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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present financial instruments measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019, by caption on the consolidated balance sheets and by FASB ASC 820 valuation hierarchy (as described above) (in thousands):

			Total carrying value in the consolidated balance sheet						Quoted market prices in an active market (Level 1)						Models with significant observable market parameters (Level 2)						Models with significant unobservable market parameters (Level 3)
June 30, 2020
Investment securities available-for-sale:
U.S. Treasury securities			$	72,612					$	—					$	72,612					$	—
U.S. government agency securities			76,311						—						76,311						—
Mortgage-backed securities			1,738,446						—						1,738,446						—
State and municipal securities			1,179,729						—						1,164,434						15,295
Agency-backed securities			140,415						—						140,415						—
Corporate notes and other			102,765						—						102,765						—
Total investment securities available-for-sale			$	3,310,278					$	—					$	3,294,983					$	15,295
Other investments			66,276						—						25,664						40,612
Other assets			280,593						—						280,593						—
Total assets at fair value			$	3,657,147					$	—					$	3,601,240					$	55,907
Other liabilities			$	212,810					$	—					$	212,810					$	—
Total liabilities at fair value			$	212,810					$	—					$	212,810					$	—
December 31, 2019
Investment securities available-for-sale:
U.S. Treasury securities			$	72,867					$	—					$	72,867					$	—
U.S. government agency securities			79,692						—						79,692						—
Mortgage-backed securities			1,463,907						—						1,463,907						—
State and municipal securities			1,714,453						—						1,698,550						15,903
Agency-backed securities			152,972						—						152,972						—
Corporate notes and other			56,104						—						56,104						—
Total investment securities available-for-sale			3,539,995						—						3,524,092						15,903
Other investments			63,291						—						25,135						38,156
Other assets			134,040						—						134,040						—
Total assets at fair value			$	3,737,326					$	—					$	3,683,267					$	54,059
Other liabilities			$	87,613					$	—					$	87,613					$	—
Total liabilities at fair value			$	87,613					$	—					$	87,613					$	—

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following table presents assets measured at fair value on a nonrecurring basis as of June 30, 2020 and December 31, 2019 (in thousands):

June 30, 2020			Total carrying value in the consolidated balance sheet						Quoted market prices in an active market (Level 1)						Models with significant observable market parameters (Level 2)						Models with significant unobservable market parameters (Level 3)
Other real estate owned			$	22,080					$	—					$	—					$	22,080
Collateral dependent loans			36,408						—						—						36,408
Total			$	58,488					$	—					$	—					$	58,488
December 31, 2019
Other real estate owned			$	29,487					$	—					$	—					$	29,487
Impaired loans, net (1)			32,478						—						—						32,478
Total			$	61,965					$	—					$	—					$	61,965

⁽¹⁾ Amount is net of valuation allowance of $3.3 million at December 31, 2019 as required by ASC 310-10, "Receivables."

Rollforward of the Balance Sheet Amounts, Unobservable Input Reconciliation

The table below includes a rollforward of the balance sheet amounts for the three and six months ended June 30, 2020 and June 30, 2019 (including the change in fair value) for financial instruments classified by Pinnacle Financial within Level 3 of the valuation hierarchy measured at fair value on a recurring basis including changes in fair value due in part to observable factors that are part of the valuation methodology (in thousands):

			For the Three months ended June 30,																														For the Six months ended June 30,
			2020												2019															2020												2019
			Available-for-sale Securities			Other assets						Available-for-sale Securities			Other assets									Available-for-sale Securities			Other assets						Available-for-sale Securities			Other assets
Fair value, beginning of period			$	14,767		$	39,756					$	13,730		$	28,107								$	15,903		$	38,156					$	14,595		$	26,422
Total realized gains (losses) included in income			27			(278)						29			481									55			(452)						59			929
Changes in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at period-end			501			—						1,504			—									480			—						1,008			—
Purchases			—			1,366						—			3,518									—			3,727						—			5,188
Issuances			—			—						—			—									—			—						—			—
Settlements			—			(232)						—			(584)									(1,143)			(819)						(399)			(1,017)
Transfers out of Level 3			—			—						—			—									—			—						—			—
Fair value, end of period			$	15,295		$	40,612					$	15,263		$	31,522								$	15,295		$	40,612					$	15,263		$	31,522
Total realized gains (losses) included in income related to financial assets and liabilities still on the consolidated balance sheet at period-end			$	27		$	(278)					$	29		$	481								$	55		$	(452)					$	59		$	929

Carrying Amounts, Estimated Fair Value and Placement in the Fair Value Hierarchy of Financial Instruments

The following tables present the carrying amounts, estimated fair value and placement in the fair value hierarchy of Pinnacle Financial's financial instruments at June 30, 2020 and December 31, 2019.  This table excludes financial instruments for which the carrying amount approximates fair value.  For short-term financial assets such as cash, cash equivalents, and restricted cash, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization.  For financial liabilities such as non-interest bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity (in thousands):

June 30, 2020			Carrying/ Notional Amount						Estimated Fair Value (1)						Quoted market prices in an active market (Level 1)						Models with significant observable market parameters (Level 2)						Models with significant unobservable market parameters (Level 3)
Financial assets:
Securities held-to-maturity			$	1,048,035					$	1,061,233					$	—					$	1,061,233					$	—
Loans, net			22,234,928						22,534,896						—						—						22,534,896
Consumer loans held-for-sale			69,443						71,409						—						71,409						—
Commercial loans held-for-sale			16,201						16,660						—						16,660						—
Financial liabilities:
Deposits and securities sold under
agreements to repurchase			25,716,382						24,880,600						—						—						24,880,600
Federal Home Loan Bank advances			1,787,551						1,936,334						—						—						1,936,334
Subordinated debt and other borrowings			717,043						728,610						—						—						728,610
Off-balance sheet instruments:
Commitments to extend credit (2)			8,898,952						22,238						—						—						22,238

December 31, 2019
Financial assets:
Securities held-to-maturity			$	188,996					$	201,217					$	—					$	201,217					$	—
Loans, net			19,693,099						19,717,845						—						—						19,717,845
Consumer loans held-for-sale			81,820						82,986						—						82,986						—
Commercial loans held-for-sale			17,585						17,836						—						17,836						—
Financial liabilities:
Deposits and securities sold under
agreements to repurchase			20,307,382						19,647,392						—						—						19,647,392
Federal Home Loan Bank advances			2,062,534						2,078,514						—						—						2,078,514
Subordinated debt and other borrowings			749,080						712,220						—						—						712,220
Off-balance sheet instruments:
Commitments to extend credit (2)			8,141,920						3,786						—						—						3,786

(1)Estimated fair values are consistent with an exit-price concept. The assumptions used to estimate the fair values are intended to approximate those that a market-participant would realize in a hypothetical orderly transaction.

(2)At the end of each quarter, Pinnacle Financial evaluates the inherent risks of the outstanding off-balance sheet commitments, including both commitments for unfunded loans and standby letters of credit. In making this evaluation, Pinnacle Financial utilizes credit loss expectations on funded loans from our allowance for credit losses methodology and evaluates the probability that the outstanding commitment will eventually become a funded loan. As a result, at June 30, 2020 and December 31, 2019, Pinnacle Financial included in other liabilities $20.8 million and $2.4 million, respectively, representing expected credit losses on off-balance sheet commitments, which are reflected in the estimated fair values of the related commitments. Also included in the fair values at June 30, 2020 and December 31, 2019 are unamortized fees related to these commitments of $1.4 million at both dates.

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- Definition

Tabular disclosure of assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). Disclosures may include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3).

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Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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Tabular disclosure of assets and liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

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