |  |  | 622,648 |  |  | 7,776 |
State and municipal securities | 204,958 |  |  | 1,938 |  |  | 244,884 |  |  | 5,311 |  |  | 449,842 |  |  | 7,249 |
Asset-backed securities | 75,488 |  |  | 796 |  |  | 59,816 |  |  | 497 |  |  | 135,304 |  |  | 1,293 |
Corporate notes | — |  |  | — |  |  | 16,908 |  |  | 743 |  |  | 16,908 |  |  | 743 |
Total temporarily-impaired securities | $ | 781,054 |  |  | $ | 7,851 |  |  | $ | 516,267 |  |  | $ | 9,934 |  |  | $ | 1,297,321 |  |  | $ | 17,785 |
The applicable dates for determining when securities were in an unrealized loss position were June 30, 2020 and December 31, 2019. As such, it is possible that a security had a market value less than its amortized cost on other days during the past twelve-month pe riods ended June 30, 2020 and December 31, 2019, but is not in the "Investments with an Unrealized Loss of less t han 12 months" category above. As shown in the tables above, including both available-for-sale and held-to-maturity investment securities, at June 30, 2020, Pinnacle Financial had approximately $40.7 million in unrealized losses on $965.1 million of securities. The unrealized losses associated with $873.6 million and $179.8 million of municipal securities transferred from the available-for-sale portfolio to the held-to-maturity portfolio during the quarters ended March 31, 2020 and September 30, 2018, respectively, represent unrealized losses since the date of purchase, independent of the impact associated with changes in the cost basis upon transfer between portfolios. As described in Note 1. Summary of Significant Accounting Policies, for any securities classified as available-for-sale that are in an unrealized loss position at the balance sheet date, Pinnacle Financial assesses whether or not it intends to sell the security, or more likely than not will be required to sell the security, before recovery of its amortized cost basis which would require a write-down to fair value through net income. Because Pinnacle Financial currently does not intend to sell those securities that have an unrealized loss at June 30, 2020, and it is not more-likely-than-not that Pinnacle Financial will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, Pinnacle Financial has determined that no write-down is necessary. In addition, Pinnacle Financial evaluates whether any portion of the decline in fair value is the result of credit deterioration, which would require the recognition of an allowance for credit losses. Such evaluations consider the extent to which the amortized cost of the security exceeds its fair value, changes in credit ratings and any other known adverse conditions related to the specific security. The unrealized losses associated with securities at June 30, 2020 are driven by changes in interest rates and are not due to the credit quality of the securities, and accordingly, no allowance for credit losses is considered necessary related to available-for-sale securities at June 30, 2020. These securities will continue to be monitored as a part of Pinnacle Financial's ongoing evaluation of credit quality. Management evaluates the financial performance of the issuers on a quarterly basis to determine if it is probable that the issuers can make all contractual principal and interest payments. The allowance for credit losses on held-to-maturity securities is measured on a collective basis by major security type as described in Note 1. Summary of Significant Accounting Policies. At June 30, 2020, Pinnacle Financial's held-to-maturity securities consist entirely of municipal securities. A reasonable and supportable period of 18 months and reversion period of 12 months was utilized to estimate credit losses on held-to-maturity municipal securities at June 30, 2020. With the implementation of CECL effective January 1, 2020, estimated credit losses on held-to-maturity municipal securities totaled approximately $10,000. At June 30, 2020, the estimated allowance for credit losses on these securities increased to $188,000, with the increase driven largely by changes in macroeconomic projections. Pinnacle Financial utilizes bond credit ratings assigned by third party ratings agencies to monitor the credit quality of debt securities held-to-maturity. At June 30, 2020, all debt securities classified as held-to-maturity were rated A or higher by the ratings agencies. Updated credit ratings are obtained as they become available from the ratings agencies. Periodically, available-for-sale securities may be sold or the composition of the portfolio realigned to improve yields, quality or marketability, or to implement changes in investment or asset/liability strategy, including maintaining collateral requirements and raising funds for liquidity purposes or preparing for anticipated changes in market interest rates. Additionally, if an available-for-sale security loses its investment grade or tax-exempt status, the underlying credit support is terminated or collection otherwise becomes uncertain based on factors known to management, Pinnacle Financial will consider selling the security, but will review each security on a case-by-case basis as these factors become known. Consistent with the investment policy, during the six months ended June 30, 2020, available-for-sale securities of approximately $100.1 million were sold and net unrealized gains, net of tax, of $247,000 were reclassified from accumulated other comprehensive income into net income. The carrying values of Pinnacle Financial's investment securities could decline in the future if the financial condition of issuers deteriorates and management determines it is probable that Pinnacle Financial will not recover the entire amortized cost bases of the securities. As a result, there is a risk that other-than-temporary impairment charges may occur in the future. Additionally, there is a risk that other-than-temporary impairment charges may occur in the future if management's intention to hold these securities to maturity and/or recovery changes. Pinnacle Financial has entered into various fair value hedging transactions to mitigate the impact of changing interest rates on the fair values of available for sale securities. See Note 8. Derivative Instruments for disclosure of the gains and losses recognized on derivative instruments and the cumulative fair value hedging adjustments to the carrying amount of the hedged securities.

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