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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2021

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, 2021 and December 31, 2020, 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, 2021
Investment securities available-for-sale:
U.S. Treasury securities			$	111,469					$	—					$	111,469					$	—
U.S. government agency securities			422,856						—						422,856						—
Mortgage-backed securities			1,899,248						—						1,899,248						—
State and municipal securities			1,580,713						—						1,579,873						840
Agency-backed securities			200,088						—						200,088						—
Corporate notes and other			116,696						—						116,696						—
Total investment securities available-for-sale			4,331,070						—						4,330,230						840
Other investments			104,039						—						25,284						78,755
Other assets			82,527						—						82,527						—
Total assets at fair value			$	4,517,636					$	—					$	4,438,041					$	79,595
Other liabilities			$	119,043					$	—					$	119,043					$	—
Total liabilities at fair value			$	119,043					$	—					$	119,043					$	—
December 31, 2020
Investment securities available-for-sale:
U.S. Treasury securities			$	82,209					$	—					$	82,209					$	—
U.S. government agency securities			76,403						—						76,403						—
Mortgage-backed securities			1,689,191						—						1,689,191						—
State and municipal securities			1,443,363						—						1,427,866						15,497
Agency-backed securities			177,936						—						177,936						—
Corporate notes and other			117,579						—						117,579						—
Total investment securities available-for-sale			3,586,681						—						3,571,184						15,497
Other investments			73,395						—						25,636						47,759
Other assets			242,470						—						242,470						—
Total assets at fair value			$	3,902,546					$	—					$	3,839,290					$	63,256
Other liabilities			$	177,025					$	—					$	177,025					$	—
Total liabilities at fair value			$	177,025					$	—					$	177,025					$	—

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, 2021 and December 31, 2020 (in thousands):

June 30, 2021			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			$	9,602					$	—					$	—					$	9,602
Collateral dependent loans (1)			39,739						—						—						39,739
Total			$	49,341					$	—					$	—					$	49,341
December 31, 2020
Other real estate owned			$	12,360					$	—					$	—					$	12,360
Collateral dependent loans (1)			43,795						—						—						43,795
Total			$	56,155					$	—					$	—					$	56,155

(1) The carrying values of collateral dependent loans at June 30, 2021 and December 31, 2020 are net of valuation allowances of $2.2 million and $3.5 million, respectively.

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, 2021 and June 30, 2020 (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,
			2021						2020									2021						2020
			Available-for-sale Securities			Other investments						Available-for-sale Securities			Other  investments									Available-for-sale Securities			Other investments						Available-for-sale Securities			Other investments
Fair value, beginning of period			$	13,513		$	62,129					$	14,767		$	39,756								$	15,497		$	47,759					$	15,903		$	38,156
Total realized gains (losses) included in income			1,256			6,957						27			(278)									1,298			10,397						55			(452)
Changes in unrealized gains/losses included in other comprehensive income			(1,293)			—						501			—									(3,168)			—						480			—
Purchases			—			13,124						—			1,366									—			25,556						—			3,727
Issuances			—			—						—			—									—			—						—			—
Settlements			(12,636)			(3,455)						—			(232)									(12,787)			(4,957)						(1,143)			(819)
Transfers out of Level 3			—			—						—			—									—			—						—			—
Fair value, end of period			$	840		$	78,755					$	15,295		$	40,612								$	840		$	78,755					$	15,295		$	40,612
Total realized gains (losses) included in income			$	1,256		$	6,957					$	27		$	(278)								$	1,298		$	10,397					$	55		$	(452)

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, 2021 and December 31, 2020.  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):

			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)
June 30, 2021
Financial assets:
Securities purchased with agreement to resell			$	500,000					$	486,397					$	—					$	—					$	486,397
Securities held-to-maturity			995,838						1,030,639						—						1,030,639						—
Loans, net			22,624,188						22,629,233						—						—						22,629,233
Consumer loans held-for-sale			56,968						57,810						—						57,810						—
Commercial loans held-for-sale			25,843						26,225						—						26,225						—
Financial liabilities:
Deposits and securities sold under
agreements to repurchase			28,395,264						27,472,418						—						—						27,472,418
Federal Home Loan Bank advances			888,304						943,600						—						—						943,600
Subordinated debt and other borrowings			671,994						662,942						—						—						662,942
Off-balance sheet instruments:
Commitments to extend credit (2)			10,648,545						25,031						—						—						25,031
December 31, 2020
Financial assets:
Securities held-to-maturity			$	1,028,359					$	1,066,531					$	—					$	1,066,531					$	—
Loans, net			22,139,451						22,407,546						—						—						22,407,546
Consumer loans held-for-sale			87,821						89,625						—						89,625						—
Commercial loans held-for-sale			31,200						31,841						—						31,841						—
Financial liabilities:
Deposits and securities sold under
agreements to repurchase			27,833,739						26,929,142						—						—						26,929,142
Federal Home Loan Bank advances			1,087,927						1,189,035						—						—						1,189,035
Subordinated debt and other borrowings			670,575						677,521						—						—						677,521
Off-balance sheet instruments:
Commitments to extend credit (2)			9,692,607						24,887						—						—						24,887

(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, 2021 and December 31, 2020, Pinnacle Financial included in other liabilities $23.2 million, 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, 2021 and December 31, 2020 are unamortized fees related to these commitments of $1.8 million and $1.7 million, respectively.

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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).

+ References

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-Name Accounting Standards Codification
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-Section 50
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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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